<PAGE>
PAINEWEBBER GROWTH FUND
(THE SOLE SERIES OF PAINEWEBBER OLYMPUS FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
December 27, 2000
Dear Shareholder,
The enclosed proxy statement and prospectus asks for your vote on a
proposal that will determine the future of PaineWebber Growth Fund.
We are seeking shareholder approval to merge Growth Fund into PACE Large
Company Growth Equity Investments ("PACE Fund"). If the merger is approved,
you will receive shares of the corresponding class of shares of the PACE Fund
in exchange for your Growth Fund shares, and Growth 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 Growth Fund.
Mitchell Hutchins is the investment manager for both Funds and has retained
Alliance Capital Management L.P. and State Street Global Advisors, two
unaffiliated firms, to manage each Fund's assets. The two Funds have similar
investment objectives and policies. Each Fund seeks capital appreciation. PACE
Large Company Growth Fund pursues its objective by investing primarily in
stocks of companies that are believed to have substantial potential for
capital growth and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. Growth Fund pursues its objective generally
by investing in stocks of larger capitalization companies that are believed to
have substantial potential for capital growth, but has the flexibility to
invest in companies having any market capitalization.
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 GROWTH FUND PROPOSED MERGER
QUESTIONS AND ANSWERS
On October 6, 2000, the Board of Trustees of PaineWebber Olympus Fund
("Olympus Fund"), on behalf of its sole series, PaineWebber Growth Fund
("Growth Fund"), unanimously approved the merger of Growth Fund into PACE
Large Company Growth Equity Investments ("PACE Large Company Growth Fund"), a
series of PaineWebber PACE Select Advisors Trust ("PACE Trust"). This merger,
however, can only occur if Growth 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 Olympus
Fund's Board believe that Growth Fund's shareholders will benefit from the
merger with PACE Large Company Growth Fund because the combined Fund would
have a larger asset base to invest, 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
similar investments and management would result in higher expenses and less
efficient operations than a single fund that combines the assets of the two
original funds.
Growth Fund and PACE Large Company Growth Fund have similar investment
objectives and policies in that both Funds seek capital appreciation and
generally invest in stocks of companies with larger market capitalizations.
PACE Large Company Growth Fund pursues its objective by investing primarily in
stocks of companies that are believed to have substantial potential for
capital growth and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. Similarly, Growth Fund pursues its objective
generally by investing in companies with larger market capitalizations that
are believed to have substantial potential for capital growth, but has the
flexibility to invest in companies having any market capitalization. (See
"Comparison of the Funds" on page 6 of the Combined Proxy Statement/Prospectus
for more information on the investment policies and risks of each Fund.)
Pursuant to sub-advisory contracts dated October 10, 2000, Mitchell
Hutchins has allocated Growth Fund's assets between the same two sub-
advisers -- Alliance Capital Management L.P. ("Alliance Capital") and State
Street Global Advisors ("SSgA") -- that are sub-advisers to PACE Large Company
Growth Fund. Each sub-adviser uses the same basic investment strategy for both
Funds. SSgA seeks to outperform the Russell 1000 Growth Index (before
deducting fees and expenses). Alliance Capital selects individual stocks and
other investments for each Fund based on its proprietary investment strategy.
As a result, the two Funds are now managed in a substantially 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 Large Company Growth Fund having a total value
equal to the total value of your Growth 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 Large Company Growth Fund issued in the merger will
otherwise have characteristics that are substantially identical to the
corresponding class of shares of Growth Fund.
IF I CURRENTLY ELECT TO RECEIVE MY GROWTH 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 LARGE COMPANY GROWTH FUND SHARES AFTER THE
MERGER?
Yes, your distribution choice will remain the same after the merger.
1
<PAGE>
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 Large Company Growth Fund shares, and that your basis for the PACE
Large Company Growth Fund shares you receive in the merger will be the same as
the basis for your Growth Fund shares.
Immediately prior to the merger, Growth 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 Growth Fund
shareholders. You should note, however, that both Funds must distribute by
December 31, 2000 their ordinary income for the calendar year ending
December 31, 2000 and 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 Growth Fund, if the merger
takes place, you can expect to receive two taxable distributions of ordinary
income and net capital gain, if any, within a short period of time. Because of
the relatively high portfolio turnover that has occurred for Growth Fund after
October 31, 2000 in connection with Alliance Capital's continuing realignment
of the Fund's assets under its management to reflect its proprietary
investment strategies, it is expected that the Fund's pre-merger distribution
of realized net capital gain may be substantial.
HOW WILL THE MERGER AFFECT FUND EXPENSES?
The management fee paid by PACE Large Company Growth Fund to Mitchell
Hutchins is greater than the management fee paid by Growth Fund. However, the
post-merger combined Fund is expected to have overall operating expenses that
are somewhat lower than the current operating expenses of Growth Fund because
of a written management fee waiver agreement between PACE Large Company Growth
Fund and Mitchell Hutchins, which will remain in effect through December 1,
2002. Absent that fee waiver, it is expected that the overall operating
expenses of the combined Fund would be somewhat higher for its Class A and
Class Y shares than the current expenses of Growth Fund. If the management fee
waiver agreement is not renewed after December 1, 2002, the combined Fund will
have overall operating expenses for its Class A and Class Y shares that are
higher than the current expenses of Growth Fund, assuming that the operating
expenses of the combined Fund remain the same. (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 LARGE COMPANY GROWTH FUND AND GROWTH FUND PERFORMED?
The following tables show the average annual total returns over several
time periods for each class of shares of Growth Fund and the Class P shares of
PACE Large Company Growth 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 both
these Funds because the current sub-advisers did not manage the assets of
Growth Fund during the periods shown and Alliance Capital was the sole sub-
adviser for PACE Large Company Growth Fund from November 10, 1997 until
October 10, 2000. Prior to November 10, 1997, a different sub-adviser managed
the assets of that Fund.
The table for Growth 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 Large Company Growth Fund reflects
the maximum annual PaineWebber PACESM Select Advisors Program fee of 1.50%
(which does not apply to shares received in the merger). A footnote to this
table shows the performance of PACE Large Company Growth 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.
2
<PAGE>
The different sales charges, expenses and program fees applicable to the
different classes of shares of the two Funds and the different time 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
Growth Fund are not subject to any sales charges or 12b-1 fees, they are most
comparable to the Class P shares of PACE Large Company Growth Fund. The
performance of Growth Fund's Class Y shares for the 1999 calendar year can
thus be compared to that of the Class P shares of PACE Large Company Growth
Fund before deduction of the PACESM Select Advisors Program fee, as shown in
the footnote to that Fund's table.
PACE LARGE COMPANY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS P RUSSELL 1000
(INCEPTION DATE) (8/24/95) GROWTH INDEX
---------------- --------- ------------
<S> <C> <C>
One Year................................................. 23.38% 33.16%
Life of Class............................................ 25.07% 31.22%
</TABLE>
----------------
* The above performance reflects the deduction of the maximum annual PACESM
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 25.25% for the
year ended December 31, 1999 and 26.96% for "Life of Class."
GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS A CLASS B* CLASS C CLASS Y
(INCEPTION DATE) (3/18/85) (7/1/91) (7/2/92) (8/26/91) S&P 500 INDEX
---------------- --------- -------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
One Year.................... 26.46% 26.35% 30.39% 32.86% 21.03%
Five Years.................. 24.27% 24.25% 24.43% 25.78% 28.54%
Ten Years................... 16.14% N/A N/A N/A 18.19%
Life of Class............... 16.52% 17.73% 18.23% 17.83% **
</TABLE>
----------------
* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the S&P 500 Index for the life of each
class were as follows: Class A --18.57%; Class B -- 20.30%; Class C --
21.25%; and Class Y -- 19.75%.
WHEN WILL THE PROPOSED MERGER OCCUR?
The Funds expect to merge in February 2001, assuming Growth Fund
shareholder approval at the special meeting scheduled to be held on February
1, 2001.
CAN I SELL OR EXCHANGE MY GROWTH FUND SHARES BEFORE THE MERGER?
If you do not wish to receive shares of PACE Large Company Growth Fund, you
are free to sell or exchange your Growth 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 Growth 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.
3
<PAGE>
PAINEWEBBER GROWTH FUND
(THE SOLE SERIES OF PAINEWEBBER OLYMPUS FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 1, 2001
----------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of PaineWebber Growth Fund ("Growth Fund"), the sole series of PaineWebber
Olympus Fund ("Olympus Fund"), will be held on February 1, 2001, at 1285
Avenue of the Americas, 14th Floor, New York, New York, 10019-6028, at
11:00 a.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 Growth Fund
into PACE Large Company Growth Equity Investments ("PACE Large Company
Growth Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE
Trust"). Pursuant to the Plan, Growth Fund will transfer all its assets
to PACE Large Company Growth Fund, which will assume all the stated
liabilities of Growth Fund, and PACE Trust will issue to each Growth
Fund shareholder the number of full and fractional shares of the
applicable class of PACE Large Company Growth 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 in
Growth Fund.
