MITCHELL HUTCHINS SERIES TRUST
GLOBAL GROWTH PORTFOLIO
The fund offers its Class H and Class I shares only to insurance company
separate accounts that fund certain variable annuity and variable life insurance
contracts. This prospectus should be read together with the prospectus for those
contracts.
PROSPECTUS
May 1, 1999
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AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS
IS COMPLETE OR ACCURATE. TO STATE OTHERWISE IS A CRIME.
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Mitchell Hutchins Global Growth Portfolio
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CONTENTS
GLOBAL GROWTH PORTFOLIO
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What every investor 3 Global Growth Portfolio
should know about 5 More About Risks and Investment Strategies
the fund
INVESTING IN THE FUND
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Information for 7 Purchases, Redemptions and Exchanges
managing your fund 7 Pricing and Valuation
account
ADDITIONAL INFORMATION
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Additional important 8 Management
information about 9 Dividends and Taxes
the fund 10 Financial Highlights
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Where to learn more Back Cover
about this fund
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The fund is not a complete or balanced
investment program.
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Mitchell Hutchins Global Growth Portfolio
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GLOBAL GROWTH PORTFOLIO
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE:
Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of companies in the United States and in
foreign countries that are represented in the MSCI Europe, Australia and Far
East Index. The EAFE Index reflects stocks in most developed countries outside
North America. The fund also invests, to a lesser extent, in stocks of issuers
in other countries, including emerging markets, and in U.S. and foreign bonds.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc.,
allocates the fund's assets between U.S. and foreign markets based on how it
expects U.S. stock markets to perform in comparison to stock markets in certain
of the EAFE countries. Mitchell Hutchins may increase the allocation of the
fund's assets to either the U.S. or foreign markets if it believes that one of
those markets has a greater potential for high returns, relative to the risk of
loss. Mitchell Hutchins may use futures and forward currency contracts to adjust
the fund's exposure to either the U.S. or foreign markets.
Mitchell Hutchins manages the fund's U.S. investments using its own Factor
Valuation Model to identify companies that appear undervalued. The model ranks
companies based on "value" factors, such as dividends, cash flows, earnings and
book values, as well as on "growth" factors, such as earnings momentum and
industry performance forecasts. Mitchell Hutchins then applies fundamental
analysis to select specific stocks from among those identified by the model.
Mitchell Hutchins has appointed Invista Capital Management LLC as the
sub-adviser for the fund's foreign investments. Invista selects foreign stocks
for the fund through a qualitative analysis of the fundamental business
prospects of industries and of individual companies and by making a quantitative
assessment of the relative risks presented by the countries in which those
companies operate.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Mitchell Hutchins may not be successful in choosing the best allocation between
U.S. and foreign investments. Equities, such as common stocks, generally
fluctuate in price more than other investments. The fund could lose all of its
investment in a company's stock. The value of the fund's foreign investments may
fall due to adverse political, social and economic developments abroad. These
risks are greater for the fund's investments in emerging market issuers. The
fund is subject, to a lesser extent, to interest rate risk, which means that the
value of the fund's bond investments generally will fall when interest rates
rise.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies" under the
following headings:
o Sector Allocation Risk
o Equity Risk
o Foreign Securities Risk
o Emerging Markets Risk
o Interest Rate Risk
o Credit Risk
o Derivatives Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
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Mitchell Hutchins Global Growth Portfolio
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PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The fund's shares are sold only to insurance company separate accounts that fund
certain variable annuity and variable life contracts. The bar chart and table do
not reflect sales charges or other expenses of these contracts. If those sales
charges and expenses were included, the total returns shown would be lower.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart shows Class H shares because they have the longer performance history.
The table that follows the bar chart shows the average annual returns over
several time periods compared to a broad-based market index.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true for the period prior to
November 2, 1998, which is the date on which Mitchell Hutchins and Invista
assumed day-to-day management of the fund's assets. Prior to that date, another
sub-adviser was responsible for managing all the fund's assets.
GLOBAL GROWTH PORTFOLIO -- TOTAL RETURN ON CLASS H SHARES
The chart below contains the following plot points:
1989 19.18%
1990 7.53%
1991 4.93%
1992 -7.55%
1993 40.02%
1994 -11.94%
1995 -3.54%
1996 15.14%
1997 7.16%
1998 13.50%
Best quarter during years shown: 4th quarter, 1998 - 19.55%
Worst quarter during years shown: 3rd quarter, 1998 - (18.97)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
CLASS CLASS H MSCI WORLD
(INCEPTION DATE) 05/04/87 INDEX
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One Year 13.50% 24.80%
Five Years 3.54% 16.19%
Ten Years 7.26% 11.21%
Life of Class 7.06% 10.62%*
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* Return is for the period 5/31/87 to 12/31/98, annualized.
