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[MAS FRONT COVER]
1999 SEMI-ANNUAL REPORT
VALUE PORTFOLIO
MAS FUNDS
[MAS FUNDS LOGO]
<PAGE> 2
MAS Funds is pleased to present the Semi-Annual Report for the Value Portfolio
as of March 31, 1999. 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 Operations..................... 5
Statement of Changes in Net Assets.......... 6
Financial Highlights........................ 7
Notes to Financial Statements............... 9
</TABLE>
THIS SEMI-ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 3
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined valuation
process with the judgment gained through considerable experience in low P/E
investing, emphasizing large capitalization stocks from all market sectors. MAS
considers a company's intrinsic worth, projected earnings and other measures to
help determine if its current price makes it a strong candidate for value
investing. MAS also employs a formal sell discipline. Individual positions are
sold when price appreciation or earnings-per-share deterioration raises the
current P/E ratio.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/99*
<TABLE>
<CAPTION>
MAS VALUE
---------------------------------------
INSTITUTIONAL# INVESTMENT< ADVISER@ S&P 500 INDEX
-------------------------------------------------------
<S> <C> <C> <C> <C>
SIX MONTHS 11.78% 11.66% 11.64% 27.34%
ONE YEAR (12.87) (13.02) (13.10) 18.45
FIVE YEARS 17.01 16.89 16.85 26.24
TEN YEARS 15.15 15.09 15.07 18.97
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
# Represents an investment in the Institutional Class.
< Represents an investment in the Investment Class which commenced operations
5/6/96. Total returns for periods beginning prior to this date are based on the
performance of the Institutional Class and do not include the 0.15% Shareholder
Servicing Fee applicable to the Investment Class.
@ Represents an investment in the Adviser Class which commenced operations
7/17/96. Total returns for periods beginning prior to this date are based on the
performance of the Institutional Class and do not include the 0.25% 12b-1 Fee
applicable to the Adviser Class.
Total returns for the Investment Class of the Portfolio reflect expenses
reimbursed by the Adviser for certain periods. Without such reimbursements,
total returns would have been lower.
* Total returns are compared to the S&P 500 Index, an unmanaged market index.
Returns for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
COMMON STOCKS (96.9%)
<TABLE>
<CAPTION>
- -----------------------------------------------------
VALUE
MARCH 31, 1999 SHARES (000)!
- -----------------------------------------------------
<S> <C> <C>
BANKS (14.9%)
Bank One Corp. 528,500 $ 29,101
BankAmerica Corp. 493,300 34,839
BankBoston Corp. 290,700 12,591
Chase Manhattan Corp. 737,607 59,977
First Union Corp. 340,413 18,191
PNC Bank Corp. 692,200 38,460
Republic New York Corp. 195,902 9,036
UnionBanCal Corp. 539,100 18,363
Washington Mutual, Inc. 1,006,300 41,133
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GROUP TOTAL 261,691
- -----------------------------------------------------
BASIC RESOURCES (6.8%)
Air Products & Chemicals, Inc. 409,600 14,029
IMC Global, Inc. 957,994 19,579
Lubrizol Corp. 1,261,700 28,388
Morton International, Inc. 276,900 10,176
Rohm & Haas Co. 581,468 19,515
Ryerson Tull, Inc. 706,500 10,377
Westvaco Corp. 258,520 5,429
* W.R. Grace & Co. 883,300 10,710
- -----------------------------------------------------
GROUP TOTAL 118,203
- -----------------------------------------------------
CONSUMER DURABLES (13.7%)
Dana Corp. 667,851 25,378
Eastman Kodak Co. 274,600 17,540
Ford Motor Co. 745,130 42,286
General Motors Corp. 936,509 81,359
Goodyear Tire & Rubber Co. 586,813 29,231
Navistar International Corp. 385,000 15,472
Owens Corning 868,541 27,630
- -----------------------------------------------------
GROUP TOTAL 238,896
- -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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1
<PAGE> 4
STATEMENT OF NET ASSETS
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VALUE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)!
