<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH 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--High Income Portfolio (the "Portfolio") for the six-month period
ended June 30, 2000.
MARKET REVIEW
--------------------------------------------------------------------------------
[GRAPHIC]
During the first half of 2000, the Federal Reserve raised the Federal Funds rate
by one percent in response to booming economic conditions. Rising interest rates
created difficult conditions for all sectors of the fixed income market. U.S.
Treasurys fared the best, gaining 4.97% as measured by the Lehman Brothers
Government Bond Index. The broad market, as measured by the Lehman Brothers
Aggregate Bond Index, gained 3.99% for the period. The high-yield sector lost
0.84% as measured by the CS First Boston High Yield Bond Index.
In mid-January the U.S. Treasury announced final plans to buy back Treasury debt
in response to a fiscal year surplus of around $200 billion. The size of the
buyback--about $30 billion in calendar 2000--surprised many market participants.
What's more, Treasury officials indicated that they intend to reduce the supply
of 30-year bonds and make the 10-year Treasury note the new long-maturity
bellwether. The resulting surge in demand for 30-year notes caused a drastic
yield inversion in which 10-year notes yielded more than 30-year bonds.
The market illiquidity created by this yield-curve inversion plagued the spread
sectors. Trading volume stayed low, and investors tried to shed "spread-sector"
overweightings while displaying a marked preference for higher credit quality.
("Spread sectors" include high-yield bonds, investment-grade corporate bonds,
and mortgage-backed bonds, the yields of which are gauged by their relationship,
or spread, to U.S. Treasurys.) Credit quality became the overriding concern, and
higher-rated debt generally outperformed lower-rated debt.
Bearish market sentiment seemed to ease toward the end of the period, as
evidence of a slowing economy mounted. Investors saw this as a sign that the
Federal Reserve might be approaching the end of the current cycle of interest
rate increases.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO REVIEW
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 6/30/00
<TABLE>
<CAPTION>
6 Months 1 Year Inception*
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
High Income Portfolio -5.79% -4.38% 2.50%
CSFB High Yield Bond Index -0.84 -0.40 5.21*
---------------------------------------------------------------------------------------
</TABLE>
* Inception: since commencement of issuance on September 28, 1998.
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.
Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity contracts.
PORTFOLIO HIGHLIGHTS
The Portfolio trailed the Lipper High Current Yield Median and the CS First
Boston High Yield Bond Index, declining 17.3% versus a decrease of 1.5% for the
Median and 0.8% for the Index. The adverse conditions affecting the broad
fixed-income market hit the high-yield sector particularly hard. Portfolio
performance reflected this, and was exacerbated by losses in several of our
small-cap holdings. Effective February 2000, James F. (Jim) Keegan, managing
director and head of the Taxable Credit Group, assumed management responsibility
for the Portfolio.
Previously, the Portfolio had focused on high-income potential, emphasizing
lower-rated, smaller securities that provided higher yields. While the Portfolio
will continue to seek high income, the management team seeks to lower the
Portfolio's volatility and improve credit quality. Over the past several months,
adverse market conditions have impeded management's efforts to increase the
Portfolio's exposure to larger-cap, more liquid and higher-rated issues and to
place a smaller emphasis on smaller-cap holdings. Those efforts will continue,
consistent with market conditions and the interests of long-term shareholders.
