<PAGE>
As Filed With the Securities and Exchange Commission on September __, 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]
MAS FUNDS
---------
(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
-------------
Ms. Lorraine Truten
One Tower Bridge
West Conshohocken, PA 19428-0868
--------------------------------------
(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
September _, 1998
Cross Reference Sheet
<TABLE>
<CAPTION>
ITEMS REQUIRED BY FORM N-14
<S> <C>
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 and
MSIF 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 and
MSIF 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>
<CAPTION>
<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 October 30, 1998. If you are a
Shareholder of record as of the close of business on September 20, 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 liabilities to the Fund's Municipal Portfolio.
Assuming approval by Shareholders, you would receive 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
___________, 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 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 on the date of the transaction, and the shares provided
in return will have a 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. Shareholders of the PA Municipal Portfolio
will thus effectively be converted into 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 OCTOBER 30, 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 October 30, 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 September 20, 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
_______________, 1998
<PAGE>
PROXY STATEMENT/PROSPECTUS
_________________, 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 October 30, 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 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 ______, 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 August 27, 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 October 6, 1998. Only shareholders of record as of the close of
business on September 20, 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 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 $____ billion of
assets under management as of ________, 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................... 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.
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
<PAGE>
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 substantially all of the assets and
liabilities of the PA Municipal Portfolio will be transferred to the Municipal
Portfolio at the close of business on _________, 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 ______________, 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 __________________, (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
Combined 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 _________, 1998
PA Municipal Portfolio Municipal Portfolio
Institutional Class Institutional Class
1 Year
5 Year
Since
Inception*
* 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................... 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 ______, 1998,
had approximately $____ 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 they choose 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 Fund.
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:
______________ 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
- --------------------------------------------------------------------------------
Number of Percentage of
Name & Address Shares Owned Shares Owned
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Municipal Portfolio
- --------------------------------------------------------------------------------
Number of Percentage of
Name & Address Shares Owned Shares Owned
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Record and Beneficial Ownership.
+ Less than 1%.
17
<PAGE>
As of September 20, 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>
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 or substantially all of the liabilities of the Acquired
Fund and (b) beneficial shares of the Acquiring Fund 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 or substantially 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
__________________, 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 ______, 1998 for the
Special Meeting of Shareholders (the "Meeting") of the PA Municipal Portfolio
(the "Portfolio"), to be held on October 30, 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 ____________, 1998.
<PAGE>
APPENDIX A
MAS Funds
Statement of Net Assets (Unaudited)
<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 Portfolio
---------- ---------- -----------
<S> <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 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 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) (000)
------------- ------------- -------------
<S> <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 (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 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 Potfolio and PA Municipal Potfolio 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 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, OCTOBER 30, 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 October 30, 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.
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 filed herewith.
(12) Opinion and Consent of Morgan, Lewis & Bockius LLP as to tax
matters and consequences is filed herewith.
(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 August 27, 1998, is filed herewith.
(17)(b) Statement of Additional Information for MAS Funds dated
January 31, 1998 is filed herewith.
(17)(c) Audited Financial Statements dated September 30, 1997 for the
MAS Funds are filed herewith.
17(d) Unaudited Semi-Annual Financial Statements dated March 31,
1998 for the MAS Funds are 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 2nd
day of September, 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 September 2, 1998
- --------------------------
Thomas L. Bennett
* Trustee September 2, 1998
- --------------------------
Thomas P. Gerrity
* Trustee September 2, 1998
- --------------------------
Joseph P. Healey
* Trustee September 2, 1998
- --------------------------
Joseph J. Kearns
* Trustee September 2, 1998
- --------------------------
Vincent R. McLean
* Trustee September 2, 1998
- --------------------------
C. Oscar Morong, Jr.
* President September 2, 1998
- --------------------------
James D. Schmid
/s/ James A. Gallo Principal Financial September 2, 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 filed herewith.
12 Opinion and Consent of Morgan, Lewis & Bockius LLP as to tax
matters and consequences is filed herewith.
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 PricewaterhouseCooppers 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 August 27, 1998, is filed herewith.
17(b) Statement of Additional Information for MAS Funds dated
January 31, 1998, is filed herewith.
17(c) Audited Financial Statements dated September 30, 1997 for the
MAS Funds is filed herewith.
17(d) Unaudited Semi-Annual Financial Statements dated March 31,
1998 for the MAS Funds are filed herewith.
C-8
<PAGE>
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 or substantially all of the liabilities of the Acquired
Fund and (b) beneficial shares of the Acquiring Fund 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 or substantially 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.
1
<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>
September 2, 1998
MAS Funds
One Tower Bridge
West Conshohocken, PA 19428
RE: MAS Funds - Form N-14 Opinion
-----------------------------
Ladies and Gentlemen:
We refer to the Registration Statement on Form N-14 (SEC File No. 002-89729)
(the "Registration Statement") of the MAS Funds (the "Fund") relating to the
transfer of all the assets and liabilities of the PA Municipal Portfolio (the
"Acquired Portfolio"), in exchange for shares of the Municipal Portfolio (the
"Acquiring Portfolio") followed by the distribution of such Shares (the
"Acquiring Portfolio's Shares"), in exchange for such Acquired Portfolio's
Shares in complete liquidation of the Acquired Portfolio (the "Reorganization"),
pursuant to the Agreement.
We have been requested by the Fund to furnish this opinion as Exhibit 11 to the
Registration Statement.
We have examined such records, documents, instruments, certificates of public
officials and of the Fund, made such inquiries of the Fund, and examined such
questions of law as we have deemed necessary for the purpose of rendering the
opinion set forth herein. We have assumed the genuineness of all signatures and
the authenticity of all items submitted to us as originals and the conformity
with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Fund has been duly and validly
authorized by all appropriate action and, upon delivery thereof and
payment therefor in accordance with the Registration Statement, the
Shares, when issued, will be duly authorized, validly issued, fully
paid and nonassessable by the Fund.
<PAGE>
We have not reviewed the securities laws of any state or territory in connection
with the proposed offering of Shares and we express no opinion as to the
legality of any offer of sale of Shares under any such state or territorial
securities laws.
This opinion is intended only for your use in connection with the offering of
Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as an exhibit to the Fund's
Registration Statement to be filed with the Securities and Exchange Commission.
Very truly yours,
Morgan, Lewis & Bockius LLP
<PAGE>
September 8, 1998
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428
Re: Agreement and Plan of Reorganization by MAS Funds and on behalf
of its PA Municipal Portfolio and Municipal Portfolio
Ladies and Gentlemen:
We have acted as counsel to MAS Funds, a Pennsylvania business trust, in
connection with the execution and delivery of the Agreement and Plan of
Reorganization (the "Agreement"), dated as of September , 1998, by MAS Funds and
on behalf of its PA Municipal Portfolio and Municipal Portfolio, relating to the
transfer of all the assets and liabilities of the PA Municipal Portfolio (the
"Acquired Portfolio"), in exchange for shares of the Municipal Portfolio (the
"Acquiring Portfolio") followed by the distribution of such Shares (the
"Acquiring Portfolio Shares) to the holders of shares of the Acquired Portfolio
("Acquired Portfolio's Shares") in exchange for such Acquired Portfolio's Shares
in complete liquidation of the Acquired Portfolio (the "Reorganization"),
pursuant to the Agreement. This opinion letter is delivered to you pursuant to
Section 8(d) of the Agreement. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Agreement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Agreement, and (ii) such other documents as we have deemed necessary or
appropriate in order to enable us to render the opinion below. In our
examination, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. Our opinion is based in part on the facts set forth
below. We have not undertaken an independent investigation or verification of
these facts or of the information set forth either in the aforementioned
documents or in other documents that we have reviewed.
1. The Reorganization will be consummated in compliance with the
material terms of the Agreement, and none of the material
terms and conditions therein have been waived or modified and
neither party has any plan or intention to waive or modify any
such material condition.
2. The fair market value of the Acquiring Portfolio Shares to be
received by each Acquired Portfolio shareholder in the
Reorganization will be approximately equal to the fair market
value of the shares in the Acquired Portfolio surrendered and
exchanged therefor.
3. To the knowledge of the Acquired Portfolio there is no plan or
intention on the part of any shareholder of the Acquired
Portfolio to sell, exchange or otherwise dispose of a number
of Shares received in the transaction that would reduce the
number of Acquiring Portfolio Shares held by the shareholders
of the Acquired Portfolio to a number of shares having a
value, as of the date of the Reorganization equal to less than
50 percent of the value of all the formerly outstanding
Acquired Portfolio Shares.
<PAGE>
4. No consideration other than the Acquiring Portfolio Shares and
the assumption by the Acquiring Portfolio of the stated
liabilities of the Acquired Portfolio will be issued in
exchange for shares of common stock in the Acquired Portfolio
in the Reorganization.
5. The Acquiring Portfolio has no plan or intention to sell
additional shares of beneficial interest in the Acquiring
Portfolio or to redeem or otherwise reacquire any of the
Acquiring Portfolio Shares issued in the Reorganization other
than in the ordinary course of its business as a regulated
investment company.
6. The Acquiring Portfolio has no plan or intention to sell or
otherwise dispose of any of the Acquired Portfolio assets to
be acquired by it in the Reorganization except for
dispositions made in the ordinary course of its business as a
regulated investment company.
7. Following the Reorganization, the Acquiring Portfolio will
continue the historic business of the Acquired Portfolio or
use a significant portion of the Acquired Portfolio's assets
in its business.
8. Immediately following consummation of the Reorganization, the
Acquiring Portfolio immediately prior to the Reorganization.
The fair market value of the assets of the Acquired Portfolio
acquired by the Acquiring Portfolio will exceed the
liabilities of the Acquired Portfolio assumed by the Acquiring
Portfolio plus the amount of liabilities, if any, to which the
acquired assets are subject.
9. There is no intercorporate indebtedness existing between the
Acquiring Portfolio and the Acquired Portfolio that was
issued, acquired, or will be settled at a discount.
10. The Acquiring Portfolio will meet the requirements of
Subchapter M of the Internal Revenue Code of 1986 for
qualification and treatment as a regulated investment company.
11. The Acquiring Portfolio does not own nor will it acquire prior
to the consummation of the Reorganization any shares of common
stock in the Acquired Portfolio.
Our opinion summarizes certain Federal income tax consequences of the
Reorganization to holders of shares in the Acquired Portfolio (individually, a
"Shareholder" and, collectively, the "Shareholders"). Our opinion does not
address all aspects of Federal income taxation that may be relevant to
particular Shareholders and may not be applicable to Shareholders who are not
citizens or residents of the United States. Further, our opinion does not
address the effect of any applicable foreign, state, local or other tax laws.
In rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986 (the "Code"), Treasury Regulations, pertinent
judicial authorities, interpretive rulings of the Internal Revenue Service and
such other authorities as we have considered relevant.
Based upon and subject to the foregoing, we are of the opinion that the
Reorganization will, under current law, constitute a tax-free reorganization
under Section 368(a)(1)(C) of the Code, and that the Acquired Portfolio and
Acquiring Portfolio will each be a party to the reorganization within the
meaning of Section 368(b) of the Code.
The Reorganization, as a tax-free reorganization, will have the following
Federal income tax consequences for the Shareholders, the Acquired Portfolio and
the Acquiring Portfolio:
1. No gain or loss will be recognized to the Acquired Portfolio
upon the transfer of its assets in exchange solely for the
Acquiring Portfolio Shares and the assumption by the Acquiring
Portfolio of the Acquired Portfolio's stated liabilities;
2. No gain or loss will be recognized to the Acquiring Portfolio
on its receipt of the Acquired Portfolio's assets in exchange
for the Acquiring Portfolio Shares and the assumption by the
Acquiring Portfolio of the Acquired Portfolio's liabilities;
3. The basis of an Acquired Portfolio's assets in the Acquiring
Portfolio's hands will be the same as the basis of those
assets in the Acquired Portfolio's hands immediately before
the conversion;
<PAGE>
4. The Acquiring Portfolio's holding period for the assets
transferred to the Acquiring Portfolio by the Acquired
Portfolio will include the holding period of those assets in
the Acquired Portfolio's hands immediately before the
conversion;
5. No gain or loss will be recognized to the Acquired Portfolio
on the distribution of the Acquiring Portfolio Shares to the
Acquired Portfolio's shareholders in exchange for its Acquired
Portfolio Shares;
6. No gain or loss will be recognized to the Acquired Portfolio's
shareholders as a result of the Acquired Portfolio's
distribution of Acquiring Portfolio Shares to the Acquired
Portfolio's shareholders in exchange for the Acquired
Portfolio's shareholders' Acquired Funds Shares;
7. The basis of the Acquiring Portfolio Shares received by the
Acquired Portfolio's shareholders will be the same as the
adjusted basis of that Acquired Portfolio's shareholders'
Acquired Portfolio Shares surrendered in exchange therefor;
and
8. The holding period of the Acquiring Portfolio Shares received
by the Acquired Portfolio's shareholders will include the
Acquired Portfolio's shareholders' holding period for the
Acquired Portfolio's shareholders' Acquired Portfolio Shares
surrendered in exchange therefor, provided that said Acquired
Portfolio Shares were held as capital assets on the date of
the conversion.
Except as set forth above, we express no opinion as to the tax consequences to
any party, whether Federal, state, local or foreign, of the Reorganization or
the Agreement or of any transactions related to the Reorganization or the
Agreement or contemplated by the Reorganization or the Agreement. This opinion
is being furnished to you on behalf of the Acquired Portfolio in connection with
the Reorganization and the Agreement and solely for your benefit in connection
therewith and may not be used or relied upon for any other purpose and may not
be circulated, quoted or otherwise referred to for any other purpose without our
express written consent.
Very truly yours,
<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
through August 27, 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
September 9, 1998
<PAGE>
MAS Funds
Supplement dated August 27, 1998 to all MAS Funds
Prospectuses dated on or after January 31, 1998
This supplement provides new and additional information beyond that contained in
the Prospectus and should be read in conjunction with the Prospectus.
- --------------------------------------------------------------------------------
The following information applies only to the Fund's Institutional Class
Prospectus dated January 31, 1998, as revised May 13, 1998.
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.
The section titled "Portfolio Management" beginning on page 61 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
assumed responsibility for the Global Fixed Income Portfolio in 1998.
- --------------------------------------------------------------------------------
The following information applies to all of the Fund's Prospectuses that include
fixed income Portfolios.
In each Prospectus, the section entitled "Prospectus Glossary: Investments"
describes the Fund's futures and options policy. Effective August 4, 1998, all
fixed-income Portfolios will follow the following futures and options policy:
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.
PLEASE RETAIN FOR FUTURE REFERENCES
<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.
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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
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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;
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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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<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.
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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.
- --------------------------------------------------------------------------------
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.
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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
STATEMENT OF ADDITIONAL INFORMATION
January 31, 1998
MAS Funds (the "Fund") is a no load mutual fund consisting of twenty-seven
portfolios offering a variety of investment alternatives. This Statement of
Additional Information sets forth information about the Fund applicable to all
twenty-seven portfolios.
This Statement is not a prospectus but should be read in conjunction with the
Fund's prospectuses dated January 31, 1998, each as revised from time to time.
To obtain any of these prospectuses, please call the Client Services Group.
Client Services Group: 1-800-354-8185
Prices and Investment Results: 1-800-522-1525
TABLE OF CONTENTS
Page
----
Business History 3
Strategies and Investments 3
Repurchase Agreements 3
Securities Lending 3
Foreign Investments 4
Futures Contracts 5
Restrictions on the Use of Futures Contracts 6
Risk Factors in Futures Transactions 6
Options 7
Options on Foreign Currencies 8
Combined Transactions 9
Risks of Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies 9
Swap Contracts 10
Foreign Currency Exchange-Related Securities 11
Municipal Bonds 12
Duration 13
Mortgage-Backed Securities 14
Stripped Mortgage-Backed Securities 16
U.S. Government Securities 16
Zero Coupon Bonds 17
Eurodollar and Yankee Obligations 17
Brady Bonds 18
Cash Reserves Portfolio 18
Tax Considerations 19
Purchase of Shares 22
Redemption of Shares 22
Transactions with Broker/Dealers 22
Shareholder Services 23
Investment Limitations 23
<PAGE>
Management of the Fund 26
Distribution Plans 30
Shareholder Service Agreement 31
Investment Adviser 31
Administration 33
Distributor for Fund 34
Custodians 34
Portfolio Transactions 34
Annual Turnover 36
General Information 36
Performance Information 38
Comparative Indices 44
Financial Statements 50
Appendix-Description of Securities and Ratings 50
2
<PAGE>
BUSINESS HISTORY
MAS Funds (formerly MAS Pooled Trust Fund) is an open end management investment
company established under Pennsylvania law as a Pennsylvania business trust
under an Amended and Restated Agreement and Declaration of Trust dated November
18, 1993. The Fund was originally established as The MAS Pooled Trust Fund, a
Pennsylvania business trust, in February, 1984.
STRATEGIES AND INVESTMENTS
The following information supplements the characteristics and risks of
strategies and investments set forth in the Fund's prospectuses:
REPURCHASE AGREEMENTS
Each of the Fund's portfolios may invest in repurchase agreements collateralized
by U.S. Government securities, certificates of deposit and certain bankers'
acceptances. 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. In these
transactions, the securities purchased by a portfolio have a total value in
excess of the value of the repurchase agreement and are held by the portfolio's
custodian bank until repurchased. Such agreements permit a portfolio to keep all
its assets at work while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature. The Adviser and the Fund's Administrator
will continually monitor the value of the underlying securities to ensure that
their value always equals or exceeds the repurchase price.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreements defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, a
portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of a portfolio and
therefore subject to sale by the trustee in bankruptcy. Finally, it is possible
that a portfolio may not be able to substantiate its interest in the underlying
securities. While the Fund's management acknowledges these risks, it is expected
that they can be controlled through stringent security selection criteria and
careful monitoring procedures.
SECURITIES LENDING
Each portfolio may lend its investment securities to qualified institutional
investors who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the portfolio. Each portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 ( the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the borrower
pledge and maintain with the portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank, or securities
issued or guaranteed by the U.S. Government having a value at all times not less
than 100% of the value of the securities loaned, (b) the borrower add to such
3
<PAGE>
collateral whenever the price of the securities loaned rises (i.e., the borrower
"marks to the market" on a daily basis), (c) the loan be made subject to
termination by the portfolio at any time, and (d) the portfolio receive
reasonable interest on the loan (which may include the portfolio investing any
cash collateral in interest bearing short-term investments), any distribution on
the loaned securities and any increase in their market value. All relevant facts
and circumstances, including the creditworthiness of the broker, dealer or
institution, will be considered in making decisions with respect to the lending
of securities, subject to review by the Trustees.
At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Trustees. In addition, voting rights may pass with the
loaned securities, but if a material event were to occur affecting an investment
on loan, the loan must be called and the securities voted.
FOREIGN INVESTMENTS
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
domestic securities. Since the securities of foreign issuers are frequently
denominated in foreign currencies, and since the portfolios may temporarily hold
uninvested reserves in bank deposits in foreign currencies, the portfolios will
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. The investment policies of the portfolios (except
for the Domestic Fixed Income, Limited Duration, Mortgage-Backed Securities,
Advisory Mortgage and Cash Reserves Portfolios) permit them to enter into
forward foreign currency exchange contracts in order to hedge their respective
holdings and commitments against changes in the level of future currency rates.
Such contracts involve an obligation to purchase or sell a specific currency at
a future date at a price set at the time of the contract.
As non-U.S. companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to domestic issuers, there may be less publicly available information about
certain foreign securities than about domestic securities. Securities of some
foreign issuers are generally less liquid and more volatile than securities of
comparable domestic companies. There is generally less government supervision
and regulation of stock exchanges, brokers and listed issuers than in the U.S.
In addition, 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.
Although the portfolios will endeavor to achieve most favorable execution costs
in their portfolio transactions, 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 custodian arrangements of the
portfolio's foreign securities will be somewhat greater than the expenses for
the custodian arrangements for handling the 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
received from investments in such countries. However, these foreign withholding
taxes are not expected to have a significant impact on those portfolios for
which the investment objective is to seek long-term capital appreciation and any
income should be considered incidental.
The International Equity, Emerging Markets Value, International Fixed Income,
Advisory Foreign Fixed Income, Global Fixed Income, Multi-Asset-Class, High
Yield, Municipal, PA Municipal, Balanced Plus, Balanced, and Multi-Market Fixed
Income Portfolios may invest in the securities of issuers in Eastern
4
<PAGE>
European and other developing markets. The economies of these 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 economies. Unstable economic and political conditions may
adversely affect security values. Upon the accession to power of Communist
regimes approximately 50 years ago, 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 a portfolio's investments in Eastern
Europe would not also be expropriated, nationalized or otherwise confiscated.
In addition, the Equity, Growth, International Equity, Mid Cap Growth, Mid Cap
Value, Small Cap Value, Value, Balanced. Multi-Asset-Class and Balanced Plus
Portfolios may invest in Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs") to the extent that they come available. GDRs and
EDRs are typically issued by foreign depositaries, and evidence ownership
interests in a security or pool of securities issued by either a foreign or a
U.S. corporation.
Holders of unsponsored GDRs and EDRs generally bear all the costs associated
with establishing the unsponsored GDRs and EDRs. The depositary of unsponsored
GDRs and EDRs is under no obligation to distribute shareholder communications
received from the underlying issuer or to pass through to the holders of the
unsponsored GDRs and EDRs voting rights with respect to the deposited securities
or pool of securities. GDRs and EDRs are not necessarily denominated in the same
currency as the underlying securities to which they may be connected. Generally,
GDRs or EDRs in registered form are designed for use in the U.S. securities
market and GDRs or EDRs in bearer form are designed for use in securities
markets outside the U.S.. The above portfolios may invest in sponsored and
unsponsored GDRs and EDRs. For purposes of the Funds' investment policies, a
portfolio's investments in GDRs or EDRs will be deemed to be investments in the
underlying securities.
FUTURES CONTRACTS
Each portfolio, except the Cash Reserves Portfolio, may enter into futures
contracts, options, and options on futures contracts. Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. Futures contracts which are standardized as to maturity date and
underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying securities)
if it is not terminated prior to the specified delivery date. Minimum initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on the basis of
margin deposits that may range upward from less than 5% of the value of the
contract being traded. A portfolio's margin deposits will be placed in a
segregated account maintained by the Fund's Custodian or with a futures
commission merchant as approved by the Fund's Board of Trustees.
5
<PAGE>
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, a change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers" or
"speculators." Hedgers use the futures markets primarily to offset unfavorable
changes in the value of securities otherwise held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
value of the underlying securities. Regulations of the CFTC applicable to the
Fund require that the aggregate initial margins and premiums required to
establish non-hedging positions not exceed 5% of the liquidation value of a
portfolio.
Although techniques other than the sale and purchase of futures contracts could
be used to control a portfolio's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the portfolios will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
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, and 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 SEC's position on
asset coverage.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, a portfolio would continue to be required
to make daily cash payments to maintain its required margin. In such situations,
if the portfolio has insufficient cash, it may have to sell portfolio securities
to meet daily margin requirements at a time when it may be disadvantageous to do
so. In addition, the portfolio may be required to make delivery of the
instruments underlying interest rate futures contracts it holds. The inability
to close options and futures positions also could have an adverse impact on a
portfolio's ability to effectively hedge. A portfolio will minimize the risk
that it will be unable to close out a futures contract by only entering into
futures which are traded on national futures exchanges and for which there
appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
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purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract. A portfolio would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that a portfolio could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by a portfolio of margin deposits in the event of bankruptcy of a
broker with whom the portfolio has an open position in a futures contract or
related option. Most futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
OPTIONS
Investments in options involve some of the same considerations that are involved
in connection with investments in futures contracts (e.g., the existence of a
liquid secondary market). In addition, the purchase of an option also entails
the risk that changes in the value of the underlying security or contract will
not be fully reflected in the value of the option purchased. Depending on the
pricing of the option compared to either the futures contract or securities, an
option may or may not be less risky than ownership of the futures contract or
actual securities. In general, the market prices of options can be expected to
be more volatile than the market prices on the underlying futures contract or
securities.
OTC Options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC Option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
portfolios expect generally to enter into OTC Options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC Option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
Option it has entered into with a portfolio or fails to make a cash settlement
payment due in accordance with the terms of that option, the portfolio will lose
any premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor of credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC Option will be
satisfied. The staff of the SEC currently takes the position that OTC Options
purchased by the portfolios or sold by them (the cost of the sell-back plus the
in-the-money amount, if any) are illiquid, and are subject to each portfolio's
limitation on investing in illiquid securities.
The portfolios may also write covered-call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to protect against a decline in the U.S. dollar value
of a currency due to the changes of exchange rates vis a vis the U.S. dollar and
the option is written for a currency other than the currency in which the
security is denominated. In such circumstances, the portfolios will follow the
coverage requirements as described in the preceding paragraph.
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OPTIONS ON FOREIGN CURRENCIES
All portfolios, except the Cash Reserves, Domestic Fixed Income, Limited
Duration, Mortgage-Backed Securities and Advisory Mortgage Portfolios, may
purchase and write options on foreign currencies in a manner similar to that in
which futures contracts on foreign currencies, or forward contracts, will be
utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminution in the value of portfolio securities, a
portfolio may purchase put options on the foreign currency. If the value of the
currency does decline, a portfolio will have the right to sell such currency for
a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, a portfolio may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to a portfolio derived from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the portfolios could sustain losses on transactions in
foreign currency options which would require them to forego a portion or all of
the benefits of advantageous changes in such rates.
The portfolios may write options on foreign currencies for the same purposes.
For example, where a portfolio anticipates a decline in the dollar value of
foreign currency denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call option on the
relevant currency. If the anticipated decline occurs, the option will most
likely not be exercised, and the diminution in value of portfolio securities
will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, a portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the portfolio to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
portfolio would be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium. Through the writing
of options on foreign currencies, a portfolio also may be required to forego all
or a portion of the benefits which might otherwise have been obtained from
favorable movements in exchange rates.
The portfolios may only write covered call options on foreign currencies. A call
option written on a foreign currency by a portfolio is "covered" if the
portfolio owns the underlying foreign currency covered by the call, an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the Custodian) or upon conversion or exchange of other foreign currency held
in its portfolio. A written call option is also covered if a portfolio has a
call on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the portfolio in cash or
liquid securities in a segregated account with the Custodian, or (c) maintains
in a segregated account cash or liquid securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars, marked-to-market
daily.
The portfolios may also write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline in the
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U.S. dollar value of a security which a portfolio owns or has the right to
acquire due to an adverse change in the exchange rate and which is denominated
in the currency underlying the option. In such circumstances, the portfolio will
either "cover" the transaction as described above or collateralize the option by
maintaining in a segregated account with the Custodian, cash or liquid
securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
COMBINED TRANSACTIONS
The portfolios may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple foreign currency
transactions (including forward foreign currency exchange contracts) and any
combination of futures, options and foreign currency transactions, instead of a
single transaction, as part of a single hedging strategy when, in the opinion of
the Adviser, it is in the best interest of the portfolio to do so. A combined
transaction, while part of a single strategy, may contain elements of risk that
are present in each of its component transactions and will be structured in
accordance with applicable SEC regulations and SEC staff guidelines.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on contract
markets regulated by the CFTC or (with the exception of certain foreign currency
options) by the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. Similarly, options on currencies may be traded over-the-counter.
In an over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchase of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, the option writer and a trader of
forward contracts could lose amounts substantially in excess of their initial
investments, due to the margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on national securities exchanges are within
the jurisdiction of the SEC, as are other securities traded on such exchanges.
As a result, many of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation ("OCC"), thereby
reducing the risk of counterparty default. Furthermore, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, are
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effect of other political and
economic events. In addition, exchange-traded options of foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign countries
for this purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special
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procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward contracts
and options on foreign currencies may be traded on foreign exchanges. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the U.S. of
data on which to make trading decisions, (iii) delays in a portfolio's ability
to act upon economic events occurring in foreign markets during non business
hours in the U.S., (iv) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the U.S., and (v) lesser
trading volume.
SWAP CONTRACTS
All portfolios, except the Cash Reserves and Mid Cap Growth Portfolios, may
enter into Swap Contracts. A swap 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 currencies, fixed interest
rates, prices, 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 national amount.
The swaps in which the portfolios may engage also include rate caps, floors and
collars under which one party pays a single or periodic fixed amount(s) (or
premium), and the other party pays periodic amounts based on the movement of a
specified index. Swaps do not involve the delivery of securities, other
underlying assets, or principal. Accordingly, the risk of loss with respect to
swaps is limited to the net amount of payments that a portfolio is contractually
obligated to make. If the other party to a swap defaults, a portfolio's risk of
loss consists of the net amount of payments that a portfolio is contractually
entitled to receive. Currency swaps usually 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 is 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, the portfolios
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. 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 portfolios will usually enter into swaps on a net basis, i.e., the two
payment 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 payments. A portfolio's obligations under
a swap agreement will be accrued daily (offset 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 to avoid any potential leveraging of the portfolio. To the
extent that these swaps, caps, floors, and collars are entered into for hedging
purposes, the Adviser believes such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, will not treat them as being
subject to a portfolio's borrowing restrictions. All of the portfolios of MAS
Funds except the Cash Reserves Portfolio may enter into OTC Derivatives
transactions (swaps, caps, floors, puts, etc., but excluding foreign exchange
contracts) with Counterparties that are approved by the Adviser in accordance
with guidelines established by the Board of
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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.
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.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
Foreign currency warrants--Foreign currency warrants are warrants which entitle
the holder to receive from the issuer an amount of cash (generally, for warrants
issued in the U.S., in U.S. dollars) which is calculated pursuant to a
predetermined formula and based on the exchange rate between a specified foreign
currency and the U.S. dollar as of the exercise date of the warrant. Foreign
currency warrants generally are exercisable upon their issuance and expire as of
a specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk which, from
the point of view of prospective purchasers of the securities, is inherent in
the international fixed-income marketplace. Foreign currency warrants may
attempt to reduce the foreign exchange risk assumed by purchasers of a security
by, for example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case where the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants. Warrants are generally unsecured obligations of their issuers and are
not standardized foreign currency options issued by the OCC. Unlike foreign
currency options issued by the OCC, the terms of foreign exchange warrants
generally will not be amended in the event of governmental or regulatory actions
affecting exchange rates or in the event of the imposition of other regulatory
controls affecting the international currency markets. The initial public
offering price of foreign currency warrants is generally considerably in excess
of the price that a commercial user of foreign currencies might pay in the
interbank market for a comparable option involving significantly larger amounts
of foreign currencies. Foreign currency warrants are subject to complex
political or economic factors.
Principal exchange rate linked securities--Principal exchange rate linked
securities are debt obligations the principal on which is payable at maturity in
an amount that may vary based on the exchange rate between the U.S. dollar and a
particular foreign currency at or about that time. The return on "standard"
principal exchange rate linked securities is enhanced if the foreign currency to
which the security is linked appreciates against the U.S. dollar, and is
adversely affected by increases in the foreign exchange value of the U.S.
dollar; "reverse"
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principal exchange rate linked securities are like the "standard" securities,
except that their return is enhanced by increases in the value of the U.S.
dollar and adversely impacted by increases in the value of foreign currency.
Interest payments on the securities are generally made in U.S. dollars at rates
that reflect the degree of foreign currency risk assumed or given up by the
purchaser of the notes (i.e., at relatively higher interest rates if the
purchaser has assumed some of the foreign exchange risk, or relatively lower
interest rates if the issuer has assumed some of the foreign exchange risk,
based of the expectations of the current market). Principal exchange rate linked
securities may in limited cases be subject to acceleration of maturity
(generally, not without the consent of the holders of the securities), which may
have an adverse impact on the value of the principal payment to be made at
maturity.
Performance indexed paper--Performance indexed paper is U.S. dollar-denominated
commercial paper the yield of which is linked to certain foreign exchange rate
movements. The yield to the investor on performance indexed paper is between the
U.S. dollar and a designated currency as of or about that time (generally, the
index maturity two days prior to maturity). The yield to the investor will be
within a range stipulated at the time of purchase of the obligation, generally
with a guaranteed minimum rate of return that is below, and a potential maximum
rate of return that is above, market yields on U.S. dollar-denominated
commercial paper, with both the minimum and maximum rates of return on the
investment corresponding to the minimum and maximum values of the spot exchange
rate two business days prior to maturity.
MUNICIPAL BONDS
Municipal Bonds generally include debt obligations issued by states and their
political subdivisions, and duly constituted authorities and corporations, to
obtain funds to construct, repair or improve various public facilities such as
airports, bridges, highways, hospitals, housing, schools, streets and water and
sewer works. Municipal Bonds may also be issued to refinance outstanding
obligations as well as to obtain funds for general operating expenses and for
loans to other public institutions and facilities.
The two principal classifications of Municipal Bonds are "general obligation"
and "revenue" or "special tax" bonds. General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue or special tax bonds are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other tax, but not from
general tax revenues. The Municipal and PA Municipal Portfolios ("the
portfolios") may also invest in tax-exempt industrial development bonds,
short-term municipal obligations, project notes, demand notes and tax-exempt
commercial paper.
Industrial revenue bonds in most cases are revenue bonds and generally do not
have the pledge of the credit of the issuer. The payment of the principal and
interest on such industrial revenue bonds is dependent solely on the ability of
the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment. Short-term municipal obligations issued by states,
cities, municipalities or municipal agencies, include Tax Anticipation Notes,
Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan Notes and
Short-Term Discount Notes. Project Notes are instruments issued by the
Department of Housing and Urban Development but issued by a state or local
housing agency. While the issuing agency has the primary obligation on such
Project notes, they are also secured by the full faith and credit of the U.S..
Note obligations with demand or put options may have a stated maturity in excess
of one year, but permit any holder to demand payment of principal plus accrued
interest upon a specified number of days' notice. Frequently, such obligations
are secured by letters of credit or other credit support arrangements provided
by banks. The issuer of such notes normally has a corresponding right, after a
given period, to repay at its discretion the outstanding principal of the note
plus accrued interest upon a specific number of days' notice to
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the bondholders. The interest rate on a demand note may be based upon a known
lending rate, such as the prime lending rate, and be adjusted when such rate
changes, or the interest rate on a demand note may be a market rate that is
adjusted at specified intervals. Each note purchased by the portfolios will meet
the quality criteria set out in the prospectus for the portfolios.
The yields of Municipal Bonds depend on, among other things, general money
market conditions, conditions in the municipal bond market, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The ratings of Moody's and Standard & Poor's represent their opinions of
the quality of the Municipal Bonds rated by them. It should be emphasized that
such ratings are general and are not absolute standards of quality.
Consequently, Municipal Bonds with the same maturity, coupon and rating may have
different yields, while Municipal Bonds of the same maturity and coupon, but
with different ratings may have the same yield. It will be the responsibility of
the investment management staff to appraise independently the fundamental
quality of the bonds held by the portfolios.
Municipal Bonds are sometimes purchased on a "when-issued" basis meaning the
portfolio has committed to purchase certain specified securities at an agreed
upon price when they are issued. The period between commitment date and issuance
date can be a month or more. It is possible that the securities will never be
issued and the commitment canceled.
From time to time proposals have been introduced before Congress to restrict or
eliminate the federal income tax exemption for interest on Municipal Bonds.
Similar proposals may be introduced in the future. If any such proposal were
enacted, it might restrict or eliminate the ability of the portfolios to achieve
their investment objectives. In that event, the Fund's Trustees and officers
would reevaluate investment objectives and policies and consider recommending to
shareholders changes in such objectives and policies.
Similarly, from time to time proposals have been introduced before state and
local legislatures to restrict or eliminate the state and local income tax
exemption for interest on Municipal Bonds. Similar proposals may be introduced
in the future. If any such proposal were enacted, it might restrict or eliminate
the ability of a portfolio to achieve its investment objective. In that event,
the Fund's Trustees and officers would reevaluate investment objectives and
policies and consider recommending to shareholders changes in such objectives
and policies.
DURATION
The Limited Duration and Intermediate Duration Portfolios seek to achieve their
objectives by investing in the types of fixed income securities described in the
prospectus and by maintaining an average duration of between one and three years
and two and five years, respectively. Duration is one of the fundamental tools
used by the Adviser in security selection for the portfolios and any other
portfolio which invests in fixed income securities.
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 the "term of
maturity." Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure.
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, 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
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pattern of the security's payments prior to maturity. 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 things 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, in the
case of mortgage-backed securities, the current prepayment rates are more
critical than their stated final maturities in determining their interest rate
exposure. In these and other similar situations, the Adviser will use more
sophisticated analytical techniques that incorporate the economic life of a
security into the determination of its interest rate exposure.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to investors. Most
issuers or poolers provide guarantees of payments, regardless of whether or not
the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are individual loan, title, pool and hazard insurance purchased by the
issuer. There can be no assurance that the private issuers can meet their
obligations under the policies. Mortgage-backed securities issued by private
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 portfolios will be rated investment grade by Moody's
or Standard & Poor's, or, if unrated, deemed by the Adviser to be of investment
grade quality.
Underlying Mortgages
Pools consist of whole mortgage loans or participation in loans. The majority of
these loans are made to purchasers of 1-4 family homes. The terms and
characteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. For example, in addition to fixed-rate fixed-term
mortgages, the portfolios may purchase pools of adjustable rate mortgages (ARM),
growing equity mortgages (GEM), graduated payment mortgage (GPM) and other types
where the principal and interest payment procedures vary. ARM's are mortgages
which reset the mortgage's interest rate with changes in open market interest
rates. The portfolios' interest income will vary with changes in the applicable
interest rate on pools of ARM's. GPM and GEM pools maintain constant interest
rates, with varying levels of principal repayment over the life of the mortgage.
These different interest and principal payment procedures should not impact the
portfolios' net asset values since the prices at which these securities are
valued each day will reflect the payment procedures.
All poolers apply standards for qualifications to local lending institutions
which originate mortgages for the pools. Poolers also establish credit standards
and underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.
Average Life
The average life of pass-through pools varies with the maturities, coupon rates,
and type of the underlying mortgage instruments. In addition, a pool's term may
be shortened by unscheduled or early payments of
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principal and interest on the underlying mortgages. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions.
Returns of Mortgage-Backed Securities
Yields on mortgage-backed pass-through securities are typically quoted based on
a prepayment assumption derived from the coupon and maturity of the underlying
instruments. Actual prepayment experience may cause the realized return to
differ from the assumed yield. Reinvestment of prepayments may occur at higher
or lower interest rates than the original investment, thus affecting the
realized returns of the portfolios. The compounding effect from reinvestment of
monthly payments received by each portfolio will increase its return to
shareholders, compared to bonds that pay interest semi-annually.
About Mortgage-Backed Securities
Interests in pools of mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments resulting from the sale of the
underlying residential property, refinancing or foreclosure net of fees or costs
which may be incurred. Some mortgage-backed securities are described as
"modified pass-through." These securities entitle the holders to receive all
interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. FHLMC issues
Participation Certificates ("PC's") which represent interests in mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal.
Fannie Mae is a Government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. Fannie Mae purchases residential mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings, banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by Fannie Mae are
guaranteed as to timely payment of principal and interest by Fannie Mae.
The principal Government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
Government and Government-related pools because there are no direct or indirect
Government guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance purchased by the issuer.
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The insurance and guarantees are issued by Governmental entities, private
insurers and the mortgage poolers. There can be no assurance that the private
insurers can meet their obligations under the policies. Mortgage-backed
securities purchased for the portfolios will, however, be rated of investment
grade quality by Moody's and/or Standard & Poor's or, if unrated, deemed by the
Adviser to be of investment grade quality.
It is expected that Governmental or private entities may create mortgage loan
pools offering pass-through investments in addition to those described above.
The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payment
may vary or whose terms to maturity may be shorter than previously customary. As
new types of mortgage-backed securities are developed and offered to investors,
the portfolios will, consistent with their investment objective and policies,
consider making investments in such new types of securities.
STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities ("SMBS") are derivative multiclass mortgage
securities. SMBS may be issued by agencies or instrumentalities of the U.S.
Government or by 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. A
common 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 the most extreme
case, 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 an IO class 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's yield to maturity from these
securities. 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.
SMBS are generally purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers. Certain of these
securities may be deemed "illiquid" and subject to each portfolio's limitation
on investing in illiquid securities.
U.S. GOVERNMENT SECURITIES
The term "U.S. Government securities" refers to a variety of securities which
are issued or guaranteed by the U.S. Government, and by various
instrumentalities which have been established or sponsored by the U.S.
Government. U.S. Treasury securities are backed by the "full faith and credit"
of the U.S.
Agency Securities: Securities issued or guaranteed by federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the U.S. In the case of securities not backed by the full
faith and credit of the U.S., the investor must look principally to the agency
or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the U.S. itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the U.S. include the Export Import
Bank, Farmers Home Administration, Federal Financing Bank, and others. Certain
debt issued by Resolution Funding Corporation has both its principal and
interest backed by the full faith and credit of the U.S. Treasury in that its
principal is defeased by U.S. Treasury zero coupon issues, while the U.S.
Treasury is explicitly required to advance funds sufficient to pay interest on
it, if needed. Certain agencies and instrumentalities, such as the
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Government National Mortgage Association, are, in effect, backed by the full
faith and credit of the U.S. through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Fannie Mae, are not guaranteed by the U.S., but those
institutions are protected by the discretionary authority of the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under Government supervision, but their
debt securities are backed only by the credit worthiness of those institutions,
not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities include
the Export-Import Bank of the United States, Farmers Home Administration,
Federal Housing Administration, Maritime Administration, Small Business
Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency organized under
federal charter with Government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and Fannie Mae.
ZERO COUPON BONDS
Zero Coupon Bonds is a term used to describe notes and bonds which have been
stripped of their unmatured interest coupons, or the coupons themselves, and
also receipts or certificates representing interest in such stripped debt
obligations and coupons. The timely payment of coupon interest and principal on
these instruments remains guaranteed by the issuer.
A Zero Coupon Bond does not pay interest. Instead, it is issued at a substantial
discount to its "face value"-- what it will be worth at maturity. The difference
between a security's issue or purchase price and its face value represents the
imputed interest an investor will earn if the security is held until maturity.
For tax purposes, a portion of this imputed interest is deemed as income
received by zero coupon bondholders each year. The Fund, which expects to
qualify as a regulated investment company, intends to pass along such interest
as a component of the portfolio's distributions of net investment income.
Zero Coupon Bonds may offer investors the opportunity to earn higher yields than
those available on other bonds of similar maturity. However, zero coupon bond
prices may also exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest is returned to the
investor.
Zero Coupon Treasury Bonds are sold under a variety of different names, such as:
Certificate of Accrual on Treasury Securities (CATS), Treasury Receipts (TRS),
Separate Trading of Registered Interest and Principal of Securities (STRIPS) and
Treasury Investment Growth Receipts (TIGERS).
EURODOLLAR AND YANKEE OBLIGATIONS
Each portfolio, except the Domestic Fixed Income Portfolio, can invest in
Eurodollar and Yankee obligations. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks.
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks.
Eurodollar and Yankee obligations are subject to the same risks that pertain to
domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a limited extent, Yankee) obligations are
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subject to certain sovereign risks. One such risk is the possibility that a
sovereign country might prevent capital, in the form of dollars, from flowing
across their borders. Other risks include: adverse political and economic
developments; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes, and the
expropriation or nationalization of foreign issuers. However, Eurodollar and
Yankee obligations held in the Cash Reserves Portfolio will undergo the same
credit analysis as domestic issues in which the Cash Reserves Portfolio invests,
and will have at least the same financial strength as the domestic issuers
approved for the Cash Reserves Portfolio.
BRADY BONDS
A portion of certain of the Fund's fixed-income investments may be invested in
certain debt obligations customarily referred to as "Brady Bonds", 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
actively traded in the over-the-counter secondary market.
Dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury Zero Coupon Obligations which have
the same maturity as the Brady Bonds. Interest payments on these Brady Bonds
generally are collateralized by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
that time and is adjusted at regular intervals thereafter. Certain Brady Bonds
are entitled to "value recovery payments" in certain circumstances, which in
effect constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the event of
a default with respect to collateralized Brady Bonds as a result of which the
payment obligations of the issuer are accelerated, the U.S. Treasury Zero Coupon
Obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. In addition, in light of the residual risk of the Brady Bonds
and, among other factors, the history of default with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.
CASH RESERVES PORTFOLIO
A-1 and Prime-1 Commercial Paper Ratings: Commercial paper rated A-1 by Standard
& Poor's has the following characteristics: (1) liquidity ratios are adequate to
meet cash requirements; (2) long-term senior debt is rated "A" or better; (3)
the issuer has access to at least two additional channels of borrowing; (4)
basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances; (5) typically, the issuer's industry is well established
and the issuer has a strong position within the industry; and (6) the
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
A-1, A-2, or A-3. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings
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are the following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and the appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
TAX CONSIDERATIONS
In order for a portfolio to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, interest,
income derived from loans of securities, and gains from the sale of securities
or foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. It is anticipated that any net gain
realized from the closing out of futures contracts will be considered gain from
the sale of securities and therefore be qualifying income for purposes of the
90% requirement. In addition, (i) a portfolio must distribute annually to its
shareholders at least the sum of 90% of its net interest income excludable from
gross income plus 90% of its investment company taxable income; (ii) at the
close of each quarter of a portfolio's taxable year, at least 50% of its total
assets must be represented by cash and cash items, vs. government securities,
securities of other regulated investment companies and such other securities
with limitations; and (iii) at the close of each quarter of a portfolio's
taxable year, not more than 25% of the value of its assets may be invested in
securities of any one issuer, or of two or more issuers engaged in same or
similar businesses if the portfolio owns at least 20% of the voting power of
such issuers.
Each portfolio of the Fund will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
including unrealized gains at the end of the portfolio's fiscal year on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the portfolio's other investments and shareholders will be
advised of the nature of the payments.
The Taxpayer Relief Act of 1997 provides various capital gains rates which
pertain to shareholders who are individuals. Each portfolio will, therefore,
designate distributions derived from capital gains of the portfolio (whether
such distributions are paid in cash or additional shares) as a "20% rate gain
distribution" or a "28% rate gain distribution" in accordance with guidance
issued by the Internal Revenue Service. The Fund will notify shareholders
annually as to the federal tax classification of dividends and distributions
paid by a portfolio including, but not limited to notifying individuals as to
the amount of capital gain distributions subject to the 20% and 28% federal
capital gain tax rates. Distributions of dividends or capital gains may also be
subject to state and local taxes.
Some of the options, futures contracts, forward contracts, and swap contracts
entered into by the portfolios may be "Section 1256 contracts." Section 1256
contracts held by a portfolio at the end of its taxable year (and, for purposes
of the 4% excise tax, on certain other dates as prescribed under the Code) are
"marked to market" with unrealized gains or losses treated as though they were
realized. Any gains or losses, including "marked to market" gains or losses, on
Section 1256 contracts other than forward contracts are generally 60% long-term
and 40% short-term capital gains or losses ("60/40") although all foreign
currency gains and losses from such contracts may be treated as ordinary in
character absent a special election.
Generally, hedging transactions and certain other transactions in options,
futures, forward contracts and swap contracts undertaken by a portfolio, may
result in "straddles" for U.S. federal income tax purposes. The straddle rules
may affect the character of gain or loss realized by a portfolio. In addition,
losses realized by a portfolio on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into
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account in calculating the taxable income for the taxable year in which such
losses are realized. Because only a few regulations implementing the straddle
rules have been promulgated, the tax consequences of transactions in options,
futures, forward contracts, and swap agreements to a portfolio are not entirely
clear. The transactions may increase the amount of short-term capital gain
realized by a portfolio. Short-term capital gain is taxed as ordinary income
when distributed to shareholders.
A portfolio may make one or more of the elections available under the Code which
are applicable to straddles. If a portfolio makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the elections made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a portfolio that did not engage in such hedging transactions.
The Taxpayer Relief Act of 1997 provides constructive sales treatment for
appreciated financial positions such as stock which has increased in value in
the hands of a portfolio. Under this constructive sales treatment, the portfolio
may be treated as having sold such stock and be required to recognize gain if it
enters into a short sale, an offsetting notional principal contract, a futures
or forward contract, or a similar transaction with respect to such stock or
substantially identical property.
Each portfolio intends to declare and pay dividends and capital gain
distributions so as to avoid imposition of the federal excise tax. To do so,
each portfolio expects to distribute an amount at least equal to (i) 98% of its
calendar year ordinary income, (ii) 98% of its capital gains net income for the
one-year period ending October 31st, and (iii) 100% of any undistributed
ordinary and capital gain net income from the prior year.
Although income received on direct U.S. Government obligations is taxable at the
Federal level, such income is exempt from tax at the state level when received
directly, and may be exempt, depending on the state, when received by a
shareholder. Each portfolio will inform shareholders annually of the percentage
of income and distributions derived from direct U.S. Government obligations.
Shareholders should consult their tax advisers to determine whether any portion
of dividends received from the portfolio is considered tax exempt in their
particular states.
Any gain or loss recognized on a sale or redemption of shares of a portfolio by
a shareholder who is not a dealer in securities will generally be treated as
long-term capital gain or loss if the shares have been held for more than
eighteen months, mid-term if the shares have been held for over one year but not
for over eighteen months, and short-term if for a year or less. Long-term
capital gains are currently taxed at a maximum rate of 20%; mid-term capital
gains are currently taxed at a maximum rate of 28%; and short-term gains are
currently taxed at ordinary income tax rates. If shares held for six months or
less are sold or redeemed for a loss, two special rules apply: First, if shares
on which a net capital gain distribution has been received are subsequently sold
or redeemed, and such shares have been held for six months or less, any loss
recognized will be treated as long-term capital loss to the extent of the
long-term capital gain distributions. Second, any loss recognized by a
shareholder upon the sale or redemption of shares of a municipal portfolio fund
held for six months or less will be disallowed to the extent of any
exempt-interest dividends received by the Shareholder with respect to such
shares.
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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. The U.S. has entered into Tax Treaties with many foreign countries which
would entitle the portfolios to a reduced rate of tax or exemption from tax on
such income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the portfolios' assets to be invested within various
countries is not known. The portfolios intend to operate so as to qualify for
treaty-reduced rates of tax where applicable.
If more than 50% of a portfolio's assets are represented by foreign securities,
then such portfolio may file an election with the Internal Revenue Service to
pass through to shareholders the amount of foreign income taxes paid by such
portfolio. A portfolio will make such an election only if it is deemed to be in
the best interests of such shareholders.
If a portfolio makes the above-described election, the portfolio will not be
allowed a deduction or a credit for foreign taxes it paid and the amount of such
taxes will be treated as a dividend paid by the portfolio. The shareholders of
the portfolios will be required to: (i) include in gross income, even though not
actually received, their respective pro rata share of foreign taxes paid by the
portfolio; (ii) treat their pro rata share of foreign taxes as paid by them;
(iii) treat as gross income from sources within the respective foreign
countries, for purposes of the foreign tax credit, their pro rata share of such
foreign taxes and their pro rate share of any dividend paid by the portfolio
which represents income from sources within foreign countries; and (iv) either
deduct their pro rata share of foreign taxes in computing their taxable income
or use it within the limitations set forth in the Internal Revenue Code (the
"Code") as a foreign tax credit against U.S. income taxes (but not both). In no
event shall a shareholder be allowed a foreign tax credit if the shareholder
holds shares in a portfolio for 15 days or less during the 30-day period
beginning on the date which is 15 days before the date on which such shares
become ex-dividend with respect to such dividends.
Each shareholder of a portfolio will be notified within 60 days after the close
of each taxable (fiscal) year of the Fund if the Foreign taxes paid by the
portfolio will pass through for that year, and, if so, the amount of each
shareholder's pro rata share (by country) of (i) the foreign taxes paid, and
(ii) the portfolio's gross income from foreign sources. The notice from the
portfolio to shareholders will also include the amount of foreign taxes paid by
the portfolio which are not allowable as a foreign tax credit because the
portfolio did not hold the foreign securities for more than 15 days during the
30-day period beginning on the date which is 15 days before the date on which
the security becomes ex-dividend with respect to the foreign source dividend or
because and to the extent that the recipient of the dividend is under an
obligation to make related payments with respect to positions in substantially
similar or related property. Shareholders who are not liable for federal income
taxes, such as retirement plans qualified under Section 401 of the Code, will
not be affected by any such "pass-through" of foreign tax credits.
Special Tax Considerations for the Municipal and PA Municipal Portfolios: Each
of the Municipal and PA Municipal Portfolios intends that at the close of each
quarter of its taxable year, at least 50% of the value of the portfolio's total
assets will consist of obligations the interest on which is excludable from
gross income (i.e., municipal bonds and notes), so that it may pay
"exempt-interest" dividends to shareholders. Exempt-interest dividends, which
are defined in the Code, are excluded from a shareholder's gross income for
federal income tax purposes, but may nevertheless be subject to the alternative
minimum tax (imposed at a rate of 26%-28% in the case of non-corporate taxpayers
and at the rate of 20% in the case of corporate taxpayers). A shareholder may,
however, lose the federal tax-exempt status of the accrued income of the
portfolio if the shareholder redeems its shares before a dividend has been
declared. Exempt-interest dividends received by shareholders from the
above-referenced 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.
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These portfolios may invest in private activity municipal securities, the
interest on which is subject to the federal alternative minimum tax for
corporations and individuals and the federal environmental tax for corporations
only. These 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. A
"substantial user" is defined generally to include certain persons who regularly
use in a trade or business or facility financed from the proceeds of industrial
development bonds or private activity bonds. Such persons should consult their
tax advisers before purchasing shares.
Any distributions received by individual shareholders which are derived from
capital gains of the portfolio will be designated by either portfolio as a "20%
rate gain distribution" or a "28% rate gain distribution" in accordance with
guidance issued by the Internal Revenue Service.
Interest on indebtedness incurred or continued by a shareholder in order to
purchase or carry shares of these portfolios is not deductible for federal
income tax purposes to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
PURCHASE OF SHARES
Each portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares (ii) to reject purchase orders, and (iii) to reduce or
waive the minimum for initial and subsequent investments. The officers of the
Fund may from time to time waive the minimum initial and subsequent investment
requirements in connection with investments in the Fund by employees of the
Adviser and its affiliates.
REDEMPTION OF SHARES
Each portfolio may suspend redemption privileges or postpone the date of payment
(i) during any period that the New York Stock Exchange ("NYSE") is closed, or
trading on the NYSE is restricted as determined by the SEC, (ii) during any
period when an emergency exists as defined by the rules of the SEC as a result
of which it is not reasonably practicable for a portfolio to dispose of
securities owned by it, or fairly to determine the value of its assets, and
(iii) for such other periods as the SEC may permit.
The Fund has made an election with the SEC pursuant to Rule 18f-1 under the 1940
Act to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of the portfolio at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. Redemptions in excess of
the above limits may be paid in whole or in part in investment securities or in
cash, as the Trustees may deem advisable; however, payment will be made wholly
in cash unless the Trustees believe that economic or market conditions exist
which would make such a practice detrimental to the best interests of the Fund.
If redemptions are paid in investment securities, such securities will be valued
as set forth in the Fund's prospectuses under "Valuation of Shares" and a
redeeming shareholder would normally incur brokerage expenses in converting
these securities to cash.
No charge is made by a portfolio for redemptions. Redemption proceeds may be
more or less than the shareholder's cost depending on the market value of the
securities held by the portfolio.
TRANSACTIONS WITH BROKER/DEALERS
The Fund has authorized one or more brokers to accept on its behalf purchase and
redemption orders. These brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
For purposes of determining the purchase price of shares, the Fund will be
deemed to have received a purchase or redemption order when an authorized
broker, or if applicable, a broker's
22
<PAGE>
authorized designee, accepts the order. In other words, orders will be priced at
the net asset value net computed after such orders are accepted by an authorized
broker or the broker's authorized designee.
SHAREHOLDER SERVICES
Exchange Privilege
The exchange privilege is only available with respect to portfolios that are
qualified for sale in a shareholder's state. Exchange requests should be sent to
MAS Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge, West
Conshohocken, PA 19428-0868. Any such exchange will be based on the respective
net asset values of the shares involved. Before making an exchange, a
shareholder should consider the investment objectives of the portfolio to be
purchased. Exchange requests may be made either by mail or telephone. Telephone
exchanges (referred to as "expedited exchanges") will be accepted only if the
certificates for the shares to be exchanged are held by the Fund for the account
of the shareholder and the registration of the two accounts are identical.
Requests for expedited exchanges received prior to the time at which each
portfolio determines its net asset value, as described in the prospectus will be
processed as of the close of business on the same day. Requests received after
these times will be processed on the next business day. Expedited exchanges may
also be subject to limitations as to amounts or frequency, and to other
restrictions established by the Board of Trustees to assure that such exchanges
do not disadvantage the Fund and its shareholders. 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.
For federal income tax purposes, an exchange between portfolios of the Fund is a
taxable event, and, accordingly, a capital gain or loss may be realized. It is
likely, therefore, that a capital gain or loss would be realized on an exchange
between portfolios; you may want to consult your tax adviser for further
information in this regard. The exchange privilege may be modified or terminated
at any time.
Transfer of Shares
Shareholders may transfer shares of the Fund's portfolios to another person by
written request to the Client Services Group at the address noted above. The
request should clearly identify the account and number of shares to be
transferred and include the signature of all registered owners and all share
certificates, if any, which are subject to the transfer. The signature on the
letter of request, the share certificate or any stock power must be guaranteed
in the same manner as described under "Redemption of Shares." As in the case of
redemptions, the written request must be received in good order before any
transfer can be made.
INVESTMENT LIMITATIONS
Each portfolio of the Fund is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the portfolio.
As a matter of fundamental policy, each portfolio will not:
(1) invest in physical commodities or contracts on physical commodities;
23
<PAGE>
(2) purchase or sell real estate, although it may purchase and sell securities
of companies which deal in real estate, other than real estate limited
partnerships, and may purchase and sell marketable securities which are secured
by interests in real estate;
(3) make loans except: (i) by purchasing debt securities in accordance with its
investment objectives and policies, or entering into repurchase agreements,
subject to the limitations described in non-fundamental limitation (7), below,
(ii) by lending its portfolio securities, and (iii) by lending portfolio assets
to other portfolios of the Fund, so long as such loans are not inconsistent with
the 1940 Act, or the rules and regulations, or interpretations or orders of the
SEC thereunder;
(4) with respect to 75% of its assets, purchase a security if, as a result, it
would hold more than 10% (taken at the time of such investment) of the
outstanding voting securities of any issuer (this restriction is not applicable
to the Global Fixed Income, International Fixed Income, Advisory Foreign Fixed
Income or the Emerging Markets Value Portfolios);
(5) with respect to 75% of its assets, purchase securities of any issuer if, as
a result, more than 5% of the portfolio's total assets, taken at market value at
the time of such investment, would be invested in the securities of such issuer
except that this restriction does not apply to securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (this restriction
does not apply to the Global Fixed Income, International Fixed Income, Advisory
Foreign Fixed Income or the Emerging Markets Value Portfolios);
(6) borrow money, except (i) as a temporary measure for extraordinary or
emergency purposes, and (ii) in connection with reverse repurchase agreements,
provided that (i) and (ii) in combination do not exceed 33 1/3% of the
portfolio's total assets (including the amount borrowed) less liabilities
(exclusive of borrowings);
(7) underwrite the securities of other issuers (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the Securities Act
of 1933 in connection with the disposition of restricted securities); and
(8) acquire any securities of companies within one industry, if, as a result of
such acquisition, more than 25% of the value of the portfolio's total assets
would be invested in securities of companies within such industry; provided,
however that (i) there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(ii) the Cash Reserves Portfolio may invest without limitation in certificates
of deposit or bankers' acceptances of domestic banks; (iii) utility companies
will be divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (iv)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; (v) asset-backed securities
will be classified according to the underlying assets securing such securities;
and (vi) the Mortgage-Backed Securities and Advisory Mortgage Portfolios will
concentrate in mortgage-backed securities.
24
<PAGE>
Each portfolio is also subject to the following restrictions which may be
changed by the Board of Trustees without shareholder approval.
As a matter of non-fundamental policy, no portfolio will:
(1) enter into futures contracts to the extent that each portfolio's outstanding
obligations to purchase securities under these contracts in combination with its
outstanding obligations with respect to options transactions would exceed 50% of
each portfolio's total assets, and 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 SEC's position on asset coverage;
(2) write put or call options except to the extent described above in (1);
(3) purchase on margin, except for use of short-term credit as may be necessary
for the clearance of purchases and sales of securities, provided that each
portfolio may make margin deposits in connection with transactions in options,
futures, and options on futures;
(4) sell short unless, the portfolio (i) by virtue of its ownership of other
securities, has the right to obtain securities equivalent in kind and amount to
the securities sold and, if the right is conditional, the sale is made upon the
same conditions, or (ii) maintains in a segregated account on the books of the
Fund's custodian an amount that, when combined with the amount of collateral
deposited with the broker in connection with the short sale, equals the current
market value of the security sold short or such other amount as the SEC or its
staff may permit by rule, regulation, order or interpretation (transactions in
futures contracts and options, however, are not deemed to constitute selling
securities short);
(5) borrow money other than from banks or other portfolios of MAS Funds,
provided that a portfolio may borrow from banks or other portfolios of MAS Funds
so long as such borrowing is not inconsistent with the 1940 Act or the rules,
regulations, interpretations or orders of the SEC and its staff thereunder; or
purchase additional securities when borrowings exceed 5% of total (gross)
assets;
(6) pledge, mortgage or hypothecate assets in an amount greater than 50% of its
total assets, provided that each portfolio may segregate assets without limit in
order to comply with the requirements of Section 18(f) of the 1940 Act and
applicable rules, regulations or interpretations of the SEC and its staff;
(7) invest more than an aggregate of 15% of the net assets of the portfolio,
determined at the time of investment, in illiquid securities provided that this
limitation shall not apply to any investment in securities that are not
registered under the 1933 Act but that can be sold to qualified institutional
investors in accordance with Rule 144A under the 1933 Act and are determined to
be liquid securities under guidelines or procedures adopted by the Board of
Trustees;
(8) invest for the purpose of exercising control over management of any company;
and
(9) invest its assets in securities of any investment company, except as
permitted by the 1940 Act or the rules, regulations, interpretations or orders
of the SEC and its staff thereunder.
Unless otherwise indicated, if a percentage limitation on investment or
utilization of assets as set forth above 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 portfolio's assets will not be considered a violation of the
restriction, and the sale of securities will not be required.
25
<PAGE>
MANAGEMENT OF THE FUND
Trustees and Officers
The Fund's officers, under the supervision of the Board of Trustees, manage the
day-to-day operations of the Fund. The Trustees set broad policies for the Fund
and choose its officers. The following is a list of the Trustees and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 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 Corp.; 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; Vice President and Treasurer, 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 1940 Act.
- ------------------------------------------------------------------------------
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.
26
<PAGE>
Remuneration of Trustees and Officers
The Fund pays each Trustee, who is not also an officer or interested person, a
fee for each Board of Trustees Meeting attended plus travel and other expenses
incurred in attending such meetings. Trustees who are also officers or
interested persons receive no remuneration for their service as Trustees. The
Fund's officers and employees are paid by the Adviser or Sub-Administrator.
The Fund maintains an unfunded Deferred Compensation Plan ("Plan") which allows
each independent Trustee to defer payment of his or her retainer and fees to a
later date. The Fund's policy is for each Trustee to defer at least twenty-five
percent (25%) of his or her retainer and fees received annually from the Fund.
To that end, the Plan requires that each Eligible Trustee (defined by the Plan
as a member of the Board of Trustees who is not an "interested person" of the
Fund, as such term is defined under Section 2(a)(19) of the 1940 Act) defer his
or her entire retainer, which is deemed a deferral of twenty-five percent (25%)
of the Trustee's retainer and fees received from the Fund for the year. The Plan
also permits the Eligible Trustee to defer all, or a portion, of the fees
received for attending meetings of the Board of Trustees throughout the year.
Amounts deferred by each Eligible Trustee are credited with a return equal to
what those amounts would have received if they had been invested in portfolios
of the Fund selected by that Trustee. Any deferred amounts will not be available
to Eligible Trustees for a period of three (3) or more years and distributions
may not be deferred beyond the Eligible Trustee's membership on the Board of
Trustees. Distributions to an Eligible Trustee are either in the form of a lump
sum or equal annual installments over a period of five (5) years and commence
within ninety (90) days after the last date during the deferral period on which
the Fund makes a valuation of the Eligible Trustee's deferred compensation. The
Fund intends that the Plan shall be maintained at all times on an unfunded basis
for federal income tax purposes under the Internal Revenue Code of 1986. The
rights of an Eligible Trustee and the beneficiaries to the amounts held under
the Plan are unsecured and such amounts are subject to the claims of the
creditors of the Fund. The Plan became effective May 23, 1996. There were no
payments under the Plan during the fiscal year ended September 30, 1997.
As of the fiscal year ended September 30, 1997, the Trustees and officers of the
Fund owned, in the aggregate, less than 1% of the outstanding shares of the
Fund. The aggregate compensation paid by the Fund to each of the Trustees during
its fiscal year ended September 30, 1997 is set forth below.
<TABLE>
<CAPTION>
Aggregate Pension or Benefits
Compensation from Accrued as Part of Total Compensation
Name of Trustee the Fund# Fund Expenses from the Fund
- --------------- --------- ------------- -------------
<S> <C> <C> <C>
Thomas L. Bennett* -0- -0- -0-
Thomas P. Gerrity $57,000## $64,942 $57,000
Joseph P. Healey $57,000## $30,173 $57,000
Joseph J. Kearns $57,000## $60,102 $57,000
C. Oscar Morong, Jr. $57,000## $89,534 $57,000
Vincent R. McLean $57,000## $96,238 $57,000
</TABLE>
27
<PAGE>
* Trustee Bennett is deemed to be an "interested person" of the Fund as that
term is defined in the 1940 Act.
# Includes amounts deferred from quarterly meeting fees at the election of
Trustees under the Deferred Compensation Plan.
## In addition, each Trustee has deferred his retainer of $12,000 under the
Deferred Compensation Plan.
Principal Holders of Securities
As of January 5, 1998 the following persons owned of record or beneficially 5%
or more of the shares of a portfolio:
Equity Portfolio: Los Angeles County Deferred Compensation & Thrift Plan,
Englewood, CO, 7.4%.
Value Portfolio: Charles Schwab & Co., Inc., Special Custody Account for the
Exclusive Benefit of Customers, San Francisco, CA, 13.7%; Donaldson Lufkin &
Jenrette, Jersey City, NJ, 6.0%.
Small Cap Value Portfolio: The J. Paul Getty Trust, c/o The Northern Trust
Company, Chicago, IL, 10.6%; The Northern Trust Company, FBO Silicon Graphics,
Chicago, IL, 9.5%; Fishnet & Company, FBO The Hearst Foundation, Boston, MA,
5.1%.
Mid Cap Growth Portfolio: The J. Paul Getty Trust, c/o The Northern Trust
Company, Chicago, IL, 23.5%; Morgan Stanley, c/o MAS Team, Boston, MA, 6.2%; MAC
& Co., Pittsburgh, PA, 5.4%.
Domestic Fixed Income Portfolio: Fleet National Bank, Rochester, NY, 11.7%; The
Philadelphia Orchestra Unrestricted Endowment Fund, Philadelphia, PA, 11.0%;
Saxon & Company, FBO Weirton Medical Center Retirement Income Plan,
Philadelphia, PA, 9.2%; Strafe & Co., Marion General Hospital Retirement Plan,
Westerville, OH, 9.0%; Paintmakers Money Accumulation Pension Plan-B, Portland,
OR, 8.6%; Patterson & Co., c/o CoreStates Bank, N.A., Philadelphia, PA, 6.8%;
Key Trust Danis Industries, Cleveland, OH, 6.2%; Delta Dental Plan of NH, Inc.,
Concord, NH, 5.9%.
Cash Reserves Portfolio: The Northern Trust Company, Chicago, IL, 32.3%; The
Taft School, Watertown, CT, 13.1%; Skadden ARPS Slate Meagher & Flom LLP, New
York, NY, 11.2%; Association for Information and Image Management, Silver
Spring, MD, 5.2%.
International Equity Portfolio: Western Metal Industry, c/o Miller Andersen &
Sherrerd, West Conshohocken, PA, 11.8%; Ministers & Missionaries Benefit Board
of American Baptist Churches, New York, NY, 11.0%; Carnegie Corporation of New
York, New York, NY, 6.8%; Puerto Rico Telephone Company Pension Plan, San Juan,
PR, 6.3%.
Fixed Income Portfolio II: Diocese of Camden, Camden, NJ, 10.4%; Bankers Trust
Co., Jersey City, NJ, 9.9%; Board of Trustees of Sheet Metal Workers Local #100
Pension Plan, Suitland, MD, 9.5%; The Northern Trust Company, Chicago, IL, 6.5%;
Saul & Co., c/o First Union National Bank, Charlotte, NC, 6.2%.
High Yield Securities Portfolio: Charles Schwab & Co., Inc., Special Custody
Account for the Exclusive Benefit of Customers, San Francisco, CA, 8.5%; Western
Metal Industry, c/o Miller Andersen & Sherrerd, West Conshohocken, PA, 7.0%;
Donaldson Lufkin & Jenrette, Jersey City, NJ, 6.2%; Armco Master Pension Trust,
Pittsburgh, PA, 5.3%.
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<PAGE>
Special Purpose Fixed Income Portfolio: Robertson Research Fund, Cold Spring
Harbor, NY, 5.2%.
Limited Duration Portfolio: Bankers Trust Company, Los Angeles, CA, 14.4%; Boys
& Girls Club of America Pension Trust, Atlanta, GA, 11.9%; Citibank, NA,
Fieldcrest Cannon Hourly Retirement Plan, Tampa, FL, 8.6%; Northern California
Bakery Drivers Security Fund, Alameda, CA 7.0%; Batrus & Co., c/o Bankers Trust
Company, New York, NY, 6.4%; Sheet Metal Workers Local # 100, Washington, DC,
5.8%.
Mortgage-Backed Securities Portfolio: Northwestern University Investment
Department, Evanston, IL, 30.6%; John S. Donovan, Trustee for Cives Corporation
Savings and Profit-Sharing Retirement Trust, Roswell, GA, 25.3%; The Paper Magic
Group, Inc., Scranton, PA, 16.3%; Melhorn & Co., c/o PNC Bank 641 Teamster
Pension, Philadelphia, PA 16.3%.
International Fixed Income Portfolio: Armco Master Pension Trust, Pittsburgh,
PA, 16.4%; CoreStates Bank, Childrens Hospital, Philadelphia, PA, 15.5%;
Northern Trust Co. as Custodian FBO: The J. Paul Getty Trust, Chicago, IL,
12.7%; The Skillman Foundation, Detroit, MI, 11.4%; Western Metal Industry
Pension Fund, c/o Miller Anderson & Sherrerd, West Conshohocken, PA, 9.6%;
Syntex (U.S.A.) Inc., Pension Trust, Palo Alto, CA, 6.7%; Chemical Bank as
Custodian for Smithsonian Institution, New York, NY, 6.1%; Wellesley College,
Wellesley, MA, 5.4%.
Emerging Markets Value Portfolio: Ministers & Missionaries Benefit Board of the
American Baptist Churches, New York, NY, 34.9%; Chemical Bank as Custodian for
Smithsonian Institution, New York, NY, 33.0%; Richard B. Worley, c/o Miller
Anderson & Sherrerd, West Conshohocken, PA, 7.7%; Philadelphia Orchestra
Association, Employee Pension & Retirement Plan, Philadelphia, PA 6.0%.
PA Municipal Portfolio: Kenneth B. Dunn & Pamela R. Dunn, Bala Cynwyd, PA 20.7%;
R. & S. Roberts, Philadelphia, PA, 17.9%; Southwest National Bank of PA,
Greensburg, PA 11.7%; John J. F. Sherrerd, Bryn Mawr, PA, 9.3%; A. Morris
Williams, Jr. & Ruth W. Williams, Gladwyne, PA, 6.9%; Sanford C. Bernstein & Co.
Inc., FBO Cook Family Fund, New York, NY, 5.2%.
Municipal Portfolio: Bost &Co., FBO Union Electric Employees Benefit Trust for
Union Retirees, Pittsburgh, PA, 21.2%; Bost & Co., FBO Union Electric Employee
Benefit Trust for Management Retirees, Pittsburgh, PA, 12.2%; Batrus & Co., c/o
Bankers Trust Company, New York, NY, 8.6%; Robert A. Fox, Jenkintown, PA, 8.4%;
Jesse J. Thompson, Charlotte, NC, 8.4%.
Balanced Portfolio: Northern Trust Co., Chicago, IL, 30.2%; Wendel & Co.,
Trustee for A&P Savings Plan, New York, NY, 8.7%; Wendel & Co., c/o The Bank of
New York, New York, NY, 7.3%; Wendel & Co.,c/o The Bank of New York, New York,
NY, 6.7%; Wendel & Co., FAO Aramark Corporation, New York, NY, 5.9%; Fidelity
Investments Institutional Operations Co., Covington, KY, 6.5%.
Global Fixed Income Portfolio: The Charles A. Dana Foundation, Inc., New York,
NY, 31.1%; "All for Her" Fund, c/o Rosary Inc., Albany, NY, 13.9%; Hudson-Webber
Foundation, Detroit, MI, 13.0%; Abilene Christian University, Abilene, TX,
10.2%; State Street Bank & Trust, Forest Oil Corporation Pension Trust, Boston,
MA, 8.4%; Rockefeller Family Fund Inc., New York, NY, 5.8%.
Intermediate Duration Portfolio: Southwest National Bank of PA, Greensburg, PA,
30.8%; Bankers Trust Company, the Los Angeles Hotel-Restaurant Employer Union
Welfare Fund, Los Angeles, CA, 19.2%; Jaffe Foundation, Suffern, NY, 11.5%;
Northumberland County Employees Retirement Fund, Altoona, PA, 8.1%; Nyack
Hospital, Nyack, NY, 6.5%.
29
<PAGE>
Multi-Asset-Class-Portfolio: Albany Medical College, Albany, NY, 17.8%; Chase
Manhattan Bank, Milbank Tweed Hadley & McCloy Master trust, Brooklyn, NY, 11.5%;
The Library Company of Philadelphia, Philadelphia, PA, 8.7%; Wachovia Bank, NA,
The W-S Foundation, Winston-Salem, NC, 5.3%; The National Center for State
Courts, Williamsburg, VA, 5.2%.
Advisory Foreign Fixed Income Portfolio: Minnesota State Board of Investments,
St. Paul, MN, 8.4%; Ford Motor Company Master Trust, Dearborn, MI, 7.0%; Kaiser
Foundation, Oakland, CA, 6.0%.
Mid Cap Value Portfolio: Charles Schwab & Co., Inc., Special Custody Account for
the Exclusive Benefit of Customers, San Francisco, CA, 10.7%; Georgetown
Memorial Hospital Funded Depreciation Account, Georgetown, SC, 9.3%; Fishnet &
Co., Boston, MA, 7.8%; The Chase Manhattan Bank, FAO Hearst Corporation, New
York, NY, 7.8%; Berklee College of Music, Boston, MA, 7.0%; The Northern Trust
Company, FBO Morgan Stanley Plan, Chicago, IL, 5.3%.
Advisory Mortgage Portfolio: Ford Motor Company Master Trust, Dearborn, MI,
9.8%; Public School Teachers of Chicago, Chicago, IL, 5.1%.
Multi-Market Fixed Income Portfolio: Connelly Foundation, West Conshohocken, PA,
73.4%; The Greenwall Foundation, New York, NY, 18.0%; Paperworkers Union Local
#286, Philadelphia, PA, 5.1%.
The persons listed above as owning 25% or more of the outstanding shares of each
portfolio may be presumed to "control" (as that term is defined in the 1940 Act)
such portfolios. As a result, those persons would have the ability to vote a
majority of the shares of the portfolios on any matter requiring the approval of
shareholders of such portfolios.
DISTRIBUTION PLANS
The Fund's Distribution Plan provides that the Adviser Class Shares will pay MAS
Fund Distribution, Inc. (the "Distributor") an annualized fee of .25% of the
average daily net assets of each portfolio attributable to Adviser Class Shares,
which the Distributor can use to compensate broker/dealers and service providers
which provide distribution services to Adviser Class Shareholders or their
customers who beneficially own Adviser Class Shares.
The Fund has adopted the Distribution Plan in accordance with the provisions of
Rule 12b-1 under the 1940 Act which regulates circumstances under which an
investment company may directly or indirectly bear expenses relating to the
distribution of its shares. Continuance of the Plan must be approved annually by
a majority of the Trustees of the Fund and the Trustees who are not "interested
persons" of the Fund within the meaning of the 1940 Act. The Plan requires that
quarterly written reports of amounts spent under the Plan and the purposes of
such expenditures be furnished to and reviewed by the Trustees. The Plan may not
be amended to increase materially the amount which may be spent thereunder
without approval by a majority of the outstanding Adviser Class Shares of the
Fund. All material amendments of the Plan will require approval by a majority of
the Trustees of the Fund and of the Trustees who are not "interested persons" of
the Fund. For the fiscal year ended September 30, 1997, the Mid Cap Growth,
Value, Fixed Income, High Yield and Balanced Portfolios paid $665, $201,647,
$67,500, $3,009 and $37,084, respectively, in distribution fees pursuant to the
Distribution Plan. Other than $4,492 of fees retained by the Distributor, fees
paid to the Distributor during the fiscal year were used to reimburse
third-parties for distribution-related services performed on behalf of the Fund.
30
<PAGE>
SHAREHOLDER SERVICE AGREEMENT
The Fund has entered into a Shareholder Service Agreement with the Distributor
whereby the Distributor will compensate service providers who provide certain
services to clients who beneficially own Investment Class shares of the
portfolios described in the Investment Class prospectus. Each portfolio will pay
to the Distributor a fee at the annual rate of .15% of the average daily net
assets of such portfolio attributable to the shares serviced by the service
provider, which fee will be computed daily and paid monthly. During the fiscal
year ended September 30, 1997, the Fund paid $61, 244 to compensate the
Distributor under this Shareholder Service Agreement.
INVESTMENT ADVISER
Under an Investment Advisory Agreement ("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 for investment securities.
As compensation for the services rendered by the Adviser under the Agreement and
the assumption by the Adviser of the expenses related thereto (other than the
cost of securities purchased for the portfolios and the taxes and brokerage
commissions, if any, payable in connection with the purchase and/or sale of such
securities), each portfolio pays the Adviser an advisory fee calculated by
applying a quarterly rate, based on the following annual percentage rates, to
the portfolio's average daily net assets for the quarter:
Rate
----
Emerging Markets Value Portfolio 0.750%
Equity Portfolio 0.500
Growth Portfolio 0.500
International Equity Portfolio 0.500
Mid Cap Growth Portfolio 0.500
Mid Cap Value Portfolio 0.750
Small Cap Value Portfolio 0.750
Value Portfolio 0.500
Cash Reserves Portfolio 0.250
Domestic Fixed Income Portfolio 0.375
Fixed Income Portfolio 0.375
Fixed Income II Portfolio 0.375
Global Fixed Income Portfolio 0.375
Multi-Market Fixed Income Portfolio 0.450
High Yield Portfolio 0.375
Intermediate Duration Portfolio 0.375
International Fixed Income Portfolio 0.375
Limited Duration Portfolio 0.300
Mortgage-Backed Securities Portfolio 0.375
Municipal Portfolio 0.375
PA Municipal Portfolio 0.375
Special Purpose Fixed Income Portfolio 0.375
Balanced Portfolio 0.450
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<PAGE>
Multi-Asset-Class Portfolio 0.650
Balanced Plus Portfolio 0.550
Advisory Foreign Fixed Income Portfolio 0.375
Advisory Mortgage Portfolio 0.375
In cases where a shareholder of any of the portfolios has an investment
counseling relationship with the Adviser, the Adviser may, at its discretion,
reduce the shareholder's investment counseling fees by an amount equal to the
pro-rata advisory fees paid by the Fund. This procedure will be utilized with
clients having contractual relationships based on total assets managed by Miller
Anderson & Sherrerd, LLP to avoid situations where excess advisory fees might be
paid to the Adviser. In no event will a client pay higher total advisory fees as
a result of the client's investment in the Fund. In addition, the Adviser has
voluntarily agreed to waive its advisory fees and/or reimburse certain expenses
to the extent necessary, if any, to keep total annual 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, Advisory Foreign Fixed Income and Advisory
Mortgage Portfolios from exceeding 1.180%, .320%, .500%, .500%, .500%, .580%,
.150% and .080% of its average daily net assets, respectively. With respect to
the Investment Class and the Adviser Class of the Multi-Asset-Class Portfolio,
the Adviser is, on a voluntary basis, waiving its fees and/or reimbursing
certain expenses. The fee waivers and expense reimbursements for the Investment
Class and Adviser Class of the Multi-Asset-Class Portfolio are voluntary and
may be discontinues at any time at the Adviser's discretion. With respect to the
Institutional Class of the Multi-Asset-Class Portfolio, the Adviser has
voluntarily agreed to waive its advisory fees and/or reimburse certain expenses
to keep total operating expenses from exceeding 0.780%.
For the fiscal years ended September 30, 1995, 1996 and 1997, the Fund paid the
following advisory fees:
<TABLE>
<CAPTION>
Advisory Fees Paid Advisory Fees Waived
1995 1996 1997 1995 1996 1997
Portfolio (000) (000) (000) (000) (000) (000)
- --------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets Value Portfolio $ 85 $ 286 $ 195 $ 52 $ 42 $ 30
Equity Portfolio 6,840 7,785 6,928 0 0 0
Growth Portfolio * * * * * *
International Equity Portfolio 5,437 3,458 3,236 0 0 0
Mid Cap Growth Portfolio 1,504 1,986 1,961 0 0 0
Mid Cap Value Portfolio 0 188 896 14 46 28
Small Cap Value Portfolio 2,683 3,464 5,161 0 0 0
Value Portfolio 5,078 7,716 14,010 0 0 0
Cash Reserves Portfolio 51 138 166 39 52 65
Domestic Fixed Income Portfolio 75 257 372 23 8 11
Fixed Income Portfolio 4,893 5,917 9,431 0 0 0
Fixed Income II Portfolio 567 773 776 0 0 0
Global Fixed Income Portfolio 190 205 289 0 0 0
Multi-Market Fixed Income Portfolio * * * * * *
High Yield Portfolio 764 1,073 1,558 0 0 0
Intermediate Duration Portfolio 57 52 144 17 18 23
International Fixed Income Portfolio 395 555 549 0 0 0
Limited Duration Portfolio 206 351 404 11 0 4
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Mortgage-Backed Securities Portfolio 348 177 173 5 21 22
Municipal Portfolio 110 167 211 37 38 30
PA Municipal Portfolio 32 77 79 31 30 26
Special Purpose Fixed Income Portfolio 1,574 1,517 1,816 0 0 0
Balanced Portfolio 1,385 1,521 1,527 0 0 0
Multi-Asset-Class Portfolio 220 635 797 100 112 126
Balanced Plus Portfolio * * * * * *
Advisory Foreign Fixed Income Portfolio 0 1,933 0 1,631 1,933 713
Advisory Mortgage Portfolio 0 6,056 0 1,711 6,056 9,155
</TABLE>
* Not in operation during the period.
The Agreement continues for successive one year periods, only if each renewal is
specifically approved by a vote of the Fund's Board of Trustees, including the
affirmative votes of a majority of the Trustees who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of any such party
in person at a meeting called for the purpose of considering such approval. In
addition, the question of continuance of the Agreement may be presented to the
shareholders of the Fund; in such event, continuance shall be effected only if
approved by the affirmative vote of a majority of the outstanding voting
securities of each portfolio of the Fund. If the holders of any portfolio fail
to approve the Agreement, the Adviser may continue to serve as investment
adviser to each portfolio which approved the Agreement, and to any portfolio
which did not approve the Agreement until new arrangements have been made. The
Agreement is automatically terminated if assigned, and may be terminated by any
portfolio without penalty, at any time, (1) by vote of the Board of Trustees or
by vote of the outstanding voting securities of the portfolio or (2) on sixty
(60) days' written notice to the Adviser, or (3) by the Adviser upon ninety (90)
days' written notice to the Fund.
The Fund bears all of its own costs and expenses, including but not limited to:
services of its independent accountants, its administrator and dividend
disbursing and transfer agent, legal counsel, taxes, insurance premiums, costs
incidental to meetings of its shareholders and Trustees, the cost of filing its
registration statements under federal and state securities laws, reports to
shareholders, and custodian fees. These Fund expenses are, in turn, allocated to
each portfolio, based on their relative net assets. Each portfolio bears its own
advisory fees and brokerage commissions and transfer taxes in connection with
the acquisition and disposition of its investment securities.
ADMINISTRATION
MAS also serves as Administrator to the Fund pursuant to an Administration
Agreement dated as of November 18, 1993. Chase Global Funds Services Company
(formerly Mutual Fund Services Company, or MFSC), an affiliate of The Chase
Manhattan Bank, serves as transfer agent and provides fund accounting and other
services pursuant to a sub-administration agreement.
For the fiscal years ended September 30, 1995, 1996 and 1997, the Fund paid the
following administrative fees:
Administrative Fees Paid
1995 1996 1997
(000) (000) (000)
--------------------------------
Emerging Markets Value Portfolio $ 14 $ 38 $ 24
Equity Portfolio 1,094 1,246 1,136
Growth Portfolio * * *
International Equity Portfolio 870 553 544
33
<PAGE>
Mid Cap Growth Portfolio 241 318 314
Mid Cap Value Portfolio 1 20 123
Small Cap Value Portfolio 286 369 550
Value Portfolio 812 1,235 2,285
Cash Reserves Portfolio 29 44 74
Domestic Fixed Income Portfolio 21 55 82
Fixed Income Portfolio 1,044 1,262 2,030
Fixed Income II Portfolio 121 165 165
Global Fixed Income Portfolio 41 44 62
Multi-Market Fixed Income Portfolio * * *
High Yield Portfolio 163 229 356
Intermediate Duration Portfolio 16 11 36
International Fixed Income Portfolio 84 118 117
Limited Duration Portfolio 58 93 109
Mortgage-Backed Securities Portfolio 75 38 42
Municipal Portfolio 31 36 51
PA Municipal Portfolio 13 16 22
Special Purpose Fixed Income Portfolio 336 323 414
Balanced Portfolio 246 271 280
Multi-Asset-Class Portfolio 57 113 143
Balanced Plus Portfolio * * *
Advisory Foreign Fixed Income Portfolio 357 412 152
Advisory Mortgage Portfolio 374 1,292 1,954
* Not in operation during the period.
DISTRIBUTOR FOR FUND
MAS Fund Distribution, Inc. (the "Distributor"), a wholly-owned subsidiary of
the Adviser, with its principal office at One Tower Bridge, West Conshohocken,
Pennsylvania 19428, distributes the shares of the Fund. Under the Distribution
Agreement, the Distributor, as agent of the Fund, agrees to use its best efforts
as sole distributor of the Fund's shares. The Distribution Agreement continues
in effect so long as such continuance is approved at least annually by the
Fund's Board of Trustees, including a majority of those Trustees who are not
parties to such Distribution Agreement nor interested persons of any such party.
The Distribution Agreement provides that the Fund will bear the costs of the
registration of its shares with the SEC and various states and the printing of
its prospectuses, statements of additional information and reports to
shareholders.
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 of the Fund as required by the 1940 Act. Morgan
Stanley Trust Company is an affiliated person, as defined in the 1940 Act, of
the Adviser and is compensated for its services as custodian on a per account
basis plus out of pocket expenses.
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 so doing, the Adviser will consider all matters it deems
relevant, including the following: the Adviser's knowledge of negotiated
commission rates and spreads currently available; the nature of the security or
instrument being traded; the size and type of the transaction; the nature and
character of the markets for the security or instrument to be purchased or sold;
the desired timing of the transaction; the activity existing and expected in the
market for the particular security or
34
<PAGE>
instrument; confidentiality; the execution, clearance, and settlement
capabilities of the broker or dealer selected and other brokers or dealers
considered; the reputation and perceived soundness of the broker or dealer
selected and other brokers or dealers considered; the Adviser's knowledge of any
actual or apparent operational problems of a broker or dealer; and the
reasonableness of the commission or its equivalent for the specific transaction.
Although the Adviser generally seeks competitive commission rates and dealer
spreads, a portfolio will not necessarily pay the lowest available commission on
brokerage transactions or markups on principal transactions. Transactions may
involve specialized services on the part of the broker or dealer involved, and
thereby justify higher commissions or markups than would be the case with other
transactions requiring more routine services. In addition, a portfolio may pay
higher commission rates or markups than the lowest available when the Adviser
believes it is reasonable to do so in light of the value of the research,
statistical, pricing, and execution services provided by the broker or dealer
effecting the transaction. The Adviser does not attempt to put a specific dollar
value on the research services rendered or to allocate the relative costs or
benefits of those services among its clients, believing that the research it
receives will help the Adviser to fulfill its overall duty to its clients. The
Adviser uses research services obtained in this manner for the benefit of all of
its clients, though each particular research service may not be used to service
each client. As a result, the Fund may pay brokerage commissions or markups that
are used, in part, to purchase research services that are not used to benefit
the Fund.
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. During the fiscal years
ended September 30, 1995, 1996 and 1997, the Fund paid brokerage commissions of
$13,457,075, $18,252,335 and $19,134,219, respectively.
Some securities considered for investment by each of the Fund's portfolios may
also be appropriate for other clients serviced 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 judgment, joint execution is in the best
interest of each participant and will result in best price execution.
Transactions involving commingled orders are allocated in a manner deemed to be
equitable to each account or portfolio. Although it is recognized that, in some
cases, joint execution of orders could adversely affect the price or volume of
the security that a particular account or fund may obtain, it is the opinion of
the Adviser and the Fund's Board of Trustees that combining such orders
generally will be more advantageous to the Fund than effecting such transactions
separately.
If purchases or sales of securities consistent with the investment policies of a
portfolio and one or more of these other clients serviced 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.
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, Discover & Co. As an indirect subsidiary of Morgan Stanley, Dean Witter,
Discover & Co., the Adviser is affiliated with certain U.S.-registered
broker-dealers and foreign broker-dealers (collectively, the AAffiliated
Brokers@). The Adviser may, in the exercise of its discretion under its
investment management agreement, effect transactions in securities or other
instruments for the Fund through the Affiliated Brokers. The Fund paid $132,104
in brokerage commissions to affiliates for $75,128,827 of brokered transactions
for the fiscal year ended September 30, 1997.
35
<PAGE>
ANNUAL TURNOVER
The annual turnover rate for each portfolio for the past two fiscal years ended
September 30 was as follows:
Portfolio 1996 1997
- --------- ---- ----
Emerging Markets Value 108% 64%
Equity 67% 85%
Growth N/A N/A
International Equity 78% 62%
Mid Cap Growth 141% 134%
Mid Cap Value 377% 184%
Small Cap Value 145% 107%
Value 53% 46%
Domestic Fixed Income 168% 217%
Fixed Income 162% 179%
Fixed Income II 165% 182%
Global Fixed Income 133% 137%
Multi-Market Fixed Income N/A N/A
High Yield 115% 96%
Intermediate Duration 251% 204%
International Fixed Income 124% 107%
Limited Duration 174% 130%
Mortgage-Backed Securities 116% 164%
Municipal 78% 54%
PA Municipal 51% 64%
Special Purpose Fixed Income 151% 198%
Balanced 110% 145%
Multi-Asset-Class 122% 141%
Balanced Plus N/A N/A
Advisory Mortgage 139% 144%
Advisory Foreign Fixed Income 170% 208%
N/A -- Portfolio had not commenced operations as of September 30, 1997.
GENERAL INFORMATION
Description of Shares and Voting Rights
The Declaration of Trust permits the Trustees 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 is offering shares of
twenty-seven portfolios.
The shares of each portfolio of the Fund are fully paid and non-assessable,
except as set forth below, 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. A shareholder of a class is entitled to one vote for each full
class share held (and a fractional vote for each fractional class share held) in
the shareholder's name on the books of the Fund. Shareholders of a class have
36
<PAGE>
exclusive voting rights regarding any matter submitted to shareholders that
relates solely to that class of shares (such as a distribution plan or service
agreement relating to that class), 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.
The Fund will continue without limitation of time, provided however that:
1) Subject to the majority vote of the holders of shares of any portfolio of the
Fund outstanding, the Trustees may sell or convert the assets of such portfolio
to another investment company in exchange for shares of such investment company,
and distribute such shares, ratably among the shareholders of such portfolio;
2) Subject to the majority vote of shares of any portfolio of the Fund
outstanding, the Trustees may sell and convert into money the assets of such
portfolio and distribute such assets ratably among the shareholders of such
portfolio; and
3) Without the approval of the shareholders of any portfolio, unless otherwise
required by law, the Trustees may combine the assets of any two or more
portfolios into a single portfolio so long as such combination will not have a
material adverse effect upon the shareholders of such portfolio.
Upon completion of the distribution of the remaining proceeds or the remaining
assets of any portfolio as provided in paragraphs 1), 2), and 3) above, that
portfolio shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest of
all parties shall be canceled and discharged with regard to that portfolio.
Dividends and Distributions
The Fund's policy is to distribute substantially all of each portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the federal excise tax on undistributed income
and capital gains (see discussion under "Dividends, Distributions and Taxes" in
the prospectus). The amounts of any income dividends or capital gains
distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
portfolio by an investor may have the effect of reducing the per share net asset
value of that portfolio by the per share amount of the dividend or distribution,
except for the Cash Reserves Portfolio. Furthermore, such dividends or
distributions, although in effect a return of capital, are subject to income
taxes as set forth in the prospectus.
As set forth in the prospectus, unless the shareholder elects otherwise in
writing, all dividends and distributions are automatically received in
additional shares of that portfolio of the Fund at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to the
record date that either the Income Option (income dividends in cash and capital
gains distributions in additional shares at net asset value) or the Cash Option
(both income dividends and capital gain distributions in cash) has been elected.
An account statement is sent to shareholders whenever a dividend or distribution
is paid.
Each portfolio of the Fund is treated as a separate entity (and hence, as a
separate "regulated investment company") for federal tax purposes. Any net
capital gains recognized by a portfolio are distributed to its investors without
need to offset (for federal income tax purposes) such gains against any net
capital losses of another portfolio.
37
<PAGE>
Shareholder and Trustee Liability
Under Pennsylvania law, shareholders of a trust such as the Fund may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. The Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation, or instrument
entered into or executed by the Fund or the Trustees, but this disclaimer may
not be effective in some jurisdictions or as to certain types of claims. The
Declaration of Trust further provides for indemnification out of the Fund's
property of any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
Pursuant to the Declaration of Trust, the Trustees may also authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios with distinct investment
objectives and policies and share purchase, redemption and net asset valuation
procedures) with such preferences, privileges, limitations and voting and
dividend rights as the Trustees may determine. All consideration received by the
Fund for shares of any additional series or class, and all assets in which such
consideration is invested, would belong to that series or class (subject only to
the rights of creditors of the Fund) and would be subject to the liabilities
related thereto. Pursuant to the 1940 Act shareholders of any additional series
or class of shares would normally have to approve the adoption of any advisory
contract relating to such series or class and of any changes in the investment
policies relating thereto.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
office.
PERFORMANCE INFORMATION
The Fund may from time to time quote various performance figures to illustrate
the past performance of its portfolios. Performance quotations by investment
companies are subject to rules adopted by the SEC, which require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC. An
explanation of the methods for computing performance follows.
Total Return
A portfolio's average annual total return is determined by finding the average
annual compounded rates of return over 1, 5, and 10 year periods (or, if
shorter, the period since inception of the portfolio) that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5, and 10 year period (or, if shorter, the period since inception of the
portfolio) and the deduction of all applicable Fund expenses on an annual basis.
When considering average total return figures for periods longer than one year,
it is important to note that a portfolio's annual total return for any one
period might have been greater or less than the average for the entire period.
Average annual total return is calculated according to the following formula:
38
<PAGE>
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the stated period
The average annual total return of each Institutional Class portfolio of the
Fund for the periods noted is set forth below:
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception
ended ended ended to Inception
9/30/97 9/30/97 9/30/97 9/30/97 Date
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Emerging Markets Value Portfolio 18.08 -- -- 15.71 02/28/95
Equity Portfolio 38.46 18.66 14.74 17.56 11/14/84
Growth Portfolio* N/A N/A N/A N/A N/A
International Equity Portfolio 23.16 12.30 -- 9.5 11/25/88
Mid Cap Growth Portfolio 28.05 22.77 -- 21.44 03/30/90
Mid Cap Value Portfolio 61.40 -- -- 42.61 12/30/94
Small Cap Value Portfolio 49.81 26.75 17.15 15.44 07/01/86
Value Portfolio 41.25 23.31 16.39 18.59 11/05/84
Cash Reserves Portfolio 5.32 4.48 -- 4.75 08/29/90
Domestic Fixed Income Portfolio 10.20 7.83 10.02 10.01 09/30/87
Fixed Income Portfolio 11.47 8.39 10.30 10.96 11/14/84
Fixed Income Portfolio II 10.58 7.69 -- 10.08 08/31/90
Global Fixed Income Portfolio 3.53 -- -- 7.36 04/30/93
Multi-Market Fixed Income Portfolio* N/A N/A N/A N/A N/A
High Yield Portfolio 19.90 14.03 -- 12.40 02/28/89
Intermediate Duration Portfolio 8.93 -- -- 8.87 10/03/94
International Fixed Income Portfolio 0.44 -- -- 6.81 04/29/94
Limited Duration Portfolio 6.98 5.19 -- 5.99 03/31/92
Mortgage-Backed Securities Portfolio 10.70 7.32 -- 7.50 01/31/92
Municipal Portfolio 8.47 -- -- 7.95 10/01/92
PA Municipal Portfolio 8.01 -- -- 8.28 10/01/92
Special Purpose Fixed Income Portfolio 11.78 8.90 -- 9.84 03/31/92
Balanced Portfolio 27.44 -- -- 14.53 12/31/92
Multi-Asset-Class Portfolio 26.50 -- -- 18.14 07/29/94
Balanced Plus Portfolio* N/A N/A N/A N/A N/A
Advisory Foreign Fixed Income Portfolio 14.08 -- -- 14.31 10/07/94
Advisory Mortgage Portfolio 11.03 -- -- 9.63 04/12/95
</TABLE>
* The Growth, Balanced Plus and Multi-Market Fixed Income Portfolios had not
commenced operations as of September 30, 1997.
The average annual total return of each Investment Class portfolio of the Fund
for the periods noted is set forth below:
<TABLE>
<CAPTION>
Inception
1 Year 5 Years 10 Years Inception Date of
ended ended ended to Investment
9/30/97 9/30/97 9/30/97 9/30/97 Class
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Equity Portfolio 38.12 -- -- 29.53 04/10/96
International Equity Portfolio 22.85 -- -- 16.24 04/10/96
Mid Cap Value Portfolio 61.05 -- -- 46.01 05/10/96
Value Portfolio 41.01 -- -- 32.09 05/06/96
Fixed Income Portfolio -- -- -- 10.07 10/15/96
High Yield Portfolio 19.77 -- -- 18.61 05/21/96
Special Purpose Fixed Income Portfolio 11.62 -- -- 10.83 04/10/96
Balanced Portfolio -- -- -- 18.40 04/04/97
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Multi-Asset-Class Portfolio 26.32 -- -- 21.18 06/10/96
Balanced Plus Portfolio* -- -- -- -- N/A
</TABLE>
* The Balanced Plus Portfolio had not commenced operations as of September 30,
1997.
The average annual total return of each Adviser Class portfolio of the Fund for
the periods noted is set forth below:
<TABLE>
<CAPTION>
Inception
1 Year 5 Years 10 Years Inception Date of
ended ended ended to Adviser
9/30/97 9/30/97 9/30/97 9/30/97 Class
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Mid Cap Growth Portfolio -- -- -- 27.99 01/31/97
Value Portfolio 40.87 -- -- 44.49 07/17/96
Fixed Income Portfolio -- -- -- 7.79 11/07/96
High Yield Portfolio -- -- -- 12.63 01/31/97
Balanced Portfolio -- -- -- 23.82 11/01/96
</TABLE>
The portfolios may also calculate total return on an aggregate basis which
reflects the cumulative percentage change in value over the measuring period.
Aggregate total returns may be shown by means of schedules, charts or graphs and
may include subtotals of the various components of total return (e.g. income
dividends or returns for specific types of securities such as industry or
country types). The formula for calculating aggregate total return can be
expressed as follows:
Aggregate Total Return = [ ( ERV ) - 1 ]
---------------------------
P
The aggregate total return of each portfolio for the periods noted is set forth
below. One year aggregate total return figures and portfolio inception dates are
reflected under the annual total return figures provided above.
5 Years
ended Inception to
9/30/97 9/30/97
------- ------------
Emerging Markets Value Portfolio N/A 45.86%
Equity Portfolio 135.21% 702.87
Growth Portfolio** -- --
International Equity Portfolio 78.62 123.96
Mid Cap Growth Portfolio 178.94 329.47
Mid Cap Value Portfolio N/A 165.50
Small Cap Value Portfolio 227.21 403.11
Value Portfolio 185.13 802.03
Cash Reserves Portfolio 24.52 38.96
Domestic Fixed Income Portfolio 45.76 159.92
Fixed Income Portfolio 49.60 281.77
Fixed Income Portfolio II 44.81 97.47
Global Fixed Income Portfolio N/A 36.90
Multi-Market Fixed Income Portfolio** -- --
High Yield Portfolio 92.83 172.84
Intermediate Duration Portfolio N/A 28.94
International Fixed Income Portfolio N/A 25.29
Limited Duration Portfolio 28.81 37.70
Mortgage-Backed Securities Portfolio 42.40 50.58
Municipal Portfolio N/A 46.59
PA Municipal Portfolio N/A 48.80
Special Purpose Fixed Income Portfolio 53.13 67.63
Balanced Portfolio N/A 90.44
Multi-Asset-Class Portfolio N/A 69.69
Balanced Plus Portfolio** -- --
Advisory Foreign Fixed Income Portfolio N/A 48.97
Advisory Mortgage Portfolio N/A 25.44
40
<PAGE>
* The above performance information relates solely to the Institutional Class.
Performance for the Investment Class and Adviser Class would be lower because
of the Shareholder Servicing fees and 12b-1 fees charged to the Investment
Class and Adviser Class, respectively.
** The Growth, Balanced Plus and Multi-Market Fixed Income Portfolios had not
commenced operations as of September 30, 1997.
The portfolios may also calculate a total return gross of all expenses which
reflects the cumulative percentage change in value over the measuring period
prior to the deduction of all fund expenses. The formula for calculating the
total return gross of all expenses can be expressed as follows:
Total Return Gross of all Expenses = ((ERV + E)/P) -1)
E = Fund expenses deducted from the ending redeemable value during the measuring
period.
The annualized since inception gross of fees returns of the Fund's portfolios
are set forth below:
Annualized Since
Inception
Period Ended:
9/30/97
MAS EQUITY FUNDS (Gross of Fees)*
Inception Date
- --------------
11/14/84 Equity Portfolio 18.29%
N/A Growth Portfolio --
11/05/84 Value Portfolio 19.33
07/01/86 Small Cap Value Portfolio 16.44
03/30/90 Mid Cap Growth Portfolio 22.17
11/25/88 International Equity Portfolio 10.22
12/30/94 Mid Cap Value Portfolio 43.71
02/28/95 Emerging Markets Value Portfolio 17.10
MAS FIXED INCOME FUNDS
11/14/84 Fixed Income Portfolio 11.50%
09/30/87 Domestic Fixed Income Portfolio 10.54
03/31/92 Special Purpose Income Portfolio 10.36
03/31/92 Limited Duration Portfolio 6.41
01/31/92 Mortgage-Backed Portfolio 8.12
02/28/89 High Yield Portfolio 13.07
10/01/92 Municipal Portfolio 8.56
10/01/92 PA Municipal Portfolio 8.82
04/30/93 Global Fixed Income Portfolio 8.02
N/A Multi-Market Fixed Income Portfolio --
04/29/94 International Fixed Income Portfolio 7.40
10/07/94 Advisory Foreign Fixed Income Portfolio 16.64
10/03/94 Intermediate Duration Portfolio 9.46
04/12/95 Advisory Mortgage Portfolio 9.72
MAS BALANCED FUNDS
12/31/92 Balanced Portfolio 15.16%
N/A Balanced Plus Portfolio --
07/29/94 Multi-Asset-Class Portfolio 18.90
*Annualized
41
<PAGE>
As of September 30, 1997, the Growth, Multi-Market Fixed Income and Balanced
Plus Portfolios had not commenced operations.
The Municipal and PA Municipal Portfolio may also calculate a total return which
reflects the cumulative percentage change in value over the measuring period
after the deduction of income taxes. The formula for calculating the total after
tax return can be expressed as follows:
Total After Tax Return = (((((ERV-M)/P) x T) + (M/P)) -1)
M = Portion of ending redeemable value which was derived from tax exempt income.
T = Applicable tax rate.
The after tax returns are as follows for the Municipal and PA Municipal
Portfolios for the period 10/1/92 (inception of the Funds) through 9/30/97:
Pre-tax return Post-tax return
Municipal Portfolio 7.95*/46.59** 7.86*/45.98**
PA Municipal Portfolio 8.28*/48.80** 7.98*/46.79**
*Annualized
**Cumulative
The tax rates used were 31% federal and 2.8% Pennsylvania. All Municipal
Interest was considered exempt from federal taxes and interest from treasuries
was considered exempt from Pennsylvania.
Yield
In addition to total return, each portfolio of the Fund (except the Cash
Reserves Portfolio) may quote performance in terms of a 30-day yield. The yield
formula provides for semiannual compounding, which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period. Methods used to calculate advertised yields are standardized
for all stock and bond mutual funds. However, these methods differ from the
accounting methods used by the portfolio to maintain its books and records,
therefore the advertised 30-day yield may not reflect the income paid to your
own account or the yield reported in the portfolios's reports to shareholders. A
portfolio may also advertise or quote a yield which is gross of expenses. The
yield figures provided will be calculated according to a formula prescribed by
the SEC and can be expressed as follows:
Yield = 2 [ ( (a-b/cd) + 1) 6 - 1 ]
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by a portfolio at a discount or premium,
the formula generally calls for amortization of the discount or
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premium; the amortization schedule will be adjusted monthly to reflect changes
in the market value of the debt obligations. The 30-day yield figures for each
of the Fund's fixed-income and equity portfolios is set forth below:
Period ending
9/30/97
-------
Emerging Markets Value Portfolio 1.02
Equity Portfolio 1.15
International Equity Portfolio 1.60
Mid Cap Growth Portfolio 0.00
Mid Cap Value Portfolio 0.08
Small Cap Value Portfolio 0.45
Value Portfolio 1.93
Domestic Fixed Income Portfolio 6.32
Fixed Income Portfolio 6.37
Fixed Income Portfolio II 6.66
Global Fixed Income Portfolio 5.30
High Yield Portfolio 8.60
Intermediate Duration Portfolio 6.34
International Fixed Income Portfolio 4.65
Limited Duration Portfolio 5.74
Mortgage-Backed Securities Portfolio 9.96
Municipal Portfolio 4.42
PA Municipal Portfolio 4.78
Special Purpose Fixed Income Portfolio 7.08
Balanced Portfolio 3.27
Multi-Asset-Class Portfolio 2.57
Advisory Foreign Fixed Income Portfolio 5.44
Advisory Mortgage Portfolio 7.39
As of September 30, 1997, the Growth, Balanced Plus and Multi-Market Fixed
Income Portfolios had not commenced operations.
* The above performance information relates solely to the Institutional Class.
Performance for the Investment Class and Adviser Class would be lower because of
the shareholder servicing fees and 12b-1 fees charged to the Investment Class
and Adviser Class, respectively.
Yield of the Cash Reserves Portfolio
The current yield of the Cash Reserves Portfolio is calculated daily on a base
period return of a hypothetical account having a beginning balance of one share
for a particular period of time (generally 7 days). The return is determined by
dividing the net change (exclusive of any capital changes) in such account by
the value of the account at the beginning of the period and then multiplying it
by 365/7 to get the annualized current yield. The calculation of net change
reflects the value of additional shares purchased with the dividends by the
portfolio, including dividends on both the original share and on such additional
shares. An effective yield, which reflects the effects of compounding and
represents an annualizing of the current yield with all dividends reinvested,
may also be calculated for the portfolio by dividing the base period return by
7, adding 1 to the quotient, raising the sum to the 365th power, and subtracting
1 from the results.
Set forth below is an example, for purposes of illustration only, of the current
and effective yield calculations for the Cash Reserves Portfolio for the 7 day
base period ending September 30, 1997.
Period ending
9/30/97
-------
Value at beginning of period $1.00
Value at end of period $1.00
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Current yield 5.61%
Effective yield 5.46%
The net asset value per share of the Cash Reserves Portfolio is $1.00 and has
remained at that amount since the initial offering of the portfolio. The yield
of the portfolio will fluctuate. The annualizing of a week's dividend is not a
representation by the portfolio as to what an investment in the portfolio will
actually yield in the future. Actual yields will depend on such variables as
investment quality, average maturity, the type of instruments the portfolio
invests in, changes in interest rates on instruments, changes in the expenses of
the Fund and other factors. Yields are one basis investors may use to analyze
the portfolios of the Fund and other investment vehicles; however, yields of
other investment vehicles may not be comparable because of the factors set forth
in the preceding sentence, differences in the time periods compared and
differences in the methods used in valuing portfolio instruments, computing net
asset value and calculating yield.
The performance of a portfolio, as well as the composite performance of all
fixed-income portfolios and all equity portfolios, may be compared to data
prepared by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., the Donoghue Organization, Inc. or other independent services
which monitor the performance of investment companies, and may be quoted in
advertising in terms of their rankings in each applicable universe. In addition,
the Fund may use performance data reported in financial and industry
publications, including Barron's, Business Week, Forbes, Fortune, Investor's
Business Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall
Street Journal and USA Today.
COMPARATIVE INDICES
Each portfolio of the Fund may from time to time use one or more of the
following unmanaged indices for performance comparison purposes:
Consumer Price Index
The Consumer Price Index is published by the US Department of Labor and is a
measure of inflation.
Financial Times Actuaries World Ex US Index
The FT-A World Ex US Index is a capitalization-weighted price index, expressed
in dollars, after dividend withholding taxes, of foreign stock prices. This
index is calculated daily and reflects price changes in 24 major foreign equity
markets. It is jointly compiled by the Financial Times, Ltd., Goldman, Sachs &
Co., and County NatWest/Wood Mackenzie in conjunction with the Institute of
Actuaries and the Faculty of Actuaries. First Boston High Yield Index
The First Boston High Yield Index was constructed to mirror the public high
yield debt market. The index is a market weighted, trader priced index, tracked
by the First Boston Corporation. There are approximately 475 securities in the
index with a total market value of approximately $93 billion.
JP Morgan Traded Government Bond Index
The JP Morgan Traded Government Bond Index is designed to provide a
comprehensive measure of total return performance of the domestic Government
bond market of 13 countries. The index is maintained by JP Morgan Securities,
Inc. and includes only liquid issues.
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J.P. Morgan Emerging Markets Bond Index
The J.P. Morgan Emerging Markets bond Index is a market-weighted index composed
of all Brady Bonds outstanding and includes Argentina, Brazil, Bulgaria, Mexico,
Nigeria, the Philippines, Poland and Venezuela.
Lehman Brothers 5-Year Municipal Bond Index
Lehman Brothers 5-Year Municipal Bond Index is a total return performance
benchmark for the intermediate investment grade tax exempt bond market. the
index includes general obligation bonds, revenue bonds, insured bonds and
prefunded bonds with maturities between 4 and 6 years.
Lehman Brothers 10-Year Municipal
Lehman Brothers 10-Year Municipal Bond Index is a total return performance
benchmark for the long term, investment grade tax exempt bond market. The index
includes general obligation bonds, revenue bonds, insured bonds and prefunded
bonds with maturities between 8 and 12 years.
Lehman Brothers Aggregate Index
The Lehman Brothers Aggregate Index is a fixed income market value-weighted
index that combines the Lehman Brothers Government/Corporate Index and the
Lehman Brothers Mortgage-Backed Securities Index. It includes fixed rate issues
of investment grade (BBB) or higher, with maturities of at least one year and
outstanding par values of at least $100 million for U. S. Government issues and
$25 million for others.
Lehman Brothers Government/Corporate Index
The Lehman Brothers Government/Corporate Index is a combination of the
Government and Corporate Bond Indices. The Government Index includes public
obligations of the U. S. Treasury, issues of Government agencies, and corporate
debt backed by the U. S. Government. The Corporate Bond Index includes
fixed-rate nonconvertible corporate debt. Also included are Yankee Bonds and
nonconvertible debt issued by or guaranteed by foreign or international
governments and agencies. All issues are investment grade (BBB) or higher, with
maturities of at least one year and an outstanding par value of at least $100
million for U. S. Government issues and $25 million for others. Any security
downgraded during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of accrued income.
Lehman Brothers Intermediate Government/Corporate Index
The Lehman Brothers Intermediate Government/Corporate Index is a combination of
the Government and Corporate Bond Indices. All issues are investment grade (BBB)
or higher, with maturities of one to ten years and an outstanding par value of
at least $100 million for U. S. Government issues and $25 million for others.
The Government Index includes public obligations of the U. S. Treasury, issues
of Government agencies, and corporate debt backed by the U. S. Government. The
Corporate Bond Index includes fixed-rate nonconvertible corporate debt. Also
included are Yankee Bonds and nonconvertible debt issued by or guaranteed by
foreign or international governments and agencies. Any security downgraded
during the month is held in the index until month-end and then removed. All
returns are market value weighted inclusive of accrued income.
Lehman Brothers Long Municipal Bond Index
The Lehman Brothers Long Municipal Bond Index is a total return for the
long-term, investment-grade tax-exempt bond market for bonds. The index includes
municipal bonds with maturities of 22 years or more.
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Lehman Brothers Mortgage-Backed Securities Index
The Lehman Brothers Mortgage-Backed Securities Index includes fixed rate
mortgage securities backed by GNMA, FHLMC, and FNMA. Graduated Payment Mortgages
(GPM's) are included. All issues are AAA, with maturities of at least one year
and outstanding par values of at least $100 million. Returns are market value
weighted inclusive of accrued income.
Lipper Growth & Income Fund Index
The Lipper Growth & Income Fund Index is a net asset value weighted index of the
30 largest Funds within the Growth & Income investment objective. It is
calculated daily with adjustments for income dividends and capital gains
distributions as of the ex-dividend dates.
Lipper High Current Yield Fund Average
The Lipper High Current Yield Fund Average reports the average return of all the
Funds tracked by Lipper Analytical Services, Inc. classified as high yield
funds. The number of Funds tracked varies. As a result, reported returns for
longer time periods do not always match the linked product of shorter period
returns.
Salomon World Government Bond Index ex US
The Salomon World Government Bond Index ex US is designed to provide a
comprehensive measure of total return performance of the domestic government
bond markets of 12 countries outside the U.S. The index has been constructed
with the aim of choosing "an inclusive" universe of institutionally traded fixed
rate bonds. The selection of security types to be included in the index is made
with the aim of being as comprehensive as possible, while satisfying the
criterion of reasonable availability to domestic and international institutions
and the existence of complete pricing and market profile data.
International Finance Corporation Emerging Markets Index
The IFC Emerging Markets Index is an index designed to measure the total return
in either US or local currency terms of developing markets as defined by the
World Bank. The selection of stocks is made based on size, liquidity and
industry.
The weight given to any stock is determined by its market capitalization.
Lipper Money Market Average
The Lipper Money Market Average reports the average return of all the Funds
tracked by Lipper Analytical Services, Inc., classified as money market Funds
for any given period. The number of Funds tracked varies. As a result, reported
returns for longer time periods do not always match the linked product of
shorter period returns.
Merrill Lynch Corporate & Government Bond Index
The Merrill Lynch Corporate & Government Bond Index includes over 4,500 U.S.
Treasury, Agency and investment grade corporate bonds. The Index is calculated
daily and will be used from time to time in performance comparison for partial
month periods.
Morgan Stanley Capital International World ex USA Index
The Morgan Stanley Capital International World ex USA Index is a
capitalization-weighted price index expressed in dollars. The index reflects the
performance of over 1,100 companies in 19 foreign equity markets. The index
includes dividends, net of foreign withholding taxes.
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Morgan Stanley Capital International EAFE Index
The Morgan Stanley Capital International EAFE Index is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morgan Stanley Capital International EAFE-GDP Weighted Index
The EAFE-GDP index is an arithmetic average of the performance of over 900
securities listed on the stock exchanges of countries in Europe, Australia and
the Far East. The index is weighted by the Grow Domestic Product of the various
countries in the index.
Morgan Stanley Capital International Emerging Markets Free Index
The MSCI Emerging Markets Free Index is a capitalization weighted index of over
800 stocks from 17 different emerging market countries.
Nasdaq Industrials Index
The Nasdaq Industrials Index is a measure of all Nasdaq National Market System
issues classified as industrial based on Standard Industrial Classification
codes relative to a company's major source of revenue. The index is exclusive of
warrants, and all domestic common stocks traded in the regular Nasdaq market
which are not part of the Nasdaq National Market System. The Nasdaq Industrials
Index is market value weighted.
Russell 1000
The Russell 1000 Index consists of the 1,000 largest of the 3,000 largest
stocks. Market capitalization is typically between $610 million and $85 billion.
The list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 1,000 stocks in the Russell 1000 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
Russell 2000
The Russell 2000 Index consists of the 2,000 smallest of the 3,000 largest
stocks. Market capitalization is typically between $610 million and $57 million.
The list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 2,000 stocks in the Russell 2000 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
Russell 2500
The Russell 2500 Index consists of the 2,500 smallest of the 3,000 largest
stocks. Market capitalization is typically between $1.7 billion and $57 million.
The list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 2,500 stocks in the Russell 2500 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
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Russell 3000
The Russell 3000 Index is a combination of the Russell 1000 Index and the
Russell 2000 Index.
Salomon 1-3 Year Treasury/Government Sponsored Index
The Salomon 1-3 Year Treasury/Government Sponsored Index includes U.S. Treasury
and agency securities with maturities one year or greater and less than three
years. Securities with amounts outstanding of at least $25 million are included
in the index.
Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index
The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index includes U.S.
Treasury, agency and investment grade (BBB or better) securities with maturities
one year or greater and less than three years. Securities with amounts
outstanding of at least $25 million are included in the index.
Salomon Broad Index
The Salomon Broad Index, also known as the Broad Investment Grade (BIG) Index,
is a fixed income market capitalization-weighted index, including U. S.
Treasury, agency, mortgage and investment grade (BBB or better) corporate
securities with maturities of one year or longer and with amounts outstanding of
at least $25 million. The government index includes traditional agencies; the
mortgage index includes agency pass-throughs and FHA and GNMA project loans; the
corporate index includes returns for 17 industry sub-sectors. Securities
excluded from the Broad Index are floating/variable rate bonds, private
placements, and derivatives (e. g., U. S. Treasury zeros, CMOs, mortgage
strips). Every issue is trader-priced at month-end and the index is published
monthly.
Salomon High-Yield Market Index
The Salomon High-Yield Market Index includes public, non-convertible corporate
bond issues with at least one year remaining to maturity and $50 million in par
amount outstanding which carry a below investment-grade quality rating from
either Standard & Poor's or Moody's rating services.
Salomon Mortgage Index
The Salomon Mortgage Index includes agency pass-throughs (GNMA, FHLMC, FNMA) and
FHA and GNMA project loans. Pools with remaining terms shorter than 25 years are
seasoned; pools with longer terms are classified as new. The index is published
monthly.
Salomon One To Three Year Treasury Index
The Salomon One To Three Year Treasury Index includes only U.S. Treasury Notes
and Bonds with maturities one year or greater and less than three years.
Salomon World Government Bond Index
The Salomon World Government Bond Index is designed to provide a comprehensive
measure of total return performance of the domestic Government bond market of
thirteen countries. The index has been constructed with the aim of choosing an
"all inclusive" universe of institutionally traded fixed-rate bonds. The
selection of security types to be included in the index is made with the aim of
being as comprehensive as possible, while satisfying the criterion of reasonable
availability to domestic and international institutions and the existence of
complete pricing and market profile data.
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S&P 500
The S&P 500 is a portfolio of 500 stocks designed to mimic the overall equity
market's industry weightings. Most, but not all, large capitalization stocks are
in the index. There are also some small capitalization names in the index. The
list is maintained by Standard & Poor's Corporation. It is market capitalization
weighted. Unlike the Russell indices, there are always 500 names in the S&P 500.
Changes are made by Standard & Poor's as needed.
S&P Mid Cap 400 Index
The S&P Mid Cap 400 Index consists of 400 domestic stocks chosen for market
size, liquidity, and industry group representation. It is also a market-value
weighted index and was the first benchmark of mid cap stock price movement.
S&P/BARRA Mid Cap 400 Growth Index
The S&P/BARRA Mid Cap 400 Growth Index is constructed by dividing the stocks in
the S&P MidCap 400 Index according to a single attribute: price-to-book ratios.
The MidCap 400 Growth Index is composed of firms with higher price-to-book
ratios. Like the MidCap 400, the MidCap 400 Growth Index is
capitalization-weighted, meaning that each stock is weighted in the appropriate
index in proportion to its market value.
S&P 500 Ex South Africa Index
The S&P 500 Ex South Africa Index is the same as the S&P 500 Index excluding
companies that are on the Investor Responsibility Research Center (IRRC) list of
companies doing business in South Africa. This index is maintained by Wilshire
Associates.
Wilshire 5000 Equity Index
The Wilshire 5000 Equity Index measures performance of all US headquartered
equity securities with readily available price data. Approximately 6,000
capitalization weighted security returns are used to calculate the index.
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FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended September 30, 1997,
including notes thereto and the report of Price Waterhouse LLP thereon are
incorporated herein by reference. A copy of the 1997 Annual Report will
accompany the delivery of this Statement of Additional Information. In the 1997
Annual Report, the Emerging Markets Value Portfolio is referred to as the
Emerging Markets Portfolio. The portfolio changed its name following the
printing of the Annual Report. In addition, the 1997 Annual Report includes
financial information for the Investment Class of the Special Purpose Fixed
Income Portfolio. Following the printing of the Annual Report, the Fund closed
the Investment Class of this portfolio. Accordingly, this portfolio has been
removed from the Investment Class prospectus.
APPENDIX-DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Bond Ratings
Excerpts from Moody's Investors Service, Inc.'s Corporate Bond Ratings:
Aaa: judged to be the best quality; carry the smallest degree of investment
risk; Aa--judged to be of high quality by all standards; A: possess many
favorable investment attributes and are to be considered as higher medium grade
obligations; Baa: considered as lower medium grade obligations, i.e., they are
neither highly protected nor poorly secured; Ba: B: protection of interest and
principal payments is questionable.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. C: Bonds which are rated C are lowest rated class of bonds
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's may apply numerical modifiers, 1,2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Excerpts from Standard & Poor's Corporation's Corporate Bond Ratings:
AAA: highest grade obligations; possess the ultimate degree of protection as to
principal and interest; AA: also qualify as high grade obligations, and in the
majority of instances differs from AAA issues only in small degree; A: regarded
as upper medium grade; have considerable investment strength but are not
entirely free from adverse effects of changes in economic and trade conditions.
Interest and principal are regarded as safe; BBB: regarded as borderline between
definitely sound obligations and those where the speculative element begins to
predominate; this group is the lowest which qualifies for commercial bank
investments.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI: The rating CI is reserved for income bonds on which no interest is being
paid. D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P's believes
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that such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus(+) or Minus(-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Excerpts from Fitch Investors Services, Inc. Corporate Bond Ratings:
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short term debt of these issuers is generally rated "-,+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on the these bonds, and "D"
represents the lowest potential for recovery.
Plus (+) Minus(-) Plus and minus signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the "DDD", "DD", or "D" categories.
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Excerpts from Duff & Phelps Corporate Bond Ratings:
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time of economic conditions.
A+, A, A-: Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+,BBB, BBB-: Below average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protections
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearage.
Description of Bond Ratings
Excerpts from Moody's Investors Service, Inc.'s Preferred Stock Ratings
aaa: An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks. aa: An issue which
is rated aa is considered a high-grade preferred stock. This rating indicates
that there is reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future. a: An issue which
is rated a is considered to be an upper medium grade preferred stock. While
risks are judged to be somewhat greater than in the aaa and aa classifications,
earnings and asset protection are, nevertheless expected to be maintained at
adequate levels. baa: An issue which is rated baa is considered to be medium
grade, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time. ba: an issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class. b: An
issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small. caa: An issue which is rated
caa is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payment. ca: An issue which is
rated ca is speculative in a high degree an is likely to be in arrears on
dividends with little
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likelihood of eventual payment. c: This is the lowest rated class of preferred
of preference stock. Issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1,2 and 3 in each rating
classification from "aa "through "b" in its preferred stock rating system. The
modifier 1 indicated that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range raking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
Excerpts from Standard & Poor's Corporation's Preferred Stock Ratings
AAA: This is the highest rating that may be assigned by S&P's to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations. AA: A preferred stock issue rated AA also qualifies as a high
quality fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA. A: An
issue rated A is backed by a sound capacity to pay the preferred stock
obligations , although it is somewhat more susceptible to the adverse effect of
the changes in circumstances and economic conditions. BBB: An issue rated BBB is
regarded as backed by an adequate capacity to pay the preferred stock
obligations. Whereas it normally exhibits adequate protection parameter, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to make payments for a preferred stock in this category than
for issues in the A category. BB,B,CCC: Preferred stock rated BB, B, and CCC are
regarded, on balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. Bb indicates the lowest degree of
speculation and CCC the highest degree of speculation. While such issues will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties of major risk exposures to adverse conditions. CC: The
rating CC is reserved for a preferred stock in arrears on dividends or sinking
fund payments but that is currently paying. C: A preferred stock rated C is a
non-paying issue. D: A preferred stock rated D is a non-paying issue with the
issuer in default on debt instruments.
Plus(+) or Minus(-): The ratings from "AA" for "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Excerpts from Fitch Investors Services, Inc. Preferred Stock Ratings:
AAA: Preferred stocks assigned this rating are the highest quality. Strong asset
protection, conservative balance sheet ratios, and positive indications of
continued protection of preferred dividend requirements are prerequisites for an
"AAA" rating.
AA: Preferred of preference issues assigned this rating are good quality. Asset
protection and coverages of preferred dividends are considered adequate and are
expected to be maintained.
A: Preferred of preference issues assigned this rating are good quality. Asset
protection and coverages of preferred dividends are considered adequate and are
expected to be maintained.
BBB: Preferred or preference issues assigned this rating are reasonably safe but
lack the protections of the "A" to "AAA" categories. Current results should be
watched for possible of deterioration.
BB: Preferred or preference issues assigned this rating are considered
speculative. The margin of protection is slim or subject to wide fluctuations.
The loner-term financial capacities of the enterprises cannot be predicted with
assurance.
B: Issues assigned this rating are considered highly speculative. While earnings
should normally cover dividends,
53
<PAGE>
directors may reduce or omit payment due to unfavorable developments, inability
to finance, or wide fluctuations in earnings.
CCC: Issues assigned this rating are extremely speculative and should be
assessed on their prospects in a possible reorganization. Dividend payments may
be in arrears with the status of the current dividend uncertain.
CC: Dividends are not currently being paid and may be in arrears. The outlook
for future payments cannot be assured.
C: Dividends are not currently being paid and may be in arrears. Prospects for
future payments are remote.
D: Issuer is in default on its debt obligations and has filed for reorganization
or liquidation under the bankruptcy law.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA", "CCC", "CC", "C", and "D"
categories.
54
<PAGE>
Statement of Net Assets
Value
Portfolio
Statement of Net Assets
Common Stocks (81.2%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Banks (7.6%)
Bank of New York Co. 684,085 $ 32,836
Chase Manhattan Corp. 581,817 68,654
Citicorp 290,480 38,906
Crestar Financial Corp. 329,268 15,434
First Union Corp. 625,682 31,323
Mellon Bank Corp. 606,696 33,217
Republic New York Corp. 271,601 30,861
Signet Banking Corp. 634,309 34,411
Group Total 285,642
Basic Resources (5.7%)
Cabot Oil & Gas Corp., Class A 690,842 18,610
Dow Chemical Co. 370,275 33,579
E.I. DuPont de Nemours & Co. 466,068 28,692
IMC Global, Inc. 591,694 20,857
Great Lakes Chemical Corp. 947,218 46,710
Inland Steel Industries, Inc. 671,500 14,689
Rohm & Haas Co. 365,456 35,061
Westvaco Corp. 483,420 17,433
Group Total 215,631
Consumer Durables (8.7%)
Dana Corp. 706,351 34,876
Ford Motor Co. 2,330,530 105,456
General Motors Corp. 872,309 58,390
Goodyear Tire & Rubber Co. 1,117,013 76,795
Owens Corning 937,341 34,213
Tupperware Corp. 686,576 19,310
Group Total 329,040
Consumer Services (0.3%)
Standard Register Co. 350,311 11,670
Credit & Finance/
Investment Companies (1.4%)
Capital One Financial Corp. 764,680 34,984
Federal National Mortgage Association 410,356 19,287
Group Total 54,271
Energy (8.1%)
Amoco Corp. 398,136 38,370
Atlantic Richfield Co. 478,956 40,921
British Petroleum plc ADR 447,442 40,633
El Paso Natural Gas Co. 423,506 25,649
MAPCO, Inc. 841,108 27,704
Phillips Petroleum Co. 795,595 41,073
Repsol SA ADR 743,210 32,237
Ultramar Diamond Shamrock Corp. 601,090 19,423
YPF SA ADR 1,105,038 40,748
Group Total 306,758
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Food, Tobacco & Other (4.5%)
IBP, Inc. 896,903 21,189
Philip Morris Co., Inc. 1,706,405 70,923
RJR Nabisco Holdings Corp. 1,427,490 49,070
Universal Foods Corp. 722,247 29,070
Group Total 170,252
Health Care (4.6%)
Beckman Instruments, Inc. 952,399 40,536
Bergen Brunswig Corp., Class A 533,908 21,557
Columbia/HCA Healthcare Corp. 1,172,161 33,700
* Foundation Health Corp. 1,092,185 34,950
Mallinckrodt, Inc. 748,851 26,959
* Maxicare Health Plans, Inc. 812,360 15,130
Group Total 172,832
Heavy Industry/Transportation (19.8%)
Aeroquip-Vickers, Inc. 1,416,976 69,432
* AMR Corp. 312,490 34,589
Burlington Northern Santa Fe, Inc. 221,165 21,370
Case Corp. 1,146,226 76,367
Caterpillar, Inc. 436,094 23,522
CSX Corp. 390,196 22,826
++ Cummins Engine Co., Inc. 1,383,486 107,998
Deere & Co. 367,802 19,769
Delta Air Lines, Inc. 402,300 37,892
Eaton Corp. 461,902 42,668
* FMC Corp. 392,265 34,814
Harnischfeger Industries, Inc. 1,200,101 51,304
Kennametal, Inc. 786,512 38,146
Olsten Corp. 1,505,360 27,943
Parker Hannifin Corp. 831,937 37,437
Raytheon Corp. 278,994 16,496
Tecumseh Products Co., Class A 585,476 32,604
TRW, Inc. 566,318 31,077
* UAL Corp. 236,352 20,001
Group Total 746,255
Insurance (7.5%)
Allstate Corp. 528,920 42,512
American General Corp. 529,055 27,445
Chubb Corp. 322,215 22,897
Everest Reinsurance Holdings, Inc. 900,091 36,904
Hartford Financial Services Group, Inc. 440,353 37,898
Old Republic International Corp. 816,200 31,832
ReliaStar Financial Corp. 821,574 32,709
TIG Holdings, Inc. 615,982 21,444
Transatlantic Holdings, Inc. 378,558 27,114
Group Total 280,755
Retail (5.4%)
Dillard's, Inc., Class A 704,809 30,879
* Federated Department Stores, Inc. 862,200 37,182
Russell Corp. 716,215 21,084
Springs Industries, Inc., Class A 661,418 34,725
* Toys 'R' Us, Inc. 965,551 34,277
V.F. Corp. 485,953 45,011
Group Total 203,158
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Technology (5.4%)
* Arrow Electronics, Inc. 257,500 14,935
International Business Machines Corp. 858,744 90,973
* Seagate Technology, Inc. 900,552 32,533
Tektronix, Inc. 495,678 33,427
* Western Digital Corp. 826,752 33,122
Group Total 204,990
Utilities (2.2%)
Cinergy Corp. 379,607 12,693
DTE Energy Co. 614,840 18,714
Duke Energy Corp. 314,623 15,554
Entergy Corp. 630,745 16,439
GPU, Inc. 538,004 19,301
OGE Energy Corp. 2,000 94
Group Total 82,795
Total Common Stocks (Cost $2,252,115) 3,064,049
CASH EQUIVALENTS (26.7%)
Face
Amount Value
(000) (000)+
----- ------
Short-term Investments
Held as Collateral for
Loaned Securities (7.8%) $295,614 295,614
Commercial Paper (12.2%)
American Express Credit Corp.
5.50%, 10/17/97 35,000 34,914
Asset Securitization Corp.
5.55%, 11/6/97 40,000 39,778
Associates Corp.
5.52%, 10/6/97 $ 50,000 49,962
Atlantic Asset Securitization Corp.
5.57%, 10/16/97 20,000 19,954
Barclays U.S. Funding Corp.
5.53%, 10/8/97 25,000 24,973
Canadian Imperial Holdings
5.54%, 10/30/97 40,000 39,822
Commercial Credit Corp.
5.50%, 10/2/97 25,000 24,996
5.50%, 10/27/97 25,000 24,901
Delaware Funding Corp.
5.53%, 10/14/97 50,000 49,900
Eiger Capital Corp.
5.55%, 11/5/97 43,375 43,141
ss. First Chicago Financial Corp.
5.51%, 10/16/97 (acquired 9/16/97, cost $22,149) 22,200 22,149
Societe Generale
5.51%, 10/23/97 25,000 24,916
5.52%, 10/17/97 20,000 19,951
Sony Capital Corp.
5.55%, 10/29/97 40,000 39,827
Group Total 459,184
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
<S> <C> <C>
Discount Note (3.0%)
Federal Home Loan Mortgage Corporation
10/30/97 75,000 74,977
Federal National Mortgage Association
0.00%, 10/30/97 40,000 39,824
Group Total 114,801
Repurchase Agreement (3.7%)
Chase Securities, Inc.
5.90%, dated 9/30/97, due 10/1/97, to
be repurchased at $138,187, collateralized
by various U.S. Government Obligations,
due 10/1/97-1/29/99, valued at $139,466 138,164 138,164
Total Cash Equivalents (Cost $1,007,763) 1,007,763
Total Investments (107.9%) (Cost $3,259,878) 4,071,812
</TABLE>
4
<PAGE>
Value
(000)+
------
Other Assets and Liabilities (-7.9%)
Cash 1
Dividends Receivable 4,171
Interest Receivable 23
Receivable for Fund Shares Sold 9,907
Other Assets 72
Payable for Investments Purchased (8,452)
Payable for Fund Shares Redeemed (1,270)
Payable for Investment Advisory Fees (4,491)
Payable for Administrative Fees (245)
Payable for Shareholder Servicing Fee-
Investment Class (4)
Payable for Distribution Fee-Adviser Class (39)
Payable for Trustees' Deferred Compensation Plan-Note F (57)
Payable for Daily Variation on Futures Contracts (1,450)
Collateral on Securities Loaned, at Value (295,614)
Other Liabilities (492)
(297,940)
NET ASSETS (100%) $ 3,773,872
INSTITUTIONAL CLASS
Net Assets
Applicable to 173,895,195 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 3,542,772
NET ASSET VALUE PER SHARE $ 20.37
INVESTMENT CLASS
Net Assets
Applicable to 1,465,899 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 29,847
NET ASSET VALUE PER SHARE $ 20.36
ADVISER CLASS
Net Assets
Applicable to 9,890,611 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 201,253
NET ASSET VALUE PER SHARE $ 20.35
Net Assets Consist of:
Paid in Capital $ 2,632,809
Undistributed Net Investment Income (Loss) 18,442
Undistributed Realized Net Gain (Loss) 306,739
Unrealized Appreciation (Depreciation) on:
Investment Securities 811,934
Futures 3,948
Net Assets $ 3,773,872
ss. Restricted Security-Total market value of restricted securities owned
at September 30, 1997 was $22,149 or 0.6% of net assets.
+ See Note A1 to Financial Statements.
* Non-income producing security.
++ A portion of these securities was pledged to cover margin requirements
for futures contracts.
