<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
(ON BEHALF OF PACE LARGE COMPANY VALUE EQUITY INVESTMENTS)
PAINEWEBBER MANAGED INVESTMENTS TRUST
(ON BEHALF OF PAINEWEBBER TAX-MANAGED EQUITY 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
Tax-Managed Equity Fund ("Tax-Managed Equity Fund"), a series of PaineWebber
Managed Investments Trust ("Managed Investments Trust"), in exchange solely
for shares of PACE Large Company Value Fund and the assumption by PACE Large
Company Value Fund of all of Tax-Managed Equity Fund's stated liabilities.
This Statement of Additional Information consists of this cover page, the PRO
FORMA financial statements of PACE Large Company Value Equity Fund (giving
effect to the Reorganization) for the year ended July 31, 2000, and the
following described documents, each of which is incorporated by reference
herein and accompanies this Statement of Additional Information:
(1) The combined Statement of Additional Information of PACE Trust,
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 Tax-Managed Equity Fund for
the fiscal year ended August 31, 2000, which is incorporated by reference from
Managed Investments Trust's Form N-30D, SEC File Number 811-04040, filed on
November 3, 2000, accession number 0000912057-00-047058.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Combined Proxy Statement/Prospectus dated
December 29, 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 29, 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 Tax-Managed Equity 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 Growth and Income Fund, Tax-Managed Equity Fund and
PACE Large Company Value Fund as adjusted to show the combined effect of the
Reorganization and the proposed reorganization of PaineWebber Growth and
Income Fund into PACE Large Company Value Fund, which are 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 half of its portfolio was realigned after October 10, 2000 to
reflect the proprietary investment style and strategies of a third sub-adviser.
Tax-Managed Equity Fund's entire portfolio was realigned after that date to
reflect the proprietary investment style and strategies of its two new
sub-advisers. Other changes in the two Funds' holdings are due to normal
portfolio turnover in response to changes in market conditions.
As of December 22, 2000, none of Tax-Managed Equity Fund's portfolio
holdings was incompatible with PACE Large Company Value Fund's holdings or would
have to be sold if Tax-Managed Equity Fund's shareholders approve the
Reorganization. It is expected, however, that some of Tax-Managed Equity Fund's
holdings may not remain at the time of the Reorganization due to normal
portfolio turnover.
2
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER TAX-MANAGED EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE PW TAX-MANAGED
EQUITY INVESTMENTS EQUITY FUND
--------------------- ---------------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $344,403,107, $40,790,811
and $385,193,918, respectively) $ 335,291,823 $ 46,424,785
Investment of cash collateral for securities loaned (cost - $28,786,800,
$2,271,800 and $31,058,600, respectively) 28,786,800 2,271,800
Cash 32,936 8,680
Receivable for investments sold 1,478,244 28,190
Receivable for shares of beneficial interest sold 175,085 -
Dividends and interest receivable 303,098 30,959
Deferred organizational expenses 1,025 -
Other assets 46,443 37,038
-------------------- --------------------
Total assets 366,115,454 48,801,452
-------------------- --------------------
LIABILITIES
Payable for cash collateral for securities loaned 28,786,800 2,271,800
Payable for investments purchased 1,538,295 -
Payable for shares of beneficial interest repurchased 111,422 101,762
Payable to affiliates 231,826 30,810
Accrued expenses and other liabilities 152,701 166,832
-------------------- --------------------
Total liabilities 30,821,044 2,571,204
-------------------- --------------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding -
20,507,671, 3,415,082 and 91,947,028, respectively 354,857,514 42,919,532
Accumulated undistributed (distributions in excess of) net investment income (loss) 1,716,264 (300,595)
Accumulated net realized losses from investment transactions (12,168,084) (2,022,663)
Net unrealized appreciation (depreciation) of investments (9,111,284) 5,633,974
-------------------- --------------------
Net assets applicable to shares outstanding $ 335,294,410 $ 46,230,248
==================== ====================
CLASS P:
Net assets $ 335,294,410 $ -
-------------------- --------------------
Shares outstanding 20,507,671 -
-------------------- --------------------
Net asset value and offering price per share $ 16.35 $ -
==================== ====================
CLASS A:
Net assets $ - $ 12,711,482
-------------------- --------------------
Shares outstanding - 933,197
-------------------- --------------------
Net asset and redemption value per share $ - $ 13.62
==================== ====================
Maximum offering price per share (net asset value plus sales charge of 4.5% of
offering price) $ - $ 14.26
==================== ====================
CLASS B:
Net assets $ - $ 20,655,968
-------------------- --------------------
Shares outstanding $ - 1,529,570
-------------------- --------------------
Net asset value and offering price per share $ - $ 13.50
==================== ====================
CLASS C:
Net assets $ - $ 12,610,157
-------------------- --------------------
Shares outstanding - 933,703
-------------------- --------------------
Net asset value and offering price per share $ - $ 13.51
==================== ====================
CLASS Y:
Net assets $ - $ 252,641
-------------------- --------------------
Shares outstanding - 18,612
-------------------- --------------------
Net asset value and offering price per share $ - $ 13.57
==================== ====================
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMPANY
VALUE EQUITY
ADJUSTMENTS INVESTMENTS
------------------- --------------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $344,403,107, $40,790,811
and $385,193,918, respectively) $ - $ 381,716,608
