<PAGE>
MITCHELL HUTCHINS SERIES TRUST -- GROWTH AND INCOME PORTFOLIO
SEMIANNUAL REPORT August 15, 2000
Dear Contract Owner,
We are pleased to present you with the semiannual report for Mitchell Hutchins
Series Trust--Growth and Income Portfolio (the "Portfolio") for the six-month
period ended June 30, 2000.
MARKET REVIEW
-------------------------------------------------------------------------------
[GRAPHIC]
In stark contrast to 1999, when virtually every major equity market recorded
dramatic gains, the first six months of 2000 produced a market correction as
three interest rate hikes, valuation concerns and inflation fears combined to
start slowing the red-hot economy down. When the Federal Reserve Board (the
"Fed") raised the Fed Funds' rate by one-half percentage point in May, it marked
the third increase in five months totaling a full one-percent.
Inflation-adjusted gross domestic product (GDP) shot up 5.5% in the first
quarter, following a 7.3% increase in the previous quarter, and investors began
taking a closer look at valuations, particularly among technology stocks.
The result was sluggish performance across the board during the period. The
Standard & Poor's 500 Index (S&P 500) declined 0.43% and the NASDAQ was down
2.54%, which includes a 13.27% dip in the second quarter. The Dow Jones
Industrial Average (DJIA) lost 8.44% during the period.
PORTFOLIO REVIEW
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 6/30/00
<TABLE>
<CAPTION>
6 Months 1 Year 5 Years Inception*
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class H -2.44% 4.12% 17.94% 11.42%
Class I -2.50 4.12 N/A 5.59
S&P 500 Index -0.43 7.24 23.80 18.37
-------------------------------------------------------------------------------
</TABLE>
*Inception: since commencement of issuance on January 2, 1992 for Class H shares
and January 5, 1999 for Class I shares. Index performance is shown as of
inception of oldest share class.
The investment return and the 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. Returns for periods of less than one year are not
annualized. Past performance is no guarantee of future performance. Figures
assume reinvestment of all dividends and capital gains distributions, if any, at
net asset value on the payable dates and do not include sales charges. In
addition, for the fiscal year ended December 31, 1999 and the period from
January 1, 2000 through February 29, 2000, the Portfolio's adviser voluntarily
waived payment of certain fees for Class I shares. Without this waiver
performance would have been lower. Performance relates to the Portfolio and does
not reflect separate account charges applicable to variable annuity
contracts.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
Our exposure to technology sectors, which stood at 25.5% at year-end, has risen
to 29.6% as we look to stocks with price weakness. Our overweight in technology
contributed as much to the Portfolio's negative performance, a 3.4% decline, as
any other sector in the past six months. In May, we focused more on energy,
technology and health care sectors, believing that analysts were underestimating
earnings in those sectors.
Cisco Systems, at 4.3% of holdings, remained the Portfolio's largest holding but
Microsoft and Apple Computer fell from our top 10 holdings. JDS Uniphase, the
fast-growing fiber optic engineering company, was our second largest holding.
During the period, the Portfolio increased its position in cash and cash
equivalents from 8.1% to 19.1%
OUTLOOK
-------------------------------------------------------------------------------
Despite fears of inflation, rising interest rates and the general unevenness of
the market, the outlook for equities going into the second half looks reasonably
favorable. Growth forecasts now call for a 3.5% annual increase in GDP for the
year and the rate of inflation may slow, particularly when oil prices are
factored out of the equation. Oil prices are likely to decline during the second
half, while the Federal Reserve appears neutral about imposing another rate
increase during its August 22 meeting. Any blip in oil production or employment
costs, however, may trigger one more rate increase.
On the corporate front, we expect a number of positive earnings surprises this
summer as large pockets of the technology sector continue strong, sustainable
growth. Negative earnings surprises and previous interest rate hikes have
already been priced into the market. With the prospects of a soft landing,
leaving the U.S. economy with moderate growth, we believe corporate profits will
range between 17-18% for the rest of this year and between 9-10% in 2001.
