<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO SEMIANNUAL REPORT
August 15, 2000
Dear Contract Owner,
We are pleased to present you with the semiannual report for Mitchell Hutchins
Series Trust--Tactical Allocation Portfolio (the "Portfolio") for the six-month
period ended June 30, 2000.
MARKET REVIEW
--------------------------------------------------------------------------------
[GRAPHIC]
There was a great deal of volatility in the capital markets in the
first half of this year, in part because of the tug of war between interest
rate expectations and the outlook for corporate profits. Daily price swings
of one or two percent of index values became the norm in the latter part of
the period. The NASDAQ Composite, buffeted by shifting values among dot-com
enterprises, ended the six-month period down 2.54%. The Dow Jones Industrial
Average (Dow) lost 8.54% and Standard & Poor's 500 Index (S&P 500), a broader
market gauge, was down just 0.43% for the period.
PORTFOLIO REVIEW
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 6/30/00
<TABLE>
<CAPTION>
6 Months 1 Year Inception*
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Class H 0.61% 6.76% 25.45%
Class I 0.48 6.64 12.44
S&P 500 Index -0.43 7.24 24.22
--------------------------------------------------------------------------------
</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 December 31, 1999, and the
period from January 1, 2000 through February 29, 2000, the Portfolio's
adviser voluntarily waived payment of certain fees for Class I shares.
Without this waiver performance would have been lower. Performance relates to
the Portfolio and does not reflect separate account charges applicable to
variable annuity contracts.
PORTFOLIO HIGHLIGHTS
At the start of the reporting period, on Monday, January 3, 2000, the Equity
Risk Premium (ERP) registered 4.80%, below the level for a dominant position
in equities. Based on this reading, the Portfolio moved from its previous
allocation of 75% equities and 25% in 30-day Treasury bills and began the
reporting period with 50% in equities and 50% in 5-year U.S. Treasury notes.
In February, the Bond Risk Premium declined to 0.47%. Based on this reading,
the fixed-income portion of the Portfolio changed to three-month Treasury
bills. The 50% equity allocation held steady throughout the reporting period.
1
<PAGE>
SEMIANNUAL REPORT
Based on an increase in the Equity Risk Premium from 4.45% to 5.05% at the
end of the reporting period, the Portfolio has begun the next reporting
period by shifting from a 50-50 weighting of stocks and cash to a weighting
of 75% stocks and 25% cash. Based on the Bond Risk Premium (BRP) of 0.20%,
cash continues to be the preferred asset class and the Portfolio's cash
component remains in 30-day Treasury bills.
A stock allocation of less than 100% does not necessarily signal the end of
this leg of the bull market. But an Equity Risk Premium of 5.0% to 5.5% does
indicate a more "fully valued" range. If the Equity Risk Premium returns to
5.5% or higher, the Portfolio again will be fully invested in stocks. On the
other hand, if the Equity Risk Premium declines further, the Portfolio could
shift to a greater allocation in either cash or bonds. A shift away from
stocks would depend upon future short-term interest rate moves, stock market
valuations and changes in dividend growth expectations.
The fundamental reasons for owning the Portfolio have not changed: greater
stock market participation when the growth potential of stocks outweighs the
potential risks. This approach, market participation with an eye on capital
protection, makes the Portfolio a good long-term equity market investment.
HOW THE PORTFOLIO WORKS
The Portfolio attempts to outperform the S&P 500 Index (the "Index") over the
long term, with less volatility over the course of a full market cycle, 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.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO SEMIANNUAL REPORT
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS* 6/30/00 12/31/99
--------------------------------------------------------------------------------
<S> <C> <C>
Equities 50.0% 76.0%
Cash Equivalents 50.0% 24.0%
Number of Holdings 468 471
P/E Ratio(1) 27.6x 32.1x
Turnover Rate 104% 110%
Equity Risk Premium 4.56% 4.80%
Bond Risk Premium 0.22% 0.52%
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS* 6/30/00 12/31/99
--------------------------------------------------------------------------------
<S> <C> <C> <C>
General Electric 2.1% Microsoft 3.7%
Intel 1.8 General Electric 3.1
Cisco Systems 1.8 Cisco Systems 2.2
Microsoft 1.7 Wal Mart Stores 1.9
Pfizer 1.2 Exxon Mobil 1.7
Exxon Mobil 1.1 Intel 1.7
Oracle Systems 1.0 Lucent Technologies 1.5
Wal Mart Stores 1.0 Citigroup 1.2
Citigroup 0.8 IBM 1.2
Nortel Networks 0.8 America Online 1.0
--------------------------------------------------------------------------------
Total 13.3 Total 19.2
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS* 6/30/00 12/31/99
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology 16.9% Technology 23.7%
Financial Services 8.7 Financial Services 13.4
Consumer Cyclicals 5.6 Consumer Cyclicals 10.2
Healthcare 5.5 Utilities 7.5
Utilities 4.2 Healthcare 6.9
--------------------------------------------------------------------------------
Total 40.9 Total 61.7
</TABLE>
* Percentages of net assets as of the dates indicated. Portfolio weightings
reflect the weightings of the S&P 500 Index and will vary over time. The
Portfolio's asset allocation is actively managed according to the Model and
will vary over time.
(1) Price-to-earnings (P/E) ratio.
3
<PAGE>
SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman and President and
Chief Executive Officer Chief Operating Officer
Mitchell Hutchins Mitchell Hutchins
Asset Management Inc. Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
Portfolio performed during the six-month period ended June 30, 2000, and
reflects our views at the time of its writing. Of course, these views may
change in response to changing circumstances.