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Mitchell Hutchins Global Growth Portfolio
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MORE ABOUT RISKS AND INVESTMENT STRATEGIES
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further details about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a bond will not make
principal or interest payments when they are due. Even if an issuer does not
default on a payment, a bond's value may decline if the market believes that the
issuer has become less able, or less willing, to make payments on time. Even
high quality bonds are subject to some credit risk. However, credit risk is
greater for lower quality bonds.
DERIVATIVES RISK. The value of "derivatives" - so-called because their value
"derives" from the value of an underlying asset, reference rate or index may
rise or fall more rapidly than other investments. For some derivatives, it is
possible for the fund to lose more than the amount it invested in the
derivative. Options, futures contracts and forward currency contracts are
examples of derivatives. If the fund uses derivatives to adjust or "hedge" the
overall risk of its portfolio, it is possible that the hedge will not succeed.
This may happen for various reasons, including unexpected changes in the value
of the derivatives that are not matched by opposite changes in the value of the
rest of the fund's portfolio.
EMERGING MARKETS RISK. Securities of issuers located in emerging market
countries are subject to all of the risks of other foreign securities (see
below). However, the level of those risks often is higher due to the fact that
political, legal and economic systems in emerging market countries may be less
fully developed and less stable than those in developed countries. Emerging
market securities also may be subject to additional risks, such as lower
liquidity and larger changes in value.
EQUITY RISK. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. The
fund may lose a substantial part, or even all, of its investment in a company's
stock.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices. When securities are
denominated in foreign currencies, they also are subject to the risk that the
value of the foreign currency will fall in relation to the U.S. dollar. Currency
exchange rates can be volatile and can be affected by, among other factors, the
general economics of a country, the actions of the U.S. and foreign governments
or central banks, the imposition of currency controls, and speculation.
INTEREST RATE RISK. The value of bonds can be expected to fall when interest
rates rise and to rise when interest rates fall. Interest rate risk is the risk
that interest rates will rise, so that the value of the fund's investments in
bonds will fall. Because interest rate risk is the primary risk presented by
U.S. government and other very high quality bonds, changes in interest rates may
actually have a greater effect on the value of those bonds than on lower quality
bonds.
SECTOR ALLOCATION RISK. Mitchell Hutchins may not be successful in choosing the
best allocation among market sectors. Because the fund allocates its assets
among market sectors, it is more dependent on Mitchell Hutchins' ability to
successfully assess the relative values in each sector than are funds that do
not do so.
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ADDITIONAL RISKS
YEAR 2000 RISK. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from service providers that they are taking similar steps.
Similarly, the companies in which the fund invests and trading systems used by
the fund could be adversely affected by this issue. The ability of a company or
trading system to respond successfully to the issue requires both technological
sophistication and diligence, and there can be no assurance that any steps taken
will be sufficient to avoid an adverse impact on the fund. This risk may be
greater with respect to trading systems in foreign countries and, in particular,
in emerging market countries.
ADDITIONAL INVESTMENT STRATEGIES
DEFENSIVE POSITIONS; CASH RESERVES. In order to protect itself from adverse
market conditions, the fund may take a defensive position that is different from
its normal investment strategy. This means that the fund may temporarily invest
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Mitchell Hutchins Global Growth Portfolio
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a larger-than-normal part, or even all, of its assets in cash or money market
instruments. Since these investments provide relatively low income, a defensive
position may not be consistent with achieving the fund's investment objective.
The fund may invest up to 35% of its total assets in cash or money market
instruments as a cash reserve for liquidity or other purposes.
PORTFOLIO TURNOVER. The fund may engage in frequent trading (high portfolio
turnover) in order to achieve its investment objective. Frequent trading may
result in a high portfolio turnover rate and higher fund expenses due to
transaction costs.
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Mitchell Hutchins Global Growth Portfolio
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INVESTING IN THE FUND
PURCHASES, REDEMPTIONS AND EXCHANGES
Shares of the fund are sold only to insurance company separate accounts that
fund benefits under variable annuity or variable life insurance contracts. These
separate accounts are the shareholders of the fund - not the individual contract
owners. However, the separate accounts may pass through voting rights to the
contract owners.
