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| LOGO PROSPECTUS |
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| Small Cap Value Portfolio |
| January 30, 1996 |
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| | Client Services: 1-800-354-8185 Prices and Investment Results: | |
| | 1-800-522-1525 | |
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| | MAS Funds (the Fund) is a no-load mutual fund consisting of twenty-six | |
| | portfolios, one of which is described in this Prospectus. The investment| |
| | objective of the Small Cap Value Portfolio (the "portfolio") is | |
| | described with a summary of investment policies as referenced below. | |
| | This Prospectus offers the Institutional Class Shares of the Fund. This | |
| | Prospectus is for use only by defined contribution plan participants. | |
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| PORTFOLIO PAGE REFERENCE |
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| How to Use This Prospectus: 2 |
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| Prospectus Summary: 3 |
| Prospectus Glossary: |
| Strategies 10 |
| Investments 10 |
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| General Shareholder |
| Information: 15 |
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| Table of Contents: Back Cover |
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| | This Prospectus, which should be retained for future reference, sets | |
| | forth concisely information that you should know before you invest. A | |
| | Statement of Additional Information containing additional information | |
| | about the Fund has been filed with the Securities and Exchange | |
| | Commission. Such Statement is dated January 30, 1996 as revised from | |
| | time to time, and has been incorporated by reference into this | |
| | Prospectus. A copy of the Statement may be obtained, without charge, by | |
| | writing to the Fund or by calling the Client Services Group at the | |
| | telephone number shown above. | |
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| |
| THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE |
|SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS|
| THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE |
| SECURITIES COMMISSION PASSED UPON THE ACCURACY OR |
| ADEQUACY OF THIS PROSPECTUS. |
| ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. |
| |
| MILLER |
| ANDERSON |
- ------ & SHERRERD, LLP ------ ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428---
o 800-354-8185
<PAGE>
EXPENSE SUMMARY - INSTITUTIONAL CLASS SHARES
The following tables illustrate the various expenses and fees that a
shareholder for the portfolio will incur either directly or indirectly. The
expenses and fees set forth below are based on the portfolio's operations
during the fiscal year ended September 30, 1995.
Shareholder Transaction Expenses:
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses:
(as a percentage of average net assets after fee waivers)
12b-1 Fees None
Investment Total
Advisory Other Operating
Portfolio Fees Expenses Expenses
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Small Cap Value 0.750% 0.124% 0.874%
EXAMPLE
The purpose of this table is to assist in understanding the various expenses
that a shareholder in the portfolio will bear directly or indirectly. The
following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return, and (2) redemption at the end of each time period. The example should
not be considered a representation of past or future expenses and actual
expenses may be greater or less than those shown.
Portfolio 1 year 3 year 5 year 10 year
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Small Cap Value $9 $28 $48 $108
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HOW TO USE THIS PROSPECTUS
A PROSPECTUS SUMMARY begins on page 3;
FINANCIAL HIGHLIGHTS and a description of YIELD AND TOTAL RETURN begin on
page 5;
GENERAL INFORMATION including INVESTMENT LIMITATIONS begins on page 6;
SUMMARY PAGES for the portfolio's Objective, Policies and Strategies begin on
page 9;
The PROSPECTUS GLOSSARY which defines specific Allowable Investments,
Policies and Strategies printed in bold type throughout this Prospectus
begins on page 10;
GENERAL SHAREHOLDER INFORMATION begins on page 15.
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MAS Funds - 2 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
PROSPECTUS SUMMARY
The Small Cap Value Portfolio (not currently offered to new investors) seeks
to achieve above-average total return over a market cycle of three to five
years, consistent with reasonable risk, by investing primarily in a
diversified portfolio of Common Stocks with equity capitalizations in the
range of companies represented in the Russell 2000 Index which are deemed by
the Adviser to be relatively undervalued based on certain proprietary
measures of value. The portfolio will typically exhibit lower price/earnings
and price/book value ratios than the Russell 2000.
RISK FACTORS: Prospective investors in the Fund should consider the following
factors as they apply to the Portfolio's allowable investments and policies.
See the Prospectus Glossary for more information on terms printed in bold
type:
o The portfolio may invest in Repurchase Agreements, which entail a risk of
loss should the seller default in its obligation to repurchase the
security which is the subject of the transaction;
o The portfolio may participate in a Securities Lending program which
entails a risk of loss should a borrower fail financially;
o Fixed-Income Securities will be affected by general changes in interest
rates resulting in increases or decreases in the value of the obligations
held by a portfolio. The value of fixed-income securities can be expected
to vary inversely to changes in prevailing interest rates, i.e., as
interest rates decline, market value tends to increase and vice versa;
o Investments in common stocks are subject to market risks which may cause
their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these
securities, but will affect the Portfolio's net asset value.
o Securities purchased on a When-Issued basis may decline or appreciate in
market value prior to their actual delivery to the portfolio;
o The portfolio may invest a portion of its assets in Derivatives including
Futures & Options. Futures contracts, options and options on futures
contracts entail certain costs and risks, including imperfect correlation
between the value of the securities held by the portfolio and the value of
the particular derivative instrument, and the risk that a portfolio could
not close out a futures or options position when it would be most
advantageous to do so and,
o Investments in foreign securities involve certain special considerations
which are not typically associated with investing in U.S. companies. See
Foreign Investing. The portfolio may also engage in foreign currency
exchange transactions. See Forwards, Futures & Options, and Swaps.
HOW TO INVEST: This Prospectus is for use only by defined contribution plan
participants who may invest according to plan specifications. For information
on how to purchase, redeem, or exchange Investment Class Shares, participants
should contact their plan administrator.
THE FUND'S INVESTMENT ADVISER: Miller Anderson & Sherrerd, LLP (the "Adviser"
or "MAS") is a Pennsylvania limited liability partnership founded in 1969,
wholly owned by indirect subsidiaries of the Morgan Stanley Group, Inc. and
is located at One Tower Bridge, West Conshohocken, PA 19428. The Adviser is
an Equal Opportunity/Affirmative Action Employer. The Adviser provides
investment counseling services to employee benefit plans, endowments,
foundations and other institutional investors, and as of the date of this
Prospectus had in excess of $35 billion in assets under management.
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 3
<PAGE>
THE FUND'S DISTRIBUTOR: MAS Fund Distribution, Inc. (the "Distributor")
provides distribution services to the Fund.
ADMINISTRATIVE SERVICES: The Adviser provides the Fund directly, or through
third parties, with fund administration services. Chase Global Funds Services
Company, a subsidiary of The Chase Manhattan Bank, N.A., serves as Transfer
Agent to the Fund. See Administrative Services.