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 2000(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--49.95%+
AGRICULTURE, FOOD & BEVERAGE--1.56%
2,800 Archer-Daniels-Midland Co. .................. $ 27,475
1,200 Bestfoods Co. ............................... 83,100
1,900 Campbell Soup Co. ........................... 55,337
11,000 Coca-Cola Co. ............................... 631,812
1,900 Coca-Cola Enterprises, Inc. ................. 30,994
2,200 Conagra, Inc. ............................... 41,938
1,300 General Mills, Inc. ......................... 49,725
1,600 Heinz, H. J. and Co. ........................ 70,000
600 Hershey Foods Corp. ......................... 29,100
1,800 Kellogg Co. ................................. 53,550
6,400 Pepsico, Inc. ............................... 284,400
600 Quaker Oats Co. ............................. 45,075
1,500 RJR Nabisco Group Holdings Corp. ............ 38,906
3,900 Sara Lee Corp. .............................. 75,319
600 Supervalue, Inc. ............................ 11,438
1,500 Sysco Corp. ................................. 63,187
2,500 Unilever N.V. ............................... 107,500
500 Wrigley, Wm. Jr. Co. ........................ 40,094
-----------
1,738,950
-----------
AIRLINES--0.09%
700 AMR Corp.* .................................. 18,506
500 Delta Air Lines, Inc. ....................... 25,281
2,200 Southwest Airlines Co. ...................... 41,663
300 US Airways Group, Inc.* ..................... 11,700
-----------
97,150
-----------
ALCOHOL--0.26%
2,000 Anheuser-Busch Companies, Inc. .............. 149,375
300 Brown Forman Corp., Class B ................. 16,125
200 Coors Adolph Co. ............................ 12,100
1,900 Seagram Company Ltd. ........................ 110,200
-----------
287,800
-----------
APPAREL, RETAIL--0.18%
3,800 Gap, Inc. ................................... 118,750
1,900 Limited, Inc. ............................... 41,088
600 Nordstrom, Inc. ............................. 14,475
1,400 TJX Companies, Inc. ......................... 26,250
-----------
200,563
-----------
APPAREL, TEXTILES--0.06%
300 Liz Claiborne, Inc. ......................... 10,575
1,200 Nike, Inc. .................................. 47,775
600 V. F. Corp. ................................. 14,288
-----------
72,638
-----------
BANKS--2.97%
1,800 AmSouth Bancorporation ...................... 28,350
3,300 Bank of New York Company Inc. ............... 153,450
5,100 Bank One Corp. .............................. 135,469
7,300 BankAmerica Corp. ........................... 313,900
1,600 BB & T Corp. ................................ 38,200
1,000 Charter One Financial Inc. .................. 23,000
5,500 Chase Manhattan Corp. ....................... 253,344
15,000 Citigroup, Inc. ............................. 903,750
700 Comerica, Inc. .............................. 31,412
1,400 Fifth Third Bancorp ......................... 88,550
4,400 First Union Corp. ........................... 109,175
4,300 Firstar Corp. ............................... 90,569
4,000 FleetBoston Financial Corp. ................. 136,000
1,000 Huntington Bancshares, Inc. ................. 15,813
700 J.P. Morgan & Company, Inc. ................. 77,087
2,000 KeyCorp. .................................... 35,250
2,200 Mellon Financial Corp. ...................... 80,162
2,700 National City Corp. ......................... 46,069
1,000 Northern Trust Corp. ........................ 65,062
630 Old Kent Financial Corp. .................... 16,853
1,300 PNC Bank Corp. .............................. 60,937
1,000 Regions Financial Corp. ..................... 19,875
800 SouthTrust Corp. ............................ 18,100
700 State Street Corp. .......................... 74,244
800 Summit Bancorp, Inc. ........................ 19,700
1,300 Suntrust Banks, Inc. ........................ 59,394
1,300 Synovus Financial Corp. ..................... 22,912
600 Union Planters Corp. ........................ 16,763
3,300 US Bancorp, Inc. ............................ 63,525
900 Wachovia Corp. .............................. 48,825
7,100 Wells Fargo and Co. ......................... 275,125
-----------
3,320,865
-----------
CHEMICALS--1.07%
1,000 Air Products & Chemicals, Inc. .............. 30,813
400 Ashland, Inc. ............................... 14,025
500 Avery Dennison Corp. ........................ 33,562
3,000 Dow Chemical Co. ............................ 90,562
4,700 DuPont (E.I.) de Nemours & Co. .............. 205,625
400 Eastman Chemical Co. ........................ 19,100
600 Ecolab, Inc. ................................ 23,438
600 Engelhard Corp. ............................. 10,238
200 FMC Corp.* .................................. 11,600
700 Goodyear Tire & Rubber Co. .................. 14,000
300 Great Lakes Chemical Corp. .................. 9,450
500 Hercules, Inc. .............................. 7,031
1,400 Illinois Tool Works, Inc. ................... 79,800
400 Kerr-McGee Corp. ............................ 23,575
1,800 Minnesota Mining &
Manufacturing Co. ......................... 148,500
5,600 Pharmacia Corp. ............................. 289,450
800 PPG Industries, Inc. ........................ 35,450
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONTINUED)
CHEMICALS--(CONCLUDED)
700 Praxair, Inc. ............................... $ 26,206
1,000 Rohm & Haas Co. ............................. 34,500
400 Sealed Air Corp.* ........................... 20,950
800 Sherwin-Williams Co. ........................ 16,950
600 Union Carbide Corp. ......................... 29,700
500 Vulcan Materials Co. ........................ 21,344
-----------
1,195,869
-----------
COMPUTER HARDWARE--4.89%
1,600 3Com Corp.* ................................. 92,200
500 Adaptec Inc.* ............................... 11,375
1,500 Apple Computer, Inc.* ....................... 78,563
1,000 Broadcom Corp. .............................. 218,813
800 Cabletron Systems, Inc.* .................... 20,200
30,900 Cisco Systems Inc.* ......................... 1,964,081
7,600 Compaq Computer Corp. ....................... 194,275
11,400 Dell Computer Corp.* ........................ 562,162
9,600 EMC Corp.* .................................. 738,600
1,400 Gateway, Inc.* .............................. 79,450
4,400 Hewlett-Packard Co. ......................... 549,450
600 Lexmark International Group, Inc.* .......... 40,350
