<PAGE>
As filed with the Securities and Exchange Commission on November 30, 2000
1933 Act Registration No. 333-___
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. ____ [_] Post-Effective Amendment No.______
PAINEWEBBER PACE SELECT ADVISORS TRUST
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
AMY R. DOBERMAN, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas, 18th Floor
New York, New York 10019
(Name and address of agent for service)
Copies to:
JON S. RAND, ESQ. ARTHUR J. BROWN, ESQ.
Willkie Farr & Gallagher Kirkpatrick & Lockhart LLP
787 Seventh Avenue 1800 Massachusetts Avenue, N.W.,2/nd/ Floor
New York, New York 10019-6099 Washington D.C. 20036
Telephone: (212) 821-8256 Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: as soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on the 30th day after
filing pursuant to Rule 488.
Title of securities being registered: Class A, Class B, Class C and Class Y
shares of beneficial interest in the series of the Registrant designated PACE
Large Company Value Equity Investments.
No filing fee is due because the Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended, pursuant to which it has previously
registered an indefinite number of securities.
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
(THE SOLE SERIES OF PAINEWEBBER AMERICA FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
December [ ], 2000
Dear Shareholder,
The enclosed proxy statement and prospectus asks for your vote on a
proposal that will determine the future of PaineWebber Growth and Income Fund.
We are seeking shareholder approval to merge Growth and Income Fund into
PACE Large Company Value Equity Investments ("PACE Fund"). If the merger is
approved, you will receive shares of the corresponding class of shares of the
PACE Fund in exchange for your Growth and Income Fund shares, and Growth and
Income Fund will cease operations. The expenses of each class of shares of the
PACE Fund following the merger would be no higher than the current expenses of
the corresponding class of Growth and Income Fund.
Mitchell Hutchins is the investment manager for both Funds and has retained
Institutional Capital Corporation, Westwood Management Corporation and State
Street Global Advisors, three unaffiliated firms, to manage each Fund's
assets. The two Funds have similar investment objectives and policies. Each
Fund seeks a combination of capital appreciation and income. PACE Large
Company Value Fund pursues its objective by investing primarily in stocks of
U.S. companies that are believed to be undervalued and that have total market
capitalizations of $4.0 billion or more. Growth and Income Fund pursues its
objective generally by investing in stocks of large capitalization companies,
but is not required to invest in companies with any minimum capitalization.
Many of the stocks held by each Fund provide dividend income as well as
potential capital appreciation.
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,
Brian M. Storms
President
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND PROPOSED MERGER
QUESTIONS AND ANSWERS
On October 6, 2000, the Board of Trustees of PaineWebber America Fund
("America Fund"), on behalf of its sole series, PaineWebber Growth and Income
Fund ("Growth and Income Fund"), unanimously approved the merger of Growth and
Income Fund into PACE Large Company Value Equity Investments ("PACE Large
Company Value Fund"), a series of PaineWebber PACE Select Advisors Trust
("PACE Trust"). This merger, however, can occur only if Growth and Income
Fund's shareholders approve the transaction. Here are answers to some of the
most commonly asked questions.
WHAT IS A MERGER?
A fund is said to merge with another fund when it transfers its assets and
liabilities to that other fund; subsequently, the old fund ceases to operate.
Shareholders of the old fund become shareholders of the new fund.
WHY IS THIS MERGER BEING PROPOSED?
Growth and Income Fund and PACE Large Company Value Fund have similar
investment objectives and policies in that both Funds seek capital
appreciation by investing primarily in stocks of large capitalization
companies and both seek to provide their shareholders with income, primarily
from dividend paying stocks. PACE Large Company Value Fund pursues its
objective by investing primarily in stocks of U.S. companies that are believed
to be undervalued and have total market capitalizations of $4.0 billion or
more. Growth and Income Fund pursues its objective by investing generally in
stocks of larger capitalization companies, but is not required to invest in
companies with any minimum capitalization. Many of the stocks held by each
Fund provide dividend income as well as potential capital appreciation. (See
"Comparison of the Funds" on page [ ] of the Combined Proxy
Statement/Prospectus for more information on the investment policies and risks
of each Fund.)
Effective October 10, 2000, Mitchell Hutchins allocated Growth and Income
Fund's assets among the same three sub-advisers -- Institutional Capital
Corporation, Westwood Management Corporation and State Street Global
Advisors -- that are sub-advisers to PACE Large Company Value Fund. Each sub-
adviser uses the same basic investment strategy for both Funds. State Street
Global Advisors seeks to outperform the Russell 1000 Value Index (before
deducting fees and expenses). The two other sub-advisers select individual
stocks and other investments for each Fund based on their proprietary
investment strategies. As a result, the two Funds are now managed in a similar
manner.
Mitchell Hutchins and America Fund's Board believe that Growth and Income
Fund's shareholders will benefit from the merger because the combined Fund
would have a larger asset base to invest, which should provide greater
opportunities for diversifying investments and realizing economies of scale.
HOW MANY SHARES WILL I RECEIVE AT THE TIME OF THE MERGER?
If the merger is approved, you will receive full and fractional shares of
the corresponding class of PACE Large Company Value Fund having a total value
equal to the total value of your Growth and Income Fund shares at the time of
the merger. Although the two Funds have different net asset values per share,
each class of shares of PACE Large Company Value Fund issued in the merger
will otherwise have characteristics that are substantially identical to the
corresponding class of shares of Growth and Income Fund.
IF I CURRENTLY ELECT TO RECEIVE MY GROWTH AND INCOME FUND DIVIDEND AS CASH OR
IF I HAVE THE DIVIDEND AUTOMATICALLY REINVESTED INTO THE FUND, WILL MY
DISTRIBUTION CHOICE REMAIN THE SAME FOR MY PACE LARGE COMPANY VALUE FUND
SHARES AFTER THE MERGER?
Yes, your distribution choice will remain the same after the merger.
1
<PAGE>
WILL I HAVE TO PAY TAXES AS A RESULT OF THE MERGER?
The merger has been structured as a tax-free transaction, which means that
no gain or loss will be recognized by either Fund as a direct result of the
merger. This means that you will not realize any gain or loss on your receipt
of PACE Large Company Value Fund shares, and that your basis for the PACE
Large Company Value Fund shares you receive in the merger will be the same as
the basis for your Growth and Income Fund shares.
Immediately prior to the merger, Growth and Income Fund will have to
distribute all of its previously undistributed income and net capital gain, if
any, to its shareholders, and that distribution will be taxable to Growth and
Income Fund shareholders. You should note, however, that both Funds expect to
distribute their ordinary income for the calendar year and net gain, if any,
for the one year period ended October 31, 2000. This distribution will be made
regardless of whether the merger takes place because of tax requirements
applicable to all mutual funds. This means that if you remain a shareholder of
Growth and Income Fund, if the merger takes place, you may receive two
distributions of ordinary income and net capital gain, if any, within a short
period of time.
HOW WILL THE MERGER AFFECT FUND EXPENSES?
The management fee paid by PACE Large Company Value Fund to Mitchell
Hutchins is greater than the management fee for Growth and Income Fund.
However, the post-merger combined Fund is expected to have overall operating
expenses that are either the same (Class Y shares) or slightly lower than the
current operating expenses of Growth and Income Fund because of a written
management fee waiver agreement between PACE Large Company Value Fund and
Mitchell Hutchins, which will remain in effect through December 1, 2002.
Absent that fee waiver, it is expected that the overall operating expenses of
the combined Fund would be somewhat higher than the current expenses of Growth
and Income Fund. (For more details about fees and expenses of each class of
shares, see "Comparative Fee Table" on page [ ] of the Combined Proxy
Statement/Prospectus.)
HOW HAVE PACE LARGE COMPANY VALUE FUND AND GROWTH AND INCOME FUND PERFORMED?
The following tables show the average annual total returns over several
time periods for each class of shares of Growth and Income Fund and the Class
P shares of PACE Large Company Value Fund (the only outstanding class of
shares during the periods shown). A Fund's past performance does not
necessarily indicate how it will perform in the future. This may be
particularly true for both these Funds because the current sub-advisers did
not manage their assets during the periods shown. The table for Growth and
Income Fund reflects sales charges on its Class A, B and C shares and the
higher expenses for these classes due to the fees paid under their Rule 12b-1
plans. The table for PACE Large Company Value Fund does not reflect the
maximum PaineWebber PACESM Select Advisors Program fee of 1.50% (which does
not apply to shares received in the merger). The Class Y shares of Growth and
Income Fund and the Class P shares of PACE Large Company Value Fund are not
subject to any sales charges or 12b-1 fees. 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.
PACE LARGE COMPANY VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS P RUSSELL 1000
(INCEPTION DATE) (8/24/95) VALUE INDEX
---------------- --------- ------------
<S> <C> <C>
One Year................................................. (4.14)% 7.35%
Since Inception.......................................... 16.94% 20.64%
</TABLE>
2
<PAGE>
GROWTH AND INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS A CLASS B* CLASS C CLASS Y S&P 500
(INCEPTION DATE) (12/20/83) (7/1/91) (7/2/92) (2/12/92) INDEX
---------------- ---------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
One Year......................... 4.12% 3.21% 7.23% 9.31% 21.03%
Five Years....................... 21.64% 21.64% 21.83% 23.10% 28.54%
Ten Years........................ 13.02% N/A N/A N/A 18.19%
Since Inception.................. 13.45% 13.78% 13.90% 13.64% **
</TABLE>
----------------
* Assumes conversion of Class B shares to Class A shares after six years.
** Average annual total returns for the S&P 500 Index for the life of each
class were as follows: Class A -- 18.04%; Class B -- 20.36%; Class C --
21.31%; and Class Y -- 20.27%.
WHEN WILL THE PROPOSED MERGER OCCUR?
The Funds expect to merge in February 2001, assuming Growth and Income Fund
shareholder approval at the special meeting scheduled to be held on February
1, 2001.
CAN I SELL OR EXCHANGE MY GROWTH AND INCOME FUND SHARES BEFORE THE MERGER?
If you do not wish to receive shares of PACE Large Company Value Fund, you
are free to sell or exchange your Growth and Income Fund shares at any time
prior to the merger. You will be subject to any applicable contingent deferred
sales charges and taxes if you sell your Growth and Income Fund shares. If you
elect to exchange your shares prior to the merger, you may be subject to
taxes. Consult your tax adviser for the tax implications of an exchange.
Please call your Financial Advisor to discuss your investment options or with
any questions.
WHAT IS THE BOARD'S RECOMMENDATION ON THE MERGER?
Your Board of Trustees unanimously recommends a vote "FOR" the merger.
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
(THE SOLE SERIES OF PAINEWEBBER AMERICA FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 1, 2001
----------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of PaineWebber Growth and Income Fund ("Growth and Income Fund"), the sole
series of PaineWebber America Fund ("America Fund"), will be held on February
1, 2001, at 1285 Avenue of the Americas, 14th Floor, New York, New York,
10019-6028, at [ ], Eastern time, for the following purpose:
To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of Growth and
Income Fund into PACE Large Company Value Equity Investments ("PACE
Large Company Value Fund"), a series of PaineWebber PACE Select
Advisors Trust ("PACE Trust"). Pursuant to the Plan, Growth and Income
Fund will transfer all its assets to PACE Large Company Value Fund,
which will assume all the stated liabilities of Growth and Income Fund,
and PACE Trust will issue to each Growth and Income Fund shareholder
the number of full and fractional shares of the applicable class of
PACE Large Company Value Fund having an aggregate net asset value that,
on the effective date of the reorganization, is equal to the aggregate
net asset value of the shareholder's shares of Growth and Income 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
America Fund, 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
America Fund or by voting in person at the Meeting.
By Order of the Board of Trustees,
Dianne E. O'Donnell
Secretary
December [ ], 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL
BE VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the
additional expense of further solicitation, we ask your cooperation in
mailing your proxy card promptly. As an alternative to using the paper proxy
card to vote, you may vote shares that are registered in your name, as well
as shares held in "street name" through a broker, via the internet or
telephone. To vote in this manner, you will need the 14-digit "control"
number(s) that appear on your proxy card(s).
To vote via the internet, please access http://www.[ ] on the World
Wide Web and follow the on-screen instructions.
You may also call [1-888- ] 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 GROWTH AND INCOME FUND
(THE SOLE SERIES OF PAINEWEBBER AMERICA FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
PACE LARGE COMPANY VALUE 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 [ ], 2000
----------------
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Growth and Income Fund ("Growth and Income Fund"), the sole series
of PaineWebber America Fund ("America Fund"), a Massachusetts business trust,
to be held on January 26, 2001, at 1285 Avenue of the Americas, 14th Floor,
New York, New York, 10019-6028, at 10:00 a.m., Eastern time (such meeting and
any adjournments thereof are referred to collectively as the "Meeting"). At
the Meeting, the shareholders of Growth and Income Fund will be asked to
consider and approve the following proposal:
To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of Growth and
Income Fund into PACE Large Company Value Equity Investments ("PACE
Large Company Value Fund"), a series of PaineWebber PACE Select
Advisors Trust ("PACE Trust"). Pursuant to the Plan, Growth and Income
Fund will transfer all its assets to PACE Large Company Value Fund,
which will assume all the stated liabilities of Growth and Income Fund,
and PACE Trust will issue to each Growth and Income Fund shareholder
the number of full and fractional shares of the applicable class of
PACE Large Company Value Fund having an aggregate net asset value that,
on the effective date of the reorganization, is equal to the aggregate
net asset value of the shareholder's shares of Growth and Income Fund.
A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF AMERICA FUND HAS UNANIMOUSLY
APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF GROWTH AND INCOME FUND AND
ITS SHAREHOLDERS. (Growth and Income Fund and PACE Large Company Value Fund
sometimes are referred to individually as a "Fund" and together as "Funds.")
Pursuant to the Plan, Growth and Income Fund will transfer all its assets
to PACE Large Company Value Fund, which will assume all the stated liabilities
of Growth and Income Fund, and PACE Trust will issue to each Growth and Income
Fund shareholder the number of full and fractional shares of beneficial
interest of the applicable class of PACE Large Company Value Fund having an
aggregate net asset value ("NAV") that, on the effective date of the
Reorganization, is equal to the aggregate NAV of the shareholder's shares of
beneficial interest in the corresponding class of Growth and Income Fund (the
"Reorganization"). The value of each Growth and Income Fund shareholder's
account with PACE Large Company Value Fund immediately after the
Reorganization will be the same as the value of such shareholder's account
with Growth and Income Fund immediately prior to the Reorganization. As a
result of the Reorganization, shareholders of each class of shares of Growth
and Income Fund will become shareholders of the corresponding class of shares
of PACE Large Company Value Fund. No sales charges will be assessed on the
shares of PACE Large Company Value Fund issued in connection with the
Reorganization.
<PAGE>
PACE Large Company Value Fund is a diversified series of PACE Trust, which
is an open-end management investment company currently comprised of twelve
series. PACE Large Company Value Fund's investment objective is capital
appreciation and dividend income. The Fund seeks to achieve its investment
objective by investing primarily in stocks of U.S. companies that are believed
to be undervalued and that have total market capitalizations of $4.0 billion
or greater at the time of purchase. The Fund seeks income primarily from
dividend paying stocks. Mitchell Hutchins allocates the Fund's assets among
three sub-advisers.
This Proxy Statement/Prospectus sets forth the information that a Growth
and Income Fund shareholder should know before voting on the Plan. It should
be read carefully and retained for future reference.
A Statement of Additional Information ("SAI") dated December [ ], 2000,
containing additional information about the Reorganization, including
historical financial statements, has been filed with the Securities and
Exchange Commission ("SEC") and is hereby incorporated by reference in its
entirety into this Proxy Statement/Prospectus. PACE Large Company Value Fund's
Annual Report to Shareholders for the fiscal year ended July 31, 2000, has
been filed with the SEC and is incorporated by reference in the SAI.
Information about Growth and Income Fund is included in its current Prospectus
and SAI, each dated December 1, 1999, as supplemented, which are on file with
the SEC and are hereby incorporated by reference into this Proxy
Statement/Prospectus. Copies of the other referenced documents, as well as
Growth and Income Fund's Annual Report to Shareholders for the fiscal year
ended August 31, 2000, are available without charge by writing either Growth
and Income Fund or PACE Large Company Value Fund at the address shown above,
or by calling (800) 647-1568. The SEC maintains an internet web site at
http://www.sec.gov that contains information regarding PACE Trust and America
Fund. Copies of such material may also be obtained, after paying a duplicating
fee, from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, DC,
20549, or by electronic request at the following e-mail address:
[email protected]. Additional information about the Funds also may be
obtained on the Web at http://www.painewebber.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
------------- ----
<S> <C>
INTRODUCTION............................................................. 1
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION.......................................... 2
SYNOPSIS................................................................. 2
The Proposed Reorganization............................................ 2
Comparative Fee Table.................................................. 3
Summary Comparison of the Funds........................................ 4
COMPARISON OF PRINCIPAL RISK FACTORS..................................... 5
Primary Difference in the Investment Risks of the Funds................ 5
COMPARISON OF THE FUNDS.................................................. 6
Investment Objectives.................................................. 6
Investment Policies.................................................... 6
Operations of PACE Large Company Value Fund Following the
Reorganization........................................................ 8
Performance............................................................ 8
Sales Charges.......................................................... 10
Dividends and Other Distributions...................................... 10
Taxes.................................................................. 10
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF PACE LARGE
COMPANY VALUE FUND...................................................... 10
Flexible Pricing....................................................... 10
Buying Shares.......................................................... 14
Selling Shares......................................................... 15
Exchanging Shares...................................................... 16
Pricing and Valuation.................................................. 17
MANAGEMENT............................................................... 17
Investment Manager and Investment Adviser.............................. 17
Sub-Advisers........................................................... 18
Advisory Fees and Fund Expenses........................................ 18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION.......................... 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 LARGE COMPANY VALUE FUND'S
PERFORMANCE............................................................. C-1
</TABLE>
iii
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Growth and Income Fund, the sole series of America Fund, in connection with
the solicitation of proxies by the Board for use at the Meeting. All properly
executed and unrevoked proxies received in time for the Meeting will be voted
as instructed by shareholders. Approval of the proposal requires the
affirmative vote of the lesser of (1) 67% or more of the shares of Growth and
Income Fund present at the Meeting, if more than 50% of the outstanding shares
are represented at the Meeting in person or by proxy, or (2) more than 50% of
the outstanding shares entitled to vote at the Meeting. If you execute your
proxy but give no voting instructions, your shares that are represented by
proxies will be voted "FOR" the proposal described in this Proxy
Statement/Prospectus. The presence in person or by proxy of Growth and Income
Fund shareholders entitled to cast a majority of all the votes entitled to be
cast at the Meeting will constitute a quorum. If a quorum is not present at
the Meeting or a quorum is present but sufficient votes to approve the
proposal are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of the
shares represented at the Meeting in person or by proxy. The persons named as
proxies will vote those proxies that they are entitled to vote "FOR" the
proposal in favor of such an adjournment and will vote those proxies required
to be voted "AGAINST" the proposal against such adjournment.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners
or other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present at the Meeting for quorum purposes but will not be
(i) considered votes cast at the Meeting or (ii) voted for or against any
adjournment or proposal. Abstentions and broker non-votes are effectively
votes against the proposal.
Any person giving a proxy has the power to revoke it at any time prior to
its exercise by executing a superseding proxy or by submitting a written
notice of revocation to the Secretary of America Fund ("Secretary"). To be
effective, such revocation must be received by the Secretary prior to the
Meeting. In addition, although mere attendance at the Meeting will not revoke
a proxy, a shareholder present at the Meeting may withdraw his or her proxy by
voting in person.
Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. America Fund intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December [ ],
2000. Shareholders of record as of the close of business on December 1, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date,
Growth and Income Fund had [ ] shares issued and outstanding, consisting of
[ ] Class A shares, [ ] Class B shares, [ ] Class C shares, and [ ]
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.]
America Fund has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the
Meeting. America Fund expects to solicit proxies by mail, telephone and via
the internet. America Fund officers and employees of Mitchell Hutchins who
assist in the proxy solicitation will not receive any additional or special
compensation for any such efforts. SCC will be paid approximately $77,000 for
proxy solicitation services. America Fund will request broker/dealer firms,
custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of the shares held of record by such persons. Mitchell
Hutchins may reimburse such broker/dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such
proxy solicitation.
1
<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, America Fund's Board believes that the
proposed Reorganization will benefit Growth and Income Fund's shareholders.
THE PROPOSED REORGANIZATION
The Boards of PACE Trust and America Fund, including their respective
Trustees who are not "interested persons," as that term is defined in the
Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Trustees"), considered and approved the Plan at meetings held on September 13,
2000 and October 6, 2000, respectively. The Plan provides for the acquisition
by PACE Large Company Value Fund of all of Growth and Income Fund's assets in
exchange for PACE Large Company Value Fund shares and the assumption by PACE
Large Company Value Fund of all of Growth and Income Fund's stated liabilities.
Growth and Income Fund will then distribute the PACE Large Company Value Fund
shares to Growth and Income Fund's shareholders, by class, so that each Growth
and Income Fund shareholder will receive the number of full and fractional
shares of the corresponding class of PACE Large Company Value Fund equal in
aggregate value to the aggregate value of the shares of Growth and Income Fund
that the shareholder held at the time of the Reorganization. These transactions
are scheduled to occur as of 4:00 p.m., Eastern time, on February 23, 2001, or
on such later date as the conditions to consummation of the Reorganization are
satisfied ("Closing Date"). Growth and Income Fund will be terminated as soon
as is practicable after the Closing Date. See "Additional Information About the
Reorganization," below.
America Fund and PACE Trust will each receive an opinion of Kirkpatrick &
Lockhart LLP to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund nor any of
its shareholders will recognize any gain or loss for federal income tax
purposes as a direct result of the Reorganization. To the extent Growth and
Income Fund sells securities prior to the Closing Date, it may recognize net
gains or losses. Any such net recognized gains would increase the amount of any
distribution made to shareholders of Growth and Income Fund prior to the
Closing Date. See "Additional Information About the Reorganization -- Federal
Income Tax Considerations," below.
For the reasons set forth below under "Additional Information About the
Reorganization -- Reasons for the Reorganization," the Board of America Fund
has determined that the Reorganization is in the best interests of Growth and
Income Fund and that the interests of existing Growth and Income Fund
shareholders will not be diluted as a result of the Reorganization.
ACCORDINGLY, AMERICA FUND'S BOARD UNANIMOUSLY RECOMMENDS APPROVAL OF THE
TRANSACTION.
2
<PAGE>
COMPARATIVE FEE TABLE
The table below describes the fees and expenses that you would pay if you
buy and hold Growth and Income Fund shares or PACE Large Company Value Fund
shares before the Reorganization and PACE Large Company Value Fund shares
after the Reorganization. The "Annual Fund Operating Expenses" set forth below
are based on the fees and expenses for the fiscal year ended July 31, 2000 for
PACE Large Company Value Fund and for the fiscal year ended August 31, 2000
for Growth and Income Fund. The pro forma information reflects the anticipated
effects of the Reorganization as well as the proposed reorganization of
PaineWebber Tax-Managed Equity Fund, which is expected to occur at
approximately the same time as the Reorganization.
<TABLE>
<CAPTION>
COMBINED PACE LARGE COMPANY
GROWTH AND INCOME FUND PACE LARGE COMPANY VALUE FUND VALUE FUND PRO FORMA*
------------------------ ------------------------------- --------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B C Y CLASS A B CLASS C CLASS Y CLASS A B CLASS C CLASS Y
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge
(load) Imposed on Pur-
chases (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 re-
demption proceeds,
whichever is less)..... None 5% 1% None None 5% 1% None None 5% 1% None
Exchange Fee............ None None None None None None None None None None None None
ANNUAL FUND OPERATING EXPENSES (fees that are deducted from fund assets)
Management Fees**....... 0.70% 0.70% 0.70% 0.70% 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***....... 0.20% 0.25% 0.24% 0.15% 0.17% 0.19% 0.18% 0.16% 0.15% 0.17% 0.16% 0.12%
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
Total Annual Fund Oper-
ating Expenses......... 1.15% 1.95% 1.94% 0.85% 1.22% 1.99% 1.98% 0.96% 1.20% 1.97% 1.96% 0.92%
===== ===== ===== ===== ======= ======= ======= ======= ======= ======= ======= =======
Management Fee Waiver+.. N/A N/A N/A N/A (0.07)% (0.07)% (0.07)% (0.07)% (0.07)% (0.07)% (0.07)% (0.07)%
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
Net Expenses+........... 1.15% 1.95% 1.94% 0.85% 1.15% 1.92% 1.91% 0.89% 1.13% 1.90% 1.89% 0.85%
===== ===== ===== ===== ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
----------------
* The pro forma expense information assumes that shareholders of Growth and
Income Fund and PaineWebber Tax-Managed Equity Fund approve the proposed
reorganizations. If shareholders of Growth and Income Fund approve the
Reorganization and shareholders of PaineWebber Tax-Managed Equity Fund do
not approve its reorganization, the pro forma "Net Expenses" for each
class of shares of PACE Large Company Value Fund would be the same as
shown above due to the relatively small size of PaineWebber Tax-Managed
Equity Fund and the fee waiver agreement in effect for PACE Large Company
Value Fund.
** For both Funds, "Management Fees" include fees paid to Mitchell Hutchins
for administrative services.
*** "Other Expenses" for PACE Large Company Value 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. "Other Expenses" for each class
of the combined Fund are based on the combined assets of Growth and
Income Fund and PaineWebber Tax-Managed Equity Fund.
