<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION 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--Tactical Allocation 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
improving 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>
Class H Shares Cumulative
- --------------------------------------------------------------------------------
<S> <C>
Six Months 11.74%
Since Inception 9/29/98 39.66%
- --------------------------------------------------------------------------------
<CAPTION>
Class I Shares Cumulative
- --------------------------------------------------------------------------------
<S> <C>
Six Months N/A
Since Inception 1/4/99 11.75%
- --------------------------------------------------------------------------------
</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.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
The Portfolio attempts to outperform the S&P 500 Index (the "Index") over the
long term with less volatility by shifting assets between stocks and bonds or
cash. Management employs the Tactical Allocation Model (the "Model") to
determine the Portfolio's asset mix between an equity portion designed to track
the performance of the Index and a fixed-income portion consisting of either
bonds (five-year U.S. Treasury notes) or cash (30-day U.S. Treasury bills). The
Portfolio may deviate from the recommendations of the Model in certain
instances, including meeting diversification requirements. For example, the
Portfolio may not invest more than 55% of its total assets in U.S. Treasury
obligations, even if the Model indicates a higher percentage.
The Model is a systematic, quantitative approach to calculating the risk
premium of stocks and bonds. The Model compares the expected return of the stock
market and of bonds with the "risk-free" asset (the one-year Treasury bill) to
determine the equity risk premium (ERP) and bond risk premium (BRP). The ERP
reflects whether investors are being compensated adequately for the risk of
owning stocks. If so, the Portfolio will invest in the stock market in order to
take advantage of the return potential that stocks provide.
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
Characteristics
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Equities 98% 96%
Cash Equivalents 2 4
Number of Holdings 467 467
Equity Risk Premium 5.98% 6.37%
Bond Risk Premium 0.75% 0.16%
- --------------------------------------------------------------------------------
</TABLE>
Throughout the six-month period, the equity risk premium remained above the
5.5% hurdle rate for full investment in equities. Tactical shifts did not affect
the Portfolio's performance for the period.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
SEMIANNUAL REPORT
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
Top Five Sectors*
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Technology 22.0 15.9
Financial Services 19.7 18.7
Consumer Cyclicals 16.0 13.8
Healthcare 11.6 12.3
Utilities 10.5 10.7
- --------------------------------------------------------------------------------
Top Five Total 79.8 71.4
</TABLE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
Top Ten Holdings*
<TABLE>
<CAPTION>
Portfolio % Portfolio %
as of 6/30/99 as of 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Microsoft Corp. 4.0 3.3
General Electric Co. 3.2 3.2
International Business Machines 2.1 1.7
Wal-Mart Stores, Inc. 1.9 1.8
Cisco Systems, Inc. 1.8 1.4
Lucent Technologies, Inc. 1.8 1.4
Intel Corp. 1.7 1.9
Exxon Corp. 1.6 1.7
AT&T Corp. 1.6 1.3
Merck & Co., Inc. 1.5 1.7
- --------------------------------------------------------------------------------
</TABLE>
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.
* Weightings represent percentages of portfolio assets as of June 30, 1999. The
Portfolio's composition will vary over time.
3
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
COMMON STOCKS--100.07%
AGRICULTURE, FOOD & BEVERAGE--3.94%
1,800 Archer-Daniels-Midland Co. ............. $ 27,788
800 Bestfoods Co. .......................... 39,600
1,300 Campbell Soup Co. ...................... 60,287
7,400 The Coca-Cola Co. ...................... 462,500
1,300 Coca-Cola Enterprises, Inc. ............ 38,675
1,500 Conagra, Inc. .......................... 39,938
500 General Mills, Inc. .................... 40,187
1,100 Heinz, H. J. and Co. ................... 55,137
400 Hershey Foods Corp. .................... 23,750
1,200 Kellogg Co. ............................ 39,600
1,000 Nabisco Group Holdings Corp. ........... 19,563
4,400 Pepsico, Inc. .......................... 170,225
700 Pioneer Hi-Bred International, Inc. .... 27,256
400 Quaker Oats Co. ........................ 26,550
2,700 Sara Lee Corp. ......................... 61,256
400 Supervalue, Inc. ....................... 10,275
1,000 Sysco Corp. ............................ 29,813
1,700 Unilever N.V. .......................... 118,575
400 Wrigley, Wm. Jr. Co. ................... 36,000
-------------
1,326,975
-------------
AIRLINES--0.29%
500 AMR Corp.*.............................. 34,125
400 Delta Air Lines, Inc. .................. 23,050
1,000 Southwest Airlines Co. ................. 31,125
200 US Airways Group, Inc.*................. 8,713
-------------
97,013
-------------
ALCOHOL--0.54%
1,400 Anheuser-Busch Companies, Inc. ......... 99,312
200 Brown Forman Corp. ..................... 13,038
100 Coors Adolph Co. ....................... 4,950
1,300 Seagram Co. Ltd. ....................... 65,488
-------------
182,788
-------------
APPAREL, RETAIL--0.61%
2,600 Gap, Inc. .............................. 130,975
