<PAGE> 1
MAS Funds is pleased to present the Annual Report for the Value Portfolio as of
September 30, 1998. Please call your Miller Anderson & Sherrerd service contact
at 800-354-8185 with any questions regarding these Financial Statements.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Portfolio Overview.......................... 1
Statement of Net Assets..................... 3
Statement of Operations..................... 6
Statement of Changes in Net Assets.......... 7
Financial Highlights........................ 8
Notes to Financial Statements............... 10
Report of Independent Accountants........... 16
</TABLE>
THIS ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 2
PORTFOLIO OVERVIEW
- --------------------------------------------------------------------------------
VALUE PORTFOLIO
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined stock
valuation process with the judgment gained through considerable experience in
low-P/E investing.
MAS's process is executed in two stages. An initial screen is used to identify
companies with flat or positive earnings growth which have underperformed the
broad market averages and whose valuations currently fall into the lower segment
of MAS's investment universe. In the second stage, fundamental analysis is used
to determine the cyclical sustainability of earnings and the competitive
dynamics of the company. This approach is fortified by attention to risk
management. MAS emphasizes portfolio diversification in terms of both sectors
and stocks. Maximum sector limitations are imposed and limits placed on the size
of individual positions, thereby minimizing the risk of any sector or holding.
MAS also utilizes a clearly defined, firmly enforced sell discipline. Many value
managers who are able to identify outstanding securities err in holding
successful investments past their peaks. Perhaps the greatest strategic
advantage of the MAS approach is that the sell discipline mandates the sale of
any stock that satisfies one or more of the three sell criteria--price
appreciation, earnings deterioration or negative fundamental change.
The fiscal year ended September 30, 1998 was the most challenging on record for
the Value Portfolio. While the S&P 500 gained 9.1% during the year, the
Portfolio declined 16.4%. In a market environment characterized by financial
turmoil and market panic, as evidenced in particular toward the end of the
fiscal year, liquidity and perceived stability can command irrational premiums.
While the capitalization-weighted benchmark S&P 500 continued to be heavily
influenced by very large market capitalization growth/defensive stocks, the
smaller, cheaper, more cyclical companies continued to be out of favor. The
Portfolio is restricted from owning most of the mega-cap stocks in any sector,
including energy, health care, telephones, food, personal care, technology, and
even heavy industry. To do so would violate the Portfolio's low P/E discipline.
This year has also been extraordinary in that every investment style and
strategy employed by the Portfolio has significantly underperformed its
counterpart. For example, high P/E stocks significantly outperformed low P/E
stocks. The most expensive P/E quintile outperformed the cheapest quintile by
2600 basis points year to date. The Growth Style significantly outdistanced the
Value Style with the S&P Barra Growth Index topping the S&P Value Index.
Finally, an investment strategy utilizing economically sensitive stocks
dramatically underperformed a stable/defensive strategy. The Portfolio
represents one of the purest, most committed value portfolios in the investment
community and consequently has suffered more noticeably. Valuation, liquidity,
style, and investment strategy factors all contributed to make the past twelve
months the most challenging period ever for the Portfolio.
Relative performance was impacted by stock selection and sector allocation
decisions. Stock selection in health care, technology, heavy industry, and
retail penalized returns. The negative sector selection impact resulted from the
Portfolio's avoidance of defensive sectors such as telephones, health care and
technology. The Portfolio was also significantly overweighted in the
economically sensitive and financial service sectors, which substantially
underperformed the index. Some of the mega-cap stocks which the Portfolio can
own, such as IBM, Citicorp, and Philip Morris, represented portfolio winners.
The Portfolio's "smaller" and cyclical companies generated most of the
underperformance with holdings in Ford, Foundation Health, Case, Cummins,
Venator, and Tektronix.
