PAINEWEBBER PACE SELECT ADVISORS TRUST, 497, 2000-12-15

PAINEWEBBER PACE SELECT ADVISORS TRUST
497, 2000-12-15

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<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

December 14, 2000

Dear Shareholder:

The enclosed proxy statement and prospectus asks for your vote on a proposal
that will determine the future of PaineWebber U.S. Government Income Fund.

We are seeking shareholder approval to merge U.S. Government Income Fund
into PACE Government Securities Fixed Income Investments ("PACE Fund"). If the
merger is approved, you will receive shares of the corresponding class of the
PACE Fund in exchange for your U.S. Government Income Fund shares, and U.S.
Government Income Fund will cease operations. The expenses of each class of
shares of the PACE Fund following the merger would be no higher than the current
expenses of the corresponding class of U.S. Government Income Fund.

Mitchell Hutchins is the investment manager for both Funds and has retained
Pacific Investment Management Company LLC, an unaffiliated firm, to manage each
Fund's assets. The two Funds have similar investment objectives and policies.
Both seek current income. The PACE Fund pursues this objective by investing
primarily in U.S. government bonds and other bonds of varying maturities, but
normally limits its portfolio duration to between one and seven years. U.S.
Government Income Fund invests primarily in U.S. government bonds, including
those backed by mortgages, but without any restrictions on its overall portfolio
duration.

The enclosed document describes the proposed merger more fully and compares
the investment strategies and policies, risk characteristics, operating expenses
and performance histories of the two Funds in more detail. Please read this
document carefully. We have included a "Question and Answer" section that we
believe will be helpful to most investors.

YOUR VOTE IS VERY IMPORTANT. After reviewing the enclosed document, please
complete, date and sign your proxy card and return it TODAY in the enclosed
postage-paid return envelope. Or you may vote your shares by telephone or the
internet. Voting your shares early will avoid costly follow-up mail and
telephone solicitation.

THE BOARD UNANIMOUSLY URGES THAT YOU VOTE "FOR" THE PROPOSED MERGER.

Sincerely,

/s/ Brian M. Storms

Brian M. Storms
PRESIDENT
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND PROPOSED MERGER
QUESTIONS AND ANSWERS

On October 6, 2000, the Board of Trustees of PaineWebber Managed Investments
Trust ("Managed Investments Trust"), on behalf of its series, PaineWebber U.S.
Government Income Fund ("U.S. Government Income Fund"), unanimously approved the
merger of U.S. Government Income Fund into PACE Government Securities Fixed
Income Investments ("PACE Government Securities Fixed Income Fund"), a series of
PaineWebber PACE Select Advisors Trust ("PACE Trust"). This merger, however, can
occur only if U.S. Government Income Fund's shareholders approve the
transaction. Here are answers to some of the most commonly asked questions.

WHAT IS A MERGER?

A fund is said to merge with another fund when it transfers its assets and
liabilities to that other fund; subsequently, the old fund ceases to operate.
Shareholders of the old fund become shareholders of the acquiring fund.

WHY IS THIS MERGER BEING PROPOSED?

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and Managed
Investments Trust's Board believe that U.S. Government Income Fund's
shareholders will benefit from the merger with PACE Government Securities Fixed
Income Fund because the combined Fund would have a larger asset base, which
should provide greater opportunities for diversifying investments and realizing
economies of scale. In addition, the Board and Mitchell Hutchins believe that
operating two funds that offer significantly similar investments and similar
management would result in higher expenses and less efficient operations than a
single fund that combines the assets of the two original funds.

U.S. Government Income Fund and PACE Government Securities Fixed Income Fund
have similar investment objectives and policies in that both Funds seek current
income and invest primarily in U.S. government bonds. U.S. Government Income
Fund seeks high current income consistent with the preservation of capital and
liquidity, while PACE Government Securities Fixed Income Fund seeks current
income. PACE Government Securities Fixed Income Fund pursues its objective by
investing primarily in U.S. government bonds and other bonds of varying
maturities, but normally limits its portfolio duration to between one and seven
years. U.S. Government Income Fund pursues its objective by investing primarily
in U.S. government bonds, including bonds that are backed by mortgages, but has
no stated duration policy. U.S. Government Income Fund normally concentrates its
investments in U.S. government and privately issued bonds that are backed by
mortgages or other assets. (See "Comparison of the Funds" on page 6 of the
Combined Proxy Statement/Prospectus for a more detailed comparison of the
investment objectives and policies of the Funds.)

Pacific Investment Management Company LLC ("PIMCO"), an investment adviser
that is not affiliated with Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), has served as sub-adviser for PACE Government Securities Fixed
Income Fund since its inception in August 1995. Effective October 10, 2000,
Mitchell Hutchins also retained PIMCO to serve as sub-adviser for U.S.
Government Income Fund. PIMCO uses the same basic investment strategy for both
Funds. As a result, the two Funds are now managed in a similar manner.

HOW MANY SHARES WILL I RECEIVE AT THE TIME OF THE MERGER?

If the merger is approved, you will receive full and fractional shares of
the corresponding class of PACE Government Securities Fixed Income Fund having a
total value equal to the total value of your U.S. Government Income Fund shares
at the time of the merger. Although the two Funds will have different net asset
values per share, each class of shares of PACE Government Securities Fixed
Income Fund issued in the merger will otherwise have characteristics that are
substantially identical to the corresponding class of shares of U.S. Government
Income Fund.

2
<PAGE>
IF I CURRENTLY ELECT TO RECEIVE MY U.S. GOVERNMENT INCOME FUND DIVIDEND AS CASH
OR IF I HAVE THE DIVIDEND AUTOMATICALLY REINVESTED INTO THE FUND, WILL MY
DISTRIBUTION CHOICE REMAIN THE SAME FOR MY PACE GOVERNMENT SECURITIES FIXED
INCOME FUND SHARES AFTER THE MERGER?

Yes, your distribution choice will remain the same after the merger.

WILL I HAVE TO PAY TAXES AS A RESULT OF THE MERGER?

The merger has been structured as a tax-free transaction, which means that
no gain or loss will be recognized by either Fund as a direct result of the
merger. This means that you will not realize any gain or loss on your receipt of
PACE Government Securities Fixed Income Fund shares, and that your basis for the
PACE Government Securities Fixed Income Fund shares you receive in the merger
will be the same as the basis for your U.S. Government Income Fund shares.

Immediately prior to the merger, U.S. Government Income Fund will have to
distribute all of its previously undistributed income and net capital gain, if
any, to its shareholders, and that distribution will be taxable to U.S.
Government Income Fund shareholders. You should note, however, that both Funds
pay monthly dividends and must distribute their net capital gain, if any, for
the one year period ended October 31, 2000. This distribution must be made
regardless of whether the merger takes place because of tax requirements
applicable to all mutual funds. This means that if you remain a shareholder of
U.S. Government Income Fund, if the merger takes place, you may receive two
taxable distributions of net capital gain, if any, within a short period of
time.

HOW WILL THE MERGER AFFECT FUND EXPENSES?

The management fee paid by PACE Government Securities Fixed Income Fund to
Mitchell Hutchins is greater than the management fee paid by U.S. Government
Income Fund. However, the post-merger combined Fund is expected to have overall
operating expenses that are no higher than the current operating expenses of
U.S. Government Income Fund because the overall operating expenses of the
combined Fund are subject to a written management fee waiver and expense
reimbursement agreement between PACE Government Securities Fixed Income Fund and
Mitchell Hutchins. That agreement will remain in effect through December 1,
2002. Absent that agreement, it is expected that the overall operating expenses
of the combined Fund would be higher than the current expenses of U.S.
Government Income Fund. If the management fee waiver and expense reimbursement
agreement is not renewed after December 1, 2002, the combined Fund will have
overall operating expenses for each class of shares that are higher than the
current expenses of U.S. Government Income Fund. (For more details about fees
and expenses of each class of shares, see "Comparative Fee Table" on page 3 of
the Combined Proxy Statement/Prospectus.)

HOW HAVE PACE GOVERNMENT SECURITIES FIXED INCOME FUND AND U.S. GOVERNMENT INCOME
FUND PERFORMED?

The following tables show the average annual total returns over several time
periods for each class of shares of U.S. Government Income Fund and the Class P
shares of PACE Government Securities Fixed Income Fund (the only outstanding
class of shares during the periods shown). A Fund's past performance does not
necessarily indicate how it will perform in the future. This may be particularly
true for U.S. Government Income Fund because the current sub-adviser did not
manage its assets during the periods shown.

The table for U.S. Government Income Fund reflects sales charges on its
Class A, B and C shares and the higher expenses for these classes due to the
fees paid under their Rule 12b-1 plans. The table for PACE Government Securities
Fixed Income Fund reflects the maximum annual PaineWebber PACE-SM- Select
Advisors Program fee of 1.50% (which does not apply to shares received in the
merger). A footnote to this table shows performance of PACE Government
Securities Fixed Income Fund's Class P shares for the same periods without
deduction of this fee. The tables also compare each Fund's returns to returns of
a broad-based market index. The comparative indices, which are different for the
two Funds, are unmanaged and, therefore, do not reflect the deduction of any
sales charges or expenses.

3
<PAGE>
The different sales charges, expenses and program fees applicable to the
different classes of shares of the two Funds and the different periods for which
performance is shown after the 1999 calendar year make it difficult to compare
the Funds' performance. However, because the Class Y shares of U.S. Government
Income Fund are not subject to any sales charges or 12b-1 fees, they are most
comparable to the Class P shares of PACE Government Securities Fixed Income
Fund. The performance of U.S. Government Income Fund's Class Y shares for the
1999 calendar year can thus be compared to that of the Class P shares of PACE
Government Securities Fixed Income Fund before deduction of the PACE-SM- Select
Advisors Program fee, as shown in the footnote to that Fund's table.

PACE GOVERNMENT SECURITIES FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS CLASS P LEHMAN BROTHERS MORTGAGE-
(INCEPTION DATE) (8/24/95) BACKED SECURITIES INDEX
---------------- --------- -------------------------
<S> <C> <C>
One Year................................ (0.49)% 1.86%
Life of Class .......................... 4.29% 6.42%
</TABLE>

-------------------

* The above performance reflects the deduction of the maximum annual PACE-SM-
Select Advisors Program fee of 1.50% (which does not apply to shares
received in the merger). If the program fee were not deducted, the average
annual total returns of the Fund's Class P shares would be 1.01% for the
year ended December 31, 1999 and 5.87% for "Life of Class."

U.S. GOVERNMENT INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
LEHMAN BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y GOVERNMENT BOND
(INCEPTION DATE) (8/31/84) (7/1/91) (7/2/92) (9/11/91) INDEX
---------------- --------- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
One Year................. (6.77)% (8.27)% (4.11)% (2.65)% (2.23)%
Five Years............... 5.40% 5.11% 5.73% 6.58% 7.44%
Ten Years................ 5.20% N/A N/A N/A 7.48%
Life of Class............ 7.09% 4.43% 3.26% 4.85% **
</TABLE>

-------------------

* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the Lehman Brothers Government Bond Index
for the life of each class were as follows: Class A -- 9.29%; Class B --
7.35%; Class C -- 6.53%; and Class Y -- 7.06%.

WHEN WILL THE PROPOSED MERGER OCCUR?

The Funds expect to merge in February 2001, assuming U.S. Government Income
Fund shareholder approval at the special meeting scheduled to be held on
January 25, 2001.

CAN I SELL OR EXCHANGE MY U.S. GOVERNMENT INCOME FUND SHARES BEFORE THE MERGER?

If you do not wish to receive shares of PACE Government Securities Fixed
Income Fund, you are free to sell or exchange your U.S. Government Income Fund
shares at any time prior to the merger. You will be subject to any applicable
contingent deferred sales charges and taxes if you sell your U.S. Government
Income Fund shares. If you elect to exchange your shares prior to the merger,
you may be subject to taxes. Consult your tax adviser for the tax implications
of an exchange. Please call your Financial Advisor to discuss your investment
options or with any questions.

WHAT IS THE BOARD'S RECOMMENDATION ON THE MERGER?

Your Board of Trustees unanimously recommends a vote "FOR" the merger.

4
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

-------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JANUARY 25, 2001

-------------------

To the Shareholders:

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting") of
PaineWebber U.S. Government Income Fund ("U.S. Government Income Fund"), a
series of PaineWebber Managed Investments Trust ("Managed Investments Trust"),
will be held on January 25, 2001, at 1285 Avenue of the Americas, 14th Floor,
New York, New York, 10019-6028, at 3:00 p.m., Eastern time, for the following
purpose:

To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of U.S.
Government Income Fund into PACE Government Securities Fixed Income
Investments ("PACE Government Securities Fixed Income Fund"), a series of
PaineWebber PACE Select Advisors Trust ("PACE Trust"). Pursuant to the
Plan, U.S. Government Income Fund will transfer all its assets to PACE
Government Securities Fixed Income Fund, which will assume all the stated
liabilities of U.S. Government Income Fund, and PACE Trust will issue to
each U.S. Government Income Fund shareholder the number of full and
fractional shares of the applicable class of PACE Government Securities
Fixed Income Fund having an aggregate net asset value that, on the
effective date of the reorganization, is equal to the aggregate net asset
value of the shareholder's shares of U.S. Government Income Fund.

Shareholders of record as of the close of business on November 21, 2000, 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 Trustees of Managed Investments
Trust, or vote your shares by telephone or the internet. 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 Managed
Investments Trust or by voting in person at the Meeting.

By Order of the Board of Trustees,

Dianne E. O'Donnell
Secretary

December 14, 2000
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. As an alternative to using the paper proxy card to vote, you
may vote shares that are registered in your name, as well as shares held in
"street name" through a broker, via the internet or telephone. To vote in this
manner, you will need the 14-digit "control" number(s) that appear on your
proxy card(s).

To vote via the internet, please access https://vote.proxy-direct.com on
the World Wide Web and follow the on-screen instructions.

You may also call 1-800-597-7836 and vote by telephone.

