PAINEWEBBER PACE SELECT ADVISORS TRUST, 497, 2000-12-22

PAINEWEBBER PACE SELECT ADVISORS TRUST
497, 2000-12-22

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<PAGE>

PAINEWEBBER EMERGING MARKETS EQUITY FUND
(THE SOLE SERIES OF PAINEWEBBER INVESTMENT TRUST II)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

December 20, 2000

Dear Shareholder,

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

We are seeking shareholder approval to merge Emerging Markets Equity Fund
into PACE International Emerging Markets 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 Emerging Markets Equity Fund
shares, and Emerging Markets Equity Fund will cease operations. The expenses
of each class of shares of the PACE Fund following the merger would be lower
than the current expenses of the corresponding class of Emerging Markets
Equity Fund.

Mitchell Hutchins is the investment manager for both Funds and has retained
Schroder Investment Management North America Inc., an unaffiliated firm, to
manage each Fund's assets. The two Funds have very similar investment
objectives and policies. Each Fund seeks capital appreciation and pursues this
objective by investing primarily in stocks of companies in emerging market
countries.

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

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

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

Sincerely,
/s/ Brian M. Storms
Brian M. Storms
President
<PAGE>

PAINEWEBBER EMERGING MARKETS EQUITY FUND PROPOSED MERGER
QUESTIONS AND ANSWERS

On October 6, 2000, the Board of Trustees of PaineWebber Investment Trust
II ("Investment Trust II"), on behalf of its sole series, PaineWebber Emerging
Markets Equity Fund ("Emerging Markets Equity Fund"), unanimously approved the
merger of Emerging Markets Equity Fund into PACE International Emerging
Markets Equity Investments ("PACE International Emerging Markets Equity
Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE Trust").
This merger, however, can only occur if Emerging Markets Equity Fund's
shareholders approve the transaction. Here are answers to some of the most
commonly asked questions.

WHAT IS A MERGER?

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

WHY IS THIS MERGER BEING PROPOSED?

Emerging Markets Equity Fund's assets have generally declined over the last
five years to the point where the Fund had less than $6 million in assets as
of November 30, 2000. As a result of these low asset levels, the Fund's
expenses have increased and it has become more difficult to manage
efficiently. Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and
Investment Trust II's Board believe that Emerging Markets Equity 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.

Emerging Markets Equity Fund and PACE International Emerging Markets Equity
Fund have very similar investment objectives and policies. PACE International
Emerging Markets Equity Fund seeks capital appreciation, while Emerging
Markets Equity Fund seeks long-term capital appreciation. Each Fund pursues
its objective by investing primarily in stocks of companies domiciled in
emerging market countries. Both Funds define emerging market countries as
countries that are not included in the Morgan Stanley Capital International
("MSCI") World Index of major world economies. (See "Comparison of the Funds"
on page 6 of the Combined Proxy Statement/Prospectus for more information on
the investment policies and risks of each Fund.)

Schroder Investment Management North America Inc., ("SIMNA") an investment
adviser that is not affiliated with Mitchell Hutchins, has served as the sub-
adviser for PACE International Emerging Markets Equity Fund since the Fund's
inception in August 1995 and for Emerging Markets Equity Fund since February
1997. SIMNA uses the same basic investment strategy for both Funds. As a
result, the two Funds are managed in a similar manner.

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

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

IF I CURRENTLY ELECT TO RECEIVE MY EMERGING MARKETS EQUITY 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 INTERNATIONAL EMERGING MARKETS
EQUITY FUND SHARES AFTER THE MERGER?

Yes, your distribution choice will remain the same after the merger.
<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 International Emerging Markets Equity Fund shares, and that your basis
for the PACE International Emerging Markets Equity Fund shares you receive in
the merger will be the same as the basis for your Emerging Markets Equity Fund
shares.

Immediately prior to the merger, Emerging Markets Equity 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 Emerging
Markets Equity Fund shareholders. You should note, however, that both Funds
must distribute by December 31, 2000 their ordinary income for the calendar
year ending December 31, 2000 and net capital gain, if any, for the one-year
period ended October 31, 2000. This distribution must be made regardless of
whether the merger takes place because of tax requirements applicable to all
mutual funds. Emerging Markets Equity Fund, however, has little or no ordinary
income and has substantial capital loss carryforwards, which means that if you
remain a shareholder of the Fund and the merger takes place, you are not
likely to receive any taxable distributions prior to the merger.

HOW WILL THE MERGER AFFECT FUND EXPENSES?

The post-merger combined Fund is expected to have overall operating
expenses that are lower than the current operating expenses of Emerging
Markets Equity Fund due to economies of scale and a lower management fee paid
by PACE International Emerging Markets Equity Fund to Mitchell Hutchins. The
overall operating expenses of the PACE International Emerging Markets Equity
Fund are also subject to a written management fee waiver and expense
reimbursement agreement between the Fund and Mitchell Hutchins, which will
remain in effect through December 1, 2002. Even absent that agreement,
however, it is expected that the overall operating expenses of the combined
Fund would be lower than the current operating expenses of Emerging Markets
Equity Fund. (For more details about fees and expenses of each class of
shares, see "Comparative Fee Table" beginning on page 2 of the Combined Proxy
Statement/Prospectus.)

HOW HAVE PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS
EQUITY FUND PERFORMED?

The following tables show the average annual total returns over several
time periods for each class of shares of Emerging Markets Equity Fund and the
Class P shares of PACE International Emerging Markets Equity 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.

The table for Emerging Markets Equity 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 International
Emerging Markets Equity Fund reflects the maximum annual PaineWebber PACESM
Select Advisors Program fee of 1.50% (which does not apply to shares received
in the merger). A footnote to this table shows the performance of PACE
International Emerging Markets Equity Fund's Class P shares for the same
periods without deduction of this fee. The tables also compare each Fund's
returns to returns of a broad-based market index. The comparative index is
unmanaged and, therefore, does not reflect the deduction of any sales charges
or expenses.

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

2
<PAGE>

PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

* The above performance reflects the deduction of the maximum annual PACESM
Select Advisors Program fee of 1.50% (which does not apply to shares received
in the merger). If the program fee were not deducted, the average annual
total returns of the Fund's Class P shares would be 61.85% for the year ended
December 31, 1999 and 5.08% for "Life of Class."

EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS CLASS A CLASS B CLASS C CLASS Y MSCI EMERGING
(INCEPTION DATE) (1/19/94) (12/5/95) (1/19/94) (1/19/94) MARKETS FREE INDEX
---------------- --------- --------- --------- --------- ------------------
<S> <C> <C> <C> <C> <C>
One Year............ 54.20 % 55.06% 58.85 % 61.92 % 66.41%
Five Years.......... 0.17 % N/A 0.26 % 1.31 % 2.00%
Life of Class....... (2.10)% 3.43% (2.13)% (1.12)% *
</TABLE>
----------------

* Average annual total returns for the MSCI Emerging Markets Free Index for
the life of each class were as follows: Class A -- 0.08%; Class B -- 4.92%;
Class C -- 0.08%; and Class Y -- 0.08%.

WHEN WILL THE PROPOSED MERGER OCCUR?

The Funds expect to merge in February 2001, assuming Emerging Markets
Equity Fund shareholder approval at the special meeting scheduled to be held
on January 25, 2001.

CAN I SELL OR EXCHANGE MY EMERGING MARKETS EQUITY FUND SHARES BEFORE THE
MERGER?

If you do not wish to receive shares of PACE International Emerging Markets
Equity Fund, you are free to sell or exchange your Emerging Markets Equity
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
Emerging Markets Equity Fund shares. If you elect to exchange your shares
prior to the merger, you may be subject to taxes. Consult your tax adviser for
the tax implications of an exchange. Please call your Financial Advisor to
discuss your investment options or with any questions.

WHAT IS THE BOARD'S RECOMMENDATION ON THE MERGER?

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

3
<PAGE>

PAINEWEBBER EMERGING MARKETS EQUITY FUND
(THE SOLE SERIES OF PAINEWEBBER INVESTMENT TRUST II)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JANUARY 25, 2001

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

To the Shareholders:

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of PaineWebber Emerging Markets Equity Fund ("Emerging Markets Equity Fund"),
the sole series of PaineWebber Investment Trust II ("Investment Trust II"),
will be held on January 25, 2001, at 1285 Avenue of the Americas, 14th Floor,
New York, New York, 10019-6028, at 10:00 a.m., Eastern time, for the following
purpose:

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

Shareholders of record as of the close of business on November 21, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.

Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Board of Trustees of
Investment Trust II, 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 Investment Trust II or by voting in person at the Meeting.

By Order of the Board of Trustees,

DIANNE E. O'DONNELL
Secretary

December 20, 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>

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

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

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

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

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

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 EMERGING MARKETS EQUITY FUND
(THE SOLE SERIES OF PAINEWEBBER INVESTMENT TRUST II)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568

PACE INTERNATIONAL EMERGING MARKETS 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 20, 2000

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

This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Emerging Markets Equity Fund ("Emerging Markets Equity Fund"), the
sole series of PaineWebber Investment Trust II ("Investment Trust II"), a
Massachusetts business trust, to be held on January 25, 2001, at 1285 Avenue
of the Americas, 14th Floor, New York, New York, 10019-6028, at 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 Emerging
Markets Equity Fund are being asked to consider and approve the following
proposal:

A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF INVESTMENT TRUST II HAS
UNANIMOUSLY APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF EMERGING
MARKETS EQUITY FUND AND ITS SHAREHOLDERS. (Emerging Markets Equity Fund and
PACE International Emerging Markets Equity Fund sometimes are referred to
individually as a "Fund" and together as "Funds.")

Pursuant to the Plan, Emerging Markets Equity Fund will transfer all its
assets to PACE International Emerging Markets Equity Fund, which will assume
all the stated liabilities of Emerging Markets Equity Fund, and PACE Trust
will issue to each Emerging Markets Equity Fund shareholder the number of full
and fractional shares of beneficial interest in the applicable class of PACE
International Emerging Markets Equity 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 Emerging Markets Equity Fund (the "Reorganization").
The value of each Emerging Markets Equity Fund shareholder's account with

AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
<PAGE>

PACE International Emerging Markets Equity Fund immediately after the
Reorganization will be the same as the value of such shareholder's account
with Emerging Markets Equity Fund immediately prior to the Reorganization. As
a result of the Reorganization, shareholders of each class of shares of
Emerging Markets Equity Fund will become shareholders of the corresponding
class of shares of PACE International Emerging Markets Equity Fund. No sales
charges will be assessed on the shares of PACE International Emerging Markets
Equity Fund issued in connection with the Reorganization.