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MAS Funds - 4 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
FINANCIAL HIGHLIGHTS -- FISCAL YEARS ENDED SEPTEMBER 30
Selected per share data and ratios for a share outstanding throughout
each period
The following information should be read in conjunction with the Fund's
financial statements which are included in the Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information. The
Fund's financial statements for the year ended September 30, 1995 have been
examined by Price Waterhouse LLP whose opinion thereon (which was unqualified)
is also incorporated by reference in the Statement of Additional Information.
(Adjusted to reflect a 2.5 for 1 share split as of August 13, 1993)
<TABLE>
<CAPTION>
Net Gains Dividend
Net Asset or Losses Distributions Capital Gain
Value- Net on Securities Total from (net Distributions
Beginning Investment (realized and Investment investment (realized net Other
of Period Income unrealized) Activities income) capital gains) Distributions
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Small Cap Value Portfolio (Commencement of Operations 7/1/86)#, ##
<C> <C> <C> <C> <C> <C> <C> <C>
1995 $17.67 $0.19 $2.49 $2.68 ($0.14) ($1.93) --
1994 17.55 0.16 1.14 1.30 (0.24) (0.94) --
1993 12.84 0.18 4.64 4.82 (0.11) -- --
1992 11.45 0.10 1.48 1.58 (0.19) -- --
1991 7.20 0.23 4.21 4.44 (0.19) -- --
1990 10.42 0.28 (3.05) (2.77) (0.45) -- --
1989 8.54 0.34 1.74 2.08 (0.20) -- --
1988 10.24 0.18 (1.42) (1.24) (0.14) (0.32) --
1987 9.35 0.13 0.84 0.97 (0.08) -- --
1986 10.00 0.08 (0.73) (0.65) -- -- --
</TABLE>
<TABLE>
<CAPTION>
Net Asset Net Assets- Ratio of Ratio of
Value- End of Expenses Net Income Portfolio
Total End of Total Period to Average to Average Turnover
Distributions Period Return** (thousands) Net Assets Net Assets Rate
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Small Cap Value Portfolio (Commencement of Operations 7/1/86)#, ##
<C> <C> <C> <C> <C> <C> <C> <C>
1995 ($2.07) $18.28 18.39% $430,368 0.87% 1.20% 119%
1994 (1.18) 17.67 8.04 308,156 0.88 0.91 162
1993 (0.11) 17.55 37.72 175,029 0.88 1.33 93
1992 (0.19) 12.84 14.12 105,886 0.86 1.06 50
1991 (0.19) 11.45 63.07 52,182 0.88 1.70 53
1990 (0.45) 7.20 (27.63) 100,848 0.85 1.77 59
1989 (0.20) 10.42 24.85 189,223 0.85 3.48 36
1988 (0.46) 8.54 (11.50) 202,500 0.86 2.32 41
1987 (0.08) 10.24 10.53 201,621 0.92 1.67 38
1986 -- 9.35 (6.52) 87,755 0.90 2.27* 0
</TABLE>
* Annualized
** Total return figures for partial years are not annualized.
# Formerly Small Capitalization Value Portfolio (through December 23, 1994)
## For the period ended September 30, 1995, the Ratio of Expenses to Average Net
Assets for the Small Cap Value Portfolio excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would not significantly differ.
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 5
<PAGE>
YIELD AND TOTAL RETURN:
From time to time the portfolio advertises its yield and total return. Both
yield and total return figures are based on historical earnings and are not
intended to indicate future performance. The average annual total return
reflects changes in the price of a portfolio's shares and assumes that any
income dividends and/or capital gain distributions made by the portfolio
during the period were reinvested in additional shares of the portfolio.
Figures will be given for one-, five- and ten-year periods ending with the
most recent calendar quarter-end (if applicable), and may be given for other
periods as well (such as from commencement of the portfolio's operations).
When considering average total return figures for periods longer than one
year, it is important to note that a portfolio's annual total return for any
one year in the period might have been greater or less than the average for
the entire period.
In addition to average annual total return, the portfolio may also quote an
aggregate total return for various periods representing the cumulative change
in value of an investment in a portfolio for a specific period. Aggregate
total returns may be shown by means of schedules, charts or graphs and may
include subtotals of the various components of total return (e.g., income
dividends or returns for specific types of securities such as industry or
country types).
The yield of the portfolio is computed by dividing the net investment income
per share (using the average number of shares entitled to receive dividends)
earned during the 30-day period stated in the advertisement by the closing
price per share on the last day of the period. For the purpose of determining
net investment income, the calculation includes as expenses of the portfolio
all recurring fees and any non recurring charges for the period stated. The
yield formula provides for semiannual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized
at the end of a six-month period. Methods used to calculate advertised yields
are standardized for all stock and bond mutual funds. However, these methods
differ from the accounting methods used by the portfolio to maintain its
books and records, therefore the advertised 30-day yield may not reflect the
income paid to your own account or the yield reported in the portfolio's
reports to shareholders. The portfolio may also advertise or quote a yield
which is gross of expenses.
The performance of the portfolio may be compared to data prepared by
independent services which monitor the performance of investment companies,
data reported in financial and industry publications, returns of other
investment advisers and mutual funds, and various indices as further
described in the Statement of Additional Information.
The Annual Report to Shareholders of the Fund for the Fund's most recent
fiscal year-end contains additional performance information that includes
comparisons with appropriate indices. The Annual Report is available without
charge upon request by writing to the Fund or calling the Client Services
Group at the telephone number shown on the front cover of this Prospectus.
GENERAL INFORMATION:
The following information relates to the portfolio and should be read in
conjunction with specific information about the portfolio.
Objectives: The portfolio seeks to achieve its investment objective relative
to the universe of securities in which it is authorized to invest and,
accordingly, the total return or current income achieved by the portfolio may
not be as great as that achieved by another portfolio that can invest in a
broader range of securities. The objective of the portfolio is fundamental
and may only be changed with approval of holders of a majority of the shares
of the portfolio. The achievement of the portfolio's objective cannot be
assured.
Suitability: The portfolio is designed for long-term investors who can accept
the risks entailed in investing in the stock and bond markets, and is not
meant to provide a vehicle for playing short-term swings in the market. The
portfolio is designed principally for the investments of tax-exempt fiduciary
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MAS Funds - 6 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
investors who are entrusted with the responsibility of investing assets held for
the benefit of others. Since such investors are not subject to Federal income
taxes, securities transactions will not be influenced by the different tax
treatment of long-term capital gains, short-term capital gains, and dividend
income under the Internal Revenue Code.
Securities Lending: The portfolio may lend its securities to qualified
brokers, dealers, banks and other financial institutions for the purpose of
realizing additional income. Loans of securities will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
Government or its agencies. The collateral will equal at least 100% of the
current market value of the loaned securities. In addition, the portfolio
will not loan its portfolio securities to the extent that greater than
one-third of its total assets, at fair market value, would be committed to
loans at that time.