- -----------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (1.4%)
Service Corp. International 1,221,100 $ 17,401
Standard Register Co. 229,211 6,805
- -----------------------------------------------------
GROUP TOTAL 24,206
- -----------------------------------------------------
ENERGY (3.1%)
Coastal Corp. 165,000 5,445
* Nabors Industries, Inc. 1,144,500 20,816
Tosco Corp. 385,400 9,563
Ultramar Diamond Shamrock
Corp. 869,690 18,807
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GROUP TOTAL 54,631
- -----------------------------------------------------
FOOD & TOBACCO (3.6%)
IBP, Inc. 528,103 9,836
Philip Morris Cos., Inc. 443,305 15,599
RJR Nabisco Holdings Corp. 798,890 19,972
Universal Foods Corp. 890,894 18,375
- -----------------------------------------------------
GROUP TOTAL 63,782
- -----------------------------------------------------
HEALTH CARE (10.8%)
Beckman Coulter, Inc. 430,199 18,929
CIGNA Corp. 432,400 36,240
Columbia/HCA Healthcare Corp. 753,761 14,274
* Foundation Health Systems,
Inc., Class A 1,465,884 17,865
* HEALTHSOUTH Corp. 2,792,300 28,970
* Humana, Inc. 958,700 16,538
* Tenet Healthcare Corp. 1,354,900 25,658
United HealthCare Corp. 597,300 31,433
- -----------------------------------------------------
GROUP TOTAL 189,907
- -----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (12.8%)
* AMR Corp. 371,380 21,749
Burlington Northern Santa Fe,
Inc. 275,300 9,050
Case Corp. 866,326 21,983
CNF Transportation, Inc. 74,600 2,821
++ Cummins Engine Co., Inc. 861,086 30,622
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
- -----------------------------------------------------
<S> <C> <C>
Delta Air Lines, Inc. 423,400 $ 29,426
Eaton Corp. 136,702 9,774
* FMC Corp. 274,165 13,537
Harnischfeger Industries, Inc. 976,701 5,555
Kennametal, Inc. 430,472 7,533
Olsten Corp. 1,229,360 7,607
Parker Hannifin Corp. 692,237 23,709
Ryder Systems, Inc. 90,900 2,511
Tecumseh Products Co., Class A 482,276 24,566
TRW, Inc. 317,618 14,452
- -----------------------------------------------------
GROUP TOTAL 224,895
- -----------------------------------------------------
INSURANCE (7.5%)
Allstate Corp. 731,840 27,124
American General Corp. 210,455 14,837
Everest Reinsurance Holdings,
Inc. 538,191 16,785
Hartford Financial Services
Group, Inc. 433,206 24,612
Old Republic International
Corp. 720,700 13,153
ReliaStar Financial Corp. 448,931 19,136
Transatlantic Holdings, Inc. 202,858 15,214
- -----------------------------------------------------
GROUP TOTAL 130,861
- -----------------------------------------------------
RETAIL (7.5%)
Dillard's, Inc., Class A 559,909 14,208
Liz Claiborne, Inc. 983,100 32,074
Sears, Roebuck & Co. 446,400 20,172
Springs Industries, Inc.,
Class A 327,618 8,866
* Toys 'R' Us, Inc. 1,189,951 22,386
V.F. Corp. 711,106 33,555
- -----------------------------------------------------
GROUP TOTAL 131,261
- -----------------------------------------------------
TECHNOLOGY (7.9%)
* Arrow Electronics, Inc. 804,000 12,060
Avnet, Inc. 364,900 13,364
First Data Corp. 1,016,500 43,455
</TABLE>
The accompanying notes are an integral part of the financial statements.
