<PAGE> 1
MSDW LETTERHEAD
2000 Annual Report
September 30, 2000
MAS 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................................ 2
Equity Portfolio............................... 6
Small Cap Value Portfolio...................... 11
Mid Cap Growth Portfolio....................... 17
Mid Cap Value Portfolio........................ 21
Small Cap Growth Portfolio..................... 27
Strategic Small Value Portfolio................ 31
Core Fixed Income Distinguishing
Characteristics and General Strategy........ 35
Fixed Income Portfolio...................... 36
Domestic Fixed Income Portfolio............. 46
Fixed Income II Portfolio................... 54
Special Purpose Fixed Income Portfolio...... 62
High Yield Portfolio........................... 71
Cash Reserves Portfolio........................ 79
Limited Duration Portfolio..................... 83
Municipal Portfolio............................ 90
Global Fixed Income Portfolio.................. 98
International Fixed Income Portfolio........... 103
Intermediate Duration Portfolio................ 107
Multi-Market Fixed Income Portfolio............ 115
Balanced Portfolio............................. 125
Multi-Asset-Class Portfolio.................... 136
Statement of Operations.......................... 150
Statement of Changes in Net Assets............... 155
Financial Highlights............................. 162
Notes to Financial Statements.................... 179
Independent Auditors' Report..................... 192
</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
--------------------------------------------------------------------------------
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 (21 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 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
--------------------------------------------------------------------------------
1
<PAGE> 4
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
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 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, 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.
--------------------------------------------------------------------------------
2
<PAGE> 5
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS VALUE INSTITUTIONAL MAS VALUE INVESTMENT MAS VALUE ADVISER S&P 500
----------------------- -------------------- ----------------- -------
<S> <C> <C> <C> <C>
90 1000 1000
91 1455 1312
92 1642 1457
93 1965 1646
94 2111 1707
95 2799 2214
96 3315 2664
97 4682 3742
98 3914 4080
99 4239 5215
00 4649 4618 4599 5907
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
MAS VALUE
------------------------------------------
INSTITUTIONAL M INVESTMENT K ADVISER O 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.
M Represents an investment in the Institutional Class.
K 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.
O 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.
--------------------------------------------------------------------------------
3
<PAGE> 6
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
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
---------------------------------------------------------
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
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
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
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
* National Semiconductor Corp. 274,100 11,033
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
4
<PAGE> 7
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
* 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
---------------------------------------------------------
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
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
---------------------------------------------------------
<S> <C> <C>
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
---------------------------------------------------------
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.
--------------------------------------------------------------------------------
5
<PAGE> 8
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
EQUITY PORTFOLIO
The Equity Portfolio is Miller Anderson & Sherrerd's core-strategy stock fund.
The Portfolio is heavily oriented toward large-capitalization stocks, with
strategic commitments to both value and growth equities. In constructing the
Portfolio, the MAS equity team applies a value-oriented discipline to three key
equity decisions: stock selection, sector allocation, and portfolio risk
control.
MAS's goals for core equity investing are to provide capital appreciation with
income through broad market exposure, and to achieve above-average, consistent
returns compared to other managers and the broad market averages over long
periods of time.
The fiscal year ended with the stock market in the midst of an extreme style
reversal. As measured by S&P BARRA Growth and Value Indices, value stocks surged
on a relative basis during the fourth fiscal quarter. At fiscal year-end, value
stocks lead growth stocks for the trailing twelve months, after lagging behind
growth stocks by over 1800 basis points through the first three fiscal quarters.
The Portfolio outperformed its benchmark for the second consecutive year by
returning 19.83%, compared to 13.27% for the S&P 500 Index. Competitively, the
Portfolio outperformed the Lipper Large Cap Core Index, which returned 17.72%
for the year.
The Portfolio's performance relative to its benchmark is captured in three
segments: stock selection within sectors, portfolio versus index sector
weightings, and cash. The portfolio's investment approach emphasizes stock
selection. Outperformance during the year was driven by positive stock
selection, with marginally negative contributions from sector weightings and
cash. The leading stock selection decisions were strong positions in the energy
and technology sectors, which significantly outperformed the market. MAS
concentrated on the main beneficiaries of the oil-price driven capital spending
cycle (i.e., drillers and oil-well services companies) instead of the oil
majors. In a year in which technology returns dominated the market, it was
extremely difficult to outperform the market while being underweighted in the
sector. However, the Portfolio succeeded in precisely that manner, by
discriminating carefully among the industry choices within the sector. Cyclicals
were avoided in favor of dominant software services companies and
telecommunications equipment suppliers. Notably, Portfolio stock selection was
positive among ten of the thirteen market economic sectors. This was a more
active-than-normal year for the Portfolio, reflecting several strategic
considerations which were executed successfully. These included:
- UNWINDING the restructuring theme (that theme, composed of overweighted
positions in companies drawn from various industries, had been based on
expectations of strong stock-price recovery driven by positive management
actions. Though successful in several instances, the theme had not been strong
enough to overcome other, more powerful market forces which caused half of the
affected stocks in this theme to seriously underperform);
- IMPLEMENTING the energy/oil services investment cycle theme;
- REDUCING the industry overweight in reinsurance and property & casualty
holdings, coupled with adding more attractive insurance brokerage exposure
with better top-line growth prospects;
- TRANSFORMING the portfolio's bank exposure from interest margin sensitive
holdings to those banks with more stable earnings prospects; and
- LIQUIDATING undesirable smaller positions and smaller cap holdings.
As a result, portfolio turnover increased sharply on an annualized basis during
the first fiscal quarter, but subsequently returned to more normal levels.
Traditional labels "growth" and "value" remained tenuous throughout the year.
High price/earnings ratios became a technology phenomenon instead of an
investment discipline. Large cap non-tech growth stocks began sharing the "low
p/e space" with value stocks. The practical implications for investors are that
style labels should not get in the way of a more discriminating search for solid
relative value within the market. Though some of the market extremes relaxed
since March, relative value remained key. Since the end of the second fiscal
quarter, the large cap weighted median p/e ratio declined significantly (from
35X to 28X). The bulk of the decline occurred in technology, recovering only
partially during the later months of the fiscal year. The non-tech growth sector
multiples remained virtually unchanged over this same period. Multiples within
value sectors also declined, but not nearly as much as in technology.
The market continued to search for effective valuation criteria for super-growth
or market-dominant technology companies. In the process, impatient growth
investors and style rotators continued to seek out alternate havens within the
value and non-tech growth sectors. Assuming that the massive and sudden funds
flows accompanying these processes have been efficient would be imprudent.
The past fiscal year has provided a good market for the Portfolio's core
approach. Volatility presents danger but also opportunity. Relying on picking
the best stocks in all sectors of the market, the Portfolio is built on
risk-adjusted opportunities which have continued to present themselves. As long
as differences in revenue and earnings growth rates and prospects remain wide,
and with them exploitable disparities in valuation, chances to add value should
continue to exist.
--------------------------------------------------------------------------------
6
<PAGE> 9
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS EQUITY
INSTITUTIONAL MAS EQUITY ADVISER S&P 500
------------- ------------------ -------
<S> <C> <C> <C> <C>
90 1000 1000
91 1402 1312
92 1564 1457
93 1736 1646
94 1808 1707
95 2280 2214
96 2654 2664
97 3666 3742
98 3564 4080
99 4631 5215
00 5854 5547.00 5907
</TABLE>
<TABLE>
<CAPTION>
MAS EQUITY
----------------------------
INSTITUTIONAL M ADVISER O S&P 500 INDEX
----------------------------------------------------------------------
<S> <C> <C> <C>
One Year 19.83% 19.58% 13.27%
Five Years 19.61% 19.45% 21.68%
Ten Years 18.77% 18.69% 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.
M Represents an investment in the Institutional Class.
O Represents an investment in the Adviser Class which commenced operations
1/16/98. 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 500 Index, an unmanaged market index.
** The Investment Class ceased operations on June 1, 2000.
--------------------------------------------------------------------------------
7
<PAGE> 10
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
EQUITY
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (98.7%)
<TABLE>
<CAPTION>
---------------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
BANKS (5.6%)
Bank of America Corp. 152,200 $ 7,971
Bank of New York Co. 122,900 6,890
Bank One Corp. 108,700 4,199
Chase Manhattan Corp. 180,050 8,316
Washington Mutual, Inc. 188,000 7,485
---------------------------------------------------------
GROUP TOTAL 34,861
---------------------------------------------------------
BASIC RESOURCES (1.3%)
E.I. DuPont de Nemours & Co. 94,000 3,895
Rohm & Haas Co. 144,000 4,185
---------------------------------------------------------
GROUP TOTAL 8,080
---------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (4.4%)
Anheuser-Busch Cos., Inc. 194,600 8,234
Avon Products, Inc. 73,600 3,009
Coca-Cola Co. 124,100 6,841
Kimberly-Clark Corp. 28,100 1,568
PepsiCo, Inc. 103,300 4,752
Procter & Gamble Co. 44,200 2,961
---------------------------------------------------------
GROUP TOTAL 27,365
---------------------------------------------------------
CONSUMER DURABLES (0.9%)
Ford Motor Co. 98,221 2,486
General Motors Corp. 23,514 1,529
Masco Corp. 90,100 1,678
---------------------------------------------------------
GROUP TOTAL 5,693
---------------------------------------------------------
CONSUMER SERVICES (5.7%)
* America Online, Inc. 110,500 5,939
* Clear Channel Communications, Inc. 92,300 5,215
* Comcast Corp., Class A Special 49,300 2,018
News Corp., Ltd. ADR 109,700 5,142
Seagram Ltd. 12,800 735
Time Warner, Inc. 64,202 5,024
* Viacom, Inc. 73,600 4,306
Walt Disney Co. 126,300 4,831
* Yahoo!, Inc. 26,800 2,439
---------------------------------------------------------
GROUP TOTAL 35,649
---------------------------------------------------------
CREDIT & FINANCE/
INVESTMENT COMPANIES (6.7%)
American Express Co. 104,200 6,330
Charles Schwab Corp. 81,600 2,897
Citigroup, Inc. 331,700 17,932
Federal Home Loan Mortgage Corp. 52,200 2,822
Lehman Brothers Holdings, Inc. 11,100 1,640
Merrill Lynch & Co., Inc. 81,600 5,386
USA Education, Inc. 90,000 4,337
---------------------------------------------------------
GROUP TOTAL 41,344
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
ENERGY (6.2%)
Baker Hughes, Inc. 68,700 $ 2,551
Chevron Corp. 63,900 5,447
Enron Corp. 74,400 6,519
ENSCO International, Inc. 56,700 2,169
Exxon Mobil Corp. 90,300 8,048
* Global Marine, Inc. 51,600 1,593
Halliburton Co. 32,300 1,581
R & B Falcon Corp. 206,600 5,759
Texaco, Inc. 52,300 2,746
Tidewater, Inc. 48,400 2,202
---------------------------------------------------------
GROUP TOTAL 38,615
---------------------------------------------------------
FOOD, TOBACCO & OTHER (0.9%)
General Mills, Inc. 53,600 1,903
Philip Morris Cos., Inc. 118,200 3,479
---------------------------------------------------------
GROUP TOTAL 5,382
---------------------------------------------------------
HEALTH CARE (12.6%)
Abbott Laboratories 163,800 7,791
American Home Products Corp. 150,900 8,535
* Amgen, Inc. 50,600 3,533
Bristol-Myers Squibb Co. 159,100 9,089
* Genentech, Inc. 9,500 1,764
HCA-The Healthcare Co. 83,000 3,081
* HEALTHSOUTH Corp. 565,800 4,597
Johnson & Johnson 69,300 6,510
Medtronics, Inc. 73,100 3,788
Merck & Co., Inc. 47,800 3,558
Pfizer, Inc. 333,575 14,990
Pharmacia Corp. 93,000 5,597
Schering Plough Corp. 73,700 3,427
* Tenet Healthcare Corp. 56,500 2,055
Visteon Corp. 3,536 54
---------------------------------------------------------
GROUP TOTAL 78,369
---------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (9.1%)
Dover Corp. 43,800 2,056
Emerson Electric Co. 65,900 4,415
General Electric Co. 497,800 28,717
Honeywell International, Inc. 58,787 2,094
@ Kennametal, Inc. 1 --
Minnesota Mining & Manufacturing Co. 21,700 1,978
Tyco International Ltd. 220,900 11,459
United Technologies Corp. 79,600 5,512
---------------------------------------------------------
GROUP TOTAL 56,231
---------------------------------------------------------
INSURANCE (3.6%)
American General Corp. 27,600 2,153
American International Group, Inc. 112,250 10,741
Chubb Corp. 19,700 1,559
Hartford Financial Services Group,
Inc. 21,100 1,539
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
8
<PAGE> 11
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
Marsh & McLennan Cos, Inc. 36,600 $ 4,858
St. Paul Companies, Inc. 31,000 1,529
---------------------------------------------------------
GROUP TOTAL 22,379
---------------------------------------------------------
RETAIL (5.9%)
* Best Buy Co., Inc. 56,200 3,576
Costco Wholesale Corp. 29,800 1,041
CVS Corp. 70,200 3,251
Home Depot, Inc. 109,100 5,789
RadioShack Corp. 117,100 7,567
* Safeway, Inc. 30,600 1,429
Wal-Mart Stores, Inc. 284,400 13,687
---------------------------------------------------------
GROUP TOTAL 36,340
---------------------------------------------------------
TECHNOLOGY (28.5%)
* ADC Telecommunications, Inc. 57,800 1,554
* Agilent Technologies, Inc. 20,414 999
Altera Corp. 72,300 3,452
* Broadcom Corp., Class A 19,900 4,851
* Cisco Systems, Inc. 342,600 18,929
Compaq Computer Corp. 146,000 4,027
Corning, Inc. 14,400 4,277
* Dell Computer Corp. 90,700 2,795
Electronic Data Systems Corp. 53,100 2,204
* EMC Corp. 143,900 14,264
Hewlett Packard Co. 78,037 7,569
Intel Corp. 261,200 10,872
International Business Machines
Corp. 125,800 14,152
* JDS Uniphase Corp. 55,000 5,208
Lucent Technologies, Inc. 84,700 2,589
* Microsoft Corp. 211,300 12,731
* Network Appliance, Inc. 42,900 5,464
Nokia Corp. ADR 38,300 1,525
Nortel Networks Corp. 244,000 14,533
* Oracle Systems Corp. 95,700 7,536
* Palm, Inc. 83,400 4,415
* Peoplesoft, Inc. 91,100 2,545
* QLogic Corp. 34,700 3,054
* Qualcomm, Inc. 26,800 1,909
* Siebel Systems, Inc. 48,700 5,421
* Solectron Corp. 27,900 1,287
* Sun Microsystems, Inc. 63,400 7,402
Texas Instruments, Inc. 21,100 996
* VERITAS Software Corp. 23,100 3,280
* Vitesse Semiconductor Corp. 29,500 2,624
* Xilinx, Inc. 47,600 4,076
---------------------------------------------------------
GROUP TOTAL 176,540
---------------------------------------------------------
UTILITIES (7.3%)
AT&T Corp. 154,841 4,549
Coastal Corp. 63,100 4,677
Global Crossing Ltd. 66,800 2,071
* Qwest Communications
International, Inc. 75,700 3,638
SBC Communications, Inc. 253,273 12,664
Sprint Corp. (FON Group) 58,700 1,721
* Sprint Corp. (PCS Group) 59,300 2,079
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
Verizon Communications 170,600 $ 8,263
* Vodafone Group plc ADR 59,250 2,192
* Worldcom, Inc. 106,725 3,242
---------------------------------------------------------
GROUP TOTAL 45,096
---------------------------------------------------------
TOTAL COMMON STOCKS (Cost $497,935) 611,944
---------------------------------------------------------
CASH EQUIVALENT (4.0%)
---------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C>
REPURCHASE AGREEMENT (4.0%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $25,167,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $25,406
(Cost $25,154) $25,154 25,154
---------------------------------------------------------
TOTAL INVESTMENTS (102.7%) (Cost $523,089) 637,098
---------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.7%)
Cash 5
Dividends Receivable 276
Interest Receivable 9
Receivable for Investments Sold 9,977
Receivable for Fund Shares Sold 752
Investments Held as Collateral for Loaned
Securities 3,485
Other Assets 123
Payable for Investments Purchased (26,894)
Payable for Fund Shares Redeemed (190)
Payable for Investment Advisory Fees (814)
Payable for Administrative Fees (42)
Payable for Trustees' Deferred Compensation
Plan-Note F (113)
Payable for Distribution Fees-Adviser Class (1)
Collateral on Securities Loaned, at Value (3,485)
Other Liabilities (69)
--------
(16,981)
---------------------------------------------------------
NET ASSETS (100%) $620,117
---------------------------------------------------------
INSTITUTIONAL CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 35,587,730 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $615,078
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 17.28
---------------------------------------------------------
ADVISER CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 292,250 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 5,039
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 17.24
---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
9
<PAGE> 12
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
EQUITY
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)!
---------------------------------------------------------
<S> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $409,594
Undistributed Net Investment Income (Loss) 893
Undistributed Realized Net Gain (Loss) 95,621
Unrealized Appreciation (Depreciation) on
Investment Securities 114,009
---------------------------------------------------------
NET ASSETS $620,117
---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! See Note A1 to Financial Statements.
* Non-income producing security
@ Value is less than $500.
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
10
<PAGE> 13
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
11
<PAGE> 14
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Small Cap Value MAS Small Cap Value Russell 2000
<S> <C> <C> <C>
90 1000 1000
91 1631 1451
92 1861 1581
93 2563 2105
94 2769 2160
95 3278 2666
96 4065 3016
97 6089 4017
98 4972 3253
99 6158 3874
00 7581 7563 4780
</TABLE>
<TABLE>
<CAPTION>
MAS SMALL CAP VALUE
----------------------------
INSTITUTIONAL M ADVISER O 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.
M Represents an investment in the Institutional Class.
O 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.
--------------------------------------------------------------------------------
12
<PAGE> 15
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
---------------------------------------------------------
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
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
* 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
---------------------------------------------------------
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
---------------------------------------------------------
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
</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>
* 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
---------------------------------------------------------
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
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
* 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
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
* 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
</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>
* 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
* 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>
<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>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
15
<PAGE> 18
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)!
---------------------------------------------------------
<S> <C> <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.
--------------------------------------------------------------------------------
16
<PAGE> 19
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 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
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Mid Cap Growth S&P MidCap 400 MAS Mid Cap Growth
------------------ -------------- ------------------
<S> <C> <C> <C>
90 1000 1000
91 1663 1503
92 1710 1690
93 2290 2097
94 2215 2130
95 2892 2679
96 3726 3054
97 4771 4248
98 4866 3980
99 7993 4995
00 12517 7153 12416
</TABLE>
<TABLE>
<CAPTION>
MAS MID CAP GROWTH
---------------------------- S&P MIDCAP
INSTITUTIONAL M ADVISER O 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.
M Represents an investment in the Institutional Class.
O 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
* 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
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
* 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
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
* QLogic Corp. 449,100 39,521
* Rational Software Corp. 979,300 67,939
Scientific-Atlanta, Inc. 524,000 33,340
</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>
* 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
---------------------------------------------------------
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
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
---------------------------------------------------------
<S> <C> <C>
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
---------------------------------------------------------
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.
--------------------------------------------------------------------------------
20
<PAGE> 23
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
MID CAP VALUE PORTFOLIO
The Mid Cap Value Portfolio applies Miller Anderson & Sherrerd's value
investment philosophy to the 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 S&P MidCap
400 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 S&P MidCap 400 Index in the quality and growth
characteristics of its holdings, while the overall valuation of the Portfolio
will generally be lower.
The past twelve months were a volatile period for the equity markets. During the
period, mid-cap stocks, as represented by the S&P MidCap 400 Index, appreciated
over 40% and outperformed both small and large cap stocks. The technology sector
was the primary driver of performance during the period, and growth stocks
continued to outperform value stocks. As a result, the valuation gap between
growth and value remained wide at fiscal year-end.
During the past fiscal year, the Portfolio underperformed the S&P 400 MidCap
Index. Stock selection was the primary driver of underperformance, while sector
allocation enhanced results. Stock selection was the strongest within the energy
and utilities sectors. During the period, the Portfolio had greater-than-index
exposure to energy, which contributed positively to performance. Nabors
Industries, Global Marine, and Transocean Offshore were strong performers within
the energy sector. Calpine Corp. and Coastal Corp. were the top performers
within utilities.
Stock selection was the weakest within the technology, heavy industry, and
consumer services sectors. Within technology, strong gains were generated from
Sandisk Corp., Powerwave Technologies, Extreme Networks, and Seagate Technology,
while underweight positions in Veritas Software and Siebel Systems detracted
from results. Valassis Communications was the most significant detractor within
consumer services while Titan Corp., the largest holding within heavy industry,
underperformed during the period. Teva Pharmaceutical and Alza Corp, both
pharmaceutical companies, were strong performers over the past fiscal year,
while auto parts manufacturer Tower Automotive underperformed.
During the period, less-than-index exposure to basic resources and retail
contributed positively to results. A slight overweight position in technology
had a positive impact on performance as this sector generated strong returns for
the period, while an underweight position in health care, which produced strong
results, detracted from performance.
The Portfolio's energy position was reduced on strength, and exposure to
financial services was increased. The Portfolio's exposure to technology was
decreased due to valuation levels and volatility within the sector. Finally, the
Portfolio maintained an underweight position in retail due to decreased consumer
demand. At fiscal year-end, MAS expected continued market volatility due to
economic uncertainty and continued to look for value opportunities on an
industry-by-industry basis.
--------------------------------------------------------------------------------
21
<PAGE> 24
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS MID CAP VALUE MAS MID CAP VALUE MAS MID CAP VALUE S&P MIDCAP 400
<S> <C> <C> <C> <C>
* 1000 1000
95 1345 1291
96 1645 1472
97 2655 2047
98 2471 1918
99 3199 2407
00 4142 4120 4111 3447
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
MAS MID CAP VALUE
------------------------------------------ S&P MIDCAP
INSTITUTIONAL M INVESTMENT K ADVISER O 400 INDEX
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 29.48% 29.25% 29.12% 43.21%
Five Years 25.22% 25.04% 25.09% 21.70%
Since Inception 28.03% 27.87% 27.92% 24.01%
</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.
M Represents an investment in the Institutional Class.
K Represents an investment in the Investment Class which commenced operations
5/10/96. 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.
O Represents an investment in the Adviser Class which commenced operations
07/17/98. 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. It is expected that, over time, returns
for the Adviser Class will be lower than for the Investment Class due to the
higher expenses charged.
Total returns for the Institutional and Investment Classes of the Portfolio
reflect expenses reimbursed by the Adviser for certain periods. Without such
waivers and/or reimbursements, total returns would have been lower.
* The Mid Cap Value Portfolio commenced operations on 12/30/94. Total returns
are compared to the S&P MidCap 400 Index, an unmanaged market index.
The Portfolio's holdings in Nabors Industries (1.0%), Global Marine (0.7%),
Transocean Offshore (0.2%), Calpine Corp. (2.2%), Coastal Corp. (0.4%), Sandisk
Corp. (2.2%), Powerwave Technologies (0.6%), Extreme Networks (0.0%), Seagate
Technology (0.0%), Veritas Software (0.0%), Siebel Systems (0.0%), Valassis
Communications (1.0%), Titan Corp. (1.3%), Teva Pharmaceutical (1.1%), Alza
Corp. (0.9%), and Tower Automotive (0.7%) as of 9/30/00.
--------------------------------------------------------------------------------
22
<PAGE> 25
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (91.3%)
<TABLE>
<CAPTION>
---------------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
BANKS (6.4%)
@ AmSouth Bancorp. 1 $ --
Charter One Financial, Inc. 211,848 5,164
* Checkfree Corp. 54,400 2,279
Comerica, Inc. 105,700 6,177
Dime Bancorp, Inc. 507,800 10,949
First Security Corp. 408,500 6,664
First Tennessee National Corp. 24,600 503
Golden State Bancorp, Inc. 253,600 5,991
GreenPoint Financial Corp. 43,700 1,295
Hibernia Corp., Class A 129,600 1,587
KeyCorp. 96,300 2,437
Marshall & Ilsley Corp. 72,700 3,644
Mellon Financial Corp. 425,700 19,742
Mercantile Bankshares Corp. 124,570 4,521
North Fork Bancorp., Inc. 219,600 4,749
SouthTrust Corp. 306,900 9,648
UnionBanCal Corp. 84,200 1,963
Washington Mutual, Inc. 220,000 8,759
---------------------------------------------------------
GROUP TOTAL 96,072
---------------------------------------------------------
BASIC RESOURCES (1.2%)
AK Steel Holding Corp. 336,900 3,158
AMETEK, Inc. 37,000 784
* Freeport-McMoRan Copper & Gold,
Inc. 177,700 1,566
* Gaylord Container Corp., Class A 392,100 662
Rohm & Haas Co. 284,600 8,271
* Stora Enso Oyj 128,334 1,059
* W.R. Grace & Co. 376,400 2,588
---------------------------------------------------------
GROUP TOTAL 18,088
---------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (0.7%)
Fortune Brands, Inc. 76,900 2,038
Pepsi Bottling Group, Inc. 301,100 9,052
---------------------------------------------------------
GROUP TOTAL 11,090
---------------------------------------------------------
CONSUMER DURABLES (2.5%)
* American Standard Companies,
Inc. 73,600 3,270
* Furniture Brands International,
Inc. 270,900 4,503
Kaufman & Broad Home Corp. 82,400 2,220
* Lear Corp. 580,800 11,943
Masco Corp. 222,000 4,135
* SPX Corp. 7,400 1,050
* Tower Automotive, Inc. 1,051,400 9,857
---------------------------------------------------------
GROUP TOTAL 36,978
---------------------------------------------------------
CONSUMER SERVICES (7.1%)
* Bally Total Fitness Holding
Corp. 629,700 15,743
* Chris-Craft Industries, Inc. 44,800 3,690
* Clear Channel Communications,
Inc. 88,100 4,978
* Comcast Corp., Class A 45,240 1,852
* EchoStar Communications Corp. 198,200 10,455
H&R Block, Inc. 74,100 2,746
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
* Harrah's Entertainment, Inc. 115,200 $ 3,168
* Havas Advertising S.A. 131,753 1,927
* Hispanic Broadcasting Corp. 81,000 2,258
News Corp., Ltd. ADR 166,100 7,786
Readers Digest Association (The),
Inc., Class A 290,800 10,269
Royal Caribbean Cruises Ltd. 428,800 11,037
* Univision Communications, Inc.,
Class A 193,000 7,213
* Valassis Communications, Inc. 661,950 14,728
* ValueVision International, Inc.,
Class A 267,400 6,719
* 24/7 Media, Inc. 156,100 1,576
---------------------------------------------------------
GROUP TOTAL 106,145
---------------------------------------------------------
CREDIT & FINANCE/
INVESTMENT COMPANIES (2.5%)
* Concord EFS, Inc. 379,800 13,489
* Dain Rauscher Corp. 70,300 6,538
* E*TRADE Group, Inc. 205,500 3,378
Heller Financial, Inc. 193,000 5,513
* Knight Trading Group, Inc. 126,400 4,550
The PMI Group, Inc. 53,000 3,591
USA Education, Inc. 22,500 1,084
---------------------------------------------------------
GROUP TOTAL 38,143
---------------------------------------------------------
ENERGY (7.1%)
Anadarko Petroleum Corp. 99,144 6,589
Apache Corp. 60,800 3,595
* BJ Services Co. 69,600 4,254
Burlington Resources, Inc. 40,100 1,476
Dynergy, Inc., Class A 217,400 12,392
* EOG Resources, Inc. 106,000 4,121
* Global Marine, Inc. 352,800 10,893
* Nabors Industries, Inc. 282,600 14,808
* Noble Drilling Corp. 328,800 16,522
* Precision Drilling Corp. 238,200 8,486
* R & B Falcon Corp. 95,300 2,656
* Rowan Cos., Inc. 189,000 5,481
Santa Fe International Corp. 83,800 3,776
* Smith International, Inc. 41,400 3,377
Transocean Sedco Forex, Inc. 63,500 3,723
* Weatherford International, Inc. 108,900 4,683
---------------------------------------------------------
GROUP TOTAL 106,832
---------------------------------------------------------
FOOD, TOBACCO & OTHER (1.6%)
Earthgrains Co. 209,200 3,857
Flowers Industries, Inc. 325,000 6,337
* Fresh Del Monte Produce, Inc. 441,900 2,900
IBP, Inc. 195,800 3,586
Quaker Oats Co. 60,800 4,811
R.J. Reynolds Tobacco Holdings,
Inc. 78,900 2,544
---------------------------------------------------------
GROUP TOTAL 24,035
---------------------------------------------------------
HEALTH CARE (13.6%)
Alpharma, Inc., Class A 237,800 14,536
* Alza Corp. 153,600 13,286
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
23
<PAGE> 26
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
Biomet, Inc. 279,600 $ 9,786
* Celgene Corp. 113,700 6,765
* Cephalon, Inc. 159,100 7,716
* First Health Group Corp. 89,900 2,899
* Forest Laboratories, Inc. 63,700 7,306
* Foundation Health Systems, Inc.,
Class A 778,900 12,949
* Gilead Sciences, Inc. 95,400 10,464
* Health Management Associates,
Inc., Class A 329,700 6,862
* ImClone Systems, Inc. 1,800 211
* Ivax Corp. 169,600 7,802
* Lincare Holdings, Inc. 304,000 8,721
* Millennium Pharmaceuticals, Inc. 49,600 7,245
Mylan Laboratories, Inc. 314,100 8,461
PerkinElmer, Inc. 50,400 5,260
* Quest Diagnostics, Inc. 28,700 3,293
* Sepracor, Inc. 67,100 8,232
* St. Jude Medical, Inc. 302,600 15,433
* Sybron International Corp. 323,700 7,769
Tenet Healthcare Corp. 384,400 13,983
Teva Pharmaceutical Industries
Ltd. ADR 222,800 16,306
* Trigon Healthcare, Inc. 60,800 3,196
* United Therapeutics Corp. 70,300 6,142
---------------------------------------------------------
GROUP TOTAL 204,623
---------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (11.0%)
* Atlas Air, Inc. 123,800 5,231
* C-Mac Industries, Inc. 103,800 5,968
Canadian National Railway Co. 143,000 4,192
* Circle.com 148,250 435
CNF Transportation, Inc. 80,300 1,787
Comdisco, Inc. 74,100 1,413
* CSG Systems International, Inc. 50,200 1,456
Dover Corp. 245,100 11,504
* Fiserv, Inc. 112,200 6,718
General Dynamics Corp. 94,200 5,917
ITT Industries, Inc. 302,900 9,825
* Litton Industries, Inc. 137,600 6,149
Lockheed Martin Corp. 18,194 600
Martin Marietta Materials, Inc. 275,800 10,558
* MasTec, Inc. 334,800 10,462
Miller (Herman), Inc. 24,500 786
* Modis Professional Services,
Inc. 99,700 517
* Navistar International Corp. 95,700 2,865
Parker-Hannifin Corp. 170,100 5,741
* Republic Services, Inc., Class A 832,400 10,925
* SCI Systems, Inc. 391,300 16,043
Southwest Airlines Co. 236,525 5,736
* Spherion Corp. 191,200 2,282
Teekay Shipping Corp. 45,100 2,117
The B.F. Goodrich Co. 281,400 11,027
* Titan Corp. 1,174,900 19,386
* United Rentals, Inc. 233,900 5,643
---------------------------------------------------------
GROUP TOTAL 165,283
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
INSURANCE (4.5%)
Ace Ltd. 203,800 $ 7,999
Allmerica Financial Corp. 191,300 12,231
Ambac Financial Group, Inc. 166,100 12,167
Everest Reinsurance Holdings, Inc. 18,400 911
Jefferson-Pilot Corp. 42,500 2,885
* John Hancock Financial Services,
Inc. 222,400 5,977
MBIA, Inc. 37,100 2,639
* SAFECO Corp. 139,400 3,798
UnumProvident Corp. 694,500 18,925
---------------------------------------------------------
GROUP TOTAL 67,532
---------------------------------------------------------
RETAIL (3.2%)
* Ann Taylor Stores, Inc. 143,500 5,516
* Brinker International, Inc. 126,100 3,799
* CDW Computer Center, Inc. 12,000 828
* Costco Wholesale Corp. 413,500 14,447
CVS Corp. 60,900 2,820
Family Dollar Stores, Inc. 257,100 4,949
* Jones Apparel Group, Inc. 133,700 3,543
* Lands' End, Inc. 67,900 1,426
Liz Claiborne, Inc. 37,000 1,425
* Outback Steakhouse, Inc. 106,200 2,881
* ShopKo Stores, Inc. 80,300 833
* Sunglass Hut International, Inc. 787,200 5,141
---------------------------------------------------------
GROUP TOTAL 47,608
---------------------------------------------------------
TECHNOLOGY (19.4%)
* 3Com Corp. 91,700 1,759
* Advanced Micro Devices, Inc. 63,300 1,495
* Affiliated Computer Services,
Inc. 284,100 14,169
* Altera Corp. 260,700 12,448
* Amdocs Ltd. 88,700 5,533
* Andrew Corp. 143,300 3,753
* Braun Consulting 160,100 3,172
* BroadVision, Inc. 244,800 6,258
* Cypress Semiconductor Corp. 212,900 8,849
* DMC Stratex Networks, Inc. 361,900 5,813
* Efficient Networks, Inc. 160,100 5,974
* Electronics for Imaging, Inc. 216,200 5,459
* Flextronics International Ltd. 156,500 12,853
* Foundry Networks, Inc. 88,600 5,931
* Harmonic, Inc. 91,100 2,186
* Informix Corp. 212,900 878
* Internet Security Systems 44,700 3,358
* Intuit, Inc. 40,700 2,320
* Lam Research Corp. 60,900 1,275
Leading Brands, Inc. 204,100 2,156
* Legato Systems, Inc. 213,200 2,865
* LSI Logic Corp. 251,600 7,359
* Macromedia, Inc. 130,000 10,506
* MarchFirst, Inc. 483,207 7,580
* Microchip Technology, Inc. 1,650 55
* National Semiconductor Corp. 423,200 17,034
* Network Associates, Inc. 300,500 6,799
* NOVA Corp. 346,100 5,927
* Polycom, Inc. 49,800 3,335
* Powerwave Technologies, Inc. 227,400 8,634
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
24
<PAGE> 27
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
---------------------------------------------------------
<S> <C> <C>
* PSINet, Inc. 335,000 $ 3,224
* QLogic Corp. 166,600 14,661
* Quantum Corp.-DLT & Storage
Systems 288,800 4,350
* Rational Software Corp. 89,400 6,202
* SanDisk Corp. 503,600 33,615
* Silicon Storage Technology, Inc. 302,500 8,224
* SunGard Data Systems, Inc. 336,400 14,402
* Symbol Technologies, Inc. 47,200 1,696
* Terayon Communication Systems,
Inc. 239,500 8,128
* Usinternetworking, Inc. 247,300 1,650
* Vitesse Semiconductor Corp. 222,300 19,771
---------------------------------------------------------
GROUP TOTAL 291,656
---------------------------------------------------------
UTILITIES (10.5%)
* Adelphia Business Solutions,
Inc. 380,700 4,497
* Allete 51,900 1,148
Allegheny Energy, Inc. 90,700 3,464
Black Hills Corp. 47,050 1,320
* Broadwing, Inc. 259,700 6,639
* Calpine Corp. 322,400 33,650
Coastal Corp. 84,400 6,256
EL Paso Energy Corp. 143,700 8,855
Energy East Corp. 159,700 3,613
* Flag Telecom Holdings Ltd. 115,300 1,268
Florida Progress Corp. 74,100 3,923
IPALCO Enterprises, Inc. 69,100 1,581
Kansas City Power & Light Co. 40,500 1,081
* Kinder Morgan, Inc. 380,800 15,589
* Leap Wireless International,
Inc. 36,500 2,284
* McLeodUSA, Inc., Class A 199,800 2,860
MCN Energy Group, Inc. 28,000 717
PECO Energy Co. 122,600 7,425
PG&E Corp. 180,500 4,366
* Pinnacle Holdings, Inc. 189,700 5,051
Pinnacle West Capital Corp. 62,400 3,175
Potomac Electric Power Co. 384,600 9,687
PPL Corp. 117,300 4,897
Public Service Enterprise Group,
Inc. 81,700 3,651
* Southern Co. 380,800 12,352
* Southern Energy, Inc. 91,700 2,877
TXU Corp. 144,400 5,722
---------------------------------------------------------
GROUP TOTAL 157,948
---------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,272,041) 1,372,033
---------------------------------------------------------
UNIT TRUST (0.8%)
S & P 400 Mid-Cap Depositary
Receipts
(Cost $9,078) 113,300 11,132
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
---------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS (8.9%)
---------------------------------------------------------
REPURCHASE AGREEMENT (8.9%)
Chase Securities, Inc, 6.40%,
dated 9/29/00, due 10/2/00, to
be repurchased at $134,196
collateralized by various U.S.
Government Obligations due
11/2/00-3/29/01 valued at
$135,465
(Cost $134,124) $ 134,124 $ 134,124
---------------------------------------------------------
TOTAL INVESTMENTS (101.0%) (Cost $1,415,243) 1,517,289
---------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.0%)
Cash 1
Dividends Receivable 697
Interest Receivable 48
Receivable for Investments Sold 6,723
Receivable for Fund Shares Sold 3,334
Other Assets 47
Payable for Investments Purchased (22,444)
Payable for Fund Shares Redeemed (259)
Payable for Investment Advisory Fees (2,693)
Payable for Administrative Fees (98)
Payable for Shareholder Servicing
Fees-Investment Class (7)
Payable for Distribution Fees-Adviser Class (19)
Payable for Trustees' Deferred Compensation
Plan-Note F (36)
Other Liabilities (127)
----------
(14,833)
---------------------------------------------------------
NET ASSETS (100%) $1,502,456
---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
25
<PAGE> 28
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MID CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)!
---------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 54,825,895 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $1,374,275
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 25.07
---------------------------------------------------------
INVESTMENT CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 1,184,989 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 29,593
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 24.97
---------------------------------------------------------
ADVISER CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 3,939,597 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 98,588
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 25.02
---------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $1,234,906
Undistributed Net Investment Income (Loss) 3,073
Undistributed Realized Net Gain (Loss) 162,431
Unrealized Appreciation (Depreciation) on
Investment Securities 102,046
---------------------------------------------------------
NET ASSETS $1,502,456
---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! See Note A1 to Financial Statements.
* Non-income producing security
@ Value is less than $500.
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
26
<PAGE> 29
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.
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.
--------------------------------------------------------------------------------
27
<PAGE> 30
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS SMALL CAP GROWTH RUSSELL 2000
<S> <C> <C>
* 1000 1000
98 857 799
99 3228 951
00 5820 1173
</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.
--------------------------------------------------------------------------------
28
<PAGE> 31
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
* 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
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C>
* 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
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
* Interwoven, Inc. 43,500 4,918
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
29
<PAGE> 32
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SMALL CAP GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)!
--------------------------------------------------------
<S> <C> <C>
* 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
--------------------------------------------------------
CASH EQUIVALENT (3.2%)
--------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C>
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.
--------------------------------------------------------------------------------
30
<PAGE> 33
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
STRATEGIC SMALL VALUE PORTFOLIO
The Strategic Small Value Portfolio applies Miller Anderson & Sherrerd's value
investment philosophy to the small cap value 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 Value 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, 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 Value Index in overall valuation, while the quality
and growth characteristics will generally be higher.
Since its inception on June 30, 2000, the Strategic Small Value Portfolio
advanced 6.20% versus a return of 7.34% for the Russell 2000 Value Index.
The equity markets experienced a great deal of volatility during the fourth
fiscal quarter as technology stocks experienced a sell-off during September. For
the quarter, small cap stocks outperformed large caps, and value stocks
outperformed growth stocks led by strong gains within financial services.
Additionally, energy and health care were the best performing sectors for the
calendar year, and although technology underperformed during the quarter, the
sector advanced over 25% for the year.
During the quarter, sector allocation was the primary driver of
underperformance, while security selection contributed positively to results.
The decision to underweight basic resources and consumer services had a
favorable impact on performance, while the overweight position in technology
dampened returns. Stock selection was strongest within consumer durables and
financial services and weakest within technology. Overweight positions in
Dal-Tile International and Everest Re enhanced results, while overweight
position in GaSonics detracted from returns. Columbia Sportswear was the most
significant contributor within retail, while Shaw Group produced strong results
within heavy industry.
During the past three months, the Portfolio's energy position was reduced on
strength, and exposure to financial services was increased. The technology
position was reduced due to valuation levels and volatility within the sector.
At fiscal year-end, MAS expected continued market volatility due to economic
uncertainty and continued to look for value opportunities on an industry-by-
industry basis.
<TABLE>
<CAPTION>
MAS Strategic Small Value Russell 2000 Value
<S> <C> <C>
* 1000 1000
00 1062 1073
</TABLE>
AGGREGATE TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS STRATEGIC RUSSELL 2000
SMALL VALUE VALUE INDEX
-----------------------------------------------------------------
<S> <C> <C>
Since Inception 6.20% 7.34%
</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 Strategic Small Value Portfolio commenced operations on 6/30/00. Total
returns are compared to the Russell 2000 Value Index, an unmanaged market
index and are not annualized.
The Portfolio's holdings in Dal-Tile International (2.3%), Everest Re (0.8%),
GaSonics (0.3%), Columbia Sportswear (1.1%), and Shaw Group (1.4%) as of
9/30/00.
--------------------------------------------------------------------------------
31
<PAGE> 34
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
STRATEGIC SMALL VALUE
PORTFOLIO
STATEMENT OF NET ASSETS
COMMON STOCKS (91.8%)
<TABLE>
<CAPTION>
--------------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)!
--------------------------------------------------------
<S> <C> <C>
BANKS (11.3%)
Astoria Financial Corp. 500 $ 19
Bank United Corp., Class A 500 25
Colonial BancGroup, Inc. 600 6
Commerce Bancorp, Inc. 500 29
Cullen/Frost Bankers, Inc. 600 20
First Midwest Bancorp, Inc. 500 13
FirstMerit Corp. 400 9
Fulton Financial Corp. 600 12
Mercantile Bankshares Corp. 500 18
National Penn Bancshares, Inc. 200 4
* Silicon Valley plc 400 23
* Southwest Bancorp of Texas, Inc. 500 16
Sovereign Bancorp, Inc. 1,500 14
Sterling Bancshares, Inc. 1,100 17
TCF Financial Corp. 900 34
Trustmark Corp. 500 10
Westamerica Bancorp 400 14
--------------------------------------------------------
GROUP TOTAL 283
--------------------------------------------------------
BASIC RESOURCES (4.9%)
AK Steel Holding Corp. 1,400 13
Ferro Corp. 800 15
Gibraltar Steel Corp. 500 8
Millenium Chemicals, Inc. 600 9
* Mueller Industries, Inc. 400 9
* Pactiv Corp. 1,300 14
* Scotts Co., Class A 300 10
* Steel Dynamics, Inc. 1,300 12
U.S. Can Corp. 1,100 22
USX-U.S. Steel Group, Inc. 300 5
Worthington Industries, Inc. 500 5
--------------------------------------------------------
GROUP TOTAL 122
--------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (2.8%)
Adolph Coors Co., Class B 300 19
Church & Dwight, Inc. 300 5
* Constellation Brands, Inc. 600 33
Dean Foods Co. 400 13
--------------------------------------------------------
GROUP TOTAL 70
--------------------------------------------------------
CONSUMER DURABLES (8.3%)
ArvinMeritor, Inc. 1,000 14
Borg-Warner Automotive, Inc. 500 17
D.R. Horton, Inc. 981 17
* Dal-Tile International, Inc. 4,700 59
Ethan Allen Interiors, Inc. 600 17
* Furniture Brands International, Inc. 1,000 17
* Gentex Corp. 300 7
Kaufman & Broad Home Corp. 1,000 27
Lennar Corp. 600 18
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C>
Snap-On, Inc. 200 $ 5
* Tower Automotive, Inc. 1,100 10
--------------------------------------------------------
GROUP TOTAL 208
--------------------------------------------------------
CONSUMER SERVICES (2.1%)
* Argosy Gaming Co. 600 11
* Aztar Corp. 600 9
* SCP Pool Corp. 400 12
* Station Casinos, Inc. 800 11
* Valassis Communications, Inc. 400 9
--------------------------------------------------------
GROUP TOTAL 52
--------------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (5.0%)
Downey Financial Corp. 400 16
Eaton Vance Corp. 400 20
GATX Corp. 400 17
Morgan Keegan, Inc. 900 16
Radian Group, Inc. 300 20
Southwest Securities Group, Inc. 750 22
Webster Financial Corp. 500 13
--------------------------------------------------------
GROUP TOTAL 124
--------------------------------------------------------
ENERGY (7.4%)
* Cal Dive International, Inc. 400 23
Energen Corp. 900 27
* Global Industries Ltd. 400 5
MDU Resources Group, Inc. 400 12
Mitchell Energy & Development Corp. 400 19
* National-Oilwell, Inc. 400 13
New Jersey Resources Corp. 100 4
* Ocean Energy, Inc. 600 9
* Patterson Energy, Inc. 800 27
Southwest Gas Corp. 800 17
Valero Energy Corp. 500 17
Western Gas Resources, Inc. 500 13
--------------------------------------------------------
GROUP TOTAL 186
--------------------------------------------------------
FOOD & TOBACCO (1.2%)
Delta & Pine Land Co. 500 13
Earthgrains Co. 1,000 18
--------------------------------------------------------
GROUP TOTAL 31
--------------------------------------------------------
HEALTH CARE (4.2%)
* Abiomed, Inc. 200 14
Alpharma, Inc., Class A 400 24
Cooper Companies, Inc. 500 18
* Core, Inc. 1,500 9
Mid Atlantic Medical Services, Inc. 900 14
* Oxford Health Plans, Inc. 500 15
* Sybron International Corp. 500 12
--------------------------------------------------------
GROUP TOTAL 106
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
32
<PAGE> 35
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
--------------------------------------------------------
<S> <C> <C>
HEAVY INDUSTRY/TRANSPORTATION (12.4%)
* Arkansas Best Corp. 900 $ 14
* Astec Industries, Inc. 200 2
* Brightpoint, Inc. 1,700 9
* EGL, Inc. 600 18
Graco, Inc. 500 16
* Litton Industries, Inc. 400 18
Manitowoc Co., Inc. 500 10
* MasTec, Inc. 500 16
Milacron, Inc. 1,300 17
* Navistar International Corp. 600 18
* OMI Corp. 2,200 18
Oshkosh Truck Corp. 600 23
Pentair, Inc. 400 11
* Sensormatic Electronics Corp. 1,300 19
* Shaw Group, Inc. 500 35
Smith (A.O.) Corp., Class B 600 8
* Teledyne Technologies, Inc. 300 9
* Tetra Tech, Inc. 600 17
Texas Industries, Inc. 200 6
Tredegar Corp. 900 16
U.S. Freightways Corp. 500 11
--------------------------------------------------------
GROUP TOTAL 311
--------------------------------------------------------
INSURANCE (5.0%)
Arthur J. Gallagher & Co. 400 24
* Choicepoint, Inc. 300 14
Commerce Group, Inc. 400 12
Everest Reinsurance Holdings, Inc. 400 20
Leucadia National Corp. 500 13
Liberty Corp. 300 10
Mony Group, Inc. 400 16
Stancorp Financial Group, Inc. 400 17
--------------------------------------------------------
GROUP TOTAL 126
--------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (8.7%)
Alexandria Real Estate Equities, Inc. 400 14
AMB Property Corp. 500 12
Apartment Investment & Management Co. 300 14
Avalonbay Communities, Inc. 300 14
Boston Properties, Inc. 300 13
Camden Property Trust 600 19
CarrAmerica Realty Corp. 300 9
Colonial Properties Trust 400 10
Developers Diversified Realty Corp. 400 5
First Industrial Realty Trust 300 9
Home Properties of N.Y., Inc. 500 15
Kilroy Realty Corp. 400 11
Liberty Property Trust 400 11
Reckson Associates Realty Corp., Class
B 400 10
Regency Realty Corp. 500 12
SL Green Realty Corp. 400 11
Smith (Charles E.) Residential Realty,
Inc. 400 18
Vornado Realty Trust 300 11
--------------------------------------------------------
GROUP TOTAL 218
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
--------------------------------------------------------
<S> <C> <C>
RETAIL (7.2%)
* BJ's Wholesale Club, Inc. 600 $ 20
* California Pizza Kitchen, Inc. 300 8
* Columbia Sportswear Co. 600 28
* Michaels Stores, Inc. 300 12
Ross Stores, Inc. 600 9
ShopKo Stores, Inc. 600 6
Talbots, Inc. 100 7
* The Men's Wearhouse, Inc. 500 14
* Tropical Sportswear International
Corp. 1,800 31
* United Stationers, Inc. 400 11
* Venator Group, Inc. 1,100 14
* Zale Corp. 600 19
--------------------------------------------------------
GROUP TOTAL 179
--------------------------------------------------------
TECHNOLOGY (5.6%)
* Advanced Energy Industries, Inc. 100 3
* Barra, Inc. 300 19
* Brooks Automation, Inc. 200 7
* Cable Design Technologies Corp. 400 10
Caminus Corp. 200 8
* Carrier Access Corp. 300 6
* Cymer, Inc. 200 6
Electronics for Imaging, Inc. 200 5
* GaSonics International Corp. 600 7
General Semiconductor, Inc. 500 6
Ingram Micro, Inc., Class A 500 7
* Kulicke & Soffa Industries, Inc. 400 5
* Lightbridge, Inc. 200 2
* Sybase, Inc. 800 19
TTM Technologies, Inc. 600 14
* Varian, Inc. 300 13
* Westell Technologies, Inc. 300 4
--------------------------------------------------------
GROUP TOTAL 141
--------------------------------------------------------
UTILITIES (5.7%)
Cleco Corp. 300 14
* EL Paso Electric Co. 1,000 14
Empire District Electric Co. 200 5
Idacorp, Inc. 200 9
Kansas City Power & Light Co. 500 13
National Fuel Gas Co. 300 17
OGE Energy Corp. 600 13
ONEOK, Inc. 500 20
Philadelphia Suburban Corp. 500 11
* Pinnacle Holdings, Inc. 400 11
Washington Gas Light Co. 600 16
--------------------------------------------------------
GROUP TOTAL 143
--------------------------------------------------------
TOTAL COMMON STOCKS (Cost $2,197) 2,300
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
33
<PAGE> 36
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
STRATEGIC SMALL VALUE
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(CONT'D) (000) (000)!
--------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENT (7.5%)
--------------------------------------------------------
REPURCHASE AGREEMENT (7.5%)
Chase Securities, Inc. 6.40% dated
9/29/00, due 10/2/00, to be
repurchased at $189, collateralized
by various U.S. Government
Obligations, due 11/2/00-3/29/01,
valued at $191 (Cost $189) $ 189 $ 189
--------------------------------------------------------
TOTAL INVESTMENTS (99.3%) (Cost $2,386) 2,489
--------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.7%)
Cash 10
Dividends Receivable 3
Receivable for Investments Sold 9
Receivable from Investment Adviser 8
Other Liabilities (13)
------
17
--------------------------------------------------------
NET ASSETS (100%) $2,506
--------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------
NET ASSETS
Applicable to 236,027 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $2,506
--------------------------------------------------------
NET ASSET VALUE PER SHARE $10.62
--------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $2,399
Undistributed Net Investment Income (Loss) 6
Undistributed Realized Net Gain (Loss) (2)
Unrealized Appreciation (Depreciation) on
Investment Securities 103
--------------------------------------------------------
NET ASSETS $2,506
--------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! See Note A1 to Financial Statements.
* Non-income producing security
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
34
<PAGE> 37
--------------------------------------------------------------------------------
CORE FIXED-INCOME DISTINGUISHING CHARACTERISTICS AND GENERAL STRATEGY
- FIXED INCOME PORTFOLIO
- DOMESTIC FIXED INCOME PORTFOLIO
- FIXED INCOME II PORTFOLIO
- SPECIAL PURPOSE 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; the SPECIAL PURPOSE FIXED INCOME PORTFOLIO has
similar guidelines, but is designed especially for use as part of a balanced
investment program. The FIXED INCOME II PORTFOLIO invests only in fixed-income
securities with credit-quality ratings of BBB or better, 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 and Special Purpose 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, Special Purpose Fixed Income Portfolio, and the Fixed Income
II 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.
--------------------------------------------------------------------------------
35
<PAGE> 38
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.
<TABLE>
<CAPTION>
MAS FIXED INCOME MAS FIXED INCOME MAS FIXED INCOME
INSTITUTIONAL INVESTMENT ADVISER SALOMON BROAD
---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
90 1000 1000
91 1211 1160
92 1385 1307
93 1582 1440
94 1512 1394
95 1727 1590
96 1859 1669
97 2072 1831
98 2235 2041
99 2243 2036
00 2400 2386 2377 2176
</TABLE>
<TABLE>
<CAPTION>
MAS FIXED INCOME
------------------------------------------- SALOMON BROAD
INSTITUTIONAL M INVESTMENT K ADVISER O 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.
M Represents an investment in the Institutional Class.
K 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.
O 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.
--------------------------------------------------------------------------------
36
<PAGE> 39
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
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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
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
-----------------------------------------------------------
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>
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>
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
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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+)++ 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
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.
