PACE Select Advisors Trust

Transcription

1 PACE Select Advisors Trust April 30, 2018 Supplement to the prospectuses relating to Class A, Class C and Class Y shares (the Multi-Class Prospectus ) and Class P shares (the Class P Prospectus ) (collectively, the Prospectuses ) and the Statement of Additional Information ( SAI ), each dated November 28, 2017, as supplemented. Includes: PACE Small/Medium Co Value Equity Investments PACE International Emerging Markets Equity Investments Dear Investor, The purpose of this supplement is to update certain information for PACE Select Advisors Trust (the Trust ). First, this supplement updates certain information regarding the portfolio management team for Systematic Financial Management, L.P. ( Systematic ), a subadvisor to PACE Small/Medium Co Value Equity Investments, a series of the Trust. Effective as of April 1, 2018, Aman Patel has been added as a portfolio manager for the portion of the fund s assets managed by Systematic. Second, this supplement updates certain information regarding the portfolio management team for William Blair Investment Management, LLC ( William Blair ), a subadvisor to PACE International Emerging Markets Equity Investments, a series of the Trust. Effective as of February 28, 2018, Jeffrey A. Urbina ceased to be a portfolio manager for the portion of the fund s assets managed by William Blair. I. PACE Small/Medium Co Value Equity Investments Effective as of April 1, 2018, the Prospectuses and SAI are revised as follows: The section captioned PACE Small/Medium Co Value Equity Investments Fund summary and subcaptioned Portfolio management team on page 49 of the Multi-Class Prospectus and page 48 of the Class P Prospectus is revised by replacing the third bullet point of that section with the following: Systematic Ronald M. Mushock, Managing Partner and Lead Portfolio Manager, and D. Kevin McCreesh, Chief Investment Officer and Managing Partner, have been portfolio managers of the fund since Aman Patel, Partner, has been a portfolio manager of the fund since April The section captioned Management and sub-captioned PACE Small/Medium Co Value Equity Investments beginning on page 148 of the Multi-Class Prospectus and page 143 of the Class P ZS-953

2 Prospectus is revised by replacing the second and third sentences of the third paragraph of that section with the following: Ronald M. Mushock, D. Kevin McCreesh and Aman Patel are primarily responsible for the day-to-day management of the fund s assets allocated to Systematic. Messrs. Mushock and McCreesh have held their responsibilities advising the fund since May Mr. Patel has held his responsibilities advising the fund since April The same section of each Prospectus is revised by adding the following as the last sentences of the paragraph: Mr. McCreesh became a Partner at Systematic in Mr. Patel serves as a portfolio manager and has been involved with the portfolio management of Systematic s small/mid cap value equity and mid cap value equity portfolios since Mr. Patel joined Systematic in 2002 as an equity research analyst initially covering the basic materials, energy and utilities sectors. Mr. Patel became a Partner at Systematic in The section captioned Portfolio managers and sub-captioned PACE Small/Medium Co Value Equity Investments Systematic Financial Management, L.P. beginning on page 181 of the SAI is revised by replacing the first paragraph of that section in its entirety with the following: Systematic uses a team approach in managing its portion of the fund. Ronald Mushock, D. Kevin McCreesh and Aman Patel are the portfolio managers primarily responsible for the day-to-day management of the portion of the fund allocated to Systematic. The following tables provide information relating to other accounts managed by Ronald Mushock and D. Kevin McCreesh as of July 31, 2017 and by Aman Patel as of March 31, 2018: The same section of the SAI is revised by adding the following as the third table of that section: Aman Patel: Registered Other pooled investment companies investment vehicles Other accounts Number of Accounts Managed Number of Accounts Managed with Performance-Based Advisory Fees Assets Managed (in millions) $774 $0 $1,178 Assets Managed with Performance-Based Advisory Fees (in millions) $0 $0 $75 The same section of the SAI is revised by replacing the second sentence of the sixth paragraph with the following: The compensation package for portfolio managers Messrs. Mushock, McCreesh and Patel consists of a fixed base salary and a share of Systematic s profits based on each manager s respective individual ownership position in Systematic. The same section of the SAI is revised by adding the following as the last sentence of the seventh paragraph: As of March 31, 2018, Mr. Patel owned no shares of the fund. 2

