<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH 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--High Income Portfolio, for the six-month period ended
June 30, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
Bond prices ended the period lower, with long-term interest rates up almost
one percentage point vs. the beginning of the period. From January to June, the
Treasury yield curve flattened as rates for bonds with maturities of two years
rose more than those of bonds with maturities of 30 years. The overall bond
market suffered losses as spreads (the difference in yield or income that
securities must pay to compensate for the additional risk) over Treasurys
widened. We attribute this widening to: profit-taking in the corporate and
mortgage sectors; heavy net issuance of asset-backed securities, commercial
mortgage-backed securities and high-yield bonds; and uncertainty about the
Federal Reserve's moves.
HIGH-YIELD BONDS GAIN
The high yield market regained its footing after heavy losses in 1998. As
measured by the CS First Boston High Yield Index, high-yield bonds gained 2.8%
for the period, outperforming all other sectors of the bond market.
INFLATION FEARS RESURFACE
Inflation risk became the dominant theme driving bond yields, as the markets
reacted to improving economic prospects in Asia and Latin America, rapidly
growing U.S. demand, higher oil prices and fears that future wage increases
would not be offset by commodity deflation. The Federal Reserve raised the
federal funds rate by 0.25% on June 30 and assumed a neutral stance, meaning it
had no predisposition to raise or lower rates at its meeting in August.
OUTLOOK
Our outlook for calendar-year 1999 calls for gross domestic product growth of
about 3% and inflation around 2%. Currently, there are no signs of recession. We
expect the Federal Reserve to raise rates by another 0.25% and believe the
economy will most likely slow down moderately. We expect the long bond to remain
around 6%. Global growth and rising commodity prices represent risks to the bond
markets--if inflation rises, then current historically low inflation-risk
premiums could also rise, resulting in a greater rise in interest rates.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE--TOTAL RETURNS FOR PERIODS ENDED 6/30/99
<TABLE>
<CAPTION>
Cumulative
- --------------------------------------------------------------------------------
<S> <C>
Six Months 3.87%
Since Inception 9/28/98 9.23%
- --------------------------------------------------------------------------------
</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.
HIGHLIGHTS
We invested the bulk of the Portfolio's funds in mid-October 1998, near the
bottom of the high yield market slump. We were able to take advantage of low
prices to construct a high credit-quality portfolio--around a BB rating. This
higher than normal quality helped performance during the period. As the
Portfolio realizes gains by selling some of its BB positions, we expect
Portfolio quality to decline gradually to a B rating.
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
Credit Quality(1)
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
BB & Higher 21.8 21.2
B 50.1 49.7
CCC & Lower 6.4 7.9
Non-Rated 12.2 12.9
Cash 3.3 2.8
Equity/Preferred 6.2 5.5
- --------------------------------------------------------------------------------
Total 100.0 100.0
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Weighted Avg Maturity 8.02 Yrs 8.88 Yrs
Weighted Avg Duration 5.31 Yrs 5.45 Yrs
- --------------------------------------------------------------------------------
</TABLE>
(1) 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--HIGH INCOME PORTFOLIO SEMIANNUAL REPORT
The Portfolio's largest sector weighting remains fixed communications
(15.4%),(1) where we are emphasizing international long distance companies. Two
companies we like are Viatel (1.3%), which is building a European fiber optic
network, and Barak (1.1%), a competitive long distance carrier in Israel. In the
U.S. we continue to focus on companies with extensive fiber optic networks such
as Metromedia Fiber (2.0%) and Northeast Optic Network (1.0%). While we still
find competitive local exchange carriers attractive, we are opting to take
profits given their significant price appreciation. In cable (12.9%), the second
largest sector weighting, we favor new entrants that offer integrated voice data
and video, such as RCN Corporation (1.3%).
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
Top Five Sectors(1)
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Communications--fixed 15.4 25.2
Cable 12.9 5.7
Service 8.1 --
Retail 6.2 2.2
Hotels and Lodging 5.8 2.6
- --------------------------------------------------------------------------------
</TABLE>
Top Ten Holdings1(1)
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Park Place Entertainment 3.7 --
Ames Department Stores 2.9 --
Knology Holdings 2.3 --
Host Marriott L.P. 2.2 1.6
Spectrasite Holdings 2.2 --
NTL Communications 2.1 1.2
EchoStar DBS 2.0 --
Hyperion Telecommunications 2.0 --
Metromedia Fiber Network Inc. 2.0 2.3
Nextlink Communications 2.0 --
- --------------------------------------------------------------------------------
</TABLE>
(1) Weightings represent percentages of portfolio assets as of June 30, 1999.