Illiquid Securities/Restricted Securities: The portfolio may invest up to 15%
of its net assets in securities that are illiquid by virtue of the absence of
a readily available market, or because of legal or contractual restrictions
on resale. This policy does not limit the acquisition of (i) restricted
securities eligible for resale to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933 or (ii) commercial paper issued
pursuant to Section 4(2) under the Securities Act of 1933, that are
determined to be liquid in accordance with guidelines established by the
Fund's Board of Trustees.
Turnover: The Adviser manages the portfolio generally without regard to
restrictions on portfolio Turnover, except those imposed by provisions of the
federal tax laws regarding short-term trading. In general, the portfolio will
not trade for short-term profits, but when circumstances warrant, investments
may be sold without regard to the length of time held.
Cash Equivalents/Temporary Defensive Investing: Although the portfolio
intends to remain substantially fully invested, a small percentage of the
portfolio's assets are generally held in the form of Cash Equivalents in
order to meet redemption requests and otherwise manage the daily affairs of
the portfolio. In addition, the portfolio may, when the Adviser deems that
market conditions are such that a temporary defensive approach is desirable,
invest in cash equivalents or the Fixed-Income Securities listed for the
portfolio without limit.
Concentration: Concentration is defined as investment of 25% or more of a
portfolio's total assets in the securities of issuers operating in any one
industry. The portfolio will not concentrate investments in any one industry.
Investment Limitations: The portfolio is subject to certain limitations
designed to reduce its exposure to specific situations. Some of these
limitations are:
(a) with respect to 75% of its assets, the portfolio will not purchase
securities of any issuer if, as a result, more than 5% of the portfolio's
total assets taken at market value would be invested in the securities of any
single issuer except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
(b) with respect to 75% of its assets, the portfolio will not purchase a
security if, as a result, the portfolio would hold more than 10% of the
outstanding voting securities of any issuer.
(c) the portfolio will not invest more than 5% of its total assets in the
securities of issuers (other than securities issued or guaranteed by U.S. or
foreign governments or political subdivisions thereof) which have (with
predecessors) a record of less than three years of continuous operation;
(d) the portfolio will not acquire any securities of companies within one
industry, if, as a result of such acquisition, more than 25% of the value of
the portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that (1) there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (2) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry;
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 7
<PAGE>
(3) financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry, and (4) asset-backed
securities will be classified according to the underlying assets securing such
securities.
(e) the portfolio will not make loans except (i) by purchasing debt
securities in accordance with its investment objectives and policies, or
entering into Repurchase Agreements, (ii) by lending its portfolio securities
and (iii) by lending portfolio assets to other portfolios of the Fund, so
long as such loans are not inconsistent with the Investment Company Act of
1940, as amended or the Rules and Regulations, or interpretations or orders
of the Securities and Exchange Commission thereunder;
(f) the portfolio will not borrow money, except (i) as a temporary measure
for extraordinary or emergency purposes or (ii) in connection with reverse
repurchase agreements provided that (i) and (ii) in combination do not exceed
33 1/3% of the portfolio's total assets (including the amount borrowed) less
liabilities (exclusive of borrowings);
(g) the portfolio will not pledge, mortgage, or hypothecate any of its assets
to an extent greater than 50% of its total assets at fair market value; and
(h) the portfolio will not invest its assets in securities of any investment
company, except by purchase in the open market involving only customary
brokers' commissions or in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the Investment
Company Act of 1940, as amended.
Limitations (a), (b), (d), (e) and (f),and certain other limitations
described in the Statement of Additional Information are fundamental and may
be changed only with the approval of the holders of a majority of the shares
of the portfolio. The other investment limitations described here and in the
Statement of Additional Information are not fundamental policies meaning that
the Board of Trustees may change them without shareholder approval. If a
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value or total cost of the
portfolio's assets will not be considered a violation of the restriction, and
the sale of securities will not be required.
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MAS Funds - 8 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
Small Cap Value Portfolio
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in common stocks with equity capitalizations
in the range of the companies represented in the Russell
2000 Small Stock Index which are deemed by the Adviser to
be relatively undervalued based on certain proprietary
measures of value. The Portfolio will typically exhibit
lower price/earnings and price/book value ratios than the
Russell 2000. Dividend income will typically be lower
than for the Equity and Value Portfolios.
Approach: The Adviser selects common stocks which are deemed to be
undervalued at the time of purchase, based on proprietary
measures of value. The Portfolio will be structured
taking into account the economic sector weights of the
Russell 2000 Index, with the portfolio's sector weights
normally being within 5% of the sector weights for the
Index.
Policies: Generally at least 65% invested in Equity Securities of
small-cap companies deemed to be undervalued
Up to 5% invested in Foreign Equities (excluding ADRs)
Derivatives may be used to pursue portfolio strategy
Capitalization Range: Generally matching the Russell 2000 size distribution
(currently $50 million to $800 million)
<TABLE>
<S> <C> <C> <C> <C>
Allowable Investments: Common Stock Preferred Stock Convertibles ADRs
Cash Equivalents Repurchase Agreements Foreign Equities Rights
Warrants Futures & Options Swaps Foreign Currency
Forwards U.S. Governments Zero Coupons Agencies
Corporates Foreign Bonds Investment Companies When Issued
</TABLE>
Comparative Index: Russell 2000 Index
Strategies: Value Stock Investing
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 9
<PAGE>
PROSPECTUS GLOSSARY
CHARACTERISTICS AND RISKS OF STRATEGIES AND INVESTMENTS
STRATEGIES
Foreign Investing: Investors should recognize that investing in Foreign
Bonds and Foreign Equities involves certain special considerations which are
not typically associated with investing in domestic securities.
As non-U.S. companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to U.S. companies, there may be less publicly available
information about certain foreign securities than about U.S. securities.
Foreign Bonds and Foreign Equities may be less liquid and more volatile than
securities of comparable U.S. companies. There is generally less government
supervision and regulation of stock exchanges, brokers and listed companies
than in the U.S. With respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments
in those countries. Additionally, there may be difficulty in obtaining and
enforcing judgments against foreign issuers.
Since Foreign Bonds and Foreign Equities may be denominated in foreign
currencies, and since the portfolio may temporarily hold uninvested reserves
in bank deposits of foreign currencies prior to reinvestment or conversion to
U.S. dollars, the portfolio may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies.