3 II. PACE International Emerging Markets Equity Investments Effective as of February 28, 2018, the Prospectuses and SAI are revised as follows: The section captioned PACE International Emerging Markets Equity Investments Fund summary and sub-captioned Portfolio management team beginning on page 62 of the Multi-Class Prospectus and on page 61 of the Class P Prospectus is revised by replacing the third bullet point of that section with the following: William Blair Todd M. McClone and Jack Murphy, Partners of William Blair, have been portfolio managers of the fund since 2011 and 2016, respectively. The section captioned Management and sub-captioned PACE International Emerging Markets Equity Investments beginning on page 151 of the Multi-Class Prospectus and page 146 of the Class P Prospectus is revised by replacing the sixth and seventh sentences of the sixth paragraph of that section with the following: Todd M. McClone and Jack Murphy are primarily responsible for the day-to-day management of the fund. Messrs. McClone and Murphy have served as portfolio managers since March 2011 and October 2016, respectively. The same section of each Prospectus is revised by deleting the eighth paragraph of that section in its entirety. The section captioned Portfolio managers and sub-captioned PACE International Emerging Markets Equity Investments William Blair Investment Management, LLC beginning on page 195 of the SAI is revised by replacing the first paragraph of that section in its entirety with the following: Todd McClone and Jack Murphy are the portfolio managers primarily responsible for the day-to-day management of the portion of the fund allocated to William Blair Investment Management, LLC ( William Blair ). The following tables provide information relating to other accounts managed by Todd McClone and Jack Murphy as of July 31, 2017: The same section of the SAI is revised by deleting the second table of that section in its entirety. The same section of the SAI is revised by replacing the second sentence of the fifth paragraph of that section in its entirety with the following: Messrs. McClone and Murphy are partners of William Blair, and their compensation consists of a fixed base salary, a share of the firm s profits and, in some instances, a discretionary bonus. PLEASE BE SURE TO RETAIN THIS IMPORTANT INFORMATION FOR FUTURE REFERENCE. 3

4 UBS All rights reserved. UBS Asset Management (Americas) Inc.

5 PACE Select Advisors Trust February 2, 2018 Supplement to the prospectuses relating to Class A, Class C and Class Y shares and Class P shares and the Statement of Additional Information ( SAI ), each dated November 28, Includes: PACE Mortgage-Backed 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 High Yield Investments PACE Large Co Value Equity Investments PACE Large Co Growth Equity Investments PACE Small/Medium Co Value Equity Investments PACE Small/Medium Co Growth Equity Investments PACE International Equity Investments PACE International Emerging Markets Equity Investments PACE Global Real Estate Securities Investments PACE Alternative Strategies Investments PACE Government Money Market Investments Dear Investor, The purpose of this supplement is to update information regarding the funds comprising PACE Select Advisors Trust (the funds ). PACE Global Real Estate Securities Investments ( PACE Global Real Estate Securities ) ceased offering Class Y shares effective on January 25, New or additional investments into Class Y shares of PACE Global Real Estate Securities will not be permitted after January 25, In addition, effective immediately, the first paragraph in the section titled Organization of the trust; trustees and officers; principal holders and management ownership of securities Leadership structure and qualifications of the board of trustees in the SAI is replaced with the following: The board is responsible for oversight of the funds. The board is currently composed of five trustees, four of whom are not interested persons of the funds as that term is defined by the Investment Company Act ( Independent Trustees ). The remaining trustee, Prof. Feldberg, is independent of UBS AM but is an interested person of the funds within the meaning of the Investment Company Act because he holds a senior position with a registered broker dealer that may execute transactions with the funds from time to time. The board members have selected Prof. ZS-936

