-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SfHpA9VJyh4D5NKu6TxMS7QpuUv6sAvTeTt0PD0e1pusk1QzgbKigUoH8y3RqtUS ZWuUZZJdyVkwJ900MgiEQg== 0000912057-01-001832.txt : 20010123 0000912057-01-001832.hdr.sgml : 20010123 ACCESSION NUMBER: 0000912057-01-001832 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAINEWEBBER PACE SELECT ADVISORS TRUST CENTRAL INDEX KEY: 0000930007 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 333-49850 FILM NUMBER: 1510352 BUSINESS ADDRESS: STREET 1: C/O MITCHELL HUTCHINS ASSET MGMT INC STREET 2: 1285 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132000 MAIL ADDRESS: STREET 1: C/O MITCHELL HU51 WEST 52ND ST STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST DATE OF NAME CHANGE: 19941212 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER CONSULTING FUND PRODUCT DATE OF NAME CHANGE: 19940914 497 1 a2035282z497.txt 497 PAINEWEBBER PACE SELECT ADVISORS TRUST (ON BEHALF OF PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS) PAINEWEBBER SECURITIES TRUST (ON BEHALF OF PAINEWEBBER SMALL CAP 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 Small/Medium Company Value Equity Investments ("PACE Small/Medium Company Value Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE Trust"), would acquire all of the assets of PaineWebber Small Cap Fund ("Small Cap Fund"), a series of PaineWebber Securities Trust ("Securities Trust"), in exchange solely for shares of PACE Small/Medium Company Value Fund and the assumption by PACE Small/Medium Company Value Fund of all of Small Cap Fund's stated liabilities. This Statement of Additional Information consists of this cover page, the PRO FORMA financial statements of PACE Small/Medium 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 Small/Medium Company Value Fund and is incorporated by reference from PACE Trust's Statement of Additional Information as 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, which includes information relating to PACE Small/Medium Company Value Fund for the fiscal year ended July 31, 2000 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 Small Cap Fund for the fiscal year ended July 31, 2000, which is incorporated by reference from Securities Trust's Form N-30D, SEC File Number 811-07374, filed on October 2, 2000, accession number 0000930413-00-001277. This Statement of Additional Information is not a prospectus and should be read only in conjunction with the Combined Proxy Statement/Prospectus dated December 15, 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 15, 2000. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The following 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 Small Cap Fund and PACE Small/Medium Company Value Fund as adjusted giving effect to the Reorganization. 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, primarily because one or more new sub-advisers have realigned their portions of each Fund's portfolio after October 10, 2000 to reflect their proprietary investment strategies. These changes are greater for Small Cap Fund because all its assets were allocated between two new sub-advisers. PACE Small/Medium Company Value Fund replaced one of its two sub-advisers. That realignment was not complete as of November 30, 2000. Other changes in the two Funds' holdings are due to normal portfolio turnover in response to changes in market conditions. It is not expected that any of Small Cap Fund's holdings will be incompatible with PACE Small/Medium Company Value Fund's holdings. However, if shareholders of Small Cap Fund approve the Reorganization, it is expected that some of the Fund's current holdings (less than 20% as of November 30, 2000) may be sold in the months following the Reorganization to adjust the proportion of the stocks of companies with smaller total market capitalizations ($1.5 billion and lower) in the combined Fund's portfolio. The amount of Small Cap Fund's assets that would be sold by the post-merger combined Fund for this purpose and the timing of those sales will depend on market conditions and on the applicable sub-adviser's continuing assessment of the appropriate proportion of stocks of companies with smaller total market capitalizations in the combined Fund's portfolio. 2 PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS PAINEWEBBER SMALL CAP FUND PRO FORMA STATEMENT OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
PRO FORMA COMBINED PACE SMALL/MEDIUM PACE SMALL/MEDIUM COMPANY VALUE PW SMALL CAP COMPANY VALUE EQUITY EQUITY INVESTMENTS FUND ADJUSTMENTS INVESTMENTS -------------------- ------------- ----------- -------------------- ASSETS Investments in securities, at value (cost - $229,343,032, $66,005,468, and $295,348,500, respectively) $ 212,687,610 $ 66,129,386 $ - $ 278,816,996 Investments in cash collateral received for securities loaned (cost - $18,674,100, $5,116,400 and $23,790,500, respectively) 18,674,100 5,116,400 - 23,790,500 Cash 843 1,998 - 2,841 Receivable for investments sold 1,286,772 1,725,106 - 3,011,878 Receivable for shares of beneficial interest sold 114,978 25,088 - 140,066 Dividends and interest receivable 120,739 25,178 - 145,917 Deferred organizational expenses 1,025 - - 1,025 Other assets 66,167 5,533 - 71,700 -------------------- ------------- ----------- -------------------- Total assets 232,952,234 73,028,689 - 305,980,923 -------------------- ------------- ----------- -------------------- LIABILITIES Payable for cash collateral for securities loaned 18,674,100 5,116,400 - 23,790,500 Payable for investments purchased 154,954 999,959 - 1,154,913 Payable for shares of beneficial interest repurchased 99,013 136,776 - 235,789 Payable to affiliates 140,995 89,699 - 230,694 Accrued expenses and other liabilities 134,303 131,669 - 265,972 -------------------- ------------- ----------- -------------------- Total liabilities 19,203,365 6,474,503 - 25,677,868 -------------------- ------------- ----------- -------------------- NET ASSETS Beneficial interest shares of $0.001 par value outstanding - 16,034,793, 5,549,996 and 21,027,487, respectively 230,680,256 67,529,315 - 298,209,571 Accumulated undistributed (distributions in excess of) net investment income (loss) 1,068,966 (1,121,699) - (52,733) Accumulated net realized gains (losses) from investment transactions (1,344,931) 22,652 - (1,322,279) Net unrealized appreciation (depreciation) of investments (16,655,422) 123,918 - (16,531,504) -------------------- ------------- ----------- -------------------- Net assets applicable to shares outstanding $ 213,748,869 $ 66,554,186 $ - $ 280,303,055 ==================== ============= =========== ==================== CLASS P: Net assets $ 213,748,869 $ - $ - $ 213,748,869 -------------------- ------------- ----------- -------------------- Shares outstanding 16,034,793 - - 16,034,793 -------------------- ------------- ----------- -------------------- Net asset and redemption value per share $ 13.33 $ - $ - $ 13.33 ==================== ============= =========== ==================== CLASS A: Net assets $ - $ 40,482,113 $ - $ 40,482,113 -------------------- ------------- ----------- -------------------- Shares outstanding - 3,294,688 (257,842) 3,036,846 -------------------- ------------- ----------- -------------------- Net asset and redemption value per share $ - $ 12.29 $ - $ 13.33 ==================== ============= =========== ==================== Maximum offering price per share (net asset value plus sales charge of 4.5% of offering price) $ - $ 12.87 $ - $ 13.96 ==================== ============= =========== ==================== CLASS B: Net assets $ - $ 11,592,905 $ - $ 11,592,905 -------------------- ------------- ----------- -------------------- Shares outstanding - 1,008,312 (138,647) 869,665 -------------------- ------------- ----------- -------------------- Net asset value and offering price per share $ - $ 11.50 $ - $ 13.33 ==================== ============= =========== ==================== CLASS C: Net assets $ - $ 12,648,217 $ - $ 12,648,217 -------------------- ------------- ----------- -------------------- Shares outstanding - 1,099,604 (150,773) 948,831 -------------------- ------------- ----------- -------------------- Net asset value and offering price per share $ - $ 11.50 $ - $ 13.33 ==================== ============= =========== ==================== CLASS Y: Net assets $ - $ 1,830,951 $ - $ 1,830,951 -------------------- ------------- ----------- -------------------- Shares outstanding - 147,392 (10,040) 137,352 -------------------- ------------- ----------- -------------------- Net asset value and offering price per share $ - $ 12.42 $ - $ 13.33 ==================== ============= =========== ====================
See accompanying notes to pro forma financial statements PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS PAINEWEBBER SMALL CAP FUND PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
PRO FORMA COMBINED PACE SMALL/MEDIUM PACE SMALL/MEDIUM COMPANY VALUE PW SMALL CAP COMPANY VALUE EQUITY EQUITY INVESTMENTS FUND ADJUSTMENTS INVESTMENTS --------------------- ------------- ----------- -------------------- INVESTMENT INCOME: Interest (net of foreign withholding taxes, if any) $ 505,157 $ 117,212 $ - $ 622,369 Dividends (net of foreign withholding taxes, if any) 2,978,001 162,027 - 3,140,028 --------------------- ------------- ----------- ------------------- 3,483,158 279,239 - 3,762,397 --------------------- ------------- ----------- ------------------- EXPENSES: Investment advisory and administration fees 1,574,930 729,053 (145,815)(a) 2,158,168 Shareholder distribution and servicing fees - 383,508 - 383,508 Transfer agency fees and expenses 110,990 124,884 - 235,874 Reports and notices to shareholders 43,030 49,590 (39,672)(b) 52,948 Legal and audit 57,490 54,415 (54,415)(b) 57,490 Trustees' fees 26,250 13,500 (13,500)(b) 26,250 Federal and state registration fees 36,260 - - 36,260 Amortization of organizational expenses 19,032 - - 19,032 Custody and accounting 118,120 45,823 - 163,943 Other expenses 11,259 2,294 - 13,553 --------------------- ------------- ----------- ------------------- 1,997,361 1,403,067 (253,402) 3,147,026 Less: Fee waivers and reimbursements from investment adviser (32,450) (2,129) - (34,579) --------------------- ------------- ----------- ------------------- Net expenses 1,964,911 1,400,938 (253,402) 3,112,447 --------------------- ------------- ----------- ------------------- Net investment income (loss) 1,518,247 (1,121,699) 253,402 649,950 --------------------- ------------- ----------- ------------------- REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES: Net realized gains from investment transactions 2,717,494 9,753,603 - 12,471,097 Net change in unrealized depreciation of investments (25,897,124) (1,650,030) - (27,547,154) --------------------- ------------- ----------- ------------------- Net realized and unrealized gains (losses) from investment activities (23,179,630) 8,103,573 - (15,076,057) --------------------- ------------- ----------- ------------------- Net increase (decrease) in net assets resulting from operations $ (21,661,383) $ 6,981,874 $ 253,402 $ (14,426,107) ===================== ============= =========== ===================
- ------------------------- (a) Reflects decrease in fees resulting from lower fee schedule of PACE Small/Medium Company Value Equity Investments. (b) Reflects the anticipated savings of the merger. See accompanying notes to pro forma financial statements PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS PAINEWEBBER SMALL CAP FUND PRO FORMA PORTFOLIO OF INVESTMENTS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- COMMON STOCKS - 94.53% Agriculture, Food & Beverage - 4.37% 7,500 Agribrands International, Inc.* $ 281,250 $ - $ 281,250 9,700 Andersons Inc. 84,269 - 84,269 46,700 Cadiz Inc.* - 449,488 449,488 18,200 Canandaigua Wine Inc.*(1) - 898,625 898,625 882,000 Creative Bakeries, Inc.* - 689,062 689,062 1,200 Golden State Vintners, Inc.* 5,550 - 5,550 6,200 International Multifoods Corp. 108,112 - 108,112 132,900 McCormick & Company Inc. 3,895,631 - 3,895,631 13,700 Nash Finch Co. 124,156 - 124,156 55,600 Performance Food Group Co.* - 1,831,325 1,831,325 18,950 Pilgrims Pride Corp., Class A 99,488 - 99,488 37,900 Pilgrims Pride Corp., Class B 274,775 - 274,775 14,600 Sanderson Farms Inc. 93,075 - 93,075 5,500 Suprema Specialties Inc.* 56,719 - 56,719 9,300 Sylvan, Inc.* 90,094 - 90,094 5,900 Todhunter International Inc.* 44,250 - 44,250 209,100 Whitman Corp. 3,123,431 - 3,123,431 20,000 WLR Foods Inc.* 92,500 - 92,500 --------------------------------------------------------------- 8,373,300 3,868,500 12,241,800 --------------------------------------------------------------- Airlines - 0.54% 21,000 Alaska Air Group, Inc.* (1) 576,187 - 576,187 44,700 America West Holding Corp.* (1) 717,994 - 717,994 7,100 Amtran Inc.* 93,188 - 93,188 49,600 Hawaiian Airlines Inc.* 114,700 - 114,700 --------------------------------------------------------------- 1,502,069 - 1,502,069 --------------------------------------------------------------- Apparel, Retail - 1.28% 17,400 Abercrombie and Fitch Co.* (1) 279,487 - 279,487 35,300 Burlington Coat Factory Warehouse Corp. 414,775 - 414,775 1,900 Cache, Inc.* 5,581 - 5,581 14,400 Finish Line Inc.* 116,100 - 116,100 125,500 Florsheim Group, Inc.* - 223,547 223,547 22,100 Genesco Inc.* 337,025 - 337,025 40,200 Goodys Family Clothing Inc.* 209,794 - 209,794 11,200 J. Baker, Inc. 57,400 - 57,400 8,200 Jos. A. Bank Clothiers, Inc.* 32,800 - 32,800 12,400 One Price Clothing Stores Inc.* 23,250 - 23,250 10,400 Paul Harris Stores Inc.* 30,550 - 30,550 5,700 S & K Famous Brands Inc.* 45,244 - 45,244 7,700 Shoe Carnival, Inc.* 48,125 - 48,125 4,900 Shoe Pavilion, Inc.* 11,025 - 11,025 4,900 The Buckle, Inc.* 66,762 - 66,762 4,900 The Cato Corp., Class A 213,600 - 213,600 3,600 United Retail Group Inc.* 21,038 - 21,038 78,789 Wilsons The Leather Experts Inc.* - 1,447,748 1,447,748 --------------------------------------------------------------- 1,912,556 1,671,295 3,583,851 --------------------------------------------------------------- Apparel, Textiles - 1.03% 17,200 Brown Shoe Inc. 244,025 - 244,025 30,000 Burlington Industries Inc.* 48,750 - 48,750 6,700 Culp, Inc. 38,106 - 38,106 8,200 Cutter & Buck Inc.* 70,725 - 70,725 10,700 Dan River Inc.* 48,150 - 48,150 3,832 Decorator Industries, Inc. 16,765 - 16,765 14,700 Dixie Group Inc.* 77,175 - 77,175 6,400 Garan Inc. 140,000 - 140,000 13,400 Gerber Childrenswear Inc.* 69,512 - 69,512 2,500 Haggar Corp. 30,938 - 30,938 1,800 Hallwood Group Inc.* 12,713 - 12,713 4,600 Hampshire Group, Ltd.* 38,238 - 38,238 6,400 K-Swiss, Inc. 108,800 - 108,800 19,600 Kellwood Co. 438,550 - 438,550 10,600 Maxwell Shoe Inc.* 114,612 - 114,612 26,700 Nautica Enterprises Inc.* 290,362 - 290,362 9,600 Oxford Industries Inc. 185,400 - 185,400 8,100 Perry Ellis International Inc.* 78,975 - 78,975
