PAINEWEBBER PACE SELECT ADVISORS TRUST, 485APOS, 2000-09-29

PAINEWEBBER PACE SELECT ADVISORS TRUST
485APOS, 2000-09-29

Previous: INKINE PHARMACEUTICAL CO INC, S-8, EX-99, 2000-09-29

Next: PAINEWEBBER PACE SELECT ADVISORS TRUST, 485APOS, EX-99.16, 2000-09-29

<PAGE>

As filed with the Securities and Exchange Commission on September 29, 2000
------------------

1933 Act Registration No. 33-87254
1940 Act Registration No. 811-8764

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]
--

Post-Effective Amendment No. 9 [ X ]
--

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 11 [ X ]
--

(Check appropriate box or boxes.)

PAINEWEBBER PACE SELECT ADVISORS TRUST
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000

DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)

Copies to:
JON S. RAND, ESQ.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Telephone: (212) 821-8256

Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.

It is proposed that this filing will become effective:

[ ] Immediately upon filing pursuant to Rule 485(b)

[ ] On pursuant to Rule 485(b)
[ X ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)

Title of Securities Being Registered: Shares of Beneficial Interest

<PAGE>
PACE Money Market Investments

--------------------

PROSPECTUS
NOVEMBER , 2000

----------------------------------

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>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Money Market Investments

Contents
THE FUND

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
What every investor 3 Investment Objective, Strategies and Risks
should know about
the fund 4 Performance
5 Expenses and Fee Tables
6 More About Risks and Investment Strategies
</TABLE>

YOUR INVESTMENT

--------------------------------------------------------------------------------

<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.

--------------------------------------------------------------------------------
Prospectus Page 2
<PAGE>
--------------------------------------------------------------------------------
------------------------
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. Mitchell
Hutchins considers safety of principal and liquidity in selecting securities for
the fund and thus may not buy securities that pay the highest yield.

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, you may lose money by investing in the fund. Money market instruments
generally have a low risk of loss, but they are not risk-free. The principal
risks presented by the fund are:

- CREDIT RISK -- Issuers of money market instruments may fail to make payments
when due, or they may become less willing or less able to do so.

- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when short term interest rates rise, and its yield will tend to lag behind
prevailing rates.

- FOREIGN INVESTING RISK -- The value of the fund's investments in foreign
securities may fall due to adverse political, social and economic developments
abroad. However, because the fund's foreign investments must be denominated in
U.S. dollars, it generally is not subject to the risk of changes in currency
valuations.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 3
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %
Best quarter during calendar years shown: 4th quarter, 1997 -- 1.33%
Worst quarter during calendar years shown: 1st quarter, 1999 -- 1.12%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
INCEPTION DATE (8/24/95)
-------------- ---------
<S> <C>
One Year.................................................... 3.26%
Life of Fund................................................ 3.55%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 4
<PAGE>
--------------------------------------------------------------------------------
------------------------
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 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*............................................. 0.80%
----
Total Annual Fund Operating Expenses........................ 0.95%
====
Expense Reimbursements**.................................... 0.45%
----
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 a written expense
reimbursement agreement. Mitchell Hutchins is contractually obligated to
reimburse the fund to the extent that the fund's expenses through December 1,
2001, 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 sell 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 $721 $1,265 $2,752
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 5
<PAGE>
--------------------------------------------------------------------------------
------------------------
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 generally will tend to fall more slowly.

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. The fund's investment strategies are designed to comply with
these requirements.

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>
--------------------------------------------------------------------------------
------------------------
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>
--------------------------------------------------------------------------------
------------------------
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. ("PW Group"), a publicly owned financial services
holding company. On October 31, 2000, Mitchell Hutchins was adviser or sub-
adviser to investment companies with separate funds and aggregate assets of
approximately $ billion.

On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had entered
into an agreement and plan of merger under which PW Group will merge into a
wholly owned subsidiary of UBS. If all required approvals are obtained and the
required conditions are satisfied, PW Group and UBS expect to complete the
transaction in the fourth quarter of 2000. UBS, with headquarters in Zurich,
Switzerland, is an internationally diversified organization with operations in
many areas of the financial services industry.

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, 2000,
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.

--------------------------------------------------------------------------------
Prospectus Page 9
<PAGE>
--------------------------------------------------------------------------------
------------------------
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 annually 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.

--------------------------------------------------------------------------------
Prospectus Page 10
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ -----------------
Net investment income.... 0.05 0.05 0.05 0.05 0.05
------ ------ ------ ------ -----------------
Dividends from net
investment income........ (0.05) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ -----------------
Net asset value, end of
period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== =================
Total investment return
(1)...................... 5.53% 4.85% 5.32% 5.13% 4.75%
====== ====== ====== ====== =================
Ratios/Supplemental Data:
Net assets, end of period
(000's).................. $65,521 $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% 0.50%*
Expenses to average net
assets, before fee
waivers and expense
reimbursements........... 0.95% 1.07% 1.20% 1.89% 2.40%*
Net investment income to
average net assets, net
of fee waivers and
expense reimbursements... 5.46% 4.70% 5.20% 5.04% 4.93%*
Net investment income to
average net assets,
before fee waivers and
expense
reimbursements........... 5.01% 4.13% 4.50% 3.65% 3.03%*
</TABLE>

-----------

+ 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.

--------------------------------------------------------------------------------
Prospectus Page 11
<PAGE>
--------------------------------------------------------------------------------
------------------------
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 its 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 Financial
Advisor. You may obtain free copies of the fund's annual and semi-annual reports
and its SAI by contacting the fund directly at 1-800-647-1568.

You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8090. You can get copies of
reports and other information about the fund:

-For a fee, by electronic request at [email protected] or by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102; or

- Free from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

PaineWebber PACE Select Advisors Trust
Investment Company Act File No. 811-8764

---------------
--------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS
DATED SEPTEMBER , 2000

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
NOVEMBER , 2000

----------------------------------

This prospectus offers Class P 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.

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

Contents
THE FUNDS

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
What every investor PACE Money Market Investments
should know about 4 Investment Objective, Strategies and
Risks
the funds 5 Performance
6 Expenses and Fee Tables
PACE Government Securities Fixed Income Investments
7 Investment Objective, Strategies and
Risks
8 Performance
9 Expenses and Fee Tables
PACE Intermediate Fixed Income Investments
10 Investment Objective, Strategies and
Risks
11 Performance
12 Expenses and Fee Tables
PACE Strategic Fixed Income Investments
13 Investment Objective, Strategies and
Risks
14 Performance
15 Expenses and Fee Tables
PACE Municipal Fixed Income Investments
16 Investment Objective, Strategies and
Risks
17 Performance
18 Expenses and Fee Tables
PACE Global Fixed Income Investments
19 Investment Objective, Strategies and
Risks
21 Performance
22 Expenses and Fee Tables
PACE Large Company Value Equity Investments
23 Investment Objective, Strategies and
Risks
24 Performance
25 Expenses and Fee Tables
PACE Large Company Growth Equity Investments
26 Investment Objective, Strategies and
Risks
27 Performance
28 Expenses and Fee Tables
PACE Small/Medium Company Value Equity Investments
29 Investment Objective, Strategies and
Risks
30 Performance
31 Expenses and Fee Tables
PACE Small/Medium Company Growth Equity Investments
32 Investment Objective, Strategies and
Risks
33 Performance
34 Expenses and Fee Tables
PACE International Equity Investments
35 Investment Objective, Strategies and
Risks
36 Performance
37 Expenses and Fee Tables
PACE International Emerging Markets Equity Investments
38 Investment Objective, Strategies and
Risks
39 Performance
40 Expenses and Fee Tables
41 More About Risks and Investment
Strategies
</TABLE>

YOUR INVESTMENT

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Information for 44 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 46 Management
information about 50 Dividends and Taxes
the funds 51 Financial Highlights
A-1 Appendix A
B-1 Appendix B
</TABLE>

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Where to learn more Back Cover
about these funds
</TABLE>

The funds are not complete or
balanced investment programs.

PACE Money Market Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Current income consistent with preservation of capital and liquidity.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

- CREDIT RISK -- Issuers of money market instruments may fail to make payments
when due, or they may become less willing or less able to do so.

- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when short term interest rates rise, and its yield will tend to lag behind
prevailing rates.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1997 -- 1.33%

Worst quarter during calendar years shown: 1st quarter, 1999 -- 1.12%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

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 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)

---------

* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement. Mitchell Hutchins is contractually obligated to
reimburse the fund to the extent that the fund's expenses through December 1,
2001 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 sell 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 $721 $1,265 $2,752
</TABLE>

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 LLC ("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; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when interest rates rise. Many corporate bonds provide that the issuer may
repay them earlier than the maturity date. When interest rates are falling,
bond issuers may exercise this right more often, and the fund may have to
reinvest these repayments at lower interest rates.

- PREPAYMENT RISK -- The fund's mortgage- and asset-backed securities may be
prepaid more rapidly than expected, especially when interest rates are
falling, and the fund may have to reinvest those prepayments at lower interest
rates. When interest rates are rising, slower prepayments may extend the
duration of the securities and may reduce their value.

- LEVERAGE RISK -- Leverage magnifies the effect of changes in market values.
While leverage can increase the fund's income and potential for gain, it also
can increase expenses and the risk of loss. The fund attempts to limit the
magnifying effect of its leverage by managing its portfolio duration.

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
MORTGAGE-BACKED
(INCEPTION DATE) (8/24/95) SECURITIES INDEX
---------------- --------- ----------------
<S> <C> <C>
One Year.................................................... (0.49)% 1.86%
Life of Fund................................................ 4.29% 6.42%
</TABLE>

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 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*............................................. %
----
Total Annual Fund Operating Expenses........................ %+
====
Management Fee Waiver/Expense Reimbursements**.............. %
----
Net Expenses**.............................................. 0.72%+
====
</TABLE>

---------

* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 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, 2000.

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 sell 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 two year period when the fund's
expenses are lower due to its 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 $748 $1,282 $2,743
</TABLE>

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
Metropolitan West Asset Management, LLC ("MWAM") to serve as the fund's
investment adviser. MWAM decides to buy or sell specific bonds for the fund
based on its value added strategies, with the goal of outperforming the Lehman
Brothers Intermediate Government Credit Index while maintaining below average
volatility. These strategies are anchored by MWAM's long-term economic outlook
and include managing interest rate risk through limited duration shifts, yield
curve management, diversifying the fund's investments across all permitted
investment sectors while overweighting the most attractive sectors, identifying
undervalued securities and aggressive execution.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- SINGLE ISSUER CONCENTRATION RISK -- 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.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

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 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 10, 2000, which is the date on which MWAM 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. [SEE APPENDIX A FOR INFORMATION
ABOUT THE COMPOSITE PERFORMANCE OF PRIVATE ACCOUNTS MANAGED BY MWAM WITH
SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS THOSE OF
THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
INTERMEDIATE
(INCEPTION DATE) (8/24/95) GOVERNMENT CREDIT INDEX
---------------- --------- -----------------------
<S> <C> <C>
One Year................................................. (1.59)% 0.39%
Life of Fund............................................. 3.41% 5.74%
</TABLE>

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 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*............................................. 0.39%
----
Total Annual Fund Operating Expenses........................ 0.79%
====
Management Fee Waiver/Expense Reimbursement**............... 0.07%
----
Net Expenses**.............................................. 0.72%
====
</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 sell 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 two-year period when the fund's
expenses are lower due to its 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>
$231 $714 $1,224 $2,625
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 12
<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 LLC ("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, sector and prepayment exposure, as
appropriate.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so. This risk is greater for lower
quality bonds than for bonds that are investment grade

- FOREIGN INVESTING RISK -- The value of the fund's investments in foreign
securities may fall due to adverse political, social and economic developments
abroad and due to decreases in foreign currency values relative to the U.S.
dollar. Investments in foreign government bonds involve special risks because
the fund may have limited legal recourse in the event of default.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 13
<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 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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT/CORPORATE
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- --------------------
<S> <C> <C>
One Year................................................... (4.19)% (2.15)%
Life of Fund............................................... 4.98% 5.84%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 14
<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 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*............................................. 0.39%
----
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 a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through December 1,
2002 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 sell 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 two 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 15
<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
Standish, Ayer & Wood, Inc. ("Standish") to serve as the fund's investment
adviser. In deciding which securities to buy or sell for the fund, Standish
seeks to identify undervalued sectors or geographical regions of the municipal
market or undervalued individual securities. To do this, Standish uses credit
research and valuation analysis and monitors the relationship of the municipal
yield curve to the treasury yield curve. Standish also uses credit quality
assessments from its in-house analysts to identify potential rating changes,
undervalued issues and macro trends with regard to market sectors and
geographical regions. Standish may make modest duration adjustments based on
economic analyses and interest rate forecasts.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when interest rates rise. Many municipal bonds provide that the issuer may
repay them earlier than the maturity date. When interest rates are falling,
bond issuers may exercise this right more often, and the fund may have to
reinvest these repayments at lower interest rates.

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- POLITICAL RISK -- The fund's investments are significantly affected by
political changes, including legislation proposals which may make municipal
bonds less attractive in comparison to taxable bonds.

- RELATED SECURITIES CONCENTRATION RISK -- Because the fund may invest more than
25% of its total assets in municipal bonds that are issued to finance similar
projects, economic, business, or political developments or changes that affect
one municipal bond also may affect other municipal bonds in the same sector.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 16
<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 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
June 1, 2000, which is the date on which Standish 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. [SEE APPENDIX A FOR INFORMATION
ABOUT THE PERFORMANCE OF A MUTUAL FUND MANAGED BY STANDISH WITH SUBSTANTIALLY
SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS THOSE OF THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 3rd quarter, 1998 -- 2.52%

Worst quarter during calendar years shown: 2nd quarter, 1999 -- (1.21)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
MUNICIPAL FIVE-YEAR
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- -------------------
<S> <C> <C>
One Year.................................................... (3.60)% 0.73%
Life of Fund................................................ 3.02% 4.49%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 17
<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 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%
====
Management Fee Waiver/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 a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to waive its Management Fee and/or reimburse the fund to the extent that the
fund's expenses through December 1, 2002 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 sell 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 two year period when the fund's
expenses are lower due to its 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>
$ $ $ $
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 18
<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 and Fischer Francis Trees & Watts, Inc. (and its affiliates)
("FFTW") to serve as the fund's investment advisers. Mitchell Hutchins allocates
the fund's assets between Rogge Global Partners and FFTW.

Rogge Global Partners seeks to invest the fund assets it manages 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.

FFTW seeks to outperform the fund's benchmark (the Lehman Global Aggregate Index
(Unhedged)) for its share of the fund's assets through an active bond selection
process that relies on (1) construction of portfolios around diversified and
balanced off-benchmark exposures that are expected to have low relative
correlations, (2) identifying the most attractive sectors and the most
attractive individual securities within those sectors and (3) monitoring of
portfolio risk with risk management tools. FFTW divides the investment universe
into three blocs (Europe, the United States and Japan) and analyzes in each bloc
trends in economic growth, inflation, monetary and fiscal policies. FFTW decides
which securities to buy or sell for the fund by looking for investment
opportunities where its opinions on the current economic environment of a bloc
or country differ from current market valuations.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when interest rates rise. Some corporate bonds and asset backed securities
provide that the issuer may repay them earlier than the maturity date. When
interest rates are falling, bond issuers may exercise this right more often,
and the fund may have to reinvest these repayments at lower interest rates.

- FOREIGN INVESTING AND EMERGING MARKETS RISKS -- The value of the fund's
investments in foreign securities may fall due to adverse political, social
and economic developments abroad and due to decreases in foreign currency
values relative to the U.S. dollar. These risks are greater for investments in
emerging market issuers. Investments in foreign government bonds involve
special risks because the fund may have limited legal recourse in the event of
default.

--------------------------------------------------------------------------------
Prospectus Page 19
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Global Fixed Income Investments

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 20
<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. This may be particularly true for the period prior to
October 10, 2000, which is the date on which FFTW assumed day-to-day management
of a portion of the fund's assets. Prior to that date, Rogge Global Partners was
responsible for managing all the fund's assets. [SEE APPENDIX A FOR INFORMATION
ABOUT THE COMPOSITE PERFORMANCE OF PRIVATE ACCOUNTS MANAGED BY FFTW WITH
SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS THOSE OF
THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 3rd quarter, 1998 -- 8.60%

Worst quarter during calendar years shown: 1st quarter, 1999 -- (4.83)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
SALOMON SMITH BARNEY
WORLD GOVERNMENT
(INCEPTION DATE) (8/24/95) BOND INDEX
---------------- --------- --------------------
<S> <C> <C>
One Year................................................... (9.88)% (4.27)%
Life of Fund............................................... 3.10% 4.43%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 21
<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 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*............................................. 0.58%
----
Total Annual Fund Operating Expenses........................ 1.18%
====
Expense Reimbursements**.................................... 0.23%
----
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 a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 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 sell 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 two 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 $811 $1,400 $2,996
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 22
<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 seeks income primarily from dividend
paying stocks.

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 10% 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.

The fund's manager, Mitchell Hutchins Asset Management Inc. has allocated the
fund's assets among three investment advisers -- Institutional Capital
Corporation ("ICAP"), Westwood Management Corporation ("Westwood") and State
Street Global Advisors ("SSgA"). SSgA manages approximately 50% of the fund's
assets and ICAP and Westwood manage approximately 25% each. The relative values
of the assets managed by each investment adviser may change over time.

ICAP uses its proprietary valuation model to identify large-capitalization
companies that ICAP believes offer the best relative values because they sell
below the price-to-earnings ratio warranted by their prospects. ICAP looks for
companies where a catalyst for a positive change is about to occur with
potential to produce stock appreciation of 20% or more relative to the market
over a 12 to 18 month period. The catalyst can be thematic (E.G., global
economic recovery) or company specific (E.G., a corporate restructuring or a new
product). ICAP also uses internally generated research to evaluate the financial
condition and business prospects of every company it considers. ICAP monitors
each stock purchased and sells the stock when its target price is achieved, the
catalyst becomes inoperative or ICAP identifies another stock with greater
opportunity for appreciation.

Westwood maintains a list of securities that it believes have proven records and
potential for above-average earnings growth. It considers purchasing a security
on this list for the fund if Westwood's forecast for growth rates and earnings
estimates exceeds Wall Street expectations, or Westwood's forecasted
price/earnings ratio is less than the forecasted growth rate. Westwood monitors
the issuing companies and will sell a stock if Westwood expects limited future
price appreciation or the projected price/earnings ratio exceeds the three-year
growth rate.

SSgA uses several independent valuation measures to identify investment
opportunities within a large cap value universe. Factors are combined to produce
an overall rank. Comprehensive research determines the optimal weighting of
these perspectives to arrive at schemes that vary by industry. All companies
within the investable universe are ranked from top to bottom based on their
relative attractiveness. The portfolio is constructed to select the
highest-ranked stocks from the universe and to manage deviations from the
benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Value Index.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- INDEX STRATEGY RISK -- SSgA's proprietary strategy may not result in the fund
assets managed by it outperforming the total return of the designated index,
and these assets may even underperform relative to the index. Their
performance also may deviate from that of the index because of shareholder
purchases and sales of shares, which can occur daily, and because of fees and
expenses borne by the fund.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 23
<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 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
July 1, 2000, when another investment manager was responsible for managing all
the fund's assets. ICAP and Westwood each assumed day-to-day management of a
portion of the fund's assets on July 1, 2000 and SSgA also assumed day-to-day
management of a portion of the fund's assets on October 10, 2000. [SEE
APPENDIX A FOR INFORMATION ABOUT THE PERFORMANCE OF MUTUAL FUNDS MANAGED BY ICAP
AND WESTWOOD AND THE COMPOSITE PERFORMANCE OF PRIVATE ACCOUNTS MANAGED BY SSGA
WITH SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS
THOSE OF THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1998 -- 16.26%

Worst quarter during calendar years shown: 3rd quarter, 1999 -- (14.40)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
RUSSELL 1000
(INCEPTION DATE) (8/24/95) VALUE INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... (5.57)% 7.35%
Life of Fund................................................ 15.20% 20.64%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 24
<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 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 Fee Waiver/Expense Reimbursement**............... 0.07%
----
Net Expenses**.............................................. 0.89%
====
</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 sell 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 two-year period when the fund's
expenses are lower due to its 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>
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 25
<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 advisers' 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 10% 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.

The fund's manager, Mitchell Hutchins Asset Management Inc. has allocated the
fund's assets between two investment advisers -- Alliance Capital Management
L.P. ("Alliance Capital") and State Street Global Advisors ("SSgA"). Alliance
Capital manages approximately 60% of the fund's assets and SSgA manages
approximately 40%. The relative values of the assets allocated to each
investment adviser may change over time.

Alliance Capital follows its "disciplined growth" strategy in managing its share
of the fund's assets and seeks to identify the best combinations of earnings
growth and reasonable valuation in selecting stocks for the fund. Alliance
Capital 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.

SSgA uses several independent valuation measures to identify investment
opportunities within a large cap growth universe. Factors are combined to
produce an overall rank. Comprehensive research determines the optimal weighting
of these perspectives to arrive at schemes that vary by industry. All companies
within the investable universe are ranked from top to bottom based on their
relative attractiveness. The portfolio is constructed to select the
highest-ranked stocks from the universe and to manage deviations from the
benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Growth Index.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 26
<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 fund's past performance does not necessarily indicate how the fund will
perform in the future. Prior to November 10, 1997, another investment manager
was responsible for managing all the fund's assets. Alliance Capital assumed
day-to-day management of the fund's assets on November 10, 1997 and SSgA assumed
day-to-day management of a portion of the fund's assets on October 10, 2000.
[SEE APPENDIX A FOR INFORMATION ABOUT THE COMPOSITE PERFORMANCE OF PRIVATE
ACCOUNTS MANAGED BY SSGA WITH SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVES,
POLICIES AND STRATEGIES AS THOSE OF THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
RUSSELL 1000
(INCEPTION DATE) (8/24/95) GROWTH INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 23.38% 33.16%
Life of Fund................................................ 25.07% 31.22%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 27
<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 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 Fee Waiver/Expense Reimbursement**............... 0.07%
----
Net Expenses**.............................................. 0.87%
====
</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 sell 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 two-year period when the fund's
expenses are lower due to its 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>
$247 $761 $1,301 $2,776
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 28
<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. ("Ariel") and ICM Asset Management, Inc. ("ICM") to
serve as the fund's investment advisers. Mitchell Hutchins allocates the fund's
assets between the two investment advisers.

Ariel 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.

ICM invests its share of the fund's assets primarily in common stocks of small-
and mid-cap companies believed to offer good relative value that have either
fallen into disfavor among investors or are under-researched. In deciding which
stocks to buy or sell for the fund, ICM uses a top-down analysis to identify
broad sectors of the market believed to offer good relative value and then seeks
to identify individual companies within those sectors that meet ICM's investment
criteria. ICM also performs a bottom-up analysis to attempt to discover
inefficiently-priced stocks in a broad range of sectors, including those not
identified in the top-down analysis. These two approaches are combined in
various proportions depending on market conditions. Regardless of which approach
is used to identify stock candidates, ICM then applies fundamental research
analysis.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- LIMITED CAPITALIZATION RISK -- Equity risk is greater for the common stocks of
mid and small cap companies because they generally are more vulnerable than
larger companies to adverse business or economic developments and they may
have more limited resources. In general, these risks are greater for small cap
companies than for mid cap companies.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 29
<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 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, when another investment manager was responsible for managing
all the fund's assets. Ariel assumed day-to-day management of a portion of the
fund's assets on October 4, 1999 and ICM assumed responsibility for managing a
portion of the fund's assets on October 10, 2000. [SEE APPENDIX A FOR
INFORMATION ABOUT THE PERFORMANCE OF A MUTUAL FUND MANAGED BY ARIEL AND THE
COMPOSITE PERFORMANCE OF PRIVATE ACCOUNTS MANAGED BY ICM WITH SUBSTANTIALLY
SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS THOSE OF THE FUND.]

TOTAL RETURN (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 2nd quarter, 1999 -- 21.25%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (20.00)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
RUSSELL 2500
(INCEPTION DATE) (8/24/95) VALUE INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... (4.24)% 1.49%
Life of Fund................................................ 7.76% 13.13%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 30
<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 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*............................................. %
----
Total Annual Fund Operating Expenses........................ %
====
Expense Reimbursements**.................................... %
----
Net Expenses**.............................................. %
====
</TABLE>

---------

* Includes an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 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 sell 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 two 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>
$ $ $ $
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 31
<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; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 32
<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 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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 38.15%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (15.44)%
AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
RUSSELL 2500
(INCEPTION DATE) (8/24/95) GROWTH INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 76.09% 55.48%
Life of Fund................................................ 23.15% 19.95%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 33
<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 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%
====
Expense Reimbursements**.................................... 0.01%
----
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 a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 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 sell 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 two 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 $766 $1,310 $2,795
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 34
<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; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 35
<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 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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 24.39%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (14.64)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
MSCI EUROPE,
ASIA AND
(INCEPTION DATE) (8/24/95) FAR EAST INDEX
---------------- --------- --------------
<S> <C> <C>
One Year.................................................... 33.63% 26.96%
Life of Fund................................................ 15.13% 13.70%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 36
<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 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*............................................. 0.46%
----
Total Annual Fund Operating Expenses........................ 1.16%
====
</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 sell 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>
$269 $826 $1,410 $2,993
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 37
<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 generally defines emerging market countries as countries
that are not included in the MSCI World Index of major world economies.
Countries included in this index may be considered emerging markets based on
current political and economic factors. Schroder Investment Management North
America Inc. ("SIMNA"), the fund's investment adviser, has determined, based on
an analysis of current economic and political factors pertaining to Hong Kong
SAR, that Hong Kong SAR should be considered as an emerging market country for
purposes of the Fund's eligible investments. 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. Below investment grade
securities 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 SIMNA
to serve as the fund's investment adviser. SIMNA focuses on companies that it
believes have a sustainable competitive advantage and growth potential that is
undervalued by other investors. SIMNA allocates the fund's assets among emerging
market countries based on its assessment of the likelihood that those countries
will have favorable long-term business environments. In deciding which
securities within a country to buy or sell for the fund, SIMNA analyzes
historical growth rates and future growth prospects, management capability and
profit margins. SIMNA's evaluation of securities reflects information available
from the extensive network of locally based analysts maintained by SIMNA and its
affiliates.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- GEOGRAPHIC CONCENTRATION RISK -- 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.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

--------------------------------------------------------------------------------
Prospectus Page 38
<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 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

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 27.14%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (21.52)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
MSCI EMF
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- --------
<S> <C> <C>
One Year.................................................... 59.43% 66.41%
Life of Fund................................................ 3.51% 3.14%
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 39
<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 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*............................................. 0.85%
----
Total Annual Fund Operating Expenses........................ 1.75%
====
Expense Reimbursements**.................................... 0.25%
----
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 a written expense
reimbursement agreement. Mitchell Hutchins is contractually obligated to
reimburse the fund to the extent that the fund's expenses through December 1,
2002 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 sell 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 two 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 $978 $1,676 $3,532
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page 40
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

MORE ABOUT RISKS AND INVESTMENT STRATEGIES

--------------------------------------------------------------------------------

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. Some of these low quality bonds
may be in default when purchased by a fund. Low quality bonds may fluctuate in
value more than higher quality bonds and, during periods of market volatility,
may be more difficult to sell 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. A fund's use of derivatives may not succeed for various reasons,
including unexpected changes in the values of the derivatives or the assets
underlying them. Also, if a fund uses derivatives to adjust or "hedge" the
overall risk of its portfolio, the hedge may not succeed if changes in the
values of the derivatives are not matched by opposite changes in the values of
the assets being hedged.

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
social, 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 or more rapid 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 INVESTING RISK. Foreign investing involves risks relating to political,
social and economic developments abroad to a greater extent than investing in
the securities of U.S. issuers. In addition, there are differences between U.S.
and foreign regulatory requirements and market practices. Foreign investments
denominated in foreign currencies are subject to the risk that the value of a
foreign currency will fall in relation to the U.S. dollar. Currency exchange
rates can be volatile and can be affected by, among other factors, the general
economics of a country, the actions of U.S. and foreign governments or central
banks, the imposition of currency controls and speculation. 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.

GEOGRAPHIC CONCENTRATION RISK. 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.

INDEX STRATEGY RISK. An investment adviser may not be successful in selecting
stocks from an index that

--------------------------------------------------------------------------------
Prospectus Page 41
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

outperform the total return of such index. In addition, the performance of a
fund's stock investments generally will not be identical to that of an index
because of fees and expenses borne by a fund and shareholder purchases and sales
of shares, which can occur daily.

INTEREST RATE RISK. The value of bonds 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 a fund's
investments in bonds will fall. Interest rate risk is the primary source of risk
for U.S. government and usually for other very high quality bonds. The impact of
changes in the general level of interest rates on lower quality bonds may be
greater or less than the impact on higher quality bonds.

Many corporate, municipal and asset backed bonds provide that the issuer may
repay them at a predetermined price earlier than the maturity date, particularly
those bonds issued at relatively high interest rates. When interest rates are
falling, the issuers of these bonds may exercise their right to repay prior to
maturity. A fund then might have to reinvest the repayments at lower interest
rates. These "call" provisions can adversely affect the market value of bonds
subject to them so that they may not benefit fully from the rise in value that
generally occurs for bonds when interest rates fall.

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
Government Securities Fixed Income Investments and PACE Strategic Fixed Income
Investments, which 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 mid and small cap
companies may be less liquid and more volatile than securities of larger
capitalization companies or the market averages in general. In addition, small
cap 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 for small cap companies
than for mid cap companies.

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. Faster prepayments often happen when
market interest rates are falling. As a result, a fund may need to reinvest
these early payments at those lower interest rates, thus reducing its income.
Conversely, when interest rates rise, prepayments may happen more slowly,
causing the underlying loans to be outstanding for a longer time. 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.

SINGLE ISSUER CONCENTRATION RISK. PACE Intermediate Fixed Income Investments
and PACE Global Fixed Income Investments are non-diversified. A non-diversified
fund may invest more than 5% of its total assets in securities of a single
issuer to a greater extent than a diversified fund. 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

--------------------------------------------------------------------------------
Prospectus Page 42
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

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.

ADDITIONAL INVESTMENT STRATEGIES

CASH RESERVES; DEFENSIVE POSITIONS. PACE Money Market Investments invests
exclusively in money market 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.

As vehicles to implement long-term investment strategies, 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. In addition, each fund may increase its cash reserves in connection
with transitioning its portfolio to reflect the investment style and strategies
of a new investment adviser. Because these investments provide relatively low
income, a defensive or transition 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 in excess of 100% (high portfolio turnover).

Frequent trading may increase the portion of 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 the portion
of a fund's realized capital gains that are considered "short-term" for tax
purposes. Shareholders will pay higher taxes on dividends that represent short-
term capital gains than they would pay on dividends that represent 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.

--------------------------------------------------------------------------------
Prospectus Page 43
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

INVESTING IN THE FUNDS

--------------------------------------------------------------------------------

BUYING SHARES

If you are a participant in the PaineWebber PACE-SM- Program, you may buy
Class P 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.

--------------------------------------------------------------------------------
Prospectus Page 44
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

--------------------------------------------------------------------------------
Prospectus Page 45
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

MANAGEMENT

--------------------------------------------------------------------------------

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. ("PW Group"), a
publicly owned financial services holding company. On , 2000,
Mitchell Hutchins was adviser or sub-adviser to investment companies with
separate funds and aggregate assets of approximately $ billion. On July 12,
2000, PW Group and UBS AG ("UBS") announced that they had entered into an
agreement and plan of merger under which PW Group will merge into a wholly owned
subsidiary of UBS. If all required approvals are obtained and the required
conditions are satisfied, PW Group and UBS expect to complete the transaction in
the fourth quarter of 2000. UBS, with headquarters in Zurich, Switzerland, is an
internationally diversified organization with operations in many areas of the
financial services industry.

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, 2000, 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.......................... 0.66%
PACE Intermediate Fixed Income
Investments.......................... 0.59%
PACE Strategic Fixed Income
Investments.......................... %
PACE Municipal Fixed Income
Investments.......................... %
PACE Global Fixed Income Investments... 0.57%
PACE Small/Medium Company Value Equity
Investments.......................... %
PACE Small/Medium Company Growth Equity
Investments.......................... %
PACE International Emerging Markets
Equity Investments................... 0.85%
</TABLE>

INVESTMENT ADVISERS AND PORTFOLIO MANAGERS

PACE MONEY MARKET INVESTMENTS. Mitchell Hutchins provides all investment
advisory services for this fund. Susan P. Ryan, a senior vice president of
Mitchell

--------------------------------------------------------------------------------
Prospectus Page 46
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

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 LLC ("PIMCO") serves
as investment adviser for these funds. PIMCO is located at 840 Newport Center
Drive, Suite 300, Newport Beach, California 92660. On September 30, 2000, PIMCO
had approximately $ billion in assets under management. PIMCO is one of the
largest fixed income management firms in the nation. Included among PIMCO's
institutional clients are many "Fortune 500" companies.

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 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. Metropolitan West Asset Management,
LLC ("MWAM") serves as investment adviser for this fund. MWAM is located at
11766 Wilshire Blvd., Suite 1580, Los Angeles, California 90025. MWAM was formed
in 1996 and, as of October 31, 2000, had over $ billion in fixed income
investments under management.

MWAM uses a team approach in advising PACE Intermediate Fixed Income
Investments. The team members are Scott B. Dubchansky, Stephen Kane, Laird R.
Landmann, Tad Rivelle and Brian H. Loo and all have held their fund
responsibilities since October 10, 2000. Mr. Dubchansky has been chief executive
officer of MWAM since August 1996. From August 1992 through August 1996, he was
a senior vice president of Donaldson Lufkin & Jenrette in the fixed income
division. Prior to August 1992, Mr. Dubchansky was senior vice president, fixed
income sales, at Kidder Peabody and responsible for fixed income sales to
institutional clients. Mr. Kane has been a portfolio manager with MWAM since
August 1996. From November 1995 until July 1996, he was an account manager with
PIMCO in Newport Beach, California. Before then, Mr. Kane was a merchant banking
associate with Union Bank in Los Angeles, California. Mr. Landmann has been a
managing director and portfolio manager with MWAM since August 1996. From
November 1992 until July 1996, he was a principal and co-director of fixed
income with Hotchkis and Wiley in Los Angeles, California. Before then, he was a
portfolio manager with PIMCO in Newport Beach, California. Mr. Rivelle has been
the chief investment officer and a managing director with MWAM since August
1996. From November 1992 until July 1996, he was a principal and co-director of
fixed income with Hotchkis and Wiley in Los Angeles, California. Before then, he
was a portfolio manager with PIMCO in Newport Beach, California. Mr. Loo has
been a portfolio manager and analyst with MWAM since August 1996. From June 1996
until July 1996, Mr. Loo worked as an analyst with Hotchkis and Wiley in Los
Angeles, California. Before then, he worked as an analyst with Trust Company of
the West (starting in May 1994 while completing a graduate finance degree at
Carnegie Mellon University.

PACE MUNICIPAL FIXED INCOME INVESTMENTS. Standish, Ayer & Wood, Inc. serves as
investment adviser for this fund. Standish is located at One Financial Center,
Boston, Massachusetts 02111. Standish was founded in 1933 and, as of
September 30, 2000, had over $[ ] billion in assets under management.
Christine L. Todd is primarily responsible for the day-to-day management of the
fund. She has held her fund responsibilities since June 1, 2000. Ms. Todd is an
associate director of Standish. She joined Standish in 1995 from Gannett,
Welsh & Kotler, where she was a vice president responsible for municipal bond
research and trading.

PACE GLOBAL FIXED INCOME INVESTMENTS. Rogge Global Partners plc and Fischer
Francis Trees & Watts, Inc. ("FFTW") serve as investment advisers for this fund.
Rogge Global Partners is located at Sion Hall, 56 Victoria Embankment, London,
EC4Y ODZ, England. Rogge Global Partners was organized in 1984 and specializes
in global fixed income management. As of October 31, 2000, it had approximately
[$ BILLION] in assets under management.

Rogge Global Partners 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 Conway and Richard Gray.
Mr. Rogge, who founded Rogge Global Partners in 1984, has been managing global
investments

--------------------------------------------------------------------------------
Prospectus Page 47
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

for more than 25 years. Mr. Graham joined Rogge Global Partners 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 Partners in
June 1990 and serves as a director, portfolio manager and analyst. Mr. James
joined Rogge Global Partners 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. Conway joined Rogge Global Partners 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 Partners in April 1999 and serves as a portfolio manager and
head of emerging markets. He was previously a vice president, emerging debt
research of 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. Conway, who
has held her fund responsibilities since August 1998 and Mr. Gray, who has held
his fund responsibilities since April 1999.

FFTW is located at 200 Park Avenue, 46th Floor, New York, New York 10166. Its
affiliates are Fischer Francis Trees & Watts (UK), which is located at 3 Royal
Court, The Royal Exchange, London EC 3V 3RA, Fischer Francis Trees & Watts, Pte
Ltd (Singapore), which is located at 50 Raffles Place, #22-01 Singapore Land
Tower, Singapore 048623, and Fischer Francis Trees & Watts KK (Japan), which is
located at Fukoku Seimei Building 21F, 2-2, Uchisaiwaicho 2-chome, Chiyoda-Ku,
Tokyo 100. FFTW's affiliates are either wholly owned subsidiaries of FFTW or
owned jointly by FFTW and its parent company, Charter Atlantic Corporation.
(Fischer Francis Trees & Watts, Inc. and its affiliates are referred to
collectively as "FFTW"). FFTW (Japan) will not assume duties as sub-adviser to
the fund until it has completed its registration as a registered investment
adviser with the SEC.

FFTW uses a team approach in which a specific portfolio manager is responsible
for managing FFTW's share of the fund's assets and determines the broad risk
parameters under which these investments operate, but relies on specialist
investment teams to determine specific fund investments. The portfolio manager
is David Marmon, a managing director of FFTW. The team members are Liaquat
Ahamed, a managing director and chief investment officer of FFTW, and Adnan
Akant, Stewart Russell, Richard Williams and Simon Hard, all of whom are
managing directors of FFTW. Mr. Marmon joined FFTW in 1990 from Yamaichi
International (America) where he was head of futures and options research. His
responsibilities at Yamaichi included generating trade ideas, daily analysis of
market opportunities and preparing research reports. He was previously a
financial analyst and strategist at the First Boston Corporation, where he
developed hedging programs for financial institutions and industrial firms. He
also performed historical and scenario analyses of the futures and options
markets for traders and clients. Mr. Marmon began his career in finance as a
research analyst on Chase Manhattan's arbitrage and municipal trading desks.

Mr. Ahamed came to FFTW in 1988 after nine years with the World Bank, where he
was in charge of the bank's investments in all non-dollar government bond
markets. Before assuming responsibility for the management of the non-dollar
portfolios, he was responsible for investment and trading in each of the
markets, including pounds sterling, Deutsche mark, Japanese yen, Canadian
dollars and Australian dollars. In addition, he was involved in providing
technical advice to numerous central banks on reserve and liability management.
Mr. Ahamed worked initially as an economist at the World Bank, providing
economic advice and analyses to senior government officials in numerous
developing countries including the Philippines, Korea, Bangladesh and Kenya.

Mr. Akant joined FFTW in 1984 after six years with the World Bank, where he
served initially as a project financial analyst in Europe and the Middle East
area before joining the treasurer's staff as an investment officer in 1979. Over
the next five years, as a member of the investment department, he was
responsible for investment and trading of each of the major sectors of the
bank's actively managed liquidity portfolio. He was a member of the investment
strategy committee and shares responsibility for formulating and implementing
the bank's trading and investment strategy. In 1982, Mr. Akant was promoted to
senior investment officer and was the division's deputy in charge of the U.S.
dollar portfolio.

--------------------------------------------------------------------------------
Prospectus Page 48
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

obligations, corporate bonds and asset-backed securities. Prior to that,
Mr. Russell managed J.P. Morgan's short-term interest rate risk group,
coordinating a $10 billion book of assets and liabilities.

Mr. Williams joined FFTW in 1995 from Deutsche Morgan Grenfell, where he worked
as an analyst in the fixed-income research department.

Mr. Hard joined FFTW's affiliate in London in 1989 from Mercury Asset
Management, the investment management affiliate of S.G. Warburg & Co., LTD (now
Warburg Dillon Read). His responsibilities there included the formulation of
global bond and currency investment policies, and the management of interest
rate and currency exposures of the firm's specialist non-dollar bond portfolios.
He was previously first vice president and London branch manager of Julius Baer
Investment Management, Inc.

PACE LARGE COMPANY VALUE EQUITY INVESTMENTS. Institutional Capital Corporation,
Westwood Management Corporation and State Street Global Advisors ("SSgA") serve
as investment advisers for PACE Large Company Value Equity Investments. ICAP is
located at 225 West Wacker Drive, Suite 2400, Chicago, Illinois 60606-1229, and
has been in the investment management business since 1970. As of October 31,
2000, ICAP had approximately $[ ] billion in assets under management. ICAP
uses a team approach in the day-to-day management of its share of the fund's
assets. Institutional Capital Corporation has held its fund responsibilities
since July 1, 2000.

Westwood is located at 300 Crescent Court, Suite 1300, Dallas, Texas 75201, and
has been in the investment management business since 1983. As of September 30,
2000, Westwood had approximately $[ ] billion in assets under management.
Susan M. Byrne, President of Westwood since 1983, is primarily responsible for
the day-to-day management of Westwood's share of the fund's assets. She has held
her fund responsibilities since July 1, 2000.

SSgA is located at Two International Place, Boston, Massachusetts 02110, and is
the investment management division of State Street Bank and Trust Company. As of
September 30, 2000, SSgA had approximately $[ ] billion under management. SSgA
uses a team approach in the day-to-day management of its share of the fund's
assets.

PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS. Alliance Capital Management L.P.
serves as one of the two investment advisers for this fund. Alliance 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 of
approximately $[ ] billion as of September 30, 2000. Jane Mack Gould is
primarily responsible for the day-to-day management of Alliance Capital's share
of the fund's assets. She has held her fund responsibilities since its inception
in August 1995. Ms. Gould is a senior vice president and portfolio manager and
has been with Alliance Capital since 1971.

State Street Global Advisors ("SSgA") is located at Two International Place,
Boston, Massachusetts 02110, and is the investment management division of State
Street Bank and Trust Company. As of September 30, 2000, SSgA had approximately
$[ ] billion under management. SSgA uses a team approach in the day-to-day
management of its share of the fund's assets.

PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS. Ariel Capital Management,
Inc. ("Ariel") and ICM Asset Management, Inc. ("ICM") 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 [$ BILLION] in assets under management as of October 31, 2000.
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.

ICM is located at 601 W. Main Avenue, Suite 600, Spokane, WA 99201. As of
October 31, 2000, it had approximately [$ BILLION] in assets under management.
ICM uses a team approach in the day-to-day management of the fund's assets
allocated to ICM.

PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS. Delaware Management
Company, Inc. serves as investment adviser for this fund. Delaware Management
Company is located at One Commerce Square, Philadelphia, PA 19103. Delaware
Management Company 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, 2000, Delaware Management
Company and its affiliates had over $ billion in assets under management.

--------------------------------------------------------------------------------
Prospectus Page 49
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

Management Company is a part in 1996, Mr. Frey was a senior director with Morgan
Grenfell Capital Management, Incorporated in New York. He has 18 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 Company team: John A. Heffern, Marshall
T. Bassett, Jeffrey Hynoski, Steven Lampe, Lori F. Wachs and Frank Houghton.
Mr. Heffern joined Delaware Management Company 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 Company 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 Company 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 Company in 1992 and serves as an assistant vice
president. Previously, she was an equity analyst at Goldman Sachs & Company for
two years. Mr. Houghton joined Delaware Management Company in and serves as
a . Previously,
.

PACE INTERNATIONAL EQUITY INVESTMENTS. Martin Currie Inc. serves as investment
adviser for this fund. Martin 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, 2000, Martin Currie Inc. and its affiliates had
over $ 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. SIMNA
is located at 787 Seventh Avenue, New York, New York 10019. SIMNA and its
affiliates have developed an expertise in emerging markets investments. As of
June 30, 2000, SIMNA had approximately $46 billion in assets under management.
As of the same date, SIMNA's ultimate parent, Schroders plc, and its affiliates
collectively had approximately $217 billion in assets under management.

John A. Troiano, Heather Crighton and Mark Bridgeman, with the assistance of
SIMNA's emerging markets investment committee, are primarily 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. Troiano is chief
executive officer and a director of SIMNA and has been employed by various
affiliates of SIMNA since 1981 in the portfolio management area. He is currently
chairman of SIMNA's emerging markets investment committee. Ms. Crighton is a
senior vice president and a director of SIMNA and Mr. Bridgeman is a senior vice
president and director of SIMNA. Ms. Crighton and Mr. Bridgeman have been
employed by SIMNA or its affiliates since 1993 and 1990, respectively, in the
investment research and portfolio management area.

--------------------------------------------------------------------------------
Prospectus Page 50
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

--------------------------------------------------------------------------------
Prospectus Page 51
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ -------
Net investment income......... 0.05 0.05 0.05 0.05 0.05
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.05) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== =======
Total investment return (1)... 5.53% 4.85% 5.32% 5.13% 4.75%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $65,521 $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% 0.50%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 0.95% 1.07% 1.20% 1.89% 2.40%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 5.46% 4.70% 5.20% 5.04% 4.93%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 5.01% 4.13% 4.50% 3.65% 3.03%*
</TABLE>

------------------------

+ 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.