ADR American Depositary Receipt
5
<PAGE>
Equity
Portfolio
Statement of Net Assets
Common Stocks (94.0%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Banks (3.6%)
BankBoston Corp. 203,200 $17,970
Citicorp 92,100 12,336
First Union Corp. 249,854 12,508
Wells Fargo & Co. 17,900 4,923
Group Total 47,737
Basic Resources (5.0%)
Boise Cascade Corp. 98,400 4,139
Bowater, Inc. 147,200 7,507
Champion International Corp. 330,100 20,115
E.I. DuPont de Nemours & Co. 307,000 18,900
Weyerhaeuser Co. 89,400 5,308
W.R. Grace & Co. 135,900 10,006
Group Total 65,975
Beverage & Personal Products (0.6%)
Coca-Cola Enterprises, Inc. 275,600 7,424
Consumer Durables (6.2%)
Ford Motor Co. 690,000 31,222
General Motors Corp. 350,917 23,490
Goodyear Tire & Rubber Co. 155,100 10,663
Lucas Varity plc ADR 411,700 15,619
Group Total 80,994
Consumer Services (5.9%)
* Clear Channel Communications, Inc. 234,700 15,226
* GTECH Holdings Corp. 154,100 5,269
* HFS, Inc. 298,600 22,227
News Corp. Ltd. ADR 354,900 6,366
Service Corp. International 321,500 10,348
Tele-Communications, Inc., Class A 524,400 10,750
* Tele-Communications Liberty Media Group, Class A 257,142 7,698
Group Total 77,884
Credit & Finance/
Investment Companies (3.4%)
American Express Co. 77,200 6,321
Bear Stearns Co., Inc. 194,000 8,536
CMAC Investment Corp. 90,700 4,864
Lehman Brothers Holdings, Inc. 85,000 4,558
SLM Holding Corp. 131,700 20,347
Group Total 44,626
Energy (6.2%)
Atlantic Richfield Co. 111,700 9,543
British Petroleum plc ADR 241,934 21,971
Coastal Corp. 150,200 9,200
Columbia Gas System, Inc. 116,100 8,127
Phillips Petroleum Co. 370,800 19,143
Repsol SA ADR 162,500 7,048
Texaco, Inc. 108,800 6,684
Group Total 81,716
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Food, Tobacco & Other (4.8%)
Philip Morris Cos., Inc. 1,111,270 46,187
RJR Nabisco Holdings Corp. 501,980 17,256
Group Total 63,443
Health Care (6.1%)
Aetna, Inc. 287,900 23,446
Baxter International, Inc. 140,800 7,357
Bristol-Myers Squibb Co. 166,072 13,743
Columbia/HCA Healthcare Corp. 214,205 6,158
* Health Management Associates, Class A 241,100 7,625
* Lincare Holdings, Inc. 156,000 7,868
Merck & Co., Inc. 78,600 7,855
SmithKline Beecham plc ADR 128,600 6,285
Group Total 80,337
Heavy Industry/Transportation (17.2%)
Aeroquip-Vickers, Inc. 120,800 5,919
Allied Signal, Inc. 166,800 7,089
* AMR Corp. 70,400 7,792
* Berkshire Hathaway, Inc. 149 6,675
Boeing Co. 132,870 7,233
Case Corp. 311,500 20,754
Cummins Engine Co., Inc. 388,800 30,351
Delta Air Lines, Inc. 14,700 1,384
Eaton Corp. 84,500 7,806
* FMC Corp. 164,229 14,575
Harnischfeger Industries, Inc. 118,300 5,057
Lockheed Martin Corp. 214,200 22,839
*@ PML, Inc. 125 --
Textron, Inc. 177,100 11,511
Union Pacific Corp. 162,650 10,186
United Technologies Corp. 372,600 30,181
Waste Management, Inc. 766,500 26,780
York International Corp. 223,100 9,984
Group Total 226,116
Insurance (5.4%)
Allstate Corp. 116,600 9,372
CIGNA Corp. 45,100 8,400
Exel Ltd. 197,900 11,787
Hartford Financial Services Group (The), Inc. 200,350 17,243
Loews Corp. 207,300 23,412
Group Total 70,214
Mid Cap Growth (4.3%)
* Advanced Fibre Communications, Inc. 15,800 648
* Allied Waste Industries, Inc. 11,800 226
* ASE Test Ltd. 4,200 356
At Home Corp., Series A 21,000 486
Bell Canada International, Inc. 13,900 262
* BioChem Pharmaceutical, Inc. 19,700 621
* BMC Software, Inc. 13,400 868
* Borders Group, Inc. 31,700 872
* Brightpoint, Inc. 10,100 468
Brylane, Inc. 7,100 326
* Cellular Communications International, Inc. 4,000 166
CIENA Corp. 12,500 619
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Cinar Films, Inc., Class B 19,400 740
Cintas Corp. 12,800 944
Coinstar, Inc. 22,100 287
Comcast Corp., Class A Special 34,800 896
Complete Business Solutions, Inc. 14,500 413
* CompUSA, Inc. 16,000 560
* Computer Horizons Corp. 14,000 507
Cott Corp. 39,400 399
CVS Corp. 13,800 785
* Cyberonics, Inc. 20,900 337
Danaher Corp. 15,600 905
Diamond Offshore Drilling, Inc. 9,700 535
* Digital Microwave Corp. 11,700 524
* Electronics for Imaging, Inc. 11,100 566
Estee Lauder Cos., Class A 14,900 689
* Fiserv, Inc. 17,550 770
* Florida Panthers Holdings, Inc. 3,900 92
Franklin Resources, Inc. 6,200 577
* Global Marine, Inc. 19,700 655
* Globalstar Telecommunications Ltd. 37,800 1,984
HBO & Co. 21,800 823
* Health Management Associates, Class A 49,195 1,556
Healthcare Recoveries, Inc. 20,900 470
* Heftel Broadcasting Corp., Class A 8,600 651
* Imax Corp. 25,500 666
* Inter-Tel, Inc. 12,000 636
Ionica Group plc ADR 15,000 280
* Jacor Communications, Inc. 12,000 530
J.D. Edwards & Co. 11,200 375
Jones Apparel Group, Inc. 11,400 616
J. Ray McDermott, S.A. 7,200 353
* Kemet Corp. 16,000 486
* Lincare Holdings, Inc. 31,600 1,594
* Loral Space & Communications 47,500 980
* MAPICS, Inc. 34,300 446
* McAfee Associates, Inc. 16,825 892
McDermott International, Inc. 8,600 314
* Metro Networks, Inc. 17,800 536
MicroFocus Group ADR 17,000 597
Money Store (The), Inc. 500 14
* Newbridge Networks Corp. 10,500 629
NEXTLINK Communications, Inc., Class A 9,200 221
* Office Depot, Inc. 14,800 299
* Orbotech Ltd. 9,600 554
* Orthodontic Centers
of America, Inc. 29,000 580
* Outdoor Systems, Inc. 21,900 575
* PanAmSat Corp. 14,200 612
* Pediatrix Medical Group, Inc. 9,800 432
* Peoplesoft, Inc. 13,400 801
Positron Fiber Systems Corp. 17,900 185
* Premier Parks, Inc. 14,800 559
ProBusiness Services, Inc. 2,700 52
Qwest Communications International, Inc. 14,600 673
* Republic Industries, Inc. 18,600 613
* Rexall Sundown, Inc. 16,000 730
* Robert Mondavi Corp., Class A 12,600 690
Santa Fe International Corp. 11,000 511
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Sapient Corp. 8,000 407
* Saville Systems Ireland plc ADR 5,800 407
* Sealed Air Corp. 9,300 511
* Security Capital Group Inc., Class B 7,200 248
Security Capital Industrial Trust 24,990 583
* Security Capital U.S. Realty 25,300 377
* Silicon Valley Group, Inc. 9,300 331
Sirrom Capital Corp. 23,600 1,224
* Stage Stores, Inc. 10,900 470
State Street Corp. 10,700 652
SunAmerica, Inc. 12,300 482
* Tele-Communications Liberty Media Group, Class A 30,058 900
* Tele-Communications, Inc., Class A 44,000 902
* Tellabs, Inc. 11,000 566
* Tel-Save Holdings, Inc. 23,400 563
* 3Com Corp. 22,475 1,152
Tidewater, Inc. 11,500 681
* Tommy Hilfiger Corp. 8,900 444
* Total Renal Care Holdings, Inc. 12,300 615
TV Azteca, SA de C.V. ADR 17,800 400
* U.S. Office Products Co. 12,100 427
* Uniphase Corp. 4,900 390
* Univision Communications, Inc., Class A 10,400 564
* Valassis Communications, Inc. 19,400 618
* Visio Corp. 10,900 455
Wesley Jessen VisionCare, Inc. 18,800 531
* Wind River Systems 9,300 384
* WorldCom, Inc. 27,050 957
Group Total 56,855
Retail (3.6%)
CVS Corp. 180,800 10,283
* Federated Department Stores, Inc. 265,800 11,463
Home Depot, Inc. 181,988 9,486
McDonald's Corp. 58,100 2,767
* Office Depot, Inc. 367,400 7,417
Sears, Roebuck & Co. 111,800 6,366
Group Total 47,782
Technology (8.7%)
* BMC Software, Inc. 220,100 14,252
* Cisco Systems, Inc. 197,500 14,430
Flextronics International Ltd. 5,500 258
Hewlett Packard Co. 300 21
Intel Corp. 99,400 9,176
* Microsoft Corp. 198,500 26,264
* Oracle Corp. 305,107 11,117
RSL Communications Ltd., Class A 10,800 238
* Sabre Group Holdings, Inc. 113,800 4,075
* Seagate Technology, Inc. 326,000 11,777
* 3Com Corp. 300,475 15,399
Xerox Corp. 83,600 7,038
Group Total 114,045
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Utilities (3.7%)
* Airtouch Communications, Inc. 140,600 4,982
Duke Energy Corp. 13,368 661
GTE Corp. 192,100 8,717
SBC Communications, Inc. 177,600 10,900
Sprint Corp. 211,000 10,550
* WorldCom, Inc. 374,189 13,237
Group Total 49,047
Value (9.3%)
Aeroquip-Vickers, Inc. 62,700 3,072
Allstate Corp. 19,981 1,606
American General Corp. 24,600 1,276
Amoco Corp. 13,600 1,311
* AMR Corp. 11,100 1,229
* Arrow Electronics Inc. 3,800 220
Atlantic Richfield Co. 19,600 1,675
Bank of New York Co. 32,000 1,536
Beckman Instruments, Inc. 34,800 1,481
Bergen Brunswig Corp., Class A 59,500 2,402
British Petroleum plc ADR 14,266 1,296
Burlington Northern Santa Fe, Inc. 8,800 850
Cabot Oil & Gas Corp., Class A 32,700 881
Capital One Financial Corp. 44,853 2,052
Case Corp. 38,200 2,545
Caterpillar, Inc. 25,800 1,392
Chase Manhattan Corp. 21,000 2,478
Chubb Corp. 17,600 1,251
Citicorp 16,900 2,264
Columbia/HCA Healthcare Corp. 21,400 615
Crestar Financial Corp. 66,526 3,118
CSX Corp. 32,100 1,878
Cummins Engine Co., Inc. 51,800 4,044
Deere & Co. 21,200 1,139
Dillard's, Inc., Class A 25,400 1,113
Dow Chemical Co. 11,600 1,052
E.I. DuPont de Nemours & Co. 24,000 1,477
Eaton Corp. 25,300 2,337
Entergy Corp. 36,367 948
Federal National Mortgage Association 14,000 658
First Union Corp. 16,600 831
* FMC Corp. 19,671 1,746
Ford Motor Co. 90,900 4,113
* Foundation Health Corp. 52,110 1,667
General Motors Corp. 39,132 2,619
Goodyear Tire & Rubber Co. 45,200 3,107
GPU, Inc. 39,800 1,428
Great Lakes Chemical Corp. 19,900 981
Harnischfeger Industries, Inc. 40,400 1,727
Hartford Financial Group,
(The), Inc. 16,100 1,386
IBP, Inc. 48,000 1,134
International Business Machines Corp. 39,200 4,153
Kennametal, Inc. 18,376 891
Mallinckrodt, Inc. 33,100 1,192
MAPCO, Inc. 41,100 1,354
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Maxicare Health Plans, Inc. 42,400 790
Mellon Bank Corp. 27,600 1,511
Old Republic International Corp. 34,200 1,334
Olsten Corp. 43,200 802
Parker Hannifin Corp. 35,250 1,586
Philip Morris Cos., Inc. 61,800 2,569
Phillips Petroleum Co. 25,600 1,322
Raytheon Corp. 19,100 1,129
ReliaStar Financial Corp. 29,800 1,186
Repsol SA ADR 30,400 1,319
Republic New York Corp. 12,900 1,466
RJR Nabisco Holdings Corp. 52,300 1,798
Rohm & Haas Co. 23,500 2,255
Russell Corp. 30,300 892
* Seagate Technology, Inc. 34,200 1,235
Signet Banking Corp. 48,727 2,643
Springs Industries, Inc., Class A 30,100 1,580
Standard Register Co. 22,200 740
Talbots, Inc. 33,200 948
Tecumseh Products Co., Class A 50,100 2,790
Tektronix, Inc. 30,900 2,084
TIG Holdings, Inc. 24,100 839
* Toys R Us, Inc. 41,700 1,480
Transatlantic Holdings, Inc. 16,800 1,203
TRW, Inc. 24,800 1,361
Tupperware Corp. 27,200 765
* UAL Corp. 14,600 1,235
Ultramar Diamond Shamrock Corp. 35,000 1,131
V.F. Corp. 26,300 2,436
* Western Digital Corp. 26,900 1,078
YPF SA ADR 46,200 1,704
Group Total 122,736
Total Common Stocks (Cost $935,035) 1,236,931
CASH EQUIVALENTS (13.7%)
Face
Amount
(000)
--------
Short-Term Investments Held as Collateral
for Loaned Securities (8.0%) $ 104,927 104,927
Discount Note (1.9%)
Federal Home Loan Mortgage Corporation
10/3/97 25,000 24,992
Repurchase Agreement (3.8%)
Chase Securities, Inc., 5.90%, dated 9/30/97, due 10/1/97, to be repurchased at
$49,571, collateralized by various U.S. Government Obligations, due
10/1/97-1/29/99 valued at $50,030 49,563 49,563
Total Cash Equivalents (Cost $179,482) 179,482
Total Investments (107.7%) (Cost $1,114,517) 1,416,413
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Other Assets and Liabilities (-7.7%)
Cash 1
Dividends Receivable 1,988
Interest Receivable 8
Receivable for Investments Sold 12,698
Receivable for Fund Shares Sold 323
Other Assets 45
Payable for Investments Purchased (5,450)
Payable for Fund Shares Redeemed (4,266)
Payable for Investment Advisory Fees (1,690)
Payable for Administrative Fees (86)
Payable for Trustees' Deferred Compensation Plan-Note F (41)
Collateral on Securities Loaned, at Value (104,927)
Other Liabilities (115)
(101,512)
NET ASSETS (100%) $ 1,314,901
Value
(000)+
------
INSTITUTIONAL CLASS
Net Assets
Applicable to 44,576,212 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 1,312,547
NET ASSET VALUE PER SHARE $ 29.45
INVESTMENT CLASS
Net Assets
Applicable to 80,011 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 2,354
NET ASSET VALUE PER SHARE $ 29.42
Net Assets Consist of:
Paid In Capital $ 670,052
Undistributed Net Investment Income (Loss) 4,070
Undistributed Realized Net Gain (Loss) 338,883
Unrealized Appreciation (Depreciation) on Investment Securities 301,896
Net Assets $ 1,314,901
</TABLE>
+ See Note A1 to Financial Statements.
* Non-income producing security.
@ Value is less than $500.
ADR American Depositary Receipt
12
<PAGE>
Statement of Net Assets
Small Cap Value
Portfolio
Statement of Net Assets
Common Stocks (95.9%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Banks (4.8%)
Bank United Corp., Class A 77,400 3,425
Banknorth Group, Inc. 20,400 1,114
* Coast Savings Financial, Inc. 61,000 3,199
Colonial BancGroup, Inc. 33,800 972
Cullen/Frost Bankers, Inc. 62,100 2,942
Eagle Financial Corp. 113,900 4,556
First Financial Corp. of Wisconsin 64,600 2,200
Long Island Bancorp, Inc. 68,100 3,201
Magna Group, Inc. 44,700 1,763
* Mechanics Savings Bank 76,600 2,011
ML Bancorp, Inc. 77,200 2,113
North Fork Bancorp., Inc. 80,700 2,340
* PFF Bancorp, Inc. 85,000 1,647
* Prime Bancshares, Inc. 17,600 334
* Redfed Bancorp, Inc. 110,000 1,932
Reliance Bancorp, Inc. 103,300 3,409
Trustco Bank Corp. 42,895 1,169
Union Planters Corp. 41,237 2,304
Whitney Holding Corp. 49,800 2,353
Group Total 42,984
Basic Resources (5.7%)
* ACX Technologies, Inc. 154,300 4,108
Agnico-Eagle Mines Ltd. 219,000 2,204
* Alumax, Inc. 98,200 4,014
Caraustar Industries, Inc. 24,300 832
Chesapeake Corp. 62,100 2,251
Commonwealth Industries, Inc. 100,000 1,925
Crompton & Knowles Corp. 75,000 1,992
Gibraltar Steel Corp. 126,100 3,074
Harsco Corp. 57,400 2,605
Ivex Packaging Corp. 44,000 704
* Lone Star Technologies, Inc. 58,500 3,053
Longview Fibre Co. 134,500 2,673
Oregon Steel Mills, Inc. 134,600 3,651
P.H. Glatfelter Co. 72,200 1,602
Pope & Talbot, Inc. 33,400 708
* RMI Titanium Co. 107,800 2,695
Rouge Industries, Inc., Class A 5,000 78
Special Metals Corp. 54,000 1,013
Steel Dynamics, Inc. 170,000 3,995
* Tetra Technologies, Inc. 207,400 4,796
* Titanium Metals Corp. 88,600 3,300
Group Total 51,273
Beverage & Personal Products (0.5%)
* Blyth Industries, Inc. 160,050 4,481
Consumer Durables (4.5%)
Arvin Industries, Inc. 226,700 8,898
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Brewer (C) Homes, Inc., Class A 121,300 258
Centex Corp. 38,300 2,236
Excel Industries, Inc. 207,700 4,141
* Furniture Brands International, Inc. 121,300 2,290
General Cable Corp. 94,200 3,344
* Giant Cement Holdings, Inc. 237,300 5,784
Interface, Inc. 16,400 478
* Lear Corp. 84,900 4,181
Lone Star Industries, Inc. 28,300 1,528
Simpson Industries, Inc. 206,100 2,383
Southdown, Inc. 44,700 2,442
* Tower Automotive, Inc. 56,800 2,556
Group Total 40,519
Consumer Services (3.0%)
Central Newspapers, Inc., Class A 30,100 2,235
* John Q. Hammons Hotels, Inc. 129,600 1,134
Journal Register Co. 253,700 4,979
* Prime Hospitality Corp. 432,600 9,761
* Regal Cinemas, Inc. 52,700 1,416
Sotheby's Holdings, Inc., Class A 105,600 2,145
TMP Worldwide, Inc. 200,000 4,825
Travel Services International, Inc. 16,200 336
Group Total 26,831
Credit & Finance/
Investment Companies (5.3%)
Eaton Vance Corp. 76,200 2,724
EVEREN Capital Corp. 195,000 7,922
* First Alliance Corp. 87,900 2,769
* FIRSTPLUS Financial Group, Inc. 72,200 4,052
* Hambrecht & Quist Group 182,100 6,419
Healthcare Financial Partners, Inc. 30,100 929
* Imperial Credit Industries, Inc. 181,500 4,810
Legg Mason, Inc. 89,733 4,733
Money Store (The), Inc. 203,600 5,803
North American Mortgage Co. 78,300 2,251
Raymond James Financial, Inc. 92,250 3,321
* Renters Choice, Inc. 60,000 1,363
* Southern Pacific Funding Corp. 67,800 953
Group Total 48,049
Energy (9.6%)
Aquila Gas Pipeline Corp. 111,000 1,429
* Benton Oil & Gas Co. 101,900 1,904
* BJ Services Co. 59,600 4,425
Camco International, Inc. 45,500 3,174
* Carrizo Oil & Gas, Inc. 57,900 868
* Dawson Production Services, Inc. 142,000 3,000
Eastern Enterprises 67,000 2,500
Energen Corp. 129,100 4,591
* Global Industries Ltd. 136,600 5,447
* HS Resources, Inc. 277,301 4,783
Input/Output, Inc. 35,000 1,037
KN Energy, Inc. 140,000 6,405
* Marine Drilling Co., Inc. 118,000 3,687
* Maverick Tube Corp. 109,600 4,521
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Nabors Industries, Inc. 46,900 1,826
National Fuel Gas Co. 66,000 2,904
* Noble Drilling Corp. 153,200 4,941
* NS Group, Inc. 101,600 3,289
* Ocean Energy, Inc. 23,500 1,621
Pioneer Natural Resources Co. 153,600 6,432
* Pride International, Inc. 58,700 1,996
Power-One, Inc. 30,500 427
Reading & Bates Corp. 40,000 1,662
Santa Fe International Corp. 119,400 5,552
Southwestern Energy Co. 83,500 1,070
Stewart & Stevenson Services, Inc. 60,000 1,444
* Tejas Gas Corp. 36,500 2,192
* Veritas DGC, Inc. 33,600 1,430
Vintage Petroleum, Inc. 17,900 882
Wicor, Inc. 7,100 307
Group Total 85,746
Food, Tobacco & Other (4.4%)
* Consolidated Cigar Holdings, Inc. 125,000 5,109
* CTB International Corp. 134,000 2,111
Dean Foods Co. 40,400 1,869
Dimon, Inc. 798,600 19,965
* Standard Commercial Corp. 227,250 3,835
* Stokely USA, Inc. 561,300 526
Swisher International Group, Inc., Class A 104,400 1,886
Universal Corp. 114,600 4,154
Group Total 39,455
Health Care (10.6%)
Alpharma, Inc. 139,600 3,124
Angelica Corp. 246,300 4,895
* ARV Assisted Living, Inc. 350,700 4,406
Beckman Instruments, Inc. 93,600 3,984
* Beverly Enterprises 143,700 2,497
* Coherent, Inc. 134,700 7,459
* Datascope Corp. 137,000 3,014
* FPA Medical Management, Inc. 310,500 10,673
* Genesis Health Ventures, Inc. 79,600 3,099
* HealthCare Compare Corp. 62,000 3,960
* Lincare Holdings, Inc. 83,600 4,217
* Marquette Medical Systems, Inc., Class A 92,100 2,855
* Maxicare Health Plans, Inc. 147,200 2,742
* Medpartners, Inc. 35,400 759
* Mid Atlantic Medical Services, Inc. 267,700 4,233
* Multicare Cos., Inc. 34,950 972
* NBTY, Inc. 105,400 2,227
* Personnel Group of America, Inc. 91,200 3,124
Physicians' Specialty Corp. 153,100 1,531
* RightCHOICE Managed Care, Inc., Class A 48,100 493
* Rotech Medical Corp. 161,300 3,105
* Sterile Recoveries, Inc. 67,000 963
* Total Renal Care Holdings, Inc. 57,900 2,895
* Universal Health Services, Inc., Class B 115,300 4,987
* Vivus, Inc. 194,400 7,290
* Watson Pharmaceuticals, Inc. 100,500 6,005
Group Total 95,509
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Heavy Industry/Transportation (14.8%)
AAR Corp. 98,200 3,277
* AccuStaff, Inc. 220,000 6,930
Air Express International Corp. 67,500 2,464
Airborne Freight Corp. 80,700 4,887
* Allied Waste Industries, Inc. 238,600 4,563
Arnold Industries, Inc. 229,700 5,369
* Atlas Air, Inc. 59,900 1,681
Aviall, Inc. 199,200 3,050
* Aviation Sales Co. 105,000 3,176
* BE Aerospace, Inc. 214,900 7,736
* Catalina Lighting, Inc. 44,500 259
* CDI Corp. 198,200 7,482
Cincinnati Milacron, Inc. 74,600 2,005
Columbus McKinnon Corp. 61,200 1,607
Crane Co. 233,050 9,584
Danka Business Systems plc ADR 43,500 1,936
* Data Processing Resources Corp. 71,100 1,778
* Fiserv, Inc. 41,400 1,816
Flowserve Corp. 157,600 4,708
Greenbrier Cos., Inc. 140,800 2,358
* Hagler Bailly, Inc. 22,400 568
* Halter Marine Group, Inc. 50,000 2,419
Hanover Compressor Co. 27,000 662
* Hirsch International Corp., Class A 75,200 1,330
* Insurance Auto Auctions, Inc. 201,500 2,519
JLG Industries, Inc. 21,000 269
Kaydon Corp. 65,300 3,918
Knightsbridge Tankers Ltd. 112,200 3,177
* Lason Holdings, Inc. 10,000 276
* Midwest Express Holdings, Inc. 45,000 1,443
* OMI Corp. 629,500 7,869
Precision Castparts Corp. 98,700 6,416
* PST Vans, Inc. 80,800 313
* Seacor Holdings, Inc. 50,300 3,119
ServiceMaster, L.P. 25,000 714
* Staffmark, Inc. 66,200 2,524
* Swift Transportation Co., Inc. 47,000 1,486
Teekay Shipping Corp. 71,000 2,387
Tranz Rail Holdings Ltd. ADR 161,500 2,665
* Triumph Group, Inc. 225,600 7,544
Werner Enterprises, Inc. 184,400 4,472
Group Total 132,756
Insurance (4.1%)
Allied Life Financial Corp. 120,100 2,882
AmerUs Life Holdings, Inc., Class A 100,000 3,281
American Bankers Insurance
Group, Inc. 43,600 1,591
Everest Reinsurance Holdings, Inc. 120,000 4,920
FBL Financial Group, Inc., Class A 52,100 1,928
Fremont General Corp. 144,100 6,881
Hartford Life, Inc., Class A 106,600 4,097
Nationwide Financial Services, Inc., Class A 231,300 6,447
Presidential Life Corp. 100,700 2,001
PXRE Corp. 83,619 2,639
Group Total 36,667
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Real Estate Investment Trusts (7.6%)
Associated Estates Realty Corp. 94,300 2,263
Avalon Properties, Inc. 51,000 1,517
Cali Realty Corp. 60,000 2,498
^ Canadian Hotel Income Properties 300,000 2,139
CarrAmerica Realty Corp. 55,000 1,760
Chateau Communities, Inc. 153,908 4,540
Crescent Real Estate Equities Co. 86,500 3,471
Duke Realty Investments, Inc. 134,912 3,078
Equity Office Properties Trust 38,700 1,313
Excel Realty Trust, Inc. 187,400 5,880
Health Care REIT, Inc. 95,500 2,626
Health and Retirement Property Trust 95,000 1,793
Healthcare Realty Trust, Inc. 102,200 2,906
Home Properties of N.Y., Inc. 306,667 7,973
Kilroy Realty Corp. 142,700 3,853
Post Properties, Inc. 61,900 2,461
* Security Capital Group Inc., Class B 109,600 3,768
Smith (Charles E.) Residential Realty, Inc. 231,500 7,871
Spieker Properties, Inc. 81,400 3,302
United Dominion Realty Trust, Inc. 206,900 3,104
Group Total 68,116
Retail (6.6%)
Applebee's International, Inc. 217,200 5,430
* Borders Group, Inc. 99,400 2,734
Brylane, Inc. 119,000 5,459
Cato Corp., Class A 271,200 2,475
Culp, Inc. 250,300 5,194
800-JR CIGAR, Inc. 23,800 833
Family Dollar Stores, Inc. 85,500 1,950
* Galey & Lord, Inc. 84,100 1,587
Hughes Supply, Inc. 71,400 2,155
* Landry's Seafood Restaurants, Inc. 83,000 2,438
* Max & Erma's Restaurants, Inc. 30,900 218
* Nautica Enterprises, Inc. 60,100 1,690
Novel Denim Holdings Ltd. 10,000 270
* Office Depot, Inc. 135,000 2,725
Pier 1 Imports, Inc. 217,250 3,897
* Proffitt's, Inc. 39,400 2,334
Rare Hospitality International, Inc. 91,600 882
Russ Berrie & Co., Inc. 64,800 1,895
* Stage Stores, Inc. 81,800 3,528
* U.S. Office Products Co. 136,200 4,801
* Zale Corp. 254,200 6,593
Group Total 59,088
Technology (13.5%)
* Ade Corp. 46,200 1,854
* Align-Rite International, Inc. 131,700 3,144
* Altera Corp. 65,500 3,357
* Boston Technology, Inc. 90,800 3,076
Box Hill Systems Corp. 44,400 777
* Cadence Design Systems, Inc. 45,700 2,445
* Checkfree Corp. 102,400 2,163
* Cherry Corp., Class A 20,000 380
* CHS Electronics, Inc. 104,100 2,850
* Computer Products, Inc. 105,000 3,124
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Compuware Corp. 65,900 3,987
* Comverse Technology, Inc. 91,600 4,832
* Creative Technology Ltd. 100,000 2,556
* Credence Systems Corp. 74,000 3,608
* Davox Corp. 96,600 3,236
* Dionex Corp. 41,000 2,211
* Exar Corp. 34,800 922
* FactSet Research Systems, Inc. 25,300 753
* Globecomm Systems, Inc. 32,100 562
* HMT Technology Corp. 326,700 5,125
* ITI Technologies, Inc. 19,200 547
Ingram Micro, Inc., Class A 106,300 2,877
Innovex, Inc. 72,200 2,328
* Integrated Device Technology, Inc. 87,800 1,059
* Intevac, Inc. 312,900 4,420
Investors Financial Services Corp. 15,000 619
* KLA-Tencor Corp. 60,700 4,101
* Micro Linear Corp. 273,000 2,457
* MicroTouch Systems, Inc. 110,300 3,075
* Microage, Inc. 201,800 5,852
* PairGain Technologies, Inc. 39,600 1,129
* P-COM, Inc. 200,000 4,788
Penn Engineering & Manufacturing Corp. 163,900 4,569
* Quantum Corp. 120,100 4,601
Salient 3 Communications, Inc., Class A 43,900 549
* Sanmina Corp. 14,000 1,212
* SCI Systems, Inc. 237,000 11,746
* Spectran Corp. 81,400 1,160
*@ Sterling Software, Inc. (Escrow) 6,951 --
* Summit Design, Inc. 193,800 3,440
* Technology Modeling Association, Inc. 155,500 2,381
Tower Semiconductor Ltd. 105,200 2,091
* USCS International, Inc. 72,500 1,622
* Unit Instruments, Inc. 166,500 2,019
* Wonderware Corp. 70,100 1,288
Group Total 120,892
Utilities (0.9%)
Commonwealth Energy System 216,200 5,837
Rochester Gas & Electric Corp. 43,700 1,082
* U.S. Long Distance Corp. 54,600 1,095
Group Total 8,014
Total Common Stocks (Cost $643,540) 860,380
RIGHT (0.0%)
* Alpharma, Inc., expiring 11/25/97 (Cost $0) 23,267 131
WARRANT (0.2%)
ss.* Canadian Hotel Income Properties REIT,
expiring 6/25/98 (acquired 9/16/97, Cost $1,929) 300,000 1,929
CASH EQUIVALENT (4.4%)
FaceAmount(000)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Face
Amount
(000)
-----
<S> <C> <C>
Repurchase Agreement (4.4%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $39,113,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at
$39,476 (Cost $39,107) $39,107 39,107
Total Investments (100.5%) (Cost $684,576) 901,547
Value
(000)+
--------
Other Assets and Liabilities (-0.5%)
Cash 7
Dividends Receivable 836
Interest Receivable 6
Receivable for Investments Sold 1,325
Receivable for Fund Shares Sold 287
Other Assets 19
Payable for Investments Purchased (4,432)
Payable for Fund Shares Redeemed (513)
Payable for Investment Advisory Fees (1,530)
Payable for Administrative Fees (56)
Payable for Trustees' Deferred Compensation Plan-Note F (16)
Other Liabilities (84)
(4,151)
NET ASSETS (100%) $897,396
INSTITUTIONAL CLASS
Net Assets
Applicable to 35,932,079 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $897,396
NET ASSET VALUE PER SHARE $ 24.97
Net Assets Consists of:
Paid in Capital $582,644
Undistributed Net Investment Income (Loss) 2,064
Undistributed Realized Net Gain (Loss) 95,717
Unrealized Appreciation (Depreciation) on Investment Securities 216,971
Net Assets $897,396
</TABLE>
ss. Restricted Security-Total market value of restricted security owned at
September 30, 1997 was $1,929 or 0.2% of net assets.
+ See Note A1 to Financial Statements.
* Non-income producing security.
144A security. Certain conditions for public sale may exist.
@ Value is less than $500.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
19
<PAGE>
Statement of Net Assets
International Equity
Portfolio
Statement of Net Assets
Common Stocks (96.1%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Argentina (0.8%)
YPF SA ADR 146,700 $5,409
Australia (0.9%)
Reinsurance Australia Corp., Ltd. 2,057,071 5,609
Austria (2.0%)
OMV AG 89,159 13,306
Brazil (0.4%)
Votorantim Celulose e Papel SA 99,600,000 2,773
Canada (4.2%)
Canadian National Railway Co. 92,000 4,784
National Bank of Canada 585,000 8,192
Quebecor, Inc., Class B 397,100 7,098
TransCanada Pipelines Ltd. 379,100 7,339
Group Total 27,413
China (0.7%)
New World Development Co., Ltd. ADR 695,000 4,204
France (6.1%)
Cie Generale des Eaux 67,136 7,898
* Dexia France 76,999 7,294
Elf Aquitaine 109,630 14,634
Scor 229,200 9,901
Group Total 39,727
Germany (3.5%)
Deutsche Bank AG 91,260 6,404
Henkel KGaA 143,900 8,103
Springer (Axel) Verlag AG 9,526 8,140
Group Total 22,647
Hong Kong (3.9%)
China Southern Airlines Co., Ltd. 106,800 3,191
Great Eagle Holdings Ltd. 1,866,600 5,150
HSBC Holdings plc 94,000 3,146
Jardine Matheson Holdings Ltd. 431,000 3,491
Jardine Strategic Holdings Ltd. 1,418,500 5,561
Wheelock & Co., Ltd. 2,447,000 4,981
Group Total 25,520
India (0.7%)
Housing Development Finance Corp., Ltd. 279 25
ITC Ltd. 9,374 153
* Jardine Fleming India Fund, Inc. 374,600 3,371
Tata Power Supply Co., Ltd. 11,940 42
Videsh Sanchar Nigam Ltd. 45,000 1,046
Group Total 4,637
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Indonesia (1.0%)
* Gulf Indonesia Resources Ltd. 94,100 2,094
Lippo Securities 24,939,000 3,707
Pabrik Kertas Tjiwi Kimia 1,357,500 755
Group Total 6,556
Ireland (1.3%)
Irish Life plc 1,592,000 8,294
Italy (5.0%)
ENI S.p.A. 1,460,500 9,202
Pirelli S.p.A. 3,468,000 10,172
Telecom Italia S.p.A. 3,361,221 13,083
Group Total 32,457
Japan (19.9%)
Bridgestone Corp. 573,000 13,767
Canon, Inc. 394,000 11,523
Chiyoda Fire & Marine
Insurance Co., Ltd. 1,011,000 3,870
Fuji Photo Film Ltd. 243,000 10,026
Hirose Electric Co., Ltd. 50,600 3,727
Mitsubishi Heavy Industries Ltd. 805,000 4,408
Mitsui Fudosan Co., Ltd. 639,000 7,782
Nichido Fire & Marine Insurance Co. 794,000 5,197
Nintendo Corp., Ltd. 99,000 9,268
Promise Co., Ltd. 66,000 3,445
Sankyo Co., Ltd. 178,000 6,164
Sony Corp. 80,000 7,556
Sumitomo Electric Industries 402,000 5,762
Sumitomo Marine & Fire Insurance Co. 891,000 6,164
Takeda Chemical Industries 353,000 10,587
Takefuji Corp. 69,000 2,613
Tokio Marine & Fire Insurance 543,000 6,523
UNY Co., Ltd. 332,000 5,006
Yasuda Fire & Marine Insurance 1,042,000 6,138
Group Total 129,526
Korea (0.3%)
Samsung Electronics GDR 16,440 1,573
Mexico (2.3%)
ALFA, SA de C.V., Class A 789,000 7,418
Cemex SA de C.V., Series B 734,300 4,403
*@ Grupo Financiero Capital SA 761,325 --
Grupo Mexico SA, Series B 806,000 3,260
Group Total 15,081
Netherlands (6.5%)
ING Groep N.V. 274,055 12,586
Philips Electronics N.V. 205,800 17,414
Vendex International N.V. 202,365 11,998
Group Total 41,998
Norway (1.4%)
Christiania Bank OG Kreditkasse 2,733,700 9,427
Russia (0.6%)
Lukoil Holding ADR 37,800 3,713
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Singapore (1.2%)
* Creative Technology Ltd. 299,100 7,646
Spain (2.2%)
Telefonica de Espana ADR 148,800 14,006
Sweden (4.5%)
Nordbanken AB 273,800 9,349
SKF AB, Class B 290,900 8,476
Sparbanken Sverige AB, Class A 484,100 11,680
Group Total 29,505
Switzerland (2.4%)
* Swissair AG (Registered) 11,835 15,831
Thailand (0.0%)
Hana Microelectronics Public Co., Ltd. (Foreign) 71,400 245
United Kingdom (24.3%)
Abbey National plc 766,500 11,805
Bank of Scotland 1,354,400 11,207
Bass plc 721,200 9,725
B.A.T. Industries plc 1,546,904 13,549
BG plc 2,384,400 10,346
BOC Group plc 691,782 12,376
Burmah Castrol plc 662,000 11,810
Cable & Wireless plc 1,232,780 10,499
Imperial Tobacco Group plc 1,726,200 10,330
LucasVarity plc 2,457,000 9,274
Railtrack Group plc PP 522,454 7,576
Sun Alliance Insurance Group plc 1,327,842 12,521
Sainsbury (J.) plc 1,481,500 11,088
Tomkins plc 2,831,255 15,756
Group Total 157,862
Total Common Stocks (Cost $506,388) 624,965
PREFERRED STOCK (0.6%)
Brazil (0.6%)
Multicanal Participacoes SA ADR (Cost $4,642) 351,800 3,738
WARRANTS (0.5%)
France (0.0%)
* Cie Generale des Eaux, expiring 5/2/01 75,170 41
Germany (0.5%)
* Veba AG, expiring 4/6/98 9,229 3,421
Total Warrants (Cost $1,798) 3,462
PURCHASED OPTIONS (1.2%)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
No. of
Contracts
---------
<S> <C> <C>
Korea (1.2%)
Kookmin Bank Call Option expiring 9/4/99,
strike price $0.01 22,577 252
Kookmin Bank Call Option expiring 9/30/99,
strike price $0.01 143,173 1,546
Pohang Iron & Steel Co. Call Option
expiring 9/30/99, strike price $0.01 43,000 2,562
Shinhan Bank Call Option expiring 9/30/99,
strike price $0.01 80,140 652
SK Telecom Co., Ltd. Call Option
expiring 9/4/99, strike price $0.01 1,761 829
SK Telecom Co., Ltd. Call Option
expiring 9/30/99, strike price $0.01 3,965 1,808
Total Purchased Options (Cost $11,120) 7,649
FIXED INCOME SECURITY (0.3%)
</TABLE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount
& Poor's) (000)
--------- -----
<S> <C> <C> <C>
Germany (0.3%)
+Bundesobligationen 7.00%,
12/22/97 (Cost $1,764) Aaa DEM 3,100 1,767
FOREIGN CURRENCY (0.3%)
Canadian Dollar CAD 15 11
French Franc FRF 116 20
Hong Kong Dollar HKD 787 102
Indian Rupee INR 61,910 1,713
Japanese Yen JPY 2,947 24
Philippines Peso PHP 6,599 194
Total Foreign Currency (Cost $2,062) 2,064
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
----- ------
<S> <C> <C>
CASH EQUIVALENTS (5.8%)
Short-Term Investments held as
Collateral for Loaned Securities (5.2%) $33,926 $33,926
Repurchase Agreement (0.6%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $4,326,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued
at $4,366 (Cost $4,325) 4,325 4,325
Total Cash Equivalents (Cost $38,251) 38,251
Total Investments (104.8%) (Cost $566,025) 681,896
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
Other Assets and Liabilities (-4.8%)
Dividends Receivable 1,715
Interest Receivable 96
Receivable for Withholding Tax Reclaim 346
Receivable for Investments Sold 2,441
Receivable for Fund Shares Sold 153
Unrealized Gain on Forward Foreign Currency Contracts 901
Other Assets 38
Payable for Investments Purchased (1,835)
Payable for Fund Shares Redeemed (481)
Payable for Investment Advisory Fees (819)
Payable for Administrative Fees (43)
Payable for Trustees' Deferred Compensation Plan-Note F (18)
Payable to Custodian (1)
Collateral on Securities Loaned, at Value (33,926)
Other Liabilities (77)
(31,510)
NET ASSETS (100%) $650,386
Value
(000)+
------
INSTITUTIONAL CLASS
Net Assets
Applicable to 41,463,323 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $649,755
NET ASSET VALUE PER SHARE $ 15.67
INVESTMENT CLASS
Net Assets
Applicable to 40,359 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 631
NET ASSET VALUE PER SHARE $ 15.63
Net Assets Consist of:
Paid in Capital $479,226
Undistributed Net Investment Income (Loss) 9,914
Undistributed Realized Net Gain (Loss) 44,500
Unrealized Appreciation (Depreciation) on:
Investment Securities 115,869
Foreign Currency Transactions 877
Net Assets $650,386
</TABLE>
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
* Non-income producing security.
+ Moody's Investor Service, Inc. rating. Security is not rated by
Standard & Poor's Corporation.
@ Value is less than $500.
ADR American Depositary Receipt
GDR Global Depositary Receipt
PP Partially Paid
24
<PAGE>
Mid Cap Growth
Portfolio
Statement of Net Assets
Common Stocks (95.6%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Banks (1.1%)
State Street Corp. 78,800 $4,802
Basic Resources (0.9%)
* Sealed Air Corp. 69,600 3,824
Beverage & Personal Products (2.9%)
Cott Corp. 286,900 2,905
Estee Lauder Cos., Class A 110,000 5,087
* Robert Mondavi Corp., Class A 92,900 5,086
Group Total 13,078
Consumer Durables (1.5%)
Danaher Corp. 115,150 6,679
Consumer Services (16.5%)
At Home Corp., Series A 144,650 3,345
* Cinar Films, Inc., Class B 147,600 5,627
Coinstar, Inc. 113,500 1,476
Comcast Corp., Class A Special 257,297 6,625
Florida Panthers Holdings, Inc. 34,500 813
* Heftel Broadcasting Corp., Class A 63,200 4,787
* Imax Corp. 194,400 5,079
* Jacor Communications, Inc. 89,000 3,933
Metro Networks, Inc. 133,900 4,034
* Outdoor Systems, Inc. 162,050 4,254
PanAmSat Corp. 107,500 4,636
* Premier Parks, Inc. 112,100 4,232
* Tele-Communications, Inc., Class A 325,200 6,667
* Tele-Communications Liberty Media Group, Class A 230,144 6,890
TV Azteca, SA de C.V. ADR 130,600 2,938
* Univision Communications, Inc., Class A 78,300 4,248
* Valassis Communications, Inc. 143,600 4,577
Group Total 74,161
Credit & Finance/
Investment Companies (3.4%)
Franklin Resources, Inc. 47,600 4,433
Money Store (The), Inc. 12,400 353
* Security Capital Group, Inc., Class B 54,800 1,884
Sirrom Capital Corp. 165,800 8,601
Group Total 15,271
Energy (4.0%)
Diamond Offshore Drilling, Inc. 73,500 4,056
* Global Marine, Inc. 148,200 4,927
* J. Ray McDermott, S.A. 55,100 2,700
McDermott International, Inc. 62,900 2,296
Santa Fe International Corp. 81,500 3,790
Group Total 17,769
Food, Tobacco & Other (1.2%)
* Rexall Sundown, Inc. 119,200 5,438
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Health Care (11.7%)
* BioChem Pharmaceutical, Inc. 145,800 4,593
* Cyberonics, Inc. 159,400 2,570
HBO & Co. 161,200 6,085
* Health Management Associates, Inc., Class A 368,500 11,654
* Lincare Holdings, Inc. 227,000 11,449
* Orthodontic Centers of America, Inc. 219,600 4,392
* Pediatrix Medical Group, Inc. 72,700 3,208
* Total Renal Care Holdings, Inc. 91,600 4,580
Wesley Jessen VisionCare, Inc. 142,200 4,017
Group Total 52,548
Heavy Industry/Transportation (7.0%)
* Allied Waste Industries, Inc. 90,000 1,721
Cintas Corp. 94,750 6,988
* Fiserv, Inc. 129,550 5,684
* Loral Space & Communications 351,200 7,243
ProBusiness Services, Inc. 20,600 394
ss.* Republic Industries, Inc. (acquired
1/20/97-5/5/97, cost $4,250) 133,700 4,404
Tidewater, Inc. 86,800 5,143
Group Total 31,577
Insurance (1.6%)
Healthcare Recoveries, Inc. 158,400 3,564
SunAmerica, Inc. 90,900 3,562
Group Total 7,126
Real Estate Investment Trusts (1.7%)
Security Capital Industrial Trust 189,064 4,408
^ Security Capital U.S. Realty 196,500 2,928
Group Total 7,336
Retail (8.2%)
* Borders Group, Inc. 234,200 6,440
Brylane, Inc. 52,300 2,399
* CompUSA, Inc. 130,700 4,575
CVS Corp. 113,200 6,438
* Jones Apparel Group, Inc. 86,000 4,644
* Office Depot, Inc. 96,900 1,956
Stage Stores, Inc. 83,800 3,614
* Tommy Hilfiger Corp. 65,600 3,276
* U.S. Office Products Co. 92,000 3,243
Group Total 36,585
Technology (26.7%)
* Advanced Fibre Communications, Inc. 129,200 5,297
* ASE Test Ltd. 32,300 2,738
Bell Canada International, Inc. 107,300 2,025
* BMC Software, Inc. 102,400 6,630
* Brightpoint, Inc. 75,600 3,506
* Cellular Communications International, Inc. 27,800 1,154
CIENA Corp. 95,700 4,740
Complete Business Solutions, Inc. 108,000 3,078
* Computer Horizons Corp. 92,700 3,360
* Digital Microwave Corp. 84,400 3,777
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Electronics for Imaging, Inc. 82,100 4,187
Flextronics International Ltd. 42,500 1,997
* Inter Tel, Inc. 89,300 4,733
J. D. Edwards & Co. 85,200 2,854
* Kemet Corp. 121,500 3,691
* MAPICS, Inc. 281,000 3,653
* McAfee Associates, Inc. 128,962 6,835
* MicroFocus Group ADR 123,200 4,327
* Newbridge Networks Corp. 79,600 4,766
NEXTLINK Communications, Inc., Class A 70,900 1,702
* Orbotech, Ltd. 69,100 3,991
* Peoplesoft, Inc. 109,500 6,543
Positron Fiber Systems Corp. 143,500 1,480
RSL Communications Ltd., Class A 83,200 1,830
* Sapient Corp. 61,200 3,114
* Saville Systems Ireland plc ADR 44,100 3,098
* Silicon Valley Group, Inc. 71,200 2,532
* Tellabs, Inc. 83,800 4,316
* 3Com Corp. 171,975 8,814
* Uniphase Corp. 36,100 2,870
* Visio Corp. 80,800 3,373
* Wind River Systems 68,900 2,842
Group Total 119,853
Utilities (7.2%)
* Globalstar Telecommunications Ltd. 294,102 15,440
Ionica Group plc ADR 115,800 2,164
Qwest Communications
International, Inc. 76,000 3,506
* Tel-Save Holdings, Inc. 167,800 4,038
* WorldCom, Inc. 206,874 7,318
Group Total 32,466
Total Common Stocks (Cost $299,282) 428,513
Face
Amount Value
(000) (000)+
----- ------
CASH EQUIVALENTS (24.8%)
Short-term Investments Held as Collateral for
Loaned Securities (24.0%) $107,435 107,435
Repurchase Agreement (0.8%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $3,427,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99,
valued at $3,458 3,426 3,426
Total Cash Equivalents (Cost $110,861) 110,861
Total Investments (120.4%) (Cost $410,143) 539,374
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
-------- --------
<S> <C> <C>
Other Assets and Liabilities (-20.4%)
Dividends Receivable 29
Interest Receivable 1
Receivable for Investments Sold 23,619
Receivable for Fund Shares Sold 485
Other Assets 12
Payable for Investments Purchased (7,142)
Payable for Fund Shares Redeemed (159)
Payable for Investment Advisory Fees (517)
Payable for Administrative Fees (28)
Payable for Trustees' Deferred Compensation Plan-Note F (11)
Collateral on Securities Loaned, at Value (107,435)
Other Liabilities (65)
(91,211)
NET ASSETS (100%) $448,163
INSTITUTIONAL CLASS
Net Assets
Applicable to 20,465,497 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $446,963
NET ASSET VALUE PER SHARE $ 21.84
ADVISER CLASS
Net Assets
Applicable to 55,013 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 1,200
NET ASSET VALUE PER SHARE $ 21.81
Net Assets Consist of:
Paid In Capital $265,123
Undistributed Realized Net Gain (Loss) 53,809
Unrealized Appreciation (Depreciation) on Investment Securities 129,231
Net Assets $448,163
</TABLE>
ss. Restricted Security-Total market value of restricted securities owned
at September 30, 1997 was $4,404 or 1.0% of net assets.
+ See Note A1 to Financial Statements.
* Non-income producing security.
^ 144A security. Certain conditions for public sale may exist.
ADR American Depositary Receipt
28
<PAGE>
Mid Cap Value
Portfolio
Statement of Net Assets
Common Stocks (96.7%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Banks (10.6%)
City National Corp. 32,200 1,030
Colonial BancGroup, Inc. 20,100 578
Comerica, Inc. 28,400 2,242
Community First Bankshares, Inc. 29,000 1,407
Crestar Financial Corp. 41,500 1,945
Cullen/Frost Bankers, Inc. 25,000 1,184
First Financial Corp. of Wisconsin 24,800 845
First of America Bank Corp. 30,713 1,649
Greenpoint Financial Corp. 8,500 539
Hubco, Inc. 11,700 371
Long Island Bancorp, Inc. 22,100 1,039
Mercantile Bankshares Corp. 122 4
National Commerce Bancorp. 25,400 692
North Fork Bancorp, Inc. 79,700 2,311
Northern Trust Corp. 19,800 1,171
Prime Bancshares, Inc. 4,300 82
Southtrust Corp. 30,200 1,487
Summit Bancorp. 35,838 1,593
Trans Financial, Inc. 34,800 1,109
UnionBanCal Corp. 12,700 1,099
Webster Financial Corp. 2,000 118
Wilmington Trust Corp. 16,300 890
Group Total 23,385
Basic Resources (2.3%)
Bowater, Inc. 9,100 464
H. B. Fuller Co. 12,042 653
Lubrizol Corp. 14,900 626
* Owens-Illinois, Inc. 16,500 560
P.H. Glatfelter Co. 37,100 823
Rohm & Haas Co. 7,000 672
* Tetra Technologies, Inc. 60,300 1,394
Group Total 5,192
Consumer Durables (5.8%)
Arvin Industries, Inc. 16,000 628
Callaway Golf Co. 19,000 663
* Champion Enterprises, Inc. 22,900 438
* Furniture Brands International, Inc. 20,400 385
General Cable Corp. 47,400 1,683
Harley-Davidson, Inc. 35,400 1,033
Ivex Packaging Corp. 10,800 173
* Lear Corp. 25,200 1,241
Lone Star Industries, Inc. 25,500 1,377
Mascotech, Inc. 16,500 338
Premark International, Inc. 22,900 733
Southdown, Inc. 40,000 2,185
* Tower Automotive, Inc. 16,300 734
* USG Corp. 27,400 1,313
Group Total 12,924
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Consumer Services (3.1%)
* Doubletree Corp. 11,000 531
* Gibson Greetings, Inc. 31,800 823
Hertz Corp., Class A 11,000 414
Journal Register Co. 67,600 1,327
McClatchy Newspapers, Inc., Class A 26,175 900
* MGM Grand, Inc. 17,300 751
New York Times Co., Class A 7,000 368
Omnicom Group, Inc. 300 22
* Valassis Communications, Inc. 20,000 638
Washington Post Co., Class B 2,300 1,031
Group Total 6,805
Credit & Finance/
Investment Companies (4.6%)
AMBAC, Inc. 14,800 602
Bear Stearns Co., Inc. 28,620 1,259
Capital One Financial Corp. 21,500 984
CMAC Investment Corp. 23,300 1,249
Franklin Resources, Inc. 43,750 4,074
Healthcare Financial Partners, Inc. 5,900 182
Lehman Brothers Holdings, Inc. 17,000 912
Money Store (The), Inc. 32,600 929
Group Total 10,191
Energy (11.9%)
Apache Corp. 22,000 943
* BJ Services Co. 38,100 2,829
Columbia Gas System, Inc. 17,500 1,225
* Cooper Cameron Corp. 14,200 1,020
Diamond Offshore Drilling, Inc. 32,600 1,799
El Paso Natural Gas Co. 6,200 375
* EVI, Inc. 19,100 1,222
* Falcon Drilling Co., Inc. 80,600 2,846
* Forcenergy, Inc. 15,200 590
* Global Industries Ltd. 6,000 239
* Nabors Industries, Inc. 28,100 1,094
National Fuel Gas Co. 14,400 634
NICOR, Inc. 13,500 506
Noble Affiliates, Inc. 13,400 600
* Noble Drilling Corp. 24,100 777
* NS Group, Inc. 24,800 803
ONEOK, Inc. 14,647 478
Pacific Enterprises 8,900 301
Sun Co., Inc. 12,100 530
Transocean Offshore, Inc. 15,400 738
* Tuboscope Vetco International Corp. 26,700 838
Union Texas Petro Holdings, Inc. 24,800 583
* United Meridian Corp. 20,300 746
* Varco International, Inc. 10,300 500
* Veritas DGC, Inc. 13,800 587
Vintage Petroleum, Inc. 12,800 630
* Weatherford Enterra, Inc. 38,800 2,069
* Western Atlas, Inc. 11,100 977
Group Total 26,479
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Food, Tobacco & Other (5.4%)
* Consolidated Cigar Holdings, Inc. 14,100 576
* CTB International Corp. 32,100 506
Dean Foods Co. 18,600 860
Dimon, Inc. 68,400 1,710
Interstate Bakeries Corp. 16,800 1,152
Lancaster Colony Corp. 9,300 494
Schweitzer-Mauduit
International, Inc. 37,200 1,581
Tyson Foods, Inc., Class A 25,200 591
Universal Corp. 124,400 4,509
Group Total 11,979
Health Care (7.6%)
* Biogen, Inc. 17,000 551
* Coherent, Inc. 8,600 476
* Datascope Corp. 40,000 880
* Dura Pharmaceuticals, Inc. 16,400 715
* FPA Medical Management, Inc. 53,300 1,832
* Health Care and Retirement Corp. 11,800 439
* Healthdyne Technologies, Inc. 127,000 2,365
ICN Pharmaceuticals, Inc. 14,000 689
* Marquette Medical Systems, Inc., Class A 30,100 933
* Personnel Group of America, Inc. 19,300 661
* Rotech Medical Corp. 19,500 375
Sullivan Dental Products, Inc. 92,300 2,365
* Universal Health Services, Inc., Class B 25,600 1,107
* Watson Pharmaceuticals, Inc. 10,400 621
* Wellpoint Health Networks, Inc. 40,100 2,323
Xomed Surgical Products, Inc. 20,000 398
Group Total 16,730
Heavy Industry/Transportation (16.4%)
* AccuStaff, Inc. 87,600 2,759
Aeroquip-Vickers, Inc. 30,400 1,490
Agco Corp. 12,400 393
Air Express International Corp. 123,300 4,500
Airborne Freight Corp. 9,800 594
Arnold Industries, Inc. 54,600 1,276
* Aviation Sales Co. 24,100 729
* Banner Associates, Inc. 66,700 684
Case Corp. 16,900 1,126
* CDI Corp. 53,600 2,023
* Ceridian Corp. 18,000 666
CNF Transportation, Inc. 42,100 1,834
* Coltec Industries, Inc. 16,800 363
Crane Co. 12,950 533
Danka Business Systems plc ADR 43,200 1,922
DONCASTERS plc ADR 11,200 336
Expeditors International of Washington, Inc. 24,700 1,034
* Fiserv, Inc. 28,600 1,255
* Halter Marine Group, Inc. 13,400 648
* Hirsch International Corp., Class A 14,800 262
Ingersoll Rand Co. 4,650 200
* Interim Services, Inc. 35,800 1,007
Kaydon Corp. 13,700 822
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Lockheed Martin Corp. 1 --
Miller (Herman), Inc. 50,600 2,707
PACCAR, Inc. 17,400 974
Parker Hannifin Corp. 3,600 162
Power-One, Inc. 7,500 105
Precision Castparts Corp. 25,600 1,664
* SPS Technologies, Inc. 20,800 978
Technitrol, Inc. 12,000 478
Trinity Industries, Inc. 14,300 690
Triumph Group, Inc. 19,000 635
* USA Waste Services, Inc. 30,700 1,224
York International Corp. 4,600 206
Group Total 36,279
Insurance (3.7%)
Everest Reinsurance Holdings, Inc. 24,600 1,009
Hartford Life, Inc., Class A 13,600 523
Mercury General Corp. 15,500 1,356
Nationwide Financial Services, Inc., Class A 92,600 2,581
Old Republic International Corp. 8,500 332
Reliance Group Holdings, Inc. 33,800 458
Torchmark Corp. 20,800 816
Western National Corp. 37,400 1,073
Group Total 8,148
Real Estate Investment Trusts (0.9%)
Kilroy Realty Corp. 16,900 456
Security Capital Group, Inc., Class B 26,600 914
SL Green Realty Corp. 20,500 530
Group Total 1,900
Retail (9.4%)
Arbor Drugs, Inc. 34,700 807
Applebee's International, Inc. 43,500 1,088
Brylane, Inc. 12,600 578
Culp, Inc. 23,200 481
CVS Corp. 37,700 2,144
* Fred Meyer, Inc. 8,700 463
Hughes Supply, Inc. 52,500 1,585
* Neiman Marcus Group (The), Inc. 12,400 397
* Office Depot, Inc. 65,600 1,324
Pier 1 Imports, Inc. 53,250 955
ProSource, Inc. 54,800 356
Richfood Holdings, Inc. 28,800 747
Ross Stores, Inc. 51,800 1,768
Russ Berrie & Co., Inc. 37,600 1,100
* Shopko Stores, Inc. 53,600 1,394
* Stage Stores, Inc. 16,200 699
TJX Companies, Inc. 108,000 3,301
* Tommy Hilfiger Corp. 19,300 964
V.F. Corp. 6,200 574
Group Total 20,725
Technology (12.5%)
* ADC Telecommunications, Inc. 17,000 553
* Altera Corp. 23,200 1,189
* BMC Software, Inc. 7,000 453
Box Hill Systems Corp. 10,700 187
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
* Cadence Design Systems, Inc. 21,300 1,140
* Computer Products, Inc. 42,000 1,250
* Comverse Technology, Inc. 33,100 1,746
* Credence Systems Corp. 10,100 492
Elbit Systems Ltd. 35,200 484
* Electro Scientific Industries, Inc. 6,000 366
* ESS Technology, Inc. 8,500 129
* Gateway 2000, Inc. 15,000 472
* HMT Technology Corp. 78,700 1,235
* Inacom Corp. 32,100 1,194
Innovex, Inc. 3,800 123
* Intevac, Inc. 27,300 386
* KLA Tencor Corp. 14,900 1,007
* Microage, Inc. 44,300 1,285
* Quantum Corp. 18,900 724
* SCI Systems, Inc. 63,000 3,122
* Semitool, Inc. 18,700 470
* Solectron Corp. 27,400 1,219
Storage Technology Corp. 20,100 961
* Symantec Corp. 90,800 2,066
* Tech Data Corp. 27,700 1,274
* Technology Modeling Association, Inc. 31,200 478
Tektronix, Inc. 11,100 749
* Teradyne, Inc. 32,500 1,749
* USCS International, Inc. 13,800 309
Vishay Intertechnology, Inc. 21,300 563
* Xilinx, Inc. 8,200 415
Group Total 27,790
Utilities (2.5%)
Black Hills Corp. 25,200 739
IPALCO Enterprises, Inc. 27,800 952
LG&E Energy Corp. 30,800 683
New Century Energies, Inc. 21,400 889
* Nextel Communications, Inc., Class A 52,500 1,516
Pinnacle West Capital Corp. 23,700 797
Group Total 5,576
Total Common Stocks (Cost $172,425) 214,103
UNIT TRUST (0.9%)
S&P 400 Mid-Cap Depository Receipts (Cost $2,051) 32,100 2,070
Face
Amount Value
(000) (000)+
----- ------
CASH EQUIVALENT (2.6%)
Repurchase Agreement (2.6%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $5,793,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued
at $5,847 (Cost $5,792) $ 5,792 5,792
Total Investments (100.2%) (Cost $180,268) 221,965
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
Other Assets and Liabilities (-0.2%)
Dividends Receivable 109
Interest Receivable 1
Receivable for Investments Sold 785
Receivable for Fund Shares Sold 1,556
Other Assets 3
Payable for Investments Purchased (2,510)
Payable for Fund Shares Redeemed (1)
Payable for Administrative Fees (14)
Payable for Investment Advisory Fees (337)
Payable for Trustees' Deferred Compensation Plan-Note F (2)
Other liabilities (57)
(467)
NET ASSETS (100%) $221,498
INSTITUTIONAL CLASS
Net Assets
Applicable to 10,103,104 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 220,260
NET ASSET VALUE PER SHARE $ 21.80
INVESTMENT CLASS
Net Assets
Applicable to 56,951 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 1,238
NET ASSET VALUE PER SHARE $ 21.75
Net Assets Consist of:
Paid In Capital $ 157,584
Undistributed Net Investment Income (Loss) 310
Undistributed Realized Net Gain (Loss) 21,907
Unrealized Appreciation (Depreciation) on Investment Securities 41,697
Net Assets $ 221,498
</TABLE>
+ See Note A1 to Financial Statements.
* Non-income producing security.
@ Value is less than $500.
ADR American Depositary Receipt
34
<PAGE>
Emerging Markets
Portfolio
Statement of Net Assets
Common Stocks (76.2%)
<TABLE>
<CAPTION>
Value
September 30, 1997 Shares (000)+
- ------------------ ------ ------
<S> <C> <C>
Argentina (3.2%)
YPF SA ADR 19,500 $719
Brazil (7.4%)
Light Participacoes SA 2,500,000 890
* Multicanal Participacoes SA ADR 48,900 520
Telebras SA 2,361,000 273
Group Total 1,683
Hong Kong (1.8%)
* China Southern Airlines Co., Ltd. ADR 13,600 406
India (13.0%)
Bajaj Auto Ltd. 27,000 412
East India Hotels Ltd. 24,000 251
Hindustan Lever Ltd. 2,704 100
Indian Petrochemicals Corp., Ltd. 131,000 413
ITC Ltd. 5,633 92
Mahanagar Telephone Nigam Ltd. 134,000 953
Reliance Industries Ltd. 74,820 746
Group Total 2,967
Indonesia (6.7%)
Enseval PuTera Mega 866,000 142
Gulf Indonesia Resources Ltd. 12,900 287
Hanjaya Mandala Sampoerna (Foreign) 153,000 316
Lippo Securities 1,650,000 245
Pabrik Kertas Tjiwi Kimia 343,500 191
Sinar Mas Multiartha (Foreign) 166,600 44
Unilever Indonesia (Foreign) 29,000 306
Group Total 1,531
Israel (7.3%)
Bank Hapoalim Ltd. 240,000 557
Elron Electronic Industries Ltd. 10,000 184
First International Bank of Israel Ltd., Class 1 3,300 439
Supersol Ltd. 150,000 488
Group Total 1,668
Korea (1.8%)
LG International Corp. 60,938 419
Mexico (21.1%)
ALFA SA de C.V., Class A 121,000 1,138
Cemex SA de C.V., Series B 125,000 749
Coca-Cola Femsa SA ADR 12,000 697
Grupo Mexico SA, Series B 137,000 554
* Grupo Posadas SA, Series A 969,000 749
Organizacion Soriana SA de C.V., Series B 232,000 920
Group Total 4,807
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)+
------ ------
<S> <C> <C>
Russia (2.3%)
* Lukoil Holding ADR 5,300 521
Singapore (2.3%)
* Creative Technology Ltd. 20,900 534
Thailand (4.1%)
Hana Microelectronics Public Co., Ltd. (Foreign) 105,000 360
Ruam Pattana Fund II (Foreign) 830,600 167
* Sub-Thawee Fund 785,400 407
Group Total 934
Turkey (3.5%)
Yapi ve Kredi Bankasi AS 32,397,000 809
United Kingdom (1.7%)
Lonrho PLC 210,000 392
Total Common Stocks (Cost $15,931) 17,390
PREFERRED STOCKS (11.8%)
Brazil (11.8%)
Banco Itau SA 1,391,000 899
* CESP 14,950,000 1,267
Telebras SA 2,119,700 274
Votorantim Celulose e Papel SA 9,400,000 262
Total Preferred Stocks (Cost $1,498) 2,702
WARRANT (0.0%)
Indonesia (0.0%)
* Sinar Mas Multiartha (Foreign),
expiring 11/28/01 (Cost $0) 12,495 1
PURCHASED OPTIONS (4.7%)
Korea (4.7%)
Pohang Iron & Steel Co. Call Option,
expiring 9/4/99, strike price $0.01 6,720 413
Shinhan Bank Call Option, expiring
9/4/99, strike price $0.01 21,450 180
SK Telecom Co., Ltd. Call Option,
expiring 9/4/99, strike price $0.01 1,019 479
Total Purchased Options (Cost $1,603) 1,072
FOREIGN CURRENCY (0.1%)
</TABLE>
<TABLE>
<CAPTION>
Face
Amount
(000)
-----
<S> <C> <C> <C>
@ Hong Kong Dollar HKD 2 --
Indian Rupee INR 489 13
Indonesian Rupiah IDR 2,163 1
Israeli Shekel ILS 7 2
Singapore Dollar SGD 2 1
Total Foreign Currency (Cost $18) 17
CASH EQUIVALENTS (8.4%)
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Face
Amount
(000)
-----
<S> <C> <C>
U.S. Treasury Security (0.8%)
++ U.S. Treasury Bill 11/20/97 $170 169
Repurchase Agreement (7.6%)
Chase Securities, Inc. 5.90%, dated
9/30/97, due 10/1/97, to be repurchased
at $1,738, collateralized by various
U.S. Government Obligations,
due 10/1/97-1/29/99, valued at $1,754 1,738 1,738
Total Cash Equivalents (Cost $1,907) 1,907
Total Investments (101.2%) (Cost $20,957) 23,089
Value
(000)+
Other Assets and Liabilities (-1.2%)
Foreign Currency Held as Collateral on Futures
Contracts (Cost $60) $ 60
Dividends Receivable 30
Receivable for Withholding Tax Reclaim 1
Unrealized Gain on Futures Contracts 18
Other Assets 2
Payable for Investments Purchased (252)
Payable for Investment Advisory Fees (47)
Payable for Administrative Fees (1)
Accrued Foreign Capital Gains Taxes (38)
Payable for Trustees' Deferred Compensation
Plan-Note F (1)
Other Liabilities (53)
(281)
NET ASSETS (100%) $22,808
INSTITUTIONAL CLASS
Net Assets
Applicable to 1,838,162 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $22,808
NET ASSET VALUE PER SHARE $ 12.41
Net Assets Consist of:
Paid in Capital $17,829
Undistributed Net Investment Income (Loss) 91
Undistributed Realized Net Gain (Loss) 2,776
Unrealized Appreciation (Depreciation) on:
Investment Securities (Net of Foreign Capital
Gain Tax of $38) 2,095
Foreign Currency Transactions (1)
Futures 18
Net Assets $22,808
</TABLE>
+ See Note A1 to Financial Statements.
* Non-income producing security.
++ A portion of these securities was pledged to cover margin
requirements for futures contracts.
@ Value is less than $500.
ADR American Depositary Receipt
37
<PAGE>
Statement of Net Assets
Fixed Income
Portfolio
Statement of Net Assets
Fixed Income Securities (97.9%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Adjustable Rate Mortgages (9.5%)
--Government National Mortgage
Association Various Pools:
6.00%, 7/20/27 Agy 118,000 118,885
November TBA
6.00%, 11/20/27 Agy 195,000 196,158
Group Total 315,043
Agency Fixed Rate Mortgages (11.4%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
9.50%, 10/1/16 Agy 1,825 1,976
10.00%, 11/1/20 Agy 10,800 11,786
10.50%, 4/1/11-10/1/20 Agy 3,958 4,415
11.00%, 9/1/15-9/1/20 Agy 6,620 7,431
11.25%, 10/1/11-12/1/15 Agy 1,674 1,885
11.50%, 1/1/11-12/1/15 Agy 169 193
11.75%, 4/1/19 Agy 175 199
12.50%, 8/1/13 Agy 19 22
13.00%, 6/1/19 Agy 57 65
14.75%, 3/1/10 Agy 35 41
Gold Pools:
7.00%, 9/1/23-6/1/25 Agy 53,789 53,881
7.50%, 2/1/27-6/1/27 Agy 1,697 1,730
9.50%, 10/1/17-1/1/21 Agy 8,719 9,507
10.00%, 10/1/20 Agy 4,282 4,732
10.50%, 8/1/19-4/1/21 Agy 1,875 2,085
Federal National
Mortgage Association
Conventional Pools:
9.50%, 7/1/16 Agy 2,861 3,109
10.00%, 10/1/07-4/1/27 Agy 11,117 12,186
10.50%, 6/1/10-11/1/20 Agy 7,128 7,984
10.75%, 2/1/11 Agy 45 50
11.00%, 1/1/16-11/1/20 Agy 5,689 6,411
11.50%, 11/1/15-2/1/20 Agy 6,165 7,035
12.00%, 4/1/15 Agy 55 64
12.50%, 5/1/12 Agy 1,126 1,313
Government National Mortgage
Association Various Pools:
7.00%, 12/15/22-12/15/23 Agy 95,712 96,047
10.00%, 11/15/09-3/15/27 Agy 57,669 63,908
10.50%, 2/15/13-8/15/26 Agy 21,996 24,748
11.00%, 12/15/09-5/15/26 Agy 44,689 51,052
11.50%, 7/20/15-9/20/19 Agy 520 580
12.00%, 4/15/12-3/15/16 Agy 1,530 1,775
Group Total 376,210
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Asset Backed Corporates (5.3%)
Advanta Mortgage Loan Trust,
Series 97-3 A2
6.61%, 4/25/12 AAA 13,000 13,022
Arcadia Auto,
Series 97-C A4
6.375%, 1/15/03 AAA 15,280 15,341
^Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 43 43
##Airplanes Pass Through Trust,
Series 1 B
6.756%, 3/15/19 A 5,816 5,830
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 5,900 6,039
94-1 C2 CMO
9.35%, 9/15/04 BBB 4,975 5,116
CIT Group Home Equity Loan Trust,
Series 97-1 A3
6.25%, 9/15/01 AAA 9,625 9,629
Commercial Financial Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A 8,225 8,221
^Federal Mortgage
Acceptance Corp.,
Loan Receivables Trust,
Series 96-B A1
7.629%, 11/1/18 A 5,422 5,530
First Plus Home Loan Trust, Series:
97-3 A2
6.48%, 9/10/08 AAA 9,590 9,612
97-3 A3
6.57%, 10/10/10 AAA 8,860 8,895
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 28,307 28,283
^Long Beach Auto,
Series 97-2 A
6.69%, 9/25/04 AAA 12,076 12,078
^NAL Auto Trust,
Series:
96-4 A
6.90%, 12/15/00 N/R 3,968 3,943
97-2 A
7.75%, 9/15/02 N/R 9,086 9,095
^National Car Rental Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 8,025 8,223
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Old Stone Credit Corp,
Series 92-3 B1
6.35%, 9/25/07 AAA 10 10
Security Pacific
Home Equity Trust,
Series 91-AB
10.50%, 3/10/06 A+ 3,073 3,075
^Team Fleet Financing Corp.,
Series 96-1A
6.65%, 12/15/02 A- 4,800 4,805
WFS Financial Owner Trust,
Series 97-C A3
6.01%, 3/20/02 AAA 17,350 17,331
Group Total 174,121
Asset Backed Mortgages (1.1%)
Advanta Mortgage
Loan Trust,
Series 96-2 A5
8.08%, 6/25/27 AAA 8,940 9,297
Champion Home Equity
Loan Trust,
Series 96-2 A4
8.00%, 9/25/28 AAA 6,800 7,091
Cityscape Home Equity
Loan Trust,
Series:
96-3 YMA
10/25/26 N/R 165,603 223
96-3 A IO
1.00%, 10/25/26 N/R 140,679 3,487
Contimortgage Home Equity Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 139,666 3,670
96-4 A12 IO
1.05%, 1/15/28 AAA 45,114 1,186
ss. 96-4 A12 YMA
1/15/28
(acquired 12/16/96, cost $83) AAA 56,415 83
^96-4 A12 YMA
1/15/28 AAA 169,152 252
97-1 A10 YMA
3/15/28 N/R 168,379 235
97-1 A10 I IO
1.10%, 3/15/28 AAA 164,485 4,503
IMC Home Equity
Loan Trust,
Series 96-3 A7
8.05%, 8/25/26 AAA 6,717 6,998
Group Total 37,025
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Collateralized Mortgage Obligations-
Agency Collateral Series (2.6%)
Federal Home Loan Mortgage Corporation,
Series:
1415 S Inv Fl IO CMO
18.813%, 11/15/07 Agy 3,111 1,434
1476 S Inv Fl IO
REMIC PAC
4.363%, 2/15/08 Agy 29,318 3,419
1485 S Inv Fl IO
REMIC
3.913%, 3/15/08 Agy 28,037 2,487
1600 SA Inv Fl IO
REMIC
2.313%, 10/15/08 Agy 59,012 3,263
1709 H PO REMIC
1/15/24 Agy 801 409
1750 C PD PO REMIC
3/15/24 Agy 1,206 856
1813 K PO
2/15/24 Agy 795 547
1844 PC PO
3/15/24 Agy 1,460 922
1887 I PO
10/15/22 Agy 860 577
1950 Inv Fl IO
2.313%, 10/15/22 Agy 1,550 142
90-129 H PAC
8.85%, 3/15/21 Agy 80 87
90-1007 F Inv Fl
21.795%, 1/15/20 Agy 1 1
92-1398 I Inv Fl REMIC
10.304%, 10/15/07 Agy 2,471 2,786
93-149 O PO REMIC
8/25/23 Agy 1,733 1,100
Federal National Mortgage Association,
Series:
90-118 S Inv Fl CMO
28.975%, 9/25/20 Agy 1,348 2,099
92-186 S Inv Fl IO CMO
3.363%, 10/25/07 Agy 55,194 4,741
93-205 G PO REMIC
9/25/23 Agy 4,363 2,812
93-235 H PO REMIC
9/25/23 Agy 1,744 1,364
96-11 V PO REMIC
9/25/23 Agy 12,280 8,278
96-14 PC PO REMIC
12/25/23 Agy 1,385 797
96-37 H PO REMIC
8/25/23 Agy 8,563 6,365
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
96-46 PB PO REMIC
9/25/23 Agy 1,425 954
96-54 N PO REMIC
7/25/23 Agy 1,025 766
96-54 O PO REMIC
11/25/23 Agy 1,145 713
96-68 SC Inv Fl IO
REMIC
2.475%, 1/25/24 Agy 11,695 1,419
97-7 AE PO REMIC
2/15/23 Agy 4,943 3,566
97-30 Inv Fl IO REMIC
2.281%, 7/25/22 Agy 465 43
282 1 PO
5/15/24 Agy 27,242 18,669
287 1 PO
12/17/07 Agy 19,282 12,618
G92-53 S Inv Fl IO
REMIC
32.625%, 9/25/22 Agy 2,561 2,123
Government National Mortgage
Association, Series:
96-12 S Inv Fl IO
2.813%, 6/16/26 Agy 2,091 145
96-13 S Inv Fl IO
3.65%, 7/16/11 Agy 819 71
96-17 S Inv Fl IO REMIC
2.863%, 8/16/26 Agy 1,019 73
Kidder Peabody Mortgage Assets
Trust, Series:
87-B IO
9.50%, 4/22/18 AAA 86 26
87-B PO
4/22/18 AAA 86 64
Morgan Stanley
Mortgage Trust,
Series 88-28 8 PAC
9.40%, 10/1/18 AAA 75 78
Group Total 85,814
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (6.1%)
American Housing Trust, Series V 1G
9.125%, 4/25/21 AAA 6,566 6,974
Capstead Mortgage Corp.
7.25%, 9/15/27 AAA 12,275 12,270
Citicorp Mortgage Securities, Inc.,
Series 93-9 A1
7.00%, 3/25/20 AAA 55 56
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
CMC Securities Corp. IV,
Series 94-G A4
7.00%, 9/25/24 AAA 5,937 5,673
Countrywide Funding Corp.,
Series 94-12 A10
7.00%, 5/25/24 AAA 510 492
DLJ Mortgage
Acceptance Corp.,
Series:
97-CF1 A1B
7.60%, 5/15/30 AAA 11,650 12,349
^97-CF1 S IO
1.097%, 5/15/30 AAA 74,739 4,971
97-CF2 A1B
6.82%, 10/15/30 AAA 19,725 19,860
ss.First Boston Mortgage Corp.,
Series 92-4 B1
8.125%, 10/25/22 (acquired
1/25/93-12/9/93, cost $3,945) A 4,157 4,242
GE Capital Mortgage Services, Inc.,
Series 94-24 A4
7.00%, 7/25/24 AAA 8,138 7,798
J. P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5 A2
7.069%, 9/15/29 AAA 14,750 15,071
ss.##Kidder Peabody
Funding Corp.,
Series 92-4 B2
8.467%, 5/28/22 (acquired 8/5/92-
8/29/97, cost $3,770) N/R 3,758 3,755
Mid-State Trust II, Series 88-2 A4
9.625%, 4/1/03 AAA 2,715 2,949
PNC Mortgage
Securities Corp.,
Series 96-1 B1
7.50%, 6/25/26 AA 138 140
Prudential Home Mortgage Securities
Co., Inc., Series:
ss.90-5 A3
9.50%, 5/25/05 (acquired 4/19/90-
11/30/94, cost $806) AAA 847 847
+92-33 B1
7.50%, 11/15/22 Aa3 120 116
^+92-A 2B4
7.90%, 4/28/22 A1 11,188 10,950
ss.+93-17 B1
6.50%, 3/1/23 (acquired 4/14/93-
10/13/94, cost $6,316) A2 6,604 6,507
^#94-A 3B5
6.802%, 4/28/24 N/R 11,307 10,915
^94-A 3B3
6.803%, 4/28/24 N/R 410 397
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Residential Accredit
Loans, Inc., Series:
97-Q52 A8
7.75%, 3/25/27 AAA 5,540 5,708
+97-QS1 A11
7.50%, 2/25/27 Aaa 10,466 10,594
97-QS3
7.75%, 4/25/27 AAA 11,980 12,327
97-QS4 A7
7.75%, 5/25/27 AAA 13,000 13,399
Residential Funding Mortgage
Securities Co., Inc., Series:
92-S15 A5
8.00%, 5/25/07 AAA 14 13
93-MZ3 A2
6.97%, 8/28/23 N/R 7,821 7,616
94-S1 A19
6.75%, 1/25/24 AAA 11,625 11,313
Rural Housing Trust, Series 87-1M
3.33%, 4/1/26 A- 5,439 5,184
Ryland Mortgage Securities Corp.,
Series:
+93-4 A9
7.50%, 8/25/24 Aaa 400 401
94-7B 4A2
7.50%, 8/25/25 AAA 7,500 7,520
Saxon Mortgage Securities Corp.,
Series 93-8A A6
7.375%, 9/25/23 AAA 235 233
Group Total 200,640
Commercial Mortgages (8.2%)
+American Southwest Financial
Securities Corp.,
Series 95-C1 A1B
7.40%, 11/17/04 Aaa 8,075 8,349
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 39,417 40,560
^+96-D3 A1C
7.40%, 10/13/26 Aaa 8,060 8,470
96-MD6 A1C
7.04%, 11/13/26 AAA 8,210 8,438
Beverly Finance Corp.
8.36%, 7/15/04 AA- 125 135
^Carousel Center
Finance, Inc.,
Series 1 A1
6.828%, 11/15/07 AA 6,200 6,244
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------ --------- ---------
<S> <C> <C> <C>
CBM Funding Corp., Series 96-1 A3PI
7.08%, 2/1/13 AA 7,520 7,752
^Creekwood Capital Corp., Series 95-1A
8.47%, 3/16/15 AA 5,612 6,249
^Crystal Run Properties,
Series A
7.393%, 8/15/11 AA 8,500 8,878
CS First Boston Mortgage Securities
Corp., Series 97-C1 A1C
7.24%, 6/20/29 AAA 15,010 15,568
DLJ Mortgage
Acceptance Corp.,
Series:
^95-CF2 A3
7.05%, 12/17/27 A 3,300 3,329
95-CF2 S2 IO
1.645%, 12/17/27 BBB 48,300 4,389
^96-CF1 A1B
7.58%, 3/13/28 AAA 5,350 5,639
^96-CF2 A1B
7.29%, 11/12/21 AAA 2,320 2,404
+##96-CF2 S IO
1.643%, 11/12/21 N/R 38,197 3,387
+##GMAC Commercial Mortgage
Securities, Inc.,
Series 96-C1 X2 IO
1.96%, 3/15/21 Aaa 35,229 3,289
+GS Mortgage Securities Corp.,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 15,545 15,876
97-GL X2 IO
1.07%, 7/13/30 Aaa 37,474 2,013
^Lakeside Finance Corp.
6.47%, 12/15/00 AA 145 145
^Lakewood Mall Finance Co.,
Series 95-C1 A
7.00%, 8/13/10 AA 7,000 7,133
+LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 9,936 10,328
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 11,500 12,001
96-C2 A2
6.82%, 11/21/28 AAA 3,855 3,903
96-C2 IO
1.529%, 11/21/28 N/R 40,132 3,603
97-C1 A3
7.12%, 6/18/29 AAA 13,000 13,382
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
+Midland Realty
Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/27 Aaa 6,855 7,093
Mortgage Capital Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 10,750 11,094
+97-MC1 A3
7.288%, 7/20/27 Aaa 14,250 14,818
Nomura Asset
Securities Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 N/R 280 288
94-MD1 A2
7.664%, 3/15/18 N/R 65 68
94-MD1 A3
8.026%, 3/15/18 N/R 4,349 4,680
^Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 11,907 12,516
Prime Property Funding, Series 1 A
6.633%, 7/23/03 AA 4,834 4,835
+Salomon Brothers Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 8,000 8,227
Sawgrass Financial,
Series 93-A1
6.45%, 1/20/06 AAA 155 155
##Structured Asset
Securities Corp.,
Series:
96-CFL X1A IO
1.483%, 2/25/28 N/R 63,256 1,680
96-CFL X1 IO
1.335%, 2/25/28 N/R 64,538 3,345
96-CFL X2 IO
1.249%, 2/25/28 N/R 15,835 475
Group Total 270,738
Energy (0.4%)
^Excel Paralubes Funding
7.43%, 11/1/15 A- 7,125 7,218
Mobile Energy Services
8.665%, 1/1/17 BBB- 7,021 7,475
Group Total 14,693
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Finance (12.1%)
^Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 17,085 18,415
^BankAmerica Institutional,
Series A
8.07%, 12/31/26 A- 18,525 19,051
^BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 16,725 16,929
^Corestates Capital Corp.
8.00%, 12/15/26 A- 14,950 15,272
^Equitable Life Assurance Society of
the U.S., Series 1 A
6.95%, 12/1/05 A 15,162 15,273
^Farmers Insurance Exchange
8.625%, 5/1/24 BBB+ 15,620 16,633
^First Chicago NBD Corp., Series A
7.95%, 12/1/26 A- 20,100 20,302
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 23,710 24,302
^Florida Property & Casualty
7.375%, 7/1/03 A- 8,700 8,981
^Florida Windstorm
6.70%, 8/25/04 A- 19,575 19,513
^+Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)63,625 61,744
^John Hancock Surplus Note
7.375%, 2/15/24 AA- 18,260 18,247
^Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA 12,200 11,871
^Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 13,160 12,950
NB Capital Trust
8.25%, 4/15/27 A- 13,975 14,730
^New York Life Insurance Co.
7.50%, 12/15/23 AA 6,105 6,042
PNC Institutional Capital, Series A
7.95%, 12/15/26 BBB+ 17,675 17,752
^Prime Property Funding
6.80%, 8/15/02 A 6,485 6,520
7.00%, 8/15/04 A 6,720 6,790
^State Street Institutional Capital,
Series:
^A
7.94%, 12/30/26 A 9,800 9,989
^B
8.035%, 3/15/27 A 6,575 6,759
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Washington Mutual Capital
8.375%, 6/1/27 BBB- 4,775 5,010
Wells Fargo Capital,
Series:
^A
8.125%, 12/1/26 BBB 16,875 17,361
B
7.95%, 12/1/26 BBB+ 1,900 1,915
^World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 10,369 10,480
96 WFP-D
6.95%, 9/1/13 AA- 16,625 16,833
Group Total 399,664
Foreign Governments (0.9%)
Government of Germany
7.375%, 1/3/05 AAA DEM45,775 29,100
Industrials (3.5%)
##Blue Bell Funding
11.85%, 5/1/99 BB- 4,542 4,655
DR Securitized Lease Trust,
Series:
93-K1 A1
6.66%, 8/15/10 BB- 9,247 8,426
93-K1 A2
7.43%, 8/15/18 BB- 260 226
94-K1 A1
7.60%, 8/15/07 BB- 7,075 6,882
DR Structured Finance,
Series 94-K2
9.35%, 8/15/19 BB- 3,795 3,845
^Entertainment Properties,
14.253%
(Preferred Stock) BBB- (1)10,200 9,811
^HMH Properties, Inc.
8.875%, 7/15/07 BB- 3,450 3,540
Kmart Corp.
7.75%, 10/1/12 B+ 160 150
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB- 3,500 3,572
News America Holdings
8.875%, 4/26/23 BBB 12,030 13,309
7.75%, 1/20/24 BBB 2,425 2,392
^Oxymar
7.50%, 2/15/16 BBB 5,520 5,516
Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ 23,577 23,278
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Philip Morris Cos., Inc.
6.375%, 2/1/06 A 170 164
Rhone-Poulenc Rorer, Inc.,
Series 92-A 3
8.62%, 1/5/21 BBB+ 7,950 8,698
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 6,940 7,258
Southland Corp.
5.00%, 12/15/03 BB+ 11,148 9,615
Tier One Properties,
11.095%
(Preferred Stock) A (1)4,650 4,556
Group Total 115,893
Non-Agency Fixed Rate Mortgages (0.0%)
ss.Household Bank,
Series 85-1
7.94%, 5/1/02 (acquired 6/22/94,
cost $259) N/R 274 275
ss.##Magnolia Federal Bank, Series 84-2
9.111%, 10/1/07 (acquired 5/1/87,
cost $793) N/R 843 865
Group Total 1,140
Rated Non-Agency Fixed Rate Mortgages
(0.3%)
Bank of America,
Series A
8.375%, 5/1/07 AAA 17 17
^DLJ Mortgage
Acceptance Corp.,
Series 93-MF7 A1
7.40%, 6/18/03 AAA 112 115
##Resolution Trust Corp.,
Series 92-5 C
8.618%, 1/25/26 AA 4,479 4,518
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 4,712 4,539
+Town & Country
Funding Corp.,
Series A
5.85%, 8/15/98 Aa2 550 549
Group Total 9,738
Stripped Mortgage Backed Securities-
Agency Collateral Series (1.2%)
Federal National Mortgage Association,
Series:
249 1 PO
10/25/23 Agy 39,071 25,818
254 1 PO
1/1/24 Agy 4,735 3,392
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
260 1 PO
4/1/24 Agy 6,307 4,481
93-146 G PO REMIC
5/25/23 Agy 5,411 3,546
93-243 C PO REMIC
11/25/23 Agy 1,192 920
93-M2 B IO REMIC
2.575%, 11/25/23 Agy 250 14
96-27 A PO REMIC
10/25/23 Agy 155 68
First Boston Mortgage Securities
Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA 67 19
Group Total 38,258
Telephones (1.2%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 7,615 8,348
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 16,515 17,773
8.75%, 2/15/23 BBB- 3,160 3,268
#Teleport Communications Group, Inc.
0.00%, 7/1/07 B 12,270 9,601
Group Total 38,990
Transportation (0.3%)
^Jet Equipment Trust,
Series:
95-A A11
10.00%, 6/15/12 A+ 275 341
95-5A C
10.69%, 11/1/13 BBB 8,320 10,530
Group Total 10,871
U.S. Treasury Securities (28.4%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 139,435 176,777
U.S. Treasury Notes
6.25%, 5/31/99 Tsy 239,800 241,524
6.75%, 6/30/99 Tsy 136,800 138,937
6.875%, 7/31/99 Tsy 15,000 15,267
++7.125%, 9/30/99 Tsy 223,000 228,434
3.375%, 1/15/07 (Inflation Indexed) Tsy 108,694 106,621
U.S. Treasury Strips, PO
11/15/18 Tsy 125,000 31,584
2/15/19 Tsy 5,000 1,243
Group Total 940,387
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Utilities (0.2%)
^Edison Mission Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 7,125 7,328
Yankee (5.2%)
^Alcoa Aluminio SA, Series 96-1
7.50%, 12/16/08 BBB 18,400 18,776
AST Research, Inc.
7.45%, 10/1/02 A- 12,500 12,449
^Hyundai Semiconductor
America
8.625%, 5/15/07 BBB- 10,100 10,307
^Israel Electric Corp., Ltd.
7.25%, 12/15/06 A- 7,925 8,030
Korea Development Bank
7.375%, 9/17/04 AA- 11,360 11,451
National Power Corp.
7.875%, 12/15/06 BB+ 11,080 10,807
8.40%, 12/15/16 BB+ 7,525 7,220
^Paiton Energy Funding
9.34%, 2/15/14 BBB- 9,395 10,304
^Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 11,850 11,745
^Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 16,420 17,341
^Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 18,340 19,917
##Republic of Argentina
5.00%, 3/31/23 BB 16,320 12,322
Republic of Argentina Par, Series L,
'Euro'
5.50%, 3/31/23 BB 4,160 3,141
Republic of Colombia
8.70%, 2/15/16 BBB- 8,855 9,025
United Mexican States,
Series A
6.25%, 12/31/19 BB 10,975 9,096
Group Total 171,931
Total Fixed Income Securities (Cost $3,179,704) 3,237,584
RIGHTS (0.0%)
Shares
------
@United Mexican States Recovery Rights,
expiring 6/30/03 (Cost $0) (1) 25,575,000 --
STRUCTURED INVESTMENT (0.1%)-See Note A7
Face
Amount
(000)
-----
Morgan Guaranty Trust Company, 11/20/05;
monthly payments equal to 1% per annum
of the outstanding notional balance,
indexed to GNMA ARM pools (Cost $6,212) N/R $156,321 4,513
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
INTEREST RATE CAPS (0.1%)-See Note A6
Bankers Trust Co., Inc.,
terminating 10/15/99, to receive on
10/15/99 the excess, as measured on
10/15/98, of 12 month LIBOR over
6.34% multiplied by the notional amount. N/R 2,800 $8
J.P. Morgan and Co., Inc., terminating
10/15/99, to receive on 10/15/99 the
excess, as measured on 10/15/98, of 12
month LIBOR over 6.34% multiplied by
the notional amount. N/R 778,400 2,355
Group Total (Premium Paid $3,301) 2,363
CASH EQUIVALENTS (23.2%)
Short-term Investments
Held as Collateral for
Loaned Securities (16.5%) 544,483 544,483
Commercial Paper (3.8%)
American Express Credit Corp.
5.50%, 10/17/97 30,000 29,927
Atlantic Asset Securitization Corp.
5.57%, 10/16/97 20,000 19,954
Delaware Funding Corp.
5.50%, 10/14/97 50,000 49,900
John Deere Capital Corp.
5.53%, 10/7/97 25,000 24,977
Group Total 124,758
Agency Floating Rate Mortgage (0.0%)
##Federal Home Loan Mortgage Corporation
2/15/24 135 135
Discount Note (0.7%)
Federal National Mortgage Association
10/30/97 25,000 24,890
U.S. Treasury Security (0.0%)
U.S. Treasury Bill
11/13/97 235 234
Face
Amount Value
(000) (000)+
----- ------
Repurchase Agreement (2.2%)
Chase Securities, Inc. 5.90% dated
9/30/97, due 10/1/97, to be repurchased
at $71,792, collateralized by various
U.S. Government Obligations, due 10/1/97-
1/29/99, valued at $72,456 71,780 71,780
Total Cash Equivalents (Cost $766,280) 766,280
Total Investments (121.3%) (Cost $3,955,497) 4,010,740
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
Other Assets and Liabilities (-21.3%)
Cash 1
Dividends Receivable 2,973
Interest Receivable 35,743
Receivable for Investments Sold 41,860
Receivable for Fund Shares Sold 16,011
Unrealized Gain on Swap Agreements 54
Receivable for Daily Variation on Futures Contracts 170
Other Assets 67
Payable for Investments Purchased (251,715)
Payable for Fund Shares Redeemed (797)
Payable for Investment Advisory Fees (2,920)
Payable for Administrative Fees (212)
Payable for Shareholder Servicing Fees-Investment Class (1)
Payable for Distribution Fees-Adviser Class (14)
Payable for Trustees' Deferred Compensation Plan-Note F (57)
Unrealized Loss on Forward Foreign Currency Contracts (454)
Collateral on Securities Loaned, at Value (544,483)
Other Liabilities (769)
(704,543)
NET ASSETS (100%) $3,306,197
INSTITUTIONAL CLASS
Net Assets
Applicable to 263,471,478 outstanding shares of beneficial
interest (unlimited authorization, no par value) $3,219,987
NET ASSET VALUE PER SHARE $12.22
INVESTMENT CLASS
Net Assets
Applicable to 779,333 outstanding shares of beneficial
interest (unlimited authorization, no par value) $9,527
NET ASSET VALUE PER SHARE $12.22
Value
(000)+
------
ADVISER CLASS
Net Assets
Applicable to 6,275,192 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 76,683
NET ASSET VALUE PER SHARE $ 12.22
Net Assets Consist of:
Paid in Capital $3,155,536
Undistributed Net Investment Income (Loss) 57,872
Undistributed Realized Net Gain (Loss) 40,102
Unrealized Appreciation (Depreciation) on:
Investment Securities 55,243
Foreign Currency Transactions (534)
Futures and Swaps (2,022)
Net Assets $3,306,197
</TABLE>
53
<PAGE>
ss. Restricted Security-Total market value of restricted
securities owned at September 30, 1997 was $16,574 or 0.5% of
net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin
requirements for futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated
by Standard & Poor's Corporation.
# Step Bond-Coupon rate increases in increments to maturity.
Rate disclosed is as of September 30, 1997. Maturity date
disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is as of
September 30, 1997.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is
the effective rate at September 30, 1997.
CMO Collateralized Mortgage Obligation
DEM German Mark
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's
Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to
Financial Statements.
YMA Yield Maintenance Agreement
54
<PAGE>
Statement of Net Assets
Domestic Fixed
Income Portfolio
Statement of Net Assets
Fixed Income Securities (96.9%)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Adjustable Rate Mortgages (10.5%)
##Government National Mortgage Association
Various Pools:
6.00%, 8/20/27-9/20/27 Agy $7,900 $7,959
November TBA
6.00%, 11/20/27 Agy 2,225 2,238
Group Total 10,197
Agency Fixed Rate Mortgages (12.7%)
Federal Home Loan Mortgage Corporation
Conventional Pools:
10.00%, 9/1/17-11/1/20 Agy 760 830
10.50%, 4/1/26 Agy 473 527
11.00%, 5/1/20 Agy 220 247
Gold Pools:
7.00%, 4/1/24-12/1/24 Agy 1,895 1,897
12.00%, 11/1/19 Agy 91 105
Federal National Mortgage Association
Conventional Pools:
9.50%, 2/1/20-8/1/21 Agy 933 1,012
10.00%, 5/1/22 Agy 139 152
10.50%, 12/1/17 Agy 379 424
11.50%, 9/1/25 Agy 179 204
Government National Mortgage Association
Various Pools:
7.00%, 12/15/22-12/15/23 Agy 3,256 3,267
10.00%, 9/15/18-12/25/26 Agy 1,029 1,139
10.50%, 5/15/19-2/15/25 Agy 1,295 1,456
11.00%, 12/15/09-7/15/20 Agy 775 887
12.00%, 12/15/12-3/15/15 Agy 141 163
Group Total 12,310
Asset Backed Corporates (8.1%)
^Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 221 222
##Airplanes Pass Through Trust,
Series 1 B
6.756%, 3/15/19 A 339 340
ALPS, Series 94-1 A4 CMO
7.80%, 9/15/04 AA 375 384
Americredit Automobile Receivables Trust,
Series 96-B A
6.50%, 1/12/02 AAA 402 404
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Arcadia Auto Receivables Trust,
Series 97-C A4
6.375%, 1/15/03 AAA 480 482
CPS Auto Grantor Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 330 332
^First Merchants Auto Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA 376 378
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 285 286
97-3 A3
6.57%, 10/10/10 AAA 280 281
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 815 814
^Long Beach Auto,
Series 97-2 A
6.69%, 9/25/04 AAA 370 371
NAL Auto Trust,
Series 97-2A
7.75%, 9/15/02 A 467 467
^National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 A 375 384
^++NPR Health Care,
Series 97-1 A
6.815%, 7/1/01 AAA 200 202
^Railcar Leasing Series 1 A2
7.125%, 1/15/13 AAA 650 672
^Team Fleet Financing Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 250 250
97-1 A
7.35%, 5/15/03 A- 600 617
Union Acceptance Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 451 452
WFS Financial Owner Trust,
Series 97-C A3
6.10%, 3/20/02 AAA 490 489
Group Total 7,827
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Asset Backed Mortgages (3.0%)
AFC Home Equity Loan Trust,
Series 96-4 1A6
7.22%, 3/25/27 AAA 500 505
Cityscape Home Equity
Loan Trust,
Series:
96-3 YMA
10/25/26 N/R 7,094 10
96-3 A8
7.65%, 9/25/25 AAA 450 460
ss.96-3 A IO
1.00%, 10/25/26 (acquired
12/24/96, cost $214) AAA 7,094 176
Contimortgage Home Equity Loan Trust,
Series:
96-3 A7
8.04%, 9/15/27 AAA 400 420
^96-4 A11 IO
1.10%, 1/15/28 AAA 6,027 158
96-4 A12 IO
1.05%, 1/15/28 AAA 1,947 51
96-4 A12 YMA
1/15/28 AAA 2,435 4
^96-4 A12 YMA
1/15/28 AAA 7,300 11
^97-1 A10 YMA
3/15/28 N/R 7,242 10
97-1 A10 IO
1.10%, 3/15/28 AAA 7,075 194
Delta Funding Home Equity Loan Trust,
Series 96-2 A5
8.01%, 10/25/27 AAA 434 459
IMC Home Equity Loan Trust,
Series 96-3 A7
8.05%, 8/25/26 AAA 450 469
Group Total 2,927
Collateralized Mortgage Obligations-
Agency Collateral Series (1.7%)
##Collateralized Mortgage Obligation
Trust,
Series 16-Q Inv Fl
12.375%, 3/20/18 AAA 128 139
Federal Home Loan Mortgage Corporation,
Series:
##1632-SA Inv Fl REMIC
5.336%, 11/15/23 Agy 300 250
##1699-SD Inv Fl IO REMIC
2.313%, 3/15/24 Agy 1,836 147
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Federal National Mortgage Association,
Series:
96-37 H PO REMIC
8/25/23 Agy 423 314
97-3 E PO REMIC
12/25/23 Agy 275 185
282 1 PO
5/15/24 Agy 964 660
Group Total 1,695
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (7.7%)
Bear Stearns Mortgage
Securities, Inc.,
Series 96-9 AI11
8.00%, 12/25/27 AAA 250 260
Citicorp Mortgage
Securities, Inc.,
Series:
94-7 A5
6.25%, 4/25/24 AAA 550 494
ss.++95-2 B1 REMIC
7.50%, 4/25/25 (acquired
8/14/95-9/27/96, cost $400) AA 415 422
Countrywide Mortgage Backed
Securities, Inc.,
Series 93-C A11
6.50%, 1/25/24 AAA 238 228
^DLJ Mortgage Acceptance Corp.,
Series:
97-CFI A1B
7.60%, 5/15/30 AAA 450 477
97-CFI S IO
1.097%, 5/15/30 AAA 2,890 192
97-CF2 A1B
6.82%, 10/15/30 AAA 550 554
++First Boston Mortgage Securities Corp.,
Series 93-5 B1
7.30%, 7/25/23 A 239 239
GE Capital Mortgage Services, Inc.,
Series:
94-24 A4
7.00%, 7/25/24 AAA 218 209
94-27 A6
6.50%, 7/25/24 AAA 250 232
+Independent National Mortgage Corp.,
Series 94-O B1
7.875%, 9/25/24 A2 243 250
J. P. Morgan Commercial Mortgage
Finance Corp.,
Series 97-2 C5 A2
7.069%, 9/15/29 AAA 450 460
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 100 109
PNC Mortgage
Securities Corp.,
Series:
94-3 A8
7.50%, 7/25/24 AAA 150 149
96-1 B1
7.50%, 6/25/26 AA 444 449
Prudential Home Mortgage Securities
Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 29 29
95-2 M
8.50%, 6/25/25 AA 271 286
Residential Accredit
Loans, Inc.,
Series:
+97-QS1 A11
7.50%, 2/25/27 Aaa 500 506
97-QS12 A8 TBA
7.25%, 12/25/27 AAA 550 551
Residential Asset Securitization Trust,
Series 96-A11 A9
7.75%, 2/25/27 AAA 350 358
Residential Funding Mortgage
Securities Co., Inc.,
Series:
++93-MZ3 A2
6.97%, 8/28/23 AA 550 536
93-S27 M2
7.50%, 6/25/23 A 237 239
Rural Housing Trust,
Series 87-1 M
3.33%, 10/1/28 A- 261 249
Group Total 7,478
Commercial Mortgages (10.3%)
American Southwest Financial
Securities Corp.,
Series:
++##93-2 S1 IO
1.056%, 1/18/09 AA 6,561 332
+95-C1 A1B
7.40%, 11/17/04 Aaa 225 233
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 211 222
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
95-MD4 A1
7.10%, 8/13/29 AAA 268 276
##95-MD4 ACS2 IO
2.381%, 8/13/29 AAA 1,766 314
^96-D3 A1C
7.40%, 10/13/26 Aaa 375 394
96-MD6 A1C
7.04%, 11/13/26 AAA 400 411
^Carousel Center Finance, Inc.,
Series 1 B
7.188%, 10/15/07 A 325 331
CBM Funding Corp.,
Series 96-1 A3PI
7.08%, 2/1/13 AA 250 258
Chase Commercial Mortgage Securities
Corp., Series 96-2 B
6.90%, 10/19/06 AA 500 504
^Creekwood Capital Corp.,
Series 95-1A
8.47%, 3/16/15 AA 242 269
^CVM Finance Corp.
7.19%, 3/1/04 AA 434 445
^DLJ Mortgage
Acceptance Corp.,
Series:
95-CF2 A3
7.05%, 12/17/27 A 400 403
95-CF2 A1B
7.29%, 7/15/06 AAA 385 399
96-CF1 A1B
7.58%, 3/13/28 AAA 375 395
##96-CF2 S IO
1.643%, 11/12/21 AAA 3,836 340
^Forum Finance
7.125%, 5/15/04 AA 375 383
+##GMAC Commercial Mortgage
Securities, Inc.,
Series 96-C1 X2 IO
1.96%, 3/15/21 Aaa 2,318 216
+LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 468 487
^Lakewood Mall Finance Co.,
Series 95-C1 A
7.00%, 8/13/10 AA 275 280
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 275 287
96-C2 A2
6.82%, 11/21/28 AAA 200 202
++96-C2 IO
1.529%, 11/21/28 AAA 2,007 180
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
+Midland Realty Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/27 Aaa 325 336
Mortgage Capital
Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 225 232
+97-MC1 A3
7.288%, 7/20/27 Aaa 650 676
++Nomura Asset
Securities Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 AAA 100 103
##94-MD1 A2
7.664%, 3/15/18 AAA 125 131
^Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 496 522
^Prime Property Funding,
Series 1 A
6.633%, 7/23/03 AA 173 173
++##Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.335%, 2/25/28 AAA 3,344 173
96-CFL X1A IO
1.483%, 2/25/28 AAA 3,293 87
96-CFL X2 IO
1.249%, 2/25/28 AAA 880 26
Group Total 10,020
Energy (0.7%)
^Excel Paralubes Funding
7.43%, 11/1/15 A- 450 456
Paiton Energy Funding
9.34%, 2/15/14 BBB- 175 192
Group Total 648
Finance (14.4%)
^Anthem Insurance Cos., Inc., Series A
9.00%, 4/1/27 BBB+ 450 485
^BankAmerica Institutional,
Class A
8.07%, 12/31/26 A- 525 540
^BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 450 455
^Corestates Capital Corp.
8.00%, 12/15/26 A- 425 434
^Equitable Life Assurance Society of
the U.S.,
Series 1A
6.95%, 12/1/05 A 600 604
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
^Farmers Insurance Exchange
8.625%, 5/1/24 BBB+ 475 506
^Fifty-Seventh Street Associates
7.125%, 6/1/17 A 571 574
^First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 550 556
^First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 575 580
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 525 538
^Florida Property & Casualty
7.375%, 7/1/03 A- 250 258
7.45%, 7/1/04 A 150 156
^Florida Windstorm
6.70%, 8/25/04 A- 300 299
^+Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)2,375 2,305
^John Hancock Surplus Note
7.375%, 2/15/24 AA- 790 789
^Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA 400 389
^Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 350 344
NB Capital Trust
8.25%, 4/15/27 A- 325 343
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 625 628
^Prime Property Funding
7.00%, 8/15/04 A 400 404
Republic of Colombia
8.70%, 2/15/16 BBB- 300 306
^State Street Institutional Capital,
Series:
A
7.94%, 12/30/26 A 400 408
B
8.035%, 3/15/27 A 100 103
Washington Mutual Capital
8.375%, 6/1/27 BBB- 180 189
^Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 600 617
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
^World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 893 903
96 WFP-D
6.95%, 9/1/13 AA- 250 253
Group Total 13,966
Industrials (0.6%)
News America Holdings
7.75%, 1/20/24 BBB 75 74
7.75%, 2/1/24 BBB 305 301
Tier One Properties,
11.095% (Preferred Stock) A (1)200 196
Group Total 571
Rated Non-Agency Fixed Rate Mortgages (0.3%)
ss.##Gemsco Mortgage Pass thru Certficate,
Series 87-A
8.701%, 11/25/10 (acquired 9/9/88,
cost $258) AA 281 286
##Resolution Trust Corp., Series 92-5 C
8.618%, 1/25/26 AA 43 43
Group Total 329
Stripped Mortgage Backed Securities-
Agency Collateral Series (2.2%)
Federal Home Loan Mortgage
Corporation,
Series 1911-C PO
11/15/23 Agy 700 361
Federal National Mortgage Association,
Series:
96-34 C PO
3/25/23 Agy 525 279
249 1 PO
10/25/23 Agy 1,631 1,078
254 1 PO
1/1/24 Agy 218 156
260 1 PO
4/1/24 Agy 292 207
Group Total 2,081
Telephones (0.5%)
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 450 484
Transportation (0.5%)
^Jet Equipment Trust,
Series 95-A A11
10.00%, 6/15/12 A+ 395 490
U.S. Treasury Securities (23.7%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 900 1,141
U.S. Treasury Notes
7.00%, 4/15/99 Tsy 2,625 2,672
6.25%, 5/31/99 Tsy 9,725 9,795
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
------------------ --------- ----- ------
<S> <C> <C> <C>
6.75%, 6/30/99 Tsy 2,280 2,316
++7.125%, 9/30/99 Tsy 1,875 1,921
3.375%, 1/15/07 (Inflation Indexed) Tsy 3,647 3,577
U.S. Treasury Strip, PO
11/15/18 Tsy 6,000 1,516
Group Total 22,938
Total Fixed Income Securities (Cost $92,468) 93,961
INTEREST RATE CAP (0.1%)-See Note A6
J.P. Morgan and Co., Inc., terminating
10/15/99, to receive on 10/15/99 the excess, as measured on
10/15/98, of 12 month LIBOR over 6.34% multiplied by the
notional amount (Premium Paid $111) N/R 26,200 79
CASH EQUIVALENTS (8.3%)
Short-term Investments Held as Collateral
for Loaned Securities (3.1%) 2,970 2,970
Repurchase Agreement (5.2%)
Chase Securities, Inc. 5.90%, dated
9/30/97, due 10/1/97, to be repurchased
at $5,068, collateralized by various
U.S. Government Obligations, due
10/1/97-1/29/99, valued at $5,115 5,068 5,068
Total Cash Equivalents (Cost $8,038) 8,038
Total Investments (105.3%) (Cost $100,617) 102,078
Other Assets and Liabilities (-5.3%)
Cash 1
Dividends Receivable 100
Interest Receivable 1,171
Receivable for Investments Sold 612
Receivable for Fund Shares Sold 4
Unrealized Gain on Swap Agreements 2
Other Assets 3
Payable for Investments Purchased (3,856)
Payable for Fund Shares Redeemed (66)
Payable for Investment Advisory Fees (83)
Payable for Administrative Fees (7)
Payable for Trustees' Deferred Compensation Plan-Note F (2)
Payable for Daily Variation on Futures Contracts (1)
Collateral on Securities Loaned, at Value (2,970)
Other Liabilities (32)
(5,124)
NET ASSETS (100%) $96,954
</TABLE>
64
<PAGE>
<TABLE>
<S> <C>
INSTITUTIONAL CLASS
Net Assets
Applicable to 8,599,726 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $96,954
NET ASSET VALUE PER SHARE $11.27
Net Assets Consist of:
Paid in Capital $92,986
Undistributed Net Investment Income (Loss) 1,805
Undistributed Realized Net Gain (Loss) 702
Unrealized Appreciation (Depreciation) on Investment Securities 1,461
Net Assets $96,954
</TABLE>
ss. Restricted Security-Total market value of restricted
securities owned at September 30, 1997 was $884 or 0.9% of net
assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
+ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin
requirements for futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated
by Standard & Poor's Corporation.
++ Fitch Rating. Security is not rated by Standard & Poor's
Corporation or Moody's Investor Service, Inc.
## Variable or floating rate security-rate disclosed is as of
September 30, 1997.
(1) Amount represents shares held by the Portfolio.
CMO Collateralized Mortgage Obligation
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is
the effective rate at September 30, 1997.
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's
Corporation or Fitch.
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to
Financial Statements.
YMA Yield Maintenance Agreement
65
<PAGE>
Statement of Net Assets
High Yield
Portfolio
Statement of Net Assets
Fixed Income Securities (90.9%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Asset Backed Corporates (3.5%)
ALPS, Series 96-1 D
12.75%, 6/15/06 BB- 6,507 7,022
EES Coke Battery Co., Inc.
9.382%, 4/15/07 BB- 2,500 2,615
Federal Mortgage Acceptance Corp.,
Loan Receivables Trust,
Series 96-B C A1
7.929%, 11/1/18 N/R 3,335 2,990
^+ Long Beach Auto,
Series 97-1 B
14.22%, 10/26/03 Ba3 6,305 6,351
Group Total 18,978
Cable (8.1%)
Cablevision Systems Corp.
9.875%, 5/15/06 B 6,340 6,847
^# Intermedia
Communications, Inc.
0.00%, 7/15/07 B 9,750 6,776
ITT Promedia
9.125%, 9/15/07 B- DEM 8,500 4,997
Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ $ 5,325 5,258
TCI Pacific Communications,
5.00% (Convertible Preferred Stock) BB- (1)20,000 2,512
Time Warner, Inc.,
Series M,
10.25% (Preferred Stock) BB+ (1)15,114 17,306
Group Total 43,696
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (3.1%)
ss.## CBA Mortgage Corp.,
Series 93-C1 A2
7.76%, 12/25/03 (acquired 8/18/95,
cost $1,334) BB 1,657 1,644
+ Citicorp Mortgage Securities, Inc.,
Series 90-8 A7
9.50%, 6/25/05 B3 1,375 723
^++ Countrywide Funding Corp., Series
95-4 B3
7.50%, 9/25/25 BB 1,451 1,137
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
DLJ Mortgage Acceptance Corp., Series:
ss. 94-3 B3
6.50%, 4/25/24 (acquired 5/8/95,
cost $914) N/R 1,369 786
97-CF2
0.357%, 10/15/30 AAA 103,893 2,755
+ First Boston Mortgage Securities
Corp., Series 92-4R 2
8.025%, 10/25/22 Ba3 5 5
^ GE Capital Mortgage
Services, Inc.,
Series 94-28 B3
8.00%, 8/25/24 N/R 1,379 1,137
^ Prudential Home Mortgage Securities
Co., Inc.,
Series:
+92-A 3B2
7.90%, 4/28/22 Caa 3,900 2,340
++96-5 B3
7.25%, 4/25/26 BB 1,458 1,321
Residential Funding Mortgage
Securities Co., Inc.,
Series:
ss.95-S10 B1
7.50%, 7/25/25 (acquired 8/25/95,
cost $464) BB 611 547
ss.95-S11 B1
7.50%, 9/25/25 (acquired 8/25/95,
cost $966) BB 1,274 1,138
95-S16 B3
7.50%, 11/25/25 N/R 1,231 1,120
## Ryland Mortgage Securities Corp.,
Series 92-A C1
8.27%, 3/29/30 BB 700 560
Saxon Mortgage Securities Corp.,
Series:
^93-8A
6.75%, 2/25/24 BB 1,581 844
ss.94-2 B3
6.75%, 1/25/24 (acquired 2/9/94,
cost $724) BB 847 495
Group Total 16,552
Commercial Mortgages (0.7%)
^## DLJ Mortgage Acceptance Corp.,
Series 96-CF2 S IO
1.643%, 11/12/21 AAA 8,226 730
+ GMAC Commercial
Mortgage Securities, Inc.,
Series 96-C1 X2 IO
1.96%, 3/15/21 Aaa 14,833 1,385
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.335%, 2/25/28 AAA 20,994 1,088
96-CFL X1A IO
1.483%, 2/25/28 AAA 20,540 545
96-CFL X2 IO
1.249%, 2/25/28 AAA 5,146 154
Group Total 3,902
Energy (2.5%)
Midland Funding II, Series A
11.75%, 7/23/05 B- 2,300 2,708
Nuevo Energy Co.
9.50%, 4/15/06 B+ 3,836 4,095
Snyder Oil Corp.
8.75%, 6/15/07 B+ 4,480 4,474
^# Transamerica Energy Corp.
0.00%, 6/15/02 B+ 2,525 2,001
Group Total 13,278
Finance (7.2%)
^ Anthem Insurance Cos., Inc., Series A
9.00%, 4/1/27 BBB+ 6,525 7,033
^ Cliffs Drilling Co.
10.25%, 5/15/03 B 975 1,051
^ Commercial Financial
Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A 5,200 5,197
^ Geberit International S.A.
10.125%, 4/15/07 B+ 4,240 2,631
Navistar Financial Corp.,
Series B
9.00%, 6/1/02 B+ 1,545 1,595
Pindo Deli Finance Mauritius
10.75%, 10/1/07 B 6,555 6,686
^# PTC International Finance
0.00%, 7/1/07 B+ 8,560 5,607
^ Riggs Capital Trust II
8.875%, 3/15/27 BB- 4,370 4,616
Western Financial Bank
8.875%, 8/1/07 BB+ 4,225 4,235
Group Total 38,651
Food, Tobacco & Other (0.4%)
^ Ameriserv Food Co.
10.125%, 7/15/07 B- 2,150 2,228
Health Care (2.1%)
^ Integrated Health Services
9.50%, 9/15/07 B 4,155 4,280
Tenet Healthcare Corp.
8.625%, 1/15/07 B+ 3,880 4,021
^ Vencor, Inc.
8.625%, 7/15/07 B+ 2,900 2,940
Group Total 11,241
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Industrials (34.7%)
Advanced Micro Devices
11.00%, 8/1/03 BB- 5,295 5,937
^ Azteca Holdings S.A.
11.00%, 6/15/02 B- 1,555 1,623
^ Big Flower Press
8.875%, 7/1/07 B 4,600 4,583
^ CA FM Lease Trust
8.50%, 7/15/17 BBB- 3,697 3,914
Comcast Cellular
9.50%, 5/1/07 BB+ 5,000 5,225
*^@ Consolidated Hydro, Inc. (Warrants,
expiring 12/31/03) N/R (1)2,700 --
Consolidated Hydro, Inc.,
13.50% (Preferred Stock) N/R (1)1,500 11
DR Securitized Lease Trust,
Series:
93-K1 A1
6.66%, 8/15/10 BB- 3,432 3,127
93-K1 A2
7.43%, 8/15/18 BB- 2,565 2,230
94-K1 A1
7.60%, 8/15/07 BB- 3,938 3,831
94-K1 A2
8.375%, 8/15/15 BB- 1,525 1,455
DR Structured Finance,
Series 94-K2
9.35%, 8/15/19 BB- 1,425 1,444
^ Fleming Cos., Inc.
10.50%, 12/1/04 B+ 2,925 3,060
10.625%, 7/31/07 B+ 1,980 2,091
^ Fo-x/Liberty Networks
#0.00%, 8/15/07 B 3,740 2,384
8.875%, 8/15/07 B 2,310 2,324
Globalstar LP/Capital
11.375%, 2/15/04 B 6,510 6,803
*^ Globalstar Telecommunications Ltd.
(Warrants, expiring 2/15/04) N/R (1)6,510 781
Grand Casinos, Inc.
10.125%, 12/1/03 BB 6,370 6,776
+ HMC Acquisition Properties
9.00%, 12/15/07 Ba3 3,585 3,684
^ HMH Properties, Inc.
8.875%, 7/15/07 BB- 1,005 1,031
^ Hermes Europe Railtel
11.50%, 8/15/07 B 1,320 1,419
Horseshoe Gaming
9.375%, 6/15/07 B 3,820 3,944
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 5,175 5,447
^## Huntsman Corp.
9.094%, 7/1/07 B+ 4,675 4,862
^ Hylsa SA de CV
9.25%, 9/15/07 BB 5,200 5,285
^ Hyundai Semiconductor America
8.625%, 5/15/07 BBB- 4,750 4,847
ISP Holdings, Inc., Series B
9.00%, 10/15/03 B+ 8,805 9,212
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
^ Impress Metal Packaging
9.875%, 5/29/07 B DEM7,650 4,595
Kmart Funding Corp., Series F
8.80%, 7/1/10 BB- $4,850 4,949
# Norcal Waste Systems, Inc.
13.00%, 11/15/05 BB- 7,910 9,097
Outdoor Systems, Inc.
8.875%, 6/15/07 B 7,360 7,507
^ RBS Participacos SA
11.00%, 4/1/07 BB- 4,975 5,236
^ Residential Reinsurance
11.45%, 12/15/98 BB- 3,000 3,084
Revlon Worldwide, Series B
Zero Coupon, 3/15/01 B- 6,850 4,975
SD Warren Co.
12.00%, 12/15/04 B+ 4,300 4,864
Sinclair Broadcast Group, Inc.
9.00%, 7/15/07 B 2,300 2,289
Sinclair Capital,
11.625% (Preferred Stock) B (1)52,815 5,730
Station Casinos, Inc.
9.75%, 4/15/07 B+ 4,410 4,399
^# TCI Satellite
Entertainment, Inc.
0.00%, 2/15/07 B- 15,295 9,980
Total Access Communications
(Convertible)
2.00%, 5/31/06 BBB- 1,640 1,644
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 5,170 5,564
+ TV Azteca S.A.,
Series:
B
10.50%, 2/15/07 Ba3 5,540 5,872
Viacom, Inc.
8.00%, 7/7/06 BB- 10,020 9,995
Group Total 187,110
Lodging (1.9%)
Courtyard by Marriott,
Series B
10.75%, 2/1/08 B- 2,185 2,368
^ Murrin Murrin Holdings
9.375%, 8/31/07 BB- 7,480 7,686
Group Total 10,054
Materials (1.2%)
Asia Pulp & Paper, Series A
12.00%, 2/15/04 B+ 6,335 6,446
Supermarkets (1.2%)
Southland Corp.
5.00%, 12/15/03 BB+ 7,599 6,554
Technology (0.4%)
- -## Blue Bell Funding
11.85%, 5/1/99 BB- 2,215 2,270
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Telephones (12.7%)
# Brooks Fiber Properties, Inc.
0.00%, 3/1/06 N/R 10,870 8,723
0.00%, 11/1/06 N/R 3,765 2,908
*@ Dial Call Communications, Inc.
(Warrants, expiring 4/25/99) N/R (1)4,800 --
# Dial Call Communications, Inc.
0.00%, 4/15/04 CCC 4,875 4,552
+0.00%, 12/15/05 B3 7,015 6,270
^ Iridium Capital Corp.
13.00%, 7/15/05 B 2,275 2,372
*^ Iridium World Communications Ltd.
(Warrants, expiring 7/15/05) N/R (1)2,275 341
^ IXC Communications, Inc., PIK 7.25%
(Preferred Stock) CCC (1)3,435 3,985
^+ IXC Communications, Inc., Series B
12.50%, 10/1/05 B2 4,600 5,313
# Nextel Communications, Inc.
0.00%, 8/15/04 CCC 9,810 8,498
Qwest Communications International,
Inc., Series B
10.875%, 4/1/07 B+ 2,415 2,729
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 6,630 7,268
Rogers Cablesystems Ltd.
10.125%, 9/1/12 BB+ 2,750 2,984
Rogers Communications, Inc.
9.125%, 1/15/06 BB- 2,060 2,096
Tele-Communications, Inc.
8.75%, 2/15/23 BBB- 175 181
# Teleport Communications Group, Inc.
0.00%, 7/1/07 B 13,290 10,399
Group Total 68,619
Transportation (1.4%)
^ Jet Equipment Trust,
Series:
95-A C
11.44%, 11/1/14 BBB- 2,350 3,045
94-A3
11.79%, 6/15/13 BBB- 3,450 4,517
Group Total 7,562
Utilities (2.9%)
Cleveland Electric Illuminating Co.
Series B
8.375%, 12/1/11 BB+ 600 614
8.375%, 8/1/12 BB+ 2,025 2,073
Midland Cogeneration Ltd. Venture LP,
Series:
C-91
10.33%, 7/23/02 BB- 628 672
Midland Funding Corp. I, Series C-94
10.33%, 7/23/02 BB- 3,328 3,561
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
National Power Corp.
7.875%, 12/15/06 BB+ 2,985 2,912
Quezon Power Ltd.
8.86%, 6/15/17 BB+ 5,800 5,844
Group Total 15,676
Yankee (6.9%)
## Central Bank of Argentina Bocon
PIK Pre 4
5.00%, 9/1/02 N/R 3,185 3,846
^ Globo Communicacoes
10.50%, 12/20/06 BB- 2,390 2,510
^ Government of Jamaica
9.625%, 7/2/02 N/R 2,295 2,329
Multicanal SA
10.50%, 2/1/07 BB- 3,000 3,206
# Occidente y Caribe Cellular
0.00%, 3/15/04 B 8,480 6,689
*@ Occidente y Caribe Cellular (Warrants,
expiring 3/15/04) N/R (1)33,920 --
## Republic of Argentina
5.50%, 3/31/23 BB 7,125 5,379
Republic of Colombia
8.70%, 2/15/16 BBB- 725 739
^ Republic of Panama
7.875%, 2/13/02 BB+ 4,315 4,342
^ Transgas de Occidente S.A.
9.79%, 11/1/10 BBB- 3,050 3,372
United Mexican States
Series B
6.25%, 12/31/19 BB 5,975 4,952
@ United Mexican States (Recovery Rights,
expiring 6/30/03) N/R (1)5,975,000 --
Group Total 37,364
Total Fixed Income Securities (Cost $461,482) 490,181
CASH EQUIVALENTS (8.8%)
Repurchase Agreements (8.8%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $23,639,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at $23,858 23,635 23,635
Goldman Sachs & Co. 6.15%, dated 9/30/97, due
10/1/97, to be repurchased at $23,638,
collateralized by U.S. Treasury Bonds, 8.00%,
due 11/15/21, valued at $24,122 23,634 23,634
Total Cash Equivalents (Cost $47,269) 47,269
Total Investments (99.7%) (Cost $508,751) 537,450
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Value
(000)+
------
<S> <C>
Other Assets and Liabilities (0.3%)
Cash 1
Dividends Receivable 378
Interest Receivable 9,035
Receivable for Investments Sold 7,931
Receivable for Fund Shares Sold 924
Receivable for Daily Variation on Futures Contracts 58
Other Assets 11
Payable for Investments Purchased (15,855)
Payable for Fund Shares Redeemed (149)
Payable for Investment Advisory Fees (451)
Payable for Administrative Fees (34)
Payable for Trustees' Deferred Compensation Plan-Note F (9)
Payable for Shareholder Servicing Fees- Investment Class (1)
Payable for Distribution Fees-Adviser Class (1)
Unrealized Loss on Forward Foreign
Currency Contracts (58)
Other Liabilities (88)
1,692
NET ASSETS (100%) $539,142
INSTITUTIONAL CLASS
Net Assets
Applicable to 51,614,460 outstanding shares of beneficial
interest (unlimited authorization, no par value) $523,899
NET ASSET VALUE PER SHARE $ 10.15
INVESTMENT CLASS
Net Assets
Applicable to 1,074,664 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10,916
NET ASSET VALUE PER SHARE $ 10.16
ADVISER CLASS
Net Assets
Applicable to 426,411 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 4,327
NET ASSET VALUE PER SHARE $ 10.15
Net Assets Consist of:
Paid in Capital$ 487,027
Undistributed Net Investment Income (Loss) 11,795
Undistributed Realized Net Gain (Loss) 12,232
Unrealized Appreciation (Depreciation) on: Investment Securities 28,699
Foreign Currency Transactions (57)
Futures (554)
Net Assets $539,142
</TABLE>
ss. estricted Security-Total market value of restricted securities owned at
September 30, 1997 was $4,610 or 0.9% of net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
* Non-Income Producing Security.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements
for futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by
Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard & Poor's Corporation or
Moody's Investors Service, Inc.
73
<PAGE>
# Step Bond-Coupon rate increases in increments to maturity. Rate
disclosed is as of September 30, 1997. Maturity date disclosed is the
ultimate maturity.
## Variable or floating rate security-rate disclosed is as of September
30, 1997.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
DEM German Mark
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's
Corporation or Fitch.
PIK Payment-In Kind Security
74
<PAGE>
Statement of Net Assets
Cash Reserves
Portfolio
Statement of Net Assets
Commercial Paper (82.6%)
<TABLE>
<CAPTION>
Face
Amount Value
September 30, 1997 (000) (000)+
- ------------------ ----- ------
<S> <C> <C>
Commercial Banking & Credit (25.3%)
Abbey National N.A.
5.51%, 12/11/97 $2,500 $2,473
American Express Credit Corp.
5.49%, 10/23/97 2,500 2,492
Associates Corp. of North America
5.51%, 12/11/97 2,500 2,473
Banc One Corp.
5.52%, 10/17/97 2,500 2,494
Canadian Imperial Holdings
5.49%, 11/3/97 2,500 2,487
CIT Group Holdings, Inc.
5.49%, 11/14/97 2,500 2,483
Eiger Capital Corp.
5.54%, 10/7/97 2,500 2,497
J.P. Morgan & Co.
5.51%, 11/10/97 2,500 2,485
SunTrust Banks, Inc.
5.49%, 11/4/97 2,500 2,487
Westdeutsche Landesbank
5.51%, 11/12/97 2,500 2,484
Group Total 24,855
Financial Leasing & Services (26.2%)
ABN-Amro Finance
5.50%, 10/20/97 2,500 2,493
A.I. Credit Corp.
5.50%, 10/27/97 2,500 2,490
Asset Securitization Corp.
5.50%, 10/15/97 2,500 2,495
Atlantic Asset Securitization Corp.
5.55%, 10/3/97 2,444 2,443
Commercial Credit Co.
5.51%, 10/28/97 2,500 2,490
Delaware Funding Corp.
5.51%, 11/20/97 2,500 2,481
First Chicago Financial Corp.
5.52%, 11/25/97 2,500 2,479
National Rural Utilities Cooperative Finance Corp.
5.53%, 1/27/98 2,000 1,964
Panasonic Finance, Inc.
5.49%, 11/7/97 2,500 2,486
UBS Finance, Inc.
5.52%, 10/14/97 1,500 1,497
USAA Capital Corp.
5.49%, 11/20/97 2,500 2,481
Group Total 25,799
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
September 30, 1997 (000) (000)+
- ------------------ ----- ------
<S> <C> <C>
Food & Household Products (4.8%)
Campbell Soup Co.
5.49%, 12/11/97 $2,300 $2,275
Clorox Co.
5.50%, 11/6/97 2,500 2,486
Group Total 4,761
Industrials (11.1%)
General Electric Capital Corp.
5.49%, 11/6/97 2,500 2,486
General Electric Capital Corp.
5.54%, 1/13/98 1,000 984
H.J. Heinz Co.
5.50%, 10/1/97 2,500 2,500
IBM Credit Corp.
5.50%, 10/10/97 2,500 2,496
John Deere & Co.
5.49%, 10/21/97 2,500 2,492
Group Total 10,958
Manufacturing and Retail Trade (2.5%)
Xerox Corp.
5.50%, 11/17/97 2,500 2,482
Personal Banking & Credit (5.1%)
Prudential Funding Corp.
5.50%, 11/26/97 2,500 2,479
Transamerica Corp.
5.51%, 10/2/97 2,500 2,500
Group Total 4,979
Telecommunications (5.1%)
Bell Atlantic Financial Services
5.52%, 10/6/97 2,500 2,498
SBC Communications, Inc.
5.50%, 10/31/97 2,500 2,488
Group Total 4,986
Transportation (2.5%)
Daimler-Benz AG
5.50%, 10/29/97 2,500 2,489
Total Commercial Paper (Cost $81,309) 81,309
CERTIFICATES OF DEPOSIT (7.1%) Commercial Banking & Credit (7.1%) Credit
Agricole Indosuez
5.56%, 11/18/97 2,500 2,500
## Societe Generale Bank
5.77%, 1/15/98 2,500 2,500
Swiss Bank (NY)
5.62%, 1/21/98 2,000 2,000
Total Certificates of Deposit (Cost $7,000) 7,000
AGENCY FLOATING RATE MORTGAGE (7.1%)
## Federal Home Loan Mortgage Corp.
5.44%, 6/22/98 (Cost $6,996) 7,000 6,996
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
September 30, 1997 (000) (000)+
- ------------------ ----- ------
<S> <C> <C>
BANKERS ACCEPTANCE (2.6%)
First Union National Bank
5.57%, 10/31/97 (Cost $2,500) 2,500 2,500
REPURCHASE AGREEMENT (0.7%) Chase Securities, Inc.
5.90%, dated 9/30/97, due 10/1/97, to be
repurchased at $710, collateralized by
U.S. Treasury Notes, 6.25%, due 7/31/98,
valued at $721 (Cost $710) 710 710
Total Investments (100.1%) (Cost $98,515) 98,515
Value(000)+
Other Assets and Liabilities (-0.1%)
Interest Receivable 85
Receivable for Fund Shares Sold 2
Other Assets 3
Dividend Payable (49)
Payable for Fund Shares Redeemed (8)
Payable for Investment Advisory Fees (47)
Payable for Administrative Fees (7)
Payable for Trustees' Deferred Compensation Plan-Note F (2)
Other Liabilities (28)
(51)
NET ASSETS (100%) $98,464
INSTITUTIONAL CLASS
Net Assets
Applicable to 98,463,030 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $98,464
NET ASSET VALUE PER SHARE $ 1.00
Net Assets Consist of:
Paid In Capital $98,464
Net Assets (100%) $98,464
</TABLE>
+ See Note A1 to Financial Statements.
## Variable or floating rate security-rate disclosed is as of September 30,
1997.
77
<PAGE>
Statement of Net Assets
Fixed Income
Portfolio II
Statement of Net Assets
Fixed Income Securities (97.0%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Adjustable Rate Mortgages (9.5%)
## Government National Mortgage
Association Various Pools:
6.00%, 8/20/27 Agy $17,000 17,128
November TBA
6.00%, 11/20/27 Agy 4,325 4,351
Group Total 21,479
Agency Fixed Rate Mortgages (12.5%)
Federal Home Loan Mortgage
Corporation Conventional Pools:
8.25%, 10/1/06 Agy 99 104
10.00%, 9/1/17-11/1/20 Agy 1,334 1,455
10.25%, 7/1/09 Agy 256 283
11.00%, 1/1/16 Agy 335 377
11.25%, 9/1/10-12/1/14 Agy 374 420
Gold Pools:
7.00%, 9/1/23-6/1/25 Agy 4,838 4,846
10.00%, 1/1/21 Agy 891 985
10.50%, 3/1/16 Agy 1,220 1,356
Federal National Mortgage
Association Conventional Pools:
10.00%, 5/1/22 Agy 832 912
10.50%, 11/1/17-12/1/17 Agy 697 780
10.75%, 8/1/13 Agy 102 115
11.25%, 11/1/00-8/1/13 Agy 215 242
11.50%, 1/1/17-9/1/25 Agy 873 993
Government National Mortgage Association
Various Pools:
7.00%, 12/15/22-12/15/23 Agy 6,050 6,071
10.00%, 11/15/09-12/15/20 Agy 6,937 7,701
10.50%, 12/15/00-5/15/19 Agy 113 127
11.00%, 2/15/10-2/15/19 Agy 1,335 1,523
11.50%, 8/20/14-1/20/18 Agy 21 24
Group Total 28,314
Asset Backed Corporates (7.9%)
^ Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 657 660
## Airplanes Pass Through Trust,
Series 1 B
6.756%, 3/15/19 A 499 500
ALPS, Series 94-1 A4 CMO
7.80%, 9/15/04 AA 800 819
Americredit Automobile Receivables
Trust, Series 96-B A
6.50%, 1/12/02 AAA 1,113 1,118
Arcadia Auto,
Series 97-C A4
6.375%, 1/15/03 AAA 1,110 1,114
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
CPS Auto Grantor Trust, Series 97-2 A
6.65%, 10/15/02 AAA 637 641
+ First Merchants Auto Receivables
Corp., Series 97-2 A1
6.85%, 11/15/02 AAA 611 615
First Plus Home Equity Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 655 656
97-3 A3
6.57%, 10/10/10 AAA 645 648
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 1,770 1,768
+ Long Beach Auto, Series 97-2A
6.69%, 9/25/04 AAA 790 790
+ NAL Auto Trust, Series 97-2A
7.75%, 9/15/02 N/R 933 934
+ National Car Rental Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 1,125 1,153
+ NPR Health Care, Series 97-1 A
6.815%, 7/1/01 N/R 400 404
+ Railcar Leasing
7.125%, 1/15/13 AAA 1,350 1,395
Security Pacific Home Equity Trust,
Series 91-AB
10.50%, 3/10/06 A+ 414 415
+ Team Fleet Financing Corp.,
Series:
96-1A
6.65%, 12/15/02 A- 475 476
97-1A
7.35%, 5/15/03 A- 1,300 1,337
Union Acceptance Corp., Series 96-B A
6.45%, 7/9/03 AAA 1,234 1,234
WFS Financial Owner Trust, Series
97-C A3
6.01%, 3/20/02 AAA 1,180 1,179
Group Total 17,856
Asset Backed Mortgages (1.0%)
AFC Home Equity Loan Trust,
Series 96-4 1A6
7.22%, 3/25/27 AAA 1,000 1,010
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 14,706 365
96-3 YMA
10/25/26 N/R 14,706 20
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Contimortgage Home Equity Loan
Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 12,055 317
ss. 96-4 A12 YMA
1/15/28 (acquired 12/16/96, cost $7) AAA 4,870 7
^ 96-4 A12 YMA
1/15/28 AAA 14,600 22
96-4 A12 IO
1.05%, 1/15/28 AAA 3,894 102
^ 97-1 A10 YMA
3/15/28 N/R 14,484 20
97-1 A10I IO
1.10%, 3/15/28 AAA 14,149 387
Group Total 2,250
Collateralized Mortgage Obligations-
Agency Collateral Series (2.7%)
Federal Home Loan Mortgage Corporation,
Series:
89-47 F PAC CMO
10.00%, 6/15/20 Agy 400 439
## 1632 SA Inv Fl REMIC
5.336%, 11/15/23 Agy 884 737
## 1699 SD Inv Fl IO REMIC
2.313%, 3/15/24 Agy 9,319 745
1709 H PO REMIC
1/15/24 Agy 62 31
1750 C PD PO REMIC
3/15/24 Agy 91 65
1813 K PO REMIC
2/15/24 Agy 60 41
1844 PC PO REMIC
3/15/24 Agy 110 70
1854 A PO REMIC
12/15/23 Agy 800 527
1887 I PO REMIC
10/15/22 Agy 65 44
Federal National Mortgage Association,
Series:
93-149 O PO REMIC
8/25/23 Agy 130 82
93-205 G PO REMIC
9/25/23 Agy 474 305
93-235 H PO REMIC
9/25/23 Agy 186 145
96-14 PC PO REMIC
12/25/23 Agy 105 60
96-37 H PO REMIC
8/25/23 Agy 752 559
96-46 PB PO REMIC
9/25/23 Agy 110 74
96-54 N PO REMIC
7/25/23 Agy 79 59
96-54 O PO REMIC
11/25/23 Agy 89 56
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
282 1 PO
5/15/24 Agy 1,831 1,255
287 1 PO
12/17/07 Agy 1,340 877
Group Total 6,171
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (10.7%)
## Bear Stearns Mortgage Securities Inc.,
Series 96-4 AI 10
8.125%, 9/25/27 AAA 1,100 1,148
+ Chase Mortgage Finance Corp.,
Series:
93-N A8
6.75%, 11/25/24 Aaa 1,287 1,218
94-H A7
7.25%, 6/25/25 Aaa 1,600 1,576
ss. Citicorp Mortgage
Securities, Inc.,
Series 95-2 B1 REMIC
7.50%, 4/25/25 (acquired
8/7/95-7/22/97, cost $849) N/R 874 887
DLJ Mortgage Acceptance Corp.,
Series 97-CF2 A1B
6.82%, 10/15/30 AAA 650 654
First Boston Mortgage Corp.,
Series:
ss.92-4 B1
8.125%, 10/25/22 (acquired 1/25/93,
cost $313) A 326 333
93-5 B1
7.30%, 7/25/23 AAA 1,419 1,418
GE Capital Mortgage
Services, Inc.,
Series 94-24 A4
7.00%, 7/25/24 AAA 582 558
J. P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5 A2
7.069%, 9/15/29 AAA 1,075 1,098
ss.## Kidder Peabody Funding Corp.,
Series 92-4 B2
8.467%, 5/28/22
(acquired 8/5/92,
cost $274) N/R 274 274
Mid-State Trust II, Series 88-2 A4
9.625%, 4/1/03 AAA 1,050 1,140
PNC Mortgage Securities Corp.,
Series:
94-3 A8
7.50%, 7/25/24 AAA 2,117 2,107
96-1 B1
7.50%, 6/25/26 AA 1,159 1,174
Prudential Home Mortgage Securities
Co., Inc.,
Series:
ss.+ 92-33 B1
7.50%, 8/15/22 (acquired 9/14/92,
cost $523) Aa3 550 535
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
^+ 92-A 2B4
7.90%, 4/28/22 A1 1,000 979
+ 93-17 B1
6.50%, 3/1/23 Aa2 597 591
^## 94-A 3B3
6.803%, 4/28/24 N/R 1,450 1,402
Residential Accredit Loans, Inc.,
Series:
97-Q52 A8
7.75%, 3/25/27 AAA 525 541
97-QS4 A7
7.75%, 5/25/27 AAA 875 902
97-QS12 A8
7.25%, 12/25/27 TBA AAA 1,400 1,402
Residential Funding Mortgage
Securities Co., Inc.,
Series:
93-MZ3 A2
6.97%, 8/28/23 N/R 700 682
93-S27 M2
7.50%, 6/25/23 A 789 797
94-S1 A19
6.75%, 1/25/24 AAA 765 745
Rural Housing Trust, Series 87-1 M
3.33%, 10/1/28 A- 938 894
## Ryland Mortgage Securities Corp.,
Series 92-A 1A
8.27%, 3/29/30 A- 529 535
+ Salomon Brothers Mortgage Securities,
Series 93-3 B1
7.20%, 8/25/23 Aa2 621 618
Group Total 24,208
Commercial Mortgages (10.8%)
American Southwest Financial Securities
Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 1,098 1,119
## 93-2 S1 IO
1.056%, 1/18/09 N/R 11,299 572
+ 95-C1 A1B
7.40%, 11/17/04 Aaa 1,050 1,086
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 1,222 1,280
95-MD4 A1
7.10%, 8/13/29 AAA 1,169 1,203
## 95-MD4 ACS2 IO
2.381%, 8/13/29 N/R 2,088 371
^+ 96-D3 A1C
7.40%, 10/13/26 Aaa 850 893
96-MD6 A1C
7.04%, 11/13/26 AAA 825 848
Beverly Finance Corp.
8.36%, 7/15/04 AA- 675 727
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
^+ Carousel Center Finance, Inc.,
Series 1 B
7.188%, 10/15/07 A 1,400 1,426
CBM Funding Corp. Series 96-1 A3PI
7.08%, 2/1/13 AA 950 979
^ Creekwood Capital Corp.,
Series 95-1A
8.47%, 3/16/15 AA 726 808
^ Crystal Run Properties, Series A
7.393%, 8/15/06 AA 1,100 1,149
^ CVM Finance Corp.
7.19%, 3/1/04 AA 580 594
^ DLJ Mortgage Acceptance Corp.,
Series:
95-CF2 A3
7.05%, 12/17/27 A 1,100 1,110
96-CF1 A1B
7.58%, 3/13/28 AAA 1,100 1,159
96-CF2 A1B
7.29%, 7/15/06 AAA 260 269
## 96-CF2 S IO
1.643%, 11/12/21 N/R 2,473 219
+ GMAC Commercial Mortgage Securities,
Inc., Series 96-C1 X2 IO
1.96%, 3/15/21 Aaa 3,616 338
+ GS Mortgage Securities Corp.,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 550 562
97-GL X2 IO
1.07%, 7/13/30 Aaa 2,700 145
^ Lakewood Mall Finance Co.,
Series 95-C1 A
7.00%, 8/13/10 AA 900 917
+ LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 1,035 1,076
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 1,100 1,148
96-C2 A2
6.82%, 11/21/28 AAA 400 405
96-C2 IO
1.529%, 11/21/28 N/R 4,158 373
+ Midland Realty Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 700 724
Mortgage Capital Funding, Inc.,
Series 95-MC1 A1B
7.60%, 5/25/27 AAA 1,300 1,342
## Nomura Asset Securities Corp.,
Series 94-MD1 A2
7.664%, 3/15/18 N/R 750 786
^ Prime Property Funding, Series 1A
6.633%, 7/23/03 AA 794 794
Group Total 24,422
</TABLE>
83
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Energy (0.6%)
^ Excel Paralubes Funding
7.43%, 11/1/15 A- 1,275 1,292
Finance (13.1%)
^ Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 900 970
^ BankAmerica Institutional, Series A
8.07%, 12/31/26 A- 1,350 1,388
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 850 860
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 1,025 1,047
Countrywide Funding Corp. Series A
6.55%, 4/14/00 A 1,000 1,006
^ Equitable Life Assurance Society
of the U.S., Series 1A
6.95%, 12/1/05 A 1,200 1,209
^ Farmers Insurance Exchange
8.625%, 5/1/24 BBB+ 975 1,038
^ Fifty-Seventh Street Associates
7.125%, 6/1/17 A 1,166 1,173
^ First Chicago NBD Corp., Series A
7.95%, 12/1/26 A- 1,225 1,237
^ First Hawaiian Bank, Series A
6.93%, 12/1/03 A 1,650 1,666
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 1,125 1,153
^ Florida Property & Casualty
7.375%, 7/1/03 A- 800 826
7.45%, 7/1/04 A 200 207
^ Florida Windstorm
6.70%, 8/25/04 A- 750 748
^+ Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)4,350 4,221
^ John Hancock Surplus Note
7.375%, 2/15/24 AA- 950 949
^ Metropolitan Life Insurance Co.
7.45%, 11/1/23 AA 875 851
^ Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 850 837
NB Capital Trust
8.25%, 4/15/27 A- 800 843
^ New York Life Insurance Co.
7.50%, 12/15/23 AA 500 495
PNC Institutional Capital, Series A
7.95%, 12/15/26 BBB+ 1,050 1,055
^ Prime Property Funding
7.00%, 8/15/04 A 875 884
^ State Street Institutional Capital,
Series:
A
7.94%, 12/30/26 A 825 841
B
8.035%, 3/15/27 A 250 257
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Washington Mutual Capital
8.375%, 6/1/27 BBB- 445 467
^ Wells Fargo Capital, Series A
8.125%, 12/1/26 BBB 1,150 1,183
^ World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 1,738 1,756
96 WFP-D
6.95%, 9/1/13 AA- 450 456
Group Total 29,623
Foreign Governments (0.8%)
Government of Germany
7.375%, 1/3/05 AAA DEM3,075 1,955
Industrials (0.9%)
News America Holdings
7.75%, 1/20/24 BBB $375 370
7.75%, 2/1/24 BBB 565 557
^ Oxymar
7.50%, 2/15/16 BBB 650 650
Tier One Properties, 11.095%
(Preferred Stock) A (1)425 416
Group Total 1,993
Rated Non-Agency Fixed Rate
Mortgages (0.6%)
Bank of America, Series A
8.375%, 5/1/07 AAA 120 121
California Federal Savings & Loan,
Series 86-1A
8.80%, 1/1/14 AA 77 77
First Federal Savings & Loan
Association, Series 92-C
8.75%, 6/1/06 AA 43 44
## Resolution Trust Corp., Series 92-5 C
8.618%, 1/25/26 AA 455 459
Ryland Acceptance Corp.
Series IV 79-A
6.65%, 7/1/11 AA 779 750
Group Total 1,451
Stripped Mortgage Backed Securities-
Agency Collateral Series (1.2%)
Federal National Mortgage Association,
Series:
93-146 G PO REMIC
5/25/23 Agy 583 382
93-243 C PO REMIC
11/25/23 Agy 128 99
249 1 PO
10/25/23 Agy 1,941 1,282
254 1 PO
1/1/24 Agy 634 454
260 1 PO
4/1/24 Agy 848 603
Group Total 2,820
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
Telephones (0.4%)
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 825 888
Transportation (0.5%)
^ Jet Equipment Trust, Series 95-A A11
10.00%, 6/15/12 A+ 950 1,178
U.S. Treasury Securities (20.3%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 10,795 13,686
U.S. Treasury Notes
6.25%, 5/31/99 Tsy 12,075 12,162
6.75%, 6/30/99 Tsy 4,000 4,062
++ 7.125%, 9/30/99 Tsy 5,600 5,736
3.625%, 7/15/02 (Inflation Indexed) Tsy 501 500
3.375%, 1/15/07 (Inflation Indexed) Tsy 8,129 7,974
U.S. Treasury Strip, PO
11/15/18 Tsy 7,400 1,870
Group Total 45,990
Utilities (0.2%)
^ Edison Mission Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 500 514
Yankee (3.3%)
^ Alcoa Aluminio SA, Series 96-1
7.50%, 12/16/08 BBB 975 995
AST Research, Inc.