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 1,482 Simone Central Holdings Inc.* 2,779 - 2,779 400 Sport Harley Inc.* 1,475 - 1,475 6,900 Tandy Brands Accessories Inc.* 61,237 - 61,237 9,200 Tarrant Apparel Group* 73,600 - 73,600 12,900 The Warnaco Group Inc., Class A 53,213 - 53,213 31,200 Westpoint Stevens Inc. (1) 374,400 - 374,400 3,600 Weyco Group Inc. 90,000 - 90,000 17,700 Wolverine World Wide Inc. (1) 186,956 - 186,956 --------------------------------------------------------------- 2,895,456 - 2,895,456 --------------------------------------------------------------- Banks - 1.58% 1,100 American Bank Inc. 20,900 - 20,900 5,200 Arrow Financial Corp. 79,625 - 79,625 3,000 BostonFed Bancorp, Inc. 44,625 - 44,625 1,500 BYL Bancorp 13,406 - 13,406 34,300 Citizens Banking Corp. 686,000 - 686,000 2,700 Columbia Bancorp 26,831 - 26,831 34,900 Commercial Federal Corp. 619,475 - 619,475 3,700 Community Bank Systems, Inc. 81,862 - 81,862 17,500 Corus Bank Shares Inc. 511,875 - 511,875 18,600 Delta Financial Corp.* 25,575 - 25,575 12,800 First Citizens Bancshares, Inc. 780,800 - 780,800 3,200 GBC Bancorp 104,000 - 104,000 3,900 IBERIABANK Corp. 64,350 - 64,350 1,900 Independent Bank Corp. 21,969 - 21,969 3,500 Industrial Bancorp, Inc. 42,000 - 42,000 6,800 Merchants Bancshares Inc. 132,600 - 132,600 10,600 National City Bancorp 155,025 - 155,025 3,130 Northrim Bank Alaska 23,084 - 23,084 2,100 PFF Bancorp, Inc. 36,488 - 36,488 4,000 Republic Bancorp Inc. 32,500 - 32,500 6,000 Sterling Bancorp 96,000 - 96,000 9,700 Sterling Financial Corp.* 108,519 - 108,519 8,050 Three Rivers Bancorp, Inc. 65,909 - 65,909 16,100 U.S. Bancorp, Inc. 79,494 - 79,494 22,700 Webster Financial Corp. 507,912 - 507,912 3,600 West Coast Bancorp 33,075 - 33,075 3,900 Yardville National Bancorp 41,438 - 41,438 --------------------------------------------------------------- 4,435,337 - 4,435,337 --------------------------------------------------------------- Chemicals - 3.02% 7,100 A. Schulman, Inc. 89,194 - 89,194 4,100 American Biltrite Inc. 50,738 - 50,738 5,100 American Pacific Corp.* 32,513 - 32,513 3,300 American Vanguard Corp. 26,813 - 26,813 4,800 Ameron, Inc. 180,000 - 180,000 4,700 Associate Materials Inc. 76,963 - 76,963 24,500 Avery Dennison Corp. 1,329,125 - 1,329,125 9,600 Baimco Corp. 69,000 - 69,000 8,100 Brady Corp. - 246,544 246,544 24,200 Carlisle Companies Inc. - 1,095,050 1,095,050 5,900 Chemfab Corp.* 106,937 - 106,937 101,100 Ethyl Corp. 202,200 - 202,200 4,300 Foamex International Inc. 29,025 - 29,025 50,400 Gencorp Inc. 400,050 - 400,050 49,600 International Security Products Inc. 291,400 - 291,400 15,100 Ivex Packaging Corp.* 156,662 - 156,662 9,100 Lydall Inc.* 101,238 - 101,238 15,700 Myers Industries, Inc. 209,987 - 209,987 3,100 NCH Corp. 118,187 - 118,187 61,600 NL Industries Inc. 1,139,600 - 1,139,600 4,100 Oil-Dri Corporation of America 32,800 - 32,800 50,400 Omnova Solutions Inc. 321,300 - 321,300 8,100 Patrick Industries Inc. 55,434 - 55,434 10,800 Quaker Chemical 184,275 - 184,275 5,300 Raven Industries Inc. 79,500 - 79,500 39,700 Spartech Corp. - 1,064,456 1,064,456 11,700 Stepan Chemical Co. 257,400 - 257,400 5,200 Summa Industries* 62,075 - 62,075 46,300 W.R. Grace & Co.* 457,212 - 457,212 --------------------------------------------------------------- 6,059,628 2,406,050 8,465,678 --------------------------------------------------------------- Computer Hardware - 1.15% 14,400 Amplicon Inc. 136,800 - 136,800 17,400 Gerber Scientific, Inc. 174,000 - 174,000 4,000 Global Imaging Systems, Inc.* 31,000 - 31,000 9,400 Gradco Systems Inc.* 14,394 - 14,394 4,100 McRae Industries Inc. 21,012 - 21,012
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 21,100 Paravant Inc.* 60,662 - 60,662 73,000 Pitney Bowes, Inc. 2,527,625 - 2,527,625 14,400 PSC Inc.* 52,200 - 52,200 18,900 ScanSoft, Inc.* 34,847 - 34,847 43,300 Systemax Inc.* 159,669 - 159,669 --------------------------------------------------------------- 3,212,209 - 3,212,209 --------------------------------------------------------------- Computer Software - 0.76% 40,400 Avant Corp.* 631,250 - 631,250 6,900 Bell Industries, Inc. 17,250 - 17,250 9,600 Comdial Corp.* 24,600 - 24,600 2,700 Concentrex, Inc.* 18,394 - 18,394 156,317 Quadramed Corp.* - 371,253 371,253 4,300 Software Spectrum, Inc.* 66,112 - 66,112 46,426 Tecnomatix Technologies Ltd.* - 719,603 719,603 8,900 TTI Team Telecom International Ltd.* - 273,119 273,119 --------------------------------------------------------------- 757,606 1,363,975 2,121,581 --------------------------------------------------------------- Construction - 6.07% 10,100 Beazer Homes USA, Inc.* 212,731 - 212,731 8,500 Butler Manufacturing Co. 176,906 - 176,906 4,100 Catalina Lighting, Inc.* 17,425 - 17,425 34,100 Champion Enterprise Inc.* 185,419 - 185,419 90,500 D.R. Horton Inc. 1,196,600 206,150 1,402,750 35,000 Dal-Tile International Inc.* 315,000 - 315,000 6,100 Dominion Homes Inc.* 32,597 - 32,597 24,950 Elcor Corp. - 478,728 478,728 3,500 EMCOR Group, Inc.* 82,031 - 82,031 13,500 Engle Homes Inc. 129,094 - 129,094 33,800 Hovnanian Enterprises Inc.* 202,800 - 202,800 35,100 Kaufman and Broad Home Corp. 686,644 - 686,644 19,900 M.D.C. Holdings, Inc. 398,000 - 398,000 22,700 M/I Schottenstein Homes, Inc. 192,600 216,000 408,600 2,700 Meadow Valley Corp.* 8,269 - 8,269 4,300 Miller Building Systems Inc.* 32,788 - 32,788 13,100 Morrison Knudsen Corp.* 126,087 - 126,087 21,900 NCI Building Systems Inc.* 413,362 - 413,362 170,675 Nobility Homes Inc.* 21,494 943,887 965,381 25,200 NVR Inc.* 813,450 739,500 1,552,950 22,900 Owens Corning 125,950 - 125,950 17,900 Palm Harbor Homes Inc.* 264,025 - 264,025 6,100 Park Ohio Holdings Corp.* 56,425 - 56,425 6,900 Perini Corp. 27,600 - 27,600 33,600 Pulte Corp. 770,700 - 770,700 10,300 Railworks Corp.* 95,275 - 95,275 190,900 Rouse Co. 4,975,331 - 4,975,331 18,000 Ryland Group Inc. 360,000 - 360,000 7,500 Silverleaf Resorts Inc.* 25,313 - 25,313 10,900 Skyline Corp. 220,044 - 220,044 35,900 Standard Pacific Corp. 455,481 - 455,481 44,100 Toll Brothers Inc.* 1,066,669 - 1,066,669 27,100 Trammell Crow Co.* 281,162 - 281,162 5,300 Wabash National Corp. 56,975 56,975 9,400 Washington Homes Inc. 61,100 - 61,100 22,000 Webb Delaware Corp. 335,500 - 335,500 --------------------------------------------------------------- 14,420,847 2,584,265 17,005,112 --------------------------------------------------------------- Consumer Durables - 3.88% 12,900 Chromcraft Revington Inc.* 141,900 - 141,900 12,200 Flexsteel Industries Inc. 150,213 - 150,213 50,700 Furniture Brands International, Inc.* 579,169 171,825 750,994 174,900 Herman Miller Inc. 5,487,487 - 5,487,487 8,900 Home Products International Inc.* 26,700 - 26,700 63,900 Interface, Inc. 327,487 - 327,487 188,200 Leggett & Platt, Inc. (1) 3,293,500 - 3,293,500 16,390 Rowe Furniture Corp. 73,755 - 73,755 19,900 Royal Appliance Manufacturing Co.* 104,475 - 104,475 8,600 Stanley Furniture Co., Inc.* 194,575 - 194,575 7,200 The First Years Inc. 78,750 - 78,750 7,900 U.S. Can Corp.* 148,125 - 148,125 6,788 Virco Manufacturing Corp. 86,547 - 86,547 --------------------------------------------------------------- 10,692,683 171,825 10,864,508 --------------------------------------------------------------- Defense/Aerospace - 0.78% 5,900 AAR Corp. 70,800 - 70,800 6,900 Ducommun Inc.* 92,287 - 92,287 8,100 EDO Corp. 48,094 - 48,094 6,200 Herley Industries, Inc.* 111,600 - 111,600
