<PAGE>
PAINEWEBBER PACE-SM-
--------------------------------------------------------------------------------
PACE
MONEY MARKET
INVESTMENTS
ANNUAL REPORT
JULY 31, 2000
<PAGE>
PACE MONEY MARKET INVESTMENTS ANNUAL REPORT
PACE MONEY MARKET INVESTMENTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years Since Inception 8/24/95
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
With PACE program fee* 2.13% 3.96% 3.66% 3.63%
Without PACE program fee 2.90% 5.53% 5.23% 5.20%
90-Day U.S. T-Bill 2.91% 5.50% 5.07% 5.11%
Lipper Money Market Funds Median 2.78% 5.31% 5.00% 4.92%
---------------------------------------------------------------------------------------------------
</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.
ADVISER'S COMMENTS
On the heels of six Fed Fund rate increases during the 12 months ended June 30
totaling 1.75 percent, the Federal Reserve (the "Fed") decided against
additional tightening at its August 22 Open Market Committee meeting. Recent
economic news suggests that the economy has achieved its hoped-for soft landing
and that interest rates will stabilize along with the economy. Gross domestic
product (GDP), adjusted for inflation, slowed in the second quarter after
recording a 5.5% increase during the first quarter and a 7.3% surge in fourth
quarter 1999. Gasoline prices, which increased dramatically during the period,
have also stabilized and may decrease in the coming months. Unemployment figures
remain a concern, however, as a continuing shortage of workers may continue to
pressure wages.
Yields on the 30-year Treasury suffered during the fiscal year. The U.S.
Treasury's announcement in January to buy back $30 billion in Treasury debt
during 2000 drove down the yield on the 30-year Treasury, causing a dramatic
yield curve inversion. Short-term rates rose during the period, with the yield
on 90-day T-bills increasing from 5.31% to 5.86% at period-end.
During the period, the Fund had a weighted average maturity below that of
its peer group, a beneficial strategy since rates rose significantly during the
span. At the same time, the Fund continued to focus on investments of the
highest credit quality.
We anticipate that inflation as measured by the Consumer Price Index (CPI)
will slow to 3.5% annually by year-end and to 3% annually in 2001. Thus, we
believe that rate increases of the past year have served their purpose and the
economic activity has slowed to manageable levels. Reduced Treasury supply in
the face of increasing federal surpluses may continue to hamper the recovery of
long bonds. However, shorter-term instruments should stabilize and spreads
should recover if the economy avoids future inflationary or interest-rate shocks
in the coming months. Should this scenario play out, the Fund's average weighted
maturity may continue to increase.
-----------------------------------
PACE MONEY MARKET
INVESTMENTS
FUND PROFILE
ADVISER:
Mitchell Hutchins Asset
Management Inc.
PORTFOLIO MANAGER:
Susan Ryan
OBJECTIVE:
Current income consistent
with preservation of
capital and liquidity
INVESTMENT PROCESS:
The Portfolio is a money
market mutual fund and
seeks to maintain a stable
price of $1.00 per share,
although it may be
possible to lose money by
investing in this fund. The
Portfolio invests in a
diversified portfolio of
high-quality money
market instruments of
governmental and private
issuers. Security selection
is based on the
assessment of relative
values and changes in
market and economic
conditions.
