<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO ANNUAL REPORT
PERFORMANCE AT A GLANCE
- --------------------------------------------------------------------------------
Comparison of the change of a $10,000 investment in Mitchell Hutchins Series
Trust--Tactical Allocation Portfolio (Class H) and the S&P 500 Index, from
September 28, 1998 through December 31, 1999
<TABLE>
<CAPTION>
TACTICAL ALLOCATION
PORTFOLIO (H) S&P 500 INDEX
<S> <C> <C>
9/1/98 $10,000 $10,000
10/98 $11,150 $10,812
11/98 $11,817 $11,467
12/98 $12,498 $12,128
1/99 $13,018 $12,635
2/99 $12,607 $12,242
3/99 $13,094 $12,731
4/99 $13,572 $13,224
5/99 $13,245 $12,912
6/99 $13,958 $13,629
7/99 $13,538 $13,203
8/99 $13,471 $13,137
9/99 $13,098 $12,777
10/99 $13,912 $13,586
11/99 $14,181 $13,862
12/99 $14,811 $14,677
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%), PERIODS ENDED 12/31/99
- -------------------------------------------------------
6 Months 1 Year Inception*
<S> <C> <C> <C>
Class H 6.11 18.43 36.66
Class I 6.12 N/A 18.52
S&P 500 Index 7.70 21.03 35.94
</TABLE>
* Inception: since commencement of issuance on September 28, 1998 for Class H
shares and January 5, 1999 for Class I shares. Index performance is shown as
of inception of oldest share class.
The investment return and the principal value of an investment will fluctuate,
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. Returns for periods of less than one year are not
annualized.
Past performance is no guarantee of future performance. Figures assume
reinvestment of all dividends and capital gains distributions, if any, at net
asset value on the payable dates and do not include sales charges. In
addition, for the fiscal year ended 1999, the Portfolio's adviser voluntarily
waived payment of certain fees (including the distribution fee payable by
Class I Shares). Absent this waiver, performance would have been lower.
Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity contracts.
[Sidenote]
The graph depicts the performance of Mitchell Hutchins Series Trust--Tactical
Allocation Portfolio (Class H) and the S&P 500 Index. Fees and expenses of Class
I Shares are higher than those of Class H Shares and the performance of Class I
Shares will differ from the performance of Class H Shares. It is important to
note the Tactical Allocation Portfolio is a professionally managed mutual fund
while the Index is not available for investment and is unmanaged. The comparison
is shown for illustrative purposes only.
1
<PAGE>
ANNUAL REPORT
Dear Contract Owner, February 15, 2000
We are pleased to present you with the annual report for the Mitchell Hutchins
Series Trust--Tactical Allocation Portfolio (the "Portfolio") for the fiscal
year ended December 31, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
[ICON] All of the major equity markets gained during the fiscal year, but none
more than the NASDAQ Composite, which, propelled by technology stocks, rocketed
up 85.59%. The Dow Jones Industrial Average (Dow) and Standard and Poor's 500
Index (S&P 500) saw strong gains of 27.29% and 21.03%, respectively. Throughout
the fiscal year, a relatively small number of stocks led the charge, and market
breadth fell to a three-year low. In ever-greater numbers, investors chased
technology stocks, where earnings growth and positive earnings surprises have
been strong.
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
The Portfolio attempts to outperform the S&P 500 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.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS*
12/31/99 6/30/99 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equities 76% 98% 96%
Cash Equivalents 24% 2% 4%
Number of Holdings 471 467 467
Price to Earnings (P/E) Ratio(1) 32.1x N/A N/A
Turnover Rate 110% 70% 6%
Equity Risk Premium 4.80% 5.98% 6.37%
Bond Risk Premium 0.52% 0.75% 0.16%
</TABLE>
- --------------------------------------------------------------------------------
* Weightings represent percentages of portfolio assets as of December 31,
1999, unless indicated otherwise. The Portfolio is actively managed and its
composition will vary over time.
(1) P/E for fiscal year 1999.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO ANNUAL REPORT
<TABLE>
<CAPTION>
TOP TEN HOLDINGS*
12/31/99 6/30/99
- --------------------------------------------------------------------------------
<S> <C>
Microsoft Corp. 3.7% Microsoft Corp. 4.0%
General Electric Co. 3.1 General Electric Co. 3.2
Cisco Systems Inc. 2.2 IBM Corp. 2.1
Wal Mart Stores Inc. 1.9 Wal Mart Stores Inc. 1.9
Exxon/Mobil Corp. 1.7 Cisco Systems Inc. 1.8
Intel Corp. 1.7 Lucent Technologies Inc. 1.8
Lucent Technologies Inc. 1.5 Intel Corp. 1.7
IBM Corp. 1.2 Exxon Corp. 1.6
Citigroup Inc. 1.2 AT&T Corp. 1.6
America Online Inc. 1.0 Merck & Co. Inc. 1.5
- --------------------------------------------------------------------------------
Total 19.2 Total 21.2
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS*
As of 12/31/99 As of 6/30/99
- --------------------------------------------------------------------------------
<S> <C>
Technology 23.7% Technology 22.0%
Financial Services 13.3 Financial Services 19.7
Consumer Cyclicals 10.2 Consumer Cyclicals 16.0
Utilities 7.5 Healthcare 11.6
Healthcare 6.9 Utilities 10.5
- --------------------------------------------------------------------------------
Total 61.6 Total 79.8
</TABLE>
The Model's ERP stood at 5.98% on July 1, above the 5.5% hurdle rate for full
investment in equities, so the Portfolio began the period with substantially all
its assets invested in stocks. The ERP remained above 5.5% and the Portfolio
remained fully invested in equities through November. Rising short-term rates
and improving stock prices during November bumped the ERP and BRP readings down
to 5.18% and 0.41%, respectively, as of the December 1 reading. These changes
prompted a shift, on December 1, of about 25% of the Portfolio's assets out of
equities and into cash. (A BRP below 0.5% dictates a shift into cash; a BRP of
0.5% or higher dictates a shift into bonds.)
