<PAGE>
MITCHELL HUTCHINS PORTFOLIOS SEMIANNUAL REPORT
January 15, 1999
Dear Shareholder,
We are pleased to present you with the semiannual report for the Mitchell
Hutchins Portfolios, covering the six-month period ended November 30, 1998.
MARKET REVIEW
[GRAPHIC]
The financial markets became extremely volatile in August as
investors reacted to heightened global uncertainty by moving money out of
stocks. Concerns about exposure to over-leveraged hedge funds and emerging
markets caused a sell-off in financial stocks as investors backed away from
potential credit quality and liquidity problems. Weakness in global markets
also hurt U.S. companies sensitive to export growth.
The stock market rallied, however, after the Federal Reserve cut interest
rates three times and other central banks around the globe followed suit in
anticipation of the new euro currency. Many of the sectors that had lagged
from August through October--primarily technology and financial
services--rebounded by November 30. The rate cuts allayed investor concerns
about the market decline and its economic impact. As measured by the S&P 500
Index (the "Index"), the rally produced one of the best year-end quarters ever
and a fourth straight year of market gains over 20%. In addition, the rally
broadened beyond the largest 20 or so stocks in the Index to include some mid-
to small-capitalization stocks.
PORTFOLIO REVIEW
PERFORMANCE
[GRAPHIC]
Aggressive Portfolio
The Aggressive Portfolio's total return consists of the change in net asset
value with dividends reinvested. For the six months ended November 30, 1998,
without deducting sales charges, Class A shares lost 4.85%, Class B shares
lost 5.25%, Class C shares lost 5.25% and Class Y shares lost 4.77%.
The Portfolio's total return may be lower for shareowners who purchased or
redeemed Fund shares during the period. After deducting the maximum applicable
sales charges, Class A shares lost 9.12%, Class B shares lost 9.98% and Class
C shares lost 6.19%. Class Y shares are not subject to sales charges.
Moderate Portfolio
The Moderate Portfolio's total return consists of the change in net asset
value with dividends reinvested. For the six months ended November 30, 1998,
without deducting sales charges, Class A shares lost 2.01%, Class B shares
lost 2.28%, Class C shares lost 2.31% and Class Y shares lost 1.91%.
The Portfolio's total return may be lower for shareowners who purchased or
redeemed Fund shares during the period. After deducting the maximum applicable
sales charges, Class A shares lost 6.42%, Class B shares lost 7.13% and Class
C shares lost
Mitchell Hutchins Portfolios
PROFILES
(arrow) GoalS:
Aggressive -- long-term capital growth
Moderate -- total return
Consertive -- income; secondary, capital growth
(arrow) Portfolio Managers:
T. Kirkham Barneby, Mark Tincher,
Dennis McCauley,
Mitchell Hutchins Asset Management Inc.
(arrow) Total Net Assets at November 30, 1998:
Aggressive -- $6.3 million
Moderate -- $11.3 million
Conservative -- $4.2 million
1
<PAGE>
3.28%. Class Y shares are not subject to sales charges.
Conservative Portfolio
The Conservative Portfolio's total return consists of the change in net
asset value with dividends reinvested. For the six months ended November 30,
1998, without deducting sales charges, Class A shares gained 3.75%, Class B
shares gained 3.36%, Class C shares gained 3.42% and Class Y shares gained
3.86%. The Portfolio's total return may be lower for shareowners who purchased
or redeemed Fund shares during the period. After deducting the maximum
applicable sales charges, Class A shares lost 0.89%, Class B shares lost 1.64%
and Class C shares gained 2.67%. Class Y shares are not subject to sales
charges.
PORTFOLIO HIGHLIGHTS
We adjusted the Portfolios' asset allocations several times during the
six-month period ended November 30, 1998. Foremost among the changes was a
redeployment of cash into stock funds for all three Portfolios, which occurred
from mid July to early August. All three Portfolios increased their positions
in the PaineWebber Growth and Income Fund--from 20% to 30% in the Aggressive
and Moderate Portfolios, and from 15% to 30% in the Conservative Portfolio.
Despite the volatility in the markets at the time, we were bullish on
stocks and felt that exposure to larger, growth-oriented funds offered more
attractive potential over the near term. The result of this shift was that all
three Portfolios were overweighted in stock funds compared to their normal
allocations. These moves enabled the Portfolios to benefit from the year-end
rally in the stock market.
<TABLE>
<CAPTION>
Mitchell Hutchins Portfolios
Asset Allocations, November 30, 1998(1)
Aggressive Moderate Conservative
---------- -------- ------------
<S> <C> <C> <C> <C>
Stock Funds PaineWebber Growth Fund 5.0% 10.0% 0.0%
PaineWebber Growth and Income Fund 30.0 30.0 30.0
PaineWebber Small Cap Fund 40.0 20.0 0.0
Bond Funds PaineWebber Low Duration
U.S. Government Income Fund 0.0 0.0 30.0
PaineWebber
U.S. Government Income Fund 0.0 2.5 22.5
PaineWebber
Investment Grade Income Fund 5.0 7.5 7.5
PaineWebber High Income Fund 5.0 10.0 0.0
Global Funds PaineWebber Global Equity Fund 15.0 10.0 0.0
PaineWebber Global Income Fund 0.0 10.0 10.0
Money Market
Fund PaineWebber Cashfund Inc. 0.0 0.0 0.0
Total 100.0% 100.0% 100.0%
</TABLE>
(1) All weightings represent percentages of net assets as of November 30,
1998, unless noted otherwise. The Portfolios are actively managed, as
are the underlying funds, and their composition will differ over time.