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 1,900 International Airline Support Inc.* 3,800 - 3,800 6,900 Kellstrom Industries Inc.* 38,812 - 38,812 9,800 Ladish Co., Inc.* 106,575 - 106,575 1,000 LMI Aerospace Inc.* 2,438 - 2,438 6,600 Moog Inc.* 191,400 - 191,400 23,100 Precision Castparts Corp. 1,476,956 - 1,476,956 6,000 SIFCO Industries, Inc. 36,375 - 36,375 --------------------------------------------------------------- 2,179,137 - 2,179,137 --------------------------------------------------------------- Diversified Retail - 0.27% 18,500 BonTon Stores Inc.* 43,938 - 43,938 11,800 Elder Beerman Stores Corp.* 51,256 - 51,256 45,900 Homebase Inc.* 111,881 - 111,881 14,100 Jo-Ann Stores, Inc.* 102,225 - 102,225 20,700 RDO Equipment Co.* 90,562 - 90,562 23,600 Shopko Stores, Inc.* 340,725 - 340,725 5,300 Specialty Catalog Corp.* 13,913 - 13,913 --------------------------------------------------------------- 754,500 - 754,500 --------------------------------------------------------------- Drugs & Medicine - 1.90% 11,400 Alpharma, Inc. - 746,700 746,700 34,600 Cardinal Health, Inc. (1) 2,543,100 - 2,543,100 5,800 Chattem, Inc.* 71,050 - 71,050 32,004 Herbalife International Inc., Class A 306,038 - 306,038 19,533 Herbalife International Inc., Class B 180,680 - 180,680 5,000 Natrol, Inc.* 11,875 - 11,875 50,771 Noven Pharmaceuticals Inc.* - 1,440,627 1,440,627 7,700 USANA Health Sciences, Inc.* 23,100 - 23,100 --------------------------------------------------------------- 3,135,843 2,187,327 5,323,170 --------------------------------------------------------------- Electric Utilities - 0.83% 8,900 Bangor Hydro Electric Co. 208,594 - 208,594 3,100 Central Vermont Public Service Corp. 36,813 - 36,813 14,271 Lennox International Inc. 188,199 - 188,199 400 Maine Public Service Co. 9,450 - 9,450 49,300 Public Service Co. of New Mexico 893,562 - 893,562 43,500 RGS Energy Group Inc. 997,781 - 997,781 --------------------------------------------------------------- 2,334,399 - 2,334,399 --------------------------------------------------------------- Electrical Equipment - 2.00% 34,700 Artesyn Technologies Inc.*(1) - 1,179,800 1,179,800 7,700 DSP Group Inc.* - 322,919 322,919 21,500 Orbotech Ltd.*(1) - 1,771,062 1,771,062 4,200 Pioneer-Standard Electronics, Inc. 56,700 - 56,700 36,000 Rogers Corp.* - 1,287,000 1,287,000 4,000 Technitrol Inc.* - 441,000 441,000 18,600 Thermo Ecotek Corp.* - 160,425 160,425 11,600 Xircom, Inc.* - 396,575 396,575 --------------------------------------------------------------- 56,700 5,558,781 5,615,481 --------------------------------------------------------------- Electrical Power - 0.54% 10,000 A.O. Smith Corp. 161,250 - 161,250 10,100 Carbide/Graphite Group Inc.* 43,556 - 43,556 28,300 Hughes Supply, Inc. 535,931 - 535,931 10,500 Lamson & Sessions Co.* 182,438 - 182,438 2,800 Lincoln Electric Holdings Inc. 42,350 - 42,350 2,200 LSI Industries Inc. 36,850 - 36,850 10,500 The Alpine Group, Inc.* 69,563 - 69,563 13,400 Woodward Governor Co. 442,200 - 442,200 --------------------------------------------------------------- 1,514,138 - 1,514,138 --------------------------------------------------------------- Electronic Components - 0.20% 12,200 SLI, Inc. 131,913 - 131,913 14,200 Triumph Group Inc.* 434,875 - 434,875 --------------------------------------------------------------- 566,788 - 566,788 --------------------------------------------------------------- Energy Reserves & Production - 1.36% 20,000 Comstock Resources Inc.* - 138,750 138,750 92,100 Patterson Energy Inc.* - 2,296,744 2,296,744 27,900 Pioneer Natural Resources Co.* - 299,925 299,925 19,000 Remington Oil Gas Corp.* - 116,375 116,375 32,200 Swift Energy Co.* - 706,387 706,387 13,700 Vintage Petroleum Inc. - 246,600 246,600 --------------------------------------------------------------- - 3,804,781 3,804,781 --------------------------------------------------------------- Entertainment - 0.58% 86,400 Carnival Corp. 1,614,600 - 1,614,600 ---------------------------------------------------------------
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- Environmental Services - 1.24% 2,400 ATG Inc.* 5,550 - 5,550 7,100 Exponent Inc.* 63,013 - 63,013 16,500 IT Group, Inc.* 72,188 - 72,188 5,000 Met-Pro Corp. 50,625 - 50,625 94,150 Stericycle Inc.* - 2,353,750 2,353,750 99,800 The ServiceMaster Co. 929,387 - 929,387 27,800 Thermatrix Inc.* - 11,148 11,148 --------------------------------------------------------------- 1,120,763 2,364,898 3,485,661 --------------------------------------------------------------- Financial Services - 4.07% 30,700 Advanta Corp. (1) 351,131 - 351,131 2,700 American Business Financial Services, Inc. (1) 36,788 - 36,788 31,700 Americredit Corp.*(1) - 657,775 657,775 28,000 Bluegreen Corp.* 77,000 - 77,000 5,100 CCBT Financial Companies Inc. 80,962 - 80,962 3,800 DeWolfe Companies, Inc. 28,975 - 28,975 11,600 Doral Financial Corp. - 150,800 150,800 11,400 Ezcorp Inc. 16,744 - 16,744 279,500 First Cash Financial Services, Inc.* - 847,234 847,234 11,400 Gallagher (Arthur J.) & Co. 559,312 - 559,312 49,100 H&R Block, Inc. 1,571,200 - 1,571,200 3,800 Hawthorne Financial Corp.* 38,950 - 38,950 9,200 Kaye Group Inc. 57,500 - 57,500 4,100 Main St. & Main Inc.* 10,891 - 10,891 3,900 Matrix Bancorp Inc.* 40,463 - 40,463 132,100 MBNA Corp. 4,408,837 - 4,408,837 72,000 Metris Co., Inc.(1) - 2,110,500 2,110,500 3,700 New Century Financial Corp.* (1) 44,227 - 44,227 4,800 Onyx Acceptance Corp.* 21,900 - 21,900 3,200 Pacific Crest Capital Inc. 39,200 - 39,200 5,900 Refac* 18,806 - 18,806 22,300 Resource Bank Shares Mortgage Group Inc. 91,987 - 91,987 1,300 TFC Enterprises, Inc.* 2,356 - 2,356 3,500 Ugly Duckling Corp.* 24,938 - 24,938 1,700 Union Acceptance Corp.* 10,413 - 10,413 23,000 World Acceptance Corp.* 117,875 - 117,875 --------------------------------------------------------------- 7,650,455 3,766,309 11,416,764 --------------------------------------------------------------- Food Retail - 0.67% 52,025 Albertson's Inc. 1,570,504 - 1,570,504 25,000 M & F Worldwide Corp.* 137,500 - 137,500 8,700 Marsh Supermarkets Inc. 130,500 - 130,500 3,650 Schultz Sav-O Stores, Inc. 43,344 - 43,344 --------------------------------------------------------------- 1,881,848 - 1,881,848 --------------------------------------------------------------- Forest Products, Paper - 0.70% 3,000 Baltek Corp.* 20,437 - 20,437 6,400 BCT International Inc.