<PAGE>
- --------------------------------------------------------------------------------
MAS ADVISER CLASS PROSPECTUS
- ---------
MAS FUNDS
JANUARY 31, 1999
(AS REVISED MARCH 10, 1999)
- --------------------------------------------------------------------------------
Client Services: 1-800-354-8185 Prices and Investment Results: 1-800-522-1525
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is a no-load mutual fund consisting of 30 different
investment portfolios, 10 of which are described in this prospectus. Miller
Anderson & Sherrerd, LLP (the "Adviser"), a division of Morgan Stanley Dean
Witter Investment Management, is the Fund's investment adviser. This prospectus
offers Adviser Class Shares of the following portfolios (each a "Portfolio" and
collectively the "Portfolios"):
EQUITY PORTFOLIOS
-----------------
EQUITY
MID CAP GROWTH
MID CAP VALUE
SMALL CAP VALUE
VALUE
FIXED INCOME PORTFOLIOS
-----------------------
DOMESTIC FIXED INCOME
FIXED INCOME
HIGH YIELD
BALANCED PORTFOLIOS
-------------------
BALANCED
MULTI-ASSET-CLASS
INVESTMENT ADVISER
MILLER ANDERSON & SHERRERD, LLP
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
MORGAN STANLEY DEAN WITTER
- --------------------------
INVESTMENT MANAGEMENT ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY
INVESTOR SUITABILITY, INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES, RISKS AND PERFORMANCE ...................................... 1
EQUITY PORTFOLIOS
EQUITY ................................................................. 2
MID CAP GROWTH ......................................................... 3
MID CAP VALUE .......................................................... 4
SMALL CAP VALUE ........................................................ 5
VALUE .................................................................. 6
FIXED INCOME PORTFOLIOS
DOMESTIC FIXED INCOME .................................................. 7
FIXED INCOME ........................................................... 9
HIGH YIELD ............................................................. 11
BALANCED PORTFOLIOS
BALANCED ............................................................... 13
MULTI-ASSET-CLASS ...................................................... 15
IMPORTANT INVESTMENT INFORMATION
DESCRIPTION OF PRINCIPAL INVESTMENTS ................................... 17
FEES AND EXPENSES OF THE PORTFOLIOS
SHAREHOLDER FEES AND ANNUAL PORTFOLIO OPERATING EXPENSES ............... 22
PURCHASING SHARES ......................................................... 24
REDEEMING SHARES .......................................................... 25
VALUATION OF SHARES ....................................................... 26
GENERAL SHAREHOLDER INFORMATION
EXCHANGE PRIVILEGE, DIVIDENDS AND DISTRIBUTIONS, AND TAXES ............. 26
FUND MANAGEMENT
INFORMATION ABOUT THE ADVISER, THE PORTFOLIO MANAGERS AND THE
DISTRIBUTOR ............................................................ 28
DISTRIBUTION PLAN ......................................................... 31
YEAR 2000 DISCLOSURE STATEMENT ............................................ 31
FINANCIAL HIGHLIGHTS ...................................................... 32
<PAGE>
INVESTMENT SUMMARY
This section explains each Portfolio's:
o Investment Objective
o Principal Investment Strategy
o Principal Risks
The discussions on the following pages use a number of important investment
terms. These terms, printed in BOLD, are explained in the section entitled
"Important Investment Information," which follows the individual Portfolio
summaries.
There is more information about the Portfolios in the Statement of Additional
Information ("SAI"), which legally is a part of this prospectus. For details
about how to obtain the SAI, and other reports and information, see the back
cover of this prospectus.
INVESTOR SUITABILITY
o The Portfolios may be suitable for you if you are a long-term investor who
can accept the risks of investing in the stock and bond markets. In fact,
some of the Portfolios strive to meet their investment objectives over an
extended period. These Portfolios focus on a market cycle of three to five
years. This means that the Portfolios will strive to meet their respective
investment objectives within that period without regard to interim market
fluctuations.
o The Portfolios are designed principally for investment by fiduciary
investors who are entrusted with the responsibility of investing assets
held for the benefit of others.
o While the Portfolios consider whether their securities transactions will
generate distributions taxable at capital gain or ordinary income rates,
minimizing such taxes is not a principal investment strategy.
1
<PAGE>
EQUITY PORTFOLIO
OBJECTIVE The Equity Portfolio seeks above-average total return over a market
cycle of three to five years.
APPROACH The Portfolio invests primarily in common stocks and other EQUITY
SECURITIES of large companies. The Portfolio also makes targeted
investments in stocks of small companies and invests to a limited
extent in FOREIGN EQUITY SECURITIES. The Adviser may use
DERIVATIVES in managing the Portfolio.
PROCESS A team of portfolio managers, organized into "value" and "growth"
units, manages the Portfolio. While the Portfolio's overall sector
allocation is driven by bottom-up stock selection, the Adviser
tries to diversify the Portfolio's investments across market
sectors, seeking the best values within each sector. In determining
whether securities should be sold, the Adviser considers factors
such as high price/earnings ratios and relative valuations.
PRINCIPAL RISKS
The prices of common stocks and other equity securities will rise and fall in
response to events that affect entire financial markets or industries, and to
events that affect a particular issuer. Investments in smaller companies may
involve greater risk than investments in larger, more established companies, and
smaller companies' securities may be subject to more abrupt or erratic price
movements. The Portfolio also may be subject to the risks associated with
derivatives. The Portfolio's investments in foreign securities are subject to
certain risks, including the risks associated with fluctuating currency exchange
rates. Please read the section entitled "Important Investment Information" for
more information about these risks.
GENERALLY AT LEAST 65% INVESTED IN
EQUITY SECURITIES
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY GREATER
THAN $1 BILLION
- --------------------------------------------------------------------------------
BENCHMARK: S&P 500 INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO.: 552-913-345
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
ARDEN C. ARMSTRONG, JAMES J.
JOLINGER, NICHOLAS J. KOVICH, BRIAN
KRAMP, ROBERT J. MARCIN AND
GARY G. SCHLARBAUM
<PAGE>
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on November 14, 1984
28.28% 1989
- -0.09% 1990
39.96% 1991
7.78% 1992
6.66% 1993
0.05% 1994
33.02% 1995
20.59% 1996
25.84% 1997
19.67% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/90
21.34% -15.00%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
EQUITY PORTFOLIO S&P 500 INDEX
- --------------------------------------------------------------------------------
One Year 19.67 28.57
- --------------------------------------------------------------------------------
Five Years 19.41 24.06
- --------------------------------------------------------------------------------
Ten Years 17.48 19.21
- --------------------------------------------------------------------------------
Since Inception
11/14/84 17.26 18.70
The bar chart and table above show the Portfolio's Institutional Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1, 5, and 10 year periods and since inception.
The table also shows the corresponding returns of the Portfolio's benchmark
index. The Adviser Class Shares would have had similar annual returns, but
returns would have generally been lower as expenses of this class are higher.
The variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
2
<PAGE>
MID CAP GROWTH PORTFOLIO
OBJECTIVE The Mid Cap Growth Portfolio seeks long-term capital growth.
APPROACH The Portfolio invests primarily in common stocks and other EQUITY
SECURITIES having capitalizations in the range of companies
included in the S&P MidCap 400 Index. The Adviser particularly
focuses on the expectations of stock analysts and invests the
Portfolio in stocks of companies that it believes will report
earnings growth exceeding analysts' expectations. The Portfolio may
invest to a limited extent in FOREIGN EQUITY SECURITIES. The
Adviser may use dERIVATIVES in managing the Portfolio.
PROCESS The Adviser uses a quantitative screen to sort stocks based on
revisions to analysts' earnings predictions. The Adviser then
conducts extensive fundamental research into those companies with
the most attractive earnings revisions. Finally, the Adviser
evaluates the valuation of the stocks to eliminate from
consideration the most overvalued stocks. The Adviser also follows
a strict sell discipline. The Portfolio sells stocks when their
earnings revision scores fall to unacceptable levels, fundamental
research reveals unfavorable trends, or their valuations exceed
levels that are reasonable in relation to the stocks' growth
prospects.
PRINCIPAL RISKS
The prices of common stocks and other equity securities will rise and fall in
response to events that affect entire financial markets or industries, and
events that affect a particular issuer. Investments in smaller companies may
involve greater risk than investments in larger, more established companies, and
smaller companies' securities may be subject to more abrupt or erratic price
movements. Certain market conditions may favor growth stocks or stocks of
mid-sized companies, while other conditions may favor value stocks or stocks of
larger or smaller companies. Accordingly, a portfolio of mid cap growth stocks
may, over certain periods of time, underperform a portfolio of value stocks or
stocks of larger or smaller companies. The Portfolio also may be subject to the
risks associated with derivatives. The Portfolio's investments in foreign
securities are subject to certain risks, including the risks associated with
fluctuating currency exchange rates. Please read the section entitled "Important
Investment Information" for more information about these risks.
GENERALLY 65% INVESTED IN EQUITY
SECURITIES OF MID CAP COMPANIES
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY MATCHING
THE BENCHMARK (CURRENTLY $500
MILLION TO $6 BILLION)
- --------------------------------------------------------------------------------
FOCUS ON GROWTH SECURITIES
- --------------------------------------------------------------------------------
BENCHMARK: S&P MIDCAP 400 INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: MACGX
- --------------------------------------------------------------------------------
CUSIP NO.: 552-913-436
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
ARDEN C. ARMSTRONG AND DAVID P. CHU
<PAGE>
- --------------------------------------------------------------------------------
MID CAP GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on January 31, 1997
37.00% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/98
35.89% -19.21%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
MID CAP GROWTH S&P MIDCAP
PORTFOLIO 400 INDEX
- --------------------------------------------------------------------------------
One Year 37.00 19.12
- --------------------------------------------------------------------------------
Since Inception
1/31/97 34.75 24.37
The bar chart and table above show the Portfolio's Adviser Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
3
<PAGE>
MID CAP VALUE PORTFOLIO
OBJECTIVE The Mid Cap Value Portfolio seeks above-average total return over a
market cycle of three to five years.
APPROACH The Portfolio invests primarily in common stocks and other EQUITY
SECURITIES having capitalizations in the range of companies
included in the S&P MidCap 400 Index. The Portfolio focuses on
stocks that are undervalued based on the Adviser's proprietary
measures of value. While VALUE STOCKS typically pay dividends, the
Portfolio may purchase stocks that do not pay dividends based on
other value characteristics. The Portfolio may invest to a limited
extent in FOREIGN EQUITY SECURITIES. The Adviser may use
DERIVATIVES in managing the Portfolio.
PROCESS The Adviser continually measures the relative attractiveness of the
Portfolio's current holdings against potential purchases, analyzing
each security on a fundamental basis. The Portfolio's holdings
typically will have lower price/earnings ratios than the average
stock included in the S&P MidCap 400 Index. In determining whether
securities should be sold, the Adviser considers factors such as
high valuations relative to other investment opportunities and
deteriorating short or long-term earnings growth projections.
Sector weightings normally are kept within 5% of those of the S&P
MidCap 400 Index.
PRINCIPAL RISKS
The prices of common stocks and other equity securities will rise and fall in
response to events that affect entire financial markets or industries, and to
events that affect a particular issuer. Investments in smaller companies may
involve greater risk than investments in larger, more established companies, and
smaller companies' securities may be subject to more abrupt or erratic price
movements. Certain market conditions may favor value stocks or stocks of
mid-sized companies, while other conditions may favor growth stocks or stocks of
larger or smaller companies. Accordingly, a portfolio of mid cap value stocks
may, over certain periods of time, underperform a portfolio of growth stocks or
stocks of larger or smaller companies. The Portfolio also may be subject to the
risks associated with derivatives. The Portfolio's investments in foreign
securities are subject to certain risks, including the risks associated with
fluctuating currency exchange rates. Please read the section entitled "Important
Investment Information" for more information about these risks.
