SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MAS FUNDS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
same
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11(1).
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
<PAGE>
March 31, 1997
Dear Shareholder:
The enclosed proxy statement relates to a Special Meeting of the
Shareholders of MAS Funds (the "Fund"). On February 4, 1997, Morgan Stanley
Group Inc., the parent corporation of Miller Anderson & Sherrerd, LLP ("MAS"),
the Fund's investment adviser, and Dean Witter, Discover & Co. entered into an
Agreement and Plan of Merger. Pursuant to the merger agreement, MAS will become
an indirect subsidiary of the merged company, which will be named Morgan
Stanley, Dean Witter, Discover & Co. MAS will continue to provide the Fund with
investment advisory and management services following the merger. The purposes
of the Special Meeting are to permit the Fund's shareholders to (i) consider a
new investment advisory agreement with MAS to take effect following the merger,
which will be identical to the Fund's current investment advisory agreement,
except for the dates of execution, effectiveness and termination; (ii) vote for
the election of six Trustees to the Fund's Board of Trustees; and (iii) and
ratify the current Board of Trustees' selection of the Fund's independent
accountant. Shareholders of the Domestic Fixed Income Portfolio and the Fixed
Income Portfolio II also will be asked to approve an amendment to those
Portfolios' investment objectives.
The attached proxy statement seeks shareholder approval on these
proposals. Please read carefully the full proxy statement. Enclosed you will
find a brief question-and-answer section for your convenience.
Your vote is important and your participation
in the governance of your Fund does make a difference.
The proposals have been unanimously approved by the Fund's Board of
Trustees, including the Independent Trustees, who recommend you vote "FOR" each
of the proposals. Your immediate response will help save on the costs of
additional solicitations. We look forward to your participation, and we thank
you for your continued confidence in MAS Funds.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Sincerely,
James D. Schmid
President
<PAGE>
MAS FUNDS
One Tower Bridge
West Conshohocken, PA 19428
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
March 31, 1997
A Special Meeting of Shareholders (the "Meeting") of MAS Funds (the
"Fund"), will be held at the offices of the Fund, One Tower Bridge, West
Conshohocken, Pennsylvania 19428, on May 1, 1997, at 10:00 a.m., local time, for
the following purposes:
I. To consider and vote upon a proposal to approve a new
investment advisory agreement between the Fund and Miller
Anderson & Sherrerd, LLP.
II. To consider and vote upon a proposal to elect six Trustees to
the Fund's Board of Trustees.
III. To consider and vote upon a proposal to ratify the Board of
Trustees' selection of Price Waterhouse LLP as the Fund's
independent accountants.
IV. For Shareholders of the Domestic Fixed Income Portfolio to
consider and vote upon a change in the Portfolio's investment
objective to permit the Portfolio to invest in a broader range
of investment grade fixed income securities.
V. For Shareholders of the Fixed Income Portfolio II to consider
and vote upon a change in the Portfolio's investment objective
to permit the Portfolio to invest in a broader range of
investment grade fixed income securities.
VI. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
All Shareholders 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
<PAGE>
shares may be voted. If you are present at the Meeting, you may change your
vote, if desired, at that time. Shareholders of record at the close of business
on March 10, 1997 are entitled to notice of and to vote at this Meeting or any
adjournment thereof.
By Order of the Board of Trustees
John H. Grady, Jr.
Secretary
March 31, 1997
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT TO A SHAREHOLDER UPON REQUEST. REQUESTS SHOULD BE DIRECTED TO THE FUND BY
CALLING 1-800-354-8185 OR BY WRITING TO THE FUND AT ONE TOWER BRIDGE, WEST
CONSHOHOCKEN, PA 19428.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE
ASK THAT YOU MAIL YOUR PROXY PROMPTLY.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU CAST YOUR VOTE:
o FOR approval of the new investment advisory agreement;
o FOR the election of the six proposed Trustees;
o FOR ratification of the Trustees' selection of the independent
accountants.
o FOR the change in the investment objective of the Domestic
Fixed Income Portfolio.
o FOR the change in the investment objective of the Fixed Income
Portfolio II.
YOUR VOTE IS IMPORTANT
PLEASE RETURN YOUR PROXY CARD PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
2
<PAGE>
PROXY STATEMENT
MAS FUNDS
ONE TOWER BRIDGE
WEST CONSHOHOCKEN, PA 19428
SPECIAL MEETING OF SHAREHOLDERS
MAY 1, 1997
This proxy statement is furnished in connection with the solicitation
by the Board of Trustees (the "Board") of MAS Funds (the "Fund") of proxies to
be voted at a Special Meeting of Shareholders and all adjournments thereof (the
"Meeting"), to be held at the offices of the Fund on May 1, 1997 at 10:00 a.m.
The approximate mailing date of this proxy statement and accompanying form of
proxy is March 31, 1997.
The primary purpose of the Meeting is to permit the Fund's shareholders
to consider a New Advisory Agreement (defined below) to take effect following
the consummation of the transactions (the "Merger") contemplated by an Agreement
and Plan of Merger, dated as of February 4, 1997 (the "Merger Agreement"),
between Morgan Stanley Group Inc. ("MS Group"), the indirect parent of the
Fund's investment adviser, Miller Anderson & Sherrerd, LLP ("MAS"), and Dean
Witter, Discover & Co. ("Dean Witter Discover"). Pursuant to the Merger
Agreement, MAS will become an indirect subsidiary of the merged company, which
will be called Morgan Stanley, Dean Witter, Discover & Co. The Fund's New
Advisory Agreement is identical to the Fund's Current Advisory Agreement
(defined below), except for the dates of execution, effectiveness and
terminations.
All Shareholders of the Fund are entitled to vote on Proposals I, II,
and III. Proposal IV requires action by Shareholders of the Domestic Fixed
Income Portfolio. Proposal V requires action by Shareholders of the Fixed Income
Portfolio II. The summary voting table below sets forth all of the proposals to
be acted upon and indicates which Portfolio Shareholders are asked to vote with
respect to each proposal.
Proposal Portfolio(s)
-------- ------------
I, II, III All Portfolios
IV Domestic Fixed Income
V Fixed Income II
<PAGE>
The Fund will furnish, without charge, a copy of the most recent Annual
Report to Shareholders of the Fund on request. Requests should be directed to
the Fund at One Tower Bridge, West Conshohocken, Pennsylvania 19428 or by
calling (800) 354-8185.
Shareholders of record at the close of business on March 10, 1997 are
entitled to vote at the Meeting and at any adjourned session. Each share is
entitled to one vote. As of the record date, the total number of shares issued
and outstanding for the Fund was 1,037,747,884.635, of which the following were
issued and outstanding for each Portfolio:
<TABLE>
<CAPTION>
Portfolio Shares Outstanding Portfolio Shares Outstanding
- --------- ------------------ --------- ------------------
<S> <C> <C> <C>
Advisory Foreign Fixed Income 14,753,201.521 Intermediate Duration 3,297,250.248
Advisory Mortgage 218,187,677.545 International Equity 46,331,448.027
Balanced 24,257,416.389 International Fixed Income 15,573,684.332
Balanced Plus N/A Limited Duration 11,896,445.675
Cash Reserves 70,924,137.798 Mid Cap Growth 24,441,738.463
Domestic Fixed Income 9,372,997.951 Mid Cap Value 7,201,844.799
Emerging Markets 2,640,460.387 Mortgage-Backed Securities 5,025,511.090
Equity 53,331,100.287 Multi-Asset-Class 12,217,979.388
Fixed Income 207,720,095.818 Municipal 5,422,465.105
Fixed Income II 17,192,014.647 PA Municipal 2,509,284.469
Global Fixed Income 7,480,533.510 Small Cap Value 34,966,264.761
Growth N/A Special Purpose Fixed Income 40,116,731.171
High Yield 44,268,609.732 Value 158,619,009.522
</TABLE>
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. Abstentions
and proxies signed and returned by brokers without voting on a proposal ("broker
non-votes") will not be counted for or against the proposal, but will be counted
as votes present for purposes of determining whether a quorum is present.
Abstentions and broker non-votes will be counted as votes present for purposes
of determining a "majority of the outstanding voting securities" present at the
Meeting and will therefore have the effect of counting against any Proposal to
which they relate.
2
<PAGE>
If sufficient votes in favor of the proposals set forth in the Notice
of the Special Meeting 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 reasonable period of time to permit further solicitation of proxies with
respect to the proposals. Any such adjournment will require the affirmative vote
of a majority of the votes cast on the question in person or by proxy at the
session of the Meeting to be adjourned. The persons named as proxies will vote
in favor of such adjournment those proxies which they are entitled to vote in
favor of the proposals. They will vote against any such adjournment those
proxies required to be voted against the proposals.
Required Vote
Each Proposal requires a "vote of a majority of the outstanding voting
securities." However, as required by the Investment Company Act of 1940 ("1940
Act"), "majority" is defined differently for each Proposal.
Proposal I. Shareholders of each Portfolio vote separately. Approval of
the New Advisory Agreement by Shareholders of a Portfolio requires the
affirmative vote of the lesser of (i) 67% or more of the shares of the Portfolio
entitled to vote thereon present at the Meeting if the holders of more than 50%
of such outstanding shares are present in person or represented by proxy; or
(ii) more than 50% of such outstanding shares of the Portfolio entitled to vote
thereon.
Proposal II. The six persons receiving the largest number of votes
(i.e., a plurality), whether voted in person or by proxy, at the Meeting will be
elected as Trustees of the Fund.
Proposal III. The vote of a simple majority of the shares of the Fund
voted in person or by proxy at the Meeting is required for the ratification of
the selection of the independent accountants.
