<PAGE>
MITCHELL HUTCHINS SERIES TRUST--MONEY MARKET PORTFOLIO
SEMIANNUAL REPORT
Dear Contract Owner, August 20, 1999
We are pleased to present you with the semiannual report for the Mitchell
Hutchins Series Trust--Money Market Portfolio for the six-month period ended
June 30, 1999.
MARKET REVIEW
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[GRAPHIC]
During the six-month period, inflation risk became the dominant theme
driving bond yields. Interest rates rose as the markets reacted to improving
economic prospects in Asia and Latin America, rapidly growing U.S. demand,
higher oil prices and fears that future wage increases might not be offset by
commodity deflation. At the end of the period, the Federal Reserve raised the
federal funds rate by 0.25% to 5%.
PORTFOLIO REVIEW
PERFORMANCE AND CHARACTERISTICS, JUNE 30, 1999
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<TABLE>
<S> <C>
7-Day Current Yield 3.41%
Weighted Average Maturity 51 days
Net Assets $6.8 million
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</TABLE>
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We remained slightly bullish on the fixed income markets during the first
part of the period, expecting interest rates to remain unchanged. Since we did
not expect major changes in rates, we kept the Portfolio's weighted average
maturity slightly long, about 5-10 days above the average of its peer group.
During the last part of the period, we shortened the maturity to 3-5 days above
the peer group average in anticipation of rising interest rates. We maintained
our focus on top-tier credit quality instruments.
OUTLOOK
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[GRAPHIC]
We are closely monitoring the market as Y2K approaches. It is likely that
issues of new short-term debt will decrease toward year-end, limiting supplies
and triggering price increases. Also, investors might seek safety by reducing
their exposure to corporate credits and increasing their positions in U.S.
government securities, precipitating a "flight to quality." To provide
sufficient liquidity at year-end, we expect to maintain a position of about 20%
in U.S. Government securities.* However, this planned defensive posture may
change in response to changing market circumstances as 1999 draws to a close.
*Weightings represent percentages of portfolio assets as of June 30, 1999. The
Portfolio is actively managed and its composition will vary over time.
1
<PAGE>
SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief President and Chief
Executive Officer Operating Officer
Mitchell Hutchins Asset Mitchell Hutchins Asset
Management Inc. Management Inc.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS JUNE 30, 1999(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------- -------- -----------
<C> <S> <C> <C> <C>
BANK NOTES (DOMESTIC)--7.42%
$ 200 First Tennessee Bank NA, Memphis............. 07/06/99 5.449%* $ 200,000
300 KeyBank NA................................... 04/25/00 5.750 301,224
-----------
Total Bank Notes (cost--$501,224)........................ 501,224
-----------
BANKER ACCEPTANCE--4.43%
300 Toronto Dominion Bank (cost--$299,167)....... 07/21/99 5.000 299,167
-----------
CERTIFICATES OF DEPOSIT (YANKEE)--8.88%
200 Bayerische Vereinsbank AG.................... 04/28/00 5.150 199,849
100 Canadian Imperial Bank of Commerce........... 04/12/00 5.100 99,962
200 Royal Bank of Canada......................... 07/02/99 4.890* 199,916
100 Toronto Dominion Bank........................ 04/17/00 5.060 99,954
-----------
Total Certificates of Deposit (cost--$599,681)........... 599,681
-----------
COMMERCIAL [email protected]%
ASSET BACKED-AUTO & TRUCK--4.43%
300 New Center Asset Trust....................... 07/14/99 4.810 299,479
-----------
ASSET BACKED-BANKING--3.27%
222 Woodstreet Funding Corp...................... 07/26/99 5.130 221,209
-----------
ASSET BACKED-MISCELLANEOUS--4.44%
300 Preferred Receivables Funding Corp........... 07/06/99 4.820 299,799
-----------
AUTO & TRUCK--8.88%
300 BMW US Capital Inc........................... 07/01/99 5.700 300,000
300 Ford Motor Credit Corp....................... 07/08/99 4.840 299,718
-----------
599,718
-----------
BANKING--4.43%
300 BBL North America Funding Corp............... 07/26/99 4.810 298,998
-----------
BROKER-DEALER--4.44%
300 Goldman Sachs Group, Inc..................... 07/01/99 5.750 300,000
-----------
COMPUTERS--2.95%
200 IBM Corp..................................... 07/19/99 4.950 199,505
-----------
CONSUMER PRODUCTS--4.44%
300 Gillette Co.................................. 07/01/99 5.700 300,000
-----------
DRUGS, HEALTHCARE--4.44%
300 American Home Products Corp.................. 07/01/99 5.700 300,000
-----------
ENERGY--2.96%
200 BP America Inc............................... 07/07/99 4.950 199,835
-----------
</TABLE>
3
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------- -------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER@--(CONCLUDED)
FINANCE-RETAIL--4.42%
$ 300 American Express Credit Co................... 08/04/99 4.800% $ 298,640
-----------
FOOD, BEVERAGE & TOBACCO--4.44%
300 Diageo Capital PLC........................... 07/01/99 4.840 300,000
-----------
INSURANCE--4.44%
300 USAA Capital Corp............................ 07/09/99 5.000 299,667
-----------
MANUFACTURING-DIVERSIFIED--4.88%
330 BTR Dunlop Finance Inc....................... 07/01/99 5.750 330,000
-----------
TELECOMMUNICATIONS--8.11%
300 AT&T Capital Corp............................ 08/13/99 4.830 298,269
250 BellSouth Capital Funding Corp............... 07/13/99 4.960 249,587
-----------
547,856
-----------
Total Commercial Paper (cost--$4,794,706)................ 4,794,706
-----------
SHORT-TERM CORPORATE OBLIGATIONS--7.43%
BANKING--7.43%
200 Banc One Corp................................ 03/24/00 6.700@ 202,158
300 Norwest Corp................................. 08/31/99 5.550@ 299,985
-----------
Total Short-Term Corporate Obligations
(cost--$502,143)....................................... 502,143
-----------
REPURCHASE AGREEMENT--1.40%
95 Repurchase Agreement dated 06/30/99 with
State Street Bank & Trust Company,
collateralized by $96,719 U.S.Treasury
Bonds, 5.625% due 11/15/11 (value--
$96,900); proceeds: $95,011
(cost--$95,000)............................ 07/01/99 4.000 95,000
-----------
Total Investments (cost--$6,791,921 which approximates
cost for federal income tax purposes)--100.53%......... 6,791,921
Liabilities in excess of other assets--(0.53)%........... (36,003)
-----------
Net Assets (applicaple to 6,764,632 shares of beneficial
interest outstanding at $1.00 per share)--100.00%...... $6,755,918
-----------
-----------
</TABLE>
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* Variable rate security--Maturity date reflects earlier of reset date or
stated maturity. The interest rates shown are the current rates at June 30,
1999 and reset periodically.
@ Interest rates shown are discount rates at dates of purchase.
Weighted average maturity--51 days.
See accompanying notes to financial statements
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Interest............................................................................................................ $ 206,888
-------------
EXPENSES:
Investment advisory and administration.............................................................................. 20,446
Legal and audit..................................................................................................... 19,876
Reports and notices to shareholders................................................................................. 12,182
Trustees' fees...................................................................................................... 3,750
Custody and accounting.............................................................................................. 1,653
Transfer agency fees and related service expenses................................................................... 750
Other expenses...................................................................................................... 2,170
-------------
60,827
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NET INVESTMENT INCOME............................................................................................... 146,061
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NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS..................................................................... 66
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................................ $ 146,127
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
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<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................................... $ 146,061 $ 422,080
Net realized gains from investment transactions................................................. 66 32
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Net increase in net assets resulting from operations............................................ 146,127 422,112
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DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income........................................................................... (146,061) (422,080)
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FROM BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets from beneficial interest transactions..................... (2,826,433) 676,361
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Net increase (decrease) in net assets........................................................... (2,826,367) 676,393
NET ASSETS:
Beginning of period............................................................................. 9,582,285 8,905,892
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End of period................................................................................... $ 6,755,918 $ 9,582,285
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</TABLE>
See accompanying notes to financial statements
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust -- Money Market Portfolio (the "Portfolio") is
a diversified Portfolio of Mitchell Hutchins Series Trust (the "Fund"), which is
organized under Massachusetts law by a Declaration of Trust dated November 21,
1986 and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund operates as a series company currently offering thirteen
Portfolios. Shares of each Portfolio are offered only to insurance company
separate accounts that fund certain variable contracts.
The Fund accounts separately for the assets, liabilities and operations for
each Portfolio. Expenses directly attributable to each Portfolio are charged to
that Portfolio's operations; expenses which are applicable to all Portfolios are
allocated among them on a pro rata basis.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Fund's 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 AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value, unless the Fund's
Board of Trustees determines that this does not represent fair value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/ or retention of the
collateral may be subject to legal proceedings. The Portfolio may participate in
joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly-owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber") and investment
adviser and administrator of the Portfolio.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Portfolio to
meet their obligations may be affected by economic developments, including those
particular to a specific industry or region.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's Board of Trustees has approved an investment advisory and
administration contract with Mitchell Hutchins. In accordance with the Advisory
Contract the Portfolio pays Mitchell Hutchins an investment advisory and
administration fee, which is accrued daily and payable monthly at an annual rate
of 0.50% of the Portfolio's average daily net assets. At June 30, 1999, the
Portfolio owed Mitchell Hutchins $2,859 in investment advisory and
administration fees.
OTHER LIABILITIES
At June 30, 1999, the amount payable for dividends aggregate $21,293.
FEDERAL TAX STATUS
The Portfolio 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.
At December 31, 1998, the Portfolio had a net capital loss carryforward of
$10,379 which is available as a reduction, to the extent provided in the
regulations, of any future net capital gains realized before the end of fiscal
year 2002. To the extent that the losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
SHARES OF BENEFICIAL INTEREST
There was an unlimited amount of $0.001 par value beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Shares sold................................................. 2,428,967 7,550,491
Shares redeemed............................................. (5,411,555) (7,305,182)
Dividends reinvested........................................ 156,167 431,052
------------- -----------------
Net increase (decrease) in shares outstanding............... (2,826,421) 676,361
------------- -----------------
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</TABLE>
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 1999 -----------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
Net investment income...................................... 0.02 0.04 0.04 0.04 0.05 0.03
------------- --------- --------- --------- --------- ---------
Dividends from net investment income....................... (0.02) (0.04) (0.04) (0.04) (0.05) (0.03)
------------- --------- --------- --------- --------- ---------
Net asset value, end of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Total investment return (1)................................ 1.77% 4.51% 4.53% 4.32% 5.22% 3.43%
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's).......................... $ 6,756 $ 9,582 $ 8,906 $ 12,287 $ 21,974 $ 25,042
Expenses to average net assets............................. 1.49%* 1.15% 1.22% 1.17% 0.79% 0.88%
Net investment income to average net assets................ 3.57%* 4.42% 4.43% 4.27% 5.23% 3.56%
</TABLE>
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* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates and a sale at net asset value on the last
day of each period reported. The figures do not include additional contract
level charges; results would be lower if such charges were included. Total
investment return for periods of less than one year has not been
annualized.
<PAGE>
SEMIANNUAL REPORT
- ------------------------------------------
MITCHELL
HUTCHINS SERIES
TRUST
MONEY MARKET
PORTFOLIO
JUNE 30, 1999
- -C-1999 PaineWebber Incorporated
