497 1 0001.txt 497 PAINEWEBBER PACE SELECT ADVISORS TRUST (ON BEHALF OF PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS) PAINEWEBBER MANAGED ASSETS TRUST (ON BEHALF OF PAINEWEBBER MID 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 Growth Equity Investments ("PACE Small/Medium Company Growth Equity Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE Trust"), would acquire all of the assets of PaineWebber Mid Cap Fund ("Mid Cap Fund"), the sole series of PaineWebber Managed Assets Trust ("Managed Assets Trust"), in exchange solely for shares of PACE Small/Medium Company Growth Equity Fund and the assumption by PACE Small/Medium Company Growth Equity Fund of all of Mid 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 Growth 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 Small/Medium Company Growth Equity 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 Small/Medium Company Growth Equity 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 Mid Cap Fund for the fiscal year ended August 31, 2000, which is incorporated by reference from Managed Assets Trust Form N-30D, SEC File Number 811-06376, filed on November 3, 2000, accession number 0000912057-00-047148. This Statement of Additional Information is not a prospectus and should be read only in conjunction with the Combined Proxy Statement/Prospectus dated December 28, 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 28, 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 Mid Cap Fund and PACE Small/Medium Company Growth Equity 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 Mid Cap Fund have changed significantly since that date, primarily because the Fund's portfolio was realigned by its new sub-adviser after October 10, 2000 to reflect its proprietary investment style and strategies. 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 Mid Cap Fund's portfolio holdings were incompatible with PACE Small/Medium Company Growth Fund's holdings or would have to be sold if Mid Cap Fund's shareholders approve the Reorganization. It is expected, however, that some of Mid Cap Fund's holdings may not remain at the time of the Reorganization due to normal portfolio turnover. 2
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS PAINEWEBBER MID CAP FUND COMBINED PACE PRO FORMA STATEMENT OF ASSETS AND LIABILITIES SMALL/MEDIUM FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED) COMPANY PACE SMALL/MEDIUM GROWTH EQUITY COMPANY GROWTH PW MID CAP INVESTMENTS EQUITY INVESTMENTS FUND ADJUSTMENTS PRO FORMA ------------------ ---------- ----------- --------- ASSETS Investments in securities, at value (cost - $202,529,663, $155,857,446 and $358,387,109, respectively) $ 316,589,197 $ 223,104,152 $ - $ 539,693,349 Investment of cash collateral for securities loaned (cost - $47,973,850, $35,432,700 and $83,406,550, respectively) 47,973,850 35,432,700 - 83,406,550 Cash 423 678 - 1,101 Receivable for investments sold 7,202,034 932,719 - 8,134,753 Receivable for shares of beneficial interest sold 130,664 260,065 - 390,729 Dividends and interest receivable 6,152 221,313 - 227,465 Deferred organizational expenses 1,025 - - 1,025 Other assets 60,023 14,018 - 74,041 ------------- ------------- ----------- ------------- Total assets 371,963,368 259,965,645 - 631,929,013 ------------- ------------- ----------- ------------- LIABILITIES Payable for cash collateral for securities loaned 47,973,850 35,432,700 - 83,406,550 Payable for investments purchased 3,956,880 9,228,359 - 13,185,239 Payable for shares of beneficial interest repurchased 118,601 325,241 - 443,842 Payable to affiliates 233,378 204,466 - 437,844 Accrued expenses and other liabilities 109,188 468,009 - 577,197 ------------- ------------- ----------- ------------- Total