600 Limited, Inc. .......................... 27,225
400 Nordstrom, Inc. ........................ 13,400
1,000 TJX Companies, Inc. .................... 33,313
-------------
204,913
-------------
APPAREL, TEXTILES--0.24%
200 Liz Claiborne, Inc. .................... 7,300
900 Nike, Inc. ............................. 56,981
400 V. F. Corp. ............................ 17,100
-------------
81,381
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
BANKS--8.21%
500 Amsouth Bancorporation.................. $ 11,594
2,300 Bank of New York Co. Inc. .............. 84,381
3,600 Bank One Corp. ......................... 214,425
5,200 BankAmerica Corp. ...................... 381,225
900 BankBoston Corp. ....................... 46,013
900 BB&T Corp. ............................. 33,019
2,500 Chase Manhattan Corp. .................. 216,562
10,200 Citigroup, Inc. ........................ 484,500
500 Comerica, Inc. ......................... 29,719
800 Fifth Third Bancorp..................... 53,250
2,900 First Union Corp. ...................... 136,300
2,000 Firstar Corp. .......................... 56,000
1,700 Fleet Financial Group, Inc. ............ 75,437
600 Huntington Bancshares, Inc. ............ 21,000
500 J.P. Morgan & Co., Inc. ................ 70,250
1,400 KeyCorp. ............................... 44,975
1,600 Mellon Bank Corp. ...................... 58,200
500 Mercantile Bancorporation, Inc. ........ 28,563
900 National City Corp. .................... 58,950
300 Northern Trust Corp. ................... 29,100
900 PNC Bank Corp. ......................... 51,862
700 Regions Financial Corp. ................ 26,906
300 Republic New York Corp. ................ 20,456
500 SouthTrust Corp. ....................... 19,188
500 State Street Corp. ..................... 42,688
500 Summit Bancorp, Inc. ................... 20,906
1,000 Suntrust Banks, Inc. ................... 69,437
800 Synovus Financial Corp. ................ 15,900
500 Union Planters Corp. ................... 22,344
2,200 US Bancorp, Inc. ....................... 74,800
600 Wachovia Corp. ......................... 51,337
5,000 Wells Fargo and Co. .................... 213,750
-------------
2,763,037
-------------
CHEMICALS--2.35%
700 Air Products & Chemicals, Inc. ......... 28,175
200 Ashland, Inc. .......................... 8,025
300 Avery Dennison Corp. ................... 18,113
700 Dow Chemical Co. ....................... 88,812
3,400 DuPont (E.I.) de Nemours & Co. ......... 232,262
200 Eastman Chemical Co. ................... 10,350
400 Ecolab, Inc. ........................... 17,450
400 Engelhard Corp. ........................ 9,050
100 FMC Corp.*.............................. 6,831
200 Great Lakes Chemical Corp. ............. 9,213
300 Hercules, Inc. ......................... 11,794
800 Illinois Tool Works, Inc. .............. 65,600
1,200 Minnesota Mining & Manufacturing Co. ... 104,325
200 Nalco Chemical Co. ..................... 10,375
</TABLE>
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
CHEMICALS--(CONCLUDED)
<TABLE>
<C> <S> <C>
1,100 Occidental Petroleum Corp. ............. $ 23,237
500 PPG Industries, Inc. ................... 29,531
500 Praxair, Inc. .......................... 24,469
611 Rohm & Haas Co. ........................ 26,197
300 Sealed Air Corp.*....................... 19,463
500 Sherwin Williams Co. ................... 13,875
600 Tenneco, Inc. .......................... 14,325
400 Union Carbide Corp. .................... 19,500
-------------
790,972
-------------
COMPUTER HARDWARE--7.94%
500 Apple Computer, Inc.*................... 23,156
500 Cabletron Systems, Inc.*................ 6,500
9,600 Cisco Systems, Inc.*.................... 617,400
5,100 Compaq Computer Corp. .................. 120,806
7,600 Dell Computer Corp.*.................... 281,200
3,000 EMC Corp.*.............................. 165,000
500 Gateway, Inc.*.......................... 29,500
3,100 Hewlett-Packard Co. .................... 311,550
500 Ikon Office Solutions, Inc. ............ 7,500
5,500 International Business Machines......... 710,875
200 Network Appliance, Inc.*................ 11,175
800 Pitney Bowes, Inc. ..................... 51,400
700 Seagate Technology, Inc.*............... 17,938
600 Silicon Graphics, Inc.*................. 9,825
2,300 Sun Microsystems, Inc.*................. 158,413
1,100 3Com Corp.*............................. 29,356
2,000 Xerox Corp. ............................ 118,125
-------------
2,669,719
-------------
COMPUTER SOFTWARE--5.34%
200 Adobe Systems, Inc. .................... 16,431
700 BMC Software, Inc.*..................... 37,800
Computer Associates International,
1,600 Inc. ................................... 88,000
1,100 Compuware Corp.*........................ 34,994
15,300 Microsoft Corp.*........................ 1,379,869
1,000 Novell, Inc.*........................... 26,500
4,300 Oracle Systems Corp.*................... 159,637
800 Parametric Technology Corp.*............ 11,100
700 Peoplesoft, Inc.*....................... 12,075
800 Unisys Corp.*........................... 31,150
-------------
1,797,556
-------------
CONSTRUCTION--0.17%
100 Armstrong World Industries, Inc. ....... 5,781
200 Centex Corp. ........................... 7,513
200 Fluor Corp. ............................ 8,100
1,000 Masco Corp. ............................ 28,875
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
CONSTRUCTION--(CONCLUDED)
<TABLE>
<C> <S> <C>
200 Owens-Corning Fiberglass................ $ 6,875
-------------
57,144
-------------
CONSUMER DURABLES--0.16%
300 Black & Decker Corp. ................... 18,938
