<PAGE> 1
MSDW LETTERHEAD
2000 Semi-Annual Report
Advisory Portfolios
MAS LOGO
<PAGE> 2
We are pleased to present the Semi-Annual Report for the Advisory Foreign Fixed
Income and Advisory Mortgage Portfolios of MAS Funds as of March 31, 2000.
TABLE OF CONTENTS
<TABLE>
<S> <C>
MAS Overview and Statement of Net Assets
Advisory Foreign Fixed Income
Portfolio............................. 1
Advisory Mortgage Portfolio.............. 3
Statement of Operations..................... 13
Statement of Changes in Net Assets.......... 14
Financial Highlights........................ 15
Notes to Financial Statements............... 17
</TABLE>
THIS SEMI-ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 3
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY FOREIGN FIXED
INCOME PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Advisory Foreign Fixed Income Portfolio is used as a vehicle for making
opportunistic foreign bond investments in core fixed-income portfolios managed
by Miller Anderson & Sherrerd. This strategy concentrates on enhancing total
returns through investments in foreign fixed-income securities and is managed as
one component of a diversified portfolio. All securities held in the Portfolio
have a credit quality of A or better at the time of purchase. Derivatives may be
used to represent country investments or otherwise pursue portfolio strategy.
Investment results for this portfolio should not be analyzed on a stand-alone
basis, but as part of the total return for a diversified fixed-income
investment. Returns are presented here in compliance with reporting requirements
for mutual funds. The Portfolio is available only to private advisory clients of
Morgan Stanley Dean Witter Investment Management.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/2000*
<TABLE>
<CAPTION>
MAS ADVISORY SALOMON BROAD
FOREIGN INDEX
----------------------------
<S> <C> <C>
SIX MONTHS 2.73% 2.02%
ONE YEAR 2.73% 1.81%
FIVE YEARS 10.83% 7.14%
SINCE INCEPTION 10.57% 7.61%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. Foreign investments are subject to certain risks such as
currency fluctuations, economic instability, and political developments.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Advisory Foreign Fixed Income Portfolio commenced operations on 10/7/94.
Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index. Returns for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (47.0%)
<TABLE>
<CAPTION>
- ------------------------------------------------------
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ------------------------------------------------------
<S> <C> <C> <C>
DANISH KRONE (3.2%)
Kingdom of Denmark
6.00%, 11/15/02 AAA DKK 3,000 $ 394
- ------------------------------------------------------
EURO (43.8%)
Deutsche Pfandbriefe &
Hypothekenbank AG
5.625%, 2/7/03 AAA EUR 511 499
Government of France O.A.T.
8.50%, 4/25/03 AAA 1,906 2,018
Netherlands Government
6.50%, 4/15/03 AAA 454 455
Spanish Government
5.25%, 1/31/03 AAA 343 332
Treuhandanstalt
7.375%, 12/2/02 AAA 2,096 2,138
- ------------------------------------------------------
GROUP TOTAL 5,442
- ------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $6,725) 5,836
- ------------------------------------------------------
CASH EQUIVALENTS (56.8%)
- ------------------------------------------------------
DISCOUNT NOTES (52.1%)
Federal Home Loan Bank
5.75%, 4/26/00 $ 1,300 1,295
5.76%, 4/5/00 1,300 1,299
5.80%, 4/24/00 1,300 1,295
Federal Home Loan Mortgage
Corporation
5.76%, 4/18/00 1,300 1,297
Federal National Mortgage
Association
5.94%, 5/16/00 1,300 1,290
- ------------------------------------------------------
GROUP TOTAL 6,476
- ------------------------------------------------------
REPURCHASE AGREEMENTS (4.7%)
Chase Securities, Inc.
6.05%, dated 3/31/00, due 4/3/00,
to be repurchased at $193,
collateralized by various U.S.
Government Obligations, due
4/3/00-11/15/02, valued at $195 193 193
Goldman Sachs & Co.
6.00%, dated 3/31/00, due 4/3/00,
to be repurchased at $192,
collateralized by U.S. Treasury
Bonds, 12.00%, due 8/15/13, valued
at $196 192 192
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
1
<PAGE> 4
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY FOREIGN FIXED INCOME
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(CONT'D) (000) (000)!
- ------------------------------------------------------
<S> <C> <C> <C>
Merill Lynch & Co., Inc.
5.90%, dated 3/31/00, due 4/3/00, to
be repurchased at $192,
collateralized by U.S. Treasury
Notes, 11.625%, due 11/15/04, valued
at $196 $192 $ 192
- ------------------------------------------------------
GROUP TOTAL 577
- ------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $7,053) 7,053
- ------------------------------------------------------
TOTAL INVESTMENTS (103.8%) (Cost $13,778) 12,889
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-3.8%)
Cash 7
Foreign Currency (Cost $119) 120
Interest Receivable 237
Receivable from Investment Adviser 7
Unrealized Gain on Forward Foreign
Currency Contracts 274
Other Assets 18
Payable for Fund Shares Redeemed (1,100)
Payable for Administrative Fees (1)
Payable for Trustees' Deferred Compensation
Plan-Note F (18)
Other Liabilities (11)
-------
(467)
- ------------------------------------------------------
NET ASSETS (100%) $12,422
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
- ------------------------------------------------------
- ------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
- ------------------------------------------------------
NET ASSETS
Applicable to 3,413,073 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $12,422
- ------------------------------------------------------
NET ASSET VALUE PER SHARE $ 3.64
- ------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $12,480
Undistributed Net Investment Income (Loss) 71
Undistributed Realized Net Gain (Loss) 451
Unrealized Appreciation (Depreciation) on:
Investment Securities (889)
Foreign Currency Transactions 262
Futures 47
- ------------------------------------------------------
NET ASSETS $12,422
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! See Note A1 to Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 5
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
MAS OVERVIEW
- ---------------------------------------------------------
The Advisory Mortgage Portfolio is used as a vehicle for making mortgage
investments in core fixed-income portfolios managed by Miller Anderson &
Sherrerd. The Advisory Mortgage Portfolio invests in a broad range of mortgage
securities, collateralized mortgage obligations (CMOs), asset-backed securities,
U.S. Government and other fixed-income securities and is managed as one
component of a diversified portfolio. Miller Anderson & Sherrerd selects
mortgages that appear most attractively priced, while managing the Portfolio's
prepayment sensitivity. Derivatives may be used to pursue portfolio strategy.
Investment results for this portfolio should not be analyzed on a stand-alone
basis, but as part of the total return for a diversified fixed-income
investment. Returns are presented here in compliance with reporting requirements
for mutual funds. The Portfolio is available only to private advisory clients of
Morgan Stanley Dean Witter Investment Management.
AVERAGE ANNUAL TOTAL RETURNS ENDED 3/31/2000*
<TABLE>
<CAPTION>
MAS ADVISORY LEHMAN MORTGAGE
MORTGAGE INDEX
------------------------------
<S> <C> <C>
SIX MONTHS 0.64% 1.77%
ONE YEAR (0.12)% 2.25%
SINCE INCEPTION 6.84% 7.02%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Advisory Mortgage Portfolio commenced operations on 4/12/95. Total returns
are compared to the Lehman Mortgage Index, an unmanaged market index. Returns
for periods less than one year are cumulative.