PACE International Emerging Markets Equity Fund is a diversified series of
PACE Trust, which is an open-end management investment company currently
comprised of twelve series. PACE International Emerging Markets Equity Fund's
investment objective is capital appreciation. PACE International Emerging
Markets Equity Fund pursues its objective by investing primarily in stocks of
companies domiciled in emerging market countries. The Fund generally defines
emerging market countries as countries that are not included in the Morgan
Stanley Capital International ("MSCI") World Index of major world economies.

This Proxy Statement/Prospectus sets forth the information that a
shareholder of Emerging Markets Equity Fund should know before voting on the
proposal. It should be read carefully and retained for future reference.

A Statement of Additional Information ("SAI") dated December 20, 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 International Emerging
Markets Equity 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 Emerging Markets Equity Fund is included in its
current Prospectus and SAI, each dated March 1, 2000, as supplemented, which
are on file with the SEC and are hereby incorporated by reference into this
Proxy Statement/Prospectus. Copies of the other referenced documents, as well
as Emerging Markets Equity Fund's Semi-Annual Report to Shareholders for the
six months ended April 30, 2000, and its Annual Report to Shareholders for the
fiscal year ended October 31, 1999, are available without charge by writing
either Emerging Markets Equity Fund or PACE International Emerging Markets
Equity Fund at the address shown above, or by calling 1-800-647-1568. The SEC
maintains an internet web site at http://www.sec.gov that contains information
regarding PACE Trust and Investment Trust II. Copies of such material may also
be obtained, after paying a duplicating fee, from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, DC, 20549, or by electronic request at the following
e-mail address: [email protected]. Additional information about the Funds
------------------
also may be obtained on the Web at http://www.painewebber.com.

ii
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION TITLE PAGE
------------- ----
<S> <C>
INTRODUCTION............................................................. 1
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION.......................................... 2
SYNOPSIS................................................................. 2
The Proposed Reorganization............................................. 2
Comparative Fee Table................................................... 2
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 International Emerging Markets Equity Fund Following
the Reorganization..................................................... 7
Performance............................................................. 7
Sales Charges........................................................... 9
Dividends and Other Distributions....................................... 9
Taxes................................................................... 9
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF PACE
INTERNATIONAL EMERGING MARKETS EQUITY FUND.............................. 10
Flexible Pricing........................................................ 10
Buying Shares........................................................... 14
Selling Shares.......................................................... 14
Exchanging Shares....................................................... 15
Pricing and Valuation................................................... 16
MANAGEMENT............................................................... 17
Investment Manager and Investment Adviser............................... 17
Sub-Adviser............................................................. 17
Advisory Fees and Fund Expenses......................................... 17
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION.......................... 18
Reasons for the Reorganization.......................................... 18
Terms of the Reorganization............................................. 19
Description of Securities to be Issued.................................. 20
Temporary Waiver of Investment Restrictions............................. 20
Federal Income Tax Considerations....................................... 21
Required Vote........................................................... 22
ORGANIZATION OF THE FUNDS................................................ 22
FINANCIAL HIGHLIGHTS..................................................... 23
CAPITALIZATION........................................................... 24
LEGAL MATTERS............................................................ 24
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION............ 25
EXPERTS.................................................................. 25
OTHER INFORMATION........................................................ 25
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 International Emerging
Markets
Equity Fund's Performance............................................... C-1
</TABLE>

iii
<PAGE>

INTRODUCTION

This Proxy Statement/Prospectus is being furnished to shareholders of
Emerging Markets Equity Fund, a series of Investment Trust II, 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 Emerging
Markets Equity 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 30% of the
shares of beneficial interest of Emerging Markets Equity Fund 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 Investment Trust II ("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. Investment Trust II intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December 20,
2000. Shareholders of record as of the close of business on November 21, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date,
Emerging Markets Equity Fund had 750,776 shares issued and outstanding,
consisting of 407,725 Class A shares, 81,979 Class B shares, 186,935 Class C
shares, and 74,137 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 of
Emerging Markets Equity Fund, as a group, owned slightly less than 1.50% of
Emerging Markets Equity Fund's Class A shares and less than 1% of any other
class of the Fund's shares. As of that same date, the trustees and officers of
PACE Trust, as a group, owned less than 1% of any class of PACE International
Emerging Markets Equity Fund's outstanding shares.

Investment Trust II has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the
Meeting. Investment Trust II expects to solicit proxies by mail, telephone and
via the internet. Investment Trust II 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
$2,400 for proxy solicitation services. Investment Trust II 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.
<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, Investment Trust II's Board believes
that the proposed Reorganization will benefit Emerging Markets Equity Fund's
shareholders.

THE PROPOSED REORGANIZATION

The Boards of PACE Trust and Investment Trust II, 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 International Emerging Markets Equity Fund of all of Emerging Markets
Equity Fund's assets in exchange for PACE International Emerging Markets
Equity Fund shares and the assumption by PACE International Emerging Markets
Equity Fund of all of Emerging Markets Equity Fund's stated liabilities.
Emerging Markets Equity Fund will then distribute the PACE International
Emerging Markets Equity Fund shares to Emerging Markets Equity Fund's
shareholders, by class, so that each Emerging Markets Equity Fund shareholder
will receive the number of full and fractional shares of the corresponding
class of PACE International Emerging Markets Equity Fund equal in aggregate
NAV to the NAV of the shares of Emerging Markets Equity 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 9, 2001, or on
such later date as the conditions to consummation of the Reorganization are
satisfied ("Closing Date"). Emerging Markets Equity Fund will be terminated as
soon as is practicable after the Closing Date, and it is expected that
Investment Trust II will be de-registered as a management investment company.
See "Additional Information About the Reorganization," below.

Investment Trust II and PACE Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP to the effect that the Reorganization will
constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, neither Fund nor any of its shareholders will recognize any gain
or loss for federal income tax purposes as a direct result of the
Reorganization. Emerging Markets Equity Fund expects to sell securities prior
to the Closing Date and anticipates recognizing net gains or losses. Any such
net recognized gains would increase the amount of any distribution made to
shareholders of Emerging Markets Equity 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 Investment
Trust II has determined that the Reorganization is in the best interests of
Emerging Markets Equity Fund and that the interests of existing Emerging
Markets Equity Fund shareholders will not be diluted as a result of the
Reorganization. ACCORDINGLY, INVESTMENT TRUST II'S BOARD UNANIMOUSLY
RECOMMENDS APPROVAL OF THE REORGANIZATION.

COMPARATIVE FEE TABLE

The table below describes the fees and expenses that you would pay if you
buy and hold Emerging Markets Equity Fund shares or PACE International
Emerging Markets Equity Fund shares before the Reorganization and PACE
International Emerging Markets Equity 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 International
Emerging Markets Equity Fund and for the six months ended April 30, 2000
(annualized) for Emerging Markets Equity Fund. The pro forma information
reflects the anticipated effects of the Reorganization as well as the proposed
reorganization of PaineWebber Asia Pacific Growth Fund with PACE International
Emerging Markets Equity Fund, which is expected to occur at approximately the
same time as the Reorganization.

2
<PAGE>

<TABLE>
<CAPTION>
COMBINED PACE
PACE INTERNATIONAL INTERNATIONAL EMERGING
EMERGING MARKETS EQUITY EMERGING MARKETS EQUITY MARKETS EQUITY FUND PRO
FUND FUND FORMA*
----------------------------- ----------------------------- -----------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C Y A B C Y A B C Y
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge
(load) Imposed on
Purchases (as a
percentage of
offering price)..... 4.5% None None None 4.5% None None None 4.5% None None None
Maximum Deferred
Sales Charge (load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less)............ None 5% 1% None None 5% 1% None None 5% 1% None
Exchange Fee......... None None None None None None None None None None None None
ANNUAL FUND OPERATING EXPENSES (fees that are deducted from fund assets)
Management Fees**.... 1.20% 1.20% 1.20% 1.20% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%
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***.... 2.22% 2.29% 2.28% 2.28% 0.66% 0.68% 0.67% 0.65% 0.61% 0.63% 0.62% 0.60%
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Annual Fund
Operating Expenses.. 3.67% 4.49% 4.48% 3.48% 2.01% 2.78% 2.77% 1.75% 1.96% 2.73% 2.72% 1.70%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Management Fee
Waiver/Expense
Reimbursements+..... (1.23)% (1.30)% (1.29)% (1.29)% (0.25)% (0.25)% (0.25)% (0.25)% (0.20)% (0.20)% (0.20)% (0.20)%
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Expenses+........ 2.44% 3.19% 3.19% 2.19% 1.76% 2.53% 2.52% 1.50% 1.76% 2.53% 2.52% 1.50%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
----------------
* The pro forma expense information assumes that shareholders of Emerging
Markets Equity Fund and PaineWebber Asia Pacific Growth Fund approve the
proposed reorganizations. If shareholders of Emerging Markets Equity Fund
approve the Reorganization and shareholders of PaineWebber Asia Pacific
Growth Fund do not approve its reorganization, the pro forma "Net Expenses"
for each class of shares of the combined Fund would be the same as shown
above due to the management fee waiver and expense reimbursement
arrangement in effect for PACE International Emerging Markets Equity Fund.

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

*** "Other Expenses" for PACE International Emerging Markets Equity 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
Emerging Markets Equity Fund, PaineWebber Asia Pacific Growth Fund and
PACE International Emerging Markets Equity Fund.

+ Investment Trust II and Mitchell Hutchins have entered into a written
expense reimbursement agreement with respect to Emerging Markets Equity Fund
under which Mitchell Hutchins is contractually obligated to reimburse the
Fund to the extent that the Fund's total expenses through March 1, 2001
otherwise would exceed the "Net Expenses" rates for each class as shown
above. The Fund has agreed to repay Mitchell Hutchins for any reimbursed
expenses if it can do so over the following three years without causing the
Fund's expenses in any of those years to exceed those "Net Expenses" rates.

PACE Trust and Mitchell Hutchins have entered into a written agreement with
respect to PACE International Emerging Markets Equity Fund under which
Mitchell Hutchins is contractually obligated to waive its management fees
and/or reimburse the Fund to the extent that the total operating expenses of
each class through December 1, 2002 otherwise would exceed the sum of 1.50%
(the expense cap for the Fund's Class P shares) plus the 12b-1 fees, if any,
and any higher transfer agency fees applicable to the class. The Fund has
agreed to repay Mitchell Hutchins for any reimbursed expenses if it can do
so over the following three fiscal years without causing the Fund's expenses
in any of those three years to exceed these expense caps.