Proposals IV and V. Approval of the proposed amendments to the
investment objectives of the Domestic Fixed Income Portfolio and Fixed Income
Portfolio II requires the affirmative vote of the lesser of (i) 67% or more of
the shares of the relevant Portfolio entitled to vote thereon present at the
Meeting if the holders of more than 50% of such outstanding shares are present
in person or represented by proxy; or (ii) more than 50% of such outstanding
shares of the relevant Portfolio entitled to vote thereon.
3
<PAGE>
PROPOSAL I. APPROVAL OF A NEW ADVISORY CONTRACT
Miller Anderson & Sherrerd, LLP
MAS has been in the investment advisory business since 1969, and as of
January 31, 1997 had in excess of $40.9 billion in assets under management. MAS
is registered under the Investment Advisers Act of 1940. After consummation of
the Merger, MAS will continue to be registered under the Investment Advisers Act
and will employ the same key personnel as it did prior to the Merger.
On January 3, 1996, MS Group acquired MAS in a transaction in which
Morgan Stanley Asset Management Holdings Inc. ("MSAM Holdings"), an indirect
wholly owned subsidiary of MS Group, became the sole general partner of MAS.
MSAM Holdings' address is 1221 Avenue of the Americas, New York, NY 10020. MSAM
Holdings and two other wholly owned subsidiaries of MS Group are also the
limited partners of MAS.
The principal executive officers of MAS are Thomas L. Bennett, Gary G.
Schlarbaum, Marna C. Whittington, and Richard B. Worley, each of whom is a
member of MAS's Executive Committee and a Managing Director of Morgan Stanley &
Co., Incorporated ("Morgan Stanley"). The principal business address of each is
One Tower Bridge, West Conshohocken, Pennsylvania 19428.
MAS also serves as administrator to the Fund under an Administration
Agreement dated as of January 3, 1996. As Administrator, MAS receives an annual
fee of 0.08% of the Fund's average daily net assets and is responsible for all
fees payable under any sub-administration and transfer agency agreements. During
the fiscal year ended September 30, 1996, the Fund paid MAS in the aggregate
$8,301,000 under the Administration Agreement.
In addition to serving as investment adviser to the Fund, MAS serves as
the investment adviser or subadviser to certain other registered investment
companies with similar investment objectives as the Fund and its Portfolios.
These investment companies have separate boards of directors from the Fund's
Board. The table provided at Annex B provides the name of each of these funds or
portfolios, and the approximate net assets of, and the annual advisory fee
payable by, each fund or portfolio.
Information Concerning Morgan Stanley Group
MS Group and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley, a registered broker-dealer and investment adviser, and
Morgan Stanley International, provide a wide range of financial services on a
global basis. Their principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring, real estate,
project finance and other corporate finance advisory activities; merchant
banking and other
4
<PAGE>
principal investment activities; stock brokerage and research services; asset
management; the trading of foreign exchange and commodities as well as
derivatives on a broad range of asset categories, rates, and indices; real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending.
Information Concerning Dean Witter, Discover & Co.
Dean Witter Discover is a diversified financial services company
offering a broad range of nationally marketed credit and investment products
with a primary focus on individual customers. Dean Witter Discover has two
principal lines of business: credit services and securities. Its credit services
business consists primarily of the issuance, marketing and servicing of general
purpose credit cards and the provision of transaction processing services,
private-label credit card services and real estate secured loans. It is the
largest single issuer of general purpose credit cards in the United States as
measured by number of accounts and cardmembers and the third largest originator
and servicer of credit card receivables, as measured by managed loans. Dean
Witter Discover's securities business is conducted primarily through its
wholly-owned subsidiaries, Dean Witter Reynolds Inc. ("DWR") and Dean Witter
InterCapital Inc. ("Intercapital"). DWR is a full-service securities firm
offering a wide variety of securities products to serve the investment needs of
its individual clients through over 9,100 professional account executives
located in 371 branch offices. DWR is among the largest members of the New York
Stock Exchange and is a member of other major securities, futures and options
exchanges. Intercapital is a registered investment adviser that, along with its
subsidiaries, services investment companies, individual accounts and
institutional portfolios.
The Merger
Pursuant to the Merger Agreement, MS Group will be merged with and into
Dean Witter Discover and the surviving corporation will be named Morgan Stanley,
Dean Witter, Discover & Co. Following the Merger, MAS will be an indirect
subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Under the terms of the Merger Agreement, each of MS Group's common
shares will be converted into the right to receive 1.65 shares of Morgan
Stanley, Dean Witter, Discover & Co. common stock and each issued and
outstanding share of Dean Witter Discover common stock will remain outstanding
and will thereafter represent one share of Morgan Stanley, Dean Witter, Discover
& Co. common stock. Following the Merger, MS Group's former shareholders will
own approximately 45% and Dean Witter Discover's former shareholders will own
approximately 55% of the outstanding shares of common stock of Morgan Stanley,
Dean Witter, Discover & Co.
5
<PAGE>
The Merger is expected to be consummated in mid-1997 and is subject to
certain closing conditions, including certain regulatory approvals and the
approval of shareholders of both MS Group and Dean Witter Discover.
The Board of Directors of Morgan Stanley, Dean Witter, Discover & Co.
will initially consist of fourteen members, two of whom will be MS Group
insiders and two of whom will be Dean Witter Discover insiders. The remaining
ten directors will be independent directors, with MS Group and Dean Witter
Discover each nominating five of the ten. The Chairman and Chief Executive
Officer of Morgan Stanley, Dean Witter, Discover & Co. will be the current
Chairman and Chief Executive Officer of Dean Witter Discover, Phillip Purcell.
The President and Chief Operating Officer of Morgan Stanley, Dean Witter,
Discover & Co. will be the current President of MS Group, John Mack.
MAS does not anticipate any reduction in the quality of services now
provided to the Fund and does not expect that the Merger will result in any
material changes in the business of MAS or in the manner in which MAS renders
services to the Fund. Nor does MAS anticipate that the Merger or any ancillary
transactions will have any adverse effect on its ability to fulfill its
obligations under the New Advisory Agreement (as defined below) with the Fund or
to operate its business in a manner consistent with past business practice.
The Advisory Agreements
In anticipation of the Merger, the Fund's Trustees, including the
Trustees who are not parties to the New Advisory Agreement or interested persons
of any such party ("Independent Trustees"), approved a new investment advisory
agreement (the "New Advisory Agreement") between the Fund and MAS. The form of
New Advisory Agreement is reproduced at Annex A to this Proxy Statement and is
identical to the Fund's Current Advisory Agreement except for the dates of
execution, effectiveness, and termination. The holders of a majority of the
outstanding voting securities (within the meaning of the 1940 Act) of each
Portfolio of the Fund are being asked to approve the New Advisory Agreement. See
"The New Advisory Agreement" below.
The following summary of the Current Advisory Agreement and the New
Advisory Agreement set forth herein is qualified by reference to Annex A.
The Current Advisory Agreement. The Current Advisory Agreement was last
approved by Shareholders of the Fund at a special meeting held on October 6,
1995 for the purpose of voting on such Agreement and became effective for all
Portfolios except the Balanced Plus Portfolio on January 3, 1996. The sole
shareholder of the Balanced Plus Portfolio approved the Current Advisory
Agreement on October 11, 1996. Since October 1, 1995, the Board has (i) reviewed
and approved the Current Advisory Agreement, and (ii) voted to increase the
amount of the investment advisory fee paid to MAS by the Multi-Asset-Class
Portfolio from 0.45% to
6
<PAGE>
0.65%. The increase in the Multi-Asset-Class Portfolio's investment advisory fee
was approved by that Portfolio's shareholders at a special meeting of
shareholders on December 17, 1996.
The Current Advisory Agreement provides that MAS, as investment adviser
to the Fund, in return for its fee, and 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, will manage the investment and
reinvestment of the assets of each Portfolio of the Fund. In this regard, it is
the responsibility of MAS to make investment decisions for each Portfolio and to
place each Portfolio's purchase and sale orders for investment securities. The
Current Advisory Agreement states that MAS will provide adequate office space,
facilities and personnel to perform its advisory services for the Fund.
The Current Advisory Agreement has an initial term of two years from
January 6, 1996, and thereafter continues for successive annual periods,
provided that such continuation is approved at least annually 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 Current Advisory Agreement may be terminated by 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 MAS. The Current Advisory Agreement may
be terminated by MAS at any time, without the payment of any penalty, upon 90
days' written notice to the Fund. The Current Advisory Agreement automatically
terminates in the event of its assignment.
The Current Advisory Agreement provides that, in the absence of (i)
willful misfeasance, bad faith or gross negligence on the part of MAS in
performance of its obligations and duties, (ii) reckless disregard by MAS 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, MAS 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.
As compensation for the services rendered by MAS under the Current
Advisory Agreement, each Portfolio pays MAS an advisory fee calculated by
applying a quarterly rate, based on the following annual percentage rates, to
the Portfolio's average daily net assets. The annual rate paid by each Portfolio
will remain unchanged under the New Advisory Agreement. The annual rate payable
to MAS by each Portfolio under the Current and New Advisory Agreements, and the
actual amounts paid by each, net of any waivers or reimbursements, during the
fiscal year ended September 30, 1996 are set forth below:
7
<PAGE>
- --------------------------------------------------------------------------------
|Portfolio | Annual Rate (%)* | Advisory Fee Paid ($000's)**|
- --------------------------------------------------------------------------------
Advisory Foreign Fixed Income .375 0
Advisory Mortgage .375 0
Balanced .450 1,521
Balanced Plus .550 (c)
Cash Reserves .250 86
Domestic Fixed Income .375 249
Emerging Markets .750 244
Equity .500 7,785
Fixed Income .375 5,917
Fixed Income II .375 773
Global Fixed Income .375 205
Growth .500 (c)
High Yield .375 1,073
Intermediate Duration .375 34
International Equity .500 3,458
International Fixed Income .375 555
Limited Duration .300 351
Mid Cap Growth .500 1,986
Mid Cap Value .750 142
Mortgage-Backed Securities .375 156
Multi-Asset-Class .650 **** 523
Municipal .375 129
PA Municipal .375 47
Small Cap Value .750 3,464
Special Purpose Fixed Income .375 1,517
Value .500 7,716
Total Advisory Fees Paid to
MAS by Fund 37,931
* MAS has voluntarily agreed to waive its advisory fees to the extent
necessary, if any, to keep the Institutional Class Shares of the
Advisory Foreign Fixed Income, Advisory Mortgage, Cash Reserves,
Domestic Fixed
8
<PAGE>
Income, Emerging Markets, Intermediate Duration, Limited Duration, Mid
Cap Value, Mortgage-Backed Securities, Multi-Asset-Class, Municipal,
and PA Municipal Portfolios' total annual operating expenses from
exceeding .150%, .080%, .320%, .500%, 1.180%, .520%, .420%, .880%,
.500%, .780% .500%, and .500% of its average daily net assets,
respectively.