-----------------------------------
1
<PAGE>
ANNUAL REPORT
<TABLE>
<CAPTION>
Portfolio Composition*
-------------------------------------------------------------
<S> <C>
Commercial Paper 57.9%
U.S. Government Agency Obligations 16.6
Short-Term Corporate Obligations 11.7
Certificates of Deposit 6.9
Money Market Funds 3.7
Other Assets in Excess of Liabilities 1.7
Bank Notes 1.5
-------------------------------------------------------------
Total 100.0
<CAPTION>
Top 10 Holdings (excluding U.S. Gov't Agency Obligations)*
-------------------------------------------------------------
<S> <C>
Parthenon Receivables Funding 3.9%
AT&T Capital 3.1
Beta Finance 3.1
Centric Capital 3.1
International Lease Finance 3.1
Merrill Lynch 3.1
Morgan Stanley Dean Witter 3.1
Bell Atlantic Financial Services 3.0
Giro Funding 3.0
RTZ America 3.0
-------------------------------------------------------------
Total 31.5
<CAPTION>
Characteristics*
-----------------------------------------------------------------------------
<S> <C>
Net Assets ($MM) $65.5
Number of Issuers (excl Govts) 36
Weighted Average Maturity 68 days
-----------------------------------------------------------------------------
</TABLE>
* Weightings represent percentages of net assets as of July 31, 2000. The
Portfolio is actively managed and all holdings are subject to change.
2
<PAGE>
PACE MONEY MARKET INVESTMENTS JULY 31, 2000
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 16.63%
$3,003 Federal Home Loan Mortgage Corp. ....................................... 08/15/00 6.400% $ 2,995,526
2,400 Federal National Mortgage Association .................................. 08/03/00 to 08/09/00 6.390 2,397,976
5,500 Student Loan Marketing Association ..................................... 08/01/00 6.719 to 6.919* 5,499,033
-----------
Total U.S. Government Agency Obligations (cost-- $10,892,535) .................. 10,892,535
-----------
BANK NOTES -- 1.53%
DOMESTIC -- 1.53%
1,000 Bank of America N.A. (cost-- $1,000,000) ............................... 10/12/00 6.650 1,000,000
-----------
CERTIFICATES OF DEPOSIT -- 6.87%
YANKEE -- 6.87%
1,500 Commerzbank AG ......................................................... 06/22/01 to 07/23/01 7.075 to 7.090 1,499,844
1,500 Svenska Handelsbanken .................................................. 05/02/01 to 06/20/01 6.995 to 7.100 1,500,349
500 UBS AG Stamford Branch ................................................. 07/19/01 7.030 499,905
1,000 Westpac Banking Corp. .................................................. 05/14/01 6.815 1,000,000
-----------
Total Certificates of Deposit (cost-- $4,500,098) 4,500,098
-----------
COMMERCIAL PAPER@ -- 57.87%
ASSET BACKED - BANKING -- 6.08%
2,000 Atlantis One Funding Corp. ............................................. 09/13/00 6.550 1,984,353
2,000 Centric Capital Corp. .................................................. 08/04/00 6.550 1,998,908
-----------
3,983,261
-----------
ASSET BACKED - MISCELLANEOUS -- 11.68%
1,105 Delaware Funding Corp. ................................................. 10/05/00 6.540 1,091,952
2,000 Giro Funding Corp. ..................................................... 08/17/00 6.550 1,994,178
2,610 Parthenon Receivables Funding LLC ...................................... 09/13/00 to 10/25/00 6.560 to 6.630 2,574,192
2,000 Receivables Capital Corp. .............................................. 08/23/00 6.550 1,991,994
-----------
7,652,316
-----------
AUTO & TRUCK -- 2.85%
1,000 DaimlerChrysler N.A. Holding Corp. ..................................... 09/27/00 6.550 989,629
892 PACCAR Financial Corp. ................................................. 10/20/00 6.510 879,096
-----------
1,868,725
-----------
BANKING - DOMESTIC -- 1.90%
1,245 San Paolo IMI U.S. Finance Co. ......................................... 08/01/00 6.530 1,245,000
-----------
BANKING - FOREIGN -- 3.03%
1,000 Halifax PLC ............................................................ 09/01/00 6.500 994,403