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 periods when each Fund's and the
combined Fund's expenses are lower due to the agreements with Mitchell
Hutchins. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
Class A....................................... $686 $1,293 $2,041 $4,000
Class B (assuming sale of all shares at end of
period)...................................... 822 1,408 2,236 4,078
Class B (assuming no sale of shares).......... 322 1,108 2,036 4,078
Class C (assuming sale of all shares at end of
period)...................................... 422 1,107 2,034 4,393
Class C (assuming no sale of shares).......... 322 1,107 2,034 4,393
Class Y....................................... 222 815 1,564 3,537
PACE INTERNATIONAL EMERGING MARKETS EQUITY
FUND
Class A....................................... $621 $1,005 $1,439 $2,643
Class B (assuming sale of all shares at end of
period)...................................... 756 1,114 1,624 2,717
Class B (assuming no sale of shares).......... 256 814 1,424 2,717
Class C (assuming sale of all shares at end of
period)...................................... 355 811 1,419 3,062
Class C (assuming no sale of shares).......... 255 811 1,419 3,062
Class Y....................................... 153 501 901 2,020
PRO FORMA PACE INTERNATIONAL EMERGING MARKETS
EQUITY FUND
Class A....................................... $621 $1,000 $1,423 $2,601
Class B (assuming sale of all shares at end of
period)...................................... 756 1,108 1,608 2,675
Class B (assuming no sale of shares).......... 256 808 1,408 2,675
Class C (assuming sale of all shares at end of
period)...................................... 355 805 1,403 3,021
Class C (assuming no sale of shares).......... 255 805 1,403 3,021
Class Y....................................... 153 496 884 1,974
</TABLE>

SUMMARY COMPARISON OF THE FUNDS

Investment Objectives and Policies

The Funds have very similar investment objectives, policies and overall
risk characteristics. PACE International Emerging Markets Equity Fund seeks
capital appreciation, while Emerging Markets Equity Fund seeks long-term
capital appreciation. Each Fund pursues this objective by investing primarily
in stocks of companies in emerging market countries. Both Funds generally
define emerging market countries as countries that are not included in the
MSCI World Index of major world economies.

Investment Advisory Services

Mitchell Hutchins has served as investment manager and administrator for
PACE International Emerging Markets Equity Fund since its inception in August
1995. As investment manager for the Fund, Mitchell Hutchins provides portfolio
management oversight rather than directly managing the Fund's investments.
Mitchell Hutchins provides portfolio management oversight principally by
performing initial reviews of prospective sub-advisers and supervising and
monitoring the performance of the sub-advisers thereafter. Mitchell Hutchins
also recommends to the Board of PACE Trust whether agreements with sub-
advisers should be renewed, modified or terminated. The Fund's current sub-
adviser -- Schroder Investment Management North America Inc. ("SIMNA") -- has
managed the Fund's investment portfolio since its inception.

4
<PAGE>

Mitchell Hutchins has served as investment adviser and administrator for
Emerging Markets Equity Fund since February 1995. Effective February 25, 1997,
the Board of Investment Trust II appointed SIMNA to serve as the Fund's sub-
adviser. Prior to that date, a different sub-adviser managed the Fund's
assets.

Purchase and Redemption Procedures

Funds in the PaineWebber Flexible PricingSM System generally offer Class A,
Class B, Class C and Class Y shares. PACE International Emerging Markets
Equity 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 International Emerging Markets Equity Fund's Class A, Class B, Class C
and Class Y shares are the same as those currently in effect for the
corresponding classes of shares of Emerging Markets Equity Fund. You may
exchange Class A, Class B or Class C shares of PACE International Emerging
Markets Equity Fund for shares of the same class of most other PACE funds or
PaineWebber Money Market Fund. Exchanges between other PaineWebber funds and
PACE funds will not be activated until on or around March 1, 2001. You may not
exchange Class Y shares.

COMPARISON OF PRINCIPAL RISK FACTORS

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

Equity Risk -- The prices of common stocks and other equity securities
generally fluctuate more than those of other investments. They reflect changes
in the issuing company's financial condition and changes in the overall
market. A Fund may lose a substantial part, or even all, of its investment in
a company's stock.

Foreign Investing and Emerging Markets Risks -- Foreign investing involves
risks relating to political, social and economic developments abroad to a
greater extent than investing in the securities of U.S. issuers. In addition,
there are differences between U.S. and foreign regulatory requirements and
market practices. Foreign investments denominated in foreign currencies are
subject to the risk that the value of a foreign currency will fall in relation
to the U.S. dollar. Currency exchange rates can be volatile and can be
affected by, among other factors, the general economics of a country, the
actions of U.S. and foreign governments or central banks, the imposition of
currency controls and speculation.

Securities of issuers located in emerging market countries are subject to
all of the risks of other foreign securities. However, the level of those
risks often is higher due to the fact that social, political, legal and
economic systems in emerging market countries may be less fully developed and
less stable than those in developed countries. Emerging market securities also
may be subject to additional risks, such as lower liquidity and larger or more
rapid changes in value.

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, futures contracts and forward currency
contracts are examples of derivatives. A Fund's use of derivatives may not
succeed for various reasons, including unexpected changes in the value of the
derivatives or the assets underlying them. Also, if a Fund uses derivatives to
adjust or "hedge" the overall risk of the 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

Geographic Concentration Risk -- PACE International Emerging Markets Equity
Fund will not necessarily seek to diversify its investments on a geographic
basis within the emerging markets category. To the extent the Fund
concentrates its investments in issuers located in one country or area, it is
more susceptible to factors adversely affecting that country or area.

5
<PAGE>

COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES

The Funds have very similar investment objectives. PACE International
Emerging Markets Equity Fund's investment objective is capital appreciation,
while Emerging Markets Equity Fund's investment objective is long-term capital
appreciation.

INVESTMENT POLICIES

The Funds also have very similar investment policies. Both Funds invest
primarily in stocks of companies in emerging market countries. Each Fund
generally defines emerging market countries as countries that are not included
in the MSCI World Index of major world economies. Countries included in this
index may be considered emerging markets based on current political and
economic factors. For example, SIMNA has determined, based on an analysis of
current economic and political factors pertaining to Hong Kong SAR, that Hong
Kong SAR should be considered as an emerging market country for purposes of
each Fund's eligible investments.

Unlike Emerging Markets Equity Fund, PACE International Emerging Markets
Equity Fund may not always diversify its investments on a geographic basis
among emerging market countries. Each Fund may invest in the securities of
other investment companies, including investment companies that invest in
emerging markets.

In selecting investments for each Fund, SIMNA focuses on companies that it
believes have a sustainable competitive advantage and growth potential that is
undervalued by other investors. SIMNA allocates each Fund's assets among
emerging market countries based on its assessment of the likelihood that those
countries will have favorable long-term business environments. In deciding
which securities within a country to buy or sell for each Fund, SIMNA analyzes
historical growth rates and future growth prospects, management capability and
profit margins. SIMNA's evaluation of securities reflects information
available from the extensive network of locally based analysts maintained by
SIMNA and its affiliates. SIMNA generally sells securities when either the
country or the issuer no longer meets these selection criteria or when it
identifies more attractive investment opportunities.

Debt Securities. PACE International Emerging Markets Equity Fund may
invest, to a limited extent, in bonds, including up to 10% of its total assets
in bonds that are below investment grade. Below investment grade securities
are commonly known as "junk bonds."

Derivatives. The Funds have identical policies with respect to the use of
derivatives relating to the securities in which they normally invest. Each
Fund may (but is not required to) use options, futures contracts, forward
currency contracts 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 International Emerging Markets Equity Fund
is normally fully invested in accordance with its investment objective and
policies. However, with the concurrence of Mitchell Hutchins, PACE
International Emerging Markets Equity 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.

6
<PAGE>

Other Investment Policies. Each Fund may invest up to 15% of its net assets
in illiquid securities. Each Fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. PACE International Emerging Markets Equity Fund and
Emerging Markets Equity Fund may borrow money from banks or through reverse
repurchase agreements for temporary or emergency purposes, but not in excess
of 10% and 33 1/3% of each Fund's respective total assets. Neither Fund may
purchase securities while borrowings in excess of 5% of its total assets are
outstanding. Both Funds may sell short "against the box."

Portfolio Turnover. Each Fund may engage in frequent trading to achieve its
investment objectives. Frequent trading may result in portfolio turnover of
100% or more (high portfolio turnover). Frequent trading may increase the
portion of a Fund's capital gains that is realized for tax purposes in any
given year, which may increase the Fund's taxable distributions in that year.
Frequent trading also may increase the portion of a Fund's realized capital
gains that is considered "short-term" for tax purposes. Shareholders will pay
higher taxes on distributions that represent net short-term capital gains than
they would pay on distributions that represent net long-term capital gains.
Frequent trading also may result in higher Fund expenses due to transaction
costs. Neither Fund restricts the frequency of trading to limit expenses or
the tax effect that its distributions may have on shareholders. The portfolio
turnover rates for Emerging Markets Equity Fund for the last two fiscal years
ended October 31, 2000 and 1999, were 117% and 80%, respectively, while the
portfolio turnover rates for PACE International Emerging Markets Equity Fund's
last two fiscal years ended July 31, 2000 and 1999, were 115% and 66%,
respectively.

OPERATIONS OF PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND FOLLOWING THE
REORGANIZATION

It is not expected that PACE International Emerging Markets Equity Fund
will revise any of its policies following the Reorganization to reflect those
of Emerging Markets Equity Fund. SIMNA has reviewed Emerging Markets Equity
Fund's current portfolio and determined that its holdings are compatible with
PACE International Emerging Markets Equity Fund's portfolio. However, Emerging
Markets Equity Fund holds securities of companies in countries (including
Brazil, Greece, India, Korea, Malaysia, Poland and Taiwan) that do not permit
ownership of securities to be transferred from one fund to another as part of
a reorganization. As ofNovember 30, 2000, these investments represented
approximately 44% of Emerging Markets Equity Fund's portfolio. If shareholders
of Emerging Markets Equity Fund approve the Reorganization, all these
securities will be sold in an orderly manner and the proceeds of these sales
held in temporary investments pending reinvestment. SIMNA expects to reinvest
these proceeds in the same securities after the Reorganization is effected,
except to the extent that it identifies more attractive investment
opportunities.

