<PAGE> 1
1998
SEMI-ANNUAL REPORT
VALUE PORTFOLIO
[MAS FUND LOGO]
MAS FUNDS
<PAGE> 2
MAS Funds is pleased to present the Semi-Annual Report for the Value Portfolio
as of March 31, 1998. Please call your Miller Anderson & Sherrerd service
contact at 800-354-8185 with any questions regarding these Financial Statements.
TABLE OF CONTENTS
<TABLE>
<S> <C>
MAS Overview and Statement of Net Assets
Value Portfolio.......................... 1
Statement of Operations..................... 5
Statement of Changes in Net Assets.......... 6
Financial Highlights........................ 7
Notes to Financial Statements............... 9
</TABLE>
THIS SEMI-ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 3
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined valuation
process with the judgment gained through considerable experience in low P/E
investing, emphasizing large capitalization stocks from all market sectors. MAS
considers a company's intrinsic worth, projected earnings and other measures to
help determine if its current price makes it a strong candidate for value
investing. MAS also employs a formal sell discipline. Individual positions are
sold when price appreciation or earnings-per-share deterioration raises the
current P/E ratio.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
<TABLE>
<CAPTION>
MAS VALUE
---------------------------------------
INSTITUTIONAL# INVESTMENT< ADVISER@ S&P 500 INDEX
-------------------------------------------------------
<S> <C> <C> <C> <C>
SIX MONTHS 7.23% 7.13% 7.07% 17.23%
ONE YEAR 33.03 32.83 32.71 47.99
FIVE YEARS 21.82 21.74 21.72 22.40
TEN YEARS 18.78 18.74 18.73 18.94
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
< Represents an investment in the Investment Class which commenced operations
5/6/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
@ Represents an investment in the Adviser Class which commenced operations
7/17/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25% 12b-1
Fee applicable to the Adviser Class.
Total returns for the Investment Class of the Portfolio reflect expenses
reimbursed by the Adviser for certain periods. Without such reimbursements,
total returns would have been lower.
* Total returns are compared to the S&P 500 Index, an unmanaged market index.
Returns for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
COMMON STOCKS (88.8%)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
MARCH 31, 1998 SHARES (000)+
- ----------------------------------------------------
<S> <C> <C>
BANKS (8.5%)
Chase Manhattan Corp. 688,054 $ 92,801
Citicorp 309,380 43,932
Crestar Financial Corp. 364,202 21,533
First Union Corp. 1,408,603 79,938
Mellon Bank Corp. 635,396 40,348
NationsBank Corp. 386,600 28,198
Republic New York Corp. 297,701 39,706
- ----------------------------------------------------
GROUP TOTAL 346,456
- ----------------------------------------------------
BASIC RESOURCES (7.3%)
Cabot Oil & Gas Corp., Class
A 755,242 27,850
Dow Chemical Co. 372,475 36,223
E.I. DuPont de Nemours & Co. 506,768 34,460
Great Lakes Chemical Corp. 1,030,818 55,664
IMC Global, Inc. 955,494 36,369
Inland Steel Industries,
Inc. 995,300 27,495
Lubrizol Corp. 242,800 9,348
National Steel Corp, Class B 786,200 13,464
Rohm & Haas Co. 400,856 41,413
Westvaco Corp. 526,120 16,178
- ----------------------------------------------------
GROUP TOTAL 298,464
- ----------------------------------------------------
CONSUMER DURABLES (11.2%)
Chrysler Corp. 487,100 20,245
Dana Corp. 709,451 41,281
Ford Motor Co. 2,857,630 125,914
General Motors Corp. 1,628,809 109,843
Goodyear Tire & Rubber Co. 1,197,813 90,734
Owens Corning 1,441,941 51,820
Tupperware Corp. 748,976 19,942
- ----------------------------------------------------
GROUP TOTAL 459,779
- ----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
1
<PAGE> 4
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)+
-----------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (0.3%)
Standard Register Co. 411,011 $ 13,949
-----------------------------------------------------
ENERGY (6.7%)
Amoco Corp. 228,136 19,705
Atlantic Richfield Co. 507,656 39,914
British Petroleum plc ADR 498,442 42,897