Investment of cash collateral for securities loaned (cost - $28,786,800,
$2,271,800 and $31,058,600, respectively) - 31,058,600
Cash - 41,616
Receivable for investments sold - 1,506,434
Receivable for shares of beneficial interest sold - 175,085
Dividends and interest receivable - 334,057
Deferred organizational expenses - 1,025
Other assets - 83,481
-------------------- --------------------
Total assets - 414,916,906
-------------------- --------------------
LIABILITIES
Payable for cash collateral for securities loaned - 31,058,600
Payable for investments purchased - 1,538,295
Payable for shares of beneficial interest repurchased - 213,184
Payable to affiliates - 262,636
Accrued expenses and other liabilities - 319,533
-------------------- --------------------
Total liabilities - 33,392,248
-------------------- --------------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding -
20,507,671, 3,415,082 and 91,947,028, respectively - 397,777,046
Accumulated undistributed (distributions in excess of) net investment income (loss) - 1,415,669
Accumulated net realized losses from investment transactions - (14,190,747)
Net unrealized appreciation (depreciation) of investments - (3,477,310)
-------------------- --------------------
Net assets applicable to shares outstanding $ - $ 381,524,658
==================== ====================
CLASS P:
Net assets $ - $ 335,294,410
-------------------- --------------------
Shares outstanding - 20,507,671
-------------------- --------------------
Net asset value and offering price per share $ - $ 16.35
==================== ====================
CLASS A:
Net assets $ - $ 744,656,229
-------------------- --------------------
Shares outstanding 44,612,343 45,545,540
-------------------- --------------------
Net asset and redemption value per share $ - $ 16.35
==================== ====================
Maximum offering price per share (net asset value plus sales charge of 4.5% of
offering price) $ - $ 17.12
==================== ====================
CLASS B:
Net assets $ - $ 236,878,224
-------------------- --------------------
Shares outstanding 12,958,654 14,488,224
-------------------- --------------------
Net asset value and offering price per share $ - $ 16.35
==================== ====================
CLASS C:
Net assets $ - $ 139,119,392
-------------------- --------------------
Shares outstanding 7,575,281 8,508,984
-------------------- --------------------
Net asset value and offering price per share $ - $ 16.35
==================== ====================
CLASS Y:
Net assets $ - $ 47,358,706
-------------------- --------------------
Shares outstanding 2,877,997 2,896,609
-------------------- --------------------
Net asset value and offering price per share $ - $ 16.35
==================== ====================
</TABLE>
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
PAINEWEBBER TAX-MANAGED EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE PW TAX-MANAGED
EQUITY INVESTMENTS EQUITY FUND
---------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 517,478 $ 369,940
Dividends 5,821,563 607,113
---------------------- ----------------------
TOTAL INCOME 6,339,041 977,054
---------------------- ----------------------
EXPENSES:
Investment advisory and administration 2,800,505 419,843
Shareholder distribution and servicing fees - 439,315
Transfer agency and service 153,350 29,273
Trustees' fees 26,250 13,500
Legal and audit 44,674 70,235
Amortization of organizational expenses 19,032 -
Reports and notices to shareholders 48,573 38,915
Federal and state registration fees 53,991 97,916
Custody and accounting 210,038 33,587
Other expenses 18,862 51,121
---------------------- ----------------------
3,375,275 1,193,705
Less: fee waivers and reimbursements from investment adviser (16,771) (24,267)
---------------------- ----------------------
Net expenses 3,358,504 1,169,438
---------------------- ----------------------
Net investment income (loss) 2,980,537 (192,384)
---------------------- ----------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized losses from investment transactions (4,441,250) (2,181,904)
Net change in unrealized appreciation (depreciation) of investments (56,910,128) 4,703,436
---------------------- ----------------------
Net realized and unrealized gains (losses) from investment activities (61,351,378) 2,521,532
---------------------- ----------------------
Net increase (decrease) in net assets resulting from operations $ (58,370,841) $ 2,329,148
====================== ======================
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMPANY
VALUE EQUITY
ADJUSTMENTS INVESTMENTS
-------------------- --------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest - $ 887,418
Dividends - 6,428,676
-------------------- --------------------
TOTAL INCOME - 7,316,095
-------------------- --------------------
EXPENSES:
Investment advisory and administration 27,987 (a) 3,248,335
Shareholder distribution and servicing fees - 439,315
Transfer agency and service - 182,623
Trustees' fees (13,500) (b) 26,250
Legal and audit (70,235) (b) 44,674
Amortization of organizational expenses - 19,032
Reports and notices to shareholders (31,132) (b) 56,356
Federal and state registration fees (78,333) (b) 73,574
Custody and accounting - 243,625
Other expenses - 69,983
-------------------- --------------------
(165,212) 4,403,767
Less: fee waivers and reimbursements from investment adviser - (41,038)
-------------------- --------------------
Net expenses (165,212) 4,362,729
-------------------- --------------------
Net investment income (loss) 165,212 2,953,365
-------------------- --------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized losses from investment transactions - (6,623,154)
Net change in unrealized appreciation (depreciation) of investments - (52,206,692)
-------------------- --------------------
Net realized and unrealized gains (losses) from investment activities - (58,829,846)
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations $ 165,212 $ (55,876,481)
===================== =====================
</TABLE>
------------------------
(a) Reflects increase in fees resulting from the higher fee schedule of PACE
Large Company Value Equity Investments.
