<PAGE> 1
1997
Annual Report
VALUE PORTFOLIO
MAS FUNDS
<PAGE> 2
We are pleased to present the Annual Report for the Value Portfolio of MAS Funds
as of September 30, 1997.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Portfolio Overview.......................... 1
Statement of Net Assets..................... 3
Statement of Operations..................... 7
Statement of Changes in Net Assets.......... 8
Financial Highlights........................ 9
Notes to Financial Statements............... 11
Report of Independent Accountants........... 17
</TABLE>
THIS ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 3
PORTFOLIO OVERVIEW
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined stock
valuation process with the judgment gained through considerable experience in
low-P/E investing.
MAS's process is executed in two stages. An initial screen is used to identify
companies with flat or positive earnings growth which have underperformed the
broad market averages and whose valuations currently fall into the lower segment
of MAS's investment universe. In the second stage, fundamental analysis is used
to determine the cyclical sustainability of earnings and the competitive
dynamics of the company.
Perhaps the greatest strategic advantage of this approach is that the sell
discipline mandates the sale of any stock that satisfies one or more sell
criteria--price appreciation, earnings deterioration, or negative fundamental
change.
The hallmark of MAS's strategy is its clearly defined, firmly enforced sell
discipline. Many value managers who are able to identify outstanding securities
err in holding successful investments past their peaks. Perhaps the greatest
strategic advantage of this approach is that the sell discipline mandates the
sale of any stock that satisfies one or more sell criteria--price appreciation,
earnings deterioration, or negative fundamental change. This approach is
fortified by attention to risk management. MAS emphasizes portfolio
diversification in terms of both sectors and stocks. Maximum sector limitations
are imposed and limits placed on the size of individual positions, thereby
minimizing the risk of any sector or holding.
For the fiscal year ended September 30, 1997, the Value Portfolio once again
outperformed its benchmark, returning 41.2% versus 40.5% for the S&P 500. Stock
selection contributed the most to the Portfolio's strong relative and absolute
performance results, with sector selection also acting as a positive
contributor. The Portfolio's holdings in cash equivalent investments penalized
results somewhat, as the fiscal year witnessed another strong move upward in the
broad stock market indices and cash proved to be an underperforming asset.
For most of the fiscal year, the equity market maintained a fairly narrow focus,
with the so-called "New Nifty-Fifty" stocks accounting for most of the market's
performance. In general, these larger, growth-oriented companies tended to
outperform smaller companies or those which exhibited greater economic or
interest rate sensitivity. The Value Portfolio's disciplined approach to stock
selection which is based on attractive, low price-to-earnings valuation
characteristics, required it to maintain significant underexposure to this
narrow group of stocks. In fact, the Portfolio had significant underweightings
in three of the four best performing sectors in the S&P 500 (health care,
technology and beverages and personal care), during most of the year because of
these valuation considerations. As the fiscal year ended, market rotation away
from traditional growth sectors and toward financial services and consumer
durables enhanced the Portfolio's relative performance.
The Portfolio's largest sector commitment is to heavy industry, evidenced by
large positions in Cummins Engine, Case, Aeroquip-Vickers, Eaton, Harnischfeger,
Parker-Hannifin, and Kennametal. The consumer durable sector represents the
fund's second largest overweighting with significant positions in Ford, General
Motors, Goodyear, and Owens Corning. Financial service stocks represent the
third largest overweighting,
- --------------------------------------------------------------------------------
1
<PAGE> 4
PORTFOLIO OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
although exposure has been reduced due to superior relative price performance
and subsequent upward revaluation. Sector underweightings remain concentrated in
the higher growth segments of the market as well as in the utility industries.
Health care, consumer staples, consumer services, and technology remain
underrepresented due to excessive valuations.
MAS continues to be somewhat cautious regarding the equity markets in general as
evidenced by a cash position of 15%. The recent rally in bonds combined with
high expectations for third quarter profits and healthy cash flows into equities
have driven most market indices to new highs. Valuations, at record levels in
the beginning of the quarter, expanded even more during the September period.
The Portfolio continues to invest opportunistically, but it will require a
significant market correction or sector rotation to comfortably employ its cash
reserves.