The Portfolio is actively managed and its composition will vary over time.
3
<PAGE>
SEMIANNUAL REPORT
As a result of the increased supply and interest rate backup at the end of
May, high-yield spreads have widened somewhat. In light of this widening we are
looking at high quality single-B-rated bonds. We expect new bond issuance to
remain lighter through 1999 than it was in 1998--in fact, we think we may be
seeing this year's surge of issuance now, as borrowers rush to market ahead of
year-end and potential Y2K problems. If supply diminishes later in the year, we
believe spreads will tighten again, so this seems like a good time to take
advantage of the attractive yields in high quality B credits.
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.
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------- -------------
<C> <S> <C> <C> <C>
CORPORATE BONDS--93.55%
AUTOMOTIVE--3.76%
$ 250 Federal Mogul Corporation**....................... 01/15/09 7.500% $ 230,710
250 HDA Parts Systems Incorporated**.................. 08/01/05 12.000 252,500
-------------
483,210
-------------
CABLE--12.73%
250 @Entertainment Incorporated....................... 07/15/08 14.500+ 162,500
250 21st Century Telecom Group Incorporated........... 02/15/08 12.250+ 110,000
250 EchoStar DBS Corporation**........................ 02/01/09 9.375 255,000
500 Knology Holdings Incorporated..................... 10/15/07 11.875+ 290,000
250 NTL Communications Corporation.................... 10/01/08 11.500 273,750
125 Park N View Incorporated.......................... 05/15/08 13.000 37,500
250 RCN Corporation................................... 10/15/07 11.125+ 166,875
250 UIH Australia Pacific Incorporated................ 05/15/06 14.000+ 177,500
250 United International Holdings Incorporated........ 02/15/08 10.750+ 165,000
-------------
1,638,125
-------------
CHEMICALS--2.95%
250 Lyondell Chemical Company**....................... 05/01/07 9.875 254,688
125 ZSC Specialty**................................... 07/01/09 11.000 125,312
-------------
380,000
-------------
COMMUNICATIONS--FIXED--15.28%
125 Allegiance Telecom, Incorporated.................. 05/15/08 12.875 132,500
250 Barak ITC......................................... 11/15/07 12.500+ 142,500
250 Flag Limited...................................... 01/30/08 8.250 233,125
125 GST Equipment Funding Incorporated................ 05/01/07 13.250 135,000
250 Hyperion Telecommunications Incorporated**........ 11/01/07 12.000 252,500
250 Metromedia Fiber Network Incorporated............. 11/15/08 10.000 256,875
250 NEXTLINK Communications Incorporated.............. 06/01/09 10.750 256,250
125 Northeast Optic Network Incorporated.............. 08/15/08 12.750 128,750
250 Pathnet Incorporated.............................. 04/15/08 12.250 140,000
125 Time Warner Telecommunications LLC................ 07/15/08 9.750 128,125
250 Viatel Incorporated............................... 04/15/08 12.500+ 160,000
-------------
1,965,625
-------------
COMMUNICATIONS--MOBILE--5.40%
250 Nextel Communications............................. 02/15/08 9.950+ 172,500
250 Orange PLC........................................ 08/01/08 8.000 236,875
500 Spectrasite Holdings Incorporated**............... 04/15/09 11.250+ 285,000
-------------
694,375
-------------
CONSUMER MANUFACTURING--1.87%
250 Decora Industries Incorporated.................... 05/01/05 11.000 240,312
-------------
ENERGY--3.66%
250 Gulfmark Offshore Incorporated.................... 06/01/08 8.750 235,625
250 R&B Falcon Corporation............................ 12/15/08 9.500 235,000
-------------
470,625
-------------
FINANCE--2.39%
125 Airplanes Pass Through Trust...................... 03/15/19 10.875 120,625
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONTINUED)
FINANCE (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 250 Signet Capital Trust I............................ 08/15/27 9.500% $ 187,500
-------------
308,125
-------------
FOOD & BEVERAGE--2.55%
250 Iowa Select Farms L.P.**.......................... 12/01/05 10.750 205,000
125 Packaged Ice Incorporated......................... 02/01/05 9.750 122,500
-------------
327,500
-------------
GAMING--3.69%
500 Park Place Entertainment Corporation.............. 12/15/05 7.875 475,000
-------------
GENERAL INDUSTRIAL--5.30%
250 Coltec Industries Incorporated.................... 04/15/08 7.500 241,250
125 Jordan Telecommunication Products................. 08/01/07 11.750+ 106,250
125 Roller Bearing Company America Incorporated....... 06/15/07 9.625 116,250
250 SabreLiner Corporation**.......................... 06/15/08 11.000 217,500
-------------
681,250
-------------
HEALTHCARE--3.67%
125 Fresenius Medical Care Capital Trust.............. 02/01/08 7.875 116,250
125 InSight Health Services Corporation............... 06/15/08 9.625 120,625
250 Tenet Healthcare Corporation...................... 12/01/08 8.125 235,000
-------------
471,875
-------------
HOTELS & LODGING--5.71%
300 Host Marriott L.P. ............................... 02/15/06 8.375 286,500
250 Signature Resorts Incorporated.................... 05/15/06 9.250 240,000
250 Silverleaf Resorts Incorporated................... 04/01/08 10.500 207,500
-------------
734,000
-------------
REAL ESTATE--3.69%
250 D.R. Horton Incorporated.......................... 02/01/09 8.000 236,250
250 Forest City Enterprises Incorporated.............. 03/15/08 8.500 238,750
-------------
475,000
-------------
RESTAURANTS--1.75%
250 American Restaurant Group Incorporated............ 02/15/03 11.500 225,625
-------------
RETAIL--6.10%
250 Advance Stores Company Incorporated............... 04/15/08 10.250 238,750
375 Ames Department Stores Incorporated**............. 04/15/06 10.000 367,500
172 Tuesday Morning Corporation....................... 12/15/07 11.000 178,880
-------------
785,130
-------------
SERVICE--8.07%
250 Ameriserve Food Distribution Incorporated......... 07/15/07 10.125 210,000
125 Atlantic Express Transportation Corporation....... 02/01/04 10.750 123,438
250 Budget Group Incorporated......................... 04/01/06 9.125 230,000
250 Premire Graphics Incorporated..................... 12/01/05 11.500 235,000
250 Protection One Alarm Incorporated**............... 01/15/09 8.125 240,000
-------------
1,038,438
-------------
</TABLE>
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
SUPERMARKETS & DRUGSTORES--0.99%
$ 125 The Pantry Incorporated........................... 10/15/07 10.250% $ 127,500
