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Previous: PAINEWEBBER PACE SELECT ADVISORS TRUST, 497, 2001-01-19 |
Next: SYMPHONIX DEVICES INC, SC 13D/A, 2001-01-19 |
<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
(ON BEHALF OF PACE LARGE COMPANY VALUE EQUITY INVESTMENTS)
PAINEWEBBER AMERICA FUND
(ON BEHALF OF PAINEWEBBER GROWTH AND INCOME FUND)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby PACE Large Company Value Equity Investments
("PACE Large Company Value Fund"), a series of PaineWebber PACE Select Advisors
Trust ("PACE Trust"), would acquire all of the assets of PaineWebber Growth and
Income Fund ("Growth and Income Fund"), the sole series of PaineWebber America
Fund ("America Fund"), in exchange solely for shares of PACE Large Company Value
Fund and the assumption by PACE Large Company Value Fund of all of Growth and
Income Fund's stated liabilities. This Statement of Additional Information
consists of this cover page, the PRO FORMA financial statements of PACE Large
Company Value Fund (giving effect to the Reorganization) for the year ended July
31, 2000, and the following described documents, each of which is incorporated
by reference herein and accompanies this Statement of Additional Information:
(1) The combined Statement of Additional Information of PACE Trust,
dated November 27, 2000, which includes information relating to PACE Large
Company Value Fund and is incorporated by reference from PACE Trust's Statement
of Additional Information filed on January 8, 2001 under Rule 497, SEC File
Numbers 033-87254 and 811-08764, accession number 0000898432-01-000012;
(2) The combined Annual Report to Shareholders of PACE Trust for the
fiscal year ended July 31, 2000, which includes information relating to PACE
Large Company Value Fund and is incorporated by reference from PACE Trust's Form
N-30D, SEC File Number 811-08764, filed on October 6, 2000, accession number
0000912057-00-043979; and
(3) The Annual Report to Shareholders of Growth and Income Fund for the
fiscal year ended August 31, 2000, which is incorporated by reference from
America Fund's Form N-30D, SEC File Number 811-03502, filed on November 3, 2000,
accession number 0000912057-00-047148.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Combined Proxy Statement/Prospectus dated
December 27, 2000 relating to the proposed Reorganization. A copy of the
Combined Proxy Statement/Prospectus may be obtained without charge by calling
toll-free 1-800-647-1568. This Statement of Additional Information is dated
December 27, 2000.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The first three tables set forth the unaudited PRO FORMA condensed
Statement of Assets and Liabilities as of July 31, 2000, the unaudited PRO FORMA
condensed Statement of Operations for the twelve month period ended July 31,
2000 and the unaudited PRO FORMA Portfolio of Investments as of July 31, 2000
for Growth and Income Fund and PACE Large Company Value Fund as adjusted giving
effect to the Reorganization.
The next three tables set forth the unaudited PRO FORMA condensed
Statement of Assets and Liabilities as of July 31, 2000, the unaudited PRO FORMA
condensed Statement of Operations for the twelve month period ended July 31,
2000 and the unaudited PRO FORMA Portfolio of Investments as of July 31, 2000
for PaineWebber Tax-Managed Equity Fund, Growth and Income Fund and PACE Large
Company Value Fund as adjusted to show the combined effect of the Reorganization
and the proposed reorganization of PaineWebber Tax-Managed Equity Fund into PACE
Large Company Value Fund, which is expected to occur at the same time.
The PRO FORMA Portfolio of Investments contains information about the
securities holdings of the Funds as of July 31, 2000. The holdings of both Funds
have changed significantly since that date. For PACE Large Company Value Fund,
approximately 50% of its portfolio was realigned after October 10, 2000 to
reflect the proprietary investment style and strategies of a third sub-adviser.
Growth and Income Fund's entire portfolio was realigned after that date to
reflect the proprietary investment style and strategies of its three new
sub-advisers. Other changes in the two Funds' holdings are due to normal
portfolio turnover in response to changes in market conditions.
If Growth and Income Fund's shareholders approve the Reorganization,
the Fund's holdings that are not compatible with PACE Large Company Value Fund's
holdings will be sold in an orderly manner and the proceeds of these sales held
in temporary investments pending reinvestment in assets that are consistent with
the holdings of PACE Large Company Value Fund. As of November 30, 2000, Growth
and Income Fund's investments in such securities represented less than 20% of
its total portfolio and, to the extent they were held by Growth and Income Fund
on July 31, 2000, are marked on the PRO FORMA Portfolio of Investments.
The portion of Growth and Income Fund's assets that will be liquidated
in connection with the Reorganization will depend on market conditions and on
the sub-advisers' continuing assessment of the compatibility of Growth and
Income Fund's holdings with PACE Large Company Value Fund's portfolio
composition and its investment objective and policies at the approximate time of
the Reorganization. The need for Growth and Income Fund to dispose of
investments in connection with the Reorganization may result in its selling
securities at a disadvantageous time and could result in its realizing gains (or
losses) that would not otherwise have been realized.
<PAGE>
<TABLE>
<CAPTION>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED) COMBINED
PACE LARGE
COMPANY
PACE LARGE VALUE EQUITY
COMPANY VALUE PW GROWTH AND INVESTMENTS
EQUITY INVESTMENTS INCOME FUND ADJUSTMENTS PRO FORMA
------------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Investments in securities, at value (cost -
$344,403,107, $863,423,243 and $1,207,826,350, respectively) $ 335,291,823 $ 1,120,072,740 $ - $ 1,455,364,563
Investment of cash collateral for securities loaned
(cost - $28,786,800, $0 and $28,786,600 respectively) 28,786,800 - - 28,786,800
Cash 32,936 143,975 - 176,911
Receivable for investments sold 1,478,244 3,629,195 - 5,107,439
Receivable for shares of beneficial interest sold 175,085 91,262 - 266,347
Dividends and interest receivable 303,098 1,073,168 - 1,376,266
Deferred organizational expenses 1,025 - - 1,025
Other assets 46,443 76,866 - 123,309
------------- --------------- ---------- ---------------
Total assets 366,115,454 1,125,087,206 - 1,491,202,660
------------- --------------- ---------- ---------------
LIABILITIES
Payable for cash collateral for securities loaned 28,786,800 - - 28,786,800
Payable for investments purchased 1,538,295 - - 1,538,295
Payable for shares of beneficial interest repurchased 111,422 1,909,630 - 2,021,052
Payable to affiliates 231,826 687,616 - 919,442
Accrued expenses and other liabilities 152,701 707,657 - 860,358
------------ --------------- ---------- ---------------
Total liabilities 30,821,044 3,304,903 - 34,125,947
------------- --------------- ---------- ---------------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding - 20,507,671, 34,677,488 and
91,947,028, respectively 354,857,514 727,258,953 - 1,082,116,467
Accumulated undistributed (distributions in excess of)
net investment income (loss) 1,716,264 (131,367) - 1,584,897
Accumulated net realized gains (losses) from
investment transactions (12,168,084) 138,005,220 - 125,837,136
Net unrealized appreciation (depreciation) of investments (9,111,284) 256,649,497 - 247,538,213
------------- --------------- ---------- ---------------
Net assets applicable to shares outstanding $ 335,294,410 $ 1,121,782,303 - $ 1,457,076,713
============= =============== ========== ===============
CLASS P:
Net assets $ 335,294,410 $ - $ - $ 335,294,410
------------- --------------- ---------- ---------------
Shares outstanding 20,507,671 - - 20,507,671
------------- --------------- ---------- ---------------
Net asset value and offering price per share $ 16.35 $ - $ - $ 16.35
============= =============== ========== ===============
CLASS A:
Net assets $ - $ 731,944,747 $ - $ 744,656,229
------------- --------------- ---------- ---------------
Shares outstanding - 22,516,039 23,029,501 45,545,540
------------- --------------- ---------- ---------------
Net asset and redemption value per share $ - $ 32.51 $ - $ 16.35
============= =============== ========== ===============
Maximum offering price per share (net asset value plus