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (143.8%)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
MARCH 31, 2000 & POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (98.0%)
Federal Home Loan Mortgage
Association,
Conventional Pools:
6.75%, 12/1/05 Agy $ 53 $ 51
8.00%,
3/1/07-9/1/08 Agy 616 619
8.25%,
10/1/06-7/1/08 Agy 702 706
8.75%, 4/1/08 Agy 115 118
9.00%, 10/1/16 Agy 354 365
9.50%,
10/1/19-3/1/20 Agy 12,639 13,280
10.00%,
2/1/09-12/1/20 Agy 22,208 23,560
10.25%,
1/1/09-9/1/16 Agy 97 103
10.50%,
7/1/00-3/1/27 Agy 10,135 10,884
11.00%,
2/1/11-9/1/20 Agy 5,935 6,372
11.25%,
6/1/10-12/1/15 Agy 49 53
11.50%,
1/1/07-9/1/19 Agy 3,237 3,567
11.75%,
3/1/11-8/1/14 Agy 313 343
12.00%,
10/1/09-7/1/20 Agy 4,464 4,892
12.50%,
10/1/09-6/1/15 Agy 430 473
13.00%,
9/1/10-11/1/13 Agy 43 48
13.50%,
12/1/09-2/1/10 Agy 56 62
Gold Pools:
6.00%, 3/1/30 Agy 140,000 127,313
9.00%, 4/1/21 Agy 3,575 3,712
9.50%,
11/1/16-12/1/22 Agy 13,547 14,324
10.00%,
6/1/09-4/1/25 Agy 10,015 10,691
10.50%,
5/1/10-3/1/21 Agy 3,578 3,876
11.00%,
5/1/12-9/1/20 Agy 2,725 3,001
11.50%,
8/1/15-6/1/20 Agy 793 872
11.75%, 4/1/15 Agy 49 54
12.00%,
8/1/14-6/1/20 Agy 2,962 3,272
12.50%, 7/1/19 Agy 75 82
April TBA
6.00%, 4/1/30 Agy 1,147,250 1,044,709
6.50%, 4/1/30 Agy 360,000 337,799
Federal National Mortgage
Association,
Conventional Pools:
7.00%, 3/1/11 Agy 2,240 2,199
7.50%,
6/1/24-8/1/24 Agy 1,710 1,688
8.00%,
10/1/07-12/1/16 Agy 109 110
8.50%, 4/1/09 Agy 417 426
9.00%,
6/1/18-12/1/21 Agy 16,584 17,189
9.50%,
7/1/16-5/1/28 Agy 33,350 35,201
10.00%,
3/1/06-4/1/27 Agy 64,293 68,529
10.50%,
9/1/05-2/1/28 Agy 17,489 18,903
10.75%,
11/1/07-6/1/13 Agy 84 92
11.00%,
5/1/11-11/1/20 Agy 5,251 5,755
11.25%,
1/1/11-1/1/16 Agy 232 255
11.50%,
2/1/11-9/1/25 Agy 3,058 3,394
12.00%,
9/1/10-5/1/20 Agy 4,653 5,214
12.50%,
9/1/09-9/1/15 Agy 3,463 3,920
12.75%, 7/1/14 Agy 6 7
14.00%, 9/1/11 Agy 31 36
14.50%, 1/1/13 Agy 40 46
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 6
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
April TBA
6.00%, 4/1/30 Agy $2,460,450 $ 2,239,010
6.50%, 4/1/30 Agy 380,000 356,250
Government National Mortgage
Association:
Adjustable Rate
Mortgages:
6.00%, 8/20/27 Tsy 10,300 10,335
6.125%,
12/20/25-12/20/27 Tsy 129,868 130,715
6.375%,
2/20/25-6/20/25 Tsy 20,420 20,541
6.50%, 1/20/28 Tsy 33,500 33,698
6.625
7/20/27-9/20/27 Tsy 56,266 56,461
6.875%,
1/20/25-6/20/26 Tsy 111,324 111,948
7.00%,
2/20/25-11/20/25 Tsy 162,959 164,005
7.125%, 7/20/25 Tsy 12,286 12,373
7.375%,
6/20/25-6/20/26 Tsy 3,817 3,839
10.50%,
8/20/16-12/20/16 Tsy 114 120
11.00%, 11/20/19 Tsy 111 118
11.50%, 10/20/15 Tsy 37 39
Various Pools:
6.50%, 2/20/28 Tsy 688 692
6.625%, 9/20/27 Tsy 18,821 18,893
6.875%,
4/20/25-2/20/27 Tsy 9,855 9,917
7.00%,
4/15/29-3/15/30 Tsy 327,188 315,814
7.50%, 6/15/29 Tsy 318 307
8.50%,
7/15/08-3/15/20 Tsy 17,684 18,235
9.00%,
10/15/17-11/15/24 Tsy 99,134 103,438
9.50%,
7/15/09-9/15/28 Tsy 211,895 224,342
10.00%,
10/15/09-10/15/28 Tsy 294,181 314,297
10.50%,
3/15/01-4/15/25 Tsy 60,066 65,080
11.00%,
12/15/09-1/15/29 Tsy 79,620 87,369
11.50%,
12/15/09-11/15/19 Tsy 4,007 4,430
12.00%,
11/15/12-5/15/16 Tsy 7,477 8,397
12.50%,
5/15/10-7/15/15 Tsy 441 499
13.00%,
1/15/11-11/15/13 Tsy 223 252
13.50%,
5/15/10-9/15/14 Tsy 146 165
April TBA
7.00%, 4/1/30 Tsy 1,260,050 1,220,472
- ----------------------------------------------------------
GROUP TOTAL 7,310,216
- ----------------------------------------------------------
ASSET BACKED CORPORATES (35.8%)
Advanta Mortgage Loan
Trust,
Series 99-3 A1
6.81%, 5/25/14 AAA 33,988 33,779
AFG Receivables
Trust,
Series 97-A A
6.35%, 10/15/02 AAA 70 70
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 39,785 39,600
97-D A3
6.20%, 5/15/03 AAA 43,651 43,390
98-A A3
5.90%, 11/15/02 AAA 16,373 16,302
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Banc One Home Equity
Trust,
Series 99-1 A1
6.06%, 1/25/12 AAA $ 365 $ 360
BankBoston Home
Equity Loan Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA 1,966 1,955
Block Mortgage
Finance, Inc.,
Series 99-1 A1
5.94%, 9/25/13 AAA 674 667
BMW Vehicle Owner
Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 67,877 67,671
Boston Edison Co.,
Series 99-1 A1
5.99%, 3/15/03 AAA 46,983 46,695
Capital Auto Receivables Asset
Trust,
Series 99-2 A2
6.06%, 6/15/02 AAA 66,325 66,151
Caterpillar Financial
Asset Trust,
Series 99-A A2
5.90%, 3/25/02 AAA 50,000 49,847
Centex Home Equity,
Series:
99-1 A1
6.07%, 3/25/18 AAA 345 343
99-2 A1
5.91%, 4/25/19 AAA 1,003 991
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 8,875 8,811
CIT RV Trust,
Series 99-A A1
5.33%, 12/15/05 AAA 1,124 1,118
## Citibank Credit
Card Master Trust
I,
Series 98-7 A
6.014%, 5/15/02 AAA 79,225 79,219
Conseco Finance,
Series 99-H AF1
6.45%, 11/15/29 AAA 80,678 80,248
Contimortgage Home
Equity Loan Trust,
Series 99-1 A1
6.01%, 12/25/13 AAA 1,527 1,514
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 674 671
97-2 A
6.65%, 10/15/02 AAA 3,100 3,089
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 7
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Daimler Benz Auto
Grantor Trust,
Series 97-A A
6.05%, 3/31/05 AAA $ 8,060 $ 8,011
Daimler Benz Vehicle
Trust,
Series:
98-A A2
5.23%, 12/20/01 AAA 18,766 18,736
98-A A3
5.16%, 12/20/07 AAA 16,370 16,148
Delta Funding Home
Equity Loan Trust,
Series:
98-4 A1F
6.16%, 2/15/16 AAA 16,493 16,412
99-1 A1F
5.81%, 11/15/15 AAA 38,092 37,820
EQCC Home Equity Loan
Trust,
Series:
98-2 A1F
6.235%, 4/15/08 AAA 87 86
99-1 A1F
5.77%, 5/20/10 AAA 43,261 42,794
99-2 A1F
6.05%, 1/25/10 AAA 45,428 44,974
99-3 A1F
6.548%, 4/25/10 AAA 115,179 114,194
First Merchants Auto
Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 498 496
(+) 97-2 A1
6.85%, 11/15/02 AAA 1,269 1,265
First Security Auto
Grantor Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 16,279 16,195
98-A A
5.97%, 4/15/04 AAA 17,406 17,219
First Security Auto
Owner Trust,
Series:
99-1 A2
5.311%, 9/15/00 AAA 19,615 19,584
99-2 A2
5.492%, 4/15/02 AAA 2,079 2,074
## First USA Credit
Card Master Trust,
Series 97-10 A
5.97%, 9/17/03 AAA 74,825 74,820
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Ford Credit Auto
Owner Trust,
Series:
97-B A3
6.05%, 4/15/01 AAA $ 4,489 $ 4,487
98-A A3