1,400 Network Appliance, Inc.* .................... 112,700
1,200 Pitney Bowes, Inc. .......................... 48,000
1,000 Seagate Technology, Inc.* ................... 55,000
7,000 Sun Microsystems, Inc.* ..................... 636,562
3,000 Xerox Corp. ................................. 62,250
-----------
5,464,031
-----------
COMPUTER SOFTWARE--4.11%
500 Adobe Systems, Inc. ......................... 65,000
300 Autodesk, Inc. .............................. 10,406
1,100 BMC Software, Inc.* ......................... 40,133
800 Citrix Systems, Inc.* ....................... 15,150
2,600 Computer Associates
International, Inc. ....................... 133,087
1,600 Compuware Corp.* ............................ 16,600
7,900 International Business
Machines Corp. ............................ 865,544
400 Mercury Interactive Corp.* .................. 38,708
23,400 Microsoft Corp.* ............................ 1,872,000
400 NCR Corp.* .................................. 15,575
1,500 Novell, Inc.* ............................... 13,875
12,600 Oracle Systems Corp.* ....................... 1,059,187
1,200 Parametric Technology Corp.* ................ 13,200
1,200 Peoplesoft, Inc.* ........................... 20,100
600 Sabre Holdings Corp.* ....................... 17,100
300 Sapient Corp.* .............................. 32,081
900 Siebel Systems Inc.* ........................ 147,206
1,400 Unisys Corp.* ............................... 20,388
1,700 Veritas Software Co.* ....................... 192,127
-----------
4,587,467
-----------
CONSTRUCTION--0.05%
300 Centex Corp. ................................ 7,050
400 Fluor Corp. ................................. 12,650
2,100 Masco Corp. ................................. 37,931
-----------
57,631
-----------
CONSUMER DURABLES--0.06%
400 Black & Decker Corp. ........................ 15,725
400 Grainger, W.W., Inc. ........................ 12,325
900 Leggett & Platt, Inc. ....................... 14,850
400 Maytag Corp. ................................ 14,750
300 Whirlpool Corp. ............................. 13,988
-----------
71,638
-----------
DEFENSE & AEROSPACE--0.32%
4,000 Boeing Co. .................................. 167,250
900 General Dynamics Corp. ...................... 47,025
500 Goodrich, B.F., Co. ......................... 17,031
1,800 Lockheed Martin Corp. ....................... 44,663
300 Northrop Grumman Corp. ...................... 19,875
1,600 Raytheon Co., Class B ....................... 30,800
600 TRW, Inc. ................................... 26,025
-----------
352,669
-----------
DIVERSIFIED RETAIL--1.40%
2,000 Costco Wholesale Corp.* ..................... 66,000
1,000 Federated Department Stores, Inc.* .......... 33,750
1,200 J.C. Penney, Inc. ........................... 22,125
2,300 K Mart Corp.* ............................... 15,669
1,500 Kohls Corp.* ................................ 83,437
1,500 May Department Stores Co. ................... 36,000
1,600 Sears Roebuck & Co. ......................... 52,200
2,000 Target Corp. ................................ 116,000
19,800 Wal Mart Stores, Inc. ....................... 1,140,975
-----------
1,566,156
-----------
DRUGS & MEDICINE--3.97%
600 Allergan, Inc. .............................. 44,700
5,800 American Home Products Corp. ................ 340,750
4,600 Amgen, Inc.* ................................ 323,150
700 Biogen Inc.* ................................ 45,150
8,800 Bristol-Myers Squibb Co. .................... 512,600
1,200 Cardinal Health, Inc. ....................... 88,800
5,000 Lilly, Eli & Co. ............................ 499,375
1,300 McKesson HBOC, Inc. ......................... 27,219
900 Medimmune Inc. .............................. 66,600
10,200 Merck & Co., Inc. ........................... 781,575
28,000 Pfizer, Inc. ................................ 1,344,000
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONTINUED)
DRUGS & MEDICINE--(CONCLUDED)
6,500 Schering-Plough Corp. ....................... $ 328,250
400 Sigma-Aldrich Corp. ......................... 11,700
400 Watson Pharmaceuticals, Inc.* ............... 21,500
-----------
4,435,369
-----------
ELECTRIC UTILITIES--0.79%
1,900 AES Corp.* .................................. 86,687
600 Ameren Corp. ................................ 20,250
1,400 American Electric Power, Inc. ............... 41,475
700 Cinergy Corp. ............................... 17,806
500 CMS Energy Corp. ............................ 11,063
900 Consolidated Edison, Inc. ................... 26,663
700 Constellation Energy Group, Inc. ............ 22,794
700 CP & L Energy, Inc. ......................... 22,356
700 DTE Energy Co. .............................. 21,394
1,600 Duke Energy Corp. ........................... 90,200
1,500 Edison International, Inc. .................. 30,750
1,000 Entergy Corp. ............................... 27,187
1,100 FirstEnergy Corp. ........................... 25,713
400 Florida Progress Corp. ...................... 18,750
800 FPL Group, Inc. ............................. 39,600
600 GPU Inc.. ................................... 16,238
500 New Century Energies Inc. ................... 15,000
800 Niagara Mohawk Holdings, Inc.* .............. 11,150
700 Northern States Power Co. ................... 14,131
700 PECO Energy Co. ............................. 28,219
1,700 PG&E Corp. .................................. 41,862
400 Pinnacle West Capital Corp. ................. 13,550
700 PPL Corp. ................................... 15,356
1,000 Public Service Enterprise Group, Inc. ....... 34,625
1,300 Reliant Energy, Inc. ........................ 38,431
900 Sempra Energy ............................... 15,300
2,900 Southern Co. ................................ 67,606
1,200 Texas Utilities Co. ......................... 35,400
800 Unicom Corp. ................................ 30,950
-----------
880,506
-----------
ELECTRICAL EQUIPMENT--3.36%
1,500 ADC Telecommunications Inc.* ................ 125,812
2,000 Agilent Technologies, Inc. .................. 147,500
400 Andrew Corp.* ............................... 13,425
700 Comverse Technology, Inc.* .................. 65,100
1,200 Corning, Inc. ............................... 323,850
600 Danaher Corp. ............................... 29,663
900 Dover Corp. ................................. 36,506
300 Eaton Corp. ................................. 20,100
3,500 Honeywell, Inc. ............................. 117,906