300 Maytag Corp. ........................... 20,906
200 Whirlpool Corp. ........................ 14,800
-------------
54,644
-------------
DEFENSE/AEROSPACE--1.31%
1,700 Allied Signal, Inc. .................... 107,100
2,900 Boeing Co. ............................. 128,144
400 General Dynamics Corp. ................. 27,400
200 Goodrich, B.F. Co. ..................... 8,500
1,200 Lockheed Martin Corp. .................. 44,700
200 Northrop Grumman Corp. ................. 13,263
1,000 Raytheon Co. ........................... 70,375
500 Textron, Inc. .......................... 41,156
-------------
440,638
-------------
DIVERSIFIED RETAIL--3.02%
700 Costco Co., Inc.*....................... 56,044
1,300 Dayton Hudson Corp. .................... 84,500
300 Dillard Department Stores, Inc. ........ 10,537
600 Federated Department Stores, Inc.*...... 31,762
1,500 K Mart Corp.*........................... 24,656
500 Kohls Corp.*............................ 38,594
1,000 May Department Stores Co. .............. 40,875
800 Penney, (J.C.), Inc. ................... 38,850
1,100 Sears Roebuck & Co. .................... 49,019
13,300 Wal-Mart Stores, Inc. .................. 641,725
-------------
1,016,562
-------------
DRUGS & MEDICINE--7.84%
200 Allergan, Inc. ......................... 22,200
300 Alza Corp.*............................. 15,263
3,900 American Home Products Corp. ........... 224,250
1,500 Amgen, Inc.*............................ 91,312
6,000 Bristol-Myers Squibb Co. ............... 422,625
800 Cardinal Health, Inc. .................. 51,300
3,300 Lilly, Eli & Co. ....................... 236,362
800 McKesson HBOC, Inc. .................... 25,700
7,100 Merck & Co., Inc. ...................... 525,400
1,900 Monsanto Co. ........................... 74,931
3,900 Pfizer, Inc. ........................... 428,025
1,500 Pharmacia & Upjohn, Inc. ADR............ 85,219
4,400 Schering-Plough Corp. .................. 233,200
300 Sigma-Aldrich Corp. .................... 10,331
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
DRUGS & MEDICINE--(CONCLUDED)
<TABLE>
<C> <S> <C>
2,600 Warner Lambert Co. ..................... $ 180,375
300 Watson Pharmaceuticals, Inc.*........... 10,519
-------------
2,637,012
-------------
ELECTRIC UTILITIES--2.08%
600 AES Corp. .............................. 34,875
400 Ameren Corp. ........................... 15,350
600 American Electric Power, Inc. .......... 22,537
500 Carolina Power & Light Co. ............. 21,406
700 Central & South West Corp. ............. 16,363
500 Cinergy Corp. .......................... 16,000
300 CMS Energy Corp. ....................... 12,563
Consolidated Edison Co. of New
700 York, Inc. ............................. 31,675
500 Constellation Energy Group, Inc. ....... 14,813
600 Dominion Resources, Inc. ............... 25,987
400 DTE Energy Co. ......................... 16,000
1,100 Duke Energy Corp. ...................... 59,812
1,000 Edison International, Inc. ............. 26,750
700 Entergy Corp. .......................... 21,875
700 FirstEnergy Corp. ...................... 21,700
300 Florida Progress Corp. ................. 12,394
500 FPL Group, Inc. ........................ 27,312
400 General Public Utilities Corp. ......... 16,875
400 New Century Energies, Inc. ............. 15,525
600 Niagara Mohawk Holdings, Inc.*.......... 9,638
500 Northern States Power Co. .............. 12,094
900 PacifiCorp. ............................ 16,538
500 PECO Energy Co. ........................ 20,938
500 Pennsylvania Power & Light Co. ......... 15,375
1,100 PG&E Corp. ............................. 35,750
600 Public Service Enterprise Group, Inc. .. 24,525
900 Reliant Energy, Inc. ................... 24,862
2,100 Southern Co. ........................... 55,650
800 Texas Utilities Co. .................... 33,000
600 Unicom Corp. ........................... 23,137
-------------
701,319
-------------
ELECTRICAL EQUIPMENT--4.06%
700 Corning, Inc. .......................... 49,087
400 Danaher Corp. .......................... 23,250
200 Eaton Corp. ............................ 18,400
500 General Instrument Corp.*............... 21,250
300 Harris Corp. ........................... 11,756
400 Honeywell, Inc. ........................ 46,350
300 ITT Industries, Inc. ................... 11,438
300 Johnson Controls, Inc. ................. 20,794
300 KLA-Tencor Corp.*....................... 19,463
9,090 Lucent Technologies, Inc. .............. 613,007
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
ELECTRICAL EQUIPMENT--(CONCLUDED)
<TABLE>
<C> <S> <C>
100 Millipore Corp. ........................ $ 4,056
1,800 Motorola, Inc. ......................... 170,550
2,000 Nortel Networks Corp. .................. 173,625
200 PE Corp. ............................... 22,950
200 Raychem Corp. .......................... 7,400
200 Scientific-Atlanta, Inc. ............... 7,200
800 Solectron Corp.*........................ 53,350
1,200 Tellabs, Inc.*.......................... 81,075
500 Thermo Electron Corp.*.................. 10,031
-------------
1,365,032
-------------
ELECTRICAL POWER--0.53%
300 Cooper Industries, Inc. ................ 15,600
100 Cummins Engine Co., Inc. ............... 5,713
1,300 Emerson Electric Co. ................... 81,737
300 Grainger, W.W., Inc. ................... 16,144
200 Phelps Dodge Corp. ..................... 12,387
600 Rockwell International Corp. ........... 36,450
200 Thomas & Betts Corp. ................... 9,450
-------------
177,481
-------------
ENERGY RESERVES & PRODUCTION--5.09%
300 Amerada Hess Corp. ..................... 17,850
400 Anadarko Petroleum Corp. ............... 14,725