* Nabors Industries, Inc. 370,900 8,786
Phillips Petroleum Co. 863,595 43,126
Repsol SA ADR 857,710 43,636
Ultramar Diamond Shamrock
Corp. 930,290 32,793
YPF SA ADR 1,330,938 45,252
----------------------------------------------------
GROUP TOTAL 276,109
----------------------------------------------------
FOOD, TOBACCO & OTHER (4.9%)
IBP, Inc. 972,603 21,823
Philip Morris Cos., Inc. 1,784,005 74,371
RJR Nabisco Holdings Corp. 1,925,090 60,279
Universal Foods Corp. 859,547 42,118
----------------------------------------------------
GROUP TOTAL 198,591
----------------------------------------------------
HEALTH CARE (5.5%)
Beckman Instruments, Inc. 1,034,399 59,284
Columbia/HCA Healthcare
Corp. 1,294,561 41,750
* Foundation Health Systems,
Inc. 1,603,284 44,190
Mallinckrodt, Inc. 794,651 31,389
* Maxicare Health Plans,
Inc. 816,960 8,987
* Vencor, Inc. 795,800 23,824
* Wellpoint Health Networks,
Inc. 215,500 14,546
----------------------------------------------------
GROUP TOTAL 223,970
----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (16.9%)
Aeroquip-Vickers, Inc. 1,351,176 78,115
* AMR Corp. 269,390 38,573
Case Corp. 1,509,926 102,864
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
----------------------------------------------------
<S> <C> <C>
Caterpillar, Inc. 478,094 $ 26,325
CSX Corp. 555,596 33,058
Cummins Engine Co., Inc. 1,414,386 77,968
Delta Air Lines, Inc. 310,800 36,752
Eaton Corp. 252,602 24,045
* FMC Corp. 401,565 31,523
Harnischfeger Industries,
Inc. 1,542,501 52,734
Kennametal, Inc. 772,563 40,656
Olsten Corp. 2,198,160 34,896
Parker Hannifin Corp. 906,237 46,445
Tecumseh Products Co., Class
A 648,176 34,839
TRW, Inc. 618,818 34,112
----------------------------------------------------
GROUP TOTAL 692,905
----------------------------------------------------
INSURANCE (9.7%)
Allstate Corp. 569,820 52,388
American General Corp. 574,955 37,192
Chubb Corp. 237,115 18,584
CIGNA Corp. 294,200 60,311
Everest Reinsurance
Holdings, Inc. 984,191 40,475
Hartford Financial Services
Group, Inc. 441,053 47,854
Loews Corp. 266,400 27,772
Old Republic International
Corp. 887,800 39,341
ReliaStar Financial Corp. 901,338 41,518
Transatlantic Holdings, Inc. 411,458 31,116
----------------------------------------------------
GROUP TOTAL 396,551
----------------------------------------------------
RETAIL (8.2%)
Dillard's, Inc., Class A 1,176,309 43,450
* Federated Department
Stores, Inc. 707,400 36,652
Russell Corp. 789,415 21,166
Sears, Roebuck & Co. 740,000 42,504
Springs Industries, Inc.,
Class A 645,018 35,436
* Toys 'R' Us, Inc. 2,471,551 74,301
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 5
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
----------------------------------------------------
<S> <C> <C>
V.F. Corp. 1,187,006 $ 62,392
* Woolworth Corp. 755,600 18,890
---------------------------------------------------
GROUP TOTAL 334,791
---------------------------------------------------
TECHNOLOGY (6.9%)
* Arrow Electronics, Inc. 957,200 25,904
Avnet, Inc. 311,700 17,942
International Business
Machines Corp. 962,244 99,953
* Quantum Corp. 872,700 18,599
* Seagate Technology, Inc. 955,752 24,133
* Stratus Computer, Inc. 1,327,400 58,489
Tektronix, Inc. 852,817 38,057
---------------------------------------------------
GROUP TOTAL 283,077
---------------------------------------------------
UTILITIES (2.7%)
Cinergy Corp. 411,607 15,229
DTE Energy Co. 666,540 26,203
Duke Energy Corp. 349,822 20,836
Entergy Corp. 681,545 20,276
GPU, Inc. 583,204 25,807
- -----------------------------------------------------
GROUP TOTAL 108,351
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,732,121) 3,632,993
- -----------------------------------------------------
CASH EQUIVALENTS (17.8%)
- -----------------------------------------------------
FACE
AMOUNT
(000)
----------
Short-term Investments
Held as Collateral for
Loaned Securities (8.4%) $ 345,139 345,139
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -----------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (7.2%)
CIT Group Holdings
5.51%, 5/22/98 $ 46,700 $ 46,336
Eiger Capital Corp.