400 Johnson Controls, Inc. ...................... 20,525
800 KLA-Tencor Corp. * .......................... 46,850
14,500 Lucent Technologies, Inc. ................... 859,125
200 Millipore Corp. ............................. 15,075
900 Molex Inc. .................................. 43,313
9,600 Motorola, Inc. .............................. 279,000
13,400 Nortel Networks Corp (1) .................... 914,550
900 PE Corp. .................................... 59,288
3,300 Qualcomm, Inc.* ............................. 198,000
700 Sanmina Corp.* .............................. 59,850
700 Scientific-Atlanta, Inc. .................... 52,150
2,700 Solectron Corp.* ............................ 113,062
200 Tektronix, Inc. ............................. 14,800
1,800 Tellabs, Inc.* .............................. 123,187
800 Teradyne, Inc.* ............................. 58,800
700 Thermo Electron Corp.* ...................... 14,744
-----------
3,752,181
-----------
ELECTRICAL POWER--0.17%
900 American Power Conversion Corp.* ............ 36,731
500 Cooper Industries, Inc. ..................... 16,281
1,900 Emerson Electric Co. ........................ 114,713
900 Rockwell International Corp. ................ 28,350
-----------
196,075
-----------
ENERGY RESERVES & PRODUCTION--2.09%
400 Amerada Hess Corp. .......................... 24,700
600 Anadarko Petroleum Corp. .................... 29,588
500 Apache Corp. ................................ 29,406
1,000 Burlington Resources, Inc. .................. 38,250
2,900 Chevron Corp. ............................... 245,956
15,400 Exxon Mobil Corp. ........................... 1,208,900
1,700 Occidental Petroleum Corp. .................. 35,806
1,100 Phillips Petroleum Co. ...................... 55,756
9,500 Royal Dutch Petroleum Co., ADR .............. 584,844
700 Tosco Corp. ................................. 19,819
1,100 Union Pacific Resources Group, Inc. ......... 24,200
1,100 Unocal Corp. ................................ 36,437
-----------
2,333,662
-----------
ENTERTAINMENT--0.46%
2,700 Carnival Corp. .............................. 52,650
6,800 Viacom, Inc., Class B* ...................... 463,675
-----------
516,325
-----------
ENVIRONMENTAL SERVICES--0.06%
900 Allied Waste Industries Inc.* ............... 9,000
2,800 Waste Management, Inc. ...................... 53,200
-----------
62,200
-----------
FINANCIAL SERVICES--3.26%
5,900 American Express Co. ........................ 307,537
1,100 AON Corp. ................................... 34,169
3,200 Associates First Capital Corp. .............. 71,400
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONTINUED)
FINANCIAL SERVICES--(CONCLUDED)
900 Capital One Financial Corp. ................. $ 40,163
3,200 Cendant Corp.* .............................. 44,800
700 Convergys Corp. ............................. 36,313
500 Countrywide Credit Industries, Inc. ......... 15,156
3,100 Federal Home Loan Mortgage Corp. ............ 125,550
4,500 Federal National Mortgage
Association ............................... 234,844
43,900 General Electric Co. ........................ 2,326,700
400 H&R Block, Inc. ............................. 12,950
2,100 Household International, Inc. ............... 87,281
1,200 Marsh & McLennan Companies, Inc. ............ 125,325
3,600 MBNA Corp. .................................. 97,650
600 Providian Financial Corp. ................... 54,000
700 SLM Holding Corp. ........................... 26,206
-----------
3,640,044
-----------
FOOD RETAIL--0.23%
1,900 Albertson's, Inc. ........................... 63,175
3,700 Kroger Co.* ................................. 81,631
2,200 Safeway, Inc.* .............................. 99,275
700 Winn Dixie Stores, Inc. ..................... 10,019
-----------
254,100
-----------
FOREST PRODUCTS, PAPER--0.33%
300 Bemis, Inc. ................................. 10,088
300 Boise Cascade Corp. ......................... 7,763
900 Fort James Corp. ............................ 20,813
800 Georgia-Pacific Corp. ....................... 21,000
2,200 International Paper Co. ..................... 65,587
2,500 Kimberly Clark Corp. ........................ 143,437
500 Mead Corp. .................................. 12,625
300 Temple-Inland, Inc. ......................... 12,600
500 Westvaco Corp. .............................. 12,406
1,100 Weyerhaeuser Co. ............................ 47,300
500 Willamette Industries, Inc. ................. 13,625
-----------
367,244
-----------
FREIGHT, AIR, SEA & LAND--0.04%
1,300 FedEx Corp.* ................................ 49,400
-----------
GAS UTILITY--0.08%
400 Columbia Energy Group ....................... 26,250
100 Eastern Enterprises ......................... 6,300
1,000 El Paso Energy Corp. ........................ 50,938
200 NICOR, Inc. ................................. 6,525
-----------
90,013
-----------
HEAVY MACHINERY--0.04%
1,100 Deere & Co. ................................. 40,700
-----------
HOTELS--0.06%
600 Harrah's Entertainment, Inc.* ............... 12,563
1,700 Hilton Hotels Corp. ......................... 15,937
1,100 Marriott International, Inc. ................ 39,669
-----------
68,169
-----------
HOUSEHOLD PRODUCTS--0.76%
300 Alberto Culver Co. .......................... 9,169
1,100 Avon Products, Inc. ......................... 48,950
1,100 Clorox Co. .................................. 49,294
2,600 Colgate-Palmolive Co. ....................... 155,675
700 Fortune Brands, Inc. ........................ 16,144
4,600 Gillette Co. ................................ 160,712
500 International Flavors and Fragrances ........ 15,094
1,200 Newell Rubbermaid, Inc. ..................... 30,900
5,800 Procter & Gamble Co. ........................ 332,050
1,400 Ralston Purina Co. .......................... 27,912
-----------
845,900
-----------
INDUSTRIAL PARTS--0.29%
1,600 Caterpillar, Inc. ........................... 54,200
300 Crane Co. ................................... 7,294
900 Genuine Parts Co. ........................... 18,000
700 Ingersoll Rand Co. .......................... 28,175
400 ITT Industries, Inc. ........................ 12,150
600 Pall Corp. .................................. 11,100
500 Parker-Hannifin Corp. ....................... 17,125
300 Snap-On, Inc. ............................... 7,988
400 Stanley Works ............................... 9,500
700 Textron, Inc. ............................... 38,019