liabilities 52,391,897 45,658,775 - 98,050,672 ------------- ------------- ----------- ------------- NET ASSETS Beneficial interest shares of $0.001 par value outstanding - 10,556,285; 14,996,059 and 17,635,404, respectively 97,573,619 118,668,805 - 216,242,424 Accumulated undistributed (distributions in excess) of net investment income (loss) 1,131 (2,085,132) - (2,084,001) Accumulated net realized gains from investment transactions 107,937,187 30,476,491 - 138,413,678 Net unrealized appreciation of investments 114,059,534 67,246,706 - 181,306,240 ------------- ------------- ----------- ------------- Net assets applicable to shares outstanding $ 319,571,471 $ 214,306,870 $ - $ 533,878,341 ============= ============= =========== ============= CLASS P: Net assets $ 319,571,471 $ - $ - $ 319,571,471 ------------- ------------- ----------- ------------- Shares outstanding 10,556,285 - - 10,556,285 ------------- ------------- ----------- ------------- Net asset value and offering price per share $ 30.27 $ - $ - $ 30.27 ============= ============= =========== ============= CLASS A: Net assets $ - $ 158,798,662 $ - $ 158,798,662 ------------- ------------- ----------- ------------- Shares outstanding - 10,928,476 (5,682,939) 5,245,537 ------------- ------------- ----------- ------------- Net asset and redemption value per share $ - $ 14.53 $ - $ 30.27 ============= ============= =========== ============= Maximum offering price per share (net asset value plus sales charge of 4.5% of offering price) $ - $ 15.22 $ - $ 31.70 ============= ============= =========== ============= CLASS B: Net assets $ - $ 31,207,342 $ - $ 31,207,342 ------------- ------------- ----------- ------------- Shares outstanding - 2,180,607 (1,149,747) 1,030,860 ------------- ------------- ----------- ------------- Net asset value and offering price per share $ - $ 14.31 $ - $ 30.27 ============= ============= =========== ============= CLASS C: Net assets $ - $ 23,677,770 $ - $ 23,677,770 ------------- ------------- ----------- ------------- Shares outstanding - 1,844,318 (1,062,179) 782,139 ------------- ------------- ----------- ------------- Net asset value and offering price per share $ - $ 12.84 $ - $ 30.27 ============= ============= =========== ============= CLASS Y: Net assets $ - $ 623,095 $ - $ 623,095 ------------- ------------- ----------- ------------- Shares outstanding - 42,658 (22,076) 20,582 ------------- ------------- ----------- ------------- Net asset value and offering price per share $ - $ 14.61 $ - $ 30.27 ============= ============= =========== =============
See accompanying notes to pro forma financial statements
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS PAINEWEBBER MID CAP FUND PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED) COMBINED PACE SMALL/MEDIUM PACE COMPANY SMALL/MEDIUM GROWTH EQUITY COMPANY GROWTH PW MID CAP INVESTMENTS EQUITY INVESTMENTS FUND ADJUSTMENTS PRO FORMA ------------------ ---------- ----------------- -------------- INVESTMENT INCOME: Interest $ 764,224 $ 677,517 $ - $ 1,441,741 Dividends 200,751 591,760 - 792,511 --------------- ----------- ------------ ------------ 964,975 1,269,277 - 2,234,252 --------------- ----------- ------------ ------------ EXPENSES: Investment advisory and administration 2,495,426 2,017,682 (403,536) (a) 4,109,572 Shareholder distribution and servicing fees - 910,717 - 910,717 Transfer agency fees and expenses 121,245 201,509 - 322,754 Reports and notices to shareholders 42,332 44,808 (35,846) (b) 51,294 Legal and audit 69,680 73,785 (73,785) (b) 69,680 Trustees' fees 26,250 13,500 (13,500) (b) 26,250 Federal and state registration fees 29,682 42,055 (33,644) (b) 38,093 Amortization of organizational expenses 19,032 - - 19,032 Custody and accounting 187,662 121,061 - 308,723 Other expenses 2,530 55,437 - 57,967 --------------- ----------- ------------- ------------ 2,993,839 3,480,554 (560,311) 5,914,082 Less: fee waivers from adviser (17,105) (12,285) - (29,390) --------------- ----------- ------------ ------------ Net expenses 2,976,734 3,468,269 (560,311) 5,884,692 --------------- ----------- ------------ ------------ Net investment income (loss) (2,011,759) (2,198,992) 560,311 (3,650,440) --------------- ----------- ------------ ------------ REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS: Net realized gains from investment transactions 128,087,825 31,349,212 - 159,437,037 Net change in unrealized appreciation of investments 30,703,199 62,175,842 - 92,879,041 --------------- ----------- ------------ ------------ Net realized and unrealized gains from investment activities 158,791,024 93,525,054 - 252,316,078 --------------- ----------- ------------ ------------ Net increase in net assets resulting from operations $ 156,779,265 $91,326,062 $ 560,311 $248,665,638 =============== =========== ============ ============
-------------- (a) Reflects decrease in fees resulting from lower fee schedule of PACE Small/Medium Company Growth Equity Investments. (b) Reflects the anticipated savings of the merger. See accompanying notes to pro forma financial statements PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS PAINEWEBBER MID CAP FUND PRO FORMA PORTFOLIO OF INVESTMENTS FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
COMBINED PACE SMALL/MEDIUM COMPANY COMBINED PACE GROWTH EQUITY NUMBER OF SMALL/MEDIUM GROWTH PAINEWEBBER INVESTMENTS SHARES EQUITY INVESTMENTS MID CAP FUND PRO FORMA ----------------- ------------------- ------------ ------------- COMMON STOCKS - 93.51% Airlines - 0.15% 50,000 America West Holding Corp.*(1) $ - $ 803,125 $ 803,125 ------------ ------------ ------------ Apparel, Retail - 0.54% 90,000 Hot Topic Inc.* 2,902,500 - 2,902,500 ------------ ------------ ------------ Banks - 0.76% 137,200 Doral Financial Corp. 1,783,600 - 1,783,600 102,200 Webster Financial Corp. 2,286,725 - 2,286,725 ------------ ------------ ------------ 4,070,325 - 4,070,325 ------------ ------------ ------------ Broadcasting & Publishing - 0.31% 46,500 Infinity Broadcasting Corp.* - 1,639,125 1,639,125 ------------ ------------ ------------ Business & Public Services - 2.00% 89,700 Bright Horizons Family Solutions* 2,186,438 - 2,186,438 74,900 Corporate Executive Board Co.* 4,793,600 - 4,793,600 20,300 Heidrick & Struggles International, Inc.* 1,360,100 - 1,360,100 99,100 West Teleservices Corp.* 2,341,237 - 2,341,237 ------------ ------------ ------------ 10,681,375 - 10,681,375 ------------ ------------ ------------ Cable - 0.13% 10,600 Adelphi Communications Corp. - 373,650 373,650 24,800 Insight Communications Inc.* 303,800 - 303,800 ------------ ------------ ------------ 303,800 373,650 677,450 ------------ ------------ ------------ Computer-Business Services - 1.69% 69,100 Bisys Group Inc.* 4,387,850 - 4,387,850 47,300 Digital Insight Corp.* 1,481,081 - 1,481,081 52,700 eLoyalty Corp.* 782,266 - 782,266 60,500 Espeed Inc.* 1,852,812 - 1,852,812 4,000 Redback Networks Inc. - 520,000 520,000 ------------ ------------ ------------ 8,504,009 520,000 9,024,009 ------------ ------------ ------------ Computer Hardware - 4.41% 60,000 EMC Corp.* - 5,107,500 6,200,175 184,100 Network Appliance, Inc.* 15,005,244 861,875 15,867,119 40,500 RSA Security Inc.* 2,566,687 - 2,566,687 ------------ ------------ ------------ 17,571,931 5,969,375 23,541,306 ------------ ------------ ------------ Computer Software - 11.45% 35,000 BMC Software, Inc.* - 660,625 660,625 121,200 Broadbase Software Inc.