<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME 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--Growth and Income Portfolio for the six-month period
ended June 30, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC] The S&P 500 Index advanced an impressive 12.38% for the period.
Beginning in early April, market leadership shifted dramatically toward
value-oriented stocks and away from the high price-to-earnings growth stocks
that led the market for most of the last two years. As investors began to seek
undervalued stocks, the performance gap between growth and value narrowed to
more normal levels. Value stocks outperformed growth stocks by a significant
margin for the six months ended June 30, 1999: the Russell 1000 Value Index
gained 12.87% and the Russell 1000 Growth Index returned 10.45%. Smaller- and
mid-capitalization stocks also fared well.
As market leadership broadened, growth stocks again outperformed value stocks in
June by about four percentage points. We attribute this broadening to improved
global economies, particularly those in Asia and Latin America, which in turn
led to a rise in interest rates. The Federal Reserve raised the federal funds
rate by 0.25% on June 30 and assumed a neutral stance, meaning no predisposition
to raise or lower rates at its meeting in August.
OUTLOOK
We expect second-half 1999 economic growth (real gross domestic product) to slow
to 2.5-3.0% from about 4% in the first half, inflation to remain modest between
2.0-2.5% and corporate earnings to grow about 9-10%. In light of these factors,
our valuation model indicates that the stock market, as measured by the S&P 500
Index, is about 25% above fair value.
Typically, these valuations would be cause for concern; however, two factors
distinguish the current environment from recent quarters when valuations were at
similar levels. First, we feel that the majority of the negative move in
interest rates is behind us; and second, corporate profit growth expectations
are being raised, not lowered. Given this combination of rising earnings growth
rates and relatively stable interest rates, we believe the market will grow into
its valuation, barring any external shocks.
In this environment, stock picking becomes a key contributor to performance. We
remain optimistic that wider market participation will continue to characterize
U.S. stock markets. Broader markets tend to favor stock pickers.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
MITCHELL HUTCHINS SERIES TRUST-
GROWTH AND INCOME PORTFOLIO
[PIE CHART]
<TABLE>
<CAPTION>
ASSET ALLOCATION*
<S> <C>
Equities 86.5%
Convertible Bonds/Preferred 5.6%
Cash Equivalents 7.9%
</TABLE>
<TABLE>
<CAPTION>
Fund Characteristics*
- ------------------------------------------------
<S> <C>
Number of Holdings 110
Avg. Market Cap $54.6 billion
Dividend Yield 1.19%
</TABLE>
<TABLE>
<CAPTION>
Top Ten Sectors*
- ------------------------------------------------
<S> <C>
Consumer Cyclicals 19.2%
Technology 18.2
Financial Services 12.9
Utilities 11.3
Healthcare 7.5
Capital Goods 6.3
Energy 6.0
Consumer Noncyclical 3.8
Basic Materials 2.7
Transportation 0.7
- ------------------------------------------------
Top Ten Total 88.6%
</TABLE>
<TABLE>
<CAPTION>
Top Ten Holdings*
- ------------------------------------------------
<S> <C>
Bell Atlantic Financial
Services Inc. 3.6%
United Technologies Corp. 2.0
Cisco Systems, Inc. 2.0
International Business Machines 1.9
AT&T Corp. 1.9
Applied Materials, Inc. 1.8
Chase Manhattan Corp. 1.8
BP Amoco PLC, ADR 1.7
Tyco International Ltd. 1.5
GTE Corp. 1.5
- ------------------------------------------------
Top Ten Total 19.7%
</TABLE>
PERFORMANCE--TOTAL RETURNS FOR PERIODS ENDED 6/30/99
<TABLE>
<CAPTION>
Class H Shares Cumulative Annualized
- --------------------------------------------------------------------------------
<S> <C> <C>
Six Months 3.38% --
One Year 5.32% 5.32%
Five Years 156.65% 20.75%
Since Inception 1/2/92 140.86% 12.44%
- --------------------------------------------------------------------------------
Class I Shares Cumulative Annualized
- --------------------------------------------------------------------------------
Six Months -- --
Since Inception 1/4/99 4.15% --
- --------------------------------------------------------------------------------
</TABLE>
Past performance does not guarantee future performance. Total return
calculations assume reinvestment of all dividends and capital gain
distributions, if any, at net asset value on the payable dates and do not
include sales charges. Performance relates to the Portfolio and does not reflect
separate account charges applicable to variable annuity contracts. The return
and principal value of an investment will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
PORTFOLIO HIGHLIGHTS
The Portfolio lagged its benchmark, the S&P 500 Index, for the six-month period
ended June 30, 1999. The main cause of this underperformance was the Portfolio's
investment style, which favors value stocks. Values stocks lagged the overall
stock market from January through March, then began to outpace growth stocks in
April. The Portfolio did not immediately benefit, however, since many of the
April gains were concentrated among commodity producers in the basic industry
sector, where the Portfolio was underweighted. Commodity producers depend
heavily on inflation to increase their earnings, and we do not expect inflation
to rise enough to sustain earnings increases.