The relative portion of Emerging Markets Equity Fund's assets represented
by investments in the securities described above may change depending on
SIMNA's continuing assessment of changing market conditions and investment
opportunities. It is also expected that some of Emerging Markets Equity Fund's
current holdings may not remain at the time of the Reorganization due to
normal portfolio turnover. The need for Emerging Markets Equity Fund to
dispose of assets in connection with the Reorganization may result in its
selling securities at a disadvantageous time and could result in its realizing
gains (or losses) that would not otherwise have been realized. However,
because the Fund has substantial capital loss carryforwards to offset any
realized capital gains, the liquidation of these assets is not expected to
result in any significant additional taxable distributions to Emerging Markets
Equity Fund's shareholders.

PERFORMANCE

The following bar chart and table provide information about the performance
of PACE International Emerging Markets Equity 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 International Emerging Markets Equity Fund's
performance has varied from calendar year to calendar year. The bar chart does
not reflect the maximum annual PACE SM Select Advisors Program fee of 1.50%
(which does not apply to shares received in the Reorganization) or the effect
of sales charges or the higher expenses of PACE International Emerging Markets
Equity Fund's Class A, Class B and Class C shares; if it did, the total
returns shown would be lower.

7
<PAGE>

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

The second table that follows the bar chart shows the average annual total
returns over several time periods for Emerging Markets Equity Fund's Class A,
Class B, Class C and Class Y shares. This table reflects sales charges and
12b-1 fees for Class A, Class B and Class C shares of the Fund. The Fund's
Class Y shares are not subject to any sales charges or 12b-1 fees and thus are
most comparable to the Class P shares of PACE International Emerging Markets
Equity Fund. The performance of Emerging Markets Equity Fund's Class Y shares
for the 1999 calendar year can thus be compared to that of the Class P shares
of PACE International Emerging Markets Equity Fund before deduction of the
PACESM Select Advisors Program fee, as shown in the footnote to that Fund's
table.

The tables also compare each Fund's returns to returns of a broad-based
market index -- the MSCI Emerging Markets Free Index -- that is unmanaged and,
therefore, does not reflect the deduction of any fees or expenses.

Each Fund's past performance does not necessarily indicate how it will
perform in the future. This may be particularly true for Emerging Markets
Equity Fund because, prior to February 25, 1997, a different sub-adviser
managed its assets.

PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND -- TOTAL RETURN ON CLASS P
SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

[GRAPH]

Calendar Year Total Return
1996 8.52%
1997 (4.72)%
1998 (24.43)%
1999 61.85%

Total return January 1 to September 30, 2000 -- (24.35)%

Best quarter during years shown: 4th quarter, 1999 -- 27.14%
Worst quarter during years shown: 3rd quarter, 1998 -- (21.52)%

8
<PAGE>

PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS CLASS P MSCI EMERGING
(INCEPTION DATE) (8/24/95) MARKETS FREE INDEX
---------------- --------- ------------------
<S> <C> <C>
One Year........................................... 59.43% 66.41%
Life of Class...................................... 3.51% 3.14%
</TABLE>
----------------
* The above performance reflects the deduction of the maximum annual PACESM
Select Advisors Program fee of 1.50% (which does not apply to shares
received in the Reorganization). If the program fee were not deducted, the
average annual total returns of the Fund's Class P shares would be 61.85%
for the year ended December 31, 1999 and 5.08% for "Life of Class."

EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
MSCI EMERGING
CLASS CLASS A CLASS B CLASS C CLASS Y MARKETS
(INCEPTION DATE) (1/19/94) (12/5/95) (1/19/94) (1/19/94) FREE INDEX
---------------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
One Year.................. 54.20% 55.06% 58.85% 61.92% 66.41%
Five Years................ 0.17% N/A 0.26% 1.31% 2.00%
Life of Class............. (2.10)% 3.43% (2.13)% (1.12)% *
</TABLE>
----------------
* Average annual total returns for the MSCI Emerging Markets Free Index for
the life of each class were as follows: Class A -- 0.08%; Class B -- 4.92%;
Class C -- 0.08%; and Class Y -- 0.08%.

SALES CHARGES

No sales charges apply when Emerging Markets Equity Fund shareholders
receive shares of PACE International Emerging Markets Equity Fund in
connection with the Reorganization.

DIVIDENDS AND OTHER DISTRIBUTIONS

Each Fund normally declares and pays dividends and distributes
substantially all of its gains, if any, annually. Classes with higher expenses
are expected to have lower dividends. For example, Class B and Class C shares
are expected to have the lowest dividends of any class of a Fund's shares,
while Class Y shares (and, for PACE International Emerging Markets Equity
Fund, Class P shares) would have the highest dividends.

As a shareholder of PACE International Emerging Markets Equity 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 Emerging
Markets Equity 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, Emerging Markets Equity Fund will distribute
substantially all of its undistributed net investment income, net capital
gain, net short-term capital gain and net gains from foreign currency
transactions, 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 any 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 annually how you
should treat its dividends for tax purposes.

9
<PAGE>

FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING
SHARES OF PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND

FLEXIBLE PRICING

PACE International Emerging Markets Equity 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 International Emerging
Markets Equity Fund and the procedures for buying, selling and exchanging
these shares, as described below, are substantially identical to the
corresponding classes of shares and related procedures of Emerging Markets
Equity Fund. Prior to November 27, 2000, PACE International Emerging Markets
Equity Fund offered only Class P shares, which are available only to
participants in the PaineWebber PACESM Select Advisors Program.

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

PACE International Emerging Markets Equity Fund has adopted a plan under
Rule 12b-1 governing its Class A, Class B and Class C shares that allows it to
pay service fees for providing services to shareholders and (for Class B and
Class C shares) distribution fees for the sale of its shares. The terms of
these plans are substantially identical to the terms of the corresponding
plans now in place for Emerging Markets Equity 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 are described in the following table.

<TABLE>
<CAPTION>
REALLOWANCE TO SELECTED
CLASS A SALES CHARGES SALES CHARGE AS A PERCENTAGE OF: DEALERS AS PERCENTAGE OF
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED 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 representing reinvestment of dividends are not
subject to this 1% charge. Withdrawals in the first year after purchase
of up to 12% of the value of the fund account under the Fund's Systematic
Withdrawal Plan are not subject to this charge.

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

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

10
<PAGE>

Sales Charge Reductions and Waivers. You may qualify for a lower sales charge
if you already own Class A shares of a PaineWebber or PaineWebber PACE mutual
fund. You can combine the value of Class A shares that you own in other
PaineWebber or PaineWebber PACE funds and the purchase amount of the Class A
shares of the PaineWebber or PaineWebber PACE fund that you are buying.

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

. your spouse, parents or children under age 21;

. your Individual Retirement Accounts (IRAs);

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

. a company that you control;

. a trust that you created;

. Uniform Gifts to Minors Act/Uniform Transfers 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.

11
<PAGE>

CLASS B SHARES

Class B shares have a contingent deferred sales charge. When you purchase
Class B shares, we invest 100% of your purchase in Fund shares. However, you
may have to pay the deferred sales charge when you sell your Fund shares,
depending on how long you own the shares.

Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.

If you sell Class B shares before the end of six years, you will pay a
deferred sales charge. We calculate the deferred sales charge by multiplying
the lesser of the net asset value of the Class B shares at the time of
purchase or the net asset value at the time of sale by the percentage shown
below:

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

We will not impose the deferred sales charge on Class B shares representing
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 International Emerging Markets Equity Fund that you receive in
connection with the Reorganization will include the period for which you held
the corresponding Class B shares of Emerging Markets Equity Fund and any other
PaineWebber fund whose shares you exchanged for Class B shares of Emerging
Markets Equity 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.

12
<PAGE>

CLASS C SHARES

Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of
your purchase in Fund shares.

Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.

Class C shares also have a contingent deferred sales charge. You may have
to pay the deferred sales charge if you sell your shares within one year of
the date you purchased them. We calculate the deferred sales charge on sales
of Class C shares by multiplying 1.00% by the lesser of the net asset value of
the Class C shares at the time of purchase or the net asset value at the time
of sale. We will not impose the deferred sales charge on Class C shares
representing 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 International Emerging Markets Equity Fund that
you receive in connection with the Reorganization will include the period for
which you held the corresponding Class C shares of Emerging Markets Equity
Fund and any other PaineWebber fund whose shares you exchanged for Class C
shares of Emerging Markets Equity 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.

Class Y shares do not pay ongoing distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are the lowest for all the
classes.

13
<PAGE>

BUYING SHARES

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

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

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

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

Minimum Investments

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

The Fund may waive or reduce these amounts for:

. Employees of PaineWebber or its affiliates; or

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

Frequent Trading. The interests of a 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;

14
<PAGE>

. The Fund's name;

. The Fund account number;

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

. A guarantee of each registered owner's signature. A signature guarantee
may be obtained from a financial institution, broker, dealer or clearing
agency that is a participant in one of the medallion programs recognized
by the Securities Transfer Agents Association. These are: Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
Program (SEMP) and the New York Stock Exchange Medallion Signature
Program (MSP). The 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 same
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;

15
<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. Each Fund calculates net
asset value separately for each class as of the close of regular trading on
the NYSE (generally, 4:00 p.m., Eastern time). The NYSE normally is not open
on most national holidays and on Good Friday, and the Fund does not price its
shares on these days. If trading on the NYSE is halted for the day before 4:00
p.m., Eastern time, the Fund's net asset value per share will be calculated as
of the time trading was halted.

Your price for buying, selling or exchanging shares will be based on the
net asset value that is next calculated after the Fund accepts your order. If
you place your order through PaineWebber, your PaineWebber Financial Advisor
is responsible for making sure that your order is promptly sent to the Fund.

You should keep in mind that a front-end sales charge may be applied to
your purchase if you buy Class A shares. A deferred sales charge may be
applied when you sell Class B or Class C shares.

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

Judgment plays a greater role in valuing thinly traded securities,
including many lower-rated bonds, because there is less reliable, objective
data available.

The Fund calculates the U.S. dollar value of investments that are
denominated in foreign currencies daily, based on current exchange rates. The
Fund may own securities, including some securities that trade primarily in
foreign markets, that trade on weekends or other days on which the Fund does
not calculate net asset value. As a result, the Fund's net asset value may
change on days when you will not be able to buy and sell Fund shares. If the
Fund concludes that a material change in the value of a foreign security has
occurred after the close of trading in the principal foreign market but before
the close of the NYSE, the Fund may use fair value methods to reflect those
changes. This policy is intended to assure that the Fund's net asset value
fairly reflects security values as of the time of pricing.