5.65%, 10/15/01 AAA 2,139 2,134
98-B A3
5.85%, 10/15/01 AAA 14,680 14,633
!! 99-B A3
5.47%, 9/15/01 AAA 71,083 70,747
99-C A3
5.77%, 11/15/01 AAA 165,751 164,985
99-D A3
6.20%, 4/15/02 AAA 131,199 130,624
+ GE Capital Mortgage
Services, Inc,
Series:
99-HE3 A1
6.87%, 9/25/08 Aaa 6,872 6,838
99-HE3 A1
6.87%, 12/15/25 Aaa 70,000 69,658
General Motors
Acceptance Corp.,
Series 97-A A
6.50%, 4/15/02 AAA 5,701 5,693
Green Tree Financial Corp.,
Series:
+ 98-1 A2
5.85%, 4/1/11 Aaa 8,567 8,536
99-1 A1
5.60%, 3/1/30 AAA 3,665 3,631
99-1 A2
5.43%, 3/1/30 AAA 1,373 1,365
99-3 A2
5.51%, 2/1/31 AAA 316 313
99-5 A1
6.27%, 4/1/31 AAA 25,615 25,451
Green Tree Home
Equity Loan Trust,
Series:
98-A A2
6.04%, 6/15/29 AAA 278 277
98-C A2
6.03%, 7/15/29 AAA 16,845 16,817
99-A A1
5.59%, 2/15/13 AAA 33,387 33,284
99-C A1
5.99%, 7/15/30 AAA 65,721 65,429
99-D A1
6.29%, 10/15/13 AAA 14,725 14,672
99-E A1
6.32%, 8/15/30 AAA 69,222 68,948
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 8
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
+ Green Tree Home Improvement
Loan Trust,
Series:
98-E HIA1
5.907%, 8/15/07 Aaa $ 1,045 $ 1,042
98-E HEA2
5.829%, 2/15/12 Aaa 16,752 16,721
Green Tree Lease Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 278 277
Greenpoint Manufactured Housing,
Series:
99-1 A1
5.78%, 12/15/09 AAA 49,587 48,974
99-3 I A1
5.013%, 5/25/29 AAA 49,000 48,952
99-5 A1
6.75%, 4/25/01 AAA 14,727 14,628
Harley-Davidson Eaglemark
Motorcycle Trust,
Series:
98-3 A1
5.41%, 3/15/03 AAA 18,080 17,963
99-1 A1
5.25%, 7/15/03 AAA 794 786
99-2 A1
5.84%, 10/15/03 AAA 138 137
99-3 A1
6.22%, 2/15/04 AAA 42,054 41,811
+ HFC Home Equity Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 64,274 63,979
Honda Auto Lease Trust,
Series 99-A A2
5.875%, 10/15/01 AAA 81,914 81,755
Honda Auto
Receivables Grantor
Trust,
Series:
97-A A
5.85%, 2/15/03 AAA 10,862 10,806
97-B A
5.95%, 5/15/03 AAA 13,978 13,884
Honda Auto
Receivables Owner
Trust,
Series 99-1 A2
5.186%, 6/16/01 AAA 101 100
IMC Home Equity Loan
Trust,
Series 98-1 A2
6.31%, 12/20/12 AAA 7,130 7,102
## IndyMac Home
Equity Loan,
Series 98-A AF1
5.724%, 9/25/20 AAA 20,052 20,033
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
(+) Long Beach
Acceptance Auto
Grantor Trust,
Series:
97-1 A
6.85%, 10/25/03 AAA $ 38 $ 38
97-2 A
6.69%, 9/25/04 AAA 6,351 6,290
98-1 A
6.19%, 1/25/04 AAA 6,952 6,846
MMCA Automobile Trust,
Series:
97-1 A3
6.08%, 5/15/01 AAA 79 79
99-1 A2
5.43%, 1/15/04 AAA 256 256
99-2 A1
6.30%, 6/15/02 AAA 36,513 36,513
Navistar Financial
Corp. Owner Trust,
Series:
97-B A3
6.20%, 3/15/01 AAA 185 185
99-A A2
5.55%, 2/15/02 AAA 41,191 41,007
(+) New Holland Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 85,775 84,990
Nissan Auto
Receivables Grantor
Trust,
Series 97-A A
6.15%, 2/15/03 AAA 18,902 18,834
Nissan Auto
Receivables Owner
Trust,
Series 99-A A2
6.12%, 9/15/03 AAA 121,850 121,411
+## Oakwood Mortgage
Investors, Inc.,
Series 99-B A1
6.124%, 5/15/09 Aaa 249 249
Onyx Acceptance
Grantor Trust,
Series:
97-2 A
6.35%, 10/15/02 AAA 154 153
97-3 A
6.35%, 1/15/04 AAA 115 114
Option One Mortgage
Loan Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA 1,510 1,491
Premier Auto Trust,
Series:
99-1 A3
5.69%, 11/8/02 AAA 550 542
99-2 A2
5.28%, 11/8/01 AAA 2,679 2,668
99-3 A2
5.82%, 2/8/02 AAA 49,212 49,031
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 9
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Provident Bank Home
Equity Loan Trust,
Series 98-4 A1
6.28%, 11/25/13 AAA $ 96 $ 95
## Residential Asset
Securities Corp.,
Series 99-KS2 AI1
5.914%, 4/25/14 AAA 2,970 2,970
Residential Funding
Mortgage Securities
I,
Series:
99-HI1 A2
6.05%, 9/25/08 AAA 26,184 25,893
99-HI4 A1
6.41%, 11/25/07 AAA 39,988 39,653
Salomon Brothers Mortgage
Securities VII,
Series:
## 96-6E A1
6.338%, 3/30/25 AAA 4,335 4,305
98-NC7 A1
6.063%, 1/25/29 AAA 10,288 10,237
Saxson Asset Securities Trust,
Series 99-2 AF1
4.993%, 3/25/14 AAA 27,525 27,484
(+) Textron Financial
Corp. Receivables
Trust,
Series 98-A A1
5.82%, 2/15/02 AAA 16,146 16,073
Toyota Auto
Receivables Owner
Trust,
Series 99-A A2
5.80%, 12/17/01 AAA 6,250 6,227
UCFC Home Equity Loan,
Series:
97-D A2
6.475%, 6/15/12 AAA 1,286 1,283
## 98-C A1
6.005%, 12/15/12 AAA 16,463 16,458
Union Acceptance Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 1,832 1,819
USAA Auto Loan
Grantor Trust,
Series 97-1 A
6.00%, 5/15/04 AAA 399 397
WFS Financial Owner Trust,
Series:
97-C A3
6.10%, 3/20/02 AAA 3,649 3,646
98-C A2
5.524%, 8/20/01 AAA 376 375
99-B A2
5.83%, 4/20/02 AAA 65,750 65,557
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
!! World Omni
Automobile Lease
Securitization
Corp.,
Series 97-B A2
6.08%, 11/25/03 AAA $ 5,950 $ 5,949
- ----------------------------------------------------------
GROUP TOTAL 2,669,909
- ----------------------------------------------------------
ASSET BACKED MORTGAGES (0.0%)
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 11,980 176
(+) 96-3 A YMA
10/25/26 N/R 14,233 23
Contimortgage Home
Equity Loan Trust,
Series:
96-3 A9 IO
1.30%, 9/15/27 AAA 69,920 1,167
(+) 96-3 A9 YMA
9/15/27 N/R 24,913 36
96-3 10 IO
0.90%, 9/15/27 AAA 15,591 154
(+) 96-3 10 YMA
9/15/27 N/R 99,599 70
96-4 A11 IO
1.10%, 1/15/28 AAA 6,940 104
(+) 96-4 A11 YMA
1/15/28 AAA 6,770 10
96-4 A12 IO
1.05%, 1/15/28 AAA 1,303 14
(+) 96-4 A12 YMA
1/15/28 AAA 1,239 1
97-1 A10 IO
1.10%, 3/15/28 AAA 8,374 133
97-1 A10 YMA
3/15/28 N/R 8,374 14
- ----------------------------------------------------------
GROUP TOTAL 1,902
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL
SERIES (5.9%)
Collateralized
Mortgage Obligation
Trust,
Series 86-13 Q Inv
Fl
14.465%, 1/20/03 AAA 62 65
Federal Home Loan Mortgage
Corporation,
Series:
13-B IO REMIC
10.00%, 6/1/20 Agy 794 202
16-B IO REMIC
10.00%, 6/1/20 Agy 435 110
18-B IO REMIC
10.00%, 5/1/20 Agy 238 60
88-17 I PAC-1 (11)
9.90%, 10/15/19 Agy 3,063 3,196
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 10
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
88-22 C PAC (11)
9.50%, 4/15/20 Agy $ 1,337 $ 1,385
88-23 F PAC-1 (11)
9.60%, 4/15/20 Agy 1,176 1,222
89-39 F PAC-2 (11)
10.00%, 5/15/20 Agy 1,752 1,829
89-47 F PAC-1 (12) REMIC
10.00%, 6/15/20 Agy 1,165 1,216
89-110 F PAC
8.55%, 1/15/21 Agy 516 522
90-164 B12 REMIC
