Mitchell Hutchins Series Trust
High Grade Fixed Income Portfolio Balanced Portfolio
Strategic Income Portfolio Growth and Income Portfolio
Global Income Portfolio Growth Portfolio
High Income Portfolio Small Cap Portfolio
Global Equity Portfolio
Supplement to Prospectus dated May 1, 2000
October 10, 2000
Dear Investor,
This supplement to the Prospectus dated May 1, 2000 for the
above-referenced nine series of Mitchell Hutchins Series Trust (each a "MHST
fund") describes important changes affecting your fund. These changes were
proposed by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and
approved by your fund's board as in the best interests of fund shareholders. If
you have any questions about these changes, you should contact your Financial
Advisor.
The purpose of this supplement is to notify you of
o New investment management arrangements for each MHST fund, including
the appointment of Alliance Capital Management L.P. ("Alliance
Capital") as sub-adviser, effective October 10, 2000, and
o Related changes in each MHST fund's investment strategies and
portfolio managers.
More information about the new investment management arrangements and
related investment strategy and portfolio manager changes is set out below. The
shareholders of each MHST fund will be asked to approve its new investment
management arrangements at a meeting expected to be held in January or February
2001.
NEW INVESTMENT MANAGEMENT ARRANGEMENTS
On October 6, 2000, the board of trustees for Mitchell Hutchins Series
Trust terminated the existing Investment Advisory and Administration Contract
("Old Advisory Contract") with Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") relating to each MHST fund and approved new interim
investment management arrangements that became effective on October 10, 2000.
These new investment management arrangements for the MHST funds consist of
a new Interim Investment Management and Administration Contract ("Interim
Management Contract") with Mitchell Hutchins and an Interim Sub-Advisory
Contract with Alliance Capital. Under the Interim Management Contract, Mitchell
Hutchins' primary portfolio management responsibility is to identify appropriate
sub-advisers to manage the MHST funds' assets and to supervise and monitor the
performance of those sub-advisers and make recommendations about the retention
or replacement of sub-advisers. These new interim contracts terminate
automatically 150 days after their effective dates. The fees payable by each
MHST fund to Mitchell Hutchins under the Interim Management Contract are
identical to the fees under the Old Advisory Contract. Mitchell Hutchins (not
the funds) pays Alliance Capital for its services under the Interim Sub-Advisory
Contract.
These arrangements and some related changes in each fund's investment
strategies are described in greater detail in the revisions to the MHST funds'
Prospectus set out below.
<PAGE>
AS A RESULT OF THESE CHANGES, THE PROSPECTUS DATED MAY 1, 2000 IS REVISED AS
FOLLOWS:
FOR HIGH GRADE FIXED INCOME PORTFOLIO, THE LAST PARAGRAPH IN THE SECTION
CAPTIONED "PRINCIPAL INVESTMENT STRATEGIES" ON P. 6 OF THE PROSPECTUS IS
REPLACED IN ITS ENTIRETY BY THE FOLLOWING:
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider, among other things, the strength of certain
sectors of the fixed income market relative to others, interest
rates and other general market conditions, as well as the credit
quality and financial condition of individual issuers and, where
applicable, the protection afforded by the terms of the particular
obligations.
FOR STRATEGIC INCOME PORTFOLIO, THE LAST PARAGRAPH IN THE SECTION CAPTIONED
"PRINCIPAL INVESTMENT STRATEGIES" ON P. 10 OF THE PROSPECTUS IS REPLACED IN ITS
ENTIRETY BY THE FOLLOWING:
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider, among other things, the strength of certain
sectors of the fixed income market relative to others, interest
rates and other general market conditions, as well as the credit
quality and financial condition of individual issuers and, where
applicable, the protection afforded by the terms of the particular
obligations.
FOR GLOBAL INCOME PORTFOLIO, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT
STRATEGIES" ON P. 12 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in high quality bonds of governmental and
private issuers in the U.S. and developed foreign countries. These
high quality bonds are rated in one of the two highest rating
categories or are of comparable quality. The fund also invests, to a
lesser extent, in lower rated bonds, including bonds of issuers in
emerging markets. These may include bonds that have very low credit
ratings, but that the fund's sub-adviser believes provide a return
that is high enough to justify the additional risk.
