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[LETTERHEAD OF MORGAN STANLEY DEAN WITTER APPEARS HERE]
[MAS FUNDS LOGO APPEARS HERE]
July 30, 1999
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Client Services: 1-800-354-8185 Prices and Investment Results: 1-800-522-1525
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MAS Funds (the "Fund") is a no-load mutual fund consisting of 27 different
investment portfolios, 3 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 Investment Class Shares of the following portfolios (each a "Portfolio"
and collectively the "Portfolios"):
CASH RESERVES
FIXED INCOME
INTERMEDIATE DURATION
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.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT SUMMARY
Investor Suitability, Investment Objectives, Principal Investment
Strategies, Risks and Performance....................................... 1
PORTFOLIOS
Cash Reserves............................................................ 2
Fixed Income............................................................. 3
Intermediate Duration.................................................... 4
IMPORTANT INVESTMENT INFORMATION
Description of Principal Investments..................................... 5
FEES AND EXPENSES OF THE PORTFOLIOS
Shareholder Fees and Annual Portfolio Operating Expenses................. 8
VALUATION OF SHARES........................................................ 9
GENERAL SHAREHOLDER INFORMATION
Purpose of this Prospectus, Taxes, Dividends and Distributions........... 9
FUND MANAGEMENT
Information About the Adviser, the Sub-Adviser, the Portfolio Managers,
and the Distributor..................................................... 10
SERVICE PLAN............................................................... 11
YEAR 2000 DISCLOSURE STATEMENT............................................. 11
FINANCIAL HIGHLIGHTS....................................................... 12
</TABLE>
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Investor Suitability
INVESTMENT SUMMARY
This section explains each Portfolio's:
[_]Investment Objective
[_]Principal Investment Strategy
[_]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.
[_] 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.
[_] 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.
[_] 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
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CASH RESERVES PORTFOLIO
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Objective The Cash Reserves Portfolio seeks to realize maximum current
income, consistent with the preservation of capital and
liquidity.
Approach The Portfolio tries to maintain a stable net asset value of
$1.00 per share by investing exclusively in liquid, high
quality money market instruments. Money market
instruments consist of certain types of fixed income
securities including commercial paper, certificates of
deposit, U.S. Treasury bills, floating rate notes and
repurchase agreements, among others. The Portfolio's average
weighted maturity will not exceed 90 days, and no individual
security will have an expected maturity in excess of 397
days.
Process The Portfolio's Sub-Adviser, Morgan Stanley Dean Witter
Advisors Inc., determines the appropriate average maturity
for the Portfolio based on the shape of the money market
yield curve and its view of the direction of short term
interest rates over the next one to six months. The Sub-
Adviser invests in a variety of securities in order to
diversify credit risk, as well as interest rate risk.
Securities are selected on the basis of their value,
adjusted for risk. The Sub-Adviser may sell securities when
it believes that expected risk-adjusted return is low
compared to other investment opportunities, when a security
is downgraded or for liquidity needs.
Principal Risks The market prices of fixed income securities generally rise
and fall in response to changes in interest rates and the
credit quality of individual issuers. The Portfolio invests
in the money market obligations of private financial and
non-financial corporations, as well as obligations of the
U.S. Government and its agencies and instrumentalities. If
an issuer's credit rating is downgraded, the market value of
its money market obligations may fall. Repurchase agreements
are subject to additional risks associated with the
possibility of default by the seller at a time when the
collateral has declined in value, or insolvency of the
seller, which may affect the Portfolio's right to control
the collateral. Please read the section entitled "Important
Investment Information" for more information about these
risks. An investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Portfolio.
Dollar weighted average
maturity less than 90 days
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100% of non-U.S. Government
securities rated A-1/P-1 or
better by Moody's or
Standard & Poor's
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Individual maturities 397
days or less
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Benchmark: Salomon 1-Month
Treasury Bill
Index;
Lipper Money
Market Average
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Ticker Symbol: Not
Available
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CUSIP No.: 552-913-543
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PORTFOLIO MANGERS
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Dale R. Albright and
Jonathan R. Page
[BAR GRAPH APPEARS HERE]
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CASH RESERVES PORTFOLIO
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Commenced operations on August 29, 1990
1991 5.81%
1992 3.46%
1993 2.80%
1994 3.93%
1995 5.75%
1996 5.24%
1997 5.39%
1998 5.36%
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HIGH (QUARTER) LOW (QUARTER)
Quarter Ended 3/31/91 Quarter Ended 3/31/93
1.64% 0.66%
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AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
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<TABLE>
<CAPTION>
CASH SALOMON 1-MONTH LIPPER MONEY
RESERVES TREASURY BILL MARKET
PORTFOLIO INDEX AVERAGE
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<S> <C> <C> <C>
One Year 5.36 4.56 4.83
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Five Years 5.13 4.70 4.68
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Since Inception
8/29/90 4.85 4.43 4.49
</TABLE>
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 and 5 year periods and since inception. The
table also shows the corresponding returns of the Portfolio's benchmark index.