--------------------------------------------------------------------------------
Prospectus Page 52
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $12.10 $12.59 $12.61 $12.07 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.73 0.68 0.72 0.64 0.49
Net realized and unrealized
gains (losses) from
investments and futures..... 0.01 (0.43) 0.18 0.58 0.03
------ ------ ------ ------ -------
Net increase from investment
operations.................. 0.74 0.25 0.90 1.22 0.52
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.75) (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............... (0.75) (0.74) (0.92) (0.68) (0.45)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $12.09 $12.10 $12.59 $12.61 $ 12.07
====== ====== ====== ====== =======
Total investment return (1)... 6.36% 2.02% 7.39% 10.42% 4.35%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $198,918 $191,719 $162,119 $101,606 $58,752
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 0.87%++ 0.87%++ 0.85% 1.57%++ 0.85%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 0.91%++ 0.93%++ 0.95% 1.70%++ 1.15%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 6.12%++ 5.49%++ 5.90% 5.44%++ 5.09%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 6.08%++ 5.43%++ 5.80% 5.31%++ 4.79%*
Portfolio turnover............ 585% 418% 353% 712% 978%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
++ Includes 0.02%, 0.01% and 0.72% of interest expense related to the reverse
repurchase agreements during the years ended July 31, 2000, July 31, 1999
and July 31, 1997, respectively.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 53
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $11.98 $12.35 $12.23 $11.95 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.71 0.63 0.67 0.66 0.53
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... (0.17) (0.28) 0.09 0.28 (0.09)
------ ------ ------ ------ -------
Net increase from investment
operations.................. 0.54 0.35 0.76 0.94 0.44
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.70) (0.64) (0.64) (0.66) (0.48)
Distributions from net
realized gains from
investments................. 0.00++ (0.08) -- -- (0.01)
------ ------ ------ ------ -------
Total dividends and
distributions............... (0.70) (0.72) (0.64) (0.66) (0.49)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $11.82 $11.98 $12.35 $12.23 $ 11.95
====== ====== ====== ====== =======
Total investment return (1)... 4.74% 2.81% 6.41% 8.14% 3.59%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $134,102 $139,043 $99,690 $66,751 $41,273
Expenses to average net
assets, net of fee waivers
and expense
reimbursements.............. 0.78% 0.80% 0.84% 0.85% 0.85%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 0.79% 0.80% 0.84% 0.99% 1.23%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 5.95% 5.26% 5.60% 5.70% 5.56%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 5.94% 5.26% 5.60% 5.56% 5.18%*
Portfolio turnover............ 88% 89% 111% 67% 36%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
++ The Portfolio made a distribution of less than $0.005 during the period.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 54
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $12.33 $13.32 $13.04 $12.44 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.73 0.69 0.69 0.67 0.59
Net realized and unrealized
gains (losses) from
investments, futures,
options and foreign
currency.................... (0.13) (0.64) 0.40 0.70 0.38
------ ------ ------ ------ -------
Net increase (decrease) from
investment operations....... 0.60 0.05 1.09 1.37 0.97
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.72) (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............... (0.72) (1.04) (0.81) (0.77) (0.53)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $12.21 $12.33 $13.32 $13.04 $ 12.44
====== ====== ====== ====== =======
Total investment return (1)... 5.08% 0.21% 8.66% 11.35% 8.15%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $234,748 $222,214 $126,880 $75,174 $42,550
Expenses to average net
assets, net of fee waivers
and expense
reimbursements.............. 0.85% 0.88%++ 0.85% 0.85% 0.85%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 0.89% 0.92%++ 0.94% 1.10% 1.40%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 6.04% 5.51%++ 5.49% 5.69% 5.85%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 6.00% 5.47%++ 5.40% 5.44% 5.30%*
Portfolio turnover............ 391% 202% 234% 357% 166%
</TABLE>

------------------------

+ 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 $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 55
<PAGE>
--------------------------------------------------------------------------------
------------------------
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
2000# 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $12.44 $12.70 $12.67 $12.32 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.57 0.56 0.58 0.61 0.49
Net realized and unrealized
gains (losses) from
investments................. (0.29) (0.26) 0.02 0.38 0.27
------ ------ ------ ------ -------
Net increase from investment
operations.................. 0.28 0.30 0.60 0.99 0.76
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.57) (0.56) (0.57) (0.61) (0.43)
Distributions from net
realized gains from
investments................. -- -- -- (0.03) (0.01)
------ ------ ------ ------ -------
Total dividends and
distributions............... (0.57) (0.56) (0.57) (0.64) (0.44)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $12.15 $12.44 $12.70 $12.67 $ 12.32
====== ====== ====== ====== =======
Total investment return (1)... 2.37% 2.34% 4.87% 8.30% 6.38%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $53,594 $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% 0.85%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 0.89% 0.89% 0.93% 1.40% 1.74%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 4.68% 4.42% 4.67% 5.08% 4.95%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 4.64% 4.38% 4.59% 4.53% 4.07%*
Portfolio turnover............ 33% 11% 34% 15% 78%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
# Sub-investment advisory functions for this portfolio were transferred from
Deutsche Asset Management, Inc. to Standish, Ayer and Wood, Inc. on
June 1, 2000.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 56
<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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $11.82 $12.25 $12.17 $12.33 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.53 0.65 0.62 0.64 0.53
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... (1.10) 0.20 (0.03) (0.21) 0.27
------ ------ ------ ------ -------
Net increase from investment
operations.................. (0.57) 0.85 0.59 0.43 0.80
------ ------ ------ ------ -------
Dividends from net investment
income and foreign
currency.................... (0.48) (0.81) (0.40) (0.51) (0.46)
Distributions from net
realized gains from
investments................. (0.09) (0.47) (0.11) (0.08) (0.01)
------ ------ ------ ------ -------
Total dividends and
distributions............... (0.57) (1.28) (0.51) (0.59) (0.47)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $10.68 $11.82 $12.25 $12.17 $ 12.33
====== ====== ====== ====== =======
Total investment return (1)... (4.97)% 6.49% 4.88% 3.54% 6.68%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $100,831 $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% 0.95%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 1.18% 1.17% 1.23% 1.29% 1.61%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 4.50% 4.57% 5.10% 5.36% 5.24%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 4.27% 4.35% 4.82% 5.02% 4.58%*
Portfolio turnover............ 170% 226% 125% 270% 197%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 57
<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
2000# 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $21.14 $20.27 $20.03 $14.07 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.15 0.13 0.14 0.11 0.12
Net realized and unrealized
gains (losses) from
investments and futures..... (3.17) 2.34 1.63 6.61 2.02
------ ------ ------ ------ -------
Net increase from investment
operations.................. (3.02) 2.47 1.77 6.72 2.14
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.14) (0.14) (0.14) (0.11) (0.05)
Distributions from net
realized gains from
investments................. (1.63) (1.46) (1.39) (0.65) (0.02)
------ ------ ------ ------ -------
Total dividends and
distributions............... (1.77) (1.60) (1.53) (0.76) (0.07)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $16.35 $21.14 $20.27 $20.03 $ 14.07
====== ====== ====== ====== =======
Total investment return (1)... (14.74)% 12.82% 9.89% 49.13% 17.90%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $335,294 $375,465 $266,354 $180,807 $80,897
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 0.96% 0.96% 0.98% 1.00% 1.00%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 0.96% 0.96% 0.98% 1.06% 1.40%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 0.85% 0.71% 0.82% 0.81% 1.22%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 0.85% 0.71% 0.82% 0.75% 0.82%*
Portfolio turnover............ 195% 40% 34% 46% 38%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
# Sub-investment advisory functions for this portfolio were transferred from
Brinson Partners, Inc. to Institutional Capital Corp. and Westwood
Management Corp. on July 1, 2000.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charge or program fees; results would be lower
if they were included. Total investment return for period of less than one
year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 58
<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
2000 1999 1998# 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $25.88 $22.99 $19.28 $13.27 $ 12.00
------ ------ ------ ------ -------
Net investment income
(loss)...................... (0.12) (0.05) (0.03) 0.03 0.03
Net realized and unrealized
gains from investments...... 4.69 4.44 4.79 6.01 1.26
------ ------ ------ ------ -------
Net increase from investment
operations.................. 4.57 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................. (0.75) (1.50) (1.04) -- --
------ ------ ------ ------ -------
Total dividends and
distributions............... (0.75) (1.50) (1.05) (0.03) (0.02)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $29.70 $25.88 $22.99 $19.28 $ 13.27
====== ====== ====== ====== =======
Total investment return (1)... 17.76% 19.66% 26.40% 45.61% 10.76%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $436,806 $379,988 $275,461 $160,334 $69,248
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 0.94% 0.97% 1.00% 1.00% 1.00%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 0.94% 0.97% 1.02% 1.05% 1.33%*
Net investment income (loss)
to average net assets, net
of fee waivers and expense
reimbursements.............. (0.42)% (0.24)% (0.14)% 0.22% 0.33%*
Net investment income (loss)
to average net assets,
before fee waivers and
expense reimbursements...... (0.42)% (0.24)% (0.16)% 0.17% (0.01)%*
Portfolio turnover............ 59% 43% 102% 73% 65%
</TABLE>

------------------------

+ 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 $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 59
<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
2000# 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $15.75 $17.39 $17.52 $12.29 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.10 0.06 0.10 0.12 0.10
Net realized and unrealized
gains (losses) from
investments................. (1.79) (0.06) 1.14 5.55 0.23
------ ------ ------ ------ -------
Net increase (decrease) from
investment operations....... (1.69) 0.00 1.24 5.67 0.33
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.06) (0.09) (0.13) (0.10) (0.04)
Distributions from net
realized gains from
investments................. (0.67) (1.55) (1.24) (0.34) --
------ ------ ------ ------ -------
Total dividends and
distributions............... (0.73) (1.64) (1.37) (0.44) (0.04)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $13.33 $15.75 $17.39 $17.52 $ 12.29
====== ====== ====== ====== =======
Total investment return (1)... (10.59)% 1.16% 6.97% 46.99% 2.76%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $213,749 $206,131 $183,558 $135,047 $63,894
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 1.00% 1.00% 0.99% 1.00% 1.00%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 1.01% 1.01% 1.00% 1.12% 1.51%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 0.77% 0.42% 0.61% 1.00% 1.07%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 0.76% 0.41% 0.60% 0.88% 0.56%*
Portfolio turnover............ 83% 57% 42% 39% 30%
</TABLE>

------------------------

+ For the period August 24, 1995 (commencement of operations) through
July 31, 1996.
* Annualized.
# As of October 4, 1999, Ariel Capital Management Inc., sub-advises a portion
of the Portfolio. Brandywine Asset Management, Inc. continues to sub-advise
a portion of the Portfolio.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 60
<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
2000 1999 1998 1997# JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $20.62 $15.80 $14.44 $11.20 $ 12.00
------ ------ ------ ------ -------
Net investment income
(loss)...................... (0.19) (0.08) (0.03) (0.02) 0.00**
Net realized and unrealized
gains (losses) from
investments................. 12.58 5.28 2.03 3.26 (0.78)
------ ------ ------ ------ -------
Net increase (decrease) from
investment operations....... 12.39 5.20 2.00 3.24 (0.78)
------ ------ ------ ------ -------
Dividends from net investment
income...................... -- -- -- -- (0.02)
Distributions from net
realized gains from
investments................. (2.74) (0.38) (0.64) -- --
------ ------ ------ ------ -------
Total dividends and
distributions............... (2.74) (0.38) (0.64) 0.00 (0.02)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $30.27 $20.62 $15.80 $14.44 $ 11.20
====== ====== ====== ====== =======
Total investment return (1)... 62.30% 33.62% 14.44% 28.93% (6.55)%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $319,571 $265,405 $198,855 $125,609 $63,364
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 0.95% 1.00% 1.00% 1.00% 1.00%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 0.96% 1.01% 1.03% 1.08% 1.27%*
Net investment loss to average
net assets, net of fee
waivers and expense
reimbursements.............. (0.64)% (0.48)% (0.20)% (0.21)% (0.14)%*
Net investment loss to average
net assets, before fee
waivers and expense
reimbursements.............. (0.65)% (0.49)% (0.23)% (0.29)% (0.41)%*
Portfolio turnover............ 81% 102% 131% 247% 115%
</TABLE>

------------------------

+ 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 $10,000 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 any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for period of less
than one year has not been annualized.

--------------------------------------------------------------------------------
Prospectus Page 61
<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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $17.18 $16.54 $15.66 $12.79 $ 12.00
------ ------ ------ ------ -------
Net investment income......... 0.07 0.07 0.16 0.10 0.12
Net realized and unrealized
gains from investments and
foreign currency............ 2.51 1.10 1.20 2.97 0.73
------ ------ ------ ------ -------
Net increase from investment
operations.................. 2.58 1.17 1.36 3.07 0.85
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.12) (0.19) (0.16) (0.13) (0.06)
Distributions from net
realized gains from
investments................. (1.02) (0.34) (0.32) (0.07) --
------ ------ ------ ------ -------
Total dividends and
distributions............... (1.14) (0.53) (0.48) (0.20) (0.06)
------ ------ ------ ------ -------
Capital contribution from
Sub-Advisor................. 0.05 -- -- -- --
------ ------ ------ ------ -------
Net asset value, end of
period...................... $18.67 $17.18 $16.54 $15.66 $ 12.79
====== ====== ====== ====== =======
Total investment return (1)... 14.91% 7.33% 9.27% 24.30% 7.08%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $246,452 $214,017 $164,477 $102,979 $45,331
Expenses to average net
assets, net of fee waivers
and expense reimbursements.. 1.16% 1.22% 1.21% 1.35% 1.50%*
Expenses to average net
assets, before fee waivers
and expense reimbursements.. 1.16% 1.22% 1.21% 1.35% 1.81%*
Net investment income to
average net assets, net of
fee waivers and expense
reimbursements.............. 0.37% 0.53% 1.14% 0.95% 1.35%*
Net investment income to
average net assets, before
fee waivers and expense
reimbursements.............. 0.37% 0.53% 1.14% 0.95% 1.04%*
Portfolio turnover............ 72% 89% 56% 55% 25%
</TABLE>

------------------------

--------------------------------------------------------------------------------
Prospectus Page 62
<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
2000 1999 1998 1997 JULY 31, 1996+
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $12.05 $10.41 $15.60 $12.49 $ 12.00
------ ------ ------ ------ -------
Net investment income......... (0.01) 0.09 0.09 0.06 0.07
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... 0.02 1.62 (5.23) 3.09 0.44
------ ------ ------ ------ -------
Net increase (decrease) from
investment operations....... 0.01 1.71 (5.14) 3.15 0.51
------ ------ ------ ------ -------
Dividends from net investment
income...................... (0.10) (0.07) (0.05) (0.04) (0.02)
------ ------ ------ ------ -------
Net asset value, end of
period...................... $11.96 $12.05 $10.41 $15.60 $ 12.49
====== ====== ====== ====== =======
Total investment return (1)... (0.02)% 16.66% (32.99)% 25.31% 4.23%
====== ====== ====== ====== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $82,179 $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% 1.50%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements.............. 1.75% 1.79% 1.79% 2.09% 2.35%*
Net investment income (loss)
to average net assets, net
of fee waivers and expense
reimbursements.............. (0.08)% 1.05% 0.98% 0.63% 0.94%*
Net investment income (loss)
to average net assets,
before fee waivers and
expense reimbursements...... (0.33)% 0.76% 0.69% 0.04% 0.08%*
Portfolio turnover............ 115% 66% 51% 39% 22%
</TABLE>

------------------------

--------------------------------------------------------------------------------
Prospectus Page 63
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

APPENDIX A

RELATED PERFORMANCE INFORMATION

Certain PACE Funds have recently undergone a change in sub-advisers. To assist
prospective and existing shareholders in making an informed investment decision,
this appendix provides performance information about accounts managed by these
sub-advisers in a substantially similar manner to the way in which the
sub-adviser manages the respective PACE Fund's assets ("Related Performance
Information").

Where a sub-adviser has been managing a registered investment company with
substantially similar investment objectives, policies and strategies
("Comparable Fund") to those of a PACE Fund, the Comparable Fund's average
annualized performance is presented in accordance with SEC standardized
performance rules (reflecting any applicable sales charges). Where the
sub-adviser manages private advisory accounts in a manner that is substantially
similar to the way in which it manages a PACE Fund's assets, this appendix
presents the composite performance of the sub-adviser's private accounts
("Private Account Composite Performance"), calculated in accordance with the
recommended standards of the Association of Investment Management and Research
("AIMR"). AIMR is a non-profit membership and education organization that, among
other things, has formulated a set of performance presentation standards for
investment advisers. Private Account Composite Performance has been adjusted to
reflect the maximum annual PACE Program fee and expenses of the corresponding
PACE Fund's Class P shares. The performance of the PACE Fund (reflecting the
maximum annual PACE Program fee) as well as that of an appropriate unmanaged
benchmark index, not adjusted for any fees or expenses, are also provided.

Finally, please note that:

- Related Performance Information is not necessarily an indication of the
corresponding PACE Fund's future performance. This is particularly true for
Private Account Composite Performance because private accounts are not subject
to certain investment limitations, diversification requirements and other
restrictions imposed on registered mutual funds by the 1940 Act and the
Internal Revenue Code, which, if applicable, may have adversely affected the
performance of the private accounts.

- As more fully described below, certain sub-advisers for which we have included
Related Performance Information manage only a portion of a PACE Fund's assets.
THUS, THE FUTURE PERFORMANCE OF EACH SUB-ADVISER WILL IMPACT THE PERFORMANCE
OF THE RESPECTIVE PACE FUND ONLY FOR THAT PORTION OF THE ASSETS IT MANAGES.
The percentage of a PACE Fund's assets that is allocated to a particular sub-
adviser can be changed at any time.

- Any sub-adviser may be replaced at any time by Mitchell Hutchins, subject to
approval by the PACE Fund's Board of Trustees. No shareholder vote is
required. THIS MANAGEMENT STRUCTURE MAY RESULT IN A MORE FREQUENT TURNOVER OF
SUB-ADVISERS THAN OTHER FUNDS WHICH TYPICALLY MUST SEEK SHAREHOLDER APPROVAL
BEFORE MAKING SUCH A CHANGE.

NOTE: ALL PERFORMANCE INFORMATION WILL BE PROVIDED AS OF 9-30-00 QUARTER END.

1. PACE INTERMEDIATE FIXED INCOME INVESTMENTS

Private Account Composite Performance for Metropolitan West Asset Management LLC
("MWAM"), a new sub-adviser to the Fund, is provided below.

Prior to October 10, 2000, all of PACE Intermediate Fixed Income Investments'
assets were managed by a different sub-adviser. As of October 10, 2000, MWAM
manages all the Fund's assets.

<TABLE>
<CAPTION>
[LEHMAN
PACE INTERMEDIATE BROTHERS]
FIXED INCOME INTERMEDIATE-
MWAM INVESTMENTS TERM
COMPOSITE AS OF CLASS P SHARES AS GOVERNMENT/
9/30/00 OF 9/30/00 CORPORATE INDEX]
--------------- ------------------ ----------------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)............
1 Year...............
3 Years..............
5 Years..............
Since inception
(8/24/95) of Class P
shares PACE Fund....
10 Years.............
</TABLE>

2. PACE MUNICIPAL FIXED INCOME INVESTMENTS

Performance for the only comparable registered investment company (mutual fund)
advised by Standish, Ayer & Wood, Inc., a new sub-adviser to the Fund, is
provided below. Prior to June 1, 2000, all of PACE Municipal Fixed Income
Investments assets were managed by a different sub-adviser.

<TABLE>
<CAPTION>
PACE MUNICIPAL
STANDISH INTERMEDIATE FIXED INCOME LEHMAN
TAX EXEMPT INVESTMENTS MUNICIPAL
MUNICIPAL FUND AS OF CLASS P SHARES 5 YEAR
9/30/00 AS OF 9/30/00 BOND INDEX
--------------------- --------------- ----------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)............
1 Year...............
3 Years..............
5 Years..............
Since inception
(8/24/95) of Class P
shares PACE Fund....
10 Years/Life of
Standish Fund.......
</TABLE>

3. PACE GLOBAL FIXED INCOME INVESTMENTS

Performance for Fischer Francis Trees & Watts, Inc. ("FFTW"), a new sub-adviser
to the Fund, is provided below. Prior to October 10, 2000, all of PACE Global
Fixed Income Investments' assets were managed by Rogge Global Partners plc
("Rogge Global Partners"). As of October 10, 2000, Rogge Global Partners manages
approximately [___%]

--------------------------------------------------------------------------------
Prospectus Page A-1
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

of the fund's assets and FFTW manages approximately [___%] of the fund's assets.
The relative values of the assets allocated to each sub-adviser can be changed
at any time.

<TABLE>
<CAPTION>
PACE GLOBAL
FIXED INCOME LEHMAN
INVESTMENTS GLOBAL
CLASS P AGGREGATE
FFTW [FUND] SHARES AS OF BOND INDEX
AS OF 9/30/00 9/30/00 (UNHEDGED)
------------- ------------ ----------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 Years/Life of FFTW
Fund......................
</TABLE>

4. PACE LARGE COMPANY VALUE EQUITY INVESTMENTS

Performance information for Institutional Capital Corp. ("ICAP"), Westwood
Management Corporation ("Westwood"), and State Street Global Advisors ("SSgA"),
the sub-advisers to the PACE Large Company Value Equity Fund, is set forth
below.

Prior to July 1, 2000, all of the Fund's assets were managed by a different
sub-adviser. As of July 1, 2000, ICAP and Westwood each managed % portion of
the fund's assets. As of October 10, 2000, ICAP and Westwood each manage
approximately 25% of the fund's assets and SSgA manages approximately 50% of the
fund's assets. The relative values of the assets allocated to each investment
adviser can be changed at any time.

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
INVESTMENTS 1000
SSGA COMPOSITE CLASS P SHARES VALUE
AS OF 9/30/00 AS OF 9/30/00 INDEX
-------------- --------------- --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 Years...................
</TABLE>

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
ICAP [EQUITY] INVESTMENTS 1000
FUND AS OF CLASS P SHARES AS VALUE
9/30/00 OF 9/30/00 INDEX
------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 Years/Life of ICAP
Fund......................
</TABLE>

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
WESTWOOD [EQUITY] INVESTMENTS 1000
FUND AS OF CLASS P SHARES AS VALUE
9/30/00 OF 9/30/00 INDEX
----------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)...............
1 Year..................
3 Years.................
5 Years.................
Since inception
(8/24/95) of Class P
shares PACE Fund.......
10 Years/Life of
Westwood Fund..........
</TABLE>

5. PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS

Prior to October 10, 2000, all of PACE Large Company Growth Equity Investments'
assets were managed by Alliance Capital Management L.P. ("Alliance Capital"). As
of October 10, 2000, Alliance Capital manages approximately 60% of the fund's
assets and State Street Global Advisors ("SSgA") manages approximately 40% of
the fund's assets. The relative values of the assets allocated to each
sub-adviser can be changed at any time.

<TABLE>
<CAPTION>
PACE LARGE
COMPANY GROWTH
EQUITY RUSSELL
INVESTMENTS 1000
SSGA AS OF CLASS P SHARES AS GROWTH
9/30/00 OF 9/30/00 INDEX
------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00)....
1 Year....................
3 Years...................
5 Years...................
Since inception (8/24/95)
of Class P shares PACE
Fund.....................
10 Years..................
</TABLE>

6. PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS

Private Account Composite performance for ICM Asset Management, Inc. ("ICM"), a
sub-adviser of PACE Small/ Medium Company Value Equity Investments, is set forth
below.

Prior to October 4, 1999, all of PACE Small/Medium Company Value Equity
Investments' assets were managed by a different sub-adviser. As of October 4,
1999, the former sub-adviser and Ariel Capital Management, Inc. ("Ariel") each
managed a portion of the fund's assets. As of October 10, 2000, Ariel and ICM
each manage approximately 50% of the fund 's assets. The relative values of the
assets allocated to each investment adviser can be changed at any time.

<TABLE>
<CAPTION>
PACE SMALL/MEDIUM
COMPANY VALUE RUSSELL
EQUITY INVESTMENTS 2500
ICM COMPOSITE CLASS P SHARES AS OF VALUE
9/30/00 9/30/00 INDEX
------------- --------------------- --------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)..............
1 Year.................
3 Years................
5 Years................
Since inception
(8/24/95) of Class P
shares PACE Fund......
10 Years...............
</TABLE>

--------------------------------------------------------------------------------
Prospectus Page A-2
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

APPENDIX B

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.

(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

----------------------------------
(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.

--------------------------------------------------------------------------------
Prospectus Page B-1
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

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.

(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;

(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;

(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.

--------------------------------------------------------------------------------
Prospectus Page B-2
<PAGE>
--------------------------------------------------------------------------------
------------------------
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;

--------------------------------------------------------------------------------
Prospectus Page B-3
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

--------------------------------------------------------------------------------
Prospectus Page B-4
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

----------------------------------
(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).

--------------------------------------------------------------------------------
Prospectus Page B-5
<PAGE>
--------------------------------------------------------------------------------
------------------------
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)

----------------------------------
(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.

--------------------------------------------------------------------------------
Prospectus Page B-6
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

----------------------------------
(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.

--------------------------------------------------------------------------------
Prospectus Page B-7
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

----------------------------------
(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.

--------------------------------------------------------------------------------
Prospectus Page B-8
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

----------------------------------
(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.

--------------------------------------------------------------------------------
Prospectus Page B-9
<PAGE>
--------------------------------------------------------------------------------
------------------------
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."

--------------------------------------------------------------------------------
Prospectus Page B-10
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

--------------------------------------------------------------------------------
Prospectus Page B-11
<PAGE>
--------------------------------------------------------------------------------
------------------------
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).

--------------------------------------------------------------------------------
Prospectus Page B-12
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.,

--------------------------------------------------------------------------------
Prospectus Page B-13
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

--------------------------------------------------------------------------------
Prospectus Page B-14
<PAGE>
--------------------------------------------------------------------------------
------------------------
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

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).

--------------------------------------------------------------------------------
Prospectus Page B-15
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

(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.

(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.

(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--

--------------------------------------------------------------------------------
Prospectus Page B-16
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

(A) Make copies of the foregoing documents available to Directing
Participants.

(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;

(A) Independent of PMAS and its affiliates;

(B) Capable of making an independent decision regarding the investment
of Plan assets;

(D) Able to make an informed decision concerning 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

--------------------------------------------------------------------------------
Prospectus Page B-17
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

(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.

(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;

--------------------------------------------------------------------------------
Prospectus Page B-18
<PAGE>
--------------------------------------------------------------------------------
------------------------
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;

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:

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:

--------------------------------------------------------------------------------
Prospectus Page B-19
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

(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

--------------------------------------------------------------------------------
Prospectus Page B-20
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.)

--------------------------------------------------------------------------------
Prospectus Page B-21
<PAGE>
--------------------------------------------------------------------------------
------------------------
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.

You may discuss your questions about the funds by contacting your Financial
Advisor. You may obtain free copies of the funds' 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 shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8090. You can get copies of
reports and other information about the funds:

- For a fee, by electronic request at [email protected] or by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102; or

- Free from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

PaineWebber PACE Select Advisors Trust
Investment Company Act File No. 811-8764

---------------
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED SEPTEMBER , 2000

PaineWebber PACE Select Advisors Trust

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
NOVEMBER , 2000

----------------------------------

This prospectus offers Class A, Class B, Class C and Class Y shares in the
eleven funds listed above. Each class has different sales charges and ongoing
expenses. You can choose the class that is best for you based on how much you
plan to invest and how long you plan to hold your fund shares. Class Y shares
are available only to certain types of investors.

Contents
THE FUNDS

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
What every investor PACE Government Securities Fixed Income Investments
should know about 4 Investment Objective, Strategies and Risks
the funds 5 Performance
6 Expenses and Fee Tables
PACE Intermediate Fixed Income Investments
8 Investment Objective, Strategies and Risks
9 Performance
10 Expenses and Fee Tables
PACE Strategic Fixed Income Investments
11 Investment Objective, Strategies and Risks
12 Performance
13 Expenses and Fee Tables
PACE Municipal Fixed Income Investments
14 Investment Objective, Strategies and Risks
15 Performance
16 Expenses and Fee Tables
PACE Global Fixed Income Investments
17 Investment Objective, Strategies and Risks
19 Performance
20 Expenses and Fee Tables
PACE Large Company Value Equity Investments
21 Investment Objective, Strategies and Risks
22 Performance
23 Expenses and Fee Tables
PACE Large Company Growth Equity Investments
24 Investment Objective, Strategies and Risks
25 Performance
26 Expenses and Fee Tables
PACE Small/Medium Company Value Equity Investments
27 Investment Objective, Strategies and Risks
28 Performance
29 Expenses and Fee Tables
PACE Small/Medium Company Growth Equity Investments
30 Investment Objective, Strategies and Risks
31 Performance
32 Expenses and Fee Tables
PACE International Equity Investments
33 Investment Objective, Strategies and Risks
34 Performance
35 Expenses and Fee Tables
PACE International Emerging Markets Equity Investments
36 Investment Objective, Strategies and Risks
37 Performance
38 Expenses and Fee Tables
39 More About Risks and Investment Strategies
</TABLE>

YOUR INVESTMENT

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Information for 42 Managing Your Fund Account
managing your fund --Initial Offering Period
account --Flexible Pricing
--Buying Shares
--Selling Shares
--Exchanging Shares
--Pricing and Valuation
</TABLE>

ADDITIONAL INFORMATION

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Additional important 47 Management
information about 52 Dividends and Taxes
the funds 53 Financial Highlights
A-1 Appendix A
</TABLE>

--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Where to learn more Back Cover
about these funds
</TABLE>

The funds are not complete or
balanced investment programs.

PACE Government Securities Fixed Income Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Current income.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the performance of
the fund's Class P shares and thus give some indication of the risks of an
investment in the fund. The fund's Class P shares were the only shares
outstanding during the periods shown.

The bar chart shows how the fund's performance has varied from year to year. The
bar chart does not reflect the maximum annual PACE Program fee of 1.50% or the
effect of sales charges or the higher expenses of the fund's Class A, Class B
and Class C shares; 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 Class P shares. Class P shares are not
subject to the sales charges applicable to the fund's Class A, Class B and
Class C shares or the higher expenses of these shares. However, because all
classes of shares invest in the same portfolio of securities, their annual
returns would differ only to the extent of the different sales charges or
expenses. 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 maximum annual PACE Program fee.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
CLASS P CLASS P MORTGAGE-BACKED
(INCEPTION DATE) (8/24/95) SECURITIES INDEX
---------------- --------- ----------------
<S> <C> <C>
One Year.................................................... (0.49)% 1.86%
Life of Fund................................................ 4.29% 6.42%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 0.75% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.50% 0.50% 0.50% 0.50%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.75 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %+
==== ==== ==== ====
Management Fee Waiver/Expense Reimbursements**.............. % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %+
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

+ [INCLUDES 0.02% OF INTEREST EXPENSE RELATED TO REVERSE REPURCHASE AGREEMENTS
[FOR CLASS P SHARES] DURING THE YEAR ENDED JULY 31, 2000.]

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two year period when the fund's expenses are lower due to its 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> <C>
Class A.....................................................
Class B (assuming sale of all shares at end of period)......
Class B (assuming no sale of shares)........................
Class C (assuming sale of all shares at end of period)......
Class C (assuming no sale of shares)........................
Class Y.....................................................
</TABLE>

PACE Intermediate Fixed Income Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Current income, consistent with reasonable stability of principal.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:
- INTEREST RATE RISK -- The value of the fund's investments generally will fall
when interest rates rise. Many corporate bonds provide that the issuer may
repay them earlier than the maturity date. When interest rates are falling,
bond issuers may exercise this right more often, and the fund may have to
reinvest these repayments at lower interest rates.

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
CLASS P CLASS P INTERMEDIATE
(INCEPTION DATE) (8/24/95) GOVERNMENT CREDIT INDEX
---------------- --------- -----------------------
<S> <C> <C>
One Year................................................. (1.59)% 0.39%
Life of Fund............................................. 3.41% 5.74%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 0.75% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.40% 0.40% 0.40% 0.40%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.75 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
Management Fee Waiver/Expense Reimbursements**.............. % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

PACE Strategic Fixed Income Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Total return consisting of income and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Mitchell Hutchins Asset Management Inc., the fund's manager, has selected
Pacific Investment Management Company LLC ("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, sector and prepayment exposure, as
appropriate.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR
Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
CLASS P CLASS P GOVERNMENT/CORPORATE
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- --------------------
<S> <C> <C>
One Year................................................... (4.19)% (2.15)%
Life of Fund............................................... 4.98% 5.84%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price) None 5% 0.75% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.50% 0.50% 0.50% 0.50%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.75 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
Expense Reimbursements**.................................... % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two 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:

PACE Municipal Fixed Income Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

High current income exempt from federal income tax.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- CREDIT RISK -- Bond issuers may fail to make payments when due, or they may
become less willing or less able to do so.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR
Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 3rd quarter, 1998 -- 2.52%
Worst quarter during calendar years shown: 2nd quarter, 1999 -- (1.21)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
LEHMAN BROTHERS
CLASS P CLASS P MUNICIPAL FIVE-YEAR
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- -------------------
<S> <C> <C>
One Year.................................................... (3.60)% 0.73%
Life of Fund................................................ 3.02% 4.49%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price) None 5% 0.75% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

PACE Global Fixed Income Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

High total return.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's Class P shares. Class P shares are not
subject to the sales charges applicable to the fund's Class A, Class B and
Class C shares or the higher expenses of these shares. However, because all
classes of shares invest in the sameportfolio of securities, their annual
returns would differ only to the extent of the different sales charges or
expenses. 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 maximum 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 10, 2000, which is the date on which FFTW assumed day-to-day management
of a portion of the fund's assets. Prior to that date, Rogge Global Partners was
responsible for managing all the fund's assets. [SEE APPENDIX A FOR INFORMATION
ABOUT THE COMPOSITE PERFORMANCE OF PRIVATE ACCOUNTS MANAGED BY FFTW WITH
SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES AS THOSE OF
THE FUND.]

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 3rd quarter, 1998 -- 8.60%

Worst quarter during calendar years shown: 1st quarter, 1999 -- (4.83)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
SALOMON SMITH BARNEY
CLASS P CLASS P WORLD GOVERNMENT
(INCEPTION DATE) (8/24/95) BOND INDEX
---------------- --------- --------------------
<S> <C> <C>
One Year................................................... (9.88)% (4.27)%
Life of Fund............................................... 3.10% 4.43%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.75 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
Expense Reimbursements**.................................... % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two 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:

PACE Large Company Value Equity Investments

INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVES

Capital appreciation and dividend income.

PRINCIPAL INVESTMENT STRATEGIES

Westwood maintains a list of securities that it believes have proven records and
potential for above-average earnings growth. It considers purchasing a security
on this list for the fund if Westwood's forecast for growth rates and earnings
estimates exceeds Wall Street expectations or Westwood's forecasted
price/earnings ratio is less than the forecasted growth rate. Westwood monitors
the issuing companies and will sell a stock if Westwood expects limited future
price appreciation or the projected price/earnings ratio exceeds the three-year
growth.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1998 -- 16.26%

Worst quarter during calendar years shown: 3rd quarter, 1999 -- (14.40)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
CLASS P CLASS P RUSSELL 1000
(INCEPTION DATE) (8/24/95) VALUE INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... (5.57)% 7.35%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price) None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
Management Fee Waiver/Expense Reimbursements**.............. % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

PACE Large Company Growth Equity Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

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, 1999

<TABLE>
<CAPTION>
CLASS P CLASS P RUSSELL 1000
(INCEPTION DATE) (8/24/95) GROWTH INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 23.38% 33.16%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 1% None
Exchange Fee None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
Management Fee Waiver/Expense Reimbursements**.............. % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written agreement under
which Mitchell Hutchins is contractually obligated to waive its Management Fees
and/or reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

PACE Small/Medium Company Value Equity Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares. Class P shares are not subject to
the sales charges applicable to the fund's Class A, Class B and Class C shares
or the higher expenses of these shares. However, because all classes of shares
invest in the same portfolio of securities, their annual returns would differ
only to the extent of the different sales charges or expenses. 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 maximum annual PACE Program fee.

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 2nd quarter, 1999 -- 21.25%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (20.00)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
CLASS P CLASS P RUSSELL 2500
(INCEPTION DATE) (8/24/95) VALUE INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... (4.24)% 1.49%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
---- ---- ---- ----
Expense Reimbursements**.................................... % % % %
==== ==== ==== ====
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two 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:

PACE Small/Medium Company Growth Equity Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

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 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; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 38.15%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (15.44)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
CLASS P CLASS P RUSSELL 2500
(INCEPTION DATE) (8/24/95) GROWTH INDEX
---------------- --------- ------------
<S> <C> <C>
One Year.................................................... 76.09% 55.48%
Life of Fund................................................ 23.15% 19.95%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses . % % % %
---- ---- ---- ----
Expense Reimbursements** . % % % %
---- ---- ---- ----
Net Expenses** . % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two 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:

PACE International Equity Investments

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

--------------------------------------------------------------------------------

FUND OBJECTIVE

Capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 24.39%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (14.64)%

AVERAGE ANNUAL TOTAL RETURNS

as of December 31, 1999

<TABLE>
<CAPTION>
MSCI EUROPE,
CLASS P CLASS P ASIA AND
(INCEPTION DATE) (8/24/95) FAR EAST INDEX
---------------- --------- --------------
<S> <C> <C>
One Year.................................................... 33.63% 26.96%
Life of Fund................................................ 15.13% 13.70%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.70% 0.70% 0.70% 0.70%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses*.............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include 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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example 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:

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 generally defines emerging market countries as countries
that are not included in the MSCI World Index of major world economies.
Countries included in this index may be considered emerging markets based on
current political and economic factors. Schroder Investment Management North
America Inc. ("SIMNA"), the fund's investment adviser, has determined, based on
an analysis of current economic and political factors pertaining to Hong Kong
SAR, that Hong Kong SAR should be considered as an emerging market country for
purposes of the fund's eligible investments. The fund may not always diversify
its investments on a geographic basis among emerging market countries.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

- EQUITY RISK -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

- GEOGRAPHIC CONCENTRATION RISK -- 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.

- DERIVATIVES RISK -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

PERFORMANCE

--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN OF CLASS P SHARES (1996 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

TOTAL RETURN

CALENDAR YEAR

Total Return January 1 to September 30, 2000 -- %

Best quarter during calendar years shown: 4th quarter, 1999 -- 27.14%

Worst quarter during calendar years shown: 3rd quarter, 1998 -- (21.52)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
CLASS P CLASS P MSCI EMF
(INCEPTION DATE) (8/24/95) INDEX
---------------- --------- --------
<S> <C> <C>
One Year.................................................... 59.43% 66.41%
Life of Fund................................................ 3.51% 3.14%
</TABLE>

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.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price)...................................... None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.90% 0.90% 0.90% 0.90%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses..............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
---- ---- ---- ----
Expense Reimbursements**.................................... % % % %
---- ---- ---- ----
Net Expenses**.............................................. % % % %
==== ==== ==== ====
</TABLE>

---------

* "Other Expenses" are based on estimated amounts for the current fiscal year
and include an administration fee of 0.20% paid by the fund to Mitchell
Hutchins.

** The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement under which Mitchell Hutchins is contractually obligated
to reimburse the fund to the extent that the fund's expenses through
December 1, 2002 otherwise would exceed the "Net Expenses" rates shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three fiscal years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rates.

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.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
two 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:

MORE ABOUT RISKS AND INVESTMENT STRATEGIES

--------------------------------------------------------------------------------

PRINCIPAL RISKS

INDEX STRATEGY RISK. An investment adviser may not be successful in selecting
stocks from an index that

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.

ADDITIONAL INVESTMENT STRATEGIES

CASH RESERVES; DEFENSIVE POSITIONS. Each fund 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.

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 may engage in frequent trading to achieve its
investment objective. Frequent trading can result in portfolio turnover in
excess of 100% (high portfolio turnover).

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.

MANAGING YOUR FUND ACCOUNT

--------------------------------------------------------------------------------

INITIAL OFFERING PERIOD
During an initial offering period currently scheduled to end on or about
November __, 2000, PaineWebber and selected dealers may obtain non-binding
indications of interest for the Class A, B, C and Y shares of certain funds.
They will accept subscriptions through the last day of the offering period date,
although no payment is due until after the funds' registration of their
Class A, B, C and Y shares becomes effective with the Securities and Exchange
Commission and a prospective investor may withdraw his or her subscription at
any time prior to that date. During the offering period, a fund may cancel or
modify the offering of its shares without notice. A fund may also refuse any
order in whole or in part.

FLEXIBLE PRICING
The funds offer four classes of shares - Class A, Class B, Class C and Class Y.
Each class has different sales charges and ongoing expenses. You can choose the
class that is best for you, based on how much you plan to invest and how long
you plan to hold your fund investment. Class Y shares are only available to
certain types of investors.

Each fund has adopted a plan under rule 12b-1 for its Class A, Class B and Class
C shares that allows it to pay service fees for providing services to
shareholders and (for Class B and Class C shares) distribution fees for the sale
of its shares. Because the 12b-1 distribution fees for Class B and Class C
shares are paid out of a fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.

CLASS A SHARES

Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class B and Class C shares.

The Class A sales charges for each fund are described in the following table.

CLASS A SALES CHARGES - 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.

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE*
-------------------- -------------- ------------------- -------------------------------
<S> <C> <C> <C>
Less than $100,000............................ 4.00% 4.17% 3.75%
$100,000 to $249,999.......................... 3.00 3.09 2.75
$250,000 to $499,999.......................... 2.25 2.30 2.00
$500,000 to $999,999.......................... 1.75 1.78 1.50
$1,000,000 and over(1)........................ None None 1.00(2)
</TABLE>

CLASS A SALES CHARGES - 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.

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE*
-------------------- -------------- ------------------- -------------------------------
<S> <C> <C> <C>
Less than $50,000............................. 4.50% 4.71% 4.25%
$50,000 to $99,999............................ 4.00 4.17 3.75
$100,000 to $249,999.......................... 3.50 3.63 3.25
$250,000 to $499,999.......................... 2.50 2.56 2.25
$500,000 to $999,999.......................... 1.75 1.78 1.50
$1,000,000 and over (1)....................... None None 1.00(2)
</TABLE>

---------

*For an initial period ending on or about December 31, 2000, Mitchell Hutchins
will reallow the full amount of the sales charge to selected dealers.

(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not subject
to this 1% charge. Withdrawals in the first year after purchase of up to 12%
of the value of the fund account under the funds' Systematic Withdrawal Plan
are not subject to this charge.

(2) Mitchell Hutchins pays 1% to PaineWebber.

SALES CHARGE REDUCTIONS AND WAIVERS. You may qualify for a lower sales charge
if you already own Class A shares of a PaineWebber mutual fund. You can combine
the value of Class A shares that you own in other PaineWebber funds and the
purchase amount of the Class A shares of the PaineWebber fund that you are
buying.

You may also qualify for a lower sales charge if you combine your purchases with
those of:

- your spouse, parents or children under age 21;

- your Individual Retirement Accounts (IRAs);

- certain employee benefit plans, including 401(k) plans;

- a company that you control;

- a trust that you created;

- Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by you or by a group of investors for your children; or

- accounts with the same adviser.

You may qualify for a complete waiver of the sales charge if you:

- Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;

- Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC, and
-- you were the Financial Advisor's client at the competing brokerage firm;

-- within 90 days of buying shares in a fund, you sell shares of one or more
mutual funds that were principally underwritten by the competing brokerage
firm or its affiliates, and you either paid a sales charge to buy those
shares, pay a contingent deferred sales charge when selling them or held
those shares until the contingent deferred sales charge was waived; and

-- you purchase an amount that does not exceed the total amount of money you
received from the sale of the other mutual fund;

- Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;

- Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
eligible employees in the plan or at least $1 million in assets;

- Are a participant in the PaineWebber Members Only-SM- Program. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in
a total amount not to exceed 1% of the amount invested; or

- Acquire these shares through a PaineWebber InsightOne-SM- Program brokerage
account.

CLASS B SHARES

Class B shares have a contingent deferred sales charge. When you purchase Class
B shares, we invest 100% of your purchase in fund shares. However, you may have
to pay the deferred sales charge when you sell your fund shares, depending on
how long you own the shares.

Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.

If you sell Class B shares before the end of six years, you will pay a deferred
sales charge. We calculate the deferred sales charge by multiplying the lesser
of the net asset value of the Class B shares at the time of purchase or the net
asset value at the time of sale by the percentage shown below:

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
IF YOU SELL THE SHARES' NET ASSET
SHARES WITHIN: VALUE IS MULTIPLIED:
-------------- ---------------------
<S> <C>
1st year since purchase........ 5%
2nd year since purchase........ 4
3rd year since purchase........ 3
4th year since purchase........ 2
5th year since purchase........ 2
6th year since purchase........ 1
7th year since purchase........ None
</TABLE>

We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.

To minimize your deferred sales charge, we will assume that you are selling:

- First, Class B shares representing reinvested dividends, and

- Second, Class B shares that you have owned the longest.

SALES CHARGE WAIVERS. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:

- You participate in the Systematic Withdrawal Plan;

- You are older than 59 1/2 and are selling shares to take a distribution from
certain types of retirement plans;

- You receive a tax-free return of an excess IRA contribution;

- You receive a tax-qualified retirement plan distribution following retirement;

- The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint tenant
with the right of survivorship; or

- The shares are held in trust and the death of the trustee requires liquidation
of the trust.

CLASS C SHARES

Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.

Class C shares pay an annual 12b-1 distribution fee of 0.50% of average net
assets for fixed income funds and 0.75% of average net assets for equity funds,
as well as an annual 12b-1 service fee of 0.25% of average net assets. Class C
shares do not convert to another class of shares. This means that you will pay
the 12b-1 fees for as long as you own your shares.

Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 0.75% for fixed income frunds and 1% for equity funds by
the lesser of the net asset value of the Class C shares at the time of purchase
or the net asset value at the time of sale. We will not impose the deferred
sales charge on Class C shares representing reinvestment of dividends or on
withdrawals in the first year after purchase of up to 12% of the value of your
Class C shares under the Systematic Withdrawal Plan.

You may be eligible to sell your shares without paying a contingent deferred
sales charge if you are a 401(k) or 403(b) qualified employee benefit plan with
fewer than 100 employees or less than $1 million in assets.

NOTE ON SALES CHARGE WAIVERS REGARDING CLASS A, CLASS B AND CLASS C SHARES

If you think you qualify for any of the sales charge waivers described above,
you will need to provide documentation to PaineWebber or the funds. For more
information, you should contact your PaineWebber Financial Advisor or
correspondent firm or call 1-800-647-1568. If you want information on the funds'
Systematic Withdrawal Plan, see the SAI or contact your PaineWebber Financial
Advisor or correspondent firm.

CLASS Y SHARES

Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:

- Buy shares through PaineWebber's PACE-SM- Multi-Advisor Program;

- Buy $10 million or more of PaineWebber fund shares at any one time;

- Are a qualified retirement plan with 5,000 or more eligible employees or
$50 million in assets;

- Are a corporation, bank, trust company, insurance company, pension fund,
employee benefit plan, professional firm, trust, estate or educational,
religious or charitable organization with 5,000 or more employees or with over
$50 million in investable assets; or

- Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.

Class Y shares do not pay ongoing 12b-1 distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are the lowest of all the
classes.

BUYING SHARES

If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the funds through the funds' transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you wish to invest in other PaineWebber Funds, you can do so by:

- Contacting your Financial Advisor (if you have an account at PaineWebber or at
a PaineWebber correspondent firm);

- Mailing an application with a check; or

- Opening an account by exchanging shares from another PaineWebber fund.

You do not have to complete an application when you make additional investments
in the same fund.

The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.

<TABLE>
<CAPTION>
MINIMUM INVESTMENTS:
<S> <C>
To open an account........... $1,000
To add to an account......... $ 100
</TABLE>

Each fund may waive or reduce these amounts for:

- Employees of PaineWebber or its affiliates; or

- Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the funds' automatic investment plans.

FREQUENT TRADING. The interests of a fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations - also
known as "market timing." When large dollar amounts are involved, the fund may
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on a fund's ability to manage its
investments, Mitchell Hutchins and the fund may reject purchase orders and
exchanges into the fund by any person, group or account that Mitchell Hutchins
believes to be a market timer. A fund may notify the market timer that a
purchase order or an exchange has been rejected after the day the order is
placed.

SELLING SHARES
You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.

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.

If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.

If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:
- Your name and address;

- The fund's name;

- The fund 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 funds will not accept
signature guarantees that are not a part of these programs.

Mail the letter to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you sell Class A shares and then repurchase Class A shares of the same fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

It costs each fund money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. A fund will not repurchase shares in accounts that fall below $500 solely
because of a decrease in the fund's net asset value.

EXCHANGING SHARES

You may exchange Class A, Class B or Class C shares of each fund for shares of
the same class of the other PACE funds offered in this prospectus or of
PaineWebber Money Market Fund. You may not exchange Class Y shares.

You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales charge if you
later sell the shares you acquired in the exchange. Each fund will use the date
that you purchased the shares in the first fund to determine whether you must
pay a deferred sales charge when you sell the shares in the acquired fund.

You may not be able to exchange your shares if your exchange is not as large as
the minimum investment amount in that other fund.

You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.

CONVERSION OF CLASS P SHARES INTO CLASS A SHARES. Class A shares of a fund also
may be acquired through conversion of Class P shares of the same fund if a PACE
Program participant of at least __ years' standing terminates his or her
participation in that program and wishes to continue investing in the fund.

PAINEWEBBER AND CORRESPONDENT FIRM CLIENTS. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.

OTHER INVESTORS. If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the fund's transfer agent. You must
include:

- Your name and address;

- The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;

- Your account number;

- How much you are exchanging (by dollar amount or by number of shares to be
sold); and

- A guarantee of your signature. (See "Selling Shares" for information on
obtaining a signature guarantee.)

Mail the letter to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

A fund may modify or terminate the exchange privilege at any time.

Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.

You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A or Class C shares. A deferred sales charge may be
applied when you sell Class B or Class C shares.

Each 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.

MANAGEMENT

--------------------------------------------------------------------------------

MANAGER AND INVESTMENT ADVISERS

Mitchell Hutchins selects investment advisers for the funds, subject to approval
of the board, and reviews the performance of those investment advisers.