2,100 United Technologies Corp. ................... 123,637
-----------
327,188
-----------
INFORMATION & COMPUTER SERVICES--1.35%
10,200 America Online Inc.* ........................ 538,050
2,800 Automatic Data Processing, Inc. ............. 149,975
700 Ceridian Corp.* ............................. 16,844
700 Computer Sciences Corp.* .................... 52,281
700 Dun & Bradstreet Corp. ...................... 20,037
2,100 Electronic Data Systems Corp. ............... 86,625
600 Equifax, Inc ................................ 15,750
1,800 First Data Corp. ............................ 89,325
1,300 IMS Health, Inc. ............................ 23,400
1,300 Interpublic Group Companies, Inc. ........... 55,900
800 Omnicom Group, Inc. ......................... 71,250
1,600 Paychex, Inc. ............................... 67,200
500 Quintiles Transnational Corp.* .............. 7,063
2,400 Yahoo, Inc.* ................................ 297,300
300 Young & Rubicam Inc.* ....................... 17,156
-----------
1,508,156
-----------
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONTINUED)
LEISURE--0.20%
500 Brunswick Corp. ............................. $ 8,281
1,000 Dominion Resources Inc. ..................... 42,875
1,400 Eastman Kodak Co. ........................... 83,300
1,400 Harley Davidson Inc. ........................ 53,900
800 Hasbro, Inc. ................................ 12,050
1,900 Mattel, Inc. ................................ 25,057
-----------
225,463
-----------
LIFE INSURANCE--0.28%
600 Aetna Life & Casualty Co. ................... 38,512
1,200 AFLAC, Inc. ................................. 55,125
1,100 American General Corp. ...................... 67,100
700 CIGNA Corp. ................................. 65,450
1,500 Conseco, Inc. ............................... 14,625
900 Lincoln National Corp. ...................... 32,512
600 Torchmark, Inc. ............................. 14,813
1,100 UNUM Provident Corp. ........................ 22,069
-----------
310,206
-----------
LONG DISTANCE & PHONE COMPANIES--2.91%
16,700 AT&T Corp. .................................. 528,137
6,900 Bell Atlantic Corp. ......................... 350,606
8,300 BellSouth Corp. ............................. 353,788
600 CenturyTel, Inc. ............................ 17,250
3,900 Global Crossing Ltd.* ....................... 102,619
4,300 GTE Corp. ................................... 267,675
12,700 MCI Worldcom Inc.* .......................... 582,612
15,100 SBC Communications, Inc. .................... 653,075
3,900 Sprint Corp. ................................ 198,900
2,300 U.S. West, Inc. ............................. 197,225
-----------
3,251,887
-----------
MEDIA--1.01%
1,500 Clear Channel Communications* ............... 112,500
4,000 Comcast Corp., Class A* ..................... 162,000
9,200 Disney, Walt Co. ............................ 357,075
200 Meredith Corp. .............................. 6,750
5,800 Time Warner, Inc. ........................... 440,800
1,400 Tribune Co. ................................. 49,000
-----------
1,128,125
-----------
MEDICAL PRODUCTS--1.70%
6,900 Abbott Laboratories ......................... 307,481
500 Alza Corp.* ................................. 29,563
200 Bard, C.R., Inc. ............................ 9,625
200 Bausch & Lomb, Inc. ......................... 15,475
1,300 Baxter International, Inc. .................. 91,406
1,100 Becton, Dickinson & Co. ..................... 31,556
500 Biomet, Inc. ................................ 19,219
1,800 Boston Scientific Corp.* .................... 39,488
1,400 Guidant Corp.* .............................. 69,300
6,200 Johnson & Johnson ........................... 631,625
300 Mallinckrodt Group, Inc. .................... 13,031
5,300 Medtronic, Inc. ............................. 264,006
400 St. Jude Medical, Inc.* ..................... 18,350
7,500 Tyco International, Ltd. .................... 355,312
-----------
1,895,437
-----------
MEDICAL PROVIDERS--0.19%
2,500 Columbia/HCA Healthcare Corp ................ 75,937
1,800 HEALTHSOUTH Corp.* .......................... 12,938
1,400 Tenet Healthcare Corp.* ..................... 37,800
700 United Healthcare Corp. ..................... 60,025
300 Wellpoint Health Networks, Inc.* ............ 21,731
-----------
208,431
-----------
MINING & METALS--0.20%
1,000 Alcan Aluminum, Ltd. ........................ 31,000
3,900 Alcoa, Inc. ................................. 113,100
400 Allegheny Technologies, Inc. ................ 7,200
700 Crown Cork & Seal, Inc. ..................... 10,500
900 Inco Ltd.* .................................. 13,838
400 Nucor Corp. ................................. 13,275
700 Owens Illinois, Inc.* ....................... 8,181
400 Phelps Dodge Corp.* ......................... 14,875
500 USX-U.S. Steel Group, Inc. .................. 9,281
-----------
221,250
-----------
MOTOR VEHICLES--0.41%
700 DANA Corp. .................................. 14,831
2,600 Delphi Automotive Systems Corp. ............. 37,863
5,400 Ford Motor Co. .............................. 232,200
2,400 General Motors Corp. ........................ 139,350
300 Navistar International Corp.* ............... 9,319
400 PACCAR, Inc. ................................ 15,875
607 Visteon Corp. ............................... 7,360
-----------
456,798
-----------
OIL REFINING--0.54%
1,000 Coastal Corp. ............................... 60,875
2,800 Conoco, Inc. ................................ 68,775
3,200 Enron Corp. ................................. 206,400
400 Sunoco, Inc. ................................ 11,775
2,500 Texaco, Inc. ................................ 133,125
1,400 USX-Marathon Group .......................... 35,087
2,000 Williams Companies, Inc. .................... 83,375
-----------
599,412
-----------
9
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONTINUED)
OIL SERVICES--0.35%
1,500 Baker Hughes, Inc. .......................... $ 48,000
2,000 Halliburton Co. ............................. 94,375
400 Rowan Companies, Inc.* ...................... 12,150
2,500 Schlumberger, Ltd. .......................... 186,562
900 Transocean Sedco Forex, Inc. ................ 48,094
-----------
389,181
-----------
OTHER INSURANCE--1.05%
3,300 Allstate Corp. .............................. 73,425
6,800 American International Group, Inc. .......... 799,000
800 Chubb Corp. ................................. 49,200