sales charge of 4.5% of offering price) $ - $ 34.04 $ - $ 17.12
============= =============== ========== ===============
CLASS B:
Net assets $ - $ 216,222,256 $ - $ 236,878,224
------------- --------------- ---------- ---------------
Shares outstanding - 6,765,936 7,722,288 14,488,224
------------- --------------- ---------- ---------------
Net asset value and offering price per share $ - $ 31.96 $ - $ 16.35
============= =============== ========== ===============
CLASS C:
Net assets $ - $ 126,509,235 $ - $ 139,119,392
------------- --------------- ---------- ---------------
Shares outstanding - 3,950,549 4,558,435 8,508,984
------------- --------------- --------- ---------------
Net asset value and offering price per share $ - $ 32.02 $ - $ 16.35
============= =============== ========== ===============
CLASS Y:
Net assets $ - $ 47,106,065 $ - $ 47,358,706
------------- --------------- ---------- ---------------
Shares outstanding - 1,444,964 1,451,645 2,896,609
------------- ---- ---------- ---------- ---------------
Net asset value and offering price per share $ - $ 32.60 $ - $ 16.35
============= =============== ========== ==============
</TABLE>
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
COMPANY
PACE LARGE VALUE EQUITY
COMPANY VALUE PW GROWTH AND INVESTMENTS
EQUITY INVESTMENTS INCOME FUND ADJUSTMENTS PRO FORMA
------------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Investment income:
Interest $ 517,478 $ 7,337,288 $ - $ 7,854,766
Dividends 5,821,563 12,292,359 - 18,113,922
------------- ------------- ---------- -------------
6,339,041 19,629,648 - 25,968,689
------------- ------------- ---------- -------------
EXPENSES:
Investment advisory and administration 2,800,505 8,989,472 1,284,208 (a) 13,074,185
Shareholder distribution and servicing fees - 6,164,635 - 6,164,635
Transfer agency and service 153,350 1,093,460 - 1,246,810
Trustees' fees 26,250 13,500 (13,500) (b) 26,250
Legal and audit 44,674 213,090 (213,090) (b) 44,674
Amortization of organizational expenses 19,032 - - 19,032
Reports and notices to shareholders 48,573 120,700 (96,560) (b) 72,713
Federal and state registration fees 53,991 54,106 (43,285) (b) 64,812
Custody and accounting 210,038 770,526 - 980,564
Other expenses 18,862 455,128 - 473,990
------------- ------------- ---------- -------------
3,375,275 17,874,617 917,773 22,167,665
Less: fee waivers and reimbursements from
investment adviser (16,771) - (1,143,991) (1,160,762)
------------- ------------- ---------- -------------
Net expenses 3,358,504 17,874,617 (226,218) (c) 21,006,903
------------- ------------- ---------- -------------
Net investment income 2,980,537 1,755,031 226,218 4,961,786
------------- ------------- ---------- -------------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment
transactions (4,441,250) 137,531,378 - 133,090,128
Net change in unrealized appreciation (depreciation)
of investments (56,910,128) 227,228,988 - 170,318,860
------------- ------------- ---------- -------------
Net realized and unrealized gains (losses) from
investment activities (61,351,378) 364,760,366 - 303,408,988
------------- -------------- ---------- -------------
Net increase (decrease) in net assets resulting from
operations $ (58,370,841) $ 366,515,396 $ 226,218 $ 308,370,774
============= ============== ========== =============
</TABLE>
--------------------------
(a) Reflects increase in fees resulting from higher fee schedule, before
waivers, of PACE Large Company Value Equity Investments.
(b) Reflects the anticipated savings of the merger.
(c) Reflects decrease in fees resulting from lower fee schedule, net of
waivers, of PACE Large Company Value Equity Investments.
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PRO FORMA PORTFOLIO OF INVESTMENTS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
COMPANY
Combined PACE PAINEWEBBER VALUE EQUITY
Number of LARGE COMPANY VALUE GROWTH AND INCOME INVESTMENTS
Shares EQUITY INVESTMENTS FUND PRO FORMA
---------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
COMMON STOCKS - 87.83%
AGRICULTURE, FOOD & BEVERAGE - 0.31%
114,900 H. J. Heinz Co. $ 4,588,819 $ - $ 4,588,819
----------- ----------- --------------
AIRLINES - 1.02%
277,300 Delta Air Lines, Inc. 5,030,519 9,857,025 14,887,544
----------- ----------- -------------
ALCOHOL - 0.66%
63,700 Anheuser-Busch Companies, Inc. 5,127,850 - 5,127,850
79,900 Seagram Co. Ltd. 4,479,394 - 4,479,394
----------- ----------- -------------
9,607,244 - 9,607,244
----------- ----------- -------------
APPAREL, RETAIL - 0.31%
220,100 The Limited, Inc. 4,498,294 - 4,498,294
----------- ----------- -------------
BANKS - 4.23%
37,900 Bank One Corp.(1) 1,205,694 - 1,205,694
549,350 Chase Manhattan Corp 5,033,344 22,262,485 27,295,829
152,100 Citigroup, Inc 10,732,556 - 10,732,556
317,300 Fleet Boston Financial Corp - 11,363,306 11,363,306
91,100 PNC Bank Corp. 4,634,712 - 4,634,712
108,800 Wells Fargo and Co. 4,494,800 - 4,494,800
45,000 Zions BanCorp 1,968,750 - 1,968,750
----------- ----------- -------------
28,069,856 33,625,791 61,695,647
----------- ----------- -------------
CHEMICALS - 1.91%
31,750 Air Products & Chemicals, Inc. 1,059,656 - 1,059,656
423,354 Dow Chemical Co - 12,171,428 12,171,428
166,500 Pharmacia Corp. 9,115,875 - 9,115,875
122,600 Union Carbide Corp.(1) 5,494,013 - 5,494,013
----------- ----------- -------------
15,669,544 12,171,428 27,840,972
----------- ----------- -------------
COMPUTER HARDWARE - 6.19%
313,280 Apple Computer, Inc.* - 15,918,540 15,918,540
720,000 Cisco Systems Inc.* (2) - 47,115,000 47,115,000
189,100 Compaq Computer Corp. 5,306,619 - 5,306,619
389,000 Dell Computer Corp.* (2) - 17,091,687 17,091,687
44,000 Hewlett-Packard Co. 4,804,250 - 4,804,250
----------- ----------- -------------
10,110,869 80,125,227 90,236,096
----------- ----------- -------------
COMPUTER SOFTWARE - 3.70%
120,700 Computer Associates International, Inc. 2,994,869 - 2,994,869
289,000 International Business Machines 10,276,787 22,217,650 32,494,437
264,425 Microsoft Corp* - 18,460,170 18,460,170
----------- ----------- -------------
13,271,656 40,677,820 53,949,476
----------- ----------- -------------
CONSUMER DURABLES - 0.46%
155,477 Whirlpool Corp. - 6,714,663 6,714,663
----------- ----------- -------------
DEFENSE AND AEROSPACE - 1.91%
316,500 Boeing Co - 15,508,500 15,508,500
59,800 General Dynamics Corp. 3,374,963 - 3,374,963
202,647 TRW, Inc 2,103,075 7,003,375 9,106,450
----------- ----------- -------------
5,478,038 22,511,875 27,989,913
----------- ----------- -------------
DIVERSIFIED RETAIL - 2.53%
410,100 Federated Department Stores, Inc* 1,987,562 7,880,469 9,868,031
930,500 Target Corp 3,828,000 23,156,500 26,984,500
----------- ----------- -------------
5,815,562 31,036,969 36,852,531
----------- ----------- -------------
DRUGS & MEDICINE - 3.72%
90,700 Bristol-Myers Squibb Co. 4,500,988 - 4,500,988
594,390 Pfizer, Inc - 25,633,068 25,633,068
556,100 Schering-Plough Corp - 24,016,569 24,016,569
----------- ----------- -------------
4,500,988 49,649,637 54,150,625
----------- ----------- -------------
ELECTRIC UTILITIES - 2.66%
181,467 Duke Energy Corp - 11,194,246 11,194,246
127,900 Edison International, Inc. 2,518,031 - 2,518,031
221,000 Energy East Corp - 4,171,375 4,171,375
100,200 Florida Progress Corp. 4,909,800 - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - 2,523,475
160,000 Reliant Energy, Inc. 5,360,000 - 5,360,000
197,200 Unicom Corp - 8,097,525 8,097,525
----------- ----------- -------------
15,311,306 23,463,146 38,774,452
----------- ----------- -------------
ELECTRICAL EQUIPMENT - 3.79%
152,553 Honeywell, Inc - 5,129,595 5,129,595
412,000 Jabil Circuit, Inc* (2) - 20,625,750 20,625,750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
COMPANY
Combined PACE PAINEWEBBER VALUE EQUITY
Number of LARGE COMPANY VALUE GROWTH AND INCOME INVESTMENTS
Shares EQUITY INVESTMENTS FUND PRO FORMA
---------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
118,400 Johnson Controls, Inc - 6,149,400 6,149,400
704,828 Motorola, Inc 4,598,994 18,704,382 23,303,376
----------- ----------- -------------
4,598,994 50,609,127 55,208,121
----------- ----------- -------------
ELECTRICAL POWER - 1.07%
138,233 Emerson Electric Co - 8,440,853 8,440,853
2,619 Koninklijke (Royal) Philips Electronics N.V.* 113,332 - 113,332
157,700 Koninklijke (Royal) Philips Electronics N.V., ADR*(1) 7,086,644 - 7,086,644
----------- ----------- -------------
7,199,976 8,440,853 15,640,829
----------- ----------- -------------
ENERGY RESERVES & PRODUCTION - 7.70%
96,300 Apache Corp.(1) 4,790,925 - 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687 - 1,288,687