5.56%, 4/16/98 50,000 49,884
General Electric Capital
Corp.
5.53%, 4/2/98 50,000 49,992
General Motors Acceptance
Corp.
5.54%, 4/15/98 50,000 49,892
Household Finance Corp.
5.54%, 4/3/98 50,000 49,985
IBM Credit Corp.
5.52%, 5/7/98 25,000 24,862
Trident Capital Finance Inc.
5.53%, 4/29/98 23,730 23,628
- -----------------------------------------------------
GROUP TOTAL 294,579
- -----------------------------------------------------
REPURCHASE AGREEMENT (2.2%)
Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased
at $89,838, collateralized by
various U.S. Government
Obligations, due 4/1/98-
11/15/99, valued at
$90,092 89,823 89,823
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $729,541) 729,541
- -----------------------------------------------------
TOTAL INVESTMENTS (106.6%) (Cost
$3,461,662) 4,362,534
- -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 6
STATEMENT OF NET ASSETS
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)+
- ----------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-6.6%)
Cash $ 2
Dividends Receivable 4,965
Interest Receivable 14
Receivable for Investments Sold 74,206
Receivable for Fund Shares Sold 5,960
Other Assets 116
Payable for Fund Shares Redeemed (4,980)
Payable for Investment Advisory Fees (4,727)
Payable for Administrative Fees (272)
Payable for Shareholder Servicing
Fee-Investment Class (4)
Payable for Distribution
Fee-Adviser Class (85)
Payable for Trustees' Deferred
Compensation Plan-Note F (98)
Collateral on Securities Loaned, at
Value (345,139)
Other Liabilities (181)
----------
(270,223)
- ----------------------------------------------------
NET ASSETS (100%) $4,092,311
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 185,149,408 outstanding
shares of beneficial interest
(unlimited authorization, no par
value) $3,632,965
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.62
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)+
====================================================
INVESTMENT CLASS
- ----------------------------------------------------
<S> <C>
NET ASSETS
Applicable to 1,487,756 outstanding
shares of beneficial interest
(unlimited
authorization, no par value) $ 29,166
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.60
- ----------------------------------------------------
ADVISER CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 21,957,690 outstanding
shares of beneficial interest
(unlimited
authorization, no par value) $ 430,180
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.59
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $3,047,427
Undistributed Net Investment Income
(Loss) 15,591
Undistributed Realized Net Gain (Loss) 128,421
Unrealized Appreciation (Depreciation)
on Investment Securities 900,872
- ----------------------------------------------------
NET ASSETS $4,092,311
- ----------------------------------------------------
+ See Note A1 to Financial Statements.
