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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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/X/ Preliminary Proxy Statement
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Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MAS Funds
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1) Title of each class of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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To Our Shareholders:
The enclosed Proxy Statement for the MAS Funds Multi-Asset-Class Portfolio
proposes an increase in advisory fees from 0.45% to 0.65%. The Fund's
Trustees are recommending that shareholders approve the increase because
managing this portfolio has proven to be more costly than the two-asset-class
Balanced Portfolio that also has an advisory fee of 0.45%.
Historically, MAS has managed balanced accounts by combining stand-alone equity
and fixed-income strategies or portfolios. The MAC Portfolio was the first to be
managed differently. MAS manages this Portfolio by looking at all five asset
classes simultaneously, analyzing each asset class compared to all others and to
cash. MAS also manages diversification and key risk factors such as currency
exposure and interest rate sensitivity across all asset classes. This more
complex process requires more costly resources, but results in more efficient
risk management.
To help illustrate why the process is more effective, MAS compared the
performance of a combination of individual portfolios with the MAC Portfolio,
using the same weights for each portfolio that were used for each asset class
within the MAC Portfolio. From its inception on July 29, 1994 through September
30, 1996, the MAC Portfolio has outperformed the combination of five existing
MAS Funds Portfolios by 70 basis points. More recently, the difference is even
greater; for the 12 months ended September 30, the MAC Portfolio outperformed by
120 basis points.
This is what would be expected for two reasons. First, using a combination of
portfolios does not allow the flexibility to manage asset allocation and risk
across all asset classes. For example, securities are selected in the Equity
Portfolio without regard to what equity-like instruments are held in the High
Yield Portfolio. Second, cash -- historically a low-performing asset -- is
generally higher in a combination of portfolios because each has its own
liquidity requirements.
This led MAS to the important conclusion that combining all asset classes in a
single portfolio is the most effective approach. In addition, there are trading
and other costs associated with using individual portfolios to manage balanced
investments. As a result, asset allocation services among individual portfolios
will no longer be offered by MAS other than for very large advisory investments.
Please read the enclosed Proxy Statement for additional information, including
information on expense ratios for comparable funds. If you have any questions,
please call us at any time at 800-854-8185 and ask for your service contact at
MAS or an MAS Funds officer.
Thank you for your attention to this very important matter.
James D. Schmid
President
MAS Funds
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PRELIMINARY COPY
MAS FUNDS
ONE TOWER BRIDGE
WEST CONSHOHOCKEN, PENNSYLVANIA 19428
Notice of Special Meeting of Shareholders
December 17, 1996
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
the Multi-Asset- Class Portfolio (the "Portfolio") of MAS Funds (the "Fund")
will be held at the offices of Miller Anderson & Sherrerd, LLP (the "Adviser"),
One Tower Bridge, West Conshohocken, Pennsylvania 19428, on December 17, 1996 at
9:00 a.m., local time, for the following purposes:
PROPOSAL 1: To approve or disapprove an amendment to the investment
advisory agreement between the Fund and Miller Anderson &
Sherrerd, LLP with respect to the Multi-Asset-Class
Portfolio which would increase the investment advisory fee
payable to Miller Anderson & Sherrerd, LLP; and
PROPOSAL 2. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
All Shareholders of the Portfolio are cordially invited to attend the Meeting.
Regardless of whether you plan to attend the Meeting, please complete, sign and
date the enclosed Proxy and return it promptly in the enclosed envelope so that
a quorum will be present and a maximum number of shares may be voted. If you are
present at the Meeting, you may change your vote, if desired, at that time.
Shareholders of the Portfolio of record at the close of business on October 31,
1996 are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
By order of the Board of Trustees
JOHN H. GRADY, JR.
Secretary
November 14, 1996
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY BALLOT
IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
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PRELIMINARY COPY
MAS FUNDS
MULTI-ASSET-CLASS PORTFOLIO
ONE TOWER BRIDGE
WEST CONSHOHOCKEN, PENNSYLVANIA 19428
SPECIAL MEETING OF SHAREHOLDERS
December 17, 1996
PROXY STATEMENT
The enclosed proxy is solicited by and on behalf of the Board of Trustees
of MAS Funds (the "Fund") in connection with the Special Meeting of Shareholders
(the "Meeting") of the Multi- Asset-Class Portfolio (the "Portfolio") to be held
on December 17, 1996 at 9:00 a.m., local time, at the offices of Miller Anderson
& Sherrerd, LLP, One Tower Bridge, West Conshohocken, Pennsylvania 19428. The
primary purpose of the Meeting is to amend the investment advisory agreement
between the Fund and Miller Anderson & Sherrerd, LLP (the "Adviser") with
respect to the Portfolio as set forth in Proposal 1.