GENERALLY AT LEAST 65% INVESTED IN
EQUITY SECURITIES OF MID CAP
COMPANIES
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY MATCHING
THE BENCHMARK (CURRENTLY $500
MILLION TO $6 BILLION)
- --------------------------------------------------------------------------------
FOCUS ON VALUE SECURITIES
- --------------------------------------------------------------------------------
BENCHMARK: S&P MIDCAP 400
INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO.: 552-913-337
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
BRADLEY S. DANIELS, WILLIAM B. GERLACH,
CHRIS LEAVY AND GARY G. SCHLARBAUM
<PAGE>
- --------------------------------------------------------------------------------
MID CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on December 30, 1994
32.71% 1995
40.77% 1996
39.58% 1997
16.05% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/98
22.46% -13.80%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
MID CAP GROWTH S&P MIDCAP
PORTFOLIO 400 INDEX
- --------------------------------------------------------------------------------
One Year 16.05 19.12
- --------------------------------------------------------------------------------
Since Inception
12/30/94 31.87 25.20
The bar chart and table above show the Portfolio's Institutional Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1, 5, and 10 year periods and since inception.
The table also shows the corresponding returns of the Portfolio's benchmark
index. The Adviser Class Shares would have had similar annual returns, but
returns would have generally been lower as expenses of this class are higher.
The variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
4
<PAGE>
SMALL CAP VALUE PORTFOLIO (not currently being offered to new investors)
OBJECTIVE The Small Cap Value Portfolio seeks above-average total return over
a market cycle of three to five years.
APPROACH The Portfolio invests primarily in common stocks and other EQUITY
SECURITIES with equity capitalizations in the range of companies
included in the Russell 2000 Index. The Portfolio focuses on stocks
that are undervalued based on the Adviser's proprietary measures of
value. While VALUE STOCKS typically pay dividends, the Portfolio
may purchase stocks that do not pay dividends based on other value
characteristics. The Portfolio may invest to a limited extent in
FOREIGN EQUITY SECURITIES. The Adviser may use DERIVATIVES in
managing the Portfolio.
PROCESS The Adviser continually measures the relative attractiveness of the
Portfolio's current holdings against potential purchases, analyzing
each security on a fundamental basis. The Portfolio's holdings
typically have lower price/earnings and price/book ratios than the
stocks in the Russell 2000 Index. In determining whether securities
should be sold, the Adviser considers factors such as high
valuations relative to other investment opportunities, and
deteriorating short or long-term earnings growth projections. The
Portfolio will normally keep its sector weightings within 5% of
those of the index.
PRINCIPAL RISKS
The prices of common stocks and other equity securities will rise and fall in
response to events that affect entire financial markets or industries, and to
events that affect a particular issuer. Investments in smaller companies may
involve greater risk than investments in larger, more established companies, and
smaller companies' securities may be subject to more abrupt or erratic price
movements. Certain market conditions may favor value stocks or stocks of small
companies, while other conditions may favor growth stocks or stocks of larger
companies. Accordingly, a portfolio of small cap value stocks may, over certain
periods of time, underperform a portfolio of growth stocks or stocks of larger
companies. The Portfolio also may be subject to the risks associated with
derivatives. The Portfolio's investments in foreign securities are subject to
certain risks, including the risks associated with fluctuating currency exchange
rates. Please read the section entitled "Important Investment Information" for
more information about these risks.
GENERALLY AT LEAST 65% INVESTED IN
EQUITIES OF SMALL CAP COMPANIES
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY
MATCHING THE BENCHMARK (CURRENTLY
$100 MILLION TO $2 BILLION)
- --------------------------------------------------------------------------------
FOCUS ON VALUE SECURITIES
- --------------------------------------------------------------------------------
BENCHMARK: RUSSELL 2000 INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO.: 552-913-261
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
BRADLEY S. DANIELS, WILLIAM B. GERLACH,
CHRIS LEAVY AND GARY G. SCHLARBAUM
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on July 1, 1986
17.61% 1989
- -16.55% 1990
63.78% 1991
22.77% 1992
21.16% 1993
2.18% 1994
21.04% 1995
35.15% 1996
30.63% 1997
-1.42% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 3/31/91 QUARTER ENDED 9/30/90
31.89% -27.20%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
SMALL CAP RUSSELL 2000
VALUE PORTFOLIO INDEX
- --------------------------------------------------------------------------------
One Year -1.42 -2.55
- --------------------------------------------------------------------------------
Five Years 16.57 11.87
- --------------------------------------------------------------------------------
Ten Years 17.80 12.92
- --------------------------------------------------------------------------------
Since Inception
7/1/86 13.25 10.23
The bar chart and table above show the Portfolio's Institutional Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1, 5 and 10 year periods and since inception.
The table also shows the corresponding returns of the Portfolio's benchmark
index. The Adviser Class Shares would have had similar annual returns, but
returns would have generally been lower as expenses of this class are higher.
The variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
5
<PAGE>
VALUE PORTFOLIO
OBJECTIVE The Value Portfolio seeks above-average total return over a market
cycle of three to five years.
APPROACH The Portfolio invests primarily in common stocks and other EQUITY
SECURITIES with equity capitalizations greater than $1.5 billion.
The Portfolio focuses on stocks that are undervalued in comparison
with the stock market as a whole, as measured by the S&P 500 Index.
While VALUE STOCKS typically pay dividends, the Portfolio may
purchase stocks that do not pay dividends based on other value
characteristics. The Portfolio may invest in FOREIGN EQUITY
SECURITIES to a limited extent. The Adviser may use DERIVATIVES in
managing the Portfolio.
PROCESS The Adviser narrows the Portfolio's universe of possible
investments through a three part analysis. The Adviser selects
stocks having the lowest price/earnings ratios. The Adviser applies
fundamental analysis and its investment judgment to determine which
of those securities are the most attractive. The Adviser also may
favor securities of companies that are in undervalued industries.
The Adviser employs a formal sell discipline, under which the
Portfolio sells securities when their price/earnings ratios rise.
PRINCIPAL RISKS
The prices of common stocks and other equity securities will rise and fall in
response to events that affect entire financial markets or industries, and to
events that affect a particular issuer. Investments in smaller companies may
involve greater risk than investments in larger, more established companies, and
smaller companies' securities may be subject to more abrupt or erratic price
movements. Certain market conditions may favor value stocks, while other
conditions may favor growth stocks. Accordingly, a portfolio of value stocks
may, over certain periods of time, underperform a portfolio of growth stocks.
The Portfolio also may be subject to the risks associated with derivatives. The
Portfolio's investments in foreign securities are subject to certain risks,
including the risks associated with fluctuating currency exchange rates. Please
read the section entitled "Important Investment Information" for more
information about these risks.
GENERALLY AT LEAST 65% INVESTED IN
EQUITIES
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY GREATER
THAN $1.5 BILLION
- --------------------------------------------------------------------------------
FOCUS ON VALUE SECURITIES
- --------------------------------------------------------------------------------
BENCHMARK: S&P 500 INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: MPVAX
- --------------------------------------------------------------------------------
CUSIP NO.: 552-913-451
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
RICHARD M. BEHLER, NICHOLAS J. KOVICH
AND ROBERT J. MARCIN
<PAGE>
- --------------------------------------------------------------------------------
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on July 17, 1996
22.99% 1997
- -3.11% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 6/30/97 QUARTER ENDED 9/30/98
14.57% -19.10%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
- --------------------------------------------------------------------------------
VALUE PORTFOLIO S&P 500 INDEX
- --------------------------------------------------------------------------------
One Year -3.11 28.57
- --------------------------------------------------------------------------------
Since Inception
7/17/96 17.15 33.21
The bar chart and table above show the Portfolio's Adviser Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
6
<PAGE>
DOMESTIC FIXED INCOME PORTFOLIO
OBJECTIVE The Domestic Fixed Income Portfolio seeks above-average total
return over a market cycle of three to five years.
APPROACH The Portfolio invests exclusively in U.S. Government securities and
other investment grade FIXED INCOME SECURITIES of U.S. issuers,
including corporate bonds and MORTGAGE SECURITIES. The Adviser will
use futures, swaps and other DERIVATIVES in managing the Portfolio.
PROCESS The Adviser actively manages the maturity and DURATION of the
Portfolio in anticipation of long-term trends in interest rates and
inflation. Depending on the Adviser's outlook for the economy,
interest rates and inflation, the Adviser may lengthen or shorten
the Portfolio's average maturity or duration. The portfolio
managers as a team determine the Portfolio's overall maturity and
duration targets and sector allocations. The portfolio managers
then individually select particular securities for the Portfolio in
various sectors within those overall guidelines. The Adviser alters
the Portfolio's weightings in various sectors based on its
perception of value. The Adviser may sell securities when it
believes that expected risk-adjusted return is low compared to
other investment opportunities.
PRINCIPAL RISKS
Market prices of the Portfolio's holdings respond to economic developments,
especially changes in interest rates, as well as to perceptions of the
creditworthiness of individual issuers. Generally, fixed income securities
decrease in value as interest rates rise and vice versa. Prices of fixed income
securities also generally will fall if an issuer's credit rating declines, and
rise if it improves. The prices of mortgage securities may be particularly
sensitive to changes in interest rates because of the risk that borrowers will
become more or less likely to refinance their mortgages. For example, an
increase in interest rates generally will reduce prepayments, effectively
lengthening the maturity of some mortgage
100% U.S. ISSUERS
- --------------------------------------------------------------------------------
GENERALLY AT LEAST 65% INVESTED IN
FIXED INCOME SECURITIES
- --------------------------------------------------------------------------------
80% OF FIXED INCOME SECURITIES RATED
A OR HIGHER (OR EQUIVALENT)
- --------------------------------------------------------------------------------
UP TO 20% OF FIXED INCOME SECURITIES
RATED BBB (OR EQUIVALENT)
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY GENERALLY
GREATER THAN 5 YEARS
- --------------------------------------------------------------------------------
MAY INVEST OVER 50% IN MORTGAGE
SECURITIES
- --------------------------------------------------------------------------------
BENCHMARKS: SALOMON BROAD
INVESTMENT GRADE
INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO: 552-913-279
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
THOMAS L. BENNETT, KENNETH B. DUNN
AND RICHARD B. WORLEY
<PAGE>
- --------------------------------------------------------------------------------
DOMESTIC FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on September 29, 1987
11.22% 1989
7.19% 1990
21.54% 1991
9.12% 1992
13.75% 1993
- -3.89% 1994
18.85% 1995
3.89% 1996
9.62% 1997
7.23% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 7/30/91 QUARTER ENDED 3/31/92
7.48% -2.28%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
DOMESTIC FIXED SALOMON BROAD
INCOME PORTFOLIO INVESTMENT GRADE INDEX
- --------------------------------------------------------------------------------
One Year 7.23 8.72
- --------------------------------------------------------------------------------
Five Years 6.88 7.30
- --------------------------------------------------------------------------------
Ten Years 9.63 9.31
- --------------------------------------------------------------------------------
Since Inception
9/29/87 9.80 9.48
The bar chart and table above show the Portfolio's Institutional Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1, 5, and 10 year periods and since inception.
The table also shows the corresponding returns of the Portfolio's benchmark
index. The Adviser Class Shares would have had similar annual returns, but
returns would have generally been lower as expenses of this class are higher.
The variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
7
<PAGE>
DOMESTIC FIXED INCOME PORTFOLIO (CONTINUED)
securities, and make them subject to more drastic price movements. Because of
prepayment issues, it is not possible to predict the ultimate maturity of
mortgage securities. The Portfolio also is subject to the risks associated with
using derivatives. Please read the section entitled "Important Investment
Information" for more information about these risks.
8
<PAGE>
FIXED INCOME PORTFOLIO
OBJECTIVE The Fixed Income Portfolio seeks above average total return over a
market cycle of three to five years.
APPROACH The Portfolio invests in a diversified portfolio of FIXED INCOME
SECURITIES, including U.S. Government securities, corporate bonds,
MORTGAGE SECURITIES, and to a limited extent, FOREIGN FIXED INCOME
SECURITIES. The Portfolio invests primarily in investment grade
securities, but also may invest a portion of its assets in HIGH
YIELD SECURITIES, also known as "junk bonds." The Adviser will use
futures, swaps and other DERIVATIVES in managing the Portfolio.
PROCESS The Adviser actively manages the maturity and DURATION of the
Portfolio in anticipation of long-term trends in interest rates and
inflation. Depending on the Adviser's outlook for the economy,
interest rates and inflation, the Adviser may lengthen or shorten
the Portfolio's average maturity or duration. The portfolio
managers as a team determine the Portfolio's overall maturity and
duration targets and sector allocations. The portfolio managers
then individually select particular securities for the Portfolio in
various sectors within those overall guidelines. The Adviser alters
the Portfolio's weightings in various sectors based on its
perception of value. The Adviser may sell securities when it
believes that expected risk-adjusted return is low compared to
other investment opportunities.
PRINCIPAL RISKS
Market prices of the Portfolio's holdings respond to economic developments,
especially changes in interest rates, as well as to perceptions of the
creditworthiness of individual issuers. Generally, fixed income securities
decrease in value as interest rates rise and vice versa. Prices of fixed income
securities also generally will fall if an issuer's credit rating declines, and
rise if it improves.
The prices of mortgage securities may be particularly sensitive to changes in
interest rates because of the risk that borrowers will become more or less
likely to refinance their mortgages. For example, an increase in
GENERALLY AT LEAST 65% INVESTED IN
FIXED INCOME SECURITIES
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY GENERALLY
GREATER THAN 5 YEARS
- --------------------------------------------------------------------------------
80% INVESTMENT GRADE SECURITIES
- --------------------------------------------------------------------------------
UP TO 20% HIGH YIELD SECURITIES
- --------------------------------------------------------------------------------
MAY INVEST OVER 50% IN MORTGAGE
SECURITIES
- --------------------------------------------------------------------------------
BENCHMARKS: SALOMON BROAD
INVESTMENT GRADE
INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: MFXAX
- --------------------------------------------------------------------------------
CUSIP NO: 552-913-444
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
THOMAS L. BENNETT, KENNETH B. DUNN
AND RICHARD B. WORLEY
<PAGE>
- --------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on November 7, 1996
9.34% 1997
6.63% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 6/30/97 QUARTER ENDED 3/31/97
3.98% -0.17%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
FIXED INCOME SALOMON BROAD
PORTFOLIO INVESTMENT GRADE INDEX
- --------------------------------------------------------------------------------
One Year 6.63 8.72
- --------------------------------------------------------------------------------
Since Inception
11/7/96 7.72 8.62
The bar chart and table above show the Portfolio's Adviser Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
9
<PAGE>
FIXED INCOME PORTFOLIO (CONTINUED)
interest rates generally will reduce prepayments, effectively lengthening the
maturity of some mortgage securities, and making them subject to more drastic
price movements. Because of prepayment issues, it is not possible to predict the
ultimate maturity of mortgage securities.
The Portfolio's investments in high yield securities expose it to a substantial
degree of credit risk. Prices of high yield securities will rise and fall
primarily in response to changes in the issuer's financial health, although
changes in market interest rates also will affect prices. High yield securities
may experience reduced liquidity, and sudden and substantial decreases in price,
during certain market conditions.
The Portfolio also is subject to the risks of investing in derivatives and, to a
limited extent, foreign fixed income securities. Foreign fixed income securities
may be denominated in foreign currencies, which will fluctuate in value relative
to the U.S. dollar. The Portfolio may use derivatives to hedge some or all of
the risks associated with foreign currencies. Certain hedging strategies or
instruments may not be available or practical in certain markets or under
certain conditions. Hedging the Portfolio's currency risks involves certain
risks, including the possibility of mismatching the Portfolio's obligations
under a forward or futures contract with the value of securities denominated in
a particular currency. Please read the section entitled "Important Investment
Information" for more information about these risks.
10
<PAGE>
HIGH YIELD PORTFOLIO
OBJECTIVE The High Yield Portfolio seeks above average total return over a
market cycle of three to five years.
APPROACH The Portfolio invests primarily in HIGH YIELD SECURITIES (commonly
referred to as "junk bonds"). The Portfolio also may invest in
other FIXED INCOME SECURITIES, including U.S. Government
securities, investment grade corporate bonds and, to a limited
extent, MORTGAGE SECURITIES. The Portfolio may invest to a limited
extent in FOREIGN FIXED INCOME SECURITIES, including EMERGING
MARKET SECURITIES. The Adviser will use futures, swaps and other
DERIVATIVES in managing the Portfolio.
PROCESS The Adviser uses equity and fixed income valuation techniques,
together with analyses of economic and industry trends, to
determine the Portfolio's overall structure, sector allocation and
desired maturity. The Adviser emphasizes securities of companies
that have strong industry positions and favorable outlooks for cash
flow and asset values. The Adviser conducts a credit analysis for
each security considered for investment to evaluate its
attractiveness relative to the level of risk it presents. The
Portfolio maintains a high level of diversification to minimize its
exposure to the risks associated with any particular issuer. The
Adviser may sell securities when it believes that expected
risk-adjusted return is low compared to other investment
opportunities.
PRINCIPAL RISKS
Market prices of the Portfolio's fixed income securities holdings respond to
economic developments, especially changes in interest rates, as well as to
perceptions of the creditworthiness of individual issuers. The Portfolio's
investments in high yield securities expose it to a substantial degree of credit
risk. These investments are considered speculative under traditional investment
standards. Prices of high yield securities will rise and fall primarily in
response to changes in the issuer's financial health, although changes in market
interest rates also will affect prices. Generally, fixed income securities
decrease in value as interest rates rise and vice versa. High yield securities
may experience reduced liquidity, and sudden and substantial decreases in price,
during certain market conditions.
AVERAGE WEIGHTED MATURITY GENERALLY
GREATER THAN 5 YEARS
- --------------------------------------------------------------------------------
GENERALLY AT LEAST 65% INVESTED IN
HIGH YIELD SECURITIES
- --------------------------------------------------------------------------------
BENCHMARK: SALOMON HIGH YIELD INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO. 552-913-428
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
ROBERT E. ANGEVINE, THOMAS L.
BENNETT AND STEPHEN F. ESSER
<PAGE>
- --------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on January 31, 1997
2.83% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/98
5.08% -6.36%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
HIGH YIELD SALOMON HIGH
PORTFOLIO YIELD INDEX
- --------------------------------------------------------------------------------
One Year 2.83 3.61
- --------------------------------------------------------------------------------
Since Inception
1/31/97 8.41 8.26
The bar chart and table above show the Portfolio's Adviser Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
11
<PAGE>
HIGH YIELD PORTFOLIO (Continued)
The Portfolio also is subject to the risks associated with using derivatives.
Foreign fixed income securities may be denominated in foreign currencies, which
will fluctuate in value relative to the U.S. dollar. The Portfolio may use
derivatives to hedge some or all of the risks associated with foreign
currencies. Certain hedging strategies or instruments may not be available or
practical in certain markets or under certain conditions. Hedging the
Portfolio's currency risks involves certain risks, including the possibility of
mismatching the Portfolio's obligations under a forward or futures contract with
the value of securities denominated in a particular currency. Please read the
section entitled "Important Investment Information" for more information about
these risks.
12
<PAGE>
BALANCED PORTFOLIO
OBJECTIVE The Balanced Portfolio seeks above average total return over a
market cycle of three to five years.
APPROACH The Portfolio invests in a mix of EQUITY and FIXED INCOME
SECURITIES. The Portfolio normally invests 45-75% of its assets
in equity securities and 25-55% of its assets in fixed income
securities. The Portfolio may invest up to 25% of its assets in
FOREIGN EQUITY and FOREIGN FIXED INCOME SECURITIES, including
EMERGING MARKET SECURITIES. Equity securities generally will be
issued by larger corporations. Fixed income securities will
include U.S. Government securities, corporate bonds, MORTGAGE
SECURITIES, HIGH YIELD SECURITIES (commonly called "junk bonds")
and foreign fixed income securities. The Adviser will use
futures, swaps and other DERIVATIVES in managing the Portfolio.
PROCESS The Adviser determines the Portfolio's equity and fixed income
investment strategies separately and then determines the mix of
those strategies that will maximize the return available from
both the stock and bond markets, based on proprietary valuation
disciplines and analysis. The Adviser evaluates international
economic developments in determining the amount to invest in
foreign securities. In determining whether securities should be
sold, the Adviser considers factors such as deteriorating
earnings, cash flows and other fundamentals, as well as high
valuations relative to the Portfolio's investment universe.
PRINCIPAL RISKS The prices of common stocks and other equity securities will
rise and fall in response to events that affect entire financial
markets or industries, and to events that affect a particular
issuer.
Market prices of the Portfolio's fixed income securities respond
to economic developments, especially changes in interest rates,
as well as to perceptions of the creditworthiness of individual
issuers. The prices of mortgage securities may be particularly
sensitive to changes in interest rates because of the risk that
borrowers will become more or less likely to refinance their
mortgages. For example, an increase in interest rates generally
will reduce prepayments, effectively lengthening the maturity of
some mortgage securities, and make them subject to more drastic
price movements. Because of prepayment issues, it is not
possible to predict the ultimate maturity of mortgage
securities.
The Portfolio is subject to the risks of investing in foreign
securities. News and events unique to a country or region will
affect those markets and their issuers, yet may have little or
no effect on the U.S. economy or similar issuers located in the
United States. Emerging market countries are generally
considered to be less economically mature than developed
nations. Emerging market
<PAGE>
GENERALLY 45-75% INVESTED IN EQUITIES,
25-55% IN FIXED INCOME SECURITIES
- --------------------------------------------------------------------------------
AT LEAST 25% INVESTED IN SENIOR FIXED
INCOME SECURITIES
- --------------------------------------------------------------------------------
UP TO 25% INVESTED IN FOREIGN EQUITY
AND FOREIGN FIXED INCOME SECURITIES
- --------------------------------------------------------------------------------
UP TO 10% INVESTED IN BRADY BONDS
(A TYPE OF EMERGING MARKET FIXED
INCOME SECURITY)
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY GREATER
THAN $1 BILLION
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY OF FIXED
INCOME SECURITIES GENERALLY GREATER
THAN 5 YEARS
- --------------------------------------------------------------------------------
BENCHMARK: WEIGHTED BLEND OF
QUARTERLY RETURNS OF
60% S&P 500 INDEX
40% SALOMON BROAD
INVESTMENT GRADE
INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: MBAAX
- --------------------------------------------------------------------------------
CUSIP NO. 552-913-394
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
THOMAS L. BENNETT, BARTON M. BIGGS,
GARY G. SCHLARBAUM, HORACIO A.