Passive and active decisions contributed to some minor sector shifts during the
last quarter and the fiscal year. The Portfolio's health care, financial and
utility holdings increased as a result of relative performance and trading
activity. Heavy industry, transportation, technology, and basic resource sector
holdings were reduced in the fund. The Portfolio initiated new positions in Liz
Claiborne, St. Paul, and United Health Care. It also added to holdings in many
depressed financial and cyclical positions including Case, Sears, Lubrizol,
Tenet Health Care, PNC, Banc One, and Washington Mutual. Eliminations included
Stratus Computer, Citicorp, Caterpillar, Russell Corp., British Petroleum, Dow
Chemical and Great Lakes Chemical. The Portfolio trimmed positions in Dupont,
Ford, IBM, and Delta Airlines.
1
<PAGE> 3
PORTFOLIO OVERVIEW
- --------------------------------------------------------------------------------
At fiscal year-end, the Portfolio's
largest sector overweightings included
the financial sector, heavy industry,
consumer durables, and basic resources.
The Portfolio's largest underweightings
remain in technology, health care,
telephone and energy stocks. The
Portfolio's investable universe, the
two lowest P/E quintiles of stocks with
greater than $1.5 billion market cap,
remains concentrated in the financial
sector, cyclicals and electric
utilities. Technology, health care,
beverages and now energy remain
conspicuously absent. The Portfolio's
relative performance will increasingly
rely on the relative performance of
those sectors in which its discipline
mandates concentration.
Current portfolio characteristics
reflect the recent, significant
underperformance of low P/E investing.
At fiscal year end, the P/E ratio for
the Portfolio was 11.4x's trailing and
10.4x's estimated profits. This
contrasts to the S&P 500 P/E of 22.2x's
trailing earnings and 19x's forecasted
earnings. The Portfolio's price/sales
ratio of 56% contrasts with the index
price/sales ratio of 162%, the largest
discount in this decade. The
Portfolio's dividend yield of 2.4%
represented a 50% premium to the index
yield of 1.6%, even though the
Portfolio's stocks have a lower payout
ratio overall. Growth and profitability
levels are at a modest discount to
those of the index, but much less than
the Portfolio's relative valuations.
Value Portfolio
DOLLARS (000)
Growth of a $1 Million Investment
Over 10 Years
FISCAL YEARS ENDING SEPTEMBER 30
<TABLE>
<CAPTION>
MAS Value S&P 500
- --------- -------
<S> <C> <C> <C>
'88 1000 1000 9/30/88
1021 1031 12/31/88
1099 1104 3/31/89
1169 1201 6/30/89
'89 1285 1330 9/30/89
1232 1358 12/31/89
1194 1317 3/31/90
1230 1399 6/30/90
'90 1030 1207 9/30/90
1156 1315 12/31/90
1354 1506 3/31/91
1379 1503 6/30/91
'91 1498 1583 9/30/91
1592 1716 12/31/91
1593 1673 3/31/92
1631 1705 6/30/92
'92 1691 1758 9/30/92
1824 1847 12/31/92
1926 1927 3/31/93
1938 1937 6/30/93
'93 2023 1987 9/30/93
2086 2033 12/31/93
2054 1956 3/31/94
2083 1964 6/30/94
'94 2174 2060 9/30/94
2158 2060 12/31/94
2390 2260 3/31/95
2669 2476 6/30/95
'95 2882 2673 9/30/95
2995 2834 12/31/95
3205 2986 3/31/96
3279 3120 6/30/96
'96 3413 3216 9/30/96
3822 3484 12/31/96
3886 3578 3/31/97
4454 4202 6/30/97
'97 4820 4517 9/30/97
4716 4647 12/31/97
5169 5295 3/31/98
4976 5470 6/30/98
'98 4029 4926 9/30/98
</TABLE>
Average Annual Total Returns Ended 9/30/98*
<TABLE>
<CAPTION>
MAS VALUE S&P
--------------------------------------------------- 500
INSTITUTIONAL (M) INVESTMENT (K) ADVISOR (O) INDEX
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year (16.41)% (16.55)% (16.66)% 9.05%
Five Years 14.77% 14.68% 14.64% 19.91%
Ten Years 14.95% 14.91% 14.89% 17.29%
</TABLE>
Total returns are net of all fees. Total returns represent past
performance and are not indicative of future results.