** Advisory fees (in thousands) voluntarily waived by MAS amounted to
$1,933 for the Advisory Foreign Fixed Income Portfolio, $6,056 for the
Advisory Mortgage Portfolio, $52 for the Cash Reserves Portfolio, $8
for the Domestic Fixed Income Portfolio, $42 for the Emerging Markets
Portfolio, $18 for the Intermediate Duration Portfolio, $46 for the Mid
Cap Value Portfolio, $21 for the Mortgage-Backed Securities Portfolio,
$112 for the Multi-Asset-Class Portfolio, $38 for the Municipal
Portfolio, and $30 for the PA Municipal Portfolio.
*** Not in operation during the period.
**** The advisory fee payable by the Multi-Asset-Class Portfolio under the
Current Advisory Agreement was increased to 0.650% from 0.450% by vote
of the Shareholders of that Portfolio at a Special Meeting held on
December 17, 1996. The fee increase was effective as of December 17,
1996.
The New Advisory Agreement. The Board of Trustees held a meeting on
February 27, 1997, at which the Trustees, including the Independent Trustees,
unanimously approved the New Advisory Agreement for the Fund and recommended the
agreement for approval by the Shareholders of the Fund. The form of the New
Advisory Agreement is attached as Annex A. The form of the New Advisory
Agreement is identical to the Current Advisory Agreement, except for the dates
of execution, effectiveness and termination. If approved, the New Advisory
Agreement will take effect upon the later to occur of (i) the obtaining of
Shareholder approval or (ii) the closing of the Merger. The New Advisory
Agreement will continue in effect for an initial two year term and thereafter
for successive annual periods as long as such continuance is approved in
accordance with the 1940 Act.
The investment advisory fee as a percentage of net assets payable by
each Portfolio of the Fund will be the same under the New Advisory Agreement as
under the Current Advisory Agreement. If the investment advisory fee under the
New Advisory Agreement had been in effect for the Fund's most recently completed
fiscal year, advisory fees paid to MAS by the Fund would have been identical to
those paid under the Current Advisory Agreement.
Prior to approving the New Advisory Agreement on February 27, 1997, the
Fund's Independent Trustees held three special meetings to consider and discuss
the proposal to approve a New Advisory Agreement with MAS in light of the
proposed Merger, resulting in MAS's ownership by Morgan Stanley, Dean Witter,
Discover & Co. In connection with these meetings, the Independent Trustees
requested and were provided with written information regarding MAS, MS Group,
Dean Witter Discover, and the proposed Merger. Officials of MAS, MSAM, and their
affiliates met with the Independent Trustees and answered questions from the
Trustees about the Merger and the future plans and intentions of MAS, MS Group,
and their affiliates, and Morgan Stanley, Dean Witter, Discover & Co. Counsel to
the Independent Trustees participated in these meetings and assisted the
Independent Trustees in
9
<PAGE>
requesting information from MAS and MS Group, analyzing the Merger, and
evaluating the potential effects of the Merger on MAS and the Fund. In addition,
counsel to the Fund and counsel to the Independent Trustees jointly prepared and
distributed an analysis of the Trustees' fiduciary duties in connection with
their consideration of the New Advisory Agreement.
In their consideration of the New Advisory Agreement, the Independent
Trustees focused principally on the effect that the Merger would have on MAS's
investment process, key personnel, and culture. In this regard, they requested
and received information concerning the relationship of MAS with MS Group, its
affiliates, and Morgan Stanley, Dean Witter, Discover & Co. following the
Merger, with particular emphasis on these issues. The Trustees received
assurances that MAS would continue to be operated as a separate business unit.
The Independent Trustees also focused on the retention record that MAS has had
with respect to its portfolio managers and other key personnel and questioned
whether the Merger might have a negative effect on MAS's ability to retain these
people. In this regard, the Trustees received assurances from MAS that retention
of key personnel would remain a high priority following the Merger.
The Trustees were informed that it was intended that the investment
management philosophy, policies, and strategies currently pursued by MAS for the
Fund would not be affected by the Merger. The Trustees received assurances from
the MS Group that there would be no changes in the portfolio managers who manage
each Portfolio's assets as a result of the Merger. The Trustees were provided
with information satisfactory to them with respect to the financial resources of
MAS following the Merger, and the commitment of MS Group and Dean Witter
Discover to the continuance, or enhancement, without interruption, of services
of the quality and type currently provided by MAS to the Fund. In this regard,
the Trustees were informed of the resources of Morgan Stanley, Dean Witter,
Discover & Co. to be made available to MAS. The Trustees also considered the
expertise of Dean Witter Discover and its affiliates in the asset management
business. Finally, the Trustees were informed that MAS currently had no plans to
discontinue the existing voluntary fee waiver and expense reimbursement programs
as a result of the Merger, and that the Fund would not bear any of the expenses
incurred by the Fund as a result of the Merger, including any of the expenses of
the preparation and mailing of this proxy statement, as it concerns the approval
of the New Advisory Agreement.
In addition to information relating to the Merger, MAS provided the
Trustees with information to update the information provided to the Trustees
relating to the factors the Trustees had considered in connection with the
renewal of the Current Advisory Agreement in May 1996. These factors included,
but were not limited to the following: the historic performance of the
10
<PAGE>
Portfolios as compared to relevant industry indices and comparable investment
companies; the nature and quality of the services expected to be rendered to the
Fund by MAS and the costs associated with such services; the terms of the
Current Advisory Agreement and the fees payable thereunder to MAS as compared to
fees paid by similar investment companies; the benefits accruing to MAS as a
result of its affiliation with the Fund; the profitability of MAS; and the
history, reputation, qualification and background of MAS. The Trustees indicated
that they would conduct a full review of the New Advisory Agreement based on
these and other factors that they deem relevant at the next meeting of the Board
in May 1997.
MAS has advised the Board of Trustees that it expects that there will
be no dilution in the scope or quality of advisory services provided to the Fund
as a result of the Merger. Accordingly, the Board of Trustees believes that the
Fund should receive investment advisory services under the New Advisory
Agreement equal or superior to those currently received under the Current
Advisory Agreement, at the same fee levels.
The Trustees also considered the effect on the Fund of MAS becoming an
affiliated person of Morgan Stanley, Dean Witter, Discover & Co. Following the
Merger, the 1940 Act will prohibit or impose certain conditions on the ability
of the Fund to engage in certain transactions with Morgan Stanley, Dean Witter,
Discover & Co. and its affiliates. For example, absent exemptive relief the Fund
will be prohibited from purchasing securities from Morgan Stanley and DWR in
transactions in which either Morgan Stanley or DWR act as principal. Currently
the Fund is prohibited from making such purchases in only those transactions in
which Morgan Stanley or an affiliate acts as principal. The Fund will also have
to satisfy certain conditions in order to engage in securities transactions in
which Morgan Stanley or DWR is acting as an underwriter. The Fund is already
required to satisfy such conditions when engaging in transactions in which
Morgan Stanley or an affiliate is acting as an underwriter. In this connection,
MAS provided assurances to the Trustees that they do not believe these
prohibitions or conditions will have a material effect on the management or
performance of the Fund.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Trustees, including the
Independent Trustees, unanimously approved the New Advisory Agreement with
respect to the Fund and voted to recommend its approval to the Shareholders of
the Fund.
In the event that Shareholders of the Fund do not approve the New
Advisory Agreement, the Board will take such action as it deems in the best
interest of the Fund and its Shareholders, which may include proposing that
Shareholders approve an agreement in lieu of the New Advisory Agreement. If the
Merger is not consummated, MAS would continue to serve as investment adviser of
the Fund pursuant to the terms of the Current Advisory Agreement.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW
ADVISORY AGREEMENT.
11
<PAGE>
PROPOSAL II. ELECTION OF TRUSTEES
Background
At the meeting, six Trustees are to be elected. Four of the six
nominees are standing for reelection. Two of the nominees, Messrs. Gerrity and
McLean, were appointed to the Board by vote of the Independent Trustees. Of the
six nominees, Mr. Bennett has served since November 1993, Mr. Gerrity has served
since November 1996, Mr. Healey has served since November 1993, Mr. Kearns has
served since August 1994, Mr. McLean has served since February 1996, and Mr.
Morong has served since August 1993.
If all six nominees are elected, over 80% of the six Trustees composing
the Fund's Board will be Independent Trustees. Because the Fund does not hold
regular annual Shareholder meetings, each nominee, if elected, will hold office
until his successor is elected and qualified.
The nominees for election as Trustees are listed below. All of the
nominees have consented to being named in this proxy statement and to serve if
elected. Should any of the nominees become unable or unwilling to accept
nomination or election, the persons named in the proxy will exercise their
voting power to vote for such person or persons as the Nominating Committee of
the Fund may recommend. The Fund knows of no reason why any nominee would be
unable or unwilling to serve if elected.
