As filed with the Securities and Exchange Commission on February 23, 1996
1933 Act Registration No. 33-87254
1940 Act Registration No. 811-8764
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
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Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 1 [ X ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
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Amendment No. 3 [ X ]
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(Check appropriate box or boxes.)
Managed Accounts Services Portfolio Trust
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
Gregory K. Todd, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
JON S. RAND, ESQ.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
(212) 821-8256
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on February 23, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
----------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S FISCAL YEAR
ENDING JULY 31, 1996 WILL BE FILED ON OR BEFORE SEPTEMBER 30, 1996.
<PAGE>
Managed Accounts Services Portfolio Trust
-----------------------------------------
Contents of Registration Statement
----------------------------------
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Managed Accounts Services Portfolio Trust
- -----------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
Managed Accounts Services Portfolio Trust
Form N-1A Cross Reference Sheet
Part A Item No.
and Caption Prospectus Caption
--------------- ------------------
1. Cover Page . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . Prospectus Summary
3. Condensed Financial
Information . . . . . . . . . . Performance Information
4. General Description of
Registrant . . . . . . . . . . Prospectus Summary; Investment
Objectives and Policies of the
Portfolios and Risk Factors;
General Information
5. Management of the Fund . . . . Management; General Information
5A. Management's Discussion of Fund
Performance . . . . . . . . . . Not applicable
6. Capital Stock and Other
Securities . . . . . . . . . . Cover Page; Dividends and Taxes;
General Information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . Purchases; Exchanges; Valuation
of Shares; Other Services and
Information; Management
8. Redemption or Repurchase . . . Redemptions; Other Services and
Information
9. Pending Legal Proceedings . . . Not Applicable
Part B Item No. Statement of Additional
and Caption Information Caption
-------------- -----------------------
10. Cover Page . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . Table of Contents
12. General Information and Other Information
History . . . . . . . . . . . .
13. Investment Objectives and
Policies . . . . . . . . . . . Investment Policies and
Restrictions; Hedging and
Related Strategies; Portfolio
Transactions
14. Management of the Registrant . Trustees and Officers;
Investment Management, Advisory,
and Distribution Arrangements
15. Control Persons and Principal
Holders of Securities . . . . . Trustees and Officers
16. Investment Advisory and Other
Services . . . . . . . . . . . Investment Management, Advisory
and Distribution Arrangements;
Other Information
17. Brokerage Allocation and Other
Practices . . . . . . . . . . . Portfolio Transactions
18. Capital Stock and Other
Securities . . . . . . . . . . Not applicable
19. Purchase, Redemption Pricing of
Securities Being Offered . . . Additional Exchange and
Redemption Information;
Valuation of Shares
20. Tax Status . . . . . . . . . . Taxes
21. Underwriters . . . . . . . . . Investment Management, Advisory
and Distribution Arrangements
22. Calculation of Performance
Data . . . . . . . . . . . . . Performance Information
<PAGE>
23. Financial Statements . . . . . Financial Statements, Statements of
Assets and Liabilities
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements - [filed herewith]
Included in Part B of the Registration Statement:
Unaudited financial statements for the period August 24, 1995
(commencement of operations) to November 30, 1995
Statement of Assets and Liabilities at June 16, 1995
Report of Ernst & Young LLP, Independent Auditors, dated June 16, 1995
(b) Exhibits:
(1) (a) Certificate of Business Trust1/
-
(b) Certificate of Amendment1/
-
(c) Trust Instrument1/
-
(d) Amended Trust Instrument2/
-
(2) (a) By-Laws1/
-
(b) Amended By-Laws2/
-
(3) Voting trust agreement - None
(4) Specimen Security - None
(5) (a) Management Agreement [filed herewith]
(b) Sub-Advisory Agreements [filed herewith]
(6) (a) Distribution Agreement [filed herewith]
(b) Dealer Agreement [filed herewith]
(7) Bonus, profit sharing or pension plans - None
(8) Form of Custodian Agreement2/
-
(9) Transfer Agency Agreement [filed herewith]
(10) (a) Opinion and consent of Kirkpatrick & Lockhart LLP2/
(b) Consent of Willkie Farr & Gallagher LLP [filed herewith]
(11) Consent of Independent Auditors [filed herewith]
(12) Financial statements omitted from prospectus - None
(13) Letter of investment intent2/
-
(14) Prototype Retirement Plan - None
(15) Plan pursuant to Rule 12b-1 - None
(16) Schedule for Computation of Performance Quotations - None
Item 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
None.
_______________
1/ Incorporated by reference to Registration Statement on Form N-1A, File No.
- - 33-87254, filed December 9, 1994.
2/ Incorporated by reference to Registration Statement Form N-1A, File No.
- - 33-87254, filed June 19, 1995.
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Shareholders
Title of Class as of February 21, 1996
-------------- ----------------------------
Shares of beneficial interest,
par value $0.001 per share, in
PACE Money Market Investments 6012
PACE Municipal Fixed Income 1076
Investments
PACE Government Securities 4510
Fixed Income Investments
PACE Intermediate Fixed Income 2496
Investments
PACE Strategic Fixed Income 3964
Investments
PACE Global Fixed Income 5265
Investments
PACE Large Company Value 6721
Equity Investments
PACE Large Company Growth 6715
Equity Investments
PACE Small/Medium Company 6469
Value Equity Investments
PACE Small/Medium Company 6384
Growth Equity Investments
PACE International Equity 6074
Investments
PACE International Emerging 5820
Markets Equity Investments
<PAGE>
Item 27. Indemnification
---------------
Article IX, Section 2 of the Managed Accounts Services Portfolio Trust
Trust Instrument ("Trust Instrument") provides that the Registrant will
indemnify its trustees, officers, employees, investment managers and
administrators and investment advisers to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee, officer, employee, investment manager and
administrator or investment adviser; provided that (i) no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
or did not act in good faith in the reasonable belief that his or her action was
in the best interest of the Registrant, or (ii) no such person shall be
indemnified where there has been a settlement, unless there has been a
determination that such person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office; such determination shall be made (A) by the court or other
body approving the Settlement, (B) by the vote of at least a majority of those
trustees who are neither Interested Persons of the trust nor are parties to the
proceeding based upon a review of readily available facts (as opposed to a full
trial-type inquiry), or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry).
"Interested Person" has the meaning provided in the Investment Company Act
of 1940, as amended from time to time. Article IX, Section 2(c) of the Trust
Instrument also provides that the Registrant may maintain insurance policies
covering such rights of indemnification.
Article IX, Section 1 of the Trust Instrument provides that the trustees
and officers of the Registrant (i) shall not be personally liable to any person
contracting with, or having a claim against, the Trust, and (ii) shall not be
liable for neglect or wrongdoing by them or any officer, agent, employee or
investment adviser of the Registrant, provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are in the
best interest of the Registrant.
Article X, Section 2 of the Trust Instrument provides that, subject to the
provisions of Article IX, the trustees shall not be liable for (i) errors of
judgment or mistakes of fact or law, or (ii) any act or omission made in
accordance with advice of counsel or other experts, or (iii) failure to follow
such advice, with respect to the meaning and operation of the Trust Instrument.
Registrant undertakes to carry out all indemnification provisions of its
Trust Instrument and By-laws in accordance with Investment Company Act Release
No. 11330 (September 4, 1980) and successor releases.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Brandywine Asset Management, Inc. ("Brandywine") is a registered investment
adviser. William Anthony Hitschler owns 32.5% of Brandywine's voting
securities, which makes him a controlling person of Brandywine. Information on
the officers and directors of Brandywine is included in its Form ADV filed with
the Securities and Exchange Commission (registration number 801-27797) and is
incorporated herein by reference.
Brinson Partners, Inc. ("Brinson Partners") is a registered investment
adviser. Gary P. Brinson is President and Managing Partner of Brinson Partners.
Brinson Holdings, Inc., which owns all of the outstanding stock of Brinson
Partners, is wholly-owned by Swiss Bank Corporation ("Swiss Bank"). Swiss Bank,
with headquarters in Basel, Switzerland, is an internationally diversified
organization with operations in many aspects of the financial
<PAGE>
services industry. Information on the officers and directors of Brinson
Partners is included in its Form ADV filed with the Securities and Exchange
Commission (registration number 801-34910) and is incorporated herein by
reference.
Chancellor Capital Management, Inc. ("Chancellor") is a registered
investment adviser. Chancellor Partners, L.P. ("Chancellor Partners"), of which
Chancellor Partners, Inc. ("Chancellor PI") is the General Partner, is the
beneficial owner of at least 51% of Chancellor's common stock on a fully diluted
and converted basis, while USF&G Investment Management Group, Inc. ("USF&G") is
the beneficial owner of 100% of Chancellor's convertible preferred stock which
is convertible into and up to 49% of Chancellor's common stock. Chancellor
Partners is a limited partnership controlled by Chancellor employees to hold
their investment in Chancellor. Robert G. Wade Jr., who is Chairman of
Chancellor's Board of Directors, is the sole shareholder of Chancellor PI.
Accordingly, Mr. Wade, Chancellor Partners and USF&G are controlling persons of
Chancellor. USF&G is a wholly owned subsidiary of United States Fidelity and
Guarantee Company, which is in turn wholly owned by USF&G Corporation, a holding
company with interests in, among other things, the insurance industry.
Information on the officers and directors of Chancellor is included in its Form
ADV filed with the Securities and Exchange Commission (registration number 801-
9087) and is incorporated herein by reference.
Martin Currie Inc. ("Martin Currie") is a registered investment adviser.
It is a wholly owned subsidiary of Martin Currie Limited, a UK money manager.
Information on the officers and directors of Martin Currie is included in its
Form ADV filed with the Securities and Exchange Commission (registration number
801-14261) and is incorporated herein by reference.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is a
registered investment adviser and is a wholly owned subsidiary of PaineWebber
Incorporated ("PaineWebber"), which is in turn wholly owned by Paine Webber
Group Inc., a publicly owned financial services holding company. Mitchell
Hutchins is primarily engaged in the investment advisory business. Information
on the officers and directors of Mitchell Hutchins is included in its Form ADV
filed with the Securities and Exchange Commission (registration number 801-
13219) and is incorporated herein by reference.
Morgan Grenfell Capital Management, Incorporated ("MGCM") is a registered
investment adviser. All of the outstanding voting stock of MGCM is owned by
Morgan Grenfell Asset Management, Ltd., which is a wholly owned subsidiary of
Morgan Grenfell Group plc. Morgan Grenfell Group plc is an indirect wholly
owned subsidiary of Deutsche Bank AG, an international commercial and investment
banking group. Information on the officers and directors of MGCM is included in
its Form ADV filed with the Securities and Exchange Commission (registration
number 801-27291) and is incorporated herein by reference.
Pacific Income Advisers, Inc. ("PIA") is a registered investment adviser.
Lloyd McAdams and Heather U. Baines, who serve as Chairman and Chief Investment
Officer of PIA and President and Chief Executive Officer, respectively, own
PIA's voting securities, which makes each of them controlling persons of PIA.
Information on the officers and directors of PIA is included in its Form ADV
filed with the Securities and Exchange Commission (registration number 801-
27828) and is incorporated herein by reference.
Pacific Investment Management Company ("PIMCO") is a registered investment
adviser. It is a subsidiary partnership of PIMCO Advisors L.P. ("PIMCO
Advisors"), a publicly held investment advisory firm. A majority interest in
PIMCO Advisors is held by PIMCO Partners, G.P., ("PIMCO Partners") a general
partnership between Pacific financial Asset Management Corporation, an indirect
wholly owned subsidiary of Pacific Mutual Life Insurance Company ("Pacific
Mutual"), and PIMCO Partners, L.P., a limited partnership controlled by the
PIMCO Managing Directors. Information on the officers and directors of PIMCO is
included in its Form ADV filed with the Securities and Exchange Commission
(registration number 801-7260) and is incorporated herein by reference.
Rogge Global Partners plc ("Rogge Global") is a registered investment
adviser. Olaf Rogge owns 85% of the voting securities of Rogge Global, which
makes him a controlling person of Rogge Global. Information on the officers and
directors of Rogge Global is included in its Form ADV filed with the Securities
and Exchange Commission (registration number 801-25482) and is incorporated
herein by reference.
Schroder Capital Management International Inc. ("SCMI") is a registered
investment adviser. It is a wholly owned U.S. subsidiary of Schroders
Incorporated, the wholly owned U.S. holding company subsidiary of Schroders plc.
Schroders plc, which is listed on the London Stock Exchange, is the holding
parent of a large worldwide group of banks and financial services companies
(referred to as the "Schroder Group"), with associated companies and branch and
representative offices located in seventeen countries worldwide.
<PAGE>
Information on the officers and directors of SCMI is included in its Form ADV
filed with the Securities and Exchange Commission (registration number 801-
15834) and is incorporated herein by reference.
Westfield Capital Management Company, Inc. ("Westfield Capital") is a
registered investment adviser. Charles Michael Hazard, who serves as President
and Chief Investment Officer of Westfield Capital, owns more than 25% of its
voting securities, which makes him a controlling person of Westfield Capital.
Information on the officers and directors of Westfield Capital is included in
its Form ADV filed with the Securities and Exchange Commission (registration
number 801-34350) and is incorporated herein by reference.
Item 29. Principal Underwriters
----------------------
(a) Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") serves as
principal underwriter and/or investment adviser for the following investment
companies:
PaineWebber Amercia Fund
PaineWebber Olympus Fund
PaineWebber Managed Investments Trust
PaineWebber Master Series, Inc.
PaineWebber Managed Municipal Trust
PaineWebber Investment Series
PaineWebber Mutual Fund Trust
PaineWebber Municipal Series
PaineWebber RMA Money Fund, Inc.
PaineWebber RMA Tax-Free Fund, Inc.
PaineWebber Cashfund, Inc.
PaineWebber Financial Services Growth Fund Inc.
PaineWebber Managed Assets Trust
PaineWebber Securities Trust
PaineWebber Series Trust
Managed Accounts Services Portfolio Trust
Strategic Global Income Fund, Inc.
Global High Income Dollar Fund Inc.
Global Small Cap Fund Inc.
Managed High Yield Fund Inc.
Investment Grade Municipal Income Fund Inc.
Insured Municipal Income Fund Inc.
Triple A and Government Series - 1997, Inc.
2002 Target Term Trust Inc.
All-American Term Trust Inc.
PaineWebber Offshore Funds PLC
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.
PaineWebber/Kidder, Peabody Premium Account Fund
Mitchell Hutchins/Kidder, Peabody Investment Trust
Mitchell Hutchins/Kidder, Peabody Investment Trust II
Mitchell Hutchins/Kidder, Peabody Investment Trust III
Kidder, Peabody Municipal Money Market Series
Institutional Series Trust
Liquid Institutional Reserves
MH U.S. Dollar Liquid Reserves Ltd
<PAGE>
(b) Mitchell Hutchins is the principal underwriter for the Registrant.
PaineWebber acts as a dealer for the shares of the Registrant. The directors
and officers of Mitchell Hutchins, their principal business addresses and their
positions and offices with Mitchell Hutchins are identified in its Form ADV
filed January 22, 1996, with the Securities and Exchange Commission
(registration number 801-13219). The directors and officers of PaineWebber,
their principal business addresses and their positions and offices with
PaineWebber are identified in its Form ADV filed January 17, 1996, with the
Securities and Exchange Commission (registration number 801-7163). The
foregoing information is hereby incorporated by reference. The information set
forth below is furnished for those directors and officers of Mitchell Hutchins
or PaineWebber who also serve as trustees or officers of the Registrant:
<PAGE>
<TABLE><CAPTION>
Name and Principal Position and Offices With
Business Address Position With Registrant Underwriter or Dealer
------------------ ------------------------ -------------------------
<S> <C> <C>
Margo N. Alexander Trustee and President President, Chief Executive
1285 Avenue of the Americas Officer and Director of Mitchell
New York, New York 10019 Hutchins
Teresa M. Boyle Vice President First Vice President and
1285 Avenue of the Americas Manager--Advisory Administration
New York, New York 10019 of Mitchell Hutchins
Joan L. Cohen Vice President and Vice President and Attorney of
1285 Avenue of the Americas Assistant Secretary Mitchell Hutchins
New York, New York 10019
C. William Maher Vice President and First Vice President and a
1285 Avenue of the Americas Assistant Treasurer Senior Manager of the Mutual
New York, New York 10019 Fund Finance Division of
Mitchell Hutchins
Ann E. Moran Vice President and Vice President of Mitchell
1285 Avenue of the Americas Assistant Treasurer Hutchins
New York, New York 10019
Dianne E. O'Donnell Vice President and Senior Vice President and Deputy
1285 Avenue of the Americas Secretary General Counsel of Mitchell
New York, New York 10019 Hutchins
Victoria E. Schonfeld Vice President Managing Director and General
1285 Avenue of the Americas Counsel of Mitchell Hutchins
New York, New York 10019
Paul H. Schubert Vice President and First Vice President and a Senior
1285 Avenue of the Americas Assistant Treasurer Manager of the Mutual Fund Finance
New York, New York 10019 Division of Mitchell Hutchins
Julian F. Sluyters Vice President and Senior Vice President and
1285 Avenue of the Americas Treasurer Director of the Mutual Fund
New York, New York 10019 Finance Division of Mitchell
Hutchins
Gregory K. Todd Vice President and First Vice President and
1285 Avenue of the Americas Assistant Secretary Associate General Counsel of
New York, New York 10019 Mitchell Hutchins
</TABLE>
(c) None
Item 30. Location of Accounts and Records
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and (d) of
Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Mitchell Hutchins Asset Management Inc., 1285 Avenue of
the Americas, New York, New York 10019, Pacific Investment Management Company,
840 Newport Center Drive, Suite 360, Newport Beach, California 92660, Pacific
Income Advisers, Inc., 1299 Ocean Avenue, Suite 210, Santa Monica, California,
Morgan Grenfell Capital Management,
<PAGE>
Incorporated, 1435 Walnut Street, Philadelphia, Pennsylvania 19102, Rogge Global
Partners plc, 5-6 St. Andrew's Hill, London, England EC4V 5BY, Brinson Partners
Inc., 209 South LaSalle Street, Chicago, Illinois 60604, Chancellor Capital
Management, Inc., 1166 Avenue of the Americas, New York, New York 10036,
Brandywine Asset Management, Inc., Three Christina Centre, Suite 1200, 201 N.
Walnut Street, Wilmington, Delaware 19801, Westfield Capital Management Company,
Inc., One Financial Center, Boston, Massachusetts 02111, Martin Curie Inc.,
Saltire Court, 20 Castle Terrace, Edinburgh, Scotland EH1 2ES and Schroder
Capital Management International Inc., 1166 Avenue of the Americas, New York,
New York 10036. All other accounts, books and documents required by Rule 31a-1
are maintained in the physical possession of Registrant's transfer agent and
custodian.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of Registrant's 1933 Act Registration Statement.
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PROSPECTUS DATED FEBRUARY 23, 1996
1285 Avenue of the Americas, New York, New York 10019
- --------------------------------------------------------------------------------
Managed Accounts Services Portfolio Trust (the "Trust") is an open-end,
management investment company currently composed of twelve separate no-load
investment portfolios (each a "Portfolio") managed by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins" or the "Manager"), a wholly owned
subsidiary of PaineWebber Incorporated ("PaineWebber"). Shares of the Portfolios
currently are available only to participants in the PaineWebber PACE Program
("PACE Program"). The PACE Program and the Trust are designed to assist you in
devising an asset allocation strategy to meet your individual needs.
PaineWebber, through the PACE Program, provides investment advisory services in
connection with the allocation of assets among the Portfolios by: identifying
your risk tolerances and investment objectives based on information provided by
you; identifying and recommending, in writing, a suggested allocation of assets
among the Portfolios that conforms to those tolerances and objectives; providing
a monthly account statement; providing performance data on a quarterly basis;
and providing a quarterly (optional) rebalancing service. See
"Purchases--General--The PACE Program."
For each Portfolio other than PACE Money Market Investments, investment
advisory services are provided by an investment adviser (each an "Adviser")
monitored and compensated by, and unaffiliated with, the Manager. For PACE Money
Market Investments, investment advisory services are provided by Mitchell
Hutchins. The Trust consists of the following twelve Portfolios:
. PACE Money Market Investments
. PACE Government Securities Fixed Income Investments
. PACE Intermediate Fixed Income Investments
. PACE Strategic Fixed Income Investments
. PACE Municipal Fixed Income Investments
. PACE Global Fixed Income Investments
. PACE Large Company Value Equity Investments
. PACE Large Company Growth Equity Investments
. PACE Small/Medium Company Value Equity Investments
. PACE Small/Medium Company Growth Equity Investments
. PACE International Equity Investments
. PACE International Emerging Markets Equity Investments
An investment in PACE Money Market Investments is neither insured nor
guaranteed by the U.S. government. While PACE Money Market Investments seeks to
maintain a stable net asset value of $1.00 per share, there can be no assurance
that it will be able to do so.
Under the PACE Program, you will pay PaineWebber a separate investment
advisory fee ("Program Fee") at an annual rate of up to 1.50% of the value of
shares of the Portfolios held in your PaineWebber account. Certain participants
are eligible for a reduction of the Program Fee. See "Purchases." As a PACE
Program participant, you may incur greater total fees and expenses than
investors purchasing shares of similar investment companies without the benefit
of these professional asset allocation recommendations.
This Prospectus concisely sets forth information about the Trust that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information ("SAI"), dated February 23,
1996 (which information is incorporated by reference herein), is on file with
the Securities and Exchange Commission ("SEC"). You can obtain a free copy of
the SAI by calling toll-free at 1-800-647-1568, and further inquiries can be
made by contacting your PaineWebber investment executive.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
This section summarizes certain terms and provisions of the PACE Program and
the Portfolios of the Trust. Please read the rest of this Prospectus for
additional important information.
PACE PROGRAM. The PACE Program is an investment advisory service pursuant to
which PaineWebber provides to you personalized asset allocation recommendations
and related services based on an evaluation of your investment objectives and
risk tolerances. For the services provided to you under the PACE Program, you
pay PaineWebber a quarterly Program Fee at an annual rate of up to 1.50% of the
value of the shares of the Portfolios held in your PaineWebber account. Certain
participants are eligible for a reduction of the Program Fee. See "Purchases."
THE TRUST. The Trust is a mutual fund which provides a convenient means of
investing in a number of professionally managed portfolios. The Trust currently
consists of twelve separate no-load Portfolios. The following is a summary of
important features of the Portfolios.
<TABLE>
<CAPTION>
INVESTMENT CORE PORTFOLIO INVESTMENT
PACE PORTFOLIO OBJECTIVE INVESTMENTS ADVISER
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
PACE MONEY MARKET Current income High quality money Mitchell Hutchins
INVESTMENTS consistent with market instruments Asset Management Inc.
preservation of
capital and liquidity
PACE GOVERNMENT Current income Primarily U.S. Pacific Investment
SECURITIES FIXED government and agency Management Company
INCOME INVESTMENTS securities of varying
maturities, as well
as mortgage-backed
securities, with a
dollar-weighted
average portfolio
duration of between
two and seven years
PACE INTERMEDIATE Current income, Fixed income Pacific Income
FIXED INCOME consistent with securities with a Advisers, Inc.
INVESTMENTS reasonable stability dollar-weighted
of principal average portfolio
duration of between
two and four and
one-half years
PACE STRATEGIC FIXED Total return Fixed income Pacific Investment
INCOME INVESTMENTS consisting of income securities of varying Management Company
and capital maturities with a
appreciation dollar-weighted
average portfolio
duration of between
three and eight years
PACE MUNICIPAL FIXED High current income General obligation, Morgan Grenfell
INCOME INVESTMENTS exempt from federal revenue and private Capital Management,
income tax activity bonds and Incorporated
notes, the interest
on which is exempt
from federal income
tax, with a dollar-
weighted average
portfolio duration of
between three and
seven years
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CORE PORTFOLIO INVESTMENT
PACE PORTFOLIO OBJECTIVE INVESTMENTS ADVISER
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
PACE GLOBAL FIXED High total return High-grade fixed Rogge Global Partners
INCOME INVESTMENTS income securities plc
issued by domestic
and foreign
governments and
supranational
entities and private
issuers located
overseas, with a
dollar-weighted
average portfolio
duration of between
four and eight years
PACE LARGE COMPANY Capital appreciation Equity securities Brinson Partners,
VALUE EQUITY and dividend income with the majority of Inc.
INVESTMENTS the Portfolio
invested in common
stocks of companies
with total market
capitalization (i.e.,
market value of
common stock
outstanding) of at
least $2.5 billion
PACE LARGE COMPANY Capital appreciation Equity securities of Chancellor Capital
GROWTH EQUITY companies Management, Inc.
INVESTMENTS characterized by an
earnings growth rate
which is faster than
that of the S&P 500
index and with total
market capitalization
(i.e., market value
of common stock
outstanding) of at
least $2.5 billion
PACE SMALL/MEDIUM Capital appreciation Equity securities of Brandywine Asset
COMPANY VALUE EQUITY companies that have Management, Inc.
INVESTMENTS below-market average
price/earnings ratios
and with total market
capitalization (i.e.,
market value of
common stock
outstanding) of less
than $2.5 billion
PACE SMALL/MEDIUM Capital appreciation Equity securities of Westfield Capital
COMPANY GROWTH EQUITY companies Management Company,
INVESTMENTS characterized by Inc.
above- average growth
of earnings rates
with total market
capitalization (i.e.
market value of
common stock
outstanding) of less
than $2.5 billion
PACE INTERNATIONAL Capital appreciation Equity securities of Martin Currie Inc.
EQUITY INVESTMENTS issuers domiciled
outside the United
States
PACE INTERNATIONAL Capital appreciation Equity securities of Schroder Capital
EMERGING MARKETS issuers domiciled or Management
EQUITY INVESTMENTS doing business in International Inc.
emerging markets
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT. Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins" or
the "Manager") acts as the Manager for each Portfolio and also as the investment
adviser for PACE Money Market Investments. All other Portfolios are advised by
an Adviser monitored and compensated by, and unaffiliated with, the Manager. See
"Management."
RISK FACTORS AND SPECIAL CONSIDERATIONS. No assurance can be given that any
Portfolio will achieve its investment objective. Investing in a Portfolio that
invests in securities of companies and governments of foreign countries,
particularly emerging market countries, involves risks that go beyond the usual
risks inherent in a Portfolio that limits its holdings to domestic investments.
A substantial portion of the assets of certain Portfolios may be held in
securities denominated in one or more foreign currencies, which will result in
these Portfolios bearing the risk that those currencies may lose value in
relation to the U.S. dollar. See "Investment Objectives and Policies of the
Portfolios and Risk Factors-- Other Investment Policies and Risk Factors."
Certain Portfolios may use derivative instruments, investment techniques and
strategies such as entering into forward currency contracts, repurchase
agreements and interest rate protection transactions and purchasing and selling
(writing) options, futures contracts and options on futures contracts, which can
increase a Portfolio's risks. See "Investment Objectives and Policies of the
Portfolios and Risk Factors--Other Investment Policies and Risk Factors."
PACE Government Securities Fixed Income Investments, PACE Intermediate Fixed
Income Investments and PACE Strategic Fixed Income Investments may invest in
U.S. government stripped mortgage-related securities and zero coupon securities,
which, due to changes in interest rates, are more speculative and subject to
greater fluctuations in value than securities that pay interest currently. See
"Investment Objectives and Policies of the Portfolios and Risk Factors--Other
Investment Policies and Risk Factors."
PACE Intermediate Fixed Income Investments and PACE Global Fixed Income
Investments each are "non-diversified" as that term is defined in the Investment
Company Act of 1940 ("1940 Act"). To the extent that a Portfolio at times may
include the securities of a smaller number of issuers than if it were
"diversified" (as defined in the 1940 Act), that Portfolio will be subject to
greater risk with respect to its portfolio securities than if it had invested in
a broader range of securities, because changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the
Portfolio's total return and the price of its shares. See "Investment Objectives
and Policies of the Portfolios and Risk Factors--Other Investment Policies and
Risk Factors."
In addition, PACE Strategic Fixed Income Investments may invest
significantly in high yield, high risk securities (commonly known as "junk
bonds") that are predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal. See "Investment Objectives and Policies of
the Portfolios and Risk Factors--Other Investment Policies and Risk Factors."
PaineWebber provides advisory services to you as a participant in the PACE
Program, for which you pay a fee that does not vary based on the Portfolios
recommended for your investments. At the same time, Mitchell Hutchins, a wholly
owned subsidiary of PaineWebber, serves as the Trust's Manager, which has
responsibility for monitoring and compensating each Adviser. As Manager,
Mitchell Hutchins receives a fee from each Portfolio and retains all or a
portion of that fee, the amount of which depends on the Portfolio involved.
Consequently, PaineWebber, when making asset allocation recommendations for
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
you, may have a conflict of interest as to the specific Portfolios recommended
for investment. PaineWebber, however, is required by applicable standards of
fiduciary duty to act solely in your best interest when making investment
recommendations for you. You also should be aware that the Manager may have
various conflicts of interest when making decisions regarding the retention and
compensation of particular Advisers. However, the Manager's compensation and
decisions, including the specific amount of the Manager's compensation to be
paid to the Adviser, are subject to review and approval by the Trust's board of
trustees and separately by the trustees who are not affiliated with the Manager,
any of the Advisers or any of their affiliates. See "Management--Manager" and
"Purchases--General--The PACE Program."
The Portfolios are intended as vehicles for the implementation of long-term
asset allocation strategies rendered through the PACE Program that are based on
an evaluation of your investment objectives and risk tolerances. Because these
asset allocation strategies are designed to spread investment risk across the
various segments of the securities markets through investment in a number of
Portfolios, each individual Portfolio generally intends to be fully invested in
accordance with its investment objective and policies during most market
conditions. Although the Adviser of a Portfolio may, upon the concurrence of the
Manager, take a temporary defensive position when the Adviser believes adverse
market conditions so warrant, it can be expected that a defensive posture will
be adopted less frequently than would be the case for other mutual funds. This
policy may impede an Adviser's ability to protect a Portfolio's capital during
declines in the particular segment of the market to which the Portfolio's assets
are committed. Consequently, no single Portfolio should be considered a complete
investment program, and an investment among the Portfolios should be regarded as
a long-term investment that should be held through several market cycles.
There can also be no assurance that PaineWebber's periodic recommendations
for adjustments in the allocation of assets among Portfolios will be successful
or can be developed, transmitted and acted upon in a manner sufficiently timely
to avoid market shifts, which can be sudden and substantial. You are urged to
consider carefully PaineWebber's asset allocation recommendations in light of
your investment needs and to act promptly upon any recommended reallocation of
assets among the Portfolios. See "Exchanges."
PURCHASE AND REDEMPTION OF SHARES. You may purchase shares of the Portfolios
only if you are a participant in the PACE Program. The minimum initial
investment in the Trust is $25,000 and any subsequent investment in the Trust
must be at a minimum of $500. The minimum initial investment in an individual
retirement account is $10,000. Shares of the Portfolios are offered for purchase
and redemption at their respective net asset values next determined after
receipt. You do not pay a sales charge in connection with purchases or
redemptions. As stated above under "PACE Program," for services provided to you
under the PACE Program, you pay PaineWebber a quarterly Program Fee at an annual
rate of up to 1.50% of the value of the shares of the Portfolios held in your
PaineWebber account. Certain participants are eligible for a reduction in the
Program Fee. See "Purchases" and "Redemptions."
DIVIDENDS AND TAXES. Dividends from the net investment income of PACE Money
Market Investments are declared daily and paid monthly. Dividends from the net
investment income of PACE Government Securities Fixed Income Investments, PACE
Intermediate Fixed Income Investments, PACE Strategic Fixed Income Investments,
PACE Municipal Fixed Income Investments and PACE
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Global Fixed Income Investments are declared and paid monthly and may be
accompanied by distributions of net realized short-term capital gains and net
realized gains from foreign currency transactions, if any. Dividends from the
net investment income of the six equity Portfolios are declared and paid
annually. Distributions of any undistributed net realized gains from foreign
currency transactions, net capital gain (the excess of net long term capital
gain over net short-term capital loss) and undistributed net realized short-term
capital gain, if any, earned by a Portfolio will be made annually. See
"Dividends and Taxes."
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company is
custodian of each Portfolio's assets and employs foreign sub-custodians to
provide custody of the Portfolio's foreign assets, if any. PFPC Inc. is each
Portfolio's transfer and dividend disbursing agent (the "Transfer Agent").
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
7
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TRUST EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE LISTS THE COSTS AND EXPENSES, INCLUDING THE SEPARATE
FEES FOR THE PACE PROGRAM, THAT YOU WILL INCUR EITHER DIRECTLY OR INDIRECTLY
AS A SHAREHOLDER OF EACH PORTFOLIO BASED ON THE PORTFOLIO'S PROJECTED ANNUAL
OPERATING EXPENSES.
<TABLE>
<CAPTION>
PACE
PACE GOVERNMENT PACE PACE PACE PACE
MONEY SECURITIES INTERMEDIATE STRATEGIC MUNICIPAL GLOBAL
MARKET FIXED INCOME FIXED INCOME FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES.................
Maximum Program Fee (as a
percentage of average value
of Portfolio shares held on
the last calendar day of
the previous quarter)...... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
ANNUAL PORTFOLIO OPERATING
EXPENSES*
(as a percentage of average
net assets)
Management Fees (Before Fee
Waivers)**.................. 0.15% 0.50% 0.40% 0.50% 0.40% 0.60%
Distribution (Rule 12b-1)
Expenses................... None None None None None None
Other Expenses (Before
Expense Reimbursements)+... 2.45% 0.74% 1.10% 1.56% 1.63% 0.96%
----- ----- ----- ----- ----- -----
Total Portfolio Operating
Expenses (Before Fee
Waivers and Expense
Reimbursements)+............ 2.60% 1.24% 1.50% 2.06% 2.03% 1.56%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Total Portfolio Operating
Expenses (Net of Fee
Waivers and Expense
Reimbursements)***.......... 0.50% 0.85% 0.85% 0.85% 0.85% 0.95%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
-------------
* Does not include the Program Fee.
** "Management Fees" includes the amounts paid by Mitchell Hutchins to the
Adviser for each Portfolio.
*** Mitchell Hutchins has agreed to waive all or a portion of its management
fees and then subsidize certain operating expenses with respect to each
Portfolio for the fiscal year ending July 31, 1996, which will lower the
overall expenses of each Portfolio, to the levels noted above.
+ Based on estimated data for the Trust's fiscal year ending July 31, 1996
before the fee waivers and expense reimbursements and includes an
administration fee of 0.20% payable to Mitchell Hutchins by each
Portfolio.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE PACE
PACE PACE SMALL/ SMALL/ PACE
LARGE LARGE MEDIUM MEDIUM INTERNATIONAL
COMPANY COMPANY COMPANY COMPANY PACE EMERGING
VALUE GROWTH VALUE GROWTH INTERNATIONAL MARKETS
EQUITY EQUITY EQUITY EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
----------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES.....................
Maximum Program Fee (as
a percentage of average
value of
Portfolio shares held on the
last
calendar day of the previous
quarter).................... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
ANNUAL PORTFOLIO
OPERATING EXPENSES*
(as a percentage of average
net assets)
Management Fees (Before Fee
Waivers)**.................. 0.60% 0.60% 0.60% 0.60% 0.70% 0.90%
Distribution (Rule 12b-1)
Expenses.................... None None None None None None
Other Expenses (Before
Expense
Reimbursements)+............ 0.99% 1.08% 0.66% 0.58% 1.92% 1.38%
----- ----- ----- ----- ----- -----
Total Portfolio Operating
Expenses
(Before Fee Waivers and
Expense Reimbursements)+.... 1.59% 1.68% 1.26% 1.18% 2.62% 2.28%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Total Portfolio Operating
Expenses
(Net of Fee Waivers and
Expense
Reimbursements)***........... 1.00% 1.00% 1.00% 1.00% 1.50% 1.50%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
--------------
See footnotes on previous page.
- --------------------------------------------------------------------------------
9
<PAGE>
Management and Administration Fees; Expenses. Each Portfolio pays the
Manager a fee for its services that is computed daily and paid monthly at an
annual rate ranging among the Portfolios from 0.15% to 0.90% of the value of the
average daily net assets of the Portfolio. The fees of each Adviser are paid by
the Manager. Each Portfolio also pays Mitchell Hutchins an administration fee
that is computed daily and paid monthly at an annual rate of 0.20% of the value
of the average daily net assets of the Portfolio. The nature of the services
provided to, and the aggregate management and administration fees paid by, each
Portfolio are described under "Management." "Other Expenses" include the
administration fee and estimated fees for shareholder services, custodial fees,
legal and accounting fees, printing costs, registration fees, the costs of
regulatory compliance and a Portfolio's allocated portion of the costs
associated with maintaining the Trust's legal existence and the costs involved
in the Trust's communications with shareholders. Through the Trust's first
fiscal year ending July 31, 1996, the Manager will voluntarily waive all or a
portion of the fees otherwise payable to it and then reimburse certain operating
expenses of a Portfolio, in order to have the Portfolios operate at the expense
ratios indicated in the Expense Table above.
Example.
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Portfolios through the PACE Program. These
amounts, which include the maximum fees for the PACE Program, are based upon (i)
payment by the Portfolios of operating expenses (net of fee waivers and expense
reimbursements) at the levels set forth in the Expense Table above and (ii) the
specific assumptions stated below:
<TABLE>
<CAPTION>
PACE
GOVERNMENT PACE PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC MUNICIPAL
MONEY FIXED FIXED FIXED FIXED
MARKET INCOME INCOME INCOME INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
-------------- -------------- -------------- -------------- --------------
1 3 1 3 1 3 1 3 1 3
YEAR YEARS YEAR YEARS YEAR YEARS YEAR YEARS YEAR YEARS
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A shareholder would pay the
following
expenses on a $1,000
investment,
assuming (i) a 5% annual
return and (ii)
redemption at the end of each
time period: $20 $63 $24 $73 $24 $73 $24 $73 $24 $73
<CAPTION>
PACE
GLOBAL
FIXED
INCOME
INVESTMENTS
--------------
1 3
YEAR YEARS
---- -----
<S> <C> <C>
A shareholder would pay the
following
expenses on a $1,000
investment,
assuming (i) a 5% annual
return and (ii)
redemption at the end of each
time period: $25 $76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACE
PACE PACE SMALL/
PACE LARGE SMALL/ MEDIUM
LARGE COMPANY MEDIUM COMPANY PACE
COMPANY GROWTH COMPANY GROWTH INTERNATIONAL
VALUE EQUITY EQUITY VALUE EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
-------------- -------------- -------------- -------------- --------------
1 3 1 3 1 3 1 3 1 3
YEAR YEARS YEAR YEARS YEAR YEARS YEAR YEARS YEAR YEARS
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A shareholder would pay the
following
expenses on a $1,000
investment,
assuming (i) a 5% annual
return and (ii)
redemption at the end of each
time period: $25 $78 $25 $78 $25 $78 $25 $78 $30 $93
<CAPTION>
PACE
INTERNATIONAL
EMERGING
MARKETS
EQUITY
INVESTMENTS
--------------
1 3
YEAR YEARS
---- -----
<S> <C> <C>
A shareholder would pay the
following
expenses on a $1,000
investment,
assuming (i) a 5% annual
return and (ii)
redemption at the end of each
time period: $30 $93
</TABLE>
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Portfolio
Operating Expenses remain the same in the years shown. It also assumes payment
of the maximum Program Fee of 1.50% of the value of the shares of the
10
<PAGE>
Portfolios held in your PaineWebber account each year. The above tables and the
assumption in the Example of a 5% annual return are required by regulations of
the SEC applicable to all mutual funds; the assumed 5% annual return is not a
prediction of, and does not represent, the projected or actual performance of
the Portfolios' shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The actual expenses attributable to each Portfolio's shares will depend
upon, among other things, the level of average net assets, the extent to which a
Portfolio incurs variable expenses, such as transfer agency costs, and whether
the Manager reimburses all or a portion of the Portfolio's expenses and/or
waives all or a portion of its management and administration fees.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE TABLE BELOW PROVIDES SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)
FOR A SHARE OF BENEFICIAL INTEREST FOR THE PERIOD SHOWN. THIS INFORMATION IS
SUPPLEMENTED BY THE FINANCIAL STATEMENTS FOR SUCH PERIOD, AND THE ACCOMPANYING
NOTES (UNAUDITED) APPEARING THEREIN, WHICH IS A SEPARATE DOCUMENT SUPPLIED WITH
THE TRUST'S STATEMENT OF ADDITIONAL INFORMATION, WHICH CAN BE OBTAINED BY
SHAREHOLDERS UPON REQUEST.
FOR THE PERIOD AUGUST 24, 1995+ TO NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PACE
GOVERNMENT PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC
MONEY MARKET FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period... $ 1.00 $ 12.00 $ 12.00 $ 12.00
------ ------------ ------------ ------------
Net investment income.................. 0.01 0.12 0.13 0.15
Net realized and unrealized gains
(losses)
from investment and foreign
currency transactions................ -- 0.29 0.21 0.88
------ ------------ ------------ ------------
Net income (loss) from
operations................................ 0.01 0.41 0.34 1.03
------ ------------ ------------ ------------
Dividends from net investment income... (0.01) (0.07) (0.08) (0.09)
------ ------------ ------------ ------------
Net asset value, end of period......... $ 1.00 $ 12.34 $ 12.26 $ 12.94
------ ------------ ------------ ------------
------ ------------ ------------ ------------
Total investment return (1)............ 1.44% 3.43% 2.81% 8.59%
------ ------------ ------------ ------------
------ ------------ ------------ ------------
Ratios/Supplemental Data:
Net assets, end of period (000's)...... $4,136 $ 22,147 $ 17,572 $ 15,007
Expenses to average net assets, net of
fee waivers and expense
reimbursements,........................... 0.50%* 0.85%* 0.85%* 0.85%*
Expenses to average net assets, before
fee waivers and expense
reimbursements,........................... 2.60%* 1.24%* 1.50%* 2.06%*
Net investment income to average net
assets, net of fee waivers and
expense reimbursements,.............. 5.12%* 4.96%* 5.36%* 6.00%*
Net investment income (loss) to average
net assets, before fee waivers and
expense reimbursements .............. 3.02%* 4.57%* 4.71%* 4.79%*
Portfolio turnover..................... 0% 120% 21% 58%
</TABLE>
-------------
+ Commencement of operations
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
capital gain distributions, if any, at net asset value on the payable
dates, and a sale at net asset value on the last day of each period
reported. The figures do not include the PACE Program Fee; results for
each Portfolio would be lower if this fee was included. Total investment
returns for periods of less than one year have not been annualized.
12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
PACE PACE PACE SMALL/MEDIUM
MUNICIPAL PACE LARGE PACE SMALL/MEDIUM COMPANY PACE
FIXED GLOBAL COMPANY LARGE COMPANY COMPANY GROWTH INTERNATIONAL
INCOME FIXED INCOME VALUE EQUITY GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
- ----------- ------------ ------------ ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$12.00 $12.00 $12.00 $12.00 $12.00 $12.00 $12.00
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
0.12 0.10 0.04 0.01 0.03 0.02 0.02
0.31 0.45 1.13 0.80 (0.19) (0.31) (0.06)
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
0.43 0.55 1.17 0.81 (0.16) (0.29) (0.04)
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
(0.08) (0.07) -- -- -- -- --
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
$12.35 $12.48 $13.17 $12.81 $11.84 $11.71 $11.96
- ----------- ------------ ------------ ------------- ------------ ------------
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
3.55% 4.60% 9.75% 6.75% (1.33)% (2.42)% (0.33)%
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
- ----------- ------------ ------------ ------------- ------------ ------------ ------------
$7,257 $17,162 $30,161 $23,489 $27,962 $30,426 $12,402
0.85%*
0.95%* 1.00%* 1.00%* 1.00%* 1.00%* 1.50%*
2.03%*
1.56%* 1.59%* 1.68%* 1.26%* 1.18%* 2.62%*
4.90%*
5.03%* 1.88%* 0.60%* 1.49%* 0.81%* 1.06%*
3.72%* 4.42%* 1.29%* (0.08)%* 1.23%* 0.63%* (0.06)%*
9 % 15 % 10 % 8 % 0 % 19 % 2 %
<CAPTION>
PACE
INTERNATIONAL
EMERGING
MARKETS
EQUITY
INVESTMENTS
- -------------
<C>
$12.00
- -------------
0.01
(0.64)
- -------------
(0.63)
- -------------
--
- -------------
$11.37
- -------------
- -------------
(5.25)%
- -------------
- -------------
$8,829
1.50%*
2.28%*
0.70%*
(0.08)%*
1 %
</TABLE>
--------------
See footnotes on previous page.
- --------------------------------------------------------------------------------
13
<PAGE>
INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS
AND RISK FACTORS
A description of the investment objective and policies of each Portfolio
follows. There can be no assurance that a Portfolio will achieve its investment
objective. The investment objective of a Portfolio is a fundamental policy and
may not be changed without the approval by vote of the shareholders of that
Portfolio. See the SAI for a further definition of approval by vote of the
shareholders. Unless otherwise specified, the other investment policies of a
Portfolio are not fundamental and can be changed by the board of trustees acting
alone. Further information about the investment policies of each Portfolio,
including a list of those restrictions on its investment activities that cannot
be changed without shareholder approval, appears in the "Investment Policies and
Restrictions" section of the SAI.
PACE MONEY MARKET INVESTMENTS
Adviser: Mitchell Hutchins Asset Management Inc.
Objective: Current income consistent with preservation of capital and
liquidity
PACE Money Market Investments seeks to achieve its investment objective by
investing in high quality money market instruments including U.S. government
securities, obligations of U.S. banks, commercial paper and other short-term
corporate obligations, corporate bonds and notes, variable and floating rate
securities or repurchase agreements involving any of the foregoing securities.
The Portfolio may also purchase participation interests in any of the securities
in which it is permitted to invest. Participation interests are pro rata
interests in securities held by others (i.e., banks or brokers). The Portfolio
invests only in U.S. dollar-denominated securities that have remaining
maturities of 397 days or less at the time of purchase. The Portfolio maintains
a dollar-weighted average portfolio maturity of 90 days or less.
The Portfolio may invest in obligations (including certificates of deposit,
bankers' acceptances and similar obligations) of U.S banks, including foreign
branches of domestic banks and domestic branches of foreign banks, having total
assets in excess of $1.5 billion at the time of purchase. The Portfolio may also
invest in interest-bearing savings deposits in U.S. commercial and savings banks
having total assets of $1.5 billion or less, provided that the principal amounts
at each such bank are fully insured by the Federal Deposit Insurance Corporation
and the aggregate amount of such deposits (plus interest earned) does not exceed
5% of the value of the Portfolio's assets.
The commercial paper and other short-term corporate obligations purchased by
the Portfolio consist only of obligations that Mitchell Hutchins determines,
pursuant to procedures adopted by the Trust's board of trustees, present minimal
credit risks and are either (1) rated in the highest short-term rating category
by at least two nationally recognized statistical rating organizations
("NRSROs"), (2) rated in the highest short-term rating category by a single
NRSRO if only that NRSRO has assigned the obligations a short-term rating or (3)
unrated, but determined by Mitchell Hutchins to be of comparable quality
(collectively, "First Tier Securities"). The Portfolio generally may invest no
more than 5% of its total assets in the securities of a single issuer (other
than securities issued by the U.S. government, its agencies or
instrumentalities).
The Portfolio follows these policies to maintain a constant net asset value
of $1.00 per share, although there can be no assurance it will be able to do so.
The yield and value of Portfolio shares and the yield and value of portfolio
securities are
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also not insured or guaranteed by the U.S. government. The yield attained by the
Portfolio may not be as high as that of other funds that invest in lower quality
or longer term securities. See "Investment Objectives and Policies of the
Portfolios and Risk Factors--Other Investment Policies and Risk Factors" for
other investment policies of the Portfolio.
PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
Adviser: Pacific Investment Management Company
Objective: Current income
PACE Government Securities Fixed Income Investments seeks to achieve its
investment objective by investing primarily in U.S. government and agency
securities of varying maturities, as well as mortgage-backed securities, with a
dollar-weighted average portfolio duration of between two and seven years. Under
normal conditions, the Portfolio invests at least 65% of its total assets in
U.S. government Fixed Income Securities, which include U.S. Treasury obligations
and obligations issued or guaranteed by U.S. government agencies or
instrumentalities and repurchase agreements with respect to these securities.
"Fixed Income Securities" include debt instruments the interest payment on which
may be fixed, variable or floating and also includes zero coupon securities
which pay no interest until maturity.
The Portfolio may invest in U.S. government securities that are backed by
the full faith and credit of the U.S. government, such as Government National
Mortgage Association mortgage-backed securities ("GNMA certificates"),
securities that are supported primarily or solely by the creditworthiness of the
issuer, such as securities issued by the Resolution Funding Corporation ("RFC")
and the Tennessee Valley Authority ("TVA"), and securities that are supported
primarily or solely by specific pools of assets and the creditworthiness of a
U.S. government-related issuer, such as mortgage-backed securities issued by the
Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") or the Resolution Trust Corporation ("RTC").
The Portfolio also may invest in certain zero coupon securities that are
U.S. Treasury notes and bonds that have been stripped of their unmatured
interest coupon receipts or interests in such U.S. Treasury securities or
coupons, including Certificates of Accrual Treasury Securities ("CATS") and
Treasury Income Growth Receipts ("TIGRs"). The SEC staff currently takes the
position that "stripped" U.S. government securities that are not issued through
the U.S. Treasury STRIPS program are not U.S. government securities. As long as
the SEC takes this position, CATS and TIGRs will not be considered U.S.
government securities for purposes of the 65% investment requirement. See
"Investment Objectives and Policies of the Portfolios and Risk Factors-- Other
Investment Policies and Risk Factors-- Risks of Mortgage- and Asset-Backed
Securities" for further discussion of the mortgage- and asset-backed securities
in which the Portfolio may invest.
The Portfolio may invest up to 35% of its total assets in mortgage-backed
securities that are issued by private issuers and in debt securities of other
corporate issuers. To maintain a dollar-weighted average portfolio duration of
between two and seven years, the Adviser monitors the prepayment experience of
the underlying mortgage pools of the Portfolio's mortgage-related securities and
will purchase and sell securities in the Portfolio to shorten or lengthen the
average duration of the Portfolio, as appropriate.
The Portfolio's investments in Fixed Income Securities are limited to those
that are rated at
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least A by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's, a
division of The McGraw Hill Companies, Inc. ("S&P") (or, if unrated, determined
by the Adviser to be of comparable quality). See the Appendix to the SAI for a
description of Moody's and S&P's ratings. In addition, the Portfolio will not
acquire a security if, as a result, more than 25% of the Portfolio's total
assets would be invested in securities rated below AAA, or if more than 10% of
the Portfolio's total assets would be invested in securities rated A.
The Portfolio may use options, futures contracts, options on futures
contracts and interest rate protection transactions for hedging and income and
return enhancement purposes. See "Investment Objectives and Policies of the
Portfolios and Risk Factors--Other Investment Policies and Risk Factors" for
further discussion of hedging and related strategies and other investment
policies of the Portfolio.
PACE INTERMEDIATE FIXED INCOME INVESTMENTS
Adviser: Pacific Income Advisers, Inc.
Objective: Current income, consistent with reasonable stability of principal
PACE Intermediate Fixed Income Investments seeks to achieve its objectives
through investment in Fixed Income Securities with a dollar-weighted average
portfolio duration of between two and four and one-half years. Under normal
conditions, the Portfolio invests at least 65% of its total assets in U.S.
government securities, corporate bonds, debentures, non-convertible Fixed Income
Securities, preferred stocks, mortgage-related securities, Eurodollar
certificates of deposit, Eurodollar bonds and Yankee bonds. The Portfolio also
may invest up to 10% of its total assets in securities denominated in foreign
currencies of developed countries. The Portfolio limits its investments to
investment grade securities, which are securities rated within the four highest
categories established by at least one NRSRO (e.g., Moody's or S&P) and unrated
securities determined by the Adviser to be of comparable quality. Securities in
the lowest of those four categories, i.e., rated Baa by Moody's or BBB by S&P,
have speculative characteristics and are subject to greater risks. See the
Appendix to the SAI for a description of Moody's and S&P ratings and "Investment
Objectives and Policies of the Portfolios and Risk Factors--Other Investment
Policies and Risk Factors--Debt Securities" for a description of certain risks
associated with securities in the fourth highest rating category. The Portfolio
may use options, futures contracts and options on futures contracts for hedging
and income and return enhancement purposes. See "Investment Objectives and
Policies of the Portfolios and Risk Factors--Other Investment Policies and Risk
Factors" for further discussion of hedging and related strategies and other
investment policies of the Portfolio.
In an effort to maintain a dollar-weighted average portfolio duration of
between of two and four and one-half years, the Adviser monitors the prepayment
experience of the underlying mortgage pools of the Portfolio's mortgage-related
securities and will purchase and sell securities in the Portfolio to shorten or
lengthen the duration of the Portfolio, as appropriate.
PACE STRATEGIC FIXED INCOME INVESTMENTS
Adviser: Pacific Investment Management Company
Objective: Total return consisting of income and capital appreciation
PACE Strategic Fixed Income Investments seeks to achieve its investment
objective by investing in a portfolio of Fixed Income Securities of varying
maturities with a dollar-weighted average portfolio duration of between three
and eight years. Portfolio holdings will be invested in areas of the bond market
(based on quality, sector,
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coupon or maturity) which the Adviser believes to be relatively undervalued.
Under normal conditions, the Portfolio invests at least 65% of its assets in
Fixed Income Securities which include obligations issued or guaranteed by the
U.S. government, its agencies and instrumentalities, corporate and other debt
obligations, convertible securities, mortgage- and asset-backed securities,
obligations of foreign governments or their subdivisions, agencies or
instrumentalities, obligations of supranational and quasi-governmental entities,
commercial paper, certificates of deposit, money market instruments, foreign
currency exchange-related securities and loan participations and assignments.
The Portfolio may invest up to 35% of its total assets in privately issued
mortgage-related securities. All of the securities purchased for the Portfolio
will be investment grade (rated at least Baa by Moody's or BBB by S&P, or, if
unrated, determined by the Adviser to be of comparable quality), except that the
Portfolio may invest up to 20% of its total assets in securities rated below
investment grade, but rated at least B by Moody's or S&P, or determined by the
Adviser to be of comparable quality. In the event that, due to a downgrade of
one or more debt securities, an amount in excess of 20% of the Portfolio's total
assets is held in securities rated below investment grade and comparable unrated
securities, the Adviser will engage in an orderly disposition of such securities
to the extent necessary to reduce the Portfolio's holdings thereof. Securities
rated Baa or lower by Moody's or BBB or lower by S&P have speculative
characteristics and are subject to greater risks. See "Investment Objectives and
Policies of the Portfolios and Risk Factors--Other Investment Policies and Risk
Factors--Debt Securities" below and the Appendix in the SAI for a description of
Moody's and S&P ratings.
The Portfolio may invest up to 20% of its total assets in a combination of
U.S. dollar-denominated debt of any foreign issuer, Yankee bonds, Eurodollar
bonds and debt securities denomi-nated in foreign currencies, except that not
more than 10% of the Portfolio's total assets shall be invested in debt
securities denominated in foreign currencies. Yankee bonds are U.S.
dollar-denominated obligations of foreign issuers. Eurodollar bonds are U.S.
dollar-denominated obligations of issuers that are located outside the United
States, primarily in Europe. The Portfolio may use forward currency contracts,
currency options, currency futures and options thereon to hedge against
unfavorable changes in currency exchange rates and for income and return
enhancement purposes. The Portfolio also may use options, futures contracts,
options on futures contracts and interest rate protection transactions for
hedging and income and return enhancement purposes. See "Investment Objectives
and Policies of the Portfolios and Risk Factors--Other Investment Policies and
Risk Factors" for further discussion of hedging and related strategies and other
investment policies of the Portfolio.
PACE MUNICIPAL FIXED INCOME INVESTMENTS
Adviser: Morgan Grenfell Capital Management, Incorporated
Objective: High current income exempt from federal income tax
PACE Municipal Fixed Income Investments seeks to achieve its investment
objective through investment in general obligation, revenue and private activity
bonds and notes, the interest on which is exempt from federal income tax, with a
dollar-weighted portfolio duration of between three and seven years.
Under normal conditions, the Portfolio invests at least 80% of its total
assets in general obligation, revenue and private activity bonds and notes that
are issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, or multi-
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state agencies or authorities, the interest on which, in the opinion of counsel
to the issuer of the instrument, is exempt from federal income tax ("Municipal
Obligations"), including municipal bonds, industrial development bonds ("IDBs"),
municipal lease obligations and certificates of participation therein, put bonds
and private activity bonds ("PABs"). The Portfolio also will not invest more
than 25% of its total assets in Municipal Obligations whose issuers are located
in the same state or more than 25% of its total assets in Municipal Obligations
that are secured by revenues from entities in a particular industry category
except that the Portfolio may invest up to 50% of its total assets in public
housing authorities, and state and local housing finance authorities, including
bonds that are secured or backed by the U.S. Treasury or other U.S. government
guaranteed securities. To the extent the Portfolio concentrates its investments
in single family and multi-family housing obligations, the Portfolio will be
subject to the peculiar risks associated with investments in such obligations,
including prepayment risks and the risks of default on housing loans, which may
be affected by economic conditions and other factors relating to such
obligations.
The Portfolio will include Municipal Obligations of varying maturities with
a dollar-weighted average portfolio duration of between three and seven years.
Portfolio composition generally covers a range of maturities with geographic and
issuer diversification. The Portfolio may invest in PABs collateralized by
letters of credit issued by banks having stockholders' equity in excess of $100
million as of the date of their most recently published statement of financial
condition. The Portfolio may also invest in variable rate Municipal Obligations,
most of which permit the holder thereof to receive the principal amount on
demand upon seven days' notice. The Portfolio limits its investments to
Municipal Obligations that are rated at least A, MIG-2 or Prime 2 by Moody's or
A, SP-2 or A-2 by S&P at the time of investment or unrated securities determined
to be of comparable quality by the Adviser, except that up to 15% of its total
assets may be invested in municipal bonds that, at the time of purchase, are
rated Baa by Moody's or BBB by S&P, or if unrated, are determined by the Adviser
to be of comparable quality. Municipal Obligations in the lowest investment
grade category are considered medium grade securities and have speculative
characteristics. See "Investment Objectives and Policies of the Portfolios and
Risk Factors--Other Investment Policies and Risk Factors--Debt Securities" for a
discussion of certain risks associated with securities rated in the fourth
highest rating category.
The Portfolio may invest without limit in PABs, although it does not
currently expect to invest more than 25% of its total assets in PABs. Dividends
attributable to interest income on certain types of PABs issued after August 15,
1986 to finance non-governmental activities are a tax preference item for
purposes of the federal alternative minimum tax ("AMT"). Although no assurance
can be given, the Adviser will endeavor to manage the Portfolio so that no more
than 25% of the interest income will be a tax preference item. Dividends derived
from interest income on all Municipal Obligations are a component of the
"current earnings" adjustment for corporations for purposes of the AMT.
Under normal circumstances, the Portfolio may invest up to 20% of its total
assets in certain taxable securities to maintain liquidity. In addition, for
temporary defensive purposes during periods when the Adviser determines that
market conditions warrant, the Portfolio may invest without limit in such
taxable securities. See "Investment Objectives and Policies of the Portfolios
and Risk Factors--Other Investment Policies and Risk Factors" for further
discussion of other investment policies of the Portfolio.
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PACE GLOBAL FIXED INCOME INVESTMENTS
Adviser: Rogge Global Partners plc
Objective: High total return
PACE Global Fixed Income Investments seeks to achieve its investment
objective by investing primarily in high-grade Fixed Income Securities issued by
domestic and foreign governments and supranational entities and private issuers
located overseas, with a dollar-weighted average duration of between four and
eight years. Under normal conditions, at least 65% of the value of the
Portfolio's total assets will be invested in domestic and foreign bonds issued
by governments, companies and supranational organizations such as the
International Bank for Reconstruction and Development (commonly known as the
"World Bank"), Asian Development Bank, European Investment Bank and European
Economic Community. Bonds are viewed by the Portfolio to include Fixed Income
Securities of any maturity. Under normal market conditions, investments will be
made in a minimum of four countries, one of which may be the United States. For
temporary defensive purposes, the Portfolio may invest in securities of only one
country, including the United States. The Portfolio may invest in non-U.S.
dollar denominated securities.
The Portfolio will include Fixed Income Securities of varying maturities
with a dollar-weighted average portfolio duration of between four and eight
years. The Portfolio's quality standards limit its investments to those rated
within the three highest grades assigned by Moody's or S&P, or unrated
securities determined by the Adviser to be of comparable quality, except for
bonds issued by companies and governments in emerging markets.
The Portfolio may invest up to 10% of its total assets in bonds issued by
companies and governments in emerging countries that at the time of purchase,
are rated Baa or Ba by Moody's or BBB or BB by S&P or are unrated but determined
to be of comparable quality by the Adviser.
Bonds rated below investment grade are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
These securities are commonly referred to as "junk bonds." In the event that,
due to a downgrade of one or more debt securities, an amount in excess of 10% of
the total assets of the Portfolio is held in securities rated below investment
grade and comparable unrated securities, the Adviser will engage in an orderly
disposition of such securities to the extent necessary to reduce the Portfolio's
holdings thereof.
The emerging countries in which the Portfolio may invest currently include
Argentina, Brazil, Chile, China, Columbia, Indonesia, India, Malaysia, Mexico,
the Philippines, Poland, Singapore, Thailand and Venezuela. These markets tend
to be in the less economically developed regions of the world. General
characteristics of emerging countries also include lower degrees of political
stability, a high demand for capital investment, a high dependence on export
markets for their major industries, a need to develop basic economic
infra-structures and rapid economic growth. The Adviser believes that
investments in bonds issued in emerging countries offer the opportunity for
significant long-term investment returns; however, these investments are lower
quality than the three highest rated securities and involve certain risks. See
"Investment Objectives and Policies of the Portfolios and Risk Factors-- Other
Investment Policies and Risk Factors--Foreign Securities."
The Portfolio may use forward currency contracts, currency options, currency
futures and options thereon to hedge against unfavorable changes in currency
exchange rates and for
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income and return enhancement purposes. The Portfolio also may use options,
futures contracts, and options on futures contracts for hedging and income and
return enhancement purposes. For a more detailed discussion of the risks in
investing in foreign securities, see "Investment Policies and
Restrictions--Special Characteristics of Foreign and Emerging Market Securities"
in the SAI. See "Investment Objectives and Policies of the Portfolios and Risk
Factors--Other Investment Policies and Risk Factors" for further discussion of
hedging and related strategies and other investment policies of the Portfolio.
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
Adviser: Brinson Partners, Inc.
Objective: Capital appreciation and dividend income
PACE Large Company Value Equity Investments seeks to achieve its investment
objective by investing primarily in equity securities that, in the Adviser's
opinion are undervalued. Under normal circumstances, substantially all of the
Portfolio's total assets will be invested in a wide range of equity securities
of companies that are traded on major stock exchanges as well as on the
over-the-counter ("OTC") market. The Portfolio may invest in a broad range of
equity securities of U.S. issuers, including common and preferred stocks, debt
securities convertible into or exchangeable for common stock and securities such
as warrants or rights that are convertible into common stock. Up to 10% of the
Portfolio's total assets may include convertible debt securities rated BB by
Moody's or Ba by S&P or, if unrated, determined to be of comparable quality by
the Adviser. The Portfolio expects its equity investments to encompass both
large and intermediate capitalization companies, but under normal circumstances
at least 65% of the Portfolio's total assets will be invested in common stock of
companies with total market capitalization (i.e., market value of common stock
outstanding) of $2.5 billion or greater at the time of purchase. The Portfolio
may invest up to 5% of its total assets in foreign securities, including
American Depositary Receipts ("ADRs").