* Non-income producing security
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 7
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
----------
Six Months
Ended
March 31,
1998
(In Thousands)
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends $ 30,742
Interest 13,066
- -------------------------------------------------------------------------------------
Total Income 43,808
- -------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 9,386
Administrative Fee--Note C 1,501
Custodian Fee 125
Audit Fee 15
Legal Fee 34
Shareholder Servicing Fee--Investment Class shares--Note D 20
Distribution Fees--Adviser Class shares--Note D 387
Other Expenses 227
- -------------------------------------------------------------------------------------
Total Expenses 11,695
- -------------------------------------------------------------------------------------
Expense Offset--Note H (125)
- -------------------------------------------------------------------------------------
Net Expenses 11,570
- -------------------------------------------------------------------------------------
Net Investment Income (Loss) 32,238
- -------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 160,030
Futures (1,589)
- -------------------------------------------------------------------------------------
Realized Net Gain (Loss) 158,441
- -------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 88,938
Futures (3,948)
- -------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 84,990
- -------------------------------------------------------------------------------------
Net Gain (Loss) 243,431
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $275,669
=====================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
----------------------------------
Six Months
Year Ended Ended
September 30, March 31,
1997 1998
(In Thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 53,714 $ 32,238
Realized Net Gain (Loss) 375,983 158,441
Change in Unrealized Appreciation (Depreciation) 516,078 84,990
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 945,775 275,669
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A5
INSTITUTIONAL CLASS:
Net Investment Income (43,078) (32,644)
Realized Net Gain (135,541) (306,482)
INVESTMENT CLASS:
Net Investment Income (249) (249)
Realized Net Gain (851) (2,354)
ADVISER CLASS:
Net Investment Income (894) (2,196)
Realized Net Gain (1,156) (27,923)
- ------------------------------------------------------------------------------------------------------
Total Distributions (181,769) (371,848)
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:--Note I
INSTITUTIONAL CLASS:
Issued 1,576,439 484,886
In Lieu of Cash Distributions 156,287 289,688
Redeemed (769,989) (586,989)
INVESTMENT CLASS:
Issued 21,268 7,625
In Lieu of Cash Distributions 1,086 1,734
Redeemed (6,754) (9,072)
ADVISER CLASS:
Issued 172,033 217,434
In Lieu of Cash Distributions 1,868 26,194
Redeemed (11,849) (16,882)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 1,140,389 414,618
- ------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,904,395 318,439
NET ASSETS:
Beginning of Period 1,869,477 3,773,872
- ------------------------------------------------------------------------------------------------------
END OF PERIOD $3,773,872 $4,092,311
======================================================================================================
Undistributed net investment income (loss) included in
end of period net assets $ 18,442 $ 15,591
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period +
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
Six Months
Year Ended September 30, Ended
VALUE PORTFOLIO ------------------------------------------------------ March 31,
1993 1994 1995 1996 1997++ 1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.30 0.31 0.30 0.34 0.17
Net Realized and Unrealized Gain (Loss) on
Investments 1.92 0.59 3.34 2.20 5.75 1.08
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.22 0.89 3.65 2.50 6.09 1.25
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.31) (0.29) (0.31) (0.32) (0.30) (0.19)
Realized Net Gain (1.82) (0.73) (1.08) (1.46) (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.13) (1.02) (1.39) (1.78) (1.33) (2.00)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37 $ 19.62
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.67% 7.45% 32.58% 18.41% 41.25% 7.23%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $762,175 $981,337 $1,271,586 $1,844,740 $3,542,772 $3,632,965
Ratio of Expenses to Average Net Assets
(1) 0.59% 0.61% 0.60% 0.61% 0.62% 0.60%*
Ratio of Net Investment Income to Average
Net Assets 2.48% 2.40% 2.43% 2.07% 1.93% 1.74%*
Portfolio Turnover Rate 43% 54% 56% 53% 46% 17%
Average Commission Rate ### N/A N/A N/A $ 0.0572 $ 0.0577 $ 0.0551
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61% 0.59%*
- ---------------------------------------------------------------------------------------------------------------------------------
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose the average commission rate per
share it paid for security transactions on which commissions
were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 10
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Investment Class Adviser Class
------------------------------------------ ------------------------------------------
May 6, Year Six Months July 17, Year Six Months
1996** to Ended Ended 1996*** to Ended Ended
September 30, September 30, March 31, September 30, September 30, March 31,
VALUE PORTFOLIO 1996 1997++ 1998 1996 1997++ 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.97 $ 15.60 $ 20.36 $ 14.11 $ 15.61 $ 20.35
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.12 0.31 0.16 0.01 0.30 0.18
Net Realized and Unrealized
Gain (Loss) on
Investments 0.59 5.75 1.07 1.49 5.74 1.04
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.71 6.06 1.23 1.50 6.04 1.22