The Lipper Money Market Average is an index that shows the performance of other
money market funds. The Investment 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. You may obtain the Portfolio's SEC 7-day current yield by calling 1-
800-522-1525.
2
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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 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'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.
Generally at least 65% invested in fixed
income securities
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Average weighted maturity generally greater
than 5 years
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80% investment grade securities
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Up to 20% high yield securities
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May invest over 50% in mortgage securities
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Benchmark: Salomon Broad
Investment
Grade Index
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Ticker Symbol: MAFIX
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CUSIP No.: 552-913-568
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PORTFOLIO MANAGERS
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Thomas L. Bennett, Kenneth B. Dunn and
Richard B. Worley
[BAR CHART APPEARS HERE]
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FIXED INCOME PORTFOLIO
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Commenced operations on October 15, 1996
1997 9.52%
1998 6.72%
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HIGH (QUARTER) LOW (QUARTER)
Quarter Ended 6/30/97 Quarter Ended 3/31/97
3.98% -0.09%
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AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
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FIXED INCOME SALOMON BROAD
PORTFOLIO INVESTMENT GRADE INDEX
One Year 6.72 8.72
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Since Inception
10/15/96 8.60 9.28
The bar chart and table above show the Portfolio's Investment 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
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INTERMEDIATE DURATION PORTFOLIO
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Objective The Intermediate Duration Portfolio seeks above average
total return over a market cycle of three to five years.
Approach The Portfolio invests primarily in U.S. Government
securities and investment grade corporate bonds, mortgage
and other fixed income securities. The Portfolio may invest
to a limited extent in foreign fixed income securities. The
Portfolio maintains an average duration of between two and
five years. The Adviser will use futures, swaps and other
derivatives in managing the Portfolio.
Process The Adviser actively manages the Portfolio's maturity and
duration in anticipation of long-term trends in interest
rates and inflation. The Adviser analyzes interest rates,
the yield curve, the relative appeal of U.S. versus foreign
fixed income securities, credit quality and the likelihood
of prepayments. The Adviser perceives high real interest
rates and a steep yield curve as indicators of value. The
portfolio management team selects individual securities
based on their relative values. 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 riseand vice versa.
Prices of fixed income securities also 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 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. 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.
Generally at least 65% invested in fixed
income securities
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100% investment grade securities
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Average duration 2-5 years
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May invest over 50% in mortgage securities
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Benchmark: Lehman Brothers
Intermediate
Government/
Corporate Index
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Ticker Symbol: Not Available
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CUSIP No.: 552-913-220
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PORTFOLIO MANAGERS
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Angelo G. Manioudakis and Scott F. Richard
[BAR CHART APPEARS HERE]
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INTERMEDIATE DURATION PORTFOLIO
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Commenced operations on October 3, 1994
1995 15.38%
1996 5.94%
1997 8.07%
1998 7.03%
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HIGH (QUARTER) LOW (QUARTER)
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Quarter Ended 3/31/95 Quarter Ended 3/31/96
4.80% 0.20%
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AVERAGE ANNUAL TOTAL RETURN (as of 12/31/98)
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LEHMAN BROTHERS
INTERMEDIATE INTERMEDIATE
DURATION GOVERNMENT/CORPORATE
PORTFOLIO INDEX
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One Year 7.03 8.44
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Since Inception
10/3/94 8.38 8.29
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 year period and since inception. The table
also shows the corresponding returns of the Portfolio's benchmark index. The
Investment Class Shares would have had similar 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
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IMPORTANT INVESTMENT INFORMATION
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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 investors 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.
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FIXED INCOME SECURITIES
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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.