2
<PAGE>
OUTLOOK
[GRAPHIC]
Our expectations for 1999 are a little more subdued than 1998's results. We
look for slowing economic growth around 2%, inflation below 2% and corporate
earnings growth in the 4-5% range--a stable rate after declines for most of
1998. Taking these expectations into consideration, we think the market is
about 5% above fair value, well within its normal range.
For the stock market rally to sustain itself, it will have to continue
broadening and include more small- to mid-size companies. We believe analysts'
current consensus of 1999 corporate earnings in the mid-teen range is too
optimistic. Since high single-digit returns are likely to look good this year,
we think 1999 will be a much more important year for investment selection.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
For a Quarterly Review on the Mitchell Hutchins Portfolios or any of the
funds in the PaineWebber Family of Funds,(2) please contact your Investment
Executive.
Sincerely,
/s/ Margo Alexander /s/ T. Kirkham Barneby
MARGO ALEXANDER T. KIRKHAM BARNEBY
President Managing Director and Chief
Mitchell Hutchins Asset Management Inc. Investment Officer--Quantitative
Investments
Mitchell Hutchins Asset
Management Inc.
Manager of the Portfolios
/s/ Dennis L. McCauley /s/ Mark A. Tincher
DENNIS L. MCCAULEY MARK A. TINCHER
Managing Director and Chief Managing Director and Chief
Investment--Fixed Income Investment Officer--Equities
Mitchell Hutching Asset Mitchell Hutchins Asset
Management Inc. Management Inc.
Manager of the Portfolios Manager of the Portfolios
This letter is intended to assist shareholders in understanding how the
Portfolios performed during the period ended November 30, 1998, and reflects
our views at the time of writing this report. Of course, these views may
change in response to changing circumstances. We encourage you to consult your
investment executive regarding your personal investment program.
(2) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
3
<PAGE>
MITCHELL HUTCHINS PORTFOLIOS
PERFORMANCE RESULTS (unaudited)
Aggressive Portfolio
<TABLE>
<CAPTION>
Net Asset Value Total Return(1)
----------------------------------------- ----------------------------------
6 Months 02/24/98+
11/30/98 05/31/98 02/24/98+ Ended 11/30/98 to 05/31/98
-------- -------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Class A Shares $12.35 $12.98 $12.50 (4.85)% 3.84%
Class B Shares 12.28 12.96 12.50 (5.25) 3.68
Class C Shares 12.28 12.96 12.50 (5.25) 3.68
Performance Summary Class A Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $12.35 -- -- (1.20)%
Cumulative Total Return as of 11/30/98: (1.20)%
Performance Summary Class B Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98 - 11/30/98 $12.50 $12.28 -- -- (1.76)%
Cumulative Total Return as of 11/30/98: (1.76)%
Performance Summary Class C Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $12.28 -- -- (1.76)%
Cumulative Total Return as of 11/30/98: (1.76)%
</TABLE>
<TABLE>
<CAPTION>
Moderate Portfolio
Net Asset Value Total Return(1)
----------------------------------------- ----------------------------------
6 Months 02/24/98+
11/30/98 05/31/98 02/24/98+ Ended 11/30/98 to 05/31/98
-------- -------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Class A Shares $12.54 $12.93 $12.50 (2.01)% 3.44%
Class B Shares 12.51 12.90 12.50 (2.28) 3.20
Class C Shares 12.51 12.90 12.50 (2.31) 3.20
Performance Summary Class A Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $12.54 -- $0.1244 1.36%
Cumulative Total Return as of 11/30/98: 1.36%
Performance Summary Class B Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $12.51 -- $0.0916 0.85%
Cumulative Total Return as of 11/30/98: 0.85%
Performance Summary Class C Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $12.51 -- $0.0886 0.82%
Cumulative Total Return as of 11/30/98: 0.82%
</TABLE>
+ Commencement of Operations
(1) Figures assume reinvestment of all dividends, capital gains and other
distributions at net asset value on the payable dates and do not include
sales charges; results would be lower if sales charges were included.
The data above represents past performance of the Mitchell Hutchins Portfolios
shares, which is no guarantee of future results. The principal value of an
investment in the Mitchell Hutchins Portfolios will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
4
<PAGE>
MITCHELL HUTCHINS PORTFOLIOS
PERFORMANCE RESULTS (unaudited) (concluded)
Conservative Portfolio
<TABLE>
<CAPTION>
Net Asset Value Total Return(1)
----------------------------------------- ----------------------------------
6 Months 02/24/98+
11/30/98 05/31/98 02/24/98+ Ended 11/30/98 to 05/31/98
-------- -------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Class A Shares $13.08 $12.81 $12.50 3.75% 2.48%
Class B Shares 13.04 12.79 12.50 3.36 2.32
Class C Shares 13.05 12.80 12.50 3.42 2.40
Performance Summary Class A Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $13.08 -- $0.2040 6.33%
Cumulative Total Return as of 11/30/98: 6.33%
Performance Summary Class B Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $13.04 -- $0.1741 5.76%
Cumulative Total Return as of 11/30/98: 5.76%
Performance Summary Class C Shares
Net Asset Value
------------------------- Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------- --------- ------- ------------- ----------- ---------
02/24/98+ - 11/30/98 $12.50 $13.05 -- $0.1822 5.90%
Cumulative Total Return as of 11/30/98: 5.90%
</TABLE>
+ Commencement of Operations
(1) Figures assume reinvestment of all dividends, capital gains and other
distributions at net asset value on the payable dates and do not include
sales charges; results would be lower if sales charges were included.
Note: The Mitchell Hutchins Portfolios offers Class Y shares to a limited group
of eligible investors, including participants in certain investment
programs that are sponsored by PaineWebber and may invest in PaineWebber
mutual funds. Since inception, February 24, 1998 through November 30,
1998, Aggressive Portfolio, Moderate Portfolio and Conservative Portfolio
Class Y shares had a total return of (1.04)%, 1.55%, and 6.52%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing distribution and service fees.
