<PAGE> 1
[MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT LOGO]
Miller Anderson & Sherrerd, LLP
2000 Annual Report
September 30, 2000
VALUE PORTFOLIO
SMALL CAP VALUE PORTFOLIO
MID CAP GROWTH PORTFOLIO
SMALL CAP GROWTH PORTFOLIO
FIXED INCOME PORTFOLIO
DOMESTIC FIXED INCOME PORTFOLIO
[MAS FUNDS LOGO]
<PAGE> 2
MAS Funds is pleased to present the Annual Report for the Portfolios as of
September 30, 2000. Please call your client service representative at
800-354-8185 with any questions regarding this report.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Chairman's Letter................................ 1
MAS Overview and Statement of Net Assets
Value Portfolio................................ 3
Small Cap Value Portfolio...................... 9
Mid Cap Growth Portfolio....................... 16
Small Cap Growth Portfolio..................... 22
Core Fixed Income Distinguishing
Characteristics and General Strategy........ 28
Fixed Income Portfolio...................... 29
Domestic Fixed Income Portfolio............. 45
Statement of Operations.......................... 59
Statement of Changes in Net Assets............... 61
Financial Highlights............................. 64
Notes to Financial Statements.................... 75
Independent Auditors' Report..................... 86
</TABLE>
THIS ANNUAL REPORT CONTAINS CERTAIN INVESTMENT RETURN INFORMATION. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH EITHER MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 3
CHAIRMAN'S LETTER
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DEAR FELLOW SHAREHOLDERS,
We are pleased to present the MAS Funds Annual Report for the one-year period
ended September 30, 2000. The MAS Funds currently offers 24 portfolios (6 of
which are discussed in this report) that provide investors with a diverse array
of equity, fixed-income, and asset-allocated products. In this report, you will
find portfolio manager commentary, performance statistics, and a complete list
of holdings for each of the Funds' portfolios.
Fiscal 2000 represented a broadening of the recent strong performance of the
U.S. equity markets. After experiencing gains greater than 20% in fiscal 1995,
1996, 1997, and 1999, the S&P 500 Index returned a more modest 13.3% during the
year ended 9/30/2000. However, smaller stocks showed impressive strength during
the period. Mid-cap stocks, as represented by the S&P MidCap 400 Index, returned
43.2%, and small-cap stocks, as represented by the Russell 2000 Index, returned
23.4%.
The equity markets also witnessed a dramatic rotation in style leadership.
Growth stocks had greatly outperformed value stocks during the first five months
of the fiscal year. However, from the beginning of March through the end of
September, value asserted itself and outperformed growth, a trend that was
broadly apparent across small-, mid-, and large-cap stocks. This reversal was
likely the result of inflation fears and concern about the Federal Reserve's
goal to slow the U.S. economy. Technology stocks were especially hard hit, as
expectations of a slower economy caused many investors to reassess their future
growth prospects.
The past year was an eventful one for fixed-income markets as well. Domestic
fixed-income markets were flat to negative during the first fiscal quarter, as
the potential for continued above-trend economic growth and the risk of further
Federal Reserve tightening moves forced U.S. interest rates higher. However,
anticipation of an economic slowdown, combined with the announcement of the
Treasury bond buy-back program, helped to bolster fixed-income performance in
the second fiscal quarter. During the last four months of the fiscal year, signs
of a potential "soft landing" for the economy became more apparent, and yield
spreads (after peaking in May) narrowed in the corporate and mortgage sectors.
After a strong first fiscal quarter, high yield bonds underperformed
investment-grade bonds for the remainder of the fiscal year. Supply-demand
dynamics contributed to this weakness: high yield mutual funds experienced large
outflows, while high yield issuers continued to bring new supply to the market.
Finally, returns for non-U.S. bonds on the whole were negative over the past
fiscal year, as most foreign currencies depreciated versus the U.S. dollar.
During this past year, we have introduced enhanced services for Morgan Stanley
Dean Witter institutional investors. Our website -- www.msdw.com/im -- provides
expanded information for all MSDW institutional mutual funds. We are holding an
increasing number of product conference calls, which offer investors a
convenient way to hear directly from our portfolio managers. We also opened a
new portfolio, Strategic Small Value, which is managed by our Small Cap Value
Team against the Russell 2000
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Value Index. Please request a prospectus if you are considering investing in
this portfolio; it contains more complete information about the portfolio,
including risks, charges, and expenses.
In addition, Morgan Stanley Dean Witter recently announced plans to realign its
Asset Management division, of which MAS Funds is a part. The division is now
organized by function, and operates within six core business units. The goal is
to use firm-wide resources wisely and to manage the business with greater
efficiency and flexibility. We believe that by doing so, we can better take
advantage of the full resources of the firm, responding to the needs of our
increasingly diverse client base.
We hope that you will find this report informative, and we very much appreciate
your support of MAS Funds. As always, please call your client service contact
with any questions regarding this report or any of our portfolios.
Sincerely,
/s/ Thomas L. Bennett
Thomas L. Bennett
Chairman
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2
<PAGE> 5
PORTFOLIO OVERVIEW
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VALUE PORTFOLIO
The Value Portfolio combines Miller Anderson & Sherrerd's disciplined stock
valuation process with the judgment gained through considerable experience in
low-P/E investing.
MAS's process is executed in two stages. An initial screen identifies companies
with flat or positive earnings growth which have underperformed the broad market
averages, and whose valuations fall into the lower segment of MAS's investment
universe. In the second stage, fundamental analysis is used to determine the
cyclical sustainability of earnings and the competitive dynamics of the company.
This approach is fortified by attention to risk management. MAS emphasizes
portfolio diversification in terms of both sectors and stocks. Maximum sector
and position limitations are imposed, thereby minimizing the risk of any sector
or holding.
MAS also utilizes a clearly defined, firmly enforced sell discipline. Many value
managers who are able to identify outstanding securities err in holding
successful investments past their peaks. Perhaps the greatest strategic
advantage of the MAS approach is that the sell discipline mandates the sale of
any stock that satisfies one or more of the three sell criteria--price
appreciation, earnings deterioration, or negative fundamental change.
The past few years have been difficult for low P/E value investing, and this
difficult environment continued in the Portfolio's current fiscal year. The
total return of the MAS Funds Value Portfolio was 9.67% for the period ended
September 30, 2000, as compared to 13.27% for the S&P 500.
The disappointing performance of low P/E, value stocks in recent years appears
to be the result of the following "logic" of market participants. Investors
should own companies which appear to offer growth or improving fundamentals
irrespective of valuations. Most low P/E companies seem to represent only broken
growth businesses or companies with cyclically peak profits. This "logic"
implies that these companies simply represent failing businesses or value traps.
Therefore, it follows that there is no valuation at which a company with
negative earnings estimate revisions or cyclically high profit margins should be
purchased. In fact, typically, the lower the current valuation, the larger the
fundamental problem must be that looms ahead.
This "logic" also implies that highly valued shares represent just the opposite
opportunity, since high growth companies or businesses have the potential for a
major cyclical improvement in fundamentals. Thus, there seems to be no "logical"
valuation limit at which a compelling growth story or cyclical turnaround should
be avoided. In fact, what is implied is that the higher a company's valuation,
the larger its opportunity for growth must be. Investors' expectation that
highly valued stocks will consistently outperform has been historically
incorrect; but recently, it has evolved into a self-fulfilling prophecy. In
other words, momentum rules. Low valuations are either irrelevant or a negative.
Investors are not just apathetic towards valuations, they tend to be downright
hostile towards companies that have low ones. This type of environment has made
it difficult for value investors, especially for low P/E investors like the
Portfolio, to perform well relative to their benchmarks.
The Portfolio's investment strategy has consistently reflected a commitment to
low P/E investing. At fiscal year-end, the Portfolio's largest sector exposures
included those with economic sensitivity such as consumer durables, capital
goods, basic materials, and transportation companies. Though interest rates
continued to creep higher, MAS felt that most of the Portfolio's companies in
these sectors would benefit from a still healthy domestic economy and improving
global economic activity. The average cyclical company in the Portfolio, be it a
shallow or deep cyclical, traded for under ten times earnings, generated
significant free cash flow, and probably had meaningful foreign exposure.
Non-cyclical sector overweightings included financial services and health care
services. In fact, health care comprised a significant overweight compared to
the low P/E universe and the popular value benchmarks. Two industries
represented the bulk of the Portfolio's position in health care: hospital
management companies and managed care companies. Hospital management companies
have been moderate but consistent growers generating healthy free cash flow and
trading at deep discounts to the index. Recent actions in Washington to raise
reimbursement levels, as well as better pricing flexibility for HMOs, should
provide hospitals with the opportunity to increase revenues and profit margins.
Managed care companies have suffered from somewhat overstated political and
legal concerns, while business conditions have been quite healthy. Recent
fundamentals have been characterized by
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<PAGE> 6
PORTFOLIO OVERVIEW
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strong pricing, continued reasonable unit growth, and further industry
consolidation.
Notable underweightings in the Portfolio throughout the year have been in the
technology, energy, utilities, and consumer services sectors. At fiscal
year-end, technology was the largest underweight relative to the benchmark S&P
500. Historically, the MAS Value Portfolio has been predisposed to own low P/E
technology companies. Frequently, they can offer some of the best secular
revenue growth opportunities in the low P/E universe. However, the recent high
valuations for most technology companies generally precluded their inclusion in
this low P/E Portfolio.
Portfolio characteristics have been, and at fiscal year-end remained very
favorable in the Portfolio relative to the benchmark index. Weakness in the
technology sector during the latter half of the fiscal year, perhaps signaling a
change in investor psychology, was a strong positive for the Portfolio. If
investor sentiment continues to shift and the reasonable valuations within the
low P/E universe are recognized, the Portfolio should be well positioned to
benefit.
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4
<PAGE> 7
PORTFOLIO OVERVIEW
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GROWTH OF A $1 MILLION INVESTMENT OVER 10 YEARS
[LINE GRAPH]
<TABLE>
<CAPTION>
MAS VALUE
INSTITUTIONAL MAS VALUE INVESTMENT MAS VALUE ADVISER S&P 500
------------- -------------------- ----------------- -------
<S> <C> <C> <C> <C>
90 1000.00 1000.00
91 1455.00 1312.00
92 1642.00 1457.00
93 1965.00 1646.00
94 2111.00 1707.00
95 2799.00 2214.00
96 3315.00 2664.00
97 4682.00 3742.00
98 3914.00 4080.00
99 4239.00 5215.00
00 4649.00 4618.00 4599.00 5907.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS VALUE
------------------------------------------
INSTITUTIONAL (=) INVESTMENT (-) ADVISER (/) S&P 500 INDEX
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 9.67% 9.50% 9.31% 13.27%
Five Years 10.68% 10.53% 10.44% 21.68%
Ten Years 16.61% 16.53% 16.48% 19.44%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
(=) Represents an investment in the Institutional Class.
(-) Represents an investment in the Investment Class which commenced operations
5/6/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
(/) Represents an investment in the Adviser Class which commenced operations
7/17/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25%
12b-1 Fee applicable to the Adviser Class.
Total returns for the Investment Class of the Portfolio reflect expenses
reimbursed by the Adviser for certain periods. Without such reimbursements,
total returns would have been lower.
* Total returns are compared to the S&P 500 Index, an unmanaged market
index.
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5
<PAGE> 8
STATEMENT OF NET ASSETS
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VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (97.4%)
<TABLE>
<CAPTION>
-----------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
BANKS (13.0%)
Bank of America Corp. 290,000 $ 15,189
Bank One Corp. 262,800 10,151
Chase Manhattan Corp. 587,809 27,149
First Union Corp. 172,413 5,550
FleetBoston Financial Corp. 406,858 15,867
PNC Bank Corp. 349,500 22,718
Washington Mutual, Inc. 835,200 33,251
-----------------------------------------------------
GROUP TOTAL 129,875
-----------------------------------------------------
BASIC RESOURCES (4.7%)
Eastman Chemical Co. 216,100 7,982
Engelhard Corp. 657,800 10,689
IMC Global, Inc. 518,394 7,517
International Paper Co. 98,500 2,826
Lubrizol Corp. 510,200 10,045
Solutia, Inc. 419,200 4,768
Weyerhaeuser Co. 76,800 3,101
-----------------------------------------------------
GROUP TOTAL 46,928
-----------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (1.0%)
Fortune Brands, Inc. 369,000 9,778
-----------------------------------------------------
CONSUMER DURABLES (7.9%)
Black & Decker Corp. 395,700 13,528
Dana Corp. 339,151 7,292
Ford Motor Company 834,515 21,124
Masco Corp. 720,000 13,410
Maytag Corp. 264,000 8,200
Owens Corning 615,941 1,617
Whirlpool Corp. 354,800 13,793
-----------------------------------------------------
GROUP TOTAL 78,964
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
-----------------------------------------------------
<S> <C> <C>
CREDIT & FINANCE/ INVESTMENT
COMPANIES (3.7%)
Associates First Capital Corp. 210,200 $ 7,988
Citigroup, Inc. 198,533 10,733
Federal Home Loan Mortgage
Corp. 98,000 5,298
Federal National Mortgage
Association 77,600 5,548
Household International, Inc. 127,700 7,231
-----------------------------------------------------
GROUP TOTAL 36,798
-----------------------------------------------------
ENERGY (2.0%)
Texaco, Inc. 179,600 9,429
USX-Marathon Group, Inc. 376,700 10,689
-----------------------------------------------------
GROUP TOTAL 20,118
-----------------------------------------------------
FOOD, TOBACCO & OTHER (1.1%)
IBP, Inc. 581,503 10,649
-----------------------------------------------------
HEALTH CARE (15.2%)
Aetna, Inc. 148,000 8,593
Bausch & Lomb, Inc. 140,800 5,482
Beckman Coulter, Inc. 214,299 16,528
* Foundation Health Systems,
Inc., Class A 1,671,384 27,787
* HEALTHSOUTH Corp. 5,846,300 47,501
*@ LifePoint Hospitals, Inc. 1 --
Tenet Healthcare Corp. 1,231,800 44,807
*@ Triad Hospitals, Inc. 1 --
Visteon Corp. 61,305 927
-----------------------------------------------------
GROUP TOTAL 151,625
-----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (14.9%)
* AMR Corp. 307,480 10,051
Burlington Northern Santa Fe,
Inc. 166,900 3,599
CNF Transportation, Inc. 268,500 5,974
Cooper Industries, Inc. 410,300 14,463
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
<PAGE> 9
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
Cummins Engine Co., Inc. 599,186 $ 17,938
Delta Air Lines, Inc. 363,200 16,117
Eaton Corp. 182,602 11,253
Honeywell International, Inc. 502,100 17,887
* Navistar International Corp. 195,400 5,850
Parker-Hannifin Corp. 668,037 22,546
Tecumseh Products Co., Class A 241,976 10,133
TRW, Inc. 151,418 6,151
Waste Management, Inc. 373,500 6,513
-----------------------------------------------------
GROUP TOTAL 148,475
-----------------------------------------------------
INSURANCE (8.1%)
Ace Ltd. 511,300 20,069
Allstate Corp. 364,440 12,664
American General Corp. 210,255 16,400
Everest Reinsurance Group,
Ltd. 240,091 11,885
Hartford Financial Services
Group, Inc. 215,506 15,718
UnumProvident Corp. 150,500 4,101
-----------------------------------------------------
GROUP TOTAL 80,837
-----------------------------------------------------
RESTAURANTS (1.5%)
* Tricon Global Restaurants,
Inc. 475,100 14,550
-----------------------------------------------------
RETAIL (6.1%)
* Jones Apparel Group, Inc. 364,500 9,659
Liz Claiborne, Inc. 800,500 30,819
* Toys 'R' Us, Inc. 503,651 8,184
V.F. Corp. 469,406 11,589
-----------------------------------------------------
GROUP TOTAL 60,251
-----------------------------------------------------
TECHNOLOGY (11.9%)
* Arrow Electronics, Inc. 497,800 16,956
Avnet, Inc. 429,200 12,179
Computer Associations
International, Inc. 176,300 4,440
First Data Corp. 472,400 18,453
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
* National Semiconductor Corp. 274,100 $ 11,033
* Quantum Corp.-DLT & Storage
Systems 3,078,200 46,365
Sabre Group Holdings, Inc. 222,081 6,427
Xerox Corp. 214,400 3,229
-----------------------------------------------------
GROUP TOTAL 119,082
-----------------------------------------------------
UTILITIES (6.3%)
AT&T Corp. 280,200 8,231
Duke Energy Corp. 53,322 4,572
SBC Communications, Inc. 552,100 27,605
Verizon Communications 464,060 22,478
-----------------------------------------------------
GROUP TOTAL 62,886
-----------------------------------------------------
TOTAL COMMON STOCKS (Cost $918,835) 970,816
-----------------------------------------------------
CASH EQUIVALENT (2.0%)
-----------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
---------
<S> <C> <C>
REPURCHASE AGREEMENT (2.0%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00,
to be repurchased at
$20,076, collateralized by
various U.S. Government
Obligations, due
11/2/00-3/29/01, valued at
$20,266 (Cost $20,065) $ 20,065 20,065
-----------------------------------------------------
TOTAL INVESTMENTS (99.4%) (Cost $938,900) 990,881
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
<PAGE> 10
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)(+)
-----------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (0.6%)
Dividends Receivable $ 875
Interest Receivable 7
Receivable for Investments Sold 8,222
Receivable for Fund Shares Sold 3,355
Investments Held as Collateral for Loaned
Securities 111,224
Other Assets 247
Payable for Investments Purchased (2,596)
Payable for Fund Shares Redeemed (2,905)
Payable for Investment Advisory Fees (1,222)
Payable for Administrative Fees (65)
Payable for Distribution Fees-Adviser
Class (62)
Payable for Shareholder Servicing
Fees-Investment Class (1)
Payable for Trustees' Deferred
Compensation Plan-Note F (227)
Collateral on Securities Loaned, at Value (111,224)
Other Liabilities (84)
----------
5,544
-----------------------------------------------------
NET ASSETS (100%) $ 996,425
-----------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 53,721,825 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 690,859
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.86
-----------------------------------------------------
INVESTMENT CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 316,518 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 4,069
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.86
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
-----------------------------------------------------
<S> <C>
ADVISER CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 23,490,837 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 301,497
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 12.83
-----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $1,048,476
Undistributed Net Investment Income
(Loss) 3,037
Undistributed Realized Net Gain (Loss) (107,069)
Unrealized Appreciation (Depreciation) on
Investment Securities 51,981
-----------------------------------------------------
NET ASSETS $ 996,425
-----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) See Note A1 to Financial Statements.
* Non-income producing security
@ Value is less than $500.
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
<PAGE> 11
PORTFOLIO OVERVIEW
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SMALL CAP VALUE PORTFOLIO
The Small Cap Value Portfolio applies Miller Anderson & Sherrerd's value
investment philosophy to the small- and medium-sized equity universe, combining
fundamental research with a disciplined, quantitative investment process. MAS
generally keeps sector weights within five percentage points of those of the
Russell 2000 Index, with strategic over- and under-weightings assigned to
different sectors based on their relative investment attractiveness. Decisions
about portfolio composition and structure are made by a team of MAS equity
professionals who specialize in the small- and mid-cap market segments.
MAS's investment process is driven chiefly by bottom-up considerations, although
broad macroeconomic trends that influence the outlook for certain industries are
taken into account in the decision-making process. As a value-oriented fund, the
Portfolio emphasizes stocks with below-average valuations. However, unlike many
value strategies, MAS's methodology also includes additional quality and growth
factors such as the expected future growth in earnings and dividends, the recent
pattern of earnings estimate revisions and subjective judgments regarding the
quality of a company's business franchise. As a result, the Portfolio will
generally look similar to the Russell 2000 Index in the quality and growth
characteristics of its holdings, while the overall valuation of the Portfolio
will generally be lower.
Fiscal year 2000 was a volatile period for the equity markets. During the
period, small-cap cap stocks, as represented by the Russell 2000 Index,
appreciated over 20% and outperformed large cap stocks. However, the majority of
the gains were generated during the first half of the period. During the second
half, the equity markets were plagued by a slowing U.S. economy and a reduction
in technology spending. Over the full fiscal year, growth stocks outperformed
value stocks, and the valuation gap between growth and value remained wide at
fiscal year-end. However, during calendar 2000, the valuation gap narrowed as
value stocks outperformed growth stocks led by strong gains within Financial
Services.
During the past twelve months the Portfolio slightly underperformed the Russell
2000 Index. Stock selection was the primary driver of underperformance during
the period, while sector allocation added to results. Stock selection was the
strongest within financial services, health care, and energy. Everest Re,
Investors Financial Services, and Reliastar Financial were strong performers
within financial services, while Cell Pathways and Teva Pharmaceutical were top
contributors to performance within health care. During the period, the Portfolio
had greater-than-index exposure to energy, which enhanced results, and Ensco
International, Global Marine, and BJ Services were strong performers within the
sector.
Technology was the most significant detractor during the period. The Portfolio's
underweight position during a strong rally in June 2000 hurt results, as did
overweight positions in Aperian, Inc., Unify Corp., and Genrad Inc. Sandisk
Corp. and DMC Stratex Networks were the top performers within Technology for the
period. Additionally, stock selection within heavy industry dampened returns, as
Wabash National, Central Hudson, and Modis Professional Services posted weak
results. Less-than-index exposure to financial services, consumer durables, and
retail had a favorable impact on results, while an underweight position in
utilities detracted from performance.
The Portfolio's energy position was reduced on strength, and exposure to
financial services was increased. At fiscal year-end, the Portfolio maintained
an underweight position in technology due to valuation levels and volatility
within the sector. MAS expected sustained market volatility due to economic
uncertainty and continued to look for value opportunities on an industry-
by-industry basis.
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9
<PAGE> 12
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
GROWTH OF A $1 MILLION INVESTMENT OVER 10 YEARS
<TABLE>
<CAPTION>
MAS SMALL CAP VALUE RUSSELL 2000
------------------- ------------
<S> <C> <C> <C>
90 1000.00 1000.00
91 1631.00 1451.00
92 1861.00 1581.00
93 2563.00 2105.00
94 2769.00 2160.00
95 3278.00 2666.00
96 4065.00 3016.00
97 6089.00 4017.00
98 4972.00 3253.00
99 6158.00 3874.00
00 7581.00 7563.00 4780.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS SMALL CAP VALUE
----------------------------
INSTITUTIONAL (=) ADVISER (/) RUSSELL 2000
---------------------------------------------------------------------
<S> <C> <C> <C>
One Year 23.11% 22.83% 23.39%
Five Years 18.25% 18.20% 12.38%
Ten Years 22.45% 22.42% 16.93%
</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. Generally speaking, small-capitalization stock prices
experience a greater degree of market volatility than those of
large-capitalization companies.
(=) Represents an investment in the Institutional Class.
(/) Represents an investment in the Adviser Class which commenced operations
1/22/99. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25%
12b-1 Fee applicable to the Adviser Class.
Total returns are compared to the Russell 2000 Index, an unmanaged market
index.