[GROWTH VALUE GRAPH]
<TABLE>
<CAPTION>
S&P 500 MAS FUNDS VALUE
<S> <C> <C> <C>
'87 1000 1000 9/30/87
775 790 12/31/87
819 875 3/31/88
873 944 6/30/88
'88 876 946 9/30/88
903 966 12/31/88
967 1039 3/31/89
1053 1106 6/30/89
'89 1166 1216 9/30/89
1190 1166 12/31/89
1154 1129 3/31/90
1226 1163 6/30/90
'90 1058 974 9/30/90
1153 1094 12/31/90
1320 1281 3/31/91
1317 1305 6/30/91
'91 1388 1418 9/30/91
1504 1506 12/31/91
1466 1507 3/31/92
1494 1543 6/30/92
'92 1541 1599 9/30/92
1619 1726 12/31/92
1689 1823 3/31/93
1697 1833 6/30/93
'93 1741 1914 9/30/93
1782 1973 12/31/93
1714 1943 3/31/94
1721 1970 6/30/94
'94 1805 2056 9/30/94
1805 2042 12/31/94
1981 2261 3/31/95
2170 2525 6/30/95
'95 2343 2727 9/30/95
2484 2833 12/31/95
2617 3032 3/31/96
2734 3102 6/30/96
'96 2819 3229 9/30/96
3054 3616 12/31/96
3136 3676 3/31/97
3683 4213 6/30/97
'97 3959 4560 9/30/97
3959 4560 9/30/97
3959 4560 9/30/97
3959 4560 9/30/97
</TABLE>
AVERAGE ANNUAL RETURNS
Ended 9/30/97*
<TABLE>
<CAPTION>
MAS VALUE
------------------------------------------------ S&P 500
INSTITUTIONAL + INVESTMENT - ADVISER # INDEX
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ONE YEAR 41.25% 41.01% 40.87% 40.46%
FIVE YEARS 23.31% 23.26% 23.25% 20.77%
TEN YEARS 16.39% 16.36% 16.35% 14.75%
</TABLE>
MAS Funds returns are net of all fees. Returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less
than their original cost.
+ Represents an investment in the Institutional Class.
- - Represents an investment in the Investment Class which commenced operations
5/6/96. Returns for periods beginning prior to this date are based on the
performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
# Represents an investment in the Adviser Class which commenced operations
7/17/96. Returns for periods beginning prior to this date are based on the
performance of the Institutional Class and do not include the 0.25% 12(b)-1
Fee applicable to the Adviser Class.
The Adviser has voluntarily agreed to waive its advisory fees and reimburse
certain expenses to the extent necessary to keep total annual operating expenses
for the Investment Class of shares of the Value Portfolio from exceeding 0.80%
of average daily net assets. Returns presented include the effects of these
waivers and reimbursements. If such waivers and reimbursements had not been
made, the actual returns would have been lower.
* All returns are compared to the S&P 500 Index, an unmanaged market index.
- --------------------------------------------------------------------------------
2
<PAGE> 5
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (81.2%)
<TABLE>
<CAPTION>
- ------------------------------------------------------
VALUE
SEPTEMBER 30, 1997 SHARES (000)+
- ------------------------------------------------------
<S> <C> <C>
BANKS (7.6%)
Bank of New York Co. 684,085 $ 32,836
Chase Manhattan Corp. 581,817 68,654
Citicorp 290,480 38,906
Crestar Financial Corp. 329,268 15,434
First Union Corp. 625,682 31,323
Mellon Bank Corp. 606,696 33,217
Republic New York Corp. 271,601 30,861
Signet Banking Corp. 634,309 34,411
- ------------------------------------------------------
GROUP TOTAL 285,642
- ------------------------------------------------------
BASIC RESOURCES (5.7%)
Cabot Oil & Gas Corp., Class A 690,842 18,610
Dow Chemical Co. 370,275 33,579
E.I. DuPont de Nemours & Co. 466,068 28,692
IMC Global, Inc. 591,694 20,857
Great Lakes Chemical Corp. 947,218 46,710
Inland Steel Industries, Inc. 671,500 14,689
Rohm & Haas Co. 365,456 35,061
Westvaco Corp. 483,420 17,433
- ------------------------------------------------------
GROUP TOTAL 215,631
- ------------------------------------------------------
CONSUMER DURABLES (8.7%)
Dana Corp. 706,351 34,876
Ford Motor Co. 2,330,530 105,456
General Motors Corp. 872,309 58,390
Goodyear Tire & Rubber Co. 1,117,013 76,795
Owens Corning 937,341 34,213
Tupperware Corp. 686,576 19,310
- ------------------------------------------------------
GROUP TOTAL 329,040
- ------------------------------------------------------
CONSUMER SERVICES (0.3%)
Standard Register Co. 350,311 11,670
- ------------------------------------------------------
<CAPTION>
VALUE
SHARES (000)+
- ------------------------------------------------------
<S> <C> <C>
CREDIT & FINANCE/ INVESTMENT COMPANIES (1.4%)
Capital One Financial Corp. 764,680 $ 34,984
Federal National Mortgage