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2
<PAGE> 5
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
- -----------------------------------------------------
<S> <C> <C>
International Business
Machines Corp. 283,244 $ 50,205
Tektronix, Inc. 759,517 19,178
- -----------------------------------------------------
GROUP TOTAL 138,262
- -----------------------------------------------------
UTILITIES (6.9%)
Bell Atlantic Corp. 538,900 27,854
Cinergy Corp. 225,207 6,193
DTE Energy Co. 361,340 13,889
Duke Energy Corp. 187,122 10,222
Entergy Corp. 371,345 10,212
GPU, Inc. 313,204 11,686
PECO Energy Co. 234,000 10,823
Southern Co. 481,600 11,227
U.S. West, Inc. 325,600 17,928
- -----------------------------------------------------
GROUP TOTAL 120,034
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,693,674) 1,696,629
- -----------------------------------------------------
STRUCTURED INVESTMENT (2.3%)-SEE NOTE A5
- -----------------------------------------------------
FACE
AMOUNT
(000)
--------
(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 40,854
- -----------------------------------------------------
CASH EQUIVALENTS (6.6%)
- -----------------------------------------------------
Short-term Investments Held as
Collateral for Loaned
Securities (6.0%) 105,659 105,659
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
- -----------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.6%)
Chase Securities, Inc. 4.80%,
dated 3/31/99, due 4/1/99,
to be repurchased at $9,483,
collateralized by various
U.S. Government Obligations,
due 4/1/99-2/28/01, valued
at $9,567 $ 9,482 $ 9,482
- -----------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $115,141) 115,141
- -----------------------------------------------------
TOTAL INVESTMENTS (105.8%) (Cost
$1,859,933) 1,852,624
- -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-5.8%)
Dividends Receivable 2,522
Interest Receivable 802
Receivable for Investments Sold 53,676
Receivable for Fund Shares Sold 1,781
Receivable for Daily Variation on Futures
Contracts 1,652
Other Assets 143
Payable to Custodian (368)
Payable for Investments Purchased (3,464)
Payable for Fund Shares Redeemed (49,650)
Payable for Investment Advisory Fees (2,623)
Payable for Administrative Fees (129)
Payable for Trustees' Deferred
Compensation Plan-Note F (143)
Payable for Distribution Fees-Adviser
Class (61)
Payable for Shareholder Servicing
Fees-Investment Class (2)
Collateral on Securities Loaned, at Value (105,659)
Other Liabilities (62)
----------
(101,585)
- -----------------------------------------------------
NET ASSETS (100%) $1,751,039
- -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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3
<PAGE> 6
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
VALUE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)!
- -----------------------------------------------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 102,642,380 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $1,458,126
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.21
- -----------------------------------------------------
INVESTMENT CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 931,303 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 13,217
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.19
- -----------------------------------------------------
ADVISER CLASS
- -----------------------------------------------------
NET ASSETS
Applicable to 19,727,693 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 279,696
- -----------------------------------------------------
NET ASSET VALUE PER SHARE $ 14.18
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
- -----------------------------------------------------
<S> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $1,691,896
Undistributed Net Investment Income
(Loss) 17,426
Undistributed Realized Net Gain (Loss) 48,032
Unrealized Appreciation (Depreciation)
on:
Investment Securities (7,309)
Futures 994
- -----------------------------------------------------
NET ASSETS $1,751,039
- -----------------------------------------------------
</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
(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.