700 Cincinnati Financial Corp. .................. 22,006
1,000 Hartford Financial Services Group, Inc. ..... 55,937
500 Jefferson-Pilot Corp. ....................... 28,219
500 Loews Corp. ................................. 30,000
400 MBIA, Inc. .................................. 19,275
500 MGIC Investment Corp. ....................... 22,750
300 Progressive Corp. ........................... 22,200
600 SAFECO Corp. ................................ 11,925
1,000 St. Paul Companies, Inc. .................... 34,125
-----------
1,168,062
-----------
PRECIOUS METALS--0.07%
1,800 Barrick Gold Corp. .......................... 32,738
1,400 Homestake Mining Co. ........................ 9,625
800 Newmont Mining Corp. ........................ 17,300
1,600 Placer Dome, Inc. ........................... 15,300
-----------
74,963
-----------
PUBLISHING--0.22%
400 Deluxe Corp. ................................ 9,425
600 Donnelley, R.R. & Sons Co. .................. 13,538
400 Dow Jones & Co., Inc. ....................... 29,300
1,200 Gannett, Inc. ............................... 71,775
300 Harcourt General, Inc. ...................... 16,312
400 Knight Ridder, Inc. ......................... 21,275
900 McGraw-Hill Companies, Inc. ................. 48,600
800 New York Times Co., Class A ................. 31,600
-----------
241,825
-----------
RAILROADS--0.16%
1,900 Burlington Northern Santa Fe, Inc. .......... 43,581
1,000 CSX Corp. ................................... 21,188
500 Kansas City Southern Industries, Inc. ....... 44,344
1,700 Norfolk Southern Corp. ...................... 25,287
1,100 Union Pacific Corp. ......................... 40,906
-----------
175,306
-----------
RESTAURANTS--0.24%
600 Darden Restaurants, Inc. .................... 9,750
5,900 McDonalds Corp. ............................. 194,332
800 Starbucks Corp.* ............................ 30,550
700 Tricon Global Restaurants, Inc.* ............ 19,775
500 Wendy's International, Inc. ................. 8,906
-----------
263,313
-----------
SECURITIES & ASSET MANAGEMENT--0.86%
600 Bear Stearns Company, Inc. .................. 24,975
6,100 Charles Schwab Corp. ........................ 205,112
1,100 Franklin Resources, Inc. .................... 33,413
600 Lehman Brothers Holdings, Inc. .............. 56,737
1,700 Merrill Lynch & Co., Inc. ................... 195,500
5,100 Morgan Stanley Dean Witter & Co. ............ 424,575
600 T. Rowe Price & Associates, Inc. ............ 25,500
-----------
965,812
-----------
SEMICONDUCTOR--3.42%
700 Advanced Micro Devices, Inc.* ............... 54,075
900 Altera Corp.* ............................... 91,744
1,600 Analog Devices, Inc.* ....................... 121,600
3,600 Applied Materials, Inc.* .................... 326,250
1,000 Conexant Systems, Inc.* ..................... 48,625
14,900 Intel Corp. ................................. 1,991,944
1,400 Linear Technology Corp. ..................... 89,512
1,400 LSI Logic Corp.* ............................ 75,775
1,300 Maxim Integrated Productions Inc.* .......... 88,319
2,500 Micron Technology, Inc.* .................... 220,156
800 National Semiconductor Corp.* ............... 45,400
600 Novellus Systems Inc.* ...................... 33,938
200 Perkinelmer, Inc. ........................... 13,225
7,300 Texas Instruments, Inc. ..................... 501,419
1,400 Xilinx, Inc.* ............................... 115,587
-----------
3,817,569
-----------
SPECIALTY RETAIL--0.96%
600 Autozone, Inc.* ............................. 13,200
600 Bed, Bath & Beyond, Inc.* ................... 21,750
900 Best Buy Company, Inc.* ..................... 56,925
900 Circuit City Stores, Inc. ................... 29,869
1,700 CVS Corp. ................................... 68,000
1,500 Dollar General Corp. ........................ 29,250
10,300 Home Depot, Inc. ............................ 514,356
1,700 Lowe's Companies, Inc. ...................... 69,806
1,500 Office Depot, Inc.* ......................... 9,375
800 Radioshack Corp. ............................ 37,900
1,200 Rite Aid Corp. .............................. 7,875
2,200 Staples, Inc.* .............................. 33,825
300 Tiffany & Co. ............................... 20,256
1,000 Toys R Us, Inc.* ............................ 14,562
10
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS--(CONCLUDED)
SPECIALTY RETAIL--(CONCLUDED)
4,500 Walgreen Co. ................................ $ 144,844
-----------
1,071,793
-----------
THRIFT--0.09%
700 Golden West Financial Corp. ................. 28,569
2,500 Washington Mutual, Inc. ..................... 72,187
-----------
100,756
-----------
TOBACCO--0.25%
10,200 Philip Morris Companies, Inc. ............... 270,938
800 UST, Inc. ................................... 11,750
-----------
282,688
-----------
WIRELESS TELECOMMUNICATIONS--0.48%
1,400 Alltel Corp. ................................ 86,713
3,400 Nextel Communications, Inc.* ................ 208,037
4,100 Sprint Corp.* ............................... 243,950
-----------
538,700
-----------
Total Common Stocks (cost--$52,774,968) ................ 55,767,636
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Maturity Dates Interest Rates
----------- -------------- --------------
<S> <C> <C> <C>
SHORT-TERM U.S. GOVERNMENT AND AGENCY [email protected]%
$ 1,874 Federal Farm Credit Bank Discount Notes ........................... 07/03/00 6.570% 1,873,316
54,024 U.S. Treasury Bills (1) ........................................... 07/06/00 4.380 53,991,136
------------
Total Short-Term U.S. Government and Agency Obligations (cost--$55,864,452) .. 55,864,452
------------
Total Investments (cost--$108,639,420)--99.99% ............................... 111,632,088
Other assets in excess of liabilities--0.01% ................................. 10,018
------------
Net Assets--100.00% .......................................................... $111,642,106
============
</TABLE>
------------------------------
@ Yield to maturity on discounted securities
* Non-income producing security.
(1) Security, or a portion thereof, was on loan at June 30, 2000.
ADR American Depositary Receipt.
+ The common stock portion of the portfolio is allocated in proportion to
the S&P 500 Index. Since the Fund has allocated only 50% of the portfolio
to common stocks, it represents half the weighting of the S&P 500 Index.
See accompanying notes to financial statements.