The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth
either more or less than their original cost.
(M) Represents an investment in the Institutional Class.
(K) Represents an investment in the Investment Class which commenced
operations 5/6/96. Total returns for periods beginning prior to this
date are based on the performance of the Institutional Class and do
not include the 0.15% Shareholder Servicing Fee applicable to the
Investment Class.
(O) Represents an investment in the Adviser Class which commenced
operations 7/17/96. Total returns for periods beginning prior to this
date are based on the performance of the Institutional Class and do
not include the 0.25% 12b-1 Fee applicable to the Adviser Class.
Total returns for the Investment Class of the Portfolio reflect
expenses reimbursed by the Adviser for certain periods. Without such
reimbursements, total returns would have been lower.
* Total returns are compared to the S&P 500 Index, an unmanaged market
index.
2
<PAGE> 4
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (90.4%)
<TABLE>
<CAPTION>
- -----------------------------------------------------
VALUE
SEPTEMBER 30, 1998 SHARES (000)+
- -----------------------------------------------------
<S> <C> <C>
BANKS (12.1%)
Banc One Corp. 908,400 $ 38,720
BankBoston Corp. 326,800 10,784
Chase Manhattan Corp. 1,324,707 57,294
First Union Corp. 1,355,713 69,396
NationsBank Corp. 787,100 42,110
PNC Bank Corp. 866,500 38,992
Republic New York Corp. 572,402 22,610
Washington Mutual, Inc. 1,151,700 38,870
- -----------------------------------------------------
GROUP TOTAL 318,776
- -----------------------------------------------------
BASIC RESOURCES (6.2%)
Air Products & Chemicals, Inc. 729,700 21,709
Cabot Oil & Gas Corp., Class A 305,742 7,625
IMC Global, Inc. 920,894 17,842
Inland Steel Industries, Inc. 1,255,600 27,309
Lubrizol Corp. 1,277,400 33,931
Rohm & Haas Co. 964,468 26,824
* W.R. Grace & Co. 1,329,900 16,541
Westvaco Corp. 509,220 12,221
- -----------------------------------------------------
GROUP TOTAL 164,002
- -----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (0.3%)
Tupperware Corp. 662,076 7,779
- -----------------------------------------------------
CONSUMER DURABLES (9.8%)
Dana Corp. 686,651 25,621
Ford Motor Co. 1,355,130 63,606
General Motors Corp. 1,356,409 74,179
Goodyear Tire & Rubber Co. 1,047,513 53,816
Owens Corning 1,280,641 41,701
- -----------------------------------------------------
GROUP TOTAL 258,923
- -----------------------------------------------------
CONSUMER SERVICES (0.5%)
Standard Register Co. 397,811 10,815
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -----------------------------------------------------
- -----------------------------------------------------
<S> <C> <C>
ENERGY (3.5%)
* Cooper Cameron Corp. 145,400 $ 4,089
* Nabors Industries, Inc. 1,486,800 22,581
Phillips Petroleum Co. 427,695 19,300
Ultramar Diamond Shamrock
Corp. 900,390 20,484
YPF S.A. ADR 1,003,438 26,089
- -----------------------------------------------------
GROUP TOTAL 92,543
- -----------------------------------------------------
FOOD, TOBACCO & OTHER (6.3%)
Dole Food Co., Inc. 282,500 10,205
IBP, Inc. 941,403 19,063
Philip Morris Cos., Inc. 1,321,505 60,872
RJR Nabisco Holdings Corp. 1,582,690 39,864
Universal Foods Corp. 1,691,494 35,310
- -----------------------------------------------------
GROUP TOTAL 165,314
- -----------------------------------------------------
HEALTH CARE (7.2%)
Beckman Coulter, Inc. 682,899 35,255
Columbia/HCA Healthcare Corp. 1,276,361 25,607
* Foundation Health Systems,
Inc., Class A 1,883,884 17,661
