<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED 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--Balanced 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.
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE--TOTAL RETURNS FOR PERIODS ENDED 6/30/99
<TABLE>
<CAPTION>
Cumulative Annualized
- --------------------------------------------------------------------------------
<S> <C> <C>
Six Months -0.43% --
One Year 4.17% 4.17%
Five Years 110.59% 16.06%
Ten Years 190.62% 11.26%
Since Inception 6/1/88 226.44% 11.26%
- --------------------------------------------------------------------------------
</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. Total returns for periods of less than one year are not
annualized. 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.
* Weightings represent percentages of portfolio assets as of June 30, 1999. The
Portfolio's composition will vary over time.
MITCHELL HUTCHINS SERIES TRUST -- BALANCED PORTFOLIO
ASSET ALLOCATION*
[PIE CHART]
<TABLE>
<S> <C>
Bonds 38.9%
Cash 0.7%
Equities 60.4%
</TABLE>
Characteristics*
<TABLE>
- ---------------------------------------------------
<S> <C>
Approx. No. of Securities 150
Net Assets $26.9 million
- ---------------------------------------------------
</TABLE>
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
The Portfolio employs a disciplined, model-based approach to calculate expected
returns for U.S. stocks, bonds and cash. Based on key economic variables such as
interest rates, profit growth and inflation, as well as fundamental valuation
techniques, the approach seeks to determine whether the expected return from
stocks is sufficient to offset the additional risk when compared to bonds and
"risk-free" cash investments. Portfolio assets are allocated according to the
model, with a minimum of 25% of net assets in bonds or cash at all times.
The Portfolio began the period with a 70% allocation to stocks, above its
normal weighting of 60%. As the S&P 500 Index and the Dow Jones Industrial Index
reached new heights early in the period, expectations for stock returns began to
diminish. Accordingly, we gradually reduced the Portfolio's stock allocation to
a low of 52.8% by March. As expectations rose once again, we began rebuilding
the Portfolio's stock exposure. By period end the Portfolio's stock allocation
was up to 60.4%.
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.
<TABLE>
<CAPTION>
Top Ten Equity Holdings*
- ---------------------------------
<S> <C>
United Technologies Corp 1.9%
Cisco Systems 1.6
Tyco International Ltd. 1.5
BP Amoco PLC ADR 1.4
Microsoft Corp. 1.3
Dayton Hudson 1.3
Applied Materials 1.3
MCI Worldcom 1.3
Biogen 1.2
Unisys Corp 1.2
- ---------------------------------
Top Ten Total 14.0
- ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Equity Sector Allocation*
- ---------------------------------
<S> <C>
Consumer Cyclicals 13.5%
Technology 12.3
Financial Services 8.0
Utilities 5.6
Healthcare 5.3
Energy 5.0
Capital Goods 4.6
Consumer Noncyclicals 2.9
Basic Materials 2.5
Transportation 0.7
- ---------------------------------
Equity Total 60.4
- ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fixed Income Sector Allocation*
- ---------------------------------
<S> <C>
Treasurys 14.6%
Corporates 13.4
Mortgages 9.6
Agency 1.3
- ---------------------------------
Fixed Income Total 38.9
- ---------------------------------
</TABLE>
- --------------------------------------------------------------------------------
* Weightings represent percentages of portfolio assets as of June 30, 1999.