In addition to the solicitation of proxies by mail, officers of the Fund
and employees of the Adviser may solicit proxies in person or by telephone. All
costs of printing and mailing this proxy statement, meeting notice and form of
proxy will be paid by the Portfolio. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses in sending soliciting
material to their principals.
The Fund will furnish, without charge, a copy of the most recent Annual
Report to Shareholders of the Fund and the most recent Semi-Annual Report
succeeding such Annual Report on request. Requests should be directed to the
Fund at One Tower Bridge, West Conshohocken, Pennsylvania 19428 or by calling
(800) 354-8185.
Holders of record at the close of business on October 31, 1996 are
entitled to vote at the Meeting or at any adjourned session. Each share is
entitled to one vote. As of the record date, there were approximately
_________________ shares of the Multi-Asset-Class Portfolio outstanding.
Shares represented by a properly executed proxy will be voted in
accordance with the instructions thereon, or if no specification is made, the
persons named as proxies will vote as recommended by the Board of Trustees.
Proxies may be revoked at any time before they are exercised by the subsequent
execution and submission of a revised proxy, by written notice of revocation to
the Secretary of the Fund, or by voting in person at the Meeting. The mailing
address of the Fund is One Tower Bridge, West Conshohocken, Pennsylvania 19428.
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Abstentions and proxies signed and returned by brokers without voting on a
proposal ("broker non-votes") will not be counted for or against such proposal,
but will be counted for purposes of determining whether a quorum is present and
for purposes of determining whether a "majority of the outstanding voting
securities" is present at the Meeting. Abstentions and broker non-votes will
therefore have the effect of counting against a proposal.
In the event that sufficient votes in favor of the proposal are not
received by the time scheduled for the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting for a period or periods of not
more than 60 days in the aggregate to permit further solicitation of proxies
with respect to such proposal. Any such adjournment will require the affirmative
vote of a majority of the votes cast on the question, whether or not a quorum is
present. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the proposal. They
will vote against any such adjournment those proxies required to be voted
against the proposal. The costs of any additional solicitation and of any
adjourned session will be borne by the Portfolio.
It is expected that this proxy statement will be mailed to the
shareholders on or about November 14, 1996.
PROPOSAL 1: To approve or disapprove an amendment to the investment
advisory agreement between the Fund and Miller Anderson &
Sherrerd, LLP with respect to the Multi-Asset-Class
Portfolio which would increase the investment advisory fee
payable to Miller Anderson & Sherrerd, LLP
General
On May 23, 1996, the Trustees of the Fund, including all of the Trustees
who are not "interested persons" of the Fund (referred to hereafter as the
"Independent Trustees"), unanimously approved, subject to the approval of the
shareholders of the Portfolio, an amendment to the investment advisory agreement
between the Fund and the Adviser (the "Amended Advisory Agreement") which would
increase the rate of the fee payable to the Adviser for managing the Portfolio.
Under the investment advisory agreement currently in effect with respect to the
Portfolio (the "Current Advisory Agreement"), the Portfolio pays the Adviser an
investment advisory fee calculated by applying a quarterly rate, based on an
annual rate of 0.45%, to the Portfolio's average daily net assets. The advisory
fee is allocated among the outstanding classes of the Portfolio on the basis of
the net asset value of each class in relation to the net asset value of the
Portfolio in accordance with Rule 18f-3(c) under the Investment Company Act of
1940 ("1940 Act"). The Adviser may, from time to time, voluntarily waive a
portion of its advisory fee with respect to the Portfolio to preserve or enhance
the performance of the Portfolio. For the fiscal year ended September 30, 1996,
the Adviser voluntarily waived advisory fees in the amount of $111,497, with the
result that the Portfolio paid an advisory fee of .370% of its average daily net
assets for such fiscal year. These figures have not yet been audited.
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Under the Amended Advisory Agreement, the Portfolio would pay the Adviser
an investment advisory fee calculated by applying a quarterly rate, based on an
annual rate of 0.65%, to the Portfolio's average daily net assets. The advisory
fee would continue to be allocated among the outstanding classes of the
Portfolio on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio. The effect of this change is to increase the
annual rate contractually required to be paid to the Adviser by the Portfolio
for each class by 0.20%. The Adviser would be able, from time to time, to
voluntarily waive a portion of its advisory fee with respect to the Portfolio to
preserve or enhance the performance of the Portfolio. Such voluntary waiver
would be subject to change.
Board of Trustees' Considerations
The Board's Recommendation. The Board of Trustees met on May 23, 1996 to
consider the proposed increase in the Portfolio's investment advisory fee and
its anticipated effects on the Portfolio. At that meeting, the Trustees,
including all of the Independent Trustees, approved the increase in the advisory
fee, subject to approval by the Portfolio's shareholders.