1,000 Societe Generale ....................................................... 10/13/00 6.540 986,738
-----------
1,981,141
-----------
BROKER - DEALER -- 1.50%
1,000 Goldman Sachs Group, Inc. .............................................. 10/16/00 6.550 986,172
-----------
BUILDING MATERIALS -- 2.29%
1,500 Sherwin-Williams Co. ................................................... 08/01/00 6.500 1,500,000
-----------
CHEMICALS -- 1.62%
1,074 Henkel Corp. ........................................................... 10/03/00 6.510 1,061,764
-----------
ELECTRONICS -- 2.57%
1,700 Motorola Credit Corp. .................................................. 09/15/00 6.520 1,686,145
-----------
ENTERTAINMENT -- 1.53%
1,000 Walt Disney Co. ........................................................ 08/03/00 6.480 999,640
-----------
</TABLE>
3
<PAGE>
PACE MONEY MARKET INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<S> <C> <C> <C>
COMMERCIAL PAPER@ -- (CONCLUDED)
FINANCE - AIRCRAFT -- 3.05%
$2,000 International Lease Finance Corp. ...................................... 08/02/00 6.500% $ 1,999,639
-----------
FOOD, BEVERAGE & TOBACCO -- 1.52%
1,000 Campbell Soup Co. ...................................................... 08/28/00 6.550 995,088
-----------
INSURANCE -- 6.07%
2,000 Prudential Funding Corp. ............................................... 08/21/00 6.520 1,992,756
2,000 USAA Capital Corp. ..................................................... 09/11/00 6.540 1,985,103
-----------
3,977,859
-----------
METALS & MINING -- 3.04%
2,000 RTZ America, Inc. ...................................................... 08/15/00 6.530 1,994,921
-----------
PRINTING, PUBLISHING -- 3.04%
2,000 Reed Elsevier PLC ...................................................... 08/23/00 6.530 1,992,019
-----------
TELECOMMUNICATIONS -- 6.10%
2,000 AT&T Capital Corp. ..................................................... 08/01/00 6.500 2,000,000
2,000 Bell Atlantic Financial Services, Inc. ................................. 08/16/00 6.500 1,994,583
-----------
3,994,583
-----------
Total Commercial Paper (cost--$37,918,273) ..................................... 37,918,273
-----------
SHORT-TERM CORPORATE OBLIGATIONS -- 11.71%
ASSET BACKED - FINANCE -- 3.05%
2,000 Beta Finance .......................................................... 01/18/01 6.640 2,000,000
-----------
AUTO & TRUCK -- 1.03%
675 Ford Motor Credit Corp. ................................................ 08/15/00 6.850 675,271
-----------
BROKER - DEALER -- 6.10%
2,000 Merrill Lynch & Co., Inc. ............................................. 02/07/01 to 03/06/01 6.580 to 6.740 1,999,892
2,000 Morgan Stanley Dean Witter & Co. ...................................... 08/15/00 6.645 2,000,000
-----------
3,999,892
-----------
FINANCE - INDEPENDENT -- 1.53%
1,000 National Rural Utilities Cooperative Finance Corp. MTN ................. 07/20/01 6.710 1,000,000
-----------
Total Short-Term Corporate Obligations (cost--$7,675,163) ...................... 7,675,163
-----------
SHARES
(000)
--------
MONEY MARKET FUNDS -- 3.66%
1,915 AIM Liquid Assets Portfolio ........................................... 1,915,247
483 AIM Prime Portfolio .................................................... 482,941
-----------
Total Money Market Funds (cost--$2,398,188) .................................... 2,398,188
-----------
Total Investments (cost--$64,384,257) -- 98.27% ................................ 64,384,257
Other assets in excess of liabilities -- 1.73% ................................. 1,136,500
-----------
Net Assets -- 100.00% .......................................................... $65,520,757
===========
</TABLE>
----------------------
* Variable rate securities-maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of
July 31, 2000, and reset periodically.
@ Interest rates shown are discount rates at date of purchase.
MTN Medium Term Note.