At fiscal year-end the ERP measured 4.80%, down from the month-earlier
reading of 5.18% and now below the 5.00-5.49% range (which signals that the
Portfolio's equity allocation be reduced by an additional 25%). The BRP rose
above 0.50% to a reading of 0.52% at period-end. The new BRP reading dictated
that the Portfolio's non-equity position be placed entirely in bonds. So the
December 31, 1999 readings caused the Portfolio's asset allocation target to
shift to 50% stocks/50% bonds for the month of January. This new BRP reading
implies that for stocks to fare reasonably well, we would need either
interest-rate relief or an extraordinary increase in profit expectations.
* Weightings represent percentages of portfolio assets as of December 31, 1999,
unless indicated otherwise. The Portfolio is actively managed and its
composition will vary over time.
3
<PAGE>
ANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman and President and
Chief Executive Officer Chief Operating Officer
Mitchell Hutchins Mitchell Hutchins
Asset Management Inc. Asset Management Inc.
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--75.95%
AGRICULTURE, FOOD & BEVERAGE--2.27%
3,500 Archer-Daniels-Midland Co. .............. $ 42,656
1,600 Bestfoods Co. ........................... 84,100
2,400 Campbell Soup Co. ....................... 92,850
13,900 Coca-Cola Co. ........................... 809,675
2,400 Coca-Cola Enterprises, Inc. ............. 48,300
2,800 Conagra, Inc. ........................... 63,175
1,700 General Mills, Inc. ..................... 60,775
2,000 Heinz, H. J. and Co. .................... 79,625
800 Hershey Foods Corp. ..................... 38,000
2,300 Kellogg Co. ............................. 70,869
2,000 Nabisco Group Holdings Corp. ............ 21,250
8,200 Pepsico, Inc. ........................... 289,050
800 Quaker Oats Co. ......................... 52,500
800 Supervalue, Inc. ........................ 16,000
1,800 Sysco Corp. ............................. 71,213
3,200 Unilever N.V. ........................... 174,200
700 Wrigley, Wm. Jr., Co. ................... 58,056
------------
2,072,294
------------
AIRLINES--0.17%
800 AMR Corp.* .............................. 53,600
800 Delta Air Lines, Inc. ................... 39,850
2,800 Southwest Airlines Co. .................. 45,325
400 US Airways Group, Inc.* ................. 12,825
------------
151,600
------------
ALCOHOL--0.36%
2,600 Anheuser-Busch Companies, Inc. .......... 184,275
400 Brown Forman Corp., Class B ............. 22,900
200 Coors Adolph Co. ........................ 10,500
2,400 Seagram Co., Ltd. ....................... 107,850
------------
325,525
------------
APPAREL, RETAIL--0.36%
4,800 Gap, Inc. ............................... 220,800
1,200 Limited, Inc. ........................... 51,975
800 Nordstrom, Inc. ......................... 20,950
1,800 TJX Companies, Inc. ..................... 36,788
------------
330,513
------------
APPAREL, TEXTILES--0.25%
400 Liz Claiborne, Inc. ..................... 15,050
1,600 Nike, Inc. .............................. 79,300
5,100 Sara Lee Corp. .......................... 112,519
700 V. F. Corp. ............................. 21,000
------------
227,869
------------
BANKS--4.94%
2,200 Amsouth Bancorpation .................... 42,488
4,100 Bank of New York Co., Inc. .............. 164,000
6,500 Bank One Corp. .......................... 208,406
9,600 BankAmerica Corp. ....................... 481,800
1,900 BB & T Corp. ............................ 52,013
4,600 Chase Manhattan Corp. ................... 357,362
19,000 Citigroup, Inc. ......................... 1,055,687
900 Comerica, Inc. .......................... 42,019
1,700 Fifth Third Bancorp ..................... 124,737
5,600 First Union Corp. ....................... 183,750
5,500 Firstar Corp. ........................... 116,187
5,100 FleetBoston Financial Corp. ............. 177,544
1,300 Huntington Bancshares, Inc. ............. 31,038
1,000 J.P. Morgan & Co., Inc. ................. 126,625
2,600 KeyCorp. ................................ 57,525
2,800 Mellon Financial Corp. .................. 95,375
3,500 National City Corp. ..................... 82,906
1,200 Northern Trust Corp. .................... 63,600
700 Old Kent Financial Corp. ................ 24,763
1,700 PNC Bank Corp. .......................... 75,650
1,300 Regions Financial Corp. ................. 32,663
600 Republic Bank of New York ............... 43,200
1,000 SouthTrust Corp. ........................ 37,813
900 State Street Corp. ...................... 65,756
1,000 Summit Bancorp, Inc. .................... 30,625
1,800 Suntrust Banks, Inc. .................... 123,862
1,600 Synovus Financial Corp. ................. 31,800
800 Union Planters Corp. .................... 31,550
4,100 US Bancorp, Inc. ........................ 97,631
1,100 Wachovia Corp. .......................... 74,800
9,200 Wells Fargo and Co. ..................... 372,025
------------
4,505,200
------------
CHEMICALS--1.70%
1,300 Air Products & Chemicals, Inc. .......... 43,631
500 Ashland, Inc. ........................... 16,469
600 Avery Dennison Corp. .................... 43,725
1,200 Dow Chemical Co. ........................ 160,350
5,900 DuPont (E.I.) de Nemours & Co. .......... 388,662
500 Eastman Chemical Co. .................... 23,844
700 Ecolab, Inc. ............................ 27,387
700 Engelhard Corp. ......................... 13,213
200 FMC Corp.* .............................. 11,463
900 Goodyear Tire & Rubber Co. .............. 25,369
300 Great Lakes Chemical Corp. .............. 11,456
600 Hercules, Inc. .......................... 16,725
1,700 Illinois Tool Works, Inc. ............... 114,856
500 Kerr-McGee Corp. ........................ 31,000
2,200 Minnesota Mining & Manufacturing Co. .... 215,325
3,600 Monsanto Co. ............................ 128,250
1,000 PPG Industries, Inc. .................... 62,562
900 Praxair, Inc. ........................... 45,281
1,200 Rohm & Haas Co. ......................... 48,825
500 Sealed Air Corp.* ....................... 25,906
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--(CONTINUED)
CHEMICALS--(CONCLUDED)
1,000 Sherwin Williams Co. .................... $ 21,000