The Board's Responsibilities. In determining whether to approve the
proposed increase in the Portfolio's advisory fee, the Trustees, assisted by
outside counsel, analyzed the proposal in light of their fiduciary duties as
Trustees in order to determine whether the increase in the advisory fee is in
the best interests of the Portfolio's shareholders. Outside counsel to the
Independent Trustees assisted in preparing an analysis of the Trustees'
fiduciary duties in connection with their review and approval of investment
advisory agreements. In addition to advising the Independent Trustees about
their fiduciary duties, counsel assisted the Independent Trustees in analyzing
the proposed fee increase and in evaluating the potential effects of the
increase on the Fund, and worked with the Independent Trustees in requesting
information from the Adviser. In addition to the meeting of the full Board on
May 23, 1996, the Independent Trustees held meetings on May 17, May 22, and
May 23, 1996 at which the proposed fee increase was discussed.
The Trustees also considered whether the proposed increase in the
Portfolio's investment advisory fee is in accordance with the requirements of
Section 15(f) of the 1940 Act. As applied to the Fund, Section 15(f) provides
that, when a change in the control of the Adviser occurs, the Adviser or any of
its affiliated persons may receive any amount or benefit in connection therewith
as long as two conditions are satisfied. One condition is that for three years
at least 75% of the members of the Fund's Board of Trustees must be persons who
are not "interested persons" of the Adviser. The second condition provides that
no "unfair burden" may be imposed on the Fund as a result of the transaction
relating to the change of control of the Adviser, or any express or implied
terms, conditions or understandings applicable to that transaction. As defined
in the 1940 Act, the term "unfair burden" includes any arrangement during the
two-year period after the change in control of the Adviser whereby the Adviser,
or any interested person of the Adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the Fund or its shareholders (other
than fees for bona fide investment advisory or other services), or from any
person in connection with the purchase or sale of securities or other
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property to, from, or on behalf of the Fund (other than fees for bona fide
brokerage and principal underwriting services).
In determining whether to approve the proposed increase in the advisory
fee for the Portfolio and to recommend it to the Portfolio's shareholders, the
Board of Trustees, including all of the Independent Trustees, considered (i)
whether the proposed fee increase would impose an "unfair burden" on the Fund,
and (ii) whether the proposed fee increase was a result of the acquisition of
the Adviser by Morgan Stanley Asset Management Holdings Inc. ("MSAM Holdings")
or any express or implied terms, conditions, or understandings relating to such
acquisition.
The Adviser's Presentation to the Board. In presenting the proposed fee
increase to the Board, the Adviser explained how, historically, it had managed
balanced accounts by combining stand-alone equity and fixed-income strategies or
portfolios, and that the Multi-Asset-Class Portfolio was the first portfolio
that the Adviser had managed by looking at all asset classes simultaneously,
analyzing each asset class compared to all others and to cash. The Adviser
stated that while it believes the asset allocation approach used for the
Multi-Asset-Class Portfolio is the more effective approach, it is more complex
and costly for the Adviser to implement than managing stand-alone portfolios.
To illustrate the effectiveness of its new approach, the Adviser
explained that it had compared the performance of the Portfolio to that of a
combination of individual MAS Funds portfolios which reflected the Portfolio's
asset allocation and found that the Portfolio had out-performed the combination
of portfolios since its inception. The Adviser explained that it believed this
was the case due to the lack of asset allocation flexibility in the multiple
portfolio approach, and also because the combined portfolios would generally
have a larger portion of their assets invested in lower-yielding cash
investments than would be required for the Multi-Asset-Class Portfolio's
liquidity needs. The Adviser also noted that a multiple portfolio approach
results in higher trading and other costs being assessed to the individual
portfolios, and that it intended to discontinue offering asset allocation
services using individual portfolios in most cases.
Comparative Advisory Fees. The Adviser presented to the Board an analysis
of advisory fees and expense ratios for comparable funds, making specific
reference to Morningstar's mutual fund database service, to which the Adviser
subscribes. Using database information provided by Morningstar, the Adviser
demonstrated that the Portfolio's current expense ratio of 58 basis points
compares with an average of 153 basis points for no-load funds included in
Morningstar's Multi-Asset Global Universe. Expense ratios for no-load funds
included in Morningstar's Multi- Asset Global Universe ranged from 52 to 293
basis points.