* 10,000 - 10,000 9,450 Fibermark Inc.* 112,809 - 112,809 34,400 Graphic Packaging International Corp.* 81,700 - 81,700 44,930 Greif Brothers Corp. Class A - 1,140,099 1,140,099 9,000 Mercer International Inc.* - 77,906 77,906 1,000 Quipp Inc.* 21,000 - 21,000 14,290 Republic Group Inc. 184,877 - 184,877 19,100 Schweitzer Mauduit International Inc. 253,075 - 253,075 4,700 Universal Forest Products, Inc. 59,044 - 59,044 1,100 Wickes Co.* 5,294 - 5,294 --------------------------------------------------------------- 748,236 1,218,005 1,966,241 --------------------------------------------------------------- Freight, Air, Sea & Land - 1.29% 7,500 AirNet Systems, Inc.* 35,625 - 35,625 23,800 Arkansas Best Corp.* 337,662 - 337,662 34,900 Arnold Industries Inc. 477,694 - 477,694 4,300 Boyd Brothers Transportation Inc.* 17,200 - 17,200 8,500 CD&L, Inc.* 9,563 - 9,563 10,700 Consolidated Freightways Corp.* 47,147 - 47,147 12,500 Covenant Transport, Inc., Class A* 100,000 - 100,000 5,800 Genesee & Wyoming Inc.* 108,750 - 108,750 3,500 M.S. Carriers, Inc.* 70,219 - 70,219 4,100 Motor Cargo Industries, Inc.* 18,963 - 18,963 14,200 Old Dominion Freight Lines Inc.* 138,450 - 138,450 10,200 PAM Transportation Services Inc.* 93,075 - 93,075 36,500 Roadway Express Inc. 866,875 - 866,875 6,100 Smithway Motor Xpress Corp. 18,681 - 18,681 8,100 Transport Corp. of America* 48,600 - 48,600 17,800 US Xpress Enterprises Inc.* 145,181 - 145,181 11,300 USA Truck Inc.* 74,862 - 74,862
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 19,000 USFreightways Corp. 527,250 - 527,250 30,100 Yellow Corp.* 483,481 - 483,481 --------------------------------------------------------------- 3,619,278 - 3,619,278 --------------------------------------------------------------- Gas Utility - 0.74% 3,850 Energysouth Inc. 72,188 - 72,188 38,200 Equitable Resources Inc. - 1,988,787 1,988,787 --------------------------------------------------------------- 72,188 1,988,787 2,060,975 --------------------------------------------------------------- Heavy Machinery - 0.55% 13,800 Cascade Corp. 175,087 - 175,087 16,400 Columbus McKinnon Corp. 241,900 - 241,900 7,800 Gehl Co.* 106,275 - 106,275 32,000 JLG Industries, Inc. 326,000 - 326,000 9,900 NACCO Industries Inc. 359,494 - 359,494 1,100 Richton International Corp.* 21,175 - 21,175 19,700 Terex Corp.* 325,050 - 325,050 --------------------------------------------------------------- 1,554,981 - 1,554,981 --------------------------------------------------------------- Hotels - 0.57% 8,700 Anchor Gaming* 471,431 - 471,431 4,500 Black Hawk Gaming & Development Inc.* 29,250 - 29,250 74,900 Boyd Gaming Corp.* 332,369 - 332,369 12,825 Lakes Gaming Inc.* 115,425 - 115,425 62,500 Prime Hospitality Corp.* 593,750 - 593,750 6,700 Suburban Lodges America Inc.* 47,738 - 47,738 --------------------------------------------------------------- 1,589,963 - 1,589,963 --------------------------------------------------------------- Household Products - 3.28% 77,800 Clorox Co. (1) 3,214,112 - 3,214,112 7,500 CPAC Inc. 56,250 - 56,250 2,000 Dixon Ticonderoga Co.* 6,250 - 6,250 70,300 Fortune Brands, Inc. (1) 1,581,750 - 1,581,750 16,700 French Fragrances Inc.* (1) 133,600 - 133,600 24,700 Jason Inc.* 265,525 - 265,525 32,300 National Service Industries, Inc. 660,131 - 660,131 121,700 Newell Rubbermaid, Inc. 3,278,294 - 3,278,294 --------------------------------------------------------------- 9,195,912 - 9,195,912 --------------------------------------------------------------- Industrial Parts - 0.71% 17,700 Briggs & Stratton Corp. 622,819 - 622,819 49,500 Manitowoc Co., Inc. - 1,218,938 1,218,938 3,800 Mettler-Toledo International Inc.* ADR - 153,900 153,900 --------------------------------------------------------------- 622,819 1,372,838 1,995,657 --------------------------------------------------------------- Industrial Services/Supplies - 4.06% 53,400 AHL Services, Inc.* - 433,875 433,875 16,200 Amerco* 319,950 - 319,950 29,200 ArvinMeritor, Inc. 456,250 - 456,250 37,800 Avis Rental A Car Inc.* 845,775 - 845,775 14,200 Burns International Services Corp.* 188,150 - 188,150 5,300 Butler International Inc.* 38,425 - 38,425 22,000 CDI Corp.* 437,250 - 437,250 7,400 Childrens Comprehensive Services 21,738 - 21,738 27,600 Comfort Systems USA Inc.* 122,475 - 122,475 186,120 Cornell Companies, Inc.* 48,281 1,149,866 1,198,147 38,700 Correctional Services Corp.* 32,375 146,612 178,987 19,200 Dollar Thrifty Automotive Group, Inc.* 361,200 - 361,200 90,300 Harte-Hanks Co. 2,285,719 - 2,285,719 8,500 Headway Corporate Resources Inc.* 24,969 - 24,969 13,350 Healthcare Services Group Inc.* 63,412 - 63,412 5,600 Innotrac Corp.* 28,700 - 28,700 1,200 International Aircraft Investors* 6,300 - 6,300 36,350 Interpool Inc. 415,753 - 415,753 7,900 McGrath Rentcorp. 119,487 - 119,487 16,800 National Equipment Services Inc.* 88,200 - 88,200 10,100 National Technical Systems Inc. 37,875 - 37,875 34,500 Personnel Group of America Inc.* 109,969 - 109,969 12,216 Pittston Brinks Group 146,592 - 146,592 44,700 Rollins Truck Leasing Corp. 318,487 - 318,487 21,800 Simpson Industries, Inc. 177,125 - 177,125 15,300 SOS Staffing Services Inc.* 40,163 - 40,163 3,300 Sterile Recoveries Inc.* 32,175 - 32,175 7,700 Superior Surgical Manufacturing Inc. 60,638 - 60,638 23,900 Unifirst Corp. 224,062 - 224,062 144,882 Wackenhut Corp., Class B* - 1,430,710 1,430,710 31,500 Wallace Computer Series, Inc. 281,531 - 281,531 19,200 Westaff Inc.* 81,600 - 81,600
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 28,700 York International Corp. 798,219 - 798,219 680 Zimmerman Sign Co. 2,040 - 2,040 --------------------------------------------------------------- 8,214,885 3,161,063 11,375,948 --------------------------------------------------------------- Information & Computer Services - 5.48% 5,400 Amrep Corp.* 27,338 - 27,338 1,580 Avici Systems Inc.* - 155,433 155,433 9,300 Corrpro Companies Inc.* 33,131 - 33,131 167,700 Equifax, Inc. (1) 3,961,912 - 3,961,912 5,800 FTI Consulting, Inc.* 59,812 - 59,812 3,795 General Employment Enterprises* 13,757 - 13,757 23,100 Magellan Health Services Inc.* 37,538 - 37,538 2,900 Marlton Technologies, Inc.* 5,619 - 5,619 49,700 Maximus, Inc.* - 1,186,587 1,186,587 10,400 Navigant Consulting, Co.* 35,100 - 35,100 7,700 OrthAlliance, Inc.* 43,313 - 43,313 137,100 Pomeroy Computer Resources, Inc.* 47,600 2,283,100 2,330,700 140,578 Right Management Consultants, Inc.* 46,000 1,359,780 1,405,780 118,261 Sun Guard Data Systems Inc.* 2,373,887 1,536,117 3,910,004 56,100 The Dun & Bradstreet Corp. 1,658,456 - 1,658,456 1,000 Transport Lux Corp. 4,625 - 4,625 12,400 URS Corp.* 186,000 - 186,000 63,800 US Oncology, Inc.* 319,000 - 319,000 --------------------------------------------------------------- 8,853,088 6,521,017 15,374,105 --------------------------------------------------------------- Leisure - 4.25% 6,050 Boston Acoustics Inc. 65,794 - 65,794 6,400 Brass Eagles Inc.* 24,000 - 24,000 8,600 Cannondale Corp.* 35,175 - 35,175 19,200 Department 56 Inc.* 189,600 - 189,600 4,800 Ellett Brothers Inc. 15,900 - 15,900 2,300 Escalade Inc.* 41,688 - 41,688 43,400 GTECH Holdings Corp.