(b) Reflects the anticipated savings of the merger.
See accompanying notes to pro forma financial statements
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
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 COMPANY
NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY
SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS
------------------------ ------------------------ ---------------- ----------------
<S> <C> <C> <C>
COMMON STOCKS - 97.15%
AGRICULTURE, FOOD & BEVERAGE - 1.20%
114,900 H. J. Heinz Co. $ 4,588,819 $ - $ 4,588,819
------------------------ ---------------- ----------------
AIRLINES - 1.48%
25,000 America West Holding Corp*(1) - 401,563 401,563
6,100 AMR Corp* - 201,681 201,681
93,700 Delta Air Lines, Inc. 5,030,519 - 5,030,519
------------------------ ---------------- ----------------
5,030,519 603,244 5,633,763
------------------------ ---------------- ----------------
ALCOHOL - 2.52%
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 - 1.40%
261,500 The Limited, Inc.(1) 4,498,294 846,113 5,344,407
------------------------ ---------------- ----------------
BANKS - 8.36%
37,900 Bank One Corp.(1) 1,205,694 - 1,205,694
126,500 Chase Manhattan Corp 5,033,344 1,252,125 6,285,469
181,800 Citigroup, Inc 10,732,556 2,095,706 12,828,262
13,800 Fleet Boston Financial Corp - 494,213 494,213
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 3,842,044 31,911,900
------------------------ ---------------- ----------------
CHEMICALS - 4.11%
31,750 Air Products & Chemicals, Inc. 1,059,656 - 1,059,656
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 - 15,669,544
------------------------ ---------------- ----------------
COMPUTER HARDWARE - 2.72%
4,000 Cisco Systems Inc* - 261,750 261,750
189,100 Compaq Computer Corp. 5,306,619 - 5,306,619
44,000 Hewlett-Packard Co. 4,804,250 - 4,804,250
------------------------ ---------------- ----------------
10,110,869 261,750 10,372,619
------------------------ ---------------- ----------------
COMPUTER SOFTWARE -3.98%
120,700 Computer Associates International, Inc. 2,994,869 - 2,994,869
109,500 International Business Machines 10,276,787 910,744 11,187,531
14,200 Microsoft Corp* - 991,337 991,337
------------------------ ---------------- ----------------
13,271,656 1,902,081 15,173,737
------------------------ ---------------- ----------------
CONSUMER DURABLES - 0.17%
15,000 Whirlpool Corp - 647,813 647,813
------------------------ ---------------- ----------------
DEFENSE AND AEROSPACE - 1.85%
14,100 Boeing Co - 690,900 690,900
59,800 General Dynamics Corp. 3,374,963 - 3,374,963
66,800 TRW, Inc 2,103,075 898,750 3,001,825
------------------------ ---------------- ----------------
5,478,038 1,589,650 7,067,688
------------------------ ---------------- ----------------
DIVERSIFIED RETAIL - 1.59%
92,600 Federated Department Stores, Inc* 1,987,562 240,625 2,228,187
132,000 Target Corp 3,828,000 - 3,828,000
------------------------ ---------------- ----------------
5,815,562 240,625 6,056,187
------------------------ ---------------- ----------------
DRUGS & MEDICINE - 1.27%
90,700 Bristol-Myers Squibb Co. 4,500,988 - 4,500,988
8,100 Schering-Plough Corp - 349,819 349,819
------------------------ ---------------- ----------------
4,500,988 349,819 4,850,807
------------------------ ---------------- ----------------
ELECTRIC UTILITIES - 4.32%
12,600 Constellation Energy Group, Inc - 419,737 419,737
127,900 Edison International, Inc. 2,518,031 - 2,518,031
100,200 Florida Progress Corp. 4,909,800 - 4,909,800
52,300 FPL Group, Inc. 2,523,475 - 2,523,475
8,800 PECO Energy Co - 375,650 375,650
9,100 Pinnacle West Capital Group - 360,019 360,019
160,000 Reliant Energy, Inc. 5,360,000 - 5,360,000
------------------------ ---------------- ----------------
15,311,306 1,155,406 16,466,712
------------------------ ---------------- ----------------
ELECTRICAL EQUIPMENT - 1.94%
6,000 Corning Inc - 1,403,625 1,403,625
10,000 Johnson Controls, Inc - 519,375 519,375
165,500 Motorola, Inc 4,598,994 872,850 5,471,844
------------------------ ---------------- ----------------
4,598,994 2,795,850 7,394,844
------------------------ ---------------- ----------------
ELECTRICAL POWER - 2.42%
10,000 Emerson Electric Co - 610,625 610,625
26,619 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 2,039,750 9,239,726
------------------------ ---------------- ----------------
ENERGY RESERVES & PRODUCTION - 2.52%
96,300 Apache Corp.(1) 4,790,925 - 4,790,925
39,500 Burlington Resources, Inc.(1) 1,288,687 - 1,288,687
2,300 Chevron Corp - 181,700 181,700