The Board's Consideration of the Fee Increase. The Trustees requested, and
the Adviser provided, information to assist the Trustees in their consideration
of the Amended Advisory Agreement, including information and reports relating to
the Portfolio's current and proposed fee structures, the historic performance of
the Portfolio, the Portfolio's and Adviser's expenses, and Adviser's
profitability, including the Portfolio's contribution to the Adviser's overall
profitability. It was noted at the meeting that at previous meetings of the
Board, including meetings that preceded the acquisition of the Adviser by MSAM
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<PAGE>
Holdings, the Trustees, including the Independent Trustees, had informed the
Adviser of the Board's belief that it is in the Fund's and the shareholders'
best interests to ensure that the Adviser is adequately compensated for its
services to the Fund. The Trustees took into account the Adviser's belief that
the Portfolio's current fee structure does not provide the Adviser with adequate
compensation for its services, particularly for the value that the Adviser adds
through its asset allocation advice, and the Adviser's view that the proposed
fee structure represents a reasonable return to the Adviser, remains less than
that of competing funds, and will not affect the Fund's competitive performance.
The Trustees also considered the following factors: (1) the nature and
quality of the advisory services rendered and the results achieved by the
Adviser in the management of the Portfolio, taking into consideration the likely
effect of the proposed fee on the Portfolio's performance relative to that of
comparable mutual funds; (2) the relative size of the proposed advisory fee for
the Portfolio and advisory fees paid by comparable mutual funds, the effect of
the proposed increase in the advisory fee on the Portfolio's expense ratio, and
the Portfolio's pro forma expense ratio and the expense ratios of comparable
mutual funds; (3) the costs borne by the Adviser in providing investment
advisory services to the Portfolio; (4) the profits of the Adviser in providing
services to the Portfolio; (5) the extent to which the Adviser might experience
economies of scale as a result of growth in the Portfolio's assets that could be
shared with the Fund; and (6) the benefits that the Adviser receives from its
affiliation with the Fund. On the basis of all of the information obtained, the
Trustees, including all of the Independent Trustees, determined that the
proposed investment advisory fee was for bona fide advisory services to be
provided by the Adviser to the Portfolio, and the proposed increase had not
resulted from MSAM Holdings' acquisition of the Adviser.
Comparison of the Current Advisory Agreement and the Amended Advisory Agreement
The Current Advisory Agreement was last approved on October 6, 1995 by
shareholders of each portfolio of the Fund, including shareholders of the
Multi-Asset-Class Portfolio, at a special meeting relating to the Adviser's
acquisition by affiliates of Morgan Stanley Group Inc. Except for the change in
the amount of the Multi-Asset-Class Portfolio's advisory fee, the Amended
Advisory Agreement is unchanged from the Current Advisory Agreement. The Amended
Advisory Agreement is attached to this Proxy Statement as Exhibit A. The
description of the Amended Advisory Agreement set forth in this Proxy Statement
is qualified in its entirety by reference to Exhibit A.
The Amended Advisory Agreement provides that Miller Anderson & Sherrerd,
LLP, as Adviser thereunder, in return for its fee, will manage the investment
and reinvestment of the assets of each portfolio of the Fund, 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. In this regard,
it is the Adviser's responsibility to make investment decisions for each
Portfolio and to place each portfolio's purchase and sale orders for investment
securities. The Amended Advisory Agreement states that the Adviser will provide,
at its own expense, adequate office space, furnishings, equipment, and personnel
to perform its advisory services for the Fund.
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<PAGE>
The Amended Advisory Agreement has an initial term of two years from the
effective date of the Current Advisory Agreement, i.e., January 3, 1996, and
thereafter shall continue for successive annual periods, provided that such
continuation is approved by the Fund's Independent Trustees or by vote of the
holders of a majority of a Portfolio's outstanding voting securities, as well as
by a majority of the Fund's Trustees. The Amended Advisory Agreement may be
terminated with respect to any portfolio at any time, without the payment of any
penalty, by vote of a majority of the Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the portfolio on 60 days'
written notice to the Adviser. The Amended Advisory Agreement may be terminated
by the Adviser at any time, without the payment of any penalty, upon 90 days'
written notice to the Fund. The Amended Advisory Agreement will automatically
terminate in the event of its assignment.
The Amended Advisory Agreement provides that, in the absence of (i)
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
performance of its obligations and duties, (ii) reckless disregard by the
Adviser of its obligations and duties, or (iii) a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services, the
Adviser shall not be liable to the Fund, or to any Shareholder of the Fund, for
any error or judgment, mistake of law or any other act or omission in connection
with rendering services under the respective agreements, including for any
losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of any portfolio of the Fund.
The Adviser's services are not to be deemed exclusive. The Adviser and its
officers are free to render investment advisory and other services to others,
including other investment companies, and to engage in other activities, as long
as its services to the Fund under the Amended Advisory Agreement are not
impaired thereby. The Adviser's officers may serve as officers or Trustees of
the Fund, and the Fund's officers or Trustees may serve as officers of the
Adviser, to the extent permitted by law.