The Portfolio's holdings in Everest Re (1.8%), Investors Financial Services
(0.8%), Reliastar Financial (0.0%), Cell Pathways (0.0%), Teva
Pharmaceutical (1.0%), Ensco International (0.4%), Global Marine (0.5%), BJ
Services (0.0%), Aperian Inc. (0.1%), Unify Corp (0.1%), Genrad Inc. (0.0%),
Sandisk Corp. (0.3%), DMC Stratex Networks (0.0%), Wabash National (0.3%),
Central Hudson (0.0%), and Modis Professional Services (0.2%) as of 9/30/00.
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10
<PAGE> 13
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (90.0%)
<TABLE>
<CAPTION>
-----------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
BANKS (5.6%)
@ AmSouth Bancorp 1 $ --
Bank United Corp., Class A 303,900 15,404
Dime Bancorp, Inc. 114,100 2,460
First Tennessee National Corp. 21,500 440
Golden State Bancorp, Inc. 778,500 18,392
Hudson United Bancorp 336,728 9,302
* Imperial Bancorp, Inc. 467,500 8,941
Mercantile Bankshares Corp. 95,599 3,470
Sovereign Bancorp, Inc. 331,700 3,068
TCF Financial Corp. 326,700 12,292
@ Union Planters Corp. 3 --
-----------------------------------------------------
GROUP TOTAL 73,769
-----------------------------------------------------
BASIC RESOURCES (4.3%)
Agnico-Eagle Mines Ltd. 1,361,100 7,911
Boise Cascade Corp. 93,100 2,473
Equitable Resources, Inc. 141,900 8,993
* Freeport-McMoRan Copper &
Gold, Inc., Class B 725,800 6,396
* Gaylord Container Corp.,
Class A 296,700 501
* Inco Ltd. 163,400 2,635
* Lone Star Technologies, Inc. 180,400 8,325
Phelps Dodge Corp. 76,900 3,211
* Stillwater Mining Co. 156,650 4,240
* W.R. Grace & Co. 447,100 3,074
Wellman, Inc. 379,900 5,485
Westvaco Corp. 136,900 3,654
-----------------------------------------------------
GROUP TOTAL 56,898
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
-----------------------------------------------------
<S> <C> <C>
BEVERAGE & PERSONAL PRODUCTS (1.0%)
Beringer Wine Estates
Holdings, Inc., Class B 98,500 $ 5,473
* Constellation Brands, Inc. 50,400 2,737
* Suiza Foods Corp. 104,700 5,307
-----------------------------------------------------
GROUP TOTAL 13,517
-----------------------------------------------------
CONSUMER DURABLES (3.8%)
Callaway Golf Co. 513,100 7,889
D.R. Horton, Inc. 350,980 6,032
Fastenal Co. 46,400 2,674
* Furniture Brands
International, Inc. 275,300 4,577
* JAKKS Pacific, Inc. 117,700 1,107
* Lear Corp. 351,400 7,226
Lennar Corp. 126,400 3,752
* NVR, Inc. 37,900 3,070
* Toll Brothers, Inc. 202,700 6,968
* Tower Automotive, Inc. 702,000 6,581
-----------------------------------------------------
GROUP TOTAL 49,876
-----------------------------------------------------
CONSUMER SERVICES (3.8%)
* Bally Total Fitness Holding
Corp. 853,100 21,327
Convergys Corp. 51,000 1,983
* Corinthian Colleges, Inc. 39,900 2,354
FelCor Lodging Trust, Inc.
REIT 180,100 4,165
* Hall Kinion & Associates,
Inc. 64,200 1,826
* Havas Advertising S.A. 127,544 1,865
* kforce.com, Inc. 352,300 1,233
Reynolds & Reynolds Co. 162,100 3,222
True North Communications,
Inc. 70,400 2,517
* Twinlab Corp. 337,200 1,475
* Valassis Communications,
Inc. 112,450 2,502
* Wireless Facilities, Inc. 86,000 4,961
-----------------------------------------------------
GROUP TOTAL 49,430
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
11
<PAGE> 14
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
CREDIT & FINANCE/
INVESTMENT COMPANIES (6.3%)
* Affliated Managers Group,
Inc. 57,300 $ 3,263
* AmeriCredit Corp. 120,500 3,472
Dain Rauscher Corp. 49,000 4,557
Eaton Vance Corp. 148,500 7,573
Edwards (A.G.), Inc. 46,800 2,448
* Investment Technology Group,
Inc. 69,300 2,768
Investors Financial Services
Corp. 170,300 10,750
Metris Cos., Inc. 173,100 6,837
Price (T. Rowe) Associates,
Inc. 279,600 13,124
Radian Group, Inc. 330,500 22,309
The PMI Group, Inc. 85,800 5,813
-----------------------------------------------------
GROUP TOTAL 82,914
-----------------------------------------------------
ENERGY (3.9%)
ENSCO International, Inc. 136,400 5,217
* Global Industries Ltd. 334,800 4,185
* Global Marine, Inc. 203,500 6,283
* Nabors Industries, Inc. 52,300 2,741
* National-Oilwell, Inc. 166,700 5,209
* Ocean Energy, Inc. 302,564 4,671
* Patterson Energy, Inc. 143,200 4,923
* Precision Drilling Corp. 171,600 6,113
* R & B Falcon Corp. 153,200 4,270
* Rowan Cos., Inc. 167,900 4,869
* Smith International, Inc. 32,300 2,635
-----------------------------------------------------
GROUP TOTAL 51,116
-----------------------------------------------------
FOOD, TOBACCO & OTHER (2.2%)
Earthgrains Co. 201,400 3,713
Flowers Industries, Inc. 188,300 3,672
* Fresh Del Monte Produce,
Inc. 451,900 2,966
* NBTY, Inc. 1,921,800 12,552
Universal Corp. 100,600 2,955
Universal Foods Corp. 178,600 3,639
-----------------------------------------------------
GROUP TOTAL 29,497
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
HEALTH CARE (14.1%)
Alpharma, Inc., Class A 210,300 $ 12,854
* Antigenics, Inc./Del 65,000 959
Apria Healthcare Group, Inc. 289,300 4,032
* Bruker Daltonics, Inc. 162,300 7,202
* Celgene Corp. 100,000 5,950
* Cephalon, Inc. 155,400 7,537
* COR Therapeutics, Inc. 147,800 9,210
* Digene Corp. 111,300 4,007
* Endocare, Inc. 215,600 4,258
* First Health Group Corp. 109,200 3,522
* Foundation Health Systems,
Inc., Class A 705,500 11,729
* Gilead Sciences, Inc. 78,300 8,588
Health Management Associates,
Inc., Class A 248,100 5,164
ImClone Systems, Inc. 57,000 6,672
* Intermune Pharmaceuticals,
Inc. 194,300 10,541
* Invitrogen Corp. 127,300 9,054
Lincare Holdings, Inc. 70,200 2,014
* Medicis Pharmaceutical Corp. 85,400 5,252
* Mettler-Toledo
International, Inc. 72,200 3,177
Mylan Laboratories, Inc. 224,900 6,058
* Neopharm, Inc. 101,900 4,025
PerkinElmer, Inc. 44,800 4,676
Quest Diagnostics, Inc. 52,000 5,967
* St. Jude Medical, Inc. 64,700 3,300
* Sybron International Corp. 285,400 6,850
* Telik, Inc. 181,900 1,660
Teva Pharmaceutical Industries
Ltd. ADR 184,900 13,532
* Transkaryotic Therapies,
Inc. 69,300 2,984
* Trigon Healthcare, Inc. 65,100 3,422
* United Therapeutics Corp. 63,000 5,505
* Universal Health Services,
Inc., Class B 73,800 6,319
-----------------------------------------------------
GROUP TOTAL 186,020
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
12
<PAGE> 15
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
HEAVY INDUSTRY/TRANSPORTATION (10.3%)
* Actuant Corp. 200,100 $ 788
* American Superconductor
Corp. 58,300 2,866
* Amphenol Corp., Class A 28,600 1,628
* APW Ltd. 202,000 9,847
* Astec Industries, Inc. 212,200 2,321
CNH Global N.V. 296,400 2,964
* Cognex Corp. 58,200 2,295
Dycom Industries, Inc. 39,000 1,623
* EGL, Inc. 142,100 4,298
Flextronics International Ltd. 20,800 1,708
ITT Industries, Inc. 100,400 3,257
* Litton Industries, Inc. 144,400 6,453
Manitowoc Co., Inc. 151,600 2,918
Martin Marietta Materials,
Inc. 122,800 4,701
Midwest Express Holdings, Inc. 187,100 3,765
* Modis Professional Services,
Inc. 550,700 2,857
* Navistar International Corp. 158,600 4,748
Newport News Shipbuilding,
Inc. 197,900 8,584
Oshkosh Truck Corp. 140,100 5,429
* Power-One, Inc. 80,800 4,890
Precision Castparts Corp. 157,000 6,025
* Proton Energy Systems, Inc. 11,700 335
Robbins & Myers, Inc. 128,500 3,036
* Sensormatic Electronics
Corp. 207,200 3,108
* Shaw Group, Inc. 92,400 6,514
Skywest, Inc. 148,900 7,631
* Spherion Corp. 259,000 3,092
Stewart & Stevenson Services,
Inc. 67,300 1,174
* Titan Corp. 405,200 6,686
* U.S. Air Group, Inc. 228,700 6,961
USFreightways Corp. 150,100 3,405
* Viasystems Group, Inc. 157,100 2,671
Wabash National Corp. 489,300 4,465
Werner Enterprises, Inc. 220,425 2,590
-----------------------------------------------------
GROUP TOTAL 135,633
-----------------------------------------------------
INSURANCE (4.8%)
Allmerica Financial Corp. 258,800 16,547
Annuity & Life RE Holdings
Ltd. 178,100 4,297
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
Everest Reinsurance Holdings,
Inc. 488,200 $ 24,166
Mony Group, Inc. 173,900 6,934
Old Republic International
Corp. 276,700 6,658
SAFECO Corp. 181,000 4,932
-----------------------------------------------------
GROUP TOTAL 63,534
-----------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (4.8%)
AMB Property Corp. 583,700 14,337
Camden Property Trust 111,300 3,450
CarrAmerica Realty Corp. 136,200 4,120
Chateau Communities, Inc. 121,708 3,263
Cousins Properties, Inc. 95,100 4,095
Duke Realty Investments, Inc. 505,066 12,185
First Industrial Realty Trust 112,100 3,447
Health Care REIT, Inc. 249,869 4,435
Home Properties of N.Y., Inc. 115,822 3,460
Post Properties, Inc. 161,600 7,040
Vornado Realty Trust 89,600 3,327
-----------------------------------------------------
GROUP TOTAL 63,159
-----------------------------------------------------
RETAIL (6.4%)
* American Eagle Outfitters 154,300 4,861
Applebee's International, Inc. 115,000 2,645
* Barnes & Noble, Inc. 140,600 2,768
* BJ's Wholesale Club, Inc. 178,200 6,081
* Borders Group, Inc. 342,700 4,776
* Brinker International, Inc. 211,200 6,362
* Children's Place Retail
Stores, Inc. 219,300 5,647
Darden Restaurants, Inc. 375,200 7,809
* Dress Barn (The), Inc. 66,800 1,403
* Electronics Boutique
Holdings Corp. 180,900 3,889
* Global Sports, Inc. 183,800 1,447
* Michaels Stores, Inc. 191,400 7,656
Pier 1 Imports, Inc. 673,100 9,129
* Reebok International, Ltd. 112,900 2,124
* Sunglass Hut International,
Inc. 1,041,500 6,802
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
13
<PAGE> 16
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
* Venator Group, Inc. 361,900 $ 4,479
* Zale Corp. 175,000 5,677
-----------------------------------------------------
GROUP TOTAL 83,555
-----------------------------------------------------
TECHNOLOGY (14.9%)
* Actel Corp. 89,000 3,198
* Advanced Radio Telecom Corp. 277,700 2,360
* Advent Software, Inc. 35,800 2,493
* Aeroflex, Inc. 80,100 3,895
* Andrew Corp. 203,900 5,340
*++ Aperian, Inc. 165,898 863
* Avocent Corp. 86,200 4,752
Belden, Inc. 139,400 3,293
* Braun Consulting 171,700 3,402
* Broadbase Software, Inc. 132,700 1,800
* Cable Design Technologies
Corp. 78,900 1,918
Coherent, Inc. 27,500 1,870
* Commerce One, Inc. 92,180 7,236
*++ Diversinet Corp. 357,143 1,661
* DuPont Photomasks, Inc. 76,700 4,506
* Efficient Networks, Inc. 59,600 2,224
* Exar Corp. 48,050 5,814
FileNET Corp. 52,700 958
* FSI International, Inc. 234,000 3,335
GaSonics International Corp. 75,800 929
* Informatica Corp. 52,400 4,886
* International Rectifier
Corp. 107,800 5,451
* Internet Security Systems 37,500 2,817
* Interwoven, Inc. 69,600 7,869
* M-Systems Flash Disk
Pioneers Ltd. 70,600 2,696
* Manugistics Group, Inc. 43,500 4,268
* Micromuse, Inc. 18,000 3,617
* MIPS Technologies, Inc. 99,500 3,831
* MMC Networks, Inc. 89,300 11,296
* MRV Communications, Inc. 34,700 1,572
* Natural Microsystems Corp. 37,800 2,034
* NETIQ Corp. 57,100 3,751
Netro Corp. 33,600 1,991
* Network Associates, Inc. 227,900 5,156
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
* Optimal Robotics Corp. 244,100 $ 9,825
* Packeteer, Inc. 47,100 1,787
* PC-Tel , Inc. 186,800 4,343
Powerwave Technologies, Inc. 85,800 3,258
* Proxim, Inc. 56,400 2,510
* Quantum Corp.-DLT & Storage
Systems 584,100 8,798
* SanDisk Corp. 56,900 3,798
* Satcon Technology Corp. 83,900 2,999
Silicon Storage Technology,
Inc. 271,300 7,376
* Silicon Valley Group, Inc. 66,300 1,745
* Terayon Communication
Systems, Inc. 164,800 5,593
*++ Unify Corp. 662,700 1,305
* Varian Semiconductor
Equipment Associates, Inc. 82,300 3,081
* Verity, Inc. 86,200 3,076
* WebTrends Corp. 70,400 2,631
* WorldGate Communications,
Inc. 293,500 6,163
I2 Technologies, Inc. 22,100 4,134
-----------------------------------------------------
GROUP TOTAL 195,504
-----------------------------------------------------
UTILITIES (3.8%)
* Adelphia Business Solutions,
Inc. 138,600 1,637
* Alamosa PCS Holdings, Inc. 140,900 2,281
* Allete 120,000 2,655
Eastern Enterprises 68,200 4,352
Kansas City Power & Light Co. 187,600 5,007
* Leap Wireless International,
Inc. 43,700 2,734
National Fuel Gas Co. 91,400 5,124
Potomac Electric Power Co. 643,000 16,195
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
14
<PAGE> 17
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
Sierra Pacific Resources 257,300 $ 4,631
Western Resources, Inc. 263,300 5,694
-----------------------------------------------------
GROUP TOTAL 50,310
-----------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,066,475) 1,184,732
-----------------------------------------------------
CASH EQUIVALENT (10.9%)
-----------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C>
REPURCHASE AGREEMENT (10.9%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00,
to be repurchased at
$143,413, collateralized by
various U.S. Government
Obligations, due
11/2/00-3/29/01 valued at
$144,771 (Cost $143,337) $ 143,337 143,337
-----------------------------------------------------
TOTAL INVESTMENTS (100.9%) (Cost
$1,209,812) 1,328,069
-----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.9%)
Cash 2,958
Dividends Receivable 724
Interest Receivable 51
Receivable for Investments Sold 16,350
Receivable for Fund Shares Sold 1,243
Other Assets 86
Payable for Investments Purchased (29,473)
Payable for Fund Shares Redeemed (443)
Payable for Investment Advisory Fees (2,424)
Payable for Administrative Fees (87)
Payable for Distribution Fees-Adviser
Class (10)
Payable for Trustees' Deferred
Compensation Plan-Note F (73)
Other Liabilities (92)
----------
(11,190)
-----------------------------------------------------
NET ASSETS (100%) $1,316,879
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
-----------------------------------------------------
<S> <C>
INSTITUTIONAL CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 59,925,249 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $1,269,171
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 21.18
-----------------------------------------------------
ADVISER CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 2,255,576 outstanding
shares of beneficial interest
(unlimited authorization, no par value) $ 47,708
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 21.15
-----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $1,102,573
Undistributed Net Investment Income
(Loss) 2,844
Undistributed Realized Net Gain (Loss) 93,205
Unrealized Appreciation (Depreciation) on
Investment Securities 118,257
-----------------------------------------------------
NET ASSETS $1,316,879
-----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) See Note A1 to Financial Statements.
* Non-income producing security
++ Security is fair valued by the Adviser.
@ Value is less than $500.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
15
<PAGE> 18
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
MID CAP GROWTH PORTFOLIO
The Mid Cap Growth Portfolio seeks to capitalize on the relative inefficiencies
of the small- and mid-cap equity markets. The Portfolio targets companies with
sustainable growth that exceeds market expectations by focusing on those whose
growth surpasses Wall Street analysts' estimates. MAS looks to capture the
return potential of rapidly growing companies while avoiding stocks that are
likely to disappoint. To identify such companies, MAS's mid-cap growth strategy
employs a disciplined four-part process that incorporates quantitative,
fundamental, and valuation analysis, as well as a strict sell discipline.
First, MAS conducts a quantitative screen that sorts the stocks within each
economic sector based on earnings-estimate revisions and growth potential. This
screening process limits investment choices to a statistically advantaged pool.
MAS then conducts extensive fundamental research on a group of eligible stocks
to find candidates for purchase. Only high-quality companies with strong sales
growth, rising profit margins, and high returns on capital are included in the
Portfolio. Qualitative measures are then examined, including management quality
and a company's strategic position within its industry.
MAS supplements fundamental analysis with valuation analysis. In addition to
examining measures such as price/earnings, price/sales, and price/cash flow,
valuation analysis uses a discounted-cash-flow model. Each stock's valuation is
assessed relative to its growth prospects. The goal of this valuation work is to
identify and weed out the most overvalued securities.
The sell discipline mandates an ongoing reevaluation of securities and produces
a portfolio intended to hold only those securities that are currently most
attractive. If a holding falls into one of the bottom two earnings-
estimate-revision quintiles of MAS's universe, it will generally be sold. MAS
often sells stocks when fundamental research uncovers unfavorable trends.
Analysts are often more reluctant to lower estimates than to raise them.
Therefore, companies that are having difficulties may first experience small
negative estimate revisions; such companies are frequently sold before larger
revisions materialize. Finally, holdings are sold or trimmed back when their
valuations exceed the level believed to be reasonable given their growth
prospects.
During fiscal 2000, the Portfolio delivered a return of 56.60%, versus 43.21%
for the S&P MidCap 400 Index. The market rallied strongly throughout the end of
calendar 1999 and the beginning of 2000, despite a campaign by the Federal
Reserve to raise rates and slow the economy. Investors brushed off the rate
hikes until mid-March, when value stocks rotated into favor in response to the
Federal Reserve's fifth consecutive rate increase. As evidence of a slowing
economy began to mount, equity markets posted lackluster results. In response,
the Portfolio focused on stable growth names that tend to be less cyclical, and
away from aggressive growth names which tend to underperform against the
backdrop of a slowing economy.
Strong stock and sector selection drove the outperformance of the Portfolio.
Stock selection was strongest in technology and business services during the
fiscal year. As the market rotated away from technology, the Portfolio trimmed
its overweight and reduced its exposure to highly valued stocks. Despite talk of
a "tech wreck," many technology stocks were strong performers. Fourteen
technology stocks in the Portfolio posted triple digit gains during the
twelve-month period. Although technology holdings were volatile, communications-
related technology stocks such as Applied MicroCircuits, a semiconductor
company; SDL Inc., a fiber optic equipment manufacturer; and Ciena were the
strongest contributors during the year. Within the technology portion of the
Portfolio, one of the biggest industry weightings was in semiconductor stocks.
In the spring, semiconductors did not fall as quickly or as far as many of the
other technology names, providing a cushion as technology stocks corrected. As
the fall approached, the Portfolio aggressively trimmed its semiconductor
overweight, and focused technology holdings toward software, networking, and
optical stocks.
Within the heavy industry/transportation sector, business services companies
such as Network Solutions (the dot.com registration company) and TMP Worldwide
Inc. (an executive search firm that also runs the Internet site Monster.com),
turned in strong performance returns. These were both sold later in the year.
The Portfolio's emphasis on business
--------------------------------------------------------------------------------
16
<PAGE> 19
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
services companies added some stability in a turbulent market environment.
Consumer services was the biggest detractor for the year, as many of the media
and advertising companies that the Portfolio had favored corrected after their
strong run-ups in 1999. MAS was not pleased with the performance of consumer
Internet stocks, and nearly all of the Portfolio's holdings in that area were
sold.
With the utilities sector, telephone services stocks also underperformed during
the year, and the Portfolio's overweight detracted from results. Although
fundamentals were fairly strong, these stocks were hurt by fears of a liquidity
crunch, which could lead to slower future growth. Although the Portfolio
remained overweight in these stocks at fiscal year-end, holdings were trimmed
somewhat.
Sector selection contributed to results. The Portfolio was overweighted in
technology, the best performing sector overall for the fiscal year. Significant
underweights in basic resources and financial services also added to results, as
these two sectors performed poorly. During the year, the Portfolio was neutral
to slightly underweight in the energy sector, which is not generally a focus for
growth managers. The rising price of oil continued to bolster the stock prices
of many energy-related companies, and the energy sector was one of the strongest
sectors in the index. The Portfolio maintained a slight underweight going into
the end of the year, based on MAS's assessment that there was greater downside
risk than upside potential in the energy stocks.
At fiscal year-end, MAS observed increasing signs of an economic slowdown, which
could be exacerbated by the recent spike in energy prices. In response, the
Portfolio became positioned more heavily toward stable growth names and away
from companies with capital intensive and economically sensitive businesses. MAS
continued to be constructive on technology, however, believing that in the face
of profit margin pressure, companies would choose to invest in technology to
improve operating efficiency.
--------------------------------------------------------------------------------
17
<PAGE> 20
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
GROWTH OF A $1 MILLION INVESTMENT OVER 10 YEARS
[LINE GRAPH]
<TABLE>
<CAPTION>
MAS MID CAP GROWTH S&P MIDCAP 400 MAS MID CAP GROWTH
------------------ -------------- ------------------
<S> <C> <C> <C>
90 1000.00 1000.00
91 1663.00 1503.00
92 1710.00 1690.00
93 2290.00 2097.00
94 2215.00 2130.00
95 2892.00 2679.00
96 3726.00 3054.00
97 4771.00 4248.00
98 4866.00 3980.00
99 7993.00 4995.00
00 12517.00 7153.00 12416.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS MID CAP GROWTH
---------------------------- S&P MIDCAP
INSTITUTIONAL (=) ADVISER (/) 400 INDEX
-------------------------------------------------------------------
<S> <C> <C> <C>
One Year 56.60% 56.24% 43.21%
Five Years 34.04% 33.83% 21.70%
Ten Years 28.75% 28.65% 21.74%
</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. Generally speaking, small and mid-capitalization stock
prices experience a greater degree of market volatility than those of
large-capitalization companies.
(=) Represents an investment in the Institutional Class.