Information Regarding Nominees
The following information is provided for each nominee: name; position
with the Fund; age; length of Trusteeship; principal occupation(s) or employment
during the past five years; and directorships with other companies which file
reports periodically with the Securities and Exchange Commission.
12
<PAGE>
<TABLE>
<CAPTION>
Name and Position with
Fund Age Trustee Since Principal Occupation; Directorships
- ---------------------- --- ------------- -----------------------------------
<S> <C> <C> <C>
* Thomas L. Bennett 49 November 1993 Portfolio Manager and Member of the Executive
Chairman of the Board Committee, Miller Anderson & Sherrerd, LLP;
Director, MAS Fund Distribution, Inc.; Managing
Director, Morgan Stanley
Thomas P. Gerrity 55 November 1996 Dean and Reliance Professor of Management and
Trustee Private Enterprise, Wharton School of Business,
University of Pennsylvania; Director, Digital
Equipment Corporation; Sun Company,
Inc.; Federal National Mortgage
Association; Reliance Group Holdings;
CVS Corporation, Union Carbide Corporation.
Joseph P. Healey 54 November 1993 Headmaster, Haverford School; formerly Dean,
Trustee Hobart College; Associate Dean, William & Mary
College
Joseph J. Kearns 54 August 1994 Chief Financial Officer, The J. Paul Getty Trust;
Trustee Director, Electro Rent Corporation; Trustee
Southern California Edison Nuclear
Decommissioning Trust; Director, The Ford
Family Foundation.
Vincent R. McLean 65 February 1996 Director, Alexander and Alexander Services, Inc.;
Trustee Director, Legal and General America, Inc.
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).
C. Oscar Morong, Jr. 61 August 1993 Managing Director, Morong Capital
Trustee Management; Director, Ministers and
Missionaries Benefit Board of American Baptist
Churches, The Indonesia Fund, and The Landmark
Funds; formerly Senior Vice President and
Investment Manager for CREF, TIAA-CREF Investment
Management, Inc.
</TABLE>
* Mr. Bennett, as an officer of MAS, is an "interested person" of the
Fund as defined by Section 2(a)(19) of the Investment Company Act.
13
<PAGE>
As of March 10, 1997, the number of shares of the Fund beneficially
owned by (i) each Trustee and (ii) all officers and Trustees as a group, and the
percent of the shares of the Fund so owned, were as follows:
<TABLE>
<CAPTION>
Name Portfolio Shares Owned Percent of Outstanding Shares
- ---- --------- ------------ ------------------------------
<S> <C> <C> <C>
Thomas L. Bennett High Yield 164,749.683 *
Mid Cap Growth 4,555.339 *
Mid Cap Value 11,912.985 *
Small Cap Value 3,777.528 *
Value 8,997.764 *
Total of all Officers and High Yield 164,749.683 *
Trustees Mid Cap Growth 4,555.339 *
Mid Cap Value 11,912.985 *
Small Cap Value 3,777.528 *
Value 8,997.764 *
* Less than 1%.
</TABLE>
Mr. Kearns is Chief Financial Officer of The J. Paul Getty Trust
("Getty") and a Director of the Ford Family Foundation ("Ford"). Mr. Morong is a
Director of the Ministers and Missionaries Benefit Board of American Baptist
Churches ("Ministers"). Mr. Gerrity is a Director of Sun Company Inc. Getty,
Ford, Ministers, and the Sun Company Retirement Plan Trust ("Sun") beneficially
owned the number of shares and the percentage of the shares of each Portfolio as
of March 10, 1997 set forth below. Messrs. Gerrity, Kearns, and Morong disclaim
beneficial ownership of such shares.
<TABLE>
<CAPTION>
Percentage of Portfolio's
Portfolio Beneficial Owner Shares Owned Outstanding Shares
- --------- ---------------- ------------ -------------------------
<S> <C> <C> <C>
Advisory Foreign Fixed Income Sun 321,272.559 2.2%
Cash Reserves Sun 5,492,608.030 7.7%
Emerging Markets Ministers 1,108,108.438 42.0%
Equity Ministers 622,840.405 1.2%
High Yield Ministers 993,099.410 2.3%
International Equity Ministers 4,602,892.827 9.9%
International Fixed Income Getty 2,525,886.349 16.2%
Small Cap Value Getty 3,879,943.793 11.1%
Special Purpose Fixed Income Ministers 968,442.560 2.4%
Value Ford 205,860.956 *
Getty 770,027.298 *
Ministers 203,227.765 *
</TABLE>
* Less than 1%.
As part of MS Group's acquisition of MAS in January 1996, the
then-partners of MAS, including Thomas L. Bennett, Chairman of the Fund's Board
of Trustees, sold their partnership interests in MAS to MSAM Holdings for cash
and securities of MS Group. There have been no other purchases or sales of MAS's
partnership interests, or of securities issued by any affiliate of MAS, by any
Trustee or nominee since the beginning of the Fund's current fiscal year ending
September 30, 1996. Other than Mr. Bennett, no Trustee or nominee has had during
the past five years any material interest, direct or indirect, in MAS.
14
<PAGE>
Board Approval of the Election of Trustees
The Board of Trustees has recommended that Shareholders vote for each
of the nominees for Trustee named herein. In recommending that Shareholders
elect the nominees as Trustees of the Fund, the Board considered the nominees'
experience and qualifications.
Shareholder Approval of the Election of Trustees
If the nominees are not approved by the Shareholders of the Fund, the
Board will consider alternative nominations. A meeting may be called by
Shareholders holding at least 10% of the Shares entitled to vote at the meeting
for the purpose of voting upon the removal of Trustees, in which case
Shareholders may receive assistance in communicating with other Shareholders as
if the provisions contained in Section 16(c) of the Investment Company Act
applied.
Trustee Compensation
The Fund pays each Trustee who is not also an officer or affiliated
person of the Fund a fee for each Board of Trustees' meeting attended, plus
travel and other expenses incurred in attending such meetings. Trustees who are
also officers or affiliated persons receive no remuneration for their service as
Trustees. The Fund's officers are paid by MAS. The compensation paid by the Fund
to each of its Trustees serving during the fiscal year ended September 30, 1996
is set forth in the compensation table below. The Independent Trustees defer
receipt of part or all of their compensation under an unfunded Deferred
Compensation Plan. The amounts deferred by each Trustee are credited with gains
and losses as if they were invested in Portfolios of the Fund selected by that
Trustee.
15
<PAGE>
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total
Compensation Benefits Accrued as Part Benefits upon Compensation
Name of Trustee (1) from the Fund (4) of Fund Expenses Retirement from the Fund
- --------------- ------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C>
Thomas L. Bennett* $0 $0 $0 $0
Thomas P. Gerrity (2) $0 $0 $0 $0
Joseph P. Healey $40,000 (5) $0 $0 $40,000
Joseph J. Kearns $40,000 (5) $0 $0 $40,000
Vincent R. McLean (3) $27,000 (5) $0 $0 $27,000
C. Oscar Morong, Jr. $40,000 (5) $0 $0 $40,000
</TABLE>
* Mr. Bennett is an "interested person" of the Fund as that term is
defined in the Investment Company Act.
(1) David P. Eastburn resigned as a Trustee to the Fund in February 1996.
Mr. Eastburn received compensation of $22,000 from the Fund for the
part of the year that he served as a Trustee.
(2) Mr. Gerrity became a Trustee after the end of the fiscal year end of
September 30, 1996.
(3) Mr. McLean became a Trustee on February 29, 1996.
(4) Includes amounts deferred from quarterly meeting fees at the election
of Trustees under a deferred compensation plan which was established
during the fiscal year ended September 30, 1996. Does not include
out-of-pocket expenses paid to Independent Trustees.
(5) In addition, each Trustee has deferred his retainer of $12,000 under
the deferred compensation plan.
Board Meetings and Committees
The Board of Trustees has an Audit Committee, a Nominating Committee
and a Valuation Committee. The Audit Committee is composed entirely of
Independent Trustees. Currently, Messrs. Gerrity, Healey, Kearns, McLean and
Morong are members of the Audit Committee. The Audit Committee reviews with the
Fund's independent auditors, among other things, the scope of the annual audit,
the financial procedures of the Fund, and the type of services to be rendered by
the Fund's independent auditors. The Nominating Committee, which currently
consists of all of the Independent Trustees, nominates for election as Trustee
candidates who may be either interested persons or non-interested persons of the
Fund. The Nominating Committee will consider nominees recommended by
Shareholders, which recommendation should be submitted to the Committee in care
of the Secretary of the Fund. The Valuation Committee, currently consisting of
Messrs. Bennett and Morong, meets from time to time as necessary to
16
<PAGE>
value any securities held by the Fund for which market quotations are not
available through the Fund's usual pricing procedures. The Valuation Committee
also is authorized to act for the Board of Trustees in monitoring the Cash
Reserves Portfolio's net asset value and compliance with Rule 2a-7 under the
Investment Company Act.
During the Fund's fiscal year ended September 30, 1996, there were four
meetings of the Board of Trustees, two meetings of the Audit Committee, two
meetings of the Nominating Committee, and no meetings of the Valuation
Committee. Each Trustee attended 75% or more of the aggregate number of Board
meetings and applicable committee meetings held during the period for which he
or she was a Trustee.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS
A VOTE "FOR" THE ELECTION OF ALL OF THE NOMINEES.
___________________
PROPOSAL III. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP has been selected as the Fund's independent
accountants for the current fiscal year by vote of the Board of Trustees,
including a majority of the Independent Trustees. The employment of Price
Waterhouse LLP is conditional upon the right of the Fund, by vote of a majority
of its outstanding shares, to terminate the employment without any penalties.
