<PAGE>
As Filed With the Securities and Exchange Commission on October 27, 1998
File No. 002-89729
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT No. 1 [X]
MAS FUNDS
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(Exact Name of Registrant as Specified in Charter)
One Tower Bridge
West Conshohocken, PA 19428
-------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 354-818
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Ms. Lorraine Truten
One Tower Bridge
West Conshohocken, PA 19428-0868
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(Name and Address of Agent for Service)
Copies to:
John H. Grady, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
and
Richard J. Shoch, Esq.
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428
- --------------------------------------------------------------------------------
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
<PAGE>
MAS FUNDS
October 27, 1998
Cross Reference Sheet
<TABLE>
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ITEMS REQUIRED BY FORM N-14
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Part A. Information Required in Registration Statement Heading
Prospectus ------------------------------
-----------------------
Item 1. Beginning of Registration Cover Page of Registration Statement
Statement and outside Front Cover
Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Synopsis and Risk Factors Synopsis; Risks
Item 4. Information About the Transaction Synopsis; Reasons for the Reorganization;
Description of the Reorganization
Item 5. Information About the Registrant Prospectus Cover Page; Synopsis;
Description of the Reorganization; The
Portfolios' Investment Objectives and
Policies; Shareholder Rights; The MAS
Portfolios
Item 6. Information About the Company Prospectus Cover Page; Synopsis;
Being Acquired Description of the Reorganization; The
Portfolios' Investment Objectives and
Policies; Shareholder Rights; The MAS
Portfolios
Item 7. Voting Information Prospectus Cover Page; Notice of Special
Meeting of Shareholders; Synopsis; Voting
Matters
Item 8. Interest of Certain Persons and Voting Matters
Experts
Item 9. Additional Information Required Inapplicable
for Reoffering by Persons Deemed
to be Underwriters
</TABLE>
<PAGE>
<TABLE>
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<S> <C>
Part B. Information Required in a
Statement of Additional
Information
--------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information About Incorporated by Reference to the
the Registrant Registrant's Prospectus and SAI attached as
exhibits to this filing
Item 13. Additional Information About the Incorporated by Reference to the Company's
the Company Being Acquired Prospectus and SAI attached as exhibits to
this filing
Item 14. Financial Statements Financial Statements
Part C. Other Information
Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
</TABLE>
<PAGE>
MAS Funds
PA Municipal Portfolio
Dear Shareholder:
A Special Meeting of Shareholders of the PA Municipal Portfolio of the
MAS Funds (the "Fund") has been scheduled for November 20, 1998. If you are a
Shareholder of record as of the close of business on October 7, 1998, you are
entitled to vote at the meeting and at any adjournment of the meeting.
The attached Prospectus/Proxy Statement gives you information relating
to the proposal upon which you are being asked to vote. The Board of Trustees
recommends that you approve a reorganization whereby your Portfolio would
transfer all of its assets and all of its liabilities to the Fund's Municipal
Portfolio. Assuming approval by Shareholders, you would receive Institutional
Class Shares of the corresponding Municipal Portfolio equal in value to your PA
Municipal Portfolio shares. MAS Funds is an open-end management investment
company, or mutual fund. Miller Anderson & Sherrerd, LLP is investment adviser
to the fund and is wholly-owned by indirect subsidiaries of Morgan Stanley Dean
Witter & Co. ("MSDW") It is anticipated that the transaction will be tax free
for Shareholders, and the Board of Trustees expects it to result in operational
efficiencies. We encourage you to follow the Trustees' recommendation to approve
the proposal.
Your vote is important to us. Your immediate response will help prevent
the need for additional solicitations. Thank you for taking the time to consider
this important proposal and for your investment in the Portfolio.
Please mark, sign and date the enclosed Proxy Card and return it
promptly in the enclosed, postage-paid envelope.
Sincerely,
James D. Schmid
President
November 2, 1998
<PAGE>
INFORMATION ABOUT YOUR PROXY STATEMENT/PROSPECTUS
Q. Why am I receiving this Proxy Statement/Prospectus?
A. MAS Funds seeks your approval of a reorganization of the Fund's PA
Municipal Portfolio. The Board of Trustees recommends the
reorganization because it believes that it will result in a structure
that more appropriately serves the needs of shareholders.
Q. How will the reorganization work?
A. The PA Municipal Portfolio will transfer all of its assets and all
of its liabilities to the Municipal Portfolio in return for
Institutional Class Shares of the Municipal Portfolio having an
equivalent aggregate value. The net assets of the PA Municipal
Portfolio will be transferred at their current value as of the
effective time, and the shares provided in return will have a total
value of the transferred net assets, again as of the effective time.
Finally, the PA Municipal Portfolio will distribute the shares received
by it to its shareholders in a liquidating distribution. Shareholders
of the PA Municipal Portfolio will thus effectively be converted into
Institutional Class shareholders of the Municipal Portfolio. If the
Plan is carried out as proposed there will be no federal or state tax
consequences to either Portfolio or its shareholders.
Please refer to the proxy statement/prospectus for a detailed
explanation of the proposal and for a fuller description of the PA
Municipal and Municipal Portfolios.
Q. How will this affect my account?
A. Following the reorganization you will be a shareholder of the Municipal
Portfolio. The reorganization will not, however, affect the value of
your account. In addition, you can expect the same management expertise
and shareholder services that you currently receive. The investment
advisory fees of the Municipal and PA Municipal Portfolios are the
same.
Q. Why do I need to vote?
A. Your vote is needed to ensure that the proposal can be acted upon. Your
immediate response on the enclosed proxy card will help prevent the
need for any further solicitations for a shareholder vote. We encourage
all shareholders to participate.
Q. How does the Board of Trustees suggest that I vote?
A. After careful consideration, the Board of Trustees of MAS Funds
recommends that you vote "FOR" the item proposed on the enclosed proxy
card.
Q. Who is paying for expenses related to the shareholder meeting?
A. The PA Municipal Portfolio and the Municipal Portfolio are paying for
the expenses related to the shareholder meeting.
<PAGE>
Q. Where do I mail my proxy card?
A. You may use the enclosed postage-paid envelope or mail your proxy card
to:
MAS Funds
One Tower Bridge
West Conshohocken, PA 19428-2899
Attn: Michiko Ishimura
Q. Whom do I call if I have questions?
A. We will be happy to answer your questions about the proxy solicitation.
Please call us at (800) 354-8185 between 8:00 a.m. and 5:30 p.m.
Eastern Time, Monday through Friday.
<PAGE>
MAS Funds
c/o Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 20, 1998
Notice is hereby given that a Special Meeting of Shareholders of the
Pennsylvania Municipal Portfolio (the "PA Municipal Portfolio") of MAS Funds
will be held at the offices of Miller Anderson & Sherrerd, LLP, One Tower
Bridge, West Conshohocken, Pennsylvania on November 20, 1998 at 10:00 a.m.
(Eastern Time) for the purposes of considering the proposals set forth below.
Proposal 1: Approval of an Agreement and Plan of Reorganization and
Liquidation providing for (i) the purchase by the Municipal
Portfolio (the "Municipal Portfolio") of all of the assets and
assumption of all of the liabilities of the Pennsylvania
Municipal Portfolio (the "PA Municipal Portfolio") in exchange
for shares of the Municipal Portfolio; (ii) the distribution
of the Municipal Portfolio shares so received to shareholders
of the PA Municipal Portfolio; and (iii) the termination of
the PA Municipal Portfolio;
Proposal 2: The transaction of such other business as may properly be
brought before the meeting.
Shareholders of record as of the close of business on October 7, 1998 are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
Please execute and return promptly the accompanying proxy card. This is
important to ensure a quorum at the meeting. No postage is necessary if you use
the enclosed envelope. You may revoke your proxy at any time before the meeting
by submitting a written notice of revocation or a subsequently executed proxy or
by attending the meeting and voting in person.
John H. Grady, Jr.
Secretary
November 2, 1998
<PAGE>
PROXY STATEMENT/PROSPECTUS
October 28, 1998
Relating to the Acquisition of the Assets and Liabilities of
MAS FUNDS PA MUNICIPAL PORTFOLIO
by and in Exchange for Shares of
MAS Funds Municipal Portfolio
MAS Funds
One Tower Bridge
West Conshohocken, Pennsylvania 19428
1-800-354-8185
This Proxy Statement/Prospectus is furnished in connection with the solicitation
of proxies by the Board of Trustees ("Board") of the MAS Funds (the "Fund") in
connection with the Special Meeting of Shareholders (the "Meeting") of the PA
Municipal Portfolio to be held on November 20, 1998 at 10:00 a.m. (Eastern Time)
at the offices of Miller Anderson & Sherrerd, LLP, One Tower Bridge, West
Conshohocken, PA. At the meeting, shareholders of the PA Municipal Portfolio
will be asked to consider and approve a proposed Agreement and Plan of
Reorganization and Liquidation (the "Reorganization Agreement") by the Fund, on
behalf of its PA Municipal Portfolio and the Municipal Portfolio (together, the
"Portfolios") and the matters contemplated therein. A copy of the Reorganization
Agreement is attached as Exhibit A.
The Reorganization Agreement provides that all of the assets and all of the
liabilities of the PA Municipal Portfolio will be transferred to the Municipal
Portfolio in return for Institutional Class Shares of the Municipal Portfolio
having an equivalent aggregate value. The assets and liabilities of the PA
Municipal Portfolio will be transferred to the Municipal Portfolio at their
current value on the date of that transaction, and the shares provided in return
will have a total value equal to the total value of the transferred net assets,
again as of the transaction date. Finally, the PA Municipal Portfolio will
distribute the shares received by it to its shareholders in a liquidating
distribution.
MAS Funds is an open-end management investment company, or mutual fund. Miller
Anderson & Sherrerd, LLP ("Miller Anderson") provides investment advisory
services to the fund and is wholly-owned by indirect subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW").
This Proxy Statement/Prospectus sets forth the information that a shareholder of
the PA Municipal Portfolio should know before voting on the Reorganization, and
should be retained for future reference. The following additional relevant
documents have been filed with the Securities and Exchange Commission ("SEC")
and are incorporated by reference in whole or in part:
<PAGE>
(i) A Statement of Additional Information, dated October 28, 1998, relating
to this Proxy Statement/Prospectus and the Reorganization is
incorporated into this Proxy Statement/Prospectus in its entirety. A
copy of such Statement of Additional Information is available upon
request and without charge by writing to MAS Funds, One Tower Bridge,
West Conshohocken, Pennsylvania, 19428 or by calling toll-free
1-800-354-8185.
(ii) The prospectus for MAS Funds relating to the Institutional Class Shares
of the MAS Portfolios, dated January 31, 1998, as revised May 13, 1998
and supplemented October 9, 1998, contains a more detailed discussion
of the investment objectives, policies and risks of the Fund. It is
incorporated by reference into this Proxy Statement/Prospectus insofar
as it relates to the PA Municipal Portfolio and the Municipal Portfolio
and not to any other portfolio of the Fund described therein. A copy is
available upon request and without charge by calling 1-800-354-8185.
(iii) A Statement of Additional Information for the Fund, dated January 31,
1998, is incorporated by reference into this Proxy Statement/
Prospectus. A copy is available upon request and without charge by
calling 1-800-354-8185.
This Proxy Statement/Prospectus constitutes the proxy statement of the PA
Municipal Portfolio for the Meeting and is expected to be sent to shareholders
on or about November 2, 1998. Only shareholders of record as of the close of
business on October 7, 1998 (the "Record Date") are entitled to notice of, and
to vote at, the Meeting or any adjournment thereof.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Proxy Statement/Prospectus. Any
representation to the contrary is a criminal offense.
2
<PAGE>
TABLE OF CONTENTS
Page
----
SYNOPSIS......................................................................4
The Reorganization...................................................4
The Portfolios.......................................................4
RISKS.........................................................................6
REASONS FOR THE REORGANIZATION................................................6
INFORMATION RELATING TO THE REORGANIZATION....................................7
INFORMATION ABOUT THE PORTFOLIOS..............................................9
Investment Summary:..................................................9
Investment Adviser and Distributor..................................11
Shareholder Information.............................................12
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS..................................14
PORTFOLIO TRANSACTIONS.......................................................15
SHAREHOLDER RIGHTS...........................................................15
LEGAL MATTERS................................................................16
VOTING ON THE REORGANIZATION AGREEMENT.......................................16
OTHER BUSINESS...............................................................18
SHAREHOLDER INQUIRIES........................................................18
EXHIBIT A -- AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION.................................................................1
APPENDIX A....................................................................1
3
<PAGE>
SYNOPSIS
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus and is qualified by reference to the more complete
information contained herein and in the attached Exhibit A. Shareholders should
read this entire Proxy Statement/Prospectus carefully.
The Reorganization
The Board, including the Trustees who are not "interested persons" within the
meaning of Section 2(a)(19) of the Investment Company Act of 1940 ("1940 Act"),
has unanimously approved, subject to shareholder approval, the PA Municipal
Portfolio's entry into the Reorganization Agreement. A copy of the
Reorganization Agreement is attached hereto as Exhibit A. The Reorganization
Agreement provides that the assets and liabilities of the PA Municipal Portfolio
will be transferred to the Municipal Portfolio at their current value on the
date of that transaction, and that the shares provided in return will have a
total value equal to the total value of the transferred net assets, again as of
the transaction date. Finally, the Reorganization Agreement calls for the PA
Municipal Portfolio to distribute the shares received by it to its shareholders
in a liquidating distribution. Shareholders of the PA Municipal Portfolio will
thus effectively be converted into Institutional Class shareholders of the
Municipal Portfolio. There will be no federal or state tax consequences to
either Portfolio or its shareholders. No sales charge will be imposed in
connection with these transactions.
The Board, including the Trustees who are not "interested persons," has
concluded that the Reorgan ization would be in the best interests of both
Portfolios and their shareholders and that the interests of existing
shareholders in the Portfolios would not be diluted as a result of the
transaction contemplated by the Reorganization. The Board recommends that you
vote for the approval of the Reorganization Agreement.
The Portfolios
Investment Objectives and Policies. The investment objectives and policies of
the PA Municipal Portfolio are significantly similar to those of the
corresponding Municipal Portfolio. The PA Municipal Portfolio and the Municipal
Portfolio both invest in a diversified portfolio of fixed-income securities in
order to realize above-average total return over a market cycle of three to five
years, consistent with the conservation of capital and the realization of
current income which is exempt from federal income tax. The PA Municipal
Portfolio also seeks current income exempt from Pennsylvania personal income tax
by investing principally in Pennsylvania municipal securities. The Pennsylvania
municipal securities are also permissible investments for the Municipal
Portfolio.
Risks. The PA Municipal Portfolio and the Municipal Portfolio are both municipal
fixed-income portfolios and are, therefore, subject to similar risks. The market
values of the securities in which the Portfolios invest may vary due to changes
(or perceived changes) in credit quality, interest rate movements or market
developments generally. The PA Municipal Portfolio also is subject to the risks
associated with investment in the securities of a single state, including the
risks of possible tax changes or a deterioration in economic conditions and
differing levels of supply and demand for the municipal obligations of a single
state (i.e., Pennsylvania).
4
<PAGE>
Investment Adviser and Advisory Fees. Miller Anderson & Sherrerd, LLP ("Miller
Anderson") is a registered investment adviser and serves as investment adviser
to the Fund. Miller Anderson is wholly owned, indirectly, by subsidiaries of
Morgan Stanley Dean Witter & Co. Miller Anderson also serves as investment
adviser to employee benefit plans, endowment funds, foundations and other
institutional investors, and as investment adviser or sub-adviser to several
other investment companies. Miller Anderson had approximately $66 billion of
assets under management as of September 30, 1998 and is located at One Tower
Bridge, West Conshohocken, Pennsylvania 19428.
The following table compares the annual operating expenses, including advisory
fees, of the PA Municipal Portfolio and the Municipal Portfolio:
Annual Operating Expenses*
(As a percentage of average net assets)
PA Municipal Municipal
Portfolio Portfolio
---------------- ----------------
Advisory Fees (less waivers).... 0.281% 0.352%
12b-1 Fees...................... NONE NONE
Other Expenses.................. 0.219% 0.148%
Total Operating Expenses........ 0.500%** 0.500%**
- ------------
* Net of fee waivers and/or expense reimbursements.
** The "Total Operating Expenses" shown reflect voluntary waivers and/or
reimbursements by the Adviser to the extent necessary to keep Total
Operating Expenses actually deducted from portfolio assets from exceeding
0.50%. Absent such waivers and/or reimbursements by the Adviser, the "Total
Operating Expenses" would be 0.594% for PA Municipal Portfolio and 0.523%
for the Municipal Portfolio.
Example
This example is intended to help you compare the cost of investing in the PA
Municipal Portfolio with the cost of investing in the Municipal Portfolio.
The example assumes that you invest $1,000 in each Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example assumes that your investment has a 5% return each year and
that each Portfolio's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
PA Municipal Portfolio ..... $5 $16 $28 $63
Municipal Portfolio ........ $5 $16 $28 $63
Shareholder Information. The purchase and redemption procedures and exchange
privileges of the PA Municipal Portfolio are identical to those of the Municipal
Portfolio.
o Purchase and Redemption Procedures. Shares of each of the Portfolios are
offered at net asset value. You may purchase or redeem shares directly
through the Distributor or through participating dealers. The minimum
initial investment is $5,000,000 for Institutional Class Shares. The
minimum subsequent investment is $1,000 and there is no minimum for
automatic reinvestment of dividends and distributions. The Fund reserves
the right, in its sole discretion, to waive the minimum initial and
additional investment amounts.
o Exchange Privileges. Each Portfolio's Institutional Class Shares may be
exchanged for shares of the Fund's other portfolios offering Institutional
Class Shares based on the respective net asset values of the shares
involved. The officers of the Fund reserve the right not to accept an
exchange request when, in their opinion, the exchange privilege is being
used as a tool for market timing.
5
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Tax Consequences. The consummation of the Reorganization is subject to the
receipt of an opinion of counsel to the Adviser to the effect that the
Reorganization will qualify as a tax-free reorganization for federal income tax
purposes.
RISKS
The PA Municipal Portfolio and the Municipal Portfolio are both municipal
fixed-income portfolios and are, therefore, subject to similar risks. The market
values of the securities in which the Portfolios invest may vary due to changes
(or perceived changes) in credit quality, interest rate movements or market
developments generally. In addition, high yield securities are often issued by
smaller, less credit worthy companies or by highly leveraged firms, which are
generally less able than more established or less leveraged firms to make
scheduled payments of interest and principal.
The PA Municipal Portfolio may be subject to greater credit risks than would be
present in a nationally diversified portfolio of municipal securities, such as
in the Municipal Portfolio. The risks associated with investment in the
securities of a single state include possible tax changes or a deterioration in
economic conditions and differing levels of supply and demand for the municipal
obligations of a single state (i.e., Pennsylvania).
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed principally for two reasons. First, changes
in Pennsylvania tax laws have eliminated one of the benefits of investing in the
PA Municipal Portfolio. The personal property tax was recently eliminated. As a
result, the after-tax yield advantage of Pennsylvania tax exempt securities has
been reduced by approximately 0.25% for many of the PA Municipal Portfolio's
shareholders (0.25% represents the net amount after accounting for the impact of
federal taxes, while the gross amount of the reduction was 0.40%). In addition,
Miller Anderson has found that there is a limited supply of Pennsylvania
tax-exempt securities in the market sectors it finds most attractive.
In electing to approve and recommend the Reorganization Agreement to
shareholders of PA Municipal Portfolio, the Trustees determined that the
proposed transaction would benefit shareholders of both Portfolios. The Trustees
also determined that the interests of the Portfolios' existing shareholders
would not be diluted as a result of the merger.
In addition to considering the terms and conditions of the Reorganization
Agreement, the Trustees considered the following benefits of the proposed
transaction:
o Tax Law Changes: The Trustees considered the effect that Pennsylvania tax
law changes would have on the Portfolio's after tax total returns.
o Diversification: The Trustees considered the fact that the investors would
generally benefit from better diversification by investing in the Municipal
Portfolio.
6
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o Size; Efficiency: The Trustees considered the fact that the transaction
will result in PA Municipal Portfolio shareholders owning shares in a
larger Portfolio which may experience lower expenses (before any voluntary
waivers are applied).
o Objectives and Policies: The Trustees considered the compatibility of the
Portfolios' investment objectives and policies.
o Tax Treatment: The Trustees considered the fact that Morgan, Lewis &
Bockius believes that the Reorganization will be tax-free to the
Portfolios' shareholders.
The cost of the shareholders' meeting necessary in order to carry out the
transaction will be borne by the Portfolios. These costs, however, will be
relatively low due to the small number of PA Municipal Portfolio shareholders,
and the fact that Miller Anderson personnel will conduct the proxy solicitation,
rather than using a third-party solicitation/tabulation service provider.
Approximately one-half of the PA Municipal Portfolio's beneficial owners are
Miller Anderson employees and/or their immediate family members.
Based on the factors described above, the Trustees, including the Trustees who
are not "interested persons" of the Fund, within the meaning of Section 2(a)(19)
of the 1940 Act, determined that participation in the Reorganization is in the
best interests of each Portfolio's shareholders and will not result in a
dilution of interests of either Portfolio's shareholders. Accordingly, the
Trustees recommend that shareholders approve the Reorganization.
INFORMATION RELATING TO THE REORGANIZATION
Description of the Reorganization. The following summary is qualified in its
entirety by reference to the Reorganization Agreement found in Exhibit A.
The Reorganization Agreement provides that all of the assets and all of the
liabilities of the PA Municipal Portfolio will be transferred to the Municipal
Portfolio at the close of business on November 30, 1998 or such later date as is
agreed to by the parties (the "Effective Time"). In exchange for the transfer of
these assets, the Municipal Portfolio will simultaneously issue to the PA
Municipal Portfolio, at the Effective Time, a number of full and fractional
shares equal in value to the net asset value of the PA Municipal Portfolio
immediately prior to the Effective Time.
Following the transfer of assets and liabilities in exchange for Municipal
Portfolio shares, the PA Municipal Portfolio will distribute pro rata the
Municipal Portfolio shares received to its shareholders in a liquidating
distribution. Each shareholder of the PA Municipal Portfolio owning shares at
the Effective Time will receive Municipal Portfolio shares of equal value. Such
liquidation and distribution will be accomplished by the establishment of
accounts in the names of the PA Municipal Portfolio's shareholders on the share
records of the Municipal Portfolio's transfer agent. Each account will represent
the respective pro rata number of full and fractional shares of the Municipal
Portfolio due to the shareholders of the PA Municipal Portfolio. The Municipal
Portfolio does not issue share certificates to shareholders. Shares of the
Municipal Portfolio will have no
7
<PAGE>
preemptive or conversion rights. After the Reorganization, the PA Municipal
Portfolio will cease operations.
As provided in the Reorganization Agreement, the PA Municipal Portfolio will
bear its own expenses associated with the Reorganization. The Reorganization is
subject to a number of conditions, including the approval of the Reorganization
Agreement by shareholders of the PA Municipal Portfolio; the receipt of certain
legal opinions described in Sections 6, 7 and 8 of the Reorganization Agreement
(including an opinion of counsel that the Municipal Portfolios' shares issued in
accordance with the terms of the Reorganization Agreement will be validly
issued, fully paid and non-assessable); the receipt of certain certificates from
the parties concerning aggregate asset values; and the parties' performance in
all material respects of the agreements and undertakings in the Reorganization
Agreement. Assuming satisfaction of the conditions in the Reorganization
Agreement, the Effective Time of the Reorganization will be November 30, 1998
or such later date as is agreed to by the parties.
The Reorganization Agreement and the Reorganization may be abandoned without
penalty at any time prior to the Effective Time of the Reorganization by
resolution of the Board or at the discretion of any duly authorized officer of
the Fund if circumstances should develop that, in the opinion of the Fund's
Board or officers, make it inadvisable to proceed with the Reorganization.
Federal Income Taxes. The Reorganization is intended to qualify for federal
income tax purposes as a tax-free reorganization under Section 368(a)(1)(F) of
the Internal Revenue Code of 1986, as amended. If it qualifies, shareholders of
the Fund will not recognize gain or loss in the transaction; the tax basis of
the Municipal Portfolio shares received will be the same as the tax basis of the
PA Municipal Portfolio shares surrendered; and the holding period of the
Municipal Portfolio shares received will include the holding period of the PA
Municipal Portfolio shares surrendered, provided that the shares surrendered
were capital assets in the hands of the PA Municipal Portfolio shareholders at
the time of the transaction. As a condition to the closing of the
Reorganization, the Fund will receive an opinion from counsel to that effect.
The Adviser, on behalf of Fund, has not sought a tax ruling from the Internal
Revenue Service. The opinion of counsel is not binding on the Internal Revenue
Service and does not preclude the Internal Revenue Service from adopting a
contrary position. Shareholders should consult their own tax advisers concerning
the potential tax consequences of the Reorganization to them, including state
and local tax consequences. The Adviser does not anticipate that securities held
by the combined Portfolios will be sold in significant amounts to comply with
the Municipal Portfolio's investment policies or strategies.
Capitalization. The following table sets forth as of March 31, 1998 (i) the
capitalization of each Portfolio; and (ii) the pro forma combined capitalization
of the Municipal Portfolio assuming the Reorganization has been approved.
8
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Net Asset Value
Portfolio Net Assets Per Share Shares Outstanding
- ---------------------- ------------ -------------- ------------------
PA Municipal Portfolio $28,035,483 $11.85 2,365,547
Municipal Portfolio $ 90,031,878 $11.78 7,639,910
Pro Forma Municipal Portfolio $118,067,361 $11.78 10,019,514
INFORMATION ABOUT THE PORTFOLIOS
Investment Summary:
Investments, Risks and Performance
This section tells you about and compares for each Portfolio:
o Its investment goal
o Its main investment strategies
o The risks of investing in the Portfolio
There is more information about the Portfolios' investment practices in the
Statement of Additional Information ("SAI") which legally is a part of this
Proxy Statement/Prospectus. For details about how to get an SAI and other
reports and information, see the back cover of this Proxy Statement/Prospectus.
Investment Objectives and Policies
The investment objectives and policies of the PA Municipal Portfolio are
significantly similar to those of the corresponding Municipal Portfolio. The PA
Municipal Portfolio and the Municipal Portfolio both invest in a diversified
portfolio of fixed-income securities in order to realize above-average total
return over a market cycle of three to five years, consistent with the
conservation of capital and the realization of current income which is exempt
from federal income tax. The PA Municipal Portfolio also seeks current income
exempt from Pennsylvania personal income tax by concentrating its investments in
Pennsylvania municipal securities. The Pennsylvania municipal securities are
also permissible investments for the Municipal Portfolio.
The PA Municipal Portfolio generally invests at least 80% of its assets in
municipal securities and at least 65% of its assets in Pennsylvania municipal
securities. The Municipal Portfolio invests its assets so that at least 80% of
the income it distributes to shareholders will be exempt from federal regular
income tax. Among other things, the Municipal Portfolio may invest in municipal
securities of any state or states. As a result, the Municipal Portfolio may have
greater diversification, and be less exposed to financial or economic changes
affecting a single state, than PA Municipal Portfolio. On September 25, 1998
shareholders of the Municipal Portfolio voted to change its investment policy
from generally investing at least 80% of its assets in municipal securities to
investing its assets so that at least 80% of the income it distributes to
shareholders will be exempt from regular
9
<PAGE>
income tax. As a result of this change, the Municipal Portfolio may now seek
opportunities to invest in certain types of securities that have the potential
to enhance the Portfolio's total return without materially increasing the
portion of the Portfolio's income distribution that is subject to federal income
tax.
Each Portfolio generally invests at least 80% of its assets in investment grade
securities and may invest up to 20% in high yield securities. Each Portfolio
also may use derivatives as part of its investment strategy. Each Portfolio's
policy on the use of derivatives is identical.
Performance
The table below provides the average annual total return for each Portfolio for
selected time periods. Additional information about each Portfolio is contained
in the Statement of Additional Information relating to this Proxy
Statement/Prospectus, and in the Prospectus relating to the Portfolios. How the
Portfolios have performed in the past does not necessarily indicate how the
Portfolios will perform in the future.
Average Annual Total Return for Periods Ended September 30, 1998
PA Municipal Portfolio Municipal Portfolio
Institutional Class Institutional Class
1 Year 6.8% 7.2%
5 Year 6.5% 6.6%
Since
Inception* 8.0% 7.8%
* Both the PA Municipal Portfolio Institutional Class and the Municipal
Portfolio Institutional Class commenced operations October 1, 1992.
Portfolio Management. The Portfolios have the same portfolio managers, who share
primary responsibility for managing the Portfolios' assets. The portfolio
managers of each Portfolio are Kenneth B. Dunn, Steven K. Kreider and Scott F.
Richard.
Fees and Expenses of the Portfolios
Neither the PA Municipal Portfolio nor the Municipal Portfolio charge any sales
loads or similar fees when you purchase or redeem shares. The following table
compares the annual operating expenses, including advisory fees, of the PA
Municipal Portfolio and the Municipal Portfolio:
10
<PAGE>
Annual Operating Expenses*
(as a percentage of average net assets)
PA Municipal Municipal
Portfolio Portfolio
---------------- ----------------
Advisory Fees (less waivers).... 0.281%** 0.352%**
12b-1 Fees...................... NONE NONE
Other Expenses.................. 0.219% 0.148%
Total Operating Expenses........ 0.500% 0.500%
- ------------
* Net of fee waivers and/or expense reimbursements.
** The "Total Operating Expenses" shown reflect voluntary waivers and/or
reimbursements by the Adviser to the extent necessary to keep Total
Operating Expenses actually deducted from portfolio assets from exceeding
0.50%. Absent such waivers and/or reimbursements by the Adviser, the "Total
Operating Expenses" would be 0.594% for PA Municipal Portfolio and 0.523%
for the Municipal Portfolio.
Example
This example is intended to help you compare the cost of investing in the PA
Municipal Portfolio with the cost of investing in the Municipal Portfolio.
The example assumes that you invest $1,000 in each Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example assumes that your investment has a 5% return each year and
that each Portfolio's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ----------
PA Municipal Portfolio....... $5 $16 $28 $63
Municipal Portfolio.......... $5 $16 $28 $63
Investment Adviser and Distributor
Investment Adviser
The Fund's investment adviser, Miller Anderson & Sherrerd, LLP, is a
Pennsylvania limited liability partnership founded in 1969 and is located at One
Tower Bridge, West Conshohocken, Pennsylvania 19428. Miller Anderson is
wholly-owned, indirectly, by subsidiaries of Morgan Stanley Dean Witter & Co.
The Adviser provides investment services to employee benefit plans, endowment
funds, foundations and other institutional investors and, as of September 30,
1998, had approximately $66 billion in assets under management.
11
<PAGE>
Fund Administration
Miller Anderson serves as the Fund's Administrator under an Administration
Agreement dated November 18, 1993. Chase Global Funds Services Company
("CGFSC"), a subsidiary of The Chase Manhattan Bank ("Chase"), 73 Tremont
Street, Boston, MA 02108-3913, provides accounting and other services pursuant
to a subadministration agreement with Miller Anderson. CGFSC also serves as
transfer and dividend disbursing agent for Miller Anderson. Chase serves as
custodian for the Portfolios.
Distribution of Portfolio Shares
MAS Fund Distribution, Inc., a wholly-owned subsidiary of the Adviser, One Tower
Bridge, P.O. Box 868, West Conshohocken, Pennsylvania 19428-0868, serves as the
Fund's distributor under a Distribution Agreement with the Fund.
Shareholder Information
Pricing of Portfolio Shares. The Portfolios sell and redeem shares at Net Asset
Value ("NAV"). NAV per share is computed by dividing the total value of the
investments and other assets of the portfolio, less any liabilities, by the
total outstanding shares of the portfolio. Each Portfolio's NAV per share is
determined as of one hour after the close of the bond markets (normally 4:00
p.m. Eastern Time) on each day the Portfolio is open for business.
Purchase of Shares. Institutional Class Shares of the Portfolios are available
to clients of the Adviser with combined investments of $5,000,000 and
Shareholder Organizations who have a contractual arrangement with the Fund or
the Fund's Distributor, including institutions such as trusts, foundations or
broker-dealers purchasing for the accounts of others. Institutional Class Shares
are offered directly to investors without a sales commission at the net asset
value per share next determined after receipt of the purchase order. Purchase
orders may be transmitted by mail or by wire.
Additional investments of Institutional Class Shares at net asset value may be
made at any time (minimum additional investment is $1,000). Additional
investment orders may be transmitted by mail or by wire.
The Fund reserves the right, in its sole discretion, to suspend the offering of
Institutional Class Shares of any of its portfolios or to reject any purchase
orders when, in the judgment of management, such suspension or rejection is in
the best interest of the Fund. The Fund also reserves the right, in its sole
discretion, to waive the minimum initial and subsequent investment amounts.
Redemption of Shares. Shares of each Portfolio may be redeemed without charge by
mail or, if authorized, by telephone. The shares will be redeemed at the next
determined NAV. Any redemption proceeds may be more or less than the purchase
price of the shares, depending on, among other things, the market value of the
investment securities held by the Portfolio.
12
<PAGE>
If the Board determines that it would be detrimental to the best interests of
the remaining shareholders to make payment wholly or partly in cash, redemption
proceeds may be paid in whole or in part by a distribution in-kind of readily
marketable securities held by a portfolio in lieu of cash in conformity with
applicable rules of the SEC. Investors may incur brokerage charges on the sale
of portfolio securities received in such payments of redemptions.
Exchange Privileges. Each portfolio's Institutional Class Shares may be
exchanged without charge for shares of the Fund's other portfolios offering
Institutional Class Shares based on the respective NAV of the shares involved.
The officers of the Fund reserve the right not to accept any request for an
exchange when, in their opinion, the exchange privilege is being used as a tool
for market timing. The Fund reserves the right to modify or terminate the
exchange privilege at any time upon 60 days' notice to shareholders.
Dividends and Distributions. The PA Municipal and Municipal Portfolios normally
distribute substantially all of their net investment income on a monthly basis.
All dividends and distributions are automatically paid in additional shares of
the portfolio unless the shareholder elects otherwise. Such election must be
made in writing to the Fund. Undistributed net investment income is included in
the portfolio's net assets for the purpose of calculating net asset value per
share. Therefore, on the ex-dividend date, the net asset value per share
excludes the dividend (i.e., is reduced by the per share amount of the
dividend).
Taxes. Each of the Portfolios intends to pay "exempt-interest" dividends to
shareholders which are excluded from a shareholder's gross income for federal
income tax purposes. Exempt-interest dividends received by shareholders from
such portfolios may be subject to state and local taxes, although some states
allow a shareholder to exclude that portion of a portfolio's tax-exempt income
which is accountable to municipal securities issued within the shareholder's
state of residence.
Since each of the Portfolios may invest in private activity municipal
securities, investment in either of the Portfolios may not be an appropriate
investment for persons who are "substantial users" (or persons who are related
to "substantial users") of facilities financed through industrial development
bonds or private activity bonds.
To the extent, if any, that distributions paid to shareholders of either
Portfolio are derived from taxable interest or capital gains, such distributions
will be subject to federal income tax. Additionally, such distributions are not
eligible for the dividends received deduction for corporations.
Furthermore, the PA Municipal Portfolio invests at least 65% of its assets in
Pennsylvania municipal securities. The income of the PA Municipal Portfolio that
is derived from such securities and U.S. Governments will not be subject to the
Pennsylvania personal income tax or to the Philadelphia School District
investment net income tax. Distributions by the PA Municipal Portfolio to a
Pennsylvania resident that are attributable to most other sources may be subject
to the Pennsylvania personal income tax and (for residents of Philadelphia) to
the Philadelphia School District investment net income tax.
13
<PAGE>
Further discussion of tax considerations affecting shareholders of the
Portfolios is found in the Statement of Additional Information.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
You may obtain additional information about the PA Municipal Portfolio and
Municipal Portfolio in the following ways:
Prospectus. The Portfolios have a Prospectus that contains information about the
operation and management of the Portfolios. The current prospectus, dated
January 31, 1998, as revised May 13, 1998 and supplemented August 27, 1998, is
incorporated herein by reference and accompanies this Proxy
Statement/Prospectus.
Statement of Additional Information. In addition to the prospectus, the
Portfolios have a Statement of Additional Information ("SAI"), that contains
additional, more detailed information about the Portfolios. The current SAI,
dated January 31, 1998 is available upon request and without charge by calling
1-800-354-8185.
You may obtain the SAI, annual and semi-annual reports without charge by
contacting MAS at the toll-free number above.
Shareholder Reports. The financial statements of the Portfolios contained in the
MAS Funds Annual Report to shareholders for the fiscal year ended September 30,
1997 have been audited by PricewaterhouseCoopers LLP, its independent
accountants. These financial statements, as well as interim financial statements
dated as of March 31, 1998 and pro forma financial statements reflecting the
Municipal Portfolio after the Reorganization, are incorporated by reference into
this Proxy Statement/Prospectus insofar as they relate to the Portfolios, and
not to any other portfolios that are a part of MAS Funds and described therein.
A copy of MAS Fund's Annual Report, which includes discussions of the
performance of the Portfolios, and the most recent Semi-Annual Report succeeding
such Annual Report, may be obtained by writing MAS Funds at One Tower Bridge,
West Conshohocken, Pennsylvania 19428 or by calling 1-800-354-8185. In addition,
these discussions are reproduced in Appendix A to the Proxy
Statement/Prospectus.
Information about MAS Funds, including the prospectus, SAI, and shareholder
reports of each Portfolio, may be obtained from the SEC in any of the following
ways: (1) in person: you may review and copy documents in the SEC's Public
Reference Room in Washington D.C. (for information call 1-800-SEC-0330); (2)
on-line: you may retrieve information from the SEC's web site at
"http://www.sec.gov"; or (3) mail: you may request documents, upon payment of a
duplicating fee, by writing to SEC, Public Reference Section, Washington, D.C.
20549-6009. To aid you in obtaining this information, MAS Funds' 1940 Act
registration number is 811-3980.
14
<PAGE>
PORTFOLIO TRANSACTIONS
The Portfolios' policies regarding portfolio transactions are substantially
identical. Please refer to the Portfolios' prospectus for more information.
SHAREHOLDER RIGHTS
General. The Fund was established as a business trust under Pennsylvania law by
a Declaration of Trust dated February 15, 1984, as amended and restated as of
November 11, 1993. The Fund is also governed by its Bylaws and by applicable
Pennsylvania law.
Shares. The Fund is authorized to issue an unlimited number shares of beneficial
interest, without par value, from an unlimited number of series (portfolios) of
shares. Currently, the Fund consists of thirty-three portfolios and three
classes of shares, the Institutional Class, the Adviser Class and the Investment
Class shares. The three classes differ with respect to distribution costs, as
set forth in the Fund prospectus. The Portfolios currently have only
Institutional Class Shares outstanding. The shares of each MAS Portfolio have no
preference as to conversion, exchange, dividends, retirement or other features,
and have no preemptive rights.
Shareholder Voting. Shareholders of each Portfolio have identical voting rights.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares. The shares of the Fund have non-cumulative voting
rights, which means the holder of more than 50% of the shares voting for the
election of Trustees can elect 100% of the Trustees if the holder chooses to do
so. At shareholder meetings, the holders of 40% of a portfolio's shares entitled
to vote at the meeting generally constitute a quorum. Shareholders of a class
have exclusive voting rights regarding any matter submitted to shareholders that
relates solely to that class of shares, and separate voting rights on any other
matter submitted to shareholders in which the interests of the shareholders of
that class differ from the interests of holders of any other class.
Shareholder Meetings. Annual meetings of shareholders will not be held, but
special meetings of shareholders may be held under certain circumstances. A
meeting will be held to vote on the removal of a Trustee(s) of the Fund if
requested in writing by the holders of not less than 10% of the outstanding
shares of the Fund. The Fund will assist in shareholder communications in such
matters to the extent required by law.
Election and Term of Trustees. The Fund's affairs are supervised by the Trustees
under the laws governing business trusts in the Commonwealth of Pennsylvania.
Trustees of the Fund are elected by a majority vote of a quorum cast by written
ballot at the regular meeting of shareholders, if any, or at a special meeting
held for that purpose. Trustees hold office until their successors are duly
elected and qualified or until their death, removal or resignation. Shareholders
may remove a Trustee by vote of a majority of the votes entitled to be cast for
the election of directors and may elect a successor to fill a resulting vacancy.
A Trustee elected thereby serves for the balance of the term of the removed
Trustee.
15
<PAGE>
Shareholder Liability. The shareholders of the Fund generally are not personally
liable for the acts, omissions or obligations of the Trustees or the Fund.
Liability of Trustees. The Trustees shall not be personally liable for any
obligation of the Fund. The Fund will indemnify its Trustees and officers
against all liabilities and expenses except for liabilities arising from such
person's self-dealing, willful misconduct or recklessness.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. 20036, serves
as counsel to MAS Funds.
THE BOARD OF TRUSTEES OF MAS FUNDS RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE
REORGANIZATION AGREEMENT. ---
VOTING ON THE REORGANIZATION AGREEMENT
General Information. This Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of the Fund in
connection with the Meeting. It is expected that the solicitation of proxies
will be primarily by mail. Officers of the Fund and Miller Anderson may also
solicit proxies by telephone, telegraph, facsimile or in person. The cost of
solicitation will be borne, directly or indirectly, by the Portfolios.
Vote Required to Approve Reorganization Agreement. Shareholders of the MAS Funds
PA Municipal Portfolio on the Record Date will be entitled to one vote per share
then held and a fractional vote for each fractional share then held. Approval of
the Reorganization Agreement requires the affirmative vote of a majority of the
outstanding voting securities present at the meeting, in person or by proxy. The
vote of a "majority of the outstanding securities" means the vote of 67% or more
of the voting securities present, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or the vote of
more than 50% of the outstanding voting securities, whichever is less. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to the Secretary of the Fund a written notice of revocation or a
subsequently executed proxy, or by attending the Meeting and voting in person.
Shares represented by a properly executed proxy will be voted in accordance with
the instructions thereon, or if no specification is made, the shares will be
voted "FOR" the approval of the Reorganization Agreement. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons entitled to vote shares on a particular matter) will be
treated as shares that are present at the Meeting but which have not been voted.
