PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 2000
October 10, 2000
Dear Investor,
The board of trustees for each of PaineWebber Global Equity Fund and
PaineWebber Global Income Fund has approved new investment management
arrangements for the fund and related investment strategy changes that became
effective on October 10, 2000 pursuant to a new Interim Investment Management
and Administration Agreement between each fund and Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins") and Interim Sub-Advisory Contracts between
Mitchell Hutchins and unaffiliated sub-advisers.
As a result of these new investment advisory arrangements, the funds'
Statement of Additional Information ("SAI") is revised as follows:
THE SECOND PARAGRAPH OF THE COVER PAGE IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned asset management subsidiary
of PaineWebber Incorporated ("PaineWebber") serves as
the investment adviser (or investment manager) and
administrator for each fund. As distributor for the
funds, Mitchell Hutchins has appointed PaineWebber to
serve as dealer for the sale of fund shares. Mitchell
Hutchins has appointed unaffiliated investment advisers
to serve as sub-advisers for each fund's investments
(each a "sub-adviser"). Martin Currie Inc. serves as
sub-adviser for Global Equity Fund's foreign
investments. Rogge Global Partners plc and Fischer
Francis Trees & Watts, Inc. and its affiliates ("FFTW")
serve as sub-advisers for Global Income Fund. Schroder
Investment Management North America Inc. ("SIMNA")
serves as sub-adviser for Asia Pacific Growth Fund and
Emerging Markets Equity Fund.
THE DESCRIPTION OF PAINEWEBBER GLOBAL EQUITY FUND IN THE SECOND, THIRD, FOURTH,
FIFTH AND SIXTH PARAGRAPHS OF THE SECTION CAPTIONED "THE FUNDS AND THEIR
INVESTMENT POLICIES" ON P. 2 IS REPLACED IN ITS ENTIRETY BY THE FOLLOWING:
GLOBAL EQUITY FUND'S investment objective is long-term
growth of capital. The fund invests primarily in equity
securities issued by companies in developed foreign
countries, as well as in the United States. Mitchell
Hutchins allocates the fund's investments between U.S.
and foreign markets and manages the fund's U.S.
investments. Mitchell Hutchins has appointed Martin
Currie Inc. as sub-adviser for the fund's foreign
investments.
The fund invests at least 80% of its total assets in
securities of issuers in the United States and
countries represented in the Morgan Stanley Capital
International ("MSCI") Europe, Australasia and Far East
Index ("EAFE Index"). The EAFE Index is a well known
index that reflects most major equity markets outside
the United States. The fund's investments in futures
contracts and other derivatives to attempt to replicate
the investment performance of the S&P 500 Composite
Stock Index for its U.S. investments are included in
this 80% basket. The fund may invest up to 20% of its
total assets in securities of issuers located in other
countries (for example, Canada and emerging markets).
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When Mitchell Hutchins or Martin Currie Inc. believes
it is consistent with Global Equity Fund's investment
objective, the fund may invest up to 35% of its total
assets in investment grade bonds that are issued by
corporate or governmental entities and that have
maturities no longer than seven years. The fund may
invest up to 10% of its net assets in convertible
securities rated below investment grade. When Mitchell
Hutchins or Martin Currie Inc. considers market,
economic, political or currency conditions abroad to be
unstable, the fund may assume a temporary defensive
position by investing all or a significant part of its
assets in securities of U.S. and Canadian issuers or by
holding cash or short-term money market instruments.
The fund may invest up to 35% of its total assets in
cash or investment grade money market instruments for
liquidity purposes, pending investment in other
securities or to reinvest cash collateral from
securities lending.
Mitchell Hutchins reevaluates the allocation of the
fund's assets between U.S. and foreign securities
monthly and does not expect to reallocate the fund's
assets to reflect relatively minor changes (that is,
less than 5%) in the asset allocation model employed.
When Mitchell Hutchins determines that a reallocation
of the fund's assets is appropriate, the fund may
effect the reallocation by using cash available from
the purchase of fund shares or by selectively selling
securities in a region to meet redemption requests in
addition to buying or selling portfolio securities
specifically to implement a reallocation. The fund
expects to use futures contracts and forward currency
contracts to adjust its exposure to U.S. and foreign
stock markets. Mitchell Hutchins determines the extent
to which the fund uses futures contracts and forward
currency contracts for this purpose and is responsible
for implementing these transactions.