+ PACE Trust and Mitchell Hutchins have entered into a written agreement
with respect to PACE Large Company Value Fund under which Mitchell
Hutchins is contractually obligated to waive its management fee through
December 1, 2002 to the extent necessary to reflect the lower overall
fees paid to the Fund's sub-advisers as a result of the lower sub-
advisory fee paid to SSgA. The effect of this management fee waiver is
reflected in the above table.
PACE Trust and Mitchell Hutchins have entered into an additional written
agreement with respect to PACE Large Company Value Fund that becomes
effective if the Reorganization takes place. Under that agreement, Mitchell
Hutchins is contractually obligated to waive its management fee and/or
reimburse the Fund to the extent that the total operating expenses of each
class through December 1, 2002 otherwise would exceed the current operating
expenses of Growth and Income Fund as shown under "Total Annual Fund
Operating Expenses" and "Net Expenses" above. It is not presently expected
that Mitchell Hutchins would be required to waive its management fee or
reimburse expenses under this agreement because the expenses of the combined
Fund are expected to be the same or slightly lower than the current
operating expenses of Growth and Income Fund due to the management fee
waiver described above. However, if Mitchell Hutchins does reimburse
expenses of the combined Fund under this agreement, the Fund has agreed to
repay Mitchell Hutchins for those reimbursed expenses if it can do so over
the following three fiscal years without causing the Fund's expenses in any
of those three years to exceed these expense caps.
3
<PAGE>
The example below is intended to help you compare the costs of investing in
each Fund, both before and after the Reorganization.
The example below assumes that you invest $10,000 in each Fund (including
the combined Fund) for the time periods indicated and then sell all of your
shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same, except for the two-year period when PACE Large
Company Value Fund's and the combined Fund's expenses are lower due to the
agreement with Mitchell Hutchins. Although your actual returns and costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
5 10
1 YEAR 3 YEARS YEARS YEARS
------ ------- ------ ------
<S> <C> <C> <C> <C>
GROWTH AND INCOME FUND
Class A.......................................... $562 $799 $1,054 $1,785
Class B (assuming sale of all shares at end of
period)......................................... 698 912 1,252 1,877
Class B (assuming no sale of shares)............. 198 612 1,052 1,877
Class C (assuming sale of all shares at end of
period)......................................... 297 609 1,047 2,264
Class C (assuming no sale of shares)............. 197 609 1,047 2,264
Class Y.......................................... 87 271 471 1,049
PACE LARGE COMPANY VALUE FUND
Class A.......................................... $562 $806 $1,077 $1,849
Class B (assuming sale of all shares at end of
period)......................................... 695 911 1,259 1,923
Class B (assuming no sale of shares)............. 195 611 1,059 1,923
Class C (assuming sale of all shares at end of
period)......................................... 294 607 1,054 2,295
Class C (assuming no sale of shares)............. 194 607 1,054 2,295
Class Y.......................................... 91 292 517 1,165
PRO FORMA PACE LARGE COMPANY VALUE FUND
Class A.......................................... $560 $800 $1,067 $1,827
Class B (assuming sale of all shares at end of
period)......................................... 693 904 1,249 1,902
Class B (assuming no sale of shares)............. 193 604 1,049 1,902
Class C (assuming sale of all shares at end of
period)......................................... 292 601 1,044 2,274
Class C (assuming no sale of shares)............. 192 601 1,044 2,274
Class Y.......................................... 87 279 495 1,118
</TABLE>
SUMMARY COMPARISON OF THE FUNDS
Investment Objectives and Policies
Growth and Income Fund and PACE Large Company Value Fund have similar
investment objectives, policies and overall risk characteristics in that both
Funds seek a combination of capital appreciation and income and generally
invest in companies with large market capitalizations. PACE Large Company
Value Fund invests primarily in stocks of U.S. companies that are believed to
be undervalued and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. PACE Large Company Value Fund may invest, to
a limited extent, in other securities, including stocks of companies with
smaller total market capitalizations. Growth and Income Fund generally invests
in stocks of larger capitalization companies, many of which provide dividend
income as well as potential capital appreciation. Growth and Income Fund,
however, does not have a policy of investing primarily in companies with total
market capitalizations of $4.0 billion or greater at the time of purchase.
Investment Advisory Services
Mitchell Hutchins has served as investment manager and administrator for
PACE Large Company Value Fund since its inception in August 1995. As
investment manager for the Fund, Mitchell Hutchins provides portfolio
management oversight rather than directly managing the Fund's investments.
Mitchell Hutchins
4
<PAGE>
provides portfolio management oversight principally by performing initial
reviews of prospective sub-advisers and supervising and monitoring the
performance of the sub-advisers thereafter. Mitchell Hutchins also recommends
to the Board of PACE Trust whether agreements with sub-advisers should be
renewed, modified or terminated. The Fund's three current sub-advisers --
Institutional Capital Corporation ("ICAP"), Westwood Management Corporation
("Westwood") and State Street Global Advisors ("SSgA") -- have managed the
Fund's investment portfolio since July 1, 2000 (ICAP and Westwood) and October
10, 2000 (SSgA). Prior to July 1, 2000, a different sub-adviser managed all
the Fund's assets.
Mitchell Hutchins has served as investment manager or investment adviser
and as administrator for Growth and Income Fund since March 1989 and as sub-
adviser for the Fund since its inception in December 1983 to March 1989
(PaineWebber Incorporated served as investment adviser and administrator to
the Fund during this period). Prior to October 10, 2000, Mitchell Hutchins
managed all the Fund's assets. On that date, the Fund's three current sub-
advisers -- ICAP, Westwood, and SSgA -- assumed responsibility for managing
the assets of the Fund as allocated to them by Mitchell Hutchins.
Purchase and Redemption Procedures
Funds in the PaineWebber Flexible PricingSM System generally offer Class A,
Class B, Class C and Class Y shares. PACE Large Company Value Fund did not
offer Class A, Class B, Class C and Class Y shares to the public prior to
November 27, 2000. The purchase and redemption procedures for PACE Large
Company Value Fund's Class A, Class B, Class C and Class Y shares would be the
same as those currently in effect for the corresponding classes of shares of
Growth and Income Fund. You may exchange Class A, Class B or Class C shares of
PACE Large Company Value Fund for shares of the same class of most other PACE
funds. Exchanges between 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 substantially 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 could lose a substantial part, or even all, of the value of its
investment in a company's stock.
Index Strategy Risk -- SSgA seeks to outperform (before deducting fees and
expenses) the return of the Russell 1000 Value Index for the portion of each
Fund's assets that it manages. SSgA's proprietary strategy may not result in
outperformance of the designated index and may even result in
underperformance. Each Fund's performance also may deviate from that of the
index because of shareholder purchases and sales of shares, which can occur
daily, and because of fees and expenses borne by each Fund.
Derivatives Risk -- The value of "derivatives" -- so-called because their
value "derives" from the value of an underlying asset, reference rate or
index -- may rise or fall more rapidly than other investments. For some
derivatives, it is possible for a Fund to lose more than the amount it
invested in the derivative. Options and futures contracts are examples of
derivatives. A Fund's use of derivatives may not succeed for various reasons,
including unexpected changes in the values of the derivatives or the assets
underlying them. Also, if a Fund uses derivatives to adjust or "hedge" the
overall risk of its portfolio, the hedge may not succeed if changes in the
values of the derivatives are not matched by opposite changes in the values of
the assets being hedged.
PRIMARY DIFFERENCE IN THE INVESTMENT RISKS OF THE FUNDS
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
5
<PAGE>
differences between U.S. and foreign regulatory requirements and market
practices. Growth and Income Fund may invest a larger portion of its total
assets (25%) in these securities than PACE Large Company Value Fund (10%) 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 Large Company Value
Fund's investment objective is capital appreciation and dividend income.
Growth and Income Fund's investment objective is current income and capital
growth.
INVESTMENT POLICIES
Both Funds generally invest in stocks of large capitalization companies.
PACE Large Company Value Fund invests primarily in stocks of U.S. companies
that are believed to be undervalued and that have total market capitalizations
of $4.0 billion or greater at the time of purchase. PACE Large Company Value
Fund seeks income primarily from dividend paying stocks. The Fund may invest,
to a limited extent, in other securities, including stocks of companies with
smaller total market capitalizations and convertible bonds that are rated
below investment grade.
Growth and Income Fund invests in a combination of securities to obtain
both growth and income. To obtain growth, the Fund invests in stocks that are
believed to have substantial potential for capital growth. To obtain current
income, the Fund invests in dividend paying stocks and, to a lesser extent,
convertible bonds and money market instruments. Growth and Income Fund
generally invests in large capitalization companies, but is not required to
invest in companies with any specific total market capitalization.
Mitchell Hutchins allocates each Fund's assets between the same three sub-
advisers -- ICAP, Westwood and SSgA. Mitchell Hutchins has initially allocated
each Fund's assets approximately 50% to SSgA and approximately 25% each to
ICAP and Westwood. Mitchell Hutchins may change this allocation at any time.
The relative values of each sub-adviser's shares of a Fund's assets also may
change over time.
In managing its share of each Fund's assets, ICAP uses its proprietary
valuation model to identify large-capitalization companies that ICAP believes
offer the best relative values because they sell below the price-to-earnings
ratio warranted by their prospects. ICAP looks for companies where a catalyst
for a positive change is about to occur with potential to produce stock
appreciation of 20% or more relative to the market over a 12 to 18 month
period. The catalyst can be thematic (e.g., global economic recovery) or
company specific (e.g., a corporate restructuring or a new product). ICAP also
uses internally generated research to evaluate the financial condition and
business prospects of every company it considers. ICAP monitors each stock
purchased and sells the stock when its target price is achieved, the catalyst
becomes inoperative or ICAP identifies another stock with greater opportunity
for appreciation.
In managing its share of each Fund's assets, Westwood maintains a list of
securities that it believes have proven records and potential for above-
average earnings growth. It considers purchasing a security on such list if
Westwood's forecast for growth rates and earnings estimates exceeds Wall
Street expectations or Westwood's forecasted price/earnings ratio is less than
the forecasted growth rate. Westwood monitors each stock purchased and will
sell a stock if Westwood expects limited future price appreciation or the
projected price/earnings ratio exceeds the three-year growth rate.
In managing its share of each Fund's assets, SSgA seeks to outperform the
Russell 1000 Value Index (before deducting fees and expenses). SSgA uses
several independent valuation measures to identify investment opportunities
within a large cap value universe and combines factors to produce an overall
rank. Comprehensive research determines the optimal weighting of these
perspectives to arrive at schemes that vary by industry. SSgA ranks all
companies within the investable universe from top to bottom based on their
relative attractiveness.
6
<PAGE>
SSgA constructs each Fund's portfolio by selecting the highest ranked stocks
from the universe and managing deviations from the benchmark to maximize the
risk/reward trade-off. The resulting portfolio has characteristics similar to
the Russell 1000 Value Index. SSgA generally sells stocks that no longer meet
its selection criteria or that it believes otherwise may adversely affect a
Fund's performance relative to the index.
Securities of Foreign Issuers. Both Funds may invest in U.S. dollar
denominated securities of foreign companies that are traded on recognized U.S.
exchanges or in the U.S. over-the-counter market. PACE Large Company Value
Fund must limit these investments to 10% of its total assets, while Growth and
Income Fund may invest up to 25% 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. Each Fund may invest up
to 10% of its total assets in convertible bonds that are not investment grade.
Derivatives. The Funds have very similar policies with respect to the use
of options, futures and other derivatives. Each Fund may (but is not required
to) use options, futures and other derivatives as part of its investment
strategy or to help manage portfolio risks.
Temporary Defensive Positions; Cash Reserves. Each Fund may take a
defensive position that is different from its normal investment strategy to
protect itself from adverse market conditions. This means that each Fund may
temporarily invest a larger-than-normal part, or even all, of its assets in
cash or money market instruments. In addition, each Fund may increase its cash
reserves to facilitate the transition to the investment style and strategies
of a new sub-adviser. Because these investments provide relatively low income,
a defensive or transitional position may not be consistent with achieving a
Fund's investment objective. PACE Large Company Value Fund is normally fully
invested in accordance with its investment objective and policies. However,
with the concurrence of Mitchell Hutchins, PACE Large Company Value 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 Growth and Income Fund for the last two fiscal years ended
August 31, 2000 and 1999, were 50% and 57%, respectively, while the portfolio
turnover rates for PACE Large Company Value Fund's last two fiscal years ended
July 31, 2000 and 1999, were 195% and 40%, respectively.
Growth and Income Fund changed its investment management arrangements on
October 10, 2000 when ICAP, Westwood and SSgA assumed responsibility for
managing its investment portfolio. These sub-advisers have realigned their
respective portions of the Fund's portfolio to reflect their proprietary
investment strategies.
7
<PAGE>
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. ICAP and
Westwood assumed responsibility for managing a portion of the investment
portfolio of PACE Large Company Value Fund on July 1, 2000, and SSgA assumed
its portfolio management responsibilities for that Fund on October 10, 2000.
The realignment of PACE Large Company Value Fund's portfolio to reflect the
proprietary investment strategies of the new sub-advisers increased the Fund's
portfolio turnover for its fiscal year ended July 31, 2000 and may result in a
higher overall portfolio turnover for the current fiscal year than in the
fiscal years prior to July 31, 2000.
OPERATIONS OF PACE LARGE COMPANY VALUE FUND FOLLOWING THE REORGANIZATION
It is not expected that PACE Large Company Value Fund will revise any of
its policies following the Reorganization to reflect those of Growth and
Income Fund. ICAP, Westwood and SSgA have reviewed Growth and Income Fund's
current portfolio and determined that Growth and Income Fund's holdings
generally are compatible with PACE Large Company Value Fund's portfolio. As a
result, Mitchell Hutchins believes that, if the Reorganization is approved, a
substantial portion of Growth and Income Fund's assets could be transferred to
and held by PACE Large Company Value Fund.
It is expected, however, that some of Growth and Income Fund's holdings may
not remain at the time of the Reorganization due to normal portfolio turnover.
It is also expected that if Growth and Income Fund's shareholders approve the
Reorganization, the Fund's holdings that are not compatible with PACE Large
Company Value Fund's holdings will be liquidated in an orderly manner in
connection with the Reorganization, and the proceeds of these sales held in
temporary investments or reinvested in assets that are consistent with the
holdings of PACE Large Company Value Fund. As of [ ], 2000, Growth and
Income Fund's investments in such securities represented approximately [ ]% of
its total portfolio. The portion of Growth and Income Fund's assets that will
be liquidated in connection with the Reorganization will depend on market
conditions and on the sub-advisers' continuing assessment of the compatibility
of Growth and Income Fund's holdings with PACE Large Company Value Fund's
portfolio composition and its investment objective and policies at the
approximate time of the Reorganization. The need for Growth and Income Fund to
dispose of investments in connection with the Reorganization may result in the
Fund's selling securities at a disadvantageous time and could result in the
Fund's realizing gain (or losses) that would not otherwise have been realized.
PERFORMANCE
The following bar chart and table provide information about the performance
of PACE Large Company Value Fund Class P shares and thus give some indication
of the risks of an investment in the Fund. The Fund's Class P shares were the
only outstanding class of shares during the periods shown.
The bar chart shows how PACE Large Company Value Fund's performance has
varied from year to year. The bar chart does not reflect the maximum annual
PACESM Select Advisors Program fee of 1.50% (which does not apply to shares
received in the Reorganization) or the effect of sales charges or the higher
expenses of PACE Large Company Value Fund's Class A, Class B and Class C
shares; if it did, the total returns shown would be lower.
The first table that follows the bar chart shows the average annual returns
over several time periods for the Fund's Class P shares. Class P shares are
not subject to the sales charges applicable to the Fund's Class A, Class B and
Class C shares or the higher expenses of these shares. However, because all
classes of shares invest in the same portfolio of securities, their annual
returns would differ only to the extent of the different sales charges or
expenses. The table also does not reflect the maximum annual PACESM Select
Advisors Program fee applicable only to Class P shares.
The second table that follows the bar chart shows the average annual total
returns over several time periods for Growth and Income Fund's Class A, Class
B, Class C and Class Y shares. This table reflects sales charges
8
<PAGE>
and 12b-1 fees for Class A, Class B and Class C shares of the Fund. The Fund's
Class Y shares are not subject to any sales charges or 12b-1 fees and thus are
most comparable to the Class P shares of PACE Large Company Value Fund.
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 500 Composite Stock Price Index for Growth
and Income Fund and the Russell 1000 Value Index for PACE Large Company Value
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, a different sub-adviser managed the assets of PACE Large
Company Value Fund and Mitchell Hutchins managed the assets of Growth and
Income Fund.
PACE LARGE COMPANY VALUE FUND -- TOTAL RETURN ON CLASS P SHARES (1996 IS THE
FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
[GRAPH]
1996 25.11%
1997 24.75%
1998 18.36%
1999 (4.14)%
Total return January 1 to September 30, 2000 -- (1.38)%
Best quarter during years shown: 4th quarter, 1998 -- 16.26%
Worst quarter during years shown: 3rd quarter, 1999 -- (14.40)%
PACE LARGE COMPANY VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS P RUSSELL 1000
(INCEPTION DATE) (8/24/95) VALUE INDEX S&P 500 INDEX
---------------- --------- ------------ -------------
<S> <C> <C> <C>
One Year................................... (4.14)% 7.35% 21.03%
Since Inception............................ 16.94% 20.64% 27.03%
</TABLE>
GROWTH AND INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS A CLASS B* CLASS C CLASS Y S&P 500 RUSSELL 1000
(INCEPTION DATE) (12/20/83) (7/1/91) (7/2/92) (2/12/92) INDEX VALUE INDEX
---------------- ---------- -------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
One Year........... 4.12% 3.21% 7.23% 9.31% 21.03% 7.35%
Five Years......... 21.64% 21.64% 21.83% 23.10% 28.54% 23.07%
Ten Years.......... 13.02% N/A N/A N/A 18.19% 15.60%
Since Inception.... 13.45% 13.78% 13.90% 13.64% ** **
</TABLE>
---------------
* Assumes conversion of Class B shares to Class A shares after six years.
** The average annual total returns for the S&P 500 Index and Russell 1000
Value Index for the life of each class were as follows: Class A -- 18.04%
and 16.47%; Class B shares -- 20.36% and 18.04%; Class C -- 21.31% and
18.32%; and Class Y -- 20.27% and 18.03%, respectively.
9
<PAGE>
SALES CHARGES
No sales charges apply when Growth and Income Fund shareholders receive
shares of PACE Large Company Value Fund in connection with the Reorganization.
DIVIDENDS AND OTHER DISTRIBUTIONS
Growth and Income Fund normally pays semi-annual dividends and distributes
its gains, if any, annually. PACE Large Company Value Fund normally pays
dividends and distributes its gains, if any, annually. Classes with higher
expenses are expected to have lower dividends. For example, Class B and Class
C shares are expected to have the lowest dividends of any class of a Fund's
shares, while Class Y shares (and, for PACE Large Company Value Fund, Class P
shares) would have the highest dividends.
As a shareholder of PACE Large Company Value Fund, you will receive
dividends in additional shares of the Fund unless you elect to receive them in
cash. Your current dividend distribution election for Growth and Income Fund
will remain the same after the Reorganization. Contact your Financial Advisor
at PaineWebber if you prefer to receive dividends in cash.
On or before the Closing Date, Growth and Income Fund will distribute
substantially all of its undistributed net investment income, net capital gain
and net short-term capital gain, if any, in order to continue to maintain its
tax status as a regulated investment company.
TAXES
The dividends that you receive from either Fund generally are subject to
federal income tax regardless of whether you receive them in additional Fund
shares or in cash. If you hold Fund shares through a tax-exempt account or
plan, such as an IRA or 401(k) plan, dividends on your shares generally will
not be subject to tax.
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 LARGE COMPANY VALUE FUND
FLEXIBLE PRICING
PACE Large Company Value Fund offers four new classes of shares -- Class A,
Class B, Class C and Class Y -- established prior to the Reorganization. The
four new classes of shares of PACE Large Company Value Fund and the procedures
for buying, selling and exchanging these shares, as described below, are
substantially similar to the corresponding classes of shares and related
procedures of Growth and Income Fund. Prior to November 27, 2000, PACE Large
Company Value Fund offered only Class P shares, which are available only to
participants in the PaineWebber PACESM Select Advisors Program.
No sales charges apply when Growth and Income Fund shareholders receive
Class A, Class B, Class C or Class Y shares of PACE Large Company Value Fund
as part of the Reorganization. PACE Large Company Value Fund is expected to
offer its four new classes of shares to the general public prior to the
Reorganization. Class Y
10
<PAGE>
shares are only available to certain types of investors. Class A, Class B and
Class C shares purchased other than as part of the Reorganization will be
subject to the sales charges described below. In addition, each class has
different ongoing expenses.
PACE Large Company Value 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 similar to the terms of the corresponding plans now in place for
Growth and Income Fund's Class A, Class B and Class C shares. Because the 12b-
1 distribution fees for Class B and Class C shares are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than if you paid a front-end sales charge.
CLASS A SHARES
Class A shares have a front-end sales charge that is included in the
offering price of the Class A shares. This sales charge is not invested in the
Fund. Class A shares pay an annual 12b-1 service fee of 0.25% of average net
assets, but they pay no 12b-1 distribution fees. The ongoing expenses for
Class A shares are lower than for Class B and Class C shares.
The Class A sales charges for both Funds are described in the following
table.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: REALLOWANCE TO SELECTED DEALERS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED AS 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 charged 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 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;
11
<PAGE>
. a trust that you created;
. Uniform Transfers to Minors Act/Uniform Gifts to Minors Act accounts
created by you or by a group of investors for your children; or
. accounts with the same adviser.
You may qualify for a complete waiver of the sales charge if you:
. Are an employee of PaineWebber or its affiliates or the spouse,
parent or child under age 21 of a PaineWebber employee;
. Buy these shares through a PaineWebber Financial Advisor who was
formerly employed as an investment executive with a competing
brokerage firm that was registered as a broker-dealer with the SEC,
and
-- you were the Financial Advisor's client at the competing
brokerage firm;
-- within 90 days of buying shares in a fund, you sell shares of
one or more mutual funds that were principally underwritten by
the competing brokerage firm or its affiliates, and you either
paid a sales charge to buy those shares, pay a contingent
deferred sales charge when selling them or held those shares
until the contingent deferred sales charge was waived; and
-- you purchase an amount that does not exceed the total amount of
money you received from the sale of the other mutual fund;
. Acquire these shares through the reinvestment of dividends of a
PaineWebber unit investment trust;
. Are a 401(k) or 403(b) qualified employee benefit plan with 50 or
more eligible employees in the plan or at least $1 million in assets;
. Are a participant in the PaineWebber Members OnlySM Program. For
investments made pursuant to this waiver, Mitchell Hutchins may make
payments out of its own resources to PaineWebber and to participating
membership organizations in a total amount not to exceed 1% of the
amount invested; or
. Acquire these shares through a PaineWebber InsightOneSM Program
brokerage account.
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.
12
<PAGE>
If you sell Class B shares before the end of six years, you will pay a
deferred sales charge. We calculate the deferred sales charge by multiplying
the lesser of the net asset value of the Class B shares at the time of
purchase or the net asset value at the time of sale by the percentage shown
below:
<TABLE>
<CAPTION>
PERCENTAGE BY WHICH THE
SHARES' NET ASSET
IF YOU SELL SHARES WITHIN: VALUE IS MULTIPLIED:
-------------------------- -----------------------
<S> <C>
1st year since purchase.............................. 5%
2nd year since purchase.............................. 4
3rd year since purchase.............................. 3
4th year since purchase.............................. 2
5th year since purchase.............................. 2
6th year since purchase.............................. 1
7th year since purchase.............................. None
</TABLE>
We will not impose the deferred sales charge on Class B shares purchased
through the reinvestment of dividends or on withdrawals in any year of up to
12% of the value of your Class B shares under the Systematic Withdrawal Plan.
For purposes of determining your deferred sales charge and when to convert
your Class B shares to Class A shares, the holding period for the Class B
shares of PACE Large Company Value Fund that you receive in connection with
the Reorganization will include the period for which you held the
corresponding Class B shares of Growth and Income Fund and any other
PaineWebber fund whose shares you exchanged for Class B shares of Growth and
Income 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.
13
<PAGE>
Class C shares also have a contingent deferred sales charge. You may have to
pay the deferred sales charge if you sell your shares within one year of the
date you purchased them. We calculate the deferred sales charge on sales of
Class C shares by multiplying 1.00% by the lesser of the net asset value of the
Class C shares at the time of purchase or the net asset value at the time of
sale. We will not impose the deferred sales charge on Class C shares purchased
through the reinvestment of dividends or on withdrawals in the first year after
purchase, of up to 12% of the value of your Class C shares under the Systematic
Withdrawal Plan.
For purposes of determining your deferred sales charge, the holding period
for the Class C shares of PACE Large Company Value Fund that you receive in
connection with the Reorganization will include the period for which you held
the corresponding Class C shares of Growth and Income Fund and any other
PaineWebber fund whose shares you exchanged for shares of Growth and Income
Fund.
You may be eligible to sell your shares without paying a contingent deferred
sales charge if you are a 401(k) or 403(b) qualified employee benefit plan with
50 or more eligible employees in the plan or at least $1 million in assets.
NOTE ON SALES CHARGE WAIVERS FOR CLASS A, CLASS B AND CLASS C SHARES:
If you think that you qualify for any of these sales charge waivers
described above, you will need to provide documentation to PaineWebber or the
Fund. For more information, you should contact your PaineWebber Financial
Advisor or correspondent firm or call 1-800-647-1568. If you want information
on the Fund's Systematic Withdrawal Plan, see the SAI or contact your
PaineWebber Financial Advisor or correspondent firm.
CLASS Y SHARES
Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:
. Buy shares through PaineWebber's 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.
