<PAGE>
PaineWebber PACE Select Advisors Trust
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
--------------------
PROSPECTUS
DECEMBER 1, 1999
----------------------------------
This Prospectus offers shares of the twelve funds in the Trust to participants
in the PaineWebber PACE-SM- Program. The PACE Program and these funds are
designed to assist you in devising an asset allocation strategy to meet your
individual needs.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
Contents
THE FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
What every investor 3 PACE Money Market Investments
should know about 6 PACE Government Securities Fixed Income
Investments
the funds 9 PACE Intermediate Fixed Income Investments
12 PACE Strategic Fixed Income Investments
15 PACE Municipal Fixed Income Investments
18 PACE Global Fixed Income Investments
21 PACE Large Company Value Equity Investments
24 PACE Large Company Growth Equity Investments
27 PACE Small/Medium Company Value Equity
Investments
30 PACE Small/Medium Company Growth Equity
Investments
33 PACE International Equity Investments
36 PACE International Emerging Markets Equity
Investments
39 More About Risks and Investment Strategies
</TABLE>
INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Information for 42 Investing in the Funds
managing your fund --Buying Shares
account --The PaineWebber PACE-SM- Program
--Selling Shares
--Pricing and Valuation
</TABLE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Additional important 44 Management
information about 48 Dividends and Taxes
the funds 49 Financial Highlights
61 Appendix A
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Where to learn more Back Cover
about these funds
</TABLE>
The fund is not a complete or
balanced investment program.
- --------------------------------------------------------------------------------
Prospectus Page 2
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
PACE Money Market Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Current income consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES:
The fund is a money market mutual fund and seeks to maintain a stable price of
$1.00 per share. The fund invests in a diversified portfolio of high quality
money market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's manager and investment
adviser, selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS:
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall and its yield will tend to lag behind
prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Credit Risk
- - Interest Rate Risk
- - Foreign Securities Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THESE
REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 3
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table does reflect the annual
PACE Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 5.05%
1997 5.27%
1998 5.21%
CALENDAR YEAR
</TABLE>
Total Return January 1 to September 30, 1999 -- 3.49%
Best quarter during calendar years shown: 4th quarter, 1997 -- 1.33%
Worst quarter during calendar years shown: 4th quarter, 1998 -- 1.22%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
INCEPTION DATE (8/24/95)
- -------------- ---------
<S> <C>
One Year.................................................... 3.65%
Life of Fund................................................ 3.64%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 4
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.15%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.92%
----
Total Annual Fund Operating Expenses........................ 1.07%
====
Expense Reimbursements**.................................... 0.57%
----
Net Expenses**.............................................. 0.50%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$203 $745 $1,314 $2,863
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 5
<PAGE>
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------------------------
PaineWebber PACE Government Securities Fixed Income Investments
PACE Government Securities Fixed Income Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Current income.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests in U.S. government bonds and other bonds of varying maturities,
but normally limits its portfolio "duration" to between one and seven years.
"Duration" is a measure of the fund's exposure to interest rate risk. A longer
duration means that changes in market interest rates are likely to have a larger
effect on the value of the assets in a portfolio.
The fund invests primarily in mortgage-backed securities issued or guaranteed by
U.S. government agencies and in other U.S. government securities. The fund also
invests, to a lesser extent, in investment grade bonds of private issuers,
including those backed by mortgages or other assets. These privately issued
bonds generally have one of the two highest credit ratings, although the fund
may invest to a limited extent in privately issued bonds with the third highest
credit rating. The fund may invest in when-issued or delayed delivery bonds to
increase its return, giving rise to a form of leverage. The fund may (but is not
required to) use options, futures and other derivatives as part of its
investment strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Pacific Investment Management Company ("PIMCO") to serve as the fund's
investment adviser. PIMCO establishes duration targets for the fund's portfolio
based on its expectations for changes in interest rates and then positions the
fund to take advantage of yield curve shifts. PIMCO decides to buy or sell
specific bonds based on an analysis of their values relative to other similar
bonds. PIMCO monitors the prepayment experience of the fund's mortgage-backed
bonds and will also buy and sell securities to adjust the fund's average
portfolio duration, yield curve and sector and prepayment exposure, as
appropriate.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. Because the fund
invests significantly in mortgage-backed securities, it also is subject to
prepayment risk. When interest rates fall, the underlying mortgages may be paid
earlier than expected and the fund may have to reinvest these prepayments at
lower interest rates. Mortgage prepayments tend to occur more slowly than
expected when interest rates rise, which may extend the duration of
mortgage-backed securities and make their value more volatile. The fund also is
subject to credit risk, which is the risk that issuers may fail, or become less
able, to make principal or interest payments when due.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Interest Rate Risk
- - Prepayment Risk
- - Leverage Risk
- - Credit Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 6
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Government Securities Fixed Income Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C>
1996 4.26%
1997 9.04%
1998 6.42%
Percentages
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- 0.86%
Best quarter during calendar years shown: 2nd quarter, 1997 -- 3.50%
Worst quarter during calendar years shown: 1st quarter, 1996 -- (1.33)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MORTGAGE-BACKED
(INCEPTION DATE) (8/24/95) SECURITIES INDEX
- ---------------- --------- ----------------
<S> <C> <C>
One Year.................................................... 4.84% 6.95%
Life of Fund................................................ 5.76% 7.83%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 7
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Government Securities Fixed Income Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.50%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.43%
----
Total Annual Fund Operating Expenses........................ 0.93%+
====
Expense Reimbursements**.................................... 0.06%
----
Net Expenses**.............................................. 0.87%+
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
+ Includes 0.02% of interest expense related to reverse repurchase agreements
during the year ended July 31, 1999.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$240 $752 $1,290 $2,762
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 8
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Intermediate Fixed Income Investments
PACE Intermediate Fixed Income Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Current income, consistent with reasonable stability of principal.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests in bonds of varying maturities, but normally limits its overall
portfolio "duration" to between two and four and one-half years. "Duration" is a
measure of the fund's exposure to interest rate risk. A longer duration means
that changes in market interest rates are likely to have a larger effect on the
value of the assets in a portfolio.
The fund invests primarily in U.S. and foreign government bonds, U.S. and
foreign corporate bonds and bonds that are backed by mortgages or other assets.
The fund limits its investments to investment grade bonds. The fund also may
invest in preferred stocks.
The fund's investments in securities of foreign issuers may include, to a
limited extent, securities that are denominated in foreign currencies of
developed countries. The fund may (but is not required to) use forward currency
contracts, options, futures and other derivatives as part of its investment
strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Pacific Income Advisers, Inc. ("PIA") to serve as the fund's investment adviser.
PIA seeks to anticipate yield curve shifts and actively rotates the fund's
investments among different fixed income sectors based on its assessment of the
risks and rewards of each sector. PIA uses a proprietary risk-adjustment model
to identify bonds for purchase that it believes are undervalued on a
risk-adjusted basis. When a bond held in the portfolio returns to its fair value
(as established by the risk-adjustment model), it is sold and replaced with
another undervalued security. PIA monitors changes in the prepayment
expectations of the fund's mortgage-backed securities. PIA also buys and sells
securities to adjust the fund's average portfolio duration as appropriate.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. The fund also is
subject to credit risk, which is the risk that issuers may fail, or become less
able, to make principal or interest payments when due. Because the fund may
invest significantly in mortgage-backed securities, it also can be subject to
prepayment risk. When interest rates fall, the underlying mortgages may be paid
earlier than expected and the fund may have to reinvest these prepayments at
lower interest rates. Mortgage prepayments tend to occur more slowly than
expected when interest rates rise, which may extend the duration of
mortgage-backed securities and make their value more volatile. Because the fund
is non-diversified, it can invest more of its assets in a single issuer than a
diversified fund can. As a result, changes in the market value of a single
issuer can have a greater effect on the fund's performance and share price than
if the fund held a smaller position.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Interest Rate Risk
- - Credit Risk
- - Prepayment Risk
- - Non-Diversified Status Risk
- - Foreign Securities Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 9
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Intermediate Fixed Income Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 3.14%
1997 7.45%
1998 7.36%
Percentages
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- (0.02)%
Best quarter during calendar years shown: 3rd quarter, 1998 -- 4.17%
Worst quarter during calendar years shown: 1st quarter, 1996 -- (1.13)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN BROTHERS
INTERMEDIATE-TERM
GOVERNMENT/CORPORATE
(INCEPTION DATE) (8/24/95) INDEX
- ---------------- --------- --------------------
<S> <C> <C>
One Year................................................... 5.76% 8.44%
Life of Fund............................................... 4.95% 7.41%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 10
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Intermediate Fixed Income Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund
assets)
Management Fees............................................. 0.40%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.40%
----
Total Annual Fund Operating Expenses........................ 0.80%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- -------- -------- --------
<S> <C> <C> <C>
$233 $718 $1,230 $2,636
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 11
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Strategic Fixed Income Investments
PACE Strategic Fixed Income Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Total return consisting of income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests in bonds of varying maturities, but normally limits its
portfolio "duration" to between three and eight years. "Duration" is a measure
of the fund's exposure to interest rate risk. A longer duration means that
changes in market interest rates are likely to have a larger effect on the value
of the assets in a portfolio.
The fund invests primarily in investment grade bonds of governmental and private
issuers in the United States and foreign countries, including bonds that are
backed by mortgages or other assets, and in bonds that are convertible into
common stock. The fund's investments in securities of foreign issuers may
include, to a limited extent, securities that are denominated in foreign
currencies.
The fund also invests, to a limited extent, in bonds that are below investment
grade. Securities rated below investment grade are commonly known as "junk
bonds." The fund may invest in when-issued or delayed delivery bonds to increase
its return, giving rise to a form of leverage. The fund may (but is not required
to) use forward currency contracts, options, futures and other derivatives as
part of its investment strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Pacific Investment Management Company ("PIMCO") to serve as the fund's
investment adviser. PIMCO seeks to invest the fund's assets in those areas of
the bond market that it considers undervalued, based on such factors as quality,
sector, coupon and maturity. PIMCO establishes duration targets for the fund's
portfolio based on its expectations for changes in interest rates and then
positions the fund to take advantage of yield curve shifts. PIMCO decides to buy
or sell specific bonds based on an analysis of their values relative to other
similar bonds. PIMCO monitors the prepayment experience of the fund's
mortgage-backed bonds and will also buy and sell securities to adjust the fund's
average portfolio duration, yield curve and sector and prepayment exposure, as
appropriate.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. Because the fund
invests significantly in mortgage-backed securities, it also is subject to
prepayment risk. When interest rates fall, the underlying mortgages may be paid
earlier than expected and the fund may have to reinvest these prepayments at
lower interest rates. Mortgage prepayments tend to occur more slowly than
expected when interest rates rise, which may extend the duration of
mortgage-backed securities and make their value more volatile. The fund also is
subject to credit risk, which is the risk that issuers may fail, or become less
able, to make principal or interest payments when due. This risk is greater for
bonds that are rated below investment grade. The value of the fund's foreign
investments may fall due to adverse political, social and economic developments
abroad.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Interest Rate Risk
- - Prepayment Risk
- - Credit Risk
- - Foreign Securities Risk
- - Leverage Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 12
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Strategic Fixed Income Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 3.22%
1997 10.19%
1998 8.22%
Percentages
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- (2.48)%
Best quarter during calendar years shown: 3rd quarter, 1998 -- 4.52%
Worst quarter during calendar years shown: 1st quarter, 1996 -- (2.21)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT/CORPORATE
(INCEPTION DATE) (8/24/95) INDEX
- ---------------- --------- --------------------
<S> <C> <C>
One Year................................................... 6.61% 9.47%
Life of Fund............................................... 7.88% 8.37%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 13
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Strategic Fixed Income Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund
assets)
Management Fees............................................. 0.50%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.42%
----
Total Annual Fund Operating Expenses........................ 0.92%+
====
Expense Reimbursements**.................................... 0.04%
----
Net Expenses**.............................................. 0.88%+
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
+ Includes 0.03% of interest expense related to reverse repurchase agreements
for the year ended July 31, 1999.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$241 $751 $1,287 $2,753
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 14
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Municipal Fixed Income Investments
PACE Municipal Fixed Income Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
High current income exempt from federal income tax.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests substantially all of its assets in investment grade municipal
bonds of varying maturities. These are bonds and similar securities that are
exempt from federal income tax. Normally, the fund limits its investments in
municipal bonds that are subject to the federal alternative minimum tax (AMT) so
that not more than 25% of its interest income will be subject to the AMT. The
fund invests in municipal bonds that are subject to the AMT when its investment
adviser believes that they offer attractive yields relative to municipal bonds
that have similar investment characteristics but are not subject to the AMT.
The fund normally limits its portfolio "duration" to between three and seven
years. "Duration" is a measure of the fund's exposure to interest rate risk. A
longer duration means that changes in market interest rates are likely to have a
larger effect on the value of the assets in a portfolio. The fund may invest up
to 50% of its total assets in municipal bonds that are secured by revenues from
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.
The fund limits its investments in municipal bonds with the lowest investment
grade rating to 15% of its total assets at the time the bonds are purchased. The
fund may (but is not required to) use options, futures and other derivatives as
part of its investment strategy or to help manage its portfolio duration.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Deutsche Asset Management, Inc. ("DAM") (formerly known as Morgan Grenfell
Capital Management, Incorporated) to serve as the fund's investment adviser. DAM
employs an issue-oriented relative value municipal bond investment discipline in
deciding which bonds to buy or sell for the fund, rather than using more
traditional techniques such as forecasting interest rates or anticipating credit
rating upgrades. DAM believes that the municipal market is highly inefficient
and fragmented, offering opportunities to purchase high-quality bonds at
attractive prices. DAM emphasizes individual bond issues with intermediate
maturities, including U.S. government or letter of credit-based securities.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. The fund is also
subject to credit risk, which is the risk that the issuers of municipal bonds
may not make principal or interest payments when due. The fund's ability to
invest more than 25% of its total assets in municipal housing obligations means
that the fund will be subject to greater risk than a fund with less concentrated
investments. The market for municipal bonds can be adversely affected by
legislative proposals to eliminate or limit the tax-exempt status of municipal
bond interest or the fund's dividends.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Interest Rate Risk
- - Credit Risk
- - Related Securities Concentration Risk
- - Political Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 15
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Municipal Fixed Income Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 4.86%
1997 7.01%
1998 5.39%
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- (1.39)%
Best quarter during calendar years shown: 3rd quarter, 1998 -- 2.52%
Worst quarter during calendar years shown: 1st quarter, 1996 -- (1.13)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MUNICIPAL FIVE-YEAR
(INCEPTION DATE) (8/24/95) INDEX
- ---------------- --------- -------------------
<S> <C> <C>
One Year.................................................... 3.82% 5.84%
Life of Fund................................................ 5.08% 5.64%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 16
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Municipal Fixed Income Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.40%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.49%
----
Total Annual Fund Operating Expenses........................ 0.89%
====
Expense Reimbursements**.................................... 0.04%
----
Net Expenses**.............................................. 0.85%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate .
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$238 $742 $1,272 $2,723
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 17
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Global Fixed Income Investments
PACE Global Fixed Income Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
High total return.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in high-grade bonds of governmental and private
issuers in the United States and developed foreign countries. These high-grade
bonds are rated in one of the three highest rating categories or are of
comparable quality. The fund invests, to a limited extent, in lower rated bonds
of governmental and private issuers in emerging markets, including bonds that
are rated below investment grade.
The fund invests in bonds of varying maturities, but normally limits its
portfolio "duration" to between four and eight years. "Duration" is a measure of
the fund's exposure to interest rate risk. A longer duration means that changes
in market interest rates are likely to have a larger effect on the value of the
assets in a portfolio.
The fund's assets are normally invested in part in bonds of U.S. government and
private issuers and the balance is allocated among bonds of governmental and
private issuers in various foreign countries. The fund may (but is not required
to) use forward currency contracts, options, futures and other derivatives as
part of its investment strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected Rogge
Global Partners plc to serve as the fund's investment adviser. Rogge Global
Partners seeks to invest the fund's assets in bonds of issuers in financially
healthy countries because it believes that these investments produce the highest
bond and currency returns over time. In deciding which bonds to buy or sell for
the fund, Rogge Global Partners uses a top-down analysis to find value across
countries and to forecast interest and currency-exchange rates over a one year
horizon. Rogge Global Partners also uses an optimization model to help determine
country, currency and duration positions for the fund.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. The value of the
fund's foreign investments also may fall due to adverse political, social and
economic developments abroad. The fund also is subject to credit risk, which is
the risk that issuers may fail, or become less able to make principal or
interest payments when due. This risk is greater for bonds rated below
investment grade. Because the fund is non-diversified, it can invest more of its
assets in a single issuer than a diversified fund can. As a result, changes in
the market value of a single issuer can have a greater effect on the fund's
performance and share price than if the fund held a smaller position.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Interest Rate Risk
- - Foreign Securities Risk
- - Credit Risk
- - Emerging Markets Risk
- - Sovereign Risk
- - Non-Diversified Status Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 18
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Global Fixed Income Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 4.59%
1997 1.00%
1998 18.60%
Percentages
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- (6.68)%
Best quarter during calendar years shown: 3rd quarter, 1998 -- 8.60%
Worst quarter during calendar years shown: 1st quarter, 1997 -- (3.92)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
SALOMON SMITH BARNEY
WORLD GOVERNMENT
(INCEPTION DATE) (8/24/95) BOND INDEX
- ---------------- --------- --------------------
<S> <C> <C>
One Year................................................... 16.83% 15.31%
Life of Fund............................................... 7.32% 7.19%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 19
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Global Fixed Income Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.60%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.57%
----
Total Annual Fund Operating Expenses........................ 1.17%
====
Expense Reimbursements**.................................... 0.22%
----
Net Expenses**.............................................. 0.95%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$248 $809 $1,395 $2,987
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 20
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Value Equity Investments
PACE Large Company Value Equity Investments
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVES:
Capital appreciation and dividend income.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of U.S. companies that are believed to be
undervalued and that have total market capitalizations of $4.0 billion or
greater at the time of purchase.
The fund may invest, to a limited extent, in other securities, including stocks
of companies with smaller total market capitalizations and convertible bonds
that are rated below investment grade. The fund may invest up to 5% of its total
assets in U.S. dollar-denominated foreign securities. The fund also may (but is
not required to) use options, futures and other derivatives as part of its
investment strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Brinson Partners, Inc. to serve as the fund's investment adviser. Brinson
Partners looks for undervalued stocks within the context of its macroeconomic
and market outlooks. Its research focuses on several levels of analysis,
including understanding wealth shifts that occur within the equity market and
individual company research. It conducts fundamental research on a universe of
approximately 700 stocks. Brinson Partners quantifies its expectations of a
company's ability to generate profit and grow its business into the future and
discounts to the present all future cash flows to the fund from an investment to
calculate a present or intrinsic value. This value estimate is generated by a
proprietary valuation model and is compared to market price and ranked against
other stocks. Brinson Partners uses these rankings, together with its own
investment judgment, to buy and sell stocks for the fund.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Foreign Securities Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 21
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Value Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 25.11%
1997 24.75%
1998 18.36%
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- (5.50)%
Best quarter during calendar years shown: 4th quarter, 1998 -- 16.26%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (10.44)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
RUSSELL 1000
(INCEPTION DATE) (8/24/95) VALUE INDEX
- ---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 16.59% 15.63%
Life of Fund................................................ 22.22% 24.95%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 22
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Value Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.60%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.36%
----
Total Annual Fund Operating Expenses........................ 0.96%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$249 $767 $1,311 $2,796
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 23
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Growth Equity Investments
PACE Large Company Growth Equity Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of companies that are believed to have
faster rates of earnings growth than the average rate of companies in the
Standard & Poor's 500 Composite Stock Price Index and that have total market
capitalizations of $4.0 billion or greater at the time of purchase. Dividend
income is an incidental consideration in the investment adviser's selection of
stocks for the fund.
The fund may invest, to a limited extent, in other securities, including
securities convertible into stocks and stocks of companies with smaller total
market capitalizations. The fund may invest up to 5% of its total assets in U.S.
dollar-denominated foreign securities. The fund also may (but is not required
to) use options, futures and other derivatives as part of its investment
strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Alliance Capital Management L.P. to serve as the fund's investment adviser.
Alliance Capital Management follows its "disciplined growth" strategy in
managing the fund's investments and seeks to identify the best combinations of
earnings growth and reasonable valuation in selecting stocks for the fund.
Alliance Capital Management ranks each stock in its investment universe based on
its analysts' assessments and fundamental research that includes six measures of
earnings growth and valuation. The fund normally invests in stocks that rank in
the top 30% of this research universe and generally sells stocks that rank in
the bottom half.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Foreign Securities Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN THE CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING SUCH REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 24
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Growth Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true for the period prior to
November 10, 1997, which is the date on which Alliance Capital Management
assumed day-to-day management of the fund's assets. Prior to that date, another
investment manager was responsible for managing the fund's assets.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 21.24%
1997 24.79%
1998 40.05%
CALENDAR YEAR
</TABLE>
Total Return January 1 to September 30, 1999 -- 5.88%
Best quarter during calendar years shown: 4th quarter, 1998 -- 31.80%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (14.42)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
RUSSELL 1000
(INCEPTION DATE) (8/24/95) GROWTH INDEX
- ---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 37.96% 38.70%
Life of Fund................................................ 25.58% 30.64%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 25
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Large Company Growth Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.60%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.37%
----
Total Annual Fund Operating Expenses........................ 0.97%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$250 $770 $1,316 $2,806
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 26
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Value Equity Investments
PACE Small/Medium Company Value Equity Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of companies that are believed to be
undervalued or overlooked in the market place and that have total market
capitalizations of less than $4.0 billion at the time of purchase. These stocks
also generally have price-to-earnings (P/E) ratios below the market average. The
fund invests only in stocks that are traded on major exchanges or the over-
the-counter market.
The fund may invest, to a limited extent, in stocks of companies with larger
total market capitalizations and other securities, including securities
convertible into stocks. The fund also may (but is not required to) use options,
futures and other derivatives as part of its investment strategy or to help
manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected Ariel
Capital Management, Inc. and Brandywine Asset Management, Inc. to serve as the
fund's investment advisers. Mitchell Hutchins allocates the fund's assets
between the two investment advisers.
Ariel Capital Management, Inc. invests its share of the fund's assets primarily
in common stocks of medium size companies that it believes are misunderstood or
undervalued. It seeks to identify companies in consistent industries with
distinct market niches and excellent management teams. It defines value stocks
as those that have a low P/E ratio based on forward earnings and that trade at a
significant discount to the private market value that Ariel calculates for each
stock. Ariel generally sells stocks that cease to meet these criteria or that
are at risk for fundamental deterioration.