The Adviser's approach to investing for the Portfolio is to invest in the
equity securities of U.S. companies believed to be undervalued based upon
internal research and proprietary valuation systems. Investment decisions are
based on fundamental research, internally developed valuation systems and
seasoned judgment. The Adviser's research focuses on several levels of analysis;
first, on understanding wealth shifts that occur within the equity market, and
second, on individual company research. At the company level, the Adviser
quantifies expectations of a company's ability to generate profit and to grow
business into the future. For each stock under analysis, the Adviser discounts
to the present all of the future cash flows that it believes will accrue to the
Portfolio from the investment to calculate a present or intrinsic value. This
value estimate generated by the Adviser's proprietary valuation model is
compared to observed market price and ranked against other stocks accordingly.
The rankings, in combination with the Adviser's investment judgment, determine
which securities are included in the Portfolio.
The Portfolio also may use options, futures contracts and options on futures
contracts for hedging and income and return enhancement purposes. See
"Investment Objectives and Policies of the Portfolios and Risk Factors--Other
Investment Policies and Risk Factors" for further discussion of hedging and
related strategies and other investment policies of the Portfolio.
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PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
Adviser: Chancellor Capital Management, Inc.
Objective: Capital appreciation
PACE Large Company Growth Equity Investments seeks to achieve its investment
objective by investing primarily in equity securities of companies that, in the
Adviser's opinion, are characterized by an earnings growth rate which is faster
than that of the average growth rate of the companies included in the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index") and total market
capitalization (i.e., market value of common stock outstanding) of at least $2.5
billion. Dividend income is an incidental consideration in the selection of
investments. The securities held by the Portfolio can be expected generally to
experience greater volatility than those of PACE Large Company Value Equity
Investments. The Portfolio may invest in a broad range of equity securities of
U.S. issuers, including common and preferred stocks, debt securities convertible
into or exchangeable for common stock and securities such as warrants or rights
that are convertible into common stock. In selecting securities for the
Portfolio, the Adviser evaluates factors believed to be favorable to long-term
growth of capital, such as the business outlook for the issuer's industry and
the issuer's position in that industry, as well as the issuer's background,
historical profit margins on equity and experience and qualifications of the
issuer's management. Under normal conditions, at least 65% of the Portfolio's
total assets will be invested in common stocks of companies with total market
capitalization of $2.5 billion or greater at the time of purchase. The Portfolio
may invest up to 5% of its total assets in foreign securities, including ADRs.
See "Investment Objectives and Policies of the Portfolios and Risk
Factors--Other Investment Policies and Risk Factors" for further discussion of
other investment policies of the Portfolio.
The Adviser manages the Portfolio by investing in companies from a defined
growth subset of both the S&P 500 Index and the Russell 1000 Growth indices,
which consists of companies expected to grow at least 50% faster than the
market. The Adviser divides the growth subset into 19 industry groups, and their
market capitalization weights define its normal or neutral position. Based upon
the Adviser's collective industry evaluation, it may increase or decrease
portfolio exposures on a weekly basis by a maximum 6% relative to the normal
weightings. This permits flexibility relative to its growth benchmark, yet
ensures against undue volatility associated with overexposure to one industry.
The Adviser's stock selection decisions are determined by: (1) the Adviser's
analysts' forecasts of the industry/company's relative attractiveness; (2) the
Adviser's research-driven dividend discount model; and (3) the Adviser's
quantitative, fact-based Stock Selection Model that ranks industries/stocks
based primarily on earnings momentum, earnings stability, relative value and
relative strength. The Adviser ranks the stocks in its large-capitalization
universe on a normal bell-shaped curve, purchasing stocks ranked in the top 30%
of the combined ranked universe, and selling stocks ranked in the bottom 30%.
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
Adviser: Brandywine Asset Management, Inc.
Objective: Capital appreciation
PACE Small/Medium Company Value Equity Investments seeks to achieve its
investment objective by investing primarily in equity securities that, in the
Adviser's opinion, are undervalued or overlooked in the marketplace at the time
of purchase, which generally have below-market average price/earnings ("P/E")
ratios and with total market capitalization (i.e., market value of common stock
outstanding) of less than $2.5 billion. The Portfolio will only
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invest in companies with common stock traded on the major stock exchanges as
well as on the OTC market. The Portfolio may invest in a broad range of equity
securities of U.S. issuers, including common and preferred stock, debt
securities convertible into or exchangeable for common stock and securities such
as warrants or rights that are convertible into common stock. Under normal
conditions, at least 65% of the Portfolio's total assets will be invested in
common stocks of issuers with total market capitalization of less than $2.5
billion at the time of purchase. The Portfolio defines a low P/E ratio as a P/E
(based on trailing twelve-month earnings) which places an issuer among the
lowest 25% based on P/E ratios for all exchange-traded and OTC stocks with
positive earnings and a capitalization greater than $10 million. See "Investment
Objectives and Policies of the Portfolios and Risk Factors--Other Investment
Policies and Risk Factors" for further discussion of other investment policies
of the Portfolio.
The Adviser performs a qualitative, fundamental review of candidates to
determine that they are appropriate candidates for the Portfolio. This review
identifies and avoids stocks undesirable for investment: First, the Adviser
adjusts all reported earnings for extraordinary gains and losses so as to
consider only true, low P/E stocks for entry into the Portfolio. Second, the
Adviser excludes stocks that have pre-announced significant earnings changes
which when formally reported will raise their P/E ratios. Third, stocks that
have had recent strong price increases, and therefore are not truly undervalued,
are eliminated. Fourth, the fundamental review identifies and removes those
stocks that are suffering a severe or sudden fundamental deterioration.
The Portfolio intends to invest in the common stock only of companies
meeting these criteria. Each stock's weighting in the Portfolio will be
proportional to the stock's capitalization, except that the Portfolio will not
purchase any stock if it would exceed 2% of the Portfolio. The Portfolio may
deviate from strict capitalization weighting in order to invest only in round
lots, for illiquidity considerations, or to block purchases at favorable prices.
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
Adviser: Westfield Capital Management Company, Inc.
Objective: Capital appreciation
PACE Small/Medium Company Growth Equity Investments seeks to achieve its
investment objective by investing primarily in the common stock of "emerging
growth" companies, companies characterized by above-average earnings growth
rates and total market capitalization (i.e., market value of common stock
outstanding) of less than $2.5 billion. Dividend income is an incidental
consideration in the selection of investments. The securities held by the
Portfolio can be expected generally to experience greater volatility than those
of PACE Small/Medium Company Value Equity Investments. The Portfolio may invest
in a broad range of equity securities of U.S. issuers, including common and
preferred stock, debt securities convertible into or exchangeable for common
stock and securities such as warrants or rights that are convertible into common
stock. Under normal conditions, at least 80% of the Portfolio's total assets
will be invested in common stocks of issuers with total market capitalization of
less than $2.5 billion that exhibit the potential for high future earnings
growth relative to the overall market. The Portfolio may invest up to 5% of its
total assets in foreign securities, including ADRs.
The Adviser uses a bottom-up, fundamental approach, including on-site
company visits, to uncover and analyze companies that exhibit the possibility of
accelerating earnings growth because of management changes, new products,
established products exhibiting unit volume growth or structural changes in the
economy. The quality of the management team and the strength of the company's
finances and internal controls
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are also factors in the investment decision. A 12 to 18 month time horizon is
employed in selecting stocks; however, selected issues may be held for extended
periods based on the Adviser's outlook.
The Adviser is exposed to and follows companies constituting a full range of
market sectors; nevertheless, it may focus on a limited number of attractive
industries. The securities of these companies may have limited marketability and
may be subject to more abrupt or erratic market movements than securities of
larger, more established companies or the market averages in general. The
Portfolio also may use options, futures contracts and options on futures
contracts for hedging and income and return enhancement purposes. See
"Investment Objectives and Policies of the Portfolios and Risk Factors--Other
Investment Policies and Risk Factors" for further discussion of hedging and
related strategies and other investment policies of the Portfolio.
PACE INTERNATIONAL EQUITY INVESTMENTS
Adviser: Martin Currie Inc.
Objective: Capital appreciation
PACE International Equity Investments seeks to achieve its objective by
investing in equity securities of companies domiciled outside the United States.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in common stocks, which may or may not pay dividends, as well
as convertible bonds, convertible preferred stocks, warrants, rights or other
equity securities of companies domiciled in three or more countries outside the
United States. "Domiciled," for these purposes, means companies (1) which are
organized under the laws of a country other than the United States, (2) for
which the principal securities trading market is in such a country, or (3) which
derive a significant proportion (at least 50 percent) of their revenues or
profits from goods produced or sold, investments made, or services performed in
the eponymous country or which have at least 50 percent of their assets situated
in such a country. The Portfolio also may invest up to 10% of its total assets
in securities of investment companies, such as closed-end investment management
companies which invest in foreign markets.
The Portfolio will normally invest in the securities of three or more
countries outside the United States. Particular consideration will be given to
investments principally traded in Japanese, European, Pacific and Australian
securities markets, and in foreign securities of companies traded on United
States' securities markets. The Portfolio may also invest up to 10% of its total
assets in emerging markets, including Asia, Latin America and other regions,
where markets may not yet fully reflect the potential of the developing economy.
For purposes of this Portfolio, "emerging markets" are markets in countries not
included in the Morgan Stanley Capital International World Index ("MSCI Index")
of major world economies.
In allocating the Portfolio's assets among the various securities markets of
the world, the Adviser will consider such factors as the condition and growth
potential of the various economic and securities markets, currency and taxation
considerations and other pertinent financial, social, national and political
factors. Under certain adverse investment conditions, the Portfolio may restrict
the number of securities markets in which its assets will be invested, although
under normal market circumstances, the Portfolio's investments will involve
securities principally traded in at least ten different countries. The Portfolio
will invest only in markets where, in the judgment of the Adviser, there exists
an acceptable framework of market regulation and sufficient liquidity.
When the Adviser believes that conditions in international securities
markets warrant a defensive investment strategy, the Portfolio temporarily may
invest up to 100% of its assets in domestic debt securities, foreign debt
securities principally traded in the United States, and in foreign debt
securities principally traded outside of the United States, obligations issued
or guaranteed by the
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U.S. or a foreign government or their respective agencies, authorities or
instrumentalities, corporate bonds and sponsored ADRs.
The Portfolio may use forward currency contracts, currency options, currency
futures and options thereon to hedge against unfavorable changes in currency and
for income and return enhancement purposes. The Portfolio also may use options,
futures contracts and options on futures contracts for hedging and income and
return enhancement purposes. See "Investment Objectives and Policies of the
Portfolios and Risk Factors--Other Investment Policies and Risk Factors" for
further discussion of hedging and related strategies and other investment
policies of the Portfolio. For a more detailed discussion of the risks in
investing in foreign securities, see "Investment Policies and
Restrictions--Special Characteristics of Foreign and Emerging Market Securities"
in the SAI.
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
Adviser: Schroder Capital Management International Inc.
Objective: Capital appreciation
PACE International Emerging Markets Equity Investments seeks to achieve its
investment objective by investing, under normal conditions, at least 65% of the
Portfolio's total assets in equity securities of issuers domiciled in three or
more emerging market countries. "Domiciled" for these purposes means companies
(1) which are organized under the laws of an emerging market country, (2) for
which the principal securities trading market is in such a country, or (3) which
derive a significant proportion (at least 50 percent) of their revenues or
profits from goods produced or sold, investments made, or services performed in
the eponymous country or which have at least 50 percent of their assets situated
in such a country. For purposes of this Portfolio, "emerging market" countries
are all markets in all countries not included in the MSCI Index of major world
economies and Malaysia. The Portfolio may invest in a broad range of equity
securities, including common and preferred stock, debt securities convertible
into or exchangeable for stock and securities such as warrants or rights that
are convertible into stock. The Portfolio also may invest up to 10% of its total
assets in securities of investment companies, such as closed-end investment
management companies which invest in foreign markets.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state owned industries, permitting
the value of their currencies to float against the dollar and other major
currencies, and generally reducing the level of state intervention in industry
and commerce. Important intra-regional economic integration also holds the
promise of greater trade and growth. At the same time, significant progress has
been made in restructuring the heavy external debt burden that certain emerging
market countries accumulated during the 1970s and 1980s. While there is no
assurance that these trends will continue, the Adviser will seek out attractive
investment opportunities in these countries.
The Portfolio will not necessarily seek to diversify investments on a
geographic basis within the emerging market category and to the extent the
Portfolio concentrates its investments in issuers located in one country or
area, the Portfolio is more susceptible to factors adversely affecting that
country or area.
The Portfolio may use forward currency contracts, currency options, currency
futures and options thereon to hedge against unfavorable changes in currency
exchange rates and for income and return enhancement purposes. The Portfolio may
acquire emerging market securities that are denominated in currencies other than
a currency of an emerging market country. The Portfolio also may use options,
futures contracts and options on futures contracts for hedging and
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income and return enhancement purposes. See "Investment Objectives and Policies
of the Portfolios and Risk Factors--Other Investment Policies and Risk Factors"
for further discussion of hedging and related strategies and other investment
policies of the Portfolio. For a more detailed discussion of the risks in
investing in foreign securities, see "Investment Policies and Restrictions--
Special Characteristics of Foreign and Emerging Market Securities" in the SAI.
OTHER INVESTMENT POLICIES AND RISK FACTORS
MONEY MARKET INSTRUMENTS
All Portfolios other than PACE Money Market Investments also may invest in
high-grade money market instruments such as commercial paper of a U.S. or
foreign company or foreign government certificates of deposit, bankers'
acceptances and time deposits of domestic and foreign banks, and obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities.
These obligations generally will be U.S. dollar-denominated. Commercial paper
will be rated, at the time of purchase, at least "Prime-2" by Moody's or "A-2"
by S&P or, if not rated, issued by an entity having an outstanding unsecured
debt issue rated at least "A" or "Prime-2" by Moody's or "A" or "A-2" by S&P.
See the Appendix to the SAI for a description of Moody's and S&P's ratings.
U.S. GOVERNMENT SECURITIES
Each Portfolio may invest in some or all of the following U.S. government
securities: securities that are backed by the full faith and credit of the U.S.
government, such as U.S. Treasury obligations (bills, notes and bonds),
securities that are supported primarily or solely by the creditworthiness of the
government-related issuer, such as securities issued by the RFC, the Student
Loan Marketing Association, the Federal Home Loan Banks and the TVA, and
securities that are supported primarily or solely by specific pools of assets
and the creditworthiness of a U.S. government-related issuer, such as U.S.
government mortgage-backed securities. For more information concerning the types
of mortgage-backed securities in which certain Portfolios may invest, see
"Investment Objectives and Policies of the Portfolios--Other Investment Policies
and Risk Factors--Mortgage-Backed Securities." In addition, PACE Government
Securities Fixed Income Investments, PACE Intermediate Fixed Income Investments
and PACE Strategic Fixed Income Investments may invest in certain zero coupon
securities that are "stripped" U.S. Treasury notes and bonds. See "Investment
Objectives and Policies of the Portfolios and Risk Factors--Other Investment
Policies and Risk Factors and Risk Factors--Zero Coupon Securities."
DEBT SECURITIES
Each Portfolio may invest in corporate and other debt obligations. The yield
of a Fixed Income Security depends on a variety of factors, including general
Fixed Income Security market conditions, the financial condition of the issuer,
the size of the particular offering, the maturity, credit quality and rating of
the issue and expectations regarding changes in tax rates. Generally, the longer
the maturity of a Fixed Income Security, the higher the rate of interest paid
and the greater the volatility. Furthermore, the value of the securities held by
a Portfolio will rise when interest rates decline. Conversely, when interest
rates rise, the value of Fixed Income Securities may be expected to decline.
Except where otherwise indicated, each Portfolio will invest in securities
rated A or better by any NRSRO or determined by the Adviser to be of comparable
quality. PACE Strategic Fixed Income Investments, PACE Municipal Fixed Income
Investments and PACE Global Fixed Income Investments may invest in medium-rated
securities (i.e., rated Baa by Moody's or BBB by S&P). Moody's considers
securities rated Baa to have speculative characteristics. PACE Strategic
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Fixed Income Investments also may invest in lower-rated securities (i.e., rated
lower than Baa by Moody's or lower than BBB by S&P). PACE Strategic Fixed Income
Investments, however, will not purchase a security rated lower than B by Moody's
or S&P. Changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity for such securities to make principal and interest
payments than is the case for higher grade debt securities. Debt securities
rated below investment grade are deemed by these agencies to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions and, as
previously stated, are commonly referred to as "junk bonds."
PACE Money Market Investments, PACE Government Securities Fixed Income
Investments, PACE Intermediate Fixed Income Investments, PACE Strategic Fixed
Income Investments, PACE Municipal Fixed Income Investments and PACE Global
Fixed Income Investments are permitted to purchase debt securities that are not
rated by an NRSRO but that the Portfolio's Adviser determines to be of
comparable quality to that of rated securities in which it may invest. These
securities are included in the computation of any percentage limitations
applicable to comparably rated securities.
Although the relevant Advisers will attempt to minimize the speculative
risks associated with investments in junk bonds through diversification, credit
analysis and attention to current trends in interest rates and other factors,
investors should carefully review the objectives and policies of PACE Strategic
Fixed Income Investments and consider its ability to assume the investment risks
involved before making an investment.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after a
Portfolio has acquired the security. The Advisers, and in the case of PACE Money
Market Investments, Mitchell Hutchins, would consider such an event in
determining whether the Portfolio should continue to hold the security but may
not be required to dispose of it. Credit ratings attempt to evaluate the safety
of principal and interest payments and do not evaluate the risks of fluctuations
in market value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events affecting an issuer, so that an
issuer's current financial condition may be better or worse than the rating
indicates.
Lower rated debt securities generally offer a higher current yield than that
available from higher grade issues, but they involve higher risks in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuation in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress, which could adversely
affect their ability to make payments of principal and interest and increase the
possibility of default. In addition, issuers of these securities may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater, because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.
The market for lower rated securities has expanded in recent years, and its
growth paralleled a long economic expansion. In the past, the prices of many
lower rated debt securities declined substantially, reflecting an expectation
that many issuers of such securities might experience financial difficulties. As
a result, the yields on lower rated debt securities rose dramatically. The
higher yields did not reflect the value of the income stream that holders of
such securities expected, but rather the risk that holders of such securities
could lose a substantial portion of their
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value as a result of the issuers' financial restructuring or default. There can
be no assurance that such declines will not recur. The market for lower rated
debt securities generally is thinner and less active than that for higher
quality securities, which may limit a Portfolio's ability to sell the securities
at fair value in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly-traded market.
DURATION
Duration is a measure of the expected life of a fixed income security that
was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. Duration is one of the fundamental
tools used by the Adviser in portfolio selection for PACE Government Securities
Fixed Income Investments, PACE Intermediate Fixed Income Investments, PACE
Strategic Fixed Income Investments, PACE Municipal Fixed Income Investments and
PACE Global Fixed Income Investments.
Traditionally, a debt security's "term to maturity" has been used as a proxy
for the sensitivity of the security's price to changes in interest rates (which
is the "interest rate risk" or "volatility" of the security). However, "term to
maturity" measures only the time until a debt security provides its final
payments, taking no account of the pattern of the security's payments prior to
maturity. Duration is a measure of the expected life of a Fixed Income Security
on a present value basis. Duration takes the length of the time intervals
between the present time and the time that the interest and principal payments
are scheduled or, in the case of a callable bond, expected to be received, and
weights them by the present values of the cash to be received at each future
point in time. For any Fixed Income Security with interest payments occurring
prior to the payment of principal, duration is always less than maturity. In
general, all other things being equal, the lower the stated or coupon rate of
interest of a Fixed Income Security, the longer the duration of the security;
conversely, the higher the stated or coupon rate of interest of a Fixed Income
Security, the shorter the duration of the security.
Duration allows an Adviser to make certain predictions regarding how the
value of a portfolio will generally respond to changes in the level of interest
rates. For example, a portfolio consisting entirely of treasury notes with a
remaining maturity of five years would have a duration of 4.5 years. A 1% change
in the level of interest rates would cause a change of approximately 4.5% in the
net asset value of the portfolio. A portfolio consisting entirely of treasury
notes with a remaining maturity of ten years would have a duration of about 7.5
years and a 1% change in the level of interest rates would cause a change of
between 7% and 8% in the net asset value of the portfolio. This example is
intended for demonstration purposes only, however, and is not intended to
approximate how a Portfolio's investment portfolio will respond to changes in
interest rates. A Portfolio's investment portfolio may include securities with
differing maturities and quality levels, and interest rates on those instruments
may not all change by the same amount at the same time as rates rise or fall
generally in the marketplace. Also, the treasury securities described in the
example cannot be retired prior to maturity, while some of the securities in the
Portfolios' investment portfolios can. These factors among others can cause a
Portfolio's investment portfolio to respond somewhat differently to changes in
interest rates than shown in the example.
Futures, options and options on futures have durations which, in general,
are closely related to the duration of the securities which underlie them.
Holding long futures or call option positions (backed by a segregated account of
cash and
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cash equivalents) will lengthen a Portfolio's duration by approximately the same
amount that purchasing an equivalent amount of the underlying securities would.
Short futures or put option positions have durations roughly equal to the
negative duration of the securities that underlie these positions, and have the
effect of reducing portfolio duration by approximately the same amount that
selling an equivalent amount of the underlying securities would.
There are some situations where even the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is generally 30 years, but current prepayment
rates are more critical in determining the securities' interest rate exposure.
In these and other similar situations, the Adviser will use more sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
MUNICIPAL OBLIGATIONS
Municipal Obligations include, but are not limited to, municipal bonds,
floating rate and variable rate municipal obligations, participation interests
in municipal bonds, tax-exempt commercial paper, tender option bonds and
short-term municipal notes. Municipal bonds include IDBs, municipal lease
obligations and certificates of participation therein, put bonds and PABs.
PACE Municipal Fixed Income Investments may invest in a variety of Municipal
Obligations, as described below:
MUNICIPAL BONDS. Municipal bonds are debt obligations issued to obtain funds
for various public purposes that pay interest that is exempt from federal income
tax in the opinion of issuer's counsel. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as from the user of the facility being financed. The term
"municipal bonds" also includes "moral obligation" issues, which are normally
issued by special purpose authorities. In the case of such issues, an express or
implied "moral obligation" of a related government unit is pledged to the
payment of the debt service, but is usually subject to annual budget
appropriations. The term "municipal bonds" also includes municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts and certificates of participation therein. Municipal lease
obligations are issued by state and local governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The Portfolio generally invests in municipal lease
obligations through certificates of participation. The Portfolio does not
presently intend to purchase municipal lease obligations, or certificates of
participation therein, that are not rated by Moody's or S&P.
MUNICIPAL LEASES, CERTIFICATES OF PARTICIPATION AND OTHER PARTICIPATION
INTERESTS. A municipal lease is an obligation in the form of a lease or
installment purchase contract which is issued by a state or local government to
acquire equipment and facilities. Income from such obligations is generally
exempt from state and local taxes in the state of issuance (as well as regular
federal income tax). Municipal leases frequently
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involve special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt issuance limitations are deemed
to be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that relieve the governmental issuer of any
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Thus, the Portfolio's investment in municipal leases will
be subject to the special risk that the governmental issuer may not appropriate
funds for lease payments.
In addition, such leases or contracts may be subject to the temporary
abatement of payments in the event the issuer is prevented from maintaining
occupancy of the leased premises or utilizing the leased equipment. Although the
obligations may be secured by the leased equipment or facilities, the
disposition of the property in the event of nonappropriation or foreclosure
might prove difficult, time consuming and costly, and result in an
unsatisfactory or delayed recoupment of the Portfolio's original investment.
Certificates of participation represent undivided interests in municipal
leases, installment purchase contracts or other instruments. The certificates
are typically issued by a trust or other entity which has received an assignment
of the payments to be made by the state or political subdivision under such
leases or installment purchase contracts.
Certain municipal lease obligations and certificates of participation may be
deemed illiquid for purposes of the Portfolio's limitations on investments in
illiquid securities. Other municipal lease obligations and certificates of
participation acquired by the Portfolio may be determined by the Adviser,
pursuant to guidelines adopted by the trustees of the Trust, to be liquid
securities for purposes of the Portfolio's limitation on investments in illiquid
securities. In determining the liquidity of municipal leases obligations and
certificates or participation, the Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades or quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Adviser will consider factors unique to particular lease obligations and
certificates of participation affecting the marketability thereof. These include
the general creditworthiness of the issuer, the importance to the issuer of the
property covered by the lease and the likelihood that the marketability of the
obligation will be maintained throughout the time the obligation is held by the
Portfolio. The Portfolio may not invest more than 5% of its net assets in
municipal leases.
PACE Municipal Fixed Income Investments may purchase participations in
municipal securities held by a commercial bank or other financial institution.
Such participations provide the Portfolio with the right to a pro rata undivided
interest in the underlying municipal securities. In addition, such
participations generally provide the Portfolio with the right to demand payment,
on not more than seven days notice, of all or any part of the Portfolio's
participation interest in the underlying municipal security, plus accrued
interest.
INDUSTRIAL DEVELOPMENT BONDS AND PRIVATE ACTIVITY BONDS. IDBs and PABs are
issued by or on behalf of public authorities to finance various privately
operated facilities, such as airport or pollution control facilities. These
obligations are included within the term "municipal bonds" if the interest paid
thereon is exempt from federal income tax in the opinion of the bond issuer's
counsel. IDBs and PABs are in most cases revenue
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bonds and thus are not payable from the unrestricted revenues of the issuer. The
credit quality of IDBs and PABs is usually directly related to the credit
standing of the user of the facilities being financed. IDBs issued after August
15, 1986 generally are considered PABs, and, to the extent the Portfolio invests
in such PABs, shareholders generally will be required to include a portion of
their exempt-interest dividends from that Portfolio in calculating their
liability for the AMT. See "Dividends and Taxes." The Portfolio is authorized to
invest more than 25% of its net assets in IDBs and PABs.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. See "Investment Objectives and
Policies of the Portfolios and Risk Factors--Other Investment Policies and Risk
Factors--Floating Rate and Variable Rate Obligations."
PARTICIPATION INTERESTS. Participation interests are interests in municipal
bonds, including IDBs and PABs, and floating and variable rate obligations, that
are owned by banks. These interests carry a demand feature permitting the holder
to tender them back to the bank, which demand feature generally is backed by an
irrevocable letter of credit or guarantee of the bank. The credit standing of
such bank affects the credit quality of the participation interests.
TENDER OPTION BONDS. Tender option bonds are long-term Municipal Obligations
sold by a bank subject to a "tender option" that gives the purchaser the right
to tender them to the bank at par plus accrued interest at designated times (the
tender option). The tender option may be exercisable at intervals ranging from
bi-weekly to semi-annually, and the interest rate on the bonds is typically
reset at the end of the applicable interval in order to cause the bonds to have
a market value that approximates their par value. The tender option generally
would not be exercisable in the event of a default on, or significant
downgrading of, the underlying Municipal Obligations. Therefore, the Portfolio's
ability to exercise the tender option will be affected by the credit standing of
both the bank involved and the issuer of the underlying securities.
PUT BONDS. A put bond is a municipal bond which gives the holder the
unconditional right to sell the bond back to the issuer or a remarketing agent
at a specified price and exercise date, which is typically well in advance of
the bond's maturity date. The obligation to purchase the bond on the exercise
date may be supported by a letter of credit or other credit support arrangement
from a bank, insurance company or other financial institution, the credit
standing of which affects the credit quality of the obligation.
TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Tax-exempt
commercial paper and short-term municipal notes include tax anticipation notes,
bond anticipation notes, revenue anticipation notes and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements and
other revenues.
YIELDS AND RISK FACTORS. The yield of a municipal security depends on a
variety of factors, including general municipal and fixed income security market
conditions, the financial condition of the issuer, the size of the particular
offering, the maturity, credit quality and rating of the issue and expectations
regarding changes in tax rates. Generally, the longer the maturity of a
municipal security, the higher the rate of interest paid and the greater the
volatility. Further, if general market interest rates are increasing, the prices
of Municipal Obligations ordinarily will decrease and, if rates decrease, the
opposite generally will be true. The Portfolio may invest in Municipal
Obligations with a broad range of maturities, based on the Adviser's judgment of
current and future market conditions as well as other factors, such as the
Portfolio's liquidity needs. Accordingly, the average dollar-weighted duration
of the Portfolio's portfolio may vary.
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Future federal, state and local laws may adversely affect the tax-exempt
status of interest on the Portfolio's portfolio securities or of the
exempt-interest dividends paid by the Portfolio, extend the time for payment of
principal or interest or otherwise constrain enforcement of such obligations.
Opinions relating to the validity of Municipal Obligations and the tax-exempt
status of interest thereon are rendered by the issuer's bond counsel at the time
of issuance; the Adviser will rely on such opinions without independent
investigation. See "Investment Objectives and Policies of the Portfolio--Other
Investment Policies and Risk Factors--Debt Securities" for further discussion of
ratings.
MORTGAGE-BACKED SECURITIES
PACE Government Securities Fixed Income Investments, PACE Intermediate Fixed
Income Investments and PACE Strategic Fixed Income Investments each may invest
in mortgage-backed securities. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans secured by real property and include single- and
multi-class pass-through securities and collateralized mortgage obligations.
Multi-class pass-through securities and collateralized mortgage obligations are
collectively referred to herein as CMOs.
The U.S. government securities in which these three Portfolios may invest
include mortgage-backed securities issued or guaranteed as to the payment of
principal and interest (but not as to market value) by GNMA, FNMA or the FHLMC.
Other mortgage-backed securities in which these three Portfolios may invest are
issued by private issuers, generally originators of and investors in mortgage
loans, including savings associations, mortgage bankers, commercial banks,
investment bankers and special purpose entities (collectively, "Private Mortgage
Lenders"). Payments of principal and interest (but not the market value) of such
private mortgage-backed securities may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any government guarantee of the underlying mortgage assets but
with some form of non-government credit enhancement.
GNMA CERTIFICATES. GNMA guarantees certain mortgage pass-through
certificates ("GNMA certificates") that are issued by Private Mortgage Lenders
and that represent ownership interests in individual pools of residential
mortgage loans. These securities are designed to provide monthly payments of
interest and principal to the investor. Timely payment of interest and principal
is backed by the full faith and credit of the U.S. government. Each mortgagor's
monthly payments to his lending institution on his residential mortgage are
"passed through" to certificateholders such as the Portfolios. Mortgage pools
consist of whole mortgage loans or participations in loans. The terms and
characteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. Lending institutions which originate mortgages for the
pools are subject to certain standards, including credit and other underwriting
criteria for individual mortgages included in the pools.
FNMA CERTIFICATES. FNMA facilitates a national secondary market in
residential mortgage loans insured or guaranteed by U.S. government agencies and
in privately insured or uninsured residential mortgage loans (sometimes referred
to as "conventional mortgage loans" or "conventional loans") through its
mortgage purchase and mortgage-backed securities sales activities. FNMA issues
guaranteed mortgage pass-through certificates ("FNMA certificates"), which
represent pro rata shares of all interest and principal payments made and owed
on the underlying pools. FNMA guarantees timely payment of
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interest and principal on FNMA certificates. The FNMA guarantee is not backed by
the full faith and credit of the U.S. government.
FHLMC CERTIFICATES. FHLMC also facilitates a national secondary market for
conventional residential and U.S. government-insured mortgage loans through its
mortgage purchase and mortgage-backed securities sales activities. FHLMC issues
two types of mortgage pass-through securities: mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). Each PC
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FHLMC generally guarantees timely monthly payment of
interest on PCs and the ultimate payment of principal, but it also has a PC
program under which it guarantees timely payment of both principal and interest.
GMCs also represent a pro rata interest in a pool of mortgages. These
instruments, however, pay interest semi-annually and return principal once a
year in guaranteed minimum payments. The FHLMC guarantee is not backed by the
full faith and credit of the U.S. government.
PRIVATE, RTC AND SIMILAR MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities issued by Private Mortgage Lenders are structured similarly to the
CMOs or single-class mortgage-backed securities issued or guaranteed by GNMA,
FNMA and the FHLMC. Such mortgage-backed securities may be supported by pools of
U.S. government or agency insured or guaranteed mortgage loans or by other
mortgage-backed securities issued by a government agency or instrumentality, but
they generally are supported by pools of conventional (i.e., non-government
guaranteed or insured) mortgage loans. Since such mortgage-backed securities
normally are not guaranteed by an entity having the credit standing of GNMA,
FNMA and the FHLMC, they normally are structured with one or more types of
credit enhancement. See "Other Investment Policies and Risk Factors--Types of
Credit Enhancement." Such credit enhancements do not protect investors from
changes in the market value of CMOs.
The RTC, which was organized by the U.S. government in connection with the
savings and loan crisis, holds assets of failed savings associations as either a
conservator or receiver for such associations, or it acquires such assets in its
corporate capacity. These assets include, among other things, single family and
multi-family mortgage loans, as well as commercial mortgage loans. In order to
dispose of such assets in an orderly manner, RTC has established a vehicle
registered with the SEC through which it sells mortgage-backed securities. RTC
mortgage-backed securities represent pro rata interests in pools of mortgage
loans that RTC holds or has acquired, as described above and are supported by
one or more of the types of private credit enhancements used by Private Mortgage
Lenders.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE
PASS-THROUGHS. CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively being
called "Mortgage Assets"). CMOs may be issued by Private Mortgage Lenders or by
government entities such as FNMA or the FHLMC. Multi-class mortgage pass-through
securities are interests in trusts that are comprised of Mortgage Assets and
that have multiple classes similar to those in CMOs. Unless the context
indicates otherwise, references herein to CMOs include multi-class mortgage
pass-through securities. Payments of principal of, and interest on, the Mortgage
Assets (and in the case of CMOs, any reinvestment income thereon) provide the
funds to pay debt service on the CMOs or to make scheduled distributions on the
multi-class mortgage pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO, also referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated
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maturity or final distribution date. Principal repayments on the Mortgage Assets
may cause CMOs to be retired substantially earlier than their stated maturities
or final distribution dates. Interest is paid or accrues on all classes of a CMO
(other than any PO class (defined below)) on a monthly, quarterly or semi-annual
basis. The principal and interest on the Mortgage Assets may be allocated among
the several classes of a CMO in many ways. In one structure, payments of
principal, including any principal prepayments, on the Mortgage Assets are
applied to the classes of a CMO in the order of their respective stated
maturities or final distribution dates so that no payment of principal will be
made on any class of the CMO until all other classes have an earlier stated
maturity or final distribution date that have been paid in full. In some CMO
structures, all or a portion of the interest attributable to one or more of the
CMO classes may be added to the principal amounts attributable to such classes,
rather than passed through to certificateholders on a current basis, until other
classes of the CMO are paid in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier.
ARM AND FLOATING RATE MORTGAGE-BACKED SECURITIES. ARM mortgage-backed
securities are mortgage-backed securities that represent a right to receive
interest payments at a rate that is adjusted to reflect the interest earned on a
pool of mortgage loans bearing variable or adjustable rates of interest (such
mortgage loans are referred to as "ARMs"). Floating rate mortgage-backed
securities are classes of mortgage-backed securities that have been structured
to represent the right to receive interest payments at rates that fluctuate in
accordance with an index but that generally are supported by pools comprised of
fixed-rate mortgage loans. Because the interest rates on ARM floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. See
"Investment Policies and Restrictions--ARM and Floating Rate Mortgage-Backed
Securities" in the SAI for further information on these securities.
TYPES OF CREDIT ENHANCEMENT. To lessen the effect of failures by obligors on
Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Credit enhancement generally falls into two
categories: (1) liquidity protection and (2) protection against losses resulting
after default by an obligor on the underlying assets and collection of all
amounts recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets (usually the bank, savings
association or mortgage banker that transferred the underlying loans to the
issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
after default and liquidation ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor, from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Portfolios will not
pay any additional fees for such credit enhancement, although the existence of
credit enhancement may increase the price of a security.
Examples of credit enhancement arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class
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securities with one or more classes subordinate to other classes as to the
payment of principal thereof and interest thereon, with the result that defaults
on the underlying assets are borne first by the holders of the subordinated
class), creation of "spread accounts" or "reserve funds" (where cash or
investments, sometimes funded from a portion of the payments on the underlying
assets, are held in reserve against future losses) and "over-collateralization"
(where the scheduled payments on, or the principal amount of, the underlying
assets exceed that required to make payment of the securities and pay any
servicing or other fees). The degree of credit enhancement provided for each
issue generally is based on historical information regarding the level of credit
risk associated with the underlying assets. Delinquency or loss in excess of
that anticipated could adversely affect the return on an investment in such a
security.
SPECIALLY STRUCTURED CMOS AND NEW TYPES OF MORTGAGE-BACKED SECURITIES. PACE
Government Securities Fixed Income Investments, PACE Intermediate Fixed Income
Investments and PACE Strategic Fixed Income Investments each may invest in
interest only ("IO"), principal only ("PO") and other specially structured CMO
classes. No Portfolio will invest more than 5% of its net assets in any
combination of IOs, POs and inverse floating rate securities including those
which are not mortgage- and asset-backed securities. See "Other Investment
Policies and Risk Factors--Risks of Mortgage- and Asset-Backed Securities."
New types of mortgage-backed securities are developed and marketed from time
to time and, consistent with their investment limitations, the Portfolios expect
to invest in those new types of mortgage-backed securities that the respective
Portfolio's Adviser believes may assist the Portfolio in achieving its
investment objective. Similarly, the Portfolios may invest in mortgage-backed
securities issued by new or existing governmental or private issuers other than
those identified above.
ASSET-BACKED SECURITIES
PACE Government Securities Fixed Income Investments, PACE Intermediate Fixed
Income Investments and PACE Strategic Fixed Income Investments may each invest
in asset-backed securities. Asset-backed securities have structural
characteristics similar to mortgage-backed securities. However, the underlying
assets are not first lien mortgage loans or interests therein, but include
assets such as motor vehicle installment loan contracts, home equity loans,
leases of various types of real and personal property and receivables from
revolving credit (credit card) agreements. Such assets are securitized through
the use of trusts or special purpose corporations. Payments or distributions of
principal and interest on asset-backed securities may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the issuer
or other credit enhancements may be present.
RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES
The yield characteristics of the mortgage-and asset-backed securities in
which PACE Government Securities Fixed Income Investments, PACE Intermediate
Fixed Income Investments and PACE Strategic Fixed Income Investments may invest
differ from those of traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently on mortgage-
and asset-backed securities (usually monthly) and that principal may be prepaid
at any time because the underlying mortgage loans or other assets generally may
be prepaid at any time. As a result, if a Portfolio purchases these securities
at a premium, a pre-
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payment rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Conversely, if a Portfolio purchases these
securities at a discount faster than expected, prepayments will increase, while
slower than expected prepayments will reduce, yield to maturity. Amounts
available for reinvestment by a Portfolio are likely to be greater during a
period of declining interest rates and, as a result, are likely to be reinvested
at lower interest rates than during a period of rising interest rates.
Accelerated prepayments on securities purchased by a Portfolio at a premium also
impose a risk of loss of principal, because the premium may not have been fully
amortized at the time the principal is prepaid in full. The market for privately
issued mortgage-and asset-backed securities is smaller and less liquid than the
market for U.S. government mortgage-backed securities.
CMO classes may be specially structured in a manner that provides any of a
wide variety of investment characteristics, such as yield, effective maturity
and interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market interest
rates, the attractiveness of the CMO classes and the ability of the structure to
provide the anticipated investment characteristics may be significantly reduced.
These changes can result in volatility in the market value, and in some
instances reduced liquidity, of the CMO class.
The rate of interest payable on CMO classes may be set at levels that are
either above or below market rates at the time of issuance, so that the
securities will be sold at a substantial premium to, or at a discount from, par
value. In the most extreme case, one class will be entitled to receive all or a
portion of the interest but none of the principal from the underlying mortgage
assets (the interest-only or "IO" class) and one class will be entitled to
receive all or a portion of the principal but none of the interest (the
principal-only or "PO" class). IOs and POs may also be created from
mortgage-backed securities that are not CMOs. The yields on IOs, POs and other
mortgage-backed securities that are purchased at a substantial premium or
discount generally are extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets. If the mortgage
assets underlying an IO experience greater than anticipated principal
prepayments, an investor may fail to recoup fully its initial investment even if
the security is government issued or guaranteed or is rated AAA or the
equivalent.
Some CMO classes are structured to pay interest at rates that are adjusted
in accordance with a formula, such as a multiple or fraction of the change in a
specified interest rate index, so as to pay at a rate that will be attractive in
certain interest rate environments but not in others. For example, an inverse
floating rate CMO class pays interest at a rate that increases as a specified
interest rate index decreases but decreases as that index increases. For other
CMO classes, the yield may move in the same direction as market interest
rates--i.e., the yield may increase as rates increase and decrease as rates
decrease--but may do so more rapidly or to a greater degree. The market value of
such securities generally is more volatile than that of a fixed rate obligation.
Such interest rate formulas may be combined with other CMO characteristics. For
example, a CMO class may be an "inverse IO," on which the holders are entitled
to receive no payments of principal and are entitled to receive interest at a
rate that will vary inversely with a specified index or a multiple thereof.
While the market values of particular securities in which a Portfolio
invests may be volatile, or may become volatile under certain conditions, its
Adviser will seek to manage the Portfolio so that the volatility of the
Portfolio, taken as a whole, is
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consistent with the Portfolio's investment objective. If the Adviser incorrectly
forecasts interest rate changes or other factors that may affect the volatility
of securities held by the Portfolio, the Portfolio's ability to meet its
investment objective may be reduced.
CONVERTIBLE SECURITIES
PACE Strategic Fixed Income Investments, PACE Large Company Value Equity
Investments, PACE Large Company Growth Equity Investments, PACE Small/Medium
Company Value Equity Investments, PACE Small/ Medium Company Growth Equity
Investments, PACE International Equity Investments and PACE International
Emerging Markets Equity Investments each may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or dividends paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock because they have fixed income characteristics,
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases. While no securities investment is without
some risk, investments in convertible securities generally entail less risk than
the issuer's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.
LOWER RATED CONVERTIBLE SECURITIES
PACE Large Company Value Equity Investments may invest up to 10% of its
total assets in convertible securities that are rated below investment grade but
no lower than B by S&P or Moody's or comparably rated by another NRSRO, or if
not rated by an NRSRO, determined by its Adviser to be of comparable quality.
Convertible securities rated below investment grade are commonly referred to as
"junk bonds" and are deemed by the NRSROs to be predominantly speculative and
may involve significant risk exposure to adverse conditions.
Lower rated convertible securities generally offer a higher current yield
than that available from higher grade issues, but they involve higher risks, in
that they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress, which
could adversely affect their ability to make payments of principal and interest
(or, in the case of convertible preferred stock, dividends) and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them, and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater, because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.
HEDGING AND RELATED INCOME STRATEGIES
Each Portfolio except PACE Money Market Investments, PACE Municipal Fixed
Income Investments, PACE Large Company Growth Equity Investments and PACE
Small/Medium Company Value Equity Investments may use
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options (both exchange-traded and OTC) and futures contracts to attempt to
enhance income and return and may attempt to reduce the overall risk of its
investments (hedge) by using options, options on futures contracts and futures
contracts. A Portfolio may use these instruments to enhance income or
return--for example, to change the Portfolio's exposure from one interest rate
to another or from one foreign currency to another. This can be seen as hedging
or speculation depending on the effect of the instrument, because the Portfolio
is using these instruments to change the underlying characteristic(s) of its
portfolio or of particular positions in the portfolio. These strategies may be
used by certain Portfolios in an attempt to manage their foreign currency
exposure, the average duration of PACE Government Securities Fixed Income
Investments, PACE Intermediate Fixed Income Investments, PACE Strategic Fixed
Income Investments and PACE Global Fixed Income Investments, and other risks of
a Portfolio's investments that can cause fluctuations in its net asset value.
Each Portfolio's ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations. The use of options and
futures solely to enhance income may be considered a form of speculation.
Appendix A to this Prospectus describes the hedging instruments that these
Portfolios may use, and the SAI contains further information on these
strategies.
PACE Strategic Fixed Income Investments, PACE Global Fixed Income
Investments, PACE International Equity Investments and PACE International
Emerging Markets Equity Investments may each enter into forward currency
contracts, buy or sell foreign currency futures contracts, write (sell) and
purchase call or put options on securities, currencies and securities indices,
buy or sell interest rate futures contracts and (except for PACE Strategic Fixed
Income Investments and PACE Global Fixed Income Investments) stock index futures
contracts and purchase put and call options or write call or put options on such
contracts for hedging and income and return enhancement purposes. Each Portfolio
(except PACE Money Market Investments, PACE Municipal Fixed Income Investments,
PACE Large Company Growth Equity Investments and PACE Small/Medium Company Value
Equity Investments) may enter into options and futures contracts that
approximate (but do not exceed) the full value of the Portfolio. Under normal
circumstances, however, a Portfolio's use of these instruments will place at
risk a much smaller portion of its assets.
PACE Strategic Fixed Income Investments, PACE Global Fixed Income
Investments, PACE International Equity Investments and PACE International
Emerging Market Equity Investments may enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date either
with respect to specific transactions or with respect to portfolio positions.
For example, when the Adviser anticipates making a currency exchange transaction
in connection with the purchase or sale of a security, a Portfolio may enter
into a forward contract in order to set the exchange rate at which the
transaction will be made. A Portfolio also may enter into a forward contract to
sell an amount of a foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such currency. Each Portfolio may use
forward contracts in one currency or a basket of currencies to hedge against
fluctuations in the value of another currency when the Adviser anticipates there
will be a correlation between the two and may use forward currency contracts to
shift a Portfolio's exposure to foreign currency fluctuations from one country
to another. The primary purpose of entering into these contracts is to minimize
the risk to the Portfolios from adverse changes in the relationship between the
U.S. dollar and foreign currencies.
PACE Government Securities Fixed Income Investments and PACE Strategic Fixed
Income
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Investments may enter into interest rate protection transactions, including
interest rate swaps and interest rate caps, collars and floors for hedging and
income and return enhancement purposes. For example, a Portfolio may enter into
interest rate protection transactions to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Portfolio anticipates purchasing at a
later date. A Portfolio will enter into interest rate protection transactions
only with banks and recognized securities dealers believed by its Adviser to
present minimal credit risks in accordance with guidelines established by the
Trust's board of trustees. A Portfolio may enter into interest rate protection
transactions that approximate (but do not exceed) the full value of the
Portfolio.
The Portfolios might not employ any of the strategies described above, and
there can be no assurance that any strategy used will succeed. If its Adviser
incorrectly forecasts interest rates, currency exchange rates, market values or
other economic factors in utilizing a strategy for a Portfolio, the Portfolio
might have been in a better position had it not hedged at all. The use of these
strategies involves certain special risks, including (1) the fact that skills
needed to use hedging instruments are different from those needed to select the
Portfolio's securities, (2) possible imperfect correlation, or even no
correlation, between price movements of hedging instruments and price movements
of the investments being hedged, (3) the fact that, while hedging strategies can
reduce the risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in hedged investments
and (4) the possible inability of a Portfolio to sell a portfolio security at a
disadvantageous time, due to the need for the Portfolio to maintain "cover" or
to segregate securities in connection with hedging transactions and the possible
inability of a Portfolio to close out or to liquidate its hedged position.
New financial products and risk management techniques continue to be
developed. Each Portfolio may use these instruments and techniques to the extent
consistent with its investment objectives and regulatory and federal tax
considerations.
FOREIGN SECURITIES
PACE Strategic Fixed Income Investments, PACE Global Fixed Income
Investments, PACE International Equity Investments and PACE International
Emerging Markets Equity Investments may each invest in foreign debt securities,
including securities of foreign corporations, obligations of foreign branches of
U.S. banks and securities issued by foreign governments. PACE Large Company
Value Equity Investments, PACE Large Company Growth Equity Investments and PACE
Small/Medium Company Growth Equity Investments each may invest up to 5% of its
total assets in foreign securities including ADRs. See "Investment Policies and
Restrictions--Special Characteristics of Foreign and Emerging Market Securities"
in the SAI.
Investments in foreign securities involve risks relating to political and
economic developments abroad, as well as those that result from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation, confiscatory taxation,
limitations on the use or transfer of Portfolio assets and political or social
instability or diplomatic developments. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Securities of many
foreign issuers may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. These risks are often heightened for
investments in emerging countries.
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In addition, substantial limitations may exist in certain countries with
respect to a Portfolio's ability to repatriate investment income, capital or the
proceeds of sales of securities by foreign investors. The Portfolio could be
adversely affected by delays in, or a refusal to grant, any required government
approval for repatriation of capital, as well as by the application to the
Portfolio of any restrictions on investments.
The securities markets of many of the emerging countries in which a
Portfolio may invest are substantially smaller, less developed, less liquid and
more volatile than the securities markets of the United States and other more
developed countries. Disclosure and regulatory standards in many respects are
less stringent than in the U.S. and other major markets. There also may be a
lower level of monitoring and regulation of emerging markets and the activities
of investors in such markets, and enforcement of existing regulations has been
extremely limited.
Many of the foreign securities held by a Portfolio will not be registered
with the SEC, nor will the issuers thereof be subject to SEC reporting
requirements. Accordingly, there may be less publicly available information
concerning foreign issuers of securities held by a Portfolio than is available
concerning U.S. companies. Foreign companies, and in particular, companies in
smaller and emerging countries are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory requirements
comparable to those applicable to U.S. companies. A Portfolio's net investment
income and/or capital gains from its foreign investment activities may be
subject to non-U.S. withholding taxes that, if not recoverable by a Portfolio,
may reduce the Portfolio's return.
Additionally, because foreign securities ordinarily will be denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect a Portfolio's net asset value, the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income to be distributed to shareholders by a Portfolio. If the value
of a foreign currency rises against the U.S. dollar, the value of Portfolio
assets denominated in such currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Portfolio
assets denominated in such currency will decrease. The exchange rates between
the U.S. dollar and other currencies can be volatile and are determined by
factors such as supply and demand in the currency exchange markets,
international balances of payments, government intervention, speculation and
other economic and political conditions. Any of these factors could affect a
Portfolio.
The costs attributable to foreign investing that a Portfolio must bear
frequently are higher than those attributable to domestic investing. For
example, the cost of maintaining custody of foreign securities exceeds custodian
costs for domestic securities, and transaction and settlement costs of foreign
investing also frequently are higher than those attributable to domestic
investing. Costs associated with the exchange of currencies also make foreign
investing more expensive than domestic investing. Investment income on certain
foreign securities in which a Portfolio may invest may be subject to foreign
withholding or other government taxes that could reduce the return of these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign tax to which a Portfolio
would be subject. Foreign markets have different clearance and settlement
procedures; and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a Portfolio are uninvested and no return is
earned thereon. The inability of a Portfolio to make intended security purchases
due to settlement problems could cause the Portfolio to
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miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to a Portfolio
due to subsequent declines in the value of such portfolio security or, if a
Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
In addition to purchasing securities of foreign issuers in foreign markets,
a Portfolio may invest in ADRs, European Depositary Receipts ("EDRs") or other
securities convertible into securities of companies based in foreign countries.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, traded in
registered form, are denominated in U.S. dollars and are designed for use in the
U.S. securities markets, and EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of a Portfolio's investment policies, ADRs and EDRs
are deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR evidencing ownership of common stock will be
treated as common stock.
FOREIGN GOVERNMENT SECURITIES
PACE Strategic Fixed Income Investments, PACE Global Fixed Income
Investments, PACE International Equity Investments and PACE International
Emerging Markets Equity Investments may each invest in foreign government
securities. The foreign government securities in which the Portfolios may invest
generally consist of obligations supported by national, state or provincial
governments or similar political subdivisions. Foreign government securities
also include Brady Bonds and debt obligations of supranational entities, which
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development, international
banking institutions and related government agencies. Examples include the World
Bank, the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. See "Investment Policies and
Restrictions--Brady Bonds" in the SAI for further discussion of risks involved
when investing in Brady Bonds.
Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). An example of a
multinational currency unit is the European Currency Unit ("ECU"). An ECU
represents specified amounts of the currencies of certain member states of the
European Community. Debt securities of quasi-governmental agencies are issued by
entities owned by either a national, state or equivalent government or are
obligations of a political unit that is not backed by the national government's
full faith and credit and general taxing powers. Foreign government securities
also include mortgage-related securities issued or guaranteed by national, state
or provincial governmental instrumentalities, including quasi-governmental
agencies.
Investments in foreign government debt securities involve special risks. The
issuer of the debt or the governmental authorities that control the repayment of
the debt may be unable or unwilling to pay interest or repay principal when due
in accordance with the terms of such debt, and the Portfolios may have limited
legal recourse in the event of default. Political conditions, especially a
sovereign entity's willingness to meet the terms of its debt obligations, are of
considerable significance.
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REPURCHASE AGREEMENTS
Each Portfolio may use repurchase agreements. Repurchase agreements are
transactions in which a Portfolio purchases securities from an approved bank or
securities dealer and simultaneously commits to resell the securities to the
bank or dealer at an agreed-upon date and price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
Repurchase agreements carry certain risks not associated with direct investments
in securities, including possible decline in the market value of the underlying
securities and delays and costs to each Portfolio if the other party to the
repurchase agreement becomes insolvent. Each Portfolio intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
its Adviser (or Mitchell Hutchins in the case of PACE Money Market Investments
or in the case of transactions pursuant to any joint repurchase agreement
arrangements) to present minimum credit risks in accordance with guidelines
established by the Trust's board of trustees.
DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS
PACE Government Securities Fixed Income Investments and PACE Strategic Fixed
Income Investments may enter into dollar rolls, in which a Portfolio sells
mortgage-backed or other securities for delivery in the current month and
simultaneously contracts to purchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-backed
securities, the mortgage-backed securities that are purchased will be of the
same type and will have the same interest rate as those sold, but will be
supported by different pools of mortgages. The Portfolio forgoes principal and
interest paid during the roll period on the securities sold, but the Portfolio
is compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the securities sold. The Portfolio also could be compensated through the
receipt of fee income equivalent to a lower forward price. At the time a
Portfolio enters into a dollar roll, the Trust's custodian will segregate cash
or liquid, high grade debt securities having a value not less than the forward
purchase price.
The Portfolios may also enter into reverse repurchase agreements in which
the Portfolio sells securities to a bank or dealer and agrees to repurchase them
at a mutually agreed date and price. The market value of securities sold under
reverse repurchase agreements typically is greater than the proceeds of the
sale, and, accordingly, the market value of the securities sold is likely to be
greater than the value of the securities in which the Portfolio invests those
proceeds. Thus, reverse repurchase agreements involve the risk that the buyer of
the securities sold by the Portfolio might be unable to deliver them when the
Portfolio seeks to repurchase. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, the
buyer or its trustee or receiver may receive an extension of time to determine
whether to enforce the Portfolio's obligation to repurchase the securities, and
the Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.
The dollar rolls and reverse repurchase agreements entered into by the
Portfolios normally will be arbitrage transactions in which a Portfolio will
maintain an offsetting position in securities or repurchase agreements that
mature on or before the settlement date on the related dollar roll or reverse
repurchase agreement. Since the Portfolio will receive interest on the
securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since these
securities or repurchase agreements will mature on or
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before the settlement date of the related dollar roll or reverse repurchase
agreement, the Advisers believe that these arbitrage transactions do not present
the risks to the Portfolio that are associated with other types of leverage.
Dollar rolls and reverse repurchase agreements will be considered to be
borrowings and, accordingly, will be subject to the respective Portfolios'
limitations on borrowings, which will restrict the aggregate of such
transactions (plus any other borrowings) to 33 1/3% of a Portfolio's total
assets. A Portfolio will not enter into dollar rolls or reverse repurchase
agreements other than in arbitrage transactions as described above, in an
aggregate amount in excess of 5% of the Portfolio's total assets. Neither
Portfolio currently intends to enter into dollar rolls other than in such
arbitrage transactions, and neither Portfolio currently intends to enter into
reverse repurchase agreements other than in such arbitrage transactions or for
temporary or emergency purchases. See "Investment Policies and Restrictions--
Reverse Repurchase Agreements" in the SAI.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS
Floating rate and variable rate obligations bear interest at rates that are
not fixed, but that vary with changes in specified market rates or indices.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation or capital depreciation is less than for fixed rate obligations.
Floating rate or variable rate obligations typically permit the holder to demand
payment of principal from the issuer or remarketing agent at par value prior to
maturity and may permit the issuer to prepay principal, plus accrued interest,
at its discretion after a specified notice period. Frequently, floating rate or
variable rate obligations and/or the demand features thereon are secured by
letters of credit or other credit support arrangements provided by banks, the
credit standing of which affects the credit quality of the obligations.
ILLIQUID SECURITIES
PACE Global Fixed Income Investments, PACE Small/Medium Company Value Equity
Investments, PACE International Equity Invest-
ments and PACE International Emerging Markets Equity Investments may each invest
up to 15% of its net assets in illiquid securities; PACE Money Market
Investments, PACE Government Securities Fixed Income Investments, PACE
Intermediate Fixed Income Investments, PACE Strategic Fixed Income Investments,
PACE Municipal Fixed Income Investments, PACE Large Company Value Equity
Investments, PACE Large Company Growth Equity Investments and PACE Small/Medium
Company Growth Equity Investments may each invest up to 10% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the price at which a Portfolio has valued the
securities. Under current guidelines of the staff of the SEC, IOs and POs are
considered illiquid. However, IO and PO classes of fixed-rate mortgage-backed
securities issued by the U.S. government or one of its agencies or instrumen-
talities will not be considered illiquid if the Portfolio's Adviser has
determined that they are liquid pursuant to guidelines established by the
Trust's board of trustees. Illiquid securities also are considered to include,
among other things, certain cover for OTC options, repurchase agreements in
excess of seven days, non-marketable interest bearing time deposits with
maturities in excess of seven days and securities whose disposition is
restricted under the federal securities laws (other than "Rule 144A securities"
that the Portfolio's Adviser has determined to be liquid under procedures
approved by the Trust's board of trustees). Rule 144A establishes a "safe
harbor" from the
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registration requirements of the Securities Act of 1933 ("1933 Act").
Institutional markets for restricted securities have developed as a result of
Rule 144A, providing both readily ascertainable values for restricted securities
and the ability to liquidate an investment to satisfy share redemption orders.
An insufficient number of qualified institutional buyers interested in
purchasing Rule 144A eligible restricted securities held by a Portfolio,
however, could affect adversely the marketability of such portfolio securities,
and the Portfolio might be unable to dispose of such securities promptly or at
favorable prices. See "Investment Policies and Restrictions--Illiquid
Securities" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Portfolio may purchase debt securities, including mortgage- and
asset-backed securities, on a "when-issued" basis or may purchase or sell
securities on a "delayed delivery" basis, i.e., for issuance or delivery to the
Portfolio later than the normal settlement date for such securities at a stated
price and yield. The Portfolio generally would not pay for such securities or
start earning interest on them until they are received. However, when a
Portfolio undertakes a when-issued or delayed delivery purchase commitment, it
immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure of a counter party to deliver a security purchased by a
Portfolio on a when-issued or delayed delivery basis may result in the
Portfolio's incurring a loss or missing an opportunity to make an alternative
investment. Depending on market conditions, a Portfolio's when-issued and
delayed delivery purchase commitments could cause its net asset value per share
to be more volatile, because these securities may increase the amount by which
the Portfolio's total assets, including the value of when-issued and delayed
delivery securities held by the Portfolio, exceeds its net assets. See
"Investment Policies and Restrictions--When-Issued and Delayed Delivery
Securities" in the SAI.
ZERO COUPON SECURITIES
PACE Government Securities Fixed Income Investments, PACE Intermediate Fixed
Income Investments, PACE Strategic Fixed Income Investments and PACE Global
Fixed Income Investments may invest in certain zero coupon securities that are
"stripped" U.S. Treasury notes and bonds. PACE Strategic Fixed Income
Investments also may invest in zero coupon securities of corporate issuers and
other securities that are issued with original issue discount ("OID") and
payment-in-kind ("PIK") securities. Federal tax law requires that a holder of a
security with OID accrue a portion of the OID as income each year, even though
the holder may receive no interest payment on the security during the year.
Accordingly, although the investing Portfolio will receive no payments on its
zero coupon securities prior to their maturity or disposition, it will have
income attributable to such securities prior to that time. Similarly, while PIK
securities may pay interest in the form of additional securities rather than
cash, that interest must be included in the annual income of PACE Strategic
Fixed Income Investments.
Companies such as the Portfolios, which seek to qualify for pass-through
federal income tax treatment as regulated investment companies (each, a "RIC"),
must distribute substantially all of their net investment income each year,
including non-cash income. Accordingly, each Portfolio will be required to
include in its dividends an amount equal to the income attributable to its zero
coupon, other OID and PIK securities. Those dividends will be paid from the cash
assets of a Portfolio or by liquidation of portfolio securities, if necessary,
at a time when the Portfolio otherwise might not have done so. Zero coupon and
PIK securities usually trade at a substantial dis-
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count from their face or par value and will be subject to greater fluctuations
of market value in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest in cash. See
"Taxes" in the SAI.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio is authorized to lend up to 33 1/3% of the total value of its
portfolio securities to broker-dealers or institutional investors that its
Adviser or the Manager deems qualified. Lending securities enables a Portfolio
to earn additional income, but could result in a loss or delay in recovering the
Portfolio's securities. The borrower must maintain with the Portfolio's
custodian collateral either in cash or money market instruments in an amount at
least equal to the market value of the securities loaned, plus accrued interest
and dividends, determined on a daily basis and adjusted accordingly. In
determining whether to lend securities to a particular broker-dealer or
institutional investor, the Adviser will consider, and during the period of the
loan will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. Each Portfolio will retain authority to
terminate any loans at any time. A Portfolio may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion of
the interest earned on the cash or money market instruments held as collateral
to the borrower or placing broker. A Portfolio will receive reasonable interest
on the loan or a flat fee from the borrower and amounts equivalent to any
dividends, interest or other distributions on the securities loaned. A Portfolio
will retain record ownership of loaned securities to exercise beneficial rights,
such as voting and subscription rights and rights to dividends, interest or
other distributions, when retaining such rights is considered to be in the
Portfolio's interest.
DERIVATIVES. Certain Portfolios may invest in instruments or securities that
commonly are referred to as "derivatives," because their value depends on (or
"derives" from) the value of an underlying asset, reference rate or index.
Derivative instruments include options, futures contracts, interest rate
protection contracts and similar instruments that may be used by certain
Portfolios in hedging and related income strategies. There is only limited
consensus as to what constitutes a "derivative" security. However, in the
Manager's view, the derivative securities in which one or more of the
Portfolios may invest include listed options and futures on market
indices, interest rates and foreign currencies, "stripped" securities, such
as CATS and TIGRs, and specially structured types of mortgage- and asset-backed
securities, such as IOs, POs and inverse floaters, and dollar-denominated
securities whose value is linked to foreign currencies. The market value of
derivative instruments and securities sometimes is more volatile than that of
other investments, and each type of derivative instrument may pose its own
special risks. An Adviser takes these risks into account in its management of
the Portfolio.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Portfolios may exceed 100%,
although the rate is not expected to exceed 200%. A high portfolio turnover rate
(i.e., 100% or more), may involve correspondingly greater brokerage commissions
and other transaction costs, which will be borne directly by each Portfolio. See
"Portfolio Transactions" in the SAI. In addition, high portfolio turnover may
result in increased short-term capital gains, which when distributed to
shareholders, are treated as ordinary income. See "Dividends and Taxes." PACE
Money Market Investments' portfolio turnover is expected to be zero for
regulatory reporting purposes.
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TEMPORARY DEFENSIVE INVESTMENTS
When an Adviser believes unusual circumstances warrant a defensive posture,
and with the concurrence of the Manager, each Portfolio temporarily may commit
all or any portion of its assets to cash (U.S. dollars or foreign currencies) or
money market instruments of U.S. or foreign issuers, including repurchase
agreements.
PACE Municipal Fixed Income Investments may invest temporarily without limit
in certain taxable securities for defensive purposes. PACE Global Fixed Income
Investments may invest temporarily in securities of only one country, including
the United States, for such purposes. PACE International Equity Investments also
may invest temporarily up to 100% of its assets in domestic debt, foreign debt
principally traded in the United States and in foreign securities principally
traded outside of the United States, obligations issued or guaranteed by the
U.S. or a foreign government or their respective agencies, authorities or
instrumentalities, corporate bonds and sponsored ADRs for such purposes.