THE DESCRIPTION OF PAINEWEBBER GLOBAL INCOME FUND IN THE FIRST FULL PARAGRAPH ON
P. 3 OF THE SECTION CAPTIONED "THE FUNDS AND THEIR INVESTMENT POLICIES" IS
REPLACED IN ITS ENTIRETY BY THE FOLLOWING AND THE REFERENCES TO MITCHELL
HUTCHINS IN THE SECOND, THIRD, FOURTH AND FIFTH FULL PARAGRAPHS ON P. 3 ARE
CHANGED TO "THE APPLICABLE SUB-ADVISER":
GLOBAL INCOME FUND'S primary investment objective is
high current income consistent with prudent investment
risk; capital appreciation is a secondary objective.
The fund invests primarily in high-quality bonds issued
or guaranteed by foreign governments in developed
countries, the U.S. government, their respective
agencies or instrumentalities or supranational
organizations or issued by U.S. or foreign companies.
Rogge Global Partners plc and Fischer Francis Trees &
Watts, Inc. and its affiliates ("FFTW") serve as the
fund's sub-advisers.
THE FIRST PARAGRAPH IN THE SECTION CAPTIONED "INVESTMENT ADVISORY,
ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS -- INVESTMENT ADVISORY AND
ADMINISTRATION ARRANGEMENTS" ON P. 44 IS REPLACED IN ITS ENTIRETY BY THE
FOLLOWING:
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS.
Mitchell Hutchins acts as the investment adviser and
administrator for Asia Pacific Growth Fund and Emerging
Markets Equity Fund and as investment manager and
administrator for Global Equity Fund and Global Income
Fund pursuant to separate contracts (each an "Advisory
Contract") with each Trust. Under the Advisory
Contracts, each fund pays Mitchell Hutchins a fee
(expressed as a percentage of the fund's average daily
net assets), computed daily and paid monthly, at the
annual rates indicated below.
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THE SECOND PARAGRAPH IN THE SECTION CAPTIONED "INVESTMENT ADVISORY,
ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS -- INVESTMENT ADVISORY AND
ADMINISTRATION ARRANGEMENTS" ON P. 45 IS AMENDED BY REPLACING THE LAST SENTENCE
WITH THE FOLLOWING:
The Advisory Contract for each of Asia Pacific Growth
Fund and Emerging Markets Equity Fund terminates
automatically upon assignment and is terminable at any
time without penalty by the fund's board or by vote of
the holders of a majority of the fund's outstanding
voting securities on 60 days' written notice to
Mitchell Hutchins, or by Mitchell Hutchins on 60 days'
written notice to the fund. The current Advisory
Contract for each of Global Equity Fund and Global
Income Fund is an Interim Investment Management and
Administration Contract that may be terminated without
penalty on 10 days' written notice to Mitchell Hutchins
by the board of the fund or by vote of a majority of
the outstanding voting securities of the fund and will
terminate 150 days after October 10, 2000 (on March 9,
2001) unless it has by then been approved by a majority
of the outstanding voting securities of the fund.
ALL THE TEXT AFTER THE FIRST PARAGRAPH IN THE DESCRIPTION OF THE INVESTMENT
MANAGEMENT ARRANGEMENTS FOR PAINEWEBBER GLOBAL EQUITY FUND ON PP. 45-46 IN THE
SECTION CAPTIONED "INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION
ARRANGEMENTS -- INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS -- GLOBAL
EQUITY FUND" IS REPLACED BY THE FOLLOWING:
The Advisory Contract authorizes Mitchell Hutchins to
retain one or more sub-advisers for the management of
the fund's investment portfolio. Mitchell Hutchins has
entered into an interim sub-advisory contract ("Interim
Sub-Advisory Contract") with Martin Currie Inc.
effective October 10, 2000, pursuant to which Martin
Currie Inc. serves as investment sub-adviser for the
foreign investments of Global Equity Fund. (Mitchell
Hutchins allocates the fund's investments between U.S.
and foreign investments and is responsible for the
day-to-day management of the fund's U.S. investments.)