The Fund currently is authorized to issue three classes of shares pursuant
to a plan adopted by the Board of Trustees under Rule 18f-3 under the 1940 Act.
These classes are designated as Institutional Class Shares, Adviser Class
Shares, and Investment Class Shares and differ in their purchase requirements
and expenses charged. As of the record date, the Portfolio had outstanding only
Institutional and Investment Class Shares.
The following table compares the existing fees and expenses of the
Portfolio's two existing classes under the Current Advisory Agreement and the
pro forma fees and expenses of each of those classes under the Amended Advisory
Agreement. The percentages shown below expressing existing Annual Fund Operating
Expenses are based on the actual expenses of the Institutional Class (including
voluntary fee waivers) for the fiscal year ended September 30, 1996. These
figures have not yet been audited. The figures for the Investment Class are
estimates as that class has not been in existence for the full fiscal year.
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MAS Funds Multi-Asset-Class Portfolio
<TABLE>
<CAPTION>
Institutional Class Investment Class
Shareholder Transaction Expenses Existing Pro Forma Existing Pro Forma
- -------------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchase.................................. None None None None
Maximum Sales Charge Imposed
on Reinvested Dividends...................... None None None None
Deferred Sales Charge........................ None None None None
Redemption Fees.............................. None None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(percentage of average net assets) Existing Pro Forma Existing Pro Forma
- ---------------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Advisory Fees................................ 0.370%* 0.570%* 0.370%* 0.570%*
Shareholder Service Fees..................... None None 0.150% 0.150%
12b-1 Fees................................... None None None None
Other Expenses............................... 0.210% 0.210% 0.330% 0.330%
Total Fund Operating Expenses................ 0.580% 0.780% 0.850% 1.05%
</TABLE>
* The Adviser has voluntarily agreed to waive advisory fees and reimburse
certain expenses to the extent necessary to keep Total Operating Expenses
from exceeding 0.58% (Existing) and 0.78% (Pro Forma) for the
Institutional Class and .85% (Existing) and 1.05% (Pro Forma) for the
Investment Class. Absent such fee waivers and reimbursements, Total
Operating Expenses for the Institutional Class would be 0.66% (Existing)
and 0.86% (Pro Forma), and for the Investment Class would be 0.93%
(Existing) and 1.13% (Pro Forma).
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<PAGE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Institutional Class Investment Class
---------------------------- -----------------------------
Existing Pro Forma Existing Pro Forma
-------- --------- -------- ---------
<C> <C> <C> <C> <C>
1 year.................................. $6 $8 $9 $11
3 years................................. $19 $25 $27 $33
5 years................................. $32 $43 $47 $58
10 years................................ $73 $97 $105 $128
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended September 30, 1996, the aggregate fee paid by
the Fund to the Adviser for investment advisory services on behalf of the
Portfolio (net of voluntary fee waivers of $111,497) was $523,918. If the
proposed fee had been in effect, the Adviser would have received $806,326
(assuming the same voluntary fee waivers of $111,497), which equals a 53.9%
increase over the fee that the Adviser actually received under the Current
Advisory Agreement. Without the voluntary fee waivers, the Fund would have paid
$635,415 under the Current Advisory Agreement and $917,823 under the Amended
Advisory Agreement, which would have been a 44.4% increase over the amount
payable under the Current Advisory Agreement. These figures have not yet been
audited.
The Adviser and Administrator
The Adviser to the Fund, Miller Anderson & Sherrerd, LLP is a Pennsylvania
limited partnership founded in 1969 and is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428. The Adviser provides investment services to
employee benefit plans, endowment funds, foundations and other institutional
investors and as of September 30, 1996 had approximately $37.4 billion in assets
under management. On January 3, 1996, Morgan Stanley Group Inc. acquired the
Adviser in a transaction in which MSAM Holdings, an indirect wholly owned
subsidiary of Morgan Stanley Group Inc., became the sole general partner of the
Adviser. MSAM Holdings' address is 1221 Avenue of the Americas, New York, NY
10020. MSAM Holdings and two other wholly owned subsidiaries of Morgan Stanley
Group Inc. are also the limited partners of the Adviser.
As part of the acquisition of the Adviser, the then-partners of the
Adviser, including Thomas Bennett, Chairman of the Fund's Board of Trustees,
- 8 -
<PAGE>
sold their partnership interests in the Adviser to MSAM Holdings for cash and
securities of Morgan Stanley Group Inc. The Adviser, MSAM Holdings, and Morgan
Stanley Asset Management Inc. agreed to use their best efforts to ensure that
the Fund would comply with the requirements of Section 15(f) of the 1940 Act,
including the requirement that for a period of not less than three years, no
more than 25% of the members of the Fund's Board of Trustees would be
"interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the
Adviser, its subsidiaries and affiliates, or MSAM Holdings, or any affiliated
person of any of them.