VALEIRAS AND RICHARD B. WORLEY
13
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
countries may be more likely to experience political turmoil or rapid changes
in economic conditions, and issuers in those countries may be in more precarious
financial condition. These characteristics can cause securities in emerging
market countries to experience significant price volatility. Brady Bonds are
subject to certain risks, including the risk of default by the issuer.
Many of the Portfolio's foreign securities will be denominated in a foreign
currency. Brady Bonds also may be denominated in a foreign currency. Changes in
the values of those currencies compared to the U.S. dollar may affect the value
of the Portfolio's investments. These changes may happen separately from and in
response to events that do not otherwise affect the value of the security in the
issuer's home country. The Adviser may, in its discretion, use derivatives and
other techniques to hedge currency risks. However, the Adviser cannot guarantee
that it will succeed in doing so. Certain hedging strategies or instruments may
not be available or practical in certain markets or under certain conditions.
Hedging the Portfolio's currency risks involves certain risks, including the
possibility of mismatching the Portfolio's obligations under a forward or
futures contract with the value of securities denominated in a particular
currency.
The Portfolio's investments in high yield securities expose it to a substantial
degree of credit risk. Prices of high yield securities will rise and fall
primarily in response to changes in the issuer's financial health, although
changes in market interest rates also will affect prices. High yield securities
may experience reduced liquidity, and sudden and substantial decreases in price,
during certain market conditions.
At various times, equity securities may perform better or worse than fixed
income securities. There is a risk that the Portfolio could invest too much or
too little in an asset class, which could adversely affect the Portfolio's
overall performance.
The Portfolio also is subject to the risks of using derivatives. Please read the
section entitled "Important Investment Information" for more information about
these risks.
<PAGE>
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on November 1, 1996
19.26% 1997
15.09% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/98
12.08% -6.81%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
SALOMON BROAD 60/40
BALANCED S&P 500 INVESTMENT BLENDED
PORTFOLIO INDEX GRADE INDEX INDEX*
- --------------------------------------------------------------------------------
One Year 15.09 28.57 8.72 21.24
- --------------------------------------------------------------------------------
Since Inception
11/1/96 17.67 31.59 8.86 22.59
*The 60/40 Blended Index is an unmanaged index comprised of 60% S&P 500 Index
and 40% Salomon Broad Investment Grade Index.
The bar chart and table above show the Portfolio's Adviser Class Shares
performance year-by-year, best and worst performance for a quarter, and average
annual total return for the past 1 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does not
necessarily indicate how the Portfolio will perform in the future.
14
<PAGE>
MULTI-ASSET-CLASS PORTFOLIO
OBJECTIVE The Multi-Asset-Class Portfolio seeks above average total return
over a market cycle of three to five years.
APPROACH The Portfolio seeks to invest in a combination of asset classes
that do not move in tandem with each other in order to improve
potential return and control the Portfolio's overall risk. The
Portfolio invests in EQUITY SECURITIES and FIXED INCOME SECURITIES
of U.S. and foreign issuers, including EMERGING MARKET SECURITIES,
in accordance with the Adviser's target allocation among certain
asset classes. The Portfolio's equity securities generally will be
issued by larger corporations. Fixed income securities will include
U.S. Government securities, foreign government securities,
corporate bonds, MORTGAGE SECURITIES and HIGH YIELD SECURITIES
(commonly called "junk bonds"). The Portfolio's neutral position is
generally 50% domestic equity securities, 24% domestic fixed income
securities, 14% foreign equity securities, 6% foreign fixed income
securities and 6% high yield securities. The Adviser will use
futures, swaps and other DERIVATIVES in managing the Portfolio.
GENERALLY AT LEAST 65% INVESTED IN
ISSUERS LOCATED IN AT LEAST 3 COUNTRIES,
INCLUDING THE U.S.
- --------------------------------------------------------------------------------
EQUITY CAPITALIZATION GENERALLY GREATER
THAN $1 BILLION
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY OF FIXED
INCOME SECURITIES GENERALLY GREATER
THAN 5 YEARS
BENCHMARK: A WEIGHTED BLEND OF
QUARTERLY RETURNS OF
50% S&P 500 INDEX
14% MSCI EAFE-GDP
WEIGHTED INDEX
24% SALOMON BROAD
INVESTMENT GRADE
INDEX
6% SALOMON WORLD
GOVERNMENT BOND
EX-U.S. INDEX
6% SALOMON HIGH
YIELD INDEX
- --------------------------------------------------------------------------------
TICKER SYMBOL: NOT AVAILABLE
- --------------------------------------------------------------------------------
CUSIP NO. 552-913-634
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
THOMAS L. BENNETT, BARTON M. BIGGS,
J. DAVID GERMANY, GARY G. SCHLARBAUM,
ANN D. THIVIERGE, HORACIO A. VALEIRAS,
AND RICHARD B. WORLEY.
<PAGE>
- --------------------------------------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO
- --------------------------------------------------------------------------------
Commenced operations on July 29, 1994
24.62% 1995
15.93% 1996
17.48% 1997
13.87% 1998
- --------------------------------------------------------------------------------
HIGH (QUARTER) LOW (QUARTER)
QUARTER ENDED 12/31/98 QUARTER ENDED 9/30/98
12.82% -8.64%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
SALOMON BROAD MSCI EAFE-GDP
MULTI-ASSET-CLASS S&P 500 INVESTMENT WEIGHTED BLENDED
PORTFOLIO INDEX GRADE INDEX INDEX INDEX*
- --------------------------------------------------------------------------------
One Year 13.87 28.57 8.72 26.71 22.05
- --------------------------------------------------------------------------------
Since Inception
7/29/94 15.69 27.65 8.76 10.58 18.57
* The Blended Index is an unmanaged index comprised of 50% S&P 500 Index, 24%
Salomon Broad Investment Grade Index, 14% MSCI EAFE-GDP Weighted Index, 6%
Salomon High Yield Index and 6% Salomon World Government Bond Ex-U.S. Index.
The bar chart and table above show the Portfolio's Institutuional Class Shares
performance year-by-year, best and worst performance for a quarter, and
average annual total return for the past 1 year period and since inception.
The table also shows the corresponding returns of the Portfolio's benchmark
index. The Adviser Class Shares would have similar annual returns, but returns
would have generally been lower as expenses of this class are higher. The
variability of performance over time provides an indication of the risks of
investing in the Portfolio. How the Portfolio has performed in the past does
not necessarily indicate how the Portfolio will perform in the future.
15
<PAGE>
MULTI-ASSET-CLASS PORTFOLIO (Continued)
PROCESS The Adviser makes strategic judgments based on proprietary
measures used to compare the relative risks and returns of stock
and bond markets around the world. The Adviser's asset
allocation team sets the target exposures for domestic and
international equity and fixed income securities, high yield
securities and cash, depending on the Adviser's appraisal of the
relative attractiveness of each type of investment. In
determining whether securities should be sold, the Adviser
considers factors such as deteriorating earnings, cash flows and
other fundamentals, as well as high valuations relative to the
Portfolio's investment universe.
PRINCIPAL RISKS The prices of common stocks and other equity securities will
rise and fall in response to events that affect entire financial
markets or industries, and to events that affect a particular
issuer.
Market prices of the Portfolio's fixed income securities respond
to economic developments, especially changes in interest rates,
as well as to perceptions of the creditworthiness of individual
issuers. The prices of mortgage securities may be particularly
sensitive to changes in interest rates because of the risk that
borrowers will become more or less likely to refinance their
mortgages. For example, an increase in interest rates generally
will reduce prepayments, effectively lengthening the maturity of
some mortgage securities, and make them subject to more drastic
price movements. Because of prepayment issues, it is not
possible to predict the ultimate maturity of mortgage
securities.
The Portfolio is subject to the risks of investing in foreign
securities. News and events unique to a country or region will
affect those markets and their issuers, yet may have little or
no effect on the U.S. economy or similar issuers located in the
United States. Emerging market countries are generally
considered to be less economically mature than developed
nations. Emerging market countries may be more likely to
experience political turmoil or rapid changes in economic
conditions, and issuers in those countries may be in a more
precarious financial condition. These characteristics can cause
securities in emerging market countries to experience
significant price volatility.
Many of the Portfolio's foreign securities will be denominated
in a foreign currency. Changes in the values of those currencies
compared to the U.S. dollar may affect the value of the
Portfolio's investments. These changes may happen separately
from and in response to events that do not otherwise affect the
value of the security in the issuer's home country. The Adviser
may use derivatives and other techniques to manage these risks.
However, the Adviser cannot guarantee that it will succeed in
doing so. Certain hedging strategies or instruments may not be
available or practical in certain markets or under certain
conditions. Hedging the Portfolio's currency risks involves
certain risks, including the possibility of mismatching the
Portfolio's obligations under a forward or futures contract with
the value of securities denominated in a particular currency.
The Portfolio's investments in high yield securities expose it
to a substantial degree of credit risk. Prices of high yield
securities will rise and fall primarily in response to changes
in the issuer's financial health, although changes in market
interest rates also will affect prices. High yield securities
may experience reduced liquidity, and sudden and substantial
decreases in price, during certain market conditions.
At various times, some asset classes will perform better or
worse than others. There is a risk that the Portfolio could
invest too much or too little in particular asset classes, which
could adversely affect the Portfolio's overall performance.
The Portfolio also is subject to the risks of using derivatives.
Please read the section entitled "Important Investment
Information" for more information about these risks.
16
<PAGE>
IMPORTANT INVESTMENT INFORMATION
Each Portfolio involves the risk that an investor may lose
money. Some of the Portfolios may actively trade their
securities to achieve their investment objectives. High levels
of portfolio turnover are likely to lead to increased
transaction costs and possible tax consequences. Nonetheless,
short-term trading activities represented by high portfolio
turnover rates are not incompatible with these Portfolios'
stated objectives of achieving long-term capital appreciation or
other multi-year goals, in that short-term trading can lead to
gains that ultimately will increase the value of the investor's
shares.
The following section describes the principal types of
investments that various Portfolios may make and some of the
risks associated with those investments. More information about
these investments and risks is contained in the Statement of
Additional Information.
EQUITY SECURITIES
Equity securities include common stock, preferred stock,
convertible securities, ADRs, rights, warrants and shares of
investment companies. Equity securities in which the Portfolios
may invest may be publicly traded on securities exchanges or
over-the-counter. The Portfolios also may invest in securities
that are not publicly traded. These securities may be more
difficult to sell than other equity securities and their value
may fluctuate more dramatically than other securities. Each
Portfolio may purchase shares of other investment companies
subject to limits imposed by the Investment Company Act of 1940
("1940 Act") and any other applicable law.
Equity securities are subject to the risk that prices will
fluctuate in response to events affecting particular issuers, or
entire industries or markets. Smaller companies are subject to
additional risks because they may have more limited markets and
financial resources, narrower product lines or lack of depth of
management. Smaller companies' securities also may be less
liquid, and subject to more abrupt or erratic price movements.
ADRs are U.S. dollar-denominated securities that represent
claims to shares of foreign stocks. The Fund treats ADRs as U.S.
securities for purposes of foreign investment limitations.
Growth stocks generally are characterized by higher growth
rates, betas, and price/earnings ratios, and lower yields than
the stock market in general as measured by an appropriate stock
market index. Value stocks are those stocks that are deemed by
the Adviser to be undervalued relative to the stock market in
general as measured by the appropriate market index, based on
value characteristics such as price/earnings and price/book
ratios. Value stocks are generally dividend paying common
stocks. However, non-dividend paying stocks may also be selected
for their value characteristics.