-------------
TECHNOLOGY--0.94%
125 Fairchild Semiconductor Corporation............... 03/15/07 10.125 121,250
-------------
TRANSPORTATION--3.05%
250 American Reefer Company Limited................... 03/01/08 10.250 162,500
250 Stena AB.......................................... 06/15/07 8.750 230,000
-------------
392,500
-------------
Total Corporate Bonds (cost--$11,924,800).......................... 12,035,465
-------------
<CAPTION>
NUMBER OF
WARRANTS
- -------------
<C> <S> <C> <C> <C>
WARRANTS--0.07%
CABLE--0.07%
1,000 @Entertainment Incorporated....................... 9,000
125 Park N View Incorporated.......................... 1
-------------
Total Warrants (cost--$10)......................................... 9,001
-------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--5.60%
$ 720 Repurchase Agreement, dated 06/30/99 with State
Street Bank and Trust Company, collateralized by
$733,027 U. S. Treasury Bonds, 4.000% due
11/15/11 (value--$734,402); proceeds: $720,080
(cost--$720,000)................................ 07/01/99 4.000 720,000
-------------
Total Investments (cost--$12,644,810)--99.22%...................... 12,764,466
Other assets in excess of liabilities--0.78%....................... 100,749
-------------
Net Assets--100.00%................................................ $ 12,865,215
-------------
-------------
</TABLE>
- -----------------
+ Denotes a step up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
** 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.
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost--$12,644,810)............................................................. $12,764,466
Cash.................................................................................................. 605
Receivable for investments sold....................................................................... 533,746
Interest receivable................................................................................... 239,340
Other assets.......................................................................................... 118
-----------
Total assets.......................................................................................... 13,538,275
-----------
LIABILITIES
Payable for investments purchased..................................................................... 659,916
Payable to investment adviser and administrator....................................................... 5,245
Accrued expenses and other liabilities................................................................ 7,899
-----------
Total liabilities..................................................................................... 673,060
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding--998,961; (unlimited amount authorized).... 12,087,948
Undistributed net investment income................................................................... 551,294
Accumulated net realized gain from investment transactions............................................ 106,317
Net unrealized appreciation of investments............................................................ 119,656
-----------
Net assets............................................................................................ $12,865,215
-----------
-----------
Net asset value, offering price and redemption value per share........................................ $12.88
-----------
-----------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
----------------
<S> <C>
INVESTMENT INCOME:
Interest......................................................................................................... $ 620,075
----------------
EXPENSES:
Investment advisory and administration........................................................................... 30,287
Legal and audit.................................................................................................. 13,820
Reports and notices to shareholders.............................................................................. 10,586
Custody and accounting........................................................................................... 4,188
Trustees' fees................................................................................................... 3,750
Transfer agency fees and related service expenses................................................................ 1,126
Other expenses................................................................................................... 4,931
----------------
68,688
----------------
Net investment income............................................................................................ 551,387
----------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains from investments.............................................................................. 106,443
Net change in unrealized appreciation/depreciation of investments................................................ (202,841)
----------------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENT TRANSACTIONS.................................................... (96,398)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................................. $ 454,989
----------------
----------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED SEPTEMBER 28, 1998+
JUNE 30, 1999 THROUGH
(UNAUDITED) DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income...................................................................... $ 551,387 $ 172,736
Net realized gain from investments......................................................... 106,443 20,596
Net change in unrealized appreciation/depreciation of investments.......................... (202,841) 322,497
---------------- -------------------
Net increase in net assets resulting from operations....................................... 454,989 515,829