- --------------------------------------------------------------------------------
4
<PAGE> 7
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
Six Months
Ended
March 31,
1999
(In Thousands)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 23,898
Interest 1,450
- ---------------------------------------------------------------------------------------
Total Income 25,348
- ---------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 6,036
Administrative Fee--Note C 964
Custodian Fee--Note E 290
Audit Fee 17
Legal Fee 24
Filing & Registration Fees 34
Shareholder Servicing Fee--Investment Class shares--Note
D 16
Distribution Fees--Adviser Class shares--Note D 401
Other Expenses 138
- ---------------------------------------------------------------------------------------
Total Expenses 7,920
- ---------------------------------------------------------------------------------------
Expense Offset--Note I (122)
- ---------------------------------------------------------------------------------------
Net Expenses 7,798
- ---------------------------------------------------------------------------------------
Net Investment Income (Loss) 17,550
- ---------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 89,931
Futures (36,089)
- ---------------------------------------------------------------------------------------
Realized Net Gain (Loss) 53,842
- ---------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 225,785
Futures (2,624)
- ---------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 223,161
- ---------------------------------------------------------------------------------------
Net Gain (Loss) 277,003
- ---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $294,553
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 1999 are unaudited)
<TABLE>
<CAPTION>
VALUE
PORTFOLIO
-----------------------------
<S> <C> <C> <C> <C>
Year Ended Six Months
September Ended
30, March 31,
(In Thousands) 1998 1999
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 63,524 $ 17,550
Realized Net Gain (Loss) 453,240 53,842
Change in Unrealized Appreciation (Depreciation) (1,045,358) 223,161
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations (528,594) 294,553
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A6
INSTITUTIONAL CLASS:
Net Investment Income (62,553) (11,942)
Realized Net Gain (306,482) (346,188)
INVESTMENT CLASS:
Net Investment Income (484) (120)
Realized Net Gain (2,354) (3,540)
ADVISER CLASS:
Net Investment Income (5,679) (1,312)
Realized Net Gain (27,923) (52,186)
- -------------------------------------------------------------------------------------------------
Total Distributions (405,475) (415,288)
- -------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Issued 752,802 212,144
In Lieu of Cash Distributions 313,748 311,252
Redeemed (1,493,928) (1,250,395)
INVESTMENT CLASS:
Issued 12,467 1,715
In Lieu of Cash Distributions 1,920 2,690
Redeemed (11,550) (14,847)
ADVISER CLASS:
Issued 292,374 26,953
In Lieu of Cash Distributions 29,311 48,160
Redeemed (98,912) (103,933)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions (201,768) (766,261)
- -------------------------------------------------------------------------------------------------
Total Increase (Decrease) (1,135,837) (886,996)
NET ASSETS:
Beginning of Period 3,773,872 2,638,035
- -------------------------------------------------------------------------------------------------
END OF PERIOD $2,638,035 $1,751,039
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in
end of period net assets $ 13,250 $ 17,426
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 1999 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------------------
Six Months
Ended
Year Ended September 30, March 31,
VALUE PORTFOLIO ------------------------------------------------------------ 1999
1994 1995 1996 1997++ 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.76 $ 12.63 $ 14.89 $ 15.61 $ 20.37 $ 15.16
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.31 0.30 0.34 0.34 0.16
Net Realized and Unrealized Gain (Loss) on
Investments 0.59 3.34 2.20 5.75 (3.38) 1.58
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.89 3.65 2.50 6.09 (3.04) 1.74
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.29) (0.31) (0.32) (0.30) (0.36) (0.08)
Realized Net Gain (0.73) (1.08) (1.46) (1.03) (1.81) (2.61)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.02) (1.39) (1.78) (1.33) (2.17) (2.69)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.63 $ 14.89 $ 15.61 $ 20.37 $ 15.16 $ 14.21
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.45% 32.58% 18.41% 41.25% (16.41%) 11.78%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $981,337 $1,271,586 $1,844,740 $3,542,772 $2,288,236 $1,458,126
Ratio of Expenses to Average Net Assets
(1) 0.61% 0.60% 0.61% 0.62% 0.60% 0.62%*
Ratio of Net Investment Income to Average
Net Assets 2.40% 2.43% 2.07% 1.93% 1.76% 1.49%*
Portfolio Turnover Rate 54% 56% 53% 46% 56% 19%
- ---------------------------------------------------------------------------------------------------------------------------------
(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% 0.61%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
++ 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.