The fund offers both Class H and Class I shares to insurance company separate
accounts:
o Class H shares are sold and redeemed at net asset value and do not pay any
12b-1 fees.
o Class I shares also are sold and redeemed at net asset value. However,
under a rule 12b-1 plan adopted by the fund, Class I shares pay an annual
distribution fee of 0.25% of average net assets. The fund pays this fee to
insurance companies for the sale of Class I shares and for services that
the insurance company provides to contract owners. Because these 12b-1
fees are paid out of the fund's assets on an ongoing basis, over time they
will increase the cost of a contract owner's investment and may cost more
than paying other types of sales charges.
An insurance company separate account may exchange shares of the fund for shares
of the same class in another Mitchell Hutchins Series Trust fund at their
relative net asset values per share, provided that the separate account invests
in both funds. A particular insurance company separate account may not invest in
all Mitchell Hutchins Series Trust funds or classes of fund shares.
The fund and Mitchell Hutchins (for Class I shares) reserve the right to reject
any purchase order and to suspend the offering of a fund's shares for a period
of time.
PRICING AND VALUATION
Insurance company separate accounts buy, sell or exchange fund shares at their
net asset values. The fund calculates net asset value separately for each class
as of the close of trading on the New York Stock Exchange (generally, 4:00 p.m.,
Eastern time). The NYSE normally is not open, and the fund does not price its
shares, on national holidays and on Good Friday. If trading on the NYSE is
halted for the day before 4:00 p.m., Eastern time, the fund's net asset value
per share will be calculated as of the time trading was halted.
The fund calculates its net asset value based on the current market value for
its portfolio securities. The fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
fund's board of trustees. The fund normally uses the amortized cost method to
value bonds that will mature in 60 days or less.
Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.
The fund calculates the U.S. dollar value of investments that are denominated in
foreign currencies daily, based on current exchange rates. The fund may own
securities, including some securities that trade primarily in foreign markets,
that trade on weekends or other days on which the fund does not calculate net
asset value. If the fund concludes that a material change in the value of a
foreign security has occurred after the close of trading in the principal
foreign market but before the close of the NYSE, the fund may use fair value
methods to reflect those changes. This policy is intended to assure that the
fund's net asset value fairly reflects security values as of the time of
pricing.
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Mitchell Hutchins Global Growth Portfolio
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MANAGEMENT
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the fund. Mitchell Hutchins is located at 1285 Avenue of the
Americas, New York, New York 10019, and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is wholly owned by Paine Webber
Group Inc., a publicly owned financial services holding company. On March 31,
1999, Mitchell Hutchins was adviser or sub-adviser to 33 investment companies
with 75 separate funds and aggregate assets of approximately $48.3 billion.
The fund paid advisory fees to Mitchell Hutchins for the most recent fiscal year
at the rate of 0.75% based on average daily net assets.
Invista Capital Management, LLC is the sub-adviser for Global Growth Portfolio's
foreign investments. It is located at 1800 Hub Tower, 699 Walnut, Des Moines,
Iowa 50309. As of December 31, 1998, Invista managed approximately $31.0 billion
in client assets.
The fund has received an exemptive order from the SEC to permit the board to
appoint and replace sub-advisers and to amend sub-advisory contracts without
obtaining shareholder approval. The fund's shareholders have approved this
policy, and it may be implemented by the board.
PORTFOLIO MANAGERS
T. Kirkham Barneby is responsible for allocating the fund's assets between U.S.
investments and foreign investments. Mark A. Tincher is primarily responsible
for the day-to-day management of the fund's U.S. investments. Scott D. Opsal is
primarily responsible for the day-to-day management of Global Growth Portfolio's
foreign investments.
Messrs. Barneby, Tincher and Opsal have held their management responsibilities
for the fund since November 2, 1998.
Mr. Barneby is a managing director and chief investment officer quantitative
investments of Mitchell Hutchins. He rejoined Mitchell Hutchins in 1994, after
being with Vantage Global Management for one year. During the eight years that
Mr. Barneby was previously with Mitchell Hutchins, he was a senior vice
president responsible for quantitative management and asset allocation models.
Mr. Tincher is a managing director and chief investment officer of equities
(stocks) of Mitchell Hutchins. Prior to joining Mitchell Hutchins in March
1995, Mr. Tincher worked for Chase Manhattan Private Bank, where he was vice
president. He directed the U.S. funds management and equity research area
and oversaw the management of all Chase equity funds.
Mr. Opsal is an executive vice president and chief investment officer of
Invista, where he has been employed since 1986.
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Mitchell Hutchins Global Growth Portfolio
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DIVIDENDS AND TAXES
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DIVIDENDS
Dividends and distributions are paid in additional shares of the fund unless the
shareholder requests otherwise.