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 0.40% 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 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, 2000, 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 Government Securities Fixed Income
Investments.......................... 0.66%
PACE Intermediate Fixed Income
Investments.......................... 0.59%
PACE Strategic Fixed Income
Investments.......................... %
PACE Municipal Fixed Income
Investments.......................... %
PACE Global Fixed Income Investments... 0.57%
PACE Small/Medium Company Value Equity
Investments.......................... %
PACE Small/Medium Company Growth Equity
Investments.......................... %
PACE International Emerging Markets
Equity Investments................... 0.85%
</TABLE>

INVESTMENT ADVISERS AND PORTFOLIO MANAGERS

MWAM uses a team approach in advising PACE Intermediate Fixed Income
Investments. The team members are Scott B. Dubchansky, Stephen Kane, Laird R.
Landmann, Tad Rivelle and Brian H. Loo and all have held their fund
responsibilities since October 10, 2000. Mr. Dubchansky has been chief executive
officer of MWAM since August 1996. From August 1992 through August 1996, he was
a senior vice president of Donaldson Lufkin & Jenrette in the fixed income
division. Prior to August 1992, Mr. Dubchansky was senior vice president, fixed
income sales, at Kidder Peabody and responsible for fixed income sales to
institutional clients. Mr. Kane has been a portfolio manager with MWAM since
August 1996. From November 1995 until July 1996, he was an account manager with
PIMCO in Newport Beach, California. Before then, Mr. Kane was a merchant banking
associate with Union Bank in Los Angeles, California. Mr. Landmann has been a
managing director and portfolio manager with MWAM since August 1996. From
November 1992 until July 1996, he was a principal and co-director of fixed
income with Hotchkis and Wiley in Los Angeles, California. Before then, he was a
portfolio manager with PIMCO in Newport Beach, California. Mr. Rivelle has been
the chief investment officer and a managing director with MWAM since
August 1996. From November 1992 until July 1996, he was a principal and
co-director of fixed income with Hotchkis and Wiley in Los Angeles, California.
Before then, he was a portfolio manager with PIMCO in Newport Beach, California.
Mr. Loo has been a portfolio manager and analyst with MWAM since August 1996.
From June 1996 until July 1996, Mr. Loo worked as an analyst with Hotchkis and
Wiley in Los Angeles, California. Before then, he worked as an analyst with
Trust Company of the West (starting in May 1994 while completing a graduate
finance degree at Carnegie Mellon University).

Rogge Global Partners uses a team approach in managing the fund's portfolio. The
team is lead by Olaf Rogge, the chief investment officer of Rogge Global
Partners, along with John Graham, Richard Bell, Adrian James, Malie Conway and
Richard Gray. Mr. Rogge, who founded Rogge Global Partners in 1984, has been
managing global investments for more than 25 years. Mr. Graham joined Rogge
Global Partners 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
Partners in June 1990 and serves as a director, portfolio manager and analyst.
Mr. James joined Rogge Global Partners 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. Conway joined Rogge Global Partners 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 Partners in April 1999 and
serves as a portfolio manager and head of emerging markets. He was previously a
vice president, emerging debt research of 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. Conway, who has held her fund responsibilities since
August 1998 and Mr. Gray, who has held his fund responsibilities since
April 1999.

Mr. Russell joined FFTW in 1992 from the short-term proprietary trading desk in
the global markets area of J.P. Morgan. His primary responsibilities included
proprietary positioning of U.S. and non-U.S. government obligations, corporate
bonds and asset-backed securities. Prior to that, Mr. Russell managed J.P.
Morgan's short-term interest rate risk group, coordinating a $10 billion book of
assets and liabilities.

Mr. Williams joined FFTW in 1995 from Deutsche Morgan Grenfell, where he worked
as an analyst in the fixed-income research department.

currency exposures of the firm's specialist non-dollar bond portfolios. He was
previously first vice president and London branch manager of Julius Baer
Investment Management, Inc.

PACE LARGE COMPANY VALUE EQUITY INVESTMENTS. Institutional Capital Corporation
("ICAP"), Westwood Management Corporation ("Westwood") and State Street Global
Advisors ("SSgA") serve as investment advisers for PACE Large Company Value
Equity Investments. ICAP is located at 225 West Wacker Drive, Suite 2400,
Chicago, Illinois 60606-1229, and has been in the investment management business
since 1970. As of October 31, 2000, ICAP had approximately $[ ] billion in
assets under management. ICAP uses a team approach in the day-to-day management
of its share of the fund's assets. Institutional Capital Corporation has held
its fund responsibilities since July 1, 2000.

PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS. Alliance Capital Management L.P.
("Alliance Capital") serves as one of the two investment advisers 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 of approximately $[ ] billion as of September 30, 2000.
Jane Mack Gould is primarily responsible for the day-to-day management of
Alliance Capital's share of the fund's assets. She has held her fund
responsibilities since its inception in August 1995. Ms. Gould is a senior vice
president and portfolio manager and has been with Alliance Capital since 1971.

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
Company 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, 2000, Delaware Management
Company and its affiliates had over $ 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 Company. Prior to joining the group
of companies of which Delaware Management Company is a part in 1996, Mr. Frey
was a senior director with Morgan Grenfell Capital Management, Incorporated in
New York. He has 18 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, Lori F. Wachs and Frank Houghton.
Mr. Heffern joined Delaware Management Company 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 Company 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 Company 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 Company in 1992 and serves as an assistant vice president.
Previously, she was an equity analyst at Goldman Sachs & Company for two years.
Mr. Houghton joined Delaware Management Company in and serves as a
. Previously, .

DIVIDENDS AND TAXES

--------------------------------------------------------------------------------

DIVIDENDS

Classes with higher expenses are expected to have lower dividends. For example,
Class B and Class C shares are expected to have the lowest dividends of any
class of the fund's shares, while Class Y shares are expected to have the
highest.

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

When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. 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
annually how you should treat its dividends for tax purposes.

See the SAI for a more detailed discussion. Prospective shareholders are urged
to consult their tax advisers.

FINANCIAL HIGHLIGHTS

--------------------------------------------------------------------------------

The following financial highlights tables are intended to help you understand
the funds' financial performance for the periods shown. The tables show
information for the funds' Class P shares because they were the only class of
shares outstanding 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.

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.10 $ 12.59 $ 12.61 $ 12.07 $ 12.00
-------- -------- -------- -------- -------
Net investment income....................................... 0.73 0.68 0.72 0.64 0.49
Net realized and unrealized gains (losses) from investments
and futures............................................... 0.01 (0.43) 0.18 0.58 0.03
-------- -------- -------- -------- -------
Net increase from investment operations..................... 0.74 0.25 0.90 1.22 0.52
-------- -------- -------- -------- -------
Dividends from net investment income........................ (0.75) (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........................... (0.75) (0.74) (0.92) (0.68) (0.45)
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 12.09 $ 12.10 $ 12.59 $ 12.61 $ 12.07
======== ======== ======== ======== =======
Total investment return (1)................................. 6.36% 2.02% 7.39% 10.42% 4.35%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $198,918 $191,719 $162,119 $101,606 $58,752
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.87%++ 0.87%++ 0.85% 1.57%++ 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.91%++ 0.93%++ 0.95% 1.70%++ 1.15%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 6.12%++ 5.49%++ 5.90% 5.44%++ 5.09%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 6.08%++ 5.43%++ 5.80% 5.31%++ 4.79%*
Portfolio turnover.......................................... 585% 418% 353% 712% 978%
</TABLE>

------------------------

<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
++ Includes 0.02%, 0.01% and 0.72% of interest expense related
to the reverse repurchase agreements during the years ended
July 31, 2000, July 31, 1999 and July 31, 1997,
respectively.
(1) Total investment return is calculated assuming a $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
INTERMEDIATE FIXED INCOME INVESTMENTS
-------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------------------ ENDED
2000 1999 1998 1997 JULY 31, 1996+
-------- -------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 11.98 $ 12.35 $ 12.23 $ 11.95 $ 12.00
-------- -------- ------- ------- -------
Net investment income....................................... 0.71 0.63 0.67 0.66 0.53
Net realized and unrealized gains (losses) from investments
and foreign currency...................................... (0.17) (0.28) 0.09 0.28 (0.09)
-------- -------- ------- ------- -------
Net increase from investment operations..................... 0.54 0.35 0.76 0.94 0.44
-------- -------- ------- ------- -------
Dividends from net investment income........................ (0.70) (0.64) (0.64) (0.66) (0.48)
Distributions from net realized gains from investments...... 0.00++ (0.08) -- -- (0.01)
-------- -------- ------- ------- -------
Total dividends and distributions........................... (0.70) (0.72) (0.64) (0.66) (0.49)
-------- -------- ------- ------- -------
Net asset value, end of period.............................. $ 11.82 $ 11.98 $ 12.35 $ 12.23 $ 11.95
======== ======== ======= ======= =======
Total investment return (1)................................. 4.74% 2.81% 6.41% 8.14% 3.59%
======== ======== ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $134,102 $139,043 $99,690 $66,751 $41,273
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.78% 0.80% 0.84% 0.85% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.79% 0.80% 0.84% 0.99% 1.23%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 5.95% 5.26% 5.60% 5.70% 5.56%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 5.94% 5.26% 5.60% 5.56% 5.18%*
Portfolio turnover.......................................... 88% 89% 111% 67% 36%
</TABLE>

------------------------

<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
++ The Portfolio made a distribution of less than $0.005 during
the period.
* Annualized.
(1) Total investment return is calculated assuming a $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
STRATEGIC FIXED INCOME INVESTMENTS
--------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
-------- -------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.33 $ 13.32 $ 13.04 $ 12.44 $ 12.00
-------- -------- -------- ------- -------
Net investment income....................................... 0.73 0.69 0.69 0.67 0.59
Net realized and unrealized gains (losses) from investments,
futures, options and foreign currency..................... (0.13) (0.64) 0.40 0.70 0.38
-------- -------- -------- ------- -------
Net increase (decrease) from investment operations.......... 0.60 0.05 1.09 1.37 0.97
-------- -------- -------- ------- -------
Dividends from net investment income........................ (0.72) (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........................... (0.72) (1.04) (0.81) (0.77) (0.53)
-------- -------- -------- ------- -------
Net asset value, end of period.............................. $ 12.21 $ 12.33 $ 13.32 $ 13.04 $ 12.44
======== ======== ======== ======= =======
Total investment return (1)................................. 5.08% 0.21% 8.66% 11.35% 8.15%
======== ======== ======== ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $234,748 $222,214 $126,880 $75,174 $42,550
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.85% 0.88%++ 0.85% 0.85% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.89% 0.92%++ 0.94% 1.10% 1.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 6.04% 5.51%++ 5.49% 5.69% 5.85%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 6.00% 5.47%++ 5.40% 5.44% 5.30%*
Portfolio turnover.......................................... 391% 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 $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
MUNICIPAL FIXED INCOME INVESTMENTS
-----------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
---------------------------------------- ENDED
2000# 1999 1998 1997 JULY 31, 1996+
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.44 $ 12.70 $ 12.67 $ 12.32 $ 12.00
------- ------- ------- ------- -------
Net investment income....................................... 0.57 0.56 0.58 0.61 0.49
Net realized and unrealized gains (losses) from
investments............................................... (0.29) (0.26) 0.02 0.38 0.27
------- ------- ------- ------- -------
Net increase from investment operations..................... 0.28 0.30 0.60 0.99 0.76
------- ------- ------- ------- -------
Dividends from net investment income........................ (0.57) (0.56) (0.57) (0.61) (0.43)
Distributions from net realized gains from investments...... -- -- -- (0.03) (0.01)
------- ------- ------- ------- -------
Total dividends and distributions........................... (0.57) (0.56) (0.57) (0.64) (0.44)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 12.15 $ 12.44 $ 12.70 $ 12.67 $ 12.32
======= ======= ======= ======= =======
Total investment return (1)................................. 2.37% 2.34% 4.87% 8.30% 6.38%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $53,594 $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% 0.85%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.89% 0.89% 0.93% 1.40% 1.74%*
Net investment income to average net assets, net of
fee waivers and expense reimbursements.................... 4.68% 4.42% 4.67% 5.08% 4.95%*
Net investment income to average net assets, before
fee waivers and expense reimbursements.................... 4.64% 4.38% 4.59% 4.53% 4.07%*
Portfolio turnover.......................................... 33% 11% 34% 15% 78%
</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 Deutsche Asset Management, Inc. to
Standish, Ayer and Wood, Inc. on June 1, 2000.
(1) Total investment return is calculated assuming a $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
GLOBAL FIXED INCOME INVESTMENTS
-------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
------------------------------------------ ENDED
2000 1999 1998 1997 JULY 31, 1996+
-------- -------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 11.82 $ 12.25 $ 12.17 $ 12.33 $ 12.00
-------- -------- ------- ------- -------
Net investment income....................................... 0.53 0.65 0.62 0.64 0.53
Net realized and unrealized gains (losses) from investments
and foreign currency...................................... (1.10) 0.20 (0.03) (0.21) 0.27
-------- -------- ------- ------- -------
Net increase from investment operations..................... (0.57) 0.85 0.59 0.43 0.80
-------- -------- ------- ------- -------
Dividends from net investment income and foreign currency... (0.48) (0.81) (0.40) (0.51) (0.46)
Distributions from net realized gains from investments...... (0.09) (0.47) (0.11) (0.08) (0.01)
-------- -------- ------- ------- -------
Total dividends and distributions........................... (0.57) (1.28) (0.51) (0.59) (0.47)
-------- -------- ------- ------- -------
Net asset value, end of period.............................. $ 10.68 $ 11.82 $ 12.25 $ 12.17 $ 12.33
======== ======== ======= ======= =======
Total investment return (1)................................. (4.97)% 6.49% 4.88% 3.54% 6.68%
======== ======== ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $100,831 $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% 0.95%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 1.18% 1.17% 1.23% 1.29% 1.61%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 4.50% 4.57% 5.10% 5.36% 5.24%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 4.27% 4.35% 4.82% 5.02% 4.58%*
Portfolio turnover.......................................... 170% 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 $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
LARGE COMPANY VALUE EQUITY INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000# 1999 1998 1997 JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 21.14 $ 20.27 $ 20.03 $ 14.07 $ 12.00
-------- -------- -------- -------- -------
Net investment income....................................... 0.15 0.13 0.14 0.11 0.12
Net realized and unrealized gains (losses) from investments
and futures............................................... (3.17) 2.34 1.63 6.61 2.02
-------- -------- -------- -------- -------
Net increase from investment operations..................... (3.02) 2.47 1.77 6.72 2.14
-------- -------- -------- -------- -------
Dividends from net investment income........................ (0.14) (0.14) (0.14) (0.11) (0.05)
Distributions from net realized gains from investments...... (1.63) (1.46) (1.39) (0.65) (0.02)
-------- -------- -------- -------- -------
Total dividends and distributions........................... (1.77) (1.60) (1.53) (0.76) (0.07)
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 16.35 $ 21.14 $ 20.27 $ 20.03 $ 14.07
======== ======== ======== ======== =======
Total investment return (1)................................. (14.74)% 12.82% 9.89% 49.13% 17.90%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $335,294 $375,465 $266,354 $180,807 $80,897
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.96% 0.96% 0.98% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.96% 0.96% 0.98% 1.06% 1.40%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 0.85% 0.71% 0.82% 0.81% 1.22%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 0.85% 0.71% 0.82% 0.75% 0.82%*
Portfolio turnover.......................................... 195% 40% 34% 46% 38%
</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 Brinson Partners, Inc. to Institutional
Capital Corp. and Westwood Management Corp. on July 1, 2000.
(1) Total investment return is calculated assuming a $10,000
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 any applicable sales charge or program fees; results
would be lower if they were included. Total investment
return for period of less than one year has not been
annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
LARGE COMPANY GROWTH EQUITY INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000 1999 1998# 1997 JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 25.88 $ 22.99 $ 19.28 $ 13.27 $ 12.00
-------- -------- -------- -------- -------
Net investment income (loss)................................ (0.12) (0.05) (0.03) 0.03 0.03
Net realized and unrealized gains from investments.......... 4.69 4.44 4.79 6.01 1.26
-------- -------- -------- -------- -------
Net increase from investment operations..................... 4.57 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...... (0.75) (1.50) (1.04) -- --
-------- -------- -------- -------- -------
Total dividends and distributions........................... (0.75) (1.50) (1.05) (0.03) (0.02)
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 29.70 $ 25.88 $ 22.99 $ 19.28 $ 13.27
======== ======== ======== ======== =======
Total investment return (1)................................. 17.76% 19.66% 26.40% 45.61% 10.76%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $436,806 $379,988 $275,461 $160,334 $69,248
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.94% 0.97% 1.00% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.94% 0.97% 1.02% 1.05% 1.33%*
Net investment income (loss) to average net assets, net of
fee waivers and expense reimbursements.................... (0.42)% (0.24)% (0.14)% 0.22% 0.33%*
Net investment income (loss) to average net assets, before
fee waivers and expense reimbursements.................... (0.42)% (0.24)% (0.16)% 0.17% (0.01)%*
Portfolio turnover.......................................... 59% 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 $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000# 1999 1998 1997 JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 15.75 $ 17.39 $ 17.52 $ 12.29 $ 12.00
-------- -------- -------- -------- -------
Net investment income....................................... 0.10 0.06 0.10 0.12 0.10
Net realized and unrealized gains (losses) from
investments............................................... (1.79) (0.06) 1.14 5.55 0.23
-------- -------- -------- -------- -------
Net increase (decrease) from investment operations.......... (1.69) 0.00 1.24 5.67 0.33
-------- -------- -------- -------- -------
Dividends from net investment income........................ (0.06) (0.09) (0.13) (0.10) (0.04)
Distributions from net realized gains from investments...... (0.67) (1.55) (1.24) (0.34) --
-------- -------- -------- -------- -------
Total dividends and distributions........................... (0.73) (1.64) (1.37) (0.44) (0.04)
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 13.33 $ 15.75 $ 17.39 $ 17.52 $ 12.29
======== ======== ======== ======== =======
Total investment return (1)................................. (10.59)% 1.16% 6.97% 46.99% 2.76%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $213,749 $206,131 $183,558 $135,047 $63,894
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 1.00% 1.00% 0.99% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 1.01% 1.01% 1.00% 1.12% 1.51%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 0.77% 0.42% 0.61% 1.00% 1.07%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 0.76% 0.41% 0.60% 0.88% 0.56%*
Portfolio turnover.......................................... 83% 57% 42% 39% 30%
</TABLE>

------------------------

<TABLE>
<S> <C>
+ For the period August 24, 1995 (commencement of operations)
through July 31, 1996.
* Annualized.
# As of October 4, 1999, Ariel Capital Management Inc.,
sub-advises a portion of the Portfolio. Brandywine Asset
Management, Inc. continues to sub-advise a portion of the
Portfolio.
(1) Total investment return is calculated assuming a $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000 1999 1998 1997# JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 20.62 $ 15.80 $ 14.44 $ 11.20 $ 12.00
-------- -------- -------- -------- -------
Net investment income (loss)................................ (0.19) (0.08) (0.03) (0.02) 0.00**
Net realized and unrealized gains (losses) from
investments............................................... 12.58 5.28 2.03 3.26 (0.78)
-------- -------- -------- -------- -------
Net increase (decrease) from investment operations.......... 12.39 5.20 2.00 3.24 (0.78)
-------- -------- -------- -------- -------
Dividends from net investment income........................ -- -- -- -- (0.02)
Distributions from net realized gains from investments...... (2.74) (0.38) (0.64) -- --
-------- -------- -------- -------- -------
Total dividends and distributions........................... (2.74) (0.38) (0.64) 0.00 (0.02)
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 30.27 $ 20.62 $ 15.80 $ 14.44 $ 11.20
======== ======== ======== ======== =======
Total investment return (1)................................. 62.30% 33.62% 14.44% 28.93% (6.55)%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $319,571 $265,405 $198,855 $125,609 $63,364
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 0.95% 1.00% 1.00% 1.00% 1.00%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 0.96% 1.01% 1.03% 1.08% 1.27%*
Net investment loss to average net assets, net of fee
waivers and expense reimbursements........................ (0.64)% (0.48)% (0.20)% (0.21)% (0.14)%*
Net investment loss to average net assets, before fee
waivers and expense reimbursements........................ (0.65)% (0.49)% (0.23)% (0.29)% (0.41)%*
Portfolio turnover.......................................... 81% 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 $10,000
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 any applicable sales charges or program fees;
results would be lower if they were included. Total
investment return for period of less than one year has not
been annualized.
</TABLE>

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
INTERNATIONAL EQUITY INVESTMENTS
---------------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
-------------------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.18 $ 16.54 $ 15.66 $ 12.79 $ 12.00
-------- -------- -------- -------- -------
Net investment income....................................... 0.07 0.07 0.16 0.10 0.12
Net realized and unrealized gains from investments and
foreign currency.......................................... 2.51 1.10 1.20 2.97 0.73
-------- -------- -------- -------- -------
Net increase from investment operations..................... 2.58 1.17 1.36 3.07 0.85
-------- -------- -------- -------- -------
Dividends from net investment income........................ (0.12) (0.19) (0.16) (0.13) (0.06)
Distributions from net realized gains from investments...... (1.02) (0.34) (0.32) (0.07) --
-------- -------- -------- -------- -------
Total dividends and distributions........................... (1.14) (0.53) (0.48) (0.20) (0.06)
-------- -------- -------- -------- -------
Capital contribution from Sub-Advisor....................... 0.05 -- -- -- --
-------- -------- -------- -------- -------
Net asset value, end of period.............................. $ 18.67 $ 17.18 $ 16.54 $ 15.66 $ 12.79
======== ======== ======== ======== =======
Total investment return (1)................................. 14.91% 7.33% 9.27% 24.30% 7.08%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $246,452 $214,017 $164,477 $102,979 $45,331
Expenses to average net assets, net of fee waivers and
expense reimbursements.................................... 1.16% 1.22% 1.21% 1.35% 1.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 1.16% 1.22% 1.21% 1.35% 1.81%*
Net investment income to average net assets, net of fee
waivers and expense reimbursements........................ 0.37% 0.53% 1.14% 0.95% 1.35%*
Net investment income to average net assets, before fee
waivers and expense reimbursements........................ 0.37% 0.53% 1.14% 0.95% 1.04%*
Portfolio turnover.......................................... 72% 89% 56% 55% 25%
</TABLE>

------------------------

FINANCIAL HIGHLIGHTS
(Continued)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACE
INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
-----------------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
---------------------------------------- ENDED
2000 1999 1998 1997 JULY 31, 1996+
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.05 $ 10.41 $ 15.60 $ 12.49 $ 12.00
------- ------- ------- ------- -------
Net investment income....................................... (0.01) 0.09 0.09 0.06 0.07
Net realized and unrealized gains (losses) from investments
and foreign currency...................................... 0.02 1.62 (5.23) 3.09 0.44
------- ------- ------- ------- -------
Net increase (decrease) from investment operations.......... 0.01 1.71 (5.14) 3.15 0.51
------- ------- ------- ------- -------
Dividends from net investment income........................ (0.10) (0.07) (0.05) (0.04) (0.02)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 11.96 $ 12.05 $ 10.41 $ 15.60 $ 12.49
======= ======= ======= ======= =======
Total investment return (1)................................. (0.02)% 16.66% (32.99)% 25.31% 4.23%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)........................... $82,179 $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% 1.50%*
Expenses to average net assets, before fee waivers and
expense reimbursements.................................... 1.75% 1.79% 1.79% 2.09% 2.35%*
Net investment income (loss) to average net assets, net of
fee waivers and expense reimbursements.................... (0.08)% 1.05% 0.98% 0.63% 0.94%*
Net investment income (loss) to average net assets, before
fee waivers and expense reimbursements.................... (0.33)% 0.76% 0.69% 0.04% 0.08%*
Portfolio turnover.......................................... 115% 66% 51% 39% 22%
</TABLE>

------------------------

--------------------------------------------------------------------------------
Prospectus Page 64
<PAGE>
--------------------------------------------------------------------------------
------------------------
PaineWebber PACE Select Advisors Trust

APPENDIX A
NOTE: All performance information will be provided as of 9-30-00 quarter end.

RELATED PERFORMANCE INFORMATION

Where a sub-adviser has been managing a registered investment company with
substantially similar investment objectives, policies and strategies
("Comparable Fund") to those of a PACE Fund, the Comparable Fund's average
annualized performance is presented in accordance with SEC standardized
performance rules (reflecting any applicable fund sales charges). Where the
sub-adviser manages private advisory accounts in a manner that is substantially
similar to the way in which it manages a PACE Fund's assets, this appendix
presents the composite performance of the sub-adviser's private accounts
("Private Account Composite Performance"), calculated in accordance with the
recommended standards of the Association of Investment Management and Research
("AIMR"). AIMR is a non-profit membership and education organization that, among
other things, has formulated a set of performance presentation standards for
investment advisers. Private Account Composite Performance has been adjusted to
reflect the sales charges and expenses of the corresponding PACE Fund's Class A
shares. The performance of the PACE Fund (adjusted to reflect Class A expenses
[, which are higher than Class P expenses,] and sales charges) as well as an
appropriate unmanaged benchmark index, not adjusted for any fees or expenses, is
provided as well.

Finally, please note that:

1. PACE INTERMEDIATE FIXED INCOME INVESTMENTS

Private Account Composite Performance for Metropolitan West Asset Management LLC
("MWAM"), a new sub-adviser to the Fund, is provided below.

Prior to October 10, 2000, all of PACE Intermediate Fixed Income Investments'
assets were managed by a different sub-adviser. As of October 10, 2000, MWAM
manages all the Fund's assets.

<TABLE>
<CAPTION>
[LEHMAN
PACE INTERMEDIATE BROTHERS]
FIXED INCOME INTERMEDIATE-
MWAM INVESTMENTS TERM
COMPOSITE AS OF CLASS A SHARES AS GOVERNMENT/
9/30/00 OF 9/30/00 CORPORATE INDEX]
--------------- ------------------ ----------------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)............
1 Year...............
3 Years..............
5 Years..............
Since inception
(8/24/95) of Class P
shares PACE Fund....
10 years.............
</TABLE>

2. PACE MUNICIPAL FIXED INCOME INVESTMENTS

<TABLE>
<CAPTION>
PACE MUNICIPAL
STANDISH INTERMEDIATE FIXED INCOME LEHMAN
TAX EXEMPT INVESTMENTS MUNICIPAL
MUNICIPAL FUND AS OF CLASS A SHARES 5 YEAR
9/30/00 AS OF 9/30/00 BOND INDEX
--------------------- --------------- ----------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)............
1 Year...............
3 Years..............
5 Years..............
Since inception
(8/24/95) of Class P
shares PACE Fund....
10 Years/Life of
Standish Fund.......
</TABLE>

3. PACE GLOBAL FIXED INCOME INVESTMENTS

of the fund's assets and FFTW manages approximately [___%] of the fund's assets.
The relative values of the assets allocated to each sub-adviser can be changed
at any time.

<TABLE>
<CAPTION>
PACE GLOBAL
FIXED INCOME LEHMAN
INVESTMENTS GLOBAL
FFTW [FUND] CLASS A AGGREGATE
COMPOSITE AS SHARES AS OF BOND INDEX
OF 9/30/00 9/30/00 (UNHEDGED)
------------ ------------ ----------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 YEARS/LIFE OF FFTW
FUND......................
</TABLE>

4. PACE LARGE COMPANY VALUE EQUITY INVESTMENTS

Performance information for Institutional Capital Corp. ("ICAP"), Westwood
Management Corporation ("Westwood"), and State Street Global Advisors ("SSgA")
the sub-advisers to the PACE Large Company Value Equity Fund, is set forth
below.

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
SSGA COMPOSITE INVESTMENTS 1000
PERFORMANCE AS CLASS A SHARES VALUE
OF 9/30/00 AS OF 9/30/00 INDEX
-------------- --------------- --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 years...................
</TABLE>

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
ICAP [EQUITY] INVESTMENTS 1000
FUND AS OF CLASS A SHARES AS VALUE
9/30/00 OF 9/30/00 INDEX
------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00).....
1 Year.....................
3 Years....................
5 Years....................
Since inception (8/24/95)
of Class P shares PACE
Fund......................
10 Years/Life of ICAP
Fund......................
</TABLE>

<TABLE>
<CAPTION>
PACE LARGE
COMPANY VALUE
EQUITY RUSSELL
WESTWOOD [EQUITY] INVESTMENTS 1000
FUND AS OF CLASS A SHARES AS VALUE
9/30/00 OF 9/30/00 INDEX
----------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)...............
1 Year..................
3 Years.................
5 Years.................
Since inception
(8/24/95) of Class P
shares PACE Fund.......
10 Years/Life of
Westwood Fund..........
</TABLE>

5. PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS

<TABLE>
<CAPTION>
PACE LARGE
COMPANY GROWTH
EQUITY RUSSELL
INVESTMENTS 1000
SSGA COMPOSITE CLASS A SHARES AS GROWTH
AS OF 9/30/00 OF 9/30/00 INDEX
-------------- ------------------ --------
<S> <C> <C> <C>
YTD (1/1/00 - 9/30/00)....
1 Year....................
3 Years...................
5 Years...................
Since inception (8/24/95)
of Class P shares PACE
Fund.....................
10 years..................
</TABLE>

6. PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS

Private Account Composite performance for ICM Asset Management, Inc. ("ICM"), a
sub-adviser of PACE Small/ Medium Company Value Equity Investments is set forth
below.

<TABLE>
<CAPTION>
ICM COMPOSITE
ANNUAL TOTAL PACE SMALL/MEDIUM
RETURNS OF COMPANY VALUE RUSSELL
SIMILAR EQUITY INVESTMENTS 2500
ACCOUNTS AS OF CLASS A SHARES AS OF VALUE
9/30/00 9/30/00 INDEX
-------------- --------------------- --------
<S> <C> <C> <C>
YTD (1/1/00 -
9/30/00)..............
1 Year.................
3 Years................
5 Years................
Since inception
(8/24/95) of Class P
shares PACE Fund......
10 years...............
</TABLE>

TICKER SYMBOLS (CLASS P SHARES)

<TABLE>
<S> <C>
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:

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.

- For a fee, by electronic request at [email protected] or by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102; or

- Free from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

PaineWebber PACE Select Advisors Trust
Investment Company Act File No. 811-8764

---------------
--------------------------------------------------------------------------------
<PAGE>

THE INFORMATION IN THE PRELIMINARY PROSPECTUS AND THIS PRELIMINARY STATEMENT OF
ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION BECOMES EFFECTIVE. THE PRELIMINARY PROSPECTUS AND THIS
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION ARE NOT AN OFFER TO SELL THESE
SECURITIES AND ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.

PAINEWEBBER PACE SELECT ADVISORS TRUST
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER , 2000
SUBJECT TO COMPLETION

The following funds are series of PaineWebber PACE Select Advisors
Trust ("Trust"), a professionally managed open-end investment company.

<TABLE>

<S> <C>
PACE Money Market Investments PACE Large Company Value Equity Investments
PACE Government Securities Fixed Income Investments PACE Large Company Growth Equity Investments
PACE Intermediate Fixed Income Investments PACE Small/Medium Company Value Equity Investments
PACE Strategic Fixed Income Investments PACE Small/Medium Company Growth Equity Investments
PACE Municipal Fixed Income Investments PACE International Equity Investments
PACE Global Fixed Income Investments PACE International Emerging Markets Equity Investments
</TABLE>

PACE Intermediate Fixed Income Investments and PACE Global Fixed Income
Investments are non-diversified series of the Trust. The other funds are
diversified series.

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly
owned asset management subsidiary of PaineWebber Incorporated ("PaineWebber"),
serves as the manager and administrator for each fund and also as the investment
adviser for PACE Money Market Investments. Mitchell Hutchins selects and
monitors unaffiliated investment advisers who provide advisory services for the
other funds. As distributor for the funds, Mitchell Hutchins has appointed
PaineWebber to serve as dealer for the sale of fund shares.

Portions of the funds' Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain additional copies of the funds'
Annual Report without charge by calling toll-free 1-800-647-1568.

This SAI is not a prospectus and should be read only in conjunction
with the funds' current Prospectus, dated November _______________, 2000. A copy
of the Prospectus may be obtained by calling any PaineWebber Financial Advisor
or by calling toll-free 1-800-647-1568. The Prospectus contains more complete
information about the funds. You should read it carefully before investing.

This SAI is dated November , 2000.

TABLE OF CONTENTS PAGE

<S> <C>
The Funds and Their Investment Policies................................... 2
The Funds' Investments, Related Risks and Limitations..................... 9
Strategies Using Derivative Instruments................................... 33
Organization of Trust; Trustees and Officers; Principal Holders and
Management Ownership of Securities.................................... 42
Investment Advisory, Administration and Distribution Arrangements......... 46
Portfolio Transactions.................................................... 55
Reduced Sales Charges, Additional Exchange and Redemption Information
And Other Services..................................................... 59
Conversion of Class B Shares.............................................. 64
Valuation of Shares....................................................... 65
Performance Information................................................... 66
Taxes..................................................................... 69
Other Information......................................................... 74
Financial Statements...................................................... 75
Appendix.................................................................. A-1

</TABLE>
2
<PAGE>

THE FUNDS AND THEIR INVESTMENT POLICIES

No fund's investment objective may be changed without shareholder
approval. Except where noted, the other investment policies of each fund may be
changed by the board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective.

PACE MONEY MARKET INVESTMENTS has an investment objective of current
income consistent with preservation of capital and liquidity. The fund invests
in high quality money market instruments that have, or are deemed to have,
remaining maturities of 13 months or less. Money market instruments are
short-term debt obligations and similar securities. These instruments include
(1) U.S. and foreign government securities, (2) obligations of U.S. and foreign
banks, (3) commercial paper and other short-term obligations of U.S. and foreign
corporations, partnerships, trusts and similar entities, (4) repurchase
agreements and (5) investment company securities. Money market instruments 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 may purchase participation interests in any of the securities in which it
is permitted to invest. Participation interests are pro rata interests in
securities held by others. The fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.

PACE Money Market Investments may invest in obligations (including
certificates of deposit, bankers' acceptances, time deposits and similar
obligations) of U.S. and foreign banks only if the institution has total assets
at the time of purchase in excess of $1.5 billion. The fund's investments in
non-negotiable time deposits of these institutions will be considered illiquid
if they have maturities greater than seven calendar days.

PACE Money Market Investments may purchase only those obligations that
Mitchell Hutchins determines, pursuant to procedures adopted by the board,
present minimal credit risks and are "First Tier Securities" as defined in Rule
2a-7 under the Investment Company Act of 1940, as amended ("Investment Company
Act"). First Tier Securities include U.S. government securities and securities
of other registered investment companies that are money market funds. Other
First Tier Securities are either (1) rated in the highest short-term rating
category by at least two nationally recognized statistical rating organizations
("rating agencies"), (2) rated in the highest short-term rating category by a
single rating agency if only that rating agency has assigned the obligation a
short-term rating, (3) issued by an issuer that has received such a short-term
rating with respect to a security that is comparable in priority and security,
(4) subject to a guarantee rated in the highest short-term rating category or
issued by a guarantor that has received the highest short-term rating for a
comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins
to be of comparable quality. If a security in the fund's portfolio ceases to be
a First Tier Security (as defined above) or Mitchell Hutchins becomes aware that
a security has received a rating below the second highest rating by any rating
agency, Mitchell Hutchins and, in certain cases, the board, will consider
whether the fund should continue to hold the obligation. A First Tier Security
rated in the highest short-term category at the time of purchase that
subsequently receives a rating below the highest rating category from a
different rating agency may continue to be considered a First Tier Security.

PACE Money Market Investments may purchase variable and floating rate
securities with remaining maturities in excess of 13 months issued by U.S.
government agencies or instrumentalities or guaranteed by the U.S. government.
In addition, the fund may purchase variable and floating rate securities of
other issuers. The yields on these securities are adjusted in relation to
changes in specific rates, such as the prime rate, and different securities may
have different adjustment rates. Certain of these obligations carry a demand
feature that gives the fund the right to tender them back to a specified party,
usually the issuer or a remarketing agent, prior to maturity. The fund's
investment in these securities must comply with conditions established by the
Securities and Exchange Commission ("SEC") under which they may be considered to
have remaining maturities of 13 months or less. The fund will purchase variable
and floating rate securities of non-U.S. government issuers that have remaining
maturities of more than 13 months only if the securities are subject to a demand
feature exercisable within 13 months or less. See "The Funds' Investments,
Related Risks and Limitations - Credit and Liquidity Enhancements."

Generally, PACE Money Market Investments may exercise demand features
(1) upon a default under the terms of the underlying security, (2) to maintain
its portfolio in accordance with its investment objective and policies or
applicable legal or regulatory requirements or (3) as needed to provide
liquidity to the fund in order to meet redemption requests. The ability of a
bank or other financial institutional to fulfill its obligations under a letter
of credit, guarantee or other liquidity arrangement might be affected by
possible financial difficulties of its borrowers, adverse interest rate or
economic conditions, regulatory limitations or other factors. The interest rate
on floating rate or variable rate securities

<PAGE>

ordinarily is readjusted on the basis of the prime rate of the bank that
originated the financing or some other index or published rate, such as the
90-day U.S. Treasury bill rate, or is otherwise reset to reflect market rates
of interest. Generally, these interest rate adjustments cause the market
value of floating rate and variable rate securities to fluctuate less than
the market value of fixed rate securities.

Variable rate securities include variable amount master demand notes,
which are unsecured redeemable obligations that permit investment of varying
amounts at fluctuating interest rates under a direct agreement between PACE
Money Market Investments and an issuer. The principal amount of these notes may
be increased from time to time by the parties (subject to specified maximums) or
decreased by the fund or the issuer. These notes are payable on demand (subject
to any applicable advance notice provisions) and may or may not be rated.

PACE Money Market Investments generally may invest no more than 5% of
its total assets in the securities of a single issuer (other than U.S.
government securities), except that the fund may invest up to 25% of its total
assets in First Tier Securities of a single issuer for a period of up to three
business days. The fund may purchase only U.S. dollar denominated obligations of
foreign issuers.

PACE Money Market Investments may invest up to 10% of its net assets in
illiquid securities. The fund may purchase securities on a when-issued or
delayed delivery basis. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of its
total assets. The fund may borrow from banks and through reverse repurchase
agreements for temporary or emergency purposes, but not in excess of 10% of its
total assets. The costs associated with borrowing may reduce the fund's net
income.

PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS has an investment
objective of current income. Pacific Investment Management Company LLC ("PIMCO")
serves as the fund's investment adviser. The fund invests in U.S. government
bonds and other bonds of varying maturities but normally maintains a
dollar-weighted average portfolio duration of between one and seven years. Under
normal circumstances, the fund invests at least 65% of its total assets in U.S.
government bonds, including those backed by mortgages, and related repurchase
agreements. The fund may invest up to 35% of its total assets in corporate
bonds, including mortgage- and asset-backed securities of private issuers. These
investments are limited to bonds that are rated at least A by Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P"), or Moody's Investors
Service, Inc. ("Moody's"), except that the fund may not acquire a bond if, as a
result, more than 25% of its total assets would be invested in bonds rated below
AAA or if more than 10% of its total assets would be invested in bonds rated A.
The fund may invest in bonds that are assigned comparable ratings by another
rating agency and unrated bonds that its investment adviser determines are of
comparable quality to rated securities in which the fund may invest.

PACE Government Securities Fixed Income Investments may invest in
certain zero coupon securities that are U.S. Treasury notes and bonds that have
been stripped of their unmatured interest coupon receipts. The SEC staff
currently takes the position that "stripped" U.S. government securities that are
not issued through the U.S. Treasury are not U.S. government securities. As long
as the SEC staff takes this position, the fund will not consider these stripped
U.S. government securities to be U.S. government securities for purposes of its
65% investment requirement. The fund may not invest more than 5% of its net
assets in any combination of interest-only, principal-only and inverse floating
rate securities, including those that are not mortgage- or asset-backed
securities.

PACE Government Securities Fixed Income Investments may invest up to
15% of its net assets in illiquid securities. The fund may purchase securities
on a when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may engage in dollar rolls and
reverse repurchase agreements involving up to an aggregate of not more than 5%
of its total assets for investment purposes to enhance its return. These
transactions are considered borrowings. The fund may also borrow from banks and
through reverse repurchase agreements for temporary or emergency purposes, but
not in excess of 10% of its total assets. The costs associated with borrowing
may reduce the fund's net income. The fund may invest in loan participations and
assignments. These investments are generally subject to the fund's overall
limitation on investments in illiquid securities. The fund may invest in the
securities of other investment companies and may sell short "against the box."

PACE INTERMEDIATE FIXED INCOME INVESTMENTS has an investment objective
of current income, consistent with reasonable stability of principal.
Metropolitan West Asset Management, LLC ("MWAM") serves as the

4
<PAGE>

fund's investment adviser. The fund invests in bonds of varying maturities
but normally maintains a dollar-weighted average portfolio duration of
between two and four and one-half years. Under normal circumstances, the fund
invests at least 65% of its total assets in U.S. government and foreign
government bonds (including bonds issued by supranational and
quasi-governmental entities and mortgage-backed securities), corporate bonds
(including mortgage- and asset-backed securities of private issuers,
Eurodollar certificates of deposit, Eurodollar bonds and Yankee bonds) and
preferred stocks. The fund limits its investments to investment grade
securities. The fund may invest up to 10% of its total assets in securities
denominated in foreign currencies of developed countries. The fund's
investments may include certain zero coupon securities that are U.S. Treasury
notes and bonds that have been stripped of their unmatured interest coupon
receipts. The fund may not invest more than 5% of its net assets in any
combination of interest-only, principal-only and inverse floating rate
securities, including those that are not mortgage- or asset-backed securities.

PACE Intermediate Fixed Income Investments may invest up to 15% of its
net assets in illiquid securities. The fund may purchase securities on a
when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in the securities of other
investment companies and may sell short "against the box."

PACE STRATEGIC FIXED INCOME INVESTMENTS has an investment objective of
total return consisting of income and capital appreciation. Pacific Investment
Management Company LLC ("PIMCO") serves as the fund's investment adviser. The
fund invests in bonds of varying maturities but normally maintains a
dollar-weighted average portfolio duration of between three and eight years.
Under normal circumstances, the fund invests at least 65% of its total assets in
U.S. government bonds, bonds (including convertible bonds) of U.S. and foreign
private issuers, foreign government bonds (including bonds issued by
supranational and quasi-governmental entities), foreign currency
exchange-related securities, loan participations and assignments and money
market instruments (including commercial paper and certificates of deposit).
These investments include mortgage- and asset-backed securities, although the
fund's investments in mortgage-backed securities of private issuers are limited
to 35% of its total assets. The fund may not invest more than 5% of its net
assets in any combination of interest-only, principal-only and inverse floating
rate securities, including those that are not mortgage- or asset-backed
securities.

PACE Strategic Fixed Income Investments invests primarily in investment
grade bonds but may invest up to 20% of its total assets in securities,
including convertible securities, that are not investment grade but are rated at
least B by S&P or Moody's, assigned a comparable rating by another rating agency
or, if unrated, determined by its investment adviser to be of comparable
quality. The fund may invest up to 20% of its total assets in a combination of
Yankee bonds, Eurodollar bonds and bonds denominated in foreign currencies,
except that not more than 10% of the fund's total assets may be invested in
bonds denominated in foreign currencies. The fund's investments may include
Brady Bonds. The fund's investments also may include certain zero coupon
securities that are U.S. Treasury notes and bonds that have been stripped of
their unmatured interest coupon receipts, other debt securities sold with a
discount and payment-in-kind securities.

PACE Strategic Fixed Income Investments may invest up to 15% of its net
assets in illiquid securities. The fund may purchase securities on a when-issued
or delayed delivery basis. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. The fund may engage in dollar rolls and reverse repurchase
agreements involving up to an aggregate of not more than 5% of its total assets
for investment purposes to enhance the fund's return. These transactions are
considered borrowings. The fund may also borrow from banks and through reverse
repurchase agreements for temporary or emergency purposes, but not in excess of
10% of its total assets. The costs associated with borrowing may reduce the
fund's net income. The fund may invest in loan participations and assignments.
These investments are generally subject to the fund's overall limitation on
investments in illiquid securities. The fund may invest in the securities of
other investment companies and may sell short "against the box."

PACE MUNICIPAL FIXED INCOME INVESTMENTS has an investment objective of
high current income exempt from federal income tax. Standish, Ayer & Wood, Inc.
serves as the fund's investment adviser. Under normal conditions, the fund
invests at least 80% of its total assets in municipal bonds, the interest on
which, in the opinion of counsel to the issuers, is exempt from federal income
tax. The fund invests in bonds of varying maturities but

5
<PAGE>

normally maintains a dollar-weighted average portfolio duration of between
three and seven years. The fund invests in municipal bonds rated at the time
of purchase at least A, MIG-2 or Prime-2 by Moody's or A, SP-2 or A-2 by S&P
or, if unrated, determined to be of comparable quality by its investment
adviser, except that the fund may invest up to 15% of its total assets in
municipal bonds that at the time of purchase are rated Baa by Moody's, BBB by
S&P or, if unrated, are determined to be of comparable quality by its
investment adviser. The fund also may invest without limit in private
activity bonds and other municipal bonds that pay interest that is an item of
tax preference for purposes of the federal alternative minimum tax ("AMT")
(sometimes referred to as a "tax preference item"), although the fund will
endeavor to manage its portfolio so that no more than 25% of its interest
income will be a tax preference item.

PACE Municipal Fixed Income Investments may not invest more than 25% of
its total assets in municipal obligations whose issuers are located in the same
state. The fund also may not invest more than 25% of its total assets in
municipal obligations that are secured by revenues from a particular industry,
except that it 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 backed by the U.S. Treasury or
other U.S. government-guaranteed securities. The fund may invest without limit
in private activity bonds, including private activity bonds that are
collateralized by letters of credit issued by banks having stockholders' equity
in excess of $100 million as of the date of their most recently published
statement of financial condition. The fund may not invest more than 5% of its
net assets in municipal leases.

PACE Municipal Fixed Income Investments may invest up to 15% of its net
assets in illiquid securities. The fund may purchase securities on a when-issued
or delayed delivery basis. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. The fund may borrow from banks and through reverse
repurchase agreements for temporary or emergency purposes, but not in excess of
10% of its total assets. The costs associated with borrowing may reduce the
fund's net income. The fund may invest up to 20% of its total assets in certain
taxable securities to maintain liquidity. The fund may invest in the securities
of other investment companies.

PACE GLOBAL FIXED INCOME INVESTMENTS has an investment objective of
high total return. Rogge Global Partners plc and Fischer Francis Trees & Watts,
Inc. ("FFTW") and its affiliates serve as the fund's investment advisers. The
fund invests primarily in high-grade bonds, denominated in foreign currencies or
U.S. dollars, of governmental and private issuers in the United States and
developed foreign countries. The fund invests in bonds of varying maturities but
normally maintains a dollar-weighted average portfolio duration of between four
and eight years. Under normal circumstances, the fund invests at least 65% of
its total assets in U.S. government bonds, foreign government bonds (including
bonds issued by supranational organizations and quasi-governmental entities) and
bonds of U.S. or foreign private issuers. The fund normally invests in a minimum
of four countries, one of which may be the United States. Debt securities are
considered high grade if they are rated A or better by S&P or Moody's or another
rating agency or, if unrated, determined by the fund's investment adviser to be
of comparable quality.

PACE Global Fixed Income Investments may invest up to 10% of its total
assets in bonds issued by companies and governments in emerging market countries
that are rated as low as Ba by Moody's or BB by S&P or, if unrated, determined
by the fund's investment adviser to be of comparable quality. The fund considers
"emerging market countries" to be those countries not included in the Morgan
Stanley Capital International World Index of major world economies. The fund's
investments may include Brady Bonds. The fund's investments also may include
certain zero coupon securities that are U.S. Treasury notes and bonds that have
been stripped of their unmatured interest coupon receipts.

PACE Global Fixed Income Investments may invest up to 15% of its net
assets in illiquid securities. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. The fund may borrow from banks and through reverse
repurchase agreements for temporary or emergency purposes, but not in excess of
10% of its total assets. The costs associated with borrowing may reduce the
fund's net income. The fund may invest in structured foreign investments and
loan participations and assignments. These investments are generally subject to
the fund's overall limitation on investments in illiquid securities, and in no
event may the fund's investments in loan participations and assignments exceed
10% of its total assets. The fund may invest in the securities of other
investment companies and may sell short "against the box."