17,161 Exxon Mobil Corp - 1,372,880 1,372,880
8,400 Phillips Petroleum Co - 426,825 426,825
12,700 Royal Dutch Petroleum Co., ADR - 739,775 739,775
30,200 Tosco Corp - 800,300 800,300
------------------------ ---------------- ----------------
6,079,612 3,521,480 9,601,092
------------------------ ---------------- ----------------
ENERGY SOURCES -2.78%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMBINED PACE PAINEWEBBER COMPANY
NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY
SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS
------------------------ ------------------------ ---------------- ----------------
<S> <C> <C> <C>
132,800 Exxon Mobil Corp. 10,624,000 - 10,624,000
------------------------ ---------------- ----------------
ENTERTAINMENT - 0.28%
15,995 Viacom, Inc., Class B* - 1,060,668 1,060,668
------------------------ ---------------- ----------------
FINANCIAL SERVICES -3.61%
174,650 Associates First Capital Corp. 4,573,647 - 4,573,647
9,200 Federal Home Loan Mortgage Corp - 362,825 362,825
95,150 Federal National Mortgage Association 4,745,606 - 4,745,606
77,200 Household International, Inc. 3,440,225 - 3,440,225
20,000 MBNA Corp - 667,500 667,500
------------------------ ---------------- ----------------
12,759,478 1,030,325 13,789,803
------------------------ ---------------- ----------------
FOREST PRODUCTS, PAPER - 2.11%
68,200 Kimberly Clark Corp. 3,917,237 - 3,917,237
5,900 International Paper Co - 200,600 200,600
85,900 Weyerhaeuser Co 3,088,475 836,081 3,924,556
------------------------ ---------------- ----------------
7,005,712 1,036,681 8,042,393
------------------------ ---------------- ----------------
FREIGHT, AIR, SEA & LAND - 1.23%
80,100 United Parcel Service, Inc. 4,705,875 - 4,705,875
------------------------ ---------------- ----------------
HEAVY MACHINERY - 1.26%
124,700 Deere & Co.(1) 4,808,744 - 4,808,744
------------------------ ---------------- ----------------
HOTELS - 0.68%
75,600 Starwood Hotels & Resorts Worldwide, Inc.(1) 2,579,850 - 2,579,850
------------------------ ---------------- ----------------
HOUSEHOLD PRODUCTS - 1.74%
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 - 0.68%
34,500 Mettler Toledo International Inc.* - 1,397,250 1,397,250
20,306 United Technologies Corp - 1,185,363 1,185,363
------------------------ ---------------- ----------------
- 2,582,613 2,582,613
------------------------ ---------------- ----------------
INDUSTRIAL SERVICES & SUPPLIES - 0.90%
64,000 Tyco International, Ltd. 3,424,000 - 3,424,000
------------------------ ---------------- ----------------
INFORMATION & COMPUTER SERVICES - 1.30%
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 1,354,475 4,975,075
------------------------ ---------------- ----------------
LEISURE - 0.26%
18,000 Eastman Kodak Co - 987,750 987,750
------------------------ ---------------- ----------------
LIFE INSURANCE - 0.65%
44,650 Aetna Life & Casualty Co. 2,478,075 - 2,478,075
------------------------ ---------------- ----------------
LONG DISTANCE & PHONE COMPANIES - 4.73%
157,900 AT&T Corp. 4,885,031 - 4,885,031
119,700 MCI Worldcom Inc* 4,675,781 - 4,675,781
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 - 18,053,359
------------------------ ---------------- ----------------
MEDIA - 4.37%
35,600 AMFM Inc.* 2,543,175 - 2,543,175
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 - 16,675,162
------------------------ ---------------- ----------------
MEDICAL PRODUCTS - 3.74%
92,000 Abbott Laboratories 3,829,500 - 3,829,500
22,150 Bausch & Lomb, Inc. 1,377,453 - 1,377,453
76,700 Baxter International, Inc 5,442,500 520,925 5,963,425
97,900 Becton, Dickinson & Co. 2,471,975 - 2,471,975
6700 Johnson & Johnson - 623,519 623,519
------------------------ ---------------- ----------------
13,121,428 1,144,444 14,265,872
------------------------ ---------------- ----------------
MEDICAL PROVIDERS - 1.43%
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 - 1.59%
200,244 Alcoa, Inc 5,018,475 1,038,906 6,057,381
------------------------ ---------------- ----------------
MOTOR VEHICLES - 3.80%
43,300 Delphi Automotive Systems Corp - 641,381 641,381
134,000 Ford Motor Co. 5,708,563 530,813 6,239,376
88,000 General Motors Corp. 5,010,500 - 5,010,500
111,300 Lear Corp.* 2,594,681 - 2,594,681
------------------------ ---------------- ----------------
13,313,744 1,172,194 14,485,938
------------------------ ---------------- ----------------
OIL REFINING - 5.24%
362,300 Conoco, Inc. 8,113,387 242,156 8,355,543