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.18) -- (0.27) (0.17)
Realized Net Gain -- (1.03) (1.81) -- (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (1.99) -- (1.30) (1.98)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.60 $ 20.36 $ 19.60 $ 15.61 $ 20.35 $ 19.59
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% 7.13% 10.63% 40.87% 7.07%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,244 $29,847 $29,166 $15,493 $201,253 $430,180
Ratio of Expenses to
Average Net Assets (2) 0.76%* 0.80% 0.75%* 0.86%* 0.90% 0.85%*
Ratio of Net Investment
Income to Average Net
Assets 2.05%* 1.75% 1.60%* 1.66%* 1.63% 1.50%*
Portfolio Turnover Rate 53% 46% 17% 53% 46% 17%
Average Commission Rate ### $0.0572 $0.0577 $0.0551 $0.0572 $ 0.0577 $ 0.0551
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION
ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to
Expense
Reimbursement/Waiver N/A 0.09% N/A N/A N/A N/A
Ratio Including Expense
Offsets 0.75%* 0.79% 0.74%* 0.85%* 0.89% 0.84%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
++ Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose the average commission rate per
share it paid for security transactions on which commissions
were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940
as an open-end investment company. At March 31, 1998, the Fund was comprised of
twenty-five active portfolios (each referred to as a "Portfolio"). The Fund may
offer up to three different classes of shares for certain
Portfolios -- Institutional Class shares, Investment Class shares and Advisor
Class shares.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution fees as described in Note D. The accompanying financial
statements and financial highlights are those of the Value Portfolio only. The
financial statements of the remaining Portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in
the preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results may differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds, including municipal
bonds, and other fixed income securities are valued using brokers'
quotations or on the basis of prices, provided by a pricing service, which
are based primarily on institutional size trading in similar groups of
securities. Mortgage-backed securities issued by certain government-related
organizations are valued using brokers' quotations which are based on a
matrix system which considers such factors as other security prices, yields
and maturities. Short term securities are valued using the amortized cost
method of valuation, which in the opinion of the Board of Trustees reflects
fair value. Securities for which no quotations are readily available
(including restricted securities) are valued at their fair value as
determined in good faith using methods approved by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to continue to
qualify as a regulated investment company and distribute all
- --------------------------------------------------------------------------------
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
of its taxable income. Accordingly, no provision for Federal income taxes
is required in the financial statements.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by the Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of the collateral is at least equal to the repurchase value in the
event of a default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolio may transfer its uninvested cash balances into a
joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreement. This joint repurchase agreement is
covered by the same collateral requirements as discussed above.
4. FUTURES: Futures contracts (secured by cash and securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as "variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are
closed, the difference between the opening value at the date of purchase
and the value at closing is recorded as realized gains or losses in the
Statement of Operations.
Futures contracts may be used by the Portfolio in order to hedge against
unfavorable changes in the value of securities or to attempt to realize
profits from the value of the underlying securities.
Futures contracts involve market risk in excess of the amounts recognized
in the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market.
5. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are declared and paid quarterly. Net realized capital gains
are distributed at least annually. The amount and character of income and
gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing book and tax treatments
for in-kind redemptions (Note G).
- --------------------------------------------------------------------------------
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Permanent book and tax differences relating to shareholder distributions
may result in reclassifications to undistributed net investment income
(loss), undistributed realized net gain (loss) and paid in capital.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the Financial Highlights
6. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which can not be directly attributed are
apportioned among the Portfolios on the basis of their relative net assets.
Income, expenses (other than class specific expenses) and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets.
B. INVESTMENT ADVISORY FEE: Under the terms of an Investment Advisory
Agreement, the Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the
"Adviser"), wholly owned by indirect subsidiaries of Morgan Stanley Dean Witter
& Co., for investment advisory services performed at a fee calculated by
applying a quarterly rate based on an annual percentage rate to the Portfolio's
average daily net assets for the quarter. For the six months ended March 31,
1998, the investment advisory fee of the Portfolio was 0.500%.