7.45%, 10/1/02 A- 850 847
^ Hyundai Semiconductor America
8.625%, 5/15/07 BBB- 925 944
Korea Development Bank
7.375%, 9/17/04 AA- 790 796
^ Paiton Energy Funding
9.34%, 2/15/14 BBB- 800 877
^ Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 800 793
^ Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 1,030 1,088
^ Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 350 380
Republic of Colombia
8.70%, 2/15/16 BBB- 700 714
Group Total 7,434
Total Fixed Income Securities (Cost $215,747) 219,838
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
- ------------------ --------- ----- ------
<S> <C> <C> <C>
INTEREST RATE CAP (0.1%)-See Note A6
J.P. Morgan and Co., Inc., terminating
10/15/99, to receive on 10/15/99 the
excess, as measured on 10/15/98, of
12 month LIBOR over 6.34% multiplied
by the notional amount. (Premium
Paid $243) N/R 57,500 174
CASH EQUIVALENTS (5.2%)
Short-term Investments
Held as Collateral for
Loaned Securities (0.4%) 844 844
Commercial Paper (0.6%)
First Chicago NBD Corp.
5.839%, 10/3/97 1,525 1,525
Repurchase Agreement (4.2%)
Chase Securities, Inc. 5.90% dated
9/30/97, due 10/1/97, to be repurchased
at $9,497, collateralized by various
U.S. Government Obligations due
10/1/97-1/29/99, valued at $9,584 9,495 9,495
Total Cash Equivalents (Cost $11,864) 11,864
Total Investments (102.3%) (Cost $227,854) 231,876
</TABLE>
87
<PAGE>
<TABLE>
<CAPTION>
Value
(000)+
------
<S> <C>
Other Assets and Liabilities (-2.3%)
Dividends Receivable 187
Interest Receivable 2,635
Receivable for Investments Sold 988
Receivable for Daily Variation on Futures Contracts 18
Unrealized Gain on Swap Agreements 4
Other Assets 7
Payable for Investments Purchased (7,863)
Payable for Fund Shares Redeemed (33)
Payable for Investment Advisory Fees (209)
Payable for Administrative Fees (15)
Payable for Trustees' Deferred Compensation Plan-Note F (6)
Unrealized Loss on Forward Foreign Currency Contracts (31)
Collateral on Securities Loaned, at Value (844)
Other Liabilities (52)
(5,214)
NET ASSETS (100%) $226,662
INSTITUTIONAL CLASS
Net Assets
Applicable to 19,770,477 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $226,662
NET ASSET VALUE PER SHARE $11.46
Net Assets Consist of:
Paid in Capital $216,715
Undistributed Net Investment Income (Loss) 4,574
Undistributed Realized Net Gain (Loss) 1,526
Unrealized Appreciation (Depreciation) on: Investment Securities 4,022
Foreign Currency Transactions (32)
Futures and Swaps (143)
Net Assets $226,662
</TABLE>
ss. Restricted Security-Total market value of restricted securities
owned at September 30, 1997 was $2,036 or 0.9% of net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin
requirements for futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by
Standard & Poor's Corporation.
## Variable or floating rate security-rate disclosed is as of September
30, 1997.
(1) Amount represents shares held by the Portfolio.
CMO Collateralized Mortgage Obligation
DEM German Mark
INV FI Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate.
Indicated rate is the effective rate at September 30, 1997.
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's or
Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to Financial
Statements.
YMA Yield Maintenance Agreement
88
<PAGE>
Statement of Net Assets
Mortgage-Backed
Securities Portfolio
Statement of Net Assets
Fixed Income Securities (98.0%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's (000) (000)+
- ------------------ -------- ----- ------
<S> <C> <C> <C>
Adjustable Rate Mortgages (15.0%)
## Government National Mortgage
Association
Various Pools:
6.50%, 8/20/27 Agy 2,970 3,015
October TBA
6.00%, 6/20/27 Agy 2,700 2,717
Group Total 5,732
Agency Fixed Rate Mortgages (38.1%)
Federal Home Loan Mortgage
Corporation
Conventional Pools:
10.00%, 2/1/18 Agy 341 372
11.50%, 2/1/14-1/1/16 Agy 221 251
12.50%, 9/1/11-11/1/14 Agy 179 211
Gold Pools:
7.00%, 1/1/24-12/1/24 Agy 759 760
7.50%, 2/1/27-6/1/27 Agy 5,558 5,666
October TBA
7.50%, 7/15/26 Agy 1,750 1,781
Federal National Mortgage
Association
Conventional Pools:
10.00%, 9/1/18-2/1/25 Agy 771 845
11.50%, 2/1/15-12/1/15 Agy 155 176
12.50%, 9/1/13 Agy 20 24
13.00%, 5/1/13 Agy 59 68
Government National Mortgage
Association
Various Pools:
7.00%, 12/15/23 Agy 1,812 1,818
10.00%, 1/15/13-12/25/26 Agy 706 782
10.50%, 12/15/10-12/15/17 Agy 346 390
11.00%, 12/15/09-8/15/15 Agy 42 47
11.50%, 5/15/13 Agy 26 29
12.00%, 12/15/12-11/15/15 Agy 1,097 1,273
Group Total 14,493
</TABLE>
89
<PAGE>
<TABLE>
<S> <C> <C> <C>
Asset Backed Corporates (0.5%)
Old Stone Credit Corp,
Series 92-3 B1
6.35%, 9/25/07 AAA 32 31
Security Pacific Home Equity
Trust, Series 91-A B
10.50%, 3/10/06 A+ 176 176
Group Total 207
Collateralized Mortgage Obligations-
Agency Collateral Series (8.6%)
Federal Home Loan Mortgage
Corporation,
Series:
90-129 H PAC
8.85%, 3/15/21 Agy 185 202
90-1007 F Inv Fl
21.795%, 1/15/20 Agy 3 3
1415-S Inv Fl IO CMO
18.813%, 11/15/07 Agy 142 66
1476-S Inv Fl IO REMIC PAC
4.363%, 2/15/08 Agy 1,122 131
1485-S Inv Fl IO REMIC
3.913%, 3/15/08 Agy 1,954 173
1600-SA Inv Fl IO REMIC
2.313%, 10/15/08 Agy 3,103 172
1950-SC Inv Fl IO
2.313%, 10/15/22 Agy 3,450 316
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl CMO
28.975%, 9/25/20 Agy 43 66
92-52 SQ Inv Fl IO REMIC
7229.546%, 9/25/22 Agy 1 241
92-186 S Inv Fl IO CMO
3.363%, 10/25/07 Agy 2,243 193
93-205 G PO REMIC
9/25/23 Agy 180 116
93-235 H PO REMIC
9/25/23 Agy 72 56
96-68 SC Inv Fl IO REMIC
2.475%, 1/25/24 Agy 432 52
97-30 Inv Fl IO REMIC
2.281%, 7/25/22 Agy 1,035 96
282 1 PO
5/15/24 Agy 564 386
Government National Mortgage
Association,
Series:
96-12 S Inv Fl IO REMIC
2.813%, 6/16/26 Agy 4,557 316
96-13 S Inv Fl IO REMIC
3.65%, 7/16/11 Agy 1,817 158
96-17 S Inv Fl IO REMIC
2.863%, 8/16/26 Agy 2,269 164
</TABLE>
90
<PAGE>
<TABLE>
<S> <C> <C> <C>
Kidder Peabody Mortgage Assets
Trust,
Series:
+ 87-B IO
9.50%, 4/22/18 Aaa 190 57
+ 87-B PO
4/22/18 Aaa 190 143
Morgan Stanley Mortgage Trust,
Series 28 8 PAC
9.40%, 10/1/18 AAA 165 172
Group Total 3,279
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (19.8%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 379 402
Citicorp Mortgage Securities, Inc.,
Series 93-9 A1 REMIC
7.00%, 3/25/20 AAA 123 124
CMC Securities Corp. IV,
Series 94-G A4
7.00%, 9/25/24 AAA 250 239
Countrywide Funding Corp.,
Series 94-12 A10
7.00%, 5/25/24 AAA 1,135 1,096
DLJ Mortgage Acceptance Corp.,
Series 97-CF2 A1B
6.82%, 10/15/30 AAA 100 101
ss. First Boston Mortgage Corp.,
Series 92-4 B1
8.125%, 10/25/22
(acquired 1/25/93-
10/27/93, cost $145) A 144 147
GE Capital Mortgage Services, Inc.,
Series 94-24 A4
7.00%, 7/25/24 AAA 347 333
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5 A2
7.069%, 9/15/29 AAA 125 128
ss.##Kidder Peabody Funding Corp.,
Series 92-4 B2
8.467%, 5/28/22
(acquired 8/5/92-
10/27/93, cost $118) N/R 117 117
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 590 641
PNC Mortgage Securities Corp.,
Series 96-1 B1
7.50%, 6/25/26 AA 306 310
Prudential Home Mortgage
Securities Co., Inc.,
Series:
ss.+ 92-33 B1
7.50%, 11/15/22
(acquired 11/30/92,
cost $226) Aa3 263 255
^## 94-A 3B3
6.803%, 4/28/24 N/R 910 880
</TABLE>
91
<PAGE>
<TABLE>
<S> <C> <C> <C>
Residential Accredit Loans, Inc.
Series:
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 190 192
97-Q52 A8
7.75%, 3/25/27 AAA 85 88
97-QS3 A8
7.75%, 4/25/27 AAA 170 175
97-QS12 A8 TBA
7.25%, 12/25/27 N/R 225 225
Residential Funding Mortgage
Securities Co., Inc.,
Series 94-S1 A19
6.75%, 1/25/24 AAA 301 293
Rural Housing Trust,
Series 87-1 M
3.33%, 10/1/28 A- 410 391
+ Ryland Mortgage Securities Corp.,
Series 93-4 A9
7.50%, 8/25/24 Aaa 885 887
Saxon Mortgage Securities Corp.,
Series 93-8A A6
7.375%, 9/25/23 AAA 517 513
Group Total 7,537
Commercial Mortgages (10.0%)
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 219 225
^+ 96-D3 A1C
7.40%, 10/13/26 Aaa 140 147
96-MD6 A1C
7.04%, 11/13/26 AAA 140 144
Beverly Finance Corp.
8.36%, 7/15/04 AA- 285 307
CBM Funding Corp.,
Series 96-1 A3PI
7.08%, 2/1/13 AA 155 160
CS First Boston Mortgage
Securities Corp.,
Series 97-C1 A1C
7.24%, 6/20/29 AAA 190 197
^ DLJ Mortgage Acceptance Corp.,
Series:
96-CF2 A1B
7.29%, 11/12/21 AAA 45 47
## 96-CF2 S IO
1.643%, 11/12/21 N/R 472 42
+ GS Mortgage Securities Corp.,
Series 97-GL A2D
6.94%, 7/13/30 Aaa 105 107
^ Lakeside Finance Corp.
6.47%, 12/15/00 AA 315 315
+ LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 168 174
</TABLE>
92
<PAGE>
<TABLE>
<S> <C> <C> <C>
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 70 71
96-C2 IO
1.529%, 11/21/28 N/R 740 66
+ Midland Realty Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 120 124
+ Mortgage Capital Funding, Inc.,
Series 97-MC1 A3
7.288%, 7/20/27 Aaa 225 234
Nomura Asset Securities Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 N/R 185 190
## 94-MD1 A2
7.664%, 3/15/18 N/R 150 157
^ Prime Property Funding,
Series 1 A
6.633%, 7/23/03 AA 259 259
Sawgrass Financial,
Series 93-A1
6.45%, 1/20/06 AAA 340 341
+ Stratford Finance Corp.
6.776%, 2/1/04 AA 495 493
Group Total 3,800
Finance (2.7%)
^+ Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)1,050 1,019
Rated Non-Agency Fixed Rate Mortgages (1.6%)
DLJ Mortgage Acceptance Corp.,
Series 93-MF7 A1
7.40%, 6/18/03 AAA 242 248
## Resolution Trust Corp.,
Series 92-5 C
8.618%, 1/25/26 AA 304 307
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 69 66
Group Total 621
Stripped Mortgage Backed Securities-
Agency Collateral Series (1.7%)
Federal National Mortgage Association
Series:
249 1 PO,
10/25/23 Agy 111 74
254 1 PO,
1/1/24 Agy 98 70
260 1 PO,
4/1/24 Agy 131 93
## 93-M2 B IO REMIC
2.575%, 7/25/03 Agy 554 32
93-146 G PO REMIC
5/25/23 Agy 234 153
</TABLE>
93
<PAGE>
<TABLE>
<S> <C> <C> <C>
93-243 C PO REMIC
11/25/23 Agy 44 34
96-27 A PO REMIC
10/25/23 Agy 345 151
First Boston Mortgage Securities Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA 145 40
Group Total 647
Total Fixed Income Securities (Cost $36,503) 37,335
STRUCTURED INVESTMENTS (0.4%)-See Note A7
Morgan Guaranty Trust Company,
11/20/05; monthly payments equal to 1% per annum of the outstanding
notional balance, indexed to GNMA
ARM pools. (Cost $189) N/R 4,745 137
INTEREST RATE CAPS (0.1%)-See Note A6
Bankers Trust Co., Inc., terminating
10/15/99, to receive on 10/15/99 the excess, as measured on 10/15/98,
of 12 month LIBOR over 6.34% multiplied
by the notional amount.N/R 6,600 20
J.P. Morgan and Co., Inc., terminating
10/15/99, to receive on 10/15/99 the
excess, as measured on 10/15/98, of
12 month LIBOR over 6.34% multiplied
by the notional amount. N/R 10,000 30
Group Total (Premium Paid $68) 50
CASH EQUIVALENTS (13.5%)
Agency Floating Rate Mortgage (0.8%)
## Federal Home Loan Mortgage Corporation,
2/15/24 299 299
Discount Note (7.6%)
Federal Home Loan Mortgage Corporation,
10/16/97 1,500 1,496
Federal National Mortgage
Association
10/17/97 1,400 1,397
Group Total 2,893
U.S. Treasury Security (1.3%)
++ U.S. Treasury Bill
11/13/97 515 512
Repurchase Agreement (3.8%)
Chase Securities, Inc. 5.90% dated
9/30/97, due 10/1/97, to be
repurchased at $1,434,
collateralized by various U.S.
Government Obligations, due
10/1/97-1/29/99 valued at $1,447 1,434 1,434
Total Cash Equivalents (Cost $5,134) 5,138
Total Investments (112.0%) (Cost $41,894) 42,660
</TABLE>
94
<PAGE>
<TABLE>
<S> <C>
Other Assets and Liabilities (-12.0%)
Dividends Receivable 35
Interest Receivable 357
Receivable for Investments Sold 1,966
Rceivable for Fund Shares Sold 10
Receivable for Daily Variation on Futures Contracts 8
Other Assets 2
Payable for Investments Purchased (6,819)
Payable for Fund Shares Redeemed (14)
Payable for Investment Advisory Fees (40)
Payable for Administrative Fees (3)
Payable for Trustees' Deferred Compensation Plan-Note F (1)
Unrealized Loss on Swap Agreements (51)
Other Liabilities (25)
(4,575)
NET ASSETS (100%) $38,085
INSTITUTIONAL CLASS
Net Assets
Applicable to 3,540,390 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $38,085
NET ASSET VALUE PER SHARE $10.76
Net Assets Consist of:
Paid in Capital $39,281
Undistributed Net Investment Income (Loss) 1,007
Undistributed Realized Net Gain (Loss) (2,861)
Unrealized Appreciation (Depreciation) on:
Investment Securities 766
Futures and Swaps (108)
Net Assets $38,085
</TABLE>
ss. Restricted Security-Total market value of restricted securities owned
at September 30, 1997 was $519 or 1.4% of net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements
for futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by
Standard & Poor's Corporation.
## Variable or floating rate security-rate disclosed is as of September
30, 1997.
(1) Amount represents shares held by the Portfolio.
CMO Collateralized Mortgage Obligation
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at September 30, 1997.
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's
Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See note A8 to Financial
Statements.
95
<PAGE>
Statement of Net Assets
Limited Duration
Portfolio
Statement of Net Assets
Fixed Income Securities (94.9%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's (000) (000)+
- ------------------ -------- ----- ------
<S> <C> <C> <C>
Adjustable Rate Mortgages (18.9%)
## Government National Mortgage
Association
Various Pools:
6.00%, 9/20/27 Agy $9,750 $9,823
6.50%, 8/20/27 Agy 16,830 17,088
November TBA
6.00%, 11/20/27 Agy 2,500 2,515
Group Total 29,426
Agency Fixed Rate Mortgages (8.4%)
Federal Home Loan Mortgage Corporation
Conventional Pools:
10.00%, 4/1/10-8/1/16 Agy 371 405
10.50%, 12/1/14-11/1/19 Agy 669 744
11.00%, 8/1/15-5/1/20 Agy 257 288
11.50%, 12/1/08-1/1/18 Agy 1,160 1,315
Gold Pools:
10.00%, 2/1/21-10/1/21 Agy 299 330
10.50%, 1/1/19-10/1/20 Agy 583 648
11.50%, 8/1/10 Agy 195 224
12.00%, 6/1/15-9/1/15 Agy 535 614
Federal National Mortgage Association
Conventional Pools:
10.00%, 12/1/15-9/1/16 Agy 668 732
10.50%, 4/1/15 Agy 112 126
11.00%, 7/1/20 Agy 467 526
12.00%, 5/1/14-8/1/20 Agy 344 396
12.50%, 2/1/15 Agy 99 115
Government National Mortgage Association
Various Pools:
10.00%, 11/15/09-12/25/26 Agy 3,132 3,476
10.50%, 5/15/16-5/15/26 Agy 724 816
11.00%, 1/15/10-6/15/20 Agy 1,720 1,966
11.50%, 2/15/13-9/15/14 Agy 280 325
Group Total 13,046
Asset Backed Corporates (25.3%)
^ Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 400 402
^ ACC Automobile Receivables Trust,
Series 97-C A
6.40%, 3/17/04 AAA 746 748
</TABLE>
96
<PAGE>
<TABLE>
<S> <C> <C> <C>
AFG Receivables Trust,
Series:
95-A A
6.15%, 9/15/00 A 197 197
96-B A
6.60%, 4/15/01 A 336 337
97-A A
6.35%, 10/15/02 AAA 649 650
ALPS,
Series 94-1 A2 CMO
7.15%, 11/15/97 AA 788 795
Americredit Automobile Receivables Trust,
Series 96-B A
6.50%, 1/12/02 AAA 657 660
Arcadia Auto,
Series 97-C A4
6.375%, 1/15/03 AAA 770 773
Associates Manufactured Housing
Pass Through Certificates,
Series 97-1 A3
6.60%, 6/15/28 AAA 845 851
Case Equipment Loan Trust,
Series:
95-A A
7.30%, 3/15/02 AAA 140 142
95-A B
7.65%, 3/15/02 A 209 212
Champion Home Equity Loan Trust,
Series:
96-3 A2
7.03%, 8/25/11 AAA 650 656
96-4 A2
6.66%, 11/25/11 AAA 875 876
Cityscape Home Equity Loan Trust,
Series:
96-1 A1
6.45%, 1/25/11 AAA 252 251
96-3 A2
6.65%, 6/25/11 AAA 600 600
97-1 A3
6.63%, 3/25/18 AAA 1,300 1,301
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 528 529
97-2 A
6.65%, 10/15/02 AAA 455 458
Contimortgage Home Equity Loan Trust,
Series 96-3 A2
6.97%, 7/15/11 AAA 600 602
Crown Home Equity Loan Trust,
Series 96-1 A2
6.51%, 6/25/11 AAA 950 950
CS First Boston Mortgage Securities Corp.,
Series 96-2 A2
6.32%, 3/25/05 AAA 875 873
Delta Funding Home Equity Loan Trust,
Series 96-3 A2
6.525%, 10/25/11 AAA 950 948
</TABLE>
97
<PAGE>
<TABLE>
<S> <C> <C> <C>
First Merchants Auto Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 1,175 1,167
^ 97-2 A1
6.85%, 11/15/02 AAA 564 568
First Plus Home Loan Trust,
Series:
96-3 A2
6.85%, 6/20/07 AAA 900 904
96-4 A3
6.28%, 3/10/09 AAA 900 898
97-1 A3
6.45%, 6/10/09 AAA 1,300 1,300
First Union Residential
Securitization Trust
Series
96-2 A2
6.46%, 9/25/11 AAA 925 924
Fleet Finance, Inc.,
Series 93-1 A
5.45%, 3/20/23 AAA 14 14
Fleetwood Credit Corp.,
Series 92-A A
7.10%, 2/15/07 AAA 510 511
Ford Credit Auto Owner Trust,
Series:
96-A A3
6.50%, 11/15/99 AAA 1,700 1,711
96-B
6.55%, 2/15/02 A 400 402
Ford Credit Grantor Trust,
Series 94-B A
7.30%, 10/15/99 AAA 493 497
General Electric Home Equity Loan
Asset-Backed Certificates,
Series 91-1 B
8.70%, 9/15/11 AAA 850 873
General Motors Acceptance Corp.,
Grantor Trust,
Series 93-A A
4.15%, 3/15/98 AAA 2 2
General Motors Acceptance Corp.,
Series 97-A A
6.50%, 4/15/02 AAA 885 889
Greenwich Capital Acceptance, Inc.,
Series 95-BA1 A1
6.00%, 8/10/20 AAA 302 301
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 1,281 1,280
IBM Credit Receivables Lease Asset
Master Trust,
Series 93-1 A
4.55%, 11/15/00 AAA 116 115
IMC Home Equity Loan Trust,
Series 96-4 A3
6.81%, 7/25/11 AAA 500 502
^ Long Beach Auto,
Series 97-2 A
6.69%, 9/25/04 AAA 568 568
</TABLE>
98
<PAGE>
<TABLE>
<S> <C> <C> <C>
Money Store (The) Home Equity Trust,
Series 95-CA1
6.20%, 1/15/09 AAA 127 126
^ NAL Auto Trust,
Series:
96-3A
7.30%, 12/15/00 N/R 250 249
97-2A
7.75%, 9/15/02 N/R 420 420
^ National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 600 615
Navistar Financial Corp.,
Series 94-B A
6.40%, 1/15/00 AAA 361 361
^ NPR Health Care,
Series 97-1 A
6.815%, 7/1/01 N/R 300 303
Oakwood Mortgage Investors Inc.,
Series 95-B A1
6.25%, 1/15/21 AAA 267 267
Old Stone Credit Corp,
Series 92-3 B1
6.35%, 9/25/07 AAA 94 93
Olympic Automobile Receivables Trust,
Series:
94-A1
5.65%, 1/15/01 AAA 180 180
94-B B
6.95%, 6/15/01 AAA 240 242
Onyx Acceptance Grantor Trust,
Series:
97-2 A
6.35%, 10/15/03 AAA 955 957
1997-3A
6.35%, 1/15/04 AAA 800 803
Onyx Acceptance Trust,
Series:
94-1 A
6.90%, 1/17/00 AAA 122 123
Preferred Credit Corp.,
Series 97-1 A3
6.91%, 5/1/07 AAA 850 856
Premier Auto Trust,
Series:
94-3 B
6.80%, 12/2/99 AA 113 114
95-A A4
6.00%, 5/6/00 AAA 775 775
Security Pacific Home Loan Equity Trust,
Series 91-1 B
8.85%, 5/15/98 AAA 678 688
Southern Pacific Secured Assets Corp.,
Series 96-1 A2
6.09%, 3/25/27 AAA 309 308
</TABLE>
99
<PAGE>
<TABLE>
<S> <C> <C> <C>
+ Team Fleet Financing Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 350 350
97-1 A
7.35%, 5/15/03 A- 875 900
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 722 722
97-B A2
6.70%, 6/8/03 AAA 700 706
+ Vanderbilt Mortgage Finance,
Series 97-B 1A2
6.775%, 12/7/28 Aaa 1,000 1,012
WFS Financial Owner Trust,
Series 97-C A3
6.10%, 3/20/02 AAA 810 809
Western Financial Auto Grantor Trust,
Series:
93-A1
4.45%, 7/1/98 AAA 29 29
93-2 A2
4.70%, 10/1/98 AAA 24 23
93-3 A1
4.25%, 12/1/98 AAA 37 37
94-1 A1
5.10%, 6/1/99 AAA 86 86
Group Total 39,391
Collateralized Mortgage Obligations-
Agency Collateral Series (12.4%)
Federal Home Loan Mortgage Corporation,
Series:
181 D REMIC
8.50%, 6/15/16 Agy 1,340 1,342
1386 D REMIC
6.188%, 10/15/07 Agy 1,488 1,491
1462 PAC-1 (11) REMIC
6.75%, 9/15/16 Agy 1,075 1,082
1542 H PAC-1
6.50%, 10/15/20 Agy 1,160 1,165
1548 G SEQ
6.00%, 4/15/17 Agy 926 921
1560 PE PAC-1 (11) REMIC
6.00%, 11/15/16 Agy 1,250 1,245
1576 PD PAC (11) REMIC
5.50%, 9/15/02 Agy 1,075 1,071
1680 PB PAC-1 (11)
5.70%, 6/15/12 Agy 537 535
1839 A
6.50%, 7/15/17 Agy 1,035 1,040
1931 Class A SEQ
7.25%, 6/15/21 Agy 959 970
92-127 FA REMIC
6.188%, 3/25/06 Agy 308 308
93-16 B
7.50%, 10/25/19 Agy 850 863
93-83 A SEQ
5.55%, 11/25/16 Agy 825 814
</TABLE>
100
<PAGE>
<TABLE>
<S> <C> <C> <C>
94-93 PD PAC
7.25%, 4/25/15 Agy 800 809
96-40 K
5.75%, 11/25/16 Agy 1,625 1,610
97-67 HB
6.50%, 12/17/21 Agy 1,450 1,441
97-67 HD
6.00%, 12/17/21 Agy 1,700 1,668
Federal National Mortgage Association,
Series 93-70 B
5.75%, 4/25/16 Agy 986 976
Group Total 19,351
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (0.3%)
Citicorp Mortgage Securities, Inc.,
Series 93-9 B
7.00%, 3/25/20 AAA 101 101
G E Capital Mortgage Services, Inc.,
Series 93-14 A2 REMIC
5.75%, 4/25/11 AAA 355 353
Group Total 454
Commercial Mortgages (0.8%)
+ Carolina First Bank,
Series 96
6.50%, 12/18/99 Aa2 262 262
CBM Funding Corp.,
Series 96-1B A1
7.55%, 2/1/13 AA 335 340
+ Midland Realty Acceptance Corp.,
Series 96-C2 A1
7.02%, 1/25/27 Aaa 581 592
Group Total 1,194
Finance (11.6%)
Allstate Corp.
5.875%, 6/15/98 A 1,125 1,126
Associates Corp. of
North America
8.25%, 12/1/99 AA- 800 835
Bankers Trust New York Corp.
6.625%, 7/30/99 A 635 640
Barclays American Corp.
7.875%, 8/15/98 AA 450 458
Beneficial Corp.
6.45%, 6/19/00 A 670 673
Chase Manhattan Bank N.A.
5.875%, 8/4/99 A+ 1,375 1,370
Chrysler Financial Corp.
6.375%, 1/28/00 A- 775 778
CIT Group Holdings
6.375%, 10/1/02 N/R 825 822
Countrywide Funding Corp.
7.32%, 8/15/00 A 650 667
^ Farmers Insurance Exchange
8.50%, 8/1/04 BBB- 700 750
^ First Hawaiian Bank, Series A
6.93%, 12/1/03 A 700 707
</TABLE>
101
<PAGE>
<TABLE>
<S> <C> <C> <C>
^ Florida Property & Casualty
7.45%, 7/1/04 A 150 155
7.375%, 7/1/03 A- 375 387
^ Florida Windstorm
6.70%, 8/25/04 A- 425 424
Ford Motor Credit Corp.
7.47%, 7/29/99 A+ 675 691
8.375%, 1/15/00 A+ 400 419
General Motors Acceptance Corp.
6.00%, 12/30/98 A- 600 601
+7.25%, 6/22/99 A3 285 290
Heller Financial, Inc.
9.375%, 3/15/98 BBB+ 375 381
7.875%, 11/1/99 BBB+ 525 542
Home Ownership Funding Corp.,
13.331% (Preferred Stock) AAA (1)1,800 1,747
Household International
6.00%, 3/15/99 A 575 575
^ Hyatt Equities
7.00%, 5/15/02 BBB+ 925 941
International Lease Finance
8.28%, 2/3/00 A+ 550 575
Lehman Brothers
Holding, Inc.
6.625%, 11/15/00 A 725 730
^ Prime Property Funding
6.80%, 8/15/02 A 785 789
Group Total 18,073
Floating Rate Notes (0.8%)
## Airlines Pass Through Trust,
Series 1 A5
6.006%, 3/15/19 AA 402 402
## Student Loan Marketing Association,
Series:
95-1 A1
5.759%, 4/26/04 AAA 463 463
96-1 A1
5.744%, 7/26/04 AAA 388 389
Group Total 1,254
Industrials (1.5%)
^ EES Coke Battery Co., Inc.
7.125%, 4/15/02 BBB 575 582
^ Kern River Funding Corp.
6.42%, 3/31/01 A- 649 651
Philip Morris Cos., Inc.
8.75%, 6/1/01 A 520 557
RJR Nabisco, Inc.
8.625%, 12/1/02 BBB- 575 604
Group Total 2,394
Rated Non-Agency Fixed Rate Mortgages (0.7%)
+ Town & Country Funding Corp.,
Series A
5.85%, 8/15/98 Aa2 1,000 998
</TABLE>
102
<PAGE>
<TABLE>
<S> <C> <C> <C>
Telephones (0.4%)
Tele-Communications, Inc.,
Series 95-C A1
8.25%, 1/15/03 BBB- 550 579
U.S. Treasury Securities (12.7%)
U.S. Treasury Notes
5.00%, 2/15/99 Tsy 1,200 1,188
++7.00%, 4/15/99 Tsy 2,375 2,418
3.625%, 7/15/02 (Inflation Indexed) Tsy 16,210 16,147
Group Total 19,753
Utilities (0.4%)
^ Edison Mission Energy Funding
6.77%, 9/15/03 BBB 671 677
Yankee (0.7%)
AST Research, Inc.
7.45%, 10/1/02 A- 600 598
Korea Development Bank
7.375%, 9/17/04 AA- 470 474
Group Total 1,072
Total Fixed Income Securities (Cost $147,181) 147,662
INTEREST RATE CAP (0.2%)-See Note A6
Bankers Trust Co., Inc., terminating 10/15/99, to receive on 10/15/99 the
excess, as measured on 10/15/98, of 12 month LIBOR over 6.34%
multiplied by the notional amount.
(Premium Paid $370) N/R 96,748 292
</TABLE>
103
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
----- ------
<S> <C> <C>
CASH EQUIVALENT (3.8%)
Repurchase Agreement (3.8%)
Chase Securities, Inc. 5.90% dated 9/30/97,
due 10/1/97, to be repurchased at
$5,961, collateralized by various
U.S. Government Obligations, due
10/1/97-1/29/99, valued at $6,016
(Cost $5,960) 5,960 5,960
Total Investments (98.9%) (Cost $153,511) 153,914
Other Assets and Liabilities (1.1%)
Dividends Receivable 60
Interest Receivable 1,119
Receivable for Investments Sold 14,638
Other Assets 4
Payable for Investments Purchased (8,395)
Payable for Fund Shares Redeemed (5,613)
Payable for Investment Advisory Fees (114)
Payable for Administrative Fees (11)
Payable for Trustees' Deferred Compensation Plan-Note F (3)
Other Liabilities (29)
1,656
NET ASSETS (100%) $155,570
INSTITUTIONAL CLASS
Net Assets
Applicable to 14,831,121 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $155,570
NET ASSET VALUE PER SHARE $10.49
Value
(000)+
Net Assets Consist of:
Paid in Capital $156,817
Undistributed Net Investment Income (Loss) 2,361
Undistributed Realized Net Gain (Loss) (4,002)
Unrealized Appreciation (Depreciation) on:
Investment Securities 403
Futures (9)
Net Assets $155,570
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard &
Poor's Corporation.
## Variable or floating rate security-rate disclosed is as of September 30, 1997.
(1) Amount represents shares held by the Portfolio.
CMO Collateralized Mortgage Obligation
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation or
Fitch.
PAC Planned Amortization Class
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
</TABLE>
103
<PAGE>
Statement of Net Assets
Special Purpose Fixed
Income Portfolio
Statement of Net Assets
Fixed Income Securities (97.1%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's (000) (000)+
-------- ----- ------
Adjustable Rate Mortgages (10.2%)
## Government National Mortgage
Association
Various Pools:
<S> <C> <C> <C>
6.00%, 8/20/27-9/20/27 Agy 39,800 $40,098
November TBA
6.00%, 11/20/27 Agy 10,150 10,210
Group Total 50,308
Agency Fixed Rate Mortgages (13.0%)
Federal Home Loan Mortgage Corporation
Conventional Pools:
10.50%, 2/1/19-3/1/27 Agy 4,666 5,204
11.00%, 12/1/10-9/1/20 Agy 2,410 2,700
11.75%, 12/1/17 Agy 128 146
Gold Pools:
7.00%, 9/1/23-12/1/24 Agy 9,397 9,410
10.50%, 11/1/15-4/1/21 Agy 759 844
Federal National Mortgage Association
Conventional Pools:
10.50%, 8/1/15-4/1/22 Agy 4,541 5,086
12.00%, 11/1/15 Agy 3,196 3,683
Government National Mortgage Association
Various Pools:
7.00%, 12/15/22-12/15/23 Agy 16,132 16,188
10.00%, 12/15/17-12/25/26 Agy 9,521 10,554
10.50%, 10/15/15-4/15/25 Agy 3,641 4,095
11.00%, 1/15/10-5/15/26 Agy 5,680 6,403
12.00%, 4/15/14 Agy 41 47
Group Total 64,360
Asset Backed Corporates (5.2%)
## Airplanes Pass Through Trust,
Series 1 B
6.756%, 3/15/19 A 1,223 1,227
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 1,450 1,484
94-1 C2 CMO
9.35%, 9/15/04 BBB 1,816 1,867
Arcadia Auto,
Series 97-C A4
6.375%, 1/15/03 AAA 2,280 2,289
CIT Group Home Equity Loan Trust,
Series 97-1 A3
6.25%, 9/15/01 AAA 1,325 1,326
</TABLE>
104
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal Mortgage Acceptance Corp., Loan
Receivables Trust,
Series 96-B A1
7.629%, 11/1/18 A 1,290 1,316
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 1,345 1,348
97-3 A3
6.57%, 10/10/10 AAA 1,330 1,335
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 3,959 3,955
Long Beach Auto,
Series 97-2 A
6.69%, 9/25/04 AAA 1,753 1,754
NAL Auto Trust,
Series:
96-4 A
6.90%, 12/15/00 N/R 975 969
97-2 A
7.75%, 9/15/02 N/R 1,019 1,020
National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 1,650 1,691
Security Pacific Home Equity Trust,
Series 91-AB
10.50%, 3/10/06 A+ 512 513
Team Fleet Financing Corp.,
Series 96-1A
6.65%, 12/15/02 A- 1,125 1,126
WFS Financial Owner Trust,
Series 97-C A3
6.01%, 3/20/02 AAA 2,470 2,467
Group Total 25,687
Asset Backed Mortgages (1.9%)
Champion Home Equity Loan Trust,
Series 96-2 A4
8.00%, 9/25/28 AAA 2,105 2,195
Cityscape Home Equity
Loan Trust,
Series:
ss. 96-3 YMA
10/25/26 (acquired 12/24/96, cost $53) N/R 38,981 52
96-3 A IO
1.00%, 10/25/26 N/R 34,246 849
96-3 A8
7.65%, 8/25/26 AAA 2,200 2,250
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Contimortgage Home Equity Loan Trust,
Series:
96-3 A7
8.04%, 9/15/27 AAA 2,150 2,256
96-4 A11 IO
1.10%, 1/15/28 AAA 29,147 766
96-4 A12 IO
1.05%, 1/15/28 AAA 9,408 247
96-4 A12 YMA
1/15/28 AAA 11,765 17
96-4 A12 YMA
1/15/28 AAA 35,300 53
97-1 A10 YMA
3/15/28 N/R 36,896 52
97-1 A10I IO
1.10%, 3/15/28 AAA 34,489 944
Group Total 9,681
Collateralized Mortgage Obligations-
Agency Collateral Series (2.5%)
Federal Home Loan Mortgage Corporation,
Series:
1415-S Inv Fl IO
18.813%, 11/15/07 Agy 1,003 462
1476-S Inv Fl IO
REMIC PAC
4.363%, 2/15/08 Agy 9,282 1,082
1485-S Inv Fl IO REMIC
3.913%, 3/15/08 Agy 8,804 781
1600-SA Inv Fl IO REMIC
2.313%, 10/15/08 Agy 18,995 1,050
1709 H PO
1/15/24 Agy 237 121
1750 C PD PO
3/15/24 Agy 361 257
1813 K PO
2/15/24 Agy 240 165
1844 PC PO
3/15/24 Agy 435 275
1887 I PO
10/15/22 Agy 255 171
88-22 C PAC (11)
9.50%, 4/15/20 Agy 41 46
Federal National Mortgage Association,
Series:
92-186 S Inv Fl IO CMO
3.363%, 10/25/07 Agy 17,501 1,503
93-149 O PO
8/25/23 Agy 347 220
93-205 G PO
9/25/23 Agy 853 550
93-235 H PO REMIC
9/25/23 Agy 338 264
96-14 PC PO
12/25/23 Agy 415 239
96-46 PB PO
9/25/23 Agy 425 285
96-54 N PO
7/25/23 Agy 305 228
</TABLE>
106
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
96-54 O PO
11/25/23 Agy 342 213
96-68 SC Inv Fl IO REMIC
2.475%, 1/25/24 Agy 4,050 491
97-7 AE PO REMIC
2/15/23 Agy 1,092 788
282 1 PO
5/15/24 Agy 4,433 3,038
Group Total 12,229
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (8.7%)
American Housing Trust,
Series:
IV 2
9.553%, 9/25/20 A 303 316
V 1G
9.125%, 4/25/21 AAA 1,631 1,733
+ Chase Mortgage Finance Corp.,
Series 93-N A8
6.75%, 11/25/24 Aaa 2,800 2,651
Chemical Mortgage Securities, Inc.,
Series 93-1 M
7.45%, 2/25/23 AA 225 227
CMC Securities Corp. IV,
Series 94-G A4
7.00%, 9/25/24 AAA 1,800 1,720
DLJ Mortgage Acceptance Corp.,
Series 97-CF2 A1B
6.82%, 10/15/30 AAA 2,975 2,995
ss. First Boston Mortgage Corp.,
Series 92-4 B1
8.125%, 10/25/22 (acquired
1/26/93, cost $1,056) A 1,106 1,128
GE Capital Mortgage
Services, Inc.,
Series:
^94-13 B1
6.50%, 4/25/24 N/R 5,297 5,003
94-24 A4
7.00%, 7/25/24 AAA 1,681 1,611
+ Independent National Mortgage Corp.,
Series 94-O B1
7.875%, 9/25/24 A2 2,522 2,604
J. P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 2,200 2,248
ss.##Kidder Peabody Funding Corp.,
Series 92-4 B2
8.467%, 5/28/22 (acquired
8/5/92, cost $739) N/R 738 737
Mid-State Trust II,
Series 88-A4
9.625%, 4/1/03 AAA 725 787
</TABLE>
107
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Prudential Home Mortgage Securities
Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 194 194
+ 92-A 2B4
7.90%, 4/28/22 A1 2,598 2,543
# 94-A 3B3
6.802%, 4/28/24 N/R 3,154 3,045
Residential Accredit Loans, Inc.,
Series:
97-Q52 A8
7.75%, 3/25/27 AAA 1,200 1,236
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 2,600 2,632
97-QS4 A7
7.75%, 5/25/27 AAA 2,300 2,370
97-QS12 A8 TBA
7.25%, 12/25/27 AAA 2,350 2,354
Rural Housing Trust,
Series 87-1M
3.33%, 10/1/28 A- 472 450
Ryland Mortgage Securities Corp.,
Series:
## 92-A 1A
8.27%, 3/29/30 A- 1,762 1,784
94-7B 4A2
7.50%, 8/25/25 AAA 2,700 2,707
Group Total 43,075
Commercial Mortgages (9.8%)
+ American Southwest Financial
Securities Corp.,
Series 95-C1 A1B
7.40%, 11/17/04 Aaa 2,150 2,223
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 4,796 4,935
^+ 96-D3 A1C
7.40%, 10/13/26 Aaa 1,850 1,944
96-MD6 A1C
7.04%, 11/13/26 AAA 1,950 2,004
Beverly Finance Corp.
8.36%, 7/15/04 AA- 2,300 2,476
^ Carousel Center Finance, Inc.,
Series 1 A1
6.828%, 10/15/07 AA 1,650 1,662
CBM Funding Corp.,
Series 96-1 A3PI
7.08%, 2/1/13 AA 1,800 1,856
^ Creekwood Capital Corp.,
Series 95-1A
8.47%, 3/16/15 AA 1,693 1,886
^ Crystal Run Properties,
Series A
7.393%, 8/15/11 AA 2,250 2,350
CS First Boston Mortgage
Securities Corp.,
Series 97-C1 A1C
7.24%, 6/20/29 AAA 2,600 2,697
</TABLE>
108
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
^ DLJ Mortgage Acceptance Corp.,
Series:
96-CF2 A1B
7.29%, 11/12/21 AAA 575 596
## 96-CF2 S IO
1.643%, 11/12/21 N/R 5,992 531
+ GMAC Commercial Mortgage Securities, Inc.,
Series 96-C1 X2 IO
1.96%, 3/15/21 Aaa 8,807 822
+ GS Mortgage Securities Corp.,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 2,475 2,528
97-GL X2 IO
1.07%, 7/13/30 Aaa 5,996 322
^ Lakewood Mall Finance Co.,
Series 95-C1 A
7.00%, 8/13/10 AA 1,900 1,936
+ LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 2,292 2,382
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 950 962
96-C2 IO
1.529%, 11/21/28 N/R 9,962 894
+ Midland Realty Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 1,625 1,681
+ Mortgage Capital Funding, Inc.,
Series 97-MC1 A3
7.288%, 7/20/27 Aaa 2,900 3,016
Nomura Asset Securities Corp.,
Series 94-MD1 A3
8.026%, 3/15/18 N/R 1,200 1,291
^ Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 1,042 1,095
Prime Property Funding,
Series 1 A
6.633%, 7/23/03 AA 1,519 1,520
+ Salomon Brothers Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 1,250 1,286
^ Stratford Finance Corp.
6.776%, 2/1/04 AA 2,300 2,289
Structured Asset Securities Corp.,
Series:
## 96-CFL X1A IO
1.483%, 2/25/28 N/R 16,440 437
## 96-CFL X1 IO
1.335%, 2/25/28 N/R 16,715 866
## 96-CFL X2 IO
1.249%, 2/25/28 N/R 3,970 119
Group Total 48,606
</TABLE>
109
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Energy (0.8%)
^ Excel Paralubes Funding
7.43%, 11/1/15 A- 1,825 1,849
Mobile Energy Services
8.665%, 1/1/17 BBB- 1,812 1,929
Group Total 3,778
Finance (11.9%)
^ Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 2,375 2,560
^ BankAmerica Institutional,
Series A
8.07%, 12/31/26 A- 2,825 2,905
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 1,950 1,974
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 2,075 2,120
^ Equitable Life Assurance Society
of the U. S.,
Series 1 A
6.95%, 12/1/05 A 2,490 2,508
^ Farmers Insurance Exchange
8.625%, 5/1/24 BBB+ 2,200 2,343
^ First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 2,625 2,651
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 2,850 2,921
^ Florida Property & Casualty
7.375%, 7/1/03 A- 750 774
^ Florida Windstorm
6.70%, 8/25/04 A- 2,900 2,891
^+ Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)11,000 10,675
^ John Hancock Surplus Note
7.375%, 2/15/24 AA- 2,620 2,618
^ Metropolitan Life Insurance Co.
7.45%, 11/1/23 AA 2,000 1,946
NB Capital Trust
8.25%, 4/15/27 A- 950 1,001
^ Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 1,950 1,919
^ New York Life Insurance Co.
7.50%, 12/15/23 AA 1,075 1,064
^ PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 2,550 2,561
^ Prime Property Funding
7.00%, 8/15/04 A 1,965 1,986
^ State Street Institutional Capital,
Series:
A
7.94%, 12/30/26 A 1,250 1,274
B
8.035%, 3/15/27 A 1,000 1,028
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Washington Mutual Capital
8.375%, 6/1/27 BBB- 1,300 1,364
^ Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 2,750 2,829
^ World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 3,076 3,109
96 WFP-D
6.95%, 9/1/13 AA- 1,800 1,823
Group Total 58,844
Foreign Governments (0.9%)
Government of Germany
7.375%, 1/3/05 AAA DEM7,250 4,609
Industrials (3.9%)
## Blue Bell Funding
11.85%, 5/1/99 BB- $378 387
DR Securitized Lease Trust,
Series:
93-K1 A1
6.66%, 8/15/10 BB- 481 439
93-K1 A2
7.43%, 8/15/18 BB- 200 174
94-K1 A2
8.375%, 8/15/15 BB- 1,075 1,026
DR Structured Finance,
Series 94-K2
9.35%, 8/15/19 BB- 1,280 1,297
^ Entertainment Properties,
14.253% (Preferred Stock) BBB- (1)2,100 2,020
^ HMH Properties, Inc.
8.875%, 7/15/07 BB- 575 590
News America Holdings
8.875%, 4/26/23 BBB 1,215 1,344
7.75%, 1/20/24 BBB 575 567
^ Oxymar
7.50%, 2/15/16 BBB 1,590 1,589
Paramount Communications, Inc.
8.25%, 8/1/22 BB+ 3,135 3,095
Rhone-Poulenc Rorer, Inc.,
Series 92-A3
8.62%, 1/5/21 BBB+ 2,175 2,380
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 1,616 1,691
Southland Corp.
5.00%, 12/15/03 BB+ 1,722 1,485
Tier One Properties,
11.095% (Preferred Stock) A (1)975 955
Time Warner, Inc.,
Series M,
10.25% (Preferred Stock) BB+ (1)218 250
Group Total 19,289
First Federal Savings & Loan Association,
Series 92-C
8.75%, 6/1/06 AA 50 51
</TABLE>
111
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
## Resolution Trust Corp.,
Series 92-5 C
8.618%, 1/25/26 AA 1,279 1,290
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 1,542 1,485
ss. Shearson American Express,
Series A CMO
9.625%, 12/1/12 (acquired
8/24/92-5/25/93, cost $280) AA 279 289
Group Total 3,115
Stripped Mortgage Backed Securities-
Agency Collateral Series (1.7%)
Federal National Mortgage Association,
Series:
93-146 G PO REMIC
5/25/23 Agy 1,079 707
93-243 C PO REMIC
11/25/23 Agy 238 184
249 1 PO
10/25/23 Agy 7,775 5,138
254 1 PO
1/1/24 Agy 1,207 865
260 1 PO
4/1/24 Agy 1,624 1,153
Group Total 8,047
Telephones (1.3%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 1,375 1,507
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 3,085 3,320
# Teleport Communications Group, Inc.
0.00%, 7/1/07 B 1,965 1,538
Group Total 6,365
Transportation (0.6%)
^ Jet Equipment Trust,
Series 95-5A C
10.69%, 5/1/15 BBB 2,200 2,784
U.S. Treasury Securities (18.3%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 28,825 36,545
U.S. Treasury Notes
6.25%, 5/31/99 Tsy 1,800 1,813
++ 7.125%, 9/30/99 Tsy 35,350 36,211
3.375%, 1/15/07 (Inflation Indexed) Tsy 16,385 16,073
Group Total 90,642
Utilities (0.3%)
^ Edison Mission Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 1,225 1,260
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Yankee (5.5%)
^ Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 2,542 2,594
AST Research, Inc.
7.45%, 10/1/02 A- 1,850 1,843
^ Hyundai Semiconductor America
8.625%, 5/15/07 BBB- 1,400 1,429
^ Israel Electric Corp., Ltd
7.25%, 12/15/06 A- 1,650 1,672
Korea Development Bank
7.375%, 9/17/04 AA- 1,390 1,401
National Power Corp.
7.875%, 12/15/06 BB+ 1,525 1,487
8.40%, 12/15/16 BB+ 1,415 1,358
^ Paiton Energy Funding
9.34%, 2/15/14 BBB- 1,900 2,084
^ Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 1,800 1,784
^ Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 2,345 2,477
^ Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 3,450 3,747
## Republic of Argentina Par,
Series L, 'Euro'
5.50%, 3/31/23 BB 3,220 2,431
Republic of Colombia
8.70%, 2/15/16 BBB- 1,325 1,350
United Mexican States,
Series B
6.25%, 12/31/19 BB 1,750 1,450
@ United Mexican States
(Recovery Rights, expiring
6/30/03) N/R (1)2,913,250 --
Group Total 27,107
Total Fixed Income Securities (Cost $467,705) 479,786
STRUCTURED INVESTMENT (0.2%)-See Note A7
Morgan Guaranty Trust Company, 11/20/05; monthly payments equal to 1% per
annum of the outstanding notional balance,
indexed to GNMA ARM pools (Cost $1,608) N/R 40,456 1,168
INTEREST RATE CAP (0.1%)-See Note A6
J.P. Morgan and Co., Inc., terminating
10/15/99, to receive on 10/15/99 the
excess, as measured on 10/15/98, of
12 month LIBOR over 6.34% multiplied
by the notional amount (Premium Paid $492) N/R 116,600 353
CASH EQUIVALENTS (9.4%)
Short-term Investments Held as Collateral
for Loaned Securities (4.9%) 24,378 24,378
Short-Term Corporate (0.8%)
## Ford Motor Credit Co., Medium Term Note
5.513%, 11/3/97 4,050 4,050
</TABLE>
113
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<TABLE>
<CAPTION>
<S> <C> <C>
Repurchase Agreement (3.7%)
Chase Securities, Inc. 5.90% dated 9/30/97,
due 10/1/97, to be repurchased at
$18,051, collateralized by various
U.S. Government Obligations,
due 10/1/97-1/29/99, valued at $18,218 18,048 18,048
Total Cash Equivalents (Cost $46,476) 46,476
Total Investments (106.8%)(Cost $516,281) 527,783
Value
(000)+
Other Assets and Liabilities (-6.8%)
Cash 22
Dividends Receivable 539
Interest Receivable 4,882
Receivable for Investments Sold 6,199
Receivable for Fund Shares Sold 29
Receivable for Daily Variation on Futures Contracts 67
Unrealized Gain on Swap Agreements 9
Other Assets 14
Payable for Investments Purchased (18,433)
Payable for Fund Shares Redeemed (2,055)
Payable for Administrative Fees (32)
Payable for Investment Advisory Fees (454)
Payable for Trustees' Deferred Compensation Plan-Note F (12)
Unrealized Loss on Forward Foreign Currency Contracts (72)
Collateral on Securities Loaned, at Value (24,378)
Other Liabilities (63)
(33,738)
NET ASSETS (100%) $494,045
INSTITUTIONAL CLASS
Net Assets
Applicable to 39,184,400 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $492,784
NET ASSET VALUE PER SHARE $12.58
INVESTMENT CLASS
Net Assets
Applicable to 100,429 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $1,261
NET ASSET VALUE PER SHARE $12.56
</TABLE>
114
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net Assets Consist of:
Paid in Capital $464,940
Undistributed Net Investment Income (Loss) 9,955
Undistributed Realized Net Gain (Loss) 8,474
Unrealized Appreciation (Depreciation) on:
Investment Securities 11,502
Foreign Currency Transactions (88)
Futures and Swaps (738)
Net Assets $494,045
</TABLE>
115
<PAGE>
Special Purpose Fixed
Income Portfolio
(cont'd)
<TABLE>
<CAPTION>
<S> <C>
ss. Restricted Security-Total market value of restricted securities
owned at September 30, 1997 was $2,206 or 0.4% of net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard &
Poor's Corporation.
# Step Bond-Coupon rate increases in increments to maturity. Rate disclosed is
as of September 30, 1997. Maturity date disclosed is the ultimate maturity.
## Variable or floating rate securities-rate disclosed is as of September 30,
1997.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
CMO Collateralized Mortgage Obligation
DEM German Mark
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at September 30, 1997.
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation or
Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
YMA Yield Maintenance Agreement
</TABLE>
116
<PAGE>
Municipal
Portfolio
Statement of Net Assets
Fixed Income Securities (96.1%)
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
<S> <C> <C> <C>
Municipal Bonds (92.2%)
Adelanto, CA School District (FGIC)
Zero Coupon, 9/1/18 AAA $4,350 1,418
Aldine, TX Independent School
District (PSFG)
Zero Coupon, 2/15/07 AAA 750 476
Allegheny County, PA Sanitation
Authority, Series B (MBIA)
Zero Coupon, 6/1/10 AAA 1,500 787
Arkansas State Development Finance
Authority Home Mortgage Revenue
Bonds, Series B-1
4.90%, 7/1/29 AAA 725 725
Bakersfield, CA Hospital Revenue
Bonds (AMBAC)
3.70%, 1/1/19 AAA 40 40
Benicia, CA School District (MBIA)
Zero Coupon, 8/1/11 AAA 3,480 1,715
Brazos River Authority Texas Pollution
Control Revenue Bonds, Series A
8.25%, 1/1/19 BBB+ 250 265
California Housing & Finance Agency
Revenue Bonds (MBIA)
5.30%, 8/1/14 AAA 195 198
California Pollution Control Financing
Authority Pollution Control Revenue
Bonds, Series B
8.875%, 1/1/10 A 2,800 2,879
California School Finance Authority
Lease Revenue Bonds, Series A (MBIA)
6.70%, 7/1/02 AAA 1,305 1,385
California State
Zero Coupon, 3/1/04 A+ 375 282
Casino Reinvestment Development
Authority, Series A (FSA)
5.00%, 10/1/03 AAA 1,300 1,339
Center Township, PA Sewer Authority
Revenue Bonds, Series A (MBIA)
Zero Coupon, 4/15/19 AAA 855 266
Central Valley, CA Finance Authority
5.70%, 7/1/03 BBB- 125 132
</TABLE>
117
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Chicago, IL Wastewater Transmission
Revenue Bonds (FGIC)
5.125%, 1/1/03 AAA 1,300 1,344
Cleveland, OH City School District (AMBAC)
4.80%, 6/1/03 AAA 1,300 1,326
Colorado Health Facilities Revenue
Bonds, Series A
Zero Coupon, 7/15/20 AAA 1,000 280
Delaware County, PA Industrial
Development Authority Revenue
Bonds, Series A 6.50%, 1/1/08 A 450 497
Elizabeth Forward, PA School District
Series B
Zero Coupon,
9/1/08 (AMBAC) AAA 425 249
9/1/11 (MBIA) AAA 850 414
Fort Bend, TX Independent School
District (PSFG)
Zero Coupon, 2/15/07 AAA 1,250 794
Fort Worth, TX Independent School
District (PSFG)
Zero coupon, 2/15/08 AAA 940 563
Georgia State Housing & Financing Authority,
Series A A2
5.875%, 12/1/19 AA+ 195 200
Grand Prairie, TX Independent School
District (PSFG)
Zero Coupon, 8/15/07 AAA 750 465
Hamilton Southeastern, IN (AMBAC)
Zero Coupon, 1/1/15 AAA 1,000 392
Harris County, TX Toll Road, Series A (MBIA)
Zero Coupon, 8/15/07 AA+ 475 295
Hawaii State Housing Finance &
Development Corp., Single Family
Mortgage Revenue Bonds, Series A
4.90%, 7/1/28 AA 350 348
+ Hillsborough County, FL Housing
& Finance Authority, Single Family
Mortgage Revenue Bonds
4.50%, 4/1/30 Aaa 725 728
Houston, TX Housing Finance &
Development Corp., Single Family
Mortgage Revenue
Bonds, Series B-1
8.00%, 6/1/14 A 325 354
Houston, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12 AAA 550 252
Hurst Euless Bedford, TX Independent
School District (PSFG)
Zero Coupon,
8/15/17 AAA 965 328
8/15/18 AAA 1,100 352
</TABLE>
118
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
+ Idaho Housing & Finance Association,
Single Family Mortgage Revenue Bonds,
Series F
5.70%, 7/1/27 Aaa 275 280
Series H-2 (FHA)
5.40%, 7/1/27 Aaa 500 505
Illinois Development Finance Authority
Revenue Bonds (FGIC)
Zero Coupon, 12/1/09 AAA 2,000 1,076
+ Indiana State Housing Finance Authority
Revenue Bonds Series A2 (AMBAC)
5.55%, 1/1/21 Aaa 500 511
Indiana Transportation Finance Authority
Highway Revenue Bonds (AMBAC)
Zero Coupon, 12/1/16 AAA 1,695 594
Indianapolis Airport Authority
Revenue Bonds
7.10%, 1/15/17 BBB 375 419
Intermountain Power Agency,
UT Series A
Zero Coupon, 7/1/17 A+ 1,750 599
Series B (MBIA)
6.50%, 7/1/09 AAA 875 1,007
Series C (FSA)
4.80%, 7/1/03 AAA 1,300 1,325
Iowa Finance Authority Single Family
Revenue Bonds, Series G
4.95%, 1/1/21 AAA 500 500
+ Jacksonville, FL Electric Authority
Revenue Bonds
Zero Coupon, 10/1/11 AA 325 159
Kane & De Kalb Counties, IL Unit
School District (AMBAC)
Zero Coupon, 12/1/09 AAA 525 282
Kansas City, KA Utility Systems
Revenue Bonds (AMBAC)
Zero Coupon,
3/1/06 AAA 130 87
3/1/06 AAA 95 64
+ Keller, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12 Aaa 800 366
Kentucky State Turnpike Authority (FGIC)
Zero Coupon, 1/1/10 AAA 450 243
La Joya, TX Independent School District
(PSFG)
Zero Coupon, 8/1/12 AAA 645 296
Little Rock, AK Airport Passenger
Facility Revenue Bonds (AMBAC)
5.65%, 5/1/16 AAA 220 231
Maricopa County, AZ Unified School
District-Chandler (FGIC)
Zero Coupon, 7/1/07 AAA 250 157
Maryland Transportation Authority (FGIC)
Zero Coupon, 7/1/08 AAA 250 149
</TABLE>
119
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Mercer County, NJ Revenue Bonds
Zero Coupon, 4/1/06 AA- 350 237
Metropolitan Pier & Exposition
Authority, IL Series A (AMBAC)
4.90%, 12/15/03 AAA 1,275 1,306
Metropolitan Government Nashville &
Davidson County, TN Health & Education
Facilities Board Revenue Bonds,
Series A TBA
5.25%, 5/1/03 AA 900 935
Michigan State Housing Development
Authority Series B
5.50%, 12/1/26 AA+ 500 511
Michigan State Trunk Line, Series A (AMBAC)
Zero Coupon
10/1/05 AAA 750 518
10/1/12 AAA 1,500 686
Midland, TX Independent School
District (PSFG)
Zero Coupon, 8/15/06 AAA 750 492
Millcreek Township, PA (FGIC)
Zero Coupon, 8/15/05 AAA 325 226
Minnesota State Housing &
Finance Agency, Single Family Mortgage
Revenue Bonds, Series E
5.05%, 7/1/24 AA+ 1,300 1,310
Mississippi Housing Finance Corp.
Zero Coupon, 9/15/16 AA- 5,250 1,894
Mobile, AL Industrial Development Board
Solid Waste Disposal Revenue Bonds
6.95%, 1/1/20 BBB- 180 197
Nebraska Investment Finance Authority
Revenue Bonds, Series B
5.60%, 3/1/20 AAA 490 502
Series D
5.80%, 3/1/20 AAA 490 502
Nebraska Public Power District Revenue Bonds
5.40%, 1/1/03 A+ 200 209
+ Nevada Housing Division, Series C (FHA)
5.65%, 4/1/27 Aaa 500 512
+ Nevada Housing Division Senior, Series A-2
5.50%, 10/1/27 Aaa 350 357
New Jersey Building Authority State
Building Revenue Bonds
7.20%, 6/15/13 AA- 1,150 1,192
New Jersey Economic Development Authority
Zero Coupon, 3/15/09 A+ 275 153
New Jersey State
Zero Coupon, 2/15/06 AA+ 500 337
</TABLE>
120
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
New Mexico Mortgage Finance Authority,
Series H
5.35%, 7/1/15 AAA 500 511
New York City, NY Industrial Development
Agency Revenue Bonds (FSA)
6.00%, 11/1/15 AAA 1,575 1,654
## New York City, NY General Obligation
Inverse Bonds
19.31%, 10/1/03 BBB+ 250 413
New York State Dormitory Authority
5.10%, 5/15/01 BBB+ 250 255
+ New York State Mortgage Agency
Revenue Bonds, Series 65
5.00%, 4/1/20 Aa2 1,300 1,307
Noblesville, IN High School Building
Corp. (AMBAC)
Zero Coupon,
2/15/17 AAA 900 312
2/15/19 AAA 1,850 568
Norris, CA School District (MBIA)
Zero Coupon,
5/1/15 AAA 785 309
5/1/16 AAA 400 149
North Carolina Eastern Municipal Power
Agency Revenue Bonds,
Series B
6.125%, 1/1/09 BBB 350 374
Series C
5.125%, 1/1/03 BBB 450 457
North Carolina Housing &
Finance Agency Revenue Bonds,
Series FF
5.50%, 9/1/22 AA 485 494
Series JJ
5.75%, 3/1/23 AA 555 569
Series RR
5.00%, 9/1/22 AA 1,300 1,289
North Slope Borough, AK General
Obligation, Series B (CGIC)
Zero Coupon, 6/30/04 AAA 575 419
Northern Illinois University Revenue
Bond (FGIC)
Zero Coupon, 4/1/15 AAA 675 262
Okemos, MI Public School District (MBIA)
Zero Coupon, 5/1/15 AAA 900 353
Oley Valley, PA School District (AMBAC)
Zero Coupon, 5/15/09 AAA 760 425
Orange County, FL Housing & Finance
Authority, Single Family Mortgage
Revenue Bonds, Series B
5.10%, 9/1/27 AAA 1,300 1,310
Penn Hills Township, PA
Zero Coupon, 6/1/12 N/R 1,025 443
##Pennsylvania Housing & Finance Agency
3.85%, 10/3/23 AA+ 1,000 1,000
# Pennsylvania State General Obligation
(AMBAC)
0.00%, 4/15/03 AAA 775 898
</TABLE>
121
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Philadelphia, PA Airport Revenue
Bonds TBA (FGIC)
5.50%, 6/15/01 AAA 1,340 1,393
Philadelphia, PA Authority For
Industrial Development Revenue Bonds,
Series A
6.50%, 10/1/27 N/R 220 228
Philadelphia, PA Gas Works
5.80%, 7/1/01 BBB 350 364
Philadelphia, PA General Obligation
Series A (FGIC)
5.40%, 11/15/03 AAA 600 631
Philadelphia, PA Hospitals & Higher
Education Facilities Authority
Revenue Bonds
6.15%, 7/1/05 BBB+ 125 132
Philadelphia, PA Municipal Authority (FGIC)
4.90%, 4/1/03 AAA 500 511
Philadelphia, PA Water & Wastewater
Revenue Bonds (FGIC)
5.15%, 6/15/04 AAA 1,300 1,341
Port Authority, NY & NJ Special
Obligation Revenue Bonds
7.00%, 10/1/07 N/R 450 504
+ Saline County, KS
Zero Coupon, 12/1/15 Aaa 750 285
San Antonio, TX Electric & Gas Revenue
Bonds (AMBAC)
Zero Coupon, 2/1/05 AAA 200 142
San Antonio, TX General Obligation TBA
6.00%, 8/1/06 AA 250 272
San Bernardino County, CA, Series A (MBIA)
7.40%, 7/1/16 AAA 1,150 1,176
Savannah, GA Economic Development
Authority Revenue Bonds
7.40%, 4/1/26 N/R 100 110
Schuylkill County, PA Redevelopment
Authority (FGIC)
7.125%, 6/1/13 AAA 750 830
Skokie, IL Park District, Series B (AMBAC)
Zero Coupon, 12/1/12 AAA 1,750 782
Steel Valley, PA Allegheny County
Zero Coupon, 11/1/17 A 650 217
Steel Valley, PA School District
Zero Coupon, 11/1/11 A 740 353
Utah State Housing Finance Agency, Series A-2
5.50%, 7/1/27 AAA 460 469
Washington State Public Power Supply (MBIA)
Zero Coupon, 7/1/10 AAA 475 245
7.00%, 7/1/07 AA- 375 435
##Wichita, KS Hospital Revenue Bonds,
Series III-A (MBIA)
3.79%, 10/20/17 AAA 900 900
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Wisconsin Housing & Economic Development
Authority Home Ownership Revenue
Bonds, Series E
5.125%, 9/1/26 AA 1,300 1,303
##York County, PA Hospital Authority
Revenue Bonds (AMBAC)
3.82%, 7/1/21 AAA 900 900
Group Total 69,308
Asset Backed Corporates (0.5%)
ALPS, Series 96-1 D
12.75%, 6/15/06 BB- 349 377
Industrials (1.6%)
Comcast Corp.
9.375%, 5/15/05 BB+ 225 241
Grand Casinos, Inc.
10.125%, 12/1/03 BB 250 266
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 175 184
+ Revlon Worldwide Corp.
Zero Coupon, 3/15/98 B3 235 229
Viacom, Inc.
8.00%, 7/7/06 BB- 250 249
Group Total 1,169
Telephones (0.2%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 125 137
Transportation (0.2%)
^ Jet Equipment Trust, Series 95-5A C
10.69%, 5/1/15 BBB 100 126
U.S. Treasury Security (1.0%)
++ U.S. Treasury Bond
8.75%, 8/15/20 Tsy 575 729
Yankee (0.4%)
^ Republic of Panama
7.875%, 2/13/02 BB+ 310 312
Total Fixed Income Securities (Cost $67,339) 72,158
CASH EQUIVALENTS (6.2%)
Shares
------
Money Market Instruments (4.8%)
Dreyfus Basic Municipal Money
Market Fund 1,789,204 1,789
Vanguard Municipal Fund Money
Market Portfolio 1,792,234 1,792
Group Total 3,581
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Amount Value
(000) (000)
U.S. Treasury Security (0.3%)
U.S. Treasury Bill
11/13/97 $ 250 248
Repurchase Agreement (1.1%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $862,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at $870 862 862
Total Cash Equivalents (Cost $4,691) 4,691
Total Investments (102.3%) (Cost $72,030) 76,849
Value
(000)+
Other Assets and Liabilities (-2.3%)
Interest Receivable 711
Receivable for Fund Shares Sold 2
Receivable for Daily Variation on Futures Contracts 3
Unrealized Gain on Swap Agreements 283
Other Assets 2
Dividends Payable (54)
Payable for Investments Purchased (2,529)
Payable to Custodian (40)
Payable for Fund Shares Redeemed (1)
Payable for Investment Advisory Fees (59)
Payable for Administrative Fees (5)
Payable for Trustees' Deferred Compensation Plan-Note F (2)
Other Liabilities (40)
(1,729)
NET ASSETS (100%) $75,120
INSTITUTIONAL CLASS
Net Assets
Applicable to 6,450,855 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $75,120
NET ASSET VALUE PER SHARE $11.64
Net Assets Consist of:
Paid in Capital $70,309
Undistributed Net Investment Income (Loss) 71
Undistributed Realized Net Gain (Loss) (469)
Unrealized Appreciation (Depreciation) on:
Investment Securities 4,819
Futures and Swaps 390
Net Assets $75,120
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
++ 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
September 30, 1997. Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is as of September 30, 1997.
AMBAC American Municipal Bond Assurance Corporation
CGIC Capital Guaranty Insurance Corporation
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Administration
FSA Financial Security Assurance
MBIA Municipal Bond Insurance Association
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation or
Fitch
PSFG Permanent School Fund Guarantee
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
</TABLE>
125
<PAGE>
PA Municipal
Portfolio
Statement of Net Assets
Fixed Income Securities (97.3%)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Municipal Bonds (94.9%)
Aliquippa School District, PA
Zero Coupon, 6/1/12 A 685 310
Allegheny County, PA (AMBAC)
Zero Coupon, 5/1/03 AAA 325 253
Arkansas State Development Finance
Authority Home Mortgage Revenue
Bonds, Series B-1
4.90%, 7/1/29 AAA 275 275
Berks County, PA (FGIC)
Zero Coupon,
5/15/19 AAA 1,250 387
11/15/20 AAA 1,000 284
Bucks County, PA Water & Sewer
Authority Revenue Bonds (FGIC)
Zero Coupon, 12/1/05 AAA 375 257
+Series B
5.50%, 2/1/08 Aaa 205 214
Center Township, PA Sewer Authority
Revenue Bonds
Series A (MBIA)
Zero Coupon, 4/15/17 AAA 615 215
Series A
6.00%, 4/15/03 AAA 500 538
Central Valley, CA Finance Authority
5.70%, 7/1/03 BBB- 100 105
Chartiers Valley, PA (FGIC)
Zero Coupon, 2/1/06 AAA 425 287
Clinton County, PA Industrial
Development Authority
6.25%, 11/15/06 BB- 150 152
Dauphin County, PA General Authority
Health Systems Revenue Bonds (MBIA)
4.90%, 5/15/03 AAA 550 560
Delaware County, PA Industrial Development
Authority Revenue Bonds, Series A
6.50%, 1/1/08 A 200 221
Elizabeth Forward, PA School District
Series B (MBIA)
Zero Coupon, 9/1/11 AAA 400 195
Georgia State Housing &
Financing Authority, Series A A2
5.875%, 12/1/19 AA+ 120 123
Girard Area, PA School District (FGIC)
Zero Coupon,
10/1/18 AAA 700 225
10/1/19 AAA 250 76
Hawaii State Housing Finance &
Development Corp., Single Family
Mortgage Revenue Bonds, Series A
4.90%, 7/1/28 AA 125 124
</TABLE>
126
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
+ Hillsborough County, FL Housing &
Finance Authority Single Family
Mortgage Revenue Bonds
4.50%, 4/1/30 Aaa 275 276
Houston, TX Housing Finance & Development
Corp., Single Family Mortgage Revenue
Bonds, Series B-1
8.00%, 6/1/14 A 175 191
Huron, MI School District (AMBAC)
Zero Coupon, 5/1/18 AAA 1,500 493
+ Idaho Housing & Finance Association,
Single Family Mortgage Revenue
Bonds, Series H-2
5.40%, 7/1/27 Aaa 250 253
Intermountain Power Agency, UT
Series B (MBIA)
6.50%, 7/1/09 AAA 300 345
Iowa Finance Authority, Single Family
Revenue Bonds, Series G
4.95%, 1/1/21 AAA 200 200
Kane & De Kalb Counties, IL Unit School
District (AMBAC)
Zero Coupon, 12/1/09 AAA 200 108
Lehigh County, PA General Purpose Authority
Revenue Bonds, Horizons Health
Systems, Inc., Series B
8.25%, 7/1/13 N/R 250 267
Metropolitan Government Nashville &
Davidson County, TN Health & Education
Facilities Board Revenue Bonds
Series A TBA
5.25%, 5/1/03 AA 335 348
Millcreek Township, PA (FGIC)
Zero Coupon, 8/15/05 AAA 375 261
Minnesota State Housing & Finance
Agency, Single Family Mortgage
Revenue Bonds, Series E
5.05%, 7/1/24 AA+ 550 554
Mobile, AL Industrial Development
Board Solid Waste Disposal
Revenue Bonds
6.95%, 1/1/20 BBB- 80 87
Montour, PA School District (MBIA)
Zero Coupon, 1/1/13 AAA 300 134
Nebraska Investment Finance Authority
Revenue Bonds, Series D
5.80%, 3/1/20 AAA 270 276
+ Nevada Housing Division, Series C
5.65%, 4/1/27 Aaa 250 256
New York City, NY Industrial
Development Agency Revenue Bonds (FSA)
6.00%, 11/1/15 AAA 775 814
##New York City, NY General
Obligation Inverse Bonds
19.31%, 10/1/03 BBB+ 100 165
+ New York State Mortgage Agency
Revenue Bonds, Series 65
5.00%, 4/1/20 Aa2 550 553
</TABLE>
127
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
North Carolina Eastern Municipal
Power Agency Revenue Bonds, Series C
5.125%, 1/1/03 BBB 150 152
North Carolina Housing &
Finance Agency Revenue Bonds, Series JJ
5.75%, 3/1/23 AA 300 307
Series RR
5.00%, 9/1/22 AA 550 545
North Slope Borough, AK General
Obligation, Series B (CGIC)
Zero Coupon, 6/30/04 AAA 285 208
Northwestern, PA School District (AMBAC)
Zero Coupon, 1/15/09 AAA 450 256
Oley Valley, PA School District (AMBAC)
Zero Coupon, 5/15/09 AAA 760 425
Orange County, FL Housing & Finance
Authority, Single Family Mortgage
Revenue Bonds, Series B
5.10%, 9/1/27 AAA 550 554
Penn Hills Township, PA,
Zero Coupon, 6/1/12 N/R 450 195
Series B
Zero Coupon, 12/1/13 N/R 500 197
Pennsylvania Convention Center Authority
6.25%, 9/1/04 BBB 250 267
6.70%, 9/1/16 (FGIC) AAA 500 579
Pennsylvania Housing & Finance Authority
Series 47
5.20%, 4/1/27 AA+ 375 379
Series 48
5.375%, 10/1/16 AA+ 300 305
Series 50A
5.35%, 10/1/08 AA+ 250 256
Series 51
5.65%, 4/1/20 AA+ 250 256
Series 52B
5.55%, 10/1/12 AA+ 500 509
Series 59A
4.95%, 4/1/25 AA+ 550 549
# Pennsylvania State General Obligation
(AMBAC)
0.00%, 4/15/03 AAA 300 347
Zero Coupon, 7/1/05 AAA 375 261
##Pennsylvania State Higher Education
Assistance Agency, Student Loan
Revenue Bonds (AMBAC)
3.85%, 3/1/22 AAA 500 500
Pennsylvania State Certificates of
Participation Series A (AMBAC)
5.00%, 7/1/03 AAA 500 513
Philadelphia, PA Airport Revenue
Bonds (FGIC) TBA
5.50%, 6/15/01 AAA 550 572
Philadelphia, PA Authority For
Industrial Development Revenue
Bonds, Series A
6.50%, 10/1/27 N/R 100 104
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Philadelphia, PA Gas Works
5.80%, 7/1/01 BBB 200 208
Philadelphia, PA General Obligation,
Series A (FGIC)
5.125%, 5/15/03 AAA 100 103
+ Philadelphia, PA Hospitals
10.875%, 7/1/08 Aaa 140 183
Philadelphia, PA Hospitals & Higher
Education Facilities Authority
Revenue Bonds
6.15%, 7/1/05 BBB+ 50 53
Philadelphia, PA School District,
Series A (MBIA)
5.20%, 7/1/03 AAA 200 208
Series B (AMBAC)
5.00%, 4/1/03 AAA 550 565
Philadelphia, PA Water & Wastewater
Revenue Bonds (FGIC)
5.15%, 6/15/04 AAA 550 567
5.20%, 6/15/05 AAA 500 521
Pittsburgh, PA General Obligation (AMBAC)
Zero Coupon, 9/1/04 AAA 350 255
6.50%, 4/1/11 AAA 275 301
Pittsburgh, PA Water & Sewer (FGIC)
Zero Coupon, 9/1/05 AAA 375 259
Port Authority, NY & NJ Special
Obligation Revenue Bonds
7.00%, 10/1/07 N/R 250 280
Robinson Township, PA
6.90%, 5/15/18 AAA 115 135
San Antonio, TX General Obligation TBA
6.00%, 8/1/06 AA 125 136
San Bernardino County, CA
Series A (MBIA)
7.40%, 7/1/16 AAA 450 460
Savannah, GA Economic Development
Authority Revenue Bonds
7.40%, 4/1/26 N/R 40 44
Scranton, PA Health & Welfare Authority
6.625%, 7/1/09 AAA 125 137
Southeastern Area Schools, PA,
Revenue Bonds Series A
Zero Coupon, 10/1/06 Series B A 200 130
Zero Coupon, 10/1/06 A 390 253
Steel Valley, PA School District
Zero Coupon, 11/1/11 A 430 205
Stroud Township, PA Sewer Authority (CGIC)
Zero Coupon, 11/15/05 AAA 375 258
Upper Darby Township, PA (AMBAC)
Zero Coupon, 7/15/11 AAA 525 258
Washington County, West PA Power Co.
4.95%, 3/1/03 A 150 153
</TABLE>
129
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
+ Westmoreland County, PA (AMBAC)
Zero Coupon, 8/1/14 AAA 1,475 605
Wisconsin Housing & Economic Development
Authority Home Ownership Revenue
Bonds, Series E
5.125%, 9/1/26 AA 550 551
Yough, PA School District (MBIA)
Zero Coupon, 10/1/13 AAA 1,445 623
Group Total 26,069
Asset Backed Corporates (0.6%)
ALPS, Series 96-1 D
12.75%, 6/15/06 BB- 150 161
Industrials (0.6%)
Comcast Corp.
9.375%, 5/15/05 BB+ 75 80
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 75 79
Group Total 159
Telephones (0.2%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 50 55
Transportation (0.5%)
^ Jet Equipment Trust, Series 95-5A C
10.69%, 5/1/15 BBB 100 127
Yankee (0.5%)
+ Republic of Panama
7.875%, 2/13/02 BB+ 145 146
Total Fixed Income Securities (Cost $24,731) 26,717
CASH EQUIVALENTS (5.3%)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shares Value
(000)+
Money Market Instruments (3.0%)
Dreyfus PA Municipal Money
Market Fund 401,727 402
Vanguard PA Tax-Free Money
Market Fund 408,622 408
Group Total 810
Face
Amount
(000)
U.S. Treasury Security (0.4%)
U.S. Treasury Bill
11/13/97 $ 125 124
Repurchase Agreement (1.9%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $522,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at $527 522 522
Total Cash Equivalents (Cost $1,456) 1,456
Total Investments (102.6%) (Cost $26,187) 28,173
</TABLE>
130
<PAGE>
<TABLE>
<CAPTION>
Value
(000)+
<S> <C>
Other Assets and Liabilities (-2.6%)
Cash $1
Interest Receivable 283
Receivable for Fund Shares Sold 2
Receivable for Daily Variation Margin
on Futures Contracts 1
Unrealized Gain on Swap Agreements 128
Other Assets 1
Dividends Payable (45)
Payable for Investments Purchased (1,027)
Payable for Investment Advisory Fees (20)
Payable for Administrative Fees (2)
Payable for Trustees' Deferred Compensation Plan-Note F (1)
Other Liabilities (33)
(712)
NET ASSETS (100%) $27,461
INSTITUTIONAL CLASS
Net Assets
Applicable to 2,344,197 outstanding
shares of beneficial interest (unlimited
authorization, no par value)
$27,461
NET ASSET VALUE PER SHARE $ 11.71
Net Assets Consist of:
Paid in Capital $25,489
Undistributed Net Investment Income (Loss) 20
Undistributed Realized Net Gain (Loss) (229)
Unrealized Appreciation (Depreciation) on:
Investment Securities 1,986
Futures and Swaps 195
Net Assets $27,461
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ 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
September 30, 1997. Maturity date disclosed is the ultimate maturity.
## Variable or Floating rate security-rate disclosed is as of September 30, 1997.
AMBAC American Municipal Bond Assurance Corporation
CGIC Capital Guaranty Insurance Corporation
FGIC Financial Guaranty Insurance Corporation
FSA Financial Security Assurance
MBIA Municipal Bond Insurance Association
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation or
Fitch.
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
</TABLE>
131
<PAGE>
Global Fixed Income
Portfolio
Statement of Net Assets
Fixed Income Securities (82.1%)
(Unless otherwise noted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++ Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Australian Dollar (4.9%)
Commonwealth of Australia
9.00%, 9/15/04 AAA AUD 3,575 $3,030
Federal National Mortgage
Association
6.50%, 7/10/02 Agy 1,050 785
Group Total 3,815
British Pound (5.8%)
United Kingdom Treasury
Bills
8.00%, 6/7/21 AAA GBP 1,025 1,941
8.50%, 7/16/07 AAA 1,395 2,570
Group Total 4,511
Canadian Dollar (3.0%)
^Global Econ2 EI
Zero Coupon, 11/1/98 AAA (1)600 2
^Global Econ2 PIP
Zero Coupon, 11/1/98 AAA (1)600 3
Government of Canada
7.50%, 3/1/01 AAA CAD 2,165 1,686
9.75%, 6/1/21 AA+ 640 659
Group Total 2,350
Danish Krone (2.4%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 6,765 1,133
8.00%, 3/15/06 AA+ 4,500 765
Group Total 1,898
German Mark (13.3%)
GMAC Global Bond
3.42%, 9/25/02 A- DEM 1,400 792
Government of Germany
6.25%, 1/4/24 AAA 1,000 573
7.125%, 1/29/03 AAA 2,775 1,725
7.375%, 1/3/05 AAA 2,680 1,704
7.50%, 9/9/04 AAA 2,210 1,412
8.375%, 5/21/01 AAA 6,430 4,089
Group Total 10,295
Irish Punt (1.9%)
Irish Government
8.00%, 8/18/06 AAA IEP 900 1,484
Italian Lira (5.9%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 3,180,000 $ 2,249
10.00%, 8/1/03 AAA 3,300,000 2,296
Group Total 4,545
</TABLE>
132
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++ Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Japanese Yen (5.5%)
Credit Locale de France
6.00%, 10/31/01 AAA JPY 75,000 737
European Investment Bank
3.00%, 9/20/06 AAA 88,000 786
6.625%, 3/15/00 AAA 60,000 567
Export-Import Bank of Japan
2.875%, 7/28/05 AAA 80,000 711
International Bank for
Reconstruction & Development
4.75%, 12/20/04 AAA 78,600 785
++6.75%, 6/18/01 AAA 64,000 639
Group Total 4,225
Swedish Krona (7.3%)
Swedish Government
6.00%, 2/9/05 AAA SEK 19,900 2,632
13.00%, 6/15/01 AA+ 18,175 2,994
Group Total 5,626
United States Dollar (32.1%)
Agency Fixed Rate Mortgage (3.1%)
Government National
Mortgage Association
10.50%, 5/15/18 Agy $2,144 2,411
Corporate (7.6%)
Anthem Insurance Cos.,
Inc. Series A
9.00%, 4/1/27 BBB+ 275 296
^ BankAmerica Institutional,
Series A
8.07%, 12/31/26 A- 350 360
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 325 329
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 250 255
^ Edison Mission Energy Funding
7.33%, 9/15/08 BBB 225 231
^ Entertainment Properties
14.253%, (Preferred Stock) BBB- (1)300 289
First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 400 404
^ HMH Properties, Inc.
8.875%, 7/15/07 BB- $95 $97
^+Home Ownership Funding Corp.
13.331%, (Preferred Stock) Aaa (1)1,575 1,528
Nationwide Mutual Life
Insurance
7.50%, 2/15/24 A+ 300 295
^ PNC Institutional Capital, Series A
7.95%, 12/15/26 BBB+ 425 427
^ Tier One Properties
11.095%,
(Preferred Stock) A (1)150 147
</TABLE>
133
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++ Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
^ Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 350 360
Series B
7.95%, 12/1/26 BBB+ 100 101
World Financial Properties,
Series 96 WFP-D
6.95%,9/1/13 AA- 775 785
Group Total 5,904
U.S. Treasury Securities (17.9%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 2,060 2,612
U.S. Treasury Notes
6.125%, 5/15/98 Tsy 3,875 3,888
6.75%, 5/31/99 Tsy 2,150 2,182
6.25%, 2/15/03 Tsy 455 459
7.875%, 11/15/04 Tsy 300 330
7.50%, 2/15/05 Tsy 2,615 2,824
3.375%, 1/15/07 (Inflation
Indexed) Tsy 1,621 1,590
Group Total 13,885
Yankee (3.5%)
Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 399 407
^ AST Research, Inc.
7.45%, 10/1/02 A- 300 299
^ Israel Electric Corp., Ltd.
7.25%, 12/15/06 A- 300 304
Korea Development Bank
7.375%, 9/17/04 AA- 225 227
^ Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 225 223
^ Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 375 396
^ Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ $ 550 $597
Republic of Colombia
8.70%, 2/15/16 BBB- 220 224
Group Total 2,677
Total Fixed Income Securities (Cost $64,379) 63,626
CASH EQUIVALENTS (16.4%)
Commercial Paper (5.8%)
Atlantic Asset Securitization Corp.
5.57%, 10/16/97 1,500 1,496
Barclays U.S. Funding Corp.
5.55%, 10/14/97 1,505 1,502
Daimler-Benz AG
5.57%, 10/7/97 1,500 1,499
Group Total 4,497
Discount Note (3.9%)
Federal Home Loan Mortgage Corporation
10/3/97 3,000 2,999
</TABLE>
134
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++ Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Repurchase Agreements (6.7%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $2,759,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued
at $2,785 2,759 2,759
Goldman Sachs & Co. 6.15%, dated 9/30/97,
due 10/1/97, to be repurchased at $2,470,
collateralized by U.S. Treasury Bonds,
8.00%, due 11/15/21, valued at $2,521 2,470 2,470
Group Total 5,229
Total Cash Equivalents (Cost $12,725) 12,725
FOREIGN CURRENCY (0.1%)
Canadian Dollar CAD 6 5
Irish Punt IEP 36 52
@ Italian Lira ITL2 56 --
Swedish Krona SEK 4 1
Total Foreign Currency (Cost $58) 58
Total Investments (98.6%) (Cost $77,162) 76,409
Value
(000)+
------
Other Assets and Liabilities (1.4%)
Cash $ 239
Foreign Currency Held as Collateral on Futures
Contracts (Cost $356) 356
Dividends Receivable 67
Interest Receivable 1,209
Receivable for Investments Sold 164
Receivable for Fund Shares Sold 4
Unrealized Gain on Futures Contracts 67
Other Assets 2
Payable for Investments Purchased (528)
Payable for Investment Advisory Fees (72)
Payable for Administrative Fees (5)
Payable for Trustees' Deferred Compensation
Plan-Note F (2)
Unrealized Loss on Forward Foreign Currency Contracts (377)
Other Liabilities (40)
1,084
NET ASSETS (100%) $77,493
INSTITUTIONAL CLASS
Net Assets
Applicable to 7,281,220 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $77,493
NET ASSET VALUE PER SHARE $ 10.64
Net Assets Consist of:
Paid in Capital $76,229
Undistributed Net Investment Income (Loss) 1,414
Undistributed Realized Net Gain (Loss) 921
Unrealized Appreciation (Depreciation) on:
Investment Securities (753)
Foreign Currency Transactions (385)
Futures 67
Net Assets $77,493
</TABLE>
135
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard & Poor's
Corporation.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
</TABLE>
136
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Fixed
Income Portfolio
Statement of Net Assets
Fixed Income Securities (70.6%)
++ Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Australian Dollar (5.0%)
Commonwealth of Australia
9.00%, 9/15/04 AAA AUD 7,350 $6,230
Federal National Mortgage
Association
6.50%, 7/10/02 Agy 1,960 1,466
Group Total 7,696
British Pound (8.9%)
United Kingdom Treasury Bills
8.00%, 6/7/21 AAA GBP 1,930 3,655
8.00%, 6/10/03 AAA 1,765 3,050
8.50%, 7/16/07 AAA 3,730 6,870
Group Total 13,575
Canadian Dollar (2.9%)
^ Global Econ2 EI
Zero Coupon, 11/1/98 AAA (1)1,400 4
^ Global Econ2 PIP
Zero Coupon, 11/1/98 AAA (1)1,400 6
Government of Canada
7.50%, 3/1/01 AAA CAD 3,100 2,414
9.75%, 6/1/21 AA+ 1,950 2,009
Group Total 4,433
Danish Krone (2.9%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 18,360 3,074
8.00%, 3/15/06 AA+ 7,675 1,304
Group Total 4,378
Finnish Markka (0.9%)
Government of Finland
9.50%, 3/15/04 AA- FIM 6,000 1,382
French Franc (0.8%)
Government of France O.A.T.
8.50%, 3/28/00 AAA FRF 6,400 1,183
German Mark (14.7%)
GMAC Global Bond
3.42%, 9/25/02 A- DEM 2,600 1,470
Government of Germany
6.25%, 1/4/24 AAA 2,350 1,347
+7.00%, 1/13/00 Aaa 9,300 5,579
++7.375%, 1/3/05 AAA 3,600 2,289
7.50%, 9/9/04 AAA 7,025 4,487
8.375%, 5/21/01 AAA 6,880 4,375
International Bank for Reconstruction
& Development
7.125%, 4/12/05 AAA DEM 4,550 2,851
Group Total 22,398
</TABLE>
137
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++ Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Irish Punt (2.2%)
Irish Government
8.00%, 8/18/06 AAA IEP 2,060 3,398
Italian Lira (8.3%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 9,070,000 6,415
10.00%, 8/1/03 AA 8,995,000 6,259
Group Total 12,674
Japanese Yen (13.8%)
++ Credit Locale de France
6.00%, 10/31/01 AAA JPY 516,000 5,070
European Investment Bank
6.625%, 3/15/00 AAA 205,000 1,939
3.00%, 9/20/06 AAA 151,000 1,349
Export-Import Bank of Japan
2.875%, 7/28/05 AAA 420,000 3,732
Inter-American Development Bank
6.00%, 10/30/01 AAA 465,000 4,586
International Bank for
Reconstruction & Development
++6.75%, 6/18/01 AAA 140,000 1,398
4.75%, 12/20/04 AAA 305,000 3,045
Group Total 21,119
Netherlands Guilder (1.7%)
Netherlands Government
8.25%, 2/15/07 AAA NLG 4,225 2,543
Spanish Peseta (1.2%)
Spanish Government
10.10%, 2/28/01 AAA ESP 240,000 1,858
Swedish Krona (7.3%)
Swedish Government
6.00%, 2/9/05 AAA SEK 47,800 6,321
13.00%, 6/15/01 AA+ 29,525 4,863
Group Total 11,184
Total Fixed Income Securities (Cost $110,356) 107,821
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Face
Amount Value
(000) (000)+
CASH EQUIVALENTS (27.2%)
Commercial Paper (13.3%)
Atlantic Asset Securitization Corp.
5.57%, 10/16/97 $3,000 $2,993
Daimler-Benz AG
5.57%, 10/7/97 3,000 2,997
Ford Motor Credit Corp.
5.54%, 10/7/97 3,000 2,997
Transamerica Financial Corp.
5.51%, 10/30/97 3,000 2,987
Toys 'R' Us, Inc.
5.50%, 10/27/97 3,000 2,988
</TABLE>
138
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Face
Amount Value
(000) (000)+
USAA Capital Corp.
5.53%, 10/9/97 3,000 2,997
Xerox Credit Corp.
5.55%, 10/9/97 2,340 2,337
Group Total 20,296
Discount Note (3.9%)
Federal Home Loan Mortgage Corporation
10/3/97 6,000 5,998
Repurchase Agreements (10.0%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $7,662,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at $7,733 7,661 7,661
Goldman Sachs & Co. 6.15%, dated 9/30/97, due
10/1/97, to be repurchased at $7,660,
collateralized by U.S. Treasury Bonds, 8.00%,
due 11/15/21, valued at $7,817 7,659 7,659
Group Total 15,320
Total Cash Equivalents (Cost $41,614) 41,614
FOREIGN CURRENCY (0.0%)
British Pound GBP 1 1
Canadian Dollar CAD 34 25
@ Japanese Yen JPY 3 --
@ Spanish Peseta ESP 12 --
Total Foreign Currency (Cost $25) 26
Total Investments (97.8%) (Cost $151,995) 149,461
Value
(000)+
------
Other Assets and Liabilities (2.2%)
Foreign Currency Held as Collateral on
Futures Contracts (Cost $887) 887
Interest Receivable 2,656
Receivable for Fund Shares Sold 1,876
Unrealized Gain on Futures Contracts 308
Other Assets 5
Payable for Investments Purchased (1,718)
Payable for Fund Shares Redeemed (16)
Payable for Investment Advisory Fees (133)
Payable for Administrative Fees (10)
Payable for Trustees' Deferred Compensation Plan-Note F (4)
Payable to Custodian (24)
Unrealized Loss on Forward Foreign Currency Contracts (523)
Other Liabilities (13)
3,291
NET ASSETS (100%) $152,752
INSTITUTIONAL CLASS
Net Assets
Applicable to 14,990,797 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $152,752
</TABLE>
139
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Value
(000)+
NET ASSET VALUE PER SHARE $ 10.19
Net Assets Consist of:
Paid in Capital $154,579
Undistributed Net Investment Income (Loss) (372)
Undistributed Realized Net Gain (Loss) 1,312
Unrealized Appreciation (Depreciation) on:
Investment Securities (2,535)
Foreign Currency Transactions (540)
Futures 308
Net Assets $152,752
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard & Poor's
Corporation.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
</TABLE>
140
<PAGE>
Statement of Net Assets
Intermediate Duration
Portfolio
Statement of Net Assets
Fixed Income Securities (95.5%)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Adjustable Rate Mortgages (10.0%)
## Government National Mortgage
Association November TBA
6.00%, 11/20/27 Agy 5,475 5,508
6.50%, 11/20/28 Agy 1,650 1,677
Group Total 7,185
Agency Fixed Rate Mortgages (13.6%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
11.00%, 7/1/13 Agy 113 127
11.50%, 3/1/13 Agy 178 202
Gold Pools:
7.00%, 1/1/24-12/1/24 Agy 999 1,000
10.00%, 6/1/17 Agy 464 513
Federal National
Mortgage Association
Conventional Pools:
10.00%, 5/1/22-1/1/27 Agy 317 347
10.50%, 12/1/10 Agy 95 106
Government National Mortgage
Association Conventional Pools:
7.00%, 12/15/23 Agy 2,647 2,656
10.00%, 2/15/16-
12/25/25 Agy 1,621 1,798
10.50%, 3/15/06-
2/15/18 Agy 323 363
11.00%, 3/15/10-
8/15/27 Agy 2,169 2,480
11.50%, 6/15/13 Agy 146 168
12.50%, 12/15/10 Agy 39 45
Group Total 9,805
Asset Backed Corporates (11.1%)
^ Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 71 72
^ Series 97-C A
6.40%, 3/17/04 AAA 333 334
AFG Receivables Trust,
Series:
95-A A
6.15%, 9/15/00 A 17 17
+96-B A
6.60%, 4/15/01 A2 45 45
97-A A
6.35%, 10/15/02 AAA 278 279
</TABLE>
141
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
ALPS,
Series 94-1 A4 CMO
7.80%, 9/15/04 AA 260 266
Americredit Automobile Receivables
Trust, Series 96-B A
6.50%, 1/12/02 AAA 94 94
Arcadia Auto,
Series 97-C A4
6.375%, 1/15/03 AAA 360 361
Associates Manufactured Housing,
Series:
97-1 A3
6.60%, 6/15/28 AAA 235 237
97-2 A
6.65%, 10/15/02 AAA 244 246
Case Equipment Loan Trust,
Series:
95-A A
7.30%, 3/15/02 AAA 14 14
95-A B
7.65%, 3/15/02 A 26 27
Cityscape Home Equity Loan Trust,
Series 96-1 A1
6.45%, 3/1/09 AAA 29 29
Contimortgage Home Equity Loan Trust,
Series 96-3 A2
6.97%, 7/15/11 AAA 75 75
CPS Auto Grantor Trust, Series 96-3 A
6.30%, 8/15/02 AAA 275 275
^ Federal Mortgage Acceptance Corp.,
Loan Receivables Trust,
Series:
96-B A1
7.629%, 11/1/18 A 96 97
97-A A
7.35%, 4/15/19 AAA 360 373
First Merchants Auto Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 175 174
+97-2 A1
6.85%, 11/15/02 AAA 235 237
First Plus Home Loan Trust,
Series 96-4 A3
6.28%, 3/10/09 AAA 250 249
Fleetwood Credit Corp., Series 92-A
7.10%, 2/15/07 AAA 81 81
Ford Credit Auto Owner Trust,
Series:
96-A A3
6.50%, 11/15/99 AAA 200 201
96-B
6.55%, 2/15/02 A 100 100
Ford Credit Grantor Trust,
Series 94-B A
7.30%, 10/15/99 AAA 65 66
</TABLE>
142
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
General Electric Home Equity Loan
Asset-Backed Certificates,
Series 91-1 B
8.70%, 9/15/11 AAA 250 257
General Motors Acceptance Corp.,
Grantor Trust,
Series 93-A A
4.15%, 3/15/98 AAA 1 1
Greenwich Capital Acceptance, Inc.,
Series 95-B A1
6.00%, 8/10/20 AAA 25 25
Honda Auto Receivables Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 582 582
IBM Credit Receivables Lease Asset
Master Trust, Series 93-1 A
4.55%, 11/15/00 AAA 11 11
^ Long Beach Auto,
Series 97-2 A
6.69%, 9/25/04 AAA 272 272
Money Store (The) Home Equity Trust,
Series 95-CA1
6.20%, 1/15/09 AAA 11 11
^++ NAL Auto Trust, Series 97-2A
7.75%, 9/15/02 A 210 210
^ National Auto Credit, Inc.
Series 96 3A
7.30%, 12/15/00 N/R 59 59
Navistar Financial Corp. Owner Trust,
Series 94-B A
6.40%, 1/15/00 AAA 23 23
^ NPR Health Care,
Series 97-1 A
6.815%, 7/1/01 N/R 100 101
Old Stone Credit Corp, Series 92-3 B1
6.35%, 9/25/07 AAA 60 59
Olympic Automobile Receivables Trust,
Series:
94-B A2
6.85%, 6/15/01 AAA 64 65
94-B B
6.95%, 6/15/01 AAA 32 32
Onyx Acceptance Grantor Trust,
Series:
94-1 A
6.90%, 1/17/00 AAA 25 25
97-2 A
6.35%, 10/15/02 AAA 387 388
97-3A
6.35%, 1/15/04 AAA 370 371
Premier Auto Trust, Series 95-4 A4
6.00%, 5/6/00 AAA 100 100
^ Railcar Leasing
7.125%, 1/15/13 AAA 350 362
^ Team Fleet Financing Corp.,
Series 97-1 A
7.35%, 5/15/03 A- 300 308
</TABLE>
143
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 105 105
97-B A2
6.70%, 6/8/03 AAA 300 302
Western Financial Auto Grantor Trust,
Series:
93-2 A2
4.70%, 10/1/98 AAA 9 9
94-1 A1
5.10%, 6/1/99 AAA 18 18
WFS Financial Owner Trust,
Series 97-C A3
6.01%, 3/20/02 AAA 380 380
Group Total 8,025
Collateralized Mortgage Obligations-
Agency Collateral Series (2.6%)
Federal Home Loan Mortgage Corporation,
Series:
93-149 O PO REMIC
8/25/23 Agy 35 22
## 1386 D REMIC
6.188%, 10/15/07 Agy 416 417
1632 SA Inv Fl REMIC
5.336%, 11/15/23 Agy 65 54
1709 H PO REMIC
1/15/24 Agy 14 7
1750 C PD PO REMIC
3/15/24 Agy 22 15
1813 K PO REMIC
2/15/24 Agy 15 10
1844 PC PO REMIC
3/15/24 Agy 30 19
1887 I PO REMIC
10/15/22 Agy 15 10
Federal National Mortgage Association,
Series:
93-205 G PO REMIC
9/25/23 Agy 14 9
93-235 H PO REMIC
9/25/23 Agy 4 3
96-11 V PO
9/25/23 Agy 565 381
96-14 PC PO
12/25/23 Agy 25 14
96-46 PB PO
9/25/23 Agy 30 20
96-54 N PO
7/25/23 Agy 20 15
96-54 O PO
11/25/23 Agy 20 12
97-3 E PO
12/25/23 Agy 75 50
97-7 EB PO
2/25/23 Agy 233 166
</TABLE>
144
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
282 1 PO
5/15/24 Agy 506 347
287 1 PO
12/17/07 Agy 496 325
Group Total 1,896
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (5.1%)
Asset Securitization Corp.,
Series 96-MD6 A1C
6.88%, 11/13/26 AAA 250 255
Bear Stearns Mortgage Securities, Inc.,
Series:
96-4 AI10
8.125%, 9/25/27 AAA 50 52
96-9 AI11
8.00%, 6/15/26 AAA 50 52
Citicorp Mortgage Securities, Inc.,
Series 93-9 A1
7.00%, 3/25/20 AAA 60 60
DLJ Mortgage Acceptance Corp.,
Series:
^97-CF1 A1B
7.60%, 5/15/30 AAA 300 318
^97-CF1 S IO
1.097%, 5/15/30 AAA 1,295 86
97-CF2 A1B
6.82%, 10/15/30 AAA 500 503
ICI Funding Corp., Series 97-2 1A8
8.00%, 7/25/28 AAA 349 365
## J. P. Morgan Commercial Mortgage
Finance Corp., Series 97- C5 A2
7.069%, 9/15/29 AAA 325 332
+ Independent National Mortgage Corp.,
Series 94-O B1
7.875%, 9/25/24 A2 97 100
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C1 IO
2.188%, 5/25/15 N/R 2,553 176
Residential Accredit
Loans Inc.,
Series:
97 Q52 A8 NAS
7.75%, 3/25/27 AAA 75 77
97 QS3 NAS
7.75%, 4/25/27 AAA 150 154
97 QS10 A7 TBA
7.25%, 9/15/27 AAA 550 550
Residential Asset Securitization Trust,
Series:
96-A11 A9
7.75%, 2/25/27 AAA 50 51
97-A9 A5
7.25%, 9/15/27 AAA 525 526
Group Total 3,657
</TABLE>
145
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Commercial Mortgages (7.0%)
+ American Southwest Financial Securities
Corp., Series 95-C1 A1B
7.40%, 11/17/04 Aaa 50 52
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 141 148
95-MD4 A1
7.10%, 8/13/29 AAA 706 727
96-MD6 A1C
7.04%, 11/13/26 AAA 100 103
^ Carousel Center Finance, Inc.,
Series 1 B
7.527%, 10/15/07 BBB+ 83 84
CBM Funding Corp., Series 96-1 A3PI
7.08%, 2/1/13 AA 100 103
Chase Commercial Mortgage Securities
Corp., Series 96-2 B
6.90%, 10/19/06 AA 100 101
CS First Boston Mortgage Securities
Corp., Series 97-C1 A1C
7.24%, 6/20/29 AAA 325 337
^ DLJ Mortgage Acceptance Corp.,
Series:
96-CF2 A1B
7.29%, 7/15/06 AAA 85 88
## 96-CF2 S IO
1.643%, 11/12/21 N/R 623 55
^ Forum Finance
7.125%, 5/15/04 AA 250 256
+ GMAC Commercial Mortgage Securities, Inc.,
Series 97-C1, Class A2
6.853, 9/15/06 Aaa 500 508
+ GS Mortgage Securities Corp.,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 350 357
97-GL X2 IO
1.07%, 7/13/30 Aaa 999 55
^ Hospitality Properties Mortgage
Acceptance Corp., Series 96-C1 A
6.275%, 12/6/04 A 200 200
^ Lakewood Mall Finance Co.,
Series 95-C1 A
7.00%, 8/13/10 AA 100 102
+ LB Commercial Conduit Mortgage Trust,
Series 96-C2 A
7.416%, 10/25/26 Aaa 99 102
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 100 104
96-C2 A2
6.82%, 11/21/28 AAA 345 349
96-C2 IO
1.529%, 10/25/26 N/R 444 40
</TABLE>
146
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
97-C1 A3
7.12%, 6/18/29 AAA 150 154
+ Midland Realty Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/27 Aaa 100 103
Mortgage Capital Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 150 155
97-MC1 A3
7.288%, 7/20/27 Aaa 375 390
^ Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 198 209
+ Salomon Brothers Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 150 154
Group Total 5,036
Energy (0.1%)
^ Excel Paralubes Funding
7.43%, 11/1/15 A- 100 101
Finance (13.8%)
Allstate Corp.
5.875%, 6/15/98 A 125 125
^ Anthem Insurance Cos., Inc., Series A
9.00%, 4/1/27 BBB+ 225 243
Associates Corp. of
North America, Series H
6.73%, 3/27/03 AA- 175 177
^ BankAmerica Institutional, Series A
8.07%, 12/31/26 A- 350 360
Bankers Trust New York Corp.
6.625%, 7/30/99 A 150 151
Barclays American Corp.
7.875%, 8/15/98 AA 125 127
Beneficial Corp., Series H
6.575%, 12/16/02 A 175 176
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 250 253
Chase Manhattan
Bank N.A.
5.875%, 8/4/99 A+ 575 573
Chrysler Financial Corp.
6.375%, 1/28/00 A- 200 201
6.62%, 6/16/00 A 325 328
CIT Group Holdings
6.375%, 10/1/02 AA- 400 399
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 300 307
Countrywide Funding Corp.
6.05%, 3/1/01 A 75 74
6.55%, 4/14/00 A 100 101
^ Equitable Life Assurance Society of
the U.S., Series 1 A
6.95%, 12/1/05 A 250 252
</TABLE>
147
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
^ Farmers Insurance Exchange
8.625%, 5/1/24 BBB+ 300 319
^ First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 675 682
^ First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 350 353
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 300 307
^ Florida Property & Casualty
7.375%, 7/1/03 A- 125 129
7.45%, 7/1/04 A 100 104
^ Florida Windstorm
6.70%, 8/25/04 A- 200 199
Ford Motor Credit Corp.
7.47%, 7/29/99 A+ 75 77
8.375%, 1/15/00 A+ 25 26
General Motors Acceptance Corp.
Medium Term Note
6.75%, 6/10/02 A- 100 101
+6.65%, 5/24/00 A3 100 101
^+ Home Ownership Funding Corp.,
13.331%
(Preferred Stock) Aaa (1)650 631
Household Finance Corp.
6.08%, 3/8/06 A 68 67
^ Hyatt Equities LLC
7.00%, 5/15/02 BBB+ 340 346
Lehman Brothers Holding Corp.
6.50%, 7/18/00 A 375 376
6.625%, 11/15/00 A 100 101
^ Metropolitan Life Insurance Co.
7.45%, 11/1/23 AA 325 316
PNC Institutional Capital, Series A
7.95%, 12/15/26 BBB+ 300 301
^ Prime Property Funding
6.80%, 8/15/02 A 355 357
^ State Street Institutional Capital,
Series A
7.94%, 12/30/26 A 250 255
Wells Fargo Capital,
^ Series A
8.125%, 12/1/26 BBB 100 103
Series B
7.95%, 12/1/26 BBB+ 250 252
^ World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 248 251
96 WFP-D
6.95%, 9/1/13 AA- 350 354
Group Total 9,955
</TABLE>
148
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Floating Rate Notes (0.1%)
## Student Loan Marketing Association,
Series:
95-1 A1
5.759%, 4/26/04 AAA 39 40
96-1 A1
5.744%, 7/26/04 AAA 34 34
Group Total 74
Foreign Governments (1.1%)
Government of Germany
7.375%, 1/3/05 AAA DEM 1,200 763
Industrials (0.6%)
^ EES Coke Battery Co., Inc.
7.125%, 4/15/02 BBB $200 202
Philip Morris Cos., Inc.
6.375%, 2/1/06 A 55 53
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 83 87
^ Sears Roebuck Acceptance Corp.
6.86%, 8/6/01 A2 70 71
Group Total 413
Rated Non-Agency Fixed Rate Mortgages
(0.1%)
Resolution Trust Corp., Series 92-5 C
8.618%, 1/25/26 AA 85 86
Stripped Mortgage Backed Securities-
Agency Collateral Series (0.7%)
Federal National Mortgage Association
Series:
249 1 PO
10/25/23 Agy 338 223
254 1 PO
1/1/24 Agy 44 31
260 1 PO
4/1/24 Agy 58 41
263 1 PO
5/25/24 Agy 62 41
93-M2 B IO REMIC
2.575%, 7/25/03 Agy 805 46
93-146 G PO REMIC
5/25/23 Agy 12 8
93-243 C PO REMIC
11/25/23 Agy 4 3
96-20 E PO
11/25/22 Agy 250 124
Group Total 517
Telephones (0.2%)
Tele-Communications, Inc.
8.75%, 2/15/23 BBB- 150 155
</TABLE>
149
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
U.S. Treasury Securities (26.5%)
U.S. Treasury Notes
7.00%, 4/15/99 Tsy 550 560
6.25%, 5/31/99 Tsy 8,000 8,058
6.875%, 7/31/99 Tsy 2,850 2,901
++ 7.50%, 2/15/05 Tsy 3,750 4,049
3.625%, 7/15/02
(Inflation Indexed) Tsy 2,180 2,172
3.375%, 1/15/07
(Inflation Indexed) Tsy 1,368 1,341
Group Total 19,081
Utilities (0.1%)
^ Edison Mission Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 100 103
Yankee (2.8%)
^ Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 384 392
AST Research, Inc.
7.45%, 10/1/02 A- 300 299
^ Israel Electric Corp., Ltd
7.25%, 12/15/06 A- 100 101
Korea Development Bank
7.375%, 9/17/04 AA- 220 222
Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 225 223
^ Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 350 370
^ Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 365 396
Group Total 2,003
Total Fixed Income Securities (Cost $68,139) 68,855
INTEREST RATE CAP (0.1%)-See Note A6
Bankers Trust Co., terminating 10/15/99, to
receive on 10/15/99 the excess, as
measured on 10/15/98, of 12 month LIBOR
over 6.34% multiplied by the notional
amount. (Premium Paid $85) N/R 25,000 76
</TABLE>
150
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Face
Amount Value
(000) (000)+
CASH EQUIVALENTS (10.6%)
Repurchase Agreements (10.6%)
Chase Securities, Inc. 5.90%, dated 9/30/97,
due 10/1/97, to be repurchased at $2,543,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99, valued at $2,566 2,542 2,542
Goldman Sachs & Co. 6.15%, dated 9/30/97, due 10/1/97,
to be repurchased at $2,541, collateralized by
U.S. Treasury Bonds, 8.00%, due 11/15/21, valued at $2,593 2,541 2,541
Merrill Lynch & Co., Inc. 5.90%, dated 9/30/97, due
10/1/97, to be repurchased at $2,541, collateralized by
U.S. Treasury Notes, 7.50%, due 10/31/99, valued at $2,593 2,541 2,541
Total Cash Equivalents (Cost $7,624) 7,624
Total Investments (106.2%) (Cost $75,848) 76,555
Other Assets and Liabilities (-6.2%)
Dividends Receivable 22
Interest Receivable 966
Receivable for Investments Sold 8,276
Other Assets 1
Payable for Investments Purchased (8,516)
Payable for Shares Redeemed (5,077)
Payable for Investment Advisory Fees (57)
Payable for Administrative Fees (5)
Payable for Trustees' Deferred Compensation Plan-Note F (1)
Unrealized Loss on Foreign Forward Currency Contracts (7)
Payable for Daily Variation on Futures Contract (1)
Other Liabilities (37)
(4,436)
NET ASSETS (100%) $72,119
</TABLE>
151
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Value
(000)+
INSTITUTIONAL CLASS
Net Assets
Applicable to 6,883,396 outstanding shares of beneficial
interest (unlimited authorization, no par value) $72,119
NET ASSET VALUE PER SHARE $ 10.48
Net Assets Consist of:
Paid in Capital $69,694
Undistributed Net Investment Income (Loss) 1,188
Undistributed Realized Net Gain (Loss) 538
Unrealized Appreciation (Depreciation) on:
Investment Securities 707
Foreign Currency Transactions (7)
Futures (1)
Net Assets $72,119
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard &
Poor's Corporation.
++ Fitch rating. Security is not rated by Standard & Poor's Corporation or
Moody's Investor Service, Inc.
## Variable or floating rate security-rate disclosed is as of September 30, 1997.
(1) Amount represents shares held by the Portfolio.
CMO Collateralized Mortgage Obligation
DEM German Mark
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation or
Fitch.
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
</TABLE>
152
<PAGE>
Balanced
Portfolio
Statement of Net Assets
Fixed Income Securities (35.4%)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Adjustable Rate Mortgages (3.7%)
## Government National Mortgage
Association
Various Pools:
6.00%, 8/20/27-11/20/27 Agy 10,950 11,032
November TBA
6.00%, 11/20/27 Agy 2,800 2,817
Group Total 13,849
Agency Fixed Rate Mortgages (4.7%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
10.00%, 9/1/17 Agy 644 703
10.50%, 8/1/19 Agy 503 561
11.00%, 5/1/20-9/1/20 Agy 946 1,060
12.00%, 3/1/15 Agy 359 416
Gold Pools:
7.00%, 1/1/24-6/1/25 Agy 3,034 3,039
Federal National
Mortgage Association
Conventional Pools:
10.00%, 7/1/17 Agy 783 858
10.50%, 8/1/12-4/1/22 Agy 1,646 1,844
Government National Mortgage
Association
Various Pools:
7.00%, 12/15/22-12/15/23 Agy 4,446 4,462
10.00%, 12/15/21-12/25/26 Agy 1,893 2,096
10.50%, 2/15/20-12/15/20 Agy 1,098 1,235
11.00%, 5/15/26 Agy 1,078 1,199
Group Total 17,473
Asset Backed Corporates (2.2%)
## Airplanes Pass Through Trust,
Series:
1 B
6.756%, 3/15/19 A 325 325
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 375 384
94-1 C2 CMO
9.35%, 9/15/04 BBB 622 640
96-1 D
12.75%, 6/15/06 BB- 1,097 1,184
Arcadia Auto, Series 97-CA4
6.375%, 1/15/03 AAA 640 642
CIT Group Home Equity Loan Trust,
Series:
97-1 A3
6.25%, 9/15/01 AAA 375 375
</TABLE>
153
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Federal Mortgage Acceptance Corp.
Loan Receivables Trust,
Series:
96-B A1
7.629%, 11/1/18 A 382 390
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 380 381
97-3 A3
6.57%, 10/10/10 AAA 375 376
Honda Auto Receivables Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 1,094 1,094
^ Long Beach Auto,
Series:
97-2 A
6.69%, 9/25/04 AAA 494 494
^ NAL Auto Trust,
Series:
96 3A
7.75%, 9/15/02 N/R 233 234
96-4 A
6.90%, 12/15/00 N/R 308 306
National Car Rental
Financing Ltd.,
Series:
96-1 A4
7.35%, 10/20/03 N/R 425 435
Security Pacific Home Equity Trust,
Series:
91-AB
10.50%, 3/10/06 A+ 80 80
^ Team Fleet Financing Corp.,
Series:
96-1A
6.65%, 12/15/02 A- 300 300
WFS Financial Owner Trust,
Series:
97-C A3
6.01%, 3/20/02 AAA 690 689
Group Total 8,329
Asset Backed Mortgages (0.6%)
Cityscape Home Equity Loan Trust,
Series:
96-2 A5
8.10%, 8/25/26 AAA 700 734
96-3 A IO
1.00%, 10/25/26 AAA 9,348 232
96-3 YMA
10/25/26 N/R 9,348 13
Contimortgage Home Equity Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 8,041 212
</TABLE>
154
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
^ 96-4 A12 IO
1.05%, 1/15/28 AAA 2,596 68
96-4 A12 YMA
1/15/28 N/R 12,984 19
97-1 A10 YMA
3/15/28 N/R 9,505 13
^ 97-1 A10I IO
1.10%, 3/15/28 AAA 9,285 254
First Union Residential Securization
Trust, Series 96-2 A5
7.21%, 11/25/28 AAA 675 682
Group Total 2,227
Collateralized Mortgage Obligations-
Agency Collateral Series (1.1%)
Federal Home Loan
Mortgage Corporation,
Series:
93-149 O PO REMIC
8/25/23 Agy 113 71
1415-S Inv Fl IO CMO
19.125%, 11/15/07 Agy 373 172
1476-S Inv Fl IO
REMIC PAC
4.363%, 2/15/08 Agy 3,357 391
1485-S Inv Fl IO REMIC
3.913%, 3/15/08 Agy 3,315 294
1600-SA Inv Fl IO REMIC
2.313%, 10/15/08 Agy 5,887 325
1709 H PO REMIC
1/15/24 Agy 52 27
1750 C PD PO REMIC
3/15/24 Agy 78 56
1813 K PO REMIC
2/15/24 Agy 50 34
1844 PC PO REMIC
3/15/24 Agy 95 60
1887 I PO REMIC
10/15/22 Agy 55 37
Federal National Mortgage Association,
Series:
282 1 PO
5/15/24 Agy 1,253 859
90-106 J PAC CMO
8.50%, 9/25/20 Agy 552 581
92-186 S Inv Fl IO CMO
3.363%, 10/25/07 Agy 6,381 548
93-205 G PO REMIC
9/25/23 Agy 308 198
93-235 H PO REMIC
9/25/23 Agy 122 96
96-14 PC PO REMIC
12/25/23 Agy 90 52
96-46 PB PO REMIC
9/25/23 Agy 95 64
96-54 N PO REMIC
7/25/23 Agy 69 52
</TABLE>
155
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
96-54 O PO REMIC
11/25/23 Agy 74 46
96-68 SC Inv Fl IO REMIC
2.475%, 1/25/24 Agy 1,250 152
Group Total 4,115
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (3.2%)
American Housing Trust,
Series:
V 1G
9.125%, 4/25/21 AAA 302 320
Chemical Mortgage
Securities, Inc.,
Series:
93-1 M
7.45%, 2/25/23 AA 444 448
Citicorp Mortgage
Securities, Inc.,
Series:
94-7 A5
6.25%, 4/25/24 AAA 825 742
CMC Securities Corp. IV,
Series:
94-G A4
7.00%, 9/25/24 AAA 675 645
DLJ Mortgage Acceptance Corp.,
Series:
97-CF2 A1B
6.82%, 10/15/30 AAA 825 831
ss. First Boston Mortgage Corp.,
Series:
92-4 B1
8.125%, 10/25/22
(acquired 1/25/93-
2/26/93, cost $239) A 244 249
GE Capital Mortgage
Services, Inc.,
Series:
94-24 A4
7.00%, 7/25/24 AAA 858 822
Independent National Mortgage Corp.,
Series:
95-V A3
7.12%, 2/25/26 AAA 935 927
J. P. Morgan Commercial Mortgage
Finance Corp.
Series:
97-C5 A2
7.069%, 9/15/29 AAA 600 613
ss.## Kidder Peabody Funding Corp.,
Series 92-4 B2
8.467%, 5/28/22
(acquired 2/26/93, cost $106) N/R 105 105
</TABLE>
156
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Merrill Lynch Mortgage Investors,
Inc.,
Series 95-C1 IO
2.188%, 5/25/15 N/R 5,264 363
Prudential Home Mortgage Securities
Co.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 107 107
^92-A 2B4
7.90%, 4/28/22 N/R 370 362
^92-A 3B2
7.90%, 4/28/22 N/R 1,000 600
^##94-A 3B3
6.803%, 4/28/24 N/R 1,129 1,092
Residential Accredit
Loans, Inc.,
Series:
97-Q52 AB
7.75%, 3/25/27 AAA 325 335
97-QS4 A7
7.75%, 5/25/27 N/R 600 619
97-QS12 A8 TBA
7.25%, 12/25/27 AAA 825 826
Rural Housing Trust,
Series 87-1 M
3.33%, 10/1/28 A- 620 591
Ryland Mortgage
Securities Corp.,
Series:
##92-A 1A
8.27%, 3/29/30 A- 458 464
94-7B 4A2
7.50%, 8/25/25 AAA 850 852
Group Total 11,913
Commercial Mortgages (3.4%)
American Southwest Financial
Securities Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 1,252 1,276
95-Cl A1B
7.40%, 11/17/04 N/R 650 672
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 1,315 1,353
^96-D3 A1C
7.40%, 10/13/26 N/R 525 552
96-MD6 A1C
7.04%, 11/13/26 AAA 575 591
^ Carousel Center Finance, Inc.,
Series:
1 A1
6.828%, 10/15/07 AA 525 529
</TABLE>
157
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
CBM Funding Corp.,
Series:
96-1 A3PI
7.08%, 2/1/13 AA 600 618
^ Creekwood Capital Corp.,
Series:
95-1A
8.47%, 3/16/15 AA 556 620
CS First Boston Mortgage
Securities Corp.,
Series:
97-C1 A1C
7.24%, 6/20/29 AAA 700 726
^ DLJ Mortgage Acceptance Corp.,
Series:
95-CF2 A1B
7.29%, 7/15/06 AAA 165 171
## 96-CF2 S IO
1.643%, 11/12/21 N/R 1,655 147
^ Equitable Life Assurance Society
of the U.S.
6.633%, 7/23/03 AA 483 484
GMAC Commercial Mortgage
Securities, Inc.,
Series:
96-C1 X2 IO
1.96%, 3/15/21 N/R 2,318 216
GS Mortgage Securities Corp.,
Series:
97-GL A2D
6.94%, 7/13/30 N/R 650 664
97-GL X2 IO
1.07%, 7/13/30 N/R 1,699 91
LB Commercial Conduit Mortgage Trust,
Series:
96-C2 A
7.416%, 10/25/26 N/R 641 666
Merrill Lynch Mortgage Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 270 273
96-C2 IO
1.529%, 10/25/26 N/R 2,787 250
Midland Realty Acceptance Corp.,
Series:
96-C2 A2
7.233%, 1/25/27 N/R 475 491
Mortgage Capital Funding, Inc.,
Series:
97-MC1 A3
7.288%, 7/20/27 N/R 800 832
Nomura Asset Securities Corp.,
Series:
94-MD1 A3
8.026%, 3/15/18 N/R 525 565
Salomon Brothers Mortgage Securities,
97-TZH A2
7.174%, 3/24/22 N/R 350 360
</TABLE>
158
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
^ Stratford Finance Corp.
6.776%, 2/1/04 AA 800 796
Group Total 12,943
Energy (0.3%)
^ Excel Paralubes Funding
7.43%, 11/1/15 A- 550 557
Mobile Energy Services
8.665%, 1/1/17 BBB- 494 526
Group Total 1,083
Finance (4.4%)
^ Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 650 701
^ BankAmerica Institutional,
Series A
8.07%, 12/31/26 A- 775 797
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 625 633
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 550 562
^ Equitable Life Assurance Society
of the U.S.,
Series 1 A
6.95%, 12/1/05 A 700 705
Farmers Insurance Exchange
8.625%, 5/1/24 BBB- 725 772
^ First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 700 707
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 725 743
^ Florida Property & Casualty
7.375%, 7/1/03 A- 200 206
^ Florida Windstorm
6.70%, 8/25/04 A- 800 797
+ Home Ownership Funding Corp.,
13.331% (Preferred Stock) Aaa (1)3,025 2,936
^ John Hancock Surplus Note
7.375%, 2/15/24 AA- 625 625
Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ 600 584
^ Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 525 517
NB Capital Trust
8.25%, 4/15/27 A- 300 316
^ New York Life Insurance Co.
7.50%, 12/15/23 AA 300 297
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 725 728
^ Prime Property Funding
7.00%, 8/15/04 A 540 546
</TABLE>
159
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
^ State Street Institutional Capital,
Series A
7.94%, 12/30/26 A 350 357
Series B
8.035%, 3/15/27 A 300 308
Washington Mutual Capital
8.375%, 6/1/27 BBB- 375 393
^ Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 700 720
^ World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 843 852
96 WFP-D
6.95%, 9/1/13 AA- 525 532
Group Total 16,334
Foreign Governments (0.3%)
Government of Germany
7.375%, 1/3/05 AAA DEM 2,000 1,271
Industrials (1.8%)
Blue Bell Funding
11.85%, 5/1/99 BB- $85 87
DR Securitized Lease Trust,
Series:
93-K1 A1
6.66%, 8/15/10 BB- 138 125
DR Structured Finance,
Series:
94-K2
9.35%, 8/15/19 BB- 375 380
Entertainment Properties
14.253% (Preferred Stock) BBB- (1)575 553
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 650 684
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 300 306
News America Holdings
7.75%, 1/20/24 BBB 140 138
8.875%, 4/26/23 BBB 340 376
^ Oxymar
7.50%, 2/15/16 BBB 470 470
Paramount Communications, Inc.
8.25%, 8/1/22 BB+ 860 849
Rhone-Poulenc Rorer, Inc.,
Series:
92-A 3
8.62%, 1/5/21 BBB+ 400 438
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 607 635
Southland Corp.
5.00%, 12/15/03 BB+ 485 418
Tier One Properties,
11.095% (Preferred Stock) A (1)250 245
</TABLE>
160
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
Time Warner, Inc.,
10.25% (Preferred Stock)
Series K BB+ (1)786 900
Group Total 6,604
Rated Non-Agency Fixed Rate
Mortgages (0.1%)
First Federal Savings & Loan
Association, Series:
92-C
8.75%, 6/1/06 AA 1 1
## Resolution Trust Corp.,
Series:
92-5C
8.618%, 1/25/26 AA 313 315
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 83 80
Group Total 396
Stripped Mortgage Backed Securities-
Agency Collateral Series (0.7%)
Federal National Mortgage Association,
Series:
249 1 PO
10/25/23 Agy 2,187 1,445
254 1 PO
1/1/24 Agy 435 312
260 1 PO
4/1/24 Agy 580 412
93-146 G PO REMIC
5/25/23 Agy 382 250
93-243 C PO REMIC
11/25/23 Agy 84 65
Group Total 2,484
Telephones (0.5%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 400 438
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 575 619
8.75%, 2/15/23 BBB- 225 233
# Teleport Communications Group, Inc.
0.00%, 7/1/07 B 640 501
Group Total 1,791
Transportation (0.2%)
^ Jet Equipment Trust,
Series 95-5A C
10.69%, 5/1/15 BBB 675 854
</TABLE>
161
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
September 30, 1997 & Poor's) (000) (000)+
U.S. Treasury Securities (6.1%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 3,475 4,406
U.S. Treasury Notes
6.25%, 5/31/99 Tsy 1,350 1,360
6.75%, 6/30/99 Tsy 2,375 2,412
++7.125%, 9/30/99 Tsy 9,000 9,219
3.375%, 1/15/07
(Inflation Indexed) Tsy 4,533 4,447
U.S. Treasury Strips, PO
11/15/18 Tsy 3,500 884
Group Total 22,728
Utilities (0.1%)
^ Edison Mission Energy Funding,
Series B
7.33%, 9/15/08 BBB 375 386
Yankee (2.0%)
^ Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 708 722
^ AST Research, Inc.
7.45%, 10/1/02 A- 500 498
^ Hyundai Semiconductor America
8.625%, 5/15/07 BBB- 400 408
^ Israel Electric Corp., Ltd.
7.25%, 12/15/06 A- 525 532
Korea Development Bank
7.375%, 9/17/04 AA- 390 393
National Power Corp.
7.875%, 12/15/06 BB+ 450 439
8.40%, 12/15/16 BB+ 350 336
^ Paiton Energy Funding
9.34%, 2/15/14 BBB- 545 598
^ Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 500 496
^ Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 625 660
^ Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 1,000 1,086
## Republic of Argentina Par,
Series L, 'Euro'
5.50%, 3/31/23 BB 900 680
Republic of Colombia
8.70%, 2/15/16 BBB- 375 382
United Mexican States,
Series B
6.25%, 12/31/19 BB 500 414
Group Total 7,644
Total Fixed Income Securities (Cost $129,071) 132,424
</TABLE>
162
<PAGE>
COMMON STOCKS (58.0%)
<TABLE>
<CAPTION>
<S> <C> <C>
Shares
Banks (2.3%)
BankBoston Corp. 35,300 3,122
Citicorp 16,300 2,183
First Union Corp. 46,528 2,329
Wells Fargo & Co. 3,500 963
Group Total 8,597
Basic Resources (3.1%)
Boise Cascade Corp. 17,500 736
Bowater, Inc. 27,700 1,413
Champion International Corp. 58,700 3,577
E.I. DuPont de Nemours & Co. 55,000 3,386
Sealed Air Corp. 200 11
Weyerhaeuser Co. 16,000 950
W.R. Grace & Co. 23,200 1,708
Group Total 11,781
</TABLE>
163
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Beverage & Personal Products (0.3%)
Coca-Cola Enterprises, Inc. 45,200 1,218
Estee Lauder Cos., Class A 200 9
Group Total 1,227
Consumer Durables (3.8%)
Ford Motor Co. 118,300 5,353
General Motors Corp. 61,002 4,084
Goodyear Tire & Rubber Co. 29,500 2,028
LucasVarity plc ADR 71,200 2,701
Group Total 14,166
Consumer Services (3.6%)
* Clear Channel
Communications, Inc. 40,900 2,653
* GTECH Holdings Corp. 27,400 937
* HFS, Inc. 53,100 3,953
Imax Corp. 600 16
Metro Networks, Inc. 400 12
News Corp. Ltd. ADR 60,900 1,092
Service Corp. International 59,300 1,909
Tele-Communications Liberty Media Group, Class A 41,525 1,243
Tele-Communications, Inc., Class A 86,200 1,767
Univision Communications, Inc., Class A 200 11
Group Total 13,593
Credit & Finance/
Investment Companies (2.1%)
American Express Co. 13,300 1,089
Bear Stearns Co., Inc. 31,785 1,398
CMAC Investment Corp. 16,000 858
Lehman Brothers Holdings, Inc. 14,000 751
Money Store (The), Inc. 800 23
Sirrom Capital Corp. 400 21
SLM Holding Corp. 23,400 3,615
Group Total 7,755
Energy (3.8%)
Atlantic Richfield Co. 19,400 1,657
British Petroleum plc ADR 45,800 4,159
Coastal Corp. 24,700 1,513
Columbia Gas System, Inc. 20,200 1,414
Phillips Petroleum Co. 64,400 3,325
Repsol SA ADR 27,200 1,180
Texaco, Inc. 18,400 1,130
Group Total 14,378
Food, Tobacco & Other (3.0%)
Philip Morris Cos., Inc. 197,700 8,217
RJR Nabisco Holdings Corp. 89,220 3,067
Group Total 11,284
</TABLE>
164
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Health Care (3.8%)
Aetna, Inc. 51,300 4,178
Baxter International, Inc. 24,200 1,264
Bristol-Myers Squibb Co. 29,200 2,416
Columbia/HCA Healthcare Corp. 37,660 1,082
* Health Management Associates, Class A 44,800 1,417
Lincare Holdings, Inc. 27,000 1,362
Merck & Co., Inc. 15,600 1,559
SmithKline Beecham plc ADR 22,400 1,095
Group Total 14,373
Heavy Industry/Transportation (10.8%)
Aeroquip-Vickers, Inc. 26,300 1,289
Allied Signal, Inc. 27,600 1,173
American Disposal Services, Inc. 600 19
AMR Corp. 12,600 1,395
Berkshire Hathaway, Inc. 26 1,165
Boeing Co. 23,590 1,284
Case Corp. 54,900 3,658
Cummins Engine Co., Inc. 72,100 5,628
Delta Air Lines, Inc. 2,500 235
Eaton Corp. 15,800 1,460
FMC Corp. 28,900 2,565
Harnischfeger Industries, Inc. 20,800 889
Lockheed Martin Corp. 38,200 4,073
Loral Space & Communications 400 8
Textron, Inc. 30,700 1,995
Union Pacific Corp. 28,000 1,753
United Technologies Corp. 66,100 5,354
Waste Management, Inc. 134,000 4,682
York International Corp. 39,100 1,750
Group Total 40,375
Insurance (3.5%)
Allstate Corp. 24,800 1,993
CIGNA Corp. 8,100 1,509
Exel Ltd. 38,300 2,281
Hartford Financial Services Group (The), Inc. 35,700 3,073
Loews Corp. 36,500 4,122
Group Total 12,978
Mid Cap Growth (2.7%)
Advance Fibre Communications, Inc. 2,800 115
Allied Waste Industries, Inc. 2,100 40
ASE Test Ltd. 700 59
At Home Corp., Series A 3,700 86
Bell Canada International, Inc. 2,500 47
* BioChem Pharmaceutical, Inc. 3,500 110
* BMC Software, Inc. 2,400 155
* Borders Group, Inc. 5,600 154
* Brightpoint, Inc. 1,800 84
Brylane, Inc. 1,200 55
* Cellular Communications International, Inc. 700 29
* CIENA Corp. 2,300 114
* Cinar Films, Inc., Class B 3,500 133
Cintas Corp. 2,300 170
Coinstar, Inc. 3,800 49
</TABLE>
165
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Comcast Corp., Class A Special 6,100 157
Complete Business Solutions, Inc. 2,600 74
* CompUSA, Inc. 2,800 98
* Computer Horizons Corp. 2,500 91
Cott Corp. 6,800 69
CVS Corp. 2,500 142
* Cyberonics, Inc. 3,700 60
Danaher Corp. 2,700 157
Diamond Offshore Drilling, Inc. 1,700 94
* Digital Microwave Corp. 2,000 90
* Electronics for Imaging, Inc. 2,000 102
Estee Lauder Co., Class A 2,600 120
* Fiserv, Inc. 3,100 136
* Florida Panthers Holdings, Inc. 700 17
Franklin Resources, Inc. 1,100 102
* Global Marine, Inc. 3,500 116
* Globalstar Telecommunications Ltd. 6,690 351
HBO & Co. 3,800 143
Health Management Associates, Class A 8,775 278
Healthcare Recoveries, Inc. 3,800 86
* Heftel Broadcasting Corp., Class A 1,500 114
* Imax Corp. 4,500 118
* Inter-Tel, Inc. 2,100 111
Ionica Group plc ADR 2,800 52
Jacor Communications, Inc. 2,100 93
J. D. Edwards & Co. 2,000 67
J. Ray McDermott, S.A. 1,300 64
Jones Apparel Group, Inc. 2,000 108
Kemet Corp. 2,900 88
* Lincare Holdings, Inc. 5,400 272
* Loral Space & Communications 8,400 173
MAPICS, Inc. 6,100 79
* McAfee Associates, Inc. 3,012 160
McDermott International, Inc. 1,500 55
Metro Networks, Inc. 3,100 93
MicroFocus Group ADR 2,900 102
Money Store (The), Inc. 100 3
Newbridge Networks Corp. 1,900 114
NEXTLINK Communications, Inc., Class A 1,700 41
* Office Depot, Inc. 2,700 55
* Orbotech Ltd. 1,600 92
* Orthodontic Centers of America, Inc. 5,200 104
* Outdoor Systems, Inc. 3,900 102
* PanAmSat Corp. 2,600 112
* Pediatrix Medical Group, Inc. 1,700 75
* Peoplesoft, Inc. 2,400 143
Positron Fiber Systems Corp. 3,200 33
* Premier Parks, Inc. 2,700 102
ProBusiness Services, Inc. 500 10
Qwest Communications International, Inc. 2,600 120
* Republic Industries, Inc. 3,200 105
* Rexall Sundown, Inc. 2,800 128
* Robert Mondavi Corp., Class A 2,200 120
Santa Fe International Corp. 2,900 88
* Sapient Corp. 1,400 71
Saville Systems Ireland plc ADR 1,100 77
* Sealed Air Corp. 1,700 93
</TABLE>
166
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
* Security Capital Group, Inc., Class B 1,300 45
Security Capital Industrial Trust 4,200 98
* Security Capital U.S. Realty 4,000 60
* Silicon Valley Group, Inc. 1,700 60
Sirrom Capital Corp. 4,200 218
* Stage Stores, Inc. 1,900 82
State Street Corp. 1,900 116
SunAmerica, Inc. 2,050 80
* Tel-Save Holdings, Inc. 4,000 96
Tele-Communications Liberty Media Group, Class A 5,314 159
Tele-Communications, Inc., Class A 7,700 158
* Tellabs, Inc. 2,000 103
* 3Com Corp. 4,050 208
Tidewater, Inc. 2,100 124
* Tommy Hilfiger Corp. 1,600 80
* Total Renal Care Holdings, Inc. 2,200 110
TV Azteca, SA de C.V. ADR 3,100 70
* U.S. Office Products Co. 2,100 74
* Uniphase Corp. 900 72
* Univision Communications, Inc., Class A 1,800 98
* Valassis Communications, Inc. 3,400 108
* Visio Corp. 1,900 79
Wesley Jessen VisionCare, Inc. 3,400 96
* Wind River Systems 1,600 66
* WorldCom, Inc. 4,840 171
Group Total 10,051
Retail (2.1%)
Borders Group, Inc. 600 16
CVS Corp. 30,900 1,757
dELiA*s, Inc. 700 16
* Federated Department Stores, Inc. 42,100 1,816
Home Depot, Inc. 29,800 1,553
McDonald's Corp. 9,700 462
* Office Depot, Inc. 64,600 1,304
Sears, Roebuck & Co. 19,700 1,122
Group Total 8,046
Technology (5.4%)
* BMC Software, Inc. 37,100 2,402
* Cisco Systems, Inc. 36,000 2,630
Digital Microwave Corp. 400 18
Flextronics International Ltd. 1,000 47
Intel Corp. 17,800 1,643
* McAfee Associates, Inc. 600 32
* Microsoft Corp. 35,100 4,644
* Oracle Corp. 53,212 1,939
RSL Communications Ltd., Class A 1,900 42
* Sabre Group Holdings, Inc. 24,800 888
* Seagate Technology, Inc. 56,700 2,049
* 3Com Corp. 50,400 2,583
Xerox Corp. 14,300 1,204
Group Total 20,121
</TABLE>
167
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Utilities (2.4%)
* Airtouch Communications, Inc. 24,800 879
Duke Energy Corp. 2,088 103
GTE Corp. 47,900 2,173
SBC Communications, Inc. 29,500 1,811
Sprint Corp. 35,200 1,760
* WorldCom, Inc. 63,294 2,239
Group Total 8,965
Value (5.3%)
Aeroquip-Vickers, Inc. 10,800 529
Allstate Corp. 3,427 275
American General Corp. 6,200 322
Amoco Corp. 2,200 212
* AMR Corp. 2,000 221
* Arrow Electronics, Inc. 700 41
Atlantic Richfield Co. 3,000 256
Bank of New York Co. 5,600 269
Beckman Instruments, Inc. 5,800 247
Bergen Brunswig Corp., Class A 10,625 429
British Petroleum plc ADR 2,500 227
Burlington Northern Santa Fe, Inc. 1,400 135
Cabot Oil & Gas Corp., Class A 4,900 132
Capital One Financial Corp. 6,232 285
Case Corp. 5,900 393
Caterpillar, Inc. 4,200 227
Chase Manhattan Corp. 3,401 401
Chubb Corp. 2,400 171
Citicorp 1,300 174
Columbia/HCA Healthcare Corp. 3,200 92
Crestar Financial Corp. 6,990 328
CSX Corp. 2,100 123
Cummins Engine Co., Inc. 8,700 679
Deere & Co. 3,300 177
Dillard's, Inc., Class A 4,500 197
Dow Chemical Co. 2,100 190
E.I. DuPont de Nemours & Co. 3,800 234
Eaton Corp. 4,400 406
Entergy Corp. 6,900 180
Federal National Mortgage Association 2,500 118
First Union Corp. 2,800 140
* FMC Corp. 3,300 293
Ford Motor Co. 13,700 620
* Foundation Health Corp. 8,060 258
General Motors Corp. 5,696 381
Goodyear Tire & Rubber Co. 6,900 474
GPU, Inc. 8,500 305
Great Lakes Chemical Corp. 3,000 148
Harnischfeger Industries, Inc. 5,500 235
Hartford Financial Services Group (The), Inc. 2,700 232
IBP, Inc. 8,300 196
International Business Machines Corp. 6,800 720
Kennametal, Inc. 2,925 142
Mallinckrodt, Inc. 6,200 223
MAPCO, Inc. 5,400 178
* Maxicare Health Plans, Inc. 7,600 142
Mellon Bank Corp. 4,400 241
Old Republic International Corp. 6,050 236
</TABLE>
168
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Olsten Corp. 7,600 141
Parker Hannifin Corp. 5,400 243
Phillip Morris Co., Inc. 13,800 574
Phillips Petroleum Co. 4,500 232
Raytheon Corp. 3,400 201
ReliaStar Financial Corp. 5,400 215
Repsol SA ADR 4,500 195
Republic New York Corp. 2,200 250
RJR Nabisco Holdings Corp. 8,700 299
Rohm & Haas Co. 3,800 365
Russell Corp. 4,700 138
* Seagate Technology, Inc. 5,700 206
Signet Banking Corp. 6,271 340
Springs Industries, Inc., Class A 3,800 200
Standard Register Co. 6,100 203
Talbots, Inc. 5,200 149
Tecumseh Products Co., Class A 8,400 468
Tektronix, Inc. 4,900 331
TIG Holdings, Inc. 3,900 136
* Toys "R' Us, Inc. 6,200 220
Transatlantic Holdings, Inc. 3,000 215
TRW, Inc. 3,800 209
Tupperware Corp. 4,200 118
* UAL Corp. 2,300 195
Ultramar Diamond Shamrock Corp. 6,500 210
Universal Foods Corp. 400 15
V.F. Corp. 3,700 343
Western Digital Corp. 4,800 192
* YPF SA ADR 6,900 254
Group Total 19,691
Total Common Stocks (Cost $166,656) 217,381
UNIT TRUST (4.0%)
S&P 500 Depositary Receipt (Cost $15,084) 157,700 14,903
RIGHTS (0.0%)
No. of
Rights
@ United Mexican States Recovery Rights,
expiring 6/30/03 (Cost $0) 500 --
STRUCTURED INVESTMENTS (0.1%)-See Note A7
</TABLE>
169
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face Value
(Standard Amount (000)+
& Poor's) (000)
Morgan Guaranty Trust Co, 11/20/05, monthly payments equal to 1% per annum of
the outstanding notional balance,
indexed to GNMA ARM pools (Cost $516) N/R $12,982 375
INTEREST RATE CAP (0.0%)-See Note A6
J.P. Morgan and Co., terminating 10/15/99,
to receive on 10/15/99 the excess, as
measured on 10/15/98 of 12 month LIBOR
over 6.34% multiplied by the notional
amount (Premium Paid $150) N/R 35,500 107
CASH EQUIVALENTS (19.2%)
Short-term Investments Held as Collateral
for Loaned Securities (16.4%) 61,539 61,539
Repurchase Agreement (2.8%)
Chase Securities, Inc. 5.90% dated 9/30/97, due
10/1/97, to be repurchased at $10,649,
collateralized by various U.S. Government
Obligations, due 10/1/97-1/29/99 valued at
$10,747 (Cost $10,647) 10,647 10,647
Total Cash Equivalents (Cost $72,186) 72,186
Total Investments (116.7%) (Cost $383,663) 437,376
</TABLE>
170
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Value
(000)+
Other Assets and Liabilities (-16.7%)
Dividends Receivable 517
Interest Receivable 1,744
Receivable for Investments Sold 3,246
Receivable for Fund Shares Sold 90
Receivable for Daily Variation on Futures Contracts 13
Unrealized Gain on Swap Agreements 2
Other Assets 10
Payable for Investments Purchased (6,307)
Payable for Fund Shares Redeemed (7)
Payable for Investment Advisory Fees (416)
Payable for Administrative Fees (24)
Payable for Shareholder Servicing Fees-
Investment Class (1)
Payable for Distribution Fee-Adviser Class (5)
Payable for Deferred Trustees' Compensation Plan-Note F (9)
Unrealized Loss on Forward Foreign Currency Contracts (20)
Collateral on Securities Loaned, at Value (61,539)
Other Liabilities (77)
(62,783)
NET ASSETS (100%) $374,593
INSTITUTIONAL CLASS
Net Assets
Applicable to 22,437,991 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $343,284
NET ASSET VALUE PER SHARE $ 15.30
INVESTMENT CLASS
Net Assets
Applicable to 257,760 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 3,943
NET ASSET VALUE PER SHARE $ 15.30
ADVISER CLASS
Net Assets
Applicable to 1,789,135 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 27,366
NET ASSET VALUE PER SHARE $ 15.30
Net Assets Consist of:
Paid in Capital $278,032
Undistributed Net Investment Income (Loss) 3,747
Undistributed Realized Net Gain (Loss) 39,266
Unrealized Appreciation (Depreciation) on:
Investment Securities 53,713
Foreign Currency Transactions (19)
Futures and Swaps (146)
NET ASSETS $374,593
ss. Restricted Security-Total market value of restricted securities
owned at September 30, 1997 was $354 or 0.1% of net assets.