Brandywine Asset Management, Inc. invests its share of the fund's assets
primarily in small companies by starting with quantitative analysis that focuses
on stocks with low P/E ratios. Brandywine defines a low P/E ratio (based on
positive trailing 12-month operating earnings) as one that places a company
among the lowest 25% based on P/E ratios for all exchange-traded and
over-the-counter stocks with positive earnings and a capitalization greater than
$10 million. Brandywine then uses fundamental analysis to exclude stocks based
on earnings adjustments that raise P/E above the lowest quartile, pre-announced
earnings changes that are expected to raise P/E when formally announced, strong
recent price gains and severe or sudden fundamental deterioration. Brandywine
also uses this analysis technique in determining when to sell stocks.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. This risk is greater for the common stocks of smaller
companies because they are more vulnerable to adverse business or economic
developments and may have more limited resources.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Limited Capitalization Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 27
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Value Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true for the period prior to
October 4, 1999, which is the date on which Ariel Capital Management, Inc.
assumed day-to-day management of a portion of the fund's assets. Prior to that
date, Brandywine Asset Management, Inc. was responsible for managing all the
fund's assets.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 22.35%
1997 37.26%
1998 -9.34%
CALENDAR YEAR
</TABLE>
Total Return January 1 to September 30, 1999 -- (1.77)%
Best quarter during calendar years shown: 2nd quarter, 1997 -- 15.64%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (20.00)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
RUSSELL 2500
(INCEPTION DATE) (8/24/95) VALUE INDEX
- ---------------- --------- ------------
<S> <C> <C>
One Year.................................................... (10.69)% (1.92)%
Life of Fund................................................ 11.62% 16.88%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 28
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Value Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.60%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.41%
----
Total Annual Fund Operating Expenses........................ 1.01%
====
Expense Reimbursements**.................................... 0.01%
----
Net Expenses**.............................................. 1.00%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$253 $781 $1,335 $2,845
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 29
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Growth Equity Investments
PACE Small/Medium Company Growth Equity Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of "emerging growth" companies that are
believed to have potential for high future earnings growth relative to the
overall market and that have total market capitalizations of less than $4.0
billion at the time of purchase. Dividend income is an incidental consideration
in the investment adviser's selection of stocks for the fund.
The fund may invest, to a limited extent, in stocks of companies with larger
total market capitalizations and other securities, including securities
convertible into stocks. The fund may invest up to 5% of its total assets in
U.S. dollar-denominated foreign securities. The fund also may (but is not
required to) use options, futures and other derivatives as part of its
investment strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Delaware Management Company, Inc. to serve as the fund's investment adviser. In
deciding which stocks to buy or sell for the fund, Delaware Management Company
employs a bottom-up, fundamental analysis to identify companies that have
substantially above average earnings growth because of management changes, new
products, growth of established products or structural changes in the economy.
Delaware Management Company also considers a company's management team quality
and the strength of its finances and internal controls in selecting stocks for
the fund. Although Delaware Management Company follows companies in a full range
of market sectors, it may focus on a limited number of attractive industries.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. This risk is greater for the common stocks of smaller
companies because they are more vulnerable to adverse business or economic
developments and may have more limited resources.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Limited Capitalization Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 30
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Growth Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true for the period prior to
December 17, 1996, which is the date on which Delaware Management Company
assumed day-to-day management of the fund's assets. Prior to that date, another
investment manager was responsible for managing the fund's assets.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 7.36%
1997 21.73%
1998 14.86%
Percentages
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- 29.39%
Best quarter during calendar years shown: 4th quarter, 1998 -- 24.38%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (15.44)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
RUSSELL 2500
(INCEPTION DATE) (8/24/95) GROWTH INDEX
- ---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 13.15% 3.10%
Life of Fund................................................ 10.72% 10.99%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 31
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Small/Medium Company Growth Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.60%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.41%
----
Total Annual Fund Operating Expenses........................ 1.01%
====
Expense Reimbursements**.................................... 0.01%
----
Net Expenses**.............................................. 1.00%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$253 $781 $1,335 $2,845
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 32
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Equity Investments
PACE International Equity Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of companies that are domiciled in
developed foreign countries and principally traded in Japanese, European,
Pacific and Australian securities markets or traded in U.S. securities markets.
The fund may invest, to a limited extent, in stocks of companies in emerging
markets, including Asia, Latin America and other regions where markets may not
yet fully reflect the potential of the developing economy. The fund may also
invest, to a limited extent, in securities of other investment companies that
invest in foreign markets and securities convertible into stocks, including
convertible bonds that are below investment grade. The fund may (but is not
required to) use forward currency contracts, options, futures and other
derivatives as part of its investment strategy or to help manage portfolio
risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected Martin
Currie, Inc. to serve as the fund's investment adviser. Martin Currie, Inc.
looks for companies that exhibit strong fundamentals and attractive valuations
based on estimates of future earnings. In making country allocation decisions,
Martin Currie, Inc. considers such factors as economic and political stability,
breadth and liquidity of the market, the nature of local investors, the currency
outlook, valuation and the settlement system.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. The value of the fund's foreign investments may fall due to
adverse political, social and economic developments abroad. This risk is greater
for the fund's investments in emerging market issuers.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Foreign Securities Risk
- - Emerging Markets Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THESE REPORTS).
- --------------------------------------------------------------------------------
Prospectus Page 33
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 10.30%
1997 9.46%
1998 16.34%
Calendar Year
</TABLE>
Total Return January 1 to September 30, 1999 -- 9.06%
Best quarter during calendar years shown: 4th quarter, 1998 -- 19.70%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (14.64)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
MSCI EUROPE,
ASIA AND
(INCEPTION DATE) (8/24/95) FAR EAST INDEX
- ---------------- --------- --------------
<S> <C> <C>
One Year.................................................... 14.60% 20.00%
Life of Fund................................................ 10.14% 10.00%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 34
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.70%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.52%
----
Total Annual Fund Operating Expenses........................ 1.22%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$275 $844 $1,440 $3,051
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 35
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Emerging Markets Equity Investments
PACE International Emerging Markets Equity Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISK
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests primarily in stocks of companies domiciled in emerging market
countries. The fund defines emerging market countries as countries that are not
included in the MSCI Index of major world economies. The fund may not always
diversify its investments on a geographic basis among emerging market countries.
The fund may invest, to a limited extent, in bonds, including up to 10% of its
total assets in bonds that are below investment grade. Securities rated below
investment grade are commonly known as "junk bonds." The fund may also invest,
to a limited extent, in securities of other investment companies that invest in
emerging markets. The fund may (but is not required to) use forward currency
contracts, options, futures and other derivatives as part of its investment
strategy or to help manage portfolio risks.
Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Schroder Investment Management North America Inc. to serve as the fund's
investment adviser. Schroder Investment Management's network of regional
specialists and analysts in 24 countries supports an intensive program of
proprietary emerging markets research. In deciding which securities to buy or
sell for the fund, Schroder Investment Management uses its research to identify
attractively valued companies in emerging markets that it believes can leverage
off the growth opportunities in these faster growing economies.
PRINCIPAL RISKS:
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. The value of the fund's foreign investments may fall due to
adverse political, social and economic developments abroad. These risks are
greater for the fund's investments in emerging market issuers. To the extent the
fund invests a significant portion of its assets in one geographic area, it will
be more susceptible to factors adversely affecting that area.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Equity Risk
- - Foreign Securities Risk
- - Emerging Markets Risk
- - Geographic Concentration Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN THE CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING SUCH REPORTS)
- --------------------------------------------------------------------------------
Prospectus Page 36
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Emerging Markets Equity Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE Program fee; if it did, the total
returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any fees or expenses. The table does reflect the annual PACE
Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 8.52%
1997 -4.72%
1998 -24.43%
PERCENTAGES
CALENDAR YEAR
</TABLE>
Total Return January 1 to September 30, 1999 -- 27.29%
Best quarter during calendar years shown: 4th quarter, 1998 -- 16.34%
Worst quarter during calendar years shown: 3rd quarter, 1998 -- (21.52)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
MSCI EMF
(INCEPTION DATE) (8/24/95) INDEX
- ---------------- --------- --------
<S> <C> <C>
One Year.................................................... (25.56)% (25.34)%
Life of Fund................................................ (8.98)% (10.66)%
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 37
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE International Emerging Markets Equity Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE Program (as
a % of average value of shares held on the last calendar
day of the previous quarter).............................. 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.90%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.89%
----
Total Annual Fund Operating Expenses........................ 1.79%
====
Expense Reimbursements**.................................... 0.29%
----
Net Expenses**.............................................. 1.50%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE Program and also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same, except for the one year period when the fund's
expenses are lower due to its reimbursement agreement with Mitchell Hutchins.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$303 $986 $1,692 $3,566
</TABLE>
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PaineWebber PACE Select Advisors Trust
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
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PRINCIPAL RISKS
The main risks of investing in the funds are described below. Not all of these
risks apply to each fund. You can find a list of the main risks that apply to a
particular fund by looking under the "Investment Objective, Strategies and
Risks" heading for that fund.
Other risks of investing in a fund, along with further details about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a bond will not make
principal or interest payments when they are due. Even if an issuer does not
default on a payment, a bond's value may decline if the market believes that the
issuer has become less able, or less willing, to make payments on time. Even
high quality bonds are subject to some credit risk. However, credit risk is
greater for lower quality bonds. Bonds that are not investment grade involve
high credit risk and are considered speculative. Low quality bonds may fluctuate
in value more than higher quality bonds and may be more difficult to sell during
market downturns at the time and price a fund desires.
DERIVATIVES RISK. The value of "derivatives" -- so-called because their value
"derives" from the value of an underlying asset, reference rate or index -- may
rise or fall more rapidly than other investments. For some derivatives, it is
possible for a fund to lose more than the amount it invested in the derivative.
Options, futures contracts and forward currency contracts are examples of
derivatives. If a fund uses derivatives to adjust or "hedge" the overall risk of
its portfolio, it is possible that the hedge will not succeed. This may happen
for various reasons, including unexpected changes in the value of the
derivatives that are not matched by opposite changes in the value of the rest of
the fund's portfolio.
EMERGING MARKETS RISK. Securities of issuers located in emerging market
countries are subject to all of the risks of other foreign securities (see
below). However, the level of those risks often is higher due to the fact that
political, legal and economic systems in emerging market countries may be less
fully developed and less stable than those in developed countries. Emerging
market securities also may be subject to additional risks, such as lower
liquidity and larger changes in value.
EQUITY RISK. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. A fund
may lose a substantial part, or even all, of its investment in a company's
stock.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices. When a fund's
securities are denominated in foreign currencies or it holds foreign currencies,
the fund is also subject to the risk that the value of the foreign currency will
fall in relation to the U.S. dollar.
GEOGRAPHIC CONCENTRATION. PACE International Emerging Markets Equity
Investments will not necessarily seek to diversify its investments on a
geographic basis within the emerging markets category. To the extent the fund
concentrates its investments in issuers located in one country or area, it is
more susceptible to factors adversely affecting that country or area.
INTEREST RATE RISK. The value of bonds can be expected to fall when interest
rates rise and to rise when interest rates fall. Interest rate risk is the risk
that interest rates will rise, so that the value of a fund's investments in
bonds will fall. Because interest rate risk is the primary risk presented by
U.S. government bonds and other very high quality bonds, changes in interest
rates may have a greater effect on the value of those bonds than on lower
quality bonds.
LEVERAGE RISK. Leverage involves increasing the total assets in which a fund
can invest beyond the level of its net assets. Because leverage increases the
amount of a fund's assets, it can magnify the effect on the fund of changes in
market values. As a result, while leverage can increase a fund's income and
potential for gain, it also can increase expenses and the risk of loss. PACE
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PaineWebber PACE Select Advisors Trust
Government Securities Fixed Income Investments and PACE Strategic Fixed Income
Investments, which may use leverage by investing in when-issued and delayed
delivery bonds, attempt to limit the potential magnifying effect of the leverage
by managing their portfolio duration.
LIMITED CAPITALIZATION RISK. Securities of mid and small capitalization
companies generally involve greater risk than securities of larger
capitalization companies because they may be more vulnerable to adverse business
or economic developments. Mid and small capitalization companies also may have
limited product lines, markets or financial resources, and they may be dependent
on a relatively small management group. Securities of these companies may be
less liquid and more volatile than securities of larger capitalization companies
or the market averages in general. In addition, small capitalization companies
may not be well known to the investing public, may not have institutional
ownership and may have only cyclical, static or moderate growth prospects. In
general, all of these risks are greater than for larger capitalization
companies.
NON-DIVERSIFIED STATUS RISK. A non-diversified fund is not subject to certain
limitations on its ability to invest more than 5% of its total assets in
securities of a single issuer. When a fund holds a large position in the
securities of one issuer, changes in the financial condition or in the market's
assessment of that issuer may cause larger changes in the fund's total return
and in the price of its shares than if the fund held only a smaller position.
POLITICAL RISK. The municipal bond market can be significantly affected by
political changes, including legislation or proposals at either the state or the
federal level to eliminate or limit the tax-exempt status of municipal bond
interest or the tax-exempt status of a municipal bond fund's dividends.
Similarly, reductions in tax rates may make municipal bonds less attractive in
comparison to taxable bonds. Legislatures also may fail to appropriate funds
needed to pay municipal bond obligations. These events could cause the value of
the municipal bonds held by PACE Municipal Fixed Income Investments to fall and
might adversely affect the tax-exempt status of the fund's investments or of the
dividends that the fund pays. During periods of uncertainty, the prices of
municipal securities can become volatile.
PREPAYMENT RISK. Payments on bonds that are backed by mortgage loans or similar
assets may be received earlier or later than expected due to changes in the rate
at which the underlying loans are prepaid. When interest rates fall, borrowers
often prepay the underlying loans sooner than expected. This can reduce a fund's
income because the fund often must reinvest early payments at the prevailing
lower interest rates. Conversely, when interest rates rise, borrowers may prepay
the underlying loans more slowly so that the loans are outstanding for a longer
time. These slower prepayments tend to extend the duration of mortgage-backed
securities and make them more sensitive to interest rate changes. This can cause
the market value of the security to fall because the market may view its
interest rate as too low for a longer term investment.
RELATED SECURITIES CONCENTRATION RISK. PACE Municipal Fixed Income Investments
may invest more than 25% of its total assets in municipal bonds that are issued
by public housing authorities and state and local housing finance authorities.
Economic, business or political developments or changes that affect one
municipal bond in this sector also may affect other municipal bonds in the same
sector. As a result, the fund is subject to greater risk than a fund that does
not follow this practice.
SOVEREIGN RISK. Investments in foreign government bonds involve special risks
because the investors may have limited legal recourse in the event of default.
Political conditions, especially a country's willingness to meet the terms of
its debt obligations, can be of considerable significance.
ADDITIONAL RISKS
YEAR 2000 RISK. The funds could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins, the funds'
investment advisers and the funds' other service providers to recognize the year
2000. While year 2000-related computer problems could have a negative effect on
the funds, Mitchell Hutchins is working to avoid these problems with respect to
its own computer systems and to obtain assurances from service providers that
they are taking similar steps.
Similarly, the companies in which the funds invest and trading systems used by
the funds could be adversely affected by this issue. The ability of a company or
trading system to respond successfully to the issue requires both technological
sophistication and diligence, and there can be no assurance that any steps taken
will be sufficient to avoid an adverse impact on the funds. This risk may be
greater with respect to trading systems in foreign countries and, in particular,
in emerging market countries.
ADDITIONAL INVESTMENT STRATEGIES
CASH RESERVES; DEFENSIVE POSITIONS. PACE Money Market Investments invests
exclusively in money market
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PaineWebber PACE Select Advisors Trust
instruments. Each of the other funds may invest to a limited extent in money
market instruments as a cash reserve for liquidity or other purposes. PACE
Municipal Fixed Income Investments may invest to a limited extent in taxable
money market instruments for liquidity purposes when suitable municipal money
market instruments are not available.
The funds are intended as vehicles to implement long-term asset allocation
strategies, and each fund is normally fully invested in accordance with its
investment objective and policies. As a result, funds may take a temporary
defensive position less frequently than would be the case for other similar
mutual funds. However, with the concurrence of Mitchell Hutchins Asset
Management Inc., a fund may take a defensive position that is different from its
normal investment strategy to protect itself from adverse market conditions.
This means that a fund may temporarily invest a larger-than-normal part, or even
all, of its assets in cash or money market instruments, including (for funds
that are authorized to invest outside the United States) money market
instruments that are denominated in foreign currencies. Because these
investments provide relatively low income, a defensive position may not be
consistent with achieving a fund's investment objective.
In addition, the funds listed below may make the following temporary investments
for defensive purposes:
- - PACE Municipal Fixed Income Investments may invest without limit in certain
taxable securities.
- - PACE Global Fixed Income Investments may invest in securities of only one
country, including the United States.
- - PACE International Equity Investments may invest without limit in bonds that
are traded in the United States and in foreign markets.
PORTFOLIO TURNOVER. Each fund (other than PACE Money Market Investments) may
engage in frequent trading to achieve its investment objective. Frequent trading
can result in portfolio turnover of 100% or more (high portfolio turnover).
Frequent trading may increase a fund's capital gains that are realized for tax
purposes in any given year. This may increase the fund's taxable dividends in
that year. Frequent trading also may increase a fund's realized capital gains
that are considered "short-term" for tax purposes. Shareholders will pay higher
taxes on dividends that represent net short-term capital gains than they would
pay on dividends that represent net long-term capital gains. Frequent trading
also may result in higher fund expenses due to transaction costs.
The funds do not restrict the frequency of trading to limit expenses or the tax
effect that the fund's dividends may have on shareholders.
PACE MONEY MARKET INVESTMENTS. Like all money market funds, PACE Money Market
Investments is subject to maturity, quality and diversification requirements
designed to help it maintain a stable price of $1.00 per share. Mitchell
Hutchins may use a number of professional money management techniques to respond
to changing economic and money market conditions and to shifts in fiscal and
monetary policy. These techniques include varying the fund's composition and
weighted average maturity based on its assessment of the relative values of
various money market instruments and future interest rate patterns. Mitchell
Hutchins also may buy or sell money market instruments to take advantage of
yield differences.
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Prospectus Page 41
<PAGE>
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PaineWebber PACE Select Advisors Trust
INVESTING IN THE FUNDS
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BUYING SHARES
If you are a participant in the PaineWebber PACE-SM- Program, you may buy shares
of the funds through a managed account maintained with PaineWebber Incorporated.
You must make payment for fund shares by check made payable to PaineWebber. Your
payment is due no later than the first business day after the order is placed.
You may not place an order until you have completed the Investor Profile
Questionnaire for the PACE Program (described below), reviewed the resulting
analysis, made the asset allocation decision and executed the necessary PACE
Program documentation. Your Financial Advisor is responsible for promptly
forwarding your order to PaineWebber's headquarters.
The Trust and PaineWebber reserve the right to reject a purchase order or
suspend the offering of fund shares.
The minimum initial aggregate investment in the Trust is $10,000. Any subsequent
investment in the Trust must be at least $500. The Trust may vary these
minimums.
THE PAINEWEBBER PACE-SM- PROGRAM
The PaineWebber PACE-SM- Program is an investment advisory service pursuant to
which PaineWebber Incorporated provides you with personalized investment
allocation recommendations. PaineWebber does not have any investment discretion
over your PACE Program account. You will make all the investment decisions.
Under the PACE Program, your Financial Advisor assists you in
- - identifying your financial characteristics, including your risk tolerance and
investment objectives; and
- - completing an Investor Profile Questionnaire, which you may update from time
to time with your Financial Advisor's assistance.
PaineWebber uses an investment profile evaluation and asset allocation
methodology to translate this information into a suggested allocation of your
assets among different funds. Your Financial Advisor presents the recommended
allocation to you initially and reviews the PACE Program account with you at
least annually. Your Financial Advisor also may, if you so request, review with
you the monthly account statements and other information, such as quarterly
performance data. Your Financial Advisor also monitors any changes in your
financial characteristics that you identify through a revised Investor Profile
Questionnaire and communicates these changes to PaineWebber for reevaluation of
your investment profile.
You may direct your PaineWebber Financial Advisor to automatically rebalance
your PACE Program account on a quarterly basis to assure that any deviation from
the designated allocation among the funds does not exceed a specified threshold.
PACE PROGRAM FEE
For the services provided to you under the PACE Program, you will pay
PaineWebber a quarterly Program Fee at an annual rate of up to 1.50% of the
value of the shares of the funds held in your account under the PACE Program.
This quarterly fee is generally charged to your PaineWebber account. The Program
Fee may be reduced for
- - certain Individual Retirement Accounts,
- - retirement plans for self-employed individuals and
- - employee benefit plans that are subject to the Employee Retirement Security
Act of 1974
For these participants, PaineWebber may provide different services than those
described above and may charge different fees. These participants also may make
arrangements to pay the quarterly fee separately. In addition, Trustees of the
Trust, employees of Mitchell Hutchins and PaineWebber and their family members
who maintain an "employee-related" account at PaineWebber, and trustees or
directors of other PaineWebber mutual funds may participate in the PACE Program
at a reduced fee or for no fee.
Program Fees also may be subject to negotiation and may differ based upon the
type of account, the size of the account, the amount of PACE Program assets in
the account and the number or range of supplementary advisory services to be
provided by Financial Advisors, among other factors.
Financial Advisors receive a portion of the PACE Program Fee for the services
they provide to participants.
Investors who are fiduciaries for a retirement or employee benefit plan should
consider, in a prudent manner, the relationship of the fees to be paid by the
plan and the level of services to be provided by PaineWebber.
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PaineWebber PACE Select Advisors Trust
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.
SELLING SHARES
You can sell your fund shares at any time. You may sell your shares by
contacting your Financial Advisor in person or by telephone or mail. Your
Financial Advisor is responsible for promptly forwarding your request to
PaineWebber's headquarters. After it receives and accepts your request,
PaineWebber repurchases your fund shares. You generally will receive the
proceeds of the sale within the first business day after PaineWebber receives
the order.
PaineWebber reserves the right not to repurchase your shares. In that case,
PaineWebber forwards your request to sell your shares to the funds' transfer
agent. The transfer agent will sell your shares after you provide it with the
following information in writing:
- - Your name and address;
- - The fund's name;
- - Your account number;
- - The dollar amount or number of shares you want to sell; and
- - A guarantee of each registered owner's signature. A signature guarantee may be
obtained from a financial institution, broker, dealer or clearing agency that
is a participant in one of the medallion programs recognized by the Securities
Transfer Agents Association. These are: Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The Trust and the transfer
agent will not accept signature guarantees that are not a part of these
programs.