(/) Represents an investment in the Adviser Class which commenced operations
1/31/97. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25%
12b-1 Fee applicable to the Adviser Class.
* Total returns are compared to the S&P MidCap 400 Index, an unmanaged market
index.
The Portfolio's holdings in Applied MicroCircuits (0.0%), SDL Inc. (0.0%), Ciena
(1.1%), Network Solutions (0.0%), and TMP Worldwide Inc. (0.0%) as of 9/30/00.
--------------------------------------------------------------------------------
18
<PAGE> 21
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MID CAP GROWTH
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (98.3%)
<TABLE>
<CAPTION>
-----------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
BEVERAGE & PERSONAL PRODUCTS (0.6%)
Estee Lauder Cos., Inc., Class
A 539,300 $ 19,752
-----------------------------------------------------
CONSUMER DURABLES (1.2%)
Harley-Davidson, Inc. 785,700 37,615
-----------------------------------------------------
CONSUMER SERVICES (9.4%)
* Cablevision Systems Corp.,
Class A 430,800 28,567
* Electronic Arts, Inc. 791,500 39,080
* Gemstar-TV Guide
International, Inc. 499,363 43,538
Homestore.com, Inc. 645,700 30,187
* Lamar Advertising Co. 580,700 21,994
* Liberty Digital, Inc., Class
A 168,100 3,404
MGM Grand, Inc. 818,600 31,260
Reader's Digest Association
(The), Inc., Class A 740,300 26,142
* Univision Communications,
Inc., Class A 482,200 18,022
* USA Networks, Inc. 1,010,900 22,177
Young & Rubicam, Inc. 538,400 26,651
-----------------------------------------------------
GROUP TOTAL 291,022
-----------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (2.5%)
* Concord EFS, Inc. 1,431,000 50,823
Lehman Brothers Holdings, Inc. 167,900 24,807
-----------------------------------------------------
GROUP TOTAL 75,630
-----------------------------------------------------
ENERGY (5.4%)
* BJ Services Co. 438,800 26,821
Dynergy, Inc., Class A 850,696 48,490
* Global Marine, Inc. 1,005,600 31,048
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
-----------------------------------------------------
<S> <C> <C>
* Nabors Industries, Inc. 697,800 $ 36,565
* Varco International, Inc. 1,152,034 23,977
-----------------------------------------------------
GROUP TOTAL 166,901
-----------------------------------------------------
HEALTH CARE (21.3%)
Allergan, Inc. 461,700 38,985
* Alza Corp. 585,200 50,620
* Biovail Corp. 455,000 37,054
* Celgene Corp. 406,100 24,163
* Forest Laboratories, Inc. 240,200 27,548
* Health Management
Associates, Inc., Class A 2,564,700 53,378
* Human Genome Sciences, Inc. 245,500 42,502
* Lincare Holdings, Inc. 1,474,800 42,308
* MedImmune, Inc. 550,300 42,511
* Mettler-Toledo
International, Inc. 516,500 22,726
* Millennium Pharmaceuticals,
Inc. 370,200 54,072
PerkinElmer, Inc. 513,600 53,607
* QLT, Inc. 303,800 21,532
* Quest Diagnostics, Inc. 52,900 6,070
* Serono S.A. ADR 812,500 24,578
* St. Jude Medical, Inc. 561,700 28,647
* Tenet Healthcare Corp. 1,068,900 38,881
* Waters Corp. 541,400 48,185
-----------------------------------------------------
GROUP TOTAL 657,367
-----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (15.2%)
B.F. Goodrich Co. (The) 974,000 38,169
Bombardier, Inc., Class B 1,916,100 33,063
* Crown Castle International
Corp. 826,500 25,673
Dover Corp. 371,500 17,437
* Dycom Industries, Inc. 662,950 27,595
Embraer-Empresa Aircraft Corp.
ADR 479,800 14,874
* Fiserv, Inc. 514,287 30,793
Gilat Satellite Networks Ltd. 341,500 26,253
* Jabil Circuit, Inc. 804,000 45,627
* MasTec, Inc. 797,700 24,928
* Plexus Corp. 423,100 29,829
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
19
<PAGE> 22
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MID CAP GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
Power-One, Inc. 418,400 $ 25,320
Precision Castparts Corp. 795,400 30,523
* Quanta Services, Inc. 870,900 23,950
* SCI Systems, Inc. 654,500 26,834
* Titan Corp. 935,100 15,429
* ViaSat, Inc. 1,180,200 26,407
* Viasystems Group, Inc. 456,700 7,764
-----------------------------------------------------
GROUP TOTAL 470,468
-----------------------------------------------------
RETAIL (4.7%)
CVS Corp. 862,500 39,945
RadioShack Corp. 658,800 42,575
* Starbucks Corp. 851,000 34,093
Tiffany & Co. 736,000 28,382
-----------------------------------------------------
GROUP TOTAL 144,995
-----------------------------------------------------
TECHNOLOGY (29.6%)
* Andrew Corp. 1,291,500 33,821
* Art Technology Group, Inc. 403,000 38,184
* Bookham Technology Plc 273,200 11,713
* CIENA Corp. 264,900 32,533
* Critical Path, Inc. 304,700 18,511
* Digex, Inc. 138,100 6,473
* Emulex Corp. 298,400 36,554
* Exodus Communications, Inc. 1,188,600 58,687
* Extreme Networks, Inc. 482,300 55,223
* Finisar Corp. 641,500 31,033
* Globespan, Inc. 251,200 30,646
* Inktomi Corp. 330,300 37,654
* Internet Security Systems,
Inc. 427,800 32,139
* Mercury Interactive Corp. 516,200 80,914
* MIPS Technologies, Inc.,
Class A 471,700 18,161
* MMC Networks, Inc. 402,100 50,866
* Nuance Communications, Inc. 172,000 20,930
* Peoplesoft, Inc. 1,046,400 29,234
* Polycom, Inc. 405,300 27,142
* Powerwave Technologies, Inc. 1,083,400 41,135
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
-----------------------------------------------------
<S> <C> <C>
* QLogic Corp. 449,100 $ 39,521
* Rational Software Corp. 979,300 67,939
Scientific-Atlanta, Inc. 524,000 33,340
* Software.com, Inc. 168,800 30,627
* Vitesse Semiconductor Corp. 581,300 51,699
-----------------------------------------------------
GROUP TOTAL 914,679
-----------------------------------------------------
UTILITIES (8.4%)
* Calpine Corp. 570,900 59,588
* IDT Corp. 849,300 33,016
* McLeodUSA, Inc., Class A 1,745,400 24,981
* Microcell
Telecommunications, Inc. 629,000 18,280
* Southern Energy, Inc. 503,500 15,797
* Time Warner Telecom, Inc.,
Class A 375,000 18,117
* Tritel, Inc. 930,500 13,318
* Voicestream Wireless Corp. 437,453 50,772
* Western Wireless Corp.,
Class A 714,600 25,458
-----------------------------------------------------
GROUP TOTAL 259,327
-----------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,552,967) 3,037,756
-----------------------------------------------------
CASH EQUIVALENT (4.6%)
-----------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
---------
<S> <C> <C>
REPURCHASE AGREEMENT (4.6%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00,
to be repurchased at
$140,403, collateralized by
various U.S. Government
Obligations, due
11/2/00-3/29/01, valued at
$141,731 (Cost $140,328) $ 140,328 140,328
-----------------------------------------------------
TOTAL INVESTMENTS (102.9%) (Cost
$2,693,295) 3,178,084
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
20
<PAGE> 23
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)(+)
-----------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (-2.9%)
Cash $ 1
Dividends Receivable 317
Interest Receivable 50
Receivable for Investments Sold 49,084
Receivable for Fund Shares Sold 9,210
Other Assets 80
Payable for Investments Purchased (131,548)
Payable for Fund Shares Redeemed (11,440)
Payable for Investment Advisory Fees (3,655)
Payable for Administrative Fees (199)
Payable for Distribution Fees-Adviser
Class (197)
Payable for Trustees' Deferred
Compensation Plan-Note F (65)
Other Liabilities (278)
----------
(88,640)
-----------------------------------------------------
NET ASSETS (100%) $3,089,444
-----------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 60,025,661 outstanding
shares of beneficial interest
(unlimited
authorization, no par value) $2,109,750
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 35.15
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
-----------------------------------------------------
<S> <C> <C>
ADVISER CLASS
-----------------------------------------------------
NET ASSETS
Applicable to 28,159,573 outstanding
shares of beneficial interest
(unlimited
authorization, no par value) $ 979,694
-----------------------------------------------------
NET ASSET VALUE PER SHARE $ 34.79
-----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $2,259,234
Undistributed Realized Net Gain (Loss) 345,421
Unrealized Appreciation (Depreciation) on
Investment Securities 484,789
-----------------------------------------------------
NET ASSETS $3,089,444
-----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) See Note A1 to Financial Statements.
* Non-income producing security
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
21
<PAGE> 24
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
SMALL CAP GROWTH PORTFOLIO
The SmallCap Growth Portfolio seeks to capitalize on the relative inefficiencies
of the small-cap equity markets. The Portfolio targets companies with
sustainable growth that exceeds market expectations by focusing on those whose
growth surpasses Wall Street analysts' estimates. MAS looks to capture the
return potential of rapidly growing companies while avoiding stocks that are
likely to disappoint. To identify such companies, MAS's small-cap growth
strategy employs a disciplined four-part process that incorporates quantitative,
fundamental, and valuation analysis, as well as a strict sell discipline.
First, MAS conducts a quantitative screen that sorts the stocks within each
economic sector based on earnings-estimate revisions and growth potential. This
screening process limits investment choices to a statistically advantaged pool.
MAS then conducts extensive fundamental research on a group of eligible stocks
to find candidates for purchase. Only high-quality companies with strong sales
growth, rising profit margins, and high returns on capital are included in the
Portfolio. Qualitative measures are then examined, including management quality
and a company's strategic position within its industry.
MAS supplements fundamental analysis with valuation analysis. In addition to
examining measures such as price/earnings, price/sales, and price/cash flow,
valuation analysis uses a discounted-cash-flow model. Each stock's valuation is
assessed relative to its growth prospects. The goal of this valuation work is to
identify and weed out the most overvalued securities.
The sell discipline mandates an ongoing reevaluation of securities and produces
a portfolio intended to hold only those securities that are currently most
attractive. If a holding falls into one of the bottom two
earnings-estimate-revision quintiles of MAS's universe, it will generally be
sold. MAS often sells stocks when fundamental research uncovers unfavorable
trends. Analysts are often more reluctant to lower estimates than to raise them.
Therefore, companies that are having difficulties may first experience small
negative estimate revisions; such companies are frequently sold before larger
revisions materialize. Finally, holdings are sold or trimmed back when their
valuations exceed the level believed to be reasonable given their growth
prospects.
During fiscal 2000, the portfolio delivered a return of 80.31%, versus 23.39%
for the Russell 2000 Index. The market rallied strongly throughout the end of
calendar 1999 and the beginning of 2000, despite a campaign by the Federal
Reserve to raise rates and slow the economy. Investors brushed off the rate
hikes until mid-March, when value stocks rotated into favor in response to the
Federal Reserve's fifth consecutive rate increase. As evidence of a slowing
economy began to mount, equity markets posted lackluster results. In response,
the Portfolio focused on stable growth names that tend to be less cyclical, and
away from aggressive growth names which tend to underperform against a backdrop
of a slowing economy.
Strong stock selection was the primary contributor to the Portfolio's
outperformance. Stock selection was strongest in business services, technology,
and telephone services during the fiscal year. Within the heavy
industry/transportation sector, business services companies such as Merix Corp.,
a contract manufacturer, and TMP Worldwide Inc., an executive search firm that
also runs the Internet site Monster.com, turned in strong performance. At fiscal
year-end, TMP Worldwide Inc. was no longer held in the portfolio as it migrated
out of the small capitalization universe. The Portfolio's emphasis on business
services companies added some stability in a turbulent market environment.
As the market rotated away from technology, the Portfolio's overweight was
trimmed, and exposure to highly valued stocks was reduced. Despite talk of a
"tech wreck," many technology stocks were strong performers. Although technology
holdings were volatile, communications-related technology stocks such Ortel
Corp. and software-related companies such as Embarcadero Technologies and Agile
Software Corp. were the strongest contributors during the fiscal year. Within
the technology portion of the Portfolio, one of the biggest industry weightings
was in semiconductor stocks. In the spring of 2000, semiconductors did not fall
as quickly or as far as many of the other technology names, providing a cushion
as technology stocks corrected. As we moved into the fall, the Portfolio
aggressively trimmed its semiconductor overweight and focused technology
holdings toward software, networking, and optical stocks.
--------------------------------------------------------------------------------
22
<PAGE> 25
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
Within the utilities sector, telephone services stocks generally underperformed
during the fiscal year; however, the holdings in the Portfolio posted strong
performance due to strong stock selection. Although fundamentals were fairly
strong, these stocks were hurt by fears of a liquidity crunch, which could lead
to slower future growth. Although the Portfolio remained overweight in these
stocks at fiscal year-end, holdings were trimmed somewhat.
Consumer services was the biggest detractor for the year, as many of the media
and advertising companies that the Portfolio had favored corrected after their
strong run-ups in 1999. MAS was not pleased with the performance of consumer
Internet stocks, and nearly all of the Portfolio's holdings in that area were
sold. Exposure to traditional advertising businesses was also reduced.
Sector selection contributed to results. During the fiscal year, the Portfolio
was overweighted in technology, one of the best performing sectors. Significant
underweights in basic resources and financial services also added to results, as
these two sectors performed poorly.
At fiscal year-end, MAS observed increasing signs of an economic slowdown, which
could be exacerbated by the recent spike in energy prices. In response, the
Portfolio became positioned more heavily toward stable growth names and away
from companies with capital intensive and economically sensitive businesses. MAS
continued to be constructive on technology however, believing that in the face
of profit margin pressure, companies would choose to invest in technology to
improve operating efficiency.
--------------------------------------------------------------------------------
23
<PAGE> 26
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
GROWTH OF A $1 MILLION INVESTMENT SINCE INCEPTION
<TABLE>
<CAPTION>
MAS SMALL CAP GROWTH RUSSELL 2000
-------------------- ------------
<S> <C> <C>
* 1000.00 1000.00
98 857.00 799.00
99 3228.00 951.00
00 5820.00 1173.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS SMALL RUSSELL 2000
CAP GROWTH INDEX
----------------------------------------------------------
<S> <C> <C>
One Year 80.31% 23.39%
Since Inception 118.61% 7.35%
</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. Generally speaking, small-capitalization stock prices
experience a greater degree of market volatility than those of
large-capitalization companies.
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 Small Cap Growth Portfolio commenced operations on 6/30/98. Total returns
are compared to the Russell 2000 Index, an unmanaged market index. The
Portfolio's total return reflects, among other things, the use of short-term
trading techniques, including close-in-time purchases and sales of initial
public offerings, as the Adviser responded to market conditions in existence
at that time. There can be no assurance that these market conditions will
re-occur, nor can the Adviser guarantee continued access to and use of
profitable short-term trading techniques.
The Portfolio's holdings in Merix Corp. (2.4%), TMP Worldwide Inc. (0.0%),
Ortel Corp. (0.0%), Embarcadero Technologies (1.2%), and Agile Software Corp.
(2.0%) as of 9/30/00.
--------------------------------------------------------------------------------
24
<PAGE> 27
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP GROWTH
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (97.9%)
<TABLE>
<CAPTION>
----------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)(+)
----------------------------------------------------
<S> <C> <C>
BASIC RESOURCES (0.3%)
Eden Bioscience Corp. 40,600 $ 1,340
Nanophase Technologies Corp. 17,700 239
----------------------------------------------------
GROUP TOTAL 1,579
----------------------------------------------------
CONSUMER SERVICES (11.2%)
Asia Satellite
Telecommunications Holdings
Ltd. ADR 92,600 2,315
* Crown Media Holdings, Inc.,
Class A 136,000 1,930
* Entravision Communications
Corp. 127,300 2,212
* Hispanic Broadcasting Corp. 161,300 4,496
* Homestore.com, Inc. 116,800 5,461
Imax Corp. 163,000 2,761
Internet Pictures Corp. 722,200 3,927
* Liberty Satellite &
Technology, Inc. 373,400 3,967
* Regent Communications, Inc. 509,000 2,831
* Sirius Satellite Radio, Inc. 65,800 3,479
* Take-Two Interactive Software,
Inc. 287,100 3,607
* Ticketmaster
Online-CitySearch, Inc., Class
B 353,900 5,994
True North Communications, Inc. 99,500 3,557
VerticalNet, Inc. 72,000 2,529
----------------------------------------------------
GROUP TOTAL 49,066
----------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (1.0%)
Investors Financial Services
Corp. 67,800 4,280
----------------------------------------------------
ENERGY (4.8%)
Coflexip SA ADR 74,900 4,662
* Grey Wolf, Inc. 821,700 4,725
Rowan Cos., Inc. 121,500 3,523
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
----------------------------------------------------
----------------------------------------------------
<S> <C> <C>
* Spinnaker Exploration Co. 140,500 $ 4,900
* Varco International, Inc. 148,735 3,096
----------------------------------------------------
GROUP TOTAL 20,906
----------------------------------------------------
FOOD, TOBACCO & OTHER (1.2%)
* Hain Celestial Group, Inc. 151,200 5,311
----------------------------------------------------
HEALTH CARE (17.9%)
* AmeriSource Health Corp.,
Class A 95,700 4,498
* Barr Laboratories, Inc. 66,800 4,430
* Bruker Daltonics, Inc. 44,500 1,975
* Charles River Laboratories
International, Inc. 188,600 6,412
* Genencor International, Inc. 58,900 1,745
ImClone Systems, Inc. 68,800 8,054
* LifePoint Hospitals, Inc. 191,800 6,809
* Lincare Holdings, Inc. 182,100 5,224
* Maxim Pharmaceuticals, Inc. 76,400 4,641
* Mettler-Toledo International,
Inc. 95,100 4,184
* Oxford Health Plans, Inc. 142,600 4,383
* Province healthcare Co. 85,950 3,433
* Quest Diagnostics, Inc. 57,300 6,575
* Regeneration Technologies,
Inc. 175,200 1,445
* Titan Pharmaceuticals, Inc. 151,000 9,815
* United Therapeutics Corp. 54,100 4,727
----------------------------------------------------
GROUP TOTAL 78,350
----------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (19.8%)
* American Superconductor Corp. 116,400 5,722
* Artesyn Technologies, Inc. 226,800 6,606
* BE Aerospace, Inc. 340,300 5,487
* CACI International, Inc.,
Class A 131,200 2,813
* Dycom Industries, Inc. 109,600 4,562
Gilat Satellite Networks Ltd. 55,200 4,243
* Insituform Technologies, Inc.,
Class A 175,200 5,891
* MasTec, Inc. 178,250 5,570
* Merix Corp. 164,350 10,652
* Plexus Corp. 46,300 3,264
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
25
<PAGE> 28
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)(+)
----------------------------------------------------
<S> <C> <C>
Precision Castparts Corp. 116,800 $ 4,482
* ProsoftTraining.com 378,900 5,399
* SBA Communications Corp. 59,700 2,504
* Titan Corp. 134,500 2,219
* Valence Technology, Inc. 316,900 5,467
* ViaSat, Inc. 475,600 10,642
* Viasystems Group, Inc. 65,700 1,117
----------------------------------------------------
GROUP TOTAL 86,640
----------------------------------------------------
INSURANCE (0.3%)
Annuity & Life RE Holdings Ltd. 62,600 1,510
----------------------------------------------------
RETAIL (4.8%)
* California Pizza Kitchen, Inc. 24,600 689
* Duane Reade, Inc. 196,900 4,775
* InterTAN, Inc. 284,300 4,105
* Too, Inc. 156,400 3,714
* Ultimate Electronics, Inc. 185,000 7,608
----------------------------------------------------
GROUP TOTAL 20,891
----------------------------------------------------
TECHNOLOGY (32.9%)
* Adept Technology, Inc. 131,000 6,886
* Aeroflex, Inc. 117,800 5,728
* Agile Software Corp. 98,100 8,823
* Anaren Microwave, Inc. 51,650 7,005
* Andrew Corp. 170,200 4,457
* Avocent Corp. 104,800 5,777
* Bell Microproducts, Inc. 180,150 5,630
* Blue Martini Software, Inc. 32,000 1,084
* Centillium Communications,
Inc. 51,000 4,896
* Cobalt Networks, Inc. 76,300 4,416
Coherent, Inc. 54,700 3,720
* Embarcadero Technologies, Inc. 103,500 5,317
* Exar Corp. 50,000 6,050
* Exfo Electro Optical
Engineering, Inc. 52,600 2,291
Extended Systems, Inc. 34,100 1,833
* Globix Corp. 173,600 4,047
* Informatica Corp. 28,900 2,695
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)(+)
----------------------------------------------------
<S> <C> <C>
* Interwoven, Inc. 43,500 $ 4,918
* Macrovision Corp. 66,500 5,386
* MIPS Technologies, Inc. 193,650 7,456
* Omnivision Technologies, Inc. 70,700 2,558
Precise Software Solutions Ltd 95,000 4,097
* Proxim, Inc. 74,600 3,320
* RADVision Ltd. 179,700 5,065
* Read-Rite Corp. 594,700 6,690
* SignalSoft Corp 84,100 3,417
* SonicWall, Inc. 116,000 3,306
* SpeechWorks International,
Inc. 35,900 2,226
* TranSwitch Corp. 79,450 5,065
* Tut Systems, Inc. 62,900 5,429
* Western Multiplex 284,600 4,571
----------------------------------------------------
GROUP TOTAL 144,159
----------------------------------------------------
UTILITIES (3.7%)
* AirGate PCS, Inc. 107,500 4,824
* Dobson Communications Corp. 213,100 3,130
* Microcell Telecommunications,
Inc. 125,900 3,659
* Proton Energy Systems, Inc. 14,200 406
* Ubiquitel, Inc. 465,200 4,187
----------------------------------------------------
GROUP TOTAL 16,206
----------------------------------------------------
TOTAL COMMON STOCKS (Cost $335,482) 428,898
----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
26
<PAGE> 29
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)(+)
----------------------------------------------------
<S> <C> <C>
CASH EQUIVALENT (3.2%)
----------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00, to
be repurchased at $13,914,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01 valued at
$14,046 (Cost $13,907) $ 13,907 $ 13,907
----------------------------------------------------
TOTAL INVESTMENTS (101.1%) (Cost $349,389) 442,805
----------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.1%)
Cash 2,262
Dividends Receivable 15
Interest Receivable 5
Receivable for Investments Sold 10,892
Receivable for Fund Shares Sold 2,826
Other Assets 6
Payable for Investments Purchased (17,515)
Payable for Fund Shares Redeemed (2,174)
Payable for Investment Advisory Fees (1,125)
Payable for Administrative Fees (29)
Other Liabilities (70)
--------
(4,907)
----------------------------------------------------
NET ASSETS (100%) $437,898
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
----------------------------------------------------
<S> <C> <C>
INSTITUTIONAL CLASS
----------------------------------------------------
NET ASSETS
Applicable to 8,269,051 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $437,898
----------------------------------------------------
NET ASSET VALUE PER SHARE $ 52.96
----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $328,214
Undistributed Realized Net Gain (Loss) 16,268
Unrealized Appreciation (Depreciation) on
Investment Securities 93,416
----------------------------------------------------
NET ASSETS $437,898
----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) See Note A1 to Financial Statements.