9.50%, 7/15/21 Agy 3,000 3,137
1364-B Inv Fl IO REMIC
5.036%, 9/15/07 Agy 5,205 441
1364-E Inv Fl IO
5.036%, 9/15/07 Agy 6,253 874
1369-S Inv Fl IO REMIC
5.438%, 9/15/07 Agy 5,107 304
## 1377-F REMIC
6.563%, 9/15/07 Agy 4,497 4,518
1381-SB Inv Fl IO
10.243%, 10/15/07 Agy 2,424 470
1395-S Inv Fl IO
4.449%, 10/15/22 Agy 16,105 2,232
1415-S Inv Fl IO
16.938%, 11/15/07 Agy 154 46
1463-B Inv Fl IO
2.288%, 1/15/23 Agy 17,353 722
1476-S Inv Fl IO
REMIC PAC
4.398%, 2/15/08 Agy 1,623 151
1485-S Inv Fl IO REMIC
3.538%, 3/15/08 Agy 1,716 101
## 1506-SD IO
2.438%, 5/15/08 Agy 632 18
## 1591-FG REMIC
6.438%, 10/15/23 Agy 577 573
1600-SA Inv Fl IO REMIC
1.938%, 10/15/08 Agy 12,506 393
1621-SD Inv Fl
7.537%, 11/15/23 Agy 3,505 2,845
1634-SC Inv Fl
6.20%, 12/15/23 Agy 4,000 3,112
## 1710-D IO
6.513%, 6/15/20 Agy 16,960 16,962
## 1809-SC IO
6.50%, 12/15/23 Agy 96,912 12,938
1887-SC Inv Fl IO
6.606%, 3/15/24 Agy 300 67
1911-C PO
11/15/23 Agy 7,247 4,428
1936-A IO PAC
1.00%, 2/15/27 Agy 85,969 3,052
## 1963-SA IO
1.50%, 6/17/27 Agy 13,004 485
1983-IB IO
8.00%, 8/15/27 Agy 122,958 35,535
1985-PR IO
8.00%, 7/15/27 Agy 61,403 17,825
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
## 2006-FA REMIC
6.463%, 10/15/23 Agy $ 2,149 $ 2,149
2006-I IO
8.00%, 10/15/12 Agy 2,317 539
2182-AD Inv Fl IO
1.496%, 9/15/25 Agy 189,446 4,452
2186-SY Inv Fl IO
2.396%, 4/15/28 Agy 46,634 2,299
2193-B Inv Fl IO
2.396%, 9/15/29 Agy 173,179 7,724
E2 F
5.988%, 2/15/24 Agy 11,521 11,479
Federal National
Mortgage
Association,
Series:
43-2 IO
9.50%, 9/1/18 Agy 16 4
89-22 G PAC (11)
10.00%, 5/25/19 Agy 3,102 3,260
89-86 E PAC (11)
8.75%, 11/25/19 Agy 92 94
89-92 G PAC (11)
8.60%, 12/25/04 Agy 750 759
90-106 J PAC
8.50%, 9/25/20 Agy 707 717
90-118 S Inv Fl REMIC
26.006%, 9/25/20 Agy 205 283
## 92-43 FC REMIC
6.725%, 10/25/21 Agy 1,234 1,239
92-89 SQ Inv Fl IO
PAC (11)
2884.456%, 6/25/22 Agy 3 188
92-186 S Inv Fl IO
3.349%, 10/25/07 Agy 2,634 180
93-9 SB Inv Fl IO
5.775%, 1/25/23 Agy 6,177 1,572
## 94-73 F
6.625%, 12/25/20 Agy 669 670
## 94-97 FC REMIC
6.825%, 3/25/24 Agy 12,166 12,253
96-14 PC PO
12/25/23 Agy 3,804 2,246
96-68 SC Inv Fl IO REMIC
1.975%, 1/25/24 Agy 6,607 431
## 97-24 FG REMIC
6.644%, 9/18/22 Agy 166 166
97-30 SP Inv Fl REMIC
2990.687%, 4/25/22 Agy 13 871
97-42 SG Inv Fl IO
1.906%, 7/18/27 Agy 22,268 824
97-53 PI IO PAC
8.00%, 8/18/27 Agy 5,337 1,531
97-57 PJ IO
7.50%, 10/18/26 Agy 23,083 6,443
97-57 PV IO
8.00%, 9/18/27 Agy 56,700 20,815
97-59 JA IO
8.00%, 7/18/27 Agy 7,000 3,295
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 11
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
97-61 PK IO REMIC
8.00%, 8/18/27 Agy $ 15,000 $ 6,333
## 97-70 FA REMIC
PAC (11)
5.388%, 7/18/20 Agy 2,742 2,740
## 98-22 FA REMIC
PAC (11)
6.471%, 4/18/28 Agy 59,027 58,705
98-22 SA Inv Fl IO
2.529%, 4/18/28 Agy 70,098 3,442
98-66 QH Inv Fl IO
3.261%, 5/25/26 Agy 34,490 835
98-66 QK Inv Fl IO
2.075%, 12/25/28 Agy 24,291 1,973
99-42 SA Inv Fl IO
2.075%, 10/25/28 Agy 189,708 7,304
186 IO
8.00%, 8/1/27 Agy 26,149 7,673
191 IO
8.00%, 1/1/28 Agy 46,947 13,722
195 IO
7.50%, 4/1/28 Agy 26,026 7,962
207 2 IO
8.00%, 2/1/23 Agy 10,174 2,925
264 2 IO
8.00%, 7/1/24 Agy 39,628 11,473
267 2 IO
8.50%, 10/1/24 Agy 35,474 10,021
270 2 IO
8.50%, 9/1/23 Agy 31,197 8,881
274 2 IO
8.50%, 10/1/25 Agy 41,419 11,701
277 2 IO
7.50%, 4/1/27 Agy 22,253 6,749
281 2 IO
9.00%, 11/1/26 Agy 32,495 8,906
291 2 IO
8.00%, 11/1/27 Agy 25,881 7,511
296 2 IO
8.00%, 4/1/24 Agy 1,172 337
2163-SA Inv Fl IO
2.10%, 6/15/29 Agy 159,783 3,084
2171-B
6.28%, 6/25/09 Agy 190 176
G92-52 SQ Inv Fl IO REMIC
7290.969%, 9/25/22 Agy 19 2,790
G92-53 S Inv Fl IO REMIC
28.125%, 9/25/22 Agy 2,111 1,276
## G93-11 FA REMIC
6.525%, 12/25/08 Agy 8,535 8,545
First Boston Mortgage
Securities Corp.,
Series 87-B2 IO
8.985%, 4/25/17 AAA 125 26
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Government National
Mortgage
Association,
Series:
96-12 S Inv Fl IO REMIC
2.563%, 6/16/26 Tsy $ 20,224 $ 952
96-13 S Inv Fl IO REMIC
3.213%, 7/16/11 Tsy 11,885 695
97-13 SB Inv Fl IO
2.063%, 9/16/27 Tsy 29,500 1,696
97-14 SB Inv Fl IO
2.063%, 9/16/27 Tsy 900 53
99-29 SD Inv Fl IO
1.983%, 3/16/26 Tsy 1,876 67
99-30 S Inv Fl IO
2.80%, 8/16/29 Tsy 329,526 13,412
99-30 SA Inv Fl IO
2.583%, 8/16/29 Tsy 2,991 175
99-32 SB Inv Fl IO REMIC
2.75%, 7/16/27 Tsy 242,924 9,037
99-34 SB Inv Fl IO
2.65%, 7/16/27 Tsy 1,963 73
99-43 UN Inv Fl IO
2.22%, 11/16/29 Tsy 205,836 7,266
99-43 UO Inv Fl IO
1.15%, 11/16/29 Tsy 205,836 5,969
+ Kidder Peabody Mortgage Assets
Trust,
Series 87 B IO CMO
9.50%, 4/22/18 Aaa 147 35
- ----------------------------------------------------------
GROUP TOTAL 442,039
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.8%)
American Housing Trust,
Series:
IV 2 C
9.553%, 9/25/20 A 1,883 1,916
V 1G
9.125%, 4/25/21 AAA 5,586 5,702
sec. Chase Mortgage Finance
Corp.,
Series 93-1 B2
7.911%, 3/28/24
(acquired 4/28/95-
12/21/99, cost
$5,179) N/R 5,290 5,151
Countrywide Funding Corp.,
Series 95-4 M
7.50%, 9/25/25 AA 6,286 6,021
GE Capital Mortgage
Services, Inc.,
Series 94-14 A7
7.50%, 4/25/24 AAA 4,000 3,911
## Kidder Peabody
Funding Corp.,
Series 92-4 B2
8.514%, 5/28/22 A 1 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 12
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA $ 35,100 $ 35,949
Sears Mortgage
Securities,
Series 89-A 1
9.00%, 9/25/19 N/R 37 37
- ----------------------------------------------------------
GROUP TOTAL 58,688
- ----------------------------------------------------------
COMMERCIAL MORTGAGES (2.8%)
American Southwest Financial
Securities Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 7,708 7,469
## 93-2 S1 IO
1.117%, 1/18/09 N/R 64,223 1,726
93-2 S2 IO
0.70%, 1/18/09 N/R 19,817 307
Asset Securitization Corp.,
Series:
96-MD6 A1C
7.04%, 11/13/26 AAA 21,220 20,492
+## 97-D5 PS1 IO
0.97%, 2/14/41 Aaa 151,154 12,679
(+) Beverly Finance
Corp.,
Series 94-1
8.36%, 7/15/04 AA- 11,840 11,984
(+) Carousel Center Finance,
Inc.,
Series:
1 A1
6.828%, 11/15/07 AA 4,925 4,818
1 B
7.188%, 10/15/07 A 16,900 16,595
1 C
7.527%, 10/15/07 BBB+ 868 856
(+) Creekwood Capital Corp.,
Series 95-1A
8.47%, 3/16/15 AA 6,563 6,738
(+) Crystal Run Properties,
Inc.,
Series A
7.393%, 8/15/11 AA 15,900 15,401
(+) CVM Finance Corp.