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider, among other things, the strength of certain
sectors of the fixed income market relative to others, interest
rates and other general market conditions, the credit quality and
financial condition of individual issuers, the protection afforded
by the terms of the particular obligations (where applicable), and
the political and economic developments affecting the relevant
country as well as recent experience in the markets for the
country's government securities.
FOR HIGH INCOME PORTFOLIO, THE LAST TWO PARAGRAPHS IN THE SECTION CAPTIONED
"PRINCIPAL INVESTMENT STRATEGIES" ON P. 14 OF THE PROSPECTUS ARE REPLACED IN
THEIR ENTIRETY BY THE FOLLOWING:
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
2
<PAGE>
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider, among other things, the strength of certain
sectors of the fixed income market relative to others, interest
rates and other general market conditions, as well as the credit
quality and financial condition of individual issuers and, where
applicable, the protection afforded by the terms of the particular
obligations.
FOR BALANCED PORTFOLIO, THE LAST TWO PARAGRAPHS IN THE SECTION CAPTIONED
"PRINCIPAL INVESTMENT STRATEGIES" ON P. 16 OF THE PROSPECTUS ARE REPLACED IN
THEIR ENTIRETY BY THE FOLLOWING:
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
equity securities to buy and sell for the fund, Alliance Capital
will generally consider, among other things, a company's strength in
fundamentals, its potential for earnings growth over time, and the
current price of its securities relative to their perceived worth.
In deciding which fixed income securities to buy and sell for the
fund, Alliance Capital will generally consider, among other things,
the strength of certain sectors of the fixed income market relative
to others, interest rates and other general market conditions, as
well as the credit quality and financial condition of individual
issuers and, where applicable, the protection afforded by the terms
of the particular obligations.
FOR GROWTH AND INCOME PORTFOLIO, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT
STRATEGIES" ON P. 18 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
PRINCIPAL INVESTMENT STRATEGIES
The fund invests in a combination of securities to obtain both
growth and income. To obtain growth, the fund invests in stocks that
its sub-adviser believes have substantial potential for capital
growth. To obtain current income, the fund invests in dividend
paying stocks and, to a lesser extent, convertible bonds and money
market instruments.
The fund generally invests in large capitalization companies. Some
of the fund's investments may be in U.S. dollar denominated
securities of foreign issuers. The fund may (but is not required
to) use derivatives as part of its investment strategy or to help
manage portfolio risks.
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
equity securities to buy and sell for the fund, Alliance Capital
will generally consider, among other things, a company's strength in
fundamentals, its potential for earnings growth over time, and the
current price of its securities relative to their perceived worth.
In deciding which fixed income securities to buy and sell for the
fund, Alliance Capital will generally consider, among other things,
the strength of certain sectors of the fixed income market relative
to others, interest rates and other general market conditions, as
well as the credit quality and financial condition of individual
issuers and, where applicable, the protection afforded by the terms
of the particular obligations.
3
<PAGE>
FOR GROWTH PORTFOLIO, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT STRATEGIES" ON
P. 22 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE FOLLOWING:
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in stocks of companies that its
sub-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.
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider, among other things, a company's strength in
fundamentals, its potential for earnings growth over time, and the
current price of its securities relative to their perceived worth.
FOR SMALL CAP PORTFOLIO, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT STRATEGIES"
ON P. 26 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE FOLLOWING:
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in common stocks of small capitalization
("small cap") companies that its sub-adviser believes have
substantial potential for capital growth. The fund considers
companies with market capitalizations of up to $1.5 billion to be
small cap.
The fund may invest, to a lesser extent, in stocks of larger
companies and in bonds and money market instruments. Some of the
fund's investments may be in U.S. dollar denominated securities of
foreign issuers. The fund may (but is not required to) use options,
futures contracts and other derivatives as part of its investment
strategy or to help manage portfolio risks.
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. In deciding which
securities to buy and sell for the fund, Alliance Capital will
generally consider the relevant economic and political outlook, the
values of the specific securities relative to other investments,
trends in the determinants of corporate profits, and management
capability and practices.
FOR GLOBAL EQUITY PORTFOLIO, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT
STRATEGIES" ON P. 28 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
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, Australasia 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
4
<PAGE>
countries, including emerging markets, and in U.S. and foreign
bonds.