* Non-income producing security
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
27
<PAGE> 30
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
CORE FIXED-INCOME DISTINGUISHING CHARACTERISTICS AND GENERAL STRATEGY
- FIXED INCOME PORTFOLIO
- DOMESTIC FIXED INCOME PORTFOLIO
The MAS Funds core fixed-income portfolios invest in a broad array of
fixed-income securities--including U.S. Treasury and Agency securities,
corporate obligations, mortgage-backed issues, and, where permitted, non-dollar
bonds--while maintaining a high overall credit quality. To meet the various
needs of different core fixed-income investors, MAS Funds offers four different
core fixed-income mutual funds--all of which are actively managed by Miller
Anderson & Sherrerd's fixed-income team.
The FIXED INCOME PORTFOLIO is the flagship offering of the MAS Funds core
fixed-income portfolios, and is structured to take full advantage of MAS's core
fixed-income capabilities; while the DOMESTIC FIXED INCOME PORTFOLIO invests
only in dollar-denominated fixed-income securities issued by domestic entities
with a credit-quality rating of BBB or better.
MAS's core fixed-income strategies have three major objectives. The first is to
provide investors with a positive real return--a total return including income
and capital gains that is greater than the rate of inflation. The second is to
help diversify equity-oriented strategies in other areas of clients' investment
programs. The third is to provide a hedge against a severe economic contraction.
To provide this hedge, each portfolio maintains a high average credit quality
and an emphasis on non-callable, prepayment-protected securities. This approach
positions each portfolio to perform well when other market sectors experience
poor returns.
The MAS fixed-income team's research-based, value-driven investment process is
built around several key decisions. The first decision relates to the
portfolio's sensitivity to changes in corporate yield spreads relative to U.S.
Treasury securities. MAS's research shows that a diversified approach toward
owning corporate securities enhances overall portfolio returns, as their yield
spreads provide significant compensation for their credit risk; our corporate
activities within the Fixed Income Portfolio also include the opportunistic use
of below-investment grade securities on a limited basis.
The second decision involves the portfolio's sensitivity to changes in mortgage
yield spreads relative to U.S. Treasuries. MAS's research shows that a properly
managed portfolio of mortgage securities improves overall portfolio returns, as
their yield spreads provide ample compensation for their prepayment risk.
The third decision relates to the portfolio's sensitivity to changes in interest
rates, which is driven by a careful analysis of implied market inflation
forecasts relative to actual inflation trends. MAS's research shows that the
market tends to be a poor forecaster, and that contrarian interest-rate risk
strategies (e.g., above-benchmark interest-rate risk positions when the market's
implied inflation forecasts are too high, and vice-versa) enhance overall
portfolio returns.
The fourth decision relates to yield-curve positioning, which involves assessing
which maturities offer the best value relative to their risk. For the Fixed
Income Portfolio, there is also a fifth decision involving the opportunistic use
of non-dollar securities. To make this decision, the MAS fixed-income team
evaluates which, if any, non-dollar securities offer better relative value than
dollar-denominated alternatives, and makes active decisions regarding the
currency risk associated with such securities.
--------------------------------------------------------------------------------
28
<PAGE> 31
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
PERFORMANCE DISCUSSION: FIXED INCOME PORTFOLIO
Despite a significant widening of yield spreads between the Treasury and
non-Treasury sectors, the return on the Portfolio was 11 basis points ahead of
the Salomon Broad Index for the fiscal year.
Relative performance was helped by the Portfolio's above-benchmark interest-rate
risk position going into calendar year 2000, which generated favorable returns
as long-term U.S. Treasury yields declined following the turn of the year. This
position was trimmed over the course of the period, and the Portfolio ended the
fiscal year pursuing a neutral interest rate strategy relative to the benchmark.
The Portfolio's yield-curve strategy emphasized the 10-year sector for most of
this period, which also added value; the Portfolio continued to overweight the
10-year sector as of the end of the fiscal year, while underweighting
shorter-maturities and market-weighting longer-maturities.
The Portfolio's above-benchmark sensitivity to corporate, mortgage, and agency
debt yield spreads detracted from relative performance, as these non-Treasury
sectors significantly underperformed Treasury securities. The non-Treasury
sectors lagged due to strong demand for Treasury securities amidst market fears
of reduced supply of such bonds, and was not a function of deterioration in the
timing and quality of the cash flows of the bonds held in the Portfolio.
The unfavorable impact of widening yield spreads was partially offset by
favorable security selection decisions, including those in the below-investment
grade and yankee bond areas. The Portfolio continued to have an above-benchmark
sensitivity to the non-Treasury sectors at the end of the fiscal year to take
advantage of their extremely wide yield spreads, or risk premiums, at a time
when their fundamental risks remained relatively low. Despite the lack of
Treasury securities in the Portfolio, overall credit quality remained extremely
high. The allocation to non-dollar bonds was zero for the entire period, as it
remained difficult to identify superior opportunities among high-quality
non-dollar securities relative to dollar-denominated alternatives.
The Portfolio's long-term record reflects successful judgements about all of the
key decisions that are part of the MAS fixed-income team's research-based,
value-driven investment process. At fiscal year-end, the Portfolio was well
positioned to take advantage of the extraordinarily attractive opportunities in
the non-Treasury sectors while continuing to pursue a high-quality,
call-protected, diversified investment strategy.
--------------------------------------------------------------------------------
29
<PAGE> 32
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
GROWTH OF $1 MILLION INVESTMENT OVER 10 YEARS
[LINE GRAPH]
<TABLE>
<CAPTION>
MAS FIXED INCOME MAS FIXED INCOME MAS FIXED INCOME
INSTITUTIONAL INVESTMENT ADVISER SALOMON BROAD
---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
90 1000.00 1000.00
91 1211.00 1160.00
92 1385.00 1307.00
93 1582.00 1440.00
94 1512.00 1394.00
95 1727.00 1590.00
96 1859.00 1669.00
97 2072.00 1831.00
98 2235.00 2041.00
99 2243.00 2036.00
00 2400.00 2386.00 2377.00 2176.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS FIXED INCOME
------------------------------------------ SALOMON BROAD
INSTITUTIONAL (=) INVESTMENT (-) ADVISER (/) INDEX
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 7.02% 6.84% 6.79% 6.91%
Five Years 6.81% 6.68% 6.60% 6.47%
Ten Years 9.15% 9.09% 9.04% 8.09%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
(=) Represents an investment in the Institutional Class.
(-) Represents an investment in the Investment Class which commenced operations
10/15/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
(/) Represents an investment in the Adviser Class which commenced operations
11/7/96. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25%
12b-1 Fee applicable to the Adviser Class.
Total returns for the Investment and Adviser Classes of the Portfolio
reflect expenses reimbursed by the Adviser for certain periods. Without such
reimbursements, total returns would have been lower.
* Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index.
--------------------------------------------------------------------------------
30
<PAGE> 33
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (117.6%)
<TABLE>
<CAPTION>
-------------------------------------------------------
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (55.7%)
Federal Home Loan
Mortgage Corporation,
Conventional Pools:
10.00%,
2/1/10-11/1/20 Agy $ 11,736 $ 12,550
10.50%,
8/1/09-4/1/26 Agy 1,609 1,740
11.00%,
5/1/11-9/1/20 Agy 2,384 2,591
11.25%,
10/1/11-12/1/15 Agy 808 877
11.50%,
1/1/11-12/1/15 Agy 103 114
11.75%, 4/1/19 Agy 38 42
12.00%,
10/1/09-2/1/15 Agy 148 164
12.50%, 8/1/13 Agy 17 19
13.00%, 6/1/19 Agy 28 31
14.00%, 8/1/14 Agy 9 9
14.75%, 3/1/10 Agy 14 15
Gold Pools:
9.00%, 7/1/17 Agy 5,462 5,727
9.50%,
1/1/21-12/1/22 Agy 5,618 5,968
10.00%,
6/1/17-3/1/21 Agy 4,026 4,331
10.50%,
8/1/19-4/1/21 Agy 879 959
October TBA
6.00%, 10/1/29 Agy 139,650 130,521
7.50%, 10/1/30 Agy 98,050 97,932
8.00%, 10/1/30 Agy 60,250 61,103
8.50%, 10/1/30 Agy 88,750 91,005
November TBA
7.00%, 11/1/30 Agy 12,500 12,244
Federal National
Mortgage Association,
Conventional Pools:
6.00%, 4/1/29 Agy 116,376 108,718
9.00%,
12/1/08-1/1/22 Agy 14,907 15,569
9.50%,
11/1/13-12/1/26 Agy 11,720 12,426
10.00%,
9/1/10-10/1/25 Agy 4,402 4,729
10.50%,
6/1/10-7/1/25 Agy 5,114 5,576
10.75%, 2/1/11 Agy 32 35
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
11.00%,
7/1/20-11/1/20 Agy $ 1,908 $ 2,105
11.50%,
1/1/13-2/1/20 Agy 2,210 2,473
11.50%, 7/15/12 Agy 70 78
12.50%, 5/1/12 Agy 385 440
October TBA
6.00%, 10/1/29 Agy 406,900 380,024
6.50%, 10/1/29 Agy 125,000 119,948
7.00%, 10/1/30 Agy 41,800 40,934
7.50%, 10/1/30 Agy 136,250 135,916
8.00%, 10/1/30 Agy 43,350 43,905
8.50%, 10/1/30 Agy 89,200 91,267
November TBA
6.50%, 11/1/29 Agy 230,000 220,637
Government National
Mortgage Association:
Adjustable Rate Mortgages:
6.125%,
1/20/25-12/20/27 Tsy 65,413 65,750
6.375%, 2/20/25 Tsy 18,815 18,943
6.50%, 1/20/28 Tsy 4,603 4,621
6.875%, 4/20/25-
6/20/25 Tsy 14,470 14,548
7.00%, 2/20/25-
11/20/25 Tsy 39,111 39,333
7.125%, 7/20/25 Tsy 8,373 8,444
11.00%,
11/20/15-11/20/19 Tsy 74 80
11.50%, 4/20/19 Tsy 124 134
Various Pools:
9.00%,
12/15/21-11/15/24 Tsy 21,345 22,436
9.50%, 10/15/18 Tsy 14,228 15,149
10.00%,
11/15/09-10/15/28 Tsy 111,977 120,589
10.50%,
8/15/10-2/15/25 Tsy 9,665 10,556
11.00%,
12/15/09-4/15/28 Tsy 24,268 26,841
11.50%,
4/15/13-11/15/15 Tsy 421 470
12.00%,
12/15/12-11/15/19 Tsy 11,293 12,793
October TBA
7.00%, 10/15/29 Tsy 427,800 421,246
-------------------------------------------------------
GROUP TOTAL 2,394,655
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
31
<PAGE> 34
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (13.4%)
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA $ 9,718 $ 9,697
97-D A3
6.20%, 5/15/03 AAA 4,634 4,619
98-A A3
5.90%, 11/15/02 AAA 5,391 5,379
Associates Automobile
Receivables Trust,
Series 00-1
7.15%, 6/15/03 AAA 22,030 22,083
Banc One Home Equity
Trust,
Series 99-1 A1
6.06%, 1/25/12 AAA 7,232 7,150
BankBoston Home
Equity Loan Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA 3,944 3,918
BMW Vehicle Owner
Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 10,136 10,116
Centex Home Equity,
Series 99-2 A1
5.91%, 4/25/19 AAA 13,166 13,049
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 1,687 1,680
CIT RV Trust,
Series 99-A A1
5.33%, 12/15/05 AAA 8,824 8,797
(!)++ Commercial
Financial Services,
Inc.,
Series 97-5 A1
7.72%, 6/15/05 N/R 8,099 1,620
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Conseco Finance,
Series 00-B AF1
6.94%, 11/15/14 AAA $ 18,572 $ 18,575
Contimortgage Home
Equity Loan Trust,
Series 99-1 A1
6.01%, 12/25/13 AAA 5,219 5,183
Daimler Benz Auto
Grantor Trust,
Series 97-A A
6.05%, 3/31/05 AAA 2,019 2,011
Daimler Chrysler Auto
Trust,
Series 00-C A2
6.81%, 7/6/03 AAA 55,275 55,314
Delta Funding Home
Equity Loan Trust,
Series 98-4 A1F
6.16%, 2/15/16 AAA 2,066 2,057
EQCC Home Equity Loan
Trust,
Series:
99-2 A1F
6.05%, 1/25/10 AAA 9,008 8,929
99-3 A1F
6.55%, 4/25/10 AAA 19,652 19,506
Federal Home Loan
Mortgage Corp.,
Pass Through Notes,
Series T-15 A1
5.83%, 12/25/13 Agy 4,580 4,545
(!) First Mortgage
Acceptance Corp.,
Loan Receivables
Trust,
Series 96-B A1
7.629%, 11/1/18 A 7,348 5,511
First Security Auto
Grantor Trust,
Series 97-B A
6.10%, 4/15/03 AAA 3,474 3,459
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
32
<PAGE> 35
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
First Security Auto
Owner Trust,
Series 00-1 A2
7.20%, 5/15/03 AAA $ 30,975 $ 31,064
## First USA Credit
Card Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA 24,085 24,089
Ford Credit Auto
Owner Trust,
Series:
99-C A3
5.77%, 11/15/01 AAA 18,616 18,574
99-D A3
6.20%, 4/15/02 AAA 32,777 32,705
00-E A3
6.74%, 12/15/02 AAA 35,000 35,002
(!)++ Global Rated
Eligible Asset
Trust,
Series 98-A A1
7.45%, 3/15/06 N/R 7,202 1,728
Green Tree Financial
Corp.,
Series 99-4 A2
5.97%, 5/1/31 AAA 12,638 12,599
Green Tree Home
Equity Loan Trust,
Series:
99-A A1
5.59%, 2/15/13 AAA 2,040 2,038
99-C A1
5.99%, 7/15/30 AAA 9,666 9,645
Green Tree Lease
Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 462 461
Greenpoint
Manufactured
Housing,
Series 99-1 A1
5.78%, 12/15/09 AAA 10,276 10,176
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Honda Auto Lease
Trust,
Series 99-A A2
5.875%, 10/15/01 AAA $ 3,548 $ 3,546
Honda Auto
Receivables Grantor
Trust,
Series 97-B A
5.95%, 5/15/03 AAA 2,894 2,881
IndyMac Home Equity
Loan,
Series 98-A AF1
5.724%, 9/25/20 AAA 2,572 2,571
(!) Long Beach
Acceptance Auto
Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 2,334 2,314
MBNA Master Credit
Card Trust,
Series 00-E
7.80%, 10/15/12 AAA 17,085 18,048
MMCA Automobile
Trust,
Series:
99-1 A3
5.50%, 7/15/05 AAA 4,421 4,389
99-2 A1
6.30%, 6/15/02 AAA 15,433 15,408
(!) National Car
Rental Financing
Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 11,365 11,363
(!) New Holland
Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 17,385 17,357
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
33
<PAGE> 36
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Nissan Auto
Receivables Owner
Trust,
Series:
99-A A2
6.12%, 9/15/03 AAA $ 17,423 $ 17,389
00-B A2
7.15%, 12/15/02 AAA 25,995 26,065
+## Oakwood Mortgage
Investors, Inc.,
Series 99-B A1
6.739%, 5/15/09 Aaa 18,160 18,143
Peco Energy
Transition Trust
Series 00-A A3
7.625%, 3/1/10 AAA 26,874 27,655
Premier Auto Trust,
Series:
98-5 A3
5.07%, 7/8/02 AAA 4,119 4,093
99-3 A2
5.82%, 2/8/02 AAA 1,282 1,279
(!) Team Fleet
Financing Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 6,435 6,402
97-1 A
7.35%, 5/15/03 A- 6,340 6,360
-------------------------------------------------------
GROUP TOTAL 576,542
-------------------------------------------------------
ASSET BACKED MORTGAGES (0.1%)
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 53,036 721
(!) 96-3 A YMA
10/25/26 N/R 53,985 75
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Contimortgage Home
Equity Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA $ 38,130 $ 524
(!) 96-4 A11 YMA
1/15/28 AAA 38,813 40
96-4 A12 IO
1.05%, 1/15/28 AAA 6,737 73
(!) 96-4 A12 YMA
1/15/28 AAA 6,858 5
97-1 A10 IO
1.10%, 3/15/28 AAA 46,191 707
97-1 A10 YMA
3/15/28 N/R 46,190 65
-------------------------------------------------------
GROUP TOTAL 2,210
-------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL
SERIES (2.0%)
Federal Home Loan
Mortgage Corporation,
Series:
1415-S Inv Fl IO
14.125%, 11/15/07 Agy 1,241 365
1476-S Inv Fl IO
REMIC PAC
3.893%, 2/15/08 Agy 13,625 1,166
1485-S Inv Fl IO
REMIC
2.975%, 3/15/08 Agy 10,689 616
1600-SA Inv Fl IO
REMIC
1.375%, 10/15/08 Agy 25,031 834
1950-SC Inv Fl IO
1.375%, 10/15/22 Agy 14,061 612
E2 F
5.988%, 2/15/24 Agy 36 36
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
34
<PAGE> 37
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl
REMIC
22.444%, 9/25/20 Agy $ 487 $ 695
92-186 S Inv Fl IO
2.794%, 10/25/07 Agy 22,658 1,459
96-14 PC PO
12/25/23 Agy 798 515
96-68 SC Inv Fl IO REMIC
1.444%, 1/25/24 Agy 10,865 730
97-30 SI Inv Fl IO
1.344%, 7/25/22 Agy 3,015 131
97-57 PV IO
8.00%, 9/18/27 Agy 21,659 7,171
## 97-70 FA REMIC, PAC (11)
7.075%, 7/18/20 Agy 3,388 3,392
## 98-22 FA REMIC
7.023%, 4/18/28 Agy 15,128 15,111
99-42 SA Inv Fl IO
1.58%, 10/25/28 Agy 151,954 6,200
186 IO
8.00%, 8/1/27 Agy 8,028 2,268
191 IO
8.00%, 1/1/28 Agy 12,084 3,370
270 2 IO
8.50%, 9/1/23 Agy 36,065 9,777
274 2 IO
8.50%, 10/1/25 Agy 4,441 1,185
281 2 IO
9.00%, 11/1/26 Agy 6,172 1,676
291 2 IO
8.00%, 11/1/27 Agy 31,949 8,831
296 2 IO
8.00%, 4/1/24 Agy 31,641 8,775
G92-53 S Inv Fl IO REMIC
23.344%, 9/25/22 Agy 857 531
</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
1.875%, 6/16/26 Tsy $ 769 $ 38
96-13 S Inv Fl IO
REMIC
2.525%, 7/16/11 Tsy 352 21
96-17 S Inv Fl IO
REMIC
2.925%, 8/16/26 Tsy 1,211 63
99-32 SB Inv Fl IO
REMIC
1.378%, 7/16/27 Tsy 73,911 2,993
99-34 SC Inv Fl IO
3.22%, 9/16/19 Tsy 59,151 3,336
99-38 SM Inv Fl IO
1.778%, 5/16/26 Tsy 66,141 3,261
+ Kidder Peabody
Mortgage Assets
Trust,
Series 87 B IO CMO
9.50%, 4/22/18 Aaa 32 7
-------------------------------------------------------
GROUP TOTAL 85,165
-------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.4%)
American Housing
Trust,
Series V 1G
9.125%, 4/25/21 AAA 2,849 2,911
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
35
<PAGE> 38
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(S)## Kidder Peabody
Funding Corp.,
Series 92-4 B2
8.285%, 5/28/22
(acquired 8/5/92-
3/17/99, cost
$2,833) N/R $ 2,834 $ 2,834
## Morserv, Inc.,
Series 96-2 1A1
7.472%, 11/25/26 AAA 9,095 9,107
-------------------------------------------------------
GROUP TOTAL 14,852
-------------------------------------------------------
COMMERCIAL MORTGAGES (1.8%)
Asset Securitization Corp.,
Series:
96-MD6 A1C
7.04%, 11/13/26 AAA 8,005 7,876
+## 97-D5 PS1 IO
1.614%, 2/14/41 Aaa 90,210 7,096
(!) Beverly Finance
Corp.,
Series 94-1
8.36%, 7/15/04 AA- 125 129
(!) Carousel Center
Finance, Inc.,
Series:
1 A1
6.828%, 11/15/07 AA 6,090 6,044
1 C
7.527%, 11/15/07 BBB+ 3,507 3,492
(!) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 5,098 5,387
(!) Crystal Run
Properties, Inc.,
Series A
7.393%, 8/15/11 AA 12,305 12,280
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(!)## DLJ Mortgage
Acceptance Corp.,
Series 97-CF1 S IO
1.086%, 3/15/17 AAA $ 71,134 $ 2,791
+## GMAC Commercial
Mortgage
Securities, Inc.,
Series:
96-C1 X2 IO
2.027%, 3/15/21 Aaa 29,159 1,673
97-C2 X IO
1.264%, 4/15/27 Aaa 150,095 7,275
+## GS Mortgage
Securities Corp.
II,
Series 97-GL X2 IO
1.066%, 7/13/30 Aaa 32,788 1,230
Nomura Asset
Securities Corp.,
Series:
94-MD1 A1B
8.026%, 3/15/18 N/R 70 70
## 94-MD1 A2
8.24%, 3/15/18 N/R 65 65
## 94-MD1 A3
8.026%, 3/15/18 N/R 4,239 4,262
(!) Park Avenue Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 10,671 10,803
(!) Prime Property Fund,
Series 1 A
6.633%, 7/23/03 AA 4,661 4,601
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
36
<PAGE> 39
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.463%, 2/25/28 N/R $ 24,154 $ 1,345
96-CFL X1A IO
0.830%, 2/25/28 N/R 12,933 56
96-CFL X2 IO
0.337%, 2/25/28 N/R 5,823 95
-------------------------------------------------------
GROUP TOTAL 76,570
-------------------------------------------------------
ENERGY (0.8%)
CMS Energy Corp.
7.50%, 1/15/09 BB 9,705 8,683
Conoco, Inc.
6.95%, 4/15/29 A- 25,815 23,869
(a)Mobile Energy
Services LLC
8.665%, 1/1/17 D 8,204 1,641
-------------------------------------------------------
GROUP TOTAL 34,193
-------------------------------------------------------
FEDERAL AGENCY (13.0%)
Federal Home Loan
Mortgage
Corporation
6.625%, 9/15/09 Agy 152,485 150,674
Federal National
Mortgage
Association
(#)6.25%, 5/15/29 Agy 134,875 124,380
7.125%, 6/15/10 Agy 192,605 197,330
7.125%, 1/15/30 Agy 57,895 59,704
7.25%, 5/15/30 Agy 25,825 27,092
-------------------------------------------------------
GROUP TOTAL 559,180
-------------------------------------------------------
FINANCE (11.3%)
(!) Anthem Insurance Cos., Inc.
9.125%, 4/1/10 BBB+ 10,195 9,538
Series A
9.00%, 4/1/27 BBB+ 10,420 8,480
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Bank One Corp.
7.625%, 10/15/26 A- $ 7,140 $ 6,863
8.00%, 4/29/27 A- 9,870 9,891
BankAmerica Capital
Corp.
