As filed with the Securities and Exchange Commission on October 18, 1999
Registration No. 33-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. ___
PAINEWEBBER INVESTMENT TRUST
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
1285 Avenue of the Americas
18th Floor
New York, New York 10019
(Name and address of agent for service)
COPIES TO:
ARTHUR J. BROWN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: as soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on November 17,
1999, pursuant to Rule 488.
Title of securities being registered: Class A Shares of beneficial
interest, par value $0.001 per share.
No filing fee is required because of reliance on Section 24(f) of the
Investment Company Act of 1940, as amended.
<PAGE>
PAINEWEBBER INVESTMENT TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Form N-14 Cross Reference Sheet
o Notice of Special Meeting
o Part A - Prospectus/Proxy Statement
o Part B - Statement of Additional Information
o Part C - Other Information
o Signature Page
o Exhibits
<PAGE>
PAINEWEBBER INVESTMENT TRUST
FORM N-14 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A Item No. Prospectus/Proxy
and Caption Statement Caption
- ----------- -----------------
<S> <C>
1. Beginning of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Fee Table, Synopsis Information, and Reasons for the Reorganization;
Risk Factors Comparison of the Funds;
Comparison of Principal Risk
Factors
4. Information about the Transaction Reason for the Reorganization;
Additional Information about the
Reorganization
5. Information about the Registrant Reasons for the Reorganization;
Comparison of Principal Risk
Factors; Organization of the
Funds; Capitalization. See also
the Prospectus for PaineWebber
Global Equity Fund, dated March
1, 1999, previously filed on
EDGAR, Accession Number
0000928385-99-000626
6. Information about the Company Being Reasons for the Reorganization;
Acquired Comparison of Principal Risk
Factors; Organization of the
Funds; Capitalization. See also
the Annual Report to Shareholders
of Global Small Cap Fund for the
fiscal year ended July 31, 1999,
previously filed on EDGAR,
Accession Number
0000889812-99-002934
7. Voting Information Introduction
8. Interest of Certain Persons and Experts Not Applicable
<PAGE>
PAINEWEBBER INVESTMENT TRUST
FORM N-14 CROSS REFERENCE SHEET
Part A Item No. Prospectus/Proxy
and Caption Statement Caption
- ----------- -----------------
9. Additional Information Required for Not Applicable
Re-offering by Persons Deemed to be
Underwriters
Part B Item No. Statement of Additional
and Caption Information Caption
- ----------- -------------------
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information about the Statement of Additional
Registrant Information of PaineWebber Global
Equity Fund, dated March 1, 1999
and previously filed on EDGAR,
Accession Number
0000898432-99-000375; Annual
Report to Shareholders of
PaineWebber Global Equity Fund
for the fiscal year ended October
31, 1998, previously filed on
EDGAR, Accession Number
0001047469-99-000274; Semi-Annual
Report to Shareholders of
PaineWebber Global Equity Fund
for the six months ended April
30, 1999, previously filed on
EDGAR, Accession Number
0001047469-99-026576.
13. Additional Information about the Annual Report to Shareholders of
Company Being Acquired Global Small Cap Fund for the
fiscal year ended July 31, 1999,
previously filed on EDGAR,
Accession Number
0000889812-99-002934
14. Financial Statements Annual Report to Shareholders of
PaineWebber Global Equity Fund
for the fiscal year ended October
31, 1998, previously filed on
EDGAR, Accession Number
0001047469-99-000274; Semi-Annual
Report to Shareholders of Global
Equity Fund for the six months
ended April 30, 1999, previously
filed on EDGAR, Accession Number
<PAGE>
PAINEWEBBER INVESTMENT TRUST
FORM N-14 CROSS REFERENCE SHEET
Part B Item No. Prospectus/Proxy
and Caption Statement Caption
- ----------- -----------------
0001047469-99-026576; Annual
Report to Shareholders of Global
Small Cap Fund for the fiscal
year ended July 31, 1999,
previously filed on EDGAR,
Accession Number
0000889812-99-002934; PRO FORMA
Financial Statements for the nine
months ended July 31, 1999.
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
GLOBAL SMALL CAP FUND INC.
51 West 52nd Street
New York, New York 10019-6114
November 18, 1999
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a significant proposal pursuant to which Global Small Cap Fund Inc.
("Global Small Cap") would convert from a closed-end investment company to an
open-end investment company by reorganizing into PaineWebber Global Equity Fund
("Global Equity"), a series of PaineWebber Investment Trust ("Trust"), an
open-end investment company. If the proposal is approved and implemented, each
shareholder of Global Small Cap automatically would become a holder of Class A
shares of Global Equity, and Global Small Cap would be liquidated.
As with many closed-end investment companies, Global Small Cap shares
have historically traded at a discount to their net asset value on the American
Stock Exchange. THE REORGANIZATION WOULD COMPLETELY ELIMINATE THIS DISCOUNT FOR
GLOBAL SMALL CAP SHAREHOLDERS. It is the intention of the Board of Directors of
Global Small Cap (the "Board") to provide shareholders of Global Small Cap the
opportunity to realize their investment's full value by converting their shares,
at net asset value, to shares of Global Equity. In addition, the Board believes
that the reorganization would provide Global Small Cap shareholders with the
benefits of the open-end investment company form of organization shareholders
with the economies of scale, and other benefits of a combination with an
existing fund. Due to the relatively similar investment objectives and
investment policies of Global Small Cap and Global Equity, along with the more
flexible and highly disciplined investment process of Global Equity, the
proposed merger is believed to be in the overall best interests of all Global
Small Cap shareholders. AFTER CAREFUL CONSIDERATION, THE BOARD HAS UNANIMOUSLY
APPROVED THE PROPOSAL AND RECOMMENDS THAT YOU READ THE ENCLOSED MATERIALS
CAREFULLY AND THEN VOTE "FOR" THE REORGANIZATION PROPOSAL.
Global Small Cap's investment objective of long-term capital
appreciation is comparable to Global Equity's investment objective of long-term
growth of capital. Global Equity invests primarily in stocks of mid- and
large-capitalization companies located in the United States and developed
foreign markets. Global Small Cap primarily invests in equity securities of
small-capitalization companies in those same markets. The accompanying document
describes the proposed Reorganization and compares the investment policies,
operating expenses and performance histories of Global Small Cap and Global
Equity in more detail. Please read it carefully.
YOUR VOTE IS VERY IMPORTANT TO HELP DECIDE THE FUTURE OF GLOBAL SMALL
CAP. THE BOARD URGES THAT YOU VOTE "FOR" THE REORGANIZATION PROPOSAL. After
reviewing the attached materials, please take a moment to complete, date and
sign your proxy card and return it in the enclosed postage-paid return envelope
today. Voting your shares early will permit Global Small Cap to avoid costly
follow-up mail and telephone solicitation.
Sincerely,
Margo N. Alexander
PRESIDENT
<PAGE>
GLOBAL SMALL CAP FUND INC.
51 West 52nd Street
New York, New York 10019-6114
-------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 30, 1999
-------------------
To the Shareholders,
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
("Meeting") of Global Small Cap Fund Inc. ("Global Small Cap") will be held on
December 30, 1999, at 1285 Avenue of the Americas, 14th Floor, New York, New
York, 10019, at 10:30 a.m., Eastern time, for the following purpose:
To approve an Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the combination of Global Small
Cap and PaineWebber Global Equity Fund ("Global Equity"), a series of
PaineWebber Investment Trust ("Trust"). Pursuant to the Plan, Global
Small Cap will transfer all its assets to Global Equity, which will
assume all the liabilities of Global Small Cap, and the Trust will
issue to each Global Small Cap shareholder the number of full and
fractional Class A shares of Global Equity having an aggregate value
that, on the effective date of the reorganization, is equal to the
aggregate net asset value of the shareholder's shares in Global Small
Cap.
Shareholders of record as of the close of business on November 4, 1999,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Board of Directors of Global
Small Cap. Returning your proxy promptly is important to ensure a quorum at the
Meeting. You may revoke your proxy at any time before it is exercised by the
subsequent execution and submission of a revised proxy, by giving written notice
of revocation to Global Small Cap at any time before the proxy is exercised or
by voting in person at the Meeting.
By Order of the Board of Directors,
Dianne E. O'Donnell
Secretary
November 18, 1999
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card,
sign and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the additional
expense of further solicitation, we ask your cooperation in mailing your proxy
card promptly.
For more information or questions regarding casting your vote for the
Meeting, please call 1-800-949-8596.
If we do not receive your completed proxy cards after several weeks,
you may be contacted by our proxy solicitor, Shareholder Communications
Corporation. Our proxy solicitor will remind you to vote your shares.
- --------------------------------------------------------------------------------
2
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to Global Small Cap involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
REGISTRATION VALID SIGNATURE
------------ ---------------
Corporate Accounts
(1) ABC Corp................................ ABC Corp.
John Doe, Treasurer
(2) ABC Corp................................ John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer....... John Doe
(4) ABC Corp. Profit Sharing Plan........... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership..................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership.... Jane B. Smith, General
Partner
Trust Accounts
(1) ABC Trust Account....................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA............................. John B. Smith
(2) Estate of John B. Smith................. John B. Smith, Jr., Executor
3
<PAGE>
GLOBAL SMALL CAP FUND INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
(212) 882-5000
PAINEWEBBER GLOBAL EQUITY FUND
(A PORTFOLIO OF PAINEWEBBER INVESTMENT TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
TOLL FREE: (800) 647-1568
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: November 18, 1999
This document is being furnished in connection with a Special Meeting
of Shareholders of Global Small Cap Fund Inc. ("Global Small Cap"), a Maryland
corporation, to be held on December 30, 1999, at 1285 Avenue of the Americas,
14th Floor, New York, NY 10019 at 10:30 a.m., Eastern time (such meeting and any
adjournments thereof are referred to as the "Meeting"). At the Meeting, the
shareholders of Global Small Cap are being asked to consider and approve an
Agreement and Plan of Reorganization and Termination ("Plan") that provides for
the reorganization of Global Small Cap into PaineWebber Global Equity Fund
("Global Equity"), a series of PaineWebber Investment Trust, a Massachusetts
business trust ("Trust") ("Reorganization"). A form of the Plan is attached as
Appendix A to this Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). The Board of Directors of Global Small Cap ("Board") has
unanimously approved the Plan as being in the best interests of Global Small Cap
and its shareholders.
Pursuant to the Plan, Global Small Cap will transfer all its assets to
Global Equity, which will assume all the liabilities of Global Small Cap, and
the Trust will issue to each Global Small Cap shareholder the number of full and
fractional Class A shares of beneficial interest in Global Equity ("Global
Equity Class A Shares") having an aggregate value that, on the effective date of
the Reorganization, is equal to the aggregate net asset value of the
shareholder's shares of common stock of Global Small Cap ("Global Small Cap
Shares"). The value of each Global Small Cap shareholder's account with Global
Equity immediately after the Reorganization will be the same as the value of
such shareholder's Global Small Cap shares immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed on Global Equity Class A
Shares issued in connection with the Reorganization.
Global Equity is a diversified series of the Trust, which is an
open-end management investment company comprised of several outstanding series.
Global Equity's investment objective is long-term growth of capital. Global
Equity seeks to achieve its investment objective by investing primarily in
equity securities of companies located in the United States and developed
foreign markets. Global Equity may also invest in U.S. and foreign debt
securities.
4
<PAGE>
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Global Small Cap should know before voting on the Plan. It should
be read carefully and retained for future reference.
A copy of the current Prospectus of Global Equity, dated March 1, 1999,
as supplemented, is attached as Appendix B to this Proxy Statement/Prospectus.
The Annual Report to Shareholders of Global Small Cap for the fiscal year ended
July 31, 1999, is on file with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into this Proxy Statement/Prospectus. In
addition, the current Statement of Additional Information ("SAI") of Global
Equity, dated March 1, 1999, the Annual Report to Shareholders of Global Equity
for the fiscal year ended October 31, 1998, and the Semi-Annual Report to
Shareholders of Global Equity for the six months ended April 30, 1999, are on
file with the SEC and are incorporated by reference into this Proxy
Statement/Prospectus. These documents are available without charge by writing to
Mitchell Hutchins Asset Management Inc., 51 West 52nd Street, New York, NY
10019-6114 or by calling (800) 647-1568. The SEC maintains a Web site at
http://www.sec.gov that contains the documents described above and other
information about Global Small Cap and the Trust. Additional information about
Global Equity may also be obtained on the Web at http://www.painewebber.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
5
<PAGE>
TABLE OF CONTENTS
Section Title Page
- ------------- ----
INTRODUCTION...................................................................1
PROPOSAL: REORGANIZATION OF GLOBAL SMALL CAP..................................3
FUND INTO GLOBAL EQUITY
REASONS FOR THE REORGANIZATION.................................................3
The Reorganization........................................................3
Board Considerations......................................................3
COMPARISON OF THE FUNDS........................................................7
COMPARISON OF PRINCIPAL RISK FACTORS..........................................15
Primary Differences in Risks of the Funds................................15
Risks Common to Both Funds...............................................15
Investing in Securities Generally....................................15
Investing in Foreign Securities and Equity...........................16
Lower Quality Debt...................................................16
Sovereign Debt.......................................................17
Illiquid Securities..................................................17
Year 2000............................................................17
FINANCIAL HIGHLIGHTS..........................................................18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION...............................19
Terms of the Reorganization..............................................19
Description of Securities to be Issued...................................20
Dividends and Other Distributions........................................20
Potential Net Redemption.................................................21
Accounting Treatment.....................................................21
Federal Income Tax Considerations........................................21
ORGANIZATION OF THE FUNDS.....................................................23
CAPITALIZATION................................................................23
LEGAL MATTERS.................................................................
INFORMATION FILED WITH THE SEC AND AMEX.......................................
INFORMATION ABOUT THE FUNDS'ADVISER AND
SUB-ADVISERS, AND GLOBAL EQUITY'S DISTRIBUTOR...............................24
ADDITIONAL INFORMATION ABOUT GLOBAL SMALL CAP AND GLOBAL EQUITY...............25
EXPERTS.......................................................................25
SHAREHOLDER PROPOSALS.........................................................26
APPENDIX A: Plan of Reorganization and Termination...........................A-1
APPENDIX B: Effective Prospectus of Global Equity ...........................B-1
APPENDIX C: Directors/Trustees of Global Small Cap and Global Equity and
Officers of Global Small Cap.....................................C-1
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Global Small Cap in connection with the solicitation of proxies by the Board for
use at the Meeting. All properly executed and unrevoked proxies received in time
for the Meeting will be voted in accordance with the instructions contained
therein. If no instructions are given, shares represented by proxies will be
voted "FOR" approval of the Plan. The presence in person or by proxy of Global
Small Cap shareholders entitled to cast a majority of all the votes entitled to
be cast at the Meeting will constitute a quorum. If a quorum is not present at
the Meeting or a quorum is present but sufficient votes to approve the proposal
described in this Proxy Statement/Prospectus are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies that they are entitled to
vote "FOR" the proposal in favor of such an adjournment and will vote those
proxies required to be voted "AGAINST" the proposal against such adjournment.
Approval of the Plan requires the affirmative vote of a majority of the
votes entitled to be cast on the proposal.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present at the Meeting for quorum purposes but will not be considered
votes cast at the Meeting. Abstentions and broker non-votes are effectively
votes against the Plan because the required affirmative vote is a specified
majority of the total shares outstanding.
Any person giving a proxy has the power to revoke it at any time prior
to its exercise by executing a superseding proxy or by submitting a written
notice of revocation to the Secretary of Global Small Cap ("Secretary"). To be
effective, such revocation must be received by the Secretary prior to the
Meeting. In addition, although mere attendance at the Meeting will not revoke a
proxy, a shareholder present at the Meeting may withdraw his or her proxy by
voting in person.
Shareholders of record as of the close of business on November 4, 1999
("Record Date"), are entitled to vote at the Meeting. On the Record Date, there
were [____] shares of Global Small Cap outstanding. Each share is entitled to
one vote for each full share held and a fractional vote for each fractional
share held. Except as set forth below, as of October 12, 1999, Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), the investment adviser of
both Global Small Cap and Global Equity ("Funds" or, individually, a "Fund"),
does not know of any person who owns beneficially 5% or more of the shares of
either Fund:
<PAGE>
Global Small Cap Fund Inc.
NUMBER OF SHARES PERCENT BENEFICIAL
SHAREHOLDER'S NAME/ADDRESS OWNED OWNERSHIP
- -------------------------- ---------------- ------------------
Ronald Olin Investment
Management Company 615,100 16.2%
One West Pack Square, Suite 777
Asheville North Carolina 28801
Deep Discount Advisors, Inc. 984,063 25.9%
One West Pack Square, Suite 777
Asheville North Carolina 28801
Global Small Cap has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
Global Small Cap expects to solicit proxies principally by mail, but it or SCC
may also solicit proxies by telephone, facsimile, e-mail or personal interview.
Global Small Cap officers and employees of Mitchell Hutchins who assist in the
proxy solicitation will not receive any additional or special compensation for
any such efforts. Global Small Cap will bear the expenses incurred in connection
with the Reorganization, which are estimated to be $150,000. SCC will be paid
approximately $7,000 for proxy solicitation services. Global Small Cap will
request broker/dealer firms, custodians, nominees and fiduciaries to forward
proxy materials to the beneficial owners of the shares held of record by such
persons. Global Small Cap may reimburse such broker/dealer firms, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation.
Global Small Cap intends to mail this Proxy Statement/Prospectus and
the accompanying proxy card on or about November [__], 1999.
2
<PAGE>
PROPOSAL: REORGANIZATION OF
GLOBAL SMALL CAP INTO GLOBAL EQUITY
REASONS FOR THE REORGANIZATION
THE REORGANIZATION
The Plan provides for the acquisition by Global Equity of all of Global
Small Cap's assets in exchange solely for Global Equity Class A Shares and the
assumption by Global Equity of all of Global Small Cap's liabilities. Global
Small Cap will then distribute the Global Equity Class A Shares to its
shareholders so that each Global Small Cap shareholder will receive full and
fractional Global Equity Class A Shares equal in aggregate value to the value of
the shareholder's shares of Global Small Cap at that time. These transactions
are scheduled to occur at 4:00 p.m., Eastern time, on January 21, 2000, or on
such later date as the conditions to consummation of the Reorganization are
satisfied ("Closing Date"). If the Reorganization is approved, the Closing Date
will not occur directly after the shareholders' meeting on December 30, 1999,
due to technological and operational concerns of the Funds' service providers.
These service providers have informed the Funds that they will not effect major
transactions, such as the Reorganization, close to the turnover to the year
2000. Global Small Cap will be liquidated as soon as is practicable after the
Closing Date. See "Additional Information About the Reorganization" below.
Global Small Cap and the Trust each will receive an opinion of
Kirkpatrick & Lockhart LLP, their counsel, to the effect that the Reorganization
will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, neither Fund nor any of their shareholders will recognize any gain
or loss for federal income tax purposes as a result of the Reorganization. To
the extent Global Small Cap sells securities prior to the Closing Date, there
may be net recognized gains or losses to the Fund. Any net recognized gains
would increase the amount of any distribution made to shareholders of Global
Small Cap prior to the Closing Date. See "Additional Information About the
Reorganization -- Federal Income Tax Considerations" below.
If the Reorganization is not approved by shareholders at the Meeting,
the Global Small Cap will continue to operate as a closed-end fund and the Board
will then consider other options and alternatives for the future of the Fund.
BOARD CONSIDERATIONS
The Board, including a majority of Board Members who are not
"interested persons," as that term is defined in the Investment Company Act of
1940 ("1940 Act"), of either Global Small Cap or Global Equity ("Independent
Board Members"), has determined that the Reorganization is in the best interests
of Global Small Cap.
Following a series of meetings earlier in 1999, Mitchell Hutchins,
Global Small Cap's investment adviser, proposed at Board meetings held in
3
<PAGE>
September of 1999 that the Board approve the Reorganization. The Board examined
alternatives to the Reorganization and a number of factors with respect to the
Reorganization, including: (1) the compatibility of the Funds' investment
objectives, policies and restrictions; (2) the Funds' respective investment
performances; (3) the effect of the Reorganization on the expense ratio of
Global Equity Class A Shares and that expense ratio relative to Global Small
Cap's current expense ratio; (4) the costs to be incurred by each Fund as a
result of the Reorganization; (5) the tax consequences of the Reorganization;
and (6) the potential benefits of the Reorganization to other persons,
especially Mitchell Hutchins and its affiliates.
In considering whether to continue to operate Global Small Cap as a
closed-end fund, the Board compared the benefits of operating as an open-end
fund to those of operating as a closed-end fund. Particularly, the Board noted
that the closed-end structure offered benefits in terms of portfolio management,
such as the ability to invest without limitation in illiquid securities
(although Global Small Cap's investment restrictions limit its investment in
illiquid securities to 20% of net assets) and to manage the portfolio without
concern to inflows and outflows of fund assets. However, the Board also noted
that continuing to operate Global Small Cap as a closed-end fund would not
address the discount to net asset value ("NAV") at which Global Small Cap shares
have historically traded. Conversion to an open-end format would result in
immediate elimination of this discount. In addition, because Global Small Cap
has held a sizable portion of its assets in relatively liquid securities, the
loss of the more flexible illiquid securities limitation of the closed-end
format will not negatively affect it. On balance, the Board concluded that the
benefits of the closed-end structure were outweighed by the advantages of
operating as an open-end fund, most notably the elimination of the discount to
NAV.
Other techniques designed to reduce the discount, such as adopting a
managed distribution plan or repurchasing fund shares on the open market, were
rejected. In the former case and in the latter, the effectiveness of the
techniques was seriously questioned and the reduction of net assets, in either
case, was deemed likely to increase Global Small Cap's expense ratio and to
threaten the Fund's ability to remain listed on a national securities exchange
and its overall viability.
Converting Global Small Cap to an open-end fund operating on a
stand-alone basis would eliminate the discount to NAV but would result in added
distribution-related expenses borne entirely by Global Small Cap's asset base,
rather than by the combined assets of two funds. In addition, operating Global
Small Cap as a stand-alone, open-end fund might not be economically feasible
given its comparatively small asset base, which would be subject to further
diminution by probable net redemptions following conversion to an open-end
format. The Reorganization would combine Global Small Cap's assets with those of
Global Equity Class A, as of September 30, 1999, about $341 million, potentially
realizing economies of scale and the benefits noted above.
Liquidating Global Small Cap was determined by the Board to be
undesirable primarily because it would result in additional expenses arising out
of liquidating Global Small Cap's portfolio securities and would be a taxable
event to shareholders, regardless of their individual interest in continuing or
terminating their investment.
4
<PAGE>
As compared to the available alternatives, including continuing to
operate Global Small Cap as a closed-end fund, converting it to an open-end
investment company without reorganizing it into any pre-existing fund or
liquidating it, the Board determined that converting Global Small Cap to an
open-end format by merging it into Global Equity was the most advantageous
alternative for Global Small Cap. As with most closed-end equity funds, shares
of Global Small Cap have historically traded at a discount to NAV. Converting
Global Small Cap to an open-end format would eliminate the discount by enabling
shareholders to redeem shares at NAV, rather than selling them in the secondary
market. Combining the Funds, rather than operating Global Small Cap as a
stand-alone, open-end fund, would provide Global Small Cap shareholders with the
benefits of the open-end form of organization, while also providing them with
potential economies of scale.
The Board considered the investment objectives and policies of the
Funds. Global Small Cap's investment objective is long-term capital
appreciation. Global Equity has a comparable investment objective of long-term
growth of capital. To achieve its investment objective, Global Equity primarily
invests its assets in the equity securities of issuers located in the United
States and developed foreign markets. Global Small Cap normally invests at least
65% of its total assets in equity securities of small capitalization ("small
cap") companies located throughout the world, including Asia, Europe, the Far
East, the Middle East, North Africa and the Americas. The Board noted that
Global Small Cap is subject to somewhat greater risk than Global Equity to the
extent that the securities of small cap companies have historically experienced
greater volatility and are less liquid. More information on the risks of
investing in small cap companies is provided below in "Comparison of Principal
Risk Factors." The Board also determined that, although Global Equity has a
broader investment mandate, the Funds' investment objectives and policies are
reasonably compatible.
The Board considered the compatibility of the current portfolio
holdings of Global Small Cap and Global Equity Fund. Mitchell Hutchins informed
the Board that while the portfolios of the Funds had significant dissimilarities
at this point in time, Global Small Cap's portfolio managers would be able to
liquidate a significant portion of the incompatible securities of its portfolio
before the Reorganization is effected. In particular, Mitchell Hutchins
explained that such early liquidation would spread the costs and tax
consequences of selling a significant portion of Global Small Cap's portfolio
over all of its shareholders, not just over those shareholders who remain
invested in Global Equity after the Reorganization. Selling a portion of Global
Small Cap's portfolio before the Reorganization would also allow that Fund's
portfolio managers to liquidate the securities in a measured and economically
rational manner, instead of in a hurried "fire sale" environment to liquidate
all those securities at the time of the Reorganization.
The Board also considered the different advisory arrangements in place
for the Funds and the historic performance of Global Small Cap in relation to
the performance of Global Equity. Mitchell Hutchins currently serves as
investment adviser for Global Small Cap, and GE Investment Management
Incorporated ("GEIM"), an indirect wholly owned subsidiary of General Electric
Company, serves as its sub-adviser, performing day-to-day portfolio management.
Mitchell Hutchins is also the investment adviser for Global Equity, performing
5
<PAGE>
asset allocation between the U.S. and foreign portions of the portfolio and
performing day-to-day portfolio management of the U.S. portion. Invista Capital
Management LLC ("Invista"), a wholly owned subsidiary of Principal Financial
Group, serves as Global Equity's sub-adviser for the international portion of
its portfolio. The Board considered the level and quality of investment advisory
services provided by Mitchell Hutchins and Invista, and decided that Global
Small Cap shareholders would benefit from their continued provision of portfolio
management services for Global Equity after the Reorganization. Therefore, upon
the effective date of the Reorganization, GEIM would no longer act as the
sub-adviser for any of the reorganized portfolio assets.
Mitchell Hutchins also advised the Board that, while past performance
provides no guarantee of future results, Global Equity historically has
outperformed Global Small Cap. Information on the relative performance of the
Funds is provided below in "Comparison of the Funds -- Performance."