--------------------------------------------------------------------------------
38
<PAGE> 41
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& 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
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
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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
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>
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>
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
(++)## 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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Crystal Run
Properties, Inc.,
Series A
7.393%, 8/15/11 AA $ 12,305 $ 12,280
(+)## 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
## 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
-----------------------------------------------------------
</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>
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
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
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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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
(+) 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
</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>
(+) 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
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
(+) 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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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
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
</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>
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
-----------------------------------------------------------
NON-AGENCY FIXED RATE MORTGAGES (0.1%)
Bank of America,
Series A
8.375%, 5/1/07 AAA 3 3
(++) Household Bank,
Series 85-1 CMO
7.94%, 5/1/02
(acquired 6/22/94,
cost $113) N/R 90 90
(++)## 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
(!!) 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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) 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
-----------------------------------------------------------
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
43
<PAGE> 46
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
(+) 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
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
------------------------------------------------------------
PREFERRED STOCK (1.1%)
------------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
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>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (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
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>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
44
<PAGE> 47
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<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
------------------------------------------------------------
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
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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>
(++) 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
Inv Fl 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.
--------------------------------------------------------------------------------
45
<PAGE> 48
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.
<TABLE>
<CAPTION>
MAS DOMESTIC FIXED MAS DOMESTIC FIXED
INCOME INSTITUTIONAL INCOME ADVISER SALOMON BROAD
-------------------- ------------------ -------------
<S> <C> <C> <C>
90 1000 1000
91 1210 1160
92 1396 1307
93 1593 1440
94 1547 1394
95 1769 1590
96 1847 1669
97 2035 1831
98 2235 2041
99 2210 2035
00 2340 2331 2176
</TABLE>
<TABLE>
<CAPTION>
MAS DOMESTIC FIXED INCOME
------------------------------ SALOMON BROAD
INSTITUTIONAL M ADVISER O 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.
M Represents an investment in the Institutional Class.
O 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
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>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
Banc One Home Equity
Trust,
Series 99-1 A1
6.06%, 1/25/12 AAA $ 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
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
</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>
FleetBoston Home Equity
Loan Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA $ 113 $ 112
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
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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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
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
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
</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>
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
-----------------------------------------------------------
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
-----------------------------------------------------------
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
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
## 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
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
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
</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>
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
(+) 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>
<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
(+) 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
</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>
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
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
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
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
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
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
Neiman Marcus Group, Inc.
6.65%, 6/1/08 BBB 685 618
</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>
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
-----------------------------------------------------------
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%)
-----------------------------------------------------------
FACE
AMOUNT
(000)
-------
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>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
52
<PAGE> 55
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<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>
<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 Fl 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.
--------------------------------------------------------------------------------
53
<PAGE> 56
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
PERFORMANCE DISCUSSION: FIXED INCOME II PORTFOLIO
Due largely to the significant widening of yield spreads between the Treasury
and non-Treasury sectors, the return on the Portfolio was 43 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, it could not
take advantage of opportunities in the below-investment grade area. 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 investment-grade non-Treasury sectors while continuing to pursue a high-
quality, call-protected, diversified investment strategy.
<TABLE>
<CAPTION>
MAS FIXED INCOME II SALOMON BROAD
------------------- -------------
<S> <C> <C>
90 1000 1000
91 1196 1160
92 1352 1307
93 1535 1440
94 1462 1394
95 1668 1590
96 1770 1669
97 1957 1831
98 2138 2041
99 2126 2036
00 2264 2176
</TABLE>
<TABLE>
<CAPTION>
MAS FIXED SALOMON BROAD
INCOME II INDEX
---------------------------------------------------------------
<S> <C> <C>
One Year 6.48% 6.91%
Five Years 6.30% 6.47%
Ten Years 8.51% 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.
On May 12, 1997, shareholders approved a change in the Portfolio's investment
policies to allow the Portfolio to invest in fixed-income securities of domestic
issuers rated BBB or higher at the time of purchase. The Portfolio's performance
pattern may have been affected by this change.
* Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index.
--------------------------------------------------------------------------------
54
<PAGE> 57
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME II
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (121.0%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (57.1%)
Federal Home Loan
Mortgage Corporation,
Conventional Pools:
8.25%, 10/1/06 Agy $ 37 $ 38
10.00%, 9/1/17-11/1/20 Agy 466 498
10.25%, 7/1/09 Agy 103 111
11.00%, 1/1/16 Agy 143 155
11.25%, 9/1/10-12/1/14 Agy 149 162
Gold Pools:
10.00%, 10/1/19-1/1/21 Agy 786 846
10.50%, 3/1/16 Agy 441 482
October TBA
6.00%, 10/1/29 Agy 15,250 14,253
7.50%, 10/1/30 Agy 8,300 8,290
8.00%, 10/1/30 Agy 3,400 3,448
8.50%, 10/1/30 Agy 5,750 5,896
Federal National Mortgage
Association,
Conventional Pools:
6.00%, 4/1/29 Agy 28,918 27,015
9.00%, 2/1/17 Agy 648 679
9.50%, 5/1/28 Agy 1,447 1,534
10.00%, 3/1/20-5/1/22 Agy 1,281 1,377
10.50%, 11/1/17-2/1/28 Agy 503 548
10.75%, 8/1/13 Agy 22 24
11.00%, 4/1/21 Agy 1,128 1,247
11.25%, 8/1/13 Agy 77 85
11.50%, 1/1/17-9/1/25 Agy 327 366
October TBA
6.00%, 10/1/29 Agy 17,050 15,924
7.50%, 10/1/30 Agy 7,700 7,681
8.00%, 10/1/30 Agy 3,700 3,747
8.50%, 10/1/30 Agy 4,950 5,065
Government National
Mortgage Association:
Adjustable Rate
Mortgages:
6.375%,
2/20/25-3/20/25 Tsy 2,097 2,111
6.50%,
10/20/27-12/20/27 Tsy 4,355 4,374
6.875%,
4/20/25-6/20/25 Tsy 2,042 2,053
7.00%,
2/20/25-11/20/25 Tsy 2,885 2,901
7.125%, 7/20/25 Tsy 279 281
7.375%,
4/20/25-6/20/25 Tsy 1,491 1,499
11.50%, 1/20/18 Tsy 6 7
Various Pools:
9.00%, 11/15/17 Tsy 1,727 1,820
9.50%,
12/15/17-9/15/28 Tsy 6,267 6,673
10.00%,
11/15/09-10/15/28 Tsy 8,853 9,534
10.50%,
3/15/19-5/15/19 Tsy 62 68
11.00%,
2/15/10-2/15/19 Tsy 550 608
October TBA
7.00%, 10/15/29 Tsy 28,450 28,014
-----------------------------------------------------------
GROUP TOTAL 159,414
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (12.4%)
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA $ 828 $ 827
97-D A3
6.20%, 5/15/03 AAA 608 606
98-A A3
5.90%, 11/15/02 AAA 433 433
Banc One Home Equity
Trust,
Series 99-1 A1
6.06%, 1/25/12 AAA 602 595
BMW Vehicle Owner Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 850 848
Centex Home Equity,
Series 99-2 A1
5.91%, 4/25/19 AAA 770 764
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 260 259
Citibank Credit Card
Issuance Trust,
Series 00-C1
7.45%, 9/15/05 BBB 840 841
Contimortgage Home Equity
Loan Trust,
Series 99-A A1
6.01%, 12/25/13 AAA 489 486
CPS Auto Grantor Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 114 114
Daimler Benz Auto Grantor
Trust,
Series 97-A A
6.05%, 3/31/05 AAA 124 124
EQCC Home Equity Loan
Trust,
Series 99-3 A1F
6.55%, 4/25/10 AAA 1,588 1,576
(+) First Merchants Auto
Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA 28 28
First Security Auto
Grantor Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 512 510
98-A A
5.97%, 4/15/04 AAA 538 535
## First USA Credit Card
Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA 1,925 1,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
55
<PAGE> 58
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME II
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
FleetBoston Home Equity
Loan Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA $ 290 $ 288
Ford Credit Auto Owner
Trust,
Series:
99-C A3
5.77%, 11/15/01 AAA 1,669 1,665
99-D A3
6.20%, 4/15/02 AAA 2,022 2,018
+ Green Tree Financial
Corp.,
Series 98-1 A2
5.85%, 4/1/11 Aaa 188 188
Green Tree Home Equity
Loan Trust,
Series:
99-A A1
5.59%, 2/15/13 AAA 177 177
99-C A1
5.99%, 7/15/30 AAA 792 791
+ Green Tree Home
Improvement Loan Trust,
Series 98-E HIA1
5.907%, 8/15/07 Aaa 62 62
Greenpoint Manufactured
Housing,
Series 99-1 A1
5.78%, 12/15/09 AAA 902 894
(+) Health Care
Receivables
Securitization Program,
Series 97-1 A
6.815%, 7/1/01 N/R 314 314
+ HFC Home Equity Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 1,034 1,029
Honda Auto Lease Trust,
Series 99-A A2
5.875%, 10/15/01 AAA 312 311
Honda Auto Receivables
Grantor Trust,
Series 97-B A
5.95%, 5/15/03 AAA 629 626
IndyMac Home Equity Loan,
Series 98-A AF1
5.724%, 9/25/20 AAA 252 252
(+) Long Beach Acceptance
Auto Grantor Trust,
Series:
97-2 A
6.69%, 9/25/04 AAA 140 139
98-1 A
6.19%, 1/25/05 AAA 163 162
MBNA Master Credit Card
Trust,
Series 00-E
7.80%, 10/15/12 AAA 1,245 1,315
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
MMCA Automobile Trust,
Series 99-2 A1
6.30%, 6/15/02 AAA $ 1,311 $ 1,309
(+) National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 1,125 1,125
Navistar Financial Corp.
Owner Trust,
Series 99-A A2
5.55%, 2/15/02 AAA 770 769
(+) New Holland Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 1,340 1,338
+## Oakwood Mortgage
Investors, Inc.,
Series 99-B A1
6.739%, 5/15/09 Aaa 816 815
Option One Mortgage Loan
Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA 790 783
Peco Energy Transition
Trust,
Series 00-A A3
7.625%, 3/1/10 AAA 1,625 1,672
Premier Auto Trust,
Series:
99-2 A2
5.28%, 11/8/01 AAA 565 564
99-3 A2
5.82%, 2/8/02 AAA 1,519 1,516
(+) Rental Car Finance
Corp.,
Series 97-1 A2
6.45%, 8/25/05 AA 1,350 1,333
(+) Team Fleet Financing
Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 475 472
97-1 A
7.35%, 5/15/03 A- 1,300 1,304
## UCFC Home Equity Loan,
Series 98-C A1
5.06%, 12/15/12 AAA 63 63
Union Acceptance Corp.,
Series 96-B A
6.45%, 7/9/03 AAA 413 411
USAA Auto Loan Grantor
Trust,
Series 97-1 A
6.07%, 5/15/04 AAA 510 507
-----------------------------------------------------------
GROUP TOTAL 34,683
-----------------------------------------------------------
</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>
ASSET BACKED MORTGAGES (0.1%)
Cityscape Home Equity
Loan Trust,
Series
96-3 A IO
1.00%, 10/25/26 N/R $ 5,786 $ 79
(+) 96-3 A YMA
10/25/26 N/R 5,786 8
Contimortgage Home Equity
Loan Trust, Series
96-4 A11 IO
1.10%, 1/15/28 AAA 3,542 49
(+) 96-4 A11 YMA
1/15/28 AAA 3,542 4
96-4 A12 IO
1.05%, 1/15/28 AAA 626 7
(+)@ 96-4 A12 YMA
1/15/28 AAA 626 --
97-1 A10 IO
1.10%, 3/15/28 AAA 4,276 65
97-1 A10 YMA
3/15/28 N/R 4,276 6
-----------------------------------------------------------
GROUP TOTAL 218
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY
COLLATERAL SERIES (2.8%)
Federal Home Loan
Mortgage Corporation,
Series:
47-F PAC-1 (12)
10.00%, 6/15/20 Agy 177 186
63-SA Inv Fl IO
1.50%, 6/17/27 Agy 8,289 320
## 1710-D IO
7.075%, 6/15/20 Agy 735 738
1887-SH Inv Fl IO
4.638%, 3/15/24 Agy 2,550 605
Federal National Mortgage
Association,
Series:
## 92-43 FC REMIC
7.26%, 10/25/21 Agy 417 419
96-14 PC PO
12/25/23 Agy 61 39
## 97-70 FA REMIC PAC
(11)
7.075%, 7/18/20 Agy 213 213
## 98-22 FA REMIC PAC
(11)
7.02%, 4/18/28 Agy 1,019 1,018
99-42 SA Inv Fl IO
1.58%, 10/25/28 Agy 8,731 356
186 IO
8.00%, 8/1/27 Agy 1,185 335
191 IO
8.00%, 1/1/28 Agy 2,993 835
281 2 IO
9.00%, 11/1/26 Agy 1,175 319
291 2 IO
8.00%, 11/1/27 Agy 2,185 604
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
296 2 IO
8.00%, 4/1/24 Agy $ 2,422 $ 671
Government National
Mortgage Association,
Series:
99-30 SA Inv Fl IO
1.98%, 8/16/29 Tsy 8,498 493
99-32 SB Inv Fl IO
REMIC
1.38%, 7/16/27 Tsy 5,999 243
99-43 UD Inv Fl IO
1.38%, 11/16/29 Tsy 6,553 269
-----------------------------------------------------------
GROUP TOTAL 7,663
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.6%)
+## BA Mortgage
Securities, Inc.,
Series 97-1 A2
7.121%, 7/25/26 Aaa 423 423
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 578 587
## Morserv, Inc.,
Series 96-2 1A1
7.47%, 11/25/26 AAA 747 748
-----------------------------------------------------------
GROUP TOTAL 1,758
-----------------------------------------------------------
COMMERCIAL MORTGAGES (5.2%)
American Southwest
Financial Securities
Corp.,
Series:
93-2 A1
7.30%, 1/18/09 N/R 689 683
## 93-2 S1 IO
1.09%, 1/18/09 N/R 8,466 225
Asset Securitization
Corp.,
Series:
96-MD6 A1C
7.04%, 11/13/26 AAA 825 812
+## 97-D5 PS1 IO
1.59%, 2/14/41 Aaa 5,878 462
(+) Beverly Finance
Corp.,
Series 94-1
8.36%, 7/15/04 AA- 675 699
(+) Carousel Center
Finance, Inc.,
Series 1 B
7.188%, 10/15/07 A 1,400 1,393
Chase Commercial Mortgage
Securities Corp.,
Series 99-2 A2
7.198%, 11/15/09 AAA 2,275 2,278
(+) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 689 728
(+) Crystal Run
Properties, Inc.,
Series A
7.393%, 8/15/06 AA 1,100 1,098
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
57
<PAGE> 60
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME II
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
+ First Union-Chase
Commercial Mortgage,
Series 99-C2 A2
6.645%, 4/15/09 Aaa $ 1,750 $ 1,688
## GMAC Commercial
Mortgage Securities,
Inc.,
Series:
+ 96-C1 X2 IO
2.027%, 3/15/21 Aaa 3,069 176
+ 97-C2 X IO
1.264%, 4/15/27 Aaa 10,239 496
98-C2 A2
6.42%, 8/15/08 AAA 2,300 2,214
+## GS Mortgage
Securities Corp. II,
Series 97-GL X2 IO
1.066%, 7/13/30 Aaa 2,403 90
## Nomura Asset
Securities Corp.,
Series 94-MD1 A2
8.026%, 3/15/18 N/R 750 749
(+) Prime Property Fund,
Series 1 A
6.633%, 7/23/03 AA 794 784
-----------------------------------------------------------
GROUP TOTAL 14,575
-----------------------------------------------------------
ENERGY (0.5%)
Conoco, Inc.
6.95%, 4/15/29 A- 1,580 1,461
-----------------------------------------------------------
FEDERAL AGENCY (1.8%)
Federal National Mortgage
Association
6.50%, 8/15/04 Agy 2,000 1,995
7.125%, 6/15/10 Agy 1,500 1,537
7.25%, 5/15/30 Agy 1,500 1,573
-----------------------------------------------------------
GROUP TOTAL 5,105
-----------------------------------------------------------
FINANCE (17.0%)
American General Corp.
7.50%, 7/15/25 AA- 545 521
American General Finance
6.75%, 11/15/04 A+ 685 675
(+) Anthem Insurance
Cos., Inc.,
Series A
9.00%, 4/1/27 BBB+ 895 728
Associates Corp. of North
America
6.00%, 7/15/05 A+ 1,420 1,360
Bank One Corp.
6.00%, 2/17/09 A- 1,360 1,231
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 500 455
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A $ 1,470 $ 1,341
Chase Manhattan Corp.
6.00%, 2/15/09 A 1,100 1,010
7.00%, 11/15/09 A 245 240
Citicorp,
Series F
6.375%, 11/15/08 A+ 1,455 1,373
EOP Operating LP
7.25%, 6/15/28 BBB 870 742
7.50%, 4/19/29 BBB+ 865 759
Equitable Companies, Inc.
6.50%, 4/1/08 A+ 975 918
(+) Equitable Life
Assurance Society of
the U.S.,
Series 1A
6.95%, 12/1/05 A+ 1,200 1,182
(+) Farmers Exchange
Capital
7.05%, 7/15/28 A+ 1,045 864
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 A+ 975 967
(+) Fifty-Seventh Street
Associates
7.125%, 6/1/17 A 1,132 999
(+) First Hawaiian Bank,
Series A
6.93%, 12/1/03 A- 1,650 1,605
FleetBoston
6.625%, 2/1/04 A- 450 443
6.625%, 12/1/05 A- 535 522
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 900 895
Ford Motor Credit Co.
7.375%, 10/28/09 A 445 435
General Electric Capital
Corp.
7.25%, 5/3/04 AAA 1,530 1,554
!! 7.375%, 1/19/10 AAA 1,600 1,642
General Motors Acceptance
Corp.,
7.75%, 1/19/10 A 1,115 1,127
(+) Goldman Sachs Group
LP
6.50%, 2/25/09 A+ 910 849
Great Western Financial
Trust II
8.206%, 2/1/27 BBB- 415 370
Hartford Life Corp.
7.65%, 6/15/27 A 1,310 1,258
Household Finance Corp.
8.00%, 7/15/10 A 1,305 1,341
(+) John Hancock
Financial Services,
Inc.
7.375%, 2/15/24 AA- 1,880 1,745
Merck & Co., Inc.
5.95%, 12/1/28 AAA 625 534
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ $ 875 $ 766
7.80%, 11/1/25 A+ 875 842
Nationsbank Corp.
6.80%, 3/15/28 A $ 455 $ 404
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
58
<PAGE> 61
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A $ 1,245 $ 1,047
(+) New York Life
Insurance Co.
7.50%, 12/15/23 AA- 750 670
Northern Trust Co.
6.625%, 10/1/03 AA- 1,820 1,805
!! Norwest Financial,
Inc.
5.625%, 2/3/09 A+ 2,110 1,876
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 1,300 1,174
(+) Prime Property
Funding II, Inc.
6.80%, 8/15/02 A 275 271
7.00%, 8/15/04 A 1,380 1,348
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A- 1,985 2,008
State Street Corp.
7.65%, 6/15/10 A 660 675
Suntrust Banks, Inc.
7.75%, 5/1/10 A 745 760
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 990 899
Washington Mutual, Inc.
8.25%, 4/1/10 BBB 365 374
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 2,515 2,409
96 WFP-D
6.95%, 9/1/13 AA- 450 430
-----------------------------------------------------------
GROUP TOTAL 47,443
-----------------------------------------------------------
INDUSTRIALS (13.3%)
Albertson's, Inc.
7.45%, 8/1/29 A 1,285 1,156
Alcoa, Inc.
7.375%, 8/1/10 A+ 405 410
Atlas Air, Inc.,
Series A
7.38%, 1/2/18 AA-
Becton, Dickinson & Co.
6.70%, 8/1/28 A+ 660 564
7.00%, 8/1/27 A+ 420 373
Clear Channel
Communications, Inc.
7.65%, 9/15/10 BBB- 1,200 1,189
DaimlerChrysler N.A.
Holdings, Corp.
7.20%, 9/1/09 A+ 1,205 1,178
Dayton Hudson Corp.
6.75%, 1/1/28 A- 950 824
Delphi Automotive Systems
Corp.
7.125%, 5/1/29 BBB 355 304
</TABLE>
<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+ $ 210 $ 183
6.90%, 4/1/29 BBB+ 1,275 1,006
7.00%, 2/15/28 BBB+ 170 135
(+) Florida Windstorm
7.125%, 2/25/19 AAA 1,720 1,615
Ford Motor Co.
6.625%, 10/1/28 A 2,535 2,123
7.45%, 7/16/31 A 230 214
Hertz Corp.
7.625%, 8/15/07 A- 1,465 1,464
Honeywell International,
Inc.
7.50%, 3/1/10 A 230 234
(+) Hyatt Equities LLC
9.25%, 5/15/06 BBB 1,045 1,082
Kroger Co.
7.70%, 6/1/29 BBB- 1,400 1,293
8.05%, 2/1/10 BBB- 370 373
Lockheed Martin Corp.
8.20%, 12/1/09 BBB- 1,350 1,408
Lowe's Companies, Inc.
6.50%, 3/15/29 A 665 550
6.875%, 2/15/28 A 1,340 1,165
Lucent Technologies, Inc.
6.45%, 3/15/29 A 1,665 1,391
May Department Stores Co.
6.70%, 9/15/28 A+ 1,795 1,500
7.875%, 3/1/30 A+ 105 101
Neiman Marcus Group, Inc.
6.65%, 6/1/08 BBB 1,285 1,160
News America Holdings,
Inc.
7.75%, 1/20/24 BBB- 550 510
7.75%, 2/1/24 BBB- 565 525
8.875%, 4/26/23 BBB- 780 808
Pharmacia Corp.
6.60%, 12/1/28 AA- 2,050 1,828
(+) Raytheon Co.
8.20%, 3/1/06 BBB- 865 895
8.30%, 3/1/10 BBB- 170 178
Rockwell International
Corp.
6.70%, 1/15/28 A+ 1,150 989
Scotia Pacific Co. LLC
7.71%, 1/20/14 BBB 685 471
Sun Microsystems, Inc.
7.65%, 8/15/09 BBB+ 725 732
Time Warner Cos., Inc.
6.625%, 5/15/29 BBB 970 826
U.S. Airways Corp., Pass
Through Certificates
8.11%, 2/20/17 AAA 655 666
U.S. Airways Corp.,
Series 98-1
6.85%, 1/30/18 A+ 2,016 1,812
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
59
<PAGE> 62
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
FIXED INCOME II
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
United Technologies Corp.
6.70%, 8/1/28 A+ $ 2,145 $ 1,932
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA 1,865 1,850
-----------------------------------------------------------
GROUP TOTAL 37,017
-----------------------------------------------------------
NON-AGENCY FIXED RATE MORTGAGES (0.3%)
Bank of America,
Series A
8.375%, 5/1/07 AAA 48 48
California Federal
Savings & Loan,
Series 86-1A
8.80%, 1/1/14 AA 33 33
sec. First Federal
Savings & Loan
Association,
Series 92-C
8.75%, 6/1/06
(acquired
12/5/90, cost $12) AA 12 11
## Resolution Trust
Corp.,
Series 92-5C CMO
8.613%, 1/25/26 AA 176 176
Ryland Acceptance Corp.
IV,
Series 79-A
6.65%, 7/1/11 AA 450 447
-----------------------------------------------------------
GROUP TOTAL 715
-----------------------------------------------------------
TELEPHONES (2.8%)
AT&T Corp.
6.50%, 3/15/29 AA- 1,280 1,066
BellSouth
Telecommunications,
Inc.
6.375%, 6/1/28 AA- 1,275 1,080
Comcast Cable
Communications
8.375%, 5/1/07 BBB 955 998
GTE Corp.
6.94%, 4/15/28 A+ 1,765 1,601
MCI Communications Corp.
6.95%, 8/15/06 A- 470 462
MCI WorldCom, Inc.
6.95%, 8/15/28 A- 1,575 1,433
(+) Qwest Capital Funding
7.90%, 8/15/10 BBB+ 1,180 1,203
-----------------------------------------------------------
GROUP TOTAL 7,843
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION (1.5%)
Continental Airlines,
Series:
98-1 A
6.648%, 9/15/17 AA+ $ 985 $ 925
99-1 A
6.545%, 8/2/20 AA+ 398 370
(+) Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 1,400 1,561
United Parcel Service
8.375%, 4/1/20 AAA 1,230 1,358
-----------------------------------------------------------
GROUP TOTAL 4,214
-----------------------------------------------------------
UTILITIES (0.8%)
CMS Panhandle Holdings
Co.
7.00%, 7/15/29 BBB- 1,675 1,404
(+) Southern Energy, Inc.
7.90%, 7/15/09 BBB 840 797
-----------------------------------------------------------
GROUP TOTAL 2,201
-----------------------------------------------------------
YANKEE (4.8%)
Abbey National plc
7.95%, 10/26/29 AA- 1,865 1,895
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 1,050 867
AT&T Canada, Inc.
7.625%, 3/15/05 BBB 1,655 1,666
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- 1,270 1,306
(+) Express Pipeline LP,
Series A
6.47%, 12/31/13 A- 1,872 1,728
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 905 827
(+) Oil Enterprises Ltd.
6.239%, 6/30/08 AAA 1,387 1,326
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 528 507
(+) Paiton Energy Funding
BV
9.34%, 2/15/14 CC 800 168
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 1,070 1,017
(+) Unicredito Italiano
Capital Trust II
9.20%, 10/29/49 A- 140 141
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A- 550 562
7.875%, 2/15/30 A- 1,360 1,381
-----------------------------------------------------------
GROUP TOTAL 13,391
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $347,537) 337,701
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
60
<PAGE> 63
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK (1.2%)
-----------------------------------------------------------
MORTGAGE-OTHER (1.2%)
(+)+ Home Ownership
Funding Corp.
13.331% (Cost $3,269) Aaa 4,350 $ 3,262
-----------------------------------------------------------
CASH EQUIVALENTS (8.3%)
-----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
--------
<S> <C> <C> <C>
DISCOUNT NOTES (4.6%)
Federal Home Loan Bank
6.30%, 10/18/00 Agy $ 10,000 9,970
Federal Home Loan
Mortgage Corporation
6.42%, 10/26/00 Agy 3,000 2,985
-----------------------------------------------------------
GROUP TOTAL 12,955
-----------------------------------------------------------
REPURCHASE AGREEMENT (3.7%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $10,270,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $10,368 10,265 10,265
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $23,220) 23,220
-----------------------------------------------------------
TOTAL INVESTMENTS (130.5%) (Cost $374,026) 364,183
-----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-30.5%)
Dividends Receivable 145
Interest Receivable 3,271
Receivable for Investments Sold 10,484
Receivable for Forward Commitments 8,737
Unrealized Gain on Swap Agreements 454
Investments Held as Collateral for Loaned
Securities 1,893
Other Assets 33
Payable for Bank Overdraft (3,301)
Payable for Investments Purchased (3,718)
Payable for Forward Commitments (100,446)
Payable for Investment Advisory Fees (286)
Payable for Administrative Fees (19)
Payable for Trustees' Deferred Compensation
Plan-Note F (28)
Payable for Variation Margin on Futures
Contracts (103)
Collateral on Securities Loaned, at Value (1,893)
Other Liabilities (265)
----------
(85,042)
-----------------------------------------------------------
NET ASSETS (100%) $ 279,141
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
--------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 26,165,723 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 279,141
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.67
-----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 299,020
Undistributed Net Investment Income (Loss) 5,226
Undistributed Realized Net Gain (Loss) (16,038)
Unrealized Appreciation (Depreciation) on:
Investment Securities (9,843)
Futures and Swaps 776
-----------------------------------------------------------
NET ASSETS $ 279,141
-----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
sec. Restricted Security-Total market value of restricted
securities owned at September 30, 2000 was $11,000 or
0.0% of net assets.
! 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.
## Variable or floating rate security-rate disclosed is as
of September 30, 2000.
@ Value is less than $500.
CMO Collateralized Mortgage Obligation
Inv Fl 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.
--------------------------------------------------------------------------------
61
<PAGE> 64
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
PERFORMANCE DISCUSSION: SPECIAL PURPOSE FIXED INCOME PORTFOLIO
Despite a significant widening of yield spreads between the Treasury and
non-Treasury sectors, the return on the Portfolio was 8 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.
<TABLE>
<CAPTION>
MAS SPECIAL PURPOSE FIXED INCOME SALOMON BROAD
-------------------------------- -------------
<S> <C> <C>
* 1000 1000
92 1095 1085
93 1261 1196
94 1211 1158
95 1392 1320
96 1500 1386
97 1676 1520
98 1799 1694
99 1810 1690
00 1936 1807
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS SPECIAL PURPOSE SALOMON BROAD
FIXED INCOME INDEX
-----------------------------------------------------------------
<S> <C> <C>
One Year 6.99% 6.91%
Five Years 6.85% 6.47%
Since Inception 8.09% 7.21%
</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.
* The Special Purpose Fixed Income Portfolio commenced operations on 3/31/92.
Total returns are compared to the Salomon Broad Investment Grade Index, an
unmanaged market index.
--------------------------------------------------------------------------------
62
<PAGE> 65
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (113.3%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (50.4%)
Federal Home Loan Mortgage
Corporation,
Gold Pools:
10.50%, 9/1/09-3/1/27 Agy $ 3,717 $ 4,044
11.00%, 12/1/10-9/1/20 Agy 958 1,040
11.75%, 12/1/17 Agy 70 77
October TBA
7.50%, 10/1/30 Agy 6,400 6,392
8.00%, 10/1/30 Agy 4,200 4,259
8.50%, 10/1/30 Agy 8,300 8,512
Federal National Mortgage
Association,
Conventional Pools:
9.00%, 1/1/21 Agy 2,299 2,409
9.50%, 11/1/20-2/1/27 Agy 3,588 3,804
10.00%, 11/1/18-5/1/22 Agy 3,867 4,155
10.50%, 8/1/15-4/1/22 Agy 1,328 1,448
11.00%, 11/1/20 Agy 101 111
12.00%, 11/1/15 Agy 1,736 1,959
12.50%, 9/1/15 Agy 135 154
October TBA
6.00%, 10/1/29 Agy 46,700 43,615
6.50%, 10/1/29 Agy 15,150 14,538
7.00%, 10/1/30 Agy 6,000 5,876
7.50%, 10/1/30 Agy 15,800 15,761
8.00%, 10/1/30 Agy 5,700 5,773
8.50%, 10/1/30 Agy 8,350 8,543
November TBA
6.50%, 11/1/29 Agy 8,800 8,442
Government National
Mortgage Association:
Adjustable Rate
Mortgages:
6.375%, 2/20/25-3/20/25 Tsy 3,731 3,757
6.875%, 2/20/25-6/20/25 Tsy 4,778 4,806
7.00%, 2/20/25-5/20/25 Tsy 4,280 4,305
7.125%,
10/20/27-12/20/27 Tsy 4,842 4,863
7.375%, 6/20/25 Tsy 1,392 1,400
Various Pools:
7.375%, 2/20/27 Tsy 609 612
9.50%, 4/15/28 Tsy 2,248 2,393
10.00%, 2/15/16-10/15/28 Tsy 4,692 5,052
10.50%, 10/15/15-5/15/26 Tsy 1,462 1,597
11.00%, 1/15/10-5/15/26 Tsy 2,633 2,912
12.00%, 3/15/11 Tsy 18 21
12.50%, 6/15/10 Tsy 29 33
October TBA
7.00%, 10/15/29 Tsy 44,400 43,720
-----------------------------------------------------------
GROUP TOTAL 216,383
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
++RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (12.5%)
Arcadia Automobile
Receivables Trust,
Series:
97-D A3
6.20%, 5/15/03 AAA $ 821 $ 818
98-A A3
5.90%, 11/15/02 AAA 872 870
Associates Automobile
Receivables Trust,
Series 00-1 A2
7.15%, 6/15/03 AAA 2,125 2,130
Block Mortgage Finance Co.,
Series 99-1 A1
5.94%, 9/25/13 AAA 531 527
BMW Vehicle Owner Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 1,094 1,093
Centex Home Equity,
Series:
99-1 A1
6.07%, 3/25/18 AAA 347 345
99-2 A1
5.91%, 4/25/19 AAA 936 928
CIT RV Trust,
Series 99-A A1
5.33%, 12/15/05 AAA 578 576
Daimler Benz Auto
Grantor Trust, Series
97-A A
6.05%, 3/31/05 AAA 268 267
Daimler Benz Vehicle Trust,
Series 98-A A3
5.16%, 1/20/03 AAA 3,856 3,829
Delta Funding Home Equity
Loan Trust,
Series 98-4 A1F
6.16%, 2/15/16 AAA 232 231
EQCC Home Equity
Loan Trust,
Series:
99-1 A1F
5.77%, 5/20/10 AAA 832 825
99-3 A1F
6.55%, 4/25/10 AAA 2,038 2,023
(+) First Mortgage
Acceptance Corp., Loan
Receivables Trust,
Series 96-B A1
7.629%, 11/1/18 A 986 740
First Security Auto
Grantor Trust, Series
97-B A
6.10%, 4/15/03 AAA 864 861
First Security Auto Owner
Trust, Series 00-1 A2
7.20%, 5/15/03 AAA 2,975 2,984
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
63
<PAGE> 66
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
++RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
## First USA Credit Card
Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA $ 2,740 $ 2,740
Ford Credit Auto Owner
Trust,
Series:
99-B A3
5.47%, 9/15/01 AAA 1,180 1,178
99-C A3
5.77%, 11/15/01 AAA 2,034 2,029
99-D A3
6.20%, 4/15/02 AAA 3,132 3,125
00-A A3
6.82%, 6/17/02 AAA 4,158 4,159
+ Green Tree Financial
Corp.,
Series 98-E HIA1
5.907%, 12/15/23 Aaa 76 76
Green Tree Home Equity Loan
Trust,
Series:
99-A A1
5.59%, 2/15/13 AAA 209 209
99-C A1
5.99%, 7/15/13 AAA 1,014 1,012
Greenpoint Manufactured
Housing,
Series 99-1 A1
5.78%, 12/15/09 AAA 1,128 1,117
Harley-Davidson Eaglemark
Motorcycle Trust,
Series 99-2 A1
5.84%, 10/15/03 AAA 1,029 1,024
+ HFC Home Equity Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 1,195 1,189
Honda Auto Receivables
Grantor Trust,
Series 97-B A
5.95%, 5/15/03 AAA 28 27
(+) Long Beach Acceptance
Auto Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 311 308
MBNA Master Credit Card
Trust,
Series 00-E
7.80%, 10/15/12 AAA 1,595 1,685
MMCA Automobile Trust,
Series 99-2A 1
6.30%, 6/15/02 AAA 1,564 1,562
(+) National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 1,300 1,300
(+) New Holland Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 1,541 1,539
</TABLE>
<TABLE>
<CAPTION>
++RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Nissan Auto Receivables
Owner Trust,
Series 00-B A2
7.15%, 12/15/02 AAA $ 2,600 $ 2,607
Option One Mortgage Loan
Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA 996 987
Peco Energy Transition
Trust,
Series 00-A A3
7.625%, 3/1/10 AAA 2,350 2,418
Premier Auto Trust,
Series 99-3 A2
5.82%, 2/8/02 AAA 1,919 1,915
Residential Funding
Mortgage
Securities I Co., Inc.
Series 99-HI4 A1
6.41%, 11/25/07 AAA 828 823
(+)++ Securitized Multiple
Asset
Rated Trust,
Series 97-3 A1
7.71%, 4/15/06 N/R 1,272 254
(+) Team Fleet Financing
Corp.,
Series 96-1 A
6.65%, 12/15/02 A- 1,125 1,119
(+) Textron Financial Corp.
Receivables Trust,
Series 98-A A1
5.82%, 1/15/02 AAA 226 226
## UCFC Home Equity
Loan Trust,
Series 98-C A1
6.73%, 12/15/12 AAA 75 75
-----------------------------------------------------------
GROUP TOTAL 53,750
-----------------------------------------------------------
ASSET BACKED MORTGAGES (0.1%)
Cityscape Home Equity Loan
Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R 13,474 183
(+) 96-3 A YMA
10/25/26 N/R 13,474 19
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 8,564 118
(+) 96-4 A11 YMA
1/15/28 AAA 8,564 9
96-4 A12 IO
1.05%, 1/15/28 AAA 1,512 16
(+) 96-4 A12 YMA
1/15/28 AAA 1,512 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
64
<PAGE> 67
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
97-1 A10 IO
1.10%, 3/15/28 AAA $10,424 $ 160
97-1 A10 YMA
3/15/28 N/R 10,424 15
-----------------------------------------------------------
GROUP TOTAL 521
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL
SERIES (2.0%)
Federal Home Loan Mortgage
Corporation,
Series:
88-22 C REMIC PAC
9.50%, 4/15/20 Agy 29 30
186 IO
8.00%, 8/1/27 Agy 1,218 344
1415-S Inv Fl IO
14.125%, 11/15/07 Agy 406 120
1476-S Inv Fl IO
REMIC PAC
3.893%, 2/15/08 Agy 4,387 376
1485-S Inv Fl IO REMIC
2.975%, 3/15/08 Agy 3,413 197
1600-SA Inv Fl IO REMIC
1.375%, 10/15/08 Agy 8,195 273
2111-SB Inv Fl IO
2.565%, 1/15/29 Agy 11,952 345
Federal National Mortgage
Association,
Series:
92-186 S Inv Fl IO
2.974%, 10/25/07 Agy 7,307 471
## 94-73 F
7.156%, 12/25/20 Agy 180 180
## 94-97 FC REMIC
7.356%, 3/25/24 Agy 349 353
96-14 PC PO
12/25/23 Agy 227 147
96-68 SC Inv Fl IO REMIC
1.444%, 1/25/24 Agy 3,825 257
## 97-70 FA REMIC
PAC (11)
7.075%, 7/18/20 Agy 396 397
## 98-22 FA Inv Fl REMIC
PAC (11)
7.023%, 4/18/28 Agy 1,868 1,867
191 IO
8.00%, 1/1/28 Agy 4,132 1,152
291 2 IO
8.00%, 11/1/27 Agy 3,191 881
296 2 IO
8.00%, 4/1/24 Agy 2,381 660
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Government National
Mortgage Association,
Series:
99-32 SB Inv Fl IO REMIC
1.378%, 7/16/27 Tsy $ 8,141 $ 330
99-43 UN Inv Fl IO
1.378%, 11/16/29 Tsy 7,535 309
-----------------------------------------------------------
GROUP TOTAL 8,689
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.2%)
American Housing Trust,
Series:
IV 2 C
9.553%, 9/25/20 A 149 152
V 1G
9.125%, 4/25/21 AAA 683 698
-----------------------------------------------------------
GROUP TOTAL 850
-----------------------------------------------------------
COMMERCIAL MORTGAGES (4.0%)
Asset Securitization Corp.,
Series 96-MD6 A1C
7.04%, 11/13/26 AAA 1,845 1,815
(+) Beverly Finance Corp.,
Series 94-1
8.36%, 7/15/04 AA- 2,175 2,254
(+) Carousel Center Finance, Inc.,
Series 1 A1
6.828%, 11/15/07 AA 1,550 1,538
(+) Creekwood Capital
Corp.,
Series 95-1A
8.47%, 3/16/15 AA 1,607 1,698
(+) Crystal Run Properties,
Inc.,
Series A
7.393%, 8/15/11 AA 2,125 2,121
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series:
96-C1 X2 IO
2.028%, 3/15/21 Aaa 7,063 405
97-C2 X IO
1.264%, 4/15/27 Aaa 20,921 1,014
+## GS Mortgage Securities
Corp. II,
Series 97-GL X2 IO
1.066%, 7/13/30 Aaa 5,341 200
## Nomura Asset Securities
Corp.,
Series 94-MD1 A3
8.026%, 3/15/18 N/R 1,135 1,141
(+) Park Avenue Finance
Corp.,
Series 97-C1 A1
7.58%, 5/12/12 N/R 867 878
(+) Prime Property Fund
Series 1 A
6.633%, 7/23/03 AA 1,519 1,499
(+) Stratford Finance Corp.
6.776%, 2/1/04 AA 2,300 2,274
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
65
<PAGE> 68
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.463%, 2/25/28 N/R $ 5,924 $ 330
96-CFL X1A IO
0.830%, 2/25/28 N/R 3,146 14
96-CFL X2 IO
0.337%, 2/25/28 N/R 1,410 23
-----------------------------------------------------------
GROUP TOTAL 17,204
-----------------------------------------------------------
ENERGY (0.9%)
CMS Energy Corp.
7.50%, 1/15/09 BB 1,055 944
Conoco, Inc.
6.95%, 4/15/29 A- 2,550 2,358
) Mobile Energy Services
LLC
8.665%, 1/1/17 D 1,709 342
-----------------------------------------------------------
GROUP TOTAL 3,644
-----------------------------------------------------------
FEDERAL AGENCY (12.5%)
Federal Home Loan Mortgage
Corporation
6.625%, 9/15/09 Agy 15,270 15,089
Federal National Mortgage
Association
++ 6.25%, 5/15/29 Agy 3,500 3,228
7.25%, 5/15/30 Agy 2,750 2,885
7.125%, 6/15/10 Agy 31,850 32,631
-----------------------------------------------------------
GROUP TOTAL 53,833
-----------------------------------------------------------
FINANCE (11.5%)
(+) Anthem Insurance Cos.,
Inc.,
9.125%, 4/1/10 BBB+ 735 688
Series A
9.00%, 4/1/27 BBB+ 1,135 924
Bank One Corp.
7.625%, 10/15/26 A- 1,060 1,019
7.875%, 8/1/10 A- 430 441
8.00%, 4/29/27 A- 205 205
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 1,370 1,247
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 2,205 2,012
Chase Manhattan Corp.
6.00%, 2/15/09 A 1,000 918
7.00%, 11/15/09 A 370 362
Citicorp
Series F
6.375%, 11/15/08 A+ 1,285 1,213
Citigroup, Inc.
6.625%, 1/15/28 AA- 870 772
EOP Operating LP
6.763%, 6/15/07 BBB 1,420 1,340
7.50%, 4/19/29 BBB+ 670 588
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Equitable Life
Assurance Society of the
U.S.,
Series 1A
6.95%, 12/1/05 A+ $ 2,160 $ 2,128
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 A+ 2,200 2,181
(+) Florida Property and
Casualty
7.375%, 7/1/03 A- 750 746
Ford Motor Credit Co.
5.80%, 1/12/09 A 390 345
7.375%, 10/28/09 A 1,695 1,658
General Electric Capital
Corp.
7.375%, 1/19/10 AAA 2,025 2,079
General Motors
Acceptance Corp.
7.75%, 1/19/10 A 645 652
GS Holdings
Escrow Corp.
7.125%, 8/1/05 BB+ 1,955 1,824
(+) Goldman Sachs Group LP
6.50%, 2/25/09 A+ 1,050 979
Hartford Financial Services
Group, Inc.
7.90%, 6/15/10 A 1,250 1,286
HMH Properties,
Series A
7.875%, 8/1/05 BB 490 462
Household Finance Corp.
5.875%, 2/1/09 A 1,600 1,434
8.00%, 7/15/10 A 650 668
(+) John Hancock Financial
Services, Inc.
7.375%, 2/15/24 AA- 650 603
Lehman Brothers Holdings,
Inc.
8.25%, 6/15/07 A 735 760
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ 2,000 1,751
7.80%, 11/1/25 A+ 250 240
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A 2,300 1,934
(+) New York Life Insurance
Co.
7.50%, 12/15/23 AA- 1,075 961
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 1,800 1,625
(+) Prime Property Funding
II, Inc.
6.80%, 8/15/02 A 200 197
7.00%, 8/15/04 A 1,945 1,900
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A- 2,375 2,402
State Street Corp.
7.65%, 6/15/10 A+ 880 900
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 1,300 1,181
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
66
<PAGE> 69
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Washington Mutual, Inc.,
8.25%, 4/1/10 BBB $ 555 $ 568
Series A
8.206%, 2/1/27 BBB- 255 227
Wells Fargo & Co.
7.55%, 6/21/10 A+ 1,705 1,732
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 2,833 2,715
96 WFP-D
6.95%, 9/1/13 AA- 1,700 1,624
-----------------------------------------------------------
GROUP TOTAL 49,491
-----------------------------------------------------------
INDUSTRIALS (9.7%)
Adelphia Communications Corp.
7.875%, 5/1/09 B+ 260 217
9.375%, 11/15/09 B+ 1,020 924
Albertson's, Inc.
7.45%, 8/1/29 A 1,610 1,448
Alcoa, Inc.
7.375%, 8/1/10 A+ 400 405
Clear Channel
Communications, Inc.
7.65%, 9/15/10 BBB- 1,200 1,189
Columbia/HCA
Healthcare Corp.
7.19%, 11/15/15 BB+ 1,050 875
7.58%, 9/15/25 BB+ 655 551
9.00%, 12/15/14 BB+ 785 782
Continental Airlines, Inc.,
Series 97-1A
7.461%, 4/1/15 AA+ 450 443
CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 1,290 1,267
DaimlerChrysler N.A.
Holdings Corp.
8.00%, 6/15/10 A+ 795 818
Delphi Automotive
Systems Corp.
7.125%, 5/1/29 BBB 450 386
Dow Chemical Co.
7.375%, 11/1/29 A 465 450
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB+ 404 306
94-K2 A2
9.35%, 8/15/19 BB+ 1,335 997
Federated Department
Stores, Inc.
6.90%, 4/1/29 BBB+ 1,605 1,266
7.00%, 2/15/28 BBB+ 200 159
8.50%, 6/1/10 BBB+ 170 170
(+) Florida Windstorm
7.125%, 2/25/19 AAA 1,570 1,474
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Ford Motor Co.
6.625%, 10/1/28 A $ 1,830 $ 1,533
7.45%, 7/16/31 A 600 558
Fred Meyer, Inc.
7.375%, 3/1/05 BBB- 1,615 1,601
Honeywell International,
Inc.
7.50%, 3/1/10 A 455 464
International Game
Technology
8.375%, 5/15/09 BB+ 980 958
Kroger Co.
8.05%, 2/1/10 BBB- 410 413
Lenfest Communications,
Inc.
7.625%, 2/15/08 BBB 1,330 1,332
Lockheed Martin Corp.
8.50%, 12/1/29 BBB- 1,590 1,681
Lowe's Companies, Inc.
6.50%, 3/15/29 A 1,685 1,393
6.875%, 2/15/28 A 520 452
Lucent Technologies, Inc.
6.45%, 3/15/29 A 1,395 1,166
News America Holdings, Inc.
8.875%, 4/26/23 BBB- 270 280
News America, Inc.
7.275%, 6/30/28 BBB- 2,050 1,792
(+) Oxymar
7.50%, 2/15/16 BBB- 1,490 1,113
Pharmacia Corp.
6.60%, 12/1/28 AA- 2,355 2,100
(+) Raytheon Co.
8.20%, 3/1/06 BBB- 1,005 1,039
8.30%, 3/1/10 BBB- 215 225
Rockwell International
Corp.
6.70%, 1/15/28 A+ 470 404
Saks, Inc.
7.375%, 2/15/19 BB+ 970 531
Scotia Pacific Co. LLC
7.71%, 1/20/14 BBB 1,550 1,066
Sun Microsystems, Inc.
7.65%, 8/15/09 BBB+ 930 939
Tenet Healthcare Corp.,
Series B
7.625%, 6/1/08 BB+ 630 599
Time Warner, Inc.
6.625%, 5/15/29 BBB 970 826
U.S. Airways Corp., Pass
Through Certificates
8.11%, 2/20/17 AAA 780 793
USA Waste Services, Inc.
7.00%, 7/15/28 BBB 1,490 1,226
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA 355 352
7.55%, 2/15/30 AA 2,025 2,088
Waste Management, Inc.
7.375%, 5/15/29 BBB 525 451
-----------------------------------------------------------
GROUP TOTAL 41,502
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
67
<PAGE> 70
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SPECIAL PURPOSE 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 (0.3%)
sec. First Federal Savings
& Loan Association,
Series 92-C
8.75%, 6/1/06
(acquired 8/24/94 cost
$30) AA $ 13 $ 13
## Resolution Trust Corp.,
Series 92-5 C CMO
8.613%, 1/25/26 AA 467 467
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 841 835
sec. Shearson American
Express,
Series A CMO
9.625%, 12/1/12
(acquired 8/25/93
cost $130) AA 130 130
-----------------------------------------------------------
GROUP TOTAL 1,445
-----------------------------------------------------------
TELEPHONES (3.1%)
++ AT&T Corp.
6.50%, 3/15/29 AA- 1,710 1,424
BellSouth
Telecommunications, Inc.
6.375%, 6/1/28 AA- 1,665 1,410
Global Crossing Holdings
Ltd.
9.125%, 11/15/06 BB 1,335 1,322
GTE Corp.
6.94%, 4/15/28 A+ 1,740 1,579
Intermedia Communications,
Inc.
# 12.50%, 5/15/06 B 355 339
Series B
8.60%, 6/1/08 B 940 902
MCI WorldCom, Inc.
6.95%, 8/15/28 A- 2,755 2,507
Nextel Communications, Inc.
# 0.00%, 9/15/07 B 1,660 1,361
9.375%, 11/15/09 B- 300 293
# Qwest Communications
International, Inc.,
Series B
0.00%, 2/1/08 BBB+ 2,475 2,054
-----------------------------------------------------------
GROUP TOTAL 13,191
-----------------------------------------------------------
TRANSPORTATION (0.8%)
Continental Airlines,
Series:
98-1 A
6.648%, 9/15/17 AA+ 995 934
99-1 A
6.545%, 8/2/20 AA+ 345 320
(+) Jet Equipment Trust,
Series 95-C
10.69%, 11/1/13 BBB 2,080 2,275
-----------------------------------------------------------
GROUP TOTAL 3,529
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
UTILITIES (0.5%)
(+) PSEG Energy Holdings,
Inc.
9.125%, 2/10/04 BBB- $ 875 $ 894
(+) Southern Energy, Inc.
7.90%, 7/15/09 BBB 1,150 1,091
-----------------------------------------------------------
GROUP TOTAL 1,985
-----------------------------------------------------------
YANKEE (4.8%)
Abbey National plc
7.95%, 10/26/29 AA- 1,200 1,219
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 1,445 1,193
(+) Bayer Hypo-Vereinsbank
8.741%, 6/30/31 A- 205 194
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- 1,675 1,722
Federal Republic of Brazil
11.00%, 8/17/40 B+ 1,035 825
Glencore Nickel Property
Ltd.
9.00%, 12/1/14 BB+ 1,605 1,340
Grupo Minero Mexicano
S.A. de CV,
Series A
8.25%, 4/1/08 BB 1,170 1,035
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 1,695 1,550
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 B 1,200 1,033
Multicanal S.A.
10.50%, 4/15/18 BB+ 1,100 793
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 1,009 969
(+) Paiton Energy Funding
BV
9.34%, 2/15/14 CC 1,900 399
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BB 1,765 1,475
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 1,100 1,046
Republic of Colombia
8.70%, 2/15/16 BB+ 1,580 1,074
11.75%, 2/25/20 BB+ 300 254
Republic of Philippines
10.625%, 3/16/25 BB+ 1,030 872
(+) Unicredito Italiano
Capital Trust II
9.20%, 10/29/49 A- 210 211
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
68
<PAGE> 71
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
United Mexican States
Par Bond
10.375%, 2/17/09 BB+ $ 865 $ 941
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A- 195 199
7.875%, 2/15/30 A- 2,150 2,183
-----------------------------------------------------------
GROUP TOTAL 20,527
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $498,856) 486,544
-----------------------------------------------------------
PREFERRED STOCK (1.8%)
-----------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
MORTGAGE-OTHER (1.8%)
(+)+ Home Ownership Funding
Corp.
13.331% (Cost $7,759) Aaa 10,400 7,799
-----------------------------------------------------------
STRUCTURED INVESTMENT (0.0%)-SEE NOTE A6
-----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C> <C>
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 $1,226) N/R $17,309 276
-----------------------------------------------------------
CASH EQUIVALENTS (22.7%)
-----------------------------------------------------------
DISCOUNT NOTES (17.2%)
Federal Home Loan
Mortgage Corporation
4.59%, 10/10/04 Agy 4,000 3,994
5.76%, 10/26/00 Agy 20,000 19,911
Federal National Mortgage
Association
5.70%, 10/25/00 Agy 20,000 19,914
5.76%, 10/26/00 Agy 20,000 19,911
6.19%, 11/22/00 Agy 10,000 9,908
-----------------------------------------------------------
GROUP TOTAL 73,638
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (5.5%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $23,570,
collateralized by various U.S.
Government Obligations, due 11/2/00-
3/29/01, valued at $23,793 $23,557 $ 23,557
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $97,195) 97,195
-----------------------------------------------------------
TOTAL INVESTMENTS (137.8%) (Cost $605,036) 591,814
-----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-37.8%)
Dividends Receivable 347
Interest Receivable 5,384
Receivable for Investments Sold 1,632
Receivable for Forward Commitments 16,912
Receivable for Fund Shares Sold 689
Investments Held as Collateral for Loaned
Securities 57,918
Unrealized Gain on Swap Agreements 939
Other Assets 53
Payable for Bank Overdraft (2)
Payable for Investments Purchased (5,438)
Payable for Forward Commitments (181,379)
Payable for Fund Shares Redeemed (484)
Payable for Investment Advisory Fees (400)
Payable for Administrative Fees (28)
Payable for Trustees' Deferred Compensation
Plan-Note F (46)
Payable for Variation Margin on Futures
Contracts (117)
Collateral on Securities Loaned, at Value (57,918)
Other Liabilities (549)
---------
(162,487)
-----------------------------------------------------------
NET ASSETS (100%) $ 429,327
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
69
<PAGE> 72
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
SPECIAL PURPOSE FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 37,964,275 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 429,327
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.31
-----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 450,982
Undistributed Net Investment Income (Loss) 7,675
Undistributed Realized Net Gain (Loss) (17,354)
Unrealized Appreciation (Depreciation) on:
Investment Securities (13,222)
Futures and Swaps 1,246
-----------------------------------------------------------
NET ASSETS $ 429,327
-----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
sec. Restricted Security-Total market value of restricted
securities owned at September 30, 2000 was $143,000 or
0.0% of net assets.