The Portfolio's top five sectors remained the same through the period, although
the sector weightings varied. During the period we slightly increased exposure
to consumer cyclicals (19.2%). We reduced exposure to technology (18.2%),
financial services (12.9%), utilities (11.3%) and healthcare (7.5%).* Some of
the high-growth stocks that led the market early in the period have come down in
price and look attractive. We are looking to increase the Portfolio's exposure
to technology, financial services and healthcare. We expect to continue
underweighting "defensive" sectors--stocks that do well during recessions--such
as consumer durables, foods and beverages.
* Weightings represent percentages of portfolio assets as of June 30, 1999. The
Portfolio is actively managed and its composition will vary over time.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO 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 President and
Chief Executive Officer Chief Operating Officer
Mitchell Hutchins Mitchell Hutchins
Asset Management Inc. Asset Management Inc.
3
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
COMMON STOCKS--86.13%
AIRLINES--0.68%
3,000 Delta Air Lines, Inc.................... $ 172,875
-------------
ALCOHOL--0.39%
1,400 Anheuser-Busch Companies, Inc........... 99,313
-------------
APPAREL, RETAIL--1.31%
10,000 TJX Companies, Inc...................... 333,125
-------------
APPAREL, TEXTILES--0.47%
4,000 Westpoint Stevens Inc................... 119,250
-------------
BANKS--3.35%
6,800 Bank of New York Co. Inc................ 249,475
5,244 Chase Manhattan Corp.................... 454,261
4,000 Mellon Bank Corp........................ 145,500
-------------
849,236
-------------
BEVERAGES & TOBACCO--0.45%
4,900 Pepsi Bottling Group Inc................ 113,006
-------------
BROADCASTING & PUBLISHING--0.23%
2,000 Infinity Broadcasting Corp.*............ 59,500
-------------
COMPUTER HARDWARE--6.15%
5,000 Apple Computer, Inc.*................... 231,563
7,800 Cisco Systems, Inc.*.................... 501,637
9,200 Dell Computer Corp.*.................... 340,400
3,750 International Business Machines......... 484,687
-------------
1,558,287
-------------
COMPUTER SOFTWARE--4.64%
5,000 Autodesk, Inc........................... 147,813
700 BMC Software, Inc.*..................... 37,800
6,300 Cadence Design Systems, Inc.*........... 80,325
1,500 Compuware Corp.*........................ 47,719
3,900 Microsoft Corp.*........................ 351,731
6,000 Sterling Software Inc.*................. 160,125
9,000 Unisys Corp.*........................... 350,437
-------------
1,175,950
-------------
CONSUMER DURABLES--0.41%
1,500 Maytag Corp............................. 104,531
-------------
DEFENSE/AEROSPACE--1.42%
5,275 Allied Signal, Inc...................... 332,325
900 Newport News Shipbuilding Inc........... 26,550
-------------
358,875
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
DIVERSIFIED RETAIL--3.36%
5,000 Dayton Hudson Corp...................... $ 325,000
3,700 Family Dollar Stores Inc................ 88,800
6,000 Federated Department Stores, Inc.*...... 317,625
2,500 Wal Mart Stores, Inc.................... 120,625
-------------
852,050
-------------
DRUGS & MEDICINE--6.01%
8,100 Amerisource Health Corp.*............... 206,550
5,000 Biogen Inc.*............................ 321,563
1,867 Cardinal Health, Inc.................... 119,721
5,600 Elan Corp. PLC, ADR*(1)................. 155,400
5,700 Pharmacia & Upjohn ADR.................. 323,831
5,500 Schering-Plough Corp.................... 291,500
1,500 Warner Lambert Co....................... 104,063
-------------
1,522,628
-------------
ELECTRIC UTILITIES--2.24%
3,000 Consolidated Edison Co. of New York, 135,750
Inc...................................