7.19%, 3/1/04 AA 23,260 22,810
(+) DLJ Mortgage
Acceptance Corp.,
Series 97-CF1 S IO
1.097%, 3/15/17 AAA 102,326 4,224
+## GMAC Commercial Mortgage
Securities, Inc.,
Series:
96-C1 X2 IO
1.967%, 3/15/21 Aaa 98,204 6,033
97-C2 X IO
1.273%, 4/15/27 Aaa 376,942 20,453
</TABLE>
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
+## GS Mortgage
Securities Corp.
II,
Series:
97-GL X1A IO
0.651%, 7/13/30 Aaa $ 27,496 $ 36
97-GL X2 IO
1.037%, 7/13/30 Aaa 59,375 2,144
+ Midland Realty
Acceptance Corp.,
Series 96-C2 A1
7.02%, 1/25/29 Aaa 1,213 1,198
Nomura Asset Securities Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 N/R 3,346 3,340
## 94-MD1 A2
7.676%, 3/15/18 N/R 5,135 5,132
## 94-MD1 A3
8.026%, 3/15/18 N/R 5,265 5,295
(+) Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 9,645 9,553
(+) Prime Property
Fund,
Series 1 A
6.633%, 7/23/03 AA 15,452 15,050
(+) Stratford Finance
Corp.
6.776%, 2/1/04 AA 9,400 9,027
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.578%, 2/25/28 N/R 59,132 3,033
96-CFL X1A IO
1.093%, 2/25/28 N/R 49,666 310
96-CFL X2 IO
1.221%, 2/25/28 N/R 15,545 301
- ----------------------------------------------------------
GROUP TOTAL 207,004
- ----------------------------------------------------------
NON-AGENCY FIXED RATE MORTGAGES (0.2%)
+ BA Mortgage Securities, Inc.,
Series 97-1 A2
6.625%, 7/25/26 Aaa 65 65
Bank of America,
Series A
8.375%, 5/1/07 AAA 421 422
California Federal
Savings & Loan,
Series 86-1A
8.80%, 1/1/14 AA 36 37
sec. Coast Federal,
Series 84-3
7.941%, 3/1/06
(acquired 4/28/95,
cost $86) N/R 86 86
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE> 13
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
sec.## Dedham Savings
Participation Certificate
8.198%, 5/1/01
(acquired 7/30/96,
cost $104) N/R $ 104 $ 104
sec. First Federal
Savings & Loan
Association,
Series 92-C
8.75%, 6/1/06
(acquired 4/28/95-
8/28/97, cost $0) AA 1,139 1,139
sec.## Fortune Mortgage Corp.
Participation Certificate
7.80%, 8/1/01
(acquired 7/30/96-
2/3/98, cost $71) N/R 72 72
Gemsco Mortgage Pass
Through
Certificate,
Series 87-A
8.701%, 11/25/10 AA 464 460
sec. Household Bank,
Series 85-1 CMO
7.94%, 5/1/02
(acquired 5/31/95,
cost $121) N/R 120 120
## Resolution Trust
Corp.,
Series 92-5 C CMO
8.613%, 1/25/26 AA 3,945 3,916
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 4,387 4,311
Sears Mortgage Securities,
Series 82-3
10.00%, 11/1/12 AA 211 211
sec. Shearson American Express,
Series A CMO
9.625%, 12/1/12
(acquired 4/28/95-
6/29/98, cost
$283) AA 276 276
sec. Virginia Beach Federal
Savings & Loan Participation
Certificate
6.90%, 3/1/01
(acquired 3/27/97,
cost $122) N/R 128 128
- ----------------------------------------------------------
GROUP TOTAL 11,347
- ----------------------------------------------------------
U.S. TREASURY SECURITIES (0.3%)
!! U.S. Treasury
Bills
5.78%, 6/8/00 Tsy 15,500 15,337
5.81%, 5/4/00 Tsy 2,500 2,488
5.84%, 4/27/00 Tsy 2,500 2,490
- ----------------------------------------------------------
GROUP TOTAL 20,315
- ----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$10,729,654) 10,721,420
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK (1.3%)
- ----------------------------------------------------------
MORTGAGE-OTHER
(+)+ Home Ownership
Funding Corp.
13.331% (Cost
$95,485) Aaa 120,975 $ 94,906
- ----------------------------------------------------------
STRUCTURED INVESTMENT (0.0%)-SEE NOTE A6
- ----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
------
<S> <C> <C> <C>
Morgan Guaranty Trust
Co., 11/20/05;
monthly payments
equal to 1% per
annum of the
outstanding
notional balance,
indexed to GNMA ARM
pools (Cost $9,341) N/R $ 134,815 2,666
- ----------------------------------------------------------
CASH EQUIVALENTS (23.9%)
- ----------------------------------------------------------
COMMERCIAL PAPER (19.9%)
Abbott Labs, Inc.
5.94%, 4/11/00 40,850 40,783
Albertson's, Inc.
5.87%, 4/20/00 50,000 49,845
5.96%, 4/21/00 25,000 24,918
American Express Credit Corp.
5.86%, 4/10/00 50,000 49,927
6.00%, 4/19/00 50,000 49,850
Associates Corp. of North
America
5.80%, 4/4/00 47,000 46,977
AT&T Corp.
5.93%, 4/13/00 96,942 96,751
Banc One Corp.
5.90%, 5/5/00 48,000 47,732
Bank of America Corp.
5.95%, 6/2/00 25,000 24,744
Barclays U.S. Funding Corp.
6.03%, 5/1/10 40,400 40,190
Bell South Telecommunications,
Inc.
5.80%, 4/5/00 50,000 49,968
CIT Group Holdings, Inc.
6.04%, 5/1/00 50,000 49,748
Clorox Co.
5.81%, 4/3/00 16,050 16,045
Coca Cola Co.
5.81%, 4/11/00 50,000 49,919
5.96%, 4/27/00 46,800 46,598
E.I. Dupont De Nemours
5.79%, 4/13/00 46,000 45,911
Eastman Kodak Co.
5.75%, 4/4/00 9,650 9,645
Ford Motor Credit Corp.
5.82%, 4/17/00 50,000 49,871
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE> 14
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
ADVISORY MORTGAGE
PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(CONT'D) (000) (000)!
- ----------------------------------------------------------
<S> <C> <C> <C>
General Electric Capital Corp.
5.80%, 4/3/00 $ 50,000 $ 49,984
General Motors Acceptance Corp.
5.81%, 4/3/00 50,000 49,984
5.87%, 4/10/00 50,000 49,927
International Lease Finance
Corp.
5.79%, 4/3/00 50,000 49,984
Lucent Technologies, Inc.
5.97%, 5/3/00 41,300 41,081
Merrill Lynch & Co., Inc.
5.85%, 4/14/00 50,000 49,894
Metlife Funding Corp.
5.82%, 4/7/00 50,000 49,951
National Rural Utilities
Cooperative Finance Corp.
5.82%, 4/7/00 47,700 47,654
Proctor & Gamble Co.
5.83%, 4/17/00 49,700 49,571
Prudential Funding Corp.
5.83%, 4/20/00 58,500 58,316
5.91%, 5/9/00 50,000 49,688
6.05%, 6/16/00 30,000 29,617
Safeway Corp.
5.98%, 4/20/00 16,700 16,647
Sun Trust Bank, Inc.
5.90%, 4/14/00 31,000 30,934
Toyota Motor Credit Corp.
5.85%, 5/8/00 50,000 49,699
Wal-Mart Stores, Inc.
5.95%, 4/24/00 25,000 24,905
- ----------------------------------------------------------
GROUP TOTAL 1,487,258
- ----------------------------------------------------------
REPURCHASE AGREEMENT (4.0%)
Chase Securities, Inc. 6.05%,
dated 3/31/00, due 4/3/00, to
be repurchased at $297,768,
collateralized by various U.S.