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
------------------------ ---------------- ----------------
19,756,656 242,156 19,998,812
------------------------ ---------------- ----------------
OIL SERVICES - 2.10%
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
16,800 Halliburton Co - 774,900 774,900
------------------------ ---------------- ----------------
4,872,375 3,137,962 8,010,337
------------------------ ---------------- ----------------
OTHER INSURANCE - 2.33%
167,400 Allstate Corp. 4,070,981 542,981 4,613,962
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMBINED PACE PAINEWEBBER COMPANY
NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY
SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS
------------------------ ------------------------ ---------------- ----------------
<S> <C> <C> <C>
203,800 Metlife Inc.*(1) 3,859,800 420,000 4,279,800
------------------------ ---------------- ----------------
7,930,781 962,981 8,893,762
------------------------ ---------------- ----------------
PUBLISHING - 0.91%
8,000 Dow Jones & Co., Inc - 527,500 527,500
47,100 Knight Ridder, Inc 1,985,963 469,125 2,455,088
12,000 New York Times Co., Class A - 494,250 494,250
------------------------ ---------------- ----------------
1,985,963 1,490,875 3,476,838
------------------------ ---------------- ----------------
RAILROADS - 0.40%
62,600 Burlington Northern Santa Fe Inc. 1,529,788 - 1,529,788
------------------------ ---------------- ----------------
REAL PROPERTY -1.05%
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 - 0.44%
69,000 Tricon Global Restaurants, Inc.* 1,668,938 - 1,668,938
------------------------ ---------------- ----------------
SECURITIES & ASSET MANAGEMENT - 0.82%
15,000 AXA Financial Inc - 573,750 573,750
12,300 Lehman Brothers Holdings, Inc - 1,382,212 1,382,212
9,000 Merrill Lynch & Co., Inc - 1,163,250 1,163,250
------------------------ ---------------- ----------------
- 3,119,212 3,119,212
------------------------ ---------------- ----------------
SEMICONDUCTOR - 0.21%
6,400 Intel Corp - 427,200 427,200
6,100 Texas Instruments, Inc - 357,994 357,994
------------------------ ---------------- ----------------
- 785,194 785,194
------------------------ ---------------- ----------------
SPECIALTY RETAIL - 0.93%
24,000 Circuit City Stores, Inc - 550,500 550,500
11,000 Lowe's Companies, Inc - 464,062 464,062
73600 Tiffany & Co. 2,520,800 - 2,520,800
------------------------ ---------------- ----------------
2,520,800 1,014,562 3,535,362
------------------------ ---------------- ----------------
WIRELESS TELECOMMUNICATIONS - 3.56%
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 - 13,592,256
------------------------ ---------------- ----------------
Total Common Stocks (cost- $374,113,810) 327,993,076 42,643,423 370,636,499
------------------------ ---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
COMBINED PACE LARGE
PRINCIPAL PACE PAINEWEBBER COMPANY
AMOUNT MATURITY INTEREST LARGE COMPANY VALUE TAX MANAGED VALUE EQUITY
(000) DATES RATES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS
----------------------- -------------------------------------- ------------- --------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.69%
<S> <C> <C> <C> <C> <C> <C>
2,200 Federal Home Loan Mortgage Discount Notes 08/18/00 6.390@ - 2,193,362 2,193,362
500 U.S. Treasury Bills 08/17/00 5.640@ 498,747 - 498,747
------------- ------------- --------------
Total U.S. Government Agency 498,747 2,193,362 2,692,109
Obligations (cost - $2,692,109) ------------- ------------- --------------
REPURCHASE AGREEMENTS - 2.20%
1,588 Repurchase Agreement dated 07/31/00
with Dresdner Bank AG,collateralized
by $1,542,000 U.S. Treasury Bonds,
6.250% due 8/15/23 (value-$1,619,947);
proceeds: $1,588,288 08/01/00 6.540 - 1,588,000 1,588,000
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 $449,247 U.S. Treasury
Bonds, 8.125% due 8/15/19 (value - $577,844); 08/01/00 5.250 804,000 - 804,000
proceeds: $804,117
------------- ------------- --------------
Total Repurchase Agreements (cost - $8,388,000) 6,800,000 1,588,000 8,388,000
------------- ------------- --------------
Total Investments (cost - $385,193,918) - 100.05% 335,291,823 46,424,785 381,716,608
Other assets (liabilities) in excess of liabilities/other assets - (0.05% 2,587 (194,537) (191,950)
------------- ------------- --------------
Net Assets - 100.00% $335,294,410 $46,230,248 $381,524,658
============= ============= ==============
</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.