1,800 Duke Energy Corp........................ 97,875
5,200 Energy East Corp........................ 135,200
2,800 Unicom Corp............................. 107,975
3,750 Utilicorp United Inc.................... 91,172
-------------
567,972
-------------
ELECTRICAL EQUIPMENT--0.71%
4,000 Jabil Circuit Inc.*..................... 180,500
-------------
ENERGY RESERVES & PRODUCTION--3.09%
1,800 Atlantic Richfield Co................... 150,412
2,800 Mobil Corp.............................. 277,200
5,900 Royal Dutch Petroleum Co. ADR........... 355,475
-------------
783,087
-------------
ENVIRONMENTAL SERVICES--0.74%
3,500 Waste Management, Inc................... 188,125
-------------
FINANCIAL SERVICES--1.55%
1,800 General Electric Co..................... 203,400
2,500 Marsh & McLennan Co., Inc............... 188,750
-------------
392,150
-------------
FOOD RETAIL--1.34%
5,000 Food Lion Inc........................... 59,375
10,000 Kroger Co.*............................. 279,375
-------------
338,750
-------------
</TABLE>
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
FOREST PRODUCTS, PAPER--2.10%
5,000 Fort James Corp......................... $ 189,375
3,600 Georgia-Pacific Corp.................... 170,550
2,500 Weyerhaeuser Co......................... 171,875
-------------
531,800
-------------
GAS UTILITY--1.08%
4,350 Columbia Energy Group................... 272,691
-------------
HOUSEHOLD PRODUCTS--0.79%
3,600 Avon Products, Inc...................... 199,800
-------------
INDUSTRIAL PARTS--4.07%
2,700 American Standard Companies Inc.*....... 129,600
4,900 Ingersoll Rand Co....................... 316,663
1,000 SPX Corp.*.............................. 83,500
7,000 United Technologies Corp................ 501,812
-------------
1,031,575
-------------
INFORMATION & COMPUTER SERVICES--1.03%
1,700 Computer Sciences Corp.*................ 117,619
3,900 Valassis Communications Inc.*........... 142,837
-------------
260,456
-------------
INSTRUMENTS-SCIENTIFIC--0.74%
7,600 Mettler Toledo International Inc.*...... 188,575
-------------
LEISURE--0.93%
2,000 Eastman Kodak Co........................ 135,500
3,600 Hasbro, Inc............................. 100,575
-------------
236,075
-------------
LIFE INSURANCE--1.86%
2,900 American General Corp................... 218,588
2,800 Lincoln National Corp................... 146,475
3,200 Protective Life Corp.................... 105,600
-------------
470,663
-------------
LONG DISTANCE & PHONE COMPANIES--6.64%
8,400 AT&T Corp............................... 468,825
6,000 BellSouth Corp.......................... 281,250
1,800 Century Telephone Enterprises, Inc...... 71,550
5,000 GTE Corp................................ 378,750
4,000 MCI WorldCom, Inc.*..................... 344,250
2,400 SBC Communications, Inc................. 139,200
-------------
1,683,825
-------------
MEDIA--2.16%
9,000 Comcast Corp., Class A.................. 345,938
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
</TABLE>
MEDIA--(CONCLUDED)
<TABLE>
<C> <S> <C>
4,600 Viacom, Inc., Class B*.................. $ 202,400
-------------
548,338
-------------
MEDICAL PRODUCTS--2.28%
5,600 St. Jude Medical, Inc.*................. 199,500
4,000 Tyco International Ltd.................. 379,000
-------------
578,500
-------------
MEDICAL PROVIDERS--0.70%
2,100 Wellpoint Health Networks, Inc.*........ 178,238
-------------
MINING & METALS--0.63%
2,700 Martin Marietta Materials Inc........... 159,300
-------------
MOTOR VEHICLES--2.41%
2,400 Borg Warner Automotive Inc.............. 132,000
1,747 Delphi Automotive Systems Corp.......... 32,429
5,000 Ford Motor Co........................... 282,187