For this reason, abstentions and broker non-votes will have the effect of a vote
against approval of the Reorganization Agreement.
16
<PAGE>
If sufficient votes in favor of the Proposal are not received by the time
scheduled for the meeting, the persons named as proxies may propose one or more
adjournments of the Meeting for a reasonable period of time to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the votes cast in person or by proxy at the session of the
Meeting to be adjourned. The persons named as proxies will vote for an
adjournment any proxies which they are entitled to vote in favor of the
Proposal. They will vote as against any proxies required to be voted against the
Proposal. The costs of any additional solicitation and of any adjourned session
will be borne by the Portfolios.
Outstanding Shares. Only shareholders of record on the Record Date are entitled
to notice of and to vote at the Meeting and any adjournment thereof. At the
close of business on the Record Date there were outstanding and entitled to
vote:
1,886,354.801 shares of the PA Municipal Portfolio of MAS Funds
Beneficial Owners
The following table sets forth certain information as of September 20, 1998,
concerning each person who owned, of record or beneficially, 5% or more of the
shares of the PA Municipal Portfolio and/or the Municipal Portfolio. Miller
Anderson may be deemed to "beneficially own" a substantial number of shares of
the Portfolios because its investment advisory relationships may permit it to
dispose of shares or advise Shareholders to dispose of shares. Miller Anderson
may be deemed to control the Portfolio(s) if it beneficially owns more than 25%
of the Portfolio(s) outstanding shares. Miller Anderson does not vote shares of
MAS Funds for any of its clients.
- --------------------------------------------------------------------------------
PA Municipal Portfolio
- --------------------------------------------------------------------------------
Percentage of Percentage of
PA Municipal Portfolio Municipal Portfolio
Shares Owned Before Shares Owned After
Name & Address Registration Registration
- --------------------------------------------------------------------------------
R.O.S. ROBERTS JT WRDS
Attn: Ralph J. Roberts
c/o Comcast Corporation
1500 Market Street, 35th Floor
Philadelphia, PA 19102 17.72% 3.79%
SOUTHWEST NATIONAL BANK OF PA
Trust and Financial Mgmt. Services
Attn: Michael J. Earle
P.O. Box 760
Greensburg, PA 15601-0760 15.14% 3.24%
JOHN J. F. SHERRERD
621 Carisbrooke Road
Bryn Mawr, PA 19090 11.06% 2.48%
SANFORD C. BERNSTEIN & CO. INC.
FBO the Cook Organization Ltd.
#79-042
Attention: Carmine Carrella
One North Lexington Avenue
White Plains, NY 10601 6.45% 1.38%
A. MORRIS WILLIAMS JR. &
RUTH W. WILLIAMS
120 Righters Mill Road
Gladwyne, PA 19035-1531 5.98% 1.28%
DANA DORTONE
219 Iven Avenue
St. Davids, PA 19087 5.30% 1.13%
MILLER PARTNERS, L.P.
115 Maple Hill Road
Gladwyne, PA 19035-1305 5.28% 1.13%
- --------------------------------------------------------------------------------
<PAGE>
Municipal Portfolio
- --------------------------------------------------------------------------------
Percentage of Percentage of
Shares Owned Before Shares Owned After
Name & Address Registration Registration
- --------------------------------------------------------------------------------
CHARLES SCHWAB & CO., INC.
Special Custody Account FBQ Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104 11.85% 9.31%
ROBERT A. FOX
c/o R.A.F. Industries
165 Township Line Road
Suite 2100
Jenkintown, PA 19046 8.65% 6.79%
WACHOVIA BANK, N.A.
TTEE U/A 6/20/95
w/Sylvia M. Thompson for Grantor
P.O. Box 3073
301 N. Main Street MC: NC31057
Winston-Salem, NC 27150 8.62% 6.77%
JR TRUEMAN QUALIFIED
SUBCHAPTER'S TRUST
Attn:; Barbara Trueman
5490 Hayden Road
Amlin, OH 43002 8.45% 6.63%
BALSA & CO. (REINVEST)
c/o Chase Manhattan Bank
P.O. Box 1768
Grand Central Station
New York, NY 10163-1768 6.29% 4.94%
BATRUS & CO.
c/o Bankers Trust Company
P.O. Box 9005
Church Street Station
New York, NY 10008 5.78% 4.54%
- --------------------------------------------------------------------------------
* Record and Beneficial Ownership.
+ Less than 1%.
17
<PAGE>
As of October 7, 1998 the Directors and officers of the Fund as a group owned
less than 1% of the total outstanding shares of each Portfolio.
Expenses. In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph, facsimile or personal
interview by representatives of Miller Anderson or the Fund. 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 the Portfolios. Persons holding shares as
nominees will, upon request, be reimbursed for their reasonable expenses in
sending soliciting material to their principals.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting. However,
if any other matters properly come before the Meeting, proxies which do not
contain specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named as proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed the Fund in writing at the address on the
cover page of this Proxy Statement/Prospectus or by telephoning 1-800-354-8185.
Shareholders who do not expect to be present at the meeting are requested to
date and sign the enclosed proxy and return it in the enclosed envelope. No
postage is required if mailed in the United States.
The Order of the Board of Trustees,
Secretary
MAS Funds
18
<PAGE>
APPENDIX A
MAS Funds
Statement of Net Assets (Unaudited)
MAS FUNDS/FIXED INCOME
Municipal Portfolio
The Municipal Portfolio invests in long- and short-term debt obligations issued
by state and local governments or their agencies and in other fixed-income
securities. The Portfolio is actively managed by Miller Anderson & Sherrerd's
municipal investment management team, which manages the Portfolio's
interest-rate exposure and composition by making strategic shifts in portfolio
structure and conducting extensive valuation analysis of individual sectors and
securities. The goal of MAS's fixed-income management for taxable investors is
to provide a positive after-tax total return, to provide protection against
deflation and to reduce the risk of an investor's overall investment portfolio,
particularly through reduction of exposure to changes in tax rates.
MAS's research shows that there have been many times when taxable investors
would have been better served by investments in taxable bonds. Thus, MAS views
the municipal market as just one of many alternatives for helping clients
achieve their goal of maximizing after-tax returns within a given level of risk.
Sector commitments within the Portfolio are varied based on the prospects for
the municipal market relative to the taxable markets. Normally, at least 80% of
the Portfolio will be invested in municipal securities.
MAS's investment process consists of two major stages. First, MAS establishes a
forecast for inflation and economic activity in order to make judgments about
the most desirable duration and maturity targets for the portfolio. Next, MAS
examines the relative value offered by different bond sectors and determines the
mix of securities that will provide the most attractive performance. Security
selection involves adjustment of promised yields for tax considerations, credit
risk, and call risk. Capital gains are realized only when the prospective
returns of bonds purchased with the proceeds from the sales will offset the tax
on the gains and still provide excess value to the overall portfolio.
The Portfolio's performance over the past year was heavily influenced by changes
in the shape of the municipal yield curve. The 10-year portion of the curve had
the best performance, with yields falling about 45 basis points, compared to
about 20 basis points for the 20-year portion of the curve and 30 basis points
for the 5-year portion of the curve. As a result, the Portfolio's positions in
15 to 20-year non-callable zero-coupon municipal bonds performed well relative
to 5-year securities, but lagged duration-equivalent 10-year bonds. In addition,
strategic management of interest-rate risk made a positive impact on
performance. Interest-rate exposure was greater than the index when interest
rates fell in the first fiscal quarter. Interest rate exposure was reduced to
neutral in the late Spring. Management of municipal market exposure also boosted
performance. Futures were used to reduce the Portfolio's sensitivity to
<PAGE>
municipal yield changes during the third fiscal quarter. These futures were
liquidated after the municipal market cheapened due to a heavy supply of new
issues in the final fiscal quarter. Finally, a small allocation to high-yield,
taxable corporate bonds, the best-performing sector of the fixed-income market
over the period, also added to the Portfolio's return.
At fiscal year-end, MAS believes that the recent cheapening of municipal bonds
has returned a fair valuation to the municipal markets. Accordingly, the
Portfolio's exposure to municipal securities has been increased by removing
futures hedges. Since MAS perceives the municipal yield curve to be relatively
flat, i.e., investors are not being adequately compensated for purchasing
long-term municipals, recent purchases have been concentrated in
shorter-maturity issues.
MAS views the municipal market as just one of many alternatives
for helping clients achieve their goal of maximizing after-tax
returns within a given level of risk.
<PAGE>
MUNICIPAL
Growth of a $1 Million Investment
Since Inception
<TABLE>
<CAPTION>
Fiscal years
ending September 30 LEHMAN 5 YEAR MUNICIPAL MAS FUNDS MUNICIPAL LEHMAN 10 YEAR MUNICIPAL
Dollars (000)
<S> <C> <C> <C>
*10/1/92 1000 1000 1000
12/31/92 1014 1016 1020
3/31/93 1041 1061 1059
6/30/93 1065 1103 1094
'93 9/30/93 1090 1142 1134
12/31/93 1103 1162 1150
3/31/94 1072 1077 1089
6/30/94 1083 1083 1105
'94 9/30/94 1094 1089 1113
12/31/94 1089 1189 1095
3/31/95 1133 1186 1171
6/30/95 1163 1180 1202
'95 9/30/95 1191 1235 1244
12/31/95 1216 1306 1283
3/31/96 1216 1300 1275
6/30/96 1222 1317 1279
'96 9/30/96 1243 1351 1304
12/31/96 1267 1379 1341
3/31/97 1267 1383 1341
6/30/97 1298 1426 1385
'97 9/30/97 1325 1466 1428
</TABLE>
<PAGE>
AVERAGE ANNUAL RETURNS
Ended 9/30/97*
<TABLE>
<CAPTION>
MAS LEHMAN 5 YEAR LEHMAN 10 YEAR
MUNICIPAL MUNICIPAL INDEX MUNICIPAL INDEX
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ONE YEAR 8.47% 6.67% 9.50%
SINCE INCEPTION 7.95% 5.80% 7.39%
</TABLE>
MAS Funds returns are net of all fees. Returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
The Adviser has voluntarily agreed to waive its advisory fees and reimburse
certain expenses to the extent necessary to keep total annual operating expenses
for the Municipal Portfolio from exceeding 0.50% of average daily net assets.
Returns presented include the effects of these waivers and reimbursements. If
such waivers and reimbursements had not been made, the actual returns would have
been lower.
The Portfolio was initially focused on long-term securities. On April 15, 1996,
the Portfolio's investment policies were changed by shareholder vote to
emphasize fixed-income securities of shorter duration. Therefore, it is
reasonable to expect that its performance pattern will be altered.
* The Municipal Portfolio commenced operations on 10/1/92. All returns are
compared to the Lehman 5 Year Municipal Index and the Lehman 10 Year
Municipal Index, both unmanaged market indices.
<PAGE>
MAS FUNDS/FIXED INCOME
PA Municipal Portfolio
The PA Municipal Portfolio invests in long- and short-term municipal debt
securities exempt from Pennsylvania income tax and in other fixed-income
securities when appropriate. The Portfolio is actively managed by Miller
Anderson & Sherrerd's municipal investment management team, which manages the
Portfolio's interest-rate exposure and composition by making strategic shifts in
portfolio structure and conducting extensive valuation analysis of individual
sectors and securities. The goal of MAS's fixed-income management for taxable
investors is to provide investors with a positive after-tax total return, to
provide protection against deflation, and to reduce the risk of an investor's
overall investment portfolio, particularly through reduction of exposure to
changes in tax rates.
MAS's research shows that there have been many times when taxable investors
would have been better served by investments in taxable bonds. Thus, MAS views
the municipal market as just one of many alternatives for helping clients
achieve their goal of maximizing after-tax returns within a given level of risk.
Sector commitments within the Portfolio are varied based on prospects for the
municipal market relative to the taxable markets. Normally, at least 80% of the
Portfolio will be invested in municipal securities, with at least 65% invested
in Pennsylvania municipal securities.
MAS's investment process consists of two major stages. First, MAS establishes a
forecast for inflation and economic activity and makes judgments about the most
desirable duration and maturity targets for the Portfolio. Next, relative value
<PAGE>
offered by different bond sectors is examined to determine the mix of securities
that will provide the most attractive performance. Security selection involves
adjustment of promised yields for tax considerations, credit risk, and call
risk. Capital gains are realized only when the prospective returns of bonds
purchased with the proceeds from the sales will offset the tax on the gains and
still provide excess value to the overall portfolio.
The Portfolio's performance over the past year was heavily influenced by changes
in the shape of the municipal yield curve. The 10-year portion of the curve had
the best performance, with yields falling about 45 basis points, compared to
about 20 basis points for the 20-year portion of the curve and 30 basis points
for the 5-year portion of the curve. As a result, the Portfolio's positions in
15 to 20-year non-callable zero-coupon municipal bonds performed well relative
to 5-year securities, but lagged duration-equivalent 10-year bonds. In addition,
strategic management of interest-rate risk made a positive impact on
performance. Interest-rate exposure was greater than the index when interest
rates fell in the first fiscal quarter. Interest rate exposure was reduced to
neutral in the late Spring. Management of municipal market exposure also boosted
performance. Futures were used to reduce the Portfolio's sensitivity to
municipal yield changes during the third fiscal quarter. These futures were
liquidated after the municipal market cheapened due to a heavy supply of new
issues in the final fiscal quarter. Finally, a small allocation to high-yield,
taxable corporate bonds, the best-performing sector of the fixed-income market
over the period, also added to the Portfolio's return.
<PAGE>
At fiscal year-end, MAS believes that the recent cheapening of municipal bonds
has returned a fair valuation to the municipal markets. Accordingly, the
Portfolio's exposure to municipal securities has been increased by removing
futures hedges. Since MAS perceives the municipal yield curve to be relatively
flat, i.e., investors are not being adequately compensated for purchasing
long-term municipals, recent purchases have been concentrated in
shorter-maturity issues.
PA MUNICIPAL
Growth of a $1 Million Investment
Since Inception
<TABLE>
<CAPTION>
Fiscal years
ending September 30 LEHMAN 5 YEAR MUNICIPAL MAS FUNDS PA MUNICIPAL LEHMAN 10 YEAR MUNICIPAL
Dollars (000)
<S> <C> <C> <C>
*10/1/92 1000 1000 1000
12/31/92 1014 1032 1020
3/31/93 1041 1075 1059
6/30/93 1065 1122 1094
'93 9/30/93 1090 1158 1134
12/31/93 1103 1185 1150
3/31/94 1072 1095 1089
6/30/94 1083 1099 1105
'94 9/30/94 1094 1111 1113
12/31/94 1089 1104 1095
3/31/95 1133 1202 1171
6/30/95 1163 1203 1202
'95 9/30/95 1191 1264 1244
12/31/95 1216 1337 1283
3/31/96 1216 1328 1275
6/30/96 1222 1350 1279
'96 9/30/96 1243 1378 1304
12/31/96 1267 1407 1341
3/31/97 1267 1409 1341
6/30/97 1298 1450 1385
'97 9/30/97 1325 1488 1428
</TABLE>
<PAGE>
AVERAGE ANNUAL RETURNS
Ended 9/30/97*
<TABLE>
<CAPTION>
MAS LEHMAN 5 YEAR LEHMAN 10 YEAR
INDEX PA MUNICIPAL MUNICIPAL INDEX MUNICIPAL
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ONE YEAR 8.01% 6.67% 9.50%
SINCE INCEPTION 8.28% 5.80% 7.39%
</TABLE>
MAS Funds returns are net of all fees. Returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
The Adviser has voluntarily agreed to waive its advisory fees and reimburse
certain expenses to the extent necessary to keep total annual operating expenses
for the PA Municipal Portfolio from exceeding 0.50% of average daily net assets.
Returns presented include the effects of these waivers and reimbursements. If
such waivers and reimbursements had not been made, the actual returns would have
been lower.
The Portfolio was initially focused on long-term securities. On April 15, 1996,
the Portfolio's investment policies were changed by shareholder vote to
emphasize fixed-income securities of shorter duration. Therefore, it is
reasonable to expect that its performance pattern will be altered.
* The PA Municipal Portfolio commenced operations on 10/1/92. All returns are
compared to the Lehman 5 Year Municipal Index and the Lehman 10 Year
Municipal Index, both unmanaged market indices.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN
OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of
___________________ (the "Agreement"), by and between the MAS Funds Municipal
Portfolio (the "Acquiring Fund") and the MAS Funds PA Municipal Portfolio (the
"Acquired Fund").
WHEREAS, MAS Funds ("MAS") was organized under Pennsylvania law as a
business trust under a Declaration of Trust dated February 15, 1984, as amended
and restated; MAS Funds is an open-end management investment company registered
under the 1940 Act; and the Acquiring and Acquired Funds are duly organized and
validly existing series of MAS Funds;
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the parties hereto agree to effect (i) the transfer of all of the
assets of the Acquired Fund solely in exchange for (a) the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund and (b) beneficial
shares of the Acquiring Fund (Institutional Class Shares) followed by the
distribution, at the Effective Time (as defined in Section 9 of this Agreement),
of such beneficial shares of the Acquiring Fund to the holders of beneficial
shares of the Acquired Fund on the terms and conditions hereinafter set forth in
liquidation of the Acquired Fund. For convenience: the beneficial shares of the
Acquiring Fund that are given in exchange for the assets of the Acquired Fund
are referred to hereinafter as the "Acquiring Fund Shares"; and the beneficial
shares of the Acquired Fund that are held by the holders of such shares at the
Effective Time are referred to hereinafter as the "Acquired Fund Shares." The
parties hereto covenant and agree as follows:
1. Plan of Reorganization. At the Effective Time, the Acquired Fund
will assign, deliver and otherwise transfer all of its assets and good and
marketable title thereto, free and clear of all liens, encumbrances and adverse
claims except as provided in this Agreement, and assign all of its liabilities
as are set forth in a statement of assets and liabilities, to be prepared as of
the Effective Time (the "Statement of Assets and Liabilities") to the Acquiring
Fund and the Acquiring Fund shall acquire all such assets, and shall assume all
such liabilities of the Acquired Fund, in exchange for delivery to the Acquired
Fund by the Acquiring Fund of a number of its Acquiring Fund Shares (both full
and fractional) equivalent in value to the Acquired Fund Shares of the Acquired
Fund outstanding immediately prior to the Effective Time. The assets and stated
liabilities of the Acquired Fund, as set forth in a statement of assets and
liabilities shall be exclusively assigned to and assumed by the Acquiring Fund.
All debts, liabilities, obligations and duties of the Acquired Fund, to the
extent that they exist at or after the Effective Time and are stated in a
statement of assets and liabilities, shall after the Effective Time attach to
the Acquiring Fund and may be enforced against the Acquiring Fund to the same
extent as if the same had been incurred by the Acquiring Fund.
2. Transfer of Assets. The assets of the Acquired Fund to be acquired
by the Acquiring Fund shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable) as set forth in a statement of assets and liabilities, as well as
any claims or rights of action or rights to register shares under applicable
securities laws, any books or
<PAGE>
records of such Acquired Fund and other property owned by such Acquired Fund at
the Effective Time.
3. Liquidation and Dissolution of the Acquired Fund. At the Effective
Time, the Acquired Fund will liquidate and the Acquiring Fund Shares (both full
and fractional) received by the Acquired Fund will be distributed to the
shareholders of record of the Acquired Fund as of the Effective Time in exchange
for Acquired Fund Shares and in complete liquidation of the Acquired Fund. Each
shareholder of the Acquired Fund will receive a number of Acquiring Fund Shares
equal in value to the Acquired Fund Shares held by that shareholder. Such
liquidation and distribution will be accompanied by the establishment of an open
account on the share records of the Acquiring Fund in the name of each
shareholder of record of the Acquired Fund and representing the respective
number of Acquiring Fund Shares due such shareholder. As soon as practicable
after the Effective Time, but not later than November 30, 1998, MAS shall take
all steps as shall be necessary and proper to effect a complete termination of
the Acquired Fund.
4. Representations and Warranties of the Acquiring Fund. The Acquiring
Fund represents and warrants to the Acquired Fund as follows:
(a) Shares to be Issued upon Reorganization. The Acquiring Fund
Shares to be issued in connection with the Reorganization have been
duly authorized and upon consummation of the Reorganization will be
validly issued, fully paid and nonassessable.
(b) Liabilities. There are no liabilities of the Acquiring Fund,
whether or not determined or determinable, other than liabilities
disclosed or provided for in the Acquiring Fund's statement of
assets and liabilities, if any, and liabilities incurred in the
ordinary course of business prior to the Effective Time or
otherwise previously disclosed to the Acquired Fund, none of which
has been materially adverse to the business, assets or results of
operations of the Acquiring Fund.
(c) Litigation. Except as previously disclosed to the Acquired
Fund, there are no claims, actions, suits or proceedings pending
or, to the actual knowledge of the Acquiring Fund, threatened which
would materially adversely affect any of the Acquiring Fund or its
assets or business or which would prevent or hinder in any material
respect consummation of the transactions contemplated hereby.
(d) Taxes. As of the Effective Time, all Federal and other tax
returns and reports of the Acquiring Fund required by law to have
been filed shall have been filed, and all other taxes shall have
been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the Acquiring Fund's knowledge,
no such return is currently under audit and no assessment has been
asserted with respect to any of such returns.
5. Representations and Warranties of the Acquired Fund. The Acquired
Fund represents and warrants to the Acquiring Fund as follows:
A-2
<PAGE>
(a) Marketable Title to Assets. The Acquired Fund will have, at
the Effective Time, good and marketable title to, and full right,
power and authority to sell, assign, transfer and deliver, the
assets to be transferred to the Acquiring Fund. Upon delivery and
payment for such assets, the Acquiring Fund will have good and
marketable title to such assets without restriction on the transfer
thereof free and clear of all liens, encumbrances and adverse
claims.
(b) Liabilities. There are no liabilities of the Acquired Fund,
whether or not determined or determinable, other than liabilities
disclosed or provided for in the Acquired Fund's statement of
assets and liabilities, and liabilities incurred in the ordinary
course of business prior to the Effective Time or otherwise
previously disclosed to the Acquiring Fund, none of which has been
materially adverse to the business, assets or results of operations
of the Acquired Fund.
(c) Litigation. Except as previously disclosed to the Acquiring
Fund, there are no claims, actions, suits or proceedings pending
or, to the knowledge of the Acquired Fund, threatened which would
materially adversely affect the Acquired Fund or its assets or
business or which would prevent or hinder in any material respect
consummation of the transactions contemplated hereby.
(d) Taxes. As of the Effective Time, all Federal and other tax
returns and reports of the Acquired Fund required by law to have
been filed shall have been filed, and all other taxes shall have
been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the Acquired Fund's knowledge,
no such return is currently under audit and no assessment has been
asserted with respect to any of such returns.
6. Condition Precedent to Obligations of the Acquiring Fund. All
representations and warranties of the Acquired Fund contained in this Agreement
shall be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time, with the same force and effect as if made
on and as of the Effective Time.
7. Condition Precedent to Obligations of the Acquired Fund. All
representations and warranties of the Acquiring Fund contained in this Agreement
shall be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time, with the same force and effect as if made
on and as of the Effective Time.
8. Further Conditions Precedent to Obligations of the Acquired Fund
and the Acquiring Fund. The obligations of the Acquired Fund and the Acquiring
Fund to effectuate this Agreement shall be subject to the satisfaction of each
of the following conditions:
A-3
<PAGE>
(a) Such authority from the Securities and Exchange Commission
(the "SEC") as may be necessary to permit the parties to carry out
the transactions contemplated by this Agreement shall have been
received.
(b) The Registration Statement on Form N-1A of the Acquiring
Fund shall be effective under the Securities Act of 1933 (the "1933
Act"), and, to the best knowledge of the Acquiring Fund, no
investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933
Act.
(c) The Acquiring Fund has filed all documents and paid all fees
required to permit their shares to be offered to the public in all
states of the United States, the Commonwealth of Puerto Rico and
the District of Columbia (except where such qualifications are not
required) so as to permit the transfer contemplated by this
Agreement to be consummated.
(d) The Acquired Fund and the Acquiring Fund shall have received
on or before the Effective Time an opinion of counsel satisfactory
to the Acquired Fund and the Acquiring Fund substantially to the
effect that for Federal income tax purposes:
(1) No gain or loss will be recognized to the Acquired Fund
upon the transfer of its assets in exchange solely for the
Acquiring Fund Shares and the assumption by the Acquiring Fund
of the Acquired Fund's stated liabilities;
(2) No gain or loss will be recognized to the Acquiring Fund
on its receipt of the Acquired Fund's assets in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring
Fund of the Acquired Fund's liabilities;
(3) The basis of an Acquired Fund's assets in the Acquiring
Fund's hands will be the same as the basis of those assets in
the Acquired Fund's hands immediately before the conversion;
(4) The Acquiring Fund's holding period for the assets
transferred to the Acquiring Fund by the Acquired Fund will
include the holding period of those assets in the Acquired
Fund's hands immediately before the conversion;
(5) No gain or loss will be recognized to the Acquired Fund
on the distribution of the Acquiring Fund Shares to the
Acquired Fund's shareholders in exchange for their Acquired
Fund Shares;
(6) No gain or loss will be recognized to the Acquired Fund's
shareholders as a result of the Acquired Fund's distribution
of Acquiring Fund Shares to the Acquired Fund's shareholders
in exchange for the Acquired Fund's shareholders' Acquired
Fund Shares;
A-4
<PAGE>
(7) The basis of the Acquiring Fund Shares received by the
Acquired Fund's shareholders will be the same as the adjusted
basis of that Acquired Fund's shareholders' Acquired Fund
Shares surrendered in exchange therefor; and
(8) The holding period of the Acquiring Fund Shares received
by the Acquired Fund's shareholders will include the Acquired
Fund's shareholders' holding period for the Acquired Fund's
shareholders' Acquired Fund Shares surrendered in exchange
therefor, provided that said Acquired Fund Shares were held as
capital assets on the date of the conversion.
(e) A vote approving this Agreement and the Reorganization
contemplated hereby shall have been adopted by at least a majority
of the outstanding shares of the Acquired Fund entitled to vote at
an annual or special meeting.
(f) The Board of Trustees of MAS, at a meeting duly called for
such purpose, shall have authorized the issuance by the Acquiring
Fund of Acquiring Fund Shares at the Effective Time in exchange for
the assets of the Acquired Fund pursuant to the terms and
provisions of this Agreement.
9. Effective Time of the Reorganization. The exchange of the Acquired
Fund's assets for Acquiring Fund Shares shall be effective as of close of
business on November 13, 1998, or at such other time and date as fixed by the
mutual consent of the parties (the "Effective Time").
10. Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned with respect to the Acquiring Fund and/or
the Acquired Fund without penalty by resolution of the Board of Trustees of MAS
Funds or at the discretion of any duly authorized officer of MAS Funds, at any
time prior to the Effective Time, if circumstances should develop that, in the
opinion of such Board or officer, make proceeding with the Agreement
inadvisable.
11. Amendment and Waiver. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in writing by the
parties; PROVIDED, that no such amendment may have the effect of changing the
provisions for determining the number or value of Acquiring Fund Shares to be
paid to the Acquired Fund's shareholders under this Agreement to the detriment
of the Acquired Fund's shareholders without their further approval. Furthermore,
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the President or any Vice President of the waiving party with or
without the approval of such party's shareholders).
12. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
A-5
<PAGE>
13. Fees and Expenses.
(a) The Acquiring Fund and the Acquired Fund represents and
warrants to the other that there are no brokers or finders entitled
to receive any payments in connection with the transactions
provided for herein.
(b) Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by each Fund
will be borne by such Fund. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering
into and the carrying out of the provisions of this Agreement; (ii)
expenses associated with the preparation and filing of the Proxy
Statement under the Securities Exchange Act of 1934; (iii)
registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued
in connection herewith in each state in which the Acquired Fund's
shareholders are resident as of the date of the mailing of the
Proxy Statement to such shareholders; (iv) postage; (v) printing;
(vi) accounting fees; (vii) legal fees; and (viii) solicitation
costs of the transaction. The Acquiring Fund shall pay its own
Federal and state registration fees.
14. Headings, Counterparts, Assignment.
(a) The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not effect in
any way the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and
their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
15. Entire Agreement. The Acquiring Fund and the Acquired Fund agree
that neither party has made any representation, warranty or covenant not set
forth herein and that this Agreement constitutes the entire agreement between
the parties. The representations, warranties and covenants contained herein or
in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
A-6
<PAGE>
16. Further Assurances. The Acquiring Fund and the Acquired Fund shall
take such further action as may be necessary or desirable and proper to
consummate the transactions contemplated hereby.
17. Binding Nature of Agreement. As provided in the MAS Funds
Declaration of Trust, as amended and supplemented to date, on file with the
Pennsylvania Corporation Bureau of the Department of State, this Agreement was
executed by the undersigned officers of MAS Funds, on behalf of the Acquiring
Fund and the Acquired Fund, as officers and not individually, and the
obligations of this Agreement are not binding upon the undersigned officers
individually, but are binding only upon the assets and property of the
corporation or trust. Moreover, no series of a trust shall be liable for the
obligations of any other series of that trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MAS Funds, on behalf of its series, PA Municipal Portfolio
By ___________________________________
Name: ________________________________
Title: _______________________________
MAS Funds, on behalf of its series, Municipal Portfolio
By ___________________________________
Name: ________________________________
Title: _______________________________
A-7
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 28, 1998
MAS Funds PA Municipal Portfolio
One Tower Bridge
West Conshohocken, PA 19428
1-800-354-8185
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the Proxy Statement/Prospectus dated October 28, 1998 for
the Special Meeting of Shareholders (the "Meeting") of the PA Municipal
Portfolio (the "Portfolio"), to be held on November 20, 1998. Copies of the
Proxy Statement/Prospectus may be obtained at no charge by calling Miller
Anderson & Sherrerd, LLP at 1-800-354-8185.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Proxy
Statement/Prospectus.
Further information about shares of the Portfolio is contained in and
incorporated by reference to the Portfolios' Statement of Additional Information
dated January 31, 1998, a copy of which is included herewith. The audited
financial statements and related independent accountants' report for the
Portfolios contained in the 1997 Annual Report to Shareholders dated September
30, 1997 are hereby incorporated herein by reference. The unaudited financial
statements for the Portfolio contained in the 1998 Semi-Annual Report to
Shareholders dated March 31, 1998 also are incorporated herein by reference. No
other parts of the Annual Report or the subsequent Semi-Annual Report are
incorporated by reference herein.
The date of this Statement of Additional Information is October 28, 1998.
<PAGE>
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Bonds (84.8%)
Adelanto, CA School
District (FGIC)
Zero Coupon, 9/1/18...... AAA $4,350 $ -- $4,350 $ 1,507 $ -- $ 1,507
Aldine, TX Independent
School District (PSFG)
Zero Coupon, 2/15/07..... AAA 750 -- 750 497 -- 497
Aliquippa School District,
PA
Zero Coupon, 6/1/12...... A -- 685 685 -- 328 328
Allegheny County, PA
(AMBAC)
Zero Coupon, 5/1/03...... AAA -- 325 325 -- 261 261
Allegheny County, PA
Sanitation Authority,
Series B, (MBIA)
Zero Coupon, 6/1/10...... AAA 1,500 -- 1,500 838 -- 838
Arkansas State Development
Finance Authority Home
Mortgage Revenue Bonds,
Series B-1,
4.90%, 7/1/29............ AAA 725 275 1,000 731 277 1,008
Benicia, CA School District
(MBIA)
Zero Coupon, 8/1/11...... AAA 3,480 -- 3,480 1,806 -- 1,806
Berks County, PA (FGIC)
Zero Coupon 11/15/20..... AAA -- 1,000 1,000 -- 305 305
Zero Coupon 5/15/19...... AAA -- 1,250 1,250 -- 417 417
Berks County, PA Solid
Waste Authority (FGIC)
6.00%, 4/1/11............ AAA -- 250 250 -- 268 268
Bradford, PA Area School
District (FGIC)
4.60%, 10/1/10........... AAA -- 250 250 -- 245 245
Bucks County, PA Water &
Sewer Authority Revenue
Bonds (FGIC)
+Series B, 5.50%,
2/1/08................ Aaa -- 185 185 -- 191 191
Zero Coupon, 12/1/05..... AAA -- 375 375 -- 266 266
California Housing &
Finance Agency Revenue
Bonds (MBIA)
5.30%, 8/1/14............ AAA 175 -- 175 179 -- 179
California School Finance
Authority Lease Revenue
Bonds, Series A (MBIA)
6.70%, 7/1/02............ AAA 1,305 -- 1,305 1,376 -- 1,376
</TABLE>
1
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
California State Department
of Veterans Affairs Home
Purchase Revenue Bonds,
Series A, TBA (AMBAC)
4.90%, 12/1/18........... AAA $1,675 $ -- $1,675 $ 1,672 $ -- $ 1,672
California State
Zero Coupon, 3/1/04...... A+ 375 -- 375 291 -- 291
Casino Reinvestment
Development Authority,
Series A (FSA)
5.00%, 10/1/03........... AAA 1,300 -- 1,300 1,347 -- 1,347
Center Township, PA Sewer
Authority Revenue Bonds,
Series A (MBIA)
Zero Coupon, 4/15/17..... AAA -- 615 615 -- 229 229
Zero Coupon, 4/15/19..... AAA 855 -- 855 286 -- 286
6.00%, 4/15/03........... AAA -- 500 500 -- 539 539
Charleston County, SC,
Resource Recovery Revenue
Bonds (AMBAC)
5.15%, 1/1/09............ AAA 1,000 -- 1,000 1,024 -- 1,024
Chartiera Valley, PA (FGIC)
Zero Coupon, 2/1/06...... AAA -- 425 425 -- 298 298
Chicago, IL Wastewater
Transmission Revenue
Bonds (FGIC)
5.125%, 1/1/03........... AAA 1,300 -- 1,300 1,350 -- 1,350
Cleveland, OH Airport
Special Revenue Bonds,
TBA
5.50%, 12/1/08........... BB- 750 -- 750 743 -- 743
Cleveland, OH City School
District (AMBAC)
4.80%, 6/1/03............ AAA 1,300 -- 1,300 1,334 -- 1,334
Clinton County, PA
Industrial Development
Authority
6.25%, 11/15/06.......... BB- -- 150 150 -- 156 156
Colorado Health Facilities
Revenue Bonds, Series A
Zero Coupon, 7/15/20..... AAA 1,000 -- 1,000 305 -- 305
Delaware County, PA
Industrial Development
Authority Revenue Bonds,
Series A
6.50%, 1/1/08............ A 450 200 650 506 225 731
Elizabeth Forward, PA
School District
Series B
Zero Coupon, 9/1/08
(AMBAC)............... AAA 425 -- 425 262 -- 262
Zero Coupon, 9/1/11
(MBIA)................ AAA 850 400 1,250 440 207 647
</TABLE>
2
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fort Bend, TX Independent
School District (PSFG)
Zero Coupon, 2/15/07..... AAA $1,250 $ -- $1,250 $ 828 $ -- $ 828
Zero Coupon, 2/15/08..... AAA 940 -- 940 591 -- 591
Georgia State Housing &
Financing Authority,
Series A A2
5.875%, 12/1/19.......... AA+ 160 105 265 166 109 275
Girard Area, PA School
District (FGIC)
Zero Coupon 10/1/18...... AAA -- 700 700 -- 241 241
Zero Coupon 10/1/19...... AAA -- 250 250 -- 82 82
Grand Prairie, TX
Independent School
District (PSFG)
Zero Coupon, 8/15/07..... AAA 750 -- 750 486 -- 486
Hamilton Southeastern, IN
(AMBAC)
Zero Coupon, 1/1/15...... AAA 1,000 -- 1,000 417 -- 417
Harris County, TX Toll
Road, Series A (MBIA)
Zero Coupon, 8/15/07..... AA+ 475 -- 475 308 -- 308
Hawaii State Housing
Finance & Development
Corp., Single Family
Mortgage Revenue Bonds,
Series A
4.90%, 7/1/28............ AA 350 125 475 352 126 478
+Hillsborough County, FL
Housing & Finance
Authority, Single Family
Mortgage Revenue Bonds
4.50%, 4/1/30............ Aaa 725 275 1,000 736 279 1,015
Houston TX Housing Finance
& Development Corp.,
Single Family Mortgage
Revenue Bonds, Series B-1
8.00%, 6/1/14............ A 325 175 500 357 192 549
Houston, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12..... AAA 550 -- 550 266 -- 266
Huron, MI School District
(AMBAC)
Zero Coupon, 5/1/18...... AAA -- 1,500 1,500 -- 531 531
Hurst Euless Bedford, TX
Independent School
District (PSFG)
Zero Coupon, 8/15/17..... AAA 965 -- 965 349 -- 349
Zero Coupon, 8/15/18..... AAA 1,100 -- 1,100 377 -- 377
</TABLE>
3
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
+Idaho Housing & Finance
Association, Single
Family Mortgage Revenue
Bonds,
Series F, 5.70%,
7/1/27................ Aaa $ 245 $ -- $ 245 $ 252 $ -- $ 252
Series H-2, 5.40%, 7/1/27
(FHA)................. Aaa 500 250 750 510 255 765
Illinois Development
Finance Authority Revenue
Bonds (FGIC)
Zero Coupon, 12/1/09..... AAA 2,000 -- 2,000 1,150 -- 1,150
Indiana Transportation
Finance Authority Highway
Revenue Bonds (AMBAC)
Zero Coupon, 12/1/16..... AAA 1,695 -- 1,695 637 -- 637
+Indiana State Housing
Finance Authority Revenue
Bonds, Series A2 (AMBAC)
5.55%, 1/1/21............ Aaa 500 -- 500 516 -- 516
Indianapolis Airport
Authority Revenue Bonds
7.10%, 1/15/17........... BBB 375 -- 375 422 -- 422
Intermountain Power Agency,
UT,
Series A, Zero Coupon,
7/1/17................ A+ 1,750 -- 1,750 641 -- 641
Series B, 6.50%, 7/1/09
(MBIA)................ AAA 875 300 1,175 1,017 349 1,366
Series C, 4.80%, 7/1/03
(FSA)................. AAA 1,300 -- 1,300 1,331 -- 1,331
Iowa Finance Authority
Single Family Revenue
Bonds, Series G
4.95%, 1/1/21............ AAA 500 200 700 505 202 707
Jacksonville, FL Electric
Authority Revenue Bonds
Zero Coupon, 10/1/11..... AA 325 -- 325 169 -- 169
Jefferson Parish, LA School
Board Sales & Use Tax
Revenue Bonds, TBA (FSA)
Zero Coupon, 9/1/06...... AAA 1,000 -- 1,000 676 -- 676
Kane & De Kalb Counties, IL
Unit School District
(AMBAC)
Zero Coupon, 12/1/09..... AAA 525 200 725 302 115 417
Kansas City, KA Utility
Systems Revenue Bonds
(AMBAC)
Zero Coupon, 3/1/06...... AAA 130 -- 130 91 -- 91
Zero Coupon, 3/1/06...... AAA 95 -- 95 67 -- 67
</TABLE>
4
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
+Keller, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12..... Aaa $ 800 $ -- $ 800 $ 387 $ -- $ 387
Kentucky State Turnpike
Authority (FGIC)
Zero Coupon, 1/1/10...... AAA 450 -- 450 258 -- 258
La Joya, TX Independent
School District (PSFG)
Zero Coupon, 8/1/12...... AAA 645 -- 645 312 -- 312
Lehigh County, PA General
Purpose Authority Revenue
Bonds, Horizons Health
Systems, Inc.,
Series B, 8.25%,
7/1/13................ N/R -- 250 250 -- 263 263
+Series C, 4.90%, 7/1/11
(MBIA)................ Aaa 920 275 1,195 912 273 1,185
Little Rock, AK Airport
Passenger Facility
Revenue Bonds (AMBAC)
5.65%, 5/1/16............ AAA 220 -- 220 233 -- 233
Maricopa County, AZ Unified
School
District -- Chandler
(FGIC)
Zero Coupon, 7/1/07...... AAA 250 -- 250 163 -- 163
Maryland Transportation
Authority (FGIC)
Zero Coupon 7/1/08....... AAA 250 -- 250 157 -- 157
Mercer County, NJ Revenue
Bonds
Zero Coupon, 4/1/06...... AA- 350 -- 350 246 -- 246
Metropolitan Government
Nashville & Davidson
County, TN Health &
Education Facilities
Board Revenue Bonds,
Series A
5.25%, 5/1/03............ AA 900 335 1,235 942 350 1,292
Metropolitan Pier &
Exposition Authority, IL,
Series A, (AMBAC),
4.90%, 12/15/03.......... AAA 1,275 -- 1,275 1,316 -- 1,316
Michigan State Housing
Development Authority,
Series B,
5.50% 12/1/26............ AA+ 485 -- 485 500 -- 500
Michigan State Trunk Line,
Series A (AMBAC)
Zero Coupon 10/1/05...... AAA 750 -- 750 537 -- 537
Zero Coupon 10/1/12...... AAA 1,500 -- 1,500 729 -- 729
Midland, TX Independent
School District (PSFG)
Zero Coupon, 8/15/06..... AAA 750 -- 750 511 -- 511
</TABLE>
5
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Millcreek Township, PA
(FGIC)
Zero Coupon, 8/15/05..... AAA $ 325 $ 375 $ 700 $ 234 $ 270 $ 504
Minnesota State Housing &
Agency, Single Family
Mortgage Revenue Bonds,
Series E
5.05%, 7/1/24............ AA+ 1,300 550 1,850 1,321 559 1,880
Mississippi Housing Finance
Corp.,
Zero Coupon, 9/15/16..... AA- 5,250 -- 5,250 2,017 -- 2,017
Mobile, AL Industrial
Development Board Solid
Waste Disposal Revenue
Bonds
6.95%, 1/1/20............ BBB- 180 80 260 202 90 292
Montour, PA School District
(MBIA)
Zero Coupon, 1/1/13...... AAA -- 300 300 -- 143 143
Nebraska Investment Finance
Authority Revenue Bonds,
Series B, 5.60%,
3/1/20................ AAA 465 -- 465 481 -- 481
Series D, 5.80%,
3/1/20................ AAA 470 260 730 485 268 753
Nebraska Public Power
District Revenue Bonds,
5.40%, 1/1/03............ A+ 200 -- 200 210 -- 210
+Nevada Housing Division
Senior, Series A-2,
5.50%, 10/1/27........... Aaa 340 -- 340 349 -- 349
+Nevada Housing Division,
Series C (FHA),
5.65%, 4/1/27............ Aaa 490 245 735 506 253 759
New Jersey Economic
Development Authority
Zero Coupon, 3/15/09..... A+ 275 -- 275 163 -- 163
New Jersey State
Zero Coupon, 2/15/06..... AA+ 500 -- 500 351 -- 351
New Mexico Mortgage Finance
Authority, Series H
5.35%, 7/1/15............ AAA 485 -- 485 500 -- 500
New York City, NY General
Obligation, Series G
(MBIA)
5.00%, 8/1/12............ AAA 1,000 -- 1,000 996 -- 996
New York City, NY
Industrial Development
Agency Revenue Bonds
(FSA)
6.00%, 11/1/15........... AAA 1,575 775 2,350 1,683 828 2,511
</TABLE>
6
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
#New York City, NY General
Obligation Inverse Bonds
20.509%, 10/1/03......... BBB+ $ 250 $ 100 $ 350 $ 414 $ 165 $ 579
New York State Dormitory
Authority
5.10%, 5/15/01........... BBB+ 250 -- 250 257 -- 257
5.125%, 7/1/11 (FGIC).... AAA 1,000 -- 1,000 1,014 -- 1,014
+New York State Mortgage
Agency Revenue Bonds,
Series 65
5.00%, 4/1/20............ Aa2 1,300 550 1,850 1,318 558 1,876
Noblesville, TN High School
Building Corp. (AMBAC)
Zero Coupon, 2/15/17..... AAA 900 -- 900 333 -- 333
Zero Coupon, 2/15/19..... AAA 1,850 -- 1,850 615 -- 615
Norris, CA School District
(MBIA)
Zero Coupon, 5/1/15...... AAA 785 -- 785 328 -- 328
Zero Coupon, 5/1/16...... AAA 400 -- 400 158 -- 158
North Carolina Eastern
Municipal Power Agency
Revenue Bonds
Series B, 6.125%,
1/1/09................ BBB 350 -- 350 378 -- 378
Series C, 5.125%,
1/1/03................ BBB 450 150 600 460 153 613
North Carolina Housing &
Finance Agency Revenue
Bonds
Series FF, 5.50%,
9/1/22................ AA 455 -- 455 468 -- 468
Series JJ, 5.125%,
1/1/03................ AA 495 270 765 512 279 791
Series RR, 5.00%,
9/1/22................ AA 1,300 550 1,850 1,305 552 1,857
+North Hempstead, NY
General Obligation,
Series B (FGIC)
5.00%, 3/1/12............ Aaa 890 -- 890 891 -- 891
North Slope Borough, AK
General Obligation,
Series B (CGIC)
Zero coupon, 6/30/04..... AAA 575 285 860 435 216 651
Northern Illinois
University Revenue Bond
(FGIC)
Zero Coupon, 4/1/15...... AAA 675 -- 675 280 -- 280
Northwestern, PA School
District (AMBAC)
Zero Coupon, 1/15/09..... AAA -- 450 450 -- 272 272
Okomos, MI Public School
District (MBIA)
Zero Coupon, 5/1/15...... AAA 900 -- 900 375 -- 375
Oley Valley, PA School
District (AMBAC)
Zero Coupon, 5/15/09..... AAA 760 760 1,520 452 452 904
</TABLE>
7
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Orange County, FL Housing &
Finance Authority, Single
Family Mortgage Revenue
Bonds, Series B
5.10%, 9/1/27............ AAA $1,300 $ 550 $1,850 $ 1,322 $ 559 $ 1,881
Parkland, PA School
District (FGIC)
4.60%, 9/1/10............ AAA -- 250 250 -- 245 245
Penn Hills Township, PA
Zero Coupon, 6/1/12...... N/R 1,165 450 1,615 528 204 732
Penn Hills Township, PA,
Series B
Zero Coupon, 12/1/13..... N/R -- 500 500 -- 208 208
Pennsylvania Convention
Center Authority
6.25%, 9/1/04............ BBB -- 250 250 -- 267 267
6.70%, 9/1/16 (FGIC)..... AAA -- 500 500 -- 593 593
Pennsylvania Housing &
Finance Authority
Series 47, 5.20%,
4/1/27................ AA+ -- 375 375 -- 381 381
Series 48, 5.375%,
10/1/16............... AA+ -- 300 300 -- 307 307
Series 50A, 5.35%,
10/1/08............... AA+ -- 220 220 -- 227 227
Series 51, 5.65%,
4/1/20................ AA+ -- 250 250 -- 258 258
Series 52B, 5.55%,
10/1/12............... AA+ -- 500 500 -- 513 513
Series 59A, 4.95%,
4/1/25................ AA+ -- 550 550 -- 554 554
Pennsylvania State,
Certificate of
Participation, Series A
5.00%, 7/1/03............ AAA -- 500 500 -- 513 513
Pennsylvania State General
Obligation (AMBAC)
Zero coupon, 7/1/05...... AAA -- 375 375 -- 271 271
#0.00%, 4/15/03.......... AAA 775 300 1,075 935 362 1,297
+Philadelphia, PA
Hospitals, 10.875%,
7/1/08................... Aaa -- 140 140 -- 180 180
Philadelphia, PA Airport
Revenue Bonds (FGIC)
5.50%, 6/15/01........... AAA 1,340 550 1,890 1,391 571 1,962
Philadelphia, PA Authority
for Industrial
Development Revenue
Bonds, Series A
6.50%, 10/1/27........... N/R 220 100 320 237 107 344
Philadelphia, PA Gas Works
5.80%, 7/1/01............ BBB 350 200 550 366 209 575
Philadelphia, PA General
Obligation, Series A
(FGIC)
5.125%, 5/15/03.......... AAA -- 100 100 -- 104 104
5.40%, 11/15/03.......... AAA 600 -- 600 632 -- 632
</TABLE>
8
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Philadelphia, PA Hospitals
& Higher Education
Facilities Authority
Revenue Bonds
6.15%, 7/1/05............ BBB+ $ 125 $ 50 $ 175 $ 134 $ 54 $ 188
Philadelphia, PA Municipal
Authority (FGIC)
4.90%, 4/1/03............ AAA 500 -- 500 513 -- 513
Philadelphia, PA School
District,
Series A (MBIA)
5.20%, 7/1/03......... AAA -- 200 200 -- 208 208
Series B (AMBAC)
5.00%, 4/1/03......... AAA -- 550 550 -- 567 567
Philadelphia, PA Water &
Wastewater Revenue Bonds
(FGIC)
5.15%, 6/15/04........... AAA 1,300 550 1,850 1,359 575 1,934
5.20%, 6/15/05........... AAA -- 500 500 -- 522 522
Pittsburgh, PA General
Obligation (AMBAC)
Zero Coupon, 9/1/04...... AAA -- 350 350 -- 264 264
6.50%, 4/1/11............ AAA -- 275 275 -- 307 307
Pittsburgh, PA Water &
Sewer (FGIC)
Zero Coupon, 9/1/05...... AAA -- 375 375 -- 269 269
Port Authority, NY & NJ
Special Obligation
Revenue Bonds
7.00%, 10/1/07........... N/R 450 250 700 510 283 793
Robinson Township, PA
6.90%, 5/15/18........... AAA -- 115 115 -- 134 134
+Saline County, KS,
Zero Coupon, 12/1/15..... Aaa 750 -- 750 303 -- 303
San Antonio, TX Electric &
Gas Revenue Bond (AMBAC)
Zero Coupon, 2/1/05...... AAA 200 -- 200 147 -- 147
San Antonio, TX General
Obligation, TBA
6.00%, 8/1/06............ AA 500 175 675 550 192 742
San Bernardino County, CA
Series A (MBIA)
7.40%, 7/1/16............ AAA 1,150 450 1,600 1,197 468 1,665
Savannah, GA Economic
Development Authority
Revenue Bonds
7.40%, 4/1/26............ N/R 270 40 310 304 45 349
Schuylkill County, PA
Redevelopment Authority
(FGIC)
7.125%, 6/1/13........... AAA 750 -- 750 823 -- 823
</TABLE>
9
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Scranton, PA Health &
Welfare Authority
6.625%, 7/1/09........... AAA $ -- $ 125 $ 125 $ -- $ 139 $ 139
Skokie, IL Park District,
Series B, (AMBAC)
Zero Coupon, 12/1/12..... AAA 1,750 -- 1,750 836 -- 836
Southeastern Area Schools,
PA Revenue Bonds
Series A, Zero Coupon,
10/1/06............... A -- 200 200 -- 135 135
Series B, Zero Coupon,
10/1/06............... A -- 390 390 -- 263 263
Steel Valley, PA Allegheny
County
Zero Coupon, 11/1/17..... A 650 -- 650 231 -- 231
Steel Valley, PA School
District
Zero Coupon, 11/1/11..... A 740 430 1,170 375 218 593
Stroud Township, PA Sewer
Authority (CGIC)
Zero Coupon, 11/15/05.... AAA -- 375 375 -- 267 267
+Tyler, TX Health
Facilities Development
Corp.,
Series A, 5.25%,
7/1/02................ Baa2 425 -- 425 434 -- 434
Upper Darby Township, PA
(AMBAC)
Zero Coupon, 7/15/11..... AAA -- 525 525 -- 274 274
Utah State Housing Finance
Agency Series A-2
5.50%, 7/1/27............ AAA 400 -- 400 411 -- 411
Washington County, West PA
Power Co.