We believe that six interest rate hikes in the past 13 months, totaling 1.5%,
have done their job in slowing down the torrid economy, and look forward to
slower, more sustainable growth. Sectors such as consumer cyclicals and capital
goods that can take advantage of strong global economies, especially in Western
Europe, seem likely to perform well in the second half of the year.
While we expect some sectors, and certainly individual companies, to continue to
thrive going forward, uncertainty about interest rates is likely to mean
persistent market volatility during the second half of the year. Yet, we believe
corporate profits will rise into double digits through year-end on the strength
of generally positive earnings. Stock selection is likely to play a key role in
the Portfolio's performance.
To take advantage of the market in the coming months, the Portfolio is focusing
on technology stocks, particularly those exhibiting price weakness. We also
upped our exposure to energy companies while maintaining positions in consumer
cyclicals and capital goods, both of which should benefit from more moderate
growth. Once we see more confirmation that the Fed feels inflation has been
tamed and that further interest rate hikes are unlikely, we also expect the
financial sector to rebound.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
SEMIANNUAL REPORT
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS* 6/30/00 12/31/99
------------------------------------------------------------------------
<S> <C> <C>
Stocks 75.9% 85.0%
Convertible Bonds/Preferred Stocks 5.0% 6.9%
Cash Equivalents 19.1% 8.1%
No. of Securities 73 99
Net Assets ($mm) $27.13 $28.66
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS* 6/30/00 12/31/99
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology 24.4% Technology 25.5%
Financial 14.8 Financial 16.0
Consumer Cyclical 11.8 Consumer Cyclical 15.5
Energy 10.6 Utilities 8.9
Capital Goods 5.5 Capital Goods 7.8
---------------------------------------------------------------------------------------
Total 67.1 Total 73.7
</TABLE>
<TABLE>
<CAPTION>
TOP 10 HOLDINGS* 6/30/00 12/31/99
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cisco Systems 4.3% Cisco Systems 3.4%
JDS Uniphase 2.5 Applied Materials 3.2
Citigroup 2.2 Microsoft 2.3
Chevron 2.1 Apple Computer 2.1
Morgan Stanley Dean Witter & Co. 2.1 Dell Computer 1.9
Dell Computer 2.0 Exxon-Mobil 1.9
Exxon-Mobil 1.9 JDS Uniphase 1.9
Schering-Plough 1.9 Dayton Hudson 1.8
IBM 1.9 United Technologies 1.8
Applied Materials 1.8 AT&T 1.7
----------------------------------------------------------------------------------------
Total 22.7 Total 22.0
</TABLE>
*Weightings represent percentages of net assets as of the dates indicated. The
Portfolio is actively managed and its composition will vary over time.
3
<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 President and
Chief Executive Officer Chief Operating Officer
Mitchell Hutchins Mitchell Hutchins
Asset Management Inc. Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
Portfolio performed during the six-month period ended June 30, 2000, and
reflects our views at the time of its writing. Of course, these views may change
in response to changing circumstances.