If we do not receive your completed proxy cards after several weeks, our
proxy solicitor, Shareholder Communications Corporation, may contact you. Our
proxy solicitor will remind you to vote your shares or will record your vote
over the phone if you choose to vote in that manner.

ii
<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 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:

<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<C> <S> <C>
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
</TABLE>

iii
<PAGE>
[This page is intentionally left blank.]

iv
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568

PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
(A SERIES OF PAINEWEBBER PACE SELECT ADVISORS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568

-------------------

COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: DECEMBER 14, 2000

-------------------

This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber U.S. Government Income Fund ("U.S. Government Income Fund"), a
series of PaineWebber Managed Investments Trust ("Managed Investments Trust"), a
Massachusetts business trust, to be held on January 25, 2001, at 1285 Avenue of
the Americas, 14th Floor, New York, New York, 10019-6028, at 3:00 p.m., Eastern
time (such meeting and any adjournments thereof are referred to collectively as
the "Meeting"). At the Meeting, the shareholders of U.S. Government Income Fund
will be asked to consider and approve the following proposal:

A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF MANAGED INVESTMENTS TRUST HAS
UNANIMOUSLY APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF U.S. GOVERNMENT
INCOME FUND AND ITS SHAREHOLDERS. (U.S. Government Income Fund and PACE
Government Securities Fixed Income Fund sometimes are referred to individually
as a "Fund" and together as "Funds.")

Pursuant to the Plan, U.S. Government Income Fund will transfer all its
assets to PACE Government Securities Fixed Income Fund, which will assume all
the stated liabilities of U.S. Government Income Fund, and PACE Trust will issue
to each U.S. Government Income Fund shareholder the number of full and
fractional shares of beneficial interest in the applicable class of PACE
Government Securities Fixed Income Fund having an aggregate net asset value
("NAV") that, on the effective date of the reorganization, is equal to the
aggregate NAV of the shareholder's shares of beneficial interest in the
corresponding class of U.S. Government Income Fund (the "Reorganization"). The
value of each U.S. Government Income Fund shareholder's account with PACE
Government Securities Fixed Income Fund immediately after the Reorganization
will be the same as the value of such shareholder's account with U.S. Government
Income Fund immediately prior to the Reorganization. As a result of the
Reorganization, shareholders of each class of shares of U.S. Government Income
Fund will become shareholders of the corresponding class of shares of PACE
Government Securities Fixed Income Fund. No sales charges will
<PAGE>
be assessed on the shares of PACE Government Securities Fixed Income Fund issued
in connection with the Reorganization.

PACE Government Securities Fixed Income Fund is a diversified series of PACE
Trust, which is an open-end management investment company currently comprised of
twelve series. PACE Government Securities Fixed Income Fund's investment
objective is current income. The Fund seeks to achieve its investment objective
by investing in U.S. government bonds and other bonds of varying maturities, but
normally limits its portfolio duration to between one and seven years. The Fund
invests primarily in mortgage-backed securities issued or guaranteed by U.S.
government agencies and in other U.S. government securities.

This Proxy Statement/Prospectus sets forth the information that a U.S.
Government Income Fund shareholder should know before voting on the Plan. It
should be read carefully and retained for future reference.

A Statement of Additional Information ("SAI") dated December 14, 2000,
containing additional information about the Reorganization, including historical
financial statements, has been filed with the Securities and Exchange Commission
("SEC") and is hereby incorporated by reference in its entirety into this Proxy
Statement/Prospectus. PACE Government Securities Fixed Income Fund's Annual
Report to Shareholders for the fiscal year ended July 31, 2000, has been filed
with the SEC and is incorporated by reference in the SAI. Information about U.S.
Government Income Fund is included in its current Prospectus and SAI, each dated
March 31, 2000, as supplemented, which are on file with the SEC and are hereby
incorporated by reference into this Proxy Statement/Prospectus. Copies of the
other referenced documents, as well as U.S. Government Income Fund's Semi-Annual
Report to Shareholders for the six months ended May 31, 2000, and its Annual
Report to Shareholders for the fiscal year ended November 30, 1999, are
available without charge by writing either U.S. Government Income Fund or PACE
Government Securities Fixed Income Fund at the address shown above, or by
calling (800) 647-1568. The SEC maintains an internet web site at
http://www.sec.gov that contains information regarding PACE Trust and Managed
Investments Trust. Copies of such material may also be obtained, after paying a
duplicating fee, from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, DC,
20549, or by electronic request at the following e-mail address:
[email protected]. Additional information about the Funds also may 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 TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.

ii
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION TITLE PAGE
------------- ----
<S> <C>
INTRODUCTION...................................... 1
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION AND TERMINATION...... 2
SYNOPSIS.......................................... 2
The Proposed Reorganization..................... 2
Comparative Fee Table........................... 3
Summary Comparison of the Funds................. 4
COMPARISON OF PRINCIPAL RISK FACTORS.............. 5
Primary Difference in the Investment Risks of
the Funds..................................... 6
COMPARISON OF THE FUNDS........................... 6
Investment Objectives........................... 6
Investment Policies............................. 6
Operations of PACE Government Securities Fixed
Income Fund Following the Reorganization...... 8
Performance..................................... 8
Sales Charges................................... 10
Dividends and Other Distributions............... 10
Taxes........................................... 10
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING
SHARES OF PACE GOVERNMENT SECURITIES FIXED
INCOME FUND..................................... 11
Flexible Pricing................................ 11
Buying Shares................................... 15
Selling Shares.................................. 16
Exchanging Shares............................... 16
Pricing and Valuation........................... 17
MANAGEMENT........................................ 18
Investment Manager and Investment Adviser....... 18
Sub-Adviser..................................... 18
Advisory Fees and Fund Expenses................. 18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION... 19
Reasons for the Reorganization.................. 19
Terms of the Reorganization..................... 21
Description of Securities to be Issued.......... 22
Temporary Waiver of Investment Restrictions..... 22
Federal Income Tax Considerations............... 22
Required Vote................................... 23
ORGANIZATION OF THE FUNDS......................... 24
FINANCIAL HIGHLIGHTS.............................. 24
CAPITALIZATION.................................... 26
LEGAL MATTERS..................................... 26
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION...................................... 27
EXPERTS........................................... 27
OTHER INFORMATION................................. 27
APPENDIX A: Form of Agreement and Plan of
Reorganization and Termination.................. A-1
APPENDIX B: Security Ownership of Certain
Beneficial Owners............................... B-1
APPENDIX C: Management's Discussion of PACE
Government Securities Fixed Income Fund's
Performance..................................... C-1
</TABLE>

iii
<PAGE>
INTRODUCTION

This Proxy Statement/Prospectus is being furnished to shareholders of U.S.
Government Income Fund, a series of Managed Investments Trust, 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 as instructed by shareholders. Approval of the proposal requires the
affirmative vote of the lesser of (1) 67% or more of the shares of U.S.
Government Income Fund present at the Meeting, if more than 50% of the
outstanding shares are represented at the Meeting in person or by proxy, or
(2) more than 50% of the outstanding shares entitled to vote at the Meeting. If
you execute your proxy but give no voting instructions, your shares that are
represented by proxies will be voted "FOR" the proposal described in this Proxy
Statement/Prospectus. The presence in person or by proxy of U.S. Government
Income Fund 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 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.

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
(i) considered votes cast at the Meeting or (ii) voted for or against any
adjournment or proposal. Abstentions and broker non-votes are effectively votes
against the proposal.

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 Managed Investments Trust ("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.

Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Managed Investments Trust intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December 14,
2000. Shareholders of record as of the close of business on November 21, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date, U.S.
Government Income Fund had 26,718,257 shares issued and outstanding, consisting
of 23,091,867 Class A shares, 830,007 Class B shares, 1,778,197 Class C shares,
and 1,018,186 Class Y shares. Shareholders are entitled to one vote for each
full share held and a fractional vote for each fractional share held. Except as
set forth in Appendix B, as of the Record Date, Mitchell Hutchins, the
investment manager, administrator and distributor of both Funds, does not know
of any person who owns beneficially or of record 5% or more of any class of
shares of either Fund. As of that same date, the Trustees and officers, as a
group, owned less than 1% of any class of either Fund's outstanding shares.

Managed Investments Trust has engaged the services of Shareholder
Communications Corporation ("SCC") to assist it in the solicitation of proxies
for the Meeting. Managed Investments Trust expects to solicit proxies by mail,
telephone and via the internet. Managed Investments Trust officers and employees
of Mitchell Hutchins who assist in the proxy solicitation will not receive any
additional or special compensation for any such efforts. SCC will be paid
approximately $30,800 for proxy solicitation services. Managed Investments Trust
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. Mitchell Hutchins may reimburse such broker/dealer firms,
custodians, nominees and fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation.

1
<PAGE>
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION.

SYNOPSIS

The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus, the Statement of Additional Information, and
the Plan. As discussed more fully below, Managed Investments Trust's Board
believes that the proposed Reorganization will benefit U.S. Government Income
Fund's shareholders.

THE PROPOSED REORGANIZATION

The Boards of PACE Trust and Managed Investments Trust, including their
respective Trustees who are not "interested persons," as that term is defined in
the Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Trustees"), considered and approved the Plan at meetings held on September 13,
2000 and October 6, 2000, respectively. The Plan provides for the acquisition by
PACE Government Securities Fixed Income Fund of all of U.S. Government Income
Fund's assets in exchange for PACE Government Securities Fixed Income Fund
shares and the assumption by PACE Government Securities Fixed Income Fund of all
of U.S. Government Income Fund's stated liabilities. U.S. Government Income Fund
will then distribute the PACE Government Securities Fixed Income Fund shares to
U.S. Government Income Fund's shareholders, by class, so that each U.S.
Government Income Fund shareholder will receive the number of full and
fractional shares of the corresponding class of PACE Government Securities Fixed
Income Fund equal in aggregate NAV to the aggregate NAV of the shares of U.S.
Government Income Fund that the shareholder held at the time of the
Reorganization. These transactions are scheduled to occur as of 4:00 p.m.,
Eastern time, on February 2, 2001, or on such later date as the conditions to
consummation of the Reorganization are satisfied ("Closing Date"). U.S.
Government Income Fund will be terminated as soon as is practicable after the
Closing Date. See "Additional Information About the Reorganization," below.

Managed Investments Trust and PACE Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP to the effect that the Reorganization will constitute
a tax-free reorganization within the meaning of section 368(a)(1) of the
Internal Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund
nor any of its shareholders will recognize any gain or loss for federal income
tax purposes as a direct result of the Reorganization. To the extent U.S.
Government Income Fund sells securities prior to the Closing Date, it may
recognize net gains or losses. Any such net recognized gains would increase the
amount of any distribution made to shareholders of U.S. Government Income Fund
prior to the Closing Date. See "Additional Information About the Reorganization
-- Federal Income Tax Considerations," below.

For the reasons set forth below under "Additional Information About the
Reorganization -- Reasons for the Reorganization," the Board of Managed
Investments Trust has determined that the Reorganization is in the best
interests of U.S. Government Income Fund and that the interests of existing U.S.
Government Income Fund shareholders will not be diluted as a result of the
Reorganization. ACCORDINGLY, MANAGED INVESTMENTS TRUST'S BOARD UNANIMOUSLY
RECOMMENDS APPROVAL OF THE REORGANIZATION.

2
<PAGE>
COMPARATIVE FEE TABLE

The table below describes the fees and expenses that you would pay if you
buy and hold U.S. Government Income Fund shares or PACE Government Securities
Fixed Income Fund shares before the Reorganization and PACE Government
Securities Fixed Income Fund shares after the Reorganization. The "Annual Fund
Operating Expenses" set forth below are based on the fees and expenses for the
fiscal year ended July 31, 2000 for PACE Government Securities Fixed Income Fund
and for the six months ended May 31, 2000 (annualized) for U.S. Government
Income Fund. The PRO FORMA information reflects the anticipated effects of the
Reorganization as well as the proposed reorganization of PaineWebber Low
Duration U.S. Government Income Fund with PACE Government Securities Fixed
Income Fund, which is expected to occur at approximately the same time as the
Reorganization.
<TABLE>
<CAPTION>

PACE GOVERNMENT SECURITIES FIXED
U.S. GOVERNMENT INCOME FUND INCOME FUND
---------------------------------------------- ----------------------------------------------
CLASS A CLASS B CLASS C CLASS Y CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge
(load) Imposed on
Purchases (AS A
PERCENTAGE OF OFFERING
PRICE)................. 4% None None None 4% None None None
Maximum Deferred Sales
Charge (load) (AS A
PERCENTAGE OF ORIGINAL
PURCHASE PRICE OR
REDEMPTION PROCEEDS,
WHICHEVER IS LESS)..... None 5% 0.75% None None 5% 0.75% None
Exchange Fee............. None None None None None None None None
ANNUAL FUND OPERATING
EXPENSES (FEES THAT ARE
DEDUCTED FROM FUND
ASSETS)
Management Fees**........ 0.50% 0.50% 0.50% 0.50% 0.70% 0.70% 0.70% 0.70%
Distribution and/or
Service (12b-1) Fees... 0.25% 1.00% 0.75% None 0.25% 1.00% 0.75% None
Other Expenses***........ 0.22% 0.28% 0.24% 0.15% 0.20% 0.22% 0.21% 0.19%
-------- -------- -------- -------- -------- -------- -------- --------
Total Annual Fund
Operating Expenses..... 0.97% 1.78% 1.49% 0.65% 1.15% 1.92% 1.66% 0.89%
======== ======== ======== ======== ======== ======== ======== ========
Management Fee
Waiver/Expense
Reimbursements+........ N/A N/A N/A N/A (0.04)% (0.04)% (0.04)% (0.04)%
-------- -------- -------- -------- -------- -------- -------- --------
Net Expenses+............ 0.97% 1.78% 1.49% 0.65% 1.11% 1.88% 1.62% 0.85%
======== ======== ======== ======== ======== ======== ======== ========

<CAPTION>
COMBINED PACE GOVERNMENT
SECURITIES FIXED INCOME FUND
PRO FORMA*
----------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge
(load) Imposed on
Purchases (AS A
PERCENTAGE OF OFFERING
PRICE)................. 4% None None None
Maximum Deferred Sales
Charge (load) (AS A
PERCENTAGE OF ORIGINAL
PURCHASE PRICE OR
REDEMPTION PROCEEDS,
WHICHEVER IS LESS)..... None 5% 0.75% None
Exchange Fee............. None None None None
ANNUAL FUND OPERATING
EXPENSES (FEES THAT ARE
DEDUCTED FROM FUND
ASSETS)
Management Fees**........ 0.70% 0.70% 0.70% 0.70%
Distribution and/or
Service (12b-1) Fees... 0.25% 1.00% 0.75% None
Other Expenses***........ 0.15% 0.17% 0.16% 0.12%
-------- -------- -------- --------
Total Annual Fund
Operating Expenses..... 1.10% 1.87% 1.61% 0.82%
======== ======== ======== ========
Management Fee
Waiver/Expense
Reimbursements+........ (0.13)% (0.13)% (0.13)% (0.17)%
-------- -------- -------- --------
Net Expenses+............ 0.97% 1.74% 1.48% 0.65%
======== ======== ======== ========
</TABLE>

---------------------------

* The PRO FORMA expense information assumes that shareholders of U.S.
Government Income Fund and PaineWebber Low Duration U.S. Government Income
Fund approve the proposed reorganizations. If shareholders of U.S.
Government Income Fund approve the Reorganization and shareholders of
PaineWebber Low Duration U.S. Government Income Fund do not approve its
reorganization, the PRO FORMA "Net Expenses" for each class of shares of
the combined Fund would be the same as shown above due to the fee waiver
and expense reimbursement arrangement in effect for the combined Fund.
** For both Funds, "Management Fees" include fees paid to Mitchell Hutchins
for administrative services.
*** "Other Expenses" for PACE Government Securities Fixed Income Fund are
estimated based on the "other expenses" of the Fund's outstanding Class P
shares for the fiscal year ended July 31, 2000, as adjusted to reflect
estimated transfer agency expenses for each new class. "Other Expenses" for
each class of the combined Fund are based on the combined assets of U.S.
Government Income Fund and PaineWebber Low Duration U.S. Government Income
Fund.
+ PACE Trust and Mitchell Hutchins have entered into a written agreement with
respect to PACE Government Securities Fixed Income Fund under which
Mitchell Hutchins is contractually obligated to waive its management fees
and/or reimburse the Fund to the extent that the total operating expenses
of each class through December 1, 2002 otherwise would exceed the sum of
0.85% (the expense cap for the Fund's Class P shares) plus the 12b-1 fees,
if any, and any higher transfer agency fees applicable to the class. The
Fund has agreed to repay Mitchell Hutchins for any reimbursed expenses if
it can do so over the following three fiscal years without causing the
Fund's expenses in any of those three years to exceed these expense caps.