* HEALTHSOUTH Corp. 1,591,500 16,810
Mallinckrodt, Inc. 501,051 10,178
* Tenet Healthcare Corp. 1,734,900 49,878
United HealthCare Corp. 994,300 34,801
- -----------------------------------------------------
GROUP TOTAL 190,190
- -----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (13.8%)
Aeroquip-Vickers, Inc. 1,302,176 37,438
* AMR Corp. 460,480 25,528
Burlington Northern Santa Fe,
Inc. 263,400 8,429
Case Corp. 1,274,826 27,727
CSX Corp. 537,796 22,621
++ Cummins Engine Co., Inc. 1,408,386 41,899
Delta Air Lines, Inc. 258,900 25,178
Eaton Corp. 244,502 15,327
* FMC Corp. 392,565 20,242
Harnischfeger Industries, Inc. 1,498,001 16,853
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 5
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)+
- -----------------------------------------------------
<S> <C> <C>
Kennametal, Inc. 750,338 $ 20,212
Olsten Corp. 2,127,560 12,100
Parker Hannifin Corp. 1,071,537 31,811
Tecumseh Products Co., Class A 627,376 30,781
TRW, Inc. 640,618 28,428
- -----------------------------------------------------
GROUP TOTAL 364,574
- -----------------------------------------------------
INSURANCE (10.6%)
Allstate Corp. 1,199,140 49,989
American General Corp. 309,855 19,792
CIGNA Corp. 691,300 45,712
Everest Reinsurance Holdings,
Inc. 807,291 30,122
Hartford Financial Services
Group, Inc. 680,706 32,291
Old Republic International
Corp. 1,288,900 29,000
ReliaStar Financial Corp. 655,358 25,559
St. Paul Cos., Inc. 713,400 23,186
Transatlantic Holdings, Inc. 299,258 24,764
- -----------------------------------------------------
GROUP TOTAL 280,415
- -----------------------------------------------------
RETAIL (8.0%)
Dillard's, Inc., Class A 959,409 27,163
* Federated Department Stores,
Inc. 232,900 8,472
Liz Claiborne, Inc. 1,235,400 32,352
Sears, Roebuck & Co. 822,800 36,357
Springs Industries, Inc.,
Class A 624,318 21,695
* Toys 'R' Us, Inc. 2,074,551 33,582
V.F. Corp. 1,004,006 37,274
* Venator Group, Inc. 1,688,500 14,669
- -----------------------------------------------------
GROUP TOTAL 211,564
- -----------------------------------------------------
TECHNOLOGY (5.4%)
* Arrow Electronics, Inc. 926,500 12,160
Avnet, Inc. 563,400 20,740
Electronic Data Systems Corp. 795,300 26,394
International Business
Machines Corp. 472,144 60,435
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -----------------------------------------------------
Tektronix, Inc. 1,455,317 $ 22,557
- -----------------------------------------------------
GROUP TOTAL 142,286
- -----------------------------------------------------
UTILITIES (6.7%)
Bell Atlantic Corp. 967,400 46,858
Cinergy Corp. 398,407 15,239
DTE Energy Co. 645,140 29,152
Duke Energy Corp. 338,622 22,413
Entergy Corp. 659,645 20,284
GPU, Inc. 564,504 23,992
Southern Co. 634,800 18,687
- -----------------------------------------------------
GROUP TOTAL 176,625
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,600,800) 2,383,806
- -----------------------------------------------------
STRUCTURED INVESTMENT (1.3%)
- -----------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C>
(b) Merrill Lynch & Co., Inc.
Single Stock Linked Note,
3.00% plus dividends on Case
Corp. stock, 8/13/99 (Cost
$51,118) $ 1,610 35,018
- -----------------------------------------------------
CASH EQUIVALENTS (16.1%)
- -----------------------------------------------------
Short-term Investments Held as
Collateral For Loaned
Securities (9.5%) 251,040 251,040
- -----------------------------------------------------
COMMERCIAL PAPER (1.9%)
E.I. DuPont de Nemours & Co.
5.42%, 11/6/98 20,000 19,891
General Electric Capital Corp.