The data above represents past performance of the Mitchell Hutchins Portfolios
shares, which is no guarantee of future results. The principal value of an
investment in the Mitchell Hutchins Portfolios will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
5
<PAGE>
MITCHELL HUTCHINS AGGRESSIVE PORTFOLIO
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1998 (unaudited)
Number of
Shares Value
- ---------- ------
Stock Mutual Funds--88.88%
54,441 PaineWebber Global Equity Fund ............ $ 949,449
12,580 PaineWebber Growth Fund ................... 319,165
58,857 PaineWebber Growth and Income Fund ........ 1,885,179
205,710 PaineWebber Small Cap Fund ................ 2,468,522
----------
5,622,315
Bond Mutual Funds--9.99%
47,801 PaineWebber High Income Fund .............. 317,875
29,082 PaineWebber Investment Grade Income Fund .. 314,081
----------
631,956
Total Investments (cost--$6,508,912)--98.87% ......... 6,254,271
Other assets in excess of liabilities --1.13% ........ 71,628
----------
Net Assets--100.00% .................................. $6,325,899
----------
----------
See accompanying notes to financial statements
6
<PAGE>
MITCHELL HUTCHINS MODERATE PORTFOLIO
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1998 (unaudited)
Number of
Shares Value
- ---------- ------
Stock Mutual Funds--69.84%
65,472 PaineWebber Global Equity Fund ............. $ 1,141,825
45,384 PaineWebber Growth Fund .................... 1,151,394
106,188 PaineWebber Growth and Income Fund ......... 3,401,217
185,749 PaineWebber Small Cap Fund ................. 2,228,992
-----------
7,923,428
-----------
Bond Mutual Funds--29.90%
106,065 PaineWebber Global Income Fund ............. 1,114,744
172,507 PaineWebber High Income Fund ............... 1,147,172
78,753 PaineWebber Investment Grade Income Fund ... 850,528
30,548 PaineWebber U.S. Government Income Fund .... 280,735
-----------
3,393,179
-----------
Total Investments (cost--$11,362,501)--99.74% ......... 11,316,607
Other assets in excess of liabilities--0.26% .......... 29,991
-----------
Net Assets--100.00% ................................... $11,346,598
-----------
-----------
7
See accompanying notes to financial statements
<PAGE>
MITCHELL HUTCHINS CONSERVATIVE PORTFOLIO
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1998 (unaudited)
Number of
Shares Value
- ---------- ------
Stock Mutual Fund--29.92%
38,954 PaineWebber Growth and Income Fund ......... $1,247,705
----------
Bond Mutual Funds--68.93%
38,904 PaineWebber Global Income Fund ............. 408,880
28,889 PaineWebber Investment Grade Income Fund ... 312,002
515,184 PaineWebber Low Duration U.S. Government
Income Fund .............................. 1,226,138
100,852 PaineWebber U.S. Government Income Fund .... 926,834
----------
2,873,854
----------
Total Investments (cost--$4,051,655)--98.85% .......... 4,121,559
Other assets in excess of liabilities--1.15% .......... 48,031
----------
Net Assets--100.00% ................................... $4,169,590
----------
----------
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS PORTFOLIOS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1998 (unaudited)
Aggressive Moderate Conservative
Portfolio Portfolio Portfolio
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Investments in securities, at value (cost--$6,508,912,
$11,362,501 and $4,051,655, respectively) ........................ $ 6,254,271 $ 11,316,607 $ 4,121,559
Cash ............................................................... 45,817 43,251 47,780
Receivable for investments sold .................................... 55,113 -- --
Receivable from affiliate .......................................... 42,348 59,138 33,981
Receivable for shares of beneficial interest sold .................. 2,100 -- --
Dividends receivable ............................................... 1,085 9,071 4,596
Deferred organizational expenses ................................... 76,289 76,289 76,289
Other assets ....................................................... 74,328 72,013 71,363
------------ ------------ ------------
Total assets ....................................................... 6,551,351 11,576,369 4,355,568
------------ ------------ ------------
Liabilities
Payable for investments purchased .................................. 30,700 1,136 109
Payable for shares of beneficial interest repurchased .............. -- 9,581 --
Accrued expenses and other liabilities ............................. 194,752 219,054 185,869
------------ ------------ ------------
Total liabilities .................................................. 225,452 229,771 185,978
------------ ------------ ------------
Net Assets
Beneficial interest--$0.001 par value (unlimited amount authorized) 6,708,596 11,460,782 4,065,417
Undistributed net investment income ................................ 27,355 39,823 33,447
Accumulated net realized gains (losses)
from investment transactions...................................... (155,411) (108,113) 822
Net unrealized appreciation (depreciation) of investments .......... (254,641) (45,894) 69,904
------------ ------------ ------------
Net assets ......................................................... $ 6,325,899 $ 11,346,598 $ 4,169,590
------------ ------------ ------------
------------ ------------ ------------
Class A:
Net assets ......................................................... $ 1,988,031 $ 1,824,816 $ 547,347
------------ ------------ ------------
Shares outstanding ................................................. 161,000 145,514 41,862
------------ ------------ ------------
Net asset value and redemption price per share ..................... $12.35 $12.54 $13.08
------ ------ ------
------ ------ ------
Maximum offering price per share (net asset value plus sales charge
of 4.50%, 4.50% and 4.00% of offering price, respectively) .... $12.93 $13.13 $13.63
------ ------ ------
------ ------ ------
Class B:
Net assets ......................................................... $ 2,097,855 $ 5,764,123 $ 2,904,052
------------ ------------ ------------
Shares outstanding ................................................. 170,767 460,774 222,729
------------ ------------ ------------
Net asset value and offering price per share ....................... $12.28 $12.51 $13.04
------ ------ ------
------ ------ ------
Class C:
Net assets ......................................................... $ 2,230,114 $ 3,745,529 $ 712,865
------------ ------------ ------------
Shares outstanding ................................................. 181,580 299,519 54,605
------------ ------------ ------------
Net asset value and offering price per share ....................... $12.28 $12.51 $13.05
------ ------ ------
------ ------ ------
Class Y:
Net assets ......................................................... $ 9,899 $ 12,130 $ 5,326
------------ ------------ ------------
Shares outstanding ................................................. 800 966 407
------------ ------------ ------------
Net asset value, offering price and redemption value per share ..... $12.37 $12.55 $13.09