14
<PAGE>
If you wish to invest in other PaineWebber funds, you can do so by:
. Contacting your Financial Advisor (if you have an account at
PaineWebber or at a PaineWebber correspondent firm);
. Mailing an application with a check; or
. Opening an account by exchanging shares from another PaineWebber
fund.
You do not have to complete an application when you make additional
investments in the same fund.
The Fund and Mitchell Hutchins reserve the right to reject a purchase order
or suspend the offering of shares.
Minimum Investments
<TABLE>
<S> <C>
To open an account.................................................... $1,000
To add to an account.................................................. $ 100
</TABLE>
The Fund may waive or reduce these amounts for:
. Employees of PaineWebber or its affiliates; or
. Participants in certain pension plans, retirement accounts,
unaffiliated investment programs or the Fund's automatic investment
plans.
Frequent Trading. The interests of the Fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares
are repeatedly bought and sold in response to short-term market
fluctuations -- also known as "market timing." When large dollar amounts are
involved, the Fund may have difficulty implementing long-term investment
strategies, because it cannot predict how much cash it will have to invest.
Market timing also may force the Fund to sell portfolio securities at
disadvantageous times to raise the cash needed to buy a market timer's fund
shares. These factors may hurt the Fund's performance and its shareholders.
When Mitchell Hutchins believes frequent trading would have a disruptive
effect on the Fund's ability to manage its investments, Mitchell Hutchins and
the Fund may reject purchase orders and exchanges into the Fund by any person,
group or account that Mitchell Hutchins believes to be a market timer. The
Fund may notify the market timer that a purchase order or an exchange has been
rejected after the day the order is placed.
SELLING SHARES
You can sell your Fund shares at any time. If you own more than one class
of shares, you should specify which class you want to sell. If you do not, the
Fund will assume that you want to sell shares in the following order: Class A,
then Class C, then Class B and last, Class Y.
If you want to sell shares that you purchased recently, the Fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
If you have an account with PaineWebber or a PaineWebber correspondent
firm, you can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and
you bought your shares through the transfer agent, you can sell your shares by
writing to the Fund's transfer agent. Your letter must include:
. Your name and address;
. The Fund's name;
15
<PAGE>
. The Fund account number;
. The dollar amount or number of shares you want to sell; and
. A guarantee of each registered owner's signature. A signature
guarantee may be obtained from a financial institution, broker,
dealer or clearing agency that is a participant in one of the
medallion programs recognized by the Securities Transfer Agents
Association. These are: Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The Fund will not
accept signature guarantees that are not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the Fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.
It costs the Fund money to maintain shareholder accounts. Therefore, the
Fund reserves the right to repurchase all shares in any account that has a net
asset value of less than $500. If the Fund elects to do this with your
account, it will notify you that you can increase the amount invested to $500
or more within 60 days. The Fund will not repurchase shares in accounts that
fall below $500 solely because of a decrease in the Fund's net asset value.
EXCHANGING SHARES
You may exchange Class A, Class B or Class C shares of the Fund for shares
of the same class of the other PACE funds or of PaineWebber Money Market Fund.
(It is expected that shareholders will also be able to exchange Class A, Class
B or Class C shares of a PACE fund for shares of the same class of certain
other PaineWebber mutual funds beginning on or about March 1, 2001.) You may
not exchange Class Y shares.
You will not pay either a front-end sales charge or a deferred sales charge
when you exchange shares. However, you may have to pay a deferred sales charge
if you later sell the shares you acquired in the exchange. The Fund will use
the date that you purchased the shares in the first fund to determine whether
you must pay a deferred sales charge when you sell the shares in the acquired
fund.
You may not be able to exchange your shares if your exchange is not as
large as the minimum investment amount in that other fund.
You may exchange shares of one fund for shares of another fund only after
the first purchase has settled and the first fund has received your payment.
PaineWebber and Correspondent Firm Clients. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing
an order with your Financial Advisor.
Other Investors. If you are not a PaineWebber or correspondent firm client,
you may exchange your shares by writing to the Fund's transfer agent. You must
include:
. Your name and address;
. The name of the fund whose shares you are selling and the name of the
fund whose shares you want to buy;
16
<PAGE>
. Your account number;
. How much you are exchanging (by dollar amount or by number of shares
to be sold); and
. A guarantee of your signature. (See "Selling Shares" for information
on obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
The Fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
The price at which you may buy, sell or exchange Fund shares is based on net
asset value per share. The Fund calculates net asset value on days that the New
York Stock Exchange, Inc. ("NYSE") is open. The Fund calculates net asset value
separately for each class as of the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). The NYSE normally is not open on most
national holidays and on Good Friday, and the Fund does not price its shares on
these days. If trading on the NYSE is halted for the day before 4:00 p.m.,
Eastern time, the Fund's net asset value per share will be calculated as of the
time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the Fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the Fund.
You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.
The Fund calculates its net asset value based on the current market value
for its portfolio securities. The Fund normally obtains market values for their
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security,
that security is valued at a fair value determined by or under the direction of
the Fund's board. The Fund normally uses the amortized cost method to value
bonds that will mature in 60 days or less.
MANAGEMENT
INVESTMENT MANAGER AND INVESTMENT ADVISER
Mitchell Hutchins is the investment manager and administrator of both PACE
Large Company Value Fund and Growth and Income Fund. 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, an internationally diversified
organization with headquarters in Zurich, Switzerland and operations in many
areas of the financial services industry. On September 30, 2000, Mitchell
Hutchins was adviser or sub-adviser of 31 investment companies with 75 separate
portfolios and aggregate assets of approximately $57.9 billion.
As investment manager for PACE Large Company Value 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
17
<PAGE>
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 Growth and Income Fund, Mitchell Hutchins
recommends sub-advisers to the Board of America Fund and monitors and reviews
the performance of those sub-advisers. Since October 10, 2000, Mitchell
Hutchins and the sub-advisers have provided investment management services to
the Fund under interim contracts approved by the Board of America Fund. Prior
to October 10, 2000, Mitchell Hutchins managed Growth and Income Fund's assets
directly.
SUB-ADVISERS
The same three sub-advisers -- ICAP, Westwood and SSgA -- manage the assets
of each Fund allocated to them by Mitchell Hutchins. ICAP, located at 225 West
Wacker Drive, Suite 2400, Chicago, Illinois 60606-1229, has been in the
investment management business since 1970. As of September 30, 2000, ICAP had
approximately $14.4 billion in assets under management. ICAP uses a team
approach in advising its share of each Fund's assets. ICAP has held its
responsibilities for PACE Large Company Value Fund since July 1, 2000 and for
Growth and Income Fund since October 10, 2000.
Westwood, located at 300 Crescent Court, Suite 1300, Dallas, Texas 75201,
has been in the investment management business since 1983. As of September 30,
2000, Westwood had approximately $3.2 billion under management. Susan M.
Byrne, president of Westwood since 1983, is the lead portfolio manager. She
and a team of five research analysts are primarily responsible for the day-to-
day management of Westwood's share of each Fund's assets. Westwood has held
its responsibilities for PACE Large Company Value Fund since July 1, 2000 and
for Growth and Income Fund since October 10, 2000.
SSgA, located at Two International Place, Boston, Massachusetts 02110, is
the investment management division of State Street Bank and Trust Company. As
of September 30, 2000, SSgA had approximately $741 billion under management.
SSgA uses a team approach in the day-to-day management of its share of each
Fund's assets. SSgA has held its responsibilities for each Fund since October
10, 2000.
ADVISORY FEES AND FUND EXPENSES
PACE Large Company Value Fund paid fees to Mitchell Hutchins for management
and administration services for the Fund's most recent fiscal year at the
combined annual contract rate of 0.80% of average daily net assets. This
combined fee includes an annual contract rate of 0.60% for investment
management services and 0.20% for administrative services, both expressed as a
percentage of the Fund's average daily net assets. Growth and Income Fund paid
fees to Mitchell Hutchins for investment advisory and administration services
for the Fund's most recent fiscal year at the annual rate of 0.70% of the
Fund's average daily net assets.
The management fee paid by PACE Large Company Value Fund to Mitchell
Hutchins is greater than the management fee paid by Growth and Income Fund.
However, Mitchell Hutchins anticipates that shareholders of each class of
shares of Growth and Income Fund who will become shareholders of the
corresponding class of shares of PACE Large Company Value Fund will be subject
to total annual operating expenses that are the same (Class Y shares) or
slightly lower (Class A, B and C shares) than the expenses they currently pay
as shareholders of Growth and Income Fund. The overall operating expenses of
the combined Fund are subject to a written management fee waiver agreement
between PACE Large Company Value Fund and Mitchell Hutchins, which will remain
in effect through December 1, 2002. Absent this fee waiver, it is expected
that the overall operating expenses of PACE Large Company Value Fund
immediately following the Reorganization would be somewhat higher than the
current operating expenses of Growth and Income Fund.
18
<PAGE>
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
America Fund's Board approved the proposed Reorganization of Growth and
Income Fund into PACE Large Company Value Fund at a meeting held on October 6,
2000. At that meeting and in a series of prior meetings and presentations,
Mitchell Hutchins explained to the Board that it had undertaken an extensive
review of whether the best interests of shareholders of a number of
PaineWebber funds, including Growth and Income Fund, would be served by
continuing to operate the funds under their current arrangements. For Growth
and Income Fund, Mitchell Hutchins' review included a possible restructuring
of the Fund's investment management arrangements and a possible reorganization
into another PaineWebber fund.
Mitchell Hutchins noted that, although Growth and Income Fund has performed
well, it generally has underperformed its benchmark index. Mitchell Hutchins
also noted that PACE Large Company Value Fund has a similar investment
objective and, like Growth and Income Fund, invests in stocks of large
capitalization companies. Mitchell Hutchins advised the Board of America Fund
that the investment management arrangements for PACE Large Company Value Fund
were recently changed. Mitchell Hutchins had concluded that the former sub-
adviser of PACE Large Company Value Fund had underperformed over a period of
time and had recommended to PACE Trust's Board that it be replaced. The Board
of PACE Trust approved Mitchell Hutchins' recommendations. Two new sub-
advisers (Westwood and ICAP) started managing the Fund's assets effective July
1, 2000, and a third new sub-adviser (SSgA) began managing a portion of the
Fund's assets effective October 10, 2000. (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 of Growth and
Income Fund into PACE Large Company Value Fund would likely benefit Growth and
Income Fund's shareholders because the larger asset base of the combined Fund
could give the combined Fund greater opportunities to diversify investments
and realize economies of scale. Mitchell Hutchins noted that the investment
management and administration fee currently paid by PACE Large Company Value
Fund is greater than that currently paid by Growth and Income Fund. However,
Mitchell Hutchins informed the Board of America Fund that it had entered into
a written management fee waiver agreement with PACE Large Company Value Fund
to waive its management fee through December 1, 2002 to the extent necessary
to reflect the lower overall fees paid to the Fund's sub-advisers as a result
of the lower sub-advisory fee paid to SSgA. As a result of this management fee
waiver, it is expected that the net operating expenses for each class of
shares of PACE Large Company Value Fund will be the same (Class Y shares) or
slightly lower (Class A, B, and C shares) than the operating expenses of the
corresponding class of shares of Growth and Income Fund. In addition, Mitchell
Hutchins has entered into another written agreement with PACE Large Company
Value Fund that becomes effective if the Reorganization takes place. Under
that agreement, Mitchell Hutchins is contractually obligated to waive its
management fee and/or reimburse the Fund to the extent that its total annual
operating expenses for each class of shares through December 1, 2002 would
otherwise exceed the current overall operating expenses of the corresponding
class of shares of Growth and Income Fund. It is not presently expected that
Mitchell Hutchins would be required to waive its management fee or reimburse
expenses under this agreement because the expenses of the combined Fund are
expected to be the same (Class Y shares) or slightly lower (Class A, B, and C
shares) than the current operating expenses of Growth and Income Fund as a
result of the management fee waiver agreement described above. (See
"Comparative Fee Table" above for a more complete description of the fees and
expenses of the Funds, both before and after the Reorganization.)
Mitchell Hutchins then proposed immediate changes in the investment
management arrangements for Growth and Income Fund. Mitchell Hutchins advised
the Board of America Fund of its belief that, instead of selecting a single
sub-adviser for Growth and Income Fund's entire portfolio, a combination of
active stock selection and index investing through the same three sub-advisers
recently approved for PACE Large Company Value Fund would be more likely to
help Growth and Income Fund achieve its investment objective through better
long-term performance at reduced risk. 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
19
<PAGE>
which are managed by sub-advisers. Mitchell Hutchins recommended to the Board
of America Fund that ICAP, Westwood and SSgA be retained on an interim basis
to manage the assets of Growth and Income Fund, with Mitchell Hutchins having
responsibility for allocating the Fund's assets among the three sub-advisers.
After consideration of all the information presented by Mitchell Hutchins,
inquiries into the ability and resources of each proposed sub-adviser to
provide appropriate investment management services for its allocated portion
of Growth and Income Fund's assets and interviews with personnel of each
proposed sub-adviser, America Fund's Board determined to implement the new
investment management arrangements effective October 10, 2000.
To implement the new investment management arrangements for Growth and
Income Fund, the Board of America Fund, effective October 10, 2000, terminated
the existing investment advisory and administration contract between the Fund
and Mitchell Hutchins and approved a new interim contract with Mitchell
Hutchins and an interim sub-advisory contract between Mitchell Hutchins and
each sub-adviser. Under the Interim Management and Administration Contract
("Interim Management Contract"), Mitchell Hutchins serves as investment
manager for Growth and Income Fund and provides portfolio management oversight
as opposed to direct management of the Fund's investments. Mitchell Hutchins
provides portfolio management oversight principally by performing initial
reviews of prospective sub-advisers and supervising and monitoring the
performance of the sub-advisers thereafter. The Interim Management Contract
and interim sub-advisory contracts will terminate on the earlier of 150 days
from their effective date or the Closing Date of the Reorganization.
Mitchell Hutchins then reminded the Board that, once the new investment
management arrangements were in place, Growth and Income Fund and PACE Large
Company Value Fund would be managed in a similar manner. Mitchell Hutchins
noted its belief that operating two funds that offer similar investments and
management would result in higher expenses and less efficient operations than
operating a single fund that combines the assets of the two original funds.
Mitchell Hutchins also stated its belief that it would not be desirable from a
marketing or administrative perspective to maintain and distribute shares for
two similar funds. Mitchell Hutchins noted, moreover, that PACE Large Company
Growth Fund has the additional flexibility to change its sub-adviser or add
additional sub-advisers when Mitchell Hutchins and the Board of PACE Trust
decide without the cost or delay of needing first to obtain approval by a vote
of the shareholders of PACE Large Company Growth Fund.
Finally, Mitchell Hutchins reviewed with the Board of America Fund the
principal terms of the Plan. Mitchell Hutchins informed the Board that the
Reorganization would be tax-free to Growth and Income Fund and its
shareholders, that shareholders of the combined Fund after the Reorganization
could continue to exchange into other PaineWebber open-end funds without
having to pay an additional sales load should their investment priorities
change, and that no sales charges would be imposed on any PACE Large Company
Value Fund shares issued in connection with the Reorganization. Furthermore,
Mitchell Hutchins informed the Board of America Fund that, for purposes of
calculating the contingent deferred sales charge, the holding period for the
Class B and Class C shares distributed to Class B and Class C shareholders of
Growth and Income Fund would include the holding period for the shares of
Growth and Income Fund and any other PaineWebber fund shares of the same class
that were exchanged for shares of Growth and Income Fund.
As part of its considerations, the Board of America Fund examined a number
of factors with respect to the Reorganization, including: (1) the
compatibility of the Funds' investment objectives, policies and restrictions;
(2) the Funds' respective investment performances; (3) the likely impact of
the Reorganization on the expense ratio of PACE Large Company Value Fund and
that expense ratio relative to Growth and Income Fund's current expense ratio;
(4) that the costs of the Reorganization would be borne by Mitchell Hutchins;
(5) the compatibility of the Funds' portfolio holdings and the effect on
Growth and Income Fund and its shareholders of any realignment of its
portfolio in connection with the Reorganization; (6) the tax consequences of
the Reorganization; (7) the potential benefits of the Reorganization to other
persons, including Mitchell Hutchins and its affiliates; (8) Mitchell
Hutchins' assessment that the proposed Reorganization will be beneficial to
the shareholders of Growth and Income Fund and will not dilute their
interests; (9) the advisory arrangements in place for the Funds and the level
and quality of investment advisory services provided or to be provided by
Mitchell Hutchins, ICAP, Westwood and SSgA; and (10) the terms of the proposed
Plan.
20
<PAGE>
On the basis of the information provided to it and its evaluation of that
information, the Board of America Fund, including a majority of its Independent
Trustees, determined that the Reorganization would be in the best interests of
Growth and Income Fund and that the interests of existing Growth and Income
Fund shareholders would not be diluted as a result of the Reorganization.
THEREFORE, THE BOARD OF AMERICA FUND UNANIMOUSLY APPROVED THE REORGANIZATION
AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF GROWTH AND
INCOME FUND AT THE MEETING.
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan. Significant provisions of the Plan are summarized
below; however, this summary is qualified in its entirety by reference to the
Plan. A copy of the form of Agreement and Plan of Reorganization and
Termination is attached as Appendix A to this Proxy Statement/Prospectus.
The Plan contemplates (1) PACE Large Company Value Fund's acquiring on the
Closing Date all the assets of Growth and Income Fund in exchange solely for
PACE Large Company Value Fund shares and PACE Large Company Value Fund's
assumption of all of Growth and Income Fund's stated liabilities and (2) the
distribution of those shares to Growth and Income Fund shareholders. Growth and
Income Fund's assets include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on its books and other
property owned by it as of the close of business on the Closing Date
("Effective Time") (collectively, the "Assets"). PACE Large Company Value Fund
will assume from Growth and Income Fund all its liabilities, debts, obligations
and duties of whatever kind or nature, whether absolute, accrued, contingent,
or otherwise, whether or not arising in the ordinary course of business, and
whether or not specifically referred to in the Plan, but only to the extent
disclosed or provided for in Growth and Income Fund's most recent annual
financial statements, or incurred by Growth and Income Fund subsequent to the
date of those financial statements and disclosed in writing to and accepted by
PACE Trust (collectively, the "Liabilities"); provided, however, that Growth
and Income Fund will use its best efforts to discharge all of its known
Liabilities prior to the Effective Time. PACE Large Company Value Fund will
deliver its shares to Growth and Income Fund, which then will be distributed to
Growth and Income Fund's shareholders.
The value of the Assets to be acquired, and the amount of the Liabilities to
be assumed, by PACE Large Company Value Fund and the NAV of a PACE Large
Company Value Fund share will be determined as of the close of regular trading
on the NYSE on the Closing Date ("Valuation Time"), using the applicable
valuation procedures described in PACE Large Company Value Fund's then-current
Prospectus and SAI. These procedures are very similar to those used by Growth
and Income Fund and described in its Prospectus and SAI. Growth and Income
Fund's net asset value will be the value of its Assets to be acquired by PACE
Large Company Value Fund, less the amount of Growth and Income Fund's
Liabilities, as of the Valuation Time.
On, or as soon as practicable after, the Closing Date, Growth and Income
Fund will distribute to its shareholders of record as of the Effective Time the
PACE Large Company Value Fund shares it receives, by class, so that each Growth
and Income Fund shareholder will receive the number of full and fractional
shares of the corresponding class of PACE Large Company Value Fund equal in
aggregate NAV to the shareholder's shares in Growth and Income Fund. That
distribution will be accomplished by opening accounts on the books of PACE
Large Company Value Fund in the names of Growth and Income Fund's shareholders
and crediting those accounts with PACE Large Company Value Fund shares equal in
aggregate NAV to the shareholders' shares in Growth and Income Fund. Fractional
shares of PACE Large Company Value Fund will be rounded to the third decimal
place.
Immediately after the Reorganization, each former shareholder of Growth and
Income Fund will own shares of the class of PACE Large Company Value Fund equal
in aggregate NAV to the aggregate NAV of that shareholder's shares of the
corresponding class of Growth and Income Fund immediately prior to the
Reorganization. The NAV per share of PACE Large Company Value Fund will not
change as a result of the
21
<PAGE>
Reorganization. Thus, the Reorganization will not result in a dilution of the
interest of any shareholder in either Fund. In addition, Mitchell Hutchins (not
the Funds) will bear the expenses of the Reorganization. Growth and Income Fund
will be terminated after the Reorganization.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan, some of which may be waived by either Fund. In addition,
the Plan may be amended in any mutually agreeable manner, except that no
amendment may be made subsequent to the Meeting that would have a material
adverse effect on the interests of Growth and Income Fund shareholders. If the
Reorganization is not approved by shareholders at the Meeting, Growth and
Income Fund will continue to operate as a series of America Fund, and its Board
will then consider other options and alternatives for the future of the Fund,
including the liquidation of the Fund, resubmitting this proposal for
shareholder approval or other appropriate action.
DESCRIPTION OF SECURITIES TO BE ISSUED
PACE Large Company Value Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.001 per share. The Fund's shares
are divided into five classes, designated Class A, Class B, Class C, Class Y
and Class P shares. Class P shares are not involved in the Reorganization. A
share of each class of PACE Large Company Value 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
distributions shall appropriately reflect expenses allocated to a particular
class. Shares of the Fund entitle their holders to one vote per full share and
fractional votes for fractional shares held. PACE Trust does not hold annual
meetings. Shares of the Fund generally are voted together, except that only the
shareholders of a particular class of the Fund may vote on matters affecting
only that class, such as the terms of a Rule 12b-1 plan as it relates to the
class. Shares of each series of PACE Trust will be voted separately, except
when an aggregate vote of all the series is required by law.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of Growth and Income Fund, which
prohibit it from acquiring more than a stated percentage of ownership of
another company, might be construed as restricting its ability to carry out the
Reorganization. By approving the Plan, you agree to waive, only for the purpose
of the Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
FEDERAL INCOME TAX CONSIDERATIONS
The Reorganization is intended to be a tax-free reorganization within the
meaning of section 368(a)(1)(D) of the Code. America Fund and PACE Trust each
will receive an opinion of Kirkpatrick & Lockhart LLP, counsel to America Fund
and tax counsel to PACE Trust, substantially to the following effect:
(1) PACE Large Company Value Fund's acquisition of the Assets in
exchange solely for PACE Large Company Value Fund shares and PACE Large
Company Value Fund's assumption of the Liabilities, followed by Growth and
Income Fund's distribution of those shares pro rata to its shareholders
constructively in exchange for their Growth and Income Fund shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(D) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
(2) Growth and Income Fund will recognize no gain or loss on its
transfer of the Assets to PACE Large Company Value Fund in exchange solely
for PACE Large Company Value Fund shares and PACE Large Company Value
Fund's assumption of the Liabilities or on the subsequent distribution of
those shares to Growth and Income Fund's shareholders in constructive
exchange for their Growth and Income Fund shares;
(3) PACE Large Company Value Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for PACE Large Company Value Fund
shares and its assumption of the Liabilities;
22
<PAGE>
(4) PACE Large Company Value Fund's basis for the Assets will be the
same as Growth and Income Fund's basis therefor immediately before the
Reorganization, and PACE Large Company Value Fund's holding period for the
Assets will include Growth and Income Fund's holding period therefor;
(5) A Growth and Income Fund shareholder will recognize no gain or loss
on the constructive exchange of all its Growth and Income Fund shares
solely for PACE Large Company Value Fund shares pursuant to the
Reorganization; and
(6) A Growth and Income Fund shareholder's aggregate basis for the PACE
Large Company Value Fund shares to be received by it in the Reorganization
will be the same as the aggregate basis for its Growth and Income Fund
shares to be constructively surrendered in exchange for those PACE Large
Company Value Fund shares, and its holding period for those PACE Large
Company Value Fund shares will include its holding period for those Growth
and Income Fund shares, provided the shareholder holds them as capital
assets on the Closing Date.
The opinion may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by PACE Large Company Value Fund after the Reorganization of any
pre-Reorganization capital losses realized by Growth and Income Fund could be
subject to limitation in future years under the Code.
You should consult your tax adviser regarding the effect, if any, of the
Reorganization in light of your individual circumstances. Because the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, you also should consult your tax adviser as to state and local
tax consequences, if any, of the Reorganization.
REQUIRED VOTE
The proposal to approve the Plan requires the affirmative vote of the lesser
of (1) 67% or more of the shares of Growth and Income Fund present at the
Meeting, if more than 50% of the outstanding shares are represented at the
Meeting in person or by proxy, or (2) more than 50% of the outstanding shares
entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
----------------
ORGANIZATION OF THE FUNDS
PACE Large Company Value Fund commenced operations on August 24, 1995 as a
diversified series of PACE Trust. PACE Trust was formed as a Delaware business
trust on September 9, 1994, and is registered under the 1940 Act as an open-end
management investment company. The operations of PACE Trust, as a Delaware
business trust, are governed by its Trust Instrument, By-Laws and Delaware law.
Growth and Income Fund commenced operations on December 20, 1983 as a
diversified series of PaineWebber America Fund, Inc., a Maryland corporation
registered under the 1940 Act as an open-end management investment company. On
March 1, 1987, the initial series of America Fund, a Massachusetts business
trust formed on October 31, 1986, succeeded to the assets and liabilities of
PaineWebber America Fund, Inc., including its registration as an open-end
investment company. The operations of America Fund, as a Massachusetts business
trust, are governed by its Declaration of Trust, By-Laws and Massachusetts law.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you understand
PACE Large Company Value Fund's financial performance for the periods shown.
The table shows information for the Fund's Class P shares because they were the
only class of shares outstanding during the periods shown. Certain information
reflects financial results for a single Fund share. In the tables, "total
investment return" represents the rate that an investor would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends and
distributions. This information has been audited by Ernst & Young LLP,
independent auditors for PACE Large Company Value 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.