The Board also considered the impact the Reorganization would have on
expenses. As a closed-end fund, Global Small Cap currently pays no Rule 12b-1
distribution or service fees. The Global Equity Class A Shares that Global Small
Cap shareholders would receive in the Reorganization are subject to an annual
Rule 12b-1 service fee of 0.25% of average net assets attributable to Class A.
Open-end funds such as Global Equity also normally pay higher transfer agency
fees than closed-end funds due to the continuous sale and redemption of their
shares. In addition, open-end funds such as Global Equity incur expenses
associated with maintaining continuous federal securities registration.
Closed-end funds such as Global Small Cap typically do not incur these expenses.
In analyzing expenses, the Board also considered the investment
advisory and administration fees paid by Global Equity. Global Small Cap pays
Mitchell Hutchins total investment advisory and administration fees of 1.00% of
its average weekly net assets. Global Equity pays Mitchell Hutchins a fee,
computed daily and paid monthly, at the effective annual rate of 0.85% of the
Fund's average daily net assets. This fee rate is reduced to the extent that
Global Equity's net assets exceed $500 million. GEIM's and Invista's
sub-advisory fees are paid by Mitchell Hutchins and not the respective Funds.
The investment advisory fee schedule in place for Global Equity will apply after
the Reorganization. Therefore, the effective investment advisory and
administration fee rate for the combined entity will be 0.85%, 0.15% less than
Global Small Cap's current investment advisory and administration fee rate.
The Board also considered that, overall, the Reorganization will result
in slightly higher total operating expenses for Global Small Cap shareholders.
For its fiscal year ended July 31, 1999, Global Small Cap had annualized
operating expenses of 1.43% of average weekly net assets. For the six months
ended April 30, 1999, Global Equity Class A Shares had annualized total
operating expenses of 1.56% of average daily net assets. Based on Mitchell
Hutchins' preliminary calculations for the current fiscal year, Mitchell
Hutchins estimates that, on a PRO FORMA basis, Global Equity Class A Shares
would have total operating expenses of approximately 1.55% of average daily net
assets. (This PRO FORMA expense ratio assumes that the Reorganization would be
effected during the fiscal year ending October 31, 1999.) Accordingly, the
Reorganization could result in an increase in total annual operating expenses
for Global Small Cap shareholders. For more information on the comparative fees
and expenses of the Funds, see "Comparison of the Funds -- Fees and Expenses,"
below. In addition, the Board noted that no initial sales charges would be
6
<PAGE>
imposed on the Global Equity Class A Shares issued to Global Small Cap
shareholders in connection with the Reorganization.
Finally, the Board reviewed the principal terms of the Plan and noted
that the securities and other assets held by Global Small Cap at the time of the
Reorganization will be valued at full market value without any discount, that
the Reorganization would be tax-free to it and its shareholders and that Global
Small Cap shareholders will have ownership of a compatible fund and the ability
to exchange into other PaineWebber open-end funds after the Reorganization
without having to pay a sales load should their investment priorities change. In
some cases, shareholders may qualify for reduced sales charges on additional
purchases of Class A shares in PaineWebber mutual funds depending on the size of
their holdings.
On the basis of the information provided to the Board and on its
evaluation of that information, the Board determined that the proposed
Reorganization will not dilute the interests of shareholders of Global Small Cap
and is in the best interest of Global Small Cap. Therefore, the Board
recommended the approval of the Plan by the shareholders of Global Small Cap at
the Meeting.
COMPARISON OF THE FUNDS
FORMS OF ORGANIZATION
Global Equity is a diversified, open-end fund organized as a series of
the Trust, a Massachusetts business trust, with shares that are continuously
sold and redeemed based upon NAV. Global Small Cap is a diversified, closed-end
fund organized as a Maryland corporation with shares that are traded on the
American Stock Exchange, Inc. ("AMEX"). Open-end funds such as Global Equity
continuously offer and redeem their shares, causing their total assets to
fluctuate. In contrast, most closed-end funds make a single offering of
non-redeemable shares and thus retain a stable pool of assets, which changes
only upon appreciation or depreciation of their portfolio investments. Global
Small Cap issues share certificates representing its share, but Global Equity
does not issue share certificates.
Upon the effecting of the Reorganization, Global Small Cap shareholders
will become shareholders of a Massachusetts business trust. This change in
organizational form is not expected to alter the rights of shareholders
materially. In fact, Massachusetts business trust law gives investment companies
more legal flexibility by permitting the issuance of an unlimited number of
shares of beneficial interest and generally providing more flexibility in the
adoption and amendment of an investment company's governing instruments. Under
Massachusetts law, shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for acts and obligations of
the Trust and requires notice of such disclaimer be given in each note, bond,
contract, instrument, certificate or undertaking made or issued by the Board
Members or any officers or officer by or on behalf of the Trust, Global Equity,
the Board Members or any of them in connection with the Trust. The Declaration
of Trust provides for indemnification from Global Equity's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
7
<PAGE>
Global Equity itself would be unable to meet its obligations, a possibility
which Mitchell Hutchins believes is remote and not material. Upon payment of
liability incurred by a shareholder, the shareholder paying such liability will
be entitled to reimbursement from the general assets of Global Equity. The Board
Members conduct the operations of Global Equity in such a way as to avoid, as
far as possible, ultimate liability of the shareholders for liabilities of the
Fund.
INVESTMENT OBJECTIVES
The investment objectives of Global Equity and Global Small Cap are
effectively identical. Global Equity's investment objective is long-term growth
of capital. Global Small Cap's investment objective is long-term capital
appreciation.
INVESTMENT POLICIES
As described below, the primary difference in the investment policies
of Global Equity and Global Small Cap is Global Small Cap's focus on small cap
equity securities. While Global Equity also may invest in equity securities
issued by companies with relatively small capitalizations, its investments are
diversified across a broader range of issuers and are currently concentrated in
mid- and large-capitalization issuers.
Under normal circumstances, Global Equity invests at least 80% of its
total assets in stocks of companies in the United States and foreign countries
that are represented in the MSCI Europe, Australasia and Far East Index ("EAFE
Index"). The EAFE Index reflects stocks in most developed countries outside
North America. Global Equity also may invest up to 20% of its total assets in
stocks of issuers in other countries, including Canada and emerging markets; up
to 35% of its total assets in investment grade corporate and governmental bonds;
and up to 10% of its total assets in convertible securities rated below
investment grade. Global Equity normally invests in at least three countries,
one of which is typically the U.S. Global Equity's investment adviser, Mitchell
Hutchins, 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 Index countries. Mitchell Hutchins may increase the
allocation of Global Equity's assets to either the U.S. or foreign markets if it
believes that any of those markets has a greater potential for high returns,
relative to the risk of loss. Mitchell Hutchins may use futures and foreign
currency contracts to adjust Global Equity's exposure to either the U.S. or
foreign markets.
Global Small Cap normally invests at least 65% of its total assets in
equity securities of small cap companies (defined as companies with market
capitalizations of $1 billion or less at the time of investment) located
throughout the world, including Asia, Europe, the Far East, the Middle East,
North Africa and the Americas. While Global Small Cap is not restricted in the
portion of its assets that may be invested in a single country or region, under
normal market conditions, the Fund's assets are invested in issuers in at least
8
<PAGE>
three countries. In managing Global Small Cap's portfolio, the Fund's
sub-adviser, GEIM, seeks to identify those small cap companies, both in the U.S.
and abroad, that are likely to benefit from long-term trends as they develop in
the global economy. Global Small Cap may invest up to 35% of its total assets in
other securities, including equity securities of companies with higher market
capitalizations and in debt securities. It may invest up to 25% of its assets in
convertible debt securities of domestic and foreign issuers and up to 10% of its
assets in non-convertible debt securities of domestic and foreign issuers,
including obligations issued or guaranteed by the U.S. or foreign governments or
their agencies or instrumentalities. Global Small Cap may engage in hedging
strategies to attempt to reduce the overall risk of its investment portfolio,
including foreign currency transactions in an attempt to manage the Fund's
foreign currency exposure.
PORTFOLIO COMPATIBILITY
Global Small Cap's current portfolio, consisting primarily of equity
securities of issuers located in the United States and overseas, is not entirely
compatible with Global Equity's portfolio. Based on their assessment of Global
Small Cap's portfolio holdings Global Equity's portfolio managers may wish to
sell a significant portion of those holdings after the Reorganization, although
it also is expected that many of those holdings will not remain at the time of
the Reorganization due to normal turnover and the expected liquidation of
securities to raise a higher-than-normal cash level prior to the Reorganization.
Accordingly, it is impossible to predict whether significant changes will be
made to the reorganized assets by Global Equity's portfolio managers after the
Reorganization. In addition to any securities not deemed by Global Equity
portfolio managers to be appropriate for that Fund, securities held by Global
Small Cap at the time of the Reorganization that are considered to be illiquid
may be sold in order to comply with Global Equity's more restrictive limit on
illiquid securities. However, only a small portion of Global Small Cap's
portfolio is currently considered illiquid; as of July 31, 1999, about 1.14% of
Global Small Cap's assets were invested in illiquid securities.
PORTFOLIO MANAGEMENT
Closed-end funds such as Global Small Cap generally have greater
freedom in managing their portfolios than open-end funds like Global Equity.
Because closed-end funds are not subject to forced sales of portfolio securities
at undesirable times or prices to meet redemption requests, they have more
freedom to invest in illiquid securities and may keep a larger percentage of
their assets fully invested in equity or debt securities, rather than in cash.
In addition, closed-end funds have greater flexibility under the 1940 Act to
leverage their portfolios by borrowing. Despite having greater flexibility in
portfolio management, Global Small Cap has not engaged in such leveraging, nor,
as noted above, has it invested significantly in illiquid securities.
PERFORMANCE
Set forth below are average annual total returns for the periods
indicated for Global Small Cap and Global Equity. Average annual total return
figures do not take into account sales charges applicable to purchases of Global
Equity Class A Shares or brokerage commissions for Global Small Cap. (All
returns assume reinvestment of dividends.)
9
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
=========================================================================================
(FOR THE PERIODS ENDED AUGUST 31, 1999) 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
INCEPTION DATE
=========================================================================================
<S> <C> <C> <C> <C> <C>
GLOBAL SMALL CAP 19.61% 10.54% 5.69%(1) 5.12%(1) 10/15/93
(based on net asset value)
GLOBAL EQUITY (Class A Shares) 20.85%(2) 10.00% 8.22%(3) 10.43%(3) 11/14/91
MSCI WORLD INDEX(4) 24.80% [___]% 16.19% (6) ______
SALOMON BROTHERS EXTENDED MARKET INDEX(5) [__]% [___]% [___]% (7) ______
=========================================================================================
</TABLE>
(1) On March 26, 1995, GEIM became sub-adviser of Global Small Cap.
(2) Effective October 1, 1998, Invista began overseeing the day-to-day
management of the foreign portion of Global Equity's assets and Mitchell
Hutchins began allocating the Fund's portfolio between U.S. and foreign
investments and managing the U.S. portion of the Fund's assets.
(3) On February 13, 1995, Mitchell Hutchins replaced Kidder Peabody Asset
Management Inc. as Global Equity's investment adviser.
(4) The Morgan Stanley Capital International ("MSCI") World Index measures the
performance of securities in the U.S., Canada, Mexico, Western Europe,
Australia, New Zealand and the Far East.
(5) The Salomon Brothers Extended Market Index measures the performance of
over 3,000 mid and small cap issuers in 21 developed countries.
(6) Average annual total returns for the MSCI World Index since inception for
each Fund were as follows: Global Small Cap---[____%] and Global
Equity---[_____%].
(7) Average annual total returns for the Salomon Brothers Extended Market Index
since inception for each Fund were as follows: Global Small Cap---[____%]
and Global Equity---[_____%].
FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy
and hold shares of Global Equity and Global Small Cap. The PRO FORMA information
reflects the anticipated effects of the Reorganization. The information set
forth below for Global Equity is based on its fees and expenses for the fiscal
year ended October 31, 1998.
10
<PAGE>
GLOBAL EQUITY FUND
SHAREHOLDER FEES
CLASS A CLASS A PRO
FORMA COMBINED
----------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
Maximum Sales Charge (load) Imposed on Purchases
(AS A PERCENTAGE OF OFFERING PRICE) 4.50%(1) 4.50%(1)
Maximum Deferred Sales Charge (load) (AS A
PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION None(2) None(2)
PROCEEDS, WHICHEVER IS LESS)
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.85% 0.85%
Distribution and/or Service (12b-1) Fees 0.25% 0.25%
Other Expenses 0.46% 0.45%
===== =====
Total Annual Fund Operating Expenses 1.56% 1.55%
- ---------------------
(1) Shares issued in connection with the Reorganization will not be subject to
the sales charge.
(2) If you buy $1,000,000 or more of Global Equity Class A Shares (not
including Global Equity Class A Shares received as part of the
Reorganization) and redeem these shares within 12 months from the date of
purchase, you may pay a 1% contingent deferred sales charge ("CDSC") at the
time of redemption.
Set forth below are the annual operating expenses as a percentage of
net assets for shares of Global Small Cap based on its fees and expenses for the
fiscal year ended July 31, 1999.
GLOBAL SMALL CAP
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
Sales Load (as a percentage of offering price).............................None*
Dividend Reinvestment and Cash Purchase Plan Fees...........................None
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
Management Fees............................................................1.00%
Interest Payments on Borrowed Funds.........................................None
Other Expenses.............................................................0.43%
=====
Total Annual Fund Operating Expenses.......................................1.43%
- ----------------
* Purchases and sales of Global Small Cap shares on the AMEX would likely be
subject to brokerage fees and related expenses.
11
<PAGE>
EXPENSE EXAMPLE
The example below is intended to help you compare the costs of
investing in Class A Shares of Global Equity, both before and after the
Reorganization, with the costs of investing in shares of Global Small Cap
(although the impact of brokerage commissions for Global Small Cap have not been
reflected).
The example assumes that you invest $10,000 in each Fund for the time
periods indicated. The example also assumes that your investments each have a 5%
return each year and that each Fund's operating expenses remain the same.
Although your actual returns and costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
GLOBAL EQUITY
Class A Shares.................. $602 $920 $1,262 $2,223
GLOBAL SMALL CAP.................. $145 $452 $782 $1,713
COMBINED FUND PRO FORMA
Class A Shares.................. $601 $918 $1,257 $2,212
MERGED CLASS A SHARES............. $158 $490 $845 $1,845
SALES CHARGES
GLOBAL EQUITY CLASS A SHARES RECEIVED IN CONNECTION WITH THE
REORGANIZATION WILL NOT BE SUBJECT TO THE CUSTOMARY INITIAL SALES CHARGE OF
4.50%. Any new purchases of Global Equity Class A Shares by a former Global
Small Cap shareholder following the Reorganization will be subject to the
applicable initial sales charge.
DISTRIBUTION, PURCHASE, EXCHANGE AND REDEMPTION
Mitchell Hutchins is the distributor of Global Equity's shares and has
appointed PaineWebber Incorporated ("PaineWebber") and its correspondent firms
to be the exclusive dealers for the sale of those shares. The minimum initial
investment in Global Equity is $1,000; each additional investment must be $100
or more. These minimums may be waived or reduced for investments by employees of
PaineWebber or its affiliates, certain pension plans and retirement accounts,
and participants in a PaineWebber Fund's automatic investment plan.
Global Equity Class A Shares pay a fee in the amount of 0.25% of
average daily net assets to Mitchell Hutchins for shareholder services pursuant
to a Rule 12b-1 plan (the "12b-1 fee"). As noted above, Global Equity Class A
Shares are normally subject to an initial sales charge of up to 4.50%. Shares of
Global Equity may be exchanged for shares of most other PaineWebber Funds of the
corresponding class and may be acquired through exchange of the corresponding
class of shares of other PaineWebber Funds, as described in Global Equity's
prospectus. No initial sales charge is imposed on the shares acquired through an
exchange. Exchanges are subject to minimum investment and other requirements of
the PaineWebber Fund into which exchanges are made. Global Equity Class A Shares
may be redeemed by the Fund at NAV and are generally not subject to a contingent
eferred sales charge.
12
<PAGE>
Shares of Global Small Cap are listed and publicly traded on the AMEX
under the symbol "GSG" and are not subject to distribution fees. Shareholders of
Global Small Cap currently do not have an exchange privilege. Although Global
Small Cap shares are non-redeemable, shareholders of Global Small Cap may sell
their shares on the AMEX.
OPERATIONS OF GLOBAL EQUITY FOLLOWING THE REORGANIZATION
Although there are differences in the investment objectives and
policies of the Funds, it is not expected that Global Equity will revise its
investment objective or any of its policies following the Reorganization to
reflect those of Global Small Cap. Rather, because Global Small Cap's assets are
predominantly equity securities of small cap issuers, many of which are
consistent with Global Equity's investment policies, Mitchell Hutchins and GEIM,
Global Small Cap's investment adviser and sub-adviser, respectively, believe
that a large portion of Global Small Cap's assets could be transferred to and
held by Global Equity if the Reorganization is approved. However, Global Equity
is not expected to hold the majority of Global Small Cap's assets for any length
of time. Consequently, upon approval of the Reorganization, Global Small Cap
will attempt to sell the assets, if any, that are inconsistent with Global
Equity's investment policies or that are deemed by Global Equity's portfolio
managers to be incompatible with their management of the Fund prior to the
effective time of the Reorganization, and the proceeds thereof will be held in
temporary investments or reinvested in assets that qualify to be held by Global
Equity. The need, if any, for Global Small Cap to dispose of assets prior to the
effective time of the Reorganization may result in selling securities at a
disadvantageous time and could result in Global Small Cap's realizing gains (or
losses) that would not otherwise have been realized.
FUND BOARD MEMBERS AND OFFICERS
The Trust's board of trustees ("Trust's Board") will continue to serve
in that capacity for Global Equity, including for its shares stemming from the
Reorganization. The current Board Members of the Trust are the same persons who
are currently directors of Global Small Cap. In addition, the current officers
of Global Equity are predominantly the same persons who now serve as Global
Small Cap's officers. Upon the Reorganization, the officers of Global Equity
will be the officers for the combined Fund. For more information about Global
Equity's officers, see the March 1, 1999, Global Equity SAI, incorporated by
reference herein. Please see Appendix C for the names, ages and principal
occupations of the current Board Members for both Funds and for the officers of
Global Small Cap.
INVESTMENT ADVISERS AND PORTFOLIO MANAGEMENT
As noted above, Mitchell Hutchins serves as investment adviser for
Global Small Cap and GEIM serves as its sub-adviser performing, day-to-day
portfolio management. Mitchell Hutchins has served as the investment adviser for
Global Small Cap since the Fund's inception. GEIM has served as Global Small
13
<PAGE>
Cap's sub-adviser since March 26, 1995. GEIM is affiliated with Mitchell
Hutchins because its parent company, General Electric Company, owns 21.7% of
Paine Webber Group Inc. ("PW Group"), Mitchell Hutchins' indirect parent.
Mitchell Hutchins also serves as the investment adviser for Global
Equity, performing asset allocation between the U.S. and foreign portions of the
Fund's portfolio and managing the U.S. portion of the portfolio day-to-day.
Prior to February 13, 1995, Kidder Peabody Asset Management Inc. served as
investment adviser for Global Equity. Invista serves as the sub-adviser for the
international portion of Global Equity's portfolio. Prior to October 1, 1998,
GEIM served as sub-adviser for Global Equity, overseeing the day-to-day
management of the Fund's entire portfolio.
The portfolio managers responsible for the day-to-day management of
Global Small Cap's portfolio are:
o Ralph R. Layman, who is a Chartered Financial Analyst and an
Executive Vice President and a senior investment manager at GEIM and
General Electric Investment Corporation ("GEIC"). From 1989 to 1991,
Mr. Layman served as Executive Vice President, partner and portfolio
manager of Northern Capital Management Co., and prior thereto,
served as Vice President and portfolio manager of Templeton
Investment Counsel, Inc., and Vice President of the Templeton
Emerging Markets Fund; and
o Judith A. Studer, who is a Senior Vice President and Portfolio
Manager with GEIM's International Equities Team. She has more than
12 years of investment experience and has held positions with GEIM
and GEIC since 1984.
The portfolio managers responsible for the asset allocation and
day-to-day management of the domestic portion of Global Equity's portfolio are:
o T. Kirkham Barneby, who has been responsible for Global Equity's
asset allocation decisions since October 1, 1998. Mr. Barneby is a
managing director and chief investment officer for quantitative
investments of Mitchell Hutchins. Mr. Barneby rejoined Mitchell
Hutchins in 1994, after being with Vantage Global Management for one
year. Prior to that year, Mr. Barneby was a senior vice president
responsible for quantitative management and asset allocation models
at Mitchell Hutchins; and
o Mark A. Tincher, who has been primarily responsible for the
day-to-day management of Global Equity's U.S. investments since
October 1, 1998. Mr. Tincher is a managing director and chief
investment officer for equities (stocks) of Mitchell Hutchins. Prior
to joining Mitchell Hutchins in March 1995, Mr. Tincher worked for
Chase Manhattan Private Bank, where he was vice president and
directed the U.S. funds management and equity research area and
oversaw the management of all Chase U.S. equity funds.
14
<PAGE>
The portfolio manager responsible for the day-to-day management of the
international portion of Global Equity's portfolio is:
o Scott D. Opsal, who has been primarily responsible for the
day-to-day management of Global Equity's foreign investments since
October 1, 1998, when Invista was appointed as the Fund's
sub-adviser for foreign investments. Mr. Opsal is an executive vice
president and chief investment officer of Invista, where he has been
employed since 1986.
OTHER SERVICE PROVIDERS
Global Small Cap and Global Equity have the same transfer and dividend
disbursing agent (PFPC Inc.), the same custodian (State Street Bank and Trust
Company) and the same independent auditors (Ernst & Young LLP). Upon completion
of the Reorganization, these entities will continue to provide services to the
combined Fund.
COMPARISON OF PRINCIPAL RISK FACTORS
PRIMARY DIFFERENCES IN INVESTMENT RISKS OF THE FUNDS
Global Equity and Global Small Cap are subject to substantially the
same investment risks arising out of investing in foreign securities generally,
and developing markets specifically. However, Global Small Cap is subject to
additional risks arising out of its narrower issuer capitalization focus. Global
Small Cap focuses its investments in companies with market capitalizations of $1
billion or less. By contrast, Global Equity may invest in securities of issuers
with varying market capitalization levels, and thus has greater latitude in
allocating its investments in times of economic instability. On the other hand,
some of the large capitalization equity securities in which Global Equity
invests may also experience substantial economic difficulties.
Small cap companies may be more vulnerable than larger companies to
adverse business or economic developments. Small cap companies may also have
limited product lines, markets or financial resources. Securities of such
companies may be less liquid and more volatile than securities of larger
companies or the market averages in general and, therefore, may involve greater
risk than investing in larger companies. 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.
RISKS COMMON TO BOTH FUNDS
INVESTING IN SECURITIES GENERALLY
Investing in either Global Equity or Global Small Cap entails a risk
that you could lose all or a portion of your investment. The value of your
investment in either Fund goes up and down with the prices of the securities in
15
<PAGE>
which the Fund invests. The prices of equity securities change in response to
many factors, including the historical and prospective earnings of the issuer,
the value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity. Debt securities are particularly vulnerable to
credit risk and interest rate fluctuations. When interest rates rise, bond
prices generally fall; the longer the bond's duration, the more sensitive it is
to this risk.
INVESTING IN FOREIGN SECURITIES AND EQUITY
Investments in foreign securities may be affected by, among others, the
following factors:
o CURRENCY EXCHANGE RATES - The dollar value of the Funds' investments
denominated in foreign currencies will be affected by changes in the
exchange rates between the dollar and the currencies in which those
investments are traded.
o POLITICAL AND ECONOMIC CONDITIONS - The value of the Funds' foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies in
those countries.
o REGULATIONS - Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies. In addition,
certain countries may impose expropriation constraints on the assets of
certain companies.
o MARKETS - The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S.
securities.
These factors may affect the prices of securities issued by foreign
companies located in developing countries more than those in countries with more
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be additional risks and delays in custody and settlement
procedures.
LOWER QUALITY DEBT
Global Small Cap may invest up to 5% of its net assets in debt
securities rated as low as B+ by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), or B1 by Moody's Investors Service, Inc.
("Moody's"). In the event, due to a downgrade of one or more debt securities, an
amount in excess of 5% of the Fund's net assets is held in securities rated
below investment grade and comparable unrated securities, GEIM will engage in an
orderly disposition of such securities to the extent necessary to ensure that
the Fund's holdings of such securities do not exceed 5% of the Fund's net
assets.
16
<PAGE>
Global Equity may invest up to 10% of its net assets in convertible
securities rated below investment grade (below BBB by S&P or Baa by Moody's).
Compared to higher-quality debt securities, securities rated below
investment grade or "junk bonds" involve greater risk of default or price
changes due to changes in the credit quality of the issuer because they are
generally unsecured and may be subordinated to other creditors' claims. The
value of junk bonds often fluctuates in response to issuer, political or
economic developments and can decline significantly over short periods of time
or during periods of general or regional economic difficulty. During those
times, the bonds may be difficult to value or sell at a fair price. Credit
ratings on junk bonds do not necessarily reflect their actual market risk.
SOVEREIGN DEBT
Both Global Equity and Global Small Cap may invest in sovereign debt
securities of foreign governments. Investments in sovereign debt securities
involve special risks. Sovereign debt securities in which the Funds would invest
are generally lower-quality debt securities, equivalent to junk bonds.
Accordingly, they are subject to many of the same risks as junk bonds, detailed
above. In addition, sovereign debt securities are subject to the risk that,
under certain political, diplomatic, social or economic circumstances, some
developing countries that issue sovereign debt securities may be unable or
unwilling to make principal or interest payments as they come due, and a Fund
may have limited legal recourse against a sovereign in the event of default.
ILLIQUID SECURITIES
Global Small Cap may invest up to 20% of its net assets, and Global
Equity may invest up to 10% of its net assets, in illiquid securities. Any
limitations on resale and marketability of such securities may have the effect
of preventing the Funds from disposing of such securities at the time desired or
at a reasonable price. In addition, in order to resell restricted securities,
the Funds might have to bear the expense and incur the delays associated with
registering such securities.
YEAR 2000
The Funds could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the Funds' other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the Funds, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from service providers that they are taking similar steps.