6
<PAGE>

PACE LARGE COMPANY VALUE EQUITY INVESTMENTS has an investment objective
of capital appreciation and dividend income. Institutional Capital Corporation
("ICAP"), Westwood Management Corporation and State Street Global Advisers
("SSgA") serve as the fund's investment advisers. Mitchell Hutchins allocates
the fund's assets among the three investment advisers. The fund invests
primarily in equity securities of U.S. companies that are believed to be
undervalued. The fund's investments may include both large and medium
capitalization companies. However, under normal circumstances, the fund invests
at least 65% of its total assets in common stocks of companies with a total
market capitalization of $4.0 billion or greater at the time of purchase. The
term "market capitalization" means the market value of a company's outstanding
common stock. The fund seeks income primarily from dividend paying stocks.

ICAP and Westwood use active stock selection strategies to invest their
share of the fund's assets. SSgA invests its share of the fund's assets in a
selection of common stocks that are included in the Russell 1000 Value Index.
SSgA uses several independent valuation measures to identify investment
opportunities within a large cap value universe. Factors are combined to produce
an overall rank. Comprehensive research determines the optimal weighting of
these perspectives to arrive at schemes that vary by industry. All companies
within the investable universe are ranked from top to bottom based on their
relative attractiveness. The portfolio is constructed to select the
highest-ranked stocks from the universe and to manage deviations from the
benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Value Index.

PACE Large Company Value Equity Investments may invest up to 10% of its
total assets in convertible bonds that are not investment grade, but these
securities must be rated at least BB by S&P, Ba by Moody's or, if unrated,
determined to be of comparable quality by its investment adviser. Subject to its
65% investment requirement, the fund may invest in a broad range of equity
securities of U.S. issuers that are traded on major stock exchanges or in the
over-the-counter market. The fund may invest up to 10% of its total assets in
U.S. dollar-denominated foreign securities that are traded on recognized U.S.
exchanges or in the U.S. over-the-counter market. The fund also may invest in
U.S. government bonds and investment grade corporate bonds.

PACE Large Company Value Equity Investments may invest up to 15% of its
net assets in illiquid securities. The fund may purchase securities on a
when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in the securities of other
investment companies and may sell short "against the box."

PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS has an investment
objective of capital appreciation. Alliance Capital Management L.P. ("Alliance
Capital") and State Street Global Advisers ("SSgA") serve as the fund's
investment advisers. Mitchell Hutchins allocates the fund's assets between the
two investment advisers. The fund invests primarily in equity securities that
are believed to have faster rates of earnings growth than the average rate of
the companies in the Standard & Poor's 500 Composite Stock Price Index. Dividend
income is an incidental consideration in the investment advisers' selection of
investments for the fund. Although the fund may invest in a broad range of
equity securities, including securities convertible into common stocks, under
normal circumstances it invests at least 65% of its total assets in common
stocks of companies with total market capitalization of $4.0 billion or greater
at the time of purchase. The term "market capitalization" means the market value
of a company's outstanding common stock.

Alliance Capital uses an active stock selection strategy to invest its
share of the fund's assets. SSgA uses several independent valuation measures to
identify investment opportunities within a large cap growth universe. Factors
are combined to produce an overall rank. Comprehensive research determines the
optimal weighting of these perspectives to arrive at schemes that vary by
industry. All companies within the investable universe are ranked from top to
bottom based on their relative attractiveness. The portfolio is constructed to
select the highest-ranked stocks from the universe and to manage deviations from
the benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Growth Index.

Subject to its 65% investment requirement, PACE Large Company Growth
Equity Investments may invest in a broad range of equity securities of U.S.
issuers. The fund may invest up to 10% of its total assets in U.S.

<PAGE>

dollar-denominated foreign securities that are traded on recognized U.S.
exchanges or in the U.S. over-the-counter market. The fund also may invest in
U.S. government bonds and investment grade corporate bonds.

PACE Large Company Growth Equity Investments may invest up to 15% of
its net assets in illiquid securities. The fund may purchase securities on a
when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in the securities of other
investment companies and may sell short "against the box."

PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS has an investment
objective of capital appreciation. Ariel Capital Management, Inc. and ICM Asset
Management, Inc. serve as the fund's investment advisers. Mitchell Hutchins
allocates the fund's assets between the two investment advisers. The fund
invests primarily in equity securities of companies that are believed to be
undervalued or overlooked in the market place. Although the fund may invest in a
broad range of equity securities, including securities convertible into common
stocks, under normal market conditions the fund invests at least 65% of its
total assets in common stocks of companies with total market capitalization of
less than $4.0 billion at the time of purchase. The term "market capitalization"
means the market value of a company's outstanding common stock. The fund invests
in equity securities that generally have price-to-earnings ("P/E") ratios that
are below the market average. The fund invests in the equity securities of
companies only if they have common stock that is traded on a major stock
exchange or in the over-the-counter market. Subject to its 65% investment
requirement, the fund may invest in U.S. government bonds and investment grade
corporate bonds.

PACE Small/Medium Company Value Equity Investments may invest up to 15%
of its net assets in illiquid securities. The fund may purchase securities on a
when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in the securities of other
investment companies and may sell short "against the box."

PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS has an investment
objective of capital appreciation. Delaware Management Company, Inc. serves as
the fund's investment adviser. The fund invests primarily in the stocks of
companies that are characterized by above-average earnings growth rates and
total market capitalization of less than $4.0 billion at the time of purchase.
The term "market capitalization" means the market value of a company's
outstanding common stock. Dividend income is an incidental consideration in the
investment adviser's selection of investments for the fund. Although the fund
may invest in a broad range of equity securities, including securities
convertible into common stocks, under normal circumstances it invests at least
65% of its total assets in common stocks of issuers with total market
capitalization of less than $4.0 billion that exhibit the potential for high
future earnings growth relative to the overall market. Subject to its 65%
investment requirement, the fund may invest in U.S. government bonds and
investment grade corporate bonds. The fund may invest up to 5% of its total
assets in U.S. dollar denominated foreign securities that are traded on
recognized U.S. exchanges or in the U.S. over-the-counter market.

PACE Small/Medium Company Growth Equity Investments may invest up to
15% of its net assets in illiquid securities. The fund may purchase securities
on a when-issued or delayed delivery basis. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in the securities of other
investment companies and may sell short "against the box."

PACE INTERNATIONAL EQUITY INVESTMENTS has an investment objective of
capital appreciation. Martin Currie Inc. serves as the fund's investment
adviser. The fund invests primarily in equity securities of companies domiciled
outside the

<PAGE>

United States, and a large part of its investments are usually denominated in
foreign currencies. Under normal circumstances, the fund invests at least 65%
of its total assets in common stocks, which may or may not pay dividends, and
securities convertible into common stocks, of companies domiciled outside the
United States. "Domiciled," for these purposes, means companies (1) that are
organized under the laws of a country other than the United States, (2) for
which the principal securities trading market is in a country other than the
United States or (3) that derive a significant proportion (at least 50%) of
their revenues or profits from goods produced or sold, investments made or
services performed in the respective country or that have at least 50% of
their assets situated in such a country.

PACE International Equity Investments normally invests in the
securities of issuers from three or more countries outside the United States,
and, under normal market conditions, its investments involve securities
principally traded in at least 10 different countries. The fund's investment
adviser gives particular consideration to investments that are principally
traded in Japanese, European, Pacific and Australian securities markets and to
securities of foreign companies that are traded on U.S. securities markets. The
fund may also invest in the securities of companies in emerging markets,
including Asia, Latin America and other regions where the markets may not yet
fully reflect the potential of the developing economies. The fund considers
"emerging market countries" to be those countries not included in the Morgan
Stanley Capital International World Index of major world economies. The fund
invests only in those markets where the investment adviser considers there to be
an acceptable framework of market regulation and sufficient liquidity. The fund
may also invest in non-investment grade convertible securities. These
non-investment grade convertible securities may not be rated lower than B by S&P
or Moody's or, if unrated, determined by the fund's investment adviser to be of
comparable quality. The fund's investments in emerging market securities and
non-investment grade convertible securities, in the aggregate, may not exceed
10% of its total assets at the time of purchase. Subject to its 65% investment
requirement, the fund also may invest in U.S. government bonds and investment
grade bonds of U.S. and foreign issuers.

PACE International Equity Investments may invest up to 15% of its net
assets in illiquid securities. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. The fund may borrow from banks and through reverse
repurchase agreements for temporary or emergency purposes, but not in excess of
10% of its total assets. The costs associated with borrowing may reduce the
fund's net income. The fund may invest in structured foreign investments. The
fund may invest in the securities of other investment companies, including
closed-end funds that invest in foreign markets, and may sell short "against the
box."

PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS has an
investment objective of capital appreciation. Schroder Investment Management
North America Inc. ("SIMNA") serves as the fund's investment adviser. The fund
invests at least 65% of its total assets in equity securities issued by
companies domiciled in emerging market countries. "Domiciled," for these
purposes, means companies (1) that are organized under the laws of an emerging
market country, (2) for which the principal securities trading market is in an
emerging market country or (3) that derive a significant proportion (at least
50%) of their revenues or profits from goods produced or sold, investments made
or services performed in the respective country or that have at least 50% of
their assets situated in such a country. The fund considers "emerging market
countries" to be those countries not included in the Morgan Stanley Capital
International World Index of major world economies. SIMNA may at times
determine, based on its own analysis, that an economy included in the MSCI World
Index should nonetheless be considered an emerging market country, in which
case, that country would constitute an emerging market country for purposes of
the fund's investments. Based on current political and economic factors, SIMNA
considers Hong Kong SAR to be such a country. The fund normally invests in the
securities of issuers from three or more emerging market countries.

PACE International Emerging Markets Equity Investments may invest up to
35% of its total assets in bonds, including U.S. government bonds, foreign
government bonds and bonds of private U.S. and foreign issuers, including
convertible bonds. The fund's investments may include Brady Bonds. The fund's
investments in bonds of private issuers are rated at the time of purchase at
least A by S&P or Moody's or, if unrated, determined by the investment adviser
to be of comparable quality, except that up to 10% of the fund's total assets
may be invested in lower quality bonds, including convertible bonds. These lower
quality bonds must, at the time of purchase, be rated at least C by S&P or
determined by the investment adviser to be of comparable quality.

SIMNA believes that one of its key strengths is the worldwide network
of local research offices, many long established, in emerging market countries,
that is maintained by SIMNA and its affiliates. Each year, these companies
research and conduct on-site visits with approximately 1,400 companies in
emerging market countries.

<PAGE>

Of those companies, SIMNA and its affiliates further develop extensive
management contacts with, and produce independent forecasts of earnings
estimates for, approximately 800 companies. SIMNA's analysis involves
researching companies across the full capitalization spectrum.

PACE International Emerging Markets Equity Investments may invest up to
15% of its net assets in illiquid securities. The fund may lend its portfolio
securities to qualified broker-dealers or institutional investors in an amount
up to 33 1/3% of its total assets. The fund may borrow from banks and through
reverse repurchase agreements for temporary or emergency purposes, but not in
excess of 10% of its total assets. The costs associated with borrowing may
reduce the fund's net income. The fund may invest in structured foreign
investments and loan participations and assignments. These investments are
generally subject to the fund's overall limitation on investments in illiquid
securities, and in no event may the fund's investments in loan participations
and assignments exceed 10% of its total assets. The fund may invest in the
securities of other investment companies, including closed-end funds that invest
in foreign markets, and may sell short "against the box."

THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS

The following supplements the information contained in the Prospectus
and above concerning the funds' investments, related risks and limitations.
Except as otherwise indicated in the Prospectus or SAI, the funds have
established no policy limitations on their ability to use the investments or
techniques discussed in these documents.

EQUITY SECURITIES. Equity securities include common stocks, most
preferred stocks and securities that are convertible into them, including common
stock purchase warrants and rights, equity interests in trusts, partnerships,
joint ventures or similar enterprises and depositary receipts. Common stocks,
the most familiar type, represent an equity (ownership) interest in a
corporation.

Preferred stock has certain fixed income features, like a bond, but
actually it is equity that is senior to a company's common stock. Convertible
bonds may include debentures and notes that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Some preferred
stock also may be converted into or exchanged for common stock. Depositary
receipts typically are issued by banks or trust companies and evidence ownership
of underlying equity securities.

While past performance does not guarantee future results, equity
securities historically have provided the greatest long-term growth potential in
a company. However, their prices generally fluctuate more than other securities
and reflect changes in a company's financial condition and in overall market and
economic conditions. Common stocks generally represent the riskiest investment
in a company. It is possible that a fund may experience a substantial or
complete loss on an individual equity investment. While this is possible with
bonds, it is less likely.

BONDS. Bonds are fixed or variable rate debt obligations, including
bills, notes, debentures, money market instruments and similar instruments and
securities. Mortgage- and asset-backed securities are types of bonds, and
certain types of income-producing, non-convertible preferred stocks may be
treated as bonds for investment purposes. Bonds generally are used by
corporations, governments and other issuers to borrow money from investors. The
issuer pays the investor a fixed or variable rate of interest and normally must
repay the amount borrowed on or before maturity. Many preferred stocks and some
bonds are "perpetual" in that they have no maturity date.

Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and that, as a result, bond
prices will fall, lowering the value of a fund's investments in bonds. In
general, bonds having longer durations are more sensitive to interest rate
changes than are bonds with shorter durations. Credit risk is the risk that an
issuer may be unable or unwilling to pay interest and/or principal on the bond.
Credit risk can be affected by many factors, including adverse changes in the
issuer's own financial condition or in economic conditions.

CREDIT RATINGS; NON-INVESTMENT GRADE BONDS. Moody's, S&P and other
rating agencies are private services that provide ratings of the credit quality
of bonds, including municipal bonds, and certain other securities.

<PAGE>

A description of the ratings assigned to corporate bonds by Moody's and S&P
is included in the Appendix to this SAI. The process by which Moody's and S&P
determine ratings for mortgage-backed securities includes consideration of
the likelihood of the receipt by security holders of all distributions, the
nature of the underlying assets, the credit quality of the guarantor, if any,
and the structural, legal and tax aspects associated with these securities.
Not even the highest such rating represents an assessment of the likelihood
that principal prepayments will be made by obligors on the underlying assets
or the degree to which such prepayments may differ from that originally
anticipated, nor do such ratings address the possibility that investors may
suffer a lower than anticipated yield or that investors in such securities
may fail to recoup fully their initial investment due to prepayments.

Credit ratings attempt to evaluate the safety of principal and interest
payments, but they do not evaluate the volatility of a bond's value or its
liquidity and do not guarantee the performance of the issuer. Rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial condition may be better or worse
than the rating indicates. There is a risk that rating agencies may downgrade a
bond's rating. Subsequent to a bond's purchase by a fund, it may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the fund. The funds may use these ratings in determining whether to
purchase, sell or hold a security. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
bonds with the same maturity, interest rate and rating may have different market
prices.

In addition to ratings assigned to individual bond issues, the
applicable investment adviser will analyze interest rate trends and developments
that may affect individual issuers, including factors such as liquidity,
profitability and asset quality. The yields on bonds are dependent on a variety
of factors, including general money market conditions, general conditions in the
bond market, the financial condition of the issuer, the size of the offering,
the maturity of the obligation and its rating. There is a wide variation in the
quality of bonds, both within a particular classification and between
classifications. An issuer's obligations under its bonds are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of bond holders or other creditors of an issuer; litigation or other
conditions may also adversely affect the power or ability of issuers to meet
their obligations for the payment of interest and principal on their bonds.

Investment grade bonds are rated in one of the four highest rating
categories by Moody's or S&P, comparably rated by another rating agency or, if
unrated, determined by the applicable investment adviser to be of comparable
quality. Moody's considers bonds rated Baa (its lowest investment grade rating)
to have speculative characteristics. This means that changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case for higher rated debt
securities. Bonds rated D by S&P are in payment default or such rating is
assigned upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized. Bonds rated C by Moody's
are in the lowest rated class and can be regarded as having extremely poor
prospects of attaining any real investment standing. References to rated bonds
in the Prospectus or this SAI include bonds that are not rated by a rating
agency but that the applicable investment adviser determines to be of comparable
quality.

Non-investment grade bonds (commonly known as "junk bonds" and
sometimes referred to as "high yield bonds") are rated Ba or lower by Moody's,
BB or lower by S&P, comparably rated by another rating agency or, if unrated,
determined by a fund's investment adviser to be of comparable quality. A fund's
investments in non-investment grade bonds entail greater risk than its
investments in higher rated bonds. Non-investment grade bonds, which are
sometimes referred to as "high yield bonds," are considered predominantly
speculative with respect to the issuer's ability to pay interest and repay
principal and may involve significant risk exposure to adverse conditions.
Non-investment grade bonds generally offer a higher current yield than that
available for investment grade issues; however, they involve greater risks, in
that they are especially sensitive to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress that
could adversely affect their ability to make payments of interest and principal
and increase the possibility of default. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured by collateral and will not receive payment until more senior claims
are paid in full.

<PAGE>

The market for non-investment grade bonds, especially those of foreign
issuers, has expanded rapidly in recent years, which has been a period of
generally expanding growth and lower inflation. These securities will be
susceptible to greater risk when economic growth slows or reverses and when
inflation increases or deflation occurs. This has been reflected in recent
volatility in emerging market securities. In the past, many lower rated bonds
experienced substantial price declines reflecting an expectation that many
issuers of such securities might experience financial difficulties. As a result,
the yields on lower rated bonds rose dramatically. However, those higher yields
did not reflect the value of the income stream that holders of such securities
expected. Rather, they reflected the risk that holders of such securities could
lose a substantial portion of their value due to financial restructurings or
defaults by the issuers. There can be no assurance that those declines will not
recur.

The market for non-investment grade bonds generally is thinner and less
active than that for higher quality securities, which may limit a fund's ability
to sell such securities at fair value in response to changes in the economy or
financial markets. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the values and liquidity of
non-investment grade bonds, especially in a thinly traded market.

Opinions relating to the validity of municipal bonds and to the
exemption of interest thereon from federal income tax and (when available) from
treatment as a tax preference item, are rendered by bond counsel to the
respective issuing authorities at the time of issuance. Neither PACE Municipal
Fixed Income Investments, its investment adviser or Mitchell Hutchins reviews
the proceedings relating to the issuance of municipal bonds or the basis for
such opinions. An issuer's obligations under its municipal bonds are subject to
the bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors (such as the federal bankruptcy laws) and federal, state and local
laws that may be enacted that adversely affect the tax-exempt status of interest
on the municipal bonds held by the fund or the exempt-interest dividends
received by its shareholders, extend the time for payment of principal or
interest, or both, or impose other constraints upon enforcement of such
obligations. There is also the possibility that, as a result of litigation or
other conditions, the power or ability of issuers to meet their obligations for
the payment of principal of and interest on their municipal bonds may be
materially and adversely affected.

U.S. GOVERNMENT SECURITIES. U.S. government securities include direct
obligations of the U.S. Treasury (such as Treasury bills, notes or bonds) and
obligations issued or guaranteed as to principal and interest (but not as to
market value) by the U.S. government, its agencies or its instrumentalities.
U.S. government securities include mortgage-backed securities issued or
guaranteed by government agencies or government-sponsored enterprises. Other
U.S. government securities may be backed by the full faith and credit of the
U.S. government or supported primarily or solely by the creditworthiness of the
government-related issuer or, in the case of mortgage-backed securities, by
pools of assets.

U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.

Treasury inflation-protected securities ("TIPS") (also known as
"inflation-indexed securities") are Treasury bonds on which the principal value
is adjusted daily in accordance with changes in the Consumer Price Index.
Interest on TIPS is payable semi-annually on the adjusted principal value. The
principal value of TIPS would decline during periods of deflation, but the
principal amount payable at maturity would not be less than the original par
amount. If inflation is lower than expected while a fund holds TIPS, the fund
may earn less on the TIPS than it would on conventional Treasury bonds. Any
increase in the principal value of TIPS is taxable in the year the increase
occurs, even though holders do not receive cash representing the increase at
that time. See "Taxes -- Other Information," below.

ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities, as discussed in more
detail below. However, the underlying assets are not first lien mortgage loans
or interests therein but include assets such as motor vehicle installment sales
contracts, other installment sales contracts, home equity loans, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements. Such assets are securitized through the use of
trusts or special purpose corporations. Payments or distributions of principal
and interest may be guaranteed up to a certain amount and for a certain time
period by a letter of credit or pool insurance policy issued by a financial
institution unaffiliated with the issuer, or

<PAGE>

other credit enhancements may be present. See "The Funds' Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent direct
or indirect interests in pools of underlying mortgage loans that are secured by
real property. U.S. government mortgage-backed securities are issued or
guaranteed as to the payment of principal and interest (but not as to market
value) by Ginnie Mae (also known as the Government National Mortgage
Association), Fannie Mae (also known as the Federal National Mortgage
Association), Freddie Mac (also known as the Federal Home Loan Mortgage
Corporation) or other government sponsored enterprises. Other domestic
mortgage-backed securities are sponsored or issued by private entities,
generally originators of and investors in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers and special
purposes entities (collectively, "Private Mortgage Lenders"). Payments of
principal and interest (but not the market value) of such private
mortgage-backed securities may be supported by pools of mortgage loans or other
mortgage-backed securities that are guaranteed, directly or indirectly, by the
U.S. government or one of its agencies or instrumentalities, or they may be
issued without any government guarantee of the underlying mortgage assets but
with some form of non-government credit enhancement. Foreign mortgage-backed
securities may be issued by mortgage banks and other private or governmental
entities outside the United States and are supported by interests in foreign
real estate.

Mortgage-backed securities may be composed of one or more classes and
may be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-backed securities are referred to herein as
"CMOs." Some CMOs are directly supported by other CMOs, which in turn are
supported by mortgage pools. Investors typically receive payments out of the
interest and principal on the underlying mortgages. The portions of these
payments that investors receive, as well as the priority of their rights to
receive payments, are determined by the specific terms of the CMO class. CMOs
involve special risk and evaluating them requires special knowledge.

A major difference between mortgage-backed securities and traditional
bonds is that interest and principal payments are made more frequently (usually
monthly) and that principal may be repaid at any time because the underlying
mortgage loans may be prepaid at any time. When interest rates go down and
homeowners refinance their mortgages, mortgage-backed securities may be paid off
more quickly than investors expect. When interest rates rise, mortgage-backed
securities may be paid off more slowly than originally expected. Changes in the
rate or "speed" of these prepayments can cause the value of mortgage-backed
securities to fluctuate rapidly.

Mortgage-backed securities also may decrease in value as a result of
increases in interest rates and, because of prepayments, may benefit less than
other bonds from declining interest rates. Reinvestments of prepayments may
occur at lower interest rates than the original investment, thus adversely
affecting a fund's yield. Actual prepayment experience may cause the yield of a
mortgage-backed security to differ from what was assumed when the fund purchased
the security. Prepayments at a slower rate than expected may lengthen the
effective life of a mortgage-backed security. The value of securities with
longer effective lives generally fluctuates more widely in response to changes
in interest rates than the value of securities with shorter effective lives.

CMO classes may be specially structured in a manner that provides any
of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.

Certain classes of CMOs and other mortgage-backed securities are
structured in a manner that makes them extremely sensitive to changes in
prepayment rates. Interest-only ("IO") and principal-only ("PO") classes are
examples of this. IOs are entitled to receive all or a portion of the interest,
but none (or only a nominal amount) of the principal payments, from the
underlying mortgage assets. If the mortgage assets underlying an IO experience
greater than anticipated principal prepayments, then the total amount of
interest payments allocable to the IO class, and therefore the yield to
investors, generally will be reduced. In some instances, an investor in an IO
may fail to recoup all of his or her initial investment, even if the security is
government issued or guaranteed or is rated AAA or the equivalent. Conversely,
PO classes are entitled to receive all or a portion of the principal payments,
but none of

<PAGE>

the interest, from the underlying mortgage assets. PO classes are purchased
at substantial discounts from par, and the yield to investors will be reduced
if principal payments are slower than expected. Some IOs and POs, as well as
other CMO classes, are structured to have special protections against the
effects of prepayments. These structural protections, however, normally are
effective only within certain ranges of prepayment rates and thus will not
protect investors in all circumstances. Inverse floating rate CMO classes
also may be extremely volatile. These classes pay interest at a rate that
decreases when a specified index of market rates increases and vice versa.

The market for privately issued mortgage-backed securities is smaller
and less liquid than the market for U.S. government mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured differently than domestic
mortgage-backed securities, but they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.

During 1994, the value and liquidity of many mortgage-backed securities
declined sharply due primarily to increases in interest rates. There can be no
assurance that such declines will not recur. The market value of certain
mortgage-backed securities, including IO and PO classes of mortgage-backed
securities, can be extremely volatile, and these securities may become illiquid.
A fund's investment adviser seeks to manage its investments in mortgage-backed
securities so that the volatility of its portfolio, taken as a whole, is
consistent with its investment objective. Management of portfolio duration is an
important part of this. However, computing the duration of mortgage-backed
securities is complex. See, "The Funds' Investments, Related Risks and
Limitations -- Duration." If a fund's investment adviser does not compute the
duration of mortgage-backed securities correctly, the value of its portfolio may
be either more or less sensitive to changes in market interest rates than
intended. In addition, if market interest rates or other factors that affect the
volatility of securities held by a fund change in ways that its investment
adviser does not anticipate, the fund's ability to meet its investment objective
may be reduced.

More information concerning these mortgage-backed securities and the
related risks of investments therein is set forth below. New types of
mortgage-backed securities are developed and marketed from time to time and,
consistent with its investment limitations, a fund expects to invest in those
new types of mortgage-backed securities that its investment adviser believes may
assist it in achieving its investment objective. Similarly, a fund may invest in
mortgage-backed securities issued by new or existing governmental or private
issuers other than those identified herein.

GINNIE MAE CERTIFICATES -- Ginnie Mae guarantees certain mortgage
pass-through certificates ("Ginnie Mae certificates") that are issued by Private
Mortgage Lenders and that represent ownership interests in individual pools of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. Timely payment of interest
and principal is backed by the full faith and credit of the U.S. government.
Each mortgagor's monthly payments to his lending institution on his residential
mortgage are "passed through" to certificateholders such as the funds. Mortgage
pools consist of whole mortgage loans or participations in loans. The terms and
characteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. Lending institutions that originate mortgages for the
pools are subject to certain standards, including credit and other underwriting
criteria for individual mortgages included in the pools.

FANNIE MAE CERTIFICATES -- Fannie Mae facilitates a national secondary
market in residential mortgage loans insured or guaranteed by U.S. government
agencies and in privately insured or uninsured residential mortgage loans
(sometimes referred to as "conventional mortgage loans" or "conventional loans")
through its mortgage purchase and mortgage-backed securities sales activities.
Fannie Mae issues guaranteed mortgage pass-through certificates ("Fannie Mae
certificates"), which represent pro rata shares of all interest and principal
payments made and owed on the underlying pools. Fannie Mae guarantees timely
payment of interest and principal on Fannie Mae certificates. The Fannie Mae
guarantee is not backed by the full faith and credit of the U.S. government.

FREDDIE MAC CERTIFICATES -- Freddie Mac also facilitates a national
secondary market for conventional residential and U.S. government-insured
mortgage loans through its mortgage purchase and mortgage-backed securities
sales activities. Freddie Mac issues two types of mortgage pass-through
securities: mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). Each PC represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. Freddie Mac generally
guarantees timely

<PAGE>

monthly payment of interest on PCs and the ultimate payment of principal, but
it also has a PC program under which it guarantees timely payment of both
principal and interest. GMCs also represent a pro rata interest in a pool of
mortgages. These instruments, however, pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The Freddie Mac
guarantee is not backed by the full faith and credit of the U.S. government.

PRIVATE MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities
issued by Private Mortgage Lenders are structured similarly to CMOs issued or
guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac. Such mortgage-backed
securities may be supported by pools of U.S. government or agency insured or
guaranteed mortgage loans or by other mortgage-backed securities issued by a
government agency or instrumentality, but they generally are supported by
pools of conventional (I.E., non-government guaranteed or insured) mortgage
loans. Since such mortgage-backed securities normally are not guaranteed by
an entity having the credit standing of Ginnie Mae, Fannie Mae and Freddie
Mac, they normally are structured with one or more types of credit
enhancement. See "The Funds' Investments, Related Risks and Limitations --
Mortgage-Backed Securities -- TYPES OF CREDIT ENHANCEMENT." These credit
enhancements do not protect investors from changes in market value.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE
PASS-THROUGHS -- CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (collectively, "Mortgage Assets").
CMOs may be issued by Private Mortgage Lenders or by government entities such as
Fannie Mae or Freddie Mac. Multi-class mortgage pass-through securities are
interests in trusts that are comprised of Mortgage Assets and that have multiple
classes similar to those in CMOs. Unless the context indicates otherwise,
references herein to CMOs include multi-class mortgage pass-through securities.
Payments of principal of, and interest on, the Mortgage Assets (and in the case
of CMOs, any reinvestment income thereon) provide the funds to pay the debt
service on the CMOs or to make scheduled distributions on the multi-class
mortgage pass-through securities.

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMO, also referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause CMOs
to be retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrued on all classes of a CMO (other
than any principal-only or "PO" class) on a monthly, quarterly or semi-annual
basis. The principal and interest on the Mortgage Assets may be allocated among
the several classes of a CMO in many ways. In one structure, payments of
principal, including any principal prepayments, on the Mortgage Assets are
applied to the classes of a CMO in the order of their respective stated
maturities or final distribution dates so that no payment of principal will be
made on any class of the CMO until all other classes having an earlier stated
maturity or final distribution date have been paid in full. In some CMO
structures, all or a portion of the interest attributable to one or more of the
CMO classes may be added to the principal amounts attributable to such classes,
rather than passed through to certificateholders on a current basis, until other
classes of the CMO are paid in full.

Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution date
of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier.

Some CMO classes are structured to pay interest at rates that are
adjusted in accordance with a formula, such as a multiple or fraction of the
change in a specified interest rate index, so as to pay at a rate that will be
attractive in certain interest rate environments but not in others. For example,
an inverse floating rate CMO class pays interest at a rate that increases as a
specified interest rate index decreases but decreases as that index increases.
For other CMO classes, the yield may move in the same direction as market
interest rates -- I.e., the yield may increase as rates increase and decrease as
rates decrease -- but may do so more rapidly or to a greater degree. The market
value of such securities generally is more volatile than that of a fixed rate
obligation. Such interest rate formulas may be combined with other CMO
characteristics. For example, a CMO class may be an inverse IO class, on which
the holders are entitled to receive no payments of principal and are entitled to
receive interest at a rate that will vary inversely with a specified index or a
multiple thereof.

TYPES OF CREDIT ENHANCEMENT -- To lessen the effect of failures by
obligors on Mortgage Assets to make payments, mortgage-backed securities may
contain elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection and (2) loss protection. Loss protection
relates to losses resulting after

<PAGE>

default by an obligor on the underlying assets and collection of all amounts
recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets (usually the bank,
savings association or mortgage banker that transferred the underlying loans
to the issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Loss protection ensures ultimate
payment of the obligations on at least a portion of the assets in the pool.
Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor, from third parties,
through various means of structuring the transaction or through a combination
of such approaches. A fund will not pay any additional fees for such credit
enhancement, although the existence of credit enhancement may increase the
price of a security. Credit enhancements do not provide protection against
changes in the market value of the security. Examples of credit enhancement
arising out of the structure of the transaction include "senior-subordinated
securities" (multiple class securities with one or more classes subordinate
to other classes as to the payment of principal thereof and interest thereon,
with the result that defaults on the underlying assets are borne first by the
holders of the subordinated class), creation of "spread accounts" or "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the
principal amount of, the underlying assets exceed that required to make
payment of the securities and pay any servicing or other fees). The degree of
credit enhancement provided for each issue generally is based on historical
information regarding the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated could adversely
affect the return on an investment in such a security.

SPECIAL CHARACTERISTICS OF MORTGAGE- AND ASSET-BACKED SECURITIES -- The
yield characteristics of mortgage- and asset-backed securities differ from those
of traditiona1 debt securities. Among the major differences are that interest
and principal payments are made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans or
other obligations generally may be prepaid at any time. Prepayments on a pool of
mortgage loans are influenced by a variety of economic, geographic, social and
other factors, including changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties and servicing
decisions. Generally, however, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Similar factors apply to prepayments on asset-backed
securities, but the receivables underlying asset-backed securities generally are
of a shorter maturity and thus are less likely to experience substantial
prepayments. Such securities, however, often provide that for a specified time
period the issuers will replace receivables in the pool that are repaid with
comparable obligations. If the issuer is unable to do so, repayment of principal
on the asset-backed securities may commence at an earlier date. Mortgage- and
asset-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed-income securities from
declining interest rates because of the risk of prepayment.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are purchased
or traded in the secondary market at a premium or discount. In addition, there
is normally some delay between the time the issuer receives mortgage payments
from the servicer and the time the issuer makes the payments on the
mortgage-backed securities, and this delay reduces the effective yield to the
holder of such securities.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. Because prepayment rates of individual pools vary widely, it is not
possible to predict accurately the average life of a particular pool. In the
past, a common industry practice was to assume that prepayments on pools of
fixed rate 30-year mortgages would result in a 12-year average life for the
pool. At present, mortgage pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of declining interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree,

<PAGE>

if the mortgage loans in the pools have adjustable interest rates or other
special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from
the assumed average life yield. Reinvestment of prepayments may occur at
lower interest rates than the original investment, thus adversely affecting a
fund's yield.

ADJUSTABLE RATE MORTGAGE AND FLOATING RATE MORTGAGE-BACKED
SECURITIES -- Adjustable rate mortgage ("ARM") securities are mortgage-backed
securities (sometimes referred to as "ARMs") that represent a right to
receive interest payments at a rate that is adjusted to reflect the interest
earned on a pool of mortgage loans bearing variable or adjustable rates of
interest. Floating rate mortgage-backed securities are classes of
mortgage-backed securities that have been structured to represent the right
to receive interest payments at rates that fluctuate in accordance with an
index but that generally are supported by pools comprised of fixed-rate
mortgage loans. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. As a
result, during periods of rising interest rates, ARMs generally do not
decrease in value as much as fixed rate securities. Conversely, during
periods of declining rates, ARMs generally do not increase in value as much
as fixed rate securities. ARMs represent a right to receive interest payments
at a rate that is adjusted to reflect the interest earned on a pool of ARM
loans. These mortgage loans generally specify that the borrower's mortgage
interest rate may not be adjusted above a specified lifetime maximum rate or,
in some cases, below a minimum lifetime rate. In addition, certain ARM loans
specify limitations on the maximum amount by which the mortgage interest rate
may adjust for any single adjustment period. These mortgage loans also may
limit changes in the maximum amount by which the borrower's monthly payment
may adjust for any single adjustment period. If a monthly payment is not
sufficient to pay the interest accruing on the ARM, any such excess interest
is added to the mortgage loan ("negative amortization"), which is repaid
through future payments. If the monthly payment exceeds the sum of the
interest accrued at the applicable mortgage interest rate and the principal
payment that would have been necessary to amortize the outstanding principal
balance over the remaining term of the loan, the excess reduces the principal
balance of the ARM loan. Borrowers under these mortgage loans experiencing
negative amortization may take longer to build up their equity in the
underlying property and may be more likely to default.

ARM loans also may be subject to a greater rate of prepayments in a
declining interest rate environment. For example, during a period of declining
interest rates, prepayments on these mortgage loans could increase because the
availability of fixed mortgage loans at competitive interest rates may encourage
mortgagors to "lock-in" at a lower interest rate. Conversely, during a period of
rising interest rates, prepayments on ARM loans might decrease. The rate of
prepayments with respect to ARM loans has fluctuated in recent years.

The rates of interest payable on certain ARM loans, and therefore on
certain ARM securities, are based on indices, such as the one-year constant
maturity Treasury rate, that reflect changes in market interest rates. Others
are based on indices, such as the 11th District Federal Home Loan Bank Cost of
Funds Index ("COFI"), that tend to lag behind changes in market interest rates.
The values of ARM securities supported by ARM loans that adjust based on lagging
indices tend to be somewhat more sensitive to interest rate fluctuations than
those reflecting current interest rate levels, although the values of such ARM
securities still tend to be less sensitive to interest rate fluctuations than
fixed-rate securities.

Floating rate mortgage-backed securities are classes of mortgage-backed
securities that have been structured to represent the right to receive interest
payments at rates that fluctuate in accordance with an index but that generally
are supported by pools comprised of fixed-rate mortgage loans. As with ARM
securities, interest rate adjustments on floating rate mortgage-backed
securities may be based on indices that lag behind market interest rates.
Interest rates on floating rate mortgage-backed securities generally are
adjusted monthly. Floating rate mortgage-backed securities are subject to
lifetime interest rate caps, but they generally are not subject to limitations
on monthly or other periodic changes in interest rates or monthly payments.

CREDIT AND LIQUIDITY ENHANCEMENTS. A fund may invest in securities that
have credit or liquidity enhancements or may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the fund to sell the instrument at designated times
and prices. These credit and liquidity enhancements may be backed by letters of
credit or other instruments provided by banks or other financial institutions
whose credit standing affects the credit quality of the underlying obligation.
Changes in the

<PAGE>

credit quality of these financial institutions could cause losses to a fund
and affect its share price. The credit and liquidity enhancements may have
conditions that limit the ability of a fund to use them when the fund wishes
to do so.

INVESTING IN FOREIGN SECURITIES. Investing in foreign securities may
involve more risks than investing in U.S. securities. The value of foreign
securities is subject to economic and political developments in the countries
where the issuers operate and to changes in foreign currency values. Investments
in foreign securities involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. These
risks may include expropriation, confiscatory taxation, withholding taxes on
interest and/or dividends, limitations on the use of or transfer of fund assets
and political or social instability or diplomatic developments. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. In those European countries that are using the Euro as a common
currency unit, individual national economies may be adversely affected by the
inability of national governments to use monetary policy to address their own
economic or political concerns.

Securities of foreign issuers may not be registered with the SEC, and
the issuers thereof may not be subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of securities held by a fund than is available concerning U.S.
companies. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory requirements
comparable to those applicable to U.S. companies.

Securities of many foreign companies may be less liquid and their
prices more volatile than securities of comparable U.S. companies. From time to
time foreign securities may be difficult to liquidate rapidly without
significantly depressing the price of such securities. Foreign markets have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have failed to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when some of a fund's
assets are uninvested and no return is earned thereon. The inability of a fund
to make intended security purchases due to settlement problems could cause the
fund to miss attractive investment opportunities. Inability to dispose of a
portfolio security due to settlement problems could result either in losses to
the fund due to subsequent declines in the value of such portfolio security or,
if the fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Foreign securities trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose a fund to increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer. Legal
remedies for defaults and disputes may have to be pursued in foreign courts,
whose procedures differ substantially from those of U.S. courts.

The costs of investing outside the United States frequently are higher
than those attributable to investing in the United States. This is particularly
true with respect to emerging capital markets. For example, the cost of
maintaining custody of foreign securities exceeds custodian costs for domestic
securities, and transaction and settlement costs of foreign investing frequently
are higher than those attributable to domestic investing. Costs associated with
the exchange of currencies also make foreign investing more expensive than
domestic investing.

A fund may invest in foreign securities by purchasing depositary
receipts, including American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), or other securities
convertible into securities of issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities. They generally are in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. EDRs are
European receipts evidencing a similar arrangement, may be denominated in other
currencies and are designed for use in European securities markets. GDRs are
similar to EDRs and are designed for use in several international financial
markets. For purposes of each fund's investment policies, depositary receipts
generally are deemed to have the same classification as the underlying
securities they represent. Thus, a depositary receipt representing ownership of
common stock will be treated as common stock.

<PAGE>

ADRs are publicly traded on exchanges or over-the-counter in the United
States and are issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some
or all of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depositary's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR.

Eurodollar bonds and Yankee bonds are types of U.S. dollar denominated
foreign securities. Eurodollar bonds are U.S. dollar denominated bonds that are
held outside the United States, primarily in Europe. Yankee bonds are U.S.
dollar denominated bonds of foreign issuers that are sold primarily in the
United States.

The funds that invest outside the United States anticipate that their
brokerage transactions involving foreign securities of companies headquartered
in countries other than the United States will be conducted primarily on the
principal exchanges of such countries. Although each fund will endeavor to
achieve the best net results in effecting its portfolio transactions,
transactions on foreign exchanges are usually subject to fixed commissions that
are generally higher than negotiated commissions on U.S. transactions. There is
generally less government supervision and regulation of exchanges and brokers in
foreign countries than in the United States.

Investment income and gains on certain foreign securities in which the
funds may invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United States
and certain foreign countries, however, may reduce or eliminate the amount of
foreign taxes to which the funds would be subject. In addition, substantial
limitations may exist in certain countries with respect to the funds' ability to
repatriate investment capital or the proceeds of sales of securities.

FOREIGN CURRENCY RISKS. Currency risk is the risk that changes in
foreign exchange rates may reduce the U.S. dollar value of a fund's foreign
investments. If the value of a foreign currency rises against the value of the
U.S. dollar, the value of a fund's investments that are denominated in, or
linked to, that currency will increase. Conversely, if the value of a foreign
currency declines against the value of the U.S. dollar, the value of those fund
investments will decrease. These changes may have a significant impact on the
value of fund shares. In some instances, a fund may use derivative strategies to
hedge against changes in foreign currency value. (See "Strategies Using
Derivative Instruments," below.) However, opportunities to hedge against
currency risk may not exist in certain markets, particularly with respect to
emerging market currencies, and even when appropriate hedging opportunities are
available, a fund may choose not to hedge against currency risk.

Generally, currency exchange rates are determined by supply and demand
in the foreign exchange markets and the relative merits of investments in
different countries. In the case of those European countries that use the Euro
as a common currency unit, the relative merits of investments in the common
market in which they participate, rather than the merits of investments in the
individual country, will be a determinant of currency exchange rates. Currency
exchange rates also can be affected by the intervention of the U.S. and foreign
governments or central banks, the imposition of currency controls, speculation,
devaluation or other political or economic developments inside and outside the
United States.

Each fund values its assets daily in U.S. dollars, and funds that hold
foreign currencies do not intend to convert them to U.S. dollars on a daily
basis. These funds may convert foreign currency to U.S. dollars from time to
time. From time to time a fund's foreign currencies may be held as "foreign
currency call accounts" at foreign branches of foreign or domestic banks. These
accounts bear interest at negotiated rates and are payable upon relatively short
demand periods. If a bank became insolvent, a fund could suffer a loss of some
or all of the amounts deposited. A fund may convert foreign currency to U.S.
dollars from time to time.

<PAGE>

The value of the assets of a fund as measured in U.S. dollars may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, a fund may incur costs in connection with
conversions between various currencies. Currency exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to a fund at one rate, while offering a lesser rate of exchange should
a fund desire immediately to resell that currency to the dealer. A fund conducts
its currency exchange transactions either on a spot (I.E., cash) basis at the
spot rate prevailing in the foreign currency exchange market, or through
entering into forward, futures or options contracts to purchase or sell foreign
currencies.

SPECIAL CHARACTERISTICS OF EMERGING MARKET SECURITIES AND SOVEREIGN DEBT

EMERGING MARKET INVESTMENTS. The special risks of investing in foreign
securities are heightened in emerging markets. For example, many emerging market
currencies have experienced significant devaluations relative to the U.S. dollar
in recent years. Emerging market countries typically have economic and political
systems that are less fully developed and can be expected to be less stable than
those of developed countries. Emerging market countries may have policies that
restrict investment by foreigners, and there is a higher risk of government
expropriation or nationalization of private property. The possibility of low or
nonexistent trading volume in the securities of companies in emerging markets
also may result in a lack of liquidity and in price volatility. Issuers in
emerging markets typically are subject to a greater degree of change in earnings
and business prospects than are companies in more developed markets.

INVESTMENT AND REPATRIATION RESTRICTIONS -- Foreign investment in the
securities markets of several emerging market countries is restricted or
controlled to varying degrees. These restrictions may limit a fund's investment
in these countries and may increase its expenses. For example, certain countries
may require governmental approval prior to investments by foreign persons in a
particular company or industry sector or limit investment by foreign persons to
only a specific class of securities of a company, which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict or prohibit investment
opportunities in issuers or industries deemed important to national interests.
In addition, the repatriation of both investment income and capital from some
emerging market countries is subject to restrictions, such as the need for
certain government consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of a fund's operations. These restrictions may in the future make it
undesirable to invest in the countries to which they apply. In addition, if
there is a deterioration in a country's balance of payments or for other
reasons, a country may impose restrictions on foreign capital remittances
abroad. A fund could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investments.

If, because of restrictions on repatriation or conversion, a fund were
unable to distribute substantially all of its net investment income and capital
gains within applicable time periods, the fund would be subject to federal
income and/or excise taxes that would not otherwise be incurred and could cease
to qualify for the favorable tax treatment afforded to regulated investment
companies under the Internal Revenue Code. If it did cease to qualify for that
treatment, it would become subject to federal income tax on all of its income
and net gains. See "Taxes -- Qualification as a Regulated Investment Company,"
below.

DIFFERENCES BETWEEN THE U.S. AND EMERGING MARKET SECURITIES MARKETS.
Most of the securities markets of emerging market countries have substantially
less volume than the New York Stock Exchange, and equity securities of most
companies in emerging market countries are less liquid and more volatile than
equity securities of U.S. companies of comparable size. Some of the stock
exchanges in emerging market countries are in the earliest stages of their
development. As a result, security settlements may in some instances be subject
to delays and related administrative uncertainties. Many companies traded on
securities markets in emerging market countries are smaller, newer and less
seasoned than companies whose securities are traded on securities markets in the
United States. Investments in smaller companies involve greater risk than is
customarily associated with investing in larger companies. Smaller companies may
have limited product lines, markets or financial or managerial resources and may
be more susceptible to losses and risks of bankruptcy. Additionally,
market-making and arbitrage activities are generally less extensive in such
markets, which may contribute to increased volatility and reduced liquidity of
such markets. Accordingly, each of these markets may be subject to greater
influence by adverse events generally

20
<PAGE>

affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. To the extent that an emerging
market country experiences rapid increases in its money supply and investment in
equity securities for speculative purposes, the equity securities traded in that
country may trade at price-earnings multiples higher than those of comparable
companies trading on securities markets in the United States, which may not be
sustainable.

GOVERNMENT SUPERVISION OF EMERGING MARKET SECURITIES MARKETS; LEGAL
SYSTEMS. There is also less government supervision and regulation of securities
exchanges, listed companies and brokers in emerging market countries than exists
in the United States. Therefore, less information may be available to a fund
than with respect to investments in the United States. Further, in certain
countries, less information may be available to a fund than to local market
participants. Brokers in other countries may not be as well capitalized as those
in the United States, so that they are more susceptible to financial failure in
times of market, political or economic stress. In addition, existing laws and
regulations are often inconsistently applied. As legal systems in some of the
emerging market countries develop, foreign investors may be adversely affected
by new laws and regulations, changes to existing laws and regulations and
preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.

SOCIAL, POLITICAL AND ECONOMIC FACTORS -- Many emerging market
countries may be subject to a greater degree of social, political and economic
instability than is the case in the United States. Any change in the leadership
or policies of these countries may halt the expansion of or reverse any
liberalization of foreign investment policies now occurring. Such instability
may result from, among other things, the following: (1) authoritarian
governments or military involvement in political and economic decision making,
and changes in government through extra-constitutional means; (2) popular unrest
associated with demands for improved political, economic and social conditions;
(3) internal insurgencies; (4) hostile relations with neighboring countries; and
(5) ethnic, religious and racial disaffection. Such social, political and
economic instability could significantly disrupt the financial markets in those
countries and elsewhere and could adversely affect the value of a fund's assets.
In addition, there may be the possibility of asset expropriations or future
confiscatory levels of taxation affecting a fund.

The economies of many emerging markets are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally the United
States, Japan, China and the European Union. The enactment by the United States
or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of these countries. In addition, the economies of
some countries are vulnerable to weakness in world prices for their commodity
exports, including crude oil. A country whose exports are concentrated in a few
commodities could be vulnerable to a decline in the international price of such
commodities.