246,831 Chevron Corp - 19,499,649 19,499,649
314,385 El Paso Energy Corp - 15,208,374 15,208,374
452,722 Exxon Mobil Corp 10,624,000 25,593,760 36,217,760
186,261 Phillips Petroleum Co - 9,464,387 9,464,387
341,500 Royal Dutch Petroleum Co., ADR - 19,892,375 19,892,375
219,790 Tosco Corp - 5,824,435 5,824,435
----------- ----------- -------------
16,703,612 95,482,980 112,186,592
----------- ----------- -------------
ENTERTAINMENT - 1.20%
263,000 Viacom, Inc., Class B* - 17,440,188 17,440,188
----------- ----------- -------------
FINANCIAL SERVICES - 5.03%
174,650 Associates First Capital Corp. 4,573,647 - 4,573,647
329,538 Citigroup, Inc - 23,253,025 23,253,025
215,400 Federal Home Loan Mortgage Corp - 8,494,837 8,494,837
95,150 Federal National Mortgage Association 4,745,606 - 4,745,606
77,200 Household International, Inc. 3,440,225 - 3,440,225
254,400 General Electric Co (2) - 13,085,700 13,085,700
295,543 MBNA Corp - 9,863,748 9,863,748
57,075 Providian Financial Corp - 5,818,083 5,818,083
----------- ----------- -------------
12,759,478 60,515,393 73,274,871
----------- ----------- -------------
FOREST PRODUCTS, PAPER - 1.76%
68,200 Kimberly Clark Corp. 3,917,237 - 3,917,237
133,000 International Paper Co - 4,522,000 4,522,000
375,414 Weyerhaeuser Co 3,088,475 14,063,252 17,151,727
----------- ----------- -------------
7,005,712 18,585,252 25,590,964
----------- ----------- -------------
FREIGHT, AIR, SEA & LAND - 0.32%
80,100 United Parcel Service, Inc. 4,705,875 - 4,705,875
----------- ----------- -------------
HEAVY MACHINERY - 0.33%
124,700 Deere & Co.(1) 4,808,744 - 4,808,744
----------- ----------- -------------
HOTELS - 0.18%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850 - 2,579,850
----------- ----------- -------------
HOUSEHOLD PRODUCTS - 0.46%
120,600 Avon Products, Inc.(1) 4,786,312 - 4,786,312
68,850 Newell Rubbermaid, Inc. 1,854,647 - 1,854,647
----------- ----------- -------------
6,640,959 - 6,640,959
----------- ----------- -------------
INDUSTRIAL PARTS - 2.93%
156,666 Ingersoll Rand Co - 6,149,140 6,149,140
179,300 Mettler Toledo International Inc.* - 7,261,650 7,261,650
501,400 United Technologies Corp (2) - 29,269,225 29,269,225
----------- ----------- -------------
- 42,680,015 42,680,015
----------- ----------- -------------
INDUSTRIAL SERVICES & SUPPLIES - 1.36%
371,400 Tyco International, Ltd. 3,424,000 16,445,900 19,869,900
----------- ----------- -------------
INFORMATION & COMPUTER SERVICES - 1.23%
180,900 America Online Inc* - 9,644,231 9,644,231
141,200 AMR Corp* - 4,668,425 4,668,425
84,200 Electronic Data Systems Corp. 3,620,600 - 3,620,600
----------- ----------- -------------
3,620,600 14,312,656 17,933,256
----------- ----------- -------------
LIFE INSURANCE - 0.17%
44,650 Aetna Life & Casualty Co. 2,478,075 - 2,478,075
----------- ----------- -------------
LONG DISTANCE & PHONE COMPANIES - 2.14%
157,900 AT&T Corp. 4,885,031 - 4,885,031
454,200 MCI Worldcom Inc* 4,675,781 13,066,406 17,742,187
80,642 Qwest Communications International Inc.* 3,785,134 - 3,785,134
110,600 SBC Communications, Inc. 4,707,413 - 4,707,413
----------- ----------- -------------
18,053,359 13,066,406 31,119,765
----------- ----------- -------------
MEDIA - 1.78%
35,600 AMFM Inc.* 2,543,175 - 2,543,175
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
COMPANY
Combined PACE PAINEWEBBER VALUE EQUITY
Number of LARGE COMPANY VALUE GROWTH AND INCOME INVESTMENTS
Shares EQUITY INVESTMENTS FUND PRO FORMA
---------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
271,858 Comcast Corp., Class A* - 9,247,420 9,247,420
141,700 Fox Entertainment Group Inc.* 4,339,563 - 4,339,563
132,200 The Walt Disney Co. 5,114,487 - 5,114,487
61,000 Time Warner, Inc. 4,677,937 - 4,677,937
----------- ----------- -------------
16,675,162 9,247,420 25,922,582
----------- ----------- -------------
MEDICAL PRODUCTS - 1.70%
92,000 Abbott Laboratories 3,829,500 - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - 1,377,453
220,275 Baxter International, Inc 5,442,500 11,683,881 17,126,381
97,900 Becton, Dickinson & Co. 2,471,975 - 2,471,975
-----------
13,121,428 11,683,881 24,805,309
----------- ----------- -------------
MEDICAL PROVIDERS - 0.38%
62,700 Wellpoint Health Networks, Inc.* 5,466,656 - 5,466,656
----------- ----------- -------------
MINING & METALS - 1.29%
622,104 Alcoa, Inc 5,018,475 13,800,171 18,818,646
----------- ----------- -------------
MOTOR VEHICLES - 2.93%
142,600 Borg Warner Automotive, Inc - 4,839,488 4,839,488
107,635 Delphi Automotive Systems Corp - 1,594,343 1,594,343
614,600 Ford Motor Co. 5,708,563 22,908,750 28,617,313
88,000 General Motors Corp. 5,010,500 - 5,010,500
111,300 Lear Corp.* 2,594,681 - 2,594,681
----------- ----------- -------------
13,313,744 29,342,581 42,656,325
----------- ----------- -------------
OIL REFINING - 1.73%
585,300 Conoco, Inc. 8,113,387 5,385,094 13,498,481
90,300 Texaco, Inc. 4,464,206 - 4,464,206
96,600 USX-Marathon Group 2,348,588 - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - 4,830,475
----------- ----------- -------------
19,756,656 5,385,094 25,141,750
----------- ----------- -------------
OIL SERVICES - 1.91%
106,500 Devon Energy Corp. 4,872,375 - 4,872,375
374,886 Halliburton Co - 17,291,617 17,291,617
115,800 Transocean Sedco Forex, Inc - 5,732,100 5,732,100
----------- ----------- -------------
4,872,375 23,023,717 27,896,092
----------- ----------- -------------
OTHER INSURANCE - 1.83%
147,700 Allstate Corp. 4,070,981 - 4,070,981
205,032 Ambac Financial Group, Inc. - 13,211,749 13,211,749
448,300 Metlife Inc.* 3,859,800 5,554,500 9,414,300
----------- ----------- -------------
7,930,781 18,766,249 26,697,030
----------- ----------- -------------
PUBLISHING - 1.74%
332,561 Knight Ridder, Inc 1,985,963 15,348,779 17,334,742
193,711 New York Times Co., Class A - 7,978,472 7,978,472
----------- ----------- -------------
1,985,963 23,327,251 25,313,214
----------- ----------- -------------
RAILROADS - 0.10%
62,600 Burlington Northern Santa Fe Inc. 1,529,788 - 1,529,788
----------- ----------- -------------
REAL PROPERTY - 0.28%
45,000 Kimco Realty Corp. 1,856,250 - 1,856,250
55,000 Vornado Realty Trust 2,151,875 - 2,151,875
----------- ----------- -------------
4,008,125 - 4,008,125
----------- ----------- -------------
RESTAURANTS - 0.11%
69,000 Tricon Global Restaurants, Inc.* 1,668,938 - 1,668,938
----------- ----------- -------------
SECURITIES & ASSET MANAGEMENT - 4.20%
381,218 AXA Financial Inc - 14,581,588 14,581,588
149,000 Merrill Lynch & Co., Inc - 19,258,250 19,258,250
300,000 Morgan Stanley Dean Witter & Co (2) - 27,375,000 27,375,000
----------- ----------- -------------
- 61,214,838 61,214,838
----------- ----------- -------------
SEMICONDUCTOR - 5.42%
257,048 Applied Materials, Inc* (2) - 19,503,517 19,503,517
200,120 Atmel Corp* - 5,991,093 5,991,093
303,958 Intel Corp - 20,289,196 20,289,196
173,977 JDS Uniphase Corp* (2) - 20,551,033 20,551,033
141,000 Texas Instruments, Inc - 8,274,938 8,274,938
73,773 Vitesse Semiconductor Corp* - 4,398,715 4,398,715
----------- ----------- -------------
- 79,008,492 79,008,492
----------- ----------- -------------
SPECIALTY RETAIL - 1.45%
221,903 Circuit City Stores, Inc - 5,089,900 5,089,900
260,397 Home Depot, Inc - 13,475,545 13,475,545
73,600 Tiffany & Co. 2,520,800 - 2,520,800
----------- ----------- -------------
2,520,800 18,565,445 21,086,245
----------- ----------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
COMPANY
Combined PACE PAINEWEBBER VALUE EQUITY
Number of LARGE COMPANY VALUE GROWTH AND INCOME INVESTMENTS
Shares EQUITY INVESTMENTS FUND PRO FORMA
---------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
WIRELESS TELECOMMUNICATIONS - 1.69%
196,000 Nextel Communications, Inc.* - 10,963,750 10,963,750
216,802 Verizon Communications 10,189,694 - 10,189,694
78,900 Vodafone Group PLC, ADR*(1) 3,402,562 - 3,402,562
----------- ----------- -------------
13,592,256 10,963,750 24,556,006
----------- ----------- -------------
Total Common Stocks (cost - $1,035,128,098) 327,993,076 951,741,240 1,279,734,316
----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
COMBINED
PACE LARGE
Combined PACE LARGE COMPANY
Principal COMPANY VALUE PAINEWEBBER VALUE EQUITY
Amount MATURITY INTEREST EQUITY GROWTH AND INVESTMENTS
(000) DATES RATES INVESTMENTS INCOME FUND PRO FORMA
---------------- -------- -------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Convertible Bond - 1.30%
FINANCIAL SERVICES - 1.30%
$ 16,100 Bell Atlantic Financial Services Inc.