FIXED INCOME SECURITIES
Fixed income securities include a wide variety of investments,
such as U.S. Government securities; securities issued by federal
or federally sponsored agencies ("agencies"); corporate bonds;
asset-backed securities; mortgage securities; high yield
securities; municipal bonds; loan participations and
assignments; zero coupon bonds; convertible securities; Yankee
bonds; repurchase agreements; commercial paper; and cash
equivalents.
17
<PAGE>
IMPORTANT INVESTMENT INFORMATION (Continued)
Fixed income securities generally are subject to risks related
to changes in interest rates and in the financial health or
credit rating of the issuers. The value of a fixed income
security typically moves in the opposite direction of prevailing
interest rates: if rates rise, the value of a fixed income
security falls; if rates fall, the value increases. The maturity
and duration of a fixed income instrument also affects the
extent to which the price of the security will change in
response to these and other factors. Longer term securities tend
to experience larger price changes than shorter term securities
because they are more sensitive to changes in interest rateor in
the credit ratings of the issuers. Certain types of fixed income
securities, such as inverse floaters, are designed to respond
differently to changes in interest rates.
Certain fixed income securities pay a floating or variable rate
of interest. The interest rates on these securities will vary
with changes in specified market rates or indices, such as the
prime rate, or at specified intervals. The variation in the
interest rate may enable an investor to trade a floating or
variable rate security at par on a daily or periodic basis. Some
obligations carry a demand feature permitting the holder to
tender them back to the issuer or to a third party at par value
before maturity. If the demand feature is an obligation of a
foreign entity, it will be subject to certain risks described in
the section below entitled "Foreign Securities."
Some fixed income securities may be called (redeemed by the
issuer) prior to final maturity. The risk of holding a callable
security is that if it is called, a Portfolio may have to
reinvest the proceeds at a lower rate of interest.
DURATION The average duration of a fixed income portfolio measures its
exposure to the risk of changing interest rates. A Portfolio
with a lower average duration generally will experience less
price volatility in response to changes in interest rates as
compared with a Portfolio with a higher average duration.
MORTGAGE Mortgage securities are subject to the risk that as interest
rates fall, borrowers will refinance their mortgages, resulting
in prepayment of principal. A Portfolio holding mortgage
securities that are experiencing prepayments will have to
reinvest these principal payments at lower prevailing interest
rates. On the other hand, when interest rates rise, borrowers
are less likely to refinance, resulting in lower prepayments.
This can effectively extend the maturity of a Portfolio's
mortgage securities, resulting in greater price volatility.
HIGH YIELD Fixed income securities that are not investment grade are
SECURITIES commonly referred to as junk bonds or high yield, high risk
securities. These securities offer a higher yield than other,
higher rated securities, but they carry a greater degree of risk
and are considered speculative by the major credit rating
agencies. High yield securities may be issued by companies that
are restructuring, are smaller and less credit worthy or are
more highly indebted than other companies. This means that they
may have more difficulty making scheduled payments of principal
and interest. Changes in the value of high yield securities are
influenced more by changes in the financial and business
position of the issuing company than by changes in interest
rates when compared to investment grade securities.
18
<PAGE>
IMPORTANT INVESTMENT INFORMATION (Continued)
YANKEE BONDS Yankee bonds are U.S.-dollar denominated fixed income
instruments issued by foreign governments and corporations and
sold in the United States. They are considered U.S. securities
for purposes of the Portfolios' investment policies (except for
the Domestic Fixed Income Portfolio).
FOREIGN SECURITIES
While many of the characteristics and risks of foreign equity
and fixed income securities are similar to those of domestic
securities, investing in foreign securities involves certain
additional risks. Foreign issuers generally are subject to
different accounting, auditing and financial reporting standards
than U.S. companies. There may be less information available to
the public about foreign issuers. Securities of foreign issuers
can be less liquid and experience greater price movements.
Foreign stock exchanges, broker-dealers, and listed issuers may
be subject to less government regulation and oversight. The cost
of investing in foreign securities, including brokerage
commissions and custodial expenses, can be higher than in the
United States. In some foreign countries, there is also the risk
of government expropriation, excessive taxation, political or
social instability, the imposition of currency controls, or
diplomatic developments that could affect the Portfolios'
investments in those countries. There also can be difficulty
obtaining and enforcing judgments in foreign countries.
Foreign securities are denominated in foreign currencies. The
value of foreign currencies fluctuates relative to the value of
the U.S. dollar. Since the Portfolios must convert the value of
foreign securities into dollars, changes in currency exchange
rates can increase or decrease the U.S. dollar value of the
Portfolios' assets. The Adviser may use certain derivatives to
offset this risk. The risks of hedging currency risk are
described in the section below entitled "Derivatives and Other
Investments." The Adviser may in its discretion choose not to
hedge against currency risk. In addition, certain market
conditions may make it impossible or uneconomical to hedge
against currency risk.
EMERGING Investing in emerging market securities enhances the risks of
MARKET foreign investing. The risk of political or social upheaval,
SECURITIES expropriation, and restrictive controls on foreign investors'
ability to repatriate capital is greater in emerging markets.
Emerging market securities generally are less liquid and subject
to wider price and currency fluctuations than securities issued
in more developed countries. In certain countries, there may be
few publicly traded securities, and the market may be dominated
by a few issuers or sectors. Fixed income securities issued by
emerging markets issuers are more likely to be considered
equivalent to risky high yield securities. Investment funds and
structured investments are mechanisms for U.S. and other
investors to invest in certain emerging markets that have laws
precluding or limiting direct investments in their securities by
foreign investors. Brady Bonds are debt obligations created as
part of the restructuring of commercial bank loans to entities
in emerging market countries. Brady Bonds may be collateralized
or not, and may be issued in various currencies (most are
U.S.-dollar denominated).
DERIVATIVES AND OTHER INVESTMENTS
The Portfolios may use derivatives to pursue portfolio
strategies and objectives. Derivatives are financial instruments
whose value and performance are based on the value and
performance of
19
<PAGE>
IMPORTANT INVESTMENT INFORMATION (Continued)
another security or financial instrument. Derivatives include
futures, options, forward contracts, swaps, collateralized
mortgage obligations ("CMOs"), stripped mortgage-backed
securities ("SMBS"), and structured notes. Derivatives sometimes
offer the most economical way of pursuing a particular
investment strategy, limiting certain risks or enhancing
potential returns.
Certain derivative instruments are publicly traded on exchanges
or over-the-counter, while others are privately negotiated. The
Portfolios may enter into public or private over-the-counter
derivatives transactions with counterparties that meet the
Fund's requirements for credit quality and collateral. A
Portfolio will not use derivatives to increase a Portfolio's
level of risk above the level that could be achieved using only
traditional investment securities. A Portfolio will not use
derivatives as an indirect way of investing in assets that it
cannot, as a matter of policy, invest in directly. Forward
contracts are used to protect against uncertainty in the level
of future foreign currency exchange rates. The Portfolios may
use futures to gain exposure to an entire market(e.g., stock
index futures) or to control their exposure to changing foreign
currency exchange rates. Portfolios investing in fixed income
securities will use futures to control their exposure to changes
in interest rates and to manage the overall maturity and
duration of their securities holdings. If a Portfolio buys an
option, it buys a legal contract giving it the right to buy or
sell a specific amount of a security or futures contract at an
agreed-upon price. If a Portfolio "writes" an option, it sells
to another person the right to buy from or sell to the Portfolio
a specific amount of a security or futures contract at an
agreed-upon price. The Portfolios may enter into swap
transactions which are contracts in which a Portfolio agrees to
exchange the return or interest rate on one instrument for the
return or interest rate on another instrument. Payments may be
based on currencies, interest rates, securities indices and
commodity indices. Swaps may be used to manage the maturity and
duration of a fixed income portfolio, or to gain exposure to a
market without directly investing in securities traded in that
market. Structured investments are units representing an
interest in assets held in a trust that is not an investment
company as defined in the 1940 Act. The trust may pay a return
based on the income it receives from those assets, or it may pay
a return based on a specified index.
RISKS OF The primary risks of derivatives are: (i) changes in the market
DERIVATIVES value of securities held by a Portfolio, and of derivatives
relating to those securities, may not be proportionate, (ii)
there may not be a liquid market for a Portfolio to sell a
derivative, which could result in difficulty closing a position,
and (iii) certain derivatives can magnify the extent of losses
incurred due to changes in the market value of the securities to
which they relate. See the Statement of Additional Information
for more about the risks of different types of derivatives.
The amount that a Portfolio may invest in futures and options
depends on the type of portfolio. The limitations are as
follows:
Any Fixed Income Portfolio may enter into futures contracts and
options on futures contracts for bona fide hedging purposes to
an unlimited extent. It also can enter into futures contracts
and
20
<PAGE>
IMPORTANT INVESTMENT INFORMATION (Continued)
options thereon for other purposes, provided that no more than
5% of the Portfolio's total assets at the time of the
transaction are required as margin and option premiums to secure
the Portfolio's obligations under such contracts.
Any Equity Portfolio or Balanced Portfolio may enter into
futures contracts subject to the limitation that it cannot incur
obligations to purchase securities under futures and options
contracts in excess of 50% of the Portfolio's total assets. It
also is subject to the limit that no more than 5% of the
Portfolio's total assets at the time of the transaction may be
required as margin and option premiums to secure the Portfolio's
obligations under futures contracts and options thereon entered
into for purposes other than bona fide hedging.
Each Portfolio may invest in certain derivatives, such as
forwards, futures, options and mortgage derivatives as well as
when-issued securities which require the Portfolio to segregate
some or all of its cash or liquid securities to cover its
obligations under those instruments. At certain levels, this can
cause a Portfolio to lose flexibility in managing its
investments properly, responding to shareholder redemption
requests, or meeting other obligations. A Portfolio in that
position could be forced to sell other securities that it wanted
to retain or to realize unintended gains or losses.
MORTGAGE CMOs and SMBS are derivatives based on mortgage securities. CMOs
DERIVATIVES are issued in a number of series (known as "tranches"), each of
which has a stated maturity. Cash flow from the underlying
mortgages is allocated to the tranches in a predetermined,
specified order. SMBS are multi-class mortgage securities issued
by U.S. government agencies and instrumentalities and financial
institutions. They usually have two classes, one receiving most
of the principal payments from the mortgages, and one receiving
most of the interest. In some cases, classes may receive
interest only (called "IOs") or principal only (called "POs").
Both CMOs and SMBS are subject to the risks of price movements
in response to changing interest rates and the level of
prepayments made by borrowers. Depending on the class of CMO or
SMBS that a Portfolio holds, these price movements may be
significantly greater than that experienced by mortgage
securities generally, depending on whether the payments are
predominantly based on principal or interest paid on the
underlying mortgages. In addition, the yield to maturity of IOs
and POs is extremely sensitive to prepayment levels. As a
result, a high rate of prepayments can have a material effect on
a Portfolio's yield to maturity and could cause a Portfolio to
lose money on the investment.
When the Adviser believes that changes in economic, financial or
political conditions warrant, each Portfolio may invest without
limit in certain fixed income securities for temporary defensive
purposes. See the Statement of Additional Information for more
information about the types of fixed income securities in which
the Portfolios may invest. If the Adviser incorrectly predicts
the effects of these changes, such defensive investments may
adversely affect the Portfolios' performance. Consistent with
their investment policies, the Portfolios also will purchase and
sell securities without regard to the effect on portfolio
turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause the Portfolio to incur additional transaction costs
and may result in taxable gains being passed through to
shareholders.