6 Feldberg to act as chairman of the board. The chairman of the board s role is to preside at all meetings of the board and generally to act as a liaison with service providers, officers, attorneys and other trustees between meetings. The chairman may also perform such other functions as may be delegated by the board from time to time. In selecting Prof. Feldberg to act as chairman of the board, the Independent Trustees considered Prof. Feldberg s technical classification as an interested person of the funds and determined that, because he is independent of UBS AM, it is unnecessary to have a lead independent trustee. The board has established an Audit Committee and a Nominating and Corporate Governance Committee to assist the board in the oversight and direction of the business and affairs of the funds, and from time to time may establish ad hoc committees, informal working groups or designate one or more members to review and address the policies and practices of the funds or to liaise with the funds Chief Compliance Officer or service providers, including staff of UBS Financial Services Inc. or UBS AM, with respect to certain specified matters. The board meets in-person at regularly scheduled meetings five times throughout the year. In addition, the trustees may meet in-person or by telephone at special meetings or on an informal basis at other times. Each committee meets as appropriate to conduct the oversight functions delegated to the committee by the board and reports its findings to the board. The board and Audit Committee conduct annual assessments of their oversight function and structure. The Independent Trustees have also engaged independent legal counsel to assist them in performing their oversight responsibilities. The trustees have determined that the board s leadership and committee structure is appropriate because it allows the board to exercise informed and independent judgment over the matters under its purview and to allocate areas of responsibility among committees of Independent Trustees and the full board in a manner that enhances the full board s oversight. PLEASE BE SURE TO RETAIN THIS IMPORTANT INFORMATION FOR FUTURE REFERENCE. UBS All rights reserved. UBS Asset Management (Americas) Inc.

7 PACE Select Advisors Trust Statement of Additional Information November 28, Avenue of the Americas New York, New York The following funds are series of PACE Select Advisors Trust ( Trust ), a professionally managed open-end investment company. Class P Class A Class C Class Y PACE Government Money Market Investments PCEXX PACE Mortgage-Backed Securities Fixed Income Investments PCGTX PFXAX PFXCX PFXYX PACE Intermediate Fixed Income Investments PCIFX PIFAX PIICX PIFYX PACE Strategic Fixed Income Investments PCSIX PBNAX PBNCX PSFYX PACE Municipal Fixed Income Investments PCMNX PMUAX PMUCX PMUYX PACE Global Fixed Income Investments PCGLX PWFAX PWFCX PWFYX PACE High Yield Investments PHYPX PHIAX PHYCX PHDYX PACE Large Co Value Equity Investments PCLVX PCPAX PLVCX PLVYX PACE Large Co Growth Equity Investments PCLCX PLAAX PLACX PLAYX PACE Small/Medium Co Value Equity Investments PCSVX PEVAX PEVCX PVEYX PACE Small/Medium Co Growth Equity Investments PCSGX PQUAX PUMCX PUMYX PACE International Equity Investments PCIEX PWGAX PWGCX PWIYX PACE International Emerging Markets Equity Investments PCEMX PWEAX PWECX PWEYX PACE Global Real Estate Securities Investments PREQX PREAX PREEX PREYX PACE Alternative Strategies Investments PASPX PASIX PASOX PASYX All of the funds are diversified series of the Trust. UBS Asset Management (Americas) Inc. ( UBS AM ) serves as the manager and administrator for each fund and also as the investment advisor for PACE Government Money Market Investments and a portion of PACE Alternative Strategies Investments assets. Subject to the approval and oversight of the Trust s board of trustees ( board ), UBS AM selects and oversees other investment advisors who provide advisory services for the other funds. UBS Asset Management (US) Inc. ( UBS AM (US) ) serves as the Trust s principal underwriter and selects dealers for the sale of fund shares. UBS AM and UBS AM (US) are indirect wholly owned subsidiaries of UBS Group AG. 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