Weighted Average Maturity--68 days
See accompanying notes to financial statements
4
<PAGE>
PACE MONEY MARKET INVESTMENTS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
JULY 31, 2000
-------------------
<S> <C>
INVESTMENT INCOME:
Interest ........................................................................................ $3,574,741
----------
EXPENSES:
Investment advisory and administration fees ..................................................... 210,048
Transfer agency fees and expenses ............................................................... 196,018
Reports and notices to shareholders ............................................................. 47,591
Legal and audit ................................................................................. 31,850
Federal and state registration fees ............................................................. 26,367
Trustees' fees and expenses ..................................................................... 26,250
Amortization of organizational expenses ......................................................... 19,032
Custody and accounting .......................................................................... 7,925
Other expenses .................................................................................. 4,366
----------
569,447
Less: Fee waivers and reimbursements from investment adviser .................................... (269,771)
----------
Net expenses .................................................................................... 299,676
----------
NET INVESTMENT INCOME ........................................................................... 3,275,065
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS ................................................. 66
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................ $3,275,131
==========
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------
2000 1999
----------- -----------
FROM OPERATIONS:
<S> <C> <C>
Net investment income ................................................................... $ 3,275,065 $ 1,534,974
Net realized gains from investment transactions ......................................... 66 165
----------- -----------
Net increase in net assets resulting from operations .................................... 3,275,131 1,535,139
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................... (3,275,065) (1,534,974)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net increase in net assets from beneficial interest transactions ........................ 18,347,064 21,680,081
----------- -----------
Net increase in net assets .............................................................. 18,347,130 21,680,246
NET ASSETS:
Beginning of year ....................................................................... 47,173,627 25,493,381
----------- -----------
End of year ............................................................................. $65,520,757 $47,173,627
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PACE Money Market Investments (the "Portfolio") is a diversified portfolio
of PaineWebber PACE Select Advisors Trust ("the Trust"), which is organized as a
Delaware business trust under the laws of the State of Delaware by Certificate
of Trust dated September 9, 1994, as amended June 9, 1995 and thereafter, and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The trustees of the Trust have authority to issue an unlimited number of shares
of beneficial interest, par value $0.001 per share.
The Trust currently offers twelve portfolios available for investment.
Shares of the Portfolios currently are available only to participants in the
PaineWebber PACE-SM- Program.
The Trust accounts separately for the assets, liabilities and operations
for each Portfolio. Expenses directly attributable to each Portfolio are charged
to that Portfolio's operations; expenses which are applicable to all Portfolios
are allocated among them on a pro rata basis.
The Trust incurred costs of approximately $1,138,000 in connection with the
organization of the Trust and the registration of its shares. Such costs have
been deferred and are being amortized using the straight-line method over the
period of benefit, not to exceed five years, beginning with the commencement of
operations of the Trust.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Portfolio's management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value, unless the Trust's
Board of Trustees determines that this does not represent fair value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Portfolio occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), investment
adviser and administrator of the Portfolio, a wholly-owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber"), a wholly owned
subsidiary of Paine Webber Group Inc. ("PW Group").
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and distributions
are determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of debt securities held by the Portfolio to meet
its obligations may be affected by economic developments particular to a
specific industry or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has entered into an Investment Advisory and Administration
Contract ("Advisory Contract") with Mitchell Hutchins. In accordance with the
Advisory Contract, the Portfolio pays Mitchell Hutchins an investment advisory
and administration fee, which is accrued daily and paid monthly at an annual
rate of 0.35% of the Portfolio's average daily net assets. At July 31, 2000 the
Portfolio did not owe Mitchell Hutchins for investment advisory or
administration fees.
For the year ended July 31, 2000, Mitchell Hutchins agreed to waive
$210,048 of its investment advisory and administration fees and reimburse the
Portfolio $59,723 for certain operating expenses.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS,
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
with headquarters in Zurich, Switzerland, is an internationally diversified
organization with operations in many areas of the financial services industry.
OTHER LIABILITIES
At July 31, 2000, the Portfolio had dividends payable aggregating $158,206
and a payable for shares of beneficial interest repurchased of $455,959.
FEDERAL TAX STATUS
The Portfolio intends to distribute substantially all of its taxable income
and to comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Portfolio intends not to be subject to a federal excise
tax.
