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PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
SUPPLEMENT TO PROSPECTUS DATED MARCH 1, 2000
October 10, 2000
Dear Investor,
This supplement to the Prospectus dated March 1, 2000 for the
above-referenced funds (each a "PW 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
- the proposed merger of each PW fund into a series of another mutual
fund and
- changes in the investment management arrangements for PaineWebber
Global Equity Fund and PaineWebber Global Income Fund and related
investment strategy changes that became effective on October 10, 2000.
The shareholders of each PW fund must approve its proposed merger before the
transaction can be effected. The proposed mergers will be submitted to
shareholders at meetings expected to be held in January or February 2001. If
approved by the PW fund's shareholders, the merger for that PW fund is expected
to become effective no later than early March 2001.
More information about the proposed merger for each PW fund and the new
investment management arrangements and related investment strategy changes for
PaineWebber Global Equity Fund and PaineWebber Global Income Fund is set out
below.
The investment advisory arrangements and investment strategies for
PaineWebber Asia Pacific Growth Fund and PaineWebber Emerging Markets Equity
Fund are unchanged. The investment portfolios of these two PW funds will
continue to be sub-advised by Schroder Investment Management North America Inc.,
who also serves as sub-adviser to the fund proposed as their merger partner.
PROPOSED MERGERS
On October 6, 2000, the board of trustees for each PW fund approved the
submission to its shareholders of an Agreement and Plan of Reorganization and
Termination ("Plan") under which the PW fund would transfer substantially all of
its assets and liabilities to a series of PaineWebber PACE Select Advisors
Trust, an open-end mutual fund (each series a "PACE fund"). The PACE funds'
investments are managed by sub-advisers, and the same sub-adviser(s) for each
PACE fund proposed as a merger partner for a PW fund now serves as
sub-adviser(s) for that PW fund. If a PW fund's shareholders approve the
proposed merger, they will receive shares of the applicable PACE fund in
exchange for their shares in the PW fund, and the PW fund will cease operations.
Each merger is expected to be a tax-free transaction, which means that no
gain or loss will be recognized by either fund and that the PW fund's
shareholders will not realize any gain or loss on their receipt of PACE fund
shares in the merger. More information about the proposed merger for each PW
fund will be provided to its shareholders in proxy solicitation materials that
are expected to be mailed in November 2000.
Item #ZS73
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The parties to each proposed merger are identified below, along with each
fund's investment objective and primary investment strategies.
<TABLE>
PW Fund PACE Fund Proposed as Merger Partner
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PAINEWEBBER GLOBAL EQUITY FUND (A SERIES OF PACE INTERNATIONAL EQUITY INVESTMENTS
PAINEWEBBER INVESTMENT TRUST)
INVESTMENT OBJECTIVE: Long-term growth of INVESTMENT OBJECTIVE: Capital appreciation.
capital.
Invests primarily in stocks of companies in Invests primarily in stocks of companies that
the United States and in foreign countries are domiciled in developed foreign countries
that are represented in the MSCI Europe, and principally traded in Japanese, European,
Australasia and Far East Index. Pacific and Australian securities markets or
traded in U.S. securities markets. Normally
does not invest significantly in companies
domiciled in the United States.
-------------------------------------------- --------------------------------------------
PAINEWEBBER GLOBAL INCOME FUND (THE SOLE PACE GLOBAL FIXED INCOME INVESTMENTS
SERIES OF PAINEWEBBER INVESTMENT SERIES)
INVESTMENT OBJECTIVE: Primarily, high current INVESTMENT OBJECTIVE: High total return.
income consistent with prudent investment
risk; secondarily, capital appreciation.
Invests primarily in high quality bonds (in Invests primarily in high grade bonds (in the
the two highest rating categories) of three highest rating categories) of
governmental and private issuers in the governmental and private issuers in the
United States and in developed foreign United States and developed foreign
countries. countries.
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PAINEWEBBER ASIA PACIFIC GROWTH FUND (A PACE INTERNATIONAL EMERGING MARKETS EQUITY
SERIES OF PAINEWEBBER MANAGED INVESTMENTS INVESTMENTS
TRUST)
INVESTMENT OBJECTIVE: Long-term capital INVESTMENT OBJECTIVE: Capital appreciation.
appreciation.