Martin Currie Inc. is a wholly owned subsidiary of
Martin Currie Limited, a holding company. Under the
Interim Sub-Advisory Contract, Mitchell Hutchins (not
the fund) is obligated to pay Martin Currie Inc. at the
annual rate of 0.35% of the average daily net assets
allocated to its management up to and including $150
million, 0.30% on those assets in excess of $150
million up to and including $250 million, 0.25% on
those assets in excess of $250 million up to and
including $350 million, and 0.20% on those assets above
$350 million. For purposes of computing this fee, (1)
the average daily net assets of the fund that are
allocated to the management of Martin Currie Inc. are
added to the average daily net assets of another fund,
PACE International Equity Investments (which is also
sub-advised by Martin Currie Inc.), (2) the fee is
applied to the aggregate daily net assets, and (3) the
effective fee rate for these aggregate daily net assets
is applied to the fund assets that are allocated to the
management of Martin Currie Inc. and the resulting
amount is the amount payable by Mitchell Hutchins to
Martin Currie Inc. under the Interim Sub-Advisory
Contract.
From October 1, 1998 to October 10, 2000, another
sub-adviser, Invista Capital Management, LLC
("Invista") was responsible for the day-to-day
management of the fund's foreign investments under a
substantially similar sub-advisory contract. For the
fiscal year ended October 31, 1999 and for the period
from October 1 through October 31, 1998, Mitchell
Hutchins paid or accrued sub-advisory fees to Invista
of $761,740 and $95,901, respectively. Invista is an
indirect wholly owned subsidiary of Principal Life
Insurance Company. Prior to October 1, 1998, GE
Investment Management Incorporated ("GEIM") (a wholly
owned subsidiary of General Electric Company) served as
investment sub-adviser for all the fund's assets
pursuant to a sub-advisory contract with Mitchell
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Hutchins. Under that sub-advisory contract, Mitchell
Hutchins paid or accrued sub-advisory fees to GEIM for
the period from November 1, 1997 to September 30, 1998
and the fiscal year ended October 31, 1997 of
$1,332,538 and $1,695,840, respectively.
Under the Interim Sub-Advisory Contract, Martin Currie
Inc. will not be liable for any error of judgment or
mistake of law or for any loss suffered by Investment
Trust, Global Equity Fund, its shareholders or Mitchell
Hutchins in connection with the Interim Sub-Advisory
Contract, except any loss resulting from willful
misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless
disregard by it of its obligations and duties under the
Interim Sub-Advisory Contract.
The Interim Sub-Advisory Contract terminates
automatically 150 days after October 10, 2000 (on March
9, 2001) and is terminable at any time without penalty
on 10 days' written notice to Martin Currie Inc. by
Investment Trust's board or by vote of a majority of
the fund's outstanding voting securities and by Martin
Currie Inc. on 60 days' written notice to Mitchell
Hutchins. The Interim Sub-Advisory Contract may be
terminated by Mitchell Hutchins (1) upon material
breach by the sub-adviser of its representations and
warranties, which breach shall not be cured within a 20
day period after notice of such breach; or (2) if the
sub-adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract.
THE FOLLOWING NEW TEXT IS ADDED AFTER THE FIRST PARAGRAPH IN THE DESCRIPTION OF
THE INVESTMENT MANAGEMENT ARRANGEMENTS FOR PAINEWEBBER GLOBAL INCOME FUND ON P.
46 IN THE SECTION CAPTIONED "INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS -- INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS
-- GLOBAL INCOME FUND":
The Advisory Contract authorizes Mitchell Hutchins to
retain one or more sub-advisers for the management of
the fund's investment portfolio. Mitchell Hutchins has
entered into separate interim sub-advisory contracts
(each an "Interim Sub-Advisory Contract") with Rogge
Global Partners plc and Fischer Francis Trees & Watts,
Inc. and its affiliates ("FFTW") effective October 10,
2000, under which Rogge Global Partners and FFTW manage
the fund's assets. Mitchell Hutchins (not the fund)
pays Rogge Global Partners a fee at the annual rate of
0.25% of the portion of the fund's average annual net
assets that it manages and pays FFTW a fee in the
annual amount of 0.25% of the portion of the fund's
average daily net assets that it manages up to and
including $400 million and 0.20% of the average daily
net assets that it manages in excess of $400 million.
Prior to October 10, 2000, Mitchell Hutchins managed
all the fund's assets.