Association 410,356 19,287
- ------------------------------------------------------
GROUP TOTAL 54,271
- ------------------------------------------------------
ENERGY (8.1%)
Amoco Corp. 398,136 38,370
Atlantic Richfield Co. 478,956 40,921
British Petroleum plc ADR 447,442 40,633
El Paso Natural Gas Co. 423,506 25,649
MAPCO, Inc. 841,108 27,704
Phillips Petroleum Co. 795,595 41,073
Repsol SA ADR 743,210 32,237
Ultramar Diamond Shamrock
Corp. 601,090 19,423
YPF SA ADR 1,105,038 40,748
- ------------------------------------------------------
GROUP TOTAL 306,758
- ------------------------------------------------------
FOOD, TOBACCO & OTHER (4.5%)
IBP, Inc. 896,903 21,189
Philip Morris Co., Inc. 1,706,405 70,923
RJR Nabisco Holdings Corp. 1,427,490 49,070
Universal Foods Corp. 722,247 29,070
- ------------------------------------------------------
GROUP TOTAL 170,252
- ------------------------------------------------------
HEALTH CARE (4.6%)
Beckman Instruments, Inc. 952,399 40,536
Bergen Brunswig Corp., Class A 533,908 21,557
Columbia/HCA Healthcare Corp. 1,172,161 33,700
* Foundation Health Corp. 1,092,185 34,950
Mallinckrodt, Inc. 748,851 26,959
* Maxicare Health Plans, Inc. 812,360 15,130
- ------------------------------------------------------
GROUP TOTAL 172,832
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 6
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
VALUE
(CONT'D) SHARES (000)+
- ------------------------------------------------------
<S> <C> <C>
HEAVY INDUSTRY/TRANSPORTATION (19.8%)
Aeroquip-Vickers, Inc. 1,416,976 $ 69,432
* AMR Corp. 312,490 34,589
Burlington Northern Santa Fe,
Inc. 221,165 21,370
Case Corp. 1,146,226 76,367
Caterpillar, Inc. 436,094 23,522
CSX Corp. 390,196 22,826
++ Cummins Engine Co., Inc. 1,383,486 107,998
Deere & Co. 367,802 19,769
Delta Air Lines, Inc. 402,300 37,892
Eaton Corp. 461,902 42,668
* FMC Corp. 392,265 34,814
Harnischfeger Industries, Inc. 1,200,101 51,304
Kennametal, Inc. 786,512 38,146
Olsten Corp. 1,505,360 27,943
Parker Hannifin Corp. 831,937 37,437
Raytheon Corp. 278,994 16,496
Tecumseh Products Co., Class A 585,476 32,604
TRW, Inc. 566,318 31,077
* UAL Corp. 236,352 20,001
- ------------------------------------------------------
GROUP TOTAL 746,255
- ------------------------------------------------------
INSURANCE (7.5%)
Allstate Corp. 528,920 42,512
American General Corp. 529,055 27,445
Chubb Corp. 322,215 22,897
Everest Reinsurance Holdings,
Inc. 900,091 36,904
Hartford Financial Services
Group, Inc. 440,353 37,898
Old Republic International
Corp. 816,200 31,832
ReliaStar Financial Corp. 821,574 32,709
TIG Holdings, Inc. 615,982 21,444
Transatlantic Holdings, Inc. 378,558 27,114
- ------------------------------------------------------
GROUP TOTAL 280,755
- ------------------------------------------------------
RETAIL (5.4%)
Dillard's, Inc., Class A 704,809 30,879
* Federated Department Stores,
Inc. 862,200 37,182
Russell Corp. 716,215 21,084
<CAPTION>
VALUE
SHARES (000)+
- ------------------------------------------------------
<S> <C> <C>
Springs Industries, Inc.,
Class A 661,418 $ 34,725
* Toys 'R' Us, Inc. 965,551 34,277
V.F. Corp. 485,953 45,011
- ------------------------------------------------------
GROUP TOTAL 203,158
- ------------------------------------------------------
TECHNOLOGY (5.4%)
* Arrow Electronics, Inc. 257,500 14,935
International Business
Machines Corp. 858,744 90,973
* Seagate Technology, Inc. 900,552 32,533
Tektronix, Inc. 495,678 33,427
* Western Digital Corp. 826,752 33,122
- ------------------------------------------------------
GROUP TOTAL 204,990
- ------------------------------------------------------
UTILITIES (2.2%)
Cinergy Corp. 379,607 12,693
DTE Energy Co. 614,840 18,714
Duke Energy Corp. 314,623 15,554
Entergy Corp. 630,745 16,439
GPU, Inc. 538,004 19,301
OGE Energy Corp. 2,000 94
- ------------------------------------------------------
GROUP TOTAL 82,795
- ------------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,252,115) 3,064,049
- ------------------------------------------------------
CASH EQUIVALENTS (26.7%)
- ------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------
<S> <C> <C>
Short-term Investments Held as
Collateral for Loaned
Securities (7.8%) $ 295,614 295,614
- ------------------------------------------------------
COMMERCIAL PAPER (12.2%)
American Express Credit Corp.