5.42%, 11/19/98 30,000 29,779
- -----------------------------------------------------
GROUP TOTAL 49,670
- -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 6
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -----------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (4.7%)
Chase Securities, Inc. 5.40%,
dated 9/30/98, due 10/1/98,
to be repurchased at
$123,866 collateralized by
various U.S. Government
Obligations, due
10/1/98-8/31/00 valued at
$125,086 $ 123,847 $ 123,847
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $424,557) 424,557
- -----------------------------------------------------
TOTAL INVESTMENTS (107.8%) (Cost $3,076,475)2,843,381
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-7.8%)
Cash 1
Dividends Receivable 4,375
Interest Receivable 1,552
Receivable for Investments Sold 70,384
Receivable for Fund Shares Sold 2,260
Receivable for Daily Variation on Futures
Contracts 4,016
Other Assets 105
Payable for Investments Purchased (24,300)
Payable for Fund Shares Redeemed (8,229)
Payable for Investment Advisory Fees (3,972)
Payable for Administrative Fees (180)
Payable for Shareholder Servicing
Fees-Investment Class (3)
Payable for Distribution Fee-Adviser
Class (68)
Payable for Trustees' Deferred
Compensation Plan-Note F (103)
Collateral on Securities Loaned, at Value (251,040)
Other Liabilities (144)
----------
(205,346)
- -----------------------------------------------------
NET ASSETS (100%) $2,638,035
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)+
- -----------------------------------------------------
- -----------------------------------------------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 150,951,613 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $2,288,236
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.16
- -----------------------------------------------------
INVESTMENT CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 1,619,077 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 24,527
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.15
- -----------------------------------------------------
ADVISER CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 21,496,980 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 325,272
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.13
- -----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $2,458,157
Undistributed Net Investment Income
(Loss) 13,250
Undistributed Realized Net Gain (Loss) 396,104
Unrealized Appreciation (Depreciation)
on: Investment Securities (233,094)
Futures 3,618
- -----------------------------------------------------
NET ASSETS $2,638,035
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
+ See Note A1 to Financial Statements.
++ A portion of these securities was pledged to cover
margin requirements for futures contracts.
* Non-income producing security.
ADR American Depositary Receipt
(b) Security is linked to the performance of the common
stock of Case Corp.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 7
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
-------------------------
Year Ended
September 30,
1998
(In Thousands)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 64,214
Interest 21,927
- -------------------------------------------------------------------------------------------
Total Income 86,141
- -------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 18,304
Administrative Fee--Note C 2,930
Custodian Fee 185
Audit Fee 41
Legal Fee 60
Shareholder Servicing Fee--Investment Class shares--Note D 42
Distribution Fees--Adviser Class shares--Note D 908
Other Expenses 332
- -------------------------------------------------------------------------------------------
Total Expenses 22,802
- -------------------------------------------------------------------------------------------
Expense Offset--Note H (185)
- -------------------------------------------------------------------------------------------
Net Expenses 22,617
- -------------------------------------------------------------------------------------------
Net Investment Income (Loss) 63,524
- -------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 444,168
Futures 9,072
- -------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 453,240
- -------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (1,045,028)
Futures (330)
- -------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) (1,045,358)
- -------------------------------------------------------------------------------------------
Net Gain (Loss) (592,118)
- -------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ (528,594)
- -------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
---------------------------------------
Year Ended
September 30,
------------------------
(In Thousands) 1997 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 53,714 $ 63,524
Realized Net Gain (Loss) 375,983 453,240
Change in Unrealized Appreciation (Depreciation) 516,078 (1,045,358)
- ----------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 945,775 (528,594)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A11
INSTITUTIONAL CLASS:
Net Investment Income (43,078) (62,553)
Realized Net Gain (135,541) (306,482)
INVESTMENT CLASS:
Net Investment Income (249) (484)
Realized Net Gain (851) (2,354)
ADVISER CLASS:
Net Investment Income (894) (5,679)