4.95%, 3/1/03............ A -- 150 150 -- 154 154
Washington State Public
Power Supply (MBIA)
7.00%, 7/1/07............ AA- 375 -- 375 438 -- 438
Zero Coupon, 7/1/10...... AAA 475 -- 475 260 -- 260
++Westmoreland County, PA
(AMBAC)
Zero Coupon, 8/1/14...... AAA -- 1,475 1,475 -- 644 644
Wisconsin Housing &
Economic Development
Authority Home Ownership
Revenue Bonds
Series E, 5.125%,
9/1/26................ AA 1,300 550 1,850 1,314 556 1,870
Series H, 4.875%,
3/1/24................ AA 1,350 -- 1,350 1,358 -- 1,358
Yough, PA School District
(MBIA)
Zero Coupon, 10/1/13..... AAA -- 1,445 1,445 -- 661 661
------- ------- --------
Group Total................ 73,615 26,469 100,084
------- ------- --------
</TABLE>
10
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Backed Corporates
(0.4%)
ALPS, Series 96-1D
12.75%, 6/15/06.......... BB- $ 349 $ 150 $ 499 $ 350 $ 150 $ 500
------- ------- --------
Industrials (0.9%)
Comcast Corp.
9.37%, 5/15/05........... BB+ 225 75 300 241 80 321
Grand Casinos, Inc.,
10.125%, 12/1/03......... BB 250 -- 250 272 -- 272
Host Marriott Travel Plaza
9.50%, 5/15/05........... BB- 175 75 250 186 80 266
Viacom, Inc.
8.00%, 7/7/06............ BB- 250 -- 250 256 -- 256
------- ------- --------
Group Total................ 955 160 1,115
------- ------- --------
Transportation (0.2%)
*Jet Equipment Trust,
Series 95-5A C
10.69%, 5/1/15........... BBB 100 100 200 130 130 260
------- ------- --------
Yankee (2.3%)
Koren Development Bank
7.375%, 9/17/04.......... BB+ 825 285 1,110 748 259 1,007
*Rae Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14.......... BBB+ 400 -- 400 414 -- 414
*Republic of Panama
7.875%, 2/13/02.......... BB+ 310 145 455 311 145 456
Rogers Cablesystems Ltd.
10.00%, 3/15/05.......... BB+ 125 50 175 140 56 196
*Samsung Electronics Co.
7.45%, 10/1/02........... B+ 750 -- 750 673 -- 673
------- ------- --------
Group Total................ 2,286 460 2,746
------- ------- --------
Total Fixed Income
Securities (Cost $71,355,
$25,019 and $96,374,
respectively)............ 77,336 27,369 104,705
------- ------- --------
CASH EQUIVALENTS (16.6%)
Shares
---------------------------------
Money Market Instruments (4.3%)
Dreyfus Basic Municipal
Money Market Fund....... 2,113,255 -- 2,113,255 2,113 -- 2,113
Dreyfus PA Municipal Money
Market Fund............. -- 408,571 408,571 -- 409 409
Vanguard Municipal Bond
Money Market Fund....... 2,115,174 -- 2,115,174 2,115 -- 2,115
Vanguard PA Tax-Free Money
Market Fund............. -- 418,826 418,826 -- 419 419
------- ------- --------
Group Total............... 4,228 828 5,056
------- ------- --------
</TABLE>
11
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Face Amount Value
(000) (000)
--------------------------------- ---------------------------------
Ratings PA Pro Forma PA Pro Forma
(Standard Municipal Municipal Combined Municipal Municipal Combined
March 31, 1998 & Poor's) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Municipals (10.1%)
##Abilene, TX Health
Facilities Development
Corp., (MBIA)
3.70%, 9/19/25........... AAA $1,600 $ -- $1,600 $ 1,600 $ -- $ 1,600
##Chelsen, MA Lease, Series
A (FSA)
3.80%, 6/6/23............ AAA 1,600 -- 1,600 1,600 -- 1,600
##Henrico County, VA
Industrial Development
Authority (FSA)
3.65%, 8/23/27........... AAA 1,600 -- 1,600 1,600 -- 1,600
##Kansas State Development
Finance Authority, Series
E
3.75%, 3/15/24........... AAA 1,000 -- 1,000 1,000 -- 1,000
##Pennsylvania Housing &
Finance Agency
3.62%, 10/3/23........... AA+ 1,000 -- 1,000 1,000 -- 1,000
##Pennsylvania State Higher
Education Assistance
Agency, Student Loan
SAVRS (AMBAC)
3.70%, 3/1/22............ AAA 1,000 -- 1,000 1,000 -- 1,000
##Wake County, NC
Industrial Facilities &
Pollution Control Revenue
(AMBAC)
3.78%, 5/1/24............ AAA 1,500 -- 1,500 1,500 -- 1,500
##Wichita, KS Hospital
Bonds, Series III-A
(MBIA)
3.66%, 10/20/17.......... AAA 1,600 -- 1,600 1,600 -- 1,600
##York County, PA Hospital
Authority Revenue Bonds
(AMBAC)
3.65%, 7/1/21............ AAA 1,000 -- 1,000 1,000 -- 1,000
------- ------- --------
Group Total................ 11,900 -- 11,900
------- ------- --------
U.S. Treasury Security
(1.3%)
++U.S. Treasury Bond
8.75%, 8/15/20........... Tsy 1,175 -- 1,175 1,566 -- 1,566
------- ------- --------
Repurchase Agreements (0.9%)
Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, collateralized by
various U.S. Government
Obligations,
due 4/1/98-11/15/99...... 777 257 1,034 777 257 1,034
------- ------- --------
Total Cash Equivalents
(Cost $18,372, $1,085 and
$19,457, respectively)... 18,471 1,085 19,556
------- ------- --------
</TABLE>
12
<PAGE>
MAS Funds
Statement of Net Assets (Unaudited) -- (Continued)
<TABLE>
<CAPTION>
Value
(000)
----------------------------------------------------
PA Pro Forma
Municipal Municipal Combined
Portfolio Portfolio Adjustments Portfolio
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Total Investments (105.2%) (Cost $89,727, $26,104 and
$115,831, respectively)................................. $ 95,807 $ 28,454 $ 124,261
---------- ---------- -----------
Other Assets and Liabilities (-5.2%)
Cash.................................................... 5 -- 5
Interest Receivable..................................... 729 310 1,039
Receivable for Daily Variation Margin on Futures
Contracts............................................ -- 1 1
Receivable for Fund Shares Sold......................... 5 -- 5
Unrealized Gain on Swap Agreements...................... 58 26 84
Other Assets............................................ 3 1 4
Payable for Investments Purchased....................... (6,461) (703) (7,164)
Payable for Fund Shares Redeemed........................ (1) (2) (3)
Payable for Administrative Fees......................... (6) (2) (8)
Payable for Investment Advisory Fees.................... (71) (17) (88)
Payable for Trustees' Deferred Compensation Plan........ (2) (1) (3)
Payable for Daily Variation Margin on Futures Contracts. (3) -- (3)
Other Liabilities....................................... (31) (32) (63)
---------- ---------- -----------
(5,775) (419) (6,194)
---------- ---------- -----------
NET ASSETS (100%)......................................... $ 90,032 $ 28,035 $ 118,067
========== ========== ===========
INSTITUTIONAL CLASS
Net Assets
Outstanding shares of beneficial interest (unlimited
authorization, no par value)............................ 7,639,910 2,365,547 14,057(A) 10,019,514
---------- ---------- ---------- -----------
NET ASSET VALUE PER SHARE................................. $11.78 $11.85 $11.78
========== ========== ===========
Net Assets Consist of:
$ 84,308 $ 25,754 $ 110,062
Paid in Capital...........................................
61 23 84
Undistributed Net Investment Income (Loss)................
(445) (112) (557)
Undistributed Realized Net Gain (Loss)....................
Unrealized Appreciation (Depreciation) on:
6,080 2,350 8,430
Investment Securities...................................
28 20 48
Futures and Swaps.......................................
---------- ---------- -----------
$ 90,032 $ 28,035 $ 118,067
Net Assets................................................
========== ========== ===========
</TABLE>
- ---------------
(A) See Capitalization Section
++ A portion of these securities was pledged to cover margin
requirements for futures contracts.
* 144A security. Certain conditions for public sale may exist.
+ Moody's Investor Service, Inc. rating. Security is not rated
by Standard & Poor's Corporation.
# Step Bond-Coupon increases in increments to maturity. Rate
disclosed is as of March 31, 1998. Maturity disclosed is the
ultimate maturity.
## Variable or Floating rate security -- rating disclosed is as
of March 31, 1998.
AMBAC American Municipal Bond Assurance Corp.
CGIC Capital Guaranty Insurance Corp.
FGIC Financial Guaranty Insurance Corp.
FHA Federal Housing Administration
FSA Financial Security Assurance
MBIA Municipal Bond Insurance Association
PSFG Permanent School Fund Guaranteed
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's
Corporation or Fitch.
TBA Security is subject to delayed delivery.
13
<PAGE>
MAS Funds
Projected Pro Forma Combined Statement of Operations
March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
PA Pro Forma
Municipal Municipal Municipal
Portfolio Portfolio Portfolio
(000) (000) Adjustments (000)
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Investment Income
Interest......................................... $3,910 $1,444 $5,354
------ ------ ------
Expenses
Investment Advisory Services..................... $282 $102 $384
Less: Waived Fees................................ (28) 254 (27) 75 13 (42) 342
Administrative Fee............................... 60 22 82
Custodian Fee.................................... 5 5 10
Audit Fee........................................ 18 18 23
Legal Fee........................................ 1 1 2
Other Expenses................................... 41 18 (13) 59
------ ------ ------
Total Expenses........................... 379 139 518
------ ------ ------
Expense Offset................................... (3) (3 (6)
------ ------ ------
Net Expenses.................................. 376 136 512
------ ------ ------
Net Investment Income....................... 3,534 1,308 4,842
------ ------ ------
Realized Net Gain (Loss)
Investment Securities............................ (109) (72 (181)
Futures.......................................... (126) 44 (82)
------ ------ ------
Realized Net Gain (Loss)...................... (235) (28 (263)
------ ------ ------
Change in Unrealized Appreciation (Depreciation)
Investment Securities............................ 3,923 1,331 5,254
Futures and Swaps................................ (407) (177 (584)
------ ------ ------
Unrealized Appreciation (Depreciation)........ 3,516 1,154 4,670
------ ------ ------
Net Gain (Loss)............................. 3,281 1,126 4,407
------ ------ ------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. $6,815 $2,434 $9,249
====== ====== ======
</TABLE>
See notes to pro forma combined financial statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of each fund as of March
31, 1998, and the pro forma combined capitalization of both funds as if the
reorganization had occurred on such date. The table reflects pro forma exchange
ratios of approximately 1.006 shares being issued for each share of your fund.
If the reorganization is consummated, the actual exchange ratios on the
reorganization date may vary from the exchange ratios indicated. This is due to
changes in the market value of the portfolio securities of both the Municipal
Portfolio and your fund between March 31, 1998 and the reorganization date,
changes in the amount of undistributed net investment income and net realized
capital gains of the Municipal Portfolio and your fund during that period
resulting from income and distributions, and changes in the accrued liabilities
of the Municipal Portfolio and your fund during the same period.
<TABLE>
<CAPTION>
March 31, 1998
---------------------------------------
PA Pro Forma
Municipal Municipal Municipal
Portfolio Portfolio Portfolio
---------- ---------- -----------
<S> <C> <C> <C>
Net Assets............................................ $90,031,878 $28,035,483 $118,067,361
Net Asset Value Per Share............................. $ 11.78 $ 11.85 $ 11.78
Shares Outstanding.................................... 7,639,910 2,365,547 10,019,514
</TABLE>
It is impossible to predict how many shares of the Municipal Portfolio will
actually be received and distributed by your fund on the reorganization date.
The table should not be relied upon to determine the amount of the Municipal
Portfolio shares that will actually be received and distributed.
Notes to Pro Forma Combined Financial Statements -- (Unaudited)
Each of the Municipal Portfolio and PA Municipal Portfolio had in place an
identical management fee agreement and a voluntary expense limitation of .50% of
net assets. Accordingly, the pro forma adjustments only represent the
elimination of duplicate expenses (i.e., audit fees) and an offsetting reduction
in the fee waiver required as a result of the voluntary expense limitation.
Pro forma information is intended to provide shareholders of MAS Funds with
information about the impact of the proposed merger by indicating how the merger
might have affected the information had the merger been consummated as of March
31, 1998.
The pro forma combined statements of net assets and results of operations
as of March 31, 1998, have been prepared to reflect the merger of the Municipal
Portfolio and PA Municipal Portfolio.
15
<PAGE>
MAS FUNDS
PA MUNICIPAL PORTFOLIO
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 20, 1998
The undersigned Shareholder(s) of the PA Municipal Portfolio (the
"Portfolio") of MAS Funds (the "Fund") hereby appoint(s) Lorraine Truten, James
A. Gallo, and Richard J. Shoch, 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 November 20, 1998 and any
adjournments thereof (the "Meeting"), to vote all of the shares of the Portfolio
that the signer would be entitled to vote if personally present at the Meeting
on the proposal set forth below and, in accordance with their own discretion, on
any other matters properly brought before the Meeting. Said proxies are directed
to vote or refrain from voting pursuant to the Proxy Statement as checked below
upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND
AND WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of the Agreement and Plan of Reorganization and
Liquidation between PA Municipal Portfolio and Municipal Portfolio.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN ACCORDANCE WITH THEIR OWN DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
All properly executed proxies will be voted as directed herein by the
signing Shareholder(s). If no direction is given when the duly executed proxy is
returned, such shares will be voted in accordance with the recommendations of
the Board of Trustees FOR the Proposal.
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.
Please date, sign and return promptly.
Dated: _______________________________, 1998
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.
---------------------------------------------
Signature
---------------------------------------------
Signature
<PAGE>
MAS FUNDS
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
Reference is made to Article V of Registrant's By-Laws dated November 18, 1993,
which is incorporated by reference. Registrant hereby also makes the undertaking
consistent with rule 484 under the Securities Act of 1933, as amended.
The Trust shall indemnify each of its Trustees and officers (including persons
who serve at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgements, in compromise or as fines and penalties, and counsel
fees reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
or whether by or in the right of the Trust, before any court or administrative
or legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such person may be or may have
been threatened, while in office or thereafter, by reason of any alleged act or
omission as a Trustee or officer, except with respect to any matter as to which
such Covered Person shall have been finally adjudicated in any such action, suit
or other proceeding not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interest of the Trust and
except that no Covered Person shall be indemnified against any liability to the
Trust or its Shareholders to which such Covered Person would otherwise be
subject by reason of self-dealing, willful misconduct or recklessness. Expenses,
including counsel fees so incurred by any such Covered Person, may be paid from
time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding on the condition that the amounts so paid shall be
repaid to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been entitled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits
(1) Amended and Restated Agreement and Declaration of Trust dated
November 18, 1993, is incorporated by reference to Exhibit
(1) to the Registrant's Post-Effective Amendment No. 42 on
Form N-1A, as filed on July 15, 1996.
C-1
<PAGE>
(2) Amended and Restated By-Laws dated November 21, 1996, are
incorporated by reference to Exhibit (2) to the Registrant's
Post-Effective Amendment No. 43 on Form N-1A, filed on
January 29, 1997.
(3) Inapplicable.
(4) Form of Agreement and Plan of Reorganization and Liquidation
is filed herewith.
(5) Inapplicable.
(6) Investment Advisory Agreement with Miller Anderson &
Sherrerd, LLP dated May 31, 1997, is incorporated by
reference to Exhibit (5)(b) to the Registrant's
Post-Effective Amendment No. 44 on Form N-1A, as filed on
June 13, 1997.
(7) Distribution Agreement with MAS Fund Distribution, Inc. dated
May 31, 1997, is incorporated by reference to Exhibit (6)(b)
to the Registrant's Post-Effective Amendment No. 50 on Form
N-1A, filed on July 10, 1998.
(8) Deferred Compensation Plan for MAS Funds Board of Trustees is
incorporated by reference to Exhibit 8(c) of the Registrant's
Post-Effective Amendment No. 44 on Form N-1A, filed on June
13, 1997.
(9)(a) Custodian Agreement between Registrant and Morgan Stanley
Trust Company dated September 1, 1993 is incorporated by
reference to Exhibit (8)(a) of Post-Effective Amendment No.
41 on Form N-1A, as filed on January 30, 1996, as originally
filed with Post-Effective Amendment No. 29 on Form N-1A on
December 27, 1993.
(9)(b) Custodian Agreement between Registrant and United States
Trust Company of New York dated July 22, 1994 is incorporated
by reference to Exhibit (8)(b) of Post-Effective Amendment
No. 41 on Form N-1A, as filed on January 30, 1996.
(9)(c) Amendment dated January 3, 1996 between Registrant and Morgan
Stanley Trust Company is incorporated by reference to Exhibit
(8)(c) of Post-Effective Amendment No. 41 on Form N-1A, as
filed on January 30, 1996.
(9)(d) Amendment dated July 22, 1994 to the Custody Agreement
between the Registrant and United States Trust Company of New
C-2
<PAGE>
York is incorporated by reference to Exhibit (8)(e) of
Post-Effective Amendment No. 46 on Form N-1A, as filed on
January 29, 1998.
(10)(a) Distribution Plan relating to the Adviser Class Shares and
pursuant to Rule 12b-1 is incorporated by reference to
Exhibit (15) of of Post-Effective Amendment No. 41 on Form
N-1A, as filed on January 30, 1996.
(10)(b) Rule 18f-3 Multiple Class Plan is incorporated by reference
to Exhibit (18) of Post-Effective Amendment No. 41, as filed
on January 30, 1996.
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP that
shares will be validly issued, fully paid and non-assessable
is incorporated by reference to Exhibit (11) of the Fund's
Registration Statement on Form N-14, as filed on September
10, 1998.
(12) Opinion and Consent of Morgan, Lewis & Bockius LLP as to tax
matters and consequences is incorporated by reference to
Exhibit (12) of the Fund's Registration Statement on Form
N-14, as filed on September 10, 1998.
(13)(a) Sub-Administration Agreement with MAS Funds and United States
Trust Company of New York dated November 18, 1993 is
incorporated by reference to Exhibit (9)(b) of the
Registrant's Post-Effective Amendment No. 46 on Form N-1A as
filed on January 29, 1998.
(13)(b) Transfer Agency Agreement with United States Trust Company of
New York dated November 18, 1993, as amended February 9, 1995
and November 18, 1996, is incorporated by reference to
Exhibit (9)(c) of the Registrant's Post-Effective Amendment
No. 46 on Form N-1A as filed on January 29, 1998.
(13)(c) Administrative Agreement with MAS Funds and Miller Anderson &
Sherrerd, LLP is incorporated by reference to Exhibit (9)(d)
of Post-Effective Amendment No. 43 on Form N-1A, as filed on
January 29, 1997.
(13)(d) Investment Class Shareholder Service Agreement is
incorporated by reference to Exhibit (15)(a) of
Post-Effective Amendment No. 41 on Form N-1A, as filed on
January 30, 1996.
(13)(e) Investment Class Service Provider Agreement is incorporated
by reference to Exhibit (15)(b) of Post-Effective Amendment
No. 41 on Form N-1A, as filed on January 30, 1996.
(14) Consent of PricewaterhouseCoopers LLP is filed herewith.
C-3
<PAGE>
(15) Inapplicable.
(16) Powers of Attorney for Joseph P. Healey, Joseph J. Kearns,
John H. Grady, Jr., Lorraine Truten, C. Oscar Morong, Jr.,
Thomas L. Bennett, James D. Schmid, Vincent R. McLean and
Thomas P. Gerrity are incorporated by reference to Exhibit
(24) of the Registrant's Post-Effective Amendment No. 46 on
Form N-1A, as filed January 29, 1998.
(17)(a) Prospectus for MAS Funds' Institutional Class Shares dated
January 31, 1998, as revised May 13, 1998, and as
supplemented October 9, 1998, is filed herewith.
(17)(b) Statement of Additional Information for MAS Funds dated
January 31, 1998 is incorporated by reference to Exhibit
(17)(b) of the Fund's Registration Statement on Form N-14, as
filed on September 10, 1998.
(17)(c) Audited Financial Statements dated September 30, 1997 for the
MAS Funds are incorporated by reference to Exhibit (17)(c) of
the Fund's Registration Statement on Form N-14, as filed on
September 10, 1998.
17(d) Unaudited Semi-Annual Financial Statements dated March 31,
1998 for the MAS Funds are incorporated by reference to
Exhibit (17)(d) of the Fund's Registration Statement on Form
N-14, as filed on September 10, 1998.
17(e) Supplement dated October 9, 1998 to the MAS Institutional
Class Prospectus dated January 31, 1998, as revised May 13,
1998, is filed herewith.
Item 17. Undertakings.
The registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
The registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 this Registration
Statement has been signed on behalf of the Registrant in Philadelphia on the
26th day of October, 1998.
MAS FUNDS
Registrant
By: *
------------------------------
James D. Schmid, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed below by the following persons in the capacity on the
dates indicated.
* Trustee October 26, 1998
- --------------------------
Thomas L. Bennett
* Trustee October 26, 1998
- --------------------------
Thomas P. Gerrity
* Trustee October 26, 1998
- --------------------------
Joseph P. Healey
* Trustee October 26, 1998
- --------------------------
Joseph J. Kearns
* Trustee October 26, 1998
- --------------------------
Vincent R. McLean
* Trustee October 26, 1998
- --------------------------
C. Oscar Morong, Jr.
* President October 26, 1998
- --------------------------
James D. Schmid
/s/ James A. Gallo Principal Financial October 26, 1998
- -------------------------- Officer
James A. Gallo
*By: /s/ John H. Grady, Jr.
----------------------
John H. Grady, Jr.
Attorney-in-Fact
C-5
<PAGE>
Exhibit Index
1 Amended and Restated Agreement and Declaration of Trust dated
November 18, 1993, is incorporated by reference to Exhibit
(1) to the Registrant's Post-Effective Amendment No. 42 on
Form N-1A, as filed on July 15, 1996.
2 Amended and Restated By-Laws dated November 21, 1996, are
incorporated by reference to Exhibit (2) to the Registrant's
Post-Effective Amendment No. 43 on Form N-1A, filed on
January 29, 1997.
3 Inapplicable
4 Form of Agreement and Plan of Reorganization and Liquidation
is filed herewith.
5 Inapplicable.
6 Investment Advisory Agreement with Miller Anderson &
Sherrerd, LLP dated May 31, 1997, is incorporated by
reference to Exhibit (5)(b) to the Registrant's
Post-Effective Amendment No. 44 on Form N-1A, as filed on
June 13, 1997.
7 Distribution Agreement with MAS Fund Distribution, Inc. dated
May 31, 1997, is incorporated by reference to Exhibit (6)(b)
to the Registrant's Post-Effective Amendment No. 50 on Form
N-1A, filed on July 10, 1998.
8 Deferred Compensation Plan for MAS Funds Board of Trustees is
incorporated by reference to Exhibit 8(c) of the Registrant's
Post-Effective Amendment No. 44 on Form N-1A, filed on June
13, 1997.
9(a) Custodian Agreement between Registrant and Morgan Stanley
Trust Company dated September 1, 1993 is incorporated by
reference to Exhibit (8)(a) of Post-Effective Amendment No.
41 on Form N-1A, as filed on January 30, 1996, as originally
filed with Post-Effective Amendment No. 29 on Form N-1A on
December 27, 1993.
9(b) Custodian Agreement between Registrant and United States
Trust Company of New York dated July 22, 1994 is incorporated
by reference to Exhibit (8)(b) of Post-Effective Amendment
No. 41 on Form N-1A, as filed on January 30, 1996.
9(c) Amendment dated January 3, 1996 between the Registrant and
Morgan Stanley Trust Company and is incorporated by reference
to Exhibit (8)(c) of of Post-Effective Amendment No. 41 on
Form N-1A, as filed on January 30, 1996.
C-6
<PAGE>
9(d) Amendment dated July 22, 1994 to the Custody Agreement
between the Registrant and United States Trust Company of New
York is incorporated by reference to Exhibit (8)(e) of
Post-Effective Amendment No. 46 on Form N-1A, as filed on
January 29, 1998.
10(a) Distribution Plan relating to the Adviser Class Shares and
pursuant to Rule 12b-1 is incorporated by reference to
Exhibit (15) of of Post-Effective Amendment No. 41 on Form
N-1A, as filed on January 30, 1996.
10(b) Rule 18f-3 Multiple Class Plan is incorpoirated by reference
to Exhibit 18 of Post-Effective Amendment No. 41, as filed on
January 30, 1996.
11 Opinion and Consent of Morgan, Lewis & Bockius LLP that
shares will be validly issued, fully paid and non-assessable
is incorporated by reference to Exhibit (11) of the Fund's
Registration Statement on Form N-14, as filed on September
10, 1998.
12 Opinion and Consent of Morgan, Lewis & Bockius LLP as to tax
matters and consequences is incorporated by reference to
Exhibit (12) of the Fund's Registration Statement on Form
N-14, as filed on September 10, 1998.
13(a) Sub-Administration Agreement with MAS Funds and United States
Trust Company of New York dated November 18, 1993 is
incorporated by reference to Exhibit (9)(b) of the
Registrant's Post-Effective Amendment No. 46 on Form N-1A as
filed on January 29, 1998.
13(b) Transfer Agency Agreement with United States Trust Company of
New York dated November 18, 1993, as amended Februay 9, 1995
and November 18, 1996, is incorporated by reference to
Exhibit (9)(c) of the Registrant's Post-Effective Amendment
No. 46 on Form N-1A as filed on January 29, 1998.
13(c) Administrative Agreement with MAS Funds and Miller Anderson &
Sherrerd, LLP is incorporated by reference to Exhibit (9)(d)
of Post-Effective Amendment No. 43 on Form N-1A, as filed on
January 29, 1997.
13(d) Investment Class Shareholder Service Agreement is
incorporated by reference to Exhibit (15)(a) of
Post-Effective Amendment No. 41 on Form N-1A, as filed on
January 30, 1996.
13(e) Investment Class Service Provider Agreement is incorporated
by reference to Exhibit (15)(b) of Post-Effective Amendment
No. 41 on Form N-1A, as filed on January 30, 1996.
14 Consent of PricewaterhouseCoopers LLP is filed herewith.
15 Inapplicable
C-7
<PAGE>
16 Powers of Attorney for Joseph P. Healey, Joseph J. Kearns,
John H. Grady, Jr., Lorraine Truten, C. Oscar Morong, Jr.,
Thomas L. Bennett, James D. Schmid, Vincent R. McLean and
Thomas P. Gerrity are incorporated by reference to Exhibit
(24) of the Registrant's Post-Effective Amendment No. 43 on
Form N-1A, as filed January 29, 1997.
17(a) Prospectus for MAS Funds' Institutional Class Shares dated
January 31, 1998, as revised May 13, 1998, and as
supplemented October 9, 1998, is filed herewith.
17(b) Statement of Additional Information for MAS Funds dated
January 31, 1998, is incorporated by reference to Exhibit
(17)(b) of the Fund's Registration Statement on Form N-14, as
filed on September 10, 1998.
17(c) Audited Financial Statements dated September 30, 1997 for the
MAS Funds is incorporated by reference to Exhibit (17)(c) of
the Fund's Registration Statement on Form N-14, as filed on
September 10, 1998.
17(d) Unaudited Semi-Annual Financial Statements dated March 31,
1998 for the MAS Funds are incorporated by reference to
Exhibit (17)(d) of the Fund's Registration Statement on Form
N-14, as filed on September 10, 1998.
17(e) Supplement dated October 9, 1998 to the MAS Institutional
Class Prospectus dated January 31, 1998, as revised May 13,
1998, is filed herewith.
C-8
<PAGE>
EXHIBIT 4
AGREEMENT AND PLAN
OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of
___________________ (the "Agreement"), by and between the MAS Funds Municipal
Portfolio (the "Acquiring Fund") and the MAS Funds PA Municipal Portfolio (the
"Acquired Fund").
WHEREAS, MAS Funds ("MAS") was organized under Pennsylvania law as a
business trust under a Declaration of Trust dated February 15, 1984, as amended
and restated; MAS Funds is an open-end management investment company registered
under the 1940 Act; and the Acquiring and Acquired Funds are duly organized and
validly existing series of MAS Funds;
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the parties hereto agree to effect (i) the transfer of all of the
assets of the Acquired Fund solely in exchange for (a) the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund and (b) beneficial
shares of the Acquiring Fund (Institutional Class Shares) followed by the
distribution, at the Effective Time (as defined in Section 9 of this Agreement),
of such beneficial shares of the Acquiring Fund to the holders of beneficial
shares of the Acquired Fund on the terms and conditions hereinafter set forth in
liquidation of the Acquired Fund. For convenience: the beneficial shares of the
Acquiring Fund that are given in exchange for the assets of the Acquired Fund
are referred to hereinafter as the "Acquiring Fund Shares"; and the beneficial
shares of the Acquired Fund that are held by the holders of such shares at the
Effective Time are referred to hereinafter as the "Acquired Fund Shares." The
parties hereto covenant and agree as follows:
1. Plan of Reorganization. At the Effective Time, the Acquired Fund
will assign, deliver and otherwise transfer all of its assets and good and
marketable title thereto, free and clear of all liens, encumbrances and adverse
claims except as provided in this Agreement, and assign all of its liabilities
as are set forth in a statement of assets and liabilities, to be prepared as of
the Effective Time (the "Statement of Assets and Liabilities") to the Acquiring
Fund and the Acquiring Fund shall acquire all such assets, and shall assume all
such liabilities of the Acquired Fund, in exchange for delivery to the Acquired
Fund by the Acquiring Fund of a number of its Acquiring Fund Shares (both full
and fractional) equivalent in value to the Acquired Fund Shares of the Acquired
Fund outstanding immediately prior to the Effective Time. The assets and stated
liabilities of the Acquired Fund, as set forth in a statement of assets and
liabilities shall be exclusively assigned to and assumed by the Acquiring Fund.
All debts, liabilities, obligations and duties of the Acquired Fund, to the
extent that they exist at or after the Effective Time and are stated in a
statement of assets and liabilities, shall after the Effective Time attach to
the Acquiring Fund and may be enforced against the Acquiring Fund to the same
extent as if the same had been incurred by the Acquiring Fund.
2. Transfer of Assets. The assets of the Acquired Fund to be acquired
by the Acquiring Fund shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable) as set forth in a statement of assets and liabilities, as well as
any claims or rights of action or rights to register shares under applicable
securities laws, any books or records of such Acquired Fund and other property
owned by such Acquired Fund at the Effective Time.
<PAGE>
3. Liquidation and Dissolution of the Acquired Fund. At the Effective
Time, the Acquired Fund will liquidate and the Acquiring Fund Shares (both full
and fractional) received by the Acquired Fund will be distributed to the
shareholders of record of the Acquired Fund as of the Effective Time in exchange
for Acquired Fund Shares and in complete liquidation of the Acquired Fund. Each
shareholder of the Acquired Fund will receive a number of Acquiring Fund Shares
equal in value to the Acquired Fund Shares held by that shareholder. Such
liquidation and distribution will be accompanied by the establishment of an open
account on the share records of the Acquiring Fund in the name of each
shareholder of record of the Acquired Fund and representing the respective
number of Acquiring Fund Shares due such shareholder. As soon as practicable
after the Effective Time, but not later than November 30, 1998, MAS shall take
all steps as shall be necessary and proper to effect a complete termination of
the Acquired Fund.
4. Representations and Warranties of the Acquiring Fund. The Acquiring
Fund represents and warrants to the Acquired Fund as follows:
(a) Shares to be Issued upon Reorganization. The Acquiring
Fund Shares to be issued in connection with the Reorganization
have been duly authorized and upon consummation of the
Reorganization will be validly issued, fully paid and
nonassessable.
(b) Liabilities. There are no liabilities of the Acquiring
Fund, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Acquiring Fund's
statement of assets and liabilities, if any, and liabilities
incurred in the ordinary course of business prior to the
Effective Time or otherwise previously disclosed to the
Acquired Fund, none of which has been materially adverse to
the business, assets or results of operations of the Acquiring
Fund.
(c) Litigation. Except as previously disclosed to the Acquired
Fund, there are no claims, actions, suits or proceedings
pending or, to the actual knowledge of the Acquiring Fund,
threatened which would materially adversely affect any of the
Acquiring Fund or its assets or business or which would
prevent or hinder in any material respect consummation of the
transactions contemplated hereby.