8 This SAI is not a prospectus and should be read only in conjunction with the funds current prospectus, dated November 28, Different classes of shares and/or funds are offered by separate prospectuses. A copy of the relevant prospectus may be obtained by calling your Financial Advisor or by calling toll-free The prospectus also contains more complete information about the funds. You should read it carefully before investing. Table of contents Page The funds and their investment policies 3 The funds investments, related risks and limitations 15 Strategies using derivative instruments 53 Disclosure of portfolio holdings 65 Organization of the trust; trustees and officers; principal holders and management ownership of securities 72 Investment management, administration and principal underwriting arrangements 90 Portfolio managers 143 Portfolio transactions 213 Reduced sales charges, additional purchase, exchange and redemption information and other services 224 Valuation of shares 227 Taxes 229 Potential conflicts of interest 238 Other information 246 Financial statements 248 Appendix A-1 2

9 The funds and their investment policies Except where noted, the investment objective and policies of each fund may be changed by the Trust s board without shareholder approval. As with other mutual funds, there is no assurance that a fund will achieve its investment objective. As described further below, each fund (other than PACE Alternative Strategies Investments) will invest at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in the type of investment suggested by its name. The funds have not repeated the above noted parenthetical regarding borrowings each time a percentage test is recited below; however, the funds will interpret these name-related policies as if the following phrase appeared immediately after the words net assets : (plus the amount of any borrowing for investment purposes). If subsequent to an investment, a fund s 80% policy is no longer met (e.g., a fund receives a very large influx of cash to invest from new shareholders), then, under normal circumstances, the fund s future investments will be made in a manner that will bring the fund s investments back in line with the 80% threshold. PACE Government Money Market Investments has an investment objective of current income consistent with preservation of capital and liquidity. The fund is a money market fund and seeks to maintain a stable price of $1.00 per share. Under normal circumstances, the fund invests at least 80% of its net assets in US government securities, including government securities subject to repurchase agreements. The fund s 80% policy is a non-fundamental policy. This means that this investment policy may be changed by the board without shareholder approval. However, the fund has also adopted a policy to provide its shareholders with at least 60 days prior written notice of any change to the 80% investment policy. The fund may also invest in the securities of other investment companies that invest in these instruments. 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 include short-term debt obligations and similar securities. They also include longer term securities 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 60 days or less; the fund maintains a dollar-weighted average life for its portfolio of 120 days or less. The board has determined that the fund will operate as a government money market fund under Rule 2a-7 of the Investment Company Act of 1940, as amended. Therefore, in addition to the 80% policy referenced above, the fund has adopted a policy to invest 99.5% or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully (i.e., collateralized with cash and/or government securities). As a government money market fund under Rule 2a-7, the fund (1) is permitted to use the amortized cost method of valuation to seek to maintain a $1.00 share price, and (2) is not subject to a liquidity fee and/or a redemption gate on fund redemptions which might apply to other types of funds should certain triggering events specified in Rule 2a-7 occur. (In conformance with Rule 2a-7, the board has reserved its ability to change this policy with respect to liquidity fees and/or redemption gates, but such change would only become effective after shareholders were provided with specific advance notice of a change in the fund s policy and have the opportunity to redeem their shares in accordance with Rule 2a-7 before the policy change became effective.) PACE Government Money Market Investments may purchase only those obligations that UBS AM determines, pursuant to procedures adopted by the board, present minimal credit risks as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended ( Investment Company Act ). PACE Government Money Market Investments may purchase variable and floating rate securities with remaining maturities in excess of 397 calendar days issued by US government agencies or instrumentalities or guaranteed by 3