Shareholders of record as of the close of business on December 1, 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
Olympus Fund, or vote your share 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
Olympus Fund or by voting in person at the Meeting.
By Order of the Board of Trustees,
Dianne E. O'Donnell
SECRETARY
December 27, 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 PROPOSALS 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.
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
------------ ---------------
<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 Accounts........................ 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>
ii
<PAGE>
PAINEWEBBER GROWTH FUND
(THE SOLE SERIES OF PAINEWEBBER OLYMPUS FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
PACE LARGE COMPANY GROWTH EQUITY 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 27, 2000
----------------
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Growth Fund ("Growth Fund"), the sole series of PaineWebber
Olympus Fund ("Olympus Fund"), a Massachusetts business trust, to be held on
February 1, 2001, at 1285 Avenue of the Americas, 14th Floor, New York, New
York, 10019-6028, at 11:00 a.m., Eastern time (such meeting and any
adjournments thereof are referred to collectively as the "Meeting"). At the
Meeting, the shareholders of Growth Fund are being asked to consider and
approve the following proposal:
To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of Growth
Fund into PACE Large Company Growth Equity Investments ("PACE Large
Company Growth Fund"), a series of PaineWebber PACE Select Advisors
Trust ("PACE Trust"). Pursuant to the Plan, Growth Fund will transfer
all its assets to PACE Large Company Growth Fund, which will assume all
the stated liabilities of Growth Fund, and PACE Trust will issue to
each Growth Fund shareholder the number of full and fractional shares
of the applicable class of PACE Large Company Growth 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 Growth Fund.
A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF OLYMPUS FUND HAS UNANIMOUSLY
APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF GROWTH FUND AND ITS
SHAREHOLDERS. (Growth Fund and PACE Large Company Growth Fund sometimes are
referred to individually as a "Fund" and together as "Funds.")
Pursuant to the Plan, Growth Fund will transfer all its assets to PACE
Large Company Growth Fund, which will assume all the stated liabilities of
Growth Fund, and PACE Trust will issue to each Growth Fund shareholder the
number of full and fractional shares of beneficial interest in the applicable
class of PACE Large Company Growth 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 Growth Fund (the "Reorganization"). The value of each
Growth Fund shareholder's account with PACE Large Company Growth Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with Growth Fund immediately prior to the
Reorganization. As a result of the Reorganization, shareholders of
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.
<PAGE>
each class of shares of Growth Fund will become shareholders of the
corresponding class of shares of PACE Large Company Growth Fund. No sales
charges will be assessed on the shares of PACE Large Company Growth Fund
issued in connection with the Reorganization.
PACE Large Company Growth Fund is a diversified series of PACE Trust, which
is an open-end management investment company currently comprised of twelve
series. PACE Large Company Growth Fund's investment objective is capital
appreciation. The Fund seeks to achieve this investment objective by investing
primarily in stocks of companies that are believed to have substantial
potential for capital growth and that have total market capitalizations of
$4.0 billion or greater at the time of purchase. Mitchell Hutchins allocates
the Fund's assets between two sub-advisers.
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Growth Fund 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 27, 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 Large Company Growth
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 Growth Fund is included in its current Prospectus and SAI,
each dated December 1, 1999, 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 Growth Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000, are
available without charge by writing either Growth Fund or PACE Large Company
Growth Fund at the address shown above, or by calling 1-800-647-1568. The SEC
maintains an internet web site at http://www.sec.gov that contains information
regarding PACE Trust and Olympus Fund. 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.
ii
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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................ 5
COMPARISON OF THE FUNDS.................................................. 6
Investment Objectives.................................................. 6
Investment Policies.................................................... 6
Operations of PACE Large Company Growth 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 LARGE
COMPANY GROWTH FUND..................................................... 11
Flexible Pricing....................................................... 11
Buying Shares.......................................................... 15
Selling Shares......................................................... 15
Exchanging Shares...................................................... 16
Pricing and Valuation.................................................. 17
MANAGEMENT............................................................... 17
Investment Manager and Investment Adviser.............................. 17
Sub-Advisers........................................................... 18
Advisory Fees and Fund Expenses........................................ 18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION.......................... 18
Reasons for the Reorganization......................................... 18
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................................................ 23
FINANCIAL HIGHLIGHTS..................................................... 24
CAPITALIZATION........................................................... 25
LEGAL MATTERS............................................................ 26
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION............ 26
EXPERTS.................................................................. 26
OTHER INFORMATION........................................................ 26
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 Large Company Growth Fund's
Performance............................................................. C-1
</TABLE>
iii
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Growth Fund, the sole series of Olympus Fund, 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 Growth 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 Growth 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 Olympus Fund ("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. Olympus Fund intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December 27,
2000. Shareholders of record as of the close of business on December 1, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date,
Growth Fund had 18,101,574 shares issued and outstanding, consisting of
12,806,037 Class A shares, 2,297,078 Class B shares, 1,673,273 Class C shares,
and 1,325,186 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.
Olympus Fund has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the
Meeting. Olympus Fund expects to solicit proxies by mail, telephone and via
the internet. Olympus Fund 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 $48,500 for
proxy solicitation services. Olympus Fund 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
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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, Olympus Fund's Board believes that
the proposed Reorganization will benefit Growth Fund's shareholders.
THE PROPOSED REORGANIZATION
The Boards of PACE Trust and Olympus Fund, 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 Large Company Growth Fund of all of Growth Fund's assets in exchange
for PACE Large Company Growth Fund shares and the assumption by PACE Large
Company Growth Fund of all of Growth Fund's stated liabilities. Growth Fund
will then distribute the PACE Large Company Growth Fund shares to Growth
Fund's shareholders, by class, so that each Growth Fund shareholder will
receive the number of full and fractional shares of the corresponding class of
PACE Large Company Growth Fund equal in aggregate NAV to the aggregate NAV of
the shares of Growth 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 23, 2001, or on such later date as the conditions to
consummation of the Reorganization are satisfied ("Closing Date"). Growth Fund
will be terminated as soon as is practicable after the Closing Date, and it is
expected that Olympus Fund will be de-registered as an investment company. See
"Additional Information About the Reorganization," below.
Olympus Fund 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 Growth 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 Growth 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 Olympus Fund
has determined that the Reorganization is in the best interests of Growth Fund
and that the interests of existing Growth Fund shareholders will not be
diluted as a result of the Reorganization. ACCORDINGLY, OLYMPUS FUND'S BOARD
UNANIMOUSLY RECOMMENDS APPROVAL OF THE REORGANIZATION.
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COMPARATIVE FEE TABLE
The table below describes the fees and expenses that you would pay if you
buy and hold Growth Fund shares or PACE Large Company Growth Fund shares
before the Reorganization and PACE Large Company Growth 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
Large Company Growth Fund and for the fiscal year ended August 31, 2000 for
Growth Fund. The PRO FORMA information reflects the anticipated effects of the
Reorganization.
<TABLE>
<CAPTION>
COMBINED PACE LARGE
COMPANY GROWTH FUND
GROWTH FUND PACE LARGE COMPANY GROWTH FUND PRO FORMA
-------------------------- ---------------------------------- ---------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C Y A B C Y A B C Y
----- ----- ----- ----- ------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <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)................. 4.5% None None None 4.5% None None None 4.5% None None None
Maximum Deferred Sales
Charge (load) (as a
percentage of original
purchase price or
redemption proceeds,
whichever is less)..... None 5% 1% None None 5% 1% None None 5% 1% None
Exchange Fee............ None None None None None None None None None None None None
ANNUAL FUND OPERATING EXPENSES (fees that are deducted from fund assets)
Management Fees*........ 0.75% 0.75% 0.75% 0.75% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Distribution and/or
Service (12b-1) Fees... 0.25% 1.00% 1.00% None 0.25% 1.00% 1.00% None 0.25% 1.00% 1.00% None
Other Expenses**........ 0.16% 0.22% 0.19% 0.11% 0.15% 0.17% 0.16% 0.14% 0.12% 0.14% 0.13% 0.11%
----- ----- ----- ----- ------- ------ ------- ------- ------- ------- ------- -------
Total Annual Fund
Operating Expenses..... 1.16% 1.97% 1.94% 0.86% 1.20% 1.97% 1.96% 0.94% 1.17% 1.94% 1.93% 0.91%
===== ===== ===== ===== ======= ====== ======= ======= ======= ======= ======= =======
Management Fee
Waiver ***............. N/A N/A N/A N/A (0.06)% (0.06)% (0.06)% (0.06)% (0.06)% (0.06)% (0.06)% (0.06)%
----- ----- ----- ----- ------- ------ ------- ------- ------- ------- ------- -------
Net Expenses***......... 1.16% 1.97% 1.94% 0.86% 1.14% 1.91% 1.90% 0.88% 1.11% 1.88% 1.87% 0.85%
===== ===== ===== ===== ======= ====== ======= ======= ======= ======= ======= =======
</TABLE>
--------------
* For both Funds, "Management Fees" include fees paid to Mitchell Hutchins for
administrative services.