5.50%, 10/17/97 35,000 34,914
Asset Securitization Corp.
5.55%, 11/6/97 40,000 39,778
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 7
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- ------------------------------------------------------
<S> <C> <C>
Associates Corp.
5.52%, 10/6/97 $ 50,000 $ 49,962
Atlantic Asset Securitization
Corp.
5.57%, 10/16/97 20,000 19,954
Barclays U.S. Funding Corp.
5.53%, 10/8/97 25,000 24,973
Canadian Imperial Holdings
5.54%, 10/30/97 40,000 39,822
Commercial Credit Corp.
5.50%, 10/2/97 25,000 24,996
5.50%, 10/27/97 25,000 24,901
Delaware Funding Corp.
5.53%, 10/14/97 50,000 49,900
Eiger Capital Corp.
5.55%, 11/5/97 43,375 43,141
sec. First Chicago Financial
Corp.
5.51%, 10/16/97 (acquired
9/16/97, cost $22,149) 22,200 22,149
Societe Generale
5.51%, 10/23/97 25,000 24,916
5.52%, 10/17/97 20,000 19,951
Sony Capital Corp.
5.55%, 10/29/97 40,000 39,827
- ------------------------------------------------------
GROUP TOTAL 459,184
- ------------------------------------------------------
DISCOUNT NOTE (3.0%)
Federal Home Loan Mortgage
Corporation
10/30/97 75,000 74,977
Federal National Mortgage Association
10/30/97 40,000 39,824
- ------------------------------------------------------
GROUP TOTAL 114,801
- ------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)+
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.7%)
Chase Securities, Inc.
5.90%, dated 9/30/97, due
10/1/97, to be repurchased
at $138,187, collateralized
by various U.S. Government
Obligations, due 10/1/97-
1/29/99, valued at $139,466 $ 138,164 $ 138,164
- ------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $1,007,763) 1,007,763
- ------------------------------------------------------
TOTAL INVESTMENTS (107.9%) (Cost $3,259,878) 4,071,812
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-7.9%)
Cash 1
Dividends Receivable 4,171
Interest Receivable 23
Receivable for Fund Shares Sold 9,907
Other Assets 72
Payable for Investments Purchased (8,452)
Payable for Fund Shares Redeemed (1,270)
Payable for Investment Advisory Fees (4,491)
Payable for Administrative Fees (245)
Payable for Shareholder Servicing Fee-
Investment Class (4)
Payable for Distribution Fee-Adviser Class (39)
Payable for Trustees' Deferred
Compensation Plan-Note F (57)
Payable for Daily Variation on Futures
Contracts (1,450)
Collateral on Securities Loaned, at Value (295,614)
Other Liabilities (492)
----------
(297,940)
- ------------------------------------------------------
NET ASSETS (100%) $3,773,872
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 8
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
VALUE
(CONT'D) (000)+
- ------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL CLASS
- ------------------------------------------------------
NET ASSETS
Applicable to 173,895,195 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $3,542,772
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 20.37
- ------------------------------------------------------
INVESTMENT CLASS
- ------------------------------------------------------
NET ASSETS
Applicable to 1,465,899 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 29,847
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 20.36
- ------------------------------------------------------
ADVISER CLASS
- ------------------------------------------------------
NET ASSETS
Applicable to 9,890,611 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 201,253
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 20.35
- ------------------------------------------------------
<CAPTION>
VALUE
(000)+
- ------------------------------------------------------
<S> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $2,632,809
Undistributed Net Investment Income (Loss) 18,442
Undistributed Realized Net Gain (Loss) 306,739
Unrealized Appreciation (Depreciation) on:
Investment Securities 811,934
Futures 3,948
- ------------------------------------------------------
NET ASSETS $3,773,872
- ------------------------------------------------------
sec. Restricted Security-Total market value of
restricted securities owned at September 30, 1997
was $22,149 or 0.6% of net assets.
+ See Note A1 to Financial Statements.
* Non-income producing security.
++ A portion of these securities was pledged to cover
margin requirements for futures contracts.