(cost - $15,985,505) 09/15/05 4.250% - 18,917,500 18,917,500
----------- -------------- ---------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 6.89%
100,000 Federal Home Loan Mortgage Discount Notes 08/01/00 6.390@ - 100,000,000 100,000,000
500 U.S. Treasury Bills 08/17/00 5.640@ 498,747 - 498,747
----------- -------------- ---------------
Total U.S. Government Agency Obligations
(cost - $100,498,747) 498,747 100,000,000 100,498,747
----------- -------------- ---------------
REPURCHASE AGREEMENTS - 3.86%
49,414 Repurchase Agreement dated 7/31/00 with
SG Warburg, collaterized by $49,354,000 U.S.
Treasury Bonds, 6.000% due 2/15/26
(value-$50,402,773); proceeds: $49,422,922 08/01/00 6.500 - 49,414,000 49,414,000
5,996 Repurchase Agreement dated 07/31/00 with SG
Cowen Securities Group, collateralized by
$4,608,000 U.S. Treasury Bonds, 8.875% due
08/15/17 (value-$6,117,120); proceeds:
$5,997,083 08/01/00 6.500 5,996,000 - 5,996,000
804 Repurchase Agreement date 7/31/00 with State
Street Bank & Trust Co., collateralized by
$236,517 U.S. Treasury Notes, 6.625% due
03/31/02 (value - $242,430) and $566,373
U.S. Treasury Bonds, 8.125% due 08/15/19
(value - $577,844); proceeds: $804,117 08/01/00 5.250 804,000 - 804,000
----------- -------------- ---------------
Total Repurchase Agreements (cost - $56,214,000) 6,800,000 49,414,000 56,214,000
----------- -------------- ---------------
Total Investments (cost - $1,207,826,350) - 99.88% 335,291,823 1,120,072,740 1,455,364,563
Other assets in excess of liabilities - 0.12% 2,587 1,709,563 1,712,150
----------- -------------- ---------------
Net Assets - 100.00% $335,294,410 $1,121,782,303 $ 1,457,076,713
============ ============== ===============
</TABLE>
----------------
* Non-income producing security.
@ Interest rate shown is discount rate at date of purchase.
(1) Security, or portion thereof, was on loan at July 31, 2000.
ADR American Depositary Receipt.
(2) At November 30, 2000, PaineWebber Growth and Income Fund held these
securities, which are not compatible with the investment policies of PACE
Large Company Value Fund. If Growth and Income Fund's shareholders approve
the Reorganization, these securities must be sold before the Reorganization
is effected.
See accompanying notes to pro forma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
Notes to PRO FORMA Financial Statements
For the year ended July 31, 2000 (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Growth and Income Fund
("Growth and Income"), PACE Large Company Value Equity Investments ("Large
Company Value") would acquire the assets of Growth and Income in exchange solely
for the assumption by Large Company Value of Growth and Income's assets and
stated liabilities and shares of Large Company Value that correspond to the
outstanding shares of Growth and Income. The number of shares to be received
would be based on the relative net asset value of Large Company Value's shares
on the effective date of the Plan and Growth and Income will be terminated as
soon as practicable thereafter.
The PRO FORMA financial statements reflect the financial position of Large
Company Value and Growth and Income at July 31, 2000 and the combined results of
operations of Large Company Value and Growth and Income (each a "Fund" and,
together, the "Funds") for the year ended July 31, 2000.
As a result of the Plan, the investment management and administration fee will
increase due to the higher fee schedule, net of waivers, of Large Company Value.
However, after anticipated savings in other expenses of the Fund (due to the
elimination of duplicative expenses and increased asset size) and the management
fee waiver/expense reimbursement, the shareholders of Growth and Income will not
experience an increase in total expenses. Growth and Income currently pays Rule
12b-1 distribution or service fees; as of July 31, 2000, Large Company Value
does not. In addition, the PRO FORMA statement of assets and liabilities has not
been adjusted as a result of the proposed transaction because such adjustment
would not be material. The costs of approximately $335,000 associated with the
Reorganization will be paid by Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned asset management subsidiary of PaineWebber
Incorporated (a wholly owned indirect subsidiary of UBS AG), so that each Fund
bears no expenses in connection with the Reorganization. These costs are not
included in the PRO FORMA statement of operations.
The PRO FORMA financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred on August
1, 1999. The PRO FORMA financial statements should be read in conjunction with
the historical financial statements of the constituent Funds included in or
incorporated by reference in the applicable statement of additional information.
SIGNIFICANT ACCOUNTING POLICIES:
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles that require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. The following is a summary of significant
accounting policies followed by the Funds.
VALUATION OF INVESTMENTS - Each Fund calculates its net asset value based on the
current market value for its portfolio securities. Each Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued
<PAGE>
on the exchange designated as the primary market by each Fund's sub-advisers. If
a market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith or under the direction of the Fund's board of trustees (the "board"). The
amortized cost method of valuation, which approximates market value, generally
is used to value short-term debt instruments with sixty days or less remaining
to maturity, unless the board determines that this does not represent fair
value.