(d) Taxes. As of the Effective Time, all Federal and other tax
returns and reports of the Acquiring Fund required by law to
have been filed shall have been filed, and all other taxes
shall have been paid so far as due, or provision shall have
been made for the payment thereof, and to the best of the
Acquiring Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to any
of such returns.
5. Representations and Warranties of the Acquired Fund. The Acquired
Fund represents and warrants to the Acquiring Fund as follows:
(a) Marketable Title to Assets. The Acquired Fund will have,
at the Effective Time, good and marketable title to, and full
right, power and authority to sell, assign, transfer and
deliver, the assets to be transferred to the Acquiring Fund.
Upon delivery and payment for such assets, the Acquiring Fund
will have good and marketable title to such assets without
restriction on the transfer thereof free and clear of all
liens, encumbrances and adverse claims.
2
<PAGE>
(b) Liabilities. There are no liabilities of the Acquired
Fund, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Acquired Fund's
statement of assets and liabilities, and liabilities incurred
in the ordinary course of business prior to the Effective Time
or otherwise previously disclosed to the Acquiring Fund, none
of which has been materially adverse to the business, assets
or results of operations of the Acquired Fund.
(c) Litigation. Except as previously disclosed to the
Acquiring Fund, there are no claims, actions, suits or
proceedings pending or, to the knowledge of the Acquired Fund,
threatened which would materially adversely affect the
Acquired Fund or its assets or business or which would prevent
or hinder in any material respect consummation of the
transactions contemplated hereby.
(d) Taxes. As of the Effective Time, all Federal and other tax
returns and reports of the Acquired Fund required by law to
have been filed shall have been filed, and all other taxes
shall have been paid so far as due, or provision shall have
been made for the payment thereof, and to the best of the
Acquired Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to any
of such returns.
6. Condition Precedent to Obligations of the Acquiring Fund. All
representations and warranties of the Acquired Fund contained in this Agreement
shall be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time, with the same force and effect as if made
on and as of the Effective Time.
7. Condition Precedent to Obligations of the Acquired Fund. All
representations and warranties of the Acquiring Fund contained in this Agreement
shall be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time, with the same force and effect as if made
on and as of the Effective Time.
8. Further Conditions Precedent to Obligations of the Acquired Fund and
the Acquiring Fund. The obligations of the Acquired Fund and the Acquiring Fund
to effectuate this Agreement shall be subject to the satisfaction of each of the
following conditions:
(a) Such authority from the Securities and Exchange Commission
(the "SEC") as may be necessary to permit the parties to carry
out the transactions contemplated by this Agreement shall have
been received.
(b) The Registration Statement on Form N-1A of the Acquiring
Fund shall be effective under the Securities Act of 1933 (the
"1933 Act"), and, to the best knowledge of the Acquiring Fund,
no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated
under the 1933 Act.
(c) The Acquiring Fund has filed all documents and paid all
fees required to permit their shares to be offered to the
public in all states of the United States, the Commonwealth of
Puerto Rico and the District of Columbia (except where such
qualifications are not required) so as to permit the transfer
contemplated by this Agreement to be consummated.
3
<PAGE>
(d) The Acquired Fund and the Acquiring Fund shall have
received on or before the Effective Time an opinion of counsel
satisfactory to the Acquired Fund and the Acquiring Fund
substantially to the effect that for Federal income tax
purposes:
(1) No gain or loss will be recognized to the
Acquired Fund upon the transfer of its assets in
exchange solely for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of the Acquired
Fund's stated liabilities;
(2) No gain or loss will be recognized to the
Acquiring Fund on its receipt of the Acquired Fund's
assets in exchange for the Acquiring Fund Shares and
the assumption by the Acquiring Fund of the Acquired
Fund's liabilities;
(3) The basis of an Acquired Fund's assets in the
Acquiring Fund's hands will be the same as the basis
of those assets in the Acquired Fund's hands
immediately before the conversion;
(4) The Acquiring Fund's holding period for the
assets transferred to the Acquiring Fund by the
Acquired Fund will include the holding period of
those assets in the Acquired Fund's hands immediately
before the conversion;
(5) No gain or loss will be recognized to the
Acquired Fund on the distribution of the Acquiring
Fund Shares to the Acquired Fund's shareholders in
exchange for their Acquired Fund Shares;
(6) No gain or loss will be recognized to the
Acquired Fund's shareholders as a result of the
Acquired Fund's distribution of Acquiring Fund Shares
to the Acquired Fund's shareholders in exchange for
the Acquired Fund's shareholders' Acquired Fund
Shares;
(7) The basis of the Acquiring Fund Shares received
by the Acquired Fund's shareholders will be the same
as the adjusted basis of that Acquired Fund's
shareholders' Acquired Fund Shares surrendered in
exchange therefor; and
(8) The holding period of the Acquiring Fund Shares
received by the Acquired Fund's shareholders will
include the Acquired Fund's shareholders' holding
period for the Acquired Fund's shareholders' Acquired
Fund Shares surrendered in exchange therefor,
provided that said Acquired Fund Shares were held as
capital assets on the date of the conversion.
(e) A vote approving this Agreement and the Reorganization
contemplated hereby shall have been adopted by at least a
majority of the outstanding shares of the Acquired Fund
entitled to vote at an annual or special meeting.
(f) The Board of Trustees of MAS, at a meeting duly called for
such purpose, shall have authorized the issuance by the
Acquiring Fund of Acquiring Fund Shares at the Effective Time
in exchange for the assets of the Acquired Fund pursuant to
the terms and provisions of this Agreement.
4
<PAGE>
9. Effective Time of the Reorganization. The exchange of the Acquired
Fund's assets for Acquiring Fund Shares shall be effective as of close of
business on November 13, 1998, or at such other time and date as fixed by the
mutual consent of the parties (the "Effective Time").
10. Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned with respect to the Acquiring Fund and/or
the Acquired Fund without penalty by resolution of the Board of Trustees of MAS
Funds or at the discretion of any duly authorized officer of MAS Funds, at any
time prior to the Effective Time, if circumstances should develop that, in the
opinion of such Board or officer, make proceeding with the Agreement
inadvisable.
11. Amendment and Waiver. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in writing by the
parties; PROVIDED, that no such amendment may have the effect of changing the
provisions for determining the number or value of Acquiring Fund Shares to be
paid to the Acquired Fund's shareholders under this Agreement to the detriment
of the Acquired Fund's shareholders without their further approval. Furthermore,
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the President or any Vice President of the waiving party with or
without the approval of such party's shareholders).
12. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
13. Fees and Expenses.
(a) The Acquiring Fund and the Acquired Fund represents and
warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the
transactions provided for herein.
(b) Except as otherwise provided for herein, all expenses of
the transactions contemplated by this Agreement incurred by
each Fund will be borne by such Fund. Such expenses include,
without limitation, (i) expenses incurred in connection with
the entering into and the carrying out of the provisions of
this Agreement; (ii) expenses associated with the preparation
and filing of the Proxy Statement under the Securities
Exchange Act of 1934; (iii) registration or qualification fees
and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify
the Acquiring Fund Shares to be issued in connection herewith
in each state in which the Acquired Fund's shareholders are
resident as of the date of the mailing of the Proxy Statement
to such shareholders; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees; and (viii) solicitation
costs of the transaction. The Acquiring Fund shall pay its own
Federal and state registration fees.
14. Headings, Counterparts, Assignment.
(a) The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not effect
in any way the meaning or interpretation of this Agreement.
5
<PAGE>
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors
and assigns, but no assignment or transfer hereof or of any
rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation other than
the parties hereto and their respective successors and assigns
any rights or remedies under or by reason of this Agreement.
15. Entire Agreement. The Acquiring Fund and the Acquired Fund agree
that neither party has made any representation, warranty or covenant not set
forth herein and that this Agreement constitutes the entire agreement between
the parties. The representations, warranties and covenants contained herein or
in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
16. Further Assurances. The Acquiring Fund and the Acquired Fund shall
take such further action as may be necessary or desirable and proper to
consummate the transactions contemplated hereby.
17. Binding Nature of Agreement. As provided in the MAS Funds
Declaration of Trust, as amended and supplemented to date, on file with the
Pennsylvania Corporation Bureau of the Department of State, this Agreement was
executed by the undersigned officers of MAS Funds, on behalf of the Acquiring
Fund and the Acquired Fund, as officers and not individually, and the
obligations of this Agreement are not binding upon the undersigned officers
individually, but are binding only upon the assets and property of the
corporation or trust. Moreover, no series of a trust shall be liable for the
obligations of any other series of that trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MAS Funds, on behalf of its series, PA Municipal Portfolio
By
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
MAS Funds, on behalf of its series, Municipal Portfolio
By
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
6
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus/Proxy
Statement and Statement of Additional Information constituting parts of this
registration statement on Form N-14 (the "Registration Statement") of our report
dated November 20, 1997, relating to the financial statements and financial
highlights of MAS PA Municipal Portfolio and MAS Municipal Portfolio, each a
portfolio constituting part of MAS Funds, appearing in the September 30, 1997
Annual Report to Shareholders of twenty-two of the twenty-four portfolios of MAS
Funds, which financial statements and financial highlights are also incorporated
by reference into this Registration Statement. We also consent to the reference
to us in relation to MAS Funds appearing under the heading "Additional
Information About the Portfolios" in the Prospectus/Proxy Statement which is
part of the Registration Statement. We also consent to the references to us
under the heading "Financial Highlights" included in the Prospectus
(Institutional Class Shares, dated January 31, 1998 as supplemented through
March 16, 1998) of MAS Funds, and under the heading "Financial Statements"
included in the Statement of Additional Information of MAS Funds dated January
31, 1998, all of which are incorporated by reference into the Registration
Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 27, 1998
<PAGE>
MAS
---
MAS FUNDS INSTITUTIONAL CLASS PROSPECTUS
JANUARY 31, 1998
AS REVISED MAY 13, 1998
Client Services: 1-800-354-8185 Prices and Investment Results: 1-800-522-1525
MAS FUNDS (the Fund) is a no-load mutual fund consisting of twenty-eight
portfolios, twenty-five of which are described in this Prospectus. The Fund's
Small Cap Value Portfolio is not currently being offered to new investors. This
Prospectus offers the Institutional Class Shares of these twenty-five
portfolios.
SHARES OF THE CASH RESERVES PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THE PORTFOLIO SEEKS TO MAINTAIN, BUT THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN, A CONSTANT NET ASSET VALUE OF $1.00
PER SHARE.
The High Yield Portfolio will invest primarily, and certain other portfolios of
the Fund may invest to varying degrees, in high yield, high risk securities
which are speculative with regard to payment of interest and return of principal
(commonly referred to as junk bonds); therefore, investments in these portfolios
may not be suitable for all investors. See High Yield Investing in the Glossary
of Strategies for additional information regarding certain risks associated with
investment in such securities.
PORTFOLIO PAGE REFERENCE
<TABLE>
<S> <C> <C> <C> <C> <C>
HOW TO USE THIS PROSPECTUS: 3 FIXED INCOME:
Cash Reserves 21 BALANCED:
PORTFOLIO SUMMARIES: Domestic Fixed Income 22 Balanced 35
EQUITY: Fixed Income 23 Balanced Plus 36
Emerging Markets Value 16 Fixed Income II 24 Multi-Asset-Class 37
Equity 16 Global Fixed Income 25
Growth 17 High Yield 26 PROSPECTUS GLOSSARY:
International Equity 17 Intermediate Duration 27 Strategies 38
Mid Cap Growth 18 International Fixed Income 28 Investments 42
Mid Cap Value 18 Limited Duration 29
Small Cap Value 19 Mortgage-Backed Securities 30 GENERAL SHAREHOLDER
Value 20 Multi-Market Fixed Income 31 INFORMATION: 53
Municipal 32
PA Municipal 33 TABLE OF CONTENTS: Back Cover
Special Purpose Fixed Income 34
</TABLE>
This Prospectus, which should be retained for future reference, sets forth
concisely information that you should know before you invest. A Statement of
Additional Information containing additional information about the Fund has been
filed with the Securities and Exchange Commission. Such Statement is dated
January 31, 1998 as revised from time to time, and has been incorporated by
reference into this Prospectus. A copy of the Statement may be obtained, without
charge, by writing to the Fund or by calling the Client Services Group at the
telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Miller
Anderson
& Sherrerd, LLP ONE TOWER BRIDGE * WEST CONSHOHOCKEN, PA 19428 * 800-354-8185
<PAGE>
EXPENSE SUMMARY - INSTITUTIONAL CLASS SHARES
The following tables illustrate the various expenses and fees that a shareholder
in a portfolio will incur either directly or indirectly. The Adviser may from
time to time waive fees or reimburse expenses thereby reducing total operating
expenses.
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fees None
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets after fee waivers)
12b-1 Fees None
Shareholder Servicing Fee None
<TABLE>
<CAPTION>
INVESTMENT TOTAL
ADVISORY OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets Value (formerly, Emerging Markets) 0.503%* 0.677% 1.180%
Equity 0.500 0.100 0.600
Growth 0.500 0.100** 0.600
International Equity 0.500 0.150 0.650
Mid Cap Growth 0.500 0.130 0.630
Mid Cap Value 0.750 0.130 0.880
Small Cap Value 0.750 0.100 0.850
Value 0.500 0.100 0.600
Cash Reserves 0.204* 0.116 0.320
Domestic Fixed Income 0.375 0.125 0.500
Fixed Income 0.375 0.105 0.480
Fixed Income II 0.375 0.125 0.500
Global Fixed Income 0.375 0.195 0.570
High Yield 0.375 0.125 0.500
Intermediate Duration 0.375 0.125 0.500
International Fixed Income 0.375 0.155 0.530
Limited Duration 0.300 0.120 0.420
Mortgage-Backed Securities 0.318* 0.182 0.500
Multi-Market Fixed Income 0.350* 0.230** 0.580
Municipal 0.352* 0.148 0.500
PA Municipal 0.281* 0.219 0.500
Special Purpose Fixed Income 0.375 0.105 0.480
Balanced 0.450 0.130 0.580
Balanced Plus 0.550 0.150** 0.700
Multi-Asset-Class 0.594* 0.186 0.780
</TABLE>
The Total Operating Expense ratios reflected in the table above may be
higher than the ratio of expenses actually deducted from portfolio assets
because of the effect of expense offset arrangements. The result of such
arrangements is to offset expenses that otherwise would be deducted from
portfolio assets. Amounts in the above table have been restated to reflect
current fees and expenses.
*Until further notice, the Adviser has voluntarily agreed to waive its
advisory fees and/or reimburse certain expenses to the extent necessary to
keep Total Operating Expenses actually deducted from portfolio assets for the
Emerging Markets Value, Cash Reserves, Mortgage-Backed Securities, Municipal,
PA Municipal, Multi-Market Fixed Income and Multi-Asset-Class Portfolios from
exceeding 1.18%, 0.32%, 0.50%, 0.50%, 0.50%, 0.58% and 0.78%, respectively.
Absent such waivers and/or reimbursements by the Adviser, Total Operating
Expenses would be 1.427%, 0.366%, 0.557%, 0.523%, 0.594%, 0.680% and 0.836%,
for the Emerging Markets Value, Cash Reserves, Mortgage-Backed Securities,
Municipal, PA Municipal, Multi-Market Fixed Income and Multi-Asset-Class
Portfolios, respectively.
**Other expenses are based on estimated amounts for the current year.
- -------------------------------------------------------------------------------
MAS Fund - 2 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
EXAMPLE
The purpose of this table is to assist in understanding the various expenses
that a shareholder in a portfolio will bear directly or indirectly. The
following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return, and (2) redemption at the end of each time period. The example should
not be considered a representation of past or future expenses and actual
expenses may be greater or less than those shown. For portfolios with less than
10 months of operations, only the 1 and 3 year examples are shown, which are
based on estimated expenses.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Value
(formerly, Emerging Markets) $12 $37 $65 $143
Equity 6 19 33 75
Growth 6 19 -- --
International Equity 7 21 36 81
Mid Cap Growth 6 20 35 79
Mid Cap Value 9 28 49 108
Small Cap Value 9 27 47 105
Value 6 19 33 75
Cash Reserves 3 10 18 41
Domestic Fixed Income 5 16 28 63
Fixed Income 5 15 27 60
Fixed Income II 5 16 28 63
Global Fixed Income 6 18 32 71
High Yield 5 16 28 63
Intermediate Duration 5 16 28 63
International Fixed Income 5 17 30 66
Limited Duration 4 13 24 53
Mortgage-Backed Securities 5 16 28 63
Multi-Market Fixed Income 6 19 -- --
Municipal 5 16 28 63
PA Municipal 5 16 28 63
Special Purpose Fixed Income 5 15 27 60
Balanced 6 19 32 73
Balanced Plus 7 22 -- --
Multi-Asset-Class 8 25 43 97
</TABLE>
HOW TO USE THIS PROSPECTUS
A PROSPECTUS SUMMARY begins on page 4;
FINANCIAL HIGHLIGHTS and a description of YIELD AND TOTAL RETURN begin on
page 6;
GENERAL INFORMATION including INVESTMENT LIMITATIONS pertinent to all
portfolios begins on page 14;
SUMMARY PAGES for each portfolio's Objective, Policies and Strategies begin
on page 16;
The PROSPECTUS GLOSSARY which defines specific Allowable Investments, Policies
and Strategies printed in bold type throughout this Prospectus begins on page
38; and
GENERAL SHAREHOLDER INFORMATION begins on page 53.
- -------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 3
<PAGE>
SUMMARY INFORMATION:
The following information relates to each portfolio of the Fund and should be
read in conjunction with the specific information about each portfolio.
OBJECTIVES: Each portfolio seeks to achieve its investment objective relative to
the universe of securities in which it is authorized to invest and, accordingly,
the total return or current income achieved by a portfolio may not be as great
as that achieved by another portfolio that can invest in a broader range of
securities. Fixed income portfolios will seek to produce total return by
actively trading portfolio securities. The objective of each portfolio is
fundamental and may only be changed with approval of holders of a majority of
the shares of each portfolio. The achievement of any portfolio's objective
cannot be assured.
The Global Fixed Income, International Fixed Income and Emerging Markets Value
Portfolios are Non-Diversified for purposes of the Investment Company Act of
1940 (the "1940 Act"), meaning that they may invest a greater percentage of
assets in the securities of one issuer than the other portfolios. Each other
portfolio is diversified.
RISK FACTORS: Prospective investors in the Fund should consider the following
factors as they apply to each Portfolio's allowable investments and policies.
See the Prospectus Glossary for more information on terms printed in BOLD TYPE:
o Each portfolio may invest in REPURCHASE AGREEMENTS, which entail a risk of
loss should the seller default in its obligation to repurchase the security
which is the subject of the transaction;
o Each portfolio may participate in a SECURITIES LENDING program which entails
a risk of loss should a borrower fail financially;
o FIXED-INCOME SECURITIES will be affected by general changes in interest
rates resulting in increases or decreases in the value of the obligations
held by a portfolio. The value of FIXED-INCOME SECURITIES can be expected to
vary inversely to changes in prevailing interest rates, i.e., as interest
rates decline, market value tends to increase and vice versa. Certain FIXED
INCOME SECURITIES may be highly sensitive to interest rate changes, and
highly sensitive to the rate of principal payments (including prepayments on
underlying mortgage assets). Investments in securities rated below investment
grade, generally referred to as HIGH YIELD, high risk or junk bonds, carry a
high degree of credit risk and are considered speculative by the major rating
agencies;
o Investment in smaller capitalization companies may involve greater risk than
that customarily associated with investments in larger, more established
companies. Smaller companies may have more limited markets and financial
recources, narrow product lines or lack of depth of management. The
securities of smaller companies are often traded in the over-the-counter
market and, if listed on a national securities exchange, may not be traded in
volumes typical for that exchange. Thus, the securities of smaller-sized
companies may be less liquid, and subject to more abrupt or erratic market
movements than securities of larger, more established growth companies;
o COMMON STOCKS are subject to market risks which may cause their prices to
fluctuate over time. Changes in the value of portfolio securities will not
necessarily affect cash income derived from these securities, but will affect
a portfolio's net asset value;
o Investments in foreign securities involve certain special considerations
which are not typically associated with investing in U.S. companies.
Portfolios investing in foreign securities may also engage in foreign
currency exchange transactions. See FORWARDS, FUTURES & OPTIONS, and SWAPS;
o Securities purchased on a WHEN-ISSUED basis may decline or appreciate in
market value prior to their actual delivery to the portfolio;
- -------------------------------------------------------------------------------
MAS Fund - 4 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
o Each portfolio, except the Cash Reserves Portfolio, may invest a portion of
its assets in DERIVATIVES including FUTURES & OPTIONS. Futures contracts,
options and options on futures contracts entail certain costs and risks,
including imperfect correlation between the value of the securities held by
the portfolio and the value of the particular derivative instrument, and the
risk that a portfolio could not close out a futures or options position when
it would be most advantageous to do so;
o Each portfolio, except the Cash Reserves Portfolio may invest in certain
instruments such as FORWARDS, certain types of FUTURES & OPTIONS, certain
types of MORTGAGE SECURITIES and WHEN-ISSUED SECURITIES which require the
portfolio to segregate some or all of its cash or liquid securities to cover
its obligations pursuant to such instruments. As asset segregation reaches
certain levels, a portfolio may lose flexibility in managing its investments
properly, responding to shareholder redemption requests, or meeting other
obligations and may be forced to sell other securities that it wanted to
retain or to realize unintended gains or losses; and
o From time to time Congress has considered proposals to restrict or eliminate
the tax-exempt status of MUNICIPALS. If such proposals were enacted in the
future, the Municipal Portfolio and the PA Municipal Portfolio would
reconsider their investment objectives and policies.
HOW TO INVEST: Institutional Class Shares of each portfolio are available to
clients of the Adviser with combined investments of $5,000,000 and Shareholder
Organizations who have a contractual arrangement with the Fund or the Fund's
Distributor, including institutions such as trusts, foundations or
broker-dealers purchasing for the accounts of others. Shares are offered
directly to investors without a sales commission at the net asset value of the
portfolio next determined after receipt of the order. Share purchases may be
made by sending investments directly to the Fund, subject to acceptance by the
Fund. The Fund also offers Investment and Adviser Class Shares which differ from
the Institutional Class Shares in expenses charged and purchase requirements.
Further information relating to the other classes may be obtained by calling
800-354-8185.
HOW TO REDEEM: Shares of each portfolio may be redeemed at any time at the net
asset value of the portfolio next determined after receipt of the redemption
request. The redemption price may be more or less than the purchase price,
except ordinarily in the case of the Cash Reserves Portfolio which seeks to
maintain, but does not guarantee, a constant net asset value per share of $1.00.
See Redemption of Shares and Shareholder Services.
THE FUND'S INVESTMENT ADVISER: Miller Anderson & Sherrerd, LLP (the "Adviser")
is a Pennsylvania limited liability partnership founded in 1969, wholly owned by
indirect subsidiaries of Morgan Stanley Dean Witter & Co., and is located at One
Tower Bridge, West Conshohocken, PA 19428. The Adviser provides investment
counseling services to employee benefit plans, endowments, foundations and other
institutional investors, and as of December 31, 1997 had in excess of $59.4
billion in assets under management.
THE FUND'S DISTRIBUTOR: MAS Fund Distribution, Inc. (the "Distributor")
provides distribution services to the Fund.
- -------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 5
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
Selected per share data and ratios for a share outstanding
throughout each period
The following information should be read in conjunction with the Fund's
financial statements which are included in the Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information. The Fund's
financial statements for the year ended September 30, 1997 have been examined by
Price Waterhouse LLP whose opinion thereon (which was unqualified) is also
incorporated by reference in the Statement of Additional Information. As of the
fiscal year ended September 30, 1997, the Growth, Balanced Plus, and
Multi-Market Fixed Income Portfolios had not commenced operations. (Data is
adjusted to reflect a 2.5 for 1 share split as of August 13, 1993 for all
portfolios in operation as of that date, except for the Global Fixed Income
Portfolio.)
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN NET ASSET
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS VALUE-
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER TOTAL END OF
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS VALUE PORTFOLIO (FORMERLY, THE EMERGING MARKETS PORTFOLIO)
(COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 2/28/95)
1997 $11.52 $0.16 $1.73 $1.89 ($0.20) ($0.80) -- ($1.00) $12.41
1996 11.63 0.19 0.45 0.64 (0.17) (0.58) -- (0.75) (11.52)
1995 10.00 0.10 1.53 1.63 -- -- -- -- 11.63
EQUITY PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/14/84)
1997 $25.67 $0.36 $8.22 $8.58 ($0.40) ($4.40) -- ($4.80) $29.45
1996 24.43 0.50 3.26 3.76 (0.50) (2.02) -- (2.52) 25.67
1995 21.05 0.52 4.55 5.07 (0.52) (1.17) -- (1.69) 24.43
1994 22.82 0.44 0.41 0.85 (0.41) (2.21) -- (2.62) 21.05
1993 22.04 0.41 1.95 2.36 (0.43) (1.15) -- (1.58) 22.82
1992 20.78 0.43 1.86 2.29 (0.42) (0.61) -- (1.03) 22.04
1991 15.86 0.44 5.64 6.08 (0.44) (0.72) -- (1.16) 20.78
1990 18.65 0.48 (2.57) (2.09) (0.54) (0.16) -- (0.70) 15.86
1989 14.48 0.51 4.15 4.66 (0.46) (0.03) -- (0.49) 18.65
1988 17.14 0.40 (1.93) (1.53) (0.32) (0.81) -- (1.13) 14.48
INTERNATIONAL EQUITY PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/25/88)
1997+++ $13.24 $0.25 $2.71 $2.96 ($0.26) ($0.27) -- ($0.53) $15.67
1996 12.51 0.31 0.77 1.08 (0.29) (0.06) -- (0.35) 13.24
1995 14.52 0.19 (0.75) (0.56) -- (1.35) ($0.10)# (1.45) 12.51
1994 13.18 0.12 1.63 1.75 (0.16) (0.25) -- (0.41) 14.52
1993 11.03 0.21 2.14 2.35 (0.20) -- -- (0.20) 13.18
1992 11.56 0.36 (0.33) 0.03 (0.56) -- -- (0.56) 11.03
1991 9.83 0.22 1.83 2.05 (0.23) (0.09) -- (0.32) 11.56
1990 11.86 0.26 (1.90) (1.64) (0.31) (0.08) -- (0.39) 9.83
1989 10.00 0.26 1.75 2.01 (0.15) -- -- (0.15) 11.86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS- RATIO OF RATIO OF
END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS VALUE PORTFOLIO (FORMERLY, THE EMERGING MARKETS PORTFOLIO)
(COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 2/28/95)
1997 18.08% $22,808 1.18%++ 1.30% 64% $0.0019
1996 6.21% 32,984 1.18++ 1.62 108 0.0014
1995 16.30 42,459 1.18*++ 2.04* 63 --
EQUITY PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/14/84)
1997 38.46% $1,312,547 0.60% 1.30% 85% $0.0294
1996 16.48 1,442,261 0.60 1.95 67 0.0557
1995 26.15 1,597,632 0.61 2.39 67 --
1994 4.11 1,193,017 0.60 2.10 41 --
1993 11.05 1,098,003 0.59 1.86 51 --
1992 11.55 918,989 0.59 2.03 21 --
1991 40.18 675,487 0.60 2.36 33 --
1990 (11.67) 473,261 0.59 2.66 44 --
1989 32.95 602,261 0.59 3.29 29 --
1988 (8.41) 385,864 0.62 2.99 51 --
INTERNATIONAL EQUITY PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/25/88)
1997+++ 23.16% $649,755 0.66% 1.81% 62% $0.0035
1996 8.87 635,706 0.69 1.88 78 0.0093
1995 (3.36) 1,160,986 0.70 1.90 112 --
1994 13.33 1,132,867 0.64 0.89 69 --
1993 21.64 891,675 0.66 1.23 43 --
1992 0.37 512,127 0.70 1.41 42 --
1991 21.22 274,295 0.67 2.08 51 --
1990 (14.38) 126,035 0.65 2.40 45 --
1989 20.36 87,083 0.63* 3.05* 4 --
</TABLE>
- -------------------------------------------------------------------------------
MAS Fund - 6 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN NET ASSET
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS VALUE-
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER TOTAL END OF
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MID CAP GROWTH PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/30/90)
1997 $20.53 ($0.01) $4.75 $4.74 -- ($3.43) -- ($3.43) $21.84
1996 18.60 0.01 4.70 4.71 (0.03) (2.75) -- (2.78) 20.53
1995 16.29 0.03 4.21 4.24 (0.03) (1.90) -- (1.93) 18.60
1994 18.56 0.02 (0.58) (0.56) (0.01) (1.70) -- (1.71) 16.29
1993 14.51 0.01 4.80 4.81 -- (0.76) -- (0.76) 18.56
1992 14.92 0.01 0.44 0.45 (0.03) (0.83) -- (0.86) 14.51
1991 9.00 0.04 5.91 5.95 (0.03) -- -- (0.03) 14.92
1990 10.00 0.02 (1.01) (0.99) (0.01) -- -- (0.01) 9.00
MID CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 12/30/94)
1997+++ $14.49 $0.05 $8.37 $8.42 ($0.10) ($1.01) -- ($1.11) $21.80
1996 13.45 0.11 2.52 2.63 (0.55) (1.04) -- (1.59) 14.49
1995 10.00 0.55### 2.90 3.45 -- -- -- -- 13.45
SMALL CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/01/86)
1997 $19.64 $0.15 $8.39 $8.54 ($0.11) ($3.10) -- ($3.21) $24.97
1996 18.28 0.18 3.62 3.80 (0.20) (2.24) -- (2.44) 19.64
1995 17.67 0.19 2.49 2.68 (0.14) (1.93) -- (2.07) 18.28
1994 17.55 0.16 1.14 1.30 (0.24) (0.94) -- (1.18) 17.67
1993 12.84 0.18 4.64 4.82 (0.11) -- -- (0.11) 17.55
1992 11.45 0.10 1.48 1.58 (0.19) -- -- (0.19) 12.84
1991 7.20 0.23 4.21 4.44 (0.19) -- -- (0.19) 11.45
1990 10.42 0.28 (3.05) (2.77) (0.45) -- -- (0.45) 7.20
1989 8.54 0.34 1.74 2.08 (0.20) -- -- (0.20) 10.42
1988 10.24 0.18 (1.42) (1.24) (0.14) (0.32) -- (0.46) 8.54
VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/05/84)
1997+++ $15.61 $0.34 $5.75 $6.09 ($0.30) ($1.03) -- ($1.33) $20.37
1996 14.89 0.30 2.20 2.50 (0.32) (1.46) -- (1.78) 15.61
1995 12.63 0.31 3.34 3.65 (0.31) (1.08) -- (1.39) 14.89
1994 12.76 0.30 0.59 0.89 (0.29) (0.73) -- (1.02) 12.63
1993 12.67 0.30 1.92 2.22 (0.31) (1.82) -- (2.13) 12.76
1992 12.92 0.35 1.05 1.40 (0.38) (1.27) -- (1.65) 12.67
1991 10.29 0.44 3.79 4.23 (0.44) (1.16) -- (1.60) 12.92
1990 14.56 0.52 (3.14) (2.62) (0.62) (1.03) -- (1.65) 10.29
1989 12.42 0.54 2.73 3.27 (0.47) (0.66) -- (1.13) 14.56
1988 15.81 0.48 (1.68) (1.20) (0.46) (1.73) -- (2.19) 12.42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS- RATIO OF RATIO OF
END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MID CAP GROWTH PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/30/90)
1997 28.05% $446,963 0.63% (0.07%) 134% $0.0514
1996 28.81 403,281 0.60 0.04 141 0.0491
1995 30.56 373,547 0.61 0.21 129 --
1994 (3.28) 302,995 0.60 0.12 55 --
1993 33.92 309,459 0.59 0.07 69 --
1992 2.87 192,817 0.60 0.05 39 --
1991 66.26 171,163 0.60 0.29 46 --
1990 (9.98) 76,398 0.64* 0.34* 23 --
MID CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 12/30/94)
1997+++ 61.40% $220,260 0.90%++ 0.28% 184% $0.0467
1996 22.30 50,449 0.88++ 1.61 377 $0.0462
1995 34.50 4,507 0.93*++ 10.13*### 639### --
SMALL CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/01/86)
1997 49.81% $897,396 0.86% 0.70% 107% $0.0480
1996 24.00 585,457 0.86 0.99 145 0.0498
1995 18.39 430,368 0.87 1.20 119 --
1994 8.04 308,156 0.88 0.91 162 --
1993 37.72 175,029 0.88 1.33 93 --
1992 14.12 105,886 0.86 1.06 50 --
1991 63.07 52,182 0.88 1.70 53 --
1990 (27.63) 100,848 0.85 1.77 59 --
1989 24.85 189,223 0.85 3.48 36 --
1988 (11.50) 202,500 0.86 2.32 41 --
VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/05/84)
1997+++ 41.25% $3,542,772 0.62% 1.93% 46% $0.0577
1996 18.41 1,844,740 0.61 2.07 53 0.0572
1995 32.58 1,271,586 0.60 2.43 56 --
1994 7.45 981,337 0.61 2.40 54 --
1993 19.67 762,175 0.59 2.48 43 --
1992 12.83 448,329 0.60 2.87 55 --
1991 45.54 458,117 0.60 3.67 64 --
1990 (19.88) 369,044 0.59 3.87 51 --
1989 28.49 726,776 0.59 4.05 35 --
1988 (5.40) 619,287 0.59 3.96 47 --
</TABLE>
- -------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 7
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN NET ASSET
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS VALUE-
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER TOTAL END OF
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH RESERVES PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 8/29/90)
1997 $1.000 $.052 -- $.052 ($.052) -- -- ($.052) $1.000
1996 1.000 .052 -- .052 (.052) -- -- (.052) 1.000
1995 1.000 .055 -- .055 (.055) -- -- (.055) 1.000
1994 1.000 .034 -- .034 (.034) -- -- (.034) 1.000
1993 1.000 .028 -- .028 (.028) -- -- (.028) 1.000
1992 1.000 .038 -- .038 (.038) -- -- (.038) 1.000
1991 1.000 .064 -- .064 (.064) -- -- (.064) 1.000
1990 1.000 .007 -- .007 (.007) -- -- (.007) 1.000
DOMESTIC FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 9/30/87)
1997 $10.89 $0.74 $0.33 $1.07 ($0.67) ($0.02) -- ($0.69) $11.27
1996 11.03 0.56 (0.09) 0.47 (0.57) -- (0.04)# (0.61) 10.89
1995 9.87 0.52 0.87 1.39 (0.23) -- -- (0.23) 11.03
1994 11.99 0.94 (1.23) (0.29) (0.95) ($0.73) (0.15)# (1.83) 9.87
1993 11.80 0.84 0.66 1.50 (0.78) (0.53) -- (1.31) 11.99
1992 11.34 0.87 0.76 1.63 (1.00) (0.17) -- (1.17) 11.80
1991 10.26 0.92 1.10 2.02 (0.94) -- -- (0.94) 11.34
1990 10.90 0.87 (0.45) 0.42 (0.96) (0.10) -- (1.06) 10.26
1989 10.78 0.86 0.08 0.94 (0.78) (0.04) -- (0.82) 10.90
1988 9.99 0.73 0.52 1.25 (0.45) (0.01) -- (0.46) 10.78
FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/14/84)
1997 $11.83 $0.80 $0.50 $1.30 ($0.78) ($0.13) -- ($0.91) $12.22
1996 11.82 0.78 0.08 0.86 (0.79) (0.06) -- (0.85) 11.83
1995 10.93 0.80 0.69 1.49 (0.60) -- -- (0.60) 11.82
1994 12.86 0.77 (1.28) (0.51) (0.82) (0.47) ($0.13)# (1.42) 10.93
1993 12.67 0.88 0.75 1.63 (0.83) (0.61) -- (1.44) 12.86
1992 12.20 0.90 0.74 1.64 (1.02) (0.15) -- (1.17) 12.67
1991 10.94 0.94 1.25 2.19 (0.93) -- -- (0.93) 12.20
1990 11.64 0.92 (0.49) 0.43 (1.03) (0.10) -- (1.13) 10.94
1989 11.40 0.90 0.11 1.01 (0.76) (0.01) -- (0.77) 11.64
1988 10.86 0.97 0.43 1.40 (0.86) -- -- (0.86) 11.40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS- RATIO OF RATIO OF
END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MID CAP GROWTH PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/30/90)
1997 5.32% $98,464 0.33%++ 5.20% N/A --
1996 5.35 78,497 0.33++ 5.19 N/A --
1995 5.57 44,624 0.33++ 5.45 N/A --
1994 3.40 37,933 0.32++ 3.70 N/A --
1993 2.81 10,717 0.32++ 2.78 N/A --
1992 3.89 12,935 0.32++ 3.95 N/A --
1991 6.63 24,163 0.32++ 6.57 N/A --
1990 0.74 23,285 0.48* 8.31* N/A --
DOMESTIC FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 9/30/87)
1997 10.20% $96,954 0.51%++ 6.48%217% --
1996 4.41 95,362 0.52++ 5.73 168 --
1995 14.33 36,147 0.51++ 6.80 313 --
1994 (2.87) 36,521 0.50++ 7.65 78 --
1993 14.08 90,350 0.50 7.15 96 --
1992 15.41 98,130 0.47 7.67 136 --
1991 20.99 83,200 0.48 8.18 131 --
1990 3.90 77,622 0.48 8.35 181 --
1989 9.14 68,855 0.49 8.24 219 --
1988 12.63 53,236 0.50 8.62 224 --
FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 11/14/84)
1997 11.47% $3,219,987 0.49% 6.73% 179% --
1996 7.63 1,790,146 0.48 6.77 162 --
1995 14.19 1,487,409 0.49 7.28 140 --
1994 (4.43) 1,194,957 0.49 6.79 100 --
1993 14.26 909,738 0.47 7.06 144 --
1992 14.35 859,712 0.47 7.50 137 --
1991 21.12 831,547 0.47 8.25 143 --
1990 3.79 666,736 0.46 8.43 209 --
1989 9.25 559,995 0.47 8.36 100 --
1988 13.43 405,385 0.49 8.91 168 --
</TABLE>
- --------------------------------------------------------------------------------
MAS Fund - 8 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS
BEGINNING INVESTMENT (REALIZED AND INVESTMENT (INVESTMENT (REALIZED NET OTHER TOTAL
OF PERIOD INCOME UNREALIZED ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME PORTFOLIO II (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 8/31/90)
1997 $11.23 $0.74 $0.39 $1.13 ($0.79) ($0.11) -- ($0.90)
1996 11.33 0.70 (0.03) 0.67 (0.66) (0.08) (0.03)# (0.77)
1995 10.42 0.71 0.71 1.42 (0.51) -- -- (0.51)
1994 11.97 0.63 (1.16) (0.53) (0.67) (0.21) (0.14)# (1.02)
1993 11.67 0.69 0.77 1.46 (0.61) (0.55) -- (1.16)
1992 11.34 0.77 0.61 1.38 (0.81) (0.24) -- (1.05)
1991 10.09 0.81 1.10 1.91 (0.66) -- -- (0.66)
1990 10.00 0.04 0.05 0.09 -- -- -- --
GLOBAL FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 4/30/93)
1997+++ $11.01 $0.60 ($0.22) $0.38 (0.59) ($0.16) -- ($0.75)
1996 11.05 0.63 0.09 0.72 (0.71) (0.05) -- (0.76)
1995 10.20 0.71 0.81 1.52 (0.67) -- -- (0.67)
1994 10.67 0.58 (0.61) (0.03) (0.41) (0.03) -- (0.44)
1993 10.00 0.13 0.61 0.74 (0.07) -- -- (0.07)
HIGH YIELD PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 2/28/89)
1997+++ $9.32 $0.86 $0.87 $1.73 ($0.87) ($0.03) -- ($0.90)
1996 9.08 0.88 0.28 1.16 (0.92) -- -- (0.92)
1995 8.97 0.90 0.19 1.09 (0.85) ($0.08) ($0.05)# (0.98)
1994 9.49 0.75 (0.42) 0.33 (0.69) (0.16) -- (0.85)
1993 8.58 0.73 0.90 1.63 (0.72) -- -- (0.72)
1992 7.80 0.74 0.89 1.63 (0.85) -- -- (0.85)
1991 7.07 1.42 0.82 2.24 (1.51) -- -- (1.51)
1990 9.98 1.36 (2.82) (1.46) (1.42) (0.03) -- (1.45)
1989 10.00 0.55 (0.44) 0.11 (0.13) -- -- (0.13)
INTERMEDIATE DURATION PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/3/94)
1997+++ $10.28 $0.61 $0.27 $0.88 ($0.53) ($0.15) -- ($0.68)
1996 10.68 0.60 0.03 0.63 (0.65) (0.38) -- (1.03)
1995 10.00 0.69 0.42 1.11 (0.43) -- -- (0.43)
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
NET ASSET NET ASSETS- RATIO OF RATIO OF
VALUE- END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
PERIOD RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME PORTFOLIO II (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 8/31/90)
1997 $11.46 10.58% $226,662 0.50% 6.54% 182% --
1996 11.23 6.12 191,740 0.50 6.06 165 --
1995 11.33 14.13 176,945 0.51 6.75 153 --
1994 10.42 (4.76) 129,902 0.51 6.07 137 --
1993 11.97 13.53 94,836 0.51 6.17 101 --
1992 11.67 13.02 78,302 0.49 7.05 182 --
1991 11.34 19.59 42,881 0.49 7.76 190 --
1990 10.09 0.88 20,729 0.52* 8.00* 7 --
GLOBAL FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 4/30/93)
1997 $10.64 3.53% $77,493 0.57% 5.65% 137% --
1996 11.01 6.83 67,282 0.60 5.25 133 --
1995 11.05 15.54 55,147 0.58 6.34 118 --
1994 10.20 (0.29) 43,066 0.57 5.48 117 --
1993 10.67 7.43 53,164 0.58*++ 5.08* 30 --
HIGH YIELD PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 2/28/89)
1997 $10.15 19.90% $523,899 0.51% 9.05% 96% --
1996 9.32 13.83 289,810 0.49 10.04 115 --
1995 9.08 13.58 220,785 0.50 10.68 96 --
1994 8.97 3.57 182,969 0.50 9.01 112 --
1993 9.49 20.12 50,396 0.53++ 8.94 99 --
1992 8.58 22.49 20,491 0.53++ 9.74 148 --
1991 7.80 36.70 6,453 0.76 19.45 106 --
1990 7.07 (16.26) 4,820 0.82 16.93 65 --
1989 9.98 0.91 3,479 0.73* 11.66* 17 --
INTERMEDIATE DURATION PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/3/94)
1997 $10.48 8.93% $72,119 0.55%++ 5.93% 204% --
1996 10.28 6.27 12,017 0.56++ 6.17 251 --
1995 10.68 11.39 19,237 0.52*++ 6.56* 168 --
</TABLE>
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary Fund - 9
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS
BEGINNING INVESTMENT (REALIZED AND INVESTMENT (INVESTMENT (REALIZED NET OTHER TOTAL
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 4/29/94)
1997 $10.77 $0.50 ($0.44) ($0.06) ($0.38) ($0.26) -- ($0.64)
1996 11.01 0.52 0.12 0.64 (0.80) (0.08) -- (0.88)
1995 10.05 0.67 0.92 1.59 (0.63) -- -- (0.63)
1994 10.00 0.21 (0.11) 0.10 (0.05) -- -- (0.05)
LIMITED DURATION PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/31/92)
1997 $10.38 $0.62 $0.08 $0.70 ($0.59) -- -- ($0.59)
1996 10.41 0.58 (0.03) 0.55 (0.58) -- -- (0.58)
1995 10.19 0.56 0.22 0.78 (0.55) -- ($0.01)# (0.56)
1994 10.72 0.56 (0.52) 0.04 (0.51) ($0.04) (0.02)# (0.57)
1993 10.58 0.32 0.22 0.54 (0.32) (0.08) -- (0.40)
1992 10.00 0.19 0.49 0.68 (0.10) -- -- (0.10)
MORTGAGE-BACKED SECURITIES PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 1/31/92)
1997 $10.42 $0.91 $0.16 $1.07 ($0.73) -- -- ($0.73)
1996 10.49 0.68 (0.07) 0.61 (0.68) -- -- (0.68)
1995 9.95 0.72 0.47 1.19 (0.65) -- -- (0.65)
1994 10.95 0.52 (0.83) (0.31) (0.45) ($0.21) ($0.03)# (0.69)
1993 10.44 0.63 0.48 1.11 (0.60) -- -- (0.60)
1992 10.00 0.29 0.28 0.57 (0.13) -- -- (0.13)
MUNICIPAL PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/1/92)
1997 $11.23 $0.53 $0.40 $0.93 ($0.52) -- -- ($0.52)
1996 10.75 0.51 0.49 1.00 (0.52) -- -- (0.52)
1995 10.04 0.59 0.71 1.30 (0.59) -- -- (0.59)
1994 11.15 0.51 (1.01) (0.50) (0.54) -- ($0.07)# (0.61)
1993 10.00 0.37 1.04 1.41 (0.26) -- -- (0.26)
PA MUNICIPAL PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/1/92)
1997 $11.37 $0.55 $0.34 $0.89 ($0.55) -- -- ($0.55)
1996 10.91 0.51 0.46 0.97 (0.51) -- -- (0.51)
1995 10.13 0.58 0.77 1.35 (0.57) -- -- (0.57)
1994 11.26 0.56 (1.00) (0.44) (0.64) ($0.05)# -- (0.69)
1993 10.00 0.39 1.17 1.56 (0.30) -- -- (0.30)
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
NET ASSET NET ASSETS- RATIO OF RATIO OF
VALUE- END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
PERIOD RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 4/29/94)
1997 $10.19 0.44% $152,752 0.53% 5.27% 107% --
1996 10.77 6.13 143,137 0.53 5.39 124 --
1995 11.01 16.36 127,882 0.54 6.35 140 --
1994 10.05 1.01 66,879 0.60*++ 5.83* 31 --
LIMITED DURATION PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/31/92)
1997 $10.49 6.98% $155,570 0.43%++ 6.15% 130% --
1996 10.38 5.47 123,227 0.43 5.65 174 --
1995 10.41 7.95 100,186 0.43++ 5.96 119 --
1994 10.19 0.40 62,775 0.41 4.16 192 --
1993 10.72 5.33 128,991 0.42++ 3.92 217 --
1992 10.58 6.90 13,065 0.49* 4.99* 159 --
MORTGAGE-BACKED SECURITIES PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 1/31/92)
1997 $10.76 10.70% $38,085 0.50%++ 7.79% 164% --
1996 10.42 6.10 50,925 0.50++ 6.46 116 --
1995 10.49 12.52 49,766 0.50++ 6.35 107 --
1994 9.95 (2.95) 119,518 0.50++ 5.30 220 --
1993 10.95 11.03 50,249 0.50++ 6.92 93 --
1992 10.44 5.75 13,601 0.50*++ 8.11* 133 --
MUNICIPAL PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/1/92)
1997 $11.64 8.47% $75,120 0.51%++ 4.70% 54% --
1996 11.23 9.46 54,536 0.51++ 4.66 78 --
1995 10.75 13.37 36,040 0.50++ 5.64 58 --
1994 10.04 (4.64) 38,549 0.50++ 4.98 34 --
1993 11.15 14.20 26,914 0.50*++ 4.65* 66 --
PA MUNICIPAL PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 10/1/92)
1997 $11.71 8.01% $27,461 0.51%++ 4.74% 64% --
1996 11.37 9.03 28,488 0.51++ 4.58 51 --
1995 10.91 13.74 15,734 0.50++ 5.56 57 --
1994 10.13 (4.08) 23,515 0.50++ 5.39 69 --
1993 11.26 15.81 15,633 0.50*++ 4.74* 94 --
</TABLE>
- --------------------------------------------------------------------------------
MAS Fund - 10 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER TOTAL
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPECIAL PURPOSE FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/31/92)
1997+++ $12.26 $0.85 $0.52 $1.37 ($0.87) ($0.18) -- ($1.05)
1996 12.53 0.83 0.08 0.91 (0.88) (0.30) -- (1.18)
1995 11.52 0.91 0.75 1.66 (0.65) -- -- (0.65)
1994 13.40 0.80 (1.28) (0.48) (0.78) (0.53) ($0.09)# (1.40)
1993 12.72 0.88 0.92 1.80 (0.82) (0.30) -- (1.12)
1992 11.80 0.39 0.72 1.11 (0.19) -- -- (0.19)
BALANCED PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 12/31/92)
1997 $13.81 $0.51 $2.91 $3.42 ($0.54) ($1.39) -- ($1.93)
1996 13.06 0.53 1.15 1.68 (0.50) (0.43) -- (0.93)
1995 11.28 0.54 1.78 2.32 (0.47) (0.07) -- (0.54)
1994 11.84 0.47 (0.45) 0.02 (0.43) (0.15) -- (0.58)
1993 11.06 0.25 0.66 0.91 (0.13) -- -- (0.13)
MULTI-ASSET-CLASS PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/29/94)
1997+++ $12.28 $0.38 $2.57 $2.95 ($0.51) ($1.08) -- ($1.59)
1996 11.34 0.46 1.05 1.51 (0.42) (0.15) -- (0.57)
1995 9.97 0.44 1.33 1.77 (0.40) -- -- (0.40)
1994 10.00 0.07 (0.10) (0.03) -- -- -- --
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
NET ASSET NET ASSETS- RATIO OF RATIO OF
VALUE- END OF EXPENSES NET INCOME PORTFOLIO AVERAGE
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
PERIOD RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE RATE***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SPECIAL PURPOSE FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 3/31/92)
1997+++ $12.58 11.78% $492,784 0.49% 6.88% 198% --
1996 12.26 7.74 447,646 0.49 6.75 151 --
1995 12.53 14.97 390,258 0.49 7.33 143 --
1994 11.52 (4.00) 384,731 0.50 6.66 100 --
1993 13.40 15.19 300,185 0.48 6.84 124 --
1992 12.72 9.47 274,195 0.53* 6.94* 138 --
BALANCED PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 12/31/92)
1997 $15.30 27.44% $343,284 0.58% 3.56% 145% $0.0578
1996 13.81 13.47 300,868 0.57 3.85 110 0.0521
1995 13.06 21.37 334,630 0.58 4.55 95
1994 11.28 0.19 309,596 0.58 4.06 75
1993 11.84 8.31 291,762 0.58* 3.99* 62
MULTI-ASSET-CLASS PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/29/94)