800 Union Carbide Corp. ..................... 53,400
600 Vulcan Materials Co. .................... 23,963
------------
1,552,662
------------
COMPUTER HARDWARE--6.19%
1,900 3Com Corp.* ............................. 89,300
600 Adaptec, Inc.* .......................... 29,925
900 Apple Computer, Inc.* ................... 92,531
1,000 Cabletron Systems, Inc.* ................ 26,000
18,400 Cisco Systems, Inc.* .................... 1,971,100
9,600 Compaq Computer Corp. ................... 259,800
14,300 Dell Computer Corp.* .................... 729,300
5,700 EMC Corp.* .............................. 622,725
1,800 Gateway, Inc.* .......................... 129,712
5,700 Hewlett-Packard Co. ..................... 649,444
700 Lexmark International Group, Inc.* ...... 63,350
800 Network Appliance, Inc.* ................ 66,450
1,500 Pitney Bowes, Inc. ...................... 72,469
1,200 Seagate Technology, Inc.* ............... 55,875
1,100 Silicon Graphics, Inc.* ................. 10,794
8,800 Sun Microsystems, Inc.* ................. 681,450
3,800 Xerox Corp. ............................. 86,212
------------
5,636,437
------------
COMPUTER SOFTWARE--6.69%
700 Adobe Systems, Inc. ..................... 47,075
400 Autodesk, Inc. .......................... 13,500
1,400 BMC Software, Inc.* ..................... 111,912
500 Citrix Systems, Inc.* ................... 61,500
3,000 Computer Associates International, Inc. . 209,812
2,000 Compuware Corp.* ........................ 74,500
10,100 International Business Machines Corp. ... 1,090,800
29,000 Microsoft Corp.* ........................ 3,385,750
1,900 Novell, Inc.* ........................... 75,881
8,000 Oracle Systems Corp.* ................... 896,500
1,500 Parametric Technology Corp.* ............ 40,594
1,400 Peoplesoft, Inc.* ....................... 29,838
1,700 Unisys Corp.* ........................... 54,294
------------
6,091,956
------------
CONSTRUCTION--0.12%
300 Armstrong World Industries, Inc. ........ 10,013
400 Centex Corp. ............................ 9,875
500 Fluor Corp. ............................. 22,937
2,600 Masco Corp. ............................. 65,975
------------
108,800
------------
CONSUMER DURABLES--0.14%
500 Black & Decker Corp. .................... 26,125
500 Grainger,W.W., Inc. ..................... 23,907
1,100 Leggett & Platt, Inc. ................... 23,581
500 Maytag Corp. ............................ 24,000
400 Whirlpool Corp. ......................... 26,025
------------
123,638
------------
DEFENSE & AEROSPACE--0.50%
5,300 Boeing Co. .............................. 220,281
1,100 General Dynamics Corp. .................. 58,025
700 Goodrich, B.F., Co. ..................... 19,250
2,300 Lockheed Martin Corp. ................... 50,313
400 Northrop Grumman Corp. .................. 21,625
1,900 Raytheon Co., Class B ................... 50,469
700 TRW, Inc. ............................... 36,356
------------
456,319
------------
DIVERSIFIED RETAIL--2.58%
1,200 Costco Wholesale Corp.* ................. 109,500
2,500 Dayton Hudson Corp. ..................... 183,594
700 Dillard Department Stores, Inc. ......... 14,131
1,200 Federated Department Stores, Inc.* ...... 60,675
2,900 K Mart Corp.* ........................... 29,181
900 Kohls Corp.* ............................ 64,969
1,900 May Department Stores Co.* .............. 61,275
1,500 Penney, J.C., Inc. ...................... 29,906
2,200 Sears Roebuck & Co. ..................... 66,963
25,000 Wal Mart Stores, Inc. ................... 1,728,125
------------
2,348,319
------------
DRUGS & MEDICINE--4.82%
700 Allergan, Inc. .......................... 34,825
7,300 American Home Products Corp. ............ 287,894
5,700 Amgen, Inc.* ............................ 342,356
11,100 Bristol-Myers Squibb Co. ................ 712,481
1,600 Cardinal Health, Inc. ................... 76,600
6,100 Lilly, Eli & Co. ........................ 405,650
1,600 McKesson HBOC, Inc. ..................... 36,100
13,100 Merck & Co., Inc. ....................... 878,519
21,800 Pfizer, Inc. ............................ 707,137
2,900 Pharmacia & Upjohn, Inc. ................ 130,500
8,300 Schering-Plough Corp. ................... 350,156
600 Sigma-Aldrich Corp. ..................... 18,038
4,800 Warner Lambert Co. ...................... 393,300
500 Watson Pharmaceuticals, Inc.* ........... 17,906
------------
4,391,462
------------
ELECTRIC UTILITIES--1.25%
1,200 AES Corp.* .............................. 89,700
800 Ameren Corp. ............................ 26,200
1,100 American Electric Power, Inc. ........... 35,338
900 Carolina Power & Light Co. .............. 27,394
1,200 Central & South West Corp. .............. 24,000
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--(CONTINUED)
ELECTRIC UTILITIES--(concluded)
900 Cinergy Corp. ........................... $ 21,713
700 CMS Energy Corp. ........................ 21,831
1,200 Consolidated Edison, Inc. ............... 41,400
800 Constellation Energy Group, Inc. ........ 23,200
1,100 Dominion Resources, Inc. ................ 43,175
800 DTE Energy Co. .......................... 25,100
2,000 Duke Energy Corp. ....................... 100,250
2,000 Edison International, Inc. .............. 52,375
1,400 Entergy Corp. ........................... 36,050
1,300 FirstEnergy Corp. ....................... 29,494
500 Florida Progress Corp. .................. 21,156
1,000 FPL Group, Inc. ......................... 42,812
700 GPU Inc. ................................ 20,956
700 New Century Energies, Inc. .............. 21,263
1,100 Niagara Mohawk Holdings, Inc.* .......... 15,331
900 Northern States Power Co. ............... 17,550
1,000 PECO Energy Co. ......................... 34,750
800 Pennsylvania Power & Light Co. .......... 18,300
2,200 PG&E Corp. .............................. 45,100
500 Pinnacle West Capital Corp. ............. 15,281
1,200 Public Service Enterprise Group, Inc. ... 41,775
1,700 Reliant Energy, Inc. .................... 38,887
1,400 Sempra Energy ........................... 24,325
3,800 Southern Co. ............................ 89,300
1,600 Texas Utilities Co. ..................... 56,900
1,200 Unicom Corp. ............................ 40,200