------ ------ ------
------ ------ ------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
MITCHELL HUTCHINS PORTFOLIOS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended
November 30, 1998 (unaudited)
----------------------------------
Aggressive Moderate Conservative
Portfolio Portfolio Portfolio
---------- --------- ------------
<S> <C> <C> <C>
Investment income:
Dividends ................................................................... $ 41,844 $ 123,754 $ 77,855
--------- --------- --------
Expenses:
Investment advisory and administration ...................................... 9,983 16,087 5,963
Service fees--Class A ....................................................... 2,352 2,152 668
Service and distribution fees--Class B ...................................... 8,636 20,829 11,381
Service and distribution fees--Class C ...................................... 10,430 16,469 2,216
Custody and accounting ...................................................... 856 1,342 495
Amortization of organizational expenses ..................................... 9,026 9,026 9,026
Transfer agency and service fees ............................................ 4,500 4,500 4,500
Legal and audit ............................................................. 18,900 19,504 18,694
Reports and notices to shareholders ......................................... 3,200 3,406 2,906
Federal and state registration .............................................. 48,618 49,137 47,779
Trustees' fees .............................................................. 5,250 5,250 5,250
Other expenses .............................................................. 5,545 806 852
--------- --------- --------
127,296 148,508 109,730
Less: Fee waivers and expense reimbursements from adviser ................... (105,879) (109,059) (95,465)
--------- --------- --------
Net expenses ................................................................ 21,417 39,449 14,265
--------- --------- --------
Net investment income ....................................................... 20,427 84,305 63,590
--------- --------- --------
Realized and unrealized gains (losses) from investment activities:
Net realized losses from investment transactions ............................ (165,471) (140,991) (5,501)
Net change in unrealized appreciation (depreciation) of investments ......... (176,784) (2,702) 69,847
--------- --------- --------
Net realized and unrealized gains (losses) from investment activities ....... (342,255) (143,693) 64,346
--------- --------- --------
Net increase (decrease) in net assets resulting from operations ............. $(321,828) $ (59,388) $127,936
--------- --------- --------
--------- --------- --------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
MITCHELL HUTCHINS AGGRESSIVE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended February 24,
November 30, 1998 1998+ through
(unaudited) May 31, 1998
----------- ------------
<S> <C> <C>
From operations:
Net investment income........................................................ $ 20,427 $ 6,928
Net realized gains (losses) from investment transactions..................... (165,471) 10,060
Net change in unrealized depreciation of investments......................... (176,784) (77,857)
---------- -----------
Net decrease in net assets resulting from operations (321,828) (60,869)
---------- -----------
From beneficial interest transactions:
Net proceeds from the sale of shares......................................... 2,287,528 5,869,254
Cost of shares repurchased................................................... (760,065) (728,121)
---------- -----------
Net increase in net assets from beneficial interest transactions............. 1,527,463 5,141,133
---------- -----------
Net increase in net assets................................................... 1,205,635 5,080,264
Net assets:
Beginning of period......................................................... 5,120,264 40,000
---------- -----------
End of period (including undistributed net investment income of $27,355 and
$6,928, respectively)........................................................ $6,325,899 $ 5,120,264
---------- -----------
---------- -----------
</TABLE>
- ------------------
+ Commencement of operations
See accompanying notes to financial statements
11
<PAGE>
MITCHELL HUTCHINS MODERATE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended February 24,
November 30, 1998 1998+ through
(unaudited) May 31, 1998
----------------- ---------------
<S> <C> <C>
From operations:
Net investment income........................................................ $ 84,305 $ 26,759
Net realized gains (losses) from investment transactions..................... (140,991) 32,878
Net change in unrealized depreciation of investments......................... (2,702) (43,192)
----------- ------------
Net increase (decrease) in net assets resulting from operations.............. (59,388) 16,445
----------- ------------
Dividends to shareholders from:
Net investment income--Class A............................................... (18,260) --
Net investment income--Class B............................................... (29,731) --
Net investment income--Class C............................................... (23,119) --
Net investment income--Class Y............................................... (131) --
----------- ------------
Total dividends to shareholders.............................................. (71,241) --
----------- ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......................................... 5,295,856 8,439,503
Cost of shares repurchased................................................... (1,331,749) (1,051,025)
Proceeds from dividends reinvested........................................... 68,197 --
----------- ------------
Net increase in net assets from beneficial interest transactions............. 4,032,304 7,388,478
----------- ------------
Net increase in net assets................................................... 3,901,675 7,404,923
Net assets:
Beginning of period.......................................................... 7,444,923 40,000
----------- ------------
End of period (including undistributed net investment income of $39,823 and
$26,759, respectively)...................................................... $11,346,598 $ 7,444,923
----------- ------------
</TABLE>
- ------------------
+ Commencement of operations
See accompanying notes to financial statements
12
<PAGE>
MITCHELL HUTCHINS CONSERVATIVE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended February 24,
November 30, 1998 1998+ through
(unaudited) May 31, 1998
----------- ------------
<S> <C> <C>
From operations:
Net investment income........................................................ $ 63,590 $ 16,651
Net realized gains (losses) from investment transactions..................... (5,501) 6,323
Net change in unrealized appreciation of investments......................... 69,847 57
---------- -----------