! 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.
++ Security is fair valued by the Adviser.
@ 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 securities-rate disclosed is
as of
September 30, 2000.
CMO Collateralized Mortgage Obligation
Inv Fl 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.
--------------------------------------------------------------------------------
70
<PAGE> 73
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
The High Yield Portfolio focuses on investments in below-investment grade
corporate bonds. The Portfolio is actively managed by Miller Anderson &
Sherrerd's high-yield fixed-income team, which is responsible for portfolio
construction and risk control. The high-yield team utilizes a disciplined, total
return-oriented investment process to actively manage diversified high-yield
portfolios. To identify the most efficient portfolio, the team engages in
fundamental analysis and valuation of high yield securities. Individual
securities are compared on the basis of their option- and credit-risk-adjusted
expected returns. Several high-yield investment beliefs guide the process. MAS
believes that the keys to successful high-yield management are: superior,
forward-looking credit analysis; a consistent, disciplined investment process; a
value focus; and careful control of overall portfolio risk. The team manages
overall interest-rate risk and economic sensitivity, as well as the integration
of investment themes drawn from the firm's financial-market research.
MAS believes that investments in high-yield securities can improve the
diversification of a balanced portfolio and raise return for a given level of
volatility. MAS's extensive research shows that investors have been rewarded
over time for holding lower-rated securities. High-yield securities also offer
investment opportunities overlooked in the traditional stock/bond mix. MAS's
goal is to achieve superior total returns with a greater degree of consistency
than the broad market averages and other investment managers.
The high yield market experienced a somewhat difficult period over the past
twelve months. Several rate hikes by the Federal Reserve, volatile stock and
bond markets, a continued high default rate, and operational challenges for
several telecommunications companies all contributed to disappointing absolute
returns in the high yield market. The spread on the CSFB Global High Yield Index
widened by 191 basis points over the past year to 823 basis points over
treasuries by the end of September 2000.
The MAS High Yield Portfolio's one year total return was -0.22% vs. 1.92% for
the CSFB Global High Yield Index. Performance trailed the benchmark primarily
due to both an overweighting in the telecommunications sector and security
selection within this sector, particularly in non-U.S. issuers. Also detracting
from results was an underweight position in the energy sector, which had a very
good year due to high oil prices. Finally, the Portfolio's positions in the
metal and auto sectors negatively impacted results; these sectors underperformed
during the last few months of the fiscal year due to sub-par earnings
announcements.
On the other hand, there were several factors that contributed positively to
performance. The Portfolio maintained a higher average credit quality than the
benchmark, which enhanced returns, as higher quality securities outperformed
lower rated bonds. In terms of capitalization, holdings in larger companies
added to results, as these issuers greatly outperformed smaller companies. The
Portfolio's overweighting in the gaming sector further enhanced results, as did
good security selection within health care and homebuilding. Finally,
Intermedia's bonds performed very well as that company agreed to be acquired by
WorldCom, which led to an investment grade rating.
At fiscal year-end, MAS found good value in the telecommunications sector,
largely due to the dramatic widening of the sector's yield spread over the past
six months. To a smaller extent, the Portfolio remained overweight in the health
care, gaming, and cable sectors. In addition, it maintained a small allocation
in emerging markets corporate debt.
At fiscal year-end, the high yield market was trading at spread and yield levels
not seen since the last U.S. recession in the early 1990's. If a healthy
economy, low-to-moderate inflation, and a less restrictive Federal Reserve cause
yield spreads to narrow, the Portfolio should be well positioned to benefit.
--------------------------------------------------------------------------------
71
<PAGE> 74
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS HIGH YIELD MAS HIGH YIELD MAS HIGH YIELD CS FIRST BOSTON SALOMON HIGH YIELD
INSTITUTIONAL INVESTMENT ADVISER GLOBAL HIGH YIELD INDEX
----------------- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1000 1000 1000
1367 1370 1320
1674 1650 1618
2011 1908 1857
2083 1974 1900
2366 2252 2200
2693 2493 2436
3229 2886 2799
3191 2871 2868
3472 2984 2969
3464 3440 3435 3041 3000
</TABLE>
<TABLE>
<CAPTION>
CS FIRST
BOSTON
GLOBAL
MAS HIGH YIELD HIGH SALOMON
------------------------------------------ YIELD HIGH YIELD
INSTITUTIONAL M INVESTMENT K ADVISER O INDEX INDEX
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year (0.22)% (0.40)% (0.42)% 1.92% 1.04%
Five Years 7.93% 7.77% 7.74% 6.20% 6.40%
Ten Years 13.23% 13.15% 13.14% 11.76% 11.61%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. High-yield fixed-income securities, otherwise known as
"junk bonds," represent a much greater risk of default and tend to be more
volatile than higher-rated bonds.
M Represents an investment in the Institutional Class.
K Represents an investment in the Investment Class which commenced operations
5/21/96. 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.
O 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 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.
* Total returns are compared to the CS First Boston Global High Yield Index, an
unmanaged market index. Previously, the Portfolio's returns had been compared
to the Salomon High Yield Index. The Adviser believes that the CS First Boston
Global High Yield Index has a more comprehensive coverage of geographic
regions and types of securities in which the Portfolio may invest.
As of 9/30/00, the Portfolio's holdings in Intermedia were 1.4%.
--------------------------------------------------------------------------------
72
<PAGE> 75
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (86.5%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (0.4%)
(+) ++Commercial Financial
Services, Inc.,
Series 97-5 A1
7.72%, 6/15/05 N/R $ 4,693 $ 939
(+) OHA Auto Grantor
Trust,
Series 97-A
11.00%, 9/15/03 BB 2,619 2,500
-----------------------------------------------------------
GROUP TOTAL 3,439
-----------------------------------------------------------
AUTOMOTIVE (1.1%)
Hayes Lemmerz
International, Inc.
9.125%, 7/15/07 B 1,060 909
8.25%, 12/15/08 B 8,830 7,152
Tenneco, Inc.,
Series B
11.625%, 10/15/09 B+ 2,395 1,533
-----------------------------------------------------------
GROUP TOTAL 9,594
-----------------------------------------------------------
CABLE (12.5%)
Adelphia Communications
Corp.
7.75%, 1/15/09 B+ 14,255 11,885
9.375%, 11/15/09 B+ 4,325 3,920
Series B:
8.375%, 2/1/08 B+ 9,645 8,343
9.875%, 3/1/07 B+ 1,870 1,758
British Sky
Broadcasting
8.20%, 7/15/09 BB+ 7,335 6,906
Cablevision S.A.
13.75%, 5/1/09 BB 3,710 3,302
(+) Callahan NRH
14.00%, 7/15/10 B- 12,670 12,607
Charter Communications
Holdings
10.25%, 1/15/10 B+ 7,695 7,531
CSC Holdings, Inc.
9.875%, 5/15/06 BB- 4,020 4,110
Echostar DBS Corp.
9.375%, 2/1/09 B 9,715 9,520
Multicanal S.A.
10.50%, 2/1/07 BB+ 5,245 4,173
13.125%, 4/15/09 BB+ 1,460 1,324
# NTL, Inc.,
Series B
0.00%, 4/1/08 B- GBP 9,845 8,735
(+) OnePoint
Communications Corp.
14.50%, 6/1/08 N/R $ 3,620 3,620
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
# RCN Corp.
0.00%, 10/15/07 B- $ 12,210 $ 6,471
Series B
0.00%, 2/15/08 B- 4,725 2,268
(+)# Telewest plc
0.00%, 4/15/09 B+ GBP 11,355 8,647
(+) United Pan-Europe
Communications N.V.
10.875%, 8/1/09 B $ 6,210 5,278
-----------------------------------------------------------
GROUP TOTAL 110,398
-----------------------------------------------------------
CHEMICALS (3.0%)
(+) Huntsman ICI
10.125%, 7/1/09 B+ 4,770 4,680
10.125%, 7/1/09 B+ EUR 4,285 3,785
ISP Holdings, Inc.,
Series B
9.00%, 10/15/03 BB- $ 10,570 9,302
Lyondell Chemical Co.
9.625%, 5/1/07 BB 8,510 8,308
-----------------------------------------------------------
GROUP TOTAL 26,075
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.0%)
+ Citicorp Mortgage
Securities, Inc.,
Series 90-7 A7
9.50%, 6/25/05 B3 360 164
-----------------------------------------------------------
COMMERCIAL MORTGAGES (0.5%)
(+)+## DLJ Mortgage
Acceptance Corp.
Series 97-CF2 S IO
CMO
0.357%, 10/15/17 Aaa 99,829 1,983
(+) Franchise Mortgage
Acceptance Corp.,
Loan Receivables
Trust,
Series 96-B C IO
7.929%, 11/1/18 N/R 3,937 1,102
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series 96-C1 X2 IO
1.899%, 3/15/21 Aaa 12,592 722
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.379%, 2/25/28 N/R 8,059 449
96-CFL X1A IO
1.398%, 2/25/28 N/R 4,307 19
96-CFL X2 IO
1.170%, 2/25/28 N/R 1,941 32
-----------------------------------------------------------
GROUP TOTAL 4,307
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
73
<PAGE> 76
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS-FIXED (15.9%)
(+) Bayan
Telecommunications
Holdings Corp.
13.50%, 7/15/06 CCC $ 9,890 $ 3,585
Esprit Telecom Group
plc
11.00%, 6/15/08 B- EUR 2,608 1,037
11.50%, 12/15/07 B- 1,669 664
(+) Exodus
Communications, Inc.
11.625%, 7/15/10 B $ 7,780 7,799
Focal Communications
11.875%, 1/15/10 B 7,645 5,810
Global Crossing
Holdings Ltd.
9.625%, 5/15/08 BB 10,650 10,650
Globix Corp.
12.50%, 2/1/10 B- 6,180 4,388
(+)# GT Group Telecom
0.00%, 2/1/10 CCC+ 11,745 5,050
Hermes Europe Railtel
10.375%, 1/15/09 B 1,945 972
11.50%, 8/15/07 B 4,830 2,415
# Hyperion
Telecommunications,
Inc.
0.00%, 4/15/03 B+ 7,455 6,206
# Intermedia
Communications, Inc.
Series B
0.00%, 7/15/07 B 11,505 9,549
8.50%, 1/15/08 B 2,385 2,284
# Level 3
Communications
0.00%, 3/15/10 B 9,535 5,101
(+) Maxcom
Telecomunicacions,
13.75%, 4/1/07 N/R 5,805 3,178
Netia Holdings S.A.
13.50%, 6/15/09 B 6,625 5,414
NEXTLINK Communications
# 0.00%, 4/15/08 B 7,145 4,180
# 0.00%, 6/1/09 B 3,090 1,730
# 0.00%, 12/1/09 B 4,725 2,457
10.75%, 11/15/08 B 3,590 3,321
Primus
Telecommunications
Group, Inc.
11.25%, 1/5/09 B- 8,210 4,187
12.75%, 10/15/09 B- 1,455 757
Series B
9.875%, 5/15/08 B- 5,405 2,675
(+) PSINet, Inc.,
Series B
10.00%, 2/15/05 B- 11,800 7,670
Rhythms
NetConnections, Inc.,
14.00%, 2/15/10 CCC+ 9,165 6,049
Series B
# 0.00%, 5/15/08 CCC+ 9,520 3,618
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
RSL Communications plc
# 0.00%, 3/1/08 B- $ 6,880 $ 1,032
# 0.00%, 3/15/08 B- EUR 8,556 983
9.125%, 3/1/08 B- $ 7,415 1,483
9.875%, 11/15/09 B- 4,225 972
12.00%, 11/1/08 B- 3,725 913
12.25%, 11/15/06 B- 970 233
(+) Tele1 Europe B.V.
11.875%, 12/1/09 B- EUR 1,390 1,167
13.00%, 5/15/09 B- 5,705 4,939
+# Viatel, Inc.
0.00%, 4/15/08 B- $ 11,030 2,757
# Wam!Net, Inc.,
Series B
0.00%, 3/1/05 CCC+ 7,065 3,179
(+)# Winstar
Communications, Inc.
0.00%, 4/15/10 B- 37,235 11,915
-----------------------------------------------------------
GROUP TOTAL 140,319
-----------------------------------------------------------
COMMUNICATIONS-MOBILE (8.6%)
Cellco Finance N.V.
12.75%, 8/1/05 B+ 4,135 4,094
Centennial Cellular
Corp.
10.75%, 12/15/08 B- 9,260 9,052
# CTI Holdings S.A.
0.00%, 4/15/08 B 10,520 5,365
# Dolphin
Telecommunications
0.00%, 6/1/08 CCC+ EUR 11,260 1,890
0.00%, 5/15/09 CCC+ $ 4,395 879
(+) Globalstar
LP/Capital
11.375%, 2/15/04 CCC 6,735 2,020
Grupo Iusacell
S.A. de C.V.
14.25%, 12/1/06 B+ 7,805 8,273
Motient Corp.
Series B
12.25%, 4/1/08 N/R 7,195 5,198
# Nextel
Communications, Inc.
0.00%, 9/15/07 B 10,155 8,327
0.00%, 2/15/08 B 17,630 13,487
# Occidente y Caribe
Cellular
0.00%, 3/15/04 B 11,640 8,439
PTC International
Finance
11.25%, 12/1/09 N/R 7,330 6,330
(+) Total Access
Communication
(Convertible) PCL
2.00%, 5/31/06 BBB- 1,890 2,362
-----------------------------------------------------------
GROUP TOTAL 75,716
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
74
<PAGE> 77
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
ENERGY (1.9%)
# Husky Oil Ltd.
8.90%, 8/15/28 BB+ $ 6,380 $ 6,205
(+) Nuevo Energy Co.,
9.375%, 10/1/10 B+ 5,680 5,644
Vintage Petroleum, Inc.
8.625%, 2/1/09 BB- 5,150 5,124
-----------------------------------------------------------
GROUP TOTAL 16,973
-----------------------------------------------------------
FINANCE (1.8%)
(+) Anthem Insurance
9.125%, 4/1/10 BBB+ 7,560 7,073
GS Escrow Corp.
7.125%, 8/1/05 BB+ 9,235 8,618
-----------------------------------------------------------
GROUP TOTAL 15,691
-----------------------------------------------------------
FOOD & BEVERAGE (1.1%)
Smithfield Foods, Inc.
7.625%, 2/15/08 BB+ 10,870 9,756
-----------------------------------------------------------
GAMING (6.2%)
Harrahs Operating Co., Inc.
7.875%, 12/15/05 BB+ 11,260 10,838
Horseshoe Gaming
Holdings
8.625%, 5/15/09 B+ 10,115 9,913
International Game
Technology
8.375%, 5/15/09 BB+ 10,720 10,479
Park Place
Entertainment Corp.
7.875%, 12/15/05 BB+ 3,975 3,831
8.50%, 11/15/06 BBB- 4,325 4,380
Station Casinos, Inc.
8.875%, 12/1/08 B+ 5,300 5,108
9.75%, 4/15/07 B+ 7,065 7,047
10.125%, 3/15/06 B+ 3,000 3,000
-----------------------------------------------------------
GROUP TOTAL 54,596
-----------------------------------------------------------
GENERAL INDUSTRY (1.4%)
(+) Actuant Corp.
13.00%, 5/1/09 B 5,120 5,210
(+) Flowserve Corp.
12.25%, 8/15/10 B 7,245 7,408
-----------------------------------------------------------
GROUP TOTAL 12,618
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE (5.6%)
Columbia/HCA
Healthcare Corp.
6.91%, 6/15/05 BB+ $ 6,095 $ 5,770
7.15%, 3/30/04 BB+ 4,770 4,606
7.58%, 9/15/25 BB+ 660 555
7.69%, 6/15/25 BB+ 9,535 8,130
Fresenius Medical
Capital Trust II
7.875%, 2/1/08 B+ 10,360 9,790
HCA-The Healthcare Co.
8.75%, 9/1/10 BB+ 2,825 2,866
Tenet Healthcare Corp.
8.625%, 1/15/07 BB- 6,180 6,118
Series B
8.125%, 12/1/08 BB- 12,540 12,007
-----------------------------------------------------------
GROUP TOTAL 49,842
-----------------------------------------------------------
HOTELS, LODGING & RESTAURANTS (1.6%)
Hilton Hotels Corp.
7.95%, 4/15/07 BBB 9,005 8,753
HMH Properties,
Series A
7.875%, 8/1/05 BB 5,580 5,259
Host Marriott Travel
Plaza
8.375%, 2/15/06 BB 315 302
-----------------------------------------------------------
GROUP TOTAL 14,314
-----------------------------------------------------------
MEDIA & ENTERTAINMENT (3.6%)
Chancellor Media Corp.,
Series B
8.125%, 12/15/07 B 10,595 10,701
Outdoor Systems, Inc.
8.875%, 6/15/07 BB+ 3,530 3,627
TV Azteca S.A.,
Series B
10.50%, 2/15/07 B+ 9,810 9,099
Satelites Mexicanos
S.A.
10.125%, 11/1/04 B- 7,145 4,501
(+) XM Satelite Radio
Holdings, Inc.
14.00%, 3/15/10 N/R 5,055 3,538
-----------------------------------------------------------
GROUP TOTAL 31,466
-----------------------------------------------------------
METALS (2.4%)
(+) EES Coke Battery
Co., Inc.
9.382%, 4/15/07 B+ 2,210 1,941
Glencore Nickel
Property Ltd.
9.00%, 12/1/14 BB+ 3,680 3,073
Murrin Murrin
Holdings Ltd.
9.375%, 8/31/07 BB- 9,645 8,680
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
75
<PAGE> 78
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
National Steel Corp.,
Series D
9.875%, 3/1/09 B+ $ 10,365 $ 6,115
(+) Republic
Technologies
International LLC
13.75%, 7/15/09 B 5,170 931
-----------------------------------------------------------
GROUP TOTAL 20,740
-----------------------------------------------------------
PACKAGING (2.9%)
Indah Kiat Finance
Mauritius
10.00%, 7/1/07 CCC+ 8,700 4,176
Norampac, Inc.
9.50%, 2/1/08 BB 7,830 7,889
Pacifica Papers, Inc.
10.00%, 3/15/09 B+ 8,615 8,679
Pindo Deli
Financial Mauritius
10.75%, 10/1/07 CCC+ 10,065 4,932
-----------------------------------------------------------
GROUP TOTAL 25,676
-----------------------------------------------------------
REAL ESTATE/BUILDING (2.9%)
Centex Corp.
9.75%, 6/15/05 BBB 6,180 6,384
D. R. Horton, Inc.
8.00%, 2/1/09 BB 5,660 5,193
(+) Lennar Corp.
9.95%, 5/1/10 BB+ 6,340 6,514
Nortek, Inc.,
Series B
8.875%, 8/1/08 B+ 8,595 7,907
-----------------------------------------------------------
GROUP TOTAL 25,998
-----------------------------------------------------------
RETAIL (4.0%)
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB+ 2,673 2,024
94-K1 A1
7.60%, 8/15/07 BB+ 2,559 2,178
94-K1 A2
8.375%, 8/15/15 BB+ 1,705 1,197
94-K2 A2
9.35%, 8/15/19 BB+ 4,335 3,237
HMV Media Group plc
10.875%, 5/15/08 B 3,575 3,357
Series B
10.25%, 5/15/08 B 3,510 2,317
Kmart Financing
Preferred
7.75%, 6/15/16 B+ 99 3,078
Kmart Funding Corp.
8.80%, 7/1/10 BB+ 4,961 4,372
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Musicland Group, Inc.
9.00%, 6/15/03 B- $ 3,990 $ 3,711
Series B
9.875%, 3/15/08 B- 11,610 9,752
-----------------------------------------------------------
GROUP TOTAL 35,223
-----------------------------------------------------------
SERVICES (3.0%)
# Norcal Waste Systems,
Inc.
0.00%, 11/15/05 BB- 6,555 6,899
USA Waste Services
7.125%, 10/1/07 BBB 6,535 6,134
7.125%, 12/15/17 BBB 1,545 1,328
Waste Management, Inc.
7.00%, 10/15/06 BBB 9,980 9,351
7.65%, 3/15/11 BBB 2,525 2,370
-----------------------------------------------------------
GROUP TOTAL 26,082
-----------------------------------------------------------
SOVEREIGN & EMERGING MARKETS (1.5%)
Republic of Brazil
11.00%, 8/17/40 B+ 9,850 7,856
Republic of Colombia
9.75%, 4/23/09 BB+ 4,415 3,581
Republic of Philippines
10.625%, 3/16/25 BB+ 2,410 2,040
-----------------------------------------------------------
GROUP TOTAL 13,477
-----------------------------------------------------------
SUPERMARKET/DRUG (1.2%)
(+) CA FM Lease Trust
8.50%, 7/15/17 BBB- 6,658 6,250
Stater Bros. Holdings,
Inc.
10.75%, 8/15/06 B+ 5,270 4,453
-----------------------------------------------------------
GROUP TOTAL 10,703
-----------------------------------------------------------
TECHNOLOGY (0.7%)
(+) Hyundai
Semiconductor America
8.25%, 5/15/04 B 442 402
8.625%, 5/15/07 B 6,250 5,383
-----------------------------------------------------------
GROUP TOTAL 5,785
-----------------------------------------------------------
TRANSPORTATION (1.2%)
ALPS,
Series 96-1 DX
12.75%, 6/15/06 BB- 4,991 4,742
(+) Jet Equipment
Trust,
Series:
94-C1
11.79%, 6/15/13 BBB 3,050 3,425
95-D
11.44%, 11/1/14 BBB 2,050 2,262
-----------------------------------------------------------
GROUP TOTAL 10,429
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
76
<PAGE> 79
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
UTILITIES (1.5%)
AES Corp.
8.50%, 11/1/07 B+ $ 9,030 $ 8,624
(+) Paiton Energy
Funding
9.34%, 2/15/14 CC 6,665 1,400
(+) Ras Laffan
Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 2,905 2,761
-----------------------------------------------------------
GROUP TOTAL 12,785
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $910,147) 762,166
-----------------------------------------------------------
COMMON STOCK (0.1%)
-----------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
COMMUNICATIONS (0.1%)
Tele1 Europe ADR (Cost
$0) N/R 107,400 967
-----------------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.1%)
-----------------------------------------------------------
MEDIA & ENTERTAINMENT (0.1%)
(+)* Paxson
Communications Corp.
PIK 9.75%
(Cost $1,207) N/R 12,443 1,207
-----------------------------------------------------------
PREFERRED STOCKS (4.1%)
-----------------------------------------------------------
COMMUNICATIONS (2.7%)
* Broadwing
Communications, Inc.
Series B CCC+ 7,057 7,198
* Dobson Communications
Corp. 13.00% N/R 70,366 6,720
Nextel Communications,
Inc., 13.00% CCC+ 5,001 5,376
* NEXTLINK
Communications 13.50% CCC- 55 4,692
-----------------------------------------------------------
GROUP TOTAL 23,986
-----------------------------------------------------------
MEDIA & ENTERTAINMENT (0.7%)
* Paxson
Communications Corp.
13.25% CCC+ 58,211 5,676
-----------------------------------------------------------
UTILITIES (0.7%)
*(+) TNP Enterprises,
Inc.
14.50%, 4/1/11 BB 625 6,312
-----------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $23,979) 35,974
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD NO. OF VALUE
& POOR'S) WARRANTS (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
WARRANTS (0.3%)
-----------------------------------------------------------
COMMUNICATIONS (0.2%)
* GT Group Telecom,
Inc., expiring 2/1/10 N/R 118 $ 767
*(+) Globalstar
Telecommunications
Ltd.,
expiring 2/15/04 N/R 4,650 58
* MaxcomTelecomunicacione,
expiring 4/1/07 N/R 59 15
*(+) Motient Corp.,
expiring 4/1/08 N/R 64 161
* Occidente y Caribe
Cellular,
expiring 3/15/04 N/R 58,370 219
*(+) OnePoint
Communications Corp.,
expiring 6/1/08 N/R 37,000 296
*(+) Wam!Net, Inc.,
expiring 3/1/05 N/R 168,750 196
-----------------------------------------------------------
GROUP TOTAL 1,712
-----------------------------------------------------------
MEDIA & ENTERTAINMENT (0.1%)
*(+) Paxson
Communications Corp.,
expiring 6/30/03 N/R 32,160 14
* XM Satelite Radio
Holdings, Inc.
14.00%, 3/15/10 N/R 5,125 769
-----------------------------------------------------------
GROUP TOTAL 783
-----------------------------------------------------------
METALS (0.0%)
*(+)@ Republic
Technologies
International LLC,
expiring 7/15/09 N/R 52,550 --
-----------------------------------------------------------
TOTAL WARRANTS (Cost $2,693) 2,495
-----------------------------------------------------------
CASH EQUIVALENTS (4.5%)
-----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
--------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (4.4%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00, to
be repurchased at $39,110,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at
$39,480 $ 39,089 39,089
-----------------------------------------------------------
TREASURY BILL (0.1%)
++ U.S. Treasury Bill
5.83% 10/19/00 500 499
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $39,588) 39,588
-----------------------------------------------------------
TOTAL INVESTMENTS (95.6%) (Cost $977,614) 842,397
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
77
<PAGE> 80
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
HIGH YIELD
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (4.4%)
Cash $ 545
Foreign Currency Held as Collateral on Futures
Contracts (Cost $572) 578
Interest Receivable 19,467
Receivable for Investments Sold 2,844
Receivable for Fund Shares Sold 22,390
Investments Held as Collateral for Loaned
Securities 58,981
Unrealized Gain on Forward Foreign Currency
Contracts 2,324
Other Assets 72
Payable for Investments Purchased (7,463)
Payable for Fund Shares Redeemed (274)
Payable for Investment Advisory Fees (1,102)
Payable for Administrative Fees (64)
Payable for Trustees' Deferred Compensation
Plan-Note F (59)
Payable for Shareholder Servicing Fees-
Investment Class (1)
Payable for Distribution Fees-Adviser Class (5)
Payable for Variation Margin on Futures
Contracts (139)
Collateral on Securities Loaned, at Value (58,981)
Other Liabilities (71)
----------
39,042
-----------------------------------------------------------
NET ASSETS (100%) $ 881,439
-----------------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 107,902,769 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 848,507
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 7.86
-----------------------------------------------------------
INVESTMENT CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 1,289,516 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 10,151
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 7.87
-----------------------------------------------------------
</TABLE>
<TABLE>
VALUE
(000)!
-----------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
ADVISER CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 2,901,972 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 22,781
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 7.85
-----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $1,018,008
Undistributed Net Investment Income (Loss) 35,826
Undistributed Realized Net Gain (Loss) (39,538)
Unrealized Appreciation (Depreciation) on:
Investment Securities (135,217)
Foreign Currency Transactions 2,518
Futures (158)
-----------------------------------------------------------
NET ASSETS $ 881,439
-----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! 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 futures contracts
+ Moody's Investors Service, Inc. rating. Security is not
Rated by Standard & Poor's Corporation.
++ Security is fair valued by the Adviser.
# 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.
ADR American Depository Receipt
CMO Collateralized Mortgage Obligation
EUR Euro
GBP British Pound
IO Interest Only
N/R Not rated by Moody's Investors Service, Inc. or Standard &
Poor's Corporation.
PCL Public Company Limited
PIK Payment-In-Kind Security
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
78
<PAGE> 81
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
CASH RESERVES PORTFOLIO
The Cash Reserves Portfolio is a money-market fund whose primary objectives are
liquidity, preservation of capital, and high current income. The Portfolio is
managed in a conservative style, generally without the use of derivatives or
funding agreements. Investments are diversified across several fixed-income
sectors, and may include high quality commercial paper, negotiable certificates
of deposit, the bank notes of carefully selected, large depository institutions,
Federal agency obligations, and fully collateralized repurchase agreements.
The Portfolio allocates assets and selects fixed-income maturities based on an
analysis of MAS's interest rate forecast and the shape of the money market yield
curve. This is an ongoing, in-depth analysis of economic and financial
developments, both national and international in scope. The Portfolio's average
maturity is gradually shortened or lengthened, depending upon several factors.
These include portfolio valuations, recent cash flow experiences and trends, and
the current and forecasted shape of the money market yield curve.
Formal credit reviews and frequent monitoring of all investments are an integral
part of the Portfolio's management. While ratings by Nationally Recognized
Statistical Rating Organizations serve as the starting point for any potential
investment, the Portfolio looks well beyond these ratings as part of its due
diligence process. The team of portfolio managers and credit analysts
continuously reviews and reassesses the relative and absolute desirability of an
issuer's obligations.
On May 16, 2000 the Federal Open Market Committee (FOMC) raised its target rate
for federal funds by 50 basis points to 6.50%. The move marked the sixth time
the Federal Reserve raised rates since June of 1999, for a total of 175 basis
points. During this period, the Federal Reserve was concerned about the risk of
rapid expansion reigniting inflation.
Despite the rising rates, the U.S. economy continued to display strength, with
GDP up 4.8% and 5.3% in the second and third fiscal quarters, respectively. This
followed a very strong second half of calendar 1999. However, productivity gains
were extremely strong. Overall output per hour rose 5.2% for the year ended June
30, 2000, the best pace in 17 years. The rise in manufacturing productivity over
the same time period was 7%, the fastest advance since 1971. As a result,
despite continued low unemployment and surging oil prices, inflation remained
restrained. Inflation, as measured by the core Producer Price Index (excluding
tobacco) was up just 1.0% for the year ended August 31, 2000, while core
consumer prices were up just 2.5%.
Over the past year, the Portfolio continued to invest in high quality commercial
paper, bank notes, time deposits, and negotiable certificates of deposit of
financially strong commercial banks and Federal agency obligations. In terms of
its maturity structure, for most of the year the Portfolio employed a barbell
strategy, between securities that were due to mature near upcoming FOMC meeting
dates and longer-term securities with yields that better reflected anticipated
changes in Federal Reserve policy. This strategy allowed the Portfolio to
gradually shorten its weighted average maturity slightly to take advantage of
generally rising market rates, while maintaining a yield that reflected
prevailing market rates.
As the Federal Reserve's rate actions began to slow the economy, the Portfolio
began purchasing somewhat longer maturities to lock in more current market
rates. As of September 30, 2000, the Portfolio's weighted average maturity was
40 days, and 91% of holdings were due to mature in less than three months.
Therefore, the Portfolio was well positioned for stability of principal with a
very high degree of liquidity.
--------------------------------------------------------------------------------
79
<PAGE> 82
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS FUNDS CASH RESERVES - MAS FUNDS CASH RESERVES -
INSTITUTIONAL INVESTMENT LIPPER MONEY MARKET SALOMON 1-MONTH TREASURY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
90 1000 1000 1000
91 1066 1064 1057
92 1109 1105 1095
93 1140 1135 1126
94 1178 1170 1164
95 1244 1231 1224
96 1311 1291 1285
97 1380 1354 1348
98 1456 1421 1414
99 1528 1484 1474
00 1618 1615 1564 1552
</TABLE>
<TABLE>
<CAPTION>
LIPPER SALOMON
MAS CASH RESERVES MONEY 1-MONTH
------------------------------ MARKET TREASURY
INSTITUTIONAL M INVESTMENT K AVERAGE BILL INDEX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 5.91% 5.75% 5.41% 5.26%
Five Years 5.39% 5.36% 4.90% 4.86%
Ten Years 4.93% 4.91% 4.57% 4.49%
7-Day Effective Yield 6.47% 6.47%
SEC 7-Day Current
Yield 6.29% 6.14%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The SEC 7-day yield quotation more closely reflects the current earnings of the
Portfolio than the total return quotation. You may obtain the Portfolio's
current SEC 7-day yield by calling 1-800-354-8185.
M Represents an investment in the Institutional Class.
K Represents an investment in the Investment Class which commenced operations
8/16/99. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment 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.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
* Total returns are compared to the Lipper Money Market Average of money market
funds and the Salomon 1-Month Treasury Bill Index. While the Portfolio may
invest in the government securities represented by the Salomon 1-Month
Treasury Bill Index, it also invests in non-government issues and securities
with maturities greater than one month.
--------------------------------------------------------------------------------
80
<PAGE> 83
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
CASH RESERVES
PORTFOLIO
STATEMENT OF NET ASSETS
COMMERCIAL PAPER (66.0%)
<TABLE>
<CAPTION>
---------------------------------------------------------
FACE
AMOUNT VALUE
SEPTEMBER 30, 2000 (000) (000)!
---------------------------------------------------------
<S> <C> <C>
BANKING (4.6%)
JP Morgan & Co., Inc.
6.48%, 11/14/00 $2,000 $ 1,985
State Street Corp.
6.46%, 12/19/00 2,000 1,972
Wells Fargo & Co.
6.49%, 10/25/00 1,500 1,494
---------------------------------------------------------
GROUP TOTAL 5,451
---------------------------------------------------------
COMPUTER HARDWARE (3.4%)
Hewlett Packard Co.
6.52%, 10/27/00 2,000 1,991
IBM Credit Corp.
6.51%, 10/3/00 2,000 2,000
---------------------------------------------------------
GROUP TOTAL 3,991
---------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (6.2%)
Associates Corp. of N.A.
6.48%, 12/5/00 2,000 1,977
6.52%, 1/12/01 2,000 1,963
General Electric Capital Corp.
6.53%, 1/25/01 2,000 1,959
6.49%, 2/13/01 1,500 1,464
---------------------------------------------------------
GROUP TOTAL 7,363
---------------------------------------------------------
DIVERSIFIED MANUFACTURING (3.2%)
Honeywell International
6.52%, 11/9/00 2,000 1,983
6.48%, 11/21/00 1,750 1,734
---------------------------------------------------------
GROUP TOTAL 3,717
---------------------------------------------------------
FINANCE-AUTOMOTIVE (9.4%)
American Honda Finance Corp.
6.49%, 10/17/00 2,000 1,994
6.50%, 11/21/00 1,400 1,387
DaimlerChrysler N.A. Holdings Corp.
6.53%, 10/20/00 2,000 1,993
6.48%, 12/1/00 1,750 1,731
Ford Motor Co.
6.48%, 11/7/00 2,000 1,987
General Motors Acceptance Corp.
6.52%, 10/11/00 2,000 1,996
---------------------------------------------------------
GROUP TOTAL 11,088
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
FINANCE-CONSUMER (7.2%)
Household Finance Corp.
6.65%, 10/2/00 $4,500 $ 4,499
New Center Asset Trust Corp.
6.53%, 10/18/00 2,000 1,994
6.50%, 1/19/01 2,000 1,960
---------------------------------------------------------
GROUP TOTAL 8,453
---------------------------------------------------------
FINANCE-CORPORATE (5.1%)
Cisco LP Corp.
6.48%, 11/6/00 2,000 1,987
6.47%, 12/7/00 2,000 1,976
CIT Group Holdings, Inc.
6.48%, 12/15/00 2,000 1,973
---------------------------------------------------------
GROUP TOTAL 5,936
---------------------------------------------------------
FOOD & BEVERAGES (2.5%)
Nestle Capital Corp.
6.53%, 10/31/00 3,000 2,984
---------------------------------------------------------
INSURANCE (1.7%)
American General
6.52%, 10/10/00 2,000 1,997
---------------------------------------------------------
INTERNATIONAL BANKS (12.1%)
Abbey National N.A. Corp.
6.54%, 10/23/00 2,000 1,992
6.49%, 11/3/00 1,500 1,491
ANZ (DE), Inc.
6.48%, 11/8/00 2,000 1,986
6.49%, 11/28/00 2,000 1,979
Deutsche Bank
6.48%, 12/20/00 2,000 1,971
6.56%, 10/4/00 1,750 1,749
Halifax plc
6.54%, 10/16/00 2,000 1,995
National Australia Funding
6.49%, 9/27/00
UBS Finance, Inc.
5.99%, 10/2/00 1,000 1,000
---------------------------------------------------------
GROUP TOTAL 14,163
---------------------------------------------------------
INVESTMENT BANKERS/BROKERS/SERVICES (1.7%)
Goldman Sachs Group LP
6.49%, 10/19/00 2,000 1,994
---------------------------------------------------------
MAJOR PHARMACEUTICALS (1.7%)
Schering Corp.
6.48%, 11/1/00 2,000 1,989
---------------------------------------------------------
MAJOR U.S. TELECOMMUNICATIONS (5.9%)
AT&T Corp.
6.5%, 10/12/00 2,000 1,995
6.48%, 12/13/00 1,000 987
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
81
<PAGE> 84
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
CASH RESERVES
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(CONT'D) (000) (000)!
---------------------------------------------------------
<S> <C> <C>
Bell Atlantic Financial Services
6.52%, 10/6/00 $2,000 $ 1,998
Verizon Global
6.48%, 11/2/00 2,000 1,988
---------------------------------------------------------
GROUP TOTAL 6,968
---------------------------------------------------------
UTILITIES (1.3%)
National Rural Utilities Cooperative
Finance Corp.
6.48%, 11/16/00 1,500 1,488
---------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost $77,582 ) 77,582
---------------------------------------------------------
CERTIFICATES OF DEPOSIT (7.3%)
---------------------------------------------------------
INTERNATIONAL BANKS (1.7%)
Dresdner Bank
6.53%, 11/27/00 2,000 2,000
---------------------------------------------------------
MAJOR BANKS (5.6%)
Bank of America
6.65%, 10/6/00 1,500 1,500
Bank of America Corp.
6.71%, 12/22/00 2,000 2,000
Sun Trust Bank, Inc.
6.64%, 10/12/00 3,000 3,000
---------------------------------------------------------
GROUP TOTAL 6,500
---------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT (Cost $8,500) 8,500
---------------------------------------------------------
U.S. GOVERNMENT & AGENCY SECURITIES (0.8%)
Federal Home Loan Mortgage
Corporation
6.22%, 3/1/01 (Cost $974) 1,000 974
---------------------------------------------------------
DISCOUNT NOTES (10.5%)
Federal Home Loan Mortgage
Corporation
6.26%, 3/29/01 1,000 969
6.39%, 11/30/00 4,337 4,290
Federal National Mortgage Association
6.42%, 10/26/00 5,000 4,977
5.63%, 11/20/00 1,000 991
6.35%, 5/10/01 1,146 1,101
---------------------------------------------------------
TOTAL DISCOUNT NOTES (Cost $12,328) 12,328
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
---------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (15.7%)
Chase Securities, Inc. 6.40%,
dated 9/29/00, due 10/2/00, to be
repurchased at $18,452,
collateralized by U.S. Treasury
Notes, due 11/15/08, valued at
$18,792
(Cost $18,442) $18,442 $ 18,442
---------------------------------------------------------
TOTAL INVESTMENTS (100.3%) (Cost $117,826) 117,826
---------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
Interest Receivable 107
Receivable for Fund Shares Sold 560
Other Assets 13
Payable for Fund Shares Redeemed (926)
Dividend Payable (3)
Payable for Investment Advisory Fees (48)
Payable for Administrative Fees (7)
Payable for Trustees' Deferred Compensation
Plan-Note F (11)
Other Liabilities (21)
--------
(336)
---------------------------------------------------------
NET ASSETS (100%) $117,490
---------------------------------------------------------
INSTITUTIONAL CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 115,500,553 outstanding shares
of beneficial interest (unlimited
authorization, no par value) $115,513
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 1.00
---------------------------------------------------------
ADVISER CLASS
---------------------------------------------------------
NET ASSETS
Applicable to 1,976,974 outstanding shares of
beneficial interest (unlimited
authorization, no par value) $ 1,977
---------------------------------------------------------
NET ASSET VALUE PER SHARE $ 1.00
---------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $117,477
Undistributed Net Investment Income (Loss) 13
---------------------------------------------------------
NET ASSETS $117,490
---------------------------------------------------------
</TABLE>
! See Note A1 to Financial Statements.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
82
<PAGE> 85
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
LIMITED DURATION PORTFOLIO
The Limited Duration Portfolio invests in dollar-denominated bonds and maintains
a short duration. The Portfolio seeks to generate attractive fixed-income
returns without the volatility that accompanies a longer duration Portfolio. It
is ideally suited for assets for which liquidity and principal protection over a
one-year horizon are primary goals.
The benchmark for the Portfolio is the Salomon 1-3 Year Treasury and Government
Sponsored Index. This Index has relatively stable returns due to its low
sensitivity to changes in interest rates (as approximated by duration). The
duration of the Index is generally less than two years; therefore, for a 1%
increase in interest rates, the Index is expected to lose less than 2% of its
value. Typically, this potential for loss is more than offset by the yield, so
total returns over any twelve-month period are rarely negative. The goal of the
Portfolio is to achieve returns in excess of the Index without significantly
higher volatility.
Value and risk control drive the Portfolio's investment decisions. The Portfolio
is diversified across market sectors and issues, and is constrained within a
range of one to three years of duration, to an average credit quality of AA or
better (with all securities being of investment grade), and to
dollar-denominated bonds only.
The Portfolio management team relies on the investment research and expertise of
individual sector teams, which focus on the four key elements of Portfolio
structure and composition: interest-rate strategy, yield-curve positioning,
credit risk, and prepayment sensitivity.
Interest-rate strategy determines the Portfolio's overall sensitivity to changes
in interest rates. The duration decision is based on the value of extra duration
as measured by the steepness of the yield curve and the level of real rates; it
is not based on an internal forecast of the short-term direction of interest
rates or Federal Reserve policy.
MAS continually studies yield-curve positioning to determine the points along
the curve (maturities) where securities offer the most value. MAS targets the
Portfolio's investments to the area of the curve that provides the most value,
taking into account expected future changes in the shape of the yield curve.
Bearing credit risk often offers financial rewards beyond expected losses due to
defaults. Therefore, the Portfolio will typically invest a portion of its assets
in corporate bonds. In order to limit exposure to losses from defaults, the
Portfolio's exposure to an individual company's debt is generally limited to 1%.
Finally, the Portfolio's prepayment sensitivity stems from its positions in
mortgage-backed securities. The mortgage market represents one of the deepest
and most liquid sectors of the fixed-income universe, and MAS's research shows
that investors are often well compensated for assuming call risk. The aim is to
increase the
Portfolio's prepayment sensitivity when the market offers adequate compensation
for doing so, and to ensure that the call risk inherent in those positions is
adequately hedged.
For the 2000 fiscal year, the Limited Duration Portfolio returned 6.37%,
compared with 5.93% for the benchmark Salomon 1-3 Year Treasury/Government
Sponsored Index. Amid volatile market conditions, the Portfolio benefited from
successful results in all of the key decisions, including interest rate risk,
credit risk, and prepayment risk management. Interest rates rose dramatically in
the first half of the calendar year in response to a series of rate hikes by the
Federal Reserve. Treasury yields peaked in mid May after the Federal Reserve
implemented the last of its rate hikes with an aggressive 50 basis point
increase in the targeted Federal Funds Rate. The Portfolio's interest rate
sensitivity began the period longer than the benchmark by 0.5 years. This
detracted from performance in the first half of the year, but as yields peaked
in May, MAS added to the Portfolio's interest rate exposure. The subsequent
market rally, which saw the yield on the two-year Treasury fall by roughly 80
basis points, added significantly to the Portfolio's returns more than
offsetting the earlier underperformance. The Portfolio reduced its interest rate
sensitivity and at fiscal year end was neutral to the benchmark.
The past year also saw extreme volatility in yield spreads in the non-Treasury
sectors of the market. Spreads generally narrowed in the fourth quarter of 1999
and widened dramatically in the first quarter of 2000, before narrowing again in
the third quarter. Throughout this volatile period, yield spreads were at very
wide levels relative to historical norms and relative to the underlying credit
and prepayment risks in individual securities. These attractive valuations led
the Portfolio to be significantly overweighted in the corporate, asset-backed,
and mortgage sectors of the market. The attractive yields generated from these
holdings allowed the fund to have a significant income advantage on its
benchmark throughout the period. This income advantage, as well as the modest
net narrowing of yield spreads, allowed these sector weightings to add
significantly to the relative and absolute performance of the Portfolio.
Throughout the fiscal year, the Portfolio reduced its mortgage holdings by
roughly 20% in favor of agency and high grade corporate holdings. This
rebalancing was reflective of MAS's view that earlier underperformance of agency
and corporate securities relative to mortgages created a better value
opportunity in these sectors. This sector allocation strategy also added to the
relative performance of the Portfolio. With the interest rate sensitivity of the
Portfolio neutral to its benchmark at the end of the fiscal year, the central
strategy of the Portfolio was focused on capturing the attractive yield offered
by the non-Treasury sectors. MAS expected this income advantage to contribute a
steady source of added value to the Portfolio.
--------------------------------------------------------------------------------
83
<PAGE> 86
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS LIMITED DURATION SALOMON 1-3 YEAR
-----------------------------------------------------------
<S> <C> <C>
* 1000 1000
92 1069 1059
93 1126 1112
94 1131 1124
95 1220 1216
96 1287 1285
97 1377 1373
98 1461 1481
99 1514 1530
00 1611 1621
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS LIMITED SALOMON
DURATION 1-3 YEAR INDEX
----------------------------------------------------------------
<S> <C> <C>
One Year 6.37% 5.93%
Five Years 5.71% 5.92%
Since Inception 5.77% 5.85%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Limited Duration Portfolio commenced operations on 3/31/92. Total returns
are compared to the Salomon 1-3 Year Treasury/Government Sponsored Index, an
unmanaged market index.
--------------------------------------------------------------------------------
84
<PAGE> 87
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (102.1%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (31.1%)
Federal Home Loan
Mortgage Corporation,
Conventional Pools:
10.00%, 4/1/10-10/1/20 Agy $ 1,628 $ 1,740
10.50%, 12/1/14 Agy 180 195
11.00%, 5/1/20 Agy 68 74
11.00%, 8/1/15 Agy 26 29
11.50%, 4/1/11-1/1/18 Agy 528 589
Gold Pools:
10.00%, 10/1/21 Agy 117 126
10.50%, 1/1/19-10/1/20 Agy 392 428
11.50%, 8/1/10 Agy 65 72
12.00%, 6/1/15-9/1/15 Agy 184 204
October TBA
7.00%, 10/1/30 Agy 11,350 11,115
Federal National Mortgage
Association,
Conventional Pools:
9.50%, 11/1/20 Agy 292 310
10.00%, 12/1/15-9/1/16 Agy 356 382
10.50%, 4/1/15-12/1/16 Agy 241 263
11.00%, 7/1/20 Agy 182 201
11.50%, 11/1/19 Agy 248 278
12.00%, 5/1/14-8/1/20 Agy 98 111
12.50%, 2/1/15 Agy 40 46
October TBA
7.00%, 10/15/29 Agy 4,000 3,921
8.50%, 10/1/30 Agy 7,000 7,178
Government National
Mortgage Association:
Adjustable Rate
Mortgages:
6.125%, 12/20/25 Tsy 1,686 1,694
6.375%, 3/20/25 Tsy 936 942
6.50%, 1/20/28 Tsy 262 263
6.875%,
1/20/25-6/20/25 Tsy 2,872 2,889
7.125%,
6/20/25-12/20/27 Tsy 5,706 5,739
Various Pools:
6.00%, 2/20/27 Tsy 278 280
9.00%, 7/15/16-1/15/17 Tsy 1,270 1,339
9.50%,
12/15/17-12/15/21 Tsy 1,911 2,034
10.00%,
11/15/09-2/15/28 Tsy 3,451 3,717
10.50%,
11/15/18-5/15/26 Tsy 239 261
11.00%,
1/15/10-1/15/21 Tsy 1,560 1,725
11.50%,
2/15/13-11/15/19 Tsy 903 1,007
October TBA
7.00%, 10/15/29 Tsy 6,200 6,105
-----------------------------------------------------------
GROUP TOTAL 55,257
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (24.4%)
AFG Receivables Trust,
Series 97-A A
6.35%, 10/15/02 AAA $ 100 $ 100
Associates Automobile
Receivables Trust,
Series 00-1 A3
7.30%, 1/15/04 AAA 1,415 1,425
Capital Auto Receivables
Asset Trust,
Series 99-1 A2
5.58%, 6/15/02 AAA 1,639 1,631
CIT Marine Trust, Series
98-A A2
5.80%, 4/15/10 AAA 1,850 1,817
CIT RV Trust,
Series 99-A A1
5.33%, 12/15/05 AAA 462 461
Citibank Credit Card
Issuance Trust
Series:
00-A1
6.90%, 10/17/05 AAA 1,465 1,470
00-C1
7.45%, 9/15/05 BBB 505 505
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 67 67
97-2 A
6.65%, 10/15/02 AAA 108 108
98-2 A
6.09%, 11/15/03 AAA 425 422
Daimler Benz Vehicle
Trust,
Series:
98-A A3
5.16%, 12/20/07 AAA 1,909 1,896
00-C A3
6.82%, 9/6/04 AAA 540 541
First Merchants Auto
Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 149 149
(+)97-2 A1
6.85%, 11/15/02 AAA 26 25
First Security Auto
Grantor Trust,
Series:
99-1 A4
5.74%, 6/15/04 AAA 2,250 2,211
00-2 A3
7.30%, 7/15/04 AAA 1,400 1,412
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
85
<PAGE> 88
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Ford Credit Auto Owner
Trust,
Series:
99-B A4
5.80%, 6/15/02 AAA $ 2,025 $ 2,014
99-D A4
6.40%, 10/15/02 AAA 1,900 1,894
General Electric Home
Equity Loan
Asset-Backed
Certificates, Series
91-1 B
8.70%, 9/15/11 AAA 515 515
(+)++Global Rated
Eligible Asset Trust,
Series 98-A A1
7.45%, 3/15/06 N/R 650 156
Harley-Davidson Eaglemark
Motorcycle Trust,
Series:
98-2 A2
5.87%, 4/15/04 AAA 1,400 1,387
99-1 A2
5.52%, 2/15/05 AAA 1,075 1,058
(+)Health Care
Receivables
Securitization Program
Series 97-1 A
6.815%, 7/1/01 N/R 903 903
(+)Honda Auto Receivables
Grantor Trust, Series
98-A A
5.50%, 11/15/04 AAA 1,123 1,110
Honda Auto Receivables
Owner Trust, Series
99-1 A4
5.35%, 10/15/04 AAA 1,100 1,076
Illinois Power Special
Purpose Trust, Series
98-1 A2
5.26%, 6/25/03 AAA 1,117 1,109
MBNA Master Credit Card
Trust,
Series:
99-I A
6.40%, 1/18/05 AAA 850 846
99-M A
6.60%, 4/16/07 AAA 1,225 1,220
Money Store (The)
Residential Trust,
Series 97-1 A2
6.48%, 6/15/10 AAA 150 150
(+)National Car Rental
Financing Ltd., Series
96-1 A4
7.35%, 10/20/03 N/R 450 450
Newcourt Equipment Trust
Securities, Series 98-2
A3
5.45%, 10/15/02 AAA 1,266 1,258
Nissan Auto Receivables
Owner Trust, Series
00-A A3
7.01%, 9/15/03 AAA 875 878
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Peco Energy Transition
Trust, Series 99-A A2
5.63%, 3/1/05 AAA $ 1,600 $ 1,569
Premier Auto Trust,
Series:
99-1 A2
5.69%, 11/8/02 AAA 2,000 1,986
99-2 A4
5.59%, 2/9/04 AAA 2,100 2,059
99-3 A4
6.43%, 3/8/04 AAA 2,100 2,089
(+)Rental Car Finance
Corp., Series 97-1 A2
6.45%, 8/25/04 AA 625 617
(+)##Residential Funding
Mortgage Securities II,
Series 00-HI4 AI2
7.39%, 4/25/11 AAA 1,100 1,103
(+)Team Fleet Financing
Corp.,
Series:
96-1 A
6.65%, 12/15/02 A- 1,350 1,343
97-1 A
7.35%, 5/15/03 A- 1,475 1,480
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 189 188
97-B A2
6.70%, 6/8/03 AAA 490 489
+Vanderbilt Mortgage
Finance, Series 97-B
1A2
6.775%, 12/7/28 Aaa 125 125
-----------------------------------------------------------
GROUP TOTAL 43,312
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL
SERIES (1.3%)
Federal Home Loan
Mortgage Corporation,
Series 1114 E PAC (11)
8.00%, 7/15/06 Agy 1,358 1,382
Federal National Mortgage
Association,
Series:
92-44 H REMIC
7.25%, 3/25/06 Agy 651 648
## 98-22 FA REMIC
7.023%, 4/18/28 Agy 293 293
-----------------------------------------------------------
GROUP TOTAL 2,323
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
86
<PAGE> 89
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL MORTGAGES (0.5%)
Asset Securitization
Corp.,
Series 97-D5 A1A
6.50%, 1/14/04 AAA $ 589 $ 583
+ Midland Realty
Acceptance Corp.,
Series 96-C2 A1
7.02%, 1/25/27 Aaa 332 331
-----------------------------------------------------------
GROUP TOTAL 914
-----------------------------------------------------------
ENERGY (0.7%)
Conoco, Inc.
5.90%, 4/15/04 A- 1,285 1,245
-----------------------------------------------------------
FEDERAL AGENCY (5.0%)
Federal National Mortgage
Association
7.125%, 6/15/10 Agy 8,200 8,401
Tennessee Valley
Authority
6.00%, 9/24/02 Agy 575 570
-----------------------------------------------------------
GROUP TOTAL 8,971
-----------------------------------------------------------
FINANCE (19.3%)
American General Finance
Corp.
5.75%, 11/1/03 A+ 1,155 1,115
Bank of New York Co.
8.50%, 12/15/04 A 855 898
Bank One Corp.
5.625%, 2/17/04 A 930 889
BankAmerica Capital Corp.
6.875%, 6/1/03 A 1,200 1,199
Chase Manhattan Corp.,
Series C
5.69%, 2/10/04 A+ 1,165 1,120
Donaldson, Lufkin &
Jenrette, Inc.