** "Other Expenses" for PACE Large Company Growth 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 class.
*** PACE Trust and Mitchell Hutchins have entered into a written agreement
with respect to PACE Large Company Growth Fund under which Mitchell
Hutchins is contractually obligated to waive its management fee through
December 1, 2002 to the extent necessary to reflect the lower overall fees
paid to the Fund's sub-advisers as a result of the lower sub-advisory fee
paid by Mitchell Hutchins to SSgA. The effect of this management fee
waiver is reflected in the above table.
PACE Trust and Mitchell Hutchins have entered into an additional written
agreement with respect to PACE Large Company Growth Fund that becomes
effective if the merger 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
Growth Fund as shown under "Total Annual Fund Operating Expenses" and "Net
Expenses" above. It is not presently expected that Mitchell Hutchins would
be required to waive its management fee or reimburse expenses under this
agreement because the expenses of the combined Fund are expected to be
slightly lower than the current operating expenses of Growth Fund due to the
management fee waiver described above. However, if Mitchell Hutchins does
reimburse expenses of the combined Fund under this agreement, 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.
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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 each Fund's and
the combined Fund's expenses are lower due to the agreement 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>
GROWTH FUND
Class A....................................... $563 $802 $1,060 $1,796
Class B (assuming sale of all shares at end of
period)...................................... 700 918 1,262 1,894
Class B (assuming no sale of shares).......... 200 618 1,062 1,894
Class C (assuming sale of all shares at end of
period)...................................... 297 609 1,047 2,264
Class C (assuming no sale of shares).......... 197 609 1,047 2,264
Class Y....................................... 88 274 477 1,061
PACE LARGE COMPANY GROWTH FUND
Class A....................................... $561 $802 $1,069 $1,829
Class B (assuming sale of all shares at end of
period)...................................... 694 906 1,251 1,903
Class B (assuming no sale of shares).......... 194 606 1,051 1,903
Class C (assuming sale of all shares at end of
period)...................................... 293 603 1,046 2,275
Class C (assuming no sale of shares).......... 193 603 1,046 2,275
Class Y....................................... 90 287 508 1,143
Pro Forma PACE LARGE COMPANY GROWTH FUND
Class A....................................... $558 $793 $1,053 $1,796
Class B (assuming sale of all shares at end of
period)...................................... 691 897 1,236 1,871
Class B (assuming no sale of shares).......... 191 597 1,036 1,871
Class C (assuming sale of all shares at end of
period)...................................... 290 594 1,030 2,244
Class C (assuming no sale of shares).......... 190 594 1,030 2,244
Class Y....................................... 87 278 492 1,108
</TABLE>
SUMMARY COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
The Funds have similar investment objectives, policies and overall risk
characteristics in that each Fund seeks capital appreciation and generally
invests in larger capitalization companies. PACE Large Company Growth Fund
invests primarily in stocks of companies that are believed to have substantial
potential for capital growth and that have total market capitalizations of
$4.0 billion or greater at the time of purchase. Growth Fund also invests in
companies with larger market capitalizations that are believed to have
substantial potential for capital growth, but has the flexibility to invest in
companies having any market capitalization. Mitchell Hutchins allocates each
Fund's assets between the same two sub-advisers -- Alliance Capital Management
L.P. ("Alliance Capital") and State Street Global Advisors ("SSgA").
INVESTMENT ADVISORY SERVICES
Mitchell Hutchins has served as the investment manager and administrator
for PACE Large Company Growth Fund since its inception in August 1995. As
investment manager for the Fund, Mitchell Hutchins provides portfolio
management oversight rather than directly managing 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 those sub-advisers thereafter. Mitchell Hutchins
also
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recommends to the Board of PACE Trust whether agreements with sub-advisers
should be renewed, modified or terminated. The Fund's two current sub-
advisers -- Alliance Capital and SSgA -- have managed the Fund's investment
portfolio since November 10, 1997 (Alliance Capital) and October 10, 2000
(SSgA). Prior to November 10, 1997, a different sub-adviser managed all the
Fund's assets.
Mitchell Hutchins has served as investment manager or investment adviser
and as administrator for Growth Fund since March 1989 and as sub-adviser for
the Fund since its inception in March 1985 to March 1989 (PaineWebber served
as investment adviser and administrator to the Fund during this period). Prior
to its allocation of the Fund's assets to the Fund's current sub-advisers --
Alliance Capital and SSgA-- pursuant to sub-advisory contracts dated October
10, 2000, Mitchell Hutchins managed all the Fund's assets.
Purchase and Redemption Procedures
Funds in the PaineWebber Flexible PricingSM System generally offer Class
A, Class B, Class C and Class Y shares. PACE Large Company Growth 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 Large
Company Growth 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
Growth Fund. You may exchange Class A, Class B or Class C shares of PACE Large
Company Growth 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 equities. An investment in either Fund is not guaranteed; an
investor may lose money by investing in either Fund. The principal risks
presented by these Funds are:
EQUITY RISK -- The prices of common stocks and other equity securities
generally fluctuate more than those of other investments. They reflect changes
in the issuing company's financial condition and changes in the overall
market. A Fund may lose a substantial part, or even all, of the value of its
investment in a company's stock.
INDEX STRATEGY RISK -- SSgA seeks to outperform (before deducting fees and
expenses) the return of the Russell 1000 Growth Index for the portion of each
Fund's assets that it manages. SSgA's proprietary strategy may not result in
outperformance of the designated index and may even result in
underperformance. Each Fund's performance also may deviate from that of the
index because of shareholder purchases and sales of shares, which can occur
daily, and because of fees and expenses borne by each Fund.
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 value 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 value of
the assets being hedged.
PRIMARY DIFFERENCES IN THE INVESTMENT RISKS OF THE FUNDS
FOREIGN INVESTING RISK -- Foreign investing involves risks relating to
political, social and economic developments abroad to a greater extent than
investing in the securities of U.S. issuers. In addition, there are
differences between U.S. and foreign regulatory requirements and market
practices. Growth Fund may invest a larger portion of its total assets (25%)
in these securities than PACE Large Company Growth Fund (10%) and is more
exposed to foreign investing risk to the extent it does so.
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<PAGE>
TECHNOLOGY SECTOR RISK -- PACE Large Company Growth Fund has invested a
significant portion of its assets in stocks of companies in the technology
sector. As a result, the Fund is more susceptible to the risks that are
associated with that sector and its share price may be more volatile than a
fund with a broader range of investments. Individual issuers within the
technology sector, as well as the technology sector as a whole, can be
significantly affected by obsolescence of existing technology, short product
cycles, falling prices and profits and competition from new market entrants.
Growth Fund's investments in stocks of companies in the technology sector have
become more similar to those of PACE Large Company Growth Fund as a result of
the realignment of Growth Fund's portfolio by its new sub-advisers. That
realignment is continuing with respect to the assets of Growth Fund now
managed by Alliance Capital.
COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES
The Funds have similar investment objectives. PACE Large Company Growth
Fund's investment objective is capital appreciation. Growth Fund's investment
objective is long-term capital appreciation.
INVESTMENT POLICIES
The Funds also have similar investment policies in that each Fund generally
invests in stocks of larger capitalization companies. PACE Large Company
Growth Fund invests primarily in stocks of companies that are believed to have
substantial potential for capital growth and that have total market
capitalizations of $4.0 billion or greater at the time of purchase. PACE Large
Company Growth Fund may invest, to a limited extent, in other securities,
including securities convertible into stocks and stocks of companies with
smaller total market capitalizations.
Growth Fund invests primarily in common stocks that are believed to have
substantial potential for capital growth. Growth Fund generally invests in
larger capitalization companies, but has the flexibility to invest in
companies having any market capitalization. Dividend income is an incidental
consideration in the selection of stocks for either Fund.
Mitchell Hutchins allocates each Fund's assets between the same two sub-
advisers -- Alliance Capital and SSgA -- and has initially allocated
approximately 60% of each Fund's assets to Alliance Capital and approximately
40% of each Fund's assets to SSgA. Mitchell Hutchins may change this
allocation at any time. The relative values of each sub-adviser's share of a
Fund's assets also may change over time.
In managing its share of each Fund's assets, Alliance Capital follows its
"disciplined growth" strategy in seeking to identify the best combinations of
earnings growth and reasonable valuation in selecting stocks for each Fund.
Alliance Capital ranks each stock in its investment universe based on its
analysts' assessments and fundamental research that includes six measures of
earnings growth and valuation. Each Fund normally invests in stocks that rank
in the top 30% of this research universe and generally sells stocks that rank
in the bottom half.