* 886,987 - 886,987 269,200 Hasbro, Inc. 3,062,150 - 3,062,150 143,100 International Game Technology* 4,248,281 - 4,248,281 8,000 Johnson Outdoors Inc.* 49,500 - 49,500 20,000 K2 Inc.* 198,750 - 198,750 3,600 Koss Corp.* 68,400 - 68,400 10,900 MarineMax, Inc.* 84,475 - 84,475 5,400 McNaughton Apparel Group Inc.* 68,850 - 68,850 12,900 Oneida Ltd. 233,812 - 233,812 7,600 OroAmerica Inc.* 53,200 - 53,200 9,900 Russ Berrie & Company Inc. 194,288 - 194,288 82,750 SCP Pool Corp.* - 2,178,652 2,178,652 20,900 Sturm Ruger & Co. Inc. 184,181 - 184,181 5,200 Travis Boats & Motors, Inc.* 21,450 - 21,450 --------------------------------------------------------------- 9,726,481 2,178,652 11,905,133 --------------------------------------------------------------- Life Insurance - 0.89% 23,800 AmerUs Life Holdings, Inc. 544,425 - 544,425 2,812 Cotton States Life Insurance Co. 25,132 - 25,132 24,881 Delphi Financial Group, Inc.* 957,918 - 957,918 21,400 Great American Financial Resources, Inc. 374,500 - 374,500 5,800 Independence Holding Co. 79,388 - 79,388 4,200 National Western Life Insurance Co.* 308,700 - 308,700 9,200 Penn Treaty American Corp.* 147,200 - 147,200 1,700 Presidential Life Corp. 24,544 - 24,544 9,200 Standard Management Corp.* 34,500 - 34,500 --------------------------------------------------------------- 2,496,307 - 2,496,307 --------------------------------------------------------------- Long Distance & Phone Companies - 1.40% 133,700 CenturyTel, Inc. 3,919,081 - 3,919,081 --------------------------------------------------------------- Manufacturing-General - 2.00% 8,100 Alltrista Corp.* 180,225 - 180,225 9,600 Amcast Industrial Corp. 103,200 - 103,200 11,600 Ampco-Pittsburgh Corp. 137,750 - 137,750 6,800 Avteam Inc.* 12,538 - 12,538 27,800 Baldwin Technology Inc.* 53,862 - 53,862 9,000 Ballantyne Omaha Inc.* 19,688 - 19,688 23,000 Barnes Group Inc. 454,250 - 454,250 500 Chicago Rivet Machine Co. 10,625 - 10,625 7,100 CTB International Corp.* 53,250 - 53,250 6,000 Denali Inc.* 7,125 - 7,125 18,500 Detroit Diesel Corp.* 420,875 - 420,875 6,500 Farrel Corp. 9,750 - 9,750 7,900 Featherlite Manufacturing Inc.* 27,650 - 27,650 27,900 Fedders Corp. 144,731 - 144,731
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 25,100 Gentek Inc. 288,650 - 288,650 1,800 Graham Corp.* 14,175 - 14,175 9,000 Hardinge, Inc. 119,250 - 119,250 7,200 Hurco Companies Inc.* 27,000 - 27,000 6,500 JLK Direct Distribution Inc.* 46,313 - 46,313 3,600 K Tron International Inc.* 61,200 - 61,200 28,500 Kaman Corp. 356,250 - 356,250 15,400 Media Arts Group Inc.* 60,637 - 60,637 8,700 Mestek, Inc.* 146,269 - 146,269 44,800 Milacron Inc. 644,000 - 644,000 6,800 Nortek, Inc.* 133,450 - 133,450 2,500 P & F Industries Inc.* 21,250 - 21,250 1,000 Peerless Manufacturing Co. 16,250 - 16,250 3,200 Q E P Inc.* 28,400 - 28,400 4,000 Riviera Tool Co.* 13,750 - 13,750 23,400 Specialty Equipment Companies Inc.* 637,650 - 637,650 1,600 SPS Technologies, Inc.* 71,800 - 71,800 1,700 Standard Motor Products Inc. 16,469 - 16,469 8,200 Starrett LS Co. 149,137 - 149,137 8,500 TB Woods Corp. 90,312 - 90,312 15,100 Tecumseh Products Co., Class A 536,050 - 536,050 7,400 Transtechnology Corp. 74,925 - 74,925 41,200 Wabtec Corp. 414,575 - 414,575 --------------------------------------------------------------- 5,603,281 - 5,603,281 --------------------------------------------------------------- Manufacturing - High Technology - 1.02% 6,100 Acme Electric Corp.* 52,231 - 52,231 10,100 Applied Signal Technology Inc. 98,475 - 98,475 7,600 Bel Fuse Inc. 209,000 - 209,000 1,300 Bio Rad Laboratories Inc.* 30,713 - 30,713 2,900 Blonder Tongue Labs Inc.* 19,575 - 19,575 8,200 Channell Commercial Corp.* 102,500 - 102,500 7,300 Cobra Electronics Corp.* 45,169 - 45,169 9,300 Delaware Global Technologies Corp.* 84,862 - 84,862 16,600 Esterline Technologies Corp.* 244,850 - 244,850 67,800 Galileo International Inc. (1) 1,305,150 - 1,305,150 30,600 Generale Cable Corp. 263,925 - 263,925 36,800 Griffon Corp.* 230,000 - 230,000 2,200 Lowrance Electronics, Inc.* 7,975 - 7,975 1,300 Napco Security Systems Inc.* 4,956 - 4,956 15,647 Superior TeleCom Inc. 135,933 - 135,933 2,300 Tech/Ops Sevcon, Inc. 21,850 - 21,850 1,100 Thermwood Corp.* 5,638 - 5,638 --------------------------------------------------------------- 2,862,802 - 2,862,802 --------------------------------------------------------------- Media - 0.62% 53,600 Tribune Co. 1,742,000 - 1,742,000 --------------------------------------------------------------- Medical Products - 2.92% 11,500 American Medical Technologies Inc. 14,375 - 14,375 28,000 American Science & Engineering, Inc.* - 175,000 175,000 30,200 Biomatrix, Inc.*(1) - 628,537 628,537 3,200 Lakeland Industries, Inc.* 18,800 - 18,800 4,700 Mesa Labs Inc.* 26,437 - 26,437 5,400 Minntech Corp. 37,125 - 37,125 21,300 Natures Sunshine Products Inc. 170,400 - 170,400 25,800 Patterson Dental Co.* - 683,700 683,700 23,300 Pharmaceutical Product Development, Inc.* - 498,037 498,037 18,000 Sola International Inc.* 106,875 - 106,875 161,500 Sybron International Corp.* 3,361,219 - 3,361,219 46,900 Teleflex Inc. - 1,700,125 1,700,125 29,000 Theragenics Corp.* - 215,688 215,688 11,000 Utah Medical Products Inc.* 77,000 - 77,000 23,500 Young Innovations Inc.* - 478,813 478,813 --------------------------------------------------------------- 3,812,231 4,379,900 8,192,131 --------------------------------------------------------------- Medical Providers - 1.40% 6,100 Air Methods Corp.* 26,687 - 26,687 25,500 Ameripath Inc.* 323,531 - 323,531 124,000 Beverly Enterprises Inc.* 426,250 - 426,250 23,800 Capital Senior Living Corp.* 71,400 - 71,400 9,400 Carriage Services Inc.* 20,563 - 20,563 7,800 Castle Dental Centers, Inc.* 24,375 - 24,375 5,700 Coast Dental Services Inc.* 9,263 - 9,263 238,700 Counsel Corp.* - 611,669 611,669 1,000 Curative Health Services, Inc.* 6,375 - 6,375 13,900 Healthcare Recoveries Inc.* 54,731 - 54,731 62,000 Hooper Holmes Inc. - 759,500 759,500
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 8,300 Horizon Health Corp.* 43,575 - 43,575 14,400 Monarch Dental Corp.* 39,600 - 39,600 16,800 Pediatrix Medical Group* 258,300 - 258,300 10,500 Prime Medical Services, Inc.* 85,312 - 85,312 25,500 Promedco Management Co.* 34,266 - 34,266 10,600 Raytel Medical Corp.* 12,588 - 12,588 15,000 Rehabcare Group Inc.* 533,437 - 533,437 6,200 Rural/Metro Corp.* 11,819 - 11,819 127,000 Service Corporation International 325,437 - 325,437 32,400 Sierra Health Services Inc.* 103,275 - 103,275 64,900 Stewart Enterprises Inc. 141,969 - 141,969 --------------------------------------------------------------- 2,552,753 1,371,169 3,923,922 --------------------------------------------------------------- Mining & Metals - 2.16% 2,000 AK Steel Holding Corp. 20,125 - 20,125 9,200 Atchison Casting Corp.* 55,200 - 55,200 23,600 Ball Corp. 818,625 - 818,625 17,300 Bayou Steel Corp.* 38,925 - 38,925 23,500 Centex Construction Products Inc. 575,750 - 575,750 18,400 Chase Industries Inc.* 167,900 - 167,900 17,300 Commercial Metals Co. 508,187 - 508,187 9,000 Consol Energy Inc. - 154,688 154,688 4,400 Eastern Co. 64,350 - 64,350 6,200 Fansteel Inc.