------------
1,141,106
------------
ELECTRICAL EQUIPMENT--5.13%
800 ADC Telecommunications, Inc.* ........... 58,050
400 Comverse Technology, Inc.* .............. 57,900
1,400 Corning, Inc. ........................... 180,512
800 Danaher Corp. ........................... 38,600
1,200 Dover Corp. ............................. 54,450
400 Eaton Corp. ............................. 29,050
1,000 General Instrument Corp.* ............... 85,000
4,400 Honeywell, Inc. ......................... 253,825
500 Johnson Controls, Inc. .................. 28,438
500 KLA-Tencor Corp. * ...................... 55,687
17,600 Lucent Technologies, Inc. ............... 1,316,700
300 Millipore Corp. ......................... 11,588
900 Molex, Inc. ............................. 51,019
3,400 Motorola, Inc. .......................... 500,650
7,500 Nortel Networks Corp. ................... 757,500
600 PE Corp. ................................ 72,187
4,000 Qualcomm, Inc.* ......................... 704,500
400 Scientific-Atlanta, Inc. ................ 22,250
1,600 Solectron Corp.* ........................ 152,200
300 Tektronix, Inc. ......................... 11,663
2,300 Tellabs, Inc.* .......................... 147,631
1,000 Teradyne, Inc.* ......................... 66,000
1,000 Thermo Electron Corp.* .................. 15,000
------------
4,670,400
------------
ELECTRICAL POWER--0.27%
600 Cooper Industries, Inc. ................. 24,263
200 Cummins Engine Co., Inc. ................ 9,663
2,500 Emerson Electric Co. .................... 143,437
1,100 Rockwell International Corp. ............ 52,662
400 Thomas & Betts Corp. .................... 12,750
------------
242,775
------------
ENERGY RESERVES & PRODUCTION--3.39%
500 Amerada Hess Corp. ...................... 28,375
700 Anadarko Petroleum Corp. ................ 23,888
700 Apache Corp. ............................ 25,856
1,800 Atlantic Richfield Co. .................. 155,700
1,200 Burlington Resources, Inc. .............. 39,675
3,700 Chevron Corp. ........................... 320,512
19,400 Exxon Mobil Corp. ....................... 1,562,912
2,100 Occidental Petroleum Corp. .............. 45,413
1,400 Phillips Petroleum Co. .................. 65,800
12,100 Royal Dutch Petroleum Co., ADR .......... 731,294
800 Tosco Corp. ............................. 21,750
1,500 Union Pacific Resources Group, Inc. ..... 19,125
1,400 Unocal Corp. ............................ 46,987
------------
3,087,287
------------
ENTERTAINMENT--0.44%
3,500 Carnival Corp. .......................... 167,344
3,900 Viacom, Inc., Class B* .................. 235,706
------------
403,050
------------
ENVIRONMENTAL SERVICES--0.07%
3,500 Waste Management, Inc. .................. 60,156
------------
FINANCIAL SERVICES--5.14%
2,500 American Express Co. .................... 415,625
1,400 AON Corp. ............................... 56,000
4,100 Associates First Capital Corp. .......... 112,494
600 Block, H&R, Inc. ........................ 26,250
1,100 Capital One Financial Corp. ............. 53,006
4,000 Cendant Corp.* .......................... 106,250
700 Countrywide Credit Industries, Inc. ..... 17,675
800 Equifax, Inc. ........................... 18,850
3,900 Federal Home Loan Mortgage Corp. ........ 183,544
5,800 Federal National Mortgage Association ... 362,137
18,500 General Electric Co. .................... 2,862,875
2,600 Household International, Inc. ........... 96,850
1,500 Marsh & McLennan Companies, Inc. ........ 143,531
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--(CONTINUED)
FINANCIAL SERVICES--(CONCLUDED)
4,500 MBNA Corp. .............................. $ 122,625
800 Providian Financial Corp. ............... 72,850
900 SLM Holding Corp. ....................... 38,025
------------
4,688,587
------------
FOOD RETAIL--0.32%
2,400 Albertson's, Inc. ....................... 77,400
4,700 Kroger Co.* ............................. 88,713
2,900 Safeway, Inc.* .......................... 103,131
900 Winn Dixie Stores, Inc. ................. 21,544
------------
290,788
------------
FOREST PRODUCTS, PAPER--0.74%
300 Bemis, Inc. ............................. 10,463
300 Boise Cascade Corp. ..................... 12,150
500 Champion International Corp. ............ 30,969
1,200 Fort James Corp. ........................ 32,850
1,000 Georgia-Pacific Corp. ................... 50,750
2,300 International Paper Co. ................. 129,806
3,100 Kimberly Clark Corp. .................... 202,275
700 Louisiana Pacific Corp. ................. 9,975
600 Mead Corp. .............................. 26,062
1,100 Pactiv Corp.* ........................... 11,688
300 Temple-Inland, Inc. ..................... 19,781
600 Westvaco Corp. .......................... 19,575
1,300 Weyerhaeuser Co. ........................ 93,356
600 Willamette Industries, Inc. ............. 27,862
------------
677,562
------------
FREIGHT, AIR, SEA & LAND--0.08%
1,700 FDX Corp.* .............................. 69,594
------------
GAS UTILITY--0.15%
500 Columbia Energy Group ................... 31,625
500 Consolidated Natural Gas Co. ............ 32,469
200 Eastern Enterprises ..................... 11,488
1,300 El Paso Energy Corp. .................... 50,456
300 NICOR, Inc. ............................. 9,750
------------
135,788
------------
HEAVY MACHINERY--0.06%
1,300 Deere & Co. ............................. 56,388
------------
HOTELS--0.11%
700 Harrah's Entertainment, Inc.* ........... 18,506
2,100 Hilton Hotels Corp. ..................... 20,213
1,400 Marriott International, Inc. ............ 44,187
1,100 Mirage Resorts, Inc.* ................... 16,844
------------
99,750
------------
HOUSEHOLD PRODUCTS--1.69%
400 Alberto Culver Co. ...................... 10,325
1,400 Avon Products, Inc. ..................... 46,200
1,300 Clorox Co. .............................. 65,488
3,300 Colgate-Palmolive Co. ................... 214,500
900 Fortune Brands, Inc. .................... 29,756
6,000 Gillette Co. ............................ 247,125
600 International Flavors and Fragrances .... 22,650
1,600 Newell Rubbermaid, Inc. ................. 46,400
7,400 Procter & Gamble Co. .................... 810,762
1,800 Ralston Purina Co. ...................... 50,175