10 the US government. 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 US Securities and Exchange Commission ( SEC ) under which they may be considered to have remaining maturities of 397 calendar days or less. The fund will purchase variable and floating rate securities of non-us government issuers that have remaining maturities of more than 397 calendar days only if the securities are subject to a demand feature exercisable within 397 calendar days or less and otherwise consistent with the fund s investment objective and policies. See The funds investments, related risks and limitations Credit and liquidity enhancements. Generally, PACE Government 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 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 US 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. PACE Government Money Market Investments will not acquire any illiquid security (as defined below) if, immediately after the acquisition, the fund would have invested more than 5% of its total assets in illiquid securities. The fund also will comply with the daily and weekly liquidity requirements set forth in Rule 2a-7 of the Investment Company Act and, as such, must maintain a portion of its assets in cash and securities that can readily be converted into cash, which may have a negative effect on yield. 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 % of its total assets. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. The fund may invest in the securities of other investment companies, including money market funds advised by UBS AM. PACE Mortgage-Backed Securities Fixed Income Investments has an investment objective of current income. Pacific Investment Management Company LLC ( PIMCO ) serves as the fund s investment advisor. The fund invests in bonds of varying maturities but normally limits its portfolio duration to within +/- 50% of the effective duration of the fund s benchmark index, as calculated by the investment advisor. Under normal circumstances, the fund invests at least 80% of its net assets in a diversified portfolio of mortgage-related fixed income instruments, such as mortgage-backed securities (including mortgage pass-through securities and collateralized mortgage obligations ( CMOs ), commercial mortgage-backed securities, to be announced (or TBA ) securities and mortgage dollar rolls). The fund may invest up to 20% of its net assets in other fixed income instruments, including corporate bonds and asset-backed securities of private issuers. Under normal circumstances, the fund s investments will be rated at least BBB by Standard & Poor s, a division of the McGraw-Hill Companies, Inc. ( S&P ), or Moody s Investors Service, Inc. ( Moody s ), or equivalently rated by another nationally recognized statistical rating organization or, if unrated, determined by the investment adviser to be of comparable quality, and a maximum of 5% of the fund s net assets may be invested in non-investment grade securities. The fund may invest in bonds that are assigned comparable 4

11 ratings by another rating agency and unrated bonds that its investment advisor determines are of comparable quality to rated securities in which the fund may invest. The fund may invest up to 10% of its net assets in Yankee and Brady bonds. PACE Mortgage-Backed Securities Fixed Income Investments may invest in certain zero coupon securities that are US Treasury notes and bonds that have been stripped of their unmatured interest coupon receipts. The SEC staff currently takes the position that stripped US government securities that are not issued through the US Treasury are not US government securities. 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 assetbacked securities. The fund may invest up to 10% of its net assets in municipal bonds that are rated at least A by Moody s or S&P or assigned a comparable rating by another rating agency (or are unrated but deemed to be of comparable quality). The fund also may engage in short selling with respect to securities issued by the US Treasury and certain to be announced or TBA securities coupon trades. TBA securities are usually mortgage-backed securities traded on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal amount and maturity date of the securities are determined upon settlement when the specific mortgage pools are assigned. The fund limits the TBA securities that it sells short to those issued by the Governmental National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. The fund will not make short sales of securities or maintain a short position if doing so could create liabilities or require collateral deposits and segregation of assets of more than one-third of the value of its total assets. PACE Mortgage-Backed Securities Fixed Income Investments may invest up to 15% of its net assets in illiquid securities (as defined below). 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 % of its total assets. The fund may engage in dollar rolls and reverse repurchase agreements for investment purposes to enhance its return. These transactions are considered borrowings. The fund may also borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. 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. BlackRock Financial Management, Inc. ( BlackRock ) currently serves as the fund s subadvisor. The fund invests in bonds of varying maturities. It normally limits its overall portfolio duration to within +/- 50% of the duration of the Bloomberg Barclays US Aggregate Bond Index, as calculated by the investment advisor. Under normal circumstances, the fund invests at least 80% of its net assets in fixed income securities. Such investments may include US government and foreign government bonds (including bonds issued by supranational and quasi-governmental entities and mortgage-backed securities) and corporate bonds (including mortgage- and asset-backed securities of private issuers, Eurodollar certificates of deposit, Eurodollar bonds and Yankee bonds). The fund may invest in bonds that are investment grade at the time of purchase. The fund may also invest, in the aggregate, up to 15% of its total assets (measured at the time of purchase) in (1) bonds that are below investment grade at the time of purchase (or unrated bonds of equivalent quality) (i.e., junk bonds ), (2) non-us dollar denominated securities, and (3) fixed income securities of issuers located in emerging markets. The fund generally considers emerging market countries to be those countries not included in the Morgan Stanley Capital International World Index of major world economies. The fund may invest up to 5% of its total assets in tax-exempt municipal securities. The fund s investments may include certain zero coupon securities that are US Treasury notes and bonds that have been stripped of their unmatured interest coupon receipts. The fund may not invest more than 5