Net increase in net assets resulting from operations......................... 127,936 23,031
---------- -----------
Dividends to shareholders from:
Net investment income--Class A............................................... (8,541) --
Net investment income--Class B............................................... (29,894) --
Net investment income--Class C............................................... (8,272) --
Net investment income--Class Y............................................... (87) --
---------- -----------
Total dividends to shareholders.............................................. (46,794) --
---------- -----------
From beneficial interest transactions:
Net proceeds from the sale of shares......................................... 1,745,681 2,749,388
Cost of shares repurchased................................................... (366,637) (117,062)
Proceeds from dividends reinvested........................................... 34,047 --
---------- -----------
Net increase in net assets from beneficial interest transactions............. 1,413,091 2,632,326
---------- -----------
Net increase in net assets................................................... 1,494,233 2,655,357
Net assets:
Beginning of period......................................................... 2,675,357 20,000
---------- -----------
End of period (including undistributed net investment income of $33,447 and
$16,651, respectively)...................................................... $4,169,590 $ 2,675,357
---------- -----------
---------- -----------
</TABLE>
- -----------------
+ Commencement of operations
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Aggressive Portfolio ("Aggressive Portfolio"), Mitchell
Hutchins Moderate Portfolio ("Moderate Portfolio") and Mitchell Hutchins
Conservative Portfolio ("Conservative Portfolio") (collectively the
"Portfolios") are diversified series of Mitchell Hutchins Portfolios (the
"Trust"), an open-end management investment company organized as a Delaware
business trust on August 20, 1997. Prior to commencement of operations,
February 24, 1998, the Portfolios had no activity other than the sale of
shares on December 29, 1997 to Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), the investment adviser and a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"), as follows:
<TABLE>
<CAPTION>
Aggressive Moderate Conservative
Portfolio Portfolio Portfolio
---------- --------- ------------
<S> <C> <C> <C>
Class A
Shares sold 800,800 and 400, respectively....................... $ 10,000 $ 10,000 $ 5,000
Class B
Shares sold 800,800 and 400, respectively....................... 10,000 10,000 5,000
Class C
Shares sold 800,800 and 400, respectively....................... 10,000 10,000 5,000
Class Y
Shares sold 800,800 and 400, respectively....................... 10,000 10,000 5,000
</TABLE>
Costs incurred by the Portfolios in connection with their organization have
been deferred and are being amortized using the straight-line method over a
period not to exceed sixty months from the commencement of operations. If any
initial shares are redeemed by Mitchell Hutchins during the amortization
period, the redemption proceeds shall be reduced by the pro rata portion of
unamortized organizational expenses which the number of shares redeemed bears
to the number of initial shares then outstanding.
Currently, each Portfolio offers Class A, Class B, Class C and Class Y
shares. Each class represents interests in the assets of the applicable
Portfolio. The classes are identical except for differences in the sales
charge structures, ongoing service and distribution charges and certain
transfer agency and related expenses. In addition, Class B shares and all
corresponding dividend reinvested shares automatically convert to Class A
shares approximately six years after issuance. All classes of shares have
equal voting privileges except that Class A, Class B and Class C shares have
exclusive voting rights with respect to their service and/or distribution
plan. There is no distribution plan with respect to the Portfolios' Class Y
shares.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Portfolios' management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies:
Valuation of Investments--The net asset value of a Portfolio's shares
fluctuates and is determined separately for each class as of the close of
regular trading on the New York Stock Exchange (currently 4:00 p.m., Eastern
time) each business day. Each Portfolio's net asset value per share is
determined by dividing the value of the securities it holds (that is, the
shares of Underlying Funds), plus any cash or other assets, minus all
liabilities, by the total number of Portfolio shares outstanding. The value of
each Underlying Fund will be its net asset value at the time of computation.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Dividend income
is recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
to each class of shares based upon the relative net asset value of outstanding
shares (or the value of dividend-eligible shares, as appropriate) of each class
at the beginning of the day (after adjusting for current capital share activity
of the respective classes). Class specific expenses are charged directly to the
applicable class of shares.
Dividends and Distributions--Dividends and distributions to shareholders
are recorded on the ex-dividend date. Dividends from net investment income and
distributions from realized capital gains are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on the tax-basis treatment; temporary differences do not require
reclassification.
INVESTMENT RISK
All the Portfolios hold Underlying Funds that invest in equity securities,
although the specific Underlying Funds and the percentage of a Portfolio's
assets invested in each Underlying Fund varies. Equity securities historically
have shown greater growth potential than other types of securities, but they
have also shown greater volatility.
All Portfolios hold Underlying Funds that invest in bonds, although the
specific Underlying Funds and the percentage of a Portfolio's assets invested
in each Underlying Fund varies. Bonds are subject to interest rate and credit
risk. Interest rate risk is the risk that the interest rates will rise and as
a result bond prices will fall, lowering the value of the Underlying Fund's
investments. Credit risk is the risk that the issuer or guarantor may be
unable or unwilling to pay interest or repay principal on the bond. Some
Underlying Funds may invest in bonds rated below investment grade, which are
subject to greater risks of default or price fluctuation than investment grade
bonds and are considered predominantly speculative.
Some Underlying Funds are subject to the special risks of investing in
foreign equity securities or foreign bonds, which include possible adverse
political, social and economic developments abroad and differing
characteristics of foreign economics and markets. These risks are greater with
respect to securities of issuers located in emerging markets.
