PAINEWEBBER PACE SELECT ADVISORS TRUST, 497, 2000-12-29

PAINEWEBBER PACE SELECT ADVISORS TRUST
497, 2000-12-29

Previous: PAINEWEBBER PACE SELECT ADVISORS TRUST, 497, 2000-12-29

Next: ROULSTON FUNDS, NT-NSAR, 2000-12-29

<PAGE>

PAINEWEBBER MID CAP FUND
(THE SOLE SERIES OF PAINEWEBBER MANAGED ASSETS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

December 28, 2000

Dear Shareholder,

The enclosed proxy statement and prospectus asks for your vote on a
proposal that will determine the future of PaineWebber Mid Cap Fund.

We are seeking shareholder approval to merge Mid Cap Fund into PACE
Small/Medium 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 Mid Cap Fund shares, and Mid Cap Fund will
cease operations. The expenses of each class of shares of the PACE Fund
following the merger would be lower than the current expenses of the
corresponding class of Mid Cap Fund.

Mitchell Hutchins is the investment manager for both Funds and has retained
Delaware Management Company, an unaffiliated firm, to manage each Fund's
assets. The two Funds have similar investment objectives and policies. Each
Fund seeks capital appreciation. PACE Small/Medium Company Growth Fund pursues
this objective by investing primarily in stocks of "emerging growth" companies
that are believed to have potential for high future earnings growth relative
to the overall market and that have total market capitalizations of less than
$4 billion at the time of purchase. Mid Cap Fund invests primarily in common
stocks of medium capitalization companies that are believed to have
substantial potential for capital growth and that have market capitalizations
between $750 million and $8 billion.

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 MID CAP FUND PROPOSED MERGER
QUESTIONS AND ANSWERS

On October 6, 2000, the Board of Trustees of PaineWebber Managed Assets
Trust ("Managed Assets Trust"), on behalf of its series, PaineWebber Mid Cap
Fund ("Mid Cap Fund"), unanimously approved the merger of Mid Cap Fund into
PACE Small/Medium Company Growth Equity Investments ("PACE Small/Medium
Company Growth Fund"), a series of PaineWebber PACE Select Advisors Trust
("PACE Trust"). This merger, however, can occur only if Mid Cap Fund's
shareholders approve the transaction. Here are answers to some of the most
commonly asked questions.

WHAT IS A MERGER?

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

WHY IS THIS MERGER BEING PROPOSED?

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

Mid Cap Fund and PACE Small/Medium Company Growth Fund have similar
investment objectives and policies in that each seeks capital appreciation and
invests primarily in stocks of companies with limited market capitalizations.
PACE Small/Medium Company Growth Fund, however, invests primarily in companies
with market capitalizations of less than $4.0 billion at the time of purchase,
while Mid Cap Fund invests primarily in stocks of companies with market
capitalizations between $750 million and $8.0 billion at the time of purchase.
PACE Small/Medium Company Growth Fund also may invest, to a limited extent, in
stocks of companies with larger total market capitalizations and other
securities. Similarly, Mid Cap Fund may invest, to a lesser extent, in stocks
of larger and smaller companies and in bonds and money market instruments.
(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.)

Effective October 10, 2000, the same sub-adviser -- Delaware Management
Company -- manages the assets of each Fund. The sub-adviser uses the same
basic investment strategy for both Funds. As a result, the two Funds are now
managed in a similar manner, except for the overlapping but different market
capitalization limits on the companies in which each Fund primarily invests.

Mitchell Hutchins and Managed Assets Trust's Board believe that Mid Cap
Fund's shareholders will not be adversely affected by the lower market
capitalization limit for PACE Small/Medium Company Growth Fund's primary
investments because that Fund also may invest, to a limited extent, in stocks
of companies with market capitalizations larger than $4.0 billion at the time
of purchase.

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 Small/Medium Company Growth Fund having a
total value equal to the total value of your Mid Cap 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 Small/Medium Company Growth Fund issued in
the merger will otherwise have characteristics that are substantially
identical to the corresponding class of shares of Mid Cap Fund.

1
<PAGE>

IF I CURRENTLY ELECT TO RECEIVE MY MID CAP 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 SMALL/MEDIUM COMPANY GROWTH FUND SHARES
AFTER THE MERGER?

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

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

The merger has been structured as a tax-free transaction, which means that
no gain or loss will be recognized by either Fund as a direct result of the
merger. This means that you will not realize any gain or loss on your receipt
of PACE Small/Medium Company Growth Fund shares, and that your basis for the
PACE Small/Medium Company Growth Fund shares you receive in the merger will be
the same as the basis for your Mid Cap Fund shares.

Immediately prior to the merger, Mid Cap 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 Mid Cap 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 Mid Cap Fund, if the merger takes
place, you may receive two taxable distributions of ordinary income and net
capital gain, if any, within a short period of time.

HOW WILL THE MERGER AFFECT FUND EXPENSES?

The post-merger combined Fund is expected to have overall operating
expenses that are lower than the current operating expenses of Mid Cap Fund
due to economies of scale and a lower management fee paid by PACE Small/Medium
Company Growth Fund to Mitchell Hutchins. (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 SMALL/MEDIUM COMPANY GROWTH FUND AND MID CAP FUND PERFORMED?

The following tables show the average annual total returns over several
time periods for each class of shares of Mid Cap Fund and the Class P shares
of PACE Small/Medium 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-adviser did not manage Mid Cap Fund's
assets during the periods shown and did not manage the assets of PACE
Small/Medium Company Growth Fund prior to December 17, 1996.

The table for Mid Cap 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 Small/Medium 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 Small/Medium 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.

The different sales charges, expenses and program fees applicable to the
different classes of shares of the two Funds and the different periods for
which performance is shown after the 1999 calendar year make it difficult to
compare the Funds' performance. However, because the Class Y shares of Mid Cap
Fund are not subject to any sales charges or 12b-1 fees, they are most
comparable to the Class P shares of PACE Small/Medium Company Growth Fund. The
performance of Mid Cap Fund's Class Y shares for the 1999 calendar year can
thus

2
<PAGE>

be compared to that of the Class P shares of PACE Small/Medium Company Growth
Fund before deduction of the PACESM Select Advisors Program fee, as shown in
the footnote to that Fund's table.

PACE SMALL/MEDIUM COMPANY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS CLASS P RUSSELL 2500
(INCEPTION DATE) (8/24/95) GROWTH INDEX
--------------------------------------------------------- --------- ------------
<S> <C> <C>
One Year................................................. 76.09% 55.48%
Life of Class............................................ 23.15% 19.95%
</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 78.75% for the
year ended December 31, 1999 and 25.02% for "Life of Class."

MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS CLASS A CLASS B* CLASS C CLASS Y S&P MIDCAP
(INCEPTION DATE) (4/7/92) (4/7/92) (7/2/92) (3/17/98) 400 INDEX
-------------------------------- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
One Year........................ 41.65% 41.96% 46.17% 48.80% 14.72%
Five Years...................... 22.60% 22.54% 22.78% N/A 23.05%
Life of Class................... 17.51% 17.45% 19.06% 26.02% **
</TABLE>
----------------
* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the S&P MidCap 400 Index for the life of
each class were as follows: Class A and Class B -- 17.48%; Class C --
18.62%; and Class Y -- 12.60%.

WHEN WILL THE PROPOSED MERGER OCCUR?

The Funds expect to merge in February 2001, assuming Mid Cap Fund
shareholder approval at the special meeting scheduled to be held on February
1, 2001.

CAN I SELL OR EXCHANGE MY MID CAP FUND SHARES BEFORE THE MERGER?

If you do not wish to receive shares of PACE Small/Medium Company Growth
Fund, you are free to sell or exchange your Mid Cap 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 Mid Cap 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 MID CAP FUND
(THE SOLE SERIES OF PAINEWEBBER MANAGED ASSETS TRUST)
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 Mid Cap Fund ("Mid Cap Fund"), the sole series of PaineWebber
Managed Assets Trust ("Managed Assets Trust"), will be held on February 1,
2001, at 1285 Avenue of the Americas, 14th Floor, New York, New York, 10019-
6028, at 12:00 noon, 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 Mid Cap
Fund into PACE Small/Medium Company Growth Equity Investments ("PACE
Small/Medium Company Growth Fund"), a series of PaineWebber PACE Select
Advisors Trust ("PACE Trust"). Pursuant to the Plan, Mid Cap Fund will
transfer all its assets to PACE Small/Medium Company Growth Fund, which
will assume all the stated liabilities of Mid Cap Fund, and PACE Trust
will issue to each Mid Cap Fund shareholder the number of full and
fractional shares of the applicable class of PACE Small/Medium 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 Mid Cap 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
Managed Assets Trust, or vote your shares by telephone or the internet.
Returning your proxy promptly is important to ensure a quorum at the Meeting.
You may revoke your proxy at any time before it is exercised by the subsequent
execution and submission of a revised proxy, by giving written notice of
revocation to Managed Assets Trust or by voting in person at the Meeting.

By Order of the Board of Trustees,

Dianne E. O'Donnell
SECRETARY

December 28, 2000
51 West 52nd Street
New York, New York 10019-6114

i
<PAGE>

YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.

Please indicate your voting instructions on the enclosed proxy card, sign
and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL
BE VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the
additional expense of further solicitation, we ask your cooperation in
mailing your proxy card promptly. As an alternative to using the paper proxy
card to vote, you may vote shares that are registered in your name, as well
as shares held in "street name" through a broker, via the internet or
telephone. To vote in this manner, you will need the 14-digit "control"
number(s) that appear on your proxy card(s).