- --------------------------------------------------------------------------------
7
<PAGE> 10
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 1999 are unaudited)
<TABLE>
<CAPTION>
Investment Class Adviser Class
---------------------------------------------- ------------------------------------
May 6, Year Ended Six Months July 17, Year Ended
1996** to September 30, Ended 1996*** to September 30,
September 30, ---------------- March 31, September 30, ----------------
1996 1997++ 1998 1999 1996 1997++ 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.97 $ 15.60 $ 20.36 $ 15.15 $ 14.11 $ 15.61 $ 20.35
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.31 0.31 0.14 0.01 0.30 0.29
Net Realized and Unrealized Gain
(Loss) on Investments 0.59 5.75 (3.38) 1.59 1.49 5.74 (3.38)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 6.06 (3.07) 1.73 1.50 6.04 (3.09)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.33) (0.08) -- (0.27) (0.32)
Realized Net Gain -- (1.03) (1.81) (2.61) -- (1.03) (1.81)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (2.14) (2.69) -- (1.30) (2.13)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.60 $ 20.36 $ 15.15 $ 14.19 $ 15.61 $ 20.35 $ 15.13
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% (16.55%) 11.66% 10.63% 40.87% (16.66%)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,244 $29,847 $ 24,527 $ 13,217 $ 15,493 $201,253 $325,272
Ratio of Expenses to Average Net
Assets (2) 0.76%* 0.80% 0.75% 0.77%* 0.86%* 0.90% 0.85%
Ratio of Net Investment Income to
Average Net Assets 2.05%* 1.75% 1.62% 1.35%* 1.66%* 1.63% 1.52%
Portfolio Turnover Rate 53% 46% 56% 19% 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 N/A
Ratio Including Expense Offsets 0.75%* 0.79% 0.74% 0.76%* 0.85%* 0.89% 0.84%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended
March 31,
1999
- -------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.13
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10
Net Realized and Unrealized Gain
(Loss) on Investments 1.62
- -------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.72
- -------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.06)
Realized Net Gain (2.61)
- -------------------------------------------------------
TOTAL DISTRIBUTIONS (2.67)
- -------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.18
- -------------------------------------------------------
TOTAL RETURN 11.64%
- -------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 279,696
Ratio of Expenses to Average Net
Assets (2) 0.87%*
Ratio of Net Investment Income to
Average Net Assets 1.23%*
Portfolio Turnover Rate 19%
- -------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE
RATIO OF EXPENSES TO AVERAGE NET
ASSETS:
Reduction in Ratio due to
Expense Reimbursement/Waiver N/A
Ratio Including Expense Offsets 0.86%*
- -------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
- -----------------------------------------------------------------
* Annualized
++ 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> 11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940
as an open-end investment company. At March 31, 1999, the Fund was comprised of
twenty-three 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.
Each class of shares has identical voting rights (except shareholders of a
Class have exclusive voting rights regarding any matter relating solely to that
Class of shares), dividend, liquidation and other rights, except each class
bears different distribution fees as described in Note D. The accompanying
financial statements and financial highlights are those of the Value Portfolio
only. The financial statements of the remaining Portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in
the preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results may differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds, including municipal
bonds, and other fixed income securities are valued using brokers'
quotations or on the basis of prices, provided by a pricing service, which
are based primarily on institutional size trading in similar groups of
securities. 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 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
- --------------------------------------------------------------------------------
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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 a Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market.
5. STRUCTURED INVESTMENTS: The Portfolio 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.
- --------------------------------------------------------------------------------
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 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 H).
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. 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, the Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the
"Adviser"), wholly owned by indirect subsidiaries of Morgan Stanley Dean Witter
& Co., for investment advisory services performed at a fee calculated by
applying a quarterly rate based on an annual percentage rate to each
Portfolio's average daily net assets for the quarter. For the six months ended
March 31, 1999 the investment advisory fees of the Portfolio were 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 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.
- --------------------------------------------------------------------------------
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 and Shareholder Servicing 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 of accounts. The Adviser Class of shares
pays an annual 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. The Chase Manhattan Bank serves as custodian for the Fund in
accordance with a custodian agreement.
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 of 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, 1999
by the Value Portfolio were $21,000.
Expenses for the six months ended March 31, 1999 include legal fees paid to
Morgan, Lewis & Bockius LLP. A partner of that firm is secretary of the Fund.
G. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES: For the six months ended March 31, 1999,
purchases
- --------------------------------------------------------------------------------
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
and sales of investment securities other than temporary cash investments
were:
<TABLE>
<CAPTION>
(000)
----------------------
Portfolio Purchases Sales
--------- ---------- ----------
<S> <C> <C>
Value $ 434,272 $1,431,328
</TABLE>
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION): At March
31, 1999, 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 $1,859,933 $227,098 $(234,407) $(7,309)
</TABLE>
3. FUTURES CONTRACTS: At March 31, 1999, the Value Portfolio had the following
futures contracts open:
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Sales:
VALUE
S&P 500 Index 295 US$ 95,381 Jun-99 994
</TABLE>
<TABLE>
<S> <C> <C>
US$ -- U.S. Dollar
</TABLE>
H. IN-KIND TRANSACTIONS. For the six months ended March 31, 1999, the Value
Portfolio realized gains (losses) from in-kind redemptions of approximately
$990,000.
I. 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,
1999, the Value Portfolio had security lending fees totaling $87,000.
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 March 31,
1999, were as follows:
<TABLE>
<CAPTION>
Value of Value
Loaned of
Securities Collateral
Portfolio (000) (000)
--------- ---------- ----------
<S> <C> <C>
Value $101,132 $105,659
</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 $87,000 and $35,000 respectively, for the six months ended March 31,
1999.
J. OTHER. At March 31, 1999, 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. The aggregate
percentage of such owners for the Value Portfolio was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
------------------------------------
Institutional Investment Adviser
Portfolios Class Class Class
---------- ------------- ---------- -------
<S> <C> <C> <C>
Value 20.1% 41.5% 70.6%
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Transactions in Capital Shares for the Value Portfolio, by class, were as
follows:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
September 30, March 31,
1998 1999
(In Thousands) ------------- ----------
<S> <C> <C>
Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 40,398 14,109
In Lieu of Cash Distributions 17,599 22,148
Shares Redeemed (80,941) (84,566)
------- -------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (22,944) (48,309)
-------- -------
INVESTMENT CLASS:
Shares Issued 659 110
In Lieu of Cash Distributions 107 191
Shares Redeemed (613) (989)
------- -------
Net Increase (Decrease) in
Investment Class Shares
Outstanding 153 (688)
-------- -------
ADVISER CLASS:
Shares Issued 15,459 1,774
In Lieu of Cash Distributions 1,645 3,432
Shares Redeemed (5,498) (6,975)
------- -------
Net Increase (Decrease) in
Adviser Class Shares
Outstanding 11,606 (1,769)
-------- -------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 17
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 Dean Witter
& Co. ("MSDW"); 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, IKON Office Solutions, Inc.; Director, Knight-Ridder,
Inc.; formerly Director, Union Carbide Corporation.
JOSEPH P. HEALY
Trustee; Headmaster, Ethical Culture Fieldston School; Trustee, Springside
School; formerly Headmaster, Haverford School; Dean, Hobart College; Associate
Dean, William & Mary College.
JOSEPH J. KEARNS
Trustee; Investment Consultant; Chief Financial 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, MSDW; Head of Mutual Funds, Miller Anderson &
Sherrerd, LLP; Director, MAS Fund Distribution, Inc.
LORRAINE TRUTEN, CFA
Vice President, MAS Funds; Principal, MSDW; Head of Mutual Fund Services, Miller
Anderson & Sherrerd, LLP; President, MAS Fund Distribution, Inc.
JAMES A. GALLO
Treasurer, MAS Funds; Vice-President, MSDW; Head of Fund Administration, Miller
Anderson & Sherrerd, LLP; formerly Manager, Investment Accounting and then Vice
President and Director of Investment Accounting, PFPC, Inc.
JOHN H. GRADY, JR.
Secretary, MAS Funds; Partner, Morgan, Lewis & Bockius, LLP.
RICHARD J. SHOCH
Assistant Secretary, MAS Funds; Vice President, MSDW; Fund Compliance Officer,
Miller Anderson & Sherrerd, LLP; formerly Fund Legal Administrator and then
Counsel, Vice President and Assistant Secretary, SEI Corporation.
*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.
MAS Fund Distribution, Inc. serves as General Distribution Agent for MAS Funds.
- --------------------------------------------------------------------------------
15
<PAGE> 18
[MAS BACK COVER]
[MAS FUNDS 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.