PACE Trust and Mitchell Hutchins have entered into an additional written
agreement with respect to PACE Government Securities Fixed Income Fund that
becomes effective if the Reorganization takes place. Under that agreement,
Mitchell Hutchins is contractually obligated to waive its management fees
and/or reimburse the Fund to the extent that the total operating expenses
of each class through December 1, 2002 otherwise would exceed the current
operating expenses of U.S. Government Income Fund as shown under "Total
Annual Fund Operating Expenses" and "Net Expenses" above. This is the
expense cap reflected in the "Net Expenses" for the combined Fund. The Fund
has agreed to repay Mitchell Hutchins for any reimbursed expenses if it can
do so over the following three fiscal years without causing the Fund's
expenses in any of those three years to exceed these expense caps.

3
<PAGE>
The example below is intended to help you compare the costs of investing in
each Fund, both before and after the Reorganization.

The example below assumes that you invest $10,000 in each Fund (including
the combined Fund) for the time periods indicated and then sell all of your
shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same, except for the two-year period when PACE Government
Securities Fixed Income Fund's and the combined Fund's expenses are lower due to
the agreements with Mitchell Hutchins. Although your actual returns and costs
may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A....................... $495 $697 $ 915 $1,542
Class B (assuming sale of all
shares at end of period).... 681 860 1,164 1,685
Class B (assuming no sale of
shares)..................... 181 560 964 1,685
Class C (assuming sale of all
shares at end of period).... 227 471 813 1,779
Class C (assuming no sale of
shares)..................... 152 471 813 1,779
Class Y....................... 66 208 362 810
PACE GOVERNMENT SECURITIES
FIXED INCOME FUND
Class A....................... $509 $743 $1,000 $1,735
Class B (assuming sale of all
shares at end of period).... 691 895 1,229 1,852
Class B (assuming no sale of
shares)..................... 191 595 1,029 1,852
Class C (assuming sale of all
shares at end of period).... 240 515 894 1,958
Class C (assuming no sale of
shares)..................... 165 515 894 1,958
Class Y....................... 87 276 485 1,089
PRO FORMA PACE GOVERNMENT
SECURITIES FIXED INCOME FUND
Class A....................... $495 $710 $ 957 $1,664
Class B (assuming sale of all
shares at end of period).... 677 862 1,186 1,782
Class B (assuming no sale of
shares)..................... 177 562 986 1,782
Class C (assuming sale of all
shares at end of period).... 226 482 851 1,889
Class C (assuming no sale of
shares)..................... 151 482 851 1,889
Class Y....................... 66 227 421 981
</TABLE>

SUMMARY COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES AND POLICIES

U.S. Government Income Fund and PACE Government Securities Fixed Income Fund
have similar investment objectives, policies and overall risk characteristics in
that both Funds seek current income by investing primarily in U.S. government
bonds. PACE Government Securities Fixed Income Fund seeks current income, while
U.S. Government Income Fund seeks high current income consistent with the
preservation of capital and liquidity. PACE Government Securities Fixed Income
Fund invests primarily in U.S. government bonds and other bonds of varying
maturities, but normally limits its portfolio duration to between one and seven
years. U.S. Government Income Fund invests primarily in U.S. government bonds,
including bonds that are backed by mortgages, but has no stated duration policy.
U.S. Government Income Fund normally concentrates its investments in U.S.
government and privately issued bonds that are backed by mortgages or other
assets.

INVESTMENT ADVISORY SERVICES

Mitchell Hutchins has served as investment manager and administrator for
PACE Government Securities Fixed Income Fund since its inception on August 24,
1995. As investment manager for the Fund, Mitchell Hutchins provides portfolio
management oversight rather than directly managing the Fund's

4
<PAGE>
investments. Mitchell Hutchins provides portfolio management oversight
principally by performing initial reviews of prospective sub-advisers and
supervising and monitoring the performance of the sub-advisers thereafter.
Mitchell Hutchins also recommends to the Board of PACE Trust whether agreements
with sub-advisers should be renewed, modified or terminated. The Fund's current
sub-adviser -- Pacific Investment Management Company LLC ("PIMCO") -- has
managed the Fund's investment portfolio since it commenced operations on
August 24, 1995.

Mitchell Hutchins has served as investment manager or investment adviser and
as administrator for U.S. Government Income Fund since its inception on August
31, 1984 and directly managed the Fund's assets until October 10, 2000. On that
date, the Fund's current sub-adviser -- PIMCO -- assumed responsibility for
managing the assets of the Fund.

PURCHASE AND REDEMPTION PROCEDURES

Funds in the PaineWebber Flexible Pricing-SM- System generally offer
Class A, Class B, Class C and Class Y shares. PACE Government Securities Fixed
Income Fund did not offer Class A, Class B, Class C and Class Y shares to the
public prior to November 27, 2000. The purchase and redemption procedures for
PACE Government Securities Fixed Income Fund's Class A, Class B, Class C and
Class Y shares are the same as those currently in effect for the corresponding
classes of shares of U.S. Government Income Fund. You may exchange Class A,
Class B or Class C shares of PACE Government Securities Fixed Income Fund for
shares of the same class of most other PACE funds or PaineWebber Money Market
Fund. Exchanges between other PaineWebber funds and PACE funds will not be
activated until on or around March 1, 2001. You may not exchange Class Y shares.

COMPARISON OF PRINCIPAL RISK FACTORS

Both Funds are subject to similar risk factors associated with their
investments in bonds. An investment in either Fund is not guaranteed; an
investor may lose money by investing in either Fund. The principal risks
presented by the Funds are:

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. Interest rate risk is the primary source of risk
for U.S. government and usually for other very high quality bonds. The impact of
changes in the general level of interest rates on lower quality bonds may be
greater or less than the impact on higher quality bonds.

Some corporate bonds, particularly those issued at relatively high interest
rates, provide that the issuer may repay them earlier than the maturity date.
The issuers of these bonds are most likely to exercise these "call" provisions
if prevailing interest rates are lower than they were when the bonds were
issued. A Fund then may have to reinvest the repayments at lower interest rates.
Bonds subject to call provisions may not benefit fully from the rise in value
that generally occurs for bonds when interest rates fall.

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 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 than
anticipated. 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.

LEVERAGE RISK -- Leverage involves increasing the total assets in which a
Fund can invest beyond the level of its net assets. Because leverage increases
the amount of a Fund's assets, it can magnify the effect on the Fund of changes
in the market values. As a result, while leverage can increase a Fund's income
and potential for gain, it also can increase expenses and the risk of loss. Each
Fund uses leverage by investing in when-issued and delayed delivery securities
and attempts to limit the potential magnifying effect of the leverage by
managing portfolio duration.

5
<PAGE>
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
greater for lower quality bonds. Bonds that are not investment grade involve
high credit risk and are considered speculative. Some of these low quality bonds
may be in default when purchased by a Fund. Low quality bonds may fluctuate in
value more than higher quality bonds and, during periods of market volatility,
may be more difficult to sell at the time and price a Fund desires.

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 and futures contracts are examples of derivatives. A
Fund's use of derivatives may not succeed for various reasons, including
unexpected changes in the values of the derivatives or the assets underlying
them. Also, if a Fund uses derivatives to adjust or "hedge" the overall risk of
its portfolio, the hedge may not succeed if changes in the values of the
derivatives are not matched by opposite changes in the values of the assets
being hedged.

PRIMARY DIFFERENCE IN THE INVESTMENT RISKS OF THE FUNDS

CONCENTRATION RISK -- U.S. Government Income Fund normally invests at least
25% of its total assets in U.S. government and privately issued mortgage- and
asset-backed securities. Concentration increases the Fund's exposure to the
risks of these securities and might cause the Fund's net asset value to change
more than it otherwise would. PACE Government Securities Fixed Income Fund does
not concentrate its investments and, as a result, is not subject to this risk.

COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES

The Funds have similar investment objectives in that each seeks current
income. PACE Government Securities Fixed Income Fund seeks current income. U.S.
Government Income Fund seeks high current income consistent with the
preservation of capital and liquidity.

INVESTMENT POLICIES

The Funds also have similar investment policies in that each invests
primarily in U.S. government bonds. PACE Government Securities Fixed Income Fund
invests in U.S. government bonds and other bonds of varying maturities, but
normally limits its portfolio duration to between one and seven years.
"Duration" is a measure of the Fund's exposure to interest rate risk. A longer
duration means that changes in market interest rates are likely to have a larger
effect on the value of the assets in a portfolio.

PACE Government Securities Fixed Income Fund invests primarily in
mortgage-backed securities issued or guaranteed by U.S. government agencies and
in other U.S. government securities. The Fund also invests, to a lesser extent,
in investment grade bonds of private issuers, including those backed by
mortgages or other assets. These privately issued bonds generally have one of
the two highest credit ratings, although the Fund may invest to a limited extent
in privately issued bonds with the third highest credit rating.

U.S. Government Income Fund invests primarily in U.S. government bonds,
including bonds that are backed by mortgages, but has no stated duration policy.
The Fund also invests, to a lesser extent, in non-government bonds that have the
highest credit ratings and that are backed by mortgages or other assets. U.S.
Government Income Fund normally concentrates its investments in U.S. government
and privately issued bonds that are backed by mortgages or other assets.

Each Fund may invest in when-issued or delayed delivery bonds to increase
its return, giving rise to a form of leverage.

6
<PAGE>
In selecting investments for each Fund, PIMCO establishes duration targets
for each Fund's portfolio based on its expectations for changes in interest
rates and then positions each Fund to take advantage of yield curve shifts.
PIMCO decides to buy or sell specific bonds based on an analysis of their values
relative to other similar bonds. PIMCO monitors the prepayment experience of the
Fund's mortgage-backed bonds and also will buy and sell securities to adjust a
Fund's average portfolio duration, yield curve and sector and prepayment
exposure, as appropriate.

DERIVATIVES. The Funds have similar policies with respect to the use of
derivatives relating to the securities in which they normally invest. PACE
Government Securities Fixed Income Fund may (but is not required to) use
options, futures and other derivatives as part of its investment strategy or to
help manage portfolio risks. U.S. Government Income Fund uses interest rate
futures contracts and other derivatives to help manage its portfolio duration.

TEMPORARY DEFENSIVE POSITIONS; CASH RESERVES. Each Fund may take a
defensive position that is different from its normal investment strategy to
protect itself from adverse market conditions. This means that each Fund may
temporarily invest a larger-than-normal part, or even all, of its assets in cash
or money market instruments. In addition, each Fund may increase its cash
reserves to facilitate the transition to the investment style and strategies of
a new sub-adviser. Because these investments provide relatively low income, a
defensive or transitional position may not be consistent with achieving a Fund's
investment objective. PACE Government Securities Fixed Income Fund is normally
fully invested in accordance with its investment objective and policies.
However, with the concurrence of Mitchell Hutchins, PACE Government Securities
Fixed Income Fund may take a defensive position that is different from its
normal investment strategy.

Each Fund may invest to a limited extent in money market instruments as a
cash reserve for liquidity or other purposes.

OTHER INVESTMENT POLICIES. Each Fund may invest up to 15% of its net assets
in illiquid securities. Both Funds may purchase securities on a when-issued
basis or may purchase or sell securities for delayed delivery. Each Fund may
lend its securities to qualified broker-dealers or institutional investors in an
amount up to 33 1/3% of its total assets. PACE Government Securities Fixed
Income Fund may borrow from banks and through reverse repurchase agreements for
temporary or emergency purposes, but not in excess of 10% of its total assets.
U.S. Government Income Fund may borrow from banks and through reverse repurchase
agreements for temporary or emergency purposes, but not in excess of 33 1/3% of
its total assets, except that the Fund may borrow an additional 5% of its total
assets for temporary or emergency purposes. Neither Fund may purchase securities
while borrowings in excess of 5% of its total assets are outstanding. Each Fund
may invest in the securities of other investment companies and may sell short
"against the box."

PORTFOLIO TURNOVER. Each Fund may engage in frequent trading to achieve its
investment objective. Frequent trading may result in a portfolio turnover of
100% or more (high portfolio turnover). Frequent trading may increase the
portion of a Fund's capital gains that are realized for tax purposes in any
given year, which may increase the Fund's taxable distributions in that year.
Frequent trading also may increase the portion of a Fund's realized capital
gains that are considered "short-term" for tax purposes. Shareholders will pay
higher taxes on distributions that represent net short-term capital gains than
they would pay on distributions that represent net long-term capital gains.
Frequent trading also may result in higher fund expenses due to transaction
costs. Neither Fund restricts the frequency of trading to limit expenses or the
tax effect that its distributions may have on shareholders. The portfolio
turnover rates for U.S. Government Income Fund for the last two fiscal years
ended November 30, 2000 and 1999, were 352% and 375%, respectively, while the
portfolio turnover rates for PACE Government Securities Fixed Income Fund for
the last two fiscal years ended July 31, 2000 and 1999, were 585% and 418%,
respectively.