OTHER INVESTMENT POLICIES
The Portfolios (except PACE Money Market Investments and PACE Municipal
Fixed Income Investments) also may engage in short sales of securities "against
the box" to defer realization of gains and losses for tax or other purposes.
Each Portfolio may borrow money for temporary or emergency purchases, but not
in excess of 10% of its total assets; however, no Portfolio will purchase
securities when its borrowings exceed 5% of its total assets.
New types of mortgage- and asset-backed securities, derivative securities,
hedging instruments and risk management techniques are developed and marketed
from time to time. Each Portfolio may invest in these securities and
instruments and use these techniques to the extent consistent with its
investment objective and limitations and with disclosure, regulatory and tax
considerations.
NON-DIVERSIFICATION
PACE Intermediate Fixed Income Investments and PACE Global Fixed Income
Investments are "non-diversified," as that term is defined in the 1940 Act, but
each intends to qualify as a RIC for federal income tax purposes. See "Dividends
and Taxes." This means, in general, that more than 5% of each Portfolio's total
assets may be invested in securities of one issuer (including a foreign
government), but only if, at the close of each quarter of its taxable year, the
aggregate amount of such holdings does not exceed 50% of the value of its total
assets and no more than 25% of the value of its total assets is invested in the
securities of a single issuer. To the extent that either Portfolio at times may
include the securities of a smaller number of issuers than if it were
"diversified" (as defined in the 1940 Act), the Portfolio will be subject to
greater risk with respect to its portfolio securities than if it had invested in
a broader range of securities, because changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the
Portfolio's total return and the price of Portfolio shares.
MANAGEMENT
The overall management of the business and affairs of the Trust and the
Portfolios rests with the Trust's board of trustees. The trustees approve all
significant agreements between the Trust and the persons that furnish services
to the Trust and the Portfolios, including the agreements with the Manager, the
Advisers, the Trust's distributor, custodian and transfer agent. As the Trust's
Manager, Mitchell Hutchins is responsible for the day-to-day business operations
of the Trust.
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MANAGER
Mitchell Hutchins Asset Management Inc., 1285 Avenue of the Americas, New
York, New York 10019, is the Manager of the Trust. Mitchell Hutchins is a wholly
owned subsidiary of PaineWebber, which is a wholly owned subsidiary of Paine
Webber Group Inc. ("PW Group"), a publicly held financial services holding
company. Mitchell Hutchins provides investment advisory and portfolio management
services to investment companies, pension funds and other institutional,
corporate and individual clients. As of September 30, 1995, total assets under
Mitchell Hutchins' management were approximately $44.7 billion. As of that
date, Mitchell Hutchins served as investment adviser or sub-adviser to 38
registered investment companies with 81 separate portfolios having aggregate
assets of approximately $28.8 billion. See "Management--Advisers--PACE Money
Market Investments."
Pursuant to an Investment Management and Administration Agreement with the
Trust ("Management Agreement"), Mitchell Hutchins manages the investment
operations of the Trust, administers the Trust's affairs, provides investment
advisory services for PACE Money Market Investments and is responsible for the
selection, subject to review and approval of the trustees, of Advisers for each
of the Portfolios (other than PACE Money Market Investments) and the review of
the Advisers' continued performance. See "Manager" in the SAI.
Pursuant to a separate Sub-Advisory Agreement (the "Advisory Agreement")
between Mitchell Hutchins and each Adviser, the Advisers furnish investment
advisory services in connection with the investment management of the respective
Portfolios other than PACE Money Market Investments. Each Adviser is paid a fee
for its services by the Manager out of the fee it collects from the applicable
Portfolio. No additional fee is paid by the investor.
Subject to the supervision and direction of the trustees, the Manager
provides to the Trust investment management evaluation services principally by
(1) performing initial review of prospective Advisers for each Portfolio other
than PACE Money Market Investments and (2) monitoring Adviser performance. In
evaluating prospective Advisers, the Manager considers, among other factors,
each Adviser's level of expertise, relative performance, consistency of
performance and investment discipline or philosophy. The Manager is responsible
for communicating performance expectations and evaluations to the Advisers and
for ultimately recommending to the trustees whether Advisers' contracts should
be renewed, modified or terminated. The Manager reports to the trustees
regarding the results of its evaluation and monitoring functions. For PACE Money
Market Investments, the Manager is responsible for furnishing investment
advisory services to the Portfolio, subject to the supervision of the trustees.
The Manager is also responsible for conducting the general operation of the
Trust except those functions performed by the Advisers, custodian and transfer
agent. Pursuant to the Management Agreement, each Portfolio pays the Manager a
fee comprised of two components: one, for administrative services provided to
each Portfolio, computed daily and paid monthly at the annual rate of 0.20% of
each Portfolio's average daily net assets; and the other, for investment
management services provided to each Portfolio, computed daily and paid monthly
at the annual rate specified below based on the value of the Portfolio's average
daily net assets. The Manager pays each Adviser, out of the investment
management services fee it receives from the applicable Portfolio, a fee that is
computed daily and paid monthly at the annual rate specified below based on the
value of the Portfolio's average daily net assets:
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<TABLE>
<CAPTION>
FEE RATE PAID FEE RATE PAID BY
BY PORTFOLIO THE MANAGER TO
PORTFOLIO TO THE MANAGER THE ADVISER
--------- -------------- ----------------
<S> <C> <C>
(AS A % OF (AS A % OF
AVERAGE NET AVERAGE NET
ASSETS) ASSETS)
PACE Money Market Investments........................... 0.15% N/A
PACE Government Securities Fixed Income Investments..... 0.50% 0.25%
PACE Intermediate Fixed Income Investments.............. 0.40% 0.20%
PACE Strategic Fixed Income Investments................. 0.50% 0.25%
PACE Municipal Fixed Income Investments................. 0.40% 0.20%
PACE Global Fixed Income Investments.................... 0.60% 0.35%
PACE Large Company Value Equity Investments............. 0.60% 0.30%
PACE Large Company Growth Equity Investments............ 0.60% 0.30%
PACE Small/Medium Company Value Equity Investments...... 0.60% 0.30%
PACE Small/Medium Company Growth Equity Investments..... 0.60% 0.30%
PACE International Equity Investments................... 0.70% 0.40%
PACE International Emerging Markets Equity Investments.. 0.90% 0.50%
</TABLE>
Investors should be aware that the Manager may be subject to a conflict of
interest when making decisions regarding the retention and compensation of
particular Advisers. However, the Manager's compensation and the Manager's
decisions, including the identity of an Adviser and the specific amount of the
Manager's compensation to be paid to the Adviser, are subject to review and
approval by the board of trustees and separately by the trustees who are not
affiliated with the Manager, any of the Advisers or any of their affiliates. In
addition, the Manager is subject to certain standards of fiduciary duty required
by law.
ADVISERS
The Advisers have agreed to the foregoing fees, which are generally lower
than the fees they charge to institutional accounts for which they serve as
investment adviser, partially in recognition of the reduced administrative and
other responsibilities they have undertaken with respect to the Portfolios.
Subject to the monitoring of the Manager and, ultimately, the supervision and
control of the trustees, each Adviser's responsibilities are focused on making
investment decisions for the Portfolio and placing orders to purchase and sell
securities on behalf of the Portfolio in accordance with the Portfolio's stated
investment objective and policies. The Advisers are paid their fees for
management of the Portfolios by Mitchell Hutchins, not the Trust.
The Trust has received an exemptive order from the SEC that permits the
Trust's board of trustees, without the approval of shareholders: (a) to employ a
new Adviser pursuant to the terms of a new Advisory Agreement, either as a
replacement for an existing Adviser or as an additional Adviser; (b) to change
the terms of an Advisory Agreement; and (c) to continue the employment of an
existing Adviser on the same advisory contract terms where a contract has been
assigned because of a change in control of the Adviser. Shareholders would
receive notice of such action, including the information concerning the Adviser
that normally is provided in the Prospectus.
The following sets forth certain information about each of the Advisers:
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PACE MONEY MARKET INVESTMENTS
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019. It is a wholly owned subsidiary of PaineWebber, which is in turn
wholly owned by PW Group, a publicly owned financial services holding company.
As of September 30, 1995, Mitchell Hutchins was adviser or subadviser of 38
investment companies with 81 separate portfolios and aggregate assets of
approximately $28.8 billion, of which approximately $17.1 billion consisted of
assets in money market funds. Susan Messina, a senior vice president of Mitchell
Hutchins is primarily responsible for the day-to-day management of PACE Money
Market Investments. Since 1987, Ms. Messina has been a portfolio manager at
Mitchell Hutchins for taxable money market funds. See "Management--Manager."
PACE GOVERNMENT SECURITIES FIXED INCOME
INVESTMENTS AND PACE STRATEGIC FIXED
INCOME INVESTMENTS
Pacific Investment Management Company ("PIMCO") is located at 840 Newport
Center Drive, Suite 360, Newport Beach, California 92660. It is a subsidiary
partnership of PIMCO Advisors L.P. ("PIMCO Advisors"), a publicly held
investment advisory firm. A majority interest in PIMCO Advisors is held by PIMCO
Partners, G.P. ("PIMCO Partners"), a general partnership between Pacific
Financial Asset Management Corporation, an indirect wholly owned subsidiary of
Pacific Mutual Life Insurance Company ("Pacific Mutual"), and PIMCO Partners,
L.P., a limited partnership controlled by the PIMCO Managing Directors. As of
September 30, 1995, PIMCO had over $75 billion in assets under management and
was adviser or subadviser of 11 investment companies with 38 portfolios and
aggregate assets of approximately $19 billion. It has become, since its founding
in 1971, one of the largest fixed income management firms in the nation. William
C. Powers, a PIMCO Managing Director, is primarily responsible for the day-to-
day management of PACE Government Securities Fixed Income Investments. Since
1991, Mr. Powers has been associated with PIMCO as a senior member of the fixed
income portfolio management group. He was previously associated with Bear
Stearns & Co. as Senior Managing Director specializing in mortgage-backed
securities. Frank B. Rabinovitch, a PIMCO Managing Director, is primarily
responsible for the day-to-day management of PACE Strategic Fixed Income
Investments. Mr. Rabinovitch has been associated with PIMCO for eleven years as
a senior member of the fixed income portfolio management group.
PACE INTERMEDIATE FIXED INCOME INVESTMENTS
Pacific Income Advisers, Inc. ("PIA") is located at 1299 Ocean Avenue, Suite
210, Santa Monica, California 90401. Lloyd McAdams and Heather U. Baines, who
serve as Chairman and Chief Investment Officer of PIA and President and Chief
Executive Officer, respectively, own PIA's voting securities, which makes each
of them controlling persons of PIA. As of September 30, 1995, PIA had over $2
billion in assets under management. Mr. McAdams is primarily responsible for the
day-to-day management of PACE Intermediate Fixed Income Investments. Since 1986,
he has served as Chairman and Chief Investment Officer of PIA and Chairman and
Chief Executive Officer of Syndicated Capital, Inc.
PACE MUNICIPAL FIXED INCOME INVESTMENTS
Morgan Grenfell Capital Management, Incorporated ("MGCM") is located at 1435
Walnut Street, Philadelphia, Pennsylvania 19102. All of the outstanding voting
stock of MGCM is owned by Morgan Grenfell Asset Management, Ltd., which is a
wholly owned subsidiary of Morgan Grenfell Group plc. Morgan Grenfell Group
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plc is an indirect wholly owned subsidiary of Deutsche Bank AG, an international
commercial and investment banking group. As of September 30, 1995, MGCM had over
$7.5 billion in assets under management. It has been active in managing
portfolios of securities at MGCM since 1989 and over 20 years experience in the
management of tax-exempt fixed income investment. David W. Baldt is primarily
responsible for the day-to-day management of PACE Municipal Fixed Income
Investments. Since June 1989, Mr. Baldt has been Executive Vice President and
Chief Investment Officer for fixed income at MGCM.
PACE GLOBAL FIXED INCOME INVESTMENTS
Rogge Global Partners plc ("Rogge Global") is located at 5-6 St. Andrew's
Hill, London, England EC4V 5BY. Olaf Rogge owns in excess of 85% of the voting
securities of Rogge Global, which makes him a controlling person of Rogge
Global. As of September 30, 1995, Rogge Global had over $3 billion in assets
under management. It was organized in 1984 and specializes in global fixed
income management. Olaf Rogge, John Graham and Richard Bell are primarily
responsible for the day-to-day management of PACE Global Fixed Income
Investments. Mr. Rogge, who founded Rogge Global in 1984, has been managing
global investments for approximately twenty-three years. Mr. Graham joined Rogge
Global in February 1994 and is currently a Director, Portfolio Manager and
Analyst. Prior thereto, he served as a Senior Manager of the Multi-Currency
Fixed Income Investment Team at JP Morgan. Mr. Bell joined Rogge Global in June
1990 and serves as a Director, Portfolio Manager and Analyst.
PACE LARGE COMPANY VALUE EQUITY
INVESTMENTS
Brinson Partners, Inc. ("Brinson Partners") is located at 209 South LaSalle
Street, Chicago, Illinois 60604. Gary P. Brinson is President and Managing
Partner of Brinson Partners. Brinson Partners is an indirect subsidiary wholly
owned by Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in
Basel, Switzerland, is an internationally diversified organization with
operations in many aspects of the financial services industry. As of September
30, 1995, Brinson Partners had $50 billion in assets under management. It and
its predecessor entities have managed domestic and international investment
assets since December 31, 1981. Mr. Jeffrey J. Diermeier, Managing Partner of
U.S. Equities, Mr. Robert C. Moore, Partner and Director of Equity Research, Mr.
John C. Leonard, Partner and Equity Portfolio Strategy Analyst, and Ms. Lydia J.
Miller, Partner and Equity Portfolio Strategy Analyst are the team responsible
for the day-to-day management of PACE Large Company Value Equity Investments.
Mr. Diermeier was formerly Managing Director of Asset Allocation. In addition,
Mr. Diermeier and Mr. Moore have been working together for over 20 years and
both played a key role in the research, design and implementation of Brinson
Partners' proprietary equity valuation model. Prior to joining Brinson Partners
in 1991, Mr. Leonard worked as a Financial Advisor with Sheffield Financial
Management for 4 years. Ms. Miller, who joined Brinson Partners in 1995,
formerly served as Director of Equities and Portfolio Manager at SBC Portfolio
Management International, Inc. for over four years and as a mutual fund
Portfolio Manager at Value Line Asset Management for over three years.
PACE LARGE COMPANY GROWTH EQUITY
INVESTMENTS
Chancellor Capital Management, Inc. ("Chancellor") is located at 1166 Avenue
of the Americas, New York, New York 10036. Chancellor Partners, L.P.
("Chancellor Partners"), of which Chancellor Partners, Inc. ("Chancellor PI") is
the General Partner, is the beneficial owner of at least 51% of Chancellor's
common stock on a fully diluted and converted basis, while
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USF&G Investment Management Group, Inc. ("USF&G") is the beneficial owner of
100% of Chancellor's convertible preferred stock which is convertible into and
up to 49% of Chancellor's common stock. Chancellor Partners is a limited
partnership controlled by Chancellor employees to hold their investment in
Chancellor. Robert G. Wade, Jr., who is Chairman of Chancellor's Board of
Directors, is the sole shareholder of Chancellor PI. Accordingly, Mr. Wade,
Chancellor Partners and USF&G are controlling persons of Chancellor. USF&G is a
wholly owned subsidiary of United States Fidelity and Guarantee Company, which
is in turn wholly owned by USF&G Corporation. USF&G is a publicly-held company
with interests in, among other things, the insurance industry. As of September
30, 1995, Chancellor and its subsidiaries had over $30 billion in assets under
management. It is one of the largest employee-owned investment management firms
in the nation. Patricia W. Chadwick and Catherine Dudley are primarily
responsible for the day-to-day management of PACE arge Company Growth Equity
Investments. Ms. Chadwick has been a managing director of Chancellor since 1987
and a senior portfolio manager for growth equity and balanced accounts at
Chancellor since 1982. In addition, Ms. Chadwick is Chancellor's chief
investment strategist and head of its Equity Strategy Committee. Ms. Chadwick
has been with Chancellor and its predecessor, Citicorp Investment Management,
Inc., since 1980. Ms. Dudley joined Chancellor in 1995 as a vice president and
senior growth equity portfolio manager. Prior to joining Chancellor, Ms. Dudley
worked at Phoenix Investments since 1985, where she was appointed as equity
portfolio manager in 1989.
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
Brandywine Asset Management, Inc. ("Brandywine") is located at Three
Christina Centre, Suite 1200, 201 N. Walnut Street, Wilmington, Delaware 19801.
William Anthony Hitschler owns 32.5% of Brandywine's voting securities, which
makes him a controlling person of Brandywine. Mr. Hitschler is the President and
Chief Executive Officer of Brandywine. As of September 30, 1995, Brandywine had
approximately $3.6 billion in assets under management. It uses a value-oriented
approach when investing in both domestic and international markets. Henry Otto,
a Managing Director of Brandywine, Michael Jamison, a Managing Director of
Brandywine, and Steven Tonkovich, a Vice President of Brandywine, are primarily
responsible for the day-to-day management of PACE Small/Medium Company Value
Equity Investments. Mr. Otto is the primary portfolio manager for Brandywine's
small capitalization portfolios and has assisted in designing quantitative
evaluation tools at Brandywine since 1987. Mr. Jamison is Chief Investment
Officer of Brandywine's individual management program, responsible for managing
both equity and balanced portfolios at Brandywine since 1993. From 1988 to 1993,
Mr. Jamison was a managing director of Mitchell Hutchins Asset Management Inc.
Mr. Tonkovich is assistant portfolio manager for Brandywine's low
price/earnings, small capitalization portfolios and is also responsible for
the ongoing development of quantitative tools for value investing since 1989.
PACE SMALL/MEDIUM COMPANY GROWTH
EQUITY INVESTMENTS
Westfield Capital Management Company, Inc. ("Westfield Capital") is located
at One Financial Center, Boston, Massachusetts 02111. Charles Michael Hazard,
who serves as President and Chief Investment Officer of Westfield Capital, owns
54.67% of its voting securities, which makes him a controlling person of
Westfield Capital. As of September 30, 1995, Westfield Capital had over $850
million in assets under management. It has developed an expertise in growth
oriented portfolios since its founding in Boston, Massachusetts in 1989. Michael
J. Chapman is primarily responsible for the day-to-day management of PACE
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Small/Medium Company Growth Equity Investments. Since 1990, Mr. Chapman has
served as Executive Vice President, Director of Research and Portfolio Manager
of Westfield Capital.
PACE INTERNATIONAL EQUITY INVESTMENTS
Martin Currie Inc. ("Martin Currie") is located at Saltire Court, 20 Castle
Terrace, Edinburgh, Scotland EHI 2ES. It is a wholly owned subsidiary of Martin
Currie Limited. As of September 30, 1995, Martin Currie had over $6.2 billion
in assets under management. It is one of Scotland's leading independent
investment management companies, and, since its founding in 1881, has developed
an expertise in equity investments. Martin Currie uses a team approach in the
management of PACE International Equity Investments. See "Investment Objectives
and Policies of the Portfolios--PACE International Equity Investments" for a
description of the Adviser's team approach.
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
Schroder Capital Management International Inc. ("SCMI") is located at 787
Seventh Avenue, New York, New York 10019. It is a wholly owned U.S. subsidiary
of Schroders Incorporated, the wholly owned U.S. holding company subsidiary of
Schroders plc. Schroders plc, which is listed on the London Stock Exchange, is
the holding parent of a large worldwide group of banks and financial services
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in seventeen countries worldwide. The
financial services companies of the Schroder Group had approximately $100
billion in assets under management as of September 30, 1995. As of September 30,
1995, SCMI, together with its UK affiliate Schroder Capital Management
International Limited, had over $15 billion in assets under management. Since
its founding in 1980, SCMI has developed an expertise in emerging markets
investments. Laura E. Luckyn-Malone, John A. Troiano and Thomas Melendez, with
the assistance of an emerging markets investment committee, are primarily
responsible for the day-to-day management of PACE International Emerging Markets
Equity Investments. Ms. Luckyn-Malone has been a Managing Director of SCMI since
November 1995, prior to which she was a Senior Vice President and Director of
SCMI since February 1990. Mr. Troiano has been a Managing Director of SCMI
since November 1995, and has been employed by various Schroder Group companies
in the portfolio management area since 1988. Mr. Melendez has been with SCMI
since 1994. Prior to joining the Schroder Group he was a vice president for
Latin America with NatWest Securities since 1992, prior to which he attended
Columbia Business School.
FEE WAIVERS AND SUBSIDIES
Mitchell Hutchins has agreed to waive all or a portion of its management fee
and/or to subsidize certain operating expenses of the Portfolios during the
first fiscal year of the Trust to the extent necessary to assure
competitiveness. See "Trust Expenses." Fee waivers and/or expense subsidies will
increase a Portfolio's yield or total return. See "Performance Information." Fee
waivers and expense subsidies are not guaranteed to continue in future years.
DISTRIBUTOR
Mitchell Hutchins is the distributor of each Portfolio's shares. PaineWebber
is the exclusive dealer pursuant to a contract with Mitchell Hutchins.
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PORTFOLIO TRANSACTIONS
PaineWebber, and any of the Advisers or an affiliated person thereof (an
"affiliated broker"), each may act as a broker or futures commission merchant
("FCM") for a Portfolio. In order for an affiliated broker to effect any
portfolio transactions for a Portfolio on an exchange or board of trade, the
commissions, fees or other remuneration received by the affiliated broker must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers or FCMs in connection with comparable transactions
involving similar securities being purchased or sold on an exchange or board of
trade during a comparable period of time. This standard would allow an
affiliated broker to receive only that remuneration which would be expected to
be received by an unaffiliated broker or FCM in a similar arm's-length
transaction.
VALUATION OF SHARES
The net asset value of each Portfolio's shares fluctuates and is determined
as of the close of regular trading on the NYSE (currently 4:00 p.m., eastern
time) each Business Day. Each Portfolio's net asset value per share is
determined by dividing the value of the securities held by the Portfolio plus
any cash or other assets minus all liabilities by the total number of Portfolio
shares outstanding.
Each Portfolio values its assets based on their current market value when
market quotations are readily available. If this value cannot be established,
assets are valued at fair value as determined in good faith by or under the
direction of the Trust's board of trustees. The amortized cost method of
valuation is used to value all portfolio securities held by PACE Money Market
Investments and short-term dollar-denominated debt obligations of the other
Portfolios with 60 days or less remaining to maturity, unless the board of
trustees determines that this does not represent fair value. All investments
denominated in foreign currencies are valued daily in U.S. dollars based on the
then-prevailing exchange rate. It should be recognized that judgment plays a
greater role in valuing lower rated debt securities and restricted or illiquid
securities held by any of the Portfolios because there is less reliable,
objective data available.
PURCHASES
GENERAL
Purchases of shares of a Portfolio by a PACE Program participant must be
made through a securities account maintained with PaineWebber. Payment for
Portfolio shares must be made by check made payable to PaineWebber. No brokerage
account or inactivity fee is charged in connection with a brokerage account
through which an investor purchases shares of a Portfolio.
THE PACE PROGRAM. Shares of the Portfolios currently are available only to
participants in the PACE Program. The PACE Program and the Trust are designed to
assist investors in devising an asset allocation strategy to meet their
individual needs. PaineWebber, through the PACE Program, provides investment
advisory services in connection with allocations of assets among the Portfolios
principally by: identifying the investor's risk tolerances and investment
objectives based on information provided by the investor; identifying and
recommending in writing a suggested allocation of assets among the Portfolios
that conforms to those tolerances and objectives; providing a monthly account
statement; and pro-viding performance data on a quarterly basis. PaineWebber
will not have any investment discretion over the investor's PACE Program
account; all investment decisions ultimately rest with the investor.
Under the PACE Program, PaineWebber investment executives provide services
to the investor that include assisting the investor to iden-
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tify his or her financial characteristics, including risk tolerances and
investment objectives in the context of the Portfolios, and assisting the
investor to complete an Investor Profile Questionnaire, that can be updated
periodically upon the investor's request. PaineWebber uses an investment profile
evaluation and asset allocation methodology to assist it in translating investor
needs, preferences and attitudes identified from the questionnaire into
suggested portfolio allocations. A PaineWebber investment executive presents the
recommended allocation to the investor initially and may also review later with
the investor monthly account statements and other information such as the
performance data provided on a quarterly basis, monitor identified changes in
the investor's financial characteristics and assist the investor in preparing a
revised questionnaire or otherwise communicating changes to PaineWebber for
reevaluation. In addition, for any investor who so directs his or her
PaineWebber investment executive, the investor's holdings in the PACE Program
will be automatically rebalanced on a periodic basis to maintain the investor's
designated allocation among the Portfolios. Screening will be performed
quarterly with respect to accounts for which the investor has elected the
rebalancing service, and rebalancing will be performed for each such account
where the deviation from the allocation prescribed by the investor exceeds the
uniform threshold. Also, the PACE Program participant and his/her PaineWebber
investment executive will discuss the participant's investments in the PACE
Program at least annually.
PACE Program participants will pay PaineWebber a quarterly Program Fee at an
annual rate of up to 1.50% of the value of the shares of the Portfolios held in
the participant's PaineWebber account. The quarterly fee will be charged to the
participant's securities account. Qualified plans may make arrangements to pay
the quarterly fee separately. The Program Fee may be reduced at various levels
of assets and for participation by certain individual retirement accounts
("IRAs"), retirement plans for self-employed individuals and employee benefit
plans subject to the Employee Retirement Income Security Act of 1974
(collectively "Plans"). For certain Plans, PaineWebber may provide different
services than those described above for different fees. Fees may be subject to
negotiation, and fees may differ based upon a number of factors, including, but
not limited to, the type of account, the size of the account, the amount of PACE
Program assets and the number and range of supplemental advisory services to be
provided by PaineWebber investment executives. PaineWebber investment executives
receive a portion of any PACE Program fee paid in consideration of providing
services to participants in the PACE Program. Investors who are fiduciaries or
otherwise make investment decisions with respect to Plans should consider, in a
prudent manner, the relationship of the fees to be paid by the Plan along with
the level of services provided by PaineWebber. The minimum initial investment in
the Trust is $25,000, and any subsequent investment in the Trust must be at a
minimum of $500. The minimum initial investment in the Trust purchased through
an IRA, or purchased for an account established under the Uniform Gift to
Minors Act, is $10,000. The Trust reserves the right at any time to vary the
initial and subsequent investment minimums. See "Other Services and
Information--Individual Retirement Accounts."
Trustees of the Trust, employees of PaineWebber and Mitchell Hutchins and
their subsidiaries, and family members of these persons who maintain an
"employee related" account at PaineWebber and trustees/directors of PaineWebber
mutual funds may participate in the PACE Program at a reduced, or without the
imposition of the, PACE Program fee.
Payment for shares of the Trust is due at PaineWebber no later than the
third Business Day after the order is placed (the "Settlement Date").
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No order may be placed until the investor has completed a questionnaire,
reviewed the resulting analysis, made the asset allocation decision and executed
necessary PACE Program documentation. Investors who make payment prior to the
Settlement Date will designate a temporary investment (such as a non-PACE
PaineWebber money market fund) for the payment until the Settlement Date.
REDEMPTIONS
REDEMPTIONS IN GENERAL
As described below, Portfolio shares may be redeemed at their net asset
value, and redemption proceeds will be paid within three Business Days of the
receipt of a redemption request. Investors may redeem shares through
PaineWebber.
Investors may submit redemption requests to their PaineWebber investment
executives in person or by telephone, mail or wire. As each Portfolio's agent,
PaineWebber will honor a redemption request by repurchasing Portfolio shares
from a redeeming shareholder at the shares' net asset value next determined
after receipt of the request by PaineWebber's New York City offices. Within
three Business Days after receipt of the request, repurchase proceeds will be
credited to the investor's brokerage account or paid by check at the election of
the investor. PaineWebber reserves the right not to honor any redemption
request, in which case PaineWebber promptly will forward the request to the
Transfer Agent for redemption as described below. The redeeming shareholders
will be advised by their account executives if PaineWebber chooses not to honor
a redemption request. PaineWebber investment executives are responsible for
promptly forwarding redemption requests to PaineWebber's New York City offices.
A redemption request will be executed by the Transfer Agent at the net asset
value next computed after it is received in "good order." "Good order" means
that the request must be accompanied by the following: (1) a letter of
instruction or a stock assignment specifying the number of shares or amount of
investment to be redeemed (or that all shares credited to a Portfolio account by
redeemed), signed by all registered owners of the shares in the exact names in
which they are registered, (2) a guarantee of the signature of each registered
owner by an eligible institution acceptable to the Transfer Agent and in
accordance with SEC rules, such as a commercial bank trust company or member of
a recognized stock exchange, (3) other supporting legal documents for estates,
trusts, guardianships, custodianships, partnerships and corporations and (4)
duly endorsed share certificates, if any. Investors are responsible for ensuring
that a request for redemption is received in "good order."
ADDITIONAL INFORMATION ON REDEMPTIONS
An investor in the PACE Program may have redemption proceeds of $1 million
or more wired to the investor's PaineWebber brokerage account or a commercial
bank account designated by the investor. Questions about this option, or
redemption requirements generally, should be referred to the investor's
PaineWebber investment executive. If an investor requests redemption of shares
which were purchased recently, the Trust may delay payment until it is assured
that good payment has been received. In the case of purchases by check, this can
take up to 15 days.
Because the Trust incurs certain fixed costs in maintaining shareholder
accounts, the Trust reserves the right to redeem all Portfolio shares in any
PACE Program account of less than $7,500 net asset value. If the Trust elects to
do so, it will notify the investor and provide the investor the opportunity to
increase the amount invested to $7,500 or more within 30 days of the notice. The
Trust will not redeem accounts that fall below $7,500 solely as a result of a
reduction in net asset value per share or redemptions to pay PACE Program fees.
Proceeds of an involuntary redemption
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will be deposited in the investor's brokerage account unless the PACE Program is
instructed to the contrary.
OTHER SERVICES AND INFORMATION
Investors interested in the services described below should consult their
PaineWebber investment executive.
AUTOMATIC INVESTMENT PLAN. Certain shareholders may purchase shares of a
Portfolio through an automatic investment plan, under which shareholders may
authorize PaineWebber to place a purchase order each month or quarter for
Portfolio shares in an amount not less than $500 per month or quarter. The
purchase price is paid automatically from cash held in the shareholder's
PaineWebber brokerage account through the automatic redemption of the
shareholder's shares of a PaineWebber money market fund account or through the
liquidation of other securities held in the investor's PaineWebber brokerage
account. If the PACE Program assets are held in a PaineWebber RMA account, the
shareholder may arrange for preauthorized automatic fund transfer on a regular
basis, from the shareholder's bank account to the shareholder's RMA account.
Shareholders may utilize this service in conjunction with the automatic
investment plan to facilitate regular PACE investments. This automatic fund
transfer service, however, is not available for retirement plan shareholders.
In addition to providing a convenient and disciplined manner of investing,
participation in the automatic invest- ment plan enables the investor to use
the tech- nique of "dollar cost averaging." When under the automatic investment
plan a shareholder invests the same dollar amount each month, the share- holder
will purchase more shares when a Portfolio's net asset value per share is low
and fewer shares when the net asset value per share is high. Using this
technique, a shareholder's average purchase price per share over any given
period will usually be lower than if the shareholder purchased a fixed number
of shares on a monthly basis during the period. Of course, investing through
the automatic investment plan does not assure a profit or protect against loss
in declining markets. Additionally, since the automatic investment plan
involves continuous investing regardless of price levels, an investor should
consider his or her financial ability to continue purchases through periods of
low price levels.
For further information regarding the automatic investment plan, the RMA
account or the automatic funds transfer service, shareholders should contact
their PaineWebber investment executive.
AUTOMATIC REDEMPTION PLAN. Shareholders may have PaineWebber redeem a
portion of their shares in the PACE Program monthly or quarterly under the
automatic redemption plan. Quarterly redemptions are made in March, June,
September and December. The amount to be redeemed must be at least $500 per
month or quarter. Purchases of additional shares of a Portfolio concurrent with
redemption are ordinarily disadvantageous to shareholders because of tax
liabilities. For retirement plan shareholders, special limitations apply. For
further information regarding the automatic redemption plan, shareholders should
contact their PaineWebber investment executive.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Portfolios may be purchased
through IRAs. In addition, a Self-Directed IRA is available through PaineWebber
under which investments may be made in the Portfolios as well as in other
investments available through PaineWebber. The minimum initial investment in an
IRA is $10,000. Investors considering establishing an IRA should review
applicable tax laws and should consult their tax advisers.
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EXCHANGES
Shares of a Portfolio may be exchanged without payment of any exchange fee
for shares of another Portfolio at their respective net asset values. Portfolio
shares are not exchangeable with shares of other PaineWebber mutual funds.
Whether pursuant to a particular request or automatic rebalancing, an
exchange of shares is treated for federal income tax purposes as a redemption
(sale) of shares given in exchange by the shareholder, and an exchanging
shareholder may, therefore, realize a taxable gain or loss in connection with
the exchange.
For further information regarding the exchange privilege, investors should
contact their PaineWebber investment executive. PaineWebber reserves the right
to reject any exchange request and the exchange privilege may be modified or
terminated after 60 days' written notice to shareholders.
DIVIDENDS AND TAXES
DIVIDENDS
Net investment income, net realized long-and short-term capital gains, and
net realized gains from foreign currency transactions will be determined
separately for each Portfolio. Dividends from the net investment income of PACE
Money Market Investments are declared daily and paid monthly. Shareholders of
this Portfolio receive dividends from the day following the purchase up to and
including the date of redemption. Dividends from the net investment income of
PACE Government Securities Fixed Income Investments, PACE Intermediate Fixed
Income Investments, PACE Strategic Fixed Income Investments, PACE Municipal
Fixed Income Investments and PACE Global Fixed Income Investments are declared
and paid monthly. Dividends from the net investment income of the six equity
Portfolios are declared and paid annually. Net investment income includes
dividends and accrued interest and discount, less amortization of premium
(except for PACE Global Fixed Income Investments) and accrued expenses. Each of
PACE Strategic Fixed Income Investments, PACE Intermediate Fixed Income
Investments, PACE Global Fixed Income Investments, PACE International Equity
Investments and PACE International Emerging Markets Equity Investments may, but
is not required to, distribute with any dividend all or a portion of any net
realized gains from foreign currency transactions. While PACE Strategic Fixed
Income Investments, PACE Intermediate Fixed Income Investments and PACE Global
Fixed Income Investments each may accompany dividends with distributions of net
realized short-term capital gains and net realized gains from foreign currency
transactions, it is possible that, due to currency-related losses or short-term
capital losses after such a distribution, all or a portion of its distributions
may be treated as a non-taxable return of capital to shareholders for tax
purposes.
Substantially all of each Portfolio's net capital gain (the excess of net
long-term capital gain over net short-term capital loss) if any, together with
any undistributed net realized short-term capital gain and net realized gains
from foreign currency transactions, is distributed annually. A Portfolio may
make additional distributions if necessary to avoid a 4% excise tax on certain
undistributed income and capital gain.
Each Portfolio's dividends and other distributions are paid in additional
Portfolio shares at net asset value unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and/or other distributions
in cash, either mailed to the shareholder by check or credited to the
shareholder's PaineWebber account, should contact their PaineWebber investment
executive or complete the appropriate section of the application form.
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TAXES
Each Portfolio intends to qualify for treatment as a RIC under the Internal
Revenue Code so that it will be relieved of federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income, net gains from certain foreign currency transactions and net
short-term capital gain) and net capital gain that is distributed to its
shareholders.
Dividends from a Portfolio's investment company taxable income (whether paid
in cash or in additional Portfolio shares) generally are taxable to its
shareholders as ordinary income. Distributions of a Portfolio's net capital gain
(whether paid in cash or in additional Portfolio shares), when designated as
such, are taxable to its shareholders as long-term capital gain, regardless of
how long they have held their Portfolio shares. Shareholders not subject to tax
on their income will not be required to pay tax on amounts distributed to them.
Distributions by PACE Municipal Fixed Income Investments that it designates
as "exempt-interest dividends" generally may be excluded from gross income by a
shareholder. These dividends constitute the portion of the Portfolio's aggregate
dividends (excluding capital gain distributions) equal to the excess of the
excludable interest over certain amounts disallowed as deductions. In order to
pay exempt-interest dividends to its shareholders, that Portfolio must (and
intends to) satisfy the requirement that, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of
securities the interest on which is exempt from federal income tax.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of PACE Municipal Fixed Income Investments is not deductible. If
that Portfolio invests in certain PABs, shareholders must include the portion of
their exempt-interest dividends from that Portfolio attributable to those PABs
in calculating their liability for the AMT. Corporate shareholders must include
all of their exempt-interest dividends in calculating their liability for that
tax. If that Portfolio realizes capital gains as a result of market
transactions, any distribution of those gains is taxable to its shareholders.
All or a portion of the exempt-interest dividends paid by that Portfolio also
may be subject to state or local taxes, or both. Moreover, when a shareholder
redeems shares of that Portfolio, the portion of the redemption proceeds
attributable to undistributed excludable interest will lose its character as
such and may be taxable as part of the redemption proceeds (see below).
The Trust notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed paid)
that year by each Portfolio and of any portion of those dividends that qualifies
for the corporate dividends-received deduction or, in the case of PACE Municipal
Fixed Income Investments, any portion thereof that is a tax preference item for
purposes of the AMT. Under certain circumstances, the notice also will specify
the shareholder's share of any foreign taxes paid by the Portfolio, in which
event the shareholder would be required to include in his gross income his pro
rata share of those taxes but might be entitled to claim a credit or deduction
for those taxes.
The Trust is required to withhold 31% of all taxable dividends, capital gain
distributions and (except in the case of PACE Money Market Investments)
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not provide the Trust with a correct taxpayer identification
number. Withholding at that rate is also required from taxable dividends payable
to such shareholders who otherwise are subject to backup withholding.
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A redemption of shares of a Portfolio may result in taxable gain or loss to
the redeeming shareholder, depending upon whether the redemption proceeds
payable to the shareholder are more or less than the shareholder's adjusted
basis for the redeemed shares. An exchange of Portfolio shares for shares of
another Portfolio generally will have similar tax consequences. If shares of a
Portfolio are purchased within 30 days before or after redeeming that
Portfolio's shares at a loss, all or a portion of that loss will not be
deductible and will increase the basis of the newly purchased shares.
As noted above, shareholders will pay a PACE Program Fee. For most
shareholders who are individuals, this fee will be treated as a "miscellaneous
itemized deduction" for federal income tax purposes. An individual's
miscellaneous itemized deductions for any taxable year are allowable only to the
extent the aggregate of those deductions exceeds 2% of adjusted gross income.
The deductibility of this fee also is subject to the overall limitation on
itemized deductions for individuals having adjusted gross income in excess of
specified levels which vary depending on their filing status.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Portfolio and its shareholders; see the
SAI for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor. Prospective investors are
urged to consult their tax advisers.
PERFORMANCE INFORMATION
Each Portfolio performs a standardized computation of annualized total
return and may show this return in advertisements or promotional materials.
Standardized return shows the change in value of a Portfolio investment as a
steady compound annual rate of return. Actual year-by-year returns fluctuate and
may be higher or lower than standardized return. Total return calculations
assume reinvestment of dividends and other distributions.
Each Portfolio may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof.
PACE Municipal Fixed Income Investments, PACE Government Securities Fixed
Income Investments, PACE Intermediate Fixed Income Investments, PACE Strategic
Fixed Income Investments and PACE Global Fixed Income Investments also may
advertise their yield. Yield (except with regard to PACE Money Market
Investments) reflects investment income net of expenses over a 30-day (or
one-month) period on a Portfolio share, expressed as an annualized percentage of
the net asset value per share at the end of the period. PACE Money Market
Investments may advertise its yield and effective yield. The yield of PACE Money
Market Investments is the income on an investment in the Portfolio over a
specified seven-day period. This income is then "annualized" (that is, assumed
to be earned each week over a 52-week period) and shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned is assumed to be reinvested. The effective yield will be
higher than the yield because of the compounding effect of this assumed
reinvestment.
In addition to the Portfolio's yield, PACE Municipal Fixed Income
Investments may also show tax-equivalent yield. Tax-equivalent yield shows the
yield that would produce the same income after a stated rate of taxes as the
Portfolio tax-exempt yield (yield excluding taxable income). Yield computations
differ from other accounting methods and therefore may differ
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from dividends actually paid or reported net income.
Total return and yield information reflects past performance and does not
necessarily indicate future results. Investment return and principal values will
fluctuate, and proceeds upon redemption may be more or less than a shareholder's
cost. See "Performance Information" in the SAI.
GENERAL INFORMATION
ORGANIZATION
The Trust, Managed Accounts Services Portfolio Trust, is registered with the
SEC as an open-end management investment company and was organized as a Delaware
business trust under the laws of the State of Delaware by Certificate of Trust
dated September 9, 1994. The trustees have authority to issue an unlimited
number of shares of beneficial interest of separate series, par value $.001 per
share.
The Trust does not hold annual shareholder meetings. Shareholders of record
holding at least two-thirds of the outstanding shares of the Trust may remove a
trustee by votes cast in person or by proxy at a meeting called for that
purpose. The trustees are required to call a meeting of shareholders for the
purpose of voting upon the question of removal of any trustee when so required
in writing by the shareholders of record holding at least 10% of the Trust's
outstanding shares. Each share of each Portfolio has equal voting rights, except
as noted above. Each share of each Portfolio is entitled to participate equally
in dividends and other distributions and the proceeds of any liquidation. The
shares of each series of the Trust will be voted separately except when an
aggregate vote of all series is required by the 1940 Act.
To avoid additional operating costs and for investor convenience, the
Portfolios will not issue share certificates. Ownership of shares of each
Portfolio is recorded on a stock register by the Transfer Agent and shareholders
have the same rights of ownership with respect to such shares as if certificates
had been issued.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, is custodian of each Portfolio's assets and employs foreign
sub-custodians approved by the Trust's board of trustees in accordance with
applicable requirements under the 1940 Act, to provide custody of the
Portfolio's foreign assets, if any. PFPC Inc., a subsidiary of PNC Bank,
National Association, whose principal business address is 400 Bellevue Parkway,
Wilmington, Delaware 19809, is the Portfolios' transfer and dividend disbursing
agent.
CONFIRMATIONS AND STATEMENTS
Shareholders receive confirmations of their purchases and redemptions of
shares of the Portfolios. Participants in the PACE Program will receive a
statement at least monthly that reports all of their Portfolio activity and a
consolidated year-end statement that shows all their Portfolio transactions for
that year. Shareholders also receive audited annual and unaudited semiannual
financial statements of the applicable Portfolios.
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APPENDIX A
The Portfolios may use some or all of the following instruments:
OPTIONS ON EQUITY AND DEBT SECURITIES AND FOREIGN CURRENCIES--A call option
is a short-term contract pursuant to which the purchaser of the option, in
return for a premium, has the right to buy the security or currency underlying
the option at a specified price at any time during the term of the option. The
writer of the call option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to deliver the underlying
security or currency against payment of the exercise price. A put option is a
similar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security or currency at a specified price during the option
term. The writer of the put option, who receives the premium, has the
obligation, upon exercise of the option during the option term, to buy the
underlying security or currency at the exercise price.
OPTIONS ON SECURITIES INDICES--A securities index assigns relative values to
the securities included in the index and fluctuates with changes in the market
values of those securities. An index option operates in the same way as a more
traditional securities option, except that exercise of an index option is
effected with cash payment and does not involve delivery of securities. Thus,
upon exercise of an index option, the purchaser will realize, and the writer
will pay, an amount based on the difference between the exercise price and the
closing price of the index.
INDEX FUTURES CONTRACTS--An index futures contract is a bilateral agreement
pursuant to which one party agrees to accept, and the other party agrees to
make, delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of trading of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the securities comprising the index is made. Generally, contracts
are closed out prior to the expiration date of the contract.
INTEREST RATE AND FOREIGN CURRENCY FUTURES CONTRACTS--Interest rate and
foreign currency futures contracts are bilateral agreements pursuant to which
one party agrees to make, and the other party agrees to accept, delivery of a
specified type of debt security or currency at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities or currency, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.
OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon exercise
of the option, the delivery of the futures position to the holder of the option
will be accompanied by delivery of the accumulated balance that represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future. The writer of an option, upon exercise, will assume a short
position in the case of a call and a long position in the case of a put.
FORWARD CURRENCY CONTRACTS--A forward currency contract involves an
obligation to purchase or sell a specified currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.
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MANAGED ACCOUNTS SERVICES
PAINEWEBBER PORTFOLIO TRUST
--------------------------------
PAINEWEBBER
NO PERSON HAS BEEN AUTHORIZED TO PACE(SM)
GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN --------------------------------
THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE,SUCH
INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE PORTFOLIOS
OR THEIR DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE PORTFOLIOS OR THEIR
DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
- -------------------------------------------
TABLE OF CONTENTS
-----------------
PROSPECTUS SUMMARY................... 2
TRUST EXPENSES....................... 8
FINANCIAL HIGHLIGHTS................. 12
INVESTMENT OBJECTIVES AND POLICIES OF
THE PORTFOLIOS AND RISK FACTORS..... 14
OTHER INVESTMENT POLICIES AND RISK
FACTORS.............................. 25
MANAGEMENT........................... 45
VALUATION OF SHARES.................. 52
PURCHASES............................ 52
REDEMPTIONS.......................... 54
OTHER SERVICES AND INFORMATION....... 55
EXCHANGES............................ 56
DIVIDENDS AND TAXES.................. 56
PERFORMANCE INFORMATION.............. 58
GENERAL INFORMATION.................. 59
APPENDIX A........................... 60
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PROSPECTUS
FEBRUARY 23, 1996
[ Recycled Paper Logo]
(C) 1996 PaineWebber Incorporated
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MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
Managed Accounts Services Portfolio Trust ("Trust") is an open-end
management investment company currently composed of twelve separate no-load
investment portfolios (each a "Portfolio") professionally managed by Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins" or the "Manager"), a wholly
owned subsidiary of PaineWebber Incorporated ("PaineWebber"). For each Portfolio
other than PACE Money Market Investments, advisory services are provided by an
investment adviser (each an "Adviser") monitored by and unaffiliated with the
Manager. For PACE Money Market Investments, advisory services are provided by
the Manager. Mitchell Hutchins also serves as distributor for the Portfolios.
This Statement of Additional Information ("SAI") is not a prospectus and should
be read only in conjunction with the Trust's current Prospectus, dated February
23, 1996. You may obtain a copy of the Prospectus by calling any PaineWebber
investment executive or by calling toll-free at 1-800-647-1568. This SAI is
dated February 23, 1996.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Portfolios' investment policies and limitations.
YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's, a division of The McGraw Hill Companies, Inc. ("S&P") are
private services that provide ratings of the credit quality of debt obligations,
including issues of municipal securities. A description of the range of ratings
assigned to Portfolios by Moody's and S&P applicable to securities in which one
or more of the Portfolios may invest is included in the Appendix to this SAI.
The Portfolios may use these ratings in determining whether to purchase, sell or
hold a security. These ratings represent Moody's and S&P's opinions as to the
quality of the debt obligations that they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. Consequently, obligations with the same maturity, interest rate and
rating may have different market prices. Credit ratings attempt to evaluate the
safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating indicates. In
the event any security held by a Portfolio is downgraded below the rating
categories set forth for each Portfolio as discussed in the Prospectus, the
Portfolio's Adviser (or Mitchell Hutchins in the case of PACE Money Market
Investments) will review the security and determine whether to retain or dispose
of that security, provided that a Portfolio will not invest, at any time, more
than 5% (except PACE Strategic Fixed Income Investments, which may invest up to
20%, and PACE Global Fixed Income Investments and PACE Large Company Value
Equity Investments, which each may invest up to 10%) of its net assets in
securities that are rated below investment grade.
The process by which S&P and Moody's determine ratings for mortgage- and
asset-backed securities includes consideration of the likelihood of the receipt
by security holders of all distributions, the nature
<PAGE>
of the underlying securities, the credit quality of the guarantor, if any, and
the structural, legal and tax aspects associated with such securities. Neither
of such ratings represents an assessment of the likelihood that principal
prepayments will be made by mortgagors or the degree to which such prepayments
may differ from those originally anticipated, nor do such ratings address the
possibility that investors may suffer a lower than anticipated yield or that
investors in such securities may fail to recoup fully their initial investment
due to prepayments.
The yields on the money market instruments in which PACE Money Market
Investments invests (such as commercial paper and bank obligations) are
dependent on a variety of factors, including general money market conditions,
conditions in the particular market for the obligation, the financial condition
of the issuer, the size of the offering, the maturity of the obligation and the
ratings of the issue. The ratings of nationally recognized statistical rating
organizations ("NRSROs") represent their opinions as to the quality of the
obligations they undertake to rate. Because ratings are general and are not
absolute standards of quality, obligations with the same rating, maturity and
interest rate may have different market prices. Subsequent to its purchase by a
Portfolio, an issue may cease to be rated or its rating may be reduced. In the
event that a security in PACE Money Market Investments' portfolio ceases to be a
"First Tier Security," as defined in the Prospectus, or the Portfolio's Adviser
becomes aware that a security has received a rating below the second highest
rating by Moody's, S&P or any other NRSRO, Mitchell Hutchins, and in certain
cases the Trust's board of trustees, will consider whether that Portfolio should
continue to hold the obligation. A First Tier Security rated in the highest
short-term rating category by a single NRSRO at the time of purchase that
subsequently receives a rating below the highest rating category from a
different NRSRO will continue to be considered a First Tier Security.
Opinions relating to the validity of municipal securities in PACE Municipal
Fixed Income Investments and to the exemption of interest thereon from federal
income tax and also, when available, from the federal alternative minimum tax
are rendered by bond counsel to the respective issuing authorities at the time
of issuance. Neither the Portfolio nor its Adviser will review the proceedings
relating to the issuance of municipal securities or the basis for such opinions.
An issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors (such as the federal bankruptcy laws) and federal, state
and local laws that may be enacted that adversely affect the tax-exempt status
of interest on the municipal securities held by the Portfolio or of the
exempt-interest dividends received by that Portfolio's shareholders, extend the
time for payment of principal or interest, or both, or impose other constraints
upon enforcement of such obligations. There is also the possibility that, as a
result of litigation or other conditions, the power or ability of issuers to
meet their obligations for the payment of principal of, and interest on, their
municipal securities may be materially and adversely affected.
In addition to ratings assigned to individual bond issues, each Portfolio's
Adviser analyzes interest rate trends and developments that may affect
individual issuers, including factors such as liquidity, profitability and asset
quality. The yields on bonds and other debt securities in which the Portfolios
invest are dependent on a variety of factors, including general money market
conditions, general conditions on the bond market, the financial condition of
the issuer, the size of the offering, the maturity of the obligation and its
rating. There is a wide variation in the quality of bonds, both within a
particular classification and between classifications. An issuer's obligations
under its bonds are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of bond-holders or
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<PAGE>
other creditors of an issuer; litigation or other conditions may also adversely
affect the power or ability of issuers to meet their obligations for the payment
of interest and principal on their bonds.
OBLIGATIONS OF FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS. PACE Money
Market Investments may invest in obligations of domestic branches of foreign
banks and foreign branches of domestic banks. Such investments may involve risks
that are different from investments in securities of domestic branches of
domestic banks. These risks may include unfavorable political and economic
developments, withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions which might affect the
payment of principal or interest on the securities held by PACE Money Market
Investments. Additionally, there may be less publicly available information
about foreign banks and their branches, as these institutions may not be subject
to the same regulatory requirements as domestic banks.
ADJUSTABLE RATE AND FLOATING RATE MORTGAGE-BACKED SECURITIES. As set forth
in the Prospectus, PACE Government Securities Fixed Income Investments, PACE
Intermediate Fixed Income Investments and PACE Strategic Fixed Income
Investments may invest in adjustable rate mortgage ("ARM") and floating rate
mortgage-backed securities. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. As a
result, during periods of rising interest rates, ARMs generally do not decrease
in value as much as fixed-rate securities. Conversely, during periods of
declining interest rates, ARMs generally do not increase in value as much as
fixed-rate securities. ARM mortgage-backed securities represent a right to
receive interest payments at a rate that is adjusted to reflect the interest
earned on a pool of ARMs. ARMs generally provide that the borrower's mortgage
interest rate may not be adjusted above a specified lifetime maximum rate or, in
some cases, below a minimum lifetime rate. In addition, certain ARMs provide for
limitations on the maximum amount by which the mortgage interest rate may adjust
for any single adjustment period. ARMs also may provide for limitations on
changes in the maximum amount by which the borrower's monthly payment may adjust
for any single adjustment period. In the event that a monthly payment is not
sufficient to pay the interest accruing on the ARM, any such excess interest is
added to the mortgage loan ("negative amortization"), which is repaid through
future monthly payments. If the monthly payment exceeds the sum of the interest
accrued at the applicable mortgage interest rate and the principal payment that
would have been necessary to amortize the outstanding principal balance over the
remaining term of the loan, the excess reduces the principal balance of the ARM.
Borrowers under ARMs experiencing negative amortization may take longer to build
up their equity in the underlying property and may be more likely to default.
The rates of interest payable on certain ARMs, and therefore on certain ARM
mortgage-backed securities, are based on indices, such as the one-year constant
maturity Treasury rate, that reflect changes in market interest rates. Others
are based on indices, such as the 11th District Federal Home Loan Bank Cost of
Funds index, that tend to lag behind changes in market interest rates. The
values of ARM mortgage-backed securities supported by ARMs that adjust based on
lagging indices tend to be somewhat more sensitive to interest rate fluctuations
than those reflecting current interest rate levels, although the values of such
ARM mortgage-backed securities still tend to be less sensitive to interest rate
fluctuations than fixed-rate securities.
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Floating rate mortgage-backed securities are classes of mortgage-backed
securities that have been structured to represent the right to receive interest
payments at rates that fluctuate in accordance with an index but that generally
are supported by pools comprised of fixed-rate mortgage loans. As with ARM
mortgage-backed securities, interest rate adjustments on floating rate
mortgage-backed securities may be based on indices that lag behind market
interest rates. Interest rates on floating rate mortgage-backed securities
generally are adjusted monthly. Floating rate mortgage-backed securities are
subject to lifetime interest rate caps, but they generally are not subject to
limitations on monthly or other periodic changes in interest rates or monthly
payments.
SPECIAL CHARACTERISTICS OF MORTGAGE- AND ASSET-BACKED SECURITIES. As set
forth in the Prospectus, PACE Government Securities Fixed Income Investments,
PACE Intermediate Fixed Income Investments and PACE Strategic Fixed Income
Investments each are authorized to invest in mortgage-and asset-backed
securities. The yield characteristics of mortgage- and asset-backed securities
differ from those of traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other obligations generally may be prepaid at any time.
Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. Generally, however, prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Similar factors
apply to prepayments on asset-backed securities, but the receivables underlying
asset-backed securities generally are of a shorter maturity and thus are less
likely to experience substantial prepayments. Such securities, however, often
provide that for a specified time period the issuers will replace receivables in
the pool that are repaid with comparable obligations. If the issuer is unable to
do so, repayment of principal on the asset-backed securities may commence at an
earlier date. Mortgage- and asset-backed securities may decrease in value as a
result of increases in interest rates and may benefit less than other fixed
income securities from declining interest rates because of the risk of
prepayment.
ARMs also may be subject to a greater rate of prepayments in a declining
interest rate environment. For example, during a period of declining interest
rates, prepayments on ARMs could increase because the availability of fixed
mortgage loans at competitive interest rates may encourage mortgagors to "lock-
in" at a lower interest rate. Conversely, during a period of rising interest
rates, prepayments on ARMs might decrease. The rate of prepayments with respect
to ARMs has fluctuated in recent years.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are purchased
or traded in the secondary market at a premium or discount. In addition, there
is normally some delay between the time the issuer receives mortgage payments
from the servicer and the time the issuer makes the payments on the
mortgage-backed securities, and this delay reduces the effective yield to the
holder of such securities.
Yields on pass-through securities are typically quoted by investment dealers
and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life
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of pass-through pools varies with the maturities of the underlying mortgage
loans. A pool's term may be shortened by unscheduled or early payments of
principal on the underlying mortgages. Because prepayment rates of individual
pools vary widely, it is not possible to predict accurately the average life of
a particular pool. In the past, a common industry practice has been to assume
that prepayments on pools of fixed rate 30-year mortgages would result in a
12-year average life for the pool. At present, mortgage pools, particularly
those with loans with other maturities or different characteristics, are priced
on an assumption of average life determined for each pool. In periods of
declining interest rates, the rate of prepayment tends to increase, thereby
shortening the actual average life of a pool of mortgage-related securities.
Conversely, in periods of rising rates the rate of prepayment tends to decrease
thereby lengthening the actual average life of the pool. However, these effects
may not be present, or may differ in degree, if the mortgage loans in the pools
have adjustable interest rates or other special payment terms, such as a
prepayment charge. Actual prepayment experience may cause the yield of
mortgage-backed securities to differ from the assumed average life yield.
Reinvestment of prepayments may occur at lower interest rates than the original
investment, thus adversely affecting the yield of the Portfolios.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Portfolio purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. A Portfolio maintains
custody of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such securities. If the value of such securities is
less than the repurchase price, plus any agreed-upon additional amount, the
other party must provide additional collateral so that at all times the
collateral is at least equal to the repurchase price, plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the securities and the price that was paid by a Portfolio upon
their acquisition is accrued as interest and included in the Portfolio's net
investment income.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to a Portfolio if the other party
to a repurchase agreement becomes bankrupt. Each Portfolio intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
its Adviser (or Mitchell Hutchins in the case of PACE Money Market Investments
or in the case of transactions pursuant to any joint repurchase arrangements) to
present minimal credit risks in accordance with guidelines established by the
Trust's board of trustees. The Adviser will review and monitor the
creditworthiness of those institutions under the board's general supervision.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements with banks up to an aggregate value of not more than 5% of
its total assets. These agreements involve the sale of securities held by a
Portfolio subject to the Portfolio's agreement to repurchase the securities at
an agreed-upon date and price reflecting a market rate of interest. These
agreements are considered to be borrowings and may be entered into only for
extraordinary or emergency purposes or arbitrage transactions. While a reverse
repurchase agreement is outstanding, a Portfolio will maintain with its
custodian in a segregated account, cash, U.S. government securities or other
liquid, high-grade debt obligations, marked to market daily, in an amount at
least equal to the Portfolio's obligations under the reverse repurchase
agreement.
5
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ILLIQUID SECURITIES. PACE Global Fixed Income Investments, PACE Small/Medium
Company Value Equity Investments, PACE International Equity Investments and PACE
International Emerging Markets Equity Investments may each invest up to 15% of
its net assets in illiquid securities. PACE Money Market Investments, PACE
Government Securities Fixed Income Investments, PACE Intermediate Fixed Income
Investments, PACE Strategic Fixed Income Investments, PACE Municipal Fixed
Income Investments, PACE Small/Medium Company Growth Equity Investments, PACE
Large Company Value Equity Investments and PACE Large Company Growth Equity
Investments may each invest up to 10% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which a Portfolio has valued the securities and
includes, among other things, purchased over-the-counter ("OTC") options,
repurchase agreements maturing in more than seven days, non-marketable or
interest-bearing time deposits and restricted securities other than those the
Adviser has determined are liquid pursuant to guidelines established by the
Trust's board of trustees. Interest-only ("IO") and principal-only ("PO")
mortgage-backed securities are considered illiquid except that the Adviser may
determine that IO and PO classes of fixed-rate mortgage-backed securities issued
by the U.S. government or one of its agencies or instrumentalities are liquid
pursuant to guidelines established by the Trust's board of trustees. The assets
used as cover for OTC options written by a Portfolio will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the
Portfolio may repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover for an OTC
option written subject to this procedure would be considered illiquid only to
the extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option. Illiquid restricted securities may be sold only
in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the Securities Act of 1933
("1933 Act"). Where registration is required, a Portfolio may be obligated to
pay all or part of the registration expenses and a considerable period may
elapse between the time of the decision to sell and the time the Portfolio may
be permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Portfolio
might obtain a less favorable price than prevailed when it decided to sell.
Commercial paper issues in which PACE Money Market Investments may invest
include securities issued by major corporations without registration under the
1933 Act in reliance on the exemption from such registration afforded by Section
3(a)(3) thereof and commercial paper issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the federal securities laws in that resale must similarly
be made in an exempt transaction. Section 4(2) paper is normally resold to other
institutional investors through or with the assistance of investment dealers who
make a market in Section 4(2) paper, thus providing liquidity.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
These instruments are often restricted securities because the securities are
sold in transactions not requiring registration. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend either on an efficient institutional market in which
such unregistered securities can be readily resold or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there
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are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act established a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment to satisfy share redemption orders. Such markets might include
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc. ("NASD"). An
insufficient number of qualified buyers interested in purchasing Rule
144A-eligible restricted securities held by a Portfolio, however, could affect
adversely the marketability of such securities, and a Portfolio might be unable
to dispose of such securities promptly or at favorable prices.
The board of trustees has delegated the function of making day-to-day
determinations of liquidity to the appropriate Adviser or Mitchell Hutchins,
pursuant to guidelines approved by the board. The Adviser or Mitchell Hutchins,
as applicable, takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Each Portfolio's Adviser or Mitchell Hutchins,
as applicable, will monitor the liquidity of restricted securities in each
Portfolio's portfolio and report periodically on such decisions to the board of
trustees.
In making determinations as to the liquidity of municipal lease obligations
purchased by PACE Municipal Fixed Income Investments, the Adviser distinguishes
between direct investments in municipal lease obligations (or participations
therein) and investments in securities that may be supported by municipal lease
obligations or certificates of participation therein. Since these municipal
lease obligation-backed securities are based on a well-established means of
securitization, the Adviser does not believe that investing in such securities
presents the same liquidity issues as direct investments in municipal lease
obligations.
SPECIAL CHARACTERISTICS OF FOREIGN AND EMERGING MARKET SECURITIES
FOREIGN AND EMERGING MARKET SECURITIES. Many of the foreign and emerging
market securities held by PACE Intermediate Fixed Income Investments, PACE
Strategic Fixed Income Investments, PACE Global Fixed Income Investments, PACE
Large Company Value Equity Investments, PACE Large Company Growth Equity
Investments PACE Small/Medium Company Growth Equity Investments, PACE
International Equity Investments and PACE International Emerging Markets Equity
Investments will not be registered with the Securities and Exchange Commission
("SEC"), nor will the issuers thereof be subject to SEC reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of securities held by these Portfolios than is available concerning U.S.
companies. Disclosure and regulatory standards in many respects are less
stringent in emerging market countries than in the U.S. and other major markets.
There also may be a lower level of monitoring and regulation of emerging markets
and the activities of investors in such markets, and enforcement of existing
regulations may be extremely limited. Foreign companies, and in particular,
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companies in smaller and emerging capital markets are not generally subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory requirements comparable to those applicable to U.S. companies. Each
Portfolio's net investment income and capital gains from its foreign investment
activities may be subject to non-U.S. withholding taxes.
To the extent that these eight Portfolios invest in foreign securities, the
costs attributable to foreign investing that they must bear frequently are
higher than those attributable to domestic investing; this is particularly true
with respect to emerging capital markets. For example, the cost of maintaining
custody of foreign securities exceeds custodian costs for domestic securities,
and transaction and settlement costs of foreign investing also frequently are
higher than those attributable to domestic investing. Costs associated with the
exchange of currencies also make foreign investing more expensive than domestic
investing. Investment income on certain foreign securities in which the
Portfolios may invest may be subject to foreign withholding or other government
taxes that could reduce the return of these securities. Tax treaties between the
United States and foreign countries, however, may reduce or eliminate the amount
of foreign tax to which the Portfolios would be subject.
Foreign markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have failed to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in temporary periods when
assets of the Portfolio are uninvested and no return is earned thereon. The
inability of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Portfolio due to subsequent declines in the value
of such portfolio security or, if the Portfolio has entered into a contract to
sell the security, could result in possible liability to the purchaser.