Government Obligations, due
4/3/00-11/15/02, valued
at $300,595 297,618 297,618
- ----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $1,784,876) 1,784,876
- ----------------------------------------------------------
TOTAL INVESTMENTS (169.0%) (Cost $12,619,356) 12,603,868
- ----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-69.0%)
Dividends Receivable 4,032
Interest Receivable 63,685
Receivable for Investments Sold 103,547
Receivable for Forward Commitments 710,413
Receivable for Shares Sold 46,700
Receivable from Investment Adviser 166
Other Assets 507
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
- ----------------------------------------------------------
- ----------------------------------------------------------
<S> <C> <C> <C>
Payable to Custodian $ (39,910)
Payable for Investments Purchased (116,181)
Payable for Forward Commitments (5,879,712)
Payable for Administrative Fees (491)
Payable for Daily Variation Margin on Futures
Contracts (7,076)
Payable for Trustees' Deferred Compensation
Plan-Note F (373)
Unrealized Loss on Swap Agreements (25,617)
Other Liabilities (4,632)
-----------
(5,144,942)
- ----------------------------------------------------------
NET ASSETS (100%) $ 7,458,926
- ----------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------
NET ASSETS
Applicable to 764,041,681 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 7,458,926
- ----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.76
- ----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 7,963,283
Undistributed Net Investment Income (Loss) 65,841
Undistributed Realized Net Gain (Loss) (486,127)
Unrealized Appreciation (Depreciation) on:
Investment Securities (15,488)
Futures and Swaps (68,583)
- ----------------------------------------------------------
NET ASSETS $ 7,458,926
- ----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
sec. Restricted Security-Total market value of
restricted securities owned at March 31, 2000 was
$7,076,000 or 0.1% of net assets.
! See Note A1 to Financial Statements.
(+) 144A security. Certain conditions for public sale
may exist.
!! A portion of these securities was pledged to cover
margin requirements for futures contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
## Variable or floating rate security-rate disclosed
is as of March 31, 2000.
CMO Collateralized Mortgage Obligation
Inv Inverse Floating Rate-Interest rate fluctuates with
Fl an inverse relationship to an associated interest
rate. Indicated rate is the effective rate at
March 31, 2000.
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc. or
Standard & Poor's Corporation.
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery.
See Note A7 to Financial Statements.
YMA Yield Maintenance Agreement
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE> 15
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISORY
FOREIGN ADVISORY
FIXED INCOME MORTGAGE
PORTFOLIO PORTFOLIO
Six Months Ended March 31, 2000
(In Thousands)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 340 $ 275,653
Dividends -- 3,575
- -----------------------------------------------------------------------------------------------------------------------
Total Income 340 279,228
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B $ 26 $ 14,939
Less: Waived Fees (26) -- (14,939) --
Administrative Fee--Note C 6 3,187
Custodian Fee--Note E 1 152
Audit Fee 8 24
Legal Fee -- 62
Filing & Registration Fees 1 5
Other Expenses 2 208
Reimbursement of Expenses--Note B (8) (300)
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses 10 3,338
- -----------------------------------------------------------------------------------------------------------------------
Expense Offset--Note H -- (152)
- -----------------------------------------------------------------------------------------------------------------------
Net Expenses 10 3,186
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 330 276,042
- -----------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities -- (166,753)
Foreign Currency Transactions 517 --
Futures (66) (14,977)
- -----------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 451 (181,730)
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (731) (15,965)
Foreign Currency Transactions 252 --
Futures and Swaps 73 (42,481)
- -----------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) (406) (58,446)
- -----------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 45 (240,176)
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 375 $ 35,866
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Amounts for the six months ended March 31, 2000 are unaudited)
<TABLE>
<CAPTION>
ADVISORY
FOREIGN ADVISORY
FIXED INCOME MORTGAGE
PORTFOLIO PORTFOLIO
Six Months Six Months
Year Ended Ended Year Ended Ended
September 30, March 31, September 30, March 31,
(In Thousands) 1999 2000 1999 2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 638 $ 330 $ 470,794 $ 276,042
Realized Net Gain (Loss) 1,001 451 (343,768) (181,730)
Change in Unrealized Appreciation (Depreciation) (1,198) (406) (112,889) (58,446)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations 441 375 14,137 35,866
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A9
Net Investment Income (9,526) (1,111) (390,191) (267,809)
Realized Net Gain (1,724) -- -- --
In Excess of Realized Net Gain -- -- (140,602) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (11,250) (1,111) (530,793) (267,809)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued -- -- 4,166,442 774,652
In Lieu of Cash Distributions 9,223 1,002 452,674 225,093
Redeemed (1,775) (2,166) (2,035,656) (1,772,444)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 7,448 (1,164) 2,583,460 (772,699)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (3,361) (1,900) 2,066,804 (1,004,642)
NET ASSETS:
Beginning of Period 17,683 14,322 6,396,764 8,463,568
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 14,322 $ 12,422 $ 8,463,568 $ 7,458,926
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included
in end of period net assets $ 852 $ 71 $ 57,608 $ 65,841
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued -- -- 408,195 78,537
In Lieu of Cash Distributions 2,231 281 43,874 22,879
Shares Redeemed (246) (590) (197,750) (180,901)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding 1,985 (309) 254,319 (79,485)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE> 17
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 2000 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------------
October 7, Six Months
1994** to Year Ended September 30, Ended
September 30, ---------------------------------- March 31,
ADVISORY FOREIGN FIXED INCOME PORTFOLIO 1995 1996 1997++ 1998++ 1999++ 2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.80 $ 11.73 $ 10.32 $ 10.18 $ 3.85
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.74 0.68 0.58 0.48 0.19 0.10
Net Realized and Unrealized Gain (Loss) on
Investments 0.44 1.02 0.80 0.48 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.18 1.70 1.38 0.96 0.19 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.38) (0.66) (1.88) (1.10) (5.52) (0.31)
Realized Net Gain -- (0.11) (0.88) -- (1.00) --
In Excess of Realized Net Gain -- -- (0.03) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.38) (0.77) (2.79) (1.10) (6.52) (0.31)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.80 $ 11.73 $ 10.32 $ 10.18 $ 3.85 $ 3.64
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 12.12% 16.47% 14.08% 10.19% 2.87% 2.73%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 537,133 $236,092 $93,939 $17,683 $14,322 $ 12,422
Ratio of Expenses to Average Net Assets (1) 0.16%* 0.12% 0.14% 0.12% 0.15% 0.15%*
Ratio of Net Investment Income to Average Net
Assets 7.44%* 6.06% 5.68% 4.84% 4.24% 4.75%*
Portfolio Turnover Rate 96% 170% 208% 318% 0% 0%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.38%* 0.38% 0.38% 0.38% 0.39% 0.52%*
Ratio Including Expense Offsets 0.15%* 0.12% 0.14% 0.12% 0.14% 0.15%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Commencement of Operations
++ Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
15
<PAGE> 18
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
(Amounts for the six months ended March 31, 2000 are unaudited)
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------------------------
April 12, Year Ended September 30, Six Months
1995** to ----------------------------------------- Ended
September 30, March 31,
ADVISORY MORTGAGE PORTFOLIO 1995 1996 1997 1998 1999 2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.41 $ 10.29 $ 10.59 $ 10.86 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.25 0.72 0.75 0.69 0.66 0.35
Net Realized and Unrealized Gain
(Loss) on Investments 0.35 (0.06) 0.34 0.36 (0.69) (0.29)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.60 0.66 1.09 1.05 (0.03) 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.19) (0.72) (0.71) (0.67) (0.58) (0.33)
Realized Net Gain -- (0.03) (0.08) (0.11) -- --
In Excess of Realized Net Gain -- (0.03) -- -- (0.22) --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.19) (0.78) (0.79) (0.78) (0.80) (0.33)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 10.29 $ 10.59 $ 10.86 $ 10.03 $ 9.76
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.03% 6.56% 11.03% 10.36% (0.32%) 0.64%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 1,443,038 $1,974,592 $3,071,427 $6,396,764 $8,463,568 $7,458,926
Ratio of Expenses to Average Net
Assets (1) 0.10%* 0.09% 0.09% 0.09% 0.09% 0.08%*
Ratio of Net Investment Income to
Average Net Assets 6.72%* 7.17% 7.55% 6.83% 6.62% 6.49%*
Portfolio Turnover Rate 110% 139% 144% 126% 94% 30%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE
RATIO OF EXPENSES TO AVERAGE NET
ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.49%* 0.39% 0.40% 0.40% 0.39% 0.38%*
Ratio Including Expense Offsets 0.08%* 0.08% 0.08% 0.08% 0.08% 0.08%*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Commencement of Operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940
as an open-end investment company. At March 31, 2000, the Fund was comprised of
twenty-two active portfolios. The accompanying financial statements and
financial highlights are those of the Advisory Foreign Fixed Income and
Advisory Mortgage Portfolios (each referred to as a "Portfolio") only. The
financial statements of the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in
the preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results may differ from those estimates.