12 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 % of its total assets. The fund may engage in dollar rolls and reverse repurchase agreements for investment purposes to enhance its return. These transactions are considered borrowings. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. 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 ) and Neuberger Berman Investment Advisers LLC ( Neuberger Berman ) currently serve as the fund s investment advisors. The fund invests in bonds of varying maturities, but normally limits its portfolio duration to within +/- 50% of the effective duration of the fund s benchmark index, as calculated by the investment advisor. Under normal circumstances, the fund invests at least 80% of its net assets in investment grade fixed income securities. Such investments may include US government bonds, bonds that are backed by mortgages and other assets, bonds (including convertible bonds) of US and non-us private issuers, foreign government bonds (including bonds issued by supranational and quasigovernmental entities), foreign currency exchange-related securities, loan participations and assignments and money market instruments (including commercial paper and certificates of deposit). The fund may invest in commercial paper rated at least A-3 by S&P, Prime 3 by Moody s, assigned a comparable rating by another rating agency or, if unrated, determined by its investment advisor to be of comparable quality. 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. The fund may invest up to 10% of its net assets in preferred securities. PACE Strategic Fixed Income Investments also may invest up to 20% of its total assets in other fixed income instruments, including convertible securities, that are not investment grade. 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. Foreign currency exposure (from non-us dollar-denominated securities or currencies) normally will be limited to 20% of the fund s total assets. The fund s investments may include Brady Bonds. The fund s investments also may include certain zero coupon securities that are US 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. The fund may invest up to 10% of its net assets in municipal bonds that are rated at least Baa by Moody s, BBB by S&P or assigned a comparable rating by another rating agency (or are unrated but deemed to be of comparable quality). 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 % of its total assets. The fund may engage in dollar rolls and reverse repurchase agreements for investment purposes to enhance the fund s return. These transactions are considered borrowings. The fund may also borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. 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. 6

13 PACE Municipal Fixed Income Investments has an investment objective of high current income exempt from regular federal income taxes. Standish Mellon Asset Management Company LLC ( Standish ) serves as the fund s investment advisor. Under normal circumstances, the fund invests at least 80% of its net assets in municipal fixed income investments, the income from which is exempt from regular federal income taxes. The 80% policy adopted by the fund is a fundamental investment policy, and the fund may not deviate from this 80% policy without shareholder approval. The fund invests in bonds of varying maturities but normally maintains a 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, assigned a comparable rating by another rating agency or, if unrated, determined to be of comparable quality by its investment advisor, 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, assigned a comparable rating by another rating agency or, if unrated, are determined to be of comparable quality by its investment advisor. 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 (sometimes referred to as a tax preference item ) for purposes of the federal alternative minimum tax ( AMT ), 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 secured or backed by the US Treasury or other US 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, except that it may invest without limitation in (1) pre-refunded municipal leases that are collateralized by US government securities, and (2) insured municipal leases that are 100% guaranteed for timely interest and principal payment by a municipal bond insurer that is rated AAA by S&P, Aaa by Moody s, or assigned a comparable rating by another rating agency (or are unrated but deemed to be of comparable quality). 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 % of its total assets. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. Under normal circumstances, the fund may invest only up to 20% of its net 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. J.P. Morgan Investment Management Inc. ( J.P. Morgan ) serves as the fund s subadvisor. Under normal circumstances, the fund invests at least 80% of its net assets in fixed income securities. Such investments may include US government bonds, non-us government bonds (including bonds issued by supranational organizations and quasi-governmental entities) and bonds of US or non-us private issuers. The fund invests primarily in high-grade bonds, denominated in US dollars or non-us currencies, of governmental and private issuers. The fund s investments may include mortgage and asset-backed securities. The fund normally invests in a minimum of four countries, including the United States. As of August 31, 2017, the fund was invested in 15 separate countries. 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 sub- 7