5.875%, 2/15/09 A+ 8,135 7,403
(!) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 14,950 13,642
Chase Manhattan Corp.
6.00%, 2/15/09 A 8,860 8,131
7.00%, 11/15/09 A 4,620 4,519
Citicorp, Inc.
Series F
6.375%, 11/15/08 A+ 10,565 9,973
Citigroup, Inc.
6.625%, 1/15/28 AA- 9,005 7,990
EOP Operating LP
6.763%, 6/15/07 BBB 3,825 3,611
6.80%, 1/15/09 BBB 4,185 3,887
7.25%, 6/15/28 BBB 2,275 1,939
7.50%, 4/19/29 BBB+ 11,615 10,197
Equitable Companies,
Inc.
6.50%, 4/1/08 A+ 10,310 9,710
7.00%, 4/1/28 A+ 1,960 1,751
(!) Equitable Life
Assurance Society
of the U.S.
Series 1A
6.95%, 12/1/05 A+ 11,182 11,014
(!) Farmers Exchange
Capital
7.05%, 7/15/28 A+ 8,277 6,846
(!) Farmers Insurance
Exchange
8.625%, 5/1/24 A+ 15,110 14,980
(!) Florida Property
& Casualty
7.375%, 7/1/03 A- 7,820 7,776
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
37
<PAGE> 40
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Ford Motor Credit Co.
7.375%, 10/28/09 A $ 18,615 $ 18,212
(#) General Electric
Capital Corp.
7.375%, 1/19/10 AAA 20,795 21,347
General Motors
Acceptance Corp.
7.75%, 1/19/10 A 8,975 9,074
GS Holdings Escrow
Corp.
7.125%, 8/1/05 BB+ 18,435 17,203
(!) Goldman Sachs
Group LP
6.50%, 2/25/09 A 14,685 13,694
Hartford Financial
Services Group,
Inc.
7.90%, 6/15/10 A 13,415 13,796
HMH Properties,
Series A
7.875%, 8/1/05 BB 5,670 5,344
Household Finance
Corp.
5.875%, 2/1/09 A 15,240 13,655
8.00%, 7/15/10 A 8,670 8,911
(!) John Hancock
Financial Services,
Inc.
7.375%, 2/15/24 AA- 14,500 13,460
Lehman Brothers
Holdings, Inc.
8.25%, 6/15/07 A 8,310 8,588
(!) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ 14,090 12,335
7.80%, 11/1/25 A+ 8,750 8,415
(!) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A 18,225 15,326
(!) New England
Mutual,
Series DTC
7.875%, 2/15/24 A+ 750 732
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(!) New York Life
Insurance Co.
7.50%, 12/15/23 AA- $ 5,820 $ 5,201
PNC Funding Corp.
7.50%, 11/1/09 BBB+ 5,915 5,903
(!) PNC Institutional Capital,
Series A
7.95%, 12/15/26 BBB+ 12,205 11,021
(!) Prime Property
Funding II, Inc.
6.80%, 8/15/02 A 10,885 10,740
7.00%, 8/15/04 A 7,855 7,673
(!) Prudential
Insurance Co.
8.30%, 7/1/25 A- 25,570 25,861
State Street Corp.
7.65%, 6/15/10 A 9,120 9,325
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 6,855 6,226
Washington Mutual,
Inc.
8.25%, 4/1/10 BBB 6,595 6,752
Series A
8.206%, 2/1/27 BBB- 9,055 8,077
Wells Fargo & Co.
7.55%, 6/21/10 A+ 19,315 19,617
(!) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 9,405 9,012
96 WFP-D
6.95%, 9/1/13 AA- 24,060 22,977
-------------------------------------------------------
GROUP TOTAL 486,618
-------------------------------------------------------
INDUSTRIALS (10.0%)
Adelphia Communications Corp.
7.875%, 5/1/09 B+ 2,710 2,266
9.375%, 11/15/09 B+ 10,645 9,647
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
38
<PAGE> 41
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Albertson's, Inc.
7.45%, 8/1/29 A $ 15,810 $ 14,217
Alcoa, Inc.
7.375%, 8/1/10 A+ 4,085 4,131
Clear Channel Communications,
Inc.
7.65%, 9/15/10 BBB- 11,435 11,333
Columbia/HCA
Healthcare Corp.
7.19%, 11/15/15 BB+ 9,165 7,636
7.58%, 9/15/25 BB+ 9,650 8,122
8.70%, 2/10/10 BB+ 1,290 1,286
9.00%, 12/15/14 BB+ 5,925 5,900
Continental Airlines,
Inc.,
Series 97-1A
7.461%, 4/1/15 AA+ 2,354 2,316
CSC Holdings, Inc.
7.25%, 7/15/08 BB+ 1,530 1,443
7.875%, 12/15/07 BB+ 10,500 10,315
8.125%, 3/15/29 BB+ 1,240 1,230
DaimlerChrysler N.A.
Holdings Corp.
8.00%, 6/15/10 A+ 8,125 8,361
Delphi Automotive
Systems Corp.
7.125%, 5/1/29 BBB 5,050 4,327
Dow Chemical Co.
7.375%, 11/1/29 A 4,890 4,733
DR Structured
Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB+ 8,390 6,351
94-K1 A1
7.60%, 8/15/07 BB+ 5,060 4,307
94-K2 A2
9.35%, 8/15/19 BB+ 3,755 2,804
Federated Department
Stores, Inc.
6.90%, 4/1/29 BBB+ 17,645 13,922
7.00%, 2/15/28 BBB+ 3,960 3,155
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(!) Florida Windstorm
7.125%, 2/25/19 AAA $ 18,655 $ 17,520
Ford Motor Co.
6.625%, 10/1/28 A 21,760 18,226
7.45%, 7/16/31 A 4,040 3,760
Fred Meyer, Inc.
7.375%, 3/1/05 BBB- 11,700 11,602
7.45%, 3/1/08 BBB- 3,440 3,345
Honeywell
International, Inc.
7.50%, 3/1/10 A 3,670 3,741
Host Marriott LP
8.375%, 2/15/06 BB 665 638
International Game
Technology
8.375%, 5/15/09 BB+ 9,875 9,653
Kmart Funding Corp.
Series F
8.80%, 7/1/10 BB+ 2,938 2,590
Kroger Co.
8.00%, 9/15/29 BBB- 1,455 1,390
8.05%, 2/1/10 BBB- 8,440 8,510
Lenfest Communications, Inc.
7.625%, 2/15/08 BBB 13,225 13,242
Lockheed Martin Corp.
8.20%, 12/1/09 BBB- 4,035 4,208
8.50%, 12/1/29 BBB- 15,440 16,322
Lowe's Companies,
Inc.
6.50%, 3/15/29 A 22,125 18,294
Lucent Technologies,
Inc.
6.45%, 3/15/29 A 14,795 12,364
News America
Holdings, Inc.
7.275%, 2/1/24 BBB- 3,211 2,980
8.875%, 4/26/23 BBB- 4,130 4,280
News America, Inc.
7.275%, 6/30/28 BBB- 16,080 14,059
(!) Oxymar
7.50%, 2/15/16 BBB- 7,435 5,556
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
39
<PAGE> 42
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Pharmacia Corp.
6.60%, 12/1/28 AA- $ 22,500 $ 20,065
(!) Raytheon Co.
8.20%, 3/1/06 BBB- 11,640 12,037
8.30%, 3/1/10 BBB- 3,545 3,709
Rockwell
International Corp.
6.70%, 1/15/28 A+ 5,585 4,805
Saks, Inc.
7.375%, 2/15/19 BB+ 10,805 5,915
Scotia Pacific Co.
LLC
7.71%, 1/20/14 BBB 8,820 6,064
Sun Microsystems,
Inc.
7.65%, 8/15/09 BBB+ 8,310 8,394
Tenet Healthcare
Corp.
8.00%, 1/15/05 BB+ 905 897
Tenet Healthcare
Corp.
7.625%, 6/1/08 BB+ 5,365 5,104
Time Warner Cos.,
Inc.
6.625%, 5/15/29 BBB 10,445 8,890
U.S. Airways Corp.,
Pass Through
Certificates
8.11%, 2/20/17 AAA 8,555 8,700
USA Waste Services, Inc.
7.00%, 7/15/28 BBB 13,585 11,165
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA 4,485 4,448
7.55%, 2/15/30 AA 21,460 22,129
Waste Management, Inc.
7.375%, 5/15/29 BBB 6,240 5,366
-------------------------------------------------------
GROUP TOTAL 427,770
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
NON-AGENCY FIXED RATE MORTGAGES (0.1%)
Bank of America,
Series A
8.375%, 5/1/07 AAA $ 3 $ 3
(S) Household Bank,
Series 85-1 CMO
7.94%, 5/1/02
(acquired 6/22/94,
cost $113) N/R 90 90
(S)## Magnolia
Federal Bank,
Series 84-2
9.143%, 10/1/07
(acquired 5/1/87,
cost $405) N/R 413 422
## Resolution Trust
Corp.,
Series 92-5C CMO
8.613%, 1/25/26 AA 1,687 1,687
Ryland Acceptance
Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 2,651 2,634
-------------------------------------------------------
GROUP TOTAL 4,836
-------------------------------------------------------
TELEPHONES (3.2%)
(#) AT&T Corp.
6.50%, 3/15/29 AA- 18,475 15,382
BellSouth Telecommunications,
Inc.
6.375%, 6/1/28 AA- 17,570 14,883
Global Crossing
Holdings Ltd.
9.125%, 11/15/06 BB 13,015 12,885
GTE Corp.
6.94%, 4/15/28 A- 18,760 17,020
Intermedia Communications, Inc.,
Series B:
8.50%, 1/15/08 B 2,500 2,394
8.60%, 6/1/08 B 8,960 8,602
8.875%, 11/1/07 B 2,245 2,144
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
40
<PAGE> 43
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(#) MCI WorldCom, Inc.
6.95%, 8/15/28 A- $ 25,805 $ 23,485
Nextel Communications, Inc.
# 0.00%, 9/15/07 B 15,605 12,796
9.375%, 11/15/09 B- 4,820 4,712
(!) Qwest Capital
Funding
7.90%, 8/15/10 BBB+ 4,480 4,568
# Qwest
Communications
International, Inc.
Series B
0.00%, 2/1/08 BBB+ 22,640 18,791
-------------------------------------------------------
GROUP TOTAL 137,662
-------------------------------------------------------
TRANSPORTATION (0.6%)
Continental Airlines,
Series:
98-1 A
6.648%, 9/15/17 AA+ 12,133 11,395
99-1 A
6.545%, 8/2/20 AA+ 4,280 3,968
(!) Jet Equipment
Trust,
Series:
94-A A11
10.00%, 6/15/12 A+ 1,580 1,762
95-C
10.69%, 11/1/13 BBB 8,245 9,017
-------------------------------------------------------
GROUP TOTAL 26,142
-------------------------------------------------------
U.S. TREASURY SECURITIES (0.0%)
U.S. Treasury Note
3.625%, 7/15/02
(Inflation
Indexed) Tsy 60 60
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
UTILITIES (0.5%)
CMS Panhandle
Holdings Co.
7.00%, 7/15/29 BBB- $ 2,230 $ 1,870
(!) PSEG Energy
Holdings, Inc.
9.125%, 2/10/04 BBB- 10,545 10,778
(!) Southern Energy,
Inc.
7.90%, 7/15/09 BBB 10,280 9,749
-------------------------------------------------------
GROUP TOTAL 22,397
-------------------------------------------------------
YANKEE (4.7%)
Abbey National plc
7.95%, 10/26/29 AA- 12,355 12,551
Ahold Finance USA,
Inc.
6.875%, 5/1/29 A- 14,645 12,090
(!) Bayer Hypo-
Vereinsbank
8.741%, 6/30/31 A- 2,055 1,946
Deutsche Telekom
International
Finance
8.00%, 6/15/10 AA- 16,515 16,983
Glencore Nickel
Property Ltd.
9.00%, 12/1/14 BB+ 14,940 12,475
Grupo Minero Mexicano
S.A. de CV,
Series A
8.25%, 4/1/08 BB 13,875 12,279
(!) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 16,480 15,066
(!) Hyundai
Semiconductor
America
8.625%, 5/15/07 B 9,352 8,054
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
41
<PAGE> 44
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Multicanal S.A.
10.50%, 2/1/07 BB+ $ 855 $ 680
10.50%, 4/15/18 BB+ 8,715 6,282
13.125%, 4/15/09 BB+ 1,250 1,133
(!) Oil Purchase Co.
7.10%, 4/30/02 BB+ 9,198 8,834
(!) Oil Purchase Co.
II
10.73%, 1/31/04 BB+ 1,973 1,852
(!) Paiton Energy
Funding BV
9.34%, 2/15/14 CC 12,650 2,656
(!) Petrozuata
Finance, Inc.
8.22%, 4/1/17 BB 17,500 14,623
(!) Ras Laffan
Liquefied Natural
Gas Co.
8.294%, 3/15/14 BBB+ 12,295 11,687
Republic of Brazil
11.00%, 8/17/40 B+ 10,550 8,414
Republic of Colombia
8.70%, 2/15/16 BB+ 15,765 10,713
11.75%, 2/25/20 BB+ 4,715 3,990
Republic of
Philippines
10.625%, 3/16/25 BB+ 10,725 9,078
(!) Unicredito
Italiano Capital
Trust II
9.20%, 10/29/49 A- 2,255 2,270
United Mexican States
Par Bond
10.375%, 2/17/09 BB+ 5,025 5,467
(!) Vodafone AirTouch
plc
7.75%, 2/15/10 A- 7,160 7,317
7.875%, 2/15/30 A- 16,725 16,983
-------------------------------------------------------
GROUP TOTAL 203,423
-------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost
$5,151,540) 5,052,275
-------------------------------------------------------
<CAPTION>
(++)RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK (1.1%)
-------------------------------------------------------
MORTGAGE-OTHER (1.1%)
(!)+ Home Ownership
Funding Corp.
13.331% (Cost
$45,746) Aaa 60,725 $ 45,538
-------------------------------------------------------
RIGHTS (0.0%)
-------------------------------------------------------
MISC-INDUSTRIALS (0.0%)
*@ United Mexican
States
Recovery Rights,
expiring 6/30/03
(Cost $0) N/R 10,975,000 --
-------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
--------
<S> <C> <C> <C>
STRUCTURED INVESTMENT (0.0%)-SEE NOTE A6
-------------------------------------------------------
Morgan Guaranty Trust
Company, 11/20/05;
monthly payments
equal to 1% per
annum of the
outstanding
notional balance,
indexed to GNMA ARM
pools (Cost $4,739) N/R $ 66,868 1,067
-------------------------------------------------------
CASH EQUIVALENTS (21.9%)
-------------------------------------------------------
DISCOUNT NOTES (18.9%)
Federal Home Loan Bank
6.36%, 12/13/00 30,000 29,613
6.40%, 10/4/00 76,000 75,959
6.40%, 10/25/00 50,000 49,787
6.40%, 11/17/00 50,000 49,582
6.40%, 11/29/00 46,000 45,517
6.40%, 10/20/00 50,000 49,831
6.43%, 10/11/00 43,700 43,622
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
42
<PAGE> 45
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
--------------------------------------------------------
<S> <C> <C> <C>
Federal Home Loan
Mortgage Corporation
6.39%, 11/14/00 $ 9,100 $ 9,029
6.41%, 10/31/00 50,000 49,733
6.42%, 10/26/00 50,000 49,777
6.43%, 10/3/00 50,000 49,982
6.43%, 10/10/00 56,000 55,910
6.43%, 10/12/00 50,000 49,902
Federal National
Mortgage Association
6.39%, 11/22/00 50,000 49,539
6.42%, 10/25/00 65,000 64,722
6.43%, 10/26/00 90,000 89,598
--------------------------------------------------------
GROUP TOTAL 812,103
--------------------------------------------------------
REPURCHASE AGREEMENT (3.0%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00, to
be repurchased at $129,049,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at
$130,270 128,980 128,980
--------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $941,083) 941,083
--------------------------------------------------------
TOTAL INVESTMENTS (140.6%) (Cost $6,143,108) 6,039,963
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (-40.6%)
Cash $ 426
Dividends Receivable 2,024
Interest Receivable 45,360
Receivable for Investments Sold 51,000
Receivable for Forward Commitments 440,761
Receivable for Fund Shares Sold 5,408
Unrealized Gain on Swap Agreements 6,685
Investments Held as Collateral for Loaned
Securities 259,146
Other Assets 384
Payable to Broker (7,116)
Payable for Investments Purchased (3,185)
Payable for Forward Commitments (2,276,309)
Payable for Fund Shares Redeemed (2,740)
Payable for Investment Advisory Fees (4,263)
Payable for Administrative Fees (296)
Payable for Shareholder Servicing
Fees-Investment Class (7)
Payable for Distribution Fees-Adviser Class (29)
Payable for Trustees' Deferred Compensation
Plan-Note F (322)
Payable for Variation Margin on Futures
Contracts (1,235)
Collateral on Securities Loaned, at Value (259,146)
Other Liabilities (258)
----------
(1,743,712)
--------------------------------------------------------
NET ASSETS (100%) $4,296,251
--------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------
NET ASSETS
Applicable to 363,311,092
outstanding shares of
beneficial interest (unlimited
authorization, no par value) $4,087,553
--------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.25
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
43
<PAGE> 46
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT CLASS
-------------------------------------------------------
NET ASSETS
Applicable to 5,682,486 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 63,944
-------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.25
-------------------------------------------------------
ADVISER CLASS
-------------------------------------------------------
NET ASSETS
Applicable to 12,880,771
outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 144,754
-------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.24
-------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $4,496,456
Undistributed Net Investment Income (Loss) 83,032
Undistributed Realized Net Gain (Loss) (194,405)
Unrealized Appreciation (Depreciation) on:
Investment Securities (103,145)
Futures and Swaps 14,313
-------------------------------------------------------
NET ASSETS $4,296,251
-------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(S) Restricted Security-Total market value of
restricted securities owned at September 30, 2000
was $3,346,000 or 0.1% of net assets.
(+) See Note A1 to Financial Statements.
(++) Ratings are unaudited.
* Non-income producing security
(!) 144A security. Certain conditions for public sale
may exist.
(#) A portion of these securities was pledged to cover
margin requirements for future contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Security is fair valued by the Adviser.
(a) Security is in default.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of September 30,
2000. Maturity date disclosed is the ultimate
maturity.
## Variable or floating rate security-rate disclosed
is as of September 30, 2000.
@ Value is less than $500.
CMO Collateralized Mortgage Obligation
InvFl Inverse Floating Rate-Interest rate fluctuates with
an inverse relationship to an associated interest
rate. Indicated rate is the effective rate at
September 30, 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.
--------------------------------------------------------------------------------
44
<PAGE> 47
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
PERFORMANCE DISCUSSION: DOMESTIC FIXED
INCOME PORTFOLIO
Due largely to the significant widening of yield spreads between the Treasury
and non-Treasury sectors, the return on the Portfolio was 103 basis points
behind the Salomon Broad Index for the fiscal year.
Relative performance was helped by the Portfolio's above-benchmark interest-rate
risk position going into calendar year 2000, which generated favorable returns
as long-term U.S. Treasury yields declined following the turn of the year. This
position was trimmed over the course of the period, and the Portfolio ended the
fiscal year pursuing a neutral interest rate strategy relative to the benchmark.
The Portfolio's yield-curve strategy emphasized the 10-year sector for most of
this period, which also added value; the Portfolio continued to overweight the
10-year sector as of the end of the fiscal year, while underweighting
shorter-maturities and market-weighting longer-maturities.
The Portfolio's above-benchmark sensitivity to corporate, mortgage, and agency
debt yield spreads detracted from relative performance, as these non-Treasury
sectors significantly underperformed Treasury securities. The non-Treasury
sectors lagged due to strong demand for Treasury securities amidst market fears
of reduced supply of such bonds, and was not a function of deterioration in the
timing and quality of the cash flows of the bonds held in the Portfolio.
Since the Portfolio is restricted to investment-grade securities issued by
domestic entities, it could not take advantage of opportunities in either the
yankee bond or the below-investment grade areas. The Portfolio continued to have
an above-benchmark sensitivity to the non-Treasury sectors at the end of the
fiscal year to take advantage of their extremely wide yield spreads, or risk
premiums, at a time when their fundamental risks remained relatively low.
Despite the lack of Treasury securities in the Portfolio, overall credit quality
remained extremely high.
The Portfolio's long-term record reflects successful judgements about all of the
key decisions that are part of the MAS fixed-income team's research-based,
value-driven investment process. At fiscal year-end, the Portfolio was well
positioned to take advantage of the extraordinarily attractive opportunities in
the domestic investment-grade non-Treasury sectors, while continuing to pursue a
high-quality, call-protected, diversified investment strategy.
--------------------------------------------------------------------------------
45
<PAGE> 48
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS DOMESTIC FIXED MAS DOMESTIC FIXED
INCOME INSTITUTIONAL INCOME ADVISER SALOMON BROAD
-------------------- ------------------ -------------
<S> <C> <C> <C>
90 1000.00 1000.00
91 1210.00 1160.00
92 1396.00 1307.00
93 1593.00 1440.00
94 1547.00 1394.00
95 1769.00 1590.00
96 1847.00 1669.00
97 2035.00 1831.00
98 2235.00 2041.00
99 2210.00 2035.00
00 2340.00 2331.00 2176.00
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
MAS DOMESTIC FIXED INCOME
------------------------------ SALOMON BROAD
INSTITUTIONAL (=) ADVISER (/) INDEX
-----------------------------------------------------------------------
<S> <C> <C> <C>
One Year 5.88% 5.68% 6.91%
Five Years 5.76% 5.68% 6.47%
Ten Years 8.87% 8.83% 8.09%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
(=) Represents an investment in the Institutional Class.
(/) Represents an investment in the Adviser Class which commenced operations
3/1/99. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.25% 12b-1
Fee applicable to the Adviser Class.
Total returns for the 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.
On December 19, 1994, shareholders approved a change in the Portfolio's
investment policies to emphasize fixed-income securities of domestic issuers
rated A or higher. Shareholders then voted on May 1, 1997, to permit the
Portfolio to invest a limited portion of its assets in fixed-income securities
of domestic issuers rated BBB at the time of purchase. The Portfolio's
performance pattern may have been affected by these changes.
* Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index.