11
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$108,639,420) .......................................... $111,632,088
Investments of cash collateral received for securities loaned, at value (cost--$26,169,250) ....... 26,169,250
Cash .............................................................................................. 1,933
Receivable for investments sold ................................................................... 445,407
Dividends and interest receivable ................................................................. 58,968
Other assets ...................................................................................... 1,567
------------
Total assets ...................................................................................... 138,309,213
------------
LIABILITIES
Payable for cash collateral for securities loaned ................................................. 26,169,250
Payable for investments purchased ................................................................. 365,782
Payable to affiliates ............................................................................. 102,374
Accrued expenses and other liabilities ............................................................ 29,701
------------
Total liabilities ................................................................................. 26,667,107
------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized) ............................... 106,700,166
Undistributed net investment income ............................................................... 1,299,317
Accumulated net realized gains from investment transactions ....................................... 649,955
Net unrealized appreciation of investments ........................................................ 2,992,668
------------
Net assets ........................................................................................ $111,642,106
============
CLASS H:
Net assets ........................................................................................ $ 38,514,954
------------
Shares outstanding ................................................................................ 2,372,005
------------
Net asset value, offering price and redemption value per share .................................... $16.24
======
CLASS I:
Net assets ........................................................................................ $ 73,127,152
------------
Shares outstanding ................................................................................ 4,510,805
------------
Net asset value, offering price and redemption value per share .................................... $16.21
======
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--TACTICAL ALLOCATION PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,550) ............... $ 286,898
Interest ............................................................. 1,432,077
-----------
1,718,975
-----------
EXPENSES:
Investment advisory and administration ............................... 253,965
Distribution fees--Class I ........................................... 79,485
Legal and audit ...................................................... 34,085
Custody and accounting ............................................... 31,706
Reports and notices to shareholders .................................. 29,682
Trustees' fees ....................................................... 3,750
Transfer agency fees and related service expenses .................... 3,889
Other expenses ....................................................... 10,387
-----------
446,949
Less: Fee waiver from adviser ........................................ (27,693)
-----------
Net expenses ......................................................... 419,256
-----------
Net investment income ................................................ 1,299,719
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions ...................... 2,282,594
Net change in unrealized appreciation/depreciation of investments .... (2,774,790)
-----------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES ........ (492,196)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. $ 807,523
===========
</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 SIX
MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .................................................... $ 1,299,719 $ 332,626
Net realized gains from investment transactions .......................... 2,282,594 6,095,928
Net change in unrealized appreciation/depreciation of investments ........ (2,774,790) 2,759,506
------------ -----------
Net increase in net assets resulting from operations ..................... 807,523 9,188,060
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class H ........................................... (12,379) (121,887)
Net investment income--Class I ........................................... (20,565) (178,197)
Net realized gains from investments--Class H ............................. (799,723) (2,297,887)
Net realized gains from investments--Class I ............................. (1,328,551) (3,350,550)
------------ -----------
Total dividends and distributions to shareholders ........................ (2,161,218) (5,948,521)
------------ -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ..................................... 28,216,884 87,368,412
Cost of shares repurchased ............................................... (8,509,455) (28,070,328)
Proceeds from dividends reinvested ....................................... 2,161,268 6,095,944
------------ -----------
Net increase in net assets from beneficial interest transactions ......... 21,868,697 65,394,028
------------ -----------
Net increase in net assets ............................................... 20,515,002 68,633,567
NET ASSETS:
Beginning of period ...................................................... 91,127,104 22,493,537
------------ -----------
End of period (including undistributed net investment income of
$1,299,317 and $32,542, respectively) ................................. $111,642,106 $91,127,104
============ ===========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--Tactical Allocation Portfolio (the
"Portfolio") is a diversified Portfolio of Mitchell Hutchins Series Trust
(the "Fund"), which is organized under Massachusetts law by a Declaration of
Trust dated November 21, 1986 and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund operates as a series
company currently offering thirteen Portfolios. Shares of the Portfolio are
offered to insurance company separate accounts which fund certain variable
contracts.
Currently, the Portfolio offers Class H and Class I shares. Each class
represents interests in the same assets of the Portfolio, and the classes are
identical except for differences in their distribution charges. Both classes
have equal voting privileges except that Class I has exclusive voting rights
with respect to its distribution plan. Class H has no distribution plan.
The Fund accounts separately for the assets, liabilities and operations
for each Portfolio. Expenses directly attributable to each Portfolio are
charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them on a pro rata basis.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires the Fund's
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting
policies:
VALUATION OF INVESTMENTS--The Portfolio calculates its net asset value
based on the current market value for its portfolio securities. The Portfolio
normally obtains market values for its securities from independent pricing
sources. Independent pricing sources may use reported last sale prices,
current market quotations or valuations from computerized "matrix" systems
that derive values based on comparable securities. Securities traded in the
over-the-counter ("OTC") market and listed on The Nasdaq Stock Market, Inc.
("Nasdaq") normally are valued at the last sale price on Nasdaq prior to
valuation. Other OTC securities are valued at the last bid price available
prior to valuation. Securities which are listed on U.S. and foreign stock
exchanges normally are valued at the last sale price on the day the
securities are valued or, lacking any sales on such day, at the last
available bid price. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), a wholly owned subsidiary of Paine Webber Group Inc. ("PW
Group"), and investment adviser and administrator of the Portfolio. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in
good faith by or under the direction of the Fund's board of trustees (the
"board"). The amortized cost method of valuation, which approximates market
value, generally is used to value short-term debt-instruments with sixty days
or less remaining to maturity, unless the board determines that this does not
represent fair value.
REPURCHASE AGREEMENTS--The Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the
value, including accrued interest, is at least equal to the repurchase price.
In the event of default of the obligation to repurchase, the Portfolio has
the right to liquidate the collateral and apply the proceeds in satisfaction
of the
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral may be subject to legal proceedings. The Portfolio may
participate in joint repurchase agreement transactions with other funds
managed by Mitchell Hutchins.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions
are recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost basis. Dividend income
is recorded on the ex-dividend date ("ex-date"). Interest income is recorded
on an accrual basis. Premiums are amortized and discounts are accreted as
adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class
of shares based upon the relative net asset value of outstanding shares (or
the value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of
the respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders
are recorded on the ex-date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The board has approved an investment advisory and administration contract
with Mitchell Hutchins, under which Mitchell Hutchins serves as investment
adviser and administrator of the Portfolio. In accordance with the Advisory
Contract, the Portfolio pays Mitchell Hutchins an investment advisory and
administration fee, which is computed daily and payable monthly, at an annual
rate of 0.50% of the Portfolio's average daily net assets. At June 30, 2000,
the Portfolio owed Mitchell Hutchins $45,338 in investment advisory and
administration fees. Mitchell Hutchins waived a portion of its investment
advisory and administration fees in connection with the Portfolio's
investment of cash collateral from securities lending transactions in the
Mitchell Hutchins Private Money Market Fund LLC. For the six months ended
June 30, 2000, Mitchell Hutchins waived $4,238.