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
* Non-income producing security.
^ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
# Step Bond-Coupon increases in increments to maturity. Rate disclosed is as
of September 30, 1997. Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is as of September 30,
1997.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard &
Poor's Corporation.
@ Value is less than $500.
(1) Amount represents shares held by the Portfolio.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is
the effective rate at September 30, 1997
IO Interest Only
N/R Not rated by Moody's Investor Service, Inc., Standard & Poor's Corporation
or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
YMA Yield Maintenance Agreement
</TABLE>
171
<PAGE>
Multi-Asset-Class
Portfolio
Statement of Net Assets
Equity (49.6%)
<TABLE>
<CAPTION>
<S> <C> <C>
Value
September 30, 1997 Shares (000)+
U.S. COMMON STOCKS (49.6%)
Banks (1.9%)
BankBoston Corp. 13,800 1,220
Chase Manhattan Corp. 15 2
Citicorp 6,500 871
First Union Corp. 18,352 919
Wells Fargo & Co. 1,400 385
Group Total 3,397
Basic Resources (2.6%)
Boise Cascade Corp. 7,000 294
Bowater, Inc. 10,100 515
Champion International Corp. 23,500 1,432
E.I. DuPont de Nemours & Co. 21,650 1,333
W.R. Grace & Co. 9,300 685
Weyerhaeuser Co. 6,400 380
Group Total 4,639
Beverage & Personal Products (0.3%)
Coca Cola Enterprises, Inc. 18,300 493
Consumer Durables (3.4%)
Ford Motor Corp. 52,600 2,380
General Motors Corp. 25,388 1,700
Goodyear Tire & Rubber Co. 12,300 846
LucasVarity plc ADR 28,900 1,096
Group Total 6,022
Consumer Services (3.1%)
* Clear Channel Communications Inc. 16,300 1,057
* GTECH Holdings Corp. 11,000 376
* HFS, Inc. 21,200 1,578
News Corp., Ltd. ADR 25,700 461
Service Corp. International 26,100 840
TCI Satellite Entertainment, Inc., Class A 100 1
Tele-Communications, Inc., Class A 27,800 570
* Tele-Communications Liberty Media Group, Class A 19,462 583
Group Total 5,466
Credit & Finance/
Investment Companies (1.7%)
American Express Co. 5,300 434
Bear Stearns Co., Inc. 12,755 561
CMAC Investment Corp. 6,400 343
Lehman Brothers Holdings, Inc. 6,100 327
SLM Holdings Corp. 9,300 1,437
Group Total 3,102
</TABLE>
172
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
September 30, 1997 Shares (000)+
Energy (3.3%)
Atlantic Richfield Co. 7,800 666
British Petroleum plc ADR 18,000 1,634
Coastal Corp. 10,900 668
Columbia Gas System, Inc. 8,100 567
Phillips Petroleum Co. 25,700 1,327
Repsol SA ADR 11,200 486
Texaco, Inc. 7,600 467
Group Total 5,815
Food, Tobacco & Other (2.5%)
Philip Morris Cos., Inc. 77,300 3,213
RJR Nabisco Holdings Corp. 36,240 1,245
Group Total 4,458
Health Care (3.3%)
Aetna, Inc. 20,500 1,669
Baxter International, Inc. 10,600 554
Bristol-Myers Squibb Co. 11,600 960
Columbia/HCA Healthcare Corp. 14,943 430
* Health Management Associates, Class A 19,100 604
* Lincare Holdings, Inc. 10,800 545
Merck & Co., Inc. 6,400 639
SmithKline Beecham plc ADR 10,000 489
Group Total 5,890
Heavy Industry/Transportation (9.1%)
Aeroquip-Vickers, Inc. 11,500 563
Allied Signal, Inc. 12,200 519
* AMR Corp. 5,300 587
* Berkshire Hathaway, Inc. 10 448
Boeing Co. 9,430 513
Case Corp. 21,600 1,439
Cummins Engine Co., Inc. 30,200 2,357
Eaton Corp. 6,400 591
* FMC Corp. 11,400 1,012
Harnischfeger Industries, Inc. 8,300 355
Lockheed Martin Corp. 15,200 1,621
Textron, Inc. 12,600 819
Union Pacific Corp. 11,700 733
United Technologies Corp. 26,400 2,138
Waste Management, Inc. 52,900 1,848
York International Corp. 15,500 694
Group Total 16,237
Insurance (3.1%)
Allstate Corp. 9,900 796
CIGNA Corp. 4,600 857
Exel Ltd. 15,700 935
Hartford Financial Services Group (The), Inc. 15,700 1,351
Loews Corp. 14,300 1,615
Group Total 5,554
Mid Cap Growth (2.3%)
BMC Software, Inc. 6,400 414
* Borders Group, Inc. 13,800 379
Cintas Corp. 4,900 361
Danaher Corp. 7,100 412
Estee Lauder Cos., Class A 7,300 338
* Globalstar Telecommunications Ltd. 12,144 638
* Health Management Associates, Class A 12,425 393
</TABLE>
173
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
September 30, 1997 Shares (000)+
* Lincare Holdings, Inc. 10,900 550
* Loral Space & Communications 18,900 390
* 3Com Corp. 5,425 278
Group Total 4,153
Retail (1.9%)
* CompUSA, Inc. 3,900 137
CVS Corp. 12,200 694
* Federated Department Stores, Inc. 18,800 811
Home Depot, Inc. 12,000 625
McDonald's Corp. 4,500 214
* Office Depot, Inc. 25,400 513
Sears, Roebuck & Co. 7,700 438
Group Total 3,432
Technology (4.6%)
* BMC Software, Inc. 16,000 1,036
* Cisco Systems, Inc. 15,000 1,096
Intel Corp. 7,800 720
* Microsoft Corp. 14,000 1,852
* Oracle Corp. 23,362 851
Sabre Group Holdings, Inc. 7,600 272
* Seagate Technology, Inc. 23,100 835
* 3Com Corp. 21,000 1,076
Xerox Corp. 5,700 480
Group Total 8,218
Utilities (2.1%)
* Airtouch Communications, Inc. 9,700 344
GTE Corp. 16,800 762
SBC Communications, Inc. 13,100 804
Sprint Corp. 15,700 785
* WorldCom, Inc. 27,620 977
Group Total 3,672
Value (4.4%)
* Arrow Electronics, Inc. 17,000 986
Case Corp. 14,700 979
Chase Manhattan Corp. 9,400 1,109
* Federated Department Stores, Inc. 26,800 1,156
Great Lakes Chemical Corp. 20,100 991
IMC Global, Inc. 27,000 952
Mallinckrodt, Inc. 24,100 868
* Maxicare Health Plans, Inc. 40,200 749
Group Total 7,790
Total U.S. Common Stocks (Cost $73,909) 88,338
U.S. FIXED INCOME (16.9%)
Fixed Income Securities (16.9%)
(Unless otherwise noted)
</TABLE>
174
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Adjustable Rate Mortgages (1.8%)
## Government National Mortgage Association
Various Pools:
6.00%, 9/20/27 Agy 2,525 2,544
November TBA
6.00% 11/20/27 Agy 650 654
Group Total 3,198
Agency Fixed Rate Mortgages (2.4%)
Federal Home Loan Mortgage Corporation
Conventional Pools:
10.50%, 4/1/19 Agy 296 330
11.00%, 9/1/16 Agy 108 121
11.50%, 7/1/15 Agy 98 112
Gold Pools:
7.00%, 1/1/24-12/1/24 Agy 843 845
9.50%, 12/1/16 Agy 242 263
Federal National Mortgage Association
Conventional Pool:
11.00%, 11/1/20 Agy 139 157
Government National Mortgage
Association Various Pools:
7.00%, 12/15/22-12/15/23 Agy 1,020 1,024
10.00%, 10/15/18 Agy 59 65
10.50%, 2/15/19-8/15/26 Agy 562 633
11.00%, 7/15/10-7/15/19 Agy 523 598
11.50%, 1/15/13-2/15/13 Agy 79 89
Group Total 4,237
Asset Backed Corporates (0.9%)
Advanta Mortgage Loan Trust,
Series 97-3 A2
6.61%, 4/25/12 AAA 150 150
ALPS,
Series 94-1 C2 CMO
9.35%, 9/15/04 BBB 99 102
Arcadia Auto, Series 97-C A4
6.375%, 1/15/03 AAA 150 151
CIT Group Home Equity Loan Trust,
Series:
97-1 A3
6.25%, 9/15/01 AAA 100 100
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 100 100
97-3 A3
6.57%, 10/10/10 AAA 100 101
^ FMAC Loan Receivables Trust,
Series:
97-A A
7.35%, 4/15/19 AAA 247 255
Honda Auto Receivables Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 256 256
</TABLE>
175
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
^ Long Beach Auto,
Series:
97-2 A
6.69%, 9/25/04 AAA 125 125
^ NAL Auto Trust,
Series:
96-4 A
6.90%, 12/15/00 N/R 103 102
WFS Financial Owner Trust,
Series:
97-C A3
6.01%, 3/20/02 AAA 160 160
Group Total 1,602
Asset Backed Mortgages (0.3%)
Advanta Mortgage Loan Trust,
Series:
96-2 A5
8.08%, 6/25/27 AAA 150 156
Delta Funding Home Equity Loan Trust,
Series:
96-1 A7
7.95%, 6/25/27 AAA 150 158
IMC Home Equity Loan Trust,
Series:
96-3 A7
8.05%, 8/25/26 AAA 175 182
Group Total 496
Collateralized Mortgage Obligations-
Agency Collateral Series (0.3%)
Federal Home Loan Mortgage
Corporation,
Series:
1632-SA Inv Fl REMIC
5.336%, 11/15/23 Agy 75 63
1709 H PO REMIC
1/15/24 Agy 9 5
1750 C PD PO REMIC
3/15/24 Agy 13 9
1813 K PO REMIC
2/15/24 Agy 10 7
1844 PC PO REMIC
3/15/24 Agy 15 9
1887 I PO REMIC
10/15/22 Agy 10 7
93-149 O PO REMIC
8/25/23 Agy 22 14
</TABLE>
176
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Federal National Mortgage
Association,
Series:
282 1 PO
5/15/24 Agy 289 198
92-89 SQ Inv Fl IO PAC (11)
3321.956%, 6/25/22 Agy (2) -- 34
96-11 V PO REMIC
9/25/23 Agy 120 81
96-14 PC PO REMIC
12/25/23 Agy 15 9
96-46 PB PO REMIC
9/25/23 Agy 15 10
96-54 N PO REMIC
7/25/23 Agy 10 7
96-54 O PO REMIC
11/25/23 Agy 15 9
Group Total 462
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (1.2%)
American Housing Trust,
Series:
V 1G
9.125%, 4/25/21 AAA 167 178
Bear Stearns Mortgage Securities Inc.,
Series:
96-9 AI11
8.00%, 6/15/26 AAA 150 156
Countrywide Mortgage Backed
Securities, Inc.,
Series 93-C A11
6.50%, 1/25/24 AAA 143 137
DLJ Mortgage Acceptance Corp.,
Series:
^97-CF1 A1B
7.60%, 5/15/30 AAA 125 133
^97-CF1 S IO
1.097%, 5/15/30 AAA 797 53
97-CF2 A1B
6.82%, 10/15/30 AAA 175 176
GE Capital Mortgage Services, Inc.,
Series:
94-24 A4
7.00%, 7/25/24 AAA 220 211
J.P. Morgan Commercial Mortgage
Finance Corp.,
Series:
97-C5 A2
7.069%, 9/15/29 AAA 150 153
Merrill Lynch Mortgage Investors, Inc.,
Series:
##95-C1 IO
2.188%, 5/25/15 N/R 1,237 85
</TABLE>
177
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Mid-State Trust II,
Series:
88-2 A4
9.625%, 4/1/03 AAA 188 204
Residential Accredit Loans, Inc.
Series:
97-QS12 A8
7.25%, 12/25/27 AAA 175 175
Residential Asset Securitization Trust,
Series:
96-A11 A9
7.75%, 2/25/27 AAA 175 179
Residential Funding Mortgage
Securities Co., Inc.,
Series:
93-MZ3 A2
6.97%, 8/28/23 N/R 100 98
94-S1 A19
6.75%, 1/25/24 AAA 191 186
Rural Housing Trust,
Series:
87-1 M
3.33%, 10/1/28 A- 85 81
Group Total 2,205
Commercial Mortgages (1.6%)
American Southwest Financial
Securities Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 132 134
##93-2 S1 IO
1.056%, 1/18/09 N/R 1,093 55
+95-C1 A1B
7.40%, 11/17/04 Aaa 150 155
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 117 123
95-MD4 A1
7.10%, 8/13/29 AAA 219 225
##95-MD4 ACS2 IO
2.381%, 8/13/29 AAA 720 128
^+96-D3 A1C
7.40%, 10/13/26 Aaa 150 158
96-MD6 A1C
7.04%, 11/13/26 AAA 125 129
Beverly Finance Corp.
8.36%, 7/15/04 AA- 100 108
^ Carousel Center Finance, Inc.,
Series:
1 A1
6.828%, 10/15/07 AA 100 101
</TABLE>
178
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
CBM Funding Corp.,
Series:
96-1 A3PI
7.08%, 2/1/13 AA 100 103
Chase Commercial Mortgage
Securities Corp.,
Series 96-2 B
6.90%, 10/19/06 AA 175 176
CS First Boston Mortgage
Securities Corp.,
Series:
97-C1 A1C
7.24%, 6/20/29 AAA 150 156
^ DLJ Mortgage Acceptance Corp.,
Series:
96-CF1 A1B
7.58%, 3/13/28 AAA 150 158
96-CF2 A1B
7.29%, 7/15/06 AAA 135 140
##96-CF2 S IO
1.643%, 11/12/21 N/R 988 88
+ GS Mortgage Securities Corp. II
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 100 102
+ LB Commercial Conduit Mortgage Trust,
Series:
96-C2 A
7.416%, 10/25/26 Aaa 173 179
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 65 66
96-C2 IO
1.529%, 10/25/26 N/R 700 63
+ Midland Realty Acceptance Corp.,
Series:
96-C2 A2
7.233%, 1/25/27 Aaa 100 103
Mortgage Capital Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 125 129
+ Salomon Brothers Mortgage Securities,
Series:
97-TZH A2
7.174%, 3/24/22 Aa2 100 103
Group Total 2,882
</TABLE>
179
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
Energy (0.2%)
^ Excel Paralubes Funding
7.43%, 11/1/15 A- 200 203
Mobile Energy Services
8.665%, 1/1/17 BBB- 95 101
Group Total 304
Finance (1.7%)
^ Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 100 108
^ BankAmerica Institutional,
Series A
8.07%, 12/31/26 A- 100 103
^ BT Institutional Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 125 126
^ Corestates Capital Corp.
8.00%, 12/15/26 A- 100 102
^ Equitable Life Assurance Society of
the U.S.,
Series 1A
6.95%, 12/1/05 A 100 101
^ First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 125 126
First Union Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 225 231
^ Florida Windstorm
6.70%, 8/25/04 A- 175 174
^+ Home Ownership Funding
Corp.
13.331% (Preferred Stock) Aaa (1)600 582
^ John Hancock Surplus Note
7.375%, 2/15/24 AA- 250 250
^ Nationwide Mutual Life Insurance Co.
7.50%, 2/15/24 A+ 250 246
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 150 151
^ Prime Property Funding
7.00%, 8/15/04 A 120 121
^ State Street Institutional Capital,
Series A
7.94%, 12/30/26 A 125 127
Washington Mutual Capital
8.375%, 6/1/27 BBB- 75 79
^ Wells Fargo Capital, Series A
8.125%, 12/1/26 BBB 200 206
^ World Financial Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 248 251
Group Total 3,084
</TABLE>
180
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Industrials (0.7%)
DR Securitized Lease Trust,
Series 93-K1 A2
7.43%, 8/15/18 BB- 180 156
DR Securitized Lease Trust,
Series 94-K1 A1
7.60%, 8/15/07 BB- 84 82
DR Structured Finance,
Series 94-K2
9.35%, 8/15/19 BB- 30 30
^HMH Properties, Inc.
8.875%, 7/15/07 BB- 40 41
News America Holdings
7.75%, 1/20/24 BBB 30 30
8.875%, 4/26/23 BBB 80 89
^Oxymar
7.50%, 2/15/16 BBB 100 100
Paramount Communications, Inc.
8.25%, 8/1/22 BB+ 255 252
Rhone-Poulenc Rorer, Inc.,
Series 92-A 3
8.62%, 1/5/21 BBB+ 100 109
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 104 109
Southland Corp.
5.00%, 12/15/03 BB+ 100 86
Time Warner, Inc., Series M
10.25% (Preferred Stock) BB+ (1)172 197
Group Total 1,281
Stripped Mortgage Backed Securities-
Agency Collateral Series (0.3%)
Federal Home Loan Mortgage
Corporation,
Series 1911 C PO
11/15/23 Agy 100 51
Federal National Mortgage
Association,
Series:
249 1 PO
10/25/23 Agy 477 315
254 1 PO
1/1/24 Agy 83 60
260 1 PO
4/1/24 Agy 111 79
96-34 C PO
3/25/23 Agy 225 120
Group Total 625
Telephones (0.2%)
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 80 88
Tele-Communications, Inc.
8.75%, 2/15/23 BBB- 200 207
#Teleport Communications Group, Inc.
0.00%, 7/1/07 B 140 109
Group Total 404
181
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Transportation (0.1%)
^Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 125 155
U.S. Treasury Securities (4.1%)
U.S. Treasury Bond
++8.75%, 8/15/20 Tsy 850 1,078
U.S. Treasury Notes
6.25%, 5/31/99 Tsy 1,600 1,611
++7.125%, 9/30/99 Tsy 3,250 3,329
3.375%, 1/15/07
(Inflation Indexed) Tsy 1,038 1,018
U.S. Treasury Strip, PO
11/15/18 Tsy 1,000 253
Group Total 7,289
Utilities (0.1%)
^Edison Mission Energy Funding
Corp., Series B
7.33%, 9/15/08 BBB 100 103
Yankee (1.0%)
^Alcoa Aluminio SA, Series 96-1
7.50%, 12/16/08 BBB 165 168
AST Research, Inc.
7.45%, 10/1/02 A- 125 124
^Israel Electric Corp., Ltd.
7.25%, 12/15/06 A- 125 127
Korea Development Bank
7.375%, 9/17/04 AA- 90 91
National Power Corp.
7.875%, 12/15/06 BB+ 105 102
8.40%, 12/15/16 BB+ 90 86
^Paiton Energy Funding
9.34%, 2/15/14 BBB- 100 110
Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 100 99
^Petrozuata Finance, Inc.
8.22%, 4/1/17 BBB 100 106
^Ras Laffan Liquefied Natural Gas Co.
8.294%, 3/15/14 BBB+ 215 233
Republic of Argentina
5.00%, 3/31/23 BB 220 166
Republic of Colombia
8.70%, 2/15/16 BBB- 95 97
United Mexican States,
Series B
6.25%, 12/31/19 BB 250 207
@Republic of Venezuela, Oil
Linked Payment Obligation
Zero coupon, 4/15/20 B+ 1 --
Group Total 1,716
Total U.S. Fixed Income (Cost $29,326) 30,043
INTERNATIONAL FIXED INCOME (3.0%)
Fixed Income Securities (3.0%)
182
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Australian Dollar (0.2%)
Commonwealth of Australia
9.00%, 9/15/04 AAA AUD 300 254
Federal National Mortgage Association
6.50%, 7/10/02 Agy 85 64
Group Total 318
British Pound (0.3%)
United Kingdom Treasury Bills
8.00%, 6/10/03 AAA GBP 60 104
8.00%, 6/7/21 AAA 65 123
8.50%, 7/16/07 AAA 195 359
Group Total 586
Canadian Dollar (0.1%)
Government of Canada
7.50%, 3/1/01 AAA CAD 320 249
9.75%, 6/1/21 AA+ 50 52
Group Total 301
Danish Krone (0.1%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 275 46
8.00%, 3/15/06 AA+ 750 128
Group Total 174
German Mark (0.8%)
Government of Germany
6.25%, 1/4/24 AAA DEM 150 86
+7.00%, 1/13/00 Aaa 290 174
7.125%, 1/29/03 AAA 170 106
7.375%, 1/3/05 AAA 245 156
7.50%, 9/9/04 AAA 410 262
8.375%, 5/21/01 AAA 875 556
International Bank for Reconstruction
& Development
7.125%, 4/12/05 AAA 175 109
Group Total 1,449
Irish Punt (0.1%)
Irish Government
8.00%, 8/18/06 AAA IEP 75 124
Italian Lira (0.3%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 315,000 223
10.00%, 8/1/03 AA 410,000 285
Group Total 508
Japanese Yen (0.8%)
European Investment Bank
3.00%, 9/20/06 AAA JPY 4,000 36
Export-Import Bank of Japan
2.875%, 7/28/05 AAA 50,000 444
International Bank for Reconstruction
& Development
4.75%, 12/20/04 AAA 23,200 231
6.75%, 6/18/01 AAA 72,000 719
Group Total 1,430
183
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Swedish Krona (0.3%)
Swedish Government
6.00%, 2/9/05 AAA SEK 2,100 278
13.00%, 6/15/01 AA+ 1,600 263
Group Total 541
Total International Fixed Income (Cost $5,540) 5,431
Value
Shares (000)+
INTERNATIONAL EQUITY (15.9%)
Common Stock (15.9%)
Argentina (0.5%)
YPF SA ADR 25,200 929
Austria (0.5%)
OMV AG 5,350 798
Brazil (0.2%)
Multicanal Participacoes SA ADR 27,800 295
Canada (0.2%)
TransCanada Pipelines Ltd. 15,900 308
France (1.5%)
Cie Generale des Eaux 5,126 603
Credit Local de France 6,100 578
Elf Aquitaine 6,710 895
Scor 15,110 653
Group Total 2,729
Germany (1.5%)
Deutsche Bank AG 11,750 825
Henkel KGaA 9,790 551
Springer (Axel) Verlag AG 770 658
Veba AG 10,890 635
Group Total 2,669
Hong Kong (0.6%)
Great Eagle Holdings Ltd. 118,000 326
HSBC Holdings plc 6,800 228
Jardine Strategic Holdings Ltd. 95,000 372
Wheelock & Co., Ltd. 86,000 175
Group Total 1,101
India (0.2%)
*Jardine Fleming India Fund, Inc. 36,200 326
Indonesia (0.4%)
*Gulf Indonesia Resources Ltd. 6,000 134
Lippo Securities 2,794,800 415
Pabrik Kertas Tjiwi Kimia 402,500 224
Group Total 773
Ireland (0.2%)
Irish Life plc 58,000 302
Italy (1.3%)
ENI S.p.A. 147,300 928
Pirelli S.p.A. 162,000 475
Telecom Italia S.p.A. 233,604 909
Group Total 2,312
184
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (000)+
Japan (2.3%)
Bridgestone Corp. 25,000 601
Canon, Inc. 16,000 468
Fuji Photo Film Ltd. 9,000 371
Mitsubishi Heavy Industries Ltd. 33,000 181
Mitsui Fudosan Co., Ltd. 26,000 317
Nintendo Corp., Ltd. 4,000 374
Promise Co., Ltd. 6,160 322
Sankyo Corp., Ltd. 7,000 242
Takeda Chemical Industries 14,000 420
Takefuji Corp. 7,000 265
UNY Co., Ltd. 14,000 211
Yasuda Fire & Marine Insurance Ltd. 46,000 271
Group Total 4,043
Netherlands (1.2%)
ING Groep N.V. 13,207 607
Philips Electronics N.V. 9,900 838
Vendex International N.V. 10,633 630
Group Total 2,075
Norway (0.4%)
Christiania Bank OG Kreditkasse 226,100 780
Singapore (0.2%)
*Creative Technology Ltd. 14,500 371
Spain (0.4%)
Telefonica de Espana ADR 8,200 772
Sweden (0.9%)
Nordbanken AB 16,300 556
SKF AB, Class B 12,000 350
Sparbanken Sverige AB, Class A 30,585 738
Group Total 1,644
Switzerland (0.4%)
*Swissair AG (Registered) 551 737
Thailand (0.1%)
Hana Microelectronics Public Co., Ltd. (Foreign) 48,100 165
United Kingdom (2.8%)
Abbey National plc 11,800 182
B.A.T. Industries plc 53,611 470
Bank of Scotland plc 71,800 594
Bass plc 32,300 436
BG plc 95,200 413
BOC Group plc 7,304 131
Burmah Castrol plc 29,000 517
Cable & Wireless plc 40,785 347
Imperial Tobacco Group plc 61,800 370
LucasVarity plc 87,000 328
Royal & Sun Alliance Insurance Group plc 32,034 302
Sainsbury J plc 55,000 412
Tomkins plc 88,844 494
Group Total 4,996
United States (0.1%)
The India Fund, Inc. 25,100 232
Total International Equity (Cost $23,917) 28,357
HIGH YIELD (7.5%)
Fixed Income Securities (7.5%)
(Unless otherwise noted)
185
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Cable (0.6%)
Cablevision Systems Corp.
9.875%, 5/15/06 B $100 108
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 100 110
10.125%, 9/1/12 BB+ 175 190
Rogers Communications, Inc.
9.125%, 1/15/06 BB- 50 51
TCI Pacific Communications
5.00% (Convertible Preferred Stock) BB- (1)600 75
Tele-Communications, Inc.
9.25%, 1/15/23 BBB- 155 167
Time Warner, Inc., Series M,
10.25% (Preferred Stock) BB+ (1)558 441
Group Total 1,142
Collateralized Mortgage Obligations-
Non-Agency Collateral Series (0.5%)
+Citicorp Mortgage Securities, Inc.,
Series:
90-8 A7
9.50%, 6/25/05 B3 35 19
^Countrywide Funding Corp.,
Series:
95-4 B3
7.50%, 9/25/25 N/R 393 308
DLJ Mortgage Acceptance Corp.,
Series:
97-CF2
0.357%, 10/15/30 N/R 4,000 106
FMAC Loan Receivables Trust,
Series:
96-B C
7.929%, 11/1/18 N/R 100 89
^Prudential Home Mortgage
Securities Co., Inc.,
Series 96-5 B3
7.25%, 4/25/26 N/R 397 360
Group Total 882
Commercial Mortgages (0.1%)
CBM Funding Corp.,
Series:
96-1B D
8.645%, 2/1/08 AA 125 136
Energy (0.2%)
Nuevo Energy Co.
9.50%, 4/15/06 B+ 145 155
Snyder Oil Corp.
8.75%, 6/15/07 B+ 150 150
Group Total 305
186
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Finance (0.6%)
^Anthem Insurance Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 275 296
^Commercial Financial Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A 150 150
ITT Promedia
9.125%, 9/15/07 N/R DEM250 147
Navistar Financial Corp.,
Series B
9.00%, 6/1/02 B+ $35 36
^#PTC International Finance
0.00%, 7/1/07 B+ 230 151
^RBS Participacos SA
11.00%, 4/1/07 BB- 135 142
^Riggs Capital Trust II
8.875%,3/15/27 BB- 70 74
Western Financial Bank
8.875%, 8/1/07 BB+ 125 125
Group Total 1,121
Hospitals (0.2%)
^Integrated Health Services
9.50%, 9/15/07 B 115 119
Tenet Healthcare Corp.
8.625%, 1/15/07 B+ 120 124
^Vencor, Inc.
8.625%, 7/15/07 B+ 90 91
Group Total 334
Industrials (2.6%)
^Ameriserv Food Co.
10.125%, 7/15/07 B- 65 67
^Big Flower Press
8.875%, 7/1/07 B 135 135
^Cliffs Drilling Co.
10.25%, 5/15/03 B 20 22
DR Securitized Lease Trust,
Series:
93-K1 A1
6.66%, 8/15/10 BB- 346 316
^EES Coke Battery Co., Inc.
9.382%, 4/15/07 BB- 100 105
^Fleming Cos., Inc.
10.50%, 12/1/04 B+ 65 68
10.625%, 7/31/07 B+ 75 79
^Fox/Liberty Networks
#0.00%, 8/15/07 B 50 32
8.875%, 8/15/07 B 60 60
Grand Casinos, Inc.
10.125%, 12/1/03 BB 160 170
^Hermes Europe Railtel
11.50%, 8/15/07 B 30 32
+HMC Acquisition Properties
9.00%, 12/15/07 Ba3 135 139
187
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
^HMH Properties, Inc.
8.875%, 7/15/07 BB- 35 36
Horseshoe Gaming
9.375%, 6/15/07 B 125 129
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 100 105
^##Huntsman Corp.
9.094%, 7/1/07 B+ 175 182
^Hylsa SA de CV
9.25%, 9/15/07 BB 200 203
ISP Holdings, Inc., Series B
9.00%, 10/15/03 B+ 205 215
Kmart Corp.
7.75%, 10/1/12 B+ 60 56
Kmart Funding Corp., Series F
8.80%, 7/1/10 BB 175 179
^Long Beach Auto,
Series:
97-1 B
14.22%, 10/26/03 N/R 250 252
^Murrin Murrin Holdings
9.375%, 8/31/07 BB- 205 211
#Norcal Waste Systems
13.00%, 11/15/05 BB- 100 115
Outdoor Systems, Inc.
8.875%, 6/15/07 B 210 214
Paramount Communications, Inc.
8.25%, 8/1/22 BB+ 225 222
Revlon Worldwide, Series B
0.00%, 3/15/01 B- 190 138
SD Warren Co.
12.00%, 12/15/04 B+ 130 147
^Sinclair Broadcast Group, Inc.
9.00%, 715/07 B 105 104
^Sinclair Capital 11.625%
(Preferred Stock) B (1)1,300 141
Southland Corp.
5.00%, 12/15/03 BB+ 219 189
Station Casinos
9.75%, 4/15/07 B+ 100 100
^#TCI Satellite Entertainment, Inc.
0.00%, 2/15/07 B- 485 316
Group Total 4,479
Technology (0.3%)
Advanced Micro Devices, Inc.
11.00%, 8/1/03 BB- 145 162
##Blue Bell Funding
11.85%, 5/1/99 BB- 25 26
^Hyundai Semiconductor America
8.625%, 5/15/07 BBB- 100 102
^Impress Metal Packaging
9.875%, 5/29/07 B DEM200 120
Group Total 410
188
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Telephones (1.1%)
#Brooks Fiber Properties, Inc.
0.00%, 3/1/06 N/R $450 361
0.00%, 11/1/06 N/R 70 54
Comcast Cellular Corp., Series A
9.50%, 5/1/07 BB+ 160 167
Globalstar LP
11.375%, 2/15/04 N/R 125 131
^Intermedia Communications
11.25%, 7/15/07 B 300 208
^Iridium Capital Corp.
13.00%, 7/15/05 B 70 73
^IXC Communications, Inc., Series B
12.50%, 10/1/05 B2 100 116
^IXC Communications, Inc. 12.50%
(Preferred Stock) CCC+ (1)75 87
#Nextel Communications, Inc.
0.00%, 8/15/04 CCC 635 550
Qwest Communications International,
Inc., Series B
10.875%, 4/1/07 B+ 65 73
#Teleport Communications Group, Inc.
0.00%, 7/1/07 B 185 145
Total Access Communications Corp.
(Convertible)
2.00%, 5/31/06 BBB- 50 50
Group Total 2,015
Transportation (0.2%)
ALPS,
Series 96-1 D
12.75%, 6/15/06 BB- 150 161
^Jet Equipment Trust,
Series 94-A
11.79%, 6/15/13 BBB- 150 196
^#Transamerica Energy Corp.
0.00%, 6/15/02 B+ 55 44
Group Total 401
Utilities (0.2%)
Cleveland Electric Illuminating Co.,
Series B
8.375%, 8/1/12 BB+ 30 31
Midland Cogeneration Ltd. Venture LP,
Series C-91
10.33%, 7/23/02 BB- 22 24
Midland Funding Corp. I,
Series C-94
10.33%, 7/23/02 BB- 85 90
Midland Funding II,
Series A
11.75%, 7/23/05 B- 75 88
Quezon Power Ltd.
8.86%, 6/15/17 BB+ 250 252
Group Total 485
189
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
Yankee (0.9%)
Asia Pulp & Paper,
Series A
12.00%, 2/15/04 B+ 175 178
^Azteca Holdings S.A.
11.00%, 6/15/02 B- 50 52
##Central Bank of Argentina Bocon
PIK Pre 4
5.00%, 9/1/02 N/R 85 103
^Geberit International S.A.
10.125%, 4/15/07 N/R 130 81
^Globo Communicacoes
10.50%, 12/20/06 BB- 80 84
^Government of Jamaica
9.625%, 7/2/02 N/R 100 101
Multicanal S.A.
10.50%, 2/1/07 BB- 100 107
#Occidente y Caribe Cellular
0.00%, 3/15/04 B 185 146
Pindo Deli Fin Mauritius
10.75%, 10/1/07 BB 180 183
##Republic of Argentina
5.50%, 3/31/23 BB 200 151
^Republic of Panama
7.875%, 2/13/02 BB+ 150 151
TV Azteca SA de CV, Series B
10.50%, 2/15/07 N/R 150 159
United Mexican States,
Series B
6.25%, 12/31/19 BB 200 166
Group Total 1,662
Total High Yield (Cost $12,608) 13,372
WARRANTS (0.0%)
No. of Value
Rights (000)'
*Cie General des Eaux, expiring 5/2/01 3,720 2
^*Globalstar Telecommunications Ltd., expiring 2/15/04 125 15
^*Iridium World Communications, expiring 7/15/05 70 11
*@Nextel Communications, Inc., expiring 1/1/99 75 --
*@Occidente y Caribe Cellular, expiring 3/15/04 740 --
Total Warrants (Cost $14)
RIGHTS (0.0%)
@United Mexican States Recovery Rights, expiring
6/30/03 (Cost $0) 1,675,000 $--
INTEREST RATE CAP (0.0%)-See Note A6
190
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
++Ratings Face
(Standard Amount Value
& Poor's) (000) (000)+
<S> <C> <C> <C>
J.P. Morgan and Co., terminating 10/15/99,
to receive on 10/15/99 the excess, as
measured on 10/15/98, of 12 month LIBOR
over 6.34% multiplied by the notional
amount (Premium Paid $32) N/R $7,600 23
CASH EQUIVALENT (6.9%)
Repurchase Agreement (6.9%)
Chase Securities, Inc. 5.90%, dated
9/30/97, due 10/1/97, to be
repurchased at $12,336, collateralized
by various U.S. Government Obligations,
due 10/1/97-12/1/99, valued at $12,450
(Cost $12,334) 12,334 12,334
FOREIGN CURRENCY (0.1%)
British Pound GBP 6 10
French Franc FRF 271 46
Italian Lira ITL 30,570 18
Japanese Yen JPY 1,754 14
Total Foreign Currency (Cost $87) 88
Total Investments (99.9%) (Cost $157,767) 178,014
Value
(000)+
Other Assets and Liabilities (0.1%)
Cash $411
Foreign Currency Held as Collateral on Futures Contracts (Cost $177) 177
Dividends Receivable 230
Interest Receivable 757
Receivable for Withholding Tax Reclaim 18
Receivable for Investments Sold 13,441
Receivable for Fund Shares Sold 158
Unrealized Gain on Futures Contracts 33
Unrealized Gain on Swap Agreements 1
Unrealized Gain on Forward Foreign Currency Contracts 145
Other Assets 31
Payable for Investments Purchased (14,806)
Payable for Fund Shares Redeemed (9)
Payable to Custodian (38)
Payable for Investment Advisory Fees (237)
Payable for Administrative Fees (11)
Payable for Shareholder Servicing Fees- Investment Class (1)
Payable for Trustees' Deferred Compensation Plan-Note F (4)
Other Liabilities (80)
216
NET ASSETS (100%) $178,230
INSTITUTIONAL CLASS
Net Assets
Applicable to 12,694,118 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $173,155
NET ASSET VALUE PER SHARE $ 13.64
191
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Value
(000)+
<S> <C>
INVESTMENT CLASS
Net Assets
Applicable to 372,302 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 5,075
NET ASSET VALUE PER SHARE $ 13.63
Net Assets Consist of:
Paid in Capital $139,265
Undistributed Net Investment Income (Loss) 1,202
Undistributed Realized Net Gain (Loss) 17,385
Unrealized Appreciation (Depreciation) on:
Investment Securities 20,246
Foreign Currency 124
Futures and Swaps 8
Net Assets $178,230
192
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
+ See Note A1 to Financial Statements.
++ Ratings are unaudited.
* Non-Income Producing Security.
+ 144A security. Certain conditions for public sale may exist.
++ A portion of these securities was pledged to cover margin requirements for
futures contracts.
+ Moody's Investor Service, Inc. rating. Security is not rated by Standard &
Poor's Corporation.
# Step Bond-Coupon rate increases in increments to maturity. Rate disclosed is
as of September 30, 1997. Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is as of September 30,
1997.
(1) Amount represents shares held by the Portfolio.
(2) Face amount is less than $500.
@ Value is less than $500.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at September 30, 1997.
IO Interest Only
N/R Not rated by Moody's Investor Services, Inc., Standard & Poor's Corporation
or Fitch.
PAC Planned Amortization Class
PIK Payment-In Kind Security
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit.
TBA Security is subject to delayed delivery. See Note A8 to Financial Statements.
193
</TABLE>
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
SMALL INTER-
CAP NATIONAL MID CAP
VALUE EQUITY VALUE EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended September 30, 1997
<S> <C> <C> <C> <C> <C>
(In Thousands)
Investment Income +
Dividends $ 49,237 $ 22,626 $ 9,347 $ 13,271 $ 1,056
Interest 21,710 3,614 1,384 2,538 1,036
Total Income 70,947 26,240 10,731 15,809 2,092
Expenses
Investment Advisory Services
--Note B 14,010 6,928 5,161 3,236 1,961
Administrative Fee--Note C 2,285 1,136 550 544 314
Custodian Fee--Note E 310 129 71 380 83
Audit Fee 23 30 12 54 15
Shareholder Servicing Fee--
Investment Class shares--
Note D 28 3 -- 1 --
Distribution Fees--Adviser
Class shares--Note D 201 -- -- -- 1
Other Expenses 704 169 125 96 85
Reimbursement of Expenses--
Note B (18) (26) -- (26) --
Total Expenses 17,543 8,369 5,919 4,285 2,459
Expense Offset--Note K (310) (129) (19) (180) (83)
Net Expenses 17,233 8,240 5,900 4,105 2,376
Net Investment Income
(Loss) 53,714 18,000 4,831 11,704 (284)
Realized Net Gain (Loss)
Investment Securities 376,797 379,936 113,081 39,018 66,879
Foreign Currency Transactions -- -- -- (1,662) --
Futures (814) -- -- 6,109 --
Realized Net Gain (Loss) 375,983 379,936 113,081 43,465 66,879
Change in Unrealized Appreciation
(Depreciation)
Investment Securities 512,130 58,032 175,057 80,379 29,836
Foreign Currency Transactions -- -- -- 892 --
Futures 3,948 -- -- (1,357) --
Unrealized Appreciation
(Depreciation) 516,078 58,032 175,057 79,914 29,836
Net Gain (Loss) 892,061 437,968 288,138 123,379 96,715
Net Increase (Decrease) in Net
Assets Resulting from Operations $945,775 $455,968 $292,969 $135,083 $ 96,431
+ Net of $1,654 withholding tax for International Equity Portfolio.
</TABLE>
The accompanying notes are an integral part of the financial statements.
194
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
DOMESTIC
MID CAP EMERGING FIXED FIXED HIGH
VALUE MARKETS INCOME INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended September 30, 1997
<S> <C> <C> <C> <C> <C>
(In Thousands)
Investment Income
Dividends ++ $ 1,201 $ 181 $ 8,065 $ 275 $ 1,443
Interest 229 564 173,302 6,854 38,219
Total Income 1,430 745 181,367 7,129 39,662
Expenses
Investment Advisory Services
--Note B $924 $225 9,431 $383 1,558
Less: Waived Fees (28) 896 (30) 195 -- (11) 372 --
Administrative Fee--Note C 123 24 2,030 82 356
Custodian Fee--Note E 46 80 293 21 70
Audit Fee 12 44 42 13 16
Shareholder Servicing Fee--
Investment Class shares--
Note D 1 -- 11 -- 13
Distribution Fees--Adviser
Class shares--Note D -- -- 67 -- 3
Other Expenses 62 12 644 28 128
Reimbursement of Expenses--
Note B (24) -- (13) -- (19)
Total Expenses 1,116 355 12,505 516 2,125
Expense Offset--Note K (30) -- (292) (6) (44)
Net Expenses 1,086 355 12,213 510 2,081
Net Investment Income 344 390 169,154 6,619 37,581
Realized Net Gain (Loss)
Investment Securities 24,403 563 52,720 1,793 14,841
Foreign Currency Transactions -- (93) 11,172 -- 321
Futures, Written Floors and
Swaps -- 2,528 (1,029) 99 (118)
Realized Net Gain (Loss) 24,403 2,998 62,863 1,892 15,044
Change in Unrealized Appreciation
(Depreciation)
Investment Securities* 38,391 2,010 42,306 1,382 24,616
Foreign Currency Transactions -- (1) (1,972) -- (57)
Futures, Swaps and Written
Floors -- 18 (1,972) (70) (554)
Unrealized Appreciation
(Depreciation) 38,391 2,027 38,362 1,312 24,005
Net Gain (Loss) 62,794 5,025 101,225 3,204 39,049
Net Increase (Decrease) in Net Assets
Resulting from Operations $63,138 $5,415 $270,379 $9,823 $76,630
</TABLE>
++ Net of $30 withholding tax for the Emerging Markets Portfolio.
* Net of foreign capital gain taxes of $38 on unrealized gains for Emerging
Markets Portfolio.
The accompanying notes are an integral part of the financial statements.
195
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
SPECIAL
MORTGAGE- PURPOSE
CASH FIXED BACKED LIMITED FIXED
RESERVES INCOME SECURITIES DURATION INCOME
PORTFOLIO PORTFOLIO II PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended September 30, 1997
<S> <C> <C> <C> <C> <C>
(In Thousands)
Investment Income
Dividends $ -- $ 516 $ 88 $ 151 $ 1,471
Interest 5,108 14,032 4,202 8,780 34,172
Total Income 5,108 14,548 4,290 8,931 35,643
Expenses
Investment Advisory
Services-- Note B $231 776 $195 $408 1,816
Less: Waived Fees (65) 166 -- (22) 173 (4) 404 --
Administrative Fee--Note C 74 165 42 109 414
Custodian Fee--Note E 23 32 10 11 54
Audit Fee 9 16 15 13 24
Shareholder Servicing Fee--
Investment Class shares--
Note D -- -- -- -- 2
Other Expenses 33 46 19 43 79
Reimbursement of Expenses--
Note B -- -- -- -- (26)
Total Expenses 305 1,035 259 580 2,363
Expense Offset--Note K (9) (24) -- (9) (28)
Net Expenses 296 1,011 259 571 2,335
Net Investment Income 4,812 13,537 4,031 8,360 33,308
Realized Net Gain (Loss)
Investment Securities -- 2,958 1,784 357 12,744
Foreign Currency Transactions -- 1,085 -- -- 2,511
Futures and Written Floors -- 290 (595) 15 (303)
Realized Net Gain (Loss) -- 4,333 1,189 372 14,952
Change in Unrealized Appreciation
(Depreciation)
Investment Securities -- 3,648 71 519 6,272
Foreign Currency Transactions -- (241) -- -- (506)
Futures and Swaps -- (388) (115) (9) (505)
Unrealized Appreciation
(Depreciation) -- 3,019 (44) 510 5,261
Net Gain (Loss) -- 7,352 1,145 882 20,213
Net Increase (Decrease) in Net Assets
Resulting from Operations $4,812 $20,889 $5,176 $9,242 $53,521
</TABLE>
The accompanying notes are an integral part of the financial statements.
196
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
PA FIXED FIXED INTERMEDIATE
MUNICIPAL MUNICIPAL INCOME INCOME DURATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended September 30, 1997
<S> <C> <C> <C> <C> <C>
(In Thousands)
Investment Income
Dividends $ -- $ -- $ 213 $ -- $ 54
Interest + 3,341 1,468 4,583 8,480 2,816
Total Income 3,341 1,468 4,796 8,480 2,870
Expenses
Investment Advisory Services
--Note B $241 $105 289 549 $167
Less: Waived Fees (30) 211 (26) 79 -- -- (23) 144
Administrative Fee--Note C 51 22 62 117 36
Custodian Fee--Note E 6 5 31 45 18
Audit Fee 18 18 32 32 12
Other Expenses 38 18 29 32 32
Total Expenses 324 142 443 775 242
Expense Offset--Note K (3) (2) (2) (3) (11)
Net Expenses 321 140 441 772 231
Net Investment Income 3,020 1,328 4,355 7,708 2,639
Realized Net Gain (Loss)
Investment Securities 29 (68) 260 (2,002) 520
Foreign Currency Transactions -- -- (933) (5,388) 221
Futures and Swaps (14) 76 490 1,970 (60)
Realized Net Gain (Loss) 15 8 (183) (5,420) 681
Change in Unrealized Appreciation
(Depreciation)
Investment Securities 2,568 883 (1,498) (2,952) 697
Foreign Currency Transactions -- -- (145) 620 (17)
Futures and Swaps (271) (86) 17 (2) --
Unrealized Appreciation
(Depreciation) 2,297 797 (1,626) (2,334) 680
Net Gain (Loss) 2,312 805 (1,809) (7,754) 1,361
Net Increase (Decrease) in Net Assets
Resulting from Operations $5,332 $2,133 $ 2,546 $ (46) $4,000
</TABLE>
+ Net of $35 and $90 withholding tax for the Global Fixed Income and
International Fixed Income Portfolios, respectively.
The accompanying notes are an integral part of the financial statements.
197
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
MULTI-
BALANCED ASSET-CLASS
PORTFOLIO PORTFOLIO
Year Ended September 30, 1997
<S> <C> <C>
(In Thousands)
Investment Income +
Dividends $ 3,815 $ 1,775
Interest 10,178 3,986
Total Income 13,993 5,761
Expenses
Investment Advisory Services--Note B 1,527 $ 923
Less: Waived Fees -- (126) 797
Administrative Fee--Note C 280 143
Custodian Fee--Note E 51 87
Audit Fee 32 44
Shareholder Servicing Fee--Investment
Class shares--Note D 2 6
Distribution Fees--Adviser Class
shares--Note D 37 --
Other Expenses 84 75
Reimbursement of Expenses--Note B (4) (19)
Total Expenses 2,009 1,133
Expense Offset--Note K (48) (4)
Net Expenses 1,961 1,129
Net Investment Income 12,032 4,632
Realized Net Gain (Loss)
Investment Securities 44,002 17,557
Foreign Currency Transactions 574 (403)
Futures and Written Floors 602 1,727
Realized Net Gain (Loss) 45,178 18,881
Change in Unrealized Appreciation
(Depreciation)
Investment Securities 24,877 11,568
Foreign Currency Transactions (148) 185
Futures and Swaps (50) (117)
Unrealized Appreciation
(Depreciation) 24,679 11,636
Net Gain (Loss) 69,857 30,517
Net Increase (Decrease) in Net Assets
Resulting from Operations $81,889 $35,149
</TABLE>
+ Net of $79 withholding tax for the Multi-Asset-Class Portfolio.
The accompanying notes are an integral part of the financial statements.
198
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SMALL CAP
VALUE EQUITY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 32,015 $ 53,714 $ 30,500 $ 18,000 $ 4,607 $ 4,831
Realized Net Gain (Loss) 138,640 375,983 237,632 379,936 80,888 113,081
Change in Unrealized
Appreciation (Depreciation) 97,514 516,078 (24,506) 58,032 20,530 175,057
Net Increase (Decrease) in
Net Assets Resulting
from Operations 268,169 945,775 243,626 455,968 106,025 292,969
Distributions:--Note A11
Institutional Class:
Net Investment Income (30,765) (43,078) (31,471) (21,326) (4,652) (3,283)
Realized Net Gain (130,677) (135,541) (132,351) (234,965) (52,103) (92,539)
Investment Class +:
Net Investment Income (12) (249) (1) (19) -- --
Realized Net Gain -- (851) -- (298) -- --
Adviser Class ++:
Net Investment Income -- (894) -- -- -- --
Realized Net Gain -- (1,156) -- -- --
Total Distributions (161,454) (181,769) (163,823) (256,608) (56,755) (95,822)
Capital Share Transactions: (1)
Institutional Class:
Issued 930,274 1,576,439 186,997 122,058 128,125 125,463
In Lieu of Cash
Distributions 143,059 156,287 157,127 250,540 55,347 94,545
Redeemed (606,431) (769,989) (579,292) (701,366) (77,653) (105,216)
Investment Class +:
Issued 8,889 21,268 117 2,983 -- --
In Lieu of Cash
Distributions 12 1,086 1 316 -- --
Redeemed (49) (6,754) (11) (1,364) -- --
Adviser Class ++:
Issued 15,433 172,033 -- -- -- --
In Lieu of Cash
Distributions -- 1,868 -- -- -- --
Redeemed (11) (11,849) -- -- -- --
Net Increase (Decrease)
from Capital Share
Transactions 491,176 1,140,389 (235,061) (326,833) 105,819 114,792
Total Increase (Decrease) 597,891 1,904,395 (155,258) (127,473) 155,089 311,939
Net Assets:
Beginning of Period 1,271,586 1,869,477 1,597,632 1,442,374 430,368 585,457
End of Period $1,869,477 $3,773,872 $1,442,374 $1,314,901 $585,457 $897,396
Undistributed net
investment income
(loss) included in end
of period net assets $ 9,064 $ 18,442 $ 7,536 $ 4,070 $ 1,636 $ 2,064
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 63,277 90,227 7,686 4,762 7,158 6,240
In Lieu of Cash
Distributions 10,269 9,563 6,676 10,687 3,496 5,253
</TABLE>
199
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP
VALUE EQUITY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Shares Redeemed (40,739) (44,093) (23,580) (27,052) (4,377) (5,376)
Net Increase (Decrease)
in Institutional Class
Shares Outstanding 32,807 55,697 (9,218) (11,603) 6,277 6,117
Investment Class +:
Shares Issued 595 1,187 5 113 -- --
In Lieu of Cash
Distributions 1 66 -- 14 -- --
Shares Redeemed (3) (380) (1) (51) -- --
Net Increase (Decrease)
in Investment Class
Shares Outstanding 593 873 4 76 -- --
Adviser Class ++:
Shares Issued 994 9,462 -- -- -- --
In Lieu of Cash
Distributions -- 112 -- -- -- --
Shares Redeemed (1) (676) -- -- -- --
Net Increase (Decrease)
in Adviser Class
Shares Outstanding 993 8,898 -- -- -- --
</TABLE>
+ The Value and the Equity Portfolios began offering Investment Class
Shares on May 6, 1996 and April 10, 1996, respectively.
++ The Value Portfolio began offering Adviser Class Shares on July 17,
1996.
The accompanying notes are an integral part of the financial statements.
200
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP MID CAP EMERGING
EQUITY GROWTH VALUE MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income
(Loss) $ 13,039 $ 11,704 $ 173 $ (284) $ 405 $ 344 $ 622 $ 390
Realized Net Gain (Loss) 101,007 43,465 71,168 66,879 1,658 24,403 2,070 2,998
Change in Unrealized
Appreciation
(Depreciation) (57,241) 79,914 27,593 29,836 3,145 38,391 (496) 2,027
Net Increase (Decrease)
in Net Assets Resulting
from Operations 56,805 135,083 98,934 96,431 5,208 63,138 2,196 5,415
Distributions:--Note A11
Institutional Class:
Net Investment Income (16,536) (12,515) (580) -- (214) (404) (641) (572)
Realized Net Gain (3,421) (12,996) (53,149) (67,632) (405) (4,075) (2,186) (2,288)
Investment Class +:
Net Investment Income -- (4) -- -- -- (1) -- --
Realized Net Gain -- (5) -- -- -- (9) -- --
Total Distributions (19,957) (25,520) (53,729) (67,632) (619) (4,489) (2,827) (2,860)
Capital Share Transactions: (1)
Institutional Class:
Issued 145,686 96,568 58,508 72,700 41,529 137,940 9,068 5,587
In Lieu of Cash
Distributions 14,783 21,690 52,044 65,823 611 4,424 2,439 2,586
Redeemed (722,596) (213,704) (126,023) (123,453) (782) (30,955) (20,351) (20,904)
Investment Class +:
Issued 268 325 -- -- 122 854 -- --
In Lieu of Cash
Distributions -- 9 -- -- -- 10 -- --
Redeemed (34) (6) -- -- -- -- -- --
Adviser Class ++:
Issued -- -- -- 1,813 -- -- -- --
Redeemed -- -- -- (800) -- -- -- --
Net Increase (Decrease)
from Capital Share
Transactions (561,893) (95,118) (15,471) 16,083 41,480 112,273 (8,844) (12,731)
Total Increase (Decrease) (525,045) 14,445 29,734 44,882 46,069 170,922 (9,475) (10,176)
Net Assets:
Beginning of Period 1,160,986 635,941 373,547 403,281 4,507 50,576 42,459 32,984
End of Period $ 635,941 $ 650,386 $ 403,281 $ 448,163 $50,576 $221,498 $ 32,984 $ 22,808
Undistributed net
investment income
(loss) included in
end of period net assets $ 12,067 $ 9,914 $ -- $ -- $ 372 $ 310 $ 277 $ 91
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 11,400 6,875 3,094 4,220 3,154 8,139 801 488
In Lieu of Cash
Distributions 1,211 1,662 3,126 3,909 52 290 235 249
Shares Redeemed (57,391) (15,096) (6,657) (7,311) (59) (1,808) (1,823) (1,762)
Net Increase (Decrease)
in Institutional
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP MID CAP EMERGING
EQUITY GROWTH VALUE MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class Shares
Outstanding (44,780) (6,559) (437) 818 3,147 6,621 (787) (1,025)
Investment Class +:
Shares Issued 21 22 -- -- 9 47 -- --
In Lieu of Cash
Distributions -- 1 -- -- -- 1 -- --
Shares Redeemed (3) -- -- -- -- -- -- --
Net Increase (Decrease)
in Investment Class
Shares Outstanding 18 23 -- -- 9 48 -- --
Adviser Class ++:
Shares Issued -- -- -- 98 -- -- -- --
Shares Redeemed -- -- -- (43) -- -- -- --
Net Increase (Decrease)
in Adviser Class Shares
Outstanding -- -- -- 55 -- -- -- --
</TABLE>
+ The International Equity and the Mid Cap Value Portfolios began
offering Investment Class shares on April 10, 1996 and May 10, 1996,
respectively.
++ The Mid Cap Growth Portfolio began offering Adviser Class shares on
January 31, 1997.
The accompanying notes are an integral part of the financial statements.
201
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
DOMESTIC
FIXED FIXED HIGH
INCOME INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 107,138 $ 169,154 $ 3,944 $ 6,619 $ 28,826 $ 37,581
Realized Net Gain (Loss) 21,756 62,863 (937) 1,892 3,717 15,044
Change in Unrealized
Appreciation (Depreciation) (11,844) 38,362 (474) 1,312 4,627 24,005
Net Increase (Decrease) in
Net Assets Resulting from
Operations 117,050 270,379 2,533 9,823 37,170 76,630
Distributions:--Note A11
Institutional Class:
Net Investment Income (103,292) (149,960) (3,127) (6,034) (27,729) (34,334)
Realized Net Gain (7,817) (20,590) -- (179) -- (1,171)
In Excess of Realized
Net Gain -- -- (185) -- -- --
Investment Class +:
Net Investment Income -- (341) -- -- (49) (628)
Realized Net Gain -- (47) -- -- -- (20)
Adviser Class ++:
Net Investment Income -- (1,187) -- -- -- (66)
Realized Net Gain -- (61) -- -- -- --
Total Distributions (111,109) (172,186) (3,312) (6,213) (27,778) (36,219)
Capital Share Transactions: (1)
Institutional Class:
Issued 440,801 1,506,277 62,619 32,103 157,380 294,848
In Lieu of Cash
Distributions 88,188 141,335 3,009 5,270 16,060 21,776
Redeemed (232,193) (314,144) (5,634) (39,391) (113,632) (121,867)
Investment Class +:
Issued -- 10,498 -- -- 4,915 12,531
In Lieu of Cash
Distributions -- 305 -- -- 49 451
Redeemed -- (1,587) -- -- -- (8,118)
Adviser Class ++:
Issued -- 82,302 -- -- -- 5,616
In Lieu of Cash
Distributions -- 587 -- -- -- 66
Redeemed -- (7,715) -- -- -- (1,521)
Net Increase (Decrease)
from Capital Share
Transactions 296,796 1,417,858 59,994 (2,018) 64,772 203,782
Total Increase (Decrease) 302,737 1,516,051 59,215 1,592 74,164 244,193
Net Assets:
Beginning of Period 1,487,409 1,790,146 36,147 95,362 220,785 294,949
End of Period $1,790,146 $3,306,197 $ 95,362 $96,954 $294,949 $539,142
Undistributed net
investment income (loss)
included in end of period
net assets $ 42,529 $ 57,872 $ 1,348 $ 1,805 $ 8,657 $ 11,795
</TABLE>
202
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC
FIXED FIXED HIGH
INCOME INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 37,653 126,596 5,724 2,909 17,602 30,974
In Lieu of Cash
Distributions 7,612 12,016 279 484 1,830 2,349
Shares Redeemed (19,803) (26,436) (520) (3,553) (12,631) (12,813)
Net Increase
(Decrease) in
Institutional Class
Shares Outstanding 25,462 112,176 5,483 (160) 6,801 20,510
Investment Class +:
Shares Issued -- 886 -- -- 546 1,307
In Lieu of Cash
Distributions -- 26 -- -- 6 49
Shares Redeemed -- (133) -- -- -- (833)
Net Increase (Decrease)
in Investment Class
Shares Outstanding -- 779 -- -- 552 523
Adviser Class ++:
Issued -- 6,870 -- -- -- 577
In Lieu of Cash
Distributions -- 50 -- -- -- 7
Redeemed -- (645) -- -- -- (158)
Net Increase (Decrease)
in Adviser Class Shares
Outstanding -- 6,275 -- -- -- 426
</TABLE>
+ The Fixed Income and High Yield Portfolios began offering Investment
Class shares on October 15, 1996 and May 21, 1996, respectively.
++ The Fixed Income and High Yield Portfolios began offering Adviser Class
shares on November 7, 1996 and January 31, 1997, respectively.
The accompanying notes are an integral part of the financial statements.
203
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
MORTGAGE-
CASH FIXED BACKED
RESERVES INCOME SECURITIES
PORTFOLIO PORTFOLIO II PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 2,882 $ 4,812 $ 12,542 $ 13,537 $ 3,059 $ 4,031
Realized Net Gain (Loss) -- -- 1,754 4,333 (663) 1,189
Change in Unrealized
Appreciation (Depreciation) -- -- (2,268) 3,019 502 (44)
Net Increase (Decrease) in
Net Assets Resulting
from Operations 2,882 4,812 12,028 20,889 2,898 5,176
Distributions:--Note A11
Institutional Class:
Net Investment Income (2,882) (4,812) (11,608) (13,889) (3,033) (3,646)
Realized Net Gain -- -- (1,360) (1,963) -- --
In Excess of Realized
Net Gain -- -- (446) -- -- --
Total Distributions (2,882) (4,812) (13,414) (15,852) (3,033) (3,646)
Capital Share Transactions: (1)
Institutional Class:
Issued 143,726 334,996 49,696 74,512 5,648 1,046
In Lieu of Cash
Distributions 2,738 4,389 8,664 11,590 2,036 2,618
Redeemed (112,591) (319,418) (42,179) (56,217) (6,390) (18,034)
Net Increase (Decrease)
from Capital Share
Transactions 33,873 19,967 16,181 29,885 1,294 (14,370)
Total Increase (Decrease) 33,873 19,967 14,795 34,922 1,159 (12,840)
Net Assets:
Beginning of Period 44,624 78,497 176,945 191,740 49,766 50,925
End of Period $ 78,497 $ 98,464 $191,740 $226,662 $50,925 $ 38,085
Undistributed net investment
income (loss) included in
end of period net assets $ -- $ -- $ 4,660 $ 4,574 $ 1,056 $ 1,007
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 143,726 334,996 4,438 6,638 552 99
In Lieu of Cash
Distributions 2,738 4,389 781 1,045 199 252
Shares Redeemed (112,591) (319,418) (3,763) (4,981) (608) (1,695)
Net Increase (Decrease)
in Institutional Class
Shares Outstanding 33,873 19,967 1,456 2,702 143 (1,344)
</TABLE>
The accompanying notes are an integral part of the financial statements.
204
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SPECIAL
LIMITED PURPOSE
DURATION FIXED INCOME MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 6,630 $ 8,360 $ 27,370 $ 33,308 $ 2,081 $ 3,020
Realized Net Gain (Loss) (47) 372 6,698 14,952 (42) 15
Change in Unrealized
Appreciation (Depreciation) (428) 510 (3,052) 5,261 1,780 2,297
Net Increase (Decrease) in
Net Assets Resulting from
Operations 6,155 9,242 31,016 53,521 3,819 5,332
Distributions:--Note A11
Institutional Class:
Net Investment Income (6,274) (7,415) (27,847) (33,514) (2,096) (2,960)
Realized Net Gain -- -- (9,325) (6,885) -- --
Investment Class +:
Net Investment Income -- -- (8) (68) -- --
Realized Net Gain -- -- -- (12) -- --
Total Distributions (6,274) (7,415) (37,180) (40,479) (2,096) (2,960)
Capital Share Transactions: (1)
Institutional Class:
Issued 99,082 59,060 103,802 90,134 17,213 20,270
In Lieu of Cash
Distributions 4,921 6,560 34,094 35,130 1,443 2,235
Redeemed (80,843) (35,104) (74,328) (93,136) (1,883) (4,293)
Investment Class +:
Issued -- -- 758 414 -- --
In Lieu of Cash
Distributions -- -- 8 80 -- --
Redeemed -- -- -- (47) -- --
Net Increase (Decrease)
from Capital Share
Transactions 23,160 30,516 64,334 32,575 16,773 18,212
Total Increase (Decrease) 23,041 32,343 58,170 45,617 18,496 20,584
Net Assets:
Beginning of Period 100,186 123,227 390,258 448,428 36,040 54,536
End of Period $123,227 $155,570 $448,428 $494,045 $54,536 $75,120
Undistributed net investment
income (loss) included in
end of period net assets $ 1,710 $ 2,361 $ 11,292 $ 9,955 $ 11 $ 71
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 9,585 5,709 8,626 7,318 1,542 1,774
In Lieu of Cash
Distributions 480 637 2,827 2,902 130 195
Shares Redeemed (7,817) (3,383) (6,091) (7,553) (169) (375)
Net Increase (Decrease)
in Institutional Class
Shares Outstanding 2,248 2,963 5,362 2,667 1,503 1,594
</TABLE>
205
<PAGE>
<TABLE>
<CAPTION>
SPECIAL
LIMITED PURPOSE
DURATION FIXED INCOME MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Investment Class +:
Shares Issued -- -- 63 34 -- --
In Lieu of Cash
Distributions -- -- 1 7 -- --
Shares Redeemed -- -- -- (4) -- --
Net Increase (Decrease)
in Investment Class
Shares Outstanding -- -- 64 37 -- --
</TABLE>
+ The Special Purpose Fixed Income Portfolio began offering Investment
Class shares on April 10, 1996.
The accompanying notes are an integral part of the financial statements.
206
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PA GLOBAL INTERNATIONAL
MUNICIPAL FIXED INCOME FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 944 $ 1,328 $ 2,888 $ 4,355 $ 8,012 $ 7,708
Realized Net Gain (Loss) 555 8 2,936 (183) 4,561 (5,420)
Change in Unrealized
Appreciation (Depreciation) 208 797 (2,051) (1,626) (4,920) (2,334)
Net Increase (Decrease) in
Net Assets Resulting from
Operations 1,707 2,133 3,773 2,546 7,653 (46)
Distributions:--Note A11
Institutional Class:
Net Investment Income (934) (1,330) (3,105) (4,111) (10,889) (5,327)
Realized Net Gain -- -- (186) (1,137) (1,028) (3,700)
Total Distributions (934) (1,330) (3,291) (5,248) (11,917) (9,027)
Capital Share Transactions: (1)
Institutional Class:
Issued 13,003 7,972 27,692 14,273 70,949 44,423
In Lieu of Cash
Distributions 838 888 3,129 4,700 11,131 8,576
Redeemed (1,860) (10,690) (19,168) (6,060) (62,561) (34,311)
Net Increase (Decrease)
from Capital Share
Transactions 11,981 (1,830) 11,653 12,913 19,519 18,688
Total Increase (Decrease) 12,754 (1,027) 12,135 10,211 15,255 9,615
Net Assets:
Beginning of Period 15,734 28,488 55,147 67,282 127,882 143,137
End of Period $28,488 $ 27,461 $ 67,282 $77,493 $143,137 $152,752
Undistributed net investment
income (loss) included in
end of period net assets $ 22 $ 20 $ 2,358 $ 1,414 $ 3,997 $ (372)
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 1,154 698 2,557 1,308 6,561 4,363
In Lieu of Cash
Distributions 74 77 291 439 1,054 817
Shares Redeemed (165) (935) (1,725) (579) (5,940) (3,475)
Net Increase (Decrease) in
Institutional Class
Shares Outstanding 1,063 (160) 1,123 1,168 1,675 1,705
</TABLE>
The accompanying notes are an integral part of the financial statements.
207
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE MULTI-ASSET-
DURATION BALANCED CLASS
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income $ 862 $ 2,639 $ 13,041 $ 12,032 $ 5,405 $ 4,632
Realized Net Gain (Loss) 489 681 30,074 45,178 12,244 18,881
Change in Unrealized Appreciation
(Depreciation) (424) 680 (2,265) 24,679 1,249 11,636
Net Increase (Decrease) in Net Assets
Resulting from Operations 927 4,000 40,850 81,889 18,898 35,149
Distributions:--Note A11
Institutional Class:
Net Investment Income (1,050) (1,772) (12,942) (12,124) (4,740) (5,893)
Realized Net Gain (697) (349) (11,250) (30,896) (1,968) (11,866)
Investment Class +:
Net Investment Income -- -- -- (26) (27) (143)
Realized Net Gain -- -- -- -- -- (275)
Adviser Class ++:
Net Investment Income -- -- -- (416) -- --
Realized Net Gain -- -- -- (1,236) -- --
Total Distributions (1,747) (2,121) (24,192) (44,698) (6,735) (18,177)
Capital Share Transactions: (1)
Institutional Class:
Issued 21,694 73,710 40,647 43,464 76,136 75,946
In Lieu of Cash Distributions 1,746 930 24,119 42,958 6,226 16,451
Redeemed (29,840) (16,417) (115,186) (79,189) (61,779) (65,247)
Investment Class +:
Issued -- -- -- 3,910 3,020 1,103
In Lieu of Cash Distributions -- -- -- 26 27 418
Redeemed -- -- -- (460) -- (45)
Adviser Class ++:
Issued -- -- -- 26,300 -- --
In Lieu of Cash Distributions -- -- -- 1,653 -- --
Redeemed -- -- -- (2,128) -- --
Net Increase (Decrease) from
Capital Share Transactions (6,400) 58,223 (50,420) 36,534 23,630 28,626
Total Increase (Decrease) (7,220) 60,102 (33,762) 73,725 35,793 45,598
Net Assets:
Beginning of Period 19,237 12,017 334,630 300,868 96,839 132,632
End of Period $12,017 $72,119 $300,868 $374,593 $132,632 $178,230
Undistributed net investment
income (loss) included in
end of period net assets $ 295 $1,188 $ 4,707 $ 3,747 $ 3,042 $ 1,202
(1) Shares Issued and Redeemed
Institutional Class:
Shares Issued 2,133 7,235 3,040 3,110 6,609 6,059
In Lieu of Cash Distributions 171 91 1,858 3,271 541 1,403
Shares Redeemed (2,936) (1,612) (8,744) (5,724) (5,135) (5,319)
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (632) 5,714 (3,846) 657 2,015 2,143
</TABLE>
208
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE MULTI-ASSET-
DURATION BALANCED CLASS
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
(In Thousands) 1996 1997 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Investment Class +:
Shares Issued -- -- -- 287 248 90
In Lieu of Cash Distributions -- -- -- 2 2 36
Shares Redeemed -- -- -- (31) -- (4)
Net Increase (Decrease) in
Investment Class Shares Outstanding -- -- -- 258 250 122
Adviser Class ++:
Shares Issued -- -- -- 1,812 -- --
In Lieu of Cash Distributions -- -- -- 126 -- --
Shares Redeemed -- -- -- (149) -- --
Net Increase (Decrease) in
Adviser Class Shares Outstanding -- -- -- 1,789 -- --
</TABLE>
+ The Multi-Asset-Class and Balanced Portfolios began offering Investment
Class shares on June 10, 1996 and April 4, 1997, respectively.
++ The Balanced Portfolio began offering Adviser Class shares on November 1,
1996.
209
<PAGE>
Financial Highlights
For a Share Outstanding Throughout Each Period +
VALUE PORTFOLIO
<TABLE>
<CAPTION>
Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.67 $ 12.76 $ 12.63 $ 14.89 $ 15.61
Income from Investment Operations
Net Investment Income 0.30 0.30 0.31 0.30 0.34
Net Realized and Unrealized Gain
(Loss) on Investments 1.92 0.59 3.34 2.20 5.75
Total from Investment Operations 2.22 0.89 3.65 2.50 6.09
Distributions
Net Investment Income (0.31) (0.29) (0.31) (0.32) (0.30)
Realized Net Gain (1.82) (0.73) (1.08) (1.46) (1.03)
Total Distributions (2.13) (1.02) (1.39) (1.78) (1.33)
Net Asset Value, End of Period $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37
Total Return 19.67% 7.45% 32.58% 18.41% 41.25%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $762,175 $981,337 $1,271,586 $1,844,740 $3,542,772
Ratio of Expenses to Average
Net Assets (1) 0.59% 0.61% 0.60% 0.61% 0.62%
Ratio of Net Investment Income
to Average Net Assets 2.48% 2.40% 2.43% 2.07% 1.93%
Portfolio Turnover Rate 43% 54% 56% 53% 46%
Average Commission Rate ### N/A N/A N/A $ 0.0572 $ 0.0577
(1) Supplemental Information on the Ratio of Expenses to Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
May 6, Year July 17, Year
1996** to Ended 1996** to Ended
September 30, September 30, September 30, September 30,
1996 1997++ 1996 1997++
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 14.97 $ 15.60 $ 14.11 $ 15.61
Income from Investment
Operations
Net Investment Income 0.12 0.31 0.01 0.30
Net Realized and Unrealized
Gain (Loss) on Investments 0.59 5.75 1.49 5.74
Total from Investment Operations 0.71 6.06 1.50 6.04
Distributions
Net Investment Income (0.08) (0.27) -- (0.27)
Realized Net Gain -- (1.03) -- (1.03)
Total Distributions (0.08) (1.30) -- (1.30)
Net Asset Value, End of Period $ 15.60 $ 20.36 $ 15.61 $ 20.35
Total Return 4.78% 41.01% 10.63% 40.87%
Ratios and Supplemental Data
Net Assets, End of
Period (Thousands) $ 9,244 $29,847 $15,493 $201,253
Ratio of Expenses to
Average Net Assets (2) 0.76%* 0.80% 0.86%* 0.90%
Ratio of Net Investment
Income to Average Net Assets 2.05%* 1.75% 1.66%* 1.63%
Portfolio Turnover Rate 53% 46% 53% 46%
Average Commission Rate ### $0.0572 $0.0577 $0.0572 $ 0.0577
</TABLE>
210
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
May 6, Year July 17, Year
1996** to Ended 1996** to Ended
September 30, September 30, September 30, September 30,
1996 1997++ 1996 1997++
<S> <C> <C> <C> <C>
(2) Supplemental Information
on the Ratio of Expenses to
Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver N/A 0.09% N/A N/A
Ratio Including Expense Offsets 0.75%* 0.79% 0.85%* 0.89%
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on average
shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
</TABLE>
211
<PAGE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 22.04 $ 22.82 $ 21.05 $ 24.43 $ 25.67
Income from Investment Operations
Net Investment Income 0.41 0.44 0.52 0.50 0.36
Net Realized and Unrealized
Gain (Loss) on Investments 1.95 0.41 4.55 3.26 8.22
Total from Investment Operations 2.36 0.85 5.07 3.76 8.58
Distributions
Net Investment Income (0.43) (0.41) (0.52) (0.50) (0.40)
Realized Net Gain (1.15) (2.21) (1.17) (2.02) (4.40)
Total Distributions (1.58) (2.62) (1.69) (2.52) (4.80)
Net Asset Value, End of Period $ 22.82 $ 21.05 $ 24.43 $ 25.67 $ 29.45
Total Return 11.05% 4.11% 26.15% 16.48% 38.46%
Ratios and Supplemental Data
Net Assets, End of
Period (Thousands) $1,098,003 $1,193,017 $1,597,632 $1,442,261 $1,312,547
Ratio of Expenses to
Average Net Assets (1) 0.59% 0.60% 0.61% 0.60% 0.60%
Ratio of Net Investment
Income to Average Net Assets 1.86% 2.10% 2.39% 1.95% 1.30%
Portfolio Turnover Rate 51% 41% 67% 67% 85%
Average Commission Rate ### N/A N/A N/A $ 0.0557 $ 0.0294
(1) Supplemental Information
on the Ratio of Expenses to
Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.59%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class
April 10, Year
1996** to Ended
September 30, September 30,
1996 1997
<S> <C> <C>
Net Asset Value, Beginning of Period $ 24.31 $ 25.66
Income from Investment Operations
Net Investment Income 0.22 0.34
Net Realized and Unrealized Gain
(Loss) on Investments 1.24 8.17
Total from Investment Operations 1.46 8.51
Distributions
Net Investment Income (0.11) (0.35)
Realized Net Gain -- (4.40)
Total Distributions (0.11) (4.75)
Net Asset Value, End of Period $ 25.66 $ 29.42
Total Return 6.02% 38.12%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $113 $ 2,354
Ratio of Expenses to Average Net Assets (2) 0.75%* 0.80%
Ratio of Net Investment Income to Average Net Assets 1.83%* 1.12%
Portfolio Turnover Rate 67% 85%
Average Commission Rate ### $ 0.0557 $ 0.0294
(2) Supplemental Information on the
Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 1.28%
Ratio Including Expense Offsets 0.75%* 0.80%
</TABLE>
* Annualized
** Initial offering of Investment Class shares
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to
disclose the average commission rate per share it paid for security
transactions on which commissions were charged.
212
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP VALUE PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 12.84 $ 17.55 $ 17.67 $ 18.28 $ 19.64
Income from Investment Operations
Net Investment Income 0.18 0.16 0.19 0.18 0.15
Net Realized and Unrealized
Gain (Loss) on Investments 4.64 1.14 2.49 3.62 8.39
Total from Investment Operations 4.82 1.30 2.68 3.80 8.54
Distributions
Net Investment Income (0.11) (0.24) (0.14) (0.20) (0.11)
Realized Net Gain -- (0.94) (1.93) (2.24) (3.10)
Total Distributions (0.11) (1.18) (2.07) (2.44) (3.21)
Net Asset Value, End of Period $ 17.55 $ 17.67 $ 18.28 $ 19.64 $ 24.97
Total Return 37.72% 8.04% 18.39% 24.00% 49.81%
Ratios and Supplemental Data
Net Assets, End of
Period (Thousands) $175,029 $308,156 $430,368 $ 585,457 $ 897,396
Ratio of Expenses to
Average Net Assets (1) 0.88% 0.88% 0.87% 0.86% 0.86%
Ratio of Net Investment
Income to Average Net Assets 1.33% 0.91% 1.20% 0.99% 0.70%
Portfolio Turnover Rate 93% 162% 119% 145% 107%
Average Commission Rate ### N/A N/A N/A $ 0.0498 $ 0.0480
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.87% 0.86% 0.86%
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to
disclose the average commission rate per share it paid for security
transactions on which commissions were charged.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 11.03 $ 13.18 $ 14.52 $ 12.51 $ 13.24
Income from Investment Operations
Net Investment Income 0.21 0.12 0.19 0.31 0.25
Net Realized and Unrealized
Gain (Loss) on Investments 2.14 1.63 (0.75) 0.77 2.71
Total from Investment Operations 2.35 1.75 (0.56) 1.08 2.96
Distributions
Net Investment Income (0.20) (0.16) -- (0.29) (0.26)
Realized Net Gain -- (0.25) (1.35) (0.06) (0.27)
In Excess of Realized Net Gain -- -- (0.10) -- --
Total Distributions (0.20) (0.41) (1.45) (0.35) (0.53)
Net Asset Value, End
of Period $ 13.18 $ 14.52 $ 12.51 $ 13.24 $ 15.67
</TABLE>
213
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Total Return 21.64% 13.33% (3.36%) 8.87% 23.16%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $891,675 $1,132,867 $1,160,986 $635,706 $649,755
Ratio of Expenses to
Average Net Assets (1) 0.66% 0.64% 0.70% 0.69% 0.66%
Ratio of Net Investment
Income to Average Net Assets 1.23% 0.89% 1.90% 1.88% 1.81%
Portfolio Turnover Rate 43% 69% 112% 78% 62%
Average Commission Rate ### N/A N/A N/A $0.0093 $0.0035
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense OffsetsN/A N/A 0.66% 0.65% 0.63%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class
April 10, Year
1996** to Ended
September 30, September 30,
1996 1997++
<S> <C> <C>
Net Asset Value, Beginning
of Period $ 13.02 $ 13.23
Income from Investment Operations
Net Investment Income 0.09 0.23
Net Realized and Unrealized Gain (Loss)
on Investments 0.12 2.69
Total from Investment Operations 0.21 2.92
Distributions
Net Investment Income -- (0.25)
Realized Net Gain -- (0.27)
Total Distributions -- (0.52)
Net Asset Value, End of Period $ 13.23 $ 15.63
Total Return 1.61% 22.85%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 235 $ 631
Ratio of Expenses to Average Net Assets (2) 0.81%* 0.89%
Ratio of Net Investment Income to Average Net Assets 1.81%* 1.60%
Portfolio Turnover Rate 78% 62%
Average Commission Rate ### $0.0093 $0.0035
(2) Supplemental Information on the Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 6.83%
Ratio Including Expense Offsets 0.77%* 0.86%
* Annualized
** Initial offering of Investment Class shares
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on
average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
</TABLE>
214
<PAGE>
<TABLE>
<CAPTION>
MID CAP GROWTH PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 14.51 $ 18.56 $ 16.29 $ 18.60 $ 20.53
Income from Investment Operations
Net Investment Income (Loss) 0.01 0.02 0.03 0.01 (0.01)
Net Realized and Unrealized
Gain (Loss) on Investments 4.80 (0.58) 4.21 4.70 4.75
Total from Investment Operations 4.81 (0.56) 4.24 4.71 4.74
Distributions
Net Investment Income -- (0.01) (0.03) (0.03) --
Realized Net Gain (0.76) (1.70) (1.90) (2.75) (3.43)
Total Distributions (0.76) (1.71) (1.93) (2.78) (3.43)
Net Asset Value, End of Period $ 18.56 $ 16.29 $ 18.60 $ 20.53 $ 21.84
Total Return 33.92% (3.28%) 30.56% 28.81% 28.05%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $309,459 $302,995 $373,547 $403,281 $446,963
Ratio of Expenses to Average
Net Assets (1) 0.59% 0.60% 0.61% 0.60% 0.63%
Ratio of Net Investment Income
to Average Net Assets 0.07% 0.12% 0.21% 0.04% (0.07%)
Portfolio Turnover Rate 69% 55% 129% 141% 134%
Average Commission Rate ### N/A N/A N/A $ 0.0491 $ 0.0514
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Class
January 31,
1997** to
September 30
1997
<S> <C>
Net Asset Value, Beginning of Period $ 17.04
Income from Investment Operations
Net Investment Income (Loss) (0.02)
Net Realized and Unrealized Gain (Loss) on Investments 4.79
Total from Investment Operations 4.77
Net Asset Value, End of Period $ 21.81
Total Return 27.99%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 1,200
Ratio of Expenses to Average Net Assets (2) 0.88%*
Ratio of Net Investment Income to Average Net Assets (0.41%)*
Portfolio Turnover Rate 134%
Average Commission Rate ### $0.0514
(2) Supplemental Information on the Ratio of Expenses to Average Net Assets:
Ratio Including Expense Offsets 0.86%*
* Annualized
** Initial offering of Adviser Class shares
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a fund is required to
disclose the average commission rate per share it paid for security
transactions on which commissions were charged.
</TABLE>
215
<PAGE>
<TABLE>
<CAPTION>
MID CAP VALUE PORTFOLIO Institutional Class
December 30,
1994** to
September 30, Year Ended September 30,
1995 1996 1997++
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $ 13.45 $ 14.49
Income from Investment Operations
Net Investment Income 0.55^ 0.11 0.05
Net Realized and Unrealized Gain (Loss)
on Investments 2.90 2.52 8.37
Total from Investment Operations 3.45 2.63 8.42
Distributions
Net Investment Income -- (0.55) (0.10)
Realized Net Gain -- (1.04) (1.01)
Total Distributions -- (1.59) (1.11)
Net Asset Value, End of Period $ 13.45 $ 14.49 $ 21.80
Total Return 34.50% 22.30% 61.40%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $ 4,507 $ 50,449 $220,260
Ratio of Expenses to Average
Net Assets (1) 0.93%* 0.88% 0.90%
Ratio of Net Investment Income
to Average Net Assets 10.13%*^ 1.61% 0.28%
Portfolio Turnover Rate 639%^ 377% 184%
Average Commission Rate ### N/A $0.0462 $ 0.0467
(1) Supplemental Information on
the Ratio of Expenses to
Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver 2.13%* 0.18% 0.02%
Ratio Including Expense Offsets 0.88%* 0.88% 0.88%
</TABLE>
** Commencement of Operations
^ 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.
<PAGE>
<TABLE>
<CAPTION>
Investment Class
May 10 Year
1996** to Ended
September 30, September 30,
1996 1997++
<S> <C> <C>
Net Asset Value, Beginning of Period $13.77 $14.48
Income from Investment Operations
Net Investment Income 0.04 0.01
Net Realized and Unrealized Gain (Loss)
on Investments 0.67 8.36
Total from Investment Operations 0.71 8.37
Distributions
Net Investment Income -- (0.09)
Realized Net Gain -- (1.01)
Total Distributions -- (1.10)
Net Asset Value, End of Period $ 14.48 $ 21.75
Total Return 5.16% 61.05%
</TABLE>
216
<PAGE>
<TABLE>
<CAPTION>
Investment Class
May 10 Year
1996** to Ended
September 30, September 30,
1996 1997++
<S> <C> <C>
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 127 $ 1,238
Ratio of Expenses to Average Net Assets (2) 1.03%* 1.09%
Ratio of Net Investment Income to Average
Net Assets 0.86%* 0.04%
Portfolio Turnover Rate 377% 184%
Average Commission Rate ### $0.0462 $0.0467
(2) Supplemental Information on the
Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.14%* 4.60%
Ratio Including Expense Offsets 1.03%* 1.07%
*** Initial offering of Investment Class shares
* Annualized
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
++ Per share amounts for the year ended September 30, 1997, are based on
average shares outstanding.
</TABLE>
217
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
February 28,
1995** to
September 30, Year Ended September 30,
1995 1996 1997++
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.00 $ 11.63 $ 11.52
Income from Investment Operations
Net Investment Income 0.10 0.19 0.16
Net Realized and Unrealized Gain
(Loss) on Investments1.53 0.45 1.73
Total from Investment Operations 1.63 0.64 1.89
Distributions
Net Investment Income -- (0.17) (0.20)
Realized Net Gain -- (0.58) (0.80)
Total Distributions -- (0.75) (1.00)
Net Asset Value, End of Period $ 11.63 $ 11.52 $ 12.41
Total Return 16.30% 6.21% 18.08%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $42,459 $32,984 $22,808
Ratio of Expenses to Average
Net Assets (1) 1.18%* 1.18% 1.18%
Ratio of Net Investment Income
to Average Net Assets 2.04%* 1.62% 1.30%
Portfolio Turnover Rate 63% 108% 64%
Average Commission Rate ### N/A $0.0014 $0.0019
(1) Supplemental Information on
the Ratio of Expenses to Average
Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver 0.29%* 0.11% 0.10%
Ratio Including Expense Offsets 1.18%* 1.18% N/A
</TABLE>
* Annualized
** Commencement of Operations.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
<PAGE>
<TABLE>
<CAPTION>
FIXED INCOME PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 12.67 $ 12.86 $ 10.93 $ 11.82 $ 11.83
Income from Investment Operations
Net Investment Income 0.88 0.77 0.80 0.78 0.80
Net Realized and Unrealized
Gain (Loss) on Investments 0.75 (1.28) 0.69 0.08 0.50
Total from Investment Operations 1.63 (0.51) 1.49 0.86 1.30
Distributions
Net Investment Income (0.83) (0.82) (0.60) (0.79) (0.78)
Realized Net Gain (0.61) (0.47) -- (0.06) (0.13)
In Excess of Realized Net Gain -- (0.13) -- -- --
Total Distributions (1.44) (1.42) (0.60) (0.85) (0.91)
Net Asset Value, End of Period $ 12.86 $ 10.93 $ 11.82 $ 11.83 $ 12.22
Total Return 14.26% (4.43%) 14.19% 7.63% 11.47%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $909,738 $1,194,957 $1,487,409 $1,790,146 $3,219,987
</TABLE>
218
<PAGE>
<TABLE>
<CAPTION>
FIXED INCOME PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average
Net Assets (1) 0.47% 0.49% 0.49% 0.48% 0.49%
Ratio of Net Investment
Income to Average Net Assets 7.06% 6.79% 7.28% 6.77% 6.73%
Portfolio Turnover Rate 144% 100% 140% 162% 179%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense
Offsets N/A N/A 0.48% 0.48% 0.48%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
October 15, November 1,
1996** to 1996*** to
September 30, September 30,
1997++ 1997++
<S> <C> <C>
Net Asset Value, Beginning of Period $11.80 $ 12.04
Income from Investment Operations
Net Investment Income 0.75 0.70
Net Realized and Unrealized Gain (Loss)
on Investments 0.40 0.20
Total from Investment Operations 1.15 0.90
Distributions
Net Investment Income (0.60) (0.59)
Realized Net Gain (0.13) (0.13)
Total Distributions (0.73) (0.72)
Net Asset Value, End of Period $12.22 $12.22
Total Return 10.07% 7.79%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $9,527 $76,683
Ratio of Expenses to Average Net Assets (2) 0.66%* 0.77%*
Ratio of Net Investment Income to
Average Net Assets 6.57%* 6.50%*
Portfolio Turnover Rate179% 179%
(2) Supplemental Information on the
Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.12%* 0.01%*
Ratio Including Expense Offsets 0.65%* 0.76%*
</TABLE>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on
average shares outstanding.
219
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC FIXED INCOME PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 11.80 $ 11.99 $ 9.87 $ 11.03 $ 10.89
Income from Investment Operations
Net Investment Income 0.84 0.94 0.52 0.56 0.74
Net Realized and Unrealized
Gain (Loss) on Investments 0.66 (1.23) 0.87 (0.09) 0.33
Total from Investment Operations 1.50 (0.29) 1.39 0.47 1.07
Distributions
Net Investment Income (0.78) (0.95) (0.23) (0.57) (0.67)
Realized Net Gain (0.53) (0.73) -- -- (0.02)
In Excess of Realized Net Gain -- (0.15) -- (0.04) --
Total Distributions (1.31) (1.83) (0.23) (0.61) (0.69)
Net Asset Value, End of Period $ 11.99 $ 9.87 $ 11.03 $ 10.89 $ 11.27
Total Return 14.08% (2.87%) 14.33% 4.41% 10.20%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $ 90,350 $ 36,521 $36,147 $ 95,362 $ 96,954
Ratio of Expenses to
Average Net Assets (1) 0.50% 0.50% 0.51% 0.52% 0.51%
Ratio of Net Investment
Income to Average Net
Assets 7.15% 7.65% 6.80% 5.73% 6.48%
Portfolio Turnover Rate 96% 78% 313% 168% 217%
(1) Supplemental Information on
the Ratio of Expenses to
Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver N/A 0.03% 0.09% 0.01% 0.01%
Ratio Including Expense Offsets N/A N/A 0.50% 0.50% 0.50%
</TABLE>
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 8.58 $ 9.49 $ 8.97 $ 9.08 $ 9.32
Income from Investment Operations
Net Investment Income 0.73 0.75 0.90 0.88 0.86
Net Realized and Unrealized
Gain (Loss) on Investments 0.90 (0.42) 0.19 0.28 0.87
Total from Investment Operations 1.63 0.33 1.09 1.16 1.73
Distributions
Net Investment Income (0.72) (0.69) (0.85) (0.92) (0.87)
Realized Net Gain -- (0.16) (0.08) -- (0.03)
In Excess of Realized Net Gain -- -- (0.05) -- --
Total Distributions (0.72) (0.85) (0.98) (0.92) (0.90)
Net Asset Value, End of Period $ 9.49 $ 8.97 $ 9.08 $ 9.32 $ 10.15
Total Return 20.12% 3.57% 13.58% 13.83% 19.90%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $ 50,396 $ 182,969 $220,785 $289,810 $523,899
Ratio of Expenses to Average
Net Assets (1) 0.53% 0.50% 0.50% 0.49% 0.51%
</TABLE>
220
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Ratio of Net Investment
Income to Average Net Assets 8.94% 9.01% 10.68% 10.04% 9.05%
Portfolio Turnover Rate 99% 112% 96% 115% 96%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver 0.09% N/A N/A N/A N/A
Ratio Including Expense Offsets N/A N/A 0.49% 0.48% 0.50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
May 21, Year January 31,
1996** to Ended 1997*** to
September 30, September 30, September 30,
1996 1997++ 1997++
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.06 $ 9.31 $ 9.39
Income from Investment Operations
Net Investment Income 0.31 0.84 0.56
Net Realized and Unrealized Gain
(Loss) on Investments 0.16 0.88 0.59
Total from Investment Operations 0.47 1.72 1.15
Distributions
Net Investment Income (0.22) (0.84) (0.39)
Realized Net Gain -- (0.03) --
Total Distributions (0.22) (0.87) (0.39)
Net Asset Value, End of Period $ 9.31 $ 10.16 $10.15
Total Return 5.34% 19.77% 12.63%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $5,139 $10,916 $4,327
Ratio of Expenses to Average
Net Assets (2) 0.62%* 0.70% 0.78%*
Ratio of Net Investment Income
to Average Net Assets 11.06%* 8.84% 8.68%*
Portfolio Turnover Rate 115% 96% 96%
(2) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.22% N/A
Ratio Including Expense Offsets 0.61%* 0.69% 0.76%*
</TABLE>
* Annualized
** Initial offering of Investment Class shares.
*** Initial offering of Adviser Class shares.
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on
average shares outstanding.
221
<PAGE>
<TABLE>
<CAPTION>
CASH RESERVES PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.000 $1.000 $1.000 $ 1.000 $ 1.000
Income from Investment Operations
Net Investment Income 0.028 0.034 0.055 0.052 0.052
Net Realized and Unrealized
Gain (Loss) on Investments -- -- -- -- --
Total from Investment Operations 0.028 0.034 0.055 0.052 0.052
Distributions
Net Investment Income (0.028) (0.034) (0.055) (0.052) (0.052)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 2.81% 3.40% 5.57% 5.35% 5.32%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $10,717 $37,933 $44,624 $78,497 $98,464
Ratio of Expenses to Average
Net Assets (1) 0.32% 0.32% 0.33% 0.33% 0.33%
Ratio of Net Investment Income
to Average Net Assets 2.78% 3.70% 5.45% 5.19% 5.20%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction of Ratio due to
Expense Reimbursement/Waiver 0.24% 0.14% 0.11% 0.09% 0.07%
Ratio Including Expense Offsets N/A N/A 0.32% 0.32% 0.32%
FIXED INCOME PORTFOLIO II Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
Net Asset Value, Beginning
of Period $11.67 $ 11.97 $ 10.42 $ 11.33 $ 11.23
Income from Investment Operations
Net Investment Income 0.69 0.63 0.71 0.70 0.74
Net Realized and Unrealized
Gain (Loss) on Investments 0.77 (1.16) 0.71 (0.03) 0.39
Total from Investment Operations 1.46 (0.53) 1.42 0.67 1.13
Distributions
Net Investment Income (0.61) (0.67) (0.51) (0.66) (0.79)
Realized Net Gain (0.55) (0.21) -- (0.08) (0.11)
In Excess of Realized Net Gain -- (0.14) -- (0.03) --
Total Distributions (1.16) (1.02) (0.51) (0.77) (0.90)
Net Asset Value, End of Period $ 11.97 $ 10.42 $ 11.33 $ 11.23 $ 11.46
Total Return 13.53% (4.76%) 14.13% 6.12% 10.58%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $94,836 $129,902 $176,945 $191,740 $226,662
Ratio of Expenses to Average
Net Assets (1) 0.51% 0.51% 0.51% 0.50% 0.50%
Ratio of Net Investment Income
to Average Net Assets 6.17% 6.07% 6.75% 6.06% 6.54%
Portfolio Turnover Rate 101% 137% 153% 165% 182%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.49% 0.49% 0.49%
</TABLE>
222
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE-BACKED SECURITIES PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $10.44 $10.95 $ 9.95 $ 10.49 $10.42
Income from Investment Operations
Net Investment Income 0.63 0.52 0.72 0.68 0.91
Net Realized and Unrealized
Gain (Loss) on Investments 0.48 (0.83) 0.47 (0.07) 0.16
Total from Investment Operations 1.11 (0.31) 1.19 0.61 1.07
Distributions
Net Investment Income (0.60) (0.45) (0.65) (0.68) (0.73)
Realized Net Gain -- (0.21) -- -- --
In Excess of Realized Net Gain -- (0.03) -- -- --
Total Distributions (0.60) (0.69) (0.65) (0.68) (0.73)
Net Asset Value, End of Period $ 10.95 $ 9.95 $ 10.49 $ 10.42 $ 10.76
Total Return 11.03% (2.95%) 12.52% 6.10% 10.70%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $50,249 $119,518 $49,766 $50,925 $38,085
Ratio of Expenses to
Average Net Assets (1) 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of Net Investment
Income to Average Net Assets 6.92% 5.30% 6.35% 6.46% 7.79%
Portfolio Turnover Rate 93% 220% 107% 116% 164%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due
to Expense
Reimbursement/Waiver 0.06% 0.01% 0.01% 0.04% 0.04%
Ratio Including Expense
Offsets N/A N/A 0.50% 0.50% 0.50%
LIMITED DURATION PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
Net Asset Value, Beginning
of Period $ 10.58 $ 10.72 $ 10.19 $ 10.41 $10.38
Income from Investment Operations
Net Investment Income 0.32 0.56 0.56 0.58 0.62
Net Realized and Unrealized
Gain (Loss) on Investments 0.22 (0.52) 0.22 (0.03) 0.08
Total from Investment Operations 0.54 0.04 0.78 0.55 0.70
Distributions
Net Investment Income (0.32) (0.51) (0.55) (0.58) (0.59)
Realized Net Gain (0.08) (0.04) -- -- --
In Excess of Realized Net Gain -- (0.02) (0.01) -- --
Total Distributions (0.40) (0.57) (0.56) (0.58) (0.59)
Net Asset Value, End of Period $ 10.72 $ 10.19 $ 10.41 $ 10.38 $ 10.49
Total Return 5.33% 0.40% 7.95% 5.47% 6.98%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $128,991 $62,775 $100,186 $123,227 $155,570
Ratio of Expenses to Average
Net Assets (1) 0.42% 0.41% 0.43% 0.43% 0.43%
Ratio of Net Investment Income
to Average Net Assets 3.92% 4.16% 5.96% 5.65% 6.15%
Portfolio Turnover Rate 217% 192% 119% 174% 130%
</TABLE>
223
<PAGE>
<TABLE>
<CAPTION>
LIMITED DURATION PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due
to Expense Reimbursement/Waiver 0.03% N/A 0.02% N/A 0.00%#
Ratio Including Expense Offsets N/A N/A 0.42% 0.42% 0.42%
SPECIAL PURPOSE FIXED INCOME PORTFOLIO Institutional Class
Year Ended September 30,
1993 1994 1995 1996 1997++
Net Asset Value, Beginning
of Period $12.72 $13.40 $11.52 $ 12.53 $ 12.26
Income from Investment Operations
Net Investment Income 0.88 0.80 0.91 0.83 0.85
Net Realized and Unrealized
Gain (Loss) on Investments 0.92 (1.28) 0.75 0.08 0.52
Total from Investment Operations 1.80 (0.48) 1.66 0.91 1.37
Distributions
Net Investment Income (0.82) (0.78) (0.65) (0.88) (0.87)
Realized Net Gain (0.30) (0.53) -- (0.30) (0.18)
In Excess of Realized Net Gain -- (0.09) -- -- --
Total Distributions (1.12) (1.40) (0.65) (1.18) (1.05)
Net Asset Value, End of Period $ 13.40 $ 11.52 $ 12.53 $ 12.26 $ 12.58
Total Return 15.19% (4.00%) 14.97% 7.74% 11.78%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $300,185 $384,731 $390,258 $447,646 $492,784
Ratio of Expenses to
Average Net Assets (1) 0.48% 0.50% 0.49% 0.49% 0.49%
Ratio of Net Investment
Income to Average Net Assets 6.84% 6.66% 7.33% 6.75% 6.88%
Portfolio Turnover Rate 124% 100% 143% 151% 198%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense
Offsets N/A N/A 0.48% 0.49% 0.48%
Investment Class
April 10, Year
1996** Ended
September 30, September 30,
1996 1997++
Net Asset Value, Beginning of Period $ 11.89 $ 12.24
Income from Investment Operations
Net Investment Income 0.27 0.82
Net Realized and Unrealized Gain
(Loss) on Investments 0.23 0.53
Total from Investment Operations 0.50 1.35
Distributions
Net Investment Income (0.15) (0.85)
Realized Net Gain -- (0.18)
Total Distributions (0.15) (1.03)
Net Asset Value, End of Period $ 12.24 $ 12.56
Total Return 4.25% 11.62%
</TABLE>
224
<PAGE>
<TABLE>
<CAPTION>
Investment Class
April 10, Year
1996** Ended
September 30, September 30,
1996 1997++
<S> <C> <C>
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 782 $ 1,261
Ratio of Expenses to Average Net Assets (2) 0.63%* 0.67%
Ratio of Net Investment Income to
Average Net Assets 6.32%* 6.72%
Portfolio Turnover Rate 151% 198%
(2) Supplemental Information on
the Ratio of Expenses to Average
Net Assets:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 2.43%
Ratio Including Expense Offsets 0.63%* 0.66%
* Annualized
** Initial Offering of Investment Class Shares.
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
++ Per share amounts for the year ended September 30, 1997, are based on average
shares outstanding.
MUNICIPAL PORTFOLIO
October 1,
1992** to Institutional Class
September 30, Year Ended September 30,
1993 1994 1995 1996 1997++
Net Asset Value, Beginning
of Period $ 10.00 $ 11.15 $ 10.04 $ 10.75 $11.23
Income from Investment Operations
Net Investment Income 0.37 0.51 0.59 0.51 0.53
Net Realized and Unrealized Gain
(Loss) on Investments 1.04 (1.01) 0.71 0.49 0.40
Total from Investment Operations 1.41 (0.50) 1.30 1.00 0.93
Distributions
Net Investment Income (0.26) (0.54) (0.59) (0.52) (0.52)
In Excess of Net Investment Income -- (0.07) -- -- --
Total Distributions (0.26) (0.61) (0.59) (0.52) (0.52)
Net Asset Value, End of Period $ 11.15 $ 10.04 $ 10.75 $ 11.23 $ 11.64
Total Return 14.20% (4.64%) 13.37% 9.46% 8.47%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $26,914 $38,549 $36,040 $54,536 $75,120
Ratio of Expenses to Average
Net Assets (1) 0.50%* 0.50% 0.50% 0.51% 0.51%
Ratio of Net Investment
Income to Average Net Assets 4.65%* 4.98% 5.64% 4.66% 4.70%
Portfolio Turnover Rate 66% 34% 58% 78% 54%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due
to Expense
Reimbursement/Waiver 0.20%* 0.06% 0.09% 0.09% 0.05%
Ratio including Expense
Offsets N/A N/A 0.50% 0.50% 0.50%
* Annualized.
** Commencement of Operations.
+ Reflects a 2.5 for 1 share split effective August 13, 1993.
</TABLE>
225
<PAGE>
<TABLE>
<CAPTION>
PA MUNICIPAL PORTFOLIO
October 1,
1992** to Institutional Class
September 30, Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 11.26 $ 10.13 $ 10.91 $ 11.37
Income from Investment Operations
Net Investment Income 0.39 0.56 0.58 0.51 0.55
Net Realized and Unrealized
Gain (Loss) on Investments 1.17 (1.00) 0.77 0.46 0.34
Total from Investment Operations 1.56 (0.44) 1.35 0.97 0.89
Distributions
Net Investment Income (0.30) (0.64) (0.57) (0.51) (0.55)
In Excess of Realized Net Gain -- (0.05) -- -- --
Total Distributions (0.30) (0.69) (0.57) (0.51) (0.55)
Net Asset Value, End of Period $ 11.26 $ 10.13 $ 10.91 $ 11.37 $ 11.71
Total Return 15.81% (4.08%) 13.74% 9.03% 8.01%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $15,633 $23,515 $15,734 $28,488 $27,461
Ratio of Expenses to Average
Net Assets (1) 0.50%* 0.50% 0.50% 0.51% 0.51%
Ratio of Net Investment Income
to Average Net Assets 4.74%* 5.39% 5.56% 4.58% 4.74%
Portfolio Turnover Rate 94% 69% 57% 51% 64%
(1) Supplemental Information on the
Ratio of Expenses to Average
Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.25%* 0.09% 0.19% 0.15% 0.09%
Ratio Including Expense Offsets N/A N/A N/A 0.50% 0.50%
* Annualized
** Commencement of Operations.
+ Reflects a 2.5 for 1 share split effective August 13, 1993
GLOBAL FIXED INCOME PORTFOLIO
April 30,
1993** to Institutional Class
September 30, Year Ended September 30,
1993 1994 1995 1996 1997++
Net Asset Value, Beginning
of Period $ 10.00 $ 10.67 $ 10.20 $ 11.05 $ 11.01
Income from Investment Operations
Net Investment Income 0.13 0.58 0.71 0.63 0.60
Net Realized and Unrealized
Gain (Loss) on Investments 0.61 (0.61) 0.81 0.09 (0.22)
Total from Investment Operations 0.74 (0.03) 1.52 0.72 0.38
Distributions
Net Investment Income (0.07) (0.41) (0.67) (0.71) (0.59)
Realized Net Gain -- (0.03) -- (0.05) (0.16)
Total Distributions (0.07) (0.44) (0.67) (0.76) (0.75)
Net Asset Value, End of Period $ 10.67 $ 10.20 $ 11.05 $ 11.01 $ 10.64
Total Return 7.43% (0.29%) 15.54% 6.83% 3.53%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $53,164 $43,066 $55,147 $67,282 $77,493
Ratio of Expenses to Average
Net Assets (1) 0.58%* 0.57% 0.58% 0.60% 0.57%
</TABLE>
226
<PAGE>
<TABLE>
<CAPTION>
GLOBAL FIXED INCOME PORTFOLIO
April 30,
1993** to Institutional Class
September 30, Year Ended September 30,
1993 1994 1995 1996 1997++
<S> <C> <C> <C> <C> <C>
Ratio of Net Investment
Income to Average Net Assets 5.08%* 5.48% 6.34% 5.25% 5.65%
Portfolio Turnover Rate 30% 117% 118% 133% 137%
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver 0.18%* N/A N/A N/A N/A
Ratio Including Expense Offsets N/A N/A 0.56% 0.58% 0.57%
* Annualized
** Commencement of Operations.
++ Per share amounts for the year ended September 30, 1997, are based on average
shares outstanding.
INTERNATIONAL FIXED INCOME PORTFOLIO
April 29,
1994** to Institutional Class
September 30, Year Ended September 30,
1994 1995 1996 1997
Net Asset Value, Beginning
of Period $ 10.00 $10.05 $ 11.01 $ 10.77
Income from Investment
Operations
Net Investment Income 0.21 0.67 0.52 0.50
Net Realized and Unrealized
Gain (Loss) on Investments (0.11) 0.92 0.12 (0.44)
Total from Investment Operations 0.10 1.59 0.64 0.06
Distributions
Net Investment Income (0.05) (0.63) (0.80) (0.38)
Realized Net Gain -- -- (0.08) (0.26)
Total Distributions (0.05) (0.63) (0.88) (0.64)
Net Asset Value, End of
Period $ 10.05 $ 11.01 $ 10.77 $ 10.19
Total Return 1.01% 16.36% 6.13% 0.44%
Ratios and Supplemental Data
Net Assets, End of
Period (Thousands) $ 66,879 $127,882 $143,137 $152,752
Ratio of Expenses to
Average Net Assets (1) 0.60%* 0.54% 0.53% 0.53%
Ratio of Net Investment
Income to Average
Net Assets 5.83%* 6.35% 5.39% 5.27%
Portfolio Turnover Rate 31% 140% 124% 107%
(1) Supplemental Information
on the Ratio of
Expenses to Average
Net Assets:
Reduction in Ratio due
to Expense
Reimbursement/Waiver 0.11%* N/A N/A N/A
Ratio Including
Expense Offsets N/A 0.54% 0.53% 0.53%
* Annualized
** Commencement of Operations.
</TABLE>
227
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE DURATION PORTFOLIO
October 3, Institutional Class
1994** to Year Ended
September 30, September 30,
1995 1996 1997++
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $10.68 $10.28
Income from Investment Operations
Net Investment Income 0.69 0.60 0.61
Net Realized and Unrealized Gain
(Loss) on Investments 0.42 0.03 0.27
Total from Investment Operations 1.11 0.63 0.88
Distributions
Net Investment Income (0.43) (0.65) (0.53)
Realized Net Gain -- (0.38) (0.15)
Total Distributions (0.43) (1.03) (0.68)
Net Asset Value, End of Period $ 10.68 $10.28 $10.48
Total Return 11.39% 6.27% 8.93%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $19,237 $12,017 $72,119
Ratio of Expenses to Average
Net Assets (1) 0.52%* 0.56% 0.55%
Ratio of Net Investment
Income to Average Net Assets 6.56%* 6.17% 5.93%
Portfolio Turnover Rate 168% 251% 204%
(1) Supplemental Information on
the Ratio of Expenses to
Average Net Assets:
Reduction in Ratio due to
Expense Reimbursement/Waiver 0.08%* 0.13% 0.05%
Ratio Including Expense Offsets 0.52%* 0.52% 0.52%
* Annualized
** Commencement of Operations.
++ Per share amounts for the year ended September 30, 1997, are based on average
shares outstanding.
</TABLE>
228
<PAGE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
December 31,
1992** to Institutional Class
September 30, Year Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 11.06 $ 11.84 $ 11.28 $ 13.06 $ 13.81
Income from Investment
Operations
Net Investment Income 0.25 0.47 0.54 0.53 0.51
Net Realized and Unrealized
Gain (Loss) on Investments 0.66 (0.45) 1.78 1.15 2.91
Total from Investment
Operations 0.91 0.02 2.32 1.68 3.42
Distributions
Net Investment Income (0.13) (0.43) (0.47) (0.50) (0.54)
Realized Net Gain -- (0.15) (0.07) (0.43) (1.39)
Total Distributions (0.13) (0.58) (0.54) (0.93) (1.93)
Net Asset Value, End
of Period $ 11.84 $ 11.28 $ 13.06 $ 13.81 $ 15.30
Total Return 8.31% 0.19% 21.37% 13.47% 27.44%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $291,762 $309,596 $334,630 $300,868 $343,284
Ratio of Expenses to Average
Net Assets (1) 0.58%* 0.58% 0.58% 0.57% 0.58%
Ratio of Net Investment
Income to Average Net Assets 3.99%* 4.06% 4.55% 3.85% 3.56%
Portfolio Turnover Rate 62% 75% 95% 110% 145%
Average Commission Rate ### N/A N/A N/A $ 0.0521 $ 0.0578
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Ratio Including Expense Offsets N/A N/A 0.57% 0.57% 0.56%
** Commencement of Operations
Investment Adviser
Class Class
April 4, November 1,
1997*** to 1996**** to
September 30, September 30,
1997 1997
Net Asset Value, Beginning of Period $ 13.11 $ 14.05
Income from Investment Operations
Net Investment Income 0.30 0.42
Net Realized and Unrealized Gain (Loss)
on Investments 2.09 2.60
Total from Investment Operations 2.39 3.02
Distributions
Net Investment Income (0.20) (0.38)
Realized Net Gain -- (1.39)
Total Distributions (0.20) (1.77)
Net Asset Value, End of Period $ 15.30 $ 15.30
Total Return 18.40% 23.82%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 3,943 $ 27,366
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.85%*
Ratio of Net Investment Income
to Average Net Assets 3.32%* 3.24%*
</TABLE>
229
<PAGE>
<TABLE>
<CAPTION>
Investment Adviser
Class Class
April 4, November 1,
1997*** to 1996**** to
September 30, September 30,
1997 1997
<S> <C> <C>
Portfolio Turnover Rate 145% 145%
Average Commission Rate ### $0.0578 $ 0.0578
(2) Supplemental Information on the
Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.03%*
Ratio Including Expense Offsets 0.70%* 0.84%*
*** Initial offering of Investment Class shares **** Initial offering of Adviser
Class shares * Annualized + Reflects a 2.5 for 1 split effective August 13,
1993.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
</TABLE>
230
<PAGE>
<TABLE>
<CAPTION>
MULTI-ASSET-CLASS PORTFOLIO
July 29,
1994** to Institutional Class
September 30, Year Ended September 30,
1994 1995 1996 1997++
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.00 $ 9.97 $ 11.34 $ 12.28
Income from Investment
Operations
Net Investment Income 0.07 0.44 0.46 0.38
Net Realized and Unrealized
Gain (Loss) on Investments (0.10) 1.33 1.05 2.57
Total from Investment
Operations (0.03) 1.77 1.51 2.95
Distributions
Net Investment Income -- (0.40) (0.42) (0.51)
Realized Net Gain -- -- (0.15) (1.08)
Total Distributions -- (0.40) (0.57) (1.59)
Net Asset Value, End
of Period $ 9.97 $ 11.34 $ 12.28 $ 13.64
Total Return (0.30%) 18.28% 13.75% 26.50%
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $51,877 $ 96,839 $129,558 $173,155
Ratio of Expenses to
Average Net Assets (1) 0.58%* 0.58% 0.58% 0.74%
Ratio of Net Investment
Income to Average Net
Assets 4.39%* 4.56% 3.82% 3.07%
Portfolio Turnover Rate 20% 112% 122% 141%
Average Commission Rate ### N/A N/A $0.0225 $0.0114
(1) Supplemental Information
on the Ratio of Expenses
to Average Net Assets:
Reduction in Ratio due
to Expense
Reimbursement/Waiver 0.26%* 0.14% 0.08% 0.08%
Ratio Including Expense
Offsets N/A 0.58% 0.58% 0.74%
** Commencement of Operations
</TABLE>
231
<PAGE>
<TABLE>
<CAPTION>
Investment Class
June 10, Year
1996*** to Ended
September 30, September 30,
1996 1997++
<S> <C> <C>
Net Asset Value, Beginning of Period $ 12.17 $ 12.27
Income from Investment Operations
Net Investment Income 0.13 0.36
Net Realized and Unrealized
Gain (Loss) on Investments 0.08 2.57
Total from Investment Operations 0.21 2.93
Distributions
Net Investment Income (0.11) (0.49)
Realized Net Gain -- (1.08)
Total Distributions (0.11) (1.57)
Net Asset Value, End of Period $ 12.27 $ 13.63
Total Return 1.75% 26.32%
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $ 3,074 $ 5,075
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.96%
Ratio of Net Investment Income
to Average Net Assets 3.68%* 2.85%
Portfolio Turnover Rate 122% 141%
Average Commission Rate ### $ 0.0225 $ 0.0114
(2) Supplemental Information on
the Ratio of Expenses to Average Net Assets:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.08%* 0.55%
Ratio Including Expense Offsets0.73%* 0.96%
*** Initial offering of Investment Class shares.
* Annualized.
++ Per share amount for the year ended September 30, 1997, are based on average
shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
</TABLE>
232
<PAGE>
Notes to Financial Statements
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940 as
an open-end investment company. At September 30, 1997, the Fund was comprised of
twenty-four active portfolios (each referred to as a "Portfolio"). The Fund may
offer up to three different classes of shares for certain
Portfolios--Institutional Class shares, Investment Class shares and Adviser
Class shares.
The Fixed Income and Balanced Portfolios began offering Investment Class shares
on October 15, 1996 and April 4, 1997, respectively. The Fixed Income and
Balanced Portfolios began offering Adviser Class shares on November 7, 1996 and
November 1, 1996, respectively, and the Mid Cap Growth and High Yield Portfolios
each began offering Adviser Class shares on January 31, 1997. Each class of
shares has identical voting rights (except shareholders of a Class have
exclusive voting rights regarding any matter relating solely to that Class of
shares), dividend, liquidation and other rights, except each class bears
different distribution fees as described in Note D. The financial statements for
the Advisory Foreign Fixed Income and Advisory Mortgage Portfolios are presented
separately.
A. Significant Accounting Policies. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
1. Security Valuation: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges are
valued at the latest quoted sales prices. Bonds, including municipal bonds,
and other fixed income securities are valued using brokers' quotations or on
the basis of prices, provided by a pricing service, which are based
primarily on institutional size trading in similar groups of securities.
Mortgage-backed securities issued by certain government-related
organizations are valued using brokers' quotations which are based on a
matrix system which considers such factors as other security prices, yields
and maturities. Securities in the Cash Reserves Portfolio, and other
Portfolios' short term securities, are valued using the amortized cost
method of valuation, which in the opinion of the Board of Trustees reflects
fair value. Securities for which no quotations are readily available
(including restricted securities) are valued at their fair value as
determined in good faith using methods approved by the Board of Trustees.
2. Federal Income Taxes: It is each Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
and tax-exempt income. Accordingly, no provision for Federal income taxes is
required in the financial statements.
3. Repurchase Agreements: Securities pledged as collateral for repurchase
agreements are held by the Portfolios' custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of the collateral is at least equal to the repurchase value in the
event of a default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral
may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into
a joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreement. This joint repurchase agreement is covered
by the same collateral requirements as discussed above.
233
<PAGE>
4. Futures: Futures contracts (secured by cash and securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as "variation margin") are accounted for as
unrealized appreciation (depreciation). When futures contracts are closed,
the difference between the opening value at the date of purchase and the
value at closing is recorded as realized gains or losses in the Statement of
Operations.
Futures contracts may be used by each Portfolio, except the Cash Reserves
Portfolio, in order to hedge against unfavorable changes in the value of
securities or to attempt to realize profits from the value of the underlying
securities.
Futures contracts involve market risk in excess of the amounts recognized in
the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of futures
contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that a Portfolio may not be able
to enter into a closing transaction because of an illiquid secondary market.
5. Swap Agreements: Each Portfolio, except the Cash Reserves Portfolio, may
enter into swap agreements to exchange the return generated by one
instrument for the return generated by another instrument. The following
summarizes swaps entered into by the Portfolios:
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments
to pay and receive interest based on a notional principal amount. Net
periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an adjustment to interest income.
Interest rate swaps are marked-to-market daily based upon quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations.
Total Return Swaps: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the
Portfolio will receive a payment from or make a payment to the counterparty,
respectively. Total return swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized gains or losses in the Statement of Operations. Periodic payments
received or made at the end of each measurement period, but prior to
termination, are recorded as realized gains or losses in the Statement of
Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Portfolio terminated its position in the agreement. Risks
may arise upon entering into these agreements from the potential inability
of the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received, if any, at
the date of the default.
234
<PAGE>
6. Interest Rate Floor and Cap Agreements: Each Portfolio, except the Cash
Reserves Portfolio, may hold or write interest rate floors or caps to
protect itself against fluctuation in interest rates. When a Portfolio
writes an interest rate floor, it agrees to make periodic interest payments
to the holder of the interest rate floor based on a notional principal
amount to the extent that a specified interest index falls below a specified
interest rate. When a Portfolio writes an interest rate cap, it agrees to
make periodic interest payments to the holder of the interest rate cap based
on a notional principal amount to the extent that a specified interest index
rises above a specified interest rate. Any premium received by a Portfolio
is recorded as a liability and is amortized to interest income over the term
of the agreement. Any premium paid by a Portfolio is recorded as an asset
and is accreted against interest income over the term of the agreement.
Interest rate caps and floors are marked-to-market daily based on quotations
from market makers and the change, if any, is recorded as unrealized
appreciation or depreciation in the Statement of Operations. Periodic
receipts or payments of interest, if any, are recorded in the interest
income account on the Statement of Operations. Realized gains or losses from
these agreements are disclosed in the Statement of Operations.
Because there is no organized market for these agreements, the value
reported in the Statement of Net Assets may differ from that which would be
realized in the event the Portfolio terminated its position in the
agreement. Entering into these agreements involves, to varying degrees,
elements of interest rate and market risk in excess of the amount recognized
in the Statement of Net Assets. Such risks involve the possibility that
there may be no liquid market for these agreements and that there may be
adverse changes in the interest rates or the index underlying these
transactions. Risks may arise upon entering into these agreements from the
potential inability of the counterparties to meet the terms of the
agreements and are generally limited to the amount of net interest payments
to be received.
7. Structured Investments: Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes
in foreign currencies, interest rates, commodities, indices, or other
underlying instruments. A Portfolio uses these securities to increase or
decrease its exposure to different underlying instruments and to gain
exposure to markets that might be difficult to invest in through
conventional securities. Structured investments may be more volatile than
their underlying instruments, but any loss is limited to the amount of the
original investment.
8. Delayed Delivery Commitments: Each Portfolio, except the Cash Reserves
Portfolio, may purchase or sell securities on a when- issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. Collateral consisting of liquid
securities or cash is maintained in an amount at least equal to these
commitments.
9. Purchased Options: Certain Portfolios may purchase call and put options on
their portfolio securities. A call option, upon payment of a premium, gives
the purchaser of the option the right to buy, and the seller the obligation
to sell, the underlying instrument at the exercise price. The purchase of a
call option might be intended to protect the Portfolio against an increase
in the price of the underlying instrument that it intends to purchase in the
future by fixing the price at which it may purchase the instrument. A put
option gives the purchaser, upon payment of a premium, the right to sell,
and the writer the obligation to buy, the instrument at the exercise price.
A Portfolio may purchase a put option to protect its holdings in the
underlying instrument, or a similar instrument, against a substantial
decline in the market value of such instrument by giving the Portfolio the
right to sell the instrument at the option exercise price. Possible losses
from purchased options cannot exceed the total amount invested.
235
<PAGE>
10. Foreign Exchange and Forward Currency Contracts: The books and records of
the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against
U.S. dollars quoted by a bank. Net realized gains (losses) on foreign
currency transactions represent net foreign exchange gains (losses) from
forward foreign currency contracts, disposition of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income and foreign withholding taxes recorded on the Portfolio's books and
the U.S. dollar equivalent of amounts actually received or paid.
A forward foreign currency contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio (except
the Domestic Fixed Income, Cash Reserves, Mortgage-Backed Securities, and
Limited Duration Portfolios) may enter into forward foreign currency
contracts to protect securities and related receivables and payables against
future changes in foreign exchange rates. Fluctuations in the value of such
contracts are recorded as unrealized appreciation or depreciation; realized
gains or losses, which are disclosed in the Statement of Operations, include
net gains or losses on contracts which have been terminated by settlements.
Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and are
generally limited to the amount of unrealized gain on the contract, if any,
at the date of default. Risks may also arise from unanticipated movements in
the value of the foreign currency relative to the U.S. dollar.
11. Dividends and Distributions to Shareholders: Dividends from net investment
income, if any, are declared and paid quarterly except for the Municipal and
PA Municipal Portfolios which are declared and paid monthly, Small Cap
Value, International Equity, Mid Cap Growth, Mid Cap Value, and Emerging
Markets Portfolios which are declared and paid annually, and Cash Reserves
Portfolio which are declared daily and paid monthly. Net realized capital
gains are distributed at least annually. The amount and character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing book and tax treatments in
the timing of the recognition of gains or losses on securities, forwards and
futures, including Post October Losses and permanent differences such as
gain (loss) on in-kind redemptions (Note I), foreign currency transactions
and gains on certain equity securities designated as issued by "passive
foreign investment companies".
Permanent book and tax differences relating to shareholder distributions may
result in reclassifications to undistributed net investment income (loss),
undistributed realized net gain (loss) and paid in capital.
12. Other: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Securities classified as Value and Mid Cap Growth in the
Equity, Balanced and Multi-Asset-Class Portfolios are those acquired on the
basis of measures of value and growth, respectively, deemed appropriate by
the Investment Adviser. Most expenses of the Fund can be directly attributed
to a particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios on the basis of their relative net assets.
Income, expenses (other than class specific expenses) and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the Financial Highlights.
B. Investment Advisory Fee. Under the terms of an Investment Advisory Agreement,
each Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the "Adviser"),
wholly owned by indirect subsidiaries of Morgan Stanley, Dean Witter, Discover &
Co., for investment advisory services performed at a fee calculated by applying
a quarterly rate based on an annual percentage rate to each Portfolio's average
daily net assets for the quarter. For the year ended September 30, 1997 the
investment advisory fees of each of the Portfolios were:
236
<PAGE>
<TABLE>
<CAPTION>
Annual Voluntary Expense Limitations
Investment at September 30, 1997
Advisory Institutional Investment Adviser
Portfolio Fee Class Class Class
<S> <C> <C> <C> <C>
Value 0.500% --% 0.80% 0.90%
Equity 0.500 -- 0.80 --
Small Cap Value 0.750 -- -- --
International Equity 0.500 -- -- --
Mid Cap Growth 0.500 -- -- --
Mid Cap Value 0.750 0.88 1.10 --
Emerging Markets 0.750 1.18 -- --
Fixed Income 0.375 -- -- --
Domestic Fixed Income 0.375 0.50 -- --
High Yield 0.375 -- 0.70 --
Cash Reserves 0.250 0.32 -- --
Fixed Income II 0.375 -- -- --
Mortgage-Backed Securities 0.375 0.50 -- --
Limited Duration 0.300 0.42 -- 0.70
Special Purpose Fixed Income 0.375 -- 0.68 --
Municipal 0.375 0.50 -- --
PA Municipal 0.375 0.50 -- --
Global Fixed Income 0.375 -- -- --
International Fixed Income 0.375 -- -- --
Intermediate Duration 0.375 0.52 -- --
Balanced 0.450 -- -- --
Multi-Asset-Class 0.650 0.78 1.05 --
</TABLE>
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios for certain expenses so that annual
operating expenses will not exceed voluntary expense limitations established for
each class of shares as presented in the table above.
C. Administration Fee. MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the agreement, MAS receives an annual fee,
accrued daily and payable monthly, of 0.08% of each Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services. CGFSC also received additional class specific administration
fees for the Investment Class shares and Adviser Class shares. For the year
ended September 30, 1997, CGFSC earned $183,000 and $35,000 in class specific
administration fees for the Investment Class shares and Adviser Class shares,
respectively.
D. Distributor. MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of Morgan Stanley Asset Management Holdings, Inc., is
the distributor for the Fund. MASDI is a limited-purpose broker/dealer whose
only function is to distribute open-end mutual fund shares. The Distributor
provides all classes of shares in each Portfolio with distribution services
pursuant to separate Distribution Plans (the "Plans") in accordance with Rule
12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing accounts. The Adviser Class of shares pays an annual
service and distribution fee of 0.25% of average net assets of the class for
such services under the 12b-1 plan adopted by the Fund. The Investment Class of
shares pays an annual shareholder servicing fee of 0.15% of average net assets
of the class. The shareholder servicing fee is not a distribution fee and is
used to support the expenses associated with servicing and maintaining accounts.
Both fees are paid directly to MASDI. The distribution fee may
be retained by MASDI if an Adviser Class shareholder invests directly through
MASDI. Usually the fees are paid by MASDI to external organizations such as
401(k) alliance sponsors, discount brokers and bank trust departments who
distribute MAS Funds to the public.
237
<PAGE>
E. Custody. Morgan Stanley Trust Company (NY) ("MSTC"), an affiliate of the
Fund, serves as custodian for certain of the Fund's assets held outside of the
United States in accordance with a custodian agreement. MSTC is a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
For the year ended September 30, 1997, the following Portfolios incurred custody
fees and had amounts payable to MSTC at September 30, 1997:
<TABLE>
<CAPTION>
MSTC Custody
Custody Fees Fees Payable
Incurred to MSTC
(000) (000)
<S> <C> <C>
International Equity $200 $37
Emerging Markets 79 14
Global Fixed Income 29 4
International Fixed Income 43 4
Multi-Asset-Class 38 8
</TABLE>
For the year ended September 30, 1997, the following Portfolios paid brokerage
commissions to Morgan Stanley & Co. and Dean Witter Reynolds, Inc., affiliated
broker/dealers:
<TABLE>
<CAPTION>
Brokerage
Commissions (000)
Morgan Stanley Dean Witter
& Co., Inc. Reynolds, Inc.
<S> <C> <C>
Value $ -- $ 8
Equity -- 6
Small Cap Value -- 69
Mid Cap Growth 3 --
Mid Cap Value -- 35
</TABLE>
F. Trustees' Fees. The Fund pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person, as
defined under the Investment Company Act of 1940, as amended, participates in
the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of the
Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total trustees fees incurred, for the year ended September 30, 1997 by
the Portfolios were $216,000.
Expenses for the year ended September 30, 1997 include legal fees paid to
Morgan, Lewis & Bockius, LLP in the amount of $272,000. A partner of that firm
is secretary of the Fund.
238
<PAGE>
G. Portfolio Investment Activity.
1. Purchases and Sales of Securities: For the year ended September 30,
1997, purchases and sales of investment securities other than temporary
cash investments were:
<TABLE>
<CAPTION>
(000)
Portfolio Purchases Sales
<S> <C> <C>
Value $1,616,377 $1,106,356
Equity 1,118,530 1,683,052
Small Cap Value 714,263 725,133
International Equity 366,382 406,834
Mid Cap Growth 502,727 558,738
Mid Cap Value 325,676 222,740
Emerging Markets 17,777 29,543
Fixed Income 5,629,767 4,224,703
Domestic Fixed Income 203,102 205,102
High Yield 531,662 370,685
Cash Reserves -- --
Fixed Income II 365,702 554,522
Mortgage-Backed Securities 85,554 107,285
Limited Duration 193,545 167,709
Special Purpose Fixed Income 939,632 926,752
Municipal 53,409 34,537
PA Municipal 17,529 19,416
Global Fixed Income 94,915 85,923
International Fixed Income 115,544 114,611
Intermediate Duration 143,494 85,450
Balanced 472,737 467,823
Multi-Asset-Class 204,601 197,347
</TABLE>
239
<PAGE>
2. Federal Income Tax Cost and Unrealized Appreciation (Depreciation): At
September 30, 1997, cost, unrealized appreciation, unrealized
depreciation and net unrealized appreciation (depreciation) of
securities for Federal income tax purposes were:
<TABLE>
<CAPTION>
(000)
Portfolio Cost Appreciation Depreciation Net
<S> <C> <C> <C> <C>
Value $3,260,174 $829,135 $(17,497) $811,638
Equity 1,117,524 305,435 (6,546) 298,889
Small Cap Value 685,105 230,056 (13,614) 216,442
International Equity 563,965 143,862 (27,995) 115,867
Mid Cap Growth 411,096 128,711 (433) 128,278
Mid Cap Value 180,333 42,981 (1,349) 41,632
Emerging Markets 21,050 5,739 (3,717) 2,022
Fixed Income 3,955,761 63,846 (8,867) 54,979
Domestic Fixed Income 100,627 1,741 (290) 1,451
High Yield 508,850 31,555 (2,955) 28,600
Cash Reserves 98,515 -- -- --
Fixed Income II 227,854 4,629 (607) 4,022
Mortgage-Backed Securities 41,894 1,020 (254) 766
Limited Duration 153,511 711 (308) 403
Special Purpose Fixed Income 516,281 13,029 (1,527) 11,502
Municipal 72,030 4,920 (101) 4,819
PA Municipal 26,210 1,972 (9) 1,963
Global Fixed Income 77,132 867 (1,648) (781)
International Fixed Income 151,970 1,721 (4,256) (2,535)
Intermediate Duration 75,863 774 (82) 692
Balanced 384,114 55,213 (1,951) 53,262
Multi-Asset-Class 157,958 22,629 (2,661) 19,968
</TABLE>
240
<PAGE>
3. Forward Foreign Currency Contracts: Under the terms of the forward
foreign currency contracts open at September 30, 1997, each Portfolio
is obligated to deliver or receive currency in exchange for U.S.
dollars as indicated in the following table:
<TABLE>
<CAPTION>
(000)
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
<S> <C> <C> <C> <C> <C>
International Equity
Purchases
US$ 15,599 JPY 1,869,120 11/20/97 US$15,600 US$ 1
Sales
JPY 1,869,120 US$ 16,500 11/20/97 US$15,600 US$ 900
Net US$ 901
Fixed Income
Sales
DEM 53,230 US$ 29,796 12/2/97 US$30,250 US$ (454)
High Yield
Sales
DEM 4,935 US$ 2,815 10/17/97 US$ 2,796 US$ 19
DEM 8,145 4,563 11/28/97 4,628 (65)
DEM 8,500 4,824 12/23/97 4,837 (13)
DEM 375 214 12/23/97 213 1
US$ (58)
Fixed Income II
Sales
DEM 3,575 US$ 2,001 12/2/97 US$ 2,032 US$ (31)
Special Purpose Fixed Income
Sales
DEM 8,430 US$ 4,719 12/2/97 US$ 4,791 US$ (72)
Global Fixed Income
Purchases
US$ 630 ITL 1,105,768 10/20/97 US$ 641 US$ 11
3,042 DEM 5,340 10/23/97 3,027 (15)
6,475 DEM 11,430 10/23/97 6,479 4
382 ESP 56,750 10/23/97 380 (2)
863 AUD 1,170 10/27/97 849 (14)
1,569 CAD 2,155 10/31/97 1,562 (7)
1,122 GBP 690 11/4/97 1,112 (10)
1,841 JPY 215,000 11/6/97 1,791 (50)
370 IEP 255 11/18/97 370 --
1,049 CAD 1,450 11/19/97 1,052 3
14 DEM 25 11/19/97 14 --
4,072 JPY 475,250 11/19/97 3,966 (106)
2,393 ESP 365,000 11/19/97 2,448 55
2,321 SEK 17,625 11/20/97 2,328 7
1,710 DEM 3,055 11/24/97 1,735 25
US$ (99)
</TABLE>
241
<PAGE>
<TABLE>
<CAPTION>
(000)
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
<S> <C> <C> <C> <C> <C>
Sales
DEM 4,440 US$ 2,460 10/23/97 US$ 2,517 US$ (57)
DEM 4,085 2,317 10/23/97 2,316 1
AUD 1,170 871 10/27/97 849 22
AUD 715 532 11/3/97 519 13
DEM 25 13 11/5/97 14 (1)
IEP 750 1,082 11/6/97 1,088 (6)
SEK 12,740 1,601 11/13/97 1,682 (81)
IEP 255 380 11/18/97 370 10
GBP 605 969 11/19/97 974 (5)
JPY 63,000 535 11/19/97 526 9
SEK 21,390 2,680 11/20/97 2,825 (145)
CAD 1,070 775 12/2/97 777 (2)
DKK 2,695 396 12/2/97 402 (6)
FRF 3,130 518 12/10/97 530 (12)
IEP 260 387 12/18/97 377 10
AUD 3,555 2,555 12/19/97 2,583 (28)
ITL 810,000 468 12/23/97 469 (1)
CHF 3,270 2,274 12/31/97 2,273 1
US$ (278)
Net US$ (377)
International Fixed Income
Purchases
US$ 1,812 ITL 3,180,675 10/20/97 US$ 1,843 US$ 31
13,842 DEM 24,335 10/23/97 13,795 (47)
14,279 DEM 25,195 10/23/97 14,282 3
1,814 AUD 2,460 10/27/97 1,785 (29)
2,609 CAD 3,585 10/31/97 2,599 (10)
2,634 GBP 1,620 11/4/97 2,609 (25)
1,277 IEP 880 11/18/97 1,277 --
3,060 CAD 4,230 11/19/97 3,070 10
9,109 JPY 1,063,000 11/19/97 8,871 (238)
6,183 ESP 942,000 11/19/97 6,317 134
4,365 SEK 33,150 11/20/97 4,379 14
6,737 JPY 805,000 12/10/97 6,742 5
4,770 FRF 28,240 12/23/97 4,786 16
743 ITL 1,300,000 12/23/97 752 9
US$ (127)
Sales
DEM 5,240 US$ 2,950 10/23/97 US$ 2,970 US$ (20)
DEM 7,680 4,355 10/23/97 4,354 1
AUD 2,460 1,831 10/27/97 1,785 46
JPY 305,000 2,607 10/31/97 2,538 69
NLG 4,910 2,387 10/31/97 2,472 (85)
AUD 840 625 11/3/97 610 15
IEP 1,760 2,540 11/6/97 2,554 (14)
SEK 5,130 645 11/13/97 677 (32)
IEP 880 1,311 11/18/97 1,277 34
GBP 1,965 3,146 11/19/97 3,163 (17)
JPY 119,000 1,009 11/19/97 993 16
SEK 55,455 6,949 11/20/97 7,325 (376)
IEP 575 857 12/18/97 834 23
</TABLE>
242
<PAGE>
<TABLE>
<CAPTION>
(000)
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
<S> <C> <C> <C> <C> <C>
AUD 6,785 4,877 12/19/97 4,931 (54)
ITL 2,585,000 1,493 12/23/97 1,496 (3)
CHF 6,110 4,249 12/31/97 4,248 1
US$ (396)
Net US$ (523)
Intermediate Duration
Purchases
US$ 1,784 CAD 2,465 12/16/97 US$ 1,792 US$ 8
Sales
DEM 1,420 US$ 805 12/2/97 US$ 807 US$ (2)
CAD 2,465 1,779 12/16/97 1,792 (13)
US$ (15)
Net US$ (7)
Balanced
Sales
DEM 2,325 US$ 1,301 12/2/97 US$ 1,321 US$ (20)
Multi-Asset-Class
Purchases
US$ 90 DKK 595 10/14/97 US$ 89 (1)
132 ITL 231,910 10/20/97 134 2
421 DEM 740 10/23/97 419 (2)
66 AUD 90 10/27/97 65 (1)
91 CAD 125 10/31/97 91 --
300 JPY 36,100 10/31/97 300 --
170 GBP 105 11/4/97 169 (1)
47 DEM 85 11/5/97 48 1
141 SEK 1,070 11/13/97 142 1
109 IEP 75 11/18/97 109 --
33 CAD 45 11/19/97 33 --
353 ESP 54,000 11/19/97 362 9
2,345 JPY 281,000 11/20/97 2,345 --
43 SEK 325 11/20/97 43 --
377 FRF 2,230 12/23/97 378 1
US$ 9
Sales
DEM 145 US$ 83 10/17/97 US$ 82 US$ 1
DEM 110 62 10/23/97 63 (1)
AUD 90 67 10/27/97 65 2
FRF 555 90 10/31/97 94 (4)
JPY 37,000 316 10/31/97 308 8
AUD 55 41 11/3/97 40 1
DEM 160 86 11/5/97 91 (5)
IEP 115 166 11/6/97 167 (1)
SEK 2,600 327 11/13/97 343 (16)
IEP 60 89 11/18/97 87 2
GBP 110 176 11/19/97 177 (1)
JPY 6,000 51 11/19/97 50 1
JPY 281,000 2,500 11/20/97 2,345 155
SEK 325 41 11/20/97 43 (2)
DEM 220 123 11/28/97 125 (2)
DEM 325 185 12/18/97 185 --
AUD 270 194 12/19/97 196 (2)
</TABLE>
243
<PAGE>
<TABLE>
<CAPTION>
(000)
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
<S> <C> <C> <C> <C> <C>
DEM 260 148 12/23/97 148 --
ITL 108,000 62 12/23/97 62 --
CHF 295 205 12/31/97 205 --
US$ 136
Net US$ 145
AUD -- Australian Dollar
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- German Mark
DKK -- Danish Krone
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- British Pound
IEP -- Irish Punt
ITL -- Italian Lira
JPY -- Japanese Yen
NLG -- Netherlands Guilder
SEK -- Swedish Krona
US$ -- U.S. Dollar
</TABLE>
4. Futures Contracts: At September 30, 1997, the following Portfolios had
futures contracts open:
<TABLE>
<CAPTION>
Unrealized
Aggregate Appreciation
Number of Face Value (Depreciation)
Portfolio Contracts (000) Date (000)
<S> <C> <C> <C> <C>
Purchases:
Value
S&P 500 Index 400 US$ 190,900 Dec-97 US$ 3,948
Emerging Markets
Hang Seng Index 7 HKD 5,269 Oct-97 18
Fixed Income
U.S. Treasury
2 yr. Note 1,080 US$ 223,611 Dec-97 854
Domestic Fixed Income
U.S. Treasury
2 yr. Note 43 US$ 8,903 Dec-97 38
U.S. Treasury
Long Bond 5 US$ 576 Dec-97 12
Fixed Income II
U.S. Treasury
2 yr. Note 70 US$ 14,493 Dec-97 62
Mortgage-Backed Securities
U.S. Treasury
2 yr. Note 20 US$ 4,141 Dec-97 US$ 11
U.S. Treasury
Long Bond 5 US$ 576 Dec-97 8
Limited Duration
U.S. Treasury
2 yr. Note 55 US$ 11,388 Dec-97 49
</TABLE>
244
<PAGE>
<TABLE>
<CAPTION>
Unrealized
Aggregate Appreciation
Number of Face Value (Depreciation)
Portfolio Contracts (000) Date (000)
<S> <C> <C> <C> <C>
Special Purpose Fixed Income
U.S. Treasury
2 yr. Note 165 US$ 34,163 Dec-97 146
Municipal
U.S. Treasury
5 yr. Note 44 US$ 4,726 Dec-97 27
U.S. Treasury
10 yr. Note 39 US$ 4,295 Dec-97 63
PA Municipal
U.S. Treasury
5 yr. Note 10 US$ 1,074 Dec-97 10
U.S. Treasury
10 yr. Note 41 US$ 4,515 Dec-97 54
Global Fixed Income
Japanese 10 yr.
Government Bond 4 JPY 514,440 Dec-97 67
International Fixed Income
German 10 yr.
Government Bond 56 DEM 14,413 Dec-97 118
Japanese 10 yr.