The Portfolio's composition will vary over time.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------
<C> <S> <C>
COMMON STOCKS--62.77%
AIRLINES--0.75%
3,500 Delta Air Lines, Inc...................................................................... $ 201,688
----------
ALCOHOL--0.29%
1,100 Anheuser-Busch Companies, Inc............................................................. 78,031
----------
APPAREL, TEXTILES--0.36%
3,300 Westpoint Stevens Inc.*................................................................... 98,381
----------
BANKS--1.45%
3,600 The Chase Manhattan Corp.................................................................. 311,850
2,200 Mellon Bank Corp.......................................................................... 80,025
----------
391,875
----------
BEVERAGES & TOBACCO--0.40%
4,700 Pepsi Bottling Group Inc.................................................................. 108,394
----------
COMPUTER HARDWARE--3.48%
7,000 Cisco Systems, Inc.*...................................................................... 450,187
4,050 Dell Computer Corp.*...................................................................... 149,850
2,630 International Business Machines........................................................... 339,928
----------
939,965
----------
COMPUTER SOFTWARE--4.02%
700 BMC Software, Inc.*....................................................................... 37,800
5,700 Cadence Design Systems, Inc.*............................................................. 72,675
1,500 Compuware Corp.*.......................................................................... 47,719
4,200 Microsoft Corp.*.......................................................................... 378,787
7,500 Sterling Software Inc.*................................................................... 200,156
8,900 Unisys Corp.*............................................................................. 346,544
----------
1,083,681
----------
CONSUMER DURABLES--0.75%
2,900 Maytag Corp............................................................................... 202,094
----------
DEFENSE/AEROSPACE--2.68%
2,725 Allied-Signal Inc......................................................................... 171,675
700 Newport News Shipbuilding Inc............................................................. 20,650
7,400 United Technologies Corp.................................................................. 530,487
----------
722,812
----------
DIVERSIFIED RETAIL--3.18%
5,700 Dayton Hudson Corp........................................................................ 370,500
3,300 Family Dollar Stores Inc.................................................................. 79,200
6,000 Federated Department Stores Inc.*......................................................... 317,625
1,900 Wal Mart Stores, Inc...................................................................... 91,675
----------
859,000
----------
DRUGS & MEDICINE--1.89%
2,227 Cardinal Health, Inc...................................................................... 142,806
3,800 Elan Corp. PLC, ADR*(1)................................................................... 105,450
800 Pharmacia & UpJohn, Inc. ADR.............................................................. 45,450
NUMBER OF
SHARES VALUE
- ----------- ----------
DRUGS & MEDICINE--(CONCLUDED)
4,100 Schering-Plough Corp...................................................................... $ 217,300
----------
511,006
----------
ELECTRIC UTILITIES--1.72%
2,100 Consolidated Edison Co.
of New York, Inc........................................................................ 95,025
2,100 Duke Energy Corp.......................................................................... 114,187
5,900 Energy East Corp.......................................................................... 153,400
4,200 Utilicorp United Inc...................................................................... 102,113
----------
464,725
----------
ENERGY RESERVES & PRODUCTION--1.80%
2,100 Mobil Corp................................................................................ 207,900
4,600 Royal Dutch Petroleum Co. ADR............................................................. 277,150
----------
485,050
----------
ENVIRONMENTAL SERVICES--0.54%
2,700 Waste Management, Inc..................................................................... 145,125
----------
FINANCIAL SERVICES--0.56%
2,000 Marsh & McLennan Co., Inc................................................................. 151,000
----------
FOOD RETAIL--0.95%
9,200 Kroger Co.*............................................................................... 257,025
----------
FOREST PRODUCTS, PAPER--1.86%
3,600 Fort James Corp........................................................................... 136,350
4,200 Georgia-Pacific Corp...................................................................... 198,975
2,400 Weyerhaeuser Co........................................................................... 165,000
----------
500,325
----------
GAS UTILITY--0.29%
1,250 Columbia Gas System Inc................................................................... 78,359
----------
HOUSEHOLD PRODUCTS--0.86%
4,200 Avon Products, Inc........................................................................ 233,100
----------
INDUSTRIAL PARTS--1.66%
1,750 American Standard Companies Inc.*......................................................... 84,000
3,800 Ingersoll Rand Co......................................................................... 245,575
1,400 SPX Corp.*................................................................................ 116,900
----------
446,475
----------
INDUSTRIAL SERVICES/SUPPLIES--1.61%
908 Delphi Automotive Systems Corp............................................................ 16,855