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

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

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

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 Account...................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78.... Jane B. Doe

Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA................................ John B. Smith
(2) Estate of John B. Smith................ John B. Smith, Jr., Executor
</TABLE>

ii
<PAGE>

PAINEWEBBER MID CAP FUND
(THE SOLE SERIES OF PAINEWEBBER MANAGED ASSETS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568

PACE SMALL/MEDIUM 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 28, 2000

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

This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Mid Cap Fund ("Mid Cap Fund"), a series of PaineWebber Managed
Assets Trust ("Managed Assets Trust"), 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 12:00 noon, Eastern time (such meeting and any
adjournments thereof are referred to collectively as the "Meeting"). At the
Meeting, the shareholders of Mid Cap Fund will be asked to consider and
approve the following proposal:

A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF MANAGED ASSETS TRUST HAS
UNANIMOUSLY APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF MID CAP FUND
AND ITS SHAREHOLDERS. (Mid Cap Fund and PACE Small/Medium Company Growth Fund
sometimes are referred to individually as a "Fund" and together as "Funds.")

Pursuant to the Plan, Mid Cap Fund will transfer all its assets to PACE
Small/Medium Company Growth Fund, which will assume all the stated liabilities
of Mid Cap Fund, and PACE Trust will issue to each Mid Cap Fund shareholder
the number of full and fractional shares of beneficial interest in the
applicable class of PACE Small/Medium 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 Mid Cap Fund (the "Reorganization"). The value
of each Mid Cap Fund shareholder's account with PACE Small/Medium Company
Growth Fund immediately after the Reorganization will be the same as the value
of such shareholder's account with Mid Cap Fund immediately prior to the
Reorganization. As a result of the Reorganization, shareholders of each class
of shares of Mid Cap Fund will become shareholders of the corresponding class
of shares of PACE Small/Medium Company Growth Fund. No sales charges will be
assessed on the shares of PACE Small/Medium Company Growth Fund issued in
connection with the Reorganization.

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>

PACE Small/Medium Company Growth Fund is a diversified series of PACE
Trust, which is an open-end management investment company currently comprised
of twelve series. PACE Small/Medium Company Growth Fund's investment objective
is capital appreciation. The Fund seeks to achieve its investment objective by
investing primarily in stocks of "emerging growth" companies that are believed
to have potential for high future earnings growth relative to the overall
market and that have total market capitalizations of less than $4.0 billion at
the time of purchase. The Fund may invest, to a limited extent, in stocks of
companies with larger total market capitalizations and other securities.

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

A Statement of Additional Information ("SAI") dated December 28, 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 Small/Medium 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 Mid Cap 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 Mid Cap Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000, are
available without charge by writing either Mid Cap Fund or PACE Small/Medium
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 Managed Assets Trust. Copies of such
material may also be obtained, after paying a duplicating fee, from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, DC, 20549, or by electronic
request at the following e-mail address: [email protected]. Additional
information about the Funds also may be obtained on the Web at
http://www.painewebber.com.

ii
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION TITLE PAGE
------------- ----
<S> <C>
INTRODUCTION............................................................. 1
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION.......................................... 2
SYNOPSIS................................................................. 2
The Proposed Reorganization............................................ 2
Comparative Fee Table.................................................. 3
Summary Comparison of the Funds........................................ 4
COMPARISON OF PRINCIPAL RISK FACTORS..................................... 5
Primary Difference in the Investment Risks of the Funds................ 6
COMPARISON OF THE FUNDS.................................................. 6
Investment Objectives.................................................. 6
Investment Policies.................................................... 6
Operations of PACE Small/Medium Company Growth Fund Following the
Reorganization........................................................ 7
Performance............................................................ 8
Sales Charges.......................................................... 9
Dividends and Other Distributions...................................... 10
Taxes.................................................................. 10
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF PACE
SMALL/MEDIUM COMPANY GROWTH FUND........................................ 10
Flexible Pricing....................................................... 10
Buying Shares.......................................................... 14
Selling Shares......................................................... 15
Exchanging Shares...................................................... 16
Pricing and Valuation.................................................. 16
MANAGEMENT............................................................... 17
Investment Manager and Investment Adviser.............................. 17
Sub-Adviser............................................................ 17
Advisory Fees and Fund Expenses........................................ 18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION.......................... 19
Reasons for the Reorganization......................................... 19
Terms of the Reorganization............................................ 21
Description of Securities to be Issued................................. 22
Temporary Waiver of Investment Restrictions............................ 22
Federal Income Tax Considerations...................................... 22
Required Vote.......................................................... 23
ORGANIZATION OF THE FUNDS................................................ 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 SMALL/MEDIUM COMPANY GROWTH
FUND'S PERFORMANCE...................................................... C-1
</TABLE>

iii
<PAGE>

INTRODUCTION

This Proxy Statement/Prospectus is being furnished to shareholders of Mid
Cap Fund, a series of Managed Assets Trust, in connection with the
solicitation of proxies by the Board for use at the Meeting. All properly
executed and unrevoked proxies received in time for the Meeting will be voted
as instructed by shareholders. Approval of the proposal requires the
affirmative vote of the lesser of (1) 67% or more of the shares of Mid Cap
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 Mid Cap Fund shareholders entitled to
cast a majority of all the votes entitled to be cast at the Meeting will
constitute a quorum. If a quorum is not present at the Meeting or a quorum is
present but sufficient votes to approve the proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of the shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote "FOR" the proposal in favor of such an adjournment
and will vote those proxies required to be voted "AGAINST" the proposal
against such adjournment.

Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners
or other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present at the Meeting for quorum purposes but will not be
(i) considered votes cast at the Meeting or (ii) voted for or against any
adjournment or proposal. Abstentions and broker non-votes are effectively
votes against the proposal.

Any person giving a proxy has the power to revoke it at any time prior to
its exercise by executing a superseding proxy or by submitting a written
notice of revocation to the Secretary of Managed Assets Trust ("Secretary").
To be effective, such revocation must be received by the Secretary prior to
the Meeting. In addition, although mere attendance at the Meeting will not
revoke a proxy, a shareholder present at the Meeting may withdraw his or her
proxy by voting in person.

Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Managed Assets Trust intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December 28,
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, Mid
Cap Fund had 14,861,101 shares issued and outstanding, consisting of
10,620,793 Class A shares, 2,436,571 Class B shares, 1,766,010 Class C shares,
and 37,727 Class Y shares. Shareholders are entitled to one vote for each full
share held and a fractional vote for each fractional share held. Except as set
forth in Appendix B, as of the Record Date, Mitchell Hutchins, the investment
manager, administrator and distributor of both Funds, does not know of any
person who owns beneficially or of record 5% or more of any class of shares of
either Fund. As of that same date, the Trustees and officers, as a group,
owned less than 1% of any class of either Fund's outstanding shares.

Managed Assets Trust has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the
Meeting. Managed Assets Trust expects to solicit proxies by mail, telephone
and via the internet. Managed Assets Trust officers and employees of Mitchell
Hutchins who assist in the proxy solicitation will not receive any additional
or special compensation for any such efforts. SCC will be paid approximately
$25,600 for proxy solicitation services. Managed Assets Trust will request
broker/dealer firms, custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of the shares held of record by such
persons. Mitchell Hutchins may reimburse such broker/dealer firms, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation.

1
<PAGE>

PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
AND TERMINATION.

SYNOPSIS

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

THE PROPOSED REORGANIZATION

The Boards of PACE Trust and Managed Assets Trust, including their
respective Trustees who are not "interested persons," as that term is defined
in the Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Trustees"), considered and approved the Plan at meetings held on September 13,
2000 and October 6, 2000, respectively. The Plan provides for the acquisition
by PACE Small/Medium Company Growth Fund of all of Mid Cap Fund's assets in
exchange for PACE Small/Medium Company Growth Fund shares and the assumption
by PACE Small/Medium Company Growth Fund of all of Mid Cap Fund's stated
liabilities. Mid Cap Fund will then distribute the PACE Small/Medium Company
Growth Fund shares to Mid Cap Fund's shareholders, by class, so that each Mid
Cap Fund shareholder will receive the number of full and fractional shares of
the corresponding class of PACE Small/Medium Company Growth Fund equal in
aggregate NAV to the aggregate NAV of the shares of Mid Cap 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 16, 2001, or on
such later date as the conditions to consummation of the Reorganization are
satisfied ("Closing Date"). Mid Cap Fund will be terminated as soon as is
practicable after the Closing Date, and it is expected that Managed Assets
Trust will be de-registered as a management investment company. See
"Additional Information About the Reorganization," below.

Managed Assets Trust and PACE Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP to the effect that the Reorganization will
constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) 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 Mid Cap 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
Mid Cap Fund prior to the Closing Date. See "Additional Information About the
Reorganization -- Federal Income Tax Considerations," below.

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

2
<PAGE>

COMPARATIVE FEE TABLE

The table below describes the fees and expenses that you would pay if you
buy and hold Mid Cap Fund shares or PACE Small/Medium Company Growth Fund
shares before the Reorganization and PACE Small/Medium 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 Small/Medium Company Growth Fund and for the fiscal year
ended August 31, 2000 for Mid Cap Fund. The PRO FORMA information reflects the
anticipated effects of the Reorganization.