Invests primarily in stocks of companies in Invests primarily in stocks of companies
the Asia Pacific Region (except Japan), domiciled in emerging market countries
including companies in both developed and throughout the world. May not always
emerging market countries. diversify its investments on a geographic
basis.
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PAINEWEBBER EMERGING MARKETS EQUITY FUND (THE PACE INTERNATIONAL EMERGING MARKETS EQUITY
SOLE SERIES OF PAINEWEBBER INVESTMENT TRUST INVESTMENTS
II)
INVESTMENT OBJECTIVE: Long-term capital INVESTMENT OBJECTIVE: Capital appreciation.
appreciation.
Invests primarily in stocks of companies in Invests primarily in stocks of companies
emerging market countries. domiciled in emerging market countries. May
not always diversify its investments on a
geographic basis.
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</TABLE>
You may continue to buy and sell shares in the PW funds and exchange your PW
fund Class A, Class B and Class C shares for shares of the corresponding class
of other PaineWebber funds prior to the shareholder meetings. When you sell or
exchange your PW fund shares, you generally will be subject to federal income
tax on any gain you realize. If the merger proposal is approved for a PW fund,
that PW fund expects to close to new purchases and exchange purchases
approximately five business days prior to the date on which the merger is
effected.
NEW INVESTMENT MANAGEMENT ARRANGEMENTS FOR PAINEWEBBER GLOBAL EQUITY FUND AND
PAINEWEBBER GLOBAL INCOME FUND
On October 6, 2000, the board of trustees for each of these funds terminated
the existing Investment Advisory and Administration Contract ("Old Advisory
Contract") with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins")
relating to the fund and approved new interim investment management arrangements
that became effective on October 10, 2000.
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These interim investment management arrangements consist of a new Interim
Investment Management and Administration Contract ("Interim Management
Contract") with Mitchell Hutchins and one or more Interim Sub-Advisory Contracts
between Mitchell Hutchins and unaffiliated sub-advisers. Under the Interim
Management Contracts, Mitchell Hutchins' primary portfolio management
responsibility is to identify appropriate sub-advisers to manage the funds'
assets and to supervise and monitor the performance of those sub-advisers and
make recommendations about the retention or replacement of sub-advisers. The
interim contracts terminate automatically 150 days after their effective dates.
The fees payable by each fund to Mitchell Hutchins under its Interim Management
Contract are identical to the fees under the Old Advisory Contract. Mitchell
Hutchins (not the funds) pays the sub-advisers for their services under the
Interim Sub-Advisory Contracts.
The board of PaineWebber Global Equity Fund approved an Interim Sub-Advisory
Contract between Mitchell Hutchins and Martin Currie Inc. under which Martin
Currie Inc. manages the fund's foreign investments. Under its Interim Management
Contract relating to this fund, Mitchell Hutchins will continue to allocate the
fund's assets between U.S. and foreign investments and to manage the fund's U.S.
investments. However, Mitchell Hutchins now seeks to replicate the total return
of the S&P 500 Index (before fees and expenses), for the fund's U.S.
investments, as described below.
The board of PaineWebber Global Income Fund approved two Interim
Sub-Advisory Contracts -- one between Mitchell Hutchins and Rogge Global
Partners plc and the second between Mitchell Hutchins and Fischer Francis
Trees & Watts, Inc. and its affiliates ("FFTW"). Under its Interim Management
Contract relating to this fund, Mitchell Hutchins has initially allocated the
fund's assets between Rogge Global Partners and FFTW in approximately equal
portions. The relative values allocated to each sub-adviser may change over
time.
These arrangements and related changes in each fund's investment strategies
are described in greater detail below. The new sub-advisers expect to realign
their funds' portfolios to reflect their proprietary investment strategies over
the next several weeks. As a result, during this period, the funds may
experience higher portfolio turnover than normal and higher related transaction
costs, including brokerage commissions. In addition, a fund may realize capital
gains when portfolio positions are sold by a new sub-adviser. These realized
capital gains may increase a fund's taxable dividends for the current year.