4,400 Tyco International Ltd.................................................................... 416,900
----------
433,755
----------
INFORMATION & COMPUTER SERVICES--1.00%
1,600 Computer Sciences Corp.*.................................................................. 110,700
4,350 Valassis Communications Inc.*............................................................. 159,319
----------
270,019
----------
</TABLE>
3
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
INSTRUMENTS-SCIENTIFIC--0.94%
10,200 Mettler Toledo International Inc.*........................................................ $ 253,088
----------
LEISURE--0.97%
2,100 Eastman Kodak Co.......................................................................... 142,275
4,300 Hasbro, Inc............................................................................... 120,131
----------
262,406
----------
LIFE INSURANCE--1.59%
3,900 American General Corp..................................................................... 293,963
4,100 Protective Life Corp...................................................................... 135,300
----------
429,263
----------
LONG DISTANCE & PHONE COMPANIES--3.53%
2,100 AT&T Corp................................................................................. 117,206
5,900 BellSouth Corp............................................................................ 276,563
2,700 GTE Corp.................................................................................. 204,525
4,100 MCI WorldCom, Inc.*....................................................................... 352,856
----------
951,150
----------
MEDIA--1.02%
5,200 Comcast Corp., Class A.................................................................... 199,875
2,500 Infinity Broadcasting Corp.*.............................................................. 74,375
----------
274,250
----------
MEDICAL-BIOMEDICAL/GENETICS--1.29%
5,400 Biogen Inc.*.............................................................................. 347,288
----------
MEDICAL PRODUCTS--0.69%
5,200 St. Jude Medical, Inc.*................................................................... 185,250
----------
MEDICAL PROVIDERS--0.88%
2,800 Wellpoint Health Networks, Inc.*.......................................................... 237,650
----------
MEDICAL-WHOLESALE DRUG DISTRIBUTORS--0.81%
8,600 Amerisource Health Corp.*................................................................. 219,300
----------
MINING & METALS--0.72%
3,300 Martin Marietta Materials Inc............................................................. 194,700
----------
MOTOR VEHICLES--1.71%
2,100 Borg Warner Automotive Inc................................................................ 115,500
4,600 Ford Motor Co............................................................................. 259,612
1,300 General Motors Corp....................................................................... 85,800
----------
460,912
----------
OIL REFINING--3.46%
2,100 Atlantic Richfield Co..................................................................... 175,481
3,590 BP Amoco PLC, ADR......................................................................... 389,515
5,800 Coastal Corp.............................................................................. 232,000
4,200 USX-Marathon Group........................................................................ 136,763
----------
933,759
----------
NUMBER OF
SHARES VALUE
- ----------- ----------
OTHER INSURANCE--3.47%
3,500 ACE Ltd................................................................................... $ 98,875
3,400 Allstate Corp............................................................................. 121,975
2,150 Ambac Financial Group Inc................................................................. 122,819
2,179 American International Group Inc.......................................................... 255,079
3,200 MBIA Inc.................................................................................. 207,200
3,300 Travelers Property Casualty Corp.......................................................... 129,112
----------
935,060
----------
PUBLISHING--0.57%
2,800 Knight Ridder, Inc........................................................................ 153,825
----------
REAL PROPERTY--0.38%
2,900 Lafarge Corp. ADR......................................................................... 102,769
----------
RESTAURANTS--0.42%
4,200 Brinker International Inc.*............................................................... 114,188
----------
SECURITIES & ASSET MANAGEMENT--0.95%
2,500 Morgan Stanley Dean Witter & Co........................................................... 256,250
----------
SEMICONDUCTOR--3.53%
4,800 Applied Materials, Inc.*.................................................................. 354,600
2,600 Intel Corp................................................................................ 154,700
1,400 Uniphase Corp.*........................................................................... 232,400
3,100 Vitesse Semiconductor Corp.*.............................................................. 209,056
----------
950,756
----------
SPECIALTY RETAIL--2.51%
10,850 Office Depot Inc.*........................................................................ 239,378
3,050 Staples Inc.*............................................................................. 94,359
5,800 Williams Sonoma Inc.*..................................................................... 201,913
3,500 Zale Corp.*............................................................................... 140,000
----------
675,650
----------
THRIFT--0.34%
2,800 Greenpoint Financial Corp................................................................. 91,875
----------