MONEY MARKET FUND BOND
Effective September 30, 1999, the Portfolio obtained an insurance bond that
provides limited coverage for certain loss events involving certain money market
instruments held by the Portfolio. These loss events include non-payment of
principal or interest or a bankruptcy or insolvency of the issuer or credit
enhancement provider (if any). The insurance bond provides for coverage up to
$200 million for a number of funds with a deductible of 10 basis points (0.10%)
of the total assets of the Portfolio for First Tier Securities and 50 basis
points (0.50%) of the total assets of the Portfolio for Second Tier Securities,
in each case determined as of the close of business on the first business day
prior to the loss event. In the event of a loss covered under the bond, the
Portfolio would expect to retain the security in its portfolio, rather than
having to sell it at its current market value, until the date of payment of the
loss, which is generally no later than the maturity of the security. While the
policy is intended to provide some protection against credit risk and to help
the Portfolio maintain a constant price per share of $1.00, there is no
guarantee that the insurance will do so. For the period September 30, 1999
through July 31, 2000, the Portfolio did not use this insurance bond.
SHARES OF BENEFICIAL INTEREST
There are an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest, at $1.00 per
share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Shares sold ................................................................. 95,347,055 73,861,364
Shares redeemed ............................................................. (80,153,026) (53,636,534)
Dividends reinvested ........................................................ 3,153,035 1,455,251
------------ ------------
Net increase in shares outstanding 18,347,064 21,680,081
============ ============
</TABLE>
7
<PAGE>
PAINEWEBBER PACE MONEY MARKET INVESTMENTS
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
---------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income .................................................... 0.05 0.05 0.05 0.05 0.05
------- ------- ------- ------- -------
Dividends from net investment income ..................................... (0.05) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- -------
Net asset value, end of period ........................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return (1) .............................................. 5.53% 4.85% 5.32% 5.13% 4.75%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's) ........................................ $65,521 $47,174 $25,493 $16,070 $10,221
Expenses to average net assets, net of fee waivers and expense
reimbursements .......................................................... 0.50% 0.50% 0.50% 0.50% 0.50%*
Expenses to average net assets, before fee waivers and expense
reimbursements .......................................................... 0.95% 1.07% 1.20% 1.89% 2.40%*
Net investment income to average net assets, net of fee waivers
and expense reimbursements .............................................. 5.46% 4.70% 5.20% 5.04% 4.93%*
Net investment income to average net assets, before fee waivers
and expense reimbursements .............................................. 5.01% 4.13% 4.50% 3.65% 3.03%*
</TABLE>
=======================
+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. The figures do not include the PACE Program
fee; results would be lower if this fee was included. Total investment
return for period of less than one year has not been annualized.
8
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Trustees and Shareholders
PaineWebber PACE Select Advisors Trust
We have audited the accompanying statement of net assets of PaineWebber
PACE Money Market Investments (the "Portfolio") as of July 31, 2000, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with audit standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at July 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
PaineWebber PACE Money Market Investments at July 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
September 22, 2000
9
<PAGE>
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Portfolio's fiscal year end (July
31, 2000) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all of the
distributions paid during the fiscal year were derived from net investment
income. This entire amount is taxable as ordinary income, none of which
qualifies for the dividend received deduction available to corporate
shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403(b)(7) plans) may need this information for their annual
information reporting.
Because the Portfolio's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 2000. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their federal income tax returns, will be made in conjunction with
Form 1099 DIV and will be mailed in January 2001. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Portfolio.
10
<PAGE>
--------------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander Brian M. Storms
David J. Beaubien William D. White
William W. Hewitt, Jr. M. Cabell Woodward, Jr.
Morton L. Janklow
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Amy R. Doberman Dennis L. McCauley
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
Dianne E. O'Donnell Susan P. Ryan
VICE PRESIDENT AND VICE PRESIDENT
ASSISTANT SECRETARY
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
PORTFOLIO UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PAINEWEBBER
-C-2000 PaineWebber Incorporated
All rights reserved
Member SIPC