The fund normally declares and pays dividends and distributes any gains
annually.
Class I shares have higher expenses because of their distribution fees and thus
are expected to have lower dividends than Class H shares.
TAXES
Fund shares are offered only to insurance company separate accounts that fund
certain variable annuity or variable life contracts. These accounts generally
are not subject to tax on dividends from the fund or when fund shares are
exchanged or redeemed. See the applicable contract prospectus for a discussion
of the federal income tax status of
o the insurance company separate accounts that purchase and hold shares of
the fund and
o the holders of contracts funded through those separate accounts.
The fund must satisfy certain diversification requirements imposed by the
Internal Revenue Code on segregated assets accounts used to fund variable
annuity or variable life contracts. Failure of the fund to do so would result in
taxation of the insurance company issuing the variable annuity or variable life
contracts and treatment of the contract holders other than as described in the
contract prospectus.
See the SAI for information or for a more detailed discussion. Prospective
shareholders are urged to consult their tax advisers.
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Mitchell Hutchins Global Growth Portfolio
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FINANCIAL HIGHLIGHTS
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The following financial highlights table is intended to help you understand the
fund's financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. In the table, "total investment
return" represents the rate that an investor would have earned (or lost) on an
investment in the fund, assuming reinvestment of all dividends. This information
has been audited by Ernst & Young LLP, independent auditors, whose report, along
with the fund's financial statements, are included in the fund's annual report
to shareholders. The annual report may be obtained without charge by calling
1-800-986-0088.
Please note that no Class I shares were outstanding during the periods shown.
The information shown below for Class H shares should not be considered
indicative of the results the Class I shares would have achieved had they been
outstanding during these periods because Class I shares have higher expenses.
The information in this table pertains only to the fund and does not reflect
charges related to the insurance company separate accounts that fund variable
annuity or variable life contracts. See the appropriate contract prospectus for
information concerning these charges.
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Mitchell Hutchins Global Growth Portfolio
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GLOBAL GROWTH PORTFOLIO
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CLASS H
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FOR THE YEARS ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net asset value, beginning of year...... $ 14.62 $13.74 $12.00 $12.44 $14.97
------ ------ ------ ------ ------
Net investment income (loss)............ 0.08 0.04 0.07 0.01 (0.03)
Net realized and unrealized gains (losses)
from investments and foreign currency... 1.92 0.94 1.75 (0.45) (1.76)
----- ---- ---- ------ ------
Net increase (decrease) from investment
operations............................. 2.00 0.98 1.82 (0.44) (1.79)
----- ---- ---- ------ ------
Dividends from net investment income.... -- (0.04) (0.08) -- (0.01)
Distributions from net realized gains
from investments....................... (2.88) (0.06) -- -- (0.73)
------- ------ ----- ----- ------
Total dividends and distributions....... (2.88) (0.10) (0.08) 0.00 (0.74)
------- ------ ------ ----- ------
Net asset value, end of year $ 13.74 $14.62 $13.74 $12.00 $12.44
====== ====== ====== ====== ======
Total investment return (1) 13.50% 7.16% 15.14% (3.54)% (11.94)%
===== ==== ===== ====== =======
Ratios/Supplemental data:
Net assets, end of year (000's)......... $15,799 $21,215 $25,701 $28,507 $40,493
Expenses to average net assets.......... 1.33% 1.07% 1.10% 1.96% 1.48%
Net investment income (loss) to average
net assets............................. 0.46% 0.26% 0.46% 0.10% (0.13)%
Portfolio turnover rate................. 154% 81% 44% 157% 175%
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</TABLE>
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each year reported. The figures do not
include additional contract level charges; results would be lower if such
charges were included.
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If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
Additional information about the fund's investments is available in the
fund's annual and semi-annual reports to shareholders. In the fund's
annual reports, you will find a discussion of the market conditions and
investment strategies that significantly affected the fund's performance
during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CONTRACT PROSPECTUS:
The SAI provides more detailed information about the fund and is
incorporated by reference into this prospectus. Investors are advised to
also read the applicable contract prospectus.
You may discuss your questions about the fund, obtain free copies of annual and
semi-annual reports and the SAI, or request other information, by contacting the
fund directly at 1-800-986-0088.
You may review and copy information about the fund, including annual and
semi-annual reports and the SAI, at the Public Reference Room of the Securities
and Exchange Commission. You can get text-only copies of reports and other
information about the fund:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Mitchell Hutchins Series Trust
Investment Company Act File No. - 811-4919
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