The fund's manager, Mitchell Hutchins Asset Management Inc., has
appointed Alliance Capital Management L.P. ("Alliance Capital") to
serve as sub-adviser for the fund's investments. Alliance Capital
allocates the fund's assets between U.S. and foreign markets based
on its assessment of the relative risks and opportunities in each
market. The fund may (but is not required to) use derivatives as
part of its investment strategy or to help manage portfolio risks.
In deciding which securities to buy and sell for the fund, Alliance
Capital will generally consider, among other things, a company's
strength in fundamentals, its potential for earnings growth and
capital appreciation over time, and the current price of its
securities relative to their perceived worth.
THE SECTION AT P. 33 OF THE PROSPECTUS CAPTIONED "INVESTMENT ADVISERS" IS
RETITLED "INVESTMENT MANAGER/ADVISER AND SUB-ADVISERS" AND IS REPLACED IN ITS
ENTIRETY WITH THE FOLLOWING:
Mitchell Hutchins Asset Management Inc. is the investment adviser
and administrator of Money Market Portfolio, Strategic Fixed Income
Portfolio, Tactical Allocation Portfolio and Aggressive Growth
Portfolio. Mitchell Hutchins is the manager and administrator of the
remaining funds. 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. ("PW Group"), a publicly owned
financial services holding company. On August 31, 2000, Mitchell
Hutchins was adviser or sub-adviser of 31 investment companies with
75 separate portfolios and aggregate assets of approximately $57.7
billion.
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
November 2000. UBS, with headquarters in Zurich, Switzerland, is an
internationally diversified organization with operations in many
areas of the financial services industry.
Mitchell Hutchins manages the investments of Money Market Portfolio
and Tactical Allocation Portfolio directly and has appointed
sub-advisers to manage the investments of the other funds.
Pacific Investment Management Company LLC ("PIMCO") is the
sub-adviser for Strategic Fixed Income Portfolio. It is located at
840 Newport Center Drive, Suite 300, Newport Beach, California
92660. On December 31, 1999, PIMCO had approximately $186 billion in
assets under management and was adviser or sub-adviser of 18
investment companies with 65 portfolios and aggregate assets of
approximately $53 billion.
Nicholas-Applegate Capital Management ("Nicholas-Applegate") is the
sub-adviser for Aggressive Growth Portfolio. It is located at 600
West Broadway, 29th Floor, San Diego, California 92101. On February
29, 2000, Nicholas-Applegate had approximately $48.5 billion in
assets under management and was the adviser or sub-adviser of 14
investment companies with 32 portfolios and aggregate net assets of
approximately $7.8 billion.
5
<PAGE>
Alliance Capital Management L.P. ("Alliance Capital"), located at
1345 Avenue of the Americas, New York, New York 10105, is a leading
global investment management firm with approximately $388 billion in
assets under management at June 30, 2000.1 Alliance Capital manages
retirement assets for many of the largest U.S. public and private
employee benefit plans, for public employee retirement funds, and
for foundations, pension funds, endowments, bank, insurance
companies and high net worth individuals worldwide. Alliance Capital
is also one of the largest mutual fund sponsors, with a diverse
family of globally distributed mutual fund portfolios and
approximately 6.1 million shareholder accounts.
THE SECTION AT PP. 33-34 OF THE PROSPECTUS CAPTIONED "PORTFOLIO MANAGERS" IS
REPLACED IN ITS ENTIRETY BY THE FOLLOWING:
PORTFOLIO MANAGERS
MONEY MARKET PORTFOLIO. Susan Ryan, a senior vice president of
Mitchell Hutchins, is responsible for the day-to-day management of
this fund's investments. Ms. Ryan has been with Mitchell Hutchins
since 1982. She has held her fund responsibilities since its
inception.
HIGH GRADE FIXED INCOME PORTFOLIO. Timothy Bacik, an assistant
vice president and fixed income portfolio manager at Alliance
Capital, is primarily responsible for the day-to-day management of
the fund's investments and has held his fund responsibilities since
October 10, 2000. Mr. Bacik, a Chartered Financial Analyst,
manages domestic core portfolios and has eight years of investment
experience. Prior to joining Alliance in 1996, Mr. Bacik focused
on global bond portfolios at Scudder Stevens & Clark. Mr. Bacik
received a B.A. in economics from Wesleyan University.