* 2,620,150 235,625 2,855,775 7,800 Cacheflow Inc. - 530,400 530,400 162,000 Cadence Design Systems, Inc.* - 3,381,750 3,381,750 117,700 CareScience, Inc.* 706,200 - 706,200 76,000 Cysive, Inc.* 1,824,000 - 1,824,000 20,000 E. Piphany Inc. - 1,861,250 1,861,250 94,800 Exchange Applications Software* 2,085,600 - 2,085,600 29,700 Extensity Inc.* 480,769 - 480,769 35,000 Foundry Networks Inc. - 2,863,437 2,863,437 76,835 i2 Technologies, Inc.*(1) 7,471,654 2,497,688 9,969,342 90,000 Intuit - 3,060,000 3,060,000 34,500 Manugistics Group, Inc.* 1,914,750 - 1,914,750 10,000 Marimba Inc. - 179,375 179,375 74,900 NetIQ Corp.* 3,613,925 - 3,613,925 176,100 New Era Of Networks, Inc.* 3,402,500 1,000,000 4,402,500 77,000 Onyx Software Corp.* 1,862,437 - 1,862,437 125,000 Peregrine Systems Inc. - 3,117,187 3,117,187 12,000 Priceline Common Inc. - 283,500 283,500 27,000 Siebel Systems Inc.* - 3,915,000 3,915,000 103,275 VERITAS Software Corp.* 10,527,595 - 10,527,595 30,000 Vignette Corp. - 1,016,250 1,016,250 ------------ ------------ ------------ 36,509,580 24,602,087 61,111,667 ------------ ------------ ------------
COMBINED PACE SMALL/MEDIUM COMPANY COMBINED PACE GROWTH EQUITY NUMBER OF SMALL/MEDIUM GROWTH PAINEWEBBER INVESTMENTS SHARES EQUITY INVESTMENTS MID CAP FUND PRO FORMA ----------------- ------------------- ------------ ------------- Construction - 1.43% 179,050 Dycom Industries Inc.* 7,654,388 - 7,654,388 ------------ ------------ ------------ Consumer Durables - 0.49% 35,000 Black & Decker Corp. - 1,301,563 1,301,563 30,000 Whirlpool Corp. - 1,295,625 1,295,625 ------------ ------------ ------------ - 2,597,188 2,597,188 ------------ ------------ ------------ Defense & Aerospace - 0.63% 75,000 TRW Inc. - 3,370,312 3,370,312 ------------ ------------ ------------ Diversified Retail - 1.27% 174,700 Cost Plus Inc.* 5,819,694 - 5,819,694 40,000 Federated Department Stores, Inc.* - 962,500 962,500 ------------ ------------ ------------ 5,819,694 962,500 6,782,194 ------------ ------------ ------------ Drugs & Medicine - 4.77% 15,000 Biogen Inc.* - 795,000 795,000 93,200 Cima Labs Inc.* 2,830,950 - 2,830,950 86,200 Cubist Pharmaceuticals Inc.* 3,889,775 - 3,889,775 33,300 Inhale Therapeutic Systems, Inc.* 2,703,544 - 2,703,544 137,100 IntraBiotics Pharmaceuticals, Inc.* 4,095,862 - 4,095,862 129,100 Pharmacopeia Inc.* 4,964,685 - 4,964,685 63,000 United Therapeutics Corp.* 6,174,000 - 6,174,000 ------------ ------------ ------------ 24,658,816 795,000 25,453,816 ------------ ------------ ------------ Electric Utilities - 0.88% 66,000 Calpine Corp. - 4,702,500 4,702,500 ------------ ------------ ------------ Electrical Equipment - 6.30% 42,000 Advanced Energy Industries, Inc.* 1,890,000 - 1,890,000 22,000 Ciena Corp. - 3,126,750 3,126,750 49,000 Comverse Technology, Inc.* - 4,299,750 4,299,750 51,270 Flextronics International - 3,629,756 3,629,756 90,000 Jabil Circuit Inc.* - 4,505,625 4,505,625 51,300 LTX Corp.* 1,128,600 - 1,128,600 10,000 Polycom, Inc.* - 948,594 948,594 100,000 SCI Systems Inc.* - 4,587,500 4,587,500 50,000 Solectron Corp.*(1) - 2,015,625 2,015,625 109,900 Teradyne Inc.* 3,796,163 3,168,750 6,964,913 43,000 Western Multiplex Corp. 516,000 - 516,000 ------------ ------------ ------------ 7,330,763 26,282,350 33,613,113 ------------ ------------ ------------ Electronic Components - 0.12% 10,000 Bookham Technology Plc. - 627,500 627,500 ------------ ------------ ------------ Electronic Components & Instruments - 1.30% 30,000 Chartered Semiconductor Manufacturing - 2,160,000 2,160,000 8,700 Epcos AG* - 785,175 785,175 75,000 Sawtek Inc. - 3,993,750 3,993,750 ------------ ------------ ------------ - 6,938,925 6,938,925 ------------ ------------ ------------ Electronical Power - 0.46% 75,000 Helix Technology Corp. - 2,437,500 2,437,500 ------------ ------------ ------------ Energy Reserves & Production - 0.20% 40,000 Tosco Corp. - 1,060,000 1,060,000 ------------ ------------ ------------ Financial Services - 0.86% 13,000 GATX Corp. 519,188 - 519,188 139,600 Metris Co., Inc. 4,092,025 - 4,092,025 ------------ ------------ ------------ 4,611,213 - 4,611,213 ------------ ------------ ------------ Food Retail - 0.32% 84,300 American Italian Pasta Co.