See accompanying notes to pro forma financial statements.
<PAGE>
PACE Large Company Value Equity Investments
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 Tax-Managed Equity Fund
("Tax-Managed Equity"), PACE Large Company Value Equity Investments ("Large
Company Value") would acquire the assets of Tax-Managed Equity in exchange
solely for the assumption by Large Company Value of Tax-Managed Equity's assets
and stated liabilities and shares of Large Company Value that correspond to the
outstanding shares of Tax-Managed Equity. 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 Tax-Managed Equity will be terminated as
soon as practicable thereafter.
The PRO FORMA financial statements reflect the financial position of Large
Company Value and Tax-Managed Equity at July 31, 2000 and the combined results
of operations of Large Company Value and Tax-Managed Equity (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 of Large Company Value. However,
after anticipated savings in other expenses of the Fund and the management
fee waiver/expense reimbursement, the shareholders of Tax-Managed Equity will
not experience an increase in total expenses. Tax-Managed Equity currently
pays Rule 12b-1 distribution or service fees; as of July 31, 2000, Large
Company Value does not. Other fixed expenses will be reduced due to the
elimination of duplicative expenses. In addition, the PRO FORMA statement of
assets and liabilities has not been adjusted as a result of the proposed
transaction because such adjustment would not be material. The costs of
approximately $153,000 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
<PAGE>
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.
<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>
PACE LARGE
COMPANY VALUE PW GROWTH AND
EQUITY INVESTMENTS INCOME FUND
------------------ --------------
<S> <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
Investment of cash collateral for securities loaned (cost - $28,786,800, $0,
$2,271,800 and $31,058,600 respectively) 28,786,800 --
Cash 32,936 143,975
Receivable for investments sold 1,478,244 3,629,195
Receivable for shares of beneficial interest sold 175,085 91,262
Dividends and interest receivable 303,098 1,073,168
Deferred organizational expenses 1,025 --
Other assets 46,443 76,866
--------------- ---------------
Total assets 366,115,454 1,125,087,206
--------------- ---------------
LIABILITIES
Payable for cash collateral for securities loaned 28,786,800 --
Payable for investments purchased 1,538,295 --
Payable for shares of beneficial interest repurchased 111,422 1,909,630
Payable to affiliates 231,826 687,616
Accrued expenses and other liabilities 152,701 707,657
--------------- ---------------
Total liabilities 30,821,044 3,304,903
--------------- ---------------
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
Accumulated undistributed (distributions in excess of) net investment income (loss) 1,716,264 (131,367)
Accumulated net realized gains (losses) from investment transactions (12,168,084) 138,005,220
Net unrealized appreciation (depreciation) of investments (9,111,284) 256,649,497
--------------- ---------------
Net assets applicable to shares outstanding $ 335,294,410 $ 1,121,782,303
=============== ===============
CLASS P:
Net assets $ 335,294,410 $ --
--------------- ---------------
Shares outstanding 20,507,671 --
--------------- ---------------
Net asset value and offering price per share $ 16.35 $ --
=============== ===============
CLASS A:
Net assets $ -- $ 731,944,747
--------------- ---------------
Shares outstanding -- 22,516,039
--------------- ---------------
Net asset and redemption value per share $ -- $ 32.51
=============== ===============
Maximum offering price per share (net asset value plus sales charge of 4.5% of
offering price) $ -- $ 34.04
=============== ===============
CLASS B:
Net assets $ -- $ 216,222,256
--------------- ---------------
Shares outstanding -- 6,765,936
--------------- ---------------
Net asset value and offering price per share $ -- $ 31.96
=============== ===============
CLASS C:
Net assets $ -- $ 126,509,235
--------------- ---------------
Shares outstanding -- 3,950,549
--------------- ---------------
Net asset value and offering price per share $ -- $ 32.02
=============== ===============
CLASS Y:
Net assets $ -- $ 47,106,065
--------------- ---------------
Shares outstanding -- 1,444,964
--------------- ---------------
Net asset value and offering price per share $ -- $ 32.60
=============== ===============
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMPANY
PW TAX-MANAGED VALUE EQUITY
EQUITY FUND INVESTMENTS