Rogge Global Partners is a wholly owned subsidiary of
United Asset Management Corporation ("UAM"), a New York
Stock Exchange-listed company. UAM is principally
engaged through affiliated firms in the United States
and abroad in providing institutional investment
management services and acquiring institutional
management firms like Rogge Global Partners. During the
third quarter of 2000, eleven of Rogge Global Partners'
senior employees began the process of buying back 30.5%
in the aggregate of the firm from UAM, based on a
valuation date of December 31, 1999. Those eleven
employees, including all six portfolio managers, will
initially buy back 18.0% of Rogge's shares from UAM. An
additional 12.5% will be available through an option
scheme that ties in the key executives for seven years
(until 2007).
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On June 16, 2000, Old Mutual and OM Acquisition Corp.,
a Delaware corporation that was formed solely to effect
the proposed acquisition of UAM, entered into an
Agreement and Plan of Merger ("Merger Agreement") with
UAM. Pursuant to the Merger Agreement, which was
unanimously approved by the boards of directors of Old
Mutual and UAM, OM Acquisition Corp. commenced a tender
offer to acquire all of the issued and outstanding
common stock of UAM.
To initiate the transaction, Old Mutual and OM
Acquisition Corp. filed a tender offer statement and
UAM filed a solicitation/recommendation statement with
the Securities and Exchange Commission ("SEC"). The
tender offer price was set at $25 per share in cash and
was subject to downward adjustment in certain
circumstances, including should UAM's revenues from
assets under management decline below a specified level
prior to consummation of the offer. Consummation of the
tender offer also was subject to customary conditions,
including acceptances by holders of a majority of UAM's
outstanding shares and receipt of regulatory and client
approvals. On September 26, 2000, Old Mutual announced
the closure of its tender offer for UAM.
Following completion of the tender offer, OM
Acquisition Corp. will be merged with and into UAM.
Thereafter, OM Acquisition Corp. will cease to exist,
and UAM will continue as the surviving corporation and
become a direct and wholly owned subsidiary of Old
Mutual. The tender offer and merger were not subject to
any financing conditions.
Old Mutual is a 155-year old international financial
services firm that was founded in Cape Town, South
Africa, and is now headquartered in London, England.
Old Mutual was founded in 1845 principally to provide
life insurance policies in South Africa. Today, Old
Mutual provides a broad array of financial services to
clients in the United Kingdom, in South Africa and
other countries in southern Africa, and in other
locations principally outside of the United States. Old
Mutual, which was founded as a mutual organization, has
been a publicly held stock company since the middle of
1999.
Fischer Francis Trees & Watts, Inc. ("FFTW (NY)") is a
New York corporation organized in 1972 and is directly
owned by Charter Atlantic Corporation, a holding
company organized as a New York corporation. The
affiliates of FFTW NY are Fischer Francis Trees &
Watts, a corporate partnership organized under the laws
of the United Kingdom ("FFTW (UK)") and Fischer Francis
Trees & Watts, Pte Ltd (Singapore), a Singapore
corporation ("FFTW (Singapore)"). FFTW (Singapore) is a
wholly owned subsidiary of FFTW (NY). FFTW (UK) is 99%
owned by FFTW (NY) and 1% owned by Charter Atlantic
Corporation.
Under the Interim Sub-Advisory Contracts, neither Rogge
nor FFTW will be liable for any error of judgment or
mistake of law or for any loss suffered by Investment
Series, Global Income Fund, its shareholders or
Mitchell Hutchins in connection with the Interim
Sub-Advisory Contract, except loss resulting from
willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from
reckless disregard by it of its obligations and duties
under the Interim Sub-Advisory Contract.
Each Interim Sub-Advisory Contract terminates
automatically 150 days after October 10, 2000 (on March
9, 2001) and is terminable at any time without penalty
on 10 days' written notice to the sub-adviser by
Investment Series' board or by vote of the holders of a
majority of the fund's outstanding voting securities
and by the sub-adviser on 60 days' written notice to
Mitchell Hutchins. An Interim Sub-Advisory Contract may
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be terminated by Mitchell Hutchins (1) upon material
breach by the sub-adviser of its representations and
warranties, which breach shall not be cured within a 20
day period after notice of such breach; or (2) if the
sub-adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract.