14 advisor to be of comparable quality. The fund invests in bonds of varying maturities, but normally limits its portfolio duration to within +/- 50% of the effective duration of the fund s benchmark index, Bloomberg Barclays Global Aggregate Index as calculated by the investment advisor. PACE Global Fixed Income Investments may invest up to 10% of its total assets in high yield bonds of issuers domiciled in developed countries. Developed countries may include, for example, the countries that are members of the Organization for Economic Cooperation and Development ( OECD ). Domiciled, for these purposes, means companies (1) that are organized under the laws of a developed country, (2) for which the principal securities trading market is in a developed 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 a developed country or that have at least 50% of their assets situated in such a country. High yield bonds include fixed income securities that are (1) rated below investment grade by Moody s (lower than a Baa rating) or S&P (lower than a BBB rating); (2) comparably rated by another rating agency; or (3) unrated, but deemed by the fund s portfolio managers to be of comparable quality to fixed income securities rated below investment grade by a rating agency. The fund may invest up to 20% of its total assets in emerging market bonds (including bonds denominated in local emerging markets currencies), irrespective of their credit quality. The fund generally 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 US 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 % of its total assets. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. 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. PACE High Yield Investments has an investment objective of total return. Nomura Corporate Research and Asset Management Inc. ( NCRAM ) is the fund s investment advisor and Nomura Asset Management Singapore Limited ( NAM Singapore ) is the fund s sub-manager. The fund invests primarily in a professionally managed, diversified portfolio of below investment grade fixed income securities. Under normal circumstances, the fund invests at least 80% of its net assets in high yield fixed income securities that are rated below investment grade or considered to be of comparable quality (commonly referred to as junk bonds ). Such investments will include fixed income securities that are (1) rated below investment grade (lower than a Baa rating by Moody s or lower than a BBB rating by S&P; (2) comparably rated by another rating agency; or (3) unrated, but deemed by the fund s portfolio managers to be of comparable quality to fixed income securities rated below Baa, BBB or a comparable rating by a rating agency. The fund normally limits its average duration to within +/- 50% of that of the BofA Merrill Lynch Global High Yield Index, as calculated by the investment advisor. The fund may also invest in other instruments, including ETFs, that derive their value from such high yield fixed income securities. PACE High Yield Investments may invest up to 15% of its net assets in illiquid securities, including securities that, at the time of purchase, are in default or whose issuers are the subject of bankruptcy proceedings. Investment in these securities is highly speculative and involves significant risk. The fund may purchase these securities if the fund s investment advisor believes that these securities have a potential for capital appreciation. 8

15 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 % 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. The fund may also borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. The fund may invest up to 10% of its total assets in US and/or non-us senior secured bank loans (each of which may be denominated in foreign currencies), which may be in the form of 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. The fund s investments may include Brady Bonds. The fund s investments may be allocated across industries, investing in a range of high yield bonds, including corporate and distressed bonds, certain convertible securities, certain asset-backed securities, restricted securities, including private placement and Rule 144A securities, zero-coupon bonds, pay-in-kind securities and deferred payment securities. The fund may invest in global high yield fixed income instruments issued by corporations, limited liability companies or limited partnerships, other forms of enterprise and in sovereign and quasi-sovereign debt and debt-related investment instruments. These global high yield fixed income instruments may be fixed, variable or floating rate. The fund may invest up to 20% of its net assets in investment grade securities of private or government issuers, equity securities of lower-rated or comparable issuers (issuers whose debt securities are lower-rated or who the fund s investment advisor determines to be of comparable quality), money market instruments and municipal obligations. The fund may invest all or a portion of its total assets in securities of foreign issuers, including issuers in emerging market countries. The fund generally considers emerging market countries to be those countries not included in the Morgan Stanley Capital International World Index of major world economies. The fund may implement various temporary or defensive strategies at times when its investment advisor determines that conditions in the markets make pursuing the fund s basic investment strategy inconsistent with the best interests of its shareholders. When unusual market or economic conditions occur, the fund may, for temporary defensive or liquidity purposes, invest up to 100% of its total assets in securities issued or guaranteed by the US government or its agencies or instrumentalities, certificates of deposit, bankers acceptances or other bank obligations, commercial paper, or other income securities deemed by UBS AM to be consistent with a defensive posture, or it may hold cash. PACE Large Co Value Equity Investments has an investment objective of capital appreciation and dividend income. Pzena Investment Management, LLC ( Pzena ), Boston Partners Global Investors, Inc. ( Boston Partners ), Los Angeles Capital Management and Equity Research, Inc. ( Los Angeles Capital ) and River Road Asset Management, LLC ( River Road ) serve as the fund s investment advisors. UBS AM, subject to board oversight, allocates the fund s assets among the investment advisors who utilize investment strategies designed to achieve capital appreciation and dividend income. The fund invests primarily in equity securities of US companies that are believed to be undervalued. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities issued by large capitalization companies. (Large capitalization companies means companies with a total market capitalization within the market capitalization range of the companies in the Russell 1000 Value Index at the time of purchase. The term market capitalization means the market value of a company s outstanding common stocks.) PACE Large Co 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, assigned a comparable rating by another rating agency or, if unrated, determined to be of comparable quality by its investment advisor. Subject to its 80% investment requirement, the fund may invest in a broad range of equity securities of US issuers that are traded on major stock exchanges or in the over-the-counter market. The fund may invest up to 20% of its 9