AS A RESULT OF THESE CHANGES, THE PROSPECTUS DATED MARCH 1, 2000 IS REVISED AS
FOLLOWS:
FOR PAINEWEBBER GLOBAL EQUITY FUND, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT
STRATEGIES" ON P. 3 OF THE PROSPECTUS IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
PRINCIPAL INVESTMENT STRATEGIES
The fund generally 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
countries, including emerging markets, and in U.S. and
foreign bonds.
The fund's manager, 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 greater potential for high returns, relative to the
risk of loss. The fund may (but is not required to) use
forward currency contracts, options, futures and other
derivatives as part of its investment strategy or to help
manage portfolio risks.
Mitchell Hutchins has appointed Martin Currie Inc. as
sub-adviser for the fund's foreign investments. Martin
Currie Inc. looks for companies that exhibit strong
fundamentals and attractive valuations based on estimates
of future earnings. In making country allocation
decisions, Martin Currie Inc. considers such factors as
economic and political stability, breadth and liquidity of
the market, the nature of local investors, the currency
outlook, valuation and the settlement system.
In managing the fund's U.S. investments, Mitchell Hutchins
uses a "passive" investment approach in attempting to
replicate the investment performance of the
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Standard & Poor's 500 Composite Stock Index rather than
actively buying and selling stocks, some of which might
not be included in the S&P 500 Index. Mitchell Hutchins
expects to achieve this goal for the fund's U.S.
investments by using futures contracts and other
derivatives in strategies intended to simulate full
investment in the S&P 500 Index stocks while retaining a
cash balance which may be used for fund management
purposes.
FOR PAINEWEBBER GLOBAL EQUITY FUND, THE SECTION CAPTIONED "PRINCIPAL RISKS" ON
P. 3 OF THE PROSPECTUS AND THE SECTION CAPTIONED "MORE ABOUT RISKS AND
INVESTMENT STRATEGIES" ON P. 15 OF THE PROSPECTUS ARE AMENDED BY THE ADDITION OF
THE FOLLOWING NEW PARAGRAPH:
INDEX TRACKING RISK. Global Equity Fund expects a close
correlation between the performance of its U.S.
investments and that of the S&P 500 Index in both rising
and falling markets. While the fund attempts to replicate,
before deduction of fees and expenses, the investment
results of the Index for its U.S. investments, the fund's
investment results generally will not be identical to
those of the Index. Deviations from the performance of the
Index may result from shareholder purchases and sales of
shares that can occur daily. In addition, the fund must
pay fees and expenses that are not borne by the Index.
FOR PAINEWEBBER GLOBAL INCOME FUND, THE SECTION CAPTIONED "PRINCIPAL INVESTMENT
STRATEGIES" ON P. 6 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 United States and
in 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 a sub-adviser
believes may provide a return that is high enough to
justify the additional risk. Some of the fund's bonds may
be backed by mortgages.
Mitchell Hutchins Asset Management Inc., the fund's
manager, has appointed Rogge Global Partners plc and
Fischer Francis Trees & Watts, Inc. and its affiliates
("FFTW") to serve as sub-advisers for the fund's
investments. Mitchell Hutchins allocates the fund's assets
between Rogge Global Partners and FFTW.
Rogge Global Partners seeks to invest its share of the
fund's assets in bonds of issuers in financially healthy
countries because it believes that these investments
produce the highest bond and currency returns over time.
In deciding which bonds to buy or sell for the fund, Rogge
Global Partners uses a top-down analysis to find value
across countries and to forecast interest and
currency-exchange rates over a one-year horizon. Rogge
Global Partners also uses an optimization model to help
determine country, currency and duration positions for the
fund.
FFTW seeks to outperform a benchmark, the Lehman Global
Aggregate Index (Unhedged), for its share of the fund's
assets through an active bond selection process that
relies on (1) construction of portfolios around
diversified and balanced off-benchmark securities that
FFTW expects to have low relative correlations,
(2) identifying the most attractive sectors and the most
attractive individual securities within those sectors and
(3) monitoring of portfolio risk with risk management
tools. FFTW divides the investment universe into three
major blocs (Europe, the United States and Japan) and
analyzes in each bloc trends in economic growth, inflation
and monetary and fiscal policies. FFTW decides which
securities to buy or sell for the fund by looking for
investment opportunities where its opinions on the current
economic environment of a bloc or country differ from
current market valuations.