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PAINEWEBBER TAX-MANAGED EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
PACE LARGE COMPANY
COMPANY VALUE PW GROWTH AND PW TAX-MANAGED VALUE EQUITY
EQUITY INVESTMENTS INCOME FUND EQUITY FUND INVESTMENTS
------------------ -------------- -------------- -----------
<S> <C> <C> <C> <C>
Assets
Investments in securities, at value (cost - $344,403,107,
$863,423,243, $40,790,811 and $1,248,617,161, respectively) $ 335,291,823 $1,120,072,740 $ 46,424,785 $1,501,789,348
Investment of cash collateral for securities loaned
(cost - $28,786,800, $0, $2,271,800 and
$31,058,600, respectively) 28,786,800 - 2,271,800 31,058,600
Cash 32,936 143,975 8,680 185,591
Receivable for investments sold 1,478,244 3,629,195 28,190 5,135,629
Receivable for shares of beneficial interest sold 175,085 91,262 - 266,347
Dividends and interest receivable 303,098 1,073,168 30,959 1,407,225
Deferred organizational expenses 1,025 - - 1,025
Other assets 46,443 76,866 37,038 160,347
------------- -------------- ------------ --------------
Total assets 366,115,454 1,125,087,206 48,801,452 1,540,004,112
------------- -------------- ------------ --------------
LIABILITIES
Payable for cash collateral for securities loaned 28,786,800 - 2,271,800 31,058,600
Payable for investments purchased 1,538,295 - - 1,538,295
Payable for shares of beneficial interest repurchased 111,422 1,909,630 101,762 2,122,814
Payable to affiliates 231,826 687,616 30,810 950,252
Accrued expenses and other liabilities 152,701 707,657 166,832 1,027,190
------------- -------------- ------------ --------------
Total liabilities 30,821,044 3,304,903 2,571,204 36,697,151
------------- -------------- ------------ --------------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding - 20,507,671, 34,677,488, 3,415,082
and 91,947,028, respectively 354,857,514 727,258,953 42,919,532 1,125,035,999
Accumulated undistributed (distributions in excess of)
net investment income (loss) 1,716,264 (131,367) (300,595) 1,284,302
Accumulated net realized gains (losses) from
investment transactions (12,168,084) 138,005,220 (2,022,663) 123,814,473
Net unrealized appreciation (depreciation) of investments (9,111,284) 256,649,497 5,633,974 253,172,187
------------- -------------- ------------ --------------
Net assets applicable to shares outstanding $ 335,294,410 $1,121,782,303 $ 46,230,248 $1,503,306,961
============= ============== ============ ==============
CLASS P:
Net assets 335,294,410 $ - $ - $ 335,294,410
------------- -------------- ------------ --------------
Shares outstanding 20,507,671 - - 20,507,671
------------- -------------- ------------ --------------
Net asset value and offering price per share $ 16.35 $ - $ - $ 16.35
============= ============== ============ ==============
CLASS A:
Net assets $ - $ 731,944,747 $ 12,711,482 $ 744,656,229
------------- -------------- ------------ --------------
Shares outstanding - 22,516,039 933,197 45,545,540
------------- -------------- ------------ --------------
Net asset and redemption value per share $ - $ 32.51 $ 13.62 $ 16.35
============= ============== ============ ==============
Maximum offering price per share (net asset value plus
sales charge of 4.5% of offering price) $ - $ 34.04 $ 14.26 $ 17.12
============= ============== ============ ==============
CLASS B:
Net assets $ - $ 216,222,256 $ 20,655,968 $ 236,878,224
------------- -------------- ------------ --------------
Shares outstanding - 6,765,936 1,529,570 14,488,224
------------- -------------- ------------ --------------
Net asset value and offering price per share $ - $ 31.96 $ 13.50 $ $ 16.35
============= ============== ============ ==============
CLASS C:
Net assets $ - $ 126,509,235 $ 12,610,157 $ 139,119,392
------------- -------------- ------------ --------------
Shares outstanding - 3,950,549 933,703 8,508,984
------------- -------------- ------------ --------------
Net asset value and offering price per share $ - $ 32.02 $ 13.51 $ 16.35
============= ============== ============ ==============
CLASS Y:
Net assets $ - $ 47,106,065 $ 252,641 $ 47,358,706
------------- -------------- ------------ ---------------
Shares outstanding - 1,444,964 18,612 2,896,609
------------- -------------- ------------ --------------
Net asset value and offering price per share $ - $ 32.60 $ 13.57 $ 16.35
============= ============== ============ ==============
</TABLE>
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PAINEWEBBER TAX-MANAGED EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
PACE LARGE COMPANY
COMPANY VALUE PW GROWTH AND PW TAX-MANAGED VALUE EQUITY
EQUITY INVESTMENTS INCOME FUND EQUITY FUND ADJUSTMENTS INVESTMENTS
------------------ --------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $ 517,478 $ 7,337,288 $ 369,940 $ - $ 8,224,707
Dividends 5,821,563 12,292,359 607,113 - 18,721,036
------------- ------------- ----------- ----------- -------------
6,339,041 19,629,648 977,054 - 26,945,743
------------- ------------- ----------- ----------- -------------
EXPENSES:
Investment advisory and administration 2,800,505 8,989,472 419,843 1,312,198 (a) 13,522,018
Shareholder distribution and servicing fees - 6,164,635 439,315 - 6,603,950
Transfer agency and service 153,350 1,093,460 29,273 - 1,276,083
Trustees' fees 26,250 13,500 13,500 (27,000) (b) 26,250
Legal and audit 44,674 213,090 70,235 (283,325) (b) 44,674
Amortization of organizational expenses 19,032 - - - 19,032
Reports and notices to shareholders 48,573 120,700 38,915 (127,692) (b) 80,496
Federal and state registration fees 53,991 54,106 97,916 (121,618) (b) 84,396
Custody and accounting 210,038 770,526 33,587 - 1,014,152
Other expenses 18,862 455,128 51,121 - 525,110
------------- ------------- ----------- ----------- ------------
3,375,275 17,874,617 1,193,705 752,563 23,196,160
Less: fee waivers and reimbursements
from investment adviser (16,771) - (24,267) (1,183,177) (1,224,215)
------------- ------------- ----------- ------------ -------------
Net expenses 3,358,504 17,874,617 1,169,438 (430,614) (c) 21,971,945
------------- ------------- ----------- ----------- -------------
Net investment income (loss) 2,980,537 1,755,031 (192,384) 430,614 4,973,797
------------- ------------- ----------- ----------- -------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment
transactions (4,441,250) 137,531,378 (2,181,904) - 130,908,224
Net change in unrealized appreciation
(depreciation) of investments (56,910,128) 227,228,988 4,703,436 - 175,022,296
-------------- -------------- ----------- ----------- -------------
Net realized and unrealized gains (losses)
from investment activities (61,351,378) 364,760,366 2,521,532 - 305,930,520
-------------- -------------- ----------- ----------- -------------
Net increase (decrease) in net assets resulting
from operations $ (58,370,841) $ 366,515,396 $ 2,329,148 $ 430,614 $ 310,904,317
============= ============= =========== =========== =============
</TABLE>
--------------------------
(a) Reflects increase in fees resulting from higher fee schedule, before
waivers, of PACE Large Company Value Equity Investments.
(b) Reflects the anticipated savings of the merger.
(c) Reflects decrease in fees resulting from lower fee schedule, net of waivers,
of PACE Large Company Value Equity Investments.