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 rates or 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 Securities 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
Securities Fixed income securities that are not investment grade are
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
5
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IMPORTANT INVESTMENT INFORMATION (Continued)
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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.
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.
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FOREIGN SECURITIES
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While many of the characteristics and risks of foreign 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
risks. In addition, certain market conditions may make it
impossible or uneconomical to hedge against currency risk.
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DERIVATIVES ANDOTHER INVESTMENTS
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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 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
6
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IMPORTANT INVESTMENT INFORMATION (Continued)
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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
Derivatives The primary risks of derivatives are: (i) changes in the
market 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:
Each of the Fixed Income and Intermediate Duration
Portfolios may enter into futures contracts and options on
futures contracts for bona fide hedging purposes to an
unlimited extent. These Portfolios also can enter into
futures contracts and options thereon for other purposes,
provided that no more than 5% of that Portfolio's total
assets at the time of the transaction are required as margin
and option premiums to secure its obligations under such
contracts.
Each of the Fixed Income and Intermediate Duration
Portfolios 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
Derivatives CMOs and SMBS are derivatives based on mortgage securities.
CMOs 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.
Additional
Information 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.
7
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Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
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.
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.
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
OTHER EXPENSES SHAREHOLDER ANNUAL FUND
MANAGEMENT DISTRIBUTION (EX-SHAREHOLDER SERVICING OPERATING
FEES (12b-1) FEES SERVICING FEES) FEES EXPENSES
<S> <C> <C> <C> <C> <C>
Cash Reserves
Portfolio .250% None .122%* 0.15% .522%**
- --------------------------------------------------------------------------------
Fixed Income
Portfolio .375% None .109% 0.15% .634%
- --------------------------------------------------------------------------------
Intermediate
Duration
Portfolio .375% None .117%* 0.15% .642%
</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.
<TABLE>
<CAPTION>
TOTAL ANNUAL FUND OPERATING EXPENSES
AFTER MAS WAIVER/REIMBURSEMENT & OFFSETS
- -----------------------------------------------------------
<S> <C>
Cash Reserves
Portfolio .470%
- -----------------------------------------------------------
</TABLE>
This example is intended to help you compare the cost of investing in each
Portfolio with the cost of investing in other mutual funds.
<TABLE>
<CAPTION>
---------------------------------------
EXAMPLE
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Reserves Portfolio $48 $151 $263 $591
- --------------------------------------------------------------------
Fixed Income Portfolio $65 $203 $353 $791
- --------------------------------------------------------------------
Intermediate Duration
Portfolio $66 $205 $358 $801
</TABLE>
8
<PAGE>
------------------------------------------------------------
VALUATION OF SHARES
------------------------------------------------------------
We determine the NAV of the following portfolios at the
following times on each day the portfolios are open for
business:
[_] Fixed Income and Intermediate Duration Portfolios as
of one hour after the close of the bond markets
(normally 4:00 p.m. Eastern Time).
[_] Cash Reserves Portfolio as of 12:00 noon (Eastern
Time).
The Fixed Income and Intermediate Duration Portfolios value
their securities at market value. The Cash Reserves
Portfolio values its securities using amortized cost
valuation. 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 Investment 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. In addition, the Cash Reserves Portfolio is closed on
Columbus Day and Veterans 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
------------------------------------------------------------
Purpose of this This prospectus is intended solely to provide information to
Prospectus persons investing in the Morgan Stanley Dean Witter Stable
Value Fund ("Stable Value Fund"). Information concerning
purchases and redemptions of shares may be found in the
prospectus for the Stable Value Fund.
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.
Dividends and The Portfolios normally distribute substantially all of
Distributions their net investment income to shareholders as follows:
------------------------------------------------------------
PORTFOLIO MONTHLY QUARTERLY
------------------------------------------------------------
Cash Reserves X
------------------------------------------------------------
Fixed Income X
------------------------------------------------------------
Intermediate Duration 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.
9
<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 March 31, 1999, Morgan
Stanley Dean Witter Investment Management had in excess of
$165 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.
