<PAGE> 1
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
MAS FUNDS - SELECT EQUITY PORTFOLIO
<TABLE>
<CAPTION>
(In Thousands) July 31, 1996
-------------
ASSETS
<S> <C>
Cash $ 1,955
Dividends Receivable 43
Receivable for Investments Sold 37,604
--------
Total Assets 39,602
--------
LIABILITIES
Payable for Fund Shares Redeemed (39,562)
Payable for Investment Advisory Fees (22)
Payable for Administrative Fees (3)
Other Liabilities (15)
--------
Total Liabilities (39,602)
--------
NET ASSETS $ 0
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 2
STATEMENT OF OPERATIONS
- -----------------------------------
MAS FUNDS - SELECT EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Period from
October 1, 1995
(In Thousands) to July 31, 1996*
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 634
Interest 119
-------
Total Income 753
-------
EXPENSES
Investment Advisory Services - Note B $ 152
Less: Waived Fees (22) 130
Administrative Fee - Note C 24
Custodian Fee 13
Other Expenses 22
-------
Total Expenses 189
-------
Expense Offset - Note E (3)
-------
Net Expenses 186
-------
Net Investment Income 567
-------
REALIZED NET GAIN ON INVESTMENT SECURITIES 5,322
-------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENT SECURITIES - Note D (3,581)
-------
Net Gain 1,741
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,308
-------
</TABLE>
* The Portfolio ceased operations on July 31, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE> 3
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------
MAS FUNDS - SELECT EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
(In Thousands) SEPTEMBER 30, 1995 JULY 31, 1996*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 579 $ 567
Realized Net Gain 431 5,322
Change in Unrealized Appreciation (Depreciation) - Note D 4,466 (3,581)
-------- --------
Net Increase in Net Assets Resulting from Operations 5,476 2,308
-------- --------
DISTRIBUTIONS: - Note A
Net Investment Income (575) (720)
In Excess of Net Investment Income -- (4)
Realized Net Gain (9,116) (2,508)
In Excess of Realized Net Gain -- (53)
-------- --------
Total Distributions (9,691) (3,285)
-------- --------
CAPITAL SHARE TRANSACTIONS:(1)
Issued 4,847 8,260
In Lieu of Cash Distributions 9,691 3,285
Redeemed (Note G) (9,897) (40,149)
-------- --------
Net Increase (Decrease) from Capital Share Transactions 4,641 (28,604)
-------- --------
Total Increase (Decrease) 426 (29,581)
NET ASSETS:
Beginning of Period 29,155 29,581
-------- --------
--------
END OF PERIOD (2) $ 29,581 $ 0
-------- --------
(1) Shares Issued and Redeemed
Shares Issued 411 670
In Lieu of Cash Distributions 1,026 278
Shares Redeemed (Note G) (615) (3,456)
-------- --------
822 (2,508)
-------- --------
(2) Net Assets Consist of:
Paid in Capital $ 25,226 $ 0
Undistributed Net Investment Income 161 0
Undistributed Realized Net Gain 613 0
Unrealized Appreciation on Investment Securities 3,581 0
-------- --------
TOTAL NET ASSETS $ 29,581 $ 0
-------- --------
</TABLE>
* The Portfolio ceased operations on July 31, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
FINANCIAL HIGHLIGHTS
- -----------------------------------
MAS FUNDS - SELECT EQUITY PORTFOLIO
For a Share Outstanding Throughout Each Period+
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.86 $ 16.09 $ 17.65 $ 18.41 $ 17.29
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.34 0.32 0.31 0.71 0.27
Net Realized and Unrealized Gain
(Loss) on Investments 4.26 1.76 1.49 0.06 2.07
-------- -------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.60 2.08 1.80 0.77 2.34
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income (0.33) (0.31) (0.32) (0.70) (0.30)
In Excess of Net Investment Income -- -- -- -- --
Realized Net Gain (0.04) (0.21) (0.72) (1.19) (7.53)
In Excess of Realized Net Gain -- -- -- -- --
-------- -------- -------- ------- -------
TOTAL DISTRIBUTIONS (0.37) (0.52) (1.04) (1.89) (7.83)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 16.09 $ 17.65 $ 18.41 $ 17.29 $ 11.80
-------- -------- -------- ------- -------
TOTAL RETURN 39.48% 13.26% 10.46% 4.50% 26.22%
-------- -------- -------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $118,557 $205,264 $295,050 $29,155 $29,581
Ratio of Expenses to Average Net Assets ## 0.60% 0.60% 0.60% 0.62%+ 0.62%+
Ratio of Net Investment Income
to Average Net Assets 2.41% 1.89% 1.78% 1.75% 2.48%
Portfolio Turnover Rate 29% 19% 33% 27% 73%
Average Commission Rate ### N/A N/A N/A N/A N/A
-------- -------- -------- ------- -------
</TABLE>
<TABLE>
JULY 31, 1996*
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80
--------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.19
Net Realized and Unrealized Gain
(Loss) on Investments 0.70
--------
TOTAL FROM INVESTMENT OPERATIONS 0.89
--------
DISTRIBUTIONS
Net Investment Income (0.25)
In Excess of Net Investment Income --
Realized Net Gain (0.81)
In Excess of Realized Net Gain (0.02)
--------
TOTAL DISTRIBUTIONS (1.08)
--------
NET ASSET VALUE, END OF PERIOD $ 11.61#
--------
TOTAL RETURN 7.62%
--------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 0
Ratio of Expenses to Average Net Assets ## 0.62%**++
Ratio of Net Investment Income
to Average Net Assets 1.86%**
Portfolio Turnover Rate 89%
Average Commission Rate ### $ 0.0558
--------
</TABLE>
* The Portfolio ceased operations on July 31, 1996.