21
<PAGE>
FEES AND EXPENSES OF THE PORTFOLIOS
ANNUAL PORTFOLIO
OPERATING
EXPENSES
(expenses that are
deducted from Portfolio
assets)
<TABLE>
<CAPTION>
TOTAL
ANNUAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
EQUITY PORTFOLIO .500% 0.25% .110%* .860%
- --------------------------------------------------------------------------------------------------------
MID CAP GROWTH
PORTFOLIO .500% 0.25% .116% .866%
- --------------------------------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO .750% 0.25% .154%* 1.154%
- --------------------------------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO .750% 0.25% .110%* 1.110%
- --------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO .500% 0.25% .097% .847%
- --------------------------------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO .375% 0.25% .142%* .767%**
- --------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO .375% 0.25% .108% .733%
- --------------------------------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO .375% 0.25% .121% .746%
- --------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO .450% 0.25% .136% .836%
- --------------------------------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO .650% 0.25% .174%* 1.074%**
</TABLE>
Total Annual Fund Operating Expenses reflected in the table above may be
higher than the expenses actually deducted from portfolio assets because of the
effect of expense offset arrangements.
* Other expenses are based on estimated amounts for the current year.
** The Adviser has voluntarily agreed to reduce its advisory fee and/or
reimburse the Portfolios so that total expenses will not exceed the rates
shown in the table below. Fee waivers and/or expense reimbursements are
voluntary and the Adviser reserves the right to terminate any waiver and/or
reimbursement at any time and without notice.
TOTAL ANNUAL FUND OPERATING EXPENSES
AFTER MAS WAIVER/REIMBURSEMENT & OFFSETS
- -------------------------------------------------------------
DOMESTIC FIXED INCOME PORTFOLIO .750%
- -------------------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO 1.030%
- -------------------------------------------------------------
The Securities and Exchange Commission (the "Commission") requires all funds to
disclose in the table to the right the fees and expenses that you may pay if you
buy and hold shares of the Portfolios. The Portfolios do not charge any sales
loads or similar fees when you purchase or redeem shares.
22
<PAGE>
FEES AND EXPENSES OF THE PORTFOLIOS (CONTINUED)
EXAMPLE
The example assumes that you invest $10,000 in each Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example assumes that your investment has a 5% return each year and
that each Portfolio's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be
equal to the amounts reflected in the table to the right.
This example is intended to help you compare the cost of investing in each
Portfolio with the cost of investing in other mutual funds.
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
EQUITY PORTFOLIO $ 88 $274 $477 $1,061
- ------------------------------------------------------------------------------------------------------
MID CAP GROWTH PORTFOLIO $ 88 $276 $480 $1,068
- ------------------------------------------------------------------------------------------------------
MID CAP VALUE PORTFOLIO $118 $367 $635 $1,402
- ------------------------------------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO $113 $353 $612 $1,352
- ------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO $ 86 $270 $470 $1,045
- ------------------------------------------------------------------------------------------------------
DOMESTIC FIXED INCOME PORTFOLIO $ 78 $245 $426 $ 951
- ------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO $ 75 $234 $408 $ 910
- ------------------------------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO $ 76 $238 $415 $ 926
- ------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO $ 85 $267 $464 $1,032
- ------------------------------------------------------------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO $110 $342 $592 $1,310
</TABLE>
23
<PAGE>
PURCHASING SHARES
Adviser Class Shares are available to clients of the Adviser with combined
investments of $500,000 and corporations or other institutions, such as trusts,
foundations or broker-dealers, who have a contractual arrangement with the Fund
or its Distributor and who purchase shares for the accounts of others
(Shareholder Organizations).
Adviser Class Shares of each portfolio may be purchased at the net asset value
per share (NAV) next determined after we receive your purchase order.
INITIAL PURCHASE
BY MAIL
You may open an account, subject to acceptance by MAS Funds, by completing and
signing an Account Registration Form provided by Client Services ("Client
Services") and mailing it to MAS Funds c/o Miller Anderson & Sherrerd, LLP, One
Tower Bridge, West Conshohocken, PA 19428-0868 together with a check payable to
MAS Funds.
Please note that payments to investors who redeem shares purchased by check will
not be made until payment of the purchase has been collected, which may take up
to eight business days after purchase. You can avoid this delay by purchasing
shares by wire.
INITIAL PURCHASE
BY WIRE
You may purchase Adviser Class Shares of each portfolio by wiring Federal Funds
to Chase. You should forward a completed Account Registration Form to Client
Services in advance of the wire. For all portfolios, notification must be given
to Client Services at 1-800-354-8185 prior to the determination of NAV. See the
section below entitled "Valuation of Shares." (Prior notification must also be
received from investors with existing accounts.) Instruct your bank to send a
Federal Funds wire in a specified amount to Chase using the following wire
instructions:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, NY 10081
ABA #021000021
DDA #910-2-734143
Attn: MAS Funds Subscription Account
Ref: (Portfolio Name, Account Number, Account Name)
ADDITIONAL
INVESTMENTS
You may make additional investments in Adviser Class Shares (minimum additional
investment $1,000) at the NAV by mailing a check (payable to MAS Funds) to
Client Services at the address noted under Initial Purchase by Mail or by wiring
Federal Funds to Chase as outlined above.
OTHER PURCHASE
INFORMATION
We may suspend the offering of shares, or any class of shares, of any Portfolio
or reject any purchase orders when we think it is in the best interest of the
Fund. We may waive the minimum initial and additional investment amounts in
certain cases.
Purchases of a Portfolio's shares will be made in full and fractional shares of
the Portfolio calculated to three decimal places. Certificates for shares will
not be issued except if you request them in writing. Certificates for fractional
shares, however, will not be issued.
24
<PAGE>
REDEEMING SHARES
You may redeem shares of each Portfolio by mail, or, if authorized, by telephone
at no charge. The value of shares redeemed may be more or less than the purchase
price, depending on the NAV at the time of redemption.
BY MAIL
Each Portfolio will redeem shares at the NAV next determined after the request
is received in good order. Requests should be addressed to MAS Funds, c/o Miller
Anderson & Sherrerd, LLP, One Tower Bridge, West Conshohocken, PA 19428-0868.
To be in good order, redemption requests must include the following
documentation:
(a) The share certificates, if issued;
(b) A letter of instruction, if required, or a stock assignment specifying the
number of shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which the shares are registered;
(c) Any required signature guarantees. Signature guarantees are required for (1)
redemptions where the proceeds are to be sent to someone other than the
registered shareholder(s) and the registered address, and (2) share transfer
requests. Please contact Client Services for further details; and
(d) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianship, corporations, pension and profit sharing
plans and other organizations.
BY TELEPHONE
If you have authorized the Telephone Redemption Option on the Account
Registration Form, you may request a redemption of shares by calling Client
Services at 1-800-354-8185 and requesting that the redemption proceeds be mailed
or wired to you. You cannot redeem shares by telephone if you hold share
certificates for those shares.
BY FACSIMILE
Written requests in good order for redemptions, exchanges and transfers may be
forwarded to the Fund via facsimile at (610) 940-5284. If you make a request via
facsimile, you must call Client Services to ensure that the Fund properly
received your instructions. The original request must be promptly mailed to MAS
Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge, West Conshohocken,
PA 19428-0868.
We will ordinarily pay redemption proceeds within three business days after
receipt of your request. We may suspend the right of redemption or postpone the
date of redemption at times when the New York Stock Exchange ("NYSE"), the
Custodian, or the Fund is closed or under any emergency circumstances.
In certain cases, we may determine that it is in the best interest of other
shareholders not to pay redemption proceeds in cash. We may pay you partly or
entirely by distributing to you readily marketable securities held by the
portfolio from which you are redeeming. You may incur brokerage charges when you
sell those securities.
25
<PAGE>
VALUATION OF SHARES
We determine the NAV of the following portfolios at the following times on
each day the portfolio(s) is open for business:
[ ] Equity Portfolios as of the close of the NYSE (normally 4:00 p.m. Eastern
Time).
[ ] Fixed Income Portfolios as of one hour after the close of the bond
markets (normally 4:00 p.m. Eastern Time).
[ ] Balanced and Multi-Asset-Class Portfolios as of the later of the close of
the NYSE or one hour after the close of the bond markets.
Each Portfolio values its securities at market value. When no quotations are
readily available for securities or when the value of securities has been
materially affected by events occurring after the close of the market, we
will determine the value for those securities in good faith at fair value
using methods approved by the Board of Trustees.
The NAV of Adviser Class Shares may differ from that of other classes because
of class-specific expenses that each class may pay, the distribution fees
charged to Adviser Class Shares and the shareholder servicing fees charged to
Investment Class Shares.
The Fund is closed for business on weekends and the following holidays: New
Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. The value of certain portfolio securities may change on a day when you
can't purchase or redeem shares because some portfolios invest in foreign
securities that trade on days when the Fund is closed.
GENERAL SHAREHOLDER INFORMATION
Exchange
Privilege
You may exchange each Portfolio's Adviser Class Shares for Adviser Class
Shares of the Fund's other Portfolios based on their respective NAVs. The
exchange privilege is only available with respect to Portfolios offering
Adviser Class Shares that are qualified for sale in your state of residence.
We charge no fee for exchanges. You should send exchange requests to MAS
Funds, c/o Miller Anderson & Sherrerd, LLP, One Tower Bridge, West
Conshohocken, PA 19428-0868, or by facsimile with a follow-up phone call.
Exchange requests can also be made by telephone, provided the telephone
redemption option has been authorized. We reserve the right to change the
terms or conditions of the exchange privilege upon sixty days' notice.
Frequent trading by shareholders can disrupt management of a Portfolio and
raise its expenses. Therefore, we may not accept any request for an exchange
when we think the exchange privilege is being used as a tool for market
timing, and we may bar a shareholder who trades excessively from making
further purchases for an indefinite period.
26
<PAGE>
GENERAL SHAREHOLDER INFORMATION (CONTINUED)
DIVIDENDS
& DISTRIBUTIONS
The Portfolios normally distribute substantially all of their net investment
income to shareholders as follows:
PORTFOLIO QUARTERLY ANNUALLY
- ------------------------------------------------------------------------------
EQUITY X
- ------------------------------------------------------------------------------
MID CAP GROWTH X
- ------------------------------------------------------------------------------
MID CAP VALUE X
- ------------------------------------------------------------------------------
SMALL CAP VALUE X
- ------------------------------------------------------------------------------
VALUE X
- ------------------------------------------------------------------------------
DOMESTIC FIXED INCOME X
- ------------------------------------------------------------------------------
FIXED INCOME X
- ------------------------------------------------------------------------------
HIGH YIELD X
- ------------------------------------------------------------------------------
BALANCED X
- ------------------------------------------------------------------------------
MULTI-ASSET-CLASS X
If any net gains are realized from the sale of underlying securities, the
portfolios normally distribute the gains with the last distributions for the
calendar year. All dividends and distributions are automatically paid in
additional shares of the portfolio unless you elect otherwise. If you want to
change how your dividends are paid you must notify MAS Funds in writing.
TAXES
Income dividends you receive will be taxable as ordinary income, whether you
receive them in cash or in additional shares. Corporate shareholders may be
entitled to a dividends-received deduction for the portion of dividends they
receive which are attributable to dividends received by such portfolios from
U.S. corporations. Capital gains distributions may be taxable at different rates
depending on the length of time the Fund holds its assets.
Investment income received by the Portfolios from sources within foreign
countries may be subject to foreign income taxes. The Portfolios may be able to
pass through to you for foreign tax credit purposes the amount of foreign income
taxes that they paid.