In selecting holdings for the Portfolio, management will seek to add companies
that appear to offer the best relative values based on its analysis of cash
flow, leverage and other balance sheet and income statement factors.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO SEMIANNUAL REPORT
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS* 6/30/00 12/31/99
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted Average Maturity 7.34 yrs Weighted Average Maturity 7.36 yrs
Weighted Average Duration 4.89 yrs Weighted Average Duration 4.88 yrs
Net Assets ($mm) $11.35 Net Assets ($mm) $12.56
Corporate Bonds 81.4% Corporate Bonds 97.7%
Short-Term U.S. Agencies 17.2% Warrants 0.4%
Other assets in excess Other assets in excess
of liabilities 1.4% of liabilities 1.9%
-------------------------------------------------------------------------------------
<CAPTION>
CREDIT QUALITY* 6/30/00 12/31/99
-------------------------------------------------------------------------------------
<S> <C> <C>
Cash 18.6% 1.9%
BB 26.1 28.0
B 48.7 58.6
CCC 1.9 3.0
Non-Rated 4.7 8.1
Equity/Preferred 0.0 0.4
-------------------------------------------------------------------------------------
Total 100.0 100.0
<CAPTION>
TOP FIVE CORPORATE SECTORS* 6/30/00 12/31/99
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communications (fixed) 20.2% Communications (fixed) 20.9%
Cable 9.9 Cable 13.4
Communications (mobile) 6.5 Technology 7.7
Automotive 5.6 Service 7.6
Service 5.4 Communications (mobile) 5.6
-------------------------------------------------------------------------------------
Total 47.6 Total 55.2
<CAPTION>
TOP TEN CORPORATE HOLDINGS* 6/30/00 12/31/99
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Spectrasite Holdings 2.6% Park Place Entertainment 3.8%
Host Marriott 2.5 Ames Department Stores 3.0
Verio 2.5 Knology Holdings 2.7
Voicestream Wireless 2.3 Advance Stores 2.6
Blount 2.2 Host Marriott 2.2
Globenet Communications Group 2.2 Intersil 2.2
MGM Grand 2.2 Hyperion Telecommunications 2.1
NEXTLINK Communications 2.2 NTL 2.1
NTL 2.2 Spectrasite Holdings 2.1
R & B Falcon 2.2 SCG Holdings 2.1
-------------------------------------------------------------------------------------
Total 23.1 Total 24.9
</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
OUTLOOK
--------------------------------------------------------------------------------
The Federal Reserve did not raise rates at its June 28 meeting, though it
remained concerned with inflation. The economy seems to be slowing, though it's
not clear if the slowdown will be enough to prevent another interest rate
increase. We believe future rate hikes will affect equities and high yield bonds
more than higher quality bonds, and although we expect the economy to slow from
its unsustainable pace, we don't think it will slip into recession. In such an
environment, we think the spread sectors have a good chance of
recovery--particularly the mortgage-backed sector and, to a lesser extent, the
corporate sector. Current valuations are attractive, and these sectors are
showing signs of stability. Based on our outlook for continued economic growth
with low inflation and less aggressive Fed policy, we believe spreads will
narrow in the periods ahead.
The new issue calendar for the high-yield market remains manageable ($57 billion
run rate for 2000 versus $100 billion in 1999) and is likely to continue to be
dominated by the cable and fixed-communications sectors. Corporate profits
continue to surprise on the upside, economic growth remains strong and inflation
seems under control. We believe the high-yield market will likely stabilize once
the Federal Reserve is largely through raising interest rates.
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--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS JUNE 30, 2000(UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C>
CORPORATE BONDS--81.36%
AUTOMOTIVE--5.59%
$ 250 HDA Parts Systems Incorporated ......................... 08/01/05 12.000% $ 167,500
250 J.L. French Automotive Castings ........................ 06/01/09 11.500 232,500
250 Lear Corporation ....................................... 05/15/05 7.960 234,994
----------
634,994
----------
CABLE--9.92%
400 Knology Holdings Incorporated .......................... 10/15/07 11.875+ 212,000
250 NTL Communications Incorporated ........................ 10/01/08 11.500 251,250
125 Park 'N View Incorporated++ ............................ 05/15/08 13.000+ 37,500
250 RCN Corporation ........................................ 10/15/07 11.125+ 156,250
250 UIH Australia Pacific Incorporated ..................... 05/15/06 14.000+ 227,500
500 United Pan Europe Communications** ..................... 11/01/09 13.375+ 241,250
----------
1,125,750
----------
CHEMICALS--4.37%
125 Avecia Group PLC ....................................... 07/01/09 11.000 122,500
125 Huntsman ICI Chemicals LLC ............................. 07/01/09 10.125 125,938