Sales through the transfer agent may also need to include additional supporting
documents for sales by estates, trusts, guardianships, custodianships,
partnerships and corporations.
It costs the Trust money to maintain shareholder accounts. Therefore, the Trust
reserves the right to repurchase all fund shares in any PACE Program account
that has a net asset value of less than $7,500. If the Trust elects to do this
with your account, it will notify you that you can increase the amount invested
to the account minimum in effect at the time the PACE Program account was
originally opened or more within 30 days. This notice may appear on your account
statement.
If you want to sell shares that you purchased recently, the Trust may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
PRICING AND VALUATION
The price at which you may buy or sell each fund's shares is based on the next
net asset value per share calculated after your order is placed. Each fund
calculates its net asset value on days that the New York Stock Exchange is open
as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern
time). The NYSE normally is not open, and the funds do not price their shares,
on most national holidays and on Good Friday. If trading on the NYSE is halted
for the day before 4:00 p.m., Eastern time, each fund's net asset value per
share will be calculated as of the time trading was halted.
PACE MONEY MARKET INVESTMENTS' net asset value per share is expected to be $1.00
per share, although this value is not guaranteed. PACE Money Market Investments
values its securities at their amortized cost. This method uses a constant
amortization to maturity of the difference between the cost of the instrument to
the fund and the amount due at maturity.
OTHER FUNDS. Each other fund calculates its net asset value based on the
current market value for its portfolio securities. The funds normally obtain
market values for their securities from independent pricing services that use
reported last sales prices, current market quotations or valuations from
computerized "matrix" systems that derive values based on comparable securities.
If a market value is not available from an independent pricing source for a
particular security, that security is valued at a fair value determined by or
under the direction of the Trust's board of trustees. The funds normally use the
amortized cost method to value bonds that will mature in 60 days or less.
Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.
The funds calculate the U.S. dollar value of investments that are denominated in
foreign currencies daily, based on current exchange rates. A fund may own
securities, including some securities that trade primarily in foreign markets,
that trade on weekends or other days on which a fund does not calculate net
asset value. As a result, a fund's net asset value may change on days when you
will not be able to buy or sell fund shares. If a fund concludes that a material
change in the value of a foreign security has occurred after the close of
trading in the principal foreign market but before the close of the NYSE, the
fund may use fair value methods to reflect those changes. This policy is
intended to assure that the fund's net asset value fairly reflects security
values as of the time of pricing.
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PaineWebber PACE Select Advisors Trust
MANAGEMENT
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MANAGER AND INVESTMENT ADVISERS
Mitchell Hutchins Asset Management Inc. is the manager and administrator of each
fund. Mitchell Hutchins is located at 51 West 52nd Street, New York, New York
10019-6114, and is a wholly owned asset management subsidiary of PaineWebber
Incorporated, which is wholly owned by Paine Webber Group Inc., a publicly owned
financial services holding company. On October 31, 1999, Mitchell Hutchins was
adviser or sub-adviser to 33 investment companies with 76 separate funds and
aggregate assets of approximately $48.9 billion.
Mitchell Hutchins provides investment advisory services for PACE Money Market
Investments. Mitchell Hutchins selects investment advisers for the other funds,
subject to approval of the board, and reviews the performance of those
investment advisers.
The funds have received an exemptive order from the SEC to permit the board to
select and replace investment advisers and to amend the sub-advisory contracts
between Mitchell Hutchins and the investment advisers without obtaining
shareholder approval.
ADVISORY FEES
Each fund pays fees to Mitchell Hutchins for administrative and advisory
services. The annual contract rate for administrative services is 0.20% of each
fund's average daily net assets. The annual contract rate for advisory services
varies from 0.15% to 0.90% of a fund's average daily net assets. The following
table shows the combined annual fee rate for administrative and advisory
services for each fund:
<TABLE>
<S> <C>
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%
</TABLE>
During the fiscal year ended July 31, 1999, some of the funds paid Mitchell
Hutchins at the lower effective rate shown below because Mitchell Hutchins
waived a portion of its fees:
<TABLE>
<S> <C>
PACE Money Market Investments.......... 0.00%
PACE Government Securities Fixed Income
Investments.......................... 0.64%
PACE Strategic Fixed Income
Investments.......................... 0.66%
PACE Municipal Fixed Income
Investments.......................... 0.56%
PACE Global Fixed Income Investments... 0.58%
PACE Small/Medium Company Value Equity
Investments.......................... 0.79%
PACE Small/Medium Company Growth Equity
Investments.......................... 0.79%
PACE International Emerging Markets
Equity Investments................... 0.81%
</TABLE>
INVESTMENT ADVISERS AND PORTFOLIO MANAGERS
PACE MONEY MARKET INVESTMENTS. Mitchell Hutchins provides all investment
advisory services for this fund. Susan Ryan, a senior vice president of Mitchell
Hutchins, is primarily responsible for the fund's day-to-day portfolio
management. She has held her fund responsibilities since its inception.
PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS AND PACE STRATEGIC FIXED
INCOME INVESTMENTS. Pacific Investment Management Company serves as investment
adviser for these funds. PIMCO is located at 840 Newport Center Drive, Suite
300, Newport Beach, California 92660. On September 30, 1999, PIMCO had
approximately $181 billion in assets under management.
Since November 1999, Scott Mather, a senior vice president of PIMCO, has been
primarily responsible for the day-to-day portfolio management for PACE
Government Securities Fixed Income Investments. Prior
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PaineWebber PACE Select Advisors Trust
to joining PIMCO in 1998, he was associated with Goldman Sachs where he was a
trader in the fixed income division and specialized in structuring and trading a
broad range of mortgage-backed securities as well as managing a proprietary
derivatives position.
Since July 1997, William C. Powers, a managing director of PIMCO, has been
primarily responsible for the day-to-day portfolio management for PACE Strategic
Fixed Income Investments. Mr. Powers has been associated with PIMCO since 1991
as a senior member of the fixed income portfolio management group.
PACE INTERMEDIATE FIXED INCOME INVESTMENTS. Pacific Income Advisers, Inc.
serves as investment adviser for this fund. PIA is located at 1299 Ocean Avenue,
Suite 210, Santa Monica, California 90401. As of October 31, 1999, PIA had
approximately $5 billion in assets under management.
Lloyd McAdams has been primarily responsible for the fund's day-to-day portfolio
management since its inception in August 1995. Mr. McAdams has served as
chairman and chief investment officer of PIA since 1986. He also serves as
chairman and chief executive officer of Syndicated Capital, Inc.
PACE MUNICIPAL FIXED INCOME INVESTMENTS. Deutsche Asset Management, Inc.
(formerly Morgan Grenfell Capital Management, Incorporated) serves as investment
adviser for this fund. DAM is located at 150 South Independence Square West,
Philadelphia, Pennsylvania 19106. DAM has been active in managing portfolios of
securities since 1989 and the portfolio management team has over 20 years
experience in the management of tax-exempt fixed income investments. As of
September 30, 1999, DAM had over $17.2 billion in assets under management.
David W. Baldt has been primarily responsible for the fund's day-to-day
portfolio management since its inception in August 1995. Mr. Baldt has been
executive vice president and chief investment officer for fixed income at DAM
since June 1989.
PACE GLOBAL FIXED INCOME INVESTMENTS. Rogge Global Partners plc serves as
investment adviser for this fund. Rogge Global is located at Sion Hall, 56
Victoria Embankment, London, EC4Y ODZ, England. Rogge Global was organized in
1984 and specializes in global fixed income management. As of October 31, 1999,
it had approximately $6.3 billion in assets under management.
Rogge Global uses a team approach in managing the fund's portfolio. The team is
lead by Olaf Rogge, the chief investment officer of Rogge Global, along with
John Graham, Richard Bell, Adrian James, Malie Okrent and Richard Gray. Mr.
Rogge, who founded Rogge Global in 1984, has been managing global investments
for more than 25 years. Mr. Graham joined Rogge Global in February 1994 and is
currently a director, portfolio manager and analyst. Prior to that time, 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. Mr. James joined Rogge Global in April 1995 and
serves as a director, portfolio manager and analyst. From October 1987 through
April 1995, Mr. James worked for NatWest Capital Markets, where he was a
director and functioned as the international bond economist. Ms. Okrent joined
Rogge Global in 1998 as a portfolio manager in charge of global credit. She was
previously a senior portfolio manager at Rothschild Asset Management managing
U.S., global and short-term mandates. Before joining Rothschild, she spent seven
years at JP Morgan where she also managed U.S., global and short-term mandates.
Richard Gray joined Rogge Global in April 1999 and serves as a portfolio manager
and head of emerging markets. He was previously a vice president, emerging debt
research for Bank of America (1995-1999) and director, emerging debt research
for Nomura International (1994-1995). These individuals have held their fund
responsibilities since its inception in August 1995, except for Ms. Okrent, who
has held her fund responsibilities since August 1998 and Mr. Gray, who has held
his fund responsibilities since April 1999.
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS. Brinson Partners, Inc. serves as
investment adviser for this fund. Brinson Partners is located at 209 South
LaSalle Street, Chicago, Illinois 60604. It and its predecessor entities have
managed domestic and international investment assets since December 31, 1981. As
of September 30, 1999, Brinson Partners had approximately $74.6 billion in
assets under management.
Jeffrey J. Diermeier, Robert C. Moore, John C. Leonard and Lydia J. Miller are
the leaders of the team responsible for the day-to-day management of the fund's
portfolio and have held their fund responsibilities since its inception in
August 1995. Mr. Diermeier serves as managing director of U.S. equities for
Brinson Partners. He formerly was managing director of asset allocation. Mr.
Moore serves as managing director and director of equity research for Brinson
Partners. Messrs. Diermeier and Moore have worked together for over 20 years and
both played a key role in the research, design and
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implementation of Brinson Partner's proprietary equity valuation model. Mr.
Leonard serves as executive director and equity portfolio strategy analyst for
Brinson Partners. Prior to joining Brinson Partners in 1991, Mr. Leonard worked
as a financial advisor with Sheffield Financial Management for four years. Ms.
Miller serves as director and equity portfolio strategy analyst for Brinson
Partners. Prior to joining Brinson Partners in 1995, Ms. Miller 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. Alliance Capital Management L.P.
serves as investment adviser for this fund. Alliance Capital is located at 1345
Avenue of the Americas, New York, New York 10105. It is a leading international
investment manager supervising client accounts with assets as of September 30,
1999 of approximately $317.3 billion.
Jane Mack Gould is primarily responsible for the fund's day-to-day portfolio
management and has held her fund responsibilities since November 1997. Ms. Gould
is a senior vice president and portfolio manager and has been with Alliance
Capital since 1971.
PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS. Ariel Capital Management,
Inc. and Brandywine Asset Management, Inc. serve as investment advisers for this
fund. Ariel is located at 307 North Michigan Avenue, Suite 500, Chicago,
Illinois 60601. It is an investment manager with approximately $3.5 billion in
assets under management as of October 31, 1999. Eric T. McKissack is primarily
responsible for the day-to-day management of the fund's assets allocated to
Ariel and held his fund responsibilities since October 1999. He has been with
Ariel since 1986 and is currently its vice chair and co-chief investment
officer.
Brandywine Asset Management, Inc. is located at Three Christina Centre, Suite
1200, 201 N. Walnut Street, Wilmington, Delaware 19801. As of September 30,
1999, it had approximately $6.7 billion in assets under management. Henry Otto
and Steven Tonkovich are primarily responsible for the day-to-day management of
the fund's assets allocated to Brandywine and have held their fund
responsibilities since its inception in August 1995. Messrs. Otto and Tonkovich
are managing directors of Brandywine. Mr. Otto is the primary portfolio manager
for the firm's small capitalization portfolios and has assisted in designing
quantitative evaluation tools at the firm since 1988. Mr. Tonkovich is 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. Delaware Management
Company, Inc. serves as investment adviser for this fund. Delaware Management is
located at One Commerce Square, Philadelphia, PA 19103. Delaware Management and
its predecessors have been managing funds for affiliated organizations in the
financial services industry, including insurance and investment management,
since 1938. As of October 31, 1999, Delaware Management and its affiliates had
over $46 billion in assets under management.
Gerald S. Frey is primarily responsible for the fund's day-to-day portfolio
management and has held his fund responsibilities since December 1996. Mr. Frey
is a vice president of Delaware Management. Prior to joining the group of
companies of which Delaware Management is a part in 1996, Mr. Frey was a senior
director with Morgan Grenfell Capital Management, Incorporated in New York. He
has 17 years of experience in the money management business.
In making investment decisions for the fund, Mr. Frey regularly consults with
other members of the Delaware Management team: John A. Heffern, Marshall T.
Bassett, Jeffrey Hynoski, Steven Lampe and Lori F. Wachs. Mr. Heffern joined
Delaware Management in 1997 and serves as a vice president. Previously, he was a
senior vice president, equity research at NatWest Securities Corporation's
Specialty Financial Services unit. Prior to that, he was a principal and senior
regional bank analyst at Alex. Brown & Sons. Mr. Bassett joined Delaware
Management in 1997 and serves as a vice president. Previously, he was employed
by Morgan Stanley Asset Management's Emerging Growth Group, most recently as a
vice president, where he analyzed small growth companies. Prior to that, he was
a trust officer at Sovran Bank and Trust Company. Mr. Hynoski joined Delaware
Management in 1998 and serves as a vice president. Previously, he held the
position of vice president with Bessemer Trust since 1993. Prior to that, he
served as an analyst for Lord Abbett and Cowen Asset Management. Prior to that,
he held a manager position with Price Waterhouse servicing the financial
services industry. Ms. Wachs joined Delaware Management in 1992 and serves as an
assistant vice president. Previously, she was an equity analyst at Goldman Sachs
& Company for two years.
PACE INTERNATIONAL EQUITY INVESTMENTS. Martin Currie Inc. serves as investment
adviser for this fund. Martin
- --------------------------------------------------------------------------------
Prospectus Page 46
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
Currie, Inc. is located at Saltire Court, 20 Castle Terrace, Edinburgh, Scotland
EHI 2ES. Martin Currie, Inc. and its affiliates are part of one of Scotland's
leading independent investment management companies which, since its founding in
1881, has developed an expertise in equity investments. As of September 30,
1999, Martin Currie, Inc. and its affiliates had over $9 billion in assets under
management.
Martin Currie, Inc. uses a team approach in the management of the fund's
portfolio. The team is led by James Fairweather, who has served as chief
investment officer of Martin Currie, Inc. since 1997. Mr. Fairweather joined
Martin Currie, Inc. in 1984 and has served in various investment management
capacities since then. He has held his fund responsibilities since its inception
in August 1995.
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS. Schroder Investment
Management North America Inc. serves as investment adviser for this fund.
Schroder Investment is located at 787 Seventh Avenue, New York, New York 10019.
Schroder Investment and its predecessors have developed an expertise in emerging
markets investments. As of June 30, 1999, Schroder Capital Management
International Inc. and Schroder Capital Management Inc. (the corporate
predecessors to Schroder Investment), together with their UK affiliate, Schroder
Capital Management International Limited, had approximately $36.5 billion in
assets under management.
John A. Troiano, Heather Crighton and Mark Bridgeman, with the assistance of
Schroder Investment's emerging markets investment committee, are primarily
responsible for the fund's day-to-day portfolio management. Mr. Troiano has held
his fund responsibilities since its inception in August 1995. Ms. Crighton and
Mr. Bridgeman have held their fund responsibilities since December 1997. Mr.
Troiano is chief executive officer and a director of Schroder Investment and has
been employed by Schroder Investment, its predecessor or its affiliates since
1981 in the portfolio management area. Ms. Crighton is a senior vice president,
and a director and Mr. Bridgeman is a first vice president of Schroder
Investment. They have been employed by Schroder Investment, its predecessor or
its affiliates since 1992 (for Ms. Crighton) and 1990 (for Mr. Bridgeman) in the
investment research and portfolio management area.
- --------------------------------------------------------------------------------
Prospectus Page 47
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
PACE MONEY MARKET INVESTMENTS normally declares dividends daily and pays them
monthly. Shares of this fund earn dividends on the day they are sold but do not
earn dividends on the day they are purchased.
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 normally
declare and pay dividends monthly. These funds distribute substantially all of
their gains, if any, annually.
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 normally declare and
pay dividends annually. These funds distribute substantially all of their gains,
if any, annually.
You will receive dividends in additional shares of the same fund unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber if
you prefer to receive dividends in cash.
TAXES
PACE MUNICIPAL FIXED INCOME INVESTMENTS seeks to pay dividends that are exempt
from federal income tax. However, a portion of its dividends may be subject to
state income taxes and its distributions of gain may be subject to both federal
and state income taxes whether you receive them in additional fund shares or in
cash. The fund also may pay dividends that are subject to the federal
alternative minimum tax.
The dividends that you receive from the other funds generally are subject to
federal income tax regardless of whether you receive them in additional fund
shares or in cash. If you hold shares of these funds through a tax-exempt
account or plan, such as an IRA or 401(k) plan, dividends on your shares
generally will not be subject to tax.
When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. However, you will not recognize any gain on the sale of
your shares in PACE MONEY MARKET INVESTMENTS so long as it maintains a share
price of $1.00.
Any distribution of capital gains may be taxed at a lower rate than ordinary
income, depending on whether the fund held the assets that generated the gains
for more than 12 months. Your fund will tell you how you should treat its
dividends for tax purposes.
As noted above, shareholders will pay the PACE Program Fee. For individual
shareholders, this fee will be treated as a "miscellaneous itemized deduction"
for federal income tax purposes.
See the SAI for a more detailed discussion. Prospective shareholders are urged
to consult their tax advisers.
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Prospectus Page 48
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
the funds' financial performance for the periods shown. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned (or
lost) on an investment in a fund, assuming reinvestment of all dividends.
This information has been audited by Ernst & Young LLP, independent auditors,
whose report, along with the funds' financial statements, is included in the
funds' Annual Report to Shareholders. The Annual Report may be obtained without
charge by calling 1-800-986-0088.
<TABLE>
<CAPTION>
PACE
MONEY MARKET INVESTMENTS
------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
----------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Net investment income....................................... 0.05 0.05 0.05 0.05
------- ------- ------- -------
Dividends from net investment income........................ (0.05) (0.05) (0.05) (0.05)
------- ------- ------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total investment return (1)................................. 4.85% 5.32% 5.13% 4.75%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $47,174 $25,493 $16,070 $10,221
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.50% 0.50% 0.50% 0.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.07% 1.20% 1.89% 2.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 4.70% 5.20% 5.04% 4.93%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 4.13% 4.50% 3.65% 3.03%*
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
(1) Total investment return is calculated assuming a $1,000
investment on the first day of each period reported,
reinvestment of all dividends 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 would be lower if this fee was
included. Total investment return for period of less than
one year has not been annualized.
</TABLE>
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Prospectus Page 49
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.59 $ 12.61 $ 12.07 $ 12.00
-------- -------- -------- -------
Net investment income....................................... 0.68 0.72 0.64 0.49
Net realized and unrealized gains (losses) from investments
and futures................................................. (0.43) 0.18 0.58 0.03
-------- -------- -------- -------
Net increase from investment operations..................... 0.25 0.90 1.22 0.52
-------- -------- -------- -------
Dividends from net investment income........................ (0.71) (0.72) (0.63) (0.44)
Distributions from net realized gains from investments...... (0.03) (0.20) (0.05) (0.01)
-------- -------- -------- -------
Total dividends and distributions........................... (0.74) (0.92) (0.68) (0.45)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 12.10 $ 12.59 $ 12.61 $ 12.07
======== ======== ======== =======
Total investment return (1)................................. 2.02% 7.39% 10.42% 4.35%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $191,719 $162,119 $101,606 $58,752
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.87%++ 0.85% 1.57%++ 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 0.93%++ 0.95% 1.70%++ 1.15%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 5.49%++ 5.90% 5.44%++ 5.09%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 5.43%++ 5.80% 5.31%++ 4.79%*
Portfolio turnover.......................................... 418% 353% 712% 978%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
++ Includes 0.01% and 0.72% of interest expense related to the
reverse repurchase agreements during the years ended
July 31, 1999 and July 31, 1997, respectively.