* 1,664,925 - 1,664,925 1,600 Schultz Sav-O Stores, Inc. 19,000 - 19,000 ------------ ------------ ------------ 1,683,925 - 1,683,925 ------------ ------------ ------------ Gas Utility - 0.24% 25,000 Equitable Resources Inc. - 1,301,563 1,301,563 ------------ ------------ ------------
COMBINED PACE SMALL/MEDIUM COMPANY COMBINED PACE GROWTH EQUITY NUMBER OF SMALL/MEDIUM GROWTH PAINEWEBBER INVESTMENTS SHARES EQUITY INVESTMENTS MID CAP FUND PRO FORMA ----------------- ------------------- ------------ ------------- Hotels - 0.46% 177,800 Extended Stay America Inc.* 2,444,750 - 2,444,750 ------------ ------------ ------------ Human Resources - 0.25% 33,800 Hall, Kinion & Associates, Inc.* 1,322,425 - 1,322,425 ------------- ------------ ------------ Industrial Parts - 2.06% 167,600 Mettler Toledo International Inc.* 6,787,800 - 6,787,800 50,000 Mettler Toledo International Inc. ADR* - 2,025,000 2,025,000 48,000 Pri Automation Inc. - 2,190,000 2,190,000 ------------ ------------ ------------ 6,787,800 4,215,000 11,002,800 ------------ ------------ ------------ Industrial Services & Supplies - 0.13% 9,600 CoorsTek, Inc.* 413,400 - 413,400 15,800 MSC Industrial Direct Co., Inc. Class A* 287,363 - 287,363 ------------ ------------ ------------ 700,763 - 700,763 ------------ ------------ ------------ Information & Computer Services - 1.86% 60,000 America Online Inc.* - 3,198,750 3,198,750 20,000 Ariba Inc.(1) - 2,318,750 2,318,750 4,000 Avici Systems Inc.* - 393,500 393,500 50,000 Comdisco Inc. - 1,293,750 1,293,750 24,500 Diamond Technology Partners Inc.* 2,182,031 - 2,182,031 6,000 Ebay Inc. - 300,000 300,000 2,000 Yahoo, Inc.* - 257,375 257,375 ------------ ------------ ------------ 2,182,031 7,762,125 9,944,156 ------------ ------------ ------------ Insurance - 0.47% 40,900 Radian Group Inc. 2,489,788 - 2,489,788 ------------ ------------ ------------ Long Distance & Phone Companies - 0.30% 32,749 Global Crossing Ltd.* - 796,210 796,210 20,250 MCI Worldcom Inc.* - 791,016 791,016 ------------ ------------ ------------ - 1,587,226 1,587,226 ------------ ------------ ------------ Machinery & Engineering Services - 0.15% 40,000 Grant Prideco Inc. - 805,000 805,000 ------------ ------------ ------------ Manufacturing - High Technology - 1.34% 105,000 ASM Lithography Holdings N.V.* - 4,173,750 4,173,750 4,300 Avanex Corp. - 545,831 545,831 8,000 Corvis Corporation - 661,251 661,251 14,400 Sycamore Networks Inc. - 1,775,700 1,775,700 ------------ ------------ ------------ - 7,156,532 7,156,532 ------------ ------------ ------------ Media - 6.39% 37,200 Acme Communications Inc.* 395,250 - 395,250 35,000 AM/FM Inc. - 2,500,313 2,500,313 25,000 Cablevision Systems Corp. - 1,645,313 1,645,313 62,400 Comcast Corp., Class A* - 2,122,575 2,122,575 32,500 Emmis Broadcasting Corp.*(1) - 1,172,031 1,172,031 162,659 Gemstar TV Guide International Inc.* 6,251,525 3,640,175 9,891,700 110,100 Getty Images Inc.* 3,984,244 - 3,984,244 60,000 Penton Media Inc. - 2,077,500 2,077,500 284,700 Radio One, Inc.* 5,877,368 - 5,877,368 49,200 True North Communications, Inc. 2,401,575 - 2,401,575 74,400 Westwood One Inc.* 2,069,250 - 2,069,250 ------------ ------------ ------------ 20,979,212 13,157,907 34,137,119 ------------ ------------ ------------ Medical-Biomedical & Genetics - 1.51% 28,900 Exelixis, Inc.* 1,125,294 - 1,125,294 60,800 Neurocrine Biosciences Inc.* 1,941,800 - 1,941,800 87,000 Trimeris, Inc.* 4,969,875 - 4,969,875 ------------ ------------ ------------ 8,036,969 - 8,036,969 ------------ ------------ ------------ Medical Providers - 0.33% 65,000 Lincare Holdings Inc.* - 1,738,750 1,738,750 ------------ ------------ ------------ Motor Vehicles - 0.74% 110,000 Navistar International Corp.* - 3,925,625 3,925,625 ------------ ------------ ------------ Oil Refining - 0.62%