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 9
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
---------------------
Year Ended
September 30, 1997
(In Thousands)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends $ 49,237
Interest 21,710
- -------------------------------------------------------------------------------------------------------------------------
Total Income 70,947
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 14,010
Administrative Fee--Note C 2,285
Custodian Fee 310
Audit Fee 23
Shareholder Servicing Fee--Investment Class shares--Note D 28
Distribution Fees--Adviser Class shares--Note D 201
Other Expenses 704
Reimbursement of Expenses--Note B (18)
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses 17,543
- -------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note I (310)
- -------------------------------------------------------------------------------------------------------------------------
Net Expenses 17,233
- -------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 53,714
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 376,797
Foreign Currency Transactions --
Futures (814)
- -------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 375,983
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 512,130
Foreign Currency Transactions --
Futures 3,948
- -------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 516,078
- -------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 892,061
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $945,775
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
------------------------------
Year Ended
September 30,
---------------------
(In Thousands) 1996 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 32,015 $ 53,714
Realized Net Gain (Loss) 138,640 375,983
Change in Unrealized Appreciation (Depreciation) 97,514 516,078
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 268,169 945,775
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A5
INSTITUTIONAL CLASS:
Net Investment Income (30,765) (43,078)
Realized Net Gain (130,677) (135,541)
INVESTMENT CLASS +:
Net Investment Income (12) (249)
Realized Net Gain -- (851)
ADVISER CLASS ++:
Net Investment Income -- (894)
Realized Net Gain -- (1,156)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (161,454) (181,769)
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:--Note J
INSTITUTIONAL CLASS:
Issued 930,274 1,576,439
In Lieu of Cash Distributions 143,059 156,287
Redeemed (606,431) (769,989)
INVESTMENT CLASS +:
Issued 8,889 21,268
In Lieu of Cash Distributions 12 1,086
Redeemed (49) (6,754)
ADVISER CLASS ++:
Issued 15,433 172,033
In Lieu of Cash Distributions -- 1,868
Redeemed (11) (11,849)
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transactions 491,176 1,140,389
- -------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 597,891 1,904,395
NET ASSETS:
Beginning of Period 1,271,586 1,869,477
- -------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,869,477 $3,773,872
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in end of period net assets $ 9,064 $ 18,442
=========================================================================================================================
</TABLE>
+ The Value Portfolio began offering Investment Class Shares on May 6, 1996.
++ The Value Portfolio began offering Adviser Class Shares on July 17, 1996.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period +
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------
Year Ended September 30,
VALUE PORTFOLIO ------------------------------------------------------------------
1993 1994 1995 1996 1997++
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 12.76 $ 12.63 $ 14.89 $ 15.61
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.30 0.31 0.30 0.34
Net Realized and Unrealized Gain (Loss) on
Investments 1.92 0.59 3.34 2.20 5.75
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.22 0.89 3.65 2.50 6.09
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.31) (0.29) (0.31) (0.32) (0.30)
Realized Net Gain (1.82) (0.73) (1.08) (1.46) (1.03)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.13) (1.02) (1.39) (1.78) (1.33)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.67% 7.45% 32.58% 18.41% 41.25%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $762,175 $981,337 $1,271,586 $1,844,740 $3,542,772
Ratio of Expenses to Average Net Assets (1) 0.59% 0.61% 0.60% 0.61% 0.62%
Ratio of Net Investment Income to Average Net
Assets 2.48% 2.40% 2.43% 2.07% 1.93%
Portfolio Turnover Rate 43% 54% 56% 53% 46%
Average Commission Rate ### N/A N/A N/A $ 0.0572 $ 0.0577
- -------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61%
- -------------------------------------------------------------------------------------------------------------------------
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on average shares outstanding.
### 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 security transactions on which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 12
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Class Adviser Class
-------------------------------------------------------------------------
May 6, Year July 17, Year
1996** to Ended 1996*** to Ended
September 30, September 30, September 30, September 30,
1996 1997++ 1996 1997++
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.97 $ 15.60 $ 14.11 $ 15.61
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.31 0.01 0.30
Net Realized and Unrealized Gain
(Loss) on Investments 0.59 5.75 1.49 5.74
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 6.06 1.50 6.04
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) -- (0.27)
Realized Net Gain -- (1.03) -- (1.03)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) -- (1.30)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.60 $ 20.36 $ 15.61 $ 20.35
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% 10.63% 40.87%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,244 $29,847 $15,493 $201,253
Ratio of Expenses to Average Net
Assets (1) 0.76%* 0.80% 0.86%* 0.90%
Ratio of Net Investment Income
to Average Net Assets 2.05%* 1.75% 1.66%* 1.63%
Portfolio Turnover Rate 53% 46% 53% 46%
Average Commission Rate ### $0.0572 $0.0577 $0.0572 $ 0.0577
- -------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON
THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to
Expense Reimbursement/Waiver N/A 0.09% N/A N/A
Ratio Including Expense Offsets 0.75%* 0.79% 0.85%* 0.89%
- -------------------------------------------------------------------------------------------------------------------------
-
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
++ Per share amounts for the year ended September 30, 1997, are based on average shares outstanding.