The following information is provided for the principal executive officers
of the Adviser. It includes his or her name, position with the Adviser, and
principal occupation. The address for each is One Tower Bridge, West
Conshohocken, Pennsylvania 19428.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Thomas L. Bennett Portfolio Manager, Miller Anderson & Sherrerd, LLP;
Managing Director, Morgan Stanley & Co. Incorporated
Gary G. Schlarbaum Portfolio Manager, Miller Anderson & Sherrerd, LLP;
Managing Director, Morgan Stanley & Co. Incorporated
Marna C. Whittington Portfolio Manager, Miller Anderson & Sherrerd, LLP;
Managing Director, Morgan Stanley & Co. Incorporated
Richard B. Worley Portfolio Manager, Miller Anderson & Sherrerd, LLP;
Managing Director, Morgan Stanley & Co. Incorporated
</TABLE>
Miller Anderson & Sherrerd, LLP serves as the investment adviser or
subadviser to the following registered investment companies with investment
objectives similar to that of the Portfolio. These investment companies are
otherwise unaffiliated with the Fund and have separate boards of directors. The
approximate net assets of each such fund (or portfolio) and the annual advisory
fee payable by each are as follows:
[insert comparable funds]
Miller Anderson & Sherrerd, LLP also serves as Administrator to the Fund
under an Administration Agreement dated as of January 3, 1996. As Administrator,
Miller Anderson & Sherrerd, LLP receives an annual fee equal to 0.08% of the
Fund's average daily net assets and is responsible for all fees payable under
any sub-administration agreement. Miller Anderson & Sherrerd, LLP will continue
to serve as Administrator if the Amended Advisory Agreement is approved.
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<PAGE>
Required Vote
Approval of the amendment to the investment advisory agreement requires the
affirmative vote of a majority of the outstanding shares of the Portfolio. For
purposes of this proposal, "majority of the outstanding shares" means the vote
of (i) 67% or more of the Portfolio's outstanding shares present at the Meeting,
if the holders of more than 50% of the outstanding shares of the Portfolio are
present or represented by proxy, or (ii) more than 50% of the Portfolio's
outstanding shares, whichever is less. All shareholders of each class of shares
of the Portfolio will vote together.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT ON BEHALF OF THE FUND.
ADDITIONAL INFORMATION
Distribution of Shares
MAS Fund Distribution, Inc., a wholly-owned subsidiary of the Adviser, One
Tower Bridge, P.O. Box 868, West Conshohocken, Pennsylvania 19428, is the
Distributor for the Fund pursuant to a distribution agreement dated January 3,
1996.
Portfolio Transactions
The Adviser is an indirect, wholly-owned subsidiary of Morgan Stanley Group Inc.
Morgan Stanley Group Inc. also is the parent of Morgan Stanley & Co.
Incorporated ("MS&Co."), a registered broker-dealer. MS&Co., therefore, is an
"Affiliated Broker" of the Fund within the meaning of the rules under the
Securities Exchange Act of 1934. For the fiscal year ended September 30, 1996,
the Portfolio paid $10,736 in commissions to MS&Co., which constituted 2.88% of
all brokerage commissions paid by the Portfolio for the year.
Officers and Employees of the Adviser
The following Trustees and officers of the Fund are also officers or
employees of the Adviser: Thomas L. Bennett, Chairman of the Fund's Board of
Trustees, is a Portfolio Manager and Member of the Executive Committee of the
Adviser, and a Managing Director of MS&Co.; James D. Schmid, President of the
Fund, is Head of Mutual Funds with the Adviser and a Principal of MS&Co.;
Lorraine Truten, Vice President of the Fund, is Head of Mutual Fund Services
with the Adviser and a Principal of MS&Co.; Douglas W. Kugler, Treasurer of the
Fund, is Head of Mutual Fund Administration with the Adviser and a Vice
President of MS&Co.; Marion S. Mitchell, Assistant Secretary of the Fund, is
Manager of Mutual Fund Client Service Administration with the Adviser.
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Beneficial Owners
To the knowledge of the Fund's management, as of October 31, 1996, the
following were beneficial owners of 5% or more of the outstanding shares of the
Portfolio: _________.