Distributions paid in January but declared by a portfolio in October, November
or December of the previous year are taxable to you in the previous year.
Exchanges and redemptions of shares in a Portfolio are taxable events.
27
<PAGE>
FUND MANAGEMENT
ADVISER
The Investment Adviser to the Fund, Miller Anderson & Sherrerd, LLP ("MAS" or
the "Adviser"), is a Pennsylvania limited liability partnership founded in
1969. The Adviser is wholly owned by indirect subsidiaries of Morgan Stanley
Dean Witter & Co. (MSDW), and is a division of Morgan Stanley Dean Witter
Investment Management. The Adviser is located at One Tower Bridge, West
Conshohocken, PA 19428-0868. The Adviser provides investment advisory
services to employee benefit plans, endowment funds, foundations and other
institutional investors. As of December 31, 1998, Morgan Stanley Dean Witter
Investment Management had in excess of $163 billion in assets under
management.
The Adviser makes investment decisions for the Fund's portfolios and places
each portfolio's purchase and sales orders. Each portfolio, in turn, pays the
Adviser an annual advisory fee calculated by applying a quarterly rate. The
following table shows the Adviser's annual contractual and actual rates of
compensation for the Fund's 1998 fiscal year.
CONTRACTUAL FY 1998
COMPENSATION ACTUAL
RATE COMPENSATION RATE
-----------------------------------------------------------------------------
EQUITY PORTFOLIO .500 .500
-----------------------------------------------------------------------------
MID CAP GROWTH PORTFOLIO .500 .500
-----------------------------------------------------------------------------
MID CAP VALUE PORTFOLIO .750 .750
-----------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO .750 .750
-----------------------------------------------------------------------------
VALUE PORTFOLIO .500 .500
-----------------------------------------------------------------------------
DOMESTIC FIXED INCOME PORTFOLIO* .375 .361
-----------------------------------------------------------------------------
FIXED INCOME PORTFOLIO .375 .375
-----------------------------------------------------------------------------
HIGH YIELD PORTFOLIO .375 .375
-----------------------------------------------------------------------------
BALANCED PORTFOLIO .450 .450
-----------------------------------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO* .650 .608
* The Adviser is voluntarily waiving a portion of its fee and/or reimbursing
certain expenses for the Domestic Fixed Income Portfolio and the
Multi-Asset-Class Portfolio to keep Total Operating Expenses from exceeding
.750% and 1.030%, respectively.
Portfolio
Managers
A description of the business experience during the past five years
for each of the investment professionals who are primarily responsible for
the day-to-day management of the Fund's portfolios is as follows:
ROBERT E. ANGEVINE, Principal, MSDW, joined Morgan Stanley Dean Witter
Investment Management Inc. in 1988 as a Fixed Income Portfolio Manager. He
joined the management team for the High Yield Portfolio in 1996.
ARDEN C. ARMSTRONG, Managing Director, MSDW, joined MAS in 1986. She joined
the management team for the Mid Cap Growth Portfolio in 1990, the Growth
Portfolio in 1993 and the Equity Portfolio in 1994.
28
<PAGE>
FUND MANAGEMENT (CONTINUED)
RICHARD M. BEHLER, Principal, MSDW, joined MAS in 1995. He served as a
Portfolio Manager from 1992 through 1995 for Moore Capital Management. He
joined the management team for the Value Portfolio in 1996.
THOMAS L. BENNETT, Managing Director, MSDW, joined MAS in 1984. He joined the
management team for the Fixed Income Portfolio in 1984, the Domestic Fixed
Income Portfolio in 1987, the High Yield Portfolio in 1985, the Fixed Income
II Portfolio in 1990, the Special Purpose Fixed Income and Balanced
Portfolios in 1992, the Multi-Asset-Class Portfolio in 1994, the Balanced
Plus Portfolio in 1996 and the Multi-Market Fixed Income Portfolio in 1997.
BARTON M. BIGGS, Managing Director of MSDW since 1975, Chairman of Morgan
Stanley Dean Witter Investment Management Inc. since 1980 and a director of
Morgan Stanley Group, Inc. He is also a director and chairman of various
registered investment companies to which Morgan Stanley Dean Witter
Investment Management, Inc. and certain of its affiliates provide investment
advisory services. He joined the management teams for the Balanced, Balanced
Plus and Multi-Asset Class Portfolios in 1999.
DAVID P. CHU, Vice President, MSDW, joined MAS in 1998. He served as Senior
Equity Analyst from 1992 to 1997 and as Co-Portfolio Manager in 1997 for
NationsBank and its subsidiary, TradeStreet Investment Associates. He joined
the management team for the Mid Cap Growth Portfolio in 1998.
BRADLEY S. DANIELS, Principal, MSDW, joined MAS in 1985. He joined the
management team for the Small Cap Value Portfolio in 1986 and the Mid Cap
Value Portfolio in 1994.
KENNETH B. DUNN, Managing Director, MSDW, joined MAS in 1987. He joined the
management team for the Fixed Income and the Domestic Fixed Income Portfolios
in 1987, the Fixed Income II Portfolio in 1990, the Mortgage-Backed
Securities and Special Purpose Fixed Income Portfolios in 1992 and the
Multi-Market Fixed Income Portfolio in 1997.
STEPHEN F. ESSER, Managing Director, MSDW, joined MAS in 1988. He joined the
management team for the High Yield Portfolio in 1989 and the Multi-Market
Fixed Income Portfolio in 1997.
WILLIAM B. GERLACH, Principal, MSDW, joined MAS in 1991. He served as a
Research Associate from 1991 to 1996 and has served as an Equity Portfolio
Manager since 1996. He joined the management team for the Small Cap Value and
Mid Cap Value Portfolios in 1996.
J. DAVID GERMANY, Managing Director, MSDW, joined MAS in 1991. He joined the
management team for the Global Fixed Income and International Fixed Income
Portfolios in 1993, the Multi-Asset-Class Portfolio in 1994, the Balanced
Plus Portfolio in 1996 and the Multi-Market Fixed Income Portfolio in 1997.
29
<PAGE>
FUND MANAGEMENT (CONTINUED)
JAMES J. JOLINGER, Principal, MSDW, joined MAS in 1994. He served as an
Equity Analyst from 1994 to 1997, and has served as an Equity Portfolio
Manager and Director of Research since 1997. He joined the management team
for the Equity Portfolio in 1997.
NICHOLAS J. KOVICH, Managing Director, MSDW, joined MAS in 1988. He joined
the management team for the Equity Portfolio in 1994 and the Value Portfolio
in 1997.
BRIAN KRAMP, Vice President, Morgan Stanley, joined MAS in 1997. He served as
Analyst/Portfolio Manager for Meridian Asset Management and its successor,
CoreStates Investment Advisors from 1985 to 1997. He joined the management
team for the Equity Portfolio in 1998.
CHRIS LEAVY, Vice President, MSDW, joined MAS in 1997. He served as a
Portfolio Manager for Capitoline Investment Services from 1995 to 1997; a
Portfolio Manager for Premier Trust Company from 1994 to 1995; and as a
Research Analyst for Leavy Investment Management from 1993 to 1994. He joined
the management team for the Mid Cap Value and Small Cap Value Portfolio in
1998.
ROBERT J. MARCIN, Managing Director, MSDW, joined MAS in 1988. He joined the
management team for the Value Portfolio in 1990 and the Equity Portfolio in
1994.
GARY G. SCHLARBAUM, Managing Director, MSDW; Director, MAS Fund Distribution,
Inc.; joined MAS in 1987. He joined the management team for the Equity and
Small Cap Value Portfolios in 1987, the Growth Portfolio in 1993, the
Balanced Portfolio in 1992 and the Multi-Asset-Class and Mid Cap Value
Portfolios in 1994.
ANN D. THIVIERGE, Managing Director, MSDW, joined Morgan Stanley Dean Witter
Investment Management Inc. in 1986, and has been a member of its asset
allocation committee since 1991. She joined the management team for the
Multi-Asset-Class Portfolio in 1999.
HORACIO A. VALEIRAS, Managing Director, MSDW, joined MAS in 1992. He joined
the management team for the International Equity Portfolio in 1992, the
Emerging Markets Value Portfolio in 1993, the Multi-Asset-Class Portfolio in
1994 and the Balanced Portfolio in 1996.
RICHARD B. WORLEY, Managing Director, MSDW, joined MAS in 1978. He joined the
management team for the Fixed Income Portfolio in 1984, the Domestic Fixed
Income Portfolio in 1987, the Fixed Income II Portfolio in 1990, the Balanced
and Special Purpose Fixed Income Portfolios in 1992, the Global Fixed Income
and International Fixed Income Portfolios in 1993 the Multi-Asset-Class
Portfolio in 1994, the Balanced Plus Portfolio in 1996 and the Multi-Market
Fixed Income Portfolio in 1997. Mr. Worley has also served as the President
of Morgan Stanley Dean Witter Investment Management since 1998.
30
<PAGE>
FUND MANAGEMENT (CONTINUED)
DISTRIBUTOR
Shares of the Fund are distributed exclusively through MAS Fund Distribution,
Inc., a wholly-owned subsidiary of the Adviser.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution for each Portfolio's Adviser
Class Shares pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). Under
the Plan, each Portfolio pays the Distributor a monthly distribution fee at
an annual rate of 0.25% of the Portfolio's average daily net assets
attributable to Adviser Class Shares. The Distributor may keep any or all of
this fee as compensation for its services in connection with distributing
Adviser Class Shares or providing shareholder or account maintenance
services. The Distributor also may use this fee to pay financial
intermediaries, plan fiduciaries, and investment professionals, including the
Adviser, for providing distribution support services, and/or account
maintenance services to shareholders (including, when applicable, any
underlying beneficial owners) of Adviser Class Shares.
YEAR 2000 DISCLOSURE STATEMENT
The management and distribution services that the Adviser and Distributor
provide to the Fund depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the
year 2000, but revert to 1900 or some other date, due to the manner in which
dates were encoded and calculated. That failure could have a negative impact
on the handling of securities trades, pricing and account services. The
Adviser and Distributor have been actively working on necessary changes to
their own computer systems to deal with the year 2000 problem and expect that
their systems will be adapted before that date. There can be no assurance,
however, that they will be successful. In addition, other unaffiliated
service providers may be faced with similar problems. The Adviser and
Distributor are monitoring their remedial efforts, however, there can be no
assurance that they and the services they provide will not be adversely
affected.
In addition, it is possible that the markets for securities in which the
portfolios invest may be detrimentally affected by computer failures
throughout the financial services industry beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing
errors may result in production problems for individual companies and overall
economic uncertainties. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported
inconsistently in U.S. and foreign financial statements. Accordingly, the
portfolios' investments may be adversely affected.
31
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you understand
the financial performance of each Portfolio for the past five years or, if
less than five years, the life of the Portfolio or Class. The total returns
in the tables represent the rate that an investor would have earned (or lost)
on an investment in each Portfolio (assuming reinvestment of all dividends
and distributions). This information has been extracted from the Fund's
financial statements which were audited by PricewaterhouseCoopers LLP, whose
report, along with the Fund's financial statements, are incorporated by
reference into the Fund's Statement of Additional Information and are
included in the Fund's September 30, 1998 Annual Report to Shareholders.
The Adviser Class Shares of the Small Cap Value, Domestic Fixed Income and
Multi-Asset-Class Portfolios had not commenced operations as of September 30,
1998, therefore Institutional Class Share information is provided to
investors for informational purposes only and should be referred to as a
historical guide to a portfolio's operations and expenses. Past performance
does not indicate future results.