8.00%, 3/1/05 A- 840 863
EOP Operating LP
6.50%, 6/15/04 BBB 1,020 986
(+)Farmers Insurance
Exchange
8.50%, 8/1/04 A+ 680 701
First Fidelity Bancorp
6.80%, 6/15/03 A- 1,200 1,190
(+)First Hawaiian Bank,
Series A
6.93%, 12/1/03 A- 1,075 1,046
FleetBoston Financial
Corp.
6.625%, 12/1/05 A- 425 414
+ 8.125%, 7/1/04 A3 505 521
(+)Florida Property &
Casualty
7.375%, 7/1/03 A- 910 905
Ford Motor Credit Co.
5.75%, 2/23/04 A 980 935
6.125%, 4/28/03 A 575 562
6.70%, 7/16/04 A 450 442
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
General Electric Capital
Sevices, Inc.
7.25%, 5/3/04 AAA $ 1,560 $ 1,584
General Motors Acceptance
Corp.
7.50%, 7/15/05 A 695 704
Goldman Sachs Group LP
7.625%, 8/17/05 A+ 475 484
Hartford Financial
Services Group, Inc.
7.75%, 6/15/05 A 535 549
Hartford Life, Inc.
6.90%, 6/15/04 A 285 284
Heller Financial, Inc.
6.50%, 7/22/02 A- 465 461
Home Savings of America
6.50%, 8/15/04 BBB+ 800 771
Homeside Lending, Inc.
6.875%, 6/30/02 A+ 891 891
Household Finance Corp.
6.00%, 5/1/04 A 1,385 1,335
(+)Hyatt Equities LLC
7.00%, 5/15/02 BBB+ 1,190 1,168
Marsh & McLennan
Companies, Inc.
6.625%, 6/15/04 AA- 1,030 1,015
Mellon Funding Corp.
7.50%, 6/15/05 A+ 775 790
(+)!!Metropolitan Life
Insurance Co.
6.30%, 11/1/03 A+ 1,555 1,521
(+)Nationwide Mutual Life
Insurance Co.
6.50%, 2/15/04 A 1,198 1,161
Norwest Financial, Inc.
5.375%, 9/30/03 A+ 515 494
Paine Webber Group, Inc.
6.375%, 5/15/04 BBB+ 880 858
(+)Prime Property Funding
II, Inc.
6.80%, 8/15/02 A 785 774
7.00%, 8/15/04 A 225 220
(+)Prudential Insurance
Co.
6.875%, 4/15/03 A- 640 635
Smith Barney Holdings
7.00%, 3/15/04 A 1,360 1,358
Target Corp.
7.50%, 2/15/05 A 715 729
U.S. Bancorp.
6.875%, 12/1/04 A 1,035 1,024
(+)USAA Capital Corp.
7.41%, 6/30/03 AAA 820 832
Wells Fargo Co.
6.625%, 7/15/04 A+ 850 841
-----------------------------------------------------------
GROUP TOTAL 34,269
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
87
<PAGE> 90
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
LIMITED DURATION
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIALS (12.3%)
Alcoa, Inc.
7.25%, 8/1/05 A+ $ 550 $ 560
Clear Channel
Communications, Inc.
7.25%, 9/15/03 BBB- 975 976
Cox Communications, Inc.
7.50%, 8/15/04 BBB+ 820 826
CVS Corp.
5.50%, 2/15/04 A 1,525 1,448
DaimlerChrysler AG
6.90%, 9/1/04 A+ 1,295 1,286
Deere & Co.
6.55%, 7/15/04 BBB 955 937
Delphi Automotive Systems
Corp.
6.125%, 5/1/04 BBB 815 778
Dow Chemical Co.
7.00%, 8/15/05 A 860 864
(+)EES Coke Battery Co.,
Inc.
7.125%, 4/15/02 BBB 242 239
Federated Department
Stores, Inc.
6.30%, 4/1/09 BBB+ 790 687
Hertz Corp.
7.00%, 7/1/04 A- 935 925
Hewlett Packard Co.
7.15%, 6/15/05 AA- 830 841
IBM Credit
6.64%, 10/29/01 A+ 1,255 1,254
(+)Kern River Funding
Corp.
6.42%, 3/31/01 A- 100 99
Kroger Co.
7.15%, 3/1/03 BBB- 1,145 1,138
Marriott International,
Inc.
8.125%, 4/1/05 BBB+ 375 384
May Department Stores Co.
6.875%, 11/1/05 A+ 300 293
9.875%, 12/1/02 A+ 810 853
MMCA Automobile Trust,
Series
7.00%, 6/15/04 AAA 1,125 1,129
Pharmacia Corp.
5.375%, 12/1/01 AA- 1,200 1,179
Phillips Petroleum
8.50%, 5/25/05 BBB 685 723
Procter & Gamble Co.
6.60%, 12/15/04 AA 940 936
Raytheon Co.
5.70%, 11/1/03 BBB- 375 360
Sun Microsystems, Inc.
7.00%, 8/15/02 BBB+ 995 997
Walt Disney Co.
7.30%, 2/8/05 A 995 1,013
Waste Management, Inc.
6.125%, 7/15/01 BBB 1,135 1,113
-----------------------------------------------------------
GROUP TOTAL 21,838
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
TAXABLE MUNICIPAL (0.4%)
New York State Power
Authority Revenue
Bonds,
Series B
6.11%, 2/15/11 AAA $ 805 $ 796
-----------------------------------------------------------
TELEPHONES (2.6%)
AT&T Corp.
5.625%, 3/15/04 AA- 865 825
GTE Corp.
9.10%, 6/1/03 A 990 1,041
MCI WorldCom, Inc.
6.25%, 8/15/03 A- 1,195 1,174
(+)Qwest Capital Funding
7.75%, 8/15/06 BBB+ 800 814
Sprint Capital Corp.
6.50%, 11/15/01 BBB+ 800 795
-----------------------------------------------------------
GROUP TOTAL 4,649
-----------------------------------------------------------
TRANSPORTATION (0.7%)
Norfolk Southern Corp.
7.875%, 2/15/04 BBB+ 540 550
Union Pacific Corp.
9.625%, 12/15/02 BBB- 625 656
-----------------------------------------------------------
GROUP TOTAL 1,206
-----------------------------------------------------------
UTILITIES (1.0%)
(+)Edison Mission Energy
Funding Corp.
6.77%, 9/15/08 BBB 378 374
National Rural Utilities
Corp.
7.375%, 2/10/03 AA 715 724
Niagara Mohawk Power Co.
Senior Notes
7.375%, 7/1/03 BBB- 783 784
-----------------------------------------------------------
GROUP TOTAL 1,882
-----------------------------------------------------------
YANKEE (2.8%)
AT&T Canada, Inc.
7.625%, 3/15/05 BBB 740 745
Deutsche Telekom
International Finance
7.75%, 6/15/05 AA- 880 900
Inter-American
Development Bank
7.00%, 6/16/03 AAA 880 889
(+)Oil Enterprises Ltd.
6.239%, 6/30/08 AAA 849 813
(+)Oil Purchase Co.
7.10%, 4/30/02 BB+ 275 264
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
88
<PAGE> 91
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Republic of Italy
7.25%, 2/7/05 AA $ 380 $ 388
(+)Vodafone AirTouch plc
7.625%, 2/15/05 A- 920 938
-----------------------------------------------------------
GROUP TOTAL 4,937
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $182,954) 181,599
-----------------------------------------------------------
PREFERRED STOCK (0.8%)
-----------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
MORTGAGE-OTHER (0.8%)
(+)+ Home Ownership
Funding Corp.
13.331% (Cost $1,353) Aaa 1,800 1,350
-----------------------------------------------------------
CASH EQUIVALENTS (11.6%)
-----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
--------
<S> <C> <C> <C>
DISCOUNT NOTE (5.6%)
Federal Home Mortgage
Corporation
6.30%, 10/18/00 $ 10,000 9,970
-----------------------------------------------------------
REPURCHASE AGREEMENT (6.0%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $10,710,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $10,811 10,704 10,704
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $20,674) 20,674
-----------------------------------------------------------
TOTAL INVESTMENTS (114.5%) (Cost $204,981) 203,623
-----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-14.5%)
Cash 95
Dividends Receivable 60
Interest Receivable 1,779
Receivable for Investments Sold 924
Receivable for Fund Shares Sold 2
Other Assets 18
Dividend Payable (82)
Payable for Forward Commitments (28,147)
Payable Investment Advisory Fees (131)
Payable for Administrative Fees (12)
Payable for Trustees' Deferred Compensation
Plan-Note F (16)
Payable for Variation Margin on Futures
Contracts (28)
Unrealized Loss on Swap Agreements (247)
Other Liabilities (62)
----------
(25,847)
-----------------------------------------------------------
NET ASSETS (100%) $ 177,776
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 17,484,949 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 177,776
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 10.17
-----------------------------------------------------------
NET ASSETS CONSISTS OF:
Paid in Capital $ 184,540
Undistributed Net Investment Income (Loss) 175
Undistributed Realized Net Gain (Loss) (5,253)
Unrealized Appreciation (Depreciation) on:
Investment Securities (1,358)
Futures and Swaps (328)
-----------------------------------------------------------
NET ASSETS $ 177,776
-----------------------------------------------------------
</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.
++ Security is fair valued by the Advisor.
## Variable of floating rate security-rate disclosed is as
of September 30, 2000.
N/R Not rated by Moody's Investors Service, Inc. or Standard
& Poor's Corporation.
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A7 to
Financial Statements.
PAC Planned Amortization Class
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
89
<PAGE> 92
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
MUNICIPAL PORTFOLIO
The Municipal Portfolio invests primarily in tax-exempt municipal debt
obligations issued by state and local governments or their agencies. The
Portfolio will also invest selectively in taxable fixed-income securities.
Normally, at least 80% of the Portfolio's income will be exempt from regular
federal income tax. The Portfolio is managed by the MAS tax-advantaged
fixed-income team. This team works closely with the MAS interest rate team to
determine the interest rate and yield curve exposure for the Portfolio. The tax-
advantaged team also works closely with the MAS fixed-income value teams to
determine sector allocation and security selection for the Portfolio. The
Portfolio seeks to maximize after-tax total return consistent with the
preservation of capital, while providing investors with deflation protection.
The investment philosophy is consistent with that of the other MAS fixed-income
products. As research-based, value-driven investors, MAS does extensive research
to identify objective measures of value that have proven to be reliable over
long periods of time. Consequently, MAS does not attempt to forecast markets.
Instead, MAS is disciplined in applying these value measures to making
investment decisions. An important part of the MAS philosophy is utilizing
research which shows that taxable investors are sometimes better served by
investments in taxable bonds. Thus, MAS views the municipal market as just one
of many alternatives for helping clients achieve the goal of maximizing
after-tax returns, consistent with a reasonable level of risk.
The investment process consists of three major stages. First, the appropriate
level of interest rate sensitivity relative to the benchmark is established
using the same value measures--the level of real interest rates and the
difference between implied and actual inflation that are used for all of the MAS
fixed-income portfolios. Next, MAS examines the relative value offered by the
various sectors of the bond market to determine the most attractive sector
allocation. In particular, MAS attempts to add value by actively managing sector
exposures based on the prospects for the municipal market, relative to the
taxable markets. The final stage is to determine the mix of securities that will
ideally provide the most attractive performance. Security selection involves
adjustment of promised yields for tax considerations, credit risk, and
prepayment or call risk. In general, capital gains are realized only when the
prospective returns of bonds purchased will offset the tax on any gains, and
still provide excess value to the overall Portfolio.
For the past fiscal year, the Portfolio outperformed the blended benchmark by
1.05%. Interest rate risk management had the largest positive impact on returns.
The interest rate sensitivity of the Portfolio was materially longer than that
of the benchmark for most of the period in response to MAS's value indicators.
While this position detracted from returns in fiscal 1999, it benefited the
Portfolio this past year thanks to the strong rally in the bond market.
Greater-than-benchmark sensitivity to changes in municipal spreads relative to
Treasuries also had a positive impact on relative performance. Security
selection within the municipal market enhanced results, particularly the focus
on quality. Opportunistic exposure to taxable sectors detracted from returns.
The Portfolio reduced interest rate risk so that at fiscal year-end, duration
was close to that of the benchmark. This action was taken because MAS's value
signals for interest rate risk were neutral. Specifically, real interest rates
were close to fair value, and MAS's term structure model indicated that the
inflation rate implied by the yield curve was close to actual levels. Short and
intermediate municipal bonds were expensive relative to longer municipals and
taxable bonds. Therefore, municipal holdings emphasized high quality, longer
maturity issues. The Portfolio maintained exposure to selected taxable
securities that offered value on an after-tax and risk adjusted return basis.
--------------------------------------------------------------------------------
90
<PAGE> 93
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Municipal Lehman 5 Year Municipal Lehman 10 Year Municipal Blended Municipal Index
----------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
* 1000 1000 1000 1000
93 1142 1090 1134 1158
94 1089 1094 1113 1093
95 1235 1191 1244 1234
96 1351 1243 1304 1312
97 1466 1325 1428 1418
98 1571 1415 1554 1528
99 1573 1437 1547 1536
00 1678 1506 1646 1622
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
LEHMAN LEHMAN
5 YEAR 10 YEAR BLENDED
MAS MUNICIPAL MUNICIPAL MUNICIPAL
MUNICIPAL INDEX INDEX INDEX
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 6.66% 4.83% 6.39% 5.61%
Five Years 6.33% 4.81% 5.76% 5.62%
Since Inception 6.69% 5.26% 6.43% 6.24%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
The Portfolio was initially focused on longer-term securities. On April 15,
1996, shareholders approved a change in the Portfolio's investment policies to
emphasize fixed-income securities of shorter duration. On October 2, 1998,
shareholders approved a change in the Portfolio's investment policies to specify
that generally at least 80% of its income will be exempt from regular federal
income tax. The Portfolio's performance pattern may have been affected by these
changes.
* The Municipal Portfolio commenced operations on 10/1/92. Total returns are
compared to the Lehman 5 Year Municipal Index and the Lehman 10 Year Municipal
Index, both unmanaged market indices, as well as the Blended Municipal Index,
an unmanaged index comprised of the Lehman Long Municipal Index from 10/1/92
to 3/31/96 and 50% Lehman 10 Year Municipal Index and 50% Lehman 5 Year
Municipal Index thereafter.
--------------------------------------------------------------------------------
91
<PAGE> 94
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (94.3%)
<TABLE>
<CAPTION>
--------------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (87.0%)
Aliquippa School District,
PA
Zero Coupon, 6/1/12 A $ 685 $ 356
Allegheny County, PA
Hospital Development
Authority Revenue Bonds
9.25%, 11/15/15 B+ 1,300 1,286
Arkansas State Development
Finance Authority Home
Mortgage Revenue Bonds,
Series B-1
4.90%, 7/1/29 AAA 5 5
Beaver County, PA Industrial
Development Authority
Pollution Control Revenue
Bonds
4.65%, 6/1/33 BB- 750 728
Berks County, PA (FGIC)
Zero Coupon, 5/15/19 AAA 1,250 427
Zero Coupon, 11/15/20 AAA 1,000 313
Brazos County, TX River
Authority Revenue Bonds
5.20%, 12/1/18 BBB+ 550 551
+ Bucks County, PA Water &
Sewer Authority Revenue
Bonds,
Series B
5.50%, 2/1/08 Aaa 110 112
Butler & Sedgwick Counties,
KS Unified School District
(FSA)
5.85%, 9/1/17 AAA 1,375 1,418
California Housing &
Finance Agency Revenue
Bonds (MBIA)
5.30%, 8/1/14 AAA 75 75
Carbon County, PA Industrial
Development Authority
Revenue Bonds
6.65%, 5/1/10 BBB- 350 356
Center Township, PA Sewer
Authority Revenue Bonds
Series A (MBIA)
Zero Coupon, 4/15/17 AAA 615 240
Chicago, IL General
Obligation Bonds,
Series A (FGIC)
Zero Coupon, 1/1/19 AAA 4,000 1,396
4.90%, 1/1/14 AAA 2,800 2,630
Clear Creek, TX Independent
School District
5.65%, 2/15/19 AAA 1,000 1,003
+ Cleveland, OH Airport
Special Revenue Bonds
5.50%, 12/1/08 Ba2 750 698
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
--------------------------------------------------------------
<S> <C> <C> <C>
Clinton County, PA
Industrial Development
Authority
6.25%, 11/15/06 BB+ $ 130 $ 128
Colorado Health Facilities
Revenue Bonds,
Series A
Zero Coupon, 7/15/20 AAA 1,000 293
+ Colorado Public Highway
Authority Revenue Bonds
Series B (MBIA)
Zero Coupon, 9/1/29 Baa3 18,900 3,429
Council Rock, PA School
District (FGIC)
4.60%, 11/15/12 AAA 1,000 936
Crown Point IN Multi-School
Building Corp. Revenue
Bonds
Zero Coupon, 1/15/24 AAA 5,200 1,312
Dallas Fort Worth, TX
International Airport
Facility Corporate Revenue
Bonds
6.375%, 5/1/35 BBB- 1,100 1,066
Delaware County, PA
Industrial Development
Authority Revenue Bonds,
6.50%, 1/1/08 BB- 200 195
Du Page & Will Counties, IL
Community School District
No. 204, General
Obligation Bonds (FSA)
4.80%, 12/30/13 AAA 1,150 1,080
Duneland, IN School Building
Corp. Revenue Bonds (MBIA)
4.85%, 8/1/13 AAA 1,045 989
East Porter County, IN
School Building Corp.
Revenue Bonds
4.70%, 7/15/12 AAA 1,025 968
Elizabeth Forward, PA School
District,
Series B (MBIA)
Zero Coupon, 9/1/11 AAA 1,250 708
+ Essex County, NJ Utility
Authority Revenue Bonds,
Series A (FSA)
4.80%, 4/1/14 Aaa 1,005 953
Fort Wayne, IN Hospital
Authority Hospital Revenue
Bonds (MBIA)
4.70%, 11/15/11 AAA 1,100 1,037
Georgetown County, SC,
Pollution Control Facility
Revenue Bonds
5.125%, 2/1/12 BBB+ 725 682
Georgia State Housing &
Financing Authority,
Series A A2 (FHA)
5.875%, 12/1/19 AA+ 70 70
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
92
<PAGE> 95
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Girard Area, PA School
District (FGIC)
Zero Coupon, 10/1/18 AAA $ 700 $ 249
Zero Coupon, 10/1/19 AAA 250 84
Grapevine, TX Certificates
of Obligation (FGIC)
5.75%, 8/15/17 AAA 1,000 1,019
Hamilton County, IN
Redevelopment Authority
Revenue Bonds (MBIA)
4.90%, 8/1/13 AAA 1,160 1,097
Hawaii State Certificate of
Participation
Series A (AMBAC)
4.80%, 5/1/12 AAA 1,275 1,199
Houston, TX, Housing Finance
& Development Corp.,
Single Family Mortgage
Revenue Bonds,
Series B-1
8.00%, 6/1/14 A 170 183
Houston, TX, Water & Sewer
System Revenue Bonds,
Series A (FSA)
Zero Coupon, 12/1/22 AAA 2,150 583
Zero Coupon, 12/1/21 AAA 6,510 1,885
+ Howard Suamico, WI School
District General
Obligation Bonds (FSA)
4.75%, 3/1/14 Aaa 1,115 1,031
+ Idaho Housing & Finance
Association, Single Family
Mortgage Revenue Bonds,
Series H-2
5.40%, 7/1/27 Aaa 105 105
Illinois Development Finance
Authority Revenue Bonds
(FGIC)
Zero Coupon, 12/1/09 AAA 2,000 1,259
+ Illinois Health Facility
Authority Revenue Bonds
5.00%, 11/15/12 Aaa 1,000 977
Indiana State University
Revenue Bonds,
Series I (FGIC)
5.20%, 10/1/12 AAA 1,640 1,633
Indiana Transportation
Finance Authority Highway
Revenue Bonds (AMBAC)
Zero Coupon, 12/1/16 AAA 1,695 681
Indianapolis Airport
Authority Revenue Bonds
7.10%, 1/15/17 BBB 375 395
Intermountain Power Agency,
UT Power Supply Revenue
Bonds,
Series A
Zero Coupon, 7/1/17 A+ 1,750 673
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Kane & De Kalb Counties, IL
Unit School District
(AMBAC)
Zero Coupon, 12/1/09 AAA $ 725 $ 456
King County, WA Liberty
System Facility Revenue
Bonds (AMBAC)
4.85%, 12/1/13 AAA 1,110 1,048
Long Island, NY Power
Authority Electric System
Revenue Bonds,
Series A (FSA)
Zero Coupon, 12/1/15 AAA 2,535 1,103
Zero Coupon, 6/1/16 AAA 3,500 1,466
Maryland State Economic
Development Corp. Revenue
Bonds
7.50%, 12/1/14 N/R 350 344
Massachusetts State
Development Financing
Agency, Resource Recovery
Revenue Bonds,
6.90%, 12/1/29 BBB 250 260
Massachusetts State Health &
Educational Facility
Authority Revenue Bonds
4.80%, 7/1/12 AAA 1,665 1,573
Massachusetts State Port
Authority Revenue Bonds,
Series 99 A
5.75%, 10/1/29 BB+ 900 893
Maury County, TN Industrial
Development Board Solid
Waste Disposal Revenue
Bonds,
Series A
6.30%, 8/1/18 BBB- 1,075 1,076
Midland, TX Independent
School District
Zero Coupon, 8/15/06
(PSFG) AAA 750 562
5.95%, 3/1/18 (FGIC) AAA 1,225 1,262
Minnesota State Housing &
Finance Agency Single
Family Mortgage Revenue
Bonds,
Series E
5.05%, 7/1/24 AA+ 253 253
) Mobile, AL Industrial
Development Board Solid
Waste Disposal Revenue
Bonds
6.95%, 1/1/20 D 269 73
Montgomery County, PA
Industrial Development
Authority Pollution
Control Revenue Bonds
5.20%, 10/1/30 BBB+ 850 845
Montour, PA School District
(MBIA)
Zero Coupon, 1/1/13 AAA 300 155
+ Morton Grove, IL (FGIC)
4.50%, 12/1/13 Aaa 1,480 1,332
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
93
<PAGE> 96
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Nassau County, NY
Improvement Bonds,
Series E (FSA)
6.00%, 3/1/17 AAA $ 1,275 $ 1,329
Nassau County, NY Tobacco
Settlement Corp.
6.50%, 7/15/27 A- 650 663
Nebraska Investment Finance
Authority Revenue Bonds,
Series:
B
5.60%, 3/1/20 AAA 505 505
D
5.80%, 3/1/20 AAA 155 155
Nevada Department of
Business & Industry
Revenue Bonds
(AMBAC)
Zero Coupon, 1/1/21 AAA 2,000 599
Zero Coupon, 1/1/23 AAA 1,845 485
+ Nevada Housing Division,
Series:
A-2
5.30%, 4/1/28 Aaa 900 887
B-2
5.70%, 10/1/27 Aaa 660 661
C
5.65%, 4/1/27 Aaa 80 80
E (FHA)
5.35%, 10/1/27 Aaa 540 538
New Jersey Economic
Development Authority
Revenue Bonds,
Series A
Zero Coupon, 4/1/12 N/R 625 287
## New York City, NY General
Obligation Inverse Bonds
18.11%, 10/1/03 A- 350 477
New York City, NY Industrial
Development Agency Revenue
Bonds (FSA)
6.00%, 11/1/15 AAA 2,175 2,283
New York State Dormitory
Authority Revenue Bonds,
Series:
E (FSA)
5.10%, 2/15/11 AAA 1,250 1,249
H (FGIC)
5.10%, 2/15/11 AAA 825 824
Noblesville, IN High School
Building Corp. (AMBAC)
Zero Coupon, 2/15/19 AAA 1,850 641
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
North Carolina Housing &
Finance Agency Revenue
Bonds,
Series:
JJ
5.75%, 3/1/23 AA $ 85 $ 85
RR
5.00%, 9/1/22 AA 1,284 1,270
North Carolina Municipal
Power Agency, Electric
Revenue Bonds
6.625%, 1/1/10 BBB+ 850 908
+ North Dakota State Housing
& Finance Agency Revenue
Bonds,
Series C
5.15%, 1/1/21 Aa3 974 968
Okemos, MI Public School
District (MBIA)
Zero Coupon, 5/1/15 AAA 900 403
Orange County, FL Housing &
Finance Authority Single
Family Mortgage Revenue
Bonds,
5.10%, 9/1/27 AAA 435 430
Ouachita Parish, LA West
Ouachita Parish School
District Revenue Bonds
(MBIA)
4.70%, 9/1/14 AAA 1,020 931
Penn Hills Township, PA
Zero Coupon, 6/1/12 N/R 1,615 795
Series B
Zero Coupon, 12/1/13 N/R 500 222
Pennsylvania Convention
Center Authority
6.25%, 9/1/04 BBB 205 210
6.70%, 9/1/16 (FGIC) AAA 500 569
Pennsylvania Housing &
Finance Authority,
Series:
47
5.20%, 4/1/27 AA+ 310 310
48
5.375%, 10/1/16 AA+ 195 194
50A
5.35%, 10/1/08 AA+ 155 155
51
5.65%, 4/1/20 AA+ 165 167
52B
5.55%, 10/1/12 AA+ 460 462
Philadelphia, PA Authority
For Industrial Development
Revenue Bonds
7.50%, 5/1/10 N/R 525 524
Series A
6.50%, 10/1/27 N/R 320 308
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
94
<PAGE> 97
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Philadelphia, PA Gas Works
Revenue Bonds
5.80%, 7/1/01 BBB $ 200 $ 202
+ Philadelphia, PA Hospitals
10.875%, 7/1/08 Aaa 110 131
+ Philadelphia, PA Hospitals
& Higher Education
Facilities Authority
Revenue Bonds
6.15%, 7/1/05 Baa3 50 53
Philadelphia, PA Water &
Wastewater Revenue Bonds
(FGIC)
5.15%, 6/15/04 AAA 50 51
Pittsburgh, PA General
Obligation Bonds (AMBAC)
6.50%, 4/1/11 AAA 230 246
Port Authority, NY & NJ
Special Obligation Revenue
Bonds
7.00%, 10/1/07 N/R 700 729
Richardson, TX, Hotel
Occupancy Certificates of
Obligation (FGIC)
5.75%, 2/15/17 AAA 1,405 1,426
Robinson Township, PA
6.90%, 5/15/18 AAA 110 123
+ Rose Tree Media, PA School
District, General
Obligation Bonds
4.60%, 2/15/13 Aaa 1,025 946
Saginaw, MI Hospital
Financing Authority
Revenue Bonds,
5.375%, 7/1/19 AAA 1,265 1,217
San Antonio County, TX
Parking System Revenue
Bond (AMBAC)
5.50%, 8/15/17 AAA 700 694
San Bernardino County, CA
Series A (MBIA)
7.40%, 7/1/16 AAA 1,600 1,622
+ Sanger, TX Independent
School District
Zero Coupon, 2/15/19 Aaa 1,255 434
Zero Coupon, 2/15/21 Aaa 1,505 457
Zero Coupon, 2/15/22 Aaa 1,505 428
Savannah, GA Economic
Development Authority
Revenue Bonds
7.40%, 4/1/26 N/R 310 307
Scranton, PA Health &
Welfare Authority Revenue
Bonds
6.625%, 7/1/09 AAA 105 112
Southeastern Area Schools,
PA, Revenue Bonds,
Series:
A
Zero Coupon, 10/1/06 A 200 148
B
Zero Coupon, 10/1/06 A 390 289
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
St. Charles Parish, LA
Pollution Control Revenue
Bonds
Series C
5.35%, 10/1/29 BBB- $ 950 $ 948
Steel Valley, PA
Allegheny County
Zero Coupon, 11/1/17 A 650 236
Steel Valley, PA School
District
Zero Coupon, 11/1/11 A 1,170 635
Texas State Housing &
Community Revenue Bonds
Series D
5.45%, 3/1/21 AAA 990 989
+ Toledo-Lucas County, OH
Port Authority Revenue
Bonds
6.45%, 12/15/21 Baa2 900 888
TSASC, Inc., NY
Series 1
6.25%, 7/15/27 A 550 554
+ Tyler, TX Health
Facilities Development
Corp.,
Series A
5.25%, 7/1/02 Baa2 425 422
Upper Darby Township, PA
(AMBAC)
Zero Coupon, 7/15/11 AAA 525 299
Vancouver WA Water & Sewer
Revenue Bonds (MBIA)
4.60%, 6/1/13 AAA 1,000 916
Washington County, West PA
Power Co.
4.95%, 3/1/03 A+ 150 150
+ Washington State Health
Care Facilities Authority
Revenue Bonds
5.125%, 11/15/11 (AMBAC) Aaa 1,000 1,000
4.70%, 10/1/11 (FSA) Aaa 1,075 1,015
Washington State
Recreational Facility
Series S-5 (FGIC)
Zero Coupon, 1/1/17 AAA 6,900 2,750
Washoe County, NV General
Obligation Bonds
Series B (FSA)
Zero Coupon, 7/1/18 AAA 4,235 1,516
West Virginia University
Revenue Bonds,
Series A (AMBAC)
Zero Coupon, 4/1/22 AAA 1,000 283
Zero Coupon, 4/1/24 AAA 1,000 250
+ Winnebago County, IL
School District General
Obligation Bonds (FSA)
Zero Coupon, 10/1/14 Aaa 3,600 1,738
Wisconsin Housing & Economic
Development Authority Home
Ownership Revenue Bonds,
Series E
5.125%, 9/1/26 AA 2,195 2,184
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
95
<PAGE> 98
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MUNICIPAL
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin State Health &
Educational Facilities
Authority Revenue
Bonds, (AMBAC)
5.625%, 2/15/12 AAA $ 1,000 $ 1,021
Ypsilanti, MI School
District General
Obligation Bonds (FGIC)
4.70%, 5/1/12 AAA 1,115 1,053
--------------------------------------------------------------
GROUP TOTAL 100,230
--------------------------------------------------------------
ASSET BACKED CORPORATE (0.4%)
ALPS
Series 96-1 DX
12.75%, 6/15/06 BB- 430 408
--------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL SERIES
(0.8%)
Federal Home Loan Mortgage
Corp.,
Series 1707 S
2.18%, 3/15/24 Agy 1,612 155
Government National Mortgage
Association
Series:
99-43 Inv Fl IO
1.38%, 11/16/29 Tsy 3,090 127
99-44 Inv Fl IO
2.75%, 12/16/29 Tsy 2,457 127
00-9 Inv Fl IO
2.38%, 2/16/30 Tsy 4,265 245
00-16 Inv Fl IO
1.93%, 4/16/19 Tsy 5,296 293
--------------------------------------------------------------
GROUP TOTAL 947
--------------------------------------------------------------
FINANCE (1.6%)
(+) Farmers Exchange Capital
7.05%, 7/15/28 A+ 755 624
(+) New England Mutual
7.875%, 2/15/24 A+ 625 610
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 640 571
--------------------------------------------------------------
GROUP TOTAL 1,805
--------------------------------------------------------------
INDUSTRIALS (1.8%)
Columbia/HCA Healthcare
Corp.
7.50%, 12/15/23 BB+ 775 649
Federated Department Stores,
Inc.
6.90%, 4/1/29 BBB+ 400 316
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
Kroger Co.
7.70%, 6/1/29 BBB- $ 580 $ 535
News America Holdings, Inc.
7.75%, 2/1/24 BBB- 655 608
--------------------------------------------------------------
GROUP TOTAL 2,108
--------------------------------------------------------------
TELEPHONES (0.7%)
Global Crossing Holdings
Ltd.
9.125%, 11/15/06 BB 375 371
# Qwest Communications
International, Inc.,
Series B
Zero Coupon, 2/1/08 BBB+ 570 473
--------------------------------------------------------------
GROUP TOTAL 844
--------------------------------------------------------------
UTILITIES (0.5%)
CMS Panhandle Holdings Co.
7.00%, 7/15/29 BBB- 390 327
(+) Southern Energy, Inc.
7.90%, 7/15/09 BBB 300 285
--------------------------------------------------------------
GROUP TOTAL 612
--------------------------------------------------------------
YANKEE (1.5%)
(+)++ Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 525 480
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 570 542
Republic of Columbia
8.625%, 4/1/08 BB 805 633
--------------------------------------------------------------
GROUP TOTAL 1,655
--------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $107,292) 108,609
--------------------------------------------------------------
CASH EQUIVALENTS (4.1%)
--------------------------------------------------------------
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
MONEY MARKET FUNDS (4.0%)
Dreyfus Basic Municipal Money
Market Fund 2,304,384 2,304
Vanguard Municipal Money
Market Fund 2,303,928 2,304
--------------------------------------------------------------
GROUP TOTAL 4,608
--------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
96
<PAGE> 99
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
--------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (0.1%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $116, collateralized
by various U.S. Government
Obligations, due 11/2/00-3/29/01
valued at $117 $ 116 $ 116
--------------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $4,724) 4,724
--------------------------------------------------------------
TOTAL INVESTMENTS (98.4%) (Cost $112,016) 113,333
--------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.6%)
Cash 141
Interest Receivable 1,779
Receivable for Fund Shares Sold 45
Unrealized Gain on Swap Agreements 411
Other Assets 11
Dividend Payable (200)
Payable for Fund Shares Redeemed (50)
Payable for Investment Advisory Fees (130)
Payable for Administrative Fees (8)
Payable for Trustees' Deferred Compensation
Plan-Note F (9)
Payable for Variation Margin on Futures Contracts (76)
Other Liabilities (30)
--------
1,884
--------------------------------------------------------------
NET ASSETS (100%) $115,217
--------------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------------
NET ASSETS
Applicable to 10,079,092 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $115,217
--------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.43
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
--------------------------------------------------------------
--------------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $116,208
Undistributed Net Investment Income (Loss) 103
Undistributed Realized Net Gain (Loss) (3,573)
Unrealized Appreciation (Depreciation) on:
Investment Securities 1,317
Futures and Swaps 1,162
--------------------------------------------------------------
NET ASSETS $115,217
--------------------------------------------------------------
</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.
@ 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 of floating rate security-rate disclosed is as
of September 30, 2000
Inv Fl 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
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Administration
FSA Financial Security Assurance
MBIA Municipal Bond Insurance Association
N/R Not rated by Moody's Investors Service, Inc., or
Standard & Poor's Corporation.
PSFG Permanent School Fund Guaranteed
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
97
<PAGE> 100
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
The Global Fixed Income Portfolio invests in high-grade fixed-income securities
throughout the world, fluctuating around a neutral position that is
approximately two-thirds foreign bonds and one-third U.S. securities.
Fixed-income securities in the Portfolio include government bonds, corporate
bonds, mortgages, and other fixed-income securities. The Portfolio is actively
managed by Miller Anderson & Sherrerd's global fixed-income team, which makes
strategic decisions about portfolio structure and composition.
The MAS global fixed-income team makes five key decisions in building the
Portfolio. The first decision relates to the amount of interest-rate risk in the
Portfolio. Bond values generally increase when interest rates fall and decrease
when rates rise. Consequently, there are better times to bear interest-rate risk
than others. MAS bases the interest-rate decision on the level of real interest
rates and the steepness of the yield curve in bond markets throughout the world.
When real interest rates are high and longer-maturity bonds have significantly
higher yields than short-term bonds, historically that has been an attractive
time to invest in fixed-income securities with longer-than-average maturities.
The second key decision is the choice of fixed-income markets throughout the
world in which the Portfolio will invest. MAS bases this decision on comparisons
of real interest rates and yield-curve slopes across fixed-income markets.
Historically, it has been advantageous to invest in countries that offer higher
real interest rates than those available in other countries. Since the best bond
markets do not necessarily correspond to the best currency markets, MAS
separates the bond decision from the third key decision of currency management.
MAS manages currency exposures actively, and the Portfolio hedges (at least in
part) those currencies that are judged to be overvalued and in danger of
weakening.
The fourth and fifth decisions relate to the Portfolio's level of credit and
prepayment risk. MAS's research shows that bearing credit risk often offers
financial rewards and that a diversified approach to credit risk adds to overall
portfolio returns. Similarly, MAS actively manages the amount of prepayment or
call risk in the Portfolio. Many corporate bonds and most mortgages contain an
option to prepay the principal amount prior to maturity. As a result, these
bonds generally offer higher yields, and the global fixed-income team calculates
whether the additional yield is sufficient to compensate for the embedded
prepayment-option risk. Most corporate and mortgage securities are issued in the
United States, which offers the deepest and most liquid corporate and mortgage
markets in the world. However, the Portfolio will also invest in foreign or
non-dollar corporate and mortgage securities when values are attractive.
The Portfolio's return lagged that of its benchmark over the past fiscal year.
The primary cause of this lower relative return was the Portfolio's exposure to
U.S. corporate bonds, which underperformed the U.S. Treasuries that make up the
dollar portion of its benchmark. Currency exposure also detracted from relative
returns over the year, while country allocation added value.
During the fiscal year, the Portfolio maintained a well-diversified exposure to
U.S. dollar-denominated corporate bonds, because their yield advantage over U.S.
Treasury debt was near historic highs. Furthermore, the MAS global credit team,
which selects these bonds, believed that their yield advantage over Treasuries
offered generous compensation for any credit risk. The poor relative price
performance of these corporate bonds during the year reflected an increased
market preference for Treasuries more than any specific credit events, and
translated into an even more attractive yield advantage. This position was
actively managed throughout the year and was increased in size as the yield
advantage of corporate bonds grew.
Over the course of the fiscal year, the Portfolio built up an above-benchmark
exposure to the Euro against the yen. The Euro had depreciated by a significant
margin since its introduction on January 1, 1999, and looked attractive versus
the yen both on valuation grounds and because of a higher relative yield. The
Euro continued to depreciate during the year, however, depressing relative
portfolio returns. Small exposures to the Canadian and Australian dollars versus
the U.S. dollar also hurt relative performance as these currencies fell.
Management of interest rate risk added to the Portfolio's return relative to the
benchmark. Overall duration was held near that of the benchmark throughout the
year, and so had little impact on relative returns. Relative to the benchmark,
however, the Portfolio held a lower exposure to Japanese government debt offset
by additional holdings of continental European and U.S. bonds. This positioning
added to relative returns, since Japanese yields rose slightly while yields in
the other two regions fell.
--------------------------------------------------------------------------------
98
<PAGE> 101
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Global Fixed Income Salomon World Gov't Bond
<S> <C> <C>
* 1000 1000
93 1074 1053
94 1071 1072
95 1238 1246
96 1322 1299
97 1369 1330
98 1495 1484
99 1494 1491
00 1413 1433
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS GLOBAL SALOMON WORLD
FIXED INCOME GOV'T BOND INDEX
----------------------------------------------------------------
<S> <C> <C>
One Year (5.39)% (3.89)%
Five Years 2.69 % 2.83 %
Since Inception 4.77 % 4.97 %
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. Foreign investments are subject to certain risks such as
currency fluctuations, economic instability, and political developments.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The Global Fixed Income Portfolio commenced operations on 4/30/93. Total
returns are compared to the Salomon World Government Bond Index, an unmanaged
market index.
--------------------------------------------------------------------------------
99
<PAGE> 102
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
GLOBAL FIXED INCOME
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (91.4%)
<TABLE>
<CAPTION>
----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
----------------------------------------------------------
<S> <C> <C> <C>
BRITISH POUND (5.6%)
European Investment Bank
5.50%, 12/7/09 AAA GBP 630 $ 887
KFW International
Finance Corp.
5.625%, 12/7/09 AAA 315 450
# NTL, Inc.
0.00%, 4/1/08 B- 175 155
Orange plc
8.625%, 8/1/08 BB+ 235 366
# Telewest plc
0.00%, 4/15/09 B+ 105 80
----------------------------------------------------------
GROUP TOTAL 1,938
----------------------------------------------------------
CANADIAN DOLLAR (1.8%)
Government of Canada
7.50%, 3/1/01 AAA CAD 940 629
----------------------------------------------------------
DANISH KRONE (4.7%)
Kingdom of Denmark
5.00%, 8/15/05 AAA DKK 14,100 1,625
----------------------------------------------------------
EURO (34.4%)
ABN AMRO Bank N.V.
4.625%, 5/12/09 AA- EUR 200 157
Bundesreblik Deutchland
7.25%, 10/21/02 AAA 1,120 1,030
Buoni Poliennali Del Tes
4.25%, 11/1/09 AA 200 160
(+) Clear Channel
Communications, Inc.
6.50%, 7/7/05 BBB- 150 133
Colt Telecom Group plc
7.625%, 7/31/08 B+ 345 275
Deutschland Republic
6.875%, 5/12/05 AAA 1,990 1,876
Government of France
O.A.T.
5.25%, 4/25/08 AAA 825 727
Government of Germany
4.00%, 7/4/09 AAA 630 494
6.25%, 1/4/24 AAA 1,166 1,107
6.50%, 7/4/27 AAA 1,595 1,571
Kredit fuer Wiederaufbau
5.00%, 1/4/09 AAA 575 486
# Lloyds TSB Bank plc
5.625%, 7/15/49 A+ 375 300
Mannesman Finance BV
4.75%, 5/27/09 A 305 240
Marconi Corp. plc
6.375%, 3/30/10 BBB+ 225 195
Pearson plc
6.125%, 2/1/07 BBB+ 200 174
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
----------------------------------------------------------
----------------------------------------------------------
<S> <C> <C> <C>
Republic of Italy BTPS
9.50%, 2/1/06 AA EUR 466 $ 488
10.00%, 8/1/03 AA 962 952
Spanish Government
5.15%, 7/30/09 AA+ 1,256 1,083
Tecnost International
Finance NV
6.125%, 7/30/09 BBB+ 205 169
Tyco International Group
S.A.
6.125%, 4/4/07 A- 200 173
(+) Unicredito Italia
8.046%, 10/29/49 A- 100 88
+ VNU NV
6.625%, 5/30/07 A3 125 112
----------------------------------------------------------
GROUP TOTAL 11,990
----------------------------------------------------------
JAPANESE YEN (13.5%)
Credit Locale de France
6.00%, 10/31/01 AA+ JPY 60,000 589
European Investment Bank
3.00%, 9/20/06 AAA 88,000 890
+ Federal National
Mortgage
Association-Global
1.75%, 3/26/08 Aaa 100,000 930
Government of Japan
0.90%, 12/22/08 AAA 265,700 2,300
----------------------------------------------------------
GROUP TOTAL 4,709
----------------------------------------------------------
SWEDISH KRONA (2.5%)
Swedish Government
6.00%, 2/9/05 AAA SEK 8,080 871
13.00%, 6/15/01 AA+ 75 8
----------------------------------------------------------
GROUP TOTAL 879
----------------------------------------------------------
UNITED STATES DOLLAR (28.9%)
AGENCY FIXED RATE MORTGAGES (7.0%)
Federal National Mortgage
Association October TBA
6.00%, 10/1/29 Agy $ 500 467
Government National
Mortgage Association
October TBA
7.00%, 10/15/29 Tsy 2,000 1,969
----------------------------------------------------------
GROUP TOTAL 2,436
----------------------------------------------------------
ENERGY (0.8%)
CMS Energy Corp.
7.50%, 1/15/09 BB 100 89
Conoco, Inc.
6.95%, 4/15/29 A- 200 185
----------------------------------------------------------
GROUP TOTAL 274
----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
100
<PAGE> 103
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
----------------------------------------------------------
<S> <C> <C> <C>
FINANCE (8.4%)
(+) Anthem Insurance
Cos., Inc.,
9.125%, 4/1/10 BBB+ $ 65 $ 61
Series A
9.00%, 4/1/27 BBB+ 90 73
Bank One Corp.
7.625%, 10/15/26 A- 100 96
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 325 297
EOP Operating LP
6.763%, 6/15/07 BBB 140 132
Equitable Companies, Inc.
7.00%, 4/1/28 A+ 275 246
(+) Farmers Exchange
Capital
7.05%, 7/15/28 A+ 200 165
Ford Motor Credit Co
7.375%, 10/28/09 A 65 64
General Motors Acceptance
Corp.
7.75%, 1/19/10 A 60 61
GS Escrow Corp.
7.125%, 8/1/05 BB+ 150 140
Hartford Financial
Services Group, Inc.
7.90%, 6/15/10 A- 180 185
Household Finance Corp.
8.00%, 7/15/10 A- 250 257
Lehman Brothers Holdings,
Inc.
8.25%, 6/15/07 A- 75 77
(+) Nationwide Mutual
Life Insurance Co.
7.50%, 2/15/24 A 300 252
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 100 90
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A- 300 303
Washington Mutual Capital
I, Inc.
8.375%, 6/1/27 BBB- 100 91
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 80 71
(+) World Financial
Properties, Series 96
WFP-D
6.95%, 9/1/13 AA- 275 263
----------------------------------------------------------
GROUP TOTAL 2,924
----------------------------------------------------------
INDUSTRIALS (6.3%)
Alcoa, Inc.
7.375%, 8/1/10 A+ 60 61
Columbia/HCA Healthcare
Corp.
7.19%, 11/15/15 BB+ 270 225
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
----------------------------------------------------------
<S> <C> <C> <C>
CSC Holdings, Inc.
7.25%, 7/15/08 BB+ $ 245 $ 231
DaimlerChrysler AG
8.00%, 6/15/10 A+ 65 67
Delphi Automotive Systems
Corp.
7.125%, 5/1/29 BBB 50 43
!! Federated Department
Stores, Inc.
6.90%, 4/1/29 BBB+ 100 79
7.00%, 2/15/28 BBB+ 25 20
(+) Florida Windstorm
7.125%, 2/25/19 AAA 180 169
Ford Motor Co.
6.625%, 10/1/28 A 200 167
International Game
Technology
8.375%, 5/15/09 BB+ 100 98
Kroger Co.
8.05%, 2/1/10 BBB- 200 202
Lockheed Martin Corp.
8.20%, 12/1/09 BBB- 160 167
News America Holdings,
Inc.
8.875%, 4/26/23 BBB- 170 176
Pharmacia Corp.
6.60%, 12/1/28 AA- 200 178
Saks, Inc.
7.375%, 2/15/19 BB+ 130 71
Tenet Healthcare Corp.,
Series B
7.625%, 6/1/08 BB+ 50 48
Time Warner, Inc.
6.625%, 5/15/29 BBB 100 85
Waste Management, Inc.
7.375%, 5/15/29 BBB 120 103
----------------------------------------------------------
GROUP TOTAL 2,190
----------------------------------------------------------
TELEPHONES (2.5%)
!! AT&T Corp.
6.50%, 3/15/29 AA- 120 100
BellSouth
Telecommunications,
Inc.
6.375%, 6/1/28 AA- 100 85
Global Crossing Holdings
Ltd.
9.125%, 11/15/06 BB 145 144
GTE Corp.
6.94%, 4/15/28 A+ 100 91
MCI WorldCom, Inc.
6.95%, 8/15/28 A- 245 223
# Nextel Communications,
Inc.
0.00%, 9/15/07 B 150 123
(+) Qwest Capital Funding
7.90%, 8/15/10 BBB+ 100 102
----------------------------------------------------------
GROUP TOTAL 868
----------------------------------------------------------
</TABLE>
GLOBAL FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
----------------------------------------------------------
<S> <C> <C> <C>
YANKEE (3.9%)
Abbey National plc
7.95%, 10/26/29 AA- $ 115 $ 117
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 125 103
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
101
<PAGE> 104
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
GLOBAL FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
----------------------------------------------------------
<S> <C> <C> <C>
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- $ 175 $ 180
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 195 178
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 115 110
(+) Oil Purchase Co. II
10.73%, 1/31/04 BB+ 33 31
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BB 150 125
Republic of Colombia
8.70%, 2/15/16 BB+ 195 132
United Mexican States
10.375%, 2/17/09 BB+ 125 136
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A- 90 92
7.875%, 2/15/30 A- 175 178
----------------------------------------------------------
GROUP TOTAL 1,382
----------------------------------------------------------
TOTAL UNITED STATES DOLLAR 10,074
----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $35,360) 31,844
----------------------------------------------------------
PREFERRED STOCK (3.4%)
----------------------------------------------------------
SHARES
------
MORTGAGE-OTHER (3.4%)
(+)+ Home Ownership
Funding Corp.
13.331% (Cost $1,183) Aaa 1,575 1,181
----------------------------------------------------------
CASH EQUIVALENT (4.3%)
----------------------------------------------------------
FACE
AMOUNT
(000)
-------
REPURCHASE AGREEMENT (4.3%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $1,488,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $1,502
(Cost $1,487) $1,487 1,487
----------------------------------------------------------
TOTAL INVESTMENTS (99.1%) (Cost $38,030) 34,512
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
----------------------------------------------------------
----------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (0.9%)
Cash $ 105
Foreign Currency (Cost $1,299) 1,296
Foreign Currency Held as Collateral on Futures
Contracts (Cost $99) 99
Dividends Receivable 52
Interest Receivable 613
Receivable for Investments Sold 860
Receivable for Variation Margin on Futures
Contracts 13
Other Assets 7
Payable for Investments Purchased (113)
Payable for Forward Commitments (2,423)
Payable for Investment Advisory Fees (38)
Payable for Administrative Fees (2)
Payable for Trustees' Deferred Compensation
Plan-Note F (7)
Unrealized Loss on Swap Agreements (34)
Unrealized Loss on Forward Foreign Currency
Contracts (70)
Other Liabilities (43)
-------
315
----------------------------------------------------------
NET ASSETS (100%) $34,827
----------------------------------------------------------
INSTITUTIONAL CLASS
----------------------------------------------------------
NET ASSETS
Applicable to 3,771,341 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $34,827
----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.23
----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $41,725
Undistributed Net Investment Income (Loss) (1,635)
Undistributed Realized Net Gain (Loss) (1,666)
Unrealized Appreciation (Depreciation) on:
Investment Securities (3,518)
Foreign Currency Transactions (62)
Futures and Swaps (17)
----------------------------------------------------------
NET ASSETS $34,827
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <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 Services, 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.
TBA Security is subject to delayed delivery. See Note A7 to
Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
102
<PAGE> 105
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
INTERNATIONAL FIXED INCOME PORTFOLIO
The International Fixed Income Portfolio invests in high-grade fixed-income
securities, using a benchmark that is 100 percent invested in foreign bonds.
Most investments consist of securities issued by governments and supranational
organizations such as the World Bank, although the Portfolio may also hold
corporate bonds, mortgages, and other fixed-income securities. The Portfolio may
also invest to a limited extent in U.S. securities when the U.S. fixed-income
market is more attractive than foreign markets. The Portfolio is actively
managed by Miller Anderson & Sherrerd's global fixed-income team, which makes
strategic decisions about portfolio structure and composition.
The MAS global fixed-income team makes five key decisions in building the
Portfolio. The first decision relates to the amount of interest-rate risk in the
Portfolio. Bond values generally increase when interest rates fall and decrease
when rates rise. Consequently, there are better times to bear interest-rate risk
than others. MAS bases the interest-rate decision on the level of real interest
rates and the steepness of the yield curve in bond markets throughout the world.
When real interest rates are high and longer-maturity bonds have significantly
higher yields than short-term bonds, historically that has been an attractive
time to invest in fixed-income securities with longer-than-average maturities.
The second key decision is the choice of fixed-income markets throughout the
world in which the Portfolio will invest. MAS bases this decision on comparisons
of real interest rates and yield-curve slopes across fixed-income markets.
Historically it has been advantageous to invest in countries that offer higher
real interest rates than those available in other countries. Since the best bond
markets do not necessarily correspond to the best currency markets, MAS
separates the bond decision from the third key decision of currency management.
MAS manages currency exposures actively, and the Portfolio hedges (at least in
part) those currencies that are judged to be overvalued and in danger of
weakening.
The fourth and fifth decisions relate to the Portfolio's level of credit and
prepayment risk. MAS's research shows that bearing credit risk often offers
financial rewards and that a diversified approach to credit risk adds to overall
portfolio returns. Similarly, MAS actively manages the amount of prepayment or
call risk in the Portfolio. Many corporate bonds and most mortgages contain an
option to prepay the principal amount prior to maturity. As a result, these
bonds generally offer higher yields, and the global fixed-income team calculates
whether the additional yield is sufficient to compensate for the embedded
prepayment-option risk.
Absolute returns for both the Portfolio and its benchmark were negative over the
past fiscal year, because of the large depreciation of most foreign currencies
versus the U.S. dollar. The Portfolio's return was somewhat lower than that of
its benchmark because of its active allocation to the Euro against the Japanese
yen. Interest rate positioning added to relative returns.
Over the course of the fiscal year, the Portfolio built up an above-benchmark
exposure to the Euro against the yen. The Euro had depreciated by a significant
margin since its introduction on January 1, 1999, and looked attractive versus
the yen both on valuation grounds and because of a higher relative yield. The
Euro continued to depreciate during the year, however, depressing relative
portfolio returns. Small exposures to the Canadian and Australian dollars versus
the U.S. dollar also hurt relative performance as these currencies fell.
Management of interest rate risk added to the Portfolio's return relative to the
benchmark. Overall duration was held near that of the benchmark throughout the
year, and so had little impact on relative returns. Relative to the benchmark,
however, the Portfolio held a lower exposure to Japanese government debt offset
by additional holdings of continental European and U.S. bonds. This positioning
added to relative returns, since Japanese yields rose slightly while yields in
the other two regions fell.
During the past year the Portfolio continued to boost its exposure to
non-sovereign bonds, primarily issued in Euros. The Euro-denominated corporate
bond market has been expanding rapidly, increasing the number of available
issuers. These securities generally had higher yields than the government bonds
that they replaced in the Portfolio, and this yield advantage did make a
positive incremental contribution to relative returns.