In managing its share of each Fund's assets, SSgA seeks to outperform the
Russell 1000 Growth Index (before deducting fees and expenses). SSgA uses
several independent valuation measures to identify investment opportunities
within a large cap growth universe and combines factors to produce an overall
rank. Comprehensive research determines the optimal weighting of these
perspectives to arrive at strategies that vary by industry. SSgA ranks all
companies within the investable universe from top to bottom based on their
relative attractiveness. SSgA constructs each Fund's portfolio by selecting
the highest ranked stocks from the universe and manages deviations from the
benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Growth Index. SSgA generally sells
stocks that no longer meet its selection criteria or that it believes
otherwise may adversely affect a Fund's performance relative to that of the
index.
SECURITIES OF FOREIGN ISSUERS. Both Funds may invest in U.S. dollar-
denominated securities of foreign companies. PACE Large Company Growth Fund
must limit these investments to 10% of its total assets, while Growth Fund may
invest up to 25% of its total assets in these securities.
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DEBT SECURITIES. Each Fund may invest up to 35% of its total assets in U.S.
government bonds and corporate bonds, including, for Growth Fund, up to 10% in
bonds that are below investment grade (commonly known as "junk bonds").
DERIVATIVES. The Funds have very similar policies with respect to the use
of derivatives relating to securities in which they normally invest. Each 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.
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 Large Company Growth Fund is normally fully
invested in accordance with its investment objective and policies. However,
with the concurrence of Mitchell Hutchins, PACE Large Company Growth 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 and may purchase securities on a when-issued basis or
may purchase or sell securities for delayed delivery. Each Fund may lend up to
33 1/3% of its total assets to qualified broker-dealers or institutional
investors. Each Fund may borrow money from banks or through reverse repurchase
agreements, but not in excess of 10% of its total assets. Neither Fund may
purchase securities while borrowings in excess of 5% of its total assets are
outstanding.
PORTFOLIO TURNOVER. Each Fund may engage in frequent trading to achieve its
investment objectives. Frequent trading may result in portfolio turnover of
100% or more (high portfolio turnover). Frequent trading may increase the
portion of a Fund's capital gains that is 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 is 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 Growth Fund for the last two fiscal years ended August 31,
2000 and 1999, were 23% and 38%, respectively, while the portfolio turnover
rates for PACE Large Company Growth Fund's last two fiscal years ended July
31, 2000 and 1999, were 59% and 43%, respectively.
Following their appointment as sub-advisers for Growth Fund pursuant to
contracts dated October 10, 2000, Alliance Capital and SSgA started to realign
the Fund's portfolio to reflect their proprietary investment strategies. SSgA
substantially completed realignment of the Fund assets under its management by
October 31, 2000. However, Alliance Capital's realignment of the Fund's assets
has continued after that date. As a result of this realignment, the Fund's
portfolio turnover has been higher than normal during its current fiscal year,
and the Fund has realized higher net capital gain than otherwise would be the
case. A portion of that net capital gain has been realized after October 31,
2000.
Following its appointment as sub-adviser for PACE Large Company Growth Fund
on October 10, 2000, SSgA also realigned its portion of that Fund's portfolio
to reflect its proprietary investment strategies. SSgA substantially completed
realignment of the Fund assets under its management by October 31, 2000. As a
result of this realignment, the Fund's portfolio turnover has been higher than
normal during its current fiscal year, and the Fund has realized higher net
capital gain than would otherwise be the case.
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<PAGE>
OPERATIONS OF PACE LARGE COMPANY GROWTH FUND FOLLOWING THE REORGANIZATION
It is not expected that PACE Large Company Growth Fund will revise any of
its policies following the Reorganization to reflect those of Growth Fund.
Alliance Capital and SSgA have reviewed Growth Fund's current portfolio and
determined that Growth Fund's holdings generally are compatible with PACE
Large Company Growth Fund's portfolio. As a result, Mitchell Hutchins believes
that, if the Reorganization is approved, a substantial portion of Growth
Fund's assets could be transferred to and held by PACE Large Company Growth
Fund.
It is expected, however, that some of Growth Fund's holdings may not remain
at the time of the Reorganization due to normal portfolio turnover and also
due to the continuing realignment of the Fund's assets managed by Alliance
Capital to reflect its proprietary investment strategies. It is also expected
that if Growth Fund's shareholders approve the Reorganization, the Fund's
holdings that are not compatible with PACE Large Company Growth Fund's
holdings will be sold in an orderly manner, and the proceeds of these sales
held in temporary investments pending reinvestment in assets that are
consistent with the holdings of PACE Large Company Growth Fund. As of
November 30, 2000, Growth Fund's investments in such securities represented
approximately 10% of its total portfolio. The portion of Growth Fund's assets
that will be liquidated in connection with the Reorganization will depend on
market conditions and on the sub-advisers' continuing assessment of the
compatibility of its holdings with PACE Large Company Growth Fund's portfolio
composition and its investment objective and policies at the approximate time
of the Reorganization. The need for Growth Fund to dispose of investments in
connection with the Reorganization may result in its selling securities at a
disadvantageous time and could result in its realizing gains (or losses) that
would not otherwise have been realized.
PERFORMANCE
The following bar chart and table provide information about the performance
of PACE Large Company Growth 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 Large Company Growth Fund's performance has
varied from calendar year to calendar year. The bar chart does not reflect the
maximum annual PACESM 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 Large Company Growth 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 total
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 PACESM 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
performance of PACE Large Company Value 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 or expenses.
The second table that follows the bar chart shows the average annual total
returns over several time periods for Growth 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 Large Company Growth Fund. The performance of Growth
Fund's Class Y shares for the 1999 calendar year can thus be compared to that
of the Class P shares of PACE Large Company Growth Fund before deduction of
the PACESM 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
8
<PAGE>
different indices -- the Standard & Poor's 500 Composite Stock Price Index for
Growth Fund and the Russell 1000 Growth Index for PACE Large Company Growth
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 the Funds because
Mitchell Hutchins managed the assets of Growth Fund during the periods shown
and Alliance Capital was the sole sub-adviser for PACE Large Company Growth
Fund from November 10, 1997 to October 10, 2000. Prior to November 10, 1997, a
different sub-adviser managed the Fund's assets.
PACE LARGE COMPANY GROWTH FUND -- TOTAL RETURN ON CLASS P SHARES (1996 IS THE
FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
[GRAPH]
Calendar Year Total Return
1996 21.24%
1997 24.79%
1998 40.05%
1999 25.25%
Total return January 1 to September 30, 2000 -- (1.26)%
Best quarter during years shown: 4th quarter, 1998 -- 31.80%
Worst quarter during years shown: 3rd quarter, 1998 -- (14.42)%
PACE LARGE COMPANY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS P RUSSELL 1000 S&P 500
(INCEPTION DATE) (8/24/95) GROWTH INDEX INDEX
---------------- --------- ------------ -------
<S> <C> <C> <C>
One Year......................................... 23.38% 33.16% 21.03%
Life of Class.................................... 25.07% 31.22% 27.03%
</TABLE>
----------------
* The above performance reflects the deduction of the maximum annual PACESM
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 25.25%
for the year ended December 31, 1999 and 26.96% for "Life of Class."
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GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS A CLASS B* CLASS C CLASS Y S&P 500 RUSSELL 1000
(INCEPTION DATE) (3/18/85) (7/1/91) (7/2/92) (8/26/91) INDEX GROWTH INDEX
---------------- --------- -------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
One Year............ 26.46% 26.35% 30.39% 32.86% 21.03% 33.16%
Five Years.......... 24.27% 24.25% 24.43% 25.78% 28.54% 32.41%
Ten Years........... 16.14% N/A N/A N/A 18.19% 20.32%
Life of Class....... 16.52% 17.73% 18.23% 17.83% ** **
</TABLE>
----------------
* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the S&P 500 Index and Russell 1000 Growth
Index for the life of each class were as follows: Class A -- 18.57% and
19.65%; Class B -- 20.30% and 22.10%; Class C -- 21.25% and 23.27%; and Class
Y -- 19.75% and 21.34%, respectively.
SALES CHARGES
No sales charges apply when Growth Fund shareholders receive shares of PACE
Large Company Growth Fund in connection with the Reorganization.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund normally declares and pays dividends and distributes
substantially all 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 Large Company Growth Fund, Class P shares)
would have the highest dividends.
As a shareholder of PACE Large Company Growth 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 Growth 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, Growth 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. Because of the relatively high
portfolio turnover that has occurred after October 31, 2000 in connection with
Alliance Capital's continuing realignment of the Fund's assets under its
management to reflect its proprietary investment strategies, it is expected
that the Fund's pre-merger taxable distribution of realized net capital gain
may be substantial.
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.
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.