------------
1,543,381
------------
INDUSTRIAL PARTS--0.54%
2,000 Caterpillar, Inc. ....................... 94,125
1,100 Genuine Parts Co. ....................... 27,294
900 Ingersoll Rand Co. ...................... 49,556
500 ITT Industries, Inc. .................... 16,719
700 Pall Corp. .............................. 15,094
600 Parker-Hannifin Corp. ................... 30,787
400 Snap-On, Inc. ........................... 10,625
500 Stanley Works ........................... 15,062
800 Textron, Inc. ........................... 61,350
2,700 United Technologies Corp. ............... 175,500
------------
496,112
------------
INDUSTRIAL SERVICES & SUPPLIES--0.01%
400 Ryder Systems, Inc. ..................... 9,775
------------
INFORMATION & COMPUTER SERVICES--2.76%
12,600 America Online, Inc.* ................... 950,512
3,500 Automatic Data Processing, Inc. ......... 188,562
800 Ceridian Corp.* ......................... 17,250
900 Computer Sciences Corp.* ................ 85,163
900 Dun & Bradstreet Corp. .................. 26,550
2,600 Electronic Data Systems Corp. ........... 174,038
2,400 First Data Corp. ........................ 118,350
1,700 IMS Health, Inc. ........................ 46,219
1,600 Interpublic Group Companies, Inc. ....... 92,300
1,000 Omnicom Group, Inc. ..................... 100,000
1,400 Paychex, Inc. ........................... 56,000
700 Quintiles Transnational Corp.* .......... 13,081
1,500 Yahoo, Inc.* ............................ 649,031
------------
2,517,056
------------
LEISURE--0.20%
600 Brunswick Corp. ......................... 13,350
1,800 Eastman Kodak Co. ....................... 119,250
1,100 Hasbro, Inc. ............................ 20,969
2,400 Mattel, Inc. ............................ 31,500
------------
185,069
------------
LIFE INSURANCE--0.50%
900 Aetna Life & Casualty Co. ............... 50,231
1,500 AFLAC, Inc. ............................. 70,781
1,400 American General Corp. .................. 106,225
1,100 CIGNA Corp. ............................. 88,619
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--(CONTINUED)
LIFE INSURANCE--(CONCLUDED)
1,900 Conseco, Inc. ........................... $ 33,963
1,100 Lincoln National Corp. .................. 44,000
700 Torchmark, Inc. ......................... 20,344
1,400 UNUM Provident Corp. .................... 44,887
------------
459,050
------------
LONG DISTANCE & PHONE COMPANIES--5.37%
18,000 AT&T Corp. .............................. 913,500
8,700 Bell Atlantic Corp. ..................... 535,594
10,600 BellSouth Corp. ......................... 496,212
800 CenturyTel, Inc. ........................ 37,900
4,300 Global Crossing, Ltd.*(1) ............... 215,000
5,500 GTE Corp. ............................... 388,094
15,900 MCI WorldCom, Inc.* ..................... 843,694
19,200 SBC Communications, Inc. ................ 936,000
4,900 Sprint Corp. ............................ 329,831
2,800 U.S. West, Inc. ......................... 201,600
------------
4,897,425
------------
MEDIA--2.04%
4,300 CBS Corp.* .............................. 274,931
1,900 Clear Channel Communications* ........... 169,575
4,200 Comcast Corp., Class A .................. 212,363
11,600 Disney, Walt Co. ........................ 339,300
3,400 MediaOne Group, Inc.* ................... 261,163
300 Meredith Corp. .......................... 12,506
7,200 Time Warner, Inc. ....................... 521,550
1,300 Tribune Co. ............................. 71,581
------------
1,862,969
------------
MEDICAL PRODUCTS--2.23%
8,600 Abbott Laboratories ..................... 312,288
600 Alza Corp.* ............................. 20,775
300 Bard, C.R., Inc. ........................ 15,900
300 Bausch & Lomb, Inc. ..................... 20,531
1,600 Baxter International, Inc. .............. 100,500
1,400 Becton, Dickinson & Co. ................. 37,450
600 Biomet, Inc. ............................ 24,000
2,300 Boston Scientific Corp.* ................ 50,313
1,700 Guidant Corp. ........................... 79,900
7,800 Johnson & Johnson ....................... 726,375
400 Mallinckrodt Group, Inc. ................ 12,725
6,700 Medtronic, Inc. ......................... 244,131
500 St. Jude Medical, Inc.* ................. 15,344
9,500 Tyco International, Ltd. ................ 369,312
------------
2,029,544
------------
MEDICAL PROVIDERS--0.27%
3,200 Columbia/HCA Healthcare Corp. ........... 93,800
600 HCR Manor Care, Inc. .................... 9,600
2,300 HEALTHSOUTH Corp.* ...................... 12,362
1,700 Service Corp. International ............. 11,794
1,800 Tenet Healthcare Corp.* ................. 42,300
1,000 United Healthcare Corp. ................. 53,125
400 Wellpoint Health Networks, Inc.* ........ 26,375
------------
249,356
------------
MINING & METALS--0.46%
1,300 Alcan Aluminum, Ltd. .................... 53,544
2,100 Alcoa, Inc. ............................. 174,300
600 Allegheny Technologies, Inc. ............ 13,463
700 Crown Cork & Seal, Inc. ................. 15,663
1,100 Inco, Ltd.* ............................. 25,850
500 Nucor Corp. ............................. 27,406
900 Owens Illinois, Inc.* ................... 22,556
500 Phelps Dodge Corp. ...................... 33,562
400 Reynolds Metals Co. ..................... 30,650
500 USX-U.S. Steel Group, Inc. .............. 16,500
500 Worthington Industries, Inc. ............ 8,281
------------
421,775
------------
MOTOR VEHICLES AND PARTS--0.82%
1,000 DANA Corp. .............................. 29,938
3,200 Delphi Automotive Systems Corp. ......... 50,400
6,800 Ford Motor Co. .......................... 363,375
3,600 General Motors Corp. .................... 261,675
400 Navistar International Corp.* ........... 18,950
500 PACCAR, Inc. ............................ 22,156
------------
746,494
------------
OIL REFINING--0.67%
1,200 Coastal Corp. ........................... 42,525
3,500 Conoco, Inc. ............................ 87,062
4,000 Enron Corp. ............................. 177,500
600 Sunoco, Inc. ............................ 14,100
3,100 Texaco, Inc. ............................ 168,369
1,800 USX-Marathon Group ...................... 44,438
2,400 Williams Companies, Inc. ................ 73,350