--------------------------------------------------------------------------------
103
<PAGE> 106
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS International Fixed Income Salomon World Gov't Bond Ex-US
<S> <C> <C>
* 1000 1000
94 1010 1027
95 1175 1210
96 1247 1259
97 1253 1248
98 1383 1377
99 1370 1398
00 1257 1288
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS INTERNATIONAL SALOMON WORLD GOV'T
FIXED INCOME BOND EX-U.S. INDEX
---------------------------------------------------------------------
<S> <C> <C>
One Year (8.23)% (7.86)%
Five Years 1.36% 1.26%
Since Inception 3.63% 4.02%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. Foreign investments are subject to certain risks such as
currency fluctuations, economic instability, and political developments.
Total returns for the Portfolio reflect expenses waived and/or reimbursed by the
Adviser for certain periods. Without such waivers and/or reimbursements, total
returns would have been lower.
* The International Fixed Income Portfolio commenced operations on 4/29/94.
Total returns are compared to the Salomon World Government Bond Ex-U.S. Index,
an unmanaged market index.
--------------------------------------------------------------------------------
104
<PAGE> 107
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERNATIONAL FIXED
INCOME PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (86.1%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
BRITISH POUND (6.2%)
European Investment Bank
5.50%, 12/7/09 AAA GBP 1,415 $ 1,991
KFW International
Finance Corp.
5.625%, 12/7/09 AAA 705 1,007
Orange plc
8.625%, 8/1/08 BBB+ 505 788
United Kingdom Treasury
Bill
8.00%, 6/10/03 AAA 2,040 3,179
-----------------------------------------------------------
GROUP TOTAL 6,965
-----------------------------------------------------------
CANADIAN DOLLAR (3.6%)
Government of Canada
7.50%, 3/1/01 AAA CAD 4,025 2,691
10.00%, 6/1/08 AAA 1,635 1,362
-----------------------------------------------------------
GROUP TOTAL 4,053
-----------------------------------------------------------
DANISH KRONE (6.4%)
Kingdom of Denmark
5.00%, 8/15/05 AAA DKK 46,200 5,323
8.00%, 5/15/03 AAA 14,640 1,828
-----------------------------------------------------------
GROUP TOTAL 7,151
-----------------------------------------------------------
EURO (45.9%)
Ahold Finance
6.375%, 6/8/05 AA- EUR 350 312
Bundesrepublik
Deutschland
6.00%, 7/4/07 AAA 1,295 1,193
Buoni Poliennali Del Tes
4.25%, 11/1/09 AA 2,785 2,235
(+) Clear Channel
Communications, Inc.
6.50%, 7/7/05 BBB- 300 266
Colt Telecom Group plc
7.625%, 7/31/08 B+ 741 591
Deutsche Telekom
International Finance
6.625%, 7/6/10 AA- 500 448
Deutschland Republic
6.875%, 5/12/05 AAA 3,445 3,247
## GMAC Global Bond
5.50%, 2/2/05 A 1,000 869
Government of Finland
9.50%, 3/15/04 AA- 2,173 2,169
Government of France
O.A.T.
5.25%, 4/25/08 AAA 2,675 2,356
8.50%, 10/25/19 AAA 3,700 4,347
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
Government of Germany
4.00%, 7/4/09 AAA EUR 1,670 $ 1,309
6.00%, 1/4/07 AAA 950 873
6.25%, 1/4/24 AAA 6,095 5,788
6.50%, 7/4/27 AAA 5,240 5,160
8.375%, 5/21/01 AAA 2,162 1,947
Household Finance Corp.
5.125%, 6/24/09 A 725 577
International Bank for
Reconstruction &
Development
7.125%, 4/12/05 AAA 2,664 2,479
Kredit fuer Wiederaufbau
5.00%, 1/4/09 AAA 1,049 887
# Lloyds TSB Bank plc
5.625%, 7/15/09 A+ 750 600
Mannesmann Finance BV
4.75%, 5/27/09 A 490 385
Marconi Corp. plc
6.375%, 3/30/10 BBB+ 500 433
Netherlands Government
8.25%, 2/15/07 AAA 5,084 5,180
Republic of Italy BTPS
10.00%, 8/1/03 AA 5,901 5,845
Rolls-Royce plc
6.375%, 6/14/07 A- 400 355
@ Spanish Government
5.15%, 7/30/09 AA+ (c)-- --
Stora Enso Oyj
6.375%, 6/29/07 BBB+ 400 351
Tecnost International
Finance NV
6.125%, 7/30/09 BBB+ 525 433
Tyco International Group
S.A.
6.125%, 4/4/07 A- 475 412
(+) Unicredito Italia
8.046%, 10/29/49 A- 185 163
+# VNU NV
6.625%, 5/30/07 A3 400 357
-----------------------------------------------------------
GROUP TOTAL 51,567
-----------------------------------------------------------
JAPANESE YEN (13.8%)
(++) Credit Locale de
France
6.00%, 10/31/01 AA+ JPY 311,000 3,054
European Investment Bank
3.00%, 9/20/06 AAA 203,000 2,053
Export-Import Bank of
Japan
2.875%, 7/28/05 AAA 290,000 2,907
Government of Japan
0.90%, 12/22/08 AAA 734,000 6,355
(++) International Bank
for Reconstruction &
Development
6.75%, 6/18/01 AAA 121,000 1,171
-----------------------------------------------------------
GROUP TOTAL 15,540
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
105
<PAGE> 108
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERNATIONAL FIXED INCOME
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
SWEDISH KRONA (3.6%)
Swedish Government
6.00%, 2/9/05 AAA SEK 25,000 $ 2,695
13.00%, 6/15/01 AAA 12,625 1,390
-----------------------------------------------------------
GROUP TOTAL 4,085
-----------------------------------------------------------
UNITED STATES DOLLAR (6.6%)
Federal Home Loan
Mortgage Corp.
6.75%, 9/15/29 Agy $ 3,450 3,390
Federal National
Mortgage Association
7.125%, 6/15/10 Agy 2,300 2,356
U.S. Treasury Bond
8.75%, 8/15/20 Tsy 350 455
(!) U.S. Treasury Note
6.25%, 1/31/02 Tsy 1,250 1,250
-----------------------------------------------------------
GROUP TOTAL 7,451
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $108,140) 96,812
-----------------------------------------------------------
CASH EQUIVALENTS (10.7%)
-----------------------------------------------------------
DISCOUNT NOTE (6.2%)
Federal National Mortgage
Association
6.42%, 10/12/00 Agy 7,000 6,986
-----------------------------------------------------------
REPURCHASE AGREEMENT (4.5%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $5,072,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $5,120 5,069 5,069
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $12,055) 12,055
-----------------------------------------------------------
TOTAL INVESTMENTS (96.8%) (Cost $120,195) 108,867
-----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.2%)
Cash 36
Foreign Currency (Cost $116) 108
Foreign Currency Held as Collateral on Futures
(Cost $793) 793
Interest Receivable 2,345
Receivable for Investments Sold 1,130
Receivable for Fund Shares Sold 27
Receivable for Variation Margin on Futures
Contracts 196
Unrealized Gain on Forward Foreign Currency
Contracts 95
Other Assets 15
Payable for Investments Purchased (981)
Payable for Investment Advisory Fees (100)
Payable for Administrative Fees (7)
Payable for Trustees' Deferred Compensation
Plan-Note F (14)
Other Liabilities (54)
--------
3,589
-----------------------------------------------------------
NET ASSETS (100%) $112,456
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 12,657,136 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $112,456
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 8.88
-----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $129,843
Undistributed Net Investment Income (Loss) (4,712)
Undistributed Realized Net Gain (Loss) (1,595)
Unrealized Appreciation (Depreciation) on:
Investment Securities (11,328)
Foreign Currency Transactions (23)
Futures 271
-----------------------------------------------------------
NET ASSETS $112,456
-----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <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 Investor 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 security-rate disclosed is as
of September 30, 2000.
@ Value is less than $500.
(c) Face value is less than $500.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
106
<PAGE> 109
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
INTERMEDIATE DURATION PORTFOLIO
The Intermediate Duration Portfolio invests in a broad array of fixed-income
securities--including U.S. Treasury and Agency securities, investment-grade
corporate obligations, and mortgage-backed issues--while maintaining a high
overall credit quality and an overall duration between two and five years. The
fund is managed by the MAS fixed-income team, using many of the same principles
and strategies used within the MAS Funds' core fixed-income strategies.
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. 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.
The fifth decision involves 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.
Due to the significant widening of yield spreads between the Treasury and
non-Treasury sectors, the return on the Portfolio was 41 basis points behind the
Lehman Intermediate Government/ Credit 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 most 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
period 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.
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
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.
At fiscal year-end, the Portfolio was well positioned to take advantage of the
extraordinarily attractive intermediate-term opportunities in the non-Treasury
sectors while continuing to pursue a high-quality, call-protected, diversified
investment strategy.
--------------------------------------------------------------------------------
107
<PAGE> 110
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Intermediate MAS Intermediate Lehman Intermediate
Duration Institutional Duration Investment Gov't/Credit
<S> <C> <C> <C>
* 1000 1000
95 1114 1113
96 1184 1170
97 1289 1266
98 1400 1398
99 1409 1407
00 1491 1489 1495
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS INTERMEDIATE DURATION LEHMAN
------------------------------ INTERMEDIATE
INSTITUTIONAL (M) INVESTMENT (K) GOV'T/CREDIT INDEX
--------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 5.84% 5.68% 6.25%
Five Years 6.01% 5.98% 6.08%
Since Inception 6.90% 6.87% 6.94%
</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.
(M) Represents an investment in the Institutional Class.
(K) Represents an investment in the Investment Class which commenced operations
8/16/99. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
Total returns for the Institutional Class of the Portfolio reflect expenses
reimbursed by the Adviser for certain periods. Without such waivers and/or
reimbursements, total returns would have been lower.
* The Intermediate Duration Portfolio commenced operations on 10/3/94. Total
returns are compared to the Lehman Brothers Intermediate Government/Credit
Bond Index, an unmanaged market index. Effective July 1, 2000, the Lehman
Intermediate Government/Corporate Index was renamed the Lehman Intermediate
Government/Credit Index.
--------------------------------------------------------------------------------
108
<PAGE> 111
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (105.8%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (40.7%)
Federal Home Loan
Mortgage Corporation,
Gold Pools:
9.50%, 12/1/22 Agy $ 204 $ 216
10.00%, 6/1/17 Agy 163 176
10.50%, 5/1/19 Agy 20 22
11.00%, 7/1/13 Agy 53 58
October TBA
6.50%, 10/1/30 Agy 1,500 1,440
7.00%, 10/15/30 Agy 1,450 1,421
8.50%, 10/1/30 Agy 6,250 6,409
November TBA
7.00%, 11/1/30 Agy 1,620 1,587
Federal National Mortgage
Association, Conventional
Pools:
9.50%, 12/1/21 Agy 464 492
10.00%, 2/1/21-1/1/27 Agy 125 134
10.50%, 12/1/10 Agy 55 60
October TBA
7.00%, 10/1/30 Agy 1,900 1,861
8.50%, 10/1/30 Agy 1,400 1,432
Government National
Mortgage Association:
Adjustable Rate Mortgages:
6.375%, 3/20/25 Tsy 126 127
6.50%, 10/20/27 Tsy 384 385
6.875%, 4/20/25-6/20/25 Tsy 528 530
7.00%, 3/20/25-11/20/25 Tsy 1,545 1,555
7.375%, 6/20/25-10/20/27 Tsy 177 178
11.00%, 3/15/10 Tsy 38 42
Various Pools:
6.50%, 1/20/28 Tsy 112 113
6.625%, 9/20/27 Tsy 262 264
7.375%, 2/20/27-11/20/27 Tsy 621 624
9.50%, 11/15/16-12/15/21 Tsy 1,291 1,375
10.00%, 1/15/16-2/15/28 Tsy 2,002 2,156
10.50%, 3/15/06-2/15/18 Tsy 303 331
11.00%, 7/15/10-8/15/27 Tsy 774 856
11.50%, 6/15/13 Tsy 51 57
12.00%, 12/15/12-5/15/14 Tsy 36 41
12.50%, 12/15/10 Tsy 14 16
October TBA
7.00%, 10/15/29 Tsy 2,700 2,659
-----------------------------------------------------------
GROUP TOTAL 26,617
-----------------------------------------------------------
ASSET BACKED CORPORATES (14.4%)
AFG Receivables Trust,
Series 97-A A
6.35%, 10/15/02 AAA 44 43
Associates Automobile
Receivables Trust,
Series 00-1 A3
7.30%, 1/15/04 AAA 475 478
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
Chevy Chase Auto
Receivables Trust,
Series:
97-4 A
6.25%, 6/15/04 AAA $ 85 $ 85
98-1 A
5.97%, 10/20/04 AAA 295 293
Citibank Credit Card
Issuance Trust,
Series:
00-A1 A1
6.90%, 10/17/05 AAA 575 577
00-C1 C1
7.45%, 9/15/05 AAA 185 185
Citibank Credit Card Master
Trust I,
Series 99-7 A
6.65%, 11/15/06 AAA 475 472
CPS Auto Grantor Trust,
Series:
96-3 A
6.30%, 8/15/02 AAA 46 46
97-2 A
6.65%, 10/15/02 AAA 86 86
98-1 A
6.00%, 8/15/03 AAA 292 290
Daimler Benz Auto Grantor
Trust,
Series:
97-A A
6.05%, 3/31/05 AAA 41 41
DaimlerChrysler AG,
Series 00-C A3
6.82%, 9/6/04 AAA 440 441
First Merchants Auto
Receivables Corp.,
Series:
96-C A2
6.15%, 7/15/01 AAA 41 41
(+) 97-2 A1
6.85%, 11/15/02 AAA 21 21
(+) First Mortgage
Acceptance Corp., Loan
Receivables Trust, Series
96-BA 1
7.629%, 11/1/18 A 79 59
First Security Auto Grantor
Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 70 70
00-1 A3
7.30%, 7/15/04 AAA 460 464
Ford Credit Auto Owner
Trust,
Series:
99-D A4
6.40%, 10/15/02 AAA 600 598
00-E A4
6.74%, 6/15/04 AAA 480 481
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
109
<PAGE> 112
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
General Electric Home Equity
Loan Asset-Backed
Certificates,
Series 91-1 B
8.70%, 9/15/11 AAA $ 227 $ 227
(+)++ Global Rated Eligible
Asset Trust,
Series 98-A A1
7.45%, 3/15/06 N/R 336 81
Green Tree Home Equity Loan
Trust,
Series 99-C A1
5.99%, 7/15/30 AAA 146 146
Green Tree Lease Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 46 46
(+) Health Care Receivables
Securitization Program,
Series 97-1 A
6.815%, 7/1/01 N/R 196 196
Honda Auto Receivables
Grantor Trust,
Series 97-B A5
5.95%, 5/15/03 AAA 80 80
(+) Long Beach Acceptance
Auto Grantor Trust,
Series:
97-2 A
6.69%, 9/25/04 AAA 48 48
98-1 A
6.19%, 1/25/05 AAA 72 71
MBNA Master Credit Card
Trust,
Series:
+ 99-I A1
6.40%, 1/18/05 Aaa 325 323
00-I A
6.90%, 1/15/08 AAA 115 116
MMCA Automobile Trust,
Series:
99-2 A1
6.30%, 6/15/02 AAA 207 207
00-1 A3
7.00%, 6/15/04 AAA 365 366
Nissan Auto Receivables
Owner Trust,
Series 00-A A3
7.01%, 9/15/03 AAA 325 326
Onyx Acceptance Grantor
Trust,
Series:
97-2 A
6.35%, 10/15/02 AAA 95 95
97-3 A
6.35%, 1/15/04 AAA 68 67
Peco Energy Transition
Trust,
Series 00-A A2
7.30%, 9/1/04 AAA 425 428
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Rental Car Finance
Corp.,
Series 97-1 A2
6.45%, 8/25/04 AA $ 255 $ 252
## Residential Funding
Mortgage Securities II,
Series 00-HI4
7.39%, 4/25/11 AAA 375 376
(+) Team Fleet Financing
Corp., Series 97-1 A
7.35%, 5/15/03 A- 300 301
Union Acceptance Corp.,
Series:
96-B A
6.45%, 7/9/03 AAA 127 127
96-C A2
6.51%, 11/8/02 AAA 135 134
97-A A2
6.375%, 10/8/03 AAA 284 283
97-B A2
6.70%, 6/8/03 AAA 275 274
USAA Auto Loan Grantor
Trust,
Series 97-1 A
6.07%, 5/15/04 AAA 60 60
-----------------------------------------------------------
GROUP TOTAL 9,401
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (2.0%)
## Federal Home Loan Mortgage
Corporation,
Series 1710-D IO
7.07%, 6/15/20 Agy 333 334
Federal National Mortgage Association,
Series:
96-14 PC PO
12/25/23 Agy 15 9
## 97-24 FG REMIC
7.175%, 9/18/22 Agy 55 55
97-53 PI IO PAC
8.00%, 8/18/27 Agy 762 206
191 IO
8.00%, 1/1/28 Agy 320 89
270 2 IO
8.50%, 9/1/23 Agy 547 148
281 2 IO
9.00%, 11/1/26 Agy 470 128
291 2 IO
8.00%, 11/1/27 Agy 471 130
Government National
Mortgage Association,
Series 97-13 SB Inv Fl IO
1.375%, 9/16/27 Tsy 3,750 232
-----------------------------------------------------------
GROUP TOTAL 1,331
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
110
<PAGE> 113
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL MORTGAGES (3.8%)
Asset Securitization Corp.,
Series:
96-MD6 A1C
7.04%, 11/13/26 AAA $ 100 $ 99
+## 97-D5 PS1 IO
1.614%, 2/14/41 Aaa 1,975 155
+## Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 99-WF2 A1
6.36%, 6/15/08 Aaa 355 354
(+) Carousel Center Finance,
Inc.,
Series 1 C
7.527%, 11/15/07 BBB+ 50 50
Chase Commercial Mortgage
Securities Corp.,
Series 99-2 A1
7.03%, 10/15/08 AAA 357 358
(+) DLJ Commercial Mortgage
Corp.,
Series 98-CG1 A1 A
6.11%, 12/10/07 AAA 451 437
DLJ Mortgage Acceptance
Corp.,
Series 97-CF1 S IO
1.086%, 3/15/17 AAA 1,248 49
First-Union Chase Commercial
Mortgage
6.363%, 6/15/08 AAA 297 290
+## GMAC Commercial Mortgage
Securities, Inc.,
Series 97-C2 X IO
1.264%, 4/15/27 Aaa 3,509 170
+## GS Mortgage Securities
Corp. II,
Series 97-GL X2 IO
1.066%, 7/13/30 Aaa 890 33
Nationslink Funding Corp.,
Series 98-2 A1
6.001%, 11/20/07 AAA 332 321
(+) Park Avenue Finance
Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R 183 185
-----------------------------------------------------------
GROUP TOTAL 2,501
-----------------------------------------------------------
ENERGY (0.8%)
CMS Panhandle Holdings Co.
6.50%, 7/15/09 BBB- 240 217
Conoco, Inc.
6.95%, 4/15/29 A- 320 296
-----------------------------------------------------------
GROUP TOTAL 513
-----------------------------------------------------------
FEDERAL AGENCY (6.5%)
Federal National Mortgage
Association
7.125%, 6/15/10 Agy 2,450 2,510
7.125%, 2/15/05 Agy 1,700 1,735
-----------------------------------------------------------
GROUP TOTAL 4,245
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
FINANCE (17.6%)
American General Finance
Corp.
5.75%, 11/1/03 A+ $ 210 $ 203
6.75%, 11/15/04 A+ 120 118
(+) Anthem Insurance Cos.,
Inc.,
Series A
9.00%, 4/1/27 BBB+ 225 183
Bank of Boston
6.625%, 12/1/05 A- 110 107
Bank of New York Co.
8.50%, 12/15/04 A 310 326
Bank One Corp.
6.00%, 2/17/09 A- 240 217
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 430 391
Chase Manhattan Corp.
6.00%, 2/15/09 A 170 156
Citicorp,
Series F
6.375%, 11/15/08 A+ 305 288
Donaldson, Lufkin &
Jenrette, Inc.
8.00%, 3/1/05 A- 175 180
EOP Operating LP
6.763%, 6/15/07 BBB 255 241
(+) Equitable Life Assurance
Society of the U.S.,
Series 1A
6.95%, 12/1/05 A+ 275 271
(+) Farmers Insurance
Exchange
8.625%, 5/1/24 A+ 300 297
(+) First Hawaiian Bank,
Series A
6.93%, 12/1/03 A- 350 341
+ FleetBoston Financial
Corp.
8.125%, 7/1/04 A3 200 206
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 125 124
Ford Motor Credit Co.
5.75%, 2/23/04 A 305 291
6.125%, 4/28/03 A 290 284
6.70%, 7/16/04 A 85 83
General Electric Capital
Corp.
7.25%, 5/3/04 AAA 520 528
General Motors Acceptance
Corp.
7.50%, 7/15/05 A 255 258
Goldman Sachs Group, L.P.
7.625%, 8/17/05 A+ 295 301
Hartford Financial Services
Group, Inc.
7.75%, 6/15/05 A 85 87
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
111
<PAGE> 114
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Hartford Life Corp.
7.65%, 6/15/27 A $ 200 $ 192
Homeside Lending, Inc.
6.875%, 6/30/02 A+ 201 201
Household Finance Corp.
6.00%, 5/1/04 A 85 82
6.08%, 3/8/06 A 285 275
(+) Hyatt Equities LLC
7.00%, 5/15/02 BBB+ 635 623
(+) John Hancock Global
Funding
7.90%, 7/2/10 AA+ 280 289
Marsh & McLennan Companies,
Inc.
6.625%, 6/15/04 AA- 225 222
Mellon Funding Corp.
7.50%, 6/15/05 A+ 260 265
(+) Metropolitan Life
Insurance Co.
6.30%, 11/1/03 A+ 445 435
Northern Trust Corp.
7.10%, 8/1/09 A+ 350 344
Norwest Financial, Inc.
5.625%, 2/3/09 A+ 300 267
Paine Webber Group, Inc.
6.375%, 5/15/04 BBB+ 295 288
(+) PNC Institutional
Capital,
7.95%, 12/15/26 BBB+ 300 271
(+) Prime Property Funding
II, Inc.
6.80%, 8/15/02 A 240 237
7.00%, 8/15/04 A 120 117
(+) Prudential Insurance Co.
8.30%, 7/1/25 A- 150 152
Smith Barney Holdings
7.00%, 3/15/04 A 170 170
U.S. Bancorp
6.875%, 12/1/04 A 375 371
(+) USAA Capital Corp.
7.41%, 6/30/03 AAA 280 284
Washington Mutual, Inc.,
8.60%, 2/1/02 BBB+ 195 198
Wells Fargo Co.
6.625%, 7/15/04 A+ 210 208
(+) World Financial
Properties,
Series 96 WFP-B
6.91%, 9/1/13 AA- 571 547
-----------------------------------------------------------
GROUP TOTAL 11,519
-----------------------------------------------------------
INDUSTRIALS (11.4%)
Alcoa, Inc.
7.25%, 8/1/05 A+ 185 188
Becton, Dickinson & Co.
6.70%, 8/1/28 A+ 180 154
Clear Channel
Communications, Inc.
7.25%, 9/15/03 BBB- 330 330
Cox Communications, Inc.
7.50%, 8/15/04 BBB+ 280 282
DaimlerChrysler AG
6.90%, 9/1/04 A+ 485 482
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Dayton Hudson Corp.
6.65%, 8/1/28 A $ 125 $ 107
6.75%, 1/1/28 A 65 57
Deere & Co.
6.55%, 7/15/04 A+ 350 343
Delphi Automotive Systems
Corp.
7.125%, 5/1/29 BBB 60 51
Dow Chemical Co.
7.00%, 8/15/05 A 285 286
(+) EES Coke Battery Co.,
Inc.
7.125%, 4/15/02 BBB 84 83
Federated Department Stores,
Inc.
6.30%, 4/1/09 BBB+ 240 209
(+) Florida Windstorm
7.125%, 2/25/19 AAA 285 268
Hertz Corp.
7.00%, 7/1/04 A- 270 267
Hewlett Packard Co.
7.15%, 6/15/05 AA- 280 284
Honeywell International,
Inc.
7.50%, 3/1/10 A 65 66
Kroger Co.
7.70%, 6/1/29 BBB- 210 194
Lowe's Companies, Inc.
6.875%, 2/15/28 A 305 265
Marriott International, Inc.
8.125%, 4/1/05 BBB+ 140 143
May Department Stores Co.
5.95%, 11/1/08 A 200 179
6.875%, 11/1/05 A+ 85 83
(++) Neiman Marcus Group, Inc.
6.65%, 6/1/08 BBB 315 284
News America, Inc.
6.625%, 1/9/08 BBB- 300 280
Pharmacia Corp.
6.60%, 12/1/28 AA- 285 254
Philips Petroleum Co.
8.50%, 5/25/05 BBB- 230 243
Proctor & Gamble Co.
6.60%, 12/15/04 AA 360 359
Raytheon Co.
5.70%, 11/1/03 BBB- 105 101
Sun Microsystems, Inc.
7.00%, 8/15/02 BB+ 325 326
U.S. Airways Corp.,
Series 98-1A
6.85%, 1/30/18 A+ 358 322
United Technologies Corp.
6.70%, 8/1/28 A+ 300 270
USA Waste Services, Inc.
7.00%, 7/15/28 BBB 150 123
Walt Disney Co.
7.30%, 2/8/05 A 385 392
Waste Management, Inc.
6.125%, 7/15/01 BBB 145 142
-----------------------------------------------------------
GROUP TOTAL 7,417
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
112
<PAGE> 115
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
NON-AGENCY FIXED RATE MORTGAGES (0.1%)
## Resolution Trust Corp.,
Series 92-5C CMO
8.60%, 1/25/26 AA $ 33 $ 33
-----------------------------------------------------------
TAXABLE MUNICIPAL (0.6%)
New York State Power
Authority Revenue Bonds,
Series B
6.11%, 2/15/11 AAA 400 395
-----------------------------------------------------------
TELEPHONES (2.4%)
AT&T Corp.
6.50%, 3/15/29 AA- 225 187
BellSouth
Telecommunications, Inc.
6.375%, 6/1/28 AA- 185 157
Comcast Cable Communications
8.375%, 5/1/07 BBB 255 266
GTE Corp.
6.94%, 4/15/28 A+ 325 295
(++) MCI WorldCom, Inc.
6.50%, 4/15/10 A- 200 185
6.95%, 8/15/28 A- 240 219
(+) Qwest Capital Funding
7.75%, 8/15/06 BBB+ 270 275
-----------------------------------------------------------
GROUP TOTAL 1,584
-----------------------------------------------------------
TRANSPORTATION (1.1%)
Continental Airlines,
Series 98-1 A
6.648%, 9/15/17 AA+ 322 302
Norfolk Southern Corp.
7.875%, 2/15/04 BBB+ 30 31
Union Pacific Corp.
6.34%, 11/25/03 BBB- 400 390
-----------------------------------------------------------
GROUP TOTAL 723
-----------------------------------------------------------
UTILITIES (0.8%)
National Rural Utilities
Corp.
7.375%, 2/10/03 AA 275 278
Niagara Mohawk Power Co.
Senior Notes
7.375%, 7/1/03 BBB- 272 273
-----------------------------------------------------------
GROUP TOTAL 551
-----------------------------------------------------------
YANKEE (3.6%)
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 165 136
AT&T Canada, Inc.
7.625%, 3/15/05 BBB 285 287
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- $ 225 $ 232
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 385 352
Inter-American Development
Bank
7.00%, 6/16/03 AAA 295 298
(+) Oil Enterprises Ltd.
6.239%, 6/30/08 AAA 450 430
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 115 110
Republic of Italy
7.25%, 2/7/05 AA 150 153
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A- 345 353
-----------------------------------------------------------
GROUP TOTAL 2,351
-----------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $70,097) 69,181
-----------------------------------------------------------
PREFERRED STOCK (0.7%)
-----------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C> <C>
MORTGAGE-OTHER (0.7%)
(+)+ Home Ownership
Funding Corp.
13.331% (Cost $488) Aaa 650 487
-----------------------------------------------------------
CASH EQUIVALENTS (18.1%)
-----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
------
<S> <C> <C> <C>
DISCOUNT NOTES (12.2%)
Federal Home Loan Bank
6.40%, 10/11/00 Agy $ 5,000 4,991
Federal National Mortgage Association
6.42%, 10/26/00 Agy 3,000 2,987
-----------------------------------------------------------
GROUP TOTAL 7,978
-----------------------------------------------------------
REPURCHASE AGREEMENT (5.9%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $3,819, collateralized
by various U.S. Government
Obligations, due 11/2/00-3/29/01,
valued at $3,855 3,817 3,817
-----------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $11,795) 11,795
-----------------------------------------------------------
TOTAL INVESTMENTS (124.6%) (Cost $82,380) 81,463
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
113
<PAGE> 116
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
INTERMEDIATE DURATION
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (-24.6%)
Dividends Receivable $ 22
Interest Receivable 655
Receivable for Investments Sold 206
Receivable for Forward Commitments 1,584
Receivable for Fund Shares Sold 4
Other Assets 7
Dividend Payable (1)
Payable for Forward Commitments (18,294)
Payable for Investment Advisory Fees (55)
Payable for Administrative Fees (4)
Payable for Shareholder Servicing Fees-Investment
Class (3)
Payable for Trustees' Deferred Compensation
Plan-Note F (6)
Payable for Variation Margin on Futures Contracts (4)
Unrealized Loss on Swap Agreements (186)
Other Liabilities (24)
--------
(16,099)
-----------------------------------------------------------
NET ASSETS (100%) $ 65,364
-----------------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 3,897,215 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 37,686
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.67
-----------------------------------------------------------
INVESTMENT CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 2,864,659 outstanding
shares of beneficial interest (unlimited
authorization, no par value) $ 27,678
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.66
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Paid in Capital $ 69,595
Undistributed Net Investment Income (Loss) 71
Undistributed Realized Net Gain (Loss) (3,267)
Unrealized Appreciation (Depreciation) on:
Investment Securities (917)
Futures and Swaps (118)
-----------------------------------------------------------
NET ASSETS $ 65,364
-----------------------------------------------------------
</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.
** Security is fair valued by the Adviser.
## Variable or floating rate security-rate disclosed is as
of September 30, 2000.
CMO Collateralized Mortgage Obligation.
Inv Fl 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.
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA Security is subject to delayed delivery. See Note A7 to
Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
114
<PAGE> 117
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME PORTFOLIO
The Multi-Market Fixed Income Portfolio seeks to provide investors with a
superior real rate of return by investing in domestic and foreign fixed-income
instruments and high yield securities. MAS believes that the portfolio's
strategy marks the evolution of U.S.-based core fixed income portfolios towards
a more substantial commitment to alternative asset classes, including high
yield, emerging market, and non-dollar securities. All investments made in these
sectors reflect MAS's assessment of market opportunities based upon our
value-driven investment philosophy. Through careful research, MAS has identified
a set of valuation tools which, when coupled with our expertise and experience,
enables us to identify undervalued sectors and securities through a variety of
market environments.
The Multi-Market Fixed Income Portfolio is actively managed by the MAS
fixed-income management team, which is responsible for portfolio construction
and risk control. The investment process combines top-down and bottom-up
elements. Using a top-down approach, the team first determines the appropriate
global interest rate and currency exposures, utilizing value-based decision
making tools. These include the relative level of real interest rates and an
analysis of yield curve slopes. The team then formulates a sector allocation
strategy that tilts the Portfolio towards the most favorable opportunities in
the market. This sector allocation is strongly influenced by the second element
in the process: bottom-up security selection. A goal of the Portfolio's strategy
is to incorporate the best individual investment ideas of each portfolio manager
specializing in U.S. high quality bonds, international bonds, U.S. high-yield
bonds, and emerging market debt. The primary valuation tool used to select
securities is an option-adjusted and credit-risk-adjusted yield spread.
For fiscal 2000, the Portfolio underperformed its custom blended benchmark. This
occurred primarily as a result of an overweighting in U.S. high-yield bonds, as
well as negative security selection within that sector. An overweight position
in the investment-grade corporate and mortgage-backed bond sectors also
detracted from performance, as did an emphasis on Europe in the international
non-dollar holdings. An offsetting positive factor was the overall interest rate
strategy; for most of the fiscal year, the Portfolio had a longer-than-benchmark
duration strategy, which aided performance as long-term interest rates began to
fall late in the fiscal year.
The global economic environment was characterized by strong growth for most of
the fiscal year, until signs of a slowdown began to impact the financial markets
during the summer months. This economic slowdown benefited the Portfolio's
interest rate strategy, although it led to concerns late in the fiscal year over
whether a significant slowdown in economic performance would hurt corporate
credit quality.
Yield spreads on high quality non-government sectors widened compared to U.S.
Treasuries during the fiscal year. Large U.S. government surpluses led to a
reduction in the supply of U.S. Treasury securities outstanding, and this
contributed to the outperformance of Treasuries versus non-government sectors
(high quality corporate bonds and mortgage-backed securities) for much of the
year. MAS came to view the value in high grade corporates and mortgages as being
exceptional in a historical context, and the Portfolio's allocation was
increased in response to these wider yield spreads. Prepayment activity in
mortgages remained low, and credit quality among the largest and best positioned
investment-grade corporate issuers remained relatively strong. Because of this,
the large risk premiums available did not appear to be justified by the level of
risk in these sectors.
The fixed-income team also viewed the high-yield market as representing good
value based on above average yield spreads. This strategy, however, hurt
performance significantly, especially in the second half of the fiscal year.
Because of investor concerns over credit quality, declining inflows into
high-yield mutual funds, and a strong correlation with a volatile stock market,
high-yield bonds underperformed high-quality bonds significantly.
Within the high-yield market, performance was also hurt by an emphasis on
certain sectors within the telecommunications industry. At fiscal year-end, MAS
continued to believe that the Portfolio's holdings in this industry had good
competitive positions and strong business outlooks; nevertheless, the decline in
the share prices of many of these issuers hurt the Portfolio's holdings
disproportionately.
The emerging markets debt sector performed relatively well in fiscal 2000. The
Portfolio benefited from this performance early in the year, then later reduced
positions to a more neutral weighting. At fiscal year-end, valuations were
perceived to be about fair. Looking ahead, the Portfolio maintains investments
in those countries believed to be best positioned to improve their sovereign
credit quality going forward.
While the Portfolio was underweight in the international non-dollar sector over
the course of the year, positioning within that sector hurt performance. The
Portfolio has had a preference for European fixed-income issues and
euro-currency over yen-based securities among the major non-dollar regions.
MAS's view of the relative economic circumstance still supports a focus on
Europe and MAS believes that the outlook for these securities is positive.
At fiscal year-end, the fixed-income team continued to see good value in the
global markets. The non-government sectors of the markets appeared particularly
attractive, and the U.S. high-yield market was likely to remain an area of
special emphasis in the Portfolio. The team believed that the large risk
premiums available in this market could lay the foundation for strong future
returns.
--------------------------------------------------------------------------------
115
<PAGE> 118
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Multi-Market Salomon Salomon World Gov't 60/12/10/10/8
Fixed Income Broad Bond Ex-US Blended Index
<S> <C> <C> <C> <C>
* 1000 1000 1000 1000
98 1027 1110 1105 1068
99 1051 1107 1121 1095
00 1099 1184 1033 1163
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS SALOMON
MULTI-MARKET SALOMON WORLD GOV'T 60/20/12/8
FIXED BROAD BOND EX-U.S. BLENDED
INCOME INDEX INDEX INDEX
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 4.50% 6.91% (7.86)% 6.15%
Since Inception 3.19% 5.80% 1.10% 5.16%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. Foreign investments are subject to certain risks such as
currency fluctuations, economic instability, and political developments.
High-yield fixed-income securities, otherwise known as "junk bonds," represent a
much greater risk of default and tend to be more volatile than higher-rated
bonds.
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 Multi-Market Fixed Income Portfolio commenced operations on 10/1/97. Total
returns are compared to the Salomon Broad Investment Grade Index and the
Salomon World Government Bond Ex-U.S. Index, both unmanaged market indices, as
well as the 60/20/12/8 Blended Index, an unmanaged index comprised of 60%
Salomon Broad Investment Grade Index, 20% Salomon World Government Bond
Ex-U.S. Index (one half hedged into U.S. dollars), 12% CS First Boston Global
High Yield Index, and 8% J.P. Morgan Emerging Markets Bond Index Global.
Previously, the blended index included the Salomon High Yield Index as its
high yield component, but the Adviser believes that the CS First Boston Global
High Yield Index has a more comprehensive coverage of geographic regions and
types of securities in which the Portfolio may invest. In addition, the
Adviser changed the JP Morgan Emerging Markets Bond Index to the JP Morgan
Emerging Markets Bond Index Global as the emerging market component of the
Blended Index because the Adviser feels that the JP Morgan Emerging Markets
Bond Index Global is more appropriate to its broader country and security
coverage.
--------------------------------------------------------------------------------
116
<PAGE> 119
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-MARKET FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS
U.S. FIXED INCOME (65.8%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (24.8%)
Federal Home Loan
Mortgage Corporation,
Conventional Pools:
11.00%, 5/1/20 Agy $ 234 $ 255
October TBA
6.00%, 10/1/29 Agy 5,450 5,094
Federal National Mortgage
Association,
Conventional Pools:
9.50%, 7/1/16 Agy 8 8
10.00% 10/1/16-4/1/27 Agy 382 411
October TBA
6.00%, 10/1/29 Agy 4,550 4,249
Government National
Mortgage Association;
Various Pools:
10.50%, 2/15/20 Tsy 242 264
October TBA
7.00%, 10/15/29 Tsy 4,500 4,431
-----------------------------------------------------------
GROUP TOTAL 14,712
-----------------------------------------------------------
ASSET BACKED CORPORATES (13.7%)
Arcadia Automobile
Receivables Trust,
Series:
97-D A3
6.20%, 5/15/03 AAA 250 249
98-A A3
5.90%, 11/15/02 AAA 161 160
(+)++ Securitized Multiple Asset
Rated Trust Series 97-3 A1
## 7.71%, 4/15/06 N/R 138 28
7.72%, 6/15/05 N/R 90 18
Conseco Finance
Securitizations Corp.,
Series:
99-H AF1
6.45%, 11/15/29 AAA 295 294
+ 00-1 A1
6.84%, 5/1/31 Aaa 386 386
CPS Auto Grantor Trust,
Series 97-2 A
6.65%, 10/15/02 AAA 277 277
Daimler Benz Auto
Grantor Trust,
Series 97-A A
6.05%, 3/31/05 AAA 280 279
Daimler Benz Vehicle
Trust,
Series 98-A A3
5.16%, 12/20/07 AAA 916 910
## First USA Credit Card
Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA 500 500
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C> <C>
Ford Credit Auto Owner
Trust,
Series:
98-B A3
5.85%, 10/15/01 AAA $ 239 $ 239
99-C A3
5.77%, 11/15/01 AAA 407 406
99-D A3
6.20%, 4/15/02 AAA 618 617
Green Tree Lease Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA 126 126
Greenpoint Manufactured
Housing,
Series 99-5 A1
6.75%, 4/25/01 AAA 366 364
Harley-Davidson Eaglemark
Motorcycle Trust,
Series:
98-2 A1
5.77%, 9/16/02 AAA 244 244
99-3 A1
6.22%, 2/15/04 AAA 278 277
+ HFC Home Equity Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 268 267
(+) Long Beach Acceptance
Auto Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 18 17
MMCA Automobile Trust,
Series 99-2 A1
6.30%, 6/15/02 AAA 368 367
(+) New Holland Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 335 335
Nissan Auto Receivables
Grantor Trust,
Series 98-A A
5.45%, 4/15/04 AAA 314 311
Nissan Auto Receivables
Owner Trust,
Series:
99-A A2
6.12%, 9/15/03 AAA 418 417
00-A A2
6.73%, 5/15/02 AAA 550 550
+ Peco Energy Transition
Trust,
Series 00-A A1
7.18%, 9/1/03 Aaa 500 501
-----------------------------------------------------------
GROUP TOTAL 8,139
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
117
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STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-MARKET FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED MORTGAGES (0.0%)
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R $ 430 $ 6
(+) 96-3 A YMA
10/25/26 N/R 430 1
Contimortgage Home
Equity Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 308 4
(+)@ 96-4 A11 YMA
1/15/28 AAA 307 --
96-4 A12 IO
1.05%, 1/15/28 AAA 55 1
(+)@ 96-4 A12 YMA
1/15/28 AAA 55 --
97-1 A10 IO
1.10%, 3/15/28 AAA 373 6
97-1 A10 YMA
3/15/28 N/R 372 1
-----------------------------------------------------------
GROUP TOTAL 19
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL
SERIES (0.1%)
Federal Home Loan
Mortgage Corporation,
Series:
1415-S Inv Fl IO
14.125%, 11/15/07 Agy 10 3
1476-S Inv Fl IO
REMIC PAC
3.893%, 2/15/08 Agy 110 10
1485-S Inv Fl IO REMIC
2.975%, 3/15/08 Agy 86 5
1600-SA Inv Fl IO REMIC
1.375%, 10/15/08 Agy 203 7
@ 1950-SC Inv Fl IO
1.375%, 10/15/22 Agy 8 --
Federal National Mortgage
Association,
Series:
90-118 S Inv Fl REMIC
22.444%, 9/25/20 Agy 4 6
92-186 S Inv Fl IO
2.794%, 10/25/07 Agy 182 12
96-14 PC PO
12/25/23 Agy 6 4
96-68 SC Inv Fl IO
REMIC
1.444%, 1/25/24 Agy 90 6
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
@ 97-30 SI Inv Fl IO
1.344%, 7/25/22 Agy $ 4 --
G92-53 S Inv Fl IO
REMIC
23.344%, 9/25/22 Agy 7 $ 4
@ Government National
Mortgage Association
Series:
96-12 S Inv Fl IO REMIC
1.875%, 6/16/26 Tsy 6 $ --
96-13 S Inv Fl IO REMIC
2.525%, 7/16/11 Tsy 4 --
96-17 S Inv Fl IO REMIC
2.925%, 8/16/26 Tsy 3 --
+@ Kidder Peabody
Mortgage Assets Trust,
Series 87 B IO CMO
9.50%, 4/22/18 Aaa (c)-- --
-----------------------------------------------------------
GROUP TOTAL 57
-----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.0%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 22 22
-----------------------------------------------------------
COMMERCIAL MORTGAGES (0.8%)
Asset Securitization
Corp.,
Series 96-MD6 A1C
7.04%, 11/13/26 AAA 60 59
(+) Crystal Run
Properties, Inc.,
Series A
7.393%, 8/15/06 AA 100 100
(+) DLJ Mortgage
Acceptance Corp.,
Series 97-CF1 S IO
1.086%, 3/15/17 AAA 538 21
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series:
96-C1 X2 IO
2.027%, 3/15/21 Aaa 224 13
97-C2 X IO
1.264%, 4/15/27 Aaa 2,211 107
## Nomura Asset
Securities Corp.,
Series 94-MD1 A3
8.026%, 3/15/18 N/R 35 35
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Park Avenue Finance
Corp.,
Series 97-C1 A1
7.58%, 5/12/07 N/R $ 91 $ 92
## Structured Asset
Securities Corp.,
Series:
96-CFL X1 IO
1.463%, 2/25/28 N/R 187 10
96-CFL X1A IO
0.830%, 2/25/28 N/R 99 1
96-CFL X2 IO
0.337%, 2/25/28 N/R 45 1
-----------------------------------------------------------
GROUP TOTAL 439
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
118
<PAGE> 121
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
FINANCE (11.1%)
(+) Anthem Insurance
Cos., Inc.
9.125%, 4/1/10 BBB+ $ 40 $ 37
Series A
9.00%, 4/1/27 BBB+ 230 187
Associates Corp. of North
America
6.00%, 7/15/05 A+ 200 192
Bank One Corp.
7.875%, 8/1/10 A- 175 179
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 315 287
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 360 329
Chase Manhattan Corp.
6.00%, 2/15/09 A 195 179
7.00%, 11/15/09 A 115 112
Citicorp, Inc.
Series F
6.375%, 11/15/08 A+ 165 156
Citigroup, Inc.
6.625%, 1/15/28 AA- 150 133
EOP Operating LP
6.763%, 6/15/07 BBB 555 524
7.50%, 4/19/29 BBB+ 135 119
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 100 99
Ford Motor Credit Co
7.375%, 10/28/09 A 600 587
General Motors Acceptance
Corp.
7.75%, 1/19/10 A 115 116
(+) Goldman Sachs Group
LP
6.50%, 2/25/09 A+ 190 177
Hartford Financial
Services Group, Inc.
7.90%, 6/15/10 A 190 195
(+) John Hancock
Financial Services,
Inc.
7.375%, 2/15/24 AA- 305 283
Lehman Brothers Holdings,
Inc.
8.25%, 6/15/07 A 90 93
Merrill Lynch & Co., Inc.
6.50%, 7/15/18 AA- 135 119
PNC Funding Corp.
7.50%, 11/1/09 BBB+ 395 394
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 135 122
(+) Prime Property
Funding II, Inc.
6.80%, 8/15/02 A 410 405
7.00%, 8/15/04 A 50 49
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A- $ 480 $ 486
State Street Corp.
7.65%, 6/15/10 A+ 140 143
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 310 282
Washington Mutual, Inc.,
Series A
8.206%, 2/1/27 BBB- 150 134
(+) World Financial
Properties,
Series 96 WFP-D
6.95%, 9/1/13 AA- 500 478
-----------------------------------------------------------
GROUP TOTAL 6,596
-----------------------------------------------------------
INDUSTRIALS (10.3%)
Albertson's, Inc.
7.45%, 8/1/29 A 330 297
Alcoa, Inc.
7.375%, 8/1/10 A+ 60 61
Clear Channel
Communications, Inc.
7.65%, 9/15/10 BBB+ 175 173
Conagra Foods, Inc.
7.875%, 9/15/10 BBB- 235 237
Conoco, Inc.
6.95%, 4/15/29 A- 300 276
Delphi Automotive Systems
Corp.
7.125%, 5/1/29 BBB 200 171
Federated Department
Stores, Inc.
6.90%, 4/1/29 BBB+ 415 328
(+) Florida Windstorm
7.125%, 2/25/19 AAA 485 456
Honeywell International,
Inc.
7.50%, 3/1/10 A 115 117
Kroger Co.
8.00%, 9/15/29 BBB- 395 378
Lennar Corp.
9.95%, 5/1/10 BB+ 195 200
Lockheed Martin Corp.
8.50%, 12/1/29 BBB- 305 322
Lowe's Companies, Inc.
6.50%, 3/15/29 A 330 273
6.875%, 2/15/28 A 60 52
Neiman Marcus Group, Inc.
6.65%, 6/1/08 BBB 285 257
News America Holdings,
Inc.
7.75%, 1/20/24 BBB- 185 172
8.875%, 4/26/23 BBB- 525 544
Pharmacia Corp.
6.60%, 12/1/28 AA- 285 254
(+)Raytheon Co.
8.20%, 3/1/06 BBB- 285 295
Sun Microsystems, Inc.
7.65%, 8/15/09 BBB+ 200 202
U.S. Airways Corp., Pass
Through Certificates
8.11%, 2/20/17 AAA $ 180 $ 183
USA Waste Services, Inc.
7.00% 7/15/28 BBB $ 225 $ 185
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
119
<PAGE> 122
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-MARKET FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA $ 50 $ 49
7.55%, 2/15/30 AA 310 319
Waste Management, Inc.
7.375%, 5/15/29 BBB 205 176
(+)+ XM Satellite Radio
Holdings, Inc.
14.00%, 3/15/10 Caa1 150 105
-----------------------------------------------------------
GROUP TOTAL 6,082
-----------------------------------------------------------
NON-AGENCY FIXED RATE MORTGAGES (0.1%)
*Household Bank,
Series 85-1 CMO
7.94%, 5/1/02
(acquired 10/10/97
cost $1) N/R 1 1
*## Magnolia Federal
Bank,
Series 84-2
9.12%, 10/1/07
(acquired 10/10/97
cost $3) N/R 3 3
## Resolution Trust
Corp.,
Series 92-5C CMO
8.598%, 1/25/26 AA 13 13
Ryland Acceptance Corp.
IV,
Series 79-A
6.65%, 7/1/11 AA 20 20
-----------------------------------------------------------
GROUP TOTAL 37
-----------------------------------------------------------
TELEPHONES (2.6%)
AT&T Corp.
6.50%, 3/15/29 AA- 400 333
BellSouth
Telecommunications,
Inc.
6.375%, 6/1/28 AA- 320 271
(+) GTE Corp.
6.94%, 4/15/28 A+ 425 386
(+) MCI WorldCom, Inc.
6.95%, 8/15/28 A- 555 505
-----------------------------------------------------------
GROUP TOTAL 1,495
-----------------------------------------------------------
YANKEE (2.3%)
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 350 289
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- 250 257
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 200 183
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BB $ 225 $ 188
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A 140 143
7.875%, 2/15/30 A 310 315
-----------------------------------------------------------
GROUP TOTAL 1,375
-----------------------------------------------------------
TOTAL U.S. FIXED INCOME SECURITIES (Cost $39,404) 38,973
-----------------------------------------------------------
INTERNATIONAL FIXED INCOME (16.7%)
-----------------------------------------------------------
BRITISH POUND (1.5%)
United Kingdom Treasury
Bills
8.00%, 6/10/03 AAA GBP 225 351
8.50%, 7/16/07 AAA 325 560
-----------------------------------------------------------
GROUP TOTAL 911
-----------------------------------------------------------
CANADIAN DOLLAR (2.2%)
Government of Canada
7.50%, 3/1/01 AAA CAD 1,930 1,290
-----------------------------------------------------------
DANISH KRONE (2.6%)
Kingdom of Denmark
5.00%, 8/15/05 AAA DKK 13,300 1,533
-----------------------------------------------------------
EURO (10.4%)
Government of Germany
6.50%, 7/4/27 AAA EUR 1,373 1,352
6.875%, 5/12/05 AAA 1,055 994
7.50%, 9/9/04 AAA 882 842
Government of Spain
5.15%, 7/30/09 AA+ 1,180 1,017
Republic of Italy BTPS
9.50%, 2/1/06 AA 1,795 1,880
(+)+ Unicredito Italia
Capital Trust
9.20%, 10/29/49 A1 100 101
-----------------------------------------------------------
GROUP TOTAL 6,186
-----------------------------------------------------------
TOTAL INTERNATIONAL FIXED INCOME SECURITIES
(Cost $12,992) 9,920
-----------------------------------------------------------
HIGH YIELD (17.0%)
-----------------------------------------------------------
AUTOMOTIVE (0.4%)
Hayes Lemmerz
International, Inc.
8.25%, 12/15/08 B $ 300 243
-----------------------------------------------------------
CABLE (3.9%)
Adelphia Communications
Corp.
7.75%, 1/15/09 B+ 315 263
(+) Cablevision S.A.
13.75%, 5/1/09 BB+ 100 89
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
120
<PAGE> 123
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
Charter Communications
Holdings
10.25%, 1/15/10 B+ $ 300 $ 294
CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 200 196
8.125%, 3/15/29 BB+ 100 99
Lenfest Communications,
Inc.
7.625%, 2/15/08 BBB 370 370
# NTL, Inc.
Series B
0.00%, 4/1/08 B- GBP 750 457
# RCN Corp.
0.00%, 10/15/07 B- $ 450 239
Series B
0.00%, 2/15/08 B- 175 84
# Telewest plc
0.00%, 4/15/09 B+ GBP 295 225
-----------------------------------------------------------
GROUP TOTAL 2,316
-----------------------------------------------------------
COMMUNICATIONS-FIXED (2.8%)
Global Crossing Holdings
Ltd.
9.625%, 5/15/08 BB $ 305 305
# Intermedia
Communications, Inc.
Series B
0.00%, 7/15/07 B 535 444
Netia Holdings S.A.
13.50%, 6/15/09 B EUR 275 224
Primus Telecommunications
Group, Inc.
11.25%, 11/15/09 B- $ 125 64
Series B
9.875%, 5/15/08 B- 210 104
# Qwest Communications
International, Inc.,
0.00%, 2/1/08 BB+ 525 436
# RSL Communications plc
0.00%, 3/1/08 B- 500 75
9.125%, 3/1/08 B- 55 11
-----------------------------------------------------------
GROUP TOTAL 1,663
-----------------------------------------------------------
COMMUNICATIONS-MOBILE (1.7%)
# Dolphin
Telecommunications
0.00%, 5/15/09 CCC+ 1,300 260
Globalstar LP/Capital
11.375%, 2/15/04 CCC 390 117
# Nextel Communications,
Inc.
0.00%, 9/15/07 B 500 410
# Winstar Communications,
Inc.
0.00%, 4/15/10 B- 750 240
-----------------------------------------------------------
GROUP TOTAL 1,027
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
FINANCE (0.7%)
GS Escrow Corp.
7.125%, 8/1/05 BB+ $ 410 $ 383
-----------------------------------------------------------
GAMING (1.5%)
Horseshoe Gaming Holdings
8.625%, 5/15/09 B+ 300 294
Park Place Entertainment
Corp.
7.875%, 12/15/05 BB+ 300 289
Station Casinos, Inc.
10.125%, 3/15/06 B+ 275 275
-----------------------------------------------------------
GROUP TOTAL 858
-----------------------------------------------------------
HEALTH CARE (2.5%)
Columbia/HCA Healthcare
Corp.
7.15%, 3/30/04 BB+ 250 241
7.19%, 11/15/15 BB+ 320 267
Fresenius Medical Capital
Trust II
7.875%, 2/1/08 B+ 300 284
Tenet Healthcare Corp.
8.625%, 1/15/07 BB- 475 470
Series B
8.125%, 12/1/08 BB- 250 239
-----------------------------------------------------------
GROUP TOTAL 1,501
-----------------------------------------------------------
HOTELS/LODGING/RESTAURANTS (1.0%)
Hilton Hotels Corp.