STRATEGIC FIXED INCOME PORTFOLIO. William C. Powers, a PIMCO
managing director, is primarily responsible for the day-to-day
management of the fund's investments. Mr. Powers has been a senior
member of the fixed income portfolio management group of PIMCO
since 1991 and assumed his fund responsibilities in September 1996.
STRATEGIC INCOME PORTFOLIO AND GLOBAL INCOME PORTFOLIO. Douglas J.
Peebles, a senior vice president and portfolio manager at Alliance
Capital, is primarily responsible for the day-to-day management of
these funds' investments and has held his fund responsibilities
since October 10, 2000. Mr. Peebles is the group head of the
global sector rotation department and has 13 years of investment
experience. Mr. Peebles' portfolio management responsibilities at
Alliance Capital include the management of global, international,
global high yield and multi-sector fixed income portfolios. Mr.
Peebles joined Alliance Capital in 1987 and worked in the fund
accounting and tax exempt departments within Alliance. He holds a
B.A. degree in Accounting and Political Science from Muhlenberg
College and an M.B.A. from Rutgers University.
-----------------------------------
1 The combined (pro forma) assets under management of Alliance Capital and
Sanford C. Bernstein, Inc., the assets and liabilities of which Alliance Capital
acquired on October 2, 2000, totaled approximately $470 billion as of June 30,
2000.
6
<PAGE>
HIGH INCOME PORTFOLIO. Gregory R. Dube, a senior vice president and
head of the global high yield group at Alliance Capital, is
primarily responsible for the day-to-day management of the fund's
investments and has held his fund responsibilities since October 10,
2000. Mr. Dube joined Alliance Capital in 1998 to head the global
high yield group. Mr. Dube, a former partner of Donaldson, Lufkin &
Jenrette, has an extensive background in credit securities markets
and 24 years of investment experience. He has traded and sold credit
instruments including corporate, high-yield, private placement,
mortgage, Euro and distressed debt and derivatives. Mr. Dube has
been responsible for research, risk management and marketing
functions in his management capacity at Donaldson, Lufkin &
Jenrette, as executive director of Lehman Brothers International,
and as national sales manager of taxable fixed income at Lehman
Brothers. Mr. Dube is an honors graduate of Harvard College and a
Rhodes Scholar Nominee.
BALANCED PORTFOLIO. Frank Caruso, a senior vice president and
portfolio manager at Alliance Capital, and Andrew M. Aran, a senior
vice president and director of corporate bond/credit research at
Alliance Capital, are primarily responsible for the day-to-day
management of the fund's investments and have held their fund
responsibilities since October 10, 2000.
Prior to joining Alliance Capital in 1994, Mr. Caruso was a managing
director at Shearson Lehman Advisors, Shearson's $50 billion money
management organization. At Shearson Lehman Advisors, he was the
lead portfolio manager for Shearson's family of growth and income
mutual funds. Mr. Caruso holds a B.A. from SUNY College at Oneonta.
He is a Chartered Financial Analyst, a member of the New York
Society of Security Analysts and the Association for Investment
Management and Research and has 19 years of investment experience.
Mr. Aran joined Alliance Capital in 1991 and heads the corporate
bond/credit research group. He is also responsible for analyzing
U.S. and international financial services firms. As research
director, he has oversight responsibility for private placements,
investment grade and high yield bonds, municipal and money markets
research. Research conducted by corporate analysts is used by
portfolio managers in determining appropriate risk adjusted value
for investments in Alliance's fixed income mutual as well as for
institutional fixed income accounts. Mr. Aran has 20 years of
investment experience, including fixed income credit research at
PaineWebber Incorporated and heading Standard & Poor's U.S.
Financial Institutions Rating Group as senior vice president. Mr.
Aran is a Chartered Financial Analyst and holds a B.A. in Economics
from Rutgers University and an M.B.A. in Finance/International
Business from Fordham's Graduate School of Business.