250 Lyondell Chemical Company .............................. 05/01/07 9.875 247,500
----------
495,938
----------
COMMUNICATIONS-FIXED--20.17%
125 Allegiance Telecom Incorporated ........................ 05/15/08 12.875 135,310
125 Global Crossing Holdings Limited ....................... 11/15/09 9.500 120,625
250 Globenet Communications Group .......................... 07/15/07 13.000 252,500
250 Globix Corporation ..................................... 02/01/10 12.500 207,500
250 Hyperion Telecommunications Incorporated ............... 11/01/07 12.000 232,500
250 KMC Telecom Holdings Incorporated ...................... 05/15/09 13.500 210,000
250 Metromedia Fiber Network Incorporated .................. 11/15/08 10.000 246,875
250 NEXTLINK Communications Incorporated ................... 06/01/09 10.750 247,500
125 NorthEast Optic Network Incorporated ................... 08/15/08 12.750 116,250
250 Verio Incorporated ..................................... 12/01/08 11.250 280,625
250 Viatel Incorporated .................................... 04/15/08 12.500+ 117,500
125 Williams Communications Group .......................... 10/01/09 10.875 122,500
----------
2,289,685
----------
COMMUNICATIONS-MOBILE--6.45%
250 Nextel Communications Incorporated ..................... 02/15/08 9.950+ 184,375
500 Spectrasite Holdings Incorporated ...................... 04/15/09 11.250+ 290,000
250 Voicestream Wireless ................................... 11/15/09 10.375 257,500
----------
731,875
----------
ENERGY--4.40%
125 Pioneer Natural Resources Company ...................... 04/01/10 9.625 128,750
250 R & B Falcon Corporation ............................... 12/15/08 9.500 251,250
125 Tesoro Petroleum Corporation ........................... 07/01/08 9.000 119,063
----------
499,063
----------
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C>
CORPORATE BONDS--(CONCLUDED)
FINANCE--0.88%
$ 123 Airplanes Pass-Through Trust ........................... 03/15/19 10.875% $ 99,387
----------
GAMING--4.31%
250 MGM Grand Incorporated ................................. 06/01/07 9.750 253,750
250 Park Place Entertainment Corporation ................... 12/15/05 7.875 235,000
----------
488,750
----------
GENERAL INDUSTRIAL--4.00%
250 Blount Incorporated .................................... 08/01/09 13.000 255,000
250 Sabreliner Corporation** ............................... 06/15/08 11.000 198,750
----------
453,750
----------
HEALTHCARE--1.21%
150 Tenet Healthcare Corporation ........................... 12/01/08 8.125 136,875
----------
HOTELS & LODGING--2.48%
300 Host Marriott L.P. ..................................... 02/15/06 8.375 282,000
----------
PAPER & PACKAGING--2.11%
250 Tembec Industry Incorporated. .......................... 06/30/09 8.625 240,000
----------
REAL ESTATE--1.89%
250 D.R. Horton Incorporated ............................... 02/01/09 8.000 215,000
----------
RETAIL--3.63%
200 Advance Stores Company Incorporated .................... 04/15/08 10.250 164,000
375 Ames Department Stores Incorporated .................... 04/15/06 10.000 247,500
----------
411,500
----------
SERVICE--5.37%
250 Allied Waste North America Incorporated ................ 08/01/09 10.000 211,250
250 Atlantic Express Transportation Corporation ............ 02/01/04 10.750 221,250
250 Budget Group Incorporated .............................. 04/01/06 9.125 165,000
250 Premier Graphics Incorporated (b) ...................... 12/01/05 11.500 12,500
----------
610,000
----------
SUPERMARKETS & DRUGSTORES--1.05%
125 The Pantry Incorporated ................................ 10/15/07 10.250 119,063
----------
TECHNOLOGY--1.11%
125 Fairchild Semiconductor Corporation .................... 03/15/07 10.125 125,938
----------
TRANSPORTATION--1.34%
175 Stena AB ............................................... 06/15/07 8.750 152,250
----------
UTILITIES--1.08%
125 AES Corporation ........................................ 06/01/09 9.500 122,500
----------
Total Corporate Bonds (cost--$10,146,337).......................... 9,234,318
----------
</TABLE>
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
--------- --------
<S> <C>
WARRANTS (a)--0.01%
CABLE--0.01%
842 Park 'N View Incorporated (cost--$0) ................... $ 1,158
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
----------- -------------- ------------
<S> <C> <C> <C>
SHORT-TERM U.S. AGENCY OBLIGATIONS--17.22%
$ 1,955 Federal Farm Credit Bank Discount Notes
(cost--$1,954,286) .......................................... 07/03/00 6.570%# 1,954,286
------------
Total Investments (cost--$12,100,623)--98.59% ..................... 11,189,762
Other assets in excess of liabilities--1.41% ...................... 160,301
------------
Net Assets--100.00% ............................................... $11,350,063
============
</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.
++ Illiquid Security representing 0.33% of net assets.
(a) Non-income producing security.
(b) Bond interest in default.