300 Apache Corp. ........................... 11,700
1,000 Atlantic Richfield Co. ................. 83,563
500 Burlington Resources, Inc. ............. 21,625
2,000 Chevron Corp. .......................... 190,375
7,300 Exxon Corp. ............................ 563,012
300 Kerr-McGee Corp. ....................... 15,056
2,300 Mobil Corp. ............................ 227,700
800 Phillips Petroleum Co. ................. 40,250
6,400 Royal Dutch Petroleum Co. ADR........... 385,600
1,600 Texaco, Inc. ........................... 100,000
800 Union Pacific Resources Group, Inc. .... 13,050
700 Unocal Corp. ........................... 27,738
-------------
1,712,244
-------------
ENTERTAINMENT--0.28%
1,800 Carnival Corp. ......................... 87,300
200 King World Productions, Inc.*........... 6,963
-------------
94,263
-------------
ENVIRONMENTAL SERVICES--0.35%
500 Browning Ferris Industries, Inc. ....... 21,500
1,800 Waste Management, Inc. ................. 96,750
-------------
118,250
-------------
</TABLE>
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
FINANCIAL SERVICES--6.45%
1,400 American Express Co. ................... $ 182,175
800 AON Corp. .............................. 33,000
2,200 Associates First Capital Corp. ......... 97,487
300 Block, H&R, Inc. ....................... 15,000
600 Capital One Financial Corp. ............ 33,413
2,300 Cendant Corp.*.......................... 47,150
300 Countrywide Credit Industries, Inc. .... 12,825
400 Equifax, Inc. .......................... 14,275
2,100 Federal Home Loan Mortgage Corp. ....... 121,800
3,100 Federal National Mortgage Association... 211,962
9,800 General Electric Co. ................... 1,107,400
1,400 Household International, Inc. .......... 66,325
300 Kansas City Southern Industries, Inc. .. 19,144
800 Marsh & McLennan Co., Inc. ............. 60,400
2,400 MBNA Corp. ............................. 73,500
400 Providian Financial Corp. .............. 37,400
500 SLM Holding Corp. ...................... 22,906
200 Temple-Inland, Inc. .................... 13,650
-------------
2,169,812
-------------
FOOD RETAIL--0.68%
1,304 Albertson's, Inc. ...................... 67,237
2,500 Kroger Co.*............................. 69,844
1,500 Safeway, Inc.*.......................... 74,250
500 Winn Dixie Stores, Inc. ................ 18,469
-------------
229,800
-------------
FOREST PRODUCTS, PAPER--0.95%
200 Bemis, Inc. ............................ 7,950
200 Boise Cascade Corp. .................... 8,575
300 Champion International Corp. ........... 14,363
700 Fort James Corp. ....................... 26,512
500 Georgia-Pacific Corp. .................. 23,687
1,200 International Paper Co. ................ 60,600
1,600 Kimberly Clark Corp. ................... 91,200
400 Louisiana Pacific Corp. ................ 9,500
300 Mead Corp. ............................. 12,525
300 Westvaco Corp. ......................... 8,700
600 Weyerhaeuser Co. ....................... 41,250
300 Willamette Industries, Inc. ............ 13,819
-------------
318,681
-------------
FREIGHT, AIR, SEA & LAND--0.17%
900 FDX Corp.*.............................. 48,825
1,100 Laidlaw, Inc. .......................... 8,113
-------------
56,938
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
GAS UTILITY--0.17%
300 Columbia Energy Group................... $ 18,806
300 Consolidated Natural Gas Co. ........... 18,225
100 NICOR, Inc. ............................ 3,806
700 Sempra Energy........................... 15,838
-------------
56,675
-------------
HEAVY MACHINERY--0.31%
200 Case Corp. ............................. 9,625
1,100 Caterpillar, Inc. ...................... 66,000
700 Deere & Co. ............................ 27,738
-------------
103,363
-------------
HOTELS--0.09%
400 Harrah's Entertainment, Inc.*........... 8,800
800 Hilton Hotels Corp. .................... 11,350
600 Mirage Resorts, Inc.*................... 10,050
-------------
30,200
-------------
HOUSEHOLD PRODUCTS--2.32%
200 Alberto Culver Co. ..................... 5,325
800 Avon Products, Inc. .................... 44,400
400 Clorox Co. ............................. 42,725
900 Colgate-Palmolive Co. .................. 88,875
500 Fortune Brands, Inc. ................... 20,687
3,300 Gillette Co. ........................... 135,300
300 International Flavors and Fragrances.... 13,313
100 National Service Industries, Inc. ...... 3,600
800 Newell Rubbermaid, Inc. ................ 37,200
4,000 Procter & Gamble Co. ................... 357,000
1,000 Ralston Purina Co. ..................... 30,437
-------------
778,862
-------------
INDUSTRIAL PARTS--0.61%
200 Crane Co. .............................. 6,288
600 Dover Corp. ............................ 21,000
500 Ingersoll Rand Co. ..................... 32,312
200 McDermott International, Inc. .......... 5,650
400 Pall Corp. ............................. 8,875
300 Parker-Hannifin Corp. .................. 13,725
200 Snap-On, Inc. .......................... 7,238
300 Stanley Works........................... 9,656
1,400 United Technologies Corp. .............. 100,362
-------------
205,106
-------------
INDUSTRIAL SERVICES/SUPPLIES--0.02%
200 Ryder Systems, Inc. .................... 5,200
-------------
</TABLE>
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
INFORMATION & COMPUTER SERVICES--2.36%
3,300 America Online, Inc.*................... $ 364,650
1,800 Automatic Data Processing, Inc. ........ 79,200
400 Ceridian Corp.*......................... 13,075
500 Computer Sciences Corp.*................ 34,594
500 Dun & Bradstreet Corp. ................. 17,719
1,500 Electronic Data Systems Corp. .......... 84,843