<TABLE>
<CAPTION>
COMBINED PACE
PACE SMALL/MEDIUM SMALL/MEDIUM COMPANY
MID CAP FUND COMPANY GROWTH FUND 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> <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*.......... 1.00% 1.00% 1.00% 1.00% 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**..... 0.25% 0.29% 0.26% 0.24% 0.16% 0.18% 0.17% 0.15% 0.16% 0.18% 0.17% 0.15%
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Annual
Fund Operating
Expenses....... 1.50% 2.29% 2.26% 1.24% 1.21% 1.98% 1.97% 0.95% 1.21% 1.98% 1.97% 0.95%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
----------------

* For both Funds, "Management Fees" include fees paid to Mitchell Hutchins
for administrative services.

** "Other Expenses" for PACE Small/Medium 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.

3
<PAGE>

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

The example below assumes that you invest $10,000 in each Fund (including
the combined Fund) for the time periods indicated and then sell all of your
shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same. 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>
MID CAP FUND
Class A....................................... $596 $ 903 $1,232 $2,160
Class B (assuming sale of all shares at end of
period)...................................... 732 1,015 1,425 2,246
Class B (assuming no sale of shares).......... 232 715 1,225 2,246
Class C (assuming sale of all shares at end of
period)...................................... 329 706 1,210 2,595
Class C (assuming no sale of shares).......... 229 706 1,210 2,595
Class Y....................................... 126 393 681 1,500
PACE SMALL/MEDIUM COMPANY GROWTH FUND
Class A....................................... $568 $ 817 $1,085 $1,850
Class B (assuming sale of all shares at end of
period)...................................... 701 921 1,268 1,925
Class B (assuming no sale of shares).......... 201 621 1,068 1,925
Class C (assuming sale of all shares at end of
period)...................................... 300 618 1,062 2,296
Class C (assuming no sale of shares).......... 200 618 1,062 2,296
Class Y....................................... 97 303 525 1,166
PRO FORMA PACE SMALL/MEDIUM COMPANY GROWTH
FUND
Class A....................................... $568 $ 817 $1,085 $1,850
Class B (assuming sale of all shares at end of
period)...................................... 701 921 1,268 1,925
Class B (assuming no sale of shares).......... 201 621 1,068 1,925
Class C (assuming sale of all shares at end of
period)...................................... 300 618 1,062 2,296
Class C (assuming no sale of shares).......... 200 618 1,062 2,296
Class Y....................................... 97 303 525 1,166
</TABLE>

SUMMARY COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES AND POLICIES

Mid Cap Fund and PACE Small/Medium Company Growth Fund have similar
investment objectives, policies and overall risk characteristics in that both
Funds seek capital appreciation and invest primarily in stocks of companies
with limited market capitalizations. PACE Small/Medium Company Growth Fund
invests primarily in equity securities of "emerging growth" companies that are
believed to have potential for high future earnings growth relative to the
overall market and that have total market capitalizations of less than $4.0
billion at the time of purchase. PACE Small/Medium Company Growth Fund may
invest, to a limited extent, in stocks of companies with larger total market
capitalizations and other securities, including securities convertible into
stocks. Mid Cap Fund invests primarily in equity securities of medium
capitalization ("mid cap") companies that are believed to have substantial
potential for capital growth. Mid Cap Fund considers companies with market
capitalizations of between $750 million and $8.0 billion at the time of
purchase to be mid cap. Mid Cap Fund also may invest, to a lesser extent, in
stocks of larger and smaller companies and in bonds and money market
instruments.

INVESTMENT ADVISORY SERVICES

Mitchell Hutchins has served as investment manager and administrator for
PACE Small/Medium 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

4
<PAGE>

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
recommends to the Board of PACE Trust whether agreements with sub-advisers
should be renewed, modified or terminated. The Fund's current sub-adviser --
Delaware Management Company -- has managed the Fund's investment portfolio
since December 17, 1996. Prior to that date, a different sub-adviser managed
the Fund's assets.

Mitchell Hutchins has served as the investment manager or investment
adviser and as administrator for Mid Cap Fund since its inception in April
1992. On October 10, 2000, the Fund's current sub-adviser -- Delaware
Management Company -- assumed responsibility for managing the assets of the
Fund. From May 1, 1998 to October 10, 2000, Mitchell Hutchins managed the
Fund's assets, and prior to May 1, 1998, a different sub-adviser managed 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 Small/Medium 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
Small/Medium 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 Mid Cap Fund. You may exchange Class A, Class B or Class C shares
of PACE Small/Medium 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 the 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.

LIMITED CAPITALIZATION RISK -- Securities of mid and small capitalization
companies generally involve greater risk than securities of larger
capitalization companies because they may be more vulnerable to adverse
business or economic developments. Mid and small cap companies also may have
limited product lines, markets or financial resources, and they may be
dependent on a relatively small management group. Securities of mid and small
cap companies may be less liquid and more volatile than securities of larger
companies or the market averages in general. In addition, small cap companies
may not be well-known to the investing public, may not have institutional
ownership and may have only cyclical, static or moderate growth prospects. In
general, all of these risks are greater for small cap companies than for mid
cap companies.

DERIVATIVES RISK -- The value of "derivatives" -- so-called because their
value "derives" from the value of an underlying asset, reference rate or
index -- may rise or fall more rapidly than other investments. For some
derivatives, it is possible for a Fund to lose more than the amount it
invested in the derivative. Options and futures contracts are examples of
derivatives. A Fund's use of derivatives may not succeed for various reasons,
including unexpected changes in the values of the derivatives or the assets
underlying them. Also, if a Fund uses derivatives to adjust or "hedge" the
overall risk of its portfolio, the hedge may not succeed if changes in the
values of the derivatives are not matched by opposite changes in the values of
the assets being hedged.

5
<PAGE>

PRIMARY DIFFERENCE 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. Mid Cap Fund may invest a larger portion of its total assets (up to
35%) in these securities than PACE Small/Medium Company Growth Fund (up to 5%)
and is more exposed to foreign investing risk to the extent it does so.

COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES

The Funds have similar investment objectives. PACE Small/Medium Company
Growth Fund's investment objective is capital appreciation. Mid Cap Fund's
investment objective is long-term capital appreciation.

INVESTMENT POLICIES

The Funds have similar investment policies in that each Fund invests in
stocks of companies with limited market capitalizations. PACE Small/Medium
Company Growth Fund invests primarily in stocks of "emerging growth" companies
that are believed to have potential for high future earnings growth relative
to the overall market and that have total market capitalizations of less than
$4.0 billion at the time of purchase. Dividend income is an incidental
consideration in the selection of investments for the Fund. PACE Small/Medium
Company Growth Fund may invest, to a limited extent (up to 35% of its total
assets), in stocks of companies with larger total market capitalizations and
other securities, including securities convertible into stocks.

Mid Cap Fund invests primarily in common stocks of medium capitalization
companies ("mid cap") that are believed to have substantial potential for
capital growth. Mid Cap Fund considers companies with market capitalizations
of between $750 million and $8.0 billion to be mid cap. Mid Cap Fund also may
invest, to a lesser extent (up to 35% of its total assets), in stocks of
larger or smaller companies and in bonds and money market instruments.

In deciding which stocks to buy for each Fund, Delaware Management Company
follows a "bottom-up" fundamental analysis to identify companies that have
substantially above-average earnings growth because of management changes, new
products, growth of established products or structural changes in the economy.
Delaware Management Company also considers the quality of a company's
management team and the strength of its finances and internal controls in
selecting stocks for each Fund. Although Delaware Management Company follows
companies in a full range of market sectors, it may focus on a limited number
of attractive industries. Delaware Management Company generally sells stocks
that no longer meet its selection criteria, are at risk for fundamental
deterioration or when it identifies more attractive investment opportunities.

SECURITIES OF FOREIGN ISSUERS. Both Funds may invest in U.S. dollar-
denominated securities of foreign companies. PACE Small/Medium Company Growth
Fund must limit these investments to 5% of its total assets, while Mid Cap
Fund may invest up to 35% of its total assets in these securities.

DEBT SECURITIES. Each Fund may invest up to 35% of its total assets in U.S.
government bonds and investment grade corporate 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.

6
<PAGE>

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 Small/Medium Company Growth Fund is normally fully invested in
accordance with its investment objective and policies. However, with the
concurrence of Mitchell Hutchins, PACE Small/Medium 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. Both Funds 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 objective. 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 Mid Cap Fund for the last two fiscal years ended August 31,
2000 and 1999, were 71% and 79%, respectively, while the portfolio turnover
rates for PACE Small/Medium Company Growth Fund's last two fiscal years ended
July 31, 2000 and 1999, were 81% and 102%, respectively.

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

OPERATIONS OF PACE SMALL/MEDIUM COMPANY GROWTH FUND FOLLOWING THE
REORGANIZATION

It is not expected that PACE Small/Medium Company Growth Fund will revise
any of its policies following the Reorganization to reflect those of Mid Cap
Fund. Delaware Management Company has reviewed Mid Cap Fund's current
portfolio and determined that Mid Cap Fund's holdings generally are compatible
with PACE Small/Medium Company Growth Fund's portfolio. As a result, Mitchell
Hutchins believes that, if the Reorganization is approved, a substantial
portion of Mid Cap Fund's assets could be transferred to and held by PACE
Small/Medium Company Growth Fund.