Although the portfolio will endeavor to achieve the most favorable
execution costs in its portfolio transactions in foreign securities, fixed
commissions on many foreign stock exchanges are generally higher than
negotiated commissions on U.S. exchanges. In addition, it is expected that
the expenses for custodial arrangements of the portfolio's foreign securities
will be greater than the expenses for the custodial arrangements for handling
U.S. securities of equal value. Certain foreign governments levy withholding
taxes against dividend and interest income. Although in some countries a
portion of these taxes is recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income the portfolio receives from the
companies comprising the portfolio's investments.
Value Stock Investing: Emphasizes Common Stocks which are deemed by the
Adviser to be undervalued relative to the stock market in general as measured
by the appropriate market index, based on value measures such as
price/earnings ratios and price/book ratios. Value stocks are generally
dividend paying common stocks. However, non-dividend paying stocks may also
be selected for their value characteristics.
INVESTMENTS
ADRs--American Depository Receipts: are dollar-denominated securities
which are listed and traded in the United States, but which represent claims
to shares of foreign stocks. ADRs may be either sponsored or unsponsored.
Unsponsored ADR facilities typically provide less information to ADR holders.
Agencies: are securities which are not guaranteed by the U.S. Government,
but which are issued, sponsored or guaranteed by a federal agency or
federally sponsored agency such as the Student Loan Marketing Association,
Resolution Funding Corporation, or any of several other agencies.
Cash Equivalents: are short-term fixed-income instruments comprising:
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time
at a stated interest rate. Certificates of deposit are negotiable short-term
obligations issued by commercial banks or savings and loan associations
against funds deposited in the issuing institution. Variable rate
certificates of deposit are certificates of deposit on which the interest
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MAS Funds - 10 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods).
The portfolio may invest in obligations of U.S. banks, foreign branches of
U.S. banks (Eurodollars), and U.S. branches of foreign banks (Yankee
dollars). Euro and Yankee dollar investments will involve some of the same
risks of investing in international securities that are discussed in the
Foreign Investing section of this Prospectus.
The portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the
equivalent in other currencies, or, in the case of domestic banks which do
not have total assets of at least $1 billion, the aggregate investment made
in any one such bank is limited to $100,000 and the principal amount of such
investment is insured in full by the Federal Deposit Insurance Corporation,
(ii) in the case of U.S. banks, it is a member of the Federal Deposit
Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is deemed by the Adviser to be of an investment quality
comparable with other debt securities which may be purchased by the
portfolio.
(2) The portfolio may invest in commercial paper rated at time of purchase
by one or more NRSRO in one of their two highest categories, (e.g., A-l or
A-2 by Standard & Poor's or Prime 1 or Prime 2 by Moody's), or, if not rated,
issued by a corporation having an outstanding unsecured debt issue rated
high-grade by a NRSRO (e.g. A or better by Moody's, Standard & Poor's or
Fitch).
(3) Short-term corporate obligations rated high-grade at the time of
purchase by a NRSRO (e.g. A or better by Moody's, Standard & Poor's or
Fitch);
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and dates
of issue;
(5) Securities issued or guaranteed by U.S. Government sponsored
instrumentalities and Federal agencies. These include securities issued by
the Federal Home Loan Banks, Federal Land Bank, Farmers Home Administration,
Farm Credit Banks, Federal Intermediate Credit Bank, Federal National
Mortgage Association, Federal Financing Bank, the Tennessee Valley Authority,
and others, and;
(6) Repurchase agreements collateralized by securities listed above.
Common Stocks: are Equity Securities which represent an ownership interest
in a corporation, entitling the shareholder to voting rights and receipt of
dividends paid based on proportionate ownership.
Convertibles: are convertible bonds or shares of convertible Preferred
Stock which may be exchanged for a fixed number of shares of Common Stock at
the purchaser's option.
Corporates--corporate bonds: are debt instruments issued by private
corporations. Bondholders, as creditors, have a prior legal claim over common
and preferred stockholders of the corporation as to both income and assets
for the principal and interest due to the bondholder.
Derivatives: A financial instrument whose value and performance are based
on the value and performance of another security or financial instrument. The
Adviser will use derivatives only in circumstances where they offer the most
economic means of improving the risk/reward profile of the portfolio. The
Adviser will not use derivatives to increase portfolio risk above the level
that could be achieved in the portfolio using only traditional investment
securities. In addition, the Adviser will not use derivatives to acquire
exposure to changes in the value of assets or indexes of assets that are not
listed in the applicable Allowable Investments for the portfolio. Any
applicable limitations are described under each investment definition. The
portfolio may enter into over-the-counter Derivatives transactions (Swaps,
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 11
<PAGE>
Caps, Floors, Puts, etc., but excluding CMOs, Forwards, Futures and Options, and
SMBS) with counterparties approved by MAS in accordance with guidelines
established by the Board of Trustees. These guidelines provide for a minimum
credit rating for each counterparty and various credit enhancement techniques
(for example, collateralization of amounts due from counterparties) to limit
exposure to counterparties with ratings below AA. Derivatives include, but are
not limited to, Forwards, Futures and Options, and Swaps.
Equity Securities: Commonly include but are not limited to Common Stock,
Preferred Stock, ADRs, Rights, Warrants, Convertibles, and Foreign Equities.
See each individual portfolio listing of Allowable Investments to determine
which of the above the portfolio can hold. Preferred Stock is contained in
both the definition of Equity Securities and Fixed-Income Securities since it
exhibits characteristics commonly associated with each type.
Fixed-Income Securities: Commonly include but are not limited to U.S.
Governments, Zero Coupons, Agencies, Corporates, Mortgage Securities,
Convertibles, Cash Equivalents, Repurchase Agreements, Preferred Stock, and
Foreign Bonds. Preferred Stock is contained in both the definition of Equity
Securities and Fixed-Income Securities since it exhibits characteristics
commonly associated with each type of security.
Foreign Bonds: are Fixed-Income Securities denominated in foreign currency
and issued and traded primarily outside of the U.S., including: (1)
obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions; (2) debt securities
issued, guaranteed or sponsored by supranational organizations established or
supported by several national governments, including the World Bank, the
European Community, the Asian Development Bank and others; and (3)
non-government foreign corporate debt securities.
Foreign Currency: The portfolio may invest in foreign securities and
thereafter may regularly transact security purchases and sales in foreign
currencies. The portfolio may hold foreign currency or purchase or sell
currencies on a forward basis (see Forwards).
Foreign Equities: are Common Stock, Preferred Stock, Rights and Warrants
of foreign issuers denominated in foreign currency and traded primarily in
non-U.S. markets. Investing in foreign companies involves certain special
considerations which are not typically associated with investing in U.S.
companies (see Foreign Investing).