Submission of Shareholder Proposals
As a Pennsylvania business trust, the Fund is not required to hold annual
shareholder meetings. Shareholders who wish to present a proposal for action at
the next meeting or suggestions as to nominees for the Board of Trustees should
submit the proposal or suggestions to the Secretary of the Fund, John H. Grady,
Jr., c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge, West Conshohocken,
Pennsylvania 19428, to be considered for inclusion in the Fund's proxy statement
for a subsequent meeting.
Other Matters
The Trustees do not know of any matters to be presented at the Meeting
other than those set forth in this Proxy Statement. If any other business should
come before the Meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
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EXHIBIT A
FORM OF INVESTMENT ADVISORY AGREEMENT
MAS FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 3rd day of January, 1996, and amended as of the day
of November, 1996, by and between MAS Funds (the "Fund"), a business trust
organized under the laws of the Commonwealth of Pennsylvania, and Miller
Anderson & Sherrerd, LLP (or any successor-in-interest (by merger or otherwise)
thereto or transferee thereof that does not involve an "assignment" within the
meaning of the Investment Company Act of 1940 and that is a limited liability
partnership or other entity wholly owned, directly or indirectly, by Morgan
Stanley Asset Management Holdings, Inc. and/or its affiliates; Miller Anderson &
Sherrerd, LLP or such successor-in-interest or transferee being referred to
herein as the "Adviser").
1. Duties of Adviser. The Fund hereby appoints the Adviser to act as investment
adviser to each of the Portfolios listed on Schedule A hereto (the
"Portfolios"), for the period and on such terms set forth in this Agreement. The
Fund employs the Adviser to manage the investment and reinvestment of the assets
of the Portfolios, to continuously review, supervise and administer the
investment program of each of the Portfolios, to determine in its discretion the
securities to be purchased or sold and the portion of each such Portfolio's
assets to be held uninvested, to provide the Fund with records concerning the
Adviser's activities which the Fund is required to maintain, and to render
regular reports to the Fund's officers and Board of Trustees concerning the
Adviser's discharge of the foregoing responsibilities. The Adviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Board of Trustees of the Fund, and in compliance with the objectives,
policies and limitations set forth in the Fund's prospectus and applicable laws
and regulations. The Adviser accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
2. Portfolio Transactions. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of securities for each of the
Portfolios and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Subject to
policies established by the Board of Trustees of the Fund, the Adviser may also
be authorized to effect individual securities transactions at commission rates
in excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
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value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty created
by this Agreement or otherwise. The Adviser will promptly communicate to the
officers and Trustees of the Fund such information relating to portfolio
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the Adviser
as provided in Section 1 of this Agreement, the Fund shall pay to the Adviser at
the end of each of the Fund's fiscal quarters, an advisory fee calculated by
applying a quarterly rate, based on the annual percentage rates set forth
opposite each Portfolio's name on Schedule A hereto, to each Portfolio's average
daily net assets for the quarter.
In the event of termination of this Agreement, the fee provided under
this Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current fiscal quarter as
a percentage of the total number of days in such quarter.
4. Other Services. At the request of the Fund, the Adviser, in its discretion
may make available to the Fund office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and services shall be
provided for or rendered by the Adviser and billed to the Fund at the Adviser's
cost.
5. Reports. The Fund and the Adviser agree to furnish to each other current
prospectuses, proxy statements, reports to shareholders, certified copies of
their financial statements, and such other information with regard to their
affairs as each may reasonably request.
6. Status of Adviser. The services of the Adviser to the Fund are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services to the Fund are not impaired thereby.
7. Liability of Adviser. In the absence of (i) willful misfeasance, bad faith or
gross negligence on the part of the Adviser in performance of its obligations
and duties hereunder, (ii) reckless disregard by the Adviser of its obligations
and duties hereunder, or (iii) a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the Investment Company Act, the Adviser shall not be subject
to any liability whatsoever to the Fund, or to any shareholder of the Fund, for
any error or judgment, mistake of law or any other act or omission in the course
of, or connected with, rendering services hereunder including, without
limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of any Portfolio
of the Fund.
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<PAGE>
8. Permissible Interests. Subject to and in accordance with the Declaration of
Trust of the Fund and the Partnership Agreement (or other governing or
organizational documents) of the Adviser, Trustees, agents and shareholders of
the Fund are or may be interested in the Adviser (or any successor thereof) as
officers or partners, or otherwise; officers, agents and partners of the Adviser
are or may be interested in the Fund as Trustees, officers, shareholders or
otherwise; and the Adviser (or any successor) is or may be interested in the
Fund as a shareholder or otherwise. The effect of any such interrelationships
shall be governed by said Declaration of Trust or Partnership Agreement (or
other governing or organizational documents) and provisions of the Investment
Company Act.