Similarly, the companies in which the Funds invest and trading systems
used by the Funds could be adversely affected by this issue. The ability of a
company or trading system to respond successfully to the issue requires both
technological sophistication and diligence, and there can be no assurance that
any steps taken will be sufficient to avoid an adverse impact on the Funds.
17
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of Global Equity's Class A Shares. Certain information
reflects financial results for a single Global Equity Class A share.
The total returns in the table represent the rate that an investor
would have earned an investment in Global Equity Class A Shares (assuming
reinvestment of all dividends and distributions).
This information has been audited by Ernst & Young LLP, whose report,
along with Global Equity's financial statements, is included in Global Equity's
Annual Report to Shareholders, which is available upon request.
<TABLE>
<CAPTION>
GLOBAL EQUITY
------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------------------
FOR THE NINE
MONTHS ENDED FOR THE FOR THE TWO FOR THE
JULY 31, YEARS ENDED MONTHS ENDED YEARS ENDED
(UNAUDITED) OCTOBER 31, OCTOBER 31, AUGUST 31,
------------- ---------------------- ------------ -------------------------------------
1999 1998 1997 1996 1996 1995** 1994
----------- -------- ------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 16.27 $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55
------------ ------------ ------------ ------------- --------- ----------- ---------
Net investment income (loss) 0.07 0.03++ 0.00 (0.02) 0.02 0.02 0.01
(loss).....................
Net realized and
unrealized gains (losses)
from investments, futures $ 2.49 0.35++ 1.52 0.64 1.24 0.37 2.63
and foreign currency....... ------------ ------------ ------------ ------------- -------- ----------- ---------
Net increase (decrease)
from investment operations. $ 2.56 0.38 1.52 0.62 1.26 0.39 2.64
------------ ------------ ------------ ------------- -------- ----------- ---------
Dividends from net
investment income.......... (0.02) -- -- -- -- -- --
Distributions from net
realized gains............. (0.81) (2.48) (0.58) -- (0.57) (1.25) (0.21)
------------ ------------ ------------ ------------- -------- ----------- ---------
Total dividends and
distributions.............. (0.83) (2.48) (0.58) 0.00 (0.57) (1.25) (0.21)
------------ ------------ ------------ ------------- -------- ----------- ---------
Net asset value, end of $ 18.00 $ 16.27 $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98
============ ============ ============ ============= ======== =========== =========
period.....................
Total investment return(1). 16.21% 2.53% 8.87% 3.69% 8.06% 3.24% 18.23%
============ ============ ============ ============= ======== =========== =========
Ratios/Supplemental Data:
Net assets, end of period $ 237,053 $ 251,680 $ 294,878 $ 307,267 $ 305,218 $ 360,652 $ 185,493
(000's)....................
Expenses to average net 1.56%(2) 1.55% 1.44% 1.53%* 1.48% 1.71%(3) 1.58%
assets.....................
Net investment income
(loss) to average net 0.63% 0.17% 0.01% (0.80)%* 0.10% 0.09%(3) 0.07%
assets.....................
Portfolio turnover rate.... 59% 151% 86% 3% 33% 40% 51%
</TABLE>
* Annualized
** Investment advisory functions for the fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
+ Effective October 1, 1998, Invista began overseeing the day-to-day
management of the foreign portion of Global Equity's assets and Mitchell
Hutchins began allocating the Fund's portfolio between U.S. and foreign
investments and managing the U.S. portion of the Fund's assets.
++ Calculated using the average monthly shares outstanding for that year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
18
<PAGE>
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment returns for periods of less than one year have
not been annualized.
(2) During the nine months ended July 31, 1999, Mitchell Hutchins waived a
portion of its advisory and administration fees. The ratios excluding the
waiver would be the same since the fee waiver represents less than 0.005%.
(3) These ratios include non-recurring reorganization expenses of 0.06% for
Class A Shares.
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below; however, this summary is qualified in its entirety by
reference to the Plan, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus.
The Plan contemplates (a) Global Equity's acquiring on the Closing Date
all the assets of Global Small Cap in exchange solely for Global Equity Class A
Shares and Global Equity's assumption of all of Global Small Cap's liabilities
and (b) the distribution of those shares to Global Small Cap shareholders.
Global Small Cap's assets include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on its books and other
property owned by it as of the close of business on the Closing Date ("Effective
Time") (collectively, the "Assets"). Global Equity will assume from Global Small
Cap all its liabilities, debts, obligations and duties of whatever kind or
nature, whether absolute, accrued, contingent or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time and whether or not referred to in the Plan (collectively, the
"Liabilities"); provided, however, that Global Small Cap will use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
Global Equity will deliver its Class A Shares to Global Small Cap, which then
will be distributed to Global Small Cap's shareholders.
The value of the Assets to be acquired, and the amount of the
Liabilities to be assumed, by Global Equity and the NAV of a Class A Share of
Global Equity will be determined as of the close of regular trading on the AMEX
on the Closing Date. Where market quotations are readily available, portfolio
securities will be valued based upon the quotations, provided they adequately
reflect, in Mitchell Hutchins' or a sub-adviser's judgment, the fair value of
the security. Where market quotations are not readily available, securities will
be valued based upon appraisals received from a pricing service using a
computerized matrix system or appraisals derived from information concerning the
security or similar securities received from recognized dealers in those
securities. The amortized cost method of valuation generally will be used to
value debt instruments with 60 days or less remaining to maturity, unless a
Fund's Board determines that this method does not represent fair value. All
other securities and assets will be valued at fair value as determined in good
faith by or under the direction of the respective Fund's Board.
19
<PAGE>
On, or as soon as practicable after, the Closing Date, Global Small Cap
will distribute to its shareholders of record as of the Effective Time the
Global Equity Class A Shares it receives so that each Global Small Cap
shareholder will receive the number of full and fractional Class A Shares of
Global Equity equal in aggregate NAV to the shareholder's shares in Global Small
Cap. That distribution will be accomplished by opening accounts on the books of
Global Equity in the names of Global Small Cap's shareholders and crediting
those accounts with Global Equity Class A Shares equal in aggregate NAV to the
shareholders' shares in Global Small Cap. Fractional shares of Global Equity
will be rounded to the third decimal place.
Immediately after the Reorganization, each former shareholder of Global
Small Cap will own Class A Shares of Global Equity equal in NAV to the aggregate
NAV of that shareholder's shares in Global Small Cap immediately prior to the
Reorganization. The NAV per share of Global Equity will not be changed as a
result of the Reorganization. Thus, the Reorganization will not result in a
dilution of any shareholder interest.
DESCRIPTION OF SECURITIES TO BE ISSUED
The Trust is registered with the SEC as an open-end management
investment company. Pursuant to the Trust's Amended and Restated Declaration of
Trust, the Trust may issue an unlimited number of shares. The Trust's Board has
established Global Equity as a series of the Trust and has authorized the public
offering of four classes of shares of that Fund, designated Class A, Class B,
Class C and Class Y shares. Only Class A Shares will be issued in connection
with the Reorganization. Although Class A Shares are customarily subject to an
initial sales charge of 4.50% of NAV, this sales charge will be waived for the
shares issued in connection with the Reorganization.
Each share of Global Equity represents an equal proportionate interest
with other shares in that Fund, has a par value of $0.001 per share, has equal
earnings, assets and voting privileges, except as noted in the Global Equity
SAI, and is entitled to dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund declared by the
Trust's Board. Each share in a class represents an equal proportionate interest
in Global Equity's assets with each other share in that class. Shares of Global
Equity entitle their holders to one vote per full share and fractional votes for
fractional shares held, except that each class has exclusive voting rights on
matters pertaining to its plan of distribution. Shares of Global Equity, when
issued, are fully paid and non-assessable.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from Global Equity's net investment income are normally
declared and distributed annually. Any net capital gain (the excess of net
long-term capital gain over net short-term capital loss) and net short-term
capital gain realized from the sale of portfolio securities and net gains from
foreign currency transactions generally are distributed annually. Shareholders
of Global Equity receive dividends in additional shares of the same class unless
the shareholder elects to receive cash.
20
<PAGE>
Dividends from Global Small Cap's net investment income, if any, are
distributed at least annually. Any net long-term capital gain and net short-term
capital gain realized from the sale of portfolio securities and net gains from
foreign currency transactions are also generally distributed annually.
Shareholders of Global Small Cap may participate in the Fund's Dividend
Reinvestment Plan, under which dividends and other distributions are
automatically invested in additional shares of the Fund at market price.
Alternatively, shareholders may elect to receive dividends and other
distributions in cash.
Each Fund may make additional distributions, if necessary, to avoid a
4% excise tax on certain undistributed ordinary income and capital gains.
On or before the Closing Date, Global Small Cap will declare as a
distribution substantially all of its undistributed net investment income, net
capital gain, net short-term capital gain and net gains from foreign currency
transactions to maintain its tax status as a regulated investment company.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Plan, some of which may be waived by Global Small
Cap. In addition, the Plan may be amended in any mutually agreeable manner,
except that no amendment may be made subsequent to the Meeting that would have a
material adverse effect on Global Small Cap shareholders' interests.
POTENTIAL NET REDEMPTION
If a large percentage of Global Small Cap shareholders redeem their
shares shortly after the Reorganization, significant costs may be imposed on
Global Equity. To meet redemption requests, Global Equity may be required either
to draw upon a line of credit, which would impose some interest costs, or to
sell portfolio securities, which would incur brokerage costs and may result in
capital gain or loss that would not otherwise have been recognized at that time.
Any gain would, to the extent it is not otherwise offset during the year, be
distributed to shareholders. Global Equity's recognition and distribution of any
such gain would have two negative consequences: first, non-redeeming
shareholders would be required to pay taxes on larger capital gain distributions
than they would otherwise; and second, Global Equity may need to sell additional
portfolio securities to raise cash to make the distributions, potentially
resulting in recognition of additional capital gain.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Global Equity of the assets transferred to
it by Global Small Cap will be the same as Global Small Cap's book cost basis of
such assets.
FEDERAL INCOME TAX CONSIDERATIONS
Global Small Cap and the Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP, their counsel, substantially to the following
effect:
21
<PAGE>
(1) Global Equity's acquisition of the Assets in exchange solely for
Global Equity Class A Shares and Global Equity's assumption of the
Liabilities, followed by Global Small Cap's distribution of those
shares PRO RATA to its shareholders constructively in exchange for
their Global Small Cap Shares, will qualify as a reorganization within
the meaning of section 368(a)(1)(C) of the Code, and each Fund will be
"a party to a reorganization" within the meaning of section 368(b) of
the Code;
(2) Global Small Cap will recognize no gain or loss on its transfer of
the Assets to Global Equity in exchange solely for Global Equity Class
A Shares and Global Equity's assumption of the Liabilities or on the
subsequent distribution of those shares to Global Small Cap's
shareholders in constructive exchange for their Global Small Cap
Shares;
(3) Global Equity will recognize no gain or loss on its receipt of the
Assets in exchange solely for Global Equity Class A Shares and its
assumption of the Liabilities;
(4) Global Equity's basis for the Assets will be the same as Global
Small Cap's basis therefor immediately before the Reorganization, and
Global Equity's holding period for the Assets will include Global Small
Cap's holding period therefor;
(5) A Global Small Cap shareholder will recognize no gain or loss on
the constructive exchange of all its Global Small Cap Shares solely for
Global Equity Class A Shares pursuant to the Reorganization; and
(6) A Global Small Cap shareholder's aggregate basis for the Global
Equity Class A Shares to be received by it in the Reorganization will
be the same as the aggregate basis for its Global Small Cap Shares to
be constructively surrendered in exchange for those Global Equity
shares, and its holding period for those Global Equity Class A Shares
will include its holding period for those Global Small Cap Shares,
provided they are held as capital assets by the shareholder on the
Closing Date.
The opinion may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any Global Small Cap shareholder with respect to
any asset as to which any unrealized gain or loss is required to be recognized
for federal income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of accounting.
Utilization by Global Equity after the Reorganization of any
pre-Reorganization capital losses realized by Global Small Cap could be subject
to limitation in future years under the Code.
Shareholders of Global Small Cap should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
22
<PAGE>
ORGANIZATION OF THE FUNDS
Global Equity is a diversified series of the Trust, an open-end
management investment company. Global Equity commenced operations on November
14, 1991. The Trust was organized as a Massachusetts business trust on March 28,
1991. The operations of the Trust, as a Massachusetts business trust, are
governed by its Amended and Restated Declaration of Trust and Massachusetts law.
The overall direction and supervision of Global Equity is the responsibility of
the Trust's Board, which has the primary duty of ensuring that the Fund's
general investment policies and programs are adhered to and the Fund is properly
administered. Prior to August 25, 1995, the name of Global Equity was "Mitchell
Hutchins/Kidder, Peabody Global Equity Fund." Prior to February 13, 1995, the
name of the Fund was "Kidder, Peabody Global Equity Fund."
Global Small Cap is a diversified closed-end management investment
company that was organized as a Maryland corporation on June 22, 1993. Global
Small Cap shares have been listed and publicly traded on the AMEX under the
symbol "GSG" since October 15, 1993. The operations of Global Small Cap, as a
Maryland corporation, are governed by its Articles of Incorporation and By-Laws
and Maryland law. The overall direction and supervision of Global Small Cap is
the responsibility of its Board, which has the primary duty of ensuring that the
Fund's general investment policies and programs are adhered to and the Fund is
properly administered.
CAPITALIZATION
The following table shows the capitalization of Global Small Cap and
Global Equity as of July 31, 1999, and on a PRO FORMA combined basis as of July
31, 1999, giving effect to the Reorganization:
GLOBAL SMALL CAP GLOBAL EQUITY PRO FORMA CLASS A
FUND: CLASS A COMBINED
--------------- ------------- -----------------
Net Assets $66,075,392 $237,053,217 $303,128,609
Shares Outstanding 3,801,667 13,176,559 16,838,414
Net Asset Value Per $17.38 $18.00 $18.00
Share
REQUIRED VOTE. The proposal to approve the Plan requires the
affirmative vote of a majority of the votes entitled to be cast on the proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PLAN OF REORGANIZATION.
----------------------
23
<PAGE>
LEGAL MATTERS
Certain legal matters concerning Global Small Cap and the Trust and
their participation in the Reorganization, the issuance of Class A Shares of
Global Equity in connection with the Reorganization and the tax consequences of
the Reorganization will be passed upon by Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., Washington, D.C. 20036-1800, counsel to Global Small
Cap and to the Trust.
INFORMATION FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND AMEX
This Proxy Statement/Prospectus and the related SAI do not contain all
the information set forth in the registration statements and the exhibits
relating thereto and annual reports which Global Small Cap has filed with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933 Act and the Investment Company Act of 1940, as amended
("1940 Act"), to which reference is hereby made. The SEC file number for Global
Small Cap is 811-7814. Global Small Cap's Annual Report to Shareholders is
incorporated herein by reference. The SEC file number for the Trust's
registration statement containing the Prospectus and SAI relating to Global
Equity is 33-39659. Such Prospectus is attached at Appendix B and such SAI is
incorporated herein by reference.
Global Small Cap and the Trust are each subject to the informational
requirements of the 1940 Act and in accordance therewith each files reports and
other information with the SEC. Reports, proxy statements, registration
statements and other information filed by Global Small Cap and the Trust
(including the Registration Statement of the Trust relating to Global Equity and
Global Small Cap on Form N-14 of which this Proxy Statement/Prospectus is a part
and which is hereby incorporated by reference) may be inspected without charge
and copied at the public reference facilities maintained by the SEC at Room
1014, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at the
following regional offices of the SEC: 7 World Trade Center, New York, NY 10048;
and 500 West Madison Street, 14th floor, Chicago, IL 60661. Copies of such
material may also be obtained from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, DC 20549 at the prescribed rates. The SEC
maintains an Internet web site at http://www.sec.gov that contains information
regarding the Trust, Global Small Cap and other registrants that file
electronically with the SEC.
Global Small Cap shares are listed and publicly traded on the AMEX. If
the Reorganization is approved, Global Small Cap will delist from AMEX upon
consummation of the Reorganization. Reports, proxy statements and other
information concerning Global Small Cap may be inspected at the offices of AMEX,
86 Trinity Place, New York, NY 10006.
INFORMATION ABOUT THE FUNDS' ADVISER AND
SUB-ADVISERS, AND GLOBAL EQUITY'S DISTRIBUTOR
24
<PAGE>
Mitchell Hutchins serves as investment adviser to both Global Small Cap
and Global Equity. Mitchell Hutchins is located at 51 West 52nd Street, New
York, New York 10019-6114. GEIM serves as investment sub-adviser to Global Small
Cap and Invista serves as the investment sub-adviser to Global Equity. GEIM is
located at 3003 Summer Street, Stamford, Connecticut 06905, and Invista is
located at 1800 Hub Tower, 699 Walnut, Des Moines, Iowa 50309. The advisers
supervise all aspects of the Funds' respective operations and provide investment
advisory services to each Fund, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the Funds. As of September 30, 1999, Mitchell Hutchins, was adviser
or sub-adviser of 33 investment companies with 75 separate portfolios and
aggregate assets of approximately $47.3 billion, including Global Small Cap and
Global Equity, encompassing a broad range of investment objectives.
Mitchell Hutchins is an indirect wholly owned subsidiary of
PaineWebber, which in turn is an indirect wholly owned subsidiary of PW Group, a
publicly owned financial services holding company.
ADDITIONAL INFORMATION ABOUT
GLOBAL SMALL CAP AND GLOBAL EQUITY
For more information with respect to Global Small Cap concerning the
following topics, please refer to the Global Small Cap Annual Report to
Shareholders, dated July 31, 1999, as indicated: (i) see "Investment Adviser and
Administrator" for further information regarding Global Small Cap's investment
adviser, sub-adviser and administrator; (ii) see "Valuation of Investments" for
further information regarding the shares of Global Small Cap; and (iii) see
"Distribution Policy" for further information regarding the distribution of
dividends paid by Global Small Cap through its Dividend Reinvestment Plan.
For more information with respect to the Trust and Global Equity
concerning the following topics, please refer to the Global Equity Prospectus,
dated March 1, 1999, and attached as Appendix B to this Proxy
Statement/Prospectus, as indicated: (i) see "Investment Objective, Strategies
and Risks" and "Management" for further information regarding Global Equity's
principal investment strategies and risks and its management; (ii) see "Managing
Your Fund Account" and "Pricing and Valuation" for further information regarding
the shares of Global Equity; and (iii) see "Managing Your Fund Account" for
further information regarding the purchase, redemption and repurchase of shares
of Global Equity.
EXPERTS
The audited financial statements of Global Small Cap and Global Equity
incorporated by reference herein and included in Global Small Cap's Annual
Report to Shareholders for the fiscal year ended July 31, 1999, and Global
Equity's SAI dated March 1, 1999, respectively, have each been audited by Ernst
& Young LLP, independent auditors, whose reports thereon are included in the
Funds' respective Annual Reports to Shareholders for the fiscal years ended July
31, 1999, and October 31, 1998, respectively. The financial statements audited
25
<PAGE>
by Ernst & Young LLP have been incorporated herein by reference in reliance on
its reports given on its authority as experts in auditing and accounting.
SHAREHOLDER PROPOSALS
Global Small Cap will continue to hold annual meetings only if the
Reorganization is not approved. If the Reorganization is approved, Global Small
Cap will be liquidated. Any shareholder who wishes to submit a proposal for
inclusion in Global Small Cap's proxy materials for the next annual
shareholders' meeting (if held) must submit such proposal to the Fund a
reasonable time before the printing and mailing of such materials. Shareholder
proposals that are submitted in a timely manner will not necessarily be included
in Global Small Cap's proxy materials. Inclusion of such proposals is subject to
limitations under the federal securities laws.
26
<PAGE>
APPENDIX A
----------
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of [_______], between PaineWebber Investment Trust, a Massachusetts
business trust ("Trust"), on behalf of PaineWebber Global Equity Fund, a
segregated portfolio of assets ("series") thereof ("Acquiring Fund"), and Global
Small Cap Fund Inc., a Maryland corporation ("Target"). (Acquiring Fund and
Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and Trust and Target are sometimes referred to
herein individually as an "Investment Company" and collectively as the
"Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by Acquiring Fund
are made and shall be taken or undertaken by Trust.
The Investment Companies wish to effect a reorganization described in
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend this Agreement to be a "plan of reorganization" within the meaning of
the regulations under section 368 of the Code ("Regulations"). The
reorganization will involve the transfer of Target's assets to Acquiring Fund in
exchange solely for voting shares of beneficial interest ("shares") in Acquiring
Fund and the assumption by Acquiring Fund of Target's liabilities, followed by
the constructive distribution of those shares PRO RATA to the holders of shares
of common stock of Target ("Target Shares") in exchange therefor, all on the
terms and conditions set forth in this Agreement. The foregoing transactions are
referred to herein collectively as the "Reorganization."
Acquiring Fund is an open-end management investment company. Its shares
are divided into four classes, designated Class A, Class B, Class C, and Class Y
shares; only Acquiring Fund's Class A shares ("Acquiring Fund Shares") are
involved in the Reorganization.
Target is a closed-end management investment company that has only a
single class of shares. Target Shares can be purchased and sold only on the
American Stock Exchange ("AMEX").
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
--------------------------------------
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares,
determined by dividing the net value of Target (computed as set
forth in paragraph 2.1) by the net asset value ("NAV") of an
Acquiring Fund Share (computed as set forth in paragraph 2.2),
and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
A-1
<PAGE>
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Target agrees to use its best efforts to
discharge all its known Liabilities before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Trust's transfer agent's opening accounts on Acquiring Fund's
share transfer books in the Shareholders' names and transferring such Acquiring
Fund Shares thereto. Each Shareholder's account shall be credited with the
respective PRO RATA number of full and fractional (rounded to the third decimal
place) Acquiring Fund Shares due that Shareholder. All outstanding Target
Shares, including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated and any further actions shall be
taken in connection therewith as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
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2. VALUATION
---------
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the AMEX on
the date of the Closing ("Valuation Time"), using the valuation procedures set
forth in Target's most recent annual report to its shareholders, less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus relating to Acquiring Fund
Shares ("Prospectus") and statement of additional information ("SAI").
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
--------------------------
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on January 21,
2000, or at such other place and/or on such other date as to which the
Investment Companies may agree. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the Investment Companies may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the AMEX is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the AMEX or elsewhere is disrupted, so that accurate
appraisal of the net value of Target and the NAV of an Acquiring Fund Share is
impracticable, the Effective Time shall be postponed until the first business
day after the day when such trading shall have been fully resumed and such
reporting shall have been restored.
3.2. Target's fund accounting and pricing agent shall deliver to Trust at
the Closing a certificate of an authorized officer verifying the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately before the Closing. Target's
custodian shall deliver at the Closing a certificate of an authorized officer
stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. Target shall deliver to Trust at the Closing a list of the names and
addresses of the Shareholders and the number of outstanding Target Shares owned
by each Shareholder, all as of the Effective Time, certified by Target's
Secretary or Assistant Secretary. Trust's transfer agent shall deliver at the
Closing a certificate as to the opening on Acquiring Fund's share transfer books
of accounts in the Shareholders' names. Trust shall issue and deliver a
confirmation to Target evidencing the Acquiring Fund Shares to be credited to
Target at the Effective Time or provide evidence satisfactory to Target that
such Acquiring Fund Shares have been credited to Target's account on Acquiring
Fund's books. At the Closing, each Investment Company shall deliver to the other
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such bills of sale, checks, assignments, stock certificates, receipts, or other
documents as the other Investment Company or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.1. Target represents and warrants as follows:
4.1.1. Target is a corporation that is duly organized, validly
existing, and in good standing under the laws of the State of Maryland; and
its Articles of Incorporation are on file with the Department of
Assessments and Taxation of Maryland;
4.1.2. Target is duly registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"),
and such registration will be in full force and effect at the Effective
Time;
4.1.3. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.4. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Maryland law or any provision of its
Articles of Incorporation or By-Laws or of any agreement, instrument,
lease, or other undertaking to which Target is a party or by which it is
bound or result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in writing to
and accepted by Trust;
4.1.5. Except as otherwise disclosed in writing to and accepted by
Trust, all material contracts and other commitments of Target (other than
this Agreement and investment contracts, including options, futures, and
forward contracts) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the Effective
Time, without either Fund's incurring any liability or penalty with respect
thereto and without diminishing or releasing any rights Target may have had
with respect to actions taken or omitted or to be taken by any other party
thereto prior to the Closing;
4.1.6. Except as otherwise disclosed in writing to and accepted by
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against Target or any of its properties or assets
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that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business; and Target knows of no
facts that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.1.7. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Target's board of directors, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.8. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.9. No governmental consents, approvals, authorizations, or filings
are required under the Securities Act of 1933, as amended ("1933 Act"), the
Securities Exchange Act of 1934, as amended ("1934 Act"), or the 1940 Act
for the execution or performance of this Agreement by Target, except for
(a) the filing with the Securities and Exchange Commission ("SEC") of a
registration statement by Trust on Form N-14 relating to the Acquiring Fund
Shares issuable hereunder, and any supplement or amendment thereto
("Registration Statement"), including therein a prospectus/proxy statement
("Proxy Statement"), and (b) such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to
the Effective Time;
4.1.10. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the rules and regulations thereunder and (b) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading; provided that the foregoing shall not apply to statements in or
omissions from the Proxy Statement made in reliance on and in conformity
with information furnished by Trust for use therein;
4.1.11. The Liabilities were incurred by Target in the ordinary course
of its business and are associated with the Assets; and there are no
Liabilities other than liabilities disclosed or provided for in its
financial statements referred to in paragraph 4.1.17 and liabilities
incurred by Target in the ordinary course of its business subsequent to
July 31, 1999, or otherwise previously disclosed to Trust, none of which
has been materially adverse to the business, assets, or results of Target
operations;
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4.1.12. Target qualified for treatment as a regulated investment
company under Subchapter M of the Code ("RIC") for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it; and the Assets will be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing;
4.1.13. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.14. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers;
4.1.15. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years through and including the
taxable year ended July 31, 1998, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.1.16. Target's financial statements for the year ended July 31,
1999, to be delivered to Trust, fairly represent Target's financial
position as of that date and the results of its operations and changes in
its net assets for the year then ended.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Trust is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable shares
("Business Trust"), that is duly organized and validly existing under the
laws of the Commonwealth of Massachusetts; and a copy of its Amended and
Restated Agreement and Declaration of Trust ("Declaration of Trust") is on
file with the Secretary of the Commonwealth of Massachusetts;
4.2.2. Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable;
4.2.6. Acquiring Fund's current Prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
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required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law or
any provision of the Declaration of Trust or Trust's By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by Target;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Target, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Acquiring
Fund's knowledge) threatened against Trust with respect to Acquiring Fund
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Acquiring Fund's financial condition or the
conduct of its business; and Acquiring Fund knows of no facts that might
form the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Trust's board of trustees (together with Target's board of
directors, the "Boards"), which has made the determinations required by
Rule 17a-8(a) under the 1940 Act; and this Agreement constitutes a valid
and legally binding obligation of Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Trust, except for (a) the
filing with the SEC of the Registration Statement and (b) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the rules and regulations thereunder and (b) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading; provided that the foregoing shall not apply to statements in or
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omissions from the Proxy Statement made in reliance on and in conformity
with information furnished by Target for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, except to the extent it is
required by the 1940 Act to redeem any of its shares presented for
redemption at NAV in the ordinary course of that business;
4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2)
of the Regulations) and (b) use a significant portion of Target's historic
business assets (within the meaning of section 1.368-1(d)(3) of the
Regulations) in a business;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another business trust or a corporation or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers;
4.2.17. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly or
indirectly owned, at any time during the past five years, any shares of
Target;
4.2.18. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years through and
including the taxable year ended October 31, 1998, have been timely filed
and all taxes payable pursuant to such returns have been timely paid; and
4.2.19. Trust's financial statements for the year ended October 31,
1998, to be delivered to Target, fairly represent Acquiring Fund's
financial position as of that date and the results of its operations and
changes in its net assets for the year then ended.