10
<PAGE>
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES
OF PACE LARGE COMPANY GROWTH FUND
FLEXIBLE PRICING
PACE Large Company Growth 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 Large Company Growth 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 Growth Fund. Prior to November 27, 2000, PACE Large
Company Growth Fund offered only Class P shares, which are available only to
participants in the PaineWebber PACESM Select Advisors Program.
No sales charges apply when Growth Fund shareholders receive Class A, Class
B, Class C or Class Y shares of PACE Large Company Growth Fund as part of the
Reorganization. PACE Large Company Growth 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 Large Company Growth 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 Growth 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 each Fund are described in the following
table.
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 $50,000....... 4.50% 4.71% 4.25%
$50,000 to $99,999...... 4.00 4.17 3.75
$100,000 to $249,999.... 3.50 3.63 3.25
$250,000 to $499,999.... 2.50 2.56 2.25
$500,000 to $999,999.... 1.75 1.78 1.50
$1,000,000 and over(1).. None None 1.00(2)
</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.
11
<PAGE>
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
-- 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 OnlySM 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 InsightOneSM Program
brokerage account.
12
<PAGE>
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
THE SHARES' NET
ASSET VALUE IS
IF YOU SELL SHARES WITHIN: 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 Large Company Growth Fund that you receive in connection with
the Reorganization will include the period for which you held the
corresponding Class B shares of Growth Fund and any other PaineWebber fund
whose shares you exchanged for Class B shares of Growth Fund.
To minimize your deferred sales charge, we will assume that you are
selling:
. First, Class B shares representing reinvested dividends, and
. 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.
13
<PAGE>
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of
your purchase in Fund shares.
Class C shares pay an annual 12b-1 distribution fee of 0.75% 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 1.00% 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 Large Company Growth Fund that you receive in
connection with the Reorganization will include the period for which you held
the corresponding Class C shares of Growth Fund and any other PaineWebber fund
whose shares you exchanged for shares of Growth 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 PACESM Multi Advisor Program;
. 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 the lowest for all the
classes.
14
<PAGE>
BUYING SHARES
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase Fund shares through your Financial Advisor. Otherwise,
you can invest in the Funds through the Funds' transfer agent, PFPC Inc. You
can obtain an application by calling 1-800-647-1568. You must complete and
sign the application and mail it, along with a check, to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
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.
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;
15
<PAGE>
. 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 Funds will not accept signature guarantees that are
not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the 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.
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;
16
<PAGE>
. 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 "Selling 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.
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 Large Company Growth 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.
17
<PAGE>
As investment manager for Growth Fund, Mitchell Hutchins recommends sub-
advisers to the Board of Olympus Fund and monitors and reviews the performance
of the sub-advisers. Since October 10, 2000, Mitchell Hutchins and the sub-
advisers have provided investment management services to the Fund under
interim contracts approved by the Board of Olympus Fund. Prior to October 10,
2000, Mitchell Hutchins managed Growth Fund's assets directly.
SUB-ADVISERS
The same two sub-advisers -- Alliance Capital and SSgA -- manage the assets
of each Fund. Alliance Capital, located at 1345 Avenue of the Americas, New
York, New York 10105, is a leading international investment manager
supervising client accounts with assets as of September 30, 2000 of
approximately $388 billion. Jane Mack Gould is primarily responsible for the
day-to-day management of the portion of each Fund's assets allocated to
Alliance Capital. Ms. Gould is a senior vice president and portfolio manager
and has been with Alliance Capital since 1971. Alliance Capital has held its
responsibilities for PACE Large Company Growth Fund since November 10, 1997
and for Growth Fund since October 10, 2000.
SSgA, located at Two International Place, Boston, Massachusetts 02110, is
the investment management division of State Street Bank and Trust Company. As
of September 30, 2000, SSgA had approximately $741 billion under management.
SSgA uses a team approach in the day-to-day management of its share of each
Fund's assets. SSgA has held its responsibilities for each Fund since October
10, 2000.
ADVISORY FEES AND FUND EXPENSES
PACE Large Company Growth Fund paid fees to Mitchell Hutchins for
management and administrative services for the Fund's most recent fiscal year
at the combined annual contract rate of 0.80% of average daily net assets.
This combined fee includes an annual contract rate of 0.60% for investment
management services and 0.20% for administrative services, both expressed as a
percentage of the Fund's average daily net assets. Growth Fund pays fees to
Mitchell Hutchins for investment advisory and administration services at the
annual contract rate of 0.75% of the Fund's average daily net assets. As a
result of fee waivers attributable to Growth Fund's investment of cash
collateral from its securities lending activities, the Fund paid Mitchell
Hutchins for its investment advisory and administration services during the
Fund's most recent fiscal year at the effective annual rate of 0.74% of the
Fund's average daily net assets.
The management and administrative services fees paid by PACE Large Company
Growth Fund to Mitchell Hutchins are greater than those for Growth Fund.
However, Mitchell Hutchins anticipates that shareholders of each class of
shares of Growth Fund who will become shareholders of the corresponding class
of shares of PACE Large Company Growth Fund will be subject to total annual
operating expenses that are somewhat lower than the expenses they currently
pay as shareholders of Growth Fund. The overall operating expenses of the
combined Fund are subject to a written management fee waiver agreement between
PACE Large Company Growth Fund and Mitchell Hutchins, which will remain in
effect through December 1, 2002. Absent this agreement, it is expected that
the overall operating expenses of the Class A and Class Y shares of PACE Large
Company Growth Fund immediately following the Reorganization would be somewhat
higher than the current operating expenses of the corresponding class of
shares of Growth Fund. If this agreement is not renewed after December 1,
2002, the combined Fund would have overall operating expenses for its Class A
and Class Y shares that are higher than the current expenses of Growth Fund,
assuming that the operating expenses of the combined Fund remain the same.
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
Olympus Fund's Board approved the proposed Reorganization at a meeting held
on October 6, 2000. Mitchell Hutchins and Olympus Fund's Board believe that
Growth Fund's shareholders will benefit from the Reorganization because the
combined Fund would have a larger asset base to invest, which should provide
18
<PAGE>
greater opportunities for diversifying investments and realizing economies of
scale. In addition, the Board and Mitchell Hutchins believe that operating two
funds that offer similar investments and 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 Olympus Fund'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 Growth Fund, would be
served by continuing to operate the funds under their current arrangements.
For Growth 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 Growth Fund has an investment objective that
is similar to the investment objective for PACE Large Company Growth Fund and
that both Funds invest primarily in stocks of large capitalization companies.
Mitchell Hutchins advised the Board of Olympus Fund that the investment
management arrangements for PACE Large Company Growth Fund were recently
changed. Mitchell Hutchins had concluded that a combination of active
management and index investing through the use of two different sub-advisers
would be more likely to help PACE Large Company Growth Fund achieve its
investment objective through better long-term performance at reduced risk,
rather than an arrangement in which a single manager is responsible for the
entire portfolio. The Board of PACE Trust approved Mitchell Hutchins'
recommendations. SSgA assumed responsibility for managing a portion of the
Fund's assets effective October 10, 2000, with Alliance Capital continuing to
manage the other portion. (See "Comparison of the Funds" above for a more
complete description of the investment objectives, policies and risks of the
Funds.)
Mitchell Hutchins stated its belief that the Reorganization would likely
benefit Growth 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 Large Company Growth Fund are greater than those currently paid by
Growth Fund. However, Mitchell Hutchins informed the Board that it had entered
into a written management fee waiver agreement with PACE Large Company Growth
Fund to waive its management fee through December 1, 2002 to the extent
necessary to reflect the lower overall fees paid to the Fund's sub-advisers as
a result of the lower sub-advisory fee paid to SSgA. As a result of this
management fee waiver, it is expected that the net operating expenses for each
class of PACE Large Company Growth Fund will be somewhat lower following the
Reorganization than the current operating expenses of the corresponding class
of shares of Growth Fund.
In addition, Mitchell Hutchins has entered into another written agreement
with PACE Large Company Growth Fund that becomes effective if the
Reorganization takes place. Under that agreement, Mitchell Hutchins is
contractually obligated to waive its management fee and/or reimburse the Fund
to the extent that its total annual operating expenses for each class of
shares through December 1, 2002 would otherwise exceed the current overall
operating expenses of the corresponding class of shares of Growth Fund. It is
not presently expected that Mitchell Hutchins would be required to waive its
management fee or reimburse expenses under this agreement because the expenses
of the combined Fund are expected to be somewhat lower than the current
operating expenses of Growth Fund as a result of the management fee waiver
described above. (See "Comparative Fee Table" 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 to the investment
management arrangements for Growth Fund. Mitchell Hutchins advised the Board
of Olympus Fund of its belief that a combination of active stock selection and
index investing through the same two sub-advisers approved for PACE Large
Company Growth Fund would be more likely to help Growth Fund achieve its
investment objective. 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
19
<PAGE>
recommended to the Board of Olympus Fund that Alliance Capital and SSgA be
retained on an interim basis to manage the assets of Growth Fund, with
Mitchell Hutchins having responsibility for allocating the Fund's assets
between the two sub-advisers. After consideration of all the information
presented by Mitchell Hutchins, inquiries into the ability and resources of
each proposed sub-adviser to provide appropriate investment management
services for its allocated portion of Growth Fund's assets and interviews with
personnel of each proposed sub-adviser, Olympus Fund's Board determined to
implement the new investment management arrangements effective October 10,
2000.
