-----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, O4xLkNmxhoM18phIN/lndqTimDpCdpl2T0nXJBlGfwWo600Sir/b6MANCbNcbDa7 7WcOazl44yyoCBrbvbzxMQ== 0000912057-01-002223.txt : 20010123 0000912057-01-002223.hdr.sgml : 20010123 ACCESSION NUMBER: 0000912057-01-002223 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010119 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: 333-51572 FILM NUMBER: 1511981 BUSINESS ADDRESS: STREET 1: C/O MITCHELL HUTCHINS STREET 2: 51 WEST 52ND ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127133269 MAIL ADDRESS: STREET 1: C/O MITCHELL HUTCHINS STREET 2: 51 WEST 52ND ST 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 a2035578z497.txt 497 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. 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 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)
PACE LARGE COMPANY VALUE PW TAX-MANAGED EQUITY INVESTMENTS EQUITY FUND --------------------- --------------------- 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 ==================== ==================== PRO FORMA COMBINED PACE LARGE COMPANY VALUE EQUITY ADJUSTMENTS INVESTMENTS ------------------- -------------------- 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 ==================== ====================
See accompanying notes to pro forma financial statements PACE LARGE COMPANY VALUE EQUITY INVESTMENTS PAINEWEBBER TAX-MANAGED EQUITY FUND PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
PACE LARGE COMPANY VALUE PW TAX-MANAGED EQUITY INVESTMENTS EQUITY FUND ---------------------- ---------------------- 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 ====================== ====================== PRO FORMA COMBINED PACE LARGE COMPANY VALUE EQUITY ADJUSTMENTS INVESTMENTS -------------------- -------------------- 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) ===================== =====================
- ------------------------ (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 PACE LARGE COMPANY VALUE EQUITY INVESTMENTS PAINEWEBBER TAX-MANAGED EQUITY FUND PRO FORMA PORTFOLIO OF INVESTMENTS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
PRO FORMA COMBINED PACE LARGE COMBINED PACE PAINEWEBBER COMPANY NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS ------------------------ ------------------------ ---------------- ---------------- 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%
PRO FORMA COMBINED PACE LARGE COMBINED PACE PAINEWEBBER COMPANY NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS ------------------------ ------------------------ ---------------- ---------------- 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
PRO FORMA COMBINED PACE LARGE COMBINED PACE PAINEWEBBER COMPANY NUMBER OF LARGE COMPANY VALUE TAX-MANAGED VALUE EQUITY SHARES EQUITY INVESTMENTS EQUITY FUND INVESTMENTS ------------------------ ------------------------ ---------------- ---------------- 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 ------------------------ ---------------- ----------------
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% 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 ============= ============= ==============
------------------------ * 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. 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 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. 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)
PACE LARGE COMPANY VALUE PW GROWTH AND EQUITY INVESTMENTS INCOME FUND ------------------ -------------- 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 =============== =============== PRO FORMA COMBINED PACE LARGE COMPANY PW TAX-MANAGED VALUE EQUITY EQUITY FUND INVESTMENTS --------------- --------------- 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 =============== ===============
See accompanying notes to pro forma financial statements 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)
PACE LARGE COMPANY VALUE PW EQUITY PW GROWTH AND TAX-MANAGED INVESTMENTS INCOME FUND EQUITY FUND -------------- --------------- ------------ 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 ============== =============== ============ PRO FORMA COMBINED PACE LARGE COMPANY VALUE EQUITY ADJUSTMENTS INVESTMENTS ----------------- ---------------- 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 ================= ==============
- -------------------------- (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 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)
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 - ---------------- ------------- -------------- ------------- ------------- 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
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 ------------- ------------ ----------- -------------
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 ------------- ------------ ----------- -------------
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 - --------- ------------------- ----------------- ----------- ------------- - 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 ------------- ------------ ----------- -------------
COMBINED PACE PRINCIPAL LARGE COMPANY AMOUNT MATURITY INTEREST VALUE EQUITY (000) DATES RATES INVESTMENTS - ---------------- ------------- ----------- -------------- 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 ============ PRO FORMA COMBINED COMBINED PACE LARGE PRINCIPAL PAINEWEBBER PAINEWEBBER COMPANY AMOUNT GROWTH AND TAX-MANAGED VALUE EQUITY (000) INCOME FUND EQUITY FUND INVESTMENTS - ---------------- ------------- ------------- --------------- 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 ============== ============= ==============
- ---------------- * 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. 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 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. -----END PRIVACY-ENHANCED MESSAGE-----