SOVEREIGN DEBT. Investment by PACE Intermediate Fixed Income Investments,
PACE Strategic Fixed Income Investments, PACE Global Fixed Income Investments,
PACE International Equity Investments and PACE International Emerging Markets
Equity Investments in debt securities issued by foreign governments and their
political subdivisions or agencies ("Sovereign Debt") involves special risks.
The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and/or
interest when due in accordance with the terms of such debt, and the Portfolio
may have limited legal recourse in the event of default.
Sovereign Debt differs from debt obligations issued by private entities in
that, generally, remedies for defaults must be pursued in the courts of the
defaulting party. Legal recourse is therefore somewhat diminished. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank debt issued by the same sovereign
entity may not contest payments to the holders of Sovereign Debt in the event of
default under commercial bank loan agreements.
A sovereign debtor's willingness or ability to repay principal and interest
due in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely
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affect its exports. These events could diminish a country's trade account
surplus, if any, or the credit standing of a particular local government or
agency. Another factor bearing on the ability of a country to repay Sovereign
Debt is the level of the country's international reserves. Fluctuations in the
level of these reserves can affect the amount of foreign exchange readily
available for external debt payments and, thus, could have a bearing on the
capacity of the country to make payments on its Sovereign Debt.
To the extent that a country has a current account deficit (generally when
exports of merchandise and services are less than the country's imports of
merchandise and services plus net transfers (e.g., gifts of currency and goods)
to foreigners), it will need to depend on loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and inflows of foreign investment. The access of a country
to these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt obligations
can be affected by a change in international interest rates since the majority
of these obligations carry interest rates that are adjusted periodically based
upon international rates.
With respect to Sovereign Debt of emerging market issuers, investors should
be aware that certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. At times certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt; such moratoria are currently in effect in certain Latin American
countries.
Certain emerging market countries have experienced difficulty in servicing
their Sovereign Debt on a timely basis which led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds
(discussed below), and obtaining new credit to finance interest payments.
Holders of Sovereign Debt, including PACE Strategic Fixed Income Investments and
PACE Global Fixed Income Investments, may be requested to participate in the
rescheduling of such debt and to extend further loans to sovereign debtors. The
interests of holders of Sovereign Debt could be adversely affected in the course
of restructuring arrangements or by certain other factors referred to below.
Furthermore, some of the participants in the secondary market for Sovereign Debt
may also be directly involved in negotiating the terms of these arrangements and
may therefore have access to information not available to other market
participants. Obligations arising from past restructuring agreements may affect
the economic performance and political and social stability of certain issuers
of Sovereign Debt. There are no bankruptcy proceedings by which Sovereign Debt
on which a sovereign has defaulted may be collected in whole or in part.
Foreign investment in certain Sovereign Debt is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in such Sovereign Debt and increase the costs and expenses of
the Portfolio. Certain countries in which the Portfolio will invest require
governmental approval prior to investments by foreign persons, limit the amount
of investment by foreign persons in a particular issuer, limit the investment by
foreign persons only to a specific class of securities of an issuer that may
have less advantageous rights than the classes available for purchase by
domiciliaries of the countries or impose additional taxes on foreign investors.
Certain issuers may require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in a country's balance of
payments,
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the country could impose temporary restrictions on foreign capital remittances.
The Portfolio could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation of capital, as well as by
the application to the Portfolio of any restrictions on investment. Investing in
local markets may require the Portfolio to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Portfolio.
BRADY BONDS. PACE Global Fixed Income Investments, PACE International Equity
Investments and PACE International Emerging Markets Equity Investments may
invest in Brady Bonds and other Sovereign Debt of countries that have
restructured or are in the process of restructuring Sovereign Debt pursuant to
the Brady Plan, an initiative announced by former U.S. Treasury Secretary
Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external commercial bank indebtedness. In restructuring its external
debt under the Brady Plan framework, a debtor nation negotiates with its
existing bank lenders as well as multilateral institutions such as the
International Monetary Fund ("IMF"). The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for newly issued
Brady Bonds. Brady Bonds may also be issued in respect of new money being
advanced by existing lenders in connection with the debt restructuring. The
International Bank for Reconstruction and Development (more commonly known as
the "World Bank") and the IMF support the restructuring by providing funds
pursuant to loan agreements or other arrangements which enable the debtor nation
to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount.
Brady Plan debt restructurings totalling more than $80 billion have been
implemented to date in Mexico, Costa Rica, Venezuela, Uruguay, Nigeria,
Argentina and the Philippines and, in addition, Brazil has announced intentions
to issue Brady Bonds. There can be no assurance that the circumstances regarding
the issuance of Brady Bonds by these countries will not change. Investors should
recognize that Brady Bonds have been issued only recently, and accordingly do
not have a long payment history. Agreements implemented under the Brady Plan to
date are designed to achieve debt and debt-service reduction through specific
options negotiated by a debtor nation with its creditors. As a result, the
financial packages offered by each country differ. The types of options have
included the exchange of outstanding commercial bank debt for bonds issued at
100% of face value of such debt, which carry a below-market stated rate of
interest (generally known as par bonds), bonds issued at a discount from the
face value of such debt (generally known as discount bonds), bonds bearing an
interest rate which increases over time and bonds issued in exchange for the
advancement of new money by existing lenders. Regardless of the stated face
amount and stated interest rate of the various types of Brady Bonds, the
Portfolios will purchase Brady Bonds in secondary markets, as described below,
in which the price and yield to the investor reflect market conditions at the
time of purchase.
Certain Brady Bonds have been collateralized as to principal due to maturity
by U.S. Treasury zero coupon bonds with maturities equal to the final maturity
of such Brady Bonds. Collateral purchases are financed by the IMF, the World
Bank and the debtor nations' reserves. In the event of a default with respect to
collateralized Brady Bonds as a result of which the payment obligations of the
issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In
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addition, interest payments on certain types of Brady Bonds may be
collateralized by cash or high-grade securities in amounts that typically
represent between 12 and 18 months of interest accruals on these instruments
with the balance of the interest accruals being uncollateralized. Brady Bonds
are often viewed as having several valuation components: (1) the collateralized
repayment of principal, if any, at final maturity, (2) the collateralized
interest payments, if any, (3) the uncollateralized interest payments and (4)
any collateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as speculative. The
Portfolios may purchase Brady Bonds with no or limited collateralization, and
will be relying for payment of interest and (except in the case of principal
collateralized Brady Bonds) repayment of principal primarily on the willingness
and ability of the foreign government to make payment in accordance with the
terms of the Brady Bonds. Brady Bonds issued to date are purchased and sold in
secondary markets through U.S. securities dealers and other financial
institutions and are generally maintained through European transnational
securities depositories.
STRUCTURED FOREIGN INVESTMENTS. PACE Strategic Fixed Income Investments,
PACE Global Fixed Income Investments, PACE International Equity Investments and
PACE International Emerging Markets Equity Investments may each invest a portion
of its assets in interests in U.S. and foreign entities organized and operated
solely for the purpose of securitizing or restructuring the investment
characteristics of foreign securities. This type of securitization or
restructuring involves the deposit with or purchase by a U.S. or foreign entity,
such as a corporation or trust, or specified instruments (such as commercial
bank loans or Brady Bonds) and the issuance by the entity of one or more classes
of securities ("Structured Foreign Investments") backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued Structured Foreign
Investments to create securities with different investment characteristics such
as varying maturities, payment priorities and interest rate provisions, and the
extent of the payments made with respect to Structured Foreign Investments is
dependent on the extent of the cash flow on the underlying instruments.
The Structured Foreign Investments in which these Portfolios typically will
invest involve no credit enhancement. Accordingly, their credit risk generally
will be equivalent to that of the underlying instruments. The Portfolios are
permitted, however, to invest in classes of Structured Foreign Investments that
are subordinated to the right of payment of another class. Subordinated
Structured Foreign Investments typically have higher yields and present greater
risks than unsubordinated Structured Foreign Investments. Structured Foreign
Investments are typically sold in private placement transactions, and there
currently is no active trading market for Structured Foreign Investments.
FOREIGN CURRENCY TRANSACTIONS. Although PACE Intermediate Fixed Income
Investments, PACE Strategic Fixed Income Investments, PACE Global Fixed Income
Investments, PACE Large Company Value Equity Investments and PACE Large Company
Growth Equity Investments, PACE Small/Medium Company Growth Equity Investments,
PACE International Equity Investments and PACE International Emerging Markets
Equity Investments value their assets daily in U.S. dollars, they do not intend
to convert their holdings of foreign currencies to U.S. dollars on a daily
basis. The Portfolio's foreign currencies may be held as "foreign currency call
accounts" at foreign branches of foreign or domestic banks. These accounts bear
interest at negotiated rates and are payable upon
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relatively short demand periods. If a bank became insolvent, a Portfolio could
suffer a loss of some or all of the amounts deposited. Each of these Portfolios
may convert foreign currency to U.S. dollars from time to time. Although foreign
exchange dealers generally do not charge a stated commission or fee for
conversion, the prices posted generally include a "spread," which is the
difference between the prices at which the dealers are buying and selling
foreign currencies.
CONVERTIBLE SECURITIES. As described in the Prospectus, PACE Strategic Fixed
Income Investments, PACE Large Company Value Equity Investments, PACE Large
Company Growth Equity Investments, PACE Small/Medium Company Value Equity
Investments, PACE Small/Medium Company Growth Equity Investments, PACE
International Equity Investments and PACE International Emerging Markets Equity
Investments may each invest in convertible securities. Before conversion,
convertible securities have characteristics similar to non-convertible debt
securities in that they ordinarily provide a stable stream of income with
generally higher yields than those of common stocks of the same or similar
issuers. Convertible securities rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable non-convertible
securities. While no securities investment is without some risk, investments in
convertible securities generally entail less risk than the issuer's common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a Fixed Income Security. "Fixed Income Securities" include debt instruments
the interest payment on which may be fixed, variable or floating and also
includes zero coupon securities which pay no interest until maturity.
The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security generally will sell at a premium over its conversion value
determined by the extent to which investors place value on the right to acquire
the underlying common stock while holding a Fixed Income Security.
A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Portfolio is called for
redemption, the Portfolio will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
INVERSE FLOATERS. Inverse floaters are instruments whose interest rates bear
an inverse relationship to the interest rate on another security or the value of
an index. Changes in the interest rate on the other security or index inversely
affect the residual interest rate paid on the inverse floater, with the result
that the inverse floater's price will be considerably more volatile than that of
a fixed-rate bond.
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LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Portfolio may invest up to 10% of
its total assets in secured or unsecured variable or floating rate loans
("Loans") arranged through private negotiations between a borrowing corporation
and one or more banks ("Lenders"). A Portfolio's investments in Loans will be
primarily in the form of participations ("Participations") in Loans, although a
Portfolio may acquire assignments ("Assignments") of portions of Loans from
third parties. Participations typically will result in a Portfolio receiving
payments of principal, interest and any fees to which it is entitled from the
Lender selling the Participations and relying upon the Lender to collect those
payments from the borrower. In connection with purchasing Participations, a
Portfolio generally has no direct right to enforce compliance by the borrower
with the terms of the loan agreement relating to the Loan, and the Portfolio may
not directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, a Portfolio may assume the credit risk
of both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, a Portfolio may
be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower or receive the full benefit of any
collateral. A Portfolio will acquire Participations only if both the borrower
and the Lender interpositioned between the Portfolio and the borrower meet the
Portfolio's credit standards.
When the Portfolio purchases Assignments from Lenders, it acquires direct
rights against the borrower on the Loan. Under an Assignment, a Portfolio
generally will be able to collect payments and enforce remedies directly from or
against the borrower. Conversely, however, a Portfolio may not have the benefit
of the services of a lead or agent bank to administer the Loan on the
Portfolio's behalf.
Assignments and Participations are generally not registered under the 1933
Act and thus are usually subject to the Portfolios' limitations on investments
in illiquid securities. Because there is no liquid market for such securities,
the Portfolios anticipate that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market will
have an adverse impact on the value of such securities and on the Portfolio's
ability to dispose of particular Assignments or Participations when necessary to
meet the Portfolio's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the borrower. Under
normal circumstances, the bank issuing the Participation will be considered the
issuer for purposes of concentration and diversification.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. A security purchased on a
when-issued or delayed delivery basis is recorded as an asset on the commitment
date and is subject to changes in market value, generally based upon changes in
the level of interest rates. Thus, fluctuation in the value of the security from
the time of the commitment date will affect the Portfolio's net asset value.
When the Portfolio commits to purchase securities on a when-issued or delayed
delivery basis, its custodian will set aside in a segregated account cash, U.S.
government securities, or other liquid high-grade debt securities with a market
value equal to the amount of the commitment. If necessary, additional assets
will be placed in the account daily so that the value of the account will equal
or exceed the amount of the Portfolio's purchase commitment. The Portfolio
purchases when-issued securities only with the intention of taking delivery, but
may sell the right to acquire the security prior to delivery if the Adviser or
Mitchell Hutchins, as the case may be, deems it advantageous to do so, which may
result in capital gain or loss to a Portfolio.
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LEVERAGE
Each Portfolio may borrow up to 33 1/3% of its total assets and may borrow
in excess of its 33 1/3% limitation for extraordinary or emergency purposes, but
not in excess of an additional 5% of its total assets. Borrowing constitutes
leverage, a speculative technique. No Portfolio currently expects to leverage,
other than through the techniques described above and in the Prospectus during
the first year of operations. A Portfolio will only use leverage when its
Adviser believes that such leverage will benefit the Portfolio after taking
leverage risks into consideration.
The net asset value of a Portfolio and its yield may be more volatile due to
the Portfolio's use of leverage. Leverage also creates interest expenses for a
Portfolio, which will reduce its net income. To the extent the income derived
from securities purchased with funds obtained through leverage exceeds the
interest and other expenses that a Portfolio will have to pay in connection with
such leverage, the Portfolio's net income will be greater than if leverage were
not used. Conversely, if the income from the assets obtained through leverage is
not sufficient to cover the cost of leverage, the net income of a Portfolio will
be less than if leverage were not used, and therefore the amount available for
distribution to stockholders will be reduced.
TYPES OF MUNICIPAL SECURITIES
The types of municipal securities identified in the Prospectus as eligible
for purchase by PACE Municipal Fixed Income Investments may include obligations
of issuers whose revenues are primarily derived from mortgage loans on housing
projects for moderate to low income families. The Portfolio also may purchase
mortgage subsidy bonds that are normally issued by special purpose public
authorities. In some cases the repayment of such bonds depends upon annual
legislative appropriations; in other cases repayment is a legal obligation of
the issuer and, if the issuer is unable to meet its obligations, repayment
becomes a moral commitment of a related government unit (subject, however, to
such appropriations).
STAND-BY COMMITMENTS. The Portfolio may acquire stand-by commitments
pursuant to which a bank or other municipal bond dealer agrees to purchase
securities that are held in the Portfolio's portfolio or that are being
purchased by the Portfolio, at a price equal to (1) the acquisition cost
(excluding any accrued interest paid on acquisition), less any amortized market
premium or plus any accrued market or original issue discount, plus (2) all
interest accrued on the securities since the last interest payment date or the
date the securities were purchased by the Portfolio, whichever is later.
Although the Portfolio does not currently intend to acquire stand-by commitments
with respect to municipal securities held in their portfolios, the Portfolio may
acquire such commitments under unusual market conditions to facilitate portfolio
liquidity.
The Portfolio will enter into stand-by commitments only with those banks or
other dealers that, in the opinion of the Portfolio's Adviser, present minimal
credit risk. The Portfolio's right to exercise stand-by commitments would be
unconditional and unqualified. A stand-by commitment would not be transferable
by the Portfolio, although it could sell the underlying securities to a third
party at any time. The Portfolio may pay for stand-by commitments either
separately in cash or by paying a higher price for the securities that are
acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The acquisition of a stand-by
commitment would not ordinarily affect the valuation or maturity of the
underlying municipal securities. Stand-by commitments acquired by the Portfolio
would be valued at zero in determining net asset value. Whether the Portfolio
paid directly or indirectly for a stand-by commitment, its cost would be treated
as unrealized depreciation and would be amortized over the period the commitment
is held by the Portfolio.
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PUT BONDS. The Portfolio may invest in put bonds that have a fixed rate of
interest and a final maturity beyond the date on which the put may be exercised.
If the put is a "one time only" put, the Portfolio ordinarily will either sell
the bond or put the bond, depending upon the more favorable price. If the bond
has a series of puts after the first put, the bond will be held as long as, in
the judgment of the Portfolio's Adviser, it is in the best interest of the
Portfolio to do so. There is no assurance that the issuer of a put bond acquired
by the Portfolio will be able to repurchase the bond upon the exercise date, if
the Portfolio chooses to exercise its right to put the bond back to the issuer.
MUNICIPAL LEASE OBLIGATIONS. Although municipal lease obligations do not
constitute general obligations of the municipality for which its taxing power is
pledged, they ordinarily are backed by its covenant to budget for, appropriate,
and make the payments due under the lease obligation. The leases underlying
certain municipal lease obligations, however, provide that lease payments are
subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. This "abatement risk" may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reverse funds or the provision of credit enhancements such as
letters of credit.
Certain municipal lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In the case of a "non-appropriation" lease, a
Portfolio's ability to recover under the lease in the event of a
non-appropriation or default will be limited solely to the repossession of
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.
The Portfolio does not intend to invest a significant portion of its assets in
such "non-appropriation" municipal lease obligations. There is no limitation on
the Portfolio's ability to invest in other municipal lease obligations.
PARTICIPATION INTERESTS. The Portfolio also may invest in participation
interests in municipal bonds, including industrial development bonds ("IDBs"),
private activity bonds ("PABs") and floating and variable rate securities. A
participation interest gives the Portfolio an undivided interest in a municipal
bond owned by a bank. The Portfolio has the right to sell the instrument back to
the bank. Such right generally is backed by the bank's irrevocable letter of
credit or guarantee and permits the Portfolio to draw on the letter of credit on
demand, after specified notice, for all or any part of the principal amount of
the Portfolio's participation interest plus accrued interest. Generally, the
Portfolio intends to exercise the demand under the letters of credit or other
guarantees only (1) upon a default under the terms of the underlying bond, (2)
to maintain the Portfolio's portfolio in accordance with its investment
objective and policies, or (3) as needed to provide liquidity to the Portfolio
in order to meet redemption requests. The ability of a bank to fulfill its
obligations under a letter of credit or guarantee might be affected by possible
financial difficulties of its borrowers, adverse interest rate or economic
conditions, regulatory limitations, or other factors. The Portfolio's Adviser
will monitor the pricing, quality, and liquidity of the participation interests
held by the Portfolio, and the credit standing of banks issuing letters of
credit or guarantees supporting such participation interests, on the basis of
published financial information reports of NRSROs and bank analytical services.
FLOATING RATE AND VARIABLE RATE MUNICIPAL SECURITIES. As noted in the
Prospectus, the Portfolio may invest in floating rate and variable rate
municipal securities with or without demand features. A demand feature gives the
Portfolio the right to sell the securities back to a specified party, usually a
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remarketing agent, on a specified date. A demand feature is often backed by a
letter of credit or guarantee from a bank. As discussed under "Participation
Interests," to the extent that payment of an obligation is backed by a bank's
letter of credit or guarantee, such payment may be subject to the bank's ability
to satisfy that commitment. The interest rate on floating rate or variable rate
securities ordinarily is readjusted on the basis of the prime rate of the bank
that originated the financing or some other index or published rate, such as the
90-day U.S. Treasury Bill rate. Generally, these interest rate adjustments cause
the market value of floating rate and variable rate municipal securities to
fluctuate less than the market value of fixed-rate obligations. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
capital depreciation is less than for fixed-rate obligations.
HEDGING AND RELATED STRATEGIES
As discussed in the Prospectus, each Portfolio (except PACE Money Market
Investments, PACE Municipal Fixed Income Investments, PACE Small/Medium Company
Value Equity Investments and PACE Large Company Growth Equity Investments) may
use a variety of financial instruments ("Instruments"), which may include
certain options, futures contracts (sometimes referred to as "futures"), options
on futures contracts, forward currency contracts and interest rate protection
transactions, to attempt to hedge the portfolio of the Portfolio and to attempt
to enhance the Portfolio's income or return. The particular Instruments are
described in Appendix A to the Prospectus.
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of an Instrument intended partially
or fully to offset potential declines in the value of one or more investments
held in a Portfolio's portfolio. Thus, in a short hedge a Portfolio takes a
position in an Instrument whose price is expected to move in the opposite
direction of the price of the investment being hedged. For example, a Portfolio
might purchase a put option on a security to hedge against a potential decline
in the value of that security. If the price of the security declined below the
exercise price of the put, the Portfolio could exercise the put and thus limit
its loss below the exercise price to the premium paid plus transaction costs. In
the alternative, because the value of the put option can be expected to increase
as the value of the underlying security declines, the Portfolio might be able to
close out the put option and realize a gain to offset the decline in the value
of the security.
Conversely, a long hedge is a purchase or sale of an Instrument intended
partially or fully to offset potential increases in the acquisition cost of one
or more investments that a Portfolio intends to acquire. Thus, in a long hedge a
Portfolio takes a position in an Instrument whose price is expected to move in
the same direction as the price of the prospective investment being hedged. For
example, a Portfolio might purchase a call option on a security it intends to
purchase in order to hedge against an increase in the cost of the security. If
the price of the security increased above the exercise price of the call, the
Portfolio could exercise the call and thus limit its acquisition cost to the
exercise price plus the premium paid and transaction costs. Alternatively, the
Portfolio might be able to offset the price increase by closing out an
appreciated call option and realizing a gain.
Instruments on securities generally are used to hedge against price
movements in one or more particular securities positions that a Portfolio owns
or intends to acquire. Instruments on indices of equity or debt securities, in
contrast, generally are used to hedge against price movements in broad equity or
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debt market sectors in which the Portfolio has invested or expects to invest.
Instruments on debt securities may be used to hedge either individual securities
or broad fixed income market sectors.
The use of Instruments is subject to applicable regulations of the SEC, the
several options and futures exchanges upon which they are traded, the Commodity
Futures Trading Commission ("CFTC") and various state regulatory authorities. In
addition, a Portfolio's ability to use Instruments will be limited by tax
considerations. See "Taxes."
In addition to the products, strategies and risks described below and in the
Prospectus, the Advisers expect to discover additional opportunities in
connection with options, futures contracts, forward currency contracts and other
techniques. These new opportunities may become available as an Adviser develops
new techniques, as regulatory authorities broaden the range of permitted
transactions and as new options, futures contracts, forward currency contracts
or other techniques are developed. An Adviser may utilize these opportunities to
the extent that they are consistent with the Portfolio's investment objective
and permitted by the Portfolio's investment limitations and applicable
regulatory authorities. The Prospectus or SAI will be supplemented to the extent
that new products or techniques involve materially different risks than those
described below or in the Prospectus.
SPECIAL RISKS OF THESE STRATEGIES. The use of these Instruments involves
special considerations and risks, as described below. Risks pertaining to
particular Instruments are described in the sections that follow.
(1) Successful use of most Instruments depends upon the Adviser's ability to
predict movements of the overall securities, currency and interest rate markets,
which require different skills than predicting changes in the prices of
individual securities. While each Adviser is experienced in the use of
Instruments, there can be no assurance that any particular strategy adopted will
succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of an Instrument and price movements of the investments being
hedged. For example, if the value of an Instrument used in a short hedge
increased by less than the decline in value of the hedged investment, the hedge
would not be fully successful. Such a lack of correlation might occur due to
factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which Instruments are traded.
The effectiveness of hedges using Instruments on indices will depend on the
degree of correlation between price movements in the index and price movements
in the securities being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Portfolio entered in a
short hedge because the Adviser projected a decline in the price of a security
in the Portfolio's portfolio, and the price of that security increased instead,
the gain from that increase might be wholly or partially offset by a decline in
the price of the Instrument. Moreover, if the price of the Instrument declined
by more than the increase in the price of the security, the Portfolio could
suffer a loss. In either such case, the Portfolio would have been in a better
position had it not hedged at all.
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(4) As described below, a Portfolio might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Instruments involving obligations to third parties (i.e.,
Instruments other than purchased options). If a Portfolio were unable to close
out its positions in such Instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. These requirements might impair a Portfolio's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that a Portfolio sell a portfolio
security at a disadvantageous time. A Portfolio's ability to close out a
position in an Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market, the
ability and willingness of the other party to the transaction ("contra party")
to enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Portfolio.
COVER FOR THESE STRATEGIES. Transactions using Instruments, other than
purchased options, expose a Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting (covered) position in securities, currencies or other options,
futures contracts or forward contracts, or (2) cash, receivables and short-term
debt securities, with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. Each Portfolio
will comply with SEC guidelines regarding cover for these Instruments and will,
if the guidelines so require, set aside cash, U.S. government securities or
other liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount as determined daily on a mark-to-market
basis.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Instrument is open, unless they are replaced
with other appropriate assets. As a result, the commitment of a large portion of
a Portfolio's assets to cover or segregated accounts could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
OPTIONS. The Portfolios may purchase put and call options, and write (sell)
and purchase call options on debt and equity securities, foreign currencies and
indices of debt or equity securities. The purchase of call options serves as a
long hedge, and the purchase of put options serves as a short hedge. Writing
covered put or call options can enable a Portfolio to enhance income by reason
of the premiums paid by the purchasers of such options. However, if the market
price of the security underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Portfolio would expect to
suffer a loss. Writing call options serves as a limited short hedge, because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Portfolio will be
obligated to sell the security at less than its market value. If the call option
is an OTC option, the securities or other assets used as cover would be
considered illiquid to the extent described under "Investment Policies and
Restrictions-- Illiquid Securities."
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value.
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A Portfolio may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Portfolio may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, a Portfolio may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit a Portfolio to
realize profits or limit losses on an option position prior to its exercise or
expiration.
The Portfolios may purchase or write both exchange-traded and OTC options.
Currently, many options on equity securities are exchange-traded. Exchange
markets for options on debt securities and foreign currencies exist, but these
instruments are primarily traded on the OTC market. Exchange-traded options in
the United States are issued by a clearing organization affiliated with the
exchange on which the option is listed that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are contracts
between a Portfolio and its contra party (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when a Portfolio purchases or
writes an OTC option, it relies on the party from whom it purchased the option
or to whom it has written the option to make or take delivery of the underlying
investment upon exercise of the option. In the case of purchased options,
failure by the contra party to do so would result in the loss of any premium
paid by the Portfolio as well as the loss of any expected benefit of the
transaction.
Generally, the OTC debt and foreign currency options used by the Portfolios
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of the
option.
A Portfolio's ability to establish and close out positions in
exchange-traded options depends on the existence of a liquid market. Each
Portfolio intends to purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
contra party, or by a transaction in the secondary market if any such market
exists. Although a Portfolio will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Portfolio, there is no assurance that the Portfolio will be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the contra party, the Portfolio might be unable to
close out an OTC position at any time prior to its expiration.
If the Portfolio were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any profit.
The inability to enter into a closing purchase transaction for a call option
written by a Portfolio could cause material losses because the Portfolio would
be unable to sell the investment used as cover for the written option until the
option expires or is exercised.
GUIDELINES FOR OPTIONS. Each Portfolio's use of options is governed by the
following guidelines, which can be changed by the Trust's board of trustees
without shareholder vote:
(1) A Portfolio may purchase a put or call option, including any straddles
or spreads, only if the value of its premium, when aggregated with the premiums
on all other options held by the Portfolio, does not exceed 5% of the
Portfolio's total assets.
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(2) The aggregate value of securities underlying put options written by a
Portfolio, determined as of the date the put options are written, will not
exceed 50% of the Portfolio's net assets.
(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and options on futures
contracts) purchased by the Portfolio are held at any time will not exceed 20%
of the Portfolio's total net assets.
FUTURES. The purchase of futures or call options thereon can serve as long
hedge, and the sale of futures or the purchase of put options thereon can serve
as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of a
Portfolio's portfolio. If its Adviser wishes to shorten the average duration of
a Portfolio, the Portfolio may sell a futures contract or a call option thereon,
or purchase a put option on that futures contract. If its Adviser wishes to
lengthen the average duration of a Portfolio, the Portfolio may buy a futures
contract or a call option thereon, or sell a put option thereon.
PACE Global Fixed Income Investments may also write put options on foreign
currency futures contracts while at the same time purchasing call options on the
same futures contracts in order synthetically to create a long futures contract
position. Such options would have the same strike prices and expiration dates.
The Portfolio will engage in this strategy only when it is more advantageous to
the Portfolio than is purchasing the futures contract.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Portfolio is required to deposit in a
segregated account with its custodian, in the name of the futures commission
merchant ("FCM") through whom the transaction was effected, "initial margin"
consisting of cash or U.S. government securities, in an amount generally equal
to 10% or less of the contract value. Margin must also be deposited when writing
an option on a futures contract, in accordance with applicable exchange rules.
Unlike margin in securities transactions, initial margin on futures contracts
does not represent a borrowing, but rather is in the nature of a performance
bond or good-faith deposit that is returned to the Portfolio at the termination
of the transaction if all contractual obligations have been satisfied. Under
certain circumstances, such as periods of high volatility, a Portfolio may be
required by an exchange to increase the level of its initial margin payment, and
initial margin requirements might be increased generally in the future by
regulatory action.
Subsequent "variation margin" payments are made to and from the FCM daily as
the value of the futures position varies, a process known as "marking to
market." Variation margin does not involve borrowing, but represents a daily
settlement of a Portfolio's obligations to or from a FCM. When a Portfolio
purchases an option on a futures contract, the premium paid plus transaction
costs is all that is at risk. In contrast, when a Portfolio purchases or sells a
futures contract or writes an option thereon, it is subject to daily variation
margin calls that could be substantial in the event of adverse price movements.
If the Portfolio has insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a time when such sales are
disadvantageous.
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<PAGE>
Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, a futures contract or option
identical to the instrument purchased or sold. Positions in futures and options
on futures may be closed only on an exchange or board of trade that provides a
secondary market. Each Portfolio intends to enter into these transactions only
on exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for a
particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on
the amount that the price of a future or option can vary from the previous day's
settlement price; once that limit is reached, no trades may be made that day at
a price beyond the limit. Daily price limits do not limit potential losses
because prices could move to the daily limit for several consecutive days with
little or no trading, thereby preventing liquidation of unfavorable positions.
If a Portfolio were unable to liquidate a futures or related options
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Portfolio would continue to
be subject to market risk with respect to the position. In addition, except in
the case of purchased options, the Portfolio would continue to be required to
make daily variation margin payments and might be required to maintain the
position being hedged by the futures contract or option or to maintain cash or
securities in a segregated account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options markets
are subject to daily variation margin calls and might be compelled to liquidate
futures or related options positions whose prices are moving unfavorably to
avoid being subject to further calls. These liquidations could increase price
volatility of the instruments and distort the normal price relationship between
the futures or options and the investments being hedged. Also, because initial
margin deposit requirements in the futures market are less onerous than margin
requirements in the securities markets, there might be increased participation
by speculators in the futures markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading" and
other investment strategies might result in temporary price distortions.
GUIDELINES FOR FUTURES AND RELATED OPTIONS. Each Portfolio's use of futures
and related options is governed by the following guidelines, which can be
changed by the Trust's board of trustees without shareholder vote:
(1) To the extent a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case that are not for bona fide hedging purposes (as defined
by the CFTC), the aggregate initial margin and premiums required to establish
these on those positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the Portfolio's net assets.
(2) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and options on futures
contracts) purchased by a Portfolio that are held at any time will not exceed
20% of the Portfolio's total net assets.
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<PAGE>
(3) The aggregate margin deposits on all futures contracts and options
thereon held at any time by a Portfolio will not exceed 5% of the Portfolio's
total assets.
FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. PACE Strategic
Fixed Income Investments, PACE Global Fixed Income Investments, PACE
International Equity Investments and PACE International Emerging Markets Equity
Investments each may use options and futures on foreign currencies, as described
above, and forward currency forward contracts, as described below, to hedge
against movements in the values of the foreign currencies in which the
Portfolios' securities are denominated. Such currency hedges can protect against
price movements in a security that a Portfolio owns or intends to acquire that
are attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in the
securities that are attributable to other causes.
The Portfolios might seek to hedge against changes in the value of a
particular currency when no Instruments in that currency are available or such
Instruments are more expensive than certain other Instruments. In such cases, a
Portfolio may hedge against price movements in that currency by entering into
transactions using Instruments on another foreign currency or a basket of
currencies, the values of which the Adviser believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the Instrument will not correlate perfectly with movements in
the price of the currency being hedged is magnified when this strategy is used.
The Portfolios may also use options and futures on foreign currencies,
options on currency futures and forward currency contracts for income and return
enhancement, for example, by shifting a Portfolio's exposure from one foreign
currency (or the U.S. dollar) to another foreign currency.
The value of Instruments in foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Instruments, the
Portfolios could be disadvantaged by having to deal in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Instruments until they reopen.
Settlement of transactions involving foreign currencies might be required to
take place within the country issuing the underlying currency. Thus, a Portfolio
might be required to accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and might be required to pay any
fees, taxes and charges associated with such delivery assessed in the issuing
country.
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FORWARD CURRENCY CONTRACTS. PACE Strategic Fixed Income Investments, PACE
Global Fixed Income Investments, PACE International Equity Investments and PACE
International Emerging Markets Equity Investments may enter into forward
currency contracts to purchase or sell foreign currencies for a fixed amount of
U.S. dollars or another foreign currency. Such transactions may serve as long
hedges--for example, a Portfolio may purchase a forward currency contract to
lock in the U.S. dollar price of a security denominated in a foreign currency
that the Portfolio intends to acquire. Forward currency contracts may also serve
as short hedges--for example, a Portfolio may sell a forward currency contract
to lock in the U.S. dollar equivalent of the proceeds from the anticipated sale
of a security denominated in a foreign currency.
As noted above, each of these Portfolios may seek to hedge against changes
in the value of a particular currency by using forward contracts on another
foreign currency or a basket of currencies, the value of which its Adviser
believes will have a positive correlation to the values of the currency being
hedged. In addition, the Portfolios may use forward currency contracts to shift
exposure to foreign currency fluctuations from one country to another. For
example, if a Portfolio owns securities denominated in a foreign currency and
its Adviser believes that currency will decline relative to another currency, it
might enter into a forward contract to sell an appropriate amount of the first
foreign currency, with payment to be made in the second foreign currency.
Transactions that use two foreign currencies are sometimes referred to as "cross
hedging." Use of a different foreign currency magnifies the risk that movements
in the price of the Instrument will not correlate or will correlate unfavorably
with the foreign currency being hedged.
The cost to the Portfolios of engaging in forward currency contracts varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are entered into on a principal basis, no fees or commissions are involved. When
a Portfolio enters into a forward currency contract, it relies on the contra
party to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.
As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, a
forward contract identical to the forward contract purchased or sold. Secondary
markets generally do not exist for forward currency contracts, with the result
that closing transactions generally can be made for forward currency contracts
only by negotiating directly with the contra party. Thus, there can be no
assurance that a Portfolio will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the contra party, the Portfolio might be unable to close out a
forward currency contract at any time prior to maturity. In either event, the
Portfolio would continue to be subject to market risk with respect to the
position, and would continue to be required to maintain a position in the
securities or currencies that are the subject of the hedge or to maintain cash
or securities in a segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a Portfolio might need to purchase
or sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not
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covered by forward contracts. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.
INTEREST RATE PROTECTION TRANSACTIONS. PACE Government Securities Fixed
Income Investments and PACE Strategic Fixed Income Investments may enter into
interest rate protection transactions, including interest rate swaps and
interest rate caps, collars and floors. Interest rate swap transactions involve
an agreement between two parties to exchange payments that are based, for
example, on variable and fixed rates of interest and that are calculated on the
basis of a specified amount of principal (the "notional principal amount") for a
specified period of time. Interest rate cap and floor transactions involve an
agreement between two parties in which the first party agrees to make payments
to the contra party when a designated market interest rate goes above (in the
case of a cap) or below (in the case of a floor) a designated level on
predetermined dates or during a specified time period. An interest rate collar
combines elements of buying a cap and selling a floor.
These Portfolios may enter into interest rate protection transactions to
preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities it
anticipates purchasing at a later date. These Portfolios may also use interest
rate protection transactions for income and return enhancement purposes.
Each of these Portfolios may enter into interest rate swaps, caps, collars
and floors on either an asset-or liability-based basis, depending on whether it
is hedging its assets or its liabilities, and will usually enter into interest
rate swaps on a net basis, i.e., the two payment streams are netted out, with
the Portfolio receiving or paying, as the case may be, only the net amount of
the two payments. Mitchell Hutchins and each Portfolio's Adviser believe such
obligations do not constitute senior securities and, accordingly, will not treat
them as being subject to the Portfolio's borrowing restrictions. The net amount
of the excess, if any, of the Portfolio's obligations over its entitlements with
respect to each interest rate swap will be accrued on a daily basis and an
amount of cash, U.S. government securities or other liquid high-grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by a custodian that satisfies
the requirements of the Investment Company Act of 1940 ("1940 Act"). A Portfolio
also will establish and maintain such segregated accounts with respect to its
total obligations under any interest rate swaps that are not entered into on a
net basis and with respect to any interest rate caps, collars and floors that
are written by the Portfolio.
A Portfolio will enter into interest rate protection transactions only with
banks and recognized securities dealers believed by its Adviser to present
minimal credit risks in accordance with guidelines established by the Trust's
board of trustees. If there is a default by the other party to such a
transaction, the Portfolio will have to rely on its contractual remedies (which
may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreements related to the transaction.
SHORT SALES "AGAINST THE BOX". Each Portfolio may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales "against the
box") to defer realization of gains or losses for tax or other purposes. To make
delivery to the purchaser in a short sale, the executing broker borrows the
securities being sold short on behalf of the Portfolio, and the Portfolio is
obligated to replace the securities borrowed at a date in the future. When a
Portfolio sells short, it will establish a margin account with the broker
effecting the short sale, and will deposit collateral with the broker. In
addition, the Portfolio will maintain with its custodian, in a segregated
account, the securities that could be used to cover the short sale. A Portfolio
will incur
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transaction costs, including interest expense, in connection with opening,
maintaining and closing short sales against the box. None of the Portfolios
currently intend to have obligations under short-sales that at any time during
the coming year exceed 5% of the Portfolio's net assets.
A Portfolio might make a short sale "against the box" in order to hedge
against market risks when Mitchell Hutchins or an Adviser believes that the
price of a security may decline, thereby causing a decline in the value of a
security owned by the Portfolio or a security convertible into or exchangeable
for a security owned by the Portfolio, or when Mitchell Hutchins or an Adviser
want to sell a security that the Portfolio owns at a current price, but also
wishes to defer recognition of gain or loss for federal income tax purposes. In
such case, any loss in the Portfolio's long position after the short sale should
be reduced by a gain in the short position. Conversely, any gain in the long
position should be reduced by a loss in the short position. The extent to which
gains or losses in the long position are reduced will depend upon the amount of
the securities sold short relative to the amount of the securities the Portfolio
owns, either directly or indirectly, and in the case where the Portfolio owns
convertible securities, changes in the investment values or conversion premiums
of such securities.
INVESTMENT RESTRICTIONS
The Trust has adopted investment restrictions numbered 1 through 11 below as
fundamental policies of the Portfolios. Under the 1940 Act, a fundamental policy
may not be changed without the vote of a majority of the outstanding voting
securities of a Portfolio, which is defined in the 1940 Act as the lesser of (1)
67% or more of the shares present at a Portfolio meeting, if the holders of more
than 50% of the outstanding shares of the Portfolio are present or represented
by proxy or (2) more than 50% of the outstanding shares of the Portfolio.
Investment restrictions 12 through 22 may be changed by a vote of a majority of
the board of trustees at any time.
Under the investment restrictions adopted by the Portfolios:
1. A Portfolio, other than PACE Intermediate Fixed Income Investments
and PACE Global Fixed Income Investments, may not purchase securities (other
than U.S. government securities) of any issuer if, as a result of the
purchase, more than 5% of the value of the Portfolio's total assets would be
invested in such issuer, except that up to 25% of the value of the
Portfolio's total assets may be invested without regard to this 5%
limitation.
2. A Portfolio will not purchase more than 10% of the outstanding voting
securities of any one issuer, except that this limitation is not applicable
to the Portfolio's investments in U.S. government securities and up to 25%
of the Portfolio's assets may be invested without regard to these
limitations.
3. A Portfolio, other than PACE Municipal Fixed Income Investments, will
invest no more than 25% of the value of its total assets in securities of
issuers in any one industry, the term industry being deemed to include the
government of a particular country other than the United States. This
limitation is not applicable to a Portfolio's investments in U.S. government
securities.
4. A Portfolio will not issue senior securities (including borrowing
money from banks and other entities and through reverse repurchase
agreements and mortgage dollar rolls) in excess of 33 1/3% of its total
assets (including the amount of senior securities issued, but reduced by any
liabilities and indebtedness not constituting senior securities), except
that a Portfolio may borrow up to an
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additional 5% of its total assets (not including the amount borrowed) for
extraordinary or emergency purposes.
5. A Portfolio will not pledge, hypothecate, mortgage, or otherwise
encumber its assets, except to secure permitted borrowings or in connection
with its use of forward contracts, futures contracts, options, swaps, caps,
collars and floors.
6. A Portfolio will not lend any funds or other assets, except through
purchasing debt obligations, lending portfolio securities and entering into
repurchase agreements consistent with the Portfolio's investment objective
and policies.
7. A Portfolio will not purchase securities on margin, except that a
Portfolio may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts or options on futures contracts will not be deemed to be a
purchase of securities on margin.
8. A Portfolio will not make short sales of securities or maintain a
short position, unless at all times when a short position is open it owns an
equal amount of the securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issue as, and equal in amount to, the securities sold short
("short sales against the box"), and unless not more than 10% of the
Portfolio's net assets (taken at market value) is held as collateral for
such sales at any one time.
9. A Portfolio will not purchase or sell real estate or real estate
limited partnership interests, except that it may purchase and sell mortgage
related securities and securities of companies that deal in real estate or
interests therein.
10. A Portfolio will not purchase or sell commodities or commodity
contracts (except currencies, forward currency contracts, futures contracts
and options and other similar contracts).
11. A Portfolio will not act as an underwriter of securities, except
that a Portfolio may acquire restricted securities under circumstances in
which, if the securities were sold, the Portfolio might be deemed to be an
underwriter for purposes of the 1933 Act.
12. A Portfolio will not invest in oil, gas or other mineral leases or
exploration or development programs.
13. A Portfolio will not make investments for the purpose of exercising
control of management.
14. A Portfolio will not purchase any securities if as a result (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) the Portfolio would own any securities of a registered open-end
investment company or more than 3% of the total outstanding voting stock of
any registered closed-end investment company or more than 5% of the total
value of the Portfolio's total assets would be invested in securities of any
one or more registered closed-end investment companies.
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15. A Portfolio will not purchase any security if as a result the
Portfolio would then have more than 5% of its total assets invested in
securities of companies (including predecessors) that have been in
continuous operation for fewer than three years.
16. A Portfolio will not purchase or retain securities of any company
if, to the knowledge of the Trust after reasonable inquiry, any of the
Trust's officers or trustees or any officer or director of Mitchell Hutchins
or the Adviser for that Portfolio individually owns more than 1/2 of 1% of
the outstanding securities of the company and together they own beneficially
more than 5% of the securities.
17. A Portfolio will not invest in excess of 5% of the value of its net
assets in warrants, valued at the lower of cost or market value. Included
within this amount, but not to exceed 2% of the value of a Portfolio's net
assets, may be warrants that are not listed on the New York Stock Exchange,
Inc. ("NYSE") or the American Stock Exchange, Inc. Warrants acquired by a
Portfolio in units or attached to securities may be deemed to be without
value.
18. A Portfolio may not purchase securities of other investment
companies, except to the extent permitted by the 1940 Act in the open market
at no more than customary brokerage commission rates. This limitation does
not apply to securities received or acquired as dividends, through offers of
exchange, or as a result of reorganization, consolidation or merger.
19. A Portfolio (other than PACE Small/Medium Company Growth Equity
Investments) will not purchase the securities of any issuer which, together
with its predecessors, has a record of less than three years of continuous
operation, or in securities which are restricted as to disposition
(including Rule 144A securities) if, as a result of such purchase, more than
15% of the Portfolio's total assets would be invested in such securities.
20. PACE Small/Medium Company Growth Equity Investments will not invest
more than 10% of its net assets in (i) securities of any issuer which,
together with its predecessors, has a record of less than three years of
continuous operation, (ii) illiquid securities, and (iii) securities of
issuers that are restricted from being sold to the public without
registration under the 1933 Act. This restriction does not apply to
restricted securities eligible for resale pursuant to Rule 144A under the
1933 Act determined to be liquid under guidelines approved by the Trust's
board of trustees.
21. PACE Small/Medium Company Growth Equity Investments will not engage
in short-term trading.
22. PACE Small/Medium Company Growth Equity Investments will not invest
in puts, calls, straddles, spreads, and any combination thereof unless such
investments are for hedging purposes or are covered by cash or securities.
The Trust may make commitments more restrictive than the restrictions listed
above so as to permit the sale of shares of a Portfolio in certain states.
Should the Trust determine that a commitment is no longer in the best interests
of the Portfolio and its shareholders, the Trust will revoke the commitment by
terminating the sale of shares of the Portfolio in the state involved. If a
percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from a change
in values of portfolio securities or amount of total assets will not be
considered a violation of any of the foregoing limitations, except that with
regard to the borrowings limitation in investment restriction number 4, the
Portfolios will comply with the applicable restrictions of Section 18 of the
1940 Act.
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TRUSTEES AND OFFICERS
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME/AGE AND ADDRESS* POSITION WITH TRUST OTHER DIRECTORSHIPS
--------------------- ------------------- --------------------
<S> <C> <C>
Margo N. Alexander**; 48 Trustee and President Mrs. Alexander is president, chief
executive officer and a director of
Mitchell Hutchins, a director of
Mitchell Hutchins Institutional
Investors Inc. and an executive vice
president and director of PaineWebber.
Mrs. Alexander is also a director or
trustee of seven other investment
companies and president of 29 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
David J. Beaubien; 61 Trustee Mr. Beaubien is chairman of Yankee
101 Industrial Road Environmental Systems, Inc., a
Box 746 manufacturer of meteorological
Turners Falls, MA 01376 measuring systems. Prior to January
1991, he was senior vice president of
EG&G, Inc., a company which makes and
provides a variety of scientific and
technically oriented products and
services. He is also a director if IEC,
Inc., a manufacturer of electronic
assemblies; Belfort Instruments, Inc.,
a manufacturer of environmental
instruments; and Oriel Corp., a
manufacturer of optical instruments.
From 1985 to January 1995, Mr. Beaubien
served as a director or trustee on the
boards of the Kidder, Peabody & Co.
Incorporated mutual funds. Mr. Beaubien
is also a director or trustee of five
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
E. Garrett Bewkes, Jr.**; 69 Trustee Mr. Bewkes is a director of, and
consultant to, PaineWebber Group Inc.
("PW Group") (holding company of
PaineWebber and Mitchell Hutchins).
Prior to 1988, he was chairman of the
board, president and chief executive
officer of American Bakeries Company.
Mr. Bewkes is also a director of
Interstate Bakeries Corporation and
NaPro BioTherapeutics, Inc. and a
director or trustee of 24 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME/AGE AND ADDRESS* POSITION WITH TRUST OTHER DIRECTORSHIPS
--------------------- ------------------- --------------------
<S> <C> <C>
Bruce A. Bursey**; 46 Trustee Mr. Bursey is a senior vice president of
PaineWebber and director of Managed
Accounts Services.
William W Hewitt, Jr.; 67 Trustee Mr. Hewitt is retired. Since 1988, he has
P.O. Box 2359 served as a director or trustee on the
Princeton, New Jersey boards of the Guardian Life Insurance
08543-2359 Company mutual funds. From 1990 to
January 1995, Mr. Hewitt served as a
director or trustee on the boards of
the Kidder, Peabody & Co. Incorporated
mutual funds. From 1986-1988, he was an
executive vice president and director
of mutual funds, insurance and trust
services of Shearson Lehman Brothers
Inc. Mr. Hewitt is also a director or
trustee of five other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Morton L. Janklow; 65 Trustee Mr. Janklow is senior partner of Janklow
598 Madison Avenue Nesbit Associates, an international
New York, New York literary agency representing leading
10022 authors in their relationships with
publishers and motion picture,
television and multi-media companies,
and of counsel to the law firm of
Janklow, Newborn & Ashley. Mr. Janklow
is also a director of Marvel
Entertainment Group Inc., a leading
youth entertainment company.
J. Richard Sipes**; 49 Trustee Mr. Sipes is director of Products and
1200 Harbor Boulevard Trading in Private Client Group for
Weehawken, New Jersey PaineWebber. Mr. Sipes is also a
07087 director of PW Trust Co., PaineWebber
Futures Management Corp., PaineWebber
Properties Inc., Puerto Rico Investors
Tax-Free Fund and Puerto Rico Investors
Tax-Free Fund II.
William D. White; 61 Trustee Mr. White is retired. From February 1989
P.O. Box 199 through March 1994, he was president of
Upper Black Eddy, PA the National League of Professional
Baseball Clubs. Prior to 1989, he was a
television sportscaster for WPIX-TV,
New York. Mr. White is also a director
or trustee of nine other investment
companies for which PaineWebber or
Mitchell Hutchins serves as investment
adviser.
M. Cabell Woodward, Jr.; 67 Trustee Mr. Woodward is retired. From July 1985
until his retirement in February 1993,
Mr. Woodward was vice chairman and
chief financial officer of ITT
Corporation. Mr. Woodward is also a
director of Melville Corporation and
Black & Decker Corporation.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME/AGE AND ADDRESS* POSITION WITH TRUST OTHER DIRECTORSHIPS
--------------------- ------------------- --------------------
<S> <C> <C>
Teresa M. Boyle; 37 Vice President Ms. Boyle is a first vice president and
manager --advisory administration of
Mitchell Hutchins. Prior to November
1993, she was compliance manager of
Hyperion Capital Management, Inc., an
investment advisory firm. Prior to
April 1993, Ms. Boyle was a vice
president and manager--legal
administration of Mitchell Hutchins.
Ms. Boyle is also a vice president of
29 other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Joan L. Cohen; 31 Vice President and Ms. Cohen is a vice president and
Assistant Secretary attorney of Mitchell Hutchins. Prior to
December 1993, she was an associate at
the law firm of Seward & Kissel. Ms.
Cohen is also a vice president and
assistant secretary of 24 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
C. William Maher; 34 Vice President and Mr. Maher is a first vice president and a
Assistant Treasurer senior manager of the mutual fund
finance division of Mitchell Hutchins.
Mr. Maher is also a vice president and
assistant treasurer of 29 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Ann E. Moran; 38 Vice President and Ms. Moran is a vice president of Mitchell
Assistant Treasurer Hutchins. Ms. Moran is also a vice
president and assistant treasurer of 29
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice president
Secretary and deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is also a vice
president and secretary of 29 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Victoria E. Schonfeld; 45 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins.
From April 1990 to May 1994, she was a
partner in the law firm of Arnold &
Porter. Prior to April 1990, she was a
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman. Ms.
Schonfeld is also a vice president of
29 other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME/AGE AND ADDRESS* POSITION WITH TRUST OTHER DIRECTORSHIPS
-------------------- ------------------- --------------------
<S> <C> <C>
Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice president
Assistant Treasurer and a senior manager of the mutual fund
finance division of Mitchell Hutchins.
From August 1992 to August 1994, he was
a vice president at BlackRock Financial
Management, L.P. Prior to August 1992,
he was an audit manager with Ernst &
Young LLP. Mr. Schubert is also a vice
president and assistant treasurer of 29
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice president
Treasurer and the director of the mutual fund
finance division of Mitchell Hutchins.
Prior to 1991, he was an audit senior
manager with Ernst & Young LLP. Mr.
Sluyters is also a vice president and
treasurer of 29 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Gregory K. Todd; 39 Vice President and Mr. Todd is a first vice president and
Assistant Secretary associate general counsel of Mitchell
Hutchins. Prior to 1993, he was a
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman. Mr. Todd
is also a vice president and assistant
secretary of 29 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>
- ------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Messrs. Bewkes, Bursey, Sipes and Mrs. Alexander are "interested persons" of
the Trust as defined in the 1940 Act by virtue of their positions with
PaineWebber, PW Group and/or Mitchell Hutchins.
The Trust pays trustees who are not "interested persons" of the Trust
$35,000 annually and $5,000 per meeting of the board or any committee thereof.
Trustees are reimbursed for any expenses incurred in attending meetings.
Trustees of the Trust who are "interested persons" of the Trust as defined in
the 1940 Act receive no compensation from the Trust. Trustees and officers of
the Trust own in the aggregate less than 1% of the shares of each Portfolio.
Because Mitchell Hutchins, the Advisers and PaineWebber perform substantially
all of the services necessary for the operation of the Trust and the Portfolios,
the Trust requires no employees. No officer, director or employee of Mitchell
Hutchins, an Adviser or PaineWebber presently receives any compensation from the
Trust for acting as a trustee or officer. The table below includes certain
information relating to the compensation of the Trust's trustees.
31
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSIONS
OR
RETIREMENT
BENEFITS ESTIMATED TOTAL
AGGREGATE ACCRUED AS ANNUAL COMPENSATION
COMPENSATION PART OF A BENEFITS FROM THE TRUST**
FROM THE PORTFOLIO'S UPON AND
NAME OF PERSON, POSITION TRUST* EXPENSES RETIREMENT THE FUND COMPLEX+
------------------------ ------------ ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Margo N. Alexander, Trustee............. -- -- -- --
David J. Beaubien, Trustee.............. $ 60,000 -- -- $ 118,675
E. Garrett Bewkes, Jr., Trustee......... -- -- -- --
Bruce A. Bursey, Trustee................ -- -- -- --
William W. Hewitt, Trustee.............. 60,000 -- -- 118,675
Morton L. Janklow, Trustee.............. 60,000 -- -- 5,000
J. Richard Sipes, Trustee............... -- -- -- --
William D. White, Trustee............... 60,000 -- -- 33,125
M. Cabell Woodward, Jr., Trustee........ 60,000 -- -- --
</TABLE>
- ------------
* Represents amounts estimated to be paid to each trustee during the fiscal year
ending July 31, 1996.
** Mitchell Hutchins has agreed to waive its management fee and subsidize
certain operating expenses, including the payment of trustees' fees, with
respect to each Portfolio for the fiscal year ending July 31, 1996 in order
to lower the overall expenses of each Portfolio to certain designated levels.
+ Represents amounts paid to each trustee from the Trust and/or Mitchell
Hutchins and other PaineWebber mutual funds during the calendar year ended
December 31, 1995.
32
<PAGE>
INVESTMENT MANAGEMENT, ADVISORY AND DISTRIBUTION
ARRANGEMENTS
INVESTMENT MANAGEMENT ARRANGEMENTS. Mitchell Hutchins acts as the investment
manager to the Trust pursuant to an Investment Management and Administration
Agreement with the Trust ("Management Agreement") dated as of June 15, 1995.
Pursuant to the Management Agreement with the Trust, Mitchell Hutchins, subject
to the supervision of the Trust's board of trustees and in conformity with the
stated policies of the Trust, manages both the investment operations of the
Trust and the composition of the Trust's Portfolios, including the purchase,
retention, disposition and lending of securities. Mitchell Hutchins is
authorized to enter into advisory agreements for investment advisory services
("Advisory Agreement") in connection with the management of the Trust and the
Portfolios. Mitchell Hutchins will have responsibility for monitoring the
investment advisory services furnished pursuant to any such Advisory Agreements.
Mitchell Hutchins reviews the performance of all Advisers and makes
recommendations to the trustees of the Trust with respect to the retention and
renewal of Advisory Agreements. In connection therewith, Mitchell Hutchins is
obligated to keep certain books and records of the Trust. Mitchell Hutchins also
administers the Trust's business affairs and, in connection therewith, furnishes
the Trust with office facilities, together with those ordinary clerical and
bookkeeping services which are not being furnished by the Trust's custodian and
the Transfer Agent, the Trust's transfer and dividend disbursing agent. The
management services of Mitchell Hutchins for the Trust are not exclusive under
the terms of the Management Agreement, and Mitchell Hutchins is free to, and
does, render management services to others.
As required by state regulation, Mitchell Hutchins will reimburse a
Portfolio if and to the extent that the aggregate operating expenses of the
Portfolio exceed applicable limits in any fiscal year. Currently, the most
restrictive such limit applicable to a Portfolio is 2.5% of the first $30
million of the Portfolio's average daily net assets, 2.0% of the next $70
million of its average daily net assets and 1.5% of its average daily net assets
in excess of $100 million. Certain expenses, such as brokerage commissions,
taxes, interest, distribution fees, certain expenses attributable to investing
outside the United States and extraordinary items, are excluded from this
limitation.
In connection with its management of the business affairs of the Trust,
Mitchell Hutchins bears the following expenses:
(1) the salaries and expenses of all of its and the Trust's personnel except
the fees and expenses of trustees who are not affiliated persons of Mitchell
Hutchins or the Trust's Advisers;
(2) all expenses incurred, by Mitchell Hutchins or by the Trust in
connection with managing the ordinary course of the Trust's business, other than
those assumed by the Trust as described below; and
(3) the fees payable to each Adviser pursuant to the Advisory Agreements
between Mitchell Hutchins and each Adviser.
Under the terms of the Management Agreement, each Portfolio bears all
expenses incurred in its operation that are not specifically assumed by Mitchell
Hutchins or the Portfolio's Adviser. General expenses of the Trust not readily
identifiable as belonging to a Portfolio or to the Trust's other Portfolios are
allocated among series by or under the direction of the board of trustees in
such manner as the board deems to be fair and equitable. Expenses borne by each
Portfolio include the following (or a Portfolio's share of the following): (1)
the cost (including brokerage commissions) of securities purchased or sold by
33
<PAGE>
a Portfolio and any losses incurred in connection therewith, (2) fees payable to
and expenses incurred on behalf of a Portfolio by Mitchell Hutchins, (3)
organizational expenses, (4) filing fees and expenses relating to the
registration and qualification of a Portfolio's shares and the Trust under
federal and state securities laws and maintenance of such registrations and
qualifications, (5) fees and salaries payable to trustees who are not interested
persons (as defined in the 1940 Act) of the Trust, Mitchell Hutchins or the
Adviser, (6) all expenses incurred in connection with trustees' services,
including travel expenses, (7) taxes (including any income or franchise taxes)
and governmental fees, (8) costs of any liability, uncollectible items of
deposit and other insurance or fidelity bonds, (9) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or a Portfolio for violation of any law, (10) legal,
accounting and auditing expenses, including legal fees of special counsel for
the independent trustees, (11) charges of custodians, transfer agents and other
agents, (12) costs of preparing share certificates, (13) expenses of setting in
type and printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders, and costs of mailing such materials to existing shareholders, (14)
any extraordinary expenses (including fees and disbursements of counsel)
incurred by the Trust or a Portfolio, (15) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations, (16) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the board and any committees thereof, (17) the cost of
investment company literature and other publications provided to trustees and
officers and (18) costs of mailing, stationery and communications equipment.
Under the Management Agreement, Mitchell Hutchins will not be liable for any
error or judgment or mistake of law or for any loss suffered by a Portfolio in
connection with the performance of the contract, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Mitchell
Hutchins in the performance of its duties or from reckless disregard of its
duties and obligations thereunder. The Management Agreement terminates
automatically upon its assignment and is terminable at any time without penalty
by the Trust's board of trustees or by vote of the holders of a majority of a
Portfolio's outstanding voting securities, on 60 days' written notice to
Mitchell Hutchins or by Mitchell Hutchins on 60 days' written notice to the
Portfolio.
The following table shows the approximate net assets as of December 31,
1995, sorted by category of investment objective, of the investment companies as
to which Mitchell Hutchins serves as adviser or sub-adviser. An investment
company may fall into more than one of the categories below.
<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
- ------------------- ----------
($ MIL)
<S> <C>
Domestic (excluding Money Market)....................................... $ 5,674.6
Global.................................................................. 2,847.3
Equity/Balanced......................................................... 2,810.4
Fixed Income (excluding Money Market)................................... 5,711.5
Taxable Fixed Income.................................................. 3,957.9
Tax-Free Fixed Income................................................. 1,753.6
Money Market Funds...................................................... 20,622.2
</TABLE>
ADVISORY ARRANGEMENTS. As noted in the Prospectus, subject to the monitoring
of the Manager and, ultimately, the trustees, each Adviser manages the
securities held by the Portfolio it serves in accordance
34
<PAGE>
with the Portfolio's stated investment objectives and policies, makes investment
decisions for the Portfolio and places orders to purchase and sell securities on
behalf of the Portfolio.
The Advisory Agreements were approved by the board of trustees including a
majority of the Trustees who are not parties to such contract or interested
persons of any such parties, on June 15, 1995 and was approved by Mitchell
Hutchins, as sole shareholder of the Trust on June 19, 1995.
Each Advisory Agreement provides that it will terminate in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement. Each Advisory Agreement may be terminated by the Trust
upon not more than 60 days' written notice. Each Advisory Agreement may be
terminated by Mitchell Hutchins or the Adviser upon not more than 120 days'
written notice. Each Advisory Agreement provides that it will continue in effect
for a period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in accordance with the
requirements of the 1940 Act.
Under the Advisory Agreements, the Advisers will not be liable for any error
or judgment or mistake of law or for any loss suffered by a Portfolio in
connection with the performance of the contract, except a loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Advisers
in the performance of their duties or from reckless disregard of their duties
and obligations thereunder. Each Adviser has agreed to its fees as described in
the Prospectus and which are generally lower than the fees it charges to
institutional accounts for which it serves as investment adviser and performs
all administrative functions associated with serving in that capacity in
recognition of the reduced administrative responsibilities it has undertaken
with respect to the Portfolio. By virtue of the management, monitoring and
administrative functions performed by Mitchell Hutchins, and the fact that
Advisers are not required to make decisions regarding the allocation of assets
among the major sectors of the securities markets, each Adviser serves in a
subadvisory capacity to the Portfolio. Subject to the monitoring by the Manager
and, ultimately, the board of trustees, each Adviser's responsibilities are
limited to managing the securities held by the Portfolio it serves in accordance
with the Portfolio's stated investment objective and policies, making investment
decisions for the Portfolio and placing orders to purchase and sell securities
on behalf of the Portfolio.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of the
shares of each Portfolio under a distribution contract with the Trust dated as
of June 15, 1995 ("Distribution Contract") that requires Mitchell Hutchins to
use its best efforts, consistent with its other businesses, to sell shares of
the Portfolios. Shares of the Portfolios are offered continuously. Under a
dealer agreement between Mitchell Hutchins and PaineWebber dated as of June 15,
1995 ("Dealer Agreement"), PaineWebber sells the Portfolios' shares.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for a Portfolio other than PACE Money
Market Investments are made by the Adviser, subject to the overall review of the
Manager and the board of trustees. Decisions to buy and sell securities for PACE
Money Market Investments are made by Mitchell Hutchins, subject to the overall
review of the board of trustees. Although investment decisions for the
Portfolios are made independently from those of the other accounts managed by
the Adviser or Mitchell Hutchins, as applicable, investments of the type that
the Portfolio may make also may be made by those other accounts. When a
Portfolio and one or more other accounts managed by the Adviser or Mitchell
35
<PAGE>
Hutchins, as applicable, are prepared to invest in, or desire to dispose of, the
same security, available investments or opportunities for sales will be
allocated in a manner believed by the Adviser or Mitchell Hutchins, as
applicable, to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by a Portfolio or the size of the position
obtained or disposed of by a Portfolio.
Transactions on U.S. stock exchanges and some foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. No stated
commission is generally applicable to securities traded in U.S. OTC markets, but
the prices of those securities include undisclosed commissions or mark-ups. The
cost of securities purchased from underwriters include an underwriting
commission or concession and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down. U.S. government
securities generally are purchased from underwriters or dealers, although
certain newly-issued U.S. government securities may be purchased directly from
the U.S. Treasury or from the issuing agency or instrumentality.