* 25,188 - 25,188 9,039 Friedman Industries, Inc. 30,507 - 30,507 21,100 IMCO Recycling Inc. 102,862 - 102,862 30,700 Internet Corp. 222,575 - 222,575 12,500 Lawson Products, Inc. 321,875 - 321,875 7,100 Lindberg Corp. 50,588 - 50,588 46,200 Metals USA Inc.* 199,237 - 199,237 11,300 Niagara Corp.* 49,084 - 49,084 7,800 Northwest Pipe Co.* 99,938 - 99,938 5,800 Oglebay Norton Co. 152,250 - 152,250 6,300 Pitt-Des Moines, Inc. 183,881 - 183,881 20,800 Quanex Corp. 374,400 - 374,400 13,450 Roanoke Electric Steel Corp. 159,719 - 159,719 11,800 Ryerson Tull, Inc. 103,987 - 103,987 5,100 Schuff Steel Co.* 13,388 - 13,388 20,900 Silgan Holdings Inc.* 185,161 - 185,161 13,500 Steel Technologies Inc. 92,813 - 92,813 25,400 Texas Industries, Inc.* 823,912 - 823,912 38,200 USEC Inc. 167,125 - 167,125 16,100 Wolverine Tube Inc.* 279,737 - 279,737 --------------------------------------------------------------- 5,887,289 154,688 6,041,977 --------------------------------------------------------------- Motor Vehicles - 1.82% 7,800 Bandag Inc. 201,825 - 201,825 20,100 Coachmen Industries, Inc. 208,538 - 208,538 59,400 Cooper Tire & Rubber Co. 664,537 - 664,537 14,200 Delco Remy International Inc.* 118,925 - 118,925 9,500 Donnelly Corp. 124,688 - 124,688 20,900 Dura Automotive Systems, Inc.* 215,531 - 215,531 6,000 Edelbrock Corp. 58,500 - 58,500 55,900 Federal-Mogul Corp. 510,088 - 510,088 40,300 Fleetwood Enterprises Inc. (1) 521,381 - 521,381 22,400 Hayes Lemmerz International Inc.* 302,400 - 302,400 9,100 Keystone Automotive Industries, Inc.* 55,738 - 55,738 54,200 Mascotech Inc. 623,300 - 623,300 20,100 Modine Manufacturing Co. 542,700 - 542,700 10,100 R & B Inc.* 25,881 - 25,881 3,805 Rexhall Industries, Inc.* 18,549 - 18,549 8,000 Rush Enterprises Inc.* 48,250 - 48,250 16,900 Shiloh Industries Inc.* 111,963 - 111,963 2,900 Standard Automotive Corp.* 16,675 - 16,675 15,823 Supreme Industries, Inc.* 79,115 - 79,115 25,600 TBC Corp.* 118,400 - 118,400 26,300 Tower Automotive, Inc.* (1) 320,531 - 320,531 1,500 Transportation Components Inc.* 2,531 - 2,531 16,800 Winnebago Industries, Inc. 217,350 - 217,350 --------------------------------------------------------------- 5,107,396 - 5,107,396 --------------------------------------------------------------- Oil Refining - 0.43% 5,100 Adams Resources & Energy Inc. 68,213 - 68,213 9,300 Castle Energy Corp. 65,681 - 65,681 6,100 Giant Industries Inc.* 42,700 - 42,700 10,000 Holly Corp. 120,000 - 120,000 157,800 Kaneb Services, Inc.* 16,750 644,038 660,788 7,962 Mercury Air Group, Inc.* 50,758 - 50,758
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- 18,800 Petroleum Development Corp.* 94,000 - 94,000 14,700 World Fuel Services Corp. 116,681 - 116,681 --------------------------------------------------------------- 574,783 644,038 1,218,821 --------------------------------------------------------------- Oil Services - 0.07% 28,400 Friede Goldman International Inc.* 182,825 - 182,825 --------------------------------------------------------------- Other Insurance - 5.32% 10,200 Acceptance Insurance Co.* 47,175 - 47,175 10,200 Atlantic American Corp.* 21,038 - 21,038 5,880 Bancinsurance Corp.* 23,152 - 23,152 42,200 Commerce Group Inc. 1,171,050 - 1,171,050 8,733 Donegal Group Inc. 62,223 - 62,223 46,000 Enhance Financial Services Group Inc. 727,375 - 727,375 36,783 Fidelity National Financial, Inc. (1) 650,599 - 650,599 7,500 FPIC Insurance Group Inc.* 89,531 - 89,531 32,500 Harleysville Group Inc. 591,094 - 591,094 2,200 Investors Title Insurance Co. 26,400 - 26,400 18,500 LandAmerica Financial Group Inc. 448,625 - 448,625 94,600 MBIA, Inc. 5,268,037 - 5,268,037 2,100 Midland Co. 55,650 - 55,650 7,300 Philadelphia Consolidated Holding Corp.* (1) 118,169 - 118,169 5,596 Professionals Insurance Co. Management Group* 124,511 - 124,511 15,600 Radian Group, Inc. - 949,650 949,650 15,300 Radiologix Inc.* 61,200 - 61,200 13,875 RLI Corp. 485,625 - 485,625 23,100 State Auto Financial Corp. 264,206 - 264,206 17,400 Stewart Information Services Corp. 230,550 - 230,550 7,600 Unico American Corp. 50,825 - 50,825 8,800 Vesta Insurance Group, Inc. 47,850 - 47,850 51,400 XI Capital Ltd. (1) 3,392,400 - 3,392,400 --------------------------------------------------------------- 13,957,285 949,650 14,906,935 --------------------------------------------------------------- Precious Metals - 0.00% 1,900 Michael Anthony Jewelers Inc.* 4,038 - 4,038 --------------------------------------------------------------- Printing-Commercial - 0.02% 6,100 Mail-Well, Inc. 43,081 - 43,081 --------------------------------------------------------------- Publishing - 4.36% 11,400 Cadmus Communications Corp. 92,625 - 92,625 11,000 Consolidated Graphics, Inc.* 117,563 - 117,563 3,400 Courier Corp. 99,450 - 99,450 19,700 Ennis Business Forms Inc. 157,600 - 157,600 96,600 Houghton Mifflin Co. (1) 4,576,425 - 4,576,425 155,400 Lee Enterprises Inc. 4,118,100 - 4,118,100 64,200 McClatchy Co. 2,178,787 - 2,178,787 10,000 New England Business Service, Inc. 207,500 - 207,500 7,900 Primesource Corp. 39,994 - 39,994 21,400 Standard Register 274,187 - 274,187 20,800 Standex International Corp. 358,800 - 358,800 --------------------------------------------------------------- 12,221,031 - 12,221,031 --------------------------------------------------------------- Railroads - 0.27% 26,800 Greenbrier Companies, Inc. 222,775 - 222,775 27,400 Trinity Industries, Inc. 527,450 - 527,450 --------------------------------------------------------------- 750,225 - 750,225 --------------------------------------------------------------- Real Property - 0.02% 1,300 Crossmann Communities, Inc.* 19,500 - 19,500 2,000 Meritage Corp.* 26,000 - 26,000 --------------------------------------------------------------- 45,500 - 45,500 --------------------------------------------------------------- Restaurants - 1.55% 18,000 Applebees International, Inc. - 399,375 399,375 4,000 Arkansas Restaurants Corp.* 37,500 - 37,500 3,500 Benihana Inc.* 45,500 - 45,500 93,400 Bob Evans Farms Inc. 1,494,400 - 1,494,400 63,000 CKE Restaurants, Inc. 185,063 - 185,063 1,700 Dave & Busters Inc.* 10,944 - 10,944 5,200 ELXSI Corp.* 57,850 - 57,850 53,900 Jack in the Box Inc.* - 1,155,481 1,155,481 27,100 Lubys Cafeterias Inc. 220,187 - 220,187 16,300 NPC International, Inc.* 142,625 - 142,625 29,300 Rainforest Cafe Inc.* 62,263 - 62,263 44,900 Ryan's Family Steak Houses, Inc.* 409,712 - 409,712 9,800 Schlotzskys Inc.* 51,450 - 51,450 34,200 Sizzler International Inc.* 64,125 - 64,125