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
PACE LARGE COMPANY VALUE 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...................... $ 21.14 $ 20.27 $ 20.03 $ 14.07 $ 12.00
Net investment income........ 0.15 0.13 0.14 0.11 0.12
Net realized and unrealized
gains (losses) from
investments and futures..... (3.17) 2.34 1.63 6.61 2.02
-------- -------- -------- -------- -------
Net increase (decrease) from
investment operations....... (3.02) 2.47 1.77 6.72 2.14
-------- -------- -------- -------- -------
Dividends from net investment
income...................... (0.14) (0.14) (0.14) (0.11) (0.05)
Distributions from net
realized gains from
investments................. (1.63) (1.46) (1.39) (0.65) (0.02)
-------- -------- -------- -------- -------
Total dividends and
distributions............... (1.77) (1.60) (1.53) (0.76) (0.07)
-------- -------- -------- -------- -------
Net asset value, end of
period...................... $ 16.35 $ 21.14 $ 20.27 $ 20.03 $ 14.07
======== ======== ======== ======== =======
Total investment return (1).. (14.74)% 12.82% 9.89% 49.13% 17.90%
======== ======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)..................... $335,294 $375,465 $266,354 $180,807 $80,897
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 0.96% 0.96% 0.98% 1.00% 1.00%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 0.96% 0.96% 0.98% 1.06% 1.40%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 0.85% 0.71% 0.82% 0.81% 1.22%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 0.85% 0.71% 0.82% 0.75% 0.82%*
Portfolio turnover........... 195% 40% 34% 46% 38%
</TABLE>
----------------
+ For the period August 24, 1995 (commencement of operations) through July 31,
1996.
* Annualized.
# Sub-Investment advisory functions for this portfolio were transferred from
Brinson Partners, Inc. to Institutional Capital Corp. and Westwood
Management Corp. on July 1, 2000.
(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 Growth and Income
Fund and PACE Large Company Value Fund as of July 31, 2000, and pro forma
capitalization as of the same date, assuming that shareholders of Growth and
Income Fund and PaineWebber Tax-Managed Equity Fund approve the
reorganizations with PACE Large Company Value Fund:
<TABLE>
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS A
GROWTH AND INCOME FUND: VALUE FUND: COMBINED PACE LARGE
CLASS A CLASS A COMPANY VALUE FUND
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $731,944,747 $ 0 $744,656,230
Shares Outstanding...... 22,516,039 0 45,545,540
Net Asset Value Per
Share.................. $ 32.51 $ 0 $ 16.35
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS B
GROWTH AND INCOME FUND: VALUE FUND: COMBINED PACE LARGE
CLASS B CLASS B COMPANY VALUE FUND
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $216,222,256 $ 0 $236,878,224
Shares Outstanding...... 6,765,936 0 14,488,224
Net Asset Value Per
Share.................. $ 31.96 $ 0 $ 16.35
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS C
GROWTH AND INCOME FUND: VALUE FUND: COMBINED PACE LARGE
CLASS C CLASS C COMPANY VALUE FUND
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $126,509,235 $ 0 $139,119,392
Shares Outstanding...... 3,950,549 0 8,508,984
Net Asset Value Per
Share.................. $ 32.02 $ 0 $ 16.35
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS Y
GROWTH AND INCOME FUND: VALUE FUND: COMBINED PACE LARGE
CLASS Y CLASS Y COMPANY VALUE FUND
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 47,106,065 $ 0 $ 47,358,706
Shares Outstanding...... 1,444,964 0 2,896,609
Net Asset Value Per
Share.................. $ 32.60 $ 0 $ 16.35
<CAPTION>
PACE LARGE COMPANY PRO FORMA CLASS P
GROWTH AND INCOME FUND: VALUE FUND: COMBINED PACE LARGE
CLASS P CLASS P COMPANY VALUE FUND
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Assets.............. $ 0 $335,294,410 $335,294,410
Shares Outstanding...... 0 20,507,671 20,507,671
Net Asset Value Per
Share.................. $ 0 $ 16.35 $ 16.35
</TABLE>
25
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the issuance of PACE Large Company Value
Fund shares as part of the Reorganization will be passed upon by Willkie Farr &
Gallagher, 787 7th 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 America Fund are each subject to the information requirements
of the Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith each files reports and other information with the SEC. Reports, proxy
statements, registration statements and other information may be inspected
without charge and copied at the Public Reference Room maintained by the SEC at
450 Fifth Street, N.W., Washington, DC 20549, and at the following regional
offices of the SEC: 7 World Trade Center, Suite 1300, New York, NY 10048, and
500 West Madison Street, 14th floor, Chicago, IL 60661. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at 1-
202-942-8090. The SEC maintains an internet web site at http://www.sec.gov that
contains information regarding PACE Trust and America Fund, and other
registrants that file electronically with the SEC. Copies of such material may
also be obtained, after paying a duplicating fee, from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, DC, 20549, or by electronic request at the
following e-mail address: [email protected].
EXPERTS
The audited financial statements of Growth and Income Fund incorporated by
reference in the SAI have been audited by Ernst & Young LLP, independent
auditors, whose report thereon is included in Growth and Income Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000. The audited
financial statements of PACE Large Company Value Fund incorporated by reference
in the SAI for the fiscal year ended July 31, 2000 have been audited by Ernst &
Young LLP, independent auditors, whose report thereon is included in PACE Large
Company Value 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, America Fund does not hold
regular annual or other meetings of shareholders. Any shareholder who wishes to
submit proposals to be considered at a special meeting of Growth and Income
Fund's shareholders should send such proposals to Growth and Income Fund at 51
West 52nd Street, New York, New York 10019-6114. Proposals must be received a
reasonable period of time prior to any meeting to be included in the proxy
materials. Moreover, inclusion of such proposals is subject to limitations
under the federal securities laws. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
Other Business. America Fund's management knows of no other business to be
presented to the Meeting other than the matters set forth in this Proxy
Statement/Prospectus, but should any other matter requiring a vote of Growth
and Income Fund's shareholders arise, the proxies will vote thereon according
to their best judgment in the interests of the Fund.
26
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
This Agreement and Plan of Reorganization and Termination ("Agreement") is
made as of , 2000, by and among PaineWebber PACE Select Advisors Trust, a
Delaware business trust ("PACE Trust"), on behalf of PACE Large Company Value
Equity Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber America Fund, a Massachusetts business trust
("Target Trust"), on behalf of PaineWebber Growth and Income Fund, the sole
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").
A-1
<PAGE>
Such transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights
of action, rights to register shares under applicable securities laws, books
and records, deferred and prepaid expenses shown as assets on Target's books,
and other property owned by Target at the Effective Time (as defined in
paragraph 3.1).
1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.18, or otherwise disclosed in writing
to and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to
use its best efforts to discharge all its Liabilities before the Effective
Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of
its realized net capital gain, if any, for its current taxable year through
the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by PACE Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited
with the respective pro rata number of full and fractional (rounded to the
third decimal place) Acquiring Fund Shares due that Shareholder, by class
(i.e., the account for a Shareholder of Class A Target Shares shall be
credited with the respective pro rata number of Class A Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class B Target Shares
shall be credited with the respective pro rata number of Class B Acquiring
Fund Shares due that Shareholder; the account for a Shareholder of Class C
Target Shares shall be credited with the respective pro rata number of Class C
Acquiring Fund Shares due that Shareholder; and the account for a Shareholder
of Class Y Target Shares shall be credited with the respective pro rata number
of Class Y Acquiring Fund Shares due that Shareholder). All outstanding Target
Shares, including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months
after the Effective Time, Target shall be terminated as a series of Target
Trust and any further actions shall be taken in connection therewith as
required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Acquiring Fund's then-current
prospectus and statement of additional information ("SAI"), less (b) the
amount of the Liabilities as of the Valuation Time.
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2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on or about
February , 2001, or at such other place and/or on such other date as to which
the Investment Companies may agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the Investment Companies may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund
Shares is impracticable, the Effective Time shall be postponed until the first
business day after the day when such trading shall have been fully resumed and
such reporting shall have been restored.
3.2. Target Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund,
as reflected on Acquiring Fund's books immediately after the Closing, does or
will conform to such information on Target's books immediately before the
Closing. Target Trust's custodian shall deliver at the Closing a certificate
of an authorized officer stating that the Assets held by the custodian will be
transferred to Acquiring Fund at, or arrangements for the transfer thereof to
Acquiring Fund will have been made on or before, the Effective Time.
3.3. Target Trust shall deliver to PACE Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder (rounded to the third decimal
place), all as of the Effective Time, certified by Target Trust's Secretary or
an Assistant Secretary thereof. PACE Trust's transfer agent shall deliver at
the Closing a certificate as to the opening on Acquiring Fund's share transfer
books of accounts in the Shareholders' names. PACE Trust shall issue and
deliver a confirmation to Target Trust evidencing the Acquiring Fund Shares to
be credited to Target at the Effective Time or provide evidence satisfactory
to Target Trust that such Acquiring Fund Shares have been credited to Target's
account on Acquiring Fund's books. At the Closing, each Investment Company
shall deliver to the other bills of sale, checks, assignments, stock
certificates, receipts, or other documents the other Investment Company or its
counsel reasonably requests.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to
the effect that the representations and warranties it made in this Agreement
are true and correct at the Effective Time except as they may be affected by
the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants to PACE Trust, on behalf of Acquiring
Fund, as follows:
4.1.1. Target Trust is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable shares
("Business Trust"), that is duly organized and validly existing under the
laws of the Commonwealth of Massachusetts; and a copy of its Amended and
Restated Declaration of Trust ("Declaration of Trust") is on file with the
Secretary of the Commonwealth of Massachusetts;
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4.1.2. Target Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"), and such registration will be in full force and effect at the
Effective Time;
4.1.3. Target is a duly established and designated series of Target
Trust;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances (except
securities that are subject to "securities loans" as referred to in section
851(b)(2) of the Code); and on delivery and payment for the Assets,
Acquiring Fund will acquire good and marketable title thereto;
4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Massachusetts law or any provision of
the Declaration of Trust or Target Trust's By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as otherwise
disclosed in writing to and accepted by PACE Trust;
4.1.7. Except as otherwise disclosed in writing to and accepted by PACE
Trust, all material contracts and other commitments of or applicable to
Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted or to
be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by PACE
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target
Trust's knowledge) threatened against Target Trust with respect to Target
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the conduct
of its business; and Target Trust knows of no facts that might form the
basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Target Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), or the 1940 Act for the execution or
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performance of this Agreement by Target Trust, except for (a) the filing
with the Securities and Exchange Commission ("SEC") of a registration
statement by PACE Trust on Form N-14 relating to the Acquiring Fund Shares
issuable hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), and (b) such consents, approvals, authorizations, and filings
as have been made or received or as may be required subsequent to the
Effective Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the Meeting (as defined in paragraph 5.2), and at the Effective Time,
the Proxy Statement will (a) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and
the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by PACE Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business; and there are no Liabilities other than liabilities
disclosed or provided for in Target Trust's financial statements referred
to in paragraph 4.1.18, or otherwise disclosed to and accepted by PACE
Trust, none of which has been materially adverse to the business, assets,
or results of Target's operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the Code;
it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; the Assets will be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing; and Target has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers;
4.1.17. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years through and including the
taxable year ended August 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid;
4.1.18. Target Trust's audited financial statements for the year ended
August 31, 2000, to be delivered to PACE Trust, fairly represent Target's
financial position as of each such date and the results of its operations
and changes in its net assets for the period then ended; and
4.1.19. Target's management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (within such meaning) to
Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Target as a series of
an open-end investment company, (c) expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization.
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4.2. Acquiring Fund represents and warrants to Target Trust, on behalf of
Target, as follows:
4.2.1. PACE Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware; and its
Certificate of Trust, including any amendments thereto ("Certificate of
Trust"), has been duly filed in the office of the Secretary of State
thereof;
4.2.2. PACE Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
PACE Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, including the receipt of
consideration in exchange therefor in excess of the par value thereof, will
be duly and validly issued and outstanding shares of Acquiring Fund, fully
paid and non-assessable;
4.2.6. Acquiring Fund's current prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Delaware law or any
provision of PACE Trust's Certificate of Trust, Trust Instrument (including
any amendments thereto) ("Trust Instrument"), or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as otherwise disclosed in writing to and accepted
by Target Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Target Trust, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to PACE
Trust's knowledge) threatened against PACE Trust with respect to Acquiring
Fund or any of its properties or assets that, if adversely determined,
would materially and adversely affect Acquiring Fund's financial condition
or the conduct of its business; and PACE Trust knows of no facts that might
form the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of PACE Trust's board of trustees (together with Target Trust's board
of trustees, the "Boards"), which has made the determinations required by
Rule 17a-8(a) under the 1940 Act; and this Agreement constitutes a valid
and legally binding obligation of Acquiring Fund, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to
or affecting creditors' rights and to general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by PACE Trust, except
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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
4.2.19. PACE Trust's audited financial statements for the year ended
July 31, 2000, to be delivered to Target Trust, fairly represent Acquiring
Fund's financial position as of that date and the results of its operations
and changes in its net assets for the year then ended.
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4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received by
each Shareholder will be approximately equal to the fair market value of
its Target Shares constructively surrendered in exchange therefor;
4.3.2. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.3. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those
to which the Assets are subject;
4.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.5. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the
gross assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) after the date of this Agreement will be included
as assets held thereby immediately before the Reorganization;
4.3.6. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;
4.3.7. Immediately after the Reorganization, the Shareholders will 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).
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that--
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations
contemplated by each Fund's normal business activities, and
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that if Target's
shareholders approve this Agreement (and the transactions
contemplated hereby), then between the date of such approval and
the Closing, the Funds shall coordinate their respective
portfolios so that the transfer of the Assets to Acquiring Fund
will not cause it to fail
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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
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to
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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) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof, (2) limit such opinion to applicable
federal and state law, and (3) 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 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. Expenses of the Reorganization that relate to the Acquiring Fund and
Target will be borne by Mitchell Hutchins. Any such expenses which are so
borne by Mitchell Hutchins will be solely and directly related to the
Reorganization.
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 , 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
A-13
<PAGE>
Investment Company and delivered to the other party hereto. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
PaineWebber America Fund, acting on
behalf of its sole series,
PaineWebber Growth and Income Fund
By: _________________________________
PaineWebber PACE Select Advisors
Trust, acting on behalf of its
series, PACE Large Company Value
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 entities owned beneficially or of
record 5% or more of the Class [ ] shares of Growth and Income Fund or PACE
Large Company Value Fund. Mitchell Hutchins did not know of any other person
who owned beneficially or of record 5% or more of any other class of either
Fund's outstanding equity securities as of the Record Date.
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
PERCENT BENEFICIAL OWNERSHIP OF
OWNERSHIP OF COMBINED PACE
GROWTH AND INCOME LARGE COMPANY
SHAREHOLDER'S NAME/ADDRESS FUND VALUE FUND
-------------------------- ------------------ ------------------
<S> <C> <C>
[ ] % %
c/o Mitchell Hutchins Asset Management
Inc.
51 West 52nd Street
New York, New York 10019-6114
</TABLE>
PACE LARGE COMPANY VALUE FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
PERCENT BENEFICIAL OWNERSHIP OF
OWNERSHIP OF PACE COMBINED PACE
LARGE COMPANY LARGE COMPANY
SHAREHOLDER'S NAME/ADDRESS VALUE FUND VALUE FUND
-------------------------- ------------------ ------------------
<S> <C> <C>
[ ] % %
c/o Mitchell Hutchins Asset Management
Inc.
51 West 52nd Street
New York, New York 10019-6114
</TABLE>
B-1
<PAGE>
APPENDIX C
MANAGEMENT'S DISCUSSION OF PACE LARGE COMPANY VALUE FUND'S PERFORMANCE
THE DISCUSSION BELOW WAS TAKEN FROM PACE LARGE COMPANY VALUE FUND'S ANNUAL
REPORT FOR ITS FISCAL YEAR ENDED JULY 31, 2000. THIS DISCUSSION HAS NOT BEEN
REVISED TO REFLECT SUBSEQUENT CHANGES, WHICH ARE DISCUSSED ABOVE IN THE PROXY
STATEMENT/PROSPECTUS.
Advisers: Westwood Management Corporation and Institutional Capital
Corporation
Portfolio Managers: (Westwood) Susan Byrne and Kellie Stark; ICAP Investment
Team
Objective: Capital appreciation and dividend income
Westwood Investment Process: Westwood screens large capitalization companies
for those that have reported a positive earnings surprise which has received
little or no recognition in the form of positive future earnings revisions, and
for those companies that have a price-to-sales ratio less than the Standard &
Poor's 500 Index. These companies are further screened to identify those with
improving returns on equity combined with stable-to-declining debt/equity
ratios. Forward-looking fundamental analysis is then applied to these potential
investments. Those companies that pass through the screening and fundamental
research process are placed on a monitor list, at which point a catalyst for
purchase is sought.
ICAP Investment Process: ICAP uses a team approach with a value-oriented
investment style. ICAP uses a proprietary model to identify large
capitalization companies that ICAP believes offer the best relative values.
ICAP further narrows its search to companies where a catalyst for positive
change is, in ICAP's view, about to occur. Finally, ICAP researches the
financial condition and business prospects of those companies where a catalyst
may be about to occur.
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00
<TABLE>
<CAPTION>
SINCE
INCEPTION
6 MONTHS 1 YEAR 3 YEARS 8/24/95
-------- ------ ------- ---------
<S> <C> <C> <C> <C>
With PACE program fee*....................... -0.01% -16.01% 0.35% 11.67%
Without PACE program fee..................... 0.74% -14.74% 1.87% 13.36%
Russell 1000 Value Index..................... 0.24% -5.00% 8.74% 17.24%
Lipper Multi-Cap Value Funds Median.......... 4.20% -2.24% 5.23% 13.75%
</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.
C-1
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PORTFOLIO AND THE
RUSSELL 1000 VALUE INDEX
[GRAPH]
Portfolio Without Portfolio with Russell 1000
Fee Fee* Value Index
AUG-95 $10,117 $10,113 $10,000
JAN-96 11,622 11,546 11,395
JUL-96 11,790 11,625 11,428
JAN-97 14,483 14,174 14,094
JUL-97 17,581 17,077 17,009
JAN-98 17,557 16,926 17,914
JUL-98 19,320 18,486 20,020
JAN-99 20,498 19,467 21,179
JUL-99 21,798 20,546 23,021
JAN-00 18,449 17,260 21,821
JUL-00 18,585 17,257 21,872
The graph depicts the performance of PACE Large Company Value Equity
Investments versus the Russell 1000 Value Index. It is important to note that
PACE Large Company Value 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.
ADVISERS' COMMENTS
On July 1, 2000, Westwood Management Corporation and Institutional Capital
Corporation replaced Brinson Partners, Inc. as the advisers for the Portfolio.
WESTWOOD MANAGEMENT
During the 12-month period ended July 31, 2000, the performance of the
Large Company Value Equity Investments Portfolio lagged that of its benchmark,
the Russell 1000 Value Index.
The second half of 1999 ran rampant with the technology sector remaining in
the lead. Dot Com was the theme despite a series of rate hikes beginning June
30th, as inflationary pressures crept into the markets. Throughout the
domestic and foreign economies merger announcements continued to make
headlines and drive equity prices. After the beginning of the millennium, the
market rotated away from technology related issues as investors began to fear
future earnings results and retreated to the blue chip, "old economy" names
and gave up their "new economy" growth oriented names. Oil peaked to new highs
as OPEC talks regarding the production levels continued, and finished at $32
levels. Economic growth over the past 12 months remained quite strong, as real
GDP expanded by 6.1%.
For the month of July 2000, the Portfolio declined 1.63%, after deduction
of fees. In contrast, the Portfolio's benchmark, the Russell 1000 Value Index,
rose 1.25%. The performance and overweighting in the energy and technology
areas had a negative impact on the Portfolio's return. However, stock
selection and an overweighting in healthcare aided performance. Stock
selection in finance and basic materials also helped performance.
In July 2000, volatility continued to be the dominant theme for the NASDAQ
Composite Index. Following a strong rally, the NASDAQ declined sharply in the
second half of the month. Momentum investors were scared out of large-cap
growth stocks when a few large technology companies announced that earnings
would lag original forecasts. Energy prices declined from their highs, as OPEC
production increased and inventory levels
C-2
<PAGE>
began a seasonal build. The transportation and financial sectors led the
market in July. Financial stocks strengthened, as investors viewed the
prospect of higher interest rates as positive for the banking sector.
Communication services, healthcare and consumer cyclicals were among the
market sectors that declined during July. At the end of the fiscal year,
Westwood's portion of the portfolio was overweighted in energy, consumer
cyclicals, technology and transportation stocks.
INSTITUTIONAL CAPITAL CORPORATION
Performance in the equity markets over the past twelve months was more
notable for volatility than for returns. It appeared that economic growth had
begun to moderate. However, there was also upward pressure on wages and
prices. As a result, investors were anticipating modest tightening by the
Federal Reserve Board for the rest of 2000.
The stock market continued its volatile behavior in July 2000. Equity
prices rose sharply in the first half of the month but reversed course and
registered new losses by the end of the month. In comparison to the
Portfolio's benchmark, the Russell 1000 Value Index, Institutional Capital
Corporation's portion of the Portfolio was overweighted in technology and
healthcare stocks and underweighted in financial stocks.
We believe that there are many good individual investment opportunities in
the market. Valuation disparities remain extremely wide. In the technology
sector, a concentration of capitalization and an extension of valuation have
come at the expense of all other market sectors. As a result, a broad range of
companies is selling substantially below recent highs, where valuations are a
fraction of historic levels and where earnings prospects are intact. We will
continue to seek investment opportunities in companies that are undervalued
relative to their peer groups and to the market and which have an upside
potential of at least 20% over the next 12 to 18 months.
C-3
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 7/31/00
---------------- -------
<S> <C>
Size of Portfolio ($MM)................................................ $335.3
Number of Securities................................................... 92
Stocks................................................................. 97.8%
Cash & Equivalents..................................................... 2.2%
<CAPTION>
TOP TEN HOLDINGS* 7/31/00
----------------- -------
<S> <C>
Citigroup.............................................................. 3.2%
Exxon Mobil............................................................ 3.2
IBM.................................................................... 3.1
Verizon Communications................................................. 3.0
Pharmacia.............................................................. 2.7
Conoco................................................................. 2.4
Philips Electronics.................................................... 2.1
Ford Motor Co.......................................................... 1.7
Union Carbide.......................................................... 1.6
Wellpoint Health Networks.............................................. 1.6
------
Total.................................................................. 24.6%
<CAPTION>
TOP FIVE SECTORS* 7/31/00
----------------- -------
<S> <C>
Consumer Cyclical...................................................... 15.8%
Financial Services..................................................... 15.3
Technology............................................................. 13.5
Energy................................................................. 12.3
Utility................................................................ 10.0
------
Total.................................................................. 66.9%
</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-4
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY PAINEWEBBER GROWTH AND INCOME FUND PROXY
(the sole series of PaineWebber America Fund)
Special Meeting of Shareholders - February 1, 2001
This proxy is being solicited for the Board of Trustees of PaineWebber America
Fund ("Trust") on behalf of PaineWebber Growth and Income Fund, the sole series
of the Trust. The undersigned hereby appoints as proxies [_________] and
[_________], and each of them (with the power of substitution) to vote for the
undersigned all shares of beneficial interest of the undersigned in PaineWebber
Growth and Income Fund, the sole series of the Trust, at the above referenced
meeting and any adjournment thereof, with all the power the undersigned would
have if personally present. The shares represented by this proxy will be voted
as instructed on the reverse side of this proxy card. Unless indicated to the
contrary, this proxy shall be deemed to grant authority to vote "FOR" the
proposal relating to PaineWebber Growth and Income Fund.
VOTE VIA THE INTERNET: http://
VOTE VIA TELEPHONE:
CONTROL NUMBER: [999 9999 9999 999]
If shares are held by an individual, sign your name
exactly as it appears on this card. If shares are
held jointly, either party may sign, but the name of
the party signing should conform exactly to the name
shown on this proxy card. If shares are held by a
corporation, partnership or similar account, the
name and the capacity of the individual signing the
proxy card should be indicated - for example: "ABC
Corp., John Doe, Treasurer."
___________________________________________________
Signature
___________________________________________________
Signature (if held jointly)
_______________________________________,200_______
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: [_]
FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan [_] [_] [_]
Reorganization and Termination that
provides for the reorganization of
PaineWebber Growth and Income Fund,
the sole series of PaineWebber
America Fund, into PACE Large
Company Value Equity Investments, a
series of PaineWebber PACE Select
Advisors Trust.
Please date and sign the reverse side of this card.
<PAGE>
[GRAPHIC]
Your Proxy Vote is Important!
---------
And now you can Vote your
Proxy on the PHONE or on
the INTERNET.
It saves Money! Telephone and Internet voting saves postage costs. Savings which
can help to minimize fund 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 Toll Free 1-877-651-8855.