1997+++ $13.64 26.50% $173,155 0.74%++ 3.07% 141% $0.0114
1996 12.28 13.75 129,558 0.58++ 3.82 122 0.0225
1995 11.34 18.28 96,839 0.58++ 4.56 112
1994 9.97 (0.30) 51,877 0.58*++ 4.39* 20
</TABLE>
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 11
<PAGE>
NOTES TO THE FINANCIAL HIGHLIGHTS
*Annualized
**Total return figures for partial years are not annualized.
***For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose the average commission rate per share paid for security
transactions on which commissions were charged.
#Represents distributions in excess of Net realized gains.
##Represents distributions in excess of Net investment income.
###Net Investment Income, the Ratio of Net Investment Income to Average Net
Assets and the Portfolio Turnover Rate reflect activity relating to a
nonrecurring initiative to invest in higher-paying dividend income producing
securities.
+For the respective periods ended September 30, the Ratio of Expenses to
Average Net Assets for the following portfolios excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be as follows for the respective periods. Where
listed as N/A, if the expense offsets were included, the Ratio of Expenses to
Average Net Assets would not significantly differ.
<TABLE>
<CAPTION>
PORTFOLIO 1995 1996 1997 PORTFOLIO 1995 1996 1997
- --------- ---- ---- ---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets Value 1.18%* 1.18% 1.18% High Yield 0.49% 0.48% 0.50%
Equity 0.60 0.60 0.59 Intermediate Duration 0.52 0.52 0.52
International Equity 0.66 0.65 0.63 International Fixed Income 0.54 0.53 0.53
Mid Cap Growth 0.60 0.60 0.61 Limited Duration 0.42 0.42 0.42
Mid Cap Value 0.88* 0.88 0.88 Mortgage-Backed Securities 0.50 0.50 0.50
Small Cap Value 0.87 0.86 0.86 Municipal 0.50 0.50 0.50
Value 0.60 0.60 0.61 PA Municipal N/A 0.50 0.50 0.50
Cash Reserves 0.32 0.32 0.32 Special Purpose Fixed Income 0.48 0.49 0.48
Domestic Fixed Income 0.50 0.50 0.50 Balanced 0.57 0.57 0.56
Fixed Income 0.48 0.48 0.48 Multi-Asset-Class 0.58 0.58 0.74
Fixed Income II 0.49 0.49 0.49
Global Fixed Income 0.56 0.58 0.57
</TABLE>
++For the periods indicated, the Adviser voluntarily agreed to waive its
advisory fees and/or reimburse certain expenses to the extent necessary in
order to keep Total Operating Expenses actually deducted from portfolio assets
for the respective portfolios from exceeding voluntary expense limitations.
For the respective periods ended September 30, the voluntarily waived and/or
reimbursed expenses totaled the below listed amounts.
VOLUNTARILY WAIVED AND/OR REIMBURSED EXPENSES FOR:
<TABLE>
<CAPTION>
PORTFOLIO 1992 1993 1994 1995 1996 1997
- --------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets Value -- -- -- 0.29%* 0.11% 0.10%
Mid Cap Value -- -- -- 2.13* 0.18 0.02
Cash Reserves -- 0.24% 0.14% 0.11 0.09 0.07
Domestic Fixed Income -- -- 0.03 0.09 0.01 0.01
Global Fixed Income -- 0.18* -- -- -- --
High Yield 0.22 0.09 -- -- -- --
Intermediate Duration -- -- -- 0.08* 0.13 0.05
International Fixed Income -- -- 0.11* -- -- --
Limited Duration -- 0.03 -- 0.02 -- 0.00*
Mortgage-Backed Securities 0.30* 0.06 0.01 0.01 0.04 0.04
Municipal -- 0.20* 0.06 0.09 0.09 0.05
PA Municipal -- 0.25* 0.09 0.19 0.15 0.09
Multi-Asset-Class -- -- 0.26* 0.14 0.08 0.08
</TABLE>
+++Per share amounts for the year ended September 30, 1997, are based on average
shares outstanding.
*Amount is less than 0.01%
- --------------------------------------------------------------------------------
MAS Fund - 12 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
YIELD AND TOTAL RETURN:
From time to time each portfolio of the Fund advertises its yield and total
return. Both yield and total return figures are based on historical earnings and
are not intended to indicate future performance. The average annual total return
reflects changes in the price of a portfolio's shares and assumes that any
income dividends and/or capital gain distributions made by the portfolio during
the period were reinvested in additional shares of the portfolio. Figures will
be given for one-, five- and ten-year periods ending with the most recent
calendar quarter-end (if applicable), and may be given for other periods as well
(such as from commencement of the portfolio's operations).
The yield of a portfolio (other than the Cash Reserves Portfolio) is computed by
dividing the net investment income per share (using the average number of shares
entitled to receive dividends) earned during a 30-day period by the closing
price per share on the last day of the period. For the purpose of determining
net investment income, the calculation includes as expenses of the portfolio all
recurring fees and any non recurring charges for the period stated.
The Municipal and PA Municipal Portfolios may also advertise or quote
tax-equivalent yields and after-tax total returns. A tax-equivalent yield shows
the level of taxable yield needed to produce an after-tax equivalent to the
portfolio's tax-free yield. This is done by increasing the portfolio's yield
(computed as above) by the amount necessary to reflect the payment of Federal
income tax (and Pennsylvania income tax, in the case of the PA Municipal
Portfolio) at a tax rate stated in the advertisement or quote. An after-tax
return reflects the average annual or cumulative change in value over the
measuring period after the deduction of taxes at rates stated in the
advertisement or quote.
From time to time the Cash Reserves Portfolio may advertise or quote its yield
and effective yield. The yield of the Cash Reserves Portfolio refers to the
income generated by an investment in the portfolio over a stated seven day
period. This income is then annualized. That is, the amount of income generated
by the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly, but the income earned over the seven day period
by an investment in the portfolio is assumed to be reinvested when the return is
annualized. The "effective yield" will be higher than the yield because of the
compounding effect of this assumed reinvestment.
The performance of a portfolio may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported in
financial and industry publications, returns of other investment advisers and
mutual funds, and various indices as further described in the Statement of
Additional Information.
The performance of Institutional Class Shares, Investment Class Shares and
Adviser Class Shares differs because of any class-specific expenses paid by each
class and the shareholder servicing fees charged to Investment Class Shares and
distribution fees charged to Adviser Class Shares.
The Annual Report to Shareholders of the Fund for the Fund's most recent fiscal
year-end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge upon
request by writing to the Fund or calling the Client Services Group at the
telephone number shown on the front cover of this Prospectus.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 13
<PAGE>
GENERAL INFORMATION
SUITABILITY: The Fund's portfolios are designed for long-term investors who can
accept the risks entailed in investing in the stock and bond markets, and are
not meant to provide a vehicle for playing short-term swings in the market. The
Fund's portfolios are designed principally for the investments of tax-exempt
fiduciary investors who are entrusted with the responsibility of investing
assets held for the benefit of others. Since such investors are not subject to
Federal income taxes, securities transactions for all portfolios except the
Municipal and PA Municipal Portfolios will not be influenced by the different
tax treatment of capital gains and dividend income under the Internal Revenue
Code. Investments in the Municipal and PA Municipal Portfolios are suitable for
taxable investors who would benefit from the portfolios' tax-exempt income.
SECURITIES LENDING: Each portfolio may lend its securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional income. Loans of securities will be collateralized by cash, letters
of credit, or securities issued or guaranteed by the U.S. Government or its
agencies. The collateral will equal at least 100% of the current market value of
the loaned securities. In addition, a portfolio will not loan its portfolio
securities to the extent that greater than one-third of its total assets, at
fair market value, would be committed to loans at that time.
ILLIQUID SECURITIES/RESTRICTED SECURITIES: Each of the portfolios may invest up
to 15% of its net assets (except the Cash Reserves Portfolio, which may invest
up to 10% of its net assets) in securities that are illiquid by virtue of the
absence of a readily available market, or because of legal or contractual
restrictions on resale. This policy does not limit the acquisition of restricted
securities eligible for resale to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, commercial paper issued pursuant to
Section 4(2) under the Securities Act of 1933, or other restricted securities,
that are determined to be liquid in accordance with guidelines established by
the Fund's Board of Trustees.
TURNOVER: The Adviser manages the portfolios generally without regard to
restrictions on annual turnover. In general, the portfolios will not trade for
short-term profits, but when circumstances warrant, investments may be sold
without regard to the length of time held.
With respect to the fixed income portfolios and the fixed-income portion of the
Balanced, Multi-Asset-Class and Balanced Plus Portfolios, the annual turnover
rate will ordinarily exceed 100% due to changes in portfolio duration, yield
curve strategy or commitments with respect to forward delivery mortgage-backed
securities. For the Balanced, Multi-Asset-Class and Balanced Plus Portfolios,
annual turnover rate is not expected to exceed 100% with respect to EQUITY
SECURITIES.
The following portfolios have annual turnover rates of 100% or more: Mid Cap
Growth, Mid Cap Value, Small Cap Value, Domestic Fixed Income, Fixed Income,
Fixed Income II, Global Fixed Income, Intermediate Duration, International Fixed
Income, Limited Duration, Mortgage-Backed Securities, Special Purpose Fixed
Income, Balanced and Multi-Asset-Class. These high rates of annual turnover
necessarily result in correspondingly heavier brokerage and portfolio trading
costs which are paid by a portfolio. Trading in FIXED-INCOME SECURITIES does not
generally involve the payment of brokerage commissions, but does involve
indirect transaction costs. In addition to portfolio trading costs, higher rates
of annual turnover may result in the realization of capital gains. To the extent
net short-term capital gains are realized, any distributions resulting from such
gains are considered ordinary income for federal income tax purposes. The annual
turnover rate for each portfolio is shown in the Financial Highlights under
"Portfolio Turnover Rate."
- --------------------------------------------------------------------------------
MAS Fund - 14 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
CASH EQUIVALENTS/TEMPORARY DEFENSIVE INVESTING: Although each portfolio intends
to remain substantially fully invested, a small percentage of a portfolio's
assets is generally held in the form of CASH EQUIVALENTS in order to meet
redemption requests and otherwise manage the daily affairs of each portfolio. In
addition, any portfolio may, when the Adviser deems that market conditions are
such that a temporary defensive approach is desirable, invest in CASH
EQUIVALENTS or the FIXED-INCOME SECURITIES listed for that portfolio without
limit. In addition, the Adviser may, for temporary defensive purposes, increase
or decrease the average weighted maturity or duration of any fixed-income
portfolio without regard to that portfolio's usual average weighted maturity.
CONCENTRATION: Concentration is defined as investment of 25% or more of a
portfolio's total assets in the securities of issuers operating in any one
industry. Except as provided in a portfolio's specific investment policies, or
as detailed in Investment Limitations, a portfolio will not concentrate
investments in any one industry.
INVESTMENT LIMITATIONS: Each portfolio is subject to certain limitations
designed to reduce its exposure to specific situations. Some of these
limitations are:
(a) with respect to 75% of its assets, a portfolio will not purchase securities
of any issuer if, as a result, more than 5% of the portfolio's total assets
taken at market value would be invested in the securities of any single issuer
except that this restriction does not apply to securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities. This limitation is
not applicable to the Global Fixed Income, Emerging Markets Value and
International Fixed Income Portfolios. However, these portfolios will comply
with the diversification requirements imposed by Sub-Chapter M of the Internal
Revenue Code and;
(b) with respect to 75% of its assets, a portfolio will not purchase a security
if, as a result, the portfolio would hold more than 10% of the outstanding
voting securities of any issuer. This limitation is not applicable to the Global
Fixed Income, Emerging Markets Value and International Fixed Income Portfolios.
However, these portfolios will comply with the diversification requirements
imposed by Sub-Chapter M of the Internal Revenue Code.
Limitations (a) and (b) and certain other limitations described in the Statement
of Additional Information are fundamental and may be changed only with the
approval of the holders of a majority of the shares of the portfolios. Other
investment limitations described here and in the Statement of Additional
Information are not fundamental policies; meaning that the Board of Trustees may
change them without shareholder approval. If a percentage limitation on
investment or utilization of assets as set forth in this prospectus or the
Statement of Additional Information is adhered to at the time an investment is
made, a later change in percentage resulting from changes in the value or total
cost of the portfolios' assets will not be considered a violation of the
restriction, and the sale of securities will not be required.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 15
<PAGE>
EMERGING MARKETS VALUE PORTFOLIO - (FORMERLY, THE EMERGING MARKETS PORTFOLIO)
(A NON-DIVERSIFIED PORTFOLIO)
Objective: To achieve long-term capital growth by investing
primarily in common stocks of emerging markets issuers.
Approach: The Adviser evaluates both short-term and long-term
international economic trends and relative attractiveness
of emerging markets and individual emerging market
securities. The Adviser selects common stocks which are
deemed to be undervalued at the time of purchase, based
on proprietary measures of value.
Policies: Generally at least 65% invested in EQUITY SECURITIES of
EMERGING MARKETS ISSUERS, which are deemed to be
undervalued.
DERIVATIVES may be used to pursue portfolio strategy.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS EASTERN EUROPEAN ISSUERS HIGH YIELD STRUCTURED INVESTMENTS
Investments: AGENCIES EMERGING MARKETS ISSUERS INVESTMENT COMPANIES STRUCTURED NOTES
BRADY BONDS FOREIGN BONDS INVESTMENT FUNDS SWAPS
CASH EQUIVALENTS FOREIGN CURRENCY LOAN PARTICIPATIONS U.S. GOVERNMENTS
COMMON STOCKS FOREIGN EQUITIES PREFERRED STOCK WARRANTS
CONVERTIBLES FORWARDS REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CORPORATES FUTURES & OPTIONS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: MSCI Emerging Markets Free Index
Strategies: EMERGING MARKETS INVESTING
FOREIGN INVESTING
NON-DIVERSIFIED STATUS
VALUE STOCK INVESTING
Portfolio
Manager: Horacio A. Valeiras
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing primarily in dividend-paying common stocks
of companies which are deemed by the Adviser to
demonstrate long-term earnings growth that is greater
than the economy in general and greater than the expected
rate of inflation.
Approach: The Adviser's investment process is designed to capture
value by identifying stocks that offer low but rising
expectations. To determine the level of expectations for
various companies and the direction of changes in those
expectations, the Adviser analyzes the companies' equity
valuations and changes in the companies' estimates of
future earnings. In addition, the Adviser diversifies
across sectors to preserve return while reducing risk,
seeking the best values within each sector of the market.
A group of senior investment professionals invests the
portfolio using a disciplined approach to stock selection
supported by fundamental research analysts. Each
investment professional makes his or her own buy, sell
and sector-allocation decisions. Overall sector
allocation is driven by bottom-up stock selection and is
reviewed regularly to preserve the benefits of
diversification.
<PAGE>
Policies: Generally at least 65% invested in EQUITY SECURITIES
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally greater than $1 billion
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS CORPORATES FUTURES & OPTIONS SWAPS
Investments: AGENCIES FOREIGN BONDS INVESTMENT COMPANIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN EQUITIES REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: S&P 500 Index
Strategies: CORE EQUITY INVESTING
Portfolio
Management Team: Arden C. Armstrong, James J. Jolinger, Nicholas J.
Kovich, Brian Kramp, Robert J. Marcin and Gary G.
Schlarbaum
- --------------------------------------------------------------------------------
MAS Fund - 16 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
GROWTH PORTFOLIO
Objective: To achieve long-term capital growth by investing
primarily in common stocks of large size companies which
the Adviser believes offer long-term growth potential.
Approach: The Adviser selects common stocks meeting certain
criteria which the Adviser believes are related to the
stability and growth of the fundamental characteristics
of the company.
Policies: Generally at least 65% invested in EQUITY SECURITIES of
companies offering long-term growth potential.
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally greater than $1 billion
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS CORPORATES FUTURES & OPTIONS SWAPS
Investments: AGENCIES FOREIGN BONDS INVESTMENT COMPANIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN EQUITIES REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: S&P 500 Index
Strategy: GROWTH STOCK INVESTING
Portfolio
Management Team: Arden C. Armstrong and Gary G. Schlarbaum
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in common stocks of companies based outside
of the U.S.
Approach: The Adviser evaluates both short-term and long-term
international economic trends and the relative
attractiveness of non-U.S. equity markets and individual
securities.
Policies: Generally at least 65% invested in FOREIGN EQUITIES of
issuers in at least 3 countries other than the U.S.
DERIVATIVES may be used to pursue portfolio strategy
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS EASTERN EUROPEAN ISSUERS INVESTMENT COMPANIES STRUCTURED INVESTMENTS
Investments: AGENCIES EMERGING MARKETS ISSUERS INVESTMENT FUNDS SWAPS
BRADY BONDS FOREIGN BONDS LOAN PARTICIPATIONS U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN EQUITIES REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
CORPORATES FUTURES & OPTIONS STRUCTURED INVESTMENTS
</TABLE>
Comparative Index: MSCI World Ex-U.S. Index
Strategies: INTERNATIONAL EQUITY INVESTING
EMERGING MARKETS INVESTING
FOREIGN INVESTING
Portfolio
Management Team: Hassan Elmasry and Horacio A. Valeiras
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 17
<PAGE>
MID CAP GROWTH PORTFOLIO
Objective: To achieve long-term capital growth by investing
primarily in common stocks of smaller and medium size
companies which are deemed by the Adviser to offer
long-term growth potential. Due to its emphasis on
long-term capital growth, dividend income will be lower
than for the Equity and Value Portfolios.
Approach: The Adviser uses a four-part process combining
quantitative, fundamental, and valuation analysis with a
strict selling discipline. Stocks that pass an initial
screen based on estimate revisions undergo detailed
fundamental research. Valuation analysis is used to
eliminate the most overvalued securities. Holdings are
sold when their estimate-revision scores fall to
unacceptable levels, when fundamental research uncovers
unfavorable trends, or when their valuations exceed the
level that the Adviser believes is reasonable given their
growth prospects.
Policies: Generally at least 65% invested in EQUITY SECURITIES of
mid-cap companies offering long-term growth potential
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally matching the S&P MidCap 400 Index (currently
$500 million to $6 billion)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRs FOREIGN CURRENCY INVESTMENT COMPANIES RIGHTS
Investments: CASH EQUIVALENTS FOREIGN EQUITIES PREFERRED STOCK WARRANTS
COMMON STOCKS FUTURES & OPTIONS REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES
</TABLE>
Comparative Index: S&P MidCap 400 Index
Strategies: GROWTH STOCK INVESTING
Portfolio
Management Team: Arden C. Armstrong, David P. Chu and Abhi Y. Kanitkar
- --------------------------------------------------------------------------------
MID CAP VALUE PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in common stocks with equity capitalizations
in the range of the companies represented in the S&P
MidCap 400 Index which are deemed by the Adviser to be
relatively undervalued based on certain proprietary
measures of value. The portfolio will typically exhibit a
lower price/earnings value ratio than the S&P MidCap 400
Index.
Approach: The Adviser selects common stocks which are deemed to be
undervalued at the time of purchase, based on proprietary
measures of value. The portfolio will be structured
taking into account the economic sector weights of the
S&P MidCap 400 Index, with sector weights normally being
within 5% of the sector weights of the Index.
<PAGE>
Policies: Generally at least 65% invested in EQUITY SECURITIES of
mid-cap companies, which are deemed to be undervalued
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally matching the S&P MidCap 400 Index (currently
$500 million to $6 billion)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS CORPORATES FUTURES & OPTIONS SWAPS
Investments: AGENCIES FOREIGN BONDS INVESTMENT COMPANIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN EQUIITIES PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN CURRENCY REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: S&P MidCap 400 Index
Strategies: VALUE STOCK INVESTING
Portfolio
Management Team: Bradley S. Daniels, William B. Gerlach, Chris Leavy and
Gary G. Schlarbaum
- --------------------------------------------------------------------------------
MAS Fund - 18 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
SMALL CAP VALUE PORTFOLIO (NOT CURRENTLY BEING OFFERED TO NEW INVESTORS)
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in common stocks with equity capitalizations
in the range of the companies represented in the Russell
2000 Small Stock Index which are deemed by the Adviser to
be relatively undervalued based on certain proprietary
measures of value. The portfolio will typically exhibit
lower price/earnings and price/book value ratios than the
Russell 2000. Dividend income will typica lly be lower
than for the Equity and Value Portfolios.
Approach: The Adviser selects common stocks which are deemed to be
undervalued at the time of purchase, based on proprietary
measures of value. The portfolio will be structured
taking into account the economic sector weights of the
Russell 2000 Index, with the portfolio's sector weights
normally being within 5% of the sector weights for the
Index.
Policies: Generally at least 65% invested in EQUITY SECURITIES of
small-cap companies, which are deemed to be undervalued
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally matching the Russell 2000 size distribution
(currently $50 million to $1 billion)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS CORPORATES FUTURES & OPTIONS SWAPS
Investments: AGENCIES FOREIGN BONDS INVESTMENT COMPANIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN EQUITIES REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: Russell 2000 Index
Strategies: VALUE STOCK INVESTING
Portfolio
Management Team: Bradley S. Daniels, William B. Gerlach, Chris Leavy and
Gary G. Schlarbaum
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 19
<PAGE>
VALUE PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in common stocks with equity capitalizations
usually greater than $300 million which are deemed by the
Adviser to be relatively undervalued, based on various
measures such as price/earnings ratios and price/book
ratios. While capital return will be emphasized somewhat
more than income return, the portfolio's total return
will consist of both capital and income returns. It is
expected that income return will be higher than that of
the Equity Portfolio because stocks which are deemed to
be undervalued in the marketplace have, under most market
conditions, provided higher dividend income returns than
stocks which are deemed to have long-term earnings growth
potential which normally sell at higher price/earnings
ratios.
Approach: The Adviser selects common stocks which are deemed to be
undervalued relative to the stock market in general as
measured by the Standard & Poor's 500 Index, based on the
value measures such as price/earnings ratios and
price/book ratios, as well as fundamental research.
Policies: Generally at least 65% invested in EQUITY SECURITIES,
which are deemed to be undervalued
Up to 5% invested in FOREIGN EQUITIES (excluding ADRs)
DERIVATIVES may be used to pursue portfolio strategy
Capitalization Range: Generally greater than $300 million
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable ADRS CORPORATES FUTURES & OPTIONS SWAPS
Investments: AGENCIES FOREIGN BONDS INVESTMENT COMPANIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PREFERRED STOCK WARRANTS
COMMON STOCKS FOREIGN EQUITIES REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES FORWARDS RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: S&P 500 Index
Strategy: VALUE STOCK INVESTING
Portfolio
Management Team: Richard M. Behler, Nicholas J. Kovich and Robert J. Marcin
- --------------------------------------------------------------------------------
MAS Fund - 20 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
CASH RESERVES PORTFOLIO
Objective: To realize maximum current income, consistent with the
preservation of capital and liquidity, by investing in
money market instruments and other short-term securities
having expected maturities of thirteen months or less.
The portfolio's average weighted maturity will not
exceed 90 days. The securities in which the portfolio
will invest may not yield as high a level of current
income as securities of lower quality or longer
maturities which generally have less liquidity, greater
market risk and more price fluctuation. The portfolio is
designed to provide maximum principal stability for
investors seeking to invest funds for the short term,
or, for investors seeking to combine a long-term
investment program in other portfolios of the Fund with
an investment in money market instruments. The portfolio
seeks to maintain, but there can be no assurance that it
will be able to maintain, a constant net asset value of
$1.00 per share.
Approach: The Adviser selects a diversified portfolio of money
market securities of government and corporate issuers,
any of which may be variable or floating rate, and which
have remaining maturities of thirteen months or less
from the date of purchase. For the purpose of
determining remaining maturity on Floaters, demand
features and interest reset dates will be taken into
consideration.
Policies: THE PORTFOLIO SEEKS TO MAINTAIN, BUT THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN, A CONSTANT
NET ASSET VALUE OF $1.00 PER SHARE.
Quality Specifications: 100% of COMMERCIAL PAPER Rated in Top Tier
Maturity and Duration: Dollar weighted average maturity less than 90 days
Individual maturities 13 months or less
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Allowable AGENCIES CORPORATES U.S. GOVERNMENTS
Investments: ASSET-BACKEDS FLOATERS YANKEES
CASH EQUIVALENTS INVESTMENT COMPANIES ZERO COUPONS
COMMERCIAL PAPER REPURCHASE AGREEMENTS
</TABLE>
Comparative Index: Lipper Money Market Index
Strategy: MONEY MARKET INVESTING
Portfolio
Management Team: Abigail Jones Feder and Daniel M. Niland
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 21
<PAGE>
DOMESTIC FIXED INCOME PORTFOLIO
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.
Approach: The Adviser actively manages the maturity and duration
structure of the portfolio in anticipation of long-term
trends in interest rates and inflation. Investments are
diversified among a wide variety of U.S. FIXED-INCOME
SECURITIES in all market sectors.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
100% invested in domestic issuers
May invest greater than 50% in MORTGAGE SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: 80% of FIXED-INCOME SECURITIES rated A or higher (or
its equivalent)
May invest up to 20% in FIXED-INCOME SECURITIES rated BBB
(or its equivalent)
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES CORPORATES MORTGAGE SECURITIES STRUCTURED NOTES
Investments: ASSET-BACKEDS FLOATERS MUNICIPALS SWAPS
CASH EQUIVALENTS FUTURES & OPTIONS PREFERRED STOCK U.S. GOVERNMENTS
CMOS INVERSE FLOATERS REPURCHASE AGREEMENTS WHEN ISSUED SECURITIES
CONVERTIBLES INVESTMENT COMPANIES SMBS ZERO COUPONS
</TABLE>
Comparative Index: Salomon Broad Investment Grade
Lehman Brothers Aggregate
Strategies: MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Thomas L. Bennett, Kenneth B. Dunn and Richard B. Worley
- --------------------------------------------------------------------------------
MAS Fund - 22 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
FIXED INCOME PORTFOLIO
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, corporate bonds (including bonds
rated below investment grade, commonly referred to as
junk bonds), foreign fixed-income securities and
mortgage-backed securities of domestic issuers and other
fixed-income securities. The portfolio's average weighted
maturity will ordinarily be greater than five years.
Approach: The Adviser actively manages the maturity and duration
structure of the portfolio in anticipation of long-term
trends in interest rates and inflation. Investments are
diversified among a wide variety of FIXED-INCOME
SECURITIES in all market sectors.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
May invest greater than 50% in MORTGAGE SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality 80% INVESTMENT GRADE SECURITIES
Specifications: Up to 20% HIGH YIELD
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES FLOATERS INVESTMENT COMPANIES STRUCTURED NOTES
Investments: ASSET-BACKEDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
BRADY BONDS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CASH EQUIVALENTS FORWARDS MUNICIPALS WHEN ISSUED SECURITIES
CMOS FUTURES & OPTIONS PREFERRED STOCK YANKEES
CONVERTIBLES HIGH YIELD REPURCHASE AGREEMENTS ZERO COUPONS
CORPORATES INVERSE FLOATERS SMBS
</TABLE>
Comparative Index: Salomon Broad Investment Grade
Lehman Brothers Aggregate
Strategies: MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
HIGH YIELD INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
Portfolio
Management Team: Thomas L. Bennett, Kenneth B. Dunn and Richard B. Worley
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 23
<PAGE>
FIXED INCOME PORTFOLIO II
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.
Approach: The Adviser actively manages the maturity and duration
structure of the portfolio in anticipation of long-term
trends in interest rates and inflation. Investments are
diversified among a wide variety of FIXED-INCOME
SECURITIES in all market sectors.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
May invest greater than 50% in MORTGAGE SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: 100% INVESTMENT GRADE SECURITIES
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES FLOATERS INVESTMENT COMPANIES STRUCTURED NOTES
Investments: ASSET-BACKEDS FOREIGN BONDS MORTGAGE SECURITIES SWAPS
BRADY BONDS FOREIGN CURRENCY MUNICIPALS U.S. GOVERNMENTS
CASH EQUIVALENTS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CMOS FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CONVERTIBLES INVERSE FLOATERS SMBS ZERO COUPONS
CORPORATES
</TABLE>
Comparative Index: Salomon Broad Investment Grade
Lehman Brothers Aggregate
Strategies: MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
Portfolio
Management Team: Thomas L. Bennett, Kenneth B. Dunn and Richard B. Worley
- --------------------------------------------------------------------------------
MAS Fund - 24 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
GLOBAL FIXED INCOME PORTFOLIO
(A NON-DIVERSIFIED PORTFOLIO)
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in high grade fixed-income securities of
U.S. and foreign issuers. Total return is the combination
of income and changes in value. The portfolio's average
weighted maturity will ordinarily be greater than five
years.
Approach: The Adviser manages the duration, country, and currency
exposure of the portfolio by combining fundamental
research on relative values with analyses of economic,
interest-rate, and exchange-rate trends. The Adviser will
invest in mortgage and corporate bonds when it believes
they offer the most value, although most foreign currency
denominated investments are in government and
supranational securities.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES of issuers in at least 3 countries, one of
which may be the U.S.
DERIVATIVES may be used to represent country investments,
and otherwise pursue portfolio strategy
Quality
Specifications: 95% INVESTMENT GRADE SECURITIES
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES EASTERN EUROPEAN ISSUERS INVERSE FLOATERS STRUCTURED INVESTMENTS
Investments: ASSET-BACKEDS EMERGING MARKETS ISSUERS INVESTMENT COMPANIES SWAPS
BRADY BONDS FLOATERS MORTGAGE SECURITIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN BONDS MUNICIPALS WHEN ISSUED SECURITIES
CMOS FOREIGN CURRENCY PREFERRED STOCK YANKEES
CONVERTIBLES FORWARDS REPURCHASE AGREEMENTS ZERO COUPONS
CORPORATES FUTURES & OPTIONS SMBS
</TABLE>
Comparative Index: Salomon World Government Bond Index
Strategies: FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
NON-DIVERSIFIED STATUS
EMERGING MARKETS INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: J. David Germany, Michael Kushma, Paul F. O'Brien and
Richard B. Worley
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 25
<PAGE>
HIGH YIELD PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing in high yielding corporate fixed-income
securities (including bonds rated below investment grade,
commonly referred to as junk bonds). The portfolio may
also invest in U.S. Government securities,
mortgage-backed securities, investment grade corporate
bonds and in short-term fixed-income securities, such as
certificates of deposit, treasury bills, and commercial
paper. The portfolio expects to achieve its objective by
earning a high rate of current income, although the
portfolio may seek capital growth opportunities when
consistent with its objective. The portfolio's average
weighted maturity will ordinarily be greater than five
years.
Approach: The Adviser uses equity and fixed-income valuation
techniques and analyses of economic and industry trends
to determine portfolio structure. Individual securities
are selected, and monitored, by fixed-income portfolio
managers who specialize in corporate bonds and use
in-depth financial analysis to uncover opportunities in
undervalued issues.
Policies: Generally at least 65% invested in HIGH YIELD securities
(commonly referred to as junk bonds)
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: None
Maturity and Duration: Average weighted maturity generally greater than 5
years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES EMERGING MARKETS ISSUERS INVERSE FLOATERS STRUCTURED NOTES
Investments: ASSET-BACKEDS FLOATERS INVESTMENT COMPANIES SWAPS
BRADY BONDS FOREIGN BONDS LOAN PARTICIPATIONS U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN CURRENCY MORTGAGE SECURITIES WHEN ISSUED SECURITIES
CMOS FOREIGN EQUITIES MUNICIPALS YANKEES
CONVERTIBLES FORWARDS PREFERRED STOCK ZERO COUPONS
CORPORATES FUTURES & OPTIONS REPURCHASE AGREEMENTS
EASTERN EUROPEAN ISSUERS HIGH YIELD SMBS
</TABLE>
Comparative Index: Salomon High Yield Market Index
Strategies: HIGH YIELD INVESTING
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
EMERGING MARKETS INVESTING
Portfolio
Management Team: Robert E. Angevine, Thomas L. Bennett and Stephen
F. Esser
- --------------------------------------------------------------------------------
MAS Fund - 26 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
INTERMEDIATE DURATION PORTFOLIO
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 investment grade corporate,
foreign and other investment grade fixed-income
securities. The portfolio will maintain an average
duration of between two and five years.
Approach: The Adviser constructs a portfolio with a duration
between two and five years by actively managing the
maturity and duration structure of the portfolio in
anticipation of long-term trends in interest rates and
inflation. Investments are diversified among a wide
variety of investment grade FIXED-INCOME SECURITIES in
all market sectors.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
May invest greater than 50% in MORTGAGE SECURITIES
Quality
Specifications: 100% INVESTMENT GRADE SECURITIES
Maturity and Duration: Average duration between 2 and 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES FLOATERS INVESTMENT COMPANIES STRUCTURED NOTES
Investments: ASSET-BACKEDS FOREIGN BONDS MORTGAGE SECURITIES SWAPS
BRADY BONDS FOREIGN CURRENCY MUNICIPALS U.S. GOVERNMENTS
CASH EQUIVALENTS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CMOS FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CONVERTIBLES INVERSE FLOATERS SMBS ZERO COUPONS
CORPORATES
</TABLE>
Comparative Index: Lehman Brothers Intermediate Government/Corporate Index
Strategies: MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
Portfolio
Management Team: Ellen D. Harvey and Scott F. Richard
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 27
<PAGE>
INTERNATIONAL FIXED INCOME PORTFOLIO
(A NON-DIVERSIFIED PORTFOLIO)
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing primarily in high-grade fixed-income
securities of foreign issuers.
Approach: The Adviser manages the duration, country, and currency
exposure of the portfolio by combining fundamental
research on relative values with analyses of economic,
interest-rate, and exchange-rate trends. The Adviser will
invest in mortgage and corporate bonds when it believes
they offer the most value, although most foreign currency
denominated investments are in government and
supranational securities.
Policies: Generally at least 80% invested in FIXED-INCOME
SECURITIES of issuers in at least 3 countries other than
the U.S.