Government Bond 13 JPY 1,671,930 Dec-97 190
Intermediate Duration
U.S. Treasury
2 yr. Note 68 US$ 14,079 Dec-97 54
Balanced
U.S. Treasury
2 yr. Note 30 US$ 6,211 Dec-97 27
Multi-Asset-Class
U.S. Treasury
2 yr. Note 14 US$ 2,900 Dec-97 12
U.S. Treasury
5 yr. Note 7 US$ 752 Dec-97 7
Nikkei 225 Index 22 JPY 195,745 Dec-97 (73)
MIB 30 Index 9 ITL 2,175,570 Dec-97 106
Sales:
Fixed Income
90 day Eurodollar 143 US$ 33,544 Dec-97- (2)
Mar-01
U.S. Treasury
10 yr. Note 1,990 US$ 219,149 Dec-97 (2,928)
Domestic Fixed Income
U.S. Treasury
10 yr. Note 36 US$ 3,965 Dec-97 (52)
High Yield
U.S. Treasury Bond 170 US$ 19,598 Dec-97 (554)
Fixed Income II
U.S. Treasury
10 yr. Note 189 US$ 20,814 Dec-97 (209)
Mortgage-Backed Securities
U.S. Treasury
2 yr. Note 60 US$ 12,423 Dec-97 US$ (27)
U.S. Treasury
5 yr. Note 11 US$ 1,181 Dec-97 (8)
U.S. Treasury
10 yr. Note 27 US$ 2,973 Dec-97 (27)
U.S. Treasury
Long Bond 7 US$ 807 Dec-97 (14)
</TABLE>
245
<PAGE>
<TABLE>
<CAPTION>
Unrealized
Aggregate Appreciation
Number of Face Value (Depreciation)
Portfolio Contracts (000) Date (000)
<S> <C> <C> <C> <C>
Limited Duration
U.S. Treasury
10 yr. Note 40 US$ 4,405 Dec-97 (58)
Special Purpose Fixed Income
U.S. Treasury
10 yr. Note 641 US$ 70,590 Dec-97 (893)
Municipal
U.S. Treasury
Long Bond 32 US$ 3,689 Dec-97 17
PA Municipal
U.S. Treasury
2 yr. Note 9 US$ 1,863 Dec-97 (7)
U.S. Treasury
Long Bond 19 US$ 2,190 Dec-97 10
Intermediate Duration
U.S. Treasury
10 yr. Note 38 US$ 4,185 Dec-97 (55)
Balanced
U.S. Treasury
10 yr. Note 121 US$ 13,325 Dec-97 (175)
Multi-Asset-Class
U.S. Treasury
10 yr. Note 13 US$ 1,432 Dec-97 (19)
U.S. Treasury
Long Bond 8 US$ 922 Dec-97 (26)
DEM -- German Mark
HKD -- Hong Kong Dollar
ITL -- Italian Lira
JPY -- Japanese Yen
US$ -- U.S. Dollar
</TABLE>
5. Swap Agreements: At September 30, 1997, the following Portfolios had
open Interest Rate Swap Agreements:
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
<S> <C> <C>
Fixed Income
$150,000 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $54
Domestic Fixed Income
$5,000 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $2
Fixed Income II
$11,000 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $4
</TABLE>
246
<PAGE>
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
<S> <C> <C>
Mortgage-Backed Securities
$2,750 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $1
$7,000 Agreement with Salomon Brothers terminating July 1, 1998
to pay monthly if positive (receive if negative), the
total rate of return on the Salomon Brothers Benchmark
Yield Curve Average 2-Year Index based on the previous
month's return
and receive 1 month LIBOR less 38 basis points. (52)
Net $(51)
Special Purpose Fixed Income
$25,000 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $9
Municipal
$10,300 Agreement with Bankers Trust Company terminating
January 9, 2006 to pay fixed rate at 6.05%
semiannually and to receive 3 month LIBOR quarterly. $283
PA Municipal
$4,650 Agreement with Bankers Trust Company terminating
January 9, 2006 to pay fixed rate at 6.05%
semiannually and to receive 3 month LIBOR quarterly. $128
Balanced
$7,000 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $2
Multi-Asset-Class
$1,500 Agreement with Bankers Trust Company terminating
July 21, 1999 to pay 1 month LIBOR monthly and to
receive fixed rate at 6.12% semiannually. $1
LIBOR -- London Interbank Offer Rate
H. Capital Loss Carry Forward. At September 30, 1997, the following Portfolios
had available for Federal income tax purposes unused capital losses, all of
which will expire on the indicated dates:
Expiration Date
September 30,
Portfolio (000)
2003 2004
Mortgage-Backed Securities $2,746 $ --
Limited Duration 3,769 172
Municipal -- 74
PA Municipal 23 --
</TABLE>
247
<PAGE>
I. Post October Losses. Under current tax law, certain capital and net foreign
exchange losses realized after October 31 may be deferred and treated as
occurring on the first day of the following fiscal year. For the fiscal year
ended September 30, 1997, the following Portfolios may elect to defer capital
losses occurring between November 1, 1996 and September 30, 1997 up to the
following amounts:
Portfolio (000)
Global Fixed Income $42
The International Equity, Global Fixed Income and International Fixed Income
Portfolios may elect to defer net foreign currency losses occurring between
November 1, 1996 and September 30, 1997 up to the amount of $414,000, $1,141,000
and $5,713,000, respectively.
J. In-Kind Transactions. For the year ended September 30, 1997, the following
Portfolios realized gains (losses) from in-kind redemptions of approximately:
Portfolio (000)
Value $57,390
Equity 6,870
Small Cap Value 46
Mid Cap Growth 7,054
Mortgage-Backed Securities 230
Multi-Asset-Class 83
K. Securities Lending. Certain Portfolios loan securities to certain brokers and
receive security lending fees. Security lending fees are included as expense
offsets in the Statement of Operations. Fees greater than custodian expenses are
included in interest income. During the year ended September 30, 1997, the
following Portfolios had security lending fees totaling:
Fees
Portfolio (000)
Value $166
Equity 222
International Equity 175
Mid Cap Growth 254
Fixed Income 172
Domestic Fixed Income 2
Fixed Income II 7
Special Purpose Fixed Income 18
Balanced 37
248
<PAGE>
Portfolios that lend securities receive securities issued or guaranteed by the
U.S. Government or its agencies, cash or letters of credit as collateral in an
amount at least equal to 100% of the current market value of loaned securities.
The value of loaned securities and related collateral outstanding at September
30, 1997, were as follows:
<TABLE>
<CAPTION>
Value of Value
Loaned of
Securities Collateral
Portfolio (000) (000)
<S> <C> <C>
Value $291,013 $295,614
Equity 102,802 104,927
International Equity 31,938 33,926
Mid Cap Growth 106,508 107,435
Fixed Income 531,230 544,483
Domestic Fixed Income 2,913 2,970
Fixed Income II 821 844
Special Purpose Fixed Income 23,721 24,378
Balanced 59,609 61,539
</TABLE>
Custodian fees appearing in the Statement of Operations have been adjusted to
include expense offsets for custodian balance credits and security lending fees
totaling $720,000 and $517,000 respectively, for the year ended September 30,
1997.
L. Other. At September 30, 1997, the net assets of certain Portfolios were
substantially comprised of foreign denominated securities and currency. The net
assets of these Portfolios are presented at the foreign exchange rates and
market values at the close of the period. The Portfolios do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Portfolios do not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) are
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. Changes in currency exchange rates will
affect the value of and investment income from such securities and currency.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
At September 30, 1997, the High Yield Port-folio's net assets were substantially
comprised of high yield fixed income securities. The financial condition of an
issuer of these securities and general economic and industry specific conditions
may affect the issuer's ability to make payments of income and principal on
these securities.
A portion of the securities of the Municipal and PA Municipal Portfolios are
insured by certain companies specializing in the insurance of municipal debt
obligations. At September 30, 1997, approximately 52.1% and 52.0% of the net
assets of the Municipal and PA Municipal Portfolios, respectively, are covered
by such insurance. Listed below are the insurers that insure obligations
constituting more than 10% of the Portfolios' net assets:
249
<PAGE>
PA
Municipal Municipal
AMBAC 13.7% 18.7%
FGIC 12.8 16.7
MBIA 12.8 11.9
At September 30, 1997, certain employees of Miller Anderson & Sherrerd, LLP were
record owners of approximately 20.0% of the PA Municipal Portfolio. In addition,
the Fund had Portfolios with otherwise unaffiliated record owners of 10% or
greater. Investment activities of these shareholders could have a material
impact on these Portfolios. These Portfolios and the aggregate percentage of
such owners was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
Institutional Investment Adviser
Portfolio Class Class Class
<S> <C> <C> <C>
Value 14.3% 48.0% 95.5%
Equity -- 88.8 --
Small Cap Value 10.8 -- --
International Equity 22.5 90.0 --
Mid Cap Growth 22.9 -- 98.7
Mid Cap Value 22.0 91.1 --
Emerging Markets 69.1 -- --
Fixed Income -- 92.5 95.5
Domestic Fixed Income 21.7 -- --
High Yield -- 72.5 98.9
Cash Reserves 45.1 -- --
Fixed Income II 10.5 -- --
Mortgage-Backed Securities 90.7 -- --
Limited Duration 25.9 -- --
Special Purpose Fixed Income -- 91.4 --
Municipal 33.3 -- --
PA Municipal 47.8 -- --
Global Fixed Income 52.1 -- --
International Fixed Income 60.3 -- --
Intermediate Duration 52.8 -- --
Balanced 31.7 95.8 99.5
Multi-Asset-Class 30.5 92.7 --
</TABLE>
250
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
MAS Funds
In our opinion, the accompanying statements of net assets (excluding Standard &
Poor's ratings) and the related statements of operations and of changes in net
assets and the financial highlights present fairly, in all material respects,
the financial position of each of the twenty-two (22) Portfolios of the MAS
Funds listed in the accompanying table of contents, (hereafter referred to as
the "Fund") at September 30, 1997 and the results of each of their operations,
the changes in each of their net assets and their financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1997 by correspondence with the custodians and the application of
alternative auditing procedures where securities purchased were not yet received
by the custodians, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 20, 1997
251
<PAGE>
Federal Income Tax Information: (Unaudited)
Each Portfolio hereby designates the following amount as a long-term capital
gain dividend for the purpose of the dividend paid deduction on its federal
income tax return.
Amount
Portfolio (000)
Value $ 92,144
Equity 220,827
Small Cap Value 32,239
International Equity 13,001
Mid Cap Growth 42,412
Mid Cap Value 17
Emerging Markets 257*
Fixed Income 2,484
Fixed Income II 357
Special Purpose Fixed Income 1,134
Global Fixed 71
International Fixed 569
Balanced 29,821
Multi-Asset-Class 7,644
For the year ended September 30, 1997, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders for each
Portfolio were:
Portfolio Amount
Value 35.1%
Equity 44.9
Small Cap Value 8.3
Mid Cap Growth 5.3
Mid Cap Value 10.0
High Yield 3.0
Balanced 19.6
Multi-Asset-Class 13.4
Foreign taxes accrued during the fiscal year ended September 30, 1997 amounting
to $1,816,000, $152,000* and $90,000 for the International Equity Portfolio,
Emerging Markets Portfolio and the International Fixed Income Portfolio,
respectively, are expected to be passed through to shareholders as foreign tax
credits on Form 1099-DIV for the year ending December 31, 1997. In addition, for
the year ended September 30, 1997, gross income derived from sources within
foreign countries amounted to $15,937,000, $628,000* and $7,982,000 for the
International Equity Portfolio, Emerging Markets Portfolio and the International
Fixed Income Portfolio, respectively.
For the fiscal year ended September 30, 1997**, the percentage of exempt
interest dividends paid by the Municipal Portfolio and the PA Municipal
Portfolio was 91.7% and 92.7%, respectively.
252
<PAGE>
For the year ended September 30, 1997**, the percentage of income earned from
direct U.S. treasury obligations was as follows:
Income
Portfolio Earned
Fixed Income 33.2%
Domestic Fixed Income 31.8
Fixed Income II 29.9
Limited Duration 43.1
Mortgage-Backed Securities 11.6
Special Purpose Fixed Income 24.7
Municipal 11.5
PA Municipal 10.4
Global Fixed Income 27.2
International Fixed Income 11.8
Intermediate Duration 39.0
Balanced 22.7
Multi-Asset-Class 18.2
* Amount is based on October 31 tax year end.
** Amounts for the period ending December 31, 1997 will be provided with
Form 1099-DIV to be mailed in January 1998.
253
<PAGE>
Shareholder Meetings: (Unaudited)
At two special shareholder meetings held on May 1 and May 12, 1997, the
shareholders of Miller Anderson & Sherrerd, LLP (the "Fund") were held for the
purpose of voting on the following proposals:
1. To approve an amendment to the investment advisory agreement between
the Fund and Miller Anderson & Sherrerd, LLP.
<TABLE>
<CAPTION>
Voted Voted Abstain
Portfolio For Against Votes
<S> <C> <C> <C>
Value 81,180,469 226,027 525,982
Equity 27,722,514 2,303 1,428
Small Cap Value 17,726,537 909 822
International Equity 24,221,994 0 2,680
Mid Cap Growth 13,913,156 7,215 2,491
Mid Cap Value 4,158,735 4,271 22,651
Emerging Markets 2,141,399 0 0
Fixed Income 103,442,530 14,455 2,231,853
Domestic Fixed Income 5,746,614 0 1,760
High Yield 24,149,301 167,610 489,552
Cash Reserves 49,933,537 653,200 87
Fixed Income II 10,207,399 0 6,425
Mortgage-Backed Securities 3,521,496 0 0
Limited Duration 5,965,091 0 0
Special Purpose Fixed Income 21,722,881 61 24,665
Municipal 3,163,783 0 43,192
PA Municipal 1,567,944 0 0
Global Fixed Income 4,420,125 0 0
International Fixed Income 10,534,872 229 1,013
Intermediate Duration 2,976,756 0 0
Balanced 12,108,669 2,268 1,018,999
Multi-Asset-Class 7,671,603 0 516,117
</TABLE>
2. To elect the following Trustees to serve the Fund effective May 1, 1997
until such time as their successors have been duly appointed.
<TABLE>
<CAPTION>
Voted
For Withheld
<S> <C> <C>
Thomas L. Bennett 532,682,575 2,503,229
Thomas P. Gerrity 532,791,783 2,274,021
Joseph P. Healey 532,778,972 2,286,832
Joseph J. Kearns 532,802,368 2,263,436
Vincent R. McLean 532,776,415 2,289,389
C. Oscar Morong, Jr. 532,791,627 2,274,177
</TABLE>
3. To approve the proposal of the Board of Trustees' selection of Price
Waterhouse LLP as the Fund's independent accountants.
Voted Voted Abstain
For Against Votes
530,883,223 655,873 3,528,115
254
<PAGE>
4. To amend the investment objective and certain investment limitations of
the Domestic Fixed Income Portfolio.
Voted Voted Abstain
For Against Votes
5,120,238 484,851 1,760
5. To amend the investment objective and certain investment limitations of
the Fixed Income Portfolio II.
Voted Voted Abstain
For Against Votes
8,089,070 2,076,819 6,425
255
<PAGE>
MAS Funds Trustees and Officers
The following is a list of the Trustees and the principal executive officers of
the Fund and a brief statement of their present positions and principal
occupations during the past five years.
THOMAS L. BENNETT, CFA*
Chairman of the Board of Trustees; Managing Director, Morgan Stanley; Portfolio
Manager and member of the Executive Committee, Miller Anderson & Sherrerd, LLP;
Director, MAS Fund Distribution, Inc.; formerly Director, Morgan Stanley
Universal Fund, 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, Melville Corporation.
JOSEPH P. HEALY
Trustee; Headmaster, Haverford School; formerly; Dean, Hobart College; Associate
Dean, William & Mary College.
JOSEPH J. KEARNS
Trustee; Vice President and Treasurer, 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, Alexander and Alexander Services, Inc., Director, Legal and
General America, Inc., Director, William Penn Life Insurance Company of New
York; formerly Executive Vice President, Chief Financial Officer, Director and
Member of the Executive Committee of Sperry Corporation (now part of Unisys
Corporation).
C. OSCAR MORONG, JR.
Trustee; Managing Director, Morong Capital Management; Director, Ministers and
Missionaries Benefit Board of American Baptist Churches, The Indonesia Fund, The
Landmark Funds; formerly Senior Vice President and Investment Manager for CREF,
TIAA-CREF Investment Management, Inc.
JAMES D. SCHMID
President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Funds, Miller
Anderson & Sherrerd, LLP; Director, MAS Fund Distribution, Inc.; Chairman of the
Board of Directors, The Minerva Fund, Inc.
LORRAINE TRUTEN, CFA
Vice President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Fund
Services, Miller Anderson & Sherrerd, LLP; President, MAS Fund Distribution,
Inc.
DOUGLAS W. KUGLER, CFA
Treasurer, MAS Funds; Vice President, Morgan Stanley; Head of Mutual Fund
Administration, Miller Anderson & Sherrerd, LLP.
JOHN H. GRADY, JR.
Secretary, MAS Funds; Partner, Morgan, Lewis & Bockius, LLP.
* 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.
256
<PAGE>
1998
SEMI-ANNUAL REPORT
FINANCIAL STATEMENTS
[MAS FUND LOGO]
MAS FUNDS
<PAGE>
MAS Funds is pleased to present the Semi-Annual Report for the Portfolios as of
March 31, 1998. Please call your Miller Anderson & Sherrerd service contact at
800-354-8185 with any questions regarding these Financial Statements.
TABLE OF CONTENTS
MAS Overview and Statement of Net Assets
Value Portfolio......................... 1
Equity Portfolio........................ 4
Small Cap Value Portfolio............... 9
International Equity Portfolio.......... 14
Mid Cap Growth Portfolio................ 17
Mid Cap Value Portfolio................. 20
Emerging Markets Value Portfolio........ 24
Fixed Income Portfolio.................. 27
Domestic Fixed Income Portfolio......... 37
High Yield Portfolio.................... 44
Cash Reserves Portfolio................. 50
Fixed Income Portfolio II............... 52
Mortgage-Backed Securities Portfolio.... 60
Limited Duration Portfolio.............. 65
Special Purpose Fixed Income
Portfolio............................ 71
Municipal Portfolio..................... 79
PA Municipal Portfolio.................. 85
Global Fixed Income Portfolio........... 89
International Fixed Income Portfolio.... 93
Intermediate Duration Portfolio......... 96
Multi-Market Fixed Income Portfolio..... 104
Balanced Portfolio...................... 113
Multi-Asset-Class Portfolio............. 124
Statement of Operations.................... 138
Statement of Changes in Net Assets......... 143
Financial Highlights....................... 150
Notes to Financial Statements.............. 168
THIS SEMI-ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined valuation
process with the judgment gained through considerable experience in low P/E
investing, emphasizing large capitalization stocks from all market sectors. MAS
considers a company's intrinsic worth, projected earnings and other measures to
help determine if its current price makes it a strong candidate for value
investing. MAS also employs a formal sell discipline. Individual positions are
sold when price appreciation or earnings-per-share deterioration raises the
current P/E ratio.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS VALUE
---------------------------------------
INSTITUTIONAL# INVESTMENT
SIX MONTHS 7.23% 7.13% 7.07% 17.23%
ONE YEAR 33.03 32.83 32.71 47.99
FIVE YEARS 21.82 21.74 21.72 22.40
TEN YEARS 18.78 18.74 18.73 18.94
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
BANKS (8.5%)
Chase Manhattan Corp. 688,054 $ 92,801
Citicorp 309,380 43,932
Crestar Financial Corp. 364,202 21,533
First Union Corp. 1,408,603 79,938
Mellon Bank Corp. 635,396 40,348
NationsBank Corp. 386,600 28,198
Republic New York Corp. 297,701 39,706
- ----------------------------------------------------
GROUP TOTAL 346,456
- ----------------------------------------------------
BASIC RESOURCES (7.3%)
Cabot Oil & Gas Corp., Class
A 755,242 27,850
Dow Chemical Co. 372,475 36,223
E.I. DuPont de Nemours & Co. 506,768 34,460
Great Lakes Chemical Corp. 1,030,818 55,664
IMC Global, Inc. 955,494 36,369
Inland Steel Industries,
Inc. 995,300 27,495
Lubrizol Corp. 242,800 9,348
National Steel Corp, Class B 786,200 13,464
Rohm & Haas Co. 400,856 41,413
Westvaco Corp. 526,120 16,178
- ----------------------------------------------------
GROUP TOTAL 298,464
- ----------------------------------------------------
CONSUMER DURABLES (11.2%)
Chrysler Corp. 487,100 20,245
Dana Corp. 709,451 41,281
Ford Motor Co. 2,857,630 125,914
General Motors Corp. 1,628,809 109,843
Goodyear Tire & Rubber Co. 1,197,813 90,734
Owens Corning 1,441,941 51,820
Tupperware Corp. 748,976 19,942
- ----------------------------------------------------
GROUP TOTAL 459,779
- ----------------------------------------------------
CONSUMER SERVICES (0.3%)
Standard Register Co. 411,011 13,949
- ----------------------------------------------------
ENERGY (6.7%)
Amoco Corp. 228,136 19,705
Atlantic Richfield Co. 507,656 39,914
British Petroleum plc ADR 498,442 42,897
* Nabors Industries, Inc. 370,900 8,786
Phillips Petroleum Co. 863,595 43,126
Repsol SA ADR 857,710 43,636
Ultramar Diamond Shamrock
Corp. 930,290 32,793
YPF SA ADR 1,330,938 45,252
- ----------------------------------------------------
GROUP TOTAL 276,109
- ----------------------------------------------------
FOOD, TOBACCO & OTHER (4.9%)
IBP, Inc. 972,603 21,823
Philip Morris Cos., Inc. 1,784,005 74,371
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
RJR Nabisco Holdings Corp. 1,925,090 $ 60,279
Universal Foods Corp. 859,547 42,118
- ----------------------------------------------------
GROUP TOTAL 198,591
- ----------------------------------------------------
HEALTH CARE (5.5%)
Beckman Instruments, Inc. 1,034,399 59,284
Columbia/HCA Healthcare
Corp. 1,294,561 41,750
* Foundation Health Systems,
Inc. 1,603,284 44,190
Mallinckrodt, Inc. 794,651 31,389
* Maxicare Health Plans,
Inc. 816,960 8,987
* Vencor, Inc. 795,800 23,824
* Wellpoint Health Networks,
Inc. 215,500 14,546
- ----------------------------------------------------
GROUP TOTAL 223,970
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (16.9%)
Aeroquip-Vickers, Inc. 1,351,176 78,115
* AMR Corp. 269,390 38,573
Case Corp. 1,509,926 102,864
Caterpillar, Inc. 478,094 26,325
CSX Corp. 555,596 33,058
Cummins Engine Co., Inc. 1,414,386 77,968
Delta Air Lines, Inc. 310,800 36,752
Eaton Corp. 252,602 24,045
* FMC Corp. 401,565 31,523
Harnischfeger Industries,
Inc. 1,542,501 52,734
Kennametal, Inc. 772,563 40,656
Olsten Corp. 2,198,160 34,896
Parker Hannifin Corp. 906,237 46,445
Tecumseh Products Co., Class
A 648,176 34,839
TRW, Inc. 618,818 34,112
- ----------------------------------------------------
GROUP TOTAL 692,905
- ----------------------------------------------------
INSURANCE (9.7%)
Allstate Corp. 569,820 52,388
<PAGE>
American General Corp. 574,955 37,192
Chubb Corp. 237,115 18,584
CIGNA Corp. 294,200 60,311
Everest Reinsurance
Holdings, Inc. 984,191 40,475
Hartford Financial Services
Group, Inc. 441,053 47,854
Loews Corp. 266,400 27,772
Old Republic International
Corp. 887,800 39,341
ReliaStar Financial Corp. 901,338 41,518
Transatlantic Holdings, Inc. 411,458 31,116
- ----------------------------------------------------
GROUP TOTAL 396,551
- ----------------------------------------------------
RETAIL (8.2%)
Dillard's, Inc., Class A 1,176,309 43,450
* Federated Department
Stores, Inc. 707,400 36,652
Russell Corp. 789,415 21,166
Sears, Roebuck & Co. 740,000 42,504
Springs Industries, Inc.,
Class A 645,018 35,436
* Toys 'R' Us, Inc. 2,471,551 74,301
V.F. Corp. 1,187,006 62,392
* Woolworth Corp. 755,600 18,890
- ----------------------------------------------------
GROUP TOTAL 334,791
- ----------------------------------------------------
TECHNOLOGY (6.9%)
* Arrow Electronics, Inc. 957,200 25,904
Avnet, Inc. 311,700 17,942
International Business
Machines Corp. 962,244 99,953
* Quantum Corp. 872,700 18,599
* Seagate Technology, Inc. 955,752 24,133
* Stratus Computer, Inc. 1,327,400 58,489
Tektronix, Inc. 852,817 38,057
- ----------------------------------------------------
GROUP TOTAL 283,077
- ----------------------------------------------------
UTILITIES (2.7%)
Cinergy Corp. 411,607 15,229
DTE Energy Co. 666,540 26,203
Duke Energy Corp. 349,822 20,836
Entergy Corp. 681,545 20,276
GPU, Inc. 583,204 25,807
- ----------------------------------------------------
GROUP TOTAL 108,351
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,732,121) 3,632,993
- ----------------------------------------------------
CASH EQUIVALENTS (17.8%)
- ----------------------------------------------------
<PAGE>
FACE
AMOUNT
(000)
----------
Short-term Investments
Held as Collateral for
Loaned Securities (8.4%) $ 345,139 345,139
- ----------------------------------------------------
COMMERCIAL PAPER (7.2%)
CIT Group Holdings
5.51%, 5/22/98 46,700 46,336
Eiger Capital Corp.
5.56%, 4/16/98 50,000 49,884
General Electric Capital
Corp.
5.53%, 4/2/98 50,000 49,992
General Motors Acceptance
Corp.
5.54%, 4/15/98 50,000 49,892
Household Finance Corp.
5.54%, 4/3/98 50,000 49,985
IBM Credit Corp.
5.52%, 5/7/98 25,000 24,862
Trident Capital Finance Inc.
5.53%, 4/29/98 23,730 23,628
- ----------------------------------------------------
GROUP TOTAL 294,579
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
2
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)!
- ----------------------------------------------------
REPURCHASE AGREEMENT (2.2%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98,
to be repurchased at
$89,838, collateralized
by various U.S. Government
Obligations, due
4/1/98-11/15/99, valued
at $90,092 $ 89,823 $ 89,823
- ----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $729,541) 729,541
- ----------------------------------------------------
TOTAL INVESTMENTS (106.6%)
(Cost $3,461,662) 4,362,534
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.6%)
Cash 2
Dividends Receivable 4,965
Interest Receivable 14
Receivable for Investments Sold 74,206
Receivable for Fund Shares Sold 5,960
Other Assets 116
Payable for Fund Shares Redeemed (4,980)
Payable for Investment Advisory Fees (4,727)
Payable for Administrative Fees (272)
Payable for Shareholder Servicing
Fees-Investment Class (4)
Payable for Distribution
Fee-Adviser Class (85)
Payable for Trustees' Deferred
Compensation Plan-Note F (98)
Collateral on Securities Loaned, at
Value (345,139)
Other Liabilities (181)
----------
(270,223)
- ----------------------------------------------------
NET ASSETS (100%) $4,092,311
- ----------------------------------------------------
<PAGE>
VALUE
(000)!
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 185,149,408 outstanding
shares of beneficial interest
(unlimited authorization, no par
value) $3,632,965
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.62
- ----------------------------------------------------
INVESTMENT CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 1,487,756 outstanding
shares of beneficial interest
(unlimited authorization,
no par value) $ 29,166
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.60
- ----------------------------------------------------
ADVISER CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 21,957,690 outstanding
shares of beneficial interest
(unlimited authorization,
no par value) $ 430,180
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 19.59
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $3,047,427
Undistributed Net Investment Income
(Loss) 15,591
Undistributed Realized Net Gain (Loss) 128,421
Unrealized Appreciation (Depreciation)
on Investment Securities 900,872
- ----------------------------------------------------
NET ASSETS $4,092,311
- ----------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Equity Portfolio is Miller Anderson & Sherrerd's core-strategy common stock
fund, investing mostly in stocks of large companies. MAS employs strategic
economic and market analyses and disciplined valuation methodologies to identify
the best individual stocks. Strategic over- and under-weightings are managed to
maintain a portfolio that is well diversified among industry sectors.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS EQUITY
----------------------------
INSTITUTIONAL# INVESTMENT
SIX MONTHS 12.25% 12.18% 12.16% 17.23%
ONE YEAR 39.82 39.55 39.70 47.99
FIVE YEARS 19.33 19.24 19.31 22.40
TEN YEARS 17.87 17.83 17.87 18.94
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
BANKS (4.3%)
BankBoston Corp. 125,000 $ 13,781
Chase Manhattan Corp. 96,400 13,002
Citicorp 94,400 13,405
First Union Corp. 216,016 12,259
- ----------------------------------------------------
GROUP TOTAL 52,447
- ----------------------------------------------------
BASIC RESOURCES (4.5%)
Bowater, Inc. 134,900 7,613
Champion International Corp. 182,900 9,934
E.I. DuPont de Nemours & Co. 238,500 16,218
* Grace Specialty Chemicals 65,600 1,205
PPG Industries, Inc. 95,800 6,508
Praxair, Inc. 122,600 6,306
Solutia, Inc. 208,200 6,194
W. R. Grace & Co. 9,000 753
- ----------------------------------------------------
GROUP TOTAL 54,731
- ----------------------------------------------------
<PAGE>
BEVERAGE & PERSONAL PRODUCTS (1.3%)
Anheuser-Busch Cos., Inc. 125,900 5,831
Coca-Cola Enterprises, Inc. 148,300 5,441
Dial Corp. 178,300 4,268
- ----------------------------------------------------
GROUP TOTAL 15,540
- ----------------------------------------------------
CONSUMER DURABLES (7.3%)
Chrysler Corp. 152,300 6,330
Ford Motor Co. 664,800 29,293
General Motors Corp. 367,117 24,757
Goodyear Tire & Rubber Co. 132,300 10,022
LucasVarity plc ADR 247,600 10,229
Owens Corning 196,300 7,055
- ----------------------------------------------------
GROUP TOTAL 87,686
- ----------------------------------------------------
CONSUMER SERVICES (6.1%)
* Cendant Corp. 481,345 19,073
* Clear Channel Communications,
Inc. 106,300 10,417
News Corp., Ltd. ADR 327,900 7,542
Service Corp. International 274,200 11,636
* Tele-Communications, Inc.,
Class A 456,400 14,191
* Tele-Communications Liberty
Media Group, Class A 328,913 11,306
- ----------------------------------------------------
GROUP TOTAL 74,165
- ----------------------------------------------------
CREDIT & FINANCE/
INVESTMENT COMPANIES (2.7%)
American Express Co. 60,000 5,509
Associates First Capital Corp.,
Class A 21,438 1,694
Bear Stearns Co., Inc. 78,600 4,038
CMAC Investment Corp. 58,400 3,898
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
4
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
Lehman Brothers Holdings, Inc. 72,600 $ 5,436
SLM Holding Corp. 269,100 11,739
- ----------------------------------------------------
GROUP TOTAL 32,314
- ----------------------------------------------------
ENERGY (8.7%)
Atlantic Richfield Co. 76,700 6,031
British Petroleum plc ADR 125,034 10,761
Coastal Corp. 185,000 12,048
Columbia Gas System, Inc. 99,100 7,705
Diamond Offshore Drilling, Inc. 117,200 5,318
ENSCO International, Inc. 95,100 2,639
* Global Marine, Inc. 108,200 2,678
Mobil Corp. 83,500 6,398
* Nabors Industries, Inc. 177,000 4,193
Phillips Petroleum Co. 207,800 10,377
* R & B Falcon Corp. 195,000 5,777
Schlumberger Ltd. 82,800 6,272
Texaco, Inc. 203,600 12,267
USX-Marathon Group 171,200 6,441
YPF SA ADR 191,300 6,504
- ----------------------------------------------------
GROUP TOTAL 105,409
- ----------------------------------------------------
FOOD, TOBACCO & OTHER (4.1%)
Philip Morris Cos., Inc. 819,270 34,153
RJR Nabisco Holdings Corp. 550,380 15,825
- ----------------------------------------------------
GROUP TOTAL 49,978
- ----------------------------------------------------
HEALTH CARE (6.4%)
American Home Products Corp. 68,700 6,552
Baxter International, Inc. 225,400 12,425
Bristol-Myers Squibb Co. 84,972 8,864
* Health Management Associates,
Inc., Class A 219,050 6,270
* HEALTHSOUTH Rehabilitation
Corp. 250,000 7,016
* Lincare Holdings, Inc. 133,200 9,407
Merck & Co., Inc. 117,100 15,033
Mylan Labs, Inc. 104,400 2,401
* Tenet Healthcare Corp. 248,400 9,020
- ----------------------------------------------------
GROUP TOTAL 76,988
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (12.8%)
Aeroquip-Vickers, Inc. 103,100 5,960
* AMR Corp. 60,100 8,606
Case Corp. 270,000 18,394
Cummins Engine Co., Inc. 342,700 18,891
Eaton Corp. 24,000 2,285
* FMC Corp. 118,200 9,279
Harnischfeger Industries, Inc. 167,700 5,733
Lockheed Martin Corp. 226,800 25,515
Textron, Inc. 95,100 7,323
United Technologies Corp. 264,500 24,417
Waste Management, Inc. 589,300 18,158
York International Corp. 215,500 9,698
- ----------------------------------------------------
GROUP TOTAL 154,259
- ----------------------------------------------------
<PAGE>
- ----------------------------------------------------
INSURANCE (6.1%)
Allstate Corp. 65,481 $ 6,020
Everest Reinsurance Holdings,
Inc. 133,900 5,507
Exel Ltd. 168,800 13,082
Hartford Financial Services
Group, Inc. 182,150 19,763
Loews Corp. 220,800 23,018
Travelers Property Casualty
Corp., Class A 140,100 6,164
- ----------------------------------------------------
GROUP TOTAL 73,554
- ----------------------------------------------------
MID CAP GROWTH (5.6%)
* Accelr8 Technology Corp. 15,500 250
* Advanced Fibre
Communications, Inc. 19,300 702
A.G. Edwards, Inc. 11,100 486
* Allied Waste Industries, Inc. 37,500 936
* American Disposal Services,
Inc. 11,400 430
* AMF Bowling, Inc. 27,700 710
* At Home Corp., Series A 22,700 768
* Atlas Air, Inc. 14,700 479
* Beringer Wine Estates
Holdings, Inc., Class B 13,500 697
* BMC Software, Inc. 16,300 1,366
* Borders Group, Inc. 33,000 1,124
* Brylane, Inc. 11,900 667
* Cablevision Systems Corp.,
Class A 10,000 657
* Cellular Communications
International, Inc. 12,800 870
* CIENA Corp. 10,300 439
* Cinar Films, Inc., Class B 20,300 865
Cintas Corp. 19,600 1,014
Comcast Corp., Class A Special 17,500 618
* Complete Business Solutions,
Inc. 35,000 1,256
* CompUSA, Inc. 17,800 463
* Computer Horizons Corp. 20,200 1,015
* Concord EFS Inc. 31,500 1,089
CVS Corp. 14,000 1,057
Danaher Corp. 10,000 759
Diamond Offshore Drilling, Inc. 11,700 531
* Dollar Tree Stores, Inc. 9,100 483
* EarthShell Corp. 10,600 189
Estee Lauder Cos., Class A 17,600 1,195
* Exodus Communications, Inc. 5,600 157
FINOVA Group, Inc. 15,700 924
* Fiserv, Inc. 19,350 1,226
Franklin Resources, Inc. 12,000 636
* Friendly Ice Cream Corp. 24,100 491
* Geac Computer Corp., Ltd. 13,700 575
* Global Industries Ltd. 25,600 522
* Globalstar Telecommunications
Ltd. 30,500 1,933
HBO & Co. 20,000 1,208
* Health Management Associates,
Inc., Class A 80,192 2,295
* Healthcare Recoveries, Inc. 30,100 700
* Heftel Broadcasting Corp.,
Class A 13,500 604
* Hibbett Sporting Goods, Inc. 14,500 402
* Imax Corp. 33,700 956
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
Inter-Tel, Inc. 17,200 $ 463
* Intermedia Communications,
Inc. 8,500 677
* J. Ray McDermott, S.A. 11,500 484
* Jacor Communications, Inc. 16,700 985
* Level 3 Communications, Inc. 7,300 523
* Lincare Holdings, Inc. 28,900 2,041
Linear Technology Corp. 7,700 531
* Loral Space & Communications
Ltd. 41,800 1,168
* MAPICS, Inc. 43,700 773
* Metro-Goldwyn-Mayer, Inc. 23,100 517
* Metromedia Fiber Network,
Inc., Class A 7,100 239
* Micro Focus Group plc ADR 18,900 900
* Networks Associates, Inc. 15,325 1,015
* NEXTLINK Communications,
Inc., Class A 17,600 565
* Nutraceutical International
Corp. 19,200 422
ONIX Systems, Inc. 22,200 322
* Orange plc 63,000 402
* Orthodontic Centers of
America, Inc. 47,700 1,034
* Outdoor Systems, Inc. 32,650 1,145
* Pediatrix Medical Group, Inc. 10,700 498
* Peoplesoft, Inc. 13,300 701
* Polo Ralph Lauren Corp. 17,200 517
Premier Parks, Inc. 17,900 1,038
* Princeton Video Image, Inc. 17,800 145
* Province Healthcare Co. 15,600 410
* Qwest Communications
International, Inc. 15,700 610
* RELTEC Corp. 9,200 326
* Rexall Sundown, Inc. 19,400 661
* Sapient Corp. 16,800 796
* Sealed Air Corp. 13,200 865
* Security Capital Group, Inc.,
Class B 9,200 283
Security Capital Industrial
Trust 25,990 666
* Security Capital U.S. Realty 25,300 334
Shire Pharmaceuticals Group plc
ADR 8,500 182
Sirrom Capital Corp. 35,200 1,058
* Stage Stores, Inc. 9,100 470
State Street Corp. 13,800 939
Stewart Enterprises, Inc.,
Class A 9,700 540
* Sunrise Assisted Living, Inc. 17,200 770
<PAGE>
* Tele-Communications, Inc.,
Class A 20,095 625
* Tele-Communications
International, Inc., Class A 26,100 525
* Tele-Communications Liberty
Media Group, Class A 36,387 1,251
* Tele-Communications TCI
Ventures Group, Class A 45,310 796
* Tel-Save Holdings, Inc. 20,400 464
* Tellabs, Inc. 20,700 1,389
* Total Renal Care Holdings,
Inc. 16,600 553
* Uniphase Corp. 15,100 635
* United Rentals, Inc. 28,200 733
- ----------------------------------------------------
* Univision Communications,
Inc., Class A 10,200 $ 380
* USA Waste Services, Inc. 15,300 682
- ----------------------------------------------------
GROUP TOTAL 67,792
- ----------------------------------------------------
RETAIL (5.1%)
* CompUSA, Inc. 352,300 9,160
CVS Corp. 127,600 9,634
* Federated Department Stores,
Inc. 130,500 6,762
Home Depot, Inc. 110,188 7,431
* Office Depot, Inc. 342,800 10,670
* Polo Ralph Lauren Corp. 129,900 3,905
Ross Stores, Inc. 82,900 3,658
Wal-Mart Stores, Inc. 198,900 10,107
- ----------------------------------------------------
GROUP TOTAL 61,327
- ----------------------------------------------------
TECHNOLOGY (10.5%)
* Applied Materials, Inc. 145,700 5,145
* Bay Networks, Inc. 235,900 6,399
* BMC Software, Inc. 145,700 12,211
* Cisco Systems, Inc. 172,700 11,808
Compaq Computer Corp. 165,100 4,272
Intel Corp. 127,300 9,937
* Microsoft Corp. 441,000 39,470
* Network Associates, Inc. 133,800 8,864
* SCI Systems, Inc. 133,600 4,760
* Seagate Technology, Inc. 225,100 5,684
* Tellabs, Inc. 117,100 7,860
* 3Com Corp. 144,075 5,178
Xerox Corp. 54,600 5,811
- ----------------------------------------------------
GROUP TOTAL 127,399
- ----------------------------------------------------
UTILITIES (4.7%)
* Airtouch Communications, Inc. 136,600 6,685
MCI Communications Corp. 286,500 14,182
SBC Communications, Inc. 266,000 11,604
Sprint Corp. 158,000 10,695
* WorldCom, Inc. 319,189 13,745
- ----------------------------------------------------
GROUP TOTAL 56,911
- ----------------------------------------------------
VALUE (8.3%)
Aeroquip-Vickers, Inc. 49,600 2,867
American General Corp. 19,400 1,255
Amoco Corp. 10,700 924
* AMR Corp. 6,600 945
* Arrow Electronics, Inc. 24,400 660
Atlantic Richfield Co. 15,500 1,219
Avnet, Inc. 7,900 455
Beckman Instruments, Inc. 27,500 1,576
British Petroleum plc ADR 11,366 978
Cabot Oil & Gas Corp., Class A 25,900 955
Case Corp. 36,900 2,514
Caterpillar, Inc. 20,400 1,123
Chase Manhattan Corp. 16,600 2,239
Chubb Corp. 5,500 431
CIGNA Corp. 7,700 1,578
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
Citicorp 13,400 $ 1,903
Columbia/HCA Healthcare Corp. 17,000 548
Crestar Financial Corp. 53,749 3,178
CSX Corp. 25,400 1,511
Cummins Engine Co., Inc. 41,000 2,260
Delta Air Lines, Inc. 9,300 1,100
Dillard's Inc., Class A 24,600 909
Dow Chemical Co. 10,200 992
Duke Energy Corp. 10,668 635
E.I. DuPont de Nemours & Co. 19,000 1,292
Eaton Corp. 6,000 571
Entergy Corp. 28,867 859
First Union Corp. 55,599 3,155
* FMC Corp. 17,800 1,397
Ford Motor Co. 81,800 3,604
* Foundation Health Systems,
Inc., Class A 41,310 1,139
General Motors Corp. 31,032 2,093
Goodyear Tire & Rubber Co. 35,800 2,712
GPU, Inc. 31,500 1,394
Great Lakes Chemical Corp. 15,800 853
Harnischfeger Industries, Inc. 32,000 1,094
Hartford Financial Services
Group, Inc. 12,800 1,389
IBP, Inc. 38,000 853
IMC Global, Inc. 23,700 902
Inland Steel Industries, Inc. 22,700 627
International Business Machines
Corp. 31,100 3,231
Kennametal, Inc. 14,608 769
Loews Corp. 6,400 667
Mallinckrodt, Inc. 26,200 1,035
* Maxicare Health Plans, Inc. 33,600 370
Mellon Bank Corp. 21,800 1,384
National Steel Corp., Class B 28,000 479
NationsBank Corp. 7,000 511
Old Republic International
Corp. 27,100 1,201
Olsten Corp. 49,900 792
Owens Corning 24,200 870
Parker Hannifin Corp. 27,950 1,432
Philip Morris Cos., Inc. 48,900 2,039
Phillips Petroleum Co. 20,200 1,009
* Quantum Corp. 21,600 460
ReliaStar Financial Corp. 23,845 1,098
Repsol SA ADR 24,100 1,226
Republic New York Corp. 10,200 1,360
RJR Nabisco Holdings Corp. 44,700 1,400
Rohm & Haas Co. 18,600 1,922
Russell Corp. 24,000 643
* Seagate Technology, Inc. 27,100 684
Sears, Roebuck & Co. 27,500 1,580
Springs Industries, Inc.,
Class A 23,800 1,308
Standard Register Co. 17,600 597
* Stratus Computer, Inc. 36,100 1,591
Tecumseh Products Co., Class A 39,700 2,134
Tektronix, Inc. 36,750 1,640
* Toys 'R' Us, Inc. 33,300 1,001
Transatlantic Holdings, Inc. 13,300 1,006
<PAGE>
VALUE
SHARES (000)!
- ----------------------------------------------------
TRW, Inc. 19,600 $ 1,080
Tupperware Corp. 21,600 575
Ultramar Diamond Shamrock Corp. 27,700 976
* Vencor, Inc. 15,900 476
V.F. Corp. 41,600 2,187
* Wellpoint Health Networks,
Inc. 11,900 803
YPF SA ADR 41,600 1,414
- ----------------------------------------------------
GROUP TOTAL 99,639
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $876,460) 1,190,139
- ----------------------------------------------------
CASH EQUIVALENTS (11.0%)
- ----------------------------------------------------
FACE
AMOUNT
(000)
--------
Short-term Investments
Held as Collateral for
Loaned Securities (10.9%) $130,983 130,983
- ----------------------------------------------------
REPURCHASE AGREEMENT (0.1%) Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased at
$1,196, collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued at
$1,199 1,195 1,195
- ----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $132,178) 132,178
- ----------------------------------------------------
TOTAL INVESTMENTS (109.5%)
(Cost $1,008,638) 1,322,317
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-9.5%)
Cash 2
Dividends Receivable 1,429
Receivable for Investments Sold 22,953
Receivable for Fund Shares Sold 363
Other Assets 62
Payable for Investments Purchased (5,285)
Payable for Fund Shares Redeemed (1,330)
Payable for Investment Advisory Fees (1,495)
Payable for Administrative Fees (83)
Payable for Trustees' Deferred
Compensation Plan-Note F (57)
Collateral on Securities Loaned, at Value (130,983)
Other Liabilities (89)
---------
(114,513)
- ----------------------------------------------------
NET ASSETS (100%) $1,207,804
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 50,914,235 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $1,205,413
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 23.68
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)!
- ----------------------------------------------------
INVESTMENT CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 96,449 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 2,281
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 23.65
- ----------------------------------------------------
ADVISER CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 4,632 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 110**
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 23.66
- ----------------------------------------------------
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 789,504
Undistributed Net Investment Income
(Loss) 3,091
Undistributed Realized Net Gain (Loss) 101,530
Unrealized Appreciation (Depreciation) on
Investment Securities 313,679
- ----------------------------------------------------
NET ASSETS $1,207,804
- ----------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
** Represents $109,599 of net assets.
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Small Cap Value Portfolio applies Miller Anderson & Sherrerd's value
investing to small-and medium-sized companies, combining MAS's disciplined
valuation process with the judgment gained through considerable experience in
low P/E investing. The Portfolio keeps sector weights within 5% of the sector
weights of the Russell 2000 Index, with strategic over- and under-weightings
assigned to different economic sectors and industries. This portfolio is not
currently open to new investors.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS SMALL CAP RUSSELL 2000
VALUE INSTITUTIONAL INDEX
----------------------------------
SIX MONTHS 5.26% 6.37%
ONE YEAR 45.29 42.01
FIVE YEARS 23.35 17.67
TEN YEARS 19.63 14.80
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Small-capitalization stock prices have
experienced a greater degree of market volatility than those of
large-capitalization companies.
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.
* Total returns are compared to the Russell 2000 Index, an unmanaged market
index. Returns for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
COMMON STOCKS (95.4%)
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
BANKS (6.3%)
Bank United Corp., Class A 38,400 $ 1,920
Banknorth Group, Inc. 20,400 1,489
Colonial BancGroup, Inc. 122,500 4,425
Community First Bankshares,
Inc. 44,600 2,275
Cullen/Frost Bankers, Inc. 44,500 2,628
Dime Bancorp, Inc. 136,471 4,103
Eagle Financial Corp. 42,200 2,440
First American Corp. of
Tennessee 115,300 5,650
* Golden State Bancorp Inc. 189,000 7,217
Investors Financial Services
Corp. 41,100 2,260
Long Island Bancorp, Inc 22,600 1,429
Magna Group, Inc. 44,700 2,595
* Mechanics Savings Bank 76,600 2,336
Mercantile Bankshares Corp. 81,600 2,953
North Fork Bancorp., Inc. 78,100 3,017
* Prime Bancshares, Inc. 104,100 2,668
* Redfed Bancorp, Inc. 110,000 2,200
Reliance Bancorp, Inc. 103,300 4,003
Trustco Bank Corp. 49,329 1,400
Union Planters Corp. 41,936 2,608
- ----------------------------------------------------
GROUP TOTAL 59,616
- ----------------------------------------------------
<PAGE>
BASIC RESOURCES (4.8%)
* ACX Technologies, Inc. 73,700 1,764
AK Steel Holding Corp. 155,200 3,279
Agnico-Eagle Mines Ltd. 633,900 3,566
Barrick Gold Corp. 279,400 6,042
Bowater, Inc. 55,800 3,149
Crompton & Knowles Corp. 95,200 2,755
Equitable Resources, Inc. 66,700 2,218
Longview Fibre Co. 101,100 1,573
National Steel Corp., Class B 147,600 2,528
P.H. Glatfelter Co. 72,200 1,304
* RMI Titanium Co. 78,500 1,697
Solutia, Inc. 225,500 6,709
* Steel Dynamics, Inc. 120,000 2,550
* Tetra Technologies, Inc. 201,200 4,980
* Titanium Metals Corp. 53,800 1,459
- ----------------------------------------------------
GROUP TOTAL 45,573
- ----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (1.4%)
* Blyth Industries, Inc. 388,650 13,263
- ----------------------------------------------------
CONSUMER DURABLES (6.5%)
Arvin Industries, Inc. 160,000 6,550
* Brewer (C) Homes, Inc.,
Class A 121,300 243
Centex Corp. 76,600 2,920
* Essex International, Inc. 99,600 3,934
Excel Industries, Inc. 207,700 4,284
* Furniture Brands
International, Inc. 375,700 12,093
General Cable Corp. 60,600 2,750
* Giant Cement Holdings, Inc. 202,500 5,417
Interface, Inc. 48,700 2,024
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
* Lear Corp. 84,900 $ 4,786
Lone Star Industries, Inc. 92,200 6,402
Simpson Industries, Inc. 181,000 2,534
* Simpson Manufacturing Co.,
Inc. 44,500 1,813
Southdown, Inc. 59,700 4,160
Superior Telecom Inc. 30,800 1,286
- ----------------------------------------------------
GROUP TOTAL 61,196
- ----------------------------------------------------
CONSUMER SERVICES (4.8%)
* ACNielsen Corp. 73,000 1,930
* Action Performance Cos.,
Inc. 62,700 2,206
* Budget Group, Inc. 156,900 5,884
Central Newspapers, Inc.,
Class A 32,200 2,288
FelCor Suite Hotels, Inc. 91,800 3,402
* Jacor Communications, Inc. 67,400 3,977
* John Q. Hammons Hotels, Inc. 9,400 74
* Journal Register Co. 167,500 3,497
* Prime Hospitality Corp. 248,500 4,846
Sotheby's Holdings, Inc.,
Class A 105,600 2,455
* TMP Worldwide, Inc. 203,800 6,496
* Valassis Communications,
Inc. 159,900 6,556
* World Color Press, Inc. 59,200 2,057
- ----------------------------------------------------
GROUP TOTAL 45,668
- ----------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (3.3%)
CIT Group, Inc., Class A 172,100 5,615
CMAC Investment Corp. 35,000 2,336
Eaton Vance Corp. 76,200 3,672
EVEREN Capital Corp. 95,400 4,210
* First Alliance Corp. 86,850 1,363
* Franchise Mortgage
Acceptance
Co. LLC 43,400 1,090
H.F. Ahmanson & Co. 49,300 3,821
* Healthcare Financial
Partners, Inc. 30,100 1,426
Imperial Credit Industries,
Inc. 131,100 3,105
Legg Mason, Inc. 18,133 1,075
Morgan Keegan, Inc. 48,400 1,056
* T & W Financial Corp. 31,200 897
* Waddell & Reed Financial,
Inc. 43,800 1,139
- ----------------------------------------------------
GROUP TOTAL 30,805
- ----------------------------------------------------
<PAGE>
ENERGY (8.9%)
Apache Corp. 76,500 2,811
* Benton Oil & Gas Co. 101,900 1,127
Camco International, Inc. 106,400 6,437
Coflexip SA 45,000 2,779
Eastern Enterprises 67,000 2,881
Energen Corp. 258,200 5,680
Enron Oil & Gas Co. 107,700 2,470
ENSCO International, Inc. 87,000 2,414
* Global Industries Ltd. 199,000 4,055
* Global Marine, Inc. 84,500 2,091
* HS Resources, Inc. 108,201 1,691
* Input/Output, Inc. 35,000 818
KN Energy, Inc. 140,000 8,269
National Fuel Gas Co. 66,700 3,135
* National-Oilwell, Inc. 239,300 7,852
Noble Affiliates, Inc. 60,700 2,527
* Noble Drilling Corp. 208,100 6,360
* Ocean Energy, Inc. 127,764 3,010
Pioneer Natural Resources Co. 40,000 995
* Stolt Comex Seaway, S.A. 19,400 489
Sun Co., Inc. 54,400 2,224
Transocean Offshore, Inc. 109,000 5,607
* Varco International, Inc. 92,400 2,379
* Veritas DGC, Inc. 41,500 2,098
Vintage Petroleum, Inc. 188,600 3,961
Wicor, Inc 7,100 344
- ----------------------------------------------------
GROUP TOTAL 84,504
- ----------------------------------------------------
FOOD, TOBACCO & OTHER (3.2%)
* Consolidated Cigar Holdings,
Inc. 222,900 3,525
Dimon, Inc. 832,100 13,886
* Fresh Del Monte Produce,
Inc. 366,500 5,635
* General Cigar Holdings, Inc. 276,800 4,238
* Standard Commercial Corp. 177,250 2,825
- ----------------------------------------------------
GROUP TOTAL 30,109
- ----------------------------------------------------
HEALTH CARE (9.2%)
Alpharma, Inc. 215,700 4,678
* AmeriSource Health Corp.,
Class A 22,200 1,335
Angelica Corp. 171,600 3,958
* ARV Assisted Living, Inc. 107,900 1,511
Beckman Instruments, Inc. 93,600 5,364
* Genesis Health Ventures,
Inc. 79,600 2,239
* Guilford Pharmaceuticals,
Inc. 196,200 4,316
* Hologic, Inc. 139,100 3,860
* Lincare Holdings, Inc. 78,100 5,516
* Marquette Medical Systems,
Inc., Class A 92,100 2,556
* Maxicare Health Plans, Inc. 147,200 1,619
* Maxxim Medical, Inc. 111,400 3,196
Mylan Labs, Inc. 79,300 1,824
* NBTY, Inc. 65,500 3,979
* Personnel Group of America,
Inc. 162,000 3,685
* PharMerica, Inc. 353,200 5,254
* Physicians' Specialty Corp. 135,300 1,522
* PSS World Medical, Inc. 264,000 6,204
* Respironics, Inc. 100,498 2,908
* Sterile Recoveries, Inc. 43,500 740
* Transkaryotic Therapies,
Inc. 91,600 2,966
* Trex Medical Corp. 131,800 2,479
* Trigon Healthcare, Inc. 138,000 4,149
* Universal Health Services,
Inc., Class B 81,900 4,730
* Vivus, Inc. 385,200 4,526
* Wellpoint Health Networks,
Inc. 22,600 1,525
- ----------------------------------------------------
GROUP TOTAL 86,639
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (11.2%)
AAR Corp. 147,300 $ 4,014
* AccuStaff, Inc. 92,600 3,195
* AFC Cable Systems, Inc. 47,400 1,843
Arnold Industries, Inc. 25,000 422
* Atlas Air, Inc. 345,800 11,260
* Aviall, Inc. 174,100 2,611
* Aviation Sales Co. 105,000 4,305
* BE Aerospace, Inc. 97,600 2,745
* CDI Corp. 85,400 3,677
Chart Industries, Inc. 81,000 2,410
Cincinnati Milacron, Inc. 91,100 2,904
Columbus McKinnon Corp. 61,200 1,683
* Data Processing Resources
Corp. 71,100 2,209
* Fiserv, Inc. 41,400 2,624
Flowserve Corp. 185,100 6,039
Greenbrier Cos., Inc. 104,100 1,796
* Halter Marine Group, Inc. 44,000 698
* Hirsch International Corp.,
Class A 75,200 696
* Insurance Auto Auctions,
Inc. 201,500 2,216
JLG Industries, Inc. 21,000 349
Kaydon Corp. 76,400 3,123
Knightsbridge Tankers Ltd. 112,200 3,198
Manitowoc Co. 62,900 2,430
Martin Marietta Materials,
Inc. 41,100 1,775
* Midway Airlines Corp. 29,100 549
* Midwest Express Holdings,
Inc. 45,000 2,205
* OMI Corp. 401,800 3,616
* PST Vans, Inc. 80,800 545
* Philip Services Corp. 613,400 6,402
Select Appointments Holdings
plc ADR 141,800 3,580
* Steelcase Inc. 40,000 1,460
Stewart & Stevenson Services,
Inc. 60,000 1,444
* Swift Transportation Co.,
Inc. 70,500 1,692
Teekay Shipping Corp. 71,000 2,210
Tranz Rail Holdings Ltd. ADR 161,500 1,716
* Triumph Group, Inc. 78,500 3,483
Wabash National Corp. 109,700 3,181
Werner Enterprises, Inc. 229,700 5,857
- ----------------------------------------------------
GROUP TOTAL 106,162
- ----------------------------------------------------
INSURANCE (3.8%)
Allied Life Financial Corp. 120,100 2,620
AmerUs Life Holdings, Inc.,
Class A 100,000 3,237
ESG Re Ltd. 153,000 3,978
Everest Reinsurance Holdings,
Inc. 177,400 7,296
FBL Financial Group, Inc.,
Class A 52,100 2,637
Fremont General Corp. 112,300 6,605
Hartford Life, Inc., Class A 106,600 4,964
Nationwide Financial Services,
Inc., Class A 52,300 2,268
Presidential Life Corp. 100,700 1,907
- ----------------------------------------------------
GROUP TOTAL 35,512
- ----------------------------------------------------
<PAGE>
REAL ESTATE INVESTMENT TRUSTS (7.1%)
Associated Estates Realty
Corp. 94,300 1,969
Avalon Properties, Inc. 51,000 1,479
(+) Canadian Hotel Income
Properties 300,000 1,904
CarrAmerica Realty Corp. 107,500 3,225
Chateau Communities, Inc. 124,008 3,689
Cousins Properties, Inc. 15,400 476
Crescent Real Estate Equities
Co. 121,700 4,381
Duke Realty Investments, Inc. 198,894 4,848
Equity Office Properties Trust 32,100 983
Excel Realty Trust, Inc. 187,400 6,676
Health Care REIT, Inc. 147,850 4,066
Health and Retirement Property
Trust 95,000 1,912
Healthcare Realty Trust, Inc. 102,200 2,887
Home Properties of N.Y., Inc. 251,492 6,979
* Imperial Credit Commercial
Mortgage Investment Corp. 46,800 702
Liberty Property Trust 107,500 2,889
Mack-Cali Realty Corp. 73,100 2,855
Post Properties, Inc. 61,900 2,472
* Security Capital Group,
Inc., Class B 109,600 3,370
Security Capital Industrial
Trust 39,600 1,015
Smith (Charles E.) Residential
Realty, Inc. 150,700 5,011
United Dominion Realty Trust,
Inc. 206,900 3,000
- ----------------------------------------------------
GROUP TOTAL 66,788
- ----------------------------------------------------
RETAIL (7.6%)
* BJ's Wholesale Club, Inc. 163,400 6,373
* Borders Group, Inc. 100,700 3,430
* Brylane, Inc. 103,400 5,797
Cato Corp., Class A 271,200 3,220
Claire's Stores, Inc. 137,100 3,145
* Columbia Sportswear Co. 16,000 338
* CompUSA, Inc. 99,100 2,577
Culp, Inc. 185,700 3,807
* Dan River, Inc. 148,900 2,829
* Dress Barn (The), Inc. 94,600 2,720
* Friendly Ice Cream Corp. 84,900 1,730
* Galey & Lord, Inc. 32,200 741
* Goody's Family Clothing,
Inc. 77,800 3,443
Hughes Supply, Inc. 71,400 2,584
* I. C. Isaacs & Co., Inc. 67,600 473
* Office Depot, Inc. 193,800 6,032
Pier 1 Imports, Inc. 148,850 4,037
* Polo Ralph Lauren Corp. 159,500 4,795
Ross Stores, Inc. 52,700 2,325
Russ Berrie & Co., Inc. 91,300 2,767
* Stage Stores, Inc. 58,900 3,041
* Zale Corp. 187,200 5,405
- ----------------------------------------------------
GROUP TOTAL 71,609
- ----------------------------------------------------
TECHNOLOGY (11.9%)
* Acclaim Entertainment, Inc. 1,357,400 8,993
* Aspen Technology, Inc. 5,300 219
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
* Avant! Corp. 79,908 $ 1,668
* Avid Technology, Inc. 107,600 4,425
* Box Hill Systems Corp. 44,400 569
* Cherry Corp., Class A 143,700 2,587
* CHS Electronics, Inc. 259,000 4,856
* Citrix Systems, Inc. 47,400 2,569
* Computer Horizons Corp. 49,500 2,487
* Computer Products, Inc. 59,300 1,383
* Compuware Corp. 50,900 2,513
* Comverse Technology, Inc. 270,660 13,229
* Creative Technology Ltd. 66,500 1,496
* Dionex Corp. 25,000 1,394
* Electronic Arts, Inc. 53,800 2,522
* FactSet Research Systems,
Inc. 26,500 947
* General Scanning Inc. 112,900 2,427
* GenRad, Inc. 68,100 2,115
* Glenayre Technologies, Inc. 167,000 2,088
* HMT Technology Corp. 251,600 3,255
* Innova Corp. 118,000 1,829
* Ingram Micro, Inc., Class A 46,500 1,726
* Network Associates, Inc. 173,500 11,494
* P-Com, Inc. 142,000 2,840
* PairGain Technologies, Inc. 39,600 950
Penn Engineering &
Manufacturing Corp. 73,900 1,885
* Platinum Technology, Inc. 174,100 4,483
Salient 3 Communications,
Inc., Class A 43,900 505
* Sanmina Corp. 34,200 2,392
* SCI Systems, Inc. 112,700 4,015
* Splash Technology Holdings,
Inc. 132,800 2,224
*@ Sterling Software, Inc.
(Escrow) 6,951 --
* Summit Design, Inc. 175,200 2,606
* Symantec Corp. 157,900 4,253
* Systems & Computer
Technology Corp. 50,900 2,100
* Teradyne, Inc. 118,500 4,747
* USCS International, Inc. 72,500 1,545
* Unit Instruments, Inc. 166,500 1,415
- ----------------------------------------------------
GROUP TOTAL 112,751
- ----------------------------------------------------
UTILITIES (5.4%)
* CalEnergy Co., Inc. 165,200 4,667
* Calpine Corp. 131,300 2,339
Cinergy Corp. 56,500 2,090
Commonwealth Energy Systems 216,200 8,621
Illinova Corp. 158,300 4,779
* LCI International Inc. 41,364 1,593
Minnesota Power & Light Co. 58,300 2,478
* Mobile Telecommunication
Technologies Corp. 91,000 2,036
<PAGE>
New Century Energies, Inc. 46,100 2,322
New York State Electric & Gas
Corp. 78,400 3,126
* Paging Network, Inc. 188,700 2,901
Public Service Co. of New
Mexico 165,900 4,054
Rochester Gas & Electric Corp. 43,700 1,420
* SmarTalk Teleservices, Inc. 73,900 2,360
Teco Energy Inc. 207,500 5,862
- ----------------------------------------------------
GROUP TOTAL 50,648
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $732,683) 900,843
- ----------------------------------------------------
RIGHTS (0.1%)
- ----------------------------------------------------
* Coast Federal Litigation
Contingent Payment Rights
Trust (Cost $0) 61,000 991
- ----------------------------------------------------
WARRANTS (0.2%)
- ----------------------------------------------------
sec.* Canadian Hotel Income
Properties REIT, expiring
6/25/98
(acquired 9/16/97, Cost
$1,929) 300,000 1,904
- ----------------------------------------------------
CASH EQUIVALENT (4.5%)
- ----------------------------------------------------
FACE
AMOUNT
(000)
-------
REPURCHASE AGREEMENT (4.5%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98,
to be repurchased at
$42,630, collateralized by
various U.S. Government
Obligations, due
4/1/98-11/15/99, valued at
$42,751 (Cost $42,623) $ 42,623 42,623
- ----------------------------------------------------
TOTAL INVESTMENTS (100.2%) (Cost $777,235) 946,361
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
Dividends Receivable 834
Interest Receivable 7
Receivable for Investments Sold 12,549
Receivable for Fund Shares Sold 387
Other Assets 30
Payable for Investments Purchased (13,171)
Payable for Fund Shares Redeemed (663)
Payable for Investment Advisory Fees (1,649)
Payable for Administrative Fees (63)
Payable for Trustees' Deferred
Compensation Plan-Note F (25)
Other Liabilities (42)
--------
(1,806)
- ----------------------------------------------------
NET ASSETS (100%) $944,555
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
(000)!
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 42,187,111 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $944,555
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 22.39
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $705,209
Undistributed Net Investment Income (Loss) (18)
Undistributed Realized Net Gain (Loss) 70,238
Unrealized Appreciation (Depreciation) on
Investment Securities 169,126
- ----------------------------------------------------
NET ASSETS $944,555
- ----------------------------------------------------
sec. Restricted Security-Total market value of restricted security owned at
March 31, 1998 was $1,904 or 0.2% of net assets.
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale may
exist.
@ Value is less than $500.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The International Equity Portfolio is Miller Anderson & Sherrerd's core
international stock fund, investing in more than 80 different companies from
over 20 countries. MAS focuses on absolute and relative measures of value,
trends in business dynamics and risk control through diversification. MAS
analyzes both short- and long-term economic trends and employs a proprietary
valuation process and liquidity indicators to determine country weightings and
select individual stocks. Exposure to foreign currency is actively managed and
hedged when appropriate.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS INTERNATIONAL EQUITY
---------------------------- MSCI WORLD
INSTITUTIONAL# INVESTMENT
SIX MONTHS 7.07% 7.01% 5.86%
ONE YEAR 23.82 23.62 19.15
FIVE YEARS 11.99 11.90 12.13
SINCE INCEPTION 9.81 9.77 5.64
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- -----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- -----------------------------------------------------
ARGENTINA (1.3%)
* Banco Rio de La Plata SA ADR 297,900 $ 3,724
YPF SA ADR 117,000 3,978
- -----------------------------------------------------
GROUP TOTAL 7,702
- -----------------------------------------------------
AUSTRALIA (2.2%)
Foodland Associated Ltd. 313,375 2,347
National Australia Bank Ltd. 391,900 5,574
Reinsurance Australia Corp.,
Ltd. 1,767,571 4,722
- -----------------------------------------------------
GROUP TOTAL 12,643
- -----------------------------------------------------
AUSTRIA (1.7%)
OMV AG 75,259 9,704
- -----------------------------------------------------
CANADA (4.5%)
Canadian National Railway Co. 85,000 5,463
National Bank of Canada 343,200 6,438
Quebecor, Inc., Class B 330,300 6,871
TransCanada Pipelines Ltd. 324,300 7,650
- -----------------------------------------------------
GROUP TOTAL 26,422
- -----------------------------------------------------
FRANCE (11.7%)
* Dexia France 65,059 8,720
Elf Aquitaine 93,000 12,194
Groupe Danone 40,740 9,841
Lafarge SA 120,900 10,288
Lagardere S.C.A. 128,000 5,167
Rhone-Poulenc 221,710 11,274
Scor 193,110 11,070
- -----------------------------------------------------
GROUP TOTAL 68,554
- -----------------------------------------------------
GERMANY (7.6%)
Deutsche Bank AG 91,260 6,843
Deutsche Lufthansa AG 563,470 11,855
Deutsche Telekom AG 248,850 5,444
Henkel KGaA 118,560 8,541
RWE AG 93,000 5,017
Springer (Axel) Verlag AG 7,956 6,842
- -----------------------------------------------------
GROUP TOTAL 44,542
- -----------------------------------------------------
GREECE (1.0%)
Hellenic Telecommunication
Organization SA 112,000 2,806
* National Bank of Greece SA 26,620 2,917
- -----------------------------------------------------
GROUP TOTAL 5,723
- -----------------------------------------------------
HONG KONG (2.1%)
HSBC Holdings plc 81,200 2,484
Jardine Matheson Holdings Ltd. 431,000 1,957
Jardine Strategic Holdings
Ltd. 1,092,500 2,993
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- -----------------------------------------------------
New World Development Co.,
Ltd. 695,000 $ 2,453
Wharf (Holdings) Ltd. 1,334,000 2,617
- -----------------------------------------------------
GROUP TOTAL 12,504
- -----------------------------------------------------
INDIA (0.0%)
Housing Development Finance
Corp., Ltd. 10 1
ITC Ltd. 800 14
Tata Power Supply Co., Ltd. 200 1
- -----------------------------------------------------
GROUP TOTAL 16
- -----------------------------------------------------
INDONESIA (0.4%)
* Gulf Indonesia Resources
Ltd. 125,500 2,259
- -----------------------------------------------------
ITALY (7.8%)
* Banca di Roma 5,484,000 9,256
ENI S.p.A. 1,316,500 8,974
Pirelli S.p.A. 3,468,000 13,305
Telecom Italia S.p.A. 2,314,820 14,191
- -----------------------------------------------------
GROUP TOTAL 45,726
- -----------------------------------------------------
JAPAN (10.9%)
Bridgestone Corp. 405,000 9,176
Fuji Electric Co., Ltd. 1,081,000 3,706
Hirose Electric Co., Ltd. 90,600 4,513
Matsushita Electric Industrial
Co., Ltd. 92,000 1,477
Mitsui Fudosan Co., Ltd. 139,000 1,324
Nintendo Corp., Ltd. 84,000 7,247
Nippon Telegraph & Telephone
Corp. 647 5,388
Nissan Motor Co., Ltd. 1,211,000 4,633
Promise Co., Ltd. 107,000 5,547
Sony Corp. 80,000 6,782
Takefuji Corp. 92,300 4,362
TDK Corp. 52,000 4,018
Tokio Marine & Fire Insurance 492,000 5,499
- -----------------------------------------------------
GROUP TOTAL 63,672
- -----------------------------------------------------
MEXICO (2.1%)
ALFA SA de C.V., Class A 598,000 3,378
* Banacci SA de C.V., Class B 1,171,000 2,977
* Cemex SA de C.V., Class B 682,300 3,689
*@ Grupo Financiero Capital SA 761,325 --
* Tubos de Acero de Mexico SA 133,000 2,491
- -----------------------------------------------------
GROUP TOTAL 12,535
- -----------------------------------------------------
<PAGE>
NETHERLANDS (4.5%)
ING Groep N.V. 234,355 13,300
Philips Electronics N.V. 177,500 13,028
- -----------------------------------------------------
GROUP TOTAL 26,328
- -----------------------------------------------------
NORWAY (2.0%)
Christiania Bank OG
Kreditkasse 2,733,700 11,618
- -----------------------------------------------------
RUSSIA (0.7%)
Lukoil Holding ADR 58,800 4,133
- -----------------------------------------------------
SINGAPORE (1.0%)
* Creative Technology Ltd. 257,100 5,785
- -----------------------------------------------------
SPAIN (1.8%)
Telefonica de Espana 238,000 10,498
- -----------------------------------------------------
SWEDEN (7.8%)
Astra AB, Class A 399,000 8,241
* Nordbanken Holding AB 1,916,600 12,715
Pharmacia & Upjohn,
Inc.-Depository Shares 199,800 8,628
Sparbanken Sverige AB, Class A 484,100 15,967
- -----------------------------------------------------
GROUP TOTAL 45,551
- -----------------------------------------------------
SWITZERLAND (1.2%)
* Swissair AG (Registered) 5,185 7,246
- -----------------------------------------------------
UNITED KINGDOM (19.4%)
Bank of Scotland 849,400 10,055
Burmah Castrol plc 561,700 11,463
FKI plc 1,214,000 4,129
Imperial Tobacco Group plc 1,458,800 10,730
LucasVarity plc 2,576,700 10,426
National Westminster Bank plc 528,800 9,684
Pilkington plc 4,372,250 8,864
Rank Group plc 1,417,310 9,576
Sainsbury (J.) plc 1,268,592 10,909
Somerfield plc 621,000 3,725
Sun Alliance Insurance Group
plc 766,342 9,771
Tomkins plc 2,403,455 14,648
- -----------------------------------------------------
GROUP TOTAL 113,980
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $431,032) 537,141
- -----------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.7%)
- -----------------------------------------------------
JAPAN (0.7%)
Sanwa International Finance
Bermuda Trust, 1.25% (Cost
$4,222) 180 3,975
- -----------------------------------------------------
PREFERRED STOCKS (1.4%)
- -----------------------------------------------------
BRAZIL (1.4%)
Eletrobras, Class B 68,600,000 3,391
Telesp 15,640,000 5,076
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $8,091) 8,467
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- -------------------------------------------------------------
RIGHTS (0.0%)
- -------------------------------------------------------------
FRANCE (0.0%)
* Lafarge SA, expiring 4/8/98
(Cost $0) 120,900 $ 158
- -------------------------------------------------------------
FOREIGN CURRENCY (6.3%)
- -------------------------------------------------------------
FACE
AMOUNT
(000)
------------
Australian Dollar AUD 248 164
!! British Pound GBP 12,468 20,890
Canadian Dollar CAD 19 14
@ Italian Lira ITL 42 --
Japanese Yen JPY 2,121,497 15,915
Netherlands Guilder NLG 266 128
@ Norwegian Krone NOK 1 --
Singapore Dollar SGD 6 3
@ South Korean Won KRW 60 --
- --------------------------------------------------------------
TOTAL FOREIGN CURRENCY (Cost $37,560) 37,114
- --------------------------------------------------------------
CASH EQUIVALENTS (17.5%)
- --------------------------------------------------------------
Short-term Investments
Held as Collateral for Loaned
Securities (16.9%) $99,026 99,026
- --------------------------------------------------------------
REPURCHASE AGREEMENT (0.6%) Chase
Securities, Inc. 5.75%, dated 3/31/98
due 4/1/98, to be repurchased at
$3,645, collateralized by various
U.S. Government Obligations, due
4/1/98-11/15/99, valued at $3,655
(Cost $3,644) 3,644 3,644
- --------------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $102,670) 102,670
- --------------------------------------------------------------
TOTAL INVESTMENTS (117.6%) (Cost $583,575) 689,525
- --------------------------------------------------------------
<PAGE>
VALUE
(000)!
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-17.6%)
Foreign Currency Held as Collateral on Futures
Contracts (Cost $3,144) $ 3,144
Dividends Receivable 970
Interest Receivable 1
Receivable for Withholding Tax Reclaim 237
Receivable for Investments Sold 2,374
Receivable for Fund Shares Sold 342
Other Assets 65
Payable for Investments Purchased (8,563)
Payable for Fund Shares Redeemed (557)
Payable for Investment Advisory Fees (717)
Payable for Administrative Fees (39)
Accrued Foreign Capital Gains Tax (1)
Payable for Trustees' Deferred Compensation
Plan-Note F (26)
Payable to Custodian (1,476)
Unrealized Loss on Forward Foreign Currency
Contracts (1)
Unrealized Loss on Futures Contracts (245)
Collateral on Securities Loaned, at Value (99,026)
--------
(103,518)
- ---------------------------------------------------------
NET ASSETS (100%) $586,007
- ---------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------
NET ASSETS
Applicable to 38,682,123 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $585,313
- ---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.13
- ---------------------------------------------------------
INVESTMENT CLASS
- ---------------------------------------------------------
NET ASSETS
Applicable to 45,953 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 694
- ---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.10
- ---------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $434,475
Undistributed Net Investment Income (Loss) 880
Undistributed Realized Net Gain (Loss) 45,007
Unrealized Appreciation (Depreciation) on:
Investment Securities (Net of Foreign Capital
Gains Tax of $1) 106,395
Foreign Currency Transactions (505)
Futures (245)
- ---------------------------------------------------------
NET ASSETS $586,007
- ---------------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
!! A portion of these securities or currency was pledged
to cover margin requirements for futures contracts.
@ Value is less than $500.
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MID CAP GROWTH
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Mid Cap Growth Portfolio invests in the common stock of small- and
medium-sized companies with superior long-term earnings-growth potential and
rising earnings estimates. MAS's four-part process combines quantitative,
fundamental, and valuation analysis with a strict sell discipline. A
quantitative screen sorts the stocks in each sector based on estimate revision.
MAS then conducts fundamental research on purchase candidates, seeking strong
sales growth, rising profit margins, and high returns on capital. Qualitative
measures, including management quality and strategic positioning, are also
reviewed. This fundamental analysis is coupled with valuation analysis to weed
out the most overvalued securities. Holdings are sold when
earnings-estimate-revisions deteriorate, when our fundamental research uncovers
unfavorable trends, or when their valuations exceed the level that we believe is
reasonable given their growth prospects.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS MID CAP GROWTH
-------------------------- S&P MIDCAP
INSTITUTIONAL# ADVISER@ 400 INDEX
------------------------------------------
SIX MONTHS 21.99% 21.87% 11.94%
ONE YEAR 77.26 76.85 49.01
FIVE YEARS 24.25 24.19 19.51
SINCE INCEPTION 22.99 22.96 19.43
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Small-capitalization stock prices have
experienced a greater degree of market volatility than those of
large-capitalization companies.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
@ Represents an investment in the Adviser Class which commenced operations
1/31/97. Total returns for periods beginning prior to this date are based on the
performance of the Institutional Class and do not include the 0.25% 12b-1 Fee
applicable to the Adviser Class.
* The Mid Cap Growth Portfolio commenced operations on 3/30/90. Total returns
are compared to the S&P MidCap 400 Index, an unmanaged market index. Returns for
periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
COMMON STOCKS (94.7%)
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
BANKS (2.7%)
* Concord EFS, Inc. 231,600 $ 8,005
State Street Corp. 101,600 6,915
- ----------------------------------------------------
GROUP TOTAL 14,920
- ----------------------------------------------------
BASIC RESOURCES (1.5%)
* EarthShell Corp. 87,700 1,568
* Sealed Air Corp. 97,100 6,360
- ----------------------------------------------------
GROUP TOTAL 7,928
- ----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (2.5%)
* Beringer Wine Estates
Holdings, Inc., Class B 99,200 5,121
Estee Lauder Cos., Class A 129,800 8,810
- ----------------------------------------------------
GROUP TOTAL 13,931
- ----------------------------------------------------
CONSUMER DURABLES (1.0%)
Danaher Corp. 73,550 5,585
- ----------------------------------------------------
CONSUMER SERVICES (18.3%)
* AMF Bowling, Inc. 204,100 5,230
* At Home Corp., Series A 178,350 6,030
* Cablevision Systems Corp.,
Class A 75,600 4,971
* Cinar Films, Inc., Class B 147,600 6,291
Comcast Corp., Class A Special 146,097 5,159
* Heftel Broadcasting Corp.,
Class A 98,500 4,408
* Imax Corp. 247,800 7,031
* Jacor Communications, Inc. 122,800 7,245
* Metro-Goldwyn-Mayer, Inc. 169,900 3,802
* Outdoor Systems, Inc. 240,375 8,428
Premier Parks, Inc. 138,800 8,051
* Princeton Video Image, Inc. 133,700 1,086
Stewart Enterprises, Inc.,
Class A 82,400 4,584
* Tele-Communications, Inc.,
Class A 168,599 5,242
* Tele-Communications
International, Inc., Class A 191,900 3,862
* Tele-Communications Liberty
Media Group, Class A 292,116 10,041
* Tele-Communications TCI
Ventures Group, Class A 362,802 6,372
* Univision Communications,
Inc., Class A 84,100 3,133
- ----------------------------------------------------
GROUP TOTAL 100,966
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MID CAP GROWTH
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (4.3%)
A.G. Edwards, Inc. 81,400 $ 3,561
FINOVA Group, Inc. 115,600 6,806
Franklin Resources, Inc. 94,600 5,014
Sirrom Capital Corp. 271,700 8,168
- ----------------------------------------------------
GROUP TOTAL 23,549
- ----------------------------------------------------
ENERGY (2.2%)
Diamond Offshore Drilling, Inc. 91,700 4,161
* Global Industries Ltd. 198,500 4,044
* J. Ray McDermott, S.A. 87,500 3,686
- ----------------------------------------------------
GROUP TOTAL 11,891
- ----------------------------------------------------
FOOD, TOBACCO & OTHER (1.5%)
* Nutraceutical International
Corp. 160,900 3,540
* Rexall Sundown, Inc. 141,100 4,806
- ----------------------------------------------------
GROUP TOTAL 8,346
- ----------------------------------------------------
HEALTH CARE (12.4%)
HBO & Co. 145,600 8,791
* Health Management Associates,
Inc., Class A 570,450 16,329
* Lincare Holdings, Inc. 244,200 17,247
* Orthodontic Centers of
America, Inc. 350,800 7,608
* Pediatrix Medical Group, Inc. 78,400 3,646
* Province Healthcare Co. 121,300 3,184
Shire Pharmaceuticals Group plc
ADR 70,200 1,505
* Sunrise Assisted Living, Inc. 126,600 5,665
* Total Renal Care Holdings,
Inc. 122,366 4,076
- ----------------------------------------------------
GROUP TOTAL 68,051
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (9.6%)
* Allied Waste Industries, Inc. 276,000 6,891
* American Disposal Services,
Inc. 84,100 3,175
* Atlas Air, Inc. 115,400 3,758
Cintas Corp. 144,000 7,452
* Fiserv, Inc. 142,450 9,028
* Loral Space & Communications
Ltd. 304,100 8,496
ONIX Systems, Inc. 186,900 2,710
* United Rentals, Inc. 241,300 6,274
* USA Waste Services, Inc. 118,800 5,294
- ----------------------------------------------------
GROUP TOTAL 53,078
- ----------------------------------------------------
<PAGE>
INSURANCE (0.9%)
* Healthcare Recoveries, Inc. 221,600 5,152
- ----------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (1.8%)
* Security Capital Group, Inc.,
Class B 68,400 2,104
Security Capital Industrial
Trust 208,864 5,352
*(+) Security Capital U.S.
Realty 196,500 2,594
- ----------------------------------------------------
GROUP TOTAL 10,050
- ----------------------------------------------------
RETAIL (7.7%)
* Borders Group, Inc. 241,200 8,216
* Brylane, Inc. 87,600 4,911
* CompUSA, Inc. 149,900 3,898
CVS Corp. 103,500 7,814
* Dollar Tree Stores, Inc. 73,400 3,899
* Friendly Ice Cream Corp. 176,500 3,596
* Hibbett Sporting Goods, Inc. 106,600 2,958
* Polo Ralph Lauren Corp. 126,500 3,803
* Stage Stores, Inc. 66,600 3,438
- ----------------------------------------------------
GROUP TOTAL 42,533
- ----------------------------------------------------
TECHNOLOGY (19.0%)
* Accelr8 Technology Corp. 139,200 2,245
* Advanced Fibre
Communications, Inc. 142,100 5,169
* BMC Software, Inc. 121,300 10,166
* CIENA Corp. 80,300 3,423
* Complete Business Solutions,
Inc. 253,600 9,098
* Computer Horizons Corp. 161,800 8,130
* Exodus Communications, Inc. 45,400 1,271
* Geac Computer Corp., Ltd. 115,200 4,834
Inter-Tel, Inc. 209,000 5,630
Linear Technology Corp. 58,700 4,050
* MAPICS, Inc. 339,900 6,012
* Micro Focus Group plc ADR 140,900 6,710
* Network Associates, Inc. 125,462 8,312
* Peoplesoft, Inc. 95,800 5,047
* RELTEC Corp. 77,400 2,743
* Sapient Corp. 122,400 5,799
* Tellabs, Inc. 162,700 10,921
* Uniphase Corp. 125,700 5,287
- ----------------------------------------------------
GROUP TOTAL 104,847
- ----------------------------------------------------
UTILITIES (9.3%)
* Cellular Communications
International, Inc. 99,400 6,759
* Globalstar Telecommunications
Ltd. 248,702 15,761
* Intermedia Communications,
Inc. 62,600 4,985
* Level 3 Communications, Inc. 72,800 5,214
* Metromedia Fiber Network,
Inc., Class A 52,100 1,752
* NEXTLINK Communications,
Inc., Class A 130,000 4,176
* Orange plc 527,400 3,363
* Qwest Communications
International, Inc. 130,700 5,081
* Tel-Save Holdings, Inc. 170,400 3,877
- ----------------------------------------------------
GROUP TOTAL 50,968
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $350,484) 521,795
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)!
- ----------------------------------------------------
CASH EQUIVALENTS (30.0%)
- ----------------------------------------------------
Short-term Investments
Held as Collateral for
Loaned Securities (24.4%) $134,118 $ 134,118
- ----------------------------------------------------
REPURCHASE AGREEMENT (5.6%) Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased at
$30,923, collateralized by
various U.S. Government
Obligations, due
4/1/98-11/15/99, valued at
$31,010 30,918 30,918
- ----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $165,036) 165,036
- ----------------------------------------------------
TOTAL INVESTMENTS (124.7%) (Cost $515,520) 686,831
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-24.7%)
Dividends Receivable 61
Interest Receivable 5
Receivable for Investments Sold 11,730
Receivable for Fund Shares Sold 3,942
Other Assets 18
Payable for Investments Purchased (16,699)
Payable for Fund Shares Redeemed (287)
Payable for Investment Advisory Fees (583)
Payable for Administrative Fees (35)
Payable for Trustees' Deferred
Compensation Plan-Note F (16)
Payable for Distribution Fees-Adviser
Class (5)
Collateral on Securities Loaned, at Value (134,118)
Other Liabilities (45)
---------
(136,032)
- ----------------------------------------------------
NET ASSETS (100%) $ 550,799
- ----------------------------------------------------
<PAGE>
Value
(000)!
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 23,442,906 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 521,737
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 22.26
- ----------------------------------------------------
ADVISER CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 1,309,333 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 29,062
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 22.20
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 340,482
Undistributed Net Investment Income
(Loss) (329)
Undistributed Realized Net Gain (Loss) 39,335
Unrealized Appreciation (Depreciation) on
Investment Securities 171,311
- ----------------------------------------------------
NET ASSETS $ 550,799
- ----------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale may
exist.
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Mid Cap Value Portfolio applies Miller Anderson & Sherrerd's value investing
to medium-sized companies, combining MAS's disciplined valuation process with
the judgment gained through considerable experience in low P/E investing. The
Portfolio keeps sector weights within 5% of the sector weights of the S&P
Mid-Cap 400 Index, with strategic over- and under-weightings assigned to
different economic sectors and industries.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS MID CAP VALUE
---------------------------- S&P MIDCAP
INSTITUTIONAL# INVESTMENT
SIX MONTHS 10.09% 9.96% 11.94%
ONE YEAR 56.04 55.71 49.01
SINCE INCEPTION 39.11 38.93 29.07
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Small-capitalization stock prices have
experienced a greater degree of market volatility than those of
large-capitalization companies.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
BANKS (8.7%)
City National Corp. 32,200 $ 1,224
Colonial BancGroup, Inc. 91,000 3,287
Comerica, Inc. 28,400 3,005
Community First Bankshares, Inc. 29,000 1,479
Compass Bancshares, Inc. 14,900 749
Crestar Financial Corp. 25,187 1,489
Cullen/Frost Bankers, Inc. 25,000 1,476
Dime Bancorp, Inc. 77,100 2,318
First American Corp. of Tennessee 15,100 740
First of America Bank Corp. 119 10
* Golden State Bancorp., Inc. 67,000 2,558
Greenpoint Financial Corp. 33,000 1,186
Investors Financial Services
Corp. 12,100 665
Mercantile Bankshares Corp. 34,101 1,234
National Commerce Bancorp. 25,400 1,083
North Fork Bancorp., Inc. 27,700 1,070
Regions Financial Corp. 77,800 3,263
* Silicon Valley Bancshares 11,900 727
Southtrust Corp. 66,100 2,768
Sovereign Bancorp, Inc. 38,520 701
Trans Financial, Inc. 38,900 1,682
Wilmington Trust Corp. 16,300 1,082
- ----------------------------------------------------
GROUP TOTAL 33,796
- ----------------------------------------------------
BASIC RESOURCES (2.6%)
Bowater, Inc. 57,800 3,262
Crompton & Knowles Corp. 46,300 1,340
Lubrizol Corp. 14,900 574
National Steel Corp., Class B 39,500 676
* Owens-Illinois, Inc. 16,500 714
Solutia, Inc. 118,200 3,516
- ----------------------------------------------------
GROUP TOTAL 10,082
- ----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (0.2%)
Dial Corp. 30,700 735
- ----------------------------------------------------
CONSUMER DURABLES (7.0%)
Arvin Industries, Inc. 19,300 790
Centex Corp. 25,300 965
Dana Corp. 39,700 2,310
D.R. Horton, Inc. 26,800 570
* Essex International, Inc. 99,100 3,914
* Furniture Brands International,
Inc. 49,900 1,606
General Cable Corp. 28,500 1,293
Kaufman & Broad Home Corp. 34,800 1,133
* Knoll, Inc. 81,700 3,151
* Lear Corp. 45,500 2,565
Leggett & Platt, Inc. 17,900 921
Lone Star Industries, Inc. 20,300 1,410
Southdown, Inc. 57,200 3,986
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
* Tower Automotive, Inc. 29,800 $ 1,341
* USG Corp. 26,400 1,431
- ----------------------------------------------------
GROUP TOTAL 27,386
- ----------------------------------------------------
CONSUMER SERVICES (5.5%)
* Budget Group, Inc. 121,800 4,568
Central Newspapers, Inc., Class A 11,200 796
Hertz Corp., Class A 22,500 1,035
* Jacor Communications, Inc. 30,500 1,799
* Journal Register Co. 52,900 1,104
Media General, Inc., Class A 67,300 3,310
* MGM Grand, Inc. 17,300 593
New York Times Co., Class A 7,000 490
* Valassis Communications, Inc. 102,500 4,203
Viad Corp. 40,200 975
Washington Post Co., Class B 4,500 2,393
- ----------------------------------------------------
GROUP TOTAL 21,266
- ----------------------------------------------------
CREDIT & FINANCE/
INVESTMENT COMPANIES (6.9%)
AMBAC, Inc. 28,400 1,660
Associates First Capital Corp. 7,312 578
Bear Stearns Co., Inc. 69,820 3,587
Capital One Financial Corp. 33,400 2,634
* CIT Group, Inc., Class A 47,800 1,559
CMAC Investment Corp. 23,300 1,555
Franklin Resources, Inc. 92,700 4,913
Legg Mason, Inc. 37,600 2,230
Lehman Brothers Holdings, Inc. 25,200 1,887
Providian Financial Corp. 29,300 1,683
Raymond James Financial, Inc. 19,500 849
SLM Holding Corp. 84,700 3,695
- ----------------------------------------------------
GROUP TOTAL 26,830
- ----------------------------------------------------
ENERGY (6.0%)
Columbia Gas System, Inc. 23,300 1,812
* Cooper Cameron Corp. 17,000 1,026
* Dril-Quip, Inc. 8,000 260
ENSCO International, Inc. 41,800 1,160
* Global Industries Ltd. 70,700 1,440
National Fuel Gas Co. 14,400 677
NICOR, Inc. 13,500 570
Noble Affiliates, Inc. 13,400 558
* Noble Drilling Corp. 113,900 3,481
* Ocean Energy, Inc. 93,180 2,195
ONEOK, Inc. 14,785 602
Precision Drilling Corp. 18,900 399
Sun Co., Inc. 12,100 495
Tosco Corp. 25,100 885
Transocean Offshore, Inc. 74,500 3,832
* Valero Energy Corp. 20,700 691
Varco International, Inc. 41,700 1,074
Vintage Petroleum, Inc. 25,600 538
Washington Gas Light Co. 5,400 148
* Weatherford Enterra, Inc. 32,700 1,388
- ----------------------------------------------------
GROUP TOTAL 23,231
- ----------------------------------------------------
<PAGE>
FOOD, TOBACCO & OTHER (2.3%)
Dean Foods Co. 24,300 1,223
Dimon, Inc. 27,300 456
* Fresh Del Monte Produce, Inc. 125,200 1,925
Interstate Bakeries Corp. 82,900 2,679
* Keebler Foods Co. 21,900 657
Lancaster Colony Corp. 28,800 1,222
Michael Foods, Inc. 28,400 760
- ----------------------------------------------------
GROUP TOTAL 8,922
- ----------------------------------------------------
HEALTH CARE (6.6%)
Bergen Brunswig Corp., Class A 20,100 857
* Datascope Corp. 40,000 1,040
* HEALTHSOUTH Rehabilitation
Corp. 77,200 2,166
* Lincare Holdings, Inc. 37,700 2,663
* Marquette Medical Systems,
Inc., Class A 30,100 835
Mylan Labs, Inc. 96,100 2,210
* Personnel Group of America,
Inc. 22,400 510
* PharMerica, Inc. 192,400 2,862
* PSS World Medical, Inc. 49,200 1,156
* Respironics, Inc. 117,094 3,388
* Trigon Healthcare, Inc. 171,200 5,147
* Universal Health Services,
Inc., Class B 25,600 1,478
* Watson Pharmaceuticals, Inc. 41,700 1,501
- ----------------------------------------------------
GROUP TOTAL 25,813
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (10.8%)
* AccuStaff, Inc. 46,000 1,587
Agco Corp. 43,600 1,294
Air Express International Corp. 109,500 2,909
Airborne Freight Corp. 19,600 737
* Atlas Air, Inc. 101,100 3,292
* Aviation Sales Co. 24,100 988
Canadian National Railway Co. 12,800 819
Case Corp. 29,400 2,003
* CDI Corp. 17,300 745
Cincinnati Milacron, Inc. 9,800 312
CNF Transportation, Inc. 63,800 2,293
Comair Holdings, Inc. 26,600 705
Danka Business Systems plc ADR 41,500 763
* DONCASTERS plc ADR 11,200 293
* Fiserv, Inc. 28,600 1,813
* Interim Services, Inc. 47,100 1,590
Lafarge Corp. 16,500 633
Martin Marietta Materials, Inc. 101,800 4,396
Miller (Herman), Inc. 29,800 999
* Philip Services Corp. 161,100 1,681
Precision Castparts Corp. 25,600 1,515
* Select Appointments Holdings
plc ADR 65,700 1,659
* SPS Technologies, Inc. 20,800 1,122
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
* Steelcase, Inc. 13,300 $ 485
Trinity Industries, Inc. 29,200 1,602
* Triumph Group, Inc. 19,000 843
* USA Waste Services, Inc. 95,400 4,251
Vulcan Materials Co. 7,000 767
- ----------------------------------------------------
GROUP TOTAL 42,096
- ----------------------------------------------------
INSURANCE (3.2%)
Allmerica Financial Corp. 13,700 875
AmerUs Life Holdings, Inc.,
Class A 25,000 809
Capital Re Corp. 27,500 1,767
ESG Re Ltd. 23,900 621
Everest Reinsurance Holdings,
Inc. 12,600 518
Nationwide Financial Services,
Inc., Class A 55,700 2,416
Old Republic International Corp. 35,000 1,551
Reliance Group Holdings, Inc. 33,800 647
ReliaStar Financial Corp. 19,100 880
Stirling Cooke Brown Holdings,
Ltd. 46,600 1,247
Torchmark Corp. 20,800 953
- ----------------------------------------------------
GROUP TOTAL 12,284
- ----------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (2.2%)
CarrAmerica Realty Corp. 38,200 1,146
Crescent Real Estate Equities Co. 178,200 6,415
Mack-Cali Realty Corp. 7,800 305
* Security Capital Group, Inc.,
Class B 26,600 818
- ----------------------------------------------------
GROUP TOTAL 8,684
- ----------------------------------------------------
RETAIL (10.7%)
Applebee's International, Inc. 29,100 673
Arbor Drugs, Inc. 39,450 929
* Barnes & Noble, Inc. 9,200 359
* Best Buy Co., Inc. 19,500 1,299
* BJ's Wholesale Club, Inc. 86,000 3,354
* Brinker International, Inc. 66,700 1,459
* Brylane, Inc. 54,100 3,033
* Columbia Sportswear Co. 5,800 122
* CompUSA, Inc. 47,100 1,225
Culp, Inc. 13,600 279
CVS Corp. 20,200 1,525
* Dan River, Inc. 39,800 756
Hughes Supply, Inc. 52,500 1,900
* Office Depot, Inc. 146,400 4,557
Pier 1 Imports, Inc. 34,950 948
* Polo Ralph Lauren Corp. 56,700 1,705
Richfood Holdings, Inc. 49,900 1,597
Ross Stores, Inc. 123,000 5,427
Russ Berrie & Co., Inc. 54,800 1,661
* ShopKo Stores, Inc. 18,700 593
TJX Cos., Inc. 102,800 4,652
V.F. Corp. 32,900 1,729
* Zale Corp. 66,600 1,923
- ----------------------------------------------------
GROUP TOTAL 41,705
- ----------------------------------------------------
<PAGE>
TECHNOLOGY (10.1%)
* ADC Telecommunications, Inc. 47,000 1,295
* Altera Corp. 35,300 1,333
* Analog Devices, Inc. 74,200 2,467
* Atmel Corp. 48,000 723
* Avant! Corp. 20,655 431
* BMC Software, Inc. 43,200 3,621
* Cadence Design Systems, Inc. 51,800 1,794
* Computer Products, Inc. 40,700 949
* Electronic Arts, Inc. 59,300 2,783
* HMT Technology Corp. 44,200 572
* Inacom Corp. 6,100 169
* Lexmark International Group,
Inc. 21,500 970
Linear Technology Corp. 36,800 2,539
* Micron Technology, Inc. 58,600 1,703
* Network Associates, Inc. 50,100 3,319
* Platinum Technology, Inc. 59,900 1,542
* Sanmina Corp. 12,000 839
* SCI Systems, Inc. 73,600 2,622
* Storage Technology Corp. 22,800 1,734
* Stratus Computer, Inc. 13,200 582
* Symantec Corp. 194,900 5,250
Tektronix, Inc. 16,650 743
* Teradyne, Inc. 38,000 1,522
- ----------------------------------------------------
GROUP TOTAL 39,502
- ----------------------------------------------------
UTILITIES (6.4%)
Allegheny Energy, Inc. 74,800 2,510
Black Hills Corp. 37,800 876
Century Telephone Enterprises,
Inc. 24,500 1,498
CMS Energy Corp. 28,000 1,314
Florida Progress Corp. 61,300 2,555
IPALCO Enterprises, Inc. 27,800 1,253
Illinova Corp. 46,200 1,395
* LCI International, Inc. 21,400 824
LG&E Energy Corp. 30,800 795
New Century Energies, Inc. 49,900 2,514
New York State Electric &
Gas Corp. 19,400 774
* Nextel Communications, Inc.,
Class A 92,700 3,129
NIPSCO Industries, Inc. 29,800 834
Pinnacle West Capital Corp. 51,700 2,297
Teco Energy, Inc. 87,600 2,475
- ----------------------------------------------------
GROUP TOTAL 25,043
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $293,009) 347,375
- ----------------------------------------------------
UNIT TRUST (0.9%)
- ----------------------------------------------------
S&P Mid-Cap 400 Depositary Receipts
(Cost $3,320) 49,200 3,508
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)!
- ----------------------------------------------------
CASH EQUIVALENT (7.3%)
- ----------------------------------------------------
REPURCHASE AGREEMENT (7.3%)
Chase Securities, Inc. 5.75%,
dated 3/31/98 due 4/1/98, to be
repurchased at $28,473,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/98, valued at
$28,554
(Cost $28,468) $28,468 $ 28,468
- ----------------------------------------------------
TOTAL INVESTMENTS (97.4%) (Cost $324,797) 379,351
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.6%)
Cash 6
Dividends Receivable 119
Interest Receivable 5
Receivable for Investments Sold 4,325
Receivable for Fund Shares Sold 40,974
Other Assets 6
Payable for Investments Purchased (34,365)
Payable for Fund Shares Redeemed (499)
Payable for Investment Advisory Fees (547)
Payable for Administrative Fees (22)
Payable for Shareholder Servicing Fees-
Investment Class (2)
Payable for Trustee's Deferred
Compensation Plan-Note F (5)
Other Liabilities (21)
--------
9,974
- ----------------------------------------------------
NET ASSETS (100%) $389,325
- ----------------------------------------------------
VALUE
(000)!
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 17,362,051 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $372,006
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 21.43
- ----------------------------------------------------
INVESTMENT CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 810,922 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 17,319
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 21.36
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $318,864
Undistributed Net Investment Income (Loss) 297
Undistributed Realized Net Gain (Loss) 15,610
Unrealized Appreciation (Depreciation) on
Investment Securities 54,554
- ----------------------------------------------------
NET ASSETS $389,325
- ----------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EMERGING MARKETS VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Emerging Markets Value Portfolio invests primarily in common stocks of
emerging markets issuers throughout the world, investing in more than 50 stocks
from more than 20 countries. Miller Anderson & Sherrerd evaluates both
short-term and long-term international economic trends and relative
attractiveness of emerging markets and individual emerging market securities to
achieve the Portfolio's objective of long-term capital growth. Valuation
techniques and business dynamics are emphasized in determining country
allocation and stock selection. Foreign currency exposure is actively managed,
but is not often hedged due to the high cost of hedging transactions.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS EMERGING MSCI EMERGING
MARKETS VALUE MARKETS FREE INDEX
----------------------------------
SIX MONTHS (12.97)% (13.15)%
ONE YEAR (6.73) (15.27)
SINCE INCEPTION 8.04 0.60
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments.
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.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Emerging Markets Value Portfolio commenced operations on 2/28/95. Total
returns are compared to the Morgan Stanley Capital International Emerging
Markets Free Index, an unmanaged market index. Returns for periods less than one
year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
COMMON STOCKS (83.8%)
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
ARGENTINA (5.6%)
* Banco Rio de La Plata SA ADR 21,100 $ 264
YPF SA ADR 14,600 496
- ----------------------------------------------------
GROUP TOTAL 760
- ----------------------------------------------------
BRAZIL (5.8%)
* Light Participacoes SA 1,912,000 496
Pao de Acucar GDR 13,000 299
- ----------------------------------------------------
GROUP TOTAL 795
- ----------------------------------------------------
CHILE (2.2%)
Cia de Telecomunicaciones de Chile
SA ADR 3,700 102
Embotelladora Andina SA
Series B ADR 9,700 194
- ----------------------------------------------------
GROUP TOTAL 296
- ----------------------------------------------------
GREECE (6.1%)
Hellenic Telecommunication
Organization SA 16,300 408
* National Bank of Greece SA 3,900 428
- ----------------------------------------------------
GROUP TOTAL 836
- ----------------------------------------------------
HONG KONG (2.2%)
* China Southern Airlines Co.,
Ltd. ADR 13,600 187
* Guangshen Railway Co., Ltd.,
Class H 520,000 119
- ----------------------------------------------------
GROUP TOTAL 306
- ----------------------------------------------------
HUNGARY (3.3%)
* Matav Rt ADR 14,500 451
- ----------------------------------------------------
INDIA (7.5%)
Hindustan Lever Ltd. 50 2
*@ Indian Petrochemicals Corp.,
Ltd. 100 --
ITC Ltd. 1,322 24
Mahanagar Telephone Nigam Ltd. 52,900 352
* Reliance Industries Ltd. 149,640 652
- ----------------------------------------------------
GROUP TOTAL 1,030
- ----------------------------------------------------
INDONESIA (1.8%)
* Gulf Indonesia Resources Ltd. 5,500 99
International Nickel Indonesia 106,500 130
Pabrik Kertas Tjiwi Kimia 62,500 15
- ----------------------------------------------------
GROUP TOTAL 244
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
ISRAEL (7.1%)
Bank Hapoalim Ltd. 75,000 $ 206
Elron Electronic Industries
Ltd. 10,000 165
First International Bank of
Israel Ltd., Class 1 1,600 249
Supersol Ltd. 110,000 356
- ----------------------------------------------------
GROUP TOTAL 976
- ----------------------------------------------------
KOREA (2.4%)
* Hyundai Heavy Industries 5,210 194
SK Telecom Co., Ltd. ADR 17,700 140
- ----------------------------------------------------
GROUP TOTAL 334
- ----------------------------------------------------
MALAYSIA (0.7%)
* Lingkaran Trans Kota Holdings
Bhd 100,000 99
- ----------------------------------------------------
MEXICO (20.3%)
ALFA SA de C.V., Class A 110,000 621
* Banacci SA de C.V., Class B 143,000 364
* Cemex SA de C.V., Class B 104,000 562
* Grupo Posadas SA, Class A 597,000 442
Organizacion Soriana SA de
C.V., Class B 113,000 433
Panamerican Beverages, Inc.,
Class A 8,800 353
- ----------------------------------------------------
GROUP TOTAL 2,775
- ----------------------------------------------------
PHILIPPINES (1.7%)
Philippine Long Distance
Telephone Co. ADR 8,500 237
- ----------------------------------------------------
RUSSIA (2.5%)
Lukoil Holding ADR 4,800 337
- ----------------------------------------------------
SINGAPORE (3.2%)
* Creative Technology Ltd. 19,400 437
- ----------------------------------------------------
SOUTH AFRICA (2.0%)
Lonrho plc 153,000 278
- ----------------------------------------------------
TAIWAN (1.9%)
* Taiwan Semiconductor
Manufacturing Co. ADR 9,800 254
- ----------------------------------------------------
THAILAND (6.2%)
K. R. Precision Public Co.,
Ltd. (Foreign) 124,000 329
* Ruam Pattana Fund II
(Foreign) 830,600 148
* Sub-Thawee Fund (Foreign) 785,400 371
- ----------------------------------------------------
GROUP TOTAL 848
- ----------------------------------------------------
<PAGE>
- ----------------------------------------------------
VENEZUELA (1.3%)
CANTV ADR 4,300 180
- ----------------------------------------------------
TOTAL COMMON STOCKS (Cost $11,253) 11,473
- ----------------------------------------------------
PREFERRED STOCKS (12.5%)
- ----------------------------------------------------
BRAZIL (12.5%)
* Cia Cimento Portland Itau 1,100,000 259
CEMIG 10,241,000 497
Eletrobras, Class B 5,300,000 262
Telesp 1,366,000 444
Votorantim Celulose e Papel SA 11,800,000 249
- ----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $1,610) 1,711
- ----------------------------------------------------
WARRANTS (0.0%)
- ----------------------------------------------------
INDONESIA (0.0%)
*@ Sinar Mas Multiartha (Foreign),
expiring 11/28/01
(Cost $0) 12,495 --
- ----------------------------------------------------
FOREIGN CURRENCY (0.6%)
- ----------------------------------------------------
FACE
AMOUNT
(000)
-------
Indian Rupee INR 19 1
Indonesian Rupiah IDR 627,356 73
Singapore Dollar SGD 2 1
- ------------------------------------------------------
TOTAL FOREIGN CURRENCY (Cost $77) 75
- ------------------------------------------------------
CASH EQUIVALENT (3.3%)
- -------------------------------
REPURCHASE AGREEMENT (3.3%) Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased at
$457, collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued at
$458 (Cost $457) $457 457
- ------------------------------------------------------
TOTAL INVESTMENTS (100.2%) (Cost $13,397) 13,716
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EMERGING MARKETS VALUE
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)!
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
Cash $ 1
Dividends Receivable 29
Receivable for Investments Sold 225
Receivable from Investment Adviser 4
Unrealized Gain on Forward Foreign Currency
Contracts 1
Other Assets 52
Payable for Investments Purchased (294)
Payable for Administrative Fees (1)
Accrued Foreign Capital Gains Tax (22)
Payable for Trustees' Deferred Compensation
Plan-Note F (1)
Other Liabilities (16)
-------
(22)
- -------------------------------------------------------
NET ASSETS (100%) $13,694
- -------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------
NET ASSETS
Applicable to 1,432,002 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $13,694
- -------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.56
- -------------------------------------------------------
- -------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital 14,408
Undistributed Net Investment Income (Loss) 96
Undistributed Realized Net Gain (Loss) (1,100)
Unrealized Appreciation (Depreciation) on:
Investment Securities (Net of Foreign
Capital Gains Tax of $22) 299
Foreign Currency Transactions (9)
- -------------------------------------------------------
NET ASSETS $13,694
- -------------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
@ Value is less than $500.
ADR American Depositary Receipt
GDR Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Fixed Income Portfolio is Miller Anderson & Sherrerd's primary fixed-income
fund, investing in all sectors of the bond market. MAS constructs a diversified
fund with a maturity and duration structure reflecting long-term views on
interest rates and inflation. MAS selects investments in U.S. Treasuries,
agencies, corporate bonds, mortgages, foreign and other fixed-income securities
based upon relative value in the marketplace.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS FIXED INCOME
--------------------------------------- SALOMON
INSTITUTIONAL# INVESTMENT
SIX MONTHS 3.87% 3.87% 3.70% 4.60%
ONE YEAR 11.54 11.45 11.27 11.98
FIVE YEARS 7.93 7.89 7.84 7.00
TEN YEARS 9.68 9.66 9.64 9.00
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- -------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -------------------------------------------------------
ADJUSTABLE RATE MORTGAGES (8.6%)
## Government National
Mortgage Association
Various Pools:
6.00%, 7/20/27-12/20/97 Tsy $356,256 $ 361,506
- -------------------------------------------------------
AGENCY FIXED RATE MORTGAGES (10.5%)
Federal Home Loan Mortgage
Corporation
May TBA
6.50%, 5/15/28 Agy 42,800 42,330
Federal National Mortgage
Association
May TBA
6.50%, 8/15/24-5/15/28 Agy 406,450 401,475
- -------------------------------------------------------
GROUP TOTAL 443,805
- -------------------------------------------------------
ASSET BACKED CORPORATES (11.2%)
Advanta Mortgage Loan Trust,
Series:
97-3 A2
6.61%, 4/25/12 AAA 12,905 12,919
97-4 A2
6.53%, 9/25/12 AAA 16,809 16,812
Aegis Auto Receivables
Trust, Series 95-1 A
8.60%, 3/20/02 N/R 189 190
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 8,505 8,691
94-1 C2 CMO
9.35%, 9/15/04 BBB 6,999 7,125
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 28,510 28,688
97-D A3
6.20%, 5/15/03 AAA 15,350 15,381
98-A A3
5.90%, 11/15/02 AAA 18,625 18,567
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 5,458 5,468
CIT Group Home Equity Loan
Trust, Series 97-1 A3
6.25%, 9/15/11 AAA 10,100 10,106
Daimler Benz Auto Grantor
Trust, Series 97-A A
6.05%, 3/31/05 AAA 12,783 12,783
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
RATING FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -------------------------------------------------------
Empire Funding Home Loan
Owner Trust,
Series 97-5 A2
6.59%, 5/25/14 AAA $ 5,850 $ 5,864
(+) Federal Mortgage
Acceptance Corp. Loan
Receivables Trust,
Series 96-B A1
7.629%, 11/1/18 A 6,600 6,721
First Plus Home Loan
Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 9,590 9,608
97-3 A3
6.57%, 10/10/10 AAA 10,860 10,903
97-4 A2
6.30%, 8/10/09 AAA 11,425 11,416
97-4 A3
6.40%, 8/10/11 AAA 9,875 9,878
98-1 A2
5.97%, 11/10/10 AAA 16,236 16,138
98-1 A3
6.04%, 11/10/13 AAA 10,000 9,910
First Security Auto
Grantor Trust,
Series 97-B A
6.10%, 4/15/03 AAA 22,738 22,771
Ford Credit Auto Owner
Trust,
Series 97-B A3
6.05%, 4/15/01 AAA 28,337 28,405
Green Tree Financial
Corp.,
Series 97-1 A3
6.17%, 9/20/05 AAA 75 75
Honda Auto Receivables
Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 22,546 22,522
97-B A
5.95%, 5/15/03 AAA 17,793 17,798
IMC Home Equity Loan Trust,
Series 98-1 A2
6.31%, 12/20/12 AAA 20,000 19,938
(+) Long Beach Acceptance
Auto Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 10,716 10,736
NAL Auto Trust,
Series 96-4 A
6.90%, 12/15/00 N/R 13 13
(+) National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 12,000 12,435
<PAGE>
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA 25,349 25,389
Old Stone Credit Corp.
Home Equity Trust,
Series 92-3 B1
6.35%, 9/25/07 AAA 11 11
(+) Rental Car Finance
Corp.,
Series 97-1 A2
6.45%, 4/25/03 AA 23,750 23,809
(+) Securitized Multiple
Asset Rated Trust,
Series:
97-5 A1
7.72%, 6/15/05 A 8,676 8,718
98-1 A1
7.45%, 3/16/06 A 7,991 7,984
Security Pacific Home
Equity Trust,
Series 91-A B
10.50%, 3/10/06 A+ 1,872 1,871
(+) Team Fleet Financing
Corp.,
Series:
96-1A
6.65%, 12/15/02 A- 6,500 6,550
97-1A
7.35%, 5/15/03 A- 3,675 3,797
WFS Financial Owner Trust,
Series 97-C A3
6.10%, 3/20/02 AAA 17,535 17,541
World Omni Automobile
Lease Securitization
Corp., Series 97-B A2
6.08%, 11/25/03 AAA 23,700 23,729
- -------------------------------------------------------
GROUP TOTAL 471,260
- -------------------------------------------------------
ASSET BACKED MORTGAGES (0.8%)
Advanta Mortgage Loan
Trust, Series 96-2 A5
8.08%, 6/25/27 AAA 8,875 9,241
Champion Home Equity Loan
Trust, Series 96-2 A4
8.00%, 9/25/28 AAA 6,800 7,114
Cityscape Home Equity Loan
Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 119,590 2,860
sec. 96-3 A YMA 10/25/26
(acquired 12/24/96,
cost $222) N/R 119,590 161
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 I IO
1.10%, 1/15/28 AAA 106,920 2,728
96-4 A11 I YMA
1/15/28 AAA 106,920 154
(+) 96-4 A12 I IO
1.05%, 1/15/28 AAA 28,854 733
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
28
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
sec. 96-4 A12 I YMA
1/15/28 (acquired
12/16/96, cost $82) AAA $ 28,854 $ 42
97-1 A10 I IO
1.10%, 3/15/28 AAA 132,158 3,477
(+) 97-1 A10 I YMA
3/15/28 AAA 132,158 185
IMC Home Equity Loan
Trust, Series 96-3 A7
8.05%, 8/25/26 AAA 6,667 6,969
- -------------------------------------------------------
GROUP TOTAL 33,664
- -------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (1.7%)
Federal Home Loan Mortgage
Corporation,
Series:
90-129 H PAC
8.85%, 3/15/21 Agy 80 86
92-1398 I Inv Fl REMIC
12.18%, 10/15/07 Agy 2,451 2,991
1415-S Inv Fl IO
18.50%, 11/15/07 Agy 2,770 1,238
1476-S Inv Fl IO
REMIC PAC
4.26%, 2/15/08 Agy 26,386 2,950
1485-S Inv Fl IO REMIC
3.85%, 3/15/08 Agy 24,066 2,183
1600-SA Inv Fl IO REMIC
2.25%, 10/15/08 Agy 53,152 2,945
1709-H PO REMIC
1/15/24 Agy 849 520
1813-K PO REMIC
2/15/24 Agy 840 678
1844-PC PO REMIC
3/15/24 Agy 1,545 1,143
1854-A PO
12/15/23 Agy 150 110
1887-I PO
10/15/22 Agy 910 692
1950-SC Inv Fl IO
2.25%, 10/15/22 Agy 1,540 134
1965-C Inv Fl
5.988%, 2/15/24 Agy 120 120
<PAGE>
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl REMIC
28.183%, 9/25/20 Agy 1,187 1,802
92-186 S Inv Fl IO REMIC
3.26%, 10/25/07 Agy 49,193 3,985
93-149 O PO REMIC
8/25/23 Agy 1,731 1,258
93-205 G PO REMIC
9/25/23 Agy 4,330 3,089
93-205 H PO REMIC
9/25/23 Agy 19,244 10,021
93-235 H PO REMIC
9/25/23 Agy 1,592 1,369
96-11 V PO REMIC
9/25/23 Agy 12,004 8,972
96-14 PC PO
12/25/23 Agy 1,460 981
96-37 H PO REMIC
8/25/23 Agy 7,886 6,490
96-46 PB PO REMIC
9/25/23 Agy 1,500 1,127
96-54 O PO
11/25/23 Agy 1,185 817
96-68 SC Inv Fl IO
REMIC
2.35%, 1/25/24 Agy 11,605 1,439
97-3 E PO
12/25/23 Agy 150 114
97-30 Inv Fl IO REMIC
2.25%, 7/25/22 Agy 1,210 106
287 1 PO
12/17/07 Agy 18,364 12,768
G92-53 S Inv Fl IO REMIC
32.344%, 9/25/22 Agy 2,214 1,706
Government National
Mortgage Association,
Series:
96-12 S Inv Fl IO REMIC
2.75%, 6/16/26 Tsy 2,076 135
96-13 S Inv Fl IO REMIC
3.40%, 7/16/11 Tsy 730 60
96-17 S Inv Fl IO REMIC
2.80%, 8/16/26 Tsy 883 60
+ Kidder Peabody Mortgage
Assets Trust,
Series:
87-B IO
9.50%, 4/22/18 Aaa 77 20
87-B PO
4/22/18 Aaa 77 60
- -------------------------------------------------------
GROUP TOTAL 72,169
- -------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-NON-AGENCY
COLLATERAL SERIES (4.0%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 6,085 6,446
Capstead Mortgage Corp.
IV,
Series 97-NAM3
7.25%, 10/25/27 AAA 12,662 12,716
Citicorp Mortgage
Securities, Inc.,
Series:
+ 90-7 A7
9.50%, 6/25/05 Baa3 178 178
93-9 A1 REMIC
7.00%, 3/25/20 AAA 20 20
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- --------------------------------------------------------------
sec. First Boston Mortgage
Corp.,
Series 92-4 B1
8.125%, 10/25/22
(acquired 1/25/93-12/9/93,
cost $3,877) A $ 4,085 $ 4,253
+ Headlands Mortgage
Securities, Inc.
Series 97-5 AI5
7.25%, 11/25/27 Aaa 399 401
sec.## Kidder Peabody
Funding Corp., Series
92-4 B2
8.467%, 5/28/22
(acquired 8/5/92-8/29/97,
cost $3,659) N/R 3,648 3,649
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 2,695 2,902
PNC Mortgage Securities
Corp., Series 96-1 B1
REMIC
7.50%, 6/25/26 AA 137 140
Prudential Home Mortgage
Securities Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 458 458
sec.+ 92-33 B1
7.50%, 11/15/22
(acquired 8/29/97,
cost $154) Aa3 161 162
(+)+ 92-A 2B4
7.90%, 4/28/22 A1 11,188 10,971
sec.+ 93-17 B1
6.50%, 3/1/23
(acquired 4/14/93-10/13/94,
cost $6,263) A2 6,549 6,495
(+)++ 94-A 3B3
6.803%, 4/28/24 A 410 401
(+) 94-A 3B5
6.802%, 4/28/24 N/R 11,244 11,001
Residential Accredit Loans,
Inc.,
Series:
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 10,386 10,545
97-QS2 A8
7.75%, 3/25/27 AAA 5,500 5,677
97-QS3 A8
7.75%, 4/25/27 AAA 11,890 12,285
97-QS4 A7
7.75%, 5/25/27 AAA 12,905 13,271
97-QS8 A10
7.50%, 8/25/27 AAA 325 331
97-QS13 A7 REMIC
7.25%, 12/25/27 AAA 27,949 28,279
Residential Asset
Securitization Trust
Association,
Series 98-A1 A4 REMIC
6.75%, 3/25/28 AAA 22,800 22,400
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- --------------------------------------------------------------
Residential Funding Mortgage
Securities Co., Inc.,
Series 94-S1 A19
6.75%, 1/25/24 AAA $ 11,452 $ 11,316
Rural Housing Trust,
Series 87-1 B1 REMIC
3.33%, 10/1/28 A- 4,213 4,053
- --------------------------------------------------------------
GROUP TOTAL 168,350
- --------------------------------------------------------------
COMMERCIAL MORTGAGES (9.7%)
+ American Southwest Financial
Securities Corp.,
Series 95-C1 A1B
7.40%, 11/17/04 Aaa 8,015 8,292
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 38,761 40,314
(+)+ 96-D3 A1C
7.40%, 10/13/26 Aaa 8,000 8,514
96-MD6 A1B
6.88%, 11/13/26 AAA 125 129
+ 96-MD6 A1C
7.04%, 11/13/26 AAA 8,150 8,496
97-D5 A1B
6.66%, 4/14/07 AAA 10,225 10,441
+## 97-D5 PS1 IO
1.563%, 2/14/41 Aaa 94,835 10,221
Beverly Finance Corp.,
Series 94-1
8.36%, 7/15/04 AA- 125 135
(+) Carousel Center
Finance, Inc.,
Series:
1 A1
6.828%, 11/15/07 AA 6,200 6,305
1 C
7.527%, 10/15/07 BBB+ 5,408 5,490
(+) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 5,569 6,306
(+) Crystal Run
Properties, Inc.,
Series A
7.393%, 8/15/11 AA 10,925 11,671
DLJ Mortgage Acceptance
Corp.,
Series:
93-MF7 A1
7.40%, 6/18/03 AAA 111 113
(+) 95-CF2 A3
7.05%, 12/17/27 A 3,275 3,330
95-CF2 S2 IO
1.645%, 12/17/27 BBB 47,940 4,189
(+) 96-CF1 A1B
7.58%, 3/13/28 AAA 5,310 5,655
(+) 96-CF2 A1B
7.29%, 11/12/21 AAA 2,305 2,419
(+)++## 96-CF2 S IO
1.641%, 11/21/21 AAA 37,992 3,165
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- --------------------------------------------------------------
(+) 97-CF1 A1B
7.60%, 5/15/30 AAA $ 11,715 $ 12,601
(+) 97-CF1 S IO
1.097%, 5/15/30 AAA 74,455 4,734
Federal National Mortgage
Association,
Series 93-M2 B
2.581%, 11/25/23 Agy 222 8
First Union-Lehman Brothers
Commercial Mortgage Trust,
Series 97-C2 A3
6.65%, 12/18/07 AAA 22,000 22,349
+ GMAC Commercial Mortgage
Securities, Inc.,
Series:
## 96-C1 X2 IO
1.917%, 3/15/21 Aaa 34,515 2,895
97-C1 A2
6.853%, 9/15/06 Aaa 14,885 15,277
97-C2 A3
6.566%, 11/15/07 Aaa 17,000 17,185
## 97-C2 X IO
1.273%, 4/15/27 Aaa 158,662 12,053
+ GS Mortgage Securities
Corp. II,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 15,630 16,229
## 97-GL X2 IO
0.930%, 7/13/30 Aaa 37,330 1,929
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 14,865 15,615
(+) Lakeside Finance Corp.
6.47%, 12/15/00 AA 145 146
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 9,602 10,056
98-C1 IO
1.199%, 2/18/28 Aaa 167,600 11,209
Lehman Large Loan,
Series 97-LLI A2
6.84%, 9/12/06 AAA 16,650 17,108
Merrill Lynch Mortgage
Investors, Inc.,
Series:
95-C1 IO
2.185%, 5/25/15 N/R 1,409 68
96-C1 A3
7.42%, 4/25/28 AAA 11,415 11,961
96-C2 A2
6.82%, 11/21/28 AAA 3,825 3,912
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- --------------------------------------------------------------
++## 96-C2 IO
1.538%, 11/21/28 AAA $ 39,429 $ 3,322
+ Midland Realty Acceptance
Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 6,805 7,116
Mortgage Capital
Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 11,100 11,357
+ 97-MC1 A3
7.288%, 7/20/27 Aaa 17,649 18,496
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 21,225 21,515
Nomura Asset
Securities Corp.,
Series:
++ 94-MD1 A1B
7.526%, 3/15/18 AAA 255 260
++## 94-MD1 A2
7.671%, 3/15/18 AA 65 67
94-MD1 A3
8.026%, 3/15/18 N/R 4,314 4,544
(+) Park Avenue Finance
Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 11,764 12,407
(+) Prime Property Funding,
Series 1 A
6.633%, 7/23/03 AA 4,834 4,893
+ Salomon Brothers
Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 7,900 8,191
Sawgrass Financial LLC,
Series 93-1 A
6.45%, 1/20/06 AAA 155 156
++## Structured Asset
Securities Corp.,
Series:
96-CFL X1A IO
1.431%, 2/25/28 AAA 51,568 1,209
96-CFL X1 IO
1.42%, 2/25/28 AAA 56,550 3,046
96-CFL X2 IO
1.225%, 2/25/28 AAA 14,664 408
+ Town & Country
Funding Corp.,
Series A
5.85%, 8/15/98 Aa2 1,545 1,542
- --------------------------------------------------------------
GROUP TOTAL 409,049
- --------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -------------------------------------------------------
ENERGY (0.5%)
(+) ESI Tractebel
Acquisition Corp.
7.99%, 12/30/11 BB $ 5,320 $ 5,272
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 7,200 7,462
Mobile Energy Services
8.665%, 1/1/17 BBB- 9,046 9,674
- -------------------------------------------------------
GROUP TOTAL 22,408
- -------------------------------------------------------
FINANCE (8.3%)
(+) Anthem Insurance Cos.,
Inc.,
Series A
9.00%, 4/1/27 BBB+ 10,840 11,616
BankAmerica Capital Corp.
Series 2
8.00%, 12/15/26 A 60 64
(+) BankAmerica
Institutional,
Series A
8.07%, 12/31/26 A- 22,935 24,433
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 20,850 21,631
+ Boeing Capital Services
Corp., Series B
6.53%, 5/4/98 Baa2 275 275
(+) Equitable Life
Assurance Society of
the U.S.,
Series 1A
6.95%, 12/1/05 A 15,262 15,655
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 15,620 18,075
(+) First Chicago
NBD Corp.,
Series A
7.95%, 12/1/26 A- 20,250 21,238
First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ 23,830 25,272
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 8,600 8,938
(+) Florida Windstorm
6.70%, 8/25/04 A- 19,430 19,559
J.P. Morgan Capital
Trust I
7.54%, 1/15/27 AA- 4,835 4,908
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- 14,470 14,402
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A+ 14,235 14,248
NB Capital Trust
8.25%, 4/15/27 A- 7,765 8,498
(+) New York Life
Insurance Co.
7.50%, 12/15/23 AA 6,105 6,180
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 17,540 18,375
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
(+) Prime Property
Funding II
6.80%, 8/15/02 A $ 6,435 $ 6,498
7.00%, 8/15/04 A 6,945 7,044
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 4,880 5,446
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 9,800 10,424
B
8.035%, 3/15/27 A 10,750 11,531
Washington Mutual Capital
8.375%, 6/1/27 BBB- 7,240 7,811
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 9,680 10,276
Wells Fargo Capital,
Series:
(+) A
8.125%, 12/1/26 BBB 17,050 18,063
B
7.95%, 12/1/26 BBB+ 1,900 1,981
I
7.96%, 12/15/26 BBB+ 3,870 4,059
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 10,614 10,906
96 WFP-D
6.95%, 9/1/13 AA- 21,505 22,217
- -------------------------------------------------------
GROUP TOTAL 349,623
- -------------------------------------------------------
FOREIGN GOVERNMENTS (1.4%)
Government of Germany
7.375%, 12/2/02 AAA DEM97,900 59,169
- -------------------------------------------------------
INDUSTRIALS (3.8%)
American Standard Cos.
7.375%, 2/1/08 BB- $ 10,515 10,340
Columbia/HCA Healthcare
7.58%, 9/15/25 BBB 9,545 8,671
9.00%, 12/15/14 BBB 6,165 6,441
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB 10,386 9,658
93-K1 A2
7.43%, 8/15/18 BB 260 229
94-K1 A1
7.60%, 8/15/07 BB 7,076 6,966
94-K2 A2
9.35%, 8/15/19 BB 3,890 4,038
Fred Meyer, Inc.
7.375%, 3/1/05 BB+ 23,755 23,799
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 7,945 8,204
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
News America Holdings
7.75%, 2/1/24 BBB- $ 85 $ 89
8.875%, 4/26/23 BBB- 11,875 13,933
(+) Oxymar
7.50%, 2/15/16 BBB 5,785 5,886
Paramount Communications,
Inc.
8.25%, 8/1/22 BB+ 23,742 24,419
Philip Morris Cos., Inc.
6.375%, 2/1/06 A 2,790 2,749
7.00%, 7/15/05 A 6,815 6,975
Rhone-Poulenc Rorer, Inc.,
Series 92-A 3
8.62%, 1/5/21 BBB- 7,955 8,780
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 6,854 7,163
Southland Corp.
5.00%, 12/15/03 BB+ 16,080 14,070
- -------------------------------------------------------
GROUP TOTAL 162,410
- -------------------------------------------------------
NON-AGENCY FIXED RATE MORTGAGES (0.2%)
Bank of America, Series A
8.375%, 5/1/07 AAA 377 382
sec. Household Bank,
Series 85-1 CMO
7.94%, 5/1/02 (acquired
6/22/94, cost $222) N/R 234 237
sec.## Magnolia Federal
Bank,
Series 84-2
9.12%, 10/1/07
(acquired 5/1/87, cost
$745) N/R 792 813
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA 3,869 3,868
Ryland Acceptance Corp.
IV,
Series 79-A
6.65%, 7/1/11 AA 4,364 4,231
- -------------------------------------------------------
GROUP TOTAL 9,531
- -------------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-AGENCY COLLATERAL
SERIES (1.3%)
Federal National Mortgage
Association,
Series:
96-27 A PO REMIC
10/25/23 Agy 155 81
249 1 PO
10/25/23 Agy 37,257 26,109
260 1 PO
4/1/24 Agy 5,831 4,505
282 1 PO
9/1/25 Agy 25,879 19,083
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
First Boston Mortgage
Securities Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA $ 59 $ 14
Government National
Mortgage Association,
Various Pools:
1.00%, 11/20/05 Tsy 135,238 3,146
- -------------------------------------------------------
GROUP TOTAL 52,938
- -------------------------------------------------------
TELEPHONES (1.2%) CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 11,800 12,154
(+) Lenfest
Communications, Inc.
7.625%, 2/15/08 BB+ 6,595 6,611
(+)# Qwest Communications,
Inc.
0.00%, 2/1/08 B+ 18,465 13,018
# Teleport Communications
Group, Inc.
0.00%, 7/1/07 B+ 24,525 21,092
- -------------------------------------------------------
GROUP TOTAL 52,875
- -------------------------------------------------------
TRANSPORTATION (0.6%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 12,525 12,515
(+) Jet Equipment Trust,
Series:
94-A A11
10.00%, 6/15/12 A+ 275 348
95-C
10.69%, 5/1/15 BBB 8,445 10,989
- -------------------------------------------------------
GROUP TOTAL 23,852
- -------------------------------------------------------
U.S. TREASURY SECURITIES (16.6%)
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 123,930 120,135
3.625%, 7/15/02
(Inflation Indexed) Tsy 76,059 75,274
3.625%, 1/15/08
(Inflation Indexed) Tsy 88,125 87,079
5.625%, 2/28/01 Tsy 3,000 2,999
6.25%, 4/30/01 Tsy 140,000 142,362
6.375%, 3/31/01 Tsy 18,500 18,864
!! 7.125%, 2/29/00 Tsy 246,500 253,239
- -------------------------------------------------------
GROUP TOTAL 699,952
- -------------------------------------------------------
UTILITIES (0.7%) CalEnergy Co., Inc.
7.63%, 10/15/07 BB+ 14,055 14,039
CMS Energy Corp,
Series B
7.375%, 11/15/00 BB 8,455 8,544
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
(CONT'D)
- -------------------------------------------------------
(+) Edison Mission Energy
Funding Corp.,
Series B
7.33%, 9/15/08 BBB $ 7,225 $ 7,496
- -------------------------------------------------------
GROUP TOTAL 30,079
- -------------------------------------------------------
YANKEE (7.3%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 18,478 18,524
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 15,660 14,042
(+) Glencore Nickel
Property Ltd.
9.00%, 12/1/14 BB+ 11,675 11,575
Grupo Minero Mexicano SA
de CV, Series A
8.25%, 4/1/08 BB 11,310 11,222
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 10,670 9,811
(+) Hyundai Semiconductor
America
8.25%, 5/15/04 BB 2,755 2,257
8.625%, 5/15/07 BB 10,120 8,081
(+) Israel Electric Corp.,
Ltd.
7.25%, 12/15/06 A- 3,090 3,146
7.75%, 12/15/27 A- 19,150 19,436
Korea Development Bank
7.375%, 9/17/04 BB+ 18,520 16,801
National Power Corp.
7.875%, 12/15/06 BB+ 11,240 10,224
8.40%, 12/15/16 BB+ 8,315 7,234
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 17,775 17,794
(+) Paiton Energy Funding
9.34%, 2/15/14 CCC 11,245 5,398
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 20,265 18,867
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 17,415 18,244
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 23,015 23,828
(+) Reliance Industries
Ltd.
8.25%, 1/15/27 BB+ 1,890 1,765
9.375%, 6/24/26 BB+ 2,965 2,976
## Republic of Argentina
5.00%, 3/31/23 BB 16,320 12,475
# Republic of Argentina
Par, Series L
5.75%, 3/31/23 BB 14,755 11,278
Republic of Colombia
8.70%, 2/15/16 BBB- 19,215 18,802
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ $ 7,560 $ 8,467
Rogers Cantel, Inc.
8.30%, 10/1/07 BB+ 5,370 5,397
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 9,060 8,124
United Mexican States Par
Bond, Series:
A
6.25%, 12/31/19 BB 15,725 13,298
B
6.25%, 12/31/19 BB 10,975 9,281
- -------------------------------------------------------
GROUP TOTAL 308,347
- -------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$3,691,502) 3,730,987
- -------------------------------------------------------
PREFERRED STOCKS (1.8%)
- -------------------------------------------------------
SHARES
------
INDUSTRIALS (0.3%)
(+) Entertainment
Properties,
14.253% BBB- 10,200 9,500
Tier One Properties,
11.095% A 4,650 4,480
- -------------------------------------------------------
GROUP TOTAL 13,980
- -------------------------------------------------------
MORTGAGE-OTHER (1.5%)
(+)+ Home Ownership
Funding Corp.
13.331% Aaa 63,925 61,311
- -------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $78,937) 75,291
- -------------------------------------------------------
RIGHTS (0.0%)
- -------------------------------------------------------
MISC-INDUSTRIALS (0.0%)
*@ United Mexican States
Recovery Rights,
expiring 6/30/03 (Cost
$0) N/R 10,975,000 --
- -------------------------------------------------------
INTEREST RATE CAPS (0.0%)-SEE NOTE A6
- -------------------------------------------------------
FACE
AMOUNT
(000)
--------
Bankers Trust Co.,
terminating 10/15/99, to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount. A- $ 2,800 3
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
J.P. Morgan and Co.,
terminating 10/15/99, to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount. AA- $778,400 $ 724
- -------------------------------------------------------
TOTAL INTEREST RATE CAPS (Premium Paid $3,302) 727
- -------------------------------------------------------
CASH EQUIVALENTS (23.6%)
- -------------------------------------------------------
Short-term Investments
Held as Collateral for
Loaned Securities (3.6%) 153,736 153,736
- -------------------------------------------------------
CASH INVESTMENTS-MORTGAGE (14.9%)
Federal Home Loan Mortgage
Corporation Conventional
Pools:
9.50%, 10/1/16 Agy 1,593 1,735
10.00%, 10/1/10-11/1/20 Agy 28,600 31,489
10.50%, 9/1/10-10/1/20 Agy 3,569 3,928
11.00%, 5/1/11-9/1/20 Agy 5,348 6,029
11.25%, 10/1/11-12/1/15 Agy 1,591 1,795
11.50%, 1/1/11-12/1/15 Agy 152 173
11.75%, 4/1/19 Agy 148 168
12.00%, 2/1/15 Agy 26 30
12.50%, 8/1/13 Agy 19 22
13.00%, 6/1/19 Agy 50 58
14.75%, 3/1/10 Agy 31 36
Gold Pools:
9.50%, 10/1/17-12/1/22 Agy 14,638 16,056
10.00%, 6/1/17-3/1/21 Agy 9,006 9,991
10.50%, 8/1/19-4/1/21 Agy 1,677 1,873
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 4,578 4,601
## 1933-FO REMIC
6.50%, 3/15/25 Agy 8,003 8,042
## 2040-FC
5.975%, 2/15/23 Agy 22,350 22,408
Federal National
Mortgage Association
Conventional Pools;
9.00%, 12/1/08-1/1/22 Agy 35,431 38,143
9.50%, 7/1/16-12/1/26 Agy 12,323 13,470
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
10.00%, 10/1/07-1/1/27 Agy $ 20,896 $ 23,145
10.50%, 6/1/10-11/1/20 Agy 6,705 7,561
10.75%, 2/1/11 Agy 43 48
11.00%, 1/1/16-11/1/20 Agy 4,976 5,626
11.50%, 1/1/13-2/1/20 Agy 5,275 6,026
12.00%, 4/1/15 Agy 55 63
12.50%, 5/1/12 Agy 1,025 1,198
13.50%, 8/1/14 Agy 18 22
Series:
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 16,054 16,108
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 11,539 11,604
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 48,250 48,356
Government National
Mortgage Association
Adjustable Rate
Mortgages:
7.00%, 2/20/25-3/20/25 Tsy 24,457 24,948
7.125%, 7/20/25 Tsy 21,037 21,458
7.375%, 4/20/25-6/20/25 Tsy 85,031 86,731
7.50%, 1/20/25 Tsy 15,258 15,563
Various Pools:
10.00%, 11/15/09-
10/15/27 Tsy 88,066 98,004
10.50%, 8/15/10-2/15/25 Tsy 23,522 26,553
11.00%,
12/15/09-5/15/26 Tsy 39,220 44,949
11.50%, 5/15/13-9/20/19 Tsy 577 649
12.00%, 4/15/12-1/15/19 Tsy 25,797 29,972
- -------------------------------------------------------
GROUP TOTAL 628,631
- -------------------------------------------------------
REPURCHASE AGREEMENT (5.1%)
Chase Securities, Inc. 5.75%
dated 3/31/98, due 4/1/98, to
be repurchased at $213,811,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at
$214,416 213,776 213,776
- -------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $994,709) 996,143
- -------------------------------------------------------
TOTAL INVESTMENTS (113.8%) (Cost
$4,768,450) 4,803,148
- -------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)!
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-13.8%)
Cash $ 6
Dividends Receivable 2,623
Interest Receivable 41,614
Receivable for Investments Sold 401,080
Receivable for Fund Shares Sold 12,452
Unrealized Gain on Swap Agreements 479
Unrealized Gain on Forward Foreign Currency
Contracts 1,950
Other Assets 116
Payable for Investments Purchased (879,296)
Payable for Fund Shares Redeemed (4,228)
Payable for Investment Advisory Fees (3,633)
Payable for Administrative Fees (276)
Payable for Shareholder Servicing Fees-
Investment Class (4)
Payable for Distribution Fees-Adviser Class (22)
Payable for Trustees' Deferred Compensation
Plan-Note F (93)
Payable for Daily Variation on Futures
Contracts (507)
Collateral on Securities Loaned, at Value (153,736)
Other Liabilities (430)
----------
(581,905)
- -------------------------------------------------------
NET ASSETS (100%) $4,221,243
- -------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------
NET ASSETS
Applicable to 336,935,259 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $4,084,124
- -------------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.12
- -------------------------------------------------------
INVESTMENT CLASS
- -------------------------------------------------------
NET ASSETS
Applicable to 2,391,769 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 29,007
- -------------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.13
- -------------------------------------------------------
ADVISER CLASS
- -------------------------------------------------------
NET ASSETS
Applicable to 8,916,707 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 108,112
- -------------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.12
- -------------------------------------------------------
<PAGE>
VALUE
(000)!
- -------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $4,095,280
Undistributed Net Investment Income (Loss) 69,129
Undistributed Realized Net Gain (Loss) 20,936
Unrealized Appreciation (Depreciation) on:
Investment Securities 34,698
Foreign Currency Transactions 1,921
Futures and Swaps (721)
- -------------------------------------------------------
NET ASSETS $4,221,243
- -------------------------------------------------------
sec. Restricted Security-Total market value of restricted securities
owned at March 31, 1998 was $15,812 or 0.4% of net assets.
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
@ Value is less than $500.
Inv
Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
CMO Collateralized Mortgage Obligation
DEM German Mark
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
YMA Yield Maintenance Agreement
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
DOMESTIC FIXED INCOME
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Domestic Fixed Income Portfolio invests in all sectors of the domestic
investment-grade bond market. Miller Anderson & Sherrerd constructs a
diversified fund with a maturity and duration structure reflecting long-term
views on interest rates and inflation. MAS selects investments in U.S.
Treasuries, agencies, corporate bonds, mortgages and other fixed-income
securities based upon relative value in the marketplace.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS DOMESTIC FIXED SALOMON
INCOME INSTITUTIONAL BROAD INDEX
-----------------------------------
SIX MONTHS 4.20% 4.60%
ONE YEAR 11.52 11.98
FIVE YEARS 7.43 7.00
TEN YEARS 9.47 9.00
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Domestic Fixed Income Portfolio (formerly known as the Select Fixed Income
Portfolio) commenced operations on 9/30/87. Pursuant to a vote of the
Portfolio's shareholders on December 19, 1994, the Portfolio's investment
policies were changed to emphasize fixed-income securities of domestic issuers
rated A or higher. Shareholders then voted on May 1, 1997, to permit the
Portfolio to invest a limited portion of its assets in fixed-income securities
of domestic issuers rated BBB at the time of purchase. The Portfolio's
performance pattern may have been affected by these changes. Total returns are
compared to the Salomon Broad Investment Grade Index, an unmanaged market index.
Returns for periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (81.6%)
- --------------------------------------------------------------------------------
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MAR&HPOOR'S)98 (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (7.8%)
## Government National
Mortgage Association
Various Pools:
6.00%, 8/20/27-9/20/27 Tsy $ 6,443 $ 6,536
- -----------------------------------------------------
AGENCY FIXED RATE MORTGAGES (4.4%)
Federal Home Loan Mortgage
Corporation May TBA
6.50%, 5/15/28 Agy 1,300 1,285
Federal National Mortgage
Association May TBA
6.50%, 8/15/24 Agy 2,400 2,371
- -----------------------------------------------------
GROUP TOTAL 3,656
- -----------------------------------------------------
ASSET BACKED CORPORATES (13.7%)
Aegis Auto Receivables Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 117 117
ALPS,
Series 94-1 A4 CMO
7.80%, 9/15/04 AA 275 281
Americredit Automobile
Receivables Trust, Series
96-B A
6.50%, 1/12/02 AAA 232 233
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 505 508
98-A A3
5.90%, 11/15/02 AAA 325 324
Chevy Chase Auto Receivables
Trust, Series 97-4 A
6.25%, 6/15/04 AAA 372 372
CPS Auto Grantor Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 229 231
Daimler-Benz Auto Grantor
Trust, Series 97-A A
6.05%, 3/31/05 AAA 292 292
Empire Funding Home Loan
Owner Trust,
Series:
97-4 A2
7.16%, 5/25/12 AAA 366 370
97-4 A3
7.11%, 7/25/14 AAA 275 279
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
DOMESTIC FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
&CPOOR'S) (000) (000)!