### 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 security transactions on which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940
as an open-end investment company. At September 30, 1997, the Fund was
comprised of twenty-four active portfolios (each referred to as a "Portfolio").
The Fund may offer up to three different classes of shares for certain
Portfolios -- Institutional Class shares, Investment Class shares and Adviser
Class shares.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution fees as described in Note D. The accompanying financial
statements and financial highlights are those of the Value Portfolio only. The
financial statements of the remaining Portfolios are presented separately.
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 bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds, including municipal
bonds, and other fixed income securities are valued using brokers'
quotations or on the basis of prices, provided by a pricing service, which
are based primarily on institutional size trading in similar groups of
securities. Short term securities are valued using the amortized cost
method of valuation, which in the opinion of the Board of Trustees reflects
fair value. 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 continue to
qualify as a regulated investment company and distribute all of its taxable
and tax-exempt income. Accordingly, no provision for Federal income taxes
is required in the financial statements.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are
- --------------------------------------------------------------------------------
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 a
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 Portfolios may transfer their uninvested cash balances into
a joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreement. This joint repurchase agreement is
covered by the same collateral requirements as discussed above.
4. FUTURES: Futures contracts (secured by cash and securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as "variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are
closed, the difference between the opening value at the date of purchase
and the value at closing is recorded as realized gains or losses in the
Statement of Operations.
Futures contracts may be used by the Portfolio in order to hedge against
unfavorable changes in the value of securities or to attempt to realize
profits from the value of the underlying securities.
Futures contracts involve market risk in excess of the amounts recognized
in the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market.
5. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are declared and paid quarterly. 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
for in-kind redemptions (Note H).
Permanent book and tax differences relating to shareholder distributions
may result in
- --------------------------------------------------------------------------------
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
reclassifications to undistributed net investment income (loss),
undistributed realized net gain (loss) and paid in capital.
6. 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 cannot be directly attributed are apportioned among the
Portfolios on the basis of their relative net assets. Income, expenses
(other than class specific expenses) and realized and unrealized gains or
losses are allocated to each class of shares based upon their relative net
assets.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the Financial Highlights.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory
Agreement, the Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the
"Adviser"), wholly owned by indirect subsidiaries of Morgan Stanley, Dean
Witter, Discover & Co., for investment advisory services performed at a fee
calculated by applying a quarterly rate based on an annual percentage rate to
the Portfolio's average daily net assets for the quarter. For the year ended
September 30, 1997 the investment advisory fees of the Portfolio were 0.500%.
Until further notice the Adviser has voluntarily agreed to reduce the fees
payable to it and, if necessary, reimburse the Value Portfolio if annual
operating expenses exceed 0.80% and 0.90% for the Investment Class Shares and
Adviser Class Shares, respectively.
C. ADMINISTRATION FEE. MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the agreement, MAS receives an annual fee,
accrued daily and payable monthly, of 0.08% of each Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services. CGFSC also received additional class specific administration
fees for the Investment Class shares and Adviser Class shares. For the year
ended September 30, 1997, CGFSC earned $24,000 and $19,000 in class specific
administration fees for the Investment Class shares and Adviser Class shares,
respectively.
D. DISTRIBUTOR. MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of Morgan Stanley Asset Management
- --------------------------------------------------------------------------------
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Holdings, Inc., is the distributor for the Fund. MASDI is a limited-purpose
broker/dealer whose only function is to distribute open-end mutual fund shares.
The Distributor provides all classes of shares in the Portfolio with
distribution services pursuant to separate Distribution Plans (the "Plans") in
accordance with Rule 12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support
distribution efforts and/or servicing accounts. The Adviser Class of shares
pays service and distribution fees of 0.25% of average net assets of the class
for such services under the 12b-1 plan adopted by the Fund. The Investment
Class of shares pays an annual shareholder servicing fee of 0.15% of average
net assets of the class. The shareholder servicing fee is not a distribution
fee and is used to support the expenses associated with servicing and
maintaining accounts. Both fees are paid directly to MASDI. The distribution
fee may be retained by MASDI if an Adviser Class shareholder invests directly
through MASDI. Usually the fees are paid by MASDI to external organizations
such as 401(k) alliance sponsors, discount brokers and bank trust departments
who distribute MAS Funds to the public.
E. BROKERAGE COMMISSIONS: For the year ended September 30, 1997, the Value
Portfolio paid the following brokerage commissions to Morgan Stanley & Co. and
Dean Witter Reynolds, Inc., affiliated broker/dealers:
<TABLE>
<CAPTION>
Brokerage
Commissions
(000)
---------------------------------
Morgan Stanley Dean Witter
& Co., Inc. Reynolds, Inc.