7.95%, 4/15/07 BBB 485 471
HMH Properties,
Series A
7.875%, 8/1/05 BB 125 118
-----------------------------------------------------------
GROUP TOTAL 589
-----------------------------------------------------------
MEDIA & ENTERTAINMENT (0.5%)
British Sky Broadcasting
8.20%, 7/15/09 BB+ 145 137
Time Warner, Inc.
6.625%, 5/15/29 BBB 205 174
-----------------------------------------------------------
GROUP TOTAL 311
-----------------------------------------------------------
METALS (0.3%)
Glencore Nickel Property
Ltd.
9.00%, 12/1/14 BB+ 180 150
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
121
<PAGE> 124
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-MARKET FIXED
INCOME PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
RETAIL (1.3%)
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB+ $ 58 $ 44
94-K A1
7.60%, 8/15/07 BB+ 137 116
94-K2 A2
9.35%, 8/15/19 BB+ 130 97
HMV Media Group, plc
10.875%, 5/15/08 B 150 141
Kmart Financing Corp.
Series F
8.80%, 7/1/10 BB+ 265 234
Saks, Inc.
7.375%, 2/15/19 BB+ 240 132
-----------------------------------------------------------
GROUP TOTAL 764
-----------------------------------------------------------
UTILITIES (0.4%)
CMS Energy Corp.
7.50%, 1/15/09 BB 265 237
* Mobile Energy Services
LLC
8.665%, 1/1/17 D 86 18
-----------------------------------------------------------
GROUP TOTAL 255
-----------------------------------------------------------
TOTAL HIGH YIELD (Cost $12,233) 10,060
-----------------------------------------------------------
EMERGING MARKETS (11.7%)
-----------------------------------------------------------
FIXED INCOME SECURITIES (11.7%)
+## Bulgaria Government,
7.75%, 7/28/11 B2 250 191
Federal Republic of
Brazil,
11.00%, 8/17/40 B+ 100 80
12.25%, 3/6/30 N/R 300 273
14.50%, 10/15/09 N/R 241 267
Grupo Isusacell S.A. de
C.V.
14.25%, 12/1/06 B+ 150 160
Grupo Minero Mexicano
S.A. de CV,
Series A
8.25%, 4/1/08 BB 145 128
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 B 200 172
(+)## Ivory Coast
2.00%, 3/29/18 N/R 150 27
Maxcom Telecommunications
13.75%, 4/1/07 N/R 200 110
Mexican United States
9.875%, 2/1/10 BB+ 100 107
Multicanal S.A.
13.125%, 4/15/09 BB+ 200 181
Series C
10.50%, 4/15/18 BB+ 145 105
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 115 110
(+) Oil Purchase Co. II
10.73%, 1/31/04 BB+ 123 115
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
(+) Paiton Energy Funding
BV
9.34%, 2/15/14 CC $ 100 $ 21
# Peru Reduction Bond
3.25%, 3/7/17 BB 100 57
Petroleos Mexicanos
9.50%, 9/15/27 BB+ 150 155
Pindo Deli Financial
Mauritius
10.75%, 10/1/07 CCC+ 155 76
# PTC International
Finance B.V.
0.00%, 7/1/07 B+ 355 248
Reliance Industries Ltd.
10.50%, 8/6/46 BB 50 46
Republic of Argentina
## 7.375%, 3/31/05 N/R 360 330
11.75%, 4/7/09 N/R 310 293
Republic of Brazil PIK
8.00%, 4/15/14 BB- 727 557
11.625%, 4/15/04 B+ 100 103
## Republic of Brazil,
Series EI-L
7.38%, 4/15/06 N/R 186 175
Republic of Colombia
9.75%, 4/23/09 BB+ 100 81
11.75%, 2/25/20 BB+ 250 212
12.832%, 8/13/05 BB+ 60 59
Republic of Ecuador
4.00%, 8/15/01 N/R 145 58
12.00%, 11/15/12 N/R 9 6
Republic of Panama
10.75%, 5/15/20 BB+ 100 98
Republic of Philippines
10.625%, 3/16/25 BB+ 100 85
Republic of Turkey
11.75%, 6/15/10 B 100 100
Republic of Venezuela
Debt Conversion Bond
7.88%, 12/18/07 B+ 357 306
Russia
12.75%, 6/24/28 CCC 800 698
Russian Federation
2.25%, 3/31/30 B- 300 116
Tjiwi Kimia International
BV
13.25%, 8/1/01 CCC+ 150 128
Turkey Linked Structured
Notes
0.00%, 12/21/00 N/R 200 200
United Mexican States
10.375%, 2/17/09 BB+ 140 152
United Mexican States
Global Bond
10.375%, 2/17/09 BB+ 300 327
11.375%, 9/15/16 BB+ 200 233
-----------------------------------------------------------
TOTAL EMERGING MARKETS (Cost $7,149) 6,946
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
122
<PAGE> 125
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
-----------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (1.1%)
-----------------------------------------------------------
MORTGAGES-OTHER (0.6%)
(+)+ Home Ownership Funding Corp.
13.33% Aaa $ 500 $ 375
-----------------------------------------------------------
RETAIL (0.2%)
Kmart Financing
7.50% B+ 4,000 125
-----------------------------------------------------------
COMMUNICATION-MOBILE (0.3%)
* Nextel Communications, Inc.,
Series D
13.00% CCC+ 137 147
-----------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $687) 647
-----------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
---------
<S> <C> <C> <C>
WARRANTS (0.0%)
*@ Maxcom
Telecommunications
expiring 4/1/07 200 --
* XM Satellite Radio
Holdings, Inc.
expiring 3/15/10 150 23
-----------------------------------------------------------
TOTAL WARRANTS (Cost $0) 23
-----------------------------------------------------------
CASH EQUIVALENT (8.3%)
-----------------------------------------------------------
FACE
AMOUNT
(000)
------
REPURCHASE AGREEMENT (8.3%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $4,949,
collateralized by various U.S.
Government Obligations due
11/2/00-3/29/01, valued at $4,995
(Cost $4,946) $4,946 4,946
-----------------------------------------------------------
TOTAL INVESTMENTS (120.6%) (Cost $77,411) 71,515
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-----------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (-20.6%)
Cash $ 223
Foreign Currency (Cost $11) 16
Foreign Currency Held as Collateral on Futures
Contracts (Cost $9) 9
Dividends Receivable 17
Interest Receivable 1,032
Receivable for Investments Sold 394
Receivable for Forward Commitments 3,026
Unrealized Gain on Forward Foreign Currency
Contacts 105
Unrealized Gain on Swap Agreements 141
Other Assets 5
Payable for Investments Purchased (352)
Payable for Forward Commitments (16,706)
Payable Investment Advisory Fees (74)
Payable for Administrative Fees (4)
Payable for Trustees' Deferred Compensation
Plan-Note F (4)
Payable for Variation Margin on Futures Contracts (17)
Other Liabilities (22)
--------
(12,211)
-----------------------------------------------------------
NET ASSETS (100%) $ 59,304
-----------------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------------
NET ASSETS
Applicable to 6,500,109 outstanding
shares of beneficial interest
(unlimited authorization, no par
value) $ 59,304
-----------------------------------------------------------
NET ASSET VALUE PER SHARE $ 9.12
-----------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 67,290
Undistributed Net Investment Income (Loss) 1,117
Undistributed Realized Net Gain (Loss) (3,462)
Unrealized Appreciation (Depreciation) on:
Investment Securities (5,896)
Foreign Currency Transactions 107
Futures and Swaps 148
-----------------------------------------------------------
NET ASSETS $ 59,304
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
123
<PAGE> 126
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-MARKET FIXED
INCOME PORTFOLIO
<TABLE>
<S> <C> <C>
** Restricted Security-Total market value of restricted
securities owned at September 30, 2000 was $4,000 or
0.00% 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 futures contracts.
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Security is fair valued by the Adviser.
@ 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.
(a) Value is less than $500.
(c) Face Value is less than $500.
CAD Canadian Dollar
CMO Collateralized Mortgage Obligation
DKK Danish Krone
EUR Euro
GBP British Pound
Inv Fl 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
PIK Payment-In Kind Security
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.
--------------------------------------------------------------------------------
124
<PAGE> 127
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
BALANCED PORTFOLIO
The Balanced Portfolio provides active asset allocation management using Miller
Anderson & Sherrerd's core equity and fixed-income strategies in a single
portfolio. MAS shifts assets as relative values change, using a 60% equity and
40% fixed-income allocation as a neutral starting point, and manages
diversification and risk control across both asset classes.
Asset allocation decisions combine measures of value, earnings, interest rate
and inflation dynamics, and economic analysis. Sentiment and liquidity are taken
into account when they reach extreme levels. In making asset allocation
decisions, MAS calculates risk-adjusted expected returns for equities and
fixed-income securities. These returns are derived from proprietary models that
incorporate valuation levels, earnings trends, interest rate and inflation
dynamics, and sentiment measures. MAS then allocates a greater portion of the
Portfolio's assets to the asset class with the highest risk-adjusted expected
returns. Total portfolio risk is monitored in absolute terms as well as against
the product's benchmark.
Management of the Portfolio also draws on asset allocation expertise from the
entire Morgan Stanley Dean Witter Investment Management global organization. The
Asset Allocation Committee provides the portfolio management team with input on
topics such as developments in the Mergers and Acquisitions area and trends in
credit markets. Using this information, the team evaluates the relative risks
and returns of the broad asset classes and makes decisions about portfolio
composition. The individual holdings within the Portfolio are managed based on
the expertise of MAS's specific product teams for each asset class represented.
For the 2000 fiscal year, the Portfolio returned 14.75% compared to 10.99% for
its benchmark of 60% S&P 500 and 40% Salomon Broad Index. Asset allocation
provided a positive contribution relative to the benchmark, as did security
selection in the equity portion of the Portfolio.
During the year, the Portfolio maintained, on average, a slightly defensive
equity position. It began the fiscal year with the stock-to-bond ratio below the
benchmark. The Portfolio's equity weighting was subsequently increased to
benchmark level (60%) during the fourth calendar quarter of 1999, and was then
reduced to a 55% weighting in April of 2000. The defensive posture since April
was responsible for the positive contribution from asset allocation, and it was
maintained at that level for the remainder of the fiscal year.
U.S. equities were expensive relative to bonds for the entire fiscal year.
However, earnings dynamics were attractive until the second calendar quarter,
when the outlook for profit growth began to deteriorate. Analyst estimate
revisions provide a good measure of earnings dynamics. During March, analyst
estimate revisions peaked at a level of two upgrades for every downgrade to
company estimates. By May, analysts were upgrading one estimate for every
downgrade, and at the end of the fiscal year, earnings momentum was the worst
MAS has seen since 1994. Meanwhile, real interest rates, a measure of value for
bonds, became attractive in the first calendar quarter. The combination of good
value in bond markets and deteriorating fundamentals in stocks led to the
Portfolio's defensive posture.
At fiscal year-end, the equity portion of the Portfolio also continued to be
slightly defensive, with the largest overweight in energy stocks. Technology and
financial services sectors remained underweighted on the expectation of an
economic slowdown. The fixed income portion of the Portfolio was exposed to
corporate securities, since the yield spread relative to Treasury securities
remained attractive. Real interest rates had declined to average levels, and the
Portfolio's interest rate sensitivity was in line with the benchmark.
--------------------------------------------------------------------------------
125
<PAGE> 128
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Balanced - S&P Salomon 60/40 MAS Balanced - MAS Balanced -
Institutional 500 Broad Blended Investment Adviser
<S> <C> <C> <C> <C> <C> <C>
* 1000 1000 1000 1000
93 1083 1076 1099 1085
94 1085 1116 1064 1095
95 1317 1447 1213 1350
96 1494 1742 1273 1539
97 1904 2446 1397 1963
98 1959 2667 1557 2169
99 2291 3408 1553 2525
00 2630 3861 1660 2802 2616 2604
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS BALANCED S&P SALOMON 60/40
------------------------------------------ 500 BROAD BLENDED
INSTITUTIONAL(M) INVESTMENT(K) ADVISER(O) INDEX INDEX INDEX
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year 14.75% 14.59% 14.46% 13.27% 6.91% 10.99%
Five Years 14.83% 14.69% 14.61% 21.68% 6.47% 15.73%
Since Inception 13.29% 13.20% 13.15% 19.05% 6.76% 14.23%
</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.
(M) Represents an investment in the Institutional Class.
(K) Represents an investment in the Investment Class which commenced operations
4/3/97. Total returns for periods beginning prior to this date are based on
the performance of the Institutional Class and do not include the 0.15%
Shareholder Servicing Fee applicable to the Investment Class.
(O) Represents an investment in the Adviser Class which commenced operations
11/1/96. 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 Adviser Class of the Portfolio reflect expenses reimbursed
by the Adviser for certain periods. Without such reimbursements, total returns
would have been lower.
* The Balanced Portfolio commenced operations on 12/31/92. Total returns are
compared to the S&P 500 Index and the Salomon Broad Investment Grade Index,
both unmanaged market indices, as well as the 60/40 Blended Index, an
unmanaged index comprised of 60% S&P 500 Index and 40% Salomon Broad
Investment Grade Index.
--------------------------------------------------------------------------------
126
<PAGE> 129
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
BALANCED
PORTFOLIO
STATEMENT OF NET ASSETS
FIXED INCOME SECURITIES (40.3%)
<TABLE>
<CAPTION>
------------------------------------------------------------
!!RATINGS FACE
(STANDARD AMOUNT VALUE
SEPTEMBER 30, 2000 & POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (17.7%)
Federal Home Loan Mortgage
Corporation,
Conventional Pools:
10.00%, 9/1/17 Agy $ 254 $ 271
10.50%, 8/1/19-12/1/19 Agy 533 576
11.00%, 5/1/20-9/1/20 Agy 359 390
12.00%, 3/1/15 Agy 149 166
Gold Pools:
9.50%, 12/1/22 Agy 342 364
10.00%, 12/1/19 Agy 588 633
October TBA
6.00%, 10/1/29 Agy 12,550 11,730
8.00%, 10/1/30 Agy 2,800 2,840
8.50%, 10/1/30 Agy 3,750 3,845
Federal National Mortgage
Association,
Conventional Pools:
9.50%, 12/1/17 -11/1/20 Agy 3,120 3,306
10.00%, 7/1/17-1/1/20 Agy 376 405
10.50%, 12/1/16-4/1/22 Agy 1,977 2,155
11.50%, 9/1/25 Agy 24 27
12.50%, 9/1/15 Agy 94 107
October TBA
6.00%, 10/1/29 Agy 14,400 13,449
6.50%, 10/1/29 Agy 2,800 2,687
7.00%, 10/1/30 Agy 750 734
7.50%, 10/1/30 Agy 9,500 9,477
8.00%, 10/1/30 Agy 1,400 1,418
8.50%, 10/1/30 Agy 4,150 4,246
November TBA
6.50%, 11/1/29 Agy 7,500 7,195
Government National
Mortgage Association:
Adjustable Rate Mortgages:
6.125%, 12/20/25 Tsy 361 363
6.375%, 2/20/25-3/20/25 Tsy 1,203 1,211
6.50%, 1/20/28 Tsy 206 207
6.875%, 4/20/25-6/20/25 Tsy 1,346 1,354
7.00%, 2/20/25-11/20/25 Tsy 1,044 1,049
7.125%, 10/20/27-12/20/27 Tsy 1,853 1,861
7.375%, 4/20/25-5/20/25 1,897 1,908
Various Pools:
9.50%, 10/15/18-11/15/21 Tsy 798 849
10.00%, 11/15/09-10/15/28 Tsy 2,221 2,391
10.50%, 2/15/18-12/15/20 Tsy 528 574
11.00%, 5/15/26 Tsy 412 455
October TBA
7.00%, 10/15/29 Tsy 18,950 18,660
------------------------------------------------------------
GROUP TOTAL 96,903
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
------------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED CORPORATES (4.7%)
ALPS,
Series 96-1 DX
12.75%, 6/15/06 BB- $ 946 $ 899
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 421 420
97-D A3
6.20%, 5/15/03 AAA 423 422
98-A A3
5.90%, 11/15/02 AAA 265 264
Associates Automobile
Receivables Trust,
Series 00-1
7.15%, 6/15/03 AAA 935 937
BankBoston Home Equity Loan
Trust,
Series 98-2 A1
6.28%, 11/25/10 AAA 126 125
Block Mortgage Finance Co.,
Series 99-1 A1
5.94%, 8/26/13 AAA 159 158
BMW Vehicle Owner Trust,
Series 99-A A2
6.16%, 12/25/01 AAA 442 441
Centex Home Equity,
Series 99-2 A1
5.91%, 4/25/19 AAA 371 367
Chevy Chase Auto Receivables
Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 398 397
Contimortgage Home Equity
Loan Trust,
Series 99-A A1
6.01%, 12/25/13 AAA 217 215
Daimler Benz Auto Grantor
Trust,
Series 97-A A
6.05%, 3/31/05 AAA 76 76
Daimler Benz Vehicle Trust,
Series 98-A A3
5.16%, 12/20/07 AAA 1,718 1,706
Delta Funding Home
Equity Loan Trust,
Series 98-4 A1F
6.16%, 2/15/16 AAA 82 82
EQCC Home Equity
Loan Trust,
Series 99-3 A1F
6.545%, 4/25/10 AAA 821 815
(+) First Merchants Auto
Receivables Corp.,
Series 97-2 A1
6.85%, 11/15/02 AAA 28 28
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
127
<PAGE> 130
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
BALANCED
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
(+) First Mortgage
Acceptance Corp., Loan
Receivables Trust,
Series 96-B A1
7.629%, 11/15/18 A $ 316 $ 237
First Security Auto
Grantor Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 363 361
98-A A
5.97%, 4/15/04 AAA 233 232
First Security Auto
Owner Trust,
Series 00-1 A2
7.20%, 5/15/03 AAA 1,300 1,304
## First USA Credit Card
Master Trust,
Series 97-10 A
6.71%, 9/17/03 AAA 875 875
Ford Credit Auto
Owner Trust,
Series:
99-B A3
5.47%, 9/15/01 AAA 469 469
99-B A4
5.80%, 6/15/02 AAA 1,800 1,790
99-C A3
5.77%, 11/15/01 AAA 803 801
99-D A3
6.20%, 4/15/02 AAA 1,376 1,373
00-A A3
6.82%, 6/17/02 AAA 1,824 1,824
(+)++ Global Rated Eligible
Asset Trust,
Series 98-A A1
7.45%, 3/15/06 N/R 246 59
Green Tree Financial Corp.,
Series:
+ 98-1 A2
5.85%, 4/1/11 Aaa 50 50
99-1 A1
5.60%, 3/1/30 AAA 574 570
99-3 A2
5.51%, 2/1/31 AAA 683 681
Green Tree Home Equity
Loan Trust,
Series:
98-A A2
6.04%, 6/15/29 AAA 143 143
99-A A1
5.59%, 2/15/13 AAA 86 85
99-C A1
5.99%, 7/15/30 AAA 450 449
+ Green Tree Home
Improvement Loan Trust,
Series 98-E HIA1
5.907%, 8/15/07 Aaa 27 27
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
Green Tree Lease Finance,
Series 97-1 A3
6.17%, 9/20/05 AAA $ 118 $ 118
Greenpoint Manufactured
Housing,
Series 99-1 A1
5.78%, 12/15/09 AAA 350 346
+ 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 88 87
MBNA Master Credit Card
Trust,
Series 00-E A
7.80%, 10/15/12 AAA 680 718
(+) National Car Rental
Financing Ltd.,
Series 96-1 A4
7.35%, 10/20/03 N/R 425 425
Navistar Financial Corp.
Owner Trust,
Series 99-A A2
5.55%, 2/15/02 AAA 346 346
(+) New Holland Equipment
Receivables Trust,
Series 99-A A2
6.39%, 10/15/02 AAA 570 569
Nissan Auto Receivables
Owner Trust,
Series 00-B A2
7.15%, 12/15/02 AAA 1,125 1,128
Option One Mortgage
Loan Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA 335 332
Peco Energy Transition
Trust,
Series 00-A A3
7.625%, 3/1/10 AAA 900 926
Premier Auto Trust,
Series 99-3 A2
5.82%, 2/8/02 AAA 808 807
(+)++ Securitized Multiple
Asset
Rated Trust,
Series 97-3 A1
7.71%, 6/15/06 AAA 295 59
(+) Team Fleet Financing
Corp.,
Series 96-1 A
6.65%, 12/15/02 A- 300 298
## UCFC Home Equity
Loan Trust,
Series 98-C A1
6.739%, 12/15/12 AAA 29 29
Union Acceptance Corp.,
Series 96-C A2
6.51%, 11/8/02 AAA 151 151
------------------------------------------------------------
GROUP TOTAL 25,502
------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
128
<PAGE> 131
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED MORTGAGES (0.0%)
Cityscape Home Equity
Loan Trust,
Series:
96-3 A IO
1.00%, 10/25/26 N/R $ 3,803 $ 52
(+) 96-3 A YMA 1.00%
10/25/26 N/R 3,803 5
Contimortgage Home Equity
Loan Trust,
Series:
96-4 A11 IO
1.10%, 1/15/28 AAA 2,362 32
(+) 96-4 A11 YMA
1/15/28 AAA 2,362 2
96-4 A12 IO
1.05%, 1/15/28 AAA 417 5
(+)@ 96-4 A12 YMA
1/15/28 AAA 417 --
97-1 A10 IO
1.10%, 3/15/28 AAA 2,806 43
97-1 A10 YMA
3/15/28 N/R 2,806 4
------------------------------------------------------------
GROUP TOTAL 143
------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
AGENCY COLLATERAL SERIES (0.8%)
Federal Home Loan
Mortgage Corporation,
Series:
1415-S Inv Fl IO
14.125%, 11/15/07 Agy 160 47
1476-S Inv Fl IO REMIC PAC
3.893%, 2/15/08 Agy 1,679 144
1485-S Inv Fl IO REMIC
2.975%, 3/15/08 Agy 1,360 78
1600-SA Inv Fl IO REMIC
1.375%, 10/15/08 Agy 2,688 89
## 1710-D IO
7.075%, 6/15/20 Agy 455 457
2141 SD Inv IO
1.53%, 4/15/29 Agy 2,834 205
Federal National
Mortgage Association,
Series:
90-106 J PAC
8.50%, 9/25/20 Agy 168 174
92-186 S Inv Fl IO
2.794%, 10/25/07 Agy 2,819 182
## 94-97 FC REMIC
7.356%, 3/25/24 Agy 124 125
96-14 PC PO
12/25/23 Agy 52 34
96-68 SC Inv Fl IO REMIC
1.444%, 1/25/24 Agy 1,250 84
97-53 PI IO PAC
8.00%, 8/18/27 Agy 1,868 504
## 97-70 FA Inv Fl REMIC
PAC (11)
7.075%, 7/18/20 Agy 116 116
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
## 98-22 FA REMIC PAC (11)
7.023%, 4/18/28 Agy $ 525 $ 524
191 IO
8.00%, 1/1/28 Agy 395 110
270 2 IO
8.50%, 9/1/23 Agy 1,491 404
281 2 IO
9.00%, 11/1/26 Agy 560 152
291 2 IO
8.00%, 11/1/27 Agy 1,197 331
296 2 IO
8.00%, 4/1/24 Agy 1,453 403
Government National
Mortgage Association,
Series:
99-30 SA Inv Fl IO
1.978%, 8/16/29 Tsy 4,674 271
99-32 SB Inv Fl IO REMIC
1.378%, 7/16/27 Tsy 3,428 139
------------------------------------------------------------
GROUP TOTAL 4,573
------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-
NON-AGENCY COLLATERAL SERIES (0.0%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA 133 136
------------------------------------------------------------
COMMERCIAL MORTGAGES (0.9%)
American Southwest
Financial Securities
Corp.,
Series 93-2 A1
7.30%, 1/18/09 N/R 785 778
Asset Securitization Corp.,
Series:
96-MD6 A1C
7.04%, 11/13/26 AAA 575 566
+## 97-D5 PS1 IO
1.614%, 2/14/41 Aaa 3,228 254
(+) Carousel Center Finance,
Inc.,
Series 1 A1
6.828%, 11/15/07 AA 525 521
(+) Creekwood Capital Corp.,
Series 95-1A
8.47%, 3/16/15 AA 528 558
+## 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 5,865 284
+## GS Mortgage Securities
Corp. II,
Series 97-GL X2 IO
0.00%, 7/13/30 Aaa 1,513 57
## Nomura Asset Securities
Corp.,
Series 94-MD1 A3
8.026%, 3/15/18 N/R 525 528
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
129
<PAGE> 132
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
BALANCED
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
(+) Prime Property Fund,
Series 1 A
6.633%, 7/23/03 AA $ 483 $ 477
(+) Stratford Finance Corp.
6.776%, 2/1/04 AA 800 791
------------------------------------------------------------
GROUP TOTAL 4,927
------------------------------------------------------------
ENERGY (0.3%)
CMS Energy Corp.
7.50%, 1/15/09 BB 485 434
Conoco, Inc.
6.95%, 4/15/29 A- 1,050 971
) Mobile Energy Services LLC
8.665%, 1/1/17 D 440 88
------------------------------------------------------------
GROUP TOTAL 1,493
------------------------------------------------------------
FEDERAL AGENCY (5.9%)
Federal Home Loan
Mortgage Corporation
6.625%, 9/15/09 Agy 7,000 6,917
Federal National Mortgage
Association
5.25%, 1/15/09 Agy 900 813
(!!) 6.25%, 5/15/29 Agy 8,860 8,171
7.125%, 6/15/10 Agy 15,275 15,650
7.25%, 5/15/30 Agy 675 708
------------------------------------------------------------
GROUP TOTAL 32,259
------------------------------------------------------------
FINANCE (3.8%)
(+) Anthem Insurance Cos.,
Inc.
9.125%, 4/1/10 BBB+ 435 407
Series A
9.00%, 4/1/27 BBB+ 565 460
Bank One Corp.
6.00%, 2/17/09 A- 200 181
7.625%, 10/15/26 A- 315 303
7.875%, 8/1/10 A- 95 97
8.00%, 4/29/27 A- 160 160
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 515 469
(+) BT Institutional Capital
Trust,
Series A
8.09%, 12/1/26 A 695 634
Chase Manhattan Corp.
7.00%, 11/15/09 A 580 567
Citibank Credit Card
Issuance Trust
6.90%, 10/17/05 A+ 830 833
Citicorp
6.375%, 11/15/08 A+ 525 496
Citigroup, Inc.
6.625%, 1/15/28 AA- 330 293
EOP Operating LP
6.763%, 6/15/07 BBB 395 373
7.25%, 6/15/28 BBB 200 170
7.50%, 4/19/29 BBB+ 265 233
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
(+) Equitable Companies,
Inc.
6.50%, 4/1/08 A+ $ 420 $ 396
(+) Equitable Life Assurance
Society of the U.S.,
Series 1A
6.95%, 12/1/05 A+ 700 689
(+) Farmers Exchange Capital
7.05%, 7/15/28 A+ 170 141
Farmers Insurance Exchange
8.625%, 5/1/24 A+ 725 719
(+) Florida Property &
Casualty
7.375%, 7/1/03 A- 200 199
Ford Motor Credit Co.
7.375%, 10/28/09 A 900 880
General Electric Capital
Corp.
7.375%, 1/19/10 AAA 820 842
General Motors
Acceptance Corp.
7.75%, 1/19/10 A 435 440
GS Holdings Escrow Corp.
7.125%, 8/1/05 BB+ 850 793
(+) Goldman Sachs Group LP
6.50%, 2/25/09 A+ 425 396
Hartford Financial Services
Group, Inc.
7.90%, 6/15/10 A 555 571
Household Finance Corp.
5.875%, 2/1/09 A 640 573
8.00%, 7/15/10 A 215 221
(+) John Hancock Surplus
Note
7.375%, 2/15/24 AA- 600 557
Lehman Brothers Holdings,
Inc.
8.25%, 6/15/07 A 345 357
(+) Metropolitan Life
Insurance Co.
7.45%, 11/1/23 A+ 600 525
7.80%, 11/1/25 A+ 250 240
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A 775 652
(+) New York Life Insurance
Co.
7.50%, 12/15/23 AA- 300 268
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 845 763
(+) Prime Property Funding
II, Inc.
6.80%, 8/15/02 A 210 207
7.00%, 8/15/04 A 540 527
(+) Prudential Insurance Co.
8.30%, 7/1/25 A- 855 865
State Street Corp.
7.65%, 6/15/10 A+ 390 399
Washington Mutual
Capital I, Inc.
8.375%, 6/1/27 BBB- 375 341
Washington Mutual, Inc.
8.25%, 4/1/10 BBB- 170 174
Series A
8.206%, 2/1/27 BBB- 270 241
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
130
<PAGE> 133
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
Wells Fargo & Co.
7.55%, 6/21/10 A+ $ 750 $ 762
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 777 744
96 WFP-D
6.95%, 9/1/13 AA- 525 501
------------------------------------------------------------
GROUP TOTAL 20,659
------------------------------------------------------------
INDUSTRIALS (3.2%)
Adelphia Communications
Corp.
7.875%, 5/1/09 B+ 185 155
9.375%, 11/15/09 B+ 245 222
Albertson's, Inc.
7.45%, 8/1/29 A 650 585
Alcoa, Inc.
7.375%, 8/1/10 A+ 180 182
Clear Channel
Communications, Inc.
7.65%, 9/15/10 BBB- 585 580
Columbia/HCA
Healthcare Corp.
7.19%, 11/15/15 BB+ 250 208
7.50%, 12/15/23 BB+ 305 255
7.58%, 9/15/25 BB+ 320 269
9.00%, 12/15/14 BB+ 225 224
CSC Holdings, Inc.
7.875%, 12/15/07 B 390 383
8.125%, 3/15/29 BB+ 185 184
DaimlerChrysler AG
8.00%, 6/15/10 A+ 375 386
Delphi Automotive
Systems Corp.
7.125%, 5/1/29 BBB 200 171
Dow Chemical Co.
7.375%, 11/1/29 A 190 184
DR Structured Finance,
Series:
93-K1 A1
6.66%, 8/15/10 BB+ 116 87
94-K2 A2
9.35%, 8/15/19 BB+ 550 411
Federated Department
Stores, Inc.
6.90%, 4/1/29 BBB+ 680 537
8.50%, 6/1/10 BBB+ 155 155
(+) Florida Windstorm
7.125%, 2/25/19 AAA 625 587
Ford Motor Co.
6.625%, 10/1/28 A 1,025 859
7.45%, 7/16/31 A 230 214
Fred Meyer, Inc.
7.375%, 3/1/05 BBB- 665 659
Honeywell International,
Inc.
7.50%, 3/1/10 A 170 173
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
Host Marriott LP
8.375%, 2/15/06 BB $ 130 $ 125
International Game
Technology
8.375%, 5/15/09 BB+ 395 386
Kmart Funding Corp.
Series F
8.80%, 7/1/10 BB+ 192 169
Kroger Co.
8.05%, 2/1/10 BBB- 220 222
Lenfest Communications, Inc.
7.625%, 2/15/08 BBB 425 426
Lockheed Martin Corp.
8.50%, 12/1/29 BBB- 720 761
Lowe's Companies, Inc.
6.50%, 3/15/29 A 655 542
6.875%, 2/15/28 A 205 178
Lucent Technologies, Inc.
6.45%, 3/15/29 A 620 518
News America Holdings, Inc.
7.75%, 1/20/24 BBB- 190 176
News America, Inc.
7.28%, 6/30/28 BBB- 780 682
(+) Oxymar
7.50%, 2/15/16 BBB- 470 351
Pharmacia Corp.
6.60%, 12/1/28 AA- 1,025 914
(+) Raytheon Co.
8.20%, 3/1/06 BBB- 385 398
8.30%, 3/1/10 BBB- 90 94
Rockwell International Corp.
6.70%, 1/15/28 A+ 265 228
Saks, Inc.
7.375%, 2/15/19 BB+ 580 318
Scotia Pacific Co. LLC
7.71%, 1/20/14 BBB 410 282
Sun Microsystems, Inc.
7.65%, 8/15/09 BBB+ 375 379
Tenet Healthcare Corp.,
7.625%, 6/1/08 BB+ 295 281
Time Warner, Inc.
6.625%, 5/15/29 BBB 415 353
U.S. Airways Corp., Pass
Through Certificates
8.11%, 2/20/17 AAA 295 300
USA Waste Services, Inc.
7.00%, 7/15/28 BBB 745 612
Wal-Mart Stores
6.875%, 8/10/09 AA 160 159
7.55%, 2/15/30 AA 750 773
Waste Management, Inc.
7.375%, 5/15/29 BBB 265 228
------------------------------------------------------------
GROUP TOTAL 17,525
------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
131
<PAGE> 134
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
BALANCED
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
NON-AGENCY FIXED RATE MORTGAGES (0.0%)
## Resolution Trust Corp.,
Series 92-5C CMO
8.613%, 1/25/26 AA $ 121 $ 121
Ryland Acceptance Corp. IV,
Series 79-A
6.65%, 7/1/11 AA 48 48
------------------------------------------------------------
GROUP TOTAL 169
------------------------------------------------------------
TELEPHONES (1.0%)
(!!) AT&T Corp.
6.50%, 3/15/29 AA- 755 628
BellSouth
Telecommunications, Inc.
6.375%, 6/1/28 AA- 740 627
Global Crossing Holdings
Ltd.
9.125%, 11/15/06 BB 525 520
GTE Corp.
6.94%, 4/15/28 A+ 745 676
Intermedia Communications,
Inc.,
# 0.00%, 5/15/06 B 130 124
Series B
8.60%, 6/1/08 B 500 480
MCI WorldCom, Inc.
6.95%, 8/15/28 A- 1,180 1,074
Nextel Communications, Inc.
# 0.00%, 9/15/07 B 655 537
9.375%, 11/15/09 B- 120 117
(+) Qwest Capital Funding
7.90%, 8/15/10 BBB+ 165 168
# Qwest Communications
International, Inc.,
Series B
0.00%, 2/1/08 BBB+ 720 598
------------------------------------------------------------
GROUP TOTAL 5,549
------------------------------------------------------------
TRANSPORTATION (0.3%)
Continental Airlines,
Series:
98-1 A
6.648%, 9/15/17 AA+ 393 369
99-1 A
6.545%, 8/2/20 AA+ 433 401
(+) Jet Equipment Trust,
Series 95-C
10.69%, 11/1/13 BBB 675 738
------------------------------------------------------------
GROUP TOTAL 1,508
------------------------------------------------------------
UTILITIES (0.1%)
(+) PSEG Energy Holdings,
Inc.
9.125%, 2/10/04 BBB- 325 332
(+) Southern Energy, Inc.
7.90%, 7/15/09 BBB 455 432
------------------------------------------------------------
GROUP TOTAL 764
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
------------------------------------------------------------
<S> <C> <C> <C>
YANKEE (1.6%)
Abbey National plc
7.95%, 10/26/29 AA- $ 455 $ 462
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 640 528
(+) Bayer Hypo-Vereinsbank
8.741%, 6/30/31 A- 100 95
Deutsche Telekom
International Finance
8.00%, 6/15/10 AA- 745 766
Federal Republic of Brazil,
11.00%, 8/17/40 B+ 480 383
Glencore Nickel Property
Ltd.
9.00%, 12/1/14 BB+ 655 547
Grupo Minero Mexicano
S.A. de CV,
8.25%, 4/1/08 BB 470 416
(+) Hutchison Whampoa
Financial,
7.45%, 8/1/17 A 675 617
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 B 400 345
Multicanal S.A.
10.50%, 4/15/18 BB+ 330 238
13.125%, 4/15/09 BB+ 190 172
(+) Oil Purchase Co.
7.10%, 4/30/02 BB+ 321 308
(+) Oil Purchase Co. II
10.73%, 1/31/04 BB+ 78 73
(+) Paiton Energy Funding BV
9.34%, 2/15/14 CC 545 115
(+) Petrozuata Finance, Inc.
8.22%, 4/1/17 BB 670 560
(+) Ras Laffan Liquefied
Natural
Gas Co.
8.294%, 3/15/14 BBB+ 300 285
Republic of Colombia
8.70%, 2/15/16 BB+ 590 401
11.75%, 2/25/20 BB+ 170 144
Republic of Philippines
10.625%, 3/16/25 BB+ 455 385
(+) Unicredito Itali Capital
Trust
9.20%, 10/29/49 A- 130 131
United Mexican States
Par Bond
10.375%, 2/17/09 BB+ 425 462
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A- 130 133
7.875%, 2/15/30 A- 915 928
------------------------------------------------------------
GROUP TOTAL 8,494
------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (Cost $224,740) 220,604
------------------------------------------------------------
COMMON STOCKS (41.4%)
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
BANKS (2.4%)
Bank of America Corp. 56,202 2,944
Bank of New York Co. 45,100 2,528
Bank One Corp. 39,900 1,541
Chase Manhattan Corp. 66,350 3,065
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
132
<PAGE> 135
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
------------------------------------------------------------
<S> <C> <C> <C>
@ First Union Corp. (N.C.) 1 $ --
Washington Mutual, Inc. 69,400 2,763
------------------------------------------------------------
GROUP TOTAL 12,841
------------------------------------------------------------
BASIC RESOURCES (0.5%)
E.I. DuPont de Nemours & Co. 34,600 1,434
Rohm & Haas Co. 47,100 1,369
------------------------------------------------------------
GROUP TOTAL 2,803
------------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (1.9%)
Anheuser-Busch Cos., Inc. 71,600 3,030
Avon Products, Inc. 27,400 1,120
Coca-Cola Co. 47,500 2,618
Kimberly-Clark Corp. 10,500 586
PepsiCo, Inc. 37,600 1,730
Procter & Gamble Co. 16,500 1,105
------------------------------------------------------------
GROUP TOTAL 10,189
------------------------------------------------------------
CONSUMER DURABLES (0.4%)
* Ford Motor Co. 35,480 898
General Motors Corp. 8,913 579
Masco Corp. 33,100 617
------------------------------------------------------------
GROUP TOTAL 2,094
------------------------------------------------------------
CONSUMER SERVICES (2.4%)
* America Online, Inc. 40,700 2,188
* Clear Channel Communications, Inc. 33,200 1,876
* Comcast Corp., Class A Special 18,400 753
News Corp., Ltd. ADR 39,800 1,866
Seagram Ltd. 4,900 281
Time Warner, Inc. 24,489 1,916
* Viacom, Inc. 27,300 1,597
Walt Disney Co. 45,600 1,744
* Yahoo!, Inc. 10,000 910
------------------------------------------------------------
GROUP TOTAL 13,131
------------------------------------------------------------
CREDIT & FINANCE/ INVESTMENT COMPANIES (2.7%)
American Express Co. 38,600 2,345
@ Associates First Capital Corp. 2 --
Charles Schwab Corp. 29,700 1,054
Citigroup, Inc. 121,866 6,588
Federal Home Loan Mortgage Corp. 18,700 1,011
Lehman Brothers Holdings, Inc. 4,100 606
Merrill Lynch & Co., Inc. 29,100 1,921
USA Education, Inc. 31,300 1,508
------------------------------------------------------------
GROUP TOTAL 15,033
------------------------------------------------------------
ENERGY (2.6%)
* Baker Hughes Inc. 25,300 939
Chevron Corp. 23,600 2,012
Enron Corp. 27,100 2,375
ENSCO International, Inc. 20,900 799
Exxon Mobil Corp. 33,200 2,959
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
------------------------------------------------------------
<S> <C> <C> <C>
* Global Marine, Inc. 19,100 $ 590
Halliburton Co. 11,800 577
* R & B Falcon Corp. 76,300 2,127
Texaco, Inc. 19,400 1,019
Tidewater, Inc. 17,900 814
------------------------------------------------------------
GROUP TOTAL 14,211
------------------------------------------------------------
FOOD, TOBACCO & OTHER (0.4%)
General Mills, Inc. 19,400 689
Philip Morris Cos., Inc. 44,600 1,313
@ R.J. Reynolds Tobacco Holdings, Inc. 1 --
------------------------------------------------------------
GROUP TOTAL 2,002
------------------------------------------------------------
HEALTH CARE (5.3%)
Abbott Laboratories 60,400 2,873
American Home Products Corp. 55,600 3,145
* Amgen, Inc. 18,800 1,313
Bristol-Myers Squibb Co. 58,501 3,342
* Genentech, Inc. 3,500 650
HCA-The Healthcare Co. 30,300 1,125
* HEALTHSOUTH Corp. 206,600 1,678
Johnson & Johnson 25,600 2,405
Medtronics, Inc. 28,500 1,476
Merck & Co., Inc. 17,500 1,303
Pfizer, Inc. 120,775 5,427
Pharmacia Corp. 33,400 2,010
Schering Plough Corp. 26,400 1,227
Tenet Healthcare Corp. 24,900 906
Visteon Corp. 1,309 20
------------------------------------------------------------
GROUP TOTAL 28,900
------------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (3.8%)
Dover Corp. 15,900 746
Emerson Electric Co. 23,900 1,601
General Electric Co. 188,000 10,845
Honeywell International, Inc. 21,287 759
Minnesota Mining & Manufacturing Co. 7,700 702
Tyco International Ltd. 81,200 4,212
United Technologies Corp. 29,100 2,015
------------------------------------------------------------
GROUP TOTAL 20,880
------------------------------------------------------------
INSURANCE (1.7%)
American General Corp. 10,500 819
American International Group, Inc. 46,700 4,468
Chubb Corp. 7,300 578
Hartford Financial Services Group, Inc. 7,800 569
Marsh & Mclennan Cos, Inc. 15,600 2,071
St. Paul Companies, Inc. 11,500 567
------------------------------------------------------------
GROUP TOTAL 9,072
------------------------------------------------------------
RETAIL (2.4%)
* Best Buy Co., Inc. 20,700 1,317
* Costco Wholesale Corp. 10,800 377
CVS Corp. 26,300 1,218
Home Depot, Inc. 42,000 2,229
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
133
<PAGE> 136
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
BALANCED
PORTFOLIO
<TABLE>
<CAPTION>
VALUE
(CONT'D) SHARES (000)!
------------------------------------------------------------
<S> <C> <C> <C>
RadioShack Corp. 43,000 $ 2,779
* Safeway, Inc. 10,900 509
Wal-Mart Stores, Inc. 102,400 4,928
------------------------------------------------------------
GROUP TOTAL 13,357
------------------------------------------------------------
TECHNOLOGY (11.9%)
* ADC Telecommunications, Inc. 21,300 573
* Agilent Technologies, Inc. 7,610 372
* Altera Corp. 26,600 1,270
* Broadcom Corp., Class A 7,400 1,804
* Cisco Systems, Inc. 126,300 6,978
Compaq Computer Corp. 53,900 1,487
Corning, Inc. 5,900 1,752
* Dell Computer Corp. 33,500 1,032
Electronic Data Systems Corp. 19,600 813
* EMC Corp. 53,000 5,254
Hewlett Packard Co. 28,828 2,796
Intel Corp. 96,400 4,013
International Business Machines Corp. 45,900 5,164
* JDS Uniphase Corp. 19,800 1,875
Lucent Technologies, Inc. 31,200 954
* Microsoft Corp. 77,100 4,645
* Network Appliance, Inc. 15,800 2,013
Nokia Corp. 14,000 557
Nortel Networks Corp. 89,900 5,355
* Oracle Systems Corp. 35,300 2,780
* Palm Inc 30,700 1,625
* Peoplesoft, Inc. 33,600 939
* QLogic Corp. 12,800 1,126
* QUALCOMM, Inc. 9,800 698
* Siebel Systems, Inc. 17,900 1,992
Solectron Corp.* 10,300 475
* Sun Microsystems, Inc. 21,900 2,557
Texas Instruments, Inc. 9,400 444
* VERITAS Software Corp. 8,400 1,193
* Vitesse Semiconductor Corp. 10,900 969
* Xilinx, Inc. 17,400 1,490
------------------------------------------------------------
GROUP TOTAL 64,995
------------------------------------------------------------
UTILITIES (3.0%)
AT&T Corp. 57,107 1,677
Coastal Corp. 23,400 1,734
* Global Crossing Ltd. 25,800 800
* Qwest Communications International,
Inc. 29,200 1,403
SBC Communications, Inc. 93,517 4,676
Sprint Corp. 21,700 636
* Sprint Corp. (PCS Group) 22,150 777
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
------------------------------------------------------------
<S> <C> <C> <C>
Verizon Communications 63,000 $ 3,052
* Vodafone Group plc 21,750 805
* Worldcom, Inc. 40,289 1,224
------------------------------------------------------------
GROUP TOTAL 16,784
------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $189,596) 226,292
------------------------------------------------------------
PREFERRED STOCK (0.4%)
------------------------------------------------------------
MORTGAGE-OTHER (0.4%)
(+)+ Home Ownership Funding
Corp. 13.331% (Cost
$2,273) Aaa 3,025 2,268
------------------------------------------------------------
STRUCTURED INVESTMENT (0.0%)-SEE NOTE A6
------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
-------
<S> <C> <C> <C>
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
$397) N/R $ 5,555 90
------------------------------------------------------------
CASH EQUIVALENTS (11.7%)
------------------------------------------------------------
DISCOUNT NOTES (7.5%)
Federal Home Loan Bank
6.40%, 10/25/00 Agy 10,000 9,957
Federal National
Mortgage Association
6.42%, 10/12/00 Agy 10,000 9,980
6.42%, 10/26/00 Agy 10,000 9,955
6.21%, 11/14/00 Agy 8,000 7,938
6.31%, 11/22/00 Agy 3,000 2,973
------------------------------------------------------------
GROUP TOTAL 40,803
------------------------------------------------------------
REPURCHASE AGREEMENT (4.2%)
Chase Securities, Inc. 6.40%, dated
9/29/00, due 10/2/00, to be
repurchased at $23,234,
collateralized by various U.S.
Government Obligations, due
11/2/00-3/29/01, valued at $23,454 23,222 23,222
------------------------------------------------------------
TOTAL CASH EQUIVALENTS (Cost $64,025) 64,025
------------------------------------------------------------
TOTAL INVESTMENTS (93.8%) (Cost $481,031) 513,279
------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
134
<PAGE> 137
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)!
------------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS AND LIABILITIES (6.2%)
Cash $ 96
Dividends Receivable 202
Interest Receivable 2,192
Receivable for Investments Sold 4,229
Receivable for Forward Commitments 11,400
Receivable for Fund Shares Sold 116,247
Investments Held as Collateral for Loaned
Securities 16,739
Unrealized Gain on Swap Agreements 395
Other Assets 42
Payable for Fund Shares Redeemed (171)
Payable for Investments Purchased (13,038)
Payable for Forward Commitments (87,136)
Payable for Investment Advisory Fees (473)
Payable for Administrative Fees (28)
Payable for Shareholder Servicing Fees Investment
Class (1)
Payable for Distribution Fee-Adviser Class (7)
Payable for Trustees' Deferred Compensation Plan-
Note F (36)
Payable for Variation Margin on Futures Contracts (43)
Collateral on Securities Loaned, at Value (16,739)
Other Liabilities (58)
---------
33,812
------------------------------------------------------------
NET ASSETS (100%) $ 547,091
------------------------------------------------------------
INSTITUTIONAL CLASS
------------------------------------------------------------
NET ASSETS
Applicable to 37,775,385 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 505,078
------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 13.37
------------------------------------------------------------
INVESTMENT CLASS
------------------------------------------------------------
NET ASSETS
Applicable to 604,783 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 8,085
------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 13.37
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
------------------------------------------------------------
<S> <C> <C> <C>
ADVISER CLASS
------------------------------------------------------------
NET ASSETS
Applicable to 2,544,140 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 33,928
------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 13.34
------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $ 489,174
Undistributed Net Investment Income (Loss) 3,691
Undistributed Realized Net Gain (Loss) 21,404
Unrealized Appreciation (Depreciation) on:
Investment Securities 32,248
Futures and Swaps 574
------------------------------------------------------------
NET ASSETS $ 547,091
------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
! See Note A1 to Financial Statements.
!! Ratings are unaudited.
(+) 144A security. Certain conditions for public sale may
exist.
* Non-income producing security
+ Moody's Investors Service, Inc. rating. Security is
not rated by Standard & Poor's Corporation.
++ Security is fair valued by the Adviser.
@ Security is in default.
(++) A portion of these securities was pledged to cover
margin requirements for futures contracts.
# 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.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
Inv Fl 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.
--------------------------------------------------------------------------------
135
<PAGE> 138
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO
The Multi-Asset-Class Portfolio provides global asset allocation among U.S. and
foreign stocks, bonds, and high-yield securities. Miller Anderson & Sherrerd
actively shifts assets among them as their relative values and risks change, and
manages diversification and risk control across all five asset classes.
Diversification across this wide array of asset types offers a risk/return
profile that historically has been more attractive than balanced portfolios
consisting only of domestic stocks and bonds.
The investment process consists of five interrelated decisions: allocation among
global asset classes, country allocation, allocation to equities versus
fixed-income securities within markets, currency exposures, and value
determinations within markets. Asset-allocation decisions couple measures of
value, earnings, interest rate and inflation dynamics, and economic analysis.
Sentiment and liquidity are taken into account when they reach extreme levels.
In making global asset-allocation decisions, MAS calculates risk-adjusted
expected returns for each asset class. These returns are derived from
proprietary models that incorporate valuation levels, earnings trends, inflation
and interest rate dynamics, and sentiment measures. MAS allocates a greater
portion of the Portfolio's assets to the asset classes with the highest
risk-adjusted expected returns. Total portfolio risk is monitored in absolute
terms as well as against the product's benchmark.
While currency valuations help shape MAS's view of the relative value of foreign
investments, and thus influence the Portfolio's country allocations, currency
exposure is viewed as a separate decision. The degree of currency exposure is
based on MAS's analysis of deviations from purchasing-power parity, with
particular attention directed towards over- or under-valuation that cannot be
explained by differences in real interest rates.
Management of the Portfolio also draws on asset-allocation expertise from the
entire Morgan Stanley Dean Witter Investment Management global organization. The
Asset Allocation Committee provides the portfolio management team with input on
topics such as developments in the Mergers and Acquisitions area and trends in
credit markets. Using this information, the team evaluates the relative risks
and returns of the broad asset classes and makes decisions about portfolio
composition. The individual holdings of the Portfolio are managed based on the
expertise of MAS's specific product teams for each of the five asset classes
represented.
During fiscal 2000, the Portfolio returned 7.74% compared to 8.57% for its
custom benchmark of 50% U.S. equities, 14% foreign equities, 24% U.S.
fixed-income, 6% foreign fixed-income, and 6% high yield. Asset allocation added
15 basis points while security selection detracted the balance from overall
performance relative to the benchmark. The negative security selection
contribution came from the fixed-income and international equity portions of the
Portfolio.
During the year, the Portfolio maintained, on average, a slightly defensive
equity position. It began the fiscal year with the stock-to-bond ratio below the
benchmark. The Portfolio's equity weighting was subsequently increased to
benchmark level (64%) during the fourth calendar quarter of 1999, and was then
reduced to a 59% weighting in April of 2000. The defensive posture since April
was responsible for the positive contribution from asset allocation, and it was
maintained at that level for the remainder of the fiscal year.
U.S. equities were expensive relative to bonds and to other equity markets for
the entire fiscal year. However, earnings dynamics were attractive until the
second calendar quarter, when the outlook for profit growth began to
deteriorate. Analyst estimate revisions provide a good measure of earnings
dynamics. During March, analyst estimate revisions peaked at a level of two
upgrades for every downgrade to company estimates. By May, analysts were
upgrading one estimate for every downgrade. Earnings dynamics and valuations
were better in the Japanese market, where significant restructuring had been
taking place. The Portfolio maintained a tilt towards Japanese equities and away
from U.S. and European equities for the entire fiscal year. This position helped
relative performance in the fourth calendar quarter of 1999, but has hurt
relative performance since then.
Meanwhile, real interest rates in the U.S., a measure of value for bonds, became
attractive in the first calendar quarter. The combination of good value in bond
markets and deteriorating fundamentals in stocks led to the Portfolio's
defensive posture, and to the overweight in U.S. fixed-income relative to
foreign fixed-income. This positioning helped relative performance.
At fiscal year-end, the U.S. equity portion of the Portfolio also continued to
be slightly defensive, with the largest overweight in energy stocks. Technology
and financial services sectors remained underweighted on the expectation of an
economic slowdown. The fixed-income portion of the Portfolio had above-benchmark
exposure to corporate securities since the yield spread relative to Treasury
securities remained attractive. Real interest rates had declined to average
levels, and the Portfolio's interest rate sensitivity was in line with the
benchmark. High yield securities continued to offer very attractive yields
relative to Treasuries, and default rates had leveled off. The Portfolio
therefore held an overweight position in high yield.
--------------------------------------------------------------------------------
136
<PAGE> 139
PORTFOLIO OVERVIEW
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAS Multi-Asset- MAS Multi-Asset-
Class - Institutional Class - Investment S&P 500 Solomon Broad MSCI EAFE Index 50/24/14/6/6 Blended Index
<S> <C> <C> <C> <C> <C> <C>
* 1000 1000 1000 1000 1000
94 997 1016 987 991 1005
95 1179 1318 1125 1049 1213
96 1341 1585 1181 1139 1375
97 1697 2227 1296 1278 1712
98 1689 2428 1444 1171 1832
99 1988 3103 1440 1534 2169
00 2142 2131 3515 1540 1583 2355
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS ENDED 9/30/00*
<TABLE>
<CAPTION>
MAS MULTI-ASSET-CLASS S&P SALOMON MSCI 50/24/14/6/6
------------------------------ 500 BROAD EAFE BLENDED
INSTITUTIONAL M INVESTMENT K INDEX INDEX INDEX INDEX
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year 7.74% 7.54% 13.27% 6.91% 3.18% 8.57%
Five Years 12.68% 12.52% 21.68% 6.47% 8.58% 14.18%
Since Inception 13.14% 13.01% 22.59% 7.25% 7.72% 14.88%
</TABLE>
Total returns are net of all fees. Total returns represent past performance and
are not indicative of future results.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth either more or less than
their original cost. Foreign investments are subject to certain risks such as
currency fluctuations, economic instability, and political developments.