1. SECURITY VALUATION: Market values for equity securities listed on the New
York Stock Exchange ("NYSE") or other U.S. exchanges or NASDAQ are based on
the latest quoted sales prices as of the close of the NYSE (normally 4:00
p.m. Eastern Time) on the valuation date; securities not traded on the
valuation date are valued at the mean of the most recent quoted bid and
asked prices. Equity securities not listed are valued at the mean of the
most recent bid and asked prices. Securities listed on foreign exchanges
are valued at the latest quoted sales prices. Bonds and other fixed income
securities are valued using brokers' quotations or on the basis of prices,
provided by a pricing service, which are based primarily on institutional
size trading in similar groups of securities. Mortgage-backed securities
issued by certain government-related organizations are valued using
brokers' quotations which are based on a matrix system which considers such
factors as other security prices, yields and maturities. Short-term
securities are valued using the amortized cost method of valuation, which
in the opinion of the Board of Trustees reflects fair value. Securities for
which no quotations are readily available are valued at their fair value as
determined in good faith using methods approved by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for Federal income taxes is required in
the financial statements.
3. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by the Portfolios' custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of the collateral is at least equal to the repurchase value in the
event of a default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into
a joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreements. This joint repurchase agreement is
covered by the same collateral requirements as discussed above.
4. FUTURES: Futures contracts (secured by cash or securities deposited with
brokers as "initial margin") are valued based upon their quoted daily
settlement prices; changes in initial settlement value (represented by cash
paid to or received from brokers as ("variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are
closed, the difference between the opening value at the date of purchase
and the value at closing is recorded as realized gain or loss in the
Statement of Operations.
- --------------------------------------------------------------------------------
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Futures contracts may be used by each Portfolio in order to hedge against
unfavorable changes in the value of securities or to attempt to realize
profits from the value of the underlying securities. Futures contracts
involve market risk in excess of the amounts recognized in the Statement of
Net Assets. Risks arise from the possible movements in security values
underlying these instruments. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments, which
may not correlate with the change in value of the hedged investments. In
addition, there is the risk that a Portfolio may not be able to enter into
a closing transaction because of an illiquid secondary market.
5. SWAP AGREEMENTS: Each Portfolio may enter into swap agreements to exchange
the return generated by one instrument for the return generated by another
instrument. The following summarizes interest rate swaps that may be
entered into by the Portfolios:
Interest Rate Swaps: Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal
amount. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Interest rate swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate swaps
are presented in the Statement of Operations. Because there is no organized
market for these swap agreements, the value reported in the Statement of
Net Assets may differ from that which would be realized in the event the
Portfolio terminated its position in the agreement. Risks may arise upon
entering into these agreements from the potential inability of the
counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received, if any, at
the date of default.
6. STRUCTURED INVESTMENTS: Each Portfolio may invest in structured investments
whose values are linked either directly or inversely to changes in foreign
currencies, interest rates, commodities, indices, or other underlying
instruments. A Portfolio uses these securities to increase or decrease its
exposure to different underlying instruments and to gain exposure to
markets that might be difficult to invest in through conventional
securities. Structured investments may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
7. DELAYED DELIVERY COMMITMENTS: Each Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. Payment and
delivery may take place a month or more after the date of the transaction.
The price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction is
negotiated. Collateral consisting of liquid securities or cash is
maintained in an amount at least equal to these commitments with the
custodian. Securities held in segregated accounts cannot be sold while this
strategy is outstanding, unless replaced with other assets. As a result,
there is a possibility that as asset segregation reaches certain levels, a
portfolio may lose some flexibility in managing its investments, responding
to shareholder redemption requests, or meeting other current obligations.
8. FOREIGN EXCHANGE AND FORWARD CURRENCY CONTRACTS: The books and records of
the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against
U.S. dollars quoted by a bank. Net realized gains (losses) on foreign
currency transactions represent net foreign exchange gains (losses) from
forward foreign currency
- --------------------------------------------------------------------------------
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
contracts, disposition of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of investment income and foreign
withholding taxes recorded on a Portfolio's books and the U.S. dollar
equivalent of amounts actually received or paid.
A forward foreign currency contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio may
enter into forward foreign currency contracts to protect securities and
related receivables and payables against future changes in foreign exchange
rates. Fluctuations in the value of such contracts are recorded as
unrealized appreciation or depreciation; realized gains or losses, which
are disclosed in the Statement of Operations, include net gains or losses
on contracts which have been terminated by settlements. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and are generally
limited to the amount of unrealized gain on the contract, if any, at the
date of default. Risks may also arise from unanticipated movements in the
value of the foreign currency relative to the U.S. dollar.
At March 31, 2000, the Advisory Foreign Fixed Income Portfolio's net assets
included foreign denominated securities and currency. The net assets of the
Portfolio are presented at the foreign exchange rates and market values at
the close of the period. The Portfolio does not isolate that portion of the
results of operations arising as a result of changes in the foreign
exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Portfolio does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, the components of realized and unrealized
foreign currency gains (losses) representing foreign exchange changes on
investments are included in the reported net realized and unrealized gains
(losses) on investment transactions and balances. Changes in currency
exchange rates will affect the value of and investment income from such
securities and currency.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the possibly
lower level of governmental supervision and regulation of foreign
securities markets and the possibility of political or economic
instability.
9. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are declared and paid quarterly for the Advisory Foreign
Fixed Income Portfolio and monthly for the Advisory Mortgage Portfolio. Net
realized capital gains are distributed at least annually. The amount and
character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing book and tax treatments for foreign currency transactions.
Permanent book and tax differences relating to shareholder distributions
may result in reclassifications to undistributed net investment income
(loss), undistributed realized net gain (loss) and paid in capital.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the Financial Highlights.
10. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
- --------------------------------------------------------------------------------
19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which can not be directly attributed are
apportioned among the Portfolios on the basis of their relative net assets.
B. INVESTMENT ADVISORY FEE: Under the terms of an Investment Advisory
Agreement, each Portfolio pays Miller Anderson & Sherrerd, LLP ("MAS" or the
"Adviser"), wholly owned by indirect subsidiaries of Morgan Stanley Dean Witter
& Co., for investment advisory services performed at a fee calculated by
applying a quarterly rate based on an annual percentage rate of 0.375% of the
Portfolio's average daily net assets for the quarter.
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios if annual operating expenses exceed 0.15%
and 0.08% of average daily net assets of the Advisory Foreign Fixed Income and
Advisory Mortgage Portfolios, respectively.
C. ADMINISTRATION FEE: MAS serves as Administrator to the Fund pursuant to an
Administration Agreement. Under the Agreement, MAS receives an annual fee
accrued daily and payable monthly, of 0.08% of each Portfolio's average daily
net assets. Chase Global Funds Services Company ("CGFSC") serves as Transfer
Agent to the Fund and provides fund accounting and other services pursuant to a
sub-administration agreement with MAS and receives compensation from MAS for
these services.
D. DISTRIBUTOR: MAS Funds Distribution, Inc. ("MASDI" or the "Distributor"), a
wholly owned subsidiary of the Adviser, is the distributor for the Fund. MASDI
is a limited-purpose broker/ dealer whose only function is to distribute open-
end mutual fund shares.
E. CUSTODY: The Chase Manhattan Bank serves as custodian for the Fund in
accordance with a custodian agreement.
F. TRUSTEES' FEES: The Fund pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person,
as defined under the Investment Company Act of 1940, as amended, participates
in the Trustees' Deferred Compensation Plan. Under the Trustees' Deferred
Compensation Plan, such Trustees must defer at least 25% of their fees and may
elect to defer payment up to 100% of their total fees earned as a Trustee of
the Fund. These deferred amounts are invested in the Portfolios selected by the
Trustee. Total Trustees fees incurred, for the six months ended March 31, 2000
by the Portfolios were $71,000.
Expenses incurred by the Fund for the six months ended March 31, 2000 include
legal fees paid to Morgan, Lewis & Bockius, LLP. A partner of that firm is
Assistant Secretary of the Fund.