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4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received by
each Shareholder will be approximately equal to the fair market value of
its Target Shares constructively surrendered in exchange therefor;
4.3.2. Its management is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (a) any portion of
their Target Shares before the Reorganization to any person related (within
the meaning of section 1.368-1(e)(3) of the Regulations) to either Fund or
(b) any portion of the Acquiring Fund Shares to be received by them in the
Reorganization to any person related (within such meaning) to Acquiring
Fund;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.5. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.6. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions not made as
part of the Reorganization and (b) distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
4.3.7. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;
4.3.8. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" (within the meaning of section 304(c) of
the Code) of Acquiring Fund; and
4.3.9. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those
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expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187).
5. COVENANTS
---------
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that --
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations
contemplated by each Fund's normal business activities, and
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that (1) Target shall not
dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior
consent and (2) if Target's shareholders approve this Agreement
(and the transactions contemplated hereby), then between the date
of such approval and the Closing, the Funds shall coordinate
their respective portfolios so that the transfer of the Assets to
Acquiring Fund will not cause it to fail to be in compliance with
all of its investment policies and restrictions immediately after
the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Trust in obtaining information
Trust reasonably requests concerning the beneficial ownership of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
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5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate to continue its operations after
the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
--------------------
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by each Board and shall have been approved by
Target's shareholders in accordance with its Articles of Incorporation, its
By-Laws, and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target shall have received an opinion of Kirkpatrick & Lockhart LLP
("Counsel") substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of Trust, a
Business Trust with power under the Declaration of Trust to own all its
properties and assets and, to the knowledge of Counsel, to carry on its
business as presently conducted;
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6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target, is a
valid and legally binding obligation of Trust with respect to Acquiring
Fund, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized, validly issued and
outstanding, and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Declaration of Trust or Trust's By-Laws or any provision of any
agreement (known to Counsel, without any independent inquiry or
investigation) to which Trust (with respect to Acquiring Fund) is a party
or by which it is bound or (to the knowledge of Counsel, without any
independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Trust (with respect to Acquiring Fund) is a
party or by which it is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by Target;
6.4.5. To the knowledge of Counsel (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Trust on
behalf of Acquiring Fund of the transactions contemplated herein, except
those obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those
that may be required under state securities laws;
6.4.6. Trust is registered with the SEC as an investment company, and
to the knowledge of Counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of Counsel (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b)
Trust (with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Acquiring Fund's business,
except as set forth in such opinion or as otherwise disclosed in writing to
and accepted by Target.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
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knowledge of attorneys then with Counsel who have devoted substantive attention
to matters directly related to this Agreement and the Reorganization.
6.5. Trust shall have received an opinion of Counsel substantially to the
effect that:
6.5.1. Target is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland with power under
its Articles of Incorporation to own all its properties and assets and, to
the knowledge of Counsel, to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target and (b) assuming due authorization, execution, and
delivery of this Agreement by Trust on behalf of Acquiring Fund, is a valid
and legally binding obligation of Target, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Target's Articles of Incorporation or By-Laws or any provision of
any agreement (known to Counsel, without any independent inquiry or
investigation) to which Target is a party or by which it is bound or (to
the knowledge of Counsel, without any independent inquiry or investigation)
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by Trust;
6.5.4. To the knowledge of Counsel (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target of the
transactions contemplated herein, except those obtained under the 1933 Act,
the 1934 Act, and the 1940 Act and those that may be required under state
securities laws;
6.5.5. Target is registered with the SEC as an investment company, and
to the knowledge of Counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of Counsel (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target or any of its properties or assets and (b) Target
is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and adversely
affects Target's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by Trust.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the State of Maryland, on an opinion of competent Maryland counsel, (2)
A-13
<PAGE>
make assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof, (3) limit
such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with
Counsel have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of Counsel,
addressed to and in form and substance satisfactory to it, as to the federal
income tax consequences mentioned below ("Tax Opinion"). In rendering the Tax
Opinion, Counsel may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement (or in
separate letters addressed to Counsel) and the certificates delivered pursuant
to paragraph 3.4. The Tax Opinion shall be substantially to the effect that,
based on the facts and assumptions stated therein and conditioned on
consummation of the Reorganization in accordance with this Agreement, for
federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares PRO RATA to
the Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption
of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as
Target's basis therefor immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis for the Acquiring Fund Shares
to be received by it in the Reorganization will be the same as the
aggregate basis for its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares, and its holding period for those
Acquiring Fund Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the Shareholder at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
A-14
<PAGE>
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
---------------------------
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Each Fund will bear its own Reorganization expenses.
8. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
------------------------
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before April 30, 2000; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees/directors, or
officers of either Investment Company, to the other Fund.
10. AMENDMENT
---------
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
A-15
<PAGE>
11. MISCELLANEOUS
-------------
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. Target acknowledges that Trust is a Business Trust. This Agreement is
executed on behalf of Acquiring Fund and by its directors and/or officers in
their capacities as such, and not individually. Target's obligations under this
Agreement are not binding on or enforceable against any of its directors,
officers, or shareholders but are only binding on and enforceable against
Target's assets and property. Acquiring Fund agrees that, in asserting any
rights or claims under this Agreement, it shall look only to Target's assets and
property in settlement of such rights or claims and not to such directors,
officers, or shareholders.
11.4. A trustee of Trust shall not be personally liable hereunder to Target
or its directors or shareholders for any act, omission, or obligation of Trust
or any other trustee thereof. Target agrees that, in asserting any claim against
Trust or its trustees, it shall look only to Acquiring Fund's assets for payment
under such claim; and neither the shareholders nor the trustees of Trust, nor
any of their agents, whether past, present, or future, shall be personally
liable therefor.
11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: GLOBAL SMALL CAP FUND INC.
By:
- ------------------------------ ----------------------------
Secretary Vice President
A-16
<PAGE>
ATTEST: PAINEWEBBER INVESTMENT TRUST,
on behalf of its series,
PaineWebber Global Equity Fund
By:
- ------------------------------ ----------------------------
Secretary Vice President
A-17
<PAGE>
APPENDIX B
----------
EFFECTIVE PROSPECTUS FOR PAINEWEBBER GLOBAL EQUITY FUND
PaineWebber
Global Equity Fund
PaineWebber
Global Income Fund
PaineWebber
Asia Pacific
Growth Fund
PaineWebber
Emerging Markets
Equity Fund
----------------
PROSPECTUS
MARCH 1, 1999
----------------
This prospectus offers shares in PaineWebber's four Global Funds. Each fund
offers four classes of shares. Each class has different sales charges and
ongoing expenses. You can choose the class that is best for you based on how
much you plan to invest and how long you plan to hold your fund shares. Class Y
shares are available only to certain types of investors.
As with all mutual funds, the Securities and Exchange Commission has not
approved any fund's shares as investments or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
B-1
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
CONTENTS
THE FUNDS
- --------------------------------------------------------------------------------
What every investor xx PaineWebber Global Equity Fund
should know about
the funds xx PaineWebber Global Income Fund
xx PaineWebber Asia Pacific Growth Fund
xx PaineWebber Emerging Markets Equity Fund
xx More About Risks and Investment Strategies
YOUR INVESTMENT
- --------------------------------------------------------------------------------
Information for xx Managing Your Fund Account
managing your fund --Flexible Pricing
account --Buying Shares
--Selling Shares
--Exchanging Shares
--Pricing and Valuation
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Additional important xx Management
information about
the funds xx Dividends and Taxes
xx Financial Highlights
Where to learn more
about PaineWebber Back Cover
mutual funds
-----------------------------
The funds are not complete or
balanced investment programs.
-----------------------------
- --------------------------------------------------------------------------------
B-2
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund
PaineWebber Global Equity Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in stocks of companies in the United States and in
foreign countries that are represented in the MSCI Europe, Australia and Far
East Index. The EAFE Index reflects stocks in most developed countries outside
North America. The fund also invests, to a lesser extent, in stocks of issuers
in other countries, including emerging markets, and in U.S. and foreign bonds.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc.,
allocates the fund's assets between U.S. and foreign markets based on how it
expects U.S. stock markets to perform in comparison to stock markets in certain
of the EAFE countries. Mitchell Hutchins may increase the allocation of the
fund's assets to either the U.S. or foreign markets if it believes that one of
those markets has a greater potential for high returns, relative to the risk of
loss. Mitchell Hutchins may use futures and foreign currency contracts to adjust
the fund's exposure to either the U.S. or foreign markets.
Mitchell Hutchins manages the fund's U.S. investments using its own Factor
Valuation Model to identify companies that appear undervalued. The model ranks
companies based on "value" factors, such as dividends, cash flows, earnings and
book values, as well as on "growth" factors, such as earnings momentum and
industry performance forecasts. Mitchell Hutchins then applies fundamental
analysis to select specific stocks from among those identified by the model.
Mitchell Hutchins has appointed Invista Capital Management, LLC as the
sub-adviser for the fund's foreign investments. Invista selects foreign stocks
for the fund through an analysis of the fundamental business prospects of
industries and of individual companies and by making an assessment of the
relative risks presented by the countries in which those companies operate.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund. The principal risks presented by the fund are:
o Equity Risk
o Sector Allocation Risk
o Foreign Securities Risk
o Emerging Markets Risk
o Currency Risk
o Interest Rate Risk
o Credit Risk
o Derivatives Risk
For an explanation of each of these risks, see "More About Risks and Investment
Strategies," below.
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THOSE REPORTS).
- --------------------------------------------------------------------------------
B-3
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE
The following bar chart shows how the fund's performance has varied from year to
year. The chart shows Class A shares because they have the longest performance
history of any class of fund shares. The chart does not reflect the effect of
sales charges; if it did, the total returns shown would be lower.
The table that follows the chart shows the average annual returns over several
time periods for each class of the fund's shares. That table does reflect fund
sales charges. The table compares fund returns to returns on a broad-based
market index that is unmanaged and that, therefore, does not include any sales
charges or expenses.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true of the period prior to
October 1, 1998, when Mitchell Hutchins and Invista assumed the day-to-day
management of the fund's assets. Prior to that date, another sub-adviser was
responsible for managing all fund assets.
TOTAL RETURN ON CLASS A SHARES
LOGO
Best quarter during years shown: 1st quarter, 1998--19.22%
Worst quarter during years shown: 3rd quarter, 1998--(19.41)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<S> <C> <C> <C> <C> <C>
MSCI
CLASS CLASS A CLASS B CLASS C CLASS Y WORLD
(INCEPTION DATE) (11/14/91) (8/25/95) (5/10/93) (5/10/93) INDEX
- --------------- ---------- --------- --------- --------- -----
One Year............................................ 6.59% 5.67% 9.73% 11.92% 24.80%
Five Years.......................................... 7.60% N/A 7.76% 8.93% 16.19%
Life of Class....................................... 10.15% 8.79% 9.92% 11.10% *
</TABLE>
- ----------
* Average annual total returns for the MSCI World Index for the life of each
class were as follows: Class A -- 13.96%; Class B -- 18.98%; Class C --
15.76%; and Class Y -- 15.76%.
- --------------------------------------------------------------------------------
B-4
<PAGE>
PaineWebber Global Equity Fund
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)........................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)........................... None 5% 1% None
Exchange Fee........................................... None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from fund assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- --------
Management Fees........................................ 0.85% 0.85% 0.85% 0.85%
Distribution and/or Service (12b-1) Fees............... 0.25 1.00 1.00 None
Other Expenses......................................... 0.45 0.53 0.47 0.36
------ ----- ----- ----
Total Annual Fund Operating Expenses................... 1.55% 2.38% 2.32% 1.21%
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in
PaineWebber Global Equity Fund with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- ---------
Class A . $ 601 $ 918 $1,257 $2,212
Class B (assuming sales of all shares at end of period). 741 1,042 1,470 2,320
Class B (assuming no sales of shares)................... 241 742 1,270 2,320
Class C (assuming sales of all shares at end of period). 335 724 1,240 2,656
Class C (assuming no sales of shares)................... 235 724 1,240 2,656
Class Y . 123 384 665 1,466
- -------------------------------------------------------------------------------------------------------
B-5
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Income Fund
PaineWebber Global Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
Primarily, high current income consistent with prudent investment risk;
secondarily, capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in high quality bonds of governmental and private
issuers in the U.S. 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 quality bonds,
including bonds of issuers in emerging markets. These may include bonds that
have very low credit ratings but that Mitchell Hutchins Asset Management Inc.,
the fund's investment 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 normally invests a portion of the fund's assets in bonds of
U.S. government and private issuers, and allocates the balance of the fund's
portfolio among bonds of issuers in different foreign countries. Mitchell
Hutchins determines the allocation to different geographic areas, countries and
industries based upon its assessment of fundamental economic strengths, credit
quality and currency and interest rate trends. Mitchell Hutchins uses foreign
currency contracts to increase or decrease the fund's exposure to various
foreign currencies.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund. The principal risks presented by the fund are:
o Interest Rate Risk
o Foreign Securities Risk
o Sovereign Risk
o Sector Allocation Risk
o Currency Risk
o Emerging Markets Risk
o Credit Risk
o Non-Diversified Status Risk
o Prepayment Risk
o Derivatives Risk
For an explanation of each of these risks, see "More About Risks and Investment
Strategies," below.
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
B-6
<PAGE>
PaineWebber Global Income Fund
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE
The following bar chart shows how the fund's performance has varied from year to
year. The chart shows Class B shares because they have the longest performance
history of any class of fund shares. The chart does not reflect the effect of
sales charges; if it did, the total returns shown would be lower.
The table that follows the chart shows the average annual returns over several
time periods for each class of the fund's shares. That table does reflect fund
sales charges. The table compares fund returns to returns on a broad-based
market index that is unmanaged and that, therefore, does not include any sales
charges or expenses.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN ON CLASS B SHARES
LOGO
Best quarter during years shown: 3rd quarter, 1991--7.17%
Worst quarter during years shown: 1st quarter, 1994--(3.92)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SALOMON
BROTHERS
WORLD
CLASS CLASS A CLASS B CLASS C CLASS Y GOVERNMENT
(INCEPTION DATE) (7/1/91) (3/20/87) (7/2/92) (8/26/91) BOND INDEX
- ---------------- --------- --------- -------- --------- ----------
One Year..................................... 6.33% 4.73% 9.47% 11.12% 15.31%
Five Years................................... 5.16% 4.86% 5.50% 6.32% 7.85%
Ten Years.................................... N/A 7.75% N/A N/A 8.96%
Life of Class................................ 6.92% 9.06% 6.29% 7.78% *
</TABLE>
- -----------
* Average annual total returns for the Salomon Brothers World Government Bond
Index for the life of each class were as follows: Class A -- 9.95%; Class B
-- 8.90%; Class C -- 8.42%; and Class Y -- 9.58%.
- --------------------------------------------------------------------------------
B-7
<PAGE>
PaineWebber Global Income Fund
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 0.75% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- ------
Management Fees............................................ 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees................... 0.25 1.00 0.75 None
Other Expenses............................................. 0.24 0.38 0.27 0.21
------ ----- ----- -----
Total Annual Fund Operating Expenses....................... 1.24% 2.13% 1.77% 0.96%
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in
PaineWebber Global Income Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1YEAR 3YEARS 5YEARS 10YEARS
----- ------ ------ -------
Class A....................................................... $521 $778 $1,054 $1,840
Class B (assuming sales of all shares at end of period)....... 716 967 1,344 2,026
Class B (assuming no sales of shares)......................... 216 667 1,144 2,026
Class C (assuming sales of all shares at end of period)....... 255 557 959 2,084
Class C (assuming no sales of shares)......................... 180 557 959 2,084
Class Y....................................................... 98 306 531 1,178
- ------------------------------------------------------------------------------------------------------------------
B-8
</TABLE>
<PAGE>
PaineWebber Asia Pacific Growth Fund
PaineWebber Asia Pacific Growth Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in stocks of companies in the Asia Pacific Region,
except Japan.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, has
appointed Schroder Capital Management International Inc. as the fund's
sub-adviser. Schroder Capital allocates investments among Asia Pacific Region
countries based on its assessment of those countries' long-term business
environments. Within those countries, Schroder Capital selects stocks of
companies that, based on its analyses of fundamental corporate data, it believes
have sustainable competitive advantages and whose growth prospects are
undervalued by other investors. Schroder Capital's extensive network of locally
based analysts conducts comprehensive research to assess potential returns. It
also considers companies' management capability, the ability of companies to tap
capital markets, competitive position in both domestic and export markets,
government regulation, and other factors.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund. The principal risks presented by the fund are:
o Equity Risk
o Foreign Securities Risk
o Emerging Markets Risk
o Currency Risk
o Regional Concentration Risk
For an explanation of each of these risks, see "More About Risks and Investment
Strategies," below.
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THOSE REPORTS).
- --------------------------------------------------------------------------------
B-9
<PAGE>
PaineWebber Asia Pacific Growth Fund
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE
The following bar chart shows the fund's performance for the last calendar year.
The chart shows Class A shares because they have as long a performance history
as any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.
The table that follows the chart shows the average annual returns during the
last calendar year and for the life of the fund for each class of the fund's
shares. That table does reflect fund sales charges. The table compares fund
returns to returns on a broad-based market index that is unmanaged and that,
therefore, does not include any sales charges or expenses.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN ON CLASS A SHARES
LOGO
Best quarter during the year shown: 4th quarter--19.90%
Worst quarter during the year shown: 2nd quarter--(25.95)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MSCI
ASIA PACIFIC
FREE
CLASS CLASS A CLASS B CLASS C CLASS Y (EX-JAPAN)
(INCEPTION DATE) (3/25/97) (3/25/97) (3/25/97) (3/13/98) INDEX
- ---------------- --------- --------- --------- --------- -----
One Year.................................. (15.72)% (16.69)% (13.18)% N/A (4.42)%
Life of Class............................. (28.12)% (28.41)% (26.74)% (16.28)% *
</TABLE>
* Average annual total returns for the MSCI Asia Pacific Free (ex-Japan) Index
for the life of each class were as follows: Class A -- (22.07)%; Class B --
(22.07)%; Class C -- (22.07)%; and Class Y -- (13.05)%.
- --------------------------------------------------------------------------------
B-10
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Asia Pacific Growth Fund
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
Management Fees........................................... 1.20% 1.20% 1.20% 1.20%
Distribution and/or Service (12b-1) Fees.................. 0.25 1.00 1.00 None
Other Expenses............................................ 1.43 1.43 1.40 1.46
Total Annual Fund Operating Expenses...................... 2.88% 3.63% 3.60% 2.66%
</TABLE>
EXAMPLE
The following example is intended to help you compare the cost of investing in
PaineWebber Asia Pacific Growth Fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3YEARS 5YEARS 10YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A........................................................ $728 $1,302 $1,900 $3,510
Class B (assuming sales of all shares at end of period)........ 865 1,411 2,078 3,573
Class B (assuming no sales of shares).......................... 365 1,111 1,878 3,573
Class C (assuming sales of all shares at end of period)........ 462 1,103 1,864 3,862
Class C (assuming no sales of shares).......................... 362 1,103 1,864 3,862
Class Y........................................................ 269 826 1,410 2,993
</TABLE>
- --------------------------------------------------------------------------------
B-11
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Emerging Markets Equity Fund
PAINEWEBBER EMERGING MARKETS EQUITY FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in stocks of companies in emerging market countries.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, has
appointed Schroder Capital Management International Inc. as the fund's
sub-adviser. Schroder Capital diversifies the fund's investments by spreading
them among different geographic areas and industries. Schroder Capital assesses
emerging market countries to determine which are most likely to have favorable
long-term business environments and to have economic and political conditions
that will not impede a company's growth.
Within individual countries, Schroder Capital tries to diversify the fund's
investments among companies that it believes have attractive stock prices
relative to expected growth. Schroder Capital selects stocks of companies that,
based on its analyses of fundamental corporate data, it believes have
sustainable competitive advantages and whose growth prospects are undervalued by
other investors.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund. The principal risks presented by the fund are:
o Equity Risk
o Foreign Securities Risk
o Emerging Markets Risk
o Currency Risk
o Sector Allocation Risk
For an explanation of each of these risks, see "More About Risks and Investment
Strategies," below.
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THOSE REPORTS).
- --------------------------------------------------------------------------------
B-12
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Emerging Markets Equity Fund
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE
The following bar chart shows how the fund's performance has varied from year to
year. The chart shows Class A shares because they have as long a performance
history as any class of fund shares. The chart does not reflect the effect of
sales charges; if it did, the total returns shown would be lower.
The table that follows the chart shows the average annual returns over several
time periods for each class of the fund's shares. That table does reflect fund
sales charges. The table compares fund returns to returns on a broad-based
market index that is unmanaged and that, therefore, does not include any sales
charges or expenses.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true of the period prior to
February 25, 1997, which is when Mitchell Hutchins appointed Schroder Capital as
the fund's sub-adviser. Prior to that date, another sub-adviser was responsible
for managing the fund's assets.
TOTAL RETURN ON CLASS A SHARES
LOGO
Best quarter during years shown: 4th quarter, 1998--16.58%
Worst quarter during years shown: 2nd quarter, 1998--(22.48)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
MSCI
EMERGING
CLASS CLASS A CLASS B CLASS C CLASS Y MARKETS
(INCEPTION DATE) (1/19/94) (12/5/95) (1/19/94) (1/19/94) FREE INDEX
- ---------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
One Year..................................... (29.76)% (30.17)% (27.72)% (26.26)% (25.34)%
Life of Class................................ (11.51)% (10.63)% (11.36)% (10.49)% *
</TABLE>
* Average annual total returns for the MSCI Emerging Markets Free Index for the
life of each class were as follows: Class A -- (9.75)%; Class B -- (9.66)%;
Class C -- (9.75)%; and Class Y -- (9.75)%.
- --------------------------------------------------------------------------------
B-13
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Emerging Markets Equity Fund
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
Management Fees........................................... 1.20% 1.20% 1.20% 1.20%
Distribution and/or Service (12b-1) Fees.................. 0.25 1.00 1.00 None
Other Expenses............................................ 2.26 2.72 2.22 2.16
------ ------ ------ ------
Total Annual Fund Operating Expenses...................... 3.71% 4.92% 4.42% 3.36%
Expense Reimbursement*.................................... 1.27 1.73 1.23 1.17
Net Expenses*............................................. 2.44% 3.19% 3.19% 2.19%
</TABLE>
* The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent
that the fund's expenses through the end of the current fiscal year otherwise
would exceed the "Net Expenses" rates for each class as shown above. The fund
has agreed to repay Mitchell Hutchins for those reimbursed expenses if it can
do so over the following three years without causing the fund's expenses in
any of those years to exceed those "Net Expenses" rates.
EXAMPLE
The following example is intended to help you compare the cost of investing in
PaineWebber Emerging Markets Equity Fund with the cost of investing in other
mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
one year period when the fund's expenses are lower due to its reimbursement
agreement with Mitchell Hutchins. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3YEARS 5YEARS 10YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A......................................................... $686 $1,422 $2,177 $4,152
Class B (assuming sales of all shares at end of period)......... 822 1,624 2,529 4,388
Class B (assuming no sales of shares)........................... 322 1,324 2,329 4,388
Class C (assuming sales of all shares at end of period)......... 422 1,227 2,143 4,479
Class C (assuming no sales of shares)........................... 322 1,227 2,143 4,479
Class Y......................................................... 222 924 1,650 3,570
</TABLE>
- --------------------------------------------------------------------------------
B-14
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
MORE ABOUT RISKS AND INVESTMENT
STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in one or more of the funds are described below. Not
all of these risks apply to each fund. You can find a list of the main risks
that apply to a particular fund by looking under the "Investment Objective,
Strategies and Risks" heading for that fund.
Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
CREDIT RISK.Credit risk is the risk that the issuer of a bond will not make
principal or interest payments when they are due. Even if an issuer does not
default on a payment, a bond's value may decline if the market believes that the
issuer has become less able, or less willing, to make payments on time. Even
high quality bonds are subject to some credit risk. However, credit risk is
higher for lower quality bonds. Low quality bonds involve high credit risk and
are considered speculative. Some low quality bonds may be in default when
purchased by a fund.
CURRENCY RISK.Currency risk is the risk that the value of a foreign currency in
which one or more of a fund's investments are denominated will fall in relation
to the U.S. dollar. Currency exchange rates can be volatile and can be affected
by, among other factors, the general economics of a country, the actions of the
U.S. and foreign governments or central banks, the imposition of currency
controls, and speculation.
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 a fund to lose more than the amount it invested in the derivative.
Options, futures contracts and forward currency contracts are examples of
derivatives. If a fund uses derivatives to adjust or "hedge" the overall risk of
its portfolio, it is possible that the hedge will not succeed. This may happen
for various reasons, including unexpected changes in the value of the
derivatives that are not matched by opposite changes in the value of the rest of
the fund's portfolio.