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- --------
<S> <C>
COMMON STOCKS--75.86%
AIRLINES--0.65%
3,500 Delta Air Lines, Inc. ............. $ 176,969
----------
BANKS--3.79%
9,216 Chase Manhattan Corp. ............. 424,512
10,000 Citigroup, Inc. ................... 602,500
----------
1,027,012
----------
BROADCASTING & PUBLISHING--0.35%
1,600 NTL Inc.* ......................... 95,800
----------
CHEMICALS--1.40%
12,600 Dow Chemical Co. .................. 380,363
----------
COMPUTER HARDWARE--7.37%
6,000 Apple Computer, Inc.* ............. 314,250
18,200 Cisco Systems Inc.* ............... 1,156,837
10,700 Dell Computer Corp.* .............. 527,644
----------
1,998,731
----------
COMPUTER SOFTWARE--4.73%
3,100 BMC Software, Inc.* ............... 113,102
4,700 IBM Corp. ......................... 514,944
5,600 Microsoft Corp.* .................. 448,000
14,200 Unisys Corp.* ..................... 206,787
----------
1,282,833
----------
CONSUMER DURABLES--1.46%
8,500 Whirlpool Corp. ................... 396,313
----------
DEFENSE & AEROSPACE--1.55%
6,400 Boeing Co. ........................ 267,600
3,500 TRW Inc. .......................... 151,812
----------
419,412
----------
DIVERSIFIED RETAIL--2.37%
7,000 Federated Department Stores, Inc.* 236,250
7,000 Target Corp. ...................... 406,000
----------
642,250
----------
DRUGS & MEDICINE--3.16%
7,150 Pfizer, Inc. ...................... 343,200
10,200 Schering-Plough Corp. ............. 515,100
----------
858,300
----------
ELECTRIC UTILITIES--1.97%
5,200 Duke Energy Corp. ................. 293,150
6,000 Energy East Corp. ................. 114,375
3,300 Unicom Corp. ...................... 127,669
----------
535,194
----------
ELECTRICAL EQUIPMENT--3.74%
3,075 Honeywell, Inc. ................... 103,589
9,400 Jabil Circuit Inc.* ............... 466,475
2,400 Johnson Controls Inc. ............. 123,150
11,100 Motorola, Inc. .................... 322,594
----------
1,015,808
----------
ELECTRICAL POWER--0.62%
2,800 Emerson Electric Co. .............. 169,050
----------
ENERGY RESERVES & PRODUCTION--7.53%
6,700 Chevron Corp. ..................... 568,244
6,400 El Paso Energy Corp. .............. 326,000
6,708 Exxon Mobil Corp. ................. 526,578
3,900 Phillips Petroleum Co. ............ 197,681
6,900 Royal Dutch Petroleum Co., ADR .... 424,781
----------
2,043,284
----------
ENTERTAINMENT--1.33%
5,300 Viacom, Inc., Class B* ............ 361,394
----------
FINANCIAL SERVICES--2.64%
4,500 Federal Home Loan Mortgage Corp. .. 182,250
5,400 General Electric Co. .............. 286,200
5,800 MBNA Corp. ........................ 157,325
1,000 Providian Financial Corp. ......... 90,000
----------
715,775
----------
FOREST PRODUCTS, PAPER--2.01%
6,871 Georgia-Pacific Corp. ............. 180,364
3,700 International Paper Co. ........... 110,306
5,900 Weyerhaeuser Co. .................. 253,700
----------
544,370
----------
INDUSTRIAL PARTS--3.31%
2,900 Ingersoll Rand Co. ................ 116,729
7,600 Mettler-Toledo International Inc.* 304,000
8,100 United Technologies Corp. ......... 476,887
----------
897,616
----------
INDUSTRIAL SERVICES & SUPPLIES--0.80%
4,600 Tyco International Ltd., ADR ...... 217,925
----------
INFORMATION & COMPUTER SERVICES--1.09%
5,600 America Online Inc.* .............. 295,400
----------
LONG DISTANCE & PHONE COMPANIES--1.72%
10,150 MCI Worldcom Inc.* ................ 465,631
----------
MEDIA--0.60%
4,000 Comcast Corp., Class A* ........... 162,000
----------
MEDICAL PRODUCTS--1.04%
4,000 Baxter International, Inc. ........ 281,250
----------
MINING & METALS--0.94%
8,800 Alcoa, Inc. ....................... 255,200
----------
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ----------
<S> <C>
COMMON STOCKS--(CONCLUDED)
MOTOR VEHICLES--2.20%
2,800 Borg Warner Automotive, Inc. ...... $ 98,350
8,047 Delphi Automotive Systems Corp. ... 117,184
8,900 Ford Motor Co. .................... 382,700
----------
598,234
----------
OIL REFINING--0.90%
5,000 Conoco, Inc. ...................... 122,812
4,300 Tosco Corp. ....................... 121,744
----------
244,556
----------
OIL SERVICES--2.14%
9,600 Halliburton Co. ................... 453,000
2,400 Transocean Sedco Forex, Inc. ...... 128,250
----------
581,250
----------
OTHER INSURANCE--1.30%
4,150 AMBAC Financial Group Inc. ........ 227,472
6,000 Metlife Inc* ...................... 126,375
----------
353,847
----------
PUBLISHING--1.66%
5,700 Knight Ridder, Inc. ............... 303,169
3,700 New York Times Co., Class A ....... 146,150
----------
449,319
----------
SECURITIES & ASSET MANAGEMENT--3.01%
7,400 AXA Financial Inc. ................ 251,600
6,800 Morgan Stanley Dean Witter & Co. .. 566,100
----------
817,700
----------
SEMICONDUCTOR--7.44%
5,400 Applied Materials, Inc.* .......... 489,375
7,400 Atmel Corp.* ...................... 272,875
3,500 Intel Corp. ....................... 467,906
5,600 JDS Uniphase Corp.* ............... 671,300
1,600 Vitesse Semiconductor Corp.* ...... 117,700
----------
2,019,156
----------
SPECIALTY RETAIL--1.04%
4,300 Circuit City Stores, Inc. ......... 142,706
9,000 Staples, Inc.* .................... 138,375
----------
281,081
----------
Total Common Stocks (cost--$16,150,541) ...... 20,583,023
----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
PREFERRED STOCK--0.90%
WIRELESS TELECOMMUNICATIONS--0.90%
4,000 Nextel Communications, Inc.*
(cost--$158,500) .................. 244,750