Forwards--Forward Foreign Currency Exchange Contracts: are Derivatives
which are used to protect against uncertainty in the level of future foreign
exchange rates. A forward foreign currency exchange contract is an obligation
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Such contracts, which
protect the value of the portfolio's investment securities against a decline
in the value of a currency, do not eliminate fluctuations caused by changes
in the local currency prices of the securities, but rather, they simply
establish an exchange rate at a future date. Also, although such contracts
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they limit any potential gain that might be
realized.
The portfolio may use currency exchange contracts in the normal course of
business to lock in an exchange rate in connection with purchases and sales
of securities denominated in foreign currencies (transaction hedge) or to
lock in the U.S. dollar value of portfolio positions (position hedge). In
addition the portfolio may cross-hedge currencies by entering into a
transaction to purchase or sell one or more currencies that are expected to
decline in value relative to other currencies to which the portfolio has or
expects to have portfolio exposure. The portfolio may also engage in proxy
hedging which is defined as entering into positions in one currency to hedge
investments denominated in another currency, where the two currencies are
economically linked. The portfolio's entry into forward contracts, as well as
any use of Cross or Proxy hedging techniques will generally require the
portfolio to hold high-grade, liquid securities or cash equal to the
portfolio's obligations in a segregated account throughout the duration of
the contract.
The portfolio may also combine forward contracts with investments in
securities denominated in other currencies in order to achieve desired credit
and currency exposures. Such combinations are generally referred to as
synthetic securities. For example, in lieu of purchasing the foreign bond, a
portfolio may purchase a U.S. dollar-denominated security and at the same
time enter into a forward contract to exchange U.S. dollars for the
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MAS Funds - 12 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
contract's underlying currency at a future date. By matching the amount of U.S.
dollars to be exchanged with the anticipated value of the U.S.
dollar-denominated security, the portfolio may be able to lock in the foreign
currency value of the security and adopt a synthetic investment position
reflecting the credit quality of the U.S. dollar-denominated security.
There is a risk in adopting a synthetic investment position to the extent
that the value of a security denominated in the U.S. dollar or other foreign
currency is not exactly matched with the portfolio's obligation under the
forward contract. On the date of maturity, the portfolio may be exposed to
some risk of loss from fluctuations in that currency. Although the Adviser
will attempt to hold such mismatching to a minimum, there can be no assurance
that the Adviser will be able to do so. When the portfolio enters into a
forward contract for purposes of creating a synthetic security, it will
generally be required to hold high-grade, liquid securities or cash in a
segregated account with a daily value at least equal to its obligation under
the forward contract.
Futures & Options--Futures Contracts, Options on Futures Contracts and
Options: are Derivatives. Futures contracts provide for the sale by one party
and purchase by another party of a specified amount of a specific security,
at a specified future time and price. An option is a legal contract that
gives the holder the right to buy or sell a specified amount of the
underlying security or futures contract at a fixed or determinable price upon
the exercise of the option. A call option conveys the right to buy and a put
option conveys the right to sell a specified quantity of the underlying
security.
The portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts in
combination with its outstanding obligations with respect to options
transactions would exceed 50% of its total assets. It will maintain assets
sufficient to meet its obligations under such contracts in a segregated
account with the custodian bank or will otherwise comply with the SEC's
position on asset coverage.
Possible Risks: The primary risks associated with the use of futures and
options are (i) imperfect correlation between the change in market value of
the securities held by the portfolio and the prices of futures and options
relating to the stocks, bonds or futures contracts purchased or sold by the
portfolio; and (ii) possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures position which could
have an adverse impact on the portfolio's ability to execute futures and
options strategies. Additional risks associated with options transactions are
(i) the risk that an option will expire worthless; (ii) the risk that the
issuer of an over-the-counter option will be unable to fulfill its
obligation to the portfolio due to bankruptcy or related circumstances; (iii)
the risk that options may exhibit greater short-term price volatility than
the underlying security; and (iv) the risk that the portfolio may be forced
to forego participation in the appreciation of the value of underlying
securities, futures contracts or currency due to the writing of a call
option.
Investment Companies: The portfolio is permitted to invest in shares of
other open-end or closed-end investment companies. The Investment Company Act
of 1940, as amended, generally prohibits the portfolio from acquiring more
than 3% of the outstanding voting shares of an investment company and limits
such investments to no more than 5% of the portfolio's total assets in any
one investment company and no more than 10% in any combination of investment
companies. The 1940 Act also prohibits the portfolio from acquiring in the
aggregate more than 10% of the outstanding voting shares of any registered
closed-end investment company.
To the extent the portfolio invests a portion of its assets in Investment
Companies, those assets will be subject to the expenses of the investment
company as well as to the expenses of the portfolio itself. The portfolio may
not purchase shares of any affiliated investment company except as permitted
by SEC Rule or Order.
Preferred Stock: are non-voting ownership shares in a corporation which
pay a fixed or variable stream of dividends.
Repurchase Agreements: are transactions by which the portfolio purchases a
security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase). The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated
to the coupon rate or date of maturity of the purchased security. Such
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 13
<PAGE>
agreements permit the portfolio to keep all its assets at work while retaining
overnight flexibility in pursuit of investments of a longer term nature. The
Adviser will continually monitor the value of the underlying collateral to
ensure that its value, including accrued interest, always equals or exceeds the
repurchase price.
Pursuant to an order issued by the Securities and Exchange Commission, the
portfolio may pool its daily uninvested cash balances with those of other
portfolios of the Fund in order to invest in repurchase agreements on a joint
basis. By entering into repurchase agreements on a joint basis, it is
expected that the portfolio will incur lower transaction costs and
potentially obtain higher rates of interest on such repurchase agreements.
The portfolio's participation in the income from jointly purchased repurchase
agreements will be based on the portfolio's percentage share in the total
repurchase agreement.
Rights: represent a preemptive right of stockholders to purchase
additional shares of a stock at the time of a new issuance, before the stock
is offered to the general public, allowing the stockholder to retain the same
ownership percentage after the new stock offering.
Swaps--Swap Contracts: are Derivatives in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by
one instrument for the return generated by another instrument. The payment
streams are calculated by reference to a specified index and agreed upon
notional amount. The term specified index includes, but is not limited to,
currencies, fixed interest rates, prices and total return on interest rate
indices, fixed-income indices, stock indices and commodity indices (as well
as amounts derived from arithmetic operations on these indices). For example,
the portfolio may agree to swap the return generated by a fixed-income index
for the return generated by a second fixed-income index. The currency swaps
in which the portfolio may enter will generally involve an agreement to pay
interest streams in one currency based on a specified index in exchange for
receiving interest streams denominated in another currency. Such swaps may
involve initial and final exchanges that correspond to the agreed upon
national amount.