Realized Net Gain (1,156) (27,923)
- ----------------------------------------------------------------------------------------------------
Total Distributions (181,769) (405,475)
- ----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:--Note I
INSTITUTIONAL CLASS:
Issued 1,576,439 752,802
In Lieu of Cash Distributions 156,287 313,748
Redeemed (769,989) (1,493,928)
INVESTMENT CLASS:
Issued 21,268 12,467
In Lieu of Cash Distributions 1,086 1,920
Redeemed (6,754) (11,550)
ADVISER CLASS:
Issued 172,033 292,374
In Lieu of Cash Distributions 1,868 29,311
Redeemed (11,849) (98,912)
- ----------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 1,140,389 (201,768)
- ----------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,904,395 (1,135,837)
NET ASSETS:
Beginning of Period 1,869,477 3,773,872
- ----------------------------------------------------------------------------------------------------
END OF PERIOD $3,773,872 $2,638,035
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in
end of period net assets $ 18,442 $ 13,250
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------
VALUE PORTFOLIO Year Ended September 30,
-----------------------------------------------------
1994 1995 1996 1997++ 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.31 0.30 0.34 0.34
Net Realized and Unrealized Gain (Loss) on
Investments 0.59 3.34 2.20 5.75 (3.38)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.89 3.65 2.50 6.09 (3.04)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.29) (0.31) (0.32) (0.30) (0.36)
Realized Net Gain (0.73) (1.08) (1.46) (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.02) (1.39) (1.78) (1.33) (2.17)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.63 $ 14.89 $ 15.61 $ 20.37 $ 15.16
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.45% 32.58% 18.41% 41.25% (16.41%)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $981,337 $1,271,586 $1,844,740 $3,542,772 $2,288,236
Ratio of Expenses to Average Net Assets (1) 0.61% 0.60% 0.61% 0.62% 0.60%
Ratio of Net Investment Income to Average Net
Assets 2.40% 2.43% 2.07% 1.93% 1.76%
Portfolio Turnover Rate 54% 56% 53% 46% 56%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets N/A 0.60% 0.60% 0.61% 0.59%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
++ Per share amounts for the year ended September 30, 1997, are
based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 10
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Class Adviser Class
-----------------------------------------------------------------------------
May 6, Year Ended July 17,
1996** to September 30, 1996*** to Year Ended
September ----------------- September September 30,
30, 1997++ 1998 30, -----------------
1996 1996 1997++
1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.97 $ 15.60 $ 20.36 $14.11 $ 15.61 $ 20.35
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.31 0.31 0.01 0.30 0.29
Net Realized and Unrealized Gain
(Loss) on Investments 0.59 5.75 (3.38) 1.49 5.74 (3.38)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 6.06 (3.07) 1.50 6.04 (3.09)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.33) -- (0.27) (0.32)
Realized Net Gain -- (1.03) (1.81) -- (1.03) (1.81)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (2.14) -- (1.30) (2.13)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.60 $ 20.36 $ 15.15 $ 15.61 $ 20.35 $ 15.13
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% (16.55%) 10.63% 40.87% (16.66%)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $9,244 $29,847 $24,527 $15,493 $201,253 $325,272
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% 1.62% 1.66%* 1.63% 1.52%
Portfolio Turnover Rate 53% 46% 56% 53% 46% 56%
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.09% N/A N/A N/A N/A
Ratio Including Expense Offsets 0.75%* 0.79% 0.74% 0.85%* 0.89% 0.84%
- ---------------------------------------------------------------------------------------------------------------------------------
-
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
++ Per share amounts for the year ended September 30, 1997, are
based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 11
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, 1998, the Fund was
comprised of twenty-six active portfolios (each referred to as a "Portfolio").
The Funds offer up to three different classes of shares for certain
Portfolios -- Institutional Class shares, Investment Class shares and Adviser
Class shares.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution fees as described in Note D. The accompanying financial
statements and financial highlights are those of the Value Portfolio only. The
financial statements of the remaining Portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds and other fixed income
securities are valued using brokers' quotations or on the basis of prices,
provided by a pricing service, which are based primarily on institutional
size trading in similar groups of securities. Short term securities are
valued using the amortized cost method of valuation, which in the opinion
of the Board of Trustees reflects fair value. Securities for which no
quotations are readily available (including restricted securities) are
valued at their fair value as determined in good faith using methods
approved by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its income.