TOBACCO--0.58%
3,900 Philip Morris Co. Inc..................................................................... 156,731
----------
WIRELESS TELECOMMUNICATIONS--0.31%
2,100 Century Telephone Enterprises, Inc.*...................................................... 83,475
----------
Total Common Stocks (cost--$13,250,802)................................................................ 16,931,480
----------
PREFERRED STOCK--0.66%
INDUSTRIAL PARTS--0.66%
3,000 Federal Mogul Financing Trust+
(cost--$150,000)........................................................................ 177,375
----------
</TABLE>
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ------------------ -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS--14.09%
BEVERAGES & ENTERTAINMENT--0.50%
$ 140 Seagram Joseph E & Sons Inc.............. 12/15/05 6.625% $ 135,271
-----------
CABLE--0.37%
100 TCI Communications Inc................... 05/01/03 6.375 99,439
-----------
FINANCIAL SERVICES--3.45%
208 Associates Corp. N A..................... 11/01/08 6.250 197,482
200 AT&T Capital Corp........................ 01/16/01 6.875 199,419
285 Ford Motor Credit Co..................... 01/14/03 to 01/12/09 5.800 to 6.000 270,859
215 Heller Financial Inc..................... 03/19/04 6.000 208,278
60 Norwest Financial Inc.................... 02/03/09 5.625 54,657
-----------
930,695
-----------
INDUSTRIAL SERVICES/ SUPPLIES--0.52%
140 Tyco International Group S A............. 06/15/01 6.125 139,496
-----------
INSURANCE--2.15%
200 American Re Corp......................... 12/15/26 7.450 205,327
125 Hartford Financial Services Group Inc.... 11/01/08 6.375 119,890
100 Loews Corp............................... 12/15/06 6.750 97,645
150 Lumbermans Mutual Casualty Co............ 07/01/26 9.150 157,866
-----------
580,728
-----------
MEDIA--0.22%
60 News America Holdings Inc................ 10/17/96 8.250 59,662
-----------
SECURITIES & ASSET MANAGEMENT--3.21%
270 Donaldson Lufkin & Jenrette.............. 04/01/02 5.875 266,036
140 FMR Corp................................. 06/15/29 7.570 138,797
145 Lehman Brothers Holdings Inc............. 04/01/04 6.625 141,477
135 Merrill Lynch & Company Inc.............. 02/17/09 6.000 124,469
205 Morgan Stanley Group Inc................. 01/20/04 5.625 196,855
-----------
867,634
-----------
TELECOMMUNICATIONS--0.73%
210 U.S. West Capital Funding Inc............ 07/15/08 6.375 197,595
-----------
TOBACCO--1.35%
240 Philip Morris Co. Inc.................... 07/01/08 to 01/15/27 7.650 to 7.750 245,281
120 RJ Reynolds Tobacco Holdings............. 05/15/03 7.375 118,162
-----------
363,443
-----------
YANKEE--1.59%
75 Canadian Imperial Bank Commerce.......... 08/01/00 6.200 75,119
195 Household International Netherlands BV... 12/01/03 6.200 191,165
170 Imperial Tobacco Overseas BV............. 04/01/09 7.125 161,692
-----------
427,976
-----------
Total Corporate Bonds (cost--$3,922,240)............. 3,801,939
-----------
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ------------------ -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--8.96%
$ 185 Federal Home Loan Mortgage Corporation... 03/18/08 6.220% $ 178,401
200 Federal National Mortgage Association.... 01/15/09 5.250 182,642
1,119 U.S. Treasury Bonds(1)................... 08/15/13 to 02/15/29 5.250 to 12.000 1,268,294
555 U.S. Treasury Inflation Index Notes...... 07/15/02 3.625 549,686
243 U.S. Treasury Notes...................... 05/15/09 5.500 237,305
-----------
Total U.S. Government and Agency Obligations
(cost--$2,483,352)................................. 2,416,328
-----------
MORTGAGE BACKED SECURITIES--10.08%
FEDERAL HOME LOAN MORTGAGE CORPORATION CERTIFICATES--0.81%
225 FHLMC TBA................................ TBA 6.500 217,617
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--5.62%
1,030 FNMA TBA................................. TBA 6.000 968,844
390 FNMA TBA................................. TBA 6.500 383,334
22 FNMA..................................... 07/01/28 6.500 21,523
39 FNMA..................................... 01/01/26 7.500 39,778
62 FNMA..................................... 02/01/25 9.000 65,583
34 FNMA..................................... 02/01/25 9.500 35,945
-----------
1,515,007
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--1.56%
401 GNMA..................................... 11/15/17 8.500 421,410
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--2.09%
94 Amresco Commercial Mortgage Funding I
Corp.,
Series 1997-C1, Class A1............... 06/17/29 6.730 94,320
68 CS First Boston Mortgage Securities
Corp., Series 1997-2, Class A.......... 06/01/20 7.500 67,589
16 FDIC REMIC Trust, Series 1994-C1, Class
2A2.................................... 09/25/25 7.850 16,320
45 FDIC REMIC Trust, Series 1996-C1, Class
1A..................................... 05/25/26 6.750 44,514
43 FNMA REMIC Trust, Series 1996-M6, Class
E...................................... 09/17/19 7.750 43,955
82 GMAC Commercial Mortgage Security, Series
1996-C1, Class A2A..................... 09/15/03 6.790 82,489
125 LB Commercial Conduit Mortgage Trust,
Series 1998-C4, Class A1b.............. 10/15/08 6.210 119,021
95 Morgan Stanley Capital I Inc., Series
1997-WF1, Class A1+.................... 10/15/06 6.830 95,939
-----------
564,147
-----------
Total Mortgage Backed Securities
(cost--$2,718,570)................................. 2,718,181
-----------
SHORT TERM INVESTMENT--7.69%
2,078 Federal Home Loan Mortgage Corporation
Discount Notes
(cost--$2,074,353)..................... 07/14/99 4.860@ 2,074,353
-----------
</TABLE>
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ------------------ -----------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--0.81%
$ 220 Repurchase Agreement dated 06/30/99 with
State Street Bank & Trust Company,
collateralized by $223,981 U.S.