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER GROWTH AND INCOME FUND
PAINEWEBBER TAX-MANAGED EQUITY FUND
PRO FORMA PORTFOLIO OF INVESTMENTS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
Combined PACE PAINEWEBBER PAINEWEBBER COMPANY
Number of LARGE COMPANY VALUE GROWTH AND INCOME TAX-MANAGED VALUE EQUITY
Shares EQUITY INVESTMENTS FUND EQUITY FUND INVESTMENTS
---------------- ------------------ ----------------- ----------- -----------
<S> <C> <C> <C> <C>
COMMON STOCKS - 87.96%
AGRICULTURE, FOOD & BEVERAGE - 0.31%
114,900 H. J. Heinz Co. $ 4,588,819 $ - $ - $ 4,588,819
----------- ----------- ----------- -------------
AIRLINES - 1.03%
25,000 America West Holding Corp*(1) - - 401,563 401,563
6,100 AMR Corp* - - 201,681 201,681
277,300 Delta Air Lines, Inc. 5,030,519 9,857,025 - 14,887,544
----------- ----------- ----------- -------------
5,030,519 9,857,025 603,244 15,490,788
----------- ----------- ----------- -------------
ALCOHOL - 0.64%
63,700 Anheuser-Busch Companies, Inc. 5,127,850 - - 5,127,850
79,900 Seagram Co. Ltd. 4,479,394 - - 4,479,394
----------- ----------- ----------- -------------
9,607,244 - - 9,607,244
----------- ----------- ----------- -------------
APPAREL, RETAIL - 0.36%
261,500 The Limited, Inc. (1) 4,498,294 - 846,113 5,344,407
----------- ----------- ----------- -------------
BANKS - 4.36%
37,900 Bank One Corp.(1) 1,205,694 - - 1,205,694
574,550 Chase Manhattan Corp 5,033,344 22,262,485 1,252,125 28,547,954
181,800 Citigroup, Inc 10,732,556 - 2,095,706 12,828,262
331,100 Fleet Boston Financial Corp - 11,363,306 494,213 11,857,519
91,100 PNC Bank Corp. 4,634,712 - - 4,634,712
108,800 Wells Fargo and Co. 4,494,800 - - 4,494,800
45,000 Zions BanCorp 1,968,750 - - 1,968,750
----------- ----------- ----------- -------------
28,069,856 33,625,791 3,842,044 65,537,691
----------- ----------- ----------- -------------
CHEMICALS - 1.85%
31,750 Air Products & Chemicals, Inc. 1,059,656 - - 1,059,656
423,354 Dow Chemical Co - 12,171,428 - 12,171,428
166,500 Pharmacia Corp. 9,115,875 - - 9,115,875
122,600 Union Carbide Corp.(1) 5,494,013 - - 5,494,013
----------- ----------- ----------- -------------
15,669,544 12,171,428 - 27,840,972
----------- ----------- ----------- -------------
COMPUTER HARDWARE - 6.02%
313,280 Apple Computer, Inc.* - 15,918,540 - 15,918,540
724,000 Cisco Systems Inc.* (2) - 47,115,000 261,750 47,376,750
189,100 Compaq Computer Corp. 5,306,619 - - 5,306,619
389,000 Dell Computer Corp.* (2) - 17,091,687 - 17,091,687
44,000 Hewlett-Packard Co. 4,804,250 - - 4,804,250
----------- ----------- ----------- -------------
10,110,869 80,125,227 261,750 90,497,846
----------- ----------- ----------- -------------
COMPUTER SOFTWARE - 3.72%
120,700 Computer Associates International, Inc. 2,994,869 - - 2,994,869
307,100 International Business Machines 10,276,787 22,217,650 910,744 33,405,181
278,625 Microsoft Corp* - 18,460,170 991,337 19,451,507
----------- ----------- ----------- -------------
13,271,656 40,677,820 1,902,081 55,851,557
----------- ----------- ----------- -------------
CONSUMER DURABLES - 0.49%
170,477 Whirlpool Corp. - 6,714,663 647,813 7,362,476
----------- ----------- ----------- -------------
DEFENSE AND AEROSPACE - 1.97%
330,600 Boeing Co - 15,508,500 690,900 16,199,400
59,800 General Dynamics Corp. 3,374,963 - - 3,374,963
222,647 TRW, Inc 2,103,075 7,003,375 898,750 10,005,200
----------- ----------- ----------- -------------
5,478,038 22,511,875 1,589,650 29,579,563
----------- ----------- ----------- -------------
DIVERSIFIED RETAIL - 2.47%
420,100 Federated Department Stores, Inc* 1,987,562 7,880,469 240,625 10,108,656
930,500 Target Corp 3,828,000 23,156,500 - 26,984,500
----------- ----------- ----------- -------------
5,815,562 31,036,969 240,625 37,093,156
----------- ----------- ----------- -------------
DRUGS & MEDICINE - 3.63%
90,700 Bristol-Myers Squibb Co. 4,500,988 - - 4,500,988
594,390 Pfizer, Inc - 25,633,068 - 25,633,068
564,200 Schering-Plough Corp - 24,016,569 349,819 24,366,388
----------- ----------- ----------- -------------
4,500,988 49,649,637 349,819 54,500,444
----------- ----------- ----------- -------------
ELECTRIC UTILITIES - 2.66%
12,600 Constellation Energy Group, Inc - - 419,737 419,737
181,467 Duke Energy Corp - 11,194,246 - 11,194,246
127,900 Edison International, Inc. 2,518,031 - - 2,518,031
221,000 Energy East Corp - 4,171,375 - 4,171,375
100,200 Florida Progress Corp. 4,909,800 - - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - - 2,523,475
8,800 PECO Energy Co - - 375,650 375,650
9,100 Pinnacle West Capital Group - - 360,019 360,019
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
Combined PACE PAINEWEBBER PAINEWEBBER COMPANY
Number of LARGE COMPANY VALUE GROWTH AND INCOME TAX-MANAGED VALUE EQUITY
Shares EQUITY INVESTMENTS FUND EQUITY FUND INVESTMENTS
---------------- ------------------ ----------------- ----------- -----------
<S> <C> <C> <C> <C>
160,000 Reliant Energy, Inc. 5,360,000 - - 5,360,000
197,200 Unicom Corp - 8,097,525 - 8,097,525
----------- ----------- ----------- -------------
15,311,306 23,463,146 1,155,406 39,929,858
----------- ----------- ----------- -------------
ELECTRICAL EQUIPMENT - 3.86%
6,000 Corning Inc - - 1,403,625 1,403,625
152,553 Honeywell, Inc - 5,129,595 - 5,129,595
412,000 Jabil Circuit, Inc* (2) - 20,625,750 - 20,625,750
128,400 Johnson Controls, Inc - 6,149,400 519,375 6,668,775
731,228 Motorola, Inc 4,598,994 18,704,382 872,850 24,176,226
----------- ----------- ----------- -------------
4,598,994 50,609,127 2,795,850 58,003,971
----------- ----------- ----------- ------------
ELECTRICAL POWER - 1.18%
148,233 Emerson Electric Co - 8,440,853 610,625 9,051,478
26,219 Koninklijke (Royal) Philips Electronics N.V.* 113,332 - 1,078,500 1,191,832
157,700 Koninklijke (Royal) Philips Electronics N.V.,
ADR*(1) 7,086,644 - - 7,086,644
10,000 Rockwell International Corp - - 350,625 350,625
----------- ----------- ----------- -------------
7,199,976 8,440,853 2,039,750 17,680,579
----------- ----------- ----------- -------------
ENERGY RESERVES & PRODUCTION - 7.70%
96,300 Apache Corp.(1) 4,790,925 - - 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687 - - 1,288,687
249,131 Chevron Corp - 19,499,649 181,700 19,681,349
314,385 El Paso Energy Corp - 15,208,374 - 15,208,374
469,883 Exxon Mobil Corp 10,624,000 25,593,760 1,372,880 37,590,640
194,661 Phillips Petroleum Co - 9,464,387 426,825 9,891,212
354,200 Royal Dutch Petroleum Co., ADR - 19,892,375 739,775 20,632,150
249,990 Tosco Corp - 5,824,435 800,300 6,624,735
----------- ----------- ----------- -------------
16,703,612 95,482,980 3,521,480 115,708,072
----------- ----------- ----------- -------------
ENTERTAINMENT - 1.23%
278,995 Viacom, Inc., Class B* - 17,440,188 1,060,668 18,500,856
----------- ----------- ----------- -------------
FINANCIAL SERVICES - 4.94%
174,650 Associates First Capital Corp. 4,573,647 - - 4,573,647
329,538 Citigroup, Inc - 23,253,025 - 23,253,025
224,600 Federal Home Loan Mortgage Corp - 8,494,837 362,825 8,857,662
95,150 Federal National Mortgage Association 4,745,606 - - 4,745,606
77,200 Household International, Inc. 3,440,225 - - 3,440,225
254,400 General Electric Co (2) - 13,085,700 - 13,085,700
315,543 MBNA Corp - 9,863,748 667,500 10,531,248
57,075 Providian Financial Corp - 5,818,083 - 5,818,083
----------- ----------- ----------- -------------
12,759,478 60,515,393 1,030,325 74,305,196
----------- ----------- ----------- -------------
FOREST PRODUCTS, PAPER - 1.77%
68,200 Kimberly Clark Corp. 3,917,237 - - 3,917,237
138,900 International Paper Co - 4,522,000 200,600 4,722,600
393,714 Weyerhaeuser Co 3,088,475 14,063,252 836,081 17,987,808
----------- ----------- ----------- -------------
7,005,712 18,585,252 1,036,681 26,627,645
----------- ----------- ----------- -------------
FREIGHT, AIR, SEA & LAND - 0.31%
80,100 United Parcel Service, Inc. 4,705,875 - - 4,705,875
----------- ----------- ----------- -------------
HEAVY MACHINERY - 0.32%
124,700 Deere & Co.(1) 4,808,744 - - 4,808,744
----------- ----------- ----------- -------------
HOTELS - 0.17%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850 - - 2,579,850
----------- ----------- ----------- -------------