(1) Total investment return is calculated assuming a $1,000
investment on the first day of each period reported,
reinvestment of all dividends and distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
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Prospectus Page 50
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
INTERMEDIATE FIXED INCOME INVESTMENTS
-------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------ ENDED
1999 1998 1997 JULY 31, 1996+
-------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.35 $ 12.23 $ 11.95 $ 12.00
-------- ------- ------- -------
Net investment income....................................... 0.63 0.67 0.66 0.53
Net realized and unrealized gains (losses) from investments
and foreign currency........................................ (0.28) 0.09 0.28 (0.09)
-------- ------- ------- -------
Net increase from investment operations..................... 0.35 0.76 0.94 0.44
-------- ------- ------- -------
Dividends from net investment income........................ (0.64) (0.64) (0.66) (0.48)
Distributions from net realized gains from investments...... (0.08) -- -- (0.01)
-------- ------- ------- -------
Total dividends and distributions........................... (0.72) (0.64) (0.66) (0.49)
-------- ------- ------- -------
Net asset value, end of period.............................. $ 11.98 $ 12.35 $ 12.23 $ 11.95
======== ======= ======= =======
Total investment return (1)................................. 2.81% 6.41% 8.14% 3.59%
======== ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $139,043 $99,690 $66,751 $41,273
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.80% 0.84% 0.85% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 0.80% 0.84% 0.99% 1.23%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 5.26% 5.60% 5.70% 5.56%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 5.26% 5.60% 5.56% 5.18%*
Portfolio turnover.......................................... 89% 111% 67% 36%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
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Prospectus Page 51
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
STRATEGIC FIXED INCOME INVESTMENTS
--------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
-------- -------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 13.32 $ 13.04 $ 12.44 $ 12.00
-------- -------- ------- -------
Net investment income....................................... 0.69 0.69 0.67 0.59
Net realized and unrealized gains (losses) from investments,
futures, options and foreign currency..................... (0.64) 0.40 0.70 0.38
-------- -------- ------- -------
Net increase (decrease) from investment operations.......... 0.05 1.09 1.37 0.97
-------- -------- ------- -------
Dividends from net investment income........................ (0.70) (0.69) (0.67) (0.52)
Distributions from net realized gains from investments...... (0.34) (0.12) (0.10) (0.01)
-------- -------- ------- -------
Total dividends and distributions........................... (1.04) (0.81) (0.77) (0.53)
-------- -------- ------- -------
Net asset value, end of period.............................. $ 12.33 $ 13.32 $ 13.04 $ 12.44
======== ======== ======= =======
Total investment return (1)................................. 0.21% 8.66% 11.35% 8.15%
======== ======== ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $222,214 $126,880 $75,174 $42,550
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.88%++ 0.85% 0.85% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.92%++ 0.94% 1.10% 1.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 5.51%++ 5.49% 5.69% 5.85%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 5.47%++ 5.40% 5.44% 5.30%*
Portfolio turnover.......................................... 202% 234% 357% 166%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
++ Includes 0.03% of interest expense related to the reverse
repurchase agreements for the year ended July 31, 1999.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
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Prospectus Page 52
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
MUNICIPAL FIXED INCOME INVESTMENTS
------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
----------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.70 $ 12.67 $ 12.32 $ 12.00
------- ------- ------- -------
Net investment income....................................... 0.56 0.58 0.61 0.49
Net realized and unrealized gains (losses) from
investments............................................... (0.26) 0.02 0.38 0.27
------- ------- ------- -------
Net increase from investment operations..................... 0.30 0.60 0.99 0.76
------- ------- ------- -------
Dividends from net investment income........................ (0.56) (0.57) (0.61) (0.43)
Distributions from net realized gains from investments...... -- -- (0.03) (0.01)
------- ------- ------- -------
Total dividends and distributions........................... (0.56) (0.57) (0.64) (0.44)
------- ------- ------- -------
Net asset value, end of period.............................. $ 12.44 $ 12.70 $ 12.67 $ 12.32
======= ======= ======= =======
Total investment return (1)................................. 2.34% 4.87% 8.30% 6.38%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $56,659 $51,638 $34,292 $17,765
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.85% 0.85% 0.85% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.89% 0.93% 1.40% 1.74%*
Net investment income to average net assets, net of
fee waivers and expense reimbursements.................... 4.42% 4.67% 5.08% 4.95%*
Net investment income to average net assets, before
fee waivers and expense reimbursements.................... 4.38% 4.59% 4.53% 4.07%*
Portfolio turnover.......................................... 11% 34% 15% 78%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
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Prospectus Page 53
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
GLOBAL FIXED INCOME INVESTMENTS
-------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------ ENDED
1999 1998 1997 JULY 31, 1996+
-------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.25 $ 12.17 $ 12.33 $ 12.00
-------- ------- ------- -------
Net investment income....................................... 0.65 0.62 0.64 0.53
Net realized and unrealized gains (losses) from investments
and foreign currency........................................ 0.20 (0.03) (0.21) 0.27
-------- ------- ------- -------
Net increase from investment operations..................... 0.85 0.59 0.43 0.80
-------- ------- ------- -------
Dividends from net investment income and foreign currency... (0.81) (0.40) (0.51) (0.46)
Distributions from net realized gains from investments...... (0.47) (0.11) (0.08) (0.01)
-------- ------- ------- -------
Total dividends and distributions........................... (1.28) (0.51) (0.59) (0.47)
-------- ------- ------- -------
Net asset value, end of period.............................. $ 11.82 $ 12.25 $ 12.17 $ 12.33
======== ======= ======= =======
Total investment return (1)................................. 6.49% 4.88% 3.54% 6.68%
======== ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $101,143 $88,838 $60,279 $38,296
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.95% 0.95% 0.95% 0.95%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.17% 1.23% 1.29% 1.61%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 4.57% 5.10% 5.36% 5.24%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 4.35% 4.82% 5.02% 4.58%*
Portfolio turnover.......................................... 226% 125% 270% 197%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
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Prospectus Page 54
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
LARGE COMPANY VALUE EQUITY INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 20.27 $ 20.03 $ 14.07 $ 12.00
-------- -------- -------- -------
Net investment income....................................... 0.13 0.14 0.11 0.12
Net realized and unrealized gains from investments and
futures..................................................... 2.34 1.63 6.61 2.02
-------- -------- -------- -------
Net increase from investment operations..................... 2.47 1.77 6.72 2.14
-------- -------- -------- -------
Dividends from net investment income........................ (0.14) (0.14) (0.11) (0.05)
Distributions from net realized gains from investments...... (1.46) (1.39) (0.65) (0.02)
-------- -------- -------- -------
Total dividends and distributions........................... (1.60) (1.53) (0.76) (0.07)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 21.14 $ 20.27 $ 20.03 $ 14.07
======== ======== ======== =======
Total investment return (1)................................. 12.82% 9.89% 49.13% 17.90%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $375,465 $266,354 $180,807 $80,897
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.96% 0.98% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 0.96% 0.98% 1.06% 1.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 0.71% 0.82% 0.81% 1.22%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 0.71% 0.82% 0.75% 0.82%*
Portfolio turnover.......................................... 40% 34% 46% 38%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 55
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
LARGE COMPANY GROWTH EQUITY INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998# 1997 JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 22.99 $ 19.28 $ 13.27 $ 12.00
-------- -------- -------- -------
Net investment income (loss)................................ (0.05) (0.03) 0.03 0.03
Net realized and unrealized gains from investments.......... 4.44 4.79 6.01 1.26
-------- -------- -------- -------
Net increase from investment operations..................... 4.39 4.76 6.04 1.29
-------- -------- -------- -------
Dividends from net investment income........................ -- (0.01) (0.03) (0.02)
Distributions from net realized gains from investments...... (1.50) (1.04) -- --
-------- -------- -------- -------
Total dividends and distributions........................... (1.50) (1.05) (0.03) (0.02)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 25.88 $ 22.99 $ 19.28 $ 13.27
======== ======== ======== =======
Total investment return (1)................................. 19.66% 26.40% 45.61% 10.76%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $379,988 $275,461 $160,334 $69,248
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.97% 1.00% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 0.97% 1.02% 1.05% 1.33%*
Net investment income (loss) to average net assets, net of
fee waivers and expense reimbursements...................... (0.24)% (0.14)% 0.22% 0.33%*
Net investment income (loss) to average net assets, before
fee waivers and expense reimbursements...................... (0.24)% (0.16)% 0.17% (0.01)%*
Portfolio turnover.......................................... 43% 102% 73% 65%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
# Sub-Investment advisory functions for this portfolio were
transferred from Chancellor LGT Asset Management, Inc. to
Alliance Capital Management L.P. on November 10, 1997.
(1) Total investment return is calculated assuming a $1,000
investment on the first day of each period reported,
reinvestment of all dividends and distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 56
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.39 $ 17.52 $ 12.29 $ 12.00
-------- -------- -------- -------
Net investment income....................................... 0.06 0.10 0.12 0.10
Net realized and unrealized gains (losses) from
investments................................................. (0.06) 1.14 5.55 0.23
-------- -------- -------- -------
Net increase from investment operations..................... 0.00 1.24 5.67 0.33
-------- -------- -------- -------
Dividends from net investment income........................ (0.09) (0.13) (0.10) (0.04)
Distributions from net realized gains from investments...... (1.55) (1.24) (0.34) --
-------- -------- -------- -------
Total dividends and distributions........................... (1.64) (1.37) (0.44) (0.04)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 15.75 $ 17.39 $ 17.52 $ 12.29
======== ======== ======== =======
Total investment return (1)................................. 1.16% 6.97% 46.99% 2.76%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $206,131 $183,558 $135,047 $63,894
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 1.00% 0.99% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.01% 1.00% 1.12% 1.51%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 0.42% 0.61% 1.00% 1.07%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 0.41% 0.60% 0.88% 0.56%*
Portfolio turnover.......................................... 57% 42% 39% 30%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 57
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
SMALL/MEDIUM COMPANY GROWTH EQUITY
INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998 1997# JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 15.80 $ 14.44 $ 11.20 $ 12.00
-------- -------- -------- -------
Net investment income (loss)................................ (0.08) (0.03) (0.02) 0.00**
Net realized and unrealized gains (losses) from
investments................................................. 5.28 2.03 3.26 (0.78)
-------- -------- -------- -------
Net increase (decrease) from investment operations.......... 5.20 2.00 3.24 (0.78)
-------- -------- -------- -------
Dividends from net investment income........................ -- -- -- (0.02)
Distributions from net realized gains from investments...... (0.38) (0.64) -- --
-------- -------- -------- -------
Total dividends and distributions........................... (0.38) (0.64) 0.00 (0.02)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 20.62 $ 15.80 $ 14.44 $ 11.20
======== ======== ======== =======
Total investment return (1)................................. 33.62% 14.44% 28.93% (6.55)%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $265,405 $198,855 $125,609 $63,364
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 1.00% 1.00% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.01% 1.03% 1.08% 1.27%*
Net investment loss to average net assets, net of fee
waivers and expense reimbursements.......................... (0.48)% (0.20)% (0.21)% (0.14)%*
Net investment loss to average net assets, before fee
waivers and expense reimbursements.......................... (0.49)% (0.23)% (0.29)% (0.41)%*
Portfolio turnover.......................................... 102% 131% 247% 115%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
** Amount is less than $0.005 per share.
# Sub-Investment advisory functions for this portfolio were
transferred from Westfield Capital Management Company, Inc.
to Delaware Management Company, Inc. on December 17, 1996.
(1) Total investment return is calculated assuming a $1,000
investment on the first day of each period reported,
reinvestment of all dividends and distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 58
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
INTERNATIONAL EQUITY INVESTMENTS
---------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 16.54 $ 15.66 $ 12.79 $ 12.00
-------- -------- -------- -------
Net investment income....................................... 0.07 0.16 0.10 0.12
Net realized and unrealized gains from investments and
foreign currency............................................ 1.10 1.20 2.97 0.73
-------- -------- -------- -------
Net increase from investment operations..................... 1.17 1.36 3.07 0.85
-------- -------- -------- -------
Dividends from net investment income........................ (0.19) (0.16) (0.13) (0.06)
Distributions from net realized gains from investments...... (0.34) (0.32) (0.07) --
-------- -------- -------- -------
Total dividends and distributions........................... (0.53) (0.48) (0.20) (0.06)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 17.18 $ 16.54 $ 15.66 $ 12.79
======== ======== ======== =======
Total investment return (1)................................. 7.33% 9.27% 24.30% 7.08%
======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $214,017 $164,477 $102,979 $45,331
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 1.22% 1.21% 1.35% 1.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.22% 1.21% 1.35% 1.81%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 0.53% 1.14% 0.95% 1.35%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 0.53% 1.14% 0.95% 1.04%*
Portfolio turnover.......................................... 89% 56% 55% 25%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 59
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACE
INTERNATIONAL EMERGING MARKETS EQUITY
INVESTMENTS
------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
----------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.41 $ 15.60 $ 12.49 $ 12.00
------- ------- ------- -------
Net investment income....................................... 0.09 0.09 0.06 0.07
Net realized and unrealized gains (losses) from investments
and foreign currency........................................ 1.62 (5.23) 3.09 0.44
------- ------- ------- -------
Net increase (decrease) from investment operations.......... 1.71 (5.14) 3.15 0.51
------- ------- ------- -------
Dividends from net investment income........................ (0.07) (0.05) (0.04) (0.02)
------- ------- ------- -------
Net asset value, end of period.............................. $ 12.05 $ 10.41 $ 15.60 $ 12.49
======= ======= ======= =======
Total investment return (1)................................. 16.66% (32.99)% 25.31% 4.23%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $88,497 $63,237 $54,759 $25,481
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 1.50% 1.50% 1.50% 1.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.79% 1.79% 2.09% 2.35%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 1.05% 0.98% 0.63% 0.94%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 0.76% 0.69% 0.04% 0.08%*
Portfolio turnover.......................................... 66% 51% 39% 22%
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* 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 distributions 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 would be lower if this
fee was included. Total investment return for period of less
than one year has not been annualized.
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 60
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
APPENDIX A
THIS DOCUMENT HAS BEEN PREPARED BY PAINEWEBBER INCORPORATED
AS A COPY OF THE NOTICE THAT APPEARED IN THE FEDERAL REGISTER ON
FRIDAY, MARCH 22, 1996 (VOL. 61, N0. 57 AT 11882).
PAINEWEBBER INCORPORATED (PAINEWEBBER) LOCATED IN NEW YORK, NY [Application No.
D-09818]
PROPOSED EXEMPTION
Based on the facts and representations set forth in the application, the
Department is considering granting an exemption under the authority of section
408(a) of the Act and section 4975(c)(2) of the Code and in accordance with the
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10,
1990).(1)
Section I. Covered Transactions
If the exemption is granted, the restrictions of section 406(a) of the Act and
the sanctions resulting from the application of section 4975 of the Code, by
reason of section 4975(c)(1) (A) through (D) of the Code, shall not apply,
effective August 18, 1995, to the purchase or redemption of shares by an
employee benefit plan, an individual retirement account (the IRA) or a
retirement plan for a self-employed individual (the Keogh Plan) (collectively
referred to herein as the Plans) in the PaineWebber Managed Accounts Services
Portfolio Trust (the Trust) established in connection with such Plans'
participation in the PaineWebber PACE Program (the PACE Program).
In addition, the restrictions of section 406(b) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason of section
4975(c)(1) (E) and (F) of the Code, shall not apply, effective August 18, 1995,
to (a) the provision, by PaineWebber Managed Accounts Services (PMAS), a
division of PaineWebber, of asset allocation and related services to an
independent fiduciary of a Plan (the Independent Fiduciary) or to a directing
participant (the Directing Participant) in a Plan that is covered under the
provisions of section 404(c) of the Act (the Section 404(c) Plan), which may
result in the selection by the Independent Fiduciary or the Directing
Participant of portfolios of the Trust (the Portfolios) in the PACE Program for
the investment of Plan assets; and (b) the provision of investment management
services by Mitchell Hutchins Asset Management, Inc. (Mitchell Hutchins) to the
PACE Money Market Investments Portfolio of the Trust.
This proposed exemption is subject to the conditions set forth below in
Section II.
Section II. General Conditions
(a) The participation of each Plan in the PACE Program is approved by an
Independent Fiduciary or, if applicable, Directing Participant.
(b) As to each Plan, the total fees paid to PMAS and its affiliates constitute
no more than reasonable compensation and do not include the receipt of
fees pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the '40
Act) by PMAS and its affiliates in connection with the transactions.
(c) No Plan pays a fee or commission by reason of the acquisition or redemption
of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares remain at least as
favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) PMAS provides written documentation to an Independent Fiduciary or a
Directing Participant of its recommendations or evaluations based upon
objective criteria.
(f) Any recommendation or evaluation made by PMAS to an Independent Fiduciary or
Directing Participant is implemented only at the express direction of such
fiduciary or participant.
(g) PMAS provides investment advice in writing to an Independent Fiduciary or
Directing Participant with respect to all available Portfolios.
(h) With the exception of the PACE Money Market Investments Portfolio, any
sub-adviser (the Sub-Adviser) appointed by Mitchell Hutchins to exercise
investment discretion with respect to a Portfolio is independent of
PaineWebber and its affiliates.
(i) The quarterly fee that is paid by a Plan to PMAS for asset allocation and
related services rendered to such Plan under the PACE Program (i.e., the
outside fee) is offset by such amount as is necessary to assure
that Mitchell Hutchins retains 20 basis points as a management fee from any
Portfolio (with the exception of the PACE Money Market Investments Portfolio
from which Mitchell Hutchins retains an investment management fee of 15
basis points) containing investments attributable to the Plan investor.
However, the quarterly fee of 20 basis points that is paid to Mitchell
Hutchins for administrative services is retained by Mitchell Hutchins and is
not offset against the outside fee.
- --------------------------
(1) For purposes of this proposed exemption, reference to provisions of Title
I of the Act, unless otherwise specified, refer also to the corresponding
provisions of the Code.
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Prospectus Page 61
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
(j) With respect to its participation in the PACE Program prior to purchasing
Trust shares,
(1) Each Independent Fiduciary receives the following written or oral
disclosures from PaineWebber:
(A) A copy of the prospectus (the Prospectus) for the Trust discussing
the investment objectives of the Portfolios comprising the Trust; the
policies employed to achieve these objectives; the corporate
affiliation existing between PaineWebber, PMAS, Mitchell Hutchins and
their affiliates; the compensation paid to such entities; any
additional information explaining the risks of investing in the
Trust; and sufficient and understandable disclosures relating to
rebalancing of investor accounts.
(B) Upon written or oral request to PaineWebber, a Statement of
Additional Information supplementing the Prospectus, which describes
the types of securities and other instruments in which the Portfolios
may invest, the investment policies and strategies that the
Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.
(C) An investor questionnaire.
(D) A written analysis of PMAS's asset allocation decision and
recommendation of specific Portfolios.
(E) A copy of the agreement between PMAS and such Plan relating to
participation in the PACE Program.
(F) Upon written request to Mitchell Hutchins, a copy of the respective
investment advisory agreement between Mitchell Hutchins and the
Sub-Advisers.
(G) Copies of the proposed exemption and grant notice describing the
exemptive relief provided herein.
(2) In the case of a Section 404(c) Plan, the Independent Fiduciary will--
(A) Make copies of the foregoing documents available to Directing
Participants.
(B) Allow Directing Participants to interact with PaineWebber Investment
Executives and receive information relative to the services offered
under the PACE Program, including the rebalancing feature, and the
operation and objectives of the Portfolios.
(3) If accepted as an investor in the PACE Program, an Independent Fiduciary
of an IRA or Keogh Plan, is required to acknowledge, in writing to PMAS,
prior to purchasing Trust shares that such fiduciary has received copies
of the documents described in paragraph (j)(l) of this Section II.
(4) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents is provided by the Independent Fiduciary (i.e.,
the Plan administrator, trustee, investment manager or named fiduciary,
as the recordholder of Trust shares). Such Independent Fiduciary will be
required to represent in writing to PMAS that such fiduciary is--
(A) Independent of PaineWebber and its affiliates;
(B) Knowledgeable with respect to the Plan in administrative matters and
funding matters related thereto, and;
(C) Able to make an informed decision concerning participation in the
PACE Program.
(5) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to PMAS that such
fiduciary is--
(A) Independent of PMAS and its affiliates;
(B) Capable of making an independent decision regarding the investment
of Plan assets;
(C) Knowledgeable with respect to the Plan in administrative matters and
funding matters related thereto; and
(D) Able to make an informed decision concerning participation in the
PACE Program.
(k) As applicable, subsequent to its participation in the PACE Program, each
Independent Fiduciary receives the following written or oral disclosures with
respect to its ongoing participation in the PACE Program:
(1) Written confirmations of each purchase or redemption transaction by the
Plan with
respect to a Portfolio.
(2) Telephone quotations from PaineWebber of such Plan's account balance.
(3) A monthly statement of account from PaineWebber specifying the net asset
value of the Plan's investment in such account.
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Prospectus Page 62
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
Such statement is also anticipated to include cash flow and transaction
activity during the month, unrealized gains or losses on Portfolio shares
held; and a summary of total earnings and capital returns on the Plan's
PACE Portfolio for the month and year-to-date.
(4) The Trust's semi-annual and annual report which will include financial
statements for the Trust and investment management fees paid by each
Portfolio.
(5) A written quarterly monitoring report that includes a record of the
Plan's PACE Program portfolio for the quarter and since inception,
showing the rates of return relative to comparative market indices
(illustrated in a manner that reflects the effect of any fees for
participation in the PACE Program actually incurred during the period);
an investment outlook summary containing market commentary; and the
Plan's actual PACE Program portfolio with a breakdown, in both dollars
and percentages, of the holdings in each portfolio. The quarterly
monitoring report will also contain an analysis and an evaluation of
a Plan investor's account to ascertain whether the Plan's investment
objectives have been met and recommending, if required, changes in
Portfolio allocations.
(6) A statement, furnished at least quarterly or annually, specifying--
(A) The total, expressed in dollars, of each Portfolio's brokerage
commissions that are paid to PaineWebber and its affiliates;
(B) The total, expressed in dollars, of each Portfolio's brokerage
commissions that are paid to unrelated brokerage firms;
(C) The average brokerage commissions per share by the Trust to brokers
affiliated with PaineWebber, expressed as cents per share; and
(D) The average brokerage commissions per share by the Trust to brokers
unrelated to PaineWebber and its affiliates, expressed as cents per
share for any year in which brokerage commissions are paid to
PaineWebber by the Trust Portfolios in which a Plan's assets are
invested.
(7) Periodic meetings with a PaineWebber Investment Executive by Independent
Fiduciaries to discuss the quarterly monitoring report or any other
questions that may arise.
(l) In the case of a Section 404(c) Plan where the Independent Fiduciary has
established an omnibus account in the name of the Plan (the Undisclosed
Account) with PaineWebber, the information noted above in subparagraphs
(k)(1) through (k)(7) of this Section II may be provided directly by
PaineWebber to the Directing Participants or to the Independent Fiduciary for
dissemination to the Directing Participants, depending upon the arrangement
negotiated by the Independent Fiduciary with PMAS.
(m) If previously authorized in writing by the Independent Fiduciary, the Plan
investor's account is automatically rebalanced on a periodic basis to the
asset allocation previously prescribed by the Plan or participant, as
applicable, if the quarterly screening reveals that one or more Portfolio
allocations deviates from the allocation prescribed by the investor by the
agreed-upon formula threshold.
(n) The books and records of the Trust are audited annually by independent,
certified public accountants and all investors receive copies of an audited
financial report no later than 60 days after the close of each Trust fiscal
year.
(o) PaineWebber maintains, for a period of six years, the records necessary to
enable the persons described in paragraph (p) of this Section II to determine
whether the conditions of this exemption have been met, except that--
(1) A prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of PaineWebber and/or its affiliates,
the records are lost or destroyed prior to the end of the six year
period; and
(2) No party in interest other than PaineWebber shall be subject to the
civil penalty that may be assessed under section 502(i) of the Act, or to
the taxes imposed by section 4975(a) and (b) of the Code, if the records
are not maintained, or are not available for examination as required by
paragraph (p)(1) of this Section II below.
(p) (1) Except as provided in subparagraph (p)(2) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph (o) of this
Section II are unconditionally available at their customary location
during normal business hours by:
(A) Any duly authorized employee or representative of the Department,
the Internal Revenue Service (the Service) or the Securities and
Exchange Commission (the SEC);
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;
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Prospectus Page 63
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
(C) Any contributing employer to any participating Plan or any duly
authorized employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any
duly authorized representative of such participant or beneficiary.
(p) (2) None of the persons described above in paragraphs
(p)(l)(B)-(p)(l)(D) of this paragraph (P) are authorized to examine the
trade secrets of PaineWebber or Mitchell Hutchins or commercial or
financial information which is privileged or confidential.
Section III. Definitions
For purposes of this proposed exemption:
(a) The term "PaineWebber" means PaineWebber Incorporated and any affiliate of
PaineWebber, as defined in paragraph (b) of this Section III.