16
<PAGE>

MANAGEMENT

INVESTMENT MANAGER AND INVESTMENT ADVISER

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

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

As investment adviser for Emerging Markets Equity Fund, Mitchell Hutchins
recommends sub-advisers to the Board of Investment Trust II and monitors and
reviews the performance of those sub-advisers.

SUB-ADVISER

SIMNA manages the assets of each Fund. SIMNA is located at 787 Seventh
Avenue, New York, New York 10019. SIMNA and its affiliates have developed an
expertise in emerging markets investments. As of June 30, 2000, SIMNA had
approximately $46 billion in assets under management. As of the same date,
SIMNA's ultimate parent, Schroders plc, and its affiliates collectively had
approximately $217 billion in assets under management.

All investment decisions for each Fund are made by SIMNA's emerging markets
investment committee. The investment committee consists of investment
professionals with specific geographic or regional expertise, as well as
members responsible for economic analysis and strategy and global stock and
sector selection.

ADVISORY FEES AND FUND EXPENSES

PACE International Emerging Markets Equity Fund pays fees to Mitchell
Hutchins for management and administrative services at the combined annual
contract rate of 1.10% of average daily net assets. This combined fee includes
an annual contract rate of 0.90% for investment management services and 0.20%
for administrative services, both expressed as a percentage of the Fund's
average daily net assets. During the fiscal year ended July 31, 2000, PACE
International Emerging Markets Equity Fund paid Mitchell Hutchins at the lower
effective rate of 0.85% of the Fund's average daily net assets because
Mitchell Hutchins waived a portion of its fee. Emerging Markets Equity Fund
pays fees to Mitchell Hutchins for investment advisory and administrative
services at the annual rate of 1.20% of the Fund's average daily net assets.
During the fiscal year ended October 31, 2000, Emerging Markets Equity Fund
did not pay any fees for investment advisory and administrative services
because Mitchell Hutchins waived its entire fee.

Mitchell Hutchins anticipates that shareholders of each class of shares of
Emerging Markets Equity Fund who will become shareholders of the corresponding
class of shares of PACE International Emerging Markets Equity Fund will be
subject to total annual operating expenses that are lower than the expenses
they currently pay as shareholders of Emerging Markets Equity Fund due to
economies of scale and the lower management and administrative services fees
paid by PACE International Emerging Markets Equity Fund to Mitchell Hutchins.
The overall operating expenses of PACE International Emerging Markets Equity
Fund are also subject to a written management fee waiver and expense
reimbursement agreement between the Fund and Mitchell Hutchins, which will
remain in effect through December 1, 2002. Even absent that agreement,
however, it is expected that the overall operating expenses for each class of
shares of the combined Fund would be lower than the current expenses of the
corresponding class of shares of Emerging Markets Equity Fund.

17
<PAGE>

ADDITIONAL INFORMATION ABOUT THE REORGANIZATION

REASONS FOR THE REORGANIZATION

Emerging Markets Equity Fund's assets have generally declined over the last
five years to the point where the Fund had less than $6 million in assets as
of November 30, 2000. As a result of these low asset levels, the Fund's
expenses have increased and it has become more difficult to manage
efficiently. Investment Trust II's Board approved the proposed Reorganization
at a meeting held on October 6, 2000. For the reasons described more fully
below, Mitchell Hutchins and Investment Trust II's Board believe that Emerging
Markets Equity Fund's shareholders will benefit from the Reorganization
because the combined Fund would have a larger asset base, which should provide
greater opportunities for diversifying investments and realizing economies of
scale.

At the meeting of Investment Trust II's Board on October 6, 2000 and in a
series of prior meetings and presentations, Mitchell Hutchins explained to the
Board that it had undertaken an extensive review of whether the best interests
of shareholders of a number of PaineWebber funds, including Emerging Markets
Equity Fund, would be served by continuing to operate the Funds under their
current arrangements. For Emerging Markets Equity Fund, Mitchell Hutchins'
review included a possible reorganization into another PaineWebber fund.

Mitchell Hutchins noted that PACE International Emerging Markets Equity
Fund has a very similar investment objective and, like Emerging Markets Equity
Fund, invests primarily in stocks of companies in emerging market countries.
In addition, the same sub-adviser manages the assets of each Fund and uses the
same basic investment strategy for both Funds. As a result, the two Funds are
managed in a similar manner. (See "Comparison of the Funds" above for more
information about the investment objectives, policies and risks of each Fund.)

Mitchell Hutchins stated its belief that the Reorganization would likely
benefit Emerging Markets Equity 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 administrative services fees
currently paid by PACE International Emerging Markets Equity Fund are less
than those currently paid by Emerging Markets Equity Fund. In addition,
Mitchell Hutchins informed the Board that it anticipated that current
shareholders of each class of shares of Emerging Markets Equity Fund who will
become shareholders of the combined Fund if the Reorganization is approved
will be subject to total annual operating expenses that are lower than the
expenses they currently pay as shareholders of Emerging Markets Equity Fund
due to economies of scale and the lower management and administrative services
fees paid by PACE International Emerging Markets Equity Fund to Mitchell
Hutchins. Mitchell Hutchins also informed the Board that the overall operating
expenses of PACE International Emerging Markets Equity Fund are subject to a
written management fee waiver and expense reimbursement agreement between the
Fund and Mitchell Hutchins, which will remain in effect through December 1,
2002. Mitchell Hutchins noted, however, that even absent that agreement, it is
expected that the overall operating expenses of the combined Fund would be
lower than the current expenses of Emerging Markets Equity Fund. (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 also 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 to continue to distribute shares for two similar funds. Mitchell Hutchins
noted, moreover, that PACE International Emerging Markets Equity 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 International Emerging Markets Equity Fund.

Finally, Mitchell Hutchins reviewed with the Board of Investment Trust II
the principal terms of the Plan. Mitchell Hutchins informed the Board that the
Reorganization would be tax-free to Emerging Markets Equity Fund and its
shareholders, that shareholders of the combined Fund after the Reorganization
could continue to

18
<PAGE>

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 International Emerging Markets
Equity Fund shares issued in connection with the Reorganization. Furthermore,
Mitchell Hutchins informed the Board of Investment Trust II 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 Emerging Markets Equity Fund will include the holding period for the shares
of Emerging Markets Equity Fund and any other PaineWebber fund shares of the
same class that were exchanged for shares of Emerging Markets Equity Fund.

As part of its considerations, the Board of Investment Trust II 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 International Emerging Markets
Equity Fund and that expense ratio relative to Emerging Markets Equity Fund's
current expense ratio; (4) that Mitchell Hutchins would bear the costs of the
Reorganization; (5) the compatibility of the Funds' portfolio holdings and the
effect on Emerging Markets Equity 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 Emerging Markets Equity Fund and
will not dilute their interests; (9) the advisory arrangements in place for
the Funds and the level and quality of investment advisory services provided
or to be provided by Mitchell Hutchins and SIMNA; and (10) the terms of the
proposed Plan.

On the basis of the information provided to it and its evaluation of that
information, the Board of Investment Trust II, including a majority of its
Independent Trustees, determined that the Reorganization would be in the best
interests of Emerging Markets Equity Fund and that the interests of existing
Emerging Markets Equity Fund shareholders will not be diluted as a result of
the Reorganization. THEREFORE, THE BOARD OF INVESTMENT TRUST II UNANIMOUSLY
APPROVED THE REORGANIZATION AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE
SHAREHOLDERS OF EMERGING MARKETS EQUITY FUND AT THE MEETING.

TERMS OF THE REORGANIZATION

The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan. Significant provisions of the Plan are summarized
below; however, this summary is qualified in its entirety by reference to the
Plan, a copy of the form of which is attached as Appendix A to this Proxy
Statement/Prospectus.

The Plan contemplates (1) PACE International Emerging Markets Equity Fund's
acquiring on the Closing Date all the assets of Emerging Markets Equity Fund
in exchange solely for PACE International Emerging Markets Equity Fund shares
and PACE International Emerging Markets Equity Fund's assumption of all of
Emerging Markets Equity Fund's stated liabilities and (2) the distribution of
those shares to Emerging Markets Equity Fund shareholders. Emerging Markets
Equity 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 International Emerging
Markets Equity Fund will assume from Emerging Markets Equity Fund all its
stated 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 Emerging
Markets Equity Fund's most recent audited annual and unaudited semi-annual
financial statements, or incurred by Emerging Markets Equity Fund subsequent
to the date of those financial statements and disclosed in writing to and
accepted by PACE Trust (collectively, the "Liabilities"). Emerging Markets
Equity Fund agreed in the Plan to use its best efforts to discharge all of its
known Liabilities prior to the Effective Time.

19
<PAGE>

The value of the Assets to be acquired, and the amount of the Liabilities
to be assumed, by PACE International Emerging Markets Equity Fund and the NAV
per share of each class of PACE International Emerging Markets Equity Fund
shares will be determined as of the close of regular trading on the NYSE on
the Closing Date ("Valuation Time"), using the applicable valuation procedures
described in PACE International Emerging Markets Equity Fund's current
Prospectus and SAI. These procedures are identical to those used by Emerging
Markets Equity Fund and described in its current Prospectus and SAI. Emerging
Markets Equity Fund's NAV will be the value of the assets to be acquired by
PACE International Emerging Markets Equity Fund, less the amount of the
Liabilities, as of the Valuation Time.

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

The NAV per share of PACE International Emerging Markets Equity Fund will
not change as a result of the Reorganization. Thus, the Reorganization will
not result in a dilution of the interest of any shareholder of either Fund. In
addition, Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Emerging Markets Equity 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 Emerging Markets Equity Fund
shareholders. If the Reorganization is not approved by shareholders at the
Meeting, Emerging Markets Equity Fund will continue to operate as a series of
Investment Trust II, 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 International Emerging Markets Equity Fund is authorized to issue an
unlimited amount 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 International Emerging Markets
Equity Fund represents an identical interest in the Fund's investment
portfolio and has the same rights, privileges and preferences. Each share of
the Fund is entitled to participate equally in dividends and other
distributions of the Fund, except that dividends and other distributions will
appropriately reflect expenses allocated to a particular class. Shares of the
Fund entitle their holders to one vote per full share and fractional votes for
fractional shares held. PACE Trust does not hold annual meetings. Shares of
the Fund generally are voted together, except that only the shareholders of a
particular class of the Fund may vote on matters affecting only that class,
such as the terms of a Rule 12b-1 Plan as it relates to the class. Shares of
each series of PACE Trust will be voted separately, except when an aggregate
vote of all the series is required by law.

TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS

Certain fundamental investment restrictions of Emerging Markets Equity
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

20
<PAGE>

Reorganization, those fundamental investment restrictions that could prohibit
or otherwise impede the transaction.

FEDERAL INCOME TAX CONSIDERATIONS

The Reorganization is intended to be a tax-free reorganization within the
meaning of section 368(a)(1)(C) of the Code. Investment Trust II and PACE
Trust will each receive an opinion of Kirkpatrick & Lockhart LLP, counsel to
Investment Trust II and tax counsel to PACE Trust, substantially to the
following effect:

(1) PACE International Emerging Markets Equity Fund's acquisition of the
Assets in exchange solely for its shares and its assumption of the
Liabilities, followed by Emerging Markets Equity Fund's distribution of
those shares pro rata to its shareholders constructively in exchange for
their Emerging Markets Equity Fund shares, will qualify as a reorganization
within the meaning of section 368(a)(1)(C) of the Code, and each Fund will
be "a party to a reorganization" within the meaning of section 368(b) of
the Code;

(2) Emerging Markets Equity Fund will recognize no gain or loss on its
transfer of the Assets to PACE International Emerging Markets Equity Fund
in exchange solely for PACE International Emerging Markets Equity Fund
shares and PACE International Emerging Markets Equity Fund's assumption of
the Liabilities or on the subsequent distribution of those shares to
Emerging Markets Equity Fund's shareholders in constructive exchange for
their Emerging Markets Equity Fund shares;

(3) PACE International Emerging Markets Equity Fund will recognize no
gain or loss on its receipt of the Assets in exchange solely for its shares
and its assumption of the Liabilities;

(4) PACE International Emerging Markets Equity Fund's basis in the
Assets will be the same as Emerging Markets Equity Fund's basis therein
immediately before the Reorganization, and PACE International Emerging
Markets Equity Fund's holding period for the Assets will include Emerging
Markets Equity Fund's holding period therefor;

(5) An Emerging Markets Equity Fund shareholder will recognize no gain
or loss on the constructive exchange of all its Emerging Markets Equity
Fund shares solely for PACE International Emerging Markets Equity Fund
shares pursuant to the Reorganization; and

(6) An Emerging Markets Equity Fund shareholder's aggregate basis in the
PACE International Emerging Markets Equity Fund shares it receives in the
Reorganization will be the same as the aggregate basis for its Emerging
Markets Equity Fund shares it constructively surrenders in exchange for
those PACE International Emerging Markets Equity Fund shares, and its
holding period for those PACE International Emerging Markets Equity Fund
shares will include its holding period for those Emerging Markets Equity
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 International Emerging Markets Equity Fund after the
Reorganization of any pre-Reorganization capital losses realized by Emerging
Markets Equity 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.

21
<PAGE>

REQUIRED VOTE

The proposal to approve the Plan requires the affirmative vote of the
lesser of (1) 67% or more of the shares of Emerging Markets Equity 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 International Emerging Markets Equity Fund commenced operations on
August 24, 1995 as a diversified series of PACE Trust. PACE Trust was
organized 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.

Emerging Markets Equity Fund commenced operations on January 19, 1994 and
is a diversified series of Investment Trust II. Investment Trust II was
organized as a Massachusetts business trust on August 10, 1992 under the name
"Kidder, Peabody Investment Trust II," and is registered under the 1940 Act as
an open-end management investment company. The operations of Investment Trust
II, as a Massachusetts business trust, are governed by its Declaration of
Trust, By-Laws and Massachusetts law.

22
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand
PACE International Emerging Markets Equity 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 International
Emerging Markets Equity Fund, whose report, along with the Fund's financial
statements, is included in the Fund's Annual Report to Shareholders, dated
July 31, 2000, which may be obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
PACE INTERNATIONAL EMERGING MARKETS EQUITY
INVESTMENTS
----------------------------------------------------
FOR THE YEARS ENDED JULY 31, FOR THE PERIOD
------------------------------------ ENDED
2000 1999 1998 1997 JULY 31, 1996+
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 12.05 $ 10.41 $ 15.60 $ 12.49 $ 12.00
------- ------- ------- ------- -------
Net investment income
(loss)................... (0.01) 0.09 0.09 0.06 0.07
Net realized and
unrealized gains (losses)
from investments and
foreign currency......... 0.02 1.62 (5.23) 3.09 0.44
------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............... 0.01 1.71 (5.14) 3.15 0.51
------- ------- ------- ------- -------
Dividends from net
investment income........ (0.10) (0.07) (0.05) (0.04) (0.02)
------- ------- ------- ------- -------
Net asset value, end of
period................... $ 11.96 $ 12.05 $ 10.41 $ 15.60 $ 12.49
======= ======= ======= ======= =======
Total investment
return(1)................ (0.02)% 16.66% (32.99)% 25.31% 4.23%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period
(000's).................. $82,179 $88,497 $63,237 $54,759 $25,481
Expenses to average net
assets, net of fee
waivers and expense
reimbursements........... 1.50% 1.50% 1.50% 1.50% 1.50%*
Expenses to average net
assets, before fee
waivers and expense
reimbursements........... 1.75% 1.79% 1.79% 2.09% 2.35%*
Net investment income
(loss) to average net
assets, net of fee
waivers and expense
reimbursements........... (0.08)% 1.05% 0.98% 0.63% 0.94%*
Net investment income
(loss) to average net
assets, before fee
waivers and expense
reimbursements........... (0.33)% 0.76% 0.69% 0.04% 0.08%*
Portfolio turnover........ 115% 66% 51% 39% 22%
</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 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.

23
<PAGE>

CAPITALIZATION

The following table shows the capitalization of each of Emerging Markets
Equity Fund and PACE International Emerging Markets Equity Fund as of November
30, 2000, and the pro forma capitalization as of the same date, assuming that
shareholders of Emerging Markets Equity Fund and PaineWebber Asia Pacific
Growth Fund approve the reorganizations with PACE International Emerging
Markets Equity Fund:

<TABLE>
<CAPTION>
PAINEWEBBER PACE INTERNATIONAL PRO FORMA CLASS A
EMERGING MARKETS ASIA PACIFIC EMERGING MARKETS COMBINED PACE
EQUITY FUND: GROWTH FUND: EQUITY FUND: INTERNATIONAL EMERGING
CLASS A CLASS A CLASS A MARKETS EQUITY FUND
---------------- ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Net Assets.............. $2,793,925 $8,276,563 $ 0 $11,070,488
Shares Outstanding...... 403,464 947,864 0 1,223,851
Net Asset Value Per
Share.................. $ 6.92 $ 8.73 $ 0 $ 9.05

<CAPTION>
PAINEWEBBER PACE INTERNATIONAL PRO FORMA CLASS B
EMERGING MARKETS ASIA PACIFIC EMERGING MARKETS COMBINED PACE
EQUITY FUND: GROWTH FUND: EQUITY FUND: INTERNATIONAL EMERGING
CLASS B CLASS B CLASS B MARKETS EQUITY FUND
---------------- ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Net Assets.............. $ 546,187 $9,314,249 $ 0 $ 9,860,436
Shares Outstanding...... 81,979 1,096,809 0 1,090,078
Net Asset Value Per
Share.................. $ 6.66 $ 8.49 $ 0 $ 9.05

<CAPTION>
PAINEWEBBER PACE INTERNATIONAL PRO FORMA CLASS C
EMERGING MARKETS ASIA PACIFIC EMERGING MARKETS COMBINED PACE
EQUITY FUND: GROWTH FUND: EQUITY FUND: INTERNATIONAL EMERGING
CLASS C CLASS C CLASS C MARKETS EQUITY FUND
---------------- ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Net Assets.............. $1,231,958 $4,260,997 $ 0 $ 5,492,955
Shares Outstanding...... 186,863 501,194 0 607,250
Net Asset Value Per
Share.................. $ 6.59 $ 8.50 $ 0 $ 9.05

<CAPTION>
PAINEWEBBER PACE INTERNATIONAL PRO FORMA CLASS Y
EMERGING MARKETS ASIA PACIFIC EMERGING MARKETS COMBINED PACE
EQUITY FUND: GROWTH FUND: EQUITY FUND: INTERNATIONAL EMERGING
CLASS Y CLASS Y CLASS Y MARKETS EQUITY FUND
---------------- ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Net Assets.............. $ 481,247 $ 177,393 $ 0 $ 658,640
Shares Outstanding...... 68,527 20,316 0 72,813
Net Asset Value Per
Share.................. $ 7.02 $ 8.73 $ 0 $ 9.05
<CAPTION>
PAINEWEBBER PACE INTERNATIONAL PRO FORMA CLASS P
EMERGING MARKETS ASIA PACIFIC EMERGING MARKETS COMBINED PACE
EQUITY FUND: GROWTH FUND: EQUITY FUND: INTERNATIONAL EMERGING
CLASS P CLASS P CLASS P MARKETS EQUITY FUND
---------------- ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Net Assets.............. $ 0 $ 0 $63,597,677 $63,597,677
Shares Outstanding...... 0 0 7,030,771 7,030,771
Net Asset Value Per
Share.................. $ 0 $ 0 $ 9.05 $ 9.05
</TABLE>

LEGAL MATTERS

Certain legal matters concerning the issuance of PACE International
Emerging Markets Equity Fund shares as part of the Reorganization will be
passed upon by Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New
York 10019-6099, counsel to PACE Trust. Certain legal matters concerning the
tax consequences of the Reorganization will be passed upon by Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, D.C.
20036-1800.

24
<PAGE>

INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

PACE Trust and Investment Trust II 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
Investment Trust II. 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 Emerging Markets Equity Fund
incorporated by reference in the SAI have been audited by Ernst & Young LLP,
independent auditors, whose report thereon is included in Emerging Markets
Equity Fund's Annual Report to Shareholders for the fiscal year ended October
31, 1999. The audited financial statements of PACE International Emerging
Markets Equity 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 International Emerging
Markets Equity 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, Investment Trust II does not
hold annual or other regular meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of Emerging
Markets Equity Fund's shareholders should send such proposals to Emerging
Markets Equity Fund at 51 West 52nd Street, New York, New York 10019-6114.
Proposals must be received a reasonable period of time prior to any meeting to
be included in the proxy materials or otherwise considered. Moreover,
consideration of such proposals is subject to limitations under the federal
securities laws. Persons named as proxies for any subsequent shareholders'
meeting will vote in their discretion with respect to proposals submitted on
an untimely basis.

