MITCHELL HUTCHINS SERIES TRUST
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, 2000
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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 Growth Portfolio
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CONTENTS
GROWTH PORTFOLIO
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What every investor 3 Investment Objective, Strategies and Risks
should know about
the fund 4 Performance
5 More About Risks and Investment Strategies
INVESTING IN THE FUND
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Information for managing 6 Purchases, Redemptions and Exchanges
your fund account
6 Pricing and Valuation
ADDITIONAL INFORMATION
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Additional important 7 Management
information about
the fund 8 Dividends and Taxes
9 Financial Highlights
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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2
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Mitchell Hutchins Growth Portfolio
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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 that Mitchell Hutchins Asset
Management Inc., its investment adviser, believes have substantial potential for
capital growth.
The fund generally invests in larger capitalization companies but has the
flexibility to invest in companies having any market capitalization. Some of the
fund's investments may be in U.S. dollar denominated securities of foreign
issuers and the fund also may invest in bonds. The fund may (but is not required
to) use derivatives as part of its investment strategy or to help manage
portfolio risks.
In buying and selling stocks for the fund, Mitchell Hutchins uses its own
Multi-Factor Growth Model to identify companies that appear to have potential
for above-average growth in earnings, cash flow and/or book value. The model
ranks companies based on "growth" factors, such as earnings momentum, stock
price movement, economic sensitivity and industry performance forecasts.
Mitchell Hutchins then applies fundamental analysis to select specific stocks
from among those identified by the model. When investing in smaller companies,
Mitchell Hutchins also considers the trading volume of the company's stock.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:
o EQUITY RISK - Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.
o FOREIGN INVESTING RISK - The value of the fund's investments in foreign
securities may fall due to adverse political, social and economic
developments abroad.
o LIMITED CAPITALIZATION RISK - Equity risk is greater for the common stocks of
mid and small cap companies because they generally are more vulnerable than
larger companies to adverse business or economic developments and they may
have more limited resources. In general, these risks are greater for small
cap companies than for mid cap companies.
o DERIVATIVES RISK - The fund's investments in derivatives may rise or fall
more rapidly than other investments.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies."
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT 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 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, the only class outstanding during all the
periods shown.
The table that follows the bar chart shows the average annual returns for Class
H shares over several time periods. Performance for Class I shares is not
included in the table because Class I shares were not outstanding for the full
1999 calendar year. The table compares fund returns to returns on a broad-based
market index that is unmanaged and, therefore, does not include any sales
charges or expenses.
The fund's past performance does not necessarily indicate how it will perform in
the future.
TOTAL RETURN ON CLASS H SHARES
CALENDAR YEAR PERCENTAGES
1990 -8.15%
1991 42.10%
1992 5.83%
1993 19.61%
1994 -11.65%
1995 32.50%
1996 18.70%
1997 15.41%
1998 30.59%
1999 33.61%
Best quarter during years -- 4th quarter, 30.29% shown 1998: Worst quarter
during years -- 3rd quarter, (16.09)% shown 1990:
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999
CLASS CLASS H S&P 500 COMPOSITE
(INCEPTION DATE) (5/04/87) STOCK INDEX
---------------- --------- -----------
One Year............ 33.61% 21.03%
Five Years.......... 25.93% 28.54%
Ten Years........... 16.54% 18.19%
Life of Class....... 16.80% 16.79%*
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* Return is for the period 4/30/87 to 12/31/99, annualized.
4
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Mitchell Hutchins Growth Portfolio
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MORE ABOUT RISKS AND INVESTMENT STRATEGIES
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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.
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 INVESTING RISK. Foreign investing involve risks relating to political,
social and economic developments abroad to a greater extent than investing in
the securities of U.S. issuers. In addition, there are differences between U.S.
and foreign regulatory requirements and market practices.
LIMITED CAPITALIZATION RISK. Securities of mid and small cap companies generally
involve greater risk than securities of larger companies because they may be
more vulnerable to adverse business or economic developments. Mid and small cap
companies also may have limited product lines, markets or financial resources,
and they may be dependent on a relatively small management group. Securities of
mid and small cap companies may be less liquid and more volatile than securities
of larger companies or the market averages in general. In addition, small cap
companies may not be well-known to the investing public, may not have
institutional ownership and may have only cyclical, static or moderate growth
prospects. In general, all these risks are greater for small cap companies than
for mid cap companies.
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 and futures contracts are examples of derivatives. The
fund's use of derivatives may not succeed for various reasons, including
unexpected changes in the values of the derivatives or the assets underlying
them. Also, if the fund uses derivatives to adjust or "hedge" the overall risk
of its portfolio, the hedge will not succeed if changes in the values of the
derivatives are not matched by opposite changes in the values of the assets
being hedged.