EMERGING MARKETS RISK.Securities of issuers located in emerging market countries
are subject to all of the risks of other foreign securities (see below).
However, the level of those risks often is higher due to the fact that
political, legal and economic systems in emerging market countries may be less
fully developed and less stable than those in developed countries. Emerging
market securities also may be subject to additional risks, such as lower
liquidity and larger or more rapid changes in value.
EQUITY RISK.The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. A fund
may lose a substantial part, or even all, of its investment in a company's
stock.
FOREIGN SECURITIES RISK.Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices. When securities are
denominated in foreign currencies, they also are subject to currency risk (see
above).
INTEREST RATE RISK.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 a 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.
- --------------------------------------------------------------------------------
B-15
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
NON-DIVERSIFIED STATUS RISK.This means that a fund is not subject to certain
limitations on its ability to invest more than 5% of its total assets in
securities of a single issuer. When a fund holds a large position in the
securities of one issuer, changes in the financial condition or in the market's
assessment of that issuer may cause larger changes in the fund's total return
and in the price of its shares than if the fund held only a smaller position.
PREPAYMENT RISK.Payments on bonds that are backed by mortgage loans or similar
assets may be received earlier or later than expected due to changes in the rate
at which the underlying loans are prepaid. Faster prepayments often happen when
market interest rates are falling. As a result, a fund may need to reinvest
these early payments at those lower interest rates, thus reducing its income.
Conversely, when interest rates rise, prepayments may happen more slowly,
causing the underlying loans to be outstanding for a longer time. This can cause
the market value of the security to fall because the market may view its
interest rate as too low for a longer term investment.
REGIONAL CONCENTRATION RISK.Asia Pacific Growth Fund invests primarily in stocks
of companies in the Asia Pacific Region (excluding Japan). As a result, factors
affecting this region will affect the value of the fund's investments more than
if the fund invested in several geographic areas. The Asia Pacific Region
countries in which the fund invests generally have less stable economies, stock
markets, currencies and political systems than in Europe or North America. Also,
countries in the Asia Pacific Region generally are heavily dependent on
international trade and on the availability of foreign capital. This makes these
countries more subject to external influences.
SECTOR ALLOCATION RISK.Mitchell Hutchins, Schroder Capital or Invista may not be
successful in choosing the best allocation among geographic or other market
sectors. A fund that allocates its assets among market sectors is more dependent
on its investment adviser's or sub-adviser's ability to successfully assess the
relative values in each sector than are funds that do not do so.
SOVEREIGN RISK.Investments in foreign government bonds involve special risks
because the investors may have limited legal recourse in the event of default.
Political conditions, especially a country's willingness to meet the terms of
its debt obligations, can be of considerable significance.
ADDITIONAL RISKS
YEAR 2000 RISK.The funds could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the funds' other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the funds, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the companies in which the funds invest and trading systems used by
the funds could be adversely affected by this issue. The ability of a company or
trading system to respond successfully to the issue requires both technological
sophistication and diligence, and there can be no assurance that any steps taken
will be sufficient to avoid an adverse impact on the funds.
ADDITIONAL INVESTMENT STRATEGIES
DEFENSIVE POSITIONS; CASH RESERVES.In order to protect itself from adverse
market conditions, a 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 a fund's investment objective.
However, Global Income Fund may invest in money market instruments on an
unlimited basis as part of its ordinary investment strategy. Each of the other
funds 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.Each fund may engage in frequent trading in order to achieve
its investment objective. Frequent trading may result in a high portfolio
turnover rate and higher fund expenses due to transaction costs.
- --------------------------------------------------------------------------------
B-16
<PAGE>
Frequent trading also may increase the portion of a fund's dividends that
represent short-term capital gains. The federal income tax rate payable by
shareholders on dividends representing short-term capital gains is the same as
the rate on dividends representing ordinary income, but it is higher than the
rate on dividends representing long-term capital gains.
- --------------------------------------------------------------------------------
B-17
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
Your Investment
MANAGING YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
FLEXIBLE PRICING
The funds offer four classes of shares--Class A, Class B, Class C and Class Y.
Each class has different sales charges and ongoing expenses. You can choose the
class that is best for you, based on how much you plan to invest in the funds
and how long you plan to hold your fund investment. Class Y shares are only
available to certain types of investors.
CLASS A SHARES
Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class B and Class C shares.
The Class A sales charges for each fund are described in the following tables.
CLASS A SALES CHARGES FOR: GLOBAL EQUITY FUND
ASIA PACIFIC GROWTH FUND
EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE
- -------------------- -------------- ------------------- -----------------------------
<S> <C> <C> <C>
Less than $50,000....................... 4.50% 4.71% 14.25%
$50,000 to $99,999...................... 4.00 4.17 3.75
$100,000 to $249,999.................... 3.50 3.63 3.25
$250,000 to $499,999.................... 2.50 2.56 2.25
$500,000 to $999,999.................... 1.75 1.78 1.50
$1,000,000 and over (1)................. None None 1.00(2)
CLASS A SALES CHARGES FOR: GLOBAL INCOME FUND
Less than $100,000...................... 4.00% 4.17% 3.75%
$100,000 to $249,999.................... 3.00 3.09 2.75
$250,000 to $499,999.................... 2.25 2.30 2.00
$500,000 to $999,999.................... 1.75 1.78 1.50
$1,000,000 and over(1).................. None None 1.00(2)
</TABLE>
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not subject
to this 1% charge. Withdrawals in the first year after purchase of up to 12%
of the value of the fund account under the funds' Systematic Withdrawal Plan
are not subject to this charge.
(2) Mitchell Hutchins pays 1% to PaineWebber.
- --------------------------------------------------------------------------------
B-18
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
SALES CHARGE REDUCTIONS AND WAIVERS. You may qualify for a lower sales charge if
you already own Class A shares of a PaineWebber mutual fund. You can combine the
value of Class A shares that you own in other PaineWebber funds and the purchase
amount of the Class A shares of the PaineWebber fund that you are buying.
You may also qualify for a lower sales charge if you combine your purchases with
those of:
o your spouse, parents or children under age 21;
o your Individual Retirement Accounts (IRAs);
o certain employee benefit plans, including 401(k) plans;
o a company that you control;
o a trust that you created;
o Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by you or by a group of investors for your children; or
o accounts with the same adviser.
You may qualify for a complete waiver of the sales charge if you:
o Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;
o Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC, and
-- you were the Financial Advisor's client at the competing brokerage firm;
--within 90 days of buying shares in a fund, you sell shares of one or more
mutual funds that were principally underwritten by the competing brokerage
firm or its affiliates, and you either paid a sales charge to buy those
shares, pay a contingent deferred sales charge when selling them or held
those shares until the contingent deferred sales charge was waived; and
--you purchase an amount that does not exceed the total amount of money you
received from the sale of the other mutual fund;
o Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;
o Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
eligible employees in the plan or at least $1 million in assets; or
o Are a participant in the PaineWebber Members Only ProgramTM. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in
a total amount not to exceed 1% of the amount invested.
NOTE: See the funds' Statement of Additional Information for some other sales
charge waivers. If you think you qualify for any sales charge reductions or
waivers, you will need to provide documentation to PaineWebber or the fund. For
more information, you should contact your PaineWebber Financial Advisor or
correspondent firm or call 1-800-647-1568. If you want information on the funds'
Systematic Withdrawal Plan, see the Statement of Additional Information or
contact your PaineWebber Financial Advisor or correspondent firm.
CLASS B SHARES
Class B shares have a contingent deferred sales charge. When you purchase Class
B shares, we invest 100% of your purchase in fund shares. However, you may have
to pay the deferred sales charge when you sell your fund shares, depending on
how long you own the shares.
Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Over time, these fees will increase the cost of your investment and may cost you
more than if you paid a front-end sales charge. If you hold your Class B shares
- --------------------------------------------------------------------------------
B-19
<PAGE>
for six years, they will automatically convert to Class A shares, which have
lower ongoing expenses.
If you sell Class B shares before the end of six years, you will pay a deferred
sales charge. We calculate the deferred sales charge by multiplying the lesser
of the net asset value of the Class B shares at the time of
B-20
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
purchase or the net asset value at the time of sale by the percentage shown
below:
PERCENTAGE BY WHICH
IF YOU SELL THE SHARES' NET ASSET
SHARES WITHIN: VALUE IS MULTIPLIED:
- -------------- --------------------
1st year since purchase..... 5%
2nd year since purchase..... 4
3rd year since purchase..... 3
4th year since purchase..... 2
5th year since purchase..... 2
6th year since purchase..... 1
7th year since purchase..... None
We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.
To minimize the deferred sales charge, we will assume that you are selling
o First, Class B shares representing reinvested dividends and o Second, Class B
shares that you have owned the longest.
SALES CHARGE WAIVERS. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:
o You participate in the Systematic Withdrawal Plan;
o You are older than 591/2 and are selling shares to take a distribution from
certain types of retirement plans;
o You receive a tax-free return of an excess IRA contribution;
o You receive a tax-qualified retirement plan distribution following
retirement; or
o The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint tenant
with the right of survivorship.
NOTE: If you think you qualify for any of these sales charge waivers, you will
need to provide documentation to PaineWebber or the fund. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568. If you want information on the Systematic Withdrawal Plan,
see the Statement of Additional Information or contact your PaineWebber
Financial Advisor or correspondent firm.
- --------------------------------------------------------------------------------
B-21
<PAGE>
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.
Class C shares pay an annual 12b-1 distribution fee of 0.75% (0.50% for Global
Income Fund) of average net assets, as well as an annual 12b-1 service fee of
0.25% of average net assets. Over time these fees will increase the cost of your
investment and may cost you more than if you paid a front-end sales charge.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.
Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 1.00% (0.75% for Global Income Fund) by the lesser of the
net asset value of the Class C shares at the time of purchase or the net asset
value at the time of sale. We will not impose the deferred sales charge on Class
C shares representing reinvestment of dividends or on withdrawals, in the first
year after purchase, of up to 12% of the value of your Class C shares under the
Systematic Withdrawal Plan.
NOTE: If you want information on the funds' Systematic Withdrawal Plan, see the
Statement of Additional Information or contact your PaineWebber Financial
Advisor or correspondent firm.
CLASS Y SHARES
Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:
o Buy shares through PaineWebber's PACE Multi-Advisor Program;
o Buy $10 million or more of PaineWebber fund shares at any one time;
o Are a qualified retirement plan with 5,000 or more eligible employees or $50
million in assets; or
o Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.
The trustee of PaineWebber's 401(k) Plus Plan for its employees is also eligible
to purchase Class Y shares.
B-22
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
Class Y shares do not pay ongoing sales or distribution fees or sales charges.
The ongoing expenses for Class Y shares are the lowest for all the classes.
BUYING SHARES
- -------------
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the funds through the funds' transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to: PFPC Inc., Attn.: PaineWebber
Mutual Funds, P.O. Box 8950, Wilmington, DE 19899.
If you wish to invest in other PaineWebber Funds, you can do so by:
o Contacting your Financial Advisor (if you have an account at PaineWebber or
at a PaineWebber correspondent firm);
o Mailing an application with a check; or
o Opening an account by exchanging shares from another PaineWebber fund.
You do not have to complete an application when you make additional investments
in the same fund.
The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.
MINIMUM INVESTMENTS:
- --------------------
To open an account..... $1,000
To add to an account... $100
Each fund may waive or reduce these amounts for:
o Employees of PaineWebber or its affiliates; or
o Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the funds' automatic investment plans.
SELLING SHARES
- --------------
You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.
If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
B-23
<PAGE>
- --------------------------------------------------------------------------------
If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:
o Your name and address;
o The fund's name;
o The fund account number;
o The dollar amount or number of shares you want to sell; and
o A guarantee of each registered owner's signature. A signature guarantee may
be obtained from a domestic bank or trust company, broker, dealer, clearing
agency or savings association that is a participant in one of the medallion
programs recognized by the Securities Transfer Agents Association. These are:
Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature
Program (MSP). The funds will not accept signature guarantees that are not a
part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the same fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.
It costs each fund money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. A fund will not repurchase shares in accounts that fall below $500 solely
because of a decrease in the fund's net asset value.
EXCHANGING SHARES
- -----------------
You may exchange Class A, Class B or Class C shares of each fund for shares of
the same class of most other PaineWebber funds. You may not exchange Class Y
shares.
B-24
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales charge if you
later sell the shares you acquired in the exchange. Each fund will use the date
that you purchased the shares in the first fund to determine whether you must
pay a deferred sales charge when you sell the shares in the acquired fund.
Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.
You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.
PAINEWEBBER CLIENTS.If you bought your shares through PaineWebber or a
correspondent firm, you may exchange your shares by placing an order with your
PaineWebber Financial Advisor.
OTHER INVESTORS.If you are not a PaineWebber client, you may exchange your
shares by writing to the fund's transfer agent. You must include:
o Your name and address;
o The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;
o Your account number;
o How much you are exchanging (by dollar amount or by number of shares to be
sold); and
o A guarantee of your signature. (See "Buying Shares" for information on
obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
A fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
- ---------------------
The price at which you may buy, sell or exchange fund shares is based on net
asset value per share. Each fund calculates net asset value on days that the New
York Stock Exchange is open. Each fund calculates net asset value separately for
each class as of the close of regular trading on the NYSE (generally, 4:00 p.m.,
Eastern time). The NYSE normally is not open, and the funds do not price their
B-25
<PAGE>
- --------------------------------------------------------------------------------
shares, on national holidays and on Good Friday. If trading on the NYSE is
halted for the day before 4:00 p.m., Eastern time, the fund's net asset value
per share will be calculated as of the time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.
You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.
Each fund calculates its net asset value based on the current market value for
its portfolio securities. The funds normally obtain market values for their
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. The funds normally use the amortized cost method to value bonds
that will mature in 60 days or less.
Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.
The funds calculate the U.S. dollar value of investments that are denominated in
foreign currencies daily, based on current exchange rates. A fund may own
securities, including some securities that trade primarily in foreign markets,
that trade on weekends or other days on which a fund does not calculate net
asset value. You will not be able to sell your shares on those days. If a fund
concludes that a material change in the value of a foreign security has occurred
after the close of trading in its principal foreign market but before the close
of regular trading on the NYSE, the fund may use fair value methods to reflect
those changes. Any use of fair value methods would be intended to assure that
the fund's net asset value fairly reflects security values as of the time of
pricing.
- --------------------------------------------------------------------------------
B-26
<PAGE>
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 1285 Avenue of the
Americas, New York, New York, 10019, and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is wholly owned by PaineWebber
Group Inc., a publicly owned financial services holding company. On January 31,
1999, Mitchell Hutchins was adviser or sub-adviser of 33 investment companies
with 75 separate portfolios and aggregate assets of approximately $47.7 billion.
Invista Capital Management, LLC is the sub-adviser for Global Equity Fund's
foreign investments. It is located at 1800 Hub Tower, 699 Walnut, Des Moines,
Iowa 50309. As of December 31, 1998, Invista managed approximately $31.0 billion
in client assets.
Schroder Capital Management International Inc. is the sub-adviser to Asia
Pacific Growth Fund and Emerging Markets Equity Fund. Schroder Capital is
located at 1301 Avenue of the Americas, New York, New York 10019. As of December
31, 1998, Schroder Capital, together with its United Kingdom affiliate, Schroder
Capital Management International Limited, had over $27.1 billion under
management.
The funds have received an exemptive order from the SEC that permits their
boards to appoint and replace sub-advisers and to amend sub-advisory contracts
without obtaining shareholder approval. A fund's shareholders must approve this
policy before its board may implement it. As of March 1, 1999, only the
shareholders of Global Equity Fund have done so.
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 rejoined Mitchell Hutchins in 1994, after being with Vantage Global
Management for one year. Prior to that year, Mr. Barneby was a senior vice
president responsible for quantitative management and asset allocation models.
Mark A. Tincher has been primarily responsible for the day-to-day management of
the fund's U.S. investments since October 1, 1998. Mr. Tincher is a managing
director and chief investment officer for equities (stocks) of Mitchell
Hutchins. Prior to joining Mitchell Hutchins in March 1995, Mr. Tincher worked
for Chase Manhattan Private Bank, where he was vice president and directed the
U.S. funds management and equity research area and oversaw the management of all
Chase equity funds.
Scott D. Opsal has been primarily responsible for the day-to-day management of
the fund's foreign investments since October 1, 1998, when Invista was appointed
as the fund's sub-adviser for foreign investments. Mr. Opsal is an executive
vice president and chief investment officer of Invista, where he has been
employed since 1986.
GLOBAL INCOME FUND.Stuart Waugh and William King are primarily responsible for
the day-to-day management of Global Income Fund. Mr. Waugh has been involved
with the fund since its inception, first as an analyst and then as portfolio
manager since 1993. Mr. Waugh is a managing director of Mitchell Hutchins
responsible for global fixed income investments and currency trading. Mr. Waugh
has been with Mitchell Hutchins since 1983. Mr. King joined Mitchell Hutchins in
November 1995 and assumed his present responsibilities with the fund in 1997.
Prior to 1995, he was at IBM Corporation, where he was responsible for the
management of IBM Pension Fund's global bond portfolio. Both Mr. Waugh and Mr.
King are Chartered Financial Analysts.
Other members of Mitchell Hutchins' international fixed income group provide
information on market outlook, interest rate forecasts and other factors
affecting global fixed income investments.
- --------------------------------------------------------------------------------
B-27
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
ASIA PACIFIC GROWTH FUND.Louise Croset and Heather Crighton, with the assistance
of Schroder Capital's Asia Pacific Region investment committee, have been
primarily responsible for the day-to-day management of Asia Pacific Growth Fund
since its inception. Ms. Croset is a first vice president and director of
Schroder Capital and has been with the firm since 1993. She has managed Asia
Pacific Region stocks for the past 14 years. Ms. Crighton is a first vice
president of Schroder Capital and has also been with the firm since 1993.
She has managed Asia Pacific Region stocks for the past ten years.
EMERGING MARKETS EQUITY FUND.John A. Troiano, Ms. Crighton and Mark Bridgeman,
with the assistance of Schroder Capital's emerging markets investment committee,
have been primarily responsible for the day-to-day management of Emerging
Markets Equity Fund since Schroder Capital was appointed sub-adviser. On
February 25, 1997. Mr. Troiano has been chief executive of Schroder Capital
since July 1997, and has been employed by various Schroder Group companies in
the portfolio management area since 1988. He is currently chairman of Schroder
Capital's emerging markets investment committee. Mr. Bridgeman joined Schroder
Capital in 1990 and has been a vice president and international fund manager of
the firm since 1995.
The funds paid advisory fees to Mitchell Hutchins for the most recent fiscal
year at the following rates of average daily net assets:
Global Equity Fund.......... 0.85%
Global Income Fund............ 0.75%
Asia Pacific Growth Fund...... 1.20%
Emerging Markets Equity Fund. 1.20%
- --------------------------------------------------------------------------------
B-28
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
Global Income Fund normally declares and pays dividends monthly, and it
distributes substantially all of its gains, if any, annually. The other funds
normally declare and pay dividends and distribute any gains annually.
Classes with higher expenses are expected to have lower dividends. For example,
Class B shares are expected to have the lowest dividends of any class of a
fund's shares, while Class Y shares are expected to have the highest.
You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its corresponding firms if you prefer to receive dividends in cash.
TAXES
The dividends that you receive from a fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.
When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. If you exchange any fund's shares for shares of another
PaineWebber mutual fund, the transaction will be treated as a sale of the first
fund's shares, and any gain will be subject to federal income tax.
Global Income Fund expects that its dividends will be taxed primarily as
ordinary income. The other funds expect that their dividends will be comprised
primarily of capital gain distributions. The distribution of capital gains may
be taxed at a lower rate than ordinary income, depending on whether the fund
held the assets that generated the gains for more than 12 months. Your fund will
tell you how you should treat its dividends for tax purposes.
- --------------------------------------------------------------------------------
B-29
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
the funds' financial performance for the past 5 years. Shorter periods are shown
for funds or classes of fund shares that have existed for less than 5 years.
Certain information reflects financial results for a single fund share. In the
tables, "total investment return" represents the rate that an investor would
have earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends). The information in the financial highlights has been audited by
Ernst & Young LLP, independent auditors (or for Global Income Fund,
PricewaterhouseCoopers LLP, independent accountants), whose reports, along with
the funds' financial statements, are included in the funds' Annual Reports to
Shareholders. Annual Reports may be obtained without charge by calling
1-800-647-1568.
- --------------------------------------------------------------------------------
B-30
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
PaineWebber Global Equity Fund
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL EQUITY FUND
------------------
CLASS A CLASS B
------- -------
FOR THE FOR THE TWO FOR THE FOR THE FOR THE TWO
YEARS ENDED MONTHS ENDED YEARS ENDED YEARS ENDED MONTHS ENDED
OCTOBER 31, OCTOBER 31, AUGUST 31, OCTOBER 31, OCTOBER 31,
----------- ------------ ---------- -----------
1998# 1997 1996 1996 1995** 1994 1998# 1997 1996
------ ---- ---- ---- -------- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55 $17.69 $ 16.93 $ 16.35
------ ------- ------- ------- ------- ------- ------ ------ -------
Net investment income (loss)............. 0.03+ 0.00 (0.02) 0.02 0.02 0.01 (0.12)+ (0.21) (0.05)
Net realized and unrealized gains (losses)
from investments, futures and foreign 0.35+ 1.52 0.64 1.24 0.37 2.63 0.34+ 1.55 0.63
currency................................. ------ ------- ------- ------- ------- ------- ------ ------ -------
Net increase (decrease) from investment 0.38 1.52 0.62 1.26 0.39 2.64 0.22 1.34 0.58
operations............................... ------- ------- ------- ------- ------- ------- ------ ------ -------
Distributions from net realized gains.... (2.48) (0.58) -- (0.57) (1.25) (0.21) (2.48) (0.58) --
------ ------ ------- ------- ------- ------- ------ ------ -------
Net asset value, end of period........... $16.27 $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $15.43 $ 17.69 $ 16.93
====== ======= ======= ======= ======= ======= ====== ====== =======
Total investment return (1).............. 2.53% 8.87% 3.69% 8.06% 3.24% 18.23% 1.62% 8.05% 3.55%
====== ======= ======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........ $251,680 $ 294,878 $ 307,267 $ 305,218 $360,652 $185,493 $52,709 $87,104 $113,445
Expenses to average net assets........... 1.55% 1.44% 1.53%* 1.48% 1.71%(2) 1.58% 2.38% 2.26% 2.34%*
Net investment income (loss) to average
net assets............................... 0.17% 0.01% (0.80)%* 0.10% 0.09%(2) 0.07% (0.74)% (0.80)% (1.61)%*
Portfolio turnover rate.................. 151% 86% 3% 33% 40% 51% 151% 86% 3%
</TABLE>
______________
* Annualized
** Investment advisory functions for the fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
# Effective October 1, 1998, Invista Capital Management, LLC oversees the
day-to-day management of the international portion of the fund's assets and
Mitchell Hutchins allocates the portfolio between domestic and international
investments and manages the domestic portion of the fund's assets.
+ Calculated using the average monthly shares outstanding for the year.
++ For the period August 25, 1995 (commencement of offering of shares) to
August 31, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment returns for periods of less than one year have
not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.00%,
0.06% and 0.06% for Class A, Class B, Class C and Class Y shares,
respectively.
- --------------------------------------------------------------------------------
B-31
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
PaineWebber Global Equity Fund
FINANCIAL HIGHLIGHTS
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL EQUITY FUND
------------------
CLASS B CLASS C
------- -------
FOR THE FOR THE FOR THE FOR THE TWO FOR THE
YEAR ENDED PERIOD YEARS ENDED MONTHS YEARS ENDED
AUGUST 31, ENDED OCTOBER 31, ENDED AUGUST 31,
---------- AUG. 31, ----------- OCTOBER 31, ----------
-------- -----------
<S> <C> <C> <C> <C> <C> <C>
1996 1995++ 1998# 1997 1996 1996 1995**
---- ------ ----- ---- ---- ---- ------
Net asset value, beginning of period..... $ 15.82 $15.83 $17.69 $ 16.93 $ 16.35 $ 15.82 $ 16.81
----- ------ ------ ------- ------- ------- -------
Net investment income (loss)............. (0.12) 0.00 (0.11)+ (0.23) (0.05) (0.13) (0.11)
Net realized and unrealized gains (losses)
from investments, futures and foreign
currency................................. 1.22 (0.01) 0.35 + 1.57 0.63 1.23 0.37
Net increase (decrease) from investment ---- ------ ---- ---- ---- ---- ----
operations............................... 1.10 (0.01) 0.24 1.34 0.58 1.10 0.26
---- ------ ---- ---- ---- ---- ----
Distributions from net realized gains.... (0.57) -- (2.48) (0.58) -- (0.57) (1.25)
Net asset value, end of period........... $ 16.35 $15.82 $15.45 $ 17.69 $ 16.93 $ 16.35 $ 15.82
======= ====== ====== ======= ======= ======= =======
Total investment return (1).............. 7.18% (0.06)% 1.74% 8.05% 3.55% 7.18% 2.46%
======= ======== ====== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000's)........ $113,235 $142,880 $41,103 $54,510 $67,530 $66,585 $83,485
Expenses to average net assets........... 2.25% 2.17%*(2) 2.32% 2.20% 2.30%* 2.27% 2.48%(2)
Net investment income (loss) to average
net assets............................... (0.68)% (1.92)%*(2) (0.65)% (0.75)% (1.57)%* (0.70)% (0.68)%(2)
Portfolio turnover rate.................. 33% 40% 151% 86% 3% 33% 40%
</TABLE>
______________
* Annualized
** Investment advisory functions for the fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
# Effective October 1, 1998, Invista Capital Management, LLC oversees the
day-to-day management of the international portion of the fund's assets and
Mitchell Hutchins allocates the portfolio between domestic and international
investments and manages the domestic portion of the fund's assets.
+ Calculated using the average monthly shares outstanding for the year.
++ For the period August 25, 1995 (commencement of offering of shares) to
August 31, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment returns for periods of less than one year have
not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.00%,
0.06% and 0.06% for Class A, Class B, Class C and Class Y shares,
respectively.