To implement the new investment management arrangements for Growth Fund,
the Board of Olympus Fund, 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 each sub-adviser.
Under the Interim Management and Administration Contract ("Interim Management
Contract"), Mitchell Hutchins serves as investment manager for Growth 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 contracts 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, Growth Fund and PACE Large Company
Growth Fund would be managed in a similar manner. Mitchell Hutchins noted its
belief that operating two funds that offer similar investments and 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 Large Company
Growth 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 Large Company Growth Fund.
Finally, Mitchell Hutchins reviewed with the Board of Olympus Fund the
principal terms of the Plan. Mitchell Hutchins informed the Board that the
Reorganization would be tax-free to Growth 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 Large Company Growth Fund shares
issued in connection with the Reorganization. Furthermore, Mitchell Hutchins
informed the Board of Olympus Fund 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 Growth Fund will
include the holding period for the shares of Growth Fund and any other
PaineWebber fund shares of the same class that were exchanged for shares of
Growth Fund.
As part of its considerations, the Board of Olympus Fund 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 Large Company Growth Fund and
that expense ratio relative to Growth 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 Growth 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 Growth 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, Alliance Capital and SSgA;
and (10) the terms of the proposed Plan.
20
<PAGE>
On the basis of the information provided to it and its evaluation of that
information, the Board of Olympus Fund, including a majority of its
Independent Trustees, determined that the Reorganization would be in the best
interests of Growth Fund and that the interests of existing Growth Fund
shareholders will not be diluted as a result of the Reorganization. THEREFORE,
THE BOARD OF OLYMPUS FUND UNANIMOUSLY APPROVED THE REORGANIZATION AND
RECOMMENDED THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF GROWTH 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 Large Company Growth Fund's acquiring on the
Closing Date all the assets of Growth Fund in exchange solely for PACE Large
Company Growth Fund shares and PACE Large Company Growth Fund's assumption of
all of Growth Fund's stated liabilities and (2) the distribution of those
shares to Growth Fund shareholders. Growth 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 Large Company Growth Fund will assume from Growth 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 Growth Fund's
most recent annual audited financial statements, or incurred by Growth Fund
subsequent to the date of those financial statements and disclosed in writing
to and accepted by PACE Trust (collectively, the "Liabilities"). Growth Fund
agreed 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 Large Company Growth Fund and the NAV per share of each
class of PACE Large Company Growth 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 Large Company
Growth Fund's current Prospectus and SAI. These procedures are identical to
those used by Growth Fund and described in its Prospectus and SAI. Growth
Fund's NAV will be the value of the Assets to be acquired by PACE Large
Company Growth Fund, less the amount of the Liabilities, as of the Valuation
Time.
On, or as soon as practicable after, the Closing Date, Growth Fund will
distribute to its shareholders of record as of the Effective Time the PACE
Large Company Growth Fund shares it receives, by class, so that each Growth
Fund shareholder will receive the number of full and fractional shares of the
corresponding class of PACE Large Company Growth Fund equal in aggregate NAV
to the shareholder's shares in Growth Fund. That distribution will be
accomplished by opening accounts on the books of PACE Large Company Growth
Fund in the names of Growth Fund's shareholders and crediting those accounts
with the appropriate number of PACE Large Company Growth Fund shares.
Fractional shares of PACE Large Company Growth Fund will be rounded to the
third decimal place.
The NAV per share of PACE Large Company Growth Fund will not change as a
result of the Reorganization. Thus, the Reorganization will not result in a
dilution of the interest of any shareholder in either Fund. In addition,
Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Growth 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
21
<PAGE>
the interests of Growth Fund shareholders. If the Reorganization is not
approved by shareholders at the Meeting, Growth Fund will continue to operate
as a series of Olympus Fund, 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 Large Company Growth 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 Large Company Growth 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 Growth 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. Olympus Fund and PACE Trust will
each receive an opinion of Kirkpatrick & Lockhart LLP, counsel to Olympus Fund
and tax counsel to PACE Trust, substantially to the following effect:
(1) PACE Large Company Growth Fund's acquisition of the Assets in
exchange solely for its shares and its assumption of the Liabilities,
followed by Growth Fund's distribution of those shares PRO RATA to its
shareholders constructively in exchange for their Growth 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) Growth Fund will recognize no gain or loss on its transfer of the
Assets to PACE Large Company Growth Fund in exchange solely for PACE Large
Company Growth Fund shares and PACE Large Company Growth Fund's assumption
of the Liabilities or on the subsequent distribution of those shares to
Growth Fund's shareholders in constructive exchange for their Growth Fund
shares;
(3) PACE Large Company Growth 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 Large Company Growth Fund's basis in the Assets will be the
same as Growth Fund's basis therein immediately before the Reorganization,
and PACE Large Company Growth Fund's holding period for the Assets will
include Growth Fund's holding period therefor;
(5) A Growth Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Growth Fund shares solely for PACE Large
Company Growth Fund shares pursuant to the Reorganization; and
22
<PAGE>
(6) A Growth Fund shareholder's aggregate basis in the PACE Large
Company Growth Fund shares it receives in the Reorganization will be the
same as the aggregate basis in its Growth Fund shares it constructively
surrenders in exchange for those PACE Large Company Growth Fund shares, and
its holding period for those PACE Large Company Growth Fund shares will
include its holding period for those Growth 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 Large Company Growth Fund after the Reorganization of
any pre-Reorganization capital losses realized by Growth 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 Growth 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.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
----------------
ORGANIZATION OF THE FUNDS
PACE Large Company Growth 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.
Growth Fund commenced operations on March 18, 1985 as a diversified series
of PaineWebber Olympus Fund, Inc., a Maryland corporation registered under the
1940 Act as an open-end management investment company. On March 1, 1987, the
initial series of Olympus Fund, a Massachusetts business trust formed on
October 31, 1986, succeeded to the assets and liabilities of PaineWebber
Olympus Fund, Inc., including its registration as an open-end management
investment company. The operations of Olympus Fund, as a Massachusetts
business trust, are governed by its Declaration of Trust, By-Laws and
Massachusetts law.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you understand
PACE Large Company Growth 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 Large Company Growth 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.
<TABLE>
<CAPTION>
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
--------------------------------------------------------- ---
FOR THE YEARS ENDED JULY 31, FOR THE PERIOD
----------------------------------------- ENDED JULY 31,
2000 1999 1998++ 1997 1996+
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 25.88 $ 22.99 $ 19.28 $ 13.27 $ 12.00
-------- -------- -------- -------- -------
Net investment income
(loss)................. (0.12) (0.05) (0.03) 0.03 0.03
Net realized and
unrealized gains from
investments............ 4.69 4.44 4.79 6.01 1.26
-------- -------- -------- -------- -------
Net increase from
investment operations.. 4.57 4.39 4.76 6.04 1.29
-------- -------- -------- -------- -------
Dividends from net
investment income...... -- -- (0.01) (0.03) (0.02)
Distributions from net
realized gains from
investments............ (0.75) (1.50) (1.04) -- --
-------- -------- -------- -------- -------
Total dividends and
distributions.......... (0.75) (1.50) (1.05) (0.03) (0.02)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 29.70 $ 25.88 $ 22.99 $ 19.28 $ 13.27
======== ======== ======== ======== =======
Total investment
return(1).............. 17.76% 19.66% 26.40% 45.61% 10.76%
======== ======== ======== ======== =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $436,806 $379,988 $275,461 $160,334 $69,248
Expenses to average net
assets, net of fee
waivers and expense
reimbursements......... 0.94% 0.97% 1.00% 1.00% 1.00%*
Expenses to average net
assets, before fee
waivers and expense
reimbursements......... 0.94% 0.97% 1.02% 1.05% 1.33%*
Net investment income
(loss) to average net
assets, net of fee
waivers and expense
reimbursements......... (0.42)% (0.24)% (0.14)% 0.22% 0.33%*
Net investment income
(loss) to average net
assets, before fee
waivers and expense
reimbursements......... (0.42)% (0.24)% (0.16)% 0.17% (0.01)%*
Portfolio turnover...... 59% 43% 102% 73% 65%
</TABLE>
----------------
+ For the period August 24, 1995 (commencement of operations) through July
31, 1996.
* Annualized.
++ Sub-investment advisory functions for this portfolio were transferred from
Chancellor LGT Asset Management, Inc. to Alliance Capital Management L.P.
on November 10, 1997.