As of December 22, 2000, none of Mid Cap Fund's portfolio holdings were
incompatible with PACE Small/Medium Company Growth Fund's holdings or would
have to be sold if Mid Cap Fund's shareholders approve the Reorganization. It
is expected, however, that some of Mid Cap Fund's holdings may not remain at
the time of the Reorganization due to normal portfolio turnover. The need for
Mid Cap 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.

7
<PAGE>

PERFORMANCE

The following bar chart and table provide information about the performance
of PACE Small/Medium 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 Small/Medium 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 Small/Medium 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 PACE SM Select Advisors Program fee
of 1.50% applicable only to Class P shares. The program fee does not apply to
shares received in the Reorganization. A footnote to this table shows
performance of PACE Small/Medium Company Growth Fund's Class P shares for the
same periods without deduction of this fee. Because all classes of shares
invest in the same portfolio of securities, their annual returns would differ
only to the extent of the different sales charges, expenses and program fees.

The second table that follows the bar chart shows the average annual total
returns over several time periods for Mid Cap 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 Small/Medium Company Growth Fund. The performance of
Mid Cap Fund's Class Y shares for the 1999 calendar year can thus be compared
to that of the Class P shares of PACE Small/Medium Company Growth Fund before
deduction of the PACE SM Select Advisors Program fee, as shown in the footnote
to that Fund's table.

The tables also compare each Fund's returns to returns of a broad-based
market index that is unmanaged and, therefore, does not reflect the deduction
of any fees or expenses. The two Funds have historically used different
indices -- the Standard & Poor's 400 MidCap Index for Mid Cap Fund and the
Russell 2500 Growth Index for PACE Small/Medium 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 because, during the
periods shown, Mitchell Hutchins or a different sub-adviser managed the assets
of Mid Cap Fund and, prior to December 17, 1996, a different sub-adviser
managed the assets of PACE Small/Medium Company Growth Fund.

8
<PAGE>

PACE SMALL/MEDIUM COMPANY GROWTH FUND -- TOTAL RETURN ON CLASS P SHARES (1996
IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

[GRAPH]

1996 7.36%
1997 21.73%
1998 14.86%
1999 78.75%

Total return January 1 to September 30, 2000 -- 20.94%

Best quarter during years shown: 4th quarter, 1999 -- 38.15%
Worst quarter during years shown: 3rd quarter, 1998 -- (15.44)%

PACE SMALL/MEDIUM COMPANY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS P RUSSELL 2500 S&P 400
CLASS (8/24/95) GROWTH INDEX MIDCAP INDEX
(INCEPTION DATE) --------- ------------ ------------
---------
<S> <C> <C> <C>
One Year.................................... 76.09% 55.48% 14.72%
Life of Class............................... 23.15% 19.95% 20.43%
</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 78.75%
for the year ended December 31, 1999 and 25.02% for "Life of Class."

MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS A CLASS B* CLASS C CLASS Y S&P 400 RUSSELL 2500
CLASS (4/7/92) (4/7/92) (7/2/92) (3/17/98) MIDCAP INDEX GROWTH INDEX
(INCEPTION DATE) -------- -------- -------- --------- ------------ ------------
---------
<S> <C> <C> <C> <C> <C> <C>
One Year........ 41.65% 41.96% 46.17% 48.80% 14.72% 55.48%
Five Years...... 22.60% 22.54% 22.78% N/A 23.05% 23.10%
Life of Class... 17.51% 17.45% 19.06% 26.02% ** **
</TABLE>
----------------
* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the S&P MidCap 400 Index and the Russell
2500 Growth Index for the life of each class were as follows: Class A and
Class B -- 17.48% and 16.82%; Class C -- 18.62% and 19.12%; and Class Y --
12.60% and 23.28%, respectively.

SALES CHARGES

No sales charges apply when Mid Cap Fund shareholders receive shares of
PACE Small/Medium Company Growth Fund in connection with the Reorganization.

9
<PAGE>

DIVIDENDS AND OTHER DISTRIBUTIONS

Both Funds normally declare and pay dividends and distribute substantially
all of their 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 Small/Medium Company Growth Fund, Class P
shares) would have the highest dividends.

As a shareholder of PACE Small/Medium 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 Mid Cap 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, Mid Cap Fund will distribute substantially
all of its undistributed net investment income, net capital gain, and net
short-term capital gain, if any, in order to continue to maintain its tax
status as a regulated investment company.

TAXES

The dividends that you receive from either Fund generally are subject to
federal income tax regardless of whether you receive them in additional Fund
shares or in cash. If you hold Fund shares through a tax-exempt account or
plan, such as an IRA or 401(k) plan, dividends on your shares generally will
not be subject to tax.

When you sell Fund shares, you generally will be subject to federal income
tax on any gain you realize. If you exchange a Fund's shares for shares of
another PaineWebber mutual fund, the transaction will be treated as a sale of
the first fund's shares, and any gain will be subject to federal income tax.

Any distribution of capital gains may be taxed at a lower rate than
ordinary income, depending on whether the Fund held the assets that generated
the gains for more than 12 months. A Fund will tell you how you should treat
its dividends for tax purposes.

FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING
SHARES OF PACE SMALL/MEDIUM COMPANY GROWTH FUND

FLEXIBLE PRICING

PACE Small/Medium 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 Small/Medium 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 Mid Cap Fund. Prior to November
27, 2000, the PACE Small/Medium Company Growth Fund offered only Class P
shares, which are available only to participants in the PaineWebber PACE SM
Select Advisors Program.

No sales charges apply when Mid Cap Fund shareholders receive Class A,
Class B, Class C or Class Y shares of PACE Small/Medium Company Growth Fund as
part of the Reorganization. PACE Small/Medium 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 Small/Medium 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 Mid Cap Fund's Class A, Class B and Class C

10
<PAGE>

shares. Because the 12b-1 distribution fees for Class B and Class C shares are
paid out of the Fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.

CLASS A SHARES

Class A shares have a front-end sales charge that is included in the
offering price of the Class A shares. This sales charge is not invested in the
Fund. Class A shares pay an annual 12b-1 service fee of 0.25% of average net
assets, but they pay no 12b-1 distribution fees. The ongoing expenses for
Class A shares are lower than for Class B and Class C shares.

The Class A sales charges for both Funds are described in the following
table.

CLASS A SALES CHARGES

<TABLE>
<CAPTION>
REALLOWANCE TO
SALES CHARGE AS A PERCENTAGE OF: SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE*
-------------------- -------------- ------------------- -----------------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 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.

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.

11
<PAGE>

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.

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'
IF YOU SELL SHARES WITHIN: NET ASSET VALUE IS MULTIPLIED:
-------------------------- -------------------------------
<S> <C>
1st year since purchase...................... 5%
2nd year since purchase...................... 4
3rd year since purchase...................... 3
4th year since purchase...................... 2
5th year since purchase...................... 2
6th year since purchase...................... 1
7th year since purchase...................... None
</TABLE>

12
<PAGE>

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 Small/Medium 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 Mid Cap Fund and any other PaineWebber fund
whose shares you exchanged for Class B shares of Mid Cap 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.

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 Small/Medium 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 Mid Cap Fund and any other
PaineWebber fund whose shares you exchanged for shares of Mid Cap 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.

13
<PAGE>

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 lower than the ongoing
expenses of Class A, Class B or Class C shares.

BUYING SHARES

If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase Fund shares through your Financial Advisor. Otherwise,
you can invest in the Fund through the Fund's transfer agent, PFPC Inc. You
can obtain an application by calling 1-800-647-1568. You must complete and
sign the application and mail it, along with a check, to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

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

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

MINIMUM INVESTMENTS

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

The Fund may waive or reduce these amounts for:

. Employees of PaineWebber or its affiliates; or

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

14
<PAGE>

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;

. The Fund's name;

. The Fund account number;

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

. A guarantee of each registered owner's signature. A signature
guarantee may be obtained from a financial institution, broker,
dealer or clearing agency that is a participant in one of the
medallion programs recognized by the Securities Transfer Agents
Association. These are: Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The Fund will not
accept signature guarantees that are not a part of these programs.

Mail the letter to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you sell Class A shares and then repurchase Class A shares of the Fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

It costs the Fund money to maintain shareholder accounts. Therefore, the
Fund reserves the right to repurchase all shares in any account that has a net
asset value of less than $500. If the Fund elects to do this

15
<PAGE>

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;

. 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

16
<PAGE>

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 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 Small/Medium 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.

As investment manager for Mid Cap Fund, Mitchell Hutchins recommends sub-
advisers to the Board of Managed Assets Trust and monitors and reviews the
performance of those sub-advisers. Since October 10, 2000, Mitchell Hutchins
and the sub-adviser have provided investment management services to the Fund
under interim contracts approved by the Board of Managed Assets Trust. Prior
to October 10, 2000, Mitchell Hutchins or a different sub-adviser managed Mid
Cap Fund's assets.

SUB-ADVISER

Delaware Management Company serves as the sub-adviser for each Fund.
Delaware Management Company is located at One Commerce Square, Philadelphia,
Pennsylvania 19103. Delaware Management Company and its predecessors have been
managing funds for affiliated organizations in the financial services
industry, including insurance and investment management, since 1938. As of
September 30, 2000, Delaware Management Company and its affiliates had over
$80 billion in assets under management.

Gerald S. Frey, a vice president of Delaware Management Company, is
primarily responsible for the day-to-day management of each Fund. He has held
his responsibilities for PACE Small/Medium Company Growth Fund since December
1996 and for Mid Cap Fund since October 10, 2000. Prior to joining the group
of companies of which Delaware Management Company is a part in 1996, Mr. Frey
was a senior director with Morgan Grenfell Capital Management, Incorporated in
New York. He has 18 years of experience in the money management business.