-------------- --------------
<S> <C> <C>
Value $ -- $ 8
</TABLE>
F. TRUSTEES' FEES. The Fund pays 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
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person, as
defined under the Investment Company Act of 1940, as amended, participates in
the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of the
Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total trustees fees incurred for the year ended September 30, 1997, by
the Value Portfolio were $53,000.
Expenses for the year ended September 30, 1997 include legal fees paid to
Morgan, Lewis & Bockius, LLP in the amount of $61,000. A partner of that firm is
secretary of the Fund.
- --------------------------------------------------------------------------------
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
G. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES: For the year ended September 30, 1997,
purchases and sales of investment securities other than temporary cash
investments were:
<TABLE>
<CAPTION>
(000)
------------------------
Portfolio Purchases Sales
- ---------------------------------- ----------- -----------
<S> <C> <C>
Value $ 1,616,377 $ 1,106,356
</TABLE>
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION): At
September 30, 1997, cost, unrealized appreciation, unrealized depreciation
and net unrealized appreciation (depreciation) of securities for Federal
income tax purposes were:
<TABLE>
<CAPTION>
(000)
------------------------------------------------
Portfolio Cost Appreciation Depreciation Net
- ------------------ ---------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Value $3,260,174 $829,135 $(17,497) $811,638
</TABLE>
3. FUTURES CONTRACTS: At September 30, 1997, the Value Portfolio had the
following futures contracts open:
<TABLE>
<CAPTION>
Unrealized
Aggregate Appreciation
Number of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
- ----------------- --------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Purchases:
VALUE
S&P 500 Index 400 US$ 190,900 Dec-97 US$ 3,948
</TABLE>
H. IN-KIND TRANSACTIONS. For the year ended September 30, 1997, the Value
Portfolio realized gains (losses) from in-kind redemptions of approximately
$57,390,000.
I. SECURITIES LENDING. Certain Portfolios loan securities to certain brokers
and receive security lending fees. Security lending fees are included as
expense offsets in the Statement of Operations. Fees greater than custodian
expenses are included in interest income. During the year ended September 30,
1997, the Value Portfolio had security lending fees totaling $166,000.
Portfolios that lend securities receive 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.
The value of loaned securities and related collateral outstanding at September
30, 1997, was as follows:
<TABLE>
<CAPTION>
Value of Value
Loaned of
Securities Collateral
Portfolio (000) (000)
- -------------------------- -------- --------
<S> <C> <C>
Value $291,013 $295,614
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Custodian fees appearing in the Statement of Operations have been adjusted to
include expense offsets for custodian balance credits and security lending fees
totaling $275,000 and $35,000 respectively, for the year ended September 30,
1997.
J. OTHER. At September 30, 1997, the Fund had Portfolios with otherwise
unaffiliated record owners of 10% or greater. Investment activities of these
shareholders could have a material impact on these Portfolios. The Value
Portfolio and the aggregate percentage of such owners was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
------------------------------------
Institutional Investment Adviser
Portfolios Class Class Class
- ------------------ ------------- ---------- -------
<S> <C> <C> <C>
Value 14.3% 48.0% 95.5%
</TABLE>
Transactions in Capital Shares for the Value Portfolio, by class, were as
follows:
<TABLE>
<CAPTION>
Year Ended
September 30,
---------------
(In Thousands) 1996 1997
---------------------------------------------------------------
<S> <C> <C> <C>
Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 63,277 90,227
In Lieu of Cash Distributions 10,269 9,563
Shares Redeemed (40,739) (44,093)
- ---------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 32,807 55,697
- ---------------------------------------------------------------------
INVESTMENT CLASS +:
Shares Issued 595 1,187
In Lieu of Cash Distributions 1 66
Shares Redeemed (3) (380)
- ---------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares Outstanding 593 873
- ---------------------------------------------------------------------
ADVISER CLASS ++:
Shares Issued 994 9,462
In Lieu of Cash Distributions -- 112
Shares Redeemed (1) (676)
- ---------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding 993 8,898
- ---------------------------------------------------------------------
</TABLE>
+ The Value Portfolio began offering Investment Class Shares on May 6, 1996.
++ The Value Portfolio began offering Adviser Class Shares on July 17, 1996.
- --------------------------------------------------------------------------------
16
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
MAS Funds
In our opinion, the accompanying statement of net assets 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 Value Portfolio, a portfolio of the MAS Funds (hereafter referred to as the
"Fund") at September 30, 1997 and the results of its operations, the changes in
its net assets and financial highlights for the periods indicated, 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, which included confirmation of securities at September 30, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased were not yet received by the custodian,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 20, 1997
- --------------------------------------------------------------------------------
17
<PAGE> 20
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
The Value Portfolio hereby designates $92,144,000 as a long-term capital gain
dividends for the purpose of the dividend paid deduction on its federal income
tax return.