<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
(on behalf of PACE LARGE COMPANY VALUE EQUITY INVESTMENTS)
PAINEWEBBER AMERICA FUND
(on behalf of PAINEWEBBER GROWTH AND INCOME FUND)
51 West 52/nd/ Street
New York, New York 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby PACE Large Company Value Equity Investments
("PACE Large Company Value Equity Fund"), a series of PaineWebber PACE Select
Advisors Trust ("PACE Trust"), would acquire all of the assets of PaineWebber
Growth and Income Fund ("Growth and Income Fund"), the sole series of
PaineWebber America Fund, in exchange solely for shares of PACE Large Company
Value Equity Fund and the assumption by PACE Large Company Value Equity Fund of
all of Growth and Income Fund's stated liabilities. This Statement of Additional
Information consists of this cover page, the pro forma financial statements of
PACE Large Company Value Equity Fund (giving effect to the Reorganization) for
the year ended July 31, 2000, and the following described documents, each of
which is incorporated by reference herein and accompanies this Statement of
Additional Information:
(1) The combined Statement of Additional Information of PACE Trust, which
includes information relating to PACE Large Company Value Equity Fund, dated
November __, 2000 (Incorporated by reference from N-1A, SEC File Numbers
033-87254 and 811-08764, filed November 9, 2000, accession number
0000912057-00-048241);
(2) The combined Annual Report to Shareholders of PACE Trust, which
includes information relating to PACE Large Company Value Equity Fund for the
fiscal year ended July 31, 2000 (Incorporated by reference from N-30D, SEC File
Number 811-08764, filed October 6, 2000, accession number 0000912057-00-043979);
(3) The Annual Report to Shareholders of Growth and Income Fund for the
fiscal year ended August 31, 2000 (Incorporated by reference from N-30D, SEC
File Number 811-03502, filed November 3, 2000, accession number 0000912057-00-
047148).
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated November __,
2000 relating to the proposed Reorganization. A copy of the Prospectus/Proxy
Statement may be obtained without charge by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated November __, 2000.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The first three tables set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of July 31, 2000, the unaudited pro forma
condensed Statement of Operations for the twelve month period ended July 31,
2000 and the unaudited pro forma Portfolio of Investments as of July 31, 2000
for Growth and Income Fund and PACE Large Company Value Equity Fund as adjusted
giving effect to the Reorganization.
The next three tables set forth the unaudited pro forma condensed Statement
of Assets and Liabilities as of July 31, 2000, the unaudited pro forma condensed
Statement of Operations for the twelve month period ended July 31, 2000 and the
unaudited pro forma Portfolio of Investments as of July 31, 2000 for PaineWebber
Tax-Managed Equity Fund, Growth and Income Fund and PACE Large Company Value
Equity Fund as adjusted to show the combined effect of the Reorganization and
the proposed reorganization of PaineWebber Tax-Managed Equity Fund into PACE
Large Company Value Equity Fund, which is expected to occur at approximately the
same time as the Reorganization.
The pro forma Portfolio of Investments contains information about the
securities holdings of the Funds as of July 31, 2000, which has, and will
continue to, change over time due to normal portfolio turnover in response to
changes in market conditions. It is expected, however, that some of Growth and
Income Fund's holdings may not remain at the time of the Reorganization due to
normal portfolio turnover. It is also expected that if Growth and Income Fund's
shareholders approve the Reorganization, the Fund's holdings that are not
compatible with PACE Large Company Value Fund's holdings will be liquidated in
an orderly manner in connection with the Reorganization, and the proceeds of
these sales held in temporary investments or reinvested in assets that are
consistent with the holdings of PACE Large Company Value Fund. As of [ ], 2000,
Growth and Income Fund's investments in such securities represented
approximately [ ]% of its total portfolio. The portion of Growth and Income
Fund's assets that will be liquidated in connection with the Reorganization will
depend on market conditions and on the sub-advisers' continuing assessment of
the compatibility of Growth and Income Fund's holdings with PACE Large Company
Value Fund's portfolio composition and its investment objective and policies at
the approximate time of the Reorganization. The need for Growth and Income Fund
to dispose of investments in connection with the Reorganization may result in
the Fund's selling securities at a disadvantageous time and could result in the
Fund's realizing gain (or losses) that would not otherwise have been realized.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
Proforma Statement of Assets and Liabilities
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
PACE Large Value Equity
Company Value PW Growth and Investments
Equity Investments Income Fund Pro Forma
------------------ --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost - $344,403,107, $863,423,243
and $1,207,826,350, respectively) $ 335,291,823 $ 1,120,072,740 $ 1,455,364,563
Investment of cash collateral for securities loaned (cost - $28,786,800, $0
and $28,786,600 respectively) 28,786,800 -- 28,786,800
Cash (including cash denominated in foreign currencies, at value) 32,936 143,975 176,911
Receivable for investments sold 1,478,244 3,629,195 5,107,439
Receivable for shares of beneficial interests sold 175,085 91,262 266,347
Dividends and interest receivable 303,098 1,073,168 1,376,266
Deferred organizational expenses 1,025 -- 1,025
Other assets 46,443 76,866 123,309
--------------- --------------- ---------------
Total assets 366,115,454 1,125,087,206 1,491,202,660
--------------- --------------- ---------------
Liabilities
Payable for cash collateral for securities loaned 28,786,800 -- 28,786,800
Payable for investments purchased 1,538,295 -- 1,538,295
Payable for shares of beneficial interest repurchased 111,422 1,909,630 2,021,052
Payable to affiliates 231,826 687,616 919,442
Accrued expenses and other liabilities 152,701 707,657 860,358
--------------- --------------- ---------------
Total liabilities 30,821,044 3,304,903 34,125,947
--------------- --------------- ---------------
NET ASSETS
Common Stock/Beneficial interest shares of $0.001 par value outstanding -
20,507,671, 34,677,488 and 89,119,440, respectively 354,857,514 727,258,953 1,082,116,467
Accumulated undistributed (distributions in excess of) net investment
income (loss) 1,716,264 (131,367) 1,584,897
Accumulated net realized gains (losses) from investment transactions (12,168,084) 138,005,220 125,837,136
Net unrealized appreciation (depreciation) of investments (9,111,284) 256,649,497 247,538,213
--------------- --------------- ---------------
Net assets applicable to shares outstanding $ 335,294,410 $ 1,121,782,303 $ 1,457,076,713
=============== =============== ===============
CLASS P:
Net assets $ 335,294,410 $ -- $ 335,294,410
--------------- --------------- ---------------
Shares outstanding 20,507,671 -- 20,507,671
--------------- --------------- ---------------
Net asset value and offering price per share $ 16.35 $ -- $ 16.35
=============== =============== ===============
CLASS A:
Net assets $ -- $ 731,944,747 $ 744,656,230
--------------- --------------- ---------------
Shares outstanding -- 22,516,039 45,545,540
--------------- --------------- ---------------
Net asset and redemption value per share $ -- $ 32.51 $ 16.35
=============== =============== ===============
Maximum offering price per share (net asset value plus sales charge of
4.5% of offering price) $ -- $ 34.04 $ 17.12
=============== =============== ===============
CLASS B:
Net assets $ -- $ 216,222,256 $ 236,878,224
--------------- --------------- ---------------
Shares outstanding -- 6,765,936 14,488,224
--------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 31.96 $ 16.35
=============== =============== ===============
CLASS C:
Net assets $ -- $ 126,509,235 $ 139,119,392
--------------- --------------- ---------------
Shares outstanding -- 3,950,549 8,508,984
--------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 32.02 $ 16.35
=============== =============== ===============
CLASS Y:
Net assets $ -- $ 47,106,065 $ 47,358,706
--------------- --------------- ---------------
Shares outstanding -- 1,444,964 2,896,609
--------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 32.60 $ 16.35
=============== =============== ===============
</TABLE>
See accompanying notes to proforma financial statements
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
Proforma Statement of Operations
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
PACE Large Value Equity
Company Value PW Growth and Investments
Equity Investments Income Fund Adjustments Pro Forma
------------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 517,478 $ 7,337,288 $ - $ 7,854,766
Dividend 5,821,563 12,292,359 - 18,113,922
------------- ------------- ----------- -------------
6,339,041 19,629,648 - 25,968,689
------------- ------------- ----------- -------------
EXPENSES:
Investment advisory and administration 2,800,505 8,989,472 1,284,208 (a) 13,074,185
Shareholder distribution and servicing fees - 6,164,635 - 6,164,635
Transfer agency and service 153,350 1,093,460 - 1,246,810
Trustees' fees 26,250 13,500 (13,500) (b) 26,250
Legal and audit 44,674 213,090 (213,090) (b) 44,674
Amortization of organizational expenses 19,032 - - 19,032
Reports and notices to shareholders 48,573 120,700 (96,560) (b) 72,713
Federal and state registration fees 53,991 54,106 (43,285) (b) 64,812
Custody and accounting 210,038 770,526 - 980,564
Other expenses 18,862 455,128 - 473,990
------------- ------------- ----------- -------------
3,375,275 17,874,617 917,773 22,167,665
Less: fee waivers and reimbursements from
investment adviser (16,771) - (1,143,991) (1,160,762)
------------- ------------- -------------
Net expenses 3,358,504 17,874,617 (226,218) (c) 21,006,903
------------- ------------- ----------- -------------
Net investment income 2,980,537 1,755,031 226,218 4,961,786
------------- ------------- ----------- -------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment
transactions (4,441,250) 137,531,378 - 133,090,128
Net change in unrealized appreciation (depreciation)
of investments (56,910,128) 227,228,988 - 170,318,860
------------- ------------- ----------- -------------
Net realized and unrealized gains (losses) from
investment activities (61,351,378) 364,760,366 - 303,408,988
------------- ------------- ----------- -------------
Net increase (decrease) in net assets resulting
from operations $ (58,370,841) $ 366,515,396 $ 226,218 $ 308,370,774
============= ============= =========== =============
</TABLE>
________________________________
(a) Reflects increase in fees resulting from higher fee schedule, before
waivers, of PACE Large Company Value Equity Investments.
(b) Reflects the anticipated savings of the merger.
(c) Reflects decrease in fees resulting from lower fee schedule, net of waivers,
of PACE Large Company Value Equity Investments.
See accompanying notes to proforma financial statements
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
Proforma Portfolio of Investments
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber Value Equity
Number of Large Company Value Growth and Income Investments
Shares Equity Investments Fund Pro Forma
--------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Common Stocks - 87.83%
Agriculture, Food & Beverage - 0.31%
0.31% 114,900 H. J. Heinz Co. $ 4,588,819 $ - $ 4,588,819
-------------- ------------------- ----------------
Airlines - 1.02%
1.02% 277,300 Delta Air Lines, Inc. 5,030,519 9,857,025 14,887,544
-------------- ------------------- ----------------
Alcohol - 0.66%
63,700 Anheuser-Busch Companies, Inc. 5,127,850 - 5,127,850
79,900 Seagram Co. Ltd. 4,479,394 - 4,479,394
-------------- ------------------- ----------------
0.66% 9,607,244 - 9,607,244
-------------- ------------------- ----------------
Apparel, Retail - 0.31%
0.31% 220,100 The Limited, Inc. 4,498,294 - 4,498,294
-------------- ------------------- ----------------
Banks - 4.23%
37,900 Bank One Corp.(1) 1,205,694 - 1,205,694
549,350 Chase Manhattan Corp 5,033,344 22,262,485 27,295,829
152,100 Citigroup, Inc 10,732,556 - 10,732,556
317,300 Fleet Boston Financial Corp - 11,363,306 11,363,306
91,100 PNC Bank Corp. 4,634,712 - 4,634,712
108,800 Wells Fargo and Co. 4,494,800 - 4,494,800
45,000 Zions BanCorp 1,968,750 - 1,968,750
-------------- ------------------- ----------------
4.23% 28,069,856 33,625,791 61,695,647
-------------- ------------------- ----------------
Chemicals - 1.91%
31,750 Air Products & Chemicals, Inc. 1,059,656 - 1,059,656
423,354 Dow Chemical Co - 12,171,428 12,171,428
166,500 Pharmacia Corp. 9,115,875 - 9,115,875
122,600 Union Carbide Corp.(1) 5,494,013 - 5,494,013
-------------- ------------------- ----------------
1.91% 15,669,544 12,171,428 27,840,972
-------------- ------------------- ----------------
Computer Hardware - 6.19%
313,280 Apple Computer, Inc.* - 15,918,540 15,918,540
720,000 Cisco Systems Inc.* - 47,115,000 47,115,000
189,100 Compaq Computer Corp. 5,306,619 - 5,306,619
389,000 Dell Computer Corp.* - 17,091,687 17,091,687
44,000 Hewlett-Packard Co. 4,804,250 - 4,804,250
-------------- ------------------- ----------------
6.19% 10,110,869 80,125,227 90,236,096
-------------- ------------------- ----------------
Computer Software - 3.70%
120,700 Computer Associates International, Inc. 2,994,869 - 2,994,869
289,000 International Business Machines 10,276,787 22,217,650 32,494,437
264,425 Microsoft Corp* - 18,460,170 18,460,170
-------------- ------------------- ----------------
3.70% 13,271,656 40,677,820 53,949,476
-------------- ------------------- ----------------
Consumer Durables - 0.46%
0.46% 155,477 Whirlpool Corp. - 6,714,663 6,714,663
-------------- ------------------- ----------------
Defense and Aerospace - 1.91%
316,500 Boeing Co - 15,508,500 15,508,500
59,800 General Dynamics Corp. 3,374,963 - 3,374,963
202,647 TRW, Inc 2,103,075 7,003,375 9,106,450
-------------- ------------------- ----------------
1.92% 5,478,038 22,511,875 27,989,913
-------------- ------------------- ----------------
Diversified Retail - 2.53%
410,100 Federated Department Stores, Inc* 1,987,562 7,880,469 9,868,031
930,500 Target Corp 3,828,000 23,156,500 26,984,500
-------------- ------------------- ----------------
2.53% 5,815,562 31,036,969 36,852,531
-------------- ------------------- ----------------
Drugs & Medicine - 3.72%
90,700 Bristol-Myers Squibb Co. 4,500,988 - 4,500,988
594,390 Pfizer, Inc - 25,633,068 25,633,068
556,100 Schering-Plough Corp - 24,016,569 24,016,569
-------------- ------------------- ----------------
3.72% 4,500,988 49,649,637 54,150,625
-------------- ------------------- ----------------
Electric Utilities - 2.66%
181,467 Duke Energy Corp - 11,194,246 11,194,246
127,900 Edison International, Inc. 2,518,031 - 2,518,031
221,000 Energy East Corp - 4,171,375 4,171,375
100,200 Florida Progress Corp. 4,909,800 - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - 2,523,475
160,000 Reliant Energy, Inc. 5,360,000 - 5,360,000
197,200 Unicom Corp - 8,097,525 8,097,525
-------------- ------------------- ----------------
2.66% 15,311,306 23,463,146 38,774,452
-------------- ------------------- ----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber Value Equity
Number of Large Company Value Growth and Income Investments
Shares Equity Investments Fund Pro Forma
--------- ------------------ ------------------- --------------
<S> <C> <C> <C>
Electrical Equipment - 3.79%
152,553 Honeywell, Inc - 5,129,595 5,129,595
412,000 Jabil Circuit, Inc* - 20,625,750 20,625,750
118,400 Johnson Controls, Inc - 6,149,400 6,149,400
704,828 Motorola, Inc 4,598,994 18,704,382 23,303,376
------------- ------------- -------------
3.79% 4,598,994 50,609,127 55,208,121
------------- ------------- -------------
Electrical Power - 1.07%
138,233 Emerson Electric Co - 8,440,853 8,440,853
2,619 Koninklijke (Royal) Philips
Electronics N.V.* 113,332 - 113,332
157,700 Koninklijke (Royal) Philips
Electronics N.V., ADR*(1) 7,086,644 - 7,086,644
------------- ------------- -------------
1.07% 7,199,976 8,440,853 15,640,829
------------- ------------- -------------
Energy Reserves & Production - 6.97%
96,300 Apache Corp.(1) 4,790,925 - 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687 - 1,288,687
246,831 Chevron Corp - 19,499,649 19,499,649
314,385 El Paso Energy Corp - 15,208,374 15,208,374
319,922 Exxon Mobil Corp - 25,593,760 25,593,760
186,261 Phillips Petroleum Co - 9,464,387 9,464,387
341,500 Royal Dutch Petroleum Co., ADR - 19,892,375 19,892,375
219,790 Tosco Corp - 5,824,435 5,824,435
------------- ------------- -------------
6.97% 6,079,612 95,482,980 101,562,592
------------- ------------- -------------
Energy Sources - 0.73%
0.73% 132,800 Exxon Mobil Corp. 10,624,000 - 10,624,000
------------- ------------- -------------
Entertainment - 1.20%
1.20% 263,000 Viacom, Inc., Class B* - 17,440,188 17,440,188
------------- ------------- -------------
Financial Services - 5.03%
174,650 Associates First Capital Corp. 4,573,647 - 4,573,647
329,538 Citigroup, Inc - 23,253,025 23,253,025
215,400 Federal Home Loan Mortgage Corp - 8,494,837 8,494,837
95,150 Federal National Mortgage Association 4,745,606 - 4,745,606
77,200 Household International, Inc. 3,440,225 - 3,440,225
254,400 General Electric Co - 13,085,700 13,085,700
295,543 MBNA Corp - 9,863,748 9,863,748
57,075 Providian Financial Corp - 5,818,083 5,818,083
------------- ------------- -------------
5.03% 12,759,478 60,515,393 73,274,871
------------- ------------- -------------
Forest Products, Paper - 1.76%
68,200 Kimberly Clark Corp. 3,917,237 - 3,917,237
133,000 International Paper Co - 4,522,000 4,522,000
375,414 Weyerhaeuser Co 3,088,475 14,063,252 17,151,727
------------- ------------- -------------
1.76% 7,005,712 18,585,252 25,590,964
------------- ------------- -------------
Freight, Air, Sea & Land - 0.32%
0.32% 80,100 United Parcel Service, Inc. 4,705,875 - 4,705,875
------------- ------------- -------------
Heavy Machinery - 0.33%
0.33% 124,700 Deere & Co.(1) 4,808,744 - 4,808,744
------------- ------------- -------------
Hotels - 0.18%
0.18% 75,600 Starwood Hotels & Resorts
Worldwide, Inc.(1) 2,579,850 - 2,579,850
------------- ------------- -------------
Household Products - 0.46%
120,600 Avon Products, Inc.(1) 4,786,312 - 4,786,312
68,850 Newell Rubbermaid, Inc. 1,854,647 - 1,854,647
------------- ------------- -------------
0.46% 6,640,959 - 6,640,959
------------- ------------- -------------
Industrial Parts - 2.93%
156,666 Ingersoll Rand Co - 6,149,140 6,149,140
179,300 Mettler Toledo International Inc.* - 7,261,650 7,261,650
501,400 United Technologies Corp - 29,269,225 29,269,225
------------- ------------- -------------
2.93% - 42,680,015 42,680,015
------------- ------------- -------------
Industrial Services & Supplies - 1.36%
1.36% 371,400 Tyco International, Ltd. 3,424,000 16,445,900 19,869,900
------------- ------------- -------------
Information & Computer
Services - 1.23%
180,900 America Online Inc* - 9,644,231 9,644,231
141,200 AMR Corp* - 4,668,425 4,668,425
84,200 Electronic Data Systems Corp. 3,620,600 - 3,620,600
------------- ------------- -------------
1.23% 3,620,600 14,312,656 17,933,256
------------- ------------- -------------
Life Insurance - 0.17%
0.17% 44,650 Aetna Life & Casualty Co. 2,478,075 - 2,478,075
------------- ------------- -------------
Long Distance & Phone Companies -
2.14%
157,900 AT&T Corp. 4,885,031 - 4,885,031
454,200 MCI Worldcom Inc* 4,675,781 13,066,406 17,742,187
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber Value Equity
Number of Large Company Value Growth and Income Investments
Shares Equity Investments Fund Pro Forma
--------- ------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
80,642 Qwest Communications International Inc.* 3,785,134 - 3,785,134
110,600 SBC Communications, Inc. 4,707,413 - 4,707,413
-------------------- --------------- ----------------
2.14% 18,053,359 13,066,406 31,119,765
-------------------- --------------- ----------------
Media - 1.78%
35,600 AMFM Inc.* 2,543,175 - 2,543,175
271,858 Comcast Corp., Class A* - 9,247,420 9,247,420
141,700 Fox Entertainment Group Inc.* 4,339,563 - 4,339,563
132,200 The Walt Disney Co. 5,114,487 - 5,114,487
61,000 Time Warner, Inc. 4,677,937 - 4,677,937
-------------------- --------------- ----------------
1.78% 16,675,162 9,247,420 25,922,582
-------------------- --------------- ----------------
Medical Products - 1.70%
92,000 Abbott Laboratories 3,829,500 - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - 1,377,453
220,275 Baxter International, Inc 5,442,500 11,683,881 17,126,381
97,900 Becton, Dickinson & Co. 2,471,975 - 2,471,975
-------------------- --------------- ----------------
1.70% 13,121,428 11,683,881 24,805,309
-------------------- --------------- ----------------
Medical Providers - 0.38%
0.38% 62,700 Wellpoint Health Networks, Inc.* 5,466,656 - 5,466,656
-------------------- --------------- ----------------
Mining & Metals - 1.29%
1.29% 622,104 Alcoa, Inc 5,018,475 13,800,171 18,818,646
-------------------- --------------- ----------------
Motor Vehicles - 2.93%
142,600 Borg Warner Automotive, Inc - 4,839,488 4,839,488
107,635 Delphi Automotive Systems Corp - 1,594,343 1,594,343
614,600 Ford Motor Co. 5,708,563 22,908,750 28,617,313
88,000 General Motors Corp. 5,010,500 - 5,010,500
111,300 Lear Corp.* 2,594,681 - 2,594,681
-------------------- --------------- ----------------
2.93% 13,313,744 29,342,581 42,656,325
-------------------- --------------- ----------------
Oil Refining - 1.73%
585,300 Conoco, Inc. 8,113,387 5,385,094 13,498,481
90,300 Texaco, Inc. 4,464,206 - 4,464,206
96,600 USX-Marathon Group 2,348,588 - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - 4,830,475
-------------------- --------------- ----------------
1.73% 19,756,656 5,385,094 25,141,750
-------------------- --------------- ----------------
Oil Services - 1.91%
106,500 Devon Energy Corp. 4,872,375 - 4,872,375
374,886 Halliburton Co - 17,291,617 17,291,617
115,800 Transocean Sedco Forex, Inc - 5,732,100 5,732,100
-------------------- --------------- ----------------
1.91% 4,872,375 23,023,717 27,896,092
-------------------- --------------- ----------------
Other Insurance - 1.83%
147,700 Allstate Corp. 4,070,981 - 4,070,981
205,032 Ambac Financial Group, Inc. - 13,211,749 13,211,749
448,300 Metlife Incorporated* 3,859,800 5,554,500 9,414,300
-------------------- --------------- ----------------
1.83% 7,930,781 18,766,249 26,697,030
-------------------- --------------- ----------------
Publishing - 1.74%
332,561 Knight Ridder, Inc 1,985,963 15,348,779 17,334,742
193,711 New York Times Co., Class A - 7,978,472 7,978,472
-------------------- --------------- ----------------
1.74% 1,985,963 23,327,251 25,313,214
-------------------- --------------- ----------------
Railroads - 0.10%
0.10% 62,600 Burlington Northern Santa Fe Inc. 1,529,788 - 1,529,788
-------------------- --------------- ----------------
Real Property - 0.28%
45,000 Kimco Realty Corp. 1,856,250 - 1,856,250
55,000 Vornado Realty Trust 2,151,875 - 2,151,875
-------------------- --------------- ----------------
0.28% 4,008,125 - 4,008,125
-------------------- --------------- ----------------
Restaurants - 0.11%
0.11% 69,000 Tricon Global Restaurants, Inc.* 1,668,938 - 1,668,938
-------------------- --------------- ----------------
Securities & Asset Management - 4.20%
381,218 AXA Financial Inc - 14,581,588 14,581,588
149,000 Merrill Lynch & Co., Inc - 19,258,250 19,258,250
300,000 Morgan Stanley Dean Witter & Co - 27,375,000 27,375,000
-------------------- --------------- ----------------
4.20% - 61,214,838 61,214,838
-------------------- --------------- ----------------
Semiconductor - 5.42%
257,048 Applied Materials, Inc* - 19,503,517 19,503,517
200,120 Atmel Corp* - 5,991,093 5,991,093
303,958 Intel Corp - 20,289,196 20,289,196
173,977 JDS Uniphase Corp* - 20,551,033 20,551,033
141,000 Texas Instruments, Inc - 8,274,938 8,274,938
73,773 Vitesse Semiconductor Corp* - 4,398,715 4,398,715
-------------------- --------------- ----------------
5.42% - 79,008,492 79,008,492
-------------------- --------------- ----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber Value Equity
Number of Large Company Value Growth and Income Investments
Shares Equity Investments Fund Pro Forma
--------- ------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Specialty Retail - 1.45%
221,903 Circuit City Stores, Inc - 5,089,900 5,089,900
260,397 Home Depot, Inc - 13,475,545 13,475,545
73,600 Tiffany & Co. 2,520,800 - 2,520,800
-------------------- --------------- ----------------
1.45% 2,520,800 18,565,445 21,086,245
-------------------- --------------- ----------------
Wireless Telecommunications - 1.69%
196,000 Nextel Communications, Inc.* - 10,963,750 10,963,750
216,802 Verizon Communications 10,189,694 - 10,189,694
78,900 Vodafone Group PLC, ADR*(1) 3,402,562 - 3,402,562
-------------------- --------------- ----------------
1.69% 13,592,256 10,963,750 24,556,006
-------------------- --------------- ----------------
87.83% Total Common Stocks (cost - $1,035,128,098) 327,993,076 951,741,240 1,279,734,316
-------------------- --------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Combined
Principal PACE PaineWebber
Amount Maturity Interest Large Company Value Growth and Income
(000) Dates Rates Equity Investments Fund Combined
--------- -------- -------- ------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Convertible Bond - 1.30%
Financial Services - 1.30%
1.30% $ 16,100 Bell Atlantic Financial Services Inc.