(1) Total investment return is calculated assuming $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.
24
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each of Growth Fund and
PACE Large Company Growth Fund as of July 31, 2000 and the PRO FORMA
capitalization as of the same date, giving effect to the Reorganization:
<TABLE>
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS A
GROWTH FUND: GROWTH FUND: COMBINED PACE LARGE
CLASS A CLASS A COMPANY GROWTH FUND
------------ ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $418,225,441 $ 0 $418,225,441
Shares Outstanding...... 13,278,211 0 14,079,903
Net Asset Value Per
Share.................. $ 31.50 $ 0 $ 29.70
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS B
GROWTH FUND: GROWTH FUND: COMBINED PACE LARGE
CLASS B CLASS B COMPANY GROWTH FUND
------------ ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 68,487,640 $ 0 $ 68,487,640
Shares Outstanding...... 2,441,700 0 2,305,693
Net Asset Value Per
Share.................. $ 28.05 $ 0 $ 29.70
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS C
GROWTH FUND: GROWTH FUND: COMBINED PACE LARGE
CLASS C CLASS C COMPANY GROWTH FUND
------------ ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 49,184,700 $ 0 $ 49,184,700
Shares Outstanding...... 1,729,915 0 1,655,843
Net Asset Value Per
Share.................. $ 28.43 $ 0 $ 29.70
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS Y
GROWTH FUND: GROWTH FUND: COMBINED PACE LARGE
CLASS Y CLASS Y COMPANY GROWTH FUND
------------ ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 41,711,138 $ 0 $ 41,711,138
Shares Outstanding...... 1,272,443 0 1,404,240
Net Asset Value Per
Share.................. $ 32.78 $ 0 $ 29.70
</TABLE>
<TABLE>
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS P
GROWTH FUND: GROWTH FUND: COMBINED PACE LARGE
CLASS P CLASS P COMPANY GROWTH FUND
------------ ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 0 $436,806,109 $436,806,109
Shares Outstanding...... 0 14,705,436 14,705,436
Net Asset Value Per
Share.................. $ 0 $ 29.70 $ 29.70
</TABLE>
25
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the issuance of PACE Large Company Growth
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.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PACE Trust and Olympus Fund 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 Olympus
Fund. 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 Growth Fund incorporated by reference
in the SAI have been audited by Ernst & Young LLP, independent auditors, whose
report thereon is included in Growth Fund's Annual Report to Shareholders for
the fiscal year ended August 31, 2000. The audited financial statements of
PACE Large Company Growth 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 Large Company
Growth 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, Olympus Fund 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 Growth Fund's
shareholders should send such proposals to Growth 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 materials 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. Olympus Fund'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 Growth
Fund's shareholders arise, the proxies will vote thereon according to their
best judgment in the interests of the Fund.
26
<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 Large Company Growth
Equity Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Olympus Fund, a Massachusetts business trust
("Target Trust"), on behalf of PaineWebber Growth 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").
Such transactions shall take place at the Closing (as defined in paragraph
3.1).
A-1
<PAGE>
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 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 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 and statement of additional information ("SAI"), less (b) the
amount of the Liabilities as of the Valuation Time.
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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 23, 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
Restated Declaration of Trust ("Declaration of Trust") is on file with the
Secretary of the Commonwealth of Massachusetts;
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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;
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
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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 August 31, 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
August 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 period 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 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.
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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;
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;
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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;
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.
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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").
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.
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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 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.
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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;
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
A-10
<PAGE>
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;
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
A-11
<PAGE>
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 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.
A-12
<PAGE>
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. 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.
A-13
<PAGE>
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.
PAINEWEBBER OLYMPUS FUND, acting on
behalf of its series, PaineWebber
Growth Fund
By: _________________________________
PAINEWEBBER PACE SELECT ADVISORS
TRUST, acting on behalf of its
series, PACE Large Company Growth
Equity Investments
By: _________________________________
Solely with respect to paragraph 7.2
hereof:
MITCHELL HUTCHINS ASSET MANAGEMENT
INC.
By: _________________________________
A-14
<PAGE>
APPENDIX B
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, the following shareholders owned beneficially or of
record 5% or more of a class of shares of Growth Fund or PACE Large Company
Growth 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.
GROWTH FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL PRO FORMA PERCENT BENEFICIAL
SHAREHOLDER'S OWNERSHIP OF OWNERSHIP OF COMBINED PACE
NAME/ADDRESS* GROWTH FUND LARGE COMPANY GROWTH FUND
------------- ------------------ ----------------------------
<S> <C> <C>
Northern Trust Company as
Trustee 99.15% 99.15%
FBO PaineWebber 401 K Plan
#22-36026 (Class Y Shares) (Class Y Shares)
</TABLE>
PACE LARGE COMPANY GROWTH FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL PRO FORMA PERCENT BENEFICIAL
OWNERSHIP OF PACE OWNERSHIP OF COMBINED
LARGE COMPANY PACE LARGE COMPANY GROWTH
SHAREHOLDER'S NAME/ADDRESS* GROWTH FUND FUND
--------------------------- ------------------ ----------------------------
<S> <C> <C>
PaineWebber Custodian 54.41% **
PaineWebber CDN FBO Virginia
E. Duffy (Class A Shares) (Class A Shares)
Robert J. Dorfman 28.49% **
(Class A Shares) (Class A Shares)
J. Eric Casey C/F 11.39% **
Greta Cathleen Casey UTMA/WI (Class A Shares) (Class A Shares)
J. Eric Casey C/F 5.69% **
Peter Covert Casey UTMA/WI (Class A Shares) (Class A Shares)
PW Custodian 24.61% 0.01%
PaineWebber CDN FBO Deborah M.
Drews (Class B Shares) (Class B Shares)
PW Custodian 19.94% **
PaineWebber CDN FBO Hugh A.
Cuthbertson (Class B Shares) (Class B Shares)
Richard E. Edwards and Janet
K. Edwards, Joint Owners 12.30% 0.01%
(Class B Shares) (Class B Shares)
Frank Lynn Foltz 11.63% **
(Class B Shares) (Class B Shares)
Robert Kaplan and Cathy
Kaplan, Joint Owners 10.54% **
(Class B Shares) (Class B Shares)
Gary J. Fassler 10.52% **
(Class B Shares) (Class B Shares)
Karen L. Kramer 10.42% **
(Class B Shares) (Class B Shares)
PW Custodian 35.78% 0.04%
PaineWebber CDN FBO Donald
Fath (Class C Shares) (Class C Shares)
PW Custodian 20.27% 0.02%
PaineWebber CDN FBO Doris L.
Barlock (Class C Shares) (Class C Shares)
PW Custodian 15.78% 0.02%
PaineWebber CDN FBO Herbert D.
Jones (Class C Shares) (Class C Shares)
PW Custodian 12.76% 0.01%
PaineWebber CDN FBO Sandra L.
Kuritzky (Class C Shares) (Class C Shares)
Alan C. Budney and Michele M.
Budney, Joint Onwers 7.03% **
(Class C Shares) (Class C Shares)
PW Custodian 5.89% **
PaineWebber CDN FBO Thomas K.
Davila (Class C Shares) (Class C Shares)
</TABLE>
----------------
* The shareholders listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.
** This shareholder's pro forma percentage of beneficial ownership of the
specified class of shares in the combined PACE Large Company Growth Fund
is less than one tenth of one percent.
B-1
<PAGE>
APPENDIX C
MANAGEMENT'S DISCUSSION OF PACE LARGE COMPANY GROWTH FUND'S PERFORMANCE
THE DISCUSSION BELOW WAS TAKEN FROM PACE LARGE COMPANY GROWTH 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: Alliance Capital Management L.P.
PORTFOLIO MANAGER: Jane Mack Gould
OBJECTIVE: Capital appreciation
INVESTMENT PROCESS: The Portfolio invests primarily in companies that the
adviser believes have faster rates of earnings growth than the average rate of
the companies that comprise the S&P 500 Index. Normally, at least 65% of the
Portfolio is invested in common stocks of companies with market capitalization
of at least $4.0 billion at time of purchase. Alliance chooses stocks by
identifying the best combinations of earnings growth and reasonable valuation.
Each stock in the adviser's research universe is ranked based on analysts'
assessments and six measures of earnings growth and valuation. The Portfolio
normally invests in stocks that rank within the resulting top 30% of the
universe.