# Interest rate shown is discount rate at date of purchase.
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2000(UNAUDITED)
<S> <C>
ASSETS
Investments, at value (cost--$12,100,623) ............................................. $ 11,189,762
Cash .................................................................................. 1,188
Interest receivable ................................................................... 190,727
Other assets .......................................................................... 101
------------
Total assets .......................................................................... 11,381,778
------------
LIABILITIES
Payable to investment adviser and administrator ....................................... 4,684
Accrued expenses and other liabilities ................................................ 27,031
------------
Total liabilities ..................................................................... 31,715
------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding--1,024,887
(unlimited amount authorized) ......................................................... 12,393,837
Undistributed net investment income ................................................... 590,441
Accumulated net realized loss from investment transactions ............................ (723,354)
Net unrealized depreciation of investments ............................................ (910,861)
------------
Net assets............................................................................. $ 11,350,063
============
Net asset value, offering price and redemption value per share......................... $11.07
======
</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, 2000
(UNAUDITED)
--------------
<S> <C>
INVESTMENT INCOME:
Interest ...................................................................................... $ 658,804
-----------
EXPENSES:
Investment advisory and administration ........................................................ 29,959
Legal and audit ............................................................................... 16,409
Reports and notices to shareholders ........................................................... 10,797
Custody and accounting ........................................................................ 4,656
Trustees' fees ................................................................................ 3,750
Transfer agency fees and related service expenses ............................................. 750
Other expenses ................................................................................ 2,042
-----------
68,363
-----------
Net investment income ......................................................................... 590,441
-----------
REALIZED AND UNREALIZED LOSSES FROM INVESTMENTS:
Net realized losses from investments .......................................................... (685,984)
Net change in unrealized appreciation/depreciation of investments ............................. (630,366)
-----------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT TRANSACTIONS ............................... (1,316,350)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $ (725,909)
===========
</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
SIX MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ..................................................... $ 590,441 $ 1,163,932
Net realized gains (losses) from investments .............................. (685,984) 68,718
Net change in unrealized appreciation/depreciation of investments ......... (630,366) (602,992)
------------ -------------
Net increase (decrease) in net assets resulting from operations ........... (725,909) 629,658
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................................................... -- (1,164,637)
Net realized gains from investment transactions ........................... -- (105,920)
------------ -------------
Total dividends and distributions to shareholders ......................... -- (1,270,557)
------------ -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ...................................... 159,073 2,655,976
Cost of shares repurchased ................................................ (644,253) (1,850,878)
Dividend reinvestment ..................................................... -- 1,464,107
------------ -------------
Net increase (decrease) in net assets from beneficial interest transactions (485,180) 2,269,205
------------ -------------
Net increase (decrease) in net assets ..................................... (1,211,089) 1,628,306
NET ASSETS:
Beginning of period ....................................................... 12,561,152 10,932,846
------------ -------------
End of period (Including undistributed net investment
income of $590,441 at June 30, 2000) .................................... $ 11,350,063 $ 12,561,152
============ =============
</TABLE>
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 the Portfolio are offered 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 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") and investment adviser
and administrator of the Portfolio. If a market value is not available from an
independent pricing source for a particular security, that security is valued at
fair value as determined in good faith by or under the direction of the Fund's
board of trustees (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the board
determines that this does not represent fair value.
REPURCHASE AGREEMENTS--The Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Portfolio may participate in
joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost 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 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.
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.
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, 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 depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) .......... $ 168,374
Gross depreciation (investments having an excess of cost over value) .......... (1,079,235)
-----------
Net unrealized depreciation of investments .................................... $ (910,861)
===========
</TABLE>
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the six months ended June 30, 2000, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were $1,896,150 and
$3,774,500, respectively.
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.
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
SIX MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
Shares sold.......................................................... 14,161 208,151
Shares redeemed...................................................... (58,554) (144,354)
Shares reinvested.................................................... -- 123,703
-------- ---------
Net increase (decrease).............................................. (44,393) 187,500
======== =========
</TABLE>
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 FOR THE SEPTEMBER 28, 1998+
JUNE 30, 2000 YEAR ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 11.75 $ 12.40 $ 12.00
-------- -------- --------
Net investment income........................................ 0.58 1.21 0.20
Net realized and unrealized gains (losses) from investments.. (1.26) (0.54) 0.42
-------- -------- --------
Net increase (decrease) from investment operations........... (0.68) 0.67 0.62
-------- -------- --------
Dividends from net investment income......................... -- (1.21) (0.20)
Distributions from net realized gains from investments....... -- (0.11) (0.02)
-------- -------- --------
Total dividends and distributions............................ -- (1.32) (0.22)
-------- -------- --------
Net asset value, end of period............................... $ 11.07 $ 11.75 $ 12.40
======== ======== ========
Total investment return(1)................................... (5.79)% 5.42% 5.16%
======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000's)............................ $ 11,350 $ 12,561 $ 10,933
Expenses to average net assets............................... 1.14%* 1.35% 1.20%*
Net investment income to average net assets.................. 9.83%* 9.44% 7.04%*
Portfolio turnover rate...................................... 18% 69% 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>
MITCHELL
HUTCHINS SERIES
TRUST
HIGH INCOME
PORTFOLIO
SEMIANNUAL REPORT
-C-2000 PaineWebber Incorporated
All rights reserved.
Member SIPC JUNE 30, 2000