(cost - $15,985,505) 09/15/05 4.250% - 18,917,500 18,917,500
------------------- --------------- ---------------
U.S. Government and Agency Obligations - 6.89%
6.86% 100,000 Federal Home Loan Mortgage Discount
Notes 08/01/00 6.390@ - 100,000,000 100,000,000
0.03% 500 U.S. Treasury Bills 08/17/00 5.640@ 498,747 - 498,747
Total U.S. Government Agency Obligations (cost -
------------------- --------------- ---------------
$100,498,747) 498,747 100,000,000 100,498,747
------------------- --------------- ---------------
Repurchase Agreements - 3.86%
49,414 Repurchase Agreement dated 7/31/00
with SG Warburg, collaterized by
$49,354,000 U.S. Treasury Bonds,
6.000% due 2/15/26 (value-
$50,402,773); proceeds:
$49,422,922 08/01/00 6.500 - 49,414,000 49,414,000
5,996 Repurchase Agreement dated 07/31/00
with SG Cowen Securites Group,
collateralized by $4,608,000 U.S.
Treasury Bonds, 8.875% due 08/15/17
(value-$6,117,120); proceeds:
$5,997,083 08/01/00 6.500 5,996,000 - 5,996,000
804 Repurchase Agreement date 7/31/00
with State Street Bank & Trust Co.,
collateralized by $236,517 U.S.
Treasury Notes, 6.625% due 03/31/02;
(value - $242,430) and $566,373 U.S.
Treasury Bonds; 8.125% due 08/15/19;
(value - $577,844); proceeds:
$804,117 08/01/00 5.250 804,000 - 804,000
------------------- --------------- ---------------
3.86% Total Repurchase Agreements (cost -
$56,214,000) 6,800,000 49,414,000 56,214,000
------------------- --------------- ---------------
99.88% Total Investments (cost -
$1,207,826,350) - 99.88% 335,291,823 1,120,072,740 1,455,364,563
0.12% Other assets in excess of liabilities
- 0.12% 2,587 1,709,563 1,712,150
------------------- --------------- --------------
100.00% Net Assets - 100.00% $ 335,294,410 $ 1,121,782,303 $ 1,457,076,713
================== =============== ===============
</TABLE>
_________
* Non-Income producing security.
@ Interest rate shown is discount rate at date of purchase.
(1) Security, or portion thereof, was on loan at July 31, 2000.
ADS American Depositary Shares.
ADR American Depositary Receipt.
See accompanying notes to proforma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth & Income Fund
Notes to Pro Forma Financial Statements
For the year ended July 31, 2000 (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Growth & Income Fund
("Growth & Income"), PACE Large Company Value Equity Investments ("Large Company
Value") would acquire the assets of Growth & Income in exchange solely for the
assumption by Large Company Value of Growth & Income's assets and liabilities
and shares of Large Company Value that correspond to the outstanding shares of
Growth & Income. The number of shares to be received would be based on the
relative net asset value of Large Company Value's shares on the effective date
of the Plan and Growth & Income will be terminated as soon as practicable
thereafter.
The pro forma financial statements reflect the financial position of Large
Company Value and Growth & Income at July 31, 2000 and the combined results of
operations of Large Company Value and Growth & Income (each a "Fund" and,
collectively, the "Funds") for the year ended July 31, 2000.
As a result of the Plan, the investment advisory and administration fee will
increase due to the higher fee schedule, net of waivers, of Large Company Value.
However, after anticipated savings in other expenses of the Fund, the
shareholders of Growth & Income will not experience an increase in total
expenses. Growth & Income currently pays Rule 12b-1 distribution or service
fees; Large Company Value currently does not. Other fixed expenses will be
reduced due to the elimination of duplicative expenses. In addition, the pro
forma statement of assets and liabilities has not been adjusted as a result of
the proposed transaction because such adjustment would not be material. The cost
of approximately $335,000 associated with the Reorganization will be paid by
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated (a wholly owned indirect
subsidiary of UBS AG), so that each Fund bears no expenses of the
Reorganization. These costs are not included in the pro forma statement of
operations.
The pro forma financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred August 1,
1999. The pro forma financial statements should be read in conjunction with the
historical financial statements of the constituent Funds included in or
incorporated by reference in the applicable statement of additional information.
Significant Accounting Policies:
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles that require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. The following is a summary of significant
accounting policies followed by the Funds.
Valuation of Investments - Each Fund calculates its net asset value based on the
current market value for its portfolio securities. Each Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins, or by the Fund's sub-adviser. If a
<PAGE>
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith or under the direction of the Fund's board of trustees (the "board"). The
amortized cost method of valuation, which approximates market value, generally
is used to value short-term debt instruments with sixty days or less remaining
to maturity, unless the board determines that this does not represent fair
value. Each Fund's investments are valued using the amortized cost method of
valuation.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
PaineWebber Tax-Managed Equity Fund
Proforma Statement of Assets and Liabilities
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
PACE Large Value Equity
Company Value PW Growth and PW Tax-Managed Investments
Equity Investments Income Fund Equity Fund Pro Forma
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost -
$344,403,107, $863,423,243, $40,790,811
and $1,248,617,161, respectively) $ 335,291,823 $ 1,120,072,740 $ 46,424,785 $ 1,501,789,348
Investment of cash collateral for securities
loaned (cost - $28,786,800, $0, $2,271,800
and $31,058,400 respectively) 28,786,800 -- 2,271,800 31,058,600
Cash 32,936 143,975 8,680 185,591
Receivable for investments sold 1,478,244 3,629,195 28,190 5,135,629
Receivable for shares of beneficial interests sold 175,085 91,262 -- 266,347
Dividends and interest receivable 303,098 1,073,168 30,959 1,407,225
Deferred organizational expenses 1,025 -- -- 1,025
Other assets 46,443 76,866 37,038 160,347
--------------- --------------- --------------- ---------------
Total assets 366,115,454 1,125,087,206 48,801,452 1,540,004,112
--------------- --------------- --------------- ---------------
LIABILITIES
Payable for cash collateral for securities loaned 28,786,800 -- 2,271,800 31,058,600
Payable for investments purchased 1,538,295 -- -- 1,538,295
Payable for shares of beneficial interest repurchased 111,422 1,909,630 101,762 2,122,814
Payable to affiliates 231,826 687,616 30,810 950,252
Accrued expenses and other liabilities 152,701 707,657 166,832 1,027,190
--------------- --------------- --------------- ---------------
Total liabilities 30,821,044 3,304,903 2,571,204 36,697,151
--------------- --------------- --------------- ---------------
NET ASSETS
Common Stock/Beneficial interest shares of $0.001 par
value outstanding - 20,507,671, 34,677,488, 3,415,082
and 91,947,028, respectively 354,857,514 727,258,953 42,919,532 1,125,035,999
Accumulated undistributed (distributions in excess of)
net investment income (loss) 1,716,264 (131,367) (300,595) 1,284,302
Accumulated net realized gains (losses) from investment
transactions (12,168,084) 138,005,220 (2,022,663) 123,814,473
Net unrealized appreciation (depreciation) of investments (9,111,284) 256,649,497 5,633,974 253,172,187
--------------- --------------- --------------- ---------------
Net assets applicable to shares outstanding $ 335,294,410 $ 1,121,782,303 $ 46,230,248 $ 1,503,306,961
=============== =============== =============== ===============
CLASS P:
Net assets $ 335,294,410 $ -- $ -- $ 335,294,410
--------------- --------------- --------------- ---------------
Shares outstanding 20,507,671 -- -- 20,507,671
--------------- --------------- --------------- ---------------
Net asset value and offering price per share $ 16.35 $ -- $ -- $ 16.35
=============== =============== =============== ===============
CLASS A:
Net assets $ -- $ 731,944,747 $ 12,711,483 $ 744,656,230
--------------- --------------- --------------- ---------------
Shares outstanding -- 22,516,039 933,197 45,545,540
--------------- --------------- --------------- ---------------
Net asset and redemption value per share $ -- $ 32.51 $ 13.62 $ 16.35
=============== =============== =============== ===============
Maximum offering price per share (net asset
value plus sales charge of 4.5% of offering price) $ -- $ 34.04 $ 14.26 $ 17.12
=============== =============== =============== ===============
CLASS B:
Net assets $ -- $ 216,222,256 $ 20,655,968 $ 236,878,224
--------------- --------------- --------------- ---------------
Shares outstanding -- 6,765,936 1,529,570 14,488,224
--------------- --------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 31.96 $ 13.50 $ 16.35
=============== =============== =============== ===============
CLASS C:
Net assets $ -- $ 47,106,065 $ 12,610,157 $ 59,716,222
--------------- --------------- --------------- ---------------
Shares outstanding -- 1,444,964 933,703 3,652,434
--------------- --------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 32.60 $ 13.51 $ 16.35
=============== =============== =============== ===============
CLASS Y:
Net assets $ -- $ 126,509,235 $ 252,641 $ 126,761,876
--------------- --------------- --------------- ---------------
Shares outstanding -- 3,950,549 18,612 7,753,159
--------------- --------------- --------------- ---------------
Net asset value and offering price per share $ -- $ 32.02 $ 13.57 $ 16.35
=============== =============== =============== ===============
</TABLE>
See accompanying notes to proforma financial statements
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
PaineWebber Tax-Managed Equity Fund
Proforma Statement of Operations
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
PACE Large Large Company
Company Value Value Equity
Equity PW Growth and PW Tax-Managed Investments
Investments Income Fund Equity Fund Adjustments PRO FORMA
-------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 517,478 $ 7,337,288 $ 369,940 $ - $ 8,224,707
Dividend 5,821,563 12,292,359 607,113 - 18,721,036
------------- ------------- -------------- ----------- ------------
$ 6,339,041 19,629,648 977,054 - 26,945,743
------------- ------------- -------------- ----------- ------------
EXPENSES:
Investment advisory and administration 2,800,505 8,989,472 419,843 1,312,198 (a) 13,522,018
Shareholder distribution and servicing fees - 6,164,635 439,315 - 6,603,950
Transfer agency and service 153,350 1,093,460 29,273 - 1,276,083
Trustees' fees 26,250 13,500 13,500 (27,000) (b) 26,250
Legal and audit 44,674 213,090 70,235 (283,325) (b) 44,674
Amortization of organizational expenses 19,032 - - - 19,032
Reports and notices to shareholders 48,573 120,700 38,915 (127,692) (b) 80,496
Federal and state registration fees 53,991 54,106 97,916 (121,618) (b) 84,396
Custody and accounting 210,038 770,526 33,587 - 1,014,152
Other expenses 18,862 455,128 51,121 - 525,110
------------- ------------- -------------- ----------- ------------
3,375,275 17,874,617 1,193,705 752,563 23,196,160
Less: fee waivers and reimbursements from
investment adviser (16,771) - (24,267) (1,183,177) (c) (1,224,215)
------------- ------------- -------------- ----------- -------------
Net expenses 3,358,504 17,874,617 1,169,438 (430,614) 21,971,945
------------- ------------- -------------- ----------- ------------
Net investment income (loss) 2,980,537 1,755,031 (192,384) 430,614 4,973,797
------------- ------------- -------------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment
transactions (4,441,250) 137,531,378 (2,181,904) - 130,908,224
Net change in unrealized appreciation (depreciation)
of investments (56,910,128) 227,228,988 4,703,436 - 175,022,296
------------- ------------- -------------- ----------- ------------
Net realized and unrealized gains (losses) from
investment activities (61,351,378) 364,760,366 2,521,532 - 305,930,520
------------- ------------- -------------- ----------- ------------
Net increase (decrease) in net assets resulting
from operations $ (58,370,841) $ 366,515,396 $ 2,329,148 $ 430,614 $310,904,317
============= ============= ============== =========== ============
</TABLE>
-------------------
(a) Reflects increase in fees resulting from higher fee schedule, before
waivers, of PACE Large Company Value Equity Investments.
(b) Reflects the anticipated savings of the merger.
(c) Reflects decrease in fees resulting from lower fee schedule, net of waivers,
of PACE Large Company Value Equity Investments.
See accompanying notes to proforma financial statements
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
PaineWebber Tax-Managed Equity Fund
Proforma Portfolio of Investments
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber PaineWebber Value Equity
Number of Large Company Value Growth and Income Tax-Managed Investments
Shares Equity Investments Fund Equity Fund PRO FORMA
---------- ------------------ ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Common Stocks - 87.96%
Agriculture, Food & Beverage - 0.31%
114,900 H. J. Heinz Co. $ 4,588,819 $ - $ - $ 4,588,819
----------- ---------- --------- -----------
Airlines - 1.03%
25,000 America West Holding Corp*(1) - - 401,563 401,563
6,100 AMR Corp* - - 201,681 201,681
277,300 Delta Air Lines, Inc. 5,030,519 9,857,025 - 14,887,544
----------- ---------- --------- -----------
5,030,519 9,857,025 603,244 15,490,788
----------- ---------- --------- -----------
Alcohol - 0.64%
63,700 Anheuser-Busch Companies, Inc. 5,127,850 - - 5,127,850
79,900 Seagram Co. Ltd. 4,479,394 - - 4,479,394
----------- ---------- --------- -----------
9,607,244 - - 9,607,244
----------- ---------- --------- -----------
Apparel, Retail - 0.36%
261,500 The Limited, Inc. (1) 4,498,294 - 846,113 5,344,407
----------- ---------- --------- -----------
Banks - 4.36%
37,900 Bank One Corp.(1) 1,205,694 - - 1,205,694
574,550 Chase Manhattan Corp 5,033,344 22,262,485 1,252,125 28,547,954
181,800 Citigroup, Inc 10,732,556 - 2,095,706 12,828,262
331,100 Fleet Boston Financial Corp - 11,363,306 494,213 11,857,519
91,100 PNC Bank Corp. 4,634,712 - - 4,634,712
108,800 Wells Fargo and Co. 4,494,800 - - 4,494,800
45,000 Zions BanCorp 1,968,750 - - 1,968,750
----------- ---------- --------- -----------
28,069,856 33,625,791 3,842,044 65,537,691
----------- ---------- --------- -----------
Chemicals - 1.85%
31,750 Air Products & Chemicals, Inc. 1,059,656 - - 1,059,656
423,354 Dow Chemical Co - 12,171,428 - 12,171,428
166,500 Pharmacia Corp. 9,115,875 - - 9,115,875
122,600 Union Carbide Corp.(1) 5,494,013 - - 5,494,013
----------- ---------- --------- -----------
15,669,544 12,171,428 - 27,840,972
----------- ---------- --------- -----------
Computer Hardware - 6.02%
313,280 Apple Computer, Inc.* - 15,918,540 - 15,918,540
724,000 Cisco Systems Inc.* - 47,115,000 261,750 47,376,750
189,100 Compaq Computer Corp. 5,306,619 - - 5,306,619
389,000 Dell Computer Corp.* - 17,091,687 - 17,091,687
44,000 Hewlett-Packard Co. 4,804,250 - - 4,804,250
----------- ---------- --------- -----------
10,110,869 80,125,227 261,750 90,497,846
----------- ---------- --------- -----------
Computer Software - 3.72%
120,700 Computer Associates International, Inc. 2,994,869 - - 2,994,869
307,100 International Business Machines 10,276,787 22,217,650 910,744 33,405,181
278,625 Microsoft Corp* - 18,460,170 991,337 19,451,507
----------- ---------- --------- -----------
13,271,656 40,677,820 1,902,081 55,851,557
----------- ---------- --------- -----------
Consumer Durables - 0.49%
170,477 Whirlpool Corp. - 6,714,663 647,813 7,362,476
----------- ---------- --------- -----------
Defense and Aerospace - 1.97%
330,600 Boeing Co - 15,508,500 690,900 16,199,400
59,800 General Dynamics Corp. 3,374,963 - - 3,374,963
222,647 TRW, Inc 2,103,075 7,003,375 898,750 10,005,200
----------- ---------- --------- -----------
5,478,038 22,511,875 1,589,650 29,579,563
----------- ---------- --------- -----------
Diversified Retail - 2.47%
420,100 Federated Department Stores, Inc* 1,987,562 7,880,469 240,625 10,108,656
930,500 Target Corp 3,828,000 23,156,500 - 26,984,500
----------- ---------- --------- -----------
5,815,562 31,036,969 240,625 37,093,156
----------- ---------- --------- -----------
Drugs & Medicine - 3.63%
90,700 Bristol-Myers Squibb Co. 4,500,988 - - 4,500,988
594,390 Pfizer, Inc - 25,633,068 - 25,633,068
564,200 Schering-Plough Corp - 24,016,569 349,819 24,366,388
----------- ---------- --------- -----------
4,500,988 49,649,637 349,819 54,500,444
----------- ---------- --------- -----------
Electric Utilities - 2.66%
12,600 Constellation Energy Group, Inc - - 419,737 419,737
181,467 Duke Energy Corp - 11,194,246 - 11,194,246
127,900 Edison International, Inc. 2,518,031 - - 2,518,031
221,000 Energy East Corp - 4,171,375 - 4,171,375
100,200 Florida Progress Corp. 4,909,800 - - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - - 2,523,475
8,800 PECO Energy Co - - 375,650 375,650
9,100 Pinnacle West Capital Group - - 360,019 360,019
160,000 Reliant Energy, Inc. 5,360,000 - - 5,360,000
197,200 Unicom Corp - 8,097,525 - 8,097,525
----------- ---------- --------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE PaineWebber PaineWebber
Number of Large Company Value Growth and Income Tax-Managed
Shares Equity Investments Fund Equity Fund
---------- ------------------ ----------------- -------------
------------------ ----------------- -------------
<S> <C> <C> <C>
15,311,306 23,463,146 1,155,406
----------- ----------- ----------
Electrical Equipment - 3.86%
6,000 Corning Inc - - 1,403,625
152,553 Honeywell, Inc - 5,129,595 -
412,000 Jabil Circuit, Inc* - 20,625,750 -
128,400 Johnson Controls, Inc - 6,149,400 519,375
731,228 Motorola, Inc 4,598,994 18,704,382 872,850
----------- ----------- ----------
4,598,994 50,609,127 2,795,850
----------- ----------- ----------
Electrical Power - 1.18%
148,233 Emerson Electric Co - 8,440,853 610,625
26,219 Koninklijke (Royal) Philips Electronics N.V.* 113,332 - 1,078,500
157,700 Koninklijke (Royal) Philips Electronics N.V., ADR*(1) 7,086,644 - -
10,000 Rockwell International Corp - - 350,625
----------- ----------- ----------
7,199,976 8,440,853 2,039,750
----------- ----------- ----------
Energy Reserves & Production - 6.99%
96,300 Apache Corp.(1) 4,790,925 - -
39,500 Burlington Resources, Inc.(1) 1,288,687 - -
249,131 Chevron Corp - 19,499,649 181,700
314,385 El Paso Energy Corp - 15,208,374 -
337,083 Exxon Mobil Corp - 25,593,760 1,372,880
194,661 Phillips Petroleum Co - 9,464,387 426,825
354,200 Royal Dutch Petroleum Co., ADR - 19,892,375 739,775
249,990 Tosco Corp - 5,824,435 800,300
----------- ----------- ----------
6,079,612 95,482,980 3,521,480
----------- ----------- ----------
Energy Sources - 0.71%
132,800 Exxon Mobil Corp. 10,624,000 - -
----------- ----------- ----------
Entertainment - 1.23%
278,995 Viacom, Inc., Class B* - 17,440,188 1,060,668
----------- ----------- ----------
Financial Services - 4.94%
174,650 Associates First Capital Corp. 4,573,647 - -
329,538 Citigroup, Inc - 23,253,025 -
224,600 Federal Home Loan Mortgage Corp - 8,494,837 362,825
95,150 Federal National Mortgage Association 4,745,606 - -
77,200 Household International, Inc. 3,440,225 - -
254,400 General Electric Co - 13,085,700 -
315,543 MBNA Corp - 9,863,748 667,500
57,075 Providian Financial Corp - 5,818,083 -
----------- ----------- ----------
12,759,478 60,515,393 1,030,325
----------- ----------- ----------
Forest Products, Paper - 1.77%
68,200 Kimberly Clark Corp. 3,917,237 - -
138,900 International Paper Co - 4,522,000 200,600
393,714 Weyerhaeuser Co 3,088,475 14,063,252 836,081
----------- ----------- ----------
7,005,712 18,585,252 1,036,681
----------- ----------- ----------
Freight, Air, Sea & Land - 0.31%
80,100 United Parcel Service, Inc. 4,705,875 - -
----------- ----------- ----------
Heavy Machinery - 0.32%
124,700 Deere & Co.(1) 4,808,744 - -
----------- ----------- ----------
Hotels - 0.17%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850 - -
----------- ----------- ----------
Household Products - 0.44%
120,600 Avon Products, Inc.(1) 4,786,312 - -
68,850 Newell Rubbermaid, Inc. 1,854,647 - -
----------- ----------- ----------
6,640,959 - -
----------- ----------- ----------
Industrial Parts - 3.01%
156,666 Ingersoll Rand Co - 6,149,140 -
213,800 Mettler Toledo International Inc.* - 7,261,650 1,397,250
521,706 United Technologies Corp - 29,269,225 1,185,363
----------- ----------- ----------
- 42,680,015 2,582,613
----------- ----------- ----------
Industrial Services & Supplies - 1.32%
371,400 Tyco International, Ltd. 3,424,000 16,445,900 -
----------- ----------- ----------
Information & Computer Services - 1.28%
180,900 America Online Inc* - 9,644,231 -
141,200 AMR Corp* - 4,668,425 -
26,000 Comdisco Inc - - 672,750
84,200 Electronic Data Systems Corp. 3,620,600 - -
14,800 First Data Corp - - 681,725
----------- ----------- ----------
3,620,600 14,312,656 1,354,475
----------- ----------- ----------
Leisure - 0.07%
18,000 Eastman Kodak Co - - 987,750
----------- ----------- ----------
Life Insurance - 0.16%
44,650 Aetna Life & Casualty Co. 2,478,075 - -
----------- ----------- ----------
<CAPTION>
Combined
PACE Large
Company
Combined Value Equity
Number of Investments
Shares Pro Forma
---------- ------------
------------
<S> <C>
39,929,858
------------
Electrical Equipment - 3.86%
6,000 Corning Inc 1,403,625
152,553 Honeywell, Inc 5,129,595
412,000 Jabil Circuit, Inc* 20,625,750
128,400 Johnson Controls, Inc 6,668,775
731,228 Motorola, Inc 24,176,226
------------
58,003,971
------------
Electrical Power - 1.18%
148,233 Emerson Electric Co 9,051,478
26,219 Koninklijke (Royal) Philips Electronics N.V.* 1,191,832
157,700 Koninklijke (Royal) Philips Electronics N.V., ADR*(1) 7,086,644
10,000 Rockwell International Corp 350,625
------------
17,680,579
------------
Energy Reserves & Production - 6.99%
96,300 Apache Corp.(1) 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687
249,131 Chevron Corp 19,681,349
314,385 El Paso Energy Corp 15,208,374
337,083 Exxon Mobil Corp 26,966,640
194,661 Phillips Petroleum Co 9,891,212
354,200 Royal Dutch Petroleum Co., ADR 20,632,150
249,990 Tosco Corp 6,624,735
------------
105,084,072
------------
Energy Sources - 0.71%
132,800 Exxon Mobil Corp. 10,624,000
------------
Entertainment - 1.23%
278,995 Viacom, Inc., Class B* 18,500,856
------------
Financial Services - 4.94%
174,650 Associates First Capital Corp. 4,573,647
329,538 Citigroup, Inc 23,253,025
224,600 Federal Home Loan Mortgage Corp 8,857,662
95,150 Federal National Mortgage Association 4,745,606
77,200 Household International, Inc. 3,440,225
254,400 General Electric Co 13,085,700
315,543 MBNA Corp 10,531,248
57,075 Providian Financial Corp 5,818,083
------------
74,305,196
------------
Forest Products, Paper - 1.77%
68,200 Kimberly Clark Corp. 3,917,237
138,900 International Paper Co 4,722,600
393,714 Weyerhaeuser Co 17,987,808
------------
26,627,645
------------
Freight, Air, Sea & Land - 0.31%
80,100 United Parcel Service, Inc. 4,705,875
------------
Heavy Machinery - 0.32%
124,700 Deere & Co.(1) 4,808,744
------------
Hotels - 0.17%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850
------------
Household Products - 0.44%
120,600 Avon Products, Inc.(1) 4,786,312
68,850 Newell Rubbermaid, Inc. 1,854,647
------------
6,640,959
------------
Industrial Parts - 3.01%
156,666 Ingersoll Rand Co 6,149,140
213,800 Mettler Toledo International Inc.* 8,658,900
521,706 United Technologies Corp 30,454,588
------------
45,262,628
------------
Industrial Services & Supplies - 1.32%
371,400 Tyco International, Ltd. 19,869,900
------------
Information & Computer Services - 1.28%
180,900 America Online Inc* 9,644,231
141,200 AMR Corp* 4,668,425
26,000 Comdisco Inc 672,750
84,200 Electronic Data Systems Corp. 3,620,600
14,800 First Data Corp 681,725
------------
19,287,731
------------
Leisure - 0.07%
18,000 Eastman Kodak Co 987,750
------------
Life Insurance - 0.16%
44,650 Aetna Life & Casualty Co. 2,478,075
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined
PACE Large
Company
Value
Equity
Invest-
Combined PACE PaineWebber PaineWebber ments
Number of Large Company Value Growth and Tax-Managed (Pro
Shares Equity Investments Income Fund Equity Fund Forma)
---------- ------------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Long Distance & Phone Companies - 2.07%
157,900 AT&T Corp. 4,885,031 - - 4,885,031
454,200 MCI Worldcom Inc* 4,675,781 13,066,406 - 17,742,187
80,642 Qwest Communications International Inc.* 3,785,134 - - 3,785,134
110,600 SBC Communications, Inc. 4,707,413 - - 4,707,413
----------- ----------- ----------- -----------
18,053,350 13,066,406 - 31,112,763
----------- ----------- ----------- -----------
Media - 1.72%
35,600 AMFM Inc.* 2,543,175 - - 2,543,175
271,858 Comcast Corp., Class A* - 9,247,420 - 9,247,420
141,700 Fox Entertainment Group Inc.* 4,339,563 - - 4,339,563
132,200 The Walt Disney Co. 5,114,487 - - 5,114,487