Other Business. Investment Trust II'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 Emerging
Markets Equity Fund's shareholders arise, the proxies will vote thereon
according to their best judgment in the interests of the Fund.

25
<PAGE>

APPENDIX A

FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION

THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of , 2001, by and among PaineWebber PACE Select Advisors Trust, a
Delaware business trust ("PACE Trust"), on behalf of PACE International
Emerging Markets Equity Investments, a segregated portfolio of assets
("series") thereof ("Acquiring Fund"), PaineWebber Investment Trust II, a
Massachusetts business trust ("Target Trust"), on behalf of PaineWebber
Emerging Markets Equity Fund, a series thereof ("Target"), and solely for
purposes of paragraph 7.2 hereof, Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"). (Acquiring Fund and Target are sometimes referred to
herein individually as a "Fund" and collectively as the "Funds," and PACE
Trust and Target Trust are sometimes referred to herein individually as an
"Investment Company" and collectively as the "Investment Companies.") All
agreements, representations, actions, and obligations described herein made or
to be taken or undertaken by Acquiring Fund or Target are made and shall be
taken or undertaken by PACE Trust or Target Trust, respectively.

The Investment Companies wish to effect a reorganization described in
section 368(a)(1) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend this Agreement to be, and adopt it as, a "plan of reorganization"
within the meaning of the regulations under section 368 of the Code
("Regulations"). The reorganization will involve the transfer of Target's
assets to Acquiring Fund in exchange solely for voting shares of beneficial
interest in Acquiring Fund and the assumption by Acquiring Fund of Target's
stated liabilities, followed by the constructive distribution of those shares
pro rata to the holders of shares of beneficial interest in Target ("Target
Shares") in exchange therefor, all on the terms and conditions set forth
herein. The foregoing transactions are referred to herein collectively as the
"Reorganization."

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

In consideration of the mutual promises contained herein, the parties agree
as follows:

1. PLAN OF REORGANIZATION AND TERMINATION

1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor--

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

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

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

A-1
<PAGE>

1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights
of action, rights to register shares under applicable securities laws, books
and records, deferred and prepaid expenses shown as assets on Target's books,
and other property owned by Target at the Effective Time (as defined in
paragraph 3.1).

1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.18, or otherwise disclosed in writing
to and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to
use its best efforts to discharge all its Liabilities before the Effective
Time.

1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of
its realized net capital gain, if any, for its current taxable year through
the Effective Time.

1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by PACE Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited
with the respective pro rata number of full and fractional (rounded to the
third decimal place) Acquiring Fund Shares due that Shareholder, by class
(i.e., the account for a Shareholder of Class A Target Shares shall be
credited with the respective pro rata number of Class A Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class B Target Shares
shall be credited with the respective pro rata number of Class B Acquiring
Fund Shares due that Shareholder; the account for a Shareholder of Class C
Target Shares shall be credited with the respective pro rata number of Class C
Acquiring Fund Shares due that Shareholder; and the account for a Shareholder
of Class Y Target Shares shall be credited with the respective pro rata number
of Class Y Acquiring Fund Shares due that Shareholder). All outstanding Target
Shares, including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.

1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months
after the Effective Time, Target shall be terminated as a series of Target
Trust and any further actions shall be taken in connection therewith as
required by applicable law.

1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.

1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.

2. VALUATION

2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Acquiring Fund's then-current
prospectus and statement of additional information ("SAI"), less (b) the
amount of the Liabilities as of the Valuation Time.

A-2
<PAGE>

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

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

3. CLOSING AND EFFECTIVE TIME

3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
or about February 9, 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 October 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
October 31, 1999, and unaudited financial statements for the six months
ended April 30, 2000, to be delivered to PACE Trust, fairly represent
Target's financial position as of each such date and the results of its
operations and changes in its net assets for the periods then ended; and

4.1.19. Target's management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (within such meaning) to
Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and 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,

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<PAGE>

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

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

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

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

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

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

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

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

4.2.18. Acquiring Fund's federal income tax returns, and all applicable
state and local tax returns, for all taxable years through and including
the taxable year ended July 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and

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

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

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

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

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

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

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

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

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

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

5. COVENANTS

5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that--

(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations
contemplated by each Fund's normal business activities, and

(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that if Target's shareholders
approve this Agreement (and the transactions contemplated hereby),
then

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

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

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

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

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

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

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

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

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

6. CONDITIONS PRECEDENT

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

6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by each Board and shall have been approved by
Target's shareholders in accordance with the Declaration of Trust and Target
Trust's By-Laws and applicable law.

6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received
that any other or further action is required to permit the parties to carry
out the transactions contemplated hereby. The Registration Statement shall
have become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued, and the SEC shall not have
issued an unfavorable report with respect to the Reorganization under section
25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin
consummation of the transactions contemplated hereby under section 25(c) of
the 1940 Act. All consents, orders, and permits of federal, state, and local
regulatory authorities (including the SEC and state securities authorities)
deemed necessary by either Investment Company to permit consummation, in all

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

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

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

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

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

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

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

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

6.4.6. PACE Trust is registered with the SEC as an investment company,
and to the knowledge of Willkie Farr no order has been issued or proceeding
instituted to suspend such registration; and

6.4.7. To the knowledge of Willkie Farr (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PACE Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b)
PACE Trust (with respect to Acquiring Fund) is not a party to or subject to
the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by Target Trust.

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<PAGE>

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

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

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

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

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

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

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

6.5.6. To the knowledge of K&L (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Target
Trust (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Target's business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by PACE Trust.

In rendering such opinion, K&L may (1) rely, as to certain factual matters, on
a certificate of Target Trust, (2) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof, (3) limit such opinion to applicable
federal and state law, and (4) define the word "knowledge" and related terms
to mean the knowledge of attorneys then with K&L who have devoted substantive
attention to matters directly related to this Agreement and the
Reorganization.

A-11
<PAGE>

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

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

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

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

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

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

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

Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that
no opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any Asset as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end
of a taxable year (or on the termination or transfer thereof) under a mark-to-
market system of accounting.

At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.

7. BROKERAGE FEES AND EXPENSES

7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.

7.2. The Reorganization Expenses will be borne by Mitchell Hutchins.

A-12
<PAGE>

8. ENTIRE AGREEMENT; NO SURVIVAL

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

9. TERMINATION OF AGREEMENT

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

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

9.2. By the parties' mutual agreement.

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

10. AMENDMENT

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

11. MISCELLANEOUS

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

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

11.3. PACE Trust acknowledges that Target Trust is a Business Trust.
This Agreement is executed by Target Trust on behalf of Target and by its
trustees and/or officers in their capacities as such, and not individually.
Target Trust's obligations under this Agreement are not binding on or
enforceable against any of its trustees, officers, or shareholders but are
only binding on and enforceable against Target's assets and property; and a
trustee of Target Trust shall not be personally liable hereunder to PACE
Trust or its trustees or shareholders for any act, omission, or obligation
of Target Trust or any other trustee thereof. PACE Trust agrees that, in
asserting any rights or claims under this Agreement on behalf of Acquiring
Fund, it shall look only to Target's assets and property in settlement of
such rights or claims and not to such trustees, officers, or shareholders.

11.4. A trustee of PACE Trust shall not be personally liable hereunder
to Target Trust or its trustees or shareholders for any act, omission, or
obligation of PACE Trust or any other trustee thereof. Target Trust agrees
that, in asserting any claim against PACE Trust or its trustees, it shall
look only to Acquiring Fund's assets for payment under such claim; and
neither the shareholders nor the trustees of PACE Trust, nor any of their
agents, whether past, present, or future, shall be personally liable
therefor.

A-13
<PAGE>

11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by each
Investment Company and delivered to the other party hereto. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.

PaineWebber Investment Trust II,
acting on behalf of its series,
PaineWebber Emerging Markets Equity
Fund

By: _________________________________

PaineWebber PACE Select Advisors
Trust, acting on behalf of its
series, PACE International Emerging
Markets Equity Investments

By: _________________________________

Solely with respect to paragraph
7.2. hereof:

Mitchell Hutchins Asset Management
Inc.

By: _________________________________

A-14
<PAGE>

APPENDIX B

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of the Record Date, the following shareholders owned beneficially or of
record 5% or more of a class of shares of Emerging Markets Equity Fund.
Mitchell Hutchins did not know of any other person who owned beneficially or
of record 5% or more of any class of either Fund's outstanding equity
securities as of the Record Date.

The percent beneficial ownership of the combined PACE International
Emerging Markets Equity Fund assumes that shareholders of both Emerging
Markets Equity Fund and PaineWebber Asia Pacific Growth Fund approve the
reorganizations with PACE International Emerging Markets Equity Fund.

EMERGING MARKETS EQUITY FUND

<TABLE>
<CAPTION>
PRO FORMA
PERCENT BENEFICIAL
OWNERSHIP OF
PERCENT BENEFICIAL COMBINED PACE
OWNERSHIP OF EMERGING INTERNATIONAL EMERGING
SHAREHOLDER'S NAME/ADDRESS* MARKETS EQUITY FUND MARKETS EQUITY FUND
--------------------------- --------------------- ----------------------
<S> <C> <C>
Ramesh Singh 9.94% 2.40%
(Class A Shares) (Class A Shares)

PaineWebber Custodian 9.76% 7.38%
PaineWebber CDN FBO (Class Y Shares) (Class Y Shares)
J. Darwin King

Carol A. Grefenstette and David
J. Bates 5.66% 4.28%
(Class Y Shares) (Class Y Shares)
</TABLE>
----------------
* The shareholders listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

B-1
<PAGE>

APPENDIX C

MANAGEMENT'S DISCUSSION OF PACE INTERNATIONAL EMERGING MARKETS
EQUITY FUND'S PERFORMANCE

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

Adviser: Schroder Investment Management North America Inc.

Portfolio Managers: John Troiano, Heather Crighton and Mark Bridgeman

Objective: Capital appreciation

Investment Process: The Portfolio invests primarily in stocks of companies
domiciled in emerging market countries. The adviser's network of regional
specialists and analysts in 24 countries supports an intensive program of
proprietary emerging markets research. Schroder uses its proprietary research
network to identify attractively valued companies in emerging markets that it
believes can leverage off the growth opportunities in these faster growing
economies.