- -----------------------------------------------------
(+) First Merchants Auto
Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA $ 304 $ 306
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 185 185
97-3 A3
6.57%, 10/10/10 AAA 180 181
98-1 A3
6.04%, 10/10/13 AAA 400 396
First Security Auto Grantor
Trust, Series 97-B A
6.10%, 4/15/03 AAA 608 609
Ford Credit Auto Owner Trust,
Series 97-B A3
6.05%, 4/15/01 AAA 295 296
Green Tree Financial Corp.,
Series:
97-7 A3
6.18%, 9/15/09 AAA 335 335
+ 98-1 A2
5.85%, 4/11/11 Aaa 500 498
98-2 A3
6.05%, 10/1/07 AAA 425 424
(+) ++ Health Care
Receivables Securitization
Program, Series 97-1 A
6.815%, 7/1/01 AAA 200 202
Honda Auto Receivables
Grantor Trust, Series 97-A
A
5.85%, 2/15/03 AAA 505 505
IMC Home Equity Loan Trust,
Series 98-1 A2
6.31%, 12/20/12 AAA 400 399
(+) Long Beach Acceptance
Auto Grantor Trust, Series
97-2 A
6.69%, 9/25/04 AAA 230 231
(+) National Car Rental
Financing Ltd., Series 96-1
A4
7.35%, 10/20/03 N/R 375 389
Nissan Auto Receivables
Grantor Trust, Series 97-A
A
6.15%, 2/15/03 AAA 514 515
(+) Rental Car Finance
Corp., Series 97-1 A2
6.45%, 4/25/03 AA 450 451
(+) Team Fleet Financing
Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 250 252
97-1 A
7.35%, 5/15/03 A- 600 620
Union Acceptance Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 287 288
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA $ 385 $ 385
97-D A4
6.25%, 3/20/03 AAA 400 401
World Omni Automobile Lease
Securitization Corp.,
Series 97-B A2
6.08%, 11/25/03 AAA 525 526
- -----------------------------------------------------
GROUP TOTAL 11,401
- -----------------------------------------------------
ASSET BACKED MORTGAGES (2.7%)
AFC Home Equity Loan Trust,
Series 96-4 1A6
7.22%, 3/25/27 AAA 400 405
Cityscape Home Equity Loan
Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 6,076 145
sec. 96-3 A YMA
10/25/26 (acquired
12/24/96, cost $11) AAA 6,076 8
96-3 A8
7.65%, 9/25/25 AAA 350 355
Contimortgage Home Equity
Loan Trust,
Series:
96-3 A7
8.04%, 9/15/27 AAA 300 313
sec. 96-4 A11 I IO
1.10%, 1/15/28 (acquired
12/16/96, cost $152) AAA 4,649 119
(+) 96-4 A11 I YMA
1/15/28 AAA 4,649 7
96-4 A12 I IO
1.05%, 1/15/28 AAA 1,255 32
96-4 A12 I YMA
1/15/28 AAA 1,255 2
(+) 97-1 A10 I IO
1.10%, 3/15/28 AAA 5,727 151
97-1 A10 I YMA
3/15/28 N/R 5,727 8
Delta Funding Home Equity
Loan Trust, Series 96-2 A5
8.01%, 10/25/27 AAA 334 354
IMC Home Equity Loan Trust,
Series 96-3 A7
8.05%, 8/25/26 AAA 350 366
- -----------------------------------------------------
GROUP TOTAL 2,265
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-AGENCY
COLLATERAL SERIES (1.1%)
## Collateralized Mortgage
Obligation Trust, Series
16-Q Inv Fl
12.25%, 3/20/18 AAA $ 115 $ 123
## Federal Home Loan Mortgage
Corporation,
Series:
1632-SA Inv Fl REMIC
5.229%, 11/15/23 Agy 300 268
1699-SD Inv Fl IO REMIC
2.25%, 3/15/24 Agy 1,749 138
Federal National Mortgage
Association,
Series:
96-37 H PO REMIC
8/25/23 Agy 305 251
97-3 E PO
12/25/23 Agy 225 171
- -----------------------------------------------------
GROUP TOTAL 951
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-NON-AGENCY
COLLATERAL SERIES (4.0%)
Bear Stearns Mortgage
Securities, Inc.,
Series 96-9 AI11
8.00%, 12/25/27 AAA 200 207
sec.++ Citicorp Mortgage
Securities, Inc., Series
95-2 B1 REMIC
7.50%, 4/25/25 (acquired
8/7/95-9/24/96, cost $398) AA 413 419
Countrywide Mortgage Backed
Securities, Inc., Series
93-C A11
6.50%, 1/25/24 AAA 237 230
++ First Boston Mortgage
Securities Corp.,
Series 93-5 B1
7.30%, 7/25/23 AA+ 237 238
+ Independent National
Mortgage Corp.,
Series 94-O B1
7.875%, 9/25/24 A2 241 253
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 100 108
PNC Mortgage Securities
Corp., Series 96-1 B1 REMIC
7.50%, 6/25/26 AA 442 448
Prudential Home Mortgage
Securities Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 16 16
95-2 M
8.50%, 6/25/25 AA 270 278
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
+ Residential Accredit Loans,
Inc., Series 97-QS1 A11
7.50%, 2/25/27 Aaa $ 400 $ 406
Residential Asset
Securitization Trust,
Series 96-A11 A9
7.75%, 2/25/27 AAA 275 284
Residential Funding Mortgage
Securities Co., Inc.,
Series 93-S27 M2
7.50%, 6/25/23 A 235 237
Rural Housing Trust,
Series 87-1 B1 REMIC
3.33%, 10/1/28 A- 204 196
- -----------------------------------------------------
GROUP TOTAL 3,320
- -----------------------------------------------------
COMMERCIAL MORTGAGES (13.2%)
American Southwest Financial
Securities Corp.,
Series:
++## 93-2 S1 IO
1.079%, 1/18/09 AA 6,312 265
+ 95-C1 A1B
7.40%, 11/17/04 Aaa 175 181
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 210 221
++## 95-MD4 ACS2 IO
2.364%, 8/13/29 AAA 1,799 313
95-MD4 A1
7.10%, 8/13/29 AAA 169 176
(+) + 96-D3 A1C
7.40%, 10/13/26 Aaa 275 293
96-MD6 A1C
7.04%, 11/13/26 AAA 300 313
+## 97-D5 PSI IO
1.563%, 2/14/41 Aaa 2,687 290
(+) Carousel Center
Finance, Inc., Series 1 B
7.188%, 10/15/07 A 325 333
Chase Commercial Mortgage
Securities Corp., Series
96-2 B
6.90%, 10/19/06 AA 500 510
(+) Creekwood Capital
Corp., Series 95-1A
8.47%, 3/16/15 AA 240 272
(+) CVM Finance Corp.
7.19%, 3/1/04 AA 431 446
(+) DLJ Mortgage
Acceptance Corp.,
Series:
95-CF2 A3
7.05%, 12/17/27 A 400 407
96-CF1 A1B
7.58%, 3/13/28 AAA 300 319
96-CF2 A1B
7.29%, 7/15/06 AAA 310 325
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
DOMESTIC FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
(CONT'D)
- -----------------------------------------------------
++## 96-CF2 S IO
1.640%, 11/12/21 AAA $ 3,815 $ 318
97-CF1 S IO
1.097%, 3/15/17 AAA 2,900 184
97-CF1 A1B
7.60%, 4/15/07 AAA 350 376
First Union-Lehman Brothers
Commercial Mortgage,
Series 97-C2 A3
6.65%, 12/18/07 AAA 400 406
(+) Forum Finance
7.125%, 5/15/04 AA 375 384
+ GMAC Commercial Mortgage
Securities, Inc.,
Series:
96-C1 X2 IO
1.917%, 3/15/21 Aaa 2,346 197
97-C2 X IO
1.273%, 4/15/27 Aaa 3,450 262
J. P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 350 368
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 361 378
98-C1 IO
1.199%, 2/18/28 Aaa 3,450 231
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 200 210
96-C2 A2
6.82%, 11/21/28 AAA 150 153
++## 96-C2 IO
1.538%, 11/21/28 AAA 1,987 167
+ Midland Realty Acceptance
Corp., Series 96-C2 A2
7.233%, 1/25/29 Aaa 250 261
Mortgage Capital Funding,
Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 225 230
+ 97-MC1 A3
7.288%, 7/20/27 Aaa 650 681
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 475 481
Nomura Asset Securities
Corp.,
Series:
++ 94-MD1 A1B
7.526%, 3/15/18 AAA 91 93
++## 94-MD1 A2
7.672%, 3/15/18 AA 125 130
(+) Park Avenue Finance
Corp., Series 97-C1 A1
7.58%, 5/12/07 N/R 391 413
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Prime Property Funding
II
6.633%, 7/23/03 AA $ 173 $ 175
++## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.42%, 2/25/28 AAA 2,952 159
96-CFL X1A IO
1.431%, 2/25/28 AAA 2,705 63
96-CFL X2 IO
1.225%, 2/25/28 AAA 821 23
- -----------------------------------------------------
GROUP TOTAL 11,007
- -----------------------------------------------------
ENERGY (0.5%)
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 450 467
- -----------------------------------------------------
FINANCE (13.7%)
(+) Anthem Insurance Cos.,
Inc.,
Series A
9.00%, 4/1/27 BBB+ 225 241
(+) BankAmerica
Institutional, Series A
8.07%, 12/31/26 A- 525 559
Beneficial Corp.,
Series F
6.47%, 11/17/08 A 310 310
(+) BT Institutional
Capital Trust, Series A
8.09%, 12/1/26 BBB+ 550 570
(+) EOP Operating LP
6.625%, 2/15/05 BBB 325 324
(+) Equitable Life
Assurance Society of the
U.S., Series 1A
6.95%, 12/1/05 A 600 615
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 475 550
(+) Fifty-Seventh Street
Associates
7.125%, 6/1/17 A 569 579
(+) First Chicago NBD
Corp.,
Series A
7.95%, 12/1/26 A- 550 577
(+) First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 575 588
!! First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ 525 557
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 250 260
7.45%, 7/1/04 A 150 156
(+) Florida Windstorm
6.70%, 8/25/04 A- 300 302
General Motors Acceptance
Corp.
5.875%, 1/22/03 A 350 346
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- $ 400 $ 398
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A+ 350 350
NB Capital Trust
8.25%, 4/15/27 A- 150 164
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 625 655
(+) Prime Property Funding
II
7.00%, 8/15/04 A 400 406
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 150 167
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 500 532
B
8.035%, 3/15/27 A 100 107
Washington Mutual Capital
8.375%, 6/1/27 BBB- 180 194
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 110 117
(+) Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 600 636
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 889 913
96 WFP-D
6.95%, 9/1/13 AA- 250 258
- -----------------------------------------------------
GROUP TOTAL 11,431
- -----------------------------------------------------
INDUSTRIALS (1.2%)
(+) Atlas Air, Inc.,
Series A
7.38%, 1/2/18 AA- 320 327
News America Holdings
7.75%, 1/20/24 BBB- 75 79
7.75%, 2/1/24 BBB- 335 351
8.875%, 4/26/23 BBB- 70 82
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 175 179
- -----------------------------------------------------
GROUP TOTAL 1,018
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.4%)
sec.## Gemsco Mortgage Pass
thru Certificate,
Series 87-A
8.701%, 11/25/10 (acquired
9/9/88, cost $236) AA 257 262
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA $ 37 $ 37
- -----------------------------------------------------
GROUP TOTAL 299
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-AGENCY
COLLATERAL SERIES (2.6%)
Federal Home Loan Mortgage
Corporation,
Series 1911-C PO
11/15/23 Agy 550 326
Federal National Mortgage
Association,
Series:
96-34 C PO
3/25/23 Agy 425 254
249 1 PO
10/25/23 Agy 1,217 853
260 1 PO
4/1/24 Agy 218 169
282 1 PO
9/1/25 Agy 730 538
- -----------------------------------------------------
GROUP TOTAL 2,140
- -----------------------------------------------------
TELEPHONES (0.4%) MCI Communications Corp.
6.95%, 8/15/06 A 290 298
- -----------------------------------------------------
TRANSPORTATION (1.0%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 340 340
(+) Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 395 499
- -----------------------------------------------------
GROUP TOTAL 839
- -----------------------------------------------------
U.S. TREASURY SECURITIES (14.9%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 425 567
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 2,804 2,718
3.625%, 7/15/02
(Inflation Indexed) Tsy 1,107 1,096
3.625%, 1/15/08
(Inflation Indexed) Tsy 1,750 1,729
5.625%, 2/28/01 Tsy 1,750 1,750
6.25%, 4/30/01 Tsy 500 508
6.375%, 3/31/01 Tsy 3,950 4,028
- -----------------------------------------------------
GROUP TOTAL 12,396
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $66,781) 68,024
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
DOMESTIC FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS
(STANDARD VALUE
(CONT'D) & POOR'S) SHARES (000)!
- -----------------------------------------------------
PREFERRED STOCKS (1.6%)
- -----------------------------------------------------
INDUSTRIALS (0.2%)
Tier One Properties
11.095% A 200 $ 193
- -----------------------------------------------------
MORTGAGES-OTHER (1.4%)
(+)+ Home Ownership Funding
Corp.
13.331% Aaa 1,200 1,151
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $1,403) 1,344
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)--SEE NOTE A6
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
J.P. Morgan and Co., terminating 10/15/99, to receive on 10/15/99 the excess, as
measured on 10/15/98, of 12 month LIBOR over 6.34% multiplied by the notional
amount.
(Premium Paid $111) AA- $26,200 24
- -----------------------------------------------------
CASH EQUIVALENTS (26.3%)
- -----------------------------------------------------
Short-term Investments Held as
Collateral for Loaned Securities
(5.7%) 4,707 4,707
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (15.2%)
Federal Home Loan Mortgage
Corporation
Conventional Pool:
10.00%, 11/1/20 Agy 323 357
Gold Pool:
12.00%, 11/1/19 Agy 84 95
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 96 97
## 1933-FQ REMIC
6.50%, 3/15/25 Agy 188 188
Federal National Mortgage
Association Conventional Pools:
9.50%, 2/1/20-8/1/20 Agy 651 709
10.00%, 5/1/22 Agy 122 135
10.50%, 12/1/17-2/1/28 Agy 695 784
11.50%, 9/1/25 Agy 160 182
Series:
## 92-43 FC REMIC
6.35%, 10/25/21 Agy 414 417
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 319 320
## 97-70 FA REMIC, PAC (11)
6.20%, 7/18/20 Agy 226 228
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 1,000 1,002
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Government National Mortgage
Association Adjustable Rate
Mortgages:
7.00%, 2/20/25-3/20/25 Tsy $ 779 $ 795
7.375%, 4/20/25-6/20/25 Tsy 2,342 2,390
Various Pools:
9.50%, 12/15/21 Tsy 445 484
10.00%, 9/15/18-12/25/26 Tsy 892 989
10.50%, 5/15/19-2/15/25 Tsy 1,108 1,251
11.00%, 1/15/10-7/15/20 Tsy 678 776
11.50%, 8/15/13 Tsy 445 514
12.00%, 12/15/12-3/15/15 Tsy 328 381
April TBA
10.00%, 4/15/28 Tsy 550 610
- -----------------------------------------------------
GROUP TOTAL 12,704
- -----------------------------------------------------
REPURCHASE AGREEMENT (5.4%)
Chase Securities, Inc. 5.75% dated
3/31/98, due 4/1/98, to be
repurchased at $4,478
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at $4,491 4,477 4,477
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $21,842) 21,888
- -----------------------------------------------------
TOTAL INVESTMENTS (109.5%) (Cost $90,137) 91,280
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-9.5%)
Dividends Receivable 46
Interest Receivable 825
Receivable for Investments Sold 4,637
Receivable for Fund Shares Sold 1
Unrealized Gain on Swap Agreements 16
Other Assets 4
Payable for Investments Purchased (8,621)
Payable for Investment Advisory Fees (71)
Payable for Administrative Fees (6)
Payable for Trustees' Deferred Compensation
Plan-Note F (3)
Payable for Daily Variation on Futures
Contracts (7)
Collateral on Securities Loaned, at Value (4,707)
Other Liabilities (18)
-------
(7,904)
- -----------------------------------------------------
NET ASSETS (100%) $83,376
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
(000)!
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 7,460,148 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $83,376
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.18
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $80,158
Undistributed Net Investment Income (Loss) 1,309
Undistributed Realized Net Gain (Loss) 770
Unrealized Appreciation (Depreciation) on:
Investment Securities 1,143
Futures and Swaps (4)
- -----------------------------------------------------
NET ASSETS $83,376
- -----------------------------------------------------
- -----------------------------------------------------------
sec. Restricted Security-Total market value of restricted securities owned
at March 31, 1998 was $808 or 1.0% of net assets.
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for futures contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
CMO Collateralized Mortgage Obligation
Inv Fl Inverse Floating Rate-Interest rate fluctuates with
an inverse relationship to an associated interest
rate. Indicated rate is the effective rate at
March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
YMA Yield Management Agreement
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The High Yield Portfolio applies Miller Anderson & Sherrerd's analytical
capabilities to a specialized fixed-income fund, investing primarily in below-
investment-grade corporate bonds selected through study of the credit-worthiness
of the underlying companies. MAS's strategy uses equity and fixed-income
valuation techniques and analyses of economic and industry trends to determine
the Portfolio's structure. Individual securities are selected and monitored by
managers specializing in corporate bonds and using in-depth financial analysis
to uncover opportunities in undervalued issues.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS HIGH YIELD SALOMON
--------------------------------------- HIGH YIELD
INSTITUTIONAL# INVESTMENT
SIX MONTHS 5.54% 5.43% 5.43% 6.54%
ONE YEAR 19.63 19.50 19.38 16.16
FIVE YEARS 13.02 12.95 12.98 11.41
SINCE INCEPTION 12.35 12.31 12.32 12.02
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. High-yield fixed-income securities,
otherwise known as "junk bonds," represent a much greater risk of default and
tend to be more volatile than higher-rated bonds.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- ----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 POOR'S) (000) (000)!
- ----------------------------------------------------
ASSET BACKED CORPORATES (2.4%)
Commercial Financial
Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A $ 5,027 $ 5,051
(+)+ Long Beach
Acceptance Auto Grantor
Trust, Series 97-1 B
14.22%, 10/26/03 Ba3 6,082 6,078
(+) OHA Auto Grantor
Trust
Series 97-A
11.00%, 9/15/03 BB 4,296 4,231
- ----------------------------------------------------
GROUP TOTAL 15,360
- ----------------------------------------------------
CABLE (4.4%) CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 5,065 5,217
9.875%, 5/15/06 B 5,330 5,823
Lenfest Communications,
Inc.
8.375%, 11/1/05 BB+ 5,155 5,374
Rogers Cablesystems Ltd.
10.00%, 3/15/05,
Series B BB+ 5,720 6,406
10.125%, 9/1/12 BB+ 2,750 3,028
Rogers Communications,
Inc.
9.125%, 1/15/06 BB- 2,075 2,122
- ----------------------------------------------------
GROUP TOTAL 27,970
- ----------------------------------------------------
CHEMICALS (1.5%)
ISP Holdings, Inc.,
Series B
9.00%, 10/15/03 B+ 9,175 9,645
- ----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.6%)
+ Citicorp Mortgage
Securities, Inc.,
Series 90-8 A7
9.50%, 6/25/05 B3 1,105 571
sec.++ DLJ Mortgage
Acceptance Corp.,
Series 94-3 B3
6.50%, 4/25/24
(acquired 5/8/95, cost
$908) BB 1,361 671
+ First Boston Mortgage
Securities Corp.,
Series 92-4R 2
8.025%, 10/25/22 Ba3 5 5
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+)+ Prudential Home
Mortgage Securities
Co., Inc.,
Series 92-A 3B2
7.90%, 4/28/22 Caa $ 3,586 $ 2,152
## Ryland Mortgage
Securities Corp.,
Series 92-A C1
8.27%, 3/29/30 BB 700 569
- ----------------------------------------------------
GROUP TOTAL 3,968
- ----------------------------------------------------
COMMERCIAL MORTGAGES (1.5%)
(+)## DLJ Mortgage
Acceptance Corp.,
Series:
96-CF2 S IO
1.640%, 11/12/21 AAA 8,182 682
+ 97-CF2 S IO
0.356%, 10/15/17 Aaa 103,488 2,724
++ Federal Mortgage
Acceptance Corp., Loan
Receivables Trust,
Series 96-B C A1
7.929%, 11/1/18 BB 3,937 3,522
+ GMAC Commercial
Mortgage Securities,
Inc.,
Series 96-C1 X2 IO
1.868%, 3/15/21 Aaa 14,628 1,227
++## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.42%, 2/25/28 AAA 18,535 998
96-CFL X1A IO
1.431%, 2/25/28 AAA 16,871 396
96-CFL X2 IO
1.225%, 2/25/28 AAA 4,802 134
- ----------------------------------------------------
GROUP TOTAL 9,683
- ----------------------------------------------------
COMMUNICATIONS (14.6%)
Comcast Cellular Holdings
Corp., Series B
9.50%, 5/1/07 BB+ 6,050 6,413
(+) Concentric Network
Corp.
12.75%, 12/15/07 N/R 3,000 3,540
# Dial Call
Communications, Inc.
0.00%, 4/15/04 CCC+ 4,875 4,875
+ 0.00%, 12/15/05 B2 6,845 6,742
Esprit Telecom Group plc
11.50%, 12/15/07 B- DEM 8,000 4,738
(+) Flag Ltd.
8.25%, 1/30/08 B+ $ 2,480 2,548
Globalstar LP/Capital
11.375%, 2/15/04 B 3,235 3,397
# Intermedia
Communications, Inc.,
Series B
0.00%, 7/15/07 B 7,240 5,448
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Iridium Capital
Corp.,
Series A
13.00%, 7/15/05 B- $ 2,670 $ 2,990
IXC Communications, Inc.,
Series B
12.50%, 10/1/05 B 4,600 5,474
# Nextel Communications,
Inc.
0.00%, 8/15/04 CCC+ 3,400 3,272
(+) 0.00%, 2/15/08 CCC+ 3,915 2,506
(+)+# NEXTLINK
Communications Co.
0.00%, 4/15/08 B3 6,780 4,288
Qwest Communications
International, Inc.
(+)# 0.00%, 2/1/08 B+ 4,995 3,521
Series B
10.875%, 4/1/07 B+ 2,435 2,825
+# RCN Corp.
0.00%, 10/15/07 B3 8,050 5,394
Rogers Cantel, Inc.
8.30%, 10/1/07 BB+ 4,000 4,020
RSL Communications plc
# 0.00%, 3/15/08 B- DEM 13,600 4,542
(+) 9.125%, 3/1/08 B- $ 4,795 4,843
12.25%, 11/15/06 B- 425 485
# Teleport Communications
Group, Inc.
0.00%, 7/1/07 B+ 7,190 6,183
# Telesystems
International Wireless,
Inc., Series C
0.00%, 11/1/07 B- 9,070 5,737
- ----------------------------------------------------
GROUP TOTAL 93,781
- ----------------------------------------------------
CONSUMER MANUFACTURING (0.9%)
(+) Revlon Consumer
Products
8.125%, 2/1/06 B 5,695 5,766
- ----------------------------------------------------
ENERGY (1.6%)
Nuevo Energy Co.
9.50%, 4/15/06 B+ 3,871 4,123
Snyder Oil Corp.
8.75%, 6/15/07 B+ 5,830 5,990
- ----------------------------------------------------
GROUP TOTAL 10,113
- ----------------------------------------------------
FINANCIAL (3.9%)
Criimi Mae, Inc.
9.125%, 12/1/02 BB 5,000 5,050
(+)# Fuji JGB Investments
LLC,
Series A
9.87%, 12/31/49 BB+ 4,600 4,554
(+)# IBJ Preferred
Capital Co. LLC, Series
A
8.79%, 12/29/49 BBB- 3,725 3,585
Residential Reinsurance
11.45%, 12/15/98 BB- 3,000 3,034
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------
(+)# SB Treasury Co. LLC,
Series A
9.40%, 12/29/49 BBB- $ 3,485 $ 3,602
Western Financial Bank
8.875%, 8/1/07 BB+ 5,720 5,520
- ----------------------------------------------------
GROUP TOTAL 25,345
- ----------------------------------------------------
FOOD & BEVERAGE (1.0%) Ameriserve Food Co.
10.125%, 7/15/07 B- 2,165 2,327
(+) Smithfield Foods,
Inc.
7.625%, 2/15/08 BB+ 3,850 3,831
- ----------------------------------------------------
GROUP TOTAL 6,158
- ----------------------------------------------------
GAMING (2.0%)
Grand Casinos, Inc.
10.125%, 12/1/03 BB 6,915 7,537
Station Casinos, Inc.
9.75%, 4/15/07 B+ 4,460 5,051
10.125%, 3/15/06 B+ 375 421
- ----------------------------------------------------
GROUP TOTAL 13,009
- ----------------------------------------------------
GENERAL INDUSTRIAL (3.2%) American Standard Cos.
7.375%, 2/1/08 BB- 5,745 5,649
Geberit
International S.A.
10.125%, 4/15/07 B+ DEM 4,140 2,539
Navistar Financial Corp.,
Series B
9.00%, 6/1/02 B+ $ 1,555 1,635
# Norcal Waste Systems,
Inc.
13.50%, 11/15/05 BB- 9,155 10,620
- ----------------------------------------------------
GROUP TOTAL 20,443
- ----------------------------------------------------
HEALTH CARE (6.7%)
Columbia/HCA Healthcare
6.91%, 6/15/05 BBB 19,710 18,532
(+) Fresenius Medical
Capital Trust II
7.875%, 2/1/08 B+ 2,885 2,885
Integrated Health
Services
9.50%, 9/15/07 B 5,655 6,008
(+) Magellan Health
Services, Inc.
9.00%, 2/15/08 B- 3,250 3,274
(+) Pharmerica, Inc.
8.375%, 4/1/08 B 2,980 2,995
Tenet Healthcare Corp.
8.625%, 1/15/07 B+ 5,600 5,838
Vencor, Inc.
8.625%, 7/15/07 B+ 2,900 3,266
- ----------------------------------------------------
GROUP TOTAL 42,798
- ----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
HOTELS, LODGING & RESTAURANTS (1.4%)
HMC Acquisition
Properties
9.00%, 12/15/07 BB- $ 3,535 $ 3,751
Host Marriott Travel
Plaza
9.50%, 5/15/05 BB- 5,225 5,565
- ----------------------------------------------------
GROUP TOTAL 9,316
- ----------------------------------------------------
MEDIA & ENTERTAINMENT (4.9%)
Fox/Liberty Networks
# 0.00%, 8/15/07 B 8,700 5,916
8.875%, 8/15/07 B 2,330 2,417
Outdoor Systems, Inc.
8.875%, 6/15/07 B 7,460 7,833
!! Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ 5,385 5,538
Sinclair Broadcast Group,
Inc.
9.00%, 7/15/07 B 2,925 3,049
(+)# TCI Satellite
Entertainment, Inc.
0.00%, 2/15/07 B- 8,950 6,422
- ----------------------------------------------------
GROUP TOTAL 31,175
- ----------------------------------------------------
METALS (2.6%)
(+) EES Coke Battery Co.,
Inc.
9.382%, 4/15/07 BB- 2,500 2,610
(+) Impress Metal
Packaging Holdings
9.875%, 5/29/07 B DEM 9,465 5,439
(+) Murrin Murrin
Holdings
9.375%, 8/31/07 BB- $8,550 8,507
- ----------------------------------------------------
GROUP TOTAL 16,556
- ----------------------------------------------------
PACKAGING (3.3%)
# Nextel Communications,
Inc.
0.00%, 9/15/07 CCC+ 15,145 10,147
(+) Norampac, Inc.
9.50%, 2/1/08 B+ 6,000 6,255
SD Warren Co.
12.00%, 12/15/04 B+ 4,365 4,878
- ----------------------------------------------------
GROUP TOTAL 21,280
- ----------------------------------------------------
RETAIL (6.0%)
(+) CA FM Lease Trust
8.50%, 7/15/17 BBB- 8,255 8,648
DR Structured Finance
Series:
93-K1 A1
6.66%, 8/15/10 BB 3,516 3,269
93-K1 A2
7.43%, 8/15/18 BB 2,565 2,254
94-K1 A1
7.60%, 8/15/07 BB 3,795 3,736
94-K1 A2
8.375%, 8/15/15 BB 1,525 1,498
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
94-K2 A2
9.35%, 8/15/19 BB $ 3,360 $ 3,488
Fleming Cos, Inc.
10.50%, 12/1/04 B+ 2,420 2,565
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 5,925 6,118
Southland Corp.
5.00%, 12/15/03 BB+ 8,279 7,244
- ----------------------------------------------------
GROUP TOTAL 38,820
- ----------------------------------------------------
SOVEREIGN & EMERGING MARKETS (19.5%)
Asia Pulp & Paper Co.,
Ltd., Series A
12.00%, 2/15/04 B+ 6,185 5,134
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 7,160 6,420
(+) Azteca Holdings SA
11.00%, 6/15/02 B- 1,520 1,587
(+) Globo Comunicacoes
Participoes
10.50%, 12/20/06 BB- 6,030 6,120
Grupo Minero Mexicano SA
de CV, Series A
8.25%, 4/1/08 BB 6,200 6,152
Hermes Europe Railtel
11.50%, 8/15/07 B 2,825 3,200
(+) Hylsa SA de CV
9.25%, 9/15/07 BB 3,825 3,825
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 BB 5,650 4,512
Indah Kiat Finance
Mauritius
10.00%, 7/1/07 B+ 2,200 1,826
Korea Development Bank
7.375%, 9/17/04 BB+ 5,940 5,389
Korea Electric Power
Corp.
7.75%, 4/1/13 B+ 1,800 1,530
Multicanal S.A.
10.50%, 2/1/07 BB- 5,940 6,341
National Power Corp.
7.875%, 12/15/06 BB+ 2,985 2,715
(+) NSM Steel, Inc.
12.25%, 2/1/08 CCC 5,000 4,800
# Occidente y Caribe
Cellular
0.00%, 3/15/04 B 8,480 7,462
Philippine Long Distance
Telephone Co., Series E
7.85%, 3/6/07 BB+ 3,395 3,126
(+) Pindo Deli Financial
Mauritius
10.75%, 10/1/07 BB 8,640 7,085
Pohang Iron & Steel Co.,
Ltd.
7.125%, 7/15/04 B+ 690 611
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
(+)# PTC International
Finance BV
0.00%, 7/1/07 B+ $ 9,303 $ 6,513
Quezon Power Ltd.
8.86%, 6/15/17 BB+ 5,660 4,953
(+) RBS Participacos S.A.
11.00%, 4/1/07 BB- 4,375 4,424
(+) Reliance Industries
Ltd.
8.25%, 1/15/27 BB+ 1,130 1,055
9.375%, 6/24/26 BB+ 1,230 1,234
## Republic of Argentina,
Series L
6.688%, 3/31/05 BB- 7,762 7,155
+ Republic of Argentina
Pre 4 BOCON, PIK
# 0.00%, 9/1/02 Ba3 435 531
## 5.625%, 9/1/02 Ba3 2,675 3,267
(+) RG Receivables Ltd.
9.60%, 2/10/05 BB- 6,900 6,918
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 300 269
(+) Satelites Mexicanos
S.A.
10.125%, 11/1/04 B- 3,615 3,737
(+) Total Access
Communication PCL
(Convertible)
2.00%, 5/31/06 BBB- 2,140 1,455
Transgas de Occidente
S.A.
9.79%, 11/1/10 BBB- 2 2
TV Azteca S.A., Series B
10.50%, 2/15/07 B+ 5,405 5,797
- ----------------------------------------------------
GROUP TOTAL 125,145
- ----------------------------------------------------
TECHNOLOGY (1.6%)
Advanced Micro Devices,
Inc.
11.00%, 8/1/03 BB- 9,260 9,908
(+) Lenfest
Communications, Inc.
7.625%, 2/15/08 BB+ 570 572
- ----------------------------------------------------
GROUP TOTAL 10,480
- ----------------------------------------------------
TRANSPORTATION (2.2%)
ALPS, Series 96-1 DX
12.75%, 6/15/06 BB- 6,557 6,566
(+) Jet Equipment Trust,
Series:
94-C1
11.79%, 6/15/13 BBB- 3,450 4,647
95-D
11.44%, 11/1/14 BBB- 2,350 3,140
- ----------------------------------------------------
GROUP TOTAL 14,353
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------
UTILITIES (1.8%) (+) AES Corp.
8.50%, 11/1/07 B+ $ 5,495 $ 5,701
Midland Funding Corp. I,
Series C-94
10.33%, 7/23/02 BB- 3,018 3,289
Midland Funding II,
Series A
11.75%, 7/23/05 B- 2,300 2,737
- ----------------------------------------------------
GROUP TOTAL 11,727
- ----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$543,015) 562,891
- ----------------------------------------------------
PREFERRED STOCKS (4.6%)
- ----------------------------------------------------
SHARES
------
CABLE (3.0%)
Time Warner, Inc., Series M
10.25% BB+ 17,187 19,250
- ----------------------------------------------------
COMMUNICATIONS (0.7%)
IXC Communications, Inc., PIK
7.25% CCC+ 3,451 4,210
- ----------------------------------------------------
MEDIA & ENTERTAINMENT (0.9%)
Sinclair Capital
11.625% B 52,815 5,863
- ----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $26,580) 29,323
- ----------------------------------------------------
UNITS (1.3%)
- ----------------------------------------------------
COMMUNICATIONS (0.6%)
(+)# Wam ! Net, Inc.
0.00%, 3/1/05 N/R 6,325 3,811
- ----------------------------------------------------
TECHNOLOGY (0.7%) (+) AMSC Acquisition Co.
12.25%, 4/1/08 N/R 4,720 4,885
- ----------------------------------------------------
TOTAL UNITS (Cost $8,605) 8,696
- ----------------------------------------------------
WARRANTS (0.1%)
- ----------------------------------------------------
COMMUNICATIONS (0.1%)
*@ Dial Call
Communications, Inc.,
expiring 4/25/99 N/R 4,800 --
<PAGE>
RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
- ----------------------------------------------------
(+)* Globalstar
Telecommunications
Ltd.,
expiring 2/15/04 N/R 3,235 $ 485
(+)* Iridium World
Communications Ltd.,
expiring 7/15/05 N/R 1,920 461
- ----------------------------------------------------
GROUP TOTAL 946
- ----------------------------------------------------
SOVEREIGN & EMERGING MARKETS (0.0%)
*@ Occidente y Caribe
Cellular, expiring
3/15/04 N/R 33,920 --
- ----------------------------------------------------
TOTAL WARRANTS (Cost $378) 946
- ----------------------------------------------------
CASH EQUIVALENT (4.5%)
- ----------------------------------------------------
FACE
AMOUNT
(000)
--------
REPURCHASE AGREEMENT (4.5%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98, to
be repurchased at $28,810,
collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued
at $28,892 (Cost $28,820) $ 28,805 28,805
- ----------------------------------------------------
TOTAL INVESTMENTS (98.1%) (Cost $607,398) 630,661
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.9%)
Cash 2
Interest Receivable 10,844
Receivable for Investments Sold 6,939
Receivable for Fund Shares Sold 974
Unrealized Gain on Forward Foreign
Currency Contracts 277
Other Assets 18
Payable for Investments Purchased (5,986)
Payable for Fund Shares Redeemed (225)
Payable for Investment Advisory Fees (566)
Payable for Administrative Fees (43)
Payable for Trustees' Deferred
Compensation- Plan-Note F (16)
Payable for Shareholder Servicing Fees-
Investment Class (1)
Payable for Distribution Fees-Adviser
Class (2)
Payable for Daily Variation on Futures
Contracts (80)
Other Liabilities (21)
--------
12,114
- ----------------------------------------------------
NET ASSETS (100%) $642,775
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
(000)!
- ----------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 61,834,127 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $618,538
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.00
- ----------------------------------------------------
INVESTMENT CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 1,289,824 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 12,915
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.01
- ----------------------------------------------------
ADVISER CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 1,132,170 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 11,322
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.00
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $595,502 Undistributed Net Investment Income (Loss) 13,333
Undistributed Realized Net Gain (Loss) 10,453 Unrealized Appreciation
(Depreciation) on:
Investment Securities 23,263
Foreign Currency Transactions 266
Futures (42)
- ----------------------------------------------------
NET ASSETS $642,775
- ----------------------------------------------------
- ----------------------------------------------------
sec. Restricted Security-Total market value of restricted security owned at
March 31, 1998 was $671 or 0.1% of net assets.
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale may
exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is
as of March 31, 1998.
@ Value is less than $500.
DEM German Mark
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc., Standard & Poor's
Corporation or Fitch.
PCL Public Company Limited
PIK Payment-In-Kind Security
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
CASH RESERVES
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Cash Reserves Portfolio is a money market fund which invests in only the
highest quality short-term investment securities. The fund looks to maximize
current income while preserving capital and liquidity. The Portfolio purchases
cash equivalents with maturities of up to 13 months using high-grade (A1/P1)
commercial paper and other money market securities, such as repurchase
agreements and U.S. Treasury Bills.
SEC 7-DAY YIELDS AT 3/31/98
AVERAGE YIELD 5.33%
EFFECTIVE YIELD 5.47
Performance is net of all fees. The table above represents past performance and
is not indicative of future results.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
An investment in the Cash Reserves Portfolio is neither insured nor guaranteed
by the U.S. Government. The Portfolio seeks to maintain, but does not guarantee,
a constant net asset value of $1.00 per share.
STATEMENT OF NET ASSETS
COMMERCIAL PAPER (73.7%)
- ----------------------------------------------------
FACE
AMOUNT VALUE
MARCH 31, 1998 (000) (000)!
- ----------------------------------------------------
COMMERCIAL BANKING & CREDIT (25.3%) Abbey National N.A.
5.44%, 4/29/98 $2,000 $ 1,992
American Express Credit Corp.
5.49%, 6/5/98 2,000 1,980
5.56%, 4/3/98 2,000 1,999
Associates Corp. of North America
5.49%, 6/19/98 2,000 1,976
5.50%, 6/3/98 1,000 990
Australia & New Zealand Bank,
Inc., Delaware
5.48%, 6/25/98 2,000 1,974
Bank of America
5.43%, 5/20/98 1,000 993
Canadian Bank Imperial Holdings
5.48%, 6/22/98 2,000 1,975
CIT Group Holdings, Inc.
5.51%, 5/22/98 2,000 1,984
<PAGE>
FACE
AMOUNT VALUE
(000) (000)!
====================================================
Eiger Capital Corp.
5.54%, 4/20/98 $1,000 $ 997
J.P. Morgan & Co.
5.50%, 6/22/98 1,000 987
5.64%, 6/18/98 2,000 1,976
Sun Trust Co.
5.44%, 4/24/98 2,000 1,993
SunTrust Banks, Inc.
5.53%, 5/7/98 1,000 995
Rabobank U.S. Finance Corp.
5.55%, 4/29/98 2,000 1,991
Westdeutsche Landesbank
5.46%, 4/29/98 1,000 996
5.54%, 4/20/98 2,000 1,994
- ----------------------------------------------------
GROUP TOTAL 27,792
- ----------------------------------------------------
FINANCIAL LEASING & SERVICES (28.6%)
Asset Securitization Corp.
5.52%, 6/5/98 2,000 1,980
Atlantic Asset Securitization
Corp.
5.58%, 4/13/98 2,641 2,636
Commercial Credit Co.
5.47%, 4/17/98 2,000 1,995
First Chicago Financial Corp.
5.50%, 6/15/98 2,000 1,977
5.56%, 5/6/98 1,000 995
General Reinsurance Corp.
5.72%, 4/23/98 2,000 1,993
Greenwich Funding
5.53%, 5/14/98 3,000 2,980
International Lease Finance Corp.
5.43%, 5/14/98 2,000 1,987
5.48%, 6/3/98 1,000 990
Kimberly Clark
5.50%, 4/24/98 2,000 1,993
Merrill Lynch & Co.
5.45%, 5/6/98 2,000 1,989
5.49%, 4/17/98 1,000 998
National Rural Utilities
Cooperative Finance Corp.
5.45%, 5/20/98 2,000 1,985
5.68%, 4/28/98 1,000 996
Panasonic Finance, Inc.
5.52%, 4/28/98 3,000 2,988
Texaco, Inc.
5.48%, 6/22/98 2,000 1,975
USAA Capital Corp.
5.45%, 4/7/98 1,000 999
- ----------------------------------------------------
GROUP TOTAL 31,456
- ----------------------------------------------------
INDUSTRIALS (7.2%)
General Electric Capital Corp.
5.45%, 6/5/98 1,000 990
5.49%, 7/2/98 2,000 1,972
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)!
- ----------------------------------------------------
General Motors Acceptance Corp.
5.51%, 6/3/98 $2,000 $ 1,981
IBM Credit Corp.
5.52%, 5/7/98 3,000 2,983
- ----------------------------------------------------
GROUP TOTAL 7,926
- ----------------------------------------------------
MANUFACTURING AND RETAIL TRADE (4.5%)
Eastman Kodak
5.51%, 5/21/98 2,000 1,985
Electronic Data Systems
5.55%, 4/7/98 3,000 2,997
- ----------------------------------------------------
GROUP TOTAL 4,982
- ----------------------------------------------------
PERSONAL BANKING & CREDIT (5.4%) Metlife Funding, Inc.
5.49%, 4/28/98 986 982
Prudential Funding Corp.
5.51%, 6/1/98 2,000 1,981
Transamerica Corp.
5.52%, 4/23/98 3,000 2,990
- ----------------------------------------------------
GROUP TOTAL 5,953
- ----------------------------------------------------
TRANSPORTATION (2.7%)
Daimler-Benz North America Corp.
5.46%, 4/28/98 2,000 1,992
5.50%, 5/22/98 1,000 992
- ----------------------------------------------------
GROUP TOTAL 2,984
- ----------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost $81,093) 81,093
- ----------------------------------------------------
CERTIFICATES OF DEPOSIT (16.4%)
- ----------------------------------------------------
COMMERCIAL BANKING & CREDIT (16.4%)
ABN-Amro Chicago
5.69%, 3/22/99 1,000 1,000
ABN-Amro Finance
5.53%, 7/7/98 1,000 1,000
Bank of Montreal, Chicago
5.85%, 11/6/98 1,000 1,000
Barclays Bank
5.83%, 6/19/98 1,000 1,000
Barclays Bank, New York
5.50%, 5/5/98 1,000 1,000
Canadian Imperial Bank of
Commerce
5.50%, 4/27/98 2,000 2,000
Chase Manhattan Corp.
5.56%, 6/2/98 2,000 2,000
Commerzbank U.S. Finance, Inc.
5.60%, 2/11/99 1,000 998
Credit Agricole Indosuez
5.74%, 3/29/99 1,000 999
CS First Boston
5.60%, 2/11/99 2,000 2,000
Deutsche Bank
5.50%, 7/29/98 1,000 1,000
5.60%, 2/11/99 1,000 1,000
<PAGE>
FACE
AMOUNT VALUE
(000) (000)!
- ----------------------------------------------------
Landesbank Hessen Thueingen, New
York
5.88%, 4/7/98 $1,000 $ 1,000
National Westminster Bank
5.52%, 8/5/98 1,000 1,000
Swiss Bank (NY)
5.90%, 12/16/98 1,000 1,000
- ----------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $17,997) 17,997
- ----------------------------------------------------
AGENCY FLOATING RATE MORTGAGE (6.4%)
- ----------------------------------------------------
## Federal Home Loan Mortgage Corp.
5.46%, 6/22/98
(Cost $7,000) 7,000 7,000
- ----------------------------------------------------
REPURCHASE AGREEMENT (3.4%)
- ----------------------------------------------------
Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased at
$3,707, collateralized by
various U.S. Government
Obligations, due
4/1/98-11/15/99, valued at
$3,717 (Cost $3,706) 3,706 3,706
- ----------------------------------------------------
TOTAL INVESTMENTS (99.9%) (Cost $109,796) 109,796
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
Interest Receivable 264
Receivable for Fund Shares Sold 4
Other Assets 5
Dividend Payable (30)
Payable for Fund Shares Redeemed (14)
Payable for Investment Advisory Fees (61)
Payable for Administrative Fees (8)
Payable for Trustees' Deferred
Compensation Plan-Note F (3)
Other Liabilities (17)
--------
140
- ----------------------------------------------------
NET ASSETS (100%) $109,936
- ----------------------------------------------------
NET ASSETS
Applicable to 109,934,190 outstanding
shares of beneficial interest
(unlimited
authorization, no par value) $109,936
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 1.00
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid In Capital $109,936
- ----------------------------------------------------
NET ASSETS (100%) $109,936
- ----------------------------------------------------
! See Note A1 to Financial Statements.
## Variable or floating rate security-rate disclosed is as
of March 31, 1998.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO II (UNAUDITED)
MAS OVERVIEW
- -------------------------------------------------------------------------------
The Fixed Income Portfolio II invests in all sectors of the investment-grade
bond market. Miller Anderson & Sherrerd constructs a diversified fund with a
maturity and duration structure reflecting long-term views on interest rates and
inflation. MAS selects investments in U.S. Treasuries, agencies,
investment-grade corporate bonds, mortgages, foreign and other fixed-income
securities based upon relative value in the marketplace.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS FIXED SALOMON
INCOME II INSTITUTIONAL BROAD INDEX
-------------------------------------
SIX MONTHS 3.85% 4.60%
ONE YEAR 11.24 11.98
FIVE YEARS 7.29 7.00
SINCE INCEPTION 9.94 9.08
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
* The Fixed Income Portfolio II commenced operations on 8/31/90. Pursuant to a
vote of the Portfolio's shareholders on May 12, 1997, the Portfolio's investment
policies were changed to allow the Portfolio to invest in fixed-income
securities of domestic issuers rated BBB or higher at the time of purchase. The
Portfolio's performance pattern may have been affected by this change. Total
returns are compared to the Salomon Broad Investment Grade Index, an unmanaged
market index. Returns for periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (84.0%)
- ----------------------------------------------------------
RATINGS FACE
March 31, (STANDARD AMOUNT VALUE
1998 & POOR'S) (000) (000)!
- ----------------------------------------------------------
ADJUSTABLE RATE MORTGAGES (7.6%)
## Government National
Mortgage Association
Various Pools:
6.00%, 8/20/27-11/20/97 Tsy $ 20,753 $ 21,073
- -----------------------------------------------------------
AGENCY FIXED RATE MORTGAGES (8.1%)
Federal Home Loan Mortgage
Corporation
Conventional Pools:
8.25%, 10/1/06 Agy 91 95
May TBA
6.50%, 5/15/28 Agy 2,200 2,176
Federal National Mortgage
Association
May TBA
6.50%, 5/15/28 Agy 23,350 20,101
- ----------------------------------------------------------
GROUP TOTAL 22,372
- -----------------------------------------------------------
ASSET BACKED CORPORATES (13.5%)
Aegis Auto Receivables
Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 407 408
ALPS, Series, 94-1 A4 CMO
7.80%, 9/15/04 AA 800 817
Americredit Automobile
Receivables Trust,
Series 96-B A
6.50%, 1/12/02 AAA 809 813
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 1,110 1,117
97-D A3
6.20%, 5/15/03 AAA 1,400 1,403
98-A A3
5.90%, 11/15/02 AAA 1,350 1,346
Banc One Auto Grantor
Trust,
Series 97-B A
6.29%, 7/20/04 AAA 1,326 1,332
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 1,138 1,140
CPS Auto Grantor Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 555 558
(+) Credit Card Receivables
Trust, Series 98-IA A
6.478%, 12/22/04 AAA 672 671
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
Daimler Benz Auto Grantor
Trust, Series 97-A A
6.05%, 3/31/05 AAA $ 802 $ 802
Empire Funding Home Loan
Owner Trust,
Series 97-4 A2
7.16%, 5/25/12 AAA 1,000 1,011
(+) First Merchants Auto
Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA 495 498
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 655 656
97-3 A3
6.57%, 10/10/10 AAA 645 648
97-4 A2
6.30%, 8/10/09 AAA 650 650
97-4 A3
6.40%, 8/10/11 AAA 575 575
98-1 A3
6.04%, 10/10/13 AAA 1,025 1,016
First Security Auto Grantor
Trust, Series 97-B A
6.10%, 4/15/03 AAA 1,363 1,365
Ford Credit Auto Owner
Trust, Series 97-B A3
6.05%, 4/15/01 AAA 825 827
Green Tree Financial Corp.,
Series:
97-7 A3
6.18%, 9/15/09 AAA 900 900
+ 98-1 A2
5.85%, 4/1/11 Aaa 1,425 1,419
98-2 A3
6.05%, 10/1/07 AAA 1,350 1,347
(+)++ Health Care
Receivables
Securitization Program,
Series 97-1 A
6.815%, 7/1/01 AAA 400 404
Honda Auto Receivables
Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 1,392 1,390
IMC Home Equity Loan Trust,
Series 98-1 A2
6.31%, 12/20/12 AAA 1,325 1,321
(+) Long Beach Acceptance
Auto Grantor Trust,
Series:
97-2 A
6.69%, 9/25/04 AAA 670 671
98-1 A
6.19%, 1/25/04 AAA 610 607
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
(+) National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 1,125 1,166
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA $ 1,469 $ 1,472
(+) Rental Car Finance
Corp.,
Series 97-1 A2
6.45%, 4/25/03 AA 1,350 1,353
Security Pacific Home
Equity Trust,
Series 91-A B
10.50%, 3/10/06 A+ 254 254
(+) Team Fleet Financing
Corp.,
Series:
96-1A
6.65%, 12/15/02 A- 475 479
97-1A
7.35%, 5/15/03 A- 1,300 1,343
UCFC Home Equity Loan,
Series 97-D A2
6.475%, 6/15/12 AAA 1,100 1,104
Union Acceptance Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 998 1,002
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA 1,180 1,180
98-A A3
5.90%, 5/20/02 AAA 1,200 1,198
World Omni Automobile Lease
Securitization Corp.,
Series 97-B A2
6.08%, 11/25/03 AAA 1,175 1,176
- ----------------------------------------------------------
GROUP TOTAL 37,439
- ----------------------------------------------------------
ASSET BACKED MORTGAGES (0.7%)
AFC Home Equity Loan Trust,
Series 96-4 1A6
7.22%, 3/25/27 AAA 1,000 1,013
Cityscape Home Equity Loan
Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 12,180 291
sec. 96-3 A YMA 10/25/26
(acquired 12/24/96,
cost $23) N/R 12,180 17
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 I IO
1.10%, 1/15/28 AAA 9,298 237
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO II (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
(CONT'D)
- -----------------------------------------------------
sec. 96-4 A11 I YMA
1/15/28
(acquired 12/16/96, cost
$22) AAA $ 9,298 $ 13
96-4 A12 I IO
1.05%, 1/15/28 AAA 2,510 64
(+) 96-4 A12 I YMA
1/15/28 AAA 2,510 4
97-1 A10 I IO
1.10%, 3/15/28 AAA 11,454 301
(+) 97-1 A10 I YMA
3/15/28 N/R 11,454 16
- -----------------------------------------------------
GROUP TOTAL 1,956
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (1.8%)
Federal Home Loan Mortgage
Corporation,
Series:
89-47 F PAC
10.00%, 6/15/20 Agy 400 434
1632-SA Inv Fl REMIC
5.229%, 11/15/23 Agy 884 789
1699-SD Inv Fl IO REMIC
2.25%, 3/15/24 Agy 8,874 699
1709-H PO REMIC
1/15/24 Agy 62 38
1813-K PO REMIC
2/15/24 Agy 60 49
1844-PC PO REMIC
3/15/24 Agy 110 81
1854-A PO REMIC
12/15/23 Agy 800 589
1887-I PO REMIC
10/15/22 Agy 65 49
Federal National Mortgage
Association,
Series:
93-149 O PO REMIC
8/25/23 Agy 123 90
93-205 G PO REMIC
9/25/23 Agy 474 338
93-235 H PO REMIC
9/25/23 Agy 171 147
96-14 PC PO
12/25/23 Agy 105 71
96-37 H PO REMIC
8/25/23 Agy 698 574
96-46 PB PO REMIC
9/25/23 Agy 110 83
96-54 O PO
11/25/23 Agy 87 60
287 1 PO
12/17/07 Agy 1,286 894
- -----------------------------------------------------
GROUP TOTAL 4,985
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (5.6%)
Bear Stearns Mortgage
Securities, Inc.,
Series 96-4 AI 10
8.125%, 9/25/27 AAA $ 1,100 $ 1,143
sec.++ Citicorp Mortgage
Securities, Inc., Series
95-2 B1 REMIC
7.50%, 4/25/25 (acquired
8/7/95-7/22/97, cost
$844) AA 868 881
First Boston Mortgage
Securities Corp.,
Series:
sec. 92-4 B1 REMIC
8.125%, 10/25/22
(acquired 1/25/93, cost
$308) A 321 334
++ 93-5 B1
7.30%, 7/25/23 AA+ 1,409 1,414
sec. Kidder Peabody Funding
Corp., Series 92-4 B2
8.467%, 5/28/22
(acquired 8/5/92, cost
$268) N/R 268 268
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 1,050 1,131
PNC Mortgage Securities
Corp., Series 96-1 B1
REMIC
7.50%, 6/25/26 AA 1,153 1,171
Prudential Home Mortgage
Securities Co., Inc.,
Series:
sec.+ 92-33 B1
7.50%, 8/15/22 (acquired
9/14/92, cost $516) Aa3 543 545
(+)+ 92-A 2B4
7.90%, 4/28/22 A1 1,000 981
+ 93-17 B1
6.50%, 3/1/23 Aa2 592 589
(+)++## 94-A 3B3
6.803%, 4/28/24 A 1,450 1,419
Residential Accredit Loans
Inc.,
Series:
97-QS2 A8
7.75%, 3/25/27 AAA 525 542
97-QS4 A7
7.75%, 5/25/27 AAA 875 900
97-QS12 A7 REMIC
7.25%, 11/25/27 AAA 1,396 1,404
Residential Funding
Mortgage Securities Co.,
Inc.,
Series:
93-S27 M2
7.50%, 6/25/23 A 783 790
94-S1 A19
6.75%, 1/25/24 AAA 760 750
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
54
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Rural Housing Trust,
Series 87-1 B1 REMIC
3.33%, 10/1/28 A- $ 732 $ 704
Ryland Mortgage Securities
Corp. III,
Series 92-A 1A
8.27%, 3/29/30 A- 507 516
- -----------------------------------------------------
GROUP TOTAL 15,482
- -----------------------------------------------------
COMMERCIAL MORTGAGES (10.7%)
American Southwest
Financial Securities
Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 1,039 1,063
++## 93-2 S1 IO
1.079%, 1/18/09 AAA 10,870 456
+ 95-C1 A1B
7.40%, 11/17/04 Aaa 1,050 1,086
Asset Securitization Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 1,211 1,278
95-MD4 A1
7.10%, 8/13/29 AAA 1,158 1,204
++## 95-MD4 ACS2 IO
2.364%, 8/13/29 AAA 2,127 370
(+)+ 96-D3 A1C
7.40%, 10/13/26 AAA 850 905
96-MD6 A1C
7.04%, 11/13/26 AAA 825 860
+ 97-D5 PS1 IO
1.536%, 2/14/41 Aaa 6,070 654
Beverly Finance Corp.,
Series 94-1
8.36%, 7/15/04 AA- 675 727
(+) Carousel Center
Finance, Inc.,
Series 1 B
7.188%, 10/15/07 A 1,400 1,433
(+) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 720 815
(+) Crystal Run Properties,
Series A
7.393%, 8/15/11 AA 1,100 1,175
(+) CVM Finance Corp.
7.19%, 3/1/04 AA 575 594
(+) DLJ Mortgage Acceptance
Corp.,
Series:
95-CF2 A3
7.05%, 12/17/27 A 1,100 1,119
96-CF1 A1B
7.58%, 3/13/28 AAA 1,100 1,172
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) 000) (000)!
- -----------------------------------------------------
96-CF2 A1B
7.29%, 11/12/21 AAA $ 260 $ 273
++## 96-CF2 S IO
1.640%, 11/12/21 AAA 2,459 205
First Union-Lehman Brothers
Commercial Mortgage,
Series 97-C2 A3
6.65%, 12/18/07 AAA 1,125 1,143
+ GMAC Commercial Mortgage
Securities, Inc.,
Series:
## 96-C1 X2 IO
1.917%, 3/15/21 Aaa 3,566 299
97-C2 A3
6.566%, 11/15/07 Aaa 1,225 1,238
## 97-C2 X IO
1.273%, 4/15/27 Aaa 10,624 807
+ GS Mortgage Securities
Corp. II,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 550 571
## 97-GL X2 IO
0.930%, 7/13/30 Aaa 2,688 139
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 1,075 1,129
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 1,010 1,058
98-C1 IO
1.199%, 2/18/28 Aaa 11,150 746
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 1,100 1,153
96-C2 A2
6.82%, 11/21/28 AAA 400 409
++## 96-C2 IO
1.538%, 11/21/28 AAA 4,110 346
+ Midland Realty Acceptance
Corp., Series 96-C2 A2
7.233%, 1/25/29 Aaa 700 732
Mortgage Capital Funding,
Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 1,300 1,330
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 1,350 1,369
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
55
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO II (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
++## Nomura Asset
Securities Corp.,
Series:
94-MD1 A2
7.671%, 3/15/18 AA $ 750 $ 778
(+) Prime Property Funding,
Series 1A
6.633%, 7/23/03 AA 794 804
- -----------------------------------------------------
GROUP TOTAL 29,440
- -----------------------------------------------------
ENERGY (0.5%)
(+) Excel Paralubes Funding
7.43%,11/1/15 A- 1,275 1,321
- -----------------------------------------------------
FINANCE (10.1%)
(+) Anthem Insurance Cos.,
Inc.,
Series A
9.00%, 4/1/27 BBB+ 705 755
(+) BankAmerica
Institutional,
Series A
8.07%, 12/31/26 A- 1,350 1,438
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 BBB+ 1,370 1,421
Countrywide Funding Corp.,
Series A
6.55%, 4/14/00 A 1,000 1,008
(+) EOP Operating LP
6.625%, 2/15/05 BBB 1,000 996
(+) Equitable Life
Assurance Society of the
U.S., Series 1A
6.95%, 12/1/05 A 1,200 1,231
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 975 1,128
(+) Fifty-Seventh Street
Associates
7.125%, 6/1/17 A 1,162 1,182
(+) First Chicago NBD
Corp.,
Series A
7.95%, 12/1/26 A- 1,225 1,285
(+) First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 1,650 1,687
First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ 1,250 1,326
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 800 831
7.45%, 7/1/04 A 200 208
(+) Florida Windstorm
6.70%, 8/25/04 A- 750 755
General Motors Acceptance
Corp.,
5.875%, 1/22/03 A- 1,080 1,067
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- 875 871
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A+ 850 851
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) NB Capital Trust
8.25%, 4/15/27 A- $ 505 $ 553
(+) New York Life Insurance
Co.
7.50%, 12/15/23 AA 500 506
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 1,425 1,493
(+) Prime Property Funding
II
7.00%, 8/15/04 A 875 888
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 485 541
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 1,025 1,090
B
8.035%, 3/15/27 A 250 268
Washington Mutual Capital
8.375%, 6/1/27 BBB- 445 480
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 415 441
(+) Wells Fargo Capital,
Series:
A
8.125%, 12/1/26 BBB 1,150 1,218
I
7.96%, 12/15/26 BBB+ 220 231
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 1,729 1,777
96-WFP-D
6.95%, 9/1/13 AA- 450 465
- -----------------------------------------------------
GROUP TOTAL 27,991
- -----------------------------------------------------
FOREIGN GOVERNMENT (1.5%)
Government of Germany DEM
7.375%, 12/2/02 AAA 6,765 4,089
- -----------------------------------------------------
INDUSTRIALS (1.3%)
(+) Atlas Air, Inc.,
Series A
7.38%, 1/2/18 AA- $ 1,005 1,029
News America Holdings
7.75%, 1/20/24 BBB- 375 393
7.75%, 2/1/24 BBB- 565 592
8.875%, 4/26/23 BBB- 370 434
(+) Oxymar
7.50%, 2/15/16 BBB 650 661
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 565 578
- -----------------------------------------------------
GROUP TOTAL 3,687
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.5%)
Bank of America, Series A
8.375%, 5/1/07 AAA $ 110 $ 111
California Federal Savings
& Loan, Series 86-1A
8.80%, 1/1/14 AA 69 69
First Federal Savings &
Loan Association, Series
92-C
8.75%, 6/1/06 AA 36 37
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA 396 396
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 727 705
- -----------------------------------------------------
GROUP TOTAL 1,318
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (1.2%)
Federal National Mortgage
Association,
Series:
249 1 PO
10/25/23 Agy 1,856 1,301
260 1 PO
4/1/24 Agy 790 610
282 1 PO
9/1/25 Agy 1,734 1,279
- -----------------------------------------------------
GROUP TOTAL 3,190
- -----------------------------------------------------
TELEPHONES (0.3%) MCI Communications Corp.
6.95%, 8/15/06 A 915 941
- -----------------------------------------------------
TRANSPORTATION (0.8%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 1,070 1,069
(+) Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 950 1,201
- -----------------------------------------------------
GROUP TOTAL 2,270
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
U.S. TREASURY SECURITIES (14.9%)
U.S. Treasury Bond
!! 8.75%, 8/15/20 Tsy 5,045 6,724
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 8,974 8,699
3.625%, 7/15/02
(Inflation Indexed) Tsy $ 4,303 $ 4,259
3.625%, 1/15/08
(Inflation Indexed) Tsy 5,475 5,410
5.625%, 2/28/01 Tsy 5,000 4,998
6.25%, 4/30/01 Tsy 11,000 11,186
- -----------------------------------------------------
GROUP TOTAL 41,276
- -----------------------------------------------------
UTILITIES (0.2%)
(+) Edison Mission Energy
Funding Corp., Series B
7.33%,9/15/08 BBB 500 519
- -----------------------------------------------------
YANKEE (4.7%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 963 966
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 850 762
(+) Express Pipeline LP,
Series A
6.47%, 12/31/13 A 1,915 1,905
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A+ 675 621
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 BB 925 739
(+) Israel Electric Corp.,
Ltd.
7.75%, 12/15/27 A- 1,830 1,857
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 1,150 1,151
(+) Pacificorp Australia
LLC
6.15%, 1/15/08 AAA 700 690
(+) Paiton Energy Funding
9.34%, 2/15/14 CCC 800 384
(+) Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 1,015 945
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 1,030 1,079
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 850 880
Republic of Colombia
8.70%, 2/15/16 BBB- 810 793
(+) Samsung Electronics Co.
7.45%, 10/1/02 B+ 305 273
- -----------------------------------------------------
GROUP TOTAL 13,045
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$229,780) 232,394
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
57
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO II (UNAUDITED)
RATINGS
(STANDARD VALUE
(CONT'D) & POOR'S) SHARES (000)!
- -----------------------------------------------------
PREFERRED STOCKS (1.7%)
- -----------------------------------------------------
INDUSTRIALS (0.2%)
Tier One Properties,
11.095% A 425 $ 410
- -----------------------------------------------------
MORTGAGE-OTHER (1.5%)
(+)+ Home Ownership Funding
Corp., 13.331% Aaa 4,350 4,172
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $4,790) 4,582
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- -----------------------------------------------------
FACE
AMOUNT
(000)
--------
J.P. Morgan and Co.,
terminating 10/15/99, to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount. (Premium
Paid $243) AA- $ 57,500 53
- -----------------------------------------------------
CASH EQUIVALENTS (29.9%)
- -----------------------------------------------------
Short-term Investments
Held as Collateral for Loaned
Securities (8.0%) 22,171 22,171
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (16.2%)
Federal Home Loan Mortgage
Corporation
Conventional Pools:
10.00%, 9/1/17-11/1/20 Agy 1,182 1,304
10.25%, 7/1/09 Agy 227 250
11.00%, 1/1/16 Agy 298 336
11.25%, 9/1/10-12/1/14 Agy 336 379
Gold Pools:
10.00%, 10/1/19-11/1/21 Agy 1,996 2,210
10.50%, 3/1/16 Agy 1,115 1,243
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 311 312
## 1933-FQ REMIC
6.50%, 3/15/25 Agy 597 600
## 2040-FC
5.975%, 2/15/23 Agy 1,475 1,479
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Federal National Mortgage
Association
Conventional Pools:
10.00%, 3/1/20-5/1/22 Agy $ 1,244 $ 1,378
10.50%, 11/1/17-2/1/28 Agy 1,109 1,251
10.75%, 8/1/13 Agy 101 113
11.25%, 11/1/00-8/1/13 Agy 206 235
11.50%, 1/1/17-9/1/25 Agy 780 891
Series:
## 92-43 FC REMIC
6.35%, 10/25/21 Agy 1,328 1,341
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 1,051 1,055
## 97-43 FM REMIC
6.25%, 7/18/27 Agy 823 829
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 712 716
## 97-76 FM
6.20%, 9/17/27 Agy 869 875
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 3,300 3,307
Government National Mortgage
Association
Adjustable Rate Mortgages:
7.00%, 2/20/25-7/20/25 Tsy 3,063 3,124
7.125%, 7/20/25 Tsy 660 674
7.375%, 4/20/25-6/20/25 Tsy 6,179 6,302
Various Pools:
9.50%, 9/15/22-1/15/28 Tsy 2,931 3,203
10.00%, 4/15/11-12/15/20 Tsy 7,000 7,800
10.50%, 12/15/00-5/15/19 Tsy 109 122
11.00%, 2/15/10-2/15/19 Tsy 1,151 1,318
11.50%, 8/20/14-1/20/18 Tsy 17 18
April TBA
9.50%, 4/15/98 Tsy 1,825 2,001
- -----------------------------------------------------
GROUP TOTAL 44,666
- -----------------------------------------------------
REPURCHASE AGREEMENT (5.7%)
Chase Securities, Inc. 5.75%
dated 3/31/98, due 4/1/98, to
be repurchased at $15,862,
collateralized by various U.S.
Government Obligations due
4/1/98-11/15/99, value at
$15,907 15,860 15,860
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $82,579) 82,697
- -----------------------------------------------------
TOTAL INVESTMENTS (115.6%) (Cost $317,392) 319,726
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
STATEMENT OF NET ASSETS
- -------------------------------------------------------------------------------
VALUE
(000)!
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-15.6%)
Dividends Receivable $ 157
Interest Receivable 2,625
Receivable for Investments Sold 22,891
Receivable for Fund Shares Sold 1,282
Unrealized Gain on Forward Foreign Currency
Contracts 129
Unrealized Gain on Swap Agreements 35
Other Assets 9
Payable for Investments Purchased (47,733)
Payable for Investment Advisory Fees (242)
Payable for Administrative Fees (18)
Payable for Trustees' Deferred Compensation
Plan-Note F (9)
Payable for Daily Variation on Futures
Contracts (25)
Collateral on Securities Loaned, at Value (22,171)
Other Liabilities (41)
--------
(43,111)
- -----------------------------------------------------
NET ASSETS (100%) $276,615
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 24,216,000 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $276,615
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.42
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $267,343
Undistributed Net Investment Income (Loss) 5,336
Undistributed Realized Net Gain (Loss) 1,484
Unrealized Appreciation (Depreciation) on:
Investment Securities 2,334
Foreign Currency Transactions 127
Futures and Swaps (9)
- -----------------------------------------------------
NET ASSETS $276,615
- -----------------------------------------------------
<PAGE>
- -----------------------------------------------------------
sec. Restricted Security-Total market value of restricted securities owned
at March 31, 1998 was $2,058 or 0.7% of net assets.
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
CMO Collateralized Mortgage Obligation
DEM German Mark
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
YMA Yield Maintenance Agreement
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------------
59
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MORTGAGE-BACKED
SECURITIES PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Mortgage-Backed Securities Portfolio invests in a full range of mortgage
securities, collateralized mortgage obligations (CMOs), asset-backed securities,
U.S. Government securities, other fixed-income securities and derivative
instruments. Miller Anderson & Sherrerd selects mortgages that appear most
attractively priced, while managing the Portfolio's prepayment risk, interest
rate sensitivity and yield curve sensitivity.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS
MORTGAGE-BACKED LEHMAN
SECURITIES MORTGAGE INDEX
--------------------------------
SIX MONTHS 3.56% 4.04%
ONE YEAR 10.34 11.14
FIVE YEARS 7.17 6.93
SINCE INCEPTION 7.48 7.46
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Mortgage-Backed Securities Portfolio commenced operations on 1/31/92.
Total returns are compared to the Lehman Brothers Mortgage Index, an unmanaged
market index. Returns for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (94.6%)
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (25.2%)
## Government National
Mortgage Association
Various Pools:
6.00%, 10/20/27-1/20/28 Tsy $ 7,129 $ 7,218
6.50%, 8/20/27 Tsy 2,798 2,848
- -----------------------------------------------------
GROUP TOTAL 10,066
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
=====================================================
AGENCY FIXED RATE MORTGAGES (40.1%)
Federal Home Loan Mortgage
Corporation May TBA
6.50%, 5/15/28-6/15/28 Agy $ 14,975 $ 14,810
Federal National Mortgage
Association May TBA
6.50%, 8/15/24-5/15/28 Agy 1,250 1,235
- -----------------------------------------------------
GROUP TOTAL 16,045
- -----------------------------------------------------
ASSET BACKED CORPORATES (0.3%) Old Stone Credit Corp.
Home Equity Trust,
Series 92-3 B1
6.35%, 9/25/07 AAA 26 25
Security Pacific Home
Equity Trust, Series 91-A
B
10.50%, 3/10/06 A+ 108 108
- -----------------------------------------------------
GROUP TOTAL 133
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY
COLLATERAL SERIES (6.1%)
Federal Home Loan Mortgage
Corporation,
Series:
90-129 H PAC
8.85%, 3/15/21 Agy 185 200
1415-S Inv Fl IO
18.50%, 11/15/07 Agy 128 57
1476-S Inv Fl IO REMIC
PAC
4.26%, 2/15/08 Agy 1,018 114
1485-S Inv Fl IO REMIC
3.85%, 3/15/08 Agy 1,690 153
1600-SA Inv Fl IO REMIC
2.25%, 10/15/08 Agy 2,816 156
1950-SC Inv Fl IO
2.25%, 10/15/22 Agy 3,450 301
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl
28.183%, 9/25/20 Agy 38 57
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
60
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
92-52 SQ Inv Fl IO REMIC
7041.565%, 9/25/22 Agy $ 1 $ 186
92-186 S Inv Fl IO REMIC
3.26%, 10/25/07 Agy 2,014 163
93-205 G PO REMIC
9/25/23 Agy 180 129
93-235 H PO REMIC
9/25/23 Agy 66 57
96-68 SC Inv Fl IO REMIC
2.35%, 1/25/24 Agy 432 54
97-30 Inv Fl IO REMIC
2.25%, 7/25/22 Agy 1,035 91
Government National
Mortgage Association,
Series:
96-12 S Inv Fl IO REMIC
2.75%, 6/16/26 Tsy 4,117 268
96-13 S Inv Fl IO REMIC
3.40%, 7/16/11 Tsy 1,636 134
96-17 S Inv Fl IO REMIC
2.80%, 8/16/26 Tsy 1,982 135
+ Kidder Peabody Mortgage
Assets Trust,
Series:
87-B IO
9.50%, 4/22/18 Aaa 173 44
87-B PO
4/22/18 Aaa 173 135
- -----------------------------------------------------
GROUP TOTAL 2,434
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY
COLLATERAL SERIES (10.2%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 351 372
Citicorp Mortgage
Securities, Inc., Series
93-9 A1 REMIC
7.00%, 3/25/20 AAA 44 44
sec. First Boston Mortgage
Corp., Series 92-4 B1
8.125%, 10/25/22
(acquired
1/25/93-10/27/93, cost
$143) A 141 147
sec.## Kidder Peabody
Funding Corp., Series
92-4 B2
8.467%, 5/28/22
(acquired
8/5/92-10/27/93, cost
$117) N/R 115 115
Mid-State Trust II, Series
88-2 A4
9.625%, 4/1/03 AAA 590 635
PNC Mortgage Securities
Corp., Series 96-1 B1
REMIC
7.50%, 6/25/26 AA 304 309
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Prudential Home Mortgage
Securities Co. Inc.,
Series:
sec.+ 92-33 B1
7.50%, 11/15/22
(acquired 11/30/92, cost
$217) Aa3 $ 253 $ 254
(+)++## 94-A 3B3
6.803%, 4/28/24 A 910 891
Residential Accredit Loans
Inc.,
Series:
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 190 193
97-QS2 A8
7.75%, 3/25/27 AAA 85 88
97-QS3 A8
7.75%, 4/25/27 AAA 170 176
97-QS12 A7
7.25%, 11/25/27 AAA 224 226
Residential Funding
Mortgage Securities Co.,
Inc., Series 94-S1 A19
6.75%, 1/25/24 AAA 299 295
Rural Housing Trust, Series
87-1 B1 REMIC
3.33%, 10/1/28 A- 320 308
- -----------------------------------------------------
GROUP TOTAL 4,053
- -----------------------------------------------------
COMMERCIAL MORTGAGES (10.0%)
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 217 226
(+)+ 96-D3 A1C
7.40%, 10/13/26 Aaa 140 149
96-MD6 A1C
7.04%, 11/13/26 AAA 140 146
Beverly Finance Corp. ,
Series 94-1
8.36%, 7/15/04 AA- 285 307
DLJ Mortgage Acceptance
Corp.,
Series:
93-MF7 A1
7.40%, 6/18/03 AAA 240 246
(+) 96-CF2 A1B
7.29%, 11/12/21 AAA 45 47
(+)++## 96-CF2 S IO
1.641%, 11/12/21 AAA 470 39
Federal National Mortgage
Association,
## Series 93-M2 B IO
REMIC
2.587%, 7/25/03 Agy 492 17
First Union-Lehman Brothers
Commercial Mortgage
Trust, Series 97-C2 A3
6.65%, 12/18/07 AAA 200 203
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
61
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MORTGAGE-BACKED
SECURITIES PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series 97-C2 X IO
1.273%, 4/15/27 Aaa $ 1,696 $ 129
+ GS Mortgage Securities
Corp. II, Series 97-GL
A2D
6.94%, 7/13/30 Aaa 105 109
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 125 131
(+) Lakeside Finance
Corp.
6.47%, 12/15/00 AA 315 316
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 164 171
98-C1 IO
1.199%, 2/18/28 Aaa 1,675 112
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 70 72
++## 96-C2 IO
1.538%, 11/21/28 AAA 731 62
+ Midland Realty Acceptance
Corp., Series 96-C2 A2
7.233%, 1/25/29 Aaa 120 125
+ Mortgage Capital Funding,
Inc.,
Series:
97-MC1 A3
7.288%, 7/20/27 Aaa 225 236
97-MC2 A2
6.664%, 9/20/07 Aaa 225 228
++ Nomura Asset Securities
Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 AAA 169 172
## 94-MD1 A2
7.671%, 3/15/18 AA 150 156
(+) Prime Property
Funding, Series 1 A
6.633%, 7/23/03 AA 259 262
Sawgrass Financial LLC,
Series 93-1 A
6.45%, 1/20/06 AAA 340 343
- -----------------------------------------------------
GROUP TOTAL 4,004
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.8%)
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA $ 265 $ 265
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 64 63
- -----------------------------------------------------
GROUP TOTAL 328
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (1.9%)
Federal National Mortgage
Association,
Series:
96-27 A PO REMIC
10/25/23 Agy 345 180
249 1 PO
10/25/23 Agy 107 74
260 1 PO
4/1/24 Agy 122 94
282 1 PO
9/1/25 Agy 534 394
First Boston Mortgage
Securities Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA 131 31
- -----------------------------------------------------
GROUP TOTAL 773
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$37,420) 37,836
- -----------------------------------------------------
PREFERRED STOCK (2.5%)
- -----------------------------------------------------
SHARES
------
MORTGAGE-OTHER (2.5%)
(+)+ Home Ownership
Funding Corp.
13.331% (Cost $1,054) Aaa 1,050 1,007
- -----------------------------------------------------
STRUCTURED INVESTMENTS (0.2%)-SEE NOTE A7
- -----------------------------------------------------
FACE
AMOUNT
(000)
--------
Morgan Guaranty Trust Company, 11/20/05; monthly payments equal to 1% per annum
of the outstanding notional balance, indexed to GNMA
ARM pools. (Cost $184) N/R $ 4,106 96
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
62
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
INTEREST RATE CAPS (0.0%)-SEE NOTE A6
- -----------------------------------------------------
Bankers Trust Co.,
terminating, 10/15/99; to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount. A- $ 6,600 $ 6
J.P. Morgan and Co.,
terminating 10/15/99; to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount. AA- 10,000 9
- -----------------------------------------------------
TOTAL INTEREST RATE CAPS (Premium Paid $67) 15
- -----------------------------------------------------
CASH EQUIVALENTS (30.4%)
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (28.0%)
Federal Home Loan Mortgage
Corporation
Gold Pools:
9.50%, 12/1/22 Agy 329 360
10.00%, 2/1/18 Agy 303 334
11.50%, 2/1/14-1/1/16 Agy 162 185
12.50%, 9/1/11-11/1/14 Agy 133 156
Series:
1377 F Inv Fl
6.25%, 9/15/07 Agy 179 180
1591 FG Inv Fl
6.313%, 10/15/23 Agy 146 146
1660 FA Inv Fl
6.35%, 12/15/08 Agy 422 427
1890 F Inv Fl REMIC
6.25%, 6/15/24 Agy 423 425
## 1933 FM REMIC
6.50%, 3/15/25 Agy 51 51
## 2040 FC
5.975%, 2/15/23 Agy 230 231
Federal National Mortgage
Association
Various Pools:
10.00%, 2/1/25-9/1/18 Agy 671 742
11.50%, 2/1/15-12/1/15 Agy 130 148
12.50%, 9/1/13 Agy 13 15
13.00%, 9/1/13 Agy 52 60
Series:
92-43 FD Inv Fl
6.26%, 4/25/22 Agy 477 485
93-179 F Inv Fl
6.16%, 10/25/23 Agy 95 95
94-40 F Inv Fl
6.16%, 4/25/23 Agy 185 187
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 207 208
97-70 FA REMIC, PAC (11)
6.138%, 7/18/20 Agy 79 79
## 98-22 FA REMIC
6.025%, 4/18/28 Agy $ 500 $ 501
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Government National Mortgage
Association Adjustable Rate
Mortgages:
7.00%, 3/20/25-7/20/25 Tsy 669 682
7.375%, 4/20/25-5/20/25 Tsy 754 769
Various pools:
9.50%, 12/15/17-12/15/21 Tsy 575 628
10.00%, 1/15/13-12/25/26 Tsy 1,661 1,848
10.50%, 12/15/10-12/15/17 Tsy 292 329
11.00%, 12/15/09-9/15/15 Tsy 97 112
11.50%, 4/15/13-5/15/13 Tsy 35 40
12.00%, 12/15/12-11/15/15 Tsy 1,065 1,239
April TBA:
10.00%, 4/15/28 Tsy 350 389
Salomon Brothers Mortgage
Securities VII,
Series 96-6E A1 Inv Fl
6.213%, 3/30/25 AAA 131 131
- -----------------------------------------------------
GROUP TOTAL 11,182
- -----------------------------------------------------
U.S. TREASURY SECURITY (1.3%)
!! U.S. Treasury Bill
4/2/98 Tsy 515 515
- -----------------------------------------------------
REPURCHASE AGREEMENT (1.1%)
Chase Securities, Inc. 5.75%
dated 3/31/98, due 4/1/98, to
be repurchased at $423,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99 valued at $424 423 423
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $12,100) 12,120
- -----------------------------------------------------
TOTAL INVESTMENTS (127.7%) (Cost $50,825) 51,074
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-27.7%)
Cash 1
Dividends Receivable 35
Interest Receivable 403
Receivable for Investments Sold 15,683
Receivable for Fund Shares Sold 10
Unrealized Gain on Swap Agreements 12
Other Assets 2
Payable for Investments Purchased (27,141)
Payable for Investment Advisory Fees (32)
Payable for Administrative Fees (3)
Payable for Trustees' Deferred Compensation
Plan-Note F (2)
Payable for Daily Variation on Futures
Contracts (33)
Other Liabilities (15)
--------
(11,080)
- -----------------------------------------------------
NET ASSETS (100%) $ 39,994
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
63
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MORTGAGE-BACKED
SECURITIES PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)!
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 3,765,046 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 39,994
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.62
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 41,643
Undistributed Net Investment Income (Loss) 546
Undistributed Realized Net Gain (Loss) (2,470)
Unrealized Appreciation (Depreciation) on:
Investment Securities 249
Futures and Swaps 26
- -----------------------------------------------------
NET ASSETS $ 39,994
- -----------------------------------------------------
- -----------------------------------------------------------
sec. Restricted Security-Total market value of restricted securities owned
at March 31, 1998 was $516 or 1.3% of net assets.
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
## Variable or floating rate securities-rate disclosed
is as of March 31, 1998.
Inv Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
64
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Limited Duration Portfolio has a dual philosophy for achieving its
objective: earn positive real returns and minimize the possibility of a negative
return in a single quarter. Limiting average duration to between one and three
years helps control interest rate risk while allowing for a broad spectrum of
investment opportunities. The Portfolio invests in U.S. Treasury and agency
securities, investment-grade corporate bonds, mortgage-backed securities and
money market instruments, including floating-rate notes.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS LIMITED SALOMON
DURATION 1-3 YEAR INDEX
-----------------------------
SIX MONTHS 2.83% 3.17%
ONE YEAR 6.96 7.47
FIVE YEARS 5.24 5.49
SINCE INCEPTION 5.97 5.97
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Limited Duration Portfolio commenced operations on 3/31/92. Total returns
are compared to the Salomon 1-3 Year Treasury/Government Sponsored Index, an
unmanaged market index. Returns for periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (79.9%)
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (12.6%)
## Government National
Mortgage Association
Various Pools:
6.00%, 9/20/27-11/20/27 Tsy $11,881 $ 12,045
6.50%, 8/20/27 Tsy 15,856 16,141
- -----------------------------------------------------
GROUP TOTAL 28,186
- -----------------------------------------------------
ASSET BACKED CORPORATES (26.2%)
(+)ACC Automobile
Receivables Trust, Series
97-C A
6.40%, 3/17/04 AAA 838 839
Aegis Auto Receivables
Trust,
Series 95-1 A
8.60%, 3/20/02 N/R 1,081 1,084
AFG Receivables Trust,
Series:
95-A A
6.15%, 9/15/00 A 132 132
96-B A
6.60%, 4/15/01 A 237 237
97-A A
6.35%, 10/15/02 AAA 639 640
ALPS,
Series 94-1 A2 CMO
7.15%, 9/15/04 AA 837 853
Americredit Automobile
Receivables Trust,
Series 96-B A
6.50%, 1/12/02 AAA 478 480
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 770 775
98-A A3
5.90%, 11/15/02 AAA 1,100 1,097
Associates Manufactured
Housing Pass Through
Certificates,
Series 97-1 A3
6.60%, 6/15/28 AAA 845 849
Case Equipment Loan Trust,
Series:
95-A A
7.30%, 3/15/02 AAA 168 169
95-A B
7.65%, 3/15/02 A 167 169
Champion Home Equity
Loan Trust,
Series:
96-3 A2
7.03%, 8/25/11 AAA 650 654
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
65
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
(CONT'D)
- -----------------------------------------------------
96-4 A2
6.66%, 11/25/11 AAA $ 875 $ 878
Cityscape Home Equity Loan
Trust,
Series:
96-3 A2
6.65%, 6/25/11 AAA 600 598
97-1 A3
6.63%, 3/25/18 AAA 1,300 1,295
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 431 432
97-2 A
6.65%, 10/15/02 AAA 396 399
(+)Credit Card
Receivables Trust,
Series 98-IA A
6.478%, 12/22/04 AAA 523 522
Crown Home Equity Loan
Trust,
Series 96-1 A2
6.51%, 6/25/11 AAA 950 948
CS First Boston Mortgage
Securities Corp.,
Series 96-2 A2
6.32%, 3/25/05 AAA 1,125 1,120
Daimler Benz Auto Grantor
Trust,
Series 97-A A
6.05%, 3/31/05 AAA 555 555
Delta Funding Home Equity
Loan Trust, Series 96-3 A2
6.525%, 10/25/11 AAA 950 951
First Merchants Auto
Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 1,175 1,173
(+) 97-2 A1
6.85%, 11/15/02 AAA 456 460
First Plus Home Loan Trust,
Series:
96-3 A2
6.85%, 6/20/07 AAA 975 975
96-4 A3
6.28%, 3/10/09 AAA 900 899
97-1 A3
6.45%, 6/10/09 AAA 1,300 1,302
97-4 A2
6.30%, 8/10/09 AAA 475 475
97-4 A3
6.40%, 8/10/11 AAA 425 425
First Security Auto Grantor
Trust, Series 97-B A
6.10%, 4/15/03 AAA 965 966
First Union Residential
Securitization Trust,
Series 96-2 A2
6.46%, 9/25/11 AAA 1,025 1,023
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Fleetwood Credit Corp.,
Series 92-A A
7.10%, 2/15/07 AAA $ 439 $ 438
Ford Credit Auto Owner
Trust,
Series:
96-A A3
6.50%, 11/15/99 AAA 1,455 1,458
96-B
6.55%, 2/15/02 A 400 403
97-B A3
6.05%, 4/15/01 AAA 1,275 1,278
Ford Credit Grantor Trust,
Series 94-B A
7.30%, 10/15/99 AAA 301 302
General Electric Home Equity
Loan Asset-Backed
Certificates,
Series 91-1 B
8.70%, 9/15/11 AAA 850 865
General Motors Acceptance
Corp.,
Series 97-A A
6.50%, 4/15/02 AAA 660 664
Green Tree Financial Corp.,
Series:
97-7 A2
6.10%, 5/15/03 AAA 1,055 1,056
+ 98-1 A2
5.85%, 4/1/11 Aaa 1,175 1,170
98-2 A3
6.05%, 10/1/07 AAA 1,100 1,098
Green Tree Lease Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 825 825
Greenwich Capital
Acceptance, Inc., Series
95-B A1
6.00%, 8/10/20 AAA 211 211
(+)++ Health Care
Receivables Securitization
Program,
Series 97-1 A
6.815%, 7/1/01 AAA 300 303
Honda Auto Receivables
Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 1,007 1,006
97-B A
5.95%, 5/15/03 AAA 715 715
IBM Credit Receivables Lease
Asset Master Trust,
Series 93-1 A
4.55%, 11/15/00 AAA 89 88
IMC Home Equity Loan Trust,
Series:
96-4 A3
6.81%, 7/25/11 AAA 500 501
98-1 A2
6.31%, 12/20/12 AAA 1,100 1,097
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
66
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+)Long Beach Acceptance
Auto Grantor Trust,
Series:
97-1 A
6.85%, 10/25/03 AAA $ 968 $ 970
97-2 A
6.69%, 9/25/04 AAA 481 482
98-1 A
6.19%, 1/25/04 AAA 635 631
MMCA Automobile Trust,
Series 97-1 A3
6.08%, 5/15/01 AAA 1,025 1,027
(+)National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 600 622
Navistar Financial Corp.
Owner Trust,
Series 97-B A3
6.20%, 3/15/01 AAA 1,150 1,153
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA 1,490 1,492
Oakwood Mortgage Investors,
Inc.,
Series 95-B A1
6.25%, 1/15/21 AAA 36 36
Old Stone Credit Corp.
Home Equity Trust,
Series 92-3 B1
6.35%, 9/25/07 AAA 77 76
Olympic Automobile
Receivables Trust,
Series:
94-A1
5.65%, 1/15/01 AAA 148 148
94-B B
6.95%, 6/15/01 AAA 225 227
Onyx Acceptance Grantor
Trust,
Series:
94-1 A
6.90%, 1/17/00 AAA 73 73
97-2 A
6.35%, 10/15/03 AAA 1,536 1,543
97-3 A
6.35%, 1/15/04 AAA 673 676
Preferred Credit Corp.,
Series 97-1 A3
6.91%, 5/1/07 AAA 850 850
Premier Auto Trust,
Series:
94-3 B
6.80%, 12/2/99 AA 234 235
95-A A4
6.00%, 5/6/00 AAA 771 772
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+)Rental Car Finance
Corp.,
Series 97-1 A2
6.45%, 4/25/03 AA $ 925 $ 927
(+)Securitized Multiple
Asset Rated Trust, Series
98-1 A1
7.45%, 3/16/06 A 722 721
Security Pacific Home Loan
Equity Trust, Series 91-1
B
8.85%, 5/15/98 AAA 607 609
Southern Pacific Secured
Assets Corp., Series 96-1
A2
6.09%, 3/25/27 AAA 35 35
(+)Team Fleet Financing
Corp.,
Series:
96-1A
6.65%, 12/15/02 A- 1,100 1,108
97-1A
7.35%, 5/15/03 A- 875 904
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 584 586
97-B A2
6.70%, 6/8/03 AAA 800 810
USAA Auto Loan Grantor
Trust,
Series 97-1 A
6.00%, 5/15/04 AAA 981 982
+ Vanderbilt Mortgage
Finance,
Series 97-B 1A2
6.775%, 12/7/28 Aaa 1,275 1,288
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA 915 915
97-D A4
6.25%, 3/20/03 AAA 1,000 1,003
Western Financial Auto
Grantor Trust,
Series:
93-A1
4.45%, 7/1/98 AAA 4 4
93-2 A2
4.70%, 10/1/98 AAA 9 9
93-3 A1
4.25%, 12/1/98 AAA 16 15
94-1 A1
5.10%, 6/1/99 AAA 45 45
World Omni Automobile Lease
Securitization Trust,
Series 97-B A2
6.08%, 11/25/03 AAA 850 851
- -----------------------------------------------------
GROUP TOTAL 58,677
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
67
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S (000) (000)!
(CONT'D)
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (6.5%)
Federal Home Loan Mortgage
Corporation,
Series:
181-D REMIC
8.50%, 6/15/16 Agy $ 496 $ 494
1462-PE REMIC, PAC-1 (11)
6.75%, 9/15/16 Agy 910 916
1542-H PAC-1
6.50%, 10/15/20 Agy 1,160 1,172
1548-G SEQ
6.00%, 4/15/17 Agy 782 781
1560-PE REMIC, PAC-1 (11)
6.00%, 11/15/16 Agy 1,250 1,250
1576-PD REMIC, PAC (11)
5.50%, 9/15/02 Agy 404 403
1602-PD PAC-1 (11)
5.20%, 1/15/15 Agy 417 415
1680-PB PAC-1 (11)
5.70%, 6/15/12 Agy 86 86
1839-A REMIC, PAC (11)
6.50%, 7/15/17 Agy 933 939
1931-A SEQ
7.25%, 6/15/21 Agy 791 800
Federal National
Mortgage Association,
Series:
93-16 B
7.50%, 10/25/19 Agy 810 814
93-70 B REMIC
5.75%, 4/25/16 Agy 814 809
93-83 A
5.55%, 11/25/16 Agy 674 669
94-93 PD PAC-1 (11)
7.25%, 4/25/15 Agy 800 804
96-40 K
5.75%, 11/25/16 Agy 1,625 1,616
97-67 HB
6.50%, 12/17/21 Agy 1,276 1,277
97-67 HD
6.00%, 12/17/21 Agy 1,496 1,484
- -----------------------------------------------------
GROUP TOTAL 14,729
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.0%)
Citicorp Mortgage
Securities, Inc.,
Series 93-9 A1 REMIC
7.00%, 3/25/20 AAA 36 36
- -----------------------------------------------------
COMMERCIAL MORTGAGES (1.9%)
Asset Securitization Corp.,
Series 97-D5 A1A
6.50%, 2/14/41 AAA 910 919
+ Carolina First Bank,
Series 96
6.50%, 12/18/99 Aa2 156 156
CBM Funding Corp.,
Series 96-1B A1
7.55%, 2/1/13 AA $ 367 $ 371
Lehman Large Loan,
Series 97-LLI A1
6.79%, 6/12/04 AAA 1,189 1,215
+ Midland Realty Acceptance
Corp.,
Series 96-C2 A1
7.02%, 1/25/27 Aaa 569 584
+ Town & Country Funding
Corp.,
Series A
5.85%, 8/15/98 Aa2 1,000 998
- -----------------------------------------------------
GROUP TOTAL 4,243
- -----------------------------------------------------
FINANCE (10.7%) Allstate Corp.
5.875%, 6/15/98 A 1,125 1,125
American General Finance
Corp.,
Series:
D
6.35%, 9/19/00 A+ 545 554
E
6.26%, 12/15/00 A+ 90 90
Associates Corp. of North
America
8.25%, 12/1/99 AA- 800 829
Bankers Trust New York Corp.
6.625%, 7/30/99 A 635 640
Barclays American Corp.
7.875%, 8/15/98 AA 450 454
Beneficial Corp.
6.45%, 6/19/00 A 670 675
Chase Manhattan Bank
5.875%, 8/4/99 A+ 1,375 1,375
Chrysler Financial Corp.
6.375%, 1/28/00 A- 775 780
CIT Group Holdings
6.375%, 10/1/02 A+ 915 923
Countrywide Funding Corp.,
Series A
7.32%, 8/15/00 A 650 666
(+)Farmers Insurance
Exchange
8.50%, 8/1/04 BBB- 700 770
(+)First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 700 716
(+)Florida Property &
Casualty
7.375%, 7/1/03 A- 375 390
7.45%, 7/1/04 A 150 156
(+)Florida Windstorm
6.70%, 8/25/04 A- 425 428
Ford Motor Credit Corp.
7.47%, 7/29/99 A+ 675 688
8.375%, 1/15/00 A 400 416
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
68
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
General Motors Acceptance
Corp.
+ 6.00%, 12/30/98 A3 $ 600 $ 601
7.25%, 6/22/99 A 285 289
Heller Financial, Inc.
6.25%, 3/1/01 BBB+ 1,605 1,603
Homeside Lending, Inc.
6.875%, 6/30/02 A+ 861 878
Household International
6.00%, 3/15/99 A 575 574
(+)Hyatt Equities LLC
7.00%, 5/15/02 BBB+ 925 942
International Lease Finance
8.28%, 2/3/00 A+ 550 571
John Deere Capital Corp.
5.85%, 1/15/01 A+ 1,345 1,340
Lehman Brothers Holding,
Inc.
6.625%, 11/15/00 A 725 732
(+)Metropolitan Life
Insurance Co.
6.30%, 11/1/03 A+ 1,555 1,548
Norwest Financial Inc.,
Series B
6.05%, 11/19/99 AA- 1,285 1,288
(+)Prime Property Funding
II
6.80%, 8/15/02 A 785 793
(+)Prudential Insurance
Co.
6.875%, 4/15/03 A- 1,100 1,119
- -----------------------------------------------------
GROUP TOTAL 23,953
- -----------------------------------------------------
FLOATING RATE NOTES (0.1%)
## ALPS,
Series 1 A5
6.04%, 3/15/19 AA 160 160
- -----------------------------------------------------
INDUSTRIAL (1.0%)
(+) EES Coke Battery Co.,
Inc.
7.125%, 4/15/02 BBB 542 549
(+) Kern River Funding
Corp.
6.42%, 3/31/01 A- 518 522
Philip Morris Cos., Inc.
8.75%, 6/1/01 A 520 556
RJR Nabisco, Inc.
8.625%, 12/1/02 BBB- 575 604
- -----------------------------------------------------
GROUP TOTAL 2,231
- -----------------------------------------------------
TAXABLE MUNICIPALS (0.4%)
New York State Power
Authority Revenue Bonds,
Series B
6.11%, 2/15/11 AA- 805 802
- -----------------------------------------------------
TELEPHONES (0.3%)
Tele-Communications, Inc.,
Series 95-C A1
8.25%, 1/15/03 BBB- 550 588
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
U.S. TREASURY SECURITIES (18.9%)
U.S. Treasury Notes
3.625%, 7/15/02
(Inflation Indexed) Tsy $26,721 $ 26,454
5.625%, 2/28/01 Tsy 6,600 6,598
6.375%, 3/31/01 Tsy 9,000 9,177
- -----------------------------------------------------
GROUP TOTAL 42,229
- -----------------------------------------------------
UTILITIES (0.3%)
(+) Edison Mission Energy
Funding Corp.
6.77%, 9/15/03 BBB 671 678
- -----------------------------------------------------
YANKEE (1.0%) (+) AST Research, Inc.
7.45%, 10/1/02 B+ 600 538
Korea Development Bank
7.375%, 9/17/04 BB+ 470 426
(+)Oil Purchase Co.
7.10%, 10/31/02 BBB 600 601
Sony Corp
6.125%, 3/4/03 A 650 649
- -----------------------------------------------------
GROUP TOTAL 2,214
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$178,514) 178,726
- -----------------------------------------------------
PREFERRED STOCK (0.8%)
- -----------------------------------------------------
SHARES
------
MORTGAGE-OTHER (0.8%)
+ Home Ownership
Funding Corp.
13.331% (Cost $1,806) Aaa 1,800 1,726
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
Bankers Trust Co.,
terminating 10/15/99, to
receive on 10/15/99, the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the notional
amount.
(Premium Paid $370) A- $96,748 90
- -----------------------------------------------------
CASH EQUIVALENTS (18.8%)
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (15.0%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
10.00%, 4/1/10-10/1/20 Agy 1,292 1,427
10.50%, 12/1/14 Agy 280 308
11.00%, 8/1/15-5/1/20 Agy 235 265
11.50%, 12/1/08-1/1/18 Agy 1,083 1,232
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
69
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
Gold Pools:
10.00%, 2/1/21-10/1/21 Agy $ 271 $ 301
10.50%, 1/1/19-10/1/20 Agy 912 1,017
11.50%, 8/1/10 Agy 170 191
12.00%, 6/1/15-9/1/15 Agy 486 549
Series:
## 1386 D REMIC
6.25%, 10/15/07 Agy 1,488 1,496
Federal National
Mortgage Association
Conventional Pools:
10.00%, 8/1/16-12/1/15 Agy 862 954
10.50%, 4/1/15 Agy 111 125
11.00%, 7/1/20 Agy 408 461
12.00%, 5/1/14-8/1/20 Agy 319 368
12.50%, 2/1/15 Agy 94 110
Government National
Mortgage Association
Adjustable Rate Mortgages:
7.375%, 5/20/23 Tsy 10,776 11,046
Various Pools:
9.50%, 12/15/17-12/15/21 Tsy 3,951 4,321
10.00%, 11/15/09-12/25/26 Tsy 2,752 3,065
10.50%, 5/15/16-5/15/26 Tsy 598 671
11.00%, 1/15/10-1/15/21 Tsy 2,717 3,115
11.50%, 2/15/13-11/15/19 Tsy 2,172 2,509
- -----------------------------------------------------
GROUP TOTAL 33,531
- -----------------------------------------------------
REPURCHASE AGREEMENT (3.8%)
Chase Securities, Inc. 5.75% dated
3/31/98, due 4/1/98, to be
repurchased at $8,473,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at
$8,497 8,472 8,472
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $41,844) 42,003
- -----------------------------------------------------
TOTAL INVESTMENTS (99.5%) (Cost $222,534) 222,545
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
Cash 68
Dividends Receivable 60
Interest Receivable 1,525
Receivable for Investments Sold 871
Receivable for Fund Shares Sold 56
Receivable for Daily Variation on Futures
Contracts 45
Other Assets 6
Payable for Investments Purchased (1,318)
Payable for Fund Shares Redeemed (61)
Payable for Administrative Fees (15)
Payable for Investment Advisory Fees (159)
Payable for Trustees' Deferred Compensation (5)
Other Liabilities (19)
--------
1,054
- -----------------------------------------------------
NET ASSETS (100%) $223,599
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
=====================================================
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 21,335,955 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $223,599
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.48
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $224,279
Undistributed Net Investment Income (Loss) 3,334
Undistributed Realized Net Gain (Loss) (3,860)
Unrealized Appreciation (Depreciation) on:
Investment Securities 11
Futures (165)
- -----------------------------------------------------
NET ASSETS $223,599
- -----------------------------------------------------
! See Note A1 to Financial Statements.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
(+) 144A security. Certain conditions for public sale
may exist.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
## Variable or Floating rate security-rate disclosed
is as of March 31, 1998.
CMO Collateralized Mortgage Obligation
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
REMIC Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
70
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Special Purpose Fixed Income Portfolio is designed for use as part of a
balanced investment program. MAS constructs a diversified fund with a maturity
and duration structure reflecting long-term views on interest rates and
inflation. MAS selects investments in U.S. Treasuries, agencies, corporate
bonds, mortgages, foreign and other fixed-income securities based upon relative
value in the marketplace.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS SPECIAL PURPOSE SALOMON
FIXED INCOME BROAD INDEX
---------------------------------
SIX MONTHS 3.78% 4.60%
ONE YEAR 11.67 11.98
FIVE YEARS 8.27 7.00
SINCE INCEPTION 9.67 8.04
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
* The Special Purpose Fixed Income Portfolio commenced operations on 3/31/92.
Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index. Returns for periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (82.2%)
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (8.9%)
## Government National
Mortgage Association
Various Pools:
6.00%, 8/20/27-11/20/27 Tsy $ 48,517 $ 49,224
- -----------------------------------------------------
AGENCY FIXED RATE MORTGAGES (5.4%)
Federal Home Loan
Mortgage Corporation
May TBA
6.50%, 5/15/28 Agy $ 4,000 $ 3,956
Federal National
Mortgage Association
May TBA
6.50%, 8/15/24-5/15/28 Agy 26,150 25,830
- -----------------------------------------------------
GROUP TOTAL 29,786
- -----------------------------------------------------
ASSET BACKED CORPORATES (12.0%)
Advanta Mortgage Loan
Trust, Series 97-3 A2
6.61%, 4/25/12 AAA 125 125
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 1,550 1,584
94-1 C2 CMO
9.35%, 9/15/04 BBB 1,915 1,949
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 2,660 2,677
97-D A3
6.20%, 5/15/03 AAA 2,000 2,004
98-A A3
5.90%, 11/15/02 AAA 2,875 2,866
CIT Group Home Equity Loan
Trust, Series 97-1 A3
6.25%, 9/15/11 AAA 1,400 1,401
(+) Credit Card Receivables
Trust, Series 98-1A
6.478%, 12/22/04 AAA 1,344 1,341
Daimler Benz Auto Grantor
Trust, Series 97-A
6.05%, 3/31/05 AAA 1,830 1,830
Empire Funding Home Loan
Owner Trust, Series 97-4
A2
7.16%, 5/25/12 AAA 2,200 2,224
(+) Federal Mortgage
Acceptance Corp., Loan
Receivables Trust, Series
96-B A1
7.629%, 11/1/18 A 1,251 1,273
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
71
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA $ 1,445 $ 1,448
97-3 A3
6.57%, 10/10/10 AAA 1,430 1,436
97-4 A2
6.30%, 8/10/09 AAA 1,550 1,549
97-4 A3
6.40%, 8/10/11 AAA 1,350 1,350
98-1 A3
6.04%, 10/10/13 AAA 2,575 2,552
First Security Auto Grantor
Trust, Series 97-B A
6.10%, 4/15/03 AAA 3,188 3,193
Ford Credit Auto Owner
Trust, Series 97-B A3
6.05%, 4/15/01 AAA 4,150 4,160
Green Tree Financial Corp.,
Series:
97-7 A3
6.18%, 9/15/09 AAA 1,975 1,976
98-2 A3
6.05%, 10/1/07 AAA 3,000 2,994
Honda Auto Receivables
Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 3,296 3,292
97-B A
5.95%, 5/15/03 AAA 184 184
IMC Home Equity Loan Trust,
Series 98-1 A2
6.31%, 12/20/12 AAA 2,325 2,318
(+) Long Beach Acceptance
Auto Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 1,570 1,573
NAL Auto Trust, Series 96-4
A
6.90%, 12/15/00 N/R 4 4
(+) National Car Rental
Financing Ltd., Series
96-1 A4
7.35%, 10/20/03 N/R 1,650 1,710
Nissan Auto Receivables
Grantor Trust, Series
97-A A
6.15%, 2/15/03 AAA 3,449 3,454
(+) Rental Car Finance
Corp., Series 97-1 A2
6.45%, 4/25/03 AA 2,925 2,932
(+) Securitized Multiple
Asset Rated Trust, Series
97-3 A1
7.71%, 4/15/06 A 1,361 1,367
Security Pacific Home
Equity Trust, Series 91-A
B
10.50%, 3/10/06 A+ 315 314
(+) Team Fleet Financing
Corp., Series 96-1A
6.65%, 12/15/02 A- 1,125 1,134
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA $ 2,610 $ 2,611
98-A3
5.90%, 5/20/02 AAA 2,875 2,870
World Omni Automobile Lease
Securitization Trust,
Series 97-B A2
6.08%, 11/25/03 AAA 2,750 2,753
- -----------------------------------------------------
GROUP TOTAL 66,448
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
ASSET BACKED MORTGAGES (1.6%)
Champion Home Equity Loan
Trust, Series 96-2 A4
8.00%, 9/25/28 AAA 2,105 2,202
Cityscape Home Equity Loan
Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 35,167 841
++ 96-3 A YMA 10/25/26 N/R 28,363 38
sec. 96-3 A8
7.65%, 8/25/26 (acquired
8/9/96, cost $2,193) AAA 2,200 2,234
Contimortgage Home Equity
Loan Trust,
Series:
96-3 A7
8.04%, 9/15/27 AAA 2,150 2,245
96-4 A11 I IO
1.10%, 1/15/28 AAA 22,482 574
(+) 96-4 A11 I YMA
1/15/28 AAA 22,482 32
96-4 A12 I IO
1.05%, 1/15/28 AAA 6,063 154
(+) 96-4 A12 I YMA
1/15/28 AAA 6,063 9
97-1 A10 I IO
1.10%, 3/15/28 AAA 27,920 735
(+) 97-1 A10 I YMA
3/15/28 AAA 27,920 39
- -----------------------------------------------------
GROUP TOTAL 9,103
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY
COLLATERAL SERIES (1.6%)
Federal Home Loan Mortgage
Corporation,
Series:
88-22 C PAC (11)
9.50%, 4/15/20 Agy 41 45
1415-S Inv Fl IO
18.50%, 11/15/07 Agy 900 402
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
72
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
1476-S Inv Fl IO REMIC
PAC
4.26%, 2/15/08 Agy $ 8,417 $ 941
1485-S Inv Fl IO REMIC
3.85%, 3/15/08 Agy 7,614 691
1600-SA Inv Fl IO REMIC
2.25%, 10/15/08 Agy 17,239 955
1709-H PO REMIC
1/15/24 Agy 237 145
1813-K PO REMIC
2/15/24 Agy 240 194
1844-PC PO REMIC
3/15/24 Agy 435 322
1887-I PO REMIC
10/15/22 Agy 255 194
Federal National Mortgage
Association,
Series:
92-186 S Inv Fl IO REMIC
3.26%, 10/25/07 Agy 15,716 1,273
93-149 O PO REMIC
8/25/23 Agy 328 239
93-205 G PO REMIC
9/25/23 Agy 853 608
93-205 H PO REMIC
9/25/23 Agy 2,357 1,228
93-235 H PO REMIC
9/25/23 Agy 311 267
96-14 PC PO
12/25/23 Agy 415 279
96-46 PB PO REMIC
9/25/23 Agy 425 319
96-54 O PO
11/25/23 Agy 335 231
96-68 SC Inv Fl IO REMIC
2.35%, 1/25/24 Agy 4,050 502
- -----------------------------------------------------
GROUP TOTAL 8,835
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY
COLLATERAL SERIES (5.2%)
American Housing Trust,
Series:
IV 2
9.553%, 9/25/20 A 277 290
V 1G
9.125%, 4/25/21 AAA 1,504 1,593
Chemical Mortgage
Securities, Inc., Series
93-1 M
7.45%, 2/25/23 AA 223 225
sec. First Boston Mortgage
Corp., Series 92-4 B1
8.125%, 10/25/22
(acquired 1/26/93, cost
$1,038) A 1,087 1,131
(+) GE Capital Mortgage
Services, Inc., Series
94-13 B1
6.50%, 4/25/24 N/R 5,248 5,061
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
+ Independent National
Mortgage Corp., Series
94-O B1
7.875%, 9/25/24 A2 $ 2,507 $ 2,629
sec.## Kidder Peabody
Funding Corp., Series
92-4 B2
8.467%, 5/28/22
(acquired 8/5/92, cost
$723) N/R 722 722
Mid-State Trust II, Series
88-2 A4
9.625%, 4/1/03 AAA 725 781
Prudential Home Mortgage
Securities Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 106 106
(+)+ 92-A 2B4
7.90%, 4/28/22 A1 2,598 2,548
(+)++# 94-A 3B3
6.803%, 4/28/24 A 3,137 3,069
Residential Accredit Loans
Inc.,
Series:
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 2,600 2,640
97-QS2 A8
7.75%, 3/25/27 AAA 1,200 1,239
97-QS4 A7
7.75%, 5/25/27 AAA 2,300 2,365
97-QS12 A7
7.25%, 11/25/27 AAA 2,344 2,357
Rural Housing Trust, Series
87-1 B1 REMIC
3.33%, 10/1/28 A- 368 354
## Ryland Mortgage
Securities Corp. III,
Series 92-A 1A
8.27%, 3/29/30 A- 1,690 1,719
- -----------------------------------------------------
GROUP TOTAL 28,829
- -----------------------------------------------------
COMMERCIAL MORTGAGES (10.1%)
+ American Southwest
Financial Securities
Corp., Series 95-C1 A1B
7.40%, 11/17/04 Aaa 2,150 2,224
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 4,752 4,942
(+)+ 96-D3 A1C
7.40%, 10/13/26 Aaa 1,850 1,969
96-MD6 A1C
7.04%, 11/13/26 AAA 1,950 2,033
Beverly Finance Corp.
Series 94-1
8.36%, 7/15/04 AA- 2,300 2,478
(+) Carousel Center
Finance, Inc., Series 1
A1
6.828%, 11/15/07 AA 1,650 1,678
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
73
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Creekwood Capital
Corp., Series 95-1A
8.47%, 3/16/15 AA $ 1,680 $ 1,903
(+) Crystal Run Properties,
Series A
7.393%, 8/15/11 AA 2,250 2,404
(+) DLJ Mortgage Acceptance
Corp.,
Series:
96-CF2 A1B
7.29%, 11/12/21 AAA 575 603
++## 96-CF2 S IO
1.641%, 11/12/21 AAA 5,960 496
First Union-Lehman Brothers
Commercial Mortgage
Trust,
Series:
+ 97-C1 A2
7.30%, 12/18/06 Aaa 2,600 2,730
97-C2 A3
6.65%, 12/18/07 AAA 2,650 2,692
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series:
96-C1 X2 IO
1.917%, 3/15/21 Aaa 8,914 748
97-C2 X IO
1.102%, 4/15/27 Aaa 22,968 1,745
+ GS Mortgage Securities
Corp. II,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 2,475 2,570
## 97-GL X2 IO
0.930%, 7/13/30 Aaa 5,973 309
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 2,200 2,311
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 2,237 2,343
98-C1 IO
1.199%, 2/18/28 Aaa 21,825 1,460
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C2 A2
6.82%, 11/21/28 AAA 950 972
++## 96-C2 IO
1.538%, 11/21/28 AAA 9,847 830
+ Midland Realty Acceptance
Corp., Series 96-C2 A2
7.233%, 1/25/29 Aaa 1,625 1,699
+ Mortgage Capital Funding,
Inc.,
Series:
97-MC1 A3
7.288%, 7/20/27 Aaa 2,900 3,039
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
97-MC2 A2
6.664%, 9/20/07 Aaa $ 3,200 $ 3,244
Nomura Asset Securities
Corp., Series 94-MD1 A3
8.026%, 3/15/18 N/R 1,200 1,264
(+) Park Avenue Finance
Corp., Series 97-C1 A1
7.58%, 5/12/07 N/R 1,029 1,085
(+) Prime Property Funding,
Series 1 A
6.633%, 7/23/03 AA 1,519 1,538
+ Salomon Brothers Mortgage
Securities, Series 97-TZH
A2
7.174%, 3/24/22 Aa2 1,250 1,296
(+) Stratford Finance Corp.
6.776%, 2/1/04 AA 2,300 2,301
++## Structured Asset
Securities Corp.,
Series:
96-CFL X1A IO
1.431%, 2/25/28 AAA 13,039 306
96-CFL X1 IO
1.42%, 2/25/28 AAA 14,416 777
96-CFL X2 IO
1.225%, 2/25/28 AAA 3,694 103
- -----------------------------------------------------
GROUP TOTAL 56,092
- -----------------------------------------------------
ENERGY (0.9%)
(+) ESI Tractebel
Acquisition Corp.
7.99%, 12/30/11 BB 710 704
(+) Excel Paralubes Funding
7.43%, 11/1/15 A- 1,925 1,995
Mobile Energy Services
8.665%, 1/1/17 BBB- 1,878 2,008
- -----------------------------------------------------
GROUP TOTAL 4,707
- -----------------------------------------------------
FINANCE (8.6%)
(+) Anthem Insurance Cos.,
Inc., Series A
9.00%, 4/1/27 BBB+ 1,490 1,597
(+) BankAmerica
Institutional, Series A
8.07%, 12/31/26 A- 2,925 3,116
(+) BT Institutional
Capital Trust, Series A
8.09%, 12/1/26 BBB+ 2,535 2,630
(+) Equitable Life
Assurance Society of the
U.S., Series 1A
6.95%, 12/1/05 A 2,740 2,811
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 2,200 2,546
(+) First Chicago NBD
Corp., Series A
7.95%, 12/1/26 A- 2,750 2,884
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
74
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ $ 2,950 $ 3,129
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 750 779
(+) Florida Windstorm
6.70%, 8/25/04 A- 3,050 3,070
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- 2,250 2,239
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A+ 2,300 2,302
NB Capital Trust
8.25%, 4/15/27 A- 1,010 1,105
(+) New York Life Insurance
Co.
7.50%, 12/15/23 AA 1,075 1,088
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 2,675 2,802
(+) Prime Property Funding
II
7.00%, 8/15/04 A 2,070 2,099
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 505 564
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 1,350 1,436
B
8.035%, 3/15/27 A 1,000 1,073
Washington Mutual Capital,
8.375%, 6/1/27 BBB- 1,375 1,484
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 255 271
(+) Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 2,900 3,072
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 3,061 3,145
96 WFP-D
6.95%, 9/1/13 AA- 2,050 2,118
- -----------------------------------------------------
GROUP TOTAL 47,360
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
FOREIGN GOVERNMENTS (1.3%)
Government of Germany
7.375%, 12/2/02 AAA DEM 12,100 7,313
- -----------------------------------------------------
INDUSTRIALS (4.3%)
American Standard Cos.
7.375%, 2/1/08 BB- $ 1,450 1,426
Columbia/HCA Healthcare
7.58%, 9/15/25 BBB 1,210 1,099
9.00%, 12/15/14 BBB 830 867
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB $ 469 $ 437
93-K1 A2
7.43%, 8/15/18 BB 275 242
94-K1 A2
8.375%, 8/15/15 BB 1,075 1,056
94-K2 A2
9.35%, 8/15/19 BB 1,335 1,386
Fred Meyer, Inc.
7.375%, 3/1/05 BB+ 3,065 3,071
News America Holdings
8.875%, 4/26/23 BBB- 1,825 2,141
(+) Oxymar
7.50%, 2/15/16 BBB 1,590 1,618
!! Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ 3,295 3,389
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 1,110 1,136
Rhone-Poulenc Rorer, Inc.,
Series 92-A 3
8.62%, 1/5/21 BBB- 2,300 2,538
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 1,642 1,716
Southland Corp.
5.00%, 12/15/03 BB+ 1,813 1,586
- -----------------------------------------------------
GROUP TOTAL 23,708
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.5%)
First Federal Savings &
Loan Association, Series
92-C
8.75%, 6/1/06 AA 42 43
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA 1,114 1,113
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 1,439 1,395
sec. Shearson American
Express, Series A CMO
9.625%, 12/1/12
(acquired
8/24/92-5/25/93,
cost $234) AA 234 242
- -----------------------------------------------------
GROUP TOTAL 2,793
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
75
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES- AGENCY
COLLATERAL SERIES (1.7%)
Federal National Mortgage
Association,
Series:
249 1 PO
10/25/23 Agy $ 7,436 $ 5,211
260 1 PO
4/1/24 Agy 1,512 1,168
282 1 PO
9/1/25 Agy 4,198 3,096
- -----------------------------------------------------
GROUP TOTAL 9,475
- -----------------------------------------------------
TELEPHONES (1.1%) CSC Holdings Inc.
7.875%, 12/15/07 BB+ 1,740 1,792
Lenfest Communications,
Inc.
(+) 7.625%, 2/15/08 BB+ 745 747
8.375%, 11/1/05 BB+ 395 412
(+)# Qwest Communications
Inc.
0.00%, 2/1/08 B+ 2,475 1,745
# Teleport Communications
Group, Inc.
0.00%, 7/1/07 B+ 1,855 1,595
- -----------------------------------------------------
GROUP TOTAL 6,291
- -----------------------------------------------------
TRANSPORTATION (0.9%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 2,285 2,283
(+) Jet Equipment Trust,
Series 95-C
10.69%, 5/1/15 BBB 2,200 2,863
- -----------------------------------------------------
GROUP TOTAL 5,146
- -----------------------------------------------------
U.S. TREASURY SECURITIES (9.8%)
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 18,835 18,258
3.625%, 7/15/02
(Inflation Indexed) Tsy 8,402 8,318
3.625%, 1/15/08
(Inflation Indexed) Tsy 11,550 11,413
6.25%, 4/30/01 Tsy 10,000 10,169
6.375%, 3/31/01 Tsy 6,000 6,118
- -----------------------------------------------------
GROUP TOTAL 54,276
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
UTILITIES (0.8%) CalEnergy Co., Inc.
7.63%, 10/15/07 BB+ $ 1,730 $ 1,728
CMS Energy Corp, Series B
7.375%, 11/15/00 BB 1,255 1,268
(+) Edison Mission Energy
Funding Corp., Series B
7.33%, 9/15/08 BBB 1,325 1,375
- -----------------------------------------------------
GROUP TOTAL 4,371
- -----------------------------------------------------
YANKEE (7.5%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 2,643 2,650
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 2,395 2,148
(+) Glencore Nickel
Property, Ltd.
9.00%, 12/1/14 BB+ 1,605 1,591
Grupo Minero Mexicano SA de
CV, Series A
8.25%, 4/1/08 BB 1,525 1,513
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 1,870 1,719
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 BB 1,500 1,198
(+) Israel Electric Corp.,
Ltd
7.25%, 12/15/06 A- 575 585
7.75%, 12/15/27 A- 1,590 1,614
Korea Development Bank
7.375%, 9/17/04 BB+ 2,750 2,495
National Power Corp.
7.875%, 12/15/06 BB+ 1,600 1,455
8.40%, 12/15/16 BB+ 1,490 1,296
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 2,200 2,202
(+) Paiton Energy Funding
9.34%, 2/15/14 CCC 1,900 912
(+) Petroliam Nasional Bhd.
7.125%, 10/18/06 A+ 2,250 2,095
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 2,445 2,561
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 3,600 3,727
(+) Reliance Industries
Ltd.
8.25%, 1/15/27 BB+ 400 374
9.375%, 6/24/26 BB+ 400 401
# Republic of Argentina
Par, Series L
5.75%, 3/31/23 BB 4,700 3,593
Republic of Colombia
8.70%, 2/15/16 BBB- 2,540 2,486
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 1,450 1,624
(+) Samsung Electronics Co.
7.45%, 10/1/02 B+ 330 296
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
76
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
United Mexican States
Par Bond,
Series:
A
6.25%, 12/31/19 BB $ 2,040 $ 1,725
B
6.25%, 12/31/19 BB 1,750 1,480
- -----------------------------------------------------
GROUP TOTAL 41,740
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES
(Cost $446,790) 455,497
- -----------------------------------------------------
PREFERRED STOCKS (2.5%)
- -----------------------------------------------------
SHARES
------
MORTGAGE-OTHER (1.9%)
(+)+ Home Ownership Funding
Corp.
13.331% Aaa 11,000 10,550
- -----------------------------------------------------
INDUSTRIALS (0.6%)
(+) Entertainment
Properties
14.253% BBB- 2,100 1,956
Tier One Properties
11.095% A 975 939
Time Warner, Inc., Series M
10.25% BB+ 223 250
- -----------------------------------------------------
GROUP TOTAL 3,145
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $14,314) 13,695
- -----------------------------------------------------
RIGHTS (0.0%)
- -----------------------------------------------------
MISC-INDUSTRIAL (0.0%)
*@ United Mexican States
Recovery Rights, expiring
6/30/03 (Cost $0) N/R 2,913,250 --
- -----------------------------------------------------
STRUCTURED INVESTMENT (0.2%)-SEE NOTE A7
- -----------------------------------------------------
<PAGE>
FACE
AMOUNT
(000)
--------
Morgan Guaranty Trust Company, 11/20/05; monthly
payments equal to 1% per annum of the outstanding
notional balance, indexed to GNMA ARM pools
(Cost $1,556) N/R $ 35,001 814
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- -----------------------------------------------------
J.P. Morgan and Co.,
terminating 10/15/99, to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount (Premium
Paid $492) AA- $116,600 $ 109
- -----------------------------------------------------
CASH EQUIVALENTS (24.3%)
- -----------------------------------------------------
Short-term Investments Held as
Collateral for Loaned
Securities (5.1%) 28,238 28,238
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (16.0%)
Federal Home Loan Mortgage
Corporation Conventional
Pools:
10.50%, 9/1/09-3/1/27 Agy 4,514 4,972
11.00%, 12/1/10-9/1/20 Agy 2,139 2,411
11.75%, 12/1/17 Agy 81 93
Gold Pools:
10.50%, 11/1/15-4/1/21 Agy 676 755
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 617 620
## 1933-FO REMIC
6.50%, 3/15/25 Agy 1,075 1,081
## 2040-FC
5.975%, 2/15/23 Agy 2,900 2,908
Federal National Mortgage
Association Various
Pools:
9.50%, 8/1/22-2/1/27 Agy 3,262 3,569
10.00%, 11/1/18-5/1/22 Agy 3,475 3,850
10.50%, 8/1/15-4/1/22 Agy 4,173 4,705
11.00%, 11/1/20 Agy 275 311
12.00%, 11/1/15 Agy 2,801 3,233
12.50%, 9/1/15 Agy 293 343
Series:
## 94-50 FD REMIC 6.20%,
3/25/24 Agy 2,134 2,141
## 97-43 FM REMIC
6.25%, 7/18/27 Agy 1,771 1,782
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 1,405 1,413
## 97-76 FM
6.20%, 9/17/27 Agy 1,875 1,889
## 97-76 FN
6.15%, 9/17/27 Agy 1,840 1,850
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 6,400 6,414
Government National
Mortgage Association
Adjustable Rate
Mortgages:
7.00% 2/20/25-3/20/25 Tsy 6,650 6,783
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
77
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
7.375% 4/20/25-6/20/25 Tsy $ 12,452 $ 12,701
Various Pools:
10.00%, 2/15/16-12/25/26 Tsy 9,113 10,126
10.50%, 10/15/15-5/15/26 Tsy 3,642 4,108
11.00%, 1/15/10-5/15/26 Tsy 5,712 6,548
12.00%, 3/15/11-4/15/14 Tsy 43 50
12.50%, 6/15/10 Tsy 102 118
April TBA
10.00%, 4/15/28 Tsy 3,475 3,857
- -----------------------------------------------------
GROUP TOTAL 88,631
- -----------------------------------------------------
DISCOUNT NOTE (2.7%)
Federal Home Loan Mortgage
Corporation 4/10/98 Agy 15,000 14,980
- -----------------------------------------------------
REPURCHASE AGREEMENT (0.5%)
Chase Securities, Inc. 5.75%
dated 3/31/98, due 4/1/98, to
be repurchased at $2,692,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at
$2,700 2,692 2,692
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $134,284) 134,541
- -----------------------------------------------------
TOTAL INVESTMENTS (109.2%) (Cost $597,436) 604,656
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-9.2%)
Cash 1
Dividends Receivable 474
Interest Receivable 5,858
Receivable for Investments Sold 56,927
Receivable for Fund Shares Sold 83
Unrealized Gain on Forward Foreign Currency
Contracts 259
Unrealized Gain on Swap Agreements 80
Other Assets 21
Payable for Investments Purchased (85,520)
Payable for Fund Shares Redeemed (200)
Payable for Administrative Fees (38)
Payable for Investment Advisory Fees (495)
Payable for Daily Variation on Futures
Contracts (100)
Payable for Trustees' Deferred Compensation
Plan-Note F (18)
Collateral on Securities Loaned, at Value (28,238)
Other Liabilities (50)
--------
(50,956)
- -----------------------------------------------------
NET ASSETS (100%) $553,700
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
=====================================================
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 44,938,676 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $553,700
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.32
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $534,348
Undistributed Net Investment Income (Loss) 10,059
Undistributed Realized Net Gain (Loss) 1,802
Unrealized Appreciation (Depreciation) on:
Investment Securities 7,220
Foreign Currency Transactions 256
Futures and Swaps 15
- -----------------------------------------------------
NET ASSETS $553,700
- -----------------------------------------------------
sec. Restricted Security-Total market value of restricted
securities owned at March 31, 1998 was $4,329 or 0.8%
of net assets.
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security, certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity
date.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
@ Value is less than $500.
DEM German Mark
Inv
Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc, Standard & Poor's
Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
YMA Yield Maintenance Agreement
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
78
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Municipal Portfolio invests in debt obligations issued by state and local
governments or their agencies and in other fixed-income securities. Portfolio
structure reflects three key elements: duration, sector selection and security
selection. Duration varies depending on Miller Anderson & Sherrerd's outlook for
changes in interest rates, becoming longer than the benchmark index in periods
when MAS expects rates to fall and shorter in periods when MAS expects them to
rise. Investments in individual securities and sectors reflect MAS's views on
the risks and rewards available in the various bonds offered in the market.
Normally, at least 80% of the Portfolio will be invested in municipal
securities. Taxable securities are included only in cases where MAS believes
they will improve the fund's risk/reward profile on an after-tax basis.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS LEHMAN 5 YEAR LEHMAN 10 YEAR
MUNICIPAL MUNICIPAL INDEX MUNICIPAL INDEX
---------------------------------------------
SIX MONTHS 3.55% 2.87% 3.65%
ONE YEAR 9.78 7.64 10.39
FIVE YEARS 7.43 5.54 6.92
SINCE INCEPTION 7.89 5.80 7.40
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
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. The Portfolio's
performance pattern may have been affected by this change.
* The Municipal Portfolio commenced operations on 10/1/92. Total returns are
compared to the Lehman 5 Year Municipal Index and the Lehman 10 Year Municipal
Index, both unmanaged market indices. Returns for periods less than one year are
cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (85.9%)
- -----------------------------------------------------
RATINGS FACE
MARCH 31, (STANDARD AMOUNT VALUE
1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
MUNICIPAL BONDS (81.8%)
Adelanto, CA School
District (FGIC)
Zero Coupon, 9/1/18 AAA $ 4,350 $ 1,507
Aldine, TX Independent
School District (PSFG)
Zero Coupon, 2/15/07 AAA 750 497
Allegheny County, PA
Sanitation Authority,
Series B (MBIA)
Zero Coupon, 6/1/10 AAA 1,500 838
Arkansas State Development
Finance Authority Home
Mortgage Revenue Bonds,
Series B-1
4.90%, 7/1/29 AAA 725 731
Benicia, CA School District
(MBIA)
Zero Coupon, 8/1/11 AAA 3,480 1,806
California Housing &
Finance Agency Revenue
Bonds (MBIA)
5.30%, 8/1/14 AAA 175 179
California School Finance
Authority Lease Revenue
Bonds,
Series A (MBIA)
6.70%, 7/1/02 AAA 1,305 1,376
California State Department
of Veterans Affairs Home
Purchase Revenue Bonds,
Series A, TBA
(AMBAC)
4.90%, 12/1/18 AAA 1,675 1,672
California State
Zero Coupon, 3/1/04 A+ 375 291
Casino Reinvestment
Development Authority,
Series A (FSA)
5.00%, 10/1/03 AAA 1,300 1,347
Center Township, PA Sewer
Authority Revenue Bonds,
Series A (MBIA)
Zero Coupon, 4/15/19 AAA 855 286
Charleston County, SC
Resource Recovery Revenue
Bonds (AMBAC)
5.15%, 1/1/09 AAA 1,000 1,024
Chicago, IL Wastewater
Transmission Revenue
Bonds (FGIC)
5.125%, 1/1/03 AAA 1,300 1,350
Cleveland, OH Airport
Special Revenue Bonds,
TBA
5.50%, 12/1/08 BB- 750 743
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
79
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
Cleveland, OH City School
District (AMBAC)
4.80%, 6/1/03 AAA $ 1,300 $ 1,334
Colorado Health Facilities
Revenue Bonds,
Series A
Zero Coupon, 7/15/20 AAA 1,000 305
Delaware County, PA
Industrial Development
Authority Revenue Bonds,
Series A
6.50%, 1/1/08 A 450 506
Elizabeth Forward, PA
School District,
Series B
Zero Coupon
9/1/08 (AMBAC) AAA 425 262
9/1/11 (MBIA) AAA 850 440
Fort Bend, TX Independent
School District (PSFG)
Zero Coupon, 2/15/07 AAA 1,250 828
2/15/08 AAA 940 591
Georgia State Housing &
Financing Authority,
Series A A2
5.875%, 12/1/19 AA+ 160 166
Grand Prairie, TX
Independent School
District (PSFG)
Zero Coupon, 8/15/07 AAA 750 486
Hamilton Southeastern, IN
(AMBAC)
Zero Coupon, 1/1/15 AAA 1,000 417
Harris County, TX Toll
Road,
Series A (MBIA)
Zero Coupon, 8/15/07 AA+ 475 308
Hawaii State Housing
Finance & Development
Corp., Single Family
Mortgage Revenue Bonds,
Series A
4.90%, 7/1/28 AA 350 352
+ Hillsborough County, FL
Housing & Finance
Authority, Single Family
Mortgage Revenue Bonds
4.50%, 4/1/30 Aaa 725 736
Houston, TX Housing Finance
& Development Corp.,
Single Family Mortgage
Revenue Bonds,
Series B-1
8.00%, 6/1/14 A 325 357
Houston, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12 AAA 550 266
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Hurst Euless Bedford, TX
Independent School
District (PSFG)
Zero Coupon,
8/15/17 AAA $ 965 $ 349
8/15/18 AAA 1,100 377
+ Idaho Housing & Finance
Association, Single
Family Mortgage Revenue
Bonds,
Series:
F
5.70%, 7/1/27 Aaa 245 252
H-2 (FHA)
5.40%, 7/1/27 Aaa 500 510
Illinois Development
Finance Authority Revenue
Bonds (FGIC)
Zero Coupon, 12/1/09 AAA 2,000 1,150
+ Indiana State Housing
Finance Authority Revenue
Bonds,
Series A2 (AMBAC)
5.55%, 1/1/21 Aaa 500 516
Indiana Transportation
Finance Authority Highway
Revenue Bonds (AMBAC)
Zero Coupon, 12/1/16 AAA 1,695 637
Indianapolis Airport
Authority Revenue Bonds
7.10%, 1/15/17 BBB 375 422
Intermountain Power Agency,
UT,
Series:
A
Zero Coupon, 7/1/17 A+ 1,750 641
B (MBIA)
6.50%, 7/1/09 AAA 875 1,017
C (FSA)
4.80%, 7/1/03 AAA 1,300 1,331
Iowa Finance Authority
Single Family Revenue
Bonds,
Series G
4.95%, 1/1/21 AAA 500 505
Jacksonville, FL Electric
Authority Revenue Bonds
Zero Coupon, 10/1/11 AA 325 169
Jefferson Parish, LA School
Board Sales & Use Tax
Revenue Bonds, TBA (FSA)
Zero Coupon, 9/1/06 AAA 1,000 676
Kane & De Kalb Counties, IL
Unit School District
(AMBAC)
Zero Coupon, 12/1/09 AAA 525 302
Kansas City, KA Utility
Systems Revenue Bonds
(AMBAC)
Zero Coupon, 3/1/06 AAA 130 91
Zero Coupon, 3/1/06 AAA 95 67
+ Keller, TX Independent
School District (PSFG)
Zero Coupon, 8/15/12 Aaa 800 387
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
80
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Kentucky State Turnpike
Authority (FGIC)
Zero Coupon, 1/1/10 AAA $ 450 $ 258
La Joya, TX Independent
School District (PSFG)
Zero Coupon, 8/1/12 AAA 645 312
+ Lehigh County, PA General
Purpose Authority Revenue
Bonds, Lehigh Valley
Health Networks,
Series C (MBIA)
4.90%, 7/1/11 Aaa 920 912
Little Rock, AK Airport
Passenger Facility
Revenue Bonds (AMBAC)
5.65%, 5/1/16 AAA 220 233
Maricopa County, AZ Unified
School District-Chandler
(FGIC)
Zero Coupon, 7/1/07 AAA 250 163
Maryland Transportation
Authority (FGIC)
Zero Coupon, 7/1/08 AAA 250 157
Mercer County, NJ Revenue
Bonds
Zero Coupon, 4/1/06 AA- 350 246
Metropolitan Pier &
Exposition Authority, IL,
Series A (AMBAC)
4.90%, 12/15/03 AAA 1,275 1,316
Metropolitan Government
Nashville & Davidson
County, TN Health &
Education Facilities
Board Revenue Bonds,
Series A
5.25%, 5/1/03 AA 900 942
Michigan State Housing
Development Authority,
Series B
5.50%, 12/1/26 AA+ 485 500
Michigan State Trunk Line,
Series A (AMBAC)
Zero Coupon
10/1/05 AAA 750 537
10/1/12 AAA 1,500 729
Midland, TX Independent
School District (PSFG)
Zero Coupon, 8/15/06 AAA 750 511
Millcreek Township, PA
(FGIC)
Zero Coupon, 8/15/05 AAA 325 234
Minnesota State Housing &
Finance Agency, Single
Family Mortgage Revenue
Bonds,
Series E
5.05%, 7/1/24 AA+ 1,300 1,321
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Mississippi Housing Finance
Corp.
Zero Coupon, 9/15/16 AA- $ 5,250 $ 2,017
Mobile, AL Industrial
Development Board Solid
Waste Disposal Revenue
Bonds
6.95%, 1/1/20 BBB- 180 202
Nebraska Investment Finance
Authority Revenue Bonds,
Series:
B
5.60%, 3/1/20 AAA 465 481
D
5.80%, 3/1/20 AAA 470 485
Nebraska Public Power
District Revenue Bonds
5.40%, 1/1/03 A+ 200 210
+ Nevada Housing Division,
Series C (FHA)
5.65%, 4/1/27 Aaa 490 506
+ Nevada Housing Division
Senior,
Series A-2
5.50%, 10/1/27 Aaa 340 349
New Jersey Economic
Development Authority
Zero Coupon, 3/15/09 A+ 275 163
New Jersey State
Zero Coupon, 2/15/06 AA+ 500 351
New Mexico Mortgage Finance
Authority,
Series H
5.35%, 7/1/15 AAA 485 500
New York City, NY
Industrial Development
Agency Revenue Bonds
(FSA)
6.00%, 11/1/15 AAA 1,575 1,683
## New York City, NY
General Obligation
Inverse Bonds
20.509%, 10/1/03 BBB+ 250 414
New York City, NY General
Obligation,
Series G (MBIA)
5.00%, 8/1/12 AAA 1,000 996
New York State Dormitory
Authority
5.10%, 5/15/01 BBB+ 250 257
5.125%, 7/1/11 (FGIC) AAA 1,000 1,014
+ New York State Mortgage
Agency Revenue Bonds,
Series 65
5.00%, 4/1/20 Aa2 1,300 1,318
Noblesville, IN High School
Building Corp. (AMBAC)
Zero Coupon
2/15/17 AAA 900 333
2/15/19 AAA 1,850 615
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
81
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
Norris, CA School District
(MBIA)
Zero Coupon
5/1/15 AAA $ 785 $ 328
5/1/16 AAA 400 158
North Carolina Eastern
Municipal Power Agency
Revenue Bonds,
Series:
B
6,125%, 1/1/09 BBB 350 378
C
5.125%, 1/1/03 BBB 450 460
North Carolina Housing &
Finance Agency Revenue
Bonds,
Series:
FF
5.50%, 9/1/22 AA 455 468
JJ
5.75%, 3/1/23 AA 495 512
RR
5.00%, 9/1/22 AA 1,300 1,305
+ North Hempstead, NY
General Obligation,
Series B (FGIC)
5.00%, 3/1/12 Aaa 890 891
North Slope Borough, AK
General Obligation,
Series B (CGIC)
Zero Coupon, 6/30/04 AAA 575 435
Northern Illinois
University Revenue Bond
(FGIC)
Zero Coupon, 4/1/15 AAA 675 280
Okemos, MI Public School
District (MBIA)
Zero Coupon, 5/1/15 AAA 900 375
Oley Valley, PA School
District (AMBAC)
Zero Coupon, 5/15/09 AAA 760 452
Orange County, FL Housing &
Finance Authority, Single
Family Mortgage Revenue
Bonds, Series B
5.10%, 9/1/27 AAA 1,300 1,322
Penn Hills Township, PA
Zero Coupon, 6/1/12 N/R 1,165 528
# Pennsylvania State
General Obligation
(AMBAC)
0.00%, 4/15/03 AAA 775 935
Philadelphia, PA Airport
Revenue Bonds (FGIC)
5.50%, 6/15/01 AAA 1,340 1,391
Philadelphia, PA Authority
For Industrial
Development Revenue
Bonds,
Series A
6.50%, 10/1/27 N/R 220 237
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Philadelphia, PA Gas Works
5.80%, 7/1/01 BBB $ 350 $ 366
Philadelphia, PA General
Obligation,
Series A (FGIC)
5.40%, 11/15/03 AAA 600 632
Philadelphia, PA Hospitals
& Higher Education
Facilities Authority
Revenue Bonds
6.15%, 7/1/05 BBB+ 125 134
Philadelphia, PA Municipal
Authority (FGIC)
4.90%, 4/1/03 AAA 500 513
Philadelphia, PA Water &
Wasterwater Revenue Bonds
(FGIC)
5.15%, 6/15/04 AAA 1,300 1,359
Port Authority, NY & NJ
Special Obligation
Revenue Bonds
7.00%, 10/1/07 N/R 450 510
+ Saline County, KS
Zero Coupon, 12/1/15 Aaa 750 303
San Antonio, TX Electric &
Gas Revenue Bond (AMBAC)
Zero Coupon, 2/1/05 AAA 200 147
San Antonio, TX General
Obligation, TBA
6.00%, 8/1/06 AA 500 550
San Bernardino County, CA,
Series A (MBIA)
7.40%, 7/1/16 AAA 1,150 1,197
Savannah, GA Economic
Development Authority
Revenue Bonds
7.40%, 4/1/26 N/R 270 304
Schuylkill County, PA
Redevelopment Authority
(FGIC)
7.125%, 6/1/13 AAA 750 823
Skokie, IL Park District,
Series B (AMBAC)
Zero Coupon, 12/1/12 AAA 1,750 836
Steel Valley, PA Allegheny
County
Zero Coupon, 11/1/17 A 650 231
Steel Valley, PA School
District
Zero Coupon, 11/1/11 A 740 375
+ Tyler, TX Health
Facilities Development
Corp.,
Series A
5.25%, 7/1/02 Baa2 425 434
Utah State Housing Finance
Agency
Series A-2
5.50%, 7/1/27 AAA 400 411
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
82
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Washington State Public
Power Supply (MBIA)
Zero Coupon, 7/1/10 AAA $ 475 $ 260
7.00%, 7/1/07 AA- 375 438
Wisconsin Housing &
Economic Development
Authority Home Ownership
Revenue Bonds,
Series:
E
5.125%, 9/1/26 AA 1,300 1,314
H
4.875%, 3/1/24 AA 1,350 1,358
- -----------------------------------------------------
GROUP TOTAL 73,615
- -----------------------------------------------------
ASSET BACKED CORPORATES (0.4%)
ALPS,
Series 96-1 D
12.75%, 6/15/06 BB- 349 350
- -----------------------------------------------------
INDUSTRIALS (1.1%) Comcast Corp.
9.375%, 5/15/05 BB+ 225 241
Grand Casinos, Inc.
10.125%, 12/1/03 BB 250 272
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 175 186
Viacom, Inc.
8.00%, 7/7/06 BB- 250 256
- -----------------------------------------------------
GROUP TOTAL 955
- -----------------------------------------------------
TRANSPORTATION (0.1%)
(+) Jet Equipment Trust,
Series 95-C
10.69%, 5/1/15 BBB 100 130
- -----------------------------------------------------
YANKEE (2.5%)
Korea Development Bank
7.375%, 9/17/04 BB+ 825 748
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 400 414
(+) Republic of Panama
7.875%, 2/13/02 BB+ 310 311
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 125 140
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 750 673
- -----------------------------------------------------
GROUP TOTAL 2,286
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $71,355) 77,336
- -----------------------------------------------------
<PAGE>
RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
- -----------------------------------------------------
CASH EQUIVALENTS (20.5%)
- -----------------------------------------------------
MONEY MARKET INSTRUMENTS (4.7%)
Dreyfus Basic Municipal
Money Market Fund 2,113,255 $ 2,113
Vanguard Municipal Bond
Money Market Fund 2,115,174 2,115
- -----------------------------------------------------
GROUP TOTAL 4,228
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
MUNICIPALS (13.2%)
## Abilene, TX Health
Facilities Development
Corp. (MBIA)
3.70%, 9/19/25 AAA $ 1,600 1,600
## Chelsea, MA Lease,
Series A (FSA)
3.80%, 6/6/23 AAA 1,600 1,600
## Henrico County, VA
Industrial Development
Authority (FSA)
3.65%, 8/23/27 AAA 1,600 1,600
## Kansas State Development
Finance Authority,
Series E
3.75%, 3/15/24 AAA 1,000 1,000
## Pennsylvania Housing &
Finance Agency
3.62%, 10/3/23 AA+ 1,000 1,000
## Pennsylvania State
Higher Education
Assistance Agency,
Student Loan SAVRS
(AMBAC)
3.70%, 3/1/22 AAA 1,000 1,000
## Wake County, NC
Industrial Facilities &
Pollution Control Revenue
(AMBAC)
3.78%, 5/1/24 AAA 1,500 1,500
## Wichita, KS Hospital
Bonds, Series III-A
(MBIA)
3.66%, 10/20/17 AAA 1,600 1,600
## York County, PA Hospital
Authority Revenue Bonds
(AMBAC)
3.65%, 7/1/21 AAA 1,000 1,000
- -----------------------------------------------------
GROUP TOTAL 11,900
- -----------------------------------------------------
U.S. TREASURY SECURITY (1.7%)
!! U.S. Treasury Bond
8.75%, 8/15/20 Tsy 1,175 1,566
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
83
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO (UNAUDITED)
FACE
AMOUNT VALUE
(CONT'D) (000) (000)!
- -----------------------------------------------------
REPURCHASE AGREEMENT (0.9%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98, to
be repurchased at $777,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at $779 $ 777 $ 777
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $18,372) 18,471
- -----------------------------------------------------
TOTAL INVESTMENTS (106.4%) (Cost $89,727) 95,807
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.4%)
Cash 5
Interest Receivable 729
Receivable for Fund Shares Sold 5
Unrealized Gain on Swap Agreements 58
Other Assets 3
Payable for Investments Purchased (6,461)
Payable for Fund Shares Redeemed (1)
Payable for Investment Advisory Fees (71)
Payable for Administrative Fees (6)
Payable for Trustees' Deferred Compensation
Plan-Note F (2)
Payable for Daily Variation on Futures
Contracts (3)
Other Liabilities (31)
-------
(5,775)
- -----------------------------------------------------
NET ASSETS (100%) $90,032
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 7,639,910 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $90,032
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.78
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
=====================================================
NET ASSETS CONSIST OF:
Paid in Capital $84,308
Undistributed Net Investment Income (Loss) 61
Undistributed Realized Net Gain (Loss) (445)
Unrealized Appreciation (Depreciation) on:
Investment Securities 6,080
Futures and Swaps 28
- -----------------------------------------------------
NET ASSETS $90,032
- -----------------------------------------------------
! See Note A1 to Financial Statements.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
(+) 144A security. Certain conditions for public sale
may exist.