--------------- ---------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $344,403,107, $863,423,243,
$40,790,811 and $1,248,617,161, respectively) $ 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) 2,271,800 31,058,600
Cash 8,680 185,591
Receivable for investments sold 28,190 5,135,629
Receivable for shares of beneficial interest sold -- 266,347
Dividends and interest receivable 30,959 1,407,225
Deferred organizational expenses -- 1,025
Other assets 37,038 160,347
--------------- ---------------
Total assets 48,801,452 1,540,004,112
--------------- ---------------
LIABILITIES
Payable for cash collateral for securities loaned 2,271,800 31,058,600
Payable for investments purchased -- 1,538,295
Payable for shares of beneficial interest repurchased 101,762 2,122,814
Payable to affiliates 30,810 950,252
Accrued expenses and other liabilities 166,832 1,027,190
--------------- ---------------
Total liabilities 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 42,919,532 1,125,035,999
Accumulated undistributed (distributions in excess of) net investment income (loss) (300,595) 1,284,302
Accumulated net realized gains (losses) from investment transactions (2,022,663) 123,814,473
Net unrealized appreciation (depreciation) of investments 5,633,974 253,172,187
--------------- ---------------
Net assets applicable to shares outstanding $ 46,230,248 $ 1,503,306,961
=============== ===============
CLASS P:
Net assets $ -- $ 335,294,410
--------------- ---------------
Shares outstanding -- 20,507,671
--------------- ---------------
Net asset value and offering price per share $ -- $ 16.35
=============== ===============
CLASS A:
Net assets $ 12,711,482 $ 744,656,229
--------------- ---------------
Shares outstanding 933,197 45,545,540
--------------- ---------------
Net asset and redemption value per share $ 13.62 $ 16.35
=============== ===============
Maximum offering price per share (net asset value plus sales charge of 4.5% of
offering price) $ 14.26 $ 17.12
=============== ===============
CLASS B:
Net assets $ 20,655,968 $ 236,878,224
--------------- ---------------
Shares outstanding 1,529,570 14,488,224
--------------- ---------------
Net asset value and offering price per share $ 13.50 $ 16.35
=============== ===============
CLASS C:
Net assets $ 12,610,157 $ 139,119,392
--------------- ---------------
Shares outstanding 933,703 8,508,984
--------------- ---------------
Net asset value and offering price per share $ 13.51 $ 16.35
=============== ===============
CLASS Y:
Net assets $ 252,641 $ 47,358,706
--------------- ---------------
Shares outstanding 18,612 2,896,609
--------------- ---------------
Net asset value and offering price per share $ 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>
PACE LARGE
COMPANY VALUE PW
EQUITY PW GROWTH AND TAX-MANAGED
INVESTMENTS INCOME FUND EQUITY FUND
-------------- --------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 517,478 $ 7,337,288 $ 369,940
Dividends 5,821,563 12,292,359 607,113
-------------- --------------- ------------
6,339,041 19,629,648 977,054
-------------- --------------- ------------
EXPENSES:
Investment advisory and administration 2,800,505 8,989,472 419,843
Shareholder distribution and servicing fees - 6,164,635 439,315
Transfer agency and service 153,350 1,093,460 29,273
Trustees' fees 26,250 13,500 13,500
Legal and audit 44,674 213,090 70,235
Amortization of organizational expenses 19,032 - -
Reports and notices to shareholders 48,573 120,700 38,915
Federal and state registration fees 53,991 54,106 97,916
Custody and accounting 210,038 770,526 33,587
Other expenses 18,862 455,128 51,121
-------------- --------------- ------------
3,375,275 17,874,617 1,193,705
Less: fee waivers and reimbursements from investment adviser (16,771) - (24,267)
-------------- --------------- ------------
Net expenses 3,358,504 17,874,617 1,169,438
-------------- ---------------
Net investment income (loss) 2,980,537 1,755,031 (192,384)
-------------- --------------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment transactions (4,441,250) 137,531,378 (2,181,904)
Net change in unrealized appreciation (depreciation) of investments (56,910,128) 227,228,988 4,703,436
-------------- --------------- ------------
Net realized and unrealized gains (losses) from investment activities (61,351,378) 364,760,366 2,521,532
-------------- --------------- ------------
Net increase (decrease) in net assets resulting from operations $ (58,370,841) $ 366,515,396 $ 2,329,148
============== =============== ============
<CAPTION>
PRO FORMA
COMBINED
PACE LARGE
COMPANY
VALUE EQUITY
ADJUSTMENTS INVESTMENTS
----------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ - $ 8,224,707
Dividends - 18,721,036