Adoption of this proposal is not conditioned upon consummation of the Merger.
Price Waterhouse LLP has acted as the Fund's independent accountants
since the Fund's inception. If the Fund's shareholders do not ratify the
selection of Price Waterhouse LLP, other certified public accountants will be
considered for selection by the Board of Trustees.
Representatives of Price Waterhouse LLP are not expected to be present
at the Meeting although they will have an opportunity to attend and to make a
statement, if they desire to do so. If representatives of Price Waterhouse LLP
are present, they will be available to respond to appropriate questions from
shareholders.
17
<PAGE>
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS
A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF
THE INDEPENDENT ACCOUNTANT.
____________________
PROPOSAL IV. APPROVAL OF A CHANGE IN THE INVESTMENT OBJECTIVE
OF THE DOMESTIC FIXED INCOME PORTFOLIO.
The Trustees have approved a proposal to amend the Domestic Fixed Income
Portfolio's investment objective. Currently, the Portfolio's investment
objective is:
To achieve above-average total return over a market cycle of
three to five years, consistent with reasonable risk by investing in a
diversified portfolio of U.S. Government securities, corporate bonds
rated A or higher, and other fixed-income securities rated A or higher
of domestic issuers. The Portfolio's average weighted maturity will
ordinarily be greater than five years.
Subject to shareholder approval, the Trustees have adopted the following amended
investment objective:
To achieve above-average total return over a market cycle of
three to five years, consistent with reasonable risk by investing in a
diversified portfolio of U.S. Government securities and other
investment grade fixed-income securities of domestic issuers.
Further, the Board has established an operating policy that may be changed only
with the Board's approval to the effect that the Portfolio may invest up to 20%
of its assets in fixed-income securities rated BBB, or its equivalent. The
reasons for and the effects of this change are discussed under Discussion of
Proposals IV and V, below.
PROPOSAL V. APPROVAL OF A CHANGE IN THE INVESTMENT OBJECTIVE
OF THE FIXED INCOME PORTFOLIO II.
The Trustees have approved a proposal to amend the Fixed Income Portfolio II's
investment objective. Currently, the Portfolio's investment objective is:
18
<PAGE>
To achieve above-average total return over a market cycle of
three to five years, consistent with reasonable risk by investing in a
diversified portfolio of U.S. Government securities, investment grade
corporate bonds and other fixed-income securities (rated A or higher).
The Portfolio's average weighted maturity will ordinarily be greater
than five years.
Subject to shareholder approval, the Trustees have adopted the following amended
investment objective:
To achieve above-average total return over a market cycle of
three to five years, consistent with reasonable risk by investing in a
diversified portfolio of U.S. Government securities and other
investment grade fixed-income securities.
Discussion of Proposals IV and V.
The change in the investment objective of each Portfolio is designed to
permit MAS greater flexibility in managing each Portfolio's investments. The
restated objective will permit each Portfolio to invest in any investment grade
fixed income securities, including fixed income securities with a rating of BBB
or its equivalent. Either Portfolio also would be permitted to invest in unrated
fixed income securities if MAS considers the risks involved in owning those
securities to be equivalent to the risks involved in holding investment grade
fixed income securities. The Domestic Fixed Income Portfolio would be permitted,
under an investment policy adopted by MAS and approved by the Board, to invest
up to 20% of its assets in securities rated BBB, or its equivalent. The Fixed
Income Portfolio II would be permitted to invest in BBB-rated (or equivalent)
securities to an unlimited extent. In each case, the deletion of the reference
to "corporate bonds" is intended to clarify that the Portfolios may invest in
any fixed income securities that otherwise are consistent with the Portfolios'
investment objectives and policies.
If Shareholders approve the proposed changes in the Portfolios'
investment objectives, each Portfolio will continue to seek to achieve
above-average total return over a market cycle of three to five years,
consistent with reasonable risk by investing in U.S. Government securities and
other fixed income securities (limited, in the case of the Domestic Fixed Income
Portfolio, to domestic issuers) meeting the Portfolios' rating requirements.
Investment grade fixed income securities generally include securities
rated BBB or higher by Standard & Poor's Ratings Group, and Baa or higher by
Moody's Investors Service, Inc. Fixed income securities rated BBB are regarded
as having an adequate capacity to pay interest and repay principal. While a
BBB-rated fixed income security normally will have adequate protection against
default, adverse economic conditions or changing circumstances are more likely
19
<PAGE>
to weaken the issuer's ability to pay interest and repay principal than would be
the case with securities in higher rating categories. MAS believes that it can
enhance the Portfolios' total return by investing a portion of their assets in
securities rated BBB and that excluding BBB-rated securities may hurt the
Portfolios' performance. While adding BBB-rated securities to the Portfolios
will expose them to somewhat greater risk, MAS believes that the added risk is
outweighed by the potential gains that may be achieved. Of course, there is no
assurance that the Portfolios will successfully achieve these results.
Each Portfolio's investment objective also is proposed to be amended to
delete the statement that the Portfolio's average weighted maturity will
ordinarily be greater than five years. While MAS intends to continue to manage
the Portfolios in such a way that their average weighted maturities will
ordinarily exceed five years, it believes that additional flexibility is needed
so that it can respond to changing market conditions.
Each Portfolio needs the approval of its shareholders in order to amend
its investment objective. If either Portfolio's Proposal is not approved, that
Portfolio's current investment objective will remain unchanged and the Trustees
will consider other appropriate alternatives.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
OF THE DOMESTIC FIXED INCOME AND FIXED INCOME II PORTFOLIOS
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENTS TO THE
RESPECTIVE PORTFOLIO'S INVESTMENT OBJECTIVES.
____________________
GENERAL INFORMATION ABOUT THE FUND AND OTHER MATTERS
Officers of the Fund and MAS
Information about the Fund's principal executive officers, including
their names, ages, positions with the Fund, length of such positions and
principal occupation or employment during the past five years, is set forth
below.
20
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment for the Past Five
Name Age Years
- ---- --- ----------------------------------------------------
<S> <C> <C>
James D. Schmid 46 President of the Fund since November 1993; Principal,
Morgan Stanley; Head of Mutual Funds, Miller Anderson
& Sherrerd, LLP; Director, MAS Fund Distribution, Inc.;
Chairman of the Board, The Minerva Fund, Inc.;
formerly, Vice President, Chase Manhattan Bank
Lorraine Truten 35 Vice President of the Fund since 1991; Principal, Morgan
Stanley; Head of Mutual Fund Services, Miller Anderson
& Sherrerd, LLP; President, MAS Fund Distribution, Inc.
Douglas W. Kugler 35 Treasurer of the Fund since November 1993; Vice
President, Morgan Stanley; Head of Mutual Fund
Administration, Miller Anderson & Sherrerd, LLP;
formerly Assistant Vice President, Provident Financial
Processing Corporation
John H. Grady, Jr. 35 Secretary of the Fund since July 1995; Partner, Morgan
Lewis & Bockius, LLP; formerly Attorney, Ropes &
Gray
</TABLE>
One Trustee and certain officers of the Fund are also officers or
employees of MAS. The tables above describe the positions held by the Trustee,
Mr. Bennett, and three of the officers, Messrs. Schmid and Kugler and Ms.
Truten. In addition, Marion S. Mitchell, Assistant Secretary of the Fund, is
Manager of Client Service Administration with MAS.
Distribution of Shares
MAS Fund Distribution, Inc.("MASDI"), a wholly-owned subsidiary of MAS,
One Tower Bridge, P.O. Box 868, West Conshohocken, Pennsylvania, is the
distributor for the Fund pursuant to a Distribution Agreement. At their February
27, 1997 meeting, the Fund's Board of Trustees approved a new Distribution
Agreement with MASDI to be effective upon consummation of the Merger.
The Fund's Distribution Plan provides that the Adviser Class Shares
will pay MASDI a distribution fee which MASDI can use to compensate
broker-dealers and service providers who provide distribution services to
Adviser Class Shareholders or their customers who beneficially own Adviser Class
Shares. For the fiscal year ended September 30, 1996, the Fund paid MASDI
21
<PAGE>
$855 in distribution fees pursuant to the Distribution Plan. It is anticipated
that this arrangement with MASDI will continue after the consummation of the
Merger.
Officers and Directors of MASDI
Information about officers and directors of MASDI, including their
positions with MASDI, MAS, and the Fund as of March 10, 1997, is presented
below.
<TABLE>
<CAPTION>
Position with Miller Anderson & Sherrerd, LLP and
Name Position with MASDI MAS Funds
- ---- ------------------- -------------------------------------------------
<S> <C> <C>
Thomas L. Bennett Director Chairman, MAS Funds; Portfolio Manager and Member
of the Executive Committee, Miller Anderson &
Sherrerd, LLP; Director, MAS Fund Distribution, Inc.;
Managing Director, Morgan Stanley
Gary G. Schlarbaum Director Portfolio Manager and Member of the Executive
Committee, Miller Anderson & Sherrerd, LLP;
Managing Director, Morgan Stanley
James D. Schmid Director President of the Fund since November 1993; Principal,
Morgan Stanley; Head of Mutual Funds, Miller
Anderson & Sherrerd, LLP; Director, MAS Fund
Distribution, Inc.; Chairman of the Board, The Minerva
Fund, Inc.
Marna C. Whittington Chief Executive Officer Member of the Executive Committee, Miller Anderson
& Sherrerd, LLP; Managing Director, Morgan Stanley
Lorraine Truten President Head of Mutual Fund Services, Miller Anderson
& Sherrerd, LLP; Principal, Morgan Stanley; Vice
President, MAS Funds
Ronald R. Reese Secretary/Treasurer Principal - Finance, Miller Anderson & Sherrerd, LLP;
Principal, Morgan Stanley
Paul Frick Compliance Officer Vice President - Compliance, Miller Anderson &
Sherrerd, LLP; Vice President, Morgan Stanley
</TABLE>
22
<PAGE>
Shareholder Service Agreement
The Fund has entered into a Shareholder Service Agreement with MASDI
whereby MASDI will compensate service providers who provide certain services to
clients who beneficially own Investment Class shares of the Fund's portfolios.