U.S Government Income Fund changed its investment management arrangements on
October 10, 2000 when PIMCO assumed responsibility for managing its investment
portfolio. PIMCO has realigned the Fund's portfolio to reflect its proprietary
investment strategies. As a result, during the period immediately following
October 10, 2000, the Fund experienced higher portfolio turnover than normal,
which may result in higher overall portfolio turnover for the current fiscal
year.

7
<PAGE>
OPERATIONS OF PACE GOVERNMENT SECURITIES FIXED INCOME FUND FOLLOWING THE
REORGANIZATION

It is not expected that PACE Government Securities Fixed Income Fund will
revise any of its policies following the Reorganization to reflect those of U.S.
Government Income Fund. PIMCO has reviewed U.S. Government Income Fund's current
portfolio and determined that U.S. Government Income Fund's holdings generally
are compatible with PACE Government Securities Fixed Income Fund's portfolio. As
a result, Mitchell Hutchins believes that, if the Reorganization is approved, a
substantial portion of U.S. Government Income Fund's assets could be transferred
to and held by PACE Government Securities Fixed Income Fund.

It is expected that some of U.S. Government Income Fund's holdings may not
remain at the time of the Reorganization due to normal portfolio turnover. It is
not expected that any of U.S. Government Income Fund's holdings will be
incompatible with PACE Government Securities Fixed Income Fund's holdings.
However, if the shareholders of U.S. Government Income Fund approve the
Reorganization, some of the Fund's holdings may need to be liquidated
immediately prior to or following the Reorganization to adjust the duration of
the combined Fund. Any portfolio holdings of U.S. Government Income Fund that
must be sold for this reason would be liquidated in an orderly manner and the
proceeds held in temporary investments or reinvested in assets with durations
that are consistent with the duration of the combined Fund. As of November 30,
2000, only a very small percentage of U.S. Government Income Fund's portfolio
holdings would have had to be sold to adjust the portfolio duration of the
combined Fund. The portion of U.S. Government Income Fund's assets that will be
liquidated in connection with the Reorganization will depend on the
sub-adviser's continuing assessment of the appropriate portfolio duration for
PACE Government Securities Fixed Income Fund at the approximate time of the
Reorganization. The need for U.S. Government Income Fund to dispose of
investments in connection with the Reorganization may result in the Fund's
selling securities at a disadvantageous time and could result in the Fund's
realizing gain (or losses) that would not otherwise have been realized.

PERFORMANCE

The following bar chart and table provide information about the performance
of PACE Government Securities Fixed Income Fund Class P shares and thus give
some indication of the risks of an investment in the Fund. The Fund's Class P
shares were the only outstanding class of shares during the periods shown.

The bar chart shows how PACE Government Securities Fixed Income Fund's
performance has varied from calendar year to calendar year. The bar chart does
not reflect the maximum annual PACE-SM- Select Advisors Program fee of 1.50%
(which does not apply to shares received in the Reorganization) or the effect of
sales charges or the higher expenses of PACE Government Securities Fixed Income
Fund's Class A, Class B and Class C shares; if it did, the total returns shown
would be lower.

The first table that follows the bar chart shows the average annual returns
over several time periods for the Fund's Class P shares. Class P shares are not
subject to the sales charges applicable to the Fund's Class A, Class B and
Class C shares or the higher expenses of these shares. The table does, however,
reflect the maximum annual PACE-SM- Select Advisors Program fee of 1.50%
applicable only to Class P shares. The program fee does not apply to shares
received in the Reorganization. A footnote to this table shows the performance
of PACE Government Securities Fixed Income Fund's Class P shares for the same
periods without deduction of this fee. Because all classes of shares invest in
the same portfolio of securities, their annual returns would differ only to the
extent of the different sales charges, expenses and program fees.

The second table that follows the bar chart shows the average annual total
returns over several time periods for U.S. Government Income Fund's Class A,
Class B, Class C and Class Y shares. This table reflects sales charges and 12b-1
fees for Class A, Class B and Class C shares of the Fund. The Fund's Class Y
shares are not subject to any sales charges or 12b-1 fees and thus are most
comparable to the Class P shares of PACE Government Securities Fixed Income
Fund. The performance of U.S. Government Income Fund's Class Y shares for the
1999 calendar year can thus be compared to that of the Class P

8
<PAGE>
shares of PACE Government Securities Fixed Income Fund before deduction of the
PACE-SM- Select Advisors Program fee, as shown in the footnote to that Fund's
table.

The tables also compare each Fund's returns to returns of a broad-based
market index that is unmanaged and, therefore, does not reflect the deduction of
any fees or expenses. The two Funds have historically used different indices --
the Lehman Brothers Government Bond Index for U.S. Government Income Fund and
the Lehman Brothers Mortgage-Backed Securities Index for PACE Government
Securities Fixed Income Fund. For comparative purposes, the returns of both
indices are shown for each Fund in the tables below.

Each Fund's past performance does not necessarily indicate how it will
perform in the future. This may be particularly true for U.S. Government Income
Fund because, during the periods shown, Mitchell Hutchins managed the Fund's
assets.

PACE GOVERNMENT SECURITIES FIXED INCOME FUND -- TOTAL RETURN ON CLASS P SHARES
(1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR TOTAL RETURN
<S> <C>
1996 4.26%
1997 9.04%
1998 6.42%
1999 1.01%
</TABLE>

Total return January 1 to September 30, 2000 -- 7.19%

Best quarter during years shown: 2nd quarter, 1997 -- 3.50%
Worst quarter during years shown: 1st quarter, 1996 -- (1.33)%

PACE GOVERNMENT SECURITIES FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS CLASS P MORTGAGE-BACKED GOVERNMENT
(INCEPTION DATE) (8/24/95) SECURITIES INDEX BOND INDEX
---------------- --------- ---------------- ---------------
<S> <C> <C> <C>
One Year........................... (0.49)% 1.86% (2.23)%
Life of Class ..................... 4.29% 6.42% 5.80%
</TABLE>

-------------------

* The above performance reflects the deduction of the maximum annual PACE-SM-
Select Advisors Program fee of 1.50% (which does not apply to shares
received in the Reorganization). If the program fee were not deducted, the
average annual total returns of the Fund's Class P shares would be 1.01%
for the year ended December 31, 1999 and 5.87% for "Life of Class."

9
<PAGE>
U.S. GOVERNMENT INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
LEHMAN
BROTHERS LEHMAN BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y GOVERNMENT MORTGAGE-BACKED
(INCEPTION DATE) (8/31/84) (7/1/91) (7/2/92) (9/11/91) BOND INDEX SECURITIES INDEX
---------------- --------- -------- -------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
One Year................. (6.77)% (8.27)% (4.11)% (2.65)% (2.23)% 1.86%
Five Years............... 5.40% 5.11% 5.73% 6.58% 7.44% 7.98%
Ten Years................ 5.20% N/A N/A N/A 7.48% 7.78%
Life of Class ........... 7.09% 4.43% 3.26% 4.85% ** **
</TABLE>

-------------------

* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the Lehman Brothers Government Bond Index
and the Lehman Brothers Mortgage-Backed Securities Index for the life of
each class were as follows: Class A -- 9.29% and 10.13%; Class B -- 7.35%
and 7.29%; Class C -- 6.53% and 6.47%; and Class Y -- 7.06% and 6.99%,
respectively.

SALES CHARGES

No sales charges apply when U.S. Government Income Fund shareholders receive
shares of PACE Government Securities Fixed Income Fund in connection with the
Reorganization.

DIVIDENDS AND OTHER DISTRIBUTIONS

U.S. Government Income Fund normally declares dividends daily and pays them
monthly. PACE Government Securities Fixed Income Fund normally declares and pays
dividends monthly. Each Fund distributes substantially all of its gains, if any,
annually. Classes with higher expenses are expected to have lower dividends. For
example, Class B and Class C shares are expected to have the lowest dividends of
any class of a Fund's shares, while Class Y shares (and, for PACE Government
Securities Fixed Income Fund, Class P shares) would have the highest dividends.

As a shareholder of PACE Government Securities Fixed Income Fund, you will
receive dividends in additional shares of the Fund unless you elect to receive
them in cash. Your current dividend distribution election for U.S. Government
Income Fund will remain the same after the Reorganization. Contact your
Financial Advisor at PaineWebber if you prefer to receive dividends in cash.

On or before the Closing Date, U.S. Government Income Fund will distribute
substantially all of its undistributed net investment income, net capital gain
and net short-term capital gain, if any, in order to continue to maintain its
tax status as a regulated investment company.

TAXES

The dividends that you receive from either 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.

10
<PAGE>
When you sell Fund shares, you generally will be subject to federal income
tax on any gain you realize. If you exchange a 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.

Any 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. A Fund will tell you how you should treat its dividends
for tax purposes.

FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF
PACE GOVERNMENT SECURITIES FIXED INCOME FUND

FLEXIBLE PRICING

PACE Government Securities Fixed Income Fund offers four new classes of
shares -- Class A, Class B, Class C and Class Y -- established prior to the
Reorganization. The four new classes of shares of PACE Government Securities
Fixed Income Fund and the procedures for buying, selling and exchanging these
shares, as described below, are substantially identical to the corresponding
classes of shares and related procedures of U.S. Government Income Fund. Prior
to November 27, 2000, PACE Government Securities Fixed Income Fund offered only
Class P shares, which are available only to participants in the PaineWebber
PACE-SM- Select Advisors Program.

No sales charges apply when U.S. Government Income Fund shareholders receive
Class A, Class B, Class C or Class Y shares of PACE Government Securities Fixed
Income Fund as part of the Reorganization. PACE Government Securities Fixed
Income Fund is offering its four new classes of shares to the general public
prior to the Reorganization. Class Y shares are only available to certain types
of investors. Class A, Class B and Class C shares purchased other than as part
of the Reorganization will be subject to the sales charges described below. In
addition, each class has different ongoing expenses.

PACE Government Securities Fixed Income Fund has adopted a plan under
Rule 12b-1 governing its Class A, Class B and Class C shares that allows it to
pay service fees for providing services to shareholders and (for Class B and
Class C shares) distribution fees for the sale of its shares. The terms of these
plans are substantially identical to the terms of the corresponding plans now in
place for U.S. Government Income Fund's Class A, Class B and Class C shares.
Because the 12b-1 distribution fees for Class B and Class C shares are paid out
of the Fund's assets on an ongoing basis, over time they will increase the cost
of your investment and may cost you more than if you paid a front-end sales
charge.

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 both Funds are described in the following
table.

11
<PAGE>
CLASS A SALES CHARGES

<TABLE>
<CAPTION>
REALLOWANCE TO SELECTED
SALES CHARGE AS A PERCENTAGE OF: DEALERS AS PERCENTAGE
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE*
-------------------- -------------- ------------------- -----------------------
<S> <C> <C> <C>
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 purchased through the 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 Fund's Systematic
Withdrawal Plan are not subject to this charge.

(2) Mitchell Hutchins pays 1% to the dealer.

* For an initial period ending on or about December 29, 2000, Mitchell
Hutchins will reallow the full amount of the sales charge to selected
dealers.

SALES CHARGE REDUCTIONS AND WAIVERS. You may qualify for a lower sales charge if
you already own Class A shares of a PaineWebber or PaineWebber PACE mutual fund.
You can combine the value of Class A shares that you own in other PaineWebber or
PaineWebber PACE funds and the purchase amount of the Class A shares of the
PaineWebber or PaineWebber PACE fund that you are buying.

You may also qualify for a lower sales charge if you combine your purchases
with those of:

- your spouse, parents or children under age 21;

- your Individual Retirement Accounts (IRAs);

- certain employee benefit plans, including 401(k) plans;

- a company that you control;

- a trust that you created;

- Uniform Transfers to Minors Act/Uniform Gifts to Minors Act accounts
created by you or by a group of investors for your children; or

- accounts with the same adviser.

You may qualify for a complete waiver of the sales charge if you:

- Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;

- 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

12
<PAGE>
-- you purchase an amount that does not exceed the total amount of
money you received from the sale of the other mutual fund;

- Acquire these shares through the reinvestment of dividends of a
PaineWebber unit investment trust;

- 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;

- Are a participant in the PaineWebber Members Only-SM- Program. 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; or

- Acquire these shares through a PaineWebber InsightOne-SM- Program
brokerage account.

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.
If you hold your Class B shares 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 purchase or
the net asset value at the time of sale by the percentage shown below:

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
IF YOU SELL THE SHARES' NET ASSET
SHARES WITHIN: VALUE IS MULTIPLIED:
-------------- ---------------------
<S> <C>
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
</TABLE>

We will not impose the deferred sales charge on Class B shares purchased
through the 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.

For purposes of determining your deferred sales charge and when to convert
your Class B shares to Class A shares, the holding period for the Class B shares
of PACE Government Securities Fixed Income Fund that you receive in connection
with the Reorganization will include the period for which you held the
corresponding Class B shares of U.S. Government Income Fund and any other
PaineWebber fund whose shares you exchanged for Class B shares of U.S.
Government Income Fund.

To minimize your deferred sales charge, we will assume that you are selling:

- First, Class B shares representing reinvested dividends, and

13
<PAGE>
- 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:

- You participate in the Systematic Withdrawal Plan;

- You are older than 59-1/2 and are selling shares to take a distribution
from certain types of retirement plans;

- You receive a tax-free return of an excess IRA contribution;

- You receive a tax-qualified retirement plan distribution following
retirement;

- 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; or

- The shares are held in trust and the death of the trustee requires
liquidation of the trust.

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 0.50% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
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 0.75% 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 purchased
through the 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.

For purposes of determining your deferred sales charge, the holding period
for the Class C shares of PACE Government Securities Fixed Income Fund that you
receive in connection with the Reorganization will include the period for which
you held the corresponding Class C shares of U.S. Government Income Fund and any
other PaineWebber fund whose shares you exchanged for Class C shares of U.S.
Government Income Fund.

You may be eligible to sell your shares without paying a contingent deferred
sales charge if you 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.

NOTE ON SALES CHARGE WAIVERS FOR CLASS A, CLASS B AND CLASS C SHARES:

If you think that you qualify for any of these sales charge waivers
described above, 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 Fund's Systematic Withdrawal Plan, see the SAI 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:

- Buy shares through PaineWebber's PACE-SM- Multi Advisor Program;

14
<PAGE>
- Buy $10 million or more of PaineWebber fund shares at any one time;

- Are a qualified retirement plan with 5,000 or more eligible employees or
$50 million in assets;

- Are a corporation, bank, trust company, insurance company, pension fund,
employee benefit plan, professional firm, trust, estate or educational,
religious or charitable organization with 5,000 or more employees or with
over $50 million in investable assets; or

- 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 on behalf of that Plan.