--------------------------------------------------------------------------------
46
<PAGE> 49
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (113.0%)
<TABLE>
<CAPTION>
---------------------------------------------------------
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)(+)
---------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (53.2%)
Federal Home Loan
Mortgage
Corporation,
Conventional Pools:
10.00%, 11/1/20 Agy $ 130 $ 139
11.50%, 8/1/19 Agy 228 254
12.50%, 4/1/14 Agy 5 6
Gold Pools:
10.00%,
6/1/17-3/1/21 Agy 735 790
12.00%, 11/1/19 Agy 56 62
October TBA
6.00%, 10/1/30 Agy 24,550 22,946
6.50%, 10/1/30 Agy 9,550 9,171
7.50%, 10/1/30 Agy 6,000 5,993
8.00%, 10/1/30 Agy 3,150 3,195
8.50%, 10/1/30 Agy 3,550 3,640
Federal National
Mortgage
Association,
Conventional Pools:
6.00%,
4/1/27-4/1/29 Agy 11,779 11,004
9.50%,
2/1/20-8/1/21 Agy 801 849
10.00%,
8/1/18-2/1/25 Agy 413 444
10.50%,
11/1/10-2/1/28 Agy 628 684
11.00%,
9/1/19-9/1/20 Agy 770 849
11.50%,
11/1/19-9/1/25 Agy 446 499
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
---------------------------------------------------------
-------------------------------------------------------
<S> <C> <C> <C>
October TBA
7.50%, 10/1/30 Agy $ 2,500 $ 2,494
8.00%, 10/1/30 Agy 600 608
8.50%, 10/1/30 Agy 3,550 3,632
Government National
Mortgage
Association:
Adjustable Rate
Mortgages:
6.00%,
2/20/27-9/20/27 Tsy 3,584 3,605
6.50%,
10/20/27-1/20/28 Tsy 681 683
6.875%,
4/20/25-6/20/25 Tsy 851 855
7.00%,
2/20/25-8/20/25 Tsy 732 737
Various Pools:
9.00%, 11/15/17 Tsy 287 303
9.50%,
12/15/17-12/15/21 Tsy 2,143 2,282
10.00%,
8/15/17-4/15/28 Tsy 1,833 1,974
10.50%,
2/15/13-2/15/25 Tsy 3,339 3,646
11.00%,
12/15/09-7/15/20 Tsy 334 369
11.50%, 8/15/13 Tsy 230 256
12.00%,
12/15/12-2/15/15 Tsy 134 150
October TBA
7.00%, 10/15/30 Tsy 15,850 15,607
-------------------------------------------------------
GROUP TOTAL 97,726
-------------------------------------------------------
ASSET BACKED CORPORATES (11.7%)
Arcadia Automobile
Receivables Trust,
Series 98-A A3
5.90%, 11/15/02 AAA 249 248
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
47
<PAGE> 50
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Banc One Home Equity
Trust,
Series 99-1 A1
6.06%, 1/25/12 AAA $ 232 $ 229
Block Mortgage
Finance Co.,
Series 99-1 A1
5.94%, 9/25/13 AAA 137 136
BMW Vehicle Owner
Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 442 441
Capital Auto
Receivables Asset
Trust,
Series 99-1 A2
5.58%, 6/15/02 AAA 1,475 1,468
Centex Home Equity,
Series 99-2 A1
5.91%, 4/25/19 AAA 341 338
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 356 354
Citibank Credit Card
Issuance Trust,
Series 00-C1 C1
7.45%, 9/15/05 BBB 525 526
Contimortgage Home
Equity Loan Trust,
Series 99-A A1
6.01%, 12/25/13 AAA 172 171
CPS Auto Grantor
Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 47 47
Daimler Benz Auto
Grantor Trust,
Series 97-A A
6.05%, 3/31/05 AAA 45 45
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
---------------------------------------------------------
<S> <C> <C> <C>
Delta Funding Home
Equity Loan Trust,
Series 98-4 A1F
6.16%, 2/15/16 AAA $ 60 $ 60
EQCC Home Equity Loan
Trust,
Series 99-3 A1F
6.55%, 4/25/10 AAA 807 801
(!) First Merchants
Auto Receivables
Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA 17 17
First Security Auto
Grantor Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 321 320
98-A A
5.97%, 4/15/04 AAA 209 208
## First USA Credit
Card Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA 375 375
FleetBoston Home
Equity Loan Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA 113 112
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
48
<PAGE> 51
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Ford Credit Auto
Owner Trust,
Series:
99-B A3
5.47%, 9/15/01 AAA $ 421 $ 421
99-C A3
5.77%, 11/15/01 AAA 803 801
99-D A3
6.20%, 4/15/02 AAA 1,517 1,513
Green Tree Financial
Corp.,
Series:
+ 98-1 A2
5.85%, 11/1/29 Aaa 36 36
99-3 A2
5.51%, 2/1/31 AAA 670 668
Green Tree Home
Equity Loan Trust,
Series 99-C A1
5.99%, 7/15/30 AAA 374 373
Green Tree Lease
Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 104 104
Greenpoint
Manufactured
Housing,
Series 99-1 A1
5.78%, 12/15/09 AAA 338 335
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Harley-Davidson
Eaglemark
Motorcycle Trust,
Series:
99-1 A1
5.25%, 7/15/03 AAA $ 236 $ 235
99-2 A1
5.84%, 10/15/03 AAA 418 416
(!) Health Care
Receivables
Securitization
Program,
Series 97-1 A
6.815%, 7/1/01 N/R 157 157
+ HFC Home Equity
Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 483 481
(!) Long Beach
Acceptance Auto
Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 48 48
MBNA Master Credit
Card Trust,
Series:
00-1 A1
6.90%, 1/15/08 AAA 690 694
00-E
7.80%, 10/15/12 AAA 755 798
MMCA Automobile
Trust,
Series:
99-2 A1
6.30%, 6/15/02 AAA 656 655
00-1 A3
7.00%, 6/15/04 AAA 1,140 1,145
(!) National Car
Rental Financing
Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 375 375
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Navistar Financial
Corp. Owner Trust,
Series 99-A A2
5.55%, 2/15/02 AAA $ 303 $ 302
(!) New Holland
Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 603 602
Nissan Auto
Receivables Grantor
Trust,
Series 98-A A
5.45%, 4/15/04 AAA 596 590
+## Oakwood Mortgage
Investors, Inc.,
Series 99-B A1
6.739%, 5/15/09 Aaa 361 361
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
49
<PAGE> 52
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Option One Mortgage
Loan Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA $ 275 $ 272
Peco Energy Capital
Trust,
Series 00-A A3
7.625%, 3/1/10 AAA 975 1,004
Premier Auto Trust,
Series 99-3 A2
5.82%, 2/8/02 AAA 711 710
(!) Rental Car
Finance Corp.,
Series 97-1 A2
6.45%, 8/25/05 AA 450 444
+## Residential
Funding Mortgage
Securities I,
Series 99-HI4 A1
6.41%, 11/25/07 Aaa 301 300
(!) Team Fleet
Financing Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 250 249
97-1 A
7.35%, 5/15/03 A- 600 602
Union Acceptance
Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 332 330
USAA Auto Loan
Grantor Trust,
Series 97-1 A
6.00%, 5/15/04 AAA 177 176
WFS Financial Owner
Trust,
Series 99-B A2
5.83%, 4/20/02 AAA 422 421
-------------------------------------------------------
GROUP TOTAL 21,514
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED MORTGAGES (0.1%)
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R $ 2,886 $ 39
(!) 96-3 A YMA
10/25/26 N/R 2,886 4
Contimortgage Home
Equity Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 1,771 24
(!) 96-4 A11 YMA
1/15/28 AAA 1,771 2
96-4 A12 IO
1.05%, 1/15/28 AAA 313 3
(!)@ 96-4 A12 YMA
1/15/28 AAA 313 --
97-1 A10 IO
1.10%, 3/15/28 AAA 2,138 33
97-1 A10 YMA
3/15/28 N/R 2,138 3
-------------------------------------------------------
GROUP TOTAL 108
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
50
<PAGE> 53
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (2.7%)
Federal Home Loan
Mortgage
Corporation,
Series:
63-SA Inv Fl IO
1.50%, 6/17/27 Agy $ 1,440 $ 56
1887-SH Inv Fl IO
10.54%, 3/15/24 Agy 450 107
1911-C PO
11/15/23 Agy 527 356
2141 SD Inv Fl IO
1.53%, 4/15/29 Agy 2,697 195
2171 B
6.28%, 6/25/09 Agy 1,140 1,085
Structured
Pass-Through
Securities,
Series T-15 A1
5.83%, 12/25/13 Agy 178 176
Federal National
Mortgage
Association,
Series:
## 92-43 FC REMIC
7.26%, 10/25/21 Agy 130 130
## 94-73 F
7.16%, 12/25/20 Agy 15 15
97-53 IO PAC
8.00%, 8/18/27 Agy 667 180
## 97-70 FA REMIC,
PAC (11)
7.075%, 7/18/20 Agy 68 68
## 98-22 FA REMIC
7.02%, 4/18/28 Agy 309 308
99-42 SA Inv Fl IO
1.58%, 10/25/28 Agy 9,111 372
191 IO
8.00%, 1/1/28 Agy 1,487 415
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
270 2 IO
8.50%, 9/1/23 Agy $ 410 $ 111
281 2 IO
9.00%, 11/1/26 Agy 442 120
291 2 IO
8.00%, 11/1/27 Agy 462 128
296 2 IO
8.00%, 4/1/24 Agy 2,018 560
Government National
Mortgage
Association,
Series:
97-14 SB Inv Fl
2.68%, 9/16/27 Tsy 2,400 147
99-30 SA Inv Fl IO
1.98%, 8/16/29 Tsy 4,249 246
99-32 SB Inv Fl IO
REMIC
1.378%, 7/16/27 Tsy 7,819 123
-------------------------------------------------------
GROUP TOTAL 4,898
-------------------------------------------------------
COMMERCIAL MORTGAGES (3.0%)
## American Southwest
Financial
Securities Corp.,
Series 93-2 S1 IO
1.13%, 1/18/09 N/R 4,916 131
Asset Securitization
Corp.,
Series 96-MD6 A1C
7.04%, 11/13/26 AAA 300 295
(!) Carousel Center
Finance, Inc.,
Series 1 B
7.188%, 10/15/07 A 325 323
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
51
<PAGE> 54
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Chase Commercial
Mortgage Securities
Corp.,
Series 99-2 A2 AAA $ 1,100 $ 1,102
7.198%, 11/15/09
(!) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 230 243
(!)## DLJ Mortgage
Acceptance Corp.,
Series 97-CF1 S IO
1.086%, 3/15/17 AAA 2,785 109
+ First Union-Chase
Commercial
Mortgage,
Series 99-C2 A2
6.645%, 4/15/09 Aaa 925 892
GMAC Commercial
Mortgage
Securities, Inc.,
Series:
+ 96-C1 X2 IO
2.027%, 3/15/21 Aaa 1,968 113
+## 97-C2 X IO
1.264%, 4/15/27 Aaa 3,317 161
98-C2 A2
6.42%, 8/15/08 AAA 1,175 1,131
Nomura Asset
Securities Corp.,
Series:
94-MD1 A1B
7.526%, 3/15/18 N/R 25 25
## 94-MD1 A2
7.676%, 3/15/18 N/R 125 125
+ 97-D5 PS1 IO
1.62%, 2/14/43 Aaa 2,602 205
(!) Park Avenue
Finance Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 365 370
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(!) Prime Property
Fund,
Series 1 A
6.633%, 7/23/03 AA $ 173 $ 170
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.463%, 2/25/28 N/R 1,284 71
96-CFL X1A IO
0.830%, 2/25/28 N/R 691 3
96-CFL X2 IO
0.337%, 2/25/28 N/R 332 5
-------------------------------------------------------
GROUP TOTAL 5,474
-------------------------------------------------------
ENERGY (0.5%)
Conoco, Inc.
6.95%, 4/15/29 A- 1,070 989
-------------------------------------------------------
FEDERAL AGENCY (12.0%)
Federal National
Mortgage
Association,
5.25%, 1/15/09 Agy 7,375 6,667
(#) 6.25%, 5/15/29 Agy 6,240 5,754
7.125%, 6/15/10 Agy 8,700 8,913
7.25%, 5/15/30 Agy 750 787
-------------------------------------------------------
GROUP TOTAL 22,121
-------------------------------------------------------
FINANCE (13.4%)
American General
Finance Corp.
6.75%, 11/15/04 A+ 340 335
7.50%, 7/15/25 AA- 280 268
(!) Anthem Insurance
Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 430 350
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
52
<PAGE> 55
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Associates Corp. of
North America
6.00%, 7/15/05 A+ $ 600 $ 575
Bank One Corp.
6.00%, 2/17/09 A- 730 662
BankAmerica Capital
Corp.
5.875%, 2/15/09 A+ 195 177
6.25%, 4/1/08 A 345 323
Beneficial Corp.,
Series F
6.47%, 11/17/08 A 310 286
(!) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 150 137
Chase Manhattan Corp.
6.00%, 2/15/09 A 415 381
7.00%, 11/15/09 A 240 235
Citicorp, Inc.
Series F
6.375%, 11/15/08 A+ 915 864
EOP Operating LP
6.763%, 6/15/07 BBB 165 156
7.25%, 6/15/28 BBB 300 256
7.50%, 4/19/29 BBB+ 365 320
Equitable Companies,
Inc.
6.50%, 4/1/08 A+ 290 273
(!) Equitable Life
Assurance Society
of the U.S.,
Series 1A
6.95%, 12/1/05 A+ 860 847
(!) Farmers Exchange
Capital
7.05%, 7/15/28 A+ 455 376
(!) Farmers Insurance
Exchange
8.625%, 5/1/24 A+ 475 471
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
(!) Fifty-Seventh
Street Associates
7.125%, 6/1/17 A $ 555 $ 489
(!) First Hawaiian
Bank,
Series A
6.93%, 12/1/03 A- 575 559
FleetBoston Financial
Corp.
6.625%, 2/1/04 A- 230 226
6.625%, 12/1/05 A- 275 268
(!) Florida Property
& Casualty
7.375%, 7/1/03 A- 350 348
Ford Motor Credit Co.
7.375%, 10/28/09 A 475 465
General Electric
Capital Corp.
7.25%, 5/3/04 AAA 775 787
7.375%, 1/19/10 AAA 825 847
General Motors
Acceptance Corp.
7.75%, 1/19/10 A 575 581
(!) Goldman Sachs
Group LP
6.50%, 2/25/09 A+ 435 406
Great Western Finance
Corp.
Series A
8.206%, 2/1/27 BBB- 315 281
Hartford Life Corp.
7.65%, 6/15/27 A 730 701
Household Finance
Corp.
5.875%, 2/1/09 A 105 94
8.00%, 7/15/10 A 630 647
(!) Hyatt Equities
LLC
7.00%, 5/15/02 BBB+ 710 697
(!) John Hancock
Financial Services,
Inc.
7.375%, 2/15/24 AA- 930 863
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
53
<PAGE> 56
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers
Holdings, Inc.
8.25%, 6/15/07 A $ 310 $ 320
Merck & Co., Inc.
5.95%, 12/1/28 AAA 440 376
(!) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ 400 350
7.80%, 11/1/25 A+ 250 240
Nationsbank Corp.
6.80%, 3/15/28 A 170 151
(!) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A 755 635
(!) New England
Mutual,
Series DTC
7.875%, 2/15/24 A+ 350 341
Northern Trust Co.
6.625%, 10/1/03 AA- 955 947
Norwest Financial,
Inc.
5.625%, 2/3/09 A+ 1,035 920
(!) PNC Funding Corp.
7.50%, 11/1/09 BBB+ 270 269
PNC Institutional
Capital
Series A
7.95%, 12/15/26 BBB+ 495 447
(!) Prime Property
Funding II, Inc.
7.00%, 8/15/04 A 400 391
(!) Prudential
Insurance Co.
8.30%, 7/1/25 A- 1,050 1,063
State Street Corp.
7.65%, 6/15/10 A+ 360 368
Suntrust Banks, Inc.
7.75%, 5/1/10 A 385 393
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 180 163
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Washington Mutual,
Inc.
8.25%, 4/1/10 BBB $ 420 $ 430
(!) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 457 438
96 WFP-D
6.95%, 9/1/13 AA- 850 812
-------------------------------------------------------
GROUP TOTAL 24,605
-------------------------------------------------------
INDUSTRIALS (12.7%)
Albertson's, Inc.
7.45%, 8/1/29 A 620 558
(!) Alcoa, Inc.
7.375%, 8/1/10 A+ 220 222
Becton, Dickinson &
Co.
6.70%, 8/1/28 A+ 660 564
Clear Channel
Communications,
Inc.
7.65%, 9/15/10 BBB- 750 743
Comcast Cable
Communications
6.20%, 11/15/08 BBB 395 364
Continental Airlines,
Inc.,
Series 97-1 A
7.461%, 4/1/15 AA+ 329 324
DaimlerChrysler N.A.
Holdings Corp.
7.20%, 9/1/09 A+ 745 728
Dayton Hudson Corp.
6.65%, 8/1/28 A 320 274
6.75%, 1/1/28 A- 285 247
Delphi Automotive
Systems Corp.
7.125%, 5/1/29 BBB 200 171
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
54
<PAGE> 57
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Federated Department
Stores, Inc.
6.30%, 4/1/09 BBB+ $ 155 $ 135
(#) 6.90%, 4/1/29 BBB+ 675 533
7.00%, 2/15/28 BBB+ 85 68
(!) Florida Windstorm
7.125%, 2/25/19 AAA 1,160 1,089
Ford Motor Credit Co.
6.625%, 10/1/28 A 1,240 1,040
7.45%, 7/16/31 A 255 237
Hertz Corp.
7.625%, 8/15/07 A- 755 754
Home Depot, Inc.
6.50%, 9/15/04 AA- 825 819
Honeywell
International, Inc.
7.50%, 3/1/10 A 195 199
Johnson & Johnson
6.625%, 9/1/09 AAA 975 954
Kroger Co.
7.70%, 6/1/29 BBB- 710 656
8.05%, 2/1/10 BBB- 175 176
Lockheed Martin Corp.
8.20%, 12/1/09 BBB- 700 730
Lowe's Companies,
Inc.
6.50%, 3/15/29 A 625 517
6.875%, 2/15/28 A 380 331
Lucent Technologies,
Inc.
6.45%, 3/15/29 A 1,100 919
May Department Stores
Co.
6.70%, 9/15/28 A+ 1,010 844
Monsanto Co.
6.60%, 12/1/28 AA- 910 812
</TABLE>
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
Neiman Marcus Group,
Inc.
6.65%, 6/1/08 BBB $ 685 $ 618
News America
Holdings, Inc.
7.75%, 1/20/24 BBB- 240 223
7.75%, 2/1/24 BBB- 440 408
8.875%, 4/26/23 BBB- 295 306
Procter & Gamble Co.
6.60%, 12/15/04 AA 1,010 1,007
(!) Raytheon Co.
8.20%, 3/1/06 BBB- 445 460
8.30%, 3/1/10 BBB- 90 94
Rockwell
International Corp.
6.70%, 1/15/28 A+ 700 602
Sun Microsystems,
Inc.
7.65%, 8/15/09 BBB+ 370 374
Time Warner Cos.,
Inc.
6.625%, 5/15/29 BBB 140 119
7.25%, 9/1/08 BBB 210 208
U.S. Airways Corp.,
Pass-Through
Certificates
8.11%, 2/20/17 AAA 330 336
Series 98-1
6.85%, 1/30/18 A+ 856 769
United Technologies
Corp.
6.70%, 8/1/28 A+ 1,205 1,085
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA 1,700 1,686
-------------------------------------------------------
GROUP TOTAL 23,303
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
55
<PAGE> 58
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
NON-AGENCY FIXED RATE MORTGAGES (0.1%)
## Gemsco Mortgage
Pass Through
Certificate,
Series 87-A
8.635%, 11/25/10 AA $ 120 $ 120
## Resolution Trust
Corp.,
Series 92-5C CMO
8.613%, 1/25/26 AA 16 17
-------------------------------------------------------
GROUP TOTAL 137
-------------------------------------------------------
TELEPHONES (2.3%)
(#) AT&T Corp.
6.50%, 3/15/29 AA- 700 583
BellSouth
Telecommunications,
Inc.
6.375%, 6/1/28 AA- 745 631
Comcast Cable
Communications
8.375%, 5/1/07 BBB 185 193
GTE Corp.
6.94%, 4/15/28 A+ 1,190 1,080
MCI Communications
Corp.
6.95%, 8/15/06 A- 170 167
MCI WorldCom, Inc.
6.95%, 8/15/28 A- 890 810
(!) Qwest Capital
Funding
7.90%, 8/15/10 BBB+ 720 734
-------------------------------------------------------
GROUP TOTAL 4,198
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION (0.8%)
Continental Airlines,
Inc.,
Series 99-1 A
6.545%, 8/2/20 AA+ $ 428 $ 397
(!) Jet Equipment
Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 395 440
# United Parcel
Service
8.375%, 4/1/20 AAA 575 635
-------------------------------------------------------
GROUP TOTAL 1,472
-------------------------------------------------------
UTILITIES (0.5%)
CMS Panhandle
Holdings Co.
7.00%, 7/15/29 BBB- 640 537
(!) Southern Energy,
Inc.
7.90%, 7/15/09 BBB 360 341
-------------------------------------------------------
GROUP TOTAL 878
-------------------------------------------------------
TOTAL FIXED INCOME (Cost $210,959) 207,423
-------------------------------------------------------
PREFERRED STOCK (0.5%)
-------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
MORTGAGE-OTHER (0.5%)
(!)+ Home Ownership
Funding Corp.
13.331% (Cost
$869) Aaa 1,200 900
-------------------------------------------------------
CASH EQUIVALENTS (22.0%)
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
56
<PAGE> 59
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(++)RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
DISCOUNT NOTES (14.1%)
Federal Home Loan Bank
6.405%, 10/4/00 Agy $ 8,000 $ 7,996
Federal Home Loan Mortgage
Corporation
6.21%, 11/14/00 Agy 8,000 7,938
Federal National Mortgage
Association
6.19%, 11/22/00 Agy 10,000 9,907
-------------------------------------------------------
GROUP TOTAL 25,841
-------------------------------------------------------
REPURCHASE AGREEMENT (7.9%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00, to
be repurchased at $14,460,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at
$14,597 14,452 14,452
-------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $40,293) 40,293
-------------------------------------------------------
TOTAL INVESTMENTS (135.5%) (Cost $252,121) 248,616
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)(+)
-------------------------------------------------------
-------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (-35.5%)
Dividends Receivable $ 40
Interest Receivable 2,002
Receivable for Investments Sold 4,797
Receivable for Fund Shares Sold 199
Investments Held as Collateral for Loaned
Securities 15,563
Unrealized Gain on Swap Agreements 491
Other Assets 12
Payable for Bank Overdraft (3,613)
Payable for Investments Purchased (1,827)
Payable for Forward Commitments (66,859)
Payable for Fund Shares Redeemed (73)
Payable for Investment Advisory Fees (147)
Payable for Administrative Fees (12)
Payable for Trustees' Deferred Compensation
Plan-Note F (11)
Payable for Variation Margin on Futures
Contracts (64)
Collateral on Securities Loaned, at Value (15,563)
Other Liabilities (42)
----------
(65,107)
-------------------------------------------------------
NET ASSETS (100%) $ 183,509
-------------------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------------------
NET ASSETS
Applicable to 17,381,828 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $ 181,884
-------------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.46
-------------------------------------------------------
ADVISER CLASS
-------------------------------------------------------
NET ASSETS
Applicable to 155,800 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 1,625
-------------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.43
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
57
<PAGE> 60
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
DOMESTIC FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(000)(+)
-------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $ 191,703
Undistributed Net Investment Income (Loss) 3,136
Undistributed Realized Net Gain (Loss) (8,473)
Unrealized Appreciation (Depreciation) on:
Investment Securities (3,505)
Futures and Swaps 648
-------------------------------------------------------
NET ASSETS $ 183,509
-------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) See Note A1 to Financial Statements.