(b) An "affiliate" of PaineWebber includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with PaineWebber.
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(c) The term "control" means the power to exercise a controlling influence over
the management or policies of a person other than an individual.
(d) The term "Independent Fiduciary" means a Plan fiduciary which is independent
of PaineWebber and its affiliates and is either
(1) A Plan administrator, trustee, investment manager or named fiduciary, as
the recordholder of Trust shares of a Section 404(c) Plan;
(2) A participant in a Keogh Plan;
(3) An individual covered under a self-directed IRA which invests in Trust
shares;
(4) An employee, officer or director of PaineWebber and/or its affiliates
covered by an IRA not subject to Title I of the Act;
(5) A trustee, Plan administrator, investment manager or named fiduciary
responsible for investment decisions in the case of a Title I Plan that
does not permit individual direction as contemplated by Section
404(c) of the Act; or
(e) The term "Directing Participant" means a participant in a Plan covered under
the provisions of section 404(c) of the Act, who is permitted under the terms
of the Plan to direct, and who elects to so direct, the investment of the
assets of his or her account in such Plan.
(f) The term "Plan" means a pension plan described in 29 CFR 2510.3-2, a welfare
benefit plan described in 29 CFR 2510.3-1, a plan described in section
4975(e)(1) of the Code, and in the case of a Section 404(c) Plan, the
individual account of a Directing Participant.
Effective Date: If granted, this proposed exemption will be effective as of
August 18, 1995.
SUMMARY OF FACTS AND REPRESENTATIONS
1. The parties to the transactions are as follows:
(a) PAINEWEBBER GROUP (PAINE WEBBER GROUP), located in New York, New York,
is the parent of PaineWebber. Paine Webber Group is one of the leading
full-line securities firms servicing institutions, governments and
individual investors in the United States and throughout the world. Paine
Webber Group conducts its businesses in part through PMAS, a division of
PaineWebber and Mitchell Hutchins, a wholly owned subsidiary of
PaineWebber. Paine Webber Group is a member of all principal securities
and commodities exchanges in the United States and the National
Association of Securities Dealers, Inc. In addition, it holds memberships
or associate memberships on several principal foreign securities and
commodities exchanges. Although Paine Webber Group is not an operating
company and, as such, maintains no assets under management, as of
September 30, 1994, Paine Webber Group and its subsidiaries rendered
investment advisory services with respect to $36.1 billion in assets.
(b) PAINEWEBBER, whose principal executive offices are located in New York,
New York, provides investment advisory services to individuals, banks,
thrift institutions, investment companies, pension and profit sharing
plans, trusts, estates, charitable organizations, corporations and other
business and government entities. PaineWebber is also responsible for
securities underwriting, investment and merchant banking services and
securities and commodities trading as principal and agent. PaineWebber
serves as the dealer of Trust shares described herein.
(c) PMAS, located in Weehawken, New Jersey is responsible for individual
investor account management and investor consulting services. PMAS
provides such services to the investors involved in various PaineWebber
investment programs by providing asset allocation recommendations and
related services with
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PaineWebber PACE Select Advisors Trust
respect to their investments. PMAS provides investment consulting and
advisory services to more than 40,000 accounts, with account sizes
ranging from institutional accounts in excess of $650 million in assets
to individual accounts with $100,000 minimum investments. PMAS provides
investors in the Trust with asset allocation recommendations and related
services with respect to investments in the Trust Portfolios.
(d) MITCHELL HUTCHINS, which is located in New York, New York, is a
registered investment adviser under the Investment Adviser's Act of 1940
(the Advisers Act) and a wholly owned subsidiary of PaineWebber. Mitchell
Hutchins provides investment advisory and asset management services to
investors and develops and distributes investment products, including
mutual funds and limited partnerships. Mitchell Hutchins also provides
financial services to over $24.8 billion in client assets representing
twenty-eight investment companies with fifty-five separate portfolios.
Mitchell Hutchins is providing investment management and administrative
services with respect to the Trust and investment advisory services with
respect to one of the Trust's Portfolios.
(e) STATE STREET BANK AND TRUST COMPANY (STATE STREET), located in North
Quincy, Massachusetts, serves as the custodian of assets for the Trust.
State Street is not affiliated with PaineWebber and its affiliates. It
provides a full array of integrated banking products, focusing on
servicing financial assets (i.e., asset custody, cash management,
securities lending, multi-currency accounting and foreign exchange),
managing assets and commercial lending. As of September 30, 1994, State
Street rendered custodian services with respect to approximately $1.6
trillion in assets and provided investment management services to
approximately $155 billion in assets.
(f) PFPC, INC. (PFPC), a subsidiary of PNC Bank, National Association, and
whose principal address is in Wilmington, Delaware, serves as the Trust's
transfer and dividend disbursing agent. PFPC is not affiliated with
PaineWebber and its affiliates. PFPC provides a complete range of mutual
fund administration and accounting services to a diverse product base of
domestic and international investment portfolios. PFPC is also one of the
nation's leading providers of transfer and shareholder servicing services
to mutual funds and asset management accounts. As of September 30, 1994,
PFPC rendered accounting and administration services to over 400 mutual
funds and provided transfer agency, dividend disbursing and/or
shareholder servicing services with respect to more than 3.1 million
shareholder accounts.
2. The Trust is a no load, open-end, diversified management investment company
registered under the '40 Act. The Trust was organized as a Delaware business
trust on September 9, 1994 and it has an indefinite duration. As of
November 6, 1995, the Trust had $184 million in net assets. The Trust
presently consists of twelve different portfolios which will pay dividends to
investors. The composition of the Portfolios will cover a spectrum of
investments ranging from foreign and U.S. Government-related securities to
equity and debt securities issued by foreign and domestic corporations.
Although a Portfolio of the Trust is permitted to invest its assets in
securities issued by PaineWebber and/or its affiliates, the percentage of that
Portfolio's net assets invested in such securities will never exceed one
percent. With the exception of the PACE Money Market Investments Portfolio,
shares in each of the Portfolios are being initially offered to the public at
a net asset value of $10 per share. Shares in the PACE Money Market
Investments Portfolio are being initially offered to the public at a net asset
value of $1.00 per share.
3. Mitchell Hutchins serves as the distributor of Trust shares and PaineWebber
serves as the dealer with respect to shares of the Portfolios.(2) Such shares
are being offered by PaineWebber at no load, to participants in the PACE
Program. The PACE Program is an investment service pursuant to which PMAS
provides participants in the PACE Program with asset allocation
recommendations and related services with respect to the Portfolios based on
an evaluation of an investor's investment objectives and risk tolerances. As
stated above, State Street will serve as the custodian of each Portfolio's
assets and PFPC serves as the Portfolio's transfer and dividend disbursing
agent.
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(2) As distributor or principal underwriter for the Trust, Mitchell Hutchins
will use its best efforts, consistent with its other businesses, to sell shares
of the Portfolios. Pursuant to a separate dealer agreement with Mitchell
Hutchins, PaineWebber will sell Trust shares to investors. However, neither
Mitchell Hutchins nor PaineWebber will receive any compensation for their
services as distributor or dealer of Trust shares. According to the applicants,
Mitchell Hutchins and PaineWebber may be regarded as having an indirect economic
incentive by virtue of the fact that Mitchell Hutchins and PaineWebber will be
paid for the services they provide to the Trust in their respective capacities
as investment manager and administrator of the Trust (Mitchell Hutchins) and as
the provider of asset allocation and related services (PaineWebber, through
PMAS).
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PaineWebber PACE Select Advisors Trust
To participate in the PACE Program, each investor must open a brokerage
account with PaineWebber.(3) The minimum initial investment in the PACE
Program is $10,000.
Although PaineWebber anticipates that investors in the Trust will initially
consist of institutions and individuals, it is proposed that prospective
investors will include Plans for which PaineWebber may or may not currently
maintain investment accounts. A majority of these Plans may be IRAs or Keogh
Plans. In addition, it is proposed that Plans for which PaineWebber or an
affiliate serves as a prototype sponsor and/or a nondiscretionary trustee or
custodian be permitted to invest in the Trust.(4)
The applicants represent that the initial purchase of shares in the Trust by
a Plan participating in the PACE Program may give rise to a prohibited
transaction where PaineWebber, or an affiliate thereof, is a party in
interest with respect to the Plan. PaineWebber also acknowledges that a
prohibited transaction could arise upon a subsequent purchase or redemption
of shares in the Trust by a participating Plan inasmuch as the party in
interest relationship between PaineWebber and the Plan may have been
established at that point.
Accordingly, the applicants have requested retroactive exemptive relief from
the Department with respect to the purchase and redemption of shares in the
Trust by a Plan participating in the PACE Program where PaineWebber does not
(a) sponsor the Plan (other than as prototype sponsor) or (b) have
discretionary authority over such Plan's assets.(5) No commissions or fees
will be paid by a Plan with respect to the sale and redemption transactions
or a Plan's exchange of shares in a Portfolio for shares of another
Portfolio. If granted, the proposed exemption will be effective as of
August 18, 1995.
4. Overall responsibility for the management and supervision of the Trust and
the Portfolios rests with the Trust's Board of Trustees (the Trustees). The
Trustees will approve all significant agreements involving the Trust and the
persons and companies that provide services to the Trust and the Portfolios.
5. Mitchell Hutchins also serves as the investment manager to each Portfolio.
Under its investment management and administration agreement with the Trust,
Mitchell Hutchins will provide certain investment management and
administrative services to the Trust and the Portfolios that, in part, involve
calculating each Portfolio's net asset value(6) and, with the exception of the
PACE Money Market Investments Portfolio (for which Mitchell Hutchins will
exercise investment discretion), making recommendations to the Board of
Trustees of the Trust regarding (a) the investment policies of each Portfolio
and (b) the selection and retention of the Sub-Advisers who will exercise
investment discretion with respect to the assets of each Portfolio.(7)
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(3) According to the Statement of Additional Information that accompanies the
Prospectus for the PACE Program, shares in the Trust are not certificated for
reasons of economy and convenience. However, PFPC maintains a record of each
investor's ownership of shares. Although Trust shares are transferable and
accord voting rights to their owners, they do not confer pre-emptive rights
(i.e., the privilege of a shareholder to maintain a proportionate share of
ownership of a company by purchasing a proportionate share of any new stock
issues). PaineWebber represents that in the context of an open-end investment
company that continuously issues and redeems shares, a pre-emptive right would
make the normal operations of the Trust impossible.
As for voting rights, PaineWebber states that they are accorded to
recordholders of Trust shares. PaineWebber notes that a recordholder of Trust
shares may determine to seek the submission of proxies by Plan participants and
vote Trust shares accordingly. In the case of individual account plans such as
Section 404(c) Plans, PaineWebber believes that most Plans will pass the vote
through to Directing Participants on a pro-rata basis.
(4) The Department notes that the general standards of fiduciary conduct
promulgated under the Act would apply to the participation in the PACE Program
by an Independent Fiduciary. Section 404 of the Act requires that a fiduciary
discharge his duties respecting a plan solely in the interest of the plan's
participants and beneficiaries and in a prudent fashion. Accordingly, an
Independent Fiduciary must act prudently with respect to the decision to enter
into the PACE Program with PMAS as well as with respect to the negotiation of
services that will be performed thereunder and the compensation that will be
paid to PaineWebber and its affiliates. The Department expects an Independent
Fiduciary, prior to entering into the PACE Program, to understand fully all
aspects of such arrangement following disclosure by PMAS of all relevant
information.
(5) PaineWebber represents that to the extent employee benefit plans that are
maintained by PaineWebber purchase or redeem shares in the Trust, such
transactions will meet the provisions of Prohibited Transaction Exemption (PTE)
77-3 (42 FR 18734, April 8, 1977). PaineWebber further represents that, although
the exemptive relief proposed above would not permit PaineWebber or an affiliate
(while serving as a Plan fiduciary with discretionary authority over the
management of a Plan's assets) to invest those assets over which it exercises
discretionary authority in Trust shares, a purchase or redemption of Trust
shares under such circumstances would be permissible if made in compliance with
the terms and conditions of PTE 77-4 (42 FR 18732, April 8, 1977). The
Department expresses no opinion herein as to whether such transactions will
comply with the terms and conditions of PTEs 77-3 and 77-4.
(6) The net asset value of each Portfolio's shares, except for the PACE Money
Market Investments Portfolio, fluctuates and is determined as of the close of
regular trading on the New York Stock Exchange (the NYSE) (currently, 4:00 p.m.
Eastern Time) each business day. The net asset value of shares in the PACE Money
Market Investments Portfolio is determined as of 12:00 p.m. 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.
(7) Subject to the supervision and direction of the Trustees, Mitchell
Hutchins will provide to the Trust investment management evaluation services
principally by performing initial review on prospective Sub-Advisers for each
Portfolio and thereafter monitoring each Sub-Adviser's performance. In
evaluating prospective Sub-Advisers, Mitchell Hutchins will consider, among
other factors, each Sub-Adviser's level of expertise, consistency of performance
and investment discipline or philosophy. Mitchell Hutchins will have the
responsibility for communicating performance expectations and evaluations to the
Sub-Advisers and ultimately recommending to the Trustees whether a Sub-Adviser's
contract should be continued.
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PaineWebber PACE Select Advisors Trust
The Sub-Advisers will provide discretionary advisory services with respect
to the investment of the assets of the respective Portfolios (other than the
PACE Money Market Investments Portfolio) on the basis of their performance
in their respective areas of expertise in asset management. With the
exception of the PACE Money Market Investments Portfolio which will be
advised by Mitchell Hutchins, PaineWebber represents that all of the
Sub-Advisers, will be independent of, and will remain independent of
PaineWebber and/or its affiliates. The Sub-Advisers will be registered
investment advisers under the Advisers Act and maintain their principal
executive offices in various regions of the United States.
The administrative services for which Mitchell Hutchins will be responsible
include the following: (a) supervising all aspects of the operations of the
Trust and each Portfolio (e.g., oversight of transfer agency, custodial,
legal and accounting services; (b) providing the Trust and each Portfolio
with corporate, administrative and clerical personnel as well as maintaining
books and records for the Trust and each Portfolio; (c) arranging for the
periodic preparation, updating, filing and dissemination of the Trust's
Registration Statement, proxy materials, tax returns and required reports to
each Portfolio's shareholders and the SEC, as well as other federal or state
regulatory authorities; (d) providing the Trust and each Portfolio with, and
obtaining for it, office space, equipment and services; (e) providing the
Trustees with economic and investment analyses and reports, and making
available to the Trustees, upon request, any economic, statistical and
investment services. These administrative services do not include any
management services that might be performed by Mitchell Hutchins. As noted
in Representations 17 and 18, Mitchell Hutchins is separately compensated
for management services rendered to the Trust.
6. Through the PACE Program, PMAS is providing a Plan investor with non-binding,
asset allocation recommendations with respect to such investor's investments
in the Portfolios. In order to make these evaluations, PMAS will furnish
copies of an investor questionnaire, designed to elicit information about the
specific investment needs, objectives and expectations of the investor, to an
Independent Fiduciary of a Title I Plan that does not permit
individually-directed investments, to an Independent Fiduciary of an IRA or a
Keogh Plan, or to a Directing Participant of a Section 404(c) Plan. Although
the contents of the questionnaire may vary somewhat depending upon the type of
Plan investing in the PACE Program, for a particular Plan, the same
questionnaire will be given to each participant.
In the case of a Section 404(c) Plan where an Independent Fiduciary has
established an Undisclosed Account with PaineWebber in the name of the Plan,
PMAS will provide investor questionnaires to each Directing Participant
through PaineWebber Investment Executives (who are registered
representatives of PaineWebber), via the Plan's benefits personnel or
independent recordkeeper (the Recordkeeper), or by other means requested by
the Independent Fiduciary. The applicants recognize that Section
404(c) Plans typically employ a Recordkeeper to assist the Independent
Fiduciary with maintaining Plan-related data which is used to generate
benefit status reports, regulatory compliance reports and participant- and
Plan-level investment performance reports. Therefore, the Undisclosed
Account arrangement is intended to coordinate with the functions
traditionally provided to Section 404(c) Plans by their Recordkeepers.(8)
7. Based upon data obtained from the investor questionnaire, PMAS will evaluate
the investor's risk tolerances and investment objectives. PMAS will then
recommend, in writing, an appropriate allocation of assets among suitable
Portfolios that conforms to these tolerances and objectives.
PaineWebber represents that PMAS will not have any discretionary authority
or control with respect to the allocation of an investor's assets among the
Portfolios. In the case of an IRA or Keogh Plan, PaineWebber represents that
all of PMAS's recommendations and evaluations will be presented to the
Independent Fiduciary and will be implemented only if accepted and acted
upon by such fiduciary.
In the case of a Section 404(c) Plan, PaineWebber represents that Directing
Participants in such Plan will be presented with recommendations and
evaluations that are
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(8) The applicants wish to emphasize that the PACE Program can currently be
provided to participants in Section 404(c) Plans on either an Undisclosed
Account or a disclosed account (the Disclosed Account) basis (i.e., where the
Independent Fiduciary opens a separate PACE Program account with PaineWebber for
each Directing Participant). In this regard, the applicants note that
PaineWebber presently offers the PACE Program on a Disclosed Account arrangement
to IRAs and Keogh Plans. However, for other Section 404(c) Plans such as those
that are covered under the provisions of section 401(k) of the Code, PaineWebber
prefers not to establish Disclosed Accounts for individual participants because
of servicing and other administrative matters typically undertaken by such
Plan's Recordkeepers. The applicants note that from the participant's
perspective, there is no difference in the nature of the services provided under
the PACE Program regardless of whether the participant's investment is held
through a "Disclosed" or "Undisclosed" Account arrangement. The applicants state
that these designations are primarily internal distinctions relating to whether
the participant's name appears in the account set-up and reflects differences in
the applicable sub-accounting functions.
Notwithstanding the above, the Department wishes to point out that,
regardless of the arrangement negotiated with PaineWebber, an Independent
Fiduciary of a Section 404(c) Plan has the responsibility to disseminate all
information it receives to each Directing Participant investing in the PACE
Program.
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PaineWebber PACE Select Advisors Trust
tailored to the responses provided by that Directing Participant in his or
her questionnaire. PMAS's recommendations will be disseminated to Directing
Participants in accordance with procedures established for the Plan.
After receipt of PMAS's initial recommendations, which may or may not be
adopted, the Independent Fiduciary or Directing Participant, as applicable,
will select the specific Portfolios. PMAS will continue to recommend to
Independent Fiduciaries or Directing Participants asset allocations among
the selected Portfolios.
8. Aside from the investor questionnaire, in order for a Plan to participate in
the PACE Program, PaineWebber or PMAS will provide an Independent Fiduciary
with a copy of the Trust Prospectus discussing (a) the investment objectives
of the Portfolios comprising the Trust, (b) the policies employed to achieve
these objectives, (c) the corporate affiliation existing between PaineWebber,
PMAS, Mitchell Hutchins and their subsidiaries, and (d) the compensation paid
to such entities by the Trust and information explaining the risks attendant
to investing in the Trust. In addition, upon written or oral request to
PaineWebber, the Independent Fiduciary will be given a Statement of Additional
Information supplementing the Prospectus which describes, in further detail,
the types of securities and other instruments in which the Portfolios may
invest, the investment policies and strategies that the Portfolios may utilize
and certain risks attendant to those investments, policies and strategies.
Further, each Independent Fiduciary will be given a copy of the investment
advisory agreement between PMAS and such Plan relating to participation in the
PACE Program, including copies of the notice of proposed exemption and grant
notice for the exemptive relief provided herein. Upon oral or written request
to the Trust, PaineWebber will also provide an Independent Fiduciary with a
copy of the respective investment advisory agreements between Mitchell
Hutchins and the Sub-Advisers.
In the case of a Section 404(c) Plan, depending on the arrangement
negotiated with the Independent Fiduciary, PaineWebber represents that the
Independent Fiduciary will make available copies of the foregoing documents
to Directing Participants.
In addition, Independent Fiduciaries and, if applicable, Directing
Participants, will receive introductory documentation regarding the PACE
Program in marketing materials and in other communications. Further,
depending upon the arrangement negotiated between PMAS and the Independent
Fiduciary, a PaineWebber Investment Executive will meet with a Directing
Participant, upon oral or written request, to discuss the services offered
under the PACE Program, including the rebalancing feature described in
Representation 12, as well as the operation and objectives of the
Portfolios.(9)
9. If accepted as an investor in the PACE Program, an Independent Fiduciary will
be required by PMAS to acknowledge, in writing, prior to purchasing Trust
shares, that such fiduciary has received copies of the documents referred to
in Representation 8. With respect to a Plan that is covered by Title I of the
Act (e.g., a defined contribution plan), where investment decisions will be
made by a trustee, investment manager or a named fiduciary, PMAS will require
that such Independent Fiduciary acknowledge in writing receipt of such
documents and represent to PaineWebber that such fiduciary is (a) independent
of PaineWebber and its affiliates, (b) capable of making an independent
decision regarding the investment of Plan assets, (c) knowledgeable with
respect to the Plan in administrative matters and funding matters related
thereto, and (d) able to make an informed decision concerning participation in
the PACE Program.
With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Fiduciary
(i.e., the Plan administrator, trustee, investment manager or named
fiduciary, as the recordholder of Trust shares). Such Independent Fiduciary
will be required to represent, in writing, to PMAS that such fiduciary
is (a) independent of PaineWebber and its affiliates, (b) knowledgeable with
respect to the Plan in administrative matters and funding matters related
thereto, and (c) able to make an informed decision concerning participation
in the PACE Program.
10. After the selection of specific Portfolios by an Independent Fiduciary or a
Directing Participant,(10) PMAS will continue to provide recommendations to
such persons relating to asset allocations among the selected Portfolios.
However, with respect to a Section 404(c) Plan in which at least three
Portfolios may be selected by the Independent Fiduciary, PMAS's initial asset
allocation recommendation to Directing Participants will be limited to fthe
suggested Portfolios offered under the Plan. PMAS anticipates that it may
also work with the Independent Fiduciary of a Section 404(c) Plan to assist
the fiduciary in (a) identifying and
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(9) The Department is expressing no opinion as to whether the information
provided under the PACE Program is sufficient to enable a Directing Participant
to exercise independent control over assets in his or her account as
contemplated by Section 404(c) of the Act.
(10) In the case of a Section 404(c) Plan, PMAS will receive electronically
from the Recordkeeper each participant's investment selections.
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PaineWebber PACE Select Advisors Trust
drafting investment objectives, (b) selecting suitable investment categories
or actual Portfolios to be offered to Directing Participants or
(c) recommending appropriate long-term investment allocations to a Directing
Participant, if this individual receives such advice.