17
<PAGE>

In making investment decisions for each Fund, Mr. Frey regularly consults
with other members of the Delaware Management Company team: John A. Heffern,
Marshall T. Bassett, Jeffrey Hynoski, Steven Lampe, Lori F. Wachs and Frank
Houghton.

Mr. Heffern joined Delaware Management Company in 1997 and serves as a vice
president. Previously, he was a senior vice president, equity research at
NatWest Security Corporation's Specialty Financial Services unit. Prior to
that, he was a principal and senior regional bank analyst at Alex. Brown &
Sons.

Mr. Bassett joined Delaware Management Company in 1997 and serves as a vice
president. Previously, he was employed by Morgan Stanley Asset Management's
Emerging Growth Group, most recently as a vice president, where he analyzed
small growth companies. Prior to that, he was a trust officer at Sovran Bank
and Trust Company.

Mr. Hynoski joined Delaware Management Company in 1998 and serves as a vice
president. Previously, he held the position of vice president with Bessemer
Trust since 1993. Prior to that, he served as an analyst for Lord Abbett and
Cowen Asset Management.

Mr. Lampe joined Delaware Management Company in 1995 and serves as a vice
president. Prior to that, he held a manager position with Price Waterhouse
servicing the financial services industry.

Ms. Wachs joined Delaware Management Company in 1992 and serves as an
assistant vice president. Previously, she was an equity analyst at Goldman
Sachs & Company for two years.

Mr. Houghton joined Delaware Management Company in March 2000 and serves as
a vice president and portfolio manager. Previously, he was a vice president
and portfolio manager with Lynch & Mayer, a Delaware Management Company
affiliate, since 1990.

ADVISORY FEES AND FUND EXPENSES

PACE Small/Medium Company Growth Fund pays fees to Mitchell Hutchins for
management and administration services 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. During the fiscal year ended July 31, 2000, PACE
Small/Medium Company Growth Fund paid Mitchell Hutchins at the slightly lower
effective annual rate of 0.79% of the Fund's average daily net assets because
Mitchell Hutchins waived a portion of its fee.

Mid Cap Fund pays fees to Mitchell Hutchins for management and
administration services at the annual contract rate of 1.00% of the Fund's
average daily net assets. During the fiscal year ended August 31, 2000, Mid
Cap Fund paid Mitchell Hutchins at the slightly lower effective annual rate of
0.99% of the Fund's average daily net assets because Mitchell Hutchins waived
a portion of its fee.

Mitchell Hutchins anticipates that shareholders of each class of shares of
Mid Cap Fund who will become shareholders of the corresponding class of shares
of PACE Small/Medium Company Growth Fund will be subject to total annual
operating expenses that are lower than the expenses they currently pay as
shareholders of Mid Cap Fund due to economies of scale and the lower
management and administrative services fees paid by PACE Small/Medium Company
Growth Fund to Mitchell Hutchins.

18
<PAGE>

ADDITIONAL INFORMATION ABOUT THE REORGANIZATION

REASONS FOR THE REORGANIZATION

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

At the meeting of Managed Assets Trust's Board on October 6, 2000 and in a
series of prior meetings and presentations, Mitchell Hutchins explained to the
Board that it had undertaken an extensive review of whether the best interests
of shareholders of a number of PaineWebber funds, including Mid Cap Fund,
would be served by continuing to operate the funds under their current
arrangements. For Mid Cap 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 PACE Small/Medium Company Growth Fund has a
similar investment objective and, like Mid Cap Fund, invests primarily in
companies with limited market capitalizations. Mitchell Hutchins noted,
however, that PACE Small/Medium Company Growth Fund invests primarily in
companies with market capitalizations of less than $4.0 billion, while Mid Cap
Fund invests primarily in stocks of companies with market capitalizations
between $750 million and $8.0 billion. (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 Mid Cap 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 Small/Medium Company Growth Fund are less than those currently paid by
Mid Cap Fund. Mitchell Hutchins also informed the Board that it anticipated
that current shareholders of each class of shares of Mid Cap Fund who will
become shareholders of the combined Fund if the Reorganization is approved
will be subject to total annual operating expenses that are lower than the
expenses they currently pay as shareholders of Mid Cap Fund due to economies
of scale and the lower management and administrative services fees payable to
Mitchell Hutchins. (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 in the investment
management arrangements for Mid Cap Fund. Mitchell Hutchins advised the Board
of Managed Assets Trust of its belief that the proposed investment management
changes represented its judgment of the best management structure for the Fund
and believed that the changes would be more likely to help Mid Cap 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 recommended to the Board of Managed
Assets Trust that the same sub-adviser that now manages the assets of PACE
Small/Medium Company Growth Fund -- Delaware Management Company -- be retained
on an interim basis to manage the assets of Mid Cap Fund. After consideration
of all the information presented by Mitchell Hutchins, inquiries into the
ability and resources of the proposed sub-adviser to provide appropriate
investment management services and interviews with personnel of Delaware
Management Company, Managed Assets Trust's Board determined to implement the
new investment management arrangements effective October 10, 2000.

19
<PAGE>

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

Mitchell Hutchins then reminded the Board that, once the new investment
management arrangements were in place, Mid Cap Fund and PACE Small/Medium
Company Growth Fund would be managed in a similar manner, except for the
overlapping but different market capitalization limitations on the companies
in which each Fund primarily invests. Mid Cap Fund may (but is not required
to) purchase securities of companies with market capitalizations above $8.0
billion or below $750 million. Except for the different market capitalization
requirements for each Fund's primary investments, the selection criteria for
each Fund's investments would be similar. Mitchell Hutchins also stated that
the two Funds are likely to appeal to the same investors because of their
focus on stocks of companies with relatively limited market capitalizations.
Mitchell Hutchins noted its belief that operating two funds that offer
significantly overlapping investments and similar management would result in
higher expenses and less efficient operations than operating a single fund
that combines the assets of the two original funds. Mitchell Hutchins also
stated its belief that it would not be desirable from a marketing or
administrative perspective to maintain and distribute shares for two similar
funds. Mitchell Hutchins noted, moreover, that PACE Small/Medium 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 Small/Medium Company Growth Fund.

Finally, Mitchell Hutchins reviewed with the Board of Managed Assets Trust
the principal terms of the Plan. Mitchell Hutchins informed the Board that the
Reorganization would be tax-free to Mid Cap 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 Small/Medium Company Growth Fund
shares issued in connection with the Reorganization. Furthermore, Mitchell
Hutchins informed the Board of Managed Assets Trust that, for purposes of
calculating the contingent deferred sales charge, the holding period for the
Class B and Class C shares distributed to Class B and Class C shareholders of
Mid Cap Fund would include the holding period for the shares of Mid Cap Fund
and any other PaineWebber fund shares of the same class that were exchanged
for shares of Mid Cap Fund.

As part of its considerations, the Board of Managed Assets Trust examined a
number of factors with respect to the Reorganization, including: (1) the
compatibility of the Funds' investment objectives, policies and restrictions;
(2) the Funds' respective investment performances; (3) the likely impact of
the Reorganization on the expense ratio of PACE Small/Medium Company Growth
Fund and that expense ratio relative to Mid Cap 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 Mid Cap 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 Mid Cap Fund
and will not dilute their interests; (9) the advisory arrangements in place
for the Funds and the level and quality of investment advisory services
provided or to be provided by Mitchell Hutchins and Delaware Management
Company; 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 Managed Assets Trust, including a majority of its
Independent Trustees, determined that the Reorganization would be in the best
interests of Mid Cap Fund and that the interests of existing Mid Cap Fund
shareholders would not be diluted as a result of the Reorganization.
THEREFORE, THE BOARD OF MANAGED ASSETS TRUST UNANIMOUSLY APPROVED THE
REORGANIZATION AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF
MID CAP 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 Small/Medium Company Growth Fund's acquiring
on the Closing Date all the assets of Mid Cap Fund in exchange solely for PACE
Small/Medium Company Growth Fund shares and PACE Small/Medium Company Growth
Fund's assumption of all of Mid Cap Fund's stated liabilities and (2) the
distribution of those shares to Mid Cap Fund shareholders. Mid Cap 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 Small/Medium Company Growth Fund will
assume from Mid Cap 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 Mid Cap Fund's most recent annual audited financial
statements, or incurred by Mid Cap Fund subsequent to the date of those
financial statements and disclosed in writing to and accepted by PACE Trust
(collectively, the "Liabilities"). Mid Cap Fund agrees in the Plan to use its
best efforts to discharge all of its known Liabilities prior to the Effective
Time.

The value of the Assets to be acquired, and the amount of the Liabilities
to be assumed, by PACE Small/Medium Company Growth Fund and the NAV per share
of each class of PACE Small/Medium 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 Small/Medium Company Growth Fund's current Prospectus and SAI. These
procedures are identical to those used by Mid Cap Fund and described in its
Prospectus and SAI. Mid Cap Fund's NAV will be the value of the Assets to be
acquired by PACE Small/Medium Company Growth Fund, less the amount of the
Liabilities, as of the Valuation Time.