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

<TABLE>
<CAPTION>
SINCE
1 3 INCEPTION
6 MONTHS YEAR YEARS 8/24/95
-------- ----- ----- ---------
<S> <C> <C> <C> <C>
With PACE program fee*......................... -16.99% -1.51% -9.26% -1.08%
Without PACE program fee....................... -16.36% -0.02% -7.89% 0.42%
MSCI EMF Ex-Malaysia Index..................... -13.24% 6.74% -7.08% -0.04%
Lipper Emerging Markets Funds Median........... -12.30% 10.93% -7.07% 0.82%
</TABLE>
----------------
* The maximum annual PACE program fee is 1.5% of the value of PACE assets.

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

C-1
<PAGE>

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PORTFOLIO AND
THE MSCI EMF EX-MALAYSIA INDEX

[GRAPH]

MSCI EMF
Portfolio Portfolio Ex-Malaysia
Without fee With Fee* Index

Jul-95
Aug-95 $10,017 $10,013 $10,000
Sep-95 9,900 9,884 9,981
Oct-95 9,517 9,490 9,633
Nov-95 9,475 9,436 9,424
Dec-95 9,814 9,761 9,816
Jan-96 10,765 10,694 10,581
Feb-96 10,481 10,399 10,304
Mar-96 10,623 10,527 10,265
Apr-96 10,965 10,853 10,648
May-96 11,057 10,930 10,681
Jun-96 11,074 10,933 10,752
Jul-96 10,423 10,277 10,001
Aug-96 10,581 10,420 10,195
Sep-96 10,581 10,407 10,267
Oct-96 10,106 9,927 9,904
Nov-96 10,348 10,152 10,024
Dec-96 10,649 10,435 10,059
Jan-97 11,202 10,963 10,849
Feb-97 11,629 11,366 11,311
Mar-97 11,478 11,205 11,077
Apr-97 11,629 11,338 11,326
May-97 12,190 11,870 11,665
Jun-97 12,826 12,474 12,439
Jul-97 13,061 12,686 12,827
Aug-97 11,654 11,306 11,480
Sep-97 12,190 11,811 11,916
Oct-97 10,206 9,876 10,009
Nov-97 10,005 9,669 9,789
Dec-97 10,147 9,795 10,044
Jan-98 9,609 9,264 9,280
Feb-98 10,231 9,851 10,023
Mar-98 10,601 10,195 10,514
Apr-98 10,660 10,238 10,525
May-98 9,248 8,871 9,104
Jun-98 8,399 8,046 8,221
Jul-98 8,752 8,374 8,541
Aug-98 6,280 6,002 6,067
Sep-98 6,591 6,291 6,485
Oct-98 7,289 6,948 7,166
Nov-98 7,625 7,260 7,718
Dec-98 7,668 7,291 7,606
Jan-99 7,693 7,306 7,484
Feb-99 7,643 7,249 7,556
Mar-99 8,524 8,075 8,552
Apr-99 9,498 8,987 9,610
May-99 9,363 8,847 9,555
Jun-99 10,523 9,932 10,639
Jul-99 10,210 9,624 10,350
Aug-99 10,235 9,636 10,444
Sep-99 9,761 9,178 10,091
Oct-99 9,939 9,333 10,306
Nov-99 10,803 10,132 11,230
Dec-99 12,410 11,625 12,659
Jan-00 12,205 11,419 12,735
Feb-00 12,146 11,349 12,903
Mar-00 12,316 11,494 12,966
Apr-00 10,917 10,175 11,737
May-00 10,430 9,709 11,252
Jun-00 10,831 10,070 11,648
Jul-00 10,208 9,479 11,049

The graph depicts the performance of PACE International Emerging Markets
Equity Investments versus the MSCI EMF ex-Malaysia Index. It is important to
note that PACE International Emerging Markets Equity Investments is a
professionally managed portfolio while the Index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.

ADVISER'S COMMENTS

Over the fiscal year ended July 31, 2000, the Portfolio underperformed the
MSCI EMF Index. This underperformance can be attributed primarily to stock
selection in Asia, particularly in Korean and Taiwanese technology stocks.
Stock selection in Latin America (Argentina) and Europe, Middle East and
Africa (EMEA) (Turkey) also detracted from performance. The Portfolio's
underperformance was offset slightly by overweighted positions in Mexico and
Brazil along with an overweighted position in Malaysia prior to that country's
reinstatement in the MSCI EMF Index.

Recent performance of emerging markets has been driven by perceptions about
the direction of the U.S. economy and U.S. interest rates. Market volatility
in the developed markets--notably in the U.S. NASDAQ Composite Index--also
affected the emerging markets, not because of the high proportion of
technology stocks in emerging markets, but because in times of uncertainty
higher risk assets tend to suffer. As a result, emerging markets
underperformed developed markets during the second quarter of 2000, even
though economic and earnings data continued to improve. Recent emerging market
performance has improved, as U.S. economic data have suggested that the U.S.
economy is slowing and may achieve a soft landing. Falling interest rates and
compelling valuations make Brazil our favorite Latin American market. We have
increased the Portfolio's exposure to Asia through purchases of hardware
stocks in Taiwan and Korea. Within EMEA, the Portfolio is underweighted in
Greece and South Africa.

The short-term direction of the emerging markets will continue to depend on
perceptions about the global economy and investor attitudes toward risk. It is
hard to envision significant outperformance in emerging markets while there
are doubts as to whether or not the U.S. economy will suffer a hard landing.
However, we believe that ongoing structural improvements within emerging
markets will limit any underperformance and provide a platform for renewed
strength once the outlook for the U.S. becomes clearer. Although recent data
have

C-2
<PAGE>

dampened fears of a hard landing for the U.S. economy, sentiment toward Latin
America remains fragile due to the belief that it would be the hardest hit
region in the event of a U.S. economic downturn. The impact of a U.S. hard
landing would affect both direct trade links (mainly impacting Mexico) and the
availability of capital via interest rates (more significant for Brazil).
Given our core scenario for a soft landing, we believe that the capital flows
issue has been exaggerated.

PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS--PORTFOLIO STATISTICS

<TABLE>
<CAPTION>
CHARACTERISTICS* 7/31/00 REGIONAL ALLOCATION* 7/31/00
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
Net Assets ($MM).................... $82.2 Asia............................. 48.2%
Number of Securities................ 181 Latin America.................... 25.2
Equities (common and preferred
stocks, Europe/Mid East/Africa........... 23.3
warrants and rights)................ 96.7% Cash & Equivalents............... 3.3
-----
Cash & Equivalents.................. 3.3% Total............................ 100.0%
--------------------------------------------------------------------------------------
<CAPTION>
TOP FIVE COUNTRIES* 7/31/00 TOP TEN STOCKS* 7/31/00
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
Taiwan.............................. 13.0% Telefonos de Mexico.............. 4.1%
Korea............................... 11.7 Samsung Electronics.............. 3.7
Brazil.............................. 11.0 China Telecom Hong Kong.......... 2.6
Mexico.............................. 10.6 Infosys Technologies............. 2.5
Hong Kong/China..................... 7.4 China Unicom..................... 2.4
-----
Total............................... 53.7% Korea Telecom.................... 2.3
Taiwan Semiconductor............. 2.2
United Microelectronics.......... 2.1
Korea Electric Power............. 2.0
Compeq Manufacturing............. 1.8
--------------------------------------------------------------------------------------
Total............................ 25.7%
</TABLE>
----------------
* Weightings represent percentages of net assets as of July 31, 2000. The
Portfolio is actively managed and all holdings are subject to change.

C-3
<PAGE>

EVERY SHAREHOLDER'S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY

Please detach at perforation before mailing.

PROXY PAINEWEBBER EMERGING MARKETS EQUITY FUND PROXY
(A SERIES OF PAINEWEBBER INVESTMENT TRUST II)
SPECIAL MEETING OF SHAREHOLDERS - JANUARY 25, 2001

THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER
INVESTMENT TRUST II ("TRUST") ON BEHALF OF THE FUND LISTED ABOVE, A SERIES OF
THE TRUST. The undersigned hereby appoints as proxies Robyn Green and Keith
Weller, and each of them (with the power of substitution) to vote for the
undersigned all shares of beneficial interest of the undersigned in the Fund
listed above at the above referenced meeting and any adjournment thereof, with
all the power the undersigned would have if personally present. The shares
represented by this proxy will be voted as instructed on the reverse side of
this proxy card. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO
GRANT AUTHORITY TO VOTE "FOR" THE PROPOSAL.

VOTE TODAY BY MAIL, TOUCH-TONE PHONE OR THE
INTERNET. CALL TOLL FREE 1-800-597-7836 OR
LOG ON TO https://vote.proxy-direct.com.
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS.
CONTROL NUMBER: [999 9999 9999 999]

NOTE: If shares are held by an individual, sign your
name exactly as it appears on this card. If shares
are held jointly, either party may sign, but the
name of the party signing should conform exactly to
the name shown on this proxy card. If shares are
held by a corporation, partnership or similar
account, the name and the capacity of the individual
signing the proxy card should be indicated - for
example: "ABC Corp., John Doe, Treasurer."

----------------------------------------------------
Signature

----------------------------------------------------
Signature (if held jointly)

----------------------------------------------------
Date

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

EVERY SHAREHOLDER'S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY

Please detach at perforation before mailing.

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

FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan of
Reorganization and Termination that provides [ ] [ ] [ ]
for the reorganization of PaineWebber
Emerging Markets Equity Fund, a series
of PaineWebber Investment Trust II, into PACE
International Emerging Markets Equity
Investments, a series of PaineWebber PACE
Select Advisors Trust.

PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>

Your Proxy Vote is Important!
---------

And now you can Vote your Proxy
on the PHONE or on
the INTERNET.

[graphic] It saves Money! Telephone and Internet voting saves postage
costs. Savings which can help to minimize expenses.

It saves Time! Telephone and Internet voting is
instantaneous - 24 hours a day.

It's Easy! Just follow these simple steps:

1. Read your proxy statement and have it at
hand.

2. Call toll-free 1-800-597-7836 for automated
instructions, or go to website:
https://vote.proxy-direct.com.
-----------------------------

3. Enter your 14 digit Control Number from your
Proxy Card.

4. Follow the recorded or on-screen directions.

5. Do not mail your Proxy Card when you vote by
---
phone or internet.

6. If you have any questions regarding the
meeting agenda or the execution of your
proxy, please call. 1-877-388-2844.