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00
<TABLE>
<CAPTION>
1
6 MONTHS YEAR 3 YEARS SINCE INCEPTION 8/24/95
-------- ----- ------- -----------------------
<S> <C> <C> <C> <C>
With PACE program fee*........ 5.73% 16.00% 19.41% 21.96%
Without PACE program fee...... 6.53% 17.76% 21.21% 23.80%
Russell 1000 Growth Index..... 4.80% 24.38% 22.76% 27.01%
Lipper Large-Cap Growth Funds
Median....................... 5.11% 26.02% 22.33% 24.19%
</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
RUSSELL 1000 GROWTH INDEX
[GRAPH]
Portfolio Portfolio Russell 1000
Date Without Fee With Fee Growth Index
------ ------------- ------------- ---------------
Aug-95 10,000 9,997 10,000
Sep-95 10,367 10,350 10,461
Oct-95 10,400 10,371 10,468
Nov-95 10,675 10,632 10,876
Dec-95 10,667 10,610 10,938
Jan-96 10,967 10,895 11,304
Feb-96 11,234 11,147 11,511
Mar-96 11,284 11,182 11,526
Apr-96 11,485 11,367 11,829
May-96 11,810 11,674 12,242
Jun-96 11,819 11,668 12,259
Jul-96 11,076 10,921 11,540
Aug-96 11,485 11,310 11,838
Sep-96 12,520 12,314 12,700
Oct-96 12,662 12,438 12,776
Nov-96 13,338 13,085 13,736
Dec-96 12,932 12,672 13,467
Jan-97 13,660 13,368 14,411
Feb-97 13,267 12,967 14,313
Mar-97 12,313 12,020 13,538
Apr-97 13,208 12,878 14,437
May-97 13,944 13,578 15,480
Jun-97 14,605 14,204 16,099
Jul-97 16,128 15,665 17,522
Aug-97 15,115 14,664 16,496
Sep-97 16,019 15,521 17,308
Oct-97 15,567 15,064 16,668
Nov-97 15,735 15,207 17,376
Dec-97 16,138 15,577 17,571
Jan-98 16,475 15,883 18,096
Feb-98 18,089 17,417 19,457
Mar-98 18,789 18,069 20,232
Apr-98 19,100 18,344 20,512
May-98 18,896 18,126 19,930
Jun-98 20,039 19,199 21,151
Jul-98 20,385 19,506 21,011
Aug-98 16,377 15,651 17,858
Sep-98 17,149 16,368 19,229
Oct-98 19,100 18,207 20,775
Nov-98 20,350 19,375 22,356
Dec-98 22,601 21,491 24,373
Jan-99 24,138 22,923 25,803
Feb-99 23,167 21,974 24,624
Mar-99 23,996 22,732 25,922
Apr-99 24,043 22,748 25,956
May-99 23,402 22,114 25,159
Jun-99 25,429 23,999 26,920
Jul-99 24,392 22,992 26,064
Aug-99 24,835 23,380 26,489
Sep-99 23,930 22,500 25,932
Oct-99 25,731 24,163 27,890
Nov-99 26,126 24,504 29,393
Dec-99 28,307 26,516 32,450
Jan-00 26,963 25,225 30,928
Feb-00 26,750 24,995 32,441
Mar-00 30,000 27,996 34,764
Apr-00 29,071 27,096 33,109
May-00 27,708 25,793 31,440
Jun-00 29,071 27,028 33,823
Jul-00 28,723 26,671 32,413
The graph depicts the performance of PACE Large Company Growth Equity
Investments versus the Russell 1000 Growth Index. It is important to note that
PACE Large Company Growth Equity 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
During the 12-month period ended July 31, 2000, the Portfolio's performance
lagged that of the Russell 1000 Growth Index. The Portfolio's underperformance
resulted from an underweighting in technology stocks relative to the Index. In
the Index, the technology component has risen from 24.7% on July 31, 1998 to
36.6% on July 31, 1999 to 56.9% on July 31, 2000. From July 31, 1999 through
July 31, 2000, technology stocks accounted for an average of 41.2% of the
Russell 1000 Growth Index. For the same period, however, technology stocks
composed only 31.7% of the PACE Portfolio.
Currently, the Portfolio's stock selection discipline does not support a
benchmark weighting in technology stocks. On July 31, 2000, 41% of Portfolio
assets were invested in the technology sector; but technology stocks
represented 56.9% of the Russell 1000 Growth Index. As price opportunities
presented themselves, we added to the Portfolio's technology positions. We
believe that continued market volatility is likely to offer more opportunities
for technology investment.
As we move forward, we believe the investment environment will continue to
be challenging. Conviction is likely to remain fragile, as investors react to
daily consensus views on economic strength, inflation, Federal Reserve Board
intentions and the earnings guidance of corporate managements. We believe that
higher interest rates are starting to slow economic growth. Signs of
moderation are apparent in retail sales, hours worked, employment, housing
starts, purchasing manager surveys, leading indicators and business investment
excluding technology. We estimate that real GDP will grow slightly less than
4% for the remainder of the year and around 3.5% in 2001. Reported inflation
has been distorted by rising oil prices, but oil prices appear to be
declining. Despite the length of the current economic expansion, excellent
productivity gains have sustained low unit labor costs. We believe Fed policy
will continue to be sensitive to monthly data on employment, spending and
inflation. Short-term interest rates could rise 0.25% to 0.50% by year-end.
Long-term interest rates are expected to fluctuate between 5.75% and 6.75%.
We will continue to focus our investment strategy on stocks that meet our
criteria for increased revenues through strong unit growth independent of
price increases. We believe such companies will perform well during the
transition to slower economic growth and afterwards. Volatility is likely to
continue to characterize the market and may present opportunities to add to
favored holdings. In the past, we have taken advantage of such price weakness
to increase our technology holdings. Outside the area of technology, we are
aware of attractive values in other sectors and will pursue a diversified
approach to Portfolio construction. As always, we seek the best combination of
superior relative earnings growth at reasonable valuation. In that regard, we
believe the case for financial services stocks is especially compelling.
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 7/31/00
---------------- -------
<S> <C>
Net Assets ($MM)....................................................... $436.8
Number of Securities................................................... 83
Stocks................................................................. 98.4%
ADRs................................................................... 1.5%
Cash & Equivalents..................................................... 0.1%
<CAPTION>
TOP FIVE SECTORS* 7/31/00
----------------- -------
<S> <C>
Technology............................................................. 43.2%
Financial Services..................................................... 19.3
Consumer Cyclical...................................................... 12.1
Healthcare............................................................. 12.0
Utilities.............................................................. 5.3
------
Total.................................................................. 91.9%
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
TOP 10 STOCKS* 7/31/00
-------------- -------
<S> <C>
Cisco Systems........................................................... 5.5%
Intel................................................................... 5.4
Pfizer.................................................................. 4.9
Tyco International...................................................... 4.3
Citigroup............................................................... 4.3
General Electric........................................................ 4.0
Solectron............................................................... 4.0
Dell Computer........................................................... 3.8
Schering-Plough......................................................... 3.7
AT&T Liberty Media...................................................... 3.3
----
Total................................................................... 43.2%
</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-3
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY PAINEWEBBER GROWTH FUND PROXY
(A SERIES OF PAINEWEBBER OLYMPUS FUND)
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 1, 2001
THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER OLYMPUS
FUND ("TRUST") ON BEHALF OF THE FUND LISTED ABOVE, A SERIES OF THE TRUST. The
undersigned hereby appoints as proxies Robyn Green and Keith Weller, and each of
them (with the power of substitution) to vote for the undersigned all shares of
beneficial interest of the undersigned in the Fund listed above 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.
VOTE TODAY BY MAIL, TOUCH-TONE PHONE OR THE INTERNET. CALL TOLL FREE 1-800-597-
7836 OR LOG ON TO https://vote.proxy-direct.com. SEE THE ENCLOSED INSERT FOR
FURTHER INSTRUCTIONS.
-----------------------------------------
CONTROL NUMBER: 999 9999 9999 999
-----------------------------------------
NOTE: If shares are held by an individual,
sign your name exactly as it appears on
this card. If shares are held jointly,
either party may sign, but the name of the
party signing should conform exactly to
the name shown on this proxy card. If
shares are held by a corporation,
partnership or similar account, the name
and the capacity of the individual signing
the proxy card should be indicated --for
example: "ABC Corp., John Doe, Treasurer."
------------------------------------------
Signature
------------------------------------------
Signature (if held jointly)
------------------------------------------
Date
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
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: [X]
FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan of Reorganization [ ] [ ] [ ]
and Termination that provides for the reorganization
of PaineWebber Growth Fund, a series of PaineWebber
Olympus Fund, into PACE Large Company Growth Equity
Investments, a series of PaineWebber PACE Select
Advisors Trust.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>
YOUR PROXY VOTE IS IMPORTANT!
---------
AND NOW YOU CAN VOTE YOUR PROXY
ON THE PHONE OR ON
THE INTERNET.
[graphic] IT SAVES MONEY! Telephone and Internet voting saves postage
costs. Savings which can help to minimize expenses.
IT SAVES TIME! Telephone and Internet voting is
instantaneous -- 24 hours a day.
IT'S EASY! Just follow these simple steps:
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
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or internet.
6. If you have any questions regarding the meeting agenda
or the execution of your proxy, please call.
1-877-388-2844.