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

The NAV per share of PACE Small/Medium 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. Mid Cap 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 Mid Cap Fund shareholders. If the Reorganization is not
approved by shareholders at the Meeting, Mid Cap Fund will continue to operate
as a series of Managed Assets Trust, and its Board will then consider other
options and alternatives for the future of the Fund, including the liquidation
of the Fund, resubmitting this proposal for shareholder approval or other
appropriate action.

DESCRIPTION OF SECURITIES TO BE ISSUED

PACE Small/Medium 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 Small/Medium 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 Mid Cap 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)(C) of the Code. Managed Assets Trust and PACE
Trust each will receive an opinion of Kirkpatrick & Lockhart LLP, counsel to
Managed Assets Trust and tax counsel to PACE Trust, substantially to the
following effect:

(1) PACE Small/Medium Company Growth Fund's acquisition of the Assets in
exchange solely for its shares and its assumption of the Liabilities,
followed by Mid Cap Fund's distribution of those shares PRO RATA to its
shareholders constructively in exchange for their Mid Cap Fund shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;

(2) Mid Cap Fund will recognize no gain or loss on its transfer of the
Assets to PACE Small/Medium Company Growth Fund in exchange solely for PACE
Small/Medium Company Growth Fund shares and PACE Small/Medium Company
Growth Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to Mid Cap Fund's shareholders in constructive
exchange for their Mid Cap Fund shares;

(3) PACE Small/Medium 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 Small/Medium Company Growth Fund's basis in the Assets will be
the same as Mid Cap Fund's basis therein immediately before the
Reorganization, and PACE Small/Medium Company Growth Fund's holding period
for the Assets will include Mid Cap Fund's holding period therefor;

(5) A Mid Cap Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Mid Cap Fund shares solely for PACE
Small/Medium Company Growth Fund shares pursuant to the Reorganization; and

22
<PAGE>

(6) A Mid Cap Fund shareholder's aggregate basis in the PACE
Small/Medium Company Growth Fund shares it receives in the Reorganization
will be the same as the aggregate basis for its Mid Cap Fund shares it
constructively surrenders in exchange for those PACE Small/Medium Company
Growth Fund shares, and its holding period for those PACE Small/Medium
Company Growth Fund shares will include its holding period for those Mid
Cap 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 Small/Medium Company Growth Fund after the
Reorganization of any pre-Reorganization capital losses realized by Mid Cap
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 Mid Cap 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 Small/Medium 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 (originally under the name
"Managed Accounts Services Portfolio Trust") 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.

Mid Cap Fund commenced operations on April 7, 1992 as a diversified series
of Managed Assets Trust, a Massachusetts business trust registered under the
1940 Act as an open-end management investment company. The operations of
Managed Assets Trust, 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 Small/Medium 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 Small/Medium 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 SMALL/MEDIUM COMPANY GROWTH EQUITY
INVESTMENTS
----------------------------------------------------
FOR THE
PERIOD
FOR THE YEARS ENDED JULY 31, ENDED
----------------------------------------- JULY 31,
2000 1999 1998 1997# 1996+
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 20.62 $ 15.80 $ 14.44 $ 11.20 $ 12.00
Net investment loss..... (0.19) (0.08) (0.03) (0.02) (0.00)**
Net realized and
unrealized gains
(losses) from
investments............ 12.58 5.28 2.03 3.26 (0.78)
-------- -------- -------- -------- -------
Net increase (decrease)
from investment
operations............. 12.39 5.20 2.00 3.24 (0.78)
-------- -------- -------- -------- -------
Dividends from net
investment income...... -- -- -- -- (0.02)
Distributions from net
realized gains from
investments............ (2.74) (0.38) (0.64) -- --
-------- -------- -------- -------- -------
Total dividends and
distributions.......... (2.74) (0.38) (0.64) -- (0.02)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 30.27 $ 20.62 $ 15.80 $ 14.44 $ 11.20
======== ======== ======== ======== =======
Total investment return
(1).................... 62.30% 33.62% 14.44% 28.93% (6.55)%
======== ======== ======== ======== =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $319,571 $265,405 $198,855 $125,609 $63,364
Expenses to average net
assets, net of fee
waivers and expense
reimbursements......... 0.95% 1.00% 1.00% 1.00% 1.00%*
Expenses to average net
assets, before fee
waivers and expense
reimbursements......... 0.96% 1.01% 1.03% 1.08% 1.27%*
Net investment loss to
average net assets, net
of fee waivers and
expense
reimbursements......... (0.64)% (0.48)% (0.20)% (0.21)% (0.14)%*
Net investment loss to
average net assets,
before fee waivers and
expense
reimbursements......... (0.65)% (0.49)% (0.23)% (0.29)% (0.41)%*
Portfolio turnover...... 81% 102% 131% 247% 115%
</TABLE>
----------------
+ For the period August 24, 1995 (commencement of operations) through July
31, 1996.
* Annualized.
** Amount is less than ($0.005) per share.
# Sub-investment advisory functions for this portfolio were transferred from
Westfield Capital Management Company, Inc. to Delaware Management Company,
Inc. on December 17, 1996.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

24
<PAGE>

CAPITALIZATION

The following table shows the capitalization of each of Mid Cap Fund and
PACE Small/Medium 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>
PRO FORMA CLASS A
MID CAP PACE SMALL/MEDIUM COMBINED PACE
FUND: CLASS COMPANY GROWTH FUND: SMALL/MEDIUM COMPANY
A CLASS A GROWTH FUND
------------ -------------------- --------------------
<S> <C> <C> <C>
Net Assets.............. $158,798,662 $ 0 $158,798,662
Shares Outstanding...... 10,928,476 0 5,245,537
Net Asset Value Per
Share.................. $ 14.53 $ 0 $ 30.27
<CAPTION>
PRO FORMA CLASS B
MID CAP PACE SMALL/MEDIUM COMBINED PACE
FUND: CLASS COMPANY GROWTH FUND: SMALL/MEDIUM COMPANY
B CLASS B GROWTH FUND
------------ -------------------- --------------------
<S> <C> <C> <C>
Net Assets.............. $ 31,207,342 $ 0 $ 31,207,342
Shares Outstanding...... 2,180,607 0 1,030,860
Net Asset Value Per
Share.................. $ 14.31 $ 0 $ 30.27
<CAPTION>
PRO FORMA CLASS C
MID CAP PACE SMALL/MEDIUM COMBINED PACE
FUND: CLASS COMPANY GROWTH FUND: SMALL/MEDIUM COMPANY
C CLASS C GROWTH FUND
------------ -------------------- --------------------
<S> <C> <C> <C>
Net Assets.............. $ 23,677,770 $ 0 $ 23,677,770
Shares Outstanding...... 1,844,318 0 782,139
Net Asset Value Per
Share.................. $ 12.84 $ 0 $ 30.27
<CAPTION>
PRO FORMA CLASS Y
MID CAP PACE SMALL/MEDIUM COMBINED PACE
FUND: CLASS COMPANY GROWTH FUND: SMALL/MEDIUM COMPANY
Y CLASS Y GROWTH FUND
------------ -------------------- --------------------
<S> <C> <C> <C>
Net Assets.............. $ 623,095 $ 0 $ 623,095
Shares Outstanding...... 42,658 0 20,582
Net Asset Value Per
Share.................. $ 14.61 $ 0 $ 30.27
<CAPTION>
PRO FORMA CLASS P
MID CAP PACE SMALL/MEDIUM COMBINED PACE
FUND: CLASS COMPANY GROWTH FUND: SMALL/MEDIUM COMPANY
P CLASS P GROWTH FUND
------------ -------------------- --------------------
<S> <C> <C> <C>
Net Assets.............. $ 0 $319,571,471 $319,571,471
Shares Outstanding...... 0 $ 10,556,285 10,556,285
Net Asset Value Per
Share.................. $ 0 $ 30.27 $ 30.27
</TABLE>

25
<PAGE>

LEGAL MATTERS

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

EXPERTS

The audited financial statements of Mid Cap Fund incorporated by reference
in the SAI have been audited by Ernst & Young LLP, independent auditors, whose
report thereon is included in Mid Cap Fund's Annual Report to Shareholders for
the fiscal year ended August 31, 2000. The audited financial statements of
PACE Small/Medium 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 Small/Medium
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, Managed Assets Trust does not
hold annual or other regular meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of Mid Cap
Fund's shareholders should send such proposals to Mid Cap 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 presented on an untimely basis.

OTHER BUSINESS. Managed Assets Trust's management knows of no other
business to be presented to the Meeting other than the matters set forth in
this Proxy Statement/Prospectus, but should any other matter requiring a vote
of Mid Cap 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 Small/Medium Company
Growth Equity Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Managed Assets Trust, a Massachusetts business
trust ("Target Trust"), on behalf of PaineWebber Mid Cap 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.

A-2
<PAGE>

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 16, 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;

A-3
<PAGE>

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

A-4
<PAGE>

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.