FINANCIAL INFORMATION AND LEGAL STANDARDS -- Issuers in emerging market
countries generally are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. issuers. In particular, the assets and profits appearing on the
financial statements of an emerging market issuer may not reflect its financial
position or results of operations in the way they would be reflected had the
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules may require, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
issuer's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits. Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition of
those issuers and securities markets. Also, securities brokers and dealers in
other countries may not be as well capitalized as those in the United States, so
that they are more susceptible to financial failure in times of market,
political or economic stress.

In addition, existing laws and regulations are often inconsistently
applied. As legal systems in some of the emerging market countries develop,
foreign investors may be adversely affected by new laws and regulations, changes
to existing laws and regulations and preemption of local laws and regulations by
national laws. In circumstances where adequate laws exist, it may not be
possible to obtain swift and equitable enforcement of the law.

21
<PAGE>

FOREIGN SOVEREIGN DEBT. Sovereign debt includes bonds that are issued
by foreign governments or their agencies, instrumentalities or political
subdivisions or by foreign central banks. Sovereign debt also may be issued by
quasi-governmental entities that are owned by foreign governments but are not
backed by their full faith and credit or general taxing powers. Investment in
sovereign debt involves special risks. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable or
unwilling to repay principal and/or interest when due in accordance with the
terms of such debt, and the funds may have limited legal recourse in the event
of a default.

Sovereign debt differs from debt obligations issued by private entities
in that, generally, remedies for defaults must be pursued in the courts of the
defaulting party. Legal recourse is therefore somewhat diminished. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank debt issued by the same sovereign
entity may not contest payments to the holders of sovereign debt in the event of
default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. A country whose exports are concentrated in a
few commodities could be vulnerable to a decline in the international price of
such commodities. Increased protectionism on the part of a country's trading
partners, or political changes in those countries, could also adversely affect
its exports. Such events could diminish a country's trade account surplus, if
any, or the credit standing of a particular local government or agency. Another
factor bearing on the ability of a country to repay sovereign debt is the level
of the country's international reserves. Fluctuations in the level of these
reserves can affect the amount of foreign exchange readily available for
external debt payments and, thus, could have a bearing on the capacity of the
country to make payments on its sovereign debt.

The occurrence of political, social or diplomatic changes in one or
more of the countries issuing sovereign debt could adversely affect the funds'
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt.

With respect to sovereign debt of emerging market issuers, investors
should be aware that certain emerging market countries are among the largest
debtors to commercial banks and foreign governments. Some emerging market
countries have from time to time declared moratoria on the payment of principal
and interest on external debt.

Some emerging market countries have experienced difficulty in servicing
their sovereign debt on a timely basis which led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds
(discussed below), and obtaining new credit to finance interest payments.
Holders of sovereign debt, including the funds, may be requested to participate
in the rescheduling of such debt and to extend further loans to sovereign
debtors. The interests of holders of sovereign debt could be adversely affected
in the course of restructuring arrangements or by certain other factors referred
to below. Furthermore, some of the participants in the secondary market for
sovereign debt may also be directly involved in negotiating the terms of these
arrangements and may, therefore, have access to information not available to
other market participants. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of certain issuers of sovereign debt. There is no bankruptcy
proceeding by which sovereign debt on which a sovereign has defaulted may be
collected in whole or in part.

Foreign investment in certain sovereign debt is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in such sovereign debt and increase the costs and
expenses of a fund. Certain countries in which a fund may invest require
governmental approval prior to investments by foreign persons, limit the amount
of investment by foreign persons in a particular issuer, limit the investment by
foreign persons only to a specific class of securities of an issuer that may
have less advantageous

22
<PAGE>

rights than the classes available for purchase by domiciliaries of the
countries or impose additional taxes on foreign investors. Certain issuers
may require governmental approval for the repatriation of investment income,
capital or the proceeds of sales of securities by foreign investors. In
addition, if a deterioration occurs in a country's balance of payments the
country could impose temporary restrictions on foreign capital remittances. A
fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by the
application to the fund of any restrictions on investments. Investing in
local markets may require a fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve
additional costs to the fund.

BRADY BONDS -- Brady Bonds are sovereign bonds issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness. In
restructuring its external debt under the Brady Plan framework, a debtor nation
negotiates with its existing bank lenders as well as multilateral institutions
such as the International Monetary Fund ("IMF"). The Brady Plan framework, as it
has developed, contemplates the exchange of commercial bank debt for newly
issued Brady Bonds. Brady Bonds may also be issued in respect of new money being
advanced by existing lenders in connection with the debt restructuring. The
World Bank and the IMF support the restructuring by providing funds pursuant to
loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount.

Brady Bonds have been issued only in recent years, and accordingly do
not have a long payment history. Agreements implemented under the Brady Plan to
date are designed to achieve debt and debt-service reduction through specific
options negotiated by a debtor nation with its creditors. As a result, the
financial packages offered by each country differ. The types of options have
included the exchange of outstanding commercial bank debt for bonds issued at
100% of face value of such debt, which carry a below-market stated rate of
interest (generally known as par bonds), bonds issued at a discount from the
face value of such debt (generally known as discount bonds), bonds bearing an
interest rate which increases over time and bonds issued in exchange for the
advancement of new money by existing lenders. Regardless of the stated face
amount and stated interest rate of the various types of Brady Bonds, a fund will
purchase Brady Bonds in which the price and yield to the investor reflect market
conditions at the time of purchase.

Certain Brady Bonds have been collateralized as to principal due at
maturity by U.S. Treasury zero coupon bonds with maturities equal to the final
maturity of such Brady Bonds. Collateral purchases are financed by the IMF, the
World Bank and the debtor nations' reserves. In the event of a default with
respect to collateralized Brady Bonds as a result of which the payment
obligations of the issuer are accelerated, the U.S. Treasury zero coupon
obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent until the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments that would have then been due on the Brady Bonds in the
normal course. Interest payments on Brady Bonds may be wholly uncollateralized
or may be collateralized by cash or high grade securities in amounts that
typically represent between 12 and 18 months of interest accruals on these
instruments, with the balance of the interest accruals being uncollateralized.

Brady Bonds are often viewed as having several valuation components:
(1) the collateralized repayment of principal, if any, at final maturity, (2)
the collateralized interest payments, if any, (3) the uncollateralized interest
payments and (4) any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative. A fund may purchase Brady Bonds with no or limited
collateralization and will be relying for payment of interest and (except in the
case of principal collateralized Brady Bonds) repayment of principal primarily
on the willingness and ability of the foreign government to make payment in
accordance with the terms of the Brady Bonds.

STRUCTURED FOREIGN INVESTMENTS. This term generally refers to interests
in U.S. and foreign entities organized and operated solely for the purpose of
securitizing or restructuring the investment characteristics of foreign
securities. This type of securitization or restructuring usually involves the
deposit with or purchase by a U.S.

23
<PAGE>

or foreign entity, such as a corporation or trust, of specified instruments
(such as commercial bank loans or Brady Bonds) and the issuance by that
entity of one or more classes of securities backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured foreign
investments to create securities with different investment characteristics
such as varying maturities, payment priorities and interest rate provisions,
and the extent of the payments made with respect to structured foreign
investments is often dependent on the extent of the cash flow on the
underlying instruments.

Structured foreign investments frequently involve no credit
enhancement. Accordingly, their credit risk generally will be equivalent to that
of the underlying instruments. In addition, classes of structured foreign
investments may be subordinated to the right of payment of another class.
Subordinated structured foreign investments typically have higher yields and
present greater risks than unsubordinated structured foreign investments.
Structured foreign investments are typically sold in private placement
transactions, and there currently is no active trading market for structured
foreign investments.

CURRENCY-LINKED INVESTMENTS. The principal amount of securities that
are indexed to specific foreign currency exchange rates may be adjusted up or
down (but not below zero) at maturity to reflect changes in the exchange rate
between two currencies. A fund may experience loss of principal due to these
adjustments.

ZERO COUPON AND OTHER OID SECURITIES; PIK SECURITIES. Zero coupon
securities are securities on which no periodic interest payments are made but
instead are sold at a deep discount from their face value. The buyer of these
securities receives a rate of return by the gradual appreciation of the
security, which results from the fact that it will be paid at face value on a
specified maturity date. There are many types of zero coupon securities. Some
are issued in zero coupon form, including Treasury bills, notes and bonds that
have been stripped of (separated from) their unmatured interest coupons
(unmatured interest payments) and receipts or certificates representing
interests in such stripped debt obligations and coupons. Others are created by
brokerage firms that strip the coupons from interest-paying bonds and sell the
principal and the coupons separately.

Other securities that are sold with original issue discount ("OID")
(I.E., the difference between the issue price and the value at maturity) may
provide for some interest to be paid prior to maturity. In addition,
payment-in-kind ("PIK") securities pay interest in additional securities, not in
cash. OID and PIK securities usually trade at a discount from their face value.

Zero coupon securities are generally more sensitive to changes in
interest rates than debt obligations of comparable maturities that make current
interest payments. This means that when interest rates fall, the value of zero
coupon securities rises more rapidly than securities paying interest on a
current basis. However, when interest rates rise, their value falls more
dramatically. Other OID securities and PIK securities also are subject to
greater fluctuations in market value in response to changing interest rates than
bonds of comparable maturities that make current distributions of interest in
cash.

Because federal tax law requires that accrued OID and "interest" on PIK
securities be included currently in a fund's income (see "Taxes," below), a fund
might be required to distribute as a dividend an amount that is greater than the
total amount of cash it actually receives. These distributions would have to be
made from the fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. A fund would not be able to purchase additional securities
with cash used to make these distributions, and its current income and the value
of its shares would ultimately be reduced as a result.

Certain zero coupon securities are U.S. Treasury notes and bonds that
have been stripped of their unmatured interest coupon receipts or interests in
such U.S. Treasury securities or coupons. The staff of the SEC currently takes
the position that "stripped" U.S. government securities that are not issued
through the U.S. Treasury are not U.S. government securities. This technique is
frequently used with U.S. Treasury bonds to create CATS (Certificate of Accrual
Treasury Securities), TIGRs (Treasury Income Growth Receipts) and similar
securities.

24
<PAGE>

CONVERTIBLE SECURITIES. A convertible security is a bond, preferred
stock or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. A convertible security entitles
the holder to receive interest or dividends until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
unique investment characteristics in that they generally (1) have higher yields
than common stocks, but lower yields than comparable non-convertible securities,
(2) are less subject to fluctuation in value than the underlying stock because
they have fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock. However,
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security.

A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a fund is called for redemption,
the fund will be required to permit the issuer to redeem the security, convert
it into underlying common stock or sell it to a third party.

WARRANTS. Warrants are securities permitting, but not obligating,
holders to subscribe for other securities. Warrants do not carry with them the
right to dividends or voting rights with respect to the securities that they
entitle their holder to purchase, and they do not represent any rights in the
assets of the issuer. As a result, warrants may be considered more speculative
than certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying securities, and a
warrant ceases to have value if it is not exercised prior to its expiration
date.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Investments in secured or
unsecured fixed or floating rate loans ("Loans") arranged through private
negotiations between a borrowing corporation, government or other entity and one
or more financial institutions ("Lenders") may be in the form of participations
("Participations") in Loans or assignments ("Assignments") of all or a portion
of Loans from third parties. Participations typically result in the fund's
having a contractual relationship only with the Lender, not with the borrower. A
fund has the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection with
purchasing Participations, a fund generally has no direct right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the borrower, and a fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, a fund assumes the credit risk of both
the borrower and the Lender that is selling the Participation. In the event of
the insolvency of the selling Lender, the fund may be treated as a general
creditor of that Lender and may not benefit from any set-off between the Lender
and the borrower. A fund will acquire Participations only if its investment
adviser determines that the selling Lender is creditworthy.

When a fund purchases Assignments from Lenders, it acquires direct
rights against the borrower on the Loan. In an Assignment, the fund is entitled
to receive payments directly from the borrower and, therefore, does not depend
on the selling bank to pass these payments onto the fund. However, because
Assignments are arranged through private negotiations between potential
assignees and assignors, the rights and obligations acquired by the fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.

Assignments and Participations are generally not registered under the
Securities Act of 1933, as amended ("Securities Act"), and thus may be subject
to a fund's limitation on investment in illiquid securities. Because there may
be no liquid market for such securities, such securities may be sold only to a
limited number of institutional investors. The lack of a liquid secondary market
could have an adverse impact on the value of such securities and on a fund's
ability to dispose of particular Assignments or Participations when necessary to
meet the fund's liquidity needs or in response to a specific economic event,
such as a deterioration in the creditworthiness of the borrower.

TEMPORARY AND DEFENSIVE INVESTMENTS; MONEY MARKET INVESTMENTS. Each
fund may invest in money market investments for temporary or defensive purposes,
to reinvest cash collateral from its securities lending activities or as part of
its normal investment program. Such investments include, among other things, (1)
securities

25
<PAGE>

issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities, (2) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers, (3) commercial paper
and notes, including those with variable and floating rates of interest, (4)
debt obligations of foreign branches of U.S. banks, U.S. branches of foreign
banks, and foreign branches of foreign banks, (5) debt obligations issued or
guaranteed by one or more foreign governments or any of their foreign
political subdivisions, agencies or instrumentalities, including obligations
of supranational entities, (6) bonds issued by foreign issuers, (7)
repurchase agreements and (8) securities of other investment companies that
invest exclusively in money market instruments and similar private investment
vehicles. Only those funds that may trade outside the United States may
invest in money market instruments that are denominated in foreign currencies.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other investment companies, subject to limitations under the
Investment Company Act of 1940, as amended ("Investment Company Act"). Among
other things, these limitations currently restrict a fund's aggregate
investments in other investment companies to no more than 10% of its total
assets. A fund's investments in certain private investment vehicles are not
subject to this restriction. The shares of other investment companies are
subject to the management fees and other expenses of those companies, and the
purchase of shares of some investment companies requires the payment of sales
loads and (in the case of closed-end investment companies) sometimes substantial
premiums above the value of such companies' portfolio securities. At the same
time, a fund would continue to pay its own management fees and expenses with
respect to all its investments, including shares of other investment companies.
Each fund may invest in the shares of other investment companies when, in the
judgment of its investment adviser, the potential benefits of the investment
outweigh the payment of any management fees and expenses and, where applicable,
premium or sales load.

From time to time, investments in other investment companies may be the
most effective available means for a fund to invest a portion of its assets. In
some cases, investment in another investment company may be the most practical
way for a fund to invest in securities of issuers in certain countries. These
investments may include World Equity Benchmark Shares-SM- (commonly known as
"WEBS"), which are exchange-traded shares of series of an investment company
that are designed to replicate the composition and performance of publicly
traded issuers in particular foreign countries. A fund's investment in another
investment company is subject to the risks of that investment company's
underlying portfolio securities. Shares of exchange-traded investment companies
also can trade at substantial discounts below the value of the companies'
portfolio securities.

PACE Money Market Investments may invest in the securities of other
money market funds when Mitchell Hutchins believes that (1) the amounts to be
invested are too small or are available too late in the day to be effectively
invested in money market instruments, (2) shares of other money market funds
otherwise would provide a better return than direct investment in money market
instruments or (3) such investments would enhance the fund's liquidity. The
other funds may invest in the securities of money market funds for similar
reasons.

ILLIQUID SECURITIES. The term "illiquid securities" means securities
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which a fund has valued the securities and
includes, among other things, purchased over-the-counter options, repurchase
agreements maturing in more than seven days and restricted securities other than
those its investment adviser has determined are liquid pursuant to guidelines
established by the board. The assets used as cover for over-the-counter options
written by a fund will be considered illiquid unless the over-the-counter
options are sold to qualified dealers who agree that the fund may repurchase any
over-the-counter options they write at a maximum price to be calculated by a
formula set forth in the option agreements. The cover for an over-the-counter
option written subject to this procedure would be considered illiquid only to
the extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option. Under current SEC guidelines, interest-only and
principal-only classes of mortgage-backed securities generally are considered
illiquid. However, interest-only and principal-only classes of fixed-rate
mortgage-backed securities issued by the U.S. government or one of its agencies
or instrumentalities will not be considered illiquid if the fund's investment
adviser has determined that they are liquid pursuant to guidelines established
by the board. A fund may not be able to readily liquidate its investment in
illiquid securities and may have to sell other investments if necessary to raise
cash to meet its obligations. The lack of a liquid secondary market for illiquid
securities may make it more difficult for a fund to assign a value to those
securities for purposes of valuing its portfolio and calculating its net asset
value.

26
<PAGE>

Restricted securities are not registered under the Securities Act and
may be sold only in privately negotiated or other exempted transactions or after
a Securities Act registration statement has become effective. Where registration
is required, a fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time a fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a fund might obtain a less favorable price than
prevailed when it decided to sell.

Not all restricted securities are illiquid. For funds that are
authorized to trade outside the United States, foreign securities are freely
tradeable in the country in which they are principally traded generally are not
considered illiquid, even if they are restricted in the United States. A large
institutional market has developed for many U.S. and foreign securities that are
not registered under the Securities Act. Institutional investors generally will
not seek to sell these instruments to the general public but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.

Institutional markets for restricted securities also have developed as
a result of Rule 144A under the Securities Act, which establishes a "safe
harbor" from the registration requirements of the Securities Act for resales of
certain securities to qualified institutional buyers. Such markets include
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by a fund, however, could affect adversely the
marketability of such portfolio securities, and the fund might be unable to
dispose of them promptly or at favorable prices.

The board has delegated the function of making day-to-day
determinations of liquidity to each fund's investment adviser pursuant to
guidelines approved by the board. An investment adviser takes into account a
number of factors in reaching liquidity decisions, including (1) the frequency
of trades for the security, (2) the number of dealers that make quotes for the
security, (3) the number of dealers that have undertaken to make a market in the
security, (4) the number of other potential purchasers, (5) the nature of the
security and how trading is effected (E.G., the time needed to sell the
security, how bids are solicited and the mechanics of transfer) and (6) the
existence of demand features or similar liquidity enhancements. A fund's
investment adviser monitors the liquidity of restricted securities in its
portfolio and reports periodically on such decisions to the board.

In making determinations as to the liquidity of municipal lease
obligations purchased by PACE Municipal Fixed Income Investments, the investment
adviser distinguishes between direct investments in municipal lease obligations
(or participations therein) and investments in securities that may be supported
by municipal lease obligations or certificates of participation therein. Since
these municipal lease obligation-backed securities are based on a
well-established means of securitization, the investment adviser does not
believe that investing in such securities presents the same liquidity issues as
direct investments in municipal lease obligations.

Mitchell Hutchins and (where applicable) the fund's investment adviser
monitor each fund's overall holdings of illiquid securities. If a fund's
holdings of illiquid securities exceed its limitation on investments in illiquid
securities for any reason (such as a particular security becoming illiquid,
changes in the relative market values of liquid and illiquid portfolio
securities or shareholder redemptions), Mitchell Hutchins will consider what
action would be in the best interests of a fund and its shareholders. Such
action may include engaging in an orderly disposition of securities to reduce
the fund's holdings of illiquid securities. However, a fund is not required to
dispose of illiquid securities under these circumstances.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
a fund purchases securities or other obligations from a bank or securities
dealer (or its affiliate) and simultaneously commits to resell them to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. A fund maintains custody of the underlying obligations
prior to their repurchase, either through its regular custodian or through a
special "tri-party" custodian or sub-

27
<PAGE>

custodian that maintains separate accounts for both the fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
obligations.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including a possible decline in the market value of
the underlying obligations. If their value becomes less than the repurchase
price, plus any agreed-upon additional amount, the counterparty must provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price plus any agreed-upon additional amount. The difference
between the total amount to be received upon repurchase of the obligations and
the price that was paid by a fund upon acquisition is accrued as interest and
included in its net investment income. Repurchase agreements involving
obligations other than U.S. government securities (such as commercial paper and
corporate bonds) may be subject to special risks and may not have the benefit of
certain protections in the event of the counterparty's insolvency. If the seller
or guarantor becomes insolvent, the fund may suffer delays, costs and possible
losses in connection with the disposition of collateral. Each fund intends to
enter into repurchase agreements only in transactions with counterparties
believed by Mitchell Hutchins to present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve
the sale of securities held by a fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to each
fund's limitation on borrowings and may be entered into only with banks or
securities dealers or their affiliates. While a reverse repurchase agreement is
outstanding, a fund will maintain, in a segregated account with its custodian,
cash or liquid securities, marked to market daily, in an amount at least equal
to its obligations under the reverse repurchase agreement. See "The Funds'
Investments, Related Risks and Limitations -- Segregated Accounts."

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a fund might be unable to deliver them when that fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, the buyer or trustee or receiver may
receive an extension of time to determine whether to enforce a fund's obligation
to repurchase the securities, and the fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.

DOLLAR ROLLS. In a dollar roll, a fund sells mortgage-backed or other
securities for delivery on the next regular settlement date for those securities
and, simultaneously, contracts to purchase substantially similar securities for
delivery on a later settlement date. Dollar rolls also are subject to a fund's
limitation on borrowings.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to the fund later than the
normal settlement date for such securities at a stated price and yield.
When-issued securities include TBA ("to be announced") securities. TBA
securities, which are usually mortgage-backed securities, are purchased on a
forward commitment basis with an approximate principal amount and no defined
maturity date. The actual principal amount and maturity date are determined upon
settlement when the specific mortgage pools are assigned. A fund generally would
not pay for such securities or start earning interest on them until they are
received. However, when a fund undertakes a when-issued or delayed-delivery
obligation, it immediately assumes the risks of ownership, including the risks
of price fluctuation. Failure of the issuer to deliver a security purchased by a
fund on a when-issued or delayed-delivery basis may result in the fund's
incurring or missing an opportunity to make an alternative investment. Depending
on market conditions, a fund's when-issued and delayed-delivery purchase
commitments could cause its net asset value per share to be more volatile,
because such securities may increase the amount by which the fund's total
assets, including the value of when-issued and delayed-delivery securities held
by that fund, exceeds its net assets.

A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect a fund's net asset value. When a fund commits to purchase securities
on a when-issued or delayed delivery basis, its custodian segregates assets to
cover the amount of the commitment. See "The Funds' Investments, Related Risks
and Limitations -- Segregated Accounts." A fund's when-issued and delayed
delivery purchase commitments could cause its net asset

28
<PAGE>

value per share to be more volatile. A fund may sell the right to acquire the
security prior to delivery if its investment adviser deems it advantageous to
do so, which may result in a gain or loss to the fund.

PACE MUNICIPAL FIXED INCOME INVESTMENTS -- TYPES OF MUNICIPAL BONDS.
The fund may invest in a variety of municipal bonds, as described below:

MUNICIPAL BOND -- Municipal bonds are obligations that are issued by
states, municipalities, public authorities or other issuers and that pay
interest that is exempt from federal income tax in the opinion of issuer's
counsel. The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as from
the user of the facility being financed. Municipal bonds also include "moral
obligation" bonds, which are normally issued by special purpose authorities. For
these bonds, a government unit is regarded as morally obligated to support
payment of the debt service, which is usually subject to annual budget
appropriations. Various types of municipal bonds are described in the following
sections.

MUNICIPAL LEASE OBLIGATIONS -- Municipal bonds include municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by state and local governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The fund generally invests in municipal lease
obligations through certificates of participation.

Although municipal lease obligations do not constitute general
obligations of the municipality for which its taxing power is pledged, they
ordinarily are backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. The leases underlying
certain municipal lease obligations, however, provide that lease payments are
subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. This "abatement risk" may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reserve funds or the provision of credit enhancements such as
letters of credit.

Certain municipal lease obligations contain "non-appropriation"
clauses, which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Some municipal lease obligations of this type
are insured as to timely payment of principal and interest, even in the event of
a failure by the municipality to appropriate sufficient funds to make payments
under the lease. However, in the case of an uninsured municipal lease
obligation, the fund's ability to recover under the lease in the event of a
non-appropriation or default will be limited solely to the repossession of
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.

INDUSTRIAL DEVELOPMENT BONDS ("IDBs") AND PRIVATE ACTIVITY BONDS
("PABs") -- IDBs and PABs are issued by or on behalf of public authorities to
finance various privately operated facilities, such as airport or pollution
control facilities. These obligations are considered municipal bonds if the
interest paid thereon is exempt from federal income tax in the opinion of the
bond issuer's counsel. IDBs and PABs are in most cases revenue bonds and thus
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the user
of the facilities being financed. IDBs issued after August 15, 1986 generally
are considered PABs, and to the extent the fund invests in such PABs,
shareholders generally will be required to include a portion of their
exempt-interest dividends from that fund in calculating their liability for the
AMT. See "Taxes" below. The fund may invest more than 25% of its net assets in
IDBs and PABs.

FLOATING RATE AND VARIABLE RATE OBLIGATIONS -- Floating rate and
variable rate obligations are municipal bonds that bear interest at rates that
are not fixed but that vary with changes in specified market rates or indices.
The interest rate on floating rate or variable rate securities ordinarily is
readjusted on the basis of the prime rate of the bank that originated the
financing or some other index or published rate, such as the 90-day U.S.
Treasury bill rate, or is otherwise reset to reflect market rates of interest.
Generally, these interest rate adjustments cause the market value of floating
rate and variable rate municipal securities to fluctuate less than the market
value of fixed rate

29
<PAGE>

obligations. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or capital depreciation is less than for
fixed rate obligations. Floating rate or variable rate obligations typically
permit the holder to demand payment of principal from the issuer or
remarketing agent at par value prior to maturity and may permit the issuer to
prepay principal, plus accrued interest, at its discretion after a specified
notice period. Frequently, floating rate or variable rate obligations and/or
the demand features thereon are secured by letters of credit or other credit
support arrangements provided by banks or other financial institutions, the
credit standing of which affects the credit quality of the obligations.
Changes in the credit quality of these institutions could cause losses to the
fund and adversely affect its share price.

A demand feature gives the fund the right to sell the securities to a
specified party, usually a remarketing agent, on a specified date. A demand
feature is often backed by a letter of credit from a bank or a guarantee or
other liquidity support arrangement from a bank or other financial institution.
As discussed under "Participation Interests," to the extent that payment of an
obligation is backed by a letter of credit, guarantee or other liquidity support
that may be drawn upon demand, such payment may be subject to that institution's
ability to satisfy that commitment.

PARTICIPATION INTERESTS -- Participation interests are interests in
municipal bonds, including IDBs, PABs and floating and variable rate
obligations, that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature
generally is backed by an irrevocable letter of credit or guarantee of the bank.
The credit standing of such bank affects the credit quality of the participation
interests.

A participation interest gives the fund an undivided interest in a
municipal bond owned by a bank. The fund has the right to sell the instruments
back to the bank. Such right generally is backed by the bank's irrevocable
letter of credit or guarantee and permits the fund to draw on the letter of
credit on demand, after specified notice, for all or any part of the principal
amount of the fund's participation interest plus accrued interest. Generally,
the fund expects to exercise the demand under the letters of credit or other
guarantees (1) upon a default under the terms of the underlying bond, (2) to
maintain the fund's portfolio in accordance with its investment objective and
policies or (3) as needed to provide liquidity to the fund in order to meet
redemption requests. The ability of a bank to fulfill its obligations under a
letter of credit or guarantee might be affected by possible financial
difficulties of its borrowers, adverse interest rate or economic conditions,
regulatory limitations or other factors. The fund's investment adviser will
monitor the pricing, quality and liquidity of the participation interests held
by the fund, and the credit standing of banks issuing letters of credit or
guarantees supporting such participation interests on the basis of published
financial information reports of rating services and bank analytical services.

TENDER OPTION BONDS -- Tender option bonds are long-term municipal
bonds sold by a bank subject to a "tender option" that gives the purchaser the
right to tender them to the bank at par plus accrued interest at designated
times (the "tender option"). The tender option may be exercisable at intervals
ranging from bi-weekly to semi-annually, and the interest rate on the bonds is
typically reset at the end of the applicable interval in an attempt to cause the
bonds to have a market value that approximates their par value. The tender
option generally would not be exercisable in the event of a default on, or
significant downgrading of, the underlying municipal bonds. Therefore, the
fund's ability to exercise the tender option will be affected by the credit
standing of both the bank involved and the issuer of the underlying securities.

PUT BONDS -- A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a remarketing agent
at a specified price and exercise date, which is typically well in advance of
the bond's maturity date. The obligation to purchase the bond on the exercise
date may be supported by a letter of credit or other credit support arrangement
from a bank, insurance company or other financial institution, the credit
standing of which affects the credit quality of the obligation.

If the put is a "one time only" put, the fund ordinarily will either
sell the bond or put the bond, depending upon the more favorable price. If the
bond has a series of puts after the first put, the bond will be held as long as,
in the judgment of its investment adviser, it is in the best interest of the
fund to do so. There is no assurance that the issuer of a put bond acquired by a
fund will be able to repurchase the bond upon the exercise date, if the fund
chooses to exercise its right to put the bond back to the issuer.

30
<PAGE>

TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES -- Municipal
bonds include tax-exempt commercial paper and short-term municipal notes, such
as tax anticipation notes, bond anticipation notes, revenue anticipation notes
and other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.

INVERSE FLOATERS -- The fund may invest in municipal bonds on which the
rate of interest varies inversely with interest rates on other municipal bonds
or an index. Such obligations include components of securities on which interest
is paid in two separate parts - an auction component, which pays interest at a
market rate that is set periodically through an auction process or other method,
and a residual component, or "inverse floater," which pays interest at a rate
equal to the difference between the rate that the issuer would have paid on a
fixed-rate obligation at the time of issuance and the rate paid on the auction
component. The market value of an inverse floater will be more volatile than
that of a fixed-rate obligation and, like most debt obligations, will vary
inversely with changes in interest rates.

Because the interest rate paid to holders of inverse floaters is
generally determined by subtracting the interest rate paid to holders of auction
components from a fixed amount, the interest rate paid to holders of inverse
floaters will decrease as market rates increase and increase as market rates
decrease. Moreover, the extent of the increases and decreases in the market
value of inverse floaters may be larger than comparable changes in the market
value of an equal principal amount of a fixed rate municipal bond having similar
credit quality, redemption provisions and maturity. In a declining interest rate
environment, inverse floaters can provide the fund with a means of increasing or
maintaining the level of tax-exempt interest paid to shareholders.

MORTGAGE SUBSIDY BONDS -- The fund also may purchase mortgage subsidy
bonds that are normally issued by special purpose public authorities. In some
cases the repayment of such bonds depends upon annual legislative
appropriations; in other cases repayment is a legal obligation of the issuer,
and, if the issuer is unable to meet its obligations, repayment becomes a moral
commitment of a related government unit (subject, however, to such
appropriations). The types of municipal bonds identified above and in the
Prospectus may include obligations of issuers whose revenues are primarily
derived from mortgage loans on housing projects for moderate to low income
families.

STANDBY COMMITMENTS -- The fund may acquire standby commitments
pursuant to which a bank or other municipal bond dealer agrees to purchase
securities that are held in the fund's portfolio or that are being purchased by
the fund at a price equal to (1) the acquisition cost (excluding any accrued
interest paid on acquisition), less any amortized market premium or plus any
accrued market or original issue discount, plus (2) all interest accrued on the
securities since the last interest payment date or the date the securities were
purchased by the fund, whichever is later. Although the fund does not currently
intend to acquire standby commitments with respect to municipal bonds held in
its portfolio, the fund may acquire such commitments under unusual market
conditions to facilitate portfolio liquidity.

The fund would enter into standby commitments only with those banks or
other dealers that, in the opinion of its investment adviser, present minimal
credit risk. The fund's right to exercise standby commitments would be
unconditional and unqualified. A standby commitment would not be transferable by
the fund, although it could sell the underlying securities to a third party at
any time. The fund may pay for standby commitments either separately in cash or
by paying a higher price for the securities that are acquired subject to such a
commitment (thus reducing the yield to maturity otherwise available for the same
securities). The acquisition of a standby commitment would not ordinarily affect
the valuation or maturity of the underlying municipal bonds. Standby commitments
acquired by the fund would be valued at zero in determining net asset value.
Whether the fund paid directly or indirectly for a standby commitment, its cost
would be treated as unrealized depreciation and would be amortized over the
period the commitment is held by the fund.

DURATION. Duration is a measure of the expected life of a bond on a
present value basis. Duration incorporates the bond's yield, coupon interest
payments, final maturity and call features into one measure and is one of the
fundamental tools used by the applicable investment adviser in portfolio
selection and yield curve positioning of a fund's investments in bonds. Duration
was developed as a more precise alternative to the concept "term to maturity."
Traditionally, a bond's "term to maturity" has been used as a proxy for the
sensitivity of the security's price to changes in interest rates (which is the
"interest rate risk" or "volatility" of the security). However,

31
<PAGE>

"term to maturity" measures only the time until the scheduled final payment
on the bond, taking no account of the pattern of payments prior to maturity.

Duration takes the length of the time intervals between the present
time and the time that the interest and principal payments are scheduled or, in
the case of a callable bond, expected to be made, and weights them by the
present values of the cash to be received at each future point in time. For any
bond with interest payments occurring prior to the payment of principal,
duration is always less than maturity. For example, depending on its coupon and
the level of market yields, a Treasury note with a remaining maturity of five
years might have a duration of 4.5 years. For mortgage-backed and other
securities that are subject to prepayments, put or call features or adjustable
coupons, the difference between the remaining stated maturity and the duration
is likely to be much greater.

Duration allows an investment adviser to make certain predictions as to
the effect that changes in the level of interest rates will have on the value of
a fund's portfolio of bonds. For example, when the level of interest rates
increases by 1%, a debt security having a positive duration of three years
generally will decrease by approximately 3%. Thus, if an investment adviser
calculates the duration of a fund's portfolio of bonds as three years, it
normally would expect the portfolio to change in value by approximately 3% for
every 1% change in the level of interest rates. However, various factors, such
as changes in anticipated prepayment rates, qualitative considerations and
market supply and demand, can cause particular securities to respond somewhat
differently to changes in interest rates than indicated in the above example.
Moreover, in the case of mortgage-backed and other complex securities, duration
calculations are estimates and are not precise. This is particularly true during
periods of market volatility. Accordingly, the net asset value of a fund's
portfolio of bonds may vary in relation to interest rates by a greater or lesser
percentage than indicated by the above example.

Futures, options and options on futures have durations that, in
general, are closely related to the duration of the securities that underlie
them. Holding long futures or call option positions will lengthen portfolio
duration by approximately the same amount as would holding an equivalent amount
of the underlying securities. Short futures or put options have durations
roughly equal to the negative duration of the securities that underlie these
positions, and have the effect of reducing portfolio duration by approximately
the same amount as would selling an equivalent amount of the underlying
securities.

There are some situations in which the standard duration calculation
does not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by the standard duration calculation is the case of mortgage-backed
securities. The stated final maturity of such securities is generally 30 years,
but current prepayment rates are critical in determining the securities'
interest rate exposure. In these and other similar situations, an investment
adviser will use more sophisticated analytical techniques that incorporate the
economic life of a security into the determination of its duration and,
therefore, its interest rate exposure.

LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income but could result in a loss or delay in recovering these securities. The
borrower of a fund's portfolio securities must maintain acceptable collateral
with that fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. Each fund may reinvest any cash collateral in money market
investments or other short-term liquid investments, including other investment
companies. A fund also may reinvest cash collateral in private investment
vehicles similar to money market funds, including one managed by Mitchell
Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each fund will
retain authority to terminate any of its loans at any time. Each fund may pay
reasonable fees in connection with a loan and may pay the borrower or placing
broker a negotiated portion of the interest earned on the reinvestment of cash
held as collateral. A fund will receive amounts equivalent to any dividends,
interest or other distributions on the securities loaned. Each fund will regain
record ownership of loaned

32
<PAGE>

securities to exercise beneficial rights, such as voting and subscription
rights, when regaining such rights is considered to be in the fund's interest.

Pursuant to procedures adopted by the board governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for each fund. The board also has authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to
PaineWebber for these services. The board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
PaineWebber also has been approved as a borrower under each fund's securities
lending program.

SHORT SALES "AGAINST THE BOX." Each fund (other than PACE Money Market
Investments and PACE Municipal Fixed Income Investments) may engage in short
sales of securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales "against the
box"). To make delivery to the purchaser in a short sale, the executing broker
borrows the securities being sold short on behalf of a fund, and that fund is
obligated to replace the securities borrowed at a date in the future. When a
fund sells short, it establishes a margin account with the broker effecting the
short sale and deposits collateral with the broker. In addition, the fund
maintains, in a segregated account with its custodian, the securities that could
be used to cover the short sale. Each fund incurs transaction costs, including
interest expense, in connection with opening, maintaining and closing short
sales "against the box."

A fund might make a short sale "against the box" to hedge against
market risks when its investment adviser believes that the price of a security
may decline, thereby causing a decline in the value of a security owned by the
fund or a security convertible into or exchangeable for a security owned by the
fund. In such case, any loss in the fund's long position after the short sale
should be reduced by a corresponding gain in the short position. Conversely, any
gain in the long position after the short sale should be reduced by a
corresponding loss in the short position. The extent to which gains or losses in
the long position are reduced will depend upon the amount of the securities sold
short relative to the amount of the securities a fund owns, either directly or
indirectly, and in the case where the fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

SEGREGATED ACCOUNTS. When a fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis, or reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions. As described below under "Strategies Using Derivative
Instruments," segregated accounts may also be required in connection with
certain transactions involving options, futures or forward currency contracts
and swaps.

INVESTMENT LIMITATIONS OF THE FUNDS

FUNDAMENTAL LIMITATIONS. The following investment limitations cannot be
changed for a fund without the affirmative vote of the lesser of (a) more than
50% of its outstanding shares or (b) 67% or more of the shares present at a
shareholders' meeting if more than 50% of its outstanding shares are represented
at the meeting in person or by proxy. If a percentage restriction is adhered to
at the time of an investment or transaction, a later increase or decrease in
percentage resulting from changing values of portfolio securities or amount of
total assets will not be considered a violation of any of the following
limitations. With regard to the borrowings limitation in fundamental limitation
number 4, the funds will comply with the applicable restrictions of Section 18
of the Investment Company Act.

Under the investment restrictions adopted by the funds:

(1) A fund, other than PACE Intermediate Fixed Income Investments and
PACE Global Fixed Income Investments, may not purchase securities (other than
U.S. government securities) of any issuer if, as a result of the purchase, more
than 5% of the value of the fund's total assets would be invested in such
issuer, except that up to 25% of the value of the fund's total assets may be
invested without regard to this 5% limitation.

33
<PAGE>

(2) A fund will not purchase more than 10% of the outstanding voting
securities of any one issuer, except that this limitation is not applicable to
the fund's investments in U.S. government securities and up to 25% of the fund's
assets may be invested without regard to these limitations.

(3) A fund, other than PACE Municipal Fixed Income Investments, will
invest no more than 25% of the value of its total assets in securities of
issuers in any one industry, the term industry being deemed to include the
government of a particular country other than the United States. This limitation
is not applicable to a fund's investments in U.S. government securities.

(4) A fund will not issue senior securities (including borrowing money
from banks and other entities and through reverse repurchase agreements and
mortgage dollar rolls) in excess of 33 1/3% of its total assets (including the
amount of senior securities issued, but reduced by any liabilities and
indebtedness not constituting senior securities), except that a fund may borrow
up to an additional 5% of its total assets (not including the amount borrowed)
for extraordinary or emergency purposes.

(5) A fund will not pledge, hypothecate, mortgage, or otherwise
encumber its assets, except to secure permitted borrowings or in connection with
its use of forward contracts, futures contracts, options, swaps, caps, collars
and floors.

(6) A fund will not lend any funds or other assets, except through
purchasing debt obligations, lending portfolio securities and entering into
repurchase agreements consistent with the fund's investment objective and
policies.

(7) A fund will not purchase securities on margin, except that a fund
may obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or options on
futures contracts will not be deemed to be a purchase of securities on margin.

(8) A fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of the securities or securities convertible into or exchangeable for,
without payment of any further consideration, securities of the same issue as,
and equal in amount to, the securities sold short ("short sales against the
box"), and unless not more than 10% of the fund's net assets (taken at market
value) is held as collateral for such sales at any one time.

(9) A fund will not purchase or sell real estate or real estate limited
partnership interests, except that it may purchase and sell mortgage related
securities and securities of companies that deal in real estate or interests
therein.

(10) A fund will not purchase or sell commodities or commodity
contracts (except currencies, forward currency contracts, futures contracts and
options and other similar contracts).

(11) A fund will not act as an underwriter of securities, except that a
fund may acquire restricted securities under circumstances in which, if the
securities were sold, the fund might be deemed to be an underwriter for purposes
of the Securities Act.

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval. If a percentage restriction is adhered to at the time of an investment
or transaction, a later increase or decrease in percentage resulting from a
change in values of portfolio securities or amount of total assets will not be
considered a violation of any of the following limitations.

(1) A fund may not purchase securities of other investment companies,
except to the extent permitted by the Investment Company Act in the open market
at no more than customary brokerage commission rates. This limitation does not
apply to securities received or acquired as dividends, through offers of
exchange or as a result of reorganization, consolidation or merger.

34
<PAGE>

(2) A fund will not purchase portfolio securities while borrowings in
excess of 5% of its total assets are outstanding.

STRATEGIES USING DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION OF DERIVATIVE INSTRUMENTS. Each fund other than
PACE Money Market Investments is authorized to use a variety of financial
instruments ("Derivative Instruments"), including certain options, futures
contracts (sometimes referred to as "futures"), options on futures contracts and
swap transactions. For funds that are permitted to trade outside the United
States, the applicable investment adviser also may use forward currency
contracts, foreign currency options and futures and options on foreign currency
futures. A fund may enter into transactions involving one or more types of
Derivative Instruments under which the full value of its portfolio is at risk.
Under normal circumstances, however, each fund's use of these instruments will
place at risk a much smaller portion of its assets. The particular Derivative
Instruments used by the funds are described below.

A fund might not use any derivative instruments or strategies, and
there can be no assurance that using any strategy will succeed. If an investment
adviser is incorrect in its judgment on market values, interest rates or other
economic factors in using a derivative instrument or strategy, a fund may have
lower net income and a net loss on the investment.

OPTIONS ON SECURITIES AND FOREIGN CURRENCIES -- A call option is a
short-term contract pursuant to which the purchaser of the option, in return for
a premium, has the right to buy the security or currency underlying the option
at a specified price at any time during the term of the option or at specified
times or at the expiration of the option, depending on the type of option
involved. The writer of the call option, who receives the premium, has the
obligation, upon exercise of the option during the option term, to deliver the
underlying security or currency against payment of the exercise price. A put
option is a similar contract that gives its purchaser, in return for a premium,
the right to sell the underlying security or currency at a specified price
during the option term or at specified times or at the expiration of the option,
depending on the type of option involved. The writer of the put option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to buy the underlying security or currency at the exercise price.

OPTIONS ON SECURITIES INDICES -- A securities index assigns relative
values to the securities included in the index and fluctuates with changes in
the market values of those securities. A securities index option operates in the
same way as a more traditional securities option, except that exercise of a
securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the securities
index.

SECURITIES INDEX FUTURES CONTRACTS -- A securities index futures
contract is a bilateral agreement pursuant to which one party agrees to accept,
and the other party agrees to make, delivery of an amount of cash equal to a
specified dollar amount times the difference between the securities index value
at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the securities comprising
the index is made. Generally, contracts are closed out prior to the expiration
date of the contract.

INTEREST RATE AND FOREIGN CURRENCY FUTURES CONTRACTS -- Interest rate
and foreign currency futures contracts are bilateral agreements pursuant to
which one party agrees to make, and the other party agrees to accept, delivery
of a specified type of debt security or currency at a specified future time and
at a specified price. Although such futures contracts by their terms call for
actual delivery or acceptance of bonds or currency, in most cases the contracts
are closed out before the settlement date without the making or taking of
delivery.

OPTIONS ON FUTURES CONTRACTS -- Options on futures contracts are
similar to options on securities or currency, except that an option on a futures
contract gives the purchaser the right, in return for the premium, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell a
security or currency, at a specified price at any time during the option term.
Upon exercise of the option, the delivery of the futures position to the holder
of the option will be accompanied by delivery of the accumulated balance that
represents the amount by which the market price of the futures contract exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the future. The
35
<PAGE>

writer of an option, upon exercise, will assume a short position in the case
of a call and a long position in the case of a put.

FORWARD CURRENCY CONTRACTS -- A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.

GENERAL DESCRIPTION OF STRATEGIES USING DERIVATIVE INSTRUMENTS. A fund
may use Derivative Instruments to attempt to hedge its portfolio and also to
attempt to enhance income or return or realize gains and to manage the duration
of its bond portfolio. In addition, a fund may use Derivative Instruments to
adjust its exposure to different asset classes or to maintain exposure to stocks
or bonds while maintaining a cash balance for fund management purposes (such as
to provide liquidity to meet anticipated shareholder sales of fund shares and
for fund operating expenses).

Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential declines in the value of one or
more investments held in a fund's portfolio. Thus, in a short hedge a fund takes
a position in a Derivative Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged. For example, a
fund might purchase a put option on a security to hedge against a potential
decline in the value of that security. If the price of the security declined
below the exercise price of the put, a fund could exercise the put and thus
limit its loss below the exercise price to the premium paid plus transaction
costs. In the alternative, because the value of the put option can be expected
to increase as the value of the underlying security declines, a fund might be
able to close out the put option and realize a gain to offset the decline in the
value of the security.

Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that a fund intends to acquire.
Thus, in a long hedge, a fund takes a position in a Derivative Instrument whose
price is expected to move in the same direction as the price of the prospective
investment being hedged. For example, a fund might purchase a call option on a
security it intends to purchase in order to hedge against an increase in the
cost of the security. If the price of the security increased above the exercise
price of the call, a fund could exercise the call and thus limit its acquisition
cost to the exercise price plus the premium paid and transactions costs.
Alternatively, a fund might be able to offset the price increase by closing out
an appreciated call option and realizing a gain.

A fund may purchase and write (sell) straddles on securities or indices
of securities. A long straddle is a combination of a call and a put option
purchased on the same security or on the same futures contract, where the
exercise price of the put is equal to the exercise price of the call. A fund
might enter into a long straddle when its investment adviser believes it likely
that the prices of the securities will be more volatile during the term of the
option than the option pricing implies. A short straddle is a combination of a
call and a put written on the same security where the exercise price of the put
is equal to the exercise price of the call. A fund might enter into a short
straddle when its investment adviser believes it unlikely that the prices of the
securities will be as volatile during the term of the option as the option
pricing implies.

Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that a
fund owns or intends to acquire. Derivative Instruments on stock indices, in
contrast, generally are used to hedge against price movements in broad equity
market sectors in which a fund has invested or expects to invest. Derivative
Instruments on bonds may be used to hedge either individual securities or broad
fixed income market sectors.

Income strategies using Derivative Instruments may include the writing
of covered options to obtain the related option premiums. Return or gain
strategies may include using Derivative Instruments to increase or decrease a
fund's exposure to different asset classes without buying or selling the
underlying instruments. A fund also may use derivatives to simulate full
investment by the fund while maintaining a cash balance for fund management
purposes (such as to provide liquidity to meet anticipated shareholder sales of
fund shares and for fund operating expenses).

36
<PAGE>

The use of Derivative Instruments is subject to applicable regulations
of the SEC, the several options and futures exchanges upon which they are traded
and the Commodity Futures Trading Commission ("CFTC"). In addition, a fund's
ability to use Derivative Instruments may be limited by tax considerations. See
"Taxes."

In addition to the products, strategies and risks described below and
in the Prospectus, a fund's investment adviser may discover additional
opportunities in connection with Derivative Instruments and with hedging,
income, return and gain strategies. These new opportunities may become available
as regulatory authorities broaden the range of permitted transactions and as new
Derivative Instruments and techniques are developed. The applicable investment
adviser may use these opportunities for a fund to the extent that they are
consistent with the fund's investment objective and permitted by its investment
limitations and applicable regulatory authorities. The funds' Prospectus or this
SAI will be supplemented to the extent that new products or techniques involve
materially different risks than those described below or in the Prospectus.

SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as described
below. Risks pertaining to particular Derivative Instruments are described in
the sections that follow.