In selecting brokers or dealers to execute securities transactions on behalf
of a Portfolio, its Adviser or Mitchell Hutchins, as applicable, seeks the best
overall terms available. In assessing the best overall terms available for any
transactions, the Adviser or Mitchell Hutchins, as applicable, will consider the
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the amount of the commission, if any, for the specific
transaction and on a continuing basis. In addition, each Advisory Agreement
between the Trust and an Adviser authorizes the Adviser, in selecting brokers or
dealers to execute a particular transaction, and in evaluating the best overall
terms available, to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
the Portfolio and/or other accounts over which the Adviser or its affiliates
exercise investment discretion. The fees under the Management Agreement and the
Advisory Agreements, respectively, are not reduced by reason of a Portfolio's
Adviser receiving brokerage and research services. The board of trustees of the
Trust will periodically review the commissions paid by a Portfolio to determine
if the commissions paid over representative periods of time were reasonable in
relation to the benefits inuring to the Portfolio. OTC purchases and sales by a
Portfolio are transacted directly with principal market makers except in those
cases in which better prices and executions may be obtained elsewhere.
To the extent consistent with applicable provisions of the 1940 Act and the
rules and exemptions adopted by the SEC under the 1940 Act, the board of
trustees has determined that transactions for a Portfolio may be executed
through PaineWebber and other affiliated broker-dealers if, in the judgment of
the Adviser, the use of an affiliated broker-dealer is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers,
and if, in the transaction, the affiliated broker-dealer charges the Portfolio a
fair and reasonable rate.
No Portfolio will purchase any security, including U.S. government
securities or municipal securities, during the existence of any underwriting or
selling group relating thereto of which PaineWebber is a member, except to the
extent permitted by the SEC.
A Portfolio may use PaineWebber and other affiliated broker-dealers as a
commodities broker in connection with entering into futures contracts and
options on futures contracts if, in the judgment of the
36
<PAGE>
Adviser, the use of an affiliated broker-dealer is likely to result in price and
execution at least as favorable as those of other qualified broker-dealers, and
if, in the transaction, the affiliated broker-dealer charges the Portfolio a
fair and reasonable rate.
Research services furnished by dealers or brokers with or through which a
Portfolio effects securities transactions may be used by Mitchell Hutchins or an
Adviser in advising other funds or accounts and, conversely, research services
furnished to Mitchell Hutchins or an Adviser by dealers or brokers in connection
with other funds or accounts Mitchell Hutchins or an Adviser advises may be used
by Mitchell Hutchins or an Adviser in advising the Portfolios over which
Mitchell Hutchins or the Adviser has investment discretion. Information and
research received from such brokers or dealers will be in addition to, and not
in lieu of, the services required to be performed by Mitchell Hutchins or the
Advisers under the Management Agreement and Advisory Agreements.
PORTFOLIO TURNOVER
PACE Money Market Investments may attempt to increase yields by trading to
take advantage of short-term market variations, which results in high portfolio
turnover. Because purchases and sales of money market instruments are usually
effected as principal transactions, this policy does not result in high
brokerage commissions to the Portfolio. The other Portfolios do not intend to
seek profits through short-term trading. Nevertheless, the Portfolios will not
consider portfolio turnover rate a limiting factor in making investment
decisions.
A Portfolio's turnover rate is calculated by dividing the lesser of
purchases or sales of its portfolio securities for the year by the monthly
average value of the portfolio securities. Securities or options with remaining
maturities of one year or less on the date of acquisition are excluded from the
calculation. Under certain market conditions, a Portfolio authorized to engage
in transactions in options may experience increased portfolio turnover as a
result of its investment strategies. For instance, the exercise of a substantial
number of options written by a Portfolio (due to appreciation of the underlying
security in the case of call options or depreciation of the underlying security
in the case of put options) could result in a turnover rate in excess of 100%. A
portfolio turnover rate of 100% would occur if all of a Portfolio's securities
that are included in the computation of turnover were replaced once during a
period of one year.
Certain other practices that may be employed by a Portfolio also could
result in high portfolio turnover. For example, portfolio securities may be sold
in anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another comparable quality purchased at
approximately the same time to take advantage of what an Adviser believes to be
a temporary disparity in the normal yield relationship between the two
securities. These yield disparities may occur for reasons not directly related
to the investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for, or supply of, various
types of securities.
Portfolio turnover rates may vary greatly from year to year as well as
within a particular year and may be affected by cash requirements for
redemptions of a Portfolio's shares as well as by requirements that enable the
Portfolio to receive favorable tax treatment.
37
<PAGE>
ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION
As discussed in the Prospectus, shares of each Portfolio may be exchanged
without payment of any exchange fee for shares of another Portfolio at their
respective net asset values. Portfolio shares, however, are not exchangeable
with shares of other PaineWebber mutual funds. Shareholders will receive at
least 60 days' notice of any termination or material modification of the
exchange offer, except no notice need be given if, under extraordinary
circumstances, either redemptions are suspended under the circumstances
described below or a Portfolio temporarily delays or ceases the sales of its
shares because it is unable to invest amounts effectively in accordance with the
Portfolio's investment objectives, policies and restrictions.
If conditions exist that make cash payments undesirable, each Portfolio
reserves the right to honor any request for redemption by making payment in
whole or in part in securities chosen by the Portfolio and valued in the same
way as they would be valued for purposes of computing the Portfolio's net asset
value. If payment is made in securities, a shareholder may incur brokerage
expenses in converting these securities into cash. The Trust has elected,
however, to be governed by Rule 18f-1 under the 1940 Act, under which a
Portfolio is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio during any 90-day period
for one shareholder. This election is irrevocable unless the SEC permits its
withdrawal. A Portfolio may suspend redemption privileges or postpone the date
of payment during any period (1) when the NYSE is closed or trading on the NYSE
is restricted as determined by the SEC, (2) when an emergency exists, as defined
by the SEC, that makes it not reasonably practicable for the Portfolio to
dispose of securities owned by it or fairly to determine the value of its assets
or (3) as the SEC may otherwise permit. The redemption price may be more or less
than the shareholder's cost, depending on the market value of a Portfolio's
portfolio at the time.
VALUATION OF SHARES
Each Portfolio determines its net asset value per share as of the close of
regular trading (currently 4:00 p.m., eastern time) on the NYSE on each Monday
through Friday when the NYSE is open. Currently, the NYSE is closed on the
observance of the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Securities that are listed on U.S. and foreign stock exchanges are valued at
the last sale price on the day the securities are being 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 generally valued on the
exchange considered by Mitchell Hutchins as the primary market. Securities
traded in the OTC market and listed on the National Association of Securities
Dealers Automatic Quotation System ("NASDAQ") are valued at the last available
sale price on NASDAQ at 4:00 p.m., eastern time; other OTC securities are valued
at the last bid price available prior to valuation. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Trust's board of
trustees. It should be recognized that judgment often plays a greater role in
valuing non-investment grade debt securities than is the case with respect to
securities for which a broader range of dealer quotations and last-sale
information is available. All investments quoted in foreign currency are valued
daily in U.S. dollars on the basis of the foreign currency exchange rate
prevailing at the time such valuation is determined by the Portfolios'
custodian. The amortized cost method of valuation generally is
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used to value debt obligations with 60 days or less remaining until maturity,
unless the board of trustees determines that this does not represent fair value.
Foreign currency exchange rates are generally determined prior to the close
of trading on the NYSE. Occasionally events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of trading on the NYSE, which events will not be
reflected in a computation of a Portfolio's net asset value on that day. If
events materially affecting the value of such investments or currency exchange
rates occur during such time period, the investments will be valued at their
fair value as determined in good faith by or under the direction of the Trust's
board of trustees. The foreign currency exchange transaction of a Portfolio
conducted on a spot (that is, cash) basis are valued at the spot rate for
purchasing or selling currency prevailing on the foreign exchange market. This
rate under normal market conditions differs from the prevailing exchange rate in
an amount generally less than one-tenth of one percent due to the costs of
converting from one currency to another.
PACE Money Market Investments values its portfolio securities in accordance
with the amortized cost method of valuation under Rule 2a-7 (the "Rule") under
the 1940 Act. To use amortized cost to value its portfolio securities, the
Portfolio must adhere to certain conditions under the Rule relating to the
Portfolio's investments, some of which are discussed in the Prospectus.
Amortized cost is an approximation of market value of an instrument, whereby the
difference between its acquisition cost and value at maturity is amortized on a
straight-line basis over the remaining life of the instrument. The effect of
changes in the market value of a security as a result of fluctuating interest
rates is not taken into account and thus the amortized cost method of valuation
may result in the value of a security being higher or lower than its actual
market value. In the event that a large number of redemptions take place at a
time when interest rates have increased, the Portfolio might have to sell
portfolio securities prior to maturity and at a price that might not be
desirable.
The board of trustees of the Trust has established procedures ("Procedures")
for the purpose of maintaining a constant net asset value of $1.00 per share for
PACE Money Market Investments, which include a review of the extent of any
deviation of net asset value per share, based on available market quotations,
from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1%
for any Portfolio, the board of trustees will promptly consider whether any
action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redeeming shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. PACE Money Market Investments will maintain a
dollar-weighted average portfolio maturity of 90 days or less and will not
purchase any instrument with a remaining maturity greater than 13 months (as
calculated under the Rule), will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that are of
eligible quality under the Rule and that the Portfolio's Adviser, acting
pursuant to the Procedures, determine present minimal credit risks, and will
comply with certain reporting and recordkeeping procedures. There is no
assurance that a constant net asset value per share will be maintained. In the
event amortized cost ceases to represent fair value per share, the board will
take appropriate action.
In determining the approximate market value of portfolio investments, each
Portfolio may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula
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<PAGE>
method not been used. All cash, receivables and current payables are carried at
their face value. Other assets, if any, are valued at fair value as determined
in good faith by or under the direction of the board of trustees.
PERFORMANCE INFORMATION
Each Portfolio's performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represent past performance
and are not intended to indicate future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
TOTAL RETURN CALCULATIONS. Average annual total return quotes ("Standardized
Return") used in a Portfolio's Performance Advertisements are calculated
according to the following formula:
<TABLE>
<S> <C> <C> <C>
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a
Portfolio
T = average annual total return of shares of that Portfolio
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of that period.
</TABLE>
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the Performance
Advertisements for publication. Total return, or "T" in the formula above, is
computed by finding the average annual change in the value of an initial $1,000
investment over the period. All dividends and other distributions are assumed to
have been reinvested at net asset value.
Each Portfolio also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). A Portfolio calculates Non-Standardized
Return for specified periods of time by assuming an investment of $1,000 in
Portfolio shares and assuming the reinvestment of all dividends and other
distributions. The rate of return is determined by subtracting the initial value
of the investment from the ending value and by dividing the remainder by the
initial value.
YIELD. Yields used in a Portfolio's Performance Advertisements, except for
those given for PACE Money Market Investments, are calculated by dividing the
Portfolio's interest and dividend income attributable to the Portfolio's shares
for a 30-day period ("Period"), net of expenses attributable to such Portfolio,
by the average number of shares of such Portfolio entitled to receive dividends
during the Period and expressing the result as an annualized percentage
(assuming semi-annual compounding) of the net asset value per share at the end
of the Period. Yield quotations are calculated according to the following
formula:
a - b
YIELD = 2[( _____ + 1)6 - 1]
cd
<TABLE>
<S> <C> <C> <C>
where: a = interest and other income earned during the period attributable to a Portfolio
b = expenses accrued for the Period attributable to a Portfolio (net of
reimbursements)
c = the average daily number of shares of a Portfolio outstanding during the period
that were entitled to receive dividends
d = the net asset value per share on the last day of the Period
</TABLE>
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<PAGE>
Except as noted below, in determining interest and dividend income earned
during the Period (a variable in the above formula), a Portfolio calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last Business Day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the subsequent period that the obligation is in the
portfolio. Once interest earned is calculated in this fashion for each debt
obligation held by the Portfolio, interest earned during the Period is then
determined by totalling the interest earned on all debt obligations. For
purposes of these calculations, the maturity of an obligation with one or more
call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.
Tax exempt-yield for PACE Municipal Fixed Income Investments is calculated
according to the same formula except the variable "a" equals interest exempt
from federal income tax earned during the Period. This tax-exempt yield may then
be translated into tax-equivalent yield according to the following formula:
e
TAX EQUIVALENT YIELD = ( ___ ) + t
1-p
[S] [C] [C]
E = tax-exempt yield of the Portfolio
p = stated income tax rate
t = taxable yield of the Portfolio
The tax-equivalent yield of PACE Municipal Fixed Income Investments assumes
a 39.6% effective federal tax rate.
PACE Money Market Investments computes its yield and effective yield
quotations using standardized methods required by the SEC. The Portfolio from
time to time advertises (1) its current yield based on a recently ended
seven-day period, computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from that shareholder account, dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7), with the
resulting yield figure carried to at least the nearest hundredth of one percent,
and (2) its effective yield based on the same seven-day period by compounding
the base period return by adding 1, raising the sum to a power equal to (365/7),
and subtracting 1 from the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each Portfolio fluctuates, it cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each Portfolio's
investment policies, including the types of investments made, the average
maturity of the portfolio securities and whether there are any special account
charges that may reduce the yield.
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<PAGE>
OTHER INFORMATION. In Performance Advertisements, each Portfolio may compare
its Standardized Return and/or their Non-Standardized Return with data published
by Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies,
Inc. ("CDA"), Wiesenberger Investment Companies Services ("Wiesenberger"),
Investment Company Data, Inc. ("ICD"), or Morningstar Mutual Funds
("Morningstar") or with the performance of appropriate recognized stock and
other indices, including (but not limited to) the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, the Wilshire 5000
Index, other Wilshire Associates equities indices, Frank Russell Company equity
indices, the Morgan Stanley Capital International Perspective Indices, the
Salomon Brothers World Government bond indices, the Lehman Brothers Bond
indices, Municipal Bond Buyers Indices, 90 day Treasury Bills, 30-year and
10-year U.S. Treasury Bonds and changes in the Consumer Price Index as published
by the U.S. Department of Commerce. The Portfolio also may refer in such
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of a Portfolio and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE
KIPLINGER LETTERS. Ratings may include criteria relating to portfolio
characteristics in addition to performance information. In connection with a
ranking, a Portfolio may also provide additional information with respect to the
ranking, such as the particular category to which it relates, the number of
funds in the category, the criteria on which the ranking is based, and the
effect of sales charges, fee waivers and/or expense reimbursements.
Each Portfolio may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends or other distributions on a Portfolio investment are
reinvested by being paid in additional Portfolio shares, any future income or
capital appreciation of the Portfolio would increase the value, not only of the
original Portfolio investment, but also of the additional Portfolio shares
received through reinvestment. As a result, the value of the Portfolio
investment would increase more quickly than if dividends or other distributions
had been paid in cash.
TAXES
ALL PORTFOLIOS. Each Portfolio is treated as a separate corporation for
federal income tax purposes. In order to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code, each Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gain and, for certain Portfolios, net
gains from certain foreign currency transactions) plus, in the case of PACE
Municipal Fixed Income Investments, its net interest income excludable from
gross income under section 103(a) of the Internal Revenue Code ("Distribution
Requirement") and must meet several additional requirements. With respect to
each Portfolio, these requirements include the following: (1) the Portfolio must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from options, futures or forward currency contracts) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); (2) the Portfolio must derive less than 30% of its gross
income each taxable year from the
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<PAGE>
sale or other disposition of securities, or any of the following, that were held
for less than three months-- options or futures (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contracts
thereon) that are not directly related to the Portfolio's principal business of
investing in securities (or options and futures with respect to securities)
("Short-Short Limitation"); (3) at the close of each quarter of the Portfolio's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. government securities, securities of other RICs and
other securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Portfolio's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Portfolio's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. Proposed legislation would repeal
the Short-Short Limitation.
Dividends and other distributions declared by a Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in any of those months will be deemed to have been paid by the Portfolio and
received by the shareholders on December 31 of that year if the distributions
are paid by the Portfolio during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which that December
31 falls.
A portion of the dividends from a Portfolio's investment company taxable
income (whether paid in cash or in additional Portfolio shares) may be eligible
for the dividends-received deduction allowed to corporations. The eligible
portion may not exceed the aggregate dividends received by a Portfolio from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If shares of a Portfolio are sold at a loss after being held for six months
or less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or capital gain distribution, the shareholder will
pay full price for the shares and receive some portion of the price back as a
taxable distribution.
Dividends and interest received by certain Portfolios may be subject to
income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on their securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Portfolio's total assets at the close of its taxable year
consists of securities of foreign corporations, the Portfolio will be eligible
to, and may, file an election with the Internal Revenue Service that will enable
its shareholders, in effect, to receive the benefit of the foreign tax credit
with respect to any foreign and U.S. possessions income taxes paid by it.
Pursuant to the election, the Portfolio would treat those taxes as dividends
paid to its shareholders and each shareholder would be required to (1) include
in gross income, and treat as paid by the shareholder, the shareholder's
proportionate share of those taxes, (2) treat the shareholder's share of those
taxes and of any dividend paid by the Portfolio that represents income from
foreign or U.S. possessions sources as the shareholder's own income from those
sources, and (3) either deduct the taxes deemed paid by the shareholder in
computing the shareholder's taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against the shareholder's
federal income tax. Each Portfolio will report to its shareholders shortly after
each taxable year their respective shares of the Portfolio's income from sources
within, and taxes paid to, foreign countries and U.S. possessions if it makes
this election.
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<PAGE>
Each Portfolio will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
The use of hedging and option income strategies, such as writing (selling)
and purchasing options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the character
and timing of recognition of the gains and losses a Portfolio realizes in
connection therewith. Income from the disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and income
from transactions in options, futures and forward contracts derived by a
Portfolio with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they are
held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts on foreign currencies,
that are not directly related to a Portfolio's principal business of investing
in securities (or options and futures with respect to securities) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
If a Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Portfolio satisfies
the Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Portfolio will consider whether it should seek to qualify for this treatment for
its hedging transactions. To the extent a Portfolio does not qualify for this
treatment, it may be forced to defer the closing out of certain options, futures
and forward currency contracts beyond the time when it otherwise would be
advantageous to do so, in order for the Portfolio to qualify as a RIC.
Certain Portfolios may acquire zero coupon Treasury securities, zero coupon
securities of corporate issuers, other securities issued with original issue
discount ("OID") and payment-in-kind ("PIK") securities. As the holder of such
securities, each such Portfolio would have to include in its gross income (1)
the OID that accrues on the securities during the taxable year, even if it
receives no corresponding payment on the securities during the year, and (2) the
securities it receives as "interest" on PIK securities. With respect to clause
(1) above, each Portfolio will elect similar treatment for securities purchased
at a discount from their face value ("market discount"). Because each Portfolio
annually must distribute substantially all of its investment company taxable
income, including any accrued OID, market discount and other non-cash income, in
order to satisfy the Distribution Requirement and avoid imposition of the Excise
Tax, a Portfolio may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from a Portfolio's cash assets or
from the proceeds of sales of portfolio securities, if necessary. A Portfolio
may realize capital gains or losses from those sales, which would increase or
decrease the Portfolio's investment company taxable income and/or net capital
gain (the excess of net long-term capital gain over net short-term capital
loss). In addition, any such gains may be realized on the disposition of
securities held for less than three months. Because of the Short-Short
Limitation, any such gains would reduce a Portfolio's ability to sell other
securities, or certain options, futures or forward currency contracts, held for
less than three months that it might wish to sell in the ordinary course of its
portfolio management.
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<PAGE>
PACE INTERNATIONAL EQUITY INVESTMENTS AND PACE INTERNATIONAL EMERGING
MARKETS EQUITY INVESTMENTS. Each of these Portfolios may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Portfolio will be subject to federal income tax on a portion of
any "excess distribution" received on the stock of a PFIC or of any gain on
disposition of such stock (collectively "PFIC income"), plus interest thereon,
even if the Portfolio distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Portfolio's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. If a Portfolio
invests in a PFIC and elects to treat the PFIC as a "qualified electing fund"
("QEF") then in lieu of the foregoing tax and interest obligation, the Portfolio
will be required to include in income each year its pro rata share of the QEF's
annual ordinary earnings and net capital gain, even if they are not distributed
by the QEF to the Portfolio; those amounts likely would have to be distributed
by the Portfolio to satisfy the Distribution Requirement and avoid imposition of
the Excise Tax. In most instances it will be very difficult, if not impossible,
to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Portfolios,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the owner's adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
PACE MUNICIPAL FIXED INCOME INVESTMENTS. Entities or other persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by IDBs or PABs should consult their tax advisers before purchasing
shares of this Portfolio because, for users of certain of these facilities, the
interest on those bonds is not exempt from federal income tax. For these
purposes, "substantial user" is defined to include a "non-exempt person" who
regularly uses in a trade or business a part of a facility financed from the
proceeds of IDBs or PABs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as the Portfolio) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from the Portfolio still
are tax-exempt to the extent described in the Prospectus; they are only included
in the calculations of whether a recipient's income exceeds the established
amounts.
If shares of the Portfolio are sold at a loss after being held for six
months or less, the loss will be disallowed to the extent of any exempt-interest
dividends received on those shares and will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received thereon.
Although the Portfolio does not currently expect to invest in instruments
that generate taxable interest income, if it does so, under the circumstances
described in the Prospectus, the portion of any Portfolio dividend attributable
to the interest earned thereon will be taxable to the Portfolio's shareholders
as ordinary income to the extent of the Portfolio's earnings and profits, and
only the remaining portion will qualify as an exempt-interest dividend. The
respective portions will be determined by the "actual earned" method, under
which the portion of any dividend that qualifies as an exempt-interest dividend
may vary, depending on the relative proportions of tax-exempt and taxable
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<PAGE>
interest earned during the dividend period. Moreover, if the Portfolio realizes
capital gain as a result of market transactions, any distributions of the gain
will be taxable to its shareholders.
OTHER INFORMATION
The name of the Trust is Managed Accounts Services Portfolio Trust. The
Trust is organized as a Delaware business trust. Although Delaware law
statutorily limits the potential liabilities of a Delaware business trust's
shareholders to the same extent as it limits the potential liabilities of
shareholders of a Delaware corporation, shareholders of a Portfolio could, under
certain conflicts of laws jurisprudence in various states, be held personally
liable for the obligations of the Trust or a Portfolio. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust or its Portfolios and requires that notice of such disclaimer be given in
each written obligation made or issued by the trustees or by any officers or
officer by or on behalf of the Trust, the Portfolios, the trustees or any of
them in connection with the Trust. The Trust Instrument provides for
indemnification from a Portfolio's property for all losses and expenses of any
Portfolio shareholder held personally liable for the obligations of a Portfolio.
Thus, the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which a Portfolio itself
would be unable to meet its obligations, a possibility which Mitchell Hutchins
believes is remote and not material. Upon payment of any liability incurred by a
shareholder solely by reason of being or having been a shareholder of a
Portfolio, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Portfolio. The trustees intend to
conduct the operations of the Portfolios in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the
Portfolios.
In the event any of the initial shares of a Portfolio are redeemed during
the five-year amortization period, the redemption proceeds will be reduced by a
pro rata portion of any unamortized deferred organizational expenses in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
COUNSEL. The law firm of Willkie Farr & Gallagher, 153 East 53rd Street, New
York, New York serves as counsel to the Trust. Willkie Farr & Gallagher also
acts as counsel to Mitchell Hutchins and PaineWebber in connection with other
matters.
INDEPENDENT AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New
York, serves as the Trust's independent auditors.
FINANCIAL STATEMENTS
The Trust's unaudited financial statements for the period August 24, 1995
(commencement of operations) to November 30, 1995, and the accompanying notes
(unaudited) appearing therein, is a separate document supplied with this
Statement of Additional Information.
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Managed Accounts Services Portfolio Trust
We have audited each of the accompanying statements of assets and
liabilities of Managed Accounts Services Portfolio Trust (comprising,
respectively, PACE Money Market Investments, PACE Government Securities Fixed
Income Investments, PACE Intermediate Fixed Income Investments, PACE Strategic
Fixed Income Investments, PACE Municipal Fixed Income Investments, PACE Global
Fixed Income Investments, PACE Large Company Value Equity Investments, PACE
Large Company Growth Equity Investments, PACE Small/Medium Company Value Equity
Investments, PACE Small/Medium Company Growth Equity Investments, PACE
International Equity Investments and PACE International Emerging Markets Equity
Investments Portfolios) as of June 16, 1995. These statements of assets and
liabilities are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these statements of assets and liabilities based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Managed
Accounts Services Portfolio Trust at June 16, 1995 in conformity with generally
accepted accounting principles.
New York, New York
June 16, 1995
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MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE MONEY MARKET INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 12,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 106,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 12,000 shares of beneficial interest, $0.001
par value, issued and outstanding)..................................... $ 12,000
========
Net asset value per share................................................ $ 1.00
========
</TABLE>
ORGANIZATION
PACE Money Market Investments (the "Portfolio") is a diversified portfolio
of Managed Accounts Services Portfolio Trust (the "Trust"). The Trust is
registered with the Securities and Exchange Commission as an open-end management
investment company currently composed of twelve separate no-load investment
portfolios and was organized as a Delaware business trust under the laws of the
State of Delaware by Certificate of Trust dated September 9, 1994, as amended
June 9, 1995. The trustees of the Trust have authority to issue an unlimited
number of shares of beneficial interest of separate series, par value $0.001 per
share. Prior to June 16, 1995, the Trust has had no activities other than
organizational matters and the sale to Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") of 12,000 shares of beneficial interest of the Portfolio
for $12,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational cost, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENT
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.15% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at an annual rate of
0.20% of the Portfolio's average daily net assets.
48
<PAGE>
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.50% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the Pace Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
49
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Government Securities Fixed Income Investments (the "Portfolio") is a
diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.50% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
50
<PAGE>
Under a separate Sub-Advisory Agreement, between Mitchell Hutchins and
Pacific Investment Management Company (the "Sub-Adviser"), Mitchell Hutchins
(not the Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.25% of
the Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.85% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
51
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE INTERMEDIATE FIXED INCOME INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Intermediate Fixed Income Investments (the "Portfolio") is a
non-diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.40% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
52
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Pacific Income Advisers, Inc. (the "Sub-Adviser"), Mitchell Hutchins (not the
Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.20% of the
Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.85% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
53
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE STRATEGIC FIXED INCOME INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Strategic Fixed Income Investments (the "Portfolio") is a diversified
portfolio of Managed Accounts Services Portfolio Trust (the "Trust"). The Trust
is registered with the Securities and Exchange Commission as an open-end
management investment company currently composed of twelve separate no-load
investment portfolios and was organized as a Delaware business trust under the
laws of the State of Delaware by Certificate of Trust dated September 9, 1994,
as amended June 9, 1995. The trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. Prior to June 16, 1995, the Trust has had no activities other
than organizational matters and the sale to Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest of the Portfolio
for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.50% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
54
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Pacific Investment Management Company (the "Sub-Adviser"), Mitchell Hutchins
(not the Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.25% of
the Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.85% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
55
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE MUNICIPAL FIXED INCOME INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Municipal Fixed Income Investments (the "Portfolio") is a diversified
portfolio of Managed Accounts Services Portfolio Trust (the "Trust"). The Trust
is registered with the Securities and Exchange Commission as an open-end
management investment company currently composed of twelve separate no-load
investment portfolios and was organized as a Delaware business trust under the
laws of the State of Delaware by Certificate of Trust dated September 9, 1994,
as amended June 9, 1995. The trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. Prior to June 16, 1995, the Trust has had no activities other
than organizational matters and the sale to Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest of the Portfolio
for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.40% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
56
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and Morgan
Grenfell Capital Management, Incorporated (the "Sub-Adviser"), Mitchell Hutchins
(not the Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.20% of
the Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.85% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the Pace Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
57
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE GLOBAL FIXED INCOME INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Global Fixed Income Investments (the "Portfolio") is a non-diversified
portfolio of Managed Accounts Services Portfolio Trust (the "Trust"). The Trust
is registered with the Securities and Exchange Commission as an open-end
management investment company currently composed of twelve separate no-load
investment portfolios and was organized as a Delaware business trust under the
laws of the State of Delaware by Certificate of Trust dated September 9, 1994,
as amended June 9, 1995. The trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. Prior to June 16, 1995, the Trust has had no activities other
than organizational matters and the sale to Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest of the Portfolio
for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.60% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
58
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and Rogge
Global Partners plc (the "Sub-Adviser"), Mitchell Hutchins (not the Portfolio)
pays the Sub-Adviser a fee at the annual rate of 0.35% of the Portfolio's
average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 0.95% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, Shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
59
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Large Company Value Equity Investments (the "Portfolio") is a
diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.60% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
60
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Brinson Partners, Inc. (the "Sub-Adviser"), Mitchell Hutchins (not the
Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.30% of the
Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.00% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
61
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Large Company Growth Equity Investments (the "Portfolio") is a
diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.60% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
62
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Chancellor Capital Management, Inc. (the "Sub-Adviser"), Mitchell Hutchins (not
the Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.30% of the
Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.00% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
63
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Small/Medium Company Value Equity Investments (the "Portfolio") is a
diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.60% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
64
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Brandywine Asset Management, Inc. (the "Sub-Adviser"), Mitchell Hutchins (not
the Portfolio) pays the Sub-Adviser a fee at the annual rate of 0.30% of the
Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.00% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
65
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE Small/Medium Company Growth Equity Investments (the "Portfolio") is a
diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.60% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
66
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Westfield Capital Management Company, Inc. (the "Sub-Adviser"), Mitchell
Hutchins (not the Portfolio) pays the Sub-Adviser a fee at the annual rate of
0.30% of the Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.00% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, Shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolio of
the Trust.
67
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE INTERNATIONAL EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 per
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE International Equity Investments (the "Portfolio") is a diversified
portfolio of Managed Accounts Services Portfolio Trust (the "Trust"). The Trust
is registered with the Securities and Exchange Commission as an open-end
management investment company currently composed of twelve separate no-load
investment portfolios and was organized as a Delaware business trust under the
laws of the State of Delaware by Certificate of Trust dated September 9, 1994,
as amended June 9, 1995. The trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. Prior to June 16, 1995, the Trust has had no activities other
than organizational matters and the sale to Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest of the Portfolio
for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.70% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
68
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and Martin
Currie Inc. (the "Sub-Adviser"), Mitchell Hutchins (not the Portfolio) pays the
Sub-Adviser a fee at the annual rate of 0.40% of the Portfolio's average daily
net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.50% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, Shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolios of
the Trust.
69
<PAGE>
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 16, 1995
<TABLE>
<S> <C>
Assets:
Cash................................................................. $ 8,000
Deferred organizational expenses..................................... 94,833
--------
Total assets..................................................... 102,833
--------
Liabilities:
Organizational expenses payable...................................... 94,833
--------
Total liabilities................................................ 94,833
--------
Net Assets (applicable to 667 shares of beneficial interest, $0.001 par
value, issued and outstanding)......................................... $ 8,000
========
Net asset value per share................................................ $ 12.00
========
</TABLE>
ORGANIZATION
PACE International Emerging Markets Equity Investments (the "Portfolio") is
a diversified portfolio of Managed Accounts Services Portfolio Trust (the
"Trust"). The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company currently composed of twelve separate
no-load investment portfolios and was organized as a Delaware business trust
under the laws of the State of Delaware by Certificate of Trust dated September
9, 1994, as amended June 9, 1995. The trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share. Prior to June 16, 1995, the Trust has had no
activities other than organizational matters and the sale to Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") of 667 shares of beneficial interest
of the Portfolio for $8,000.
Costs incurred and to be incurred in connection with the organization and
initial registration of the Trust will be paid initially by Mitchell Hutchins;
however, the Trust will reimburse Mitchell Hutchins for such costs. Such
organizational costs, estimated at $94,833, and representing the Portfolio's
allocation of total organizational costs incurred by the Trust will be deferred
and amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commences investment operations.
MANAGEMENT AGREEMENTS
The Trust has entered into an Investment Management Agreement (the
"Management Agreement") with Mitchell Hutchins. Under the Management Agreement,
the Portfolio pays Mitchell Hutchins a fee for its services that is computed
daily and paid monthly at the annual rate of 0.90% of the Portfolio's average
daily net assets. In addition, the Portfolio also pays Mitchell Hutchins an
administration fee that is computed daily and paid monthly at the annual rate of
0.20% of the Portfolio's average daily net assets.
70
<PAGE>
Under a separate Sub-Advisory Agreement between Mitchell Hutchins and
Schroder Capital Management International Inc. (the "Sub-Adviser"), Mitchell
Hutchins (not the Portfolio) pays the Sub-Adviser a fee at the annual rate of
0.50% of the Portfolio's average daily net assets.
OTHER INFORMATION
Through the Portfolio's first fiscal year ending July 31, 1996, Mitchell
Hutchins will voluntarily reimburse expenses of the Portfolio or waive all or a
portion of the fees otherwise payable to them, or both, up to the point which
will lower the overall expense ratio of the Portfolio to 1.50% of the
Portfolio's average daily net assets.
Shares of the Portfolio currently are available only to participants in the
PaineWebber PACE Program ("PACE Program"). Under the PACE Program, Shareholders
will pay PaineWebber Incorporated a separate investment advisory fee at an
annual rate of up to 1.50% of the value of shares of each of the portfolio of
the Trust.
71
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S LONG-TERM DEBT RATINGS
AAA. Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues; Aa. Bonds which are rated "Aa"
are judged to be of high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which make the long-term risks
appear somewhat greater than the "Aaa" securities; A. Bonds which are rated "A"
possess many favorable investment attributes and are considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future; Baa. Bonds which are rated
"Baa" are considered as medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well; Ba. Bonds which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated "B" generally lack characteristics of the desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from "Aa" through "B" in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF S&P CORPORATE DEBT RATINGS
AAA. Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong; AA. Debt rated "AA" has a
very strong capacity to pay interest and repay principal and differs from the
higher rated issues only in small degree; A. Debt rated "A" has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories; BBB. Debt rated "BBB" is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories; BB, B. Debt rated "BB" and "B" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
least degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
72
<PAGE>
major risk exposures to adverse conditions; BB. Debt rated "BB" has less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BBB-" rating;
B. Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR indicates that no public rating has been requested, that there is
insufficient information in which to base a rating or that S&P does not rate a
particular type of obligation as matter of policy.
DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS
"AAA". An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks; "aa". An issue
which is rated "aa" is considered a high-grade preferred stock. This rating
indicates that there is reasonable assurance that earnings and asset protection
will remain relatively well maintained in the foreseeable future; "a". An issue
which is rated "a" is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are nevertheless expected to be
maintained at adequate levels; "baa". An issue which is rated "baa" is
considered to be medium grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate at present but may
be questionable over any great length of time; "ba". An issue which is rated
"ba" is considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very moderate and
not well safeguarded during adverse periods. Uncertainty of position
characterizes preferred stocks in this class; "b". An issue which is rated "b"
generally lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any long
period of time may be small; "caa". An issue which is rated "caa" is likely to
be in arrears on dividend payments. This rating designation does not purport to
indicate the future status of payments; "ca". An issue which is rated "ca" is
speculative in a high degree and is likely to be in arrears on dividends with
little likelihood of eventual payments; "c". This is the lowest rated class of
preferred or preference stock. Issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
73
<PAGE>
DESCRIPTION OF S&P PREFERRED STOCK RATINGS
"AAA". This is the highest rating that may be assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations. "AA". A preferred stock issue rated "AA" also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
"AAA"; "A". An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions; "BBB". An
issue rated "BBB" is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category; "BB", "B", "CCC". Preferred
stocks rated "BB", "B" and "CCC" are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Plus (+) or Minus (-): To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
DESCRIPTION OF MOODY'S SHORT-TERM DEBT RATINGS
PRIME-1. Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior capacity for repayment of short-term promissory obligations. P-1
repayment capacity will normally be evidenced by many of the following
characteristics: Leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation;
well-established access to a range of financial markets and assured sources of
alternate liquidity. PRIME-2. Issuers (or supporting institutions) rated Prime-2
(P-2) have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety. A-1. This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation. A-2. Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated "A-1". A-3. Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than
74
<PAGE>
obligations carrying the higher designations. B. Issues rated "B" are regarded
as having only an adequate capacity for timely payment. However, such capacity
may be damaged by changing conditions or short-term adversities.
DESCRIPTION OF MOODY'S FOUR HIGHEST MUNICIPAL BOND RATINGS
AAA. Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
AA. Bonds which are rated Aa are judged to be of high quality by all
standards. They are rated lower than the Aaa bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which made
the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A are judged to be upper medium grade obligations.
Security for principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
DESCRIPTION OF S&P FOUR HIGHEST MUNICIPAL BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree. The AA
rating may be modified by the addition of a plus or minus sign to show relative
standing within the AA rating category.
A. Debt rated A is regarded as safe. This rating differs from the two higher
ratings because, with respect to general obligation bonds, there is some
weakness which, under certain adverse circumstances, might impair the ability of
the issuer to meet debt obligations at some future date. With respect to revenue
bonds, debt service coverage is good but not exceptional and stability of
pledged revenues could show some variations because of increased competition or
economic influences in revenues.
BBB. Bonds rated BBB are regarded as having adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in the A category.
75
<PAGE>
DESCRIPTION OF MOODY'S HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER
SHORT-TERM LOANS
Moody's ratings for state and municipal notes and other short-term loans are
designated "Moody's Investment Grade" ("MIG" or, for variable or floating rate
obligations, "VMIG"). Such ratings recognize the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
and short-term cyclical elements are critical in short-term ratings. Symbols
used will be as follows:
MIG-1/VMIG-1. This designation denotes best quality. There is present
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing or both.
MIG-2/VMIG-2. Loans bearing this designation are of high quality, with
margins of protection that are ample although not so large as in the
preceding group.
DESCRIPTION OF S&P RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER SHORT-TERM
LOANS
S&P TAX EXEMPT NOTE RATINGS ARE GENERALLY GIVEN TO SUCH NOTES THAT MATURE IN
THREE YEARS OR LESS. THE TWO HIGHER RATING CATEGORIES ARE AS FOLLOWS:
SP-1. Very strong or strong capacity to pay principal and interest.
These issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
76
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO MANAGED ACCOUNTS SERVICES
GIVE ANYINFORMATION OR TO MAKE PORTFOLIO TRUST
ANY REPRESENTATIONS NOT CONTAINED
IN THE PROSPECTUS OR IN THIS
STATEMENT OF ADDITIONAL INFOR-
MATION IN CONNECTION WITH THE
OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS PAINEWEBBER
MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED
BY THE PORTFOLIOS OR THEIR PACE(SM)
DISTRIBUTOR. THE PROSPECTUS
AND THIS STATEMENT OF ADDITIONAL
INFORMATION DO NOT CONSTITUTE AN ---------------------------
OFFERING BY THE PORTFOLIOS OR BY
THE DISTRIBUTOR IN ANY STATEMENT OF ADDITIONAL
JURISDICTION IN WHICH SUCH OFFERING INFORMATION
MAY NOT LAWFULLY BE MADE.
-------------------
TABLE OF CONTENTS FEBRUARY 23, 1996
PAGE
----
---------------------------
INVESTMENT POLICIES AND
RESTRICTIONS........................ 1
HEDGING AND RELATED STRATEGIES....... 16
TRUSTEES AND OFFICERS................ 28
INVESTMENT MANAGEMENT, ADVISORY AND
DISTRIBUTION ARRANGEMENTS............ 33
PORTFOLIO TRANSACTIONS............... 35
ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION.......................... 38
VALUATION OF SHARES.................. 38
PERFORMANCE INFORMATION.............. 40
TAXES................................ 42
OTHER INFORMATION.................... 46
FINANCIAL STATEMENTS................. 46
APPENDIX............................. 72
[LOGO] Recycled Paper
(C) 1996 PaineWebber Incorporated
PAINEWEBBER
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Portfolios of Investments
November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
PACE MONEY MARKET INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- -------------- ----------
<C> <S> <C> <C> <C>
BANK NOTES--7.86%
DOMESTIC--7.86%
$ 50 Bank of America Illinois.................. 03/14/96 5.700% $ 50,000
150 Huntington National Bank.................. 11/13/96 5.820* 149,986
125 NationsBank of Texas, N.A................. 05/21/96 5.610 125,000
----------
324,986
Total Bank Notes (cost--$324,986).....................
----------
CERTIFICATES OF DEPOSIT--4.84%
DOMESTIC--4.84%
100 Bank One Milwaukee N.A.................... 12/28/95 5.730 99,998
100 NBD Bank N.A.............................. 12/08/95 5.750 100,000
----------
199,998
Total Certificates of Deposit (cost--$199,998)........
----------
COMMERCIAL PAPER--82.04%
ASSET-BACKED--0.96%
40 Preferred Receivables Funding
Corporation............................... 01/10/96 5.600 39,751
----------
AUTO/TRUCK--7.79%
175 Ford Motor Credit Corporation ............ 01/11/96 5.750 173,854
150 PACCAR Financial Corporation ............. 02/12/96 5.650 148,281
----------
322,135
----------
BANKING--19.10%
150 ABN-Amro North America Finance
Incorporated.............................. 04/25/96 5.500 146,654
100 Bankers Trust New York Corporation........ 02/29/96 5.690 98,578
150 Cregem North America Incorporated......... 01/22/96 5.700 148,765
40 Indosuez North America Incorporated....... 01/10/96 5.620 39,750
175 MPS U.S. Commercial Paper Corporation..... 12/05/95 to 02/23/96 5.690 to 5.700 173,309
185 Societe Generale.......................... 02/20/96 5.640 182,652
----------
789,708
----------
BROKER/DEALER--20.31%
100 Bear Stearns Companies Incorporated ...... 05/10/96 5.520 97,531
200 Dean Witter, Discover & Company .......... 02/12/96 5.700 197,688
150 Goldman Sachs Group L.P. ................. 04/09/96 5.600 146,967
100 Merrill Lynch & Co., Incorporated ........ 01/31/96 5.760 99,024
150 Morgan Stanley Group Incorporated ........ 01/22/96 to 01/23/96 5.650 to 5.720 148,750
150 Nomura Holding America Incorporated ...... 12/01/95 5.930 150,000
----------
839,960
----------
DRUGS & HEALTHCARE--10.50%
175 A.H. Robins Company Incorporated.......... 12/14/95 5.760 174,636
162 Bausch & Lomb Incorporated ............... 12/21/95 5.850 161,474
100 Lilly (Eli) & Company .................... 04/04/96 5.650 98,038
----------
434,148
----------
</TABLE>
1
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE MONEY MARKET INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- -------------- ----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(CONCLUDED)
FINANCE-CONDUIT--7.79%
$ 100 Commerzbank U.S. Finance Incorporated..... 02/21/96 5.650% $ 98,713
50 Compagnie Bancaire USA Finance
Corporation............................... 12/04/95 5.700 49,976
175 Svenska Handelsbanken Incorporated ....... 01/05/96 to 02/06/96 5.700 to 5.730 173,647
----------
322,336
----------
FINANCE EQUIPMENT--2.41%
100 AT&T Capital Corporation.................. 12/20/95 5.720 99,698
----------
FINANCE SUBSIDIARY--3.60%
150 National Australia Funding, (DE)
Incorporated ............................. 01/12/96 5.730 148,997
----------
OIL EQUIPMENT & SERVICES--3.60%
150 Colonial Pipeline Company................. 01/18/96 5.730 148,854
----------
RETAIL-MERCHANDISE--3.62%
150 Penney (J.C.) Funding Corporation ........ 12/18/95 5.720 149,595
----------
UTILITY TELEPHONE--2.36%
100 AT&T Corporation.......................... 05/10/96 5.470 97,554
----------
Total Commercial Paper (cost--$3,392,736)............. 3,392,736
----------
SHORT-TERM CORPORATE OBLIGATIONS--3.37%
BANKING--1.20%
50 NationsBank Corporation................... 08/15/96 4.750 49,650
----------
BROKER/DEALER--0.96%
40 Merrill Lynch & Co., Incorporated......... 09/03/96 5.870* 40,000
----------
BUSINESS SERVICES--1.21%
50 PHH Corporation........................... 09/16/96 5.700* 49,981
----------
Total Short-Term Corporate Obligations
(cost--$139,631)...................................... 139,631
----------
REPURCHASE AGREEMENT--0.24%
10 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $9,966 U.S. Treasury
Notes, 6.000%, due 08/31/97; proceeds:
$10,001 (cost--$10,000)................... 12/01/95 5.250 10,000
----------
Total Investments (cost--$4,067,351)--98.35%.......... 4,067,351
Other assets in excess of liabilities--1.65%.......... 68,251
----------
Net Assets--100.00%................................... $4,135,602
----------
----------
</TABLE>
- ------------
* Variable rate securities- maturity date reflects earlier of reset date or
maturity date. Interest rates shown are the current rates as of November 30,
1995 and reset periodically.
Weighted average maturity--65 days
See accompanying notes to financial statements
2
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- ------------- ------------
<C> <S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--15.38%
$ 1,839 GNMA II--ARM.............................. 06/20/22 7.375% $ 1,880,411
1,490 GNMA II--ARM.............................. 08/20/25 7.500 1,526,970
------------
Total Government National Mortgage Association
Certificates
(cost--$3,396,524)................................... 3,407,381
------------
FEDERAL HOME LOAN MORTGAGE CERTIFICATES--54.30%
9,000 FHLMC Gold................................ 01/16/26 7.500 9,154,683
3,000 FHLMC Gold................................ 01/16/26 6.000 2,871,561
------------
Total Federal Home Loan Mortgage Certificates
(cost--$11,954,688).................................. 12,026,244
------------
FEDERAL HOUSING AUTHORITY--3.90%
852 FHA Project Note (cost--$861,894)......... 08/01/20 7.430 863,111
------------
AGENCY BACKED OBLIGATIONS--15.73%
1,000 Federal Home Loan Bank Consolidated
Bonds..................................... 01/02/96 5.700 994,933
2,400 Federal Home Loan Mortgage Corporation
Discount Notes........................... 12/29/95 5.590 2,389,565
100 Federal National Mortgage Association
Discount Notes............................ 02/13/96 5.550 98,859
------------
Total Agency Backed Obligations (cost--$3,483,357).... 3,483,357
------------
COLLATERALIZED MORTGAGE OBLIGATIONS--19.95%
463 Prudential Home Mortgage 1993-29, Class A
8......................................... 08/25/08 6.750 446,028
1,213 FNMA REMIC Trust 1993-039, Class Z........ 04/25/23 7.500 1,211,921
51 FNMA 1993-250, Class Z.................... 12/25/23 7.000 49,297
165 FNMA REMIC Trust 1992-129, Class L........ 07/25/22 6.000 149,934
1,339 FHLMC Series 1078, Class GZ............... 05/15/21 6.500 1,267,307
1,088 FHLMC Series 1360, Class PE............... 12/15/17 3.500 948,932
384 FHLMC Series 1534, Class Z................ 06/15/23 5.000 249,560
107 FHLMC Series 1658, Class GZ............... 01/15/24 7.000 95,534
------------
Total Collateralized Mortgage Obligations
(cost--$4,266,658).................................... 4,418,513
------------
TREASURY BONDS--4.97%
1,100 U.S. Treasury Bonds (cost--$1,056,767).... 08/15/23 6.250 1,100,000
------------
COMMERCIAL PAPER--35.05%
800 American Telephone & Telegraph Company.... 12/08/95 5.730 799,109
1,000 Chevron Oil Finance Company............... 12/21/95 5.730 996,817
300 DuPont (E.I.) de Nemours & Company........ 01/19/96 5.670 297,685
</TABLE>
3
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE GOVERNMENT SECURITIES FIXED INCOME
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- ------------- ------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(CONCLUDED)
$ 500 Hewlett Packard Company................... 01/09/96 5.670% $ 496,929
400 Kentucky Utilities Company................ 12/05/95 5.720 399,746
800 Koch Industries........................... 01/10/96 5.680 794,951
600 National Rural Utilities Company.......... 01/12/96 5.720 595,996
800 Norfolk Southern Corporation.............. 01/11/96 to 01/12/96 5.680 794,761
500 Pitney Bowes Credit Corporation........... 01/26/96 5.660 495,598
800 Procter & Gamble Company.................. 01/24/96 5.670 793,196
900 United Parcel Service..................... 12/08/95 5.720 898,999
400 Wal Mart Stores Incorporated.............. 12/07/95 5.700 399,620
------------
Total Commercial Paper (cost--$7,763,407)............. 7,763,407
------------
REPURCHASE AGREEMENT--1.94%
429 Repurchase Agreement dated 11/30/95, with
State
Street Bank & Trust Company,
collateralized
by $430,000 U.S. Treasury Notes, 6.000%,
due
08/31/97; proceeds: $429,063
(cost--$429,000).......................... 12/01/95 5.250 429,000
------------
Total Investments (cost--$33,212,295)--151.22%........ 33,491,013
Liabilities in excess of other assets--(51.22)%....... (11,343,837)
------------
Net Assets--100.00%................................... $ 22,147,176
------------
------------
</TABLE>
- ------------
ARM Adjustable Rate Mortgage
REMIC Real Estate Mortgage Investment Conduit
See accompanying notes to financial statements
4
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERMEDIATE FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ---------------- -----------
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES--1.16%
$ 200 Standard Credit Card Services
(cost--$202,583)......................... 08/07/97 8.500% $ 202,892
-----------
CORPORATE NOTES--12.80%
265 Continental Bank NA Chicago.............. 04/01/01 to 07/01/01 11.250 to 12.500 297,328
400 Ford Motor Credit Corporation............ 11/19/99 7.500 420,184
200 ITT Corporation.......................... 03/01/06 8.750 207,679
625 K Mart Corporation....................... 08/01/97 to 07/06/99 7.240 to 8.700 518,226
275 Korea Development Bank................... 11/15/02 6.500 276,967
245 New Plan Realty Trust Corporation........ 04/06/05 7.750 264,337
250 Nordstrom Credit Incorporated............ 02/15/16 9.375 264,727
-----------
Total Corporate Notes (cost--$2,334,454)............. 2,249,448
-----------
MORTGAGE-BACKED SECURITIES--40.12%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--7.07%
1,223 GNMA (cost--$1,241,263).................. 10/20/25 6.500 1,241,805
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
CERTIFICATES--9.98%
1,252 FHLMC.................................... 01/01/25 to 06/01/25 8.000 1,289,180
469 FHLMC.................................... 12/01/99 5.500 464,731
-----------
Total Federal Home Loan Mortgage Corporation
Certificates
(cost--$1,747,444).................................. 1,753,911
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--9.24%
206 FNMA..................................... 09/01/24 to 10/01/25 6.500 202,116
1,390 FNMA..................................... 06/01/10 to 09/01/10 7.500 1,422,186
-----------
Total Federal National Mortgage Association
Certificates
(cost--$1,616,345).................................. 1,624,302
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--13.83%
180 FHLMC Series 171, Class G................ 04/15/04 9.000 183,424
500 FHLMC Series 1497 Class O................ 10/15/22 7.000 504,530
194 FHLMC Series 1588 Class TB............... 06/15/23 6.500 193,561
299 FNMA REMIC Trust 1991-04, Class E........ 09/25/05 8.250 307,539
675 FNMA REMIC Trust 1993-70, Class C........ 03/25/18 6.900 679,724
551 FNMA REMIC Trust 1990-09, Class D........ 08/25/18 8.500 560,330
-----------
Total Collateralized Mortgage Obligations
(cost--$2,380,020)................................... 2,429,108
-----------
Total Mortgage-Backed Securities
(cost--$6,985,072)................................... 7,049,126
-----------
U.S. GOVERNMENT OBLIGATIONS--35.42%
5,830 U.S. Treasury Notes (cost--$6,108,113)... 08/15/98 to 02/15/05 5.875 to 7.500 6,224,069
-----------
</TABLE>
5
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERMEDIATE FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
- --------- -------------------- ---------------- -----------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--7.07%
$ 1,243 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $1,238,082 U.S.
Treasury Notes, 6.000%, due 08/31/97;
proceeds: $1,243,181 (cost--$1,243,000).. 12/01/95 5.250% $ 1,243,000
-----------
Total Investments (cost--$16,873,222)--96.57%........ 16,968,535
Other assets in excess of liabilities--3.43%......... 603,324
-----------
Net Assets--100.00%.................................. $17,571,859
-----------
-----------
</TABLE>
- ------------
REMIC Real Estate Mortgage Investment Conduit
See accompanying notes to financial statements
6
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE STRATEGIC FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------- --------------------- ------------- -----------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES--77.87%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--6.68%
$ 994 GNMA (cost--$1,000,426)................. 07/20/25 6.000% $ 1,001,824
-----------
FEDERAL HOUSING ADMINISTRATION CERTFICATES--5.31%
786 FHA (cost--$795,594).................... 08/01/20 7.430 796,717
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
CERTFICATES--10.86%
1,000 FNMA ARM................................ 01/24/26 6.360* 1,010,000
563 FNMA.................................... 08/01/28 6.394* 570,013
48 FNMA.................................... 12/01/17 7.125* 49,574
-----------
Total Federal National Mortgage Corporation
Certificates
(cost--$1,618,658)................................ 1,629,587
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--55.02%
40 FHLMC Series 1078, Class GZ............. 05/15/21 6.500 38,019
1,000 FHLMC Series 1278, Class K.............. 05/15/22 7.000 1,000,999
100 FHLMC Series 1366, Class H.............. 08/15/07 6.000 96,531
29 FHLMC Series 1367, Class KA............. 09/15/22 6.500 26,879
122 FHLMC Series 1502, Class PX............. 04/15/23 7.000 113,544
589 FHLMC Series 1503, Class PZ............. 05/15/23 7.000 557,311
227 FHLMC Series G015, Class PZ............. 07/25/23 7.000 204,731
384 FHLMC Series 1534, Class Z.............. 06/15/23 5.000 249,560
566 FHLMC Series 1548, Class Z.............. 07/15/23 7.000 505,041
722 FHLMC Series 1562, Class Z.............. 07/15/23 7.000 672,203
61 FHLMC Series 1614, Class QZ............. 11/15/23 6.500 51,395
136 FHLMC Series 1611, Class I.............. 02/15/23 6.000 132,214
444 FHLMC Series 1628, Class KZ............. 12/15/23 6.250 362,000
255 FHLMC Series 1628, Class LZ............. 12/15/23 6.500 220,714
225 FHLMC Series 1694, Class Z.............. 03/15/24 6.500 188,553
152 FNMA REMIC Trust 1991-65, Class Z....... 06/25/21 6.500 139,695
74 FNMA REMIC Trust G92-36, Class Z........ 07/25/22 7.000 72,820
160 FNMA REMIC Trust 1992-129, Class L...... 07/25/22 6.000 145,390
126 FNMA REMIC Trust G92-40, Class ZC....... 07/25/22 7.000 121,817
75 FNMA REMIC Trust 1992-118, Class K...... 09/25/08 7.500 77,401
485 FNMA REMIC Trust 1993-65, Class ZZ...... 06/25/13 7.000 469,102
178 FNMA REMIC Trust 1993-96, Class PZ...... 06/25/23 7.000 166,399
76 FNMA REMIC Trust 1993-149, Class L...... 08/25/23 6.000 72,570
</TABLE>
7
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE STRATEGIC FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------- --------------------- ------------- -----------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES--(CONCLUDED)
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONCLUDED)
$ 279 FNMA REMIC Trust 1993-122, Class L...... 01/25/23 6.500% $ 268,945
5 FNMA REMIC Trust 1993-134, Class EA..... 11/25/05 1,159.746+(1) 146,317
106 FNMA REMIC Trust 1993-163, Class ZA..... 09/25/23 7.000 98,096
1,659 FNMA REMIC Trust 1993-201, Class JA..... 09/25/21 6.500+(2) 261,677
75 FNMA REMIC Trust 1993-199, Class Z...... 10/25/23 7.000 69,513
111 FNMA REMIC Trust 1994-23, Class PX...... 08/25/23 6.000 87,446
676 Bear Stearns Series 1994-1, Class 3A.... 05/25/23 7.304* 683,556
567 California Federal Bank Series 1990 BN1,
Class A--ARM........................... 08/25/30 6.829* 565,036
150 Residential Funding Series 1993-530,
Class A9................................ 08/25/23 7.500 147,750
288 U.S. Department of Veteran Affairs
Vandee
Mortgage Trust Series 1993-3, Class
2ZA..................................... 06/15/20 6.500 244,184
-----------
Total Collateralized Mortgage Obligations
(cost--$7,784,160)................................. 8,257,408
-----------
Total Mortgage-Backed Securities
(cost--$11,198,838)................................ 11,685,536
-----------
CORPORATE BONDS--15.96%
500 AMR Corporation......................... 02/01/01 10.000 568,302
250 AMR Corporation......................... 01/27/97 7.600 254,127
450 Continental Cablevision, Incorporated... 06/01/07 11.000 499,500
300 Gulf States Utilities Company........... 07/01/98 9.720 320,616
500 Niagara Mohawk Power Company............ 04/01/24 7.875 446,987
300 RJR Nabisco, Incorporated............... 07/15/01 8.000 306,601
-----------
Total Corporate Bonds (cost--$2,359,467)........... 2,396,133
-----------
COMMERCIAL PAPER--7.28%
300 AT & T Corporation...................... 01/12/96 5.720 297,998
200 National Rural Utilities Company........ 01/12/96 5.720 198,665
200 Norfolk Southern Corporation............ 01/12/96 5.680 198,675
200 Pitney Bowes Credit Corporation......... 01/26/96 5.660 198,239
200 United Parcel Service Corporation....... 12/08/95 5.720 199,778
-----------
Total Commercial Paper (cost--$1,093,355).......... 1,093,355
-----------
</TABLE>
8
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE STRATEGIC FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
- -------- --------------------- ------------- -----------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--2.37%
$ 355 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by
$355,000 U.S. Treasury Notes, 6.000%,
due 08/31/97; proceeds: $355,052
(cost--$355,000)........................ 12/01/95 5.250% $ 355,000
-----------
Total Investments (cost--$15,006,660)--103.48%..... 15,530,024
Liabilities in excess of other assets--(3.48%)..... (522,894)
-----------
Net Assets--100.00%................................ $15,007,130
-----------
-----------
</TABLE>
- ------------
* Variable rate security, the rate shown is as of November 30, 1995.
ARM Adjustable Rate Mortgage
REMIC Real Estate Mortgage Investment Conduit
+ Interest Only--This security entitles the holder to receive interest
payments from an underlying pool of mortgages. The risk associated with
this security is related to the speed of principal paydowns. High
prepayments would result in a smaller amount of interest being paid and
cause the yield to decrease. Low prepayments would result in a greater
amount of interest being received and cause the yield to increase.
(1) Annualized yield at date of purchase: 10.48%
(2) Annualized yield at date of purchase: 8.31%
See accompanying notes to financial statements
9
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE MUNICIPAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------ --------------------- ---------------- ----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--96.84%
ALABAMA--4.68%
$ 150 Birmingham Alabama Medical Clinic
Baptist Medical Center (Escrow to
Maturity).............................. 07/01/08 8.300% $ 182,766
155 Pell City Alabama Industrial
Development Board Revenue Shelby Steel
Fabricators (Letter of
Credit--SouthTrust Bank)*.............. 09/01/01 7.700 157,001
----------
339,767
----------
CALIFORNIA--3.22%
70 Inglewood California Residential
Rehabiliation (Escrow to Maturity).... 08/01/10 7.500 81,542
45 Sacramento California Utility District
Electricity (Escrow to Maturity)...... 03/10/10 6.750 49,075
95 Sacramento California Utility District
Electricity White Rock Project (Escrow
to Maturity)........................... 05/01/10 6.800 103,365
----------
233,982
----------
COLORADO--5.46%
75 Colorado Health Facilities Authority
Rose Medical Center (Escrow to
Maturity).............................. 09/01/08 7.125 82,429
300 Westminister Colorado Multifamily
Semper Village Apartments (Mandatory
put 09/01/06 @ par) (AXA)............. 09/01/15 5.950 313,914
----------
396,343
----------
GEORGIA--7.11%
500 Marietta Georgia Housing Authority
Multifamily Ridge Point Apartments
(Mandatory put 06/01/05 @ par) (FNMA
Collateralized)........................ 06/01/25 5.750 515,795
----------
IDAHO--6.96%
500 Idaho Housing Agency Multifamily
Section 8 Assisted Housing............ 01/01/07 6.000 505,265
----------
</TABLE>
10
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE MUNICIPAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------ --------------------- ---------------- ----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
ILLINOIS--6.35%
$ 95 Illinois Health Facilities Authority
Revenue Methodist Medical Center
(Escrow to Maturity)................... 10/01/10 9.000% $ 116,717
200 Illinois Health Facilities Authority
Revenue Ravenswood Hospital (Escrow to
Maturity).............................. 08/01/06 7.250 224,080
120 Illinois Housing Development
Residential Mortgage Revenue (Optional
put 02/01/96 @ par).................... 02/01/14 3.850(1) 120,072
----------
460,869
----------
LOUISIANA--5.03%
350 Louisiana Public Facility Authority
Revenue Multifamily Housing Edgewood
Apartments (Mandatory put 06/01/05 @
par) (FNMA Collateralized)............ 06/01/05 5.800 364,770
----------
MICHIGAN--13.97%
440 Detroit Michigan Water Supply System
(Escrow to Maturity).................. 01/01/05 8.875 526,451
130 Michigan State Hospital Finance
Authority Revenue Mount Carmel Mercy
Hospital (Escrow to Maturity)......... 08/01/05 7.500 145,319
300 Michigan State Housing Development
Authority*............................. 12/01/12 7.650 320,241
20 Petoskey Michigan Hospital Finance
Authority (Escrow to Maturity)........ 03/01/07 6.700 21,902
----------
1,013,913
----------
MINNESOTA--5.84%
190 Coon Rapids Minnesota Hospital Revenue
Health Central Incorporated (Escrow to
Maturity).............................. 08/01/08 7.625 219,009
200 Eden Prairie Minnesota Multi Family
Housing (GNMA Collateralized)......... 01/20/06 5.500 205,144
----------
424,153
----------
MISSISSIPPI--5.58%
900 Mississippi Home Corporation
Residential Revenue.................... 09/15/16 7.322@ 200,853
200 Mississippi Home Corporation Single
Family (GNMA Collateralized).......... 06/01/16 6.100 203,922
----------
404,775
----------
</TABLE>
11
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE MUNICIPAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------ --------------------- ---------------- ----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
NEW JERSEY--3.14%
$ 65 New Jersey Health Care Facilities St.
Barnabas Medical Center (Escrow to
Maturity).............................. 07/01/11 7.000% $ 72,056
60 New Jersey State Highway Garden State
Parkway (Escrow to Maturity).......... 01/01/11 6.500 65,641
35 New Jersey State Highway Garden State
Parkway (Escrow to Maturity).......... 01/01/11 6.600 38,403
45 South Jersey Port Corporation (Escrow
to Maturity).......................... 01/01/11 6.625 51,645
----------
227,745
----------
NEW MEXICO--1.61%
359 Albuquerque New Mexico Collateralized
Mortgage Municipal (FGIC Insured)..... 05/15/11 6.250@ 116,862
----------
NORTH CAROLINA--2.07%
150 Vance County North Carolina Industrial
Facilities (Letter of credit--Centura
Bank) (Optional put 09/01/96 @
par)*.................................. 09/01/00 5.000 150,010
----------
PENNSYLVANIA--1.18%
35 Caln Township Pennsylvania Municipal
Sewer Revenue (Escrow to Maturity).... 01/01/09 5.700 36,127
45 Delaware River Port Authority of
Pennsylvania & New Jersey Delaware
River Bridges Revenue (Escrow to
Maturity).............................. 01/15/11 6.500 49,207
----------
85,334
----------
SOUTH CAROLINA--1.64%
105 Charleston County South Carolina
Hospital Facility Roper Hospital
(Escrow to Maturity)................... 10/01/11 7.000 119,067
----------
TENNESSEE--3.86%
275 La Follette Tennessee Housing
Development Corp. (FHA/MBIA
Insured)............................... 01/01/05 5.400 279,925
----------
TEXAS--7.49%
200 Houston Texas Airport System Revenue
(Escrow to Maturity).................. 07/01/10 7.600 227,898
1,500 Southeast Texas Housing Finance
Corporation............................ 12/01/16 7.611@ 315,615
----------
543,513
----------
</TABLE>
12
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE MUNICIPAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------ --------------------- ---------------- ----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONCLUDED)
UTAH--7.96%
$ 85 Salt Lake City Utah Hospital Revenue
Holy Cross Hospital Project (Escrow to
Maturity).............................. 06/01/09 7.350% $ 95,432
200 Salt Lake County Utah Multifamily James
Pointe Apartments (Mandatory put
10/01/05 @ par) (Asset Guaranty
Insurance)............................. 10/01/25 5.500 203,480
275 Utah State Housing Finance Agency
(AMBAC Insured)....................... 07/01/07 5.650 279,172
----------
578,084
----------
VIRGINIA--3.45%
250 King George County Virginia Industrial
Development Elementary School
Project................................ 08/01/98 4.875 250,052
----------
WEST VIRGINIA--0.24%
15 Kanawha County West Virginia Building
Commission Revenue St. Francis
Hospital (Escrow to Maturity)......... 12/01/07 7.500 17,173
----------
Total Municipal Bonds and Notes
(cost--$6,912,277).............................. 7,027,397
----------
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS--1.12%
82 Seven Seas Money Market Fund
(cost--$81,568)*.................... 81,568
-----------
Total Investments (cost--$6,993,845)--97.96%..... 7,108,965
Other assets in excess of liabilities--2.04%..... 148,070
-----------
Net Assets--100.00%.............................. $7,257,035
-----------
-----------
</TABLE>
- ------------
<TABLE>
<S> <C>
(1) Variable rate demand note which is payable upon demand. The maturity date shown is
stated maturity; the interest rate is the current rate as of November 30, 1995.