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- --------------------------------------------------------------- 2,781,619 1,554,856 4,336,475 --------------------------------------------------------------- Securities & Asset Management - 2.75% 31,900 Affiliated Managers Group Inc.* - 1,513,256 1,513,256 7,800 Eaton Vance Corp.* - 404,138 404,138 96,700 Franklin Resources, Inc. 3,469,113 - 3,469,113 5,700 ITLA Capital Corp.* 79,889 - 79,889 21,400 Raymond James Financial, Inc. - 535,000 535,000 8,328 Stifel Financial Corp. 97,854 - 97,854 39,600 T. Rowe Price & Associates Inc. 1,618,650 - 1,618,650 --------------------------------------------------------------- 5,265,506 2,452,394 7,717,900 --------------------------------------------------------------- Semiconductor - 0.45% 1,339 Avnet, Inc. 76,240 - 76,240 800 Bell Microproducts Inc.* 18,900 - 18,900 2,600 Katy Industries Inc. 27,300 - 27,300 30,200 Neomagic Corp.* 89,656 - 89,656 3,900 O.I. Corp.* 13,650 - 13,650 68,800 Richardson Electronics Ltd. - 1,032,000 1,032,000 --------------------------------------------------------------- 225,746 1,032,000 1,257,746 --------------------------------------------------------------- Specialty Retail - 3.27% 5,900 A.C. Moore Arts & Crafts, Inc.* 49,413 - 49,413 19,600 Barnett Inc.* 242,550 - 242,550 4,100 Bebe Stores, Inc.* 40,744 - 40,744 6,500 Brookstone, Inc.* 76,375 - 76,375 15,300 Building Materials Holding Corp.* 154,912 - 154,912 34,100 Central Garden & Pet Co.* 251,487 - 251,487 20,100 CSK Auto Corp.* 170,850 - 170,850 2,100 Discount Auto Parts Inc.* 17,063 - 17,063 6,100 Duckwall Alto Stores Inc.* 51,088 - 51,088 12,600 Finlay Enterprises Inc.* 162,225 - 162,225 17,400 Friedman's Inc. 100,050 - 100,050 13,700 Hancock Fabrics, Inc. 55,656 - 55,656 16,500 Haverty Furniture Companies, Inc. 190,781 - 190,781 118,100 Intertan, Inc.*(1) - 1,387,675 1,387,675 117,500 Longs Drug Stores Corp. 2,379,375 - 2,379,375 9,500 Movie Gallery Inc.* 35,031 - 35,031 137,200 Musicland Stores Corp.*(1) 344,137 736,312 1,080,449 136,617 Piercing Pagoda, Inc. * 39,825 1,975,276 2,015,101 23,572 REX Stores Corp.*(1) - 412,510 412,510 1,200 Tractor Supply Co.* 17,550 - 17,550 5,100 United Auto Group, Inc.* 39,844 - 39,844 6,400 Wolohan Lumber Co. 70,400 - 70,400 10,800 York Group Inc. 33,750 - 33,750 3,600 Zale Corp.* - 134,550 134,550 --------------------------------------------------------------- 4,523,106 4,646,323 9,169,429 --------------------------------------------------------------- Thrift - 1.71% 1,400 Alliance Bancorp of New England, Inc. 11,200 - 11,200 2,700 Bank of the Ozarks, Inc. 40,500 - 40,500 2,100 Bank United Corp. 76,519 - 76,519 50,537 BankAtlantic Bancorp Inc. 170,562 - 170,562 13,500 Bay View Capital Corp. 118,125 - 118,125 10,500 BSB Bancorp, Inc. 224,437 - 224,437 4,100 Camco Financial Corp. 34,338 - 34,338 4,700 Capital Crossing Bank* 35,838 - 35,838 7,500 Dime Community Bancorp Inc. 128,437 - 128,437 34,100 Downey Financial Corp. (1) 1,193,500 - 1,193,500 3,000 First Bell Bancorp Inc. 46,500 - 46,500 4,400 First Essex Bancorp Inc. 69,850 - 69,850 5,500 First Republic Bank* 119,625 - 119,625 2,500 FirstFed America Bancorp, Inc. 33,125 - 33,125 23,400 FirstFed Financial Corp.* 374,400 - 374,400 9,800 Flagstar Bancorp Inc. 113,312 - 113,312 12,200 Hamilton Bancorp Inc.* 219,600 - 219,600 3,100 Klamath First Bancorp Inc. 34,100 - 34,100 18,800 Local Financial Corp.* 159,800 - 159,800 18,400 MAF Bancorp, Inc. 366,850 - 366,850 7,300 Parkvale Financial Corp. 124,100 - 124,100 6,200 PennFed Financial Services, Inc. 81,375 - 81,375 5,000 Quaker City Bancorp Inc.* 83,750 - 83,750 11,400 Republic Security Financial Corp. 49,163 - 49,163 2,300 Southwest Bancorp, Inc. 36,513 - 36,513 37,600 Washington Federal Inc. 705,000 - 705,000 2,000 Westcorp Inc. 26,000 - 26,000 3,100 WesterFed Financial Corp. 45,725 - 45,725 8,000 WSFS Financial Corp. 81,000 - 81,000
PRO FORMA COMBINED PACE COMBINED PACE SMALL/MEDIUM SMALL/MEDIUM NUMBER OF COMPANY VALUE PAINEWEBBER COMPANY VALUE EQUITY SHARES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - -------------- --------------------------------------------------------------- --------------------------------------------------------------- 4,803,244 - 4,803,244 --------------------------------------------------------------- Tobacco - 0.34% 1,700 Holts Cigar Holdings Inc.* 8,500 - 8,500 15,700 Standard Commercial Corp. 76,538 - 76,538 39,200 Universal Corp. 869,750 - 869,750 --------------------------------------------------------------- 954,788 - 954,788 --------------------------------------------------------------- Total Common Stocks (cost - $281,489,500) 201,584,610 63,373,386 264,957,996 ---------------------------------------------------------------
PRO FORMA COMBINED COMBINED PACE PRINCIPAL PACE SMALL/MEDIUM SMALL/MEDIUM AMOUNT MATURITY INTEREST COMPANY VALUE PAINE WEBBER COMPANY VALUE EQUITY (000) DATES RATES EQUITY INVESTMENTS SMALL CAP FUND INVESTMENTS - ---------- ------------------------------------------------------------------------- REPURCHASE AGREEMENTS - 4.94% $ 2,756 Repurchase Agreement dated 07/31/00 with Societe Generale, collateralized by $2,118,000 U.S. Treasury Notes, 8.875% due 08/15/17 (value $2,811,645); proceeds: $2,756,498 08/01/00 6.500 $ - $ 2,756,000 $ 2,756,000 11,103 Repurchase Agreement dated 07/31/00 with State Street Bank & Trust Co., collateralized by $3,266,232 U.S. Treasury Notes, 6.625% due 03/31/02; (value - $3,349,551) and $6,203,964 U.S. Treasury Bonds, 8.125% due 08/15/19; (value - $7,814,043); proceeds: $11,104,619 08/01/00 5.250 11,103,000 - 11,103,000 ------------------------------------------------------ Total Repurchase Agreements (cost-$13,859,000) 11,103,000 2,756,000 13,859,000 ------------------------------------------------------ Total Investments (cost - $295,348,500) -- 99.47% 212,687,610 66,129,386 278,816,996 Other Assets in Excess of Liabilities -- 0.53% 1,061,259 424,800 1,486,059 ------------------------------------------------------ Net Assets -- 100.00% $213,748,869 $66,554,186 $280,303,055 ======================================================
- --------------- * Non-income producing security. (1) Security, or portion thereof, was on loan at July 31, 2000. ADR American Depository Receipt See accompanying notes to pro forma financial statements. PACE Small/Medium Company Value Equity Investments PaineWebber Small Cap 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 Small Cap Fund ("Small Cap"), PACE Small/Medium Company Value Equity Investments ("Small/Medium Company Value") would acquire the assets of Small Cap in exchange solely for the assumption by Small/Medium Company Value of Small Cap's assets and stated liabilities and shares of Small/Medium Company Value that correspond to the outstanding shares of Small Cap. The number of shares to be received would be based on the relative net asset value of Small/Medium Company Value's shares on the effective date of the Plan and Small Cap will be terminated as soon as practicable thereafter. The PRO FORMA financial statements reflect the financial position of Small/Medium Company Value and Small Cap at July 31, 2000 and the combined results of operations of Small/Medium Company Value and Small Cap (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 decrease due to the lower fee schedule, net of waivers, of Small/Medium Company Value. Small Cap currently pays Rule 12b-1 distribution or service fees; as of July 31, 2000, Small/Medium 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 $168,000 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 on the exchange designated as the primary market by each Fund's sub-adviser. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith or under the direction of the Fund's board of trustees (the "board"). The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the board determines that this does not represent fair value. -----END PRIVACY-ENHANCED MESSAGE-----