DERIVATIVES may be used to represent country investments,
and otherwise pursue portfolio strategy
Quality
Specifications: 95% INVESTMENT GRADE SECURITIES
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES EASTERN EUROPEAN ISSUERS INVERSE FLOATERS STRUCTURED NOTES
Investments: ASSET-BACKEDS EMERGING MARKETS ISSUERS INVESTMENT COMPANIES SWAPS
BRADY BONDS FLOATERS MORTGAGE SECURITIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN BONDS MUNICIPALS WHEN ISSUED SECURITIES
CMOS FOREIGN CURRENCY PREFERRED STOCK YANKEES
CONVERTIBLES FORWARDS REPURCHASE AGREEMENTS ZERO COUPONS
CORPORATES FUTURES & OPTIONS SMBS
</TABLE>
Comparative Index: Salomon World Government Bond Index Except U.S.
Strategies: FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
NON-DIVERSIFIED STATUS
EMERGING MARKETS INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: J. David Germany, Michael Kushma, Paul F. O'Brien and
Richard B. Worley
- --------------------------------------------------------------------------------
MAS Fund - 28 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
LIMITED DURATION PORTFOLIO
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, investment-grade corporate bonds
and other fixed-income securities. The portfolio will
maintain an average duration of between one and three
years. Duration is a measure of the life of the
portfolio's debt securities on a present-value basis and
is indicative of a security's price volatility relative
to interest rate changes.
Approach: The Adviser manages the duration of the overall portfolio
as a more effective way to control interest-rate risk
than limiting the maturity of individual securities
within the portfolio. In this way investors can benefit
from opportunities across the entire yield curve as well
as in various market sectors, and at the same time limit
the volatility of investment returns. The Adviser
establishes the duration target through the use of its
top-down view of the economy and analysis of the current
level of interest rates and the shape of the yield curve.
The Adviser then strives to purchase the most
attractively priced portfolio that meets our duration and
investment objectives. When purchasing securities other
than U.S. GOVERNMENTS, the Adviser evaluates credit,
liquidity, and option risk. When the Adviser believes the
portfolio is compensated for these risks, it includes
agency, mortgage, and corporate securities which meet the
portfolio's quality specifications.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: 100% INVESTMENT GRADE SECURITIES
Maturity and Duration: Average duration between 1 and 3 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable AGENCIES CONVERTIBLES MORTGAGE SECURITIES WHEN ISSUED SECURITIES
Investments: ASSET-BACKEDS CORPORATES REPURCHASE AGREEMENTS YANKEES
BRADY BONDS FLOATERS STRUCTURED NOTES ZERO COUPONS
CASH EQUIVALENTS FUTURES & OPTIONS SWAPS
CMOS INVESTMENT COMPANIES U.S. GOVERNMENTS
</TABLE>
Comparative Index: Salomon 1-3 Year Treasury/Government Sponsored Index
Strategies: MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Ellen D. Harvey and Scott F. Richard
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 29
<PAGE>
MORTGAGE-BACKED SECURITIES PORTFOLIO
Objective: To achieve above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing primarily (at least 65% of its assets under
normal circumstances) in mortgage-backed securities. In
addition, the portfolio may also invest in U.S.
government securities and in short-term fixed-income
securities such as certificates of deposit, treasury
bills, and commercial paper. The portfolio's average
weighted maturity will ordinarily be greater than seven
years.
Approach: The Adviser sets three portfolio targets: (1)
interest-rate sensitivity; (2) yield-curve sensitivity;
and (3) prepayment sensitivity. The Adviser increases the
sensitivity of the portfolio to changes in interest rates
when bonds offer greater value on the basis of
inflation-adjusted interest rates. Similarly, the Adviser
increases yield-curve sensitivity when long-maturity
interest rates offer exceptional value relative to
short-maturity interest rates. Finally, the Adviser
increases prepayment exposure when mortgage yields,
adjusted for probable prepayments, indicate unusual value
in MORTGAGE SECURITIES.
Policies: Generally at least 65% invested in MORTGAGE SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality 100% INVESTMENT GRADE SECURITIES
Specifications:
Maturity and Duration: Average weighted maturity generally greater than 7 years
Duration generally between 2 and 7 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: AGENCIES FUTURES & OPTIONS MUNICIPALS SWAPS
ASSET-BACKEDS INVERSE FLOATERS REPURCHASE AGREEMENTS U.S. GOVERNMENTS
CASH EQUIVALENTS INVESTMENT COMPANIES SMBS WHEN ISSUED SECURITIES
CMOS MORTGAGE SECURITIES STRUCTURED NOTES ZERO COUPONS
FLOATERS
</TABLE>
Comparative Index: Lehman Mortgage Index
Strategies: MORTGAGE INVESTING
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
Portfolio
Management Team: Kenneth B. Dunn, Scott F. Richard and Roberto Sella
- --------------------------------------------------------------------------------
MAS Fund - 30 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
MULTI-MARKET FIXED INCOME PORTFOLIO
Objective: To realize above-average total return over a market cycle
of three to five years, consistent with reasonable risk,
by investing primarily in a diversified portofolio of
fixed-income securities of U.S. and foreign issuers.
Approach: The Adviser determines the mix of investments in domestic
and foreign FIXED-INCOME AND HIGH YIELD SECURITIES
expected to maximize available total return. Strategic
judgements on the asset mix are based on valuation
disciplines and tools for analysis which have been
developed by the Adviser to compare the relative
potential returns and risks of global bond markets.
Policies: Generally at least 65% in FIXED-INCOME SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: None
Maturity and
Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: AGENCIES EMERGING MARKETS ISSUERS INVESTMENT COMPANIES STRUCTURED NOTES
ASSET-BACKEDS FLOATERS LOAN ASSIGNMENTS STRUCTURED SECURITIES
BRADY BONDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
CASH EQUIVALENTS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CMOS FORWARDS MUNICIPALS WARRANTS
CONVERTIBLES FUTURES & OPTIONS PREFERRED STOCK WHEN ISSUED SECURITIES
CORPORATES HIGH YIELD REPURCHASE AGREEMENTS YANKEES
EASTERN EUROPEAN ISSUERS INVERSE FLOATERS SMBS ZERO COUPONS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
60% Salomon Broad Investment Grade Index
20% Salomon World Government Bond Index Ex U.S.
12% Salomon High Yield Market Index
8% J.P. Morgan Emerging Markets Bond Index
Strategies: FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
EMERGING MARKETS INVESTING
HIGH YIELD INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Thomas L. Bennett, Kenneth B. Dunn, Stephen F. Esser,
J. David Germany, Paul Ghaffari and Richard B. Worley
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 31
<PAGE>
MUNICIPAL PORTFOLIO
Objective: To realize above-average total return over a market cycle
of three to five years, consistent with the conservation
of capital and the realization of current income which is
exempt from federal income tax, by investing in a
diversified portfolio of fixed-income securities.
Approach: The Adviser varies portfolio structureNthe average
duration and maturity and the amount of the portfolio
invested in various types of bondsNaccording to its
outlook for interest rates and its analysis of the risks
and rewards offered by different classes of bonds. The
portfolio will invest in taxable bonds only in cases
where the Adviser believes they improve the risk/reward
profile of the portfolio on an after-tax basis.
Policies: Generally at least 80% invested in MUNICIPALS
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: 80% INVESTMENT GRADE SECURITIES
Up to 20% HIGH YIELD
Maturity and Duration: Average weighted maturity generally between 5 and 10
years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: AGENCIES EMERGING MARKETS ISSUERS INVERSE FLOATERS STRUCTURED NOTES
ASSET-BACKEDS FLOATERS INVESTMENT COMPANIES SWAPS
BRADY BONDS FOREIGN BONDS MORTGAGE SECURITIES TAXABLE INVESTMENTS
CASH EQUIVALENTS FOREIGN CURRENCY MUNICIPALS U.S. GOVERNMENTS
CMOS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CONVERTIBLES FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CORPORATES HIGH YIELD SMBS ZERO COUPONS
EASTERN EUROPEAN
ISSUERS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
50% Lehman 5-Year Municipal Bond Index
50% Lehman 10-Year Municipal Bond Index
Strategies: MUNICIPALS MANAGEMENT
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
HIGH YIELD INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Kenneth B. Dunn, Steven K. Kreider and Scott F. Richard
- --------------------------------------------------------------------------------
MAS Fund - 32 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
PA MUNICIPAL PORTFOLIO
Objective: To realize above-average total return over a market cycle
of three to five years, consistent with the conservation
of capital and the realization of current income which is
exempt from federal income tax and Pennsylvania personal
income tax by investing primarily in a diversified
portfolio of fixed-income securities.
Approach: The Adviser varies portfolio structureNthe average
duration and maturity and the amount of the portfolio
invested in various types of bondsNaccording to its
outlook for interest rates and its analysis of the risks
and rewards offered by different classes of bonds. The
portfolio will invest in federally or Pennsylvania State
taxable bonds only in cases where MAS believes they
improve the risk/reward profile of the portfolio on an
after-tax basis for Pennsylvania residents.
Policies: Generally at least 80% invested in MUNICIPAL SECURITIES
Generally at least 65% invested in PA MUNICIPAL
SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: 80% INVESTMENT GRADE SECURITIES
Up to 20% HIGH YIELD
Maturity and Duration: Average weighted maturity generally between 5 and 10
years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: AGENCIES EMERGING MARKETS ISSUERS INVESTMENT COMPANIES STRUCTURED NOTES
ASSET-BACKEDS FLOATERS MORTGAGE SECURITIES SWAPS
BRADY BONDS FOREIGN BONDS MUNICIPALS TAXABLE INVESTMENTS
CASH EQUIVALENTS FOREIGN CURRENCY PA MUNICIPALS U.S. GOVERNMENTS
CMOS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CONVERTIBLES FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CORPORATES HIGH YIELD SMBS ZERO COUPONS
EASTERN EUROPEAN ISSUERS INVERSE FLOATERS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
50% Lehman 5-Year Municipal Bond Index
50% Lehman 10-Year Municipal Bond Index
Strategies: MUNICIPALS MANAGEMENT
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
HIGH YIELD INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Kenneth B. Dunn, Steven K. Kreider and Scott F. Richard
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 33
<PAGE>
SPECIAL PURPOSE FIXED INCOME PORTFOLIO
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, corporate bonds (including bonds
rated below investment grade, commonly referred to as
junk bonds), foreign fixed-income securities and
mortgage-backed securities and other fixed-income
securities. The portfolio is structured to complement an
investment in one or more of the Fund's equity portfolios
for investors seeking a balanced investment.
Approach: The Adviser actively manages the maturity and duration
structure of the portfolio in anticipation of long-term
trends in interest rates and inflation. Investments are
diversified among a wide variety of FIXED-INCOME
SECURITIES in all market sectors. Both duration/maturity
strategy and sector allocation are determined based on
the presumption that investors are combining an
investment in the portfolio with an equity investment.
Policies: Generally at least 65% invested in FIXED-INCOME
SECURITIES
May invest greater than 50% in MORTGAGE SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Quality
Specifications: None
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: AGENCIES FLOATERS INVESTMENT COMPANIES STRUCTURED NOTES
ASSET-BACKEDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
BRADY BONDS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CASH EQUIVALENTS FORWARDS MUNICIPALS WHEN ISSUED SECURITIES
CMOS FUTURES & OPTIONS PREFERRED STOCK YANKEES
CONVERTIBLES HIGH YIELD REPURCHASE AGREEMENTS ZERO COUPONS
CORPORATES INVERSE FLOATERS SMBS
</TABLE>
Comparative Index: Salomon Broad Investment Grade
Lehman Brothers Aggregate
Strategies: MATURITY AND DURATION MANAGEMENT
FIXED INCOME MANAGEMENT AND ASSET ALLOCATION
VALUE INVESTING
MORTGAGE INVESTING
HIGH YIELD INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
Portfolio
Management Team: Thomas L. Bennett, Kenneth B. Dunn and Richard B. Worley
- --------------------------------------------------------------------------------
MAS Fund - 34 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
BALANCED PORTFOLIO
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 common stocks
and fixed-income securities. When the Adviser judges the
relative outlook for the equity and fixed-income markets
to be neutral the portfolio will be invested 60% in
common stocks and 40% in fixed-income securities. The
asset mix may be changed, however, with common stocks
ordinarily representing between 45% and 75% of the total
investment. The average weighted maturity of the
fixed-income portion of the portfolio will ordinarily be
greater than five years.
Approach: The Adviser determines investment strategies for the
equity and fixed-income portions of the portfolio
separately and then determines the mix of those
strategies expected to maximize the return available from
both the stock and bond markets. Strategic judgments on
the equity/fixed-income asset mix are based on valuation
disciplines and tools for analysis developed by the
Adviser over its twenty-five year history of managing
balanced accounts.
Policies: Generally 45% to 75% invested in EQUITY SECURITIES
Up to 25% invested in FOREIGN BONDS and/or FOREIGN
EQUITIES (excluding ADRs)
Up to 10% invested in BRADY BONDS
At least 25% invested in senior FIXED-INCOME SECURITIES
DERIVATIVES may be used to pursue portfolio strategy
Equity Capitalization: Generally greater than $1 billion
Quality
Specifications: None
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: ADRS EASTERN EUROPEAN ISSUERS INVESTMENT COMPANIES SMBS
AGENCIES FLOATERS INVESTMENT FUNDS STRUCTURED NOTES
ASSET-BACKEDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
BRADY BONDS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CASH EQUIVALENTS FOREIGN EQUITIES MUNICIPALS WARRANTS
CMOS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
COMMON STOCKS FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CONVERTIBLES HIGH YIELD RIGHTS ZERO COUPONS
CORPORATES INVERSE FLOATERS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
60% S&P 500 Index
40% Salomon Broad Investment Grade Index
Strategies: ASSET ALLOCATION MANAGEMENT
CORE EQUITY INVESTING
FIXED INCOME MANAGEMENT AND ASSET ALLOCATION
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
MORTGAGE INVESTING
HIGH YIELD INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
Portfolio
Management Team: Thomas L. Bennett, Gary G. Schlarbaum, Horacio A.
Valeiras and Richard B. Worley
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 35
<PAGE>
BALANCED PLUS PORTFOLIO
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 common stocks
of domestic and foreign issuers and fixed-income
securities.
Approach: The Adviser determines the mix of investments in domestic
and foreign equity and fixed-income securities expected
to maximize available total return. Strategic judgments
on the asset mix are based on valuation disciplines and
tools for analysis which have been developed by the
Adviser to compare the relative potential returns and
risks of global stock and bond markets. When the Adviser
believes it to be in the best interests of the fund,
opportunistic investments in both the high yield and
international fixed-income markets will be made.
Policies: Generally at least 65% invested in issuers located in at
least 3 countries, including the U.S. DERIVATIVES may be
used to pursue portfolio strategy At least 25% invested
in senior FIXED-INCOME SECURITIES
Domestic Equity
Capitalization: Generally greater than $1 billion
Quality
Specifications: None
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: ADRS EASTERN EUROPEAN ISSUERS INVERSE FLOATERS SMBS
AGENCIES EMERGING MARKETS ISSUERS INVESTMENT COMPANIES STRUCTURED INVESTMENTS
ASSET-BACKEDS FLOATERS INVESTMENT FUNDS STRUCTURED NOTES
BRADY BONDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
CASH EQUIVALENTS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CMOS FOREIGN EQUITIES MUNICIPALS WARRANTS
COMMON STOCKS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CONVERTIBLES FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CORPORATES HIGH YIELD RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
54% S&P 500 Index
40% Salomon Broad Investment Grade Index
6% MSCI World Ex U.S. Index
Strategies: ASSET ALLOCATION MANAGEMENT
FIXED INCOME MANAGEMENT AND ASSET ALLOCATION
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
CORE EQUITY INVESTING
INTERNATIONAL EQUITY INVESTING
EMERGING MARKETS INVESTING
HIGH YIELD INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Thomas L. Bennett, J. David Germany, Gary G. Schlarbaum,
Horacio A, Valeiras and Richard B. Worley
- --------------------------------------------------------------------------------
MAS Fund - 36 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
MULTI-ASSET-CLASS PORTFOLIO
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 common stocks
and fixed-income securities of U.S. and foreign issuers.
Approach: The Adviser determines the mix of investments in domestic
and foreign equity and fixed-income and high yield
securities expected to maximize available total return.
Strategic judgments on the asset mix are based on
valuation disciplines and tools for analysis which have
been developed by the Adviser to compare the relative
potential returns and risks of global stock and bond
markets.
Policies: Generally at least 65% invested in issuers located in at
least 3 countries, including the U.S. DERIVATIVES may be
used to pursue portfolio strategy
Domestic Equity
Capitalization: Generally greater than $1 billion
Quality
Specifications: None
Maturity and Duration: Average weighted maturity generally greater than 5 years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Allowable Investments: ADRS EASTERN EUROPEAN ISSUERS INVERSE FLOATERS SMBS
AGENCIES EMERGING MARKETS ISSUERS INVESTMENT COMPANIES STRUCTURED INVESTMENTS
ASSET-BACKEDS FLOATERS INVESTMENT FUNDS STRUCTURED NOTES
BRADY BONDS FOREIGN BONDS LOAN PARTICIPATIONS SWAPS
CASH EQUIVALENTS FOREIGN CURRENCY MORTGAGE SECURITIES U.S. GOVERNMENTS
CMOS FOREIGN EQUITIES MUNICIPALS WARRANTS
COMMON STOCKS FORWARDS PREFERRED STOCK WHEN ISSUED SECURITIES
CONVERTIBLES FUTURES & OPTIONS REPURCHASE AGREEMENTS YANKEES
CORPORATES HIGH YIELD RIGHTS ZERO COUPONS
</TABLE>
Comparative Index: A weighted blend of quarterly returns compiled by
the Adviser using:
50% S&P 500 Index
14% EAFE-GDP Weighted Index
24% Salomon Broad Investment Grade Index
6% Salomon World Government Bond Index Ex U.S.
6% Salomon High Yield Market Index
Strategies: ASSET ALLOCATION MANAGEMENT
FIXED INCOME MANAGEMENT AND ASSET ALLOCATION
MATURITY AND DURATION MANAGEMENT
VALUE INVESTING
FOREIGN INVESTING
FOREIGN FIXED INCOME INVESTING
CORE EQUITY INVESTING
INTERNATIONAL EQUITY INVESTING
EMERGING MARKETS INVESTING
HIGH YIELD INVESTING
MORTGAGE INVESTING
Portfolio
Management Team: Thomas L. Bennett, J. David Germany, Gary G. Schlarbaum,
Horacio A. Valeiras and Richard B. Worley
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 37
<PAGE>
PROSPECTUS GLOSSARY
CHARACTERISTICS AND RISKS OF STRATEGIES AND INVESTMENTS
STRATEGIES
ASSET ALLOCATION MANAGEMENT: The Adviser's approach to asset allocation
management is to determine investment strategies for each asset class in a
portfolio separately, and then determine the mix of those strategies expected to
maximize the return available from each market. Strategic judgments on the mix
among asset classes are based on valuation disciplines and tools for analysis
which have been developed over the Adviser's twenty-five year history of
managing balanced accounts.
Tactical asset-allocation shifts are based on comparisons of prospective risks,
returns, and the likely risk-reducing benefits derived from combining different
asset classes into a single portfolio. Experienced teams of equity, fixed-
income, and international investment professionals manage the investments in
each asset class.
CORE EQUITY INVESTING: The Adviser's "core" or primary equity strategy
emphasizes common stocks of large companies, with targeted investments in small
company stocks that promise special growth opportunities. Depending on the
Adviser's outlook for the economy and different market sectors, the mix between
value stocks and growth stocks will change.
EMERGING MARKETS INVESTING: The Adviser's approach to emerging markets investing
is based on the Adviser's evaluation of both short-term and long-term
international economic trends and the relative attractiveness of emerging
markets and individual emerging market securities.
As used in this Prospectus, emerging markets describes any country which is
generally considered to be an emerging or developing country by the
international financial community such as the International Bank for
Reconstruction and Development (more commonly known as the World Bank) and the
International Finance Corporation. There are currently over 130 countries which
are generally considered to be emerging or developing countries by the
international financial community, approximately 40 of which currently have
stock markets. Emerging markets can include every nation in the world except the
United States, Canada, Japan, Australia, New Zealand and most nations located in
Western Europe.
Currently, investing in many emerging markets is either not feasible or very
costly, or may involve unacceptable political risks. Other special risks include
the possible increased likelihood of expropriation or the return to power of a
communist regime which would institute policies to expropriate, nationalize or
otherwise confiscate investments. A portfolio will focus its investments on
those emerging market countries in which the Adviser believes the potential for
market appreciation outweighs these risks and the cost of investment. Investing
in emerging markets also involves an extra degree of custodial and/or market
risk, especially where the securities purchased are not traded on an official
exchange or where ownership records regarding the securities are maintained by
an unregulated entity (or even the issuer itself).
FIXED INCOME MANAGEMENT AND ASSET ALLOCATION: Within the Special Purpose Fixed
Income, Balanced, Multi-Asset-Class and Balanced Plus Portfolios, the Adviser
selects FIXED-INCOME SECURITIES not only on the basis of judgments regarding
MATURITY AND DURATION MANAGEMENT and VALUE INVESTING, but also on the basis of
the value offered by various segments of the FIXED-INCOME SECURITIES market
relative to CASH EQUIVALENTS and EQUITY SECURITIES. In this context, the Adviser
may find that certain segments of the FIXED-INCOME SECURITIES market offer more
or less attractive relative value when compared to EQUITY SECURITIES than when
compared to other FIXED-INCOME SECURITIES.
For example, in a given interest rate environment, EQUITY SECURITIES may be
judged to be fairly valued when compared to intermediate duration FIXED-INCOME
SECURITIES, but overvalued compared to long duration FIXED-INCOME SECURITIES.
Consequently, while a portfolio investing only in FIXED-INCOME SECURITIES may
not emphasize long duration
- --------------------------------------------------------------------------------
MAS Fund - 38 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
assets to the same extent, the fixed-income portion of a balanced investment may
invest a percentage of its assets in long duration bonds on the basis of their
valuation relative to EQUITY SECURITIES.
FOREIGN FIXED INCOME INVESTING: The Adviser invests in FOREIGN BONDS and other
FIXED-INCOME SECURITIES denominated in foreign currencies, where, in the opinion
of the Adviser, the combination of current yield and currency value offer
attractive expected returns. When the total return opportunities in a foreign
bond market appear attractive in local currency terms, but where in the
Adviser's judgment unacceptable currency risk exists, currency FUTURES &
OPTIONS, FORWARDS and SWAPS may be used to hedge the currency risk.
FOREIGN INVESTING: Investors should recognize that investing in FOREIGN BONDS
and FOREIGN EQUITIES involves certain special considerations which are not
typically associated with investing in domestic securities.
As non-U.S. companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to U.S. companies, there may be less publicly available information about
certain foreign securities than about U.S. securities. FOREI GN BONDS and
FOREIGN EQUITIES may be less liquid and more volatile than securities of
comparable U.S. companies. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than in the U.S.
With respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Additionally, there may be difficulty in obtaining and enforcing judgments
against foreign issuers.
Since FOREIGN BONDS and FOREIGN EQUITIES may be denominated in foreign
currencies, and since a portfolio may temporarily hold uninvested reserves in
bank deposits of foreign currencies prior to reinvestment or conversion to U.S.
dollars, a portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies.
Although a portfolio will endeavor to achieve the most favorable execution costs
in its portfolio transactions in foreign securities, fixed commissions on many
foreign stock exchanges are generally higher than negotiated commissions on U.S.
exchanges. In addition, it is expected that the expenses for custodial
arrangements of a portfolio's foreign securities will be greater than the
expenses for the custodial arrangements for handling U.S. securities of equal
value. Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income a portfolio receives from the companies comprising the portfolio's
investments.
GROWTH STOCK INVESTING: Seeks to invest in COMMON STOCKS generally characterized
by higher growth rates, betas, and price/earnings ratios, and lower yields than
the stock market in general as measured by the S&P 500 Index.
HIGH YIELD INVESTING: Involves investing in HIGH YIELD securities based on the
Adviser's analysis of economic and industry trends and individual security
characteristics. The Adviser conducts credit analysis for each security
considered for investment to evaluate its attractiveness relative to its risk. A
high level of diversification is also maintained to limit credit exposure to
individual issuers.
To the extent a portfolio invests in HIGH YIELD securities it will be exposed to
a substantial degree of credit risk. Lower-rated bonds are considered
speculative by traditional investment standards. HIGH YIELD securities may be
issued as a consequence of corporate restructuring or similar events. Also, HIGH
YIELD securities are often issued by smaller, less credit worthy companies, or
by highly leveraged (indebted) firms, which are generally less able than more
established or less leveraged firms to make scheduled payments of interest and
principal. The risks posed by securities issued under such circumstances are
substantial.
The market for HIGH YIELD securities is still relatively new. Because of this, a
long-term track record for bond default rates does not exist. In addition, the
secondary market for high yield securities is generally less liquid than that
for investment grade corporate securities. In periods of reduced market
liquidity, high yield bond prices may become more volatile, and both the high
yield market and a portfolio may experience sudden and substantial price
declines.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 39
<PAGE>
This lower liquidity might have an effect on a portfolio's ability to value or
dispose of such securities. Also, there may be significant disparities in the
prices quoted for high yield securities by various dealers. Under such
conditions, a portfolio may find it difficult to value its securities
accurately. A portfolio may also be forced to sell securities at a significant
loss in order to meet shareholder redemptions. These factors add to the risks
associated with investing in HIGH YIELD securities.
High yield bonds may also present risks based on payment expectations. For
example, high yield bonds may contain redemption or call provisions. If an
issuer exercises these provisions in a declining interest rate market, a
portfolio would have to replace the security with a lower yielding security,
resulting in a decreased return for investors.
Certain types of high yield bonds are non-income paying securities. For example,
ZERO COUPONS pay interest only at maturity and payment-in-kind bonds pay
interest in the form of additional securities. Payment in the form of additional
securities, or interest income recognized through discount accretion, will,
however, be treated as ordinary income which will be distributed to shareholders
even though the portfolio does not receive periodic cash flow from these
investments.
The table below provides a summary of ratings assigned to all U.S. and foreign
debt holdings of those portfolios with more than 5% invested in HIGH YIELD
securities as of September 30, 1997 (not including money market instruments).
These figures are dollar-weighted averages of month-end portfolio holdings and
do not necessarily indicate a portfolio's current or future debt holdings.
Portfolios whose debt holdings total less than 100% also invest in EQUITY
SECURITIES.
<TABLE>
High Yield Portfolio Multi-Asset-Class Portfolio
QUALITY QUALITY
<S> <C> <C> <C>
TSY,AGY,AAA 9.06% TSY,AGY,AAA 26.22%
AA 0.05 AA 2.32
A 0.19 A 1.09
BBB 6.09 BBB 2.09
BB 42.51 BB 4.64
B 35.48 B 6.02
CCC 0.96 CCC 0.35
Not Rated: Not Rated:
BB 0.83* BB 0.06*
B 2.30* B 0.22*
NR 2.54 NR 0.17
---- ----
Total Not Rated 5.66 Total Not Rated 0.45
TOTAL 100.00% TOTAL 43.18%
</TABLE>
* The Adviser believes that these non-rated securities are equivalent in quality
to the rating indicated.
INTERNATIONAL EQUITY INVESTING: The Adviser's approach to international equity
investing is based on its evaluation of both short-term and long-term
international economic trends and the relative attractiveness of non-U.S.
equity markets and individual securities.
The Adviser considers fundamental investment characteristics, the principles of
valuation and diversification, and a relatively long-term investment time
horizon. Since liquidity will also be a consideration, emphasis will likely be
influenced by the relative market capitalizations of different non-U.S. stock
markets and individual securities. Portfolios seek to diversify investments
broadly among both developed and newly industrializing foreign countries. Where
appropriate, a portfolio may also invest in regulated INVESTMENT COMPANIES or
INVESTMENT FUNDS which invest in such countries to the extent allowed by
applicable law.
MATURITY AND DURATION MANAGEMENT: One of two primary components of the Adviser's
fixed-income investment strategy is maturity and duration management. The
maturity and duration structure of a portfolio investing in FIXED-INCOME
SECURITIES is actively managed in anticipation of cyclical interest rate
changes. Adjustments are not made in an effort to capture short-term, day-to-day
movements in the market, but instead are implemented in anticipation of longer
term shifts in the levels of interest rates. Adjustments made to shorten
portfolio maturity and duration are made
- --------------------------------------------------------------------------------
MAS Fund - 40 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
to limit capital losses during periods when interest rates are expected to rise.
Conversely, adjustments made to lengthen maturity are intended to produce
capital appreciation in periods when interest rates are expected to fall. The
foundation for maturity and duration strategy lies in analysis of the U.S. and
global economies, focusing on levels of real interest rates, monetary and fiscal
policy actions, and cyclical indicators. See VALUE INVESTING for a description
of the second primary component of the Adviser's fixed-income strategy.
About Maturity and Duration: Most debt obligations provide interest (coupon)
payments in addition to a final (par) payment at maturity. Some obligations also
have call provisions. Depending on the relative magnitude of these payments and
the nature of the call provisions, the market values of debt obligations may
respond differently to changes in the level and structure of interest rates.
Traditionally, a debt security's term-to-maturity has been used as a proxy for
the sensitivity of the security's price to changes in interest rates (which is
the interest rate risk or volatility of the security). However, term-to-maturity
measures only the time until a debt security provides its final payment, taking
no account of the pattern of the security's payments prior to maturity.
Duration is a measure of the expected life of a FIXED-INCOME SECURITY that was
developed as a more precise alternative to the concept of term-to-maturity.
Duration incorporates a bond's yield, coupon interest payments, final maturity
and call features into one measure. Duration is one of the fundamental tools
used by the Adviser in the selection of FIXED-INCOME SECURITIES. Duration is a
measure of the expected life of a FIXED-INCOME SECURITY on a present value
basis. Duration takes the length of the time intervals between the present time
and the time that the interest and principal payments are scheduled or, in the
case of a callable bond, expected to be received, and weights them by the
present values of the cash to be received at each future point in time. For any
FIXED-INCOME SECURITY with interest payments occurring prior to the payment of
principal, duration is always less than maturity. In general, all other factors
being the same, the lower the stated or coupon rate of interest of a
fixed-income security, the longer the duration of the security; conversely, the
higher the stated or coupon rate of interest of a FIXED-INCOME SECURITY, the
shorter the duration of the security.
There are some situations where even the standard duration calculation does not
properly reflect the interest rate exposure of a security. For example, floating
and variable rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the coupon
reset. Another example where the interest rate exposure is not properly captured
by duration is the case of mortgage pass-through securities. The stated final
maturity of such securities is generally 30 years, but current prepayment rates
are more critical in determining the securities' interest rate exposure. In
these and other similar situations, the Adviser will use sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
MORTGAGE INVESTING: At times it is anticipated that greater than 50% of a
fixed-income portfolio's assets may be invested in mortgage-related securities.
These include MORTGAGE SECURITIES which represent interests in pools of mortgage
loans made by lenders such as commercial banks, savings and loan associations,
mortgage bankers and others. The pools are assembled by various organizations,
including the Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Fannie Mae, other government agencies, and private
issuers. It is expected that a portfolio's primary emphasis will be in MORTGAGE
SECURITIES issued by the various government-related organizations. However, a
portfolio may invest, without limit, in MORTGAGE SECURITIES issued by private
issuers when the Adviser deems that the quality of the investment, the quality
of the issuer, and market conditions warrant such investments. Securities issued
by private issuers will be rated investment grade by Moody's or Standard &
Poor's or be deemed by the Adviser to be of comparable investment qualtity.
MONEY MARKET INVESTING: A money market fund like the Cash Reserves Portfolio
invests in securities which present minimal credit risk and may not yield as
high a level of current income as securities of lower quality or longer
maturities which generally have less liquidity, greater market risk and more
price fluctuation. A money market portfolio is designed to provide maximum
principal stability for investors seeking to invest funds for the short-term,
or, for investors seeking to combine a long-term investment program in other
portfolios of the Fund with an investment in money market instruments. However,
because the Cash Reserves Portfolio invests in the money market obligations of
private financial and non-financial corporations in addition to those of the
U.S. Government or its agencies and instrumentalities, it offers higher credit
risk and yield potential relative to money market funds which invest exclusively
in U.S. Government securities. The Cash Reserves Portfolio seeks to maintain,
but does not guarantee, a constant net asset value of $1.00 per share.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 41
<PAGE>
MUNICIPALS MANAGEMENT: The Adviser manages municipal portfolios in a total
return context. This means that TAXABLE INVESTMENTS will regularly be included
in a portfolio when they have an attractive prospective after-tax total return,
regardless of the taxable nature of income on the security.
Municipals Management emphasizes a diversified portfolio of high grade municipal
debt securities. Under normal circumstances, a portfolio will invest at least
80% of net assets in municipal securities including AMT Bonds and at least 80%
will be INVESTMENT GRADE SECURITIES.
Under normal conditions, a portfolio may hold up to 20% of net assets in U.S.
GOVERNMENTS, AGENCIES, CORPORATES, CASH EQUIVALENTS, PREFERRED STOCKS, MORTGAGE
SECURITIES, ASSET-BACKEDS, FLOATERS, and INVERSE FLOATERS and other FIXED-INCOME
SECURITIES (collectively "TAXABLE INVESTMENTS").
NON-DIVERSIFIED STATUS: A portfolio may be classified as a non-diversified
investment company under the 1940 Act. Non-diversified portfolios may invest
more than 25% of assets in securities of individual issuers representing greater
than 5% each of a portfolio's total assets, whereas diversified investment
companies may only invest up to 25% of assets in positions of greater than 5%.
Both diversified and non-diversified portfolios are subject to diversification
specifications under the Internal Revenue Code of 1986, as amended, which
require that, as of the close of each fiscal quarter, (i) no more than 25% of a
portfolio's total assets may be invested in the securities of a single issuer
(except for U.S. Government securities) and (ii) with respect to 50% of its
total assets, no more than 5% of such assets may be invested in the securities
of a single issuer (except for U.S. Government securities) or invested in more
than 10% of the outstanding voting securities of a single issuer. Because of its
non-diversified status, a portfolio may be subject to greater credit and other
risks than a diversified investment company.
VALUE INVESTING: One of two primary components of the Adviser's fixed-income
strategy is value investing, whereby the Adviser seeks to identify undervalued
sectors and securities through analysis of credit quality, option
characteristics and liquidity. Quantitative models are used in conjunction with
judgment and experience to evaluate and select securities with embedded put or
call options which are attractive on a risk- and option-adjusted basis.
Successful value investing will permit a portfolio to benefit from the price
appreciation of individual securities during periods when interest rates are
unchanged. See MATURITY AND DURATION MANAGEMENT for a description of the other
key component of the Adviser's fixed-income investment strategy.
VALUE STOCK INVESTING: Emphasizes COMMON STOCKS which are deemed by the Adviser
to be undervalued relative to the stock market in general as measured by the
appropriate market index, based on value measures such as price/earnings ratios
and price/book ratios. Value stocks are generally dividend paying COMMON STOCKS.
However, non-dividend paying stocks may also be selected for their value
characteristics.
INVESTMENTS
Each portfolio may invest in the securities defined below in accordance with
their listing of Allowable Investments and any quality or policy constraints.
ADRS--American Depository Receipts: are dollar-denominated securities which are
listed and traded in the United States, but which represent claims to shares of
foreign stocks. ADRs may be either sponsored or unsponsored. Unsponsored ADR
facilities typically provide less information to ADR holders.
ADRs also include American Depository Shares.
AGENCIES: are securities which are not guaranteed by the U.S. Government, but
which are issued, sponsored or guaranteed by a federal agency or federally
sponsored agency such as the Student Loan Marketing Association or any of
several other agencies.
ASSET-BACKEDS: are securities collateralized by shorter term loans such as
automobile loans, home equity loans, computer leases, or credit card
receivables. The payments from the collateral are passed through to the
security holder. The collateral behind asset-backed securities tends to have
prepayment rates that do not vary with interest rates. In
- --------------------------------------------------------------------------------
MAS Fund - 42 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
addition the short-term nature of the loans reduces the impact of any change in
prepayment level. Due to amortization, the average life for these securities is
also the conventional proxy for maturity.
Possible Risks: Due to the possibility that prepayments (on automobile loans and
other collateral) will alter the cash flow on asset-backed securities, it is not
possible to determine in advance the actual final maturity date or average life.
Faster prepayment will shorten the average life and slower prepayments will
lengthen it. However, it is possible to determine what the range of that
movement could be and to calculate the effect that it will have on the price of
the security. In selecting these securities, the Adviser will look for those
securities that offer a higher yield to compensate for any variation in average
maturity.
BRADY BONDS: are debt obligations which are created through the exchange of
existing commercial bank loans to foreign entities for new obligations in
connection with debt restructuring under a plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the Brady Plan). Brady Bonds have
been issued fairly recently, and, accordingly, do not have a long payment
history. They may be collateralized or uncollateralized and issued in various
currencies (although most are dollar-denominated) and they are activel y traded
in the over-the-counter secondary market. For further information on these
securities, see the Statement of Additional Information. Portfolios will only
invest in Brady Bonds consistent with quality specifications.
CASH EQUIVALENTS: are short-term fixed-income instruments comprising:
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial bank or
savings and loan association. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Certificates of deposit are negotiable short-term obligations
issued by commercial banks or savings and loan associations against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
Each portfolio may invest in obligations of U.S. banks, and, except for the
Domestic Fixed Income Portfolio, in foreign branches of U.S. banks (Eurodollars)
and U.S. branches of foreign banks (Yankee dollars). Euro and Yankee dollar
investments will involve some of the same risks of investing in international
securities that are discussed in the FOREIGN INVESTING section of this
Prospectus.
The portfolios will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign branches of U.S. banks, the security is deemed by
the Adviser to be of an investment quality comparable with other debt securities
which may be purchased by the portfolio.
(2) Each portfolio (except the Cash Reserves Portfolio) may invest in COMMERCIAL
PAPER rated at time of purchase by one or more Nationally Recognized Statistical
Rating Organizations ("NRSRO") in one of their two highest categories, (e.g.,
A-l or A-2 by Standard & Poor's or Prime 1 or Prime 2 by Moody's), or, if not
rated, issued by a corporation having an outstanding unsecured debt issue rated
high-grade by a NRSRO (e.g. A or better by Moody's, Standard & Poor's or Fitch).
The Cash Reserves Portfolio invests only in COMMERCIAL PAPER rated in the
highest category;
(3) Short-term corporate obligations rated high-grade at the time of purchase by
a NRSRO (e.g. A or better by Moody's, Standard & Poor's or Fitch);
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of the U.S.
Government and differ mainly in interest rates, maturities and dates of issue;
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 43
<PAGE>
(5) Government Agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home
Administration, Farm Credit Banks, Federal Intermediate Credit Bank, Fannie Mae,
Federal Financing Bank, the Tennessee Valley Authority, and others;
(6) REPURCHASE AGREEMENTS collateralized by securities listed above; and
(7) Investments by the Cash Reserves Portfolio in Cash Equivalents are limited
by the quality, maturity and diversification requirements adopted under Rule
2a-7 of the 1940 Act.
CMOS--COLLATERALIZED MORTGAGE OBLIGATIONS: are DERIVATIVES which are
collateralized by mortgage pass-through securities. Cash flows from the mortgage
pass-through securities are allocated to various tranches (a "tranche" is
essentially a separate security) in a predetermined, specified order. Each
tranche has a stated maturity - the latest date by which the tranche can be
completely repaid, assuming no prepayments - and has an average life - the
average of the time to receipt of a principal payment weighted by the size of
the principal payment. The average life is typically used as a proxy for
maturity because the debt is amortized (repaid a portion at a time), rather than
being paid off entirely at maturity, as would be the case in a straight debt
instrument.
Possible Risks: Due to the possibility that prepayments (on home mortgages and
other collateral) will alter the cash flow on CMOs, it is not possible to
determine in advance the actual final maturity date or average life. Faster
prepayment will shorten the average life and slower prepayments will lengthen
it. However, it is possible to determine what the range of that movement could
be and to calculate the effect that it will have on the price of the security.
In selecting these securities, the Adviser will look for those securities that
offer a higher yield to compensate for any variation in average maturity.
Like bonds in general, MORTGAGE SECURITIES will generally decline in price when
interest rates rise. Rising interest rates also tend to discourage refinancings
of home mortgages with the result that the average life of MORTGAGE SECURITIES
held by a portfolio may be lengthened. This extension of average life causes the
market price of the securities to decrease further than if their average lives
were fixed. In part to compensate for these risks, mortgages will generally
offer higher yields than comparable bonds. However, when interest rates fall,
mortgages may not enjoy as large a gain in market value due to prepayment risk
because additional mortgage prepayments must be reinvested at lower interest
rates.
COMMERCIAL PAPER: is a term used to describe short-term obligations with
maturities ranging from 2 to 270 days. These obligations are primarily issued by
corporations needing to finance large amounts of receivables, but may be issued
by banks and other borrowers. COMMERCIAL PAPER is issued either directly or
through broker-dealers, and may be discounted or interest-bearing. COMMERCIAL
PAPER is unsecured, but is almost always backed by bank lines of credit.
Virtually all COMMERCIAL PAPER is ranked by Moody's or Standard & Poor's.
COMMON STOCKS: are EQUITY SECURITIES which represent an ownership interest in
a corporation, entitling the shareholder to voting rights and receipt of
dividends paid based on proportionate ownership.
CONVERTIBLES: are convertible bonds or shares of convertible PREFERRED STOCK
which may be exchanged for a fixed number of shares of COMMON STOCK at the
purchaser's option.
CORPORATES--Corporate bonds: are debt instruments issued by private
corporations. Bondholders, as creditors, have a prior legal claim over common
and preferred stockholders of the corporation as to both income and assets for
the principal and interest due to the bondholder. A portfolio will buy
Corporates subject to any quality constraints. If a security held by a portfolio
is down-graded, the portfolio may retain the security if the Adviser deems
retention of the security to be in the best interests of the portfolio.