61,000 Time Warner, Inc. 4,677,937 - - 4,677,937
----------- ----------- ----------- -----------
16,675,162 9,247,420 - 25,922,582
----------- ----------- ----------- -----------
Medical Products - 1.73%
92,000 Abbott Laboratories 3,829,500 - - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - - 1,377,453
226,975 Baxter International, Inc 5,442,500 11,683,881 520,925 17,647,306
97,900 Becton, Dickinson & Co. 2,471,975 - - 2,471,975
6700 Johnson & Johnson - - 623,519 623,519
----------- ----------- ----------- -----------
13,121,428 11,683,881 1,144,444 25,949,753
----------- ----------- ----------- -----------
Medical Providers - 0.41%
20,200 Columbia/HCA Healthcare Corp - - 686,800 686,800
62,700 Wellpoint Health Networks, Inc.* 5,466,656 - - 5,466,656
----------- ----------- ----------- -----------
5,466,656 - 686,800 6,153,456
----------- ----------- ----------- -----------
Mining & Metals - 1.32%
656,448 Alcoa, Inc 5,018,475 13,800,171 1,038,906 19,857,552
----------- ----------- ----------- -----------
Motor Vehicles - 2.92%
142,600 Borg Warner Automotive, Inc - 4,839,488 - 4,839,488
150,935 Delphi Automotive Systems Corp - 1,594,343 641,381 2,235,724
626,000 Ford Motor Co. 5,708,563 22,908,750 530,813 29,148,126
88,000 General Motors Corp. 5,010,500 - - 5,010,500
111,300 Lear Corp.* 2,594,681 - - 2,594,681
----------- ----------- ----------- -----------
13,313,744 29,342,581 1,172,194 43,828,519
----------- ----------- ----------- -----------
Oil Refining - 1.69%
595,800 Conoco, Inc. 8,113,387 5,385,094 242,156 13,740,637
90,300 Texaco, Inc. 4,464,206 - - 4,464,206
96,600 USX-Marathon Group 2,348,588 - - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - - 4,830,475
----------- ----------- ----------- -----------
19,756,656 5,385,094 242,156 25,383,906
----------- ----------- ----------- -----------
Oil Services - 2.06%
20,000 BJ Services Co.*(1) - - 1,167,500 1,167,500
18,500 Cooper Cameron Corp.*(1) - - 1,195,562 1,195,562
106,500 Devon Energy Corp. 4,872,375 - - 4,872,375
391,686 Halliburton Co - 17,291,617 774,900 18,066,517
115,800 Transocean Sedco Forex, Inc - 5,732,100 - 5,732,100
----------- ----------- ----------- -----------
4,872,375 23,023,717 3,137,962 31,034,054
----------- ----------- ----------- -----------
Other Insurance - 1.84%
167,400 Allstate Corp. 4,070,981 - 542,981 4,613,962
205,032 Ambac Financial Group, Inc. - 13,211,749 - 13,211,749
468,300 Metlife Incorporated*(1) 3,859,800 5,554,500 420,000 9,834,300
----------- ----------- ----------- -----------
7,930,781 18,766,249 962,981 27,660,011
----------- ----------- ----------- -----------
Publishing - 1.78%
8,000 Dow Jones & Co., Inc - - 527,500 527,500
341,561 Knight Ridder, Inc 1,985,963 15,348,779 469,125 17,803,867
205,711 New York Times Co., Class A - 7,978,472 494,250 8,472,722
----------- ----------- ----------- -----------
1,985,963 23,327,251 1,490,875 26,804,089
----------- ----------- ----------- -----------
Railroads - 0.10%
62,600 Burlington Northern Santa Fe Inc. 1,529,788 - - 1,529,788
----------- ----------- ----------- -----------
Real Property - 0.27%
45,000 Kimco Realty Corp. 1,856,250 - - 1,856,250
55,000 Vornado Realty Trust 2,151,875 - - 2,151,875
----------- ----------- ----------- -----------
4,008,125 - - 4,008,125
----------- ----------- ----------- -----------
Restaurants - 0.11%
69,000 Tricon Global Restaurants, Inc.* 1,668,938 - - 1,668,938
----------- ----------- ----------- -----------
Securities & Asset Management - 4.28%
396,218 AXA Financial Inc - 14,581,588 573,750 15,155,338
12,300 Lehman Brothers Holdings, Inc - - 1,382,212 1,382,212
158,000 Merrill Lynch & Co., Inc - 19,258,250 1,163,250 20,421,500
300,000 Morgan Stanley Dean Witter & Co - 27,375,000 - 27,375,000
----------- ----------- ----------- -----------
- 61,214,838 3,119,212 64,334,050
----------- ----------- ----------- -----------
Semiconductor - 5.31%
257,048 Applied Materials, Inc* - 19,503,517 - 19,503,517
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber PaineWebber Value Equity
Number of Large Company Value Growth and Tax-Managed Investments
Shares Equity Investments Income Fund Equity Fund Pro Forma
---------- ------------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
200,120 Atmel Corp* - 5,991,093 - 5,991,093
310,358 Intel Corp - 20,289,196 427,200 20,716,396
173,977 JDS Uniphase Corp* - 20,551,033 - 20,551,033
147,100 Texas Instruments, Inc - 8,274,938 357,994 8,632,932
73,773 Vitesse Semiconductor Corp* - 4,398,715 - 4,398,715
----------- ----------- ----------- -------------
- 79,008,492 785,194 79,793,686
----------- ----------- ----------- -------------
Specialty Retail - 1.47%
245,903 Circuit City Stores, Inc - 5,089,900 550,500 5,640,400
260,397 Home Depot, Inc - 13,475,545 - 13,475,545
11,000 Lowe's Companies, Inc 464,062 464,062
73,600 Tiffany & Co. 2,520,800 - - 2,520,800
----------- ----------- ----------- -------------
2,520,800 18,565,445 1,014,562 22,100,807
----------- ----------- ----------- -------------
Wireless Telecommunications - 1.63%
196,000 Nextel Communications, Inc.* - 10,963,750 - 10,963,750
216,802 Verizon Communications 10,189,694 - - 10,189,694
78,900 Vodafone Group PLC, ADR*(1) 3,402,562 - - 3,402,562
----------- ----------- ----------- -------------
13,592,256 10,963,750 - 24,556,006
----------- ----------- ----------- -------------
Total Common Stocks (cost - $1,072,137,548) 327,993,076 951,741,240 42,643,423 1,322,377,739
----------- ----------- ----------- -------------
<CAPTION>
Combined PACE
Principal Large Company
Amount Maturity Interest Value Equity
(000) Dates Rates Investments
---------- ------------- ------ -----------
<S> <C> <C> <C>
Convertible Bond - 1.26%
Financial Services - 1.26%
$ 16,100 Bell Atlantic Financial Services Inc. (cost - $15,985,505) 09/15/05 4.250% -
-------------
Short Term Investment - 6.80%
Thrift - 6.65%
100,000 Federal Home Loan Mortgage Discount Notes 08/01/00 6.390 -
-------------
U.S. Agency Securities - 0.15%
2,200 Federal Home Loan Mortgage Discount Notes 08/18/00 6.390 -
-------------
-
-------------
Total Short Term Investment (cost - $102,193,362)
U.S. Government Obligation - 0.03%
500 U.S. Treasury Bills (cost - $498,747) 08/17/00 5.640@ 498,747
-------------
Repurchase Agreements - 3.84%
1,588 Repurchase Agreement dated 07/31/00 with Dresdner Bank AG,
collateralized by $1,542,000 U.S. Treasury Bonds, 6.25% due
8/15/23 (value-$1,619,947); proceeds: $1,588,288 08/01/00 6.540 -
49,414 Repurchase Agreement dated 7/31/00 with SG Warburg, collaterized by
$49,354,000 U.S. Treasury Bonds, 6% due 2/15/26 (value-$50,402,773);
proceeds: $49,422,922 08/01/00 6.500 -
5,996 Repurchase Agreement dated 07/31/00 with SG Cowen Securites Group,
collateralized by $4,608,000 U.S. Treasury Bonds, 8.875% due
08/15/17 (value-$6,117,120); proceeds: $5,997,083 08/01/00 6.500 5,996,000
804 Repurchase Agreement date 7/31/00 with State Street Bank & Trust
Co., collateralized by $236,517 U.S. Treasury Notes, 6.625% due
03/31/02; (value - $242,430) and $566,373 U.S. Treasury Bonds;
8.125% due 08/15/19; (value - $577,844); proceeds: $804,117 08/01/00 5.250 804,000
-------------
Total Repurchase Agreements (cost - $57,802,000) 6,800,000
-------------
Total Investments (cost - $1,248,617,161) - 99.90% 335,291,823
Other assets (liabilities) in excess of liabilities/other assets - 0.10% 2,587
-------------
Net Assets - 100.00% $ 335,294,410
=============
<CAPTION>
Combined PACE
Combined Large Company
Principal PaineWebber PaineWebber Value Equity
Amount Growth and Income Tax-Managed Investments
(000) Fund Equity Fund Pro Forma
-------- ---- ----------- -------------
<S> <C> <C> <C>
Convertible Bond - 1.26%
Financial Services - 1.26%
$ 16,100 Bell Atlantic Financial Services Inc. (cost - $15,985,505) 18,917,500 - 18,917,500
--------------- ------------ ---------------
Short Term Investment - 6.80%
Thrift - 6.65%
100,000 Federal Home Loan Mortgage Discount Notes 100,000,000 - 100,000,000
--------------- ------------ ---------------
U.S. Agency Securities - 0.15%
2,200 Federal Home Loan Mortgage Discount Notes - 2,193,362 2,193,362
--------------- ------------ ---------------
Total Short Term Investment (cost - $102,193,362) 100,000,000 2,193,362 102,193,362
--------------- ------------ ---------------
U.S. Government Obligation - 0.03%
500 U.S. Treasury Bills (cost - $498,747) - - 498,747
--------------- ------------ ---------------
Repurchase Agreements - 3.84%
1,588 Repurchase Agreement dated 07/31/00 with Dresdner Bank AG,
collateralized by $1,542,000 U.S. Treasury Bonds, 6.25% due
8/15/23 (value-$1,619,947); proceeds: $1,588,288 - 1,588,000 1,588,000
49,414 Repurchase Agreement dated 7/31/00 with SG Warburg, collaterized
by $49,354,000 U.S. Treasury Bonds, 6% due 2/15/26
(value-$50,402 proceeds: $49,422,922 49,414,000 - 49,414,000
5,996 Repurchase Agreement dated 07/31/00 with SG Cowen Securites
Group, collateralized by $4,608,000 U.S. Treasury Bonds,
8.875% due 08/15/17 (value-$6,117,120); proceeds:
$5,997,083 - - 5,996,000
804 Repurchase Agreement date 7/31/00 with State Street Bank & Trust
Co., collateralized by $236,517 U.S. Treasury Notes, 6.625%
due 03/31/02; (value - $242,430) and $566,373 U.S. Treasury
Bonds; 8.125% due 08/15/19; (value - $577,844); proceeds:
$804,117 - - 804,000
--------------- ------------ ---------------
Total Repurchase Agreements (cost - $57,802,000) 49,414,000 1,588,000 57,802,000
--------------- ------------ ---------------
Total Investments (cost - $1,248,617,161) - 99.90% 1,120,072,740 46,424,785 1,501,789,348
Other assets (liabilities) in excess of liabilities/other
assets - 0.10% 1,709,563 (194,537) 1,517,613
--------------- ------------ ---------------
Net Assets - 100.00% $ 1,121,782,303 $ 46,230,248 $ 1,503,306,961
=============== ============ ===============
</TABLE>
----------
* Non-Income producing security.
(1) Security, or portion thereof, was on loan at July 31, 2000.
@ Interest rate shown is discounted rate at date of purchase.
ADS American Depositary Shares.
ADR American Depositary Receipt.
See accompanying notes to proforma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
PaineWebber Tax-Managed Equity Fund
Proforma Portfolio of Investments
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber PaineWebber Value Equity
Number of Large Company Value Growth and Income Tax-Managed Investments
Shares Equity Investments Fund Equity Fund PRO FORMA
--------- ------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Common Stocks - 87.96%
Agriculture, Food & Beverage - 0.31%
114,900 H. J. Heinz Co. $ 4,588,819 $ - $ - $ 4,588,819
------------------- ----------------- ---------------- ---------------
Airlines - 1.03%
25,000 America West Holding Corp*(1) - - 401,563 401,563
6,100 AMR Corp* - - 201,681 201,681
277,300 Delta Air Lines, Inc. 5,030,519 9,857,025 - 14,887,544
------------------- ----------------- ---------------- ---------------
5,030,519 9,857,025 603,244 15,490,788
------------------- ----------------- ---------------- ---------------
Alcohol - 0.64%
63,700 Anheuser-Busch Companies, Inc. 5,127,850 - - 5,127,850
79,900 Seagram Co. Ltd. 4,479,394 - - 4,479,394
------------------- ----------------- ---------------- ---------------
9,607,244 - - 9,607,244
------------------- ----------------- ---------------- ---------------
Apparel, Retail - 0.36%
261,500 The Limited, Inc. (1) 4,498,294 - 846,113 5,344,407
------------------- ----------------- ---------------- ---------------
Banks - 4.36%
37,900 Bank One Corp.(1) 1,205,694 - - 1,205,694
574,550 Chase Manhattan Corp 5,033,344 22,262,485 1,252,125 28,547,954
181,800 Citigroup, Inc 10,732,556 - 2,095,706 12,828,262
331,100 Fleet Boston Financial Corp - 11,363,306 494,213 11,857,519
91,100 PNC Bank Corp. 4,634,712 - - 4,634,712
108,800 Wells Fargo and Co. 4,494,800 - - 4,494,800
45,000 Zions BanCorp 1,968,750 - - 1,968,750
------------------- ----------------- ---------------- ---------------
28,069,856 33,625,791 3,842,044 65,537,691
------------------- ----------------- ---------------- ---------------
Chemicals - 1.85%
31,750 Air Products & Chemicals, Inc. 1,059,656 - - 1,059,656
423,354 Dow Chemical Co - 12,171,428 - 12,171,428
166,500 Pharmacia Corp. 9,115,875 - - 9,115,875
122,600 Union Carbide Corp.(1) 5,494,013 - - 5,494,013
------------------- ----------------- ---------------- ---------------
15,669,544 12,171,428 - 27,840,972
------------------- ----------------- ---------------- ---------------
Computer Hardware - 6.02%
313,280 Apple Computer, Inc.* - 15,918,540 - 15,918,540
724,000 Cisco Systems Inc.* - 47,115,000 261,750 47,376,750
189,100 Compaq Computer Corp. 5,306,619 - - 5,306,619
389,000 Dell Computer Corp.* - 17,091,687 - 17,091,687
44,000 Hewlett-Packard Co. 4,804,250 - - 4,804,250
------------------- ----------------- ---------------- ---------------
10,110,869 80,125,227 261,750 90,497,846
------------------- ----------------- ---------------- ---------------
Computer Software - 3.72%
120,700 Computer Associates International, Inc. 2,994,869 - - 2,994,869
307,100 International Business Machines 10,276,787 22,217,650 910,744 33,405,181
278,625 Microsoft Corp* - 18,460,170 991,337 19,451,507
------------------- ----------------- ---------------- ---------------
13,271,656 40,677,820 1,902,081 55,851,557
------------------- ----------------- ---------------- ---------------
Consumer Durables - 0.49%
170,477 Whirlpool Corp. - 6,714,663 647,813 7,362,476
------------------- ----------------- ---------------- ---------------
Defense and Aerospace - 1.97%
330,600 Boeing Co - 15,508,500 690,900 16,199,400
59,800 General Dynamics Corp. 3,374,963 - - 3,374,963
222,647 TRW, Inc 2,103,075 7,003,375 898,750 10,005,200
------------------- ----------------- ---------------- ---------------
5,478,038 22,511,875 1,589,650 29,579,563
------------------- ----------------- ---------------- ---------------
Diversified Retail - 2.47%
420,100 Federated Department Stores, Inc* 1,987,562 7,880,469 240,625 10,108,656
930,500 Target Corp 3,828,000 23,156,500 - 26,984,500
------------------- ----------------- ---------------- ---------------
5,815,562 31,036,969 240,625 37,093,156
------------------- ----------------- ---------------- ---------------
Drugs & Medicine - 3.63%
90,700 Bristol-Myers Squibb Co. 4,500,988 - - 4,500,988
594,390 Pfizer, Inc - 25,633,068 - 25,633,068
564,200 Schering-Plough Corp - 24,016,569 349,819 24,366,388
------------------- ----------------- ---------------- ---------------
4,500,988 49,649,637 349,819 54,500,444
------------------- ----------------- ---------------- ---------------
Electric Utilities - 2.66%
12,600 Constellation Energy Group, Inc - - 419,737 419,737
181,467 Duke Energy Corp - 11,194,246 - 11,194,246
127,900 Edison International, Inc. 2,518,031 - - 2,518,031
221,000 Energy East Corp - 4,171,375 - 4,171,375
100,200 Florida Progress Corp. 4,909,800 - - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - - 2,523,475
8,800 PECO Energy Co - - 375,650 375,650
9,100 Pinnacle West Capital Group - - 360,019 360,019
160,000 Reliant Energy, Inc. 5,360,000 - - 5,360,000
197,200 Unicom Corp - 8,097,525 - 8,097,525
------------------- ----------------- ---------------- ---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE PaineWebber PaineWebber Value Equity
Number of Large Company Value Growth and Income Tax-Managed Investments
Shares Equity Investments Fund Equity Fund PRO FORMA
--------- ------------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
15,311,306 23,463,146 1,155,406 39,929,858
----------------- ----------------- ------------ -----------
Electrical Equipment - 3.86%
6,000 Corning Inc - - 1,403,625 1,403,625
152,553 Honeywell, Inc - 5,129,595 - 5,129,595
412,000 Jabil Circuit, Inc* - 20,625,750 - 20,625,750
128,400 Johnson Controls, Inc - 6,149,400 519,375 6,668,775
731,228 Motorola, Inc 4,598,994 18,704,382 872,850 24,176,226
----------------- ----------------- ------------ -----------
4,598,994 50,609,127 2,795,850 58,003,971
----------------- ----------------- ------------ -----------
Electrical Power - 1.18%
148,233 Emerson Electric Co - 8,440,853 610,625 9,051,478
26,219 Koninklijke (Royal) Philips Electronics
N.V.* 113,332 - 1,078,500 1,191,832
157,700 Koninklijke (Royal) Philips Electronics
N.V., ADR*(1) 7,086,644 - - 7,086,644
10,000 Rockwell International Corp - - 350,625 350,625
----------------- ----------------- ------------ -----------
7,199,976 8,440,853 2,039,750 17,680,579
----------------- ----------------- ------------ -----------
Energy Reserves & Production - 6.99%
96,300 Apache Corp.(1) 4,790,925 - - 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687 - - 1,288,687
249,131 Chevron Corp - 19,499,649 181,700 19,681,349
314,385 El Paso Energy Corp - 15,208,374 - 15,208,374
337,083 Exxon Mobil Corp - 25,593,760 1,372,880 26,966,640
194,661 Phillips Petroleum Co - 9,464,387 426,825 9,891,212
354,200 Royal Dutch Petroleum Co., ADR - 19,892,375 739,775 20,632,150
249,990 Tosco Corp - 5,824,435 800,300 6,624,735
----------------- ----------------- ------------ -----------
6,079,612 95,482,980 3,521,480 105,084,072
----------------- ----------------- ------------ -----------
Energy Sources - 0.71%
132,800 Exxon Mobil Corp. 10,624,000 - - 10,624,000
----------------- ----------------- ------------ -----------
Entertainment - 1.23%
278,995 Viacom, Inc., Class B* - 17,440,188 1,060,668 18,500,856
----------------- ----------------- ------------ -----------
Financial Services - 4.94%
174,650 Associates First Capital Corp. 4,573,647 - - 4,573,647
329,538 Citigroup, Inc - 23,253,025 - 23,253,025
224,600 Federal Home Loan Mortgage Corp - 8,494,837 362,825 8,857,662
95,150 Federal National Mortgage Association 4,745,606 - - 4,745,606
77,200 Household International, Inc. 3,440,225 - - 3,440,225
254,400 General Electric Co - 13,085,700 - 13,085,700
315,543 MBNA Corp - 9,863,748 667,500 10,531,248
57,075 Providian Financial Corp - 5,818,083 - 5,818,083
----------------- ----------------- ------------ -----------
12,759,478 60,515,393 1,030,325 74,305,196
----------------- ----------------- ------------ -----------
Forest Products, Paper - 1.77%
68,200 Kimberly Clark Corp. 3,917,237 - - 3,917,237
138,900 International Paper Co - 4,522,000 200,600 4,722,600
393,714 Weyerhaeuser Co 3,088,475 14,063,252 836,081 17,987,808
----------------- ----------------- ------------ -----------
7,005,712 18,585,252 1,036,681 26,627,645
----------------- ----------------- ------------ -----------
Freight, Air, Sea & Land - 0.31%
80,100 United Parcel Service, Inc. 4,705,875 - - 4,705,875
----------------- ----------------- ------------ -----------
Heavy Machinery - 0.32%
124,700 Deere & Co.(1) 4,808,744 - - 4,808,744
----------------- ----------------- ------------ -----------
Hotels - 0.17%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850 - - 2,579,850
----------------- ----------------- ------------ -----------
Household Products - 0.44%
120,600 Avon Products, Inc.(1) 4,786,312 - - 4,786,312
68,850 Newell Rubbermaid, Inc. 1,854,647 - - 1,854,647
----------------- ----------------- ------------ -----------
6,640,959 - - 6,640,959
----------------- ----------------- ------------ -----------
Industrial Parts - 3.01%
156,666 Ingersoll Rand Co - 6,149,140 - 6,149,140
213,800 Mettler Toledo International Inc.* - 7,261,650 1,397,250 8,658,900
521,706 United Technologies Corp - 29,269,225 1,185,363 30,454,588
----------------- ----------------- ------------ -----------
- 42,680,015 2,582,613 45,262,628
----------------- ----------------- ------------ -----------
Industrial Services & Supplies - 1.32%
371,400 Tyco International, Ltd. 3,424,000 16,445,900 - 19,869,900
----------------- ----------------- ------------ -----------
Information & Computer Services - 1.28%
180,900 America Online Inc* - 9,644,231 - 9,644,231
141,200 AMR Corp* - 4,668,425 - 4,668,425
26,000 Comdisco Inc - - 672,750 672,750
84,200 Electronic Data Systems Corp. 3,620,600 - - 3,620,600
14,800 First Data Corp - - 681,725 681,725
----------------- ----------------- ------------ -----------
3,620,600 14,312,656 1,354,475 19,287,731
----------------- ----------------- ------------ -----------
Leisure - 0.07%
18,000 Eastman Kodak Co - - 987,750 987,750
----------------- ----------------- ------------ -----------
Life Insurance - 0.16%
44,650 Aetna Life & Casualty Co. 2,478,075 - - 2,478,075
----------------- ----------------- ------------ -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined PACE
Large Company
Combined PACE Paine Webber Paine Webber Value Equity
Number of Large Company Value Growth and Income Tax-Managed Investments
Shares Equity Investments Fund Equity Fund PRO FORMA
------------ ----------------------- -------------------- -------------- --------------
<S> <C> <C> <C> <C>
Long Distance & Phone Companies - 2.07%
157,900 AT&T Corp. 4,885,031 - - 4,885,031
454,200 MCI Worldcom Inc* 4,675,781 13,066,406 - 17,742,187
80,642 Qwest Communications International Inc.* 3,785,134 - - 3,785,134
110,600 SBC Communications, Inc. 4,707,413 - - 4,707,413
-------------- --------------- ------------- --------------
18,053,359 13,066,406 - 31,119,765
-------------- --------------- ------------- --------------
Media - 1.72%
35,600 AMFM Inc.* 2,543,175 - - 2,543,175
271,858 Comcast Corp., Class A* - 9,247,420 - 9,247,420
141,700 Fox Entertainment Group Inc.* 4,339,563 - - 4,339,563
132,200 The Walt Disney Co. 5,114,487 - - 5,114,487
61,000 Time Warner, Inc. 4,677,937 - - 4,677,937
-------------- --------------- ------------- --------------
16,675,162 9,247,420 - 25,922,582
-------------- --------------- ------------- --------------
Medical Products - 1.73%
92,000 Abbott Laboratories 3,829,500 - - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - - 1,377,453
226,975 Baxter International, Inc 5,442,500 11,683,881 520,925 17,647,306
97,900 Becton, Dickinson & Co. 2,471,975 - - 2,471,975
6700 Johnson & Johnson - - 623,519 623,519
-------------- --------------- ------------- --------------
13,121,428 11,683,881 1,144,444 25,949,753
-------------- --------------- ------------- --------------
Medical Providers - 0.41%
20,200 Columbia/HCA Healthcare Corp - - 686,800 686,800
62,700 Wellpoint Health Networks, Inc.* 5,466,656 - - 5,466,656
-------------- --------------- ------------- --------------
5,466,656 - 686,800 6,153,456
-------------- --------------- ------------- --------------
Mining & Metals - 1.32%
656,448 Alcoa, Inc 5,018,475 13,800,171 1,038,906 19,857,552
-------------- --------------- ------------- --------------
Motor Vehicles - 2.92%
142,600 Borg Warner Automotive, Inc - 4,839,488 - 4,839,488
150,935 Delphi Automotive Systems Corp - 1,594,343 641,381 2,235,724
626,000 Ford Motor Co. 5,708,563 22,908,750 530,813 29,148,126
88,000 General Motors Corp. 5,010,500 - - 5,010,500
111,300 Lear Corp.* 2,594,681 - - 2,594,681
-------------- --------------- ------------- --------------
13,313,744 29,342,581 1,172,194 43,828,519
-------------- --------------- ------------- --------------
Oil Refining - 1.69%
595,800 Conoco, Inc. 8,113,387 5,385,094 242,156 13,740,637
90,300 Texaco, Inc. 4,464,206 - - 4,464,206
96,600 USX-Marathon Group 2,348,588 - - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - - 4,830,475
-------------- --------------- ------------- --------------
19,756,656 5,385,094 242,156 25,383,906
-------------- --------------- ------------- --------------
Oil Services - 2.06%
20,000 BJ Services Co.*(1) - - 1,167,500 1,167,500
18,500 Cooper Cameron Corp.*(1) - - 1,195,562 1,195,562
106,500 Devon Energy Corp. 4,872,375 - - 4,872,375
391,686 Halliburton Co - 17,291,617 774,900 18,066,517
115,800 Transocean Sedco Forex, Inc - 5,732,100 - 5,732,100
-------------- --------------- ------------- --------------
4,872,375 23,023,717 3,137,962 31,034,054
-------------- --------------- ------------- --------------
Other Insurance - 1.84%
167,400 Allstate Corp. 4,070,981 - 542,981 4,613,962
205,032 Ambac Financial Group, Inc. - 13,211,749 - 13,211,749
468,300 Metlife Incorporated*(1) 3,859,800 5,554,500 420,000 9,834,300
-------------- --------------- ------------- --------------
7,930,781 18,766,249 962,981 27,660,011
-------------- --------------- ------------- --------------
Publishing - 1.78%
8,000 Dow Jones & Co., Inc - - 527,500 527,500
341,561 Knight Ridder, Inc 1,985,963 15,348,779 469,125 17,803,867
205,711 New York Times Co., Class A - 7,978,472 494,250 8,472,722
-------------- --------------- ------------- --------------
1,985,963 23,327,251 1,490,875 26,804,089
-------------- --------------- ------------- --------------
Railroads - 0.10%
62,600 Burlington Northern Santa Fe Inc. 1,529,788 - - 1,529,788
-------------- --------------- ------------- --------------
Real Property - 0.27%
45,000 Kimco Realty Corp. 1,856,250 - - 1,856,250
55,000 Vornado Realty Trust 2,151,875 - - 2,151,875
-------------- --------------- ------------- --------------
4,008,125 - - 4,008,125
-------------- --------------- ------------- --------------
Restaurants - 0.11%
69,000 Tricon Global Restaurants, Inc.* 1,668,938 - - 1,668,938
-------------- --------------- ------------- --------------
Securities & Asset Management - 4.28%
396,218 AXA Financial Inc - 14,581,588 573,750 15,155,338
12,300 Lehman Brothers Holdings, Inc - - 1,382,212 1,382,212
158,000 Merrill Lynch & Co., Inc - 19,258,250 1,163,250 20,421,500