ADDITIONAL RISKS
CREDIT AND INTEREST RATE RISKS. The fund is authorized to invest in bonds and
other income-producing securities. These securities are subject to credit risk
and interest rate 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. Bonds that are not investment grade involve high credit risk and
are considered speculative. Some of these low quality bonds may be in default
when purchased by the fund. Low quality bonds may fluctuate in value more than
higher quality bonds and, during periods of market volatility, may be more
difficult to sell at the time and price a fund desires.
The value of bonds generally 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 larger effect on the value of those bonds than on lower quality
bonds.
ADDITIONAL INVESTMENT STRATEGIES
DEFENSIVE POSITIONS; CASH RESERVES. 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 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 to achieve its
investment objective. Frequent trading can result in portfolio turnover of 100%
or more (high portfolio turnover).
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Mitchell Hutchins 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 the 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 most 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.
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Mitchell Hutchins Growth Portfolio
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MANAGEMENT
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INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the fund. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York 10019-6114, 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 February 29, 2000,
Mitchell Hutchins was adviser or sub-adviser to 31 investment companies with 76
separate funds and aggregate assets of approximately $54.4 billion.
The fund paid advisory fees to Mitchell Hutchins for the most recent fiscal year
at the annual contract rate of 0.75% of its average daily net 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 must approve this policy
before the board may implement it. As of the date of this Prospectus, the fund's
shareholders have not been asked to do so.
PORTFOLIO MANAGER
Ellen R. Harris is primarily responsible for the day-to-day management of the
fund. Ms. Harris has held her management responsibilities for the fund since its
inception.
Ms. Harris is a managing director of Mitchell Hutchins and has been with
Mitchell Hutchins since 1983.
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DIVIDENDS AND TAXES
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DIVIDENDS
Dividends 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 and 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 asset 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 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.
The information in this table pertains only to the fund and does not reflect
charges related to the insurance company separate accounts that invest in the
fund. See the appropriate variable annuity or variable life contract prospectus
for information concerning these charges.
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<TABLE>
<CAPTION>
Mitchell Hutchins Growth Portfolio
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GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
CLASS H CLASS I
--------------------------------------------------------------- ---------------------
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 31, JULY 18, 1999+
DECEMBER 31, 1999
--------------------------------------------------------------- ---------------------
1999 1998 1997 1996 1995 DECEMBER 31, 1999
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $ 18.03 $ 15.63 $ 17.48 $ 17.57 $ 14.56 $ 20.59
beginning of year.................. ------- ------- ------- ------- ------- -------
Net investment income (loss)......... (0.14) (0.07) 0.03 (0.06) 0.04 (0.03)
Net realized and unrealized gains
from investments.................. 6.20 4.79 2.69 3.29 4.68 3.53
---- ---- ---- ---- ---- ----
Net increase from investment
operations......................... 6.06 4.72 2.72 3.23 4.72 3.50
---- ---- ---- ---- ---- ----
Dividends from net investment
income............................. -- -- (0.03) -- (0.08) --
Distributions from net realized gains
from investments................... (0.00)++ (2.32) (4.54) (3.32) (1.63) (0.00)++
---- ---- ---- ---- ---- ----
Total dividends and distributions.... (0.00) (2.32) (4.57) (3.32) (1.71) (0.00)
---- ---- ---- ---- ---- ----
Net asset value, end of year......... $ 24.09 $ 18.03 $ 15.63 $ 17.48 $ 17.57 $ 24.09
======= ====== ====== ====== ====== =======
Total investment return(1) 33.61% 30.59% 15.41% 18.70% 32.50% 17.00%
===== ===== ===== ===== ===== =====
Ratios/Supplemental data:
Net assets, end of year (000's)...... $36,428 $36,830 $30,586 $36,357 $42,784 $ 2,375
Expenses to average net assets 1.11% 1.05% 1.05% 1.14% 1.02% 1.14%*
Net investment income (loss) to
average net assets.................. (0.58%) (0.37%) 0.12% (0.29%) 0.23% (0.58%)*
Portfolio turnover rate.............. 23% 50% 89% 53% 41% 23%
</TABLE>
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* Annualized.
+ Commencement of issuance of shares.
++ The Fund paid a distribution of less than $0.005 per share for the period
ended December 31, 1999.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each year 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.
(2) During the period ended December 31, 1999 Mitchell Hutchins waived a portion
of its fees. The ratios excluding the waiver would have been 1.11% and 1.39%
for Class H and Class I, respectively.
(3) During the period ended December 31, 1999 Mitchell Hutchins waived a portion
of its fees. The ratios excluding the waiver would have been (0.58)% and
(0.83)% for Class H and Class I, respectively.
10
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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 shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8090. You can get text-only
copies of reports and other information about the fund:
o For a fee, by electronic request at [email protected] or by writing the
SEC's Public Reference Room, Washington, D.C. 20549-0102; or
o Free, from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov
Mitchell Hutchins Series Trust
Investment Company Act File No. - 811-4919
11