DEPOSITARY RECEIPTS: include both Global Depositary Receipts ("GDRs") and
European Depositary Receipts ("EDRs"), in addition to other similar types of
depositary shares, and are securities that can be traded in U.S. or foreign
securities markets but which represent ownership interests in a security or pool
of securities by a foreign or U.S.
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MAS Fund - 44 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
corporation. DEPOSITARY RECEIPTS may be sponsored or unsponsored. The depositary
of unsponsored DEPOSITARY RECEIPTS may provide less information to receipt
holders.
DERIVATIVES: A financial instrument whose value and performance are based on the
value and performance of another security or financial instrument. The Adviser
will use derivatives only in circumstances where they offer the most economic
means of improving the risk/reward profile of the portfolio. The Adviser will
not use derivatives to increase portfolio risk above the level that could be
achieved in the portfolio using only traditional investment securities. In
addition, the Adviser will not use derivatives to acquire exposure to changes in
the value of assets or indexes of assets that are not listed in the applicable
Allowable Investments for the portfolio. Any applicable limitations are
described under each investment definition. The portfolios may enter into
over-the-counter Derivatives transactions with counterparties approved by the
Adviser in accordance with guidelines established by the Board of Trustees.
These guidelines provide for a minimum credit rating for each counterparty and
various credit enhancement techniques (for example, collateralization of amounts
due from counterparties) to limit exposure to counterparties with ratings below
AA. Derivatives include, but are not limited to, CMOS, FORWARDS, FUTURES AND
OPTIONS, SMBS, STRUCTURED INVESTMENTS, STRUCTURED NOTES and SWAPS. See each
individual portfolio's listing of Allowable Investments to determine which of
these a portfolio may hold.
EASTERN EUROPEAN ISSUERS: The economies of Eastern European countries are
currently suffering both from the stagnation resulting from centralized economic
planning and control and the higher prices and unemployment associated with the
transition to market economics. Unstable economic and political conditions may
adversely affect security values. Upon the accession to power of Communist
regimes during the 1940's, the governments of a number of Eastern European
countries expropriated a large amount of property. The claims of many property
owners against those governments were never finally settled. As a result, there
can be no assurance that the portfolio's investments in Eastern Europe would not
be expropriated, nationalized or otherwise confiscated.
EMERGING MARKETS ISSUERS: An emerging market security is one issued by a company
that has one or more of the following characteristics: (i) its principal
securities trading market is in an emerging market, (ii) alone or on a
consolidated basis it derives 50% or more of its annual revenue from either
goods produced, sales made or services performed in emerging markets, or (iii)
it is organized under the laws of, and has a principal office in, an emerging
market country. The Adviser will base determinations as to eligibility on
publicly available information and inquiries made to the companies. Investing in
emerging markets may entail purchasing securities issued by or on behalf of
entities that are insolvent, bankrupt, in default or otherwise engaged in an
attempt to reorganize or reschedule their obligations, and in entities that have
little or no proven credit rating or credit history. In any such case, the
issuer's poor or deteriorating financial condition may increase the likelihood
that the investing fund will experience losses or diminution in available gains
due to bankruptcy, insolvency or fraud.
EQUITY SECURITIES: Commonly include but are not limited to COMMON STOCK,
PREFERRED STOCK, ADRS, RIGHTS, WARRANTS, CONVERTIBLES, AND FOREIGN EQUITIES. See
each individual portfolio's listing of Allowable Investments to determine which
of these a portfolio may hold. PREFERRED STOCK is contained in both the
definition of Equity Securities and FIXED-INCOME SECURITIES since it exhibits
characteristics commonly associated with each type.
FIXED-INCOME SECURITIES: Commonly include but are not limited to U.S.
GOVERNMENTS, ZERO COUPONS, AGENCIES, CORPORATES, HIGH YIELD, MORTGAGE
SECURITIES, SMBS, CMOS, ASSET-BACKEDS, CONVERTIBLES, BRADY BONDS, FLOATERS,
INVERSE FLOATERS, CASH EQUIVALENTS, REPURCHASE AGREEMENTS, PREFERRED STOCK, and
FOREIGN BONDS. See each individual portfolio's listing of Allowable Investments
to determine which of these a portfolio may hold. PREFERRED STOCK is contained
in both the definition of EQUITY SECURITIES and Fixed-Income Securities since it
exhibits characteristics commonly associated with each type of security.
FLOATERS--Floating and Variable Rate Obligations: are debt obligations with a
floating or variable rate of interest, i.e. the rate of interest varies with
changes in specified market rates or indices, such as the prime rate, or at
specified intervals. Certain floating or variable rate obligations may carry a
demand feature that permits the holder to tender them back to the issuer of the
underlying instrument, or to a third party, at par value prior to maturity. When
the demand feature of certain floating or variable rate obligations represents
an obligation of a foreign entity, the demand feature will be subject to certain
risks discussed under FOREIGN INVESTING.
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 45
<PAGE>
FOREIGN BONDS: are FIXED INCOME SECURITIES denominated in foreign currency and
issued and traded primarily outside of the U.S., including: (1) obligations
issued or guaranteed by foreign national governments, their agencies,
instrumentalities, or political subdivisions; (2) debt securities issued,
guaranteed or sponsored by supranational organizations established or supported
by several national governments, including the World Bank, the European
Community, the Asian Development Bank and others; (3) non-government foreign
corporate debt securities; and (4) foreign MORTGAGE SECURITIES and various other
mortgages and asset-backed securities.
FOREIGN CURRENCY: Portfolios investing in foreign securities will regularly
transact security purchases and sales in foreign currencies. These portfolios
may hold foreign currency or purchase or sell currencies on a forward basis (see
FORWARDS).
FOREIGN EQUITIES: are COMMON STOCK, PREFERRED STOCK, RIGHTS and WARRANTS of
foreign issuers denominated in foreign currency and traded primarily in non-U.S.
markets. Foreign Equities also include DEPOSITARY RECEIPTS. Investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies (see FOREIGN INVESTING).
FORWARDS--Forward Foreign Currency Exchange Contracts: are DERIVATIVES which are
used to protect against uncertainty in the level of future foreign exchange
rates. A forward foreign currency exchange contract is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. Such contracts do not eliminate fluctuations caused by
changes in the local currency prices of the securities, but rather, they
establish an exchange rate at a future date. Also, although such contracts can
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they limit any potential gain that might be realized.
A portfolio may use currency exchange contracts in the normal course of business
to lock in an exchange rate in connection with purchases and sales of securities
denominated in foreign currencies (transaction hedge) or to lock in the U.S.
dollar value of portfolio positions (position hedge). In addition, the
portfolios may cross hedge currencies by entering into a transaction to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which a portfolio has or expects to have portfolio exposure.
Portfolios may also engage in proxy hedging which is defined as entering into
positions in one currency to hedge investments denominated in another currency,
where the two currencies are economically linked. A portfolio's entry into
forward contracts, as well as any use of cross or proxy hedging techniques will
generally require the portfolio to hold liquid securities or cash equal to the
portfolio's obligations in a segregated account throughout the duration of the
contract.
A portfolio may also combine forward contracts with investments in securities
denominated in other currencies in order to achieve desired credit and currency
exposures. Such combinations are generally referred to as synthetic securities.
For example, in lieu of purchasing a foreign bond, a portfolio may purchase a
U.S. dollar-denominated security and at the same time enter into a forward
contract to exchange U.S. dollars for the contract's underlying currency at a
future date. By matching the amount of U.S. dollars to be exchanged with the
anticipated value of the U.S. dollar-denominated security, a portfolio may be
able to lock in the foreign currency value of the security and adopt a synthetic
investment position reflecting the credit quality of the U.S. dollar-denominated
security.
There is a risk in adopting a transaction hedge or position hedge to the extent
that the value of a security denominated in foreign currency is not exactly
matched with a portfolio's obligation under the forward contract. On the date of
maturity, a portfolio may be exposed to some risk of loss from fluctuations in
that currency. Although the Adviser will attempt to hold such mismatching to a
minimum, there can be no assurance that the Adviser will be able to do so. For
proxy hedges, cross hedges or a synthetic position, there is an additional risk
in that these transactions create residual foreign currency exposure. When a
portfolio enters into a forward contract for purposes of creating a position
hedge, transaction hedge, cross hedge or a synthetic security, it will generally
be required to hold liquid securities or cash in a segregated account with a
daily value at least equal to its obligation under the forward contract.
FUTURES & OPTIONS--Futures Contracts, Options on Futures Contracts and Options:
are DERIVATIVES. Futures contracts provide for the sale by one party and
purchase by another party of a specified amount of a specific security, at a
specified future time and price. An option is a legal contract that gives the
holder the right to buy or sell a specified amount of the underlying security or
futures contract at a fixed or determinable price upon the exercise of the
option. A call option conveys the right to buy and a put option conveys the
right to sell a specified quantity of the underlying security.
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MAS Fund - 46 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
A portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts in
combination with its outstanding obligations with respect to options
transactions would exceed 50% of its total assets. It will maintain assets
sufficient to meet its obligations under such contracts in a segregated account
with the custodian bank or will otherwise comply with the Securities and
Exchange Commission's ("SEC's") position on asset coverage.
Possible Risks: The primary risks associated with the use of Futures and Options
are (i) imperfect correlation between the change in market value of the
securities held by a portfolio and the prices of futures and options relating to
the stocks, bonds or futures contracts purchased or sold by a portfolio; and
(ii) possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures position which could have an adverse
impact on a portfolio's ability to execute futures and options strategies.
Additional risks associated with options transactions are (i) the risk that an
option will expire worthless; (ii) the risk that the issuer of an over-the-
counter option will be unable to fulfill its obligation to the portfolio due to
bankruptcy or related circumstances; (iii) the risk that options may exhibit
greater short-term price volatility than the underlying security; and (iv) the
risk that a portfolio may be forced to forego participation in the appreciation
of the value of underlying securities, futures contracts or currency due to the
writing of a call option.
HIGH YIELD: High yield securities are generally considered to be CORPORATES,
PREFERRED STOCKS, and CONVERTIBLES rated Ba through C by Moody's or BB through D
by Standard & Poor's, and unrated securities considered to be of equivalent
quality. Securities rated less than Baa by Moody's or BBB by Standard & Poor's
are classified as non-investment grade securities and are commonly referred to
as junk bonds or high yield, high risk securities. Such securities carry a high
degree of risk and are considered speculative by the major credit rating
agencies. The following are excerpts from the Moody's and Standard & Poor's
definitions for speculative-grade debt obligations:
MOODY'S: Ba-rated bonds have "speculative elements" so their future
"cannot be considered assured," and protection of principal and
interest is "moderate" and "not well safeguarded during both good and
bad times in the future." B-rated bonds "lack characteristics of a
desirable investment" and the assurance of interest or principal
payments "may be small." Caa-rated bonds are "of poor standing" and
"may be in default" or may have "elements of danger with respect to
principal or interest." Ca-rated bonds represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings. C-rated bonds are the "lowest rated" class
of bonds, and issues so rated can be regarded as having "extremely poor
prospects" of ever attaining any real investment standing.
STANDARD & POOR'S: BB-rated bonds have "less near-term vulnerability to
default" than B- or CCC-rated securities but face "major ongoing
uncertainties . . . which may lead to inadequate capacity" to pay
interest or principal. B-rated bonds have a "greater vulnerability to
default than BB-rated bonds and the ability to pay interest or
principal will likely be impaired by adverse business conditions."
CCC-rated bonds have a currently identifiable "vulnerability to
default" and, without favorable business conditions, will be "unable to
repay interest and principal." The rating C is reserved for income
bonds on which "no interest is being paid." Debt rated D is in
"default", and "payment of interest and/or repayment of principal is in
arrears."
While these securities offer high yields, they also normally carry with them a
greater degree of risk than securities with higher ratings. Lower-rated bonds
are considered speculative by traditional investment standards. High yield
securities may be issued as a consequence of corporate restructuring or similar
events. Also, high yield securities are often issued by smaller, less credit
worthy companies, or by highly leveraged (indebted) firms, which are generally
less able than more established or less leveraged firms to make scheduled
payments of interest and principal. The price movement of these securities is
influenced less by changes in interest rates and more by the financial and
business position of the issuing corporation when compared to investment grade
bonds.
The risks posed by securities issued under such circumstances are substantial.
If a security held by a portfolio is down-graded, the portfolio may retain the
security.
INVERSE FLOATERS--Inverse Floating Rate Obligations: are FIXED-INCOME
SECURITIES, which have coupon rates that vary inversely at a multiple of a
designated floating rate, such as LIBOR (London Inter-Bank Offered Rate). Any
rise in the reference rate of an Inverse Floater (as a consequence of an
increase in interest rates) causes a drop in the coupon rate while any drop
in the reference rate of an Inverse Floater causes an increase in the coupon
rate. Inverse
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 47
<PAGE>
Floaters may exhibit substantially greater price volatility than fixed rate
obligations having similar credit quality, redemption provisions and maturity,
and Inverse Floater CMOS exhibit greater price volatility than the majority of
mortgage pass-through securities or CMOS. In addition, some Inverse Floater CMOS
exhibit extreme sensitivity to changes in prepayments. As a result, the yield to
maturity of an Inverse Floater CMO is sensitive not only to changes in interest
rates but also to changes in prepayment rates on the related underlying mortgage
assets.
INVESTMENT COMPANIES: The portfolios are permitted to invest in shares of other
open-end or closed-end investment companies. The 1940 Act generally prohibits
the portfolios from acquiring more than 3% of the outstanding voting shares of
an investment company and limits such investments to no more than 5% of the
portfolio's total assets in any one investment company and no more than 10% in
any combination of investment companies. The 1940 Act also prohibits the
portfolios from acquiring in the aggregate more than 10% of the outstanding
voting shares of any registered closed-end investment company.
To the extent a portfolio invests a portion of its assets in Investment
Companies, those assets will be subject to the expenses of the investment
company as well as to the expenses of the portfolio itself. The portfolios may
not purchase shares of any affiliated investment company except as permitted by
SEC rule or order.
INVESTMENT FUNDS: Some emerging market countries have laws and regulations that
currently preclude or limit direct foreign investment in the securities of their
companies. However, indirect foreign investment in the securities of companies
listed and traded on the stock exchanges in these countries is permitted by
certain emerging market countries through investment funds. Portfolios that may
invest in these Investment Funds are subject to applicable law as discussed
under Investment Restrictions and will invest in such Investment Funds only
where appropriate given that the portfolio's shareholders will bear indirectly
the layer of expenses of the underlying investment funds in addition to their
proportionate share of the expenses of the portfolio. Under certain
circumstances, an investment in an investment fund will be subject to the
additional limitations that apply to investments in INVESTMENT COMPANIES.
INVESTMENT GRADE SECURITIES: are those (a) rated by one or more nationally
recognized statistical rating organization (NRSRO) in one of the four highest
rating categories at the time of purchase (e.g. AAA, AA, A or BBB by Standard &
Poor's Corporation (Standard & Poor's) or Fitch Investors Service, Inc., (Fitch)
or Aaa, Aa, A or Baa by Moody's Investors Service, Inc. (Moody's)); (b)
guaranteed by the U.S. Government or a private organization; or (c) considered
by the Adviser to be investment grade quality. Securities rated BBB or Baa
represent the lowest of four levels of Investment Grade Securities and are
regarded as borderline between definitely sound obligations and those in which
the speculative element begins to predominate. MORTGAGE SECURITIES, including
mortgage pass-throughs and CMOS, deemed investment grade by the Adviser, will
either carry a guarantee from an agency of the U.S. Government or a private
issuer of the timely payment of principal and interest (such guarantees do not
extend to the market value of such securities or the net asset value per share
of the portfolio) or, in the case of unrated securities, be sufficiently
seasoned that they are considered by the Adviser to be investment grade quality.
The Adviser may retain securities if their ratings fall below investment grade
if it deems retention of the security to be in the best interests of the
portfolio. Any portfolio permitted to hold Investment Grade Securities may hold
unrated securities if the Adviser considers the risks involved in owning that
security to be equivalent to the risks involved in holding an Investment Grade
Security.
LOAN PARTICIPATIONS AND ASSIGNMENTS--A portfolio may invest in fixed rate and
floating rate loans ("Loans") arranged through private negotiations between an
issuer of sovereign debt obligations and one or more financial institutions
("Lenders"). A portfolio's investments in Loans are expected in most instances
to be in the form of participation in Loans ("Participations") and assignments
of all or a portion of Loans ("Assignments") from third parties. A portfolio
will have the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In the event of
the insolvency of the Lender selling a Participation, a portfolio may be treated
as a general creditor of the Lender and may not benefit from any set-off between
the Lender and the borrower. Certain Participations may be structured in a
manner designed to avoid purchasers of Participations being subject to the
credit risk of the Lender with respect to the Participation. Even under such a
structure, in the event of the Lender's insolvency, the Lender's servicing of
the Participation may be declared and the assignability of the Participation may
be impaired. A portfolio will acquire Participations only if the Lender
interpositioned between the portfolio and the borrower is determined by the
Adviser to be creditworthy.
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MAS Fund - 48 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
When a portfolio purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the portfolio as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender. Because there is no liquid market for such securities, the
portfolio anticipates that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the portfolio's
ability to dispose of particular Assignments or Participations when necessary to
meet the portfolio's borrower. The lack of a liquid secondary market for
Assignments and Participations also may make it more difficult for the portfolio
to assign a value to those securities for purposes of valuing the portfolio's
holdings and calculating its net asset value.
MORTGAGE SECURITIES--Mortgage-backed securities represent an ownership interest
in a pool of residential and commercial mortgage loans. Generally, these
securities are designed to provide monthly payments of interest and principal to
the investor. The mortgagee's monthly payments to his/her lending institution
are passed through to investors such as the portfolio. Most issuers or poolers
provide guarantees of payments, regardless of whether the mortgagor actually
makes the payment. The guarantees made by issuers or poolers are supported by
various forms of credit, collateral, guarantees or insurance, including
individual loan, title, pool and hazard insurance purchased by the issuer. The
pools are assembled by various governmental, government-related and private
organizations. Portfolios may invest in securities issued or guaranteed by the
Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), Fannie Mae, private issuers and other government agencies.
There can be no assurance that the private insurers can meet their obligations
under the policies. Mortgage Securities issued by non-agency issuers, whether or
not such securities are subject to guarantees, may entail greater risk. If there
is no guarantee provided by the issuer, mortgage-backed securities purchased by
the portfolio will be those which at time of purchase are rated investment grade
by one or more NRSRO, or, if unrated, are deemed by the Adviser to be of
investment grade quality.
There are two methods of trading Mortgage Securities. A specified pool
transaction is a trade in which the pool number of the security to be delivered
on the settlement date is known at the time the trade is made. This is in
contrast with the typical Mortgage Security transaction, called a TBA (to be
announced) transaction, in which the type of Mortgage Securities to be delivered
is specified at the time of trade but the actual pool numbers of the securities
that will be delivered are not known at the time of the trade. The pool numbers
of the pools to be delivered at settlement will be announced shortly before
settlement takes place. The terms of the TBA trade may be made more specific if
desired. Generally, agency pass-through Mortgage Securities are traded on a TBA
basis.
A mortgage-backed bond is a collateralized debt security issued by a thrift or
financial institution. The bondholder has a first priority perfected security
interest in collateral, usually consisting of agency mortgage pass-through
securities, although other assets, including U.S. Treasuries (including ZERO
COUPON U.S. Treasuries), agencies, cash equivalent securities, whole loans and
corporate bonds, may qualify. The amount of collateral must be continuously
maintained at levels from 115% to 150% of the principal amount of the bonds
issued, depending on the specific issue structure and collateral type.
Possible Risks: Due to the possibility that prepayments on home mortgages will
alter cash flow on Mortgage Securities, it is not possible to determine in
advance the actual final maturity date or average life. Like bonds in general,
mortgage-backed securities will generally decline in price when interest rates
rise. Rising interest rates also tend to discourage refinancings of home
mortgages, with the result that the average life of Mortgage Securities held by
a portfolio may be lengthened. This extension of average life causes the market
price of the securities to decrease further than if their average lives were
fixed. However, when interest rates fall, mortgages may not enjoy as large a
gain in market value due to prepayment risk because additional mortgage
prepayments must be reinvested at lower interest rates. Faster prepayment will
shorten the average life and slower prepayments will lengthen it. However, it is
possible to determine what the range of that movement could be and to calculate
the effect that it will have on the price of the security. In selecting these
securities, the Adviser will look for those securities that offer a higher yield
to compensate for any variation in average maturity.
MUNICIPALS--Municipal Securities: are debt obligations issued by local, state
and regional governments that provide interest income which is exempt from
federal income taxes. Municipals include both municipal bonds (those securities
with maturities of five years or more) and municipal notes (those with
maturities of less than five years). Municipal bonds are issued for a wide
variety of reasons: to construct public facilities, such as airports, highways,
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 49
<PAGE>
bridges, schools, hospitals, mass transportation, streets, water and sewer
works; to obtain funds for operating expenses; to refund outstanding municipal
obligations; and to loan funds to various public institutions and facilities.
Certain industrial development bonds are also considered municipal bonds if
their interest is exempt from federal income tax. Industrial development bonds
are issued by or on behalf of public authorities to obtain funds for various
privately-operated manufacturing facilities, housing, sports arenas, convention
centers, airports, mass transportation systems and water, gas or sewage works.
Industrial development bonds are ordinarily dependent on the credit quality of a
private user, not the public issuer.
General obligation municipal bonds are secured by the issuer's pledge of full
faith, credit and taxing power. Revenue or special tax bonds are payable from
the revenues derived from a particular facility or, in some cases, from a
special excise or other tax, but not from general tax revenue.
Municipal notes are issued to meet the short-term funding requirements of local,
regional and state governments. Municipal notes include bond anticipation notes,
revenue anticipation notes and tax and revenue anticipation notes. These are
short-term debt obligations issued by state and local governments to aid cash
flows while waiting for taxes or revenue to be collected, at which time the debt
is retired. Other types of municipal notes in which the portfolio may invest are
construction loan notes, short-term discount notes, tax-exempt commercial paper,
demand notes, and similar instruments. Demand notes permit an investor (such as
the portfolio) to demand from the issuer payment of principal plus accrued
interest upon a specified number of days' notice. The portfolios eligible to
purchase municipal bonds may also purchase AMT bonds. AMT bonds are tax-exempt
private activity bonds issued after August 7, 1986, the proceeds of which are
directed, at least in part, to private, for-profit organizations. While the
income from AMT bonds is exempt from regular federal income tax, it is a tax
preference item in the calculation of the alternative minimum tax. The
alternative minimum tax is a special separate tax that applies to a limited
number of taxpayers who have certain adjustments to income or tax preference
items.
PA MUNICIPALS: are obligations of the Pennsylvania state government, state
agencies and various local governments, including counties, cities, townships,
special districts and authorities. In general, the credit quality and credit
risk of any issuer's debt is contingent upon the state and local economy, the
health of the issuer's finances, the amount of the issuer's debt, the quality of
management and the strength of legal provisions in the debt document that
protect debt holders. Credit risk is usually lower wherever the economy is
strong, growing and diversified, where financial operations are sound and the
debt burden is reasonable.
Concentration of investment in the securities of one state exposes a portfolio
to greater credit risks than would be present in a nationally diversified
portfolio of municipal securities. The risks associated with investment in the
securities of a single state include possible tax changes or a deterioration in
economic conditions and differing levels of supply and demand for the municipal
obligations of that state.
Debt of Government Agencies, Authorities and Commissions: Certain state-created
agencies have statutory authorization to incur debt for which legislation
providing for state appropriations to pay debt service thereon is not required.
The debt of these agencies is supported by assets of, or revenues derived from,
the various projects financed; it is not an obligation of the Commonwealth. Some
of these agencies, however, such as the Delaware River Joint Toll Bridge
Commission, are indirectly dependent on Commonwealth funds through various
state-assisted programs.
PREFERRED STOCK: are non-voting ownership shares in a corporation which pay a
fixed or variable stream of dividends.
REPURCHASE AGREEMENTS: are transactions by which a portfolio purchases a
security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase). The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. Such agreements
permit the portfolio to keep all its assets at work while retaining overnight
flexibility in pursuit of investments of a longer term nature. The Adviser will
continually monitor the value of the underlying collateral to ensure that its
value, including accrued interest, always equals or exceeds the repurchase
price.
Pursuant to an order issued by the SEC, the Fund's portfolios may pool their
daily uninvested cash balances in order to invest in Repurchase Agreements on a
joint basis. By entering into Repurchase Agreements on a joint basis, it is
expected that the portfolios will incur lower transaction costs and potentially
obtain higher rates of interest on such
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MAS Fund - 50 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
Repurchase Agreements. Each portfolio's participation in the income from jointly
purchased Repurchase Agreements will be based on that portfolio's percentage
share in the total Repurchase Agreement.
RIGHTS: represent a preemptive right of stockholders to purchase additional
shares of a stock at the time of a new issuance, before the stock is offered to
the general public, allowing the stockholder to retain the same ownership
percentage after the new stock offering.
SMBS--Stripped Mortgage-Backed Securities: are DERIVATIVES in the form of
multi-class mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government and private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In some cases, one class will
receive all of the interest (the interest-only or IO class), while the other
class will receive all of the principal (the principal-only or PO class). The
yield to maturity on IOs and POs is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on a
portfolio yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a portfolio may fail to fully
recoup its initial investment in these securities, even if the security is in
one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these securities were
only recently developed. As a result, established trading markets have not yet
developed and, accordingly, certain of these securities may be deemed illiquid
and subject to a portfolio's limitations on investment in illiquid securities.
STRUCTURED INVESTMENTS: are DERIVATIVES in the form of a unit or units
representing an undivided interest(s) in assets held in a trust that is not an
investment company as defined in the 1940 Act. A trust unit pays a return based
on the total return of securities and other investments held by the trust and
the trust may enter into one or more SWAPS to achieve its objective. For
example, a trust may purchase a basket of securities and agree to exchange the
return generated by those securities for the return generated by another basket
or index of securities. A portfolio will purchase Structured Investments in
trusts that engage in such SWAPS only where the counterparties are approved by
the Adviser in accordance with credit-risk guidelines established by the Board
of Trustees.
STRUCTURED NOTES: are DERIVATIVES on which the amount of principal repayment and
or interest payments is based upon the movement of one or more factors. These
factors include, but are not limited to, currency exchange rates, interest rates
(such as the prime lending rate and LIBOR) and stock indices such as the S&P 500
Index. In some cases, the impact of the movements of these factors may increase
or decrease through the use of multipliers or deflators. The use of Structured
Notes allows a portfolio to tailor its investments to the specific risks and
returns the Adviser wishes to accept while avoiding or reducing certain other
risks.
SWAPS--Swap Contracts: are DERIVATIVES in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by one
instrument for the return generated by another instrument. The payment streams
are calculated by reference to a specified index and agreed upon notional
amount. The term specified index includes, but is not limited to, currencies,
fixed interest rates, prices and total return on interest rate indices,
fixed-income indices, stock indices and commodity indices (as well as amounts
derived from arithmetic operations on these indices). For example, a portfolio
may agree to swap the return generated by a fixed-income index for the return
generated by a second fixed-income index. The currency Swaps in which the
portfolios may enter will generally involve an agreement to pay interest streams
in one currency based on a specified index in exchange for receiving interest
streams denominated in another currency. Such Swaps may involve initial and
final exchanges that correspond to the agreed upon notiona l amount.
A portfolio will usually enter into Swaps on a net basis, i.e., the two return
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a portfolio receiving or paying, as the case
may be, only the net amount of the two returns. A portfolio's obligations under
a swap agreement will be accrued daily (offset
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 51
<PAGE>
against any amounts owing to the portfolio) and any accrued but unpaid net
amounts owed to a swap counterparty will be covered by the maintenance of a
segregated account consisting of cash or liquid securities. A portfolio will not
enter into any swap agreement unless the counterparty meets the rating
requirements set forth in guidelines established by the Board of Trustees.
Possible Risks: Interest rate and total rate of return Swaps do not involve the
delivery of securities, other underlying assets, or principal. Accordingly, the
risk of loss with respect to interest rate and total rate of return Swaps is
limited to the net amount of interest payments that a portfolio is contractually
obligated to make. If the other party to an interest rate or total rate of
return swap defaults, a portfolio's risk of loss consists of the net amount of
interest payments that a portfolio is contractually entitled to receive. In
contrast, currency swaps may involve the delivery of the entire principal value
of one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap may be subject to the
risk that the other party to the swap will default on its contractual delivery
obligations. If there is a default by the counterparty, a portfolio may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Swaps that include caps, floors, and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than Swaps.
The use of Swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the portfolios would be less favorable than it would have been if this
investment technique were not used.
TAXABLE INVESTMENTS: comprise FIXED-INCOME SECURITIES and other instruments
which pay income that is not exempt from taxation. Investors may be liable for
tax on the income distributed as a result of the portfolio holding taxable
investments. In this event, shareholders will receive an IRS form 1099
disclosing the taxable income paid for a calendar year.
U.S. GOVERNMENTS--U.S. Treasury securities: are FIXED-INCOME SECURITIES which
are backed by the full faith and credit of the U.S. Government as to the
payment of both principal and interest.
WARRANTS: are options issued by a corporation which give the holder the
option to purchase stock.
WHEN-ISSUED SECURITIES: are securities purchased at a certain price even though
the securities may not be delivered for up to 90 days. No payment or delivery is
made by a portfolio in a when-issued transaction until the portfolio receives
payment or delivery from the other party to the transaction. Although a
portfolio receives no income from the above described securities prior to
delivery, the market value of such securities is still subject to change. As a
consequence, it is possible that the market price of the securities at the time
of delivery may be higher or lower than the purchase price. A portfolio will
maintain with the custodian a segregated account consisting of cash or liquid
securities in an amount at least equal to these commitments.
YANKEES: are U.S. dollar-denominated FIXED-INCOME SECURITIES issued by a
foreign government or corporation and sold in the U.S.
ZERO COUPONS--Zero Coupon Obligations: are FIXED-INCOME SECURITIES that do not
make regular interest payments. Instead, zero coupon obligations are sold at
substantial discounts from their face value. The difference between a zero
coupon obligation's issue or purchase price and its face value represents the
imputed interest an investor will earn if the obligation is held until maturity.
Zero Coupons may offer investors the opportunity to earn higher yields than
those available on ordinary interest-paying obligations of similar credit
quality and maturity. However, zero coupon obligation prices may also exhibit
greater price volatility than ordinary FIXED-INCOME SECURITIES because of the
manner in which their principal and interest are returned to the investor.
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MAS Fund - 52 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
GENERAL SHAREHOLDER INFORMATION
PURCHASE OF SHARES
Institutional Class Shares are available to clients of the Adviser with combined
investments of $5,000,000 and Shareholder Organizations who have a contractual
arrangement with the Fund or the Fund's Distributor, including institutions such
as trusts, foundations or broker-dealers purchasing for the accounts of others.
Institutional Class Shares of each portfolio, except for the Cash Reserves
Portfolio, may be purchased at the net asset value per share next determined
after receipt of the purchase order. Such portfolios determine net asset value
as described under General Shareholder Information-Valuation of Shares each day
that the portfolios are open for business. See Other Information-Closed Holidays
and General Shareholder Information--Valuation of Shares.
The Cash Reserves Portfolio declares dividends daily and, therefore, at the time
of a purchase must have funds immediately available for investment. As a result,
payment for the purchase of shares must be in the form of Federal Funds (monies
credited to the portfolio's Custodian by a Federal Reserve Bank) before they can
be accepted by the portfolio. The portfolio is credited with Federal Funds on
the same day if the investment is made by Federal Funds. Institutional Class
Shares of the Cash Reserves Portfolio may be purchased at the net asset value
next determined after an order is received by the portfolio and Federal Funds
are received by the Custodian. The Cash Reserves Portfolio determines net asset
value as of 12:00 noon (Eastern Time) each day that the portfolios are open for
business. See Other Information-Closed Holidays and Valuation of Shares.
INITIAL PURCHASE BY MAIL: Subject to acceptance by the Fund, an account may be
opened by completing and signing an Account Registration Form (provided at the
end of the prospectus) and mailing it to MAS Funds c/o Miller Anderson &
Sherrerd, LLP, One Tower Bridge, West Conshohocken, Pennsylvania 19428-0868
together with a check ($5,000,000 minimum) payable to MAS Funds.
The portfolios requested should be designated on the Account Registration Form.
Subject to acceptance by the Fund, payment for the purchase of shares received
by mail will be credited at the net asset value per share of the portfolio next
determined after receipt. Such payment need not be converted into Federal Funds
(monies credited to the Fund's Custodian Bank by a Federal Reserve Bank) before
acceptance by the Fund, except for the Cash Reserves Portfolio. Purchases made
by check in the Cash Reserves Portfolio are ordinarily credited at the net asset
value per share determined two business days after receipt of the check by the
Fund. Please note that payments to investors who redeem shares purchased by
check will not be made until payment of the purchase has been collected, which
may take up to eight business days after purchase. Shareholders can avoid this
delay by purchasing shares by wire.
INITIAL PURCHASE BY WIRE: Subject to acceptance by the Fund, Institutional Class
Shares of each portfolio may also be purchased by wiring Federal Funds to the
Fund's Custodian Bank, The Chase Manhattan Bank (see instructions below). A
completed Account Registration Form should be forwarded to MAS Funds' Client
Services Group in advance of the wire. For all portfolios except the Cash
Reserves Portfolio, notification must be given to MAS Funds' Client Services
Group at 1-800-354-8185 prior to the determination of net asset value.
Institutional Class Shares will be purchased at the net asset value per share
next determined after receipt of the purchase order. (Prior notification must
also be received from investors with existing accounts.) Instruct your bank to
send a Federal Funds Wire in a specified amount to the Fund's Custodian Bank
using the following wiring instructions:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, NY 10081
ABA #021000021
DDA #910-2-734143
Attn: MAS Funds Subscription Account
Ref: (Portfolio Name, Account Number, Account Name)
Purchases in the Cash Reserves Portfolio may also be made by Federal Funds wire
to the Fund's Custodian. If the portfolio receives notification of an order
prior to 12:00 noon (Eastern Time) and funds are received by the Custodian the
same day, purchases of portfolio shares will become effective and begin to earn
income on that business day.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 53
<PAGE>
Orders received after 12:00 noon (Eastern Time) will be effective on the next
business day upon receipt of funds. Federal Funds purchases will be accepted
only on a day on which the portfolio is open for business. See Other
Information-Closed Holidays.
ADDITIONAL INVESTMENTS: Additional investments of Institutional Class Shares at
net asset value may be made at any time (minimum additional investment $1,000)
by mailing a check (payable to MAS Funds) to MAS Funds' Client Services Group at
the address noted under Initial Purchase by Mail or by wiring Federal Funds to
the Custodian Bank as outlined above. Shares will be purchased at the net asset
value per share next determined after receipt of the purchase order. For all
portfolios, except the Cash Reserves Portfolio, notification must be given to
MAS Funds' Client Services Group at 1-800-354-8185 prior to the determination of
net asset value. For the Cash Reserves Portfolio, notification of a Federal
Funds wire must be received by 12:00 noon (Eastern Time). Purchases made by
check in the Cash Reserves Portfolio are ordinarily credited at the net asset
value per share determined two business days after receipt of the check by the
Fund.
OTHER PURCHASE INFORMATION: The Fund reserves the right, in its sole discretion,
to suspend the offering of any of its portfolios or to reject any purchase
orders when, in the judgment of management, such suspension or rejection is in
the best interest of the Fund. The Fund also reserves the right, in its sole
discretion, to waive the minimum initial and additional investment amounts.
Purchases of a portfolio's shares will be made in full and fractional shares of
the portfolio calculated to three decimal places. In the interest of economy and
convenience, certificates for shares will not be issued except at the written
request of the shareholder. Certificates for fractional shares, however, will
not be issued.
Institutional Class Shares of the Fund's portfolios are also sold to
corporations or other institutions such as trusts, foundations or broker-dealers
purchasing for the accounts of others (Shareholder Organizations). Investors
purchasing and redeeming shares of the portfolios through a Shareholder
Organization may be charged a transaction-based fee or other fee for the
services of such organization. Each Shareholder Organization is responsible for
transmitting to its customers a schedule of any such fees and information
regarding any additional or different conditions regarding purchases and
redemptions. Customers of Shareholder Organizations should read this Prospectus
in light of the terms governing accounts with their organization. The Fund does
not pay compensation to or receive compensation from Shareholder Organizations
for the sale of Institutional Class Shares.
REDEMPTION OF SHARES
Shares of each portfolio may be redeemed by mail, or, if authorized, by
telephone. No charge is made for redemptions. The value of shares redeemed may
be more or less than the purchase price, depending on the net asset value at the
time of redemption which is based on the market value of the investment
securities held by the portfolio. See Other Information-Closed Holidays and
Valuation of Shares.
BY MAIL: Each portfolio will redeem shares at the net asset value next
determined after the request is received in good order. Requests should be
addressed to MAS Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge,
West Conshohocken, PA 19428-0868.
To be in good order, redemption requests must include the following
documentation:
(a) The share certificates, if issued;
(b) A letter of instruction, if required, or a stock assignment specifying the
number of shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which the shares are registered;
(c) Any required signature guarantees (see Signature Guarantees); and
(d) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit sharing
plans and other organizations.
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MAS Fund - 54 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
SIGNATURE GUARANTEES: To protect your account, the Fund and the Administrator
from fraud, signature guarantees are required to enable the Fund to verify the
identity of the person who has authorized a redemption from an account.
Signature guarantees are required for (1) redemptions where the proceeds are to
be sent to someone other than the registered shareholder(s) and the registered
address, and (2) share transfer requests. Please contact MAS Funds' Client
Services Group for further details.
BY TELEPHONE: Provided the Telephone Redemption Option has been authorized by
the shareholder on the Account Registration Form, a redemption of shares may be
requested by calling MAS Funds' Client Services Group and requesting that the
redemption proceeds be mailed to the primary registration address or wired per
the authorized instructions. Shares cannot be redeemed by telephone if share
certificates are held for those shares.
BY FACSIMILE: Written requests in good order (see above) for redemptions,
exchanges, and transfers may be forwarded to the Fund via facsimile. All
requests sent to the Fund via facsimile must be followed by a telephone call to
MAS Funds' Client Services Group to ensure that the instructions have been
properly received by the Fund. The original request must be promptly mailed to
MAS Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge, West
Conshohocken, PA 19428-0868.
Neither the Distributor nor the Fund will be responsible for any loss,
liability, cost, or expense for acting upon facsimile instructions or upon
telephone instructions that they reasonably believe to be genuine. In order to
confirm that telephone instructions in connection with redemptions are genuine,
the Fund and Distributor will provide written confirmation of transactions
initiated by telephone.
Payment of the redemption proceeds will ordinarily be made within three business
days after receipt of an order for a redemption. The Fund may suspend the right
of redemption or postpone the date of redemption at times when the New York
Stock Exchange ("NYSE"), the Custodian, or the Fund is closed (see Other
Information-Closed Holidays) or under any emergency circumstances as determined
by the SEC.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in-kind of readily marketable securities held by a portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may incur
brokerage charges on the sale of portfolio securities received in such payments
of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE: Each portfolio's Institutional Class Shares may be exchanged
for shares of the Fund's other portfolios offering Institutional Class Shares
based on the respective net asset values of the shares involved. The exchange
privilege is only available, however, with respect to portfolios that are
qualified for sale in a shareholder's state of residence. There are no exchange
fees. Exchange requests should be sent to MAS Funds, c/o Miller Anderson &
Sherrerd, LLP, One Tower Bridge, West Conshohocken, PA 19428-0868.
Because an exchange of shares amounts to a redemption from one portfolio and
purchase of shares of another portfolio, the above information regarding
purchase and redemption of shares applies to exchanges. Shareholders should note
that an exchange between portfolios is considered a sale and purchase of shares.
The sale of shares may result in a capital gain or loss for tax purposes.
The officers of the Fund reserve the right not to accept any request for an
exchange when, in their opinion, the exchange privilege is being used as a tool
for market timing. The Fund reserves the right to change the terms or conditions
of the exchange privilege discussed herein upon sixty days' notice.
TRANSFER OF REGISTRATION: The registration of Fund shares may be transferred by
writing to MAS Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge,
West Conshohocken, PA 19428-0868. As in the case of redemptions, the written
request must be received in good order as defined above. Unless shares are being
transferred to an existing account, requests for transfer must be accompanied by
a completed Account Registration Form for the receiving party.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 55
<PAGE>
VALUATION OF SHARES
EMERGING MARKETS VALUE, EQUITY, GROWTH, INTERNATIONAL EQUITY, MID CAP GROWTH,
MID CAP VALUE, SMALL CAP VALUE AND VALUE PORTFOLIOS:
Net asset value per share is determined by dividing the total market value of
each portfolio's investments and other assets, less any liabilities, by the
total outstanding shares of that portfolio. Net asset value per share is
determined as of the close of the NYSE (normally 4:00 p.m. Eastern Time) on each
day the portfolio is open for business (See Other Information-Closed Holidays).
EQUITY SECURITIES listed on a U.S. securities exchange or Nasdaq for which
market quotations are available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed EQUITY SECURITIES is
taken from the exchange where the security is primarily traded. EQUITY
SECURITIES listed on a foreign exchange are valued at the latest quoted sales
price available before the time when assets are valued. For purposes of net
asset value per share, all assets and liabilities initially expressed in foreign
currencies are converted into U.S. dollars at the bid price of such currencies
against U.S. dollars. Unlisted EQUITY SECURITIES and listed U.S. EQUITY
SECURITIES not traded on the valuation date for which market quotations are
readily available are valued at the mean of the most recent quoted bid and asked
price. The values of other assets and securities for which no quotations are
readily available (including restricted securities), and, to the extent
permitted by the SEC, securities for which the value has been materially
affected by events occurring after the close of the market on which they
principally trade, are determined in good faith at fair value using methods
approved by the Trustees.