------------
607,344
------------
OIL SERVICES--0.38%
1,900 Baker Hughes, Inc. ...................... 40,019
2,500 Halliburton Co. ......................... 100,625
500 Rowan Companies, Inc.* .................. 10,844
3,100 Schlumberger, Ltd. ...................... 174,375
601 Transocean Sedco Forex, Inc. ............ 20,259
------------
346,122
------------
OTHER INSURANCE--1.57%
4,500 Allstate Corp. .......................... 108,000
8,700 American International Group, Inc. ...... 940,687
1,000 Chubb Corp. ............................. 56,312
900 Cincinnati Financial Corp. .............. 28,069
1,200 Hartford Financial Services Group, Inc. . 56,850
600 Jefferson-Pilot Corp. ................... 40,950
600 Loews Corp. ............................. 36,412
</TABLE>
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
COMMON STOCKS--(CONCLUDED)
OTHER INSURANCE--(CONCLUDED)
600 MBIA, Inc. .............................. $ 31,688
600 MGIC Investment Corp. ................... 36,113
400 Progressive Corp. ....................... 29,250
800 SAFECO Corp. ............................ 19,900
1,300 St. Paul Companies, Inc. ................ 43,794
------------
1,428,025
------------
PRECIOUS METALS--0.12%
2,200 Barrick Gold Corp. ...................... 38,912
900 Freeport-McMoran Copper & Gold, Inc.* ... 19,013
1,500 Homestake Mining Co. .................... 11,719
900 Newmont Mining Corp. .................... 22,050
1,900 Placer Dome, Inc. ....................... 20,425
------------
112,119
------------
PUBLISHING--0.42%
400 American Greetings Corp., Class A ....... 9,450
400 Deluxe Corp. ............................ 10,975
700 Donnelley, R.R. & Sons Co. .............. 17,369
500 Dow Jones & Co., Inc. ................... 34,000
1,600 Gannett, Inc. ........................... 130,500
400 Harcourt General, Inc. .................. 16,100
500 Knight Ridder, Inc. ..................... 29,750
1,100 McGraw-Hill Companies, Inc. ............. 67,787
1,000 New York Times Co., Class A ............. 49,125
300 Times Mirror Co. ........................ 20,100
------------
385,156
------------
RAILROADS--0.28%
2,600 Burlington Northern Santa Fe, Inc. ...... 63,050
1,200 CSX Corp. ............................... 37,650
600 Kansas City Southern Industries, Inc. ... 44,775
2,200 Norfolk Southern Corp. .................. 45,100
1,400 Union Pacific Corp. ..................... 61,075
------------
251,650
------------
RESTAURANTS--0.41%
800 Darden Restaurants, Inc. ................ 14,500
7,600 McDonalds Corp. ......................... 306,375
900 Tricon Global Restaurants, Inc.* ........ 34,762
700 Wendy's International, Inc. ............. 14,438
------------
370,075
------------
SECURITIES & ASSET MANAGEMENT--1.07%
800 Bear Stearns Company, Inc. .............. 34,200
4,600 Charles Schwab Corp. .................... 176,525
1,500 Franklin Resources, Inc. ................ 48,094
700 Lehman Brothers Holdings, Inc. .......... 59,281
2,100 Merrill Lynch & Co., Inc. ............... 175,350
3,200 Morgan Stanley Dean Witter & Co. ........ 456,800
700 T. Rowe Price & Associates, Inc. ........ 25,856
------------
976,106
------------
SEMICONDUCTOR--2.93%
800 Advanced Micro Devices, Inc.* ........... 23,150
1,000 Analog Devices, Inc.* ................... 93,000
2,100 Applied Materials, Inc.* ................ 266,044
18,800 Intel Corp. ............................. 1,547,475
800 LSI Logic Corp.* ........................ 54,000
1,500 Micron Technology, Inc.* ................ 116,625
1,000 National Semiconductor Corp.* ........... 42,813
300 Perkinelmer, Inc. ....................... 12,506
4,500 Texas Instruments, Inc. ................. 435,937
1,800 Xilinx, Inc.* ........................... 81,844
------------
2,673,394
------------
SPECIALTY RETAIL--1.80%
800 Autozone, Inc.* ......................... 25,850
800 Bed, Bath & Beyond, Inc.* ............... 27,800
1,200 Best Buy Company, Inc.* ................. 60,225
1,100 Circuit City Stores, Inc. ............... 49,569
600 Consolidated Stores Corp.* .............. 9,750
2,200 CVS Corp. ............................... 87,863
1,500 Dollar General Corp. .................... 34,125
12,900 Home Depot, Inc. ........................ 884,456
2,200 Lowe's Companies, Inc. .................. 131,450
1,900 Office Depot, Inc.* ..................... 20,781
1,500 Rite Aid Corp. .......................... 16,781
2,600 Staples, Inc.* .......................... 53,950
1,100 Tandy Corp. ............................. 54,106
1,400 Toys R Us, Inc.* ........................ 20,038
5,600 Walgreen Co. ............................ 163,800
------------
1,640,544
------------
THRIFT--0.13%
900 Golden West Financial Corp. ............. 30,150
3,300 Washington Mutual, Inc. ................. 85,800
------------
115,950
------------
TOBACCO--0.37%
13,300 Philip Morris Companies, Inc. ........... 308,394
1,000 UST, Inc. ............................... 25,187
------------
333,581
------------
WIRELESS TELECOMMUNICATIONS--0.67%
1,800 Alltel Corp. ............................ 148,838
2,100 Nextel Communications, Inc.* ............ 216,562
2,400 Sprint Corp.* ........................... 246,000
------------
611,400
------------
TOTAL COMMON STOCKS (cost--$63,447,839) ................ $69,215,297
------------
</TABLE>
10
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount
(000) Maturity Dates Interest Rates Value
- ----------- -------------- ---------------- -----------
<S> <C> <C> <C>
Short-Term U.S. Government and Agency [email protected]%
$ 20,779 U.S. Treasury Bills (1) ........................................ 01/06/00 4.570 to 4.720% $20,765,801
1,114 Federal Home Loan Bank Discounted Notes ........................ 01/03/00 1.500 1,113,907
-----------
Total Short-Term U.S. Government and Agency Obligations (cost--$21,879,708) .. 21,879,708
-----------
Total Investments (cost--$85,327,547)--99.96% ................................ 91,095,005
Other assets in excess of liabilities--0.04% ................................. 32,099
-----------
Net Assets--100.00% .......................................................... $91,127,104
-----------
-----------
</TABLE>
- ----------------
@ Yield to maturity on discounted securities.