1,300 First Data Corp. ....................... 63,619
1,000 IMS Health, Inc. ....................... 31,250
400 Interpublic Group Co., Inc. ............ 34,650
500 Omnicom Group, Inc. .................... 40,000
700 Paychex, Inc. .......................... 22,312
100 Shared Medical System Corp. ............ 6,525
-------------
792,437
-------------
LEISURE--0.38%
300 Brunswick Corp. ........................ 8,363
1,000 Eastman Kodak Co. ...................... 67,750
600 Hasbro, Inc. ........................... 16,762
1,300 Mattel, Inc. ........................... 34,369
-------------
127,244
-------------
LIFE INSURANCE--1.04%
400 Aetna Life & Casualty Co. .............. 35,775
800 AFLAC, Inc. ............................ 38,300
800 American General Corp. ................. 60,300
600 CIGNA Corp. ............................ 53,400
1,000 Conseco, Inc. .......................... 30,438
300 Jefferson-Pilot Corp. .................. 19,856
600 Lincoln National Corp. ................. 31,387
400 Provident Cos, Inc. .................... 16,000
400 Torchmark, Inc. ........................ 13,650
400 Transamerica Corp. ..................... 30,000
400 UNUM Corp. ............................. 21,900
-------------
351,006
-------------
LONG DISTANCE & PHONE COMPANIES--7.93%
3,300 Ameritech Corp. ........................ 242,550
9,600 AT&T Corp. ............................. 535,800
4,700 Bell Atlantic Corp. .................... 307,262
5,700 BellSouth Corp. ........................ 267,187
400 Century Telephone Enterprises, Inc.*.... 15,900
500 Frontier Corp. ......................... 29,500
2,900 GTE Corp. .............................. 219,675
5,600 MCI WorldCom, Inc.*..................... 481,950
5,900 SBC Communications, Inc. ............... 342,200
2,600 Sprint Corp. ........................... 137,313
1,500 U.S. West, Inc. ........................ 88,125
-------------
2,667,462
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
MEDIA--2.88%
2,100 CBS Corp.*.............................. $ 91,219
1,000 Clear Channel Communications*........... 68,938
2,200 Comcast Corp., Class A.................. 84,562
6,200 Disney, Walt Co. ....................... 191,037
1,800 Mediaone Group, Inc.*................... 133,875
200 Meredith Corp. ......................... 6,925
3,600 Time Warner, Inc. ...................... 264,600
400 Tribune Co. ............................ 34,850
2,100 Viacom, Inc., Class B*.................. 92,400
-------------
968,406
-------------
MEDICAL PRODUCTS--3.57%
4,600 Abbott Laboratories..................... 209,300
200 Bard, C.R., Inc. ....................... 9,563
200 Bausch & Lomb, Inc. .................... 15,300
900 Baxter International, Inc. ............. 54,562
700 Becton, Dickinson & Co. ................ 21,000
300 Biomet, Inc. ........................... 11,925
1,200 Boston Scientific Corp.*................ 52,725
900 Guidant Corp. .......................... 46,294
4,000 Johnson & Johnson....................... 392,000
200 Mallinckrodt Group, Inc. ............... 7,275
1,700 Medtronic, Inc. ........................ 132,387
300 St. Jude Medical, Inc.*................. 10,688
2,500 Tyco International Ltd. ................ 236,875
-------------
1,199,894
-------------
MEDICAL PROVIDERS--0.46%
1,700 Columbia/HCA Healthcare Corp. .......... 38,781
300 HCR Manor Care, Inc.*................... 7,256
1,300 HEALTHSOUTH Corp.*...................... 19,419
500 Humana, Inc.*........................... 6,469
800 Service Corp. International............. 15,400
1,000 Tenet Healthcare Corp.*................. 18,563
500 United Healthcare Corp. ................ 31,312
200 Wellpoint Health Networks, Inc.*........ 16,975
-------------
154,175
-------------
MINING & METALS--0.54%
700 Alcan Aluminum Ltd. .................... 22,356
1,100 Alcoa, Inc. ............................ 68,063
600 Allegheny Teldyne, Inc. ................ 13,575
400 Crown Cork & Seal, Inc. ................ 11,400
300 Cyprus Amax Minerals Co. ............... 4,556
600 Inco Ltd. .............................. 10,800
300 Nucor Corp. ............................ 14,231
500 Owens Illinois, Inc.*................... 16,344
200 Reynolds Metals Co. .................... 11,800
</TABLE>
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
MINING & METALS--(CONCLUDED)
<TABLE>
<C> <S> <C>
300 USX-U.S. Steel Group, Inc. ............. $ 8,100
-------------
181,225
-------------
MOTOR VEHICLES--1.44%
200 Cooper Tire & Rubber Co. ............... 4,725
500 DANA Corp. ............................. 23,031
1,700 Delphi Automotive Systems Corp. ........ 31,557
3,600 Ford Motor Co. ......................... 203,175
2,000 General Motors Corp. ................... 132,000
500 Genuine Parts Co. ...................... 17,500
500 Goodyear Tire & Rubber Co. ............. 29,406
200 Navistar International Corp.*........... 10,000
200 Paccar, Inc. ........................... 10,675
400 TRW, Inc. .............................. 21,950
-------------
484,019
-------------
OIL REFINING--0.65%
600 Coastal Corp. .......................... 24,000
1,100 Enron Corp. ............................ 89,925
300 Sonat, Inc. ............................ 9,938
300 Sunoco, Inc. ........................... 9,056
900 USX-Marathon Group...................... 29,306
1,300 Williams Co., Inc. ..................... 55,331
-------------
217,556
-------------
OIL SERVICES--0.59%
1,000 Baker Hughes, Inc. ..................... 33,500
1,300 Halliburton Co. ........................ 58,825
300 Rowan Co., Inc.*........................ 5,531
1,600 Schlumberger Ltd. ...................... 101,900