(1) Successful use of most Derivative Instruments depends upon the
ability of a fund's investment adviser to predict movements of the overall
securities, interest rate or currency exchange markets, which requires different
skills than predicting changes in the prices of individual securities. While the
applicable investment advisers are experienced in the use of Derivative
Instruments, there can be no assurance that any particular strategy adopted will
succeed.

(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of the
investments that are being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value of
the hedged investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors affecting the markets in which Derivative
Instruments are traded, rather than the value of the investments being hedged.
The effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.

(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a fund entered into a short
hedge because the applicable investment adviser projected a decline in the price
of a security in that fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the fund could suffer a loss. In either such case, the fund would have
been in a better position had it not hedged at all.

(4) As described below, a fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the fund was
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the positions expired or matured. These requirements might impair a fund's
ability to sell a portfolio security or make an investment at a time when it
would otherwise be favorable to do so, or require that the fund sell a portfolio
security at a disadvantageous time. A fund's ability to close out a position in
a Derivative Instrument prior to expiration or maturity depends on the existence
of a liquid secondary market or, in the absence of such a market, the ability
and willingness of a counterparty to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to a fund.

COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions using
Derivative Instruments, other than purchased options, expose the funds to an
obligation to another party. A fund will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
currencies or other options or futures contracts or (2) cash or liquid
securities, with a value sufficient at all times to cover its potential
obligations

37
<PAGE>

to the extent not covered as provided in (1) above. Each fund will
comply with SEC guidelines regarding cover for such transactions and will, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open, unless
they are replaced with similar assets. As a result, committing a large portion
of a fund's assets to cover positions or to segregated accounts could impede
portfolio management or the fund's ability to meet redemption requests or other
current obligations.

OPTIONS. The funds may purchase put and call options, and write (sell)
covered put or call options on securities in which they invest and related
indices. Funds that may invest outside the United States also may purchase put
and call options and write covered options on foreign currencies. The purchase
of call options may serve as a long hedge, and the purchase of put options may
serve as a short hedge. In addition, a fund may also use options to attempt to
enhance return or realize gains by increasing or reducing its exposure to an
asset class without purchasing or selling the underlying securities. Writing
covered put or call options can enable a fund to enhance income by reason of the
premiums paid by the purchasers of such options. Writing covered call options
serves as a limited short hedge, because declines in the value of the hedged
investment would be offset to the extent of the premium received for writing the
option. However, if the security appreciates to a price higher than the exercise
price of the call option, it can be expected that the option will be exercised
and the affected fund will be obligated to sell the security at less than its
market value. Writing covered put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the fund will be obligated
to purchase the security at more than its market value. The securities or other
assets used as cover for over-the-counter options written by a fund would be
considered illiquid to the extent described under "The Funds' Investment
Policies, Related Risks and Restrictions -- Illiquid Securities."

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options normally have expiration dates
of up to nine months. Generally, over-the-counter options on bonds are
European-style options. This means that the option can only be exercised
immediately prior to its expiration. This is in contrast to American-style
options that may be exercised at any time. There are also other types of options
that may be exercised on certain specified dates before expiration. Options that
expire unexercised have no value.

A fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a fund may terminate
its obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit a fund to realize profits or limit
losses on an option position prior to its exercise or expiration.

The funds may purchase and write both exchange-traded and
over-the-counter options. Currently, many options on equity securities are
exchange-traded. Exchange markets for options on bonds and foreign currencies
exist but are relatively new, and these instruments are primarily traded on the
over-the-counter market. Exchange-traded options in the United States are issued
by a clearing organization affiliated with the exchange on which the option is
listed that, in effect, guarantees completion of every exchange-traded option
transaction. In contrast, over-the-counter options are contracts between a fund
and its counterparty (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when a fund purchases or writes an
over-the-counter option, it relies on the counterparty to make or take delivery
of the underlying investment upon exercise of the option. Failure by the
counterparty to do so would result in the loss of any premium paid by the fund
as well as the loss of any expected benefit of the transaction.

The funds' ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The funds
intend to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance that
such a market will exist at any

38
<PAGE>

particular time. Closing transactions can be made for over-the-counter
options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although the
funds will enter into over-the-counter options only with counterparties that
are expected to be capable of entering into closing transactions with the
funds, there is no assurance that a fund will in fact be able to close out an
over-the-counter option position at a favorable price prior to expiration. In
the event of insolvency of the counterparty, a fund might be unable to close
out an over-the-counter option position at any time prior to its expiration.

If a fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered put or call
option written by the fund could cause material losses because the fund would be
unable to sell the investment used as cover for the written option until the
option expires or is exercised.

A fund may purchase and write put and call options on indices in much
the same manner as the more traditional options discussed above, except the
index options may serve as a hedge against overall fluctuations in a securities
market (or market sector) rather than anticipated increases or decreases in the
value of a particular security.

LIMITATIONS ON THE USE OF OPTIONS. The funds' use of options is
governed by the following guidelines, which can be changed by the board without
shareholder vote:

(1) A fund may purchase a put or call option, including any straddle or
spread, only if the value of its premium, when aggregated with the premiums on
all other options held by the fund, does not exceed 5% of its total assets.

(2) The aggregate value of securities underlying put options written by
a fund, determined as of the date the put options are written, will not exceed
50% of its net assets.

(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and options on futures
contracts) purchased by a fund that are held at any time will not exceed 20% of
the fund's net assets.

FUTURES. The funds may purchase and sell securities index futures
contracts, interest rate futures contracts, debt security index futures
contracts and (for those funds that invest outside the United States) foreign
currency futures contracts. A fund may also purchase put and call options, and
write covered put and call options, on futures in which it is allowed to invest.
The purchase of futures or call options thereon can serve as a long hedge, and
the sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a limited
short hedge, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options on securities or indices. In addition, a fund may purchase or sell
futures contracts or purchase options thereon to increase or reduce its exposure
to an asset class without purchasing or selling the underlying securities,
either as a hedge or to enhance return or realize gains.

Futures strategies also can be used to manage the average duration of a
fund's bond portfolio. If a fund's investment adviser wishes to shorten the
average duration of its portfolio, the fund may sell a futures contract or a
call option thereon, or purchase a put option on that futures contract. If a
fund's investment adviser wishes to lengthen the average duration of its bond
portfolio, the fund may buy a futures contract or a call option thereon, or sell
a put option thereon.

A fund may also write put options on futures contracts while at the
same time purchasing call options on the same futures contracts in order
synthetically to create a long futures contract position. Such options would
have the same strike prices and expiration dates. A fund will engage in this
strategy only when it is more advantageous to a fund than is purchasing the
futures contract.

No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a fund is required to deposit in a segregated
account with its custodian, in the name of the futures broker through whom the

39
<PAGE>

transaction was effected, "initial margin" consisting of cash, obligations of
the United States or obligations fully guaranteed as to principal and interest
by the United States, in an amount generally equal to 10% or less of the
contract value. Margin must also be deposited when writing a call option on a
futures contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to a fund at the termination of the transaction if all
contractual obligations have been satisfied. Under certain circumstances, such
as periods of high volatility, a fund may be required by an exchange to increase
the level of its initial margin payment, and initial margin requirements might
be increased generally in the future by regulatory action.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of each fund's obligations to or from a futures
broker. When a fund purchases an option on a futures contract, the premium paid
plus transaction costs is all that is at risk. In contrast, when a fund
purchases or sells a futures contract or writes a call option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If a fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

Holders and writers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument held or written. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
The funds intend to enter into futures transactions only on exchanges or boards
of trade where there appears to be a liquid secondary market. However, there can
be no assurance that such a market will exist for a particular contract at a
particular time.

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or related option can vary from
the previous day's settlement price; once that limit is reached, no trades may
be made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.

If a fund were unable to liquidate a futures or related options
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. A fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, a fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.

Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options markets
are subject to daily variation margin calls and might be compelled to liquidate
futures or related options positions whose prices are moving unfavorably to
avoid being subject to further calls. These liquidations could increase price
volatility of the instruments and distort the normal price relationship between
the futures or options and the investments being hedged. Also, because initial
margin deposit requirements in the futures market are less onerous than margin
requirements in the securities markets, there might be increased participation
by speculators in the futures markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading" and
other investment strategies might result in temporary price distortions.

LIMITATIONS ON THE USE OF FUTURES AND RELATED OPTIONS. The funds' use
of futures and related options is governed by the following guidelines, which
can be changed by the board without shareholder vote:

(1) The aggregate initial margin and premiums on futures contracts,
options on futures contracts and options on foreign currencies traded on a
CFTC-regulated exchange that are not for bona fide hedging purposes (as defined
by the CFTC), excluding the amount by which options are "in-the-money," may not
exceed 5% of a fund's net assets.

40
<PAGE>

(2) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and options on futures
contracts) purchased by a fund that are held at any time will not exceed 20% of
the fund's net assets.

(3) The aggregate margin deposits on all futures contracts and options
thereon held at any time by a fund will not exceed 5% of the fund's total
assets.

FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. Each fund
that may invest outside the United States may use options and futures on foreign
currencies, as described above, and forward currency contracts, as described
below, to hedge against movements in the values of the foreign currencies in
which the fund's securities are denominated. Such currency hedges can protect
against price movements in a security a fund owns or intends to acquire that are
attributable to changes in the value of the currency in which it is denominated.
Such hedges do not, however, protect against price movements in the securities
that are attributable to other causes.

A fund might seek to hedge against changes in the value of a particular
currency when no Derivative Instruments on that currency are available or such
Derivative Instruments are considered expensive. In such cases, the fund may
hedge against price movements in that currency by entering into transactions
using Derivative Instruments on another currency or a basket of currencies, the
value of which its investment adviser believes will have a positive correlation
to the value of the currency being hedged. In addition, a fund may use forward
currency contracts to shift exposure to foreign currency fluctuations from one
country to another. For example, if a fund owned securities denominated in a
foreign currency and its investment adviser believed that currency would decline
relative to another currency, it might enter into a forward contract to sell an
appropriate amount of the first foreign currency, with payment to be made in the
second foreign currency. Transactions that use two foreign currencies are
sometimes referred to as "cross hedging." Use of a different foreign currency
magnifies the risk that movements in the price of the Derivative Instrument will
not correlate or will correlate unfavorably with the foreign currency being
hedged.

The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Derivative
Instruments, a fund could be disadvantaged by having to deal in the odd-lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Derivative Instruments until they reopen.

Settlement of Derivative Instruments involving foreign currencies might
be required to take place within the country issuing the underlying currency.
Thus, a fund might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

FORWARD CURRENCY CONTRACTS. Each fund that invests outside the United
States may enter into forward currency contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or another foreign currency. Such
transactions may serve as long hedges--for example, a fund may purchase a
forward currency contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the fund intends to acquire. Forward
currency contract transactions may also serve as short hedges--for example, a
fund may sell a forward currency contract to lock in the U.S. dollar equivalent
of the proceeds from the anticipated sale of a security denominated in a foreign
currency.

<PAGE>

The cost to a fund of engaging in forward currency contracts varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. When a fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of any expected benefit of the transaction.

As is the case with futures contracts, parties to forward currency
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures, by entering into an instrument identical to the
instrument purchased or sold, but in the opposite direction. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contracts only
by negotiating directly with the counterparty. Thus, there can be no assurance
that a fund will in fact be able to close out a forward currency contract at a
favorable price prior to maturity. In addition, in the event of insolvency of
the counterparty, a fund might be unable to close out a forward currency
contract at any time prior to maturity. In either event, the fund would continue
to be subject to market risk with respect to the position and would continue to
be required to maintain a position in the securities or currencies that are the
subject of the hedge or to maintain cash or securities in a segregated account.

The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.

LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS. A fund that may
invest outside the United States may enter into forward currency contracts or
maintain a net exposure to such contracts only if (1) the consummation of the
contracts would not obligate the fund to deliver an amount of foreign currency
in excess of the value of the position being hedged by such contracts or (2) the
fund segregates with its custodian cash or liquid securities in an amount not
less than the value of its total assets committed to the consummation of the
contract and not covered as provided in (1) above, as marked to market daily.

SWAP TRANSACTIONS. A fund may enter into swap transactions, which
include swaps, caps, floors and collars relating to interest rates, currencies,
securities or other instruments. Interest rate swaps involve an agreement
between two parties to exchange payments that are based, for example, on
variable and fixed rates of interest and that are calculated on the basis of a
specified amount of principal (the "notional principal amount") for a specified
period of time. Interest rate cap and floor transactions involve an agreement
between two parties in which the first party agrees to make payments to the
counterparty when a designated market interest rate goes above (in the case of a
cap) or below (in the case of a floor) a designated level on predetermined dates
or during a specified time period. Interest rate collar transactions involve an
agreement between two parties in which payments are made when a designated
market interest rate either goes above a designated ceiling level or goes below
a designated floor level on predetermined dates or during a specified time
period. Currency swaps, caps, floors and collars are similar to interest rate
swaps, caps, floors and collars, but they are based on currency exchange rates
than interest rates. Equity swaps or other swaps relating to securities or other
instruments are also similar, but they are based on changes in the value of the
underlying securities or instruments. For example, an equity swap might involve
an exchange of the value of a particular security or securities index in a
certain notional amount for the value of another security or index or for the
value of interest on that notional amount at a specified fixed or variable rate.

A fund may enter into interest rate swap transactions to preserve a
return or spread on a particular investment or portion of its portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. A fund may use interest rate swaps, caps, floors and
collars as a hedge on either an asset-based or liability-based basis, depending
on whether it is hedging its assets or its liabilities. Interest rate swap
transactions are subject to risks comparable to those described above with
respect to other hedging strategies.

A fund will usually enter into swaps on a net basis, I.E., the two
payment streams are netted out, with the fund receiving or paying, as the case
may be, only the net amount of the two payments. Because segregated accounts

<PAGE>

will be established with respect to these transactions, Mitchell Hutchins and
the investment advisers believe these obligations do not constitute senior
securities and, accordingly, will not treat them as being subject to a fund's
borrowing restrictions. The net amount of the excess, if any, of a fund's
obligations over its entitlements with respect to each rate swap will be accrued
on a daily basis, and appropriate fund assets having an aggregate net asset
value at least equal to the accrued excess will be maintained in a segregated
account as described above in "Investment Policies and Restrictions--Segregated
Accounts." A fund also will establish and maintain such segregated accounts with
respect to its total obligations under any swaps that are not entered into on a
net basis.

A fund will enter into swap transactions only with banks and recognized
securities dealers believed by its investment adviser to present minimal credit
risk in accordance with guidelines established by the board. If there is a
default by the other party to such a transaction, a fund will have to rely on
its contractual remedies (which may be limited by bankruptcy, insolvency or
similar laws) pursuant to the agreements related to the transaction.

ORGANIZATION OF TRUST; TRUSTEES AND OFFICERS;
PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES

The Trust was formed on September 9, 1994 as a business trust under the
laws of the State of Delaware and has twelve operating series. The Trust is
governed by a board of trustees, which is authorized to establish additional
series and to issue an unlimited number of shares of beneficial interest of each
existing or future series, par value $0.001 per share. The board oversees each
fund's operations.

The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Margo N. Alexander*+; 53 Trustee and President Mrs. Alexander is Chairman (since March 1999), chief executive
officer and a director of Mitchell Hutchins (since January 1995)
and an executive vice president and director of PaineWebber
(since March 1984). Mrs. Alexander is president and a director or
trustee of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

David J. Beaubien; 66 Trustee Mr. Beaubien is chairman of Yankee Environmental Systems, Inc.,
101 Industrial Road a manufacturer of meteorological measuring systems. Prior to
Turner Falls, MA 03176 January 1991, he was senior vice president of EG&G, Inc., a
company which makes and provides a variety of scientific and
technically oriented products and services. He is also a director
of IEC, Inc., a manufacturer of electronic assemblies, and Onix
Systems Inc., a manufacturer of process instrumentation. From
1985 to January 1995, Mr. Beaubien served as a director or
trustee on the boards of the Kidder, Peabody & Co. Incorporated
mutual funds. Mr. Beaubien is a trustee of one investment company
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

<PAGE>

NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.** +; 74 Trustee Mr. Bewkes is a director of Paine Webber Group Inc. ("PW Group")
(holding company of PaineWebber and Mitchell Hutchins). Prior to
1996, he was a consultant to PW Group. He serves as a consultant
to PaineWebber (since May 1999). Prior to 1988, he was chairman
of the board, president and chief executive officer of American
Bakeries Company. Mr. Bewkes is a director of Interstate Bakeries
Corporation. Mr. Bewkes is a director or trustee of 40 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

William W. Hewitt, Jr.; 72 Trustee Mr. Hewitt is retired. Since 1988, he has served as a director
P.O. Box 2359 or trustee on the boards of the Guardian Life Insurance Company
Princeton, NJ 08543-2359 mutual funds. From 1990 to January 1995, Mr. Hewitt served as
a director or trustee on the boards of the Kidder, Peabody & Co.
Incorporated mutual funds. From 1986-1988, he was an executive
vice president and director of mutual funds, insurance and trust
services of Shearson Lehman Brothers Inc. From 1976-1986, he was
president of Merrill Lynch Funds Distributor, Inc. Mr. Hewitt is
a trustee of one investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

Morton L. Janklow; 70 Trustee Mr. Janklow is senior partner of Janklow & Nesbit Associates,
598 Madison Avenue an international literary agency representing leading authors in
New York, NY 10022 their relationships with publishers and motion picture,
television and multi-media companies, and of counsel to the law
firm of Janklow, Newborn & Ashley. Mr. Janklow is a director of
Revlon, Inc. (cosmetics). Mr. Janklow is a trustee of one
investment company for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment adviser.

Brian M. Storms*+; 46 Trustee Mr. Storms is president and chief operating officer of Mitchell
Hutchins (since March 1999). Mr. Storms was president of
Prudential Investments (1996-1999). Prior to joining Prudential
he was a managing director at Fidelity Investments. Mr. Storms is
a director or trustee of 29 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves
as investment adviser.

William D. White; 66 Trustee Mr. White is retired. From February 1989 through March 1994,
P.O. Box 199 he was president of the National League of Professional Baseball
Upper Black Eddy, PA 10017 Clubs. Prior to 1989, he was a television sportscaster for
WPIX-TV, New York. Mr. White served on the Board of Directors of
Centel from 1989 to 1993. Presently, Mr. White is on the board of
directors of Jefferson Banks Incorporated, Philadelphia, PA. Mr.
White is a trustee of one investment company for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.

M. Cabell Woodward, Jr.**; 70 Trustee Mr. Woodward is retired. From July 1985 until his retirement
in February 1993, Mr. Woodward was vice chairman and chief
financial officer of ITT Corporation. Mr. Woodward is a trustee
of one investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

<PAGE>

NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Thomas Disbrow ***;34 Vice President and Mr. Disbrow is a first vice president and a senior manager of
Assistant Treasurer the mutual fund finance department of Mitchell Hutchins. Prior
to November 1999, he was a vice president of Zweig/Glaser
Advisers. Mr. Disbrow is a vice president and assistant treasurer
of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

Amy R. Doberman; AGE Vice President and Ms. Doberman is and general counsel of
Secretary Mitchell Hutchins. Prior to August 2000, she was [ADD REST OF BIO].

Joanne M. Kilkeary***; 32 Vice President and Ms. Kilkeary is a vice president and a manager of the mutual
Assistant Treasurer fund finance department of Mitchell Hutchins. Ms. Kilkeary is a
vice president and assistant treasurer of one investment company
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

John J. Lee***; 32 Vice President and Mr. Lee is a vice president and a manager of the mutual fund
Assistant Treasurer finance department of Mitchell Hutchins. Prior to September
1997, he was an audit manager in the financial services practice
of Ernst & Young LLP. Mr. Lee is a vice president and assistant
treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

Kevin J. Mahoney ***; 35 Vice President and Mr. Mahoney is a first vice president and a senior manager of
Assistant Treasurer the mutual fund finance department of Mitchell Hutchins. From
August 1996 through March 1999, he was the manager of the mutual
fund internal control group of Salomon Smith Barney. Prior to
August 1996, he was an associate and assistant treasurer of
BlackRock Financial Management L.P. Mr. Mahoney is a vice
president and assistant treasurer of 30 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.

Ann E. Moran***; 43 Vice President and Ms. Moran is a vice president and a manager of the mutual fund
Assistant Treasurer finance department of Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of 30 other investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Dianne E. O'Donnell**; 48 Vice President and Ms. O'Donnell is a senior vice president and deputy general
Assistant Secretary counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president
and secretary of 29 investment companies and a vice president and
assistant secretary of one investment company for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.

Paul H. Schubert***; 37 Vice President and Mr. Schubert is a senior vice president and the director of the
Treasurer mutual fund finance department of Mitchell Hutchins. Mr.
Schubert is a vice president and treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

<PAGE>

NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Barney A. Taglialatela***; 39 Vice President and Mr. Taglialatela is a vice president and a manager of the
Assistant Treasurer mutual fund finance department of Mitchell Hutchins. Mr.
Taglialatela is a vice president and assistant treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment adviser.

Keith A. Weller**; 39 Vice President and Mr. Weller is a first vice president and associate counsel of
Assistant Secretary Mitchell Hutchins. Mr. Weller is a vice president and
assistant secretary of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.

</TABLE>

-------------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas, New York,
New York 10019-6028.

*** This person's business address is Newport Center III, 499 Washington Blvd.,
14th Floor, Jersey City, New Jersey 07310-1998.

+ Messrs. Bewkes and Storms and Mrs. Alexander are "interested
persons" of the Trust as defined in the Investment Company Act by
virtue of their positions with PaineWebber, PW Group and/or
Mitchell Hutchins.

The Trust pays each board member who is not an "interested person" of
the Trust $35,000 annually and $5,000 for attending a meeting of the board or
any committee thereof. Trustees are reimbursed for any expenses incurred in
attending meetings. Trustees of the Trust who are "interested persons" of the
Trust as defined in the Investment Company Act receive no compensation from the
Trust. Because Mitchell Hutchins, the investment advisers and PaineWebber
perform substantially all of the services necessary for the operation of the
Trust and the funds, the Trust requires no employees. No officer, director or
employee of Mitchell Hutchins, an investment adviser or PaineWebber presently
receives any compensation from the Trust for acting as a trustee or officer.

The table below includes certain information relating to the
compensation of the current members of the Trust's board who held office with
the Trust during the periods indicated.

COMPENSATION TABLE+

<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION FROM THE TRUST AND THE PAINEWEBBER FUND
NAME OF PERSON, POSITION THE TRUST * COMPLEX**
------------------------ --------------------------- ----------------------------------
<S> <C> <C>
David J. Beaubien,

Trustee..........................................

46
<PAGE>

TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION FROM THE TRUST AND THE PAINEWEBBER FUND
NAME OF PERSON, POSITION THE TRUST * COMPLEX**
------------------------ --------------------------- ----------------------------------
<S> <C> <C>
William W. Hewitt,

Trustee..........................................
Morton L. Janklow,

Trustee..........................................
William D. White,

Trustee..........................................
M. Cabell Woodward, Jr.,

Trustee..........................................
</TABLE>

--------------------

+ Only independent board members are compensated by the PaineWebber funds and
identified above; trustees who are "interested persons", as defined in the
Investment Company Act, do not receive compensation from the PaineWebber
funds.

* Represents fees paid to each trustee during the fiscal year ended July 31,
2000. [ During the fiscal year ended July 31, 2000, Mitchell Hutchins waived
a portion of its management fee and subsidized certain operating expenses,
including the payment of trustees' fees, with respect to some funds in order
to lower the overall expenses of those funds to certain designated levels.]

** No fund within the PaineWebber fund complex has a bonus, pension, profit
sharing or retirement plan.

PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES. As of
___________, 2000, trustees and officers owned in the aggregate less than 1% of
the outstanding shares of any class of each fund. As of ______, 2000, the
following shareholders were shown in the Trust's records as owning more than 5%
of any class of a fund's shares:

<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES BENEFICIALLY OWNED
SHAREHOLDER NAME AND ADDRESS* AS OF , 2000
---------------------------- ------------
<S> <C>

</TABLE>

--------------
* The shareholders listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins
acts as the investment manager and administrator to the Trust pursuant to an
Investment Management and Administration Agreement with the Trust ("Management
Agreement"). Pursuant to the Management Agreement, Mitchell Hutchins, subject to
the supervision of the Trust's board and in conformity with the stated policies
of the Trust, manages both the investment operations of the Trust and the
composition of the funds, including the purchase, retention, disposition and
lending of securities. Mitchell Hutchins is authorized to enter into advisory
agreements for investment advisory services

47
<PAGE>

("Advisory Agreements") in connection with the management of the funds.
Mitchell Hutchins is responsible for monitoring the investment advisory
services furnished pursuant to the Advisory Agreements. Mitchell Hutchins
reviews the performance of all investment advisers and makes recommendations
to the board with respect to the retention and renewal of Advisory
Agreements. In connection therewith, Mitchell Hutchins keeps certain books
and records of the Trust. Mitchell Hutchins also administers the Trust's
business affairs and, in connection therewith, furnishes the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services that are not furnished by the Trust's custodian and its transfer and
dividend disbursing agent. The management services of Mitchell Hutchins under
the Management Agreement are not exclusive to the Trust, and Mitchell
Hutchins is free to, and does, render management services to others.

The following table shows the fees earned (or accrued) by Mitchell
Hutchins under the Management Agreement and the portions of those fees waived by
Mitchell Hutchins for the periods indicated.

<TABLE>
<CAPTION>
ADVISORY AND ADMINISTRATION FEES EARNED ADVISORY AND ADMINISTRATION FEES
(OR ACCRUED) WAIVED BY
BY MITCHELL HUTCHINS MITCHELL HUTCHINS
FOR FISCAL YEARS ENDED JULY 31, FOR FISCAL YEARS ENDED JULY 31,
----------------------------------------- ------------------------------------
PORTFOLIO 2000 1999 1998 2000 1999 1998
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PACE Money Market Investments...
$114,410 $76,176 $114,410 $76,176
PACE Government Securities Fixed
Income Investments............ 1,277,768 916,670 102,428 135,366
PACE Intermediate Fixed Income
Investments................................... 740,117 504,134 1,460 5,372
PACE Strategic Fixed Income
Investments................................... 1,302,736 697,639 70,795 91,847
PACE Municipal Fixed Income
Investments................................... 337,795 259,431 24,086 35,977
PACE Global Fixed Income
Investments................................... 805,390 599,606 220,842 209,982
PACE Large Company Value Equity
Investments....................... 2,581,440 1,786,641 1,732 --
PACE Large Company Growth Equity
Investments....................... 2,593,183 1,672,807 3,823 45,136
PACE Small/Medium Company Value
Equity Investments............ 1,458,785 1,384,807 25,179 11,273
PACE Small/Medium Company Growth
Equity Investments.......... 1,704,803 1,328,874 15,569 43,813
PACE International Equity
Investments................................... 1,615,444 1,163,135 834 --
PACE International Emerging Markets
Equity Investments......... 751,091 623,343 195,575 161,872
</TABLE>

In connection with its management of the business affairs of the Trust,
Mitchell Hutchins bears the following expenses:

(1) the salaries and expenses of all of its and the Trust's personnel except the
fees and expenses of trustees who are not affiliated persons of Mitchell
Hutchins or the Trust's investment advisers;

(2) all expenses incurred, by Mitchell Hutchins or by the Trust in connection
with managing the ordinary course of the Trust's business, other than those
assumed by the Trust as described below; and

48
<PAGE>

(3) the fees payable to each investment adviser (other than Mitchell Hutchins)
pursuant to the Advisory Agreements.

Under the terms of the Management Agreement, each fund bears all
expenses incurred in its operation that are not specifically assumed by Mitchell
Hutchins or the fund's investment adviser. General expenses of the Trust not
readily identifiable as belonging to a fund or to the Trust's other series are
allocated among series by or under the direction of the board in such manner as
the board deems to be fair and equitable. Expenses borne by each fund include
the following (or a fund's share of the following): (1) the cost (including
brokerage commissions) of securities purchased or sold by a fund and any losses
incurred in connection therewith, (2) fees payable to and expenses incurred on
behalf of a fund by Mitchell Hutchins, (3) organizational expenses, (4) filing
fees and expenses relating to the registration and qualification of a fund's
shares and the Trust under federal and state securities laws and maintenance of
such registration and qualifications, (5) fees and salaries payable to trustees
who are not interested persons (as defined in the Investment Company Act) of the
Trust, Mitchell Hutchins or the investment advisers, (6) all expenses incurred
in connection with trustees' services, including travel expenses, (7) taxes
(including any income or franchise taxes) and governmental fees, (8) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds, (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Trust or a fund for violation
of any law, (10) legal, accounting and auditing expenses, including legal fees
of special counsel for the independent trustees, (11) charges of custodians,
transfer agents and other agents, (12) costs of preparing share certificates,
(13) expenses of setting in type and printing prospectuses and supplements
thereto, statements of additional information and supplements thereto, reports
and proxy materials for existing shareholders, and costs of mailing such
materials to existing shareholders, (14) any extraordinary expenses (including
fees and disbursements of counsel) incurred by the Trust or a fund, (15) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations, (16) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof, (17) the cost of investment company literature and other publications
provided to trustees and officers and (18) costs of mailing, stationery and
communications equipment.

Under the Management Agreement, Mitchell Hutchins will not be liable
for any error of judgment or mistake of law or for any loss suffered by a fund
in connection with the performance of the contract, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Mitchell
Hutchins in the performance of its duties or from reckless disregard of its
duties and obligations thereunder. The Management Agreement terminates
automatically upon its assignment and is terminable at any time without penalty
by the board or by vote of the holders of a majority of a fund's outstanding
voting securities, on 60 days' written notice to Mitchell Hutchins or by
Mitchell Hutchins on 60 days' written notice to the fund.

The following table shows the approximate net assets as of October 31,
2000, sorted by category of investment objective, of the investment companies as
to which Mitchell Hutchins serves as adviser or sub-adviser. An investment
company may fall into more than one of the categories below:

<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
------------------- ($MIL)
----------
<S> <C>
Domestic (excluding Money Market).........................
Global....................................................
Equity/Balanced...........................................
Fixed Income (excluding Money Market).....................
Taxable Fixed Income.................................
Tax-Free Fixed Income................................
Money Market Funds........................................
</TABLE>

INVESTMENT ADVISORY ARRANGEMENTS. As noted in the Prospectus, subject
to the monitoring of the Manager and, ultimately, the board, each investment
adviser manages the securities held by the fund it serves in accordance with the
fund's stated investment objective and policies, makes investment decisions for
the fund and places orders to purchase and sell securities on behalf of the
fund.

49
<PAGE>

Each Advisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. Each Advisory Agreement may be
terminated by the Trust upon not more than 60 days' written notice. Each
Advisory Agreement may be terminated by Mitchell Hutchins or the investment
adviser upon not more than 120 days' written notice. Each Advisory Agreement
provides that it will continue in effect for a period of more than two years
from its execution only so long as such continuance is specifically approved at
least annually in accordance with the requirements of the Investment Company
Act.

Under the Advisory Agreements, the investment advisers will not be
liable for any error or judgment or mistake of law or for any loss suffered by a
fund in connection with the performance of the contract, except a loss resulting
from willful misfeasance, bad faith, or gross negligence on the part of the
investment advisers in the performance of their duties or from reckless
disregard of their duties and obligations thereunder. Each investment adviser
has agreed to its fees as described in the Prospectus and which are generally
lower than the fees it charges to institutional accounts for which it serves as
investment adviser and performs all administrative functions associated with
serving in that capacity in recognition of the reduced administrative
responsibilities it has undertaken with respect to the fund. By virtue of the
management, monitoring and administrative functions performed by Mitchell
Hutchins, and the fact that investment advisers are not required to make
decisions regarding the allocation of assets among the major sectors of the
securities markets, each investment adviser serves in a subadvisory capacity to
the fund. Subject to the monitoring by the Manager and, ultimately, the board,
each investment adviser's responsibilities are limited to managing the
securities held by the fund it serves in accordance with the fund's stated
investment objective and policies, making investment decisions for the fund and
placing orders to purchase and sell securities on behalf of the fund.

PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS AND PACE STRATEGIC FIXED
INCOME INVESTMENTS

Under the Advisory Agreements for these funds with Pacific Investment
Management Company LLC ("PIMCO"), Mitchell Hutchins (not the fund) pays PIMCO
for its services a fee in the annual amount of 0.225% of the average daily net
assets of PACE Government Securities Fixed Income Investments (0.25% prior to ,
2000) and 0.25% of the average daily net assets of PACE Strategic Fixed Income
Investments. For the fiscal years ended July 31, 2000, July 31, 1999 and July
31, 1998, Mitchell Hutchins paid or accrued investment advisory fees to PIMCO of
$_______, $456,345 and $327,708, respectively for PACE Government Securities
Fixed Income Investments and $________, $465,263 and $249,156, respectively for
PACE Strategic Fixed Income Investments.

PIMCO, a Delaware limited liability company, is a subsidiary of PIMCO
Advisors L.P. ("PIMCO Advisors"). PIMCO Advisors was organized as a limited
partnership under Delaware law in 1987. PIMCO Advisors' sole general partner is
Pacific-Allianz Partners LLC. Pacific-Allianz Partners LLC is a Delaware limited
liability company with two members, Allianz GP Sub LLC, a Delaware limited
liability company and Pacific Asset Management LLC, a Delaware limited liability
company. Allianz GP Sub LLC is a wholly owned subsidiary of Allianz of America,
Inc., which is wholly owned by Allianz AG. Pacific Asset Management LLC is a
wholly owned subsidiary of Pacific Life Insurance Company, which is a wholly
owned subsidiary of Pacific Mutual Holding Company.

On May 5, 2000 the general partners of PIMCO Advisors closed the
transactions contemplated by the Implementation and Merger Agreement dated as of
October 31, 1999 ("Implementation Agreement"), as amended March 3, 2000, with
Allianz of America, Inc., Pacific Asset Management LLC, PIMCO Partners, LLC,
PIMCO Holding LLC, PIMCO Partners, G.P., and other parties to the Implementation
Agreement. As a result of completing these transactions, PIMCO Advisors is now
majority-owned indirectly by Allianz AG, with subsidiaries of Pacific Life
Insurance Company retaining a significant minority interest. Allianz AG is a
German based insurer. Pacific Life Insurance Company is a Newport Beach,
California based insurer.

In connection with the closing, Allianz of America entered into a
put/call arrangement for the possible disposition of Pacific Life's indirect
interest in PIMCO Advisors. The put option held by Pacific Life will allow it to
require Allianz of America, on the last business day of each calendar quarter
following the closing, to purchase at

50
<PAGE>

a formula-based price all of the PIMCO Advisors' units owned directly or
indirectly by Pacific Life. The call option held by Allianz of America will
allow it, beginning January 31, 2003 or upon a change in control of Pacific
Life, to require Pacific Life to sell or cause to be sold to Allianz of
America, at the same formula-based price, all of the PIMCO Advisors' units
owned directly or indirectly by Pacific Life. Allianz AG's address is
Koniginstrasse 28, D-80802, Munich, Germany.

Allianz AG, the parent of Allianz of America, is a publicly traded
German company which, together with its subsidiaries, comprises the world's
second largest insurance company as measured by premium income. Allianz AG is a
leading provider of financial services, particularly in Europe, and is
represented in 68 countries world-wide through subsidiaries, branch and
representative offices, and other affiliated entities. As of June 30, 2000, the
Allianz Group (including PIMCO) had assets under management of more than $650
billion, and in its last fiscal year wrote approximately $50 billion in gross
insurance premiums.

Significant institutional shareholders of Allianz AG currently include
Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and HypoVereinsbank. BNP
Paribas, Credit Lyonnais, Munich Reinsurance, HypoVereinsbank, Dresdner Bank AG
and Deutsche Bank AG, as well as certain broker-dealers that might be controlled
by or affiliated with these entities, such as DB Alex. Brown LLC, Deutsche Bank
Securities, Inc. and Dresdner Klienwort Benson North America LLC (collectively,
the "Affiliated Brokers"), may be considered to be affiliated persons of PIMCO.
Absent an SEC exemption or other relief, PACE Government Fixed Income
Investments and PACE Strategic Fixed Income Investments generally are precluded
from effecting principal transactions with the Affiliated Brokers, and its
ability to purchase securities being underwritten by an Affiliated Broker or to
utilize the Affiliated Brokers for agency transactions is subject to
restrictions. PIMCO does not believe that the restrictions on transactions with
the Affiliated Brokers described above materially adversely affect its ability
to provide services to the funds, the funds' ability to take advantage of market
opportunities, or the funds' overall performance.

PACE INTERMEDIATE FIXED INCOME INVESTMENTS

Under the Advisory Agreement for this fund with Metropolitan West
Asset Management, LLC ("MWAM"), Mitchell Hutchins (not the fund) pays MWAM a
fee in the annual amount of 0.20% of the fund's average daily net assets up
to and including $200 million and 0.12% of the fund's average daily net
assets above $200 million. Prior to October 10, 2000, Pacific Income
Advisers, Inc. was the fund's investment adviser. For the fiscal years ended
July 31, 2000, July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or
accrued investment advisory fees to the prior investment adviser of $______,
$246,706, and $168,045, respectively. MWAM is majority-owned by its key
executives, with an approximately 40% minority ownership stake held by
Metropolitan West Financial, Inc. ("MWF"), a registered investment adviser.

PACE MUNICIPAL FIXED INCOME INVESTMENTS

Under the Advisory Agreement for this fund with Standish, Ayer & Wood,
Inc. ("Standish"), Mitchell Hutchins (not the fund) pays Standish a fee in the
annual amount of 0.20% of the fund's average daily net assets up to and
including $60 million and 0.15% of the fund's average daily net assets in excess
of $60 million. Prior to June 1, 2000, Deutsche Asset Management, Inc. was the
fund's investment adviser. For the fiscal years ended July 31, 2000, July 31,
1999 and July 31, 1998, Mitchell Hutchins paid or accrued investment advisory
fees to Standish and the prior investment adviser of $______, $246,706, and
$168,045, respectively.

Standish is a privately held investment management firm founded in
1933. Edward H. Ladd is the Chairman of the Board of Directors of Standish.
Richard S. Wood is President, Chief Executive Officer and a Managing Director of
Standish. George W. Noyes is the Vice Chairman and a Managing Director of
Standish. Austin C. Smith is the Treasurer of Standish. The following constitute
all of the Directors of Standish: Caleb F. Aldrich, David H. Cameron, Maria D.
Furman, Raymond J. Kubiak, George W. Noyes, Howard B. Rubin, Thomas P. Sorbo,
Ralph S. Tate and Richard S. Wood. All of the outstanding stock of Standish is
owned by SAW Trust, a Massachusetts business trust. SAW Trust is owned entirely
by its twenty-two trustees, all of whom are officers of Standish. Nine of the
twenty-two trustees are the Directors of Standish listed above. The remaining
thirteen

51
<PAGE>

trustee/shareholders are: Karen K. Chandor, Lavinia B. Chase, W. Charles
Cook, Joseph M. Corrado, Richard C. Doll, Dolores S. Driscoll, James E.
Hollis III, Edward H. Ladd, Laurence A. Manchester, Catherine A. Powers,
Austin C. Smith , David C. Stuehr and Michael W. Thompson. All of the
trustee/shareholders of SAW Trust are Standish controlling persons.

PACE GLOBAL FIXED INCOME INVESTMENTS

Under the current Advisory Agreements for this fund with Rogge Global
Partners plc and Fischer Francis Trees & Watts, Inc. and its affiliates,
Mitchell Hutchins (not the fund) pays Rogge Global Partners a fee in the annual
amount of 0.25% of the portion of the fund's average annual net assets that it
manages and pays FFTW a fee in the annual amount of 0.25% of the portion of the
fund's average daily net assets that it manages up to and including $400 million
and 0.20% of the average daily net assets that it manages in excess of $400
million. Prior to October 10, 2000, Rogge Global Partners managed all the fund's
assets and was paid by Mitchell Hutchins (not the fund) an annual fee of 0.35%
of the fund's average daily net assets. For the fiscal years ended July 31,
2000, July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or accrued
investment advisory fees to Rogge Global Partners of $_______, $352,679 and
$262,596, respectively.

Rogge Global Partners is a wholly owned subsidiary of United Asset
Management Corporation ("UAM"), a New York Stock Exchange listed company. UAM is
principally engaged through affiliated firms in the United States and abroad in
providing institutional investment management services and acquiring
institutional management firms like Rogge Global Partners.

On June 16, 2000, Old Mutual and OM Acquisition Corp., a Delaware
corporation that was formed solely to effect the proposed acquisition of UAM,
entered into an Agreement and Plan of Merger ("Merger Agreement") with UAM.
Pursuant to the Merger Agreement, which has been approved by the unanimous
boards of directors of Old Mutual and UAM, OM Acquisition Corp. will commence a
tender offer to acquire all of the issued and outstanding common stock of UAM.

To initiate the transaction, Old Mutual and OM Acquisition Corp. filed
a tender offer statement and UAM filed a solicitation/recommendation statement
with the SEC. The tender offer price is set at $25 per share in cash and is
subject to downward adjustment in certain circumstances, including should UAM's
revenues from assets under management decline below a specified level prior to
consummation of the offer. Consummation of the tender offer also is subject to
customary conditions, including acceptances by holders of a majority of UAM's
outstanding shares and receipt of regulatory and client approvals.

Following completion of the tender offer, OM Acquisition Corp. will be
merged with and into UAM. Thereafter, OM Acquisition Corp. will cease to exist,
and UAM will continue as the surviving corporation and become a direct and
wholly owned subsidiary of Old Mutual. The tender offer and merger are not
subject to any financing conditions.

Old Mutual is a 155-year old international financial services firm that
was founded in Cape Town, South Africa, and is now headquartered in London,
England. Old Mutual was founded in 1845 principally to provide life insurance
policies in South Africa. Today, Old Mutual provides a broad array of financial
services to clients in the United Kingdom, in South Africa and other countries
in southern Africa, and in other locations principally outside of the United
States. Old Mutual, which was founded as a mutual organization, has been a
publicly held stock company since the middle of 1999.

Fischer Francis Trees & Watts, Inc. ("FFTW") is a New York corporation
organized in 1972 and is directly owned by Charter Atlantic Corporation, a
holding company organized as a New York corporation. The affiliates of FFTW are
Fischer Francis Trees & Watts, a corporate partnership organized under the laws
of the United Kingdom (sometimes referred to as "FFTW UK"), Fischer Francis
Trees & Watts, pte Ltd (Singapore), a Singapore corporation (sometimes referred
to as "FFTW (Singapore)") and Fischer Francis Trees & Watts, Ltd Kabushiki
Kaisha (Japan), a Japanese corporation (sometimes referred to as "FFTW
(Japan)"). FFTW (Singapore) and FFTW (Japan) are wholly owned subsidiaries of
FFTW. FFTW UK is 99% owned by FFTW and 1% owned by Fischer Francis Trees & Watts
Ltd. which in turn is owned by Charter Atlantic Corporation. FFTW (Japan) will
not assume

52
<PAGE>

duties as sub-adviser to the fund until it has completed its registration as
a registered investment adviser with the SEC.

PACE LARGE COMPANY VALUE EQUITY INVESTMENTS

Under the current Advisory Agreements for this fund with Institutional
Capital Corporation ("ICAP"), Westwood Management Corporation ("Westwood") and
State Street Global Advisors ("SSgA"), Mitchell Hutchins (not the fund) pays
each investment adviser a fee in the annual amount of 0.30% (0.15% for SSgA) of
the fund's average daily net assets that it manages. Prior to July 1, 2000,
Brinson Partners, Inc. was the fund's sole investment adviser. ICAP and Westwood
assumed their fund responsibilities on July 1, 2000 and SSgA assumed its fund
responsibilities on October 10, 2000. For the fiscal years ended July 31, 2000,
July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or accrued aggregate
investment advisory fees to ICAP, Westwood and the fund's previous investment
adviser of $______, $968,040, and $670,717, respectively. Robert H. Lyon, who
serves as president, chief investment officer and a director of ICAP owns a 51%
controlling interest in ICAP. Westwood is a wholly owned subsidiary of Southwest
Securities Group, Inc., a Dallas-based securities firm. SSgA is the investment
management division of State Street Bank and Trust Company, which is a wholly
owned subsidiary of State Street Corporation, a publicly held bank holding
company.

PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS

Under the current Advisory Agreements for this fund with Alliance
Capital Management L.P. ("Alliance Capital") and State Street Global Advisors
("SSgA"), Mitchell Hutchins (not the fund) pays Alliance a fee in the annual
amount of 0.30% and SSgA a fee in the annual amount of 0.15% of the fund's
average daily net assets that it manages. Alliance Capital assumed its fund
responsibilities on November 10, 1997 and SSgA assumed its fund responsibilities
on October 10, 2000. Prior to November 10, 1997, Chancellor LGT Asset
Management, Inc. was the fund's sole investment adviser. For the fiscal years
ended July 31, 2000, July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or
accrued investment advisory fees to Alliance Capital and the prior investment
adviser, of $______, $972,444 and $628,243, respectively.

SSgA is the investment management division of State Street Bank and
Trust Company, which is a wholly owned subsidiary of State Street Corporation, a
publicly held bank holding company. Alliance Capital Management Corporation
("ACMC") is a general partner of Alliance Capital and an indirect wholly owned
subsidiary of AXA Financial, Inc. ("AXA Financial"), a Delaware corporation
whose shares are traded on the New York Stock Exchange, Inc. As of June 30,
2000, AXA Financial and its subsidiaries were the beneficial owners of an
approximately 62.5% partnership interest in Alliance Capital, and Alliance
Capital Management Holding L.P. ("Alliance Holding") owned an approximately 35%
partnership interest in Alliance Capital. Equity interests in Alliance Holding
are traded on the New York Stock Exchange in the form of units. Approximately
97.9% of Alliance Holding's units are owned by the public and management or
employees of Alliance Capital and approximately 2.1% are owned by certain
wholly-owned subsidiaries of AXA Financial. The general partner of Alliance
Holding is ACMC. As of March 1, 2000, AXA, a French insurance holding company,
owned approximately 60.3% of the issued and outstanding shares of the common
stock of AXA Financial.

PACE SMALL/MEDIUM COMPANY VALUE EQUITY INVESTMENTS

Under the current Advisory Agreements for this fund with Ariel Capital
Management, Inc. ("Ariel") and ICM Asset Management, Inc. ("ICM"), Mitchell
Hutchins (not the fund) pays each of these investment advisers a fee in the
annual amount of 0.30% of the fund's average daily net assets that it manages.
Prior to October 10, 2000, Ariel and Brandywine Asset Management, Inc. served as
investment advisers for the fund's assets and, prior to October 4, 1999,
Brandywine was the fund's sole investment adviser. For the fiscal years ended
July 31, 2000, July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or
accrued aggregate investment advisory fees to Ariel and Brandywine of $_______,
$547,044 and $519,732, respectively. Ariel is an independent subchapter S
corporation with a majority of ownership held by its employees. ICM also is an
independent subchapter S corporation with a majority of ownership held by its
employees. [ , a [title] of ICM owns more than 25% of ICM's voting stock. ]

53
<PAGE>

PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS

Under the current Advisory Agreement for this fund with Delaware
Management Company, Inc., Mitchell Hutchins (not the fund) pays Delaware
Management Company a fee in the annual amount of 0.40% of the fund's average
daily net assets. Prior to December 16, 1998, Westfield Capital Management
Company, Inc. was the fund's investment adviser. For the fiscal years ended July
31, 2000, July 31, 1999 and July 31, 1998, Mitchell Hutchins paid or accrued
aggregate investment advisory fees to Delaware Management Company and to the
prior investment adviser, of $______, $852,402, and $664,437, respectively.
Delaware Management Company is a member of Delaware Investments, a subsidiary of
Lincoln National Corporation ("Lincoln National"). Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.