** Annualized.
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Select Equity Portfolio expense ratios are net of voluntarily waived
expenses of less than 0.01%, 0.13% and 0.07%** for the years ended
September 30, 1994 and 1995 and the period ended July 31, 1996,
respectively.
# Represents Net Asset Value as of the last day of operations.
## For the year(s) ended after September 30, 1994 the Ratio of Expenses to
Average Net Assets for the Select Equity Portfolio excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses
to Average Net Assets would be 0.61% and 0.61%**, respectively.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940 as
an open-end investment company. At July 31, 1996, the Fund was comprised of
twenty-five active portfolios (the "Portfolios"). The accompanying financial
statements and financial highlights are those of the Select Equity Portfolio
(the "Portfolio") only. The Portfolio ceased operations as of July 31, 1996
through an in-kind redemption to its final remaining shareholder (Note G).
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant
accounting policies are in conformity with generally accepted
accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed
on the New York Stock Exchange ("NYSE") or other U.S.
exchanges or NASDAQ are based on the latest quoted sales
prices as of the close of the NYSE (normally 4:00 p.m. Eastern
Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent
quoted bid and asked prices. Equity securities not listed are
valued at the mean of the most recent quoted bid and asked
prices. Securities for which no quotations are readily
available (including restricted securities) are valued at
their fair value as determined in good faith using methods
approved by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to
qualify as a regulated investment company and distribute all
of its taxable income. Accordingly, no provision for Federal
income taxes is required in the financial statements.
Paid in capital, undistributed (overdistributed) net
investment income and undistributed (overdistributed) realized
net gain (loss) have been adjusted for permanent book-tax
differences.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for
repurchase agreements are held by the Portfolio's custodian
bank until maturity of the repurchase agreements. Provisions
of the agreements ensure that the market value of the
collateral is at least equal to the repurchase value in the
event of default; however, in the event of default or
bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal
proceedings.
Pursuant to an Exemptive Order issued by the Securities and
Exchange Commission, the Portfolio may transfer its uninvested
cash balances into a joint trading account which invests in
one or more repurchase agreements. This joint repurchase
agreement is covered by the same collateral requirements as
discussed above.
4. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio
distributes substantially all of its net investment income to
shareholders in the form of quarterly dividends. Net realized
capital gains are distributed at least annually. The amount
and character of income and gains to be distributed are
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax
treatments in the timing of the recognition of gains or losses
on securities, including permanent differences for gain (loss)
on in-kind redemptions.
5. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining
realized gains and losses on the sale of investment securities
are those of specific securities sold. Dividend income and
distributions to shareholders are recorded on the ex-dividend
date. Interest income is recognized on the accrual basis.
Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which can not be directly
attributed are apportioned among the Portfolios on the basis
of their relative net assets.
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory
Agreement, the Portfolio paid Miller Anderson & Sherrerd, LLP ("MAS" or
"the Adviser") for investment advisory services performed at a fee
calculated by applying a quarterly rate based on an annual percentage
rate of 0.50% to the average daily net assets for the quarter.
MAS voluntarily agreed to reduce the fees payable to it and, if
necessary, to reimburse the Portfolio if annual operating expenses
exceed 0.61% of average daily net assets.
On January 3, 1996, Morgan Stanley Group, Inc. acquired Miller Anderson
& Sherrerd, LLP 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. In addition, 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, on January 3, 1996, the Adviser entered into a new
Investment Advisory Agreement with MAS Funds under the same terms and
conditions as stated above.
C. ADMINISTRATION FEE. MAS serves as Administrator to the Fund pursuant
to an Administration Agreement. Under the agreement, MAS received an
annual fee accrued daily and payable monthly, of 0.08% of the
Portfolio's average daily net assets. Chase Global Funds Services
Company serves as Transfer Agent to the Fund and provides fund
accounting and other services pursuant to a sub-administration
agreement with MAS.
D. PORTFOLIO INVESTMENT ACTIVITY. For the period ended July
31, 1996, purchases and sales (including in-kind redemptions)
of investment securities other than temporary cash investments
were $27,044,000 and $55,308,000, respectively.
E. SECURITIES LENDING. The Portfolio loaned securities to
certain brokers and received security lending fees. Security
lending fees are included as expense offsets in the Statement
of Operations. During the period ended July 31, 1996, the
Portfolio had security lending fees totaling $1,500.
For lending securities the Portfolio received securities issued or
guaranteed by the U.S. Government or its agencies, cash or letters of
credit as collateral in an amount at least equal to 100% of the current
market value of loaned securities.
F. REMUNERATION OF TRUSTEES AND OFFICERS. The Fund paid each Trustee,
who is not also an officer or affiliated person, an annual fee plus
travel and other expenses incurred in attending Board meetings.
Trustees who are also officers or affiliated persons received no
remuneration for their service as Trustees.
G. IN-KIND TRANSACTIONS. ON July 31, 1996, the Portfolio
realized a gain from in-kind redemptions of approximately
$3,448,000 through the in-kind redemption of 3,238,498 shares
valued at $37,603,914 to its final remaining shareholder.
<PAGE> 7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
MAS Funds
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Select Equity Portfolio of MAS Funds (hereafter referred to as the "Fund")
at July 31, 1996 and the results of its operations, the changes in its net
assets and its financial highlights for the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note G to the financial statements, effective July 31, 1996 the
Fund distributed its net assets to its remaining shareholder through a
redemption in kind and ceased operations.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 21, 1996