Each Underlying Fund (other than PaineWebber Cashfund, Inc.) may use
derivatives, such as options, futures contracts, foreign currency contracts,
swaps and similar instruments, in its investment activities. Each type of
derivative instrument presents its own special risks.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Portfolios. In accordance with the Advisory Contract, each Portfolio pays
Mitchell Hutchins an investment advisory and administration fee, which is
computed and accrued daily and paid monthly, at the annual rate of 0.35% of
each Portfolio's average daily net assets. For the six months ended November
30, 1998, Mitchell Hutchins waived their entire fee. In addition, Mitchell
Hutchins reimbursed other expenses of $95,896, $92,972 and $89,502, to the
Aggressive Portfolio, Moderate Portfolio and Conservative Portfolio,
respectively, for the six months ended November 30, 1998.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Portfolio's shares and has
appointed PaineWebber as the exclusive dealer for the sale of those shares.
Under separate plans of service and/or distribution pertaining to Class A,
Class B, and Class C shares, each Portfolio pays Mitchell Hutchins monthly
service fees at the annual rate of 0.25% of the average daily net assets of
Class A, Class B, and Class C shares. The Aggressive Portfolio and Moderate
Portfolio each pay Mitchell Hutchins monthly distribution fees at the annual
rate of 0.75% of the average daily net assets of Class B and Class C shares
while the Conservative Portfolio pays monthly distribution fees at the annual
rate of 0.75% and 0.50% of the average daily net assets of Class B and Class C
shares, respectively. There is no distribution plan with respect to the
Portfolios' Class Y shares.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid by the shareholders upon the purchase of Class A shares and the
contingent deferred sales charges paid by the shareholders upon certain
redemptions of Class A, Class B, and Class C shares. Mitchell Hutchins has
informed each Portfolio that for the six months ended November 30, 1998, it
earned $25,231, $16,437 and $1,358 in sales charges for the Aggressive
Portfolio, Moderate Portfolio and Conservative Portfolio, respectively.
TRANSFER AGENCY AND RELATED SERVICES FEES
PaineWebber provides transfer agency related services to each Portfolio
pursuant to a delegation of authority from PFPC, Inc., the Portfolios'
transfer agent, and is compensated for these services by PFPC, Inc., not the
Portfolios. For the six months ended November 30, 1998, PaineWebber received
from PFPC, Inc., not the Portfolios, approximately 41%, 30% and 17% of the
total transfer agency and related services fees collected by PFPC, Inc. from
the Aggressive Portfolio, Moderate Portfolio and Conservative Portfolio,
respectively.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November
30, 1998 was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1998, the components of net unrealized appreciation
(depreciation) were as follows:
<TABLE>
<CAPTION>
Aggressive Moderate Conservative
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Gross appreciation (investments having an excess of value over cost)................ $ 65,285 $ 174,447 73,025
Gross depreciation (investments having an excess of cost over value)................ (319,926) (220,341) (3,121)
----------- ----------- -----------
Net appreciation (depreciation) of investments.................................. $ (254,641) $ (45,894) $ 69,904
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
For the six months ended November 30, 1998, total aggregate purchases and
sales of portfolio securities (underlying funds), excluding short-term
securities, were as follows:
<TABLE>
<CAPTION>
Aggressive Moderate Conservative
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Purchases................................................... $ 4,175,591 $ 8,509,233 $ 2,743,530
Sales....................................................... 2,455,329 4,118,363 1,226,247
</TABLE>
FEDERAL INCOME TAX STATUS
Each Portfolio intends to distribute substantially all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
to qualify for treatment as a regulated investment company. Accordingly, no
provision for federal income taxes is required. In addition, by distributing
during each calendar year, substantially all of its net investment income and
capital gains, if any, each Portfolio intends not to be subject to a federal
excise tax.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
SHARES OF 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 Class Y
-------------------------- -------------------------- -------------------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Aggressive Portfolio
For the Six Months
Ended November 30,
1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ...... 59,773 $ 745,801 74,718 $ 915,323 50,957 $ 626,404 -- --
Shares repurchased (23,685) (267,872) (15,047) (177,804) (27,404) (314,389) -- --
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Net increase ..... 36,088 $ 477,929 59,671 $ 737,519 23,553 $ 312,015 -- --
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
<CAPTION>
Class A Class B Class C Class Y
-------------------------- -------------------------- -------------------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Aggressive Portfolio
For the Period
February 24, 1998+
through May 31, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ...... 145,085 $ 1,900,691 120,084 $ 1,581,786 182,148 $ 2,386,777 -- --
Shares
repurchased .... (20,973) (272,878) (9,788) (129,843) (24,921) (325,400) -- --
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Net increase ..... 124,112 $ 1,627,813 110,296 $ 1,451,943 157,227 $ 2,061,377 -- --
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
<CAPTION>
Class A Class B Class C Class Y