HOUSEHOLD PRODUCTS - 0.44%
120,600 Avon Products, Inc.(1) 4,786,312 - - 4,786,312
68,850 Newell Rubbermaid, Inc. 1,854,647 - - 1,854,647
----------- ----------- ----------- -------------
6,640,959 - - 6,640,959
------------ ----------- ----------- -------------
INDUSTRIAL PARTS - 3.01%
156,666 Ingersoll Rand Co - 6,149,140 - 6,149,140
213,800 Mettler Toledo International Inc.* - 7,261,650 1,397,250 8,658,900
521,706 United Technologies Corp (2) - 29,269,225 1,185,363 30,454,588
----------- ----------- ----------- -------------
- 42,680,015 2,582,613 45,262,628
----------- ----------- ----------- -------------
INDUSTRIAL SERVICES & SUPPLIES - 1.32%
371,400 Tyco International, Ltd. 3,424,000 16,445,900 - 19,869,900
----------- ----------- ----------- -------------
INFORMATION & COMPUTER SERVICES - 1.28%
180,900 America Online Inc* - 9,644,231 - 9,644,231
141,200 AMR Corp* - 4,668,425 - 4,668,425
26,000 Comdisco Inc - - 672,750 672,750
84,200 Electronic Data Systems Corp. 3,620,600 - - 3,620,600
14,800 First Data Corp - - 681,725 681,725
----------- ----------- ----------- -------------
3,620,600 14,312,656 1,354,475 19,287,731
----------- ----------- ----------- -------------
LEISURE - 0.07%
18,000 Eastman Kodak Co - - 987,750 987,750
----------- ----------- ----------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
Combined PACE PAINEWEBBER PAINEWEBBER COMPANY
Number of LARGE COMPANY VALUE GROWTH AND INCOME TAX-MANAGED VALUE EQUITY
Shares EQUITY INVESTMENTS FUND EQUITY FUND INVESTMENTS
---------------- ------------------ ----------------- ----------- -----------
<S> <C> <C> <C> <C>
LIFE INSURANCE - 0.16%
44,650 Aetna Life & Casualty Co. 2,478,075 - - 2,478,075
----------- ----------- ----------- -------------
LONG DISTANCE & PHONE COMPANIES - 2.07%
157,900 AT&T Corp. 4,885,031 - - 4,885,031
454,200 MCI Worldcom Inc* 4,675,781 13,066,406 - 17,742,187
80,642 Qwest Communications International Inc.* 3,785,134 - - 3,785,134
110,600 SBC Communications, Inc. 4,707,413 - - 4,707,413
----------- ----------- ----------- -------------
18,053,359 13,066,406 - 31,119,765
----------- ----------- ----------- -------------
MEDIA - 1.72%
35,600 AMFM Inc.* 2,543,175 - - 2,543,175
271,858 Comcast Corp., Class A* - 9,247,420 - 9,247,420
141,700 Fox Entertainment Group Inc.* 4,339,563 - - 4,339,563
132,200 The Walt Disney Co. 5,114,487 - - 5,114,487
61,000 Time Warner, Inc. 4,677,937 - - 4,677,937
----------- ----------- ----------- -------------
16,675,162 9,247,420 - 25,922,582
----------- ----------- ----------- -------------
MEDICAL PRODUCTS - 1.73%
92,000 Abbott Laboratories 3,829,500 - - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - - 1,377,453
226,975 Baxter International, Inc 5,442,500 11,683,881 520,925 17,647,306
97,900 Becton, Dickinson & Co. 2,471,975 - - 2,471,975
6,700 Johnson & Johnson - - 623,519 623,519
----------- ----------- ----------- -------------
13,121,428 11,683,881 1,144,444 25,949,753
----------- ----------- ----------- -------------
MEDICAL PROVIDERS - 0.41%
20,200 Columbia/HCA Healthcare Corp - - 686,800 686,800
62,700 Wellpoint Health Networks, Inc.* 5,466,656 - - 5,466,656
----------- ----------- ----------- -------------
5,466,656 - 686,800 6,153,456
----------- ----------- ----------- -------------
MINING & METALS - 1.32%
656,448 Alcoa, Inc 5,018,475 13,800,171 1,038,906 19,857,552
----------- ----------- ----------- -------------
MOTOR VEHICLES - 2.92%
142,600 Borg Warner Automotive, Inc - 4,839,488 - 4,839,488
150,935 Delphi Automotive Systems Corp - 1,594,343 641,381 2,235,724
626,000 Ford Motor Co. 5,708,563 22,908,750 530,813 29,148,126
88,000 General Motors Corp. 5,010,500 - - 5,010,500
111,300 Lear Corp.* 2,594,681 - - 2,594,681
----------- ----------- ----------- -------------
13,313,744 29,342,581 1,172,194 43,828,519
----------- ----------- ----------- -------------
OIL REFINING - 1.69%
595,800 Conoco, Inc. 8,113,387 5,385,094 242,156 13,740,637
90,300 Texaco, Inc. 4,464,206 - - 4,464,206
96,600 USX-Marathon Group 2,348,588 - - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - - 4,830,475
----------- ----------- ----------- -------------
19,756,656 5,385,094 242,156 25,383,906
----------- ----------- ----------- -------------
OIL SERVICES - 2.06%
20,000 BJ Services Co.*(1) - - 1,167,500 1,167,500
18,500 Cooper Cameron Corp.*(1) - - 1,195,562 1,195,562
106,500 Devon Energy Corp. 4,872,375 - - 4,872,375
391,686 Halliburton Co - 17,291,617 774,900 18,066,517
115,800 Transocean Sedco Forex, Inc - 5,732,100 - 5,732,100
----------- ----------- ----------- -------------
4,872,375 23,023,717 3,137,962 31,034,054
----------- ----------- ----------- -------------
OTHER INSURANCE - 1.84%
167,400 Allstate Corp. 4,070,981 - 542,981 4,613,962
205,032 Ambac Financial Group, Inc. - 13,211,749 - 13,211,749
468,300 Metlife Inc.*(1) 3,859,800 5,554,500 420,000 9,834,300
----------- ----------- ----------- -------------
7,930,781 18,766,249 962,981 27,660,011
----------- ----------- ----------- -------------
PUBLISHING - 1.78%
8,000 Dow Jones & Co., Inc - - 527,500 527,500
341,561 Knight Ridder, Inc 1,985,963 15,348,779 469,125 17,803,867
205,711 New York Times Co., Class A - 7,978,472 494,250 8,472,722
----------- ----------- ----------- -------------
1,985,963 23,327,251 1,490,875 26,804,089
----------- ----------- ----------- -------------
RAILROADS - 0.10%
62,600 Burlington Northern Santa Fe Inc. 1,529,788 - - 1,529,788
----------- ----------- ----------- -------------
REAL PROPERTY - 0.27%
45,000 Kimco Realty Corp. 1,856,250 - - 1,856,250
55,000 Vornado Realty Trust 2,151,875 - - 2,151,875
----------- ----------- ----------- -------------
4,008,125 - - 4,008,125
----------- ----------- ----------- -------------
RESTAURANTS - 0.11%
69,000 Tricon Global Restaurants, Inc.* 1,668,938 - - 1,668,938
----------- ----------- ----------- -------------
SECURITIES & ASSET MANAGEMENT - 4.28%
396,218 AXA Financial Inc - 14,581,588 573,750 15,155,338
12,300 Lehman Brothers Holdings, Inc - - 1,382,212 1,382,212
158,000 Merrill Lynch & Co., Inc - 19,258,250 1,163,250 20,421,500
300,000 Morgan Stanley Dean Witter & Co (2) - 27,375,000 - 27,375,000
----------- ----------- ----------- -------------
- 61,214,838 3,119,212 64,334,050
----------- ----------- ----------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
Combined PACE PAINEWEBBER PAINEWEBBER COMPANY
Number of LARGE COMPANY VALUE GROWTH AND INCOME TAX-MANAGED VALUE EQUITY
Shares EQUITY INVESTMENTS FUND EQUITY FUND INVESTMENTS
---------------- ------------------ ----------------- ----------- -----------
<S> <C> <C> <C> <C>
SEMICONDUCTOR - 5.31%
257,048 Applied Materials, Inc* (2) - 19,503,517 - 19,503,517
200,120 Atmel Corp* - 5,991,093 - 5,991,093
310,358 Intel Corp - 20,289,196 427,200 20,716,396
173,977 JDS Uniphase Corp* (2) - 20,551,033 - 20,551,033
147,100 Texas Instruments, Inc - 8,274,938 357,994 8,632,932
73,773 Vitesse Semiconductor Corp* - 4,398,715 - 4,398,715
----------- ----------- ----------- -------------
- 79,008,492 785,194 79,793,686
----------- ----------- ----------- ------------
SPECIALTY RETAIL - 1.47%
245,903 Circuit City Stores, Inc - 5,089,900 550,500 5,640,400
260,397 Home Depot, Inc - 13,475,545 - 13,475,545
11,000 Lowe's Companies, Inc 464,062 464,062
73,600 Tiffany & Co. 2,520,800 - - 2,520,800
----------- ----------- ----------- -------------
2,520,800 18,565,445 1,014,562 22,100,807
----------- ----------- ----------- -------------
WIRELESS TELECOMMUNICATIONS - 1.63%
196,000 Nextel Communications, Inc.* - 10,963,750 - 10,963,750
216,802 Verizon Communications 10,189,694 - - 10,189,694
78,900 Vodafone Group PLC, ADR*(1) 3,402,562 - - 3,402,562
----------- ----------- ----------- -------------
13,592,256 10,963,750 - 24,556,006
----------- ----------- ----------- -------------
Total Common Stocks (cost - $1,072,137,548) 327,993,076 951,741,240 42,643,423 1,322,377,739
----------- ----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
Combined
Principal PACE
Amount MATURITY INTEREST LARGE COMPANY VALUE
(000) DATES RATES EQUITY INVESTMENTS
---------------- -------- -------- -------------------
<S> <C> <C> <C>
Convertible Bond - 1.26%
FINANCIAL SERVICES - 1.26%
$ 16,100 Bell Atlantic Financial Services Inc.