----------
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
---------- ---------------- ---------------- --------
<S> <C> <C> <C>
CONVERTIBLE BONDS--4.08%
FINANCIAL SERVICES--4.08%
$ 900 Bell Atlantic Financial Services Inc.+ (cost--$900,000) ....... 09/15/05 4.250% $ 1,107,000
-----------
SHORT-TERM U.S. AGENCY OBLIGATION--20.45%
5,549 Federal Farm Credit Bank Discount Notes (cost--$5,546,975) .... 07/03/00 6.570@ 5,546,975
-----------
Total Investments (cost--$22,756,016)--101.29% ........................... 27,481,748
Liabilities in excess of other assets--(1.29)% ........................... (349,431)
-----------
Net Assets--100.00% ...................................................... $27,132,317
===========
</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.
ADR American Depositary Receipt
@ Interest rate shown is discount rate at date of purchase.
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$22,756,016) ...................................................... $27,481,748
Cash ......................................................................................................... 3,926
Receivable for investments sold .............................................................................. 16,121
Dividends and interest receivable ............................................................................ 19,414
Other assets ................................................................................................. 1,255
-----------
Total assets ................................................................................................. 27,522,464
-----------
LIABILITIES
Payable for investments purchased ............................................................................ 299,814
Payable to affiliates ........................................................................................ 22,242
Accrued expenses and other liabilities ....................................................................... 68,091
-----------
Total liabilities ............................................................................................ 390,147
-----------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized) .......................................... 19,900,845
Undistributed net investment income .......................................................................... 92,455
Accumulated net realized gains from investment transactions .................................................. 2,413,285
Net unrealized appreciation of investments ................................................................... 4,725,732
-----------
Net assets ................................................................................................... $27,132,317
===========
CLASS H:
Net assets ................................................................................................... $19,773,155
-----------
Shares outstanding ........................................................................................... 1,327,811
-----------
Net asset value, offering price and redemption value per share ............................................... $14.89
======
CLASS I:
Net assets ................................................................................................... $ 7,359,162
-----------
Shares outstanding ........................................................................................... 494,371
-----------
Net asset value, offering price and redemption value per share ............................................... $14.89
======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Interest ..................................................................................................... $ 141,568
Dividends (net of foreign withholding taxes of $803) ......................................................... 126,633
-----------
268,201
-----------
EXPENSES:
Investment advisory and administration ....................................................................... 97,407
Legal and audit .............................................................................................. 28,970
Reports and notices to shareholders .......................................................................... 12,070
Custody and accounting ....................................................................................... 9,420
Distribution fee--Class I .................................................................................... 8,546
Trustees' fees ............................................................................................... 3,750
Transfer agency fees and related service expenses ............................................................ 1,630
Other expenses ............................................................................................... 16,379
-----------
178,172
Less: Fee waiver from adviser ................................................................................ (2,561)
-----------
Net expenses ................................................................................................. 175,611
-----------
Net investment income ........................................................................................ 92,590
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investments .......................................................................... 2,413,821
Net change in unrealized appreciation/depreciation of investments ............................................ (3,156,380)