2,500 General Motors Corp..................... 165,000
-------------
611,616
-------------
OIL REFINING--2.89%
3,985 BP Amoco PLC, ADR....................... 432,372
4,600 Coastal Corp............................ 184,000
3,600 USX-Marathon Group...................... 117,225
-------------
733,597
-------------
OTHER INSURANCE--4.61%
4,900 ACE Ltd................................. 138,425
5,000 Allstate Corp........................... 179,375
2,250 Ambac Financial Group Inc............... 128,531
2,343 American International Group Inc........ 274,277
4,200 MBIA Inc................................ 271,950
4,500 Travelers Property Casualty Corp........ 176,063
-------------
1,168,621
-------------
PUBLISHING--0.52%
2,400 Knight Ridder, Inc...................... 131,850
-------------
REAL PROPERTY--0.35%
2,500 Lafarge Corp. ADR....................... 88,594
-------------
RESTAURANTS--0.86%
4,500 Brinker International Inc.*............. 122,344
2,400 Outback Steakhouse Inc.*................ 94,350
-------------
216,694
-------------
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
<TABLE>
<C> <S> <C>
SECURITIES & ASSET MANAGEMENT--1.17%
2,900 Morgan Stanley Dean Witter & Co......... $ 297,250
-------------
SEMICONDUCTOR--4.81%
6,300 Applied Materials, Inc.*................ 465,412
4,400 Intel Corp.............................. 261,800
1,500 Uniphase Corp.*......................... 249,000
3,600 Vitesse Semiconductor Corp.*............ 242,775
-------------
1,218,987
-------------
SPECIALTY RETAIL--3.86%
6,300 Lowe's Companies, Inc................... 357,131
9,900 Office Depot Inc.*...................... 218,419
3,300 Staples Inc.*........................... 102,094
4,500 Williams Sonoma Inc.*................... 156,656
3,600 Zale Corp.*............................. 144,000
-------------
978,300
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
THRIFT--0.31%
2,400 Greenpoint Financial Corp............... $ 78,750
-------------
TOBACCO--0.79%
5,000 Philip Morris Co. Inc................... 200,938
-------------
Total Common Stocks (cost--$15,459,383).............. 21,834,243
-------------
PREFERRED STOCK--0.70%
MOTOR VEHICLES--0.70%
3,000 Federal Mogul Financing Trust+ 177,375
(cost--$150,000)........................
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- ---------- -------- ---------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS--4.89%
$ 200 Nextel Communications Inc........................................ 07/01/07 4.750% 237,000
900 Bell Atlantic Financial Services Inc............................. 09/15/05 4.250 901,125
100 Telefonos De Mexico SA........................................... 06/15/04 4.250 101,125
-----------
Total Convertible Bonds (cost--$1,200,000)................................. 1,239,250
-----------
SHORT TERM U.S. GOVERNMENT AGENCY OBLIGATION--5.90%
1,500 Federal Home Loan Mortgage Discount Notes (cost--$1,496,415)..... 07/19/99 4.780@ 1,496,415
-----------
REPURCHASE AGREEMENT--1.95%
07/01/99 4.000 495,000
495 Repurchase Agreement dated 6/30/99 with State Street Bank & Trust
Co., collateralized by $503,510 U.S. Treasury Note 5,625% due
12/31/99 (value--$504,901); proceeds; $495,055
(cost--$495,000)...............................................
-----------
Total Investments (cost--$18,800,798)--99.57%.............................. 25,242,283
Other assets in excess of liabilities--0.43%............................... 109,405
-----------
Net Assets--100.00%........................................................ $25,351,688
-----------
-----------
</TABLE>
- ---------------
* Non-Income producing security.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally to qualified institutional buyers.