PACE INTERNATIONAL EQUITY INVESTMENTS

Under the current Advisory Agreement for this fund with Martin Currie
Inc., Mitchell Hutchins (not the fund) pays Martin Currie Inc. a fee in the
annual amount of 0.35% of the fund's average daily net assets up to and
including $150 million, 0.30% of the fund's average daily net assets above $150
million up to and including $250 million, 0.25% of the fund's average daily net
assets above $250 million up to and including $350 million, and 0.20% of the
fund's average daily net assets above $350 million. Prior to , 2000, Mitchell
Hutchins (not the fund) paid Martin Currie Inc. a fee for its services under the
Advisory Agreement at the annual rate of 0.40% of the fund's average daily net
assets. For the fiscal years ended July 31, 2000, July 31, 1999 and July 31,
1998, Mitchell Hutchins paid or accrued investment advisory fees to Martin
Currie Inc. of $___________, $717,975 and $517,629, respectively. Martin Currie
Inc. is a wholly owned subsidiary of Martin Currie Limited, a holding company.

PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS

Under the current Advisory Agreement for this fund with Schroder
Investment Management North America Inc. ("SIMNA"), Mitchell Hutchins (not the
fund) pays SIMNA a fee in the annual amount of 0.50% of the fund's average daily
net assets. SIMNA is a wholly owned subsidiary of Schroder U.S. Holdings Inc.,
which engages through its subsidiary firms in the investment banking, asset
management and securities businesses. SIMNA was the surviving company in a
merger with Schroder Capital Management International Inc. (the fund's
investment adviser prior to July 1, 1999 and another wholly owned subsidiary of
Schroder U.S. Holdings Inc.). For the fiscal years ended July 31, 2000, July 31,
1999 and July 31, 1998, Mitchell Hutchins paid or accrued investment advisory
fees to SIMNA and its predecessor of $_______, $341,405 and $283,338,
respectively. Schroder U.S. Holdings Inc. is a wholly owned subsidiary of
Schroders plc., a publicly owned holding company organized under the laws of
England. Schroders plc and its affiliates currently engage in asset management
businesses. In May 2000, Schroders plc sold its worldwide investment banking
business to Salomon Smith Barney. Schroders plc retained its asset management
business.

TRANSFER AGENCY-RELATED SERVICES. PFPC Inc. ("PFPC"), each fund's
transfer agent, (not the funds) pays PaineWebber for certain transfer
agency-related services that PFPC has delegated to PaineWebber.

SECURITIES LENDING. For the fiscal year ended July 31, 2000,
PaineWebber, acting as the funds' lending agent, received compensation from the
funds as follows:

54
<PAGE>

<TABLE>
<CAPTION>
FUND COMPENSATION
---- ------------
<S> <C>
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...........
</TABLE>

PERSONAL TRADING POLICIES. The funds and Mitchell Hutchins (investment
manager and principal underwriter for the funds) each have adopted a code of
ethics under rule 17j-1 of the Investment Company Act, which permits personnel
covered by the rule to invest in securities that may be purchased or held by a
fund but prohibits fraudulent, deceptive or manipulative conduct in connection
with that personal investing. Each investment adviser also has adopted a code of
ethics under rule 17j-1.

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each class of shares of each fund under a distribution contract with the Trust
("Distribution Contract") that requires Mitchell Hutchins to use its best
efforts, consistent with its other businesses, to sell shares of the funds.
Shares of the funds are offered continuously. Under a dealer agreement between
Mitchell Hutchins and PaineWebber relating to each class of shares of the funds
("PW Dealer Agreement"), PaineWebber and its correspondent firms sell the funds'
shares. Mitchell Hutchins is located at 51 West 52nd Street, New York, New York
10019-6114 and PaineWebber is located at 1285 Avenue of the Americas, New York,
New York 10019-6028. PACE Money Market Investments has only Class P shares
established. The other funds have Class A, Class B, Class C, Class Y and Class P
shares established.

Under separate plans of distribution pertaining to the Class A, Class B
and Class C shares of each fund adopted by the Trust in the manner prescribed
under Rule 12b-1 under the Investment Company Act (each, respectively, a "Class
A Plan," "Class B Plan" and "Class C Plan," and collectively, "Plans"), each
fund pays Mitchell Hutchins a service fee, accrued daily and payable monthly, at
the annual rate of 0.25% of the average daily net assets of each class of
shares. Under the Class B Plan, each fund pays Mitchell Hutchins a distribution
fee, accrued daily and payable monthly, at the annual rate of 0.75% of the
average daily net assets of the Class B shares. Under the Class C Plan, each
fund pays Mitchell Hutchins a distribution fee, accrued daily and payable
monthly, at the annual rate of 0.75% (0.50% for fixed income funds) of the
average daily net assets of the Class C shares. There is no distribution plan
with respect to the funds' Class P or Class Y shares and the funds pay no
service or distribution fees with respect to these classes of shares.

Mitchell Hutchins uses the service fees under the Plans for Class A,
Class B and Class C shares primarily to pay PaineWebber for shareholder
servicing, currently at the annual rate of 0.25% of the aggregate investment
amounts maintained in each fund by PaineWebber clients. PaineWebber then
compensates its Financial Advisors for shareholder servicing that they perform
and offsets its own expenses in servicing and maintaining shareholder accounts,
including related overhead expenses.

55
<PAGE>

Mitchell Hutchins uses the distribution fees under the Class B and
Class C Plans to:

- Offset the commissions it pays to PaineWebber for selling each
fund's Class B and Class C shares, respectively.

- Offset each fund's marketing costs attributable to such classes,
such as preparation, printing and distribution of sales
literature, advertising and prospectuses to prospective investors
and related overhead expenses, such as employee salaries and
bonuses.

PaineWebber compensates Financial Advisors when Class B and Class C
shares are bought by investors, as well as on an ongoing basis. Mitchell
Hutchins receives no special compensation from any of the funds or investors at
the time Class B or C shares are bought.

Mitchell Hutchins receives the proceeds of the initial sales charge
paid when Class A shares are bought and of the contingent deferred sales charge
paid upon sales of shares. These proceeds may be used to cover distribution
expenses.

The Plans for Class A, Class B and Class C shares and the Distribution
Contract specify that each fund must pay service and distribution fees to
Mitchell Hutchins as compensation for its service- and distribution-related
activities, not as reimbursement for specific expenses incurred. Therefore, even
if Mitchell Hutchins' expenses for a fund exceed the service or distribution
fees it receives, the fund will not be obligated to pay more than those fees. On
the other hand, if Mitchell Hutchins' expenses are less than such fees, it will
retain its full fees and realize a profit. Expenses in excess of service and
distribution fees received or accrued through the termination date of any Plan
will be Mitchell Hutchins' sole responsibility and not that of the funds.
Annually, the board reviews the Plans and Mitchell Hutchins' corresponding
expenses for each class of shares of a fund separately from the Plans and
expenses of the other classes of shares of that fund.

Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the board at least quarterly, and the board members will review,
reports regarding all amounts expended under the Plan and the purposes for which
such expenditures were made, (2) the Plan will continue in effect only so long
as it is approved at least annually, and any material amendment thereto is
approved, by the board, including those board members who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan, acting in person
at a meeting called for that purpose, (3) payments by a fund under the Plan
shall not be materially increased without the affirmative vote of the holders of
a majority of the outstanding shares of the relevant class of the fund and (4)
while the Plan remains in effect, the selection and nomination of board members
who are not "interested persons" of the Trust shall be committed to the
discretion of the board members who are not "interested persons" of the Trust.

In reporting amounts expended under the Plans to the board members,
Mitchell Hutchins allocates expenses attributable to the sale of each class of a
fund's shares to such class based on the ratio of sales of shares of such class
to the sales of all other classes of shares. The fees paid by one class of a
fund's shares will not be used to subsidize the sale of any other class of fund
shares.

In approving the overall Flexible PricingSM system of distribution for
each fund, the board considered several factors, including that implementation
of Flexible Pricing would permit sales of fund shares outside the PACE Program
and would (1) enable investors to choose the purchasing option best suited to
their individual situation, thereby encouraging current shareholders to make
additional investments in the fund and attracting new investors and assets to
the fund to the benefit of the fund and its shareholders, (2) facilitate
distribution of the funds' shares and (3) maintain the competitive position of
the fund in relation to other funds that have implemented or are seeking to
implement similar distribution arrangements.

In approving the Class A Plan, the board considered all the features of
the distribution system, including (1) the conditions under which initial sales
charges would be imposed and the amount of such charges, (2) Mitchell Hutchins'
belief that the initial sales charge combined with a service fee would be
attractive to PaineWebber Financial Advisors and correspondent firms, resulting
in greater growth of the fund than might otherwise be the

56
<PAGE>

case, (3) the advantages to the shareholders of economies of scale resulting
from growth in the fund's assets and potential continued growth, (4) the
services provided to the fund and its shareholders by Mitchell Hutchins, (5)
the services provided by PaineWebber pursuant to the PW Dealer Agreement with
Mitchell Hutchins and (6) Mitchell Hutchins' shareholder service-related
expenses and costs.

In approving the Class B Plan, the board considered all the features of
the distribution system, including (1) the conditions under which contingent
deferred sales charges would be imposed and the amount of such charges, (2) the
advantage to investors in having no initial sales charges deducted from fund
purchase payments and instead having the entire amount of their purchase
payments immediately invested in fund shares, (3) Mitchell Hutchins' belief that
the ability of PaineWebber Financial Advisors and correspondent firms to receive
sales commissions when Class B shares are sold and continuing service fees
thereafter while their customers invest their entire purchase payments
immediately in Class B shares would prove attractive to the Financial Advisors
and correspondent firms, resulting in greater growth of the fund than might
otherwise be the case, (4) the advantages to the shareholders of economies of
scale resulting from growth in the fund's assets and potential continued growth,
(5) the services provided to the fund and its shareholders by Mitchell Hutchins,
(6) the services provided by PaineWebber pursuant to the PW Dealer Agreement
with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder service- and
distribution-related expenses and costs. The board members also recognized that
Mitchell Hutchins' willingness to compensate PaineWebber and its Financial
Advisors, without the concomitant receipt by Mitchell Hutchins of initial sales
charges, was conditioned upon its expectation of being compensated under the
Class B Plan.

In approving the Class C Plan, the board considered all the features of
the distribution system, including (1) the advantage to investors of having no
initial sales charges deducted from fund purchase payments and instead having
the entire amount of such purchase payments immediately invested in fund shares,
(2) the advantage to investors in being free from contingent deferred sales
charges upon redemption for shares held more than one year and paying for
distribution on an ongoing basis, (3) Mitchell Hutchins' belief that the ability
of PaineWebber Financial Advisors and correspondent firms to receive sales
compensation for their sales of Class C shares on an ongoing basis, along with
continuing service fees, while their customers invest their entire purchase
payments immediately in Class C shares and generally do not face contingent
deferred sales charges, would prove attractive to the Financial Advisors and
correspondent firms, resulting in greater growth to the fund than might
otherwise be the case, (4) the advantages to the shareholders of economies of
scale resulting from growth in the fund's assets and potential continued growth,
(5) the services provided to the fund and its shareholders by Mitchell Hutchins,
(6) the services provided by PaineWebber pursuant to the PW Dealer Agreement
with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder service- and
distribution-related expenses and costs. The board members also recognized that
Mitchell Hutchins' willingness to compensate PaineWebber and its Financial
Advisors after Class C shares have been held more than one year without the
concomitant receipt by Mitchell Hutchins of initial sales charges or contingent
deferred sales charges upon redemption after one year following purchase was
conditioned upon its expectation of being compensated under the Class C Plan.

With respect to each Plan, the board considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, initial sales charges, distribution
fees and contingent deferred sales charges. The board also considered the
benefits that would accrue to Mitchell Hutchins under each Plan in that Mitchell
Hutchins would receive service, distribution and management and administration
fees that are calculated based upon a percentage of the average net assets of a
fund, which fees would increase if the Plan were successful and the fund
attained and maintained significant asset levels.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for a fund other than PACE Money
Market Investments are made by the fund's investment adviser, subject to the
overall review of Mitchell Hutchins and the board of trustees. Decisions to buy
and sell securities for PACE Money Market Investments are made by Mitchell
Hutchins as that fund's investment adviser, subject to the overall review of the
board of trustees. Although investment decisions for a fund are made
independently from those of the other accounts managed by its investment
adviser, investments of the type that the fund may make also may be made by
those other accounts. When a fund and one or more other accounts managed by its
investment adviser are prepared to invest in, or desire to dispose of, the same
security, available investments or opportunities for sales will be allocated in
a manner believed by the investment adviser to

57
<PAGE>

be equitable to each. In some cases, this procedure may adversely affect the
price paid or received by a fund or the size of the position obtained or
disposed of by a fund.

Transactions on U.S. stock exchanges and some foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. No stated
commission is generally applicable to securities traded in U.S. over-the-counter
markets, but the prices of those securities include undisclosed commissions or
mark-ups. The cost of securities purchased from underwriters include an
underwriting commission or concession and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down. U.S.
government securities generally are purchased from underwriters or dealers,
although certain newly issued U.S. government securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.

For the periods indicated, the funds paid the brokerage commissions set
forth below:

<TABLE>
<CAPTION>
TOTAL BROKERAGE COMMISSIONS
FISCAL YEAR ENDED JULY 31,
FUND 2000 1999 1998
---- ---- ---- ----
<S> <C> <C> <C>
PACE Money Market Investments................................ $ 0 $ 0
PACE Government Securities Fixed Income Investments ......... 0 0
PACE Intermediate Fixed Income Investments................... 0 0
PACE Strategic Fixed Income Investments ..................... 4,297 17,292
PACE Municipal Fixed Income Investments...................... 0 0
PACE Global Fixed Income Investments......................... 0 0
PACE Large Company Value Equity Investments.................. 336,042 191,304
PACE Large Company Growth Equity Investments................. 289,045 422,526
PACE Small/Medium Company Value Equity Investments........... 715,933 491,524
PACE Small/Medium Company Growth Equity Investments.......... 296,609 303,695
PACE International Equity Investments........................ 722,215 441,600
PACE International Emerging Markets Equity Investments....... 361,372 286,220
</TABLE>

The funds have no obligation to deal with any broker or group of
brokers in the execution of portfolio transactions. The funds contemplate that,
consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through Mitchell Hutchins or its affiliates,
including PaineWebber. The board has adopted procedures in conformity with Rule
17e-1 under the Investment Company Act to ensure that all brokerage commissions
paid to PaineWebber are reasonable and fair. Specific provisions in the
Management Agreement and Advisory Agreements authorize Mitchell Hutchins and any
of its affiliates that is a member of a national securities exchange to effect
portfolio transactions for the funds on such exchange and to retain compensation
in connection with such transactions. Any such transactions will be effected and
related compensation paid only in accordance with applicable SEC regulations.
For the last three fiscal years, none of the funds paid any brokerage
commissions to PaineWebber, except as follows:

During the fiscal year ended July 31, 2000, PACE Large Company Growth
Equity Investments paid $____ in brokerage commissions to PaineWebber.

[During the fiscal year ended July 31, 2000, paid
$ in brokerage commissions to PaineWebber, which represented less
than 1% [ OR %] of the total

58
<PAGE>

commissions paid by that fund and less than 1% [ OR %] of the aggregate
dollar amount of the fund's transactions involving commission
payments.]

Transactions in futures contracts are executed through futures
commission merchants ("FCMs") who receive brokerage commissions for their
services. The funds' procedures in selecting FCMs to execute transactions in
futures contracts, including procedures permitting the use of an affiliated FCM,
including PaineWebber and its affiliates, are similar to those in effect with
respect to brokerage transactions in securities.

In selecting brokers for a fund, its investment adviser will consider
the full range and quality of a broker's services. Consistent with the interests
of the funds and subject to the review of the board, Mitchell Hutchins or the
applicable investment adviser may cause a fund to purchase and sell portfolio
securities through brokers who provide Mitchell Hutchins or the investment
adviser with brokerage or research services. The funds may pay those brokers a
higher commission than may be charged by other brokers, provided that Mitchell
Hutchins or the investment adviser, as applicable, determines in good faith that
the commission is reasonable in terms either of that particular transaction or
of the overall responsibility of Mitchell Hutchins or the investment adviser to
that fund and its other clients.

Research services obtained from brokers may include written reports,
pricing and appraisal services, analysis of issues raised in proxy statements,
educational seminars, subscriptions, portfolio attribution and monitoring
services, and computer hardware, software and access charges which are directly
related to investment research. Research services may be received in the form of
written reports, online services, telephone contacts and personal meetings with
securities analysts, economists, corporate and industry spokespersons and
government representatives.

For the fiscal year ended July 31, 2000, the funds directed portfolio
transactions to brokers chosen because they provide research and analysis as
indicated below, for which the funds paid the following in brokerage
commissions:

<TABLE>
<CAPTION>
AMOUNT OF PORTFOLIO BROKERAGE
FUND TRANSACTIONS COMMISSIONS PAID
---- ------------ ----------------
<S> <C> <C>
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............
</TABLE>

For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins or a fund's investment adviser seeks best execution. Although
Mitchell Hutchins or a fund's investment adviser may receive certain research or
execution services in connection with the transactions, it will not purchase
securities at a higher price or sell securities at a lower price than would
otherwise be paid if no weight was attributed to the services provided by the
executing dealer. Mitchell Hutchins or a fund's investment adviser may engage in
agency transactions in over-the-counter equity and debt securities in return for
research and execution services. These transactions are entered into only
pursuant to procedures that are designed to ensure that the transaction
(including commissions) is at least as favorable as it would have been if
effected directly with a market-maker that did not provide research or execution
services.

59
<PAGE>

Research services and information received from brokers or dealers are
supplemental to the research efforts of Mitchell Hutchins and a fund's
investment adviser and, when utilized, are subject to internal analysis before
being incorporated into their investment processes. Information and research
services furnished by brokers or dealers through which or with which a fund
effects securities transactions may be used by Mitchell Hutchins or the fund's
investment adviser in advising other funds or accounts and, conversely, research
services furnished to Mitchell Hutchins or a fund's investment adviser by
brokers or dealers in connection with other funds or accounts that either of
them advises may be used in advising a fund.

Investment decisions for a fund and for other investment accounts
managed by Mitchell Hutchins or the applicable investment adviser are made
independently of each other in light of differing considerations for the various
accounts. However, the same investment decision may occasionally be made for a
fund and one or more accounts. In those cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated
between that fund and the other account(s) as to amount in a manner deemed
equitable to the fund and the other account(s). While in some cases this
practice could have a detrimental effect upon the price or value of the security
as far as a fund is concerned, or upon its ability to complete its entire order,
in other cases it is believed that simultaneous transactions and the ability to
participate in volume transactions will benefit the fund.

The funds will not purchase securities that are offered in
underwritings in which PaineWebber is a member of the underwriting or selling
group, except pursuant to procedures adopted by the board pursuant to Rule 10f-3
under the Investment Company Act. Among other things, these procedures require
that the spread or commission paid in connection with such a purchase be
reasonable and fair, the purchase be at not more than the public offering price
prior to the end of the first business day after the date of the public offering
and that PaineWebber or any affiliate thereof not participate in or benefit from
the sale to the fund.

As of July 31, 2000, the funds owned securities issued by their regular
broker-dealers (as defined in Rule 10b-1 under the Investment Company Act) as
follows:

[TO BE INSERTED]

PORTFOLIO TURNOVER. PACE Money Market Investments may attempt to
increase yields by trading to take advantage of short-term market variations,
which results in high portfolio turnover. Because purchases and sales of money
market instruments are usually effected as principal transactions, this policy
does not result in high brokerage commissions to the fund. The other funds do
not intend to seek profits through short-term trading. Nevertheless, the funds
will not consider portfolio turnover rate as a limiting factor in making
investment decisions.

A fund's turnover rate is calculated by dividing the lesser of
purchases or sales of its portfolio securities for the year by the monthly
average value of the portfolio securities. Securities or options with remaining
maturities of one year or less on the date of acquisition are excluded from the
calculation. Under certain market conditions, a fund authorized to engage in
transactions in options may experience increased portfolio turnover as a result
of its investment strategies. For instance, the exercise of a substantial number
of options written by a fund (due to appreciation of the underlying security in
the case of call options or depreciation of the underlying security in the case
of put options) could result in a turnover rate in excess of 100%. A portfolio
turnover rate of 100% would occur if all of a fund's securities that are
included in the computation of turnover were replaced once during a period of
one year.

Certain other practices that may be employed by a fund also could
result in high portfolio turnover. For example, portfolio securities may be sold
in anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what an investment adviser
believes to be a temporary disparity in the normal yield relationship between
the two securities. These yield

60
<PAGE>

disparities may occur for reasons not directly related to the investment quality
of particular issues or the general movement of interest rates, such as changes
in the overall demand for, or supply of, various types of securities.

Portfolio turnover rates may vary greatly from year to year as well as
within a particular year and may be affected by cash requirements for
redemptions of a fund's shares as well as by requirements that enable the fund
to receive favorable tax treatment.

The following table sets forth the portfolio turnover rates for each
fund for the periods indicated:

PORTFOLIO TURNOVER RATES
-------------------------------------
FISCAL YEAR FISCAL YEAR
ENDED ENDED
FUND JULY 31, 2000 JULY 31, 1999
---- ----------------- ------------------
<S> <C> <C>
PACE Money Market Investments.............................................. N/A
PACE Government Securities Fixed Income Investments........................ 418%
PACE Intermediate Fixed Income Investments................................. 89%
PACE Strategic Fixed Income Investments.................................... 202%
PACE Municipal Fixed Income Investments.................................... 11%
PACE Global Fixed Income Investments....................................... 226%
PACE Large Company Value Equity Investments................................ 40%
PACE Large Company Growth Equity Investments............................... 43%
PACE Small/Medium Company Value Equity Investments......................... 57%
PACE Small/Medium Company Growth Equity Investments........................ 102%
PACE International Equity Investments...................................... 89%
PACE International Emerging Markets Equity Investments..................... 66%

</TABLE>

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES

WAIVERS OF SALES CHARGES/CONTINGENT DEFERRED SALES CHARGES -- CLASS A
SHARES. The following additional sales charge waivers are available for Class A
shares if you:

- Purchase shares through a variable annuity offered only to
qualified plans. For investments made pursuant to this waiver,
Mitchell Hutchins may make payments out of its own resources to
PaineWebber and to the variable annuity's sponsor, adviser or
distributor in a total amount not to exceed l% of the amount
invested;

- Acquire shares through an investment program that is not sponsored
by PaineWebber or its affiliates and that charges participants a
fee for program services, provided that the program sponsor has
entered into a written agreement with PaineWebber permitting the
sale of shares at net asset value to that program. For investments
made pursuant to this waiver, Mitchell Hutchins may make a payment
to PaineWebber out of its own resources in an amount not to exceed
1% of the amount invested. For subsequent investments or exchanges
made to implement a rebalancing feature of such an investment
program, the minimum subsequent investment requirement is also
waived;

- Acquire shares in connection with a reorganization pursuant to
which a fund acquires substantially all of the assets and
liabilities of another fund in exchange solely for shares of the
acquiring fund; or

- Acquire shares in connection with the disposition of proceeds from
the sale of shares of Managed High Yield Plus Fund Inc. that were
acquired during that fund's initial public offering of shares and
that meet certain other conditions described in its prospectus.

In addition, reduced sales charges on Class A shares are available
through the combined purchase plan or through rights of accumulation described
below. Class A share purchases of $1 million or more are not subject to an

<PAGE>

initial sales charge; however, if a shareholder sells these shares within one
year after purchase, a contingent deferred sales charge of 1% of the offering
price or the net asset value of the shares at the time of sale by the
shareholder, whichever is less, is imposed.

COMBINED PURCHASE PRIVILEGE -- CLASS A SHARES. Investors and eligible
groups of related fund investors may combine purchases of Class A shares of the
funds with concurrent purchases of Class A shares of any other PaineWebber
mutual fund and thus take advantage of the reduced sales charges indicated in
the tables of sales charges for Class A shares in the Prospectus. The sales
charge payable on the purchase of Class A shares of the funds and Class A shares
of such other funds will be at the rates applicable to the total amount of the
combined concurrent purchases.

An "eligible group of related fund investors" can consist of any
combination of the following:

(a) an individual, that individual's spouse, parents and
children;

(b) an individual and his or her individual retirement
account ("IRA");

(c) an individual (or eligible group of individuals) and any
company controlled by the individual(s) (a person, entity or group
that holds 25% or more of the outstanding voting securities of a
corporation will be deemed to control the corporation, and a
partnership will be deemed to be controlled by each of its general
partners);

(d) an individual (or eligible group of individuals) and one
or more employee benefit plans of a company controlled by the
individual(s);

(e) an individual (or eligible group of individuals) and a
trust created by the individual(s), the beneficiaries of which are
the individual and/or the individual's spouse, parents or
children;

(f) an individual and a Uniform Gifts to Minors Act/Uniform
Transfers to Minors Act account created by the individual or the
individual's spouse;

(g) an employer (or group of related employers) and one or
more qualified retirement plans of such employer or employers (an
employer controlling, controlled by or under common control with
another employer is deemed related to that other employer); or

(h) individual accounts related together under one registered
investment adviser having full discretion and control over the
accounts. The registered investment adviser must communicate at
least quarterly through a newsletter or investment update
establishing a relationship with all of the accounts.

RIGHTS OF ACCUMULATION -- CLASS A SHARES. Reduced sales charges are
available through a right of accumulation, under which investors and eligible
groups of related fund investors (as defined above) are permitted to purchase
Class A shares of the funds among related accounts at the offering price
applicable to the total of (1) the dollar amount then being purchased plus (2)
an amount equal to the then-current net asset value of the purchaser's combined
holdings of Class A fund shares and Class A shares of any other PaineWebber
mutual fund. The purchaser must provide sufficient information to permit
confirmation of his or her holdings, and the acceptance of the purchase order is
subject to such confirmation. The right of accumulation may be amended or
terminated at any time.

REINSTATEMENT PRIVILEGE -- CLASS A SHARES. Shareholders who have
redeemed Class A shares of a fund may reinstate their account without a sales
charge by notifying the transfer agent of such desire and forwarding a check for
the amount to be purchased within 365 days after the date of redemption. The
reinstatement will be made at the net asset value per share next computed after
the notice of reinstatement and check are received. The amount of a purchase
under this reinstatement privilege cannot exceed the amount of the redemption
proceeds. Gain on a

62
<PAGE>

redemption is taxable regardless of whether the reinstatement privilege is
exercised, although a loss arising out of a redemption will not be deductible
to the extent the reinstatement privilege is exercised within 30 days after
redemption, in which event an adjustment will be made to the shareholder's tax
basis for shares acquired pursuant to the reinstatement privilege. Gain or loss
on a redemption also will be readjusted for federal income tax purposes by the
amount of any sales charge paid on Class A shares, under the circumstances and
to the extent described in "Taxes -- Special Rule for Class A Shareholders,"
below.

WAIVERS OF CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES. The
maximum 5% contingent deferred sales charge applies to sales of shares during
the first year after purchase. The charge generally declines by 1% annually,
reaching zero after six years. Among other circumstances, the contingent
deferred sales charge on Class B shares is waived where a total or partial
redemption is made within one year following the death of the shareholder. The
contingent deferred sales charge waiver is available where the decedent is
either the sole shareholder or owns the shares with his or her spouse as a joint
tenant with right of survivorship. This waiver applies only to redemption of
shares held at the time of death.

PURCHASES OF CLASS A SHARES THROUGH THE PAINEWEBBER INSIGHTONE-SM-
PROGRAM. Investors who purchase shares through the PaineWebber InsightOne-SM-
Program are eligible to purchase Class A shares without a sales load. The
PaineWebber InsightOne-SM- Program offers a nondiscretionary brokerage account
to investors for an asset-based fee at an annual rate of up to 1.50% of the
assets in the account. Account holders may purchase or sell certain investment
products without paying commissions or other markups/markdowns.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of a PACE fund may be exchanged for shares of the
corresponding class of other PACE funds. Class P and Class Y shares are not
eligible for exchange. Shareholders will receive at least 60 days' notice of any
termination or material modification of the exchange offer, except no notice
need be given if, under extraordinary circumstances, either redemptions are
suspended under the circumstances described below or a fund temporarily delays
or ceases the sales of its shares because it is unable to invest amounts
effectively in accordance with the fund's investment objective, policies and
restrictions.

If conditions exist that make cash payments undesirable, each fund
reserves the right to honor any request for redemption by making payment in
whole or in part in securities chosen by the fund and valued in the same way as
they would be valued for purposes of computing the fund's net asset value. Any
such redemption in kind will be made with readily marketable securities, to the
extent available. If payment is made in securities, a shareholder may incur
brokerage expenses in converting these securities into cash. Each fund has
elected, however, to be governed by Rule 18f-1 under the Investment Company Act,
under which it is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of its net asset value during any 90-day period for one
shareholder. This election is irrevocable unless the SEC permits its withdrawal.

The funds may suspend redemption privileges or postpone the date of
payment during any period (1) when the New York Stock Exchange is closed or
trading on the New York Stock Exchange is restricted as determined by the SEC,
(2) when an emergency exists, as defined by the SEC, that makes it not
reasonably practicable for a fund to dispose of securities owned by it or fairly
to determine the value of its assets or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of a fund's portfolio at the time.

SERVICE ORGANIZATIONS. A fund may authorize service organizations, and
their agents, to accept on its behalf purchase and redemption orders that are in
"good form" in accordance with the policies of those service organizations. A
fund will be deemed to have received these purchase and redemption orders when a
service organization or its agent accepts them. Like all customer orders, these
orders will be priced based on the fund's net asset value next computed after
receipt of the order by the service organizations or their agents. Service
organizations may include retirement plan service providers who aggregate
purchase and redemption instructions received from numerous retirement plans or
plan participants.

AUTOMATIC INVESTMENT PLAN. PaineWebber offers an automatic investment
plan with a minimum initial investment of $1,000 through which a fund will
deduct $50 or more on a monthly, quarterly, semi-annual or annual basis from the
investor's bank account to invest directly in the funds' Class A, Class B or
Class C shares.

63
<PAGE>

For Class P shares, an automatic investment plan is available to
certain shareholders who may authorized PaineWebber to place a purchase order
each month or quarter for fund shares in an amount not less than $500 per month
or quarter.

For Class P shareholders, the purchase price is paid automatically from
cash held in the shareholder's PaineWebber brokerage account through the
automatic redemption of the shareholder's shares of a PaineWebber money market
fund or through the liquidation of other securities held in the investor's
PaineWebber brokerage account. If the PACE Program assets are held in a
PaineWebber Resource Management Account-Registered Trademark- ("RMA-Registered
Trademark-") account, the shareholder may arrange for preauthorized automatic
fund transfer on a regular basis, from the shareholder's bank account to the
shareholder's RMA account. Shareholders may utilize this service in conjunction
with the automatic investment plan to facilitate regular PACE investments. This
automatic fund transfer service, however, is not available for retirement plan
shareholders. For participants in the PACE-Registered Trademark- Multi Advisor
Program, amounts invested through the automatic investment plan will be invested
in accordance with the participant's benchmark allocation. If sufficient funds
are not available in the participant's account on the trade date to purchase the
full amount specified by the participant, no purchase will be made.

In addition to providing a convenient and disciplined manner of
investing, participation in an automatic investment plan enables an investor to
use the technique of "dollar cost averaging." When a shareholder invests the
same amount each month, the shareholder will purchase more shares when a fund's
net asset value per share is low and fewer shares when the net asset value per
share is high. Using this technique, a shareholder's average purchase price per
share over any given period will usually be lower than if the shareholder
purchased a fixed number of shares on a monthly basis during the period. Of
course, investing through the automatic investment plan does not assure a profit
or protect against loss in declining markets. Additionally, since an automatic
investment plan involves continuous investing regardless of price levels, an
investor should consider his or her financial ability to continue purchases
through periods of low price levels. An investor should also consider whether a
single, large investment in Class B or Class C shares would qualify for Class A
sales load reductions.

For further information about an automatic investment plan, the RMA
account or the automatic funds transfer service, shareholders should contact
their PaineWebber Financial Advisor.

AUTOMATIC REDEMPTION PLAN -- CLASS P SHARES. Investors in Class P

shares may have PaineWebber redeem a portion of their shares in the PACE Program
(or the PACE-Registered Trademark- Multi-Advisor Program) monthly or quarterly
under the automatic redemption plan. Quarterly redemptions are made in March,
June, September and December. The amount to be redeemed must be at least $500
per month or quarter. Purchases of additional shares of a fund concurrent with
redemption are ordinarily disadvantageous to shareholders because of tax
liabilities. For retirement plan shareholders, special limitations apply. For
further information regarding the automatic redemption plan, shareholders
should contact their PaineWebber Financial Advisors.

SYSTEMATIC WITHDRAWAL PLAN -- CLASS A, CLASS B AND CLASS C SHARES. The
systematic withdrawal plan allows investors to set up monthly, quarterly (March,
June, September and December), semi-annual (June and December) or annual
(December) withdrawals from their PaineWebber Mutual Fund accounts. Minimum
balances and withdrawals vary according to the class of shares:

- Class A and Class C shares. Minimum value of fund shares is
$5,000; minimum withdrawals of $100.

- Class B shares. Minimum value of fund shares is $10,000; minimum
monthly, quarterly, and semi-annual and annual withdrawals of
$100, $200, $300 and $400, respectively.

Withdrawals under the systematic withdrawal plan will not be subject to
a contingent deferred sales charge if the investor withdraws no more than 12% of
the value of the fund account when the investor signed up for the Plan (for
Class B shares, annually; for Class A and Class C shares, during the first year
under the Plan). Shareholders who elect to receive dividends or other
distributions in cash may not participate in this plan.

64
<PAGE>

An investor's participation in the systematic withdrawal plan will
terminate automatically if the "Initial Account Balance" (a term that means the
value of the fund account at the time the investor elects to participate in the
systematic withdrawal plan), less aggregate redemptions made other than pursuant
to the systematic withdrawal plan, is less than the minimum values specified
above. Purchases of additional shares of a fund concurrent with withdrawals are
ordinarily disadvantageous to shareholders because of tax liabilities and, for
Class A shares, initial sales charges. On or about the 20th of a month for
monthly, quarterly, semi-annual and annual plans, PaineWebber will arrange for
redemption by the funds of sufficient fund shares to provide the withdrawal
payments specified by participants in the funds' systematic withdrawal plan. The
payments generally are mailed approximately five Business Days (defined under
"Valuation of Shares") after the redemption date. Withdrawal payments should not
be considered dividends, but redemption proceeds. If periodic withdrawals
continually exceed reinvested dividends and other distributions, a shareholder's
investment may be correspondingly reduced. A shareholder may change the amount
of the systematic withdrawal or terminate participation in the systematic
withdrawal plan at any time without charge or penalty by written instructions
with signatures guaranteed to PaineWebber or PFPC Inc. Instructions to
participate in the plan, change the withdrawal amount or terminate participation
in the plan will not be effective until five days after written instructions
with signatures guaranteed are received by PFPC. Shareholders may request the
forms needed to establish a systematic withdrawal plan from their PaineWebber
Financial Advisors, correspondent firms or PFPC at 1-800-647-1568.

TRANSFER OF ACCOUNTS. If investors holding Class A, Class B, Class C or
Class Y shares of a fund in a PaineWebber brokerage account transfer their
brokerage accounts to another firm, the fund shares will be moved to an account
with PFPC. However, if the other firm has entered into a selected dealer
agreement with Mitchell Hutchins relating to the fund, the shareholder may be
able to hold fund shares in an account with the other firm.

INDIVIDUAL RETIREMENT ACCOUNTS. A Self-Directed IRA is available
through PaineWebber through which investments may be made in Class P shares of
the funds, as well as in other investments available through PaineWebber. The
minimum initial investment in this IRA is $10,000. Investors considering
establishing an IRA should review applicable tax laws and should consult their
tax advisers.

PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN-SM-;
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT-Registered Trademark- (RMA)-Registered
Trademark-

Class A, Class B, Class C and Class Y shares of PaineWebber mutual
funds, including the PACE funds (each a "PW Fund" and, collectively, the "PW
Funds"), are available for purchase through the RMA Resource Accumulation Plan
("Plan") by customers of PaineWebber and its correspondent firms who maintain
Resource Management Accounts ("RMA accountholders"). The Plan allows an RMA
accountholder to continually invest in one or more of the PW Funds at regular
intervals, with payment for shares purchased automatically deducted from the
client's RMA account. The client may elect to invest at monthly or quarterly
intervals and may elect either to invest a fixed dollar amount (minimum $100 per
period) or to purchase a fixed number of shares. A client can elect to have Plan
purchases executed on the first or fifteenth day of the month. Settlement occurs
three Business Days (defined under "Valuation of Shares") after the trade date,
and the purchase price of the shares is withdrawn from the investor's RMA
account on the settlement date from the following sources and in the following
order: uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.

To participate in the Plan, an investor must be an RMA accountholder,
must have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client Agreement
and Instruction Form available from PaineWebber. The investor must have received
a current prospectus for each PW Fund selected prior to enrolling in the Plan.
Information about mutual fund positions and outstanding instructions under the
Plan are noted on the RMA accountholder's account statement. Instructions under
the Plan may be changed at any time, but may take up to two weeks to become
effective.

The terms of the Plan, or an RMA accountholder's participation in the
Plan, may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds may
be offered through the Plan.

<PAGE>

PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the
PW Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, de-emphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of "dollar cost
averaging." By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of both low
and high share prices. However, over time, dollar cost averaging generally
results in a lower average original investment cost than if an investor invested
a larger dollar amount in a mutual fund at one time. An investor should also
consider whether a single, large investment in Class B or Class C shares would
qualify for Class A sales load reductions.

PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the
Plan, an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account is PaineWebber's comprehensive asset
management account and offers investors a number of features, including the
following:

- monthly Premier account statements that itemize all account
activity, including investment transactions, checking activity and
Platinum MasterCard-Registered Trademark- transactions during the
period, and provide unrealized and realized gain and loss
estimates for most securities held in the account;

- comprehensive year-end summary statements that provide information
on account activity for use in tax planning and tax return
preparation;

- automatic "sweep" of uninvested cash into the RMA accountholder's
choice of one of the six RMA money market funds-RMA Money Market
Portfolio, RMA U.S. Government Portfolio, RMA Tax-Free Fund, RMA
California Municipal Money Fund, RMA New Jersey Municipal Money
Fund and RMA New York Municipal Money Fund. AN INVESTMENT IN A
MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH A MONEY MARKET FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN A MONEY MARKET FUND.

- check writing, with no per-check usage charge, no minimum amount
on checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;

- Platinum MasterCard-Registered Trademark-, with or without a line
of credit, which provides RMA accountholders with direct access to
their accounts and can be used with automatic teller machines
worldwide. Purchases on the Platinum MasterCard-Registered
Trademark- are debited to the RMA account once monthly, permitting
accountholders to remain invested for a longer period of time;

- unlimited electronic funds transfers and a bill payment service
for an additional fee;

- 24-hour access to account information through toll-free numbers,
and more detailed personal assistance during business hours from
the RMA Service Center;

- expanded account protection for the net equity securities balance
in the event of the liquidation of PaineWebber. This protection
does not apply to shares of funds that are held at PFPC and not
through PaineWebber; and

- automatic direct deposit of checks into your RMA account and
automatic withdrawals from the account.

The annual account fee for an RMA account is $85, which includes the
Platinum MasterCard-Registered Trademark-, with an additional fee of $40 if the
investor selects an optional line of credit with the Platinum
MasterCard-Registered Trademark-.

CONVERSION OF CLASS B SHARES

Class B shares of a fund will automatically convert to Class A shares
of that fund, based on the relative net asset values per share of the two
classes, as of the close of business on the first Business Day (as defined under
"Valuation of Shares") of the month in which the sixth anniversary of the
initial issuance of such Class B shares

<PAGE>

occurs. For the purpose of calculating the holding period required for
conversion of Class B shares, the date of initial issuance shall mean (1) the
date on which such Class B shares were issued or (2) for Class B shares
obtained through an exchange, or a series of exchanges, the date on which the
original Class B shares were issued. For purposes of conversion to Class A
shares, Class B shares purchased through the reinvestment of dividends and
other distributions paid in respect of Class B shares will be held in a
separate sub-account. Each time any Class B shares in the shareholder's
regular account (other than those in the sub-account) convert to Class A
shares, a pro rata portion of the Class B shares in the sub-account will also
convert to Class A shares. The portion will be determined by the ratio that
the shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.

The conversion feature is subject to the continuing availability of an
opinion of counsel to the effect that the dividends and other distributions paid
on Class A and Class B shares will not result in "preferential dividends" under
the Internal Revenue Code and that the conversion of shares does not constitute
a taxable event. If the conversion feature ceased to be available, the Class B
shares would not be converted and would continue to be subject to the higher
ongoing expenses beyond six years from the date of purchase. Mitchell Hutchins
has no reason to believe that this condition will not continue to be met.

VALUATION OF SHARES

Each fund normally determines its net asset value per share as of the
close of regular trading (usually 4:00 p.m., Eastern time) on the New York Stock
Exchange on each Monday through Friday when the New York Stock Exchange is open.
Prices will be calculated earlier when the New York Stock Exchange closes early
because trading has been halted for the day. Currently the New York Stock
Exchange is closed on the observance of the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Securities that are listed on U.S. and foreign stock exchanges normally
are valued at the last sale price on the day the securities are valued or,
lacking any sales on that day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are generally
valued on the exchange considered by a fund's investment adviser as the primary
market. Securities traded in the over-the-counter market and listed on the
Nasdaq Stock Market ("Nasdaq") normally are valued at the last available sale
price on Nasdaq prior to valuation; other over-the-counter securities are valued
at the last bid price available prior to valuation, other than short-term
investments that mature in 60 days or less.

Where market quotations are readily available, bonds held by the funds
(other than PACE Money Market Investments) are valued based upon market
quotations, provided those quotations adequately reflect, in the judgment of a
fund's investment adviser, the fair value of the securities. Where those market
quotations are not readily available, bonds are valued based upon appraisals
received from a pricing service using a computerized matrix system or based upon
appraisals derived from information concerning the security or similar
securities received from recognized dealers in those securities. The amortized
cost method of valuation generally is used to value debt obligations with 60
days or less remaining until maturity, unless the board determines that this
does not represent fair value. All other securities and assets are valued at
fair value as determined in good faith by or under the direction of the board.

It should be recognized that judgment often plays a greater role in
valuing thinly traded securities and lower rated bonds than is the case with
respect to securities for which a broader range of dealer quotations and
last-sale information is available.

All investments quoted in foreign currency will be valued daily in U.S.
dollars on the basis of the foreign currency exchange rate prevailing at the
time such valuation is determined by a fund's custodian. Foreign currency
exchange rates are generally determined prior to the close of regular trading on
the NYSE. Occasionally events affecting the value of foreign investments and
such exchange rates occur between the time at which they are determined and the
close of trading on the New York Stock Exchange, which events would not be
reflected in the computation of a fund's net asset value on that day. If events
materially affecting the value of such investments or currency exchange rates
occur during such time period, the investments will be valued at their fair
value as determined in good faith by or under the direction of the board. The
foreign currency exchange transactions of the

67
<PAGE>
funds conducted on a spot (that is, cash) basis are valued at the spot rate
for purchasing or selling currency prevailing on the foreign exchange market.
Under normal market conditions this rate differs from the prevailing exchange
rate by less than one-tenth of one percent due to the costs of converting
from one currency to another.

PACE MONEY MARKET INVESTMENTS. PACE Money Market Investments values its
portfolio securities in accordance with the amortized cost method of valuation
under Rule 2a-7 under the Investment Company Act. To use amortized cost to value
its portfolio securities, the fund must adhere to certain conditions under that
Rule relating to its investments. Amortized cost is an approximation of market
value, whereby the difference between acquisition cost and value at maturity is
amortized on a straight-line basis over the remaining life of the instrument.
The effect of changes in the market value of a security as a result of
fluctuating interest rates is not taken into account and thus the amortized cost
method of valuation may result in the value of a security being higher or lower
than its actual market value. In the event that a large number of redemptions
takes place at a time when interest rates have increased, the fund might have to
sell portfolio securities prior to maturity and at a price that might not be as
desirable as the value at maturity.

The board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share for PACE Money Market Investments,
which include a review of the extent of any deviation of net asset value per
share, based on available market quotations, from the $1.00 amortized cost per
share. Should that deviation exceed 1/2 of 1%, the trustees will promptly
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
redeeming shares in kind, selling portfolio securities prior to maturity,
reducing or withholding dividends and utilizing a net asset value per share as
determined by using available market quotations. PACE Money Market Investments
will maintain a dollar weighted average portfolio maturity of 90 days or less
and will not purchase any instrument with a remaining maturity greater than 13
months (as calculated under Rule 2a-7) and except that securities subject to
repurchase agreements may have maturities in excess of 13 months. PACE Money
Market Investments will limit portfolio investments, including repurchase
agreements, to those U.S. dollar denominated instruments that are of high
quality and that the trustees determine present minimal credit risks as advised
by Mitchell Hutchins and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. In the event amortized cost ceases to represent fair value, the
board will take appropriate action.

In determining the approximate market value of portfolio instruments,
the Trust may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.

PERFORMANCE INFORMATION

Each fund's performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represent past performance
and are not intended to indicate future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in a fund's Performance Advertisements are
calculated according to the following formula:

n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000 to
purchase shares of a fund
T = average annual total return of shares of that fund
N = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of that period.

<PAGE>

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the Performance
Advertisements for publication. Total return, or "T" in the formula above, is
computed by finding the average annual change in the value of an initial $1,000
investment over the period. In calculating the ending redeemable value for Class
A shares, the maximum sales charge of 4.5% (4.0% for fixed income funds) is
deducted from the initial $1,000 payment and, for Class B and Class C shares,
the applicable contingent deferred sales charge imposed on a redemption of Class
B or Class C shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value.

Each fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). A fund calculates Non-Standardized Return for
specified periods of time by assuming an investment of $1,000 in fund shares and
assuming the reinvestment of all dividends and other distributions. The rate of
return is determined by subtracting the initial value of the investment from the
ending value and by dividing the remainder by the initial value. Neither initial
nor contingent deferred sales charges are taken into account in calculating
Non-Standardized Return; the inclusion of those charges would reduce the return.

YIELD. Yields used in a fund's Performance Advertisements, except for
those given for PACE Money Market Investments, are calculated by dividing the
fund's interest and dividend income attributable to the fund's shares for a
30-day period ("Period"), net of expenses attributable to such fund, by the
average number of shares of such fund entitled to receive dividends during the
Period and expressing the result as an annualized percentage (assuming
semi-annual compounding) of the net asset value per share at the end of the
Period. Yield quotations are calculated according to the following formula:

6
YIELD = 2 [( a-b/cd +1 ) - 1 ]
where: a = interest earned during the Period attributable to a
fund
b = expenses accrued for the Period attributable to a fund
(net of reimbursements)
c = the average daily number of shares of a fund
outstanding during the Period that were entitled to
receive dividends
d = the net asset value per share on the last day of the
Period

Except as noted below, in determining interest and dividend income
earned during the Period (a variable in the above formula), a fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the fund. Once
interest earned is calculated in this fashion for each debt obligation held by
the fund, interest earned during the Period is then determined by totaling the
interest earned on all debt obligations. For purposes of these calculations, the
maturity of an obligation with one or more call provisions is assumed to be the
next date on which the obligation reasonably can be expected to be called or, if
none, the maturity date. With respect to Class A shares, in calculating the
maximum offering price per share at the end of the Period (variable "d" in the
above formula), the fund's current maximum 4.5% (4.0% for fixed income funds)
initial sales charge on Class A shares is included.

Tax exempt-yield for PACE Municipal Fixed Income Investments is
calculated according to the same formula except the variable "a" equals interest
exempt from federal income tax earned during the Period. This tax-exempt yield
may then be translated into tax-equivalent yield according to the following
formula:

TAX EQUIVALENT YIELD = ( E ) + t
-------
1 - p
E = tax-exempt yield of the fund

69
<PAGE>

p = stated income tax rate

t = taxable yield of the fund

The tax-equivalent yield of PACE Municipal Fixed Income Investments
assumes a 39.6% effective federal tax rate.

PACE Money Market Investments computes its yield and effective yield
quotations using standardized methods required by the SEC. The fund from time to
time advertises (1) its current yield based on a recently ended seven-day
period, computed by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from that shareholder account, dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7), with the
resulting yield figure carried to at least the nearest hundredth of one percent,
and (2) its effective yield based on the same seven-day period by compounding
the base period return by adding 1, raising the sum to a power equal to (365/7),
and subtracting 1 from the result, according to the following formula:

365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.