An Independent Fiduciary or a Directing Participant will be permitted to
change his or her investment allocation by specifying the new allocation in
writing or by other means authorized by the Plan (e.g., by use of a kiosk).
Although PaineWebber currently imposes no limitation on the frequency with
which an Independent Fiduciary or a Directing Participant may change his or
her prescribed asset allocation, PaineWebber reserves the right to impose
reasonable limitations.
11. Depending on the arrangement negotiated with PMAS, PaineWebber will provide
each Independent Fiduciary with the following information: (a) Written
confirmations of each purchase and redemption of shares of a Portfolio;
(b) daily telephone quotations of such Plan's account balance; (c) a monthly
statement of account specifying the net asset value of a Plan's assets that
are invested in such account; and (d) a quarterly, written investment
performance monitoring report.
The monthly account statement will include, among other information:
(a) cash flow and transaction activity during the month, including purchase,
sale and exchange activity and dividends paid or reinvested; (b) unrealized
gains or losses on Portfolio shares held; and (c) a summary of total
earnings and capital returns on the Plan's PACE Program Portfolio for the
month and year-to-date. The quarterly investment performance report will
include, among other information, the following: (a) a record of the
performance of the Plan's PACE Program portfolio for the quarter and since
inception showing rates of return relative to comparative market indices
(illustrated in a manner that reflects the effect of any fees for
participation in the PACE Program actually incurred during the period)(11);
(b) an investment outlook summary containing market commentary; and (c) the
Plan's actual PACE Program portfolio with a breakdown, in both dollars and
percentages, of the holdings in each Portfolio. In addition, to the extent
required by the arrangement negotiated with the Independent Fiduciary, the
quarterly performance monitoring report will (a) contain an analysis and an
evaluation of a Plan investor's account to assist the investor to ascertain
whether the investment objectives are being met, and (b) recommend, from
time to time, changes in Portfolio allocations. The quarterly performance
monitoring report is described in the summary of the PACE Program contained
in the Trust Prospectus.
With respect to a Section 404(c) Plan, the quarterly investment performance
report transmitted to the Independent Fiduciary will include the following
aggregate information relative to the Undisclosed Account as well as market
commentary: (a) a record of the performance of the Plan's assets and rates
of return as compared to several appropriate market indices (illustrated in
a manner that reflects the effect of any fees for participation in the PACE
Program actually incurred during the period); and (b) the Plan's actual
investment portfolio with a breakdown of investments made in each Portfolio.
As to each Directing Participant, PMAS will provide information to be
contained in the quarterly performance monitoring report to such
participants.
In addition, on both a quarterly and annual basis, commencing with the first
quarterly report due after this notice of proposed exemption is issued,
PaineWebber will provide, as applicable, an Independent Fiduciary or a
Directing Participant with written disclosures of (a) the total, expressed
in dollars, of each Portfolio's brokerage commissions that are paid to
PaineWebber and its affiliates; (b) the total, expressed in dollars, of each
Portfolio's brokerage commissions that are paid to unrelated brokerage
firms; (c) the average brokerage commissions per share by the Trust to
brokers affiliated with the PaineWebber, expressed as cents per share; and
(d) the average brokerage commissions per share by the Trust to brokers
unrelated to the PaineWebber and its affiliates, expressed as cents per
share for any year in which brokerage commissions are paid to PaineWebber by
the Trust Portfolios in which a Plan's assets are invested.
Further, the Independent Fiduciary or Directing Participant, as applicable,
will have access to a PaineWebber Investment Executive for the discussion of
the quarterly performance monitoring reports, the rebalancing feature
described below in Representation 12 or any questions that may arise.
12. Depending on the arrangement negotiated with PMAS, for any investor who so
directs PMAS, the investor's Trust holdings will be automatically rebalanced
on a periodic basis to maintain the investor's designated allocation among
the Portfolios. PMAS will receive no additional compensation to provide this
service. At both the Independent Fiduciary and Directing Participant levels,
the rebalancing election will be made in writing or in any manner permitted
by the Plan (e.g., in the case of a Section 404(c) Plan, electronic
transmission
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(11) The comparative index is a blended index of the individual Portfolio
indices that are weighted by the allocation percentages corresponding to those
holdings that make up the investor's total investment in the PACE Program.
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PaineWebber PACE Select Advisors Trust
by the Recordkeeper to PMAS of the Directing Participant's election). The
election will be accompanied by a disclosure that is designed to provide the
Independent Fiduciary and the Directing Participant, as applicable, with an
understanding of the rebalancing feature. Disclosure of the rebalancing
feature is included in the Prospectus for the PACE Program which will be
provided to each Independent Fiduciary and Directing Participant.
It is currently anticipated that screening will be performed quarterly with
respect to the PACE Program accounts for which the investor has elected the
rebalancing service and that rebalancing will be performed for each such
account where any Portfolio allocation deviates from the allocation
prescribed by the investor by the agreed-upon uniform threshold.(12) The
threshold for triggering rebalancing is a percentage (presently, 2 1/2
percent) that has been established by PaineWebber and is applied uniformly
to all accounts subject to rebalancing. If PaineWebber were, in the future,
to determine that this uniform threshold should be changed, PMAS would
notify all investors (including Independent Fiduciaries and Directing
Participants) who had elected the rebalancing feature. Then, in order to
continue to provide this service, PMAS would need to obtain the consent of
each such investor.
The applicants note that rebalancing is a feature that an investor chooses
to apply indefinitely until the investor notifies PaineWebber that it wishes
to have this service discontinued. After rebalancing has been discontinued,
an investor may reactivate the rebalancing service by notifying PaineWebber
in writing.
13. PaineWebber notes that not all of the services described above will be
provided to every Plan. The services that will be provided will depend on
what is decided upon by the Independent Fiduciary. Assuming the Independent
Fiduciary requests a reduction in the level of services, there will be no
corresponding reduction in the fee that the fiduciary pays PMAS. This is due
to the bundled nature of the services provided in the PACE Program. For
example, if the Independent Fiduciary were to limit the number of Portfolios
available as investment options for its Plan participants, this might be
deemed a reduction in the services available under the PACE Program that
would not result in any reduction in the applicable Program fee. Similarly,
under the PACE Program, an Independent Fiduciary of a Section 404(c) Plan may
decide for its own reasons not to make the automatic rebalancing service
available to Directing Participants. Under such circumstances, PMAS will not
reduce its fees to reflect the absence of the provision of rebalancing
services to the Plan. Further, under the particular arrangement which it has
negotiated with PMAS, the Independent Fiduciary may or may not request
PaineWebber Investment Executives to make presentations or be available to
meet with Directing Participants.
Thus, an Independent Fiduciary may choose all, some or none of the PACE
Program's optional services. If an Independent Fiduciary selects all of
these services, the Plan will incur no greater an annual fee than had that
Independent Fiduciary selected some or none of these services. The absence
of a reduction in fees in the event not all services are requested is an
issue that should be considered by the Independent Fiduciary.(13)
Nonetheless, the Applicants represent that the reduction in the types of
services provided will not cause the fees paid to PaineWebber by a Plan
under the PACE Program to violate section 408(b)(2) of the Act.
14. Plans wishing to redeem their Trust shares may communicate their requests in
writing or by telephone to PMAS. Redemption requests received in proper
form prior to the close of trading on the NYSE will be effected at the net
asset value per share determined on that day. Redemption requests received
after the close of regular trading on the NYSE will be effected
at the net asset value at the close of business of the next day, except on
weekends or holidays when the NYSE is closed. A Portfolio will be required to
transmit redemption proceeds for credit to an investor's account
with PaineWebber within 5 business days after receipt of the redemption
- --------------------------
(12) Currently, with regard to investors who have elected the rebalancing
feature, rebalancing is effected by an automated, mechanical system that, as to
each account: (a) Calculates the current allocation for each Portfolio based on
the quarter-end net asset value; (b) compares the current allocation for each
Portfolio with the allocation prescribed by the investor; (c) identifies for
rebalancing all accounts with one or more Portfolios whose current allocation
deviates by the agreed-upon threshold from the allocation prescribed by the
investor; and (d) for each account which has been identified for rebalancing
pursuant to (a)-(c), (1) calculates the dollar difference between the current
allocation and the allocation prescribed by the investor, (2) reduces each
Portfolio whose current allocation exceeds the allocation prescribed by the
investor by an amount equal to the dollar difference between the two
allocations, and (3) increases each Portfolio whose current allocation is less
than the allocation prescribed by the investor by an amount equal to the dollar
difference between the two allocations. This rebalancing is accomplished by
automatically exchanging, in the order of the Portfolio's respective CUSIP
numbers, a dollar-equivalent number of shares of each Portfolio to be reduced
for the corresponding number of shares of a Portfolio to be increased until the
current allocation is equal to the allocation prescribed by the investor.
Valuation of the Portfolios is done as of the close of regular trading on the
NYSE each business day.
(13) In this regard, the Department emphasizes that it expects the Independent
Fiduciary to consider prudently the relationship of the fees to be paid by the
Plan to the level of services to be provided by PaineWebber. In response to the
Department's concern over this matter, PaineWebber represents that it will amend
the Trust Prospectus to include the following statement: "Investors who are
fiduciaries or otherwise, in the process of making 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."
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Prospectus Page 70
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
request.(14) In the case of an IRA or Keogh Plan investor, PaineWebber will
not hold redemption proceeds as free credit balances and will, in the absence
of receiving investment instructions, place all such assets in a money market
fund (other than the PACE Money Market Investments Portfolio) that may be
affiliated with PaineWebber.(15) In the case of Plans that are covered by
Title I of the Act, the redemption proceeds will be invested by PaineWebber
in accordance with the investment directions of the Independent Fiduciary
responsible for the management of the Plan's assets. With respect to a
Section 404(c) Plan, the treatment of such investment will depend upon the
arrangement for participant investment instructions selected by the Plan
sponsor. In the event that the Independent Fiduciary does not give other
investment directions, such assets will be swept into a no-load money market
fund that may be affiliated with PaineWebber. No brokerage charge or
commission is charged to the participant for this service.
Due to the high costs of maintaining small PACE Program (Plan) accounts, the
Trusts may redeem all Trust shares held in a PACE Program account in which
the Trust shares have a current value of $7,500 or less after the investor
has been given at least thirty days in which to purchase additional Trust
shares to increase the value of the account to more than the $7,500 amount.
Proceeds of an involuntary redemption will be deposited in the investor's
brokerage account unless PaineWebber is otherwise instructed.(16)
15. Through the PACE Program, shares of a Portfolio may be exchanged by an
investor for shares of another Portfolio at their respective net asset values
and without the payment of an exchange fee. However, Portfolio shares are not
exchangeable with shares of other PaineWebber group of funds or portfolio
families.
With respect to brokerage transactions that are entered into under the PACE
Program for a Portfolio, such transactions may be executed through
PaineWebber and other affiliated broker-dealers, if in the judgment of
Mitchell Hutchins or the Sub-Adviser, as applicable, the use of such
broker-dealer is likely to result in price and execution at least as
favorable, and at a commission charge comparable to those of other qualified
broker-dealers.
16. Each Portfolio will bear its own expenses, which generally include all costs
that are not specifically borne by PaineWebber, Mitchell Hutchins or the
Sub-Advisers. Included among a Portfolio's expenses will be costs incurred in
connection with the Portfolio's organization, investment management and
administration fees, fees for necessary professional and brokerage services,
fees for any pricing service, the costs of regulatory compliance and costs
associated with maintaining the Trust's legal existence and shareholder
relations. No Portfolio, however, will impose sales charges on purchases,
reinvested dividends, deferred sales charges, redemption fees; nor will any
Portfolio incur distribution expenses. Investment management fees payable to
Mitchell Hutchins and the Sub-Advisers will be disclosed in the Trust
Prospectus.
17. As to each Plan, the total fees that are paid to PMAS and its affiliates
will constitute no more than reasonable compensation.(17) In this regard, for
its services under the PACE Program, PMAS charges an investor a quarterly fee
for asset allocation and related services. This "outside fee", will not be
more than 1.50 percent on an annual basis of the maximum annual value of the
assets in the investor's PACE Program account. Such fee may be paid either
from the assets in the account or by separate check. A smaller outside fee
may be charged depending on such factors as the size of the PACE Program
account (e.g., PACE Program accounts in excess of $100,000), the number of
Plan participants or the number of PACE Program accounts. The outside fee is
charged directly to an investor and is neither affected by the allocation of
assets among the Portfolios nor by whether an investor follows or ignores
PMAS's advice.(18) In the case of Plans, the outside fee may be paid by the
Plan or the Plan sponsor or, in the case of IRAs only, the fee may be paid by
the IRA owner directly.
- --------------------------
(14) PaineWebber will provide clearance (on a fully disclosed basis),
settlement and other back office services to other broker-dealers.
(15) The applicants are not requesting, nor is the Department proposing,
exemptive relief with respect to the investment, by PaineWebber, of redemption
proceeds in an affiliated money market fund and where the Plan investor has not
given investment instructions. The applicants represent that to the extent
PaineWebber is considered a fiduciary, such investments will comply with the
terms and conditions of PTE 77-4. However, the Department expresses no opinion
herein on whether such transactions are covered by this class exemption.
(16) The thirty day limit does not restrict a Plan's ability to redeem its
interest in the Trust. The thirty day notice period is provided to give a Plan
an opportunity to increase the value of the assets in its Plan account with
PaineWebber to an amount in excess of $7,500. If desired, the Plan may still
follow the redemption guidelines described above.
(17) The applicants represent that PMAS and its affiliates will not receive
12b-1 Fees in connection with the transactions.
(18) PaineWebber represents that the outside fee will not be imposed on the
accounts of the PaineWebber Group and its subsidiaries, including PaineWebber,
PMAS, Mitchell Hutchins or their subsidiaries, accounts of their immediate
families and IRAs and certain employee pension benefit plans for these persons.
The applicants state that this fee will be waived to encourage employees to
invest in PaineWebber, although PaineWebber reserves the right to impose such
fees. However, with respect to IRAs or Plans maintained by PaineWebber or its
affiliates for their employees, the applicants assert that such waiver would be
required by PTE 77-3.
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Prospectus Page 71
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
For Plan investors, the outside fee will be payable in full within five
business days (or such other period as may be required under applicable law
or regulation) after the trade date for the initial investment in the
Portfolios and will be based on the value of assets in the PACE Program on
the trade date of the initial investment. The initial fee payment will cover
the period from the initial investment trade date through the last calendar
day of the subsequent calendar quarter, and the fee will be pro-rated
accordingly. Thereafter, the quarterly fee will cover the period from the
first calendar day through the last calendar day of the current calendar
quarter. The quarterly fee will be based on the value of assets in the PACE
Program measured as of the last calendar day of the previous quarter, and
will be payable on the fifth business day of the current quarter.
If additional funds are invested in the Portfolios during any quarter, the
applicable fee, pro-rated for the number of calendar days then remaining in
the quarter and covering the amount of such additional funds, shall be
charged and be payable five business days later. In the case of redemptions
during a quarter, the fee shall be reduced accordingly, pro-rated for the
number of calendar days then remaining in the quarter. If the net fee
increase or decrease to an investor for additional purchases and/or
redemptions during any one quarter is less than $20, the fee increase or
decrease will be waived.
In addition, for investment management and administrative services provided
to the Trust, Mitchell Hutchins will be paid, from each Portfolio, a fee
which is computed daily and paid monthly at an annual rate ranging from .35
percent to 1.10 percent, of which the management fee component ranges from
.15 percent to .90 percent on an annual basis, of each Portfolio's average
daily net assets depending upon the Portfolio's objective.(19) From these
management fees, Mitchell Hutchins will compensate the applicable
Sub-Adviser. This "inside fee," which is the difference between the
individual Portfolio's total management fee and the fee paid by Mitchell
Hutchins to the Sub-Adviser, will vary from the annual rate of .15 percent
to .40 percent depending on the Portfolio. With the exception of the PACE
Money Market Investments Portfolio from which Mitchell Hutchins is paid a
management fee of 15 basis points, Mitchell Hutchins is retaining 20 basis
points as a management fee from each remaining single Portfolio on
investment assets attributable to the Plans. Pursuant to Transfer Agency and
Service Agreements with the Trust, PFPC and State Street will be paid annual
fees of $350,000 and $650,000, respectively, for transfer agent and
custodial services.
18. The management fees that are paid at the Portfolio level to Mitchell
Hutchins and the Sub-Advisers are set forth in the following table. For
purposes of the table, Mitchell Hutchins and a Sub-Adviser are referred to as
"MH" and "SA," respectively. As noted in the table, the sum of the management
fees retained by Mitchell Hutchins and the Sub-Adviser with respect to a
Portfolio will equal the total management fee paid by that Portfolio.
<TABLE>
<CAPTION>
MH MH
MANAGEMENT SA RETAINED RETAINED FEE
PORTFOLIO FEE (PERCENT) FEE (PERCENT) (PERCENT)
- --------- ------------- ------------- ------------
<S> <C> <C> <C>
PACE Money Market
Investments.............. .15 .00 .15
PACE Government Securities
Fixed Income
Investments.............. .50 .25 .25
PACE Intermediate Fixed
Income Investments....... .40 .20 .20
PACE Strategic Fixed
Income Investments....... .50 .25 .25
PACE Municipal Fixed
Income Investments....... .40 .20 .20
PACE Global Fixed Income
Investments.............. .60 .35 .25
PACE Large Company Value
Equity Investments....... .60 .30 .30
PACE Large Company Growth
Equity Investments....... .60 .30 .30
PACE Small/Medium Company
Value Equity
Investments.............. .60 .30 .30
PACE Small/Medium Company
Growth Equity
Investments.............. .60 .30 .30
PACE International Equity
Investments.............. .70 .40 .30
PACE International
Emerging Markets
Investments.............. .90 .50 .40
</TABLE>
PMAS is offsetting, quarterly, against the outside fee such amounts as is
necessary to ensure that Mitchell Hutchins retains no more than 20 basis
points as a management fee from any Portfolio on investment assets
attributable to any Plan.(20)
- --------------------------
(19) The fees payable to Mitchell Hutchins under its investment management and
administration agreement with the Trust are comprised of two components. One
component is for administrative services provided to each Portfolio at the
annual rate of .20 percent of each Portfolio's net assets. The second component
is for investment management and related services provided to each Portfolio.
The annualized fee range here is from .15 percent to .90 percent of the
Portfolio's average daily net assets.
(20) PaineWebber asserts that it chose 20 basis points as the maximum net fee
retained for management services rendered to the Portfolios because this amount
represents the lowest percentage management fee charged by PaineWebber among the
Portfolios (excluding the PACE Money Market Investments Portfolio for which a
fee of 15 basis points will be charged).
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Prospectus Page 72
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
The administrative services fee payable to Mitchell Hutchins is not being
offset against the outside fee. Instead, that fee is being retained by
Mitchell Hutchins.
19. The following example demonstrates the operation of the fee offset
mechanism, the calculation of the net inside fee, and the calculation of the
total of a Plan investor's net outside fee and share of the investment
management fees paid by the Portfolios in a given calendar quarter or year:
Assume that as of September 30, 1995, the net asset value of Trust Portfolio
shares held by a Plan investor was $1,000. Investment assets attributable to
the Plan were distributed among five Trust Portfolios: (1) PACE Money Market
Investments in which the Plan made a $50 investment and from which Mitchell
Hutchins would retain an inside fee of .15 percent; (2) PACE Intermediate
Fixed Income Investments in which the Plan made a $200 investment and from
which Mitchell Hutchins would retain an inside fee of .20 percent; (3) PACE
Large Company Value Equity Investments in which the Plan made a $250
investment and Mitchell Hutchins would retain an inside fee of .30 percent;
(4) PACE Small/Medium Company Growth Equity Investments in which the Plan
made a $250 investment and Mitchell Hutchins would be entitled to receive an
inside fee of .30 percent; and (5) PACE International Equity Investments in
which the Plan made a $250 investment and Mitchell Hutchins would be
entitled to receive an inside fee of .30 percent.
Assume that the Plan investor pays an outside fee of 1.50 percent so that
the total outside fee for the calendar quarter October 1 through
December 31, prior to the fee offset, would be as follows:
<TABLE>
<CAPTION>
MAXIMUM OUTSIDE
AMOUNT OUTSIDE QUARTERLY
PORTFOLIO INVESTED QUARTERLY FEE FEE
- --------- -------- ------------- ---------
<S> <C> <C> <C>
PACE Money Market
Investments.................. $ 50 1.50% (.25) $0.1875
PACE Intermediate Fixed Income
Investments.................. 200 1.50% (.25) .7500
PACE Large Company Value
Equity Investments........... 250 1.50% (.25) .9375
PACE Small/Medium Company
Growth Equity Investments.... 250 1.50% (.25) .9375
PACE International Equity
Investments.................. 250 1.50% (.25) .9375
----- ---------- -------
Total Outside Fee Per
Quarter...................... 1,000 -- 3.7500
</TABLE>
Under the proposed fee offset, the outside fee charged to the Plan must be
reduced by a Reduction Factor to ensure that Mitchell Hutchins retains an
inside fee of no more than 20 basis points from each of the Portfolios on
investment assets attributable to the Plan. The following table shows the
Reduction Factor as applied to each of the Portfolios comprising the Trust:
<TABLE>
<CAPTION>
MH MAXIMUM REDUCTION
RETAINED FEE MH FEE FACTOR
PORTFOLIO (PERCENT) (PERCENT) (PERCENT)
- --------- ------------ ---------- ---------
<S> <C> <C> <C>
PACE Money Market
Investments............... .15 .15 .00
PACE Government Securities
Fixed Income
Investments............... .25 .20 .05
PACE Intermediate Fixed
Income Investments........ .20 .20 .00
PACE Strategic Fixed Income
Investments............... .25 .20 .05
</TABLE>
<TABLE>
PACE Municipal Fixed Income
Investments............... .20 .20 .00
<CAPTION>
MH MAXIMUM REDUCTION
RETAINED FEE MH FEE FACTOR
PORTFOLIO (PERCENT) (PERCENT) (PERCENT)
- --------- ------------ ---------- ---------
<S> <C> <C> <C>
PACE Global Fixed Income
Investments............... .25 .20 .05
PACE Large Company Value
Equity Investments........ .30 .20 .10
PACE Large Company Growth
Equity Investments........ .30 .20 .10
PACE Small/Medium Company
Value Equity
Investments............... .30 .20 .10
PACE Small/Medium Company
Growth Equity
Investments............... .30 .20 .10
PACE International Equity
Investments............... .30 .20 .10
PACE International Emerging
Markets Investments....... .40 .20 .20
</TABLE>
Under the proposed fee offset, a Reduction Factor of .10 percent is applied
against the quarterly outside fee with respect to the value of Plan assets
that have been invested in PACE Large Company Value Equity Investments, PACE
Small/Medium Company Growth Equity Investments and PACE International Equity
Investments. As noted above, the PACE Money Market Investments Portfolio and
the PACE Intermediate Fixed Income Investments Portfolio do not require the
application of a Reduction Factor because the management fee retained by
Mitchell Hutchins for managing these Portfolios does not exceed 20 basis
points. Therefore, the quarterly offset for the plan investor is computed as
follows:
(.25)[($250).10% + ($250).10% + ($250).10%] = $0.1875 or $.19.