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER TOTAL
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 1/16/98)
1998 $20.50 $0.10 ($0.09) $0.01 ($0.09) -- -- ($0.09)
MID CAP GROWTH PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 01/31/97)
1998 $21.81 ($0.03) $0.20 $0.17 -- ($3.43) -- ($3.43)
1997 17.04 (0.02) 4.79 4.77 -- -- -- --
MID CAP VALUE PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 7/17/98)
1998 $21.82 $0.01 ($3.71) ($3.70) -- -- -- --
SMALL CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/01/86)
1998 $24.97 $0.16 ($4.33) ($4.17) ($0.14) ($3.29) -- ($3.43)
1997 19.64 0.15 8.39 8.54 (0.11) (3.10) -- (3.21)
1996 18.28 0.18 3.62 3.80 (0.20) (2.24) -- (2.44)
1995 17.67 0.19 2.49 2.68 (0.14) (1.93) -- (2.07)
1994 17.55 0.16 1.14 1.30 (0.24) (0.94) -- (1.18)
VALUE PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 07/17/96)
1998 $20.35 $0.29 ($3.38) ($3.09) ($0.32) ($1.81) -- ($2.13)
1997+++ 15.61 0.30 5.74 6.04 (0.27) (1.03) -- (1.30)
1996 14.11 0.01 1.49 1.50 -- -- -- --
DOMESTIC FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 9/30/87)
1998 $11.27 $0.73 $0.32 $1.05 ($0.79) ($0.13) -- ($0.92)
1997 10.89 0.74 0.33 1.07 (0.67) (0.02) -- (0.69)
1996 11.03 0.56 (0.09) 0.47 (0.57) -- (0.04)# (0.61)
1995 9.87 0.52 0.87 1.39 (0.23) -- -- (0.23)
1994 11.99 0.94 (1.23) (0.29) (0.95) (0.73) (0.15)# (1.83)
</TABLE>
<PAGE>
[RE-STUBBED TABLE]
<TABLE>
<CAPTION>
NET ASSET NET ASSSETS- RATIO OF RATIO OF
VALUE- END OF EXPENSES NET INCOME PORTFOLIO
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVE
PERIOD RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>
EQUITY PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 1/16/98)
1998 $20.42 (0.02%) $ 373 0.88%* 0.65%* 77%
MID CAP GROWTH PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 01/31/97)
1998 $18.55 1.79% $51,058 0.87% (0.25%) 172%
1997 21.81 27.99 1,200 0.88* (0.41)* 134
MID CAP VALUE PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 7/17/98)
1998 $18.12 (16.96%) $4,919 1.24%* 0.25%* 213%
SMALL CAP VALUE PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/01/86)
1998 $17.37 18.34% $716,729 0.86% 0.71% 163%
1997 24.97 49.81 897,396 0.86 0.70 107
1996 19.64 24.00 585,457 0.86 0.99 145
1995 18.28 18.39 430,368 0.87 1.20 119
1994 17.67 8.04 308,156 0.88 0.91 162
VALUE PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 07/17/96)
1998 $15.13 (16.66%) $325,272 0.85% 1.52% 56%
1997+++ 20.35 40.87 201,253 0.90 1.63 46
1996 15.61 10.63 15,493 0.86* 1.66* 53
DOMESTIC FIXED INCOME PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 9/30/87)
1998 $11.40 9.83% $76,042 0.51%++ 6.32% 145%
1997 11.27 10.20 96,954 0.51++ 6.48 217
1996 10.89 4.41 95,362 0.52++ 5.73 168
1995 11.03 14.33 36,147 0.51++ 6.80 313
1994 9.87 (2.87) 36,521 0.50++ 7.65 78
</TABLE>
32
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET GAINS DIVIDEND
NET ASSET OR LOSSES DISTRIBUTIONS CAPITAL GAIN
VALUE- NET ON SECURITIES TOTAL FROM (NET DISTRIBUTIONS
BEGINNING INVESTMENT (REALIZED AND INVESTMENT INVESTMENT (REALIZED NET OTHER
OF PERIOD INCOME UNREALIZED) ACTIVITIES INCOME) CAPITAL GAINS) DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 11/07/96)
1998+++ $12.22 $0.75 $0.14 $0.89 ($0.71) ($0.17) --
1997+++ 12.04 0.70 0.20 0.90 (0.59) (0.13) --
HIGH YIELD PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 01/31/97)
1998+++ $10.15 $0.83 ($0.93) ($0.10) ($0.80) ($0.26) --
1997+++ 9.39 0.56 0.59 1.15 (0.39) -- --
BALANCED PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 11/01/96)
1998+++ $15.30 $0.44 ($0.12) $0.32 ($0.47) ($1.72) --
1997 14.05 0.42 2.60 3.02 (0.38) (1.39) --
MULTI-ASSET-CLASS PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/29/94)
1998+++ $13.64 $0.38 ($0.45) ($0.07) ($0.34) ($1.49) --
1997+++ 12.28 0.38 2.57 2.95 (0.51) (1.08) --
1996 11.34 0.46 1.05 1.51 (0.42) (0.15) --
1995 9.97 0.44 1.33 1.77 (0.40) -- --
1994 10.00 0.07 (0.10) (0.03) -- -- --
</TABLE>
[RE-STUBBED TABLE]
<TABLE>
<CAPTION>
NET ASSET NET ASSETS- RATIO OF RATIO OF
VALUE- END OF EXPENSES NET INCOME PORTFOLIO
TOTAL END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS PERIOD RETURN** (THOUSANDS) NET ASSETS+ NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 11/07/96)
1998+++ ($0.88) $12.23 7.63% $131,303 0.73% 6.22% 121%
1997+++ (0.72) 12.22 7.79 76,683 0.77*++ 6.50* 179
HIGH YIELD PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 01/31/97)
1998+++ ($1.06) $8.99 (1.37%) $10,236 0.75% 8.55% 75%
1997+++ (0.39) 10.15 12.63 4,327 0.78* 8.68* 96
BALANCED PORTFOLIO (COMMENCEMENT OF ADVISER CLASS OPERATIONS 11/01/96)
1998+++ ($2.19) $13.43 2.49% $24,654 0.84% 3.11% 100%
1997 (1.77) 15.30 23.82 27,366 0.85*++ 3.24* 145
MULTI-ASSET-CLASS PORTFOLIO (COMMENCEMENT OF INSTITUTIONAL CLASS OPERATIONS 7/29/94)
1998+++ ($1.83) $11.74 (0.46%) $165,039 0.78%++ 2.98% 107%
1997+++ (1.59) 13.64 26.50 173,155 0.74++ 3.07 141
1996 (0.57) 12.28 13.75 29,558 0.58++ 3.82 122
1995 (0.40) 11.34 18.28 96,839 0.58++ 4.56 112
1994 -- 9.97 (0.30) 51,877 0.58*++ 4.39* 20
</TABLE>
33
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
NOTES TO THE FINANCIAL HIGHLIGHTS
*Annualized
**Total return figures for partial years are not annualized.
#Represents distribution in excess of net realized gains.
+For the respective periods ended September 30, the Ratio of Expenses to
Average Net Assets for the following portfolios excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be as follows for the respective periods.
<TABLE>
<CAPTION>
PORTFOLIO 1995 1996 1997 1998
<S> <C> <C> <C> <C>
Equity -- -- -- 0.82
Mid Cap Value -- -- -- 1.17*
Mid Cap Growth -- -- 0.86* 0.84
Value -- 0.85* 0.89 0.84
Domestic Fixed Income 0.50 0.50 0.50 0.50
Fixed Income -- -- 0.76* 0.72
High Yield -- -- 0.76* 0.73
Balanced -- -- 0.84* 0.82
Multi-Asset-Class 0.58 0.58 0.74 0.78
Small Cap Value 0.87 0.86 0.86 0.86
</TABLE>
++ For the periods indicated, the Adviser voluntarily agreed to waive its
advisory fees and/or reimburse certain expenses to the extent necessary in
order to keep total operating expenses actually deducted from portfolio
assets for the respective portfolios from exceeding voluntary expense
limitations. For the respective periods ended September 30, the voluntarily
waived and reimbursed expenses totaled the below listed amounts.
VOLUNTARILY WAIVED AND/OR REIMBURSED EXPENSES FOR:
<TABLE>
<CAPTION>
PORTFOLIO 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Domestic Fixed Income 0.03% 0.09 0.01 0.01 0.01
Fixed Income -- -- -- 0.01* --
Balanced -- -- -- 0.03* --
Multi-Asset-Class 0.26* 0.14 0.08 0.08 0.04
</TABLE>
+++Per share amounts for the years ended September 30, 1997 and September 30,
1998, are based on average shares outstanding.
34
<PAGE>
(This page intentionally left blank)
<PAGE>
(This page intentionally left blank)
<PAGE>
- --MAS------------------------------------------------ADVISER CLASS PROSPECTUS---
---------
MAS FUNDS
JANUARY 31, 1999
(AS REVISED MARCH 10, 1999)
TRUSTEES OF THE FUND
--------------------
Thomas L. Bennett, Chairman Thomas L. Gerrity
Joseph P. Healey Joseph J. Kearns
C. Oscar Morong, Jr. Vincent R. McLean
OFFICERS OF THE FUND
--------------------
James D. Schmid, President John H. Grady, Jr., Secretary
Lorraine Truten, Vice President Richard J. Shoch, Compliance Officer
James A. Gallo, Treasurer
In addition to this prospectus, the Fund has a Statement of Additional
Information ("SAI"), dated January 31, 1999, which contains additional, more
detailed information about the Fund and the Portfolios. The SAI is incorporated
by reference into this prospectus and, therefore, legally forms a part of this
prospectus.
The Fund publishes annual and semi-annual reports ("Shareholder Reports") which
contain additional information about each Portfolio's investments. In the Fund's
annual report, you will find a discussion of the market conditions and the
investment strategies that significantly affected each Portfolio's performance
during the last fiscal year.
You may obtain the SAI and Shareholder Reports without charge by contacting the
Fund at the toll-free number below. If you purchased shares through a financial
intermediary, you may also obtain these documents, without charge, by contacting
your financial intermediary.
Information about the Fund, including the SAI and Shareholder Reports, may be
obtained from the Securities and Exchange Commission in any of the following
ways. (1) In person: you may review and copy documents in the Commission's
Public Reference Room in Washington D.C. (for information call 1-800-SEC-0330);
(2) On-line: you may retrieve information from the Commission's web site at
http://www.sec.gov; or (3) By mail: you may request documents, upon payment of a
duplicating fee, by writing to Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549-6009. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-03980.
MAS FUNDS
ONE TOWER BRIDGE, WEST CONSHOHOCKEN, PA 19428-0868.
FOR SHAREHOLDER INQUIRIES, CALL CLIENT SERVICES AT 1-800-354-8185.
PRICES AND INVESTMENT RESULTS ARE AVAILABLE AT 1-800-522-1525.
MORGAN STANLEY DEAN WITTER
- -----------------------------------------
I N V E S T M E N T M A N A G E M E N T
ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428
<PAGE>
- --------------------------------------------------------MAS---------------------
---------
MAS FUNDS
_______________________________
ADVISER CLASS PROSPECTUS
JANUARY 31, 1999
(As Revised March 10, 1999)
_______________________________
MORGAN STANLEY DEAN WITTER
----------------------------------------
I N V E S T M E N T M A N A G E M E N T
ONE TOWER BRIDGE o WEST CONSHOHOCKEN, PA 19428 o 800-354-8185