-------------------------- -------------------------- -------------------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Moderate Portfolio
For the Six Months Ended
November 30, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ........ 47,599 $ 587,356 291,242 $ 3,527,589 94,136 $ 1,180,911 -- --
Shares
repurchased ...... (33,103) (405,831) (61,911) (768,909) (13,669) (157,009) -- --
Dividends
reinvested ....... 1,423 17,065 2,345 27,987 1,920 23,014 11 $ 131
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Net increase ....... 15,919 $ 198,590 231,676 $ 2,786,667 82,387 $ 1,046,916 11 $ 131
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
<CAPTION>
Class A Class B Class C Class Y
-------------------------- -------------------------- -------------------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Moderate Portfolio
For the Period February 24,
1998+ through May 31, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ......... 158,341 $ 2,042,155 244,089 $ 3,131,455 251,127 $ 3,252,346 155 $ 1,969
Shares repurchased .. (30,428) (393,832) (14,909) (190,950) (34,795) (454,665) -- --
Shares converted from
Class B to Class A 882 11,578 (882) (11,578) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
Net increase ........ 128,795 $ 1,659,901 228,298 $ 2,928,927 216,332 $ 2,797,681 155 $ 1,969
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
----------- ----------- ----------- ----------- ----------- ----------- ------ --------
</TABLE>
- --------------------
+ Commencement of issuance of shares
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
SHARES OF BENEFICIAL INTEREST (concluded)
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
----------------- ---------------- ---------------- ---------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conservative Portfolio
For the Six Months Ended
November 30, 1998
Shares sold .................. 3,018 $ 38,789 105,278 $1,344,716 28,290 $ 362,176 -- --
Shares repurchased ........... (2,174) (27,872) (14,575) (185,825) (11,976) (152,940) -- --
Shares converted from
Class B to Class A ......... 200 2,570 (201) (2,570) -- -- -- --
Dividends reinvested ......... 344 4,363 1,920 24,301 418 5,296 7 $ 87
-------- ---------- ------- ---------- ------ ----------- ---- ------
Net increase ................. 1,388 $ 17,850 92,422 $1,180,622 16,732 $ 214,532 7 $ 87
-------- ---------- ------- ---------- ------ ----------- ---- ------
-------- ---------- ------- ---------- ------ ----------- ---- ------
<CAPTION>
Class A Class B Class C Class Y
----------------- ---------------- ---------------- ---------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conservative Portfolio
For the Period February 24, 1998+
through May 31, 1998
Shares sold .................. 40,074 $ 508,222 139,078 $1,765,172 37,473 $ 475,994 -- --
Shares repurchased ........... -- -- (9,171) (117,062) -- -- -- --
-------- ---------- ------- ---------- ------ ----------- ---- ------
Net increase ................. 40,074 $ 508,222 129,907 $1,648,110 37,473 $ 475,994 -- --
-------- ---------- ------- ---------- ------ ----------- ---- ------
-------- ---------- ------- ---------- ------ ----------- ---- ------
</TABLE>
- ---------------------------
+ Commencement of issuance of shares
18
<PAGE>
MITCHELL HUTCHINS AGGRESSIVE PORTFOLIO
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 Class Y
------------------- ------------------ ------------------- ----------------------
For the For the For the For the For the For the For the For the
Six Period Six Period Six Period Six Period
Months February 24, Months February 24, Months February 24, Months February 24,
Ended 1998+ Ended 1998+ Ended 1998+ Ended 1998+
November 30, through November 30, through November 30, through November 30, through
1998 May 31, 1998 May 31, 1998 May 31, 1998 May 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998 (unaudited) 1998
---------- -------- ----------- ------- ----------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $12.98 $12.50 $12.96 $12.50 $12.96 $12.50 $12.99 $12.50
------ ------ ------ ------ ------ ------ ------ ------
Net investment income.................. 0.07 0.03 0.02 0.01 0.03 0.01 0.09 0.05
Net realized and unrealized gains
(losses) from investments ........... (0.70) 0.45 (0.70) 0.45 (0.71) 0.45 (0.71) 0.44
------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations .......................... (0.63) 0.48 (0.68) 0.46 (0.68) 0.46 (0.62) 0.49
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period ........ $12.35 $12.98 $12.28 $12.96 $12.28 $12.96 $12.37 $12.99
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total investment return(1)............. (4.85)% 3.84% (5.25)% 3.68% (5.25)% 3.68% (4.77)% 3.92%
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Ratios/Supplemental data:
Net assets, end of period (000's)...... $1,988 $1,622 $2,098 $1,440 $2,230 $2,048 $ 10 $ 10
Expenses to average net assets,
net of waivers and reimbursements
from adviser......................... 0.25%* 0.25%* 1.00%* 1.00%* 1.00%* 1.00%* 0.00%* 0.00%*
Expenses to average net assets,
before waivers and
reimbursements from adviser.......... 3.94%* 3.98%* 4.82%* 4.80%* 4.64%* 4.55%* 3.93%* 3.76%*
Net investment income to average
net assets, net of waivers and
reimbursements from adviser.......... 1.23%* 1.49%* 0.43%* 0.70%* 0.49%* 0.69%* 1.50%* 1.57%*
Net investment loss to average
net assets, before waivers and
reimbursements from adviser.......... (2.46)%* (2.24)%* (3.39)%* (3.10)%* (3.15)%* (2.86)%* (2.43)%* (2.19)%*
Portfolio turnover rate ............... 45% 6% 45% 6% 45% 6% 45% 6%
</TABLE>
- -------------------
+ Commencement of issuance of shares
* 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, if any, 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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year have not been annualized.