For the six months ended June 30, 2000, the Fund paid no brokerage
commissions to PaineWebber for transactions executed on behalf of the Fund.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to
complete the transaction in the fourth quarter of 2000. UBS, with
headquarters in Zurich, Switzerland, is an internationally diversified
organization with operations in many areas of the financial services industry.
DISTRIBUTION PLAN
Class I shares are offered to insurance company separate accounts where
the related insurance companies receive payments for their services in
connection with the distribution of the Portfolio's Class I shares. Under the
plan of distribution, the Portfolio pays Mitchell Hutchins a monthly
distribution fee at the annual rate of 0.25% of the average daily net assets
of Class I shares. Mitchell Hutchins pays the entire distribution fee to the
insurance companies. For the period January 1, 2000 to February 29, 2000,
Mitchell Hutchins voluntarily agreed to waive $23,455 of the distribution
fees on Class I Shares. At June 30, 2000, the Portfolio owed Mitchell
Hutchins $56,030 in distribution fees.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 six months ended June 30, 2000, the
Portfolio earned $31,212 for lending its securities and PaineWebber earned
$10,856 in compensation as the Portfolio's lending agent. At June 30, 2000,
the Portfolio owed PaineWebber $1,006 in compensation.
As of June 30, 2000, the Portfolio held cash and/or cash equivalents
having an aggregate value of $26,169,250 as collateral for portfolio
securities loaned having a market value of $25,728,725. The cash collateral
was invested in the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -------------
<C> <S> <C>
4,921,650 AIM Liquid Assets Portfolio ................................................... $ 4,921,650
1,613,442 AIM Prime Portfolio ........................................................... 1,613,442
19,634,158 Mitchell Hutchins Private Money Market Fund LLC ............................... 19,634,158
-------------
Total investments of cash collateral received for securities loaned (cost--$26,169,250) ... $26,169,250
=============
</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 six months ended
June 30, 2000, the Portfolio did not borrow under the Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at June 30,
2000, was substantially the same as the cost of securities for financial
statement purposes.
At June 30, 2000, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) .. $ 7,229,690
Gross depreciation (investments having an excess of cost over value) .. (4,237,022)
-----------
Net unrealized appreciation of investments ............................ $ 2,992,668
===========
</TABLE>
For the six months ended June 30, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $62,503,270 and
$75,455,834, respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 FOR THE FOR THE JANUARY 5, 1999++
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 JUNE 30, 2000 DECEMBER 31, 1999
------------------------ -------------------------- ------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ------------ ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............... 363,870 $ 5,881,876 2,060,203 $ 33,179,597 1,383,334 $22,335,008 3,333,610 $54,188,815
Shares repurchased........ (268,675) (4,335,867) (1,499,667) (24,078,224) (258,690) (4,173,588) (245,923) (3,992,104)
Reinvestment of dividends. 50,347 812,152 157,007 2,567,197 83,692 1,349,116 214,782 3,528,747
---------- ------------ ------------ ------------- ----------- ------------- ----------- -------------
Net increase.............. 145,542 $ 2,358,161 717,543 $ 11,668,570 1,208,336 $19,510,536 3,302,469 $53,725,458
========== ============ ============ ============= =========== ============= =========== =============
</TABLE>
---------------------
++ 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 SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE SEPTEMBER 28, 1998+ MONTHS ENDED JANUARY 5, 1999++
JUNE 30, 2000 YEAR ENDED THROUGH JUNE 30, 2000 THROUGH
(UNAUDITED) DECEMBER 31, 1999 DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1999
------------- ----------------- ------------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 16.49 $ 14.91 $ 12.00 $ 16.48 $ 14.89
------- ------- ------- ------- -------
Net investment income ........................ 0.21@ 0.11@ 0.02 0.20@ 0.11@
Net realized and unrealized gains (losses)
from investments ........................... (0.11)@ 2.64@ 2.99 (0.12)@ 2.65@
------- ------- ------- ------- -------
Net increase from investment operations ...... 0.10 2.75 3.01 0.08 2.76
------- ------- ------- ------- -------
Dividends from net investment income ......... (0.01) (0.06) (0.02) (0.01) (0.06)
Distributions from net realized gains
from investments ............................ (0.34) (1.11) (0.08) (0.34) (1.11)
------- ------- ------- ------- -------
Total dividends and distributions to
shareholders ................................ (0.35) (1.17) (0.10) (0.35) (1.17)
------- ------- ------- ------- -------
Net asset value, end of period ............... $ 16.24 $ 16.49 $ 14.91 $ 16.21 $ 16.48
======= ======= ======= ======= =======
Total investment return(1) ................... 0.61% 18.43% 24.98% 0.48% 18.52%
======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) ............ $38,515 $36,714 $22,494 $73,127 $54,413
Expenses to average net assets,
before waiver from adviser ................. 0.72%* 0.74% 0.95%* 0.97%* 0.99%*
Expenses to average net assets,
after waiver from adviser .................. 0.71%* 0.74% 0.95%* 0.89%* 0.74%*
Net investment income to average net assets,
before waiver from adviser ................. 2.66%* 0.71% 0.77%* 2.41%* 0.56%*
Net investment income to average net assets,
after waiver from adviser .................. 2.67%* 0.71% 0.77%* 2.49%* 0.81%*
Portfolio turnover rate ...................... 104% 110% 6% 104% 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>
---------------------------------------
SEMIANNUAL REPORT
MITCHELL HUTCHINS SERIES
TRUST
TACTICAL
ALLOCATION
PORTFOLIO
-C-2000 PaineWebber Incorporated JUNE 30, 2000
All rights reserved.
Member SIPC