* Security subject to Alternative Minimum Tax.
@ Yield to maturity for zero coupon bonds
AMBAC American Municipal Bond Assurance Corporation
AXA Axa Reinsurance Company
FGIC Federal Guaranty Insurance Company
FHA Federal Housing Authority
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MBIA Municipal Bond Investors Assurance
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE GLOBAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- ----------- -------------------- ------------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES--84.38%
CANADA--4.44%
925 Government of Canada................... 12/01/04 9.000% $ 761,518
-----------
DENMARK--6.41%
5,932 Kingdom of Denmark..................... 03/15/06 8.000 1,100,628
-----------
FRANCE--8.50%
8,120 Government of France................... 10/25/05 to 10/25/25 6.000 to 7.750 1,458,533
-----------
GERMANY--21.45%
5,105 Federal Republic of Germany............ 7/15/04 to 05/12/05 6.750 to 6.875 3,681,390
-----------
ITALY--8.67%
2,480,000 Republic of Italy...................... 4/01/05 to 09/01/05 10.500 1,487,143
-----------
JAPAN--5.04%
50,000 Export Import Bank..................... 07/28/05 2.875 489,484
33,000 International Bank for Reconstruction &
Development (1)........................ 12/20/04 4.750 375,989
-----------
865,473
-----------
NETHERLANDS--8.43%
2,204 Government of Netherlands.............. 06/15/05 7.000 1,446,150
-----------
SPAIN--4.38%
94,250 Kingdom of Spain....................... 01/31/06 10.150 751,599
-----------
UNITED KINGDOM--0.76%
80 United Kingdom Gilt.................... 12/07/05 8.500 130,474
-----------
UNITED STATES--16.30%
550 U.S. Treasury Bonds.................... 08/15/25 6.875 604,827
2,084 U.S. Treasury Notes.................... 08/15/05 6.500 2,193,410
-----------
2,798,237
-----------
Total Long-Term Debt Securities
(cost--$14,210,654)................................. 14,481,145
-----------
REPURCHASE AGREEMENT--18.10%
3,107 Repurchase Agreement dated 11/30/95
with State Street Bank & Trust
Company, collateralized by $3,094,707
U.S. Treasury Notes, 6.000%, due
08/31/97; proceeds: $3,107,453
(cost--$3,107,000).................... 12/01/95 5.250 3,107,000
-----------
Total Investments (cost--$17,317,654)--102.48%...... 17,588,145
Liabilities in excess of other assets--(2.48)%...... (425,720)
-----------
Net Assets--100.00%................................. $17,162,425
-----------
-----------
</TABLE>
- ------------
Note: The Portfolio of Investments is listed by the security issuer's country
of origin.
* In local currency unless otherwise indicated
(1) "Supranational" security denominated in Japanese Yen
14
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE GLOBAL FIXED INCOME INVESTMENTS
- --------------------------------------------------------------------------------
WRITTEN OPTIONS OPEN
<TABLE><CAPTION>
NUMBER OF UNDERLYING EXPIRATION EXERCISE UNREALIZED
OPTIONS CONTRACT DATE PRICE GAIN
---------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Puts:.............................. 4,000 GBP/DEM Dec 95 $2.176 $3,084
FORWARD FOREIGN CURRENCY CONTRACTS
<CAPTION>
UNREALIZED
CONTRACT TO IN EXCHANGE MATURITY APPRECIATION
DELIVER FOR DATES (DEPRECIATION)
<S> <C> <C> <C> <C>
----------- -------------- -------- -------
German Deutschemarks......................... 163,957 U.S.$ 116,447 12/15/95 $ (2,994)
German Deutschemarks......................... 416,676 U.S.$ 300,000 12/15/95 (11,675)
German Deutschemarks......................... 566,533 U.S.$ 402,059 12/15/95 10,038
German Deutschemarks......................... 279,271 U.S.$ 198,995 01/16/96 5,429
German Deutschemarks......................... 2,262,962 U.S.$1,611,796 01/16/96 43,310
Japanese Yen................................. 41,000,000 U.S.$ 402,059 12/15/95 1,858
Japanese Yen................................. 20,000,000 U.S.$ 198,995 01/16/96 (996)
Japanese Yen................................. 184,088,431 U.S.$1,831,726 01/16/96 (9,261)
Netherland Guilders.......................... 372,682 U.S.$ 240,000 12/15/95 9,633
-------
$ 45,342
-------
-------
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--91.90%
AEROSPACE--6.05%
5,100 Boeing Company......................................................... $ 371,662
19,800 Lockheed Martin Corporation............................................ 1,452,825
-----------
1,824,487
-----------
AGRICULTURE--0.82%
4,400 Campbell Soup Company.................................................. 245,850
-----------
BANKS--7.99%
23,900 Citicorp............................................................... 1,690,925
3,900 Comerica Incorporated.................................................. 145,762
2,700 Magna Group Incorporated............................................... 65,475
4,100 State Street Boston Corporation........................................ 184,500
9,500 US Bancorp OR.......................................................... 321,813
-----------
2,408,475
-----------
BEVERAGES--1.48%
15,400 Coca-Cola Enterprises Incorporated..................................... 446,600
-----------
BUSINESS MACHINES--1.01%
5,800 Seagate Technology Incorporated*....................................... 305,950
-----------
CHEMICALS--1.24%
15,300 Lyondell Petrochemical Company......................................... 374,850
-----------
CONTAINERS--0.68%
15,800 Owens Illinois Incorporated*........................................... 205,400
-----------
COSMETICS--2.55%
10,600 Avon Products Incorporated............................................. 769,825
-----------
DRUGS/MEDICINE--9.79%
14,300 Allergan Incorporated.................................................. 443,300
11,400 Alza Corporation*...................................................... 262,200
1,300 Biogen Incorporated*................................................... 70,850
9,500 Forest Labratories Incorporated*....................................... 403,750
1,800 Genzyme Corporation*................................................... 117,450
12,200 Pfizer Incorporated.................................................... 707,600
16,500 Schering Plough Corporation............................................ 946,688
-----------
2,951,838
-----------
ELECTRIC UTILITIES--3.12%
15,200 CMS Energy Corporation................................................. 414,200
1,700 Centerior Energy Corporation........................................... 16,362
15,400 Entergy Corporation.................................................... 429,275
2,900 Illinova Corporation................................................... 82,288
-----------
942,125
-----------
</TABLE>
16
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
ELECTRONICS--4.34%
24,800 Honeywell Incorporated................................................. $ 1,181,100
6,000 National Semiconductor Corporation*.................................... 128,250
-----------
1,309,350
-----------
GAS UTILITIES--2.72%
21,900 Enron Corporation...................................................... 821,250
-----------
HEALTH--2.74%
8,600 Bard C R Incorporated.................................................. 248,325
5,600 Beckman Instruments Incorporated New................................... 195,300
2,500 Health Care and Retirement Corporation*................................ 83,750
9,200 Manor Care Incorporated................................................ 300,150
-----------
827,525
-----------
HOTELS, RESTAURANTS--0.18%
3,500 Brinker International Incorporated*.................................... 53,812
-----------
IRON & STEEL--1.40%
5,700 Birmingham Steel Corporation........................................... 84,787
8,300 Inland Steel Industries Incorporated................................... 216,837
8,200 LTV Corporation New*................................................... 118,900
-----------
420,524
-----------
LEISURE, LUXURY--1.76%
19,000 Mattel, Incorporated................................................... 532,000
-----------
LIFE INSURANCE--2.06%
8,100 Transamerica Corporation............................................... 620,663
-----------
MEDIA--0.18%
2,000 American Mobile Satellite*............................................. 55,500
-----------
MOTOR VEHICLES--1.37%
14,600 Ford Motor Company..................................................... 412,450
-----------
OIL REFINING/DISTRIBUTION--0.83%
2,500 Tosco Corporation...................................................... 95,313
6,100 Ultramar Corporation................................................... 154,025
-----------
249,338
-----------
OIL SERVICES--1.65%
4,700 Cooper Cameron Corporation............................................. 122,200
5,900 Schlumberger Ltd....................................................... 374,650
-----------
496,850
-----------
</TABLE>
17
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
OTHER INSURANCE--8.52%
8,600 Aetna Life and Casualty Company........................................ $ 631,025
17,400 Aon Corporation........................................................ 819,975
6,900 CIGNA Corporation...................................................... 759,000
5,400 Old Republic International Corporation................................. 185,625
10,000 USF&G Corporation...................................................... 172,500
-----------
2,568,125
-----------
PAPER--2.98%
10,500 Kimberly Clark Corporation............................................. 807,187
3,350 Westvaco Corporation................................................... 91,706
-----------
898,893
-----------
POLLUTION CONTROL--1.74%
17,800 WMX Technologies Incorporated.......................................... 525,100
-----------
PRODUCERS' GOODS--2.23%
3,400 Boston Technology Incorporated......................................... 48,875
2,200 Comverse Technology Incorporated*...................................... 49,500
1,500 Octel Communications Corporation....................................... 49,312
3,200 Pentair Incorporated................................................... 159,200
5,100 Raychem Corporation.................................................... 265,200
2,500 Timken Company......................................................... 100,938
-----------
673,025
-----------
PUBLISHING--0.06%
300 Gannett Incorporated................................................... 18,300
-----------
RAILROAD--4.28%
16,000 Burlington Northern, Incorporated...................................... 1,290,000
-----------
RETAIL (ALL OTHER)--3.33%
10,000 Federated Department Stores Incorporated*.............................. 291,250
8,300 Melville Corporation................................................... 258,337
15,600 Walgreen Company....................................................... 454,350
-----------
1,003,937
-----------
RETAIL (FOOD)--1.22%
16,500 Food Lion Incorporated................................................. 97,969
8,100 Kroger Company*........................................................ 271,350
-----------
369,319
-----------
SERVICES--5.33%
8,200 Automatic Data Processing.............................................. 652,925
8,460 First Data Corporation................................................. 600,660
5,600 Interpublic Group Cos Incorporated..................................... 214,900
1,900 Computer Sciences Corporated*.......................................... 138,225
-----------
1,606,710
-----------
SOAPS, HARDWARE--1.21%
13,500 Dial Corporation....................................................... 364,500
-----------
</TABLE>
18
<PAGE>
Managed Account Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
TELEPHONE & TELEGRAPH--3.12%
7,700 Nextel Communications Incorporated..................................... $ 118,388
20,600 Sprint Corporation..................................................... 824,000
-----------
942,388
-----------
TIRE & RUBBER--1.42%
10,100 Goodyear Tire and Rubber............................................... 427,988
-----------
TOBACCO--2.50%
4,100 Philip Morris Companies Incorporated................................... 359,775
13,500 RJR Nabisco Holdings Corporation....................................... 393,188
-----------
752,963
-----------
Total Common Stocks (cost--$26,073,773)............................................ 27,715,910
-----------
PREFERRED STOCKS--0.88%
TOBACCO--0.88%
45,400 RJR Nabisco Holdings Corporation (cost--$284,026)...................... 266,725
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- --------- -------------------- ---------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--0.15%
$ 45 U.S. Treasury Bills (cost--$43,807)...... 05/30/96 5.275% 43,771
-----------
REPURCHASE AGREEMENT--7.53%
2,272 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $2,263,011 U.S.
Treasury Notes, 6.000%, due 08/31/97;
proceeds: $2,272,331 (cost--$2,272,000).. 12/01/95 5.250 2,272,000
-----------
Total Investments (cost--$28,673,606)--100.46%....... 30,298,406
Liabilities in excess of other assets--(0.46%)....... (137,760)
-----------
Net Assets--100.00%.................................. $30,160,646
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
FUTURES CONTRACTS
<TABLE><CAPTION>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO RECEIVE EXCHANGE FOR DATE APPRECIATION
- ---------- ----------------------------------------------- ------------ ---------- ------------
<C> <S> <C> <C> <C>
3 December 1995 S&P500 Futures Contracts......... $910,875 Dec. 95 $18,050
------------
------------
</TABLE>
See accompanying notes to financial statements
19
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--85.16%
AEROSPACE--1.77%
5,700 Boeing Company........................................................ $ 415,387
-----------
AGRICULTURE, FOOD--3.66%
9,800 Philip Morris Company................................................. 859,950
-----------
APPAREL, TEXTILES--2.95%
8,600 Nike, Incorporated.................................................... 498,800
6,000 Sara Lee Corporation.................................................. 193,500
-----------
692,300
-----------
BANKS--1.97%
9,800 Bank of New York Company, Incorporated................................ 461,825
-----------
BEVERAGES--1.69%
7,200 PepsiCo, Incorporated................................................. 397,800
-----------
BUSINESS MACHINES--9.57%
5,000 ADC Telecommunications, Incorporated*................................. 227,500
8,100 Bay Networks, Incorporated*........................................... 364,500
3,500 Cascade Communications Corporation*................................... 305,375
5,300 Compaq Computer Corporation*.......................................... 262,350
3,100 Hewlett Packard Company............................................... 256,912
4,800 Nokia Corporation ADR................................................. 260,400
12,500 3 Com Corporation*.................................................... 571,875
-----------
2,248,912
-----------
CHEMICALS--8.05%
7,800 Allied Signal, Incorporated........................................... 368,550
6,000 Grace W R & Company................................................... 364,500
7,200 Hercules, Incorporated................................................ 395,100
4,500 Monsanto Company...................................................... 515,250
8,500 Praxair, Incorporated................................................. 247,562
-----------
1,890,962
-----------
COSMETICS--2.24%
6,100 Procter & Gamble Company.............................................. 526,888
-----------
</TABLE>
20
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
DRUGS, MEDICINE--7.61%
5,700 Johnson & Johnson..................................................... $ 493,762
9,800 Merck & Co., Incorporated............................................. 606,375
8,500 Pfizer, Incorporated.................................................. 493,000
3,400 Schering Plough Corporation........................................... 195,075
-----------
1,788,212
-----------
ELECTRONICS--5.41%
8,000 Intel Corporation..................................................... 487,000
6,300 KLA Instruments Corporation*.......................................... 217,350
4,200 LSI Logic Corporation*................................................ 175,875
8,300 Micron Technology, Incorporated....................................... 180,675
8,000 Teradyne, Incorporated*............................................... 209,000
-----------
1,269,900
-----------
HEALTH (NON-DRUG)--5.43%
11,300 Biomet, Incorporated*................................................. 209,050
5,400 Boston Scientific Corporation*........................................ 218,700
5,000 Guidant Corporation................................................... 186,875
5,500 Medtronic, Incorporated............................................... 301,813
5,700 United Healthcare Corporation......................................... 358,388
-----------
1,274,826
-----------
HOTELS, RESTAURANTS--2.73%
8,200 Boston Chicken, Incorporated*......................................... 283,925
3,100 Hospitality Franchise Systems, Incorporated*.......................... 214,675
11,200 Host Marriott Corporation*............................................ 144,200
-----------
642,800
-----------
MEDIA--5.49%
16,500 Comcast Corporation, Class A Special.................................. 325,875
32,200 Tele Communications, Incorporated*.................................... 699,250
6,600 Time Warner, Incorporated............................................. 264,000
-----------
1,289,125
-----------
MISCELLANEOUS FINANCE--1.15%
5,300 Dean Witter Discover & Company........................................ 270,300
-----------
</TABLE>
21
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
PAPER--2.25%
4,500 Riverwood International Corporation................................... $ 82,688
7,800 Scott Paper Company................................................... 445,575
-----------
528,263
-----------
PRODUCERS' GOODS--3.16%
3,900 Applied Materials, Incorporated*...................................... 189,638
4,500 Emerson Electronics Company........................................... 351,000
3,100 Sundstrand Corporation................................................ 200,725
-----------
741,363
-----------
RETAIL (ALL OTHER)--3.39%
7,500 Autozone, Incorporated*............................................... 218,438
8,400 Family Dollar Stores, Incorporated.................................... 129,150
4,900 Office Depot, Incorporated*........................................... 120,050
6,200 Rite Aid Corporation.................................................. 193,750
5,300 Staples, Incorporated*................................................ 135,150
-----------
796,538
-----------
RETAIL (FOOD)--0.97%
10,300 General Nutrition Co., Incorporated*.................................. 227,888
-----------
SERVICES--11.16%
4,200 America Online, Incorporated*......................................... 171,675
8,500 CUC International, Incorporated*...................................... 323,000
4,700 Computer Associates International, Incorporated....................... 307,850
5,740 First Data Corporation................................................ 407,540
4,500 HBO & Company......................................................... 336,375
8,800 Informix Corporation*................................................. 243,650
6,200 Manpower, Incorporated................................................ 165,850
2,700 Microsoft Corporation*................................................ 235,237
5,400 Peoplesoft, Incorporated*............................................. 226,800
5,000 Service Corporation, International.................................... 203,125
-----------
2,621,102
-----------
SOAPS, HARDWARE--2.01%
9,100 Gillette Company...................................................... 472,062
-----------
</TABLE>
22
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
TELEPHONE, TELEGRAPH--2.50%
8,400 Airtouch Communications, Incorporated*................................ $ 244,650
12,800 MCI Communications Corporation........................................ 342,400
-----------
587,050
-----------
Total Common Stocks (cost--$19,033,210)............................................ 20,003,453
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- -------------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--12.74%
$ 2,993 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $2,981,158 U.S. Treasury
Notes, 6.000%, due 08/31/97; proceeds:
$2,993,437 (cost--$2,993,000).............. 12/01/95 5.250% 2,993,000
-----------
Total Investments (cost--$22,026,210)--97.90%.......... 22,996,453
Other assets in excess of liabilities--2.10%........... 492,773
-----------
Net Assets--100.00%.................................... $23,489,226
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
ADR American Depositary Receipt
See accompanying notes to financial statements
23
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--91.06%
AEROSPACE--0.65%
5,400 Thiokol Corporation..................................................... $ 182,925
------------
AGRICULTURE, FOOD--1.80%
500 AG Service America, Incorporated*....................................... 4,375
3,500 Cagle's Incorporated.................................................... 52,936
1,575 ERLY Industries Incorporated*........................................... 10,631
1,900 Hain Food Group Incorporated*........................................... 7,006
7,200 Hudson Foods Incorporated............................................... 115,200
5,100 International Multifoods Incorporated................................... 119,218
1,400 Orange Company, Incorporated New........................................ 11,200
6,800 Pilgrims Pride Corporation.............................................. 45,900
1,900 Sanderson Farms Incorporated............................................ 20,425
2,800 Sylvan, Incorporated*................................................... 31,150
7,700 The Morningstar Group Incorporated*..................................... 62,562
1,300 Thorn Apple Valley Incorporated*........................................ 21,775
------------
502,378
------------
AIR TRANSPORT--0.05%
1,900 Tower Air Incorporated.................................................. 13,538
------------
APPAREL, TEXTILES--3.18%
2,000 Chic By HIS Incorporated*............................................... 10,750
20,100 Collins & Aikman Products Company*...................................... 128,138
750 Conso Production Company*............................................... 11,812
3,500 Crown Crafts, Incorporated.............................................. 42,874
7,600 Culp, Incorporated...................................................... 77,900
2,000 Cygne Designs Incorporated*............................................. 2,500
2,100 Cyrk Incorporated*...................................................... 21,000
6,200 Deckers Outdoor Corporation*............................................ 41,850
1,000 Decorator Industries, Incorporated...................................... 8,250
3,400 Dyersburg Corporation................................................... 16,150
2,700 ERO Incorporated*....................................................... 15,525
2,100 Fieldcrest Cannon, Incorporated*........................................ 42,262
1,100 Fuqua Enterprises Incorporated*......................................... 22,825
3,600 Galey & Lord Incorporated*.............................................. 37,350
4,000 Guilford Mills, Incorporated............................................ 92,000
1,400 Hyde Athletic Industries, Incorporated*................................. 5,338
3,200 Johnston Industries Incorporated........................................ 26,000
13,700 Justin Industries, Incorporated......................................... 148,988
1,600 K-Swiss Incorporated.................................................... 18,400
700 LAT Sportswear*......................................................... 2,013
</TABLE>
24
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
APPAREL, TEXTILES--(CONCLUDED)
2,300 Maxwell Shoes Incorporated*............................................. $ 10,063
1,200 Norton McNaughton Incorporated*......................................... 16,200
3,400 Quaker Fabric Corporation New*.......................................... 30,600
500 Rocky Shoes & Boots, Incorporated*...................................... 3,437
1,300 Superior Surgical Manufacturing Company, Incorporated................... 11,700
1,000 Supreme International Corporation*...................................... 16,500
2,600 Tandy Brands Accessories, Incorporated*................................. 18,525
2,000 Worldtex, Incorporated*................................................. 11,250
------------
890,200
------------
BANKS--5.04%
6,500 1st Washington Bancorp Incorporated..................................... 36,969
500 American Bank Connecticut Waterbury..................................... 11,687
4,000 Bancorp South Incorporated.............................................. 89,000
1,600 CVB Financial Corporation*.............................................. 23,400
1,400 First Bank Of Illinois Company.......................................... 42,000
2,800 First Citizens BancShares, Incorporated*................................ 149,800
3,100 First Commonwealth Financial Corporation*............................... 53,087
2,300 Hancock Holding Company................................................. 85,100
1,500 HUBCO, Incorporated..................................................... 30,000
500 Interchange Financial Services Incorporated............................. 10,250
6,400 Long Island Bancorp Incorporated........................................ 164,800
700 Newmill Bancorp Incorporated............................................ 4,550
4,200 North Fork Bank Corporation............................................. 97,650
6,200 One Valley Bancorp of West Virginia Incorporated........................ 198,400
4,400 Provident Bancorp, Incorporated......................................... 191,400
8,000 Trustmark Corporation................................................... 148,000
1,800 Westamerica Bancorporation.............................................. 74,250
------------
1,410,343
------------
BEVERAGES--0.12%
1,500 National Beverage Corporation*.......................................... 7,874
3,300 Todhunter International Incorporated*................................... 24,750
------------
32,624
------------
BUILDING--0.70%
6,200 Lone Star Industries, Incorporated...................................... 154,225
2,800 Simpson Manufacturing Incorporated...................................... 42,350
------------
196,575
------------
</TABLE>
25
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
BUSINESS MACHINES--0.87%
1,500 Banctec, Incorporated*.................................................. $ 28,875
5,500 Cherry Corporation*..................................................... 55,000
1,600 Encad Incorporated*..................................................... 29,600
1,400 GBC Technologies, Incorporated*......................................... 11,900
1,700 Gradco Systems, Incorporated*........................................... 4,144
1,100 Interface Systems Incorporated.......................................... 7,150
500 Pomeroy Computer Resources*............................................. 7,500
4,600 Proteon, Incorporated*.................................................. 35,075
1,600 Proxima Corporation*.................................................... 28,800
2,100 Sequoia Systems, Incorporated*.......................................... 10,763
900 Software Spectrum, Incorporated*........................................ 17,550
1,500 Southern Electronics Corporation*....................................... 7,500
------------
243,857
------------
CHEMICALS--3.27%
2,100 Aceto Corporation....................................................... 35,962
500 American Vanguard Corporation........................................... 2,875
1,000 Applied Extrusion Technologies, Incorporated*........................... 12,625
2,500 Bairnco Corporation..................................................... 12,812
7,700 First Mississippi Corporation........................................... 196,350
8,100 Foamex International Incorporated*...................................... 57,713
10,000 Gencorp Incorporated.................................................... 117,500
9,400 Griffon Corporation*.................................................... 79,900
5,600 Rexene Corporation...................................................... 54,600
2,800 Scotts Liquid Gold Incorporated......................................... 8,050
1,900 Spartech Corporation.................................................... 12,825
5,600 Stepan Chemical Company................................................. 86,800
16,600 Sterling Chemicals, Incorporated*....................................... 139,025
1,000 Total Containment Incorporated*......................................... 4,500
2,500 Triple S Plastics, Incorporated*........................................ 16,563
1,200 Unitil Corporation...................................................... 24,300
1,800 Wynn's International Incorporated....................................... 51,750
------------
914,150
------------
COAL AND URANIUM--0.55%
7,100 Ashland Coal Incorporated............................................... 154,425
------------
CONSTRUCTION--3.08%
5,200 American Woodmark Corporation*.......................................... 24,700
1,700 Ameron, Incorporated.................................................... 61,837
1,700 Butler Manufacturing Company............................................ 58,650
3,300 Champion Enterprises, Incorporated*..................................... 99,000
300 Drew Industries Incorporated New*....................................... 4,575
</TABLE>
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- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
CONSTRUCTION--(CONCLUDED)
1,700 Eljer Industries, Incorporated*......................................... $ 13,387
2,500 Florida Rock Industries, Incorporated................................... 66,250
3,600 Genlyte Group, Incorporated*............................................ 23,850
2,300 Granite Construction Incorporated....................................... 63,825
2,700 Green AP Industries, Incorporated....................................... 54,000
1,300 ILC Technology Incorporated*............................................ 13,325
600 International Aluminum Corporation...................................... 17,175
1,200 Liberty Homes, Incorporated............................................. 14,400
5,400 Lilly Industries, Incorporated.......................................... 70,200
600 Lindal Cedar Homes, Incorporated*....................................... 2,775
4,900 Medusa Corporation...................................................... 121,888
1,400 NCI Building Systems Incorporated*...................................... 32,200
800 Shelter Components Corporation.......................................... 13,100
500 Somerset Group, Incorporated............................................ 8,625
5,000 Southdown, Incorporated*................................................ 94,375
1,000 Temtex Industries Incorporated*......................................... 4,374
------------
862,511
------------
CONSUMER DURABLES--3.26%
1,800 Bush Industries Incorporated............................................ 30,150
3,800 Campo Electronics*...................................................... 14,725
1,400 Chromcraft Revington, Incorporated*..................................... 33,950
500 Craftmade International Incorporated.................................... 3,750
1,200 Creative Technical Services Corporation*................................ 2,700
600 Douglas & Lomason Company............................................... 6,637
9,600 Fedders USA Incorporated................................................ 50,400
1,700 HMI Industries Incorporated............................................. 21,674
2,600 Haverty Furniture Companies, Incorporated............................... 37,050
500 Huffman Koos Incorporated*.............................................. 4,563
2,600 Image Industries Incorporated*.......................................... 28,600
14,200 Interco Incorporated*................................................... 118,925
800 International Jensen Incorporation*..................................... 5,600
1,300 Knape & Vogt Manufacturing Company...................................... 24,050
3,400 Masland Corporation..................................................... 49,300
2,400 O'Sullivan Industries................................................... 15,300
1,100 Rex Stores Corporation*................................................. 19,250
3,400 Rhodes, Incorporated New*............................................... 34,850
1,400 River Oaks Furniture Incorporated*...................................... 9,800
2,200 Roberds Incorporated*................................................... 23,650
4,000 Rowe Furniture Corporation.............................................. 19,500
1,200 Seaman Furniture Company, Incorporated*................................. 22,200
</TABLE>
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- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
CONSUMER DURABLES--(CONCLUDED)
1,300 Stanley Furniture Company, Incorporated*................................ $ 10,725
11,700 Sun Television & Appliances, Incorporated............................... 64,350
6,900 The Good Guys, Incorporated*............................................ 71,588
3,400 Toro Company............................................................ 107,525
3,700 Ultimate Electronics Incorporated*...................................... 30,525
1,200 Virco Manufacturing Corporation......................................... 12,150
4,300 Windmere Corporation.................................................... 25,800
2,300 Winsloew Furniture Incorporated......................................... 13,513
------------
912,800
------------
CONTAINERS--0.17%
600 Holopak Technologies Incorporated....................................... 3,300
3,500 US Can Corporation*..................................................... 45,063
------------
48,363
------------
COSMETICS--0.13%
1,500 Beauticontrol Cosmetics, Incorporated................................... 13,875
2,400 Jean Phillippe Fragrances*.............................................. 21,300
------------
35,175
------------
DOMESTIC PETROLEUM--0.13%
800 Penn Virginia Corporation............................................... 25,600
800 Prima Energy Corporation*............................................... 10,600
------------
36,200
------------
DRUGS, MEDICINE--0.54%
1,700 Allou Health & Beauty Care, Incorporated*............................... 10,094
4,700 Bindley Western Industries, Incorporated................................ 84,012
1,000 Chattem, Incorporated*.................................................. 4,625
6,000 Herbalife International Incorporated.................................... 44,250
800 Sullivan Dental Products Incorporated*.................................. 7,400
------------
150,381
------------
ELECTRIC UTILITIES--2.61%
3,500 Central Hudson Gas & Electric Corporation............................... 106,312
4,500 Central Maine Power Company............................................. 60,750
7,900 Central Vermont Public Service Corporation.............................. 106,650
3,100 Commonwealth Energy Systems*............................................ 139,500
6,200 Eastern Utilities Associates............................................ 142,600
600 Green Mountain Power Corporation........................................ 16,575
500 Maine Public Service Company............................................ 10,500
</TABLE>
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SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
ELECTRIC UTILITIES--(CONCLUDED)
2,000 Public Service Company Of New Mexico*................................... $ 35,250
2,800 United Illuminating Company............................................. 104,300
400 Upper Peninsula Energy Corporation...................................... 7,800
------------
730,237
------------
ELECTRONICS--1.28%
2,100 Bell Industries, Incorporated*.......................................... 47,775
1,200 CTS Corporation......................................................... 43,350
1,200 Circuit Systems, Incorporated*.......................................... 6,825
1,100 FLIR Systems Incorporated*.............................................. 14,300
1,000 HEI, Incorporated*...................................................... 5,875
4,500 Integrated Circuit Systems Incorporated*................................ 63,562
400 M-Wave Incorporated*.................................................... 2,700
3,500 Numerex Corporation N.Y.*............................................... 24,063
1,100 O.I. Corporation*....................................................... 3,025
3,200 OPTI, Incorporated*..................................................... 32,000
6,600 Pioneer Standard Electronics, Incorporated.............................. 97,350
1,600 Quality Semiconductor Incorporated*..................................... 12,800
400 Sigmatron International, Incorporated*.................................. 2,950
------------
356,575
------------
ENGINEERING & CONSTRUCTION--0.03%
1,300 Starrett Corporation.................................................... 9,831
------------
FINANCIAL SERVICES--0.06%
728 Investors Financial Services Corporation*............................... 14,191
140 Investors Financial Services Corporation, Class A*...................... 2,727
------------
16,918
------------
FOREST PRODUCTS--1.13%
4,600 ABT Building Products Corporation*...................................... 69,000
6,100 Cameron Ashley Building*................................................ 51,087
1,300 National Picture & Frame Company*....................................... 12,025
3,000 Patrick Industries Incorporated......................................... 39,750
800 Tranzonic Companies*.................................................... 11,400
7,900 Triangle Pacific Corporation*........................................... 124,425
1,000 Varitronic Systems, Incorporated*....................................... 9,500
------------
317,187
------------
GAS UTILITIES--0.51%
1,400 Alatenn Resources, Incorporated......................................... 29,575
</TABLE>
29
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NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
GAS UTILITIES--(CONCLUDED)
500 Chesapeake Utilities Corporation........................................ $ 7,437
2,000 Connecticut Energy Corporation.......................................... 40,250
2,200 Energen Corporation..................................................... 51,150
800 Providence Energy Corporation........................................... 13,100
------------
141,512
------------
HEALTH (NON-DRUG)--1.87%
2,500 Advanced Medical Incorporated*.......................................... 7,656
1,700 Advocate Services, Incorporated*........................................ 17,638
1,500 Allied Healthcare Products, Incorporated................................ 26,625
1,100 American Healthcorp Incorporated*....................................... 10,175
600 Customedix Corporation*................................................. 1,125
4,300 Geriatric & Medical Companies, Incorporated*............................ 11,555
2,000 Home Theater Products International Incorporated*....................... 1,125
5,000 Integrated Health Services, Incorporated................................ 110,625
500 Lakeland Industries, Incorporated*...................................... 1,813
800 Medical Technology Systems Incorporated*................................ 1,300
700 NMR Of America, Incorporated*........................................... 2,625
15,500 Novacare Incorporated*.................................................. 91,063
600 PSICOR-Canada, Incorporated*............................................ 10,500
3,100 Prime Medical Services, Incorporated *.................................. 21,506
7,700 Quantum Health Resources, Incorporated*................................. 71,706
5,500 Sun Healthcare Group Incorporated*...................................... 68,063
1,000 Transworld Home Healthcare*............................................. 10,125
2,500 United Wisconsin Services Incorporated.................................. 57,188
------------
522,413
------------
HOTEL, RESTAURANTS--1.90%
1,800 Black Hawk Gaming and Development Incorporated*......................... 10,800
2,400 Chart House Enterprises Incorporated*................................... 15,600
2,900 Davco Restaurants Incorporated*......................................... 34,075
2,000 ELXSI Corporation*...................................................... 11,000
1,600 El Chico Restaurants, Incorporated*..................................... 14,400
2,300 Krystal Company*........................................................ 15,525
6,900 Morrison Restaurants Incorporated....................................... 115,575
8,400 Players International, Incorporated*.................................... 111,300
6,900 Ryan's Family Steak Houses, Incorporated*............................... 50,888
2,200 Sholodge, Incorporated*................................................. 20,625
11,600 Shoney's, Incorporated*................................................. 124,700
1,500 Taco Cabana Incorporated*............................................... 8,063
------------
532,551
------------
</TABLE>
30
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NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
HOUSEHOLD--0.29%
1,500 Celebrity Incorporated*................................................. $ 8,625
5,300 Mikasa Incorporated*.................................................... 72,875
------------
81,500
------------
IRON & STEEL--5.80%
800 Atchinson Casting Corporation*.......................................... 11,200
1,200 Bayou Steel Corporation*................................................ 5,250
13,800 Birmingham Steel Corporation............................................ 205,275
3,600 Chaparral Steel Company................................................. 37,800
8,000 Cleveland Cliffs Incorporated........................................... 313,000
2,200 Cold Metal Products Incorporated*....................................... 10,175
2,000 Insteel Industries, Incorporated........................................ 13,250
9,500 J&L Specialty Steel Incorporated........................................ 156,750
1,800 Kentucky Electric Steel Incorporated*................................... 17,100
2,100 Laclede Steel Company*.................................................. 15,225
16,500 National Steel Corporation*............................................. 208,313
1,500 New Jersey Steel Corporation*........................................... 13,875
4,500 Olympic Steel Incorporated*............................................. 39,938
2,300 Roanoke Electric Steel Corporation...................................... 35,075
8,800 Rouge Steel Company..................................................... 191,400
3,200 Schnitzer Steel Industries Incorporated................................. 93,600
4,600 Steel of West Virginia Incorporated..................................... 44,850
3,000 Sudbury, Incorporated*.................................................. 24,000
1,700 Texas Industries, Incorporated.......................................... 87,125
5,500 Titan Wheel International............................................... 94,188
1,000 Weirton Steel Corporation*.............................................. 4,375
------------
1,621,764
------------
LEISURE, LUXURY--1.74%
11,400 Aldila, Incorporated*................................................... 52,012
1,000 Baldwin Piano & Organ Company*.......................................... 12,000
7,700 Casino America Incorporated*............................................ 45,237
1,300 First Team Sports Incorporated*......................................... 20,394
6,800 Fossil Incorporated*.................................................... 63,750
2,100 Johnson Worldwide Associates, Incorporated*............................. 48,300
1,300 Michael Anthony Jewelers, Incorporated*................................. 3,413
800 North American Watch Corporation........................................ 14,900
3,100 Oneida Ltd.............................................................. 53,863
1,800 Oroamerica, Incorporated*............................................... 7,425
6,400 Outboard Marine Corporation............................................. 131,200
2,100 Rawlings Sporting Goods Company*........................................ 16,013
1,200 Swing 'n Slide Corporation*............................................. 4,950
1,700 Variflex Incorporated................................................... 13,175
------------
486,632
------------
</TABLE>
31
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NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
LIFE INSURANCE--5.33%
3,100 Allied Life Financial Corporation....................................... $ 53,475
15,800 American Annuity Group Incorporated..................................... 173,800
4,900 American Heritage Life Investment Corporation........................... 98,611
3,300 Amvestors Financial Corporation......................................... 37,950
3,400 Delphi Financial Group, Incorporated*................................... 68,850
5,000 Home Beneficial Corporation............................................. 121,875
12,900 John Alden Financial Corporation........................................ 266,063
13,900 Life Partners Group Incorporated........................................ 172,013
4,500 Life RE Corporation..................................................... 96,188
8,200 Life USA Holdings Incorporated.......................................... 70,725
500 National Western Life Insurance Company*................................ 26,625
5,800 Security-Connecticut Company............................................ 147,900
6,300 Washington National Corporation......................................... 155,925
------------
1,490,000
------------
MACHINES--0.03%
1,200 Stevens International Incorporated*..................................... 8,325
------------
MEDIA--0.73%
2,000 Applied Signal Technology*.............................................. 10,000
3,200 Carmike Cinemas Incorporated*........................................... 78,400
1,400 Communications Cent Incorporated*....................................... 6,300
400 Datron Systems Incorporated*............................................ 7,800
10,000 Handleman Company....................................................... 62,500
3,300 Image Entertainment Incorporated*....................................... 22,275
1,100 Raven Industries, Incorporated.......................................... 17,188
------------
204,463
------------
MISCELLANEOUS FINANCE--1.54%
1,600 Dwyer Group Incorporated*............................................... 4,200
2,600 Eaton Vance Corporation................................................. 74,750
1,100 Inter-Regional Financial Group Incorporated............................. 43,313
1,500 Interstate Johnson Lane, Incorporated................................... 15,188
1,000 Jefferies Group, Incorporated........................................... 42,500
3,500 Morgan Keegan, Incorporated............................................. 43,313
4,500 Piper Jaffray Companies, Incorporated................................... 57,375
600 Refac Technology Developement Corporation*.............................. 4,200
900 Ryan Beck & Company..................................................... 6,750
600 Scott & Stringfellow Financial, Incorporated............................ 8,100
2,300 Value Line Incorporated................................................. 77,625
1,000 White River Corporation*................................................ 34,500
1,100 Winthrop Resources Corporation.......................................... 18,150
------------
429,964
------------
</TABLE>
32
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NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MISCELLANEOUS MINING & METALS--1.33%
2,200 AFC Cable Systems, Incorporated*........................................ $ 28,600
7,900 Commercial Metals Company............................................... 185,650
800 Davis Water & Waste Industries, Incorporated............................ 12,600
17,300 Envirosource Incorporated*.............................................. 51,900
5,100 Foster LB Company*...................................................... 22,312
800 Friedman Industries, Incorporated....................................... 3,000
3,100 Global Industrial Technologies Incorporated*............................ 55,025
1,530 Zemex Corporation*...................................................... 13,196
------------
372,283
------------
MOTOR VEHICLES--5.37%
2,310 Autocam Corporation*.................................................... 31,185
9,600 Breed Technologies, Incorporated........................................ 194,400
3,400 Capco Automotive Products, Incorporated................................. 26,350
3,300 Coachmen Industries, Incorporated....................................... 63,937
1,500 Coast Distribution Systems*............................................. 8,811
2,800 Defiance, Incorporated*................................................. 21,000
2,000 Delfecta Shield Corporation............................................. 10,750
3,200 Excel Industries, Incorporated.......................................... 39,200
1,700 Hayes Wheels International, Incorporated................................ 45,475
1,200 Hilite Industries Incorporated*......................................... 12,600
2,600 Insurance Auto Auctions Incorporated*................................... 28,600
4,400 Larizza Industries, Incorporated*....................................... 28,050
1,200 Lund International Holdings, Incorporated*.............................. 15,900
1,100 Monaco Coach Corporation*............................................... 11,274
700 National R.V. Holdings Incorporated*.................................... 8,313
1,200 Oshkosh Truck Corporation............................................... 17,700
2,100 R & B Incorporated*..................................................... 13,913
1,700 Republic Automotive Parts, Incorporated*................................ 21,888
400 Rexhall Industries, Incorporated*....................................... 2,000
3,300 Shiloh Industries Incorporated*......................................... 37,950
9,200 Simpson Industries, Incorporated........................................ 86,250
14,200 Smith AO Corporation.................................................... 337,250
3,900 Standard Motor Products Incorporated.................................... 58,500
11,000 Stant Corporation....................................................... 101,750
2,900 Starcraft Industries*................................................... 14,500
2,200 Supreme Industries, Incorporated*....................................... 17,738
10,100 TBC Corporation*........................................................ 70,700
4,000 Thor Industries, Incorporated........................................... 66,500
2,400 Walbro Corporation...................................................... 46,800
7,300 Williams Controls Incorporated*......................................... 20,075
5,300 Winnebago Industries, Incorporated...................................... 41,075
------------
1,500,434
------------
</TABLE>
33
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NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
OIL REFINING, DISTRIBUTION--0.58%
1,300 Adams Resources & Energy, Incorporated.................................. $ 8,692
4,800 KCS Energy Incorporated................................................. 66,000
1,100 Mercury Air Group, Incorporated......................................... 9,350
9,300 Tesoro Petroleum Corporation*........................................... 77,888
------------
161,930
------------
OIL SERVICE--0.19%
1,300 Global Industries Incorporated*......................................... 34,937
2,100 RPC Energy Service, Incorporated*....................................... 16,800
------------
51,737
------------
OTHER INSURANCE--8.49%
1,000 ACMAT Corporation*...................................................... 12,250
4,700 Acceptance Insurance Company, Incorporated*............................. 68,737
5,400 Alfa Corporation........................................................ 59,400
2,600 Allied Group Incorporated............................................... 92,300
2,100 American Eagle Group Incorporated....................................... 20,213
500 American Indemnity Financial Corporation................................ 4,750
2,800 American Travellers Corporation*........................................ 70,000
500 Amwest Insurance Group, Incorporated.................................... 8,687
9,000 Capitol American Financial Corporation.................................. 184,500
3,800 Capital Re Corporation.................................................. 114,000
1,600 Central Reserve Life Corporation........................................ 15,000
4,900 Commerce Group Incorporated*............................................ 103,512
600 Donegal Group Incorporated.............................................. 10,950
2,600 EMC Insurance Group, Incorporated....................................... 31,850
4,100 Enhance Financial Services Group Incorporated........................... 98,912
1,800 First Central Financial Corporation..................................... 12,263
3,000 Foremost Corporation of America......................................... 147,000
2,400 Fremont General Corporation*............................................ 82,800
3,045 Gainsco Incorporated.................................................... 31,211
9,600 Guaranty National Corporation New*...................................... 139,200
3,800 Harleysville Group Incorporated......................................... 111,625
1,800 Home State Holdings Incorporated*....................................... 15,075
8,100 Integon Corporation..................................................... 137,700
1,000 Intercargo Corporation.................................................. 9,500
1,700 JPE Incorporated*....................................................... 18,275
2,100 MAIC Holdings, Incorporated*............................................ 66,150
1,600 Meridian Insurance Group, Incorporated.................................. 24,400
700 Midland Financial Group Incorporated.................................... 8,050
3,500 Nymagic Incorporated.................................................... 58,187
3,600 Orion Capital Corporation............................................... 150,300
5,900 PXRE Corporation........................................................ 143,076
2,400 Pacific Rim Holdings Company*........................................... 6,300
</TABLE>
34
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PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
OTHER INSURANCE--(CONCLUDED)
800 Pioneer Financial Services, Incorporated................................ $ 13,300
1,700 Scor US Corporation..................................................... 25,713
3,100 Transnational Re Corporation............................................ 82,150
900 Trenwick Group Incorporated............................................. 46,125
8,200 United Insurance Companies, Incorporated*............................... 142,475
1,300 Westbridge Capital Corporation*......................................... 7,800
------------
2,373,736
------------
PAPER--0.81%
18,500 Gaylord Container Corporation*.......................................... 171,125
2,700 Republic Gypsum Company................................................. 34,763
1,700 Specialty Paperboard Incorporated*...................................... 20,825
------------
226,713
------------
POLLUTION CONTROL--0.27%
1,900 Harding Lawson Associates Group Incorporated*........................... 12,588
2,500 Sevenson Environmental Services, Ltd.................................... 45,000
1,300 Smith Environmental Technologies Corporation*........................... 5,362
2,100 TRC Companies, Incorporated*............................................ 12,338
------------
75,288
------------
PRODUCERS' GOODS--6.91%
4,000 AAON Incorporated*...................................................... 25,500
700 ABS Industries, Incorporated............................................ 6,125
5,500 ACME Metals Incorporated*............................................... 83,875
2,600 AM International, Incorporated New*..................................... 18,850
3,300 Aeroflex, Incorporated*................................................. 14,850
2,200 Allied Products Corporation............................................. 45,925
5,800 Amcast Industrial Corporation........................................... 107,300
2,300 American United Global Incorporated*.................................... 8,050
800 Amistar Corporation*.................................................... 6,100
2,800 Amtrol Incorporated..................................................... 46,200
5,200 Astec Industries, Incorporated*......................................... 56,550
1,300 Aztec Manufacturing Company............................................. 4,550
2,800 Barnes Group Incorporated............................................... 108,500
6,900 Brenco Incorporated..................................................... 72,450
5,300 CMI Corporation*........................................................ 27,162
6,200 Cascade Corporation..................................................... 89,125
10,400 Commercial Intertech Corporation........................................ 184,600
2,200 Core Industries Incorporated............................................ 30,250
7,200 Detroit Diesel Corporation*............................................. 131,400
2,000 Durakon Industries, Incorporated*....................................... 27,500
900 ECC International Incorporated*......................................... 9,225
</TABLE>
35
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- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
PRODUCERS' GOODS--(CONCLUDED)
2,700 Ellett Brothers Incorporated............................................ $ 21,600
1,200 Farr Company*........................................................... 9,300
1,500 Gehl Company*........................................................... 10,688
500 Hein-Werner Corporation*................................................ 2,250
5,200 IMO Industries Incorporated*............................................ 37,050
700 Krug International Corporation*......................................... 2,100
3,700 Kysor Industrial Corporation............................................ 85,100
4,000 Lamson & Sessions Company*.............................................. 28,000
1,200 Lindberg Corporation.................................................... 8,100
1,100 McClain Industries, Incorporated*....................................... 5,500
500 McRae Industries, Incorporated.......................................... 3,813
2,600 Mestek, Incorporated*................................................... 28,600
1,600 Nacco Industries, Incorporated.......................................... 91,200
4,200 Nortek, Incorporated*................................................... 39,900
5,600 Park Ohio Industries Incorporated*...................................... 72,800
300 Pitt-Des Moines, Incorporated........................................... 11,475
1,200 Portec, Incorporated*................................................... 11,550
1,100 Quad Systems Corporation*............................................... 9,213
6,900 Quanex Corporation...................................................... 135,413
2,600 Raymond Corporation*.................................................... 53,950
3,100 Scotsman Industries, Incorporated....................................... 51,150
500 Simmons Outdoor Corporation*............................................ 5,063
1,000 Speizman Industries, Incorporated*...................................... 2,875
3,400 Starrett LS Company..................................................... 79,475
600 Twin Disc, Incorporated................................................. 13,725
500 Valley Forge Corporation................................................ 9,000
------------
1,932,977
------------
PUBLISHING--0.38%
1,400 Educational Insights, Incorporated*..................................... 4,900
2,800 Graphic Industries, Incorporated........................................ 29,050
2,000 Plenum Publishing Corporation........................................... 72,500
------------
106,450
------------
RAILROADS, TRANSIT--0.21%
3,600 Johnstown American Industries Incorporated*............................. 19,350
500 Providence & Worchester Railroad Company................................ 3,563
1,400 Varlen Corporation...................................................... 36,750
------------
59,663
------------
</TABLE>
36
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- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
REAL PROPERTY--1.05%
100 Amrep Corporation*...................................................... $ 562
2,700 Engle Homes, Incorporated............................................... 22,612
2,900 Fairfield Communities, Incorporated*.................................... 20,662
2,600 M.D.C. Holdings, Incorporated........................................... 17,225
600 Oriole Homes Corporation*............................................... 3,300
7,000 Schuler Homes Incorporated*............................................. 63,000
2,900 US Home Corporation New*................................................ 75,400
1,000 Washington Homes, Incorporated New*..................................... 5,000
4,200 Webb Delaware Corporation............................................... 85,050
------------
292,811
------------
RETAIL (ALL OTHER)--7.61%
1,600 Advanced Marketing Services, Incorporated*.............................. 14,600
5,300 Ames Department Stores, Incorporated*................................... 8,612
2,600 Barry's Jewelers, Incorporated*......................................... 10,400
2,400 Big B, Incorporated..................................................... 24,300
5,300 Blair Corporation....................................................... 164,962
7,500 Bon Ton Stores, Incorporated*........................................... 42,187
2,000 CML Group Incorporated.................................................. 12,250
2,600 Cache, Incorporated*.................................................... 9,425
3,300 Caldor Corporation*..................................................... 13,612
6,800 Carson Pirie Scott & Company*........................................... 135,150
6,200 Cash America International, Incorporated................................ 34,100
5,200 Catherines Stores Corporation*.......................................... 42,250
1,800 DIY Home Warehouse Incorporated*........................................ 7,875
4,500 Designs, Incorporated*.................................................. 35,437
1,400 Elek-Tek, Incorporated*................................................. 4,375
2,500 Fabri-Centers Of America, Incorporated*................................. 36,562
4,600 Finish Line, Incorporated*.............................................. 41,400
1,000 First Cash Incorporated*................................................ 3,750
2,000 Gantos Incorporated*.................................................... 4,625
2,600 Genovese Drug Stores, Incorporated...................................... 31,200
4,600 Hills Stores Company*................................................... 54,050
2,600 Hi-Lo Automotive Incorporated*.......................................... 14,625
3,000 Inacom Corporation*..................................................... 39,750
4,200 Intertan Incorporated*.................................................. 35,175
3,900 J. Baker, Incorporated.................................................. 24,862
2,000 Little Switzerland, Incorporated*....................................... 7,750
10,800 MacFrugals Bargains Closeout Incorporated*.............................. 141,750
10,400 Michaels Stores, Incorporated*.......................................... 171,600
</TABLE>
37
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
RETAIL (ALL OTHER)--(CONCLUDED)
900 Pamida Holdings Corporation*............................................ $ 3,488
14,300 Payless Cashways, Incorporated*......................................... 60,775
900 Rag Shops, Incorporated*................................................ 1,913
1,200 Schottenstein Homes Incorporated*....................................... 13,650
29,400 Service Merchandise Company, Incorporated*.............................. 180,075
15,400 Shopko Stores Incorporated.............................................. 175,175
700 Spec's Music, Incorporated*............................................. 1,400
8,600 Sportmart, Incorporated*................................................ 42,463
5,800 Sports & Recreation, Incorporated*...................................... 40,600
700 Strober Organization Incorporated....................................... 2,756
2,400 Strouds, Incorporated*.................................................. 9,600
8,500 The Cato Corporation New................................................ 60,562
6,300 The Dress Barn*......................................................... 58,274
1,400 Trak Auto Corporation*.................................................. 21,700
4,400 Venture Stores Incorporated*............................................ 15,950
9,800 Waban Incorporated*..................................................... 181,300
800 Wickes Lumber Company*.................................................. 5,000
3,200 Wolohan Lumber Company.................................................. 28,800
2,300 Younkers Incorporated*.................................................. 57,788
------------
2,127,903
------------
RETAIL (FOOD)--0.76%
1,904 Carr Gottstein Foods Company*........................................... 10,235
3,500 Marsh Supermarkets Incorporated*........................................ 47,250
6,100 Smiths Food & Drug Centers, Incorporated................................ 147,162
1,300 Western Beef, Incorporated*............................................. 7,150
------------
211,797
------------
SERVICES--2.83%
1,300 Amplicon Incorporated................................................... 18,525
6,400 CDI Corporation*........................................................ 118,400
1,300 Computer Data Systems, Incorporated*.................................... 18,362
1,200 EA Engineering Science & Technology, Incorporated*...................... 4,500
2,600 Earth Technology Corporation *.......................................... 15,600
700 Ecology & Environment, Incorporated..................................... 5,424
8,900 Interpool, Incorporated*................................................ 150,188
2,000 Isomedix Incorporated*.................................................. 28,500
2,600 Kinder-Care Learning Centers, Incorporated*............................. 31,850
5,400 McGrath Rentcorp........................................................ 97,200
1,300 PCI Services, Incorporated*............................................. 13,000
600 Personnel Management, Incorporated*..................................... 5,850
</TABLE>
38
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
SERVICES--(CONCLUDED)
13,400 Rollins Truck Leasing Corporation....................................... $ 134,000
2,000 Selective Insurance Group, Incorporated................................. 76,000
3,400 Treadco, Incorporated................................................... 21,250
4,800 Triad Systems Corporation*.............................................. 26,400
1,300 United American Healthcare Company*..................................... 13,812
1,800 URS Corporation*........................................................ 12,375
------------
791,236
------------
SOAPS, HARDWARE--0.64%
6,200 American Safety Razor Company*.......................................... 53,475
400 Dixon Ticonderoga Company*.............................................. 2,350
600 Eastern Company......................................................... 6,750
5,600 Ekco Group Incorporated................................................. 33,600
2,100 Libbey Incorporated..................................................... 47,513
3,100 Pentech International, Incorporated*.................................... 8,138
1,000 Sybron Chemicals Incorporated*.......................................... 12,750
1,100 Transtechnology Corporation............................................. 13,200
------------
177,776
------------
TELEPHONE AND TELEGRAMS--0.09%
5,300 General Communications, Incorporated*................................... 23,850
------------
THRIFT INSTITUTIONS--3.13%
750 Anchor Bancorp Wisconsin Incorporated*.................................. 26,812
8,800 Bankers Corporation..................................................... 150,150
700 Boston Bancorp.......................................................... 5,812
1,100 Eagle Financial Corporation............................................. 30,525
500 Grove Bank of Brighton Massachusetts.................................... 12,000
1,500 Leader Financial Corporation............................................ 56,813
700 MAF Bancorp Incorporated................................................ 17,675
3,300 New York Bancorp Incorporated........................................... 66,825
1,000 Pulse Bancorp, Incorporated............................................. 17,250
1,000 Queens County Bancorp................................................... 40,250
8,100 Roosevelt Financial Group, Incorporated................................. 137,700
25,800 Sovereign Bancorp, Incorporated......................................... 270,900
1,400 Sterling Financial Corporation.......................................... 19,250
400 Washington Savings Bank FSB............................................. 2,200
------------
874,162
------------
TIRE AND RUBBER--0.11%
1,600 American Biltrite Incorporated.......................................... 30,800
------------
</TABLE>
39
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
TRANSPORT BY WATER--0.14%
875 International Shipholding Corporation................................... $ 16,844
2,400 Maritrans Incorporated.................................................. 12,600
300 Oglebay Norton & Company................................................ 10,800
------------
40,244
------------
TRANSPORTATION--0.08%
1,700 MTL, Incorporated*...................................................... 22,313
------------
TRUCKING, FREIGHT--1.59%
3,200 Allied Holdings, Incorporated*.......................................... 32,000
5,500 Arkansas Best Corporation............................................... 44,688
900 Cannon Express Incorporated*............................................ 9,450
3,600 Landstar Systems Incorporated*.......................................... 92,700
800 Marten Transport Ltd.*.................................................. 12,000
2,700 Matlock Systems, Incorporated*.......................................... 23,963
1,700 Old Dominion Freight Lines, Incorporated*............................... 17,000
2,000 Sunrise Leasing Corporation............................................. 6,500
9,300 TNT Freightways Corporation............................................. 183,675
2,900 Trism Incorporated*..................................................... 23,200
------------
445,176
------------
WHOLESALE--0.10%
1,900 World Fuel Services Corporation......................................... 27,075
------------
Total Common Stocks (cost--$25,708,601)............................................. 25,462,671
------------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- -------------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--12.42%
$ 3,472 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by
$3,458,263 U.S. Treasury Notes, 6.000%,
due
08/31/97; proceeds: $3,472,506
(cost--$3,472,000)......................... 12/01/95 5.250% 3,472,000
-----------
Total Investments (cost--$29,180,601)--103.48%......... 28,934,671
Liabilities in excess of other assets--(3.48%)......... (972,720)
-----------
Net Assets--100.00%.................................... $27,961,951
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
See accompanying notes to financial statements
40
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--85.36%
APPAREL, TEXTILES--1.39%
8,800 Fila Holdings SPA ADR.................................................. $ 423,500
-----------
BANKS--0.58%
5,500 Charter One Financial Incorporated .................................... 176,000
-----------
BUSINESS MACHINES--2.38%
15,800 3Com Corporation*...................................................... 722,850
-----------
CHEMICALS--1.21%
30,000 NL Industries Incorporated* ........................................... 367,500
-----------
COMPUTERS & OFFICE EQUIPMENT--0.17%
10,000 Syncronys Softcorp*.................................................... 52,500
-----------
CONSUMER DURABLES--1.77%
27,000 Williams-Sonoma Incorporated*.......................................... 540,000
-----------
CONTAINERS--1.54%
13,000 Aptargroup Incorporated ............................................... 468,000
-----------
DATA PROCESSING--0.77%
9,500 Transaction Network Services Incorporated*............................. 232,750
-----------
DRUGS, MEDICINE--6.02%
15,000 Cygnus Corporation*.................................................... 234,375
14,000 IDEXX Labs Incorporated* .............................................. 623,000
55,000 Quidel Corporation*.................................................... 323,125
20,000 Rexall Sundown Incorporated*........................................... 390,000
21,000 SEQUUS Pharmaceuticals*................................................ 262,500
-----------
1,833,000
-----------
ELECTRONICS--3.83%
38,000 Alpha Industries Incorporated* ........................................ 560,500
11,000 KEMET Corporation*..................................................... 335,500
4,200 Teradyne Incorporated*................................................. 109,725
9,500 Triquint Semiconductor Incorporated*................................... 159,125
-----------
1,164,850
-----------
ELECTRONICS/ELECTRICAL--0.60%
5,000 Merix Corporation*..................................................... 181,250
-----------
HEALTHCARE--1.53%
20,000 CRA Managed Care Incorporated*......................................... 465,000
-----------
HEALTH (NON-DRUG)--16.35%
20,000 Apria Healthcare Group Incorporated*................................... 605,000
21,000 Avecor Cardiovascular*................................................. 330,750
</TABLE>
41
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
HEALTH (NON-DRUG)--(CONCLUDED)
20,000 Circon Corporation*.................................................... $ 438,750
10,000 Conmed Corporation*.................................................... 315,000
17,000 Genesis Health Ventures Incorporated*.................................. 554,625
40,000 Horizon CMS Healthcare Corporation*.................................... 865,000
15,000 National Surgery Centers Incorporated*................................. 318,750
10,000 Nellcor Puritan Bennett Incorporated*.................................. 575,000
23,900 Quorum Healthcare Group Incorporated*.................................. 516,837
20,000 Summit Care Corporation*............................................... 455,000
-----------
4,974,712
-----------
HOTELS, RESTAURANTS--1.58%
20,000 Quality Dining Incorporated*........................................... 480,000
-----------
LEISURE, LUXURY--2.89%
11,400 Premiere Radio Networks Incorporated*.................................. 188,100
35,000 Sinclair Broadcast Group Incorporated*................................. 691,250
-----------
879,350
-----------
MEDIA--2.94%
31,000 Spelling Entertainment Group Incorporated* ............................ 410,750
10,000 Viacom Inc. Class B*................................................... 482,500
-----------
893,250
-----------
MEDICAL SUPPLIES--1.13%
25,000 Lecroy Corporation*.................................................... 343,750
-----------
MISCELLANEOUS FINANCE--1.64%
35,000 Mercury Finance Company................................................ 498,750
-----------
OIL SERVICE--2.96%
20,000 Energy Ventures Incorporated* ......................................... 420,000
19,000 Weatherford Enterra Incorporated* ..................................... 482,125
-----------
902,125
-----------
OTHER INSURANCE--1.55%
10,000 Mercury General Corporation ........................................... 472,500
-----------
PRODUCERS' GOODS--6.32%
14,000 Aspect Telecommunications*............................................. 476,000
10,000 Danaher Corporation ................................................... 307,500
25,700 DSC Communications Corporation*........................................ 1,018,363
6,000 Insignia Solutions plc ADR*............................................ 122,250
-----------
1,924,113
-----------
RETAIL--1.40%
20,000 De Rigo S P A ADR*..................................................... 425,000
-----------
</TABLE>
42
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
SERVICES--20.46%
9,000 Adobe Systems Incorporated ............................................ $ 608,625
10,000 America Online Incorporated*........................................... 408,750
15,000 Ceridian Corporation*.................................................. 630,000
5,000 Computer Sciences Corporation*......................................... 363,750
50,000 Computervision Corporation*............................................ 625,000
33,500 Firefox Communications Incorporated*................................... 728,625
15,000 Microtec Research Incorporated*........................................ 198,750
17,000 Novell Incorporated*................................................... 286,875
42,000 ON Technology Corporation*............................................. 609,000
34,000 Platinum Software Corporation*......................................... 229,500
10,000 Service Corporation International...................................... 406,250
20,000 Softkey International Incorporated*.................................... 675,000
14,400 Spectrum Holobyte Incorporated*........................................ 124,200
12,400 Wonderware Corporation*................................................ 331,700
-----------
6,226,025
-----------
SOAPS, HARDWARES--2.10%
14,000 First Brands Corporation .............................................. 640,500
-----------
TELECOM SERVICES & EQUIPMENT--2.25%
14,000 Adtran Incorporated*................................................... 686,000
-----------
25,973,275
Total Common Stocks (cost--$25,816,181)............................................