OTHER INFORMATION. In Performance Advertisement, each fund may compare
its Standardized Return and/or Non-Standardized Return with data published by
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), Wiesenberger Investment Companies Services ("Wiesenberger"), Investment
Company Data, Inc. ("ICD"), or Morningstar Mutual Funds ("Morningstar") or with
the performance of appropriate recognized stock and other indices, including the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average, the Wilshire 5000 Index, other Wilshire Associates equities indices,
Frank Russell Company equity indices, the Morgan Stanley Capital International
Perspective Indices, the Salomon Smith Barney World Government bond indices, the
Lehman Brothers Bond indices, Municipal Bond Buyers Indices, 90 day Treasury
Bills, 30-year and 10-year U.S. Treasury Bonds and changes in the Consumer Price
Index as published by the U.S. Department of Commerce. The fund also may refer
in such materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of a fund and comparative mutual fund data and ratings reported in
independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE KIPLINGER LETTERS. Comparisons
in Performance Advertisements may be in graphic form.

Ratings may include criteria relating to portfolio characteristics in
addition to performance information. In connection with a ranking, a fund may
also provide additional information with respect to the ranking, such as the
particular category to which it relates, the number of funds in the category,
the criteria on which the ranking is based, and the effect of sales charges, fee
waivers and/or expense reimbursements.

Each fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends or other distributions on a fund investment are reinvested by
being paid in additional fund shares, any future income or capital appreciation
of the fund would increase the value, not only of the original fund investment,
but also of the additional fund shares received through

<PAGE>

reinvestment. As a result, the value of the fund investment would increase
more quickly than if dividends or other distributions had been paid in cash.

The funds may also compare their performance with the performance of
bank certificates of deposit (CDs) as measured by the CDA Certificate of
Deposit Index, the Bank Rate Monitor National Index and the averages of
yields of CDs of major banks published by Banxquote-Registered Trademark-
Money Markets. In comparing the funds' performance to CD performance, investors
should keep in mind that bank CDs are insured in whole or in part by an agency
of the U.S. government and offer fixed principal and fixed or variable rates of
interest, and that bank CD yields may vary depending on the financial
institution offering the CD and prevailing interest rates. Shares of the funds
are not insured or guaranteed by the U.S. government and returns and net asset
values will fluctuate. The debt securities held by the funds generally have
longer maturities than most CDs and may reflect interest rate fluctuations for
longer term debt securities. An investment in any fund involves greater risks
than an investment in a CD, and an investment in any fund other than PACE
Money Market Investments involves greater risks than an investment in a money
market fund.

Each fund may also compare its performance to general trends in the
stock and bond markets, as illustrated by the following graph prepared by
Ibbotson Associates, Chicago.

Ibbotson Chart Plot Points

Chart showing performance of S&P 500, long-term U.S. government bonds,
Treasury Bills and inflation from 1925 through 1999
<TABLE>
<CAPTION>
YEAR Common Stocks Long-Term Gov't Bonds Inflation/CPI Treasury Bills
<S> <C> <C> <C> <C>
1925 $10,000 $10,000 $10,000 $10,000
1926 $11,162 $10,777 $9,851 $10,327
1927 $15,347 $11,739 $9,646 $10,649
1928 $22,040 $11,751 $9,553 $11,028
1929 $20,185 $12,153 $9,572 $11,552
1930 $15,159 $12,719 $8,994 $11,830
1931 $8,590 $12,044 $8,138 $11,957
1932 $7,886 $14,073 $7,300 $12,072
1933 $12,144 $14,062 $7,337 $12,108
1934 $11,969 $15,472 $7,486 $12,128
1935 $17,674 $16,243 $7,710 $12,148
1936 $23,669 $17,464 $7,803 $12,170
1937 $15,379 $17,504 $8,045 $12,207
1938 $20,165 $18,473 $7,821 $12,205
1939 $20,082 $19,570 $7,784 $12,208
1940 $18,117 $20,761 $7,859 $12,208
1941 $16,017 $20,955 $8,622 $12,216
1942 $19,275 $21,629 $9,423 $12,248
1943 $24,267 $22,080 $9,721 $12,291
1944 $29,060 $22,702 $9,926 $12,332
1945 $39,649 $25,139 $10,149 $12,372
1946 $36,449 $25,113 $11,993 $12,416
1947 $38,529 $24,454 $13,073 $12,478
1948 $40,649 $25,285 $13,426 $12,580
1949 $48,287 $26,916 $13,184 $12,718
1950 $63,601 $26,932 $13,948 $12,870
1951 $78,875 $25,873 $14,767 $13,063
1952 $93,363 $26,173 $14,898 $13,279
1953 $92,439 $27,125 $14,991 $13,521
1954 $141,084 $29,075 $14,916 $13,638
1955 $185,614 $28,699 $14,972 $13,852
1956 $197,783 $27,096 $15,400 $14,193
1957 $176,457 $29,117 $15,866 $14,639
1958 $252,975 $27,342 $16,145 $14,864
1959 $283,219 $26,725 $16,387 $15,303
1960 $284,549 $30,407 $16,629 $15,711
1961 $361,060 $30,703 $16,741 $16,045
1962 $329,545 $32,818 $16,946 $16,483
1963 $404,685 $33,216 $17,225 $16,997
1964 $471,388 $34,381 $17,430 $17,598
1965 $530,081 $34,625 $17,765 $18,289
1966 $476,737 $35,889 $18,361 $19,159
1967 $591,038 $32,594 $18,920 $19,966
1968 $656,415 $32,509 $19,814 $21,005
1969 $600,590 $30,860 $21,024 $22,388
1970 $624,653 $34,596 $22,179 $23,849
1971 $714,058 $39,173 $22,924 $24,895
1972 $849,559 $41,400 $23,706 $25,851
1973 $725,003 $40,942 $25,792 $27,643
1974 $533,110 $42,725 $28,939 $29,855
1975 $731,443 $46,653 $30,969 $31,588
1976 $905,842 $54,470 $32,458 $33,193
1977 $840,766 $54,095 $34,656 $34,893
1978 $895,922 $53,458 $37,784 $37,398
1979 $1,061,126 $52,799 $42,812 $41,279
1980 $1,405,137 $50,715 $48,120 $45,917
1981 $1,336,161 $51,657 $52,421 $52,671
1982 $1,622,226 $72,507 $54,451 $58,224
1983 $1,987,451 $72,979 $56,518 $63,347
1984 $2,111,991 $84,274 $58,753 $69,586
1985 $2,791,166 $110,371 $60,968 $74,960
1986 $3,306,709 $137,446 $61,657 $79,580
1987 $3,479,675 $133,716 $64,376 $83,929
1988 $4,064,583 $146,650 $67,221 $89,257
1989 $5,344,555 $173,215 $70,345 $96,728
1990 $5,174,990 $183,924 $74,640 $104,286
1991 $6,755,922 $219,420 $76,927 $110,121
1992 $7,274,115 $237,092 $79,159 $113,982
1993 $8,000,785 $280,339 $81,334 $117,284
1994 $8,105,379 $258,556 $83,510 $121,862
1995 $11,139,184 $340,435 $85,630 $128,680
1996 $13,709,459 $337,265 $88,475 $135,381
1997 $18,272,762 $390,735 $89,897 $142,496
1998 $23,495,420 $441,777 $91,513 $149,416
1999 $28,456,286 $402,177 $93,998 $156,414
</TABLE>

The chart is shown for illustrative purposes only and does not represent any
fund's performance. These returns consist of income and capital appreciation (or
depreciation) and should not be considered an indication or guarantee of future
investment results. Year-to-year fluctuations in certain markets have been
significant and negative returns have been experienced in certain markets from
time to time. Stocks are measured by the S&P 500 Index, an unmanaged weighted
index comprising 500 widely held common stocks and varying in composition.
Unlike investors in bonds and U.S. Treasury bills, common stock investors do not
receive fixed income payments and are not entitled to repayment of principal.
These differences contribute to investment risk. Returns shown for long-term
government bonds are based on U.S. Treasury bonds with 20-year maturities.
Inflation is measured by the Consumer Price Index. The indexes are unmanaged and
are not available for investment.

----------------------
Source: Stocks, Bonds, Bills and Inflation 1999 Yearbook-TM- Ibbotson Assoc.,
Chi. (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

71
<PAGE>
TAXES

BACKUP WITHHOLDING. Each fund is required to withhold 31% of all
taxable dividends, capital gain distributions and redemption proceeds payable to
individuals and certain other non-corporate shareholders who do not provide the
fund or PaineWebber with a correct taxpayer identification number. Withholding
at that rate also is required from taxable dividends and capital gain
distributions payable to those shareholders who otherwise are subject to backup
withholding.

SALE OR EXCHANGE OF FUND SHARES. A shareholder's sale (redemption) of
fund shares may result in a taxable gain or loss, depending on whether the
shareholder receives more or less than his or her adjusted basis for the shares.
In addition, if a fund's shares are bought within 30 days before or after
selling other shares of the fund at a loss, all or a portion of that loss will
not be deductible and will increase the basis of the newly purchased shares.

CLASS A SHAREHOLDERS. A special tax rule applies when a shareholder
sells or exchanges Class A shares within 90 days of purchase and subsequently
acquires Class A shares of the same or another PaineWebber mutual fund without
paying a sales charge due to the 365-day reinstatement privilege or the exchange
privilege. In these cases, any gain on the sale or exchange of the original
Class A shares would be increased, or any loss would be decreased, by the amount
of the sales charge paid when those shares were bought, and that amount would
increase the basis of the PaineWebber mutual fund shares subsequently acquired.

CONVERSION OF CLASS B SHARES. A shareholder will recognize no gain or
loss as a result of a conversion from Class B shares to Class A shares.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each fund intends to
continue to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code. To so qualify, a fund must distribute to its
shareholders for each taxable year at least 90% of its investment company income
(consisting generally of net investment income, net short-term capital gain and,
for some funds, net gain from certain foreign currency transactions). (PACE
Municipal Fixed Income Investments must distribute to its shareholders for each
taxable year at least 90% of the sum of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and its net interest income excludable from gross income under
section 103(a) of the Internal Revenue Code.) In addition to this "Distribution
Requirement," a fund must meet several additional requirements. For each fund,
these requirements include the following: (1) the fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward currency contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) at the
close of each quarter of the fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities that are limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (3) at the close of each quarter of
the fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. If a fund failed to qualify for
treatment as a RIC for any taxable year, (1) it would be taxed as an ordinary
corporation on its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would treat
all those distributions, including distributions that otherwise would be
"exempt-interest dividends" as described below under "Taxes -- Information about
PACE Municipal Fixed Income Investments" and distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), as
taxable dividends (that is, ordinary income) to the extent of the fund's
earnings and profits. In addition, the fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment.

OTHER INFORMATION. Dividends and other distributions the fund declares
in October, November or December of any year that are payable to shareholders of
record on a date in any of those months will be deemed to have been paid by the
fund and received by the shareholders on December 31 of that year if the fund
pays the distributions during the following January.

72
<PAGE>
A portion of the dividends (whether paid in cash or in additional fund
shares) from the investment company taxable income of funds that invest in
equity securities of corporations may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion for a fund may not
exceed the aggregate dividends received by the fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.

If fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received thereon. Investors also
should be aware that if shares are purchased shortly before the record date for
a taxable dividend or capital gain distribution, the shareholder will pay full
price for the shares and receive some portion of the price back as a taxable
distribution.

Each fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for the calendar year and capital gain
net income for the one-year period ending on October 31 of that year, plus
certain other amounts.

Dividends and interest received, and gains realized, by a fund on
foreign securities may be subject to income, withholding or other taxes imposed
by foreign countries and U.S. possessions (collectively "foreign taxes") that
would reduce the return on its securities. Tax conventions between certain
countries and the United States, however, may reduce or eliminate foreign taxes,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors. If more than 50% of the value of a fund's
total assets at the close of its taxable year consists of securities of foreign
corporations, it will be eligible to, and may, file an election with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign taxes
paid by it. Pursuant to the election, the fund would treat those taxes as
dividends paid to its shareholders and each shareholder (1) would be required to
include in gross income, and treat as paid by him or her, his or her
proportionate share of those taxes, (2) would be required to treat his or her
share of those taxes and of any dividend paid by the fund that represents income
from foreign or U.S. possessions sources as his or her own income from those
sources and (3) could either deduct the foreign taxes deemed paid by him or her
in computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. A fund will report to its shareholders shortly after each taxable
year their respective shares of foreign taxes paid to, and the income from
sources within, foreign countries and U.S. possessions if it makes this
election. Individuals who have no more than $300 ($600 for married persons
filing jointly) of creditable foreign taxes included on Forms 1099 and all of
whose foreign source income is "qualified passive income" may elect each year to
be exempt from the extremely complicated foreign tax credit limitation, in which
event they would be able to claim a foreign tax credit without having to file
the detailed Form 1116 that otherwise is required.

Each fund may invest in the stock of "passive foreign investment
companies" ("PFICs") if that stock is a permissible investment. A PFIC is any
foreign corporation (with certain exceptions) that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain from disposition of that stock (collectively
"PFIC income"), plus interest thereon, even if the fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent it distributes that income
to its shareholders.

If a fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the fund will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(which it may have to distribute to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax) even if the QEF does not distribute those
earnings and gain to the fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain of its requirements.

Each fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock

<PAGE>

over a fund's adjusted basis therein as of the end of that year. Pursuant to
the election, a fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included by
the fund for prior taxable years under the election (and under regulations
proposed in 1992 that provided a similar election with respect to the stock
of certain PFICs). A fund's adjusted basis in each PFIC's stock with respect
to which it has made this election will be adjusted to reflect the amounts of
income included and deductions taken thereunder.

The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses a fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward currency contracts derived by a fund with respect
to its business of investing in securities or foreign currencies, will be
treated as qualifying income under the Income Requirement.

Certain futures and foreign currency contracts in which a fund may
invest may be subject to section 1256 of the Code ("section 1256 contracts").
Any section 1256 contracts a fund holds at the end of each taxable year
generally must be "marked-to-market" (that is, treated as having been sold at
that time for their fair market value) for federal income tax purposes, with the
result that unrealized gains or losses will be treated as though they were
realized. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of section
1256 contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. These rules may
operate to increase the amount that a fund must distribute to satisfy the
Distribution Requirement (I.E., with respect to the portion treated as
short-term capital gain), which will be taxable to the shareholders as ordinary
income, and to increase the net capital gain a fund recognizes, without in
either case increasing the cash available to the fund. A fund may elect not to
have the foregoing rules apply to any "mixed straddle" (that is, a straddle,
clearly identified by the fund in accordance with the regulations, at least one
(but not all) of the positions of which are section 1256 contracts), although
doing so may have the effect of increasing the relative proportion of net
short-term capital gain (taxable as ordinary income) and thus increasing the
amount of dividends that must be distributed.

Gains or losses (1) from the disposition of foreign currencies,
including forward currency contracts, (2) on the disposition of each
foreign-currency-denominated debt security that are attributable to fluctuations
in the value of the foreign currency between the dates of acquisition and
disposition of the security and (3) that are attributable to exchange rate
fluctuations between the time a fund accrues interest, dividends or other
receivables, or expenses or other liabilities, denominated in a foreign currency
and the time the fund actually collects the receivables or pays the liabilities,
generally will be treated as ordinary income or loss. These gains, referred to
under the Code as "section 988" gains or losses, will increase or decrease the
amount of a fund's investment company taxable income available to be distributed
to its shareholders as ordinary income, rather than increasing or decreasing the
amount of its net capital gain. If section 988 losses exceed other investment
company taxable income during a taxable year, a fund would not be able to
distribute any dividends, and any distributions made during that year before the
losses were realized would be recharacterized as a return of capital to
shareholders, rather than as a dividend, thereby reducing each shareholder's
basis in his or her fund shares.

Offsetting positions in any actively traded security, option, futures
or forward contract entered into or held by a fund may constitute a "straddle"
for federal income tax purposes. Straddles are subject to certain rules that may
affect the amount, character and timing of a fund's gains and losses with
respect to positions of the straddle by requiring, among other things, that (1)
loss realized on disposition of one position of a straddle be deferred to the
extent of any unrealized gain in an offsetting position until the latter
position is disposed of, (2) the fund's holding period in certain straddle
positions not begin until the straddle is terminated (possibly resulting in gain
being treated as short-term rather than long-term capital gain) and (3) losses
recognized with respect to certain straddle positions, that otherwise would
constitute short-term capital losses, be treated as long-term capital losses.
Applicable regulations also provide certain "wash sale" rules, which apply to
transactions where a position is sold at a loss and a new offsetting position is
acquired within a prescribed period, and "short sale" rules applicable to
straddles. Different elections are available to the funds, which may mitigate
the effects of the straddle rules, particularly with respect to "mixed
straddles" (I.E., a straddle of which at least one, but not all, positions are
section 1256 contracts).

74
<PAGE>

When a covered call option written (sold) by a fund expires, it will
realize a short-term capital gain equal to the amount of the premium it received
for writing the option. When a fund terminates its obligations under such an
option by entering into a closing transaction, it will realize a short-term
capital gain (or loss), depending on whether the cost of the closing transaction
is less (or more) than the premium it received when it wrote the option. When a
covered call option written by a fund is exercised, the fund will be treated as
having sold the underlying security, producing long-term or short-term capital
gain or loss, depending on the holding period of the underlying security and
whether the sum of the option price received on the exercise plus the premium
received when it wrote the option is more or less than the basis of the
underlying security.

If a fund has an "appreciated financial position"-- generally, an
interest (including an interest through an option, futures or forward currency
contract or short sale) with respect to any stock, debt instrument (other than
"straight debt") or partnership interest the fair market value of which exceeds
its adjusted basis--and enters into a "constructive sale" of the position, the
fund will be treated as having made an actual sale thereof, with the result that
gain will be recognized at that time. A constructive sale generally consists of
a short sale, an offsetting notional principal contract or a futures or forward
currency contract entered into by a fund or a related person with respect to the
same or substantially identical property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of the
underlying property or substantially identical property will be deemed a
constructive sale. The foregoing will not apply, however, to a fund's
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
that year and the fund holds the appreciated financial position unhedged for 60
days after that closing (I.E., at no time during that 60-day period is the
fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially identical or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale or granting an option to buy substantially identical
stock or securities).

A fund that acquires zero coupon or other securities issued with
original issue discount ("OID") and/or Treasury inflation-protected securities
("TIPS"), on which principal is adjusted based on changes in the Consumer Price
Index, must include in its gross income the OID that accrues on those
securities, and the amount of any principal increases on TIPS, during the
taxable year, even if the fund receives no corresponding payment on them during
the year. Similarly, a fund that invests in payment-in-kind ("PIK") securities
must include in its gross income securities it receives as "interest" on those
securities. Each fund has elected similar treatment with respect to securities
purchased at a discount from their face value ("market discount"). Because a
fund annually must distribute substantially all of its investment company
taxable income, including any accrued OID, market discount and other non-cash
income, to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax, it may be required in a particular year to distribute as a dividend
an amount that is greater than the total amount of cash it actually receives.
Those distributions would have to be made from the fund's cash assets or from
the proceeds of sales of portfolio securities, if necessary. The fund might
realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain.

INFORMATION ABOUT PACE MUNICIPAL FIXED INCOME INVESTMENTS. Dividends
paid by PACE Municipal Fixed Income Investments will qualify as "exempt-interest
dividends," and thus will be excludable from gross income for federal income tax
purposes by its shareholders, if the fund satisfies the requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of securities the interest on which is excludable from
gross income under section 103(a); the fund intends to continue to satisfy this
requirement. The aggregate dividends designated as exempt-interest dividends for
any year by the fund may not exceed its net tax-exempt income for the year.
Shareholders' treatment of dividends from the fund under state and local income
tax laws may differ from the treatment thereof under the Internal Revenue Code.
Investors should consult their tax advisers concerning this matter.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by IDBs or PABs should consult their
tax advisers before purchasing fund shares because, for users of certain of
these facilities, the interest on those bonds is not exempt from federal income
tax. For these purposes, "substantial user" is defined to include a "non-exempt
person" who regularly uses in a trade or business a part of a facility financed
from the proceeds of IDBs or PABs.

75
<PAGE>

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as the fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from the fund still
would be tax-exempt to the extent described above; they would only be included
in the calculation of whether a recipient's income exceeded the established
amounts.

If fund shares are sold at a loss after being held for six months or
less, the loss will be disallowed to the extent of any exempt-interest dividends
received on those shares, and any loss not disallowed will be treated as
long-term, instead of short-term, capital loss to the extent of any capital gain
distributions received thereon. Investors also should be aware that if shares
are purchased shortly before the record date for a capital gain distribution,
the shareholder will pay full price for the shares and receive some portion of
the price back as a taxable distribution.

If the fund invests in instruments that generate taxable interest
income, under the circumstances described in the Prospectus and in the
discussion of municipal market discount bonds below, the portion of any fund
dividend attributable to the interest earned thereon will be taxable to the
fund's shareholders as ordinary income to the extent of its earnings and
profits, and only the remaining portion will qualify as an exempt-interest
dividend. The respective portions will be determined by the "actual earned"
method, under which the portion of any dividend that qualifies as an
exempt-interest dividend may vary, depending on the relative proportions of
tax-exempt and taxable interest earned during the dividend period. Moreover, if
the fund realizes capital gain as a result of market transactions, any
distributions of the gain will be taxable to its shareholders.

The fund may invest in municipal bonds that are purchased, generally
not on their original issue, with market discount (that is, at a price less than
the principal amount of the bond or, in the case of a bond that was issued with
original issue discount, a price less than the amount of the issue price plus
accrued original issue discount) ("municipal market discount bonds"). If a
bond's market discount is less that the product of (1) 0.25% of the redemption
price at maturity times (2) the number of complete years to maturity after the
fund acquired the bond, then no market discount is considered to exist. Gain on
the disposition of a municipal market discount bond purchased by the fund after
April 30, 1993 (other than a bond with a fixed maturity date within one year
from its issuance), generally is treated as ordinary (taxable) income, rather
than capital gain, to the extent of the bond's accrued market discount at the
time of disposition. Market discount on such a bond generally is accrued
ratably, on a daily basis, over the period from the acquisition date to the date
of maturity. In lieu of treating the disposition gain as above, the fund may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.

OTHER INFORMATION

DELAWARE BUSINESS TRUST. The Trust is an entity of the type commonly
known as a Delaware business trust. Although Delaware law statutorily limits the
potential liabilities of a Delaware business trust's shareholders to the same
extent as it limits the potential liabilities of a Delaware corporation,
shareholders of a fund could, under certain conflicts of laws jurisprudence in
various states, be held personally liable for the obligations of the Trust or a
fund. However, the trust instrument of the Trust disclaims shareholder liability
for acts or obligations of the Trust or its series (the funds) and requires that
notice of such disclaimer be given in each written obligation made or issued by
the trustees or by any officers or officer by or on behalf of the Trust, a
series, the trustees or any of them in connection with the Trust. The trust
instrument provides for indemnification from a fund's property for all losses
and expenses of any fund shareholder held personally liable for the obligations
of the fund. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations, a possibility that Mitchell
Hutchins believes is remote and not material. Upon payment of any liability
incurred by a shareholder solely by reason of being or having been a shareholder
of a fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the fund. The trustees intend to
conduct the operations of the funds in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the funds.

In the event any of the initial shares of a fund are redeemed during
the five-year amortization period, the redemption proceeds will be reduced by a
pro rata portion of any unamortized deferred organizational expenses in

76
<PAGE>

the same proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.

CLASSES OF SHARES. A share of each class of a fund represents an
identical interest in that fund's investment portfolio and has the same rights,
privileges and preferences. However, each class may differ with respect to sales
charges, if any, distribution and/or service fees, if any, other expenses
allocable exclusively to each class, voting rights on matters exclusively
affecting that class, and its exchange privilege, if any. The different sales
charges and other expenses applicable to the different classes of shares of the
funds will affect the performance of those classes. Each share of a fund is
entitled to participate equally in dividends, other distributions and the
proceeds of any liquidation of that fund. However, due to the differing expenses
of the classes, dividends and liquidation proceeds on Class A, B, C, P and Y
shares will differ.

VOTING RIGHTS. Shareholders of each fund are entitled to one vote for
each full share held and fractional votes for fractional shares held. Voting
rights are not cumulative and, as a result, the holders of more than 50% of all
the shares of the funds as a group may elect all of the trustees of the Trust.
The shares of each series of the Trust will be voted separately, except when an
aggregate vote of all the series of the Trust is required by law.

The Trust does not hold annual meetings. Shareholders of record of no
less than two-thirds of the outstanding shares of the Trust may remove a trustee
through a declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose. A meeting will be called to vote on the removal
of a trustee at the written request of holders of 10% of the outstanding shares
of the Trust.

CLASS-SPECIFIC EXPENSES. Each fund may determine to allocate certain of
its expenses (in addition to service and distribution fees) to the specific
classes of its shares to which those expenses are attributable. For example,
Class B and Class C shares bear higher transfer agency fees per shareholder
account than those borne by Class A, Class P or Class Y shares. The higher fee
is imposed due to the higher costs incurred by the transfer agent in tracking
shares subject to a contingent deferred sales charge because, upon redemption,
the duration of the shareholder's investment must be determined in order to
determine the applicable charge. Although the transfer agency fee will differ on
a per account basis as stated above, the specific extent to which the transfer
agency fees will differ between the classes as a percentage of net assets is not
certain, because the fee as a percentage of net assets will be affected by the
number of shareholder accounts in each class and the relative amounts of net
assets in each class.

PRIOR NAMES. Prior to December 1, 1997, the Trust's name was "Managed
Accounts Services Portfolio Trust."

CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at 1776 Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for each fund
and employs foreign sub-custodians approved by the board in accordance with
applicable requirements under the Investment Company Act to provide custody of
the funds' foreign assets. PFPC, a subsidiary of PNC Bank, N.A., serves as each
fund's transfer and dividend disbursing agent. It is located at 400 Bellevue
Parkway, Wilmington, DE 19809.

COUNSEL. The law firm Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York serves as counsel to the Trust. Willkie Farr & Gallagher also
acts as counsel to PaineWebber and Mitchell Hutchins in connection with other
matters.

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, serves as independent auditors for the Trust.

FINANCIAL STATEMENTS

The Trust's Annual Report to Shareholders for its fiscal year ended
July 31, 2000 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors appearing
therein are incorporated by this reference into the SAI.

77
<PAGE>

APPENDIX

RATINGS INFORMATION

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues; Aa.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than in Aaa securities; A. Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future; Baa. Bonds
which are rated Baa are considered as medium-grade obligations, I.E., they are
neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well; Ba. Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa. Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca. Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category, the modifier
2 indicates a mid-range ranking, and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

DESCRIPTION OF S&P CORPORATE DEBT RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong; A. An obligation rated
A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment
on the obligation is still strong; BBB. An obligation rated BBB exhibits
adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation; BB, B, CCC, CC,
C. Obligations rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and
C the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions; BB. An obligation rated BB is less
vulnerable to nonpayment than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation; B. An obligation rated B is
more vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment
on the obligation; CCC. An obligation rated CCC is

<PAGE>

currently vulnerable to nonpayment and is dependent upon favorable business,
financial and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation; CC. An obligation rated CC is
currently highly vulnerable to nonpayment; C. The C rating may be used to
cover a situation where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued;
D. An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

CI. The rating CI is reserved for income bonds on which no interest is
being paid.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

r. This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS

PRIME-1. Issuers assigned this highest rating have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by the following characteristics: Leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well established access to
a range of financial markets and assured sources of alternate liquidity.

PRIME-2. Issuers assigned this rating have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

PRIME-3. Issuers assigned this rating have an acceptable capacity for
repayment of senior short-term obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

NOT PRIME. Issuers assigned this rating do not fall within any of the
Prime rating categories.

DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS

A-2
<PAGE>

the obligation. C. A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. D. A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues; Aa.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than in Aaa securities; A. Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future; Baa. Bonds
which are rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well; Ba. Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa. Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca. Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category, the modifier
2 indicates a mid-range ranking, and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

DESCRIPTION OF S&P MUNICIPAL DEBT RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong; A. An obligation rated
A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment
on the obligation is still strong; BBB. An obligation rated BBB exhibits
adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation; BB, B, CCC, CC,
C, D. Obligations rated BB, B, CCC, CC and C are regarded as having
significant speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions; BB. An obligation
rated BB is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation; B. An
obligation rated B is

A-3
<PAGE>

more vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment
on the obligation; CCC. An obligation rated CCC is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation; CC. An obligation rated CC is
currently highly vulnerable to nonpayment; C. The C rating may be used to
cover a situation where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued;
D. An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

CI. The rating CI is reserved for income bonds on which no interest is
being paid.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

DESCRIPTION OF MOODY'S RATINGS OF SHORT-TERM OBLIGATIONS

There are three categories for short-term obligations that define an investment
grade situation. These are designated Moody's Investment Grade as MIG 1 (best
quality) through MIG-3. Short-term obligations of speculative quality are
designated SG.

In the case of variable rate demand obligations (VRDOs), a two-component rating
is assigned. The first element represents an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the other
represents an evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of a VRDO is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g. Aaa/NR or NR/VMIG 1.

MIG ratings terminate at the retirement of the obligation, while a VMIG rating
expiration will be a function of each issue's specific structural or credit
features.

MIG-1/VMIG-1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. MIG-2/VMIG-2. This designation
denotes high quality. Margins of protection are ample although not so large as
in the preceding group. MIG-3/VMIG-3. This designation denotes favorable
quality. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established. SG. This designation denotes
speculative quality. Debt Instruments in this category lack margins of
protection.

DESCRIPTION OF S&P'S RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER
SHORT-TERM LOANS:

A S&P note rating reflects the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making the assessment.

--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).

--Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).

SP-1. Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation. SP-2.
Satisfactory capacity to pay principal and interest with some vulnerability to

A-4
<PAGE>

adverse financial and economic changes over the term of the notes. SP-3.
Speculative capacity to pay principal and interest.

DESCRIPTION OF SHORT-TERM DEBT COMMERCIAL PAPER RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

PRIME-1. Issuers (or supporting institutions) assigned this highest
rating have a superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by the following
characteristics: Leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; well
established access to a range of financial markets and assured sources of
alternate liquidity.

PRIME-2. Issuers (or supporting institutions) assigned this rating have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

PRIME-3. Issuers (or supporting institutions) assigned this rating have
an acceptable capacity for repayment of senior short-term obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.

NOT PRIME. Issuers assigned this rating do not fall within any of the
Prime rating categories.

Commercial paper rated by S&P have the following characteristics:

A-1. A short-term obligation rated A-1 is rated in the highest category
by S&P. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong. A-2. A short-term
obligation rated A-2 is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory. A-3. A short-term obligation rated
A-3 exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation. B. A
short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitments on the obligation. C. A short-term obligation rated C is currently
vulnerable to nonpayment and is dependent upon favorable business, financial and
economic conditions for the obligor to meet its financial commitment on the
obligation. D. A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

A-5

<PAGE>

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
REFERRED TO IN THE PROSPECTUS AND THIS STATEMENT OF
ADDITIONAL INFORMATION. THE FUNDS AND THEIR DISTRIBUTOR
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE PROSPECTUS AND THIS
STATEMENT OF ADDITIONAL INFORMATION ARE NOT AN OFFER TO
SELL SHARES OF THE FUNDS IN ANY JURISDICTION WHERE THE
FUNDS OR THEIR DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE
SHARES.

------------
PaineWebber PACE
Select Advisors Trust

------------------------------------------

Preliminary
Statement of Additional Information

November , 2000

------------------------------------------

<PAGE>

PART C. OTHER INFORMATION

Item 23. EXHIBITS

<TABLE>
<S> <C>
(1) (a) Certificate of Business Trust effective September 9,
1994 1/

(b) Amended and Restated Trust Instrument (to be filed)

(2) Amended and Restated By-Laws (to be filed)

(3) Instruments defining the rights of holders of Registrant's
shares of beneficial interest 2/

(4) (a) Management Agreement 3/

(b) Sub-Advisory Agreements with PIMCO Investment Management
Company LLC, Martin Currie Inc., and Schroder Investment
Management North America Inc. 3/

(d) Sub-Advisory Agreement with Standish, Ayer & Wood, Inc.
dated as of October 10, 2000 (to be filed)

(e) Sub-Advisory Agreement with Rogge Global Partners plc
dated as of August 28, 1996 4/

(f) Sub-Advisory Agreement with Fischer Francis Trees & Watts,
Inc. and its affiliates dated as of October 10, 2000 (to
be filed)

(g) Sub-Advisory Agreement with State Street Global Advisors
dated as of October 10, 2000 (to be filed)

(h) Sub-Advisory Agreement with Institutional Capital
Corporation dated as of October 10, 2000 (to be filed)

(i) Sub-Advisory Agreement with Westwood Management
Corporation dated as of October 10, 2000 (to be filed)

(j) Sub-Advisory Agreement with Alliance Capital Management
L.P. dated as of November 10, 1997 5/

(k) Sub-Advisory Agreement with Ariel Capital Management, Inc.
dated as of October 4, 1999 1/

(l) Sub-Advisory Agreement with ICM Asset Management, Inc.
dated as of October 10, 2000 (to be filed)

(m) Sub-Advisory Agreement with Delaware Management Company,
Inc. dated as of December 16, 1996 5/

(5) (a) Distribution Agreement (to be filed)

(b) Dealer Agreement (to be filed)

(6) Bonus, profit sharing or pension plans - none

(7) Custodian Agreement 1/

(8) Transfer Agency Agreement 4/

(9) (a) Opinion and consent of Counsel on legality of shares
(to be filed)

(b) Consent of Willkie Farr & Gallagher (to be filed)

(10) Other opinions, appraisals, rulings and consents: Auditors'
consent (to be filed)

(11) Financial Statements omitted from prospectus - none

(12) Letter of investment intent 6/

C-1
<PAGE>

(13) Plan pursuant to Rule 12b-1

a) Plan of Distribution pursuant to Rule 12b-1 with respect
to Class A shares (to be filed)

b) Plan of Distribution pursuant to Rule 12b-1 with respect
to Class B shares (to be filed)

c) Plan of Distribution pursuant to Rule 12b-1 with respect
to Class C shares (to be filed)

(14) Plan pursuant to Rule 18f-3 (to be filed)

(15) Code of Ethics

a) Code of Ethics for Registrant and Mitchell Hutchins Asset
Management Inc. (manager and principal distributor) 7/

b) Code of Ethics for PIMCO Investment Management Company LLC (to be
filed)

c) Code of Ethics for Metropolitan West Asset Management LLC (to be
filed)

d) Code of Ethics for Standish, Ayer & Wood, Inc. (to be filed)

e) Code of Ethics for Rogge Global Partners plc (to be filed)

f) Code of Ethics for Fischer Francis Trees & Watts, Inc. and its
affiliates (to be filed)

g) Code of Ethics for State Street Global Advisors (to be filed)

h) Code of Ethics for Institutional Capital Corporation (to be
filed)

i) Code of Ethics for Westwood Management Corporation (to be filed)

j) Code of Ethics for Alliance Capital Management L.P. (to be filed)

k) Code of Ethics for Delaware Management Company, Inc. (to be
filed)

l) Code of Ethics for Martin Currie Inc. (to be filed)

m) Code of Ethics for Schroder Investment Management North America
Inc. (to be filed)

(16) Powers of Attorney for Ms. Alexander and Messrs. Beaubien,
Bewkes, Hewitt, Janklow, Storms, White and Woodward (filed
herewith)
</TABLE>

-----------------

1/ Incorporated by reference to Post-Effective Amendment No. 8 to
Registration Statement of PaineWebber PACE Select Advisors Trust on
Form N-1A, File No. 33-87254, filed December 1, 1999.

2/ Incorporated by reference from Articles IV, VI, IX and X of
Registrant's Trust Instrument and from Articles V and IX of
Registrant's By-Laws.

3/ Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement of PaineWebber PACE Select Advisors Trust on
Form N-1A, File No. 33-87254, filed February 23, 1996.

4/ Incorporated by reference to Post-Effective Amendment No. 2 to
Registration Statement of PaineWebber PACE Select Advisors Trust on
Form N-1A, File No. 33-87254, filed October 16, 1996.

5/ Incorporated by reference to Post-Effective Amendment No. 4 to
Registration Statement of PaineWebber PACE Select Advisors Trust on
Form N-1A, File No. 33-87254, filed November 13, 1997.

6/ Incorporated by reference to Registration Statement of PaineWebber PACE
Select Advisors Trust on Form N-1A, File No. 33-87254, filed June 19,
1995.

7/ Incorporated by reference to Post-Effective Amendment No. 29 to
Registration Statement of PaineWebber Mutual Fund Trust, File No.
2-98149, filed June 27, 2000.

C-2
<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

Item 25. INDEMNIFICATION

Article IX, Section 2 of the Trust Instrument of PaineWebber PACE
Select Advisors Trust ("Trust Instrument") provides that the Registrant will
indemnify its trustees, officers, employees, investment managers and
administrators and investment advisers to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee, officer, employee, investment manager and
administrator or investment adviser; provided that (i) no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
or did not act in good faith in the reasonable belief that his or her action was
in the best interest of the Registrant, or (ii) no such person shall be
indemnified where there has been a settlement, unless there has been a
determination that such person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office; such determination shall be made (A) by the court or other
body approving the Settlement, (B) by the vote of at least a majority of those
trustees who are neither Interested Persons of the trust nor are parties to the
proceeding based upon a review of readily available facts (as opposed to a full
trial-type inquiry), or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry).

"Interested Person" has the meaning provided in the Investment Company
Act of 1940, as amended from time to time. Article IX, Section 2(c) of the Trust
Instrument also provides that the Registrant may maintain insurance policies
covering such rights of indemnification.

Article IX, Section 1 of the Trust Instrument provides that the
trustees and officers of the Registrant (i) shall not be personally liable to
any person contracting with, or having a claim against, the Trust, and (ii)
shall not be liable for neglect or wrongdoing by them or any officer, agent,
employee or investment adviser of the Registrant, provided they have exercised
reasonable care and have acted under the reasonable belief that their actions
are in the best interest of the Registrant.

Article X, Section 2 of the Trust Instrument provides that, subject to
the provisions of Article IX, the trustees shall not be liable for (i) errors of
judgment or mistakes of fact or law or (ii) any act or omission made in
accordance with advice of counsel or other experts, or (iii) failure to follow
such advice, with respect to the meaning and operation of the Trust Instrument.

Registrant undertakes to carry out all indemnification provisions of
its Trust Instrument and By-laws in accordance with Investment Company Act
Release No. 11330 (September 4, 1980) and successor releases.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

C-3
<PAGE>

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is a
registered investment adviser and serves as manager for all series of the Trust
and investment adviser for PACE MONEY MARKET INVESTMENTS. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber Incorporated, which is
in turn wholly owned by Paine Webber Group Inc., a publicly owned financial
services holding company. Mitchell Hutchins is primarily engaged in the
investment advisory business. Information on the officers and directors of
Mitchell Hutchins is included in its Form ADV filed with the Securities and
Exchange Commission (registration number 801-13219) and is incorporated herein
by reference. Mitchell Hutchins, with the approval of the Trust's board of
trustees, selects investment advisers for the other series of the Trust. The
following companies, all of which are registered investment advisers, serve as
investment advisers for the other series.

Pacific Investment Management Company LLC ("PIMCO") serves as
investment adviser for PACE GOVERNMENT SECURITIES FIXED INCOME INVESTMENTS and
PACE STRATEGIC FIXED INCOME INVESTMENTS. Information on the officers and
directors of PIMCO is included in its Form ADV filed with the Securities and
Exchange Commission (registration number 801-7260) and is incorporated herein by
reference.

Metropolitan West Asset Management, LLC ("MWAM") serves as investment
adviser for PACE INTERMEDIATE FIXED INCOME INVESTMENTS. Information on the
officers and directors of MWAM is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-53332) and is
incorporated herein by reference.

Standish, Ayer & Wood, Inc. ("Standish") serves as investment adviser
for PACE MUNICIPAL FIXED INCOME INVESTMENTS. Information on the officers and
directors of Standish is included in its Form ADV filed with the Securities and
Exchange Commission (registration number 801- ) and is incorporated herein
by reference.

Rogge Global Partners plc serves as an investment adviser for PACE
GLOBAL FIXED INCOME INVESTMENTS. Information on the officers and directors of
Rogge Global Partners is included in its Form ADV filed with the Securities and
Exchange Commission (registration number 801-25482) and is incorporated herein
by reference.

Fischer Francis Trees & Watts, Inc. ("FFTW(NY)")and its affiliates
serve as investment advisers for PACE GLOBAL FIXED INCOME INVESTMENTS.
Information on the officers and directors of FFTW(NY) is included in its Form
ADV filed with the Securities and Exchange Commission (registration number 801-
10577) and is incorporated herein by reference. Information about the
affiliates of FFTW(NY) is included in their Form ADVs filed with the SEC and is
incorporated herein by reference. The registration number for Fisher Francis
Trees & Watts is 801- and the registration number for Fischer Francis
Trees & Watts Pte Ltd (Singapore) is 801- .

State Street Global Advisors (SSgA), the investment management business
of State Street Bank and Trust Company, serves as an investment adviser for PACE
LARGE COMPANY VALUE EQUITY INVESTMENTS and PACE LARGE COMPANY GROWTH EQUITY
INVESTMENTS . Information on the officers and directors of SSgA is included in
its Form ADV filed with the Securities and Exchange Commission (registration
number 801- ) and is incorporated herein by reference.

Institutional Capital Corporation ("ICAP") serves as an investment
adviser for PACE LARGE COMPANY VALUE EQUITY INVESTMENTS. Information on the
officers and directors of ICAP is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-40779) and is
incorporated herein by reference.

Westwood Management Corporation ("Westwood") serves as an investment
adviser for PACE LARGE COMPANY VALUE EQUITY INVESTMENTS. Information on the
officers and directors of Westwood is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-18727) and is
incorporated herein by reference.

Alliance Capital Management L.P. ("Alliance Capital") serves as an
investment adviser for PACE LARGE COMPANY GROWTH EQUITY INVESTMENTS. Information
on the officers and directors of Alliance Capital is included in its Form ADV
filed with the Securities and Exchange Commission (registration number
801-32361) and is incorporated herein by reference.

C-4
<PAGE>

Ariel Capital Management, Inc. ("Ariel") serves as an investment
adviser for PACE SMALL/MEDIUM COMPANY GROWTH VALUE INVESTMENTS. Information on
the officers and directors of Ariel is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-18767) and is
incorporated herein by reference.

ICM Asset Management, Inc. ("ICM") serves as an investment adviser for
PACE SMALL/MEDIUM VALUE EQUITY INVESTMENTS. Information on the officers and
directors of ICM is included in its Form ADV filed with the Securities and
Exchange Commission (registration number 801-16670) and is incorporated herein
by reference.

Delaware Management Company, Inc. ("Delaware Management") serves as
investment adviser for PACE SMALL/MEDIUM COMPANY GROWTH EQUITY INVESTMENTS.
Information on the officers and directors of Delaware is included in its Form
ADV filed with the Securities and Exchange Commission (registration number
801-32108) and is incorporated herein by reference.

Martin Currie Inc. serves as investment adviser for PACE INTERNATIONAL
EQUITY INVESTMENTS. Information on the officers and directors of Martin Currie
Inc. is included in its Form ADV filed with the Securities and Exchange
Commission (registration number 801-14261) and is incorporated herein by
reference.

Schroder Investment Management North America Inc. ("SIMNA") serves as
investment adviser for PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS.
Information on the officers and directors of SIMNA is included in its Form ADV
filed with the Securities and Exchange Commission (registration number
801-15834) and is incorporated herein by reference.

Item 27. PRINCIPAL UNDERWRITERS

(a) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following other investment companies:

ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.

INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.

MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES

MITCHELL HUTCHINS SECURITIES TRUST
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.

(b) Mitchell Hutchins is the principal underwriter for the Registrant.
PaineWebber acts as dealer for the shares of the Registrant. The directors and
officers of Mitchell Hutchins, their principal business addresses and their
positions and offices with Mitchell Hutchins are identified in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219). The directors and officers of PaineWebber, their principal business
addresses and their positions and offices with PaineWebber are identified in its
Form ADV, as filed with the Securities and Exchange Commission (registration
number 801-7163). The foregoing information is hereby

C-5
<PAGE>

incorporated by reference. The information set forth below is furnished for
those directors and officers of Mitchell Hutchins or PaineWebber who also
serve as trustees or officers of the Registrant.

<TABLE>
<CAPTION>
Position and Offices with
Name Position With Registrant Underwriter or Dealer
----- ------------------------ ---------------------------------
<S> <C> <C>
Margo N. Alexander* Trustee and President Chairman, Chief Executive Officer and a
Director of Mitchell Hutchins and
Executive Vice President and a Director
of PaineWebber

Brian M. Storms* Trustee President and Chief Operating Officer of
Mitchell Hutchins.

Thomas Disbrow*** Vice President and Assistant First Vice President and a Senior
Treasurer Manager of the Mutual Fund Finance
Department of Mitchell Hutchins

Amy R. Doberman** Vice President and Secretary General Counsel of Mitchell Hutchins

Joanne M. Kilkeary*** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins

John J. Lee*** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins

Kevin J. Mahoney*** Vice President and Assistant First Vice President and a Senior
Treasurer Manager of the Mutual Fund Finance
Department of Mitchell Hutchins

Ann E. Moran*** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins

Dianne E. O'Donnell** Vice President and Assistant Senior Vice President and Deputy General
Secretary Counsel of Mitchell Hutchins

Paul H. Schubert*** Vice President and Treasurer Senior Vice President and Director of
the Mutual Fund Finance Department of
Mitchell Hutchins

Barney A. Taglialatela*** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins
</TABLE>

-------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas,
New York, New York 10019-6028.

*** This person's business address is Newport Center III, 499 Washington Blvd.,
14th Floor, Jersey City, New Jersey 07310-1998.

Item 28. LOCATION OF ACCOUNTS AND RECORDS

The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in
the physical possession of Mitchell Hutchins at 1285 Avenue of the Americas,
New York, New York 10019 and 51 West 52nd Street, New York, NY 10019-6114.
All other accounts, books and documents required by Rule 31a-1 are maintained
in the physical possession of Registrant's transfer agent and custodian.

C-6
<PAGE>

Item 29. MANAGEMENT SERVICES

Not applicable.

Item 30. UNDERTAKINGS

None.

C-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 28th day of September, 2000.

PAINEWEBBER PACE SELECT ADVISORS TRUST

By: /s/ Keith A. Weller
--------------------------------------
Keith A. Weller
Vice President and Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in
the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----
<S> <C>
/s/ Margo N. Alexander President and Trustee September 28, 2000
------------------------------------ (Chief Executive Officer)
Margo N. Alexander *

/s/ David J. Beaubien Trustee September 28, 2000
------------------------------------
David J. Beaubien *

/s/ E. Garrett Bewkes, Jr. Trustee September 28, 2000
---------------------------
E. Garrett Bewkes, Jr. *

/s/ William W. Hewitt, Jr. Trustee September 28, 2000
---------------------------
William W. Hewitt, Jr. *

/s/ Morton L. Janklow Trustee September 28, 2000
------------------------------------
Morton L. Janklow *

/s/ Brian M. Storms Trustee September 28, 2000
------------------------------------
Brian M. Storms *

/s/ William D. White Trustee September 28, 2000
------------------------------------
William D. White *

/s/ M. Cabell Woodward, Jr. Trustee September 28, 2000
------------------------------------
M. Cabell Woodward, Jr. *

/s/ Paul H. Schubert Vice President and Treasurer (Chief September 28, 2000
------------------------------------ Financial and Accounting Officer)
Paul H. Schubert

</TABLE>

---------------------------------
* Signatures affixed by Elinor W. Gammon pursuant to powers of attorney
dated September 12, 2000 and filed herewith as an Exhibit to this
Post-Effective Amendment.

<PAGE>

PAINEWEBBER PACE SELECT ADVISORS TRUST

EXHIBIT INDEX

Exhibit
Number
------
<S> <C>
(1) (a) Certificate of Business Trust effective September 9,
1994 1/