Sub-Adviser Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors")
serves as Sub-Adviser to the Cash Reserves Portfolio. As
Sub-Adviser, MSDW Advisors makes day-to-day investment
decisions for the Cash Reserves Portfolio and places the
Portfolio's purchase and sales orders. The Adviser pays MSDW
Advisors 40% of the fee the Adviser receives from the Cash
Reserves Portfolio as compensation for its sub-advisory
services. MSDW Advisors, located at Two World Trade Center,
New York, New York 10048, is a wholly-owned subsidiary of
MSDW. MSDW Advisors develops, markets and manages a broad
spectrum of proprietary mutual funds that are sold by MSDW
financial advisors and offers professional money management
services on a customized basis to individuals, institutional
investors and retirement plan sponsors. MSDW Advisors and
its wholly-owned subsidiary, Morgan Stanley Dean Witter
Services Company Inc., serve in various investment advisory
and administrative capacities to 100 investment companies
and other portfolios with net assets under management of
approximately $129 billion as of March 31, 1999.
--------------------------------
CONTRACTUAL FY 1998
COMPENSATION ACTUAL
RATE COMPENSATION RATE
------------------------------------------------------------
Cash Reserves Portfolio* .250 .197
------------------------------------------------------------
Fixed Income Portfolio .375 .375
------------------------------------------------------------
Intermediate Duration Portfolio .375 .375
* The Adviser is voluntarily waiving a portion of its fee
and/or reimbursing certain expenses for the Cash Reserves
Portfolio to keep Total Operating Expenses from exceeding
.470%.
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:
Dale R. Albright, Vice President, MSDW Advisors, has served
as Portfolio Manager/Analyst at MSDW Advisors since 1990. He
serves as a Portfolio Manager for MSDW Advisors' taxable
money market funds. He joined the management team for the
Cash Reserves Portfolio in 1999.
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 and the Multi-Market Fixed Income Portfolio in 1997.
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 Special Purpose Fixed
Income Portfolio in 1992 and the Multi-Market Fixed Income
Portfolio in 1997.
Angelo G. Manioudakis, Principal, MSDW, joined MAS in 1993.
He attended Harvard Graduate School of Business
Administration from 1991 to 1993. He served as a Fixed
Income
10
<PAGE>
------------------------------------------------------------
FUND MANAGEMENT, (Continued)
------------------------------------------------------------
Analyst from 1993 to 1995. From 1995 to 1998, he served as a
Fixed Income Portfolio manager. He joined the management
team for the Intermediate Duration Portfolio in 1998.
Jonathan R. Page, Senior Vice President, MSDW Advisors, has
served as Portfolio Manager at MSDW Advisors since 1975. He
serves as a Senior Portfolio Manager for MSDW Advisors'
taxable money market funds. He joined the management team
for the Cash Reserves Portfolio in 1999.
Scott F. Richard, Managing Director, MSDW, joined MAS in
1992. He joined the management team for the Limited
Duration, Intermediate Duration and Advisory Mortgage
Portfolios in 1995 and the Targeted Duration Portfolio in
1998.
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 and the
Multi-Asset-Class Portfolio in 1994. Mr. Worley has served
as President of Morgan Stanley Dean Witter Investment
Management since 1998.
Distributor Shares of the Fund are distributed exclusively through MAS
Fund Distribution, Inc., a wholly-owned subsidiary of the
Adviser.
------------------------------------------------------------
SERVICE PLAN
------------------------------------------------------------
The Fund has adopted a Service Plan (the "Service Plan") for
each Portfolio's Investment Class Shares. Under the Service
Plan, each Portfolio pays the Distributor a monthly
shareholder servicing fee at an annual rate of 0.15% of the
Portfolio's average daily net assets attributable to
Investment Class Shares. The Distributor may compensate
other parties for providing shareholder support services to
investors who purchase Investment Class Shares. Shareholder
servicing fees are separate fees of the Investment Class
Shares of each Portfolio and will reduce the net investment
income and total return of the Investment Class Shares of
these Portfolios.
------------------------------------------------------------
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.
11
<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 Investment Class Shares of the Cash Reserves and Intermediate
Duration Portfolios had not commenced operations as of September
30, 1998, therefore Institutional Class Share financial
information is provided to investors for informational purposes
only and should be referred to as an historical guide to the
Portfolio's operations and expenses. Past performance does not
indicate future results.