COMBINED PACE SMALL/MEDIUM COMPANY COMBINED PACE GROWTH EQUITY NUMBER OF SMALL/MEDIUM GROWTH PAINEWEBBER INVESTMENTS SHARES EQUITY INVESTMENTS MID CAP FUND PRO FORMA ----------------- ------------------- ------------ ------------- 65,000 Conoco, Inc. - 1,499,062 1,499,062 25,000 Smith International Inc.* - 1,784,375 1,784,375 ------------ ------------ ------------ - 3,283,437 3,283,437 ------------ ------------ ------------ Oil Services - 2.19% 45,000 Cooper Cameron Corp.* - 2,908,125 2,908,125 65,000 Diamond Offshore Drilling Inc.* - 2,441,563 2,441,563 110,000 Ensco International Inc. - 3,712,500 3,712,500 65,000 Weatherford International Inc. - 2,604,062 2,604,062 ------------ ------------ ------------ - 11,666,250 11,666,250 ------------ ------------ ------------ Optical - 0.20% 29,500 Wesley Jessen Visioncare Inc.* 1,091,500 - 1,091,500 ------------ ------------ ------------ Other Insurance - 0.39% 32,000 AMBAC Financial Group Inc. - 2,062,000 2,062,000 ------------ ------------ ------------ Restaurants - 3.45% 194,800 CEC Entertainment Inc.* 5,430,050 - 5,430,050 170,625 Cheesecake Factory Inc.* 5,172,070 - 5,172,070 34,100 Morrison Management Specialists Inc. 982,506 - 982,506 189,400 Ruby Tuesday Inc. 2,331,988 - 2,331,988 147,050 Sonic Corp.* 4,475,834 - 4,475,834 ------------ ------------ ------------ 18,392,448 - 18,392,448 ------------ ------------ ------------ Semiconductor - 16.87% 2,700 Akamai Technologies Inc. - 212,920 212,920 39,000 Alpha Industries, Inc.* - 1,328,438 1,328,438 12,500 Altera Corp.* - 1,227,344 1,227,344 119,600 Applied Micro Circuits Corp.* 15,760,800 2,089,500 17,850,300 35,000 Atmel Corp.* - 1,047,813 1,047,813 50,000 Fairchild Semiconductor International* - 1,768,750 1,768,750 70,000 JDS Uniphase Corp.* - 8,268,750 8,268,750 140,000 Lam Research Corp.* - 4,095,000 4,095,000 52,600 Maxim Integrated Productions Inc.* - 3,474,887 3,474,887 325,200 Micrel Inc.* 16,280,325 - 16,280,325 60,000 Novellus Systems Inc.* - 3,236,250 3,236,250 71,100 PMC Sierra, Inc.* 13,784,512 - 13,784,512 13,000 RF Micro Devices Inc. - 979,875 979,875 42,000 SDL Inc. - 14,576,625 14,576,625 32,700 Vitesse Semiconductor Corp.*(1) - 1,949,737 1,949,737 ------------ ------------ ------------ 45,825,637 44,255,889 90,081,526 ------------ ------------ ------------ Software - 1.42% 168,700 Jack Henry & Associates Inc. 7,570,413 - 7,570,413 ------------ ------------ ------------ Specialty Retail - 5.81% 45,000 Bed, Bath & Beyond, Inc.* - 1,656,562 1,656,562 264,375 Dollar Tree Stores Inc.* 11,252,461 - 11,252,461 153,200 Duane Reade Inc.* 3,504,450 - 3,504,450 165,100 Linens 'N Things Inc.* 4,942,681 - 4,942,681 30,000 Lowe's Companies, Inc. - 1,265,625 1,265,625 129,600 Too Inc.* 2,907,900 - 2,907,900 152,000 Tweeter Home Entertainment Group Inc.* 5,491,000 - 5,491,000 ------------ ------------ ------------ 28,098,492 2,922,187 31,020,679 ------------ ------------ ------------ Technology-Software - 0.56% 56,900 Concord Communications Inc.* 1,564,750 - 1,564,750 53,200 Register.com, Inc.* 1,441,388 - 1,441,388 ------------ ------------ ------------ 3,006,138 - 3,006,138 ------------ ------------ ------------ Wireless Telecommunications - 5.34% 65,000 Advanced Fibre Communications - 2,786,875 2,786,875 180,000 Aspect Communications Inc. - 3,307,500 3,307,500 400 Leap Wireless International, Inc.* 25,400 - 25,400 255,200 Nextlink Communications Inc.* 8,437,550 - 8,437,550 146,800 Pinnacle Holdings Inc.* 8,248,325 - 8,248,325 125,900 SBA Communications Corp.* 5,681,237 - 5,681,237 ------------ ------------ ------------ 22,392,512 6,094,375 28,486,887 ------------ ------------ ------------ Total Common Stocks (cost-$317,931,960) 303,623,197 195,615,003 499,238,200 ------------ ------------ ------------