During the fiscal year ended September 30, 1996, the Fund paid $5,739 to
compensate MASDI under this Shareholder Service Agreement. It is anticipated
that this arrangement with MASDI will continue after the consummation of the
Merger.
Fund Administration
MAS serves as administrator to the Fund under an administration
agreement. Chase Global Funds Services Company, a subsidiary of The Chase
Manhattan Bank, 73 Tremont St., Boston, MA 02108-3913, provides accounting and
other services to the Fund pursuant to a subadministration agreement with MAS.
Custody
Morgan Stanley Trust Company (NY) ("MSTC"), an affiliate of MAS and MS
Group, serves as one of the Fund's custodians. MSTC holds cash, securities and
other assets for certain Portfolios of the Fund as required by the 1940 Act. For
the fiscal year ended September 30, 1996, the Fund paid MSTC $675,735.36 for
these services.
Beneficial Owners
The following table sets forth certain information as of March 10, 1997
concerning each person or entity who is a beneficial owner of more than 5% of
the Shares of the Portfolio because he, she or it possessed or shared voting or
investment power with respect to such Shares.
<TABLE>
<CAPTION>
Shares Percentage of
Portfolio Beneficial Owner Beneficially Owned Portfolio's Shares
- --------- ---------------- ------------------ ------------------
<S> <C> <C> <C>
Advisory Foreign Minneosta State Board of 1,551,832.119 10.5%
Fixed Income Investments
Suite 105, MEA Bldg.
55 Sherborne Ave.
St. Paul, MN 55155
CoreStates Bank 1,171,399.472 7.9%
Children's Hospital Fixed Inc.
P.O. Box 7829
Philadelphia, PA 19101
Kaiser Foundation (DB Plan) 950,333.435 6.4%
One Kaiser Plaza
Oakland, CA 94612
Advisory Mortgage Children's Hospital of Philadelphia 12,113,568.656 5.6%
34th Street and Civic Center Blvd.
Philadelphia, PA 19104
Balanced Wendel & Co. 10,285,839.452 42.4%
A/C #617026
P.O. Box 1066, Wall Street Station
New York, NY 10286
Wells Fargo Bank N.A. 3,074,482.639 12.7%
SF Bay Area Rapid Transit District
P.O. Box 9800 Mutual Funds
Calabasas, CA 91372
<PAGE>
Cash Reserves The Northern Trust Company as 28,088,835.020 39.6%
TTEE
FBO Morgan Stanley Plan 8504
DV-MS
P.O. Box 92956
Chicago, IL 60675
Hans A. Wolf or Elizabeth Wolf 5,884,554.440 8.3%
TR Wolf Revocable TR Exec.
03/21/82
895 Mockingbird Lane
Palo Alto, CA 94306
Sun Co. Retirement Plan Trust 5,492,608.030 7.7%
Salteld & Co.
c/o Bankers Trust Company
P.O. Box 704
Church Street Station
New York, NY 10008
Connelly Foundation 4,366,757.520 6.2%
One Tower Bridge
Suite 1450
West Conshohocken, PA 19428
Association for Information 4,068,747,710 5.7%
and Image Management
1100 Wayne Avenue
Suite 1100
Silver Spring, MD 20910
Domestic Fixed Saxon & Co. 1,864,972.916 19.9%
Income FBO Allegheny Hospital Medical Cntrs
P.O. Box 7780-1888
Philadelphia, PA 19182
First Union National Bank 1,180,180.180 12.6%
FBO Main Line Health
401 South Tryon Street
CMGZ-1151
Charlotte, NC 26288
The Philadelphia Orchestra 783,576.704 8.4%
1420 Locust Street, Suite 320
Philadelphia, PA 19102
Saxon & Company 609,744.310 6.5%
FBO Weirton Medical Center
Retirement Income Plan
P.O. Box 7780-1888
Philadelphia, PA 19182
Paintmakers Money Accumulation 544,377.769 5.8%
Pension Plan B
1220 S.W. Morrison Street
Suite 300
Portland, OR 97205
Fox Chase Cancer Center 484,850.544 5.2%
7701 Burholme Avenue
Philadelphia, PA 19111
Thiel College 477,075.001 5.0%
75 College Avenue
Greenville, PA 16125
<PAGE>
Emerging Ministers & Missionaries Benefit 1,108,108.438 42.0%
Markets Board of the Amer. Baptist Conv.
475 Riverside Drive
New York, NY 10115
Chemical Bank as Custodian for 866,781.437 32.8%
Smithsonian Institution
4 New York Plaza, 4th Floor
New York, NY 10004
KPMG Peat Marwick 290,918.089 11.0%
Three Chestnut Ridge Road
Montvale, NJ 07645
Richard B. Worley 141,866.330 5.3%
c/o Miller Anderson & Sherrerd
One Tower Bridge
West Conshohocken, PA 19428
Equity Los Angeles County Deferred 2,780,063.711 5.2%
Compensation & Thrift Plan
Bankers Trust Company
34 Exchange Place, 6th Floor, 3064
Jersey City, NJ 07302
Fixed Income II Board of Trustees Sheet Metal 2,076,819.121 12.1%
Workers Local #100 Pension Pl.
4725 Silvermill Road
Suitland, MD 20746
Bankers Trust Co. as Custodian for 1,998,189.501 11.6%
Johns Hopkins University
34 Exchange Place, 2nd Floor, MS. 3029
Jersey City, NJ 07302
Diocese of Camden 1,662,424.884 9.7%
1845 Hadddon Avenue
Camden, NJ 08103
Northern Trust Committee 1,383,496.352 8.0%`
Sandoz Corp. Savings Plan Preservation
P.O. Box 92956 A/C 22-30553
Chicago, IL 60675
Sarah Lawrence College 953,385.143 5.5%
Vice President for Finance & Planning
One Meadway
Bronxville, NY 10708
<PAGE>
Global Fixed The Charles A. Dana Foundation Inc. 1,992,947.634 26.6%
Income 745 Fifth Avenue, Suite 700
New York, NY 10151
Hudson-Webber Foundation 873,410.822 11.7%
333 West Fort Street
Suite 1310
Detroit, MI 48226
"All for Her" Fund 822,824.893 11.0%
c/o Family Rosary Inc.
84 Pine West Plaza
Albany, NY 12205
Abilene Christian University 651,559.847 8.7%
ACU Box 28106
Abilene, TX 79699
Pitney Bowes Inc. 604,290.551 8.1%
Retirement Plans' Trust
One Elmcroft Road
Stamford, CT 06926
State Street Bank & Trust Trustee 535,368.915 7.2%
Forest Oil Corporation Pension Trust
P.O. Box 1992
Boston, MA 02105
Rockefeller Family Fund Inc. 419,198.161 5.6%
1290 Avenue of the Americas
Room 3450
New York, NY 10104
High Yield Western Metal Industry 3,619,257.447 8.2%
c/o. Miller Anderson & Sherrerd
One Tower Bridge
West Conshohocken, PA 19428
Charles Schwab & Co. Inc. 2,940,769.994 6.6%
Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 2,496,587.533 5.6%
Pershing Division
P.O. Box 2052
Jersey City, NJ 07303
Carnegie Corp. of New York 2,278,192.463 5.2%
Treasurer's Dept.
437 Madison Avenue
New York, NY 10022
<PAGE>
Intermediate Morgan Stanley Group Inc. 971,817.298 29.5%
Duration 1221 Avenue of the Americas
New York, NY 10020
Jaffe Family Foundation 685,832.538 20.8%
30 Dunnigan Drive
Suffern, NY 109014101
Bankers Trust Company 609,879.037 18.5%
C/F The Los Angeles Hotel-Restaurant
Employer-Union Welfare Fund
300 S. Grand Street, 40th Floor
Los Angeles, CA 90071
Northumberland County Employees 580,132.805 17.6%
Retirement Fund
c/o Keystone Financial Trust OPS
P.O. Box 2450
Altoona, PA 16603
Retail, Wholesale & Department Store 184,829.217 5.6%
Union Local 1034 Severance Trust Fd.
1560 Old York Road
Abington, PA 19001
International Western Metal Industry 4,747,559.919 10.3%
Equity c/o Miller Anderson & Sherrerd
One Tower Bridge
West Conshohocken, PA 19428
Ministers & Missionaries 4,602,892.827 9.9%
Benefit Board of American
Baptist Churches
475 Riverside Drive, Rm 1700
New York, NY 101150049
Carnegie Corp. of New York 2,416,776.200 5.2%
Treasurers Dept.
437 Madison Avenue
New York, NY 10022
Puerto Rico Telephone Company 2,366,293.329 5.1%
Pension Plan
1500 Roosevelt Avenue
San Juan, PR 00936
Wellesley College 2,336,434.955 5.0%
139 Green Hall
Wellesley, MA 02181
<PAGE>
International Armco Master Pension Trust 3,615,143.956 23.2%
Fixed Income One Oxford Centre
301 Grant Street, 15th Floor
Pittsburgh, PA 15219
Northern Trust Co. as Custodian 2,525,886.349 16.2%
FBO: The J. Paul Getty Trust
P.O. Box 92956
Chicago, IL 60675
Corestates Bank 2,371,132.467 15.2%
Childrens Hospital Fixed Inc. Adv. Cust.