Class Y shares do not pay ongoing distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are lower than the ongoing
expenses of Class A, Class B or Class C shares.

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 Fund through the Fund's 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.

You do not have to complete an application when you make additional
investments in the Fund.

The Fund and Mitchell Hutchins reserve the right to reject a purchase order
or suspend the offering of shares.

MINIMUM INVESTMENTS

<TABLE>
<S> <C>
To open an account................................ $1,000
To add to an account.............................. $100
</TABLE>

The Fund may waive or reduce these amounts for:

- Employees of PaineWebber or its affiliates; or

- Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the Fund's automatic investment plans.

FREQUENT TRADING. The interests of the Fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations--also
known as "market timing." When large dollar amounts are involved, the Fund may
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
Fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the Fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on the Fund's ability to manage its
investments, Mitchell Hutchins and the Fund may reject purchase orders and
exchanges into the Fund by any person, group or account that Mitchell Hutchins
believes to be a market timer. The Fund may notify the market timer that a
purchase order or an exchange has been rejected after the day the order is
placed.

15
<PAGE>
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.

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:

- Your name and address;

- The Fund's name;

- The Fund account number;

- The dollar amount or number of shares you want to sell; and

- A guarantee of each registered owner's signature. A signature guarantee
may be obtained from a financial institution, broker, dealer or clearing
agency 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 Fund 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 Fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

It costs the Fund money to maintain shareholder accounts. Therefore, the
Fund reserves the right to repurchase all shares in any account that has a net
asset value of less than $500. If the 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. The 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 the Fund for shares
of the same class of the other PACE funds or of PaineWebber Money Market Fund.
(It is expected that shareholders will also be able to exchange Class A,
Class B or Class C shares of a PACE fund for shares of the same class of certain
other PaineWebber mutual funds beginning on or about March 1, 2001.) You may not
exchange Class Y shares.

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. The 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.

16
<PAGE>
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 AND CORRESPONDENT FIRM CLIENTS. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.

OTHER INVESTORS. If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the Fund's transfer agent. You must
include:

- Your name and address;

- The name of the fund whose shares you are selling and the name of the
fund whose shares you want to buy;

- Your account number;

- How much you are exchanging (by dollar amount or by number of shares to
be sold); and

- 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.

The 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. The Fund calculates net asset value on days that the New
York Stock Exchange, Inc. ("NYSE") is open. The 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 on most
national holidays and on Good Friday, and the Fund does not price its shares on
these days. 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.

The Fund calculates its net asset value based on the current market value
for its portfolio securities. The Fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
Fund's board. The Fund normally uses the amortized cost method to value bonds
that will mature in 60 days or less.

17
<PAGE>
MANAGEMENT

INVESTMENT MANAGER AND INVESTMENT ADVISER

Mitchell Hutchins is the investment manager and administrator of both Funds.
Mitchell Hutchins is located at 51 West 52nd Street, New York, New York
10019-6114, and is a wholly owned asset management subsidiary of PaineWebber
Incorporated, which is a wholly owned indirect subsidiary of UBS AG. UBS AG,
with headquarters in Zurich, Switzerland, is an internationally diversified
organization with operations in many areas of the financial services industry.
On October 31, 2000, Mitchell Hutchins was adviser or sub-adviser of 31
investment companies with 75 separate portfolios and aggregate assets of
approximately $58.3 billion.

As investment manager for PACE Government Securities Fixed Income Fund,
Mitchell Hutchins recommends sub-advisers to the Board of PACE Trust to manage
the Fund's investments and monitors and reviews the performance of those
sub-advisers. PACE Trust has received an exemptive order from the SEC to permit
Mitchell Hutchins (subject to Board approval) to select and replace sub-advisers
and to amend the sub-advisory contracts between Mitchell Hutchins and the
sub-advisers without obtaining shareholder approval.

As investment manager for U.S. Government Income Fund, Mitchell Hutchins
recommends sub-advisers to the Board of Managed Investments Trust and monitors
and reviews the performance of those sub-advisers. Since October 10, 2000,
Mitchell Hutchins and the sub-adviser have provided investment management
services to the Fund under interim contracts approved by the Board of Managed
Investments Trust. Prior to October 10, 2000, Mitchell Hutchins managed U.S.
Government Income Fund's assets directly.

SUB-ADVISER

The same sub-adviser -- PIMCO -- manages the assets of each Fund. PIMCO is
located at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660.
As of September 30, 2000, PIMCO had approximately $207 billion in assets under
management. PIMCO is one of the largest fixed income management firms in the
nation. Included among PIMCO's institutional clients are many "Fortune 500"
companies.

Scott Mather, an executive vice president of PIMCO, has been primarily
responsible for the day-to-day portfolio management of PACE Government
Securities Fixed Income Fund since November 1999. He also has been primarily
responsible for the day-to-day management of U.S. Government Income Fund since
October 10, 2000. Prior to joining PIMCO in 1998, Mr. Mather was associated with
Goldman Sachs Funds Management, LP, where he was a trader in the fixed income
division and specialized in structuring and trading a broad range of
mortgage-backed securities as well as managing proprietary derivatives
positions. PIMCO has served as sub-adviser to PACE Government Securities Fixed
Income Fund since the Fund commenced operations on August 24, 1995 and has
served as sub-adviser to U.S. Government Income Fund since October 10, 2000.

ADVISORY FEES AND FUND EXPENSES

PACE Government Securities Fixed Income Fund pays fees to Mitchell Hutchins
for management and administration services at the combined annual contract rate
of 0.70% of average daily net assets. This combined fee includes an annual
contract rate of 0.50% for investment management services and 0.20% for
administrative services, both expressed as a percentage of the Fund's average
daily net assets. During the fiscal year ended July 31, 2000, PACE Government
Securities Fixed Income Fund paid Mitchell Hutchins at the lower effective rate
of 0.66% of the Fund's average daily net assets because Mitchell Hutchins waived
a portion of its fee. U.S. Government Income Fund paid fees to Mitchell Hutchins
for investment management and administration services for the Fund's most recent
fiscal year at the annual rate of 0.50% of the Fund's average daily net assets.

18
<PAGE>
The management and administrative services fees paid by PACE Government
Securities Fixed Income Fund are greater than the management and administrative
services fees paid by U.S. Government Income Fund, and the overall operating
expenses of each class of shares of PACE Government Securities Fixed Income Fund
are higher than the current overall operating expenses of the corresponding
class of shares of U.S. Government Income Fund. However, Mitchell Hutchins
expects that the shareholders of the post-merger combined Fund will be subject
to total annual operating expenses that are no higher than the expenses
currently paid by shareholders of the corresponding class of shares of U.S.
Government Income Fund because of a written management fee waiver and expense
reimbursement agreement between PACE Government Securities Fixed Income Fund and
Mitchell Hutchins. That agreement becomes effective if the Reorganization takes
place and will remain in effect until December 1, 2002. If the management fee
waiver and expense reimbursement agreement is not renewed after December 1,
2002, the combined Fund will have overall operating expenses for each class of
shares that are higher than the current expenses of U.S. Government Income Fund.

ADDITIONAL INFORMATION ABOUT THE REORGANIZATION

REASONS FOR THE REORGANIZATION

Managed Investments Trust's Board approved the proposed Reorganization at a
meeting held on October 6, 2000. For the reasons described more fully below, the
Board and Mitchell Hutchins believe that U.S. Government Income Fund's
shareholders will benefit from the Reorganization because the combined Fund
would have a larger asset base, which should provide greater opportunities for
diversifying investments and realizing economies of scale. In addition, the
Board and Mitchell Hutchins believe that operating two funds that offer
significantly similar investments and similar management would result in higher
expenses and less efficient operations than a single fund that combines the
assets of the two original funds.

At the meeting of Managed Investments Trust's Board on October 6, 2000 and
in a series of prior meetings and presentations, Mitchell Hutchins explained to
the Board that it had undertaken an extensive review of whether the best
interests of shareholders of a number of PaineWebber funds, including U.S.
Government Income Fund, would be served by continuing to operate the funds under
their current arrangements. For U.S. Government Income Fund, Mitchell Hutchins'
review included a possible restructuring of the Fund's investment management
arrangements and a possible reorganization into another PaineWebber fund.

Mitchell Hutchins noted that U.S. Government Income Fund and PACE Government
Securities Fixed Income Fund have similar investment objectives and that both
Funds invest primarily in U.S. government bonds. Mitchell Hutchins stated its
belief that the Reorganization would likely benefit U.S. Government Income
Fund's shareholders because the larger asset base of the combined Fund could
give the combined Fund greater opportunities to diversify investments and
realize greater economies of scale. Mitchell Hutchins noted that the investment
management and administrative services fees currently paid by PACE Government
Securities Fixed Income Fund are greater than those currently paid by U.S.
Government Income Fund. However, Mitchell Hutchins informed the Board that it
had entered into a written agreement with PACE Government Securities Fixed
Income Fund that becomes effective if the Reorganization takes place. Under that
agreement, Mitchell Hutchins will waive its management fee and reimburse the
Fund to the extent that its total annual operating expenses for each class of
shares through December 1, 2002 otherwise would exceed the current overall
operating expenses of the corresponding class of shares of U.S. Government
Income Fund. Mitchell Hutchins explained that, as a result, it anticipated that
current shareholders of each class of shares of U.S. Government Income Fund who
will become shareholders of the combined Fund if the Reorganization is approved
will be subject to total annual operating expenses that are no higher than the
expenses they currently pay as shareholders of U.S. Government Income Fund
during the period of the waiver/reimbursement. (See "Comparative Fee Table"

19
<PAGE>
above for a more complete description of the fees and expenses of the Funds,
both before and after the Reorganization.)

Mitchell Hutchins then proposed immediate changes in the investment
management arrangements for U.S. Government Income Fund. Mitchell Hutchins
advised the Board of Managed Investments Trust that the proposed investment
management changes represented its judgment of the best management structure for
the Fund and believed that the changes would be more likely to help U.S.
Government Income Fund achieve its investment objective through better long-term
performance. Mitchell Hutchins noted its experience in selecting and monitoring
unaffiliated sub-advisers, particularly with respect to the various different
series of PACE Trust, all but one of which are managed by sub-advisers. Mitchell
Hutchins recommended to the Board of Managed Investments Trust that the same
sub-adviser that now manages the assets of PACE Government Securities Fixed
Income Fund -- PIMCO -- be retained on an interim basis to manage the assets of
U.S. Government Income Fund. After consideration of all the information
presented by Mitchell Hutchins, inquiries into the ability and resources of the
proposed sub-adviser to provide appropriate investment management services and
interviews with personnel of the proposed sub-adviser, Managed Investments
Trust's Board determined to implement the new investment management arrangements
effective October 10, 2000.

To implement the new investment management arrangements for U.S. Government
Income Fund, the Board of Managed Investments Trust, effective October 10, 2000,
terminated the existing investment advisory and administration contract between
the Fund and Mitchell Hutchins and approved a new interim contract with Mitchell
Hutchins and an interim sub-advisory contract between Mitchell Hutchins and
PIMCO. Under the Interim Management and Administration Contract ("Interim
Management Contract"), Mitchell Hutchins serves as investment manager for U.S.
Government Income Fund and provides portfolio management oversight as opposed to
direct management of the Fund's investments. Mitchell Hutchins provides
portfolio management oversight principally by performing initial reviews of
prospective sub-advisers and supervising and monitoring the performance of the
sub-advisers thereafter. The Interim Management Contract and interim
sub-advisory contract will terminate on the earlier of 150 days from their
effective date or the Closing Date of the Reorganization.

Mitchell Hutchins then reminded the Board that, once the new investment
management arrangements were in place, U.S. Government Income Fund and PACE
Government Securities Fixed Income Fund would be managed in a similar manner.
Mitchell Hutchins noted its belief that operating two funds that offer
significantly similar investments and similar management would result in higher
expenses and less efficient operations than operating a single fund that
combines the assets of the two original funds. Mitchell Hutchins also stated its
belief that it would not be desirable from a marketing or administrative
perspective to maintain and distribute shares for two similar funds. Mitchell
Hutchins noted, moreover, that PACE Government Securities Fixed Income Fund has
the additional flexibility to change its sub-adviser or add additional
sub-advisers when Mitchell Hutchins and the Board of PACE Trust decide without
the cost or delay of needing first to obtain approval by a vote of the
shareholders of PACE Government Securities Fixed Income Fund.

Finally, Mitchell Hutchins reviewed with the Board of Managed Investments
Trust the principal terms of the Plan. Mitchell Hutchins informed the Board that
the Reorganization would be tax-free to U.S. Government Income Fund and its
shareholders, that shareholders of the combined Fund after the Reorganization
could continue to exchange into other PaineWebber open-end funds without having
to pay an additional sales load should their investment priorities change, and
that no sales charges would be imposed on any PACE Government Securities Fixed
Income Fund shares issued in connection with the Reorganization. Furthermore,
Mitchell Hutchins informed the Board of Managed Investments Trust that, for
purposes of calculating the contingent deferred sales charge, the holding period
for the Class B and Class C shares distributed to Class B and Class C
shareholders of U.S. Government Income Fund would include the holding period for
the shares of U.S. Government Income Fund and any other PaineWebber fund shares
of the same class that were exchanged for shares of U.S. Government Income Fund.

20
<PAGE>
As part of its considerations, the Board of Managed Investments Trust
examined 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 likely
impact of the Reorganization on the expense ratio of PACE Government Securities
Fixed Income Fund and that expense ratio relative to U.S. Government Income
Fund's current expense ratio; (4) that Mitchell Hutchins would bear the costs of
the Reorganization; (5) the compatibility of the Funds' portfolio holdings and
the effect on U.S. Government Income Fund and its shareholders of any
realignment of its portfolio in connection with the Reorganization; (6) the tax
consequences of the Reorganization; (7) the potential benefits of the
Reorganization to other persons, including Mitchell Hutchins and its affiliates;
(8) Mitchell Hutchins' assessment that the proposed Reorganization will be
beneficial to the shareholders of U.S. Government Income Fund and will not
dilute their interests; (9) the advisory arrangements in place for the Funds and
the level and quality of investment advisory services provided or to be provided
by Mitchell Hutchins and PIMCO; and (10) the terms of the proposed Plan.