-------------
199,756
-------------
OTHER INSURANCE--2.20%
2,400 Allstate Corp. ......................... 86,100
3,700 American International Group Inc. ...... 433,131
500 Chubb Corp. ............................ 34,750
500 Cincinnati Financial Corp. ............. 18,781
Hartford Financial Services Group,
700 Inc. ................................... 40,819
300 Loews Corp. ............................ 23,737
300 MBIA Inc. .............................. 19,425
300 MGIC Investment Corp. .................. 14,588
200 The Progressive Corp. .................. 29,000
400 SAFECO Corp. ........................... 17,650
700 St. Paul Co., Inc. ..................... 22,269
-------------
740,250
-------------
PRECIOUS METALS--0.18%
1,200 Barrick Gold Corp. ..................... 23,250
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
PRECIOUS METALS--(CONCLUDED)
<TABLE>
<C> <S> <C>
500 Freeport-McMoran Copper & Gold, Inc. ... $ 8,969
800 Homestake Mining Co. ................... 6,550
500 Newmont Mining Corp. ................... 9,938
1,000 Placer Dome, Inc. ...................... 11,812
-------------
60,519
-------------
PUBLISHING--0.55%
200 American Greetings Corp., Class A....... 6,025
200 Deluxe Corp. ........................... 7,788
400 Donnelley, R.R. & Sons Co. ............. 14,825
300 Dow Jones & Co., Inc. .................. 15,919
800 Gannett, Inc. .......................... 57,100
200 Harcourt General, Inc. ................. 10,313
200 Knight Ridder, Inc. .................... 10,987
600 McGraw-Hill Companies, Inc. ............ 32,362
500 New York Times Co., Class A............. 18,406
200 Times Mirror Co. ....................... 11,850
-------------
185,575
-------------
RAILROADS--0.44%
1,400 Burlington Northern Santa Fe, Inc. ..... 43,400
700 CSX Corp. .............................. 31,719
1,100 Norfolk Southern Corp. ................. 33,137
700 Union Pacific Corp. .................... 40,819
-------------
149,075
-------------
RESTAURANTS--0.72%
400 Darden Restaurants, Inc. ............... 8,725
700 Marriott International, Inc. ........... 26,163
4,100 McDonalds Corp. ........................ 169,381
500 Tricon Global Restaurants, Inc.*........ 27,062
400 Wendy's International, Inc. ............ 11,325
-------------
242,656
-------------
SECURITIES & ASSET MANAGEMENT--1.40%
400 Bear Stearns Co., Inc. ................. 18,700
1,200 Charles Schwab Corp. ................... 131,850
800 Franklin Resources, Inc. ............... 32,500
400 Lehman Brothers Holdings, Inc. ......... 24,900
1,100 Merrill Lynch & Co., Inc. .............. 87,931
1,700 Morgan Stanley Dean Witter & Co. ....... 174,250
-------------
470,131
-------------
SEMICONDUCTOR--2.74%
500 Advanced Micro Devices, Inc.*........... 9,031
1,100 Applied Materials, Inc.*................ 81,263
10,000 Intel Corp. ............................ 595,000
400 LSI Logic Corp.*........................ 18,450
</TABLE>
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
SEMICONDUCTOR--(CONCLUDED)
<TABLE>
<C> <S> <C>
800 Micron Technology, Inc.*................ $ 32,250
500 National Semiconductor Corp.*........... 12,656
1,200 Texas Instruments, Inc. ................ 174,000
-------------
922,650
-------------
SPECIALTY RETAIL--2.20%
500 Autozone, Inc.*......................... 15,063
600 Best Buy Company Inc.*.................. 40,500
300 Circuit City Stores, Inc. .............. 27,900
300 Consolidated Stores Corp.*.............. 8,100
1,200 CVS Corp. .............................. 60,900
700 Dollar General Corp. ................... 20,300
4,400 Home Depot, Inc. ....................... 283,525
1,100 Lowe's Companies, Inc. ................. 62,356
1,100 Office Depot Inc.*...................... 24,269
800 Rite Aid Corp. ......................... 19,700
1,400 Staples Inc.*........................... 43,312
600 Tandy Corp. ............................ 29,325
800 Toys R Us, Inc.*........................ 16,550
3,000 Walgreen Co. ........................... 88,125
-------------
739,925
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
THRIFT--0.25%
200 Golden West Financial Corp. ............ $ 19,600
1,800 Washington Mutual, Inc. ................ 63,675
-------------
83,275
-------------
TOBACCO--0.90%
7,200 Philip Morris Co. Inc. ................. 289,350
500 UST, Inc. .............................. 14,625
-------------
303,975
-------------
WIRELESS TELECOMMUNICATIONS--0.53%
800 Alltel Corp. ........................... 57,200
900 Nextel Communications, Inc.*............ 45,169
1,300 Sprint Corp.*........................... 74,262
-------------
176,631
-------------
Total Common Stocks (cost--$31,708,995)............ 33,661,422
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATE INTEREST RATE
- ---------- ------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--2.08%
Repurchase Agreement dated
06/30/99 with State Street
Bank & Trust Company
collateralized by $712,665
U.S. Treasury Notes, 5.625%
due 12/31/99 (value--
$714,002); proceeds: $700,078
$700 (cost--$700,000).............. 07/01/99 4.000% 700,000
---------------
Total Investments
(cost--$32,408,995)--102.15%............. 34,361,422
Liabilities in excess of other
assets--(2.15)%.......................... (722,170)
---------------
Net Assets--100.00%........................ $ 33,639,252
---------------
---------------
</TABLE>
- ---------------
* Non-Income producing security.
ADR American Depositary Receipt.
See accompanying notes to financial statements
10
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$32,408,995)..... $34,361,422
Cash........................................................ 3,715