The portfolio will usually enter into swaps on a net basis, i.e., the two
return streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with a portfolio receiving or paying, as
the case may be, only the net amount of the two returns. The portfolio's
obligations under a swap agreement will be accrued daily (offset against any
amounts owing to the portfolio) and any accrued but unpaid net amounts owed
to a swap counterparty will be covered by the maintenance of a segregated
account consisting of cash, U.S. Government securities, or high grade debt
obligations. The portfolio will not enter into any swap agreement unless the
counterparty meets the rating requirements set forth in guidelines
established by the Fund's Board of Trustees.
Possible Risks: Interest rate and total rate of return swaps do not
involve the delivery of securities, other underlying assets, or principal.
Accordingly, the risk of loss with respect to interest rate and total rate of
return swaps is limited to the net amount of interest payments that the
portfolio is contractually obligated to make. If the other party to an
interest rate or total rate of return swap defaults, the portfolio's risk of
loss consists of the net amount of interest payments that a portfolio is
contractually entitled to receive. In contrast, currency swaps usually
involve the delivery of the entire principal value of one designated currency
in exchange for the other designated currency. Therefore, the entire
principal value of a currency swap is subject to the risk that the other
party to the swap will default on its contractual delivery obligations. If
there is a default by the counterparty, the portfolio may have contractual
remedies pursuant to the agreements related to the transaction. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Swaps that include caps, floors, and collars are
more recent innovations for which standardized documentation has not yet been
fully developed and, accordingly, they are less liquid than swaps.
The use of swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Adviser is incorrect in its
forecasts of market values, interest rates, and currency exchange rates, the
investment performance of the portfolio would be less favorable than it would
have been if this investment technique were not used.
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MAS Funds - 14 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
U.S. Governments--U.S. Treasury securities: are Fixed-Income Securities
which are backed by the full faith and credit of the U.S. Government as to
the payment of both principal and interest.
Warrants: are options issued by a corporation which give the holder the
option to purchase stock.
When-Issued Securities: are securities purchased at a certain price even
though the securities may not be delivered for up to 90 days. No payment or
delivery is made by the portfolio in a when-issued transaction until the
portfolio receives payment or delivery from the other party to the
transaction. Although the portfolio receives no income from the above
described securities prior to delivery, the market value of such securities
is still subject to change. As a consequence, it is possible that the market
price of the securities at the time of delivery may be higher or lower than
the purchase price. The portfolio will maintain with the custodian a separate
account with a segregated portfolio of liquid, high-grade debt securities or
cash in an amount at least equal to these commitments.
Zero Coupons--Zero Coupon Obligations: are Fixed-Income Securities that do
not make regular interest payments. Instead, zero coupon obligations are sold
at substantial discounts from their face value. The difference between a zero
coupon obligation's issue or purchase price and its face value represents the
imputed interest an investor will earn if the obligation is held until
maturity. Zero coupon obligations may offer investors the opportunity to earn
higher yields than those available on ordinary interest-paying obligations of
similar credit quality and maturity. However, zero coupon obligation prices
may also exhibit greater price volatility than ordinary fixed-income
securities because of the manner in which their principal and interest are
returned to the investor.
GENERAL SHAREHOLDER INFORMATION
This Prospectus is for use by defined contribution plan participants who may
invest according to plan specifications. For information on how to purchase,
redeem, or exchange Institutional Class Shares of the portfolio, participants
should contact their plan administrator.
VALUATION OF SHARES
Net asset value per share of each class is determined by dividing the
total market value of the portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the portfolio. Net asset
value per share is determined as of the close of the NYSE (normally 4:00 p.m.
Eastern Time) on each day the portfolio is open for business (See Other
Information-Closed Holidays). Equity Securities listed on a U.S. securities
exchange or NASDAQ for which market quotations are available are valued at
the last quoted sale price on the day the valuation is made. Price
information on listed Equity Securities is taken from the exchange where the
security is primarily traded. Equity Securities listed on a foreign exchange
are valued at the latest quoted sales price available before the time when
assets are valued. For purposes of net asset value per share, all assets and
liabilities initially expressed in foreign currencies are converted into U.S.
dollars at the bid price of such currencies against U.S. dollars. Unlisted
Equity Securities and listed U.S. Equity Securities not traded on the
valuation date for which market quotations are readily available are valued
at the mean of the most recent quoted bid and asked price. The value of other
assets and securities for which no quotations are readily available
(including restricted securities) are determined in good faith at fair value
using methods approved by the Trustees.
Net asset value includes interest on bonds and other Fixed-Income
Securities which is accrued daily. Bonds and other Fixed-Income Securities
which are traded over the counter and on an exchange will be valued according
to the broadest and most representative market, and it is expected that for
bonds and other Fixed-Income Securities this ordinarily will be the
over-the-counter market.
However, bonds and other Fixed-Income Securities may be valued on the
basis of prices provided by a pricing service when such prices are believed
to reflect the fair market value of such securities. The prices provided by a
pricing service are determined without regard to bid or last sale prices but
take into account institutional size trading in similar groups of securities
and any developments related to specific securities. Bonds and other Fixed-
Income Securities not priced in this manner are valued at the most recent
quoted bid price, or when stock exchange valuations are used, at the latest
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 15
<PAGE>
quoted sale price on the day of valuation. If there is no such reported sale,
the latest quoted bid price will be used. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Trustees determines that amortized cost reflects fair value. In the event that
amortized cost does not approximate market, market prices as determined above
will be used. Other assets and securities, for which no quotations are readily
available (including restricted securities), will be valued in good faith at
fair value using methods approved by the Board of Trustees.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES: Dividends and Capital
Gains Distributions:
o The Small Cap Value Portfolio normally distributes substantially all of its
net investment income in the form of annual dividends.
If the portfolio does not have income available to distribute, as
determined in compliance with the appropriate tax laws, no distribution will
be made.
If any net capital gains are realized from the sale of underlying
securities, the portfolio normally distributes such gains with the last
dividend for the calendar year.
All dividends and capital gains distributions are automatically paid in
additional shares of the portfolio unless the Plan Administrator elects
otherwise.
Undistributed net investment income is included in the portfolio's net
assets for the purpose of calculating net asset value per share. Therefore,
on the ex-dividend date, the net asset value per share excludes the dividend
(i.e., is reduced by the per share amount of the dividend). Dividends paid
shortly after the purchase of shares by an investor, although in effect a
return of capital, are taxable as ordinary income.
Federal Taxes: The portfolio intends to qualify for taxation as a
regulated investment company under the Code so that it will not be subject to
Federal income tax to the extent it distributes its income to its
shareholders. Dividends, either in cash or reinvested in shares, paid by the
portfolio from net investment income will be taxable to shareholders as
ordinary income. Such dividends will generally qualify in part for the
dividends received deduction for corporations, but the portion of the
dividends so qualified depends on the aggregate taxable qualifying dividend
income received by the portfolio from domestic (U.S.) sources. The Fund will
send each shareholder a statement each year indicating the amount of the
dividend income which qualifies for such treatment.