* Non-income producing security.
(1) Security, or a portion thereof, was on loan at December 31, 1999.
ADR American Depositary Receipt.
See accompanying notes to financial statements.
11
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999
<S> <C>
ASSETS
Investments in securities, at value (cost--$85,327,547) ....................... $ 91,095,005
Investments of cash collateral received for securities
loaned, at value (cost--$10,338,900) ....................................... 10,338,900
Cash .......................................................................... 1,008
Dividends and interest receivable ............................................. 62,258
Other assets .................................................................. 11,010
-------------
Total assets .................................................................. 101,508,181
-------------
LIABILITIES
Collateral for securities loaned .............................................. 10,338,900
Payable to affiliates ......................................................... 36,585
Accrued expenses and other liabilities ........................................ 5,592
-------------
Total liabilities ............................................................. 10,381,077
-------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized) ........... 84,831,469
Undistributed net investment income ........................................... 32,542
Accumulated net realized gains from investment transactions ................... 495,635
Net unrealized appreciation of investments .................................... 5,767,458
Net assets .................................................................... 91,127,104
-------------
-------------
CLASS H:
Net assets .................................................................... $ 36,713,600
-------------
Shares outstanding ............................................................ 2,226,463
-------------
Net asset value, offering price and redemption value per share ................ $16.49
-------------
-------------
CLASS I:
Net assets .................................................................... $ 54,413,504
-------------
Shares outstanding ............................................................ 3,302,469
-------------
Net asset value, offering price and redemption value per share ................ $16.48
-------------
-------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $3,882) ......................... $ 538,401
Interest ....................................................................... 120,678
-------------
659,079
-------------
EXPENSES:
Investment advisory and administration ......................................... 221,102
Distribution fees--Class I ..................................................... 43,639
Legal and audit ................................................................ 36,470
Custody and accounting ......................................................... 26,532
Reports and notices to shareholders ............................................ 21,651
Trustees' fees ................................................................. 7,500
Interest Expense ............................................................... 3,384
Transfer agency fees and related service expenses .............................. 2,500
Other expenses ................................................................. 7,765
-------------
370,543
Less: Fee waiver from adviser .................................................. (44,090)
-------------
Net expenses ................................................................... 326,453
-------------
Net investment income .......................................................... 332,626
-------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions ................................ 6,095,928
Net change in unrealized appreciation/depreciation of investments .............. 2,759,506
-------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES ................... 8,855,434
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $ 9,188,060
-------------
-------------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SEPTEMBER 28,
YEAR ENDED 1998+ THROUGH
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ..................................................... $ 332,626 $ 28,318
Net realized gains from investment transactions ........................... 6,095,928 167,248
Net change in unrealized appreciation/depreciation of investments ......... 2,759,506 3,007,952
-------------- -------------
Net increase in net assets resulting from operations ...................... 9,188,060 3,203,518
-------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class H ............................................ (121,887) (28,368)
Net investment income--Class I ............................................ (178,197) --
Net realized gains from investments--Class H .............................. (2,297,887) (119,054)
Net realized gains from investments--Class I .............................. (3,350,550) --
-------------- -------------
Total dividends and distributions to shareholders ......................... (5,948,521) (147,422)
-------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ...................................... 87,368,412 19,989,470
Cost of shares repurchased ................................................ (28,070,328) (552,029)
Proceeds from dividends reinvested ........................................ 6,095,944 --
-------------- -------------
Net increase in net assets from beneficial interest transactions .......... 65,394,028 19,437,441
-------------- -------------
Net increase in net assets ................................................ 68,633,567 22,493,537
NET ASSETS:
Beginning of period ....................................................... 22,493,537 --
-------------- -------------
End of period (including undistributed net investment
income of $32,542 at December 31, 1999) ................................... $ 91,127,104 $ 22,493,537
-------------- -------------
-------------- -------------
</TABLE>
- -----------------------
+ Commencement of operations.
See accompanying notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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 rata basis.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Fund's management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments--The Portfolio calculates its net asset value based
on the current market value for its portfolio securities. The Portfolio normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use reported last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable securities. Securities traded in the over-the-counter
("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally
are valued at the last sale price on Nasdaq prior to valuation. Other OTC
securities are valued at the last bid price available prior to valuation.
Securities which are listed on U.S. and foreign stock exchanges normally are
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market by Mitchell Hutchins. 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.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost basis. Dividend income is
recorded on the ex-dividend date ("ex-date"). Interest income is recorded on an
accrual basis. Premiums are amortized and discounts are accreted as adjustments
to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The board has approved an investment advisory and administration contract
with Mitchell Hutchins, under which Mitchell Hutchins serves as investment
adviser and administrator of the Portfolio. In accordance with the Advisory
Contract, the Portfolio pays Mitchell Hutchins an investment advisory and
administration fee, which is computed daily and payable monthly, at an annual
rate of 0.50% of the Portfolio's average daily net assets. At December 31, 1999,
the Portfolio owed Mitchell Hutchins $35,580 in investment advisory and
administration fees. Mitchell Hutchins waived a portion of its investment
advisory and administration fees in connection with the Portfolio's investment
of cash collateral from securities lending transactions in the Mitchell Hutchins
Private Money Market Fund LLC. For the year ended December 31, 1999, Mitchell
Hutchins waived $451.