Receivable for investments sold............................. 182,072
Dividends and interest receivable........................... 25,953
Other assets................................................ 11,051
---------------
Total assets................................................ 34,584,213
---------------
LIABILITIES
Payable for investments purchased........................... 927,848
Payable to investment adviser and administrator............. 12,085
Accrued expenses and other liabilities...................... 5,028
---------------
Total liabilities........................................... 944,961
---------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount
authorized)............................................... 27,055,038
Undistributed net investment income......................... 89,223
Accumulated net realized gains from investment
transactions.............................................. 4,542,564
Net unrealized appreciation of investments.................. 1,952,427
---------------
Net assets.................................................. $33,639,252
---------------
---------------
CLASS H:
Net assets.................................................. $24,626,097
---------------
Shares outstanding.......................................... 1,479,342
---------------
Net asset value, offering price and redemption value per
share..................................................... $16.65
---------------
---------------
CLASS I:
Net assets.................................................. $ 9,013,155
---------------
Shares outstanding.......................................... 541,797
---------------
Net asset value, offering price and redemption value per
share..................................................... $16.64
---------------
---------------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Dividends and interest (net of foreign withholding taxes of
$2,379)................................................... $ 196,010
-------------
EXPENSES:
Investment advisory and administration...................... 70,459
Legal and audit............................................. 14,128
Custody and accounting...................................... 8,338
Reports and notices to shareholders......................... 7,698
Distribution fees -- Class I................................ 4,097
Trustees' fees.............................................. 3,750
Interest expense............................................ 1,150
Transfer agency fees and related service expenses........... 788
Other expenses.............................................. 426
-------------
110,834
Less: Fee waiver from adviser............................... (4,097)
-------------
Net expenses................................................ 106,737
-------------
NET INVESTMENT INCOME....................................... 89,273
-------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains from investments......................... 4,494,370
Net change in unrealized appreciation/depreciation of
investments............................................... (1,055,525)
-------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES................................................ 3,438,845
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,528,118
-------------
-------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED SEPTEMBER 28, 1998+
JUNE 30, 1999 THROUGH
(UNAUDITED) DECEMBER 31, 1998
------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 89,273 $ 28,318
Net realized gains from investments..... 4,494,370 167,248
Net change in unrealized
appreciation/depreciation of
investments........................... (1,055,525) 3,007,952
------------- -------------------
Net increase in net assets resulting
from operations....................... 3,528,118 3,203,518
------------- -------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................... -- (28,368)
Net realized gains from investments..... -- (119,054)
------------- -------------------
Total dividends and distributions to
shareholders.......................... -- (147,422)
------------- -------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.... 26,977,929 19,989,470
Cost of shares repurchased.............. (19,507,754) (552,029)
Proceeds from dividends reinvested...... 147,422 --
------------- -------------------
Net increase in net assets from
beneficial interest transactions...... 7,617,597 19,437,441
------------- -------------------
Net increase in net assets.............. 11,145,715 22,493,537
NET ASSETS:
Beginning of period..................... 22,493,537 --
------------- -------------------
End of period (including undistributed
net investment income of $89,223 at
June 30, 1999)........................ $33,639,252 $ 22,493,537
------------- -------------------
------------- -------------------
</TABLE>
- ---------------
+ Commencement of operations.
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--Tactical Allocation 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 only to
insurance company separate accounts which fund certain variable contracts.
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 $12.00 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.
Currently, the Portfolio offers Class H and Class I shares. Each class
represents interests in the same assets of the Portfolio, and the classes are
identical except for differences in their distribution charges. Both classes
have equal voting privileges except that Class I has exclusive voting rights
with respect to its distribution plan. Class H has no distribution plan.