(++) Ratings are unaudited.
(!) 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.
# Step Bond-Coupon rate increases in increments to
maturity. Rate disclosed is as of September 30,
2000. Maturity date disclosed is the ultimate
maturity.
## Variable or floating rate securities-rate disclosed
is as of September 30, 2000.
@ Value is less than $500.
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
September 30, 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.
--------------------------------------------------------------------------------
58
<PAGE> 61
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP MID CAP
VALUE VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------
Year Ended September 30, 2000
(In Thousands)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 19,234 $ 9,912 $ 1,984
Interest 984 5,592 6,971
--------------------------------------------------------------------------------------------------------------------
Total Income 20,218 15,504 8,955
--------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 5,261 9,073 11,237
Administrative Fee--Note C 842 968 1,795
Custodian Fee--Note E 177 129 196
Audit Fee 34 23 22
Legal Fee 6 18 39
Filing & Registration Fees 54 63 334
Shareholder Servicing Fee--Investment Class shares--Note D 10 -- --
Distribution Fees--Adviser Class shares--Note D 625 87 1,648
Other Expenses 79 106 271
--------------------------------------------------------------------------------------------------------------------
Total Expenses 7,088 10,467 15,542
--------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (95) (129) (196)
--------------------------------------------------------------------------------------------------------------------
Net Expenses 6,993 10,338 15,346
--------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 13,225 5,166 (6,391)
--------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (83,973) 91,380 363,641
--------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 147,319 101,247 357,764
--------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 63,346 192,627 721,405
--------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 76,571 $ 197,793 $ 715,014
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
59
<PAGE> 62
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOMESTIC
SMALL CAP FIXED FIXED
GROWTH INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 325 $ 3,652 $ 70
Interest 956 335,049 13,011
-----------------------------------------------------------------------------------------------------------------------
Total Income 1,281 338,701 13,081
-----------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 3,628 16,928 $664
(22)
Less Waived Fees -- -- 642
Administrative Fee--Note C 290 3,611 142
Custodian Fee--Note E 63 344 16
Audit Fee 22 46 24
Legal Fee 7 50 3
Filing & Registration Fees 73 81 26
Shareholder Servicing Fee--Investment Class shares--Note D -- 74 --
Distribution Fees--Adviser Class shares--Note D -- 354 3
Other Expenses 44 409 46
-----------------------------------------------------------------------------------------------------------------------
Total Expenses 4,127 21,897 902
-----------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (62) (198) (12)
-----------------------------------------------------------------------------------------------------------------------
Net Expenses 4,065 21,699 890
-----------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (2,784) 317,002 12,191
-----------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 24,174 (54,847) (2,225)
Futures and Swaps -- (40,916) (1,716)
-----------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 24,174 (95,763) (3,941)
-----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 81,574 58,467 1,077
Futures and Swaps -- 29,612 897
-----------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 81,574 88,079 1,974
-----------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 105,748 (7,684) (1,967)
-----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 102,964 $ 309,318 $ 10,224
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
60
<PAGE> 63
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
VALUE VALUE
PORTFOLIO PORTFOLIO
-----------------------------------------------
Year Ended Year Ended
September 30, September 30,
------------------- ------------------
(In Thousands) 1999 2000 1999 2000
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 27,701 $ 13,225 $ 5,904 $ 5,166
Realized Net Gain (Loss) 122,925 (83,973) 83,605 91,380
Change in Unrealized Appreciation (Depreciation) 134,138 147,319 85,609 101,247
----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 284,764 76,571 175,118 197,793
----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (30,731) (12,262) (2,892) (7,001)
Realized Net Gain (346,188) (25,846) (101,623) (68,195)
In Excess of Realized Net Gain -- (85,794) -- --
INVESTMENT CLASS:
Net Investment Income (270) (91) -- --
Realized Net Gain (3,540) (240) -- --
In Excess of Realized Net Gain -- (797) -- --
ADVISER CLASS +:
Net Investment Income (4,810) (2,959) -- (149)
Realized Net Gain (52,186) (6,169) -- (1,641)
In Excess of Realized Net Gain -- (20,478) -- --
----------------------------------------------------------------------------------------------------------------------------
Total Distributions (437,725) (154,636) (104,515) (76,986)
----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 348,999 312,026 288,575 571,381
In Lieu of Cash Distributions 327,810 115,045 103,439 72,087
Redeemed (1,761,799) (749,814) (282,283) (390,031)
INVESTMENT CLASS:
Issued 6,883 8,807 -- --
In Lieu of Cash Distributions 2,822 1,055 -- --
Redeemed (23,620) (14,802) -- --
ADVISER CLASS +:
Issued 78,928 298,268 20,392 39,376
In Lieu of Cash Distributions 51,418 28,994 -- 1,789
Redeemed (173,003) (268,601) (3,709) (12,276)
----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions (1,141,562) (269,022) 126,414 282,326
----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (1,294,523) (347,087) 197,017 403,133
NET ASSETS:
Beginning of Period 2,638,035 1,343,512 716,729 913,746
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 1,343,512 $ 996,425 $ 913,746 $ 1,316,879
----------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in
end of period net assets $ 5,140 $ 3,037 $ 5,379 $ 2,844
----------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 22,907 25,445 15,813 26,596
In Lieu of Cash Distributions 23,236 9,841 6,346 3,849
Shares Redeemed (117,686) (60,973) (15,199) (18,734)
----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class Shares
Outstanding (71,543) (25,687) 6,960 11,711
----------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 440 722 -- --
In Lieu of Cash Distributions 200 90 -- --
Shares Redeemed (1,547) (1,208) -- --
----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class Shares
Outstanding (907) (396) -- --
----------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS +:
Shares Issued 5,078 23,931 1,062 1,863
In Lieu of Cash Distributions 3,645 2,483 -- 95
Shares Redeemed (11,461) (21,681) (197) (568)
----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares
Outstanding (2,738) 4,733 865 1,390
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Small Cap Value Portfolio began offering Adviser Class shares on January
22, 1999.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
61
<PAGE> 64
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP SMALL CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
<CAPTION>
Year Ended Year Ended
September 30, September 30,
--------------------- -----------------
(In Thousands) 1999 2000 1999 2000
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ (943) $ (6,391) $ (154) $ (2,784)
Realized Net Gain (Loss) 237,742 363,641 15,676 24,174
Change in Unrealized Appreciation (Depreciation) 102,485 357,764 12,161 81,574
-------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 339,284 715,014 27,683 102,964
-------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (2) -- -- --
Realized Net Gain (77,567) (150,641) -- (20,468)
ADVISER CLASS:
Net Investment Income -- -- -- --
Realized Net Gain (14,328) (53,376) -- --
-------------------------------------------------------------------------------------------------------------------------
Total Distributions (91,897) (204,017) -- (20,468)
-------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 565,037 1,442,060 81,536 547,479
In Lieu of Cash Distributions 71,047 144,239 -- 18,296
Redeemed (486,282) (631,836) (18,994) (303,602)
ADVISER CLASS:
Issued 181,375 636,003 -- --
In Lieu of Cash Distributions 14,192 52,577 -- --
Redeemed (24,798) (113,567) -- --
-------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 320,571 1,529,476 62,542 262,173
-------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 567,958 2,040,473 90,225 344,669
NET ASSETS:
Beginning of Period 481,013 1,048,971 3,004 93,229
-------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,048,971 $3,089,444 $ 93,229 $ 437,898
-------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in
end of period net assets $ 2 $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 24,011 43,878 3,253 10,932
In Lieu of Cash Distributions 3,801 5,005 -- 412
Shares Redeemed (20,418) (19,341) (715) (5,963)
-------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class Shares
Outstanding 7,394 29,542 2,538 5,381
-------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS:
Shares Issued 7,873 19,541 -- --
In Lieu of Cash Distributions 763 1,839 -- --
Shares Redeemed (1,101) (3,509)
-------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares
Outstanding 7,535 17,871 -- --
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
62
<PAGE> 65
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOMESTIC
FIXED FIXED
INCOME INCOME
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
<CAPTION>
Year Ended Year Ended
September 30, September 30,
------------------- ----------------
(In Thousands) 1999 2000 1999 2000
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 314,624 $ 317,002 $ 9,280 $ 12,191
Realized Net Gain (Loss) (123,134) (95,763) (5,139) (3,941)
Change in Unrealized Appreciation (Depreciation) (176,179) 88,079 (6,558) 1,974
--------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 15,311 309,318 (2,417) 10,224
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (273,978) (295,280) (6,519) (11,589)
Realized Net Gain -- -- -- --
In Excess of Realized Net Gain (112,821) -- (2,430) --
INVESTMENT CLASS:
Net Investment Income (2,372) (3,205) -- --
Realized Net Gain -- -- -- --
In Excess of Realized Net Gain (1,138) -- -- --
ADVISER CLASS +:
Net Investment Income (7,874) (9,437) (21) (84)
Realized Net Gain -- -- -- --
In Excess of Realized Net Gain (3,280) -- -- --
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (401,463) (307,922) (8,970) (11,673)
--------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 958,460 758,396 152,307 20,810
In Lieu of Cash Distributions 349,941 261,360 8,513 11,332
Redeemed (1,222,480) (1,272,237) (35,643) (38,673)
INVESTMENT CLASS:
Issued 24,497 31,847 -- --
In Lieu of Cash Distributions 2,637 2,599 -- --
Redeemed (33,777) (10,059) -- --
ADVISER CLASS +:
Issued 38,314 40,570 1,807 1,956
In Lieu of Cash Distributions 8,285 7,098 21 84
Redeemed (25,174) (44,532) (608) (1,603)
--------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 100,703 (224,958) 126,397 (6,094)
--------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (285,449) (223,562) 115,010 (7,543)
NET ASSETS:
Beginning of Period 4,805,262 4,519,813 76,042 191,052
--------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $4,519,813 $4,296,251 $191,052 $183,509
--------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) included in
end of period net assets $ 82,491 $ 83,032 $ 2,949 $ 3,136
--------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 82,479 69,172 13,812 2,028
In Lieu of Cash Distributions 30,023 23,857 784 1,107
Shares Redeemed (105,699) (115,079) (3,266) (3,756)
--------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class Shares
Outstanding 6,803 (22,050) 11,330 (621)
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 2,128 2,884 -- --
In Lieu of Cash Distributions 225 237 -- --
Shares Redeemed (2,881) (914) -- --
--------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class Shares
Outstanding (528) 2,207 -- --
--------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS +:
Shares Issued 3,302 3,701 167 192
In Lieu of Cash Distributions 710 648 2 8
Shares Redeemed (2,166) (4,053) (56) (157)
--------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares
Outstanding 1,846 296 113 43
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Domestic Fixed Income Portfolio began offering Adviser Class shares on
March 1, 1999.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
63
<PAGE> 66
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
VALUE PORTFOLIO Institutional Class
-----------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------------
1996 1997(+) 1998 1999(+) 2000(+)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.89 $ 15.61 $ 20.37 $ 15.16 $ 13.59
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.34 0.34 0.21 0.16
Net Realized and Unrealized Gain (Loss) on
Investments 2.20 5.75 (3.38) 1.11 0.95
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.50 6.09 (3.04) 1.32 1.11
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.32) (0.30) (0.36) (0.28) (0.18)
Realized Net Gain (1.46) (1.03) (1.81) (2.61) (1.27)
In Excess of Realized Net Gain -- -- -- -- (0.39)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.78) (1.33) (2.17) (2.89) (1.84)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.61 $ 20.37 $ 15.16 $ 13.59 $ 12.86
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 18.41% 41.25% (16.41%) 8.30% 9.67%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $1,844,740 $3,542,772 $2,288,236 $1,079,356 $690,859
Ratio of Expenses to Average Net Assets (1) 0.61% 0.62% 0.60% 0.63% 0.61%
Ratio of Net Investment Income to Average Net
Assets 2.07% 1.93% 1.76% 1.38% 1.32%
Portfolio Turnover Rate 53% 46% 56% 53% 50%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.60% 0.61% 0.59% 0.62% 0.60%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(+) Per share amounts are based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
64
<PAGE> 67
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Class
-------------------------------------------------------
VALUE PORTFOLIO
May 6,
1996** to Year Ended September 30,
September ---------------------------
30, 1997(+) 1998 1999(+) 2000(+)
1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.97 $ 15.60 $ 20.36 $ 15.15 $ 13.58
-------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.31 0.31 0.19 0.15
Net Realized and Unrealized
Gain (Loss) on Investments 0.59 5.75 (3.38) 1.12 0.94
-------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 6.06 (3.07) 1.31 1.09
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.33) (0.27) (0.15)
Realized Net Gain -- (1.03) (1.81) (2.61) (1.27)
In Excess of Realized Net
Gain -- -- -- -- (0.39)
-------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (2.14) (2.88) (1.81)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.60 $ 20.36 $ 15.15 $ 13.58 $ 12.86
-------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% (16.55%) 8.20% 9.50%
-------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,244 $29,847 $ 24,527 $ 9,673 $ 4,069
Ratio of Expenses to Average
Net Assets (2) 0.76%* 0.80% 0.75% 0.78% 0.76%
Ratio of Net Investment
Income to Average
Net Assets 2.05%* 1.75% 1.62% 1.25% 1.19%
Portfolio Turnover Rate 53% 46% 56% 53% 50%
-------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON
THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to
Expense
Reimbursement/Waiver N/A 0.09% N/A N/A N/A
Ratio Including Expense
Offsets 0.75%* 0.79% 0.74% 0.77% 0.75%
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Adviser Class
VALUE PORTFOLIO ---------------------------------------------------------------
July 17,
1996*** to
September Year Ended September 30,
30, -----------------------------------------------
1996 1997(+) 1998 1999(+) 2000(+)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.11 $ 15.61 $ 20.35 $ 15.13 $ 13.57
--------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.30 0.29 0.17 0.13
Net Realized and Unrealized
Gain (Loss) on Investments 1.49 5.74 (3.38) 1.12 0.94
--------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.50 6.04 (3.09) 1.29 1.07
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.27) (0.32) (0.24) (0.15)
Realized Net Gain -- (1.03) (1.81) (2.61) (1.27)
In Excess of Realized Net
Gain -- -- -- -- (0.39)
--------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (1.30) (2.13) (2.85) (1.81)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.61 $ 20.35 $ 15.13 $ 13.57 $ 12.83
--------------------------------------------------------------------------------------------------
TOTAL RETURN 10.63% 40.87% (16.66%) 8.10% 9.31%
--------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 15,493 $201,253 $325,272 $254,483 $301,497
Ratio of Expenses to Average
Net Assets (2) 0.86%* 0.90% 0.85% 0.88% 0.86%
Ratio of Net Investment
Income to Average
Net Assets 1.66%* 1.63% 1.52% 1.10% 1.05%
Portfolio Turnover Rate 53% 46% 56% 53% 50%
--------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON
THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to
Expense
Reimbursement/Waiver N/A N/A N/A N/A N/A
Ratio Including Expense
Offsets 0.85%* 0.89% 0.84% 0.87% 0.85%
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
-----------------------------------------------------------------
(+) Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
65
<PAGE> 68
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO Year Ended September 30,
-----------------------------------------------------------------
1996 1997 1998 1999(+) 2000(+)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.28 $ 19.64 $ 24.97 $ 17.37 $ 18.62
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.18 0.15 0.16 0.13 0.09
Net Realized and Unrealized Gain (Loss) on
Investments 3.62 8.39 (4.33) 3.65 4.01
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 3.80 8.54 (4.17) 3.78 4.10
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.20) (0.11) (0.14) (0.07) (0.14)
Realized Net Gain (2.24) (3.10) (3.29) (2.46) (1.40)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.44) (3.21) (3.43) (2.53) (1.54)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.64 $ 24.97 $ 17.37 $ 18.62 $ 21.18
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 24.00% 49.81% (18.34%) 23.83% 23.11%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $585,457 $897,396 $716,729 $897,629 $1,269,171
Ratio of Expenses to Average Net Assets (1) 0.86% 0.86% 0.86% 0.86% 0.86%
Ratio of Net Investment Income to Average Net Assets 0.99% 0.70% 0.71% 0.70% 0.43%
Portfolio Turnover Rate 145% 107% 163% 251% 193%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.86% 0.86% 0.86% 0.86% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(+) Per share amounts are based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
66
<PAGE> 69
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
SMALL CAP VALUE PORTFOLIO Adviser Class
------------------------------------
January 22, Year
1999** to Ended
September 30, September 30,
1999(+) 2000(+)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.32 $ 18.62
------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.04
Net Realized and Unrealized Gain (Loss) on Investments 1.24 4.02
------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.30 4.06
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.13)
Realized Net Gain -- (1.40)
------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (1.53)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.62 $ 21.15
------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.51% 22.83%
------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $16,117 $47,708
Ratio of Expenses to Average Net Assets (2) 1.11%* 1.11%
Ratio of Net Investment Income to Average Net Assets 0.45%* 0.18%
Portfolio Turnover Rate 251% 193%
------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 1.10%* 1.10%
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Adviser Class shares
-----------------------------------------------------------------
(+) Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
67
<PAGE> 70
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------------
MID CAP GROWTH PORTFOLIO Year Ended September 30,
--------------------------------------------------------------
1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.60 $ 20.53 $ 21.84 $ 18.62 $ 25.77
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01 (0.01) (0.03) (0.01) (0.06)
Net Realized and Unrealized Gain (Loss) on Investments 4.70 4.75 0.24 10.65 13.71
--------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.71 4.74 0.21 10.64 13.65
--------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.03) -- -- (0.00)(#) --
Realized Net Gain (2.75) (3.43) (3.43) (3.49) (4.27)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.78) (3.43) (3.43) (3.49) (4.27)
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.53 $ 21.84 $ 18.62 $ 25.77 $ 35.15
--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 28.81% 28.05% 2.00% 64.27% 56.60%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $403,281 $446,963 $429,955 $785,659 $2,109,750
Ratio of Expenses to Average Net Assets (1) 0.60% 0.63% 0.62% 0.62% 0.62%
Ratio of Net Investment Income to Average Net Assets 0.04% (0.07%) (0.13%) (0.07%) (0.21%)
Portfolio Turnover Rate 141% 134% 172% 208% 169%
--------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.60% 0.61% 0.60% 0.60% 0.61%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(#) Amount is less than $0.01 per share.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
68
<PAGE> 71
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Adviser Class
-------------------------------------------------
January 31, Year Ended September 30,
1997** to --------------------------
September 30, 1999 2000
MID CAP GROWTH PORTFOLIO 1997 1998
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.04 $ 21.81 $ 18.55 $ 25.59
----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) (0.03) (0.05) (0.09)
Net Realized and Unrealized Gain (Loss) on Investments 4.79 0.20 10.58 13.56
----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.77 0.17 10.53 13.47
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Realized Net Gain -- (3.43) (3.49) (4.27)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.81 $ 18.55 $ 25.59 $ 34.79
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 27.99% 1.79% 63.87% 56.24%
----------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 1,200 $51,058 $263,312 $979,694
Ratio of Expenses to Average Net Assets (2) 0.88%* 0.87% 0.88% 0.87%
Ratio of Net Investment Income to Average Net Assets (0.41%)* (0.25%) (0.31%) (0.46%)
Portfolio Turnover Rate 134% 172% 208% 169%
----------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.86%* 0.84% 0.86% 0.86%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Adviser Class shares
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
69
<PAGE> 72
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------
June 30, Year Ended September 30,
1998** to ----------------------------------
September
30, 1999(+) 2000
SMALL CAP GROWTH PORTFOLIO 1998
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 8.57 $ 32.28
-----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) (0.13) (0.34)
Net Realized and Unrealized Gain (Loss) on Investments (1.42) 23.84 25.42
-----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.43) 23.71 25.08
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Realized Net Gain -- -- (4.40)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.57 $ 32.28 $ 52.96
-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (14.30%) 276.66% 80.31%
-----------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 3,004 $ 93,229 $ 437,898
Ratio of Expenses to Average Net Assets (1) 1.16%* 1.18% 1.14%
Ratio of Net Investment Income (Loss) to Average Net
Assets (0.46%)* (0.50%) (0.77%)
Portfolio Turnover Rate 67% 300% 206%
-----------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 3.67%* 0.15% N/A
Ratio Including Expense Offsets 1.15%* 1.15% 1.12%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) Per share amounts are based on average shares outstanding.