300,000 Morgan Stanley Dean Witter & Co - 27,375,000 - 27,375,000
-------------- --------------- ------------- --------------
- 61,214,838 3,119,212 64,334,050
-------------- --------------- ------------- --------------
Semiconductor - 5.31%
257,048 Applied Materials, Inc* - 19,503,517 - 19,503,517
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combined
PACE Large
Company Value
Combined PACE Paine Webber Paine Webber Equity
Number of Large Company Value Growth and Income Tax-Managed Investments
Shares Equity Investments Fund Equity Fund PRO FORMA
------------ ----------------------- -------------------- -------------- --------------
<S> <C> <C> <C> <C>
200,120 Atmel Corp* - 5,991,093 - 5,991,093
310,358 Intel Corp - 20,289,196 427,200 20,716,396
173,977 JDS Uniphase Corp* - 20,551,033 - 20,551,033
147,100 Texas Instruments, Inc - 8,274,938 357,994 8,632,932
73,773 Vitesse Semiconductor Corp* - 4,398,715 - 4,398,715
-------------- --------------- ------------- --------------
- 79,008,492 785,194 79,793,686
-------------- --------------- ------------- --------------
Specialty Retail - 1.47%
245,903 Circuit City Stores, Inc - 5,089,900 550,500 5,640,400
260,397 Home Depot, Inc - 13,475,545 - 13,475,545
11,000 Lowe's Companies, Inc 464,062 464,062
73,600 Tiffany & Co. 2,520,800 - - 2,520,800
-------------- --------------- ------------- --------------
2,520,800 18,565,445 1,014,562 22,100,807
-------------- --------------- ------------- --------------
Wireless Telecommunications - 1.63%
196,000 Nextel Communications, Inc.* - 10,963,750 - 10,963,750
216,802 Verizon Communications 10,189,694 - - 10,189,694
78,900 Vodafone Group PLC, ADR*(1) 3,402,562 - - 3,402,562
-------------- --------------- ------------- --------------
13,592,256 10,963,750 - 24,556,006
-------------- --------------- ------------- --------------
Total Common Stocks (cost - $1,072,137,548) 327,993,076 951,741,240 42,643,423 1,322,377,739
-------------- --------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Combined
Combined PACE Large
Principal PACE PaineWebber Company Value
Amount Large Company Growth and PaineWebber Equity
Maturity Interest Value Equity Income Tax-Managed Investments
(000) Dates Rates Investments Fund Equity Fund PRO FORMA
--------- ------------- ----------- ---------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Convertible Bond - 1.26%
Financial Services - 1.26%
$ 16,100 Bell Atlantic Financial Services
Inc. (cost - $15,985,505) 09/15/05 4.250% - 18,917,500 - 18,917,500
------------- -------------- --------------- --------------
Short Term Investment - 6.80%
Thrift - 6.65%
100,000 Federal Home Loan Mortgage Discount
Notes 08/01/00 6.390 - 100,000,000 - 100,000,000
------------- -------------- --------------- --------------
U.S. Agency Securities - 0.15%
2,200 Federal Home Loan Mortgage Discount
Notes 08/18/00 6.390 - - 2,193,362 2,193,362
------------- -------------- --------------- --------------
Total Short Term Investment (cost -
$102,193,362) - 100,000,000 2,193,362 102,193,362
------------- -------------- --------------- --------------
U.S. Government Obligation - 0.03%
500 U.S. Treasury Bills (cost - $498,747) 08/17/00 5.640@ 498,747 - - 498,747
------------- -------------- --------------- --------------
Repurchase Agreements - 3.84%
1,588 Repurchase Agreement dated 07/31/00
with Dresdner Bank AG, collateralized
by $1,542,000 U.S. Treasury Bonds,
6.25% due 8/15/23 (value-$1,619,947);
proceeds: $1,588,288 08/01/00 6.540 - - 1,588,000 1,588,000
49,414 Repurchase Agreement dated 7/31/00
with SG Warburg, collaterized by
$49,354,000 U.S. Treasury Bonds,
6% due 2/15/26 (value-$50,402,773);
proceeds: $49,422,922 08/01/00 6.500 - 49,414,000 - 49,414,000
5,996 Repurchase Agreement dated 07/31/00
with SG Cowen Securites Group,
collateralized by $4,608,000
U.S. Treasury Bonds, 8.875% due
08/15/17 (value-$6,117,120);
proceeds: $5,997,083 08/01/00 6.500 5,996,000 - - 5,996,000
804 Repurchase Agreement date 7/31/00
with State Street Bank & Trust
Co., collateralized by $236,517
U.S. Treasury Notes, 6.625% due
03/31/02; (value - $242,430)
and $566,373 U.S. Treasury Bonds;
8.125% due 08/15/19; (value -
$577,844); proceeds: $804,117 08/01/00 5.250 804,000 - - 804,000
------------- -------------- --------------- --------------
Total Repurchase Agreements (cost - $57,802,000) 6,800,000 49,414,000 1,588,000 57,802,000
------------- -------------- --------------- --------------
Total Investments (cost - $1,248,617,161) - 99.90% 335,291,823 1,120,072,740 46,424,785 1,501,789,348
Other assets (liabilities) in excess of
liabilities/other assets - 0.10% 2,587 1,709,563 (194,537) 1,517,613
------------- -------------- --------------- --------------
Net Assets - 100.00% $ 335,294,410 $1,121,782,303 $46,230,248,410 $1,503,306,961
============= ============== =============== ==============
</TABLE>
__________
* Non-Income producing security.
(1) Security, or portion thereof, was on loan at July 31, 2000.
@ Interest rate shown is discounted rate at date of purchase.
ADS American Depositary Shares.
ADR American Depositary Receipt.
See accompanying notes to proforma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth & Income Fund
PaineWebber Tax-Managed Equity Fund
Notes to Pro Forma Financial Statements
For the year ended July 31, 2000 (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Growth & Income Fund
("Growth & Income") and PaineWebber Tax-Managed Equity Fund ("Tax-Managed"),
PACE Large Company Value Equity Investments ("Large Company Value") would
acquire the assets of Growth & Income and Tax-Managed in exchange solely for the
assumption by Large Company Value of Growth & Income's and Tax-Managed's assets
and liabilities and shares of Large Company Value that correspond to the
outstanding shares of Growth & Income and Tax-Managed. The number of shares to
be received would be based on the relative net asset value of Large Company
Value's shares on the effective date of the Plan and Growth & Income and Tax-
Managed will be terminated as soon as practicable thereafter.
The pro forma financial statements reflect the financial position of Large
Company Value, Growth & Income and Tax-Managed at July 31, 2000 and the combined
results of operations of Large Company Value, Growth & Income and Tax-Managed
(each a "Fund" and, collectively, the "Funds") for the year ended July 31, 2000.
As a result of the Plan, the investment advisory and administration fee will
increase due to the higher fee schedule, net of waivers, of Large Company Value.
However, after anticipated savings in other expenses of the Fund, the
shareholders of Growth & Income and Tax-Managed will not experience an increase
in total expenses. Growth & Income and Tax-Managed currently pay Rule 12b-1
distribution or service fees; Large Company Value currently does not. Other
fixed expenses will be reduced due to the elimination of duplicative expenses.
In addition, the pro forma statement of assets and liabilities has not been
adjusted as a result of the proposed transaction because such adjustment would
not be material. The cost of approximately $488,000 associated with the
Reorganization will be paid by Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned asset management subsidiary of PaineWebber
Incorporated (a wholly owned indirect subsidiary of UBS AG) so that each Fund
bears no expenses of the Reorganization. These costs are not included in the pro
forma statement of operations.
The pro forma financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred August 1,
1999. The pro forma financial statements should be read in conjunction with the
historical financial statements of the constituent Funds included in or
incorporated by reference in the applicable statement of additional information.
Significant Accounting Policies:
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles that require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. The following is a summary of significant
accounting policies followed by the Funds.
Valuation of Investments - Each Fund calculates its net asset value based on the
current market value for its portfolio securities. Each Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are
<PAGE>
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market by Mitchell Hutchins, or by the
Fund's sub-adviser. If a market value is not available from an independent
pricing source for a particular security, that security is valued at fair value
as determined in good faith or under the direction of the Fund's board of
trustees (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the board
determines that this does not represent fair value. Each Fund's investments are
valued using the amortized cost method of valuation.
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 15. Indemnification
---------------
Article IX, Section 2 of the Amended and Restated Trust Instrument of
PaineWebber PACE Select Advisors Trust ("Trust Instrument") provides that the
Registrant will indemnify its trustees, officers, employees, investment managers
and administrators and investment advisers to the fullest extent permitted by
law against claims and expenses asserted against or incurred by them by virtue
of being or having been a trustee, officer, employee, investment manager and
administrator or investment adviser; provided that (i) no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
or did not act in good faith in the reasonable belief that his or her action was
in the best interest of the Registrant, or (ii) no such person shall be
indemnified where there has been a settlement, unless there has been a
determination that such person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office; such determination shall be made (A) by the court or other
body approving the Settlement, (B) by the vote of at least a majority of those
trustees who are neither Interested Persons of the trust nor are parties to the
proceeding based upon a review of readily available facts (as opposed to a full
trial-type inquiry), or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry).
"Interested Person" has the meaning provided in the Investment Company Act
of 1940, as amended from time to time. Article IX, Section 2(d) of the Trust
Instrument also provides that the Registrant may maintain insurance policies
covering such rights of indemnification.
Article IX, Section 1 of the Trust Instrument provides that the trustees
and officers of the Registrant (i) shall not be personally liable to any person
contracting with, or having a claim against, the Trust, and (ii) shall not be
liable for neglect or wrongdoing by them or any officer, agent, employee or
investment adviser of the Registrant, provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are in the
best interest of the Registrant.
Article X, Section 2 of the Trust Instrument provides that, subject to the
provisions of Article IX, the trustees shall not be liable for (i) errors of
judgment or mistakes of fact or law or (ii) any act or omission made in
accordance with advice of counsel or other experts, or (iii) failure to follow
such advice, with respect to the meaning and operation of the Trust Instrument.
Registrant undertakes to carry out all indemnification provisions of its
Trust Instrument and By-laws in accordance with Investment Company Act Release
No. 11330 (September 4, 1980) and successor releases.
Section 9 of the Investment Management and Administration Agreement
("Management Agreement") with Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") provides that Mitchell Hutchins shall not be liable for any error of
judgment or mistake of law or for any loss suffered by any series of the
Registrant in connection with the matters to which the Management Agreement
relates, except for a loss resulting from the willful misfeasance, bad faith, or
gross negligence of Mitchell Hutchins in the performance of its duties or from
its reckless disregard of its obligations and duties under the Management
Agreement. Section 10 of the Management Agreement provides that the Trustees
and shareholders shall not be liable for any obligations of the Registrant or
any series under the Management Agreement and that Mitchell Hutchins shall look
only to the assets and property of the Registrant in
C-1
<PAGE>
settlement of such right or claim and not to the assets and property of the
Trustees or shareholders.
Section 6 of the Sub-Advisory Agreement provides that the Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the portfolio, the Registrant or its shareholders or by Mitchell
Hutchins in connection with the matters to which the Sub-Advisory Agreement
relates, except for a loss resulting from the willful misfeasance, bad faith, or
gross negligence on its part in the performance of its duties or from its
reckless disregard of its obligations and duties under the Management Agreement.
Section 9 of the Distribution Contract provides that the Registrant will
indemnify Mitchell Hutchins and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Registrant for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of the Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Registrant, its
officers and Trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with the Contract.
Section 9 of the Dealer Agreement contains provisions similar to Section 9
of the Distribution Contract, with respect to PaineWebber Incorporated
("PaineWebber").
Section 15 of the Distribution Contract contains provisions similar to
Section 10 of the Management Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits
--------
(1) (a) Certificate of Business Trust effective September 9, 1994 1/
-
(b) Amended and Restated Trust Instrument 2/
-
C-2
<PAGE>
(2) Amended and Restated By-Laws 2/
-
(3) Copies of any voting trust agreement - none
(4) A copy of the Agreement and Plan of Reorganization and Termination is
included in the Combined Proxy Statement/Prospectus as Appendix A
thereto and incorporated by reference.
(5) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
-
(6) (a) Investment Management and Administration Agreement 4/
-
(b) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Government Securities Fixed Income
Investments dated as of October 10, 2000 2/
-
(c) Sub-Advisory Agreement with Metropolitan West Asset Management
LLC with respect to PACE Intermediate Fixed Income Investments
dated as of October 10, 2000 2/
-
(d) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Strategic Fixed Income Investments dated
as of May 5, 2000 2/
-
(e) Sub-Advisory Agreement with Standish, Ayer & Wood, Inc. with
respect to PACE Municipal Fixed Income Investments dated as of
October 10, 2000 2/
-
(f) Sub-Advisory Agreement with Rogge Global Partners plc with
respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(g) Sub-Advisory Agreement with Fischer Francis Trees & Watts, Inc.
with respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(h) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Value Equity Investments dated as
of October 10, 2000 2/
-
(i) Sub-Advisory Agreement with Institutional Capital Corporation
with respect to PACE Large Company Value Equity Investments dated
as of July 1, 2000 2/
-
(j) Sub-Advisory Agreement with Westwood Management Corporation with
respect to PACE Large Company Value Equity Investments dated as
of July 1, 2000 2/
-
(k) Sub-Advisory Agreement with Alliance Capital Management L.P. with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(l) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(m) Sub-Advisory Agreement with Ariel Capital Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 4, 1999 1/
-
(n) Sub-Advisory Agreement with ICM Asset Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 10, 2000 2/
-
(o) Sub-Advisory Agreement with Delaware Management Company with
respect to PACE Small/Medium Company Growth Equity Investments
dated as of December 16, 1996 5/
-
C-3
<PAGE>
(p) Sub-Advisory Agreement with Martin Currie Inc. with respect to
PACE International Equity Investments dated as of October 10,
2000 6/
-
(q) Sub-Advisory Agreement with Schroder Investment Management North
America Inc. with respect to PACE International Emerging Markets
Equity Investments dated as of June 15, 1995 4/
-
(7) (a) Distribution Contract 2/
(b) Dealer Agreement 2/
(8) Bonus, profit sharing or pension plans - none
(9) Custodian Agreement 1/
(10) Plan pursuant to Rule 12b-1
a) Plan of Distribution pursuant to Rule 12b-1 with respect to
Class A shares 2/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B shares 2/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C shares 2/
(d) Plan pursuant to Rule 18f-3 7/
(11) Opinion and consent of Counsel on legality of shares (filed herewith)
(12) Opinion and consent of Counsel on tax matters (to be filed)
(13) Transfer Agency Agreement 8/
(14) Auditors' consent (filed herewith)
(15) Financial Statements omitted from prospectus - none
(16) (a) Powers of Attorney for Ms. Alexander and Messrs. Beaubien,
Bewkes, Hewitt, Janklow, White and Woodward 9/
-
(b) Power of Attorney for Mr. Storms 10/
--
(17) Additional Exhibits - none
--------------------------
_____________________
1/ Incorporated by reference from Post-Effective Amendment No. 8 to
_ registration statement, SEC File No. 33-87254, filed December 1, 1999.
2/ Incorporated by reference from Registrant's N-14 registration statement,
- SEC File No. 333-49052, filed November 1, 2000.
3/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
- Trust Instrument and from Articles V and IX of Registrant's By-Laws.
4/ Incorporated by reference from Post-Effective Amendment No. 1 to
- registration statement, SEC File No. 33-87254, filed February 23, 1996.
C-4
<PAGE>
5/ Incorporated by reference from Post-Effective Amendment No. 4 to
- registration statement, SEC File No. 33-87254, filed November 13, 1997.
6/ Incorporated by reference from Post-Effective Amendment No. 10 to
- registration statement, SEC File No. 33-87254, filed November 9, 2000.
7/ Incorporated by reference from Registrant's N-14 registration statement,
- SEC File No. 333-49850, filed November 13, 2000.
8/ Incorporated by reference from Post-Effective Amendment No. 2 to
- registration statement, SEC File No. 33-87254, filed October 16, 1996.
9/ Incorporated by reference from Post-Effective Amendment No. 9 to
- registration statement, SEC File No. 33-87254, filed September 29, 2000.
10/ Incorporated by reference from Registrant's N-14 registration statement,
-- SEC File No. 333-50238, filed November 17, 2000.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public re-offering
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new Registration Statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 27th day of November, 2000.
PAINEWEBBER PACE SELECT ADVISORS TRUST
By: /s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Brian M. Storms President and Trustee November 27, 2000
------------------- (Chief Executive Officer)
Brian M. Storms **
/s/ David J. Beaubien Trustee and Chairman November 27, 2000
--------------------- of the Board of Trustees
David J. Beaubien *
/s/ Margo N. Alexander Trustee November 27, 2000
----------------------
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee November 27, 2000
--------------------------
E. Garrett Bewkes, Jr. *
/s/ William W. Hewitt, Jr. Trustee November 27, 2000
--------------------------
William W. Hewitt, Jr. *
/s/ Morton L. Janklow Trustee November 27, 2000
---------------------
Morton L. Janklow *
/s/ William D. White Trustee November 27, 2000
--------------------
William D. White *
/s/ M. Cabell Woodward, Jr Trustee November 27, 2000
--------------------------
M. Cabell Woodward, Jr. *
/s/ Paul H. Schubert Vice President and Treasurer November 27, 2000
-------------------- (Chief Financial and
Paul H. Schubert Accounting Officer)
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
September 12, 2000 and incorporated by reference from Exhibit 16 to Post-
Effective Amendment No. 9 to the Registration Statement on Form N-1A of
PaineWebber PACE Select Advisors Trust, SEC File 33-87254, filed September
29, 2000.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
November 13, 2000 and incorporated by reference from Exhibit 16(b) to
Registrant's Registration Statement on Form N-14, SEC File No. 333-50238,
filed November 17, 2000.
<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
EXHIBIT INDEX
-------------
Exhibit
Number
------
(1) (a) Certificate of Business Trust effective September 9, 1994 1/
-
(b) Amended and Restated Trust Instrument 2/
-
(2) Amended and Restated By-Laws 2/
-
(3) Copies of any voting trust agreement - none
(4) A copy of the Agreement and Plan of Reorganization and Termination is
included in the Combined Proxy Statement/Prospectus as Appendix A
thereto and incorporated by reference.
(5) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
-
(6) (a) Investment Management and Administration Agreement 4/
-
(b) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Government Securities Fixed Income
Investments dated as of October 10, 2000 2/
-
(c) Sub-Advisory Agreement with Metropolitan West Asset Management
LLC with respect to PACE Intermediate Fixed Income Investments
dated as of October 10, 2000 2/
-
(d) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Strategic Fixed Income Investments dated
as of May 5, 2000 2/
-
(e) Sub-Advisory Agreement with Standish, Ayer & Wood, Inc. with
respect to PACE Municipal Fixed Income Investments dated as of
October 10, 2000 2/
-
(f) Sub-Advisory Agreement with Rogge Global Partners plc with
respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(g) Sub-Advisory Agreement with Fischer Francis Trees & Watts, Inc.
with respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(h) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Value Equity Investments dated as
of October 10, 2000 2/
-
(i) Sub-Advisory Agreement with Institutional Capital Corporation
with respect to PACE Large Company Value Equity Investments dated
as of July 1, 2000 2/
-
(j) Sub-Advisory Agreement with Westwood Management Corporation with
respect to PACE Large Company Value Equity Investments dated as
of July 1, 2000 2/
-
(k) Sub-Advisory Agreement with Alliance Capital Management L.P. with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(l) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
<PAGE>
(m) Sub-Advisory Agreement with Ariel Capital Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 4, 1999 1/
-
(n) Sub-Advisory Agreement with ICM Asset Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 10, 2000 2/
-
(o) Sub-Advisory Agreement with Delaware Management Company with
respect to PACE Small/Medium Company Growth Equity Investments
dated as of December 16, 1996 5/
-
(p) Sub-Advisory Agreement with Martin Currie Inc. with respect to
PACE International Equity Investments dated as of October 10,
2000 6/
-
(q) Sub-Advisory Agreement with Schroder Investment Management North
America Inc. with respect to PACE International Emerging Markets
Equity Investments dated as of June 15, 1995 4/
-
(7) (a) Distribution Contract 2/
-
(b) Dealer Agreement 2/
-
(8) Bonus, profit sharing or pension plans - none
(9) Custodian Agreement 1/
-
(10) Plan pursuant to Rule 12b-1
(a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
A shares 2/
-
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B shares 2/
-
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C shares 2/
-
(d) Plan pursuant to Rule 18f-3 7/
-
(11) Opinion and consent of Counsel on legality of shares (filed herewith)
(12) Opinion and consent of Counsel on tax matters (to be filed)
(13) Transfer Agency Agreement 8/
-
(14) Auditors' consent (filed herewith)
(15) Financial Statements omitted from prospectus - none
(16) (a) Powers of Attorney for Ms. Alexander and Messrs. Beaubien,
Bewkes, Hewitt, Janklow, White and Woodward 9/
-
(b) Power of Attorney for Mr. Storms 10/
--
(17) Additional Exhibits - none
<PAGE>
_______________________
1/ Incorporated by reference from Post-Effective Amendment No. 8 to
- registration statement, SEC File No. 33-87254, filed December 1, 1999.
2/ Incorporated by reference from Registrant's N-14 registration statement,
- SEC File No. 333-49052, filed November 1, 2000.
3/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
- Trust Instrument and from Articles V and IX of Registrant's By-Laws.
4/ Incorporated by reference from Post-Effective Amendment No. 1 to
- registration statement, SEC File No. 33-87254, filed February 23, 1996.
5/ Incorporated by reference from Post-Effective Amendment No. 4 to
- registration statement, SEC File No. 33-87254, filed November 13, 1997.
6/ Incorporated by reference from Post-Effective Amendment No. 10 to
- registration statement, SEC File No. 33-87254, filed November 9, 2000.
7/ Incorporated by reference from Registrant's N-14 registration statement,
- SEC File No. 333-49850, filed November 13, 2000.
8/ Incorporated by reference from Post-Effective Amendment No. 2 to
- registration statement, SEC File No. 33-87254, filed October 16, 1996.
9/ Incorporated by reference from Post-Effective Amendment No. 9 to
- registration statement, SEC File No. 33-87254, filed September 29, 2000.
10/ Incorporated by reference from Registrant's N-14 registration statement,
-- SEC File No. 333-50238, filed November 17, 2000.