19
<PAGE>
MITCHELL HUTCHINS MODERATE PORTFOLIO
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 Class Y
-------------------- ------------------------ --------------------- -------------------
For the For the For the For the For the For the For the For the
Six Period Six Period Six Period Six Period
Months February 24, Months February 24, Months February 24, Months February 24,
Ended 1998+ Ended 1998+ Ended 1998+ Ended 1998+
November 30, through November 30, through November 30, through November 30, through
1998 May 31, 1998 May 31, 1998 May 31, 1998 May 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998 (unaudited) 1998
---------- ------- ----------- ------- ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $12.93 $12.50 $12.90 $12.50 $12.90 $12.50 $12.94 $12.50
------ ------ ------ ------ ------ ------ ------ ------
Net investment income................. 0.14 0.06 0.08 0.04 0.09 0.04 0.17 0.09
Net realized and unrealized gains
(losses) from investments........... (0.41) 0.37 (0.38) 0.36 (0.39) 0.36 (0.42) 0.35
------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations........................... (0.27) 0.43 (0.30) 0.40 (0.30) 0.40 (0.25) 0.44
------ ------ ------ ------ ------ ------ ------ ------
Dividends from net investment income... (0.12) -- (0.09) -- (0.09) -- (0.14) --
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period......... $12.54 $12.93 $12.51 $12.90 $12.51 $12.90 $12.55 $12.94
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total investment return (1)............ (2.01)% 3.44% (2.28)% 3.20% (2.31)% 3.20% (1.91)% 3.52%
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Ratios/Supplemental data:
Net assets, end of period (000's)...... $1,825 $1,676 $5,764 $2,956 $3,746 $2,801 $ 12 $ 12
Expenses to average net assets,
net of waivers and reimbursements
from adviser......................... 0.25%* 0.25%* 1.00%* 1.00%* 1.00%* 1.00%* 0.00%* 0.00%*
Expenses to average net assets,
before waivers and
reimbursements from adviser.......... 2.67%* 2.78%* 3.36%* 3.57%* 3.36%* 3.29%* 2.71%* 2.59%*
Net investment income to average
net assets, net of waivers and
reimbursements from adviser.......... 2.46%* 2.63%* 1.68%* 1.87%* 1.70%* 1.92%* 2.72%* 2.76%*
Net investment income (loss) to average
net assets, before waivers and
reimbursements from adviser.......... 0.04%* 0.10%* (0.68)%* (0.70)%* (0.66)%* (0.37)%* 0.01%* 0.17%*
Portfolio turnover rate ............... 46% 13% 46% 13% 46% 13% 46% 13%
</TABLE>
- ----------------
+ Commencement of issuance of shares
* 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, if any, 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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year have not been annualized.
20
<PAGE>
MITCHELL HUTCHINS CONSERVATIVE PORTFOLIO
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 Class Y
-------------------- ------------------- ---------------------- ---------------------
For the For the For the For the For the For the For the For the
Six Period Six Period Six Period Six Period
Months February 24, Months February 24, Months February 24, Months February 24,
Ended 1998+ Ended 1998+ Ended 1998+ Ended 1998+
November 30, through November 30, through November 30, through November 30, through
1998 May 31, 1998 May 31, 1998 May 31, 1998 May 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998 (unaudited) 1998
----------- -------- ------------ -------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $12.81 $12.50 $12.79 $12.50 $12.80 $12.50 $12.82 $12.50
------ ------ ------ ------ ------ ------ ------ ------
Net investment income................. 0.27 0.10 0.19 0.07 0.21 0.08 0.29 0.16
Net realized and unrealized gains
from investments.................... 0.20 0.21 0.23 0.22 0.22 0.22 0.20 0.16
------ ------ ------ ------ ------ ------ ------ ------
Net increase from investment
operations.......................... 0.47 0.31 0.42 0.29 0.43 0.30 0.49 0.32
------ ------ ------ ------ ------ ------ ------ ------
Dividends from net investment income.. (0.20) -- (0.17) -- (0.18) -- (0.22) --
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period........ $13.08 $12.81 $13.04 $12.79 $13.05 $12.80 $13.09 $12.82
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total investment return(1)............ 3.75% 2.48% 3.36% 2.32% 3.42% 2.40% 3.86% 2.56%
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Ratios/Supplemental data:
Net assets, end of period (000's).... $ 547 $ 519 $2,904 $1,667 $ 713 $ 485 $ 5 $ 5
Expenses to average net assets,
net of waivers and reimbursements
from adviser ...................... 0.25%* 0.25%* 1.00%* 1.00%* 0.75%* 0.75%* 0.00%* 0.00%*
Expenses to average net assets,
before waivers and
reimbursements from adviser........ 5.76%* 6.43%* 6.61%* 7.13%* 6.41%* 6.99%* 5.43%* 6.19%*
Net investment income to average
net assets, net of waivers and
reimbursements from adviser......... 4.35%* 4.66%* 3.56%* 3.92%* 3.82%* 4.23%* 4.61%* 4.75%*
Net investment loss to average
net assets, before waivers and
reimbursements from adviser........ (1.16)%* (1.52)%* (2.05)%* (2.21)%* (1.84)%* (2.00)%* (0.82)%* (1.43)%*
Portfolio turnover rate.............. 37% 11% 37% 11% 37% 11% 37% 11%
</TABLE>
- ----------------
+ Commencement of issuance of shares
* 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, if any, 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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year have not been annualized.
21
<PAGE>
[This Page Intentionally Left Blank]
22
<PAGE>
- ------------------------------------------------------------
Trustees
E. Garrett Bewkes, Jr.
Chairman Mary C. Farrell
Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
Principal Officers
Margo N. Alexander T. Kirkham Barneby
President Vice President
Victoria E. Schonfeld Dennis McCauley
Vice President Vice President
Dianne E. O'Donnell Mark A. Tincher
Vice President and Secretary Vice President
Paul H. Schubert
Vice President and Treasurer
Investment Adviser,
Administrator and Distributor
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
This report is not to be used in conjunction with the offering of shares of
the Portfolios unless accompanied or preceded by an effective prospectus.
The financial information included herein is taken from the records of the
Portfolios without examination by independent auditors who do not express an
opinion thereof.
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
corresponding firm. Read the prospectus carefully before investing.
PaineWebber offers a family of 27 funds which encompass a diversified range of
investment goals.
Bond Funds
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
Tax-Free Bond Funds
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
Stock Funds
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Tax-Managed Equity Fund
o Utility Income Fund
Asset Allocation Funds
o Balanced Fund
o Tactical Allocation Fund
Global Funds
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
Mitchell Hutchins Portfolios
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
PaineWebber Money Market Fund
[LOGO] PaineWebber
(Copyright )1999 PaineWebber Incorporated
Member SIPC
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SEMIANNUAL REPORT
MITCHELL HUTCHINS
PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
November 30, 1998