Accordingly, no provision for Federal income taxes is required in the
financial statements.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by the Portfolio's custodian bank until
- --------------------------------------------------------------------------------
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
maturity of the repurchase agreements. Provisions of the agreements ensure
that the market value of the collateral is at least equal to the repurchase
value in the event of a default; however, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolio may transfer its uninvested cash balances into a
joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreement. A joint repurchase agreement is covered
by the same collateral requirements as discussed above.
4. FUTURES: Futures contracts (secured by cash and securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as "variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are
closed, the difference between the opening value at the date of purchase
and the value at closing is recorded as realized gains or losses in the
Statement of Operations.
Futures contracts may be used by the Portfolio in order to hedge against
unfavorable changes in the value of securities or to attempt to realize
profits from the value of the underlying securities.
Futures contracts involve market risk in excess of the amounts recognized
in the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market.
5. 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, equity
securities, 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.
- --------------------------------------------------------------------------------
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are declared and paid quarterly. Net realized capital gains
are distributed at least annually. The amount and character of income and
gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing book and tax treatments
for in-kind redemptions (Note G).
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.
7. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which 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 the Portfolio's
average daily net assets for the quarter. For the year ended September 30, 1998
the investment advisory fee of the Portfolio was 0.500%.
C. ADMINISTRATION FEE: MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the Agreement, MAS receives an annual fee
accrued daily and payable monthly, of 0.08% of the Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services.
- --------------------------------------------------------------------------------
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
D. DISTRIBUTOR: MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of Morgan Stanley Asset Management Holdings, Inc., is
the distributor for the Fund. MASDI is a limited-purpose broker/dealer whose
only function is to distribute open-end mutual fund shares. The Distributor
provides all classes of shares in the Portfolio with distribution services
pursuant to separate Distribution Plans (the "Plans") in accordance with Rule
12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing accounts. The Adviser Class of shares pays service and
distribution fees of 0.25% of average net assets of the class for such services
under the 12b-1 plan adopted by the Fund. The Investment Class of shares pays an
annual shareholder servicing fee of 0.15% of average net assets of the class.
The shareholder servicing fee is not a distribution fee and is used to support
the expenses associated with servicing and maintaining accounts. Both fees are
paid directly to MASDI. The distribution fee may be retained by MASDI if an
Adviser Class shareholder invests directly through MASDI. Usually the fees are
paid by MASDI to external organizations such as 401(k) alliance sponsors,
discount brokers and bank trust departments who distribute MAS Funds to the
public.
E. TRUSTEES' FEES: The Fund pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person, as
defined under the Investment Company Act of 1940, as amended, participates in
the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of the
Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total Trustees fees incurred, for the year ended September 30, 1998, by
the Portfolio was $71,000.
Expenses for the year ended September 30, 1998 include legal fees paid to
Morgan, Lewis & Bockius, LLP. A partner of that firm is secretary to the Fund.
F. PORTFOLIO INVESTMENT ACTIVITY:
1. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 1998,
purchases and sales of investment securities other than temporary cash
investments, for the Portfolio, were:
<TABLE>
<CAPTION>
(000)
- ------------------------
Purchases Sales
- ---------- ----------
<S> <C>
$1,788,123 $1,860,274
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION). At
September 30, 1998, cost, unrealized appreciation, unrealized depreciation
and net unrealized appreciation (depreciation) of securities for Federal
income tax purposes, for the Portfolio, was:
<TABLE>
<CAPTION>
(000)
- ----------------------------------------------------
Cost Appreciation Depreciation Net
- ---------- ------------ ------------ ---------
<S> <C> <C> <C>
$3,076,581 $239,189 $(472,389) $(233,200)
</TABLE>
3. FUTURES CONTRACTS. At September 30, 1998, the Portfolio had futures
contracts open:
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Contracts (000) Date (000)
--------- ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Sales:
S&P 500 510 US$130,815 Dec-98 US$3,618
</TABLE>
G. IN-KIND TRANSACTIONS: For the year ended September 30, 1998, the Portfolio
realized gains (losses) from in-kind redemptions of approximately $27,131,000.