---------------- -------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................................................... -- (172,829)
Net realized gains from investment transactions............................................ -- (20,722)
---------------- -------------------
Total dividends and distributions to shareholders.......................................... -- (193,551)
---------------- -------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares....................................................... 2,293,171 10,610,658
Cost of shares repurchased................................................................. (1,009,341) (90)
Dividend reinvestment...................................................................... 193,550 --
---------------- -------------------
Net increase in net assets from beneficial interest transactions........................... 1,477,380 10,610,568
---------------- -------------------
Net increase in net assets................................................................. 1,932,369 10,932,846
NET ASSETS:
Beginning of period........................................................................ 10,932,846 --
---------------- -------------------
End of period (including undistributed net investment income of $551,294 at June 30,
1999).................................................................................... $ 12,865,215 $ 10,932,846
---------------- -------------------
---------------- -------------------
</TABLE>
- -------------
+ Commencement of operations
See accompanying notes to financial statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--High Income (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.
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 in a pro rated basis.
Prior to the commencement of operations on September 28, 1998, the Portfolio
had no activity other than the sale of one share for a total amount of $12 to
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.
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. 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.
11
<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. 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-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of debt securities held by the Portfolio to meet
their obligations may be affected by economic and political developments,
including those 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 payable monthly, at
an annual rate of 0.50% of the Portfolio's average daily net assets.
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 rates 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 (investments having an excess of value over cost)................ $ 442,310
Gross depreciation (investments having an excess of cost over value)................ (322,654)
-----------
Net unrealized appreciation of investments.......................................... $ 119,656
-----------
-----------
</TABLE>
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
For the six months ended June 30, 1999, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $7,502,509 and
$6,245,331, 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.
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>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED SEPTEMBER 28, 1998+
JUNE 30, 1999 THROUGH DECEMBER
(UNAUDITED) 31, 1998
----------------- -------------------
<S> <C> <C>
Shares sold.......................................................... 179,934 881,787
Shares redeemed...................................................... (78,324) (7)
Shares reinvested.................................................... 15,571 --
------- -------
Net increase......................................................... 117,181 881,780
------- -------
------- -------
</TABLE>
- ---------------
+ Commencement of operations
13
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED SEPTEMBER 28, 1998+
JUNE 30, 1999 THROUGH
(UNAUDITED) DECEMBER 31, 1998
-------------------- --------------------
<S> <C> <C>
Net asset value, beginning of period.................................................. $ 12.40 $ 12.00
-------- --------
Net investment income................................................................. 0.55 0.20
Net realized and unrealized gain (losses) from investments............................ (0.07) 0.42
-------- --------
Net increase from investment operations............................................... 0.48 0.62
-------- --------
Dividends from net investment income.................................................. -- (0.20)
Distributions from net realized gains from investments................................ -- (0.02)
-------- --------
Total dividends and distributions..................................................... -- (0.22)
-------- --------
Net asset value, end of period........................................................ $ 12.88 $ 12.40
-------- --------
-------- --------
Total investment return (1)........................................................... 3.87% 5.16%
-------- --------
-------- --------
Ratios/Supplemental Data:
Net assets, end of period (000's)..................................................... $ 12,865 $ 10,933
Expenses to average net assets........................................................ 1.13%* 1.20%*
Net investment income to average net assets........................................... 9.10%* 7.04%*
Portfolio turnover rate............................................................... 56% 21%
</TABLE>
- -----------------
+ Commencement of operations
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the 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 the 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>
SEMIANNUAL REPORT
- ----------------------
MITCHELL
HUTCHINS SERIES
TRUST
HIGH INCOME
PORTFOLIO
JUNE 30, 1999
- -C-1999 PaineWebber Incorporated