In the foregoing example, if the Plan investor elects to receive an invoice
directly, the Plan investor would be mailed a statement for its PACE Program
account on or about October 15, 1995. This statement would show the outside
fee to be charged for the calendar quarter October 1 through December 31, as
adjusted by subtracting the quarterly offset from the quarterly outside fee
as determined above. The net quarterly outside fee that would be paid to
PMAS would be determined as follows:
$3.75 - $.19 = $3.56.
The Plan investor that elects to receive an invoice directly would be asked
to pay the outside fee for that quarter within 30 days of the date
on which the statement was mailed (e.g.,
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Prospectus Page 73
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
November 15, 1995). If the outside fee were not paid by that date, PMAS
would debit the account of the Plan investor (as with other investors) for
the amount of the outside fee (pursuant to the authorization contained in
the PACE Program Investment Advisory Agreement, and as described in the PACE
Program Description appended to the Prospectus).(21) A Plan investor that
elects to have the outside fee debited from its account would receive, in
November, a statement as of October 31 reflecting the outside fee and the
quarterly offset therefrom.
Assuming the Plan investor's investment in and allocation among the
Portfolios remains constant throughout the quarter, (a) the Plan investor's
fees for the quarter for asset allocation and related services provided by
PMAS (net outside fee) and (b) the fees paid by the Portfolios for
investment management services provided by Mitchell Hutchins (inside fee)
would be as follows:
$3.56 (net outside fee)+(.25) [($50+$200+$250+$250+$250).20%]
(administrative services fee)+(.25)
[($50).15% + ($200).20% + ($250 + $250 + $250).30%] (inside fee) =
$4.74.
Assuming the Plan investor's investment in and allocation among the
Portfolios remains constant throughout the year, the total net outside fee
and inside fee borne by the Plan investor for the year would be as follows:
4 (($4.74) = $18.96 or 1.89% per $1,000 invested.
20. PaineWebber notes that a potential conflict may exist by reason of the
variance in retained inside fees between the different Portfolios. For
example, Mitchell Hutchins will retain a lower inside fee with respect to
assets invested in the PACE Money Market Investments Portfolio than all other
Portfolios. PaineWebber recognizes that this factor could result in the
recommendation of a higher fee-generating Portfolio to an investing Plan.
Nonetheless, PMAS will be subject to and intends to comply fully with the
standards of fiduciary duty that require that it act solely in the best
interest of the Plan when making investment recommendations.
21. The books of the Trust will be audited annually by independent, certified
public accountants selected by the Trustees and approved by the investors.
All investors will receive copies of an audited financial report no later
than sixty days after the close of each Trust fiscal year. All Trust
financial statements will be prepared in accordance with generally accepted
accounting principles and relevant provisions of the federal securities laws.
The books and financial records of the Trust will be open for inspection by
any investor, including the Department, the Service and SEC, at all times
during regular business hours.
22. In summary, it is represented that the transactions will satisfy the
statutory criteria for an exemption under section 408(a) of the Act because:
(a) The investment of a Plan's assets in the PACE Program will be made and
approved by a Plan fiduciary or participant that is independent of
PaineWebber and its affiliates such that the Independent Fiduciary or
Directing Participant will maintain complete discretion with respect to
participating in the PACE Program.
(b) An Independent Fiduciary or Directing Participant will have full
discretion to redeem his or her shares in the Trust.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust and PMAS nor will its affiliates
receive 12b-1 Fees in connection with the transactions.
(d) Prior to making an investment in the PACE Program, each Independent
Fiduciary or Directing Participant will receive offering materials and
disclosures from PMAS which disclose all material facts concerning the
purpose, fees, structure, operation, risks and participation in the PACE
Program.
(e) PMAS will provide written documentation to an Independent Fiduciary or
Directing Participant of its recommendations or evaluations based upon
objective criteria.
(f) With the exception of Mitchell Hutchins which will manage the PACE Money
Market Investments Portfolio, any Sub-Adviser appointed to exercise
investment discretion over a Portfolio will always be independent of
PaineWebber and its affiliates.
(g) The quarterly investment advisory fee that is paid by a Plan to PMAS for
investment advisory services rendered to such Plan will be offset by such
amount as is necessary to assure that Mitchell Hutchins retains 20 basis
points from any Portfolio (with the exception of the PACE Money Market
Investments Portfolio) on investment assets attributable to the Plan
investor. However, the quarterly fee paid to Mitchell Hutchins
- --------------------------
(21) PaineWebber explains that the foregoing example illustrates the fact that
Plan investors will get the benefit of the fee offset contemporaneously upon the
payment of the outside fee. Because the inside fee is paid monthly and the fee
offset is computed quarterly, the applicants also explain that PMAS does not
receive the benefit of a "float" as a result of such calculations because the
fee offset will always be realized no later than the time that the outside fee
is paid. Since the inside fee is paid at the end of each calendar month, the
applicants further explain that Plan investors will realize the full benefit of
the offset before the time that the inside fee is paid for the second and third
months of the calendar quarter.
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Prospectus Page 74
<PAGE>
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------------------------
PaineWebber PACE Select Advisors Trust
for administrative services will be retained by Mitchell Hutchins and
will not be offset against the outside fee.
(h) Each participating Plan will receive copies of the Trust's semi-annual
and annual report which will include financial statements for the Trust
that have been prepared by independent, certified public accountants and
investment management fees paid by each Portfolio.
(i) On a quarterly and annual basis, PaineWebber will provide written
disclosures to an Independent Fiduciary or, if applicable, Directing
Participant, with respect to (1) the total, expressed in dollars, of each
Portfolio's brokerage commissions that are paid to PaineWebber and its
affiliates; (2) the total, expressed in dollars, of each Portfolio's
brokerage commissions that are paid to unrelated brokerage firms;
(3) the average brokerage commissions per share by the Trust to brokers
affiliated with the PaineWebber, expressed as cents per share; and
(4) the average brokerage commissions per share by the Trust to brokers
unrelated to the PaineWebber and its affiliates, expressed as cents per
share for any year in which brokerage commissions are paid to PaineWebber
by the Trust Portfolios in which a Plan's assets are invested.
For Further Information Contact: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
40000-40004 FEDERAL REGISTER VOL. 61, NO. 148 WEDNESDAY, JULY 31, 1996
[PROHIBITED TRANSACTION EXEMPTION 96-59; EXEMPTION
APPLICATION NO. D-09818, ET AL.] NOTICES
GRANT OF INDIVIDUAL EXEMPTIONS; PAINEWEBBER INCORPORATED
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: GRANT OF INDIVIDUAL EXEMPTIONS.
- --------------------------------------------------------------------------------
SUMMARY: This document contains exemptions issued by the Department of Labor
(the Department) from certain of the prohibited transaction restrictions of the
Employee Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).
Notices were published in the FEDERAL REGISTER of the pendency before the
Department of proposals to grant such exemptions. The notices set forth a
summary of facts and representations contained in each application for exemption
and referred interested persons to the respective applications for a complete
statement of the facts and representations. The applications have been available
for public inspection at the Department in Washington, D.C. The notices also
invited interested persons to submit comments on the requested exemptions to the
Department. In addition the notices stated that any interested person might
submit a written request that a public hearing be held (where appropriate). The
applicants have represented that they have complied with the requirements of the
notification to interested persons. No public comments and no requests for a
hearing, unless otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions are being
granted solely by the Department because, effective December 31, 1978, section
102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978)
transferred the authority of the Secretary of the Treasury to issue exemptions
of the type proposed to the Secretary of Labor.
STATUTORY FINDINGS
In accordance with section 408(a) of the Act and/or section 4975(c)(2) of the
Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836,
32847, August 10, 1990) and based upon the entire record, the Department makes
the following findings:
(a) The exemptions are administratively feasible;
(b) They are in the interests of the plans and their participants and
beneficiaries; and
(c) They are protective of the rights of the participants and beneficiaries of
the plans.
PAINEWEBBER INCORPORATED (PAINEWEBBER), LOCATED IN NEW YORK, NY [Prohibited
Transaction Exemption 96-59; Exemption Application No. D-09818]
EXEMPTION
Section I. Covered Transactions
The restrictions of section 406(a) of the Act and the sanctions resulting from
the application of section 4975 of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply, effective August 18,
1995, to the purchase or redemption of shares by an employee benefit plan, a
plan described in section 403(b) of the Code (the Section 403(b) Plan), an
individual retirement account (the IRA) or a retirement plan for a self-employed
individual (the Keogh Plan) (collectively referred to herein as the Plans) in
the PaineWebber Managed Accounts Services Portfolio Trust (the Trust)
established in connection with such Plans' participation in the PaineWebber PACE
Program (the PACE Program).
In addition, the restrictions of section 406(b) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply, effective August 18, 1995,
to (a) the provision, by PaineWebber Managed Accounts Services (PMAS), a
division of PaineWebber, of asset
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PaineWebber PACE Select Advisors Trust
allocation and related services to an independent fiduciary of a Plan (the
Independent Fiduciary) or to a directing participant (the Directing Participant)
in a Plan that is covered under and permits participant selection as
contemplated by the provisions of section 404(c) of the Act (the Section
404(c) Plan), which may result in the selection by the Independent Fiduciary or
the Directing Participant of portfolios of the Trust (the Portfolios) in the
PACE Program for the investment of Plan assets; and (b) the provision of
investment management services by Mitchell Hutchins Asset Management, Inc.
(Mitchell Hutchins) to the PACE Money Market Investments Portfolio of the Trust.
This exemption is subject to the conditions set forth below in Section II.
Section II. General Conditions
(a) The participation of each Plan in the PACE Program is approved by an
Independent Fiduciary or, if applicable, Directing Participant.
(b) As to each Plan, the total fees paid to PMAS and its affiliates constitute
no more than reasonable compensation and do not include the receipt of fees
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the '40 Act)
by PMAS and its affiliates in connection with the transactions.
(c) No Plan pays a fee or commission by reason of the acquisition or redemption
of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares remain at least as
favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) PMAS provides written documentation to an Independent Fiduciary or a
Directing Participant of its recommendations or evaluations based upon
objective criteria.
(f) Any recommendation or evaluation made by PMAS to an Independent Fiduciary or
Directing Participant is implemented only at the express direction of such
fiduciary or participant.
(g) PMAS provides investment advice in writing to an Independent Fiduciary or
Directing Participant with respect to all Portfolios made available under the
Plan.
(h) With the exception of the PACE Money Market Investments Portfolio, any
sub-adviser (the Sub-Adviser) appointed by Mitchell Hutchins to exercise
investment discretion with respect to a Portfolio is independent of
PaineWebber and its affiliates.
(i) The quarterly fee that is paid by a Plan to PMAS for asset allocation and
related services rendered to such Plan under the PACE Program (i.e., the
outside fee) is offset by such amount as is necessary to assure that
Mitchell Hutchins retains 20 basis points as a management fee from any
Portfolio (with the exception of the PACE Money Market Investments Portfolio
from which Mitchell Hutchins retains an investment management fee of 15
basis points) containing investments attributable to the Plan investor.
However, the quarterly fee of 20 basis points that is paid to Mitchell
Hutchins for administrative services is retained by Mitchell Hutchins and is
not offset against the outside fee.
(j) With respect to its participation in the PACE Program prior to purchasing
Trust shares,
(1) Each Independent Fiduciary receives the following written or oral
disclosures from PaineWebber:
(A) A copy of the prospectus (the Prospectus) for the Trust discussing
the investment objectives of the Portfolios comprising the Trust; the
policies employed to achieve these objectives; the corporate
affiliation existing between PaineWebber, PMAS, Mitchell Hutchins and
their affiliates; the compensation paid to such entities; any
additional information explaining the risks of investing in the
Trust; and sufficient and understandable disclosures relating to
rebalancing of investor accounts.
(B) Upon written or oral request to PaineWebber, a Statement of
Additional Information supplementing the Prospectus, which describes
the types of securities and other instruments in which the Portfolios
may invest, the investment policies and strategies that the
Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.
(C) An investor questionnaire.
(D) A written analysis of PMAS's asset allocation recommendation of
specific Portfolios.
(E) A copy of the agreement between PMAS and such Plan relating to
participation in the PACE Program.
(F) Upon written request to Mitchell Hutchins, a copy of the respective
investment advisory agreements between Mitchell Hutchins and the
Sub-Advisers.
(G) Copies of the proposed exemption and grant notice describing the
exemptive relief provided herein.
(2) In the case of a Section 404(c) Plan, the Independent Fiduciary will--
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PaineWebber PACE Select Advisors Trust
(A) Make copies of the foregoing documents available to Directing
Participants.
(B) Allow Directing Participants to interact with PaineWebber Investment
Executives and receive information relative to the services offered
under the PACE Program, including the rebalancing feature, and the
operation and objectives of the Portfolios.
(3) If accepted as an investor in the PACE Program, an Independent Fiduciary
of a Section 403(b) Plan, an IRA or a Keogh Plan, is required to
acknowledge, in writing to PMAS, prior to purchasing Trust shares that
such fiduciary has received copies of the documents described in
paragraph (j)(1) of this Section II.
(4) With respect to a Section 404(c) Plan, written acknowledgment of the
receipt of such documents is provided by the Independent Fiduciary (i.e.,
the Plan administrator, trustee, investment manager or named fiduciary).
Such Independent Fiduciary will be required to represent in writing to
PMAS that such fiduciary is--
(A) Independent of PaineWebber and its affiliates;
(B) Knowledgeable with respect to the Plan in administrative matters and
funding matters related thereto, and;
(C) Able to make an informed decision concerning participation in the
PACE Program.
(5) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to PMAS that such
fiduciary is
(A) Independent of PMAS and its affiliates;
(B) Capable of making an independent decision regarding the investment
of Plan assets;
(C) Knowledgeable with respect to the Plan in administrative matters and
funding matters related thereto; and
(D) Able to make an informed decision concerning participation in the
PACE Program.
(k) As applicable, subsequent to its participation in the PACE Program, each
Independent Fiduciary receives the following written or oral disclosures with
respect to its ongoing participation in the PACE Program:
(1) Written confirmations of each purchase or redemption transaction by the
Plan with respect to a Portfolio.
(2) Telephone access to quotations from PaineWebber of such Plan's account
balance.
(3) A monthly statement of account from PaineWebber specifying the net asset
value of the Plan's investment in such account. Such statement is also
anticipated to include cash flow and transaction activity during the
month, unrealized gains or losses on Portfolio shares held; and a summary
of total earnings and capital returns on the Plan's PACE Portfolio for
the month and year-to-date.
(4) The Trust's semi-annual and annual report which will include financial
statements for the Trust and investment management fees paid by each
Portfolio.
(5) A written quarterly monitoring report that includes (a) a record of the
Plan's PACE Program portfolio for the quarter and since inception,
showing the rates of return relative to comparative market indices
(illustrated in a manner that reflects the effect of any fees for
participation in the PACE Program actually incurred during the period);
(b) an investment outlook summary containing market commentary; and
(c) the Plan's actual PACE Program portfolio with a breakdown, in both
dollars and percentages, of the holdings in each portfolio. The quarterly
monitoring report will also contain an analysis and an evaluation of a
Plan investor's account to assist the investor to ascertain whether the
Plan's investment objectives have been met and recommending, if required,
changes in Portfolio allocations.
(6) A statement, furnished at least quarterly or annually, specifying--
(A) The total, expressed in dollars, of each Portfolio's brokerage
commissions that are paid to PaineWebber and its affiliates;
(B) The total, expressed in dollars, of each Portfolio's brokerage
commissions that are paid to unrelated brokerage firms;
(C) The average brokerage commissions per share that are paid by the
Trust to brokers affiliated with PaineWebber, expressed as cents per
share; and
(D) The average brokerage commissions per share that are paid by the
Trust to
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PaineWebber PACE Select Advisors Trust
brokers unrelated to PaineWebber and its affiliates, expressed as
cents per share for any year in which brokerage commissions are paid
to PaineWebber by the Trust Portfolios in which a Plan's assets are
invested.
(7) Periodic meetings with a PaineWebber Investment Executive (or the
appropriate PaineWebber representative) by Independent Fiduciaries to
discuss the quarterly monitoring report or any other questions that may
arise.
(1) In the case of a Section 404(c) Plan where the Independent Fiduciary has
established an omnibus account in the name of the Plan (the Undisclosed
Account) with PaineWebber, depending upon the arrangement negotiated by the
Independent Fiduciary with PMAS, certain of the information noted above in
subparagraphs (k)(1) through (k)(7) of this Section II may be provided by
PaineWebber to the Directing Participants or to the Independent Fiduciary for
dissemination to the Directing Participants.
(m) If previously authorized in writing by the Independent Fiduciary, the Plan
investor's account is automatically rebalanced on a periodic basis to the
asset allocation previously prescribed by the Plan or participant, as
applicable, if the quarterly screening reveals that one or more Portfolio
allocations deviates from the allocation prescribed by the investor by the
agreed-upon formula threshold.
(n) The books and records of the Trust are audited annually by independent,
certified public accountants and all investors are sent copies of an audited
financial report no later than 60 days after the close of each Trust fiscal
year.
(o) PaineWebber maintains, for a period of six years, the records necessary to
enable the persons described in paragraph (p) of this Section II to determine
whether the conditions of this exemption have been met, except that--
(1) A prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of PaineWebber and/or its affiliates,
the records are lost or destroyed prior to the end of the six year
period; and
(2) No party in interest other than PaineWebber shall be subject to the
civil penalty that may be assessed under section 502(i) of the Act, or to
the taxes imposed by section 4975 (a) and (b) of the Code, if the records
are not maintained, or are not available for examination as required by
paragraph (p)(l) of this Section II below.
(p) (1) Except as provided in subparagraph (p)(2) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of section 504
of the Act, the records referred to in paragraph (o) of this Section II are
unconditionally available at their customary location during normal business
hours by:
(A) Any duly authorized employee or representative of the Department, the
Internal Revenue Service (the Service) or the Securities and Exchange
Commission (the SEC);
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;
(C) Any contributing employer to any participating Plan or any duly
authorized employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.
(p) (2) None of the persons described above in paragraphs (p)(1)(B)-(p)(1)(D) of
this paragraph (p) are authorized to examine the trade secrets of PaineWebber
or Mitchell Hutchins or commercial or financial information which is
privileged or confidential.
Section III. Definitions
For purposes of this exemption:
(a) The term "PaineWebber" means PaineWebber Incorporated and any affiliate of
PaineWebber, as defined in paragraph (b) of this Section III.
(b) An "affiliate" of PaineWebber includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with PaineWebber.
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(c) The term "control" means the power to exercise a controlling influence over
the management or policies of a person other than an individual.
(d) The term "Independent Fiduciary" means a Plan fiduciary which is independent
of PaineWebber and its affiliates and is either
(1) A Plan administrator, trustee, investment manager or named fiduciary of
a Section 404(c) Plan or a Section 403(b) Plan;
(2) A participant in a Keogh Plan;
(3) An individual covered under a self-directed IRA which invests in Trust
shares;
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PaineWebber PACE Select Advisors Trust
(4) An employee, officer or director of PaineWebber and/or its affiliates
covered by an IRA not subject to Title I of the Act;
(5) A trustee, Plan administrator, investment manager or named fiduciary
responsible for investment decisions in the case of a Title I Plan that
does not permit individual direction as contemplated by Section
404(c) of the Act; or
(e) The term "Directing Participant" means a participant in a Plan covered under
the provisions of section 404(c) of the Act, who is permitted under the terms
of the Plan to direct, and who elects to so direct, the investment of the
assets of his or her account in such Plan.
(f) The term "Plan" means a pension plan described in 29 CFR 2510.3-2, a welfare
benefit plan described in 29 CFR 2510.3-1, a plan described in section
4975(e)(1) of the Code, and in the case of a Section 404(c) Plan, the
individual account of a Directing Participant.
EFFECTIVE DATE: This exemption will be effective as of August 18, 1995.
For a more complete statement of the facts and representations supporting
the Department's decision to grant this exemption, refer to the notice of
proposed exemption (the Notice) published on March 22, 1996 at 61 FR 11882.
WRITTEN COMMENTS
The Department received one written comment with respect to the Notice and no
requests for a public hearing. The comment was submitted by PaineWebber, PMAS
and Mitchell Hutchins (collectively, the Applicants). Their comment is broken
down into the areas discussed below.
(1) SECTION 403(b) PLAN PARTICIPATION. In addition to IRAs, Keogh Plans, Section
404(c) Plans and other types of employee benefit plans that will participate
in the PACE Program, the Applicants represent that they wish to offer shares
in the Trust to Plans that are described in section 403(b) of the Code.
Therefore, the Applicants have requested that the Department include
references to Section 403(b) Plans in the exemptive language set forth in
Section I, in the conditional language set forth in Sections II(j)(3) and
III(d)(1) and in Representation 6 of the Summary of Facts and Representations
(the Summary). The Department has revised the Notice accordingly.
(2) AVAILABLE PORTFOLIOS. Section II(g) of the Notice states that PMAS will
provide investment advice in writing to an Independent Fiduciary or a
Directing Participant with respect to all available Portfolios offered by the
Trust. The Applicants note, however, that, in the case of a Section
404(c) Plan, an Independent Fiduciary will determine the initial array of
Portfolios among which the Directing Participants may allocate Plan assets,
and that such fiduciary may decide to include less than all of the Portfolios
in that array. Therefore, the Applicants have requested that the Department
revise Section II(g) of the Notice as follows to make it clear that
"available" Portfolios are those that will be selected by the Independent
Fiduciary under such circumstances:
(g) PMAS provides investment advice in writing to an Independent Fiduciary or
Directing Participant with respect to all Portfolios made available under the
Plan.
The Department has made the change requested by the Applicants.