Treasury Notes, 5.625% due 12/31/99
(value-$224,400); proceeds: $220,024
(cost--$220,000)....................... 07/01/99 4.000% $ 220,000
-----------
Total Investments (cost--$24,819,317)--105.06%....... 28,339,656
Liabilities in excess of other assets--(5.06)%....... (1,363,998)
-----------
Net Assets--100.00%.................................. $26,975,658
-----------
-----------
</TABLE>
- -----------------
* Non-income producing security.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
@ Interest rate shown is the discount rate at date of purchase.
ADR American Depositary Receipt
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Assigned--Securities are purchased on a forward commitment with an
approximate principal amount (generally +/- 1.0%) and generally stated
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
(1) Security, or portion thereof, was on loan at June 30, 1999.
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost--$24,819,317)............................................................. $28,339,656
Investment of cash collateral for securities loaned (cost--$1,223,375)................................ 1,223,375
Cash.................................................................................................. 7,195
Receivable for investments sold....................................................................... 213,072
Dividends and interest receivable..................................................................... 141,176
Other assets.......................................................................................... 1,243
-----------
Total assets.......................................................................................... 29,925,717
-----------
LIABILITIES
Payable for investments purchased..................................................................... 1,678,662
Collateral for seucrities loaned...................................................................... 1,223,375
Payable to affiliates................................................................................. 16,593
Accrued expenses and other liabilities................................................................ 31,429
-----------
Total liabilities..................................................................................... 2,950,059
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding--2,348,762 (unlimited number authorized)... 21,191,457
Undistributed net investment income................................................................... 287,609
Accumulated net realized gains from investments....................................................... 1,976,253
Net unrealized appreciation of investments............................................................ 3,520,339
-----------
Net assets............................................................................................ $26,975,658
-----------
-----------
Net asset value, offering price and redemption value per share........................................ $11.49
-----------
-----------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
----------------
<S> <C>
INVESTMENT INCOME:
Interest......................................................................................................... $ 375,024
Dividends........................................................................................................ 79,497
----------------
454,521
----------------
EXPENSES:
Investment advisory and administration........................................................................... 108,288
Legal and audit.................................................................................................. 21,122
Reports and notices to shareholders.............................................................................. 20,559
Custody and accounting........................................................................................... 9,773
Trustees' fees................................................................................................... 3,750
Transfer agency fees and related service expenses................................................................ 750
Other expenses................................................................................................... 1,184
----------------
165,426
----------------
Net investment income............................................................................................ 289,095
----------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains from investments.............................................................................. 1,979,677
Net change in unrealized appreciation/depreciation of investments................................................ (2,493,789)
----------------
Net realized and unrealized loss from investments................................................................ (514,112)
----------------
Net decrease in net assets resulting from operations............................................................. $ (225,017)
----------------
----------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1999 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................................................. $ 289,095 $ 692,840
Net realized gains from investments................................... 1,979,677 3,474,310
Net change in unrealized appreciation of investments.................. (2,493,789) 1,039,874
------------- ------------------
Net increase (decrease) in net assets resulting from operations....... (225,017) 5,207,024
------------- ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................. -- (670,147)
Net realized gains from investments................................... -- (3,490,506)
------------- ------------------
-- (4,160,653)
------------- ------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares of beneficial interest........... 512,587 2,174,591
Cost of shares of beneficial interest repurchased..................... (6,021,161) (8,713,360)
Proceeds from dividends reinvested.................................... 4,160,653 5,829,680
------------- ------------------
Net decrease in net assets from beneficial interest transactions...... (1,347,921) (709,089)
------------- ------------------
Net increase (decrease) in net assets................................. (1,572,938) 337,282
NET ASSETS:
Beginning of period................................................... 28,548,596 28,211,314
------------- ------------------
End of period (including undistributed net investment income of
$287,609 at June 30, 1999).......................................... $26,975,658 $28,548,596
------------- ------------------
------------- ------------------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--Balanced 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 benefits under certain variable contracts.