-----------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- ---------- -------------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--18.41%
$5,601 Repurchase Agreement dated 11/30/95 with
State
Street Bank & Trust Company,
collateralized by
$5,578,965 U.S. Treasury Notes, 6.000%,
due 08/31/97;
proceeds: $5,601,817 (cost--$5,601,000)... 12/01/95 5.250% 5,601,000
-----------
Total Investments (cost--$31,417,181)--103.77%......... 31,574,275
Liabilities in excess of other assets--(3.77)%......... (1,148,139)
-----------
Net Assets--100.00%.................................... $30,426,136
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
ADR American Depositary Receipt
See accompanying notes to financial statements
43
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--85.89%
ARGENTINA--0.83%
ENERGY UTILITIES--0.83%
3,200 Capex S.A. GDR........................................................ $ 103,200
-----------
AUSTRALIA--2.21%
BASIC INDUSTRIES--2.21%
20,200 Broken Hill Proprietary Company, Ltd.................................. 274,650
-----------
AUSTRIA--1.72%
TRANSPORTATION & STORAGE--1.72%
3,100 Flughafen Wien AG..................................................... 213,562
-----------
BRAZIL--2.02%
ENERGY UTILITIES--2.02%
7,000 Centrais Electricas Brasileiras S.A. ADR*............................. 96,250
8,600 Telecomunicacoes Brasileiras S.A. ADR................................. 153,600
-----------
249,850
-----------
FRANCE--4.31%
CAPITAL GOODS--2.23%
7,500 Schneider S.A. ....................................................... 275,924
-----------
CONSUMER GOODS & SERVICES--2.08%
2,000 Peugeot S.A........................................................... 258,491
-----------
Total France Common Stocks......................................................... 534,415
-----------
GERMANY--3.63%
BASIC INDUSTRIES--1.46%
700 Hoechst AG............................................................ 181,159
-----------
UTILITIES--2.17%
6,600 Veba AG............................................................... 269,239
-----------
Total Germany Common Stocks........................................................ 450,398
-----------
HONG KONG--7.65%
COMMERCIAL BANKS & OTHER BANKS--2.24%
18,858 HSBC Holdings plc..................................................... 277,937
-----------
DIVERSIFIED HOLDING COMPANY--2.32%
51,000 Hutchison Whampoa, Ltd. .............................................. 288,135
-----------
REAL ESTATE--1.51%
196,000 Amoy Properties, Ltd. ................................................ 187,514
-----------
UTILITIES--1.58%
41,500 China Light & Power Company, Ltd. .................................... 195,297
-----------
]Total Hong Kong Common Stocks..................................................... 948,883
-----------
ITALY--1.75%
CONSUMER GOODS & SERVICES--1.75%
38,800 La Rinascente......................................................... 217,393
-----------
</TABLE>
44
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONTINUED)
JAPAN--26.59%
<C> <S> <C>
CHEMICALS--3.43%
32,000 Asahi Chemical Industry Company, Ltd.................................. $ 239,017
9,000 Shin-Etsu Chemical Company, Ltd....................................... 185,749
-----------
424,766
-----------
COMPUTERS/OFFICE/TELECOM EQUIPMENT--1.81%
28 DDI Corporation....................................................... 225,101
-----------
CONSTRUCTION & BUILDING MATERIALS--1.63%
15,000 Sumitomo Forestry Company, Ltd. ...................................... 201,966
-----------
ELECTRONICS/CONTROL EQUIPMENT--7.82%
12,000 Cannon, Incorporated.................................................. 211,106
20,000 Hitachi, Ltd.*........................................................ 202,457
3,000 Kyocera Corporation................................................... 237,346
6,000 Sony Corporation...................................................... 318,428
-----------
969,337
-----------
FINANCIAL INSTITUTIONS & SERVICES--2.00%
18,000 Sumitomo Trust & Banking Company, Ltd................................. 247,666
-----------
HEAVY ENGINEERING/SHIPBUILDING--2.19%
34,000 Mitsubishi Heavy Industries, Ltd. .................................... 270,998
-----------
RETAIL TRADE--1.78%
4,000 Ito-Yokado Company, Ltd............................................... 220,934
-----------
TRANSPORTATION & STORAGE--3.58%
24,000 Kamigumi Company, Ltd. ............................................... 218,653
26,000 Nippon Express Corporation, Ltd....................................... 225,631
-----------
444,284
-----------
WHOLESALE TRADE--2.35%
44,000 Itochu Corporation.................................................... 291,892
-----------
Total Japan Common Stocks.......................................................... 3,296,944
-----------
MALAYSIA--3.85%
CONSUMER GOODS & SERVICES--2.18%
22,000 Edaran Otomobil Nasional Berhad....................................... 157,824
13,000 Genting Berhad........................................................ 112,219
-----------
270,043
-----------
FINANCE/INSURANCE/REAL ESTATE--1.67%
20,000 AMMB Holdings Berhad.................................................. 206,937
-----------
Total Malaysia Common Stocks...................................................... 476,980
-----------
MEXICO--2.53%
BASIC INDUSTRIES--1.28%
39,250 Apasco, S.A. de C.V................................................... 158,875
-----------
CAPITAL GOODS--1.25%
29,200 Grupo Industrial San Luis S.A.*....................................... 154,816
-----------
Total Mexico Common Stocks........................................................ 313,691
-----------
</TABLE>
45
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONTINUED)
<C> <S> <C>
NETHERLANDS--1.97%
CONSUMER GOODS & SERVICES--1.97%
2,900 Wolters Kluwer N.V.................................................... $ 244,637
-----------
SINGAPORE--4.10%
CONSUMER GOODS & SERVICES--2.40%
25,700 Jardine Matheson...................................................... 155,485
9,000 Singapore Press Holdings, Ltd......................................... 142,290
-----------
297,775
-----------
FINANCE/INSURANCE/REAL ESTATE--1.70%
18,000 Developement Bank Singapore, Ltd. .................................... 210,564
-----------
Total Singapore Common Stocks..................................................... 508,339
-----------
SPAIN--3.01%
CONSUMER GOODS & SERVICES--1.32%
7,300 Continente Cent Company............................................... 163,762
-----------
FINANCE/INSURANCE/REAL ESTATE--1.69%
4,500 Banco de Santander S.A................................................ 209,931
-----------
Total Spain Common Stocks.......................................................... 373,693
-----------
]SWITZERLAND--2.06%
CONSUMER GOODS & SERVICES--2.06%
240 Nestle S.A.-Registered................................................ 255,823
-----------
THAILAND--1.66%
FINANCE/INSURANCE/REAL ESTATE--1.66%
59,000 Thai Military Bank Public Company, Ltd................................ 206,359
-----------
UNITED KINGDOM--16.00%
BANKS--1.91%
38,000 TSB Group plc......................................................... 237,064
-----------
BUILDING MATERIALS & MERCHANDISE--1.91%
34,000 Wolseley plc.......................................................... 236,314
-----------
ELECTRICITY--1.87%
17,000 East Midland Electricity plc*......................................... 232,279
-----------
FOOD MANUFACTURERS--2.03%
13,000 Unilever plc.......................................................... 252,059
-----------
LEISURE & HOTELS--1.92%
109,000 Ladbroke Group........................................................ 238,625
-----------
PHARMACEUTICALS--1.83%
17,000 Glaxo Wellcome plc, ADR............................................... 226,814
-----------
RETAIL, FOOD--1.92%
50,000 Argyll Group.......................................................... 238,059
-----------
</TABLE>
46
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
UNITED KINGDOM--(CONCLUDED)
TELECOMMUNICATIONS--0.73%
13,000 Cable & Wireless, Ltd. ............................................... $ 90,256
-----------
TRANSPORTATION--1.88%
33,000 British Airways....................................................... 232,394
-----------
Total United Kingdom Common Stocks................................................. 1,983,864
-----------
Total Common Stocks (cost--$10,648,544)............................................ 10,652,681
-----------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- --------- -------------------- --------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES--0.90%
$ 100 MBL International Finance
(cost--$105,250)........................... 11/30/02 3.000% 111,000
-----------
REPURCHASE AGREEMENT--]12.39%
1,536 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $1,529,923 U.S. Treasury
Notes, 6.000%, due 08/31/97; proceeds:
$1,536,224 (cost--$1,536,000).............. 12/01/95 5.250 1,536,000
-----------
Total Investments (cost--$12,289,794)--99.18%.......... 12,299,681
Other assets in excess of liabilities--0.82%........... 102,197
-----------
Net Assets--100.00%.................................... $12,401,878
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
GDR Global Depositary Receipt
ADR American Depositary Receipt
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE><CAPTION>
UNREALIZED
CONTRACT TO MATURITY APPRECIATION
DELIVER IN EXCHANGE FOR DATES (DEPRECIATION)
----------- --------------- -------- --------------
<S> <C> <C> <C> <C>
German Deutschemarks............... 250,250 US$ 174,257 12/01/95 $ (1,229)
Japanese Yen....................... 80,669,760 US$ 816,000 02/14/96 13,970
Japanese Yen....................... 100,918,440 US$ 1,008,000 02/14/96 4,655
------
$ 17,396
------
------
</TABLE>
47
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--79.85%
ARGENTINA--2.88%
INTERNATIONAL OIL--1.29%
67,000 Astra Cia Argentina ARA Class B........................................ $ 113,946
----------
MISCELLANEOUS--1.59%
29,000 Naviera Perez Comp Class B............................................. 140,706
----------
Total Argentina Common Stocks...................................................... 254,652
----------
BRAZIL--1.31%
CONSTRUCTION--0.29%
3,000 Usiminas Siderur Sponsor ADR........................................... 25,500
----------
MEDIA--1.02%
10,000 Aracruz Celulose ADR................................................... 90,000
----------
Total Brazil Common Stocks......................................................... 115,500
----------
CHILE--4.68%
BANKS--1.12%
8,000 Banco Osorno Y La Un ADS............................................... 99,000
----------
MEDIA--2.53%
3,100 Companhia De Telecomucicac ADR......................................... 223,588
----------
RETAIL (ALL OTHER)--1.03%
3,800 Santa Isabel ADS....................................................... 90,725
----------
Total Chile Common Stocks.......................................................... 413,313
----------
CHINA--0.64%
IRON & STEEL--0.64%
3,500 China Steel Corporation GDR............................................ 56,858
----------
CZECHOSLOVAKIA--1.15%
TELEPHONE, TELEGRAPH--1.15%
1,100 SPT Telecom............................................................ 101,243
----------
</TABLE>
48
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
GREECE--2.71%
BANKS--1.30%
2,000 Alpha Credit Bank...................................................... $ 114,945
----------
BEVERAGES--1.06%
3,200 Hellenic Bottling Company.............................................. 93,469
----------
MISCELLANEOUS MINING & METALS--0.35%
1,700 Silver and Baryte Ores................................................. 30,936
----------
Total Greece Common Stocks......................................................... 239,350
----------
HONG KONG--0.56%
ELECTRIC UTILITIES--0.56%
110,000 Guangdon Electric Class B.............................................. 49,774
----------
INDIA--6.72%
CONSTRUCTION--0.92%
6,400 Tata Engineering and Locomotive GDR.................................... 80,960
----------
DRUGS, MEDICINE--0.69%
3,000 Ranbaxy Labs GDS....................................................... 60,750
----------
HOTELS, RESTAURANTS--0.92%
4,500 The Indian Hotels Company GDR.......................................... 81,000
----------
MISCELLANEOUS FINANCE--4.19%
22,500 India Fund............................................................. 196,875
19,000 Morgan Stanley India Investment Fund................................... 173,375
----------
370,250
----------
Total India Common Stocks.......................................................... 592,960
----------
</TABLE>
49
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
INDONESIA--9.35%
AGRICULTURE, FOOD--2.04%
41,000 Indofoods Suksesi Makb................................................. $ 179,549
----------
MEDIA--3.16%
39,000 Indosat................................................................ 131,936
7,000 Perusahaan Persero PT Telekom ADS...................................... 147,000
----------
278,936
----------
MISCELLANEOUS--3.40%
15,000 Gudang Garam........................................................... 144,515
46,000 Indocement Tunggal..................................................... 156,120
----------
300,635
----------
REAL PROPERTY--0.75%
27,000 Jaya Real Property..................................................... 66,214
----------
Total Indonesia Common Stocks...................................................... 825,334
----------
]KOREA--6.90%
BANKS--1.37%
6,000 Shinhan Bank........................................................... 120,677
----------
ELECTRIC UTILITIES--2.48%
9,000 Korea Electric Power ADR............................................... 219,375
----------
RETAIL (ALL OTHER)--0.94%
1,000 Shinsegae Department Store............................................. 82,917
----------
TELEPHONE, TELEGRAPH--2.11%
5,000 Korea Mobile Telephone GDS............................................. 186,250
----------
Total Korea Common Stocks.......................................................... 609,219
----------
</TABLE>
50
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MEXICO--7.74%
CONSTRUCTION--2.26%
66,000 Cemex S.A.............................................................. $ 199,708
----------
MINING & METALS--1.63%
33,000 Industrias Penoles..................................................... 143,869
----------
MISCELLANEOUS--0.74%
18,000 Empresas La Moderna Class A............................................ 65,693
----------
PAPER--1.07%
7,200 Kimberly Clark de Mexico............................................... 94,599
----------
SERVICES--0.84%
13,400 Grupo Carso Class A.................................................... 74,336
----------
TELEPHONE, TELEGRAPH--1.20%
3,200 Telefonos de Mexico ADR................................................ 105,600
----------
Total Mexico Common Stocks......................................................... 683,805
----------
PHILIPPINES--7.47%
BANKS--0.42%
22,000 Philippine Savings Bank................................................ 37,388
----------
ELECTRIC UTILITIES--1.49%
17,000 Manila Electric Company Class B........................................ 131,144
----------
REAL PROPERTY--3.13%
95,000 Ayala Land Incorporated................................................ 108,841
150,000 C & P Homes Incorporated............................................... 95,952
260,000 SM Prime............................................................... 71,491
----------
276,284
----------
RETAIL (FOOD)--0.84%
23,000 San Miguel Corporation Class B......................................... 73,782
----------
TELEPHONE, TELEGRAPH--1.59%
2,500 Philippines Long Distance.............................................. 140,825
----------
Total Philippines Common Stocks.................................................... 659,423
----------
</TABLE>
51
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
PORTUGAL--3.02%
FOREST PRODUCTS--1.18%
11,000 Semapa................................................................. $ 104,123
----------
RETAIL (OTHER)--1.84%
3,000 Jeronimo Martins....................................................... 162,269
----------
Total Portugal Common Stocks....................................................... 266,392
----------
SOUTH AFRICA--5.16%
BEVERAGES--0.63%
1,650 South African Breweries................................................ 55,790
----------
CHEMICALS--1.21%
30,000 Sentrachem Limited..................................................... 107,163
----------
MISCELLANEOUS--2.06%
1,100 Anglo American Industrials............................................. 48,892
4,500 Barlow Limited......................................................... 60,433
11,000 Malbak................................................................. 72,737
----------
182,062
----------
OIL SERVICES--0.55%
6,500 Sasol.................................................................. 48,742
----------
RETAIL (ALL OTHER)--0.71%
20,000 Waltons Stationery..................................................... 62,716
----------
Total South Africa Common Stocks................................................... 456,473
----------
TAIWAN--1.35%
ELECTRONICS--1.08%
3,000 Advanced Semiconductor GDS............................................. 33,000
4,000 Siliconware Precious GDR............................................... 62,000
----------
95,000
----------
MISCELLANEOUS--0.27%
3,000 Hocheng Corporation GDR................................................ 24,000
----------
Total Taiwan Common Stocks......................................................... 119,000
----------
</TABLE>
52
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
THAILAND--12.52%
BANKS--5.12%
14,000 Bangkok Bank........................................................... $ 149,126
29,000 Krung Thai Bank plc.................................................... 107,194
115,000 Siam City Bank plc..................................................... 124,553
8,000 Thai Farmers Bank...................................................... 71,224
----------
452,097
----------
CONSTRUCTION--1.09%
2,000 Siam Cement Company.................................................... 96,184
----------
ELECTRIC UTILITIES--2.36%
61,000 Electricity Generating................................................. 208,506
----------
PRODUCERS' GOODS--1.93%
46,000 Siam Makro............................................................. 170,031
----------
REAL PROPERTY--0.33%
2,000 Land and House plc..................................................... 29,412
----------
TELEPHONE, TELEGRAPH--1.69%
48,000 Telecom Asia Corporation............................................... 148,808
----------
Total Thailand Common Stocks....................................................... 1,105,038
----------
TURKEY--2.60%
BANKS--0.48%
400,000 Eczacibasi Yapi Gere................................................... 42,213
----------
BEVERAGES--0.57%
181,700 Ege Biracilik Ve Malt Sanayii.......................................... 50,417
----------
CONSTRUCTION--0.39%
238,000 Adana Cimento Class A.................................................. 34,210
----------
RETAIL (ALL OTHER)--1.16%
100,500 Migros................................................................. 102,402
----------
Total Turkey Common Stocks......................................................... 229,242
----------
</TABLE>
53
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
NUMBER OF
SHARES VALUE
- --------- ----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
UNITED STATES--3.09%
ELECTRIC UTILITIES--1.98%
11,000 Huaneng Power International Incorporated ADS........................... $ 174,625
----------
IRON & STEEL--1.11%
4,000 Pohang Iron & Steel Limited ADR........................................ 98,000
----------
Total United States Common Stocks.................................................. 272,625
----------
Total Common Stocks (cost--$7,342,372)............................................. 7,050,201
----------
PREFERRED STOCKS--9.65%
BRAZIL--9.65%
CONSTRUCTION--0.71%
70,000,000 Uniao Sid Minas Gerais................................................. 62,312
----------
ELECTRIC UTILITIES--2.26%
709,000 Electrobras (Centrais)................................................. 199,615
----------
ELECTRONICS--1.15%
114,000 Multibras Electrodo.................................................... 101,480
----------
MISCELLANEOUS--1.57%
273,000 Itausa Investimentos................................................... 138,464
----------
PAPER--1.09%
100,000 Klabin Fabricadora..................................................... 96,263
----------
TELEPHONE, TELEGRAPH--2.87%
5,150,000 Telebras............................................................... 253,742
----------
Total Brazil Preferred Stocks...................................................... 851,876
----------
Total Preferred Stocks (cost--$866,225)............................................ 851,876
----------
</TABLE>
54
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
- --------- -------------------- -------------- ----------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--8.54%
$ 754 Repurchase Agreement dated 11/30/95 with
State Street Bank & Trust Company,
collateralized by $754,110 U.S. Treasury
Notes, 6.000%, due 08/31/97; proceeds:
$772,149 (cost--$754,000)................... 12/01/95 5.250% $ 754,000
----------
Total Investments (cost--$8,960,806)--98.04%............ 8,656,077
Other assets in excess of liabilities--1.96%............ 173,411
----------
Net Assets--100.00%.................................... $8,829,488
----------
----------
</TABLE>
- ------------
ADR American Depositary Receipt
ADS American Depositary Shares
GDR Global Depositary Receipt
GDS Global Depositary Shares
See accompanying notes to financial statements
55
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
GOVERNMENT PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC
MONEY MARKET FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost--$4,057,351; $32,783,295;
$15,630,222; $14,651,660; $6,993,845; $14,210,654;
$26,401,606; $19,033,210; $25,708,601; $25,816,181;
$10,753,794 and $8,206,806, respectively)...................... $4,057,351 $ 33,062,013 $ 15,725,535 $15,175,024
Repurchase agreements, at value (cost--$10,000; $429,000;
$1,243,000; $355,000; $0; $3,107,000; $2,272,000;
$2,993,000; $3,472,000; $5,601,000; $1,536,000 and $754,000,
respectively).................................................. 10,000 429,000 1,243,000 355,000
------------ ------------ ------------ ------------
4,067,351 33,491,013 16,968,535 15,530,024
Cash.......................................................... 949 714 601 --
Cash denominated in foreign currencies, at value (cost--$0;
$0; $0; $0; $0; $172,481; $0; $0; $0; $0; $174,162 and
$1,761, respectively).......................................... -- -- -- --
Receivable for investments sold............................... -- 5,067,188 -- --
Receivable for shares of beneficial interest sold............. 114,552 523,459 399,623 388,325
Receivable from investment adviser............................ 12,855 -- 16,969 30,889
Receivable for foreign currency sold.......................... -- -- -- --
Unrealized appreciation of forward foreign currency
contracts...................................................... -- -- -- --
Dividends and interest receivable............................. 4,631 75,898 221,112 145,045
Receivable for foreign taxes withheld......................... -- -- -- --
Deferred organizational costs................................. 89,685 89,685 89,685 89,685
Other assets.................................................. 1,043 -- 10,672 --
------------ ------------ ------------ ------------
Total assets.............................................. 4,291,066 39,247,957 17,707,197 16,183,968
------------ ------------ ------------ ------------
LIABILITIES
Payable for shares of beneficial interest repurchased......... 56,483 6,340 9,642 5,336
Dividends payable............................................. 8,465 -- -- --
Payable for investments purchased............................. -- 16,995,313 -- 1,036,413
Unrealized depreciation of forward foreign currency
contracts...................................................... -- -- -- --
Payable to investment adviser................................. -- 7,076 -- --
Outstanding options written, at value (premium
received--$3,112).............................................. -- -- -- --
Variation margin payable...................................... -- -- -- --
Accrued expenses and other liabilities........................ 90,516 92,052 125,696 135,089
------------ ------------ ------------ ------------
Total liabilities......................................... 155,464 17,100,781 135,338 1,176,838
------------ ------------ ------------ ------------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding--(4,135,602; 1,794,058; 1,433,039; 1,159,958;
587,475; 1,374,753; 2,290,342; 1,834,201; 2,362,252;
2,598,341; 1,036,773 and 776,349, respectively) (unlimited
amount authorized)............................................. 4,135,602 21,708,384 17,401,394 14,397,833
Undistributed net investment income........................... -- 84,725 74,470 69,948
Accumulated net realized gains (losses) from investment
transactions................................................ -- 75,349 682 15,985
Net unrealized appreciation (depreciation) of investments and
assets and liabilities denominated in foreign currencies.... -- 278,718 95,313 523,364
------------ ------------ ------------ ------------
Net assets.................................................... $4,135,602 $ 22,147,176 $ 17,571,859 $15,007,130
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net asset value, offering price and redemption value per
share.......................................................... $1.00 $12.34 $12.26 $12.94
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
PACE SMALL/MEDIUM
PACE PACE PACE PACE SMALL/MEDIUM COMPANY PACE
MUNICIPAL GLOBAL LARGE COMPANY LARGE COMPANY COMPANY GROWTH INTERNATIONAL
FIXED INCOME FIXED INCOME VALUE EQUITY GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$7,108,965 $ 14,481,145 $28,026,406 $20,003,453 $25,462,671 $25,973,275 $10,763,681
-- 3,107,000 2,272,000 2,993,000 3,472,000 5,601,000 1,536,000
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,108,965 17,588,145 30,298,406 22,996,453 28,934,671 31,574,275 12,299,681
-- 125,308 316 542 746 533 343
-- 171,984 -- -- -- -- 174,178
-- 4,701,023 121,890 27,356 53,123 486,750 141,160
77,478 390,413 666,939 528,085 619,616 666,148 317,340
7,534 12,677 -- -- -- -- 21,187
-- -- -- -- -- -- 1,998,257
-- 70,268 -- -- -- -- 18,625
136,710 366,097 54,994 16,951 30,079 2,392 24,440
-- 1,262 -- -- -- -- 644
89,685 89,685 89,685 89,685 89,685 89,685 89,685
1,049 -- 28,911 -- 11,686 1,049 --
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,421,421 23,516,862 31,261,141 23,659,072 29,739,606 32,820,832 15,085,540
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
1,116 4,282 14,247 12,704 27,440 25,336 8,838
-- -- -- -- -- -- --
70,891 6,213,487 937,837 49,442 1,630,512 2,260,353 2,545,656
-- 24,926 -- -- -- -- 1,229
-- -- 9,704 156 13,961 16,434 --
-- 28 -- -- -- -- --
-- -- 1,200 -- -- -- --
92,379 111,714 136,507 107,544 105,742 92,573 127,939
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
164,386 6,354,437 1,100,495 169,846 1,777,655 2,394,696 2,683,662
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,112,621 16,787,577 28,355,828 22,575,270 28,126,024 30,714,140 12,363,870
27,643 68,460 96,094 24,378 73,421 42,591 23,080
1,651 (18,402) 65,874 (80,665) 8,436 (487,689 ) (18,498)
115,120 324,790 1,642,850 970,243 (245,930 ) 157,094 33,426
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
$7,257,035 $ 17,162,425 $30,160,646 $23,489,226 $27,961,951 $30,426,136 $12,401,878
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
$12.35 $12.48 $13.17 $12.81 $11.84 $11.71 $11.96
<CAPTION>
PACE
PACE INTERNATIONAL
MUNICIPAL EMERGING MARKETS
FIXED INCOME EQUITY
INVESTMENTS INVESTMENTS
- ------------ ----------------
<S> <C>
$7,108,965 $7,902,077
-- 754,000
- ------------ ----------------
7,108,965 8,656,077
-- 137
-- 1,785
-- --
77,478 199,388
7,534 --
-- --
-- --
136,710 3,702
-- --
89,685 89,685
1,049 1,049
- ------------ ----------------
7,421,421 8,951,823
- ------------ ----------------
1,116 8,666
-- --
70,891 18,500
-- --
-- 1,946
-- --
-- --
92,379 93,223
- ------------ ----------------
164,386 122,335
- ------------ ----------------
7,112,621 9,136,594
27,643 10,878
1,651 (13,240)
115,120 (304,744)
- ------------ ----------------
$7,257,035 $8,829,488
- ------------ ----------------
- ------------ ----------------
$12.35 $11.37
</TABLE>
See accompanying notes to financial statements
57
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Statement of Operations
For the Period August 24, 1995 (commencement of operations) to
November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
GOVERNMENT PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC
MONEY MARKET FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding
taxes, if any)........................... $ 41,264 $217,378 $188,885 $174,628
Dividends (net of foreign withholding
taxes,
if any)............................... -- -- -- --
------------ ------------ ------------ ------------
41,264 217,378 188,885 174,628
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory and
administration........................... 2,569 26,184 19,926 18,089
Trustees' fees and expenses............. 8,708 8,708 8,708 8,708
Amortization of organizational
expenses................................. 5,148 5,148 5,148 5,148
Custody and accounting.................. 1,378 2,053 3,827 7,183
Reports and notices to shareholders..... 395 952 1,505 2,735
Transfer agency fees and expenses....... 318 1,112 2,201 4,620
Federal and state registration fees..... 305 1,100 1,646 1,775
Legal and audit......................... 221 1,005 2,483 4,193
Other expenses.......................... 54 19 96 114
------------ ------------ ------------ ------------
19,096 46,281 45,540 52,565
Less: Fee waivers and expense
reimbursements from investment
adviser.................................. (15,425) (14,486) (19,684) (30,889)
------------ ------------ ------------ ------------
Net expenses............................ 3,671 31,795 25,856 21,676
------------ ------------ ------------ ------------
Net investment income.................... 37,593 185,583 163,029 152,952
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions............... -- 75,349 682 15,985
Futures contracts..................... -- -- -- --
Foreign currency transactions......... -- -- -- --
Net change in unrealized
appreciation/depreciation of:
Investments........................... -- 278,718 95,313 523,364
Assets, liabilities and forward
contracts denominated in foreign
currencies............................... -- -- -- --
------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) from investment transactions... -- 354,067 95,995 539,349
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations............... $ 37,593 $539,650 $259,024 $692,301
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
58
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
PACE SMALL/MEDIUM
PACE PACE PACE PACE SMALL/MEDIUM COMPANY PACE
MUNICIPAL GLOBAL LARGE COMPANY LARGE COMPANY COMPANY GROWTH INTERNATIONAL
FIXED INCOME FIXED INCOME VALUE EQUITY GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 74,912 $176,823 $ 39,831 $ 32,480 $ 58,365 $ 90,888 $ 22,873
-- -- 107,378 32,409 64,190 4,590 32,564
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
74,912 176,823 147,209 64,889 122,555 95,478 55,437
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,820 19,531 40,891 32,409 33,287 42,309 20,437
8,708 8,708 8,708 8,708 8,708 8,708 8,708
5,148 5,148 5,148 5,148 5,148 5,148 5,148
1,061 4,420 15,709 12,647 7,997 2,670 12,821
713 826 1,957 1,891 1,322 729 974
501 3,727 3,773 2,684 2,666 837 3,997
1,059 1,593 1,230 1,422 209 561 1,273
922 1,806 3,539 2,697 2,433 1,041 2,473
500 318 230 344 208 369 277
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
26,432 46,077 81,185 67,950 61,978 62,372 56,108
(15,354) (18,006) (30,070) (27,439) (12,844) (9,485) (23,751)
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
11,078 28,071 51,115 40,511 49,134 52,887 32,357
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
63,834 148,752 96,094 24,378 73,421 42,591 23,080
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
1,651 (3,037) 29,934 (80,665) 8,436 (487,689) (27,577)
-- -- 35,940 -- -- -- --
-- (15,365) -- -- -- -- 9,079
115,120 270,491 1,642,850 970,243 (245,930) 157,094 9,887
-- 54,299 -- -- -- -- 23,539
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
116,771 306,388 1,708,724 889,578 (237,494) (330,595) 14,928
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
180,605
$ $455,140 $ 1,804,818 $ 913,956 $ (164,073) $ (288,004) $ 38,008
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
<CAPTION>
PACE
PACE INTERNATIONAL
MUNICIPAL EMERGING MARKETS
FIXED INCOME EQUITY
INVESTMENTS INVESTMENTS
- ------------ ----------------
<S> <C>
$ 74,912 $ 19,338
-- 14,933
- ------------ --------
74,912 34,271
- ------------ --------
7,820 14,988
8,708 8,708
5,148 5,148
1,061 1,888
713 1,190
501 1,208
1,059 --
922 1,746
500 665
- ------------ --------
26,432 35,541
(15,354) (12,148)
- ------------ --------
11,078 23,393
- ------------ --------
63,834 10,878
- ------------ --------
1,651 (10,533)
-- --
-- (2,707)
115,120 (184,353)
-- (120,391)
- ------------ --------
116,771 (317,984)
- ------------ --------
180,605
$ $ (307,106)
- ------------ --------
- ------------ --------
</TABLE>
See accompanying notes to financial statements
59
<PAGE>
Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the Period August 24, 1995 (commencement of operations) to November 30, 1995
(unaudited)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
GOVERNMENT PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC
MONEY MARKET FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 37,593 $ 185,583 $ 163,029 $ 152,952
Net realized gains (losses) from investment
transactions................................... -- 75,349 682 15,985
Net realized gains from futures contracts... -- -- -- --
Net realized gains (losses) from foreign
currency transactions..................... -- -- -- --
Net change in unrealized
appreciation/depreciation of:
Investments............................... -- 278,718 95,313 523,364
Assets, liabilities and forward contracts
denominated in foreign currencies....... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. 37,593 539,650 259,024 692,301
------------ ------------ ------------ ------------
DIVIDENDS FROM NET INVESTMENT INCOME........... (37,593) (100,858) (88,559) (83,004)
------------ ------------ ------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........ 4,507,135 22,468,147 17,996,158 14,676,979
Cost of shares repurchased.................. (412,321) (867,858) (690,149) (369,509)
Proceeds from dividends reinvested.......... 28,788 100,095 87,385 82,363
------------ ------------ ------------ ------------
Net increase in net assets derived from
beneficial interest transactions.......... 4,123,602 21,700,384 17,393,394 14,389,833
------------ ------------ ------------ ------------
Net increase in net assets.................. 4,123,602 22,139,176 17,563,859 14,999,130
NET ASSETS:
Beginning of period......................... 12,000 8,000 8,000 8,000
------------ ------------ ------------ ------------
End of period............................... $4,135,602 $ 22,147,176 $ 17,571,859 $ 15,007,130
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE
PACE SMALL/MEDIUM
PACE PACE PACE PACE SMALL/MEDIUM COMPANY PACE
MUNICIPAL GLOBAL LARGE COMPANY LARGE COMPANY COMPANY GROWTH INTERNATIONAL
FIXED INCOME FIXED INCOME VALUE EQUITY GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 63,834 $ 148,752 $ 96,094 $ 24,378 $ 73,421 $ 42,591 $ 23,080
1,651 (3,037) 29,934 (80,665) 8,436 (487,689 ) (27,577)
-- -- 35,940 -- -- -- --
-- (15,365) -- -- -- -- 9,079
115,120 270,491 1,642,850 970,243 (245,930 ) 157,094 9,887
-- 54,299 -- -- -- -- 23,539
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
180,605 455,140 1,804,818 913,956 (164,073 ) (288,004 ) 38,008
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
(36,191) (80,292) -- -- -- -- --
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,177,568 17,215,726 29,243,463 23,203,158 28,884,366 31,530,785 12,730,603
(108,477) (516,273) (895,635) (635,888) (766,342 ) (824,645 ) (374,733)
35,530 80,124 -- -- -- -- --
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,104,621 16,779,577 28,347,828 22,567,270 28,118,024 30,706,140 12,355,870
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
7,249,035 17,154,425 30,152,646 23,481,226 27,953,951 30,418,136 12,393,878
8,000 8,000 8,000 8,000 8,000 8,000 8,000
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
$7,257,035 $ 17,162,425 $30,160,646 $23,489,226 $27,961,951 $30,426,136 $ 12,401,878
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
- ------------ ------------ ------------- ------------- ------------ ------------ -------------
<CAPTION>
PACE
PACE INTERNATIONAL
MUNICIPAL EMERGING MARKETS
FIXED INCOME EQUITY
INVESTMENTS INVESTMENTS
- ------------ ----------------
<S> <C>
$ 63,834 $ 10,878
1,651 (10,533)
-- --
-- (2,707)
115,120 (304,744)
-- --
- ------------ ----------------
180,605 (307,106)
- ------------ ----------------
(36,191) --
- ------------ ----------------
7,177,568 9,526,012
(108,477) (397,418)
35,530 --
- ------------ ----------------
7,104,621 9,128,594
- ------------ ----------------
7,249,035 8,821,488
8,000 8,000
- ------------ ----------------
$7,257,035 $8,829,488
- ------------ ----------------
- ------------ ----------------
</TABLE>
See accompanying notes to financial statements
61
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Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements--(unaudited)
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Managed Accounts Services Portfolio Trust (the "Trust") is registered with
the Securities and Exchange Commission ("SEC") as an open-end management
investment company currently composed of twelve separate no-load investment
portfolios and was organized as a Delaware business trust under the laws of the
State of Delaware by Certificate of Trust dated September 9, 1994, as amended
June 9, 1995. The trustees of the Trust have authority to issue an unlimited
number of shares of beneficial interest of separate series, par value $0.001 per
share.
As of June 16, 1995, the Trust had twelve Portfolios of shares available for
investment, each having its own investment objectives and policies: PACE Money
Market Investments, PACE Government Securities Fixed Income Investments, PACE
Intermediate Fixed Income Investments, PACE Strategic Fixed Income Investments,
PACE Municipal Fixed Income Investments, PACE Global Fixed Income Investments,
PACE Large Company Value Equity Investments, PACE Large Company Growth Equity
Investments, PACE Small/Medium Company Value Equity Investments, PACE
Small/Medium Company Growth Equity Investments, PACE International Equity
Investments and PACE International Emerging Markets Equity Investments
(collectively referred to as the "Portfolios").
All Portfolios of shares are diversified with the exception of PACE
Intermediate Fixed Income Investments and PACE Global Fixed Income Investments.
Shares of the Portfolios currently are available only to participants in the
PaineWebber PACE Program.
Organizational Matters--Prior to June 16, 1995, the Trust had no activities
other than organizational matters and activities related to the initial public
offering and issuance, at net asset value, of 19,337 shares of beneficial
interest of the Trust for a total of $100,000 to Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly-owned subsidiary of PaineWebber
Incorporated ("PaineWebber"). The Trust incurred costs of approximately
$1,138,000 in connection with the organization of the Trust and the registration
of its shares. Such costs have been deferred and are being amortized using the
straight-line method over the period of benefit, not to exceed five years,
beginning with the commencement of operations of the Trust.
Valuation of Investments--Securities that are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid price.
In cases where securities are traded on more than on exchange, the securities
are generally valued on the exchange considered by Mitchell Hutchins or the
applicable sub-adviser as the primary market for each Portfolio. Securities
traded in the over-the-counter ("OTC") market and listed on the Nasdaq are
valued at the last available trade price on Nasdaq prior to the time of
valuation; other OTC securities are valued at the last bid price available prior
to valuation. The amortized cost method of valuation, which approximates market
value, is used to value debt obligations with sixty days or less remaining to
maturity unless the Trust's board of trustees determines that this does not
represent fair value. Securities and assets for which market quotations are not
readily available
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Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
are valued at fair value as determined in good faith by or under the direction
of the Trust's board of trustees.
All investments quoted in foreign currencies are valued daily in U.S.
dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined by each Portfolio's custodian, unless the
board of trustees determines that this does not represent fair value. Foreign
currency exchange rates are generally determined prior to the close of trading
on the New York Stock Exchange ("NYSE"). Occasionally, events affecting the
value of foreign investments and such exchange rates occur between the time at
which they are determined and the close of trading on the NYSE, which will not
be reflected in a computation of the Portfolio's net asset values. If events
materially affecting the value of such investments or currency exchange rates
occur during such time period, the securities will be valued at their fair value
as determined in good faith by or under the direction of the Trust's board of
trustees.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions and foreign exchange transactions are calculated on the identified
cost basis. Dividend income and other distributions are recorded on the
ex-dividend date ("ex-date") (except for certain dividends from foreign
securities that are recorded as soon after the ex-date as the respective
Portfolio becomes aware of such dividends). Interest income is recorded on an
accrual basis. Discounts are accreted as adjustments to interest income and the
identified cost of investments.
Foreign Currency Translation--The books and records of the Portfolios are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in foreign
currencies are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the rate
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statement of Operations.
The Portfolios do not generally isolate the effect of fluctuations in
foreign exchange rates from the effects of fluctuations in the market price of
investment securities. However, the Portfolios do isolate the effect of
fluctuations in foreign exchange rates when determining the realized gain or
loss upon the sale or maturity of foreign currency-denominated debt obligations
pursuant to federal income tax regulations; such amount is categorized as
foreign exchange gain or loss for both financial reporting and income tax
purposes.
Forward Foreign Currency Contracts--Certain Portfolios may enter into
forward foreign currency exchange contracts ("forward contracts") in connection
with planned purchases or sales of securities to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. These Portfolios may
also engage in cross-hedging by using forward contracts in one currency to hedge
fluctuations in the value of securities denominated in a different currency if
Mitchell Hutchins or the
63
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Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
applicable sub-adviser anticipates that there is a correlation between the two
currencies. Forward contracts may also be used to shift a Portfolio's exposure
to foreign currency fluctuations from one country to another.
These Portfolios have no specific limitation on the percentage of assets
which may be committed to such contracts; however, the value of all forward
contracts will not exceed the total market value of a Portfolio's total assets.
The Portfolios may enter into forward contracts or maintain a net exposure to
forward contracts only if (1) the consummation of the contracts would not
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the positions being hedged by such contracts or (2) the Portfolios
maintain cash, U.S. government securities or liquid, high-grade debt securities
in a segregated account in an amount not less than the value of the Portfolio's
total assets committed to the consummation of the forward contracts and not
covered as provided in (1) above, as marked-to-market daily.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar.
Fluctuations in the value of forward contracts are recorded for book
purposes as unrealized gains or losses by the Portfolios. Realized gains and
losses include net gains or losses recognized by the Portfolio on contracts
which have matured.
Option Writing--When a Portfolio writes a call or a put option, an amount
equal to the premium received by the Portfolio is included in the Portfolio's
Statement of Assets and Liabilities as an asset and as an equivalent liability.
The amount of the liability is subsequently marked-to market to reflect the
current market value of the option written. If an option which the Portfolio has
written either expires on its stipulated expiration date or the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain (or loss if
the cost of a closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a call option which the Portfolio has written is exercised, the Portfolio
realizes a capital gain or loss (long-term or short-term, depending on the
holding period of the underlying security) from the sale of the underlying
security and the proceeds from the sale are increased by the premium originally
received. If a put option which the Portfolio has written is exercised, the
amount of the premium originally received reduces the cost of the security which
the Portfolio purchases upon exercise of the option.
Futures Contracts--Using financial futures contracts involves various market
risks. The maximum amount at risk from the purchase of a futures contract is the
contract value. The Portfolios are subject to a number of guidelines which
reduce the risk by seeking to ensure that financial futures contracts are used
for hedging purposes or to manage the average duration of a portfolio and not
for leverage.
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- --------------------------------------------------------------------------------
However, imperfect correlations between futures contracts and the portfolio
securities being hedged or, market disruptions, do not normally permit full
control of these risks at all times.
Upon entering into a financial futures contract, a Portfolio is required to
pledge to a broker an amount equal to a certain percentage of the contract
amount. This amount is known as the "initial margin." Subsequent payments known
as "variation margin," are made or received by the Portfolio each day, depending
on the daily fluctuations in the value of the underlying financial futures
contracts. Such variation margin is recorded for financial statement purposes on
a daily basis as unrealized gain or loss until the financial futures contract is
closed, at which time the net gain or loss is reclassified to realized.
Repurchase Agreements--Each Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolios have the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligations. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. Each Portfolio (with the
exception of PACE Municipal Fixed Income Investments) occasionally participates
in joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amounts of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of currencies,
adverse fluctuations in foreign currency values and possible adverse political,
social and economic developments, including those particular to a specific
industry, country or region, which could cause the securities and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and U.S. government securities. These risks are greater with respect
to securities of issuers located in emerging market countries in which this Fund
is authorized to
65
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Managed Accounts Services Portfolio Trust
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- --------------------------------------------------------------------------------
invest. The ability of the issuers of debt securities held by the Portfolio to
meet their obligations may be affected by economic and political developments
particular to a specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
Each of the Portfolios has entered into an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins. In
accordance with the Advisory Contract each Portfolio pays Mitchell Hutchins an
investment advisory and administration fee, which is accrued daily and payable
monthly, in accordance with the following schedule:
ANNUAL RATE
AS A PERCENTAGE
OF EACH PORTFOLIO'S
PORTFOLIO AVERAGE NET ASSETS
- ---------------------------------------------------------- -------------------
PACE Money Market Investments............................. 0.35%
PACE Government Securities Fixed Income Investments....... 0.70%
PACE Intermediate Fixed Income Investments................ 0.60%
PACE Strategic Fixed Income Investments................... 0.70%
PACE Municipal Fixed Income Investments................... 0.60%
PACE Global Fixed Income Investments...................... 0.80%
PACE Large Company Value Equity Investments............... 0.80%
PACE Large Company Growth Equity Investments.............. 0.80%
PACE Small/Medium Company Value Equity Investments........ 0.80%
PACE Small/Medium Company Growth Equity Investments....... 0.80%
PACE International Equity Investments..................... 0.90%
PACE International Emerging Markets Equity Investments.... 1.10%
66
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Managed Accounts Services Portfolio Trust
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- --------------------------------------------------------------------------------
Under a separate Sub-Advisory Agreement with the exception of PACE Money
Market Investments, Mitchell Hutchins (not the Portfolios) pays each Sub-Adviser
a fee, which is accrued daily and paid monthly, in accordance with the following
schedule:
<TABLE><CAPTION>
ANNUAL RATE
AS A PERCENTAGE
OF EACH PORTFOLIO'S
PORTFOLIO SUB-ADVISER AVERAGE NET ASSETS
- ----------------------------------------- --------------------------------- -------------------
<S> <C> <C>
PACE Government Securities Fixed Income Pacific Investment Management
Investments Company 0.25%
PACE Intermediate Fixed Income Pacific Income Advisers, Inc.
Investments 0.20%
PACE Strategic Fixed Income Investments Pacific Investment Management
Company 0.25%
PACE Municipal Fixed Income Investments Morgan Grenfell Capital
Management, Inc. 0.20%
PACE Global Fixed Income Investments Rogge Global Partners plc 0.35%
PACE Large Company Value Equity Brinson Partners, Inc.
Investments 0.30%
PACE Large Company Growth Equity Chancellor Capital Management,
Investments Inc. 0.30%
PACE Small/Medium Company Value Equity Brandywine Asset Management, Inc.
Investments 0.30%
PACE Small/Medium Company Growth Equity Westfield Capital Management
Investments Company, Inc. 0.30%
PACE International Equity Investments Martin Currie Inc. 0.40%
PACE International Emerging Markets Schroder Capital Management
Equity Investments International Inc. 0.50%
</TABLE>
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Portfolios if and to the extent that the aggregate operating
expenses in any fiscal year, exclusive of taxes, distribution fees, interest,
brokerage fees and extraordinary expenses, exceed limitations imposed by various
state regulations. Currently, the most restrictive limitation applicable to the
Portfolios is 2.5% of the first $30 million of average daily net assets, 2.0% of
the next $70 million and 1.5% of any excess over $100 million. For the period
August 24, 1995 (commencement of operations) to November 30, 1995, no
reimbursements were required pursuant to the above limitation. Mitchell Hutchins
voluntarily reimbursed the Portfolios for a portion of their expenses and/or
waived their investment adviser and administration fees.
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Managed Accounts Services Portfolio Trust
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- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
At November 30, 1995, the components of net unrealized appreciation
(depreciation) of investments were as follows:
<TABLE><CAPTION>
NET
UNREALIZED
GROSS GROSS APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
PACE Government Securities Fixed Income Investments.... $ 278,718 $ -- $ 278,718
PACE Intermediate Fixed Income Investments............. $ 197,740 $ 102,427 $ 95,313
PACE Strategic Fixed Income Investments................ $ 536,192 $ 12,828 $ 523,364
PACE Municipal Fixed Income Investments................ $ 118,365 $ 3,245 $ 115,120
PACE Global Fixed Income Investments................... $ 277,936 $ 7,445 $ 270,491
PACE Large Company Value Equity Investments............ $ 1,869,317 $ 244,517 $1,624,800
PACE Large Company Growth Equity Investments........... $ 1,550,877 $ 580,634 $ 970,243
PACE Small/Medium Company Value Equity Investments..... $ 989,368 $ 1,235,298 $ (245,930)
PACE Small/Medium Company Growth Equity Investments.... $ 1,405,332 $ 1,248,238 $ 157,094
PACE International Equity Investments.................. $ 143,797 $ 133,910 $ 9,887
PACE International Emerging Markets Equity
Investments............................................ $ 89,971 $ 274,324 $ (184,353)
</TABLE>
For federal income tax purposes, the cost of securities owned at November
30, 1995 was substantially the same as the cost of securities for financial
statement purposes.
For the period August 24, 1995 (commencement of operations) to November 30,
1995, aggregate purchases and sales of portfolio securities, excluding
short-term securities were as follows:
<TABLE><CAPTION>
PORTFOLIO PURCHASES SALES
- ----------------------------------------------------------------- ----------- -----------
<S> <C> <C>
PACE Government Securities Fixed Income Investments.............. $34,431,888 $12,976,446
PACE Intermediate Fixed Income Investments....................... $17,982,002 $ 2,234,311
PACE Strategic Fixed Income Investments.......................... $13,230,865 $ 5,504,813
PACE Municipal Fixed Income Investments.......................... $ 7,332,179 $ 425,478
PACE Global Fixed Income Investments............................. $17,447,453 $ 1,284,821
PACE Large Company Value Equity Investments...................... $28,008,536 $ 1,680,671
PACE Large Company Growth Equity Investments..................... $20,299,089 $ 1,017,164
PACE Small/Medium Company Value Equity Investments............... $25,774,141 $ 73,976
PACE Small/Medium Company Growth Equity Investments.............. $29,185,083 $ 2,881,211
PACE International Equity Investments............................ $10,907,293 $ 142,094
PACE International Emerging Markets Investments.................. $ 8,262,764 $ 45,230
</TABLE>
FEDERAL TAX STATUS
Each of the Portfolios intends to distribute all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, each Portfolio intends not to be subject to federal excise tax.
68
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Managed Accounts Services Portfolio Trust
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- --------------------------------------------------------------------------------
WRITTEN OPTION ACTIVITY
Written option activity for the period August 24, 1995 (commencement of
operations) to November 30, 1995 for PACE Global Fixed Income Investments were
as follows:
<TABLE><CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
--------- ---------
<S> <C> <C>
Options written during the period ended November 30, 1995.............. 4,000 $ 3,112
Options cancelled in closing purchased transactions.................... -- --
Options expired prior to exercise...................................... -- --
Options exercised...................................................... -- --
--------- ---------
Options outstanding at November 30, 1995............................... 4,000 $ 3,112
</TABLE>
SHARES OF BENEFICIAL INTEREST
At November 30, 1995, there was an unlimited amount of $0.001 par value
shares of beneficial interest authorized. Transaction in shares of beneficial
interest for each of the Portfolios were as follows:
<TABLE>
<CAPTION>
DIVIDENDS
SHARES REINVESTED NET INCREASE
PORTFOLIO SHARES SOLD REPURCHASED IN ADDITIONAL SHARES IN SHARES OUTSTANDING
- ----------------------------------- ----------- ----------- -------------------- ---------------------
<S> <C> <C> <C> <C>
PACE Money Market Investments...... 4,507,135 (412,321) 28,788 4,123,602
PACE Government Securities Fixed
Income Investments................. 1,856,789 (71,595) 8,197 1,793,391
PACE Intermediate Fixed Income
Investments........................ 1,481,783 (56,581) 7,170 1,432,372
PACE Strategic Fixed Income
Investments........................ 1,182,390 (29,563) 6,464 1,159,291
PACE Municipal Fixed Income
Investments........................ 592,836 (8,936) 2,908 586,808
PACE Global Fixed Income
Investments........................ 1,409,734 (42,068) 6,420 1,374,086
PACE Large Company Value Equity
Investments........................ 2,361,521 (71,846) -- 2,289,675
PACE Large Company Growth Equity
Investments........................ 1,884,916 (51,381) -- 1,833,535
PACE Small/Medium Company Value
Equity Investments................. 2,425,996 (64,411) -- 2,361,585
PACE Small/Medium Company Growth
Equity Investments................. 2,667,563 (69,889) -- 2,597,674
PACE International Equity
Investments........................ 1,067,530 (31,424) -- 1,036,106
PACE International Emerging Markets
Equity Investments................. 809,840 (33,491) -- 776,349
</TABLE>
69
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Managed Accounts Services Portfolio Trust
- --------------------------------------------------------------------------------
Financial Highlights
For the Period August 24, 1995+ to November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest of each Portfolio
outstanding throughout the period is presented below:
<TABLE><CAPTION>
PACE
GOVERNMENT PACE PACE
PACE SECURITIES INTERMEDIATE STRATEGIC
MONEY MARKET FIXED INCOME FIXED INCOME FIXED INCOME
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 1.00 $ 12.00 $ 12.00 $ 12.00
------ ------------ ------------ ------------
Net investment income........................ 0.01 0.12 0.13 0.15
Net realized and unrealized gains (losses)
from investment and foreign
currency transactions....................... -- 0.29 0.21 0.88
------ ------------ ------------ ------------
Net income (loss) from investment
operations................................... 0.01 0.41 0.34 1.03
------ ------------ ------------ ------------
Dividends from net investment income......... (0.01) (0.07) (0.08) (0.09)
------ ------------ ------------ ------------
Net asset value, end of period............... $ 1.00 $ 12.34 $ 12.26 $ 12.94
------ ------------ ------------ ------------
------ ------------ ------------ ------------
Total investment return (unaudited) (1)...... 1.44% 3.43% 2.81% 8.59%
------ ------------ ------------ ------------
------ ------------ ------------ ------------
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $4,136 $22,147 $17,572 $15,007
Expenses to average net assets, net of fee
waivers and expense reimbursements.......... 0.50%* 0.85%* 0.85%* 0.85%*
Expenses to average net assets, before fee
waivers and expense reimbursements.......... 2.60%* 1.24%* 1.50%* 2.06%*
Net investment income to average net assets,
net of fee waivers and expense
reimbursements............................... 5.12%* 4.96%* 5.36%* 6.00%*
Net investment income to average net assets,
before fee waivers and expense
reimbursements............................... 3.02%* 4.57%* 4.71%* 4.79%*
Portfolio turnover........................... 0% 120% 21% 58%
</TABLE>
- ------------
<TABLE>
<S> <C>
+ Commencement of operations
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain distributions, if
any, at net asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. The figures do not include the PACE Program Fee; results
for each Portfolio would be lower if this fee was included. Total investment returns for
periods of less than one year have not been annualized.
</TABLE>
70
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
PACE PACE
PACE PACE PACE PACE SMALL/MEDIUM INTERNATIONAL
MUNICIPAL GLOBAL LARGE PACE SMALL/MEDIUM COMPANY PACE EMERGING
FIXED FIXED COMPANY LARGE COMPANY COMPANY GROWTH INTERNATIONAL MARKETS
INCOME INCOME VALUE EQUITY GROWTH EQUITY VALUE EQUITY EQUITY EQUITY EQUITY
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
- ----------- ----------- ------------ ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00 $12.00 $ 12.00 $ 12.00
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
0.12 0.10 0.04 0.01 0.03 0.02 0.02 0.01
0.31 0.45 1.13 0.80 (0.19) (0.31) (0.06) (0.64)
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
0.43 0.55 1.17 0.81 (0.16) (0.29) (0.04) (0.63)
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
(0.08) (0.07) -- -- -- -- -- --
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
$ 12.35 $ 12.48 $ 13.17 $ 12.81 $ 11.84 $11.71 $ 11.96 $ 11.37
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
3.55% 4.60% 9.75% 6.75% (1.33)% (2.42)% (0.33)% (5.25)%
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
- ----------- ----------- ------------ ------------- ------------ ------ ------ ---------
$7,257 $17,162 $30,161 $23,489 $27,962 $30,426 $12,402 $8,829
0.85%* 0.95%* 1.00%* 1.00%* 1.00%* 1.00%* 1.50%* 1.50%*
2.03%* 1.56%* 1.59%* 1.68%* 1.26%* 1.18%* 2.62%* 2.28%*
4.90%* 5.03%* 1.88%* 0.60%* 1.49%* 0.81%* 1.06%* 0.70%*
3.72%* 4.42%* 1.29%* (0.08)%* 1.23%* 0.63%* (0.06)%* (0.08)%*
9% 15% 10% 8% 0% 19% 2% 1%
</TABLE>
71
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No.1 to the Registrant's Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, in the State of New York, on the 22nd day of February
1996.
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
By: /s/Margo N. Alexander
---------------------
Margo N. Alexander*
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE><CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee February 22, 1996
- ------------------------------
Margo N. Alexander*
/s/ Julian F. Sluyters Vice President and Treasurer February 22, 1996
- ------------------------------ (Chief Financial Officer)
Julian F. Sluyters
/s/ David J. Beaubien Trustee February 22, 1996
- ------------------------------
David J. Beaubien*
/s/Bruce A. Bursey Trustee February 22, 1996
- ------------------------------
Bruce A. Bursey**
/s/ E. Garrett Bewkes, Jr. Trustee February 22, 1996
- ------------------------------
E. Garrett Bewkes, Jr.*
/s/ William W. Hewitt, Jr. Trustee February 22, 1996
- ------------------------------
William W. Hewitt, Jr.*
/s/ Morton L. Janklow Trustee February 22, 1996
- ------------------------------
Morton L. Janklow *
/s/ J. Richard Sipes Trustee February 22, 1996
- ------------------------------
J. Richard Sipes*
/s/ William D. White Trustee February 22, 1996
- ------------------------------
William D. White*
/s/ M. Cabell Woodward, Jr. Trustee February 22, 1996
- ------------------------------
M. Cabell Woodward, Jr.**
</TABLE>
* Signatures affixed by Gregory K. Todd pursuant to powers of attorney
dated June 15, 1995, filed herewith.
** Signatures affixed by Gregory K. Todd pursuant to powers of attorney
dated February 22, 1996, filed herewith.
<PAGE>
POWER OF ATTORNEY
I, Bruce A. Bursey, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ Bruce A. Bursey Trustee February 22, 1996
- -------------------
Bruce A. Bursey
<PAGE>
POWER OF ATTORNEY
I, M. Cabell Woodward Jr., Trustee of Managed Accounts Services Portfolio
Trust (the "Trust"), hereby constitute and appoint Victoria E. Schonfeld,
Dianne E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and
each of them singly, my true and lawful attorneys, with full power to them
to sign for me, and in my capacity as Trustee for the Trust, any and all
amendments to each of the particular registration statements of the Trust,
and all instruments necessary or desirable in connection therewith, filed
with the Securities and Exchange Commission, hereby ratifying and
confirming my signature as it may be signed by said attorneys to any and
all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ M. Cabell Woodward, Jr. Trustee February 22, 1996
- ---------------------------
M. Cabell Woodward, Jr.
<PAGE>
POWER OF ATTORNEY
I, Margo N. Alexander, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ Margo N. Alexander_____ Trustee June 15, 1995
- ----------------------
Margo N. Alexander
<PAGE>
POWER OF ATTORNEY
I, David J. Beaubien, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ David J. Beaubien Trustee June 15, 1995
-------------------
David J. Beaubien
<PAGE>
POWER OF ATTORNEY
I, E. Garrett Bewkes, Jr., Trustee of Managed Accounts Services Portfolio
Trust (the "Trust"), hereby constitute and appoint Victoria E. Schonfeld,
Dianne E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and
each of them singly, my true and lawful attorneys, with full power to them
to sign for me, and in my capacity as Trustee for the Trust, any and all
amendments to each of the particular registration statements of the Trust,
and all instruments necessary or desirable in connection therewith, filed
with the Securities and Exchange Commission, hereby ratifying and
confirming my signature as it may be signed by said attorneys to any and
all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/E. Garrett Bewkes, Jr. Trustee June 15, 1995
- -------------------------
E. Garrett Bewkes, Jr.
<PAGE>
POWER OF ATTORNEY
I, William W. Hewitt, Jr., Trustee of Managed Accounts Services Portfolio
Trust (the "Trust"), hereby constitute and appoint Victoria E. Schonfeld,
Dianne E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and
each of them singly, my true and lawful attorneys, with full power to them
to sign for me, and in my capacity as Trustee for the Trust, any and all
amendments to each of the particular registration statements of the Trust,
and all instruments necessary or desirable in connection therewith, filed
with the Securities and Exchange Commission, hereby ratifying and
confirming my signature as it may be signed by said attorneys to any and
all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ William W. Hewitt, Jr. Trustee June 15, 1995
- --------------------------
William W. Hewitt, Jr.
<PAGE>
POWER OF ATTORNEY
I, Morton L. Janklow, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ Morton L. Janklow Trustee June 15, 1995
- ---------------------
Morton L. Janklow
<PAGE>
POWER OF ATTORNEY
I, J. Richard Sipes, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ J. Richard Sipes Trustee June 15, 1995
- --------------------
J. Richard Sipes
<PAGE>
POWER OF ATTORNEY
I, William D. White, Trustee of Managed Accounts Services Portfolio Trust
(the "Trust"), hereby constitute and appoint Victoria E. Schonfeld, Dianne
E. O'Donnell, Gregory K. Todd, Joan L. Cohen and Jon S. Rand, and each of
them singly, my true and lawful attorneys, with full power to them to sign
for me, and in my capacity as Trustee for the Trust, any and all amendments
to each of the particular registration statements of the Trust, and all
instruments necessary or desirable in connection therewith, filed with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by said attorneys to any and all amendments
to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on
the date indicated.
Signature Title Date
/s/ William D. White Trustee June 15, 1995
- --------------------
William D. White
<PAGE>
PART C. OTHER INFORMATION
Financial Statements and Exhibits
- ---------------------------------
Unaudited financial statements for the period August 24,
1995 [Commencement of operations] to November 30, 1995
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
(1) (a) Certificate of Business Trust1/
-
(b) Certificate of Amendment1/
-
(c) Trust Instrument1/
-
(d) Amended Trust Instrument2/
-
(2) (a) By-Laws1/
-
(b) Amended By-Laws2/
-
(3) Voting trust agreement - None
(4) Specimen Security - None
(5) (a) Management Agreement [filed herewith]
(b) Sub-Advisory Agreements [filed herewith]
(6) (a) Distribution Agreement [filed herewith]
(b) Dealer Agreement [filed herewith]
(7) Bonus, profit sharing or pension plans - None
(8) Form of Custodian Agreement2/
-
(9) Transfer Agency Agreement [filed herewith]
(10) (a) Opinion and consent of Kirkpatrick & Lockhart LLP2/
(b) Consent of Willkie Farr & Gallagher LLP [filed herewith]
(11) Consent of Independent Auditors [filed herewith]
(12) Financial statements omitted from prospectus - None
(13) Letter of investment intent2/
-
(14) Prototype Retirement Plan - None
(15) Plan pursuant to Rule 12b-1 - None
(16) Schedule for Computation of Performance Quotations - None
Item 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
None.
_______________
1/ Incorporated by reference to Registration Statement on Form N-1A, File No.
- - 33-87254, filed December 9, 1994.
2/ Incorporated by reference to Registration Statement Form N-1A, File No.
- - 33-87254, filed June 19, 1995.
Exhibit 5(a)
INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT
THIS AGREEMENT made as of June 15, 1995, is between MANAGED ACCOUNTS
SERVICES PORTFOLIO TRUST, a Delaware business trust ("Trust"), and MITCHELL
HUTCHINS ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended ("1934 Act"), and as an investment adviser under the Investment Advisers
Act of 1940, as amended ("Advisers Act").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of beneficial
interest (each a "Portfolio"); and
WHEREAS, the Trust desires and intends to have one or more investment
advisers ("Sub-Advisers") provide investment advisory and portfolio management
services with respect to the Portfolios other than any Portfolios managed by
Mitchell Hutchins;
WHEREAS, the Trust desires to retain Mitchell Hutchins as investment
manager and administrator to furnish certain administrative, investment advisory
and management services to the Trust and each Portfolio as now exists and as
hereafter may be established, and Mitchell Hutchins is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as
-----------
investment manager and administrator of the Trust and each Portfolio for the
period and on the terms set forth in this Agreement. Mitchell Hutchins accepts
such appointment and agrees
<PAGE>
to render the services herein set forth, for the compensation herein provided.
2. Duties as Investment Manager for PACE Money Market Investments.
--------------------------------------------------------------
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
the PACE Money Market Investments Portfolio, including investment research and
management. Mitchell Hutchins will determine from time to time what securities
and other investments will be purchased, retained or sold by PACE Money Market
Investments. Mitchell Hutchins will be responsible for placing purchase and sell
orders for investments and for other related transactions. Mitchell Hutchins
will provide services under this Agreement in accordance with PACE Money Market
Investments' investment objective, policies and restrictions as stated in the
Trust's Registration Statement as it applies to PACE Money Market Investments.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution. In
no instance will portfolio securities be purchased from or sold to Mitchell
Hutchins, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. Mitchell
Hutchins may aggregate sales and purchase orders of the assets of the Portfolio
with similar orders being made simultaneously for other accounts advised by
Mitchell Hutchins or its affiliates. Whenever Mitchell Hutchins simultaneously
places orders to purchase or sell the same security on behalf of PACE Money
Market Investments and one or more other accounts advised by Mitchell Hutchins,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account. The Trust recognizes that in
some cases this procedure may adversely affect the results obtained for PACE
Money Market Investments.
(c) Mitchell Hutchins will maintain all books and records required
to be maintained by Mitchell Hutchins pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions on behalf of
PACE Money Market
- 2 -
<PAGE>
Investments, and will furnish the Board with such periodic and special reports
as the Board reasonably may request. In compliance with the requirements
of Rule 31a-3 under the 1940 Act, Mitchell Hutchins hereby agrees that all
records which it maintains for the Trust and PACE Money Market Investments are
the property of the Trust, agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any records which it maintains for the Trust and which
are required to be maintained by Rule 31a-1 under the 1940 Act and further
agrees to surrender promptly to the Trust any records which it maintains for the
Trust upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board,
Mitchell Hutchins will provide the Board with economic and investment analyses
and reports as well as quarterly reports setting forth the performance of PACE
Money Market Investments and make available to the Board any economic,
statistical and investment services normally available to institutional or other
customers of Mitchell Hutchins.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, Mitchell Hutchins is responsible for assisting in the fair
valuation of all portfolio securities and will arrange for the provision of a
price(s) from a party(ies) independent of Mitchell Hutchins for each portfolio
security for which the custodian does not obtain prices in the ordinary course
of business from an automated pricing service.
3. Duties as Investment Manager to Other PACE Portfolios; Appointment
------------------------------------------------------------------
of Sub-Advisers.
- ---------------
(a) Subject to the supervision and direction of the Board, Mitchell
Hutchins will provide to the Trust investment management evaluation services
principally by performing initial review of prospective Sub-Advisers for each
Portfolio other than PACE Money Market Investments and supervising and
monitoring Sub-Adviser performance thereafter. Mitchell Hutchins agrees to
report to the Trust results of its evaluation, supervision and monitoring
functions and to keep certain books and records of the Trust in connection
therewith. Mitchell Hutchins further agrees to communicate performance
expectations and evaluations to the Sub-
- 3 -
<PAGE>
Advisers, and to recommend to the Trust whether agreements with Sub-Advisers
should be renewed, modified or terminated.