High-yield fixed-income securities, otherwise known as "junk bonds," represent a
much greater risk of default and tend to be more volatile than higher-rated
bonds.
M Represents an investment in the Institutional Class.
K Represents an investment in the Investment Class which commenced operations
6/10/96. 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.
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 Multi-Asset-Class Portfolio commenced operations on 7/29/94. Total returns
are compared to the S&P 500 Index, the Salomon Broad Investment Grade Index,
and the Morgan Stanley Capital International EAFE Index, all unmanaged market
indices, as well as the 50/24/14/6/6 Blended Index, an unmanaged index
comprised of 50% S&P 500 Index, 24% Salomon Broad Investment Grade Index, 14%
MSCI EAFE Index, 6% CS First Boston Global High Yield Index and 6% JP Morgan
Emerging Markets Bond Index Global. Previously, the blended index included the
Salomon High Yield Index as its high yield component, but the Adviser believes
that the CS First Boston Global High Yield Index has a more comprehensive
coverage of geographic regions and types of securities in which the Portfolio
may invest. In addition, the Adviser changed the JP Morgan Emerging Markets
Bond Index to the JP Morgan Emerging Markets Bond Index Global as the emerging
market component of the Blended Index because the Adviser feels that the JP
Morgan Emerging Markets Bond Index Global is more appropriate to its broader
country and security coverage.
--------------------------------------------------------------------------------
137
<PAGE> 140
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
STATEMENT OF NET ASSETS
U.S. EQUITY (44.6%)
<TABLE>
<CAPTION>
-----------------------------------------------------------
VALUE
SEPTEMBER 30, 2000 SHARES (000)!
-----------------------------------------------------------
<S> <C> <C>
U.S. COMMON STOCKS (44.6%)
-----------------------------------------------------------
BANKS (2.6%)
Bank of America Corp. 16,500 $ 864
Bank of New York Co. 14,000 785
Bank One Corp. 11,800 456
Chase Manhattan Corp. 19,550 903
Washington Mutual, Inc. 20,300 808
-----------------------------------------------------------
GROUP TOTAL 3,816
-----------------------------------------------------------
BASIC RESOURCES (0.6%)
E.I. DuPont de Nemours & Co. 10,300 427
Rohm & Haas Co. 13,800 401
-----------------------------------------------------------
GROUP TOTAL 828
-----------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS (2.0%)
Anheuser-Busch Cos., Inc. 21,000 888
Avon Products, Inc. 8,100 331
Coca-Cola Co. 14,000 772
Kimberly-Clark Corp. 3,100 173
PepsiCo, Inc. 11,300 520
Procter & Gamble Co. 4,900 328
-----------------------------------------------------------
GROUP TOTAL 3,012
-----------------------------------------------------------
CONSUMER DURABLES (0.4%)
Ford Motor Co. 10,718 271
General Motors Corp. 2,773 180
Masco Corp. 9,900 185
-----------------------------------------------------------
GROUP TOTAL 636
-----------------------------------------------------------
CONSUMER SERVICES (2.3%)
* America Online, Inc. 12,200 656
* Clear Channel Communications, Inc. 10,000 565
* Comcast Corp., Class A Special 5,500 225
Seagram Ltd. 1,500 86
Time Warner, Inc. 7,228 566
Viacom, Inc. 8,300 485
Walt Disney Co. 13,700 524
* Yahoo!, Inc. 2,900 264
-----------------------------------------------------------
GROUP TOTAL 3,371
-----------------------------------------------------------
CREDIT & FINANCE/ INVESTMENT
COMPANIES (3.0%)
American Express Co. 11,500 699
Charles Schwab Corp. 9,150 325
Citigroup, Inc. 35,900 1,941
Federal Home Loan Mortgage Corp. 5,600 303
Lehman Brothers Holdings, Inc. 1,200 177
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
-----------------------------------------------------------
-----------------------------------------------------------
<S> <C> <C>
Merrill Lynch & Co., Inc. 9,000 $ 594
USA Education, Inc. 9,700 467
-----------------------------------------------------------
GROUP TOTAL 4,506
-----------------------------------------------------------
ENERGY (2.8%)
Baker Hughes, Inc. 7,400 275
Chevron Corp. 6,900 588
Enron Corp. 8,200 719
ENSCO International, Inc. 6,100 233
Exxon Mobil Corp. 9,800 874
* Global Marine, Inc. 5,600 173
Halliburton Co. 3,600 176
* R & B Falcon Corp. 22,400 624
Texaco, Inc. 5,700 299
Tidewater, Inc. 5,300 241
-----------------------------------------------------------
GROUP TOTAL 4,202
-----------------------------------------------------------
FOOD & TOBACCO (0.4%)
General Mills, Inc. 5,800 206
Philip Morris Cos., Inc. 13,100 386
-----------------------------------------------------------
GROUP TOTAL 592
-----------------------------------------------------------
HEALTH CARE (5.8%)
Abbott Laboratories 17,700 842
American Home Products Corp. 16,300 922
* Amgen, Inc. 5,700 398
Bristol-Myers Squibb Co. 17,325 990
* Genentech, Inc. 1,000 186
HCA-The Healthcare Co. 9,000 334
Healthsouth Corp. 61,600 500
Johnson & Johnson 7,600 714
Medtronics, Inc. 8,600 446
Merck & Co., Inc. 5,300 395
Pfizer, Inc. 36,550 1,642
Pharmacia Corp. 10,100 608
Schering Plough Corp. 7,900 367
Tenet Healthcare Corp. 7,500 273
Visteon Corp. 406 6
-----------------------------------------------------------
GROUP TOTAL 8,623
-----------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (4.1%)
Dover Corp. 4,800 225
Emerson Electric Co. 7,200 482
General Electric Co. 53,900 3,109
Honeywell International, Inc. 6,162 219
Minnesota Mining & Manufacturing Co. 2,300 210
Tyco International Ltd. 23,900 1,240
United Technologies Corp. 8,600 596
-----------------------------------------------------------
GROUP TOTAL 6,081
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
138
<PAGE> 141
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)!
-----------------------------------------------------------
<S> <C> <C>
INSURANCE (1.7%)
American General Corp. 3,100 $ 242
American International Group, Inc. 12,900 1,234
Chubb Corp. 2,100 166
Hartford Financial Services Group,
Inc. 2,300 168
Marsh & McLennan Cos, Inc. 4,600 610
St. Paul Companies, Inc. 3,400 168
-----------------------------------------------------------
GROUP TOTAL 2,588
-----------------------------------------------------------
RETAIL (2.7%)
Best Buy Co., Inc. 6,100 388
* Costco Wholesale Corp. 3,200 112
CVS Corp. 7,800 361
Home Depot, Inc. 12,650 671
RadioShack Corp. 12,700 821
Safeway, Inc. 3,300 154
Wal-Mart Stores, Inc. 30,700 1,478
-----------------------------------------------------------
GROUP TOTAL 3,985
-----------------------------------------------------------
TECHNOLOGY (12.9%)
ADC Telecommunications, Inc. 6,400 172
Agilent Technologies, Inc. 2,303 113
Altera Corp. 7,800 372
Broadcom Corp., Class A 2,200 536
* Cisco Systems, Inc. 37,100 2,050
Compaq Computer Corp. 15,800 436
Corning, Inc. 1,800 535
* Dell Computer Corp. 9,800 302
Electronic Data Systems Corp. 5,900 245
* EMC Corp. 15,600 1,546
Hewlett Packard Co. 8,410 816
Intel Corp. 28,300 1,178
International Business Machines Corp. 13,800 1,552
* JDS Uniphase Corp. 6,000 568
Lucent Technologies, Inc. 9,400 287
* Microsoft Corp. 23,200 1,398
Network Appliance, Inc. 4,600 586
Nokia Corp. 4,400 175
Nortel Networks Corp. 26,400 1,572
* Oracle Systems Corp. 10,400 819
Palm, Inc. 9,000 476
Peoplesoft, Inc. 9,900 277
QLogic Corp. 3,800 334
* Qualcomm, Inc. 2,900 207
Siebel Systems, Inc. 5,300 590
* Solectron Corp. 3,000 138
* Sun Microsystems, Inc. 6,600 771
Texas Instruments, Inc. 2,800 132
* Veritas Software Corp. 2,500 355
Vitesse Semiconductor Corp. 3,200 285
* Xilinx, Inc. 5,300 454
-----------------------------------------------------------
GROUP TOTAL 19,277
-----------------------------------------------------------
UTILITIES (3.3%)
AT&T Corp. 16,891 496
Coastal Corp. 5,800 430
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
-----------------------------------------------------------
<S> <C> <C>
* Global Crossing Ltd. 7,600 $ 236
* Qwest Communications International,
Inc. 8,600 413
SBC Communications, Inc. 27,370 1,369
Sprint Corp. (FON Group) 6,400 188
* Sprint Corp. (PCS Group) 7,300 256
Verizon Communications 18,400 891
Vodafone Airtouch plc ADR 6,350 235
!! Worldcom, Inc. 11,572 351
-----------------------------------------------------------
GROUP TOTAL 4,865
-----------------------------------------------------------
TOTAL U.S. COMMON STOCKS (Cost $54,792) 66,382
-----------------------------------------------------------
</TABLE>
<TABLE>
U.S. FIXED INCOME (34.6%)
-------------------------------------------------------------
FACE
AMOUNT
(000)
-------
<S> <C> <C> <C>
AGENCY FIXED RATE MORTGAGES (15.8%)
Federal Home Loan
Mortgage Corporation,
Conventional Pools:
10.00%, 6/1/19 Agy $ 31 34
10.50%, 4/1/19 Agy 117 126
11.00%, 9/1/16 Agy 41 44
11.50%, 8/1/15 Agy 26 29
Gold Pools:
8.00%, 10/1/30 Agy 300 304
8.50%, 10/1/30 Agy 900 923
9.50%, 12/1/16 Agy 68 73
10.00%, 1/1/21 Agy 94 101
11.50%, 7/1/15-1/1/16 Agy 131 146
October TBA
6.00%, 10/1/29 Agy 4,825 4,510
Federal National Mortgage
Association,
Conventional Pools:
10.00%, 5/1/22 Agy 332 357
10.50%, 12/1/09-6/1/19 Agy 131 143
11.00%, 11/1/20 Agy 50 55
12.50%, 3/1/15 Agy 22 25
October TBA
6.00%, 10/1/29 Agy 2,150 2,008
6.50%, 10/1/29 Agy 2,500 2,399
7.00%, 10/1/30 Agy 1,400 1,371
7.50%, 10/1/30 Agy 2,250 2,244
8.00%, 10/1/30 Agy 700 709
8.50%, 10/1/30 Agy 900 921
November TBA
6.50%, 11/1/29 Agy 500 480
Government National
Mortgage Association:
Adjustable Rate
Mortgages:
6.00%, 2/20/27 Tsy 70 70
6.375%, 3/20/25 Tsy 56 56
6.50%, 10/20/27-12/20/27 Tsy 551 554
6.875%, 4/20/25-6/20/25 Tsy 358 360
7.00%, 3/20/25-11/20/25 Tsy 831 836
11.50%, 1/15/13 Tsy 21 24
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
139
<PAGE> 142
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
Various Pools:
10.00%, 7/15/16-8/15/20 Tsy $ 207 $ 223
10.50%, 1/15/16-5/15/26 Tsy 724 792
11.00%, 12/15/09-8/15/19 Tsy 352 389
11.50%, 8/15/11-4/15/13 Tsy 87 96
12.00%, 11/15/12-10/15/15 Tsy 38 43
October TBA
7.00%, 10/15/29 Tsy 3,250 3,200
-------------------------------------------------------------
GROUP TOTAL 23,645
-------------------------------------------------------------
ASSET BACKED CORPORATES (3.6%)
Arcadia Automobile
Receivables Trust,
Series:
97-C A4
6.375%, 1/15/03 AAA 115 115
97-D A3
6.20%, 5/15/03 AAA 87 87
Associates Automobile
Receivables Trust,
Series 00-1
7.15%, 6/15/03 AAA 220 221
Banc One Home Equity Trust,
Series 99-2 A1
6.06%, 1/25/12 AAA 116 115
Block Mortgage Finance Co.,
Series 99-1 A1
5.94%, 8/26/13 AAA 71 70
Centex Home Equity,
Series 99-1 A1
6.07%, 3/25/18 AAA 48 47
Chevy Chase Auto
Receivables Trust,
Series 97-4 A
6.25%, 6/15/04 AAA 106 106
Daimler Benz Auto Grantor
Trust,
Series 97-A A
6.05%, 3/31/05 AAA 19 19
Daimler Benz Vehicle Trust,
Series 98-A A3
5.16%, 12/20/07 AAA 382 379
EQCC Home Equity
Loan Trust,
Series:
99-1 A1F
5.77%, 3/20/29 AAA 125 124
99-2 A1F
6.05%, 1/25/10 AAA 100 99
99-3 A1F
6.548%, 4/25/10 AAA 212 210
+ First Security Auto
Grantor Trust,
Series:
97-B A
6.10%, 4/15/03 AAA 73 73
98-A A
5.97%, 4/15/04 AAA 155 154
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
+ First Security Auto Owner
Trust,
Series 00-1 1
7.20%, 5/15/03 Aaa $ 300 $ 301
Ford Credit Auto Owner
Trust,
Series:
99-B A4
5.80%, 6/15/02 AAA 450 447
99-D A3
6.20%, 4/15/02 AAA 323 322
+ 00-A A3
6.82%, 6/17/02 Aaa 438 438
Green Tree Financial Corp.,
Series 99-1 A2
5.43%, 3/1/30 AAA 91 91
Green Tree Home Equity Loan
Trust,
Series 99-C A1
5.99%, 7/15/30 AAA 120 120
Harley-Davidson Eaglemark
Motorcycle Trust,
Series:
99-1 A1
5.25%, 7/15/03 AAA 148 147
99-2 A1
5.84%, 10/15/03 AAA 118 117
+ HFC Home Equity Loan,
Series 99-1 A1
6.83%, 12/20/16 Aaa 121 120
Honda Auto Receivables
Grantor Trust,
Series 97-B A
5.95%, 5/15/03 AAA 22 22
(+) Long Beach Acceptance
Auto Grantor Trust,
Series 97-2 A
6.69%, 9/25/04 AAA 22 22
+ MBNA Master Credit Card
Trust,
Series 00-E
7.80%, 10/15/12 Aaa 170 180
Navistar Financial Corp.
Owner Trust,
Series 99-A A2
5.55%, 2/15/02 AAA 95 95
+ Nissan Auto Receivables
Owner Trust,
Series 00-B A2
7.15%, 12/15/02 Aaa 275 276
Option One Mortgage Loan
Trust,
Series 99-2 A1
5.88%, 5/25/29 AAA 86 85
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
140
<PAGE> 143
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
+ Peco Energy Transition
Trust,
Series:
00-A A1
7.18%, 9/1/03 Aaa $ 175 $ 175
00-A A3
7.625%, 3/1/10 Aaa 250 257
Premier Auto Trust,
Series 99-3 A2
5.82%, 2/8/02 AAA 224 224
## Residential Funding
Mortgage Securities I,
Series 99-HI4 A1
6.41%, 11/25/07 AAA 90 90
-------------------------------------------------------------
GROUP TOTAL 5,348
-------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- AGENCY COLLATERAL SERIES
(0.7%)
Federal Home Loan
Mortgage Corporation
Series:
1707-S Inv Fl IO
2.18%, 3/15/24 Agy 483 47
## 1710-D IO
7.075%, 6/15/20 Agy 131 132
1911-C PO
11/15/23 Agy 96 65
Federal National Mortgage
Association
Series:
92-89 SQ Inv Fl IO PAC
(11) 2884.45%, 6/25/22 Agy (c)-- 9
97-53 PI IO PAC
8.00%, 8/18/27 Agy 591 159
## 97-70 FA REMIC PAC
(11) 7.075%, 7/18/20 Agy 23 23
99-42 SA Inv Fl IO
1.578%, 10/25/28 Agy 1,519 62
191 IO
8.00%, 1/1/28 Agy 621 173
291 2 I0
8.00%, 11/1/27 Agy 363 100
296 2 IO
8.00%, 4/1/24 Agy 161 45
Government National
Mortgage Association
Series:
97-13 SB Inv Fl IO
1.375%, 9/16/27 Tsy 1,800 111
99-30 SA Inv Fl IO
1.978%, 8/16/29 Tsy 1,275 74
-------------------------------------------------------------
GROUP TOTAL 1,000
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.3%)
American Housing Trust,
Series V 1G
9.125%, 4/25/21 AAA $ 74 $ 76
+## BA Mortgage Securities,
Inc.,
Series 97-1 A2
7.121%, 7/25/26 Aaa 115 115
Mid-State Trust II,
Series 88-2 A4
9.625%, 4/1/03 AAA 103 105
## Morserv, Inc.,
Series 96-2 1A1
6.72%, 11/25/26 AAA 124 125
-------------------------------------------------------------
GROUP TOTAL 421
-------------------------------------------------------------
COMMERCIAL MORTGAGES (0.3%)
American Southwest
Financial Securities
Corp.,
Series 93-2 A1
7.30%, 1/18/09 N/R 83 82
Asset Securitization Corp.,
Series 96-MD6 A1C
7.04%, 11/13/26 AAA 125 123
(+) Beverly Finance Corp.,
Series 94-1
8.36%, 7/15/04 AA- 100 104
(+) Carousel Center
Finance, Inc.,
Series 1 A1
6.828%, 11/15/07 AA 100 99
+## GMAC Commercial
Mortgage Securities,
Inc.,
Series 97-C2 X IO
1.264%, 4/15/27 Aaa 1,466 71
-------------------------------------------------------------
GROUP TOTAL 479
-------------------------------------------------------------
ENERGY (0.2%)
CMS Energy Corp.
7.50%, 1/15/09 BB 95 85
Conoco, Inc.
6.95%, 4/15/29 A- 290 268
@ Mobile Energy Services
LLC
8.67%, 1/1/17 D 85 17
-------------------------------------------------------------
GROUP TOTAL 370
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
141
<PAGE> 144
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
)i
FEDERAL AGENCY (5.1%)
!! Federal Home Loan
Mortgage Corporation
6.625%, 9/15/09 Agy $ 800 $ 790
Federal National Mortgage
Association
6.25%, 5/15/29 Agy 2,155 1,987
7.125%, 6/15/10 Agy 4,350 4,457
7.125%, 1/15/30 Agy 250 259
7.25%, 5/15/30 Agy 175 184
-------------------------------------------------------------
GROUP TOTAL 7,677
-------------------------------------------------------------
FINANCE (3.2%)
(+) Anthem Insurance Cos.,
Inc.
Series A
9.00%, 4/1/27 BBB+ 100 81
9.125%, 4/1/10 BBB+ 95 89
Bank One Corp.
6.90%, 4/1/29 BBB+ 150 118
7.625%, 10/15/26 A- 125 120
+ 7.875%, 8/1/10 A1 60 62
BankAmerica Capital Corp.
5.875%, 2/15/09 A+ 25 23
(+) BT Institutional
Capital Trust,
Series A
8.09%, 12/1/26 A 225 205
Chase Manhattan Corp.
7.00%, 11/15/09 A 125 122
Citicorp,
Series MTNF
6.375%, 11/15/08 A+ 115 109
Citigroup, Inc.
6.625%, 1/15/28 AA- 85 75
EOP Operating LP
6.763%, 6/15/07 BBB 100 94
7.50%, 4/19/29 BBB+ 70 62
Equitable Companies, Inc.
6.50%, 4/1/08 A+ 55 52
(+) Equitable Life
Assurance Society of the
U.S., Series 1A
6.95%, 12/1/05 A+ 250 246
(+) Farmers Exchange
Capital
7.05%, 7/15/28 A+ 290 240
Ford Motors Credit Co.
7.375%, 10/28/09 A+ 160 157
General Electric Capital
Corp.
7.375%, 1/19/10 AAA 205 211
General Motors Acceptance
Corp.
7.75%, 1/19/10 A+ 95 96
(+) Goldman Sachs Group LP
6.50%, 2/25/09 A+ 100 93
7.125%, 8/1/05 BB+ 195 131
+ Hartford Financial
Services
7.90%, 6/15/10 A2 170 175
HMH Properties, Series A
7.875%, 8/1/05 BB 45 43
</TABLE>
<TABLE>
<CAPTION>
++RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)+
-------------------------------------------------------------
<S> <C> <C> <C>
Household Finance Corp.
5.875%, 2/1/09 A $ 170 $ 152
+ 8.00%, 7/15/10 A2 50 51
+ Lehman Brothers Holdings
Inc.
8.25%, 6/15/07 A3 75 78
(+) Metropolitan Life
Insurance Co.
7.80%, 11/1/25 A+ 250 240
Nationsbank Corp.
6.80%, 3/15/28 A 80 71
(+) Nationwide Mutual Life
Insurance Co.
7.50%, 2/15/24 A+ 250 210
PNC Funding Corp.
7.50%, 11/1/09 BBB+ 65 65
(+) PNC Institutional
Capital,
Series A
7.95%, 12/15/26 BBB+ 150 136
(+) Prime Property Funding
II, Inc.
6.80%, 8/15/02 A 85 84
7.00%, 8/15/04 A 165 161
(+) Prudential Insurance
Co.
8.30%, 7/1/25 A- 175 177
+ State Street Corp.
7.65%, 6/15/10 A1 95 97
Washington Mutual Capital
I, Inc.
8.375%, 6/1/27 BBB- 155 141
Washington Mutual, Inc.,
Series A
8.21%, 2/1/27 BBB- 25 22
(+) World Financial
Properties,
Series:
96 WFP-B
6.91%, 9/1/13 AA- 228 219
96 WFP-D
6.95%, 9/1/13 AA- 250 239
-------------------------------------------------------------
GROUP TOTAL 4,747
-------------------------------------------------------------
INDUSTRIALS (2.7%)
Adelphia Communications
Corp.
7.875%, 5/1/09 B+ 50 42
9.375%, 11/15/09 B+ 75 68
Albertson's, Inc.
7.45%, 8/1/29 A 175 157
+ Alcoa, Inc.
7.375%, 8/1/10 A1 45 46
+ Clear Channel
Communications, Inc.
7.65%, 9/15/10 Baa3 135 134
Columbia/HCA Healthcare
Corp.
7.19%, 11/15/15 BB+ 80 67
7.50%, 12/15/23 BB+ 145 121
9.00%, 12/15/14 BB+ 50 50
CSC Holdings, Inc.
7.875%, 12/15/07 BB+ 135 133
+ DaimlerChrysler AG
8.00%, 6/15/10 A1 85 87
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
142
<PAGE> 145
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
Delphi Automotive Systems
Corp.
7.125%, 5/1/29 BBB $ 50 $ 43
+ Dow Chemical Co.
7.375%, 11/1/29 A1 50 48
DR Structured Finance,
Series:
94-K1 A1
7.60%, 8/15/07 BB+ 65 55
94-K2 A2
9.35%, 8/15/19 BB+ 30 22
Federated Department
Stores, Inc.
7.00%, 2/15/28 BBB+ 55 44
(+)+ 8.50%, 6/1/10 Baa1 30 30
(+) Florida Windstorm
7.125%, 2/25/19 AAA 235 221
Ford Motor Co.
6.625%, 10/1/28 A+ 270 226
+ 7.45%, 7/16/31 A2 65 61
Fred Meyer, Inc.
7.375%, 3/1/05 BBB- 230 228
International Game
Technology
8.375%, 5/15/09 BB+ 100 97
Honeywell International,
Inc.
7.50%, 3/1/10 A 45 46
Kmart Funding Corp.
Series F
8.80%, 7/1/10 BB+ 46 40
Lenfest Communications,
Inc.
7.625%, 2/15/08 BBB 135 135
Lockheed Martin Corp.
8.50%, 12/1/29 BBB- 180 190
Lowe's Companies, Inc.
6.50%, 3/15/29 A 175 145
6.875%, 2/15/28 A 30 26
Lucent Technologies, Inc.
6.45%, 3/15/29 A 150 125
(+) Hyundai Semiconductor
America
8.625%, 5/15/07 B 100 86
News America Holdings, Inc.
7.28%, 6/30/28 BBB- 250 219
(+) Oxymar
7.50%, 2/15/16 BBB- 100 75
(+) Raytheon Co.
8.20%, 3/1/06 BBB- 80 83
+ 8.30%, 3/1/10 Baa2 30 31
Rockwell International
Corp.
6.70%, 1/15/28 A+ 50 43
Saks, Inc.
7.375%, 2/15/19 BB+ 105 57
Sun Microsystems, Inc.
7.65%, 8/15/09 BBB+ 100 101
Tenet Healthcare Corp.
7.625%, 6/1/08 BB+ 65 62
+ Time Warner, Inc.
6.625%, 5/15/29 Baa3 105 89
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
U.S. Airways Corp., Pass
Through Certificates
8.11%, 2/20/17 AAA $ 75 $ 76
USA Waste Services, Inc.
7.00%, 7/15/28 BBB 145 119
Wal-Mart Stores, Inc.
6.875%, 8/10/09 AA 40 40
7.55%, 2/15/30 AA 180 186
Waste Management, Inc.
7.375%, 5/15/29 BBB 70 60
-------------------------------------------------------------
GROUP TOTAL 4,014
-------------------------------------------------------------
TELEPHONES (0.9%)
!! AT&T Corp.
6.50%, 3/15/29 AA- 180 150
BellSouth
Telecommunications, Inc.
6.375%, 6/1/28 AAA 175 148
Global Crossing Holdings
Ltd.
9.125%, 11/15/06 BB 140 139
GTE Corp.
6.94%, 4/15/28 A 205 186
Intermedia Communications,
Inc.
# 0.00%, 5/15/06 B 40 38
Series B
8.50, 1/15/08 B 35 34
8.875%, 11/1/07 B 30 29
!! MCI WorldCom, Inc.
6.95%, 8/15/28 A- 295 268
#!! Nextel Communications,
Inc.
0.00%, 9/15/07 B 190 156
# Qwest Communications
International, Inc.,
Series B
0.00%, 2/1/08 BBB+ 205 170
-------------------------------------------------------------
GROUP TOTAL 1,318
-------------------------------------------------------------
TRANSPORTATION (0.2%)
Continental Airlines,
Series:
98-1 A
6.648%, 9/15/17 AA+ 90 85
99-1 A
6.545%, 8/2/20 AA+ 102 95
(+) Jet Equipment Trust,
Series 94-A A11
10.00%, 6/15/12 A+ 125 139
-------------------------------------------------------------
GROUP TOTAL 319
-------------------------------------------------------------
U.S. TREASURY SECURITIES (0.1%)
U.S. Treasury Notes
6.25%, 1/31/02 Tsy 50 50
!! 7.50%, 2/15/05 Tsy 50 53
-------------------------------------------------------------
GROUP TOTAL 103
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
143
<PAGE> 146
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
UTILITIES (0.1%)
(+) PSEG Energy Holdings,
Inc.
9.125%, 2/10/04 BBB- $ 85 $ 87
-------------------------------------------------------------
YANKEE (1.4%)
Abbey National plc
7.95%, 10/26/29 AA- 120 122
Ahold Finance USA, Inc.
6.875%, 5/1/29 A- 155 128
(+)+ Bayer Hypo-vereinsbank
8.741%, 6/30/31 Aa3 100 95
+ Deutsche Telekom
International Finance
8.00%, 6/15/10 Aa2 180 185
Glencore Nickel Property
Ltd.
9.00%, 12/1/14 BB+ 205 171
(+) Hutchison Whampoa
Financial,
Series B
7.45%, 8/1/17 A 125 114
(+) Hyundai Semiconductor
America
8.25%, 5/15/04 B 110 100
Multicanal S.A.
Series C
10.50%, 4/15/18 BB+ 95 69
(+) Oil Purchase Co. II
10.73%, 1/31/04 BBB- 139 130
(+) Petrozuata Finance,
Inc.
8.22%, 4/1/17 BB 200 167
(+) Ras Laffan Liquefied
Natural Gas Co.
8.294%, 3/15/14 BBB+ 100 95
Republic of Colombia
8.70%, 2/15/16 BB+ 140 95
11.75%, 2/25/20 BB+ 45 38
(+)+ Unicredito Italiano
9.20%, 10/29/49 A1 100 101
+ United Mexican States
10.375%, 2/17/09 Baa3 185 201
(+) Vodafone AirTouch plc
7.75%, 2/15/10 A 35 36
7.875%, 2/15/30 A 215 218
-------------------------------------------------------------
GROUP TOTAL 2,065
-------------------------------------------------------------
TOTAL U.S. FIXED INCOME (Cost $51,619) 51,593
-------------------------------------------------------------
INTERNATIONAL FIXED INCOME (4.2%)
-------------------------------------------------------------
FIXED INCOME SECURITIES (4.2%)
-------------------------------------------------------------
BRITISH POUND (0.1%)
United Kingdom Treasury
Bill
8.00%, 6/10/03 AAA GBP 90 140
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
CANADIAN DOLLAR (0.2%)
Government of Canada
7.50%, 3/1/01 AAA CAD 430 $ 288
10.00%, 6/1/08 AAA 100 83
-------------------------------------------------------------
GROUP TOTAL 371
-------------------------------------------------------------
DANISH KRONE (0.3%)
Kingdom of Denmark
5.00%, 8/15/05 AAA DKK 1,500 173
8.00%, 5/15/03 AAA 1,745 218
-------------------------------------------------------------
GROUP TOTAL 391
-------------------------------------------------------------
EURO (2.2%)
Government of France O.A.T.
8.50%, 10/25/19 AAA EUR 255 300
Government of Germany
6.00%, 1/4/07 AAA 863 793
6.00%, 7/4/07 AAA 130 120
6.25%, 1/4/24 AAA 240 228
6.50%, 7/4/27 AAA 292 288
6.875%, 5/12/05 AAA 425 400
7.125%, 1/29/03 AAA 87 80
7.50%, 9/9/04 AAA 413 394
Government of Spain
5.15%, 7/30/09 AA+ 335 289
International Bank for
Reconstruction &
Development
7.125%, 4/12/05 AAA 89 83
Kredit fuer Wiederaufbau
5.00%, 1/4/09 AAA 38 32
Republic of Italy BTPS
9.50%, 2/1/06 AA 68 71
10.00%, 8/1/03 AA 160 159
-------------------------------------------------------------
GROUP TOTAL 3,237
-------------------------------------------------------------
JAPANESE YEN (1.2%)
European Investment Bank
3.00%, 9/20/06 AAA JPY 4,000 40
Export-Import Bank of Japan
2.875%, 7/28/05 AAA 30,000 301
+ Federal National Mortgage
Association
Series E
1.75%, 3/26/08 Aaa 10,000 93
Government of Japan
0.90%, 12/22/08 AAA 123,000 1,065
International Bank for
Reconstruction &
Development
6.75%, 6/18/01 AAA 41,000 397
-------------------------------------------------------------
GROUP TOTAL 1,896
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
144
<PAGE> 147
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
SWEDISH KRONA (0.2%)
Swedish Government
6.00%, 2/9/05 AAA SEK 2,300 $ 248
13.00%, 6/15/01 AA+ 500 55
-------------------------------------------------------------
GROUP TOTAL 303
-------------------------------------------------------------
TOTAL INTERNATIONAL FIXED INCOME (Cost $7,125) 6,338
-------------------------------------------------------------
<CAPTION>
SHARES
----------
<S> <C> <C> <C>
INTERNATIONAL EQUITY (2.4%)
-------------------------------------------------------------
COMMON STOCK (2.4%)
-------------------------------------------------------------
AUSTRALIA (0.4%)
News Corp., Ltd. ADR 12,100 567
-------------------------------------------------------------
KOREA (1.5%)
Korea Fund, Inc. 184,800 2,218
-------------------------------------------------------------
SWEDEN (0.0%)
Tele1 Europe AB 1,879 17
-------------------------------------------------------------
GERMANY (0.5%)
Emerging Markets Telecom
Fund 67,900 832
-------------------------------------------------------------
TOTAL INTERNATIONAL EQUITY (Cost $3,788) 3,634
-------------------------------------------------------------
HIGH YIELD (7.4%)
-------------------------------------------------------------
FACE
AMOUNT
(000)
-------
ASSET BACKED CORPORATES (0.1%)
(+)++ Securitized Multiple Asset Rated
Trust Series 97-3 A1
7.72%, 6/15/05 N/R $ 135 27
(+) OHA Auto Grantor Trust,
Series 97-A
11.00%, 9/15/03 BB 88 84
-------------------------------------------------------------
GROUP TOTAL 111
-------------------------------------------------------------
AUTOMOTIVE (0.1%)
Hayes Lemmerz International, Inc.
8.25%, 12/15/08 B 175 142
Tenneco Inc.,
Series B
11.625%, 10/15/09 B+ 30 19
-------------------------------------------------------------
GROUP TOTAL 161
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
CABLE (0.9%)
Adelphia Communications
Corp.
7.75%, 1/15/09 B+ $ 125 $ 104
9.375%, 11/15/09 B+ 100 91
Series B
8.375%, 2/1/08 B+ 145 126
9.875%, 3/1/07 B+ 40 38
+ British Sky Broadcasting
8.20%, 7/15/09 B1 130 122
Cablevision S.A.
13.75%, 5/1/09 BB 100 89
(+) Callahan NRH
14.00%, 7/15/10 B- 125 124
Charter Communications
Holdings/Charter Cap
10.25%, 1/15/10 B+ 130 127
Echostar DBS Corp.
9.375%, 2/1/09 B 150 147
NTL, Inc. Series B
0.00%, 4/1/08 B- GBP 150 133
# RCN Corp.
0.00%, 10/15/07 B- $ 225 119
# Telewest plc
0.00%, 4/15/09 B+ 135 103
United Pan-Europe
Communications N.V.
10.875%, 8/1/09 B 85 72
-------------------------------------------------------------
GROUP TOTAL 1,395
-------------------------------------------------------------
CHEMICALS (0.2%)
Huntsman ICI
10.125%, 7/1/09 B+ EUR 75 74
+ 10.125%, 7/1/09 B2 $ 75 66
ISP Holdings, Inc.,
Series B
9.00%, 10/15/03 BB- 150 132
Lyondell Chemical Co.
9.625%, 5/1/07 BB 110 107
-------------------------------------------------------------
GROUP TOTAL 379
-------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS- NON-AGENCY COLLATERAL
SERIES (0.0%)
+ Citicorp Mortgage
Securities, Inc., Series
90-7 A7
9.50%, 6/25/05 B3 9 4
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
145
<PAGE> 148
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL MORTGAGES (0.1%)
(+)+## DLJ Mortgage
Acceptance Corp. Series
97-CF2 S IO
0.35%, 10/15/17 Aaa $ 3,844 $ 77
(+) Franchise Mortgage
Acceptance Corp., Loan
Receivables Trust, Series
96-B C1 IO
7.929%, 11/1/18 N/R 97 27
-------------------------------------------------------------
GROUP TOTAL 104
-------------------------------------------------------------
COMMUNICATIONS-FIXED (1.4%)
(+)+ Bayan
Telecommunications
Holdings Corp.
13.50%, 7/15/06 Caa2 140 51
Esprit Telecom Group plc
11.00%, 6/15/08 B- EUR 64 25
(+) Exodus Communications, Inc.
11.625%, 7/15/10 B $ 90 90
Focal Communications
11.875%, 1/15/10 B 100 76
Global Crossing Holdings
Ltd.
9.625%, 5/15/08 BB 135 135
Globix Corp.
12.50%, 2/1/10 B- 90 64
Hermes Europe Railtel
10.375%, 1/15/09 B 15 7
11.50%, 8/15/07 B 100 50
# Hyperion
Telecommunications, Inc.
0.00%, 4/15/03 B+ 105 87
Intermedia Communications,
Inc. Series B
# 0.00%, 7/15/08 B 175 145
8.50%, 1/15/08 B 35 33
# Level 3 Communications,
Inc.
0.00%, 3/15/10 B 125 67
Netia Holdings S.A.
13.50%, 6/15/09 B 100 82
NEXTLINK Communications
# 0.00%, 4/15/08 B 200 117
10.75%, 11/15/08 B 65 60
Pharmacia Corp.
6.60%, 12/1/28 A 225 201
Primus Telecommunications
Group, Inc.
11.25%, 1/5/09 B- 180 92
PSINet, Inc., Series B
10.00%, 2/15/05 B- 160 104
Rhythms NetConnections,
Inc.
14.00%, 2/15/10 CCC+ 30 20
Series B
# 0.00%, 5/15/08 CCC+ 315 120
RSL Communications plc
# 0.00%, 6/15/08 B- EUR 332 $ 38
9.125%, 3/1/08 B- $ 55 11
12.00%, 11/1/08 B- 45 11
12.25%, 11/15/06 B- 50 12
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
Tele1 Europe B.V.
13.00%, 5/15/09 B- EUR $100 $ 87
# Viatel, Inc.
0.00%, 4/15/08 B- $ 135 34
# Wam!Net, Inc. Series B
0.00%, 3/1/05 CCC+ 125 56
(+) WinStar Communications,
Inc.
0.00%, 4/15/10 B- 490 157
-------------------------------------------------------------
GROUP TOTAL 2,032
-------------------------------------------------------------
COMMUNICATIONS-MOBILE (0.7%)
American Mobile Satellite Corp.,
Series B
12.25%, 4/1/08 N/R 120 87
Centennial Cellular Corp.
10.75%, 12/15/08 B- 100 98
# CTI Holdings S.A.
0.00%, 4/15/08 B 150 77
Dobson Communications Corp.
0.00%, 1/1/80 N/R 1 82
# Dolphin
Telecommunications
0.00%, 6/1/08 CCC+ EUR 110 18
0.00%, 5/15/09 CCC+ $ 125 25
Globalstar LP/Capital
11.375%, 2/15/04 CCC 100 30
11.50%, 6/1/05 B 20 6
Grupo Iusacell S.A. de C.V.
14.25%, 12/1/06 B+ 115 122
# Nextel Communications,
Inc.
0.00%, 2/15/08 B 375 287
# Occidente y Caribe
Cellular
0.00%, 3/15/04 B 185 134
PTC International Finance
11.25%, 12/1/09 N/R 85 73
(+) Total Access
Communications
2.00%, 5/31/06 N/R 50,000 63
-------------------------------------------------------------
GROUP TOTAL 1,102
-------------------------------------------------------------
ENERGY (0.2%)
# Husky Oil Ltd.
8.90%, 8/15/28 BB+ 65 63
(+) Nuevo Energy Co.
9.375%, 10/1/10 B+ 65 65
Vintage Petroleum, Inc.
8.625%, 2/1/09 BB- 40 40
9.75%, 6/30/09 B+ 75 78
-------------------------------------------------------------
GROUP TOTAL 246
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
146
<PAGE> 149
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
FINANCE (0.2%)
(+) Anthem Insurance
9.125%, 4/1/10 BBB+ $ 95 $ 89
Golden State Holdings
Escrow Corp.
7.125%, 8/1/05 BB+ 140 181
-------------------------------------------------------------
GROUP TOTAL 270
-------------------------------------------------------------
FOOD & BEVERAGES (0.1%)
Smithfield Foods, Inc.
7.625%, 2/15/08 BB+ 120 108
-------------------------------------------------------------
GAMING (0.6%)
Harrahs Operating Co., Inc.
7.875%, 12/15/05 BB+ 225 217
Horseshoe Gaming Holdings
8.625%, 5/15/09 B+ 145 142
International Game
Technology
8.375%, 5/15/09 BB+ 145 142
Park Place Entertainment
Corp.
7.875%, 12/15/05 BB+ 95 92
8.50%, 11/15/06 BBB- 75 76
Station Casinos, Inc.
8.875%, 12/1/08 B+ 135 130
10.125%, 3/15/06 B+ 100 100
-------------------------------------------------------------
GROUP TOTAL 899
-------------------------------------------------------------
GENERAL INDUSTRY (0.1%)
(+) Actuant Corp.
13.00%, 5/1/09 B 65 66
(+) Flowserve Corp.
12.25%, 8/15/10 B 105 107
-------------------------------------------------------------
GROUP TOTAL 173
-------------------------------------------------------------
HEALTHCARE (0.5%)
Columbia/HCA Healthcare
Corp.
7.69%, 6/15/25 BB+ 220 188
8.75%, 9/1/10 BB+ 100 101
Fresenius Medical Capital
Trust II
9.00%, 12/1/06 B+ 140 140
Tenet Healthcare Corp.
8.125%, 12/1/08 BB- 115 110
8.625%, 1/15/07 BB- 125 124
-------------------------------------------------------------
GROUP TOTAL 663
-------------------------------------------------------------
HOTEL & LODGING (0.1%)
Hilton Hotels Corp.
7.95%, 4/15/07 BBB 150 146
HMH Properties,
Series A
7.875%, 8/1/05 BB 80 75
-------------------------------------------------------------
GROUP TOTAL 221
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
& POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
MEDIA & ENTERTAINMENT (0.3%)
Chancellor Media Corp.
Series B
8.125%, 12/15/07 B $ 90 $ 91
Multicanal S.A.
10.50%, 2/1/07 BB+ 150 119
Satelites Mexicanos S.A.
10.125%, 11/1/04 B- 90 57
TV Azteca S.A.,
Series B
10.50%, 2/15/07 B+ 140 130
-------------------------------------------------------------
GROUP TOTAL 397
-------------------------------------------------------------
METALS (0.2%)
(+) EES Coke Battery Co.,
Inc.
9.382%, 4/15/07 B+ 100 88
Murrin Murrin Holdings Ltd.
9.375%, 8/31/07 BB- 225 202
National Steel Corp. Series
D
9.875%, 3/1/09 B+ 135 80
-------------------------------------------------------------
GROUP TOTAL 370
-------------------------------------------------------------
PACKAGING (0.1%)
Norampac, Inc.
9.50%, 2/1/08 BB 96 97
Pindo Deli Financial Mauritius
10.75%, 10/1/07 CCC+ 250 122
-------------------------------------------------------------
GROUP TOTAL 219
-------------------------------------------------------------
REAL ESTATE (0.2%)
D. R. Horton, Inc.
8.00%, 2/1/09 BB 70 64
(+) Lennar Corp.
9.95%, 5/1/10 BB+ 75 77
Nortek, Inc., Series B
8.875%, 8/1/08 B+ 115 106
-------------------------------------------------------------
GROUP TOTAL 247
-------------------------------------------------------------
RETAIL (0.3%)
DR Structured Finance,
Series 93-K1 A1
6.66%, 8/15/10 BB+ 236 179
HMV Media Group plc Series
B
10.25%, 5/15/08 B 145 95
Kmart Financing
7.75%, 1/1/80 B+ 2 50
Musicland Group, Inc.,
Series B
9.875%, 3/15/08 B- 200 168
-------------------------------------------------------------
GROUP TOTAL 492
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
147
<PAGE> 150
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
MULTI-ASSET-CLASS
PORTFOLIO
<TABLE>
<CAPTION>
!!RATINGS FACE
(STANDARD AMOUNT VALUE
(CONT'D) & POOR'S) (000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
SERVICES (0.2%)
Waste Management, Inc.
6.875%, 5/15/09 BBB $ 20 $ 18
7.00%, 10/15/06 BBB 155 145
7.125%, 10/1/07 BBB 70 66
7.125%, 12/15/17 BBB 25 21
7.65%, 3/15/11 BBB 25 24
-------------------------------------------------------------
GROUP TOTAL 274
-------------------------------------------------------------
SOVEREIGN & EMERGING MARKETS (0.3%)
Federative Republic of Brazil,
11.00%, 8/17/40 B+ 260 207
(+)# GT Group Telecom
0.00%, 2/1/10 CCC+ 160 82
Republic of Colombia
9.75%, 4/23/09 BB+ 80 65
Republic of Philippines
10.625%, 3/16/25 BB+ 130 110
-------------------------------------------------------------
GROUP TOTAL 464
-------------------------------------------------------------
SUPERMARKET/DRUG (0.2%)
(+) CA FM Lease Trust
8.50%, 7/15/17 BBB- 222 208
Stater Bros. Holdings, Inc.
10.75%, 8/15/06 B+ 70 59
-------------------------------------------------------------
GROUP TOTAL 267
-------------------------------------------------------------
TRANSPORTATION (0.2%)
ALPS, Series 96-1 DX
12.75%, 6/15/06 BB- 129 123
(+) Jet Equipment Trust,
Series 94-C1
11.79%, 6/15/13 BBB 150 168
-------------------------------------------------------------
GROUP TOTAL 291
-------------------------------------------------------------
UTILITIES (0.1%)
AES Corp.
8.50%, 11/1/07 B+ 110 105
(+) Paiton Energy Funding
9.34%, 2/15/14 CC 200 42
-------------------------------------------------------------
GROUP TOTAL 147
-------------------------------------------------------------
TOTAL HIGH YIELD (Cost $14,007) 11,036
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
!!RATINGS
(STANDARD VALUE
& POOR'S) SHARES (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (0.5%)
-------------------------------------------------------------
COMMUNICATIONS-FIXED (0.1%)
Broadwing Communications
Series B (PIK) N/R 104 $ 106
-------------------------------------------------------------
COMMUNICATIONS-MOBILE (0.0%)
Nextel Communications, Inc. N/R 36 39
-------------------------------------------------------------
MEDIA & ENTERTAINMENT (0.1%)
Paxson Communications Corp.
13.00% CCC+ 895 88
(+) Paxson Communications
Corp. N/R 363 34
-------------------------------------------------------------
GROUP TOTAL 122
-------------------------------------------------------------
MORTGAGES-OTHER (0.3%)
+(+) Home Ownership Funding
Corp. Aaa 600 450
-------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $583) 717
-------------------------------------------------------------
WARRANTS (0.0%)
-------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
----------
<S> <C> <C> <C>
COMMUNICATIONS-FIXED (0.0%)
*(+) Wam!Net, Inc.,
expiring 3/1/05 N/R 3,750 4
-------------------------------------------------------------
COMMUNICATIONS-MOBILE (0.0%)
*(+) Globalstar
Telecommunications Ltd.,
expiring 2/15/04 N/R 125 2
*(+) Motient Corp.
expiring 4/1/08 N/R 2 5
*(+) Occidente y Caribe
Cellular expiring 3/15/04 N/R 925 3
-------------------------------------------------------------
GROUP TOTAL 10
-------------------------------------------------------------
MEDIA & ENTERTAINMENT (0.0%)
*(+)@ Paxson Communications
Corp.
expiring 6/30/03 N/R 96 --
-------------------------------------------------------------
TOTAL WARRANTS (Cost $10) 14
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
148
<PAGE> 151
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)!
-------------------------------------------------------------
<S> <C> <C> <C>
CASH EQUIVALENT (7.8%)
-------------------------------------------------------------
REPURCHASE AGREEMENT (7.8%)
Chase Securities, Inc.
6.40%, dated 9/29/00, due
10/2/00, to be
repurchased at 11,572,
collateralized by various
U.S. Government
Obligations, due
11/2/00-3/29/01, valued
at 11,681, (Cost $11,566) $ 11,566 $ 11,566
-------------------------------------------------------------
TOTAL INVESTMENTS (101.5%) (Cost $143,490) 151,280
-------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.5%)
Cash 2,727
Foreign Currency (Cost $16,756) 13,840
Foreign Currency held as collateral on Futures
Contracts (Cost $1,419) 1,359
Dividends Receivable 50
Interest Receivable 941
Receivable for Investments Sold 1,952
Receivable for Forward Commitments 2,776
Receivable for Fund Shares Sold 5
Receivable for Withholding Tax Reclaim 8
Receivable for Variation Margin on Futures
Contracts 862
Unrealized Gain on Swap Agreements 80
Other Assets 18
Payable for Investments Purchased (3,786)
Payable for Forward Commitments (21,756)
Payable for Fund Shares Redeemed (59)
Payable for Investment Advisory Fees (247)
Payable for Administrative Fees (8)
Payable for Trustees' Deferred Compensation
Plan-Note F (16)
Payable for Shareholder Servicing Fees-Investment
Class (1)
Unrealized Loss on Forward Foreign Currency
Contracts (947)
Other Liabilities (79)
--------
(2,281)
-------------------------------------------------------------
NET ASSETS (100%) $148,999
-------------------------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------------------------
NET ASSETS
Applicable to 12,346,059 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $143,434
-------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.62
-------------------------------------------------------------
INVESTMENT CLASS
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)!
-------------------------------------------------------------
-------------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS
Applicable to 480,678 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 5,565
-------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 11.58
-------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital $134,219
Undistributed Net Investment Income (Loss) (1,321)
Undistributed Realized Net Gain (Loss) 10,776
Unrealized Appreciation (Depreciation) on:
Investment Securities 7,790
Foreign Currency (1,676)
Futures and Swaps (789)
-------------------------------------------------------------
NET ASSETS $148,999
-------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
! See Note A1 to Financial Statements.
!! Ratings are unaudited.
(+) 144A security. Certain conditions for public sale may
exist.
* Non-income producing security
(!) 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.
++ 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.
ADR American Depositary Receipt
(c) Face amount is less than $500.
Inv Fl 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 Services, Inc. or Standard
& Poor's
Corporation.