+ Moody's Investors Service, Inc. rating. Security
is not rated by Standard & Poor's Corporation.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or Floating rate security-rate 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 Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
84
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
PA MUNICIPAL
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The PA Municipal Portfolio invests in municipal debt securities exempt from
Pennsylvania income tax, and in other fixed-income securities. Portfolio
structure reflects three key elements: duration, sector selection and security
selection. Duration varies depending on Miller Anderson & Sherrerd's outlook for
changes in interest rates, becoming longer than the benchmark index in periods
when MAS expects rates to fall and shorter in periods when MAS expects them to
rise. Investments in individual securities and sectors reflect MAS's views on
the risks and rewards available in the various bonds offered in the market.
Normally, at least 80% of the Portfolio will be invested in municipal
securities, with at least 65% invested in Pennsylvania municipal securities.
Taxable securities are included only in cases where MAS believes they will
improve the fund's risk/reward profile on an after-tax basis.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS LEHMAN 5 YEAR LEHMAN 10 YEAR
PA MUNICIPAL MUNICIPAL INDEX MUNICIPAL INDEX
------------------------------------------------
SIX MONTHS 3.62% 2.87% 3.65%
ONE YEAR 9.42 7.64 10.39
FIVE YEARS 7.48 5.54 6.92
SINCE INCEPTION 8.20 5.80 7.40
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
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. The Portfolio's
performance pattern may have been affected by this change.
* The PA Municipal Portfolio commenced operations on 10/1/92. Total returns are
compared to the Lehman 5 Year Municipal Index and the Lehman 10 Year Municipal
Index, both unmanaged market indices. Returns for periods less than one year are
cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (97.6%)
- -----------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------------
MUNICIPAL BONDS (94.4%)
Aliquippa School District, PA
Zero Coupon, 6/1/12 A $ 685 $ 328
Allegheny County, PA (AMBAC)
Zero Coupon, 5/1/03 AAA 325 261
Arkansas State Development
Finance Authority Home
Mortgage Revenue Bonds,
Series B-1
4.90%, 7/1/29 AAA 275 277
Berks County, PA (FGIC)
Zero Coupon
5/15/19 AAA 1,250 417
11/15/20 AAA 1,000 305
Berks County, PA Solid Waste
Authority (FGIC)
6.00%, 4/1/11 AAA 250 268
Bradford, PA
Area School District (FGIC)
4.60%, 10/1/10 AAA 250 245
Bucks County, PA Water &
Sewer Authority Revenue Bonds
(FGIC)
Zero Coupon, 12/1/05 AAA 375 266
+ Series B
5.50%, 2/1/08 Aaa 185 191
Center Township, PA Sewer
Authority Revenue Bonds,
Series A (MBIA)
Zero Coupon, 4/15/17 AAA 615 229
Series A
6.00%, 4/15/03 AAA 500 539
Chartiers Valley, PA (FGIC)
Zero Coupon, 2/1/06 AAA 425 298
Clinton County, PA Industrial
Development Authority
6.25%, 11/15/06 BB- 150 156
Delaware County, PA
Industrial Development
Authority Revenue Bonds,
Series A
6.50%, 1/1/08 A 200 225
Elizabeth Forward, PA School
District, Series B (MBIA)
Zero Coupon, 9/1/11 AAA 400 207
Georgia State Housing &
Financing Authority,
Series A A2
5.875%, 12/1/19 AA+ 105 109
Girard Area, PA
School District (FGIC)
Zero Coupon
10/1/18 AAA 700 241
10/1/19 AAA 250 82
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
85
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
PA MUNICIPAL
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -------------------------------------------------------
Hawaii State Housing
Finance & Development
Corp., Single Family
Mortgage Revenue Bonds,
Series A
4.90%, 7/1/28 AA $ 125 $ 126
+ Hillsborough County, FL
Housing & Finance
Authority, Single Family
Mortgage Revenue Bonds,
4.50%, 4/1/30 Aaa 275 279
Houston TX Housing Finance &
Development Corp., Single
Family Mortgage Revenue
Bonds, Series B-1
8.00%, 6/1/14 A 175 192
Huron, MI School District
(AMBAC)
Zero Coupon, 5/1/18 AAA 1,500 531
+ Idaho Housing & Finance
Association, Single Family
Mortgage Revenue Bonds,
Series H-2
5.40%, 7/1/27 Aaa 250 255
Intermountain Power Agency, UT,
Series B (MBIA)
6.50%, 7/1/09 AAA 300 349
Iowa Finance Authority Single
Family Revenue Bonds,
Series G
4.95%, 1/1/21 AAA 200 202
Kane & De Kalb Counties, IL
Unit School District
(AMBAC)
Zero Coupon, 12/1/09 AAA 200 115
Lehigh County, PA General
Purpose Authority Revenue
Bonds, Horizons Health
Systems, Inc., Series B
8.25%, 7/1/13 N/R 250 263
+ Lehigh County, PA General
Purpose Authority Revenue
Bonds, Lehigh Valley Health
Network, Series C (MBIA)
4.90%, 7/1/11 Aaa 275 273
Metropolitan Government
Nashville & Davidson
County, TN Health &
Education Facilities Board
Revenue Bonds, Series A
5.25%, 5/1/03 AA 335 350
Millcreek Township, PA (FGIC)
Zero Coupon, 8/15/05 AAA 375 270
Minnesota State Housing &
Finance Agency, Single
Family Mortgage Revenue
Bonds, Series E
5.05%, 7/1/24 AA+ 550 559
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -------------------------------------------------------
Mobile, AL Industrial
Development Board Solid
Waste Disposal Revenue
Bonds
6.95%, 1/1/20 BBB- $ 80 $ 90
Montour, PA School
District (MBIA)
Zero Coupon, 1/1/13 AAA 300 143
Nebraska Investment Finance
Authority Revenue Bonds,
Series D
5.80%, 3/1/20 AAA 260 268
+ Nevada Housing Division,
Series C
5.65%, 4/1/27 Aaa 245 253
New York City, NY Industrial
Development Agency Revenue
Bonds (FSA)
6.00%, 11/1/15 AAA 775 828
## New York City, NY General
Obligation Inverse Bonds
20.509%, 10/1/03 BBB+ 100 165
+ New York State Mortgage
Agency Revenue Bonds,
Series 65
5.00%, 4/1/20 Aa2 550 558
North Carolina Eastern
Municipal Power Agency
Revenue Bonds, Series C
5.125%, 1/1/03 BBB 150 153
North Carolina Housing &
Finance Agency Revenue
Bonds,
Series:
JJ
5.75%, 3/1/23 AA 270 279
RR
5.00%, 9/1/22 AA 550 552
North Slope Borough, AK
General Obligation,
Series B (CGIC)
Zero Coupon, 6/30/04 AAA 285 216
Northwestern, PA School
District (AMBAC)
Zero Coupon, 1/15/09 AAA 450 272
Oley Valley, PA School
District (AMBAC)
Zero Coupon, 5/15/09 AAA 760 452
Orange County, FL Housing &
Finance Authority, Single
Family Mortgage Revenue
Bonds, Series B
5.10%, 9/1/27 AAA 550 559
Parkland, PA School District
(FGIC)
4.60%, 9/1/10 AAA 250 245
Penn Hills Township, PA
Zero Coupon, 6/1/12 N/R 450 204
Series B
Zero Coupon, 12/1/13 N/R 500 208
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
86
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Pennsylvania Convention
Center Authority
6.25%, 9/1/04 BBB $ 250 $ 267
6.70%, 9/1/16 (FGIC) AAA 500 593
Pennsylvania Housing &
Finance Authority, Series:
47
5.20%, 4/1/27 AA+ 375 381
48
5.375%, 10/1/16 AA+ 300 307
50A
5.35%, 10/1/08 AA+ 220 227
51
5.65%, 4/1/20 AA+ 250 258
52B
5.55%, 10/1/12 AA+ 500 513
59A
4.95%, 4/1/25 AA+ 550 554
Pennsylvania State General
Obligation (AMBAC)
# 0.00%, 4/15/03 AAA 300 362
Zero Coupon, 7/1/05 AAA 375 271
Pennsylvania State,
Certificate of
Participation Series A
5.00%, 7/1/03 AAA 500 513
Philadelphia, PA Airport
Revenue Bonds (FGIC)
5.50%, 6/15/01 AAA 550 571
Philadelphia, PA Authority
For Industrial Development
Revenue Bonds, Series A
6.50%, 10/1/27 N/R 100 107
Philadelphia, PA Gas Works
5.80%, 7/1/01 BBB 200 209
Philadelphia, PA General
Obligation, Series A (FGIC)
5.125%, 5/15/03 AAA 100 104
+ Philadelphia, PA Hospitals
10.875%, 7/1/08 Aaa 140 180
Philadelphia, PA Hospitals &
Higher Education Facilities
Authority Revenue Bonds
6.15%, 7/1/05 BBB+ 50 54
Philadelphia, PA School
District, Series:
A
5.20%, 7/1/03 (MBIA) AAA 200 208
B
5.00%, 4/1/03 (AMBAC) AAA 550 567
Philadelphia, PA Water &
Wasterwater Revenue Bonds
(FGIC)
5.15%, 6/15/04 AAA 550 575
5.20%, 6/15/05 AAA 500 522
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Pittsburgh, PA General
Obligation (AMBAC)
Zero Coupon, 9/1/04 AAA $ 350 $ 264
6.50%, 4/1/11 AAA 275 307
Pittsburgh, PA Water &
Sewer (FGIC)
Zero Coupon, 9/1/05 AAA 375 269
Port Authority, NY & NJ
Special Obligation Revenue
Bonds
7.00%, 10/1/07 N/R 250 283
Robinson Township, PA
6.90%, 5/15/18 AAA 115 134
San Antonio, TX
General Obligation TBA
6.00%, 8/1/06 AA 175 192
San Bernardino County, CA,
Series A (MBIA)
7.40%, 7/1/16 AAA 450 468
Savannah, GA Economic
Development Authority
Revenue Bonds
7.40%, 4/1/26 N/R 40 45
Scranton, PA Health & Welfare
Authority
6.625%, 7/1/09 AAA 125 139
Southeastern Area Schools,
PA, Revenue Bonds, Series:
A
Zero Coupon, 10/1/06 A 200 135
B
Zero Coupon, 10/1/06 A 390 263
Steel Valley, PA School
District
Zero Coupon, 11/1/11 A 430 218
Stroud Township, PA Sewer
Authority (CGIC)
Zero Coupon, 11/15/05 AAA 375 267
Upper Darby Township, PA
(AMBAC)
Zero Coupon, 7/15/11 AAA 525 274
Washington County, West PA
Power Co.
4.95%, 3/1/03 A 150 154
++ Westmoreland County, PA
(AMBAC)
Zero Coupon, 8/1/14 AAA 1,475 644
Wisconsin Housing & Economic
Development Authority Home
Ownership Revenue Bonds,
Series E
5.125%, 9/1/26 AA 550 556
Yough, PA School District
(MBIA)
Zero Coupon, 10/1/13 AAA 1,445 661
- -----------------------------------------------------
GROUP TOTAL 26,469
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
87
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
PA MUNICIPAL
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
ASSET BACKED CORPORATES (0.5%)
ALPS,
Series 96-1 D
12.75%, 6/15/06 BB- $ 150 $ 150
- -----------------------------------------------------
INDUSTRIALS (0.6%) Comcast Corp.
9.375%, 5/15/05 BB+ 75 80
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- 75 80
- -----------------------------------------------------
GROUP TOTAL 160
- -----------------------------------------------------
TRANSPORTATION (0.5%)
(+) Jet Equipment Trust,
Series 95-C
10.69%, 5/1/15 BBB 100 130
- -----------------------------------------------------
YANKEE (1.6%)
Korea Development Bank
7.375%, 9/17/04 BB+ 285 259
(+) Republic of Panama
7.875%, 2/13/02 BB+ 145 145
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 50 56
- -----------------------------------------------------
GROUP TOTAL 460
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $25,019) 27,369
- -----------------------------------------------------
CASH EQUIVALENTS (3.9%)
- -----------------------------------------------------
SHARES
------
MONEY MARKET INSTRUMENTS (3.0%)
Dreyfus PA Municipal
Money Market Fund 408,571 409
Vanguard PA Tax-Free
Money Market Fund 418,826 419
- -----------------------------------------------------
GROUP TOTAL 828
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
REPURCHASE AGREEMENT (0.9%)
Chase Securities, Inc. 5.75%, dated
3/31/98, due 4/1/98, to be
repurchased at $257,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at $258 $ 257 257
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $1,085) 1,085
- -----------------------------------------------------
TOTAL INVESTMENTS (101.5%) (Cost $26,104) 28,454
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
=====================================================
OTHER ASSETS AND LIABILITIES (-1.5%)
Interest Receivable $ 310
Receivable for Daily Variation Margin on
Futures Contracts 1
Unrealized Gain on Swap Agreements 26
Other Assets 1
Payable for Investments Purchased (703)
Payable for Fund Shares Redeemed (2)
Payable for Administrative Fees (2)
Payable for Investment Advisory Fees (17)
Payable for Trustees' Deferred Compensation
Plan-Note F (1)
Other Liabilities (32)
-------
(419)
- -----------------------------------------------------
NET ASSETS (100%) $28,035
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 2,365,547 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $28,035
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.85
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $25,754
Undistributed Net Investment Income (Loss) 23
Undistributed Realized Net Gain (Loss) (112)
Unrealized Appreciation (Depreciation) on:
Investment Securities 2,350
Futures and Swaps 20
- -----------------------------------------------------
NET ASSETS $28,035
- -----------------------------------------------------
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
++ A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security
is not rated by Standard & Poor's Corporation.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or Floating rate security-rate disclosed
is as of March 31, 1998.
AMBAC American Municipal Bond Assurance Corp.
CGIC Capital Guaranty Insurance Corp.
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
MBIA Municipal Bond Insurance Association
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
88
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL FIXED INCOME
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Global Fixed Income Portfolio invests in high-grade fixed-income securities
around the world, including the United States. Miller Anderson & Sherrerd
manages the duration, country, and currency exposure of the portfolio by
combining research on relative values with analyses of economic, interest rate,
and exchange rate trends. Particular attention is paid to prospective inflation
and real interest rates. The Portfolio will tend to invest in those countries
offering the highest real interest rates and steepest yield curves, after
adjusting for differences in the fiscal soundness of each country. Foreign
currency exposure is handled as a separate management decision and foreign
currencies which MAS judges to be significantly overvalued are hedged.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS GLOBAL SALOMON WORLD
FIXED INCOME GOV'T BOND INDEX
-------------------------------
SIX MONTHS
1.16% 1.00%
ONE YEAR
5.81 5.38
SINCE INCEPTION
6.84 6.18
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments.
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.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Global Fixed Income Portfolio commenced operations on 4/30/93. Total
returns are compared to the Salomon World Government Bond Index, an unmanaged
market index. Returns for periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (86.5%)
- ------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- ------------------------------------------------------
AUSTRALIAN DOLLAR (2.7%)
Commonwealth of
Australia
10.00%, 2/15/06 AAA AUD 1,300 $ 1,095
Federal National
Mortgage Association
6.50%, 7/10/02 Agy 1,050 717
- ------------------------------------------------------
GROUP TOTAL 1,812
- ------------------------------------------------------
BRITISH POUND (6.7%)
United Kingdom Treasury
Bill
8.50%, 7/16/07 AAA GBP 2,295 4,531
- ------------------------------------------------------
CANADIAN DOLLAR (3.4%)
(+)@ Global Econ2 EI
Zero Coupon,
11/1/98 AAA (1)600 --
(+)@ Global Econ2 PIP
Zero Coupon,
11/1/98 AAA (1)600 --
Government of Canada
7.50%, 3/1/01 AAA CAD 2,165 1,624
9.75%, 6/1/21 AA+ 640 685
- ------------------------------------------------------
GROUP TOTAL 2,309
- ------------------------------------------------------
DANISH KRONE (2.7%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 6,765 1,099
8.00%, 3/15/06 AA+ 4,500 759
- ------------------------------------------------------
GROUP TOTAL 1,858
- ------------------------------------------------------
GERMAN MARK (19.5%)
## GMAC Global Bond
3.66%, 9/25/02 A- DEM 1,400 754
Government of Germany
+ 5.75%, 8/22/00 Aaa 4,475 2,506
+ 6.00%, 1/5/06 Aaa 2,925 1,698
6.25%, 1/4/24 AAA 2,255 1,353
7.125%, 1/29/03 AAA 2,775 1,666
7.375%, 1/3/05 AAA 1,830 1,136
7.50%, 9/9/04 AAA 1,210 753
8.375%, 5/21/01 AAA 5,580 3,370
- ------------------------------------------------------
GROUP TOTAL 13,236
- ------------------------------------------------------
ITALIAN LIRA (6.0%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 2,630,000 1,852
10.00%, 8/1/03 AA 3,300,000 2,240
- ------------------------------------------------------
GROUP TOTAL 4,092
- ------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
89
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(cont'd) & POOR'S) (000) (000)!
- ------------------------------------------------------
JAPANESE YEN (5.1%)
Credit Locale de France
6.00%, 10/31/01 AAA JPY 75,000 $ 659
European Investment Bank
3.00%, 9/20/06 AAA 88,000 722
6.625%, 3/15/00 AAA 60,000 502
Export-Import Bank of
Japan
2.875%, 7/28/05 AAA 80,000 648
International Bank for
Reconstruction &
Development
4.75%, 12/20/04 BB+ 39,600 358
6.75%, 6/18/01 AAA 64,000 567
- ------------------------------------------------------
GROUP TOTAL 3,456
- ------------------------------------------------------
SOUTH AFRICAN RAND (1.0%)
Republic of South Africa
13.00%, 8/31/10 BBB+ ZAR 3,500 687
- ------------------------------------------------------
SWEDISH KRONA (7.2%)
Swedish Government
6.00%, 2/9/05 AAA SEK 15,700 2,062
13.00%, 6/15/01 AA+ 18,175 2,803
- ------------------------------------------------------
GROUP TOTAL 4,865
- ------------------------------------------------------
UNITED STATES DOLLAR (28.5%)
CORPORATE (8.3%)
Anthem Insurance Cos.,
Inc., Series A
9.00%, 4/1/27 BBB+ $ 195 209
(+) BankAmerica
Institutional,
Series A
8.07%, 12/31/26 A- 350 373
(+) BT Institutional
Capital Trust, Series
A
8.09%, 12/1/26 BBB+ 425 441
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 225 225
CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 250 257
(+) Edison Mission
Energy Funding
7.33%, 9/15/08 BBB 225 233
First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 400 420
First Union
Institutional Capital
I
8.04%, 12/1/26 BBB+ 375 398
Nationwide Mutual Life
Insurance
7.50%, 2/15/24 A+ 300 300
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 150 154
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ------------------------------------------------------
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ $ 425 $ 445
Prudential Insurance Co.
8.30%, 7/1/25 A 150 167
# Rhone-Poulenc Rorer,
Inc., Series 92-A3
8.62%, 1/5/21 BBB- 215 237
(+) State Street
Institutional Capital,
Series A
7.94%, 12/30/26 A 275 292
Washington Mutual
Capital I
8.375%, 6/1/27 BBB- 100 108
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 130 138
(+) Wells Fargo Capital,
Series:
A
8.125%, 12/1/26 BBB 350 371
B
7.95%, 12/1/26 BBB+ 100 104
World Financial
Properties, Series 96
WFP-D
6.95%, 9/1/13 AA- 775 801
- ------------------------------------------------------
GROUP TOTAL 5,673
- ------------------------------------------------------
U.S. TREASURY SECURITIES (20.2%)
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 1,650 2,199
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 1,632 1,582
3.625%, 1/15/08
(Inflation Indexed) Tsy 1,575 1,556
6.125%, 5/15/98 Tsy 3,875 3,878
6.75%, 5/31/99 Tsy 2,150 2,177
7.50%, 2/15/05 Tsy 2,100 2,309
- ------------------------------------------------------
GROUP TOTAL 13,701
- ------------------------------------------------------
YANKEE (3.7%)
Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 395 396
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 300 269
Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 195 179
Israel Electric Corp.,
Ltd.,
7.25%, 12/15/06 A- 75 76
(+) 7.75%, 12/15/27 A- 300 305
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 250 250
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 335 312
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
90
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ------------------------------------------------------
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB $ 375 $ 393
(+) Reliance Industries
Ltd.,
Series A
8.25%, 1/15/27 BB+ 250 234
(+) Samsung Electronics
Co.
7.45%,10/1/02 B+ 100 90
- ------------------------------------------------------
GROUP TOTAL 2,504
- ------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $60,362) 58,724
- ------------------------------------------------------
PREFERRED STOCKS (2.9%)
- ------------------------------------------------------
SHARES
------
INDUSTRIALS (0.7%)
(+) Entertainment Properties
14.253% BBB- 300 279
(+) Tier One Properties
11.095% A 150 144
- ------------------------------------------------------
GROUP TOTAL 423
- ------------------------------------------------------
MORTGAGE-OTHER (2.2%)
(+)+ Home Ownership Funding
Corp.
13.331% Aaa 1,575 1,511
- ------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $2,030) 1,934
- ------------------------------------------------------
CASH EQUIVALENTS (9.7%)
- ------------------------------------------------------
<PAGE>
FACE
AMOUNT VALUE
(000) (000)!
- ------------------------------------------------------
AGENCY FIXED RATE MORTGAGE (3.1%)
Government National
Mortgage Association
10.50%, 5/15/18 Tsy $ 1,867 2,114
- ------------------------------------------------------
REPURCHASE AGREEMENTS (6.6%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98,
to be repurchased at $1,483,
collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/98, value
at $1,488 1,483 1,483
Goldman Sachs & Co. 5.65%,
dated 3/31/98, due 4/1/98,
to be repurchased at $1,483,
collateralized by U.S.
Treasury Bonds, 8.75%, due
8/15/17, valued at $1,523 1,483 1,483
Merrill Lynch & Co., Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased at
$1,483, collateralized by
U.S. Treasury Notes, 6.50%,
due 4/30/99, valued at
$1,514 $ 1,483 $ 1,483
- ------------------------------------------------------
GROUP TOTAL 4,449
- ------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $6,530) 6,563
- ------------------------------------------------------
FOREIGN CURRENCY (0.1%)
- ------------------------------------------------------
British Pound GBP 7 12
Canadian Dollar CAD 81 57
German Mark DEM 13 7
@ Italian Lira ITL 81 --
Swedish Krona SEK 5 1
- ------------------------------------------------------
TOTAL FOREIGN CURRENCY (Cost $76) 77
- ------------------------------------------------------
TOTAL INVESTMENTS (99.2%) (Cost $68,998) 67,298
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
Cash 244
Foreign Currency Held as Collateral on
Futures Contracts (Cost $58) 58
Dividends Receivable 67
Interest Receivable 1,407
Receivable for Investments Sold 515
Unrealized Gain on Futures Contracts 8
Other Assets 3
Payable for Investments Purchased (1,259)
Payable for Fund Shares Redeemed (204)
Payable for Investment Advisory Fees (64)
Payable for Administrative Fees (4)
Payable for Trustees' Deferred Compensation
Plan--Note F (3)
Unrealized Loss on Forward Foreign Currency
Contracts (196)
Other Liabilities (20)
-------
552
- ------------------------------------------------------
NET ASSETS (100%) $67,850
- ------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
91
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL FIXED INCOME
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) (000)!
- ------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------
Applicable to 6,628,170 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $67,850
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.24
- ------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $69,365
Undistributed Net Investment Income (Loss) 894
Undistributed Realized Net Gain (Loss) (507)
Unrealized Appreciation (Depreciation) on:
Investment Securities (1,701)
Foreign Currency Transactions (215)
Futures 14
- ------------------------------------------------------
NET ASSETS $67,850
- ------------------------------------------------------
- ------------------------------------------------------------
! See Note A1 to Financial Statements.
(+) 144A Security. Certain conditions for public sale may
exist.
+ Moody's Investors Service, Inc. rating. Security is not
rated by Standard & Poor's Corporation.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed is as
of March 31, 1998.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
92
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERNATIONAL FIXED
INCOME PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The International Fixed Income Portfolio invests in high-grade foreign
fixed-income securities. Miller Anderson & Sherrerd manages the duration,
country, and currency exposure of the Portfolio by combining research on
relative values with analyses of economic, interest rate, and exchange rate
trends. Particular attention is paid to prospective inflation and real interest
rates. The Portfolio will tend to invest in those countries offering the highest
real interest rates and steepest yield curves, after adjusting for differences
in the fiscal soundness of each country. Foreign currency exposure is handled as
a separate management decision and foreign currencies which MAS judges to be
significantly overvalued are hedged.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS INTERNATIONAL SALOMON WORLD GOV'T
FIXED INCOME BOND EX-U.S. INDEX
---------------------------------------
SIX MONTHS (0.60)% (0.98)%
ONE YEAR 2.72 2.02
SINCE INCEPTION 5.76 5.54
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments.
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.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The International Fixed Income Portfolio commenced operations on 4/29/94.
Total returns are compared to the Salomon World Government Bond Ex-U.S. Index,
an unmanaged market index. Returns for periods less than one year are
cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (73.0%)
- ------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- ------------------------------------------------------
AUSTRALIAN DOLLAR (1.4%)
Commonwealth of
Australia
10.00%, 2/15/06 AAA AUD 850 $ 716
Federal National
Mortgage Association
6.50%, 7/10/02 Agy 1,960 1,338
- ------------------------------------------------------
GROUP TOTAL 2,054
- ------------------------------------------------------
BRITISH POUND (9.7%)
United Kingdom
Treasury Bills
8.00%, 6/10/03 AAA GBP 2,165 3,924
8.50%, 7/16/07 AAA 5,055 9,981
- ------------------------------------------------------
GROUP TOTAL 13,905
- ------------------------------------------------------
CANADIAN DOLLAR (2.1%)
(+)@ Global Econ2 EI
Zero Coupon,
11/1/98 AAA (1)1,400 --
(+) Global Econ2 PIP
Zero Coupon,
11/1/98 AAA (1)1,400 1
Government of Canada
7.50%, 3/1/01 AAA CAD 1,175 881
9.75%, 6/1/21 AA+ 1,950 2,087
- ------------------------------------------------------
GROUP TOTAL 2,969
- ------------------------------------------------------
DANISH KRONE (2.7%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 15,610 2,536
8.00%, 3/15/06 AA+ 7,675 1,295
- ------------------------------------------------------
GROUP TOTAL 3,831
- ------------------------------------------------------
FINNISH MARKKA (0.9%)
Government of Finland
9.50%, 3/15/04 AA- FIM 6,000 1,328
- ------------------------------------------------------
FRENCH FRANC (0.8%)
Government of France
O.A.T.
8.50%, 3/28/00 AAA FRF 6,400 1,117
- ------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
93
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERNATIONAL FIXED
INCOME PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ------------------------------------------------------
GERMAN MARK (23.5%)
## GMAC Global Bond
3.66%, 9/25/02 A- DEM 2,600 $ 1,400
Government of Germany
+ 5.75%, 8/22/00 Aaa 8,970 5,022
+ 6.00%, 1/5/06 Aaa 4,875 2,830
6.25%, 1/4/24 AAA 5,240 3,145
+ 7.00%, 1/13/00 Aaa 9,300 5,281
7.375%, 1/3/05 AAA 9,200 5,712
7.50%, 9/9/04 AAA 9,225 5,739
8.375%, 5/21/01 AAA 3,205 1,936
International Bank for
Reconstruction &
Development
7.125%, 4/12/05 AAA 4,550 2,782
- ------------------------------------------------------
GROUP TOTAL 33,847
- ------------------------------------------------------
ITALIAN LIRA (7.7%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 10,055,000 7,080
10.00%, 8/1/03 AA 5,945,000 4,035
- ------------------------------------------------------
GROUP TOTAL 11,115
- ------------------------------------------------------
JAPANESE YEN (12.7%)
Credit Locale de
France
6.00%, 10/31/01 AAA JPY 361,000 3,171
European Investment
Bank
3.00%, 9/20/06 AAA 236,000 1,936
6.625%, 3/15/00 AAA 205,000 1,714
Export-Import Bank of
Japan
2.875%, 7/28/05 AAA 420,000 3,405
Inter-American
Development Bank
6.00%, 10/30/01 AAA 465,000 4,091
International Bank for
Reconstruction &
Development
4.75%, 12/20/04 BB+ 300,000 2,711
6.75%, 6/18/01 AAA 140,000 1,242
- ------------------------------------------------------
GROUP TOTAL 18,270
- ------------------------------------------------------
NETHERLANDS GUILDER (1.7%)
Netherlands Government
8.25%, 2/15/07 AAA NLG 4,225 2,504
- ------------------------------------------------------
SOUTH AFRICAN RAND (1.0%)
Republic of South
Africa
13.00%, 8/31/10 BBB+ ZAR 7,250 1,423
- ------------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ------------------------------------------------------
SPANISH PESETA (1.2%)
Spanish Government
10.10%, 2/28/01 AAA ESP 240,000 $ 1,761
- ------------------------------------------------------
SWEDISH KRONA (7.6%)
Swedish Government
6.00%, 2/9/05 AAA SEK 47,100 6,185
13.00%, 6/15/01 AA+ 30,325 4,677
- ------------------------------------------------------
GROUP TOTAL 10,862
- ------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$109,934) 104,986
- ------------------------------------------------------
CASH EQUIVALENTS (26.4%)
- ------------------------------------------------------
COMMERCIAL PAPER (16.0%) Delaware Funding Corp.
5.56%, 4/14/98 $ 4,000 3,992
General Electric Capital
Corp.
5.53%, 4/8/98 4,000 3,996
Greenwich Funding Corp.
5.57%, 4/21/98 4,000 3,988
Societe General Bank
5.54%, 4/2/98 4,000 3,999
Southern California Edison
Corp.
5.53%, 4/9/98 3,062 3,058
Transamerica Financial Corp.
5.53%, 5/8/98 4,000 3,977
- ------------------------------------------------------
GROUP TOTAL 23,010
- ------------------------------------------------------
REPURCHASE AGREEMENTS (10.4%) Chase Securities, Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased
at $4,979, collateralized
by various U.S. Government
Obligations, due
4/1/98-11/15/99, valued at
$4,993 4,979 4,979
Goldman Sachs & Co. 5.65%,
dated 3/31/98, due 4/1/98,
to be repurchased at
$4,979 collateralized by
U.S. Treasury Bonds, 8.75%
due 8/15/17, valued at
$5,112 4,978 4,978
Merrill Lynch & Co., Inc.
5.75%, dated 3/31/98, due
4/1/98, to be repurchased
at $4,979, collateralized
by U.S. Treasury Notes,
6.50%, due 4/30/99, valued
at $5,084 4,978 4,978
- ------------------------------------------------------
GROUP TOTAL 14,935
- ------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $37,945) 37,945
- ------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
94
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)!
- ------------------------------------------------------
FOREIGN CURRENCY (0.1%)
- ------------------------------------------------------
British Pound GBP 12 $ 21
Canadian Dollar CAD 1 1
French Franc FRF 544 88
German Mark DEM 24 13
@ Spanish Peseta ESP 12 --
- ------------------------------------------------------
TOTAL FOREIGN CURRENCY (Cost $122) 123
- ------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (Cost $148,001) 143,054
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
Foreign Currency Held as Collateral on
Futures Contracts (Cost $173) 173
Interest Receivable 2,466
Receivable for Fund Shares Sold 109
Unrealized Gain on Futures Contracts 84
Other Assets 37
Payable for Investments Purchased (1,449)
Payable for Investment Advisory Fees (132)
Payable for Administrative Fees (10)
Payable for Trustees' Deferred Compensation
Plan-Note F (6)
Payable to Custodian (327)
Unrealized Loss on Forward Foreign Currency
Contracts (200)
Other Liabilities (24)
--------
721
- ------------------------------------------------------
NET ASSETS (100%) $143,775
- ------------------------------------------------------
<PAGE>
VALUE
(000)!
======================================================
NET ASSETS
Applicable to 14,860,284 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $143,775
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.68
- ------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $153,350
Undistributed Net Investment Income (Loss) (2,395)
Undistributed Realized Net Gain (Loss) (2,051)
Unrealized Appreciation (Depreciation) on:
Investment Securities (4,948)
Foreign Currency Transactions (265)
Futures 84
- ------------------------------------------------------
NET ASSETS $143,775
- ------------------------------------------------------
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale may
exist.
+ Moody's Investors Service, Inc. rating. Security is not
rated by Standard & Poor's Corporation.
## Variable or floating rate security-rate disclosed is as
of March 31, 1998.
(1) Amount represents shares held by the Portfolio.
@ Value is less than $500.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
95
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Intermediate Duration Portfolio invests in all sectors and maturities of the
bond market, while limiting average duration to between two and five years.
Miller Anderson & Sherrerd utilizes a value-based investment philosophy to
actively manage the duration and yield curve structure of the Portfolio by
understanding long-term trends in real interest rates and inflation. MAS selects
investments in U.S. Treasuries, agencies, investment-grade corporate bonds,
mortgages, foreign and other fixed-income securities based upon relative value
in the marketplace.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS LEHMAN
INTERMEDIATE INTERMEDIATE
DURATION GOV'T/CORP. INDEX
--------------------------------------
SIX MONTHS 3.62% 3.73%
ONE YEAR 9.64 9.67
SINCE INCEPTION 8.66 8.12
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Intermediate Duration Portfolio commenced operations on 10/3/94. Total
returns are compared to the Lehman Brothers Intermediate Government/Corporate
Bond Index, an unmanaged market index. Returns for periods less than one year
are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (95.5%)
- ----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
March 31, 1998 & POOR'S) (000) (000)!
- ----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (4.5%)
## Government National
Mortgage Association
Various Pools:
6.00%, 10/20/27-
11/20/27 Tsy $ 4,566 $ 4,631
6.50%, 1/20/28 Tsy 647 658
- ----------------------------------------------------
GROUP TOTAL 5,289
- ----------------------------------------------------
AGENCY FIXED RATE MORTGAGES (15.3%)
Federal Home Loan
Mortgage Corporation
May TBA
6.50%, 5/15/28 Agy 2,600 2,571
Federal National
Mortgage Association
May TBA
6.50%,
4/15/28-5/15/28 Agy 15,700 15,508
- ----------------------------------------------------
GROUP TOTAL 18,079
- ----------------------------------------------------
ASSET BACKED CORPORATES (17.1%)
(+) ACC Automobile
Receivables Trust,
Series 97-C A
6.40%, 3/17/04 AAA 463 464
Aegis Auto Receivables
Trust, Series 95-1 A
8.60%, 3/20/02 N/R 44 44
AFG Receivables Trust,
Series:
95-A A
6.15%, 9/15/00 A 164 164
96-B A
6.60%, 4/15/01 A 145 146
97-A A
6.35%, 10/15/02 AAA 277 277
ALPS, Series 94-1 A4 CMO
7.80%, 9/15/04 AA 260 266
Americredit Automobile
Receivables Trust,
Series 96-B A
6.50%, 1/12/02 AAA 185 186
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 360 362
97-D A3
6.20%, 5/15/03 AAA 500 501
98-A A3
5.90%, 11/15/02 AAA 550 548
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
96
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
Associates Manufactured
Housing Pass Through
Certificates,
Series 97-1 A3
6.60%, 6/15/28 AAA $ 650 $ 654
Case Equipment
Loan Trust,
Series:
95-A A
7.30%, 3/15/02 AAA 26 26
95-A B
7.65%, 3/15/02 A 63 63
Chevy Chase Auto
Receivables Trust,
Series:
97-4 A
6.25%, 6/15/04 AAA 372 372
98-1 A
5.97%, 10/20/04 AAA 545 544
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 293 294
97-2 A
6.65%, 10/15/02 AAA 279 281
98-1 A
6.00%, 8/15/03 AAA 700 698
(+) Credit Card
Receivables Trust,
Series 98-IA A
6.478%, 12/22/04 AAA 274 273
Daimler Benz Auto
Grantor Trust, Series
97-A A
6.05%, 3/31/05 AAA 267 267
(+) Federal Mortgage
Acceptance Corp.,
Loan Receivables
Trust,
Series:
96-B A1
7.629%, 11/1/18 A 93 94
97-A A
7.35%, 4/15/19 AAA 348 360
First Merchants Auto
Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 325 325
(+) 97-2 A1
6.85%, 11/15/02 AAA 380 383
First Plus Home Loan
Trust, Series 96-4 A3
6.28%, 3/10/09 AAA 250 250
First Security Auto
Grantor Trust, Series
97-B A
6.10%, 4/15/03 AAA 461 462
Fleetwood Credit Corp,
Series 92-A-A
7.10%, 2/15/07 AAA 508 508
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
Ford Credit Auto
Owner Trust,
Series:
96-A A3
6.50%, 11/15/99 AAA $ 364 $ 365
96-B
6.55%, 2/15/02 A 175 176
97-B A3
6.05%, 4/15/01 AAA 600 601
Ford Credit Auto Grantor
Trust, Series 94-B A
7.30%, 10/15/99 AAA 286 286
General Electric Home
Equity Loan
Asset-Backed
Certificates, Series
91-1 B
8.70%, 9/15/11 AAA 375 382
Green Tree Lease
Finance, Series 97-1
A3
6.17%, 9/20/05 AAA 407 407
Greenwich Capital
Acceptance, Inc.,
Series 95-B A1
6.00%, 8/10/20 AAA 211 211
(+)++ Health Care
Receivables
Securitization
Program, Series 97-1 A
6.815%, 7/1/01 AAA 250 253
Honda Auto Receivables
Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 458 457
97-B A
5.95%, 5/15/03 AAA 511 511
IBM Credit Receivables
Lease Asset Master
Trust, Series 93-1 A
4.55%, 11/15/00 AAA 49 49
(+) Long Beach
Acceptance Auto
Grantor Trust,
Series:
97-1 A
6.85%, 10/25/03 AAA 323 323
97-2 A
6.69%, 9/25/04 AAA 230 231
98-1 A
6.19%, 1/25/04 AAA 268 267
MMCA Automobile Trust,
Series 97-1 A3
6.08%, 5/15/01 AAA 375 376
Navistar Financial Corp.
Owner Trust,
Series 97-B A3
6.20%, 3/15/01 AAA 545 547
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA 735 736
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
97
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(cont'd) & POOR'S) (000) (000)!
- ----------------------------------------------------
Old Stone Credit Corp.
Home Equity Trust
Series 92-3 B1
6.35%, 9/25/07 AAA $ 49 $ 49
Olympic Automobile
Receivables Trust,
Series:
94-A1
5.65%, 1/15/01 AAA 76 75
94-B A2
6.85%, 6/15/01 AAA 47 48
94-B B
6.95%, 6/15/01 AAA 154 155
Onyx Acceptance
Grantor Trust,
Series:
94-1 A
6.90%, 1/17/00 AAA 91 91
97-2 A
6.35%, 10/15/02 AAA 319 320
97-3 A
6.35%, 1/15/04 AAA 311 313
Premier Auto Trust,
Series 95-4 A4
6.00%, 5/6/00 AAA 572 572
(+) Rental Car Finance
Corp., Series 97-1 A2
6.45%, 4/25/03 AA 450 451
(+) Securitized Multiple
Asset Rated Trust,
Series 98-1 A1
7.45%, 3/16/06 A 373 373
(+) Team Fleet Financing
Corp., Series 97-1 A
7.35%, 5/15/03 A- 300 310
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 577 579
97-B A2
6.70%, 6/8/03 AAA 550 557
USAA Auto Loan Grantor
Trust, Series 97-1 A
6.00%, 5/15/04 AAA 470 470
Western Financial Auto
Grantor Trust,
Series:
93-2 A2
4.70%, 10/1/98 AAA 3 3
94-1 A1
5.10%, 6/1/99 AAA 49 49
WFS Financial Owner
Trust, Series 97-C A3
6.01%, 3/20/02 AAA 380 380
World Omni Automobile
Lease Securitization
Corp., Series 97-B A2
6.08%, 11/25/03 AAA $ 400 $ 400
- ----------------------------------------------------
GROUP TOTAL 20,185
- ----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (0.8%)
Federal Home Loan
Mortgage Corporation,
Series:
93-149 O PO REMIC
8/25/23 Agy 33 24
1632-SA Inv Fl REMIC
5.229%, 11/15/23 Agy 65 58
1709-H PO REMIC
1/15/24 Agy 14 9
1813-K PO REMIC
2/15/24 Agy 15 12
1844-PC PO REMIC
3/15/24 Agy 30 22
1887-I PO REMIC
10/15/22 Agy 15 11
Federal National
Mortgage Association,
Series:
93-205 G PO REMIC
9/25/23 Agy 14 10
93-235 H PO REMIC
9/25/23 Agy 4 3
96-11 V PO REMIC
9/25/23 Agy 548 410
96-14 PC PO
12/25/23 Agy 25 17
96-46 PB PO REMIC
9/25/23 Agy 30 23
96-54 O PO
11/25/23 Agy 19 13
97-3 E PO REMIC
12/25/23 Agy 75 57
287 1 PO
12/17/07 Agy 476 331
- ----------------------------------------------------
GROUP TOTAL 1,000
- ----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (3.6%)
Bear Stearns Mortgage
Securities, Inc.,
Series:
## 96-4 AI10
8.125%, 9/25/27 AAA 50 52
96-9 AI11
8.00%, 12/25/27 AAA 50 52
Citicorp Mortgage
Securities, Inc.,
Series 93-9 A1
7.00%, 3/25/20 AAA 21 21
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
98
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
ICI Funding Corp.,
Series 97-2 1A8
8.00%, 7/25/28 AAA $ 348 $ 361
+ Independent National
Mortgage Corp.,
Series 94-O B1
7.875%, 9/25/24 A2 96 101
Residential Accredit
Loans, Inc.,
Series:
97-QS2 A8
7.75%, 3/25/27 AAA 75 77
97-QS3 A8
7.75%, 4/25/27 AAA 150 155
97-QS10 A4
7.25%, 10/25/27 AAA 548 551
98-QS2 A7
7.00%, 2/25/28 AAA 700 697
98-QS4 AI5
7.00%, 3/25/28 AAA 750 747
Residential Asset
Securitization Trust,
Series:
96-A11 A9
7.75%, 2/25/27 AAA 125 129
97-A9 A5
7.25%, 9/15/27 AAA 523 526
98-A1 A4 REMIC
6.75%, 3/15/28 AAA 750 737
- ----------------------------------------------------
GROUP TOTAL 4,206
- ----------------------------------------------------
COMMERCIAL MORTGAGES (9.2%)
+ American Southwest
Financial Securities
Corp.,
Series 95-C1 A1B
7.40%, 11/17/04 Aaa 50 52
Asset Securitization
Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 140 147
95-MD4 A1
7.10%, 8/13/29 AAA 700 728
96-MD6 A1B
6.88%, 11/13/26 AAA 250 258
96-MD6 A1C
7.04%, 11/13/26 AAA 100 104
97-D5 A1B
6.66%, 2/14/41 AAA 225 230
+## 97-D5 PS1 IO
1.563%, 2/14/41 Aaa 2,046 221
(+) Carousel Center
Finance, Inc., Series
1 C
7.527%, 11/15/07 BBB+ 78 79
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
Chase Commercial
Mortgage Securities
Corp., Series 96-2 B
6.90%, 10/19/06 AA $ 100 $ 102
CS First Boston Mortgage
Securities Corp.,
Series 97-C1 A1C
7.24%, 6/20/29 AAA 775 814
DLJ Commercial
Mortgage Corp.,
Series 98-CF1 A1B
6.41%, 2/15/08 AAA 650 650
(+) DLJ Mortgage
Acceptance Corp.,
Series:
96-CF2 A1B
7.29%, 11/12/21 AAA 85 89
++## 96-CF2 S IO
1.640%, 11/12/21 AAA 623 52
97-CF1 A1B
7.60%, 4/15/07 AAA 300 323
## 97-CF1 S IO
1.095%, 3/15/17 AAA 1,292 82
97-CF2 A1B
6.82%, 9/15/07 AAA 775 796
Federal National
Mortgage Association
Series 93-M2 B IO
2.572%, 7/25/03 Agy 715 25
First Union-Lehman
Brothers Commercial
Mortgage,
Series:
+ 97-C1 A2
7.30%, 12/18/06 Aaa 375 394
97-C2 A3
6.65%, 12/18/07 AAA 375 381
(+) Forum Finance
7.125%, 5/15/04 AA 250 256
+ GMAC Commercial
Mortgage Securities,
Inc.,
Series:
97-C1 A2
6.853%, 9/15/06 Aaa 500 513
97-C2 A3
6.566%, 11/15/07 Aaa 425 430
## 97-C2 X IO
1.273%, 4/15/27 Aaa 3,650 277
+ GS Mortgage Securities
Corp. II,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 350 363
## 97-GL X2 IO
0.930%, 7/13/30 Aaa 996 51
J.P. Morgan Commercial
Mortgage Finance
Corp., Series 97-C5 A2
7.069%, 9/15/29 AAA 325 341
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
99
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------
+## LB Commercial
Conduit Mortgage
Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa $ 96 $ 101
98-C1 IO
1.199%, 2/18/28 Aaa 4,600 308
Lehman Large Loan,
Series 97-LLI A1
6.79%, 6/12/04 AAA 545 557
Merrill Lynch Mortgage
Investors, Inc.,
Series:
## 95-C1 IO
2.185%, 5/25/15 AAA 2,520 122
96-C1 A3
7.42%, 4/25/28 AAA 100 105
96-C2 A2
6.82%, 11/21/28 AAA 345 353
++## 96-C2 IO
1.538%, 11/21/28 AAA 441 37
+ Midland Realty
Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 100 105
Mortgage Capital
Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 150 153
+ 97-MC1 A3
7.288%, 7/20/27 Aaa 375 393
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 450 456
(+) Park Avenue Finance
Corp., Series 97-C1 A1
7.58%, 5/12/07 AA 196 207
+ Salomon Brothers
Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 150 155
- ----------------------------------------------------
GROUP TOTAL 10,810
- ----------------------------------------------------
ENERGY (0.1%)
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 100 104
- ----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
FINANCE (10.8%) Allstate Corp.
5.875%, 6/15/98 A 125 125
American General Finance
Corp., Series D
6.35%, 9/19/00 A+ 270 274
(+) Anthem Insurance
Cos., Inc., Series A
9.00%, 4/1/27 BBB+ 225 241
Associates Corp. of
North America,
Series H
6.73%, 3/27/03 AA- $ 475 $ 486
(+) BankAmerica
Institutional, Series
A
8.07%, 12/31/26 A- 455 485
Bankers Trust New York
Corp.
6.625%, 7/30/99 A 150 151
Barclays American Corp.
7.875%, 8/15/98 AA 125 126
Beneficial Corp., Series
H
6.575%, 12/16/02 A 175 177
(+) BT Institutional
Capital Trust, Series
A
8.09%, 12/1/26 BBB+ 500 519
Chase Manhattan Bank
5.875%, 8/4/99 A+ 575 575
Chrysler Financial Corp.
6.375%, 1/28/00 A- 200 201
6.62%, 6/16/00 A 325 329
CIT Group Holdings
6.375%, 10/1/02 AA- 400 404
Countrywide Funding
Corp.
6.05%, 3/1/01 A 75 75
6.55%, 4/14/00 A 175 176
Series A
7.32%, 8/15/00 A 175 179
(+) EOP Operating LP
6.625%, 2/15/05 BBB 440 438
(+) Equitable Life
Assurance Society of
the U.S., Series 1A
6.95%, 12/1/05 A 250 256
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 300 347
(+) First Chicago NBD
Corp., Series A
7.95%, 12/1/26 A- 675 708
(+) First Hawaiian Bank,
Series A
6.93%, 12/1/03 A 350 358
First Union
Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 400 424
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 125 130
7.45%, 7/1/04 A 100 104
(+) Florida Windstorm
6.70%, 8/25/04 A- 200 201
Ford Motor Credit Corp.
7.47%, 7/29/99 A+ 75 76
8.375%, 1/15/00 A 75 78
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
100
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
General Motors
Acceptance Corp.,
Medium Term Note
6.65%, 5/24/00 A $ 100 $ 101
6.75%, 6/10/02 A 100 102
Homeside Lending, Inc.
6.875%, 6/30/02 A+ 441 450
Household Finance Corp.
6.08%, 3/8/06 A 408 405
(+) Hyatt Equities LLC
7.00%, 5/15/02 BBB+ 340 346
Lehman Brothers Holdings
Corp.
6.50%, 7/18/00 A 375 377
6.625%, 11/15/00 A 100 101
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- 325 323
NB Capital Trust
8.25%, 4/15/27 A- 250 274
PNC Institutional
Capital, Series A
7.95%, 12/15/26 BBB+ 300 314
(+) Prime Property
Funding II
6.80%, 8/15/02 A 355 359
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 250 266
B
8.035%, 3/15/27 A 245 263
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 235 250
8.60%, 2/1/02 BBB+ 195 211
Wells Fargo Capital,
Series:
(+) A
8.125%, 12/1/26 BBB 100 106
B
7.95%, 12/1/26 BBB+ 250 261
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 247 254
96 WFP-D
6.95%, 9/1/13 AA- 350 362
- ----------------------------------------------------
GROUP TOTAL 12,768
- ----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
FLOATING RATE NOTES (1.0%)
## Student Loan
Marketing Association,
Series:
95-1 A1
5.83%, 4/26/04 AAA $ 648 $ 647
96-1 A1
5.815%, 7/26/04 AAA 530 529
- ----------------------------------------------------
GROUP TOTAL 1,176
- ----------------------------------------------------
FOREIGN GOVERNMENT (4.9%)
Government of Germany
7.00%, 11/25/99 Agy DEM 10,100 5,716
- ----------------------------------------------------
INDUSTRIALS (0.5%)
(+) EES Coke Battery
Co., Inc.
7.125%, 4/15/02 BBB $ 189 191
Philip Morris Cos., Inc.
6.375%, 2/1/06 A 55 54
7.00%, 7/15/05 A 185 189
Scotia Pacific Holding
Co.
7.95%, 7/20/15 BBB 80 84
Sears Roebuck Acceptance
Corp.
6.86%, 8/6/01 A- 70 72
- ----------------------------------------------------
GROUP TOTAL 590
- ----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.1%)
## Resolution Trust
Corp., Series 92-5 C
8.617%, 1/25/26 AA 74 74
- ----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (0.7%)
Federal National
Mortgage Association,
Series:
96-20 E PO
11/25/22 Agy 250 142
249 1 PO
10/25/23 Agy 323 227
260 1 PO
4/1/24 Agy 54 41
263 1 PO
5/25/24 Agy 60 42
282 1 PO
9/15/25 Agy 479 353
- ----------------------------------------------------
GROUP TOTAL 805
- ----------------------------------------------------
TAXABLE MUNICIPAL (0.3%)
New York State Power
Authority Revenue
Bonds, Series B
6.11%, 2/15/11 AA- 400 398
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
101
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------
U.S. TREASURY SECURITIES (24.1%)
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy $ 2,497 $ 2,421
3.625%, 7/15/02
(Inflation Indexed) Tsy 5,523 5,466
6.375%, 3/31/01 Tsy 18,250 18,609
!! 6.875%, 7/31/99 Tsy 750 762
7.50%, 2/15/05 Tsy 1,050 1,155
- ----------------------------------------------------
GROUP TOTAL 28,413
- ----------------------------------------------------
UTILITIES (0.1%)
(+) Edison Mission
Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 100 104
- ----------------------------------------------------
YANKEE (2.4%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 381 382
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 300 269
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 185 170
(+) Israel Electric
Corp., Ltd
7.25%, 12/15/06 A- 60 61
7.75%, 12/15/27 A- 265 269
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 250 250
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 325 303
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 350 367
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 365 378
Sony Corp
6.125%, 3/4/03 A 325 324
- ----------------------------------------------------
GROUP TOTAL 2,773
- ----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$111,978) 112,490
- ----------------------------------------------------
PREFERRED STOCK (0.5%)
- ----------------------------------------------------
SHARES
------
MORTGAGE-OTHER (0.5%)
(+)+ Home Ownership
Funding Corp.,
13.331% (Cost $652) Aaa 650 624
- ----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- ----------------------------------------------------
Bankers Trust Co., terminating 10/15/99, to receive
on 10/15/99 the excess, as measured on 10/15/98,
of 12 month LIBOR over 6.34% multiplied by the
notional amount.
(Premium Paid $85) A- $ 25,000 $ 23
- ----------------------------------------------------
CASH EQUIVALENTS (18.5%)
- ----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (13.7%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
10.50%, 5/1/19-
10/1/19 Agy 108 118
11.00%, 7/1/13 Agy 111 125
11.50%, 3/1/13 Agy 173 197
Gold Pools:
9.50%, 12/1/22 Agy 485 532
10.00%, 6/1/17 Agy 405 449
Series:
## 1386-D REMIC
6.25%, 10/15/07 Agy 416 418
Federal National
Mortgage Association
Conventional Pools:
10.00%, 2/1/21-1/1/27 Agy 315 350
10.50%, 12/1/10 Agy 93 104
12.00%, 8/1/12 Agy 44 51
Series:
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 414 415
## 97-43 FM REMIC
6.25%, 7/18/27 Agy 354 356
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 213 214
## 97-76 FM
6.20%, 9/17/27 Agy 377 379
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 1,350 1,353
Government National
Mortgage Association
Adjustable Rate Mortgages:
7.00%,
3/20/25-7/20/25 Tsy 1,271 1,296
7.375%, 4/20/25-
6/20/25 Tsy 2,475 2,523
Various Pools:
9.50%, 12/15/17-
12/15/21 Tsy 1,349 1,472
10.00%, 1/15/16-
12/25/26 Tsy 2,743 3,058
10.50%, 3/15/06-
2/15/18 Tsy 293 330
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
102
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------
11.00%, 3/15/10-
8/15/27 Tsy $ 1,857 $ 2,128
11.50%, 6/15/13 Tsy 108 125
12.00%, 12/15/12-
5/15/14 Tsy 88 102
12.50%, 12/15/10 Tsy 38 45
- ----------------------------------------------------
GROUP TOTAL 16,140
- ----------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98,
to be repurchased at $5,623,
collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued
at $5,639 5,622 5,622
- ----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $21,710) 21,762
- ----------------------------------------------------
TOTAL INVESTMENTS (114.5%) (Cost $134,425) 134,899
- ----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-14.5%)
Dividends Receivable 22
Interest Receivable 895
Receivable for Investments Sold 17,875
Receivable for Fund Shares Sold 161
Unrealized Gain on Forward Foreign
Currency Contracts 80
Other Assets 2
Payable for Investments Purchased (35,973)
Payable for Fund Shares Redeemed (8)
Payable for Investment Advisory Fees (96)
Payable for Administrative Fees (8)
Payable for Trustees' Deferred
Compensation Plan-Note F (2)
Payable for Daily Variation on Futures
Contracts (7)
Other Liabilities (14)
--------
(17,073)
- ----------------------------------------------------
NET ASSETS (100%) $117,826
- ----------------------------------------------------
<PAGE>
VALUE
(000)!
====================================================
INSTITUTIONAL CLASS
- ----------------------------------------------------
NET ASSETS
Applicable to 11,268,171 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $117,826
- ----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.46
- ----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $115,379
Undistributed Net Investment Income (Loss) 1,706
Undistributed Realized Net Gain (Loss) 357
Unrealized Appreciation (Depreciation) on:
Investment Securities 474
Foreign Currency Transactions 77
Futures (167)
- ----------------------------------------------------
NET ASSETS $117,826
- ----------------------------------------------------
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for futures contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
CMO Collateralized Mortgage Obligation
DEM German Mark
Inv Fl Inverse Floating Rate-Interest rate fluctuates
with an inverse relationship to an associated interest
rate. Indicated rate is the effective rate at
March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
103
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Multi-Market Fixed Income Portfolio combines a broad array of both domestic
and international fixed income securities to maximize active management
opportunities within a single fixed-income strategy. The Portfolio will include
the most attractively valued securities from four major areas: domestic
investment-grade bonds, international bonds, high-yield bonds, and emerging
markets debt. MAS constructs a diversified fund with a maturity and duration
structure reflecting long-term views on interest rates and inflation, and
controls risk through diversification within and among these four major areas.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS SALOMON SALOMON WORLD
MULTI-MARKET BROAD GOV'T BOND
FIXED INCOME INDEX EX-U.S. INDEX
--------------------------------------
SINCE INCEPTION...... 3.14% 4.20% (0.86)%
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments. High-yield fixed income securities, otherwise known as "junk
bonds," represent a much greater risk of default and tend to be more volatile
than higher-rated bonds.
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.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Multi-Market Fixed Income Portfolio commenced operations on 10/1/97. Total
returns are compared to the Salomon Broad Investment Grade Index and the Salomon
World Government Bond Ex-U.S. Index, both unmanaged market indices. Returns for
periods less than one year are cumulative.
<PAGE>
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (92.1%)
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (1.6%)
## Government National
Mortgage Association
Various Pools:
6.00%, 7/20/27 Tsy $ 869 $ 883
- -----------------------------------------------------
ASSET BACKED CORPORATES (2.9%)
Advanta Mortgage Loan
Trust, Series 97-3 A2
6.61%, 4/25/12 AAA 95 95
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 45 46
94-1 C2 CMO
9.35%, 9/15/04 BBB 40 40
Arcadia Automobile
Receivables Trust,
Series 97-C A4
6.375%, 1/15/03 AAA 115 116
CIT Group Home Equity
Loan Trust,
Series 97-1 A3
6.25%, 9/15/11 AAA 100 100
Commercial Financial
Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A 97 97
(+) Credit Card
Receivables Trust,
Series 98-IA A
6.478%, 12/22/04 AAA 199 199
First Plus Home Loan
Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 100 100
97-3 A3
6.57%, 10/10/10 AAA 100 100
Honda Auto Receivables
Grantor Trust, Series
97-A A
5.85%, 2/15/03 AAA 168 168
(+) Long Beach Acceptance
Auto Grantor Trust,
Series:
+ 97-1 B
14.22%, 10/26/03 Ba3 208 208
97-2 A
6.69%, 9/25/04 AAA 84 84
(+) Securitized Multiple
Asset Rated Trust,
Series 97-6 A1
7.71%, 4/15/06 A 148 149
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
104
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Security Pacific Home
Equity Trust,
Series 91-A B
10.50%, 3/10/06 A+ $ 15 $ 15
WFS Financial Owner
Trust, Series 97-C A3
6.10%, 3/20/02 AAA 130 130
- -----------------------------------------------------
GROUP TOTAL 1,647
- -----------------------------------------------------
ASSET BACKED MORTGAGES (0.5%)
Advanta Mortgage Loan
Trust, Series 96-2 A5
8.08%, 6/25/27 AAA 65 68
Champion Home Equity Loan
Trust,
Series 96-2 A4
8.00%, 9/25/28 AAA 50 52
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 1,150 28
96-3 A YMA
10/25/26 N/R 994 1
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 I IO
1.10%, 1/15/28 AAA 843 22
(+)96-4 A11 I YMA
1/15/28 AAA 1,002 1
96-4 A12 I IO
1.05%, 1/15/28 AAA 228 6
Sec.@ 96-4 A12 I YMA
1/15/28 (acquired
10/10/97, cost $0) AAA 219 --
97-1 A10 I IO
1.10%, 3/15/28 AAA 1,037 27
(+)97-1 A10 I YMA
3/15/28 AAA 1,195 2
IMC Home Equity Loan
Trust, Series 96-3 A7
8.05%, 8/25/26 AAA 50 52
- -----------------------------------------------------
GROUP TOTAL 259
- -----------------------------------------------------
CABLE (1.1%) CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 330 340
(+) Lenfest
Communications, Inc.
7.625%, 2/15/08 BB+ 55 55
Rogers Cablesystems Ltd.,
Series B
10.00%, 3/15/05 BB+ 215 241
- -----------------------------------------------------
GROUP TOTAL 636
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY
COLLATERAL SERIES (0.8%)
Federal Home Loan
Mortgage Corporation,
Series:
1398-I Inv Fl REMIC
12.18%, 10/15/07 Agy $ 20 $ 24
1415-S Inv Fl IO
18.813%, 11/15/07 Agy 22 10
1476-S Inv Fl IO REMIC
PAC
4.287%, 2/15/08 Agy 203 23
1485-S Inv Fl IO REMIC
3.85%, 3/15/08 Agy 194 18
1600-SA Inv Fl IO REMIC
2.25%, 10/15/08 Agy 423 23
1709-H PO REMIC
1/15/24 Agy 5 3
1813-K PO REMIC
2/15/24 Agy 5 4
1844-PC PO REMIC
3/15/24 Agy 10 7
1887-I PO REMIC
10/15/22 Agy 5 4
1950-SC Inv Fl IO
2.25%, 10/15/22 Agy 10 1
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl
28.777%, 9/25/20 Agy 9 14
92-186 S Inv Fl IO
3.287%, 10/25/07 Agy 380 31
93-149 O PO REMIC
8/25/23 Agy 12 9
93-205 G PO REMIC
9/25/23 Agy 33 24
93-235 H PO REMIC
9/25/23 Agy 12 10
96-11 V PO REMIC
9/25/23 Agy 88 65
96-14 PC PO
12/25/23 Agy 10 7
96-37 H PO REMIC
8/25/23 Agy 61 50
96-46 PB PO REMIC
9/25/23 Agy 10 8
96-54 O PO
11/25/23 Agy 10 7
96-68 SC Inv Fl IO
REMIC
2.444%, 1/25/24 Agy 90 11
@ 97-30 Inv Fl IO REMIC
1.875%, 7/25/22 Agy 5 --
287 1 PO
12/17/07 Agy 138 96
G92-53 S Inv Fl IO
REMIC
32.344%, 9/25/22 Agy 18 13
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
105
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Government National
Mortgage Association,
Series:
96-12 S Inv Fl IO REMIC
2.813%, 6/16/26 Tsy $ 15 $ 1
96-13 S Inv Fl IO REMIC
3.40%, 7/16/11 Tsy 8 1
96-17 S Inv Fl IO REMIC
2.863%, 8/16/26 Tsy 8 1
+ Kidder Peabody Mortgage
Assets Trust,
Series:
87-B PO 4/22/18 Aaa 1 1
@ 87-B IO
9.50%, 4/22/18 Aaa 1 --
- -----------------------------------------------------
GROUP TOTAL 466
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-NON-AGENCY
COLLATERAL SERIES (1.1%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 46 48
Capstead Mortgage Corp.
7.25%, 9/15/27 AAA 90 90
@ Citicorp Mortgage
Securities, Inc.,
Series 93-9 A1
7.00%. 3/25/20 AAA (2)-- --
Sec.## Kidder Peabody
Funding Corp., Series
92-4 B2
8.467%, 5/28/22
(acquired 10/10/97,
cost $29) N/R 29 29
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 20 22
Prudential Home Mortgage
Securities Co., Inc.,
Series 90-5 A3
9.50%, 5/25/05 AAA 4 4
Residential Accredit
Loans, Inc.,
Series:
+ 97-QS1 A11
7.50%, 2/25/27 Aaa 80 81
97-QS2 A8
7.75%, 3/25/27 AAA 40 41
97-QS3 A8
7.75%, 4/25/27 AAA 90 93
97-QS4 A7
7.75%, 5/25/27 AAA 95 98
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Residential Funding
Mortgage Securities
Co., Inc.,
Series 94-S1 A19
6.75%, 1/25/24 AAA $ 85 $ 84
Rural Housing Trust,
Series 87-1 B1 REMIC
3.33%, 10/1/28 A- 32 31
- -----------------------------------------------------
GROUP TOTAL 621
- -----------------------------------------------------
COMMERCIAL MORTGAGES (7.9%)
+ American Southwest
Financial Securities
Corp.,
Series 95-C1 A1B
7.40%, 11/17/04 Aaa 60 62
Asset Securitization
Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 439 457
(+) 96-D3 A1C
7.40%, 10/13/26 AAA 60 64
+ 96-MD6 A1C
7.04%, 11/13/26 Aaa 60 62
(+) Crystal Run
Properties, Series A
7.393%, 8/15/11 AA 100 107
CS First Boston Mortgage
Securities Corp.,
Series 97-C1 A1C
7.24%, 6/20/29 AAA 415 436
DLJ Commercial Mortgage
Corp.,
Series 98-CF1 A1B
6.41%, 2/15/08 AAA 350 350
DLJ Mortgage Acceptance
Corp.,
Series:
(+) 95-CF2 A3
7.05%, 12/17/27 A 25 25
## 95-CF2 S2 IO
1.645%, 12/17/27 BBB 360 31
(+) 96-CF1 A1B
7.58%, 3/13/28 AAA 40 43
(+) 96-CF2 A1B
7.29%, 11/12/21 AAA 15 16
(+)++## 96-CF2 S IO
1.640%, 11/12/21 AAA 286 24
(+) 97-CF1 A1B
7.60%, 4/15/07 AAA 85 91
(+) 97-CF1 S IO
1.097%, 3/15/17 AAA 560 36
(+) 97-CF2 A1B
6.82%, 9/15/07 AAA 400 411
First Union-Lehman
Brothers Commercial
Mortgage,
Series 97-C2 A3
6.65%, 12/18/07 AAA 200 203
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
106
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
+ GMAC Commercial
Mortgage Securities,
Inc.,
Series:
96-C1 X2 IO
1.868%, 3/15/21 Aaa $ 261 $ 22
97-C1 A2
6.853%, 9/15/06 Aaa 115 118
97-C2 A3
6.566%, 11/15/07 Aaa 275 278
## 97-C2 X IO
1.273%, 4/15/27 Aaa 2,300 175
+ GS Mortgage Securities
Corp. II,
Series 97-GL A2D
6.94%, 7/13/30 Aaa 115 119
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 110 116
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 96 101
98-C1 IO
1.199%, 2/18/28 Aaa 2,400 160
Merrill Lynch Mortgage
Investors, Inc.,
Series:
96-C1 A3
7.42%, 4/25/28 AAA 85 89
96-C2 A2
6.82%, 11/21/28 AAA 30 31
++## 96-C2 IO
1.538%, 11/21/28 AAA 299 25
+ Midland Realty
Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 50 52
Mortgage Capital Funding,
Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 100 102
+ 97-MC1 A3
7.288%, 7/20/27 Aaa 105 110
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 250 253
Nomura Asset Securities
Corp., Series 94-MD1 A3
8.026%, 3/15/18 N/R 35 37
(+) Park Avenue Finance
Corp., Series 97-C1 A1
7.58%, 5/12/07 N/R 98 103
+ Salomon Brothers
Mortgage Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 100 104
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
++## Structured Asset
Securities Corp.,
Series:
96-CLF X1 IO
1.42%, 2/25/28 AAA $ 442 $ 24
96-CFL X1A IO
1.431%, 2/25/28 AAA 408 10
96-CFL X2 IO
1.225%, 2/25/28 AAA 114 3
+ Town & Country Funding
Corp.,
5.85%, 8/15/00 Aa2 5 5
- -----------------------------------------------------
GROUP TOTAL 4,455
- -----------------------------------------------------
COMMUNICATIONS (2.7%)
Comcast Cellular Holdings
Corp., Series B
9.50%, 5/1/07 BB+ 120 127
+# Dial Call
Communications, Inc.
0.00%, 12/15/05 B2 170 168
# Intermedia
Communications, Inc.
0.00%, 7/15/07 B 485 365
# Nextel Communications,
Inc.
0.00%, 8/15/04 CCC+ 235 226
(+)# Qwest Communications
International, Inc.
0.00%, 2/1/08 B+ 245 173
(+)+# RCN Corp.
0.00%, 2/15/08 B3 175 109
# Teleport Communications
Group, Inc.
0.00%, 7/1/07 B+ 430 370
- -----------------------------------------------------
GROUP TOTAL 1,538
- -----------------------------------------------------
EMERGING MARKETS (0.3%)
# PTC International
Finance B.V.
0.00%, 7/1/07 B+ 205 144
- -----------------------------------------------------
ENERGY (0.5%)
(+) ESI Tractebell
Acquisition Corp.
7.99%, 12/30/11 BB 100 99
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 100 104
Mobile Energy Services
8.665%, 1/1/17 BBB- 91 97
- -----------------------------------------------------
GROUP TOTAL 300
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
107
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
FINANCE (6.3%)
(+) Anthem Insurance
Cos., Inc., Series A
9.00%, 4/1/27 BBB+ $ 130 $ 139
(+) BankAmerica
Institutional, Series A
8.07%, 12/31/26 A- 250 266
(+) BT Institutional
Capital Trust, Series A
8.09%, 12/1/26 BBB+ 125 130
(+) EOP Operating LP
6.625%, 2/15/05 BBB 160 160
(+) First Chicago NBD
Corp., Series A
7.95%, 12/1/26 A- 250 262
First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ 180 191
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 100 104
(+) Florida Windstorm
6.70%, 8/25/04 A- 145 146
## Fuji JGB Investment
LLC, Series A
9.87%, 12/31/49 BB+ 180 178
(+)## IBJ Preferred Cap
Co. LLC, Series A
8.79%, 12/29/49 BBB- 175 168
J.P. Morgan Capital Trust
I
7.54%, 1/15/27 AA- 105 107
NB Capital Trust
8.25%, 4/15/27 A- 100 110
PNC Institutional
Capital, Series A
7.95%, 12/15/26 BBB+ 135 142
(+) Prime Property
Funding II
6.80%, 8/15/02 A 215 217
7.00%, 8/15/04 A 50 51
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 150 167
(+)## SB Treasury Co.
LLC, Series A
9.40%, 12/29/49 BBB- 160 165
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 100 106
B
8.035%, 3/15/27 A 100 107
Washington Mutual Capital
8.375%, 6/1/27 BBB- 35 38
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 150 159
(+) Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB $ 125 $ 133
(+) World Financial
Properties, Series 96
WFP-D
6.95%, 9/1/13 AA- 250 258
- -----------------------------------------------------
GROUP TOTAL 3,504
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
FOREIGN GOVERNMENTS (18.8%)
Commonwealth of Australia
10.00%, 2/15/06 AAA AUD 2,250 1,895
Government of France
O.A.T.
8.50%, 3/28/00 AAA FRF 7,180 1,253
Government of Germany
+5.75%, 8/22/00 Aaa DEM 1,775 994
6.00%, 1/5/06 Agy 1,500 871
7.50%, 9/9/04 AAA 1,725 1,073
International Bank for
Reconstruction &
Development
4.75%, 12/20/04 BB+ JPY 85,000 768
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 930,000 655
Republic of South Africa
13.00%, 8/31/10 BBB+ ZAR 1,150 226
Swedish Government
6.00%, 2/9/05 AAA SEK 7,600 998
13.00%, 6/15/01 AA+ 6,200 956
United Kingdom Treasury
Bill
8.50%, 7/16/07 AAA GBP 435 859
- -----------------------------------------------------
GROUP TOTAL 10,548
- -----------------------------------------------------
GAMING (0.3%)
Grand Casinos, Inc.
10.125%, 12/1/03 BB $ 155 169
- -----------------------------------------------------
GENERAL INDUSTRIAL (0.1%)
Geberit International SA
10.125%, 4/15/07 B+ DEM 100 61
- -----------------------------------------------------
HEALTHCARE (0.2%)
Tenet Healthcare Corp.
8.625%, 1/15/07 B+ $ 125 130
- -----------------------------------------------------
HOTELS, LODGING & RESTAURANTS (0.2%)
HMC Acquisition
Properties
9.00%, 12/15/07 BB- 85 90
- -----------------------------------------------------
INDUSTRIALS (2.3%)
Columbia/HCA Healthcare
7.58%, 9/15/25 BBB 240 218
News America Holdings
7.75%, 1/20/24 BBB- 185 194
8.875%, 4/26/23 BBB- 525 616
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 125 128
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
108
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Rhone-Poulenc Rorer,
Inc., Series 92-A 3
8.62%, 1/5/21 BBB- $ 60 $ 66
Scotia Pacific Holding
Co.
7.95%, 7/20/15 BBB 52 55
- -----------------------------------------------------
GROUP TOTAL 1,277
- -----------------------------------------------------
MEDIA & ENTERTAINMENT (0.8%)
Paramount Communications,
Inc.
8.25%, 8/1/22 BB+ 175 180
Viacom, Inc.
8.00%, 7/7/06 BB- 240 245
- -----------------------------------------------------
GROUP TOTAL 425
- -----------------------------------------------------
METALS (0.5%)
Impress Metal Packaging
Holdings
9.875%, 5/29/07 B DEM 185 106
(+) Murrin Murrin
Holdings Ltd.
9.375%, 8/31/07 BB- $ 180 179
- -----------------------------------------------------
GROUP TOTAL 285
- -----------------------------------------------------
PACKAGING (0.9%)
American Standard Cos.
7.375%, 2/1/08 BB- 155 152
Integrated Health
Services, Series A
9.50%, 9/15/07 B 200 213
Revlon Worldwide, Series
B Zero Coupon 3/15/01 B- 165 126
- -----------------------------------------------------
GROUP TOTAL 491
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.1%)
sec. Household Bank,
Series 85-1 CMO
7.94%, 5/1/02
(acquired 10/10/97,
cost $2) N/R 2 1
sec.## Magnolia Federal
Bank, Series 84-2
9.12%, 10/1/07
(acquired 10/10/97,
cost $6) N/R 6 6
Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA 30 30
Ryland Acceptance Corp.
IV, Series 79-A
6.65%, 7/1/11 AA 33 32
- -----------------------------------------------------
GROUP TOTAL 69
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
RETAIL (1.3%)
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB $ 68 $ 63
94-K1 A1
7.60%, 8/15/07 BB 178 175
94-K2 A2
9.35%, 8/15/19 BB 130 135
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 140 144
Southland Corp.
5.00%, 12/15/03 BB+ 210 184
- -----------------------------------------------------
GROUP TOTAL 701
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (0.7%)
Federal National Mortgage
Association,
Series:
249 1 PO
10/25/23 Agy 281 197
260 1 PO
4/1/24 Agy 43 33
282 1 PO
9/1/25 Agy 192 142
@ First Boston Mortgage
Securities Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA (2)-- --
- -----------------------------------------------------
GROUP TOTAL 372
- -----------------------------------------------------
SUPERMARKETS (0.5%)
Fred Meyer, Inc.
7.375%, 3/1/05 BB+ 300 301
- -----------------------------------------------------
TECHNOLOGY (0.4%)
Advanced Micro Devices,
Inc.
11.00%, 8/1/03 BB- 200 214
- -----------------------------------------------------
TRANSPORTATION (0.3%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 185 185
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
109
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
U.S. TREASURY SECURITIES (19.5%)
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy $ 1,606 $ 1,557
3.625%, 7/15/02
(Inflation Indexed) Tsy 1,007 997
3.625%, 1/15/08
(Inflation Indexed) Tsy 1,225 1,210
5.625%, 2/28/01 Tsy 1,000 1,000
!! 7.125%, 9/30/99 Tsy 720 736
7.125%, 2/29/00 Tsy 5,275 5,419
- -----------------------------------------------------
GROUP TOTAL 10,919
- -----------------------------------------------------
UTILITIES (1.0%) CalEnergy Co., Inc.
7.63%, 10/15/07 BB+ 260 260
CMS Energy Corp., Series
B
7.375%, 11/15/00 BB 180 182
(+) Edison Mission Energy
Funding Corp., Series B
7.33%, 9/15/08 BBB 100 103
- -----------------------------------------------------
GROUP TOTAL 545
- -----------------------------------------------------
YANKEE (18.5%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 138 139
Asia Pulp & Paper Co.,
Ltd., Series A
12.00%, 2/15/04 B+ 150 125
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 345 309
Azteca Holdings SA
11.00%, 6/15/02 B- 35 37
Federative Republic of
Brazil, C Bond, PIK
8.00%, 4/15/14 BB- 1,140 960
(+) Globo Comunicacoes
Participoes
10.50%, 12/20/06 BB- 435 442
Grupo Minero Mexicano SA
de CV, Series A
8.25%, 4/1/08 BB 160 159
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 205 188
(+) Hylsa SA de CV
9.25%, 9/15/07 BB 125 125
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 BB 100 80
(+) Israel Electric
Corp., Ltd.
7.25%, 12/15/06 A- 40 41
7.75%, 12/15/27 A- 340 345
Korea Development Bank
7.375%, 9/17/04 BB+ 215 195
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Korea Electric Power
Corp.
7.75%, 4/1/13 B+ $ 165 $ 140
National Power Corp.
7.875%, 12/15/06 BB+ 85 77
8.40%, 12/15/16 BB+ 55 48
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 250 250
(+) Paiton Energy Funding
9.34%, 2/15/14 CCC 100 48
Pera Financial Services
9.375%, 10/15/02 N/R 300 283
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 200 186
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 225 236
(+) Pindo Deli Financial
Mauritius
10.75%, 10/1/07 BB 155 127
Quezon Power Ltd.
8.86%, 6/15/17 BB+ 140 123
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 140 145
## Republic of Argentina,
Series L
6.625%, 3/31/05 BB- 768 709
+# Republic of Argentina
Pre 4 BOCON, PIK
0.00%, 9/1/02 Ba3 75 92
Republic of Colombia
8.70%, 2/15/16 BBB- 265 259
## Republic of Venezuela
Debt Conversion Bond,
Series DL
6.813%, 12/18/07 B+ 750 683
(+) RG Receivables Ltd.
9.60%, 2/10/05 BB- 170 170
## Russia Principal
Loans,
3.249%, 12/15/20 N/R 1,800 1,146
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 150 134
(+) Sanluis Corp. SA
8.875%, 3/18/08 N/R 500 493
TJIWI KIMIA International
13.25%, 8/1/01 B- 500 459
TV Azteca SA, Series B
10.50%, 2/15/07 B+ 135 145
United Mexican States
Global Bond
11.50%, 5/15/26 BB 850 1,036
United Mexican States Par
Bond, Series B
6.25%, 12/31/19 BB 250 211
- -----------------------------------------------------
GROUP TOTAL 10,345
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $51,869) 51,580
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
110
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
- -----------------------------------------------------
PREFERRED STOCKS (1.7%)
- -----------------------------------------------------
COMMUNICATIONS (0.2%)
* IXC Communications, Inc.,
Series B, 12.50% CCC+ 85 $ 104
- -----------------------------------------------------
INDUSTRIALS (0.6%)
Time Warner, Inc.,
Series M, 10.25% BB+ 314 352
- -----------------------------------------------------
MORTGAGE-OTHER (0.9%)
(+)+ Home Ownership
Funding Corp.,
13.331% Aaa 500 480
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $934) 936
- -----------------------------------------------------
CASH EQUIVALENTS (4.4%)
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
CASH INVESTMENTS-MORTGAGE (4.0%)
Federal Home Loan Mortgage
Corporation
Conventional Pools:
11.00%, 5/1/20 Agy $ 535 603
Federal National Mortgage
Association
Conventional Pools:
9.50%, 7/1/16 Agy 18 20
10.00%, 1/1/20-4/1/27 Agy 872 966
Government National Mortgage
Association
Various Pools:
10.50%, 2/15/20 Tsy 586 657
- -----------------------------------------------------
GROUP TOTAL 2,246
- -----------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98, to
be repurchased at $238,
collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued
at $239 238 238
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $2,477) 2,484
- -----------------------------------------------------
TOTAL INVESTMENTS (98.2%) (Cost $55,280) 55,000
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
=====================================================
OTHER ASSETS AND LIABILITIES (1.8%)
Cash $ 1
Dividends Receivable 17
Interest Receivable 1,155
Receivable for Withholding Tax Reclaim 9
Receivable for Investments Sold 260
Unrealized Gain on Forward Foreign Currency
Contracts 131
Other Assets 1
Payable for Investments Purchased (444)
Payable for Investment Advisory Fees (55)
Payable for Administrative Fees (4)
Payable for Daily Variation on Futures
Contracts (12)
Other Liabilities (28)
-------
1,031
- -----------------------------------------------------
NET ASSETS (100%) $56,031
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 5,508,826 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $56,031
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.17
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $54,890
Undistributed Net Investment Income (Loss) 832
Undistributed Realized Net Gain (Loss) 462
Unrealized Appreciation (Depreciation) on:
Investment Securities (280)
Foreign Currency Transactions 116
Futures 11
- -----------------------------------------------------
NET ASSETS $56,031
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
111
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME
PORTFOLIO (UNAUDITED)
(CONT'D)
- ----------------------------------------------------------
sec. Restricted Security-Total market value of restricted
securities owned at March 31, 1998 was $36 or 0.1% of
net assets.
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for futures contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity.
Rate disclosed is as of March 31, 1998. Maturity
date
disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
(2) Face amount is less than $500.
@ Value is less than $500.
AUD Australian Dollar
CMO Collateralized Mortgage Obligation
DEM German Mark
FRF French Franc
GBP British Pound
Inv
Fl Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
IO Interest Only
ITL Italian Lira
JPY Japanese Yen
N/R Not rated by Moody's Investors Service, Inc., Standard & Poor's
Corporation or Fitch.
PAC Planned Amortization Class
PIK Payment-in-Kind Security
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
SEK Swedish Krona
YMA Yield Maintenance Agreement
ZAR South African Rand
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
112
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Balanced Portfolio provides ongoing asset allocation management with Miller
Anderson & Sherrerd's core equity and fixed-income management strategies. The
Portfolio considers a 60% equity/40% fixed-income mix as a neutral, or
starting-point investment. As expected future returns increase in one asset
class versus the other, the mix between asset classes will change.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MAS BALANCED SALOMON
--------------------------------------- S&P 500 BROAD
INSTITUTIONAL# INVESTMENT
SIX MONTHS 8.61% 8.45% 8.46% 17.23% 4.60%
ONE YEAR 28.28 28.01 27.92 47.99 11.98
FIVE YEARS 14.86 14.82 14.80 22.40 7.00
SINCE
INCEPTION...... 14.86 14.81 14.79 22.23 7.49
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 1998 & POOR'S) (000) (000)!
- -----------------------------------------------------
ADJUSTABLE RATE MORTGAGES (3.4%)
## Government National
Mortgage Association
Various Pools:
6.00%, 8/20/27-10/20/27 Tsy $ 13,354 $ 13,549
- -----------------------------------------------------
AGENCY FIXED RATE MORTGAGES (5.6%)
Federal Home Loan Mortgage
Corporation
May TBA
6.50%, 5/15/28 Agy 15,000 14,835
Federal National Mortgage
Association
May TBA
6.50%, 5/15/28 Agy 7,500 7,408
- -----------------------------------------------------
GROUP TOTAL 22,243
- -----------------------------------------------------
ASSET BACKED CORPORATES (4.7%)
ALPS,
Series:
94-1 A4 CMO
7.80%, 9/15/04 AA 375 383
94-1 C2 CMO
9.35%, 9/15/04 BBB 622 633
96-1 D
12.75%, 6/15/06 BB- 1,097 1,098
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 640 644
98-A A3
5.90%, 11/15/02 AAA 825 822
CIT Group Home Equity Loan
Trust, Series 97-1 A3
6.25%, 9/15/11 AAA 375 375
(+)Credit Card
Receivables Trust, Series
98-1
6.478%, 12/22/04 AAA 373 373
Daimler Benz Auto Grantor
Trust, Series 97-A A
6.05%, 3/31/05 AAA 494 494
Empire Funding Home Loan
Owner Trust,
Series:
97-4 A2
7.16%, 5/25/12 AAA 675 683
97-4 A3
7.11%, 7/25/14 AAA 475 482
(+)First Mortgage
Acceptance Corp., Loan
Receivables Trust, Series
96-B A1
7.629%, 11/1/18 A 371 377
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
113
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
First Merchants Auto
Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA $ 495 $ 498
First Plus Home Loan Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 380 381
97-3 A3
6.57%, 10/10/10 AAA 375 376
97-4 A2
6.30%, 8/10/09 AAA 425 425
97-4 A3
6.40%, 8/10/11 AAA 375 375
First Security Auto Grantor
Trust, Series 97-B A
6.10%, 4/15/03 AAA 839 840
Ford Credit Auto Owner
Trust, Series 97-B A3
6.05%, 3/15/01 AAA 725 727
Green Tree Financial Corp.,
Series:
+ 98-1 A2
5.85%, 10/2/08 Aaa 699 697
98-2 A3
6.05%, 10/1/07 AAA 825 823
Honda Auto Receivables
Grantor Trust,
Series 97-A A
5.85%, 2/15/03 AAA 861 860
(+) Long Beach
Acceptance Auto Grantor
Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 419 419
NAL Auto Trust,
Series 96-4 A
6.90%, 12/15/00 N/R 1 1
(+) National Car Rental
Financing Ltd., Series
96-1 A4
7.35%, 10/20/03 N/R 425 440
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA 877 879
(+) Rental Car Finance
Corp. Series 97-1 A2
6.45%, 4/25/03 AA 775 777
(+) Securitized Multiple
Asset Rated Trust,
Series:
97-6 A1
7.71%, 4/15/06 A 315 317
98-1 A1
7.45%, 3/16/06 A 274 274
Security Pacific Home
Equity Trust, Series 91-A
B
10.50%, 3/10/06 A+ 49 49
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Team Fleet Financing
Corp., Series 96-1A
6.65%, 12/15/02 A- $ 300 $ 302
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA 690 690
97-D A4
6.25%, 3/20/03 AAA 700 702
98-A3
5.90%, 5/20/02 AAA 825 823
World Omni Automobile Lease
Securitization Trust,
Series 97-B A2
6.08%, 11/25/03 AAA 725 726
- -----------------------------------------------------
GROUP TOTAL 18,765
- -----------------------------------------------------
ASSET BACKED MORTGAGES (0.5%)
Cityscape Home Equity Loan
Trust,
Series:
96-2 A5
8.10%, 8/25/26 AAA 700 719
96-3 A IO
1.00%, 10/25/26 N/R 8,007 191
sec. 96-3 A YMA
10/25/26 (acquired
12/24/96 cost $15) AAA 8,007 11
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 I IO
1.10%, 1/15/28 AAA 6,202 158
(+) 96-4 A11 I YMA
1/15/28 AAA 6,202 9
96-4 A12 I IO
1.05%, 1/15/28 AAA 1,673 43
sec. 96-4 A12 I YMA
1/15/28 (acquired
12/16/96 cost $5) AAA 1,673 3
97-1 A10 I IO
1.10%, 3/15/28 AAA 7,517 198
(+) 97-1 A10 I YMA
3/15/28 N/R 7,517 11
First Union Residential
Securitization Trust,
Series 96-2 A5
7.21%, 11/25/28 AAA 675 691
- -----------------------------------------------------
GROUP TOTAL 2,034
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
114
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (0.9%)
Federal Home Loan Mortgage
Corporation,
Series:
1415-S Inv Fl IO
18.50%, 11/15/07 Agy $ 335 $ 150
1476-S Inv Fl IO
REMIC PAC
4.26%, 2/15/08 Agy 3,044 340
1485-S Inv Fl IO REMIC
3.85%, 3/15/08 Agy 2,867 260
1600-SA Inv Fl IO REMIC
2.25%, 10/15/08 Agy 5,343 296
1709-H PO REMIC
1/15/24 Agy 52 32
1813-K PO REMIC
2/15/24 Agy 50 40
1844-PC PO REMIC
3/15/24 Agy 95 70
1887-I PO REMIC
10/15/22 Agy 55 42
Federal National Mortgage
Association,
Series:
90-106 J PAC
8.50%, 9/25/20 Agy 481 506
92-186 S Inv Fl IO
3.287%, 10/25/07 Agy 5,730 464
93-149 O PO REMIC
8/25/23 Agy 107 78
93-205 G PO REMIC
9/25/23 Agy 308 220
93-235 H PO REMIC
9/25/23 Agy 113 97
96-5 NH
4/25/24 Agy 589 395
96-14 PC PO
12/25/23 Agy 90 61
96-46 PB PO REMIC
9/25/23 Agy 95 71
96-54 O PO
11/25/23 Agy 73 50
96-68 SC Inv Fl IO REMIC
2.35%, 1/25/24 Agy 1,250 155
- -----------------------------------------------------
GROUP TOTAL 3,327
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (1.7%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 278 295
Chemical Mortgage
Securities, Inc.,
Series 93-1 M
7.45%, 2/25/23 AA 441 444
sec. First Boston Mortgage
Corp., Series 92-4 B1
8.125%, 10/25/22
(acquired
1/25/93-2/26/93 cost
$235) A $ 240 $ 249
Independent National
Mortgage Corp.,
Series 95-V A3
7.12%, 2/25/26 AAA 930 934
sec.## Kidder Peabody
Funding Corp., Series
92-4 B2
8.467%, 5/28/22
(acquired 2/26/93, cost
$104) N/R 103 103
Prudential Home Mortgage
Securities Co., Inc.,
Series:
90-5 A3
9.50%, 5/25/05 AAA 58 58
(+)+ 92-A 2B4
7.90%, 4/28/22 A1 370 363
(+)+ 92-A 3B2
7.90%, 4/28/22 Caa 920 552
(+)++## 94-A 3B3
6.803%, 4/28/24 A 1,129 1,105
Residential Accredit Loans,
Inc.,
Series:
97-QS2 A8
7.75%, 3/25/27 AAA 325 336
97-QS4 A7
7.75%, 5/25/27 AAA 600 617
97-QS12 A7 REMIC
7.25%, 11/25/27 AAA 823 827
Rural Housing Trust,
Series 87-1 B1 REMIC
3.33%, 10/1/28 A- 484 466
Ryland Mortgage Securities
Corp. III, Series 92-A 1A
8.27%, 3/29/30 A- 440 447
- -----------------------------------------------------
GROUP TOTAL 6,796
- -----------------------------------------------------
COMMERCIAL MORTGAGES (3.8%)
American Southwest
Financial Securities
Corp.,
Series:
++ 93-2 A1
7.30%, 1/18/09 AA 1,184 1,212
+ 95-C1 A1B
7.40%, 11/17/04 Aaa 650 673
Asset Securitization Corp.,
Series:
95-MD4 A1
7.10%, 8/13/29 AAA 1,303 1,355
(+)+ 96-D3 A1C
7.40%, 10/13/26 Aaa 525 559
96-MD6 A1C
7.04%, 11/13/26 AAA 575 599
+## 97-D5 PSI IO
1.563%, 2/14/41 Aaa 3,334 359
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
115
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Carousel Center
Finance, Inc., Series 1
A1
6.828%, 11/15/07 AA $ 525 $ 534
(+) Creekwood Capital
Corp., Series 95-1A
8.47%, 3/16/15 AA 552 625
(+) DLJ Mortgage
Acceptance Corp.,
Series:
96-CF2 A1B
7.29%, 11/12/21 AAA 165 173
++## 96-CF2 S IO
1.641%, 11/12/21 AAA 1,646 137
First Union-Lehman Brothers
Commercial Mortgage
Trust, Series 97-C2 A3
6.65%, 12/18/07 AAA 700 711
+ GMAC Commercial Mortgage
Securities, Inc.,
Series:
96-C1 X2 IO
1.917%, 3/15/21 Aaa 2,346 197
## 97-C2 X IO
1.273%, 4/15/27 Aaa 6,100 463
+ GS Mortgage Securities
Corp. II,
Series:
97-GL A2D
6.94%, 7/13/30 Aaa 650 675
## 97-GL X2 IO
0.930%, 7/13/30 Aaa 1,692 88
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5 A2
7.069%, 9/15/29 AAA 600 630
+## LB Commercial Conduit
Mortgage Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 625 655
98-C1 IO
1.199%, 2/18/28 Aaa 5,900 395
Merrill Lynch Mortgage
Investors, Inc.,
Series:
95-C1 IO
2.185%, 5/25/15 N/R 5,172 251
96-C2 A2
6.82%, 11/21/28 AAA 270 276
++## 96-C2 IO
1.538%, 11/21/28 AAA 2,825 238
+ Midland Realty Acceptance
Corp., Series 96-C2 A2
7.233%, 1/25/29 Aaa 475 497
+ Mortgage Capital Funding,
Inc.,
Series:
97-MC1 A3
7.288%, 7/20/27 Aaa 800 838
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
97-MC2 A2
6.664%, 9/20/07 Aaa $ 850 $ 862
Nomura Asset Securities
Corp.,
Series:
94-MD1 A3
8.026%, 3/15/18 N/R 525 553
(+) Prime Property
Funding,
Series 1 A
6.633%, 7/23/03 AA 483 489
+ Salomon Brothers Mortgage
Securities,
Series 97-TZH A2
7.174%, 3/24/22 Aa2 350 363
(+) Stratford Finance
Corp.
6.776%, 2/1/04 AA 800 800
- -----------------------------------------------------
GROUP TOTAL 15,207
- -----------------------------------------------------
ENERGY (0.3%)
(+) ESI Tractebel
Acquisition Corp.,
7.99%, 12/30/11 BB 195 193
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 550 570
Mobile Energy Services
8.665%, 1/1/17 BBB- 486 520
- -----------------------------------------------------
GROUP TOTAL 1,283
- -----------------------------------------------------
FINANCE (3.2%)
(+) Anthem Insurance
Cos., Inc., Series A
9.00%, 4/1/27 BBB+ 390 418
(+) BankAmerica
Institutional, Series A
8.07%, 12/31/26 A- 775 826
(+) BT Institutional
Capital Trust, Series A
8.09%, 12/1/26 BBB+ 725 752
(+) Equitable Life
Assurance Society of the
U.S.,
Series 1A
6.95%, 12/1/05 A 700 718
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 BBB+ 725 839
(+) First Chicago NBD
Corp., Series A
7.95%, 12/1/26 A- 700 734
First Union Institutional
Capital, Series I
8.04%, 12/1/26 BBB+ 725 769
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 200 208
(+) Florida Windstorm
6.70%, 8/25/04 A- 800 805
J.P. Morgan Capital Trust I
7.54%, 1/15/27 AA- 255 259
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
116
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 AA- $ 600 $ 597
(+) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A+ 525 525
NB Capital Trust
8.25%, 4/15/27 A- 260 285
(+) New York Life
Insurance Co.
7.50%, 12/15/23 AA 300 304
PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 725 759
(+) Prime Property
Funding II
7.00%, 8/15/04 A 540 548
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A 155 173
(+) State Street
Institutional Capital,
Series:
A
7.94%, 12/30/26 A 350 372
B
8.035%, 3/15/27 A 300 322
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 65 69
Washington Mutual Capital
8.375%, 6/1/27 BBB- 375 405
(+) Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB 700 742
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 839 862
96 WFP-D
6.95%, 9/1/13 AA- 525 542
- -----------------------------------------------------
GROUP TOTAL 12,833
- -----------------------------------------------------
FOREIGN GOVERNMENTS (0.6%)
Government of Germany
DEM
7.375%, 12/2/02 AAA 3,925 2,372
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
INDUSTRIALS (1.8%)
American Standard Cos.
7.375%, 2/1/08 BB- $ 385 379
Columbia/HCA Healthcare
7.58%, 9/15/25 BBB 320 291
9.00%, 12/15/14 BBB 225 235
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB 134 125
94-K2 A2
9.35%, 8/15/19 BB 550 571
Fred Meyer, Inc.
7.375%, 3/1/05 BB+ 860 862
Host Marriott Travel Plaza
9.50%, 5/15/05 BB- $ 650 $ 692
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 300 310
News America Holdings
8.875%, 4/26/23 BBB- 495 581
(+) Oxymar
7.50%, 2/15/16 BBB 470 478
!! Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ 860 884
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 300 307
Rhone-Poulenc Rorer, Inc.,
Series 92-A 3
8.62%, 1/5/21 BBB- 400 441
Scotia Pacific Holding Co.
7.95%, 7/20/15 BBB 586 613
Southland Corp.
5.00%, 12/15/03 BB+ 485 424
- -----------------------------------------------------
GROUP TOTAL 7,193
- -----------------------------------------------------
RATED NON-AGENCY FIXED RATE MORTGAGES (0.1%)
First Federal Savings &
Loan Association, Series
92-C
8.75%, 6/1/06 AA 1 1
## Resolution Trust Corp.,
Series 92-5 C
8.617%, 1/25/26 AA 272 272
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 77 75
- -----------------------------------------------------
GROUP TOTAL 348
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (0.7%)
Federal National Mortgage
Association,
Series:
249 1 PO
10/25/23 Agy 2,092 1,466
260 1 PO
4/1/24 Agy 540 417
282 1 PO
9/1/25 Agy 1,186 875
- -----------------------------------------------------
GROUP TOTAL 2,758
- -----------------------------------------------------
TELEPHONES (0.4%) CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 470 484
(+) Lenfest
Communications, Inc.
7.625%, 2/15/08 BB+ 245 246
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
117
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(cont'd) & POOR'S) (000) (000)!
- -----------------------------------------------------
(+)# Qwest
Communications, Inc.
0.00%, 2/1/08 B+ $ 720 $ 507
# Teleport Communications
Group, Inc.
0.00%, 7/1/07 B+ 480 413
- -----------------------------------------------------
GROUP TOTAL 1,650
- -----------------------------------------------------
TRANSPORTATION (0.4%)
Continental Airlines
Series 98-1 A
6.648%, 9/15/17 AA+ 660 660
(+) Jet Equipment Trust,
Series 95-C
10.69%, 5/1/15 BBB 675 878
- -----------------------------------------------------
GROUP TOTAL 1,538
- -----------------------------------------------------
U.S. TREASURY SECURITIES (3.4%)
U.S. Treasury Note
3.375%, 1/15/07
(Inflation Indexed) Tsy 5,684 5,510
3.625%, 7/15/02
(Inflation Indexed) Tsy 2,591 2,565
3.625%, 1/15/08
(Inflation Indexed) Tsy 3,050 3,014
6.25%, 4/30/01 Tsy 1,500 1,525
6.375%, 3/31/01 Tsy 750 765
- -----------------------------------------------------
GROUP TOTAL 13,379
- -----------------------------------------------------
UTILITIES (0.3%) CalEnergy Co., Inc.
7.63%, 10/15/07 BB+ 455 455
CMS Energy Corp.,
Series B
7.375%, 11/15/00 BB 330 333
(+) Edison Mission
Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 375 389
- -----------------------------------------------------
GROUP TOTAL 1,177
- -----------------------------------------------------
YANKEE (3.0%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 702 703
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 500 448
(+) Glencore Nickel
Property Ltd.
9.00%, 12/1/14 BB+ 425 421
Grupo Minero Mexicano SA de
CV, Series A
8.25%, 4/1/08 BB 460 456
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 690 634
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Hyundai
Semiconductor America
8.625%, 5/15/07 BB $ 400 $ 319
(+) Israel Electric
Corp., Ltd.
7.25%, 12/15/06 A- 135 137
7.75%, 12/15/27 A- 575 584
Korea Development Bank
7.375%, 9/17/04 BB+ 715 649
National Power Corp.
7.875%, 12/15/06 BB+ 450 409
8.40%, 12/15/16 BB+ 350 305
(+) Oil Purchase Co.
7.10%, 10/31/02 BBB 450 450
(+) Paiton Energy
Funding
9.34%, 2/15/14 CCC 545 262
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 790 736
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 625 655
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 1,000 1,035
(+) Reliance Industries
Ltd.
9.375%, 6/24/26 BB+ 250 251
# Republic of Argentina
Par, Series L
5.75%, 3/31/23 BB 1,235 944
Republic of Colombia
8.70%, 2/15/16 BBB- 670 656
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 400 448
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 360 323
United Mexican States
Par Bond,
Series:
A
6.25%, 12/31/19 BB 540 457
B
6.25%, 12/31/19 BB 500 423
- -----------------------------------------------------
GROUP TOTAL 11,705
- -----------------------------------------------------
TOTAL FIXED INCOME SECURITIES
(Cost $135,889) 138,157
- -----------------------------------------------------
COMMON STOCKS (56.5%)
- -----------------------------------------------------
SHARES
------
BANKS (2.5%)
BankBoston Corp. 23,700 2,613
Chase Manhattan Corp. 18,200 2,455
Citicorp 17,500 2,485
First Union Corp. 41,567 2,359
- -----------------------------------------------------
GROUP TOTAL 9,912
- -----------------------------------------------------
BASIC RESOURCES (2.6%)
Bowater, Inc. 25,600 1,445
Champion International Corp. 34,600 1,879
E.I. DuPont de Nemours & Co. 45,700 3,108
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
118
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- -----------------------------------------------------
Grace Specialty Chemicals 22,500 $ 413
PPG Industries, Inc. 17,900 1,216
Praxair, Inc. 22,700 1,168
Solutia, Inc. 38,700 1,151
- -----------------------------------------------------
GROUP TOTAL 10,380
- -----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (0.7%)
Anheuser-Busch Cos., Inc. 23,700 1,098
Coca-Cola Enterprises, Inc. 27,600 1,012
Dial Corp. 31,700 759
Estee Lauder Cos., Class A 200 13
- -----------------------------------------------------
GROUP TOTAL 2,882
- -----------------------------------------------------
CONSUMER DURABLES (4.1%)
Chrysler Corp. 27,200 1,130
Ford Motor Co. 121,700 5,362
General Motors Corp. 68,802 4,640
Goodyear Tire & Rubber Co. 26,100 1,977
LucasVarity plc ADR 53,000 2,190
Owens Corning 27,300 981
- -----------------------------------------------------
GROUP TOTAL 16,280
- -----------------------------------------------------
CONSUMER SERVICES (3.0%)
* Cendant Corp. 90,296 3,578
* Clear Channel Communications,
Inc. 16,700 1,636
Service Corp. International 52,400 2,224
Tele-Communications, Inc.,
Class A 56,758 1,765
Tele-Communications Liberty Media
Group, Class A 55,088 1,894
Tele-Communications TCI Ventures
Group., Class A 38,786 681
- -----------------------------------------------------
GROUP TOTAL 11,778
- -----------------------------------------------------
CREDIT & FINANCE (1.5%)
American Express Co. 10,900 1,001
Associates First Capital Corp. 4,376 346
Bear Stearns Co., Inc. 14,785 760
CMAC Investment Corp. 11,100 741
Lehman Brothers Holdings, Inc. 12,400 928
SLM Holding Corp. 50,350 2,196
- -----------------------------------------------------
GROUP TOTAL 5,972
- -----------------------------------------------------
ENERGY (5.0%)
Atlantic Richfield Co. 14,500 1,140
British Petroleum plc ADR 23,400 2,014
Coastal Corp. 35,000 2,279
Columbia Gas System, Inc. 17,900 1,392
Diamond Offshore Drilling, Inc. 22,200 1,007
ENSCO International, Inc. 18,000 500
* Global Marine, Inc. 20,500 507
Mobil Corp. 15,800 1,211
* Nabors Industries, Inc. 31,900 756
Phillips Petroleum Co. 39,200 1,958
* R & B Falcon Corp. 36,900 1,093
Schlumberger Ltd. 15,700 1,189
<PAGE>
VALUE
SHARES (000)!
- -----------------------------------------------------
Texaco, Inc. 38,200 $ 2,302
USX-Marathon Group 31,800 1,196
YPF SA ADR 35,300 1,200
- -----------------------------------------------------
GROUP TOTAL 19,744
- -----------------------------------------------------
FOOD, TOBACCO & OTHER (2.4%)
Philip Morris Cos., Inc. 167,200 6,395
RJR Nabisco Holdings Corp. 105,120 2,969
- -----------------------------------------------------
GROUP TOTAL 9,364
- -----------------------------------------------------
HEALTH CARE (3.6%)
American Home Products Corp. 13,000 1,240
Baxter International, Inc. 42,500 2,343
Bristol-Myers Squibb Co. 16,100 1,680
* Health Management Associates,
Class A 41,100 1,176
* HEALTHSOUTH Rehabilitation
Corp. 47,200 1,325
* Lincare Holdings, Inc. 23,900 1,688
Merck & Co., Inc. 22,000 2,824
Mylan Labs, Inc. 19,100 439
* Tenet Healthcare Corp. 46,600 1,692
- -----------------------------------------------------
GROUP TOTAL 14,407
- -----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (7.4%)
Aeroquip-Vickers, Inc. 23,200 1,341
* AMR Corp. 11,100 1,589
Case Corp. 51,300 3,495
Cummins Engine Co., Inc. 63,700 3,512
Eaton Corp. 4,400 419
* FMC Corp. 21,900 1,719
Harnischfeger Industries, Inc. 32,000 1,094
Lockheed Martin Corp. 41,900 4,714
Textron, Inc. 18,000 1,386
United Technologies Corp. 48,900 4,514
Waste Management, Inc. 121,100 3,731
York International Corp. 39,400 1,773
- -----------------------------------------------------
GROUP TOTAL 29,287
- -----------------------------------------------------
INSURANCE (3.6%)
Allstate Corp. 15,927 1,464
Everest Reinsurance Holdings,
Inc. 24,500 1,008
Exel Ltd. 33,800 2,620
Hartford Financial Services Group
(The), Inc. 34,500 3,743
Loews Corp. 41,300 4,305
Travelers Property Casualty,
Class A 26,500 1,166
- -----------------------------------------------------
GROUP TOTAL 14,306
- -----------------------------------------------------
MID CAP GROWTH (3.2%)
* Accelr8 Technology Corp. 3,200 52
* Advanced Fibre Communications,
Inc. 3,800 138
* Allied Waste Industries, Inc. 7,300 182
* American Disposal Services,
Inc. 2,200 83
* AMF Bowling, Inc. 5,400 138
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
119
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- -----------------------------------------------------
* At Home Corp., Series A 4,500 $ 152
Atlas Air, Inc. 2,900 94
* Beringer Wine Estates Holdings,
Inc., Class B 2,600 134
* BMC Software, Inc. 2,800 235
* Borders Group, Inc. 5,700 194
* Brylane, Inc. 2,300 129
* Cablevision Systems Corp.,
Class A 2,000 132
* Cellular Communications
International, Inc. 2,500 170
* CIENA Corp. 2,000 85
* Cinar Films, Inc., Class B 3,900 166
Cintas Corp. 3,400 176
Comcast Corp., Class A Special 3,300 117
* Complete Business Solutions,
Inc. 6,800 244
* CompUSA, Inc. 3,300 86
* Computer Horizons Corp. 3,900 196
* Concord EFS Inc. 6,200 214
CVS Corp. 2,800 211
Danaher Corp. 1,800 137
* Diamond Offshore Drilling, Inc. 2,300 104
* Dollar Tree Stores, Inc. 1,700 90
* Earthshell Corp. 2,000 36
Edwards (A.G.), Inc. 2,200 96
Estee Lauder Cos., Class A 3,100 210
Exodus Communications, Inc. 1,000 28
FINOVA Group, Inc. 3,100 183
* Fiserv, Inc. 3,800 241
Franklin Resources, Inc. 2,400 127
* Friendly Ice Cream Corp. 4,700 96
* Geac Computer Corp., Ltd. 2,600 109
* Global Industries Ltd. 5,000 102
* Globalstar Telecommunications
Ltd. 5,590 354
HBO & Co. 3,900 235
Health Management Associates,
Class A 13,362 383
* Healthcare Recoveries, Inc. 5,900 137
* Heftel Broadcasting Corp.,
Class A 2,600 116
* Hibbett Sporting Goods, Inc. 2,800 78
* Imax Corp. 6,600 187
Inter-Tel, Inc. 3,400 92
* Intermedia Communications, Inc. 1,700 135
* J. Ray McDermott, S.A. 2,300 97
* Jacor Communications, Inc. 3,300 195
* Lincare Holdings, Inc. 5,200 367
Linear Technology Corp. 1,500 104
* Loral Space & Communications 7,200 201
MAPICS, Inc. 8,600 152
* Metro-Goldwyn-Mayer Inc. 4,500 101
Metromedia Fiber Network Inc.,
Class A 1,400 47
* Micro Focus Group ADR 3,600 171
* Network Associates, Inc. 3,012 200
* NEXTLINK Communications, Inc.,
Class A 3,500 112
* Nutraceutical International
Corp. 3,600 79
* ONIX Systems, Inc. 4,200 61
* Orange plc 11,800 75
* Orthodontic Centers of America,
Inc. 9,300 202
<PAGE>
VALUE
SHARES (000)!
- -----------------------------------------------------
* Outdoor Systems, Inc. 6,350 $ 223
* Pediatrix Medical Group, Inc. 2,100 98
* Peoplesoft, Inc. 2,500 132
Peter Kiewit Sons, Inc. 1,300 93
* Polo Ralph Lauren Corp. 3,400 102
* Premier Parks, Inc. 3,500 203
* Princeton Video Image, Inc. 3,300 27
* Province Healthcare Co. 3,100 81
* Qwest Communications
International, Inc. 2,900 113
* RELTEC Corp. 1,700 60
* Rexall Sundown, Inc. 3,600 123
* Sapient Corp. 3,200 152
* Sealed Air Corp. 2,600 170
* Security Capital Group, Inc.,
Class B 1,900 58
Security Capital Industrial Trust 5,000 128
* Security Capital U.S. Realty 4,000 53
Shire Pharmaceuticals plc ADR 1,600 34
Sirrom Capital Corp. 7,000 210
* Stage Stores, Inc. 1,700 88
State Street Corp. 2,700 184
Stewart Enterprises, Inc., Class
A 1,800 100
* Sunrise Assisted Living, Inc. 3,400 152
* Tel-Save Holdings, Inc. 3,900 89
* Tele-Communications, Inc.,
Class A 3,740 116
* Tele-Communications
International, Inc., Class A 5,100 103
Tele-Communications Liberty Media
Group, Class A 7,071 243
* Tele-Communications TCI
Ventures Group., Class A 9,718 171
* Tellabs, Inc. 4,100 275
* Total Renal Care Holdings, Inc. 3,266 109
* Uniphase Corp. 2,800 118
* United Rentals, Inc. 5,400 140
* Univision Communications, Inc.,
Class A 2,000 75
* USA Waste Services, Inc. 3,000 134
- -----------------------------------------------------
GROUP TOTAL 12,925
- -----------------------------------------------------
RETAIL (2.9%)
* CompUSA, Inc. 68,900 1,791
CVS Corp. 24,500 1,850
* Federated Department Stores,
Inc. 24,400 1,264
Home Depot, Inc. 20,500 1,383
* Office Depot, Inc. 76,800 2,390
* Polo Ralph Lauren Corp. 18,300 550
Ross Stores, Inc. 13,700 605
Wal-Mart Stores, Inc. 37,300 1,895
- -----------------------------------------------------
GROUP TOTAL 11,728
- -----------------------------------------------------
TECHNOLOGY (6.1%)
* 3Com Corp. 27,300 981
* Applied Material, Inc. 27,600 975
Bay Networks, Inc. 44,300 1,202
* BMC Software, Inc. 27,500 2,305
* Cisco Systems, Inc. 32,350 2,212
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
120
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- -----------------------------------------------------
Compaq Computer Corp. 30,900 $ 800
Intel Corp. 24,000 1,873
* Microsoft Corp. 82,700 7,402
* Network Associates, Inc. 26,400 1,749
* SCI Systems, Inc. 27,100 965
* Seagate Technology, Inc. 41,400 1,045
* Tellabs, Inc. 22,000 1,477
Xerox Corp. 10,300 1,096
- -----------------------------------------------------
GROUP TOTAL 24,082
- -----------------------------------------------------
UTILITIES (2.7%)
* Airtouch Communications, Inc. 26,100 1,277
MCI Communications Corp. 52,900 2,619
SBC Communications, Inc. 52,200 2,277
Sprint Corp. 31,100 2,105
* WorldCom, Inc. 55,894 2,407
- -----------------------------------------------------
GROUP TOTAL 10,685
- -----------------------------------------------------
VALUE (5.2%)
Aeroquip-Vickers, Inc. 10,800 624
American General Corp. 6,200 401
Amoco Corp. 2,200 190
* AMR Corp. 1,600 229
* Arrow Electronics, Inc. 4,900 133
Atlantic Richfield Co. 3,000 236
Avnet, Inc. 1,800 104
Beckman Instruments, Inc. 5,800 332
British Petroleum plc ADR 2,500 215
Cabot Oil & Gas Corp., Class A 4,900 181
Case Corp. 8,000 545
Caterpillar, Inc. 4,200 231
Chase Manhattan Corp. 3,401 459
Chubb Corp. 1,400 110
CIGNA Corp. 1,800 369
Citicorp 1,300 185
Columbia/HCA Healthcare Corp. 3,200 103
Crestar Financial Corp. 7,118 421
CSX Corp. 2,100 125
Cummins Engine Co., Inc. 8,700 480
Delta Air Lines, Inc. 2,300 272
Dillard's, Inc., Class A 6,000 222
Dow Chemical Co. 2,100 204
Duke Energy Corp. 2,088 124
E.I. DuPont de Nemours & Co. 3,800 258
Eaton Corp. 1,500 143
Entergy Corp. 6,900 205
First Union Corp. 9,701 550
* FMC Corp. 3,300 259
Ford Motor Co. 16,700 736
* Foundation Health Corp. 9,260 255
General Motors Corp. 7,196 485
Goodyear Tire & Rubber Co. 6,900 523
<PAGE>
VALUE
SHARES (000)!
- -----------------------------------------------------
GPU, Inc. 8,500 $ 376
Great Lakes Chemical Corp. 2,700 146
Harnischfeger Industries, Inc. 5,500 188
Hartford Financial Services
Group, Inc. 2,700 292
IBP, Inc. 8,300 186
IMC Global, Inc. 4,900 186
Inland Steel Industries, Inc. 5,100 141
International Business Machines
Corp. 6,800 706
Kennametal, Inc. 2,946 155
Loews Corp. 1,300 136
Mallinckrodt, Inc. 5,500 217
* Maxicare Health Plans, Inc. 6,700 74
Mellon Bank Corp. 4,400 279
National Steel Corp., Class B 6,400 110
NationsBank Corp. 1,700 124
Old Republic International Corp. 6,050 268
Olsten Corp. 11,500 183
Owens Corning 5,700 205
Parker Hannifin Corp. 5,400 277
Philip Morris Cos., Inc. 13,800 575
Phillips Petroleum Co. 4,500 225
* Quantum Corp. 5,000 107
ReliaStar Financial Corp. 5,442 251
Repsol SA ADR 4,500 229
Republic New York Corp. 2,200 293
RJR Nabisco Holdings Corp. 10,300 322
Rohm & Haas Co. 3,800 393
Russell Corp. 4,700 126
* Seagate Technology, Inc. 5,700 144
Sears, Roebuck & Co. 6,400 368
Springs Industries, Inc., Class A 3,800 209
Standard Register Co. 6,100 207
* Stratus Computer, Inc. 8,400 370
Tecumseh Products Co., Class A 8,400 451
Tektronix, Inc. 7,350 328
* Toys 'R' Us, Inc. 8,100 243
Transatlantic Holdings, Inc. 3,000 227
TRW, Inc. 3,800 209
Tupperware Corp. 4,200 112
Ultramar Diamond Shamrock Corp. 6,500 229
Universal Corp. 400 18
V.F. Corp. 7,400 389
* Vencor, Inc. 3,900 117
Wellpoint Health Networks, Inc. 2,700 182
YPF SA ADR 6,900 235
- -----------------------------------------------------
GROUP TOTAL 20,717
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $168,039) 224,449
- -----------------------------------------------------
PREFERRED STOCKS (1.5%)
- -----------------------------------------------------
INDUSTRIAL (0.4%)
(+) Entertainment Properties,
14.253% 575 536
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
121
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
BALANCED
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- -----------------------------------------------------
Tier One Properties, 11.095% 250 $ 241
Time Warner, Inc., Series M,
10.25% 826 925
- -----------------------------------------------------
GROUP TOTAL 1,702
- -----------------------------------------------------
MORTGAGE-OTHER (0.7%)
(+) Home Ownership
Funding Corp., 13.331% 3,025 2,901
- -----------------------------------------------------
PUBLISHING AND BROADCASTING (0.4%)
News Corp., Ltd. ADR 61,900 1,424
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $5,731) 6,027
- -----------------------------------------------------
STRUCTURED INVESTMENTS (0.1%)-SEE NOTE A7
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT
& POOR'S) (000)
--------- -------
Morgan Guaranty Trust Company, 11/20/05; monthly
payments equal to 1% per annum of the outstanding
notional balance indexed to GNMA ARM pools
(Cost $502) N/R $ 11,232 262
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- -----------------------------------------------------
J.P. Morgan and Co.,
terminating 10/15/99, to
receive on 10/15/99 the
excess, as measured on
10/15/98, of 12 month
LIBOR over 6.34%
multiplied by the
notional amount
(Premium Paid $150) AA- 35,500 33
- -----------------------------------------------------
CASH EQUIVALENTS (19.0%)
- -----------------------------------------------------
Short-term Investments
Held as Collateral for
Loaned Securities (7.5%) 29,976 29,976
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (6.3%)
Federal Home Loan Mortgage
Corporation
Conventional Pools:
10.00%, 91/17 Agy 578 638
10.50%, 8/1/19-12/1/19 Agy 1,103 1,214
11.00%, 5/1/20-9/1/20 Agy 828 932
12.00%, 3/1/15 Agy 348 403
Gold Pool:
9.50%, 12/1/22 Agy 814 893
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 165 166
## 1933-FO REMIC
6.50%, 3/15/25 Agy 291 292
## 2040-FC
5.975%, 2/15/23 Agy 780 782
Federal National Mortgage
Association
Conventional Pools:
10.00%, 1/1/10-1/1/20 Agy $ 860 $ 952
10.50%, 8/1/12-4/1/22 Agy 2,138 2,411
11.50%, 9/1/25 Agy 53 61
12.50%, 9/1/15 Agy 204 238
Series:
## 94-50 FD REMIC
6.20%, 3/25/24 Agy 573 575
## 97-43 FM REMIC
6.25%, 7/18/27 Agy 513 517
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 388 390
## 97-76 FM
6.20%, 9/17/27 Agy 542 546
## 97-76 FN
6.15%, 9/17/27 Agy 533 537
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 1,700 1,704
Government National Mortgage
Association
Adjustable Rate Mortgages:
7.00%, 2/20/25-3/20/25 Tsy 1,541 1,572
7.375%, 4/20/25-6/20/25 Tsy 3,512 3,582
Various Pools:
9.50%, 11/15/21 Tsy 496 539
10.00%,
11/15/09-12/25/26 Tsy 3,152 3,501
10.50%, 2/15/18-12/15/20 Tsy 1,183 1,332
11.00%, 5/15/26 Tsy 943 1,081
- -----------------------------------------------------
GROUP TOTAL 24,858
- -----------------------------------------------------
COMMERCIAL PAPER (3.5%)
Federal Home Loan Mortgage
Corporation Discount Notes:
4/10/98 Agy 4,000 3,994
4/16/98 Agy 5,000 4,989
4/20/98 Agy 5,000 4,986
- -----------------------------------------------------
GROUP TOTAL 13,969
- -----------------------------------------------------
REPURCHASE AGREEMENTS (1.7%)
Chase Securities, Inc. 5.75%
dated 3/31/98, due 4/1/98, to
be repurchased at $6,685,
collateralized by various U.S.
Government Obligations, due
4/1/98-11/15/99, valued at
$6,704 6,684 6,684
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $75,365) 75,487
- -----------------------------------------------------
TOTAL INVESTMENTS (111.9%) (Cost $385,676) 444,415
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
122
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
(000)!
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-11.9%)
Cash $ 3
Dividends Receivable 410
Interest Receivable 1,681
Receivable for Investments Sold 27,350
Receivable for Fund Shares Sold 1
Unrealized Gain on Forward Foreign Currency
Contracts 71
Unrealized Gain on Swap Agreements 22
Other Assets 15
Payable for Investments Purchased (46,065)
Payable for Fund Shares Redeemed (200)
Payable for Administrative Fees (26)
Payable for Investment Advisory Fees (422)
Payable for Distribution Fees-Adviser Class (7)
Payable for Daily Variation on Futures
Contracts (21)
Payable for Deferred Trustees' Compensation
Plan-Note F (13)
Collateral on Securities Loaned, at Value (29,976)
Other Liabilities (46)
--------
(47,223)
- -----------------------------------------------------
NET ASSETS (100%) $397,192
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
Applicable to 25,263,924 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $364,664
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.43
- -----------------------------------------------------
INVESTMENT CLASS
- -----------------------------------------------------
Applicable to 61,056 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 880
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.42
- -----------------------------------------------------
ADVISER CLASS
- -----------------------------------------------------
Applicable to 2,194,304 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 31,648
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.42
- -----------------------------------------------------
<PAGE>
VALUE
(000)!
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $318,103
Undistributed Net Investment Income (Loss) 3,391
Undistributed Realized Net Gain (Loss) 17,007
Unrealized Appreciation (Depreciation) on:
Investment Securities 58,739
Foreign Currency Transactions 72
Futures and Swaps (120)
- -----------------------------------------------------
NET ASSETS $397,192
- -----------------------------------------------------
sec. Restricted Security-Total market value of
restricted securities owned at March 31, 1998 was
$366 or 0.1% of net assets.
! See Note A1 to Financial Statements.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
* Non-income producing security
(+) 144A security. Certain conditions for public sale
may exist.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or floating rate securities-rate disclosed
is as of March 31, 1998.
@ Value is less than $500.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
DEM German Mark
Inv FI Inverse Floating Rate-Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
YMA Yield Maintenance Agreement
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
123
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Multi-Asset-Class Portfolio provides global asset allocation management with
a level of international diversification that is appropriate for U.S.-oriented
investors. Miller Anderson & Sherrerd manages investments in five asset classes,
and considers a benchmark consisting of 50% U.S. equities, 14% foreign equities,
24% U.S. fixed-income, 6% foreign fixed-income and 6% high yield to be a
neutral, or starting-point investment. Allocations are based on a value-driven
approach which favors those equity markets offering the highest risk-adjusted
expected returns and those bond markets offering the highest real interest rates
and steepest yield curves.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/98*
MSCI
MAS MULTI-ASSET CLASS SALOMON EAFE-GDP
---------------------------- S&P 500 BROAD WEIGHTED
INSTITUTIONAL# INVESTMENT
SIX MONTHS 8.13% 8.04% 17.23% 4.60% 9.76%
ONE YEAR 27.16 26.98 47.99 11.98 23.23
SINCE INCEPTION 17.98 17.88 29.87 8.63 10.54
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results. Foreign investments are subject to certain
risks such as currency fluctuations, economic instability, and political
developments. High-yield fixed-income securities, otherwise known as "junk
bonds," represent a much greater risk of default and tend to be more volatile
than higher-rated bonds.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
<PAGE>
- ----------------------------------------------------
VALUE
MARCH 31, 1998 SHARES (000)!
- ----------------------------------------------------
U.S. COMMON STOCKS (42.2%)
- ----------------------------------------------------
BANKS (1.8%)
BankBoston Corp. 7,100 $ 783
Chase Manhattan Corp. 6,715 906
Citicorp 6,200 880
First Union Corp. 15,715 892
- ----------------------------------------------------
GROUP TOTAL 3,461
- ----------------------------------------------------
BASIC RESOURCES (1.9%)
Bowater, Inc. 9,000 508
Champion International Corp. 12,800 695
E.I. DuPont de Nemours & Co. 15,850 1,078
* Grace Specialty Chemicals 7,600 140
PPG Industries, Inc. 6,500 441
Praxair, Inc. 8,100 417
Solutia, Inc. 13,800 410
- ----------------------------------------------------
GROUP TOTAL 3,689
- ----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (0.6%)
Anheuser-Busch Cos., Inc. 8,700 403
Coca Cola Enterprises, Inc. 9,800 359
Dial Corp. 12,200 292
- ----------------------------------------------------
GROUP TOTAL 1,054
- ----------------------------------------------------
CONSUMER DURABLES (3.1%)
Chrysler Corp. 10,000 416
Ford Motor Corp. 44,800 1,974
General Motors Corp. 24,888 1,678
Goodyear Tire & Rubber Co. 10,500 795
LucasVarity plc ADR 20,500 847
Owens Corning 10,400 374
- ----------------------------------------------------
GROUP TOTAL 6,084
- ----------------------------------------------------
CONSUMER SERVICES (2.6%)
* Cendant Corp. 32,504 1,288
* Clear Channel Communications,
Inc. 7,000 686
News Corp., Ltd. ADR 21,900 504
Service Corp. International 22,200 942
* TCI Satellite Entertainment,
Inc., Class A 100 1
* Tele-Communications, Inc.,
Class A 17,606 547
* Tele-Communications Liberty
Media Group, Class A 24,893 856
* Tele-Communications TCI
Ventures Group., Class A 12,088 212
- ----------------------------------------------------
GROUP TOTAL 5,036
- ----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
124
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
SHARES (000)!
- ----------------------------------------------------
CREDIT & FINANCE/
INVESTMENT COMPANIES (1.2%)
American Express Co. 4,100 $ 376
Associates First Capital Corp.,
Class A 3,441 272
Bear Stearns Co., Inc. 5,355 275
CMAC Investment Corp. 3,800 254
Lehman Brothers Holdings, Inc. 5,200 389
SLM Holdings Corp. 18,600 812
- ----------------------------------------------------
GROUP TOTAL 2,378
- ----------------------------------------------------
ENERGY (3.5%)
Atlantic Richfield Co. 5,300 417
British Petroleum plc ADR 8,400 723
Coastal Corp. 12,900 840
Columbia Gas System, Inc. 6,900 537
Diamond Offshore Drilling, Inc. 8,200 372
ENSCO International, Inc. 6,700 186
* Global Marine, Inc. 7,600 188
Mobil Corp. 5,800 444
* Nabors Industries, Inc. 11,800 280
Phillips Petroleum Co. 14,400 719
* R & B Falcon Corp. 13,700 406
Schlumberger Ltd. 5,800 439
Texaco, Inc. 13,800 831
USX-Marathon Group 11,800 444
- ----------------------------------------------------
GROUP TOTAL 6,826
- ----------------------------------------------------
FOOD, TOBACCO & OTHER (1.8%)
Philip Morris Cos., Inc. 56,600 2,360
RJR Nabisco Holdings Corp. 34,340 1,075
- ----------------------------------------------------
GROUP TOTAL 3,435
- ----------------------------------------------------
HEALTH CARE (2.7%)
American Home Products Corp. 4,800 458
Baxter International, Inc. 15,600 860
Bristol-Myers Squibb Co. 5,900 615
* Health Management Associates,
Class A 14,750 422
* HEALTHSOUTH Rehabilitation
Corp. 16,500 463
* Lincare Holdings, Inc. 9,200 650
Merck & Co., Inc. 7,900 1,014
Mylan Labs, Inc. 6,900 159
* Tenet Healthcare Corp. 16,800 610
- ----------------------------------------------------
GROUP TOTAL 5,251
- ----------------------------------------------------
<PAGE>
VALUE
SHARES (000)!
- ----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (5.6%)
Aeroquip-Vickers, Inc. 9,800 567
* AMR Corp. 4,500 644
Case Corp. 18,400 1,254
Cummins Engine Co., Inc. 25,700 1,417
Eaton Corp. 1,600 152
* FMC Corp. 8,300 651
Harnischfeger Industries, Inc. 11,700 400
Lockheed Martin Corp. 15,500 1,744
Textron, Inc. 6,600 $ 508
United Technologies Corp. 18,000 1,662
Waste Management, Inc. 44,100 1,359
York International Corp. 14,200 639
- ----------------------------------------------------
GROUP TOTAL 10,997
- ----------------------------------------------------
INSURANCE (2.7%)
Allstate Corp. 4,600 423
Exel Ltd. 13,400 1,039
Everest Reinsurance Holdings,
Inc. 9,000 370
Hartford Financial Services
Group (The), Inc. 12,800 1,389
Loews Corp. 14,600 1,522
Travelers Property Casualty
Corp., Class A 9,800 431
- ----------------------------------------------------
GROUP TOTAL 5,174
- ----------------------------------------------------
MID CAP GROWTH (2.4%)
* BMC Software, Inc. 5,400 452
* Borders Group, Inc. 11,700 398
Cintas Corp. 8,300 429
Danaher Corp. 6,000 456
Estee Lauder Cos., Class A 6,200 421
* Globalstar Telecommunications
Ltd. 12,144 770
* Health Management Associates,
Class A 15,837 453
* Lincare Holdings, Inc. 9,300 657
Linear Technology Corp. 2,300 159
* Loral Space & Communications
Ltd. 16,100 450
- ----------------------------------------------------
GROUP TOTAL 4,645
- ----------------------------------------------------
RETAIL (2.2%)
* CompUSA, Inc. 26,600 692
CVS Corp. 8,500 642
* Federated Department Stores,
Inc. 9,000 466
Home Depot, Inc. 6,500 438
* Office Depot, Inc. 29,700 924
* Polo Ralph Lauren Corp. 7,500 226
Ross Stores, Inc. 4,900 216
Wal-Mart Stores, Inc. 13,500 686
- ----------------------------------------------------
GROUP TOTAL 4,290
- ----------------------------------------------------
TECHNOLOGY (4.4%)
* Applied Material, Inc. 10,200 360
* Bay Networks, Inc. 16,000 434
* BMC Software, Inc. 9,600 805
* Cisco Systems, Inc. 11,750 803
Compaq Computer Corp. 11,200 290
Intel Corp. 8,300 648
* Microsoft Corp. 28,900 2,586
* Network Associates, Inc. 9,300 616
* SCI Systems, Inc. 10,300 367
* Seagate Technology, Inc. 14,400 364
* Tellabs, Inc. 7,900 530
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
125
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- ----------------------------------------------------
* 3Com Corp. 10,100 $ 363
Xerox Corp. 3,700 394
- ----------------------------------------------------
GROUP TOTAL 8,560
- ----------------------------------------------------
UTILITIES (2.2%)
* Airtouch Communications, Inc. 9,100 445
MCI Communications Corp. 19,500 965
SBC Communications, Inc. 22,200 969
Sprint Corp. 13,400 907
* WorldCom, Inc. 23,520 1,013
- ----------------------------------------------------
GROUP TOTAL 4,299
- ----------------------------------------------------
VALUE (3.5%)
* Arrow Electronics, Inc. 28,900 782
Case Corp. 12,500 852
Chase Manhattan Corp. 8,000 1,079
* Federated Department Stores,
Inc. 22,800 1,181
Great Lakes Chemical Corp. 17,100 923
IMC Global, Inc. 23,000 876
Mallinckrodt, Inc. 20,500 810
* Maxicare Health Plans, Inc. 34,200 376
- ----------------------------------------------------
GROUP TOTAL 6,879
- ----------------------------------------------------
TOTAL U.S. COMMON STOCKS (Cost $64,834) 82,058
- ----------------------------------------------------
PREFERRED STOCKS (0.6%)
- ----------------------------------------------------
RATINGS
(STANDARD
& POOR'S)
----------
INDUSTRIALS (0.3%)
Time Warner, Inc.,
Series M,
10.25% BB+ 571 640
- -----------------------------------------------------
MORTGAGE-OTHER (0.3%)
(+)+ Home Ownership
Funding Corp.,
13.331% Aaa 600 576
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $1,197) 1,216
- -----------------------------------------------------
U.S. FIXED INCOME (20.0%)
- -----------------------------------------------------
FIXED INCOME SECURITIES (20.0%)
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT
& POOR'S) (000)
---------- -------
ADJUSTABLE RATE MORTGAGES (0.8%)
## Government National
Mortgage Association
Various Pools:
6.00%, 9/20/27-
11/20/27 Tsy $ 1,611 1,633
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
AGENCY FIXED RATE MORTGAGES (5.3%)
Federal Home Loan
Mortgage Corporation
May TBA
6.50%, 5/15/28 Agy $ 9,000 $ 8,901
Federal National
Mortgage Association
May TBA
6.50%,
8/15/24-5/15/28 Agy 1,500 1,482
- -----------------------------------------------------
GROUP TOTAL 10,383
- -----------------------------------------------------
ASSET BACKED CORPORATES (1.6%)
Advanta Mortgage Loan
Trust,
Series:
97-3 A2
6.61%, 4/25/12 AAA 150 150
97-4 A2
6.53%, 9/25/12 AAA 150 150
ALPS, Series 94-1 C2 CMO
9.35%, 9/15/04 BBB 99 101
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 175 176
97-D A3
6.20%, 5/15/03 AAA 200 201
CIT Group Home Equity
Loan Trust, Series
97-1 A3
6.25%, 9/15/11 AAA 100 100
Daimler Benz Auto
Grantor Trust, Series
97-A A
6.05%, 3/31/05 AAA 123 123
First Plus Home Loan
Trust,
Series:
97-3 A2
6.48%, 9/10/08 AAA 100 101
97-3 A3
6.57%, 10/10/10 AAA 100 100
First Security Auto
Grantor Trust, Series
97-B A
6.10%, 4/15/03 AAA 210 210
(+) Federal Mortgage
Acceptance Corp. Loan
Receivables Trust,
Series 97-A A
7.35%, 4/15/19 AAA 238 247
Ford Credit Auto Owner
Trust, Series 97-B A3
6.05%, 4/15/01 AAA 250 251
Honda Auto Receivables
Grantor Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 201 201
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
126
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)+
- -----------------------------------------------------
97-B A
5.95%, 5/15/03 AAA $ 143 $ 143
(+) Long Beach
Acceptance Auto
Grantor Trust, Series
97-2 A
6.69%, 9/25/04 AAA 105 105
@ NAL Auto Trust,
Series 96-4 A
6.90%, 12/15/00 N/R (2)-- --
Nissan Auto Receivables
Grantor Trust,
Series 97-A A
6.15%, 2/15/03 AAA 204 204
(+) Rental Car
Finance Corp.,
Series 97-1 A2
6.45%, 4/25/03 AA 200 200
WFS Financial Owner
Trust,
Series 97-C A3
6.01%, 3/20/02 AAA 160 160
UCFC Home Equity Loan,
Series 98 A A1
5.70%, 7/15/11 AAA 250 250
- -----------------------------------------------------
GROUP TOTAL 3,173
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (0.1%)
Federal Home Loan
Mortgage Corporation,
Series 1632-SA Inv Fl
REMIC
5.229%, 11/15/23 Agy 75 67
Federal National
Mortgage Association,
Series 92-89 SQ Inv Fl
IO PAC (11)
3353.206%, 6/25/22 Agy (2)-- 27
- -----------------------------------------------------
GROUP TOTAL 94
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.9%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 155 164
Bear Stearns Mortgage
Securities, Inc.,
Series 96-9 AI11
8.00%, 6/15/26 AAA 150 156
Countrywide Mortgage
Backed Securities,
Inc., Series 93-C A11
6.50%, 1/25/24 AAA 142 138
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 188 202
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Residential Accredit
Loans, Inc.,
Series:
97-QS12 A7 REMIC
7.25%, 11/25/27 AAA $ 175 $ 175
98-QS4 A15
7.00%, 3/25/28 AAA 600 598
Residential Asset
Securitization Trust,
Series 96-A11 A9
7.75%, 2/25/27 AAA 175 181
Residential Funding
Mortgage Securities
Co., Inc., Series
94-S1 A19
6.75%, 1/25/24 AAA 190 188
- -----------------------------------------------------
GROUP TOTAL 1,802
- -----------------------------------------------------
COMMERCIAL MORTGAGES (1.8%)
American Southwest
Financial Securities
Corp.,
Series:
++ 93-2 A1
7.30%, 1/18/09 AA 125 127
+ 95-C1 A1B
7.40%, 11/17/04 Aaa 150 155
Asset Securitization
Corp.,
Series:
95-D1 A1
7.59%, 8/11/27 AAA 116 123
## 95-MD4 A1
7.10%, 8/13/29 AAA 217 226
++## 95-MD4 A CS2 IO
2.364%, 8/13/29 AAA 736 128
(+)+ 96-D3 A1C
7.40%, 10/13/26 Aaa 150 160
96-MD6 A1C
7.04%, 11/13/26 AAA 125 130
Beverly Finance Corp.,
Series 94-1
8.36%, 7/15/04 AA- 100 108
(+) Carousel Center
Finance, Inc., Series
1 A1
6.828%, 11/15/07 AA 100 102
Chase Commercial
Mortgage Securities
Corp.,
Series 96-2 B
6.90%, 10/19/06 AA 175 179
(+) DLJ Mortgage Acceptance
Corp.,
Series:
96-CF1 A1B
7.58%, 3/13/28 AAA 150 160
96-CF2 A1B
7.29%, 11/12/21 AAA 135 142
97-CF1 A1B
7.60%, 4/15/07 AAA 125 134
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
127
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ------------------------------------------------------------
First Union-Lehman
Brothers Commercial
Mortgage Trust,
Series:
+ 97-C1 A2
7.30%, 12/18/06 Aaa $ 175 $ 184
97-C2 A3
6.65%, 12/18/07 AAA 175 178
+ GMAC Commercial
Mortgage Securities,
Inc.,
Series:
97-C2 A3
6.566%, 11/15/07 Aaa 175 177
## 97-C2 X IO
1.273%, 4/15/27 Aaa 1,522 115
+ GS Mortgage Securities
Corp. II,
Series 97-GL A2D
6.94%, 7/13/30 Aaa 100 104
J.P. Morgan Commercial
Mortgage Finance
Corp., Series 97-C5 A2
7.069%, 9/15/29 AAA 150 157
+## LB Commercial
Conduit Mortgage
Trust,
Series:
96-C2 A
7.424%, 10/25/26 Aaa 168 176
98-C1 IO
1.199%, 2/18/28 Aaa 1,300 87
+ Midland Realty
Acceptance Corp.,
Series 96-C2 A2
7.233%, 1/25/29 Aaa 100 104
Mortgage Capital
Funding, Inc.,
Series:
95-MC1 A1B
7.60%, 5/25/27 AAA 125 128
+ 97-MC2 A2
6.664%, 9/20/07 Aaa 200 203
- -----------------------------------------------------
GROUP TOTAL 3,487
- -----------------------------------------------------
ENERGY (0.2%)
(+) Excel Paralubes
Funding
7.43%, 11/1/15 A- 200 207
Mobile Energy Services
8.665%, 1/1/17 BBB- 93 100
- -----------------------------------------------------
GROUP TOTAL 307
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
FINANCE (1.3%)
(+) Anthem Insurance Cos.,
Inc.,
Series A
9.00%, 4/1/27 BBB+ 100 107
(+) BankAmerica
Institutional,
Series A
8.07%, 12/31/26 A- 200 213
(+) BT Institutional
Capital
(+) BT Institutional
Capital
Trust, Series A
8.09%, 12/1/26 BBB+ $ 225 $ 233
(+) Equitable Life
Assurance Society of
the U.S., Series 1A
6.95%, 12/1/05 A 100 103
(+) First Chicago NBD Corp.,
Series A
7.95%, 12/1/26 A- 180 189
First Union
Institutional Capital,
Series I
8.04%, 12/1/26 BBB+ 225 239
(+) Florida Windstorm
6.70%, 8/25/04 A- 175 176
(+) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A+ 250 250
NB Capital Trust
8.25%, 4/15/27 A- 75 82
PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 150 157
(+) Prime Property
Funding II
7.00%, 8/15/04 A 120 122
(+) State Street
Institutional Capital,
Series A
7.94%, 12/30/26 A 125 133
Washington Mutual
Capital
8.375%, 6/1/27 BBB- 75 81
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 25 26
(+) Wells Fargo Capital,
Series A
8.125%, 12/1/26 BBB+ 200 212
(+) World Financial
Properties,
Series 96 WFP-B
6.91%, 9/1/13 AA- 247 254
- -----------------------------------------------------
GROUP TOTAL 2,577
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
128
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
INDUSTRIALS (1.3%)
American Standard Cos.
7.375%, 2/1/08 BB- 305 300
Columbia/HCA Healthcare
7.58%, 9/15/25 BBB 75 68
9.00%, 12/15/14 BBB 50 52
DR Structured Finance,
Series:
93-K1 A2
7.43%, 8/15/18 BB 180 158
94-K1 A1
7.60%, 8/15/07 BB 81 80
94-K2 A2
9.35%, 8/15/19 BB 230 239
Fred Meyer, Inc.
7.375%, 3/1/05 BB+ 240 240
News America Holdings
8.875%, 4/26/23 BBB- 125 147
(+) Oxymar
7.50%, 2/15/16 BBB $ 100 $ 102
Paramount
Communications, Inc.
8.25%, 8/1/22 BB+ 480 494
Philip Morris Cos., Inc.
7.00%, 7/15/05 A 70 72
Rhone-Poulenc Rorer,
Inc., Series 92-A 3
8.62%, 1/5/21 BBB- 100 110
Scotia Pacific Holding
Co.
7.95%, 7/20/15 BBB 100 105
Southland Corp.
5.00%, 12/15/03 BB+ 496 434
- -----------------------------------------------------
GROUP TOTAL 2,601
- -----------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITIES-
AGENCY COLLATERAL SERIES (0.4%)
Federal Home Loan
Mortgage Corporation,
Series 1911 C PO
11/15/23 Agy 100 59
Federal National
Mortgage Association,
Series:
96-34 C PO
3/25/23 Agy 225 134
249 1 PO
10/25/23 Agy 456 320
260 1 PO
4/1/24 Agy 104 80
282 1 PO
9/1/25 Agy 274 202
- -----------------------------------------------------
GROUP TOTAL 795
- -----------------------------------------------------
TELEPHONES (0.5%)
Cablevision Systems
Corp.
7.875%, 12/15/07 BB+ 115 118
CalEnergy Co., Inc.
7.63%, 10/15/07 BB+ 115 115
CSC Holdings, Inc
7.875%, 12/15/07 BB+ 100 103
(+) Lenfest Communications,
Inc.
7.625%, 2/15/08 BB+ 55 55
(+)# Qwest
Communications, Inc.
0.00%, 2/1/08 B+ 405 286
# Teleport
Communications Group,
Inc.
0.00%, 7/1/07 B+ 215 185
- -----------------------------------------------------
GROUP TOTAL 862
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
TRANSPORTATION (0.2%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ $ 190 $ 190
(+) Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 125 158
- -----------------------------------------------------
GROUP TOTAL 348
- -----------------------------------------------------
U.S. TREASURY SECURITIES (3.4%)
U.S. Treasury Notes
3.375%, 1/15/07
(Inflation Indexed) Tsy 1,478 1,433
3.625%, 7/15/02
(Inflation Indexed) Tsy 730 723
3.625%, 1/15/08
(Inflation Indexed) Tsy 1,025 1,012
6.25%, 4/30/01 Tsy 1,000 1,017
6.375%, 3/31/01 Tsy 500 510
7.125%, 9/30/99 Tsy 1,475 1,507
7.125%, 2/29/00 Tsy 400 411
- -----------------------------------------------------
GROUP TOTAL 6,613
- -----------------------------------------------------
UTILITIES (0.1%)
CMS Energy Corp, Series
B
7.375%, 11/15/00 BB 85 86
(+) Edison Mission
Energy Funding Corp.,
Series B
7.33%, 9/15/08 BBB 100 104
- -----------------------------------------------------
GROUP TOTAL 190
- -----------------------------------------------------
YANKEE (2.1%)
(+) Alcoa Aluminio SA,
Series 96-1
7.50%, 12/16/08 BBB 163 163
(+) AST Research, Inc.