@ Interest rate shown is discount rate at date of purchase.
(1) Security, or a portion thereof, was on loan at June 30, 1999.
ADR American Depositary Receipt.
See accompanying notes to financial statements
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$18,800,798).................................................. $25,242,283
Investments of cash collateral received for securities loaned, at value.................................. 162,400
Cash..................................................................................................... 782
Receivable for investments sold.......................................................................... 206,199
Dividends and interest receivable........................................................................ 23,262
Other assets............................................................................................. 11,421
-----------
Total assets............................................................................................. 25,646,347
-----------
LIABILITIES
Payable for cash collateral for securities loaned........................................................ 162,400
Payable for investments purchased........................................................................ 112,766
Payable to affiliates.................................................................................... 14,599
Accrued expenses and other liabilities................................................................... 4,894
-----------
Total liabilities........................................................................................ 294,659
-----------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized)...................................... 17,421,214
Undistributed net investment income...................................................................... 50,102
Accumulated net realized gains from investment transactions.............................................. 1,438,887
Net unrealized appreciation of investments............................................................... 6,441,485
-----------
Net assets............................................................................................... $25,351,688
-----------
-----------
CLASS H:
Net assets............................................................................................... $22,856,109
-----------
Shares outstanding....................................................................................... 1,492,761
-----------
Net asset value, offering price and redemption value per share........................................... $15.31
-----------
-----------
CLASS I:
Net assets............................................................................................... $ 2,495,579
-----------
Shares outstanding....................................................................................... 162,983
-----------
Net asset value, offering price and redemption value per share........................................... $15.31
-----------
-----------
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JUNE 30, 1999
(UNAUDITED)
------------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $12)......................... $ 69,518
Dividends (net of foreign withholding taxes of $1,131)..................... 113,372
------------------
182,890
------------------
EXPENSES:
Investment advisory and administration..................................... 88,682
Legal and audit............................................................ 17,358
Reports and notices to shareholders........................................ 10,093
Custody and accounting..................................................... 8,603
Trustees' fees............................................................. 3,750
Distribution fee--Class I.................................................. 1,567
Transfer agency fees and related service expenses.......................... 767
Other expenses............................................................. 953
------------------
131,773
Less: Fee waiver from adviser.............................................. (1,567)
------------------
Net expenses............................................................... 130,206
------------------
Net investment income...................................................... 52,684
------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains from investments........................................ 1,440,083
Net change in unrealized appreciation/depreciation of investments.......... (652,206)
------------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENT ACTIVITIES................ 787,877
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 840,561
------------------
------------------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income...................................................... $ 52,684 $ 110,048
Net realized gains from investments........................................ 1,440,083 1,729,133
Net change in unrealized appreciation/depreciation of investments.......... (652,206) 1,878,953
------------------ ------------------
Net increase in net assets resulting from operations....................... 840,561 3,718,134
------------------ ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................................... -- (107,162)
Net realized gains from investments........................................ -- (1,721,861)
------------------ ------------------
Total dividends and distributions to shareholders.......................... -- (1,829,023)
------------------ ------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares....................................... 7,082,350 7,325,308
Cost of shares repurchased................................................. (8,896,916) (6,668,876)
Proceeds from dividends reinvested......................................... 1,829,023 3,457,938
------------------ ------------------
Net increase in net assets from beneficial interest transactions........... 14,457 4,114,370
------------------ ------------------
Net increase in net assets................................................. 855,018 6,003,481
NET ASSETS:
Beginning of period........................................................ 24,496,670 18,493,189
------------------ ------------------
End of period (including undistributed net investment income of $50,102 at
June 30, 1999)........................................................... $25,351,688 $24,496,670
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--Growth and Income 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 which fund certain variable contracts.
Currently, the Portfolio offers Class H and Class I shares. Each class
represents interests in the same assets of the Portfolio, and the classes are
identical except for differences in their distribution charges. Both classes
have equal voting privileges except that Class I has exclusive voting rights
with respect to its distribution plan. Class H has no distribution plan.