PAC Planned Amortization Class
PIK Payment-in-Kind Security
PO Principal Only
REMIC Real Estate Mortgage Investment conduit
TBA Security is subject to delayed delivery. See Note A7 to
Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
149
<PAGE> 152
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
CAP MID CAP
VALUE EQUITY VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 19,234 $ 5,151 $ 9,912 $ 1,984
Interest 984 942 5,592 6,971
---------------------------------------------------------------------------------------------------------------------------------
Total Income 20,218 6,093 15,504 8,955
---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 5,261 3,433 9,073 11,237
Administrative Fee--Note C 842 549 968 1,795
Custodian Fee--Note E 177 92 129 196
Audit Fee 34 22 23 22
Legal Fee 6 17 18 39
Filing & Registration Fees 54 40 63 334
Shareholder Servicing Fee--Investment Class
shares--Note D 10 1 -- --
Distribution Fees--Adviser Class shares--Note D 625 9 87 1,648
Other Expenses 79 53 106 271
---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 7,088 4,216 10,467 15,542
---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (95) (19) (129) (196)
---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 6,993 4,197 10,338 15,346
---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 13,225 1,896 5,166 (6,391)
---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (83,973) 108,194 91,380 363,641
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 147,319 16,826 101,247 357,764
---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 63,346 125,020 192,627 721,405
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 76,571 $ 126,916 $ 197,793 $ 715,014
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
150
<PAGE> 153
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL STRATEGIC DOMESTIC
MID CAP CAP SMALL FIXED FIXED
VALUE GROWTH VALUE INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 7,421 $ 325 $ 8 $ 3,652 $ 70
Interest 5,918 956 4 335,049 13,011
---------------------------------------------------------------------------------------------------------------------------------
Total Income 13,339 1,281 12 338,701 13,081
---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 8,821 3,628 $ 5 16,928 $664
Less Waived Fees -- -- (5) -- -- (22) 642
Administrative Fee--Note C 941 290 1 3,611 142
Custodian Fee--Note E 182 63 3 344 16
Audit Fee 22 22 10 46 24
Legal Fee 19 7 -- 50 3
Filing & Registration Fees 99 73 1 81 26
Shareholder Servicing Fee--Investment
Class shares--Note D 36 -- -- 74 --
Distribution Fees--Adviser Class
shares--Note D 164 -- -- 354 3
Other Expenses 129 44 1 409 46
Expenses Reimbursed by Advisor -- -- (8) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 10,413 4,127 8 21,897 902
---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (171) (62) (2) (198) (12)
---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 10,242 4,065 6 21,699 890
---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,097 (2,784) 6 317,002 12,191
---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities 167,559 24,174 (2) (54,847) (2,225)
Futures and Swaps -- -- -- (40,916) (1,716)
---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) 167,559 24,174 (2) (95,763) (3,941)
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 118,977 81,574 103 58,467 1,077
Futures and Swaps -- -- -- 29,612 897
---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation
(Depreciation) 118,977 81,574 103 88,079 1,974
---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 286,536 105,748 101 (7,684) (1,967)
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 289,633 $ 102,964 $ 107 $ 309,318 $ 10,224
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
151
<PAGE> 154
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL
PURPOSE
FIXED FIXED HIGH CASH
INCOME II INCOME YIELD RESERVES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 253 $ 606 $ 1,110 $ --
Interest 25,171 31,686 110,547 7,554
---------------------------------------------------------------------------------------------------------------------------------
Total Income 25,424 32,292 111,657 7,554
---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 1,276 1,587 4,536 $312
Less: Waived Fees -- -- -- (66) 246
Administrative Fee--Note C 272 339 806 100
Custodian Fee--Note E 36 48 74 74
Audit Fee 24 31 29 14
Legal Fee 4 5 9 1
Filing & Registration Fees 24 16 47 12
Shareholder Servicing Fee--Investment Class
shares--Note D -- -- 13 2
Distribution Fees--Adviser Class shares--Note D -- -- 49 --
Other Expenses 24 30 114 11
---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,660 2,056 5,677 460
---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (17) (11) (74) (59)
---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1,643 2,045 5,603 401
---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 23,781 30,247 106,054 7,153
---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (4,855) (3,407) (48,919) --
Foreign Currency Transactions -- -- 7,075 --
Futures and Swaps (2,583) (2,579) 2,691 --
---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) (7,438) (5,986) (39,153) --
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 1,609 2,482 (69,420) --
Foreign Currency Transactions -- -- 3,003 --
Futures and Swaps 1,831 2,452 (1,044) --
---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 3,440 4,934 (67,461) --
---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) (3,998) (1,052) (106,614) --
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 19,783 $ 29,195 $ (560) $ 7,153
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
152
<PAGE> 155
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTER-
GLOBAL NATIONAL
LIMITED FIXED FIXED
DURATION MUNICIPAL INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ 105 $ -- $ 92 $ --
Interest 10,996 7,691 2,609 4,997
---------------------------------------------------------------------------------------------------------------------------------
Total Income 11,101 7,691 2,701 4,997
---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 485 $477 185 435
Less: Waived Fees -- (12) 465 -- --
Administrative Fee--Note C 129 102 40 93
Custodian Fee--Note E 15 13 42 58
Audit Fee 22 23 24 29
Legal Fee 2 2 -- 1
Filing & Registration Fees 15 13 11 18
Shareholder Servicing Fee--Investment Class
shares--Note D -- -- -- --
Distribution Fees--Adviser Class shares--Note D -- -- -- --
Other Expenses 12 31 6 10
---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 680 649 308 644
---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (12) (13) (14) (10)
---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 668 636 294 634
---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 10,433 7,055 2,407 4,363
---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (259) (2,191) (3,450) (2,893)
Foreign Currency Transactions -- -- (899) (4,002)
Futures and Swaps (1,099) (1,468) (200) 538
---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) (1,358) (3,659) (4,549) (6,357)
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 756 4,076 (910) (6,897)
Foreign Currency Transactions -- -- 274 (899)
Futures and Swaps 343 1,314 6 (66)
---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 1,099 5,390 (630) (7,862)
---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) (259) 1,731 (5,179) (14,219)
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 10,174 $ 8,786 $ (2,772) $ (9,856)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
+ Net of $5 and $20 withholding tax for the Global Fixed
Income and International Fixed Income Portfolios,
respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
153
<PAGE> 156
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MULTI-MARKET MULTI-ASSET-
DURATION FIXED INCOME BALANCED CLASS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------------------------------
Year Ended September 30, 2000
(In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME +
Dividends $ 38 $ 50 $ 1,885 $ 608
Interest 4,300 7,024 13,647 5,436
---------------------------------------------------------------------------------------------------------------------------------
Total Income 4,338 7,074 15,532 6,044
---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Services--Note B 217 $390 1,809 $1,057
Less: Waived Fees -- (2) 388 -- (44) 1,013
Administrative Fee--Note C 46 69 321 130
Custodian Fee--Note E 8 22 67 52
Audit Fee 19 23 32 34
Legal Fee -- 1 5 1
Filing & Registration Fees 13 2 37 17
Shareholder Servicing Fee--Investment Class
shares--Note D 24 -- 7 9
Distribution Fees--Adviser Class shares--Note D -- -- 82 --
Foreign Tax -- 38 -- --
Other Expenses 10 8 42 26
---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 337 551 2,402 1,282
---------------------------------------------------------------------------------------------------------------------------------
Expense Offset--Note K (8) (10) (37) (3)
---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 329 541 2,365 1,279
---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 4,009 6,533 13,167 4,765
---------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities (635) (1,334) 24,861 9,997
Foreign Currency Transactions -- (158) -- (2,621)
Futures and Swaps (322) (151) (544) 1,932
---------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) (957) (1,643) 24,317 9,308
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 184 (1,695) 15,259 863
Foreign Currency Transactions -- 347 -- (1,937)
Futures and Swaps 5 233 1,009 (379)
---------------------------------------------------------------------------------------------------------------------------------
Unrealized Appreciation (Depreciation) 189 (1,115) 16,268 (1,453)
---------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) (768) (2,758) 40,585 7,855
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,241 $ 3,775 $ 53,752 $ 12,620
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Net of $1 and $1 withholding tax for the Multi-Market Fixed Income and
Multi-Asset Class Portfolios, respectively.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
154
<PAGE> 157
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
VALUE EQUITY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
-------------------- ------------------ --------------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 27,701 $ 13,225 $ 5,340 $ 1,896 $ 5,904 $ 5,166
Realized Net Gain (Loss) 122,925 (83,973) 190,256 108,194 83,605 91,380
Change in Unrealized Appreciation
(Depreciation) 134,138 147,319 50,024 16,826 85,609 101,247
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from
Operations 284,764 76,571 245,620 126,916 175,118 197,793
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (30,731) (12,262) (6,669) (1,798) (2,892) (7,001)
Realized Net Gain (346,188) (25,846) (222,761) (194,869) (101,623) (68,195)
In Excess of Realized Net Gain -- (85,794) -- -- -- --
INVESTMENT CLASS:
Net Investment Income (270) (91) (11) (1) -- --
Realized Net Gain (3,540) (240) (609) (274) -- --
In Excess of Realized Net Gain -- (797) -- -- -- --
ADVISER CLASS +:
Net Investment Income (4,810) (2,959) (4) (2) -- (149)
Realized Net Gain (52,186) (6,169) (124) (629) -- (1,641)
In Excess of Realized Net Gain -- (20,478) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (437,725) (154,636) (230,178) (197,573) (104,515) (76,986)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 348,999 312,026 101,383 92,710 288,575 571,381
In Lieu of Cash Distributions 327,810 115,045 220,297 190,400 103,439 72,087
Redeemed (1,761,799) (749,814) (574,286) (233,314) (282,283) (390,031)
INVESTMENT CLASS:
Issued 6,883 8,807 135 -- -- --
In Lieu of Cash Distributions 2,822 1,055 618 275 -- --
Redeemed (23,620) (14,802) (1,753) (1,188) -- --
ADVISER CLASS +:
Issued 78,928 298,268 2,007 3,761 20,392 39,376
In Lieu of Cash Distributions 51,418 28,994 128 631 -- 1,789
Redeemed (173,003) (268,601) (333) (1,203) (3,709) (12,276)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions (1,141,562) (269,022) (251,804) 52,072 126,414 282,326
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (1,294,523) (347,087) (236,362) (18,585) 197,017 403,133
NET ASSETS:
Beginning of Period 2,638,035 1,343,512 875,064 638,702 716,729 913,746
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 1,343,512 $ 996,425 $ 638,702 $ 620,117 $ 913,746 $ 1,316,879
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period
net assets $ 5,140 $ 3,037 $ 798 $ 893 $ 5,379 $ 2,844
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 22,907 25,445 4,930 5,070 15,813 26,596
In Lieu of Cash Distributions 23,236 9,841 12,497 11,625 6,346 3,849
Shares Redeemed (117,686) (60,973) (28,048) (13,178) (15,199) (18,734)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (71,543) (25,687) (10,621) 3,517 6,960 11,711
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued 440 722 6 -- -- --
In Lieu of Cash Distributions 200 90 35 17 -- --
Shares Redeemed (1,547) (1,208) (91) (67) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding (907) (396) (50) (50) -- --
---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS +:
Shares Issued 5,078 23,931 98 212 1,062 1,863
In Lieu of Cash Distributions 3,645 2,483 7 39 -- 95
Shares Redeemed (11,461) (21,681) (16) (66) (197) (568)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Adviser Class Shares
Outstanding (2,738) 4,733 89 185 865 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.
--------------------------------------------------------------------------------
155
<PAGE> 158
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP MID CAP SMALL CAP
GROWTH VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
--------------------- ------------------- -----------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ (943) $ (6,391) $ 3,425 $ 3,097 $ (154) $ (2,784)
Realized Net Gain (Loss) 237,742 363,641 109,808 167,559 15,676 24,174
Change in Unrealized Appreciation
(Depreciation) 102,485 357,764 15,607 118,977 12,161 81,574
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 339,284 715,014 128,840 289,633 27,683 102,964
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (2) -- (1,451) (2,940) -- --
Realized Net Gain (77,567) (150,641) (31,726) (98,165) -- (20,468)
INVESTMENT CLASS:
Net Investment Income -- -- (32) (37) -- --
Realized Net Gain -- -- (1,377) (2,499) -- --
ADVISER CLASS:
Net Investment Income -- -- (8) (79) -- --
Realized Net Gain (14,328) (53,376) (355) (5,142) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (91,897) (204,017) (34,949) (108,862) -- (20,468)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 565,037 1,442,060 370,988 711,537 81,536 547,479
In Lieu of Cash Distributions 71,047 144,239 31,687 92,684 -- 18,296
Redeemed (486,282) (631,836) (188,868) (317,626) (18,994) (303,602)
INVESTMENT CLASS:
Issued -- -- 6,915 16,804 -- --
In Lieu of Cash Distributions -- -- 1,251 2,117 -- --
Redeemed -- -- (6,141) (18,527) -- --
ADVISER CLASS:
Issued 181,375 636,003 40,211 65,295 -- --
In Lieu of Cash Distributions 14,192 52,577 363 4,843 -- --
Redeemed (24,798) (113,567) (7,784) (22,290) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 320,571 1,529,476 248,622 534,837 62,542 262,173
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 567,958 2,040,473 342,513 715,608 90,225 344,669
NET ASSETS:
Beginning of Period 481,013 1,048,971 444,335 786,848 3,004 93,229
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,048,971 $3,089,444 $786,848 $1,502,456 $ 93,229 $ 437,898
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ 2 $ -- $ 3,056 $ 3,073 $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 24,011 43,878 17,268 31,117 3,253 10,932
In Lieu of Cash Distributions 3,801 5,005 1,661 4,550 -- 412
Shares Redeemed (20,418) (19,341) (9,185) (13,801) (715) (5,963)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding 7,394 29,542 9,744 21,866 2,538 5,381
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued -- -- 324 747 -- --
In Lieu of Cash Distributions -- -- 66 104 -- --
Shares Redeemed -- -- (279) (822) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares
Outstanding -- -- 111 29 -- --
---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS:
Shares Issued 7,873 19,541 1,930 2,810 -- --
In Lieu of Cash Distributions 763 1,839 19 238 -- --
Shares Redeemed (1,101) (3,509) (362) (967)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser
Class Shares Outstanding 7,535 17,871 1,587 2,081 -- --
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
156
<PAGE> 159
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOMESTIC
STRATEGIC FIXED FIXED
SMALL VALUE INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
June 30, Year Ended Year Ended
2000* to September 30, September 30,
September 30, --------------------- ------------------
(In Thousands) 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 6 $ 314,624 $ 317,002 $ 9,280 $ 12,191
Realized Net Gain (Loss) (2) (123,134) (95,763) (5,139) (3,941)
Change in Unrealized Appreciation (Depreciation) 103 (176,179) 88,079 (6,558) 1,974
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 107 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 2,399 958,460 758,396 152,307 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 2,399 100,703 (224,958) 126,397 (6,094)
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 2,506 (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 $ 2,506 $4,519,813 $4,296,251 $191,052 $183,509
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss)
included in end of period net assets $ 6 $ 82,491 $ 83,032 $ 2,949 $ 3,136
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 236 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 236 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>
* Commencement of Operations
+ 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.
--------------------------------------------------------------------------------
157
<PAGE> 160
STATEMENT OF CHANGE IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL
FIXED PURPOSE HIGH
INCOME II FIXED INCOME YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
------------------ ----------------- -----------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 24,833 $ 23,781 $ 32,201 $ 30,247 $ 87,828 $ 106,054
Realized Net Gain (Loss) (9,479) (7,438) (14,050) (5,986) (8,975) (39,153)
Change in Unrealized Appreciation (Depreciation) (18,047) 3,440 (14,975) 4,934 (6,643) (67,461)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (2,693) 19,783 3,176 29,195 72,210 (560)
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (23,025) (24,141) (30,952) (28,955) (75,740) (103,792)
Realized Net Gain -- -- (1,670) -- (3,816) --
In Excess of Realized Net Gain (9,302) -- (13,202) -- (13,719) --
INVESTMENT CLASS:
Net Investment Income -- -- -- -- (674) (754)
Realized Net Gain -- -- -- -- (37) --
In Excess of Realized Net Gain -- -- -- -- (131) --
ADVISER CLASS:
Net Investment Income -- -- -- -- (1,019) (1,978)
Realized Net Gain -- -- -- -- (40) --
In Excess of Realized Net Gain -- -- -- -- (145) --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (32,327) (24,141) (45,824) (28,955) (95,321) (106,524)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 47,254 13,340 102,595 57,104 564,421 497,033
In Lieu of Cash Distributions 28,219 22,441 41,048 26,394 64,229 74,128
Redeemed (99,483) (137,175) (193,590) (114,085) (371,320) (556,225)
INVESTMENT CLASS:
Issued -- -- -- -- 5,963 6,923
In Lieu of Cash Distributions -- -- -- -- 799 754
Redeemed -- -- -- -- (10,904) (3,683)
ADVISER CLASS:
Issued -- -- -- -- 28,455 24,892
In Lieu of Cash Distributions -- -- -- -- 1,072 1,751
Redeemed -- -- -- -- (25,988) (15,274)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions (24,010) (101,394) (49,947) (30,587) 256,727 30,299
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (59,030) (105,752) (92,595) (30,347) 233,616 (76,785)
NET ASSETS:
Beginning of Period 443,923 384,893 552,269 459,674 724,608 958,224
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 384,893 $ 279,141 $ 459,674 $429,327 $958,224 $ 881,439
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss)
included in end of period net assets $ 6,422 $ 5,226 $ 7,327 $ 7,675 $ 29,048 $ 35,826
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 4,326 1,282 8,853 5,222 62,967 58,969
In Lieu of Cash Distributions 2,531 2,152 3,506 2,393 7,249 8,821
Shares Redeemed (9,004) (13,094) (16,558) (10,249) (41,499) (66,784)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional
Class Shares Outstanding (2,147) (9,660) (4,199) (2,634) 28,717 1,006
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued -- -- -- -- 671 827
In Lieu of Cash Distributions -- -- -- -- 90 90
Shares Redeemed -- -- -- -- (1,210) (429)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class
Shares Outstanding -- -- -- -- (449) 488
---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS:
Shares Issued -- -- -- -- 3,188 2,934
In Lieu of Cash Distributions -- -- -- -- 120 209
Shares Redeemed -- -- -- -- (2,883) (1,806)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class
Shares Outstanding -- -- -- -- 425 1,337
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
158
<PAGE> 161
STATEMENT OF CHANGE IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH LIMITED
RESERVES DURATION MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
---------------------- ---------------------- ----------------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 8,354 $ 7,153 $ 12,979 $ 10,433 $ 5,221 $ 7,055
Realized Net Gain (Loss) 12 -- (2,453) (1,358) 1,657 (3,659)
Change in Unrealized Appreciation
(Depreciation) -- -- (3,219) 1,099 (7,350) 5,390
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations (8,366) 7,153 7,307 10,174 (472) 8,786
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (8,350) (7,069) (15,085) (10,098) (5,526) (6,964)
In Excess of Realized Net Gain -- -- -- -- -- (680)
INVESTMENT CLASS+:
Net Investment Income (4) (84) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (8,354) (7,153) (15,085) (10,098) (5,526) (7,644)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 501,605 360,308 31,868 53,049 52,900 47,037
Issued due to Reorganization--Note M -- -- -- -- 22,605 --
In Lieu of Cash Distributions 7,429 6,782 13,707 9,100 3,164 4,258
Redeemed (520,765) (408,087) (128,970) (45,987) (33,036) (59,137)
INVESTMENT CLASS+:
Issued 1,370 14,600 -- --
In Lieu of Cash Distributions 4 84 -- -- -- --
Redeemed (454) (13,626) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (10,811) (39,939) (83,395) 16,162 45,633 (7,842)
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (10,799) (39,939) (91,173) 16,238 39,635 (6,700)
NET ASSETS:
Beginning of Period 168,228 157,429 252,711 161,538 82,282 121,917
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 157,429 $ 117,490 $ 161,538 $ 177,776 $ 121,917 $ 115,217
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(loss) included in end of period net
assets $ -- $ 13 $ 353 $ 175 $ 12 $ 103
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 501,607 360,308 3,088 5,255 4,439 4,216
Shares Issued due to
Reorganization--Note M -- -- -- -- 1,898 --
In Lieu of Cash Distributions 7,429 6,782 1,331 903 268 381
Shares Redeemed (520,764) (408,088) (12,522) (4,546) (2,782) (5,223)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Institutional Class Shares
Outstanding (11,728) (40,998) (8,103) 1,612 3,823 (626)
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS+:
Shares Issued 1,370 14,600 -- -- -- --
In Lieu of Cash Distributions 4 84 -- -- -- --
Shares Redeemed (455) (13,627) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Investment Class Shares Outstanding 919 1,057 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Cash Reserves Portfolio began offering Investment Class shares on August
16, 1999.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
159
<PAGE> 162
STATEMENT OF CHANGE IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTER-
GLOBAL NATIONAL INTERMEDIATE
FIXED INCOME FIXED INCOME DURATION
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
-------------------- ---------------------- --------------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 3,217 $ 2,407 $ 4,790 $ 4,363 $ 5,821 $ 4,009
Realized Net Gain (Loss) 2,461 (4,549) 3,686 (6,357) (2,436) (957)
Change in Unrealized Appreciation
(Depreciation) (5,503) (630) (9,698) (7,862) (2,824) 189
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 175 (2,772) (1,222) (9,856) 561 3,241
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (2,797) (666) (3,664) -- (6,864) (2,819)
In Excess of Net Investment Income -- (1,635) (786) (3,477) -- --
Realized Net Gain (1,208) -- (2,919) (579) -- --
In Excess of Realized Net Gain -- (1,663) -- (1,595) (2,363) --
INVESTMENT CLASS +:
Net Investment Income -- -- -- -- (127) (1,060)
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (4,005) (3,964) (7,369) (5,651) (9,354) (3,879)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 17,920 7,646 40,078 44,531 9,931 5,467
In Lieu of Cash Distributions 3,545 3,608 6,680 5,076 6,347 2,666
Redeemed (25,410) (33,750) (62,499) (47,625) (73,849) (20,287)
INVESTMENT CLASS +:
Issued -- -- -- -- 9,163 19,630
In Lieu of Cash Distributions -- -- -- -- 127 1,060
Redeemed -- -- -- -- -- (2,351)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (3,945) (22,496) (15,741) 1,982 (48,281) 6,185
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (7,775) (29,232) (24,332) (13,525) (57,074) 5,547
NET ASSETS:
Beginning of Period 71,834 64,059 150,313 125,981 116,891 59,817
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 64,059 $ 34,827 $ 125,981 $ 112,456 $ 59,817 $ 65,364
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss)
included in end of period net assets $ 1,121 $ (1,635) $ (785) $ (4,712) $ 135 $ 71
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 1,705 793 3,925 4,779 975 570
In Lieu of Cash Distributions 327 373 622 532 626 278
Shares Redeemed (2,397) (3,543) (6,082) (5,106) (7,376) (2,120)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional
Class Shares Outstanding (365) (2,377) (1,535) 205 (5,775) (1,272)
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS +:
Shares Issued -- -- -- -- 939 2,048
In Lieu of Cash Distributions -- -- -- -- 13 111
Redeemed -- -- -- -- -- (246)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment
Class Shares Outstanding -- -- -- -- 952 1,913
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Intermediate Duration Portfolio began offering Investment Class shares on
August 16, 1999.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
160
<PAGE> 163
STATEMENT OF CHANGE IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTI-MARKET MULTI-ASSET-
FIXED INCOME BALANCED CLASS
PORTFOLIO PORTFOLIO PORTFOLIO
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
-------------------- --------------------- --------------------
(In Thousands) 1999 2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 6,661 $ 6,533 $ 13,987 $ 13,167 $ 5,054 $ 4,765
Realized Net Gain (Loss) (1,192) (1,643) 47,459 24,317 17,846 9,308
Change in Unrealized Appreciation
(Depreciation) (3,213) (1,115) 9,204 16,268 7,066 (1,453)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,256 3,775 70,650 53,752 29,966 12,620
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:--Note A10
INSTITUTIONAL CLASS:
Net Investment Income (6,324) (6,914) (12,193) (11,714) (4,601) (3,856)
In Excess of Net Investment Income -- -- -- -- -- (1,267)
Realized Net Gain -- -- (38,112) (46,224) (13,405) (17,099)
INVESTMENT CLASS:
Net Investment Income -- -- (12) (105) (189) (163)
In Excess of Net Investment Income -- -- -- -- -- (54)
Realized Net Gain -- -- (45) (29) (506) (783)
ADVISER CLASS:
Net Investment Income -- -- (781) (964) -- --
Realized Net Gain -- -- (2,479) (4,100) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (6,324) (6,914) (53,622) (63,136) (18,701) (23,222)
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
INSTITUTIONAL CLASS:
Issued 8,691 13,376 71,797 178,002 13,772 13,582
In Lieu of Cash Distributions 3,908 3,403 50,242 57,872 16,513 20,143
Redeemed (4,287) (55,642) (178,690) (63,836) (53,340) (32,973)
INVESTMENT CLASS:
Issued -- -- 259 9,339 119 124
In Lieu of Cash Distributions -- -- 58 134 695 1,000
Redeemed -- -- (584) (1,784) (188) (2,383)
ADVISER CLASS:
Issued -- -- 4,775 7,360 -- --
In Lieu of Cash Distributions -- -- 3,259 5,062 -- --
Redeemed -- -- (4,278) (6,978) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions 8,312 (38,863) (53,162) 185,171 (22,429) (507)
---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 4,244 (42,002) (36,134) 175,787 (11,164) (11,109)
NET ASSETS:
Beginning of Period 97,062 101,306 407,438 371,304 171,272 160,108
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $101,306 $ 59,304 $ 371,304 $547,091 $160,108 $148,999
---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss)
included in end of period net assets $ 1,742 $ 1,117 $ 3,741 $ 3,691 $ 2,087 $ (1,321)
---------------------------------------------------------------------------------------------------------------------------------
(1) Shares Issued and Redeemed
INSTITUTIONAL CLASS:
Shares Issued 913 1,451 5,144 13,288 1,097 1,111
In Lieu of Cash Distributions 405 369 3,808 4,519 1,394 1,701
Shares Redeemed (452) (6,028) (12,652) (4,745) (4,252) (2,759)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional
Class Shares Outstanding 866 (4,208) (3,700) 13,062 (1,761) 53
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
Shares Issued -- -- 19 714 10 10
In Lieu of Cash Distributions -- -- 4 10 58 85
Shares Redeemed -- -- (41) (134) (15) (198)
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment
Class Shares Outstanding -- -- (18) 590 53 (103)
---------------------------------------------------------------------------------------------------------------------------------
ADVISER CLASS:
Shares Issued -- -- 341 555 -- --
In Lieu of Cash Distributions -- -- 247 396 -- --
Shares Redeemed -- -- (306) (524) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class
Shares Outstanding -- -- 282 427 -- --
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
161
<PAGE> 164
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>
<TABLE>
<CAPTION>
Investment Class Adviser Class
----------------------------------------------------- ----------------------------------
May 6, July 17, Year Ended
1996** to Year Ended September 30, 1996*** to September 30,
September -------------------------------- September -------------------
30, 1997+ 1998 1999+ 2000+ 30, 1997+ 1998
1996 1996
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.97 $ 15.60 $ 20.36 $ 15.15 $ 13.58 $ 14.11 $ 15.61 $ 20.35
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.12 0.31 0.31 0.19 0.15 0.01 0.30 0.29
Net Realized and
Unrealized Gain
(Loss) on Investments 0.59 5.75 (3.38) 1.12 0.94 1.49 5.74 (3.38)
------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.71 6.06 (3.07) 1.31 1.09 1.50 6.04 (3.09)
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.27) (0.33) (0.27) (0.15) -- (0.27) (0.32)
Realized Net Gain -- (1.03) (1.81) (2.61) (1.27) -- (1.03) (1.81)
In Excess of Realized
Net Gain -- -- -- -- (0.39) -- -- --
------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.08) (1.30) (2.14) (2.88) (1.81) -- (1.30) (2.13)
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.60 $ 20.36 $ 15.15 $ 13.58 $ 12.86 $ 15.61 $ 20.35 $ 15.13
------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.78% 41.01% (16.55%) 8.20% 9.50% 10.63% 40.87% (16.66%)
------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands) $ 9,244 $29,847 $ 24,527 $ 9,673 $ 4,069 $ 15,493 $201,253 $325,272
Ratio of Expenses to
Average Net Assets
(2) 0.76%* 0.80% 0.75% 0.78% 0.76% 0.86%* 0.90% 0.85%
Ratio of Net Investment
Income to Average
Net Assets 2.05%* 1.75% 1.62% 1.25% 1.19% 1.66%* 1.63% 1.52%
Portfolio Turnover Rate 53% 46% 56% 53% 50% 53% 46% 56%
------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL
INFORMATION ON THE
RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due
to Expense
Reimbursement/Waiver N/A 0.09% N/A N/A N/A N/A N/A N/A
Ratio Including Expense
Offsets 0.75%* 0.79% 0.74% 0.77% 0.75% 0.85%* 0.89% 0.84%
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999+ 2000+
-----------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 15.13 $ 13.57
-----------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.17 0.13
Net Realized and
Unrealized Gain
(Loss) on Investments 1.12 0.94
-----------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 1.29 1.07
-----------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.24) (0.15)
Realized Net Gain (2.61) (1.27)
In Excess of Realized
Net Gain -- (0.39)
-----------------------------------------------------
TOTAL DISTRIBUTIONS (2.85) (1.81)
-----------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.57 $ 12.83
-----------------------------------------------------
TOTAL RETURN 8.10% 9.31%
-----------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands) $254,483 $301,497
Ratio of Expenses to
Average Net Assets
(2) 0.88% 0.86%
Ratio of Net Investment
Income to Average
Net Assets 1.10% 1.05%
Portfolio Turnover Rate 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
Ratio Including Expense
Offsets 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.
--------------------------------------------------------------------------------
162
<PAGE> 165
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
EQUITY PORTFOLIO Year Ended September 30,
--------------------------------------------------
1996 1997 1998 1999 2000+
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.43 $ 25.67 $ 29.45 $ 20.44 $ 19.82
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.36 0.24 0.14 0.05
Net Realized and Unrealized Gain (Loss) on
Investments 3.26 8.22 (1.04) 5.24 3.53
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 3.76 8.58 (0.80) 5.38 3.58
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.50) (0.40) (0.28) (0.17) (0.05)
Realized Net Gain (2.02) (4.40) (7.93) (5.83) (6.07)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.52) (4.80) (8.21) (6.00) (6.12)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.67 $ 29.45 $ 20.44 $ 19.82 $ 17.28
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 16.48% 38.46% (2.66%) 30.15% 19.83%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $1,442,261 $1,312,547 $872,662 $635,593 $615,078
Ratio of Expenses to Average Net Assets (1) 0.60% 0.60% 0.61% 0.62% 0.61%
Ratio of Net Investment Income to Average Net
Assets 1.95% 1.30% 0.94% 0.64% 0.27%
Portfolio Turnover Rate 67% 85% 77% 103% 211%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.60% 0.59% 0.59% 0.60% 0.61%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class##
----------------------------------------------------------
April 10, Year Ended
1996** to September 30, October 1,
September 30, ------------------------ 1999 to
1997 1998 1999 June 1,
1996 2000#+
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.31 $ 25.66 $ 29.42 $ 20.42 $ 19.80
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.34 0.20 0.07 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 1.24 8.17 (1.03) 5.27 3.21
------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.46 8.51 (0.83) 5.34 3.22
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.11) (0.35) (0.24) (0.13) (0.02)
Realized Net Gain -- (4.40) (7.93) (5.83) (6.07)
------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.11) (4.75) (8.17) (5.96) (6.09)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.66 $ 29.42 $ 20.42 $ 19.80 $ 16.93
------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.02% 38.12% (2.78%) 29.92% 10.30%
------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 113 $ 2,354 $ 2,029 $ 986 $ --@
Ratio of Expenses to Average Net Assets (2) 0.75%* 0.80% 0.76% 0.77% 0.76%*
Ratio of Net Investment Income to Average
Net Assets 1.83%* 1.12% 0.78% 0.52% 0.08%*
Portfolio Turnover Rate 67% 85% 77% 103% 211%
------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 1.28% N/A N/A N/A
Ratio Including Expense Offsets 0.75%* 0.80% 0.74% 0.75% 0.76%*
------------------------------------------------------------------------------------------------------------------
<CAPTION>
Adviser Class
---------------------------------
January 16, Year Ended
1998*** to September 30,
September 30, ---------------
2000+
1998 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.50 $ 20.42 $ 19.79
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.11 0.01
Net Realized and Unrealized Gain (Loss) on
Investments (0.09) 5.21 3.53
------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.01 5.32 3.54
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.09) (0.12) (0.02)
Realized Net Gain -- (5.83) (6.07)
------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.09) (5.95) (6.09)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.42 $ 19.79 $ 17.24
------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (0.02%) 29.80% 19.58%
------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 373 $ 2,123 $ 5,039
Ratio of Expenses to Average Net Assets (2) 0.88%* 0.87% 0.86%
Ratio of Net Investment Income to Average
Net Assets 0.65%* 0.34% 0.04%
Portfolio Turnover Rate 77% 103% 211%
------------------------------------------------------------------------------------------------------------------
(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
Ratio Including Expense Offsets 0.82%* 0.85% 0.86%
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
# The Investment Class ceased operations as of June 1, 2000.
## Amounts for the period from October 1, 1999 to June 1, 2000
are unaudited.
-----------------------------------------------------------------
@ Value is less than $500.
+ Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
163
<PAGE> 166
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>
<TABLE>
<CAPTION>
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.
--------------------------------------------------------------------------------
164
<PAGE> 167
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>
<TABLE>
<CAPTION>
Adviser Class
-------------------------------------------------
January 31, Year Ended September 30,
1997** to --------------------------
September 30, 1998 1999 2000
1997
----------------------------------------------------------------------------------------------------------------------
<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.
--------------------------------------------------------------------------------
165
<PAGE> 168
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
-----------------------------------------------------------------
MID CAP VALUE PORTFOLIO Year Ended September 30,
-------------------------------------------------
1997+ 1998+ 1999+ 2000+
1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.45 $ 14.49 $ 21.80 $ 18.12 $ 21.88
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.05 0.08 0.12 0.06
Net Realized and Unrealized Gain (Loss) on
Investments 2.52 8.37 (1.53) 5.01 5.78
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.63 8.42 (1.45) 5.13 5.84
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.55) (0.10) (0.04) (0.06) (0.08)
Realized Net Gain (1.04) (1.01) (2.19) (1.31) (2.57)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.59) (1.11) (2.23) (1.37) (2.65)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.49 $ 21.80 $ 18.12 $ 21.88 $ 25.07
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 22.30% 61.40% (6.92%) 29.44% 29.48%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 50,449 $220,260 $420,555 $721,015 $1,374,275
Ratio of Expenses to Average Net Assets (1) 0.88% 0.90% 0.90% 0.87% 0.87%
Ratio of Net Investment Income to Average Net Assets 1.61% 0.28% 0.40% 0.57% 0.28%
Portfolio Turnover Rate 377% 184% 213% 244% 226%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.18% 0.02% N/A N/A N/A
Ratio Including Expense Offsets 0.88% 0.88% 0.88% 0.86% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
---------------------------------------------------------- --------------
May 10, Year Ended September 30, July 17,
1996** to ----------------------------------- 1998*** to
September 30, 1997+ 1998+ 1999+ 2000+ September 30,
1996 1998+
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.77 $ 14.48 $ 21.75 $ 18.05 $ 21.80 $ 21.82
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.01 0.05 0.09 0.03 0.01
Net Realized and Unrealized Gain (Loss)
on Investments 0.67 8.36 (1.53) 5.00 5.75 (3.71)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.71 8.37 (1.48) 5.09 5.78 (3.70)
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (0.09) (0.03) (0.03) (0.04) --
Realized Net Gain -- (1.01) (2.19) (1.31) (2.57) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (1.10) (2.22) (1.34) (2.61) --
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.48 $ 21.75 $ 18.05 $ 21.80 $ 24.97 $ 18.12
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.16% 61.05% (7.08%) 29.30% 29.25% (16.96%)
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 127 $ 1,238 $18,861 $25,197 $29,593 $ 4,919
Ratio of Expenses to Average Net Assets
(2) 1.03%* 1.09% 1.05% 1.02% 1.02% 1.24%*
Ratio of Net Investment Income to
Average Net Assets 0.86%* 0.04% 0.25% 0.42% 0.14% 0.25%*
Portfolio Turnover Rate 377% 184% 213% 244% 226% 213%
---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.14%* 4.60% N/A N/A N/A N/A
Ratio Including Expense Offsets 1.03%* 1.07% 1.03% 1.01% 1.00% 1.17%*
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Adviser Class
----------------
Year Ended
September 30,
----------------
1999+ 2000+
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.12 $ 21.86
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.07 0.01
Net Realized and Unrealized Gain (Loss)
on Investments 5.01 5.76
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 5.08 5.77
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.03) (0.04)
Realized Net Gain (1.31) (2.57)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.34) (2.61)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.86 $ 25.02
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 29.12% 29.12%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $40,636 $98,588
Ratio of Expenses to Average Net Assets
(2) 1.12% 1.12%
Ratio of Net Investment Income to
Average Net Assets 0.33% 0.03%
Portfolio Turnover Rate 244% 226%
---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A N/A
Ratio Including Expense Offsets 1.11% 1.10%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
*** Initial offering of Adviser Class shares
-----------------------------------------------------------------
+ Per share amounts are based upon average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
166
<PAGE> 169
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------
June 30, Year Ended September 30,
1998** to ---------------------
September 30,
1998 1999+ 2000
SMALL CAP GROWTH PORTFOLIO
-----------------------------------------------------------------------------------------------------------------------
<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.
</TABLE>
<TABLE>
<CAPTION>
Institutional Class
---------------------------
June 30,
2000** to
September 30,
2000
STRATEGIC SMALL VALUE PORTFOLIO
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03
Net Realized and Unrealized Gain (Loss) on Investments 0.59
---------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.62
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.62
---------------------------------------------------------------------------------------
TOTAL RETURN 6.20%
---------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 2,506
Ratio of Expenses to Average Net Assets (2) 1.31%*
Ratio of Net Investment Income to Average Net Assets 1.15%*
Portfolio Turnover Rate 33%
---------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 4.23%*
Ratio Including Expense Offsets 1.15%*
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Commencement of Operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
167
<PAGE> 170
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>
<TABLE>
<CAPTION>
Investment Class Adviser Class
------------------------------- -------------------------------------------------
October 15, Year Ended November 7, Year Ended
1996** to September 30, 1996*** to September 30,
September 30, ---------------------- September 30, -------------------------
1998+ 1999+ 2000+ 1999+ 2000+
1997+ 1997+ 1998+
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <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.
--------------------------------------------------------------------------------
168
<PAGE> 171
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>
<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.
--------------------------------------------------------------------------------
169
<PAGE> 172
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------------
FIXED INCOME II PORTFOLIO Year Ended September 30,
------------------------------------------------
1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.33 $ 11.23 $ 11.46 $ 11.69 $ 10.74
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.70 0.74 0.61 0.69 0.78
Net Realized and Unrealized Gain (Loss) on Investments (0.03) 0.39 0.40 (0.75) (0.12)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.67 1.13 1.01 (0.06) 0.66
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.66) (0.79) (0.66) (0.63) (0.73)
Realized Net Gain (0.08) (0.11) (0.12) -- --
In Excess of Realized Net Gain (0.03) -- -- (0.26) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.77) (0.90) (0.78) (0.89) (0.73)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.23 $ 11.46 $ 11.69 $ 10.74 $ 10.67
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.12% 10.58% 9.23% (0.57%) 6.48%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $191,740 $226,662 $443,923 $384,893 $279,141
Ratio of Expenses to Average Net Assets (1) 0.50% 0.50% 0.50% 0.48% 0.49%
Ratio of Net Investment Income to Average Net Assets 6.06% 6.54% 6.19% 6.20% 6.99%
Portfolio Turnover Rate 165% 182% 92% 106% 43%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.49% 0.49% 0.49% 0.47% 0.48%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------------
SPECIAL PURPOSE 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 $ 12.53 $ 12.26 $ 12.58 $ 12.33 $ 11.32
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.83 0.85 0.84 0.78 0.81
Net Realized and Unrealized Gain (Loss) on Investments 0.08 0.52 0.03 (0.69) (0.06)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.91 1.37 0.87 0.09 0.75
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.88) (0.87) (0.85) (0.73) (0.76)
Realized Net Gain (0.30) (0.18) (0.27) (0.04) --
In Excess of Realized Net Gain -- -- -- (0.33) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.18) (1.05) (1.12) (1.10) (0.76)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.26 $ 12.58 $ 12.33 $ 11.32 $ 11.31
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.74% 11.78% 7.31% 0.71% 6.99%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $447,646 $492,784 $552,269 $459,674 $429,327
Ratio of Expenses to Average Net Assets (2) 0.49% 0.49% 0.49% 0.49% 0.49%
Ratio of Net Investment Income to Average Net Assets 6.75% 6.88% 6.89% 6.46% 7.13%
Portfolio Turnover Rate 151% 198% 105% 124% 53%
---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.49% 0.48% 0.48% 0.48% 0.48%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
+ Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
170
<PAGE> 173
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
HIGH YIELD 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 $ 9.08 $ 9.32 $ 10.15 $ 8.99 $ 8.77
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.88 0.86 0.85 0.86 0.89
Net Realized and Unrealized Gain (Loss) on
Investments 0.28 0.87 (0.93) (0.10) (0.88)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.16 1.73 (0.08) 0.76 0.01
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.92) (0.87) (0.82) (0.79) (0.92)
Realized Net Gain -- (0.03) (0.26) (0.04) --
In Excess of Realized Net Gain -- -- -- (0.15) --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.92) (0.90) (1.08) (0.98) (0.92)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.32 $ 10.15 $ 8.99 $ 8.77 $ 7.86
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 13.83% 19.90% (1.17%) 8.81% (0.22%)
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $289,810 $523,899 $703,110 $937,482 $848,507
Ratio of Expenses to Average Net Assets (1) 0.49% 0.51% 0.50% 0.49% 0.56%
Ratio of Net Investment Income to Average Net Assets 10.04% 9.05% 8.74% 9.61% 10.50%
Portfolio Turnover Rate 115% 96% 75% 45% 55%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.48% 0.50% 0.48% 0.48% 0.55%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class Adviser Class
--------------------------------------------------------------------
May 21, Year Ended September 30, January 31,
1996** to ---------------------------- 1997*** to
September 30, 1997+ 1998+ 1999+ 2000+ September 30,
1996 1997+
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.06 $ 9.31 $ 10.16 $ 9.00 $ 8.78 $ 9.39
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.31 0.84 0.83 0.85 0.88 0.56
Net Realized and Unrealized Gain (Loss) on
Investments 0.16 0.88 (0.93) (0.10) (0.89) 0.59
-----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.47 1.72 (0.10) 0.75 (0.01) 1.15
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.22) (0.84) (0.80) (0.78) (0.90) (0.39)
Realized Net Gain -- (0.03) (0.26) (0.04) -- --
In Excess of Realized Net Gain -- -- -- (0.15) -- --
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.22) (0.87) (1.06) (0.97) (0.90) (0.39)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.31 $ 10.16 $ 9.00 $ 8.78 $ 7.87 $ 10.15
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.34% 19.77% (1.37%) 8.67% (0.40%) 12.63%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 5,139 $10,916 $11,262 $7,041 $10,151 $ 4,327
Ratio of Expenses to Average Net Assets (2) 0.62%* 0.70% 0.65% 0.64% 0.71% 0.78%*
Ratio of Net Investment Income to Average Net
Assets 11.06%* 8.84% 8.58% 9.50% 10.43% 8.68%*
Portfolio Turnover Rate 115% 96% 75% 45% 55% 96%
-----------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver N/A 0.22% N/A N/A N/A N/A
Ratio Including Expense Offsets 0.61%* 0.69% 0.63% 0.63% 0.70% 0.76%*
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Adviser Class
----------------------
Year Ended
September 30,
----------------------
1998+ 1999+ 2000+
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 8.99 $ 8.76
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.83 0.84 0.87
Net Realized and Unrealized Gain (Loss) on
Investments (0.93) (0.11) (0.88)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.10) 0.73 (0.01)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.80) (0.77) (0.90)
Realized Net Gain (0.26) (0.04) --
In Excess of Realized Net Gain -- (0.15) --
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.06) (0.96) (0.90)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.99 $ 8.76 $ 7.85
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (1.37%) 8.44% (0.42%)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $10,236 $13,701 $ 22,781
Ratio of Expenses to Average Net Assets (2) 0.75% 0.74% 0.81%
Ratio of Net Investment Income to Average Net
Assets 8.55% 9.29% 10.34%
Portfolio Turnover Rate 75% 45% 55%
-----------------------------------------------------------------------------------------------------------------------------
(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
Ratio Including Expense Offsets 0.73% 0.73% 0.80%
-----------------------------------------------------------------------------------------------------------------------------
</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.
--------------------------------------------------------------------------------
171
<PAGE> 174
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
CASH RESERVES 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 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.052 0.052 0.053 0.048 0.058
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.052) (0.052) (0.053) (0.048) (0.058)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.35% 5.32% 5.47% 4.93% 5.91%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $78,497 $98,464 $168,228 $156,510 $115,513
Ratio of Expenses to Average Net Assets (1) 0.33% 0.33% 0.32% 0.33% 0.37%
Ratio of Net Investment Income to Average Net Assets 5.19% 5.20% 5.33% 4.77% 5.72%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction of Ratio due to Expense Reimbursement/Waiver 0.09% 0.07% 0.05% 0.04% 0.05%
Ratio Including Expense Offsets 0.32% 0.32% 0.32% 0.32% 0.32%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class
-----------------------------------
August 16, Year
1999** to Ended
September 30, September 30,
1999 2000
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.006 0.056
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.006) (0.056)
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------
TOTAL RETURN 0.60% 5.75%
---------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 919 $ 1,977
Ratio of Expenses to Average Net Assets (2) 0.48%* 0.52%
Ratio of Net Investment Income to Average Net Assets 4.83%* 5.74%
---------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction of Ratio due to Expense Reimbursement/Waiver 0.04%* 0.07%
Ratio Including Expense Offsets 0.47%* 0.47%
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
172
<PAGE> 175
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------------
LIMITED DURATION PORTFOLIO Year Ended September 30,
------------------------------------------------
1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $ 10.38 $ 10.49 $ 10.54 $ 10.18
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.58 0.62 0.59 0.68 0.60
Net Realized and Unrealized Gain (Loss) on Investments (0.03) 0.08 0.03 (0.31) (0.03)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.55 0.70 0.62 0.37 0.57
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.58) (0.59) (0.57) (0.73) (0.58)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.38 $ 10.49 $ 10.54 $ 10.18 $ 10.17
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.47% 6.98% 6.13% 3.61% 6.37%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $123,227 $155,570 $252,711 $161,538 $177,776
Ratio of Expenses to Average Net Assets (1) 0.43% 0.43% 0.42% 0.41% 0.42%
Ratio of Net Investment Income to Average Net Assets 5.65% 6.15% 5.89% 6.16% 6.61%
Portfolio Turnover Rate 174% 130% 107% 102% 57%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver N/A 0.00%# N/A N/A N/A
Ratio Including Expense Offsets 0.42% 0.42% 0.41% 0.41% 0.41%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
# Amount is less than 0.01%
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------------
MUNICIPAL PORTFOLIO Year Ended September 30,
---------------------------------------------
1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.75 $ 11.23 $ 11.64 $ 11.96 $ 11.39
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.51 0.53 0.54 0.55 0.62
Net Realized and Unrealized Gain (Loss) on Investments 0.49 0.40 0.28 (0.53) 0.10
--------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.00 0.93 0.82 0.02 0.72
--------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.52) (0.52) (0.50) (0.59) (0.62)
In Excess of Realized Net Gain -- -- -- -- (0.06)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.52) (0.52) (0.50) (0.59) (0.68)
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.23 $ 11.64 $ 11.96 $ 11.39 $ 11.43
--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 9.46% 8.47% 7.20% 0.11% 6.66%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $54,536 $75,120 $82,282 $121,917 $115,217
Ratio of Expenses to Average Net Assets (2) 0.51% 0.51% 0.52% 0.51% 0.51%
Ratio of Net Investment Income to Average Net Assets 4.66% 4.70% 4.58% 4.72% 5.51%
Portfolio Turnover Rate 78% 54% 140% 88% 82%
--------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.09% 0.05% 0.04% 0.09% 0.01%
Ratio Including Expense Offsets 0.50% 0.50% 0.50% 0.50% 0.50%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
173
<PAGE> 176
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO 1996 1998 1999 2000
1997+
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 11.01 $ 10.64 $ 11.03 $ 10.42
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.63 0.60 0.55 0.51 0.53
Net Realized and Unrealized Gain (Loss) on
Investments 0.09 (0.22) 0.38 (0.49) (1.06)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.72 0.38 0.93 0.02 (0.53)
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.71) (0.59) (0.39) (0.44) (0.11)
In Excess of Net Investment Income -- -- -- -- (0.27)
Realized Net Gain (0.05) (0.16) (0.15) (0.19) --
In Excess of Realized Net Gain -- -- -- -- (0.28)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.76) (0.75) (0.54) (0.63) (0.66)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.01 $ 10.64 $ 11.03 $ 10.42 $ 9.23
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.83% 3.53% 9.18% (0.05%) (5.39%)
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $67,282 $77,493 $71,834 $64,059 $34,827
Ratio of Expenses to Average Net Assets (1) 0.60% 0.57% 0.56% 0.54% 0.62%
Ratio of Net Investment Income to Average Net Assets 5.25% 5.65% 5.11% 4.83% 4.87%
Portfolio Turnover Rate 133% 137% 88% 56% 54%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.58% 0.57% 0.56% 0.53% 0.60%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Per Share amounts are based on average shares outstanding.
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------------------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------
INTERNATIONAL FIXED INCOME PORTFOLIO 1996 1998 1999 2000
1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.01 $ 10.77 $ 10.19 $ 10.75 $ 10.12
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.52 0.50 0.45 0.34 0.35
Net Realized and Unrealized Gain (Loss) on
Investments 0.12 (0.44) 0.56 (0.41) (1.15)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.64 0.06 1.01 (0.07) (0.80)
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.80) (0.38) (0.36) (0.28) --
In Excess of Net Investment Income -- -- -- (0.06) (0.27)
Realized Net Gain (0.08) (0.26) (0.09) (0.22) (0.04)
In Excess of Realized Net Gain -- -- -- -- (0.13)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.88) (0.64) (0.45) (0.56) (0.44)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.77 $ 10.19 $ 10.75 $ 10.12 $ 8.88
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.13% 0.44% 10.38% (0.93%) (8.23%)
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $143,137 $152,752 $150,313 $125,981 $112,456
Ratio of Expenses to Average Net Assets (2) 0.53% 0.53% 0.52% 0.52% 0.56%
Ratio of Net Investment Income to Average Net Assets 5.39% 5.27% 4.59% 3.68% 3.76%
Portfolio Turnover Rate 124% 107% 75% 64% 91%
---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.53% 0.53% 0.52% 0.52% 0.55%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
174
<PAGE> 177
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INTERMEDIATE DURATION 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 $ 10.68 $ 10.28 $ 10.48 $ 10.68 $ 9.77
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.60 0.61 0.58 0.72 0.67
Net Realized and Unrealized Gain (Loss) on Investments 0.03 0.27 0.28 (0.65) (0.19)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.63 0.88 0.86 0.07 0.48
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.65) (0.53) (0.56) (0.76) (0.58)
Realized Net Gain (0.38) (0.15) (0.10) -- --
In Excess of Realized Net Gain -- -- -- (0.22) --
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.03) (0.68) (0.66) (0.98) (0.58)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.48 $ 10.68 $ 9.77 $ 9.67
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.27% 8.93% 8.57% 0.64% 5.84%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $12,017 $72,119 $116,891 $50,513 $37,686
Ratio of Expenses to Average Net Assets (1) 0.56% 0.55% 0.52% 0.49% 0.54%
Ratio of Net Investment Income to Average Net Assets 6.17% 5.93% 5.84% 6.20% 6.95%
Portfolio Turnover Rate 251% 204% 131% 97% 76%
-----------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.13% 0.05% N/A N/A N/A
Ratio Including Expense Offsets 0.52% 0.52% 0.51% 0.48% 0.53%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class
-----------------------------------
August 16, Year
1999** to Ended
September 30, September 30,
1999 2000+
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 9.77
-------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.65
Net Realized and Unrealized Gain (Loss) on Investments 0.04 (0.23)
-------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.15 0.42
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.14) (0.53)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.66
-------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.49% 5.68%
-------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 9,304 $ 27,678
Ratio of Expenses to Average Net Assets (2) 0.64%* 0.69%
Ratio of Net Investment Income to Average Net Assets 8.99%* 6.81%
Portfolio Turnover Rate 97% 76%
-------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.63%* 0.68%
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Initial offering of Investment Class shares
-----------------------------------------------------------------
+ Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
175
<PAGE> 178
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------
October 1, Year Ended
1997** to September 30,
September 30, ----------------
MULTI-MARKET FIXED INCOME PORTFOLIO 1998 1999 2000
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 9.86 $ 9.46
-----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.65 0.80
Net Realized and Unrealized Gain (Loss) on Investments (0.29) (0.42) (0.39)
-----------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.27 0.23 0.41
-----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.40) (0.63) (0.75)
In Excess of Realized Net Gain (0.01) -- --
-----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.41) (0.63) (0.75)
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.86 $ 9.46 $ 9.12
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.72% 2.36% 4.50%
-----------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $97,062 $101,306 $59,304
Ratio of Expenses to Average Net Assets (1) 0.58%* 0.58% 0.58%
Ratio of Net Investment Income to Average Net Assets 6.48%* 6.79% 7.51%
Portfolio Turnover Rate 163% 86% 59%
-----------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense Reimbursement/Waiver 0.05%* N/A 0.00%#
Ratio Including Expense Offsets 0.58%* 0.58% 0.58%
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Commencement of Operations
# Amount is less than 0.01%
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
176
<PAGE> 179
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------
Year Ended September 30,
------------------------------------------------
BALANCED PORTFOLIO 1996 1998+ 1999+ 2000+
1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.06 $ 13.81 $ 15.30 $ 13.46 $ 13.83
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.53 0.51 0.48 0.45 0.44
Net Realized and Unrealized Gain (Loss) on
Investments 1.15 2.91 (0.11) 1.71 1.45
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.68 3.42 0.37 2.16 1.89
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.50) (0.54) (0.49) (0.43) (0.46)
Realized Net Gain (0.43) (1.39) (1.72) (1.36) (1.89)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.93) (1.93) (2.21) (1.79) (2.35)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.81 $ 15.30 $ 13.46 $ 13.83 $ 13.37
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 13.47% 27.44% 2.85% 16.99% 14.75%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $300,868 $343,284 $382,339 $341,886 $505,078
Ratio of Expenses to Average Net Assets (1) 0.57% 0.58% 0.59% 0.58% 0.58%
Ratio of Net Investment Income to Average Net Assets 3.85% 3.56% 3.36% 3.21% 3.29%
Portfolio Turnover Rate 110% 145% 100% 111% 162%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Ratio Including Expense Offsets 0.57% 0.56% 0.57% 0.57% 0.57%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Adviser
Investment Class Class
--------------------------------------------- ----------
April 4, Year Ended September 30, November 1,
1997** to --------------------- 1996*** to
September 30, 1998+ 1999+ 2000+ September 30,
1997 1997
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.11 $ 15.30 $ 13.45 $ 13.82 $ 14.05
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.46 0.42 0.42 0.42
Net Realized and Unrealized Gain (Loss) on
Investments 2.09 (0.13) 1.72 1.45 2.60
-----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.39 0.33 2.14 1.87 3.02
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.20) (0.46) (0.41) (0.43) (0.38)
Realized Net Gain -- (1.72) (1.36) (1.89) (1.39)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.20) (2.18) (1.77) (2.32) (1.77)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.30 $ 13.45 $ 13.82 $ 13.37 $ 15.30
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 18.40% 2.56% 16.84% 14.59% 23.82%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 3,943 $ 445 $ 208 $ 8,085 $ 27,366
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.74% 0.74% 0.73% 0.85%*
Ratio of Net Investment Income to Average Net
Assets 3.32%* 3.24% 3.03% 3.13% 3.24%*
Portfolio Turnover Rate 145% 100% 111% 162% 145%
-----------------------------------------------------------------------------------------------------------------------------
(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 0.03%*
Ratio Including Expense Offsets 0.70%* 0.72% 0.72% 0.72% 0.84%*
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Adviser Class
---------------------------
Year Ended September 30,
---------------------------
1998+ 2000+
1999+
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.30 $ 13.43 $ 13.80
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.44 0.42 0.41
Net Realized and Unrealized Gain (Loss) on
Investments (0.12) 1.71 1.44
-----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.32 2.13 1.85
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.47) (0.40) (0.42)
Realized Net Gain (1.72) (1.36) (1.89)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.19) (1.76) (2.31)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.43 $ 13.80 $ 13.34
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.49% 16.76% 14.46%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $24,654 $ 29,210 $ 33,928
Ratio of Expenses to Average Net Assets (2) 0.84% 0.83% 0.83%
Ratio of Net Investment Income to Average Net
Assets 3.11% 2.97% 3.04%
Portfolio Turnover Rate 100% 111% 162%
-----------------------------------------------------------------------------------------------------------------------------
(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
Ratio Including Expense Offsets 0.82% 0.82% 0.82%
-----------------------------------------------------------------------------------------------------------------------------
</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.
--------------------------------------------------------------------------------
177
<PAGE> 180
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
-----------------------------------------------------
MULTI-ASSET-CLASS PORTFOLIO Year Ended September 30,
------------------------------------------------
1996 1997+ 1998+ 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34 $ 12.28 $ 13.64 $ 11.74 $ 12.43
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.46 0.38 0.38 0.37 0.36
Net Realized and Unrealized Gain (Loss) on
Investments 1.05 2.57 (0.45) 1.62 0.60
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.51 2.95 (0.07) 1.99 0.96
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.42) (0.51) (0.34) (0.34) (0.31)
In Excess of Net Investment Income -- -- -- -- (0.10)
Realized Net Gain (0.15