<TABLE>
<CAPTION>
Net Gains
or Losses
on Dividend Capital Gain
Net Asset Securities Distributions Distributions Net Asset
Value- Net (realized Total from (net (realized net Value-
Beginning Investment and Investment investment capital Other Total End of Total
of Period Income unrealized) Activities income) gains) Distributions Distributions Period Return**
Cash Reserves Portfolio (Commencement of Institutional Class Operations 8/29/90)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $1.000 $.053 -- $.053 ($.053) -- -- ($.053) $1.000 5.47%
1997 1.000 .052 -- .052 (.052) -- -- (.052) 1.000 5.32
1996 1.000 .052 -- .052 (.052) -- -- (.052) 1.000 5.35
1995 1.000 .055 -- .055 (.055) -- -- (.055) 1.000 5.57
1994 1.000 .034 -- .034 (.034) -- -- (.034) 1.000 3.40
Fixed Income Portfolio (Commencement of Investment Class Operations 10/15/96)
1998+++ $12.22 $0.76 $0.14 $0.90 ($0.73) ($0.17) -- ($0.90) $12.22 7.72%
1997+++ 11.80 0.75 0.40 1.15 (0.60) (0.13) -- (0.73) 12.22 10.07
Intermediate Duration Portfolio (Commencement of Institutional Class Operations 10/3/94)
1998 $10.48 $0.58 $0.28 $0.86 ($0.56) ($0.10) -- ($0.66) $10.68 8.57%
1997+++ 10.28 0.61 0.27 0.88 (0.53) (0.15) -- (0.68) 10.48 8.93
1996 10.68 0.60 0.03 0.63 (0.65) (0.38) -- (1.03) 10.28 6.27
1995 10.00 0.69 0.42 1.11 (0.43) -- -- (0.43) 10.68 11.39
<CAPTION>
Ratio of
Expenses
Net Assets- to Ratio of
End of Average Net Income Portfolio
Period Net to Average Turnover
(thousands) Assets+ Net Assets Rate
Cash Reserves Portfolio (Commencement of Institutional Class Operations 8/29/90)
<S> <C> <C> <C> <C>
1998 $168,228 0.32%++ 5.33% N/A
1997 98,464 0.33++ 5.20 N/A
1996 78,497 0.33++ 5.19 N/A
1995 44,624 0.33++ 5.45 N/A
1994 37,933 0.32++ 3.70 N/A
Fixed Income Portfolio (Commencement of Investment Class Operations 10/15/96)
1998+++ $48,944 0.63% 6.31% 121%
1997+++ 9,527 0.66*++ 6.57* 179
Intermediate Duration Portfolio (Commencement of Institutional Class Operations 10/3/94)
1998 $116,891 0.52% 5.84% 131%
1997+++ 72,119 0.55++ 5.93 204
1996 12,017 0.56++ 6.17 251
1995 19,237 0.52*++ 6.56* 168
</TABLE>
Notes to the Financial Highlights
* Annualized
** Total return figures for partial years are not annualized.
+ 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>
Cash Reserves 0.32 0.32 0.32 0.32
Fixed Income -- -- 0.65* 0.62
Intermediate Duration 0.52* 0.52 0.52 0.51
</TABLE>
12
<PAGE>
FINANCIAL HIGHLIGHTS (Continued)
++ For the periods indicated, the Adviser voluntarily agreed to
waive its advisory fees and/or reimburse certain expenses to
the extent necessary in order to keep Total Operating Expenses
actually deducted from portfolio assets for the respective
portfolios from exceeding voluntary expense limitations. For
the respective periods ended September 30, the voluntarily
waived and/or reimbursed expenses totaled the below listed
amounts.
<TABLE>
<CAPTION>
Voluntarily waived and/or reimbursed expenses for:
Portfolio 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Cash Reserves 0.14% 0.11 0.09 0.07 0.05
Fixed Income -- -- -- 0.12* --
Intermediate
Duration -- 0.08* 0.13 0.05 --
</TABLE>
+++Per share amounts for the years ended September 30, 1997, and
September 30, 1998 are based on average shares outstanding.
13
<PAGE>
[LETTERHEAD OF MORGAN STANLEY DEAN WITTER APPEARS HERE]
[MAS FUNDS LOGO APPEARS HERE]
July 30, 1999
Trustees of the Fund
Thomas L. Bennett, Thomas L. Gerrity
Chairman Joseph J. Kearns
Joseph P. Healey C. Oscar Morong, Jr.
Vincent R. McLean
Officers of the Fund
Lorraine Truten, Richard J. Shoch,
President Secretary
James A. Gallo, John H. Grady, Jr.,
Vice President & Assistant Secretary
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.