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THE SECTION AT P. 22 OF THE PROSPECTUS CAPTIONED "INVESTMENT ADVISERS" IS
REPLACED WITH THE FOLLOWING:
INVESTMENT ADVISER/MANAGER AND SUB-ADVISERS
Mitchell Hutchins Asset Management Inc. is the investment
adviser and administrator for Asia Pacific Growth Fund and
Emerging Markets Equity Fund. Mitchell Hutchins is the
manager and administrator for Global Equity Fund and
Global Income 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. ("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.
Martin Currie Inc., the sub-adviser for Global Equity
Fund's foreign investments, is located at Saltire Court,
20 Castle Terrace, Edinburgh, Scotland EHI 2ES. Martin
Currie Inc. and its affiliates are part of one of
Scotland's leading independent investment management
companies which, since its founding in 1881, has developed
an expertise in equity investments.
Rogge Global Partners plc, the sub-adviser for a portion
of Global Income Fund's assets, is located at Sion Hall,
56 Victoria Embankment, London, EC4Y ODZ. Rogge Global
Partners was organized in 1984 and specializes in global
fixed income management.
Fischer Francis Trees & Watts, Inc. ("FFTW (NY)") and its
affiliates are subadvisers for a portion of Global Income
Fund's assets. FFTW (NY) is located at 200 Park Avenue,
46th Floor, New York, New York 10166. The addresses for
its affiliates are 3 Royal Court, The Royal Exchange,
London, EC 3V 3RA for Fischer Francis Trees & Watts (UK)
and 50 Raffles Place, #22-01 Singapore Land Tower,
Singapore 048623 for Fischer Francis Trees & Watts Pte Ltd
(Singapore). The affiliates are either wholly owned
subsidiaries of FFTW (NY) or are owned jointly by FFTW
(NY) and its parent corporation. FFTW (NY) and its
affiliates are referred to collectively as "FFTW." As of
September 30, 2000, FFTW and its affiliates had
approximately $30 billion in assets under management.
Schroder Investment Management North America Inc.
("SIMNA") is the sub-adviser to Asia Pacific Growth Fund
and Emerging Markets Equity Fund. SIMNA is located at
787 Avenue of the Americas, New York, New York 10019.
THE SECTION AT P. 22 OF THE PROSPECTUS CAPTIONED "PORTFOLIO MANAGERS" IS REVISED
BY REPLACING THE FIRST FIVE PARAGRAPHS WITH THE FOLLOWING:
PORTFOLIO MANAGERS
GLOBAL EQUITY FUND. Mitchell Hutchins is responsible for
allocating Global Equity Fund's assets between U.S. and
foreign markets and for managing its U.S. investments.
Since October 1, 1998, T. Kirkham Barneby has been
responsible for the fund's asset allocation decisions.
Mr. Barneby is a managing director and chief investment
officer for quantitative investments of Mitchell Hutchins.
Mr. Barneby and Frank Vallario assumed responsibility for
the day-to-day management of the fund's U.S. investments
on October 10, 2000. Mr. Vallario is a first vice
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president of Mitchell Hutchins and a member of its
quantitative investments group. Prior to joining Mitchell
Hutchins in March 1996, Mr. Vallario worked at PaineWebber
in its capital markets group.
Martin Currie Inc. uses a team approach in its management
of the fund's foreign investments. The team is led by
James Fairweather, who has served as chief investment
officer of Martin Currie Inc. since 1997. Mr. Fairweather
joined Martin Currie Inc. in 1984 and has served in
various investment management capacities since then. He
has held his fund responsibilities since October 10, 2000.
GLOBAL INCOME FUND. Rogge Global Partners plc uses a team
approach in managing its share of Global Income Fund's
assets. The team is led by Olaf Rogge, the chief
investment officer of Rogge Global Partners. Mr. Rogge,
who founded Rogge Global Partners in 1984, has been
managing global investments for more than 25 years and has
held his fund responsibilities since October 10, 2000.
Other members of the team are John Graham, Richard Bell,
Adrian James, Malie Conway and Richard Gray. These team
members have held their fund responsibilities since
October 10, 2000.
Mr. Graham joined Rogge Global Partners in February 1994
and is currently a director, portfolio manager and
analyst. Prior to that time, he served as a senior manager
of the multi-currency fixed income investment team at J.P.