GROWTH AND INCOME PORTFOLIO. Frank Caruso, a senior vice president
and portfolio manager at Alliance Capital, is primarily responsible
for the day-to-day management of the fund's investments and has held
his fund responsibilities since October 10, 2000. Prior to joining
Alliance Capital in 1994, Mr. Caruso was a managing director at
Shearson Lehman Advisors, Shearson's $50 billion money management
organization. At Shearson Lehman Advisors, he was the lead portfolio
manager for Shearson's family of growth and income mutual funds. Mr.
Caruso holds a B.A. from SUNY College at Oneonta. He is a Chartered
Financial Analyst, a member of the New York Society of Security
Analysts and the Association for Investment Management and Research
and has 19 years of investment experience.
7
<PAGE>
TACTICAL ALLOCATION PORTFOLIO. T. Kirkham Barneby is primarily
responsible for the fund's asset allocation decisions and the
day-to-day management of its investments. Mr. Barneby is a
managing director and chief investment officer for quantitative
investments of Mitchell Hutchins. He has held his fund
responsibilities since its inception.
GROWTH PORTFOLIO. Tyler J. Smith, a senior vice president and
portfolio manager at Alliance Capital, is primarily responsible for
the day-to-day management of the fund's investments and has held his
fund responsibilities since October 10, 2000. Mr. Smith joined
Alliance Capital in 1993 from Equitable Capital. He has 37 years of
investment experience and is currently responsible for the common
stock portfolio of the EQ Advisors Trust, the Alliance Growth Fund,
and several single client portfolios. Prior to joining The Equitable
as an analyst in 1970, Mr. Smith spent five years managing
investment portfolios for Smith Barney's private client group. He
also served as a general partner of a small private investment
partnership. A member of the New York Society of Security Analysts
and a Chartered Financial Analyst, Mr. Smith received a bachelor's
degree in economics from Williams College.
AGGRESSIVE GROWTH PORTFOLIO. The Systems Driven Internal Research
team at Nicholas-Applegate, which is primarily responsible for the
day-to-day management of the fund's investments, has been under the
supervision of portfolio manager John Kane for the past five years.
Mr. Kane has been the lead portfolio manager for the team since he
joined the firm in 1994. The team has held its fund responsibilities
since the fund's inception.
SMALL CAP PORTFOLIO. Bruce K. Aronow, a senior vice president and
portfolio manager/research analyst at Alliance Capital, is primarily
responsible for the day-to-day management of the fund's investments
and has held his fund responsibilities since October 10, 2000. Mr.
Aronow is team leader of the small cap growth equity portfolio
management team. Prior to joining Alliance Capital in 1999, Mr.
Aronow was responsible for research and portfolio management of the
small cap consumer sectors at INVESCO (NY) and auto/transportation
since early 1997. He joined Chancellor Capital Management in 1994 as
a small cap analyst primarily focusing on autos/transportation,
specialty finance and consumer-related companies. Previously, Mr.
Aronow was a senior associate with Kidder, Peabody & Company. Mr.
Aronow has 12 years of investment experience and holds a B.A. with a
concentration in Philosophy and a minor in Economics from Colgate
University. He has served as a recent graduate member on the Board
of Trustees of Colgate University from 1990-1993. Mr. Aronow is a
Chartered Financial Analyst and a member of both the New York
Society of Security Analysts and the Association of Investment
Management and Research.
GLOBAL EQUITY PORTFOLIO. Sandra L. Yeager, a senior vice president
at Alliance Capital, is primarily responsible for the day-to-day
management of the fund's investments and has held her fund
responsibilities since October 10, 2000. Ms. Yeager is a portfolio
manager in the global/international equity group. Prior to
portfolio management, she was a US Research Analyst at Alliance
Capital covering the advertising, broadcasting, cable,
media/entertainment and publishing businesses for three years and
the bank and financial industries for five years. Before coming to
Alliance Capital in 1990, Ms. Yeager was an analyst for Kidder,
Peabody & Co. Ms. Yeager has 12 years of investment experience and
received her undergraduate degree in Mathematics and English from
Wellesley College and an M.B.A. from Harvard University.
8
<PAGE>
THE SECTION AT PP. 34-35 OF THE PROSPECTUS CAPTIONED "POSITIONS WITH MITCHELL
HUTCHINS AND BUSINESS EXPERIENCE OF MITCHELL HUTCHINS EMPLOYEES" IS DELETED IN
ITS ENTIRETY.
9