For the year ended September 30, 1997, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders for the Value
Portfolio was 35.1%.
SHAREHOLDER MEETINGS: (UNAUDITED)
At two special shareholder meetings held on May 1 and May 12, 1997, the
shareholders of Miller Anderson & Sherrerd, LLP (the "Fund") were held for the
purpose of voting on the following proposals:
1. To approve an amendment to the investment advisory agreement between the Fund
and Miller Anderson & Sherrerd, LLP
<TABLE>
<CAPTION>
VOTED VOTED ABSTAIN
PORTFOLIO FOR AGAINST VOTES
------------------------------------------------------------ ----------- ------------ ----------
<S> <C> <C> <C>
Value 81,180,469 226,027 525,982
</TABLE>
2. To elect the following Trustees to serve the Fund effective May 1, 1997 until
such time as their successors have been duly appointed.
<TABLE>
<CAPTION>
VOTED
FOR WITHHELD
----------- ----------
<S> <C> <C>
Thomas L. Bennett 532,682,575 2,503,229
Thomas P. Gerrity 532,791,783 2,274,021
Joseph P. Healey 532,778,972 2,286,832
Joseph J. Kearns 532,802,368 2,263,436
Vincent R. McLean 532,776,415 2,289,389
C. Oscar Morong, Jr. 532,791,627 2,274,177
</TABLE>
3. To approve the proposal of the Board of Trustees' selection of Price
Waterhouse LLP as the Fund's independent accountants.
<TABLE>
<CAPTION>
VOTED VOTED ABSTAIN
FOR AGAINST VOTES
----------- -------- ----------
<S> <C> <C> <C>
530,883,223 655,873 3,528,115
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE> 21
MAS FUNDS 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.
<TABLE>
<S> <C>
THOMAS L. BENNETT, CFA* C. OSCAR MORONG, JR.
Chairman of the Board of Trustees; Managing Trustee; Managing Director, Morong Capital
Director, Morgan Stanley; Portfolio Manager and Management; Director, Ministers and Missionaries
member of the Executive Committee, Miller Anderson & Benefit Board of American Baptist Churches, The
Sherrerd, LLP; Director, MAS Fund Distribution, Indonesia Fund, The Landmark Funds; formerly Senior
Inc.; formerly Director, Morgan Stanley Universal Vice President and Investment Manager for CREF,
Fund, Inc. TIAA-CREF Investment Management, Inc.
THOMAS P. GERRITY JAMES D. SCHMID
Trustee; Dean and Reliance Professor of Management President, MAS Funds; Principal, Morgan Stanley;
and Private Enterpise, Wharton School of Business, Head of Mutual Funds, Miller Anderson & Sherrerd,
University of Pennsylvania; Director, Digital LLP; Director, MAS Fund Distribution, Inc.; Chairman
Equipment Corporation; Director, Sun Company, Inc.; of the Board of Directors, The Minerva Fund, Inc.
Director, Fannie Mae; Director, Reliance Group
Holdings; Director, Melville Corporation
JOSEPH P. HEALY LORRAINE TRUTEN, CFA
Trustee; Headmaster, Haverford School; formerly; Vice President, MAS Funds; Principal, Morgan
Dean, Hobart College; Associate Dean, William & Mary Stanley; Head of Mutual Fund Services, Miller
College. Anderson & Sherrerd, LLP; President, MAS Fund
Distribution, Inc.
JOSEPH J. KEARNS DOUGLAS W. KUGLER, CFA
Trustee; Vice President and Treasurer, The J. Paul Treasurer, MAS Funds; Vice President, Morgan
Getty Trust; Director, Electro Rent Corporation; Stanley; Head of Mutual Fund Administration, Miller
Trustee, Southern California Edison Nuclear Anderson & Sherrerd, LLP.
Decommissioning Trust; Director, The Ford Family
Foundation.
VINCENT R. MCLEAN JOHN H. GRADY, JR.
Trustee; Director, Alexander and Alexander Services, Secretary, MAS Funds; Partner, Morgan, Lewis &
Inc., Director, Legal and General America, Inc., Bockius, LLP.
Director, William Penn Life Insurance Company of New
York; formerly Executive Vice President, Chief
Financial Officer, Director and Member of the
Executive Committee of Sperry Corporation (now part
of Unisys Corporation).
</TABLE>
*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.
- --------------------------------------------------------------------------------
19
<PAGE> 22
MAS FUNDS
MILLER
ANDERSON
& SHERRERD, LLP
One Tower Bridge
West Conshohocken, PA 19428-2899
Investment Adviser: (610)940-5000
MAS Funds: (800)354-8185
Printed in U.S.A.
This Report has been prepared for
shareholders and may be distributed to
others only if preceded or accompanied by a
current porspectus.