P.O. Box 7829
Philadelphia, PA 19101
Western Metal Industry Pension Fund 1,892,684.878 12.2%
c/o Miller Anderson & Sherrerd
One Tower Bridge
West Conshohocken, PA 19428
Chemical Bank as Custodian for 968,383.940 6.2%
Smithsonian Institution
4 New York Plaza, 4th Floor
New York, NY 10004
Limited Citibank, NA TTEE for Fieldcrest 1,629,048.262` 13.7%
Duration Cannon Hourly Retirement Plan
111 Wall Street, 20th Floor
Zone 1
New York, NY 10043
Bankers Trust Company 1,413,418.914 11.9%
C/F The Los Angeles Hotel-Restaurant
Employer-Union Welfare Fund
300 S. Grand Street, 40th Floor
Los Angeles, CA 90071
Northern California Bakery Drivers 1,068,136.685 9.0%
Security Fund c/o ATPA
642 Harrison Street
San Francisco, CA 94107
Paper Converters Local 286 Welfare Fund 712,018.425 6.0%
410-24 North Eighth Street
Philadelphia, PA 19123
Benedictine Abbey of Newark 648,812.655 5.4%
528 Martin Luther King Boulevard
Newark, NJ 07102
<PAGE>
Mid Cap The J. Paul Getty Trust 4,568,199.653 18.7%
Growth Mutual Funds Dept.
P.O. Box 92956
Chicago, IL 60675
New York State Common Retirement Fund 2,018,645.695 8.3%
State of New York
Albany, NY 12236
Mid Cap Georgetown Memorial Hospital 1,032,099.734 14.3%
Value Funded Depreciation Account
P.O. Drawer 1718
Administration
Georgetown, SC 29442
Fishnet & Company 983,606.557 13.7%
FBO The Hearst Foundation
c/o State Street Bank & Trust
P.O. Box 1992
Boston, MA 02105
The Chase Manhattan Bank 983,606.557 13.7%
FAO Hearst Foundation
Global Securities Services
3 Chase Metro Tech. Center
6th Floor
New York, NY 11245
Berklee College of Music 740,898.487 10.3%
Office of the Comptroller
1140 Boylston Street, Box 67
Boston, MA 02215
Charles Schwab & Co., Inc. 663,113.921 9.2%
Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104
Mortgage-Backed Inglis House Foundation 1,574,937.100 31.3%
Securities 2600 Belmont Avenue
Philadelphia, PA 19131
Northwestern University 1,146,023.399 22.8%
633 Clark Street
Evanston, IL 60208
John S. Donovan, Trustee for 822,279.900 16.4%
Cives Corporation Savings and
Profit-Sharing Retirement Trust
411 Rouse Lane
Roswell, GA 30076
Saxon & Co. 562,988.431 11.2%
FBO Local 641 Teamster Pension Fd.
A/C#42-43-202-2041416
P.O. Box 7780-1888
Philadelphia, PA 19182
The Paper Magic Group, Inc. 551,521.187 11.1%
401 Adams Avenue
Scranton, PA 185102025
<PAGE>
Multi-Asset- KPMG Peat Marwick 2,300,228.324 18.8%
Class Three Chestnut Ridge Road
Montvale, NJ 07645
The Library Company of Philadelphia 1,115,704.846 9.1%
No. 1 Common Trust Fund
1314 Locust Street
Philadelphia, PA 19107
Chase Manhattan Bank as Trustee for 870,504.995 7.1%
Milbank Tweed Hadley & McCloy Retire.
Partners Retirement
3 Chase Metrotech Center - 5th Floor
Brooklyn, NY 11245
Wachovia Bank of North Carolina 674,808.228 5.5%
The W-S Foundation &
The W-S Foundation Inc. Mastr. Cust.
& Sub-Acctg Services Agreement
301 North Main Street, MC: NC-31051
Winston-Salem, NC 27150
National Center for State Courts 664,817.335 5.4%
Attn: Christine K. Polk, Controller
300 Newport Avenue
Williamsburg, VA 231854147
Municipal Bost & Co 1,676,362.049 30.9%
FBO Union Electric Employees
P.O. Box 3198
Pittsburgh PA 152303
Robert A. Fox 555,070.614 10.2%
c/o R.A.F. Industries
165 Township Line Road
Suite 2100
Jenkintown, PA 19046
Jesse J. Thompson 553,452.048 10.2%
4500 Cameron Valley Parkway
Suite 450
Charlotte, NC 28211
Batrus & Co. 274,216.102 5.0%
c/o Bankers Trust Company
P.O. Box 9005
Church Street Station
New York, NY 10006
<PAGE>
PA Richard B. Worley 645,662.200 25.7%
Municipal c/o Miller Anderson & Sherrerd
One Tower Bridge
West Conshohocken, PA 19428
Kenneth B. Dunn & 469,441.144 18.7%
Pamela R. Dunn
323 Llandrillo Road
Bala Cynwyd, PA 190042336
R. & S. Roberts Jt WROs 389,736.796 15.5%
1500 Market Street, 35th Floor
Philadelphia, PA 19102
John J. F. Sherrerd 202,634.756 8.1%
833 Muirfield Road
Bryn Mawr, PA 19010
A. Morris Williams Jr. & 155,006.362 6.2%
Ruth W. Williams
120 Righters Mill Road
Gladwyne, PA 190351531
Small Cap The J. Paul Getty Trust 3,879,943.793 11.1%
Value c/o The Northern Trust Company
P.O. Box 92956
Chicago, IL 60675
The Northern Trust Company TTEE 3,296,954.234 9.4%
FBO Silicon Graphics
P.O. Box 92956
Chicago, IL 60675
Fishnet & Company 1,883,753.414 5.4%
FBO The Hearst Foundation
c/o State Street Bank & Trust Co.
P.O. Box 1992
Boston, MA 02105
American Red Cross Retirement System 1,785,163.967 5.1%
Bill Gatehouse Road
Falls Church, VA 22042
Value Charles Schwab & Co., Inc. 19,076,792.952 12.0%
Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
23
<PAGE>
Portfolio Transactions
MAS is authorized to select the brokers or dealers that will execute
the purchases and sales of investment securities for the Fund and to use its
best efforts to obtain the most favorable execution with respect to all
transactions for the Fund. MAS may, however, consistent with the best interests
of the Fund, also select brokers on the basis of the research, statistical, and
pricing services they provide to the Fund. Research services furnished by
brokers through whom the Fund effects securities transactions may be used by MAS
in managing all of its accounts, and not all such services may be used by MAS in
connection with the Fund. A commission paid to such brokers may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that any such commission is paid in compliance with the
Securities Exchange Act of 1934, as amended. It is not the Fund's practice to
allocate brokerage or principal business on the basis of sales of Fund shares
made through intermediary brokers or dealers. However, MAS may place portfolio
securities orders for Portfolios with qualified broker-dealers who recommend the
Fund or who act as agents in the purchase of shares of the Fund for their
clients.
MAS is an indirect, wholly-owned subsidiary of MS Group. MS Group also
is the parent of Morgan Stanley, a registered broker-dealer. Morgan Stanley,
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 Fund paid $453,834 in commissions to Morgan Stanley, which
constituted 2.49% of all brokerage commissions paid by the Fund for the year.
Expenses
All costs of solicitation (including the printing and mailing of this
proxy statement, meeting notice and form of proxy, as well as any necessary
supplementary solicitations) will be paid by MAS or its affiliates with respect
to Proposal I. The Fund will not pay for the expenses relating to the approval
of Proposal I. The Fund will pay such costs as they relate to Proposals II
through V. Persons holding shares as nominees will, upon request, be reimbursed
for their reasonable expenses in sending soliciting material to their
principals.
24
<PAGE>
In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made in person or by mail or telephone by representatives of
the Fund, MAS, its affiliates, or by Management Information Service Corporation
("MIS"), a solicitation firm located in Norwell, Massachusetts that has been
engaged to assist in proxy solicitation at an estimated cost of approximately
$30,000. The cost of MIS's services will be allocated between MAS and the Fund
in the same manner as other costs relating to the solicitation of proxies, as
described above. Likewise, the costs of any additional solicitation and of any
adjourned session will be borne by MAS or its affiliates if they relate to
Proposal I and by the Fund if they relate to Proposals II through V.
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 MAS, 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.
A list of Shareholders of the Fund entitled to be present and vote at
the Meeting will be available at the offices of the Fund, One Tower Bridge, West
Conshohocken, PA 19428 for inspection by any Shareholder during regular business
hours for ten days prior to the date of the Meeting.
Failure of a quorum to be present at the Meeting for the Fund may
necessitate adjournment and may subject the Fund to additional expense.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY, NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
March 31, 1997
John H. Grady, Jr.
Secretary
25
<PAGE>
ANNEX A
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of , 19 , 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 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
<PAGE>
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.
2
<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 , __________ 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.
3
<PAGE>
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: _______________________
4
<PAGE>
Schedule A
Portfolio Rate
Advisory Foreign Fixed Income .375%
Advisory Mortgage .375%
Balanced .450%
Balanced Plus .550%
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%
5
<PAGE>
ANNEX B
Other Registered Investment Companies or Portfolios Managed by MAS.