COMBINED PACE SMALL/MEDIUM COMPANY PRINCIPAL PACE GROWTH EQUITY AMOUNT MATURITY INTEREST SMALL/MEDIUM GROWTH PAINEWEBBER INVESTMENTS (000) DATES RATES EQUITY INVESTMENTS MID CAP FUND PRO FORMA -------------- -------- -------- ------------------- ------------ ------------- SHORT TERM INVESTMENTS - 3.32% Money Market Funds - 1.07% $ 723 Scudder Institutional Fund $ - 723,41 $ 723,416 5,000 TempCash Portfolio - 5,000,000 5,000,000 -------------- ------------ ------------- - 5,723,416 5,723,416 -------------- ------------ ------------- U.S. Government Agency Obligation - 2.24% 12,000 Federal Home Loan Bank Consolidated Dsc Note 08/11/00 6.380% - 11,978,733 11,978,733 -------------- ------------ ------------- Total Short Term Investments (cost-$17,702,149) - 17,702,149 17,702,149 -------------- ------------ ------------- REPURCHASE AGREEMENTS - 4.26% 12,996 Repurchase Agreement dated 07/31/00 with State Street Bank & Trust Co. collateralized by $3,814,282 U.S. Treasury Notes, 6.625% due 03/31/02; (value-$3,909,639) and $7,244,943 U.S. Treasury Bonds, 8.125% due 8/15/19; (value-$9,318,808); proceeds: $12,967,891 08/01/00 5.250 12,966,000 - 12,966,000 9,787 Repurchase Agreement dated 07/31/00 with Dresdner Bank AG collateralized by $9,872,000 U.S. Treasury Notes, 5.750% due 08/15/03 (value-$9,983,191); proceeds: $9,788,778 08/01/00 6.540 - 9,787,000 9,787,000 -------------- ------------ ------------- Total Repurchase Agreements (cost-$22,753,000) 12,966,000 9,787,000 22,753,000 -------------- ------------ ------------- Total Investments (cost - $358,387,109) -- 101.09% 316,589,197 223,104,152 539,693,349 Other assets (liabilities) in excess of (liabilities) other assets -- (1.09)% 2,982,274 (8,797,282) (5,815,008) -------------- ------------ ------------- Net Assets -- 100.00% $ 319,571,471 $214,306,870 $ 533,878,341 ============== ============ =============
---------------- * Non-income producing security. (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 Small/Medium Company Growth Equity Investments PaineWebber Mid 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 Mid Cap Fund ("Mid Cap"), PACE Small/Medium Company Growth Equity Investments ("Small/Medium Company Growth") would acquire the assets of Mid Cap in exchange solely for the assumption by Small/Medium Company Growth of Mid Cap's assets and stated liabilities and shares of Small/Medium Company Growth that correspond to the outstanding shares of Mid Cap. The number of shares to be received would be based on the relative net asset value of Small/Medium Company Growth's shares on the effective date of the Plan and Mid Cap will be terminated as soon as practicable thereafter. The PRO FORMA financial statements reflect the financial position of Small/Medium Company Growth and Mid Cap at July 31, 2000 and the combined results of operations of Small/Medium Company Growth and Mid 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 of Small/Medium Company Growth. Mid Cap currently pays Rule 12b-1 distribution or service fees; as of July 31, 2000, Small/Medium Company Growth 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 $190,000 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.