The Fund accounts separately for the assets, liabilities and operations for
each Portfolio. Expenses directly attributable to each Portfolio are charged to
that Portfolio's operations; expenses which are applicable to all Portfolios are
allocated among them on a pro rated basis.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Fund's management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Portfolio calculates its net asset value based
on the current market value for its portfolio securities. The Portfolio normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use reported last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable securities. Securities traded in the over-the-counter
("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally
are valued at the last sale price on Nasdaq prior to valuation. Other OTC
securities are valued at the last bid price available prior to valuation.
Securities which are listed on U.S. and foreign stock exchanges normally are
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market by Mitchell Hutchins. 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,
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost basis. Dividend income and
other distributions are recorded on the ex-dividend date ("ex-date"). Interest
income is recorded on an accrual basis. Premiums are amortized and discounts are
accreted as adjustments to interest income and the identified cost of
investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board 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.
DISTRIBUTION PLAN
Class I shares are offered to insurance company separate accounts where the
related insurance companies receive payments for their services in connection
with the distribution of the Portfolio's Class I shares. Under the plan of
distribution, the Portfolio pays Mitchell Hutchins a monthly distribution fee at
the annual rate of 0.25% of the average daily net assets of Class I shares.
Mitchell Hutchins pays the entire distribution fee to the insurance companies.
For the period January 5, 1999 (commencement of issuance of Class I shares) to
June 30, 1999, Mitchell Hutchins and the insurance companies waived the entire
distribution fee.
BANK LINE OF CREDIT
The Portfolio may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sales or purchases of portfolio
securities, the repurchase or redemption of shares of the Portfolio at the
request of the shareholders and other temporary or emergency purposes. In
connection therewith, the Portfolio has agreed to pay commitment fees, pro rata,
based on the relative asset size of the funds in the Facility. Interest is
charged to the Portfolio at a rate based on
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
prevailing market rates in effect at the time of borrowings. On April 14, 1999,
the Portfolio borrowed $4,100,000 under the Facility for two days at a rate of
5.05% which resulted in $1,150 of interest expense. The Portfolio did not borrow
under the Facility at any other time during the six months ended June 30, 1999.
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)................................................ $ 2,547,114
Gross depreciation (investments having an excess of cost
over value)............................................... (594,687)
-----------
Net unrealized appreciation of investments.................. $ 1,952,427
-----------
-----------
</TABLE>
For the six months ended June 30, 1999, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $28,136,727 and
$20,512,472, 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 number 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 PERIOD
FOR THE SIX SEPTEMBER 28, 1998+ JANUARY 5, 1999++
MONTHS ENDED THROUGH THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999
----------------------------- ----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 1,080,942 $ 16,451,501 1,547,313 $ 19,989,470 664,978 $ 10,526,428
Shares repurchased............ (1,120,421) (17,529,323) (38,393) (552,029) (123,181) (1,978,431)
Reinvestment of dividends..... 9,901 147,422 -- -- -- --
------------ -------------- ------------ -------------- ------------ --------------
Net increase (decrease)....... (29,578) $ (930,400) 1,508,920 $ 19,437,441 541,797 $ 8,547,997
------------ -------------- ------------ -------------- ------------ --------------
------------ -------------- ------------ -------------- ------------ --------------
</TABLE>
- ---------------
+ Commencement of operations.
++ Commencement of issuance of shares.
16
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION 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 PERIOD FOR THE PERIOD
SEPTEMBER 28, JANUARY 5,
FOR THE SIX 1998+ 1999++
MONTHS ENDED THROUGH THROUGH
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
(UNAUDITED) 1998 (UNAUDITED)
------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 14.91 $ 12.00 $ 14.89
------------- ------- -------
Net investment income................... 0.05@ 0.02 0.05@
Net realized and unrealized gains from
investments............................ 1.69@ 2.99 1.70@
------------- ------- -------
Net increase from investment
operations............................. 1.74 3.01 1.75
------------- ------- -------
Dividends from net investment income.... 0.00 (0.02) 0.00
Distributions from net realized gains
from investments....................... 0.00 (0.08) 0.00
------------- ------- -------
Total dividends and distributions to
shareholders........................... 0.00 (0.10) 0.00
------------- ------- -------
Net asset value, end of period.......... $ 16.65 $ 14.91 $ 16.64
------------- ------- -------
------------- ------- -------
Total investment return(1).............. 11.74% 24.98% 11.75%
------------- ------- -------
------------- ------- -------
Ratios/Supplemental data:
Net assets, end of period (000's)....... $ 24,626 $ 22,494 $ 9,013
Expenses to average net assets, before
waiver from adviser.................... 0.75%* 0.95%* 1.04%*
Expenses to average net assets, after
waiver from adviser.................... 0.75%* 0.95%* 0.79%*
Net investment income to average net
assets, before waiver from adviser..... 0.62%* 0.77%* 0.48%*
Net investment income to average net
assets, after waiver from adviser...... 0.62%* 0.77%* 0.73%*
Portfolio turnover rate................. 70% 6% 70%
</TABLE>
- ---------------
+ Commencement of operations.
++ 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
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.
17
<PAGE>
- -C- 1999 PAINEWEBBER INCORPORATED
[GRAPHIC]
- --------------------------------------------------------------------------------
MITCHELL
HUTCHINS SERIES
TRUST
TACTICAL
ALLOCATION
PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1999