C. ADMINISTRATION FEE: MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the Agreement, MAS receives an annual fee
accrued daily and payable monthly, of 0.08% of the Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services.
D. DISTRIBUTOR: MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of Morgan Stanley Asset Management Holdings, Inc., is
the distributor for the Fund. MASDI is a limited-purpose broker/dealer whose
only function is to distribute open-end mutual fund shares. The Distributor
provides all classes of shares in the Portfolio with distribution services
pursuant to separate Distribution Plans (the "Plans") in accordance with Rule
12b-1 under the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support
distribution efforts and/or servicing accounts. The Adviser Class of shares
pays service and distribution fees of 0.25% of average net assets of the class
for such services under the 12b-1 plan adopted by the Fund. The Investment
Class of shares pays an annual shareholder servicing fee of 0.15% of average
net assets of the class. The shareholder servicing fee is not a distribution
fee and is used to support the expenses associated with servicing and
maintaining accounts. Both fees are paid directly to MASDI. The distribution
fee may be retained by MASDI if an Adviser Class shareholder invests directly
through MASDI. Usually the fees are paid by MASDI to external organizations
such as 401(k) alliance sponsors, discount brokers and bank trust departments
who distribute MAS Funds to the public.
E. TRUSTEES' FEES: The Fund pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person,
as defined under the Investment Company Act of 1940, as amended, participates
in the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of
the Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total trustees fee incurred, for the six months ended March 31, 1998,
by the Portfolio was $30,000.
Expenses for the six months ended March 31, 1998 include legal fees paid to
Morgan, Lewis & Bockius, LLP. A partner of that firm is secretary to the Fund.
F. PORTFOLIO INVESTMENT ACTIVITY:
1. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 1998,
the Portfolio had purchases and sales of investment securities other than
temporary cash investments were:
<TABLE>
<CAPTION>
(000)
--------------------
Purchases Sales
--------- --------
<S> <C>
$951,711 $572,098
</TABLE>
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION). At March
31, 1998, the Portfolio had cost, unrealized appreciation, unrealized
depreciation and net unrealized appreciation (depreciation) of securities
for Federal income tax purposes was:
<TABLE>
<CAPTION>
(000)
---------------------------------------------------
Cost Appreciation Depreciation Net
---------- ------------ ------------ --------
<S> <C> <C> <C>
$3,461,662 $944,345 $(43,473) $900,872
</TABLE>
G. IN-KIND TRANSACTIONS: For the six months ended March 31, 1998, the Value
Portfolio realized gains (losses) from in-kind redemptions of approximately
$27,131,000.
- --------------------------------------------------------------------------------
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
H. SECURITIES LENDING: The Portfolio loans securities to certain brokers and
receives security lending fees. Security lending fees are included as expense
offsets in the Statement of Operations. Fees greater than custodian expenses
are included in interest income. During the six months ended March 31, 1998,
the Value Portfolio had security lending fees totaling approximately $173,000.
Portfolios that lend securities receive securities issued or guaranteed by the
U.S. Government or its agencies, cash or letters of credit as collateral in an
amount at least equal to 100% of the current market value of loaned securities.
For the Value Portfolio, the value of loaned securities and related collateral
outstanding at March 31, 1998, was as follows:
<TABLE>
<CAPTION>
Value of Value
Loaned of
Securities Collateral
(000) (000)
---------- ----------
<S> <C>
$339,614 $345,139
</TABLE>
Custodian fees appearing in the Statement of Operations have been adjusted to
include expense offsets for custodian balance credits totaling approximately
$125,000, for the six months ended March 31, 1998.