- --------------------------------------------------------------------------------
B-32
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
PaineWebber Global Equity Fund
FINANCIAL HIGHLIGHTS
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL EQUITY FUND
CLASS Y
-------
FOR THE FOR THE TWO FOR THE
YEARS ENDED MONTHS YEARS ENDED
OCTOBER 31, ENDED AUGUST 31,
----------- OCTOBER 31, ----------
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1998# 1997 1996 1996 1995** 1994
---- ----- ---- ---- ---- ------ ----
Net asset value, beginning of period..... $14.52 $18.63 $17.60 $16.97 $16.22 $17.03 $14.56
------ ------ ------ ------ ------ ------ ------
Net investment income (loss)............. (0.07) 0.09+ 0.10 (0.01) 0.07 0.07 0.05
Net realized and unrealized gains (losses)
from investments, futures and foreign 2.57 0.35+ 1.51 0.64 1.25 0.37 2.63
currency................................. ---- ----- ---- ---- ---- ---- ----
Net increase (decrease) from investment
operations............................... 2.50 0.44 1.61 0.63 1.32 0.44 2.68
---- ---- ---- ---- ---- ---- ----
Distributions from net realized gains.... (0.21) (2.48) (0.58) -- (0.57) (1.25) (0.21)
Net asset value, end of period........... $16.81 $16.59 $18.63 $17.60 $16.97 $16.22 $17.03
====== ====== ====== ====== ====== ====== ======
Total investment return (1).............. 17.29% 2.86% 9.31% 3.71% 8.39% 3.54% 18.49%
======= ======= ======= ======= ======= ======= ========
Ratios/Supplemental Data:
Net assets, end of period (000's)........ $31,837 $51,025 $57,683 $63,225 $61,736 $57,150 $28,390
Expenses to average net assets........... 2.33% 1.21% 1.10% 1.18%* 1.17% 1.46%(2) 1.33%
Net investment income (loss) to average
net assets............................... (0.68)% 0.50% 0.36% (0.45)%* 0.46% 0.36%(2) 0.32%
Portfolio turnover rate.................. 51% 151% 86% 3% 33% 40% 51%
</TABLE>
______________
* Annualized
** Investment advisory functions for the fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
# Effective October 1, 1998, Invista Capital Management, LLC oversees the
day-to-day management of the international portion of the fund's assets and
Mitchell Hutchins allocates the portfolio between domestic and international
investments and manages the domestic portion of the fund's assets.
+ Calculated using the average monthly shares outstanding for the year.
++ For the period August 25, 1995 (commencement of offering of shares) to
August 31, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment returns for periods of less than one year have
not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.00%,
0.06% and 0.06% for Class A, Class B, Class C and Class Y shares,
respectively.
B-33
<PAGE>
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
------------------
CLASS A CLASS B
------- -------
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------
1998 1997 1996 1995 1994 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................... $ 10.27 $ 10.46 $ 10.35 $ 9.99 $ 10.97 $ 10.24 $ 10.44 $ 10.31
----- ----- ----- ---- ----- ----- ----- -----
Net investment income.......... 0.62@ 0.69@ 0.72@ 0.77@ 0.72 0.51@ 0.58@ 0.64@
Net realized and unrealized
gains (losses) from investments
currency....................... 0.32@ (0.19)@ 0.13@ 0.31@ (1.05) 0.33@ (0.17)@ 0.15@
----- ------- ----- ----- ------ ----- ------- -----
Net increase (decrease) from
investment transactions........ 0.94 0.50 0.85 1.08 (0.33) 0.84 0.41 0.79
----- ------- ----- ----- ------ ----- ------- -----
Dividends from net investment
income......................... (0.50) (0.54) (0.74) (0.72) (0.33) (0.43) (0.48) (0.66)
Distributions in excess of net
investment income.............. (0.05) (0.06) -- -- -- (0.04) (0.05) --
Distribution from paid-in capital (0.08) (0.09) -- -- (0.32) (0.07) (0.08) --
------ -------- ------ ------ ------ ------ -------- ------
Total dividends and distributions
to shareholders................ (0.63) (0.69) (0.74) (0.72) (0.65) (0.54) (0.61) (0.66)
------ -------- ------ ------ ------ ------ -------- ------
Net asset value, end of year... $ 10.58 $ 10.27 $ 10.46 $ 10.35 $ 9.99 $10.54 $ 10.24 $10.44
====== ====== ====== ====== ====== ====== ======== ======
Total investment return (1).... 9.51% 4.99% 8.60% 11.09% (3.10)% 8.53% 4.11% 7.95%
====== ====== ====== ====== ======= ====== ======== ======
Ratio/Supplemental data:
Net assets, end of year (000's) $408,190 $486,718 $ 549,932 $663,022 $ 611,855 $33,478 $103,312 $307,577
Expenses to average net assets. 1.24% 1.21% 1.27% 1.24%(2) 1.17% 2.13% 1.99% 1.99%
Net investment income to
average net assets............. 6.07% 6.66% 6.88% 7.47%(2) 6.94% 5.16% 5.83% 6.14%
Portfolio turnover rate........ 93% 172% 126% 113% 108% 93% 172% 126%
</TABLE>
- ---------------
@ Calculated using the average monthly shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions 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 sales charges; results would be lower if sales charges were
included.
(2) These ratios include non-recurring reorganization expenses of 0.04%.
- --------------------------------------------------------------------------------
B-34
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
PaineWebber Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
GLOBAL INCOME FUND
------------------
CLASS B CLASS C
------- -------
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------
<CAPTION>
1995 1994 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of $ 9.96 $ 10.95 $ 10.26 $ 10.45 $ 10.33 $ 9.98
year........................... ------ ------- ------- ------- ------- ------
0.69@ 0.86 0.56@ 0.63@ 0.67@ 0.71@
Net investment income..........
Net realized and unrealized 0.30@ (1.28) 0.33@ (0.18)@ 0.14@ 0.31@
gains (losses) from investments ----- ------- ------- ------- ------- ------
currency....................... 0.99 (0.42) 0.89 0.45 0.81 1.02
----- ------- ------- ------- ------- ------
Net increase (decrease) from (0.64) (0.29) (0.46) (0.50) (0.69 ) (0.67)
investment transactions........
Dividends from net investment -- -- (0.04) (0.06) -- --
income.........................
Distributions in excess of net
investment income.............. -- (0.28) (0.07) (0.08) -- --
Distribution from paid-in capital ----- ------- ------- ------- ------- ------
Total dividends and distributions
to shareholders................ (0.64) (0.57) (0.57) (0.64) (0.69 ) (0.67)
----- ------- ------- ------- ------- ------
Net asset value, end of year... $ 10.31 $9.96 $10.58 $10.26 $10.4 5 $10.33
======= ======= ======= ======= ====== = ======
Total investment return (1).... 10.24% (3.90)% 9.01% 4.48% 8.12 % 10.49%
======= ======= ======= ======= ====== = ======
Ratio/Supplemental data: $484,534 $728,553 $28,633 $ 36,935 $ 50,928 $71,329
Net assets, end of year (000's) 2.00%(2) 1.94% 1.77% 1.69% 1.73% 1.75%(2)
Expenses to average net assets.
Net investment income to
average net assets............. 6.71%(2) 6.05% 5.54% 6.17% 6.40% 6.96%(2)
Portfolio turnover rate........ 113% 108% 93% 172% 126% 113%
</TABLE>
@ Calculated using the average monthly shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions 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 sales charges; results would be lower if sales charges were
included.
(2) These ratios include non-recurring reorganization expenses of 0.04%.
B-35
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
PaineWebber Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
------------------
CLASS Y
-------
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------
<CAPTION>
1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of $ 10.96 $ 10.27 $ 10.49 $ 10.35 $ 9.99 $ 10.97
year........................... ------- ------- ------- ------- ------ -------
Net investment income.......... 0.70 0.65@ 0.71@ 0.75@ 0.78@ 0.75
Net realized and unrealized
gains (losses) from investments
currency....................... (1.09) 0.32@ (0.21)@ 0.17@ 0.32@ (1.06)
------- ------- ------- ------- ------ -------
Net increase (decrease) from
investment transactions........ (0.39) 0.97 0.50 0.92 1.10 (0.31)
------- ------- ------- ------- ------ -------
Dividends from net investment
income......................... (0.30) (0.52) (0.56) (0.78) (0.74) (0.34)
Distributions in excess of net
investment income.............. -- (0.05) (0.06) -- -- --
Distribution from paid-in capital
Total dividends and distributions
to shareholders................ (0.29) (0.09) (0.10) -- -- (0.33)
------- ------- ------- ------- ------ -------
Net asset value, end of year... (0.59) (0.66) (0.72) (0.78) (0.74) (0.67)
------- ------- ------- ------- ------ -------
Total investment return (1).... $ 9.98 $ 10.58 $10.27 $10.49 $10.35 $ 9.99
======= ======= ======= ======= ====== =======
Ratio/Supplemental data: (3.56)% 9.89% 5.20% 9.25% 11.39% (2.86)%
Net assets, end of year (000's) ======= ======= ======= ======= ====== =======
Expenses to average net assets. $92,480 $ 9,547 $ 10,096 $ 13,077 $16,613 $12,975
Net investment income to 1.68% 0.96% 0.94% 0.96% 0.95%(2) 0.88%
average net assets............. 6.34% 6.35% 6.93% 7.19% 7.77%(2) 7.23%
Portfolio turnover rate........ 108% 93% 172% 126% 113% 108%
</TABLE>
- ---------------------
@ Calculated using the average monthly shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions 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 sales charges; results would be lower if sales charges were
included.
(2) These ratios include non-recurring reorganization expenses of 0.04%.
B-36
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PaineWebber Asia Pacific Growth Fund
FINANCIAL HIGHLIGHTS
(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
ASIA PACIFIC GROWTH FUND
------------------------
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
FOR THE
FOR THE FOR THE FOR THE FISCAL YEAR
FISCAL YEARS FISCAL YEARS FISCAL YEARS ENDED
ENDED ENDED ENDED OCTOBER 31,
OCTOBER 31, OCTOBER 31, OCTOBER 31, 1998++
1998 1997+ 1998 1997+ 1998 1997+ ------
---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 8.96 $12.50 $8.92 $12.50 $ 8.92 $ 12.50 $ 8.66
----- ------ ----- ------ ----- ------ -------
Net investment income (loss).............. 0.00@ 0.03 (0.06)@ (0.03) (0.06)@ (0.03) (0.06)@
Net realized and unrealized losses from
investments and foreign currency......... (2.14)@ (3.57) (2.12)@ (3.55) (2.12)@ (3.55) (1.93)@
Net decrease from investment operations... (2.14) (3.54) (2.18) (3.58) (2.18) (3.58) (1.87)
------ ------ ------- ------- ------- ------- -------
Net asset value, end of period............ $6.82 $ 8.96 $6.74 $ 8.92 $6.74 $ 8.92 $6.79
====== ======= ======= ======= ======= ======= =======
Total investment return(1)................ (23.88)% (28.32)% (24.44)% (28.64)% (24.44)% (28.64)% (21.59)%
======== ======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000s).......... $ 11,526 $ 21,466 $12,746 $ 22,949 $ 6,220 $13,887 $ 47
Expenses to average net assets............ 2.88% 2.33%* 3.63% 3.12%* 3.60% 3.10%* 2.66%*
Net investment income (loss) to average
net assets............................... (0.02)% 0.37%* (0.78)% (0.43)%* (0.79)% (0.42)%* 1.46%*
Portfolio turnover rate................... 59% 13% 59% 13% 59% 13% 59%
- -----------------
* Annualized
+ For the period March 25, 1997 (commencement of operations) to October 31, 1997.
++ For the period March 13, 1998 (commencement of offering) through October 31, 1998.
@ Calculated using the average monthly shares outstanding for the period.
(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 period reported. The figures do not include sales charges;
results would be lower if sales charges were included. Total investment returns for periods less than a year
have not been annualized.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-37
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund
[INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
B-38
<PAGE>
<TABLE>
<CAPTION>
PaineWebber Emerging Markets Equity Fund
FINANCIAL HIGHLIGHTS
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
----------------------------
CLASS A CLASS B
------- -------
FOR THE FOR THE FOUR
FOR THE FOR THE FOUR FOR THE PERIOD FOR THE YEARS MONTHS
YEARS ENDED MONTHS ENDED YEARS ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, OCTOBER 31,
1998 1997*** 1996 1996 1995** 1994+ 1998 1997*** 1996
---- ------- ---- ---- ------ ----- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $9.39 $9.46 $10.0 $9.73 $10.79 $12.00 $ 9.19 $ 9.32 $ 9.94
----- ----- ----- ----- ------ ------ ------ ------ ------
Net investment income (loss).............. (0.01)@ (0.06) (0.13) (0.14) (0.04) 0.04 (0.08)@ (0.10) (0.07)
Net realized and unrealized losses from
investments and foreign currency......... (2.86)@ (0.01) (0.47) 0.47 (0.97) (1.25) (2.74)@ (0.03) (0.55)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) from
investment operations.................... (2.87) (0.07) (0.60) 0.33 (1.01) (1.21) (2.82) (0.13) (0.62)
------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net investment income...... -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period............ $6.52 $9.39 $9.46 $10.06 $9.73 $10.79 $6.37 $ 9.19 $9.32
====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment return(1)................ (30.56)% (0.74)% (5.96)% 3.39% (9.29)% (10.08)% (30.69)% (1.39)% (6.24)%
======== ======== ======== ====== ======= ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000s).......... $4,237 $9,222 $14,992 $20,680 $33,043 $ 46,758 $461 $ 1,598 $879
Expenses net of fee waivers, to
average net assets........................ 2.44% 2.44% 2.44% 2.44% 2.44% 2.47%* 3.19% 3.19% 3.19%*
Expenses before fee waivers, to average
net assets............................... 3.71% 3.01% 3.48% 3.42% 2.54% 2.47%* 4.92% 3.82% 4.23%*
Net investment income (loss), net
of fee waivers, to average net assets.... (0.16)% (0.40)% (1.42)% (0.52)% (0.76)% 0.72%* (0.99)% (1.25)% (2.12)%*
Net investment income (loss) to average
net assets............................... (1.43)% (0.97)% (2.46)% (1.50)% (0.86)% 0.72%* (2.72)% (1.88)% (3.16)%*
Portfolio turnover rate................... 64% 87% 22% 69% 76% 8% 64% 87% 22%*
- -----------------
+ For the period January 19, 1994 (commencement of operations) to June 30, 1994.
++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.
@ Calculated using the average monthly shares outstanding for the year.
* Annualized
** Investment advisory functions for the fund were transferred from Kidder Peabody Asset Management Inc.
to Mitchell Hutchins on February 13, 1995.
*** Investment sub-advisory functions for the fund were transferred from Emerging Markets Management
to Schroder Capital effective February 25, 1997.
(1) Total investment return is calculated assuming a $1,000 investment on the first day of each period
reported, reinvestment of all dividends at net asset value on the payable dates and a sale at net asset
value on the last day of each period reported. The figures do not include sales charges; results would
be lower if sales charges were included. Total investment returns for periods of less than one year have not been annualized.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-39
<PAGE>
<TABLE>
<CAPTION>
PaineWebber Emerging Markets Equity Fund
FINANCIAL HIGHLIGHTS
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
----------------------------
CLASS B CLASS C
------- -------
FOR THE FOR THE
PERIOD FOR THE FOR THE FOUR FOR THE PERIOD FOR THE
ENDED YEARS ENDED MONTHS ENDED YEARS ENDED ENDED YEARS ENDED
JUNE 30, OCTOBER 31, OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996++ 1998 1997*** 1996 1996 1995** 1994+ 1998 1997***
------ ---- ------- ---- ---- ------ ----- ---- -------
Net asset value, beginning of period...... $ 9.13 $ 9.17 $ 9.32 $ 9.94 $ 9.67 $ 10.75 $ 12.00 $ 9.46 $ 9.51
------ ------ ------ ------ ------ ------- ------- ------ ------
Net investment income (loss).............. (0.01) (0.08)@ (0.14) (0.22) (0.24) (0.17) -- (0.01)@ (0.02)
Net realized and unrealized losses from
investments and foreign currency......... 0.82 (2.77)@ (0.01) (0.40) 0.51 (0.90) (1.25) (2.87)@ (0.03)
------ ------- ------ ------- ------ -------- -------- ------- ------
Net increase (decrease) from 0.81 (2.85) (0.15) (0.62) 0.27 (1.07) (1.25) (2.88) (0.05)
investment operations.................... ------ ------- ------- ------- ------ -------- -------- ------- -------
Dividends from net investment income...... -- -- -- -- -- (0.01) -- -- --
-- -- -- -- -- -------- -- -- --
Net asset value, end of period............ $9.94 $ 6.32 $ 9.17 $ 9.32 $ 9.94 $ 9.67 $ 10.75 $ 6.58 $ 9.46
======= ====== ======= ====== ====== ======= ======== ====== =====
Total investment return(1)................ 8.87% (31.08)% (1.61)% (6.24)% 2.79% (10.01) (10.42)% (30.44)% (0.53)%
======= ======== ======= ======= ====== ======= ========= ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000s).......... $936 $ 2,575 $ 5,345 $7,882 $11,561 $18,551 $26,721 $ 877 $10,053
Expenses net of fee waivers, to
average net assets........................ 3.19%* 3.19% 3.19% 3.19%* 3.19% 3.19% 3.22%* 2.19% 2.19%
Expenses before fee waivers, to average
net assets............................... 4.97%* 4.42% 3.78% 4.23%* 4.17% 3.29% 3.22%* 3.36% 2.69%
Net investment income (loss), net
of fee waivers, to average net assets.... (0.21)%* (0.96)% (1.18)% (2.16)%* (1.28)% (1.50)% (0.03)%* (0.08)% (0.15)%
Net investment income (loss) to average
net assets............................... (1.99)%* (2.19)% (1.77)% (3.20)%* (2.26)% (1.60)% (0.03)%* (1.25)% (0.65)%
Portfolio turnover rate................... 64% 64% 87% 22% 69% 76% 8% 64% 87%
- --------------------
+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.
++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.
@ Calculated using the average monthly shares outstanding for the year.
* Annualized
** Investment advisory functions for the fund were transferred from Kidder Peabody Asset Management Inc.
to Mitchell Hutchins on February 13, 1995.
*** Investment sub-advisory functions for the fund were transferred from Emerging Markets Management
to Schroder Capital effective February 25, 1997.
(1) Total investment return is calculated assuming a $1,000 investment on the first day of each period
reported, reinvestment of all dividends at net asset value on the payable dates and a sale at net asset
value on the last day of each period reported. The figures do not include sales charges; results would
be lower if sales charges were included. Total investment returns for periods of less than one year have not been annualized.
</TABLE>
B-40
<PAGE>
<TABLE>
EMERGING MARKETS EQUITY FUND
----------------------------
CLASS Y
-------
FOR THE
FOR THE FOUR FOR THE PERIOD
MONTHS ENDED YEARS ENDED ENDED
OCTOBER 31, JUNE 30, JUNE 30,
<S> <C> <C> <C> <C>
1996 1996 1995** 1994+
---- ---- ------ -----
Net asset value, beginning of period...... $ 10.11 $ 9.75 $ 10.80 $ 12.00
------- ------ ------- -------
Net investment income (loss).............. (0.05) (0.01) (0.01) 0.05
Net realized and unrealized losses from
investments and foreign currency......... (0.55) 0.37 (0.99) (1.25)
------- ------ ------- --------
Net increase (decrease) from
investment operations.................... (0.60) 0.36 (0.98) (1.20)
-------- ------ -------- --------
Dividends from net investment income...... -- -- (0.07) --
-- -- -------- --
Net asset value, end of period............ $ 9.51 $10.11 $ 9.75 $ 10.80
======== ====== ========= =======
Total investment return(1)................ (5.93)% 3.69% (9.03)% (10.00)%
========= ======= ========= ========
Ratios/Supplemental Data:
Net assets, end of period (000s).......... $ 11,375 $ 12,979 $ 12,332 $ 15,435
Expenses net of fee waivers, to
average net assets........................ 2.19%* 2.19% 2.19% 2.22%*
Expenses before fee waivers, to average
net assets............................... 3.23%* 3.29% 2.29% 2.22%*
Net investment income (loss), net
of fee waivers, to average net assets.... (1.13)%* (0.15)% (0.51)% 0.97%*
Net investment income (loss) to average
net assets............................... (2.17)%* (1.25)% (0.61)% 0.97%*
Portfolio turnover rate................... 22% 69% 76% 8%
- -------------------------
+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.
++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.
@ Calculated using the average monthly shares outstanding for the year.
* Annualized
** Investment advisory functions for the fund were transferred from Kidder Peabody Asset Management Inc.
to Mitchell Hutchins on February 13, 1995.
*** Investment sub-advisory functions for the fund were transferred from Emerging Markets Management
to Schroder Capital effective February 25, 1997.
(1) Total investment return is calculated assuming a $1,000 investment on the first day of each period
reported, reinvestment of all dividends at net asset value on the payable dates and a sale at net asset
value on the last day of each period reported. The figures do not include sales charges; results would
be lower if sales charges were included. Total investment returns for periods of less than one year have not been annualized.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TICKER SYMBOL: Global Equity Fund Class A: KPGEX.Q Asia Pacific Growth Fund Class A: PPGAX.Q
B: KPGLX.Q B: PPGBX.Q
C: KPGBX.Q C: PPGCX.Q
Y: KPGCX.Q Y: None
Global Income Fund Class A: PGBAX.Q Emerging Markets Equity Fund Class A: KPEAX.Q
B: PGBBX.Q B: None
C: PWIDX.Q C: KPEBX.Q
Y: None Y: None
</TABLE>
For investors who want more information about the funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders. In the funds' annual reports,
you will find a discussion of the market conditions and investment strategies
that significantly affected the funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.
You may discuss your questions about the funds by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the funds directly at 1-800-647-1568.
You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the funds:
o For a fee, by writing to or calling the Commission's Public Reference Room,
Washington, D.C. 20549-6009 Telephone: 1-800-SEC-0330
o Free from the Commission's Internet website at: http://www.sec.gov
Investment Company Act File No.
PaineWebber Global Equity Fund: 811-6292
PaineWebber Global Income Fund: 811-5259
PaineWebber Asia Pacific Growth Fund: 811-4040
PaineWebber Emerging Markets Equity Fund: 811-7104
B-42
<PAGE>
APPENDIX C
----------
BOARD MEMBERS OF GLOBAL SMALL CAP AND GLOBAL EQUITY AND OFFICERS OF
GLOBAL SMALL CAP
The following is a list of the present Board Members of both Funds and
officers of Global Small Cap, their ages, business addresses and a description
of their principal occupations during the past five years:
POSITION WITH
NAME AND ADDRESS; AGE GLOBAL SMALL BUSINESS EXPERIENCE; OTHER
CAP/GLOBAL DIRECTORSHIPS
EQUITY
- ----------------------- ---------------- -------------------------------------
Margo N. Alexander*+; 52 Board Member Mrs. Alexander is chairman (since
and President March 1999), chief executive officer
and a director of Mitchell Hutchins
(since January 1995), and an
executive vice president and director
of PaineWebber Incorporated
("PaineWebber") (since March 1984).
Mrs. Alexander is president and a
director or trustee of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Richard Q. Armstrong; Board Member Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of RQA Enterprises
One Old Church Road - (management consulting firm) (since
Unit #6 April 1991 and principal occupation
Greenwich, CT 06830 since March 1995). Mr. Armstrong was
chairman of the board, chief
executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). He was a partner of
The New England Consulting Group
(management consulting firm)
(December 1992-September 1993). He
was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the
French luxury goods conglomerate,
Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman
of its wine and spirits subsidiary,
Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a
director or trustee of 31 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
E. Garrett Bewkes, Jr.* Board Member Mr. Bewkes is a director of PW Group
+; 73 and Chairman (holding company of PaineWebber and
of the Board Mitchell Hutchins). Prior to December
1995, he was a consultant to PW
Group. Prior to 1988, he was chairman
of the board, president and chief
executive officer of American
Bakeries Company (baker and
distributor of bakery products). Mr.
C-1
<PAGE>
POSITION WITH
NAME AND ADDRESS; AGE GLOBAL SMALL BUSINESS EXPERIENCE; OTHER
CAP/GLOBAL DIRECTORSHIPS
EQUITY
- ----------------------- ---------------- -------------------------------------
Bewkes is a director of Interstate
Bakeries Corporation. Mr. Bewkes is a
director or trustee of 35 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Richard R. Burt; 52 Board Member Mr. Burt is chairman of IEP Advisers,
1275 Pennsylvania Inc. (international investments and
Ave., N.W. consulting firm) (since March 1994)
Washington, D.C. and a partner of McKinsey & Company
20004 (management consulting firm) (since
1991). He is also a director of
Archer-Daniels-Midland Co.
(agricultural commodities), Hollinger
International Co. (publishing),
Homestake Mining Corp. (gold mining),
Powerhouse Technologies Inc.
(provides technology to gaming and
wagering industries) and Weirton
Steel Corp. (steel fabrication and
finished steel products). He was the
chief negotiator in the Strategic
Arms Reduction Talks with the former
Soviet Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a
director or trustee of 31 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Mary C. Farrell*+; 49 Board Member Ms. Farrell is a managing director,
senior investment strategist and
member of the Investment Policy
Committee of PaineWebber. Ms. Farrell
joined PaineWebber in 1982. She is a
member of the Financial Women's
Association and Women's Economic
Roundtable and appears as a regular
panelist on Wall $treet Week with
Louis Rukeyser. She also serves on
the Board of Overseers of New York
University's Stern School of
Business. Ms. Farrell is a director
or trustee of 30 investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Meyer Feldberg; 57 Board Member Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior
New York, New York to 1989, he was president of the
10027 Illinois Institute of Technology.
Dean Feldberg is also a director of
Primedia Inc. (publishing), Federated
Department Stores Inc. (operator of
department stores) and Revlon, Inc.
(cosmetics). Dean Feldberg is a
director or trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or their
affiliates serves as investment
adviser.