-----------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES ................................................ (742,559)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................................................... $ (649,969)
===========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--GROWTH AND INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999
--------------- ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................................................. $ 92,590 $ 91,533
Net realized gains from investments ................................................................... 2,413,821 1,821,542
Net change in unrealized appreciation/depreciation of investments ..................................... (3,156,380) 788,421
------------- ------------
Net increase (decrease) in net assets resulting from operations ....................................... (649,969) 2,701,496
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class H ........................................................................ (69,395) (296)
Net investment income--Class I ........................................................................ (22,273) (47)
Net realized gains from investments--Class H .......................................................... (1,376,246) --
Net realized gains from investments--Class I .......................................................... (441,711) --
------------- ----------
Total dividends and distributions to shareholders ..................................................... (1,909,625) (343)
------------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .................................................................. 5,483,545 13,898,885
Cost of shares repurchased ............................................................................ (6,359,414) (14,267,919)
Proceeds from dividends reinvested .................................................................... 1,909,625 1,829,366
------------ ---------
Net increase in net assets from beneficial interest transactions ...................................... 1,033,756 1,460,332
------------ ---------
Net increase (decrease) in net assets ................................................................. (1,525,838) 4,161,485
NET ASSETS:
Beginning of period ................................................................................... 28,658,155 24,496,670
----------- ----------
End of period (including undistributed net investment income of $92,455 and $91,533, respectively) .... $27,132,317 $ 28,658,155
=========== ============
</TABLE>
See accompanying notes to financial statements
10
<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 the Portfolio are offered 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 rata basis.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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"), a wholly owned
subsidiary of Paine Webber Group Inc. ("PW Group") 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
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
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 is
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 board 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, 2000, the
Portfolio owed Mitchell Hutchins $16,256 in investment advisory and
administration fees. Mitchell Hutchins waived a portion of its investment
advisory and administration fees in connection with the Portfolio's investment
of cash collateral from securities lending transactions in the Mitchell Hutchins
Private Money Market Fund LLC. For the six months ended June 30, 2000, Mitchell
Hutchins waived $2.
For the six months ended June 30, 2000, the Portfolio paid $16,578 in
brokerage commissions to PaineWebber for transactions executed on behalf of the
Portfolio.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS, with headquarters in Zurich,
Switzerland, is an internationally diversified organization with operations in
many areas of the financial services industry.
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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
period January 1, 2000 to February 29, 2000, Mitchell Hutchins voluntarily
agreed to waive $2,559 of the distribution fees on Class I shares. At June 30,
2000, the Portfolio owed Mitchell Hutchins $5,986 in distribution fees.
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,
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, 2000, the Portfolio
did not borrow under the Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at June 30,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At June 30, 2000, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investment having an excess of value over cost) ........ $ 6,047,313
Gross depreciation (investment having an excess of cost over value) ........ (1,321,581)
-----------
Net unrealized appreciation of investments ................................. $ 4,725,732
===========
</TABLE>
For the six months ended June 30, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $7,164,624 and
$10,885,080, 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 $6 from the Portfolio for the six months ended June 30,
2000.
For the six months ended June 30, 2000, the Portfolio earned $20 net of
fees, rebates and expenses, for securities lending transactions. At June 30,
2000, there were no securities out on loan.