The Fund accounts separately for the assets, liabilities and operations of
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 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. 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.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
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. 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.
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.
CONCENTRATION OF RISK
The ability of the issuers of debt securities held by the Portfolio to meet
their obligations may be affected by economic and political developments
particular to a specific industry, country or region.
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 paid monthly, at an
annual rate of 0.75% of the Portfolio's average daily net assets. At June 30,
1999, the Portfolio owed Mitchell Hutchins $16,531 in investment advisory and
administration fees.
For the six months ended June 30, 1999, the Portfolio paid $1,308 in brokerage
commissions to PaineWebber for transactions executed on behalf of the Portfolio.
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 $117 from the Portfolio for the six months ended June
30, 1999. At June 30, 1999, the Portfolio owed PaineWebber $62 in security
lending fees.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
For the six months ended June 30, 1999, the Portfolio earned $345 net of fees,
rebates and expenses, for securities lending transactions. At June 30, 1999, the
Fund's custodian held cash having an aggregate value of $1,223,375 as collateral
for portfolio securities loaned having a market value of $1,168,431 which was
invested in the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------
<C> <S> <C>
295,552 Janus Money Market Institutional Shares..................................................... $ 295,552
220,439 Liquid Assets Portfolio..................................................................... 220,439
707,384 MH Private Money Market Fund LLC............................................................ 707,384
----------
Total investments of cash collateral for securities loaned (cost--$1,223,375)............... $1,223,375
----------
----------
</TABLE>
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 shareholders and other temporary or emergency purposes. In connection
therewith, the Portfolio has agreed to pay a commitment fee, pro rata, based on
the relative asset size of the funds in the Facility. Interest is charged to the
Portfolio at rates based on prevailing market rates in effect at the time of
borrowing. For the period 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 (investments having an excess of value over cost)........................ $ 3,933,510
Gross depreciation (investments having an excess of cost over value)........................ (413,171)
-----------
Net unrealized appreciation of investments.................................................. $ 3,520,339
-----------
-----------
</TABLE>
For the six months ended June 30, 1999, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $38,861,095 and
$41,328,195, respectively.
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.
13
<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 for the
Portfolio was as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
<S> <C> <C>
Shares sold................................................................................. 45,546 180,169
Shares redeemed............................................................................. (533,942) (711,812)
Dividends reinvested........................................................................ 363,376 514,535
------- -------
Net decrease................................................................................ (125,020) (17,108)
------- -------
------- -------
</TABLE>
14
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year 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.............. $ 11.54 $ 11.33 $ 10.95 $ 10.70 $ 9.54 $ 11.95
------------- -------- -------- -------- -------- --------
Net investment income............................. 0.12 0.28 0.28 0.29 0.35 0.30
Net realized and unrealized gains (losses) from
investments...................................... (0.17) 1.61 2.44 1.49 1.88 (1.44)
------------- -------- -------- -------- -------- --------
Net increase (decrease) from investment
operations....................................... (0.05) 1.89 2.72 1.78 2.23 (1.14)
------------- -------- -------- -------- -------- --------
Dividends from net investment income.............. -- (0.27) (0.28) (0.28) (0.35) (0.30)
Distributions from net realized gains on
investments...................................... -- (1.41) (2.06) (1.25) (0.72) (0.97)
------------- -------- -------- -------- -------- --------
Total dividends and distributions................. -- (1.68) (2.34) (1.53) (1.07) (1.27)
------------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 11.49 $ 11.54 $ 11.33 $ 10.95 $ 10.70 $ 9.54
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
Total investment return(1)........................ (0.43)% 16.81% 24.86% 16.82% 23.27% (9.59)%
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $26,976 $ 28,549 $ 28,211 $ 29,224 $ 23,413 $ 23,263
Expenses to average net assets.................... 1.17%* 0.97% 1.19% 1.24% 1.09% 1.03%
Net investment income to average net assets....... 1.98%* 2.08% 2.06% 2.29% 2.88% 2.30%
Portfolio turnover................................ 140% 177% 169% 235% 171% 112%
</TABLE>
- ---------------
+ Prior to the close of business on January 26, 1996, the Balanced
Portfolio was known as the Asset Allocation Portfolio.
* 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
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 return for periods of less
than one year has not been annualized.
15
<PAGE>
SEMIANNUAL REPORT
- --------------------
MITCHELL
HUTCHINS SERIES TRUST
BALANCED PORTFOLIO
JUNE 30, 1999
- -C-1999 PaineWebber Incorporated