7.45%, 10/1/02 B+ 405 363
(+) Glencore Nickel Property,
Ltd.
9.00%, 12/1/14 BB+ 105 104
Grupo Minero Mexicano SA
de CV, Series A
8.25%, 4/1/08 BB 345 342
(+) Hutchison Whampoa
Financial, Series B
7.45%, 8/1/17 A+ 225 207
(+) Hyundai
Semiconductor America
8.625%, 5/15/07 BB 110 90
(+) Israel Electric
Corp., Ltd.
7.25%, 12/15/06 A- 30 31
7.75%, 12/15/27 A- 140 142
Korea Development Bank
7.375%, 9/17/04 BB+ 380 345
National Power Corp.
7.875%, 12/15/06 BB+ 105 96
8.40%, 12/15/16 BB+ 90 78
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
129
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
(+) Paiton Energy
Funding
9.34%, 2/15/14 CCC $ 100 $ 48
(+) Petroliam Nasional
Bhd.
7.125%, 10/18/06 A+ 225 209
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BBB 200 210
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 215 223
# Republic of Argentina
Par, Series L
5.75%, 3/31/23 BB 480 367
Republic of Colombia
8.70%, 2/15/16 BBB- 165 161
Rogers Cablesystems Ltd.
10.00%, 3/15/05 BB+ 180 202
Rogers Cantel, Inc.
8.30%, 10/1/07 BB+ 225 226
(+) Samsung Electronics
Co.
7.45%, 10/1/02 B+ 150 134
United Mexican States
Par Bond, Series B
6.25%, 12/31/19 BB 450 381
- -----------------------------------------------------
GROUP TOTAL 4,122
- -----------------------------------------------------
TOTAL U.S. FIXED INCOME (Cost $38,383) 38,987
- -----------------------------------------------------
INTERNATIONAL FIXED INCOME (2.2%)
- -----------------------------------------------------
FIXED INCOME SECURITIES (2.2%)
- -----------------------------------------------------
AUSTRALIAN DOLLAR (0.1%)
Commonwealth of Australia
10.00%, 2/15/06 AAA AUD 50 42
Federal National
Mortgage Association
6.50%, 7/10/02 Agy 85 58
- -----------------------------------------------------
GROUP TOTAL 100
- -----------------------------------------------------
BRITISH POUND (0.2%)
United Kingdom Treasury Bill
8.50%, 7/16/07 AAA GBP 240 474
- -----------------------------------------------------
CANADIAN DOLLAR (0.1%)
Government of Canada
7.50%, 3/1/01 AAA CAD 160 120
9.75%, 6/1/21 AA+ 50 53
- -----------------------------------------------------
GROUP TOTAL 173
- -----------------------------------------------------
DANISH KRONE (0.1%)
Kingdom of Denmark
8.00%, 5/15/03 AA+ DKK 275 45
8.00%, 3/15/06 AA+ 750 127
- -----------------------------------------------------
GROUP TOTAL 172
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ---------------------------------------------------------
GERMAN MARK (0.7%)
Government of Germany
+5.75%, 8/22/00 Aaa DEM 355 $ 199
6.00%, 1/5/06 Agy 175 102
6.25%, 1/4/24 AAA 230 138
7.125%, 1/29/03 AAA 170 102
7.50%, 9/9/04 AAA 410 255
8.375%, 5/21/01 AAA 875 528
International Bank for
Reconstruction &
Development
7.125%, 4/12/05 AAA 175 107
- ---------------------------------------------------------
GROUP TOTAL 1,431
- ---------------------------------------------------------
ITALIAN LIRA (0.3%)
Republic of Italy BTPS
9.50%, 2/1/06 AAA ITL 315,000 222
10.00%, 8/1/03 AA 410,000 278
- ---------------------------------------------------------
GROUP TOTAL 500
- ---------------------------------------------------------
JAPANESE YEN (0.5%)
European Investment Bank
3.00%, 9/20/06 AAA JPY 4,000 33
Export-Import Bank of Japan
2.875%, 7/28/05 AAA 30,000 243
International Bank for
Reconstruction &
Development
4.75%, 12/20/04 BB+ 23,200 210
6.75%, 6/18/01 AAA 52,000 461
- ---------------------------------------------------------
GROUP TOTAL 947
- ---------------------------------------------------------
SOUTH AFRICAN RAND (0.0%)
Republic of South Africa
13.00%, 8/31/10 BBB+ ZAR 225 44
- ---------------------------------------------------------
SWEDISH KRONA (0.2%)
Swedish Government
6.00%, 2/9/05 AAA SEK 1,600 210
13.00%, 6/15/01 AA+ 1,200 185
- ---------------------------------------------------------
GROUP TOTAL 395
- ---------------------------------------------------------
TOTAL INTERNATIONAL FIXED INCOME (Cost
$4,425) 4,236
- ---------------------------------------------------------
INTERNATIONAL EQUITY (17.3%)
- ---------------------------------------------------------
COMMON STOCKS (16.7%)
- ---------------------------------------------------------
SHARES
------
ARGENTINA (0.8%)
* Banco Rio de La Plata SA ADR 23,600 295
YPF SA ADR 38,300 1,302
- ---------------------------------------------------------
GROUP TOTAL 1,597
- ---------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
130
<PAGE>
STATEMENT OF NET ASSETS
- -------------------------------------------------------------------------------
VALUE
SHARES (000)!
- -----------------------------------------------------
AUSTRIA (0.3%)
OMV AG 5,350 $ 690
- -----------------------------------------------------
CANADA (0.2%)
TransCanada Pipelines Ltd. 15,900 375
- -----------------------------------------------------
FRANCE (2.6%)
Credit Local de France 6,100 818
Elf Aquitaine 6,710 880
Groupe Danone 3,150 761
Lafarge SA 8,000 681
Lagardere S.C.A. 9,000 363
Rhone-Poulenc 13,300 676
Scor 15,110 866
- -----------------------------------------------------
GROUP TOTAL 5,045
- -----------------------------------------------------
GERMANY (1.8%)
Deutsche Bank AG 11,750 881
Deutsche Lufthansa AG 32,000 673
Deutsche Telekom AG 15,000 328
Henkel KGaA 9,790 705
RWE AG 6,000 323
Springer (Axel) Verlag AG 770 662
- -----------------------------------------------------
GROUP TOTAL 3,572
- -----------------------------------------------------
GREECE (0.4%)
Hellenic Telecommunication
Organization SA 15,500 388
* National Bank of Greece SA 3,600 395
- -----------------------------------------------------
GROUP TOTAL 783
- -----------------------------------------------------
HONG KONG (0.5%)
Hong Kong Telecommunications
Ltd. 25,000 52
* Hong Kong Telecommunications
Ltd. ADR 6,100 128
HSBC Holdings plc 15,600 477
Jardine Strategic Holdings
Ltd. 95,000 260
- -----------------------------------------------------
GROUP TOTAL 917
- -----------------------------------------------------
INDIA (0.1%)
* Jardine Fleming India Fund,
Inc. 36,200 262
- -----------------------------------------------------
INDONESIA (0.1%)
* Gulf Indonesia Resources
Ltd. 7,800 140
Lippo Securities 1,174,800 41
Pabrik Kertas Tjiwi Kimia 73,000 17
- -----------------------------------------------------
GROUP TOTAL 198
- -----------------------------------------------------
<PAGE>
VALUE
SHARES (000)!
- -----------------------------------------------------
ITALY (1.5%)
* Banca di Roma 411,000 694
ENI S.p.A. 124,300 847
Pirelli S.p.A. 162,000 $ 622
Telecom Italia S.p.A. 111,004 681
- -----------------------------------------------------
GROUP TOTAL 2,844
- -----------------------------------------------------
JAPAN (1.4%)
Bridgestone Corp. 21,000 476
Fuji Electric Co., Ltd. 113,000 387
Nintendo Corp., Ltd. 4,000 345
Nippon Telegraph & Telephone
Corp. 36 300
Promise Co., Ltd. 6,100 316
Takefuji Corp. 7,000 331
TDK Corp. 7,000 541
- -----------------------------------------------------
GROUP TOTAL 2,696
- -----------------------------------------------------
MEXICO (0.3%)
* Tubos de Acero de Mexico SA 34,000 638
- -----------------------------------------------------
NETHERLANDS (0.8%)
ING Groep N.V. 13,207 750
Philips Electronics N.V. 9,900 727
- -----------------------------------------------------
GROUP TOTAL 1,477
- -----------------------------------------------------
NORWAY (0.5%)
Christiania Bank OG
Kreditkasse 226,100 961
- -----------------------------------------------------
RUSSIA (0.1%)
Lukoil Holding ADR 3,700 260
- -----------------------------------------------------
SINGAPORE (0.2%)
* Creative Technology Ltd. 14,500 326
- -----------------------------------------------------
SPAIN (0.3%)
Telefonica de Espana 15,500 684
- -----------------------------------------------------
SWEDEN (1.5%)
* Astra AB, Class A 25,000 516
* Nordbanken Holding AB 114,100 757
Pharmacia & Upjohn, Inc.-
Depositary Shares 12,600 544
Sparbanken Sverige AB, Class A 30,585 1,009
- -----------------------------------------------------
GROUP TOTAL 2,826
- -----------------------------------------------------
SWITZERLAND (0.2%)
* Swissair AG (Registered) 281 393
- -----------------------------------------------------
UNITED KINGDOM (3.0%)
Bank of Scotland 55,300 655
Burmah Castrol plc 29,000 592
FKI plc 75,000 255
Imperial Tobacco Group plc 61,800 455
LucasVarity plc 117,000 473
National Westminister Bank plc 34,576 633
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
131
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
VALUE
(CONT'D) SHARES (000)!
- -----------------------------------------------------
Pilkington plc 253,000 $ 513
Rank Group plc 93,015 629
Royal & Sun Alliance Insurance
Group plc 32,034 408
Sainsbury J. plc 55,422 476
Somerfield plc 41,000 246
Tomkins plc 88,844 541
- -----------------------------------------------------
GROUP TOTAL 5,876
- -----------------------------------------------------
UNITED STATES (0.1%)
* The India Fund, Inc. 25,100 182
- -----------------------------------------------------
TOTAL INTERNATIONAL EQUITY (Cost $26,412) 32,602
- -----------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.1%)
- -----------------------------------------------------
JAPAN (0.1%)
* Sanwa International Finance
Bermuda Trust, 1.25% (Cost
$235) 10 221
- -----------------------------------------------------
PREFERRED STOCKS (0.5%)
- -----------------------------------------------------
BRAZIL (0.5%)
Eletrobras, Class B 7,400,000 366
Telesp 1,592,000 517
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $830) 883
- -----------------------------------------------------
HIGH YIELD (9.2%)
- -----------------------------------------------------
FIXED INCOME SECURITIES (9.1%)
- -----------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT
& POOR'S) (000)
--------- -------
ASSET BACKED CORPORATES (0.2%)
(+) Commercial Financial
Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 A $ 145 146
(+)+ Long Beach
Acceptance Auto
Grantor Trust, Series
97-1 B
14.22%, 10/26/03 Ba3 208 208
(+) OHA Auto Grantor
Trust,
Series 97-A
11.00%, 9/15/03 BB 127 125
- -----------------------------------------------------
GROUP TOTAL 479
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
CABLE (0.4%)
Cablevision Systems
Corp.
7.875%, 12/15/07 BB+ 265 273
Lenfest Communications,
Inc.
8.375%, 11/1/05 BB+ 200 208
Rogers Cablesystems Ltd.
10.125%, 9/1/12 BB+ $ 175 $ 193
Rogers Communications,
Inc.
9.125%, 1/15/06 BB- 50 51
- -----------------------------------------------------
GROUP TOTAL 725
- -----------------------------------------------------
CHEMICALS (0.2%)
ISP Holdings, Inc.,
Series B
9.00%, 10/15/03 B+ 415 436
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.0%)
+ Citicorp Mortgage
Securities, Inc.,
Series 90-8 A7
9.50%, 6/25/05 B3 28 15
- -----------------------------------------------------
COMMERCIAL MORTGAGES (0.2%)
CBM Funding Corp.,
Series 96-1B D
8.645%, 2/1/08 AA 125 135
(+)+ DLJ Mortgage
Acceptance Corp.,
Series 97-CF2 S IO
0.356%, 10/15/17 Aaa 3,991 105
++ Federal Mortgage
Acceptance Corp. Loan
Receivables Trust,
Series 96-B C 1
7.929%, 11/1/18 BB 97 87
- -----------------------------------------------------
GROUP TOTAL 327
- -----------------------------------------------------
COMMUNICATIONS (1.7%)
Comcast Cellular
Holdings Corp., Series
B
9.50%, 5/1/07 BB+ 260 276
(+) Concentric Network
Corp.
12.75%, 12/15/07 N/R 100 118
Esprit Telecom Group plc
11.50%, 12/15/07 B- DEM 400 237
(+) Flag Ltd.
8.25%, 1/30/08 B+ $ 90 92
Globalstar LP/Capital
11.375%, 2/15/04 B 125 131
# Intermedia
Communications, Inc.,
Series B
0.00%, 7/15/07 B 600 451
Iridium Capital Corp.,
Series A
13.00%, 7/15/05 B- 70 78
IXC Communications,
Inc., PIK, Series B
12.50%, 8/15/09 B 200 238
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
132
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
# Nextel Communications,
Inc.
0.00%, 8/15/04 CCC+ $ 610 $ 587
0.00%, 9/15/07 CCC 265 178
Qwest Communications
International Inc.,
Series B
10.875%, 4/1/07 B+ 65 75
+# RCN Corp
0.00%, 10/15/07 B3 300 201
RSL Communications plc
# 0.00%, 3/15/08 B- 450 150
(+) 9.125%, 3/1/08 B- 170 172
12.25%, 11/15/06 B- 25 29
# Telesystems
International
Wireless, Inc., Series
C
0.00%, 11/1/07 B- 400 253
- -----------------------------------------------------
GROUP TOTAL 3,266
- -----------------------------------------------------
CONSUMER MANUFACTURING (0.1%)
(+) Revlon Consumer
Products
8.125%, 2/1/06 B 200 203
- -----------------------------------------------------
ENERGY (0.2%)
Nuevo Energy Co.
9.50%, 4/15/06 B+ 145 154
Snyder Oil Corp.
8.75%, 6/15/07 B+ 200 206
- -----------------------------------------------------
GROUP TOTAL 360
- -----------------------------------------------------
FINANCE (0.7%)
(+)## IBJ Preferred
Capital Co. LLC,
Series A
8.79%, 12/29/49 BBB- 565 544
(+)## SB Treasury Co.
LLC,
Series A
9.40%, 12/29/49 BBB- 545 564
Western Financial Bank
8.875%, 8/1/07 BB+ 250 241
- -----------------------------------------------------
GROUP TOTAL 1,349
- -----------------------------------------------------
FOOD & BEVERAGE (0.1%) Ameriserve Food Co.
10.125%, 7/15/07 B- 65 70
(+) Smithfield Foods,
Inc.
7.625%, 2/15/08 BB+ 80 79
- -----------------------------------------------------
GROUP TOTAL 149
- -----------------------------------------------------
GAMING (0.1%)
Station Casinos, Inc.
9.75%, 4/15/07 B+ 100 113
10.125%, 3/15/06 B+ 100 112
- -----------------------------------------------------
GROUP TOTAL 225
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
GENERAL INDUSTRIAL (0.1%)
Geberit International SA
10.125%, 4/15/07 B+ DEM 130 $ 80
Navistar Financial
Corp.,
Series B
9.00%, 6/1/02 B+ $ 35 37
# Norcal Waste Systems,
Inc.
13.50%, 11/15/05 BB- 100 116
- -----------------------------------------------------
GROUP TOTAL 233
- -----------------------------------------------------
HEALTHCARE (0.5%)
Columbia/HCA Healthcare
6.91%, 6/15/05 BBB 445 418
(+) Fresenius Medical
Capital Trust II
7.875%, 2/1/08 B+ 100 100
(+) Magellan Health
Services, Inc.
9.00%, 2/15/08 B- 115 116
Tenet Healthcare Corp.
8.625%, 1/15/07 B+ 240 250
- -----------------------------------------------------
GROUP TOTAL 884
- -----------------------------------------------------
HOTELS, LODGING & RESTAURANTS (0.1%)
HMC Acquisition
Properties, Series B
9.00%, 12/15/07 BB- 135 143
Host Marriott Travel
Plaza
9.50%, 5/15/05 BB- 100 107
- -----------------------------------------------------
GROUP TOTAL 250
- -----------------------------------------------------
MEDIA & ENTERTAINMENT (0.7%) Criimi Mae, Inc.
9.125%, 12/1/02 BB 200 202
Fox/Liberty Networks LLC
# 0.00%, 8/15/07 B 475 323
8.875%, 8/15/07 B 60 62
Outdoor Systems, Inc.
8.875%, 6/15/07 B 210 220
Sinclair Broadcast
Group, Inc.
9.00%, 7/15/07 B 205 214
(+)# TCI Satellite
Entertainment, Inc.
0.00%, 2/15/07 B- 355 255
- -----------------------------------------------------
GROUP TOTAL 1,276
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
133
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
METALS (0.3%)
(+) EES Coke Battery
Co., Inc.
9.382%, 4/15/07 BB- $ 100 $ 105
Impress Metal Packaging
Holdings
9.875%, 5/29/07 B DEM 300 172
(+) Murrin Murrin
Holdings
9.375%, 8/31/07 BB- $ 355 353
- -----------------------------------------------------
GROUP TOTAL 630
- -----------------------------------------------------
PACKAGING (0.6%)
Columbia/HCA Heathcare
7.00%, 7/1/07 BBB 235 219
Grand Casinos, Inc.
10.125%, 12/1/03 BB 160 174
Integrated Health
Services,
Series A
9.50%, 9/15/07 B 240 255
(+) Pharmerica, Inc.
8.375%, 4/1/08 B 100 101
SD Warren Co.
12.00%, 12/15/04 B+ 130 145
Vencor, Inc.
8.625%, 7/15/07 B+ 165 186
- -----------------------------------------------------
GROUP TOTAL 1,080
- -----------------------------------------------------
RETAIL (0.4%)
(+) CA FM Lease Trust
8.50%, 7/15/17 BBB- 243 254
DR Securitized Lease
Trust, Series 93-K1 A1
6.66%, 8/15/10 BB 338 314
Kmart Funding Corp.,
Series F
8.80%, 7/1/10 BB 275 284
- -----------------------------------------------------
GROUP TOTAL 852
- -----------------------------------------------------
SOVEREIGN & EMERGING MARKETS (1.9%)
Asia Pulp & Paper Co.,
Ltd., Series A
12.00%, 2/15/04 B+ 175 145
Azteca Holdings SA
11.00%, 6/15/02 B- 50 52
## Fuji JGB Investments
LLC,
Series A
9.87%, 12/31/49 BB+ 525 520
(+) Globo Comunicacoes
Participoes
10.50%, 12/20/06 BB- 205 208
Hermes Europe Railtel
11.50%, 8/15/07 B 30 34
(+) Hyundai
Semiconductor America
8.25%, 5/15/04 BB 100 80
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
Korea Electric Power
Corp.
7.75%, 4/1/13 B+ $ 65 $ 55
Multicanal SA
10.50%, 2/1/07 BB- 300 320
(+) Norampac, Inc.
9.50%, 2/1/08 B+ 205 214
(+) NSM Steel, Inc.
12.25%, 2/1/08 CCC 100 96
# Occidente y Caribe
Cellular
0.00%, 3/15/04 B 185 163
Philippine Long Distance
Telephone Co., Series E
7.85%, 3/6/07 BB+ 275 253
(+) Pindo Deli Financial
Mauritius
10.75%, 10/1/07 BB 380 312
Pohang Iron & Steel Co.,
Ltd.
7.125%, 7/15/04 B+ 100 88
# PTC International
Finance BV
0.00%, 7/1/07 B+ 230 161
Quezon Power Ltd.
8.86%, 6/15/17 BB+ 250 219
+# Republic of Argentina
Pre 4 BOCON, PIK
0.00%, 9/1/02 Ba3 85 104
## Republic of
Argentina,
Series L
6.688%, 3/31/05 BB- 283 261
##@ Republic of
Venezuela, Oil Linked
Obligation
0.00%, 4/15/20 B+ 1 --
(+) RG Receivables Ltd.
9.60%, 2/10/05 BB- 210 210
(+) Satelites Mexicanos
SA
10.125%, 11/1/04 B- 105 109
(+) Total Access
Communication PCL
(Convertible)
2.00%, 5/31/06 BBB- 50 34
TV Azteca SA, Series B
10.50%, 2/15/07 B+ 150 161
- -----------------------------------------------------
GROUP TOTAL 3,799
- -----------------------------------------------------
TECHNOLOGY (0.2)
Advanced Micro Devices,
Inc.
11.00%, 8/1/03 BB- 320 342
# NEXTLINK Communication
Co.
0.00%, 4/15/08 B 235 149
- -----------------------------------------------------
GROUP TOTAL 491
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
134
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
TRANSPORTATION (0.2%)
ALPS, Series 96-1 DX
12.75%, 6/15/06 BB- $ 150 $ 150
(+) Jet Equipment Trust,
Series 95-A
11.79%, 6/15/13 BBB- 150 202
- -----------------------------------------------------
GROUP TOTAL 352
- -----------------------------------------------------
UTILITIES (0.2%) (+) AES Corp.
8.50%, 11/1/07 B+ 185 192
Midland Funding Corp. I,
Series C-94
10.33%, 7/23/02 BB- 77 84
Midland Funding II,
Series A
11.75%, 7/23/05 B- 75 89
- -----------------------------------------------------
GROUP TOTAL 365
- -----------------------------------------------------
TOTAL HIGH YIELD (Cost $17,248) 17,746
- -----------------------------------------------------
PREFERRED STOCKS (0.1%)
- -----------------------------------------------------
SHARES
------
COMMUNICATIONS (0.0%)
* IXC Communications,
Inc., PIK
Series B 12.50% CCC+ 77 94
- -----------------------------------------------------
PACKAGING (0.1%)
Sinclair Capital 11.625% B 1,300 144
- -----------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $209) 238
- -----------------------------------------------------
UNITS (0.2%)
- -----------------------------------------------------
COMMUNICATIONS (0.1%)
(+) # Wam ! Net, Inc.
0.00%, 3/1/05 N/R 225 136
- -----------------------------------------------------
TECHNOLOGY (0.1%) (+) AMSC Acquisition Co.
12.25%, 4/1/08 N/R 165 171
- -----------------------------------------------------
TOTAL UNITS (Cost $303) 307
- -----------------------------------------------------
WARRANTS (0.0%)
- -----------------------------------------------------
<PAGE>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- -----------------------------------------------------
COMMUNICATIONS (0.0%)
(+)* Globalstar
Telecommunications
Ltd., expiring 2/15/04 N/R 125 19
(+)* Iridium World
Communications,
expiring 7/15/05 N/R 70 17
*@ Nextel
Communications, Inc.,
expiring 1/1/99 N/R 75 $ --
*@ Occidente y Caribe
Cellular, expiring
3/15/04 N/R 740 --
- -----------------------------------------------------
TOTAL WARRANTS (Cost $14) 36
- -----------------------------------------------------
RIGHTS (0.0%)
- -----------------------------------------------------
MISC-INDUSTRIALS (0.0%)
* Lafarge, expiring
4/8/98 N/R 8,000 10
*@ United Mexican States
Recovery Rights,
expiring 6/30/03 N/R 450,000 --
- -----------------------------------------------------
TOTAL RIGHTS (Cost $0) 10
- -----------------------------------------------------
INTEREST RATE CAP (0.0%)-SEE NOTE A6
- -----------------------------------------------------
FACE
AMOUNT
(000)
-------
J.P. Morgan and Co.,
terminating 10/15/99,
to receive on 10/15/99
the excess, as
measured on 10/15/98,
of the 12 month LIBOR
over 6.34% multiplied
by the notional amount
(Premium Paid $32) AA- $ 7,600 7
- -----------------------------------------------------
CASH EQUIVALENTS (12.5%)
- -----------------------------------------------------
CASH INVESTMENTS-MORTGAGE (3.7%)
Federal Home Loan
Mortgage Corporation
Conventional Pools:
10.00%, 6/1/19 Agy 33 36
10.50%, 4/1/19 Agy 270 296
11.00%, 9/1/16 Agy 96 109
11.50%, 7/1/15-8/1/15 Agy 144 163
Gold Pools:
9.50%, 12/1/16 Agy 209 229
10.00%, 1/1/21 Agy 423 468
11.50%, 1/1/16 Agy 139 156
Series:
## 1933-FM REMIC
6.50%, 3/15/25 Agy 39 39
## 1933-FQ REMIC
6.50%, 3/15/25 Agy 65 65
Federal National
Mortgage Association
Conventional Pools:
10.50%,
11/1/11-6/1/19 Agy 215 243
11.00%, 11/1/20 Agy 123 140
12.50%, 3/1/15 Agy 23 27
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
136
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO (UNAUDITED)
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- -----------------------------------------------------
Series:
## 94-50 FD REMIC
6.20%, 3/25/24 Agy $ 127 $ 128
## 97-43 FM REMIC
6.25%, 7/18/27 Agy 147 148
## 97-70 FA REMIC, PAC
(11)
6.20%, 7/18/20 Agy 79 79
## 97-76 FM
6.20%, 9/17/27 Agy 158 159
## 97-76 FN
6.15%, 9/17/27 Agy 153 154
## 98-22 FA REMIC
6.025%, 4/18/28 Agy 400 401
Government National
Mortgage Association
Adjustable Rate
Mortgages:
7.00%, 3/20/25 Tsy 305 311
7.375%, 4/20/25-
6/20/25 Tsy 877 894
Various Pools:
@ 7.00%, 12/15/23 Tsy (2)-- --
10.00%, 6/15/03-
8/15/20 Tsy 607 676
10.50%,
215/19-5/15/26 Tsy 511 575
11.00%, 7/15/10-
7/15/19 Tsy 448 515
11.50%, 1/15/13-
12/15/17 Tsy 127 147
12.00%, 11/15/12 Tsy 7 8
April TBA
9.50%, 4/15/98 Tsy 875 959
- -----------------------------------------------------
GROUP TOTAL 7,125
- -----------------------------------------------------
REPURCHASE AGREEMENT (8.8%)
Chase Securities, Inc. 5.75%,
dated 3/31/98, due 4/1/98,
to be repurchased at 17,143,
collateralized by various
U.S. Government Obligations,
due 4/1/98-11/15/99, valued
at $17,192 17,141 17,141
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $24,237) 24,266
- -----------------------------------------------------
<PAGE>
FACE
AMOUNT VALUE
(000) (000)!
- -----------------------------------------------------
FOREIGN CURRENCY (2.4%)
- -----------------------------------------------------
Austrian Schilling ATS 12 1
Belgian Franc BEF 24 1
British Pound GBP 1,095 1,835
Canadian Dollar CAD 4 3
French Franc FRF 51 8
German Mark DEM 151 81
Greek Drachma GRD 183,148 573
Indonesian Rupiah IDR 703,613 82
Italian Lira ITL 1,778,545 $ 976
Japanese Yen JPY 64,110 481
Netherlands Guilder NLG 2 1
@ Philippines Peso PHP 15 --
Spanish Peseta ESP 100,558 641
- -----------------------------------------------------
TOTAL FOREIGN CURRENCY (Cost $4,737) 4,683
- -----------------------------------------------------
TOTAL INVESTMENTS (106.6%) (Cost $183,096) 207,496
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.6%)
Cash 141
Foreign Currency Held as Collateral on
Futures Contracts (Cost $69) 69
Dividends Receivable 212
Interest Receivable 1,003
Receivable for Withholding Tax Reclaim 13
Receivable for Investments Sold 32,364
Receivable for Fund Shares Sold 249
Unrealized Gain on Futures Contracts 75
Unrealized Gain on Swap Agreements 5
Unrealized Gain on Forward Foreign Currency
Contracts 20
Other Assets 7
Payable for Investments Purchased (45,648)
Payable for Fund Shares Redeemed (1,015)
Payable for Investment Advisory Fees (272)
Payable for Administrative Fees (13)
Payable for Shareholder Servicing Fees-
Investment Class (1)
Payable for Trustees' Deferred Compensation
Plan-Note F (6)
Other Liabilities (61)
--------
(12,858)
- -----------------------------------------------------
NET ASSETS (100%) $194,638
- -----------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 14,581,177 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $189,093
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.97
- -----------------------------------------------------
INVESTMENT CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 427,633 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 5,545
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.97
- -----------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
137
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
(CONT'D) (000)+
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $162,169
Undistributed Net Investment Income (Loss) 2,026
Undistributed Realized Net Gain (Loss) 5,951
Unrealized Appreciation (Depreciation) on:
Investment Securities 24,454
Foreign Currency (22)
Futures and Swaps 60
- -----------------------------------------------------
NET ASSETS $194,638
- -----------------------------------------------------
! See Note A1 to Financial Statements.
* Non-income producing security
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Fitch rating. Security is not rated by Standard &
Poor's Corporation or Moody's Investors Service,
Inc.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of March 31, 1998.
Maturity date disclosed is the ultimate maturity.
## Variable or floating rate security-rate disclosed
is as of March 31, 1998.
(2) Face amount is less than $500.
@ Value is less than $500.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
Inv Inverse Floating Rate-Interest rate fluctuates with Fl an inverse
relationship to an associated interest
rate. Indicated rate is the effective rate at March
31, 1998.
IO Interest Only
N/R Not rated by Moody's Investors Services, Inc., Standard & Poor's
Corporation of Fitch.
PAC Planned Amortization Class
PCL Public Company Limited
PIK Payment-in-Kind Security
PO Principal Only
REMIC Real Estate Mortgage Investment conduit
TBA Security is subject to delayed delivery. See Note
A8 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
138
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL INTER-
CAP NATIONAL MID CAP
VALUE EQUITY VALUE EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
Six Months Ended March 31, 1998
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ 30,742 $ 8,525 $ 5,084 $ 3,889 $ 490
Interest 13,066 1,809 1,598 476 551
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income 43,808 10,334 6,682 4,365 1,041
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 9,386 3,105 3,289 1,471 1,137
Administrative Fee--Note C 1,501 498 350 236 181
Custodian Fee--Note E 125 68 38 188 66
Audit Fee 15 15 8 29 8
Legal Fee 34 11 8 5 4
Shareholder Servicing Fee--Investment Class
shares--Note D 20 2 -- -- --
Distribution Fees--Adviser Class shares--Note D 387 -- -- -- 10
Other Expenses 227 77 52 37 30
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 11,695 3,776 3,745 1,966 1,436
- ---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note J (125) (68) (12) (55) (66)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 11,570 3,708 3,733 1,911 1,370
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 32,238 6,626 2,949 2,454 (329)
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 160,030 119,697 92,744 43,883 52,750
Foreign Currency Transactions -- -- -- 992 --
Futures (1,589) -- -- 438 --
- ---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 158,441 119,697 92,744 45,313 52,750
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities* 88,938 11,783 (47,845) (9,474) 42,080
Foreign Currency Transactions -- -- -- (1,382) --
Futures (3,948) -- -- (245) --
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 84,990 11,783 (47,845) (11,101) 42,080
- ---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 243,431 131,480 44,899 34,212 94,830
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $275,669 $138,106 $ 47,848 $ 36,666 $ 94,501
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Net of $406 withholding tax for the International Equity Portfolio.
* Net of foreign capital gains tax of $1 on unrealized gains for the
International Equity Portfolio.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
139
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING DOMESTIC
MID CAP MARKETS FIXED FIXED HIGH
VALUE VALUE INCOME INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------
Six Months Ended March 31, 1998
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ 1,171 $ 137 $ 5,264 $ 91 $ 777
Interest 412 82 127,291 2,973 25,215
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income 1,583 219 132,555 3,064 25,992
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 989 $ 68 6,966 $160 1,086
Less: Waived Fees -- (51) 17 -- (5) 155 --
Administrative Fee--Note C 105 7 1,486 34 232
Custodian Fee--Note E 37 55 173 10 31
Audit Fee 8 22 23 7 10
Legal Fee 2 -- 31 1 5
Shareholder Servicing Fee--Investment
Class shares--Note D 8 -- 16 -- 9
Distribution Fees--Adviser Class
shares--Note D -- -- 112 -- 10
Other Expenses 27 4 221 9 39
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,176 105 9,028 216 1,422
- ---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note J (32) -- (173) (3) (25)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1,144 105 8,855 213 1,397
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 439 114 123,700 2,851 24,595
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 19,104 (1,601) 31,947 938 13,561
Foreign Currency Transactions -- (38) 2,866 -- 574
Futures (438) (177) (3,269) 37 (1,448)
- ---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 18,666 (1,816) 31,544 975 12,687
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities* 12,857 (1,796) (20,545) (318) (5,436)
Foreign Currency Transactions -- (8) 2,455 -- 323
Futures and Swaps -- (18) 1,301 (4) 512
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation
(Depreciation) 12,857 (1,822) (16,789) (322) (4,601)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 31,523 (3,638) 14,755 653 8,086
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $31,962 $(3,524) $138,455 $3,504 $32,681
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Net of $10 withholding tax for the Emerging Markets Value Portfolio.
* Net of foreign capital gains tax of $22 on unrealized gains for the Emerging
Markets Value Portfolio.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
140
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL
MORTGAGE- PURPOSE
CASH FIXED BACKED LIMITED FIXED
RESERVES INCOME SECURITIES DURATION INCOME
PORTFOLIO PORTFOLIO II PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------
Six Months Ended March 31, 1998
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ -- $ 314 $ 70 $ 120 $ 943
Interest 3,232 8,212 1,399 5,859 18,727
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income 3,232 8,526 1,469 5,979 19,670
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note
B $142 461 $ 72 282 986
Less: Waived Fees (29) 113 -- (10) 62 -- --
Administrative Fee--Note C 46 98 16 75 211
Custodian Fee--Note E 9 17 5 10 24
Audit Fee 5 9 8 7 14
Legal Fee 1 2 -- 2 5
Shareholder Servicing
Fee--Investment Class shares--Note D -- -- -- -- 1
Other Expenses 11 18 7 18 29
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 185 605 98 394 1,270
- ---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note J (3) (12) (1) (9) (21)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 182 593 97 385 1,249
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 3,050 7,933 1,372 5,594 18,421
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities -- 2,673 511 (74) 6,426
Foreign Currency Transactions -- 197 -- -- 413
Futures -- (360) (120) 216 (2,182)
- ---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) -- 2,510 391 142 4,657
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities -- (1,688) (517) (392) (4,282)
Foreign Currency Transactions -- 159 -- -- 344
Futures and Swaps -- 134 134 (156) 753
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation
(Depreciation) -- (1,395) (383) (548) (3,185)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) -- 1,115 8 (406) 1,472
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $3,050 $ 9,048 $1,380 $5,188 $19,893
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
141
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTER-
GLOBAL NATIONAL
PA FIXED FIXED INTERMEDIATE
MUNICIPAL MUNICIPAL INCOME INCOME DURATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------
Six Months Ended March 31, 1998
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ -- $ -- $ 135 $ -- $ 43
Interest 2,085 715 2,103 3,817 2,882
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income 2,085 715 2,238 3,817 2,925
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory
Services--Note B $152 $ 51 136 276 169
Less: Waived Fees (12)140 (15)36 -- -- --
Administrative Fee--Note C 32 11 29 59 36
Custodian Fee--Note E 3 2 12 27 13
Audit Fee 9 10 17 17 7
Legal fee 1 -- 1 2 1
Other Expenses 19 10 9 13 11
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 204 69 204 394 237
- ---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note J (2) (1) -- (2) (13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 202 68 204 392 224
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,883 647 2,034 3,425 2,701
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (109) 7 128 (480) 301
Foreign Currency Transactions -- -- (683) (2,349) 109
Futures 133 110 132 828 231
- ---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 24 117 (423) (2,001) 641
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 1,261 364 (948) (2,413) (233)
Foreign Currency Transactions -- -- 170 275 84
Futures and Swaps (362) (175) (53) (224) (166)
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation
(Depreciation) 899 189 (831) (2,362) (315)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 923 306 (1,254) (4,363) 326
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 2,806 $ 953 $ 780 $ (938) $3,027
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Net of $4 and $6 withholding tax for the Global Fixed Income and International
Fixed Income Portfolios, respectively.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTI-MARKET MULTI-
FIXED INCOME BALANCED ASSET-CLASS
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------
October 1, Six Months Six Months
1997* to Ended Ended
March 31, March 31, March 31,
(In Thousands) 1998 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ 41 $ 1,892 $ 847
Interest 1,618 5,497 2,236
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income 1,659 7,389 3,083
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B $107 846 $577
Less: Waived Fees (17) 90 -- (44) 533
Administrative Fee--Note C 19 150 71
Custodian Fee--Note E 9 27 43
Audit Fee 9 17 24
Legal Fee -- 3 2
Shareholder Servicing Fee--Investment Class
shares--Note D -- 3 4
Distribution Fees--Adviser Class shares--Note D -- 37 --
Other Expenses 14 40 22
Reimbursement of Expenses--Note B (2) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 139 1,123 699
- ---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note J -- (27) (2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 139 1,096 697
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,520 6,293 2,386
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 153 20,706 8,120
Foreign Currency Transactions 398 (84) 150
Futures (36) (243) (231)
- ---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 515 20,379 8,039
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (280) 5,026 4,208
Foreign Currency Transactions 116 91 (146)
Futures and Swaps 11 26 52
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) (153) 5,143 4,114
- ---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 362 25,522 12,153
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,882 $31,815 $14,539
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ Net of $7 and $15 withholding tax for the Multi-Market Fixed Income and
Multi-Asset-Class Portfolios, respectively.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
142
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
SMALL CAP
VALUE EQUITY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO-
---------------------------------------------------------------------------------------
Year Ended Six Months Year Ended Six Months Year Ended Six Months
September Ended September Ended September Ended
30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 53,714 $ 32,238 $ 18,000 $ 6,626 $ 4,831 $ 2,949
Realized Net Gain (Loss) 375,983 158,441 379,936 119,697 113,081 92,744
Change in Unrealized
Appreciation (Depreciation) 516,078 84,990 58,032 11,783 175,057 (47,845)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 945,775 275,669 455,968 138,106 292,969 47,848
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (43,078) (32,644) (21,326) (7,593) (3,283) (5,031)
Realized Net Gain (135,541) (306,482) (234,965) (356,453) (92,539) (118,223)
INVESTMENT CLASS:
Net Investment Income (249) (249) (19) (12) -- --
Realized Net Gain (851) (2,354) (298) (597) -- --
ADVISER CLASS +:
Net Investment Income (894) (2,196) -- -- --
---
Realized Net Gain (1,156) (27,923) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (181,769) (371,848) (256,608) (364,655) (95,822) (123,254)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 1,576,439 484,886 122,058 91,693 125,463 78,049
In Lieu of Cash Distributions 156,287 289,688 250,540 355,797 94,545 121,720
Redeemed (769,989) (586,989) (701,366) (328,429) (105,216) (77,204)
INVESTMENT CLASS:
Issued 21,268 7,625 2,983 120 -- --
In Lieu of Cash Distributions 1,086 1,734 316 607 -- --
Redeemed (6,754) (9,072) (1,364) (438) -- --
ADVISER CLASS +:
Issued 172,033 217,434 -- 111 -- --
In Lieu of Cash Distributions 1,868 26,194 -- -- -- --
Redeemed (11,849) (16,882) -- (9) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions 1,140,389 414,618 (326,833) 119,452 114,792 122,565
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,904,395 318,439 (127,473) (107,097) 311,939 47,159
NET ASSETS:
Beginning of Period 1,869,477 3,773,872 1,442,374 1,314,901 585,457 897,396
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,773,872 $4,092,311 $1,314,901 $1,207,804 $897,396 $944,555
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) included in end
of period net assets $ 18,442 $ 15,591 $ 4,070 $ 3,091 $ 2,064 $ (18)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 90,227 25,797 4,762 3,689 6,240 3,601
In Lieu of Cash Distributions 9,563 16,349 10,687 17,350 5,253 6,169
Shares Redeemed (44,093) (30,892) (27,052) (14,701) (5,376) (3,515)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 55,697 11,254 (11,603) 6,338 6,117 6,255
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 1,187 401 113 6 -- --
In Lieu of Cash Distributions 66 98 14 29 -- --
Shares Redeemed (380) (477) (51) (19) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 873 22 76 16 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS+:
Shares Issued 9,462 11,479 -- 5 -- --
In Lieu of Cash Distributions 112 1,483 -- -- -- --
Shares Redeemed (676) (895) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Adviser Class Shares
Outstanding 8,898 12,067 -- 5 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Equity Portfolio began offering Adviser Class shares on January 16, 1998.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
143
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP MID CAP
EQUITY GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------
Six Months Year Ended Six Months Year Ended Six Months
Year Ended Ended September Ended September Ended
September 30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 11,704 $ 2,454 $ (284) $ (329) $ 344 $ 439
Realized Net Gain (Loss) 43,465 45,313 66,879 52,750 24,403 18,666
Change in Unrealized Appreciation
(Depreciation) 79,914 (11,101) 29,836 42,080 38,391 12,857
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 135,083 36,666 96,431 94,501 63,138 31,962
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (12,515) (11,478) -- -- (404) (439)
Realized Net Gain (12,996) (44,763) (67,632) (66,908) (4,075) (24,048)
INVESTMENT CLASS:
Net Investment Income (4) (10) -- -- (1) (13)
Realized Net Gain (5) (43) -- -- (9) (915)
ADVISER CLASS +:
Realized Net Gain -- -- -- (316) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (25,520) (56,294) (67,632) (67,224) (4,489) (25,415)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 96,568 74,385 72,700 88,322 137,940 165,504
In Lieu of Cash Distributions 21,690 52,266 65,823 64,517 4,424 23,810
Redeemed (213,704) (171,474) (123,453) (102,433) (30,955) (43,222)
INVESTMENT CLASS:
Issued 325 71 -- -- 854 18,025
In Lieu of Cash Distributions 9 54 -- -- 10 918
Redeemed (6) (53) -- -- -- (3,755)
ADVISER CLASS +:
Issued -- -- 1,813 27,281 -- --
In Lieu of Cash Distributions -- -- -- 310 -- --
Redeemed -- -- (800) (2,638) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (95,118) (44,751) 16,083 75,359 112,273 161,280
- ------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 14,445 (64,379) 44,882 102,636 170,922 167,827
NET ASSETS:
Beginning of Period 635,941 650,386 403,281 448,163 50,576 221,498
- ------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $650,386 $586,007 $448,163 $550,799 $221,498 $389,325
- ------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ 9,914 $ 880 $ -- $ (329) $ 310 $ 297
- ------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 6,875 5,312 4,220 4,345 8,139 8,132
In Lieu of Cash Distributions 1,662 3,871 3,909 3,693 290 1,280
Shares Redeemed (15,096) (11,964) (7,311) (5,061) (1,808) (2,153)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (6,559) (2,781) 818 2,977 6,621 7,259
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 22 5 -- -- 47 883
In Lieu of Cash Distributions 1 4 -- -- 1 49
Shares Redeemed -- (4) -- -- -- (178)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment
Class Shares Outstanding 23 5 -- -- 48 754
- ------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS +:
Shares Issued -- -- 98 1,362 -- --
In Lieu of Cash Distributions -- -- -- 18 -- --
Shares Redeemed -- -- (43) (126) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding -- -- 55 1,254 -- --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMERGING
MARKETS VALUE
PORTFOLIO
----------------------
Year Ended Six Months
September Ended
30, March 31,
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 390 $ 114
Realized Net Gain (Loss) 2,998 (1,816)
Change in Unrealized Appreciation
(Depreciation) 2,027 (1,822)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 5,415 (3,524)
- -------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (572) (109)
Realized Net Gain (2,288) (2,060)
INVESTMENT CLASS:
Net Investment Income -- --
Realized Net Gain -- --
ADVISER CLASS +:
Realized Net Gain -- --
- -------------------------------------------------------------------------------
Total Distributions (2,860) (2,169)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 5,587 1,691
In Lieu of Cash Distributions 2,586 2,122
Redeemed (20,904) (7,234)
INVESTMENT CLASS:
Issued -- --
In Lieu of Cash Distributions -- --
Redeemed -- --
ADVISER CLASS +:
Issued -- --
In Lieu of Cash Distributions -- --
Redeemed -- --
- -------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (12,731) (3,421)
- -------------------------------------------------------------------------------
Total Increase (Decrease) (10,176) (9,114)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
NET ASSETS:
Beginning of Period 32,984 22,808
- -------------------------------------------------------------------------------
END OF PERIOD $22,808 $13,694
- -------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ 91 $ 96
- -------------------------------------------------------------------------------
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 488 186
In Lieu of Cash Distributions 249 231
Shares Redeemed (1,762) (823)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (1,025) (406)
- -------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued -- --
In Lieu of Cash Distributions -- --
Shares Redeemed -- --
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Investment
Class Shares Outstanding -- --
- -------------------------------------------------------------------------------
ADVISER CLASS +:
Shares Issued -- --
In Lieu of Cash Distributions -- --
Shares Redeemed -- --
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding -- --
- -------------------------------------------------------------------------------
</TABLE>
+ The Mid Cap Growth Portfolio began offering Adviser Class shares on January
31, 1997.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
144
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
DOMESTIC
FIXED FIXED HIGH
INCOME INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------
Year Ended Six Months Year Ended Six Months Year Ended Six Months
September Ended September Ended September Ended
30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 169,154 $ 123,700 $ 6,619 $ 2,851 $ 37,581 $ 24,595
Realized Net Gain (Loss) 62,863 31,544 1,892 975 15,044 12,687
Change in Unrealized
Appreciation (Depreciation) 38,362 (16,789) 1,312 (322) 24,005 (4,601)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 270,379 138,455 9,823 3,504 76,630 32,681
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (149,960) (109,506) (6,034) (3,347) (34,334) (22,425)
Realized Net Gain (20,590) (49,292) (179) (907) (1,171) (14,043)
INVESTMENT CLASS +:
Net Investment Income (341) (535) -- -- (628) (387)
Realized Net Gain (47) (297) -- -- (20) (243)
ADVISER CLASS ++:
Net Investment Income (1,187) (2,402) -- -- (66) (245)
Realized Net Gain (61) (1,121) -- -- -- (180)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (172,186) (163,153) (6,213) (4,254) (36,219) (37,523)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 1,506,277 1,039,839 32,103 14,629 294,848 167,181
In Lieu of Cash Distributions 141,335 138,514 5,270 3,555 21,776 27,494
Redeemed (314,144) (290,100) (39,391) (31,012) (121,867) (95,150)
INVESTMENT CLASS +:
Issued 10,498 24,109 -- -- 12,531 6,016
In Lieu of Cash Distributions 305 686 -- -- 451 446
Redeemed (1,587) (5,192) -- -- (8,118) (4,447)
ADVISER CLASS ++:
Issued 82,302 42,603 -- -- 5,616 10,714
In Lieu of Cash Distributions 587 2,215 -- -- 66 413
Redeemed (7,715) (12,930) -- -- (1,521) (4,192)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions 1,417,858 939,744 (2,018) (12,828) 203,782 108,475
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,516,051 915,046 1,592 (13,578) 244,193 103,633
NET ASSETS:
Beginning of Period 1,790,146 3,306,197 95,362 96,954 294,949 539,142
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,306,197 $4,221,243 $96,954 $83,376 $539,142 $642,775
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) included in end
of period net assets $57,872 $69,129 $1,805 $1,309 $11,795 $13,333
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 126,596 85,865 2,909 1,299 30,974 17,021
In Lieu of Cash Distributions 12,016 11,583 484 322 2,349 2,848
Shares Redeemed (26,436) (23,984) (3,553) (2,761) (12,813) (9,649)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 112,176 73,464 (160) (1,140) 20,510 10,220
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS +:
Shares Issued 886 1,986 -- -- 1,307 613
In Lieu of Cash Distributions 26 57 -- -- 49 46
Shares Redeemed (133) (431) -- -- (833) (444)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 779 1,612 -- -- 523 215
- ---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS ++:
Shares Issued 6,870 3,524 -- -- 577 1,086
In Lieu of Cash Distributions 50 185 -- -- 7 43
Shares Redeemed (645) (1,067) -- -- (158) (423)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Adviser Class Shares
Outstanding 6,275 2,642 -- -- 426 706
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Fixed Income Portfolio began offering Investment Class shares on October
15, 1996. ++ The Fixed Income and High Yield Portfolios began offering Adviser
Class shares on November 7, 1996 and January 31, 1997, respectively.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
145
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
MORTGAGE-
CASH FIXED BACKED
RESERVES INCOME SECURITIES
PORTFOLIO PORTFOLIO II PORTFOLIO
----------------------------------------------------------------------------------------------
Year Ended Six Months Year Ended Six Months Year Ended Six Months
September Ended September Ended September Ended
30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 4,812 $ 3,050 $ 13,537 $ 7,933 $ 4,031 $ 1,372
Realized Net Gain (Loss) -- -- 4,333 2,510 1,189 391
Change in Unrealized
Appreciation (Depreciation) -- -- 3,019 (1,395) (44) (383)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 4,812 3,050 20,889 9,048 5,176 1,380
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (4,812) (3,050) (13,889) (7,171) (3,646) (1,833)
Realized Net Gain -- -- (1,963) (2,552) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (4,812) (3,050) (15,852) (9,723) (3,646) (1,833)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 334,996 180,895 74,512 56,646 1,046 2,489
In Lieu of Cash Distributions 4,389 2,702 11,590 7,098 2,618 1,129
Redeemed (319,418) (172,125) (56,217) (13,116) (18,034) (1,256)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions 19,967 11,472 29,885 50,628 (14,370) 2,362
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 19,967 11,472 34,922 49,953 (12,840) 1,909
NET ASSETS:
Beginning of Period 78,497 98,464 191,740 226,662 50,925 38,085
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 98,464 $ 109,936 $226,662 $276,615 $ 38,085 $39,994
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) included in end
of period net assets $ -- $ -- $ 4,574 $ 5,336 $ 1,007 $ 546
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 334,996 180,895 6,638 4,972 99 236
In Lieu of Cash Distributions 4,389 2,702 1,045 630 252 108
Shares Redeemed (319,418) (172,125) (4,981) (1,156) (1,695) (119)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 19,967 11,472 2,702 4,446 (1,344) 225
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
146
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SPECIAL
LIMITED PURPOSE
DURATION FIXED INCOME MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------
Year Ended Six Months Year Ended Six Months Year Ended Six Months
September Ended September Ended September Ended
30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 8,360 $ 5,594 $ 33,308 $ 18,421 $ 3,020 $ 1,883
Realized Net Gain (Loss) 372 142 14,952 4,657 15 24
Change in Unrealized
Appreciation (Depreciation) 510 (548) 5,261 (3,185) 2,297 899
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 9,242 5,188 53,521 19,893 5,332 2,806
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (7,415) (4,621) (33,514) (18,272) (2,960) (1,893)
Realized Net Gain -- -- (6,885) (11,303) -- --
INVESTMENT CLASS:
Net Investment Income -- -- (68) (45) -- --
Realized Net Gain -- -- (12) (26) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (7,415) (4,621) (40,479) (29,646) (2,960) (1,893)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 59,060 78,514 90,134 113,088 20,270 15,357
In Lieu of Cash Distributions 6,560 4,200 35,130 26,955 2,235 1,527
Redeemed (35,104) (15,252) (93,136) (69,407) (4,293) (2,885)
INVESTMENT CLASS:
Issued -- -- 414 40 -- --
In Lieu of Cash Distributions -- -- 80 71 -- --
Redeemed -- -- (47) (1,339) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions 30,516 67,462 32,575 69,408 18,212 13,999
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 32,343 68,029 45,617 59,655 20,584 14,912
NET ASSETS:
Beginning of Period 123,227 155,570 448,428 494,045 54,536 75,120
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $155,570 $223,599 $494,045 $553,700 $75,120 $90,032
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) included in end
of period net assets $ 2,361 $ 3,334 $ 9,955 $ 10,059 $ 71 $ 61
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 5,709 7,562 7,318 9,178 1,774 1,305
In Lieu of Cash Distributions 637 406 2,902 2,212 195 130
Shares Redeemed (3,383) (1,463) (7,553) (5,636) (375) (246)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 2,963 6,505 2,667 5,754 1,594 1,189
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued -- -- 34 3 -- --
In Lieu of Cash Distributions -- -- 7 6 -- --
Shares Redeemed -- -- (4) (109) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding -- -- 37 (100) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
147
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
INTER-
PA GLOBAL NATIONAL
MUNICIPAL FIXED INCOME FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------
Year Ended Six Months Year Ended Six Months Year Ended Six Months
September Ended September Ended September Ended
30, March 31, 30, March 31, 30, March 31,
(In Thousands) 1997 1998 1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,328 $ 647 $ 4,355 $ 2,034 $ 7,708 $ 3,425
Realized Net Gain (Loss) 8 117 (183) (423) (5,420) (2,001)
Change in Unrealized
Appreciation (Depreciation) 797 189 (1,626) (831) (2,334) (2,362)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 2,133 953 2,546 780 (46) (938)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (1,330) (644) (4,111) (2,554) (5,327) (5,448)
Realized Net Gain -- -- (1,137) (1,005) (3,700) (1,362)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1,330) (644) (5,248) (3,559) (9,027) (6,810)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 7,972 1,848 14,273 1,064 44,423 17,148
In Lieu of Cash Distributions 888 331 4,700 3,143 8,576 6,158
Redeemed (10,690) (1,914) (6,060) (11,071) (34,311) (24,535)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions (1,830) 265 12,913 (6,864) 18,688 (1,229)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (1,027) 574 10,211 (9,643) 9,615 (8,977)
NET ASSETS:
Beginning of Period 28,488 27,461 67,282 77,493 143,137 152,752
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $27,461 $28,035 $77,493 $67,850 $152,752 $143,775
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) included in end
of period net assets $ 20 $ 23 $ 1,414 $ 894 $ (372) $ (2,395)
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 698 156 1,308 104 4,363 1,748
In Lieu of Cash Distributions 77 28 439 306 817 634
Shares Redeemed (935) (163) (579) (1,063) (3,475) (2,513)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (160) 21 1,168 (653) 1,705 (131)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
148
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the period ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
INTERMEDIATE MULTI-MARKET
DURATION FIXED INCOME BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------
Year Ended Six Months October 1, Year Ended Six Months
September Ended 1997* to September Ended
30, March 31, March 31, 30, March 31,
(In Thousands) 1997 1998 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 2,639 $ 2,701 $ 1,520 $ 12,032 $ 6,293
Realized Net Gain (Loss) 681 641 515 45,178 20,379
Change in Unrealized Appreciation
(Depreciation) 680 (315) (153) 24,679 5,143
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 4,000 3,027 1,882 81,889 31,815
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (1,772) (2,183) (688) (12,124) (6,095)
Realized Net Gain (349) (822) (53) (30,896) (38,845)
INVESTMENT CLASS +:
Net Investment Income -- -- -- (26) (68)
Realized Net Gain -- -- -- -- (453)
ADVISER CLASS ++:
Net Investment Income -- -- -- (416) (486)
Realized Net Gain -- -- -- (1,236) (3,340)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (2,121) (3,005) (741) (44,698) (49,287)
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 73,710 56,518 55,585 43,464 23,415
In Lieu of Cash Distributions 930 1,611 741 42,958 44,892
Redeemed (16,417) (12,444) (1,436) (79,189) (30,995)
INVESTMENT CLASS +:
Issued -- -- -- 3,910 914
In Lieu of Cash Distributions -- -- -- 26 521
Redeemed -- -- -- (460) (4,240)
ADVISER CLASS ++:
Issued -- -- -- 26,300 3,538
In Lieu of Cash Distributions -- -- -- 1,653 3,825
Redeemed -- -- -- (2,128) (1,799)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 58,223 45,685 54,890 36,534 40,071
- ---------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 60,102 45,707 56,031 73,725 22,599
NET ASSETS:
Beginning of Period 12,017 72,119 -- 300,868 374,593
- ---------------------------------------------------------------------------------------------------------------------
END OF PERIOD $72,119 $117,826 $56,031 $374,593 $397,192
- ---------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ 1,188 $ 1,706 $ 832 $ 3,747 $ 3,391
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 7,235 5,421 5,576 3,110 1,664
In Lieu of Cash Distributions 91 156 75 3,271 3,391
Shares Redeemed (1,612) (1,192) (142) (5,724) (2,229)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 5,714 4,385 5,509 657 2,826
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS+:
Shares Issued -- -- -- 287 65
In Lieu of Cash Distributions -- -- -- 2 39
Shares Redeemed -- -- -- (31) (300)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding -- -- -- 258 (196)
- ---------------------------------------------------------------------------------------------------------------------
ADVISER CLASS ++:
Shares Issued -- -- -- 1,812 244
In Lieu of Cash Distributions -- -- -- 126 289
Shares Redeemed -- -- -- (149) (128)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding -- -- -- 1,789 405
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
MULTI-ASSET-
CLASS
PORTFOLIO
-------------------------------------
Year Ended Six Months
September Ended
30, March 31,
(In Thousands) 1997 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 4,632 $ 2,386
Realized Net Gain (Loss) 18,881 8,039
Change in Unrealized Appreciation
(Depreciation) 11,636 4,114
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 35,149 14,539
- -------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11 INSTITUTIONAL CLASS:
Net Investment Income (5,893) (1,524)
Realized Net Gain (11,866) (18,906)
INVESTMENT CLASS +:
Net Investment Income (143) (38)
Realized Net Gain (275) (567)
ADVISER CLASS ++:
Net Investment Income -- --
Realized Net Gain --
---
- -------------------------------------------------------------------------------
Total Distributions (18,177) (21,035)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 75,946 12,285
In Lieu of Cash Distributions 16,451 19,454
Redeemed (65,247) (9,496)
INVESTMENT CLASS +:
Issued 1,103 172
In Lieu of Cash Distributions 418 605
Redeemed (45) (116)
ADVISER CLASS ++:
Issued -- --
In Lieu of Cash Distributions -- --
Redeemed -- --
- -------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 28,626 22,904
- -------------------------------------------------------------------------------
Total Increase (Decrease) 45,598 16,408
NET ASSETS:
Beginning of Period 132,632 178,230
- -------------------------------------------------------------------------------
END OF PERIOD $178,230 $194,638
- -------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ 1,202 $ 2,026
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Shares Issued and Redeemed INSTITUTIONAL CLASS:
Shares Issued 6,059 978
In Lieu of Cash Distributions 1,403 1,656
Shares Redeemed (5,319) (747)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 2,143 1,887
- -------------------------------------------------------------------------------
INVESTMENT CLASS+:
Shares Issued 90 13
In Lieu of Cash Distributions 36 51
Shares Redeemed (4) (9)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 122 55
- -------------------------------------------------------------------------------
ADVISER CLASS ++:
Shares Issued -- --
In Lieu of Cash Distributions -- --
Shares Redeemed -- --
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding -- --
- -------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ The Balanced Portfolio began offering Investment Class shares on April 4,
1997.
++ The Balanced Portfolio began offering Adviser Class shares on November
1, 1996.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
149
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
VALUE PORTFOLIO --------------------------------------------- March 31,
1993 1994 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.30 0.31 0.30 0.34 0.17
Net Realized and Unrealized Gain (Loss) on
Investments 1.92 0.59 3.34 2.20 5.75 1.08
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.22 0.89 3.65 2.50 6.09 1.25
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.31) (0.29) (0.31) (0.32) (0.30) (0.19)
Realized Net Gain (1.82) (0.73) (1.08) (1.46) (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.13) (1.02) (1.39) (1.78) (1.33) (2.00)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37 $ 19.62
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.67% 7.45% 32.58% 18.41% 41.25% 7.23%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $762,175 $981,337 $1,271,586 $1,844,740 $3,542,772 $3,632,965
Ratio of Expenses to Average Net Assets
(1) 0.59% 0.61% 0.60% 0.61% 0.62% 0.60%*
Ratio of Net Investment Income to Average
Net Assets 2.48% 2.40% 2.43% 2.07% 1.93% 1.74%*
Portfolio Turnover Rate 43% 54% 56% 53% 46% 17%
Average Commission Rate ### N/A N/A N/A $ 0.0572 $ 0.0577 $ 0.0551
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61% 0.59%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
---------------------------------------------- -----------------------------------------------
May 6, Year Six Months July 17, Year Six Months
1996** to Ended Ended 1996*** to Ended Ended
September 30, September 30, March 31, September 30, September 30, March 31,
1996 1997!! 1998 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.97 $ 15.60 $ 20.36 $ 14.11 $ 15.61 $ 20.35
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.12 0.31 0.16 0.01 0.30 0.18
Net Realized and
Unrealized Gain (Loss)
on Investments 0.59 5.75 1.07 1.49 5.74 1.04
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.71 6.06 1.23 1.50 6.04 1.22
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.18) -- (0.27) (0.17)
Realized Net Gain -- (1.03) (1.81) -- (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (1.99) -- (1.30) (1.98)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.60 $ 20.36 $ 19.60 $ 15.61 $ 20.35 $ 19.59
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% 7.13% 10.63% 40.87% 7.07%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,244 $29,847 $29,166 $15,493 $201,253 $430,180
Ratio of Expenses to
Average Net Assets (2) 0.76%* 0.80% 0.75%* 0.86%* 0.90% 0.85%*
Ratio of Net Investment
Income to Average Net
Assets 2.05%* 1.75% 1.60%* 1.66%* 1.63% 1.50%*
Portfolio Turnover Rate 53% 46% 17% 53% 46% 17%
Average Commission Rate
### $0.0572 $0.0577 $0.0551 $0.0572 $ 0.0577 $ 0.0551
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due
to Expense
Reimbursement/Waiver N/A 0.09% N/A N/A N/A N/A
Ratio Including Expense
Offsets 0.75%* 0.79% 0.74%* 0.85%* 0.89% 0.84%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------
150
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period +
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
EQUITY PORTFOLIO ----------------------------------------------- March 31,
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.04 $ 22.82 $ 21.05 $ 24.43 $ 25.67 $ 29.45
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.44 0.52 0.50 0.36 0.14
Net Realized and Unrealized Gain
(Loss) on Investments 1.95 0.41 4.55 3.26 8.22 2.19
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.36 0.85 5.07 3.76 8.58 2.33
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.43) (0.41) (0.52) (0.50) (0.40) (0.17)
Realized Net Gain (1.15) (2.21) (1.17) (2.02) (4.40) (7.93)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.58) (2.62) (1.69) (2.52) (4.80) (8.10)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.82 $ 21.05 $ 24.43 $ 25.67 $ 29.45 $ 23.68
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 11.05% 4.11% 26.15% 16.48% 38.46% 12.25%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $1,098,003 $1,193,017 $1,597,632 $1,442,261 $1,312,547 $1,205,413
Ratio of Expenses to Average Net
Assets (1) 0.59% 0.60% 0.61% 0.60% 0.60% 0.61%*
Ratio of Net Investment Income to
Average Net Assets 1.86% 2.10% 2.39% 1.95% 1.30% 1.07%*
Portfolio Turnover Rate 51% 41% 67% 67% 85% 33%
Average Commission Rate ### N/A N/A N/A $ 0.0557 $ 0.0294 $ 0.0570
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.59% 0.60%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
--------------------------------------------- ---------------------
April 10, Six Months January 16,
1996** to Year Ended Ended 1998*** to
September 30, September 30, March 31, March 31,
1996 1997 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.31 $ 25.66 $ 29.42 $ 20.50
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.34 0.12 0.02
Net Realized and Unrealized Gain (Loss) on
Investments 1.24 8.17 2.19 3.14
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.46 8.51 2.31 3.16
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.11) (0.35) (0.15) --
Realized Net Gain -- (4.40) (7.93) --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.11) (4.75) (8.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.66 $ 29.42 $ 23.65 $ 23.66
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.02% 38.12% 12.18% 15.42%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 113 $ 2,354 $ 2,281 $ 110
Ratio of Expenses to Average Net Assets (2) 0.75%* 0.80% 0.76%* 0.86%*
Ratio of Net Investment Income to Average Net Assets 1.83%* 1.12% 0.91%* 0.78%*
Portfolio Turnover Rate 67% 85% 33% 33%
Average Commission Rate ### $0.0557 $0.0294 $0.0570 $0.0570
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 1.28% N/A N/A
Ratio Including Expense Offsets 0.75%* 0.80% 0.75%* 0.85%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose the average commission rate per share it paid
for security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------
151
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
SMALL CAP VALUE PORTFOLIO ----------------------------------------- March 31,
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.84 $ 17.55 $ 17.67 $ 18.28 $ 19.64 $ 24.97
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.18 0.16 0.19 0.18 0.15 0.08
Net Realized and Unrealized Gain (Loss) on
Investments 4.64 1.14 2.49 3.62 8.39 0.77
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.82 1.30 2.68 3.80 8.54 0.85
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.11) (0.24) (0.14) (0.20) (0.11) (0.14)
Realized Net Gain -- (0.94) (1.93) (2.24) (3.10) (3.29)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.11) (1.18) (2.07) (2.44) (3.21) (3.43)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.55 $ 17.67 $ 18.28 $ 19.64 $ 24.97 $ 22.39
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 37.72% 8.04% 18.39% 24.00% 49.81% 5.26%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $175,029 $308,156 $430,368 $585,457 $897,396 $944,555
Ratio of Expenses to Average Net Assets (1) 0.88% 0.88% 0.87% 0.86% 0.86% 0.86%*
Ratio of Net Investment Income to Average Net
Assets 1.33% 0.91% 1.20% 0.99% 0.70% 0.67%*
Portfolio Turnover Rate 93% 162% 119% 145% 107% 70%
Average Commission Rate ### N/A N/A N/A $ 0.0498 $ 0.0480 $ 0.0524
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.87% 0.86% 0.86% 0.85%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose the average commission rate per share it paid
for security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
152
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------------------
Six Months
Ended
Year Ended September 30, March 31,
INTERNATIONAL EQUITY PORTFOLIO ----------------------------------------------------- 1998
1993 1994 1995 1996 1997!!
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.03 $ 13.18 $ 14.52 $ 12.51 $ 13.24 $ 15.67
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.21 0.12 0.19 0.31 0.25 0.08
Net Realized and Unrealized Gain (Loss) on
Investments 2.14 1.63 (0.75) 0.77 2.71 0.85
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.35 1.75 (0.56) 1.08 2.96 0.93
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.20) (0.16) -- (0.29) (0.26) (0.30)
Realized Net Gain -- (0.25) (1.35) (0.06) (0.27) (1.17)
In Excess of Realized Net Gain -- -- (0.10) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.20) (0.41) (1.45) (0.35) (0.53) (1.47)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.18 $ 14.52 $ 12.51 $ 13.24 $ 15.67 $ 15.13
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 21.64% 13.33% (3.36%) 8.87% 23.16% 7.07%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $891,675 $1,132,867 $1,160,986 $635,706 $649,755 $ 585,313
Ratio of Expenses to Average Net Assets (1) 0.66% 0.64% 0.70% 0.69% 0.66% 0.67%*
Ratio of Net Investment Income to Average
Net Assets 1.23% 0.89% 1.90% 1.88% 1.81% 0.83%*
Portfolio Turnover Rate 43% 69% 112% 78% 62% 42%
Average Commission Rate ### N/A N/A N/A $ 0.0093 $ 0.0035 $ 0.0040
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.66% 0.65% 0.63% 0.65%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class
-----------------------------------------------------
April 10, Year Six Months
1996** to Ended Ended
September 30, September 30, March 31,
1996 1997!! 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.02 $ 13.23 $ 15.63
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.09 0.23 0.09
Net Realized and Unrealized Gain (Loss) on Investments 0.12 2.69 0.83
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.21 2.92 0.92
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.25) (0.28)
Realized Net Gain -- (0.27) (1.17)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (0.52) (1.45)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.23 $ 15.63 $ 15.10
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.61% 22.85% 7.01%
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 235 $ 631 $ 694
Ratio of Expenses to Average Net Assets (2) 0.81%* 0.89% 0.82%*
Ratio of Net Investment Income to Average Net Assets 1.81%* 1.60% 0.71%*
Portfolio Turnover Rate 78% 62% 42%
Average Commission Rate ### $0.0093 $0.0035 $0.0040
- -------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 6.83% N/A
Ratio Including Expense Offsets 0.77%* 0.86% 0.80%*
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Initial offering of Investment Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
153
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------
Six Months
Ended
Year Ended September 30, March 31,
MID CAP GROWTH PORTFOLIO ------------------------------------------------ 1998
1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.51 $ 18.56 $ 16.29 $ 18.60 $ 20.53 $ 21.84
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01 0.02 0.03 0.01 (0.01) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments 4.80 (0.58) 4.21 4.70 4.75 3.86
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.81 (0.56) 4.24 4.71 4.74 3.85
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.01) (0.03) (0.03) -- --
Realized Net Gain (0.76) (1.70) (1.90) (2.75) (3.43) (3.43)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.76) (1.71) (1.93) (2.78) (3.43) (3.43)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.56 $ 16.29 $ 18.60 $ 20.53 $ 21.84 $ 22.26
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 33.92% (3.28%) 30.56% 28.81% 28.05% 21.99%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $309,459 $302,995 $373,547 $403,281 $446,963 $ 521,737
Ratio of Expenses to Average Net Assets (1) 0.59% 0.60% 0.61% 0.60% 0.63% 0.63%*
Ratio of Net Investment Income to Average Net
Assets 0.07% 0.12% 0.21% 0.04% (0.07%) (0.14%)*
Portfolio Turnover Rate 69% 55% 129% 141% 134% 65%
Average Commission Rate ### N/A N/A N/A $ 0.0491 $ 0.0514 $ 0.0503
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.60% 0.60% 0.61% 0.60%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adviser Class
----------------------------
January 31,
1997**, to Six Months
September Ended
30, March 31,
1997 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.04 $ 21.81
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) (0.01)
Net Realized and Unrealized Gain (Loss) on Investments 4.79 3.83
- -----------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.77 3.82
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Realized Gain -- (3.43)
- -----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (3.43)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.81 $ 22.20
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN 27.99% 21.87%
- -----------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 1,200 $29,062
Ratio of Expenses to Average Net Assets (2) 0.88%* 0.88%*
Ratio of Net Investment Income to Average Net Assets (0.41%)* (0.38%)*
Portfolio Turnover Rate 134% 65%
Average Commission Rate ### $0.0514 $0.0503
- -----------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.86%* 0.85%*
- -----------------------------------------------------------------------------------------------------
</TABLE>
** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
### For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose the average commission rate per share it paid
for security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
154
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------------------
Year Ended September
December 30, 30, Six Months
1994** to -------------------- Ended
September 30, March 31,
MID CAP VALUE PORTFOLIO 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 13.45 $ 14.49 $ 21.80
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.55T 0.11 0.05 0.03
Net Realized and Unrealized Gain (Loss) on
Investments 2.90 2.52 8.37 1.83
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 3.45 2.63 8.42 1.86
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.55) (0.10) (0.04)
Realized Net Gain -- (1.04) (1.01) (2.19)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (1.59) (1.11) (2.23)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.45 $ 14.49 $ 21.80 $ 21.43
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 34.50% 22.30% 61.40% 10.09%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 4,507 $50,449 $220,260 $372,006
Ratio of Expenses to Average Net Assets (1) 0.93%* 0.88% 0.90% 0.89%*
Ratio of Net Investment Income to Average Net
Assets 10.13%*T 1.61% 0.28% 0.34%*
Portfolio Turnover Rate 639%T 377% 184% 70%
Average Commission Rate ### N/A $0.0462 $ 0.0467 $ 0.0093
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 2.13%* 0.18% 0.02% N/A
Ratio Including Expense Offsets 0.88%* 0.88% 0.88% 0.86%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
* 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.
<PAGE>
<TABLE>
<CAPTION>
Investment Class
---------------------------------------------------------
May 10, Year Six Months
1996*** to Ended Ended
September 30, September 30, March 31,
1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.77 $ 14.48 $ 21.75
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.01 0.03
Net Realized and Unrealized Gain (Loss) on Investments 0.67 8.36 1.80
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 8.37 1.83
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.09) (0.03)
Realized Net Gain -- (1.01) (2.19)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (1.10) (2.22)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.48 $ 21.75 $ 21.36
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.16% 61.05% 9.96%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 127 $ 1,238 $17,319
Ratio of Expenses to Average Net Assets (2) 1.03%* 1.09% 1.04%*
Ratio of Net Investment Income to Average Net Assets 0.86%* 0.04% 0.22%*
Portfolio Turnover Rate 377% 184% 70%
Average Commission Rate ### $0.0462 $0.0467 $0.0093
- ---------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.14%* 4.60% N/A
Ratio Including Expense Offsets 1.03%* 1.07% 1.01%*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*** Initial offering of Investment Class shares
- -----------------------------------------------------------------
* Annualized
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
155
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period (Amounts for the six months ended
March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------------
Year Ended September
February 28, 30, Six Months
1995** to ------------------- Ended
September 30, March 31,
EMERGING MARKETS VALUE PORTFOLIO 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 11.63 $ 11.52 $ 12.41
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.19 0.16 0.08
Net Realized and Unrealized Gain (Loss) on
Investments 1.53 0.45 1.73 (1.74)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.63 0.64 1.89 (1.66)
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.17) (0.20) (0.06)
Realized Net Gain -- (0.58) (0.80) (1.13)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (0.75) (1.00) (1.19)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.63 $ 11.52 $ 12.41 $ 9.56
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 16.30% 6.21% 18.08% (12.97)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $42,459 $32,984 $22,808 $13,694
Ratio of Expenses to Average Net Assets (1) 1.18%* 1.18% 1.18% 1.18%*
Ratio of Net Investment Income to Average Net
Assets 2.04%* 1.62% 1.30% 1.29%*
Portfolio Turnover Rate 63% 108% 64% 59%
Average Commission Rate ### N/A $0.0014 $0.0019 $0.0008
- ----------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.29%* 0.11% 0.10% 0.58%*
Ratio Including Expense Offsets 1.18%* 1.18% N/A 1.18%*
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
156
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
FIXED INCOME PORTFOLIO -------------------------------------------------------- March 31,
1993 1994 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 12.86 $ 10.93 $ 11.82 $ 11.83 $ 12.22
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.88 0.77 0.80 0.78 0.80 0.37
Net Realized and Unrealized Gain (Loss)
on Investments 0.75 (1.28) 0.69 0.08 0.50 0.09
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.63 (0.51) 1.49 0.86 1.30 0.46
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.83) (0.82) (0.60) (0.79) (0.78) (0.39)
Realized Net Gain (0.61) (0.47) -- (0.06) (0.13) (0.17)
In Excess of Realized Net Gain -- (0.13) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.44) (1.42) (0.60) (0.85) (0.91) (0.56)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.86 $ 10.93 $ 11.82 $ 11.83 $ 12.22 $ 12.12
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 14.26% (4.43%) 14.19% 7.63% 11.47% 3.87%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $909,738 $1,194,957 $1,487,409 $1,790,146 $3,219,987 $4,084,124
Ratio of Expenses to Average Net Assets
(1) 0.47% 0.49% 0.49% 0.48% 0.49% 0.48%*
Ratio of Net Investment Income to
Average Net Assets 7.06% 6.79% 7.28% 6.77% 6.73% 6.67%*
Portfolio Turnover Rate 144% 100% 140% 162% 179% 56%
- ---------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.48% 0.48% 0.48% 0.47%*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
---------------------------------------------------------------
October 15, Six Months November 7, Six Months
1996** to Ended 1996*** to Ended
September 30, March 31, September 30, March 31,
1997!! 1998 1997!! 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.22 $ 12.04 $ 12.22
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.75 0.31 0.70 0.40
Net Realized and Unrealized Gain (Loss) on
Investments 0.40 0.15 0.20 0.04
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.15 0.46 0.90 0.44
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.60) (0.38) (0.59) (0.37)
Realized Net Gain (0.13) (0.17) (0.13) (0.17)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.73) (0.55) (0.72) (0.54)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.22 $ 12.13 $ 12.22 $ 12.12
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 10.07% 3.87% 7.79% 3.70%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 9,527 $29,007 $76,683 $108,112
Ratio of Expenses to Average Net Assets (2) 0.66%* 0.63%* 0.77%* 0.73%*
Ratio of Net Investment Income to Average Net Assets 6.57%* 6.53%* 6.50%* 6.41%*
Portfolio Turnover Rate 179% 56% 179% 56%
- -----------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.12%* N/A 0.01%* N/A
Ratio Including Expense Offsets 0.65%* 0.62%* 0.76%* 0.72%*
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
157
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
DOMESTIC FIXED INCOME PORTFOLIO -------------------------------------------- March 31,
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 11.99 $ 9.87 $ 11.03 $ 10.89 $ 11.27
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.84 0.94 0.52 0.56 0.74 0.39
Net Realized and Unrealized Gain (Loss) on
Investments 0.66 (1.23) 0.87 (0.09) 0.33 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.50 (0.29) 1.39 0.47 1.07 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.78) (0.95) (0.23) (0.57) (0.67) (0.42)
Realized Net Gain (0.53) (0.73) -- -- (0.02) (0.13)
In Excess of Realized Net Gain -- (0.15) -- (0.04) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.31) (1.83) (0.23) (0.61) (0.69) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.99 $ 9.87 $ 11.03 $ 10.89 $ 11.27 $ 11.18
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 14.08% (2.87%) 14.33% 4.41% 10.20% 4.20%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $90,350 $36,521 $36,147 $95,362 $96,954 $83,376
Ratio of Expenses to Average Net Assets (1) 0.50% 0.50% 0.51% 0.52% 0.51% 0.50%*
Ratio of Net Investment Income to Average Net Assets 7.15% 7.65% 6.80% 5.73% 6.48% 6.65%*
Portfolio Turnover Rate 96% 78% 313% 168% 217% 62%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.03% 0.09% 0.01% 0.01% 0.01%*
Ratio Including Expense Offsets N/A N/A 0.50% 0.50% 0.50% 0.50%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
158
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------
Six Months
Year Ended September 30, Ended
HIGH YIELD PORTFOLIO ------------------------------------------------- March 31,
1993 1994 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.58 $ 9.49 $ 8.97 $ 9.08 $ 9.32 $ 10.15
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.73 0.75 0.90 0.88 0.86 0.41
Net Realized and Unrealized Gain (Loss) on
Investments 0.90 (0.42) 0.19 0.28 0.87 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.63 0.33 1.09 1.16 1.73 0.53
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.72) (0.69) (0.85) (0.92) (0.87) (0.42)
Realized Net Gain -- (0.16) (0.08) -- (0.03) (0.26)
In Excess of Realized Net Gain -- -- (0.05) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.72) (0.85) (0.98) (0.92) (0.90) (0.68)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.49 $ 8.97 $ 9.08 $ 9.32 $ 10.15 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 20.12% 3.57% 13.58% 13.83% 19.90% 5.54%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $50,396 $182,969 $220,785 $289,810 $523,899 $618,538
Ratio of Expenses to Average Net Assets (1) 0.53% 0.50% 0.50% 0.49% 0.51% 0.48%*
Ratio of Net Investment Income to Average Net
Assets 8.94% 9.01% 10.68% 10.04% 9.05% 8.50%*
Portfolio Turnover Rate 99% 112% 96% 115% 96% 38%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.09% N/A N/A N/A N/A N/A
Ratio Including Expense Offsets N/A N/A 0.49% 0.48% 0.50% 0.48%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
---------------------------------------------------------------------------
May 21, Six Months January 31, Six Months
1996** to Year Ended Ended 1997*** to Ended
September 30, September 30, March 31, September 30, March 31,
1996 1997!! 1998 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.06 $ 9.31 $ 10.16 $ 9.39 $ 10.15
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.31 0.84 0.44 0.56 0.42
Net Realized and Unrealized Gain (Loss) on
Investments 0.16 0.88 0.08 0.59 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.47 1.72 0.52 1.15 0.52
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.22) (0.84) (0.41) (0.39) (0.41)
Realized Net Gain -- (0.03) (0.26) -- (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.22) (0.87) (0.67) (0.39) (0.67)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.31 $ 10.16 $ 10.01 $ 10.15 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.34% 19.77% 5.43% 12.63% 5.43%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 5,139 $10,916 $12,915 $ 4,327 $11,322
Ratio of Expenses to Average Net Assets (2) 0.62%* 0.70% 0.63%* 0.78%* 0.73%*
Ratio of Net Investment Income to Average Net
Assets 11.06%* 8.84% 8.35%* 8.68%* 8.31%*
Portfolio Turnover Rate 115% 96% 38% 96% 38%
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.22% N/A N/A N/A
Ratio Including Expense Offsets 0.61%* 0.69% 0.63%* 0.76%* 0.73%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
Per share amounts for the year ended September 30, 1997 are
!! based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
159
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
CASH RESERVES PORTFOLIO
Institutional Class
----------------------------------------------------------------
Six Months
Year Ended September 30, Ended
-------------------------------------------- March 31,
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.028 0.034 0.055 0.052 0.052 0.027
Net Realized and Unrealized Gain (Loss) on
Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.028 0.034 0.055 0.052 0.052 0.027
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.028) (0.034) (0.055) (0.052) (0.052) (0.027)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.81% 3.40% 5.57% 5.35% 5.32% 2.70%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $10,717 $37,933 $44,624 $78,497 $98,464 $109,936
Ratio of Expenses to Average Net Assets (1) 0.32% 0.32% 0.33% 0.33% 0.33% 0.32%*
Ratio of Net Investment Income to Average Net Assets 2.78% 3.70% 5.45% 5.19% 5.20% 5.34%*
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction of Ratio due to Expense
Reimbursement/Waiver 0.24% 0.14% 0.11% 0.09% 0.07% 0.05%*
Ratio Including Expense Offsets N/A N/A 0.32% 0.32% 0.32% 0.32%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
<PAGE>
FIXED INCOME PORTFOLIO II
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------------
Six Months
Year Ended September 30, Ended
------------------------------------------------ March 31,
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.67 $ 11.97 $ 10.42 $ 11.33 $ 11.23 $ 11.46
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.69 0.63 0.71 0.70 0.74 0.34
Net Realized and Unrealized Gain (Loss) on
Investments 0.77 (1.16) 0.71 (0.03) 0.39 0.09
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.46 (0.53) 1.42 0.67 1.13 0.43
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.61) (0.67) (0.51) (0.66) (0.79) (0.35)
Realized Net Gain (0.55) (0.21) -- (0.08) (0.11) (0.12)
In Excess of Realized Net Gain -- (0.14) -- (0.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.16) (1.02) (0.51) (0.77) (0.90) (0.47)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.97 $ 10.42 $ 11.33 $ 11.23 $ 11.46 $ 11.42
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 13.53% (4.76%) 14.13% 6.12% 10.58% 3.85%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $94,836 $129,902 $176,945 $191,740 $226,662 $276,615
Ratio of Expenses to Average Net Assets (1) 0.51% 0.51% 0.51% 0.50% 0.50% 0.49%*
Ratio of Net Investment Income to Average Net
Assets 6.17% 6.07% 6.75% 6.06% 6.54% 6.46%*
Portfolio Turnover Rate 101% 137% 153% 165% 182% 45%
- ----------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.49% 0.49% 0.49% 0.48%*
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
160
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------
Six Months
Year Ended September 30, Ended
------------------------------------------ March 31,
MORTGAGE-BACKED SECURITIES PORTFOLIO 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.44 $ 10.95 $ 9.95 $ 10.49 $ 10.42 $ 10.76
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.63 0.52 0.72 0.68 0.91 0.37
Net Realized and Unrealized Gain (Loss) on
Investments 0.48 (0.83) 0.47 (0.07) 0.16 --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.11 (0.31) 1.19 0.61 1.07 0.37
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.60) (0.45) (0.65) (0.68) (0.73) (0.51)
Realized Net Gain -- (0.21) -- -- -- --
In Excess of Realized Net Gain - (0.03) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.60) (0.69) (0.65) (0.68) (0.73) (0.51)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.95 $ 9.95 $ 10.49 $ 10.42 $ 10.76 $ 10.62
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 11.03% (2.95%) 12.52% 6.10% 10.70% 3.56%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $50,249 $119,518 $49,766 $50,925 $38,085 $39,994
Ratio of Expenses to Average Net Assets (1) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%*
Ratio of Net Investment Income to Average Net Assets 6.92% 5.30% 6.35% 6.46% 7.79% 7.05%*
Portfolio Turnover Rate 93% 220% 107% 116% 164% 49%
- --------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.06% 0.01% 0.01% 0.04% 0.04% 0.05%*
Ratio Including Expense Offsets N/A N/A 0.50% 0.50% 0.50% 0.50%*
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
-------------------------------------------------------------
Six Months
Year Ended September 30, Ended
--------------------------------------------- March 31,
LIMITED DURATION PORTFOLIO 1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.58 $ 10.72 $ 10.19 $ 10.41 $ 10.38 $ 10.49
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.32 0.56 0.56 0.58 0.62 0.30
Net Realized and Unrealized Gain (Loss) on
Investments 0.22 (0.52) 0.22 (0.03) 0.08 (0.01)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.54 0.04 0.78 0.55 0.70 0.29
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.32) (0.51) (0.55) (0.58) (0.59) (0.30)
Realized Net Gain (0.08) (0.04) -- -- -- --
In Excess of Realized Net Gain -- (0.02) (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.40) (0.57) (0.56) (0.58) (0.59) (0.30)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.72 $ 10.19 $ 10.41 $ 10.38 $ 10.49 $ 10.48
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.33% 0.40% 7.95% 5.47% 6.98% 2.83%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $128,991 $62,775 $100,186 $123,227 $155,570 $223,599
Ratio of Expenses to Average Net Assets (1) 0.42% 0.41% 0.43% 0.43% 0.43% 0.43%*
Ratio of Net Investment Income to Average Net
Assets 3.92% 4.16% 5.96% 5.65% 6.15% 5.96%*
Portfolio Turnover Rate 217% 192% 119% 174% 130% 37%
- ---------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.03% N/A 0.02% N/A 0.00%# N/A
Ratio Including Expense Offsets N/A N/A 0.42% 0.42% 0.42% 0.42%*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
# Amount is less than 0.01%.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
161
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the period ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------------
Six Months
Year Ended September 30, Ended
------------------------------------------------- March 31,
SPECIAL PURPOSE FIXED INCOME PORTFOLIO 1993 1994 1995 1996 1997!! 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.72 $ 13.40 $ 11.52 $ 12.53 $ 12.26 $ 12.58
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.88 0.80 0.91 0.83 0.85 0.42
Net Realized and Unrealized Gain (Loss) on
Investments 0.92 (1.28) 0.75 0.08 0.52 0.04
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.80 (0.48) 1.66 0.91 1.37 0.46
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.82) (0.78) (0.65) (0.88) (0.87) (0.45)
Realized Net Gain (0.30) (0.53) -- (0.30) (0.18) (0.27)
In Excess of Realized Net Gain -- (0.09) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.12) (1.40) (0.65) (1.18) (1.05) (0.72)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.40 $ 11.52 $ 12.53 $ 12.26 $ 12.58 $ 12.32
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 15.19% (4.00%) 14.97% 7.74% 11.78% 3.78%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $300,185 $384,731 $390,258 $447,646 $492,784 $553,700
Ratio of Expenses to Average Net Assets (1) 0.48% 0.50% 0.49% 0.49% 0.49% 0.48%*
Ratio of Net Investment Income to Average Net
Assets 6.84% 6.66% 7.33% 6.75% 6.88% 6.99%*
Portfolio Turnover Rate 124% 100% 143% 151% 198% 49%
- --------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.48% 0.49% 0.48% 0.47%*
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class
-------------------------------------------------------
April 10, Year Period
1996** to Ended Ended
September 30, September 30, January 30,
1996 1997!! 1998!!!
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.89 $ 12.24 $ 12.56
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.27 0.82 0.29
Net Realized and Unrealized Gain (Loss) on Investments 0.23 0.53 0.13
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.50 1.35 0.42
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.15) (0.85) (0.45)
Realized Net Gain -- (0.18) (0.27)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.15) (1.03) (0.72)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.24 $ 12.56 $ 12.26
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.25% 11.62% 3.46%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 782 $ 1,261 --
Ratio of Expenses to Average Net Assets (2) 0.63%* 0.67% 0.63%*
Ratio of Net Investment Income to Average Net Assets 6.32%* 6.72% 6.95%*
Portfolio Turnover Rate 151% 198% N/A
- -------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 2.43% N/A
Ratio Including Expense Offsets 0.63%* 0.66% 0.62%*
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Initial Offering of Investment Class Shares
- -----------------------------------------------------------------
* Annualized
! Reflects a 2.5 for 1 share split effective August 13, 1993.
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
!!! As of January 30, 1998, there were no outstanding Investment Class shares
for the Special Purpose Fixed Income Portfolio.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
162
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period !
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------------
October 1, Year Ended September 30, Six Months
1992** to ----------------------------- Ended
September 30, 1994 1995 1996 1997 March 31,
MUNICIPAL PORTFOLIO 1993 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 11.15 $ 10.04 $ 10.75 $ 11.23 $ 11.64
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.37 0.51 0.59 0.51 0.53 0.26
Net Realized and Unrealized Gain (Loss) on
Investments 1.04 (1.01) 0.71 0.49 0.40 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.41 (0.50) 1.30 1.00 0.93 0.41
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.26) (0.54) (0.59) (0.52) (0.52) (0.27)
In Excess of Net Investment Income -- (0.07) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.26) (0.61) (0.59) (0.52) (0.52) (0.27)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.15 $ 10.04 $ 10.75 $ 11.23 $ 11.64 $ 11.78
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 14.20% (4.64%) 13.37% 9.46% 8.47% 3.55%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $26,914 $38,549 $36,040 $54,536 $75,120 $90,032
Ratio of Expenses to Average Net Assets (1) 0.50%* 0.50% 0.50% 0.51% 0.51% 0.51%*
Ratio of Net Investment Income to Average Net
Assets 4.65%* 4.98% 5.64% 4.66% 4.70% 4.65%*
Portfolio Turnover Rate 66% 34% 58% 78% 54% 13%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.20%* 0.06% 0.09% 0.09% 0.05% 0.03%*
Ratio Including Expense Offsets N/A N/A 0.50% 0.50% 0.50% 0.50%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
! Reflects a 2.5 for 1 share split effective August 13, 1993.
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------------
October 1, Year Ended September 30, Six Months
1992** to -------------------------------- Ended
September 30, 1994 1995 1996 1997 March 31,
PA MUNICIPAL PORTFOLIO 1993 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 11.26 $ 10.13 $ 10.91 $ 11.37 $ 11.71
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.39 0.56 0.58 0.51 0.55 0.28
Net Realized and Unrealized Gain (Loss) on
Investments 1.17 (1.00) 0.77 0.46 0.34 0.14
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.56 (0.44) 1.35 0.97 0.89 0.42
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.30) (0.64) (0.57) (0.51) (0.55) (0.28)
In Excess of Realized Net Gain -- (0.05) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.30) (0.69) (0.57) (0.51) (0.55) (0.28)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.26 $ 10.13 $ 10.91 $ 11.37 $ 11.71 $ 11.85
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 15.81% (4.08%) 13.74% 9.03% 8.01% 3.62%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $15,633 $23,515 $15,734 $28,488 $27,461 $28,035
Ratio of Expenses to Average Net Assets (1) 0.50%* 0.50% 0.50% 0.51% 0.51% 0.50%*
Ratio of Net Investment Income to Average Net
Assets 4.74%* 5.39% 5.56% 4.58% 4.74% 4.77%*
Portfolio Turnover Rate 94% 69% 57% 51% 64% 6%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.25%* 0.09% 0.19% 0.15% 0.09% 0.11%*
Ratio Including Expense Offsets N/A N/A N/A 0.50% 0.50% 0.50%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
! Reflects a 2.5 for 1 share split effective August 13, 1993.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
163
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period (Amounts for the six months ended
March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
GLOBAL FIXED INCOME PORTFOLIO
Institutional Class
----------------------------------------------------------------------------
April 30, Year Ended September 30, Six Months
1993** to ------------------------------------------- Ended
September 30, 1994 1995 1996 1997!! March 31,
1993 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.67 $ 10.20 $ 11.05 $ 11.01 $ 10.64
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.58 0.71 0.63 0.60 0.31
Net Realized and Unrealized Gain
(Loss) on Investments 0.61 (0.61) 0.81 0.09 (0.22) (0.19)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.74 (0.03) 1.52 0.72 0.38 0.12
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.07) (0.41) (0.67) (0.71) (0.59) (0.37)
Realized Net Gain -- (0.03) -- (0.05) (0.16) (0.15)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.07) (0.44) (0.67) (0.76) (0.75) (0.52)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.67 $ 10.20 $ 11.05 $ 11.01 $ 10.64 $ 10.24
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.43% (0.29%) 15.54% 6.83% 3.53% 1.16%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $53,164 $43,066 $55,147 $67,282 $77,493 $67,850
Ratio of Expenses to Average Net
Assets (1) 0.58%* 0.57% 0.58% 0.60% 0.57% 0.57%*
Ratio of Net Investment Income to
Average Net Assets 5.08%* 5.48% 6.34% 5.25% 5.65% 5.62%*
Portfolio Turnover Rate 30% 117% 118% 133% 137% 34%
- ---------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE
RATIO OF EXPENSES TO AVERAGE NET
ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.18%* N/A N/A N/A N/A N/A
Ratio Including Expense Offsets N/A N/A 0.56% 0.58% 0.57% 0.57%*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
!! Per Share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
<PAGE>
INTERNATIONAL FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Institutional Class
-------------------------------------------------------------------------
April 29, Year Ended September 30, Six Months
1994** to ---------------------------------- Ended
September 30, 1995 1996 1997 March 31,
1994 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.05 $ 11.01 $ 10.77 $ 10.19
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.21 0.67 0.52 0.50 0.22
Net Realized and Unrealized Gain (Loss) on
Investments (0.11) 0.92 0.12 (0.44) (0.28)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 1.59 0.64 0.06 (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.05) (0.63) (0.80) (0.38) (0.36)
Realized Net Gain -- -- (0.08) (0.26) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.05) (0.63) (0.88) (0.64) (0.45)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 11.01 $ 10.77 $ 10.19 $ 9.68
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.01% 16.36% 6.13% 0.44% (0.60%)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $66,879 $127,882 $143,137 $152,752 $143,775
Ratio of Expenses to Average Net Assets (1) 0.60%* 0.54% 0.53% 0.53% 0.53%*
Ratio of Net Investment Income to Average
Net Assets 5.83%* 6.35% 5.39% 5.27% 4.64%*
Portfolio Turnover Rate 31% 140% 124% 107% 25%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.11%* N/A N/A N/A N/A
Ratio Including Expense Offsets N/A 0.54% 0.53% 0.53% 0.53%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
164
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the period ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------
October 3, Six Months
1994** to Year Ended September 30, Ended
September 30, ------------------------ March 31,
INTERMEDIATE DURATION PORTFOLIO 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.68 $ 10.28 $ 10.48
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.69 0.60 0.61 0.27
Net Realized and Unrealized Gain (Loss) on
Investments 0.42 0.03 0.27 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.11 0.63 0.88 0.37
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.43) (0.65) (0.53) (0.29)
Realized Net Gain -- (0.38) (0.15) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.43) (1.03) (0.68) (0.39)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 10.28 $ 10.48 $ 10.46
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 11.39% 6.27% 8.93% 3.62%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $19,237 $12,017 $72,119 $117,826
Ratio of Expenses to Average Net Assets (1) 0.52%* 0.56% 0.55% 0.52%*
Ratio of Net Investment Income to Average Net
Assets 6.56%* 6.17% 5.93% 5.98%*
Portfolio Turnover Rate 168% 251% 204% 63%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.08%* 0.13% 0.05% N/A
Ratio Including Expense Offsets 0.52%* 0.52% 0.52% 0.50%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
!! Per share amounts for the year ended September 30, 1997 are
based on average shares outstanding.
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
-------------------
October 1,
1997** to
March 31,
MULTI-MARKET FIXED INCOME PORTFOLIO 1998
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28
Net Realized and Unrealized Gain (Loss) on Investments 0.03
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.31
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.13)
Realized Net Gain (0.01)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.14)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.17
- --------------------------------------------------------------------------------
TOTAL RETURN 3.14%
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $56,031
Ratio of Expenses to Average Net Assets (1) 0.58%*
Ratio of Net Investment Income to Average Net Assets 6.36%*
Portfolio Turnover Rate 71%
- --------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.08%*
Ratio Including Expense Offsets 0.58%*
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
165
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period!
(Amounts for the six months ended March 31, 1998 are unaudited)
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------------
December 31,
1992** to Year Ended September 30, Six Months
September ----------------------------------- Ended
30, 1994 1995 1996 1997 March 31,
1993 1998!!
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 11.84 $ 11.28 $ 13.06 $ 13.81 $ 15.30
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.25 0.47 0.54 0.53 0.51 0.24
Net Realized and Unrealized Gain (Loss) on
Investments 0.66 (0.45) 1.78 1.15 2.91 0.88
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.91 0.02 2.32 1.68 3.42 1.12
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.13) (0.43) (0.47) (0.50) (0.54) (0.27)
Realized Net Gain -- (0.15) (0.07) (0.43) (1.39) (1.72)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.13) (0.58) (0.54) (0.93) (1.93) (1.99)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.84 $ 11.28 $ 13.06 $ 13.81 $ 15.30 $ 14.43
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 8.31% 0.19% 21.37% 13.47% 27.44% 8.61%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $291,762 $309,596 $334,630 $300,868 $343,284 $364,664
Ratio of Expenses to Average Net Assets(1) 0.58%* 0.58% 0.58% 0.57% 0.58% 0.58%*
Ratio of Net Investment Income to Average
Net Assets 3.99%* 4.06% 4.55% 3.85% 3.56% 3.35%*
Portfolio Turnover Rate 62% 75% 95% 110% 145% 46%
Average Commission Rate### N/A N/A N/A $0.0521 $0.0578 $0.0614
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A N/A 0.57% 0.57% 0.56% 0.56%*
- ---------------------------------------------------------------------------------------------------------------------------------
** Commencement of Operations
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
------------------------- ---------------------------------
April 4, November 1,
1997*** to Six Months 1996**** to Six Months
September Ended September Ended
30, March 31, 30, March 31,
1997 1998!! 1997 1998!!
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.11 $ 15.30 $ 14.05 $ 15.30
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.23 0.42 0.22
Net Realized and Unrealized Gain (Loss) on Investments 2.09 0.87 2.60 0.88
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.39 1.10 3.02 1.10
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.20) (0.26) (0.38) (0.26)
Realized Net Gain -- (1.72) (1.39) (1.72)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.20) (1.98) (1.77) (1.98)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.30 $ 14.42 $ 15.30 $ 14.42
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 18.40% 8.45% 23.82% 8.46%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $3,943 $880 $27,366 $31,648
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.73%* 0.85%* 0.83%*
Ratio of Net Investment Income to Average Net Assets 3.32%* 3.24%* 3.24%* 3.11%*
Portfolio Turnover Rate 145% 46% 145% 46%
Average Commission Rate ### $0.0578 $0.0614 $0.0578 $0.0614
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A N/A 0.03%* N/A
Ratio Including Expense Offsets 0.70%* 0.72%* 0.84%* 0.81%*
- ---------------------------------------------------------------------------------------------------------------------------------
*** Initial offering of Investment Class shares
**** Initial offering of Adviser Class shares
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
! Reflects a 2.5 for 1 split effective August 13, 1993.
!! Per share amounts for the period ended March 31, 1998 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
166
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 1998 are unaudited)
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
MULTI-ASSET-CLASS PORTFOLIO ---------------------------------------------------------------------
July 29, Six Months
1994** to Year Ended September 30, Ended
September 30, ------------------------------- March 31,
1994 1995 1996 1997!! 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.97 $ 11.34 $ 12.28 $ 13.64
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.07 0.44 0.46 0.38 0.16
Net Realized and Unrealized Gain (Loss) on
Investments (0.10) 1.33 1.05 2.57 0.78
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.03) 1.77 1.51 2.95 0.94
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.40) (0.42) (0.51) (0.12)
Realized Net Gain -- -- (0.15) (1.08) (1.49)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (0.40) (0.57) (1.59) (1.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.97 $ 11.34 $ 12.28 $ 13.64 $ 12.97
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (0.30%) 18.28% 13.75% 26.50% 8.13%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $51,877 $96,839 $129,558 $173,155 $189,093
Ratio of Expenses to Average Net Assets (1) 0.58%* 0.58% 0.58% 0.74% 0.78%*
Ratio of Net Investment Income to Average Net
Assets 4.39%* 4.56% 3.82% 3.07% 2.69%*
Portfolio Turnover Rate 20% 112% 122% 141% 44%
Average Commission Rate ### N/A N/A $ 0.0225 $ 0.0114 $ 0.0092
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.26%* 0.14% 0.08% 0.08% 0.05%*
Ratio Including Expense Offsets N/A 0.58% 0.58% 0.74% 0.78%*
- ---------------------------------------------------------------------------------------------------------------------------------
** Commencement of Operations
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Class
-----------------------------------------------------
June 10, Six Months
1996*** to Year Ended Ended
September 30, September 30, March 31,
1996 1997!! 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 12.27 $ 13.63
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.36 0.17
Net Realized and Unrealized Gain (Loss) on Investments 0.08 2.57 0.76
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.21 2.93 0.93
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.11) (0.49) (0.10)
Realized Net Gain -- (1.08) (1.49)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.11) (1.57) (1.59)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.27 $ 13.63 $ 12.97
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.75% 26.32% 8.04%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 3,074 $ 5,075 $ 5,545
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.96% 0.93%*
Ratio of Net Investment Income to Average Net Assets 3.68%* 2.85% 2.54%*
Portfolio Turnover Rate 122% 141% 44%
Average Commission Rate ### $0.0225 $0.0114 $0.0092
- --------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.08%* 0.55% 0.05%*
Ratio Including Expense Offsets 0.73%* 0.96% 0.93%*
- --------------------------------------------------------------------------------------------------------------------------
*** Initial offering of Investment Class shares
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
!! Per share amount for the year ended September 30, 1997 are
based on average shares outstanding.
### For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
security transactions on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
167
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940 as
an open-end investment company. At March 31, 1998, the Fund was comprised of
twenty-five active portfolios (each referred to as a "Portfolio"). The
Multi-Market Fixed Income Portfolio commenced operations on October 1, 1997. The
Funds may offer up to three different classes of shares for certain Portfolios
- -- Institutional Class shares, Investment Class shares and Adviser Class shares.
The Equity Portfolio began offering Adviser Class shares on January 16, 1998.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution fees as described in Note D. The financial statements for
the Advisory Foreign Fixed Income and Advisory Mortgage Portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds, including municipal
bonds, and other fixed income securities are valued using brokers'
quotations or on the basis of prices, provided by a pricing service, which
are based primarily on institutional size trading in similar groups of
securities. Mortgage-backed securities issued by certain government-related
organizations are valued using brokers' quotations which are based on a
matrix system which considers such factors as other security prices, yields
and maturities. Securities in the Cash Reserves Portfolio, and other
Portfolios' short term securities, are valued using the amortized cost
method of valuation, which in the opinion of the Board of Trustees reflects
fair value. Securities for which no quotations are readily available
(including restricted securities) are valued at their fair value as
determined in good faith using methods approved by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
and tax-exempt income. Accordingly, no provision for Federal income taxes is
required in the financial statements.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by the Portfolios' custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of the collateral is at least equal to the repurchase value in the
event of a default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral
may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into
a joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreement. This joint repurchase agreement is covered
by the same collateral requirements as discussed above.
- --------------------------------------------------------------------------------
168
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. FUTURES: Futures contracts (secured by cash and securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as "variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are
closed, the difference between the opening value at the date of purchase
and the value at closing is recorded as realized gains or losses in the
Statement of Operations.
Futures contracts may be used by each Portfolio, except the Cash Reserves
Portfolio, in order to hedge against unfavorable changes in the value of
securities or to attempt to realize profits from the value of the underlying
securities.
Futures contracts involve market risk in excess of the amounts recognized in
the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of futures
contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that a Portfolio may not be able
to enter into a closing transaction because of an illiquid secondary market.
5. SWAP AGREEMENTS: Each Portfolio, except the Cash Reserves and Mid Cap Growth
Portfolios, may enter into swap agreements to exchange the return generated
by one instrument for the return generated by another instrument. The
following summarizes swaps entered into by the Portfolios:
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments
to pay and receive interest based on a notional principal amount. Net
periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an adjustment to interest income.
Interest rate swaps are marked-to-market daily based upon quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations.
Total Return Swaps: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the
Portfolio will receive a payment from or make a payment to the counterparty,
respectively. Total return swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized gains or losses in the Statement of Operations. Periodic payments
received or made at the end of each measurement period, but prior to
termination, are recorded as realized gains or losses in the Statement of
Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Portfolio terminated its position in the agreement. Risks
may arise upon entering into these agreements from the potential inability
of the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received, if any, at
the date of the default.
6. INTEREST RATE FLOOR AND CAP AGREEMENTS: Each Portfolio, except the Cash
Reserves Portfolio, may hold or write interest rate floors or caps to
protect itself against fluctuation in interest rates. When a Portfolio
writes an interest rate floor, it agrees to make periodic interest payments
to the holder of the interest rate floor based on a notional principal
amount to the extent that
- --------------------------------------------------------------------------------
169
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
a specified interest index falls below a specified interest rate. When a
Portfolio writes an interest rate cap, it agrees to make periodic interest
payments to the holder of the interest rate cap based on a notional
principal amount to the extent that a specified interest index rises above a
specified interest rate. Any premium received by a Portfolio is recorded as
a liability and is amortized to interest income over the term of the
agreement. Any premium paid by a Portfolio is recorded as an asset and is
accreted against interest income over the term of the agreement. Interest
rate caps and floors are marked-to-market daily based on quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations. Periodic receipts or
payments of interest, if any, are recorded in the interest income account on
the Statement of Operations. Realized gains or losses from these agreements
are disclosed in the Statement of Operations.
Because there is no organized market for these agreements, the value
reported in the Statement of Net Assets may differ from that which would be
realized in the event the Portfolio terminated its position in the
agreement. Entering into these agreements involves, to varying degrees,
elements of interest rate and market risk in excess of the amount recognized
in the Statement of Net Assets. Such risks involve the possibility that
there may be no liquid market for these agreements and that there may be
adverse changes in the interest rates or the index underlying these
transactions. Risk may arise upon entering into these agreements from the
potential inability of the counterparties to meet the terms of the
agreements and are generally limited to the amount of net interest payments
to be received.
7. STRUCTURED INVESTMENTS: Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes
in foreign currencies, interest rates, commodities, indices, or other
underlying instruments. A Portfolio uses these securities to increase or
decrease its exposure to different underlying instruments and to gain
exposure to markets that might be difficult to invest in through
conventional securities. Structured investments may be more volatile than
their underlying instruments, but any loss is limited to the amount of the
original investment.
8. DELAYED DELIVERY COMMITMENTS: Each Portfolio, except the Cash Reserves
Portfolio, may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. Collateral consisting of liquid
securities or cash is maintained in an amount at least equal to these
commitments.
9. PURCHASED OPTIONS: Certain Portfolios may purchase call and put options on
their portfolio securities. A call option, upon payment of a premium, gives
the purchaser of the option the right to buy, and the seller the obligation
to sell, the underlying instrument at the exercise price. The purchase of a
call option might be intended to protect the Portfolio against an increase
in the price of the underlying instrument that it intends to purchase in
the future by fixing the price at which it may purchase the instrument. A
put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the instrument at
the exercise price. A Portfolio may purchase a put option to protect its
holdings in the underlying instrument, or a similar instrument, against a
substantial decline in the market value of such instrument by giving the
Portfolio the right to sell the instrument at the option exercise price.
Possible losses from purchased options cannot exceed the total amount
invested.
- --------------------------------------------------------------------------------
170
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. FOREIGN EXCHANGE AND FORWARD CURRENCY CONTRACTS: The books and records of
the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against
U.S. dollars quoted by a bank. Net realized gains (losses) on foreign
currency transactions represent net foreign exchange gains (losses) from
forward foreign currency contracts, disposition of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income and foreign withholding taxes recorded on the Portfolio's books and
the U.S. dollar equivalent of amounts actually received or paid.
A forward foreign currency contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio (except
the Mid Cap Growth, Domestic Fixed Income, Cash Reserves, Mortgage-Backed
Securities, and Limited Duration Portfolios) may enter into forward foreign
currency contracts to protect securities and related receivables and
payables against future changes in foreign exchange rates. Fluctuations in
the value of such contracts are recorded as unrealized appreciation or
depreciation; realized gains or losses, which are disclosed in the Statement
of Operations, include net gains or losses on contracts which have been
terminated by settlements. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and are generally limited to the amount of unrealized
gain on the contract, if any, at the date of default. Risks may also arise
from unanticipated movements in the value of the foreign currency relative
to the U.S. dollar.
At March 31, 1998, the net assets of certain Portfolios were substantially
comprised of foreign denominated securities and currency. The net assets of
these Portfolios are presented at the foreign exchange rates and market
values at the close of the period. The Portfolios do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the
Portfolios do not isolate the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of
securities sold during the period. Accordingly, realized and unrealized
foreign currency gains (losses) are included in the reported net realized
and unrealized gains (losses) on investment transactions and balances.
Changes in currency exchange rates will affect the value of and investment
income from such securities and currency.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
11. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are declared and paid quarterly except for the Municipal and
PA Municipal Portfolios which are declared and paid monthly, Small Cap
Value, International Equity, Mid Cap Growth, Mid Cap Value, and Emerging
Markets Value Portfolios which are declared and paid annually, and Cash
Reserves Portfolio which are declared daily and paid monthly. Net realized
capital gains are distributed at least annually. The amount and character of
income and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing book and tax
treatments in the timing of the recognition of gains or
- --------------------------------------------------------------------------------
171
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
losses on securities, forwards and futures, including Post October Losses
and permanent differences such as gain (loss) on in-kind redemptions (Note
I), foreign currency transactions and gains on certain equity securities
designated as issued by "passive foreign investment companies".
Permanent book and tax differences relating to shareholder distributions may
result in reclassifications to undistributed net investment income (loss),
undistributed realized net gain (loss) and paid in capital.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the Financial Highlights.
12. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Securities classified as Value and Mid Cap Growth in the
Equity, Balanced and Multi-Asset-Class Portfolios are those acquired on the
basis of measures of value and growth, respectively, deemed appropriate by
the Investment Adviser. Most expenses of the Fund can be directly attributed
to a particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios on the basis of their relative net assets.
Income, expenses (other than class specific expenses) and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory Agreement,
each Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the "Adviser"),
wholly owned by indirect subsidiaries of Morgan Stanley Dean Witter & Co., for
investment advisory services performed at a fee calculated by applying a
quarterly rate based on an annual percentage rate to each Portfolio's average
daily net assets for the quarter. For the six months ended March 31, 1998 the
investment advisory fees of each of the Portfolios were:
<PAGE>
Annual Voluntary Expense Limitations
Investment ------------------------------------
Advisory Institutional Investment Adviser
Portfolio Fee Class Class Class
--------- ---------- ------------- ---------- -------
Value 0.500% --% --% --%
Equity 0.500 -- -- --
Small Cap Value 0.750 -- -- --
International Equity 0.500 -- -- --
Mid Cap Growth 0.500 -- -- --
Mid Cap Value 0.750 -- -- --
Emerging Markets Value 0.750 1.18 -- --
Fixed Income 0.375 -- -- --
Domestic Fixed Income 0.375 0.50 -- --
High Yield 0.375 -- -- --
Cash Reserves 0.250 0.32 -- --
Fixed Income II 0.375 -- -- --
Mortgage-Backed
Securities 0.375 0.50 -- --
Limited Duration 0.300 -- -- --
Special Purpose Fixed
Income 0.375 -- -- --
Municipal 0.375 0.50 -- --
PA Municipal 0.375 0.50 -- --
Global Fixed Income 0.375 -- -- --
International Fixed
Income 0.375 -- -- --
Intermediate Duration 0.375 -- -- --
Multi-Market Fixed
Income 0.450 0.58 -- --
Balanced 0.450 -- -- --
Multi-Asset-Class 0.650 0.78 -- --
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios for certain expenses so that annual
operating expenses will not exceed voluntary expense limitations established for
each class of shares as presented in the table above.
C. ADMINISTRATION FEE. MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the agreement, MAS receives an annual fee,
accrued daily and payable monthly, of 0.08% of each Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services.
D. DISTRIBUTOR. MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of Morgan Stanley Asset Management
- --------------------------------------------------------------------------------
172
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Holdings, Inc., is the distributor for the Fund. MASDI is a limited-purpose
broker/dealer whose only function is to distribute open-end mutual fund shares.
The Distributor provides all classes of shares in each Portfolio with
distribution services pursuant to separate Distribution Plans (the "Plans") in
accordance with Rule 12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing accounts. The Adviser Class of shares pays an annual
service and distribution fee of 0.25% of average net assets of the class for
such services under the 12b-1 plan adopted by the Fund. The Investment Class of
shares pays an annual shareholder servicing fee of 0.15% of average net assets
of the class. The shareholder servicing fee is not a distribution fee and is
used to support the expenses associated with servicing and maintaining accounts.
Both fees are paid directly to MASDI. The distribution fee may be retained by
MASDI if an Adviser Class shareholder invests directly through MASDI. Usually
the fees are paid by MASDI to external organizations such as 401(k) alliance
sponsors, discount brokers and bank trust departments who distribute MAS Funds
to the public.
E. CUSTODY. Morgan Stanley Trust Company (NY) ("MSTC"), an affiliate of the
Fund, serves as custodian for certain of the Fund's assets held outside of the
United States in accordance with a custodian agreement. MSTC is a wholly owned
subsidiary of Morgan Stanley Dean Witter & Co.
For the six months ended March 31, 1998, the following Portfolios incurred
custody fees and had amounts payable to MSTC at March 31, 1998:
MSTC Custody
Custody Fees Fees Payable
Incurred to MSTC
(000) (000)
------------ ---------------
International Equity $133 $--
Emerging Markets Value 54 6
Global Fixed Income 12 5
International Fixed Income 25 10
Multi-Asset-Class 15 5
F. TRUSTEES' FEES. The Fund pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person, as
defined under the Investment Company Act of 1940, as amended, participates in
the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of the
Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total trustees fees incurred, for the six months ended March 31, 1998
by the Portfolios were $104,000.
Expenses for the six months ended March 31, 1998 include legal fees paid to
Morgan, Lewis & Bockius LLP. A partner of that firm is secretary of the Fund.
<PAGE>
G. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES: For the six months ended March 31, 1998,
purchases and sales of investment securities other than temporary cash
investments were:
(000)
----------------------
Portfolio Purchases Sales
--------- ---------- ----------
Value $ 951,711 $ 572,098
Equity 387,576 551,391
Small Cap Value 582,694 584,974
International Equity 234,097 358,754
Mid Cap Growth 296,024 293,744
Mid Cap Value 284,829 179,328
Emerging Markets Value 9,863 14,430
Fixed Income 3,295,929 2,110,815
Domestic Fixed Income 51,661 64,043
High Yield 308,384 209,204
Cash Reserves -- --
Fixed Income II 166,923 109,172
Mortgage-Backed Securities 31,544 18,979
Limited Duration 135,633 68,938
Special Purpose Fixed Income 324,098 251,625
Municipal 28,409 10,847
PA Municipal 2,102 1,667
Global Fixed Income 21,694 21,452
International Fixed Income 28,225 27,357
Intermediate Duration 119,579 59,103
Multi-Market Fixed Income 85,064 30,067
Balanced 171,825 168,277
Multi-Asset-Class 83,228 75,713
- --------------------------------------------------------------------------------
173
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION): At March
31, 1998, cost, unrealized appreciation, unrealized depreciation and net
unrealized appreciation (depreciation) of securities for Federal income tax
purposes were:
(000)
---------------------------------------------------
Portfolio Cost Appreciation Depreciation Net
--------- ---------- ------------ ------------ --------
Value $3,461,662 $944,345 $(43,473) $900,872
Equity 1,008,638 325,789 (12,110) 313,679
Small Cap Value 777,235 191,735 (22,609) 169,126
International Equity 546,015 123,057 (16,661) 106,396
Mid Cap Growth 515,520 174,459 (3,148) 171,311
Mid Cap Value 324,797 57,757 (3,203) 54,554
Emerging Markets
Value 13,320 2,055 (1,734) 321
Fixed Income 4,768,450 72,142 (37,444) 34,698
Domestic Fixed Income 90,137 1,784 (641) 1,143
High Yield 607,398 30,602 (7,339) 23,263
Cash Reserves 109,796 -- -- --
Fixed Income II 317,392 4,769 (2,435) 2,334
Mortgage-Backed
Securities 50,825 646 (397) 249
Limited Duration 222,534 956 (945) 11
Special Purpose Fixed
Income 597,436 13,140 (5,920) 7,220
Municipal 89,727 6,126 (46) 6,080
PA Municipal 26,104 2,358 (8) 2,350
Global Fixed Income 68,922 919 (2,620) (1,701)
International Fixed
Income 147,879 1,889 (6,837) (4,948)
Intermediate Duration 134,425 1,049 (575) 474
Multi-Market Fixed
Income 55,280 564 (844) (280)
Balanced 385,676 62,628 (3,889) 58,739
Multi-Asset-Class 178,359 27,224 (2,770) 24,454
3. FORWARD FOREIGN CURRENCY CONTRACTS: Under the terms of the forward foreign
currency contracts open at March 31, 1998, each Portfolio is obligated to
deliver or receive currency in exchange for U.S. dollars as indicated in the
following table:
<TABLE>
<CAPTION>
(000)
---------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------- -------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY
Purchases
US$ 259 AUD 390 4/1/98 US$ 258 US$ (1)
------------
EMERGING MARKETS VALUE
Sales
INR 627,356 US$ 74 4/1/98 US$ 73 US$ 1
------------
FIXED INCOME
Sales
DEM 102,650 US$ 57,560 4/29/98 US$ 55,616 US$ 1,944
DEM 8,230 4,465 4/29/98 4,459 6
------------
US$ 1,950
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(000)
---------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------- -------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
HIGH YIELD
Sales
DEM 4,935 US$ 2,722 4/20/98 US$ 2,672 US$ 50
DEM 815 447 4/20/98 441 6
DEM 9,675 5,351 5/29/98 5,250 101
DEM 8,000 4,422 6/18/98 4,346 76
DEM 8,400 4,609 6/23/98 4,565 44
------------
US$ 277
------------
FIXED INCOME II
Purchases
US$ 465 DEM 857 4/6/98 US$ 464 US$ (1)
------------
Sales
DEM 855 US$ 464 4/29/98 US$ 463 US$ 1
DEM 6,805 3,816 4/29/98 3,687 129
------------
US$ 130
------------
NET US$ 129
------------
SPECIAL PURPOSE FIXED INCOME
Sales
DEM 13,695 US$ 7,679 4/29/98 US$ 7,420 US$ 259
------------
GLOBAL FIXED INCOME
Purchases
US$ 2,865 CHF 4,285 4/1/98 US$ 2,813 US$ (52)
485 AUD 715 4/3/98 473 (12)
614 ITL 1,105,000 4/20/98 607 (7)
1,269 DEM 2,300 4/23/98 1,246 (23)
5,442 DEM 9,840 4/23/98 5,329 (113)
369 ESP 56,750 4/23/98 362 (7)
1,685 DEM 3,055 4/24/98 1,655 (30)
1,486 CAD 2,155 4/30/98 1,520 34
1,125 GBP 690 5/5/98 1,154 29
1,028 IEP 750 5/6/98 1,018 (10)
3,464 JPY 423,000 5/6/98 3,189 (275)
1,055 DEM 1,925 5/18/98 1,044 (11)
1,009 CAD 1,450 5/19/98 1,024 15
2,366 ESP 365,000 5/19/98 2,330 (36)
3,298 JPY 412,250 5/19/98 3,114 (184)
------------
US$ (682)
------------
Sales
CHF 4,285 US$ 3,005 4/1/98 US$ 2,813 US$ 192
DEM 13 7 4/1/98 7 --
AUD 715 485 4/3/98 473 12
DEM 635 344 4/23/98 343 1
DEM 4,660 2,585 4/30/98 2,525 60
IEP 750 1,047 5/6/98 1,018 29
JPY 130,000 1,067 5/11/98 981 86
SEK 12,740 1,571 5/13/98 1,597 (26)
DEM 6,435 3,562 5/18/98 3,490 72
GBP 605 983 5/19/98 1,011 (28)
SEK 3,765 466 5/20/98 472 (6)
CAD 1,070 754 6/2/98 756 (2)
DKK 2,695 392 6/2/98 384 8
FRF 3,130 513 6/10/98 507 6
IEP 260 358 6/18/98 353 5
AUD 2,120 1,424 6/19/98 1,404 20
ITL 810,000 449 6/23/98 445 4
CHF 4,285 2,895 6/30/98 2,842 53
------------
US$ 486
------------
NET US$ (196)
------------
INTERNATIONAL FIXED INCOME
Purchases
US$ 6,909 CHF 10,335 4/1/98 US$ 6,784 US$ (125)
112 AUD 165 4/3/98 109 (3)
3,165 ITL 5,680,000 4/20/98 3,118 (47)
9,030 DEM 16,365 4/23/98 8,863 (167)
13,906 DEM 25,125 4/23/98 13,608 (298)
2,472 CAD 3,585 4/30/98 2,530 58
2,199 JPY 285,000 4/30/98 2,147 (52)
2,641 GBP 1,620 5/5/98 2,709 68
</TABLE>
- -------------------------------------------------------------------------------
174
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(000)
---------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------- -------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
US$ 2,413 IEP 1,760 5/6/98 US$ 2,390 US$ (23)
410 DEM 750 5/18/98 407 (3)
4,952 CAD 7,120 5/19/98 5,027 75
5,651 ESP 872,000 5/19/98 5,567 (84)
4,080 JPY 510,000 5/19/98 3,852 (228)
6,389 JPY 805,000 6/10/98 6,100 (289)
6,484 JPY 830,000 6/18/98 6,296 (188)
4,621 FRF 28,240 6/23/98 4,582 (39)
------------
US$ (1,345)
------------
Sales
CHF 10,335 US$ 7,224 4/1/98 US$ 6,784 US$ 440
DEM 24 13 4/1/98 13 --
AUD 165 112 4/3/98 109 3
DEM 11,100 6,157 4/30/98 6,014 143
FRF 544 88 4/30/98 88 --
JPY 305,000 2,472 4/30/98 2,298 174
JPY 175,000 1,404 4/30/98 1,318 86
NLG 4,910 2,417 4/30/98 2,360 57
IEP 1,760 2,456 5/6/98 2,390 66
SEK 5,130 632 5/13/98 643 (11)
DEM 11,160 6,180 5/18/98 6,052 128
CAD 1,050 738 5/19/98 741 (3)
GBP 1,040 1,690 5/19/98 1,738 (48)
SEK 22,305 2,761 5/20/98 2,797 (36)
IEP 575 791 6/18/98 781 10
AUD 1,090 723 6/19/98 722 1
ITL 1,285,000 713 6/23/98 706 7
CHF 10,335 6,983 6/30/98 6,855 128
------------
US$ 1,145
------------
NET US$ (200)
------------
INTERMEDIATE DURATION
Sales
DEM 10,735 US$ 5,905 5/29/98 US$ 5,825 US$ 80
------------
MULTI-MARKET FIXED INCOME
Purchases
US$ 577 DEM 1,045 4/23/98 US$ 566 US$ (11)
823 IEP 600 5/6/98 815 (8)
970 CAD 1,395 5/19/98 984 14
486 ESP 75,000 5/19/98 479 (7)
231 DEM 425 6/23/98 231 --
------------
US$ (12)
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Sales
AUD 2,745 US$ 1,863 4/3/98 US$ 1,815 US$ 48
FRF 8,180 1,345 4/16/98 1,322 23
GBP 215 349 4/16/98 360 (11)
ITL 260,000 145 4/16/98 143 2
JPY 105,000 814 4/16/98 789 25
DEM 1,045 582 4/23/98 566 16
IEP 600 838 5/6/98 815 23
SEK 7,645 942 5/13/98 958 (16)
DEM 1,505 826 6/23/98 818 8
DEM 1,500 822 6/26/98 815 7
CHF 1,485 1,003 6/30/98 985 18
------------
US$ 143
------------
NET US$ 131
------------
BALANCED
Sales
DEM 3,705 US$ 2,077 4/29/98 US$ 2,007 US$ 70
DEM 745 404 4/29/98 403 1
------------
US$ 71
-------------
(000)
---------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------- -------- --------- ---------- ---------- --------------
MULTI-ASSET-CLASS
Purchases
US$ 318 CHF 475 4/1/98 US$ 312 US$ (6)
973 FRF 5,958 4/1/98 962 (11)
37 AUD 55 4/3/98 36 (1)
86 DKK 595 4/14/98 84 (2)
128 ITL 230,000 4/20/98 126 (2)
347 DEM 630 4/23/98 341 (6)
175 DEM 315 4/23/98 171 (4)
86 CAD 125 4/30/98 88 2
7 JPY 900 4/30/98 7 --
171 GBP 105 5/5/98 175 4
157 IEP 115 5/6/98 156 (1)
91 CAD 130 5/19/98 92 1
350 ESP 54,000 5/19/98 345 (5)
20 IEP 15 5/19/98 20 --
41 JPY 5,250 5/19/98 40 (1)
196 JPY 25,000 6/18/98 190 (6)
365 FRF 2,230 6/23/98 362 (3)
------------
US$ (41)
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Sales
CHF 475 US$ 332 4/1/98 US$ 312 US$ 20
DEM 149 81 4/1/98 80 1
GBP 187 315 4/1/98 314 1
IDR 703,813 83 4/1/98 82 1
AUD 55 37 4/3/98 36 1
DKK 595 85 4/14/98 84 1
DEM 175 97 4/20/98 95 2
DEM 75 41 4/23/98 41 --
DEM 370 205 4/30/98 200 5
FRF 555 92 4/30/98 90 2
JPY 900 7 4/30/98 7 --
DEM 75 42 5/5/98 41 1
IEP 115 160 5/6/98 156 4
SEK 1,530 189 5/13/98 192 (3)
DEM 520 288 5/18/98 282 6
CAD 90 63 5/19/98 63 --
ESP 14,000 90 5/19/98 89 1
GBP 110 179 5/19/98 184 (5)
IEP 15 21 5/19/98 20 1
JPY 14,000 112 5/19/98 106 6
DEM 315 174 5/29/98 171 3
DEM 270 149 6/18/98 146 3
DEM 400 221 6/18/98 217 4
AUD 65 43 6/19/98 43 --
DEM 285 156 6/23/98 155 1
ITL 108,000 60 6/23/98 59 1
CHF 335 226 6/30/98 222 4
------------
US$ 61
------------
NET US$ 20
------------
AUD -- Australian Dollar
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- German Mark
DKK -- Danish Krone
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- British Pound
IDR -- Indonesian Rupiah
IEP -- Irish Punt
INR -- Indian Rupee
ITL -- Italian Lira
JPY -- Japanese Yen
NLG -- Netherlands Guilder
SEK -- Swedish Krona
US$ -- U.S. Dollar
</TABLE>
- --------------------------------------------------------------------------------
175
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. FUTURES CONTRACTS: At March 31, 1998, the following Portfolios had futures
contracts open:
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Purchases:
INTERNATIONAL EQUITY
FTSE 100 Index 137 GBP 8,175 Jun-98 US$ 188
Nikkei 225 Index 132 JPY 2,151,600 Jun-98 (433)
FIXED INCOME
U.S. Treasury 2 yr.
Note 579 US$ 120,387 Jun-98 (350)
U.S. Treasury 5 yr.
Note 2,290 US$ 249,324 Jun-98 (1,475)
U.S. Treasury Long
Bond 281 US$ 33,790 Jun-98 (259)
DOMESTIC FIXED
INCOME
U.S. Treasury 2 yr.
Note 17 US$ 1,851 Jun-98 (5)
U.S. Treasury 5 yr.
Note 72 US$ 14,970 Jun-98 (43)
U.S. Treasury Long
Bond 25 US$ 3,006 Jun-98 (7)
FIXED INCOME II
U.S. Treasury 2 yr.
Note 119 US$ 24,743 Jun-98 (72)
U.S. Treasury 5 yr.
Note 23 US$ 2,504 Jun-98 (5)
U.S. Treasury Long
Bond 2 US$ 241 Jun-98 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIMITED DURATION
U.S. Treasury 2 yr.
Note 445 US$ 92,525 Jun-98 (245)
SPECIAL PURPOSE
FIXED INCOME
U.S. Treasury 2 yr.
Note 526 US$ 109,367 Jun-98 (318)
U.S. Treasury 5 yr.
Note 25 US$ 2,722 Jun-98 (5)
U.S. Treasury Long
Bond 151 US$ 18,158 Jun-98 (20)
MUNICIPAL
U.S. Treasury 5 yr.
Note 44 US$ 4,791 Jun-98 (9)
U.S. Treasury 10
yr. Note 30 US$ 3,371 Jun-98 (6)
PA MUNICIPAL
U.S. Treasury 5 yr.
Note 5 US$ 544 Jun-98 (1)
U.S. Treasury 10
yr. Note 41 US$ 4,607 Jun-98 (8)
GLOBAL FIXED INCOME Japanese 10 yr.
Government Bond 4 JPY 520,720 Jun-98 8
INTERNATIONAL FIXED
INCOME
German 10 yr.
Government Bond 45 DEM 8,316 Jun-98 64
Japanese 10 yr.
Government Bond 11 JPY 1,431,980 Jun-98 20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
INTERMEDIATE
DURATION
U.S. Treasury 2 yr.
Note 97 US$ 10,561 Jun-98 US$ (79)
U.S. Treasury 5 yr.
Note 117 US$ 24,327 Jun-98 (71)
BALANCED
U.S. Treasury 2 yr.
Note 70 US$ 14,555 Jun-98 (42)
U.S. Treasury 5 yr.
Note 133 US$ 14,480 Jun-98 (28)
U.S. Treasury Long
Bond 11 US$ 1,323 Jun-98 --
MULTI-ASSET CLASS
U.S. Treasury 2 yr.
Note 24 US$ 4,990 Jun-98 (15)
U.S. Treasury 5 yr.
Note 18 US$ 1,960 Jun-98 (4)
MIB 30 Index 7 ITL 2,470,720 Jun-98 161
Nikkei 225 Index 13 JPY 211,900 Jun-98 (86)
Sales:
FIXED INCOME
90 day Eurodollar 112 US$ 26,352 Jun-98-
Mar-01 (107)
U.S. Treasury 10
yr. Note 4,226 US$ 474,897 Jun-98 991
DOMESTIC FIXED
INCOME
U.S. Treasury 10
yr. Note 120 US$ 13,485 Jun-98 35
HIGH YIELD
U.S. Treasury Long
Bond 170 US$ 20,443 Jun-98 (42)
FIXED INCOME II
U.S. Treasury 10
yr. Note 162 US$ 18,205 Jun-98 33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MORTGAGE-BACKED
SECURITIES
U.S. Treasury 2 yr.
Note 18 US$ 3,743 Jun-98 2
U.S. Treasury 5 yr.
Note 11 US$ 1,198 Jun-98 2
U.S. Treasury 10
yr. Note 70 US$ 7,866 Jun-98 10
U.S. Treasury Long
Bond 2 US$ 241 Jun-98 --
LIMITED DURATION
U.S. Treasury Long
Bond 141 US$ 16,955 Jun-98 80
SPECIAL PURPOSE
FIXED INCOME
U.S. Treasury 10
yr. Note 842 US$ 94,620 Jun-98 278
MUNICIPAL
U.S. Treasury Long
Bond 61 US$ 7,335 Jun-98 (15)
PA MUNICIPAL
U.S. Treasury 2 yr.
Note 16 US$ 3,327 Jun-98 9
U.S. Treasury Long
Bond 23 US$ 2,766 Jun-98 (6)
GLOBAL FIXED INCOME
U.S. Treasury 10
yr. Note 18 US$ 2,023 Jun-98 6
INTERMEDIATE
DURATION
U.S. Treasury 10
yr. Note 35 US$ 3,933 Jun-98 (2)
U.S. Treasury Long
Bond 114 US$ 13,709 Jun-98 (15)
Jun-98 (15)
</TABLE>
- --------------------------------------------------------------------------------
176
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------- ---------- --------------
MULTI-MARKET FIXED
INCOME
U.S. Treasury 10
yr. Note 29 US$ 3,259 Jun-98 US$ 12
U.S. Treasury Long
Bond 4 US$ 481 Jun-98 (1)
BALANCED
U.S. Treasury 10
yr. Note 241 US$ 27,082 Jun-98 (72)
MULTI-ASSET CLASS
U.S. Treasury 10
yr. Note 18 US$ 2,023 Jun-98 (2)
U.S. Treasury Long
Bond 5 US$ 601 Jun-98 1
DEM -- German Mark
GBP -- British Pound
ITL -- Italian Lira
JPY -- Japanese Yen
US$ -- U.S. Dollar
5. SWAP AGREEMENTS: At March 31, 1998, the following Portfolios had open
Interest Rate Swap Agreements:
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
- ---------------------------------------------------------------
FIXED INCOME
$150,000 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$479
----------
DOMESTIC FIXED INCOME
$5,000 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$16
----------
FIXED INCOME II
$11,000 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$35
----------
MORTGAGE-BACKED SECURITIES
$2,750 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed
rate at 6.12% semiannually. $9
<PAGE>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
- ---------------------------------------------------------------
$7,000 Agreement with Salomon Brothers
terminating July 1, 1998 to pay
total rate of return on the
Salomon Brothers Benchmark
Yield Curve Average 2-Year
Index based on the previous
months return, if positive, and
to receive 1 month LIBOR less
38 basis points monthly and
receive the total rate of
return on the reference index
if the reference index is
negative. $3
----------
$12
----------
SPECIAL PURPOSE FIXED INCOME
$25,000 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$80
----------
MUNICIPAL
$10,300 Agreement with Bankers Trust Company terminating January 9, 2006
to pay fixed rate at 6.05% semiannually and to receive 3 month
LIBOR quarterly.
$58
----------
PA MUNICIPAL
$4,650 Agreement with Bankers Trust Company terminating January 9, 2006
to pay fixed rate at 6.05% semiannually and to receive 3 month
LIBOR quarterly.
$26
----------
BALANCED
$7,000 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$22
----------
MULTI-ASSET-CLASS
$1,500 Agreement with Bankers Trust Company terminating July 21, 1999
to pay 1 month LIBOR monthly and to receive fixed rate at 6.12%
semiannually.
$5
----------
LIBOR -- London Interbank Offer Rate
- --------------------------------------------------------------------------------
177
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
H. CAPITAL LOSS CARRYFORWARD. At March 31, 1998, the following Portfolios had
available for Federal income tax purposes unused capital losses, all of which
will expire on the indicated dates:
Expiration Date
September 30,
(000)
---------------
Portfolio 2003 2004
--------- ------ -----
Mortgage-Backed Securities $2,746 $ --
Limited Duration 3,769 172
Municipal -- 74
PA Municipal 23 --
I. IN-KIND TRANSACTIONS. For the six months ended March 31, 1998, the following
Portfolios realized gains (losses) from in-kind redemptions of approximately:
Portfolio (000)
--------- -------
Value $27,131
Equity 10,439
Small Cap Value (46)
Fixed Income 343
High Yield 297
J. SECURITIES LENDING. Certain Portfolios loan securities to certain brokers and
receive security lending fees. Security lending fees are included as expense
offsets in the Statement of Operations. Fees greater than custodian expenses are
included in interest income. During the six months ended March 31, 1998, the
following Portfolios had security lending fees totaling:
<PAGE>
Fees
Portfolio (000)
--------- -------------
Value $173
Equity 95
International Equity 55
Mid Cap Growth 226
Fixed Income 90
Domestic Fixed Income 1
Fixed Income II 3
Special Purpose Fixed Income 18
Balanced 28
Portfolios that lend securities receive securities issued or guaranteed by the
U.S. Government or its agencies, cash or letters of credit as collateral in an
amount at least equal to 100% of the current market value of loaned securities.
The value of loaned securities and related collateral outstanding at March 31,
1998, were as follows:
Value of Value
Loaned of
Securities Collateral
Portfolio (000) (000)
--------- ---------- ----------
Value $339,614 $345,139
Equity 127,783 130,983
International Equity 94,310 99,026
Mid Cap Growth 130,673 134,118
Fixed Income 149,684 153,736
Domestic Fixed Income 4,609 4,707
Fixed Income II 21,734 22,171
Special Purpose Fixed
Income 27,720 28,238
Balanced 29,415 29,976
Custodian fees appearing in the Statement of Operations have been adjusted to
include expense offsets for custodian balance credits and security lending fees
totaling $454,000 and $196,000 respectively, for the six months ended March 31,
1998.
K. OTHER. At March 31, 1998, the High Yield Portfolio's net assets were
substantially comprised of high yield fixed income securities. The financial
condition of an issuer of these securities and general economic and industry
specific conditions may affect the issuer's ability to make payments of income
and principal on these securities.
A portion of the securities of the Municipal and PA Municipal Portfolios are
insured by certain companies specializing in the insurance of municipal debt
obligations. At March 31, 1998, approximately 56.6% and 49.9% of the net assets
of the Municipal and PA Municipal Portfolios, respectively, are covered by such
insurance. Listed below are the insurers that insure obligations constituting
more than 10% of the Portfolios' net assets:
PA
Municipal Municipal
--------- ---------
AMBAC 17.7% 15.4%
FGIC 13.0 18.8
MBIA 15.7 11.0
At March 31, 1998, certain employees of Miller Anderson & Sherrerd, LLP were
record owners of approximately 20.0% of the PA Municipal Portfolio. In addition,
the Fund had Portfolios with otherwise unaffiliated record owners of 10% or
- --------------------------------------------------------------------------------
178
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
greater. Investment activities of these shareholders could have a material
impact on these Portfolios. These Portfolios and the aggregate percentage of
such owners was as follows:
Percentage
of Ownership
------------------------------------
Institutional Investment Adviser
Portfolios Class Class Class
---------- ------------- ---------- -------
Value 15.2% 42.4% 83.4%
Equity -- 97.1 90.8
Small Cap Value 10.8 -- --
International Equity 14.7 88.7 --
Mid Cap Growth 22.3 -- 98.2
Mid Cap Value -- 78.9 --
Emerging Markets Value 66.9 -- --
Fixed Income -- 46.4 83.0
Domestic Fixed Income 21.4 -- --
High Yield -- 70.8 77.0
Cash Reserves 39.5 -- --
Fixed Income II 11.1 -- --
Mortgage-Backed
Securities 89.2 -- --
Limited Duration 27.4 -- --
Special Purpose Fixed
Income -- -- --
Municipal 34.0 -- --
PA Municipal 51.3 -- --
Global Fixed Income 70.2 -- --
International Fixed
Income 57.7 -- --
Intermediate Duration 45.7 -- --
Multi-Market Fixed
Income 93.3 -- --
Balanced 32.7 95.2 98.5
Multi-Asset-Class 29.1 91.2 --
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179
<PAGE>
MAS FUNDS TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following is a list of the Trustees and the principal executive officers of
the Fund and a brief statement of their present positions and principal
occupations during the past five years:
THOMAS L. BENNETT, CFA*
Chairman of the Board of Trustees; Managing Director, Morgan Stanley; Portfolio
Manager and member of the Executive Committee, Miller Anderson & Sherrerd, LLP;
Director, MAS Fund Distribution, Inc.; Director, Morgan Stanley Universal Funds,
Inc.
THOMAS P. GERRITY
Trustee; Dean and Reliance Professor of Management and Private Enterprise,
Wharton School of Business, University of Pennsylvania; Director, Digital
Equipment Corporation; Director, Sun Company, Inc.; Director, Fannie Mae;
Director, Reliance Group Holdings; Director, CVS Corporation; Director, Union
Carbide Corporation.
JOSEPH P. HEALEY
Trustee; Headmaster, Haverford School; formerly Dean, Hobart College; Associate
Dean, William & Mary College.
JOSEPH J. KEARNS
Trustee; Investment Consultant, Chief Investment Officer, The J. Paul Getty
Trust; Director, Electro Rent Corporation; Trustee, Southern California Edison
Nuclear Decommissioning Trust; Director, The Ford Family Foundation.
VINCENT R. MCLEAN
Trustee; Director, Legal and General America, Inc., Director, William Penn Life
Insurance Company of New York; formerly Executive Vice President, Chief
Financial Officer, Director and Member of the Executive Committee of Sperry
Corporation (now part of Unisys Corporation).
C. OSCAR MORONG, JR.
Trustee; Managing Director, Morong Capital Management; Director, Ministers and
Missionaries Benefit Board of American Baptist Churches, The Indonesia Fund, The
Landmark Funds; formerly Senior Vice President and Investment Manager for CREF,
TIAA-CREF Investment Management, Inc.
JAMES D. SCHMID
President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Funds, Miller
Anderson & Sherrerd, LLP; Director, MAS Fund Distribution, Inc.; Chairman of the
Board of Directors, The Minerva Fund, Inc.; formerly Vice President, The Chase
Manhattan Bank.
LORRAINE TRUTEN, CFA
Vice-President, MAS Funds; Principal, Morgan Stanley; Head of Mutual Fund
Services, Miller Anderson & Sherrerd, LLP; President, MAS Fund Distribution,
Inc.
JOHN H. GRADY, JR.
Secretary, MAS Funds; Partner, Morgan, Lewis & Bockius, LLP; formerly Attorney,
Ropes & Gray.
RICHARD J. SHOCH
Assistant Secretary and Compliance Officer, MAS Funds; formerly Vice President
and Assistant Secretary, SEI Corporation.
JAMES A. GALLO
Treasurer, MAS Funds; Vice-President, Morgan Stanley; Head of Fund Accounting,
Miller Anderson & Sherrerd, LLP; formerly Vice President and Director of
Investment Accounting, PFPC, Inc.
*Trustee Bennett is deemed to be an "interested person" of the Fund as that term
is defined in the Investment Company Act of 1940, as amended.
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180
<PAGE>
[MAS FUND LOGO]
MILLER ANDERSON & SHERRERD, LLP
One Tower Bridge
West Conshohocken, PA 19428-2899
Investment Adviser: (610) 940-5000
MAS Funds: (800) 354-8185
Printed in U.S.A. This Report has been
prepared for shareholders and may be
distributed to others only if preceded or
accompanied by a current prospectus.