On the basis of the information provided to it and its evaluation of that
information, the Board of Managed Investments Trust, including a majority of its
Independent Trustees, determined that the Reorganization would be in the best
interests of U.S. Government Income Fund and that the interests of existing U.S.
Government Income Fund shareholders would not be diluted as a result of the
Reorganization. THEREFORE, THE BOARD OF MANAGED INVESTMENTS TRUST UNANIMOUSLY
APPROVED THE REORGANIZATION AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE
SHAREHOLDERS OF U.S. GOVERNMENT INCOME FUND AT THE MEETING.

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 the form of which is attached as Appendix A to this Proxy
Statement/Prospectus.

The Plan contemplates (1) PACE Government Securities Fixed Income Fund's
acquiring on the Closing Date all the assets of U.S. Government Income Fund in
exchange solely for PACE Government Securities Fixed Income Fund shares and PACE
Government Securities Fixed Income Fund's assumption of all of U.S. Government
Income Fund's stated liabilities and (2) the distribution of those shares to
U.S. Government Income Fund shareholders. U.S. Government Income Fund'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"). PACE Government Securities Fixed Income Fund will assume from U.S.
Government Income Fund 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, and whether or not
specifically referred to in the Plan, but only to the extent disclosed or
provided for in U.S. Government Income Fund's most recent annual audited and
semi-annual unaudited financial statements, or incurred by U.S. Government
Income Fund subsequent to the date of those financial statements and disclosed
in writing to and accepted by PACE Trust (collectively, the "Liabilities"). U.S.
Government Income Fund agreed in the Plan to use its best efforts to discharge
all of its known Liabilities prior to the Effective Time.

The value of the Assets to be acquired, and the amount of the Liabilities to
be assumed, by PACE Government Securities Fixed Income Fund and the NAV per
share of each class of PACE Government Securities Fixed Income Fund shares will
be determined as of the close of regular trading on the NYSE on the Closing Date
("Valuation Time"), using the applicable valuation procedures described in PACE
Government Securities Fixed Income Fund's then-current Prospectus and SAI. These
procedures are identical to those used by U.S. Government Income Fund and
described in its current Prospectus and SAI.

21
<PAGE>
U.S. Government Income Fund's NAV will be the value of the Assets to be acquired
by PACE Government Securities Fixed Income Fund, less the amount of the
Liabilities, as of the Valuation Time.

On, or as soon as practicable after, the Closing Date, U.S. Government
Income Fund will distribute to its shareholders of record as of the Effective
Time the PACE Government Securities Fixed Income Fund shares it receives, by
class, so that each U.S. Government Income Fund shareholder will receive the
number of full and fractional shares of the corresponding class of PACE
Government Securities Fixed Income Fund equal in aggregate NAV to the
shareholder's shares in U.S. Government Income Fund. That distribution will be
accomplished by opening accounts on the books of PACE Government Securities
Fixed Income Fund in the names of U.S. Government Income Fund's shareholders and
crediting those accounts with the appropriate number of PACE Government
Securities Fixed Income Fund shares. Fractional shares of PACE Government
Securities Fixed Income Fund will be rounded to the third decimal place.

The NAV per share of PACE Government Securities Fixed Income Fund will not
change as a result of the Reorganization. Thus, the Reorganization will not
result in a dilution of any shareholder interest in either Fund. In addition,
Mitchell Hutchins (not the Funds) will bear the expenses of the Reorganization.
U.S. Government Income Fund will be terminated after the Reorganization.

The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan, some of which may be waived by either Fund. 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 the interests of U.S. Government Income Fund shareholders. If
the Reorganization is not approved by shareholders at the Meeting, U.S.
Government Income Fund will continue to operate as a series of Managed
Investments Trust, and its Board will then consider other options and
alternatives for the future of the Fund, including the liquidation of the Fund,
resubmitting this proposal for shareholder approval or other appropriate action.

DESCRIPTION OF SECURITIES TO BE ISSUED

PACE Government Securities Fixed Income Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $0.001 per share.
The Fund's shares are divided into five classes, designated Class A, Class B,
Class C, Class Y and Class P shares. Class P shares are not involved in the
Reorganization. A share of each class of PACE Government Securities Fixed Income
Fund represents an identical interest in the Fund's investment portfolio and has
the same rights, privileges and preferences. Each share of the Fund is entitled
to participate equally in dividends and other distributions of the Fund, except
that dividends and other distributions will appropriately reflect expenses
allocated to a particular class. Shares of the Fund entitle their holders to one
vote per full share and fractional votes for fractional shares held. PACE Trust
does not hold annual meetings. Shares of the Fund generally are voted together,
except that only the shareholders of a particular class of the Fund may vote on
matters affecting only that class, such as the terms of a Rule 12b-1 plan as it
relates to the class. Shares of each series of PACE Trust will be voted
separately, except when an aggregate vote of all the series is required by law.

TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS

Certain fundamental investment restrictions of U.S. Government Income Fund,
which prohibit it from acquiring more than a stated percentage of ownership of
another company, might be construed as restricting its ability to carry out the
Reorganization. By approving the Plan, you agree to waive, only for the purpose
of the Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.

FEDERAL INCOME TAX CONSIDERATIONS

The Reorganization is intended to be a tax-free reorganization within the
meaning of section 368(a)(1) of the Code. Managed Investments Trust and PACE
Trust each will receive an opinion of

22
<PAGE>
Kirkpatrick & Lockhart LLP, counsel to Managed Investments Trust and tax counsel
to PACE Trust, substantially to the following effect:

(1) PACE Government Securities Fixed Income Fund's acquisition of the
Assets in exchange solely for its shares and its assumption of the
Liabilities, followed by U.S. Government Income Fund's distribution of those
shares PRO RATA to its shareholders constructively in exchange for their
U.S. Government Income Fund shares, will qualify as a reorganization within
the meaning of section 368(a)(1) of the Code, and each Fund will be "a party
to a reorganization" within the meaning of section 368(b) of the Code;

(2) U.S. Government Income Fund will recognize no gain or loss on its
transfer of the Assets to PACE Government Securities Fixed Income Fund in
exchange solely for PACE Government Securities Fixed Income Fund shares and
PACE Government Securities Fixed Income Fund's assumption of the Liabilities
or on the subsequent distribution of those shares to U.S. Government Income
Fund's shareholders in constructive exchange for their U.S. Government
Income Fund shares;

(3) PACE Government Securities Fixed Income Fund will recognize no gain
or loss on its receipt of the Assets in exchange solely for its shares and
its assumption of the Liabilities;

(4) PACE Government Securities Fixed Income Fund's basis in the Assets
will be the same as U.S. Government Income Fund's basis therein immediately
before the Reorganization, and PACE Government Securities Fixed Income
Fund's holding period for the Assets will include U.S. Government Income
Fund's holding period therefor;

(5) A U.S. Government Income Fund shareholder will recognize no gain or
loss on the constructive exchange of all its U.S. Government Income Fund
shares solely for PACE Government Securities Fixed Income Fund shares
pursuant to the Reorganization; and

(6) A U.S. Government Income Fund shareholder's aggregate basis in the
PACE Government Securities Fixed Income Fund shares it receives in the
Reorganization will be the same as the aggregate basis for its U.S.
Government Income Fund shares it constructively surrenders in exchange for
those PACE Government Securities Fixed Income Fund shares, and its holding
period for those PACE Government Securities Fixed Income Fund shares will
include its holding period for those U.S. Government Income Fund shares,
provided the shareholder holds them as capital assets 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 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 PACE Government Securities Fixed Income Fund after the
Reorganization of any pre-Reorganization capital losses realized by U.S.
Government Income Fund could be subject to limitation in future years under the
Code.

You should consult your tax adviser regarding the effect, if any, of the
Reorganization in light of your individual circumstances. Because the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, you also should consult your tax adviser as to state and local
tax consequences, if any, of the Reorganization.

REQUIRED VOTE

The proposal to approve the Plan requires the affirmative vote of the lesser
of (1) 67% or more of the shares of U.S. Government Income Fund present at the
Meeting, if more than 50% of the outstanding shares are represented at the
Meeting in person or by proxy, or (2) more than 50% of the outstanding shares
entitled to vote at the Meeting.

23
<PAGE>
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.

-------------------

ORGANIZATION OF THE FUNDS

PACE Government Securities Fixed Income Fund commenced operations on August
24, 1995 as a diversified series of PACE Trust. PACE Trust was formed as a
Delaware business trust on September 9, 1994, and is registered under the 1940
Act as an open-end management investment company. The operations of PACE Trust,
as a Delaware business trust, are governed by its Trust Instrument, By-Laws and
Delaware law.

U.S. Government Income Fund commenced operations on August 31, 1984 and is a
diversified series of Managed Investments Trust. Managed Investments Trust was
organized as a Massachusetts business trust on November 21, 1986, and is
registered under the 1940 Act as an open-end management investment company. The
operations of Managed Investments Trust, as a Massachusetts business trust, are
governed by its Declaration of Trust, By-Laws and Massachusetts law.

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand
PACE Government Securities Fixed Income Fund's financial performance for the
periods shown. The table shows information for the Fund's Class P shares because
they were the only class of shares outstanding during the periods shown. 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 the Fund, assuming reinvestment of all dividends
and distributions. This information has been audited by Ernst & Young LLP,
independent auditors for PACE Government Securities Fixed Income Fund, whose
report, along with the Fund's financial statements, is included in the Fund's
Annual Report to Shareholders, dated July 31, 2000, which may be obtained
without charge by calling 1-800-647-1568.

24
<PAGE>

<TABLE>
<CAPTION>
PACE
GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
--------------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 12.10 $ 12.59 $ 12.61 $ 12.07 $ 12.00
-------- -------- -------- -------- -------
Net investment income...................................... 0.73 0.68 0.72 0.64 0.49
Net realized and unrealized gains (losses) from
investments, options and futures......................... 0.01 (0.43) 0.18 0.58 0.03
-------- -------- -------- -------- -------
Net increase from investment operations.................... 0.74 0.25 0.90 1.22 0.52
-------- -------- -------- -------- -------
Dividends from net investment income....................... (0.75) (0.71) (0.72) (0.63) (0.44)
Distributions from net realized gains from investments..... -- (0.03) (0.20) (0.05) (0.01)
-------- -------- -------- -------- -------
Total dividends and distributions.......................... (0.75) (0.74) (0.92) (0.68) (0.45)
-------- -------- -------- -------- -------
Net asset value, end of period............................. $ 12.09 $ 12.10 $ 12.59 $ 12.61 $ 12.07
======== ======== ======== ======== =======
Total investment return (1)................................ 6.36% 2.02% 7.39% 10.42% 4.35%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's).......................... $198,918 $191,719 $162,119 $101,606 $58,752
Expenses to average net assets, net of fee waivers and
expense reimbursements................................... 0.87%++ 0.87%++ 0.85% 1.57%++ 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements................................... 0.91%++ 0.93%++ 0.95% 1.70%++ 1.15%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements....................... 6.12%++ 5.49%++ 5.90% 5.44%++ 5.09%*
Net investment income to average net assets, before fee
waivers and expense reimbursements....................... 6.08%++ 5.43%++ 5.80% 5.31%++ 4.79%*
Portfolio turnover......................................... 585% 418% 353% 712% 978%
</TABLE>

-------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.

* Annualized.

++ Includes 0.02%, 0.01% and 0.72% of interest expense related to reverse
repurchase agreements during the years ended July 31, 2000, July 31, 1999
and July 31, 1997, respectively.

(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period 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 period reported. The figures do not
include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

25
<PAGE>
CAPITALIZATION

The following table shows the capitalization of each of U.S. Government
Income Fund and PACE Government Securities Fixed Income Fund as of July 31,
2000, and the PRO FORMA capitalization as of the same date, assuming that
shareholders of both U.S. Government Income Fund and PaineWebber Low Duration
U.S. Government Income Fund approve the reorganizations with PACE Government
Securities Fixed Income Fund:

<TABLE>
<CAPTION>
U.S. GOVERNMENT PACE GOVERNMENT SECURITIES PRO FORMA CLASS A COMBINED
INCOME FUND: FIXED INCOME FUND: PACE GOVERNMENT SECURITIES
CLASS A CLASS A FIXED INCOME FUND
--------------- -------------------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $205,845,006 $ 0 $312,387,473
Shares Outstanding................. 24,304,537 0 25,847,535
Net Asset Value Per Share.......... $ 8.47 $ 0 $ 12.09

<CAPTION>
U.S. GOVERNMENT PACE GOVERNMENT SECURITIES PRO FORMA CLASS B COMBINED
INCOME FUND: FIXED INCOME FUND: PACE GOVERNMENT SECURITIES
CLASS B CLASS B FIXED INCOME FUND
--------------- -------------------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $ 7,515,198 $ 0 $ 11,610,434
Shares Outstanding................. 887,146 0 960,669
Net Asset Value Per Share.......... $ 8.47 $ 0 $ 12.09

<CAPTION>
U.S. GOVERNMENT PACE GOVERNMENT SECURITIES PRO FORMA CLASS C COMBINED
INCOME FUND: FIXED INCOME FUND: PACE GOVERNMENT SECURITIES
CLASS C CLASS C FIXED INCOME FUND
--------------- -------------------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $ 15,913,817 $ 0 $ 65,502,560
Shares Outstanding................. 1,880,778 0 5,419,807
Net Asset Value Per Share.......... $ 8.46 $ 0 $ 12.09

<CAPTION>
U.S. GOVERNMENT PACE GOVERNMENT SECURITIES PRO FORMA CLASS Y COMBINED
INCOME FUND: FIXED INCOME FUND: PACE GOVERNMENT SECURITIES
CLASS Y CLASS Y FIXED INCOME FUND
--------------- -------------------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $ 8,810,698 $ 0 $ 9,668,860
Shares Outstanding................. 1,041,269 0 800,020
Net Asset Value Per Share.......... $ 8.46 $ 0 $ 12.09

<CAPTION>
U.S. GOVERNMENT PACE GOVERNMENT SECURITIES PRO FORMA CLASS P COMBINED
INCOME FUND: FIXED INCOME FUND: PACE GOVERNMENT SECURITIES
CLASS P CLASS P FIXED INCOME FUND
--------------- -------------------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $ 0 $198,918,021 $198,918,021
Shares Outstanding................. 0 16,458,856 16,458,856
Net Asset Value Per Share.......... $ 0 $ 12.09 $ 12.09
</TABLE>

LEGAL MATTERS

Certain legal matters concerning the issuance of PACE Government Securities
Fixed Income Fund shares as part of the Reorganization will be passed upon by
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
counsel to PACE Trust. Certain legal matters concerning the tax consequences of
the Reorganization will be passed upon by Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, NW, Second Floor, Washington, DC 20036-1800.