C-2
<PAGE>
POSITION WITH
NAME AND ADDRESS; AGE GLOBAL SMALL BUSINESS EXPERIENCE; OTHER
CAP/GLOBAL DIRECTORSHIPS
EQUITY
- ----------------------- ---------------- -------------------------------------
George W. Gowen; 70 Board Member Mr. Gowen is a partner in the law
666 Third Avenue firm of Dunnington, Bartholow &
New York, New York Miller. Prior to May 1994, he was a
10017 partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is a director
or trustee of 34 investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Frederic V. Malek; 62 Board Member Mr. Malek is chairman of Thayer
1455 Pennsylvania Capital Partners (merchant bank).
Avenue, N.W. From January 1992 to November 1992,
Suite 350 he was campaign manager of
Washington, D.C. Bush-Quayle '92. From 1990 to 1992,
20004 he was vice chairman and, from 1989
to 1990, he was president of
Northwest Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is also
a director of Aegis Communications,
Inc. (tele-services), American
Management Systems, Inc. (management
consulting and computer-related
services), Automatic Data Processing,
Inc. (computing services), CB Richard
Ellis, Inc. (real estate services),
Choice Hotels International (hotel
and hotel franchising), FPL Group,
Inc. (electric services), HCR/Manor
Care, Inc. (health care) and
Northwest Airlines Inc. Mr. Malek is
a director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
Carl W. Schafer; 63 Board Member Mr. Schafer is president of the
66 Witherspoon Street Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He is a director of Labor
Ready, Inc. (temporary employment),
Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds,
Harding, Loevner Funds, Evans
Systems, Inc. (a motor fuels,
convenience store and diversified
company), Electronic Clearing House,
Inc. (financial transactions
processing), Frontier Oil Corporation
and Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he
was chairman of the Investment
Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer
is a director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
C-3
<PAGE>
POSITION WITH
NAME AND ADDRESS; AGE GLOBAL SMALL BUSINESS EXPERIENCE; OTHER
CAP/GLOBAL DIRECTORSHIPS
EQUITY
- ----------------------- ---------------- -------------------------------------
Brian M. Storms*+; 45 Board Member Mr. Storms is president and chief
operating officer of Mitchell
Hutchins (since March 1999). Mr.
Storms was president of Prudential
Investments (1996-1999). Prior to
joining Prudential, he was a managing
director at Fidelity Investments. Mr.
Storms is a director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
INFORMATION REGARDING THE OFFICERS OF
GLOBAL SMALL CAP
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE GLOBAL SMALL CAP DIRECTORSHIPS
- --------------------- ---------------- --------------------------
Ann E. Moran*; 42 Vice President Ms. Moran is a vice president and a
and manager of the mutual fund finance
Assistant department of Mitchell Hutchins. Ms.
Treasurer Moran is a vice president and
assistant treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Dianne E. O'Donnell*; Vice President Ms. O'Donnell is a senior vice
47 and president and deputy general counsel
Secretary of Mitchell Hutchins. Ms. O'Donnell
is a vice president and secretary of
31 investment companies and a vice
president and assistant secretary of
one investment company for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
Emil Polito**; 39 Vice President Mr. Polito is a senior vice president
and director of operations and
control for Mitchell Hutchins. Mr.
Polito is vice president of 32
investment companies for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
Victoria E. Vice President Ms. Schonfeld is a managing director
Schonfeld*; 48 and general counsel of Mitchell
Hutchins since May 1994 and a
senior vice president of PaineWebber
since July 1995. Ms. Schonfeld is a
vice president of 31 investment
companies and a vice president and
secretary of one investment company
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Paul H. Schubert*; 36 Vice President Mr. Schubert is a senior vice
and Treasurer president and director of the mutual
fund finance department of Mitchell
C-4
<PAGE>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE GLOBAL SMALL CAP DIRECTORSHIPS
- --------------------- ---------------- --------------------------
Hutchins. From August 1992 to August
1994, he was vice presiden at
BlackRock Financial Management L.P.
Mr. Schubert is a vice president and
treasurer of 32 investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Barney A. Vice President Mr. Taglialatela is a vice president
Taglialatela*; 38 and and a manager of the mutual fund
Assistant finance department of Mitchell
Treasurer Hutchins. Prior to February 1995, he
was a manager of the mutual fund
finance division of Kidder Peabody
Asset Management, Inc. Mr.
Taglialatela is a vice president and
assistant treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Mark A.Tincher**; 44 Vice President Mr. Tincher is a managing director
and chief investment
officer--equities of Mitchell
Hutchins. Prior to March 1995, he was
a vice president and directed the
U.S. funds management and equity
research areas of Chase Manhattan
Private Bank. Mr. Tincher is a vice
president of 13 investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Keith A. Weller*; 38 Vice President Mr. Weller is a first vice president
and and associate general counsel of
Assistant Mitchell Hutchins. Prior to May 1995,
Secretary he was an attorney at Brown & Wood
(New York City). Mr. Weller is a vice
president and assistant secretary of
31 investment companies for which
Mitchell Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.
- ------------------------
* This person's business address is 1285 Avenue of the Americas, New York,
New York 10019.
** This person's business address is 51 West 52nd Street, New York, New York
10019.
+ Mrs. Alexander, Mr. Bewkes, Mrs. Farrell, and Mr. Storms are "interested
persons" of Global Small Cap, as defined in the 1940 Act, by virtue of
their positions with PW Group, PaineWebber and/or Mitchell Hutchins.
C-5
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
(A PORTFOLIO OF PAINEWEBBER INVESTMENT TRUST)
GLOBAL SMALL CAP FUND INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby PaineWebber Global Equity Fund ("Global
Equity"), a portfolio of PaineWebber Investment Trust, would acquire all of the
assets of Global Small Cap Fund Inc. ("Global Small Cap") in exchange solely for
shares of Global Equity and the assumption by Global Equity of all of Global
Small Cap's liabilities. This Statement of Additional Information consists of
this cover page, the PRO FORMA financial statements of Global Equity (giving
effect to the Reorganization) for the nine months ended July 31, 1999, and the
following described documents, each of which is incorporated by reference
herein:
(1) The Statement of Additional Information of Global Equity, dated March
1, 1999.
(2) The Annual Report to Shareholders of Global Equity for the fiscal year
ended October 31, 1998.
(3) The Annual Report to Shareholders of Global Small Cap for the fiscal
year ended July 31, 1999.
(4) The Semi-Annual Report to Shareholders of Global Equity for the six
months ended April 30, 1999.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated November __,
1999, relating to the above-referenced matter. A copy of the Prospectus/Proxy
Statement may be obtained without charge by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated November __, 1999.
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio of Investments
July 31, 1999
- --------------------------------------------------------------------------------
Number of Shares
in all Funds
- ------------------------
COMMON STOCKS - Global Global Combined
Equity Small Cap
<S> <C> <C> <C> <C> <C>
Australia -
Banks -
621,000 Australia & New Zealand Banking Group $ 0 $
Ltd. 4,369,087 4,369,087
246,000 National Australia Bank, Ltd. 3,756,914 0 3,756,914
Computer Software & Services -
59,245 Computershare Ltd. 0 $ 701,792 701,792
Engineering Services -
242,348 Pacific BBA Ltd. 0 1,067,637 1,067,637
0
Insurance -
381,000 QBE Insurance Group Ltd. 1,434,766 0 1,434,766
Oil-
287,986 Novus Petroleum 0 332,679 332,679
Retail - Specialty
-
118,215 Spotless Group 0 345,645 345,645
=====================================
Total Australia Common Stocks 9,560,767 2,447,753 12,008,520
=====================================
Austria -
Banks -
47,900 Bank of Austria AG 2,548,848 0 2,548,848
Energy Sources -
27,600 OMV AG 2,362,119 0 2,362,119
Materials & Commodities -
66,000 RHI AG 1,691,033 0 1,691,033
=====================================
Total Austria Common Stocks 6,602,000 0 6,602,000
=====================================
Belgium -
Telecommunications
-
3,465 Telinfo S.A. 0 366,979 366,979
=====================================
Total Belgium Common Stocks 0 366,979 366,979
=====================================
Canada -
Banks -
88,200 Royal Bank of Canada 3,820,653 0 3,820,653
Household Products
-
27,571 Intertape Polymer Group Inc 0 768,759 768,759
Multi
Industry -
90,000 Imasco Ltd. 2,437,762 0 2,437,762
Pharmaceutical -
18,186 Biovail Corporation International* 0 1,021,826 1,021,826
Specialized Services -
7,075 Trojan Technologies Inc.* 0 126,583 126,583
=====================================
Total Canada Common Stocks 6,258,415 1,917,168 8,175,583
=====================================
Chile -
Beverages -
6,000 Vina Concha Y Toro SA ADR* 0 220,125 220,125
=====================================
Total Chile Common Stocks 0 220,125 220,125
=====================================
Denmark -
Food & Household Products -
80,300 Danisco A/S 3,577,557 0 3,577,557
=====================================
Total Denmark Common Stocks 3,577,557 0 3,577,557
=====================================
Finland -
Banks -
760,889 Merita OYJ "A" Shares PLC 4,110,696 0 4,110,696
Broadcasting
-
81,733 Rapala Normark Corp. 0 612,066 612,066
Chemicals -
209,000 Kemira OY 1,330,350 0 1,330,350
Electronics
-
124,906 Perlos Corp 0 1,773,197 1,773,197
Electrical & Electronics -
31,732 Nokia OYJ "A" 2,749,699 0 2,749,699
Shares
Forest Products, Paper -
79,400 UPM - Kymmene OY 2,675,677 0 2,675,677
Household Products
-
552 Hackman 0 10,925 10,925
Telecommunications
-
37,482 Teleste Corp 0 330,810 330,810
=====================================
Total Finland Common Stocks 10,866,422 2,726,998 13,593,420
=====================================
France -
Aerospace & Military Technology -
87,000 Lagardere S.C.A. 3,432,518 0 3,432,518
Automobiles
-
30,900 Montupet 0 1,011,539 1,011,539
Beverages & Tobacco -
52,600 Seita 3,030,220 0 3,030,220
Building Materials & Components -
36,300 Lafarge 3,937,742 0 3,937,742
Chemicals -
60,000 Rhodia 1,373,623 0 1,373,623
Computer Software & Services -
5,541 Transiciel 0 617,673 617,673
S.A.
Energy Sources -
23,602 Elf Aquitaine 4,039,908 0 4,039,908
Health & Personal Care -
25,000 Rhone Poulenc S.A.* 1,222,247 0 1,222,247
Recreation & Other Consumer Goods -
53,000 BIC 2,863,320 0 2,863,320
=====================================
Total France Common Stocks 19,899,578 1,629,212 21,528,790
=====================================
Germany -
Computer Software & Services -
20,267 Fortunecity 0 301,375 301,375
Health & Personal Care -
106,000 Hoechst AG 4,467,914 0 4,467,914
Media -
8,520 Id Media 0 301,697 301,697
Motor Vehicles -
40,600 DaimlerChrysler AG 3,088,149 0 3,088,149
Telecommunications
-
1,897 Adva AG 0 132,926 132,926
=====================================
Total Germany Common Stocks 7,556,063 735,998 8,292,061
=====================================
Greece -
Wireless Telecommunications -
386,000 Hellenic Telecommunications ADR 3,898,600 0 3,898,600
=====================================
Total Greece Common Stocks 3,898,600 0 3,898,600
=====================================
Hong Kong -
Consumer Goods -
198,000 Li & Fung 0 553,571 553,571
Ltd.
Food -
809,000 Four Seasons Mercantile Holdings 0 302,270 302,270
Insurance -
688,000 Pacific 0 518,553 518,553
Century
Retail - Apparel -
602,000 Giordano International Limited 0 515,783 515,783
=====================================
Total Hong Kong Common Stocks 0 1,890,177 1,890,177
=====================================
India -
Computer Software & Services -
26,200 Pentafour 0 751,248 751,248
Software* #
27,400 Satyam Computer 0 1,061,869 1,061,869
=====================================
0 1,813,117 1,813,117
=====================================
Ireland -
Airlines -
15,000 Ryanair Holdgs PLC 0 780,000 780,000
Banks -
495,150 Bank Of Ireland 4,661,462 0 4,661,462
Telecommunications
-
42,958 Esat Telecom Group PLC* 0 1,739,799 1,739,799
Transportation -
29,551 Irish Continental Group PLC 0 363,557 363,557
Wireless Telecommunications -
222,000 Bord Telecom Eirea 1,097,230 0 1,097,230
=====================================
Total Ireland Common Stocks 5,758,692 2,883,356 8,642,048
=====================================
Israel -
Computer Software & Services -
11,259 Check Point Software Tech Ltd 0 770,538 770,538
Electrical & Electronics -
115,295 ECI Telecommunications Ltd. 3,912,824 0 3,912,824
Electrical
Equipment -
42,600 Orbotech 2,268,450 0 2,268,450
Ltd.*
Electronics
-
21,372 Orbotech 0 1,138,059 1,138,059
Ltd.*
=====================================
Total Israel Common Stocks 6,181,274 1,908,597 8,089,871
=====================================
Italy -
Machinery ( Diversified) -
199,425 Riva Finanziaria 0 554,697 554,697
Miscellaneous -
111,555 STA Azionaria 0 745,885 745,885
Motor Vehicle -
175,811 Ducati Motor 0 550,142 550,142
Holdings
Publishing -
35,915 Class Editore 0 297,769 297,769
471,463 Poligrafici Editor S.P.A. 0 1,041,022 1,041,022
Wireless Telecommunications -
791,000 Telecom Italia SPA 4,315,681 0 4,315,681
=====================================
Total Italy Common Stocks 4,315,681 3,189,515 7,505,196
=====================================
Japan -
Banks -
308,000 Sanwa Bank 3,374,312 0 3,374,312
Beverages & Tobacco -
261 Japan Tobacco Inc 3,141,698 0 3,141,698
Chemicals -
7,500 Fujimi Inc.* 0 399,058 399,058
Computer Software & Services -
27,000 Catena Corporation 0 308,518 308,518
Data Processing & Reproduction -
100,000 Canon Inc. 3,166,296 0 3,166,296
Electronic Components -
106,000 Fujitsu 3,180,601 0 3,180,601
Financial Services
-
41,000 Takefuji 4,924,506 0 4,924,506
Corp.
Health & Personal Care -
55,000 Takeda Chemical Industries 2,983,994 0 2,983,994
92,000 Terumo Corp. 2,299,097 0 2,299,097
Merchandising -
37,400 Yamada Denki Co. 2,260,735 0 2,260,735
Motor Vehicles -
52,000 Honda Motor Co. 2,254,263 0 2,254,263
91,000 Mitsubishi Motor 460,378 0 460,378
=====================================
Total Japan Common Stocks 28,045,880 707,576 28,753,456
=====================================
Korea -
Banks -
48,000 Housing and Commercial Bank 1,172,580 0 1,172,580
101,000 Shinhan Bank 923,141 0 923,141
Electronic Components, Instruments -
85,827 Dae Duck Electronics Co.* 0 1,112,506 1,112,506
Machinery ( Diversified) -
57,929 Medison Co.* 0 789,394 789,394
Textiles -
180,000 Younggone Corp. 0 478,604 478,604
Wireless Telecommunications -
49,000 Korea Telecom 1,803,812 0 1,803,812
=====================================
Total Korea Common Stocks 3,899,533 2,380,504 6,280,037
=====================================
Mexico -
Broadcasting
-
100,000 Tv Azteca S A De C 0 450,000 450,000
V
Multi
Industry -
86,893 Desc S.A. De C.V. 1,851,907 0 1,851,907
=====================================
Total Mexico Common Stocks 1,851,907 450,000 2,301,907
=====================================
Netherlands
-
Appliance & Household Durables -
54,072 Koninklijke Philips Electronics 5,521,423 5,521,423
N.V.
Business & Public Services -
182,307 Vedior N.V. CVA 3,071,755 3,071,755
Computer-business Services -
40,000 Getronics NV 1,645,353 1,645,353
Computer Software & Services -
34,705 Devote Nv 0 519,784 519,784
22,768 ICT Automatisering N.V. 0 557,780 557,780
Consumer Goods -
23,302 Airspray N.V. 0 600,776 600,776
Forest Products, Paper -
19,700 Benckiser 1,238,160 0 1,238,160
N.V.
137,000 Buhrmann N.V. 2,784,690 0 2,784,690
Human Resources -
42,223 Unique Intl 0 1,009,553 1,009,553
Nv
Machinery & Engineering Services
-
68,500 New Holland N.V. 1,027,500 0 1,027,500
Multi-industry
-
21,130 Aalberts Industrie 0 365,069 365,069
Wireless Telecommunications -
83,500 Kon KPN N.V. 3,814,319 0 3,814,319
=====================================
Total Netherlands Common Stocks 19,103,200 3,052,962 22,156,162
=====================================
New Zealand -
Wireless Telecommunications -
896,000 Telecom Corp. of New Zealand Ltd. 4,062,572 0 4,062,572
=====================================
Total Netherlands Common Stocks 4,062,572 0 4,062,572
=====================================
Norway -
Multi
Industry -
256,000 Orkla ASA 3,887,023 0 3,887,023
Telecommunications
-
30,477 Netcom Asa* 0 1,000,017 1,000,017
=====================================
Total Norway Common Stocks 3,887,023 1,000,017 4,887,040
=====================================
Portugal -
Transport - Road & Rail -
74,000 Brisa Auto Estrada 2,917,238 0 2,917,238
=====================================
2,917,238 0 2,917,238
=====================================
Singapore -
Communication Equipment -
433,000 Datacraft 0 2,061,080 2,061,080
Asia
Electronic Equipment -
267,000 Idt Hldgs 0 606,090 606,090
Sing
=====================================
Total Singapore Common Stocks 0 2,667,170 2,667,170
=====================================
South Africa
-
Energy Sources -
233,000 Sasol Ltd. 1,731,667 0 1,731,667
=====================================
Total South Africa Common Stocks 1,731,667 0 1,731,667
=====================================
Spain -
Banks -
58,734 Banco De Valencia* 0 507,067 507,067
Computer Software & Services -
19,290 Meta4 Nv 0 323,992 323,992
Telecommunications
-
133,000 Indra Sistemas Sa 0 1,334,619 1,334,619
=====================================
Total Spain Common Stocks 0 2,165,678 2,165,678
=====================================
Sweden -
Auto Parts -
43,800 Garphyttan 0 538,818 538,818
Banks -
369,000 Svenska Handelsbanken Series A 4,876,434 0 4,876,434
Beverages & Tobacco -
1,134,000 Swedish Match AB 4,419,868 0 4,419,868
Computer Software & Services -
13,296 Framtidsfabriken AB 0 390,287 390,287
23,178 Ibs AB 0 450,280 450,280
104,713 Mandator AB 0 695,094 695,094
132,584 Sigma Ab 0 1,025,442 1,025,442
Hotels -
120,000 Scandic Hotels AB 0 1,315,437 1,315,437
Industrial Parts -
65,068 Autoliv, Inc. 2,242,850 0 2,242,850
Multi
Industry -
218,000 Trelleborg AB 1,832,111 0 1,832,111
Wireless Telecommunications -
183,562 Ericsson LM B 5,980,711 0 5,980,711
Shares
=====================================
Total Sweden Common Stocks 19,351,974 4,415,358 23,767,332
=====================================
Switzerland
-
Banks -
13,600 UBS AG 4,142,618 0 4,142,618
451 BK Sarasin & Cie 0 800,985 800,985
Electrical
Equipment -
9,652 Gretag Imaging Holdings* 0 1,002,654 1,002,654
Chemicals -
6,000 Clariant 2,879,164 0 2,879,164
Health & Personal Care -
2,954 Novartis AG 4,264,403 0 4,264,403
Life Insurance -
484 Helvetia Patria Holdings 0 418,444 418,444
Manufacturing -
17,000 Mettler Toledo International Inc.* 0 491,937 491,937
=====================================
Total Switzerland Common Stocks 11,286,185 2,714,020 14,000,205
=====================================
Thailand -
Food -
78,000 Pizza Public Co 0 230,614 230,614
Ltd.
=====================================
0 230,614 230,614
=====================================
United Kingdom -
Aerospace & Military Technology -
178,000 Smiths Industries 2,501,163 2,501,163
PLC
Beverages & Tobacco -
448,000 Diageo PLC 4,552,484 4,552,484
Broadcasting & Publishing -
488,000 United News & Media PLC 5,314,862 5,314,862
Business & Public Services -
323,000 Securicor PLC 3,075,482 3,075,482
319,000 WPP Group PLC 2,864,200 2,864,200
Computer Software & Services -
116,611 Autonomy Corp.* 845,430 845,430
398,557 Synstar 864,270 864,270
Employment -
97,311 Select Appointments Holdings 0 1,241,194 1,241,194
Financial Services
-
459,000 Amvescap PLC 4,255,118 0 4,255,118
Food & Household Products -
330,000 Reckitt & Colman 4,687,796 0 4,687,796
PLC
Health & Personal Care -
104,936 Astrazeneca PLC 3,827,962 0 3,827,962
Leisure & Tourism
-
392,000 Carlton Communications PLC 3,195,633 0 3,195,633
Manufacturing -
68,633 Weir Group 0 302,555 302,555
Multi
Industry -
233,000 Charter PLC 1,329,234 0 1,329,234
970,000 Cookson Group PLC 3,552,900 0 3,552,900
865,104 Tomkins PLC 4,023,955 0 4,023,955
Publishing -
72,637 Dorling Kindersley 0 439,106 439,106
Retail -
354,265 Electron Boutique 0 568,416 568,416
Telecommunications
-
185,810 Kingston Commerce Hull 0 924,507 924,507
=====================================
Total United Kingdom Common Stocks 43,180,789 5,185,478 48,366,267
=====================================
United States -
Airlines -
17,700 Delta Air Lines, 1,055,363 0 1,055,363
Inc.
Alcohol -
8,000 Anheuser-Busch Companies, Inc. 631,500 0 631,500
Apparel, Retail -
80,000 TJX Companies, Inc. 2,645,000 0 2,645,000
Apparel, Textiles
-
23,600 Westpoint Stevens Inc. 643,100 0 643,100
Banks -
67,800 Bank of New York Co. Inc. 2,504,363 0 2,504,363
74,400 Mellon Bank Corp. 2,511,000 0 2,511,000
38,700 The Chase Manhattan Corp. 2,975,062 0 2,975,062
Cable -
20,000 JDS Uniphase Corporation* 1,807,500 0 1,807,500
Computer Hardware
-
48,400 Cisco Systems, 3,006,850 0 3,006,850
Inc.*
52,400 Dell Computer 2,141,850 0 2,141,850
Corp.*
21,600 International Business Machines 2,714,850 0 2,714,850
Computer Software
-
25,200 Autodesk, 667,800 0 667,800
Inc.
10,000 BMC Software, Inc.* 538,750 0 538,750
20,100 Compuware Corp.* 557,775 0 557,775
22,100 Microsoft Corp.* 1,896,456 0 1,896,456
34,900 Sterling Software Inc.* 861,594 0 861,594
70,000 Unisys Corp.* 2,856,875 0 2,856,875
Computer Software & Services -
35,000 Accrue Software Incorporated 0 424,375 424,375
50,000 Cognizant Technology Solutions* 0 1,343,750 1,343,750
5,400 Documentum Inc.* 0 81,337 81,337
39,024 Fundtech Limited 0 985,356 985,356
10,000 High Speed Access Corporation 0 346,875 346,875
18,750 Medical Manager Corp. 0 1,190,625 1,190,625
33,919 Softworks 0 246,973 246,973
Inc.*
63,891 Tecnomatix Technologies Ltd.* 0 1,213,929 1,213,929
Computer Services
-
20,000 Zebra Technologies Corp. 0 938,750 938,750
Consumer Durables
-
14,100 Maytag Corp. 981,713 0 981,713
Defense/ Aerospace -
41,100 Allied Signal, Inc. 2,658,656 0 2,658,656
Diversified Retail
-
40,000 Dayton Hudson Corp. 2,587,500 0 2,587,500
55,300 Family Dollar Stores Inc. 1,157,844 0 1,157,844
40,200 Federated Department Stores, Inc.* 2,062,762 0 2,062,762
15,700 Wal Mart Stores, 663,325 0 663,325
Inc.
Drugs & Medicine -
83,400 Amerisource Health Corp.* 1,551,200 784,000 2,335,200
21,400 Biogen Inc.* 1,472,587 0 1,472,587
16,932 Cardinal Health, 1,155,609 0 1,155,609
Inc.
31,700 Schering-Plough 1,553,300 0 1,553,300
Corp.
25,400 Warner Lambert Co. 1,676,400 0 1,676,400
Electric Utilities
-
22,800 Consolidated Edison Co. of New York, Inc. 991,800 0 991,800
29,600 Energy East Corp. 752,950 0 752,950
22,500 Utilicorp United 535,781 0 535,781
Inc.
Electronics -
53,392 DII Group Inc. * 0 1,978,841 1,978,841
Electronic Components, Instruments -
10,000 Globespan Semiconductor Inc. 0 507,500 507,500
Employment -
15,000 Interim Services 0 316,875 316,875
Inc.*
Energy Reserves & Production -
10,300 Atlantic Richfield 927,644 0 927,644
Co.
16,000 Mobil Corp. 1,636,000 0 1,636,000
36,900 Royal Dutch Petroleum Co. ADR 2,250,900 0 2,250,900
Engineering & Construction -
14,000 Jacobs Engineering Group Inc. * 0 481,250 481,250
Financial -
54,200 Medallion Financial Corp. 0 1,063,675 1,063,675
20,100 Profit Recovery Group International Inc.* 0 1,035,150 1,035,150
34,000 Radian Group Inc. 0 1,753,125 1,753,125
Financial Services
-
27,600 Associates First Capital Corp. 1,057,425 0 1,057,425
16,500 Marsh & McLennan Co., Inc. 1,254,000 0 1,254,000
Food Retail -
20,000 Food Lion 238,750 0 238,750
Inc.
83,800 Kroger Co.* 2,204,987 0 2,204,987
Forest Products, Paper -
12,100 Champion International Corp. 626,175 0 626,175
38,000 Fort James Corp. 1,387,000 0 1,387,000
20,400 Georgia-Pacific 916,725 0 916,725
Corp.
17,900 Weyerhaeuser Co. 1,157,906 0 1,157,906
Gas Utility
-
25,200 Columbia Energy Group 1,499,400 0 1,499,400
Household Products
-
21,300 Avon Products, Inc. 969,150 0 969,150
Industrial Parts -
15,700 American Standard Companies Inc.* 691,781 0 691,781
41,000 Ingersoll Rand Co. 2,636,813 0 2,636,813
7,600 SPX Corp.* 646,000 0 646,000
44,000 United Technologies Corp. 2,934,250 0 2,934,250
Information & Computer Services -
4,700 Computer Sciences Corp.* 302,563 0 302,563
19,800 Valassis Communications Inc.* 737,550 0 737,550
Instruments-scientific -
48,200 Mettler Toledo International Inc.* 1,394,788 0 1,394,788
Leisure -
12,300 Eastman Kodak Co. 850,238 0 850,238
37,400 Hasbro, Inc. 972,400 0 972,400
Life Insurance -
20,900 American General Corp. 1,617,137 0 1,617,137
16,100 Equitable Companies Inc. 1,034,425 0 1,034,425
30,000 Lincoln National 1,500,000 0 1,500,000
Corp.