(3) INDEPENDENT FIDUCIARY ROLE. With respect to a Section 404(c) Plan,
Section II(j)(4) of the Notice states that written acknowledgement of the
receipt of initial disclosures from PaineWebber will be provided by the
Independent Fiduciary who may be the Plan administrator, trustee,
investment manager or the named fiduciary, as the record holder of Trust
shares. The Applicants wish to clarify that because the trustee of a
trust is generally the legal owner of trust assets, the Plan trustee
rather than the Independent Fiduciary is the actual recordholder of Trust
shares. Therefore, the Applicants request that the Department revise
Section II(j)(4) of the Notice to read as follows:
(4) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents is provided by the Independent Fiduciary (i.e.,
the Plan administrator, trustee, investment manager or named fiduciary).
The Department has amended the Notice in this regard.
(4) DIRECTING PARTICIPANT DISCLOSURE. Section II(1) of the Notice states, in
relevant part, that if an Independent Fiduciary of a Section 404(c) Plan
has established an Undisclosed Account with PaineWebber, certain
disclosures will be provided by PaineWebber to the Directing Participants
or to the Independent Fiduciary for dissemination to the Directing
Participants, depending upon the arrangement negotiated with PMAS. In an
effort to reflect the manner in which that information will be
distributed or made available to Directing Participants and/or to the
Independent Fiduciaries of Section 404(c) Plans, the Applicants request
that the Department modify Section II(l) of the Notice.
The Department has amended Section II(1) of the Notice to read as follows:
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PaineWebber PACE Select Advisors Trust
(1) In the case of a Section 404(c) Plan where the Independent Fiduciary has
established an omnibus account in the name of the Plan (the Undisclosed
Account) with PaineWebber, depending upon the arrangement negotiated by the
Independent Fiduciary with PMAS, certain of the information noted above in
subparagraphs (k)(1) through (k)(7) of this Section II may be provided by
PaineWebber to the Directing Participants or to the Independent Fiduciary for
dissemination to the Directing Participants.
(5) DESCRIPTION OF PAINEWEBBER GROUP AND PAINEWEBBER. Representation
1(a) of the Summary, states, in part, that the PaineWebber Group is a
member of all principal securities and commodities exchanges in the
United States and the National Association of Securities Dealers, Inc. It
is also represented that PaineWebber Group holds memberships or associate
memberships on several principal foreign securities and commodities
exchanges. Although the Applicants furnished this information to the
Department, they wish to clarify that these representations pertain to
PaineWebber rather than to the Paine Webber Group. Therefore, they
request that the Department make appropriate changes to the Summary.
The Department has revised the language in Representation 1(b) of the
Summary as follows:
PaineWebber is a member of all principal securities and commodities
exchanges in the United States and the National Association of Securities
Dealers, Inc. It also holds memberships or associate memberships on several
principal foreign securities and commodities exchanges.
(6) NET ASSET VALUE PER SHARE. In pertinent part, Representation 2 of the
Summary states that with the exception of the PACE Money Market
Investments Portfolio, shares in the Trust were initially offered to the
public by PaineWebber at a net asset value of $10 per share and that
shares in the PACE Money Market Investments Portfolio are being offered
to the public at a net asset value of $1.00 per share. The Applicants
wish to clarify that with the exception of the PACE Money Market
Investments Portfolio in which shares are offered to the public at a net
asset value of $1.00 per share, shares in the other Portfolios were
initially offered to the public at a net asset value of $12 per share.
Accordingly, the Department has revised the sixth and seventh sentences of
Representation 2 to read as follows:
With the exception of the PACE Money Market Investments Portfolio, shares in
each of the Portfolios were initially offered to the public at a net asset value
of $12 per share. Shares in the PACE Money Market Investments Portfolio are
offered to the public at a net asset value of $1.00 per share.
(7) MINIMUM INVESTMENTS. The second paragraph of Representation 3 of the Summary
states, in part, that the minimum initial investment for a prospective
investor in the PACE Program is $10,000. The Applicants note, however, that
the minimum initial investment threshold for an investor is currently $25,000
and not $10,000. For Plan investors and Uniform Gift or Transfer to Minors
Accounts, the Applicants wish to clarify that the minimum initial investment
is presently $10,000.
The Department has revised part of Representation 3 to read as follows:
*** The minimum initial investment in the PACE Program currently is $25,000
(except for Plans and Uniform Gift or Transfer to Minors Accounts, for
which the minimum initial investment is currently $10,000).
(8) VALUATION OF PORTFOLIO SHARES. Footnote 10 of the Summary states, in part,
that the net asset value of shares in the PACE Money Market Investments
Portfolio is determined as of 12 p.m. each business day. To indicate that the
net asset value of all Portfolio shares, including shares of the PACE Money
Market Investments Portfolio, is being determined as of the close of regular
trading on the New York Stock Exchange (currently 4 p.m., Eastern Time) each
business day, the Applicants request that the Department modify Footnote 10
of the Summary.
The Department has modified Footnote 10 to read as follows:
The net asset value of each Portfolio's shares is determined as of the close
of regular trading on the New York Stock Exchange (the NYSE) (currently,
4 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.
In addition, the Applicants have requested that Footnote 16 of the Summary
be revised to incorporate the following language:
*** The net asset value of each Portfolio's shares is determined as of the
close of regular trading on the NYSE (currently, 4 p.m. Eastern Time)
each business day. PaineWebber may, in the future, impose a minimum
dollar threshold on rebalancing transactions in order to avoid DE
MINIMUS transactions.
(9) PAYMENT OF REDEMPTION PROCEEDS. Representation 14 of the Summary states, in
part, that a Portfolio
will be required to transmit redemption
proceeds for credit to an investor's
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PaineWebber PACE Select Advisors Trust
account within 5 business days after receipt. Similarly, Representation 17 of
the Summary sets forth the same time frame for the payment of the outside fee
as well as the applicable fee if additional funds are invested during a
calendar quarter. Because Federal Securities laws currently require
PaineWebber to settle its obligations within three business days, the
Applicants have requested that the Department revise the Summary to reflect
the current timing of such payments.
The Department does not object to these necessary revisions and has deleted
references to the five business day requirement and inserted the phrase "three
business days" in the fourth sentence of paragraph one of Representation 14, in
the first sentence of paragraph two of Representation 17 and in the first
sentence of paragraph three of Representation 17.
(10) BROKERAGE COMMISSION INFORMATION. Representation 22(i) of the Summary
states, in part, that on a quarterly and annual basis, PaineWebber will
provide written disclosures to an Independent Fiduciary or, if applicable, a
Directing Participant regarding brokerage commissions that are paid to
PaineWebber and/or its affiliates or to unrelated parties. The Applicants
have requested that the Department revise this representation to reflect
that brokerage commission information will be provided to the Independent
Fiduciary and, depending on the arrangement negotiated between the
Independent Fiduciary of a Section 404(c) Plan and PMAS, to a Directing
Participant. The Applicants state that the language set forth in the Summary
appears to indicate that PaineWebber will provide such information under all
circumstances to Independent Fiduciaries and where applicable, to Directing
Participants only.
The Department has revised paragraph (i) of Representation 22 to read, in
part, as follows:
(i) On a quarterly and annual basis, PaineWebber will provide written
disclosures to an Independent Fiduciary and, depending on the arrangement
negotiated with PMAS, a Directing Participant, with respect to (1) the total,
expressed in dollars, of each Portfolio's brokerage commissions that are paid
to PaineWebber and its affiliates;***
After giving full consideration to the entire record, the Department has
decided to grant the exemption subject to the modifications or clarifications
described above. The Applicants' comment letter has been included as part of the
public record of the exemption application. The complete application file,
including all supplemental submissions received by the Department, is made
available for public inspection in the Public Documents Room of the Pension and
Welfare Benefits Administration, Room N-5638, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
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PaineWebber PACE Select Advisors Trust
TICKER SYMBOLS
<TABLE>
<S> <C>
PACE Money Market Investments PCEXX
PACE Government Securities Fixed Income Investments PCGTX
PACE Intermediate Fixed Income Investments PCIFX
PACE Strategic Fixed Income Investments PCSIX
PACE Municipal Fixed Income Investments PCMNX
PACE Global Fixed Income Investments PCGLX
PACE Large Company Value Equity Investments PCLVX
PACE Large Company Growth Equity Investments PCLCX
PACE Small/Medium Company Value Equity Investments PCSVX
PACE Small/Medium Company Growth Equity Investments PCSGX
PACE International Equity Investments PCIEX
PACE International Emerging Markets Equity Investments PCEMX
</TABLE>
If you want more information about the funds, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders. In the funds' annual reports,
you will find a discussion of the market conditions and investment strategies
that significantly affected the funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CONTRACT PROSPECTUS:
The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus. Investors are advised to also read the
applicable contract prospectus.
You may discuss your questions about the funds, obtain free copies of annual and
semi-annual reports and the SAI by contacting the funds directly at
1-800-647-1568.
You may review and copy information about the funds, including annual and
semi-annual reports and the SAI, at the Public Reference Room of the Securities
and Exchange Commission. You can get text-only copies of reports and other
information about the funds and about the operations of the SEC's Public
Reference Room:
- - For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
- - Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber PACE Select Advisors Trust
Investment Company Act File No. 811-8764
- -C- 1999 PaineWebber Incorporated. All rights reserved. Member SIPC.
---------------
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<PAGE>
PACE Money Market Investments
--------------------
PROSPECTUS
DECEMBER 1, 1999
----------------------------------
This Prospectus offers shares of PACE Money Market Investments, a series of
PaineWebber PACE-SM- Select Advisors Trust, to participants in the PaineWebber
PACE-SM- Multi Advisor Program. The PaineWebber PACE-SM- Multi Advisor Program
is designed to assist you in devising an asset allocation strategy to meet your
individual needs.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
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PaineWebber PACE Money Market Investments
Contents
THE FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
What every investor 3 PACE Money Market Investments
should know about
the fund 6 More About Risks and Investment Strategies
</TABLE>
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Information for 7 Investing in the Fund
managing your fund --Buying Shares
account --The PaineWebber PACE-SM- Multi Advisor
Program
--Selling Shares
--Pricing and Valuation
</TABLE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Additional important 9 Management
information about
the fund 10 Dividends and Taxes
11 Financial Highlights
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Where to learn more Back Cover
about the fund
</TABLE>
The fund is not a complete or
balanced investment program.
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PaineWebber PACE Money Market Investments
PACE Money Market Investments
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
Current income consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES:
The fund is a money market mutual fund and seeks to maintain a stable price of
$1.00 per share. The fund invests in a diversified portfolio of high quality
money market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's manager and investment
adviser, selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS:
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall and its yield will tend to lag behind
prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
- - Credit Risk
- - Interest Rate Risk
- - Foreign Securities Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THESE
REPORTS).
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Prospectus Page 3
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
PERFORMANCE
- --------------------------------------------------------------------------------
RISK/RETURN BAR CHART AND TABLE:
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the annual PACE-SM- Multi Advisor Program fee; if it
did, the total returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. The table does reflect the annual
PACE-SM- Multi Advisor Program fee.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENTAGES
<S> <C>
1996 5.05%
1997 5.27%
1998 5.21%
CALENDAR YEAR
</TABLE>
Total Return January 1 to September 30, 1999 -- 3.49%
Best quarter during calendar years shown: 4th quarter, 1997 -- 1.33%
Worst quarter during calendar years shown: 4th quarter, 1998 -- 1.22%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
INCEPTION DATE (8/24/95)
- -------------- ---------
<S> <C>
One Year.................................................... 3.65%
Life of Fund................................................ 3.64%
</TABLE>
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Prospectus Page 4
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Maximum Annual Account Fee for PaineWebber PACE-SM- Multi
Advisor Program (as a % of average value of shares held on
the last calendar day of the previous quarter)............ 1.50%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.15%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses*............................................. 0.92%
----
Total Annual Fund Operating Expenses........................ 1.07%
====
Expense Reimbursements**.................................... 0.57%
----
Net Expenses**.............................................. 0.50%
====
</TABLE>
- ---------
* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.
** The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those reimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example includes the maximum annual fee for the PACE-SM- Multi Advisor Program
and also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same, except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with Mitchell
Hutchins. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- -------- --------
<S> <C> <C> <C>
$203 $745 $1,314 $2,863
</TABLE>
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Prospectus Page 5
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further details about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even high quality money market instruments
are subject to some credit risk.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when interest rates rise and to rise when interest rates fall.
Interest rate risk is the risk that interest rates will rise, so that the value
of the fund's investments in money market instruments will fall. Also, the
fund's yield will tend to lag behind changes in prevailing short-term interest
rates. This means that the fund's income will tend to rise more slowly than
increases in short-term interest rates. Similarly, when short-term interest
rates are falling, the fund's income will tend to fall more slowly.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
YEAR 2000 RISK. The fund could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from service providers that they are taking similar steps. Similarly,
the issuers in which the fund invests and trading systems used by the fund could
be adversely affected by this issue. The ability of an issuer or trading system
to respond successfully to the issue requires both technological sophistication
and diligence, and there can be no assurance that any steps taken will be
sufficient to avoid an adverse impact on the fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. Mitchell Hutchins may use a number of professional money
management techniques to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
varying the fund's composition and weighted average maturity based on an
assessment of the relative values of various money market instruments and future
interest rate patterns. Mitchell Hutchins also may buy or sell money market
instruments to take advantage of yield differences.
- --------------------------------------------------------------------------------
Prospectus Page 6
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
BUYING SHARES
If you are a participant in the PaineWebber PACE-SM- Multi Advisor Program, you
may buy shares of the fund through a managed account maintained with PaineWebber
Incorporated. Payment for investments made through the PACE-SM- Multi Advisor
Program is made by debiting this account. Your payment for fund shares is due no
later than the first business day after the order is placed. You may place an
order only after you have executed the necessary PACE-SM- Multi Advisor Program
documentation and made an asset allocation decision. Your Financial Advisor is
responsible for promptly forwarding your order to PaineWebber's headquarters.
The fund and PaineWebber reserve the right to reject a purchase order or suspend
the offering of fund shares.
THE PAINEWEBBER PACE-SM- MULTI ADVISOR PROGRAM
The PACE-SM- Multi Advisor Program is described in detail in the PACE-SM- Multi
Advisor Disclosure Document, the PACE-SM- Multi Advisor Investment Advisory
Agreement and other Program documents. The description of the PACE-SM- Multi
Advisor Program in this Prospectus is only a brief summary of certain features
of the Program and is not intended as a complete description.
The PaineWebber PACE-SM- Multi Advisor Program is an advisory program sponsored
by PaineWebber that includes comprehensive investment services, including
investor profiling, a personalized asset allocation strategy using an
appropriate combination of shares in no-load, low-load and load-waived funds and
a quarterly investment performance review. PaineWebber has no investment
discretion over your PACE-SM- Multi Advisor Program account except to the extent
required to permit automatic rebalancing of your account if you elect that
service. Otherwise, you will make all the investment decisions.
The fund is one of several funds used as vehicles to implement the long-term
asset allocation strategies recommended through the PACE-SM- Multi Advisor
Program based on an evaluation of your investment objectives and risk
tolerances.
The minimum initial aggregate investment in the PACE-SM- Multi Advisor Program
is $10,000 and is subject to the minimum investment requirements of the funds in
the Program. Any subsequent investment in the Program must be at least $500 if
invested proportionately among the funds.
It is possible that PaineWebber's periodic recommendations for adjustments in
the allocation of your assets among different funds may not be successful or may
not be developed, transmitted and acted upon quickly enough 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.
PAINEWEBBER PACE-SM- MULTI ADVISOR PROGRAM FEE
For the services provided to you under the PACE-SM- Multi Advisor Program, you
will pay PaineWebber a quarterly Program Fee at an annual rate of up to 1.50% of
the value of the shares of the funds held in your account under the Program.
This quarterly fee is generally charged to your PaineWebber account. Employees
of PaineWebber and its affiliates may participate in the PACE-SM- Multi Advisor
Program at a reduced fee or for no fee.
PaineWebber Financial Advisors receive a portion of the PACE-SM- Program Fee for
the services they provide to participants.
As a PACE-SM- Multi Advisor Program participant, you may incur greater total
fees and expenses than investors purchasing shares of similar funds without the
benefit of these professional asset allocation recommendations.
SELLING SHARES
You can sell your fund shares at any time. You may sell your shares by
contacting your PaineWebber Financial Advisor in person or by telephone or mail.
Your Financial Advisor is responsible for promptly forwarding your request to
PaineWebber's headquarters. After it receives and accepts your request,
PaineWebber repurchases your
- --------------------------------------------------------------------------------
Prospectus Page 7
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber PACE Money Market Investments
fund shares. You generally will receive the proceeds of the sale within the
first business day after PaineWebber receives the order.
PaineWebber reserves the right not to repurchase your shares. In that case,
PaineWebber forwards your request to sell your shares to the fund's transfer
agent. The transfer agent will sell your shares after you provide it with the
following information in writing:
- - Your name and address;
- - The fund's name;
- - Your account number;
- - The dollar amount or number of shares you want to sell; and
- - A guarantee of each registered owner's signature. A signature guarantee may be
obtained from a financial institution, broker, dealer or clearing agency that
is a participant in one of the medallion programs recognized by the Securities
Transfer Agents Association. These are: Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The fund and the transfer
agent will not accept signature guarantees that are not a part of these
programs.
Sales through the transfer agent may also need to include additional supporting
documents for sales by estates, trusts, guardianships, custodianships,
partnerships and corporations.
PaineWebber may terminate your participation in the PACE-SM- Multi Advisor
Program if the value of your assets in the Program declines or is reduced to
less than $7,500. If PaineWebber elects to do this with your account, it will
notify you that you can increase the amount invested to the account minimum or
more within 30 days. This notice may appear on your account statement.
PaineWebber will not terminate your participation in the Program if the value of
your account falls below $7,500 solely as a result of a reduction in net asset
value per share of the funds or redemptions to pay Program fees.
If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
PRICING AND VALUATION
The price at which you may buy or sell the fund's shares is based on the next
net asset value per share calculated after your order is placed. The fund
calculates its net asset value on days that the New York Stock Exchange is open
as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern
time). The NYSE normally is not open, and the fund does not price its shares, on
most national holidays and on Good Friday. If trading on the NYSE is halted for
the day before 4:00 p.m., Eastern time, the fund's net asset value per share
will be calculated as of the time trading was halted.
The fund's net asset value per share is expected to be $1.00 per share, although
this value is not guaranteed. The fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
- --------------------------------------------------------------------------------
Prospectus Page 8
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
MANAGEMENT
- --------------------------------------------------------------------------------
MANAGER AND INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the fund's manager and administrator
and also provides investment advisory services. Mitchell Hutchins is located at
51 West 52nd Street, New York, New York 10019-6114, and is a wholly owned asset
management subsidiary of PaineWebber Incorporated, which is wholly owned by
Paine Webber Group Inc., a publicly owned financial services holding company. On
October 31, 1999, Mitchell Hutchins was adviser or sub-adviser to 33 investment
companies with 76 separate funds and aggregate assets of approximately $48.9
billion.
The fund has received an exemptive order from the SEC to permit the board to
appoint and replace investment sub-advisers and to amend the sub-advisory
contracts between Mitchell Hutchins and any sub-advisers without obtaining
shareholder approval.
ADVISORY AND ADMINISTRATION FEES
The fund pays fees to Mitchell Hutchins for administrative services and advisory
services at the annual contract rates of 0.20% and 0.15%, respectively, of the
fund's average daily net assets. During the fiscal year ended July 31, 1999,
Mitchell Hutchins waived all its administrative and advisory fees:
PORTFOLIO MANAGER
Susan Ryan, a senior vice president of Mitchell Hutchins, is primarily
responsible for the day-to-day management of the fund's portfolio. She has held
her fund responsibilities since its inception.
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Prospectus Page 9
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
The fund normally declares dividends daily and pays them monthly. Shares of the
fund earn dividends on the day they are sold but do not earn dividends on the
day they are purchased.
You will receive dividends in additional shares of the fund unless you elect to
receive them in cash. Contact your Financial Advisor at PaineWebber if you
prefer to receive dividends in cash.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. The fund expects that its dividends will be taxed as ordinary income.
If you hold fund shares through a tax-exempt account or plan, such as an IRA or
401(k) plan, dividends on your shares generally will not be subject to tax.
The fund will tell you how you should treat its dividends for tax purposes. You
will not recognize any gain on the sale of fund shares so long as the fund
maintains a share price of $1.00.
As noted above, shareholders will pay the PACE-SM- Multi Advisor Program Fee.
For individual shareholders, this fee will be treated as a "miscellaneous
itemized deduction" for federal income tax purposes.
See the SAI for a a more detailed discussion. Prospective shareholders are urged
to consult their tax advisers.
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Prospectus Page 10
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
the fund's financial performance for the periods shown. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned (or
lost) on an investment in the fund, assuming reinvestment of all dividends.
This information has been audited by Ernst & Young LLP, independent auditors,
whose report, along with the fund's financial statements, is included in the
fund's Annual Report to Shareholders. The Annual Report may be obtained without
charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
PACE
MONEY MARKET INVESTMENTS
------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
----------------------------- ENDED
1999 1998 1997 JULY 31, 1996+
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Net investment income....................................... 0.05 0.05 0.05 0.05
------- ------- ------- -------
Dividends from net investment income........................ (0.05) (0.05) (0.05) (0.05)
------- ------- ------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total investment return (1)................................. 4.85% 5.32% 5.13% 4.75%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $47,174 $25,493 $16,070 $10,221
Expenses to average net assets, net of fee waivers and
expense reimbursements...................................... 0.50% 0.50% 0.50% 0.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements...................................... 1.07% 1.20% 1.89% 2.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements.......................... 4.70% 5.20% 5.04% 4.93%*
Net investment income to average net assets, before fee
waivers and expense reimbursements.......................... 4.13% 4.50% 3.65% 3.03%*
</TABLE>
- ------------------------
<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
(1) Total investment return is calculated assuming a $1,000
investment on the first day of each period reported,
reinvestment of all dividends 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-SM- Multi Advisor Program Fee; results would be lower
if this fee was included. Total investment return for period
of less than one year has not been annualized.
</TABLE>
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Prospectus Page 11
<PAGE>
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------------------------
PaineWebber PACE Money Market Investments
TICKER SYMBOL
<TABLE>
<S> <C>
PACE Money Market Investments PCEXX
</TABLE>
If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting your PaineWebber Financial Advisor or the fund
directly at 1-800-647-1568.
You may review and copy information about the fund, including annual and
semi-annual reports and the SAI, at the Public Reference Room of the Securities
and Exchange Commission. You can get text-only copies of reports and other
information about the funds and about the operations of the SEC's Public
Reference Room:
- - For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
- - Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber PACE Select Advisors Trust
Investment Company Act File No. 811-8764
- -C- 1999 PaineWebber Incorporated. All rights reserved. Member SIPC.
---------------
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