9. Declaration of Trust. The Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in Article VIII of the
Declaration of Trust of the Fund and agrees that the obligations assumed by the
Fund pursuant to this Agreement shall be limited in all cases to the Fund and
its assets, and the Adviser shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Fund. Nor shall the Adviser seek
satisfaction of any such obligations from the Trustees or any individual
Trustee.
10. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue until January 3, 1998 and thereafter for
additional periods of one year from the anniversary thereof, but only so long as
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Trustees of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Fund or by vote of a majority of the outstanding
voting securities of each Portfolio of the Fund; provided, however, that if the
holders of any Portfolio fail to approve the Agreement as provided herein, the
Adviser may continue to serve in such capacity in the manner and to the extent
permitted by the Investment Company Act and Rules thereunder. This Agreement may
be terminated by any Portfolio of the Fund at any time, without the payment of
any penalty, by vote of a majority of the entire Board of Trustees of the Fund
or by vote of a majority of the outstanding voting securities of the Portfolio
on 60 days' written notice to the Adviser. This Agreement may be terminated by
the Adviser at any time, without the payment of any penalty, upon 90 days'
written notice to the Fund. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postpaid, to the other
party at any office of such party.
As used in this Section 10, the terms "assignment," "interested
persons," and "a vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the Investment Company Act.
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11. Amendment of Agreement. This Agreement may be amended by mutual consent, but
the consent of the Fund must be approved (a) by a vote of a majority of those
members of the Board of Trustees of the Fund who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of each Portfolio of the Fund.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this ____ day of __________, 19__.
MILLER ANDERSON & SHERRERD, LLP MAS FUNDS
By ____________________________ By ___________________________
Name __________________________ Name: ________________________
Title: ________________________ Title: _______________________
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<PAGE>
Schedule A
Portfolio Rate
- --------- -----
Advisory Foreign Fixed Income .375%
Advisory Mortgage .375%
Balanced .450%
Cash Reserves .250%
Domestic Fixed Income .375%
Emerging Markets .750%
Equity .500%
Fixed Income .375%
Fixed Income II .375%
Global Fixed Income .375%
Growth .500%
High Yield .375%
Intermediate Duration .375%
International Fixed Income .375%
International Equity .500%
Limited Duration .300%
Mid Cap Growth .500%
Mid Cap Value .750%
Mortgage-Backed Securities .375%
Multi-Asset-Class .650%
Municipal .375%
PA Municipal .375%
Small Cap Value .750%
Special Purpose Fixed Income .375%
Value .500%
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EXHIBIT B
MAS Funds -- Multi-Asset-Class Portfolio
Proxy for Special Meeting of Shareholders, December 17, 1996
The undersigned Shareholder(s) of the Multi-Asset-Class Portfolio ("Portfolio")
of MAS Funds (the "Fund"), revoking previous proxies, hereby appoint(s) Douglas
W. Kugler and John H. Grady, Jr., and each of them (each with full power of
substitution), as the proxy or proxies of the undersigned to attend the Special
Meeting of Shareholders of the Fund to be held on December 17, 1996, and any
adjournment thereof (the "Meeting"), and to vote all of the shares of the Fund
that the signer would be entitled to vote if personally present at the Meeting
on the proposals set forth below respecting the amendment of the investment
advisory agreement between the Fund and Miller Anderson & Sherrerd, LLP and, in
accordance with their own discretion, on any other matters properly brought
before the Meeting.
This proxy is solicited on behalf of the Board of Trustees of the Fund which
recommends a vote "FOR" the following proposals:
I. To approve an amendment to the investment advisory agreement between
the Fund and Miller Anderson & Sherrerd, LLP with respect to the
Multi-Asset-Class Portfolio which would increase the investment
advisory fee payable to Miller Anderson & Sherrerd, LLP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. Not applicable.
The undersigned acknowledges receipt with this proxy of a copy of the Notice of
Special Meeting of Shareholders and the Proxy Statement of the Board of
Trustees.
This proxy will, when properly executed, be voted as directed herein by the
signing shareholder. If no contrary direction is given when the duly executed
proxy is returned, this proxy will be voted FOR the proposal to increase the
advisory fee payable to Miller Anderson & Sherrerd, LLP and will be voted in the
appointed proxies' discretion upon such other business as may properly come
before the Meeting.
Your signature(s) on this proxy should be exactly as your name or names appear
on this proxy. If the shares are held jointly, each holder should sign. If
signing is by attorney, executor, administrator, Trustee or guardian, please
print your full title below your signature.
Dated: __________ __, 1996 _______________________________
Signature
_______________________________
Signature
Please date, sign and return promptly whether or not you expect to attend the
Meeting. You may nevertheless vote in person if you do attend the Meeting.
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