I. OTHER: At March 31, 1998, the Fund had Portfolios with otherwise
unaffiliated record owners of 10% or greater. Investment activities of these
shareholders could have a material impact on these Portfolios. For the Value
Portfolio, the aggregate percentage of such owners was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
--------------------------------------
Institutional Investment Adviser
Class Class Class
------------- ---------- -------
<S> <C> <C>
15.2% 42.4% 83.4%
</TABLE>
Transactions in Capital Shares for the Value Portfolio, by class, were as
follows:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
September 30, March 31,
(In Thousands) 1997 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 90,227 25,797
In Lieu of Cash Distributions 9,563 16,349
Shares Redeemed (44,093) (30,892)
- ----------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 55,697 11,254
- ----------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 1,187 401
In Lieu of Cash Distributions 66 98
Shares Redeemed (380) (477)
- ----------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 873 22
- ----------------------------------------------------------------------
ADVISER CLASS:
Shares Issued 9,462 11,479
In Lieu of Cash Distributions 112 1,483
Shares Redeemed (676) (895)
- ----------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 8,898 12,067
- ----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 16
MAS FUNDS TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following is a list of the Trustees and the principal executive officers of
the Fund and a brief statement of their present positions and principal
occupations during the past five years:
THOMAS L. BENNETT, CFA*
Chairman of the Board of Trustees; Managing Director, Morgan Stanley; Portfolio
Manager and member of the Executive Committee, Miller Anderson & Sherrerd, LLP;
Director, MAS Fund Distribution, Inc.; Director, Morgan Stanley Universal Funds,
Inc.
THOMAS P. GERRITY
Trustee; Dean and Reliance Professor of Management and Private Enterprise,
Wharton School of Business, University of Pennsylvania; Director, Digital
Equipment Corporation; Director, Sun Company, Inc.; Director, Fannie Mae;
Director, Reliance Group Holdings; Director, CVS Corporation; Director, Union
Carbide Corporation.
JOSEPH P. HEALEY
Trustee; Headmaster, Haverford School; formerly Dean, Hobart College; Associate
Dean, William & Mary College.
JOSEPH J. KEARNS
Trustee; Investment Consultant, Chief Investment Officer, The J. Paul Getty
Trust; Director, Electro Rent Corporation; Trustee, Southern California Edison
Nuclear Decommissioning Trust; Director, The Ford Family Foundation.
VINCENT R. MCLEAN
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.
Trustee; Managing Director, Morong Capital Management; Director, Ministers and
Missionaries Benefit Board of American Baptist Churches, The Indonesia Fund, The
Landmark Funds; formerly Senior Vice President and Investment Manager for CREF,
TIAA-CREF Investment Management, Inc.
JAMES D. SCHMID
President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Funds, Miller
Anderson & Sherrerd, LLP; Director, MAS Fund Distribution, Inc.; Chairman of the
Board of Directors, The Minerva Fund, Inc.; formerly Vice President, The Chase
Manhattan Bank.
LORRAINE TRUTEN, CFA
Vice-President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Fund
Services, Miller Anderson & Sherrerd, LLP; President, MAS Fund Distribution,
Inc.
JOHN H. GRADY, JR.
Secretary, MAS Funds; Partner, Morgan, Lewis & Bockius, LLP; formerly Attorney,
Ropes & Gray.
RICHARD J. SHOCH
Assistant Secretary and Compliance Officer, MAS Funds; formerly Vice President
and Assistant Secretary, SEI Corporation.
JAMES A. GALLO
Treasurer, MAS Funds; Vice-President, Morgan Stanley; Head of Fund Accounting,
Miller Anderson & Sherrerd, LLP; formerly Vice President and Director of
Investment Accounting, PFPC, Inc.
*Trustee Bennett is deemed to be an "interested person" of the Fund as that term
is defined in the Investment Company Act of 1940, as amended.
- --------------------------------------------------------------------------------
14
<PAGE> 17
[MAS FUND LOGO]
MILLER
ANDERSON
& SHERRERD, LLP
One Tower Bridge
West Conshohocken, PA 19428-2899
Investment Advisor: (610) 940-5000
MAS Funds: (800) 354-8185
Printed in U.S.A.
This Report has been prepared
for shareholders and may be
distributed to others only if
preceded or accompanied by a
current prospectus.