FEDERAL TAX STATUS
The Portfolio intends to distribute all of its taxable income and to comply
with the 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 were as
follows:
<TABLE>
<CAPTION>
CLASS H CLASS I
------------------------------------------------ -------------------------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE JANUARY 5, 1999+
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 JUNE 30, 2000 DECEMBER 31, 1999
----------------------- ----------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold .............. 224,828 $ 3,460,845 475,891 $ 7,077,528 129,752 $2,022,700 457,242 $ 6,821,357
Shares repurchased ....... (363,529) (5,660,749) (879,980) (13,103,459) (44,420) (698,665) (77,853) (1,164,460)
Dividends reinvested ..... 92,432 1,445,642 124,442 1,829,319 29,647 463,983 3 47
--------- ------------ --------- ------------- -------- ----------- -------- -----------
Net increase (decrease) .. (46,269) $ (754,262) (279,647) $ (4,196,612) 114,979 $1,788,018 379,392 $5,656,944
========= ============ ========= ============= ======== =========== ======== ===========
</TABLE>
----------------------
+ Commencement of issuance of shares.
14
<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 H CLASS I
-------------------------------------------------------- -------------------------------
FOR THE SIX FOR THE YEARS ENDED DECEMBER 31, FOR THE SIX FOR THE PERIOD
MONTHS ENDED ----------------------------------- MONTHS ENDED JANUARY 5, 1999+
JUNE 30, 2000 JUNE 30, 2000 THROUGH
(UNAUDITED) 1999 1998 1997 1996 1995 (UNAUDITED) DECEMBER 31, 1999
------------- ---- ---- ---- ---- ---- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 16.34 $ 14.81 $ 13.69 $ 12.27 $ 11.83 $ 9.16 $ 16.35 $ 14.70
------- ------- ------- ------- ------- ------- ------- -------
Net investment income ..................... 0.06 0.05@ 0.07 0.10 0.06 0.10 0.04 0.04@
Net realized and unrealized gains (losses)
from investments ........................ (0.41) 1.48@ 2.16 3.88 2.53 2.70 (0.40) 1.61@
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) from investment
operations .............................. (0.35) 1.53 2.23 3.98 2.59 2.80 (0.36) 1.65
------- ------- ------- ------- ------- ------- ------- -------
Dividends from net
investment income ....................... (0.05) (0.00)# (0.07) (0.10) (0.06) (0.10) (0.05) (0.00)#
Distributions from net realized
gains from investments .................. (1.05) -- (1.04) (2.46) (2.09) (0.03) (1.05) --
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions ......... (1.10) (0.00)# (1.11) (2.56) (2.15) (0.13) (1.10) (0.00)#
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............ $ 14.89 $ 16.34 $ 14.81 $ 13.69 $ 12.27 $ 11.83 $ 14.89 $ 16.35
======== ======= ======= ======= ======= ======= ======= =======
Total investment return(1) ................ (2.44)% 10.33% 16.32% 32.45% 22.12% 30.52% (2.50)% 11.23%
======== ======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's) ......... $19,773 $22,457 $24,497 $18,493 $14,520 $14,797 $ 7,359 $ 6,201
Expenses to average net assets,
before waiver from adviser .............. 1.22%* 1.23% 1.04% 1.04% 1.58% 1.37% 1.46%* 1.48%*
Expenses to average net assets,
after waiver from adviser ............... 1.22%* 1.23% 1.04% 1.04% 1.58% 1.37% 1.38%* 1.23%*
Net investment income to
average net assets, before
waiver from adviser ..................... 0.70%* 0.36% 0.46% 0.71% 0.49% 0.94% 0.48%* 0.04%*
Net investment income to
average net assets, after
waiver from adviser ..................... 0.70%* 0.36% 0.46% 0.71% 0.49% 0.94% 0.56%* 0.29%*
Portfolio turnover rate ................... 30% 65% 69% 92% 99% 134% 30% 65%
</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.
# Amount is less than $0.005.
15
<PAGE>
SEMIANNUAL REPORT
-------------------------------------------------------------------------------
MITCHELL
HUTCHINS SERIES
TRUST
GROWTH AND
INCOME PORTFOLIO
JUNE 30, 2000
-C-2000 PaineWebber Incorporated
All rights reserved.
Member SIPC