23,600 Protective Life 842,225 0 842,225
Corp.
Long Distance & Phone Companies -
18,450 AT&T Corp. 958,247 0 958,247
40,000 BellSouth Corp. 1,920,000 0 1,920,000
28,550 Century Telephone Enterprises, 1,220,512 0 1,220,512
Inc.
28,500 GTE Corp. 2,100,094 0 2,100,094
20,000 MCI WorldCom, Inc.* 1,650,000 0 1,650,000
60,490 SBC Communications, Inc. 3,459,272 0 3,459,272
Marketing & Advertising -
10,578 Catalina Marketing Corp.* 0 1,012,844 1,012,844
Media -
34,600 Comcast Corp., Class A 1,332,100 0 1,332,100
29,200 Viacom, Inc., 1,224,575 0 1,224,575
Class B*
Medical Products -
32,000 St. Jude Medical, Inc.* 1,190,000 0 1,190,000
30,000 Tyco International 2,930,625 0 2,930,625
Ltd.
Medical Products & Supplies
20,143 Henry Schein Incorporated 0 443,146 443,146
Medical Providers
-
13,400 Wellpoint Health Networks, Inc.* 1,100,475 0 1,100,475
Mining & Metals -
15,900 Martin Marietta Materials Inc. 865,556 0 865,556
Motor Vehicles -
27,600 Borg Warner Automotive, Inc. 1,402,425 0 1,402,425
12,720 Delphi Automotive Systems Corp. 228,960 0 228,960
40,000 Ford Motor 1,945,000 0 1,945,000
Co.
18,200 General Motors 1,109,062 0 1,109,062
Corp.
Oil Refining
-
26,900 Coastal Corp. 1,064,231 0 1,064,231
20,700 USX-Marathon Group 628,763 0 628,763
Other Insurance -
9,700 ACE Ltd. 225,525 0 225,525
17,200 Ambac Financial Group Inc. 956,750 0 956,750
15,571 American International Group, Inc. 1,808,182 0 1,808,182
34,300 Travelers Property Casualty Corp. 1,354,850 0 1,354,850
Publishing
14,100 Knight Ridder, Inc. 756,113 0 756,113
Real Property -
21,600 Lafarge Corp. ADR 668,250 0 668,250
Restaurants -
24,000 Brinker International Inc.* 669,000 0 669,000
30,150 Outback Steakhouse Inc.* 1,006,256 0 1,006,256
Retail - Specialty
-
20,000 Barnes & Noble 0 451,250 451,250
Inc.*
35,000 Hines Horticulture Inc.* 0 293,125 293,125
Securities & Asset Management -
16,800 Morgan Stanley Dean Witter Discover & Co. 1,514,100 0 1,514,100
Semiconductor -
47,000 Applied Materials, Inc.* 3,381,062 0 3,381,062
17,000 Atmel Corp.* 506,813 0 506,813
19,300 Intel Corp. 1,331,700 0 1,331,700
20,900 Vitesse Semiconductor Corp.* 1,334,987 0 1,334,987
Specialized Services -
30,000 International Telecomm Data Systems Inc.* 0 281,250 281,250
13,322 Sunrise Assisted Living Inc.* 0 402,158 402,158
Specialty Retail -
30,300 Home Depot, Inc. 1,933,519 0 1,933,519
79,600 Office Depot Inc.* 1,492,500 0 1,492,500
34,650 Staples Inc.* 1,000,519 0 1,000,519
33,100 Williams Sonoma 1,239,181 0 1,239,181
Inc.*
10,700 Zale Corp.* 428,000 0 428,000
Telecommunications
-
78,768 Tti Team Telecome 0 866,448 866,448
Thrift -
33,600 Greenpoint Financial Corp. 1,087,800 0 1,087,800
Tobacco -
40,000 Philip Morris Co., 1,490,000 0 1,490,000
Inc.
=====================================
Total United States Common Stocks 132,618,351 18,442,607 151,060,958
=====================================
=====================================
Total Common Stocks (cost - $303,031,850, 356,411,368 65,140,979 421,552,347
$52,039,792)
=====================================
Principal
Amount Short Term Interest Maturity
Rates Dates
4,000 United States Treasury Bills 4.46% 10/21/99 3,959,860 0 3,959,860
6,189,000 Societe Generale Repo 5.05 8/2/99 6,189,000 0 6,189,000
=====================================
Total U.S. Government & Repurchase Agreement 10,148,860 0 10,148,860
(cost - $10,148,860)
=====================================
Total Investments (cost - $365,220,502) , 366,560,228 65,140,979 431,701,207
99.59%
Assets in excess Liabilities 0.41% 825,519 934,413 1,759,932
=====================================
Net Assets 100.00%
$367,385,747 $66,075,392 $433,461,139
=====================================
* Non-income producing security.
# Illiquid security.
ADR American Depository Receipt
<PAGE>
Futures Contracts
Unrealized Unrealized Unrealized
Number of Outstanding Future In Expiration Appreciation Appreciation Appreciation
Contracts Contracts Exchange for Dates (Depreciation) (Depreciation) (Depreciation)
- ------------------------ ---------------------- -------------------------------------------------
61 CAC40 Ten Euro $2,843,836 Aug-99 ($34,004) 0 ($34,004)
(France)
25 DAX Index (Germany) $3,425,265 Sep-99 (331922) 0 (331,922)
72 FTSE Index (United $7,290,736 Sep-99 (427649) 0 (427,649)
Kingdom)
8 Hang Seng Index $684,102 Aug-99 28,575 0 28,575
(Hong Kong)
13 IBEX Plus (Spain) $1,302,236 Aug-99 (123,134) 0 (123,134)
7 MIB 30 Index $1,225,524 Sep-99 (157,508) 0 (157,508)
(Italy)
95 OMX Index (Sweden) $1,069,407 Aug-99 7,610 0 7,610
29 S & P 500 (United $9,655,550 Sep-99 438,200 0 438,200
States)
13 SPI Futures $634,365 Sep-99 (14,691) 0 (14,691)
(Australia)
53 Topix Index $6,757,440 Sep-99 88,564 0 88,564
(Japan)
==============================================
$(525,959) $0 $(525,959)
==============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------- ------------------------------------------------
PROFORMA STATEMENT OF ASSETS AND LIABILITIES Global Combined
As of July 31, 1999 Global Small Global Equity
Equity Cap Global Small Cap
- -------------------------------------------------------- --------------- ----------------- -----------------
ASSETS
<S> <C> <C> <C>
Investments in securities, at value (cost -
$313,180,710; $52,039,792 and $365,220,502)............. $ 366,560,228 $ 65,140,979 $ 431,701,207
Investment of cash collateral received for securities
loaned(cost - $23,246,462; $1,720,750 and $24,967,212)... 23,249,575 1,720,750 24,970,325
Cash and cash denominated in foreign securities, at
value (cost - $2,066,023; $261,379 and $2,327,402)....... 2,055,126 271,543 2,326,669
Receivable for investments sold.......................... 0 2,086,242 2,086,242
Receivable for shares of beneficial interest sold........ 64,452 0 64,452
Dividends and interest receivable........................ 1,258,378 160,707 1,419,085
Futures variation margin receivable...................... 374,376 0 374,376
Deferred organizational costs............................ 0 0 0
Other assets............................................. 228,440 1,080 229,520
-------------- ---------------- -----------------
Total assets.............. 393,790,575 69,381,301 463,171,876
-------------- ---------------- -----------------
LIABILITIES
Payable for investments purchased........................ 1,560,810 1,321,695 2,882,505
Payable for shares of beneficial interest repurchased.... 737,522 0 737,522
Payable for cash collateral.............................. 23,246,462 1,720,750 24,967,212
Payable to affiliate..................................... 0 55,981 55,981
Payable futures variation margin......................... 0 0
Accrued expenses and other liabilities .................. 860,034 207,483 1,067,517
-------------- ---------------- -----------------
Total liabilities.......... 26,404,828 3,305,909 29,710,737
-------------- ---------------- -----------------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding (unlimited amount authorized)................ 267,219,930 50,737,990 317,957,920
Undistributed net investment income...................... 276,640 (90,525) 186,115
Accumulated net realized losses from investment and 0
foreign currency transactions............................ 47,040,755 2,428,060 49,468,815
Net unrealized appreciation of investments and assets 0
and liabilities denominated in foreign currencies........ 52,848,421 12,999,867 65,848,288
-------------- ---------------- =================
Net assets ............... $ 367,385,747 $ 66,075,392 $ 433,461,139
============== ================ =================
CLASS A :
Net assets............................................ $ 237,053,217 $ 66,075,392 $ 303,128,609
-------------- ---------------- -----------------
Shares outstanding.................................... 13,167,559 3,801,667 16,838,414
-------------- ---------------- -----------------
Net asset and redemption value per share.............. $18.00 $17.38 $18.00
============== ================ =================
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price)......... $18.85 $18.85
============== =================
CLASS B :
Net assets............................................ $ 38,045,802 $ 38,045,802
-------------- -----------------
Shares outstanding.................................... 2,246,402 2,246,402
-------------- -----------------
Net asset value, offering price and redemption
value per share....................................... $16.94 $16.94
============== =================
CLASS C :
Net assets............................................ $ 36,963,218 $ 36,963,218
-------------- -----------------
Shares outstanding.................................... 2,178,774 2,178,774
-------------- -----------------
Net asset value, offering price and redemption value
per share ............................................ $16.97 $16.97
============== =================
CLASS Y :
Net assets............................................ $ 55,323,510 $ 55,323,510
-------------- -----------------
Shares outstanding.................................... 3,007,781 3,007,781
-------------- -----------------
Net asset value, offering price and redemption value
per share ............................................ $18.39 $18.39
============== =================
See accompanying notes to proforma financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------ -----------
PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended July 31, 1999 (unaudited)
- ------------------------------------------------------------------------------------------------ -----------
Global Global
Equity Small Cap Adjustment Combined
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends................................ $6,544,302 $505,064 0 $7,049,366
Interest................................. 1,240,850 76,169 0 1,317,019
----------- ---------- ---------- ----------
7,785,152 581,233 0 8,366,385
=========== ========== ---------- ==========
EXPENSES:
Investment advisory and administration 3,337,157 606,639 (90,996) (a) 3,852,800
fees...................................
Service fees - Class A................... 621,013 0 151,660 (b) 772,673
Service and distribution fees - Class B.. 491,667 0 0 491,667
Service and distribution fees - Class C.. 408,242 0 0 408,242
Transfer agency fees and expenses........ 358,501 11,300 0 369,801
Custody and accounting................... 1,001,577 106,501 0 1,108,078
Reports and notices to shareholders...... 290,253 41,625 (30,000) (c) 301,878
Legal and audit.......................... 207,694 60,006 (60,006) (c) 207,694
Amortization of organizational expenses.. 0 7,955 (7,955) (d) 0
State registration fees.................. 51,862 0 0 51,862
Trustees' fees and expenses.............. 16,060 10,500 (10,500) (c) 16,060
Other expenses........................... 36,475 21,788 0 58,263
----------- ---------- ------------- -----------
6,820,501 866,314 (47,797) 7,639,018
Less: Fee waiver from advisor............... (742) (852) (1,594)
----------- ---------- ----------
6,819,759 865,462 7,637,424
----------- ---------- ----------
Net investment income (loss)............. 965,393 (284,229) 728,961
----------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT
TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions............. 21,384,510 2,428,411 23,812,921
Foreign currency transactions....... 1,924,329 (108,630) 1,815,699
Futures transactions................ 5,992,441 0 5,992,441
Net change in unrealized appreciation/
depreciation of:
Investments......................... (81,269,841) (5,560,639) (86,830,480)
Futures............................. (3,390,343) (101,172) (3,491,515)
Assets and liabilitiesdenominated
in foreign currencies............... 2,925 0 2,925
----------- ---------- ----------
Net realized and unrealized............. (55,355,979) (3,342,030) (58,698,009)
losses from investment transactions: ----------- ---------- ----------
Net decrease in net assets resulting
from operations..................... ($54,390,586) ($3,626,259) ($57,969,048)
============ ============ ============
------------
(a) Reflects decrease in fees resulting from the lower fee schedule of Global Equity Fund.
(b) Reflects increase in service fee
for Class A share assets for Global Small Cap shareholders previously not subject to Rule 12B-1 Fees.
(c) Reflects the anticipated savings of the merger.
(d) Reflects write-off of unamortized organizational expenses.
See accompanying notes to pro forma financial statements
</TABLE>
<PAGE>
Notes To Pro Forma Combined Financial Statements (Unaudited)
Basis of Presentation:
Subject to the approval of the Plan of Reorganization by the shareholders of
Global Small Cap Fund, Inc. ("Global Small Cap"), PaineWebber Global Equity Fund
("Global Equity") would acquire the assets of Global Small Cap in exchange
solely for the assumption by Global Equity of Global Small Cap's liabilities and
Class A shares of Global Equity that correspond to the outstanding shares of
Global Small Cap. The number of shares to be received would be based on the
relative net asset value of Global Equity's Class A shares on the effective date
of the Plan of Reorganization and Global Small Cap will be terminated as soon as
practicable thereafter.
The pro forma combined financial statements reflect the financial position of
Global Small Cap and Global Equity at July 31, 1999 and the combined results of
operations of Global Small Cap and Global Equity for the year ended July 31,
1999.
As a result of the Plan of Reorganization, the investment advisory and
administration agreement fee will decrease due to the lower fee schedule of
Global Equity. As a closed end fund, Global Small Cap currently pays no Rule
12b-1 distribution or service fees, however, the Class A shares that Global
Small Cap shareholders would receive in the Plan of Reorganization are subject
to an annual Rule 12b-1 distribution and service fee of average net assets
attributable to Class A. Other fixed expenses will be reduced due to the
elimination of duplicative expenses. In addition, the pro forma combined
statement of assets and liabilities has not been adjusted as a result of the
proposed transaction because such adjustment would not be material. It is
estimated that the cost of approximately $150,000 associated with the merger
will be charged to each Fund based on the net assets on the date of
reorganization. These costs are not included in the pro forma statement of
operations since they are not recurring.
The pro forma combined financial statements are presented for the information of
the reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Plan of Reorganization occurred at
July 31, 1999. The pro forma combined financial statements should be read in
conjunction with the historical financial statements of the constituent Funds
included in or incorporated by reference in the applicable statement of
additional information.
<PAGE>
PART C. OTHER INFORMATION
-------------------------
ITEM 15. INDEMNIFICATION.
----------------
Section 4.2 of Article IV of the Registrant's Declaration of Trust provides
that no Trustee, officer, employee or agent of the Trust shall be liable to the
Trust, its shareholders, or to any shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 4.3(a) of Article IV of the Registrant's Declaration of Trust
provides that the appropriate series of the Registrant will indemnify its
Trustees and officers to the fullest extent permitted by law against all
liability and against all expenses reasonably incurred or paid by such Trustees
and officers in connection with any claim, action, suit or proceeding in which
such Trustee or officer becomes involved as a party or otherwise by virtue of
his or her being or having been a Trustee or officer and against amounts paid or
incurred by him or her in the settlement thereof. Additionally, Section 4.3(b)
of Article IV provides that no such person shall be indemnified (i) where such
person is liable to the Trust, a series thereof or the shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, (ii) where such person has
been finally adjudicated not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Trust, or a series
thereof, or (iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in (ii) above resulting in a payment
by a Trustee or officer, unless there has been a determination by the court or
other body approving the settlement or other disposition or based upon a review
of readily available facts by vote of a majority of the non-interested Trustees
or written opinion of independent legal counsel, that such Trustee or officer
did not engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office. Section
4.3(b) of Article IV further provides that the rights of indemnification may be
insured against by policies maintained by the Trust. Section 4.4 of Article IV
provides that no Trustee shall be obligated to give any bond or other security
for the performance of any of his or her duties hereunder.
Section 4.6 of Article IV provides that each Trustee, officer or employee
of the Trust or a series thereof shall, in the performance of his or her duties,
be fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Trust or a series thereof, upon an opinion of counsel,
or upon reports made to the Trust or a series thereof by any of its officers or
employees or by the Investment Adviser, the Administrator, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
Section 9 of each Investment Advisory and Administration Contract with
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that
Mitchell Hutchins shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any series of the Registrant in connection with
the matters to which the Contract relates, except for a loss resulting from the
willful misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Contract. Each Contract also provides that the Trustees shall
not be liable for any obligations of the Trust or any series under the Contract
and that Mitchell Hutchins shall look only to the assets and property of the
Registrant in settlement of such right or claim and not to the assets and
property of the Trustees.
Section 6 of the Sub-Investment Advisory Agreement between Mitchell
Hutchins and Invista Capital Management, Inc. ("Invista") provides that Invista
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Agreement
relates, except for a loss resulting from the willful misfeasance, bad faith, or
gross negligence of Invista in the performance of its duties or from its
reckless disregard of its obligations and duties under the Agreement.
<PAGE>
Section 9 of each Distribution Contract provides that the Trust will
indemnify Mitchell Hutchins and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Trust for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Trust, its
officers and Trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with the Contract.
Section 10 of each Distribution Contract contains provisions similar to
Section 13 of the Investment Advisory and Administration Contract.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to Trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
Trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS.
---------
(1) Amended and Restated Declaration of Trust 1/
(2) Restated By-Laws 1/
(3) Voting Trust Agreements -- None
(4) A copy of the form of Agreement and Plan of Reorganization and Termination
is attached as Appendix A to the Prospectus contained in the Registration
Statement.
(5) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 2/
(6) (a) Investment Advisory and Administration Contract applicable to
PaineWebber Tactical Allocation Fund 3/
(b) Investment Advisory and Administration Contract applicable to
PaineWebber Global Equity Fund 4/
(c) Sub-Advisory Contract with Invista Capital Management, Inc. 4/
<PAGE>
(7) (a) Distribution Contract for Class A Shares 5/
(b) Distribution Contract for Class B Shares 5/
(c) Distribution Contract for Class C Shares 5/
(d) Distribution Contract for Class Y Shares 5/
(e) Exclusive Dealer Agreement with respect to Class A Shares 5/
(f) Exclusive Dealer Agreement with respect to Class B Shares 5/
(g) Exclusive Dealer Agreement with respect to Class C Shares 5/
(h) Exclusive Dealer Agreement with respect to Class Y Shares 5/
(8) Bonus, profit sharing or pension plans -- None
(9) Custody Contract 1/
(10) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to
Class A shares 4/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
shares 4/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
shares 4/
(d) Plan pursuant to Rule 18f-3 6/
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the legality
of securities being registered -- filed herewith
(12) Opinion and consent of Kirkpatrick & Lockhart LLP regarding certain tax
matters in connection with PaineWebber Investment Trust and Global Small
Cap Fund Inc.-- to be filed
(13) Transfer Agency Services and Shareholder Services Agreement 7/
(14) Other opinions, appraisals, rulings and consents: Auditors' consent: --
filed herewith
(15) Financial statements omitted from part B -- none
(16) Power of Attorney -- none
(17) Form of Proxy
- -----------------------------
1/ Incorporated by reference from Post-Effective Amendment No. 22 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on February 27, 1998.
2/ Incorporated by reference from Articles IV, V, VI, VII, and X of
Registrant's Amended and Restated Declaration of Trust and from Articles
II and XI of Registrant's Restated By-Laws.
3/ Incorporated by reference from Post-Effective Amendment No. 14 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on December 29, 1995.
<PAGE>
4/ Incorporated by reference from Post-Effective Amendment No. 25 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on November 23, 1998.
5/ Incorporated by reference from Post-Effective Amendment No. 15 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on July 1, 1996.
6/ Incorporated by reference from Post-Effective Amendment No. 23 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on August 29, 1996.
7/ Incorporated by reference from Post-Effective Amendment No. 16 to the
registration statement of PaineWebber Investment Trust, SEC File. No.
33-39659, filed on September 1, 1998.
ITEM 17. UNDERTAKINGS.
-------------
(1) The undersigned Registrant agrees that prior to any public re-offering
of the securities registered through the use of the prospectus which is a part
of this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offering by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 13th day of October, 1999.
PAINEWEBBER INVESTMENT TRUST
By: /s/ Dianne E. O'Donnell
-----------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Margo N. Alexander President and Trustee October 13, 1999
- ------------------------ (Chief Executive Officer)
Margo N. Alexander
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman October 13, 1999
- ------------------------ of the Board of Trustees
E. Garrett Bewkes, Jr.
/s/ Richard Q. Armstrong Trustee October 12, 1999
- ------------------------
Richard Q. Armstrong
/s/ Richard R. Burt Trustee October 12, 1999
- ------------------------
Richard R. Burt
/s/ Mary C. Farrell Trustee October 12, 1999
- ------------------------
Mary C. Farrell
/s/ Meyer Feldberg Trustee October 12, 1999
- ------------------------
Meyer Feldberg
/s/ George W. Gowen Trustee October 12, 1999
- ------------------------
George W. Gowen
/s/ Frederic V. Malek Trustee October 13, 1999
- ------------------------
Frederic V. Malek
/s/ Carl W. Schafer Trustee October 13, 1999
- ------------------------
Carl W. Schafer
/s/ Brian M. Storms Trustee October 13, 1999
- ------------------------
Brian M. Storms
/s/ Paul H. Schubert Vice President and October 13, 1999
- ------------------------ Treasurer (Chief Financial
Paul H. Schubert and Accounting Officer)
<PAGE>
PAINEWEBBER INVESTMENT TRUST
EXHIBIT INDEX
-------------
(4) A copy of the form of Agreement and Plan of Reorganization and Termination
is attached as Appendix A to the Prospectus contained in the Registration
Statement
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the legality
of securities being registered -- filed herewith
(14) Other opinions, appraisals, rulings and consents: Auditors' consent: --
filed herewith
(17) Form of Proxy
EXHIBIT 11
ARTHUR J. BROWN
(202) 778-9046
[email protected]
October 18, 1999
Global Small Cap Fund Inc.
51 West 52nd Street
New York, New York 10019-6114
Ladies and Gentlemen:
You have requested our opinion, as counsel to PaineWebber Global Equity
Fund ("Acquiring Fund"), a series of PaineWebber Investment Trust ("Trust"), a
Massachusetts business trust, as to certain matters regarding the issuance of
Shares of the Trust in connection with the reorganization of Global Small Cap
Fund Inc. ("Acquired Fund"), a Maryland corporation, into Acquiring Fund, as
provided for in the Agreement and Plan of Reorganization and Termination between
the Trust, acting on behalf of Acquiring Fund, and Acquired Fund ("Plan"). The
Plan provides for Acquired Fund to transfer all of its assets to Acquiring Fund
in exchange solely for the issuance of Shares and Acquiring Fund's assumption of
the liabilities of Acquired Fund. (As used in this letter, the term "Shares"
means the Class A shares of beneficial interest in Acquiring Fund to be issued
in connection with the Plan.)
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Trust's Amended and Restated Declaration of Trust dated
February 11, 1998, ("Agreement"), Amended and Restated Bylaws, and such other
documents relating to its organization and operation as we have deemed relevant
to our opinion, as set forth herein. Our opinion is limited to the laws and
facts in existence on the date hereof, and it is further limited to the laws
(other than the conflict of law rules) of the Commonwealth of Massachusetts that
in our experience are normally applicable to the issuance of shares of
beneficial interest by business trusts and to the Securities Act of 1933, as
amended ("1933 Act"), the Investment Company Act of 1940, as amended ("1940
Act") and the rules and regulations of the Securities and Exchange Commission
("SEC") thereunder.
<PAGE>
Global Small Cap Fund Inc.
October 18, 1999
Page 2
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust; and that, when issued and sold in
accordance with the terms contemplated by the Trust's registration statement on
Form N-14 ("Registration Statement"), including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been legally issued, fully paid, and non-assessable.
We hereby consent to this opinion accompanying the Registration
Statement when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur J. Brown
--------------------
Arthur J. Brown
EXHIBIT 14
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "other
Service Providers", "Financial Highlights" and "Experts" in this combined Proxy
Statement and Prospectus and to the use of our reports dated September 20, 1999
with respect to Global Small Cap Fund, Inc. and December 21, 1998 with respect
to PaineWebber Global Equity Fund, which are incorporated by reference, in this
Registration Statement on Form N-14 of PaineWebber Investment Trust.
ERNST & YOUNG LLP
New York, New York
October 12, 1999
EXHIBIT 17
PROXY PROXY
GLOBAL SMALL CAP FUND INC.
SPECIAL MEETING OF SHAREHOLDERS DECEMBER 30, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GLOBAL
SMALL CAP FUND INC. The undersigned hereby appoints as proxies Keith A. Weller
and Stephanie Hemphill-Johnson and each of them (with power of substitution) to
vote for the undersigned all shares of common stock of the undersigned in Global
Small Cap Fund Inc. at the above referenced meeting and any adjournment thereof,
with all the power the undersigned would have if personally present. The shares
represented by this proxy will be voted as instructed on the reverse of this
card. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT
AUTHORITY TO VOTE "FOR" THE PROPOSAL RELATING TO GLOBAL SMALL CAP FUND INC.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it
promptly in the enclosed envelope.
If shares are held by an individual, sign your name exactly
as it appears on this card. If shares are held jointly,
either party may sign, but the name of the party signing
should conform exactly to the name shown on this proxy card.
If shares are held by a corporation, partnership or similar
account, the name and the capacity of the individual signing
the proxy card should be indicated---for example: "ABC Corp.,
John Doe, Treasurer."
--------------------------------------------------------
Signature
--------------------------------------------------------
Signature (if held jointly)
--------------------------------------------------------
Dated
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL. PLEASE INDICATE
YOUR VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE: /(SHADE)/ ---------
PROPOSAL: FOR AGAINST ABSTAIN
Approval of the Agreement and Plan of
Reorganization and Termination that /_/ /_/ /_/
provides for the combination of Global
Small Cap Fund Inc. and PaineWebber
Global Equity Fund, a series of
PaineWebber Investment Trust.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