Morgan. Mr. Bell joined Rogge Global Partners in June 1990
and serves as a director, portfolio manager and analyst.
Mr. James joined Rogge Global Partners in April 1995 and
serves as a director, portfolio manager and analyst. From
October 1987 through April 1995, Mr. James worked for
NatWest Capital Markets, where he was a director and
functioned as the international bond economist.
Ms. Conway joined Rogge Global Partners in 1998 as a
portfolio manager in charge of global credit. She was
previously a senior portfolio manager at Rothschild Asset
Management managing U.S., global and short-term mandates.
Before joining Rothschild, she spent seven years at J.P.
Morgan where she also managed U.S., global and short-term
mandates.
Richard Gray joined Rogge Global Partners in April 1999
and serves as a portfolio manager and head of emerging
markets. He was previously a vice president, emerging debt
research of Bank of America (1995-1999) and director,
emerging debt research for Nomura International
(1994-1995).
FFTW uses a team approach in which a specific portfolio
manager is responsible for managing FFTW's share of Global
Income Fund's assets and determines the broad risk
parameters under which these investments operate, but
relies on specialist investment teams to determine
specific fund investments. The portfolio manager is David
Marmon, a managing director of FFTW. Key members of the
team are Liaquat Ahamed, a managing director and chief
investment officer of FFTW, and Adnan Akant, Stewart
Russell, Richard Williams and Simon Hard, all of whom are
managing directors of FFTW. These individuals have held
their fund responsibilities since October 10, 2000.
Mr. Marmon joined FFTW in 1990 from Yamaichi International
(America) where he was head of futures and options
research. His responsibilities at Yamaichi included
generating trade ideas, daily analysis of market
opportunities and preparing research reports. He was
previously a financial analyst and strategist at the First
Boston Corporation, where he developed hedging programs
for financial institutions and industrial firms. He also
performed historical and scenario analyses of the futures
and options markets for traders and clients. Mr. Marmon
began his career in finance as a research analyst on Chase
Manhattan's arbitrage and municipal trading desks.
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Mr. Ahamed came to FFTW in 1988 after nine years with the
World Bank, where he was in charge of the bank's
investments in all non-dollar government bond markets.
Before assuming responsibility for the management of the
non-dollar portfolios, he was responsible for investment
and trading in each of the markets, including pounds
sterling, Deutsche mark, Japanese yen, Canadian dollars
and Australian dollars. In addition, he was involved in
providing technical advice to numerous central banks on
reserve and liability management. Mr. Ahamed worked
initially as an economist at the World Bank, providing
economic advice and analyses to senior government
officials in numerous developing countries including the
Philippines, Korea, Bangladesh and Kenya.
Mr. Akant joined FFTW in 1984 after six years with the
World Bank, where he served initially as a project
financial analyst in Europe and the Middle East area
before joining the treasurer's staff as an investment
officer in 1979. Over the next five years, as a member of
the investment department, he was responsible for
investment and trading of each of the major sectors of the
bank's actively managed liquidity portfolio. He was a
member of the investment strategy committee and shared
responsibility for formulating and implementing the bank's
trading and investment strategy. In 1982, Mr. Akant was
promoted to senior investment officer and was the
division's deputy in charge of the U.S. dollar portfolio.
Mr. Williams joined FFTW in 1995 from Deutsche Morgan
Grenfell, where he worked as an analyst in the
fixed-income research department.
Mr. Hard joined FFTW's affiliate in London in 1989 from
Mercury Asset Management, the investment management
affiliate of S.G. Warburg & Co., Ltd (now Warburg Dillon
Read). His responsibilities there included the formulation
of global bond and currency investment policies, and the
management of interest rate and currency exposures of the
firm's specialist non-dollar bond portfolios. He was
previously first vice president and London branch manager
of Julius Baer Investment Management, Inc.
Mr. Russell joined FFTW in 1992 from the short-term
proprietary trading desk in the global markets area of
J.P. Morgan. His primary responsibilities included
proprietary positioning of U.S. and non-U.S. government
obligations, corporate bonds and asset-backed securities.
Prior to that, Mr. Russell managed J.P. Morgan's
short-term interest rate risk group, coordinating a
$10 billion book of assets and liabilities.
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