H. SECURITIES LENDING: The Portfolio loans securities to certain brokers and
receives security lending fees. Security lending fees are included as expense
offsets in the Statement of Operations. Fees greater than custodian expenses
are included in interest income. During the year ended September 30, 1998, the
Portfolio had security lending fees totaling approximately $345,000.
Portfolios that lend securities receive securities issued or guaranteed by the
U.S. Government or its agencies, cash or letters of credit as collateral in an
amount at least equal to 100% of the current market value of loaned securities.
The value of loaned securities and related collateral outstanding at September
30, 1998, for the Portfolio, was as follows:
<TABLE>
<CAPTION>
Value of Value
Loaned of
Securities Collateral
(000) (000)
- ---------- ----------
<S> <C>
$235,770 $251,040
</TABLE>
Custodian fees appearing in the Statement of Operations have been adjusted to
include expense offsets for custodian balance credits totaling approximately
$185,000 for the year ended September 30, 1998.
I. OTHER: At September 30, 1998, the Fund had Portfolios with otherwise
unaffiliated record owners of 10% or greater. Investment activities of these
shareholders could have a material impact on these Portfolios. For the
Portfolio, the aggregate percentage of such owners was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
- -----------------------------------
Institutional Investment Adviser
Class Class Class
- ------------- ---------- -------
<S> <C> <C>
19.4% 39.9% 77.9%
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Transactions in Capital Shares for the Portfolio, by class, were as follows:
<TABLE>
<CAPTION>
Year Ended
September 30,
------------------
(In Thousands) 1997 1998
- --------------------------------------------------------------------
<S> <C> <C>
Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 90,227 40,398
In Lieu of Cash Distributions 9,563 17,599
Shares Redeemed (44,093) (80,941)
- --------------------------------------------------------------------
Net Increase (Decrease) in Institutional
Class Shares Outstanding 55,697 (22,944)
- --------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 1,187 659
In Lieu of Cash Distributions 66 107
Shares Redeemed (380) (613)
- --------------------------------------------------------------------
Net Increase (Decrease) in Investment
Class Shares Outstanding 873 153
- --------------------------------------------------------------------
ADVISER CLASS:
Shares Issued 9,462 15,459
In Lieu of Cash Distributions 112 1,645
Shares Redeemed (676) (5,498)
- --------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class
Shares Outstanding 8,898 11,606
- --------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
MAS Funds
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Value Portfolio, a Portfolio of the MAS Funds (hereafter referred to as the
"Fund") at September 30, 1998 and the results of its operations, the changes in
its net assets and financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 20, 1998
- --------------------------------------------------------------------------------
16
<PAGE> 18
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
The Portfolio hereby designates the following amount as long-term capital gain
dividends for the purpose of the dividend paid deduction on its federal income
tax return.
<TABLE>
<CAPTION>
(000)
- ----------------------------------------------
LONG-TERM LONG-TERM
CAPITAL GAINS -- 20% CAPITAL GAINS -- 28%
- -------------------- --------------------
<S> <C>
$115,259 $119,559
</TABLE>
For the year ended September 30, 1998, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders for the
Portfolio was 41.6%.
- --------------------------------------------------------------------------------
17
<PAGE> 19
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.
- --------------------------------------------------------------------------------
18
<PAGE> 20
MAS FUNDS
1998 ANNUAL REPORT
VALUE PORTFOLIO
[MAS FUNDS LOGO]
<PAGE> 21
MILLER ANDERSON & SHERRERD, LLP
One Tower Bridge, West Conshohocken, PA 19428-2899
[MAS FUNDS LOGO]
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.