16 total assets in non-us securities. Such securities may trade either within or outside the United States. Non-US securities generally means securities which are issued by a company that is organized under the laws of a country other than the United States where the principal trading market for the issuer s securities is in a country other than the United States. The fund also may invest in US government bonds and investment grade corporate bonds. PACE Large Co 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 % of its total assets. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. The fund may invest in the securities of other investment companies and may sell securities short both against the box or without owning the security sold short. PACE Large Co Growth Equity Investments has an investment objective of capital appreciation. Jackson Square Partners, LLC ( JSP ), Mar Vista Investment Partners, LLC ( Mar Vista ) and J.P. Morgan Investment Management Inc, ( J.P. Morgan ) serve as the fund s investment advisors. UBS AM, subject to board oversight, allocates the fund s assets among the investment advisors who utilize investment strategies designed to achieve capital appreciation. The fund invests primarily in equity securities that are believed to have substantial potential for capital growth. Dividend income is an incidental consideration in the investment advisors selection of investments for the fund. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities issued by large capitalization companies. (Large capitalization companies means companies with a total market capitalization within the market capitalization range of the companies in the Russell 1000 Growth Index at the time of purchase. The term market capitalization means the market value of a company s outstanding common stocks.) Subject to its 80% investment requirement, PACE Large Co Growth Equity Investments may invest in a broad range of equity securities of US issuers. The fund may invest up to 20% of its total assets in non-us securities. Such securities may trade either within or outside the United States. Non-US securities generally means securities which are issued by a company that is organized under the laws of a country other than the United States where the principal trading market for the issuer s securities is in a country other than the United States. The fund also may invest in US government bonds and investment grade corporate bonds. PACE Large Co 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 % of its total assets. The fund may borrow money 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. See The funds investments, related risks and limitations Investment limitations of the funds for more information regarding borrowings. The fund may invest in securities of other investment companies and may sell securities short against the box. PACE Small/Medium Co Value Equity Investments has an investment objective of capital appreciation. Sapience Investments, LLC ( Sapience ), Systematic Financial Management, L.P. ( Systematic ), Kayne Anderson Rudnick Investment Management, LLC ( Kayne Anderson Rudnick ) and Huber Capital Management LLC ( Huber Capital ) serve as the fund s subadvisors. UBS AM, subject to board oversight, allocates the fund s assets among the investment advisors who utilize investment strategies designed to achieve capital appreciation. The fund invests primarily in equity securities of companies that are believed to be undervalued or overlooked in the marketplace. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities issued by small/medium capitalization companies. (Small/medium capitalization companies means companies with a total market capitalization within the market capitalization range of the companies in the Russell 2500 Value Index at the time of purchase. The term market capitalization means the market value of a company s outstanding common stocks.) The fund 10