26
<PAGE>
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

PACE Trust and Managed Investments Trust are each subject to the information
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith each files reports and other information with the SEC.
Reports, proxy statements, registration statements and other information may be
inspected without charge and copied at the Public Reference Room maintained by
the SEC at 450 Fifth Street, N.W., Washington, DC 20549, and at the following
regional offices of the SEC: 7 World Trade Center, Suite 1300, New York, NY
10048, and 500 West Madison Street, 14th floor, Chicago, IL 60661. Information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 1-202-942-8090. The SEC maintains an internet web site at http://www.sec.gov
that contains information regarding PACE Trust and Managed Investments Trust.
Copies of such material may also be obtained, after paying a duplicating fee,
from the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, DC, 20549, or by
electronic request at the following e-mail address: [email protected].

EXPERTS

The audited financial statements of U.S. Government Income Fund incorporated
by reference in the SAI have been audited by Ernst & Young LLP, independent
auditors, whose report thereon is included in U.S. Government Income Fund's
Annual Report to Shareholders for the fiscal year ended November 30, 1999. The
audited financial statements of PACE Government Securities Fixed Income Fund
incorporated by reference in the SAI for the fiscal year ended July 31, 2000,
have been audited by Ernst & Young LLP, independent auditors, whose report
thereon is included in PACE Government Securities Fixed Income Fund's Annual
Report to Shareholders for the fiscal year ended July 31, 2000. The financial
statements audited by Ernst & Young LLP have been incorporated by reference in
the SAI in reliance on its report given on its authority as experts in auditing
and accounting.

OTHER INFORMATION

SHAREHOLDER PROPOSALS. As a general matter, Managed Investments Trust does
not hold annual or other regular meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of U.S.
Government Income Fund's shareholders should send such proposals to U.S.
Government Income Fund at 51 West 52nd Street, New York, New York 10019-6114.
Proposals must be received a reasonable period of time prior to any meeting to
be included in the proxy material or otherwise considered. Moreover,
consideration of such proposals is subject to limitations under the federal
securities laws. Persons named as proxies for any subsequent shareholders'
meeting will vote in their discretion with respect to proposals submitted on an
untimely basis.

OTHER BUSINESS. Managed Investments Trust's management knows of no other
business to be presented to the Meeting other than the matters set forth in this
Proxy Statement/Prospectus, but should any other matter requiring a vote of U.S.
Government Income Fund's shareholders arise, the proxies will vote thereon
according to their best judgment in the interests of the Fund.

27
<PAGE>
APPENDIX A

FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION

THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of , 2001, by and among PaineWebber PACE Select Advisors Trust, a
Delaware business trust ("PACE Trust"), on behalf of PACE Government Securities
Fixed Income Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Managed Investments Trust, a Massachusetts
business trust ("Target Trust"), on behalf of PaineWebber U.S. Government Income
Fund, a series thereof ("Target"), and solely for purposes of paragraph 7.2
hereof, Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
(Acquiring Fund and Target are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and PACE Trust and Target Trust 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 or Target are made and shall be taken or undertaken by PACE Trust
or Target Trust, respectively.

The Investment Companies wish to effect a reorganization described in
section 368(a)(1) of the Internal Revenue Code of 1986, as amended ("Code"), and
intend this Agreement to be, and adopt it as, 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 in Acquiring
Fund and the assumption by Acquiring Fund of Target's stated liabilities,
followed by the constructive distribution of those shares PRO RATA to the
holders of shares of beneficial interest in Target ("Target Shares") in exchange
therefor, all on the terms and conditions set forth herein. The foregoing
transactions are referred to herein collectively as the "Reorganization."

The Target Shares are divided into four classes, designated Class A,
Class B, Class C, and Class Y shares ("Class A Target Shares," "Class B Target
Shares," "Class C Target Shares," and "Class Y Target Shares," respectively).
Acquiring Fund's shares are divided into five classes, four of which also are
designated Class A, Class B, Class C, and Class Y shares ("Class A Acquiring
Fund Shares," "Class B Acquiring Fund Shares," "Class C Acquiring Fund Shares,"
and "Class Y Acquiring Fund Shares," respectively, and collectively "Acquiring
Fund Shares"). Each class of Acquiring Fund Shares is substantially similar to
the identically designated class of Target Shares.

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) (i) Class A Acquiring Fund
Shares determined by dividing the net value of Target (computed as
set forth in paragraph 2.1) ("Target Value") attributable to the
Class A Target Shares by the net asset value ("NAV") of a Class A
Acquiring Fund Share (computed as set forth in paragraph 2.2),
(ii) Class B Acquiring Fund Shares determined by dividing the
Target Value attributable to the Class B Target Shares by the NAV
of a Class B Acquiring Fund Share (as so computed), (iii) Class C
Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class C Target Shares by the NAV of a Class C
Acquiring Fund Share (as so computed), and (iv) Class Y Acquiring
Fund Shares determined by dividing the Target Value attributable to
the Class Y Target Shares by the NAV of a Class Y Acquiring Fund
Share (as so computed), and

(b) to assume all of Target's stated liabilities described in paragraph
1.3 ("Liabilities").

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Such transactions shall take place at the Closing (as defined in
paragraph 3.1).

1.2. The Assets shall 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 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 all of Target's liabilities, debts,
obligations, and duties of whatever kind of nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.18, or otherwise disclosed in writing to
and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to use
its best efforts to discharge all its 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 its 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 PACE 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, by class (i.e., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective PRO RATA number of Class A Acquiring Fund Shares due that
Shareholder; the account for a Shareholder of Class B Target Shares shall be
credited with the respective PRO RATA number of Class B Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class C Target Shares
shall be credited with the respective PRO RATA number of Class C Acquiring Fund
Shares due that Shareholder; and the account for a Shareholder of Class Y Target
Shares shall be credited with the respective PRO RATA number of Class Y
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 as a series of Target Trust 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 on 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.

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 New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in Acquiring Fund's then-current prospectus

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and statement of additional information ("SAI"), less (b) the amount of the
Liabilities as of the Valuation Time.

2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.

2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of Mitchell Hutchins.

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 or about
February 2, 2001, 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 NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund Shares
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 Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that 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 after the Closing, does or will
conform to such information on Target's books immediately before the Closing.
Target Trust's custodian shall deliver at the Closing a certificate of an
authorized officer stating that the Assets held by the custodian will be
transferred to Acquiring Fund at, or arrangements for the transfer thereof to
Acquiring Fund will have been made on or before, the Effective Time.

3.3. Target Trust shall deliver to PACE Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder (rounded to the third decimal
place), all as of the Effective Time, certified by Target Trust's Secretary or
an Assistant Secretary thereof. PACE 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. PACE Trust shall issue and deliver a
confirmation to Target Trust evidencing the Acquiring Fund Shares to be credited
to Target at the Effective Time or provide evidence satisfactory to Target Trust
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 bills of sale, checks, assignments, stock certificates, receipts, or
other documents the other Investment Company or its counsel reasonably requests.

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 to PACE Trust, on behalf of Acquiring
Fund, as follows:

4.1.1. Target 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

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Restated Declaration of Trust ("Declaration of Trust") is on file with the
Secretary of the Commonwealth of Massachusetts;

4.1.2. Target Trust is duly registered as an open-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. Target is a duly established and designated series of Target
Trust;

4.1.4. 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 (except
securities that are subject to "securities loans" as referred to in section
851(b)(2) of the Code); and on delivery and payment for the Assets,
Acquiring Fund will acquire good and marketable title thereto;

4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("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 required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;

4.1.6. 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, Massachusetts law or any provision of the
Declaration of Trust or Target Trust's 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 otherwise disclosed in
writing to and accepted by PACE Trust;

4.1.7. Except as otherwise disclosed in writing to and accepted by PACE
Trust, all material contracts and other commitments of or applicable to
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;

4.1.8. Except as otherwise disclosed in writing to and accepted by PACE
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target
Trust's knowledge) threatened against Target Trust with respect to Target or
any of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the conduct
of its business; and Target Trust 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;

4.1.9. 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 Target Trust's board of trustees, 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,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;

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4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;

4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 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 Trust, except for (a) the filing with the
Securities and Exchange Commission ("SEC") of a registration statement by
PACE 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;

4.1.12. On the effective date of the Registration Statement, at the time
of the Meeting (as defined 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 PACE Trust for use therein;

4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business; and there are no Liabilities other than liabilities
disclosed or provided for in Target Trust's financial statements referred to
in paragraph 4.1.18, or otherwise disclosed to and accepted by PACE Trust,
none of which has been materially adverse to the business, assets, or
results of Target's operations;

4.1.14. Target is a "fund" as defined in section 851(g)(2) of the Code;
it 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; the Assets will be invested at
all times through the Effective Time in a manner that ensures compliance
with the foregoing; and Target has no earnings and profits accumulated in
any taxable year in which the provisions of Subchapter M did not apply to
it;

4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);

4.1.16. 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;

4.1.17. 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 November 30, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid;

4.1.18. Target Trust's audited financial statements for the year ended
November 30, 1999, and unaudited financial statements for the six months
ended May 31, 2000, to be delivered to PACE Trust, fairly represent Target's
financial position as of each such date and the results of its operations
and changes in its net assets for the periods then ended; and

4.1.19. Target's management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) 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 (ii) 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, (b) does not anticipate dispositions of those Acquiring Fund
Shares at the time of or soon after the Reorganization to exceed the usual
rate and

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frequency of dispositions of shares of Target as a series of an open-end
investment company, (c) expects that the percentage of Shareholder
interests, if any, that will be disposed of as a result of or at the time of
the Reorganization will be DE MINIMIS, and (d) does not anticipate that
there will be extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization.

4.2. Acquiring Fund represents and warrants to Target Trust, on behalf of
Target, as follows:

4.2.1. PACE Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware; and its
Certificate of Trust, including any amendments thereto ("Certificate of
Trust"), has been duly filed in the office of the Secretary of State
thereof;

4.2.2. PACE 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
PACE 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, including the receipt of
consideration in exchange therefor in excess of the par value thereof, 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
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, Delaware law or any provision of
PACE Trust's Certificate of Trust, Trust Instrument (including any
amendments thereto) ("Trust Instrument"), or 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 otherwise disclosed in writing to and accepted by Target Trust;

4.2.8. Except as otherwise disclosed in writing to and accepted by
Target Trust, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to PACE
Trust's knowledge) threatened against PACE 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 PACE Trust 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 PACE Trust's board of trustees (together with Target Trust's board
of trustees, 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, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to or
affecting creditors' rights and to general principles of equity;

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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 PACE 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 Meeting, 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 Target Trust 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 or any person "related" (within the meaning
of section 1.368-1(e)(3) of the Regulations) thereto 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) will 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; in addition,
Acquiring Fund (c) has no plan or intention to sell or otherwise dispose of
any of the Assets, except for dispositions made in the ordinary course of
that business and dispositions necessary to maintain its status as a RIC and
(d) expects to retain substantially all the Assets in the same form as it
receives them in the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes necessary to
make dispositions thereof to maintain such status;

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;

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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 July 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and

4.2.19. PACE Trust's audited financial statements for the year ended
July 31, 2000, to be delivered to Target Trust, 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.

4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, 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. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;

4.3.3. 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;

4.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;

4.3.5. 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 in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend 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) after the date of this Agreement will be included as
assets held thereby immediately before the Reorganization;

4.3.6. 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;

4.3.7. 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

4.3.8. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those 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) ("Reorganization Expenses").

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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 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 any 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 ("Meeting").

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 PACE Trust in obtaining
information PACE 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 PACE 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 assignments and other instruments, and will take or cause to be
taken further action, 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.

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 state
securities laws it deems 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

A-9
<PAGE>
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 the Declaration of Trust and Target Trust's
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 Trust shall have received an opinion of Willkie Farr & Gallagher
("Willkie Farr") substantially to the effect that:

6.4.1. Acquiring Fund is a duly established series of PACE Trust, a
business trust duly organized, validly existing, and in good standing under
the laws of the State of Delaware, with power under its Certificate of Trust
and Trust Instrument to own all its properties and assets and, to the
knowledge of Willkie Farr, to carry on its business as presently conducted;

6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PACE Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target Trust on
behalf of Target, is a valid and legally binding obligation of PACE Trust
with respect to Acquiring Fund, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to 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 and the receipt of consideration in exchange
therefor in excess of the par value thereof, 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 PACE Trust's Certificate of Trust, Trust Instrument, or By-Laws or
any provision of any agreement (known to Willkie Farr, without any
independent inquiry or investigation) to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
Willkie Farr, 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 PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound, except as set forth in
such opinion or as otherwise disclosed in writing to and accepted by Target
Trust;

A-10
<PAGE>
6.4.5. To the knowledge of Willkie Farr (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by PACE
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. PACE Trust is registered with the SEC as an investment company,
and to the knowledge of Willkie Farr no order has been issued or proceeding
instituted to suspend such registration; and

6.4.7. To the knowledge of Willkie Farr (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 PACE Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and
(b) PACE 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 Trust.

In rendering such opinion, Willkie Farr may (1) rely (i) as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, and (ii) as to certain factual matters, on a certificate of PACE Trust,
(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 knowledge of attorneys then with
Willkie Farr who have devoted substantive attention to matters directly related
to this Agreement and the Reorganization.

6.5. PACE Trust shall have received an opinion of Kirkpatrick & Lockhart LLP
("K&L") substantially to the effect that:

6.5.1. Target is a duly established series of Target Trust, a Business
Trust duly organized and validly existing under the laws of the Commonwealth
of Massachusetts with power under the Declaration of Trust to own all its
properties and assets and, to the knowledge of K&L, to carry on its business
as presently conducted;

6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PACE Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of
Target Trust with respect to Target, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to or
affecting creditors' rights and to 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 the Declaration of Trust or Target Trust's By-Laws or any provision
of any agreement (known to K&L, without any independent inquiry or
investigation) to which Target Trust (with respect to Target) is a party or
by which it is bound or (to the knowledge of K&L, 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 Trust (with respect to Target) is a party or by which it is
bound, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by PACE Trust;

6.5.4. To the knowledge of K&L (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 Trust
on behalf of 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;

A-11
<PAGE>
6.5.5. Target Trust is registered with the SEC as an investment company,
and to the knowledge of K&L no order has been issued or proceeding
instituted to suspend such registration; and

6.5.6. To the knowledge of K&L (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 Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Target
Trust (with respect to 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 PACE Trust.