* Annualized
** Commencement of Operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
70
<PAGE> 73
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------------------------
FIXED INCOME PORTFOLIO Year Ended September 30,
----------------------------------------------------------------------
1996 1997(+) 1998(+) 1999(+) 2000(+)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.82 $ 11.83 $ 12.22 $ 12.22 $ 11.26
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.78 0.80 0.78 0.77 0.77
Net Realized and Unrealized Gain (Loss) on
Investments 0.08 0.50 0.14 (0.72) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.86 1.30 0.92 0.05 0.75
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.79) (0.78) (0.75) (0.71) (0.76)
Realized Net Gain (0.06) (0.13) (0.17) -- --
In Excess of Realized Net Gain -- -- -- (0.30) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.85) (0.91) (0.92) (1.01) (0.76)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 12.22 $ 12.22 $ 11.26 $ 11.25
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.63% 11.47% 7.90% 0.33% 7.02%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $1,790,146 $3,219,987 $4,625,015 $4,338,939 $4,087,553
Ratio of Expenses to Average Net Assets (1) 0.48% 0.49% 0.48% 0.48% 0.48%
Ratio of Net Investment Income to Average Net
Assets 6.77% 6.73% 6.49% 6.62% 7.03%
Portfolio Turnover Rate 162% 179% 121% 103% 62%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.48% 0.48% 0.47% 0.47% 0.47%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(+) Per share amounts are based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
71
<PAGE> 74
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Class Adviser Class
------------------------------------------- -----------------------------------------------
October 15, Year Ended November 7, Year Ended
1996** to September 30, 1996*** to September 30,
September ---------------------- September ---------------------------
30, 1999(+) 2000(+) 30, 1999(+) 2000(+)
FIXED INCOME PORTFOLIO 1997(+) 1998(+) 1997(+) 1998(+)
-------------------------------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.80 $ 12.22 $ 12.22 $ 11.27 $ 12.04 $ 12.22 $ 12.23 $ 11.26
-------------------------------------------------------------------------------- ----------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.75 0.76 0.76 0.76 0.70 0.75 0.74 0.75
Net Realized and
Unrealized Gain (Loss)
on Investments 0.40 0.14 (0.72) (0.03) 0.20 0.14 (0.72) (0.02)
-------------------------------------------------------------------------------- ----------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 1.15 0.90 0.04 0.73 0.90 0.89 0.02 0.73
-------------------------------------------------------------------------------- -----------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.60) (0.73) (0.69) (0.75) (0.59) (0.71) (0.69) (0.75)
Realized Net Gain (0.13) (0.17) -- -- (0.13) (0.17) -- --
In Excess of Realized Net
Gain -- -- (0.30) -- -- -- (0.30) --
-------------------------------------------------------------------------------- -----------------------------------------------
TOTAL DISTRIBUTIONS (0.73) (0.90) (0.99) (0.75) (0.72) (0.88) (0.99) (0.75)
-------------------------------------------------------------------------------- -----------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.22 $ 12.22 $ 11.27 $ 11.25 $ 12.22 $ 12.23 $ 11.26 $ 11.24
-------------------------------------------------------------------------------- -----------------------------------------------
TOTAL RETURN 10.07% 7.72% 0.24% 6.84% 7.79% 7.63% 0.07% 6.79%
-------------------------------------------------------------------------------- -----------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands) $ 9,527 $48,944 $39,165 $63,944 $ 76,683 $131,303 $141,709 $144,754
Ratio of Expenses to
Average Net Assets (2) 0.66%* 0.63% 0.63% 0.63% 0.77%* 0.73% 0.73% 0.73%
Ratio of Net Investment
Income to Average Net
Assets 6.57%* 6.31% 6.50% 6.89% 6.50%* 6.22% 6.38% 6.78%
Portfolio Turnover Rate 179% 121% 103% 62% 179% 121% 103% 62%
-------------------------------------------------------------------------------- -----------------------------------------------
(2) SUPPLEMENTAL INFORMATION
ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Reduction in Ratio due to
Expense
Reimbursement/Waiver 0.12%* N/A N/A N/A 0.01%* N/A N/A N/A
Ratio Including Expense
Offsets 0.65%* 0.62% 0.62% 0.62% 0.76%* 0.72% 0.72% 0.72%
-------------------------------------------------------------------------------- ------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
-----------------------------------------------------------------
(+) Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
72
<PAGE> 75
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
DOMESTIC FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Institutional Class
Year Ended September 30,
---------------------------------------------
1996 1997 1998 1999 2000(+)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.03 $ 10.89 $ 11.27 $ 11.40 $ 10.55
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.74 0.73 0.71 0.71
Net Realized and Unrealized Gain (Loss) on Investments (0.09) 0.33 0.32 (0.83) (0.12)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.47 1.07 1.05 (0.12) 0.59
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.57) (0.67) (0.79) (0.52) (0.68)
Realized Net Gain -- (0.02) (0.13) -- --
In Excess of Realized Net Gain (0.04) -- -- (0.21) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.61) (0.69) (0.92) (0.73) (0.68)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.89 $ 11.27 $ 11.40 $ 10.55 $ 10.46
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.41% 10.20% 9.83% (1.12%) 5.88%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $95,362 $96,954 $76,042 $189,860 $181,884
Ratio of Expenses to Average Net Assets (1) 0.52% 0.51% 0.51% 0.51% 0.51%
Ratio of Net Investment Income to Average Net Assets 5.73% 6.48% 6.32% 6.09% 6.86%
Portfolio Turnover Rate 168% 217% 145% 115% 51%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.01% 0.01% 0.01% N/A 0.01%
Ratio Including Expense Offsets 0.50% 0.50% 0.50% 0.49% 0.50%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(+) Per share amounts are based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
73
<PAGE> 76
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
DOMESTIC FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
Adviser Class
----------------------------------
March 1, Year
1999** to Ended
September 30, September 30,
1999 2000(+)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.85 $ 10.53
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.39 0.68
Net Realized and Unrealized Gain (Loss) on Investments (0.43) (0.11)
---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.04) 0.57
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.28) (0.67)
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.53 $ 10.43
---------------------------------------------------------------------------------------------------------
TOTAL RETURN (0.40%) 5.68%
---------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 1,192 $ 1,625
Ratio of Expenses to Average Net Assets (2) 0.75%* 0.76%
Ratio of Net Investment Income to Average Net Assets 6.73%* 6.61%
Portfolio Turnover Rate 115% 51%
---------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 0.01%
Ratio Including Expense Offsets 0.74%* 0.75%
---------------------------------------------------------------------------------------------------------
</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.
--------------------------------------------------------------------------------
74
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
MAS Funds (the "Fund") is registered under the Investment Company Act of 1940
as an open-end investment company. At September 30, 2000, the Fund was
comprised of twenty-four active portfolios (each referred to as a "Portfolio").
The Funds offer up to three different classes of shares for certain
Portfolios -- Institutional Class shares, Investment Class shares and Adviser
Class shares.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution or service fees as described in Note D. The accompanying
financial statements and financial highlights are those of the Value Portfolio,
Small Cap Value Portfolio, Mid Cap Growth Portfolio, Small Cap Growth Portfolio,
Fixed Income Portfolio and Domestic Fixed Income Portfolio only. The financial
statements for the remaining Portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with accounting principles generally accepted in the
United States of America for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial statements
generally accepted in the United States of America. 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 on those exchanges. Bonds,
including municipal bonds, and other fixed income securities are valued
using brokers' quotations or on the basis of prices provided by a pricing
service, which are based primarily on institutional trading in similar
securities. Mortgage-backed securities issued by certain government-related
organizations are valued using brokers' quotations based on a matrix system
which considers such factors as other security prices, yields and
maturities. Short-term securities maturing 60 days or less, are valued
using the amortized cost method of valuation, which in the opinion of the
Board of Trustees reflects fair value. Securities for which no quotations
are readily available (including restricted securities) are valued at their
fair value as determined in good faith
--------------------------------------------------------------------------------
75
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 income
and net capital gain. 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 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. Any such joint repurchase agreement is
covered by the same collateral requirements as discussed above.
4. FUTURES: Financial 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 gains
or losses in the Statement of Operations.
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 changes in the value of the related 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
the prices of securities relating to these instruments. The change in value
of futures contracts primarily corresponds with the value of their related
securities, but may not precisely correlate with the change in value of
such securities. 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, except the Mid Cap Growth Portfolio, may
enter into swap agreements to exchange the interest rate on or return
generated by one nominal instrument for the return generated by
--------------------------------------------------------------------------------
76
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
another nominal 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 payments to be received, if any, at the date
of default.
6. STRUCTURED INVESTMENTS: Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes
in foreign currencies, interest rates, commodities, indices, equity
securities or other underlying instruments. A Portfolio uses these
securities to increase or decrease its exposure to different underlying
instruments and to gain exposure to markets that might be difficult to
invest in through conventional securities. Structured investments may be
more volatile than their underlying instruments, but any loss is limited to
the amount of the original investment.
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. Liquid securities or cash is earmarked in an amount at least
equal to these commitments. Securities held for this purpose cannot be sold
while this strategy is outstanding, unless replaced with other assets. As a
result, there is a possibility that, as asset earmarking reaches certain
levels, a portfolio might lose some flexibility in managing its
investments, responding to shareholder redemption
--------------------------------------------------------------------------------
77
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
requests, or meeting other current obligations.
8. PURCHASED OPTIONS: Certain Portfolios may purchase call and put options on
their portfolio securities. A call option, upon payment of a premium, gives
the purchaser of the option the right to buy, and the seller the obligation
to sell, the underlying instrument at the exercise price. The purchase of a
call option might be intended to protect the Portfolio against an increase
in the price of the underlying instrument that it intends to purchase in
the future by fixing the price at which it may purchase the instrument. A
put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the instrument at
the exercise price. A Portfolio may purchase a put option to protect its
holdings in the underlying instrument, or a similar instrument, against a
substantial decline in the market value of such instrument by giving the
Portfolio the right to sell the instrument at the option exercise price.
Possible losses from purchased options cannot exceed the total amount
invested.
9. 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 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
(except the Mid Cap Growth and Domestic Fixed Income Portfolios) 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.
--------------------------------------------------------------------------------
78
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
At September 30, 2000, the net assets of certain Portfolios were
substantially comprised of foreign-currency denominated securities and
foreign currency. The net assets of these Portfolios are presented at the
foreign exchange rates and market values at the close of the period. The
Portfolios do 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 Portfolios do 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
possibility of lower level governmental supervision and regulation of
foreign securities markets, relative currency valuation fluctuations and
the possibility of political or economic instability.
10. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income, if any, are declared and paid
quarterly except for the Mid Cap Growth, Small Cap Growth and Small Cap
Value Portfolios, which are declared and paid annually. 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 accounting principles
generally accepted in the United States of America. These differences are
primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on securities, forwards and futures,
including post October losses and permanent differences such as gain (loss)
on in-kind redemptions (Note I), foreign currency transactions and gains on
certain equity securities designated as issued by "passive foreign
investment companies".
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
--------------------------------------------------------------------------------
79
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
calculating net investment income (loss) per share in the Financial
Highlights.
11. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities
sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the Fund can be directly attributed to
a particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios on the basis of their relative net
assets. Income, expenses (other than class specific expenses) and realized
and unrealized gains or losses are allocated to each class of shares based
upon their relative net assets.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory
Agreement, each Portfolio has agreed to pay Miller Anderson & Sherrerd, LLP
("MAS" or the "Adviser"), wholly owned by indirect subsidiaries of Morgan
Stanley Dean Witter & Co., for investment advisory services performed at a fee
calculated by applying a quarterly rate based on an annual percentage rate to
each Portfolio's average daily net assets for the quarter. For the year ended
September 30, 2000, the investment advisory fees of each of the Portfolios
were:
<TABLE>
<CAPTION>
Annual Voluntary Expense Limitations
Investment ------------------------------------
Advisory Institutional Investment Adviser
Portfolio Fee Class Class Class
--------- ---------- ------------- ---------- -------
<S> <C> <C> <C> <C>
Value 0.500% --% --% --%
Small Cap Value 0.750 -- -- --
Mid Cap Growth 0.500 -- -- --
Small Cap Growth 1.000 1.15 -- --
Fixed Income 0.375 -- -- --
Domestic Fixed
Income 0.375 0.50 -- 0.75
</TABLE>
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse certain Portfolios so that annual operating expenses
giving effect to custody fee offsets, will not exceed voluntary expense
limitations established for each class of shares as presented in the table
above.
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 Miller Anderson & Sherrerd LLP, is the distributor
for the Fund. MASDI is a limited-
--------------------------------------------------------------------------------
80
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
purpose broker/dealer whose only function is to distribute open-end mutual fund
shares. The Distributor provides all classes of shares in each Portfolio with
distribution services, and receives fees in connection with these services,
pursuant to separate Distribution and Shareholder Servicing Plans (the "Plans")
in accordance with Rule 12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support
distribution efforts and/or servicing of accounts. The Adviser Class of shares
pays a distribution fee of 0.25% of average net assets of the class for such
services under the 12b-1 plan adopted by the Fund. The Investment Class of
shares pays a shareholder servicing fee of 0.15% of average net assets of the
class. The shareholder servicing fee is used to support the expenses associated
with servicing and maintaining accounts. Both fees are paid directly to MASDI.
The distribution fee may be retained by MASDI if an Adviser Class shareholder
invests directly through MASDI. Usually the fees are paid by MASDI to external
organizations such as 401(k) alliance sponsors, brokers and bank trust
departments who distribute MAS Funds to the public.
E. CUSTODY. The Chase Manhattan Bank serves as custodian for the Fund in
accordance with a custodian agreement.
F. TRUSTEES' FEES. The Fund pays each Trustee, who is not an interested person,
as defined under the Investment Company Act of 1940, as amended, an annual fee
plus reimbursement of travel and other expenses incurred in attending Board
meetings. Trustees who are also affiliated persons receive no remuneration for
their service as Trustees.
Each eligible Trustee of the Fund who is not an officer or affiliated person
participates in the Trustees' Deferred Compensation Plan. Under the Trustees'
Deferred Compensation Plan, such Trustees must defer at least 25% of their fees
and may elect to defer payment of up to 100% of their total fees earned as a
Trustee of the Fund. These deferred amounts are invested in the Portfolios
selected by the Trustee. Total trustees fees incurred, for the year ended
September 30, 2000 by the Portfolios were $157,000.
Expenses incurred by the Fund for the year ended September 30, 2000, include
legal fees paid to Morgan, Lewis & Bockius, LLP. A partner of that firm is an
Assistant Secretary of the Fund.
--------------------------------------------------------------------------------
81
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
G. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES: For the year ended September 30, 2000,
purchases and sales of investment securities other than temporary cash
investments were:
<TABLE>
<CAPTION>
(000)
------------------------
Portfolio Purchases Sales
--------- ---------- ----------
<S> <C> <C>
Value $ 519,886 $ 918,331
Small Cap Value 2,299,826 2,126,764
Mid Cap Growth 4,938,677 3,604,260
Small Cap Growth 941,555 700,402
Fixed Income 3,486,871 4,310,304
Domestic Fixed
Income 115,741 156,215
</TABLE>
2. FEDERAL INCOME TAX COST AND UNREALIZED APPRECIATION (DEPRECIATION): At
September 30, 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> <C>
Value $ 973,026 $144,673 $(126,818) $ 17,855
Small Cap Value 1,220,487 234,937 (127,355) 107,582
Mid Cap Growth 2,713,995 635,539 (171,450) 464,089
Small Cap Growth 354,363 113,814 (25,372) 88,442
Fixed Income 6,143,608 49,940 (153,585) (103,645)
Domestic Fixed Income 252,144 1,554 (5,082) (3,528)
</TABLE>
3. FORWARD FOREIGN CURRENCY CONTRACTS: For the year ended September 30, 2000,
there were no forward foreign currency contracts.
4. FUTURES CONTRACTS: At September 30, 2000, the following Portfolios had
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:
FIXED INCOME
U.S. Treasury
2 yr. Note 8 US$ 1,600 Dec-00 $ 2
U.S. Treasury
5 yr. Note 767 US$ 77,107 Dec-00 560
DOMESTIC FIXED INCOME
U.S. Treasury
2 yr. Note 4 US$ 800 Dec-00 3
U.S. Treasury
5 yr. Note 19 US$ 1,910 Dec-00 14
Sales:
FIXED INCOME
90 Day Euro 12 EUR 2,801 Dec-00 1
Mar-01
U.S. Treasury
10 yr. Note 4,792 US$ 480,248 Dec-00 (1,555)
U.S. Treasury
Long Bond 5,564 US$ 548,923 Dec-00 8,620
DOMESTIC FIXED INCOME
U.S. Treasury
10 yr. Note 384 US$ 38,484 Dec-00 (157)
U.S. Treasury
Long Bond 194 US$ 19,139 Dec-00 297
</TABLE>
<TABLE>
<S> <C> <C>
EUR -- Euro
US$ -- U.S. Dollar
</TABLE>
5. SWAP AGREEMENTS: At September 30, 2000, the following Portfolios had open
Interest Rate Swap Agreements:
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
-------------------------------------------------------------------
<C> <S> <C>
FIXED INCOME
$51,000 Agreement with Bankers Trust Company $(2,551)
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually.
</TABLE>
--------------------------------------------------------------------------------
82
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
-------------------------------------------------------------------
<C> <S> <C>
$50,000 Agreement with Bankers Trust Company $(2,318)
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually.
$41,000 Agreement with Deutsche Bank (243)
terminating November 8, 2009 to pay 3
month LIBOR monthly and to receive
fixed rate at 6.81% semiannually.
$72,000 Agreement with Goldman Sachs 3,412
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually.
$19,750 Agreement with Goldman Sachs 872
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually.
$35,100 Agreement with Goldman Sachs 1,423
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually.
$89,300 Agreement with Salomon Brothers 3,018
terminating February 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.26% semiannually.
$40,200 Agreement with Salomon Brothers 1,545
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually.
$42,000 Agreement with Salomon Brothers 1,527
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually.
-------
$ 6,685
=======
DOMESTIC FIXED INCOME
$900 Agreement with Bankers Trust Company $ (45)
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually.
$1,500 Agreement with Bankers Trust Company (70)
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually.
$9,000 Agreement with Deutsche Bank (53)
terminating November 8, 2009 to pay 3
month LIBOR monthly and to receive
fixed rate at 6.81% semiannually.
$7,350 Agreement with Salomon Brothers 203
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually.
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
-------------------------------------------------------------------
<C> <S> <C>
$3,400 Agreement with Salomon Brothers $115
terminating February 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.26% semiannually.
$2,800 Agreement with Goldman Sachs 133
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually.
$750 Agreement with Goldman Sachs 33
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually.
$1,350 Agreement with Goldman Sachs 55
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually.
$1,550 Agreement with Salomon Brothers 60
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually.
$1,650 Agreement with Salomon Brothers 60
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually.
-------
$491
=======
LIBOR -- London Interbank Offer Rate
</TABLE>
H. CAPITAL LOSS CARRY FORWARD. At September 30, 2000, the following Portfolios
had available for Federal income tax purposes unused capital losses, all of
which will expire on the indicated dates:
<TABLE>
<CAPTION>
Expiration Date
September 30,
(000)
-----------------------------------
Portfolio 2003 2004 2007 2008
--------- ------ ------ ------ --------
<S> <C> <C> <C> <C>
Value $ -- $ -- $ -- $ 16,828
Fixed Income -- -- 2,005 111,596
Domestic Fixed Income -- -- 262 4,325
</TABLE>
I. IN-KIND TRANSACTIONS. For the year ended September 30, 2000, the following
Portfolios
--------------------------------------------------------------------------------
83
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
realized losses from in-kind redemptions of approximately:
<TABLE>
<CAPTION>
Portfolio (000)
--------- -------
<S> <C>
Small Cap Value $(5,530)
Fixed Income (6,326)
</TABLE>
J. POST OCTOBER LOSSES. Under the current tax law, certain capital and net
foreign exchange losses realized after October 31 may be deferred and treated
as occurring on the first day of the following fiscal year. For the fiscal year
ended September 30, 2000, the following Portfolios may elect to defer capital
losses occurring between November 1,1999 and September 30, 2000 up to the
following amounts.
<TABLE>
<CAPTION>
Portfolio (000)
--------- -------
<S> <C>
Value $56,115
Fixed Income 64,291
Domestic Fixed Income 3,372
</TABLE>
K. SECURITIES LENDING. Certain Portfolios loan securities to certain brokers
and receive security lending fees. Security lending fees are included in
interest income in the Statement of Operations. During the year ended September
30, 2000, the following Portfolios had security lending fees totaling:
<TABLE>
<CAPTION>
Fees
Portfolio (000)
--------- -----
<S> <C>
Value $ 56
Mid Cap Growth 6
Fixed Income 972
Domestic Fixed 10
</TABLE>
Portfolios that lend securities receive securities issued or guaranteed by the
U.S. Government or its agencies, cash or letters of credit as collateral in an
amount at least equal to 100% of the current market value of loaned securities.
The value of loaned securities and related collateral outstanding at September
30, 2000, were as follows:
<TABLE>
<CAPTION>
Value of
Loaned Value of
Securities Collateral
Portfolio (000) (000)
--------- ---------- ----------
<S> <C> <C>
Value $107,827 $111,224
Fixed Income 255,200 259,146
Domestic Fixed 15,371 15,563
</TABLE>
The market value of the loaned securities is determined at the close of
business of the fund and any additional collateral is delivered to the fund on
the next business day.
The Portfolios have entered into an arrangement with their custodian whereby
credits realized on uninvested cash balances were used to offset a portion of
each applicable portfolio's expenses. Expense offsets appearing in the
Statement of Operations include custodian balance credits totaling $206,000 for
the year ended September 30, 2000.
--------------------------------------------------------------------------------
84
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
L. OTHER. At September 30, 2000, certain Portfolios had otherwise unaffiliated
record owners of 10% or greater. Investment activities of these shareholders
could have a material impact on these Portfolios. These Portfolios and the
aggregate percentage of such owners was as follows:
<TABLE>
<CAPTION>
Percentage
of Ownership
------------------------------------
Institutional Investment Adviser
Portfolio Class Class Class
--------- ------------- ---------- -------
<S> <C> <C> <C>
Value 25.9% 94.6% 85.4%
Small Cap Value -- -- 55.8
Mid Cap Growth 42.3 -- 66.7
Small Cap Growth 39.1 -- --
Fixed Income -- 43.5 67.6
Domestic Fixed Income 49.8 -- 100.0
</TABLE>
--------------------------------------------------------------------------------
85
<PAGE> 88
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
MAS Funds
We have audited the accompanying statement of net assets of each of the
six Portfolios of the MAS Funds listed in the accompanying table of contents
(hereafter referred to as the "Funds"), including the portfolio of investments,
as of September 30, 2000, and the related statements of operations, changes in
net assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The Fund's financial
statements and financial highlights for the periods ended prior to September 30,
2000, were audited by other auditors whose report, dated November 19, 1999,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to provide reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned at September 30, 2000, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Funds as of
September 30, 2000, the results of its operations, the changes in its net assets
and its financial highlights for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 17, 2000
--------------------------------------------------------------------------------
86
<PAGE> 89
--------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
Each Portfolio hereby designates the following amount as long-term capital gain
dividends for the purpose of the dividend paid deduction on its federal income
tax return.
<TABLE>
<CAPTION>
LONG-TERM
CAPITAL GAINS -- 20%
FUND (000)
------------------------------------------------------------ --------------------
<S> <C>
Value $127,989
Small Cap Value 9,053
Mid Cap Growth 69,374
Small Cap Growth 126
</TABLE>
For the year ended September 30, 2000, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders for each
Portfolio were:
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT
------------------------------------------------------------ ------
<S> <C>
Value 98.1%
Small Cap Value 7.4
Mid Cap Growth 1.1
Small Cap Growth 0.6
</TABLE>
For the year ended September 30, 2000*, the percentage of income earned from
direct U.S. Treasury Obligations was as follows:
<TABLE>
<CAPTION>
INCOME
FUND EARNED
------------------------------------------------------------ --------
<S> <C>
Fixed Income 18.3%
Domestic Fixed Income 12.6
</TABLE>
* Amounts for the period ending December 31, 2000 will be provided with Form
1099-DIV to be mailed in January 2001.
ADDITIONAL INFORMATION: (UNAUDITED) On July 14, 2000, the Fund's Trustees, upon
the recommendation of the Audit Committee, accepted the resignation of
PricewaterhouseCoopers LLP ("PWC") as the Fund's independent auditors and voted
to appoint Deloitte & Touche LLP for the fiscal year ending September 30, 2000.
PWC's report on the Fund's financial statements for the fiscal year ending
September 30, 1999, contained no adverse opinion or disclaimer of opinion, nor
was it qualified or modified as to uncertainty, audit scope, or accounting
principles. Further, there were no disagreements between the Fund and
PricewaterhouseCoopers LLP on accounting principles, financial statement
disclosure or audit scope, which if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference to the
disagreement in their report.
--------------------------------------------------------------------------------
87
<PAGE> 90
MAS FUNDS TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
The following is a list of the Trustees and the principal officers of the Fund
and 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.
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.
JAMES H. SCOTT, CFA*
Trustee; Principal, Morgan Stanley & Co. Incorporated; Product Specialist, Core
Equity Strategy, Miller Anderson & Sherrerd, LLP; formerly Vice President,
Corporate Secretary and Assistant Treasurer for Texas Utilities Company.
LORRAINE TRUTEN, CFA
President, MAS Funds; Principal, Morgan Stanley & Co. Incorporated; Head of
Mutual Fund Services, Miller Anderson & Sherrerd, LLP; President and Director,
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.
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.
*Trustees Bennett & Scott are deemed to be "interested persons" 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 November 2000.
<PAGE> 91
MAS
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MAS FUNDS
Morgan Stanley Dean Witter Investment Management
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428-2899
Investment Adviser: (610) 940-5000 * MAS Funds: (800) 354-8185
Printed in U.S.A.
This Report has been prepared for
shareholders and may be distributed to
others only if preceded or accompanied by a
current prospectus.
926-boannmas-1100