----------------- --------------
- 26,945,743
----------------- --------------
EXPENSES:
Investment advisory and administration 1,312,198 (a) 13,522,018
Shareholder distribution and servicing fees - 6,603,950
Transfer agency and service - 1,276,083
Trustees' fees (27,000) (b) 26,250
Legal and audit (283,325) (b) 44,674
Amortization of organizational expenses - 19,032
Reports and notices to shareholders (127,692) (b) 80,496
Federal and state registration fees (121,618) (b) 84,396
Custody and accounting - 1,014,152
Other expenses - 525,110
----------------- --------------
752,563 23,196,160
Less: fee waivers and reimbursements from investment adviser (1,183,177) (1,224,215)
----------------- --------------
Net expenses (430,614) (c) 21,971,945
----------------- --------------
Net investment income (loss) 430,614 4,973,797
----------------- --------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment transactions - 130,908,224
Net change in unrealized appreciation (depreciation) of investments - 175,022,296
----------------- --------------
Net realized and unrealized gains (losses) from investment activities - 305,930,520
----------------- --------------
Net increase (decrease) in net assets resulting from operations $ 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
PACE PAINEWEBBER
COMBINED LARGE COMPANY PAINEWEBBER COMPANY
NUMBER OF VALUE EQUITY GROWTH AND TAX-MANAGED VALUE EQUITY
SHARES INVESTMENTS INCOME 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>
<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>
<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
6700 Johnson & Johnson - - 623,519 623,519
------------- ------------ ----------- -------------
13,121,428 11,683,881 1,144,444 25,949,753
------------- ------------ ----------- -------------
MEDICAL PROVIDERS - 0.41%
20,200 Columbia/HCA Healthcare Corp - - 686,800 686,800
62,700 Wellpoint Health Networks, Inc.* 5,466,656 - - 5,466,656
------------- ------------ ----------- -------------
5,466,656 - 686,800 6,153,456
------------- ------------ ----------- -------------
MINING & METALS - 1.32%
656,448 Alcoa, Inc 5,018,475 13,800,171 1,038,906 19,857,552
------------- ------------ ----------- -------------
MOTOR VEHICLES - 2.92%
142,600 Borg Warner Automotive, Inc - 4,839,488 - 4,839,488
150,935 Delphi Automotive Systems Corp - 1,594,343 641,381 2,235,724
626,000 Ford Motor Co. 5,708,563 22,908,750 530,813 29,148,126
88,000 General Motors Corp. 5,010,500 - - 5,010,500
111,300 Lear Corp.* 2,594,681 - - 2,594,681
------------- ------------ ----------- -------------
13,313,744 29,342,581 1,172,194 43,828,519
------------- ------------ ----------- -------------
OIL REFINING - 1.69%
595,800 Conoco, Inc. 8,113,387 5,385,094 242,156 13,740,637
90,300 Texaco, Inc. 4,464,206 - - 4,464,206
96,600 USX-Marathon Group 2,348,588 - - 2,348,588
115,700 Williams Companies, Inc. 4,830,475 - - 4,830,475
------------- ------------ ----------- -------------
19,756,656 5,385,094 242,156 25,383,906
------------- ------------ ----------- -------------
OIL SERVICES - 2.06%
20,000 BJ Services Co.*(1) - - 1,167,500 1,167,500
18,500 Cooper Cameron Corp.*(1) - - 1,195,562 1,195,562
106,500 Devon Energy Corp. 4,872,375 - - 4,872,375
391,686 Halliburton Co - 17,291,617 774,900 18,066,517
115,800 Transocean Sedco Forex, Inc - 5,732,100 - 5,732,100
------------- ------------ ----------- -------------
4,872,375 23,023,717 3,137,962 31,034,054
------------- ------------ ----------- -------------
OTHER INSURANCE - 1.84%
167,400 Allstate Corp. 4,070,981 - 542,981 4,613,962
205,032 Ambac Financial Group, Inc. - 13,211,749 - 13,211,749
468,300 Metlife 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
------------- ------------ ----------- -------------
</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>
- 61,214,838 3,119,212 64,334,050
------------- ------------ ----------- -------------
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 PACE
PRINCIPAL LARGE COMPANY
AMOUNT MATURITY INTEREST VALUE EQUITY
(000) DATES RATES INVESTMENTS
---------------- ------------- ----------- --------------
<S> <C> <C> <C>
CONVERTIBLE BOND - 1.26%
FINANCIAL SERVICES - 1.26%
$ 16,100 Bell Atlantic Financial Services Inc. (cost - $15,985,505) 09/15/05 4.250% -
------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 6.83%
102,200 Federal Home Loan Mortgage Discount Notes 08/01/00 to 08/18/00 6.390 -
500 U.S. Treasury Bills 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
============
<CAPTION>
PRO FORMA
COMBINED
COMBINED PACE LARGE
PRINCIPAL PAINEWEBBER PAINEWEBBER COMPANY
AMOUNT GROWTH AND TAX-MANAGED VALUE EQUITY
(000) INCOME 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.