In rendering such opinion, K&L may (1) rely, as to certain factual matters, on a
certificate of Target Trust, (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
knowledge of attorneys then with K&L who 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 K&L,
addressed to and in form and substance reasonably satisfactory to it, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In rendering
the Tax Opinion, K&L may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement, which
K&L may treat as representations made to it, or in separate letters addressed to
K&L 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) 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 in the Assets will be the same as Target's
basis therein 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 in the Acquiring Fund Shares to
be received by it in the Reorganization will be the same as the aggregate
basis in 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 the
Shareholder held them as capital assets 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

A-12
<PAGE>
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.

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. The Reorganization Expenses will be borne by Mitchell Hutchins.

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 before 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
before 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 July 1, 2001; 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 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 on in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.

11. MISCELLANEOUS

11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; 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. PACE Trust acknowledges that Target Trust is a Business Trust. This
Agreement is executed by Target Trust on behalf of Target and by its trustees
and/or officers in their capacities as such, and not individually. Target
Trust's obligations under this Agreement are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Target's assets and property; and a trustee of Target
Trust shall not be personally liable hereunder to PACE Trust or its trustees or
shareholders for any act, omission, or obligation of Target Trust or any other
trustee thereof.

A-13
<PAGE>
PACE Trust agrees that, in asserting any rights or claims under this Agreement
on behalf of Acquiring Fund, it shall look only to Target's assets and property
in settlement of such rights or claims and not to such trustees, officers, or
shareholders.

11.4. A trustee of PACE Trust shall not be personally liable hereunder to
Target Trust or its trustees or shareholders for any act, omission, or
obligation of PACE Trust or any other trustee thereof. Target Trust agrees that,
in asserting any claim against PACE 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 PACE 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.

<TABLE>
<S> <C> <C>
PAINEWEBBER MANAGED INVESTMENTS TRUST,
acting on behalf of its series,
PaineWebber U.S. Government Income Fund

By:
......................................

PAINEWEBBER PACE SELECT ADVISORS TRUST,
acting on behalf of its series, PACE
Government Securities Fixed Income
Investments

By:
......................................

Solely with respect to paragraph 7.2
hereof:

MITCHELL HUTCHINS ASSET MANAGEMENT INC.

By:
......................................
</TABLE>

A-14
<PAGE>
APPENDIX B

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of the Record Date, the following shareholder owned beneficially or of
record 5% or more of the Class Y shares of U.S. Government Income Fund. Mitchell
Hutchins did not know of any other person who owned beneficially or of record 5%
or more of any class of either Fund's outstanding equity securities as of the
Record Date.

The percent beneficial ownership of the combined PACE Government Securities
Fixed Income Fund assumes that shareholders of both U.S. Government Income Fund
and PaineWebber Low Duration U.S. Government Income Fund approve the
reorganizations with PACE Government Securities Fixed Income Fund.

U.S. GOVERNMENT INCOME FUND

<TABLE>
<CAPTION>
PRO FORMA
PERCENT BENEFICIAL
PERCENT BENEFICIAL OWNERSHIP OF COMBINED
OWNERSHIP OF U.S. PACE GOVERNMENT SECURITIES
SHAREHOLDER'S NAME/ADDRESS GOVERNMENT INCOME FUND FIXED INCOME FUND
-------------------------- ---------------------- --------------------------
<S> <C> <C>
Northern Trust Company as Trustee FBO 62.77% 57.69%
PaineWebber 401(k) Plan (Class Y Shares) (Class Y Shares)
c/o Mitchell Hutchins Asset Management
Inc.
51 West 52nd Street
New York, New York 10019-6114
</TABLE>

B-1
<PAGE>
APPENDIX C

MANAGEMENT'S DISCUSSION OF PACE GOVERNMENT SECURITIES FIXED INCOME FUND'S
PERFORMANCE

THE DISCUSSION BELOW WAS TAKEN FROM PACE GOVERNMENT SECURITIES FIXED INCOME
FUND'S ANNUAL REPORT FOR ITS FISCAL YEAR ENDED JULY 31, 2000. THIS DISCUSSION
HAS NOT BEEN REVISED TO REFLECT SUBSEQUENT CHANGES WHICH ARE DISCUSSED ABOVE IN
THE PROXY STATEMENT/PROSPECTUS.

ADVISER: Pacific Investment Management Company LLC (PIMCO)

PORTFOLIO MANAGER: Scott Mather

OBJECTIVE: Current income

INVESTMENT PROCESS: The Portfolio invests primarily in mortgage-backed
securities along with U.S. government and agency securities of varying
maturities. The Portfolio's dollar-weighted average duration ranges between one
and seven years. (Duration is a measure of a bond portfolio's sensitivity to
interest-rate changes.) PIMCO establishes duration targets based on its
expectations for changes in interest rates, then positions the Portfolio to take
advantage of yield curve shifts. Securities are chosen for their value relative
to other equivalent securities.

AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00

<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 3 YEARS SINCE INCEPTION 8/24/95
-------- ------ ------- -----------------------
<S> <C> <C> <C> <C>
With PACE program fee*........ 4.37% 4.77% 3.66% 4.56%
Without PACE program fee...... 5.15% 6.36% 5.23% 6.14%
Lehman Brothers Mortgage
Backed Securities Index..... 5.24% 6.43% 5.54% 6.56%
Lipper Intermediate U.S.
Government Funds Median..... 4.58% 4.69% 4.49% 5.40%
</TABLE>

-------------------

* The maximum annual PACE program fee is 1.5% of the value of PACE assets.

Past performance does not predict future performance. The return and
principal value of an investment will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Performance
results assume reinvestment of all dividends and capital gains. Total returns
for periods of one year or less are cumulative.

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PORTFOLIO AND THE
LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO WITHOUT FEE PORTFOLIO WITH FEE* LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX
<S> <C> <C> <C>
Aug-95 $10,008 $10,005 $10,000
Sep-95 $10,050 $10,034 $10,088
Oct-95 $10,219 $10,190 $10,178
Nov-95 $10,343 $10,301 $10,294
Dec-95 $10,493 $10,437 $10,422
Jan-96 $10,552 $10,483 $10,501
Feb-96 $10,402 $10,321 $10,413
Mar-96 $10,354 $10,260 $10,376
Apr-96 $10,297 $10,191 $10,347
May-96 $10,301 $10,182 $10,317
Jun-96 $10,427 $10,294 $10,459
Jul-96 $10,435 $10,289 $10,498
Aug-96 $10,460 $10,301 $10,498
Sep-96 $10,627 $10,452 $10,673
Oct-96 $10,837 $10,645 $10,883
Nov-96 $11,012 $10,804 $11,038
Dec-96 $10,940 $10,720 $10,981
Jan-97 $10,993 $10,758 $11,062
Feb-97 $11,019 $10,770 $11,099
Mar-97 $10,927 $10,667 $10,994
Apr-97 $11,090 $10,813 $11,169
May-97 $11,185 $10,891 $11,278
Jun-97 $11,310 $11,000 $11,410
Jul-97 $11,522 $11,192 $11,625
Aug-97 $11,495 $11,151 $11,597
Sep-97 $11,624 $11,262 $11,744
Oct-97 $11,771 $11,391 $11,875
Nov-97 $11,827 $11,430 $11,914
Dec-97 $11,929 $11,514 $12,022
Jan-98 $12,034 $11,601 $12,141
Feb-98 $12,049 $11,601 $12,167
Mar-98 $12,089 $11,626 $12,218
Apr-98 $12,156 $11,676 $12,288
May-98 $12,252 $11,752 $12,369
Jun-98 $12,326 $11,809 $12,428
Jul-98 $12,374 $11,840 $12,491
Aug-98 $12,515 $11,960 $12,605
Sep-98 $12,624 $12,049 $12,757
Oct-98 $12,586 $11,998 $12,740
Nov-98 $12,623 $12,018 $12,804
Dec-98 $12,694 $12,071 $12,858
Jan-99 $12,796 $12,152 $12,950
Feb-99 $12,718 $12,063 $12,898
Mar-99 $12,804 $12,129 $12,985
Apr-99 $12,848 $12,156 $13,045
May-99 $12,782 $12,078 $12,972
Jun-99 $12,707 $11,992 $12,926
Jul-99 $12,625 $11,900 $12,839
Aug-99 $12,609 $11,871 $12,839
Sep-99 $12,804 $12,039 $13,047
Oct-99 $12,849 $12,066 $13,122
Nov-99 $12,863 $12,064 $13,129
Dec-99 $12,823 $12,011 $13,097
Jan-00 $12,769 $11,946 $12,983
Feb-00 $12,953 $12,103 $13,134
Mar-00 $13,119 $12,243 $13,277
Apr-00 $13,128 $12,236 $13,286
May-00 $13,093 $12,188 $13,293
Jun-00 $13,348 $12,410 $13,577
Jul-00 $13,427 $12,468 $13,664
</TABLE>

The graph depicts the performance of PACE Government Securities Fixed
Income Investments versus the Lehman Brothers Mortgage Backed Securities Index.
It is important to note that PACE Government Securities Fixed Income Investments
is a professionally managed portfolio while the Index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.

C-1
<PAGE>
ADVISER'S COMMENTS

Below-index duration, a measure of the Portfolio's sensitivity to interest
rate changes, was a positive for performance as intermediate- and short-term
rates rose during the period. An overweight in GNMA securities had a positive
impact on performance as GNMAs outperformed conventional mortgages because of
their "full faith and credit backing" from the Federal government. An
underweight in deep discount mortgages was a modest negative as these bonds
offered the best performing coupon for the period. Limited exposure to
yield-enhancing collateralized mortgage obligations (CMOs) added to returns, as
did the use of relatively high-yielding adjustable rate mortgages (ARMs).

PIMCO's secular outlook is bullish based on expectations of a slowing U.S.
economy, leading to anticipated maximum U.S. and global growth of three percent
over the next several years. While the tightening cycle by the Federal Reserve
Board (the "Fed") appears to be almost over, monetary policy will probably
remain restrictive until a slowdown is confirmed.

Prospects for mortgages remain favorable because of limited new supply and
reduced prepayment risk due to recent increases in mortgage rates. We intend to
target portfolio duration near the benchmark in anticipation of higher inflation
in the near term. To take advantage across the yield curve, however, the
Portfolio continues to hold a broader selection of maturities than the
benchmark. We also expect to reduce the overweight of GNMAs to a more neutral
position relative to conventional mortgages as relative value between these
sectors has become more balanced. We anticipate maintaining limited exposure to
well-structured CMOs to capture attractive yields. We also expect to continue
emphasizing ARMs as their relatively high yields should increase investor demand
and boost prices.

PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS -- PORTFOLIO STATISTICS

<TABLE>
<CAPTION>
CHARACTERISTICS* PORTFOLIO INDEX
---------------- --------- -----
<S> <C> <C>
Duration................................ 3.64 yrs 4.11 yrs
Maturity................................ 4.90 yrs 7.36 yrs
Average Coupon.......................... 6.65% 6.86%
Average Yield to Maturity............... 7.96% 7.58%
Average Quality......................... AAA AAA
Net Assets ($MM)........................ $ 198.9 $1,946.6
Number of Securities.................... 186 519
Bonds................................... 165% 100%
Liabilities in Excess of Other Assets... (65)% 0%

<CAPTION>
ASSET ALLOCATION* PORTFOLIO INDEX
----------------- --------- -----
Agency Mortgage Pass-Throughs. % 118.1 % 100.0
<S> <C> <C>
Collateralized Mortgages................ 31.7 --
U.S. Government......................... 2.5 --
Cash & Equivalents...................... 8.5 --
Corporate Obligations................... 1.5 --
Asset Backed............................ 2.8 --
Liabilities in Excess of Other Assets... (65.1) --
------- --------
Total................................... 100.0% 100.0%
</TABLE>

-------------------

* Weightings represent percentages of net assets as of July 31, 2000. The
Portfolio is actively managed and all holdings are subject to change.

C-2
<PAGE>

EVERY SHAREHOLDER'S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY

Please detach at perforation before mailing.

PROXY PAINEWEBBER U.S. GOVERNMENT INCOME FUND PROXY
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)

SPECIAL MEETING OF SHAREHOLDERS - JANUARY 25, 2001

THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER MANAGED
INVESTMENTS TRUST ("TRUST") ON BEHALF OF PAINEWEBBER U.S. GOVERNMENT INCOME
FUND, A SERIES OF THE TRUST. The undersigned hereby appoints as proxies
[_____________] and [_______], and each of them (with the power of substitution)
to vote for the undersigned all shares of beneficial interest of the undersigned
in PaineWebber U.S. Government Income Fund, a series of the Trust, 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 side of this proxy card. UNLESS
INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE
"FOR" THE PROPOSAL RELATING TO PAINEWEBBER U.S. GOVERNMENT INCOME FUND.

VOTE VIA THE INTERNET: https://vote.proxy-direct.com
VOTE VIA TELEPHONE:1-800-597-7836
CONTROL NUMBER: [999 9999 9999 999]

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

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Signature (if held jointly)

, 200
-------------------------------------- ---
Date
10740/PWU

PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.

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EVERY SHAREHOLDER'S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY

Please detach at perforation before mailing.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE PROPOSAL. PLEASE INDICATE YOUR
VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE: / /

1. Approval of the Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization and Termination that provides / / / / / /
for the reorganization of PaineWebber U.S.
Government Income Fund, a series of
PaineWebber Managed Investments Trust, into
PACE Government Securities Fixed Income
Investments, a series of PaineWebber PACE
Select Advisors Trust.

PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
10740/PWU
<PAGE>
YOUR PROXY VOTE IS IMPORTANT!

AND NOW YOU CAN VOTE YOUR PROXY

ON THE PHONE OR ON

THE INTERNET.

IT SAVES MONEY! Telephone and Internet voting saves
postage costs. Savings which can help to minimize
expenses.
[graphic]

IT SAVES TIME! Telephone and Internet voting is
instantaneous - 24 hours a day.

IT'S EASY! Just follow these simple steps:

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1. Read your proxy statement and have it at hand.
2. Call toll-free 1-800-597-7836 for automated instructions,
OR GO TO WEBSITE: HTTPS://VOTE.PROXY-DIRECT.COM.
3. Enter your 14 digit CONTROL NUMBER from your Proxy Card.
4. Follow the recorded or on-screen directions.
5. Do NOT mail your Proxy Card when you vote by phone or
internet.
6. If you have any questions regarding the meeting agenda or
the execution of your proxy, please call. 1-887-388-2844.
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