(cost - $15,985,505) 09/15/05 4.250%
-------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 6.83%
102,200 Federal Home Loan Mortgage Discount Notes 08/01/00 to 08/18/02 6.390 -
500 U.S. Treasury Bills (cost - $498,747) 08/17/00 5.640@ 498,747
-------------
Total U.S. Government and
Agency Obligations (cost - $102,692,109) 498,747
-------------
REPURCHASE AGREEMENTS - 3.84%
1,588 Repurchase Agreement dated 07/31/00 with
Dresdner Bank AG, collateralized by $1,542,000
U.S. Treasury Bonds, 6.25% due 8/15/23 (value-
$1,619,947); proceeds: $1,588,288 08/01/00 6.540 -
49,414 Repurchase Agreement dated 7/31/00 with SG Warburg,
collateralized by $49,354,000 U.S. Treasury Bonds,
6.00% due 2/15/26 (value-$50,402,773); proceeds:
$49,422,922 08/01/00 6.500 -
5,996 Repurchase Agreement dated 07/31/00 with SG Cowen
Securities Group, collateralized by $4,608,000
U.S. Treasury Bonds, 8.875% due 08/15/17
(value-$6,117,120); proceeds: $5,997,083 08/01/00 6.500 5,996,000
804 Repurchase Agreement date 7/31/00 with State Street
Bank & Trust Co., collateralized by $236,517
U.S. Treasury Notes, 6.625% due 03/31/02
(value - $242,430) and $566,373 U.S. Treasury
Bonds, 8.125% due 08/15/19 (value - $577,844);
proceeds: $804,117 08/01/00 5.250 804,000
-------------
Total Repurchase Agreements (cost - $57,802,000) 6,800,000
-------------
Total Investments (cost - $1,248,617,161) - 99.90% 335,291,823
Other assets (liabilities) in excess of
liabilities/other assets - 0.10% 2,587
-------------
Net Assets - 100.00% $ 335,294,410
=============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
Combined PACE LARGE
Principal PAINEWEBBER PAINEWEBBER COMPANY
Amount GROWTH AND INCOME TAX-MANAGED VALUE EQUITY
(000) FUND EQUITY FUND INVESTMENTS
---------------- ----------------- ----------- ------------
<S> <C> <C> <C>
Convertible Bond - 1.26%
FINANCIAL SERVICES - 1.26%
$ 16,100 Bell Atlantic Financial Services Inc.
(cost - $15,985,505) 18,917,500 - 18,917,500
-------------- ------------ --------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 6.83%
102,200 Federal Home Loan Mortgage Discount Notes 100,000,000 2,193,362 102,193,362
500 U.S. Treasury Bills - - 498,747
-------------- ------------ --------------
Total U.S. Government and
Agency Obligations (cost $102,692,109) 100,000,000 2,193,362 102,692,109
-------------- ------------ --------------
REPURCHASE AGREEMENTS - 3.84%
1,588 Repurchase Agreement dated 07/31/00 with
Dresdner Bank AG, collateralized by $1,542,000
U.S. Treasury Bonds, 6.25% due 8/15/23 (value-
$1,619,947); proceeds: $1,588,288 - 1,588,000 1,588,000
49,414 Repurchase Agreement dated 7/31/00 with SG Warburg,
collateralized by $49,354,000 U.S. Treasury Bonds,
6.00% due 2/15/26 (value-$50,402,773); proceeds:
$49,422,922 49,414,000 - 49,414,000
5,996 Repurchase Agreement dated 07/31/00 with SG Cowen
Securities Group, collateralized by $4,608,000
U.S. Treasury Bonds, 8.875% due 08/15/17
(value-$6,117,120); proceeds: $5,997,083 - - 5,996,000
804 Repurchase Agreement date 7/31/00 with State Street
Bank & Trust Co., collateralized by $236,517
U.S. Treasury Notes, 6.625% due 03/31/02
(value - $242,430) and $566,373 U.S. Treasury
Bonds, 8.125% due 08/15/19 (value - $577,844);
proceeds: $804,117 - - 804,000
-------------- ------------ --------------
Total Repurchase Agreements (cost - $57,802,000) 49,414,000 1,588,000 57,802,000
-------------- ------------ --------------
Total Investments (cost - $1,248,617,161) - 99.90% 1,120,072,740 46,424,785 1,501,789,348
Other assets (liabilities) in excess of
liabilities/other assets - 0.10% 1,709,563 (194,537) 1,517,613
-------------- ------------ --------------
Net Assets - 100.00% $1,121,782,303 $ 46,230,248 $1,503,306,961
============== ============ ==============
</TABLE>
----------------
* Non-income producing security.
(1) Security, or portion thereof, was on loan at July 31, 2000.
@ Interest rate shown is discounted rate at date of purchase.
ADR American Depositary Receipt.
(2) At November 30, 2000, PaineWebber Growth and Income Fund held
these securities, which are not compatible with the investment policies
of PACE Large Company Value Fund. If shareholders of Growth and Income
Fund approve its reorganization, these securities must be sold before
the reorganization is effected.
See accompanying notes to pro forma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
PaineWebber Growth and Income Fund
PaineWebber Tax-Managed Equity Fund
Notes to PRO FORMA Financial Statements
For the year ended July 31, 2000 (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Growth and Income Fund
("Growth and Income") and PaineWebber Tax-Managed Equity Fund ("Tax-Managed"),
PACE Large Company Value Equity Investments ("Large Company Value") would
acquire the assets of Growth and Income and Tax-Managed in exchange solely for
the assumption by Large Company Value of Growth and Income's and Tax-Managed's
assets and stated liabilities and shares of Large Company Value that correspond
to the outstanding shares of Growth and Income and Tax-Managed. The number of
shares to be received would be based on the relative net asset value of Large
Company Value's shares on the effective date of the Plan and Growth and Income
and Tax-Managed will be terminated as soon as practicable thereafter.
The PRO FORMA financial statements reflect the financial position of Large
Company Value, Growth and Income and Tax-Managed at July 31, 2000 and the
combined results of operations of Large Company Value, Growth and Income and
Tax-Managed (each a "Fund" and, collectively, the "Funds") for the year ended
July 31, 2000.
As a result of the Plan, the investment management and administration fee will
increase due to the higher fee schedule of Large Company Value. However, after
anticipated savings in other expenses of the Fund (due to the elimination of
duplicative expenses and increased asset size) and the management fee
waiver/expense reimbursement, the total expenses of each class of shares of both
Funds will be no higher than their current total expenses. Growth and Income and
Tax-Managed currently pay Rule 12b-1 distribution or service fees; as of July
31, 2000, Large Company Value does not. In addition, the PRO FORMA statement of
assets and liabilities has not been adjusted as a result of the proposed
transaction because such adjustment would not be material. The costs of
approximately $488,000 associated with the Reorganization will be paid by
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated (a wholly owned indirect
subsidiary of UBS AG) so that each Fund bears no expenses in connection with the
Reorganization. These costs are not included in the PRO FORMA statement of
operations.
The PRO FORMA financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred on August
1, 1999. The PRO FORMA financial statements should be read in conjunction with
the historical financial statements of the constituent Funds included in or
incorporated by reference in the applicable statement of additional information.
SIGNIFICANT ACCOUNTING POLICIES:
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles that require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. The following is a summary of significant
accounting policies followed by the Funds.
VALUATION OF INVESTMENTS - Each Fund calculates its net asset value based on the
current market value for its portfolio securities. Each Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price
<PAGE>
available prior to valuation. Securities which are listed on U.S. and foreign
stock exchanges normally are valued at the last sale price on the day the
securities are valued or, lacking any sales on such day, at the last available
bid price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market by each
Fund's sub-advisers. If a market value is not available from an independent
pricing source for a particular security, that security is valued at fair value
as determined in good faith or under the direction of the Fund's board of
trustees (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the board
determines that this does not represent fair value.
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