<TABLE>
<CAPTION>
Net Assets ($000) as of
Fund March 20, 1997 Annual Fee
- ---- ----------------------- ----------
<S> <C> <C>
Morgan Stanley Mid Cap Growth 0 0.75%
Fund (Morgan Stanley Fund)(a)
Morgan Stanley Value Fund 0 0.70%
(Morgan Stanley Fund)(a)
Fixed Income Portfolio (Morgan 8,240 0.40% on first $500 million
Stanley Universal Funds)(b) 0.35% on next $500 million
0.30% over $1 billion
High Yield Portfolio (Morgan 8,239 0.50% on first $500 million
Stanley Universal Funds)(b) 0.45% on next $500 million
0.40% over $1 billion
Core Equity Portfolio (Morgan 0 0.55% on first $500 million
Stanley Universal Funds)(b) 0.70% on next $500 million
0.65% over $1 billion
Value Portfolio (Morgan Stanley 3,228 0.55% on first $500 million
Universal Funds)(b) 0.70% on next $500 million
0.65% over $1 billion
Mid Cap Growth Portfolio 0 0.75% on first $500 million
(Morgan Stanley Universal Funds)(b) 0.70% on next $500 million
0.65% over $1 billion
Mid Cap Value Portfolio (Morgan 3,340 0.75% on first $500 million
Stanley Universal Funds)(b) 0.70% on next $500 million
0.65% over $1 billion
International Fixed Income 0 0.50% on first $500 million
Portfolio (Morgan Stanley 0.45% on next $500 million
Universal Funds)(b) 0.40% over $1 billion
Balanced Portfolio (Morgan 0 0.50% on first $500 million
Stanley Universal Funds)(b) 0.45% on next $500 million
0.40% over $1 billion
Multi-Asset-Class Portfolio 0 0.65% on first $500 million
(Morgan Stanley Universal Funds)(b) 0.60% on next $500 million
0.55% over $1 billion
Growth Fund (Allmerica Investment Trust) 592,920 .500% on first $50 million
.375% on next $50 million
.250% on next $400 million
.200% on next $350 million
.150% over $850 million
6
<PAGE>
MAS Value Portfolio (LPT 1,432 .625% on first $25 million
Variable Insurance Series Trust) .375% on next $75 million
.250% on next $400 million
.200% over $500 million
Equity Portfolio (Minerva Fund)(c) 69,854 .500%*
Fixed Income Portfolio (Republic 89,232 .375% on first $50 million
Portfolios) .250% on next $45 million
$300,000 on assets between
$95 and $150 million
.200% on assets between
$150 and $250 million
.150% over $250 million
Money Market Income (William 21,019 .375% on first $50 million
Penn Interest Income Fund) .250% on next $50 million
.200% over $100 million
New York Tax-Free Income 291 .375% on first $50 million
(William Penn Interest Income Fund) .250% on next $50 million
.200% over $100 million
Pennsylvania Tax-Free Income 129,629 .375% on first $50 million
(William Penn Interest Income .250% on next $50 million
Fund) .200% over $100 million
Quality Income (William Penn 30,261 .375% on first $50 million
Interest Income Fund) .250% on next $50 million
.200% over $100 million
U.S. Government Securities 37,242 .375% on first $50 million
Income (William Penn Interest .250% on next $50 million
Income Fund) .200% over $100 million
Diversified Equity Fund 22,884 0.625% on first $25 million
(The Monogram Funds) 0.375% over $25 million
Value Trust 16,929 0.40% on first $50 million
(NASL Series Trust) 0.30% on next $150 million
0.20% over $200 million
High Yield Trust 15,326 0.35% on first $50 million
(NASL Series Trust 0.30% on next $150 million
0.25% on next $300 million
0.20% over $500 million
Mid Cap Growth Portfolio 10,656 0.50% on first $250 million
(Style Select Series Inc.) 0.45% over $250 million
Asset Allocation Folio 200 8,061 0.625% on first $25 million
(Asset Allocation Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Asset Allocation Folio 300 21,588 0.625% on first $25 million
(Asset Allocation Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Asset Allocation Folio 400 24,985 0.625% on first $25 million
(Asset Allocation Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Asset Allocation Folio 500 9,356 0.625% on first $25 million
(Asset Allocation Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Citi Select VIP Portfolio 200 681 0.625% on first $25 million
(Variable Annuities Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Citi Select VIP Folio 300 1,146 0.625% on first $25 million
(Variable Annuities Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Citi Select VIP Folio 400 921 0.625% on first $25 million
(Variable Annuities Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
Citi Select VIP Folio 500 791 0.625% on first $25 million
(Variable Annuities Portfolios) 0.375% on next $75 million
0.250% on next $400 million
0.200% over $500 million
</TABLE>
(a) MAS has voluntarily agreed to waive its fee to the extent necessary so that
total operating expenses for the Class A, B, and C shares of the Morgan
Stanley Mid Cap Growth Fund and Morgan Stanley Value Fund of the Morgan
Stanley Fund do not exceed 1.40%, 2.15%, and 2.15% and 1.50%, 2.25%, and
2.25%, respectively.
(b) MAS has voluntarily agreed to waive its fee to the extent necessary so that
total operating expenses for the Fixed Income Portfolio, High Yield
Portfolio, Core Equity Portfolio, Value Portfolio, Mid Cap Growth
Portfolio, Mid Cap Value Portfolio, International Fixed Income Portfolio,
Balanced Portfolio, and Multi-Asset-Class Portfolio of the Morgan Stanley
Universal Funds do not exceed .70%, .80%, .85%, .85%, 1.05%, 1.05%, .80%,
.80% and .95%, respectively.
(c) Miller Anderson & Sherrerd, LLP is a participant in a joint venture which
serves as the investment adviser of the Minerva Fund. The Minerva Fund's
advisory fees are paid to the joint venture, thereby resulting in indirect
compensation to Miller Anderson & Sherrerd, LLP. Miller Anderson &
Sherrerd, LLP receives no further compensation from the Minerva Fund. The
investment adviser of the Minerva Fund has agreed to waive its fee to the
extent necessary so that total operating expenses do not exceed 1.00%.
7
<PAGE>
MAS Funds
Advisory Foreign Fixed Income Portfolio, Advisory Mortgage Portfolio, Balanced
Portfolio, Cash Reserves Portfolio, Emerging Markets Portfolio, Equity
Portfolio, Fixed Income Portfolio, Global Fixed Income Portfolio, High Yield
Portfolio, Intermediate Duration Portfolio, International Equity Portfolio,
International Fixed Income Portfolio, Limited Duration Portfolio, Mid Cap
Growth Portfolio, Mid Cap Value Portfolio, Mortgage-Backed-Securities
Portfolio, Multi-Asset-Class Portfolio, Municipal Portfolio, PA Municipal
Portfolio, Small Cap Value Portfolio, Special Purpose Fixed Income Portfolio,
and Value Portfolio Proxy for Special Meeting of Shareholders, May 1, 1997
The undersigned Shareholder(s) of the Portfolios of MAS Funds (the "Fund")
listed above, 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 May 1, 1997, 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 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 a new investment advisory agreement between the Fund and
Miller Anderson & Sherrerd, LLP, effective upon consummation of the
transactions described in the Proxy Statement attached hereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. To elect the following nominees to the Fund's Board of Trustees: Thomas L.
Bennett, Thomas P. Gerrity, Joseph P. Healey, Joseph J. Kearns, Vincent R.
McLean, and C. Oscar Morong, Jr.
[ ] For all of the Nominees
[ ] For all of the Nominees (except those indicated below)
[ ] Withhold authority to vote for all of the Nominees
-------------------------------------------
If you wish to withhold authority for any nominee, please mark
the box entitled "For all of the Nominees (except those indicated
below)" and write the nominee's name(s) on the line above.
III. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountant.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. Not applicable.
V. Not applicable.
<PAGE>
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 proposals described
above 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: __________ __, 1997 ------------------------------------
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.
<PAGE>
MAS Funds
Domestic Fixed Income Portfolio
Proxy for Special Meeting of Shareholders, May 1, 1997
The undersigned Shareholder(s) of the Domestic Fixed Income 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 May 1, 1997, 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 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 a new investment advisory agreement between the Fund and
Miller Anderson & Sherrerd, LLP, effective upon consummation of the
transactions described in the Proxy Statement attached hereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. To elect the following nominees to the Fund's Board of Trustees: Thomas L.
Bennett, Thomas P. Gerrity, Joseph P. Healey, Joseph J. Kearns, Vincent R.
McLean, and C. Oscar Morong, Jr.
[ ] For all of the Nominees
[ ] For all of the Nominees (except those indicated below)
[ ] Withhold authority to vote for all of the Nominees
-------------------------------------------
If you wish to withhold authority for any nominee, please mark
the box entitled "For all of the Nominees (except those indicated
below)" and write the nominee's name(s) on the line above.
III. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountant.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. To approve a change in the Domestic Fixed Income Portfolio's investment
objective to permit the Portfolio to invest in a broader range of
investment grade fixed income securities.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
V. 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 proposals described
above and will be voted in the appointed proxies' discretion upon such other
business as may properly come before the Meeting.
<PAGE>
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: __________ __, 1997 ------------------------------------
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.
<PAGE>
MAS Funds
Fixed Income Portfolio II
Proxy for Special Meeting of Shareholders, May 1, 1997
The undersigned Shareholder(s) of the Fixed Income Portfolio II 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 May 1, 1997, 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 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 a new investment advisory agreement between the Fund and
Miller Anderson & Sherrerd, LLP, effective upon consummation of the
transactions described in the Proxy Statement attached hereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. To elect the following nominees to the Fund's Board of Trustees: Thomas L.
Bennett, Thomas P. Gerrity, Joseph P. Healey, Joseph J. Kearns, Vincent R.
McLean, and C. Oscar Morong, Jr.
[ ] For all of the Nominees
[ ] For all of the Nominees (except those indicated below)
[ ] Withhold authority to vote for all of the Nominees
-------------------------------------------
If you wish to withhold authority for any nominee, please mark
the box entitled "For all of the Nominees (except those indicated
below)" and write the nominee's name(s) on the line above.
III. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountant.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. Not applicable.
V. To approve a change in the Fixed Income Portfolio II's investment objective
to permit the Portfolio to invest in a broader range of investment grade
fixed income securities.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 proposals described
above and will be voted in the appointed proxies' discretion upon such other
business as may properly come before the Meeting.
<PAGE>
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: __________ __, 1997 ------------------------------------
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.