A-5
<PAGE>

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,

A-6
<PAGE>

except for (a) the filing with the SEC of the Registration Statement and
(b) such consents, approvals, authorizations, and filings as have been made
or received or as may be required subsequent to the Effective Time;

4.2.11. On the effective date of the Registration Statement, at the time
of the Meeting, and at the Effective Time, the Proxy Statement will (a)
comply in all material respects with the applicable provisions of the 1933
Act, the 1934 Act, and the 1940 Act and the rules and regulations
thereunder and (b) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall not
apply to statements in or omissions from the Proxy Statement made in
reliance on and in conformity with information furnished by Target Trust
for use therein;

4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;

4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund or any person "related" (within
the meaning of section 1.368-1(e)(3) of the Regulations) thereto have any
plan or intention to redeem or otherwise reacquire any Acquiring Fund
Shares issued to the Shareholders pursuant to the Reorganization, except to
the extent it is required by the 1940 Act to redeem any of its shares
presented for redemption at NAV in the ordinary course of that business;

4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2)
of the Regulations) and (b) will use a significant portion of Target's
"historic business assets" (within the meaning of section 1.368-1(d)(3) of
the Regulations) in a business; in addition, Acquiring Fund (c) has no plan
or intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and dispositions
necessary to maintain its status as a RIC and (d) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;

4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another business trust or a corporation or any "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization;

4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers;

4.2.17. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly or
indirectly owned at any time during the past five years, any shares of
Target;

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

A-7
<PAGE>

4.2.19. PACE Trust's audited financial statements for the year ended
July 31, 2000, to be delivered to Target Trust, fairly represent Acquiring
Fund's financial position as of that date and the results of its operations
and changes in its net assets for the year then ended.

4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, as follows:

4.3.1. The fair market value of the Acquiring Fund Shares received by
each Shareholder will be approximately equal to the fair market value of
its Target Shares constructively surrendered in exchange therefor;

4.3.2. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;

4.3.3. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those
to which the Assets are subject;

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

4.3.5. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the
gross assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) after the date of this Agreement will be included
as assets held thereby immediately before the Reorganization;

4.3.6. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;

4.3.7. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" (within the meaning of section 304(c) of
the Code) of Acquiring Fund; and

4.3.8. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187) ("Reorganization Expenses").

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

A-8
<PAGE>

hereby), then between the date of such approval and the Closing, the
Funds shall coordinate their respective portfolios so that the
transfer of the Assets to Acquiring Fund will not cause it to fail to
be in compliance with any of its investment policies and restrictions
immediately after the Closing.

5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby ("Meeting").

5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.

5.4. Target covenants that it will assist PACE Trust in obtaining
information PACE Trust reasonably requests concerning the beneficial ownership
of Target Shares.

5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PACE Trust at the Closing.

5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.

5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable in order
to vest in, and confirm to, (a) Acquiring Fund, title to and possession of all
the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.

5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.

5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.

6. CONDITIONS PRECEDENT

Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before
the Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated hereby, as of the Effective 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

A-9
<PAGE>

material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain same would not involve a risk of a
material adverse effect on either Fund's assets or properties, provided that
either Investment Company may for itself waive any of such conditions.

6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.

6.4. Target Trust shall have received an opinion of Willkie Farr &
Gallagher ("Willkie Farr") substantially to the effect that:

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

6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PACE Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target Trust on
behalf of Target, is a valid and legally binding obligation of PACE Trust
with respect to Acquiring Fund, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;

6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement and the receipt of consideration in exchange
therefor in excess of the par value thereof, will be duly authorized,
validly issued and outstanding, and fully paid and non-assessable;

6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PACE Trust's Certificate of Trust, Trust Instrument, or By-Laws or
any provision of any agreement (known to Willkie Farr, without any
independent inquiry or investigation) to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
Willkie Farr, without any independent inquiry or investigation) result in
the acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound, except as set forth in
such opinion or as otherwise disclosed in writing to and accepted by Target
Trust;

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.

A-10
<PAGE>

In rendering such opinion, Willkie Farr may (1) rely (i) as to matters
governed by the laws of the State of Delaware, on an opinion of competent
Delaware counsel, and (ii) as to certain factual matters, on a certificate of
PACE Trust, (2) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (3) limit such opinion to applicable federal and state
law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with Willkie Farr who have devoted substantive
attention to matters directly related to this Agreement and the
Reorganization.

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

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

6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PACE Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of
Target Trust with respect to Target, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to
or affecting creditors' rights and to general principles of equity;

6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Declaration of Trust or Target Trust's By-Laws or any provision
of any agreement (known to K&L, without any independent inquiry or
investigation) to which Target Trust (with respect to Target) is a party or
by which it is bound or (to the knowledge of K&L, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Target Trust (with respect to Target) is a party or by which it is
bound, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by PACE Trust;

6.5.4. To the knowledge of K&L (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target Trust
on behalf of Target of the transactions contemplated herein, except those
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those that
may be required under state securities laws;

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.

A-11
<PAGE>

6.6. Each Investment Company shall have received an opinion of K&L,
addressed to and in form and substance reasonably satisfactory to it, as to
the federal income tax consequences mentioned below ("Tax Opinion"). In
rendering the Tax Opinion, K&L may rely as to factual matters, exclusively and
without independent verification, on the representations made in this
Agreement, which K&L may treat as representations made to it, or in separate
letters addressed to K&L and the certificates delivered pursuant to paragraph
3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:

6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares pro rata to the
Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1) of the
Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;

6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;

6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption
of the Liabilities;

6.6.4. Acquiring Fund's basis in the Assets will be the same as Target's
basis therein immediately before the Reorganization, and Acquiring Fund's
holding period for the Assets will include Target's holding period
therefor;

6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and

6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares to
be received by it in the Reorganization will be the same as the aggregate
basis in its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares, and its holding period for those Acquiring
Fund Shares will include its holding period for those Target Shares,
provided the Shareholder held them as capital assets at the Effective Time.

Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that
no opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any Asset as to which 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.

A-12
<PAGE>

8. ENTIRE AGREEMENT; NO SURVIVAL

Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.

9. TERMINATION OF AGREEMENT

This Agreement may be terminated at any time at or before the Effective
Time, whether before or after approval by Target's shareholders:

9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at
or before the Effective Time, (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before July 1, 2001; or

9.2. By the parties' mutual agreement.

In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers
of either Investment Company, to the other Fund.

10. AMENDMENT

This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.

11. MISCELLANEOUS

11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.

11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies
under or by reason of this Agreement.

11.3. PACE Trust acknowledges that Target Trust is a Business Trust. This
Agreement is executed by Target Trust on behalf of Target and by its trustees
and/or officers in their capacities as such, and not individually. Target
Trust's obligations under this Agreement are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Target's assets and property; and a trustee of Target
Trust shall not be personally liable hereunder to PACE Trust or its trustees
or shareholders for any act, omission, or obligation of Target Trust or any
other trustee thereof. 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 MANAGED ASSETS TRUST,
acting on behalf of its series,
PaineWebber Mid Cap Fund

By: _________________________________

PAINEWEBBER PACE SELECT ADVISORS
TRUST, acting on behalf of its
series, PACE Small/Medium 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 Mid Cap Fund or PACE Small/Medium
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.

MID CAP FUND

<TABLE>
<CAPTION>
PRO FORMA
PERCENT BENEFICIAL
PERCENT OWNERSHIP OF
BENEFICIAL COMBINED PACE
SHAREHOLDER'S OWNERSHIP SMALL/MEDIUM
NAME/ADDRESS* OF MID CAP FUND COMPANY GROWTH FUND
------------- ---------------- -------------------
<S> <C> <C>
Conchita M. Proenza 6.69% 6.69%
(Class Y Shares) (Class Y Shares)
</TABLE>
----------------
* The shareholder listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

B-1
<PAGE>

PACE SMALL/MEDIUM COMPANY GROWTH FUND

<TABLE>
<CAPTION>
PRO FORMA
PERCENT BENEFICIAL
PERCENT BENEFICIAL OWNERSHIP OF
OWNERSHIP OF PACE COMBINED PACE
SMALL/MEDIUM COMPANY SMALL/MEDIUM
SHAREHOLDER'S NAME/ADDRESS* GROWTH FUND COMPANY GROWTH FUND
--------------------------- -------------------- -------------------
<S> <C> <C>
Sanjiv K. Basseen and 51.04% 0.05%
Virginia L. Basseen, Joint Tenants (Class A Shares) (Class A Shares)

Herman Stubbe, ACF 13.94% 0.01%
Ana Gabriel Stubbe Bird (Class A Shares) (Class A Shares)

Herman Stubbe ACF 13.28% 0.01%
Maria Alexandra Hertell Stubbe (Class A Shares) (Class A Shares)
U/PR/UGMA

Sra Esther Junco 7.50% **
(Class A Shares) (Class A Shares)

PW Custodian 39.58% 0.03%
PaineWebber CDN FBO (Class B Shares) (Class B Shares)
Delores F. Coglianese

PW Custodian 30.84% 0.02%
PaineWebber CDN FBO (Class B Shares) (Class B Shares)
Deborah M. Drews

PW Custodian 15.75% 0.01%
PaineWebber CDN FBO (Class B Shares) (Class B Shares)
Marian F. Ottens Finnberg

Robert Kaplan and 13.81% **
Cathy Kaplan, Joint Owners (Class B Shares) (Class B Shares)

PW Custodian 30.85% 0.08%
PaineWebber CDN FBO (Class C Shares) (Class C Shares)
Donald Fath

PW Custodian 18.28% 0.05%
PaineWebber CDN FBO (Class C Shares) (Class C Shares)
Doris L. Barlock

PW Custodian 18.16% 0.05%
PaineWebber CDN FBO (Class C Shares) (Class C Shares)
Aruna Rajiv Saxena IRA

PW Custodian 14.23% 0.04%
PaineWebber CDN FBO (Class C Shares) (Class C Shares)
Herbert D. Jones

PW Custodian 8.99% 0.02%
PaineWebber CDN FBO (Class C Shares) (Class C Shares)
Sandra L. Kuritzky
</TABLE>
----------------
* The shareholders listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52/nd/ 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 Small/Medium Company Growth
Fund is less than one tenth of one percent.