G. PORTFOLIO INVESTMENT ACTIVITY:
1. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 2000,
purchases and sales of investment securities other than temporary cash
investments were:
<TABLE>
<CAPTION>
(000)
-----------------------
Portfolio Purchases Sales
- ---------------------------------- ---------- ----------
<S> <C> <C>
Advisory Foreign Fixed Income $ -- $ --
Advisory Mortgage 3,707,418 4,014,139
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION). At March
31, 2000, cost, unrealized appreciation, unrealized depreciation and net
unrealized appreciation (depreciation) of securities for Federal income tax
purposes were:
<TABLE>
<CAPTION>
(000)
----------------------------------------------------
Portfolio Cost Appreciation Depreciation Net
--------- ----------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Advisory Foreign
Fixed Income $ 13,778 $ -- $ (889) $ (889)
Advisory Mortgage 12,619,356 95,379 (110,867) (15,488)
</TABLE>
3. FORWARD FOREIGN CURRENCY CONTRACTS. Under the terms of the forward foreign
currency contracts open at March 31, 2000, the Advisory Foreign Fixed Income
Portfolio is obligated to deliver or receive currency in exchange for U.S.
dollars as indicated in the following table:
<TABLE>
<CAPTION>
(000)
- -------------------------------------------------------------------------------------
Net
Currency In Unrealized
To Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
- ------------------------------- --------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
ADVISORY FOREIGN FIXED INCOME
Sales:
EUR 3,215 US$ 3,245 4/26/00 US$ 3,083 US$ 162
EUR 3,060 3,045 4/28/00 2,935 110
DKK 3,300 428 6/7/00 426 2
-------
US$ 274
-----------
</TABLE>
<TABLE>
<S> <C> <C>
DKK -- Danish Krone
EUR -- Euro
US$ -- U.S. Dollar
</TABLE>
4. FUTURES CONTRACTS. At March 31, 2000, the Portfolios had the following
futures contracts open:
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Purchases:
ADVISORY FOREIGN
FIXED INCOME
5 yr. Euro BOBL 47 EUR 4,699 Jun-00 US$ 47
------------
Sales:
ADVISORY MORTGAGE
Jun-00-
90 day Euro 129 EUR 10,461 Mar-01 US$ 136
U.S. Treasury
10 yr. Note 3,210 US$ 314,831 Jun-00 (8,558)
U.S. Treasury
Long Bond 12,313 US$1,202,826 Jun-00 (34,544)
----------
US$(42,966)
------------
</TABLE>
<TABLE>
<S> <C> <C>
EUR -- Euro
US$ -- U.S. Dollar
</TABLE>
5. SWAP AGREEMENTS. At March 31, 2000, the Advisory Mortgage Portfolio had the
following open Interest Rate Swap Agreements:
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
- ---------------------------------------------------------------
<C> <S> <C>
$115,000 Agreement with Bankers Trust
Company terminating August 25,
2008 to pay 3 month LIBOR
quarterly and to receive fixed
rate at 6.04% semiannually. $ (8,722)
50,000 Agreement with Bankers Trust
Company terminating August 27,
2008 to pay 3 month LIBOR monthly
and to receive fixed rate at
6.08% semiannually. (3,647)
116,000 Agreement with Bankers Trust
Company terminating August 27,
2008 to pay 3 month LIBOR
quarterly and to receive fixed
rate at 6.10% semiannually. (8,353)
29,000 Agreement with Bankers Trust
Company terminating August 28,
2008 to pay 3 month LIBOR monthly
and to receive fixed rate at
6.03% semiannually. (2,215)
47,500 Agreement with Bankers Trust
Company terminating September 17,
2008 to pay 3 month LIBOR
quarterly and to receive fixed
rate at 5.64% semiannually. (4,802)
78,000 Agreement with Bankers Trust
Company terminating September 21,
2008 to pay 3 month LIBOR
quarterly and to receive fixed
rate at 5.59% semiannually. (8,134)
462,000 Agreement with Goldman Sachs
terminating March 24, 2010 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.29%
semiannually. (628)
124,350 Agreement with Salomon Brothers
terminating March 24, 2010 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.29%
semiannually. 180
290,000 Agreement with Salomon Brothers
terminating February 10, 2030 to
pay 3 month LIBOR quarterly and
to receive fixed rate at 7.26%
semiannually. 1,476
222,000 Agreement with Goldman Sachs
terminating March 2, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.36%
semiannually. 4,071
120,250 Agreement with Goldman Sachs
terminating March 3, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.34%
semiannually. 1,831
106,000 Agreement with Goldman Sachs
terminating March 9, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.31%
semiannually. 1,229
120,900 Agreement with Salomon Brothers
terminating March 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.29%
semiannually. 1,152
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
- ---------------------------------------------------------------
<C> <S> <C>
$127,000 Agreement with Salomon Brothers
terminating March 13, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.27%
semiannually. $ 945
--------
$(25,617)
----------
</TABLE>
LIBOR -- London Interbank Offer Rate
H. EXPENSE OFFSETS. Custodian fees appearing in the Statement of Operations
have been adjusted to include expense offsets for custodian balance credits of
$152,000 for the Advisory Mortgage Portfolio.
I. OTHER. At March 31, 2000, the Advisory Foreign Fixed Income Portfolio had 1
unaffiliated record owner of 10% or greater. Investment activities of this
shareholder could have a material impact on the Portfolio.
- --------------------------------------------------------------------------------
22
<PAGE> 25
MAS FUNDS TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following is a list of the Trustees and the principal executive officers of
the Fund as well as a brief statement of their present positions and principal
occupations:
THOMAS L. BENNETT, CFA*
Chairman of the Board of Trustees; Managing Director, Morgan Stanley & Co.
Incorporated; Member of the Morgan Stanley Dean Witter Investment Management
Executive Committee; Portfolio Manager and Head of Fixed Income Investment Team,
Miller Anderson & Sherrerd, LLP; Trustee, Haverford School.
THOMAS P. GERRITY
Trustee; Professor of Management, Director of the Electronic Commerce Forum, and
formerly Dean, Wharton School of Business, University of Pennsylvania; Director,
ICG-Commerce, Inc., Investor Force Holdings; Sunoco; Fannie Mae; Reliance Group
Holdings; CVS Corporation; Knight-Ridder, Inc.; Internet Capital Group; formerly
Director, IKON Office Solutions, Inc., Fiserv, Digital Equipment Corporation and
Union Carbide Corporation.
JOSEPH P. HEALY
Trustee; Headmaster, Ethical Culture Fieldston School; Trustee, Springside
School; formerly Headmaster, Haverford School; Dean, Hobart College; Associate
Dean, William & Mary College.
LORRAINE TRUTEN, CFA
President, MAS Funds; Principal, Morgan Stanley & Co. Incorporated; Head of
Mutual Fund Services, Miller Anderson & Sherrerd, LLP; President, MAS Fund
Distribution, Inc.
JAMES A. GALLO
Vice President and Treasurer, MAS Funds; Head of Fund Administration, Miller
Anderson & Sherrerd, LLP; Vice President, Morgan Stanley & Co. Incorporated;
formerly Vice President and Director of Investment Accounting, PFPC, Inc.
JOSEPH J. KEARNS
Trustee; Investment Consultant; Director, Electro Rent Corporation; Trustee,
Southern California Edison Nuclear Decommissioning Trust; Director, The Ford
Family Foundation; formerly, CFO of The J. Paul Getty Trust.
VINCENT R. MCLEAN
Trustee; Director, Legal and General America, Inc.; Director, Banner Life
Insurance Co.; Director, William Penn Life Insurance Company of New York;
formerly Executive Vice President, Chief Financial Officer, Director and Member
of the Executive Committee of Sperry Corporation (now part of Unisys
Corporation).
C. OSCAR MORONG, JR.
Trustee; Managing Director, Morong Capital Management; Director, CitiFunds,
CitiSelect Folios and related portfolios; formerly Senior Vice President and
Investment Manager for CREF, TIAA-CREF Investment Management, Inc.; Director,
The Indonesia Fund and the Landmark Funds; Director, Ministers and Missionaries
Benefit Board of American Baptist Churches.
RICHARD J. SHOCH
Secretary, MAS Funds; Fund Administration Manager, Miller Anderson & Sherrerd,
LLP; Vice President, Morgan Stanley & Co. Incorporated; formerly Counsel, Vice
President and Assistant Secretary, SEI Corporation.
*Trustee Bennett is deemed to be an "interested person" of the Fund as that term
is defined in the Investment Company Act of 1940, as amended.
This report should be preceded or accompanied by a prospectus.
MAS Fund Distribution, Inc. serves as General Distribution Agent for MAS Funds.
Date of first use: May, 2000
- --------------------------------------------------------------------------------
<PAGE> 26
[MAS LOGO]
[MAS ADDRESS]
Printed in U.S.A
This Report has been prepared for
shareholders and may be distributed to
others only if preceded or accompanied by a
current prospectus.