For the year ended December 31, 1999, the Fund paid $12 in brokerage
commissions to PaineWebber for transactions executed on behalf of the Fund.
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
December 31, 1999, Mitchell Hutchins and the insurance companies waived the
entire distribution fee.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SECURITY LENDING
The Portfolio may lend securities up to 33 1/3% of its total assets to
qualified institutions. The loans are secured at all times by cash or U.S.
government securities in an amount at least equal to the market value of the
securities loaned, plus accrued interest, determined on a daily basis and
adjusted accordingly. The Portfolio will regain record ownership of loaned
securities to exercise certain beneficial rights; however, the Portfolio may
bear the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower fail financially. The Portfolio receives
compensation, which is included in interest income, for lending its securities
from interest earned on the cash or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. For the year ended December 31, 1999, the
Portfolio earned $3,085 for lending its securities and PaineWebber earned $1,039
in compensation as the Portfolio's lending agent. At December 31, 1999, the
Portfolio owed PaineWebber $1,005 in compensation.
As of December 31, 1999, the Portfolio held cash and/or cash equivalents
having an aggregate value of $10,338,900 as collateral for portfolio securities
loaned having a market value of $10,173,640. The cash collateral was invested in
the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C>
6,503,915 Mitchell Hutchins Private Money Market Fund LLC............................. $ 6,503,915
3,693,165 Liquid Assets Portfolio..................................................... 3,693,165
141,820 Prime Portfolio............................................................. 141,820
------------
Total investments of cash collateral received for securities loaned (cost--$10,338,900). $ 10,338,900
------------
------------
</TABLE>
BANK LINE OF CREDIT
The Portfolio may participate with other funds managed by Mitchell Hutchins
in a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sales or purchases of portfolio
securities, the repurchase or redemption of shares of the Portfolio at the
request of the shareholders and other temporary or emergency purposes. In
connection therewith, the Portfolio has agreed to pay commitment fees, pro rata,
based on the relative asset size of the funds in the Facility. Interest is
charged to the Portfolio at a rate based on prevailing market rates in effect at
the time of borrowings. For the year ended December 31, 1999, the Portfolio had
an average amount of borrowing outstanding under the Facility of $4,640,000 for
five days with a related weighted average annualized interest rate of 5.24%. The
Portfolio did not borrow under the Facility at any other time for the year ended
December 31, 1999.
INVESTMENTS IN SECURITIES
At December 31, 1999, the cost of securities for federal income tax purposes
was $86,959,519.
At December 31, 1999, the components of net unrealized appreciation of
investments for federal income tax purposes were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)............. $7,196,189
Gross depreciation (investments having an excess of cost over value)............. (3,060,703)
------------
Net unrealized appreciation of investments....................................... $4,135,486
------------
------------
</TABLE>
For the year ended December 31, 1999, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $85,571,167 and
$47,809,661, respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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 September 28, 1998+ January 5, 1999++
Year Ended through through
December 31, 1999 December 31, 1998 December 31, 1999
----------------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount
---------- ----------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................... 2,060,203 $33,179,597 1,547,313 $19,989,470 3,333,610 $54,188,815
Shares repurchased ................ (1,499,667) (24,078,224) (38,393) (552,029) (245,923) (3,992,104)
Reinvestment of dividends ......... 157,007 2,567,197 -- -- 214,782 3,528,747
---------- ----------- ----------- ------------ ---------- -----------
Net increase ...................... 717,543 $11,668,570 1,508,920 $19,437,441 3,302,469 $53,725,458
---------- ----------- ----------- ------------ ---------- -----------
---------- ----------- ----------- ------------ ---------- -----------
</TABLE>
- ---------------------------
+ Commencement of operations.
++ Commencement of issuance of shares.
18
<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 FOR THE PERIOD
FOR THE SEPTEMBER 28, 1998+ JANUARY 5, 1999++
YEAR ENDED THROUGH THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- ------------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period .................................. $ 14.91 $ 12.00 $ 14.89
-------- -------- --------
Net investment income ................................................. 0.11@ 0.02 0.11@
Net realized and unrealized gains from investments .................... 2.64@ 2.99 2.65@
-------- -------- --------
Net increase from investment operations ............................... 2.75 3.01 2.76
-------- -------- --------
Dividends from net investment income .................................. (0.06) (0.02) (0.06)
Distributions from net realized gains from investments ................ (1.11) (0.08) (1.11)
-------- -------- --------
Total dividends and distributions to shareholders ..................... (1.17) (0.10) (1.17)
-------- -------- --------
Net asset value, end of period ........................................ $ 16.49 $ 14.91 $ 16.48
-------- -------- --------
-------- -------- --------
Total investment return(1) ............................................ 18.43% 24.98% 18.52%
-------- -------- --------
-------- -------- --------
Ratios/Supplemental data:
Net assets, end of period (000's) ..................................... $ 36,714 $ 22,494 $ 54,413
Expenses to average net assets, before waiver from adviser ............ 0.74% 0.95%* 0.99%*
Expenses to average net assets, after waiver from adviser ............. 0.74% 0.95%* 0.74%*
Net investment income to average net assets,
before waiver from adviser ............................................ 0.71% 0.77%*
0.56%*
Net investment income to average net assets,
after waiver from adviser ............................................. 0.71% 0.77%*
0.81%*
Portfolio turnover rate ............................................... 110% 6% 110%
</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.
19
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Mitchell Hutchins Series Trust--Tactical Allocation Portfolio
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Mitchell Hutchins Series
Trust--Tactical Allocation Portfolio, (the "Portfolio") (one of the Portfolios
constituting Mitchell Hutchins Series Trust (the "Fund")) as of December 31,
1999, the related statement of operations for the year then ended, and the
statement of changes in net assets for the period September 28, 1998
(commencement of operations) through December 31, 1999 and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 1999, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Mitchell Hutchins Series Trust--Tactical Allocation Portfolio at December 31,
1999, the results of its operations for the year then ended, and the changes in
its net assets for the period September 28, 1998 through December 31, 1999 and
financial highlights for each of the indicated periods, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
February 16, 2000
20
<PAGE>
ANNUAL REPORT
- ---------------------------------------------------------------------
MITCHELL
HUTCHINS SERIES
TRUST
TACTICAL
ALLOCATION
PORTFOLIO
DECEMBER 31, 1999
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