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 rated 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 OF INVESTMENTS--The Portfolio calculates its net asset value based
on the current market value for its portfolio securities. The Portfolio normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use reported last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable securities. Securities traded in the over-the-counter
("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally
are valued at the last sale price on Nasdaq prior to valuation. Other OTC
securities are valued at the last bid price available prior to valuation.
Securities which are listed on U.S. and foreign stock exchanges normally are
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market 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. If a market value is not available from an
independent pricing source for a particular security, that security is valued at
fair value as determined in good faith by or under the direction of the Fund's
board of trustees (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term
debt-instruments with sixty days or less remaining to maturity, unless the board
determines that this does not represent fair value.
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.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
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 basis. Dividend income and
other distributions are recorded on the ex-dividend date ("ex-date"). 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.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-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.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board of trustees has approved an investment advisory and
administration contract with Mitchell Hutchins, under which Mitchell Hutchins
serves as investment adviser and administrator of the Portfolio. In accordance
with the Advisory Contract, the Portfolio pays Mitchell Hutchins an investment
advisory and administration fee, which is computed daily and payable monthly, at
the annual rate of 0.70% of the Portfolio's average daily net assets. At June
30, 1999, the Fund owned Mitchell Hutchins $14,590, in investment advisory and
administration fees.
For the six months ended June 30, 1999, the Portfolio paid $1,464 in brokerage
commissions to PaineWebber for transactions executed on behalf of the Portfolio.
DISTRIBUTION PLAN
Class I shares are offered to insurance company separate accounts where the
related insurance companies receive payments for their services in connection
with the distribution of the Portfolio's Class I shares. Under the plan of
distribution, the Portfolio pays Mitchell Hutchins a monthly distribution fee at
the annual rate of 0.25% of the average daily net assets of Class I shares.
Mitchell Hutchins pays the entire distribution fee to the insurance companies.
For the period January 5, 1999 (commencement of issuance of Class I shares) to
June 30, 1999, Mitchell Hutchins and the insurance companies waived the entire
distribution fee.
BANK LINE OF CREDIT
The Portfolio may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sales or purchases of portfolio
securities, the repurchase or redemption of shares of the Portfolio at the
request of the shareholders and other temporary or emergency purposes. In
connection therewith, the Portfolio has agreed to pay commitment fees, pro rata,
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
based on the relative asset size of the funds in the Facility. Interest is
charged to the Portfolio at a rate based on prevailing market rates in effect at
the time of borrowings. For the six months ended June 30, 1999, the Portfolio
did not borrow under the Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at June 30, 1999
was substantially the same as the cost of securities for financial statement
purposes.
At June 30, 1999, the components of net unrealized appreciation of investments
were as follows:
<TABLE>
<S> <C>
Gross appreciation (investment having an excess of value over cost)................. $6,756,628
Gross depreciation (investment having an excess of cost over value)................. (315,143)
----------
Net unrealized appreciation of investments.......................................... $6,441,485
----------
----------
</TABLE>
For the six months ended June 30, 1999, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $6,908,147 and
$10,551,072, respectively.
SECURITIES LENDING
The Portfolio may lend securities up to 33 1/3% of its total assets to
qualified institutions. The loans are secured at all times by cash or U.S.
government securities in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends, determined on a daily
basis and adjusted accordingly. The Portfolio will regain record ownership of
loaned securities to exercise certain beneficial rights; however, the Portfolio
may bear the risk of delay in recovery of, or even loss of rights in, the
securities loaned should the borrower fail financially. The Portfolio receives
compensation, which is included in interest income, for lending its securities
from interest earned on the cash or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. PaineWebber, the Portfolio's lending agent,
received compensation of $74 from the Portfolio for the six months ended June
30, 1999. At June 30, 1999, the Fund owed PaineWebber $9, in security lending
fees.
For the six months ended June 30, 1999, the Portfolio earned $218 net of fees,
rebates and expenses, for securities lending transactions. At June 30, 1999, the
Portfolio's custodian held cash having an aggregate value of $162,400 as
collateral for portfolio securities loaned having a market value of $155,400
which was invested in the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------
<C> <S> <C>
28,487 Janus Money Market Institutional Shares.............................................. $ 28,487
8,758 Liquid Assets Portfolio.............................................................. 8,758
125,155 MH Private Money Market Fund LLC..................................................... 125,155
----------
Total investments of cash collateral for securities on loaned (cost--$162,400)....... $ 162,400
----------
----------
</TABLE>
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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SHARES OF BENEFICIAL INTEREST
There are 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 H CLASS I
--------------------------------------------------- ----------------------
FOR THE FOR THE PERIOD
SIX MONTHS FOR THE JANUARY 5, 1999+
ENDED YEAR ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999
------------------------ ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 263,465 $ 3,859,836 496,647 $ 7,325,308 219,024 $ 3,222,514
Shares repurchased............ (548,854) (8,065,668) (446,318) (6,668,876) (56,041) (831,248)
Dividends reinvested.......... 124,423 1,829,023 252,588 3,457,938 -- --
--------- ------------ --------- ------------ -------- -----------
Net increase (decrease)....... (160,966) $ (2,376,809) 302,917 $ 4,114,370 162,983 $ 2,391,266
--------- ------------ --------- ------------ -------- -----------
--------- ------------ --------- ------------ -------- -----------
</TABLE>
- -------------
+ Commencement of issuance of shares.
13
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS I
FOR THE CLASS H ------------------
SIX MONTHS ---------------------------------------------------- FOR THE PERIOD
ENDED JANUARY 5, 1999+
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, THROUGH
1999 ---------------------------------------------------- JUNE 30, 1999
(UNAUDITED) 1998 1997 1996 1995 1994 (UNAUDITED)
------------ -------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 14.81 $ 13.69 $ 12.27 $ 11.83 $ 9.16 $ 9.87 $ 14.70
------------ -------- -------- -------- -------- -------- --------
Net investment income................. 0.03@ 0.07 0.10 0.06 0.10 0.10 0.03@
Net realized and unrealized gains
(losses) from investments............ 0.47@ 2.16 3.88 2.53 2.70 (0.71) 0.58@
------------ -------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations................ 0.50 2.23 3.98 2.59 2.80 (0.61) 0.61
------------ -------- -------- -------- -------- -------- --------
Dividends from net investment
income............................... -- (0.07) (0.10) (0.06) (0.10) (0.10) --
Distributions from net realized gains
from investments..................... -- (1.04) (2.46) (2.09) (0.03) -- --
------------ -------- -------- -------- -------- -------- --------
Total dividends and other
distributions........................ -- (1.11) (2.56) (2.15) (0.13) (0.10) --
------------ -------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 15.31 $ 14.81 $ 13.69 $ 12.27 $ 11.83 $ 9.16 $ 15.31
------------ -------- -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- -------- --------
Total investment return (1)........... 3.38% 16.32% 32.45% 22.12% 30.52% (6.18)% 4.15%
------------ -------- -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period (000's)..... $22,856 $24,497 $18,493 $14,520 $14,797 $12,872 $ 2,496
Expenses to average net assets, before
waiver from adviser.................. 1.03%* 1.04% 1.04% 1.58% 1.37% 1.35% 1.28%*
Expenses to average net assets, after
waiver from adviser.................. 1.03%* 1.04% 1.04% 1.58% 1.37% 1.35% 1.03%*
Net investment income to average net
assets, before waiver from adviser... 0.41%* 0.46% 0.71% 0.49% 0.94% 1.06% 0.24%*
Net investment income to average net
assets, after waiver from adviser.... 0.41%* 0.46% 0.71% 0.49% 0.94% 1.06% 0.49%*
Portfolio turnover rate............... 29% 69% 92% 99% 134% 150% 29%
</TABLE>
- ---------------
+ Commencement of issuance of shares.
* Annualized
@ Calculated using the average monthly shares outstanding for the period.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
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 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.
14
<PAGE>
- -C- 1999 PAINEWEBBER INCORPORATED
[GRAPHIC]
- -------------------------------------------------------------------------------
SEMIANNUAL REPORT
MITCHELL
HUTCHINS SERIES
TRUST
GROWTH AND
INCOME PORTFOLIO
June 30,1999