(b) Mitchell Hutchins is responsible for informing the Sub-Advisers of the
investment objective(s), policies and restrictions of the Portfolio(s) for which
the Sub-Adviser is responsible, for informing or ascertaining that it is aware
of other legal and regulatory responsibilities applicable to the Sub-Adviser
with respect to the Portfolio(s) for which the Sub-Adviser is responsible, and
for monitoring the Sub-Advisers' discharge of their duties; but Mitchell
Hutchins is not responsible for the specific actions (or inactions) of a
Sub-Adviser in the performance of the duties assigned to it.
(c) With respect to each Portfolio other than PACE Money Market
Investments, Mitchell Hutchins shall enter into an agreement ("Sub-Advisory
Agreements") with a sub-adviser in substantially the form attached hereto as
Exhibit 1.
(d) Mitchell Hutchins shall be responsible for the fees payable to and
shall pay the Sub-Adviser of each Portfolio the fee as specified in the
Sub-Advisory Agreement relating thereto.
4. Duties as Administrator. Mitchell Hutchins will administer the
-----------------------
affairs of the Trust and each Portfolio subject to the supervision of the Board
and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust and each Portfolio, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Portfolio.
(b) Mitchell Hutchins will provide the Trust and each Portfolio with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Portfolio.
- 4 -
<PAGE>
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
Portfolio's shareholders and the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust and each Portfolio with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, and similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
5. Further Duties. In all matters relating to the performance of this
--------------
Agreement, Mitchell Hutchins will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the Advisers Act, and the rules under each,
Subchapter M of the Internal Revenue Code as applicable to regulated investment
companies, and all other applicable federal and state laws and regulations.
6. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
- 5 -
<PAGE>
7. Expenses.
--------
(a) During the term of this Agreement, each Portfolio will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Portfolio will include but not be limited to
the following (or each Portfolio's proportionate share of the following): (i)
the cost (including brokerage commissions) of securities purchased or sold by
the Portfolio and any losses incurred in connection therewith; (ii) fees payable
to and expenses incurred on behalf of the Portfolio by Mitchell Hutchins under
this Agreement; (iii) expenses of organizing the Trust and each Portfolio; (iv)
filing fees and expenses relating to the registrations and qualification of the
Portfolio's shares and the Trust under federal and/or securities laws and
maintaining such registration and qualifications; (v) fees and salaries payable
to the Trust's Trustees and officers who are not interested persons of the
Trust; (vi) all expenses incurred in connection with the Trustees' services,
including travel expenses; (vii) taxes (including any income or franchise taxes)
and governmental fees; (viii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (ix) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Trust or Portfolio for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Trust who are not interested persons of the Trust; (xi)
charges of custodians, transfer agents and other agents; (xii) costs of
preparing share certificates; (xiii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders, and
costs of mailing such materials to existing shareholders; (xiv) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Trust is a party and the expenses the
Trust may incur as a result of its legal obligation to provide indemnification
to its officers, Trustees, agents and shareholders) incurred by the Trust or
Portfolio; (xv) fees, voluntary assessments and other expenses incurred in
connection with membership in investment
- 6 -
<PAGE>
company organizations; (xvi) cost of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xvii) the cost
of investment company literature and other publications provided by the Trust to
its Trustees and officers; and (xviii) costs of mailing, stationery and
communications equipment.
(c) The Trust or a Portfolio may pay directly any expenses incurred by it
in its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Agreement, the Portfolio may reduce the fee payable to Mitchell Hutchins
pursuant to Paragraph 8 thereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of the
Trust or a Portfolio that Mitchell Hutchins is not required by this Agreement to
pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or
any similar expense of the Trust or a Portfolio on any subsequent occasion.
8. Compensation.
------------
(a) For the administrative services provided to each Portfolio, each
Portfolio will pay to Mitchell Hutchins a fee, computed daily and paid monthly,
at an annual rate of 0.20% of each Portfolio's average daily net assets.
(b) For investment management services provided pursuant to this
Agreement, each Portfolio of the Trust shall pay to Mitchell Hutchins a fee,
computed daily and paid monthly on the first business day of the next succeeding
calendar month, at the annual percentage rate of each such Portfolio's average
daily net assets as set forth in Schedule I to this Agreement.
- 7 -
<PAGE>
(c) For the services provided and the expenses assumed pursuant to this
Agreement with respect to any Portfolio hereafter established, such Portfolio
will pay to Mitchell Hutchins from the assets of the Portfolio a fee in an
amount to be agreed upon in a written fee agreement ("Fee Agreement") executed
by the Trust on behalf of the Portfolio and by Mitchell Hutchins. All such Fee
Agreements shall provide that they are subject to all terms and conditions of
this Agreement.
(d) The fee shall be computed daily and paid monthly to Mitchell Hutchins
on the first business day of the next succeeding calendar month.
(e) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins, its
--------------------------------------------
officers, directors, employees and delegates, including any Sub-Adviser or the
Trust, shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Portfolio, the Trust or any of its shareholders, in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it or on the part of
its officers, directors, employees or delegates of their obligations and duties
under this Agreement. Any person, even though also an officer, director,
employee, or agent of Mitchell Hutchins, who may be or become an officer,
Trustee, employee or agent of the Trust shall be deemed, when rendering services
to any Portfolio or the Trust or acting with respect to any business of such
Portfolio or the Trust, to be rendering such service to or acting solely for the
Portfolio or the Trust and not as an officer, director, employee, or agent or
one under the control or direction of Mitchell Hutchins even though paid by it.
- 8 -
<PAGE>
10. Limitation of Liability of the Trustees and Shareholders of the Trust.
---------------------------------------------------------------------
The Trustees of the Trust and the shareholders of any Portfolio shall not be
liable for any obligations of any Portfolio or the Trust under this Agreement
and Mitchell Hutchins agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to such Trustees or shareholders.
11. Duration and Termination.
------------------------
(a) As to any Portfolio, this Agreement shall become effective upon the
date the Portfolio commences investment operations provided that, with respect
to any Portfolio, this Agreement shall not take effect unless it has first been
approved (i) by a vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval, and (ii) by vote
of a majority of that Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for a period of two years. Thereafter, if not terminated,
this Agreement shall continue automatically for successive annual periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those Trustees of the Trust who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Portfolio by vote of a majority
of the outstanding voting securities of such Portfolio.
(c) Notwithstanding the foregoing, with respect to any Portfolio this
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Portfolio on sixty days' written notice to Mitchell Hutchins
and may be terminated by Mitchell Hutchins at any time, without the payment of
any penalty, on sixty days' written notice to the Trust. Termination of this
Agreement with respect to any given Portfolio shall in no way affect the
continued validity of this Agreement or
- 9 -
<PAGE>
the performance thereunder with respect to any other Portfolio. This Agreement
will automatically terminate in the event of its assignment.
12. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement as to any
given Portfolio shall be effective until approved by vote of a majority of such
Portfolio's outstanding voting securities.
13. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof. To the extent that the applicable laws of the State of
Delaware conflict with the applicable provisions of the 1940 Act, the latter
shall control.
14. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "national securities exchange," "net assets," "prospectus," "sale,"
"sell" and "security" shall have the same meanings as such terms have in the
1940 Act, subject to such exemption as may be granted by the Securities and
Exchange Commission by any rule, regulation or order. Where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
relaxed by a rule, regulation or order of the Securities and Exchange
Commission, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Dianne E. O'Donnell By:/s/Gregory K. Todd
--------------------
Name:Gregory K. Todd
Title:First Vice President
Attest: MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
/s/ Dianne E. O'Donnell By:/s/Joan L. Cohen
--------------------
Name: Joan L. Cohen
Title:Vice President and
Assistant Secretary
- 11 -
<PAGE>
SCHEDULE I
Fee Rate
Paid by
Portfolio
to the
Portfolio Manager
--------- ---------
PACE Money Market Investments 0.15%
PACE Government Securities Fixed Income Investments 0.50%
PACE Intermediate Fixed Income Investments 0.40%
PACE Strategic Fixed Income Investments 0.50%
PACE Municipal Fixed Income Investments 0.40%
PACE Global Fixed Income Investments 0.60%
PACE Large Company Value Equity Investments 0.60%
PACE Large Company Growth Equity Investments 0.60%
PACE Small/Medium Company Value Equity Investments 0.60%
PACE Small/Medium Company Growth Equity Investments 0.60%
PACE International Equity Investments 0.70%
PACE International Emerging Markets Equity Investments 0.90%
- 12 -
Exhibit 5(b)
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and BRANDYWINE
ASSET MANAGEMENT, INC., a Delaware corporation("Sub-Adviser"), (the
"Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS ("Portfolio") series of the Trust;
and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser
- 2 -
<PAGE>
hereby agrees that all records which it maintains for the Portfolio are the
property of the Trust, agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any records which it maintains for the Portfolio and
which are required to be maintained by Rule 31a-1 under the 1940 Act, and
further agrees to surrender promptly to the Trust any records which it maintains
for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
--------- --------
under this Agreement to act in conformity with any document,
- 3 -
<PAGE>
instruction or guideline produced by the Trust or Mitchell Hutchins shall not
arise until it has been delivered to the Sub-Adviser. Any changes to the
objectives, policies and restrictions will make due allowance for the time
within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.30% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful
- 4 -
<PAGE>
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
-----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: BRANDYWINE ASSET MANAGEMENT, INC.
Three Christina Centre
Suite 1200
201 N. Walnut Street
Wilmington, DE 19801
By:/s/Michael D. Jamison
---------------------
Name: Michael D. Jamison
Title: Managing Director
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and BRINSON
PARTNERS, INC., a Delaware corporation("Sub-Adviser"), (the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
LARGE COMPANY VALUE EQUITY INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
-------- -------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.30% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
-----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: BRINSON PARTNERS, INC.
209 South LaSalle Street
Chicago, Illinois 60604
By:/s/Nicholas C. Rassas
---------------------
Name: Nicholas C. Rassas
Title: Managing Partner
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and CHANCELLOR
CAPITAL MANAGEMENT, INC., a Delaware corporation("Sub-Adviser"), (the
"Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
LARGE COMPANY GROWTH EQUITY INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
-------- -------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.30% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
-----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: CHANCELLOR CAPITAL MANAGEMENT, INC.
1166 Avenue of the Americas
New York, New York 10036
By:/s/Peter M. Jones
-----------------
Name: Peter M. Jones
Title: Managing Director
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and MARTIN CURRIE
INC., a New York corporation("Sub-Adviser"), (the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
INTERNATIONAL EQUITY INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
-------- -------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.40% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
-------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: MARTIN CURRIE, INC.
Saltire Court
20 Castle Terrace
Edinburgh, Scotland EH1 2ES
By:/s/W.M.C. Kennedy
-----------------
Name: W.M.C. Kennedy
Title: President
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and MORGAN
GRENFELL CAPITAL MANAGEMENT INCORPORATED, a Delaware corporation("Sub-Adviser"),
(the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
MUNICIPAL FIXED INCOME INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
--------- --------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.20% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: MORGAN GRENFELL CAPITAL MANAGEMENT
INCORPORATED
1435 Walnut Street
Philadelphia, Pennsylvania 19102
By:/s/James E. Minnick
-------------------
Name: James E. Minnick
Title: President
(..continued)
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and PACIFIC
INCOME ADVISERS, INC. a Delaware corporation("Sub-Adviser"), (the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
INTERMEDIATE FIXED INCOME INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
--------- --------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.20% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
-----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: PACIFIC INCOME ADVISERS, INC.
1299 Ocean Avenue
Suite 210
Santa Monica, California 90401
By:/s/Lloyd McAdams
----------------
Name: Lloyd McAdams
Title: Chairman
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and PACIFIC
INVESTMENT MANAGEMENT COMPANY, a Delaware general partnership("Sub-Adviser"),
(the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
STRATEGIC FIXED INCOME INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.25% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
-------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: PACIFIC INVESTMENT MANAGEMENT COMPANY
/s/ John S. Loftus 840 Newport Center Drive
John S. Loftus Suite 360
Executive Vice President Newport Beach, California 92660
By: PIMCO Management Inc.,
its general partner
By:/s/Dean S. Meiling
------------------
Name: Dean S. Meiling
Title: Managing Director
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and PACIFIC
INVESTMENT MANAGEMENT COMPANY, a Delaware general partnership("Sub-Adviser"),
(the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS ("Portfolio") series of the
Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.25% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
-------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: PACIFIC INVESTMENT MANAGEMENT COMPANY
/s/ John S. Loftus 840 Newport Center Drive
John S. Loftus Suite 360
Executive Vice President Newport Beach, California 92660
By: PIMCO Management Inc.,
its general partner
By:/s/Dean S. Meiling
------------------
Name: Dean S. Meiling
Title: Managing Director
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and ROGGE GLOBAL
PARTNERS PLC, a UK corporation("Sub-Adviser"), (the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
GLOBAL FIXED INCOME INVESTMENTS ("Portfolio") series of the Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.35% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: ROGGE GLOBAL PARTNERS PLC
5-6 St. Andrew's Hill
London, England EC4V 5BY
By:/s/Julie M. Cochran
-------------------
Name:
Title:
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and SCHRODER
CAPITAL MANAGEMENT INTERNATIONAL INC., a New York corporation("Sub-Adviser"),
(the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS ("Portfolio") series of the
Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
------------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
-------- -------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.50% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
----------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
-------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: SCHRODER CAPITAL MANAGEMENT
/s/ Catherine A. Mazza INTERNATIONAL INC.
Catherine A. Mazza 787 Seventh Avenue
Vice President New York, New York 10019
By:/s/David Gibson
---------------
Name: David Gibson
Title: Director
- 9 -
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
Agreement made as of June 15, 1995 between MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and WESTFIELD
CAPITAL MANAGEMENT COMPANY, INC., a Massachusetts corporation("Sub-Adviser"),
(the "Agreement").
RECITALS
--------
(1) Mitchell Hutchins has entered into a Management Agreement dated June
15, 1995 ("Management Agreement") with Managed Accounts Services Portfolio Trust
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act") with respect to the PACE
SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS ("Portfolio") series of the
Trust; and
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the Portfolio, and the Sub-Adviser
is willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser
-----------
as an investment sub-adviser with respect to the Portfolio for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
----------------------
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board"), the Sub-Adviser will provide a
continuous investment program for the Portfolio, including investment research
and management. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Portfolio. The
Sub-Adviser will be responsible for placing purchase and sell orders for
<PAGE>
investments and for other related transactions. The Sub-Adviser will provide
services under this Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Portfolio's Registration
Statement.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Portfolio with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Portfolio, and the Sub-Adviser
may pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Sub-Adviser
to the Portfolio and its other clients and that the total commissions paid by
the Portfolio will be reasonable in relation to the benefits to the Portfolio
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. The Sub-Adviser may aggregate sales and purchase orders of the
assets of the Portfolio with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by the Sub-Adviser, the
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the results
obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Portfolio, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the
- 2 -
<PAGE>
Portfolio are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Portfolio and which are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Trust any records
which it maintains for the Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the Portfolio's performance and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services normally
available to institutional or other customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. Further Duties. In all matters relating to the performance of this
---------------
Agreement, the Sub-Adviser will act in conformity with the Trust's Trust
Instrument, By-Laws and currently effective registration statement under the
1940 Act and any amendments or supplements thereto ("Registration Statement")
and with the written instructions and written directions of the Board and
Mitchell Hutchins and will comply with the applicable requirements of the 1940
Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"), the rules
under each, Subchapter M of the Internal Revenue Code as applicable to regulated
investment companies, and all other applicable federal and state laws and
regulations. Mitchell Hutchins agrees to provide to the Sub-Adviser copies of
the Trust's Trust Instrument, By-Laws, Registration Statement, written
instructions and directions of the Board and Mitchell Hutchins, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available; provided, however, that the Sub-Adviser's duty
-------- -------
under this Agreement to act in conformity with any document, instruction or
guideline produced by the Trust or Mitchell
- 3 -
<PAGE>
Hutchins shall not arise until it has been delivered to the Sub-Adviser. Any
changes to the objectives, policies and restrictions will make due allowance for
the time within which the Sub-Adviser shall have to come into compliance.
4. Expenses. During the term of this Agreement, the Sub-Adviser
---------
will bear all expenses incurred by it in connection with its services under
this Agreement. The Sub-Adviser shall not be responsible for any expenses
incurred by the Trust, the Portfolio or Mitchell Hutchins.
5. Compensation.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, Mitchell Hutchins, not the Portfolio, will pay to
the Sub-Adviser a fee, computed daily and payable monthly, at an annual rate of
.30% of the Portfolio's average daily net assets (computed in the manner
specified in the Management Agreement), and will provide the Sub-Adviser with a
schedule showing the manner in which the fee was computed.
(b) The fee shall be computed daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) For those periods in which Mitchell Hutchins has agreed to waive all
or a portion of its management fee, Mitchell Hutchins may ask the Sub-Adviser to
waive the same proportion of its fees, but the Sub-Adviser is under no
obligation to do so.
(d) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation Of Liability. The Sub-Adviser shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the
Portfolio, the Trust or its shareholders or by Mitchell Hutchins in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the
- 4 -
<PAGE>
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Representations of Sub-Adviser. The Sub-Adviser represents,
-------------------------------
warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents or the
appropriate regulatory authority to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV as most recently filed with the Securities
- 5 -
<PAGE>
and Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to or promptly after such change.
8. Services Not Exclusive. The Sub-Adviser may act as an investment
----------------------
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law; and no such performance of management or other services or taking of any
such action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Sub-Adviser to or
with the Trust, Portfolio or Mitchell Hutchins or deemed to violate or give rise
to any duty or obligation of the Sub-Adviser to the Trust, Portfolio or Mitchell
Hutchins except as otherwise imposed by law or by this Agreement.
9. Duration and Termination.
-------------------------
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is specifically approved at least
- 6 -
<PAGE>
annually (i) by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Agreement may also be terminated,
without the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) immediately upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Agreement; or (iii) immediately if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Portfolio. The Sub-Adviser may terminate this Agreement at any time, without
the payment of any penalty, on 120 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
10. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) if the terms of this Agreement shall have changed, by a vote of
a majority of the Portfolio's outstanding voting securities (unless in the case
of (ii), the Trust receives an SEC order or No-Action letter permitting it to
modify the Agreement without such vote).
11. Governing Law. This Agreement shall be construed in accordance
--------------
with the 1940 Act and the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof. To the extent that the
applicable laws of the
- 7 -
<PAGE>
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meanings as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
13. Notices. Any written notice herein required to be given to the
--------
Sub-Adviser or Mitchell Hutchins shall be deemed to have been given upon
receipt of the same at their respective addresses set forth below.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Joan L. Cohen 1285 Avenue of the Americas
Joan L. Cohen New York, New York 10019
Vice President
By:/s/Gregory K. Todd
------------------
Name: Gregory K. Todd
Title: First Vice President
Attest: WESTFIELD CAPITAL MANAGEMENT
COMPANY, INC.
One Financial Center
Boston, Massachusetts 02111
By:/s/C. Michael Hazard
--------------------
Name: C. Michael Hazard
Title: President
Exhibit 6(a)
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
DISTRIBUTION CONTRACT
SHARES OF BENEFICIAL INTEREST
CONTRACT made as of June 15, 1995, between MANAGED ACCOUNTS SERVICES
PORTFOLIO TRUST, a Delaware business trust ("Trust") and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company and
currently has twelve distinct series of shares of beneficial interest
("Series"), which correspond to distinct portfolios and have been designated as
PACE Money Market Investments, PACE Government Securities Fixed Income
Investments, PACE Intermediate Fixed Income Investments, PACE Strategic Fixed
Income Investments, PACE Municipal Fixed Income Investments, PACE Global Fixed
Income Investments, PACE Large Company Value Equity Investments, PACE Large
Company Growth Equity Investments, PACE Small/Medium Company Value Equity
Investments, PACE Small/Medium Company Growth Equity Investments, PACE
International Equity Investments, and PACE International Emerging Markets Equity
Investments; and
WHEREAS the Trust's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of each of the
above-referenced Series; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of
the share of beneficial interest of each such Series on the terms and conditions
hereinafter set forth;
WHEREAS Mitchell Hutchins proposes to act as investment manager and
administrator for the Trust and each of its Series;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
<PAGE>
1. Appointment. The Trust hereby appoints Mitchell Hutchins as its agent
-----------
to be the principal distributor to sell and to arrange for the sale of the
shares of beneficial interest of each Series on the terms and for the period set
forth in this Contract. Mitchell Hutchins hereby accepts such appointment and
agrees to act hereunder. It is understood, however, that this appointment does
not preclude sales of the shares of beneficial interest directly through the
Trust's transfer agent in the manner set forth in the Registration Statement. As
used in this Contract, the term "Registration Statement" shall mean the
registration statement of the Trust, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. Services and Duties of Mitchell Hutchins.
----------------------------------------
(a) Mitchell Hutchins agrees to sell shares of beneficial interest
on a best efforts basis from time to time during the term of this Contract as
agent for the Trust and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the shares of beneficial interest to the public by a Series,
Mitchell Hutchins will hold itself available to receive purchase orders,
satisfactory to Mitchell Hutchins, for shares of beneficial interest of that
Series and will accept such orders on behalf of the Trust as of the time of
receipt of such orders and promptly transmit such orders as are accepted to the
Trust's transfer agent. Purchase orders shall be deemed effective at the time
and in the manner set forth in the Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements to
sell shares of beneficial interest to such registered and qualified retail
dealers, including but not limited to PaineWebber Incorporated ("PaineWebber"),
as it may select. In making agreements with such dealers, Mitchell Hutchins
shall act only as principal and not as agent for the Trust.
- 2 -
<PAGE>
(d) The offering price of the shares of beneficial interest of each
Series shall be the net asset value per Share as next determined by the Trust
following receipt of an order at Mitchell Hutchins' principal office. The Trust
shall promptly furnish Mitchell Hutchins with a statement of each computation of
net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of shares of beneficial interest.
(f) To facilitate redemption of shares of beneficial interest by
shareholders directly or through dealers, Mitchell Hutchins is authorized but
not required on behalf of the Trust to repurchase shares of beneficial interest
presented to it by shareholders and dealers at the price determined in
accordance with, and in the manner set forth in, the Registration Statement.
(g) Mitchell Hutchins shall have the right to use any list of
shareholders of the Trust or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that Mitchell Hutchins shall not sell or knowingly provide such list or
lists to any unaffiliated person.
3. Authorization to Enter into Dealer Agreements and to Delegate Duties as
-----------------------------------------------------------------------
Distributor. With respect to the shares of beneficial interest of any or all
- -----------
Series, Mitchell Hutchins may enter into a dealer agreement with PaineWebber or
any other registered and qualified dealer with respect to sales of the shares of
beneficial interest or the provision of service activities. In a separate
contract or as part of any such dealer agreement, Mitchell Hutchins also may
delegate to PaineWebber or another registered and qualified dealer
("sub-distributor") any or all of its duties specified in this Contract,
provided that such separate contract or dealer agreement imposes on the
sub-distributor bound thereby all applicable duties and conditions to which
Mitchell Hutchins is subject under this Contract, and further provided that such
separate contract or dealer agreement meets all requirements of the 1940 Act and
rules thereunder.
- 3 -
<PAGE>
4. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. Duties of the Trust.
--------------------
(a) The Trust reserves the right at any time to withdraw offering
shares of beneficial interest of any or all Series by written notice to Mitchell
Hutchins at its principal office.
(b) The Trust shall determine in its sole discretion whether
certificates shall be issued with respect to the shares of beneficial interest.
If the Trust has determined that certificates shall be issued, the Trust will
not cause certificates representing shares of beneficial interest to be issued
unless so requested by shareholders. If such request is transmitted by Mitchell
Hutchins, the Trust will cause certificates evidencing shares of beneficial
interest to be issued in such names and denominations as Mitchell Hutchins shall
from time to time direct.
(c) The Trust shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may reasonably
request for use in connection with the distribution of shares of beneficial
interest, including, without limitation, certified copies of any financial
statements prepared for the Trust by its independent public auditors and such
reasonable number of copies of the most current prospectus, statement of
additional information, and annual and interim reports of any Series as Mitchell
Hutchins may request, and the Trust shall cooperate fully in the efforts of
- 4 -
<PAGE>
Mitchell Hutchins to sell and arrange for the sale of the shares of beneficial
interest of the Series and in the performance of Mitchell Hutchins under this
Contract.
(d) The Trust shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
shares of beneficial interest under the 1933 Act to the end that there will be
available for sale such number of shares of beneficial interest as Mitchell
Hutchins may be expected to sell. The Trust agrees to file, from time to time,
such amendments, reports, and other documents as may be necessary in order that
there will be no untrue statement of a material fact in the Registration
Statement, nor any omission of a material fact which omission would make the
statements therein misleading.
(e) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of beneficial interest of each
Series for sale under the securities laws of such states or other jurisdictions
as Mitchell Hutchins and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such jurisdictions; provided that the Trust shall not
be required to amend its Trust Instrument or By-Laws to comply with the laws of
any jurisdiction, to maintain an office in any jurisdiction, to change the terms
of the offering of the shares of beneficial interest in any jurisdiction from
the terms set forth in its Registration Statement, to qualify as a foreign
corporation in any jurisdiction, or to consent to service of process in any
jurisdiction other than with respect to claims arising out of the offering of
the shares of beneficial interest. Mitchell Hutchins shall furnish such
information and other material relating to its affairs and activities as may be
required by the Trust in connection with such qualifications.
6. Expenses of the Trust. The Trust shall bear all costs and expenses of
---------------------
registering the shares of beneficial interest with the Securities and Exchange
Commission and state and other regulatory bodies, and shall assume expenses
related to communications with shareholders of each Series, including (i) fees
and disbursements of its counsel and independent public
- 5 -
<PAGE>
auditors; (ii) the preparation, filing and printing of registration statements
and/or prospectuses or statements of additional information required under the
federal securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of shares of beneficial interest
for sale and of the Trust as a broker or dealer under the securities laws of
such jurisdictions as shall be selected by the Trust and Mitchell Hutchins
pursuant to Paragraph 6(e) hereof, and the costs and expenses payable to each
such jurisdiction for continuing qualification therein.
7. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear all costs
-----------------------------
and expenses of (i) preparing, printing and distributing any materials not
prepared by the Trust and other materials used by Mitchell Hutchins in
connection with the sale of shares of beneficial interest under this Contract,
including the additional cost of printing copies of prospectuses, statements of
additional information, and annual and interim shareholder reports other than
copies thereof required for distribution to existing shareholders or for filing
with any federal or state securities authorities; (ii) any expenses of
advertising incurred by Mitchell Hutchins in connection with such offering;
(iii) the expenses of registration or qualification of Mitchell Hutchins as a
broker or dealer under federal or state laws and the expenses of continuing such
registration or qualification; and (iv) any compensation paid to Mitchell
Hutchins' employees and others for selling shares of beneficial interest, and
any expenses of Mitchell Hutchins, its employees and others who engage in or
support the sale of shares of beneficial interest as may be incurred in
connection with their sales efforts.
8. Indemnification.
---------------
(a) The Trust agrees to indemnify, defend and hold Mitchell
Hutchins, its officers and directors, and any person who controls Mitchell
Hutchins within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
- 6 -
<PAGE>
Mitchell Hutchins, its officers, directors or any such controlling person may
incur under the 1933 Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements therein not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by
Mitchell Hutchins to the Trust for use in the Registration Statement; provided,
however, that this indemnity agreement shall not inure to the benefit of any
person who is also an officer or trustee of the Trust or who controls the Trust
within the meaning of Section 15 of the 1933 Act, unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in
the 1933 Act; and further provided, that in no event shall anything contained
herein be so construed as to protect Mitchell Hutchins against any liability to
the Trust or to the shareholders of any Series to which Mitchell Hutchins would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations under this Contract. The Trust shall not be liable
to Mitchell Hutchins under this indemnity agreement with respect to any claim
made against Mitchell Hutchins or any person indemnified unless Mitchell
Hutchins or other such person shall have notified the Trust in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon Mitchell Hutchins or such other person (or after Mitchell Hutchins
or the person shall have received notice of service on any designated agent).
However, failure to notify the Trust of any claim shall not relieve the Trust
from any liability which it may have to Mitchell Hutchins or any person against
whom such action is brought otherwise than on account of this indemnity
agreement. The Trust shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity agreement. If the Trust elects to
assume the
- 7 -
<PAGE>
defense of any such claim, the defense shall be conducted by counsel chosen by
the Trust and satisfactory to indemnified defendants in the suit whose approval
shall not be unreasonably withheld. In the event that the Trust elects to assume
the defense of any suit and retain counsel, the indemnified defendants shall
bear the fees and expenses of any additional counsel retained by them. If the
Trust does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants. The Trust agrees to notify Mitchell
Hutchins promptly of the commencement of any litigation or proceedings against
it or any of its officers or trustees in connection with the issuance or sale of
any of its shares of beneficial interest.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold the
Trust, its officers and trustees and any person who controls the Trust within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its trustees or
officers, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
Mitchell Hutchins to the Trust for use in the Registration Statement, arising
out of or based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration Statement
necessary to make such information not misleading, or arising out of any
agreement between Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins shall be
entitled to participate, at its own expense, in the defense or, if it so elects,
to assume the defense of any suit brought to enforce the claim, but if Mitchell
Hutchins elects to assume the defense, the defense shall be conducted by counsel
chosen by Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that Mitchell Hutchins
elects to assume the defense of any suit and retain counsel, the defendants
- 8 -
<PAGE>
in the suit shall bear the fees and expenses of any additional counsel retained
by them. If Mitchell Hutchins does not elect to assume the defense of any suit,
it will reimburse the indemnified defendants in the suit for the reasonable fees
and expenses of any counsel retained by them.
9. Limitation of Liability of the Trustees and Shareholders of the Trust.
---------------------------------------------------------------------
The trustees of the Trust and the shareholders of any Series shall not be liable
for any obligations of the Trust or any Series under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
shall look only to the assets and property of the Trust or the particular Series
in settlement of such right or claims, and not to such trustees or shareholders.
10. Services Provided to the Trust by Employees of Mitchell Hutchins. Any
----------------------------------------------------------------
person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Trust, shall be deemed, when rendering services to the Trust or acting in any
business of the Trust, to be rendering such services to or acting solely for the
Trust and not as an officer, director, employee or agent or one under the
control or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
11. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date hereabove
written, provided that, with respect to any Series, this Contract shall not take
effect unless such action has first been approved by vote of a majority of the
Board and by vote of a majority of those trustees of the Trust who are not
interested persons of the Trust as defined in the 1940 Act ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
action.
- 9 -
<PAGE>
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for a period of one year. Thereafter, if not terminated, this
Contract shall continue automatically for successive periods of twelve months
each, provided that such continuance is specifically approved at least annually
(i) by a vote of a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the Board
or with respect to any given Series by vote of a majority of the outstanding
voting securities of the shares of beneficial interest of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding voting securities of the shares of beneficial
interest of such Series on sixty days' written notice to Mitchell Hutchins or by
Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust or such Series. This Contract will
automatically terminate in the event of its assignment.
(d) Termination of this Contract with respect to any given Series
shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series.
12. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Governing Law. This Contract shall be construed in accordance with
-------------
the laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
- 10 -
<PAGE>
14. Notice. Any notice required or permitted to be given by either
------
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
15. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meanings as such terms have in the l940
Act.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: MANAGED ACCOUNTS SERVICES
PORTFOLIO TRUST
/s/Jennifer Farrell By:/s/Gregory K. Todd
----------------------- --------------------------
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/Rita Barnett By:/s/Dianne E. O'Donnell
----------------------- --------------------------
- 12 -
Exhibit 6(b)
SELECTED DEALER AGREEMENT
BENEFICIAL SHARES OF INTEREST OF
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
AGREEMENT made as of June 15, 1995, between Mitchell Hutchins Asset
Management Inc., a Delaware corporation ("Mitchell Hutchins"), and PaineWebber
Incorporated, a Delaware corporation ("PaineWebber").
WHEREAS Managed Accounts Services Portfolio Trust ("Trust") is a Delaware
business trust registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end management investment company; and
WHEREAS the Trust currently has twelve distinct series of shares of
beneficial interest ("Series"), which correspond to distinct portfolios and have
been designated as PACE Money Market Investments, PACE Government Securities
Fixed Income Investments, PACE Intermediate Fixed Income Investments, PACE
Strategic Fixed Income Investments, PACE Municipal Fixed Income Investments,
PACE Global Fixed Income Investments, PACE Large Company Value Equity
Investments, PACE Large Company Growth Equity Investments, PACE Small/Medium
Company Value Equity Investments, PACE Small/Medium Company Growth Equity
Investments, PACE International Equity Investments, and PACE International
Emerging Markets Equity Investments; and
WHEREAS the Trust's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of each of the
above-referenced Series; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with
the Trust ("Distribution Contract") pursuant to which Mitchell Hutchins serves
as principal distributor in connection with the offering and sale of the shares
of beneficial interest of each such Series; and
<PAGE>
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its agent in
connection with the offering and sale of the shares of beneficial interest of
each Series and to delegate to PaineWebber performance of certain of the
services which Mitchell Hutchins provides to the Trust under the Distribution
Contract; and
WHEREAS the sales of the shares of beneficial interest of each Series
shall be available exclusively to participants in the PACE Program; and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' agent in
connection with the offering and sale of such shares of beneficial interest and
to perform such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as its agent
-----------
to sell and to arrange for the sale of the shares of beneficial interest of each
Series on the terms and for the period set forth in this Agreement. Mitchell
Hutchins also appoints PaineWebber as its agent for the performance of certain
other services set forth herein which Mitchell Hutchins provides to the Trust
under the Distribution Contract. PaineWebber hereby accepts such appointments
and agrees to act hereunder. It is understood, however, that these appointments
do not preclude sales of shares of beneficial interest of each Series directly
through the Trust's transfer agent in the manner set forth in the Registration
Statement. As used in this Agreement, the term "Registration Statement" shall
mean the Registration Statement of the Trust, and any supplements thereto, under
the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
- 2 -
<PAGE>
2. Services, Duties and Representations of PaineWebber.
---------------------------------------------------
(a) PaineWebber agrees to sell the shares of beneficial interest on
a best efforts basis from time to time during the term of this Agreement as
agent for Mitchell Hutchins and upon the terms described in this Agreement and
the Registration Statement.
(b) Upon the later of the date of this Agreement or the initial
offering of shares of beneficial interest by a Series to the public, PaineWebber
will hold itself available to receive orders, satisfactory to PaineWebber and
Mitchell Hutchins, for the purchase of shares of beneficial interest and will
accept such orders on behalf of Mitchell Hutchins and the Trust as of the time
of receipt of such orders and will promptly transmit such orders as are accepted
to the Trust's transfer agent. Purchase orders shall be deemed effective at the
time and in the manner set forth in the Registration Statement.
(c) PaineWebber in its discretion may sell shares of beneficial
interest to (i) such other registered and qualified retail dealers as it may
select, subject to the approval of Mitchell Hutchins. In making agreements with
such dealers, PaineWebber shall act only as principal and not as agent for
Mitchell Hutchins or the Trust.
(d) The offering price of the shares of beneficial interest of each
Series shall be the net asset value per Share as next determined by the Trust
following receipt of an order at PaineWebber's principal office. Mitchell
Hutchins shall promptly furnish or arrange for the furnishing to PaineWebber of
a statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
shares of beneficial interest of each Series.
- 3 -
<PAGE>
(f) To facilitate redemption of shares of beneficial interest by
shareholders directly or through dealers, PaineWebber is authorized but not
required on behalf of Mitchell Hutchins and the Trust to repurchase shares of
beneficial interest presented to it by shareholders and other dealers at the
price determined in accordance with, and in the manner set forth in, the
Registration Statement.
(g) PaineWebber represents and warrants that: (i) it is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD")
and agrees to abide by the Rules of Fair Practice of the NASD; (ii) it is
registered as a broker-dealer with the Securities and Exchange Commission; (iii)
it will maintain any filings and licenses required by federal and state laws to
conduct the business contemplated under this Agreement; and (iv) it will comply
with all federal and state laws and regulations applicable to the offer and sale
of the shares of beneficial interest.
(h) PaineWebber shall not incur any debts or obligations on behalf
of Mitchell Hutchins or the Trust. PaineWebber shall bear all costs that it
incurs in selling the shares of beneficial interest and in complying with the
terms and conditions of this Agreement as more specifically set forth in
paragraph 8.
(i) PaineWebber shall not permit any employee or agent to offer or
sell shares of beneficial interest to the public unless such person is duly
licensed under applicable federal and state laws and regulations.
(j) PaineWebber shall not (i) furnish any information or make any
representations concerning the shares of beneficial interest other than those
contained in the Registration Statement or in sales literature or advertising
that has been prepared or approved by Mitchell Hutchins as provided in paragraph
6 or (ii) offer or sell the shares of beneficial interest in jurisdictions in
which they have not been approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber
----------------------
hereunder are not to be deemed exclusive and
- 4 -
<PAGE>
PaineWebber shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby. Nothing in this
Agreement shall limit or restrict the right of any director, officer or employee
of PaineWebber who may also be a director, trustee, officer or employee of
Mitchell Hutchins or the Trust, to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
other business, whether of a similar or a dissimilar nature.
4. Duties of Mitchell Hutchins.
---------------------------
(a) It is understood that the Trust reserves the right at any time
to withdraw all offerings of shares of beneficial interest of any or all Series
by written notice to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the
Trust's affairs and shall make available to PaineWebber copies of all
information, financial statements and other papers which PaineWebber may
reasonably request for use in connection with the distribution of shares of
beneficial interest, including, without limitation, certified copies of any
financial statements prepared for the Trust by its independent public auditors
and such reasonable number of copies of the most current prospectus, statement
of additional information, and annual and interim reports of any Series as
PaineWebber may request, and Mitchell Hutchins shall cooperate fully in the
efforts of PaineWebber to sell and arrange for the sale of the shares of
beneficial interest and in the performance of PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal laws
and regulations applicable to a distributor of the shares of beneficial
interest.
5. Advertising. Mitchell Hutchins agrees to make available such sales
-----------
and advertising materials relating to the shares of beneficial interest as
Mitchell Hutchins in its discretion determines appropriate. PaineWebber agrees
to submit all sales and advertising materials developed by it relating to the
shares of beneficial interest to Mitchell Hutchins for
- 5 -
<PAGE>
approval. PaineWebber agrees not to publish or distribute such materials to the
public without first receiving such approval in writing. Mitchell Hutchins shall
assist PaineWebber in obtaining any regulatory approvals of such materials that
may be required of or desired by PaineWebber.
6. Records. PaineWebber agrees to maintain all records required by
-------
applicable state and federal laws and regulations relating to the offer and sale
of the shares of beneficial interest. Mitchell Hutchins and its representatives
shall have access to such records during normal business hours for review or
copying.
7. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses
-----------------------
of (i) preparing, printing, and distributing any materials not prepared by the
Trust or Mitchell Hutchins and other materials used by PaineWebber in connection
with its offering of shares of beneficial interest for sale to the public; (ii)
any expenses of advertising incurred by PaineWebber in connection with such
offering; (iii) the expenses of registration or qualification of PaineWebber as
a dealer or broker under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) any compensation paid to
PaineWebber's Investment Executives or other employees and others for selling
shares of beneficial interest, and any expenses of PaineWebber, its Investment
Executives and employees and others who engage in or support the sale of shares
of beneficial interest as may be incurred in connection with their sales
efforts. PaineWebber shall bear such additional costs and expenses as it and
Mitchell Hutchins may agree upon, such agreement to be evidenced in a writing
signed by both parties. Mitchell Hutchins shall advise the Board of any such
agreement as to additional costs and expenses borne by PaineWebber at their
first regular meeting held after such agreement but shall not be required to
obtain prior approval for such agreements from the Board.
<PAGE>
8. Indemnification.
---------------
(a) Mitchell Hutchins agrees to indemnify, defend, and hold
PaineWebber, its officers and directors, and any person who controls PaineWebber
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities, and expenses (including the
cost of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the shares of beneficial
interest provided by Mitchell Hutchins to PaineWebber. However, this indemnity
agreement shall not apply to any claims, demands, liabilities, or expenses that
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by PaineWebber to Mitchell Hutchins or the
Trust for use in the Registration Statement or in any sales or advertising
material; and further provided, that in no event shall anything contained herein
be so construed as to protect PaineWebber against any liability to Mitchell
Hutchins or the Trust or to the shareholders of any Series to which PaineWebber
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell
Hutchins and its officers and directors, the Trust, its officers and trustees,
and any person who controls Mitchell Hutchins or the Trust within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which
- 7 -
<PAGE>
Mitchell Hutchins or its officers or directors or the Trust, its officers or
trustees, or any such controlling person may incur under the 1933 Act, under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
PaineWebber to Mitchell Hutchins or the Trust for use in the Registration
Statement; arising out of or based upon any alleged omission to state a material
fact in connection with such information required to be stated in the
Registration Statement or necessary to make such information not misleading; or
arising out of any agreement between PaineWebber and any other retail dealer; or
arising out of any sales or advertising material used by PaineWebber in
connection with its duties under this Agreement.
9. Duration and Termination.
------------------------
(a) This Agreement shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Trust who are not interested
persons of the Trust as defined the 1940 Act ("Independent Trustees"), cast in
person at a meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Agreement
shall continue in effect for a period of one year. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (i) by a vote of a majority of the Independent Trustees, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of the shares of beneficial interest of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Agreement may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Agreement may also be terminated at
- 8 -
<PAGE>
any time, without the payment of any penalty, by vote of the Board, by vote of a
majority of the Independent Trustees or by vote of a majority of the outstanding
voting securities of the shares of beneficial interest of such Series on 30
days' written notice to Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given Series
shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement will
automatically terminate in the event of its assignment or in the event that the
Distribution Contract is terminated.
10. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
11. Use of PaineWebber Name. PaineWebber hereby authorizes Mitchell
-----------------------
Hutchins to use the name "PaineWebber Incorporated" or any name derived
therefrom in any sales or advertising materials prepared and/or used by Mitchell
Hutchins in connection with its duties as distributor of the shares of
beneficial interest, but only for so long as this Agreement or any extension,
renewal or amendment hereof remains in effect, including any similar agreement
with any organization which shall have succeeded to the business of PaineWebber.
12. Governing Law. This Agreement shall be construed in accordance
-------------
with the laws of the State of Delaware and the 1940 Act. To the extent that
the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
13. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
- 9 -
<PAGE>
the benefit of the parties hereto and their respective successors. As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the 1940 Act.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest:/s/Rita Barnett By:/s/Dianne E. O'Donnell
--------------- ----------------------
PAINEWEBBER INCORPORATED
Attest:/s/Jennifer Farrell By:/s/Bruce Bursey
------------------- ---------------
- 11 -
Exhibit (9)
TRANSFER AGENCY SERVICES AND SHAREHOLDER SERVICES AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of August 18, 1995, to be effective
as of such date as is agreed to in writing by the parties, by and between
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST (the "Fund"), a Maryland
corporation and PFPC INC. ("PFPC"), a Delaware corporation, which is an
indirect wholly-owned subsidiary of PNC Bank Corp.
The Fund is registered as an open-end management series investment
company under the Investment Company Act of 1940, as amended ("1940 Act").
The Fund wishes to retain PFPC to serve as the transfer agent, registrar,
dividend disbursing agent and shareholder servicing agent for such portfolios
as are listed in Appendix B to this agreement, as such Appendix B may be
amended from time to time (the "Portfolios"), and PFPC wishes to furnish such
services.
In consideration of the promises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
-----------
(a) "Authorized Person". The term "Authorized Person" shall mean
-------------------
any officer of the Fund and any other person who is duly authorized by the
Fund's Governing Board to give Oral and
<PAGE>
Written Instructions on behalf of the Fund. Such persons are listed in the
Certificate attached hereto as the Authorized Persons Appendix or any
amendment thereto as may be received by PFPC from time to time. If PFPC
provides more than one service hereunder, the Fund's designation of
Authorized Persons may vary by service.
(b) "Governing Board". The term "Governing Board" shall mean the
-----------------
Fund's Board of Directors if the Fund is a corporation or the Fund's Board of
Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(c) "Oral Instructions". The term "Oral Instructions" shall mean
-------------------
oral instructions received by PFPC from an Authorized Person by telephone or
in person.
(d) "SEC". The term "SEC" shall mean the Securities and Exchange
-----
Commission.
(e) "Securities Laws". The term "Securities Laws" shall mean the
-----------------
1933 Act, the 1934 Act and the 1940 Act. The terms the "1933 Act" shall mean
the Securities Act of 1933, a amended, and the "1934 Act" shall mean the
Securities Exchange Act of 1934, a amended.
2
<PAGE>
(f) "Shares". The term "Shares" shall mean the shares of
--------
beneficial interest of any Portfolio or class of the Fund.
(g) "Written Instructions". The term "Written Instructions" shall
----------------------
mean written instructions signed by one Authorized Person and received by
PFPC. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
-----------
agent, registrar, dividend disbursing agent and shareholder servicing agent
to each of its Portfolios, in accordance with the terms set forth in this
Agreement, and PFPC accepts such appointment and agrees to furnish such
services.
3. Delivery of Documents. The Fund has provided or, where applicable,
---------------------
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PFPC to provide services
to each Portfolio and approving this agreement;
3
<PAGE>
(b) A copy of the Fund's most recent Post-Effective Amendment to
its Registration Statement on Form N-1A under the 1933 Act and 1940 Act as
filed with the SEC;
(c) A copy of the Fund's investment advisory and administration
agreement or agreements;
(d) A copy of the Fund's distribution agreement or agreements;
(e) Copies of any shareholder servicing agreements made in respect
of the Fund; and
(f) Copies of any and all amendments or supplements to the
foregoing.
4. Compliance with Government Rules and Regulations. PFPC undertakes
------------------------------------------------
to comply with all applicable requirements of the Securities Laws, and any
laws, rules and regulations of governmental authorities having jurisdiction
with respect to all duties to be performed by PFPC hereunder. Except as
specifically set forth herein, PFPC assumes no responsibility for such
compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PFPC
------------
shall act only upon Oral and Written Instructions.
4
<PAGE>
PFPC shall be entitled to rely upon any Oral and Written Instruction it
receives from an Authorized Person pursuant to this Agreement. PFPC may
assume that any Oral or Written Instruction received hereunder is not in any
way inconsistent with the provisions of organizational documents or of any
vote, resolution or proceeding of the Fund's Governing Board or of the Fund's
shareholders, unless and until it receives Written Instructions to the
contrary.
The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written
Instructions by the close of business on the next business day after such
Oral Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral or Written Instructions reasonably appear to have
been received from an Authorized Person, PFPC shall incur no liability to the
Fund in acting upon such instructions provided that PFPC's actions comply
with the other provisions of this Agreement.
5
<PAGE>
6. Right to Receive Advice.
-----------------------
(a) Advice of the Fund. If PFPC is in doubt as to any action it
------------------
should or should not take, PFPC will request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
-----------------
question of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PFPC, at the
option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
------------------
directions, advice or Oral or Written Instructions PFPC receives from the
Fund and the advice it receives from counsel, PFPC may rely upon and follow
the advice of counsel. In the event PFPC so relies on the advice of counsel,
PFPC remains liable for any action or omission on the part of PFPC which
constitutes willful misfeasance, bad faith, negligence or reckless disregard
by PFPC of any duties, obligations or responsibilities provided for in this
Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it
------------------
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund
6
<PAGE>
or from counsel in accordance with this Agreement and which PFPC believes, in
good faith, to be consistent with those directions, advice or Oral or Written
Instructions.
Nothing in this paragraph shall be construed to impose an obligation
upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or
Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not
taking such action. Nothing in this subsection shall excuse PFPC when an
action or omission on the part of PFPC constitutes willful misfeasance, bad
faith, negligence or reckless disregard of PFPC of any duties, obligations or
responsibilities provided for in this Agreement.
7. Records and Visits. PFPC shall prepare and maintain in complete
------------------
and accurate form all books and records necessary for it to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent
to the Fund, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities
Laws, rules and regulations and by state laws and (b) such books and records
as
7
<PAGE>
are necessary for PFPC to perform all of the services it agrees to provide in
this Agreement and the appendices attached hereto. The books and records
pertaining to the Fund which are in the possession, or under the control, of
PFPC shall be the property of the Fund. The Fund or the Fund's Authorized
Persons shall have access to such books and records at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or
to an Authorized Person of the Fund. Upon reasonable notice by the Fund,
PFPC shall make available during regular business hours its facilities and
premises employed in connection with its performance of this Agreement for
reasonable visits by the Fund, any agent or person designated by the Fund or
any regulatory agency having authority over the Fund.
8. Confidentiality. PFPC agrees on its own behalf and that of its
---------------
employees to keep confidential all records of the Fund and information
relating to the Fund and its shareholders (past, present and future), its
investment adviser and its principal underwriter, unless the release of such
records or information is otherwise consented to, in writing, by the Fund
prior to its
8
<PAGE>
release. The Fund agrees that such consent shall not be unreasonably
withheld, and may not be withheld where PFPC may be exposed to civil or
criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. Cooperation with Auditors. PFPC shall cooperate with the Fund's
-------------------------
independent public auditors and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such auditors for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in
-----------------
effect with appropriate parties one or more agreements making reasonable
provision for periodic backup of computer files and data with respect to the
Fund and emergency use of electronic data processing equipment. In the event
of equipment failures, PFPC shall, at no additional expense to the Fund, take
all reasonable steps to minimize service interruptions. PFPC shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failures, provided such loss or
9
<PAGE>
interruption is not caused by the negligence of PFPC and provided further
that PFPC has complied with the provisions of this Paragraph 10.
11. Compensation. As compensation for services rendered by PFPC during
------------
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to, from time to time, in writing by the Fund and PFPC.
12. Indemnification.
---------------
(a) The Fund agrees to indemnify and hold harmless PFPC and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including, without limitation, reasonable
attorneys' fees and disbursements arising directly or indirectly from any
action or omission to act which PFPC takes (i) at the request of or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PFPC, nor any of its nominees, shall be
indemnified against any liability (or any expenses incident to such
liability) arising out
10
<PAGE>
of PFPC's or its nominees' own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this Agreement.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state and
foreign securities and blue sky laws, and amendments thereto) and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
arising directly or indirectly out of PFPC's or its nominee's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments
concerning such claim.
11
<PAGE>
The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may be required
to indemnify it except with the other party's prior written consent.
13. Insurance. PFPC shall maintain insurance of the types and in the
---------
amounts deemed by it to be adequate. To the extent that policies of
insurance may provide for coverage of claims for liability or indemnity by
the parties set forth in this Agreement, the contracts of insurance shall
take precedence, and no provision of this Agreement shall be construed to
relieve an insurer of any obligation to pay claims to the Fund, PFPC or other
insured party which would otherwise be a covered claim in the absence of any
provision of this Agreement.
14. Security. PFPC represents and warrants that, to the best of its
--------
knowledge, the various procedures and systems which PFPC has implemented with
regard to the safeguarding from loss or damage attributable to fire, theft or
any other cause (including provision for twenty-four hours a day restricted
access) of the
12
<PAGE>
Fund's blank checks, certificates, records and other data and PFPC's
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate, and that it will make such changes
therein from time to time as in its judgment are required for the secure
performance of its obligations hereunder. PFPC shall review such systems and
procedures on a periodic basis and the Fund shall have access to review these
systems and procedures.
15. Responsibility of PFPC. PFPC shall be under no duty to take any
----------------------
action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise due care and diligence in the performance of its duties hereunder,
to act in good faith and to use its best efforts in performing services
provided for under this Agreement. PFPC shall be liable only for any damages
arising out of or in connection with PFPC's performance of or omission or
failure to perform its duties under this Agreement to the extent such damages
arise out of PFPC's negligence, reckless disregard of its duties, bad faith
or willful misfeasance.
13
<PAGE>
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (b) subject to the provisions of
Paragraph 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
16. Description of Services. PFPC shall perform the duties of the
-----------------------
transfer agent, registrar, dividend disbursing agent and shareholder
servicing agent of the Fund and its specified Portfolio.
14
<PAGE>
(a) Purchase of Shares. PFPC shall issue and credit an account of
------------------
an investor in the manner described in the Fund's prospectus once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account;
and
(iii) Confirmation of receipt or crediting of funds for such
order from the Fund's custodian.
(b) Redemption of Shares. PFPC shall redeem a Portfolios' Shares
--------------------
only if that function is properly authorized by the Fund's organizational
documents or resolution of the Fund's Governing Board. Shares shall be
redeemed and payment therefor shall be made in accordance with the Fund's
prospectus when the shareholder tenders his or her Shares in proper form and
directs the method of redemption.
(c) Dividends and Distributions. Upon receipt of a resolution of
---------------------------
the Fund's Governing Board authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash if provided for in each Portfolio's
15
<PAGE>
prospectus. Such issuance or payment, as well as payments upon redemption as
described above, shall be made after deduction and payment of the required
amount of funds to be withheld in accordance with any applicable tax law or
other laws, rules or regulations. PFPC shall mail to each Portfolio's
shareholders such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as are
required to be filed and mailed by applicable law, rule or regulation.
PFPC shall prepare, maintain and file with the IRS and other appropriate
taxing authorities reports relating to all dividends above a stipulated
amount paid by the Fund to its shareholders as required by tax or other law,
rule or regulation.
(d) PFPC will provide the services listed on Appendix A on an
ongoing basis. Performance of certain of these services, with accompanying
responsibilities and liabilities, may be delegated and assigned to
PaineWebber Incorporated or Mitchell Hutchins Asset Management Inc. or to an
affiliated person of either in accordance with the provisions of Section
23(b).
16
<PAGE>
17. Duration and Termination.
------------------------
(a) This Agreement shall continue until January 30, 1997 and shall
automatically be renewed thereafter on a year-to-year basis; provided that
this Agreement may be terminated by either party for cause.
(b) With respect to the Fund, cause includes, but is not limited
to: (i) PFPC's material breach of this Agreement causing it to fail to
substantially perform its duties under this Agreement. In order for such
material breach to constitute "cause" under this Paragraph, PFPC must receive
written notice from the Fund specifying the material breach and PFPC shall
not have corrected such breach within a 15-day period; (ii) financial
difficulties of PFPC evidenced by the authorization or commencement of a
voluntary or involuntary bankruptcy under the U.S. Bankruptcy Code or any
applicable bankruptcy or similar law, or under any applicable law of any
jurisdiction relating to the liquidation or reorganization of debt, the
appointment of a receiver or to the modification or alleviation of the rights
of creditors; and (iii) issuance of an administrative or court order against
PFPC with regard to the material violation or alleged
17
<PAGE>
material violation of the Securities Laws or other applicable laws related to
its business of performing transfer agency services.
(c) With respect to PFPC, cause includes, but is not limited to,
the failure of the Fund to pay the compensation set forth in writing pursuant
to Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be
effective thirty (30) daysfrom the date of such notice.
Any notice of termination for cause by PFPC shall be effective 90 days from
the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such
termination. In the event that the Fund designates a successor to any of
PFPC's obligations under this Agreement, PFPC shall, at the direction and
expense of the Fund, transfer to such successor all relevant books, records
and other data established or maintained by PFPC hereunder including a
certified list of the shareholders of each Portfolio of the Fund with name,
address, and if provided taxpayer identification or Social Security number,
and a complete record of the account of each shareholder. To the
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<PAGE>
extent that PFPC incurs expenses related to a transfer of responsibilities to
a successor, other than expenses involved in PFPC's providing the Fund's
books and records to the successor, PFPC shall be entitled to be reimbursed
for such expenses, including any out-of-pocket expenses reasonably incurred
by PFPC in connection with the transfer.
(f) Any termination effected pursuant to this Paragraph shall not
affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate
with respect to the Fund and any Portfolio thereof upon the liquidation,
merger or other dissolution of the Fund or Portfolio or upon the Fund's
ceasing to be registered investment company.
19. Registration as a Transfer Agent. PFPC represents that it is
--------------------------------
currently registered with the appropriate federal agency for the registration
of transfer agents, or is otherwise permitted to lawfully conduct its
activities without such registration and that it will remain so registered
for the duration of this Agreement. PFPC agrees that it will promptly notify
the Fund in the event of
19
<PAGE>
any material change in its status as a registered transfer agent. Should
PFPC fail to be registered with the SEC as a transfer agent at any time
during this Agreement, and such failure to register does not permit PFPC to
lawfully conduct its activities, the Fund may terminate this Agreement upon
five days written notice to PFPC.
20. Notices. All notices and other communications, other than Oral or
-------
Written Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notice shall be addressed (a) if to PFPC
at PFPC's address, 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if
to the Fund, at 1285 Avenue of the Americas, New York, N.Y. 10019; or (c) if
to neither of the foregoing, at such other address as shall have been
notified to the sender of any such notice or other communication. If the
notice is sent by confirming telegram, cable telex or facsimile sending
device during regular business hours, it shall be deemed to have been given
immediately. If sent during a time other than regular business hours, such
notice shall be deemed to have been given at the opening of the next business
day. If notice is sent by first-class mail, it shall be deemed to have
20
<PAGE>
been given three business days after it has been mailed. If notice is sent
by messenger, it shall be deemed to have been given on the day it is
delivered. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a notice hereunder shall be paid by the
sender.
21. Amendments. This Agreement, or any term thereof, may be changed or
----------
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
22. Additional Portfolio. In the event that the Fund establishes one
--------------------
or more investment Portfolios in addition to and with respect to which it
desires to have PFPC render services as transfer agent, registrar, dividend
disbursing agent and shareholder servicing agent under the terms set forth in
this Agreement, it shall so notify PFPC in writing, and PFPC shall agree in
writing to provide such services, and such investment Portfolio shall become
a Fund hereunder, subject to such additional terms, fees and conditions as
are agreed to by the parties.
21
<PAGE>
23. Assignment and Delegation.
-------------------------
(a) PFPC may, at its owns expense, assign its rights and delegate
its duties hereunder to any wholly owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., provided that (i) PFPC gives
the Fund thirty (30) days' prior written notice; (ii) the delegate agrees
with PFPC to comply with all relevant provisions of the Securities Laws; and
(iii) PFPC and such delegate promptly provide such information as the Fund
may request and respond to such questions as the Fund may ask relating to the
delegation, including, without limitation, the capabilities of the delegate.
The assignment and delegation of any of PFPC's duties under this subparagraph
(a) shall not relieve PFPC of any of its responsibilities or liabilities
under this Agreement.
(b) PFPC may assign its rights and delegate its duties hereunder
to PaineWebber Incorporated or Mitchell Hutchins Asset Management Inc. or
affiliated person of either provided that (i) PFPC gives the Fund thirty (30)
days' prior written notice; (ii) the delegate agrees to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate
promptly provide such information as the Fund may request and respond to such
22
<PAGE>
questions as the Fund may ask relative to the delegation, including, without
limitation, the capabilities of the delegate. In assigning its rights and
delegating its duties under this paragraph, PFPC may impose such conditions
or limitations as it determines appropriate including the condition that PFPC
be retained as a sub-transfer agent.
(c) In the event that PFPC assigns its rights and delegates its
duties under this section, no amendment of the terms of this Agreement shall
become effective without the written consent of PFPC.
24. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. 25. Further
-------
Actions. Each party agrees to perform such further acts and execute such
-------
further documents as are necessary to effectuate the purposes hereof.
26. Limitation of Liability. Notice is hereby given that this
-----------------------
Agreement is executed on behalf of the Fund and that the obligations of this
instrument are not binding upon any of the directors, officers or
shareholders individually but are binding
23
<PAGE>
only upon the assets and property of the Fund. PFPC agrees that, in
asserting any rights or claims under this Agreement, it shall look only to
the assets and property of the Fund or the particular Portfolio of the Fund
in settlement of such right or claims, and not to such directors, officers or
shareholders.
27. Miscellaneous. This Agreement embodies the entire agreement and
-------------
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if any,
with respect to services to be performed and compensation to be paid under
this Agreement.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware Law, except that, to the extent provision of the
Securities Laws govern the subject matter of this Agreement, such Securities
Laws will controlling. If any
24
<PAGE>
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding and inure to the
benefit of the parties hereto and their respective successors and assigns.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PFPC INC.
By: /s/ Robert Perlsweig
_______________________________
MANAGED ACCOUNTS SERVICES PORTFOLIO TRUST
By: /s/ Gregory K. Todd
_______________________________
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<PAGE>
APPENDIX A
Description of Services
-----------------------
(a) Services Provided on an Ongoing Basis by PFPC to the Fund, If
-------------------------------------------------------------
Applicable.
----------
(i) Establish and maintain proper shareholder registrations,
unless requested by the Fund;
(ii) Review new applications with correspondence to shareholders to
complete or correct information;
(iii) Direct payment processing of checks or wires;
(iv) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
(v) Countersign share certificates;
(vi) Prepare and mail to shareholders confirmation of activity;
(vii) Provide assistance when necessary for shareholder servicing;
(viii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the broker-dealer
or directly with PFPC;
(ix) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(x) Provide detailed data for underwriter/broker confirmations;
(xi) Periodic mailing of year-end tax and statement information;
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<PAGE>
(xii) Notify on a daily basis the investment adviser, accounting
agent, and custodian of fund activity; and
(xiii) Perform other participating broker-dealer shareholder services
as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral or Written Instructions of the
-------------------------------------------------------------------
Fund.
----
(i) Accept and post daily Portfolio and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates.
(c) Shareholder Account Services.
----------------------------
(i) PFPC may arrange, in accordance with the Portfolios'
prospectus, for issuance of Shares obtained through:
. The transfer of funds from shareholders' account at
financial institutions; and
Any pre-authorized check plan.
(ii) PFPC, if requested, shall arrange for a shareholder's:
. Exchange of Shares for shares of a fund for which the
Fund has exchange privileges;
A-2
<PAGE>
. Systematic withdrawal from an account where that
shareholder participates in a systematic withdrawal plan;
and/or
. Redemption of Shares from an account with a checkwriting
privilege.
(d) Communications to Shareholders. Upon timely written instructions,
------------------------------
PFPC shall mail all communications by the Fund to its shareholders,
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund Shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
If requested by the Fund, PFPC will receive and tabulate the proxy cards
for the meetings of the Fund's shareholders and supply personnel to
serve as inspectors of election.
(e) Records. PFPC shall maintain records of the accounts for each
-------
shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of Shares
for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and
A-3
<PAGE>
distributions paid and the date and price for all transactions
on a shareholder's account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(f) Lost or Stolen Certificates. PFPC shall place a stop notice
---------------------------
against any certificate reported to be lost or stolen and comply
with all applicable federal regulatory requirements for reporting
such loss or alleged misappropriation.
A new certificate shall be registered and issued upon:
(i) Shareholder's pledge of a lost instrument bond or such other
and appropriate indemnity bond issued by a surety company
approved by PFPC; and
(ii) Completion of a release and indemnification agreement signed
by the shareholder to protect PFPC.
(g) Shareholder Inspection of Stock Records. Upon requests from Fund
---------------------------------------
shareholders to inspect stock records, PFPC will notify the Fund
and require instructions granting or denying such request prior to
taking any action. Unless PFPC has acted contrary to the Fund's
instructions, the Fund agrees to release PFPC from any liability
for refusal of permission for a particular shareholder to inspect
the Fund's shareholder records.
A-4
<PAGE>
APPENDIX B
PACE Money Market Investments
PACE Government Securities Fixed Income Investments
PACE Intermediate Fixed Income Investments
PACE Strategic Fixed Income Investments
PACE Municipal Fixed Income Investments
PACE Global Fixed Income Investments
PACE Large Company Value Equity Investments
PACE Large Company Growth Equity Investments
PACE Small/Medium Company Value Equity Investments
PACE Small/Medium Company Growth Equity Investments
PACE International Equity Investments
PACE International Emerging Markets Equity Investments
Exhibit 10.(b)
CONSENT
We serve as counsel to Managed Accounts Services Portfolio Trust (the
"Trust") and hereby consent to the reference to us as such in the Statement
of Additional Information of the Trust under the caption "Other Information
- - Counsel," forming part of Post-Effective Amendment No. 1 to the Trust's
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended.
/s/ Willkie Farr & Gallagher
By:-----------------------------
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Auditors" and to the incorporation of our report dated June 16, 1995 on
Managed Accounts Services Portfolio Trust, in this Registration Statement
(Form N-1A No. 33-87254) of Pace Funds.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
February 23, 1996