B-2

<PAGE>

APPENDIX C

MANAGEMENT'S DISCUSSION OF PACE SMALL/MEDIUM COMPANY GROWTH FUND'S PERFORMANCE

THE DISCUSSION BELOW WAS TAKEN FROM PACE SMALL/MEDIUM COMPANY GROWTH FUND'S
ANNUAL REPORT FOR ITS FISCAL YEAR ENDING JULY 31, 2000. THIS DISCUSSION HAS
NOT BEEN REVISED TO REFLECT SUBSEQUENT CHANGES, WHICH ARE DISCUSSED ABOVE IN
THE PROXY STATEMENT/PROSPECTUS.

ADVISER: Delaware Management Company, Inc.
PORTFOLIO MANAGER: Gerald S. Frey
OBJECTIVE: Capital appreciation
INVESTMENT PROCESS: The Portfolio invests primarily in stocks of "emerging
growth" companies that are believed to have potential for high future earnings
growth relative to the overall market and that have market capitalizations of
less than $4.0 billion at the time of purchase. Up to 5% of the total assets
may be invested in U.S. dollar-denominated foreign securities. The adviser
employs a bottom-up, fundamental analysis to identify companies that have
substantially above average earnings growth because of management changes, new
products, growth of established products or structural changes in the economy.

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

<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 3 YEARS SINCE INCEPTION 8/24/95
-------- ------ ------- -----------------------
<S> <C> <C> <C> <C>
With PACE program fee*....... 16.04% 59.89% 33.37% 22.95%
Without PACE program fee..... 16.92% 62.30% 35.39% 24.81%
Russell 2500 Growth Index.... -1.04% 35.14% 16.76% 17.01%
Lipper Mid-Cap Growth Funds
Median...................... 4.48% 53.49% 25.90% 21.82%
</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 2500 GROWTH INDEX

[CHART]
PORTFOLIO PORTFOLIO RUSSELL 2500
WITHOUT FEE WITH FEE* GROWTH INDEX
------------- ----------- --------------
Aug-95 $9,942 $9,938 $10,000
Sep-95 $9,967 $9,951 $10,214
Oct-95 $9,575 $9,548 $9,853
Nov-95 $9,758 $9,719 $10,256
Dec-95 $9,863 $9,810 $10,393
Jan-96 $9,470 $9,408 $10,425
Feb-96 $10,004 $9,926 $10,884
Mar-96 $10,013 $9,922 $11,120
Apr-96 $10,881 $10,769 $11,882
May-96 $11,348 $11,217 $12,306
Jun-96 $10,764 $10,627 $11,689
Jul-96 $9,345 $9,215 $10,527
Aug-96 $9,821 $9,671 $11,253
Sep-96 $10,463 $10,291 $11,850
Oct-96 $10,088 $9,910 $11,482
Nov-96 $10,463 $10,266 $11,903
Dec-96 $10,589 $10,375 $11,961
Jan-97 $10,989 $10,754 $12,319
Feb-97 $10,572 $10,333 $11,780
Mar-97 $9,804 $9,571 $11,004
Apr-97 $9,571 $9,331 $11,054
May-97 $10,697 $10,416 $12,379
Jun-97 $11,198 $10,890 $12,794
Jul-97 $12,049 $11,703 $13,606
Aug-97 $12,341 $11,972 $13,938
Sep-97 $13,509 $13,089 $14,923
Oct-97 $12,917 $12,499 $13,992
Nov-97 $12,733 $12,306 $13,778
Dec-97 $12,889 $12,442 $13,729
Jan-98 $12,706 $12,250 $13,549
Feb-98 $13,430 $12,932 $14,712
Mar-98 $14,286 $13,738 $15,259
Apr-98 $14,207 $13,645 $15,397
May-98 $13,334 $12,791 $14,409
Jun-98 $14,076 $13,486 $14,514
Jul-98 $13,788 $13,193 $13,434
Aug-98 $11,022 $10,533 $10,381
Sep-98 $11,903 $11,361 $11,291
Oct-98 $12,444 $11,863 $12,054
Nov-98 $13,518 $12,870 $12,911
Dec-98 $14,805 $14,078 $14,154
Jan-99 $15,350 $14,578 $14,564
Feb-99 $14,242 $13,509 $13,382
Mar-99 $15,225 $14,423 $14,005
Apr-99 $15,832 $14,980 $15,122
May-99 $16,047 $15,163 $15,279
Jun-99 $18,066 $17,050 $16,359
Jul-99 $18,423 $17,366 $16,025
Aug-99 $17,878 $16,831 $15,679
Sep-99 $19,156 $18,011 $15,792
Oct-99 $20,523 $19,273 $16,561
Nov-99 $21,935 $20,572 $18,517
Dec-99 $26,464 $24,790 $22,009
Jan-00 $25,575 $23,927 $21,886
Feb-00 $32,974 $30,810 $27,500
Mar-00 $32,480 $30,311 $25,341
Apr-00 $29,072 $27,097 $22,873
May-00 $26,158 $24,350 $20,837
Jun-00 $30,248 $28,122 $23,592
Jul-00 $29,902 $27,766 $21,660

The graph depicts the performance of PACE Small/Medium Company Growth Equity
Investments versus the Russell 2500 Growth Index. It is important to note that
PACE Small/Medium 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.

ADVISER'S COMMENTS

For the one-year period ended July 31, 2000, the portfolio returned 59.89%
net of fees, beating the Russell 2500 Growth benchmark by nearly 25 percentage
points.

C-1
<PAGE>

Technology stocks were by far the strongest performers during the fiscal
year, with the Portfolio's holdings returning approximately 185% compared to
the benchmark's technology issues returning approximately 123%. (Technology
stocks represented 42% of the Portfolio as of July 31, 2000.) Notable
performers in this sector include Applied Micro Circuits, Network Appliance
and PMC-Sierra. Performance was somewhat dampened by our overexposure in the
consumer services sector, which was one of the poorest performing sectors in
the benchmark. Our overall stock selections within this sector, however, were
considerably better that the benchmark performance, with an 11% positive
return vs. the Index's negative 16% return.

Overall, we are pleased that patient small cap investors have been rewarded
for sticking to their long-term investment strategy. We are confident the
small capitalization segment of the market continues to offer good value to
equity investors.

We believe the primary determinant of market returns in the near future
will be whether or not the Federal Reserve (the "Fed") ends its series of
interest rate increases. If signs appear that rapid economic growth will
continue, the Fed may raise rates further in an effort to slow the economy and
control inflationary pressures. If recent rate hikes have successfully brought
the economic growth rate down to a sustainable, noninflationary level, the
financial markets should be able to continue their gains.

Until the Fed's direction becomes clear, markets will continue their recent
volatile pattern. In this environment, companies that fall short of growth
expectations may see a significant decrease in their share price. The winners
will be those companies that exhibit an ability to sustain sales and earnings
growth.

Going forward, our two largest sector weightings are technology and
business services, which we think will be the most successful sectors in the
slower growth economic environment described above. We have begun increasing
our healthcare exposure, and feel that this segment's recent gains will
continue. Our weightings of basic industries and capital goods are currently
below the benchmark, as we feel that these companies will lag the earnings and
sales growth of other sectors. We continue to emphasize quality companies with
strong fundamentals, solid business plans and good market presence while we
cull those companies we believe may miss earnings expectations.

PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS -- PORTFOLIO STATISTICS

<TABLE>
<CAPTION>
CHARACTERISTICS* 7/31/00 TOP FIVE SECTORS* 7/31/00
---------------- ------- ----------------- -------
<S> <C> <C> <C>
Price/Earnings Ratio.... 37.00x Technology.............. 42.0%
Price/Book Ratio........ 7.33x Business Services....... 11.8
Net Assets ($MM)........ $319.6 Consumer Nondurables.... 11.7
Number of Securities.... 81 Consumer Services....... 11.4
Stocks.................. 95.0% Healthcare.............. 9.4
Cash & Equivalents...... 5.0% ----
Total................... 86.3%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 10 HOLDINGS* 7/31/00
---------------- -------
<S> <C>
Micrel.................. 5.1%
Applied Micro Circuits.. 4.9
Network Appliance....... 4.7
PMC-Sierra.............. 4.3
Dollar Tree Stores...... 3.5
Veritas Software........ 3.3
Nextlink
Communications......... 2.6
Pinnacle Holdings....... 2.6
Dycom Industries........ 2.4
Henry (Jack) &
Associates............. 2.4
----
Total................... 35.8%
====
</TABLE>
----------------
* Weightings represent percentages of net assets as of July 31, 2000. The
Portfolio is actively managed and all holdings are subject to change.

C-2
<PAGE>

EVERY SHAREHOLDER'S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY

Please detach at perforation before mailing.

PROXY PAINEWEBBER MID CAP FUND PROXY
(A SERIES OF PAINEWEBBER MANAGED ASSETS TRUST)
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 1, 2001

THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER MANAGED
ASSETS TRUST ("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: [BLACK BOX APPEARS HERE]

FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan of [ ] [ ] [ ]
Reorganization and Termination that
provides for the reorganization of
PaineWebber Mid Cap Fund, a series of
PaineWebber Managed Assets Trust, into
PACE Small/Medium 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
---
or internet.
6. If you have any questions regarding the meeting agenda or
the execution of your proxy, please call. 1-877-388-2844.