Whether paid in cash or additional shares of the portfolio, and regardless
of the length of time the shares in the portfolio have been owned by the
shareholder, distributions from long-term capital gains are taxable to
shareholders as such, but are not eligible for the dividends received
deduction for corporations. Shareholders are notified annually by the Fund as
to Federal tax status of dividends and distributions paid by the portfolio.
Such dividends and distributions may also be subject to state and local
taxes.
Exchanges and redemptions of shares in the portfolio are taxable events
for Federal income tax purposes. Individual shareholders may also be subject
to state and municipal taxes on such exchanges and redemptions.
The portfolio intends to declare and pay dividends and capital gain
distributions so as to avoid imposition of the Federal excise tax. To do so,
the portfolio expects to distribute an amount at least equal to (i) 98% of
its calendar year ordinary income, (ii) 98% of its capital gains net income
(the excess of short and long-term capital gain over short and long-term
capital loss) for the one-year period ending October 31st, and (iii) 100% of
any undistributed ordinary and capital gain net income from the prior year.
Dividends declared in December by the portfolio will be deemed to have been
paid by the portfolio and received by shareholders on the record date
provided that the dividends are paid before February 1 of the following year.
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MAS Funds - 16 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions)
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify on the Account
Registration Form that your Social Security or Taxpayer Identification Number
provided is correct and that you are not currently subject to back-up
withholding, or that you are exempt from back-up withholding.
Foreign Income Taxes: Investment income received by the portfolio from
sources within foreign countries may be subject to foreign income taxes
withheld at the source. The U.S. has entered into Tax Treaties with many
foreign countries which entitle the portfolio to a reduced rate of tax or
exemption from tax on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the portfolio's
assets to be invested within various countries is not known. The portfolio
intends to operate so as to qualify for treaty reduced rates of tax where
applicable.
State and Local Taxes: The Fund is formed as a Pennsylvania Business Trust
and therefore is not liable, under current law, for any corporate income or
franchise tax of the Commonwealth of Pennsylvania. The Fund will provide
Pennsylvania taxable values on a per share basis.
TRUSTEES OF THE TRUST: The affairs of the Trust are supervised by the
Trustees under the laws governing business trusts in the Commonwealth of
Pennsylvania. The Trustees have approved contracts under which, as described
above, certain companies provide essential management, administrative and
shareholder services to the Trust.
INVESTMENT ADVISER: The Investment Adviser to the Fund, Miller Anderson &
Sherrerd, LLP (the Adviser), is a Pennsylvania limited liability partnership
founded in 1969 and is located at One Tower Bridge, West Conshohocken, PA
19428. Miller Anderson & Sherrerd, LLP is an Equal Opportunity/Affirmative
Action Employer. The Adviser provides investment services to employee benefit
plans, endowment funds, foundations and other institutional investors and as
of the date of this prospectus had in excess of $35 billion in assets under
management. On January 3, 1996, Morgan Stanley Group Inc. acquired Miller
Anderson & Sherrerd, LLP (the "Adviser") in a transaction in which Morgan
Stanley Asset Management Holdings Inc., an indirect wholly owned subsidiary
of Morgan Stanley Group Inc., became the sole general partner of the Adviser.
Morgan Stanley Asset Management Holdings Inc. and two other wholly owned
subsidiaries of Morgan Stanley Group Inc. became the limited partners of the
Adviser. In connection with this transaction, the Adviser entered into a new
Investment Management Agreement ("Agreement") with MAS Funds dated as of
January 3, 1996, which Agreement was approved by the shareholders of each
Portfolio at a special meeting held on October 6, 1995. The Adviser will
retain its name and remain at its current location, One Tower Bridge, West
Conshohocken, PA 19428. The Adviser will continue to provide investment
counseling services to employee benefit plans, endowments, foundations, and
other institutional investors.
Under the Agreement with the Fund, the Adviser, subject to the control and
supervision of the Fund's Board of Trustees and in conformance with the
stated investment objectives and policies of each portfolio of the Fund,
manages the investment and reinvestment of the assets of each portfolio of
the Fund. In this regard, it is the responsibility of the Adviser to make
investment decisions for the Fund's portfolios and to place each portfolio's
purchase and sales orders. As compensation for the services rendered by the
Adviser under the Agreement the portfolio pays the Adviser an advisory fee
calculated by applying a quarterly rate, based on the following annual
percentage rates, to the portfolio's average daily net assets for the
quarter:
Rate
------
Small Cap Value Portfolio* .750
* Advisory fees in excess of 0.750% of average net assets are considered
higher than normal for most investment companies, but are not unusual for
portfolios that invest primarily in small capitalization stocks.
For the fiscal year ended September 30, 1995, the Adviser received the
following as compensation for its services:
Rate
------
Small Cap Value Portfolio .750%
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 17
<PAGE>
PORTFOLIO MANAGEMENT
The investment professionals of MAS who are primarily responsible for the
day-to-day management of the portfolio are as follows:
Bradley S. Daniels, Portfolio Manager, joined MAS in 1985. He assumed
responsibility for the Small Cap Value Portfolio in 1986.
Gary D. Haubold, Portfolio Manager, joined MAS in 1993. Mr. Haubold served as
Senior Vice President at Wood, Struthers & Winthrop in 1993. He assumed
responsibility for the Small Cap Value Portfolio in 1993.
Gary G. Schlarbaum, Portfolio Manager, joined MAS in 1987. He assumed
responsibility for the Small Cap Value Portfolio in 1987.
ADMINISTRATIVE SERVICES: MAS serves as Administrator to the Fund pursuant to
an Administration Agreement dated as of November 18, 1993. Under its
Administration Agreement with the Fund, MAS receives an annual fee, accrued
daily and payable monthly, of 0.08% of the Fund's average daily net assets,
and is responsible for all fees payable under any sub-administration
agreements. Chase Global Funds Services Company, a subsidiary of The Chase
Manhattan Bank, N.A., 73 Tremont Street, Boston MA 02108-3913, serves as
Transfer Agent to the Fund pursuant to an agreement also dated as of November
18, 1993, and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS as Administrator.
GENERAL DISTRIBUTION AGENT: Shares of the Fund are distributed exclusively
through MAS Fund Distribution, Inc., a wholly-owned subsidiary of the
Adviser.
PORTFOLIO TRANSACTIONS: The investment advisory agreement authorizes the
Adviser to select the brokers or dealers that will execute the purchases and
sales of investment securities for each of the Fund's portfolios and directs
the Adviser to use its best efforts to obtain the best execution with respect
to all transactions for the portfolios. In doing so, a portfolio may pay
higher commission rates than the lowest available when the Adviser believes
it is reasonable to do so in light of the value of the research, statistical,
and pricing services provided by the broker effecting the transaction.
It is not the Fund's practice to allocate brokerage or principal business on
the basis of sales of shares which may be made through intermediary brokers
or dealers. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's portfolios or who act as agents in
the purchase of shares of the portfolios for their clients.
Some securities considered for investment by each of the Fund's portfolios
may also be appropriate for other clients served by the Adviser. If purchase
or sale of securities consistent with the investment policies of a portfolio
and one or more of these other clients served by the Adviser is considered at
or about the same time, transactions in such securities will be allocated
among the portfolio and clients in a manner deemed fair and reasonable by the
Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Fund's
Trustees. MAS may use its broker dealer affiliates, including Morgan Stanley
& Co., a wholly owned subsidiary of Morgan Stanley Group Inc., the parent of
MAS's general partner and limited partner, to carry out the Fund's
transactions, provided the Fund receives brokerage services and commission
rates comparable to those of other broker dealers.
OTHER INFORMATION: Description of Shares and Voting Rights: The Fund was
established under Pennsylvania law by a Declaration of Trust dated February
15, 1984, as amended and restated as of November 18, 1993. The Fund is
authorized to issue an unlimited number of shares of beneficial interest,
without par value, from an unlimited number of series (portfolios) of shares.
Currently the Fund consists of twenty-six portfolios.
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MAS Funds - 18 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
The shares of each portfolio of the Fund are fully paid and non-assessable,
and have no preference as to conversion, exchange, dividends, retirement or
other features. The shares of each portfolio of the Fund have no preemptive
rights. The shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Trustees if they choose to do so. Shareholders
are entitled to one vote for each full share held (and a fractional vote for
each fractional share held), then standing in their name on the books of the
Fund.
Meetings of shareholders will not be held except as required by the
Investment Company Act of 1940, as amended, and other applicable law. A
meeting will be held to vote on the removal of a Trustee or Trustees of the
Fund if requested in writing by the holders of not less than 10% of the
outstanding shares of the Fund. The Fund will assist in shareholder
communication in such matters to the extent required by law.
Custodians: The Chase Manhattan Bank N.A., New York, NY and Morgan Stanley
Trust Company (NY), Brooklyn, NY serve as custodians for the Fund. The
custodians hold cash, securities and other assets as required by the 1940
Act.
Transfer and Dividend Disbursing Agent: Chase Global Funds Services Company,
a subsidiary of The Chase Manhattan Bank, N.A., 73 Tremont Street, Boston, MA
02108-3913.
Reports: The Plan Administrator receives semiannual and annual financial
statements. Annual financial statements are audited by Price Waterhouse LLP,
independent accountants.
Litigation: The Fund is not involved in any litigation.
Closed Holidays: Currently, the weekdays on which the portfolio is closed for
business are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and the principal executive
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years:
Thomas L. Bennett,* Chairman of the Board of Trustees; Portfolio Manager,
Miller Anderson & Sherrerd, LLP; Director, MAS Fund Distribution, Inc.
David P. Eastburn, Trustee; Retired; formerly: Director (Trustee) of each
of the investment companies in The Vanguard Group, except Vanguard
Specialized Portfolios; Director of Penn Mutual Life Insurance Company and
General Accident Insurance; President, Federal Reserve Bank of Philadelphia.
Joseph P. Healey, Trustee; Headmaster, Haverford School; formerly Dean,
Hobart College; Associate Dean, William & Mary College.
Joseph J. Kearns, Trustee; Vice President and Treasurer, The J. Paul Getty
Trust.
C. Oscar Morong, Jr., Trustee; Managing Director, Morong Capital
Management; Director, Ministers and Missionaries Benefit Board of American
Baptist Churches, The Indonesia Fund, The Landmark Funds; formerly Senior
Vice President and Investment Manager for CREF, TIAA-CREF Investment
Management, Inc.
*Trustee Bennett is deemed to be an "interested person" of the Fund as
that term is defined in the Investment Company Act of 1940, as amended.
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 19
<PAGE>
James D. Schmid, President; Head of Mutual Funds, Miller Anderson &
Sherrerd, LLP; Director, MAS Fund Distribution, Inc.; Chairman of the Board
of Directors, The Minerva Fund, Inc.; formerly Vice President, Chase
Manhattan Bank.
Lorraine Truten, CFA, Vice President; Head of Mutual Fund Administration,
Miller Anderson & Sherrerd, LLP; President, MAS Fund Distribution, Inc.
Douglas W. Kugler, Treasurer; Manager of Mutual Fund Administration,
Miller Anderson & Sherrerd, LLP; formerly Assistant Vice President, Provident
Financial Processing Corporation.
John H. Grady, Jr., Secretary; Partner, Morgan, Lewis & Bockius, LLP;
formerly Attorney, Ropes & Gray.
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MAS Funds - 20 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 21
<PAGE>
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MAS Funds - 22 Terms in bold type are defined in the Prospectus Glossary
<PAGE>
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Terms in bold type are defined in the Prospectus Glossary MAS Funds - 23
<PAGE>
------
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| |
| LOGO PROSPECTUS |
| |
| |
| January 30, 1996 |
| |
| Investment Adviser and Administrator: Transfer Agent: |
| |
| Miller Anderson & Sherrerd, LLP Chase Global Funds Services Company |
| One Tower Bridge 73 Tremont Street |
| West Conshohocken, Boston, Massachusetts 02108-0913 |
| Pennsylvania 19428-2899 |
| |
| General Distribution Agent: |
| |
| MAS Fund Distribution, Inc. |
| One Tower Bridge |
| P.O. Box 868 |
| West Conshohocken, |
| Pennsylvania 19428-0868 |
| --------------------------------------------------------------------------- |
| Table of Contents |
| |
| Page Page |
| |
| Fund Expenses 2 General Shareholder Information |
| Prospectus Summary 3 Valuation of Shares 15 |
| Financial Highlights 5 Dividends, Capital Gains Distributions |
| Yield and Total Return 6 and Taxes 16 |
| Investment Suitability 6 Investment Adviser 17 |
| Investment Limitations 7 Portfolio Management 18 |
| Portfolio Summary 9 Administrative Services 18 |
| Prospectus Glossary: General Distribution Agent 18 |
| Strategies 10 Portfolio Transactions 18 |
| Investments 10 Other Information 18 |
| Trustees and Officers 19 |
| |
| MILLER |
| ANDERSON |
- ------ & SHERRERD, LLP ------ ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428 |
o 800-354-8185