DOMESTIC FIXED INCOME, FIXED INCOME, FIXED INCOME PORTFOLIO II, GLOBAL FIXED
INCOME, HIGH YIELD, INTERMEDIATE DURATION, INTERNATIONAL FIXED INCOME, LIMITED
DURATION, MORTGAGE-BACKED SECURITIES, MULTI-MARKET FIXED INCOME, MUNICIPAL, PA
MUNICIPAL AND SPECIAL PURPOSE FIXED INCOME PORTFOLIOS:
Net asset value per share is computed by dividing the total value of the
investments and other assets of the portfolio, less any liabilities, by the
total outstanding shares of the portfolio. The net asset value per share is
determined as of one hour after the close of the bond markets (normally 4:00
p.m. Eastern Time) on each day the portfolio is open for business (See Other
Information-Closed Holidays). Bonds and other FIXED-INCOME SECURITIES listed on
a foreign exchange are valued at the latest quoted sales price available before
the time when assets are valued. For purposes of net asset value per share, all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the bid price of such currencies against U.S.
dollars.
Net asset value includes interest on bonds and other FIXED-INCOME SECURITIES w
hich is accrued daily. Bonds and other FIXED-INCOME SECURITIES which are traded
over the counter and on an exchange will be valued according to the broadest and
most representative market, and it is expected that for bonds and other
FIXED-INCOME SECURITIES this ordinarily will be the over-the-counter market.
However, bonds and other FIXED-INCOME SECURITIES may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. The prices provided by a pricing
service are determined without regard to bid or last sale prices but take into
account institutional size trading in similar groups of securities and any
developments related to specific securities. Bonds and other FIXED-INC OME
SECURITIES not priced in this manner are valued at the most recent quoted bid
price, or when stock exchange valuations are used, at the latest quoted sale
price on the day of valuation. If there is no such reported sale, the latest
quoted bid price will be used. Securities purchased with remaining maturities of
60 days or less are valued at amortized cost when the Board of Trustees
determines that amortized cost reflects fair value. In the event that amortized
cost does not approximate market, market prices as determined above will be
used. Other assets and securities, for which no quotations are readily available
(including restricted securities), and, to the extent permitted by the SEC,
securities for which the value has been materially affected by events occurring
after the close of the market on which they principally trade, will be valued in
good faith at fair value using methods approved by the Board of Trustees.
BALANCED, BALANCED PLUS AND MULTI-ASSET-CLASS PORTFOLIOS: Net asset value per
share is computed by dividing the total value of the investments and other
assets of the portfolio, less any liabilities, by the total outstanding shares
of the portfolio. The net asset value per share of the Balanced,
Multi-Asset-Class and Balanced Plus Portfolios is determined as of the later of
the close of the NYSE or one hour after the close of the bond markets on each
day the portfolios are open for business. Equity, fixed-income and other
securities held by the portfolios will be valued using the policies described
above.
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MAS Fund - 56 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
CASH RESERVES PORTFOLIO: The net asset value per share of the Cash Reserves
Portfolio is calculated daily as of 12:00 noon (Eastern Time) on each day that
the portfolio is open for business (See Other Information-Closed Holidays). The
portfolio determines its net asset value per share by subtracting the
portfolio's liabilities (including accrued expenses and dividends payable) from
the total value of the portfolio's investments and other assets and dividing the
result by the total outstanding shares of the portfolio.
For the purpose of calculating the portfolio's net asset value per share,
securities are valued by the amortized cost method of valuation, which does not
take into account unrealized gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value based on
amortized cost is higher or lower than the price the portfolio would receive if
it sold the instrument.
The use of amortized cost and the maintenance of the portfolio's per share net
asset value at $1.00 is based on its election to operate under the provisions of
Rule 2a-7 under the 1940 Act. As conditions of operating under Rule 2a-7, the
portfolio must maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of thirteen
months or less and invest only in U.S. dollar-denominated securities which are
determined by the Trustees to present minimal credit risks and which are of
eligible quality as determined under the rule.
The Board of Trustees has also agreed to establish procedures reasonably
designed, taking into account current market conditions and the portfolio's
investment objective, to stabilize the net asset value per share as computed for
the purposes of sales and redemptions at $1.00. These procedures include
periodic review, as the Trustees deem appropriate and at such intervals as are
reasonable in light of current market conditions, of the relationship between
the amortized cost value per share and a net asset value per share based upon
available indications of market value. In such a review, investments for which
market quotations are readily available are valued at the most recent bid price
or quoted yield equivalent for such securities or for securities of comparable
maturity, quality and type as obtained from one or more of the major market
makers for the securities to be valued. Other investments and assets are valued
at fair value, as determined in good faith by the Board of Trustees.
In the event of a deviation of over 1/2 of 1% between a portfolio's net asset
value based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost, the Trustees will promptly consider what action,
if any, should be taken. The Board of Trustees will also take such action as
they deem appropriate to eliminate or to reduce to the extent reasonably
practicable any material dilution or other unfair results which might arise from
differences between the two. Such action may include redeeming shares in kind,
selling instruments prior to maturity to realize capital gains or losses or to
shorten average maturity, withholding dividends, paying distributions from
capital or capital gains, or utilizing a net asset value per share not equal to
$1.00 based upon available market quotations.
ALL PORTFOLIOS: Net asset value per share for Investment Class Shares,
Institutional Class Shares and Adviser Class Shares may differ due to
class-specific expenses paid by each class, and the shareholder servicing fees
charged to Investment Class Shares and distribution fees charged to Adviser
Class Shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES: Dividends and Distributions: The Fund
maintains different dividend and capital gain distribution policies for each
portfolio. These are:
* The Equity, Value, Growth, Fixed Income, Fixed Income II, Special Purpose
Fixed Income, High Yield, Limited Duration, Intermediate Duration,
Mortgage-Backed Securities, Balanced, Multi-Asset-Class, Global Fixed Income,
International Fixed Income, Multi-Market Fixed Income, Domestic Fixed Income and
Balanced Plus Portfolios normally distribute substantially all of their net
investment income to shareholders on a quarterly basis.
* The International Equity, Emerging Markets Value, Small Cap Value, Mid Cap
Value and Mid Cap Growth Portfolios normally distribute substantially all of
their net investment income on an annual basis.
* The Municipal and the PA Municipal Portfolios normally distribute
substantially all of their net investment income on a monthly basis.
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 57
<PAGE>
* The Cash Reserves Portfolio declares distributions daily and normally
distributes substantially all of its investment income on a monthly basis.
If any portfolio does not have income available to distribute, as determined in
compliance with the appropriate tax laws, no distribution will be made. If any
net gains are realized from the sale of underlying securities, the portfolios
normally distribute such gains with the last distribution for the calendar year.
All dividends and capital gains distributions are automatically paid in
additional shares of the portfolio unless the shareholder elects otherwise. Such
election must be made in writing to the Fund and may be made on the Account
Registration Form.
In all portfolios except the Cash Reserves Portfolio, undistributed net
investment income is included in the portfolio's net assets for the purpose of
calculating net asset value per share. Therefore, on the ex-dividend date, the
net asset value per share excludes the dividend (i.e., is reduced by the per
share amount of the dividend). Dividends paid shortly after the purchase of
shares by an investor, although in effect a return of capital, are taxable as
ordinary income.
Certain MORTGAGE SECURITIES may provide for periodic or unscheduled payments of
principal and interest as the mortgages underlying the securities are paid or
prepaid. However, such principal payments (not otherwise characterized as
ordinary discount income or bond premium expense) will not normally be
considered as income to the portfolio and therefore will not be distributed as
dividends. Rather, these payments on mortgage-backed securities will be
reinvested on behalf of the shareholders by the portfolio in accordance with its
investment objectives and policies.
SPECIAL CONSIDERATIONS FOR THE CASH RESERVES PORTFOLIO: Net investment income is
computed and dividends declared as of 12:00 noon (Eastern Time), on each day.
Such dividends are payable to Cash Reserves Portfolio shareholders of record as
of 12:00 noon (Eastern Time) on that day, if the portfolio is open for business.
Shareholders who redeem prior to 12:00 noon (Eastern Time) are not entitled to
dividends for that day. Dividends declared for Saturdays, Sundays and holidays
are payable to shareholders of record as of 12:00 noon (Eastern Time) on the
preceding business day on which the portfolio was open for business. Net
realized short-term capital gains, if any, of the Cash Reserves Portfolio will
be distributed whenever the Trustees determine that such distributions would be
in the best interest of shareholders, but at least once a year. The portfolio
does not expect to realize any long-term capital gains. Should any such gains be
realized, they will be distributed annually.
TAXES: The following is a summary of some important tax issues that affect the
portfolios of the Fund and their shareholders. The summary is based on current
tax laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the tax treatment of each portfolio or its shareholders. More
information about taxes is in the Statement of Additional Information.
Shareholders are urged to consult their tax advisors regarding sp ecific
questions as to federal, state and local income taxes.
FEDERAL TAXES: Each portfolio of the Fund is treated as a separate entity for
federal income tax purposes and intends to qualify for the special tax treatment
afforded regulated investment companies. As such, each portfolio will not be
subject to federal income tax to the extent it distributes net investment
company taxable income and net capital gains to shareholders. The Fund will
notify shareholders annually as to the tax classification of all distributions.
Income dividends received by shareholders (except for shareholders of the
Municipal and PA Municipal Portfolios (see Special Tax Considerations for the
Municipal and PA Municipal Portfolios) will be taxable as ordinary income,
whether received in cash or in additional shares. In the case of the Equity,
Value, Small Cap Value, Mid Cap Growth, Growth, Balanced, Balanced Plus,
Multi-Asset-Class and Mid Cap Value Portfolios, corporate shareholders may be
entitled to a dividends-received deduction for the portion of dividends they
receive which are attributable to dividends received by such portfolios from
U.S. corporations. Capital gains distributions are taxable to shareholders at
capital gains rates. Each portfolio will designate capital gains distributions
to individual shareholders as either subject to the federal capital gains rate
imposed on property held for more than 18 months or on property held for more
than 1 year but not more than 18 months.
Distributions paid in January but declared by a portfolio in October, November
or December of the previous year are taxable to shareholders in the previous
year.
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MAS Fund - 58 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
Each portfolio intends to declare and pay dividends and distributions so as to
avoid imposition of the federal excise tax applicable to regulated investment
companies. Further discussion is included in the Statement of Additional
Information.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends and capital gains distributions) paid to
shareholders. In order to avoid this withholding requirement, shareholders must
certify on their Account Registration Forms that their Social Security Number or
Taxpayer Identification Number is correct, and that they are not subject to
backup withholding. Exchanges and redemptions of shares in a portfolio are
taxable events.
FOREIGN INCOME TAXES: Investment income received by the portfolios from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. Each of the International Equity, Emerging Markets Value, Global Fixed
Income, International Fixed Income, Multi-Market Fixed Income, Multi-Asset-Class
and Balanced Plus Portfolios may be able to file an election with the Internal
Revenue Service to pass through to its shareholders for foreign tax credit
purposes the amount of foreign income taxes paid by such portfolio. Further
discussion is included in the Statement of Additional Information. The other
portfolios of the Fund will not be able to make this election.
STATE AND LOCAL INCOME TAXES: The Fund is formed as a Pennsylvania Business
Trust and is not liable for any corporate income or franchise tax in the
Commonwealth of Pennsylvania. Shareholders should consult their tax advisors for
the state and local income tax consequences of distributions from the
portfolios.
SPECIAL TAX CONSIDERATIONS FOR THE MUNICIPAL AND PA MUNICIPAL PORTFOLIOS: Each
of the Municipal and PA Municipal Portfolios intends to pay "exempt-interest"
dividends to shareholders which are excluded from a shareholder's gross income
for federal income tax purposes. Exempt-interest dividends received by
shareholders from such portfolios may be subject to state and local taxes,
although some states allow a shareholder to exclude that portion of a
portfolio's tax-exempt income which is accountable to municipal securities
issued within the shareholder's state of residence.
Since each of the portfolios may invest in private activity municipal
securities, investment in either of the portfolios may not be an appropriate
investment for persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds.
To the extent, if any, that distributions paid to shareholders of either
portfolio are derived from taxable interest or capital gains, such distributions
will be subject to federal income tax. Additionally, such distributions are not
eligible for the dividends received deduction for corporations.
Furthermore, the PA Municipal Portfolio invests at least 65% of its assets in PA
Municipals. As a result, the income of the PA Municipal Portfolio that is
derived from PA Municipals and U.S. Governments will not be subject to the
Pennsylvania personal income tax or to the Philadelphia School District
investment net income tax. Distributions by the PA Municipal Portfolio to a
Pennsylvania resident that are attributable to most other sources may be subject
to the Pennsylvania personal income tax and (for residents of Philadelphia) to
the Philadelphia School District investment net income tax.
Further discussion of tax considerations affecting shareholders of these
portfolios is found in the Statement of Additional Information.
TRUSTEES OF THE TRUST: The affairs of the Trust are supervised by the Trustees
under the laws governing business trusts in the Commonwealth of Pennsylvania.
The Trustees have approved contracts under which, as described above, certain
companies provide essential management, administrative and shareholder services
to the Trust.
INVESTMENT ADVISER: The Investment Adviser to the Fund, Miller Anderson &
Sherrerd, LLP (the "Adviser"), is a Pennsylvania limited liability partnership
founded in 1969, wholly owned by indirect subsidiaries of Morgan Stanley Dean
Witter & Co., and is located at One Tower Bridge, West Conshohocken, PA 19428.
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Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 59
<PAGE>
The Adviser provides investment services to employee benefit plans, endowment
funds, foundations and other institutional investors and as of December 31, 1997
had in excess of $59.4 billion in assets under management. On May 31, 1997,
Morgan Stanley Group Inc., then the indirect parent of the Adviser, merged with
Dean Witter, Discover & Co. to form Morgan Stanley Dean Witter & Co. (formerly,
Morgan Stanley, Dean Witter, Discover & Co.). In connection with this
transaction, the Adviser entered into a new Investment Management Agreement
("Agreement") with MAS Funds dated May 31, 1997, which Agreement was approved by
the shareholders of each portfolio at a special meeting held on May 1, 1997 or
at an adjournment of such meeting held on May 12, 1997. The Adviser will retain
its name and remain at its current location, One Tower Bridge, West
Conshohocken, PA 19428. The Adviser will continue to provide investment
counseling services to employee benefit plans, endowments, foundations and other
institutional investors.
Under the Agreement with the Fund, the Adviser, 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 of the Fund, manages the
investment and reinvestment of the assets of each portfolio of the Fund. In this
regard, it is the responsibility of the Adviser to make investment decisions for
the Fund's portfolios and to place each portfolio's purchase and sales orders.
As compensation for the services rendered by the Adviser under the Agreement,
each portfolio pays the Adviser an advisory fee calculated by applying a
quarterly rate. The following table shows the Adviser's contractual rate
(annualized) along with the Adviser's actual rate of compensation for the Fund's
1997 fiscal year.
<TABLE>
FY 1997
CONTRACTUAL ACTUAL
RATE COMPENSATION RATE
----------- -----------------
<S> <C> <C>
Emerging Markets Value Portfolio .750% .652%
Equity Portfolio .500 .500
Growth Portfolio .500 N/A
International Equity Portfolio .500 .500
Mid Cap Growth Portfolio .500 .500
Mid Cap Value Portfolio .750 .727
Small Cap Value Portfolio .750 .750
Value Portfolio .500 .500
Cash Reserves Portfolio .250 .180
Domestic Fixed Income Portfolio .375 .364
Fixed Income Portfolio .375 .375
Fixed Income Portfolio II .375 .375
Global Fixed Income Portfolio .375 .375
High Yield Portfolio .375 .375
Intermediate Duration Portfolio .375 .325
International Fixed Income Portfolio .375 .375
Limited Duration Portfolio .300 .297
Mortgage-Backed Securities Portfolio .375 .334
Multi-Market Fixed Income Portfolio .450 N/A
Municipal Portfolio .375 .329
PA Municipal Portfolio .375 .283
Special Purpose Fixed Income Portfolio .375 .375
Balanced Portfolio .450 .450
Balanced Plus Portfolio .550 N/A
Multi-Asset-Class Portfolio .650 .528
</TABLE>
Until further notice, the Adviser has voluntarily agreed to waive its advisory
fees and/or reimburse certain expenses to the extent necessary to keep Total
Operating Expenses actually deducted from portfolio assets for the Institutional
Class of the Emerging Markets Value, Cash Reserves, Mortgage-Backed Securities,
Municipal, PA Municipal, Multi-Market Fixed Income and Multi-Asset-Class
Portfolios from exceeding 1.18%, 0.32%, 0.50%, 0.50%, 0.50%, 0.58% and 0.78%,
respectively.
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MAS Fund - 60 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
PORTFOLIO MANAGEMENT
A description of the business experience during the past five years for each of
the investment professionals who are primarily responsible for the day-to-day
management of the Fund's portfolios is as follows:
Robert E. Angevine, Principal, Morgan Stanley, joined Morgan Stanley Asset
Management in 1988. He assumed responsibility for the High Yield Portfolio in
1996.
Arden C. Armstrong, Managing Director, Morgan Stanley, joined MAS in 1986. She
assumed responsibility for the Mid Cap Growth Portfolio in 1990, the Growth
Portfolio in 1993 and the Equity Portfolio in 1994.
Richard M. Behler, Principal, Morgan Stanley, joined MAS in 1995. He served as a
Portfolio Manager from 1992 through 1995 for Moore Capital Management. He
assumed responsibility for the Value Portfolio in 1996.
Thomas L. Bennett, Managing Director, Morgan Stanley, joined MAS in 1984. He
assumed responsibility for the Fixed Income Portfolio in 1984, the Domestic
Fixed Income Portfolio 1987, the High Yield Portfolio in 1985, the Fixed Income
Portfolio II in 1990, the Special Purpose Fixed Income and Balanced Portfolio in
1992, the Multi-Asset-Class Portfolio in 1994, the Balanced Plus Portfolio in
1996 and the Multi-Market Fixed Income Portfolio in 1997.
David P. Chu, Vice President, Morgan Stanley, joined MAS in 1998. He served as
Senior Equity Analyst from 1992 to 1997 and as Co-Portfolio Manager in 1997 for
NationsBank and its subsidiary, TradeStreet Investment Associates. He assumed
responsibility for the Mid Cap Growth Portfolio in 1998.
Bradley S. Daniels, Vice President, Morgan Stanley, joined MAS in 1985. He
assumed responsibility for the Small Cap Value Portfolio in 1986 and the Mid Cap
Value Portfolio in 1994.
Kenneth B. Dunn, Managing Director, Morgan Stanley, joined MAS in 1987. He
assumed responsibility for the Fixed Income and the Domestic Fixed Income
Portfolios in 1987, the Fixed Income II Portfolio in 1990, the Mortgage-Backed
Securities and Special Purpose Fixed Income Portfolios in 1992, the Municipal
and PA Municipal Portfolios in 1994 and the Multi-Market Fixed Income Portfolio
in 1997.
Hassan Elmasry, Principal, Morgan Stanley, joined MAS in 1995. He served as
First Vice President & International Equity Portfolio Manager from 1987 through
1995 for Mitchell Hutchins Asset Management. He assumed responsibility for the
International Equity Portfolio in 1996.
Stephen F. Esser, Managing Director, Morgan Stanley, joined MAS in 1988. He
assumed responsibility for the High Yield Portfolio in 1989 and the Multi-Market
Fixed Income Portfolio in 1997.
Abigail Jones Feder, Principal, Morgan Stanley, joined Morgan Stanley in 1985.
She assumed responsibility for the Cash Reserves Portfolio in 1996.
William B. Gerlach, Principal, Morgan Stanley, joined MAS in 1991. He assumed
responsibility for the Small Cap Value and Mid Cap Value Portfolios in 1996.
J. David Germany, Managing Director, Morgan Stanley, joined MAS in 1991. He
assumed responsibility for the Global Fixed Income and International Fixed
Income Portfolios in 1993, the Multi-Asset-Class Portfolio in 1994, the Balanced
Plus Portfolio in 1996 and the Multi-Market Fixed Income Portfolio in 1997.
Paul Ghaffari, Principal, Morgan Stanley, joined Morgan Stanley in 1993. He
served as Vice President in the Fixed Income Division of Emerging Markets Sales
and Trading Department at Morgan Stanley. He assumed responsibility for the
Multi-Market Fixed Income Portfolio in 1997.
Ellen D. Harvey, Principal, Morgan Stanley, joined MAS in 1984. She assumed
responsibility for the Limited Duration Portfolio in 1992 and the Intermediate
Duration Portfolio in 1994.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 61
<PAGE>
James J. Jolinger, Principal, Morgan Stanley, joined MAS in 1994. He served as
Equity Analyst for Oppenheimer Capital from 1987-1994. He assumed responsibility
for the Equity Portfolio in 1997.
Abhi Y. Kanitkar, Vice President, Morgan Stanley, joined MAS in 1994. He served
as an Investment Analyst from 1993 through 1994 for Newbold's Asset Management.
He assumed responsibility for the Mid Cap Growth Portfolio in 1996.
Nicholas J. Kovich, Managing Director, Morgan Stanley, joined MAS in 1988. He
assumed responsibility for the Equity Portfolio in 1994 and the Value Portfolio
in 1997.
Brian Kramp, Vice President, Morgan Stanley, joined MAS in 1997. He served as
Analyst/Portfolio Manager for Meridian Asset Management and its successor,
Corestates Investment Advisors from 1985-1997. He assumed responsibility for the
Equity Portfolio in 1998.
Steven K. Kreider, Principal, Morgan Stanley, joined MAS in 1988. He assumed
responsibility for the Municipal and the PA Municipal Portfolios in 1992.
Michael Kushma, Principal, Morgan Stanley, joined Morgan Stanley in 1988. He
assumed responsibility for the Global Fixed Income and International Fixed
Income Portfolios in 1996.
Chris Leavy joined MAS in 1997. He served as a Portfolio Manager for Capitoline
Investment Services from 1995-1997; a Portfolio Manager for Premier Trust
Company from 1994 to 1995; and as a Research Analyst for Leavy Investment
Management from 1993-1994. He assumed responsibility for the Mid
Cap Value and Small Cap Value Portfolio in 1998.
Daniel M. Niland, Vice President, Morgan Stanley, joined Morgan Stanley in
1997. He served as Vice President/Portfolio Manager at J.P. Morgan & Co. from
1987-1996 and as Vice President/Senior Portfolio Manager at Citibank Global
Asset Management from 1996-1997. He assumed responsibility for the Cash
Reserves Portfolio in 1998.
Robert J. Marcin, Managing Director, Morgan Stanley, joined MAS in 1988. He
assumed responsibility for the Value Portfolio in 1990 and the Equity Portfolio
in 1994.
Paul F. O'Brien, Principal, Morgan Stanley, joined MAS in 1996. He served as
Head of European Economics from 1993 through 1995 for JP Morgan. He assumed
responsibility for the Global Fixed Income and International Fixed Income
Portfolios in 1996.
Scott F. Richard, Managing Director, Morgan Stanley, joined MAS in 1992. He
assumed responsibility for the Mortgage-Backed Securities Portfolio in 1992, the
Limited Duration, Intermediate Duration, Municipal and PA Municipal Portfolios
in 1994 and the Advisory Mortgage Portfolio in 1995.
Gary G. Schlarbaum, Managing Director, Morgan Stanley; Director, MAS Fund
Distribution, Inc.; joined MAS in 1987. He assumed responsibility for the Equity
and Small Cap Value Portfolios in 1987, the Growth Portfolio in 1993, the
Balanced Portfolio in 1992 and the Multi-Asset-Class and Mid Cap Value
Portfolios in 1994.
Roberto Sella, Principal, Morgan Stanley, joined MAS in 1992. He assumed
responsibility for the Mortgage-Backed Securities Portfolio in 1998.
Horacio A. Valeiras, Managing Director, Morgan Stanley, joined MAS in 1992. He
assumed responsibility for the International Equity Portfolio in 1992, the
Emerging Markets Value Portfolioin 1993, the Multi-Asset-Class Portfolio in 1994
and the Balanced Portfolio in 1996.
- --------------------------------------------------------------------------------
MAS Fund - 62 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
Richard B. Worley, Managing Director, Morgan Stanley, joined MAS in 1978. He
assumed responsibility for the Fixed Income Portfolio in 1984, the Domestic
Fixed Income Portfolio in 1987, the Fixed Income Portfolio II in 1990, the
Balanced and Special Purpose Fixed Income Portfolios in 1992, the Global Fixed
Income and International Fixed Income Portfolios in 1993, the Multi-Asset-Class
Portfolio in 1994, the Balanced Plus Portfolio in 1996 and the Multi-Market
Fixed Income Portfolio in 1997.
ADMINISTRATIVE SERVICES: MAS serves as Administrator to the Fund pursuant to an
Administration Agreement dated as of November 18, 1993. Under its Administration
Agreement with the Fund, MAS receives an annual fee, accrued daily and payable
monthly, of 0.08% of the Fund's average daily net assets, and is responsible for
all fees payable under any sub-administration agreements. Chase Global Funds
Services Company, a subsidiary of The Chase Manhattan Bank, 73 Tremont Street,
Boston MA 02108-3913, serves as Transfer Agent to the Fund pursuant to an
agreement also dated as of November 18, 1993, and provides fund accounting and
other services pursuant to a sub-administration agreement with MAS as
Administrator.
GENERAL DISTRIBUTION AGENT: Shares of the Fund are distributed exclusively
through MAS Fund Distribution, Inc., a wholly-owned subsidiary of the
Adviser.
PORTFOLIO TRANSACTIONS: The investment advisory agreement authorizes the Adviser
to select the brokers or dealers that will execute the purchases and sales of
investment securities for each of the Fund's portfolios and directs the Adviser
to use its best efforts to obtain the best execution with respect to all
transactions for the portfolios. In doing so, a portfolio may pay higher
commission rates or markups on principal transactions than the lowest available
when the Adviser believes it is reasonable to do so in light of the value of the
research, statistical, and pricing services provided by the broker or dealer
effecting the transaction.
It is not the Fund's practice to allocate brokerage or principal business on the
basis of sales of shares which may be made through intermediary brokers or
dealers. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in the
purchase of shares of the portfolios for their clients.
Some securities considered for investment by each of the Fund's portfolios may
also be appropriate for other clients served by the Adviser. The Adviser may
place a combined order for two or more accounts or portfolios for the purchase
or sale of the same security if, in its judgement, joint execution is in the
best interest of each participant and will result in best price and execution.
If purchase or sale of securities consistent with the investment policies of a
portfolio and one or more of these other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Fund's
Trustees. The Adviser may use its broker dealer affiliates, including Morgan
Stanley & Co., a wholly owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co., the parent of MAS's general partner and limited partner, to
carry out the Fund's transactions, provided the Fund receives brokerage services
and commission rates comparable to those of other broker dealers.
OTHER INFORMATION: Description of Shares and Voting Rights: The Fund was
established under Pennsylvania law by a Declaration of Trust dated February 15,
1984, as amended and restated as of November 18, 1993. The Fund is authorized to
issue an unlimited number of shares of beneficial interest, without par value,
from an unlimited number of series (portfolios) of shares. Currently the Fund
consists of twenty-eight portfolios.
The shares of each portfolio of the Fund are fully paid and non-assessable, and
have no preference as to conversion, exchange, dividends, retirement or other
features. The shares of each portfolio of the Fund have no preemptive rights.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so. Shareholders are entitled to
one vote for each full share held (and a fractional vote for each fractional
share held), then standing in their name on the books of the Fund.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 63
<PAGE>
Meetings of shareholders will not be held except as required by the 1940 Act and
other applicable law. A meeting will be held to vote on the removal of a Trustee
or Trustees of the Fund if requested in writing by the holders of not less than
10% of the outstanding shares of the Fund. The Fund will assist in shareholder
communication in such matters to the extent required by law.
As of January 5, 1998, Northern Trust Company (Chicago, IL) owned a controlling
interest (as that term is defined by the 1940 Act) of the Cash Reserves
Portfolio; The Northwestern University Investment Department (Evanston, IL) and
Cives Corporation Savings and Profit-Sharing Retirement Trust (Roswell, GA)
owned a controlling interest of the Mortgage-Backed Securities Portfolio;
Ministers and Missionaries Benefit Board of the American Baptist Convention (New
York, NY) and Chemical Bank (New York, NY) owned a controlling interest of the
Emerging Markets Value Portfolio; Northern Trust Company (Chicago, IL) owned a
controlling interest of the Balanced Portfolio; The Charles A. Dana Foundation
Inc. (New York, NY) owned a controlling interest of the Global Fixed Income
Portfolio; Southwest National Bank of Pennsylvania (Greensburg, PA) owned a
controlling interest of the Intermediate Duration Portfolio; and the Connelly
Foundation (West Conshohocken, PA) owned a controlling interest of the
Multi-Market Fixed Income Portfolio.
CUSTODIANS: The Chase Manhattan Bank, New York, NY and Morgan Stanley Trust
Company (NY), Brooklyn, NY serve as custodians for the Fund. The custodians hold
cash, securities and other assets as required by the 1940 Act.
TRANSFER AND DIVIDEND DISBURSING AGENT: Chase Global Funds Services Company, a
subsidiary of The Chase Manhattan Bank, 73 Tremont Street, Boston, MA
02108-3913, serves as the Funds' Transfer Agent and dividend disbursing agent.
REPORTS: Shareholders receive semi-annual and annual financial statements.
Annual financial statements are audited by Price Waterhouse LLP, independent
accountants.
LITIGATION: The Fund is not involved in any litigation.
CLOSED HOLIDAYS: Currently, the weekdays on which the Fund is closed for
business are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. In addition, the Cash Reserves Portfolio will be closed on
Columbus Day and Veteran's Day.
YEAR 2000: The management and distribution services provided to the Fund by the
Adviser and the Distributor depend on the smooth funcioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or 1980, due to the manner in which dates were encoded
and calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. The Adviser and the Distributor
have been actively working on necessary change s to their own computer systems
to deal with the year 2000 problem and expect that their systems will be adapted
before that date. There can be no assurance, however, that they will be
successful. In addition, other unaffiliated service providers may be faced with
similar problems. The Adviser and the Distributor are monitoring their remedial
efforts, however, there can be no assurance that they and the services they
provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the
portfolios invest may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individiual companies and overall economic
uncertainties. Earnings of individual issuers will be affecte d by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the portfolios investments may be
adversely affected.
- --------------------------------------------------------------------------------
MAS Fund - 64 Terms in BOLD TYPE are defined in the Prospectus Glossary
<PAGE>
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,* 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.; formerly
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.
*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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Terms in BOLD TYPE are defined in the Prospectus Glossary MAS Fund - 65
<PAGE>
- --------------------------------------------------------------------------------
MAS ACCOUNT REGISTRATION FORM
- ---------
MAS FUNDS MAS Fund Distribution, Inc.
General Distribution Agent
- -------------------------------------------------------------------------------
1 REGISTRATION/PRIMARY
MAILING ADDRESS
Confirmations and month-end statements will be mailed to this address.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Attention
---------------------------------------------------------------------
Street or P.O. Box
------------------------------------------------------------
City State Zip
---------------------------- --------------------- -------------
Telephone No.
-----------------------
Form of Business Entity: / / Corporation / / Partnership / / Trust / / Other___
Type of Account:
/ / Defined Benefit Plan / / Defined Contribution Plan
/ / Profit Sharing/Thrift Plan
/ / Other Employee Benefit Plan
-----------------------------------------------
/ / Endowment / / Foundation / / Taxable / / Other (Specify)
-------------
/ / United States Citizen / / Resident Alien / / Non-Resident Alien,
Indicate Country of Residence
------------------
===============================================================================
2 INTERESTED PARTY OPTION
In addition to the account statement sent to the above registered address,
the Fund is authorized to mail duplicate statements to the name and address
provided at right.
For additional interested party mailings, please attach a separate sheet.
Attention
---------------------------------------------------------------------
Company
(If Applicable)
----------------------------------------------------------------
Street or P.O. Box
------------------------------------------------------------
City State Zip
---------------------------- --------------------- -------------
Telephone No.
-----------------------
===============================================================================
3 INVESTMENT
For Purchase of:
<TABLE>
<S> <C> <C>
/ / Equity Portfolio / / Fixed Income Portfolio / / International Equity Portfolio
/ / Value Portfolio / / Fixed Income Portfolio II / / Emerging Markets Value Portfolio
/ / Growth Portfolio / / Special Purpose Fixed Income Portfolio / / International Fixed Income Portfolio
/ / Mid Cap Growth Portfolio / / High Yield Portfolio / / Global Fixed Income Portfolio
/ / Mid Cap Value Portfolio / / Limited Duration Portfolio / / Multi-Market Fixed Income Portfolio
/ / Balanced Portfolio / / Intermediate Duration Portfolio / / Municipal Portfolio
/ / Multi-Asset-Class Portfolio / / Mortgage-Backed Securities Portfolio / / PA Municipal Portfolio
/ / Cash Reserves Portfolio
/ / Domestic Fixed Income Portfolio
</TABLE>
===============================================================================
<PAGE>
4 TAXPAYER IDENTIFICATION NUMBER
Part 1.
Social Security Number
---------------------
or
Employer Identification Number
------------------------------
Part 2. BACKUP WITHHOLDING
/ / Check the box if the account is subject to Backup Withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code.
- -------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer) with your correct
taxpayer identification number. Accounts that have a missing or incorrect
taxpayer identification number will be subject to backup withholding at a 31%
rate on ordinary income and capital gains distribution as well as redemptions.
Backup withholding is not an additional tax; the tax liability of person subject
to backup withholding will be reduced by the amount of tax withheld.
You may be notified that you are subject to backup withholding under section
3406(a)(1)(C) because you have underreported interest or dividends or you were
required to, but failed to, file a return which would have included a reportable
interest or dividend payment. If you have been so notified, check the box in
PART 2 at left.
- -------------------------------------------------------------------------------
MILLER
ANDERSON
& SHERRERD, LLP ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428 o 800-354-8185
- -------------------------------------------------------------------------------
SIDE ONE OF TWO
<PAGE>
- --------------------------------------------------------------------------------
MAS
- ---------
MAS FUNDS
- -------------------------------------------------------------------------------
5 TELEPHONE REDEMPTION OPTION
Please sign below if you wish to redeem or exchange shares by telephone.
Redemption proceeds requested by phone may only be mailed to the account's
primary registration address or wired according to bank instructions provided
in writing. A signature guarantee is required if the bank account listed below
is not registered identically to your Fund Account.
The Fund and its agents shall not be liable for reliance on phone instructions
reasonably believed to be genuine. The Fund will maintain procedures designed to
authenticate telephone instructions received.
Telephone requests for redemptions or exchanges will not be honored unless
signature appears below.
(X)
- ---------------------------------------------
Signature Date
===============================================================================
6 WIRING INSTRUCTIONS -- The instructions provided below may only be changed by
written notification.
Please check appropriate box(es):
/ / Wire redemption proceeds
/ / Wire distribution proceeds (please complete box 7 below)
- -------------------------------------------- ------------------------
Name of Commercial Bank (Net Savings Bank) Bank Account No.
- -----------------------------------------------------------------------------
Name(s) in which your Bank Account is Established
- -----------------------------------------------------------------------------
Bank's Street Address
- ------------------------------------------------ --------------------------
City State Zip Routing/ABA Number
===============================================================================
7 DISTRIBUTION OPTION -- Income dividends and capital gains distributions (if
any) will be reinvested in additional shares unless either box below is
checked. The instructions provided below may only be changed by written
notification.
/ / Income dividends and capital gains to be paid in cash.
/ / Income dividends to be paid in cash and capital gains distribution in
additional shares.
/ / Income dividends and capital gains to be reinvested in additional shares.
If cash option is chosen, please indicate instructions below:
/ / Mail distribution check to the name and address in which account is
registered.
/ / Wire distribution to the same commercial bank indicated in Section 6
above.
===============================================================================
8 WIRING INSTRUCTIONS
For purchasing Shares by wire, please send a Fedwire payment to:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, NY 10081
ABA# 021000021
DDA# 910-2-734143
Attn: MAS Funds Subscription Account
Ref. (Portfolio name, your Account number, your Account name)
<PAGE>
===============================================================================
SIGNATURE(S) OF ALL HOLDERS AND TAXPAYER CERTIFICATION
The undersigned certify that I/we have full authority and legal capacity to
purchase shares of the Fund and affirm that I/we have received a current MAS
Funds Prospectus and agree to be bound by its terms. Under penalties of
perjury I/we certify that the information provided in Section 4 above is true,
correct and complete. The Internal Revenue Service does not require your
consent to any provision of this document other than the certifications
required to avoid backup withholding.
(X)
------------------------------------------------------------------
Signature Date
(X)
------------------------------------------------------------------
Signature Date
(X)
------------------------------------------------------------------
Signature Date
(X)
------------------------------------------------------------------
Signature Date
This application is separate from the prospectus.
-----------------------------------------------------------------------
FOR INTERNAL USE ONLY
(X)
----------------------------------------------------------------
Signature Date
----------------------------------------------------------------
O / / F / /
------------------------------------------------------------------------
MILLER
ANDERSON
& SHERRERD, LLP ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428 o 800-354-8185
- -------------------------------------------------------------------------------
SIDE TWO OF TWO
<PAGE>
Prospectus
MAS
- ---------
MAS FUNDS
JANUARY 31, 1998
AS REVISED MAY 13, 1998
-----------------------
INVESTMENT ADVISER AND ADMINISTRATOR: TRANSFER AGENT:
MILLER ANDERSON & SHERRERD, LLP CHASE GLOBAL FUNDS SERVICES COMPANY
ONE TOWER BRIDGE 73 TREMONT STREET
WEST CONSHOHOCKEN, BOSTON, MASSACHUSETTS 02108-0913
PENNSYLVANIA 19428-2899
GENERAL DISTRIBUTION AGENT:
MAS FUND DISTRIBUTION, INC.
ONE TOWER BRIDGE
P.O. BOX 868
WEST CONSHOHOCKEN,
PENNSYLVANIA 19428-0868
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Page Page
Fund Expenses 2 General Shareholder Information
Prospectus Summary 4 Purchase of Shares 53
Financial Highlights 6 Redemption of Shares 54
Yield and Total Return 13 Shareholder Services 55
Investment Suitability 14 Valuation of Shares 56
Investment Limitations 15 Dividends, Distributions and Taxes 57
Portfolio Summaries 16 Investment Adviser 59
Equity Investments 16 Portfolio Management 61
Fixed-Income Investments 21 Administrative Services 63
Prospectus Glossary General Distribution Agent 63
Strategies 38 Portfolio Transactions 63
Investments 42 Other Information 63
Trustees and Officers 65
</TABLE>
MILLER
ANDERSON
& SHERRERD, LLP - ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428 o 800-334-8185
<PAGE>
MAS Funds
Supplement dated October 9, 1998 to the MAS Funds' Institutional
Class Prospectus dated January 31, 1998, as revised May 13, 1998
This supplement to the Prospectus supersedes and replaces any existing
supplements to the Prospectus. This supplement provides new and additional
information beyond that contained in the Prospectus and should be read in
conjunction with the Prospectus.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT TEAM CHANGES
Page 25 of the Prospectus is hereby amended to include Ram Willner as a
member of the Portfolio Management Team of the Global Fixed Income Portfolio.
Page 62 of the Prospectus is hereby amended to include the following
description of Ram Willner's business experience during the last five years:
Ram Willner, Principal, Morgan Stanley, joined MAS in 1998. He served as a
Market Strategist, Risk Control Manager and Director of International Bond
Research for Pacific Investment Management Company from 1994 to 1998: and as a
Senior Quantitative Analyst for Sanford C. Bernstein & Co. from 1992 to 1994. He
joined the Portfolio Management Team of the Global Fixed Income Portfolio in
1998.
- --------------------------------------------------------------------------------
Due to other responsibilities within the firm, Ellen D. Harvey has been
removed as a member of the Portfolio Management Teams of the Intermediate
Duration and Limited Duration Portfolios. In addition, Paul Ghaffari has been
removed as a member of the Portfolio Management Team of the Multi-Market Fixed
Income Portfolio. Therefore, pages 27, 29, 31 and 61 of the Prospectus are
hereby amended to reflect these changes.
- --------------------------------------------------------------------------------
Page 27 of the Prospectus is hereby amended to include Angelo G.
Manioudakis as a member of the Portfolio Management Team of the Intermediate
Duration Portfolio.
Page 62 of the Prospectus is hereby amended to include the following
description of Angelo G. Manioudakis' business experience during the last five
years:
Angelo G. Manioudakis, Principal, joined MAS in 1993. He attended Harvard
Graduate School of Business Administration from 1991 to 1993. He served as a
fixed income analyst from 1993 to 1995. From 1995 to 1998, he served as a fixed
income portfolio manager. He joined the Portfolio Management Team of the
Intermediate Duration Portfolio in 1998.
<PAGE>
Page 29 of the Prospectus is hereby amended to include Michele A.
Kreisler as a member of the Portfolio Management Team of the Limited Duration
Portfolio.
Page 62 of the Prospectus is hereby amended to include the following
description of Michele A. Kreisler's business experience during the last five
years:
Michele A. Kreisler, Vice President, joined MAS in 1994. She attended the
Wharton School of the University of Pennsylvania from 1990 to 1994. She served
as a fixed income analyst from 1994 to 1995 and as a portfolio manager from 1995
to 1998. She joined the Portfolio Management Teams of the Targeted Duration and
Limited Duration Portfolios in 1998.
- --------------------------------------------------------------------------------
POLICIES CHANGES
The following futures and options policy replaces the existing futures
and options policy for all fixed-income Portfolios:
A fixed-income portfolio may enter into futures contracts and options thereon
for both hedging and non-hedging purposes, provided that not more than 5% of
such portfolio's total assets at the time of entering the transaction are
required as margin and option premiums to secure obligations under such
contracts other than those relating to bona fide hedging activities. It will
maintain assets sufficient to meet its obligations under such contracts in a
segregated account with the custodian bank or will otherwise comply with the
Securities and Exchange Commission's ("SEC's") position on asset coverage.
The futures and options policy for all equity and balanced portfolios remains
unchanged.
- --------------------------------------------------------------------------------
The Policies Section of the Municipal Portfolio on page 32 of this
Prospectus is hereby amended to read as follows:
Generally at least 80% of its income will be exempt from regular
federal income tax
Derivatives may be used to pursue portfolio strategy
PLEASE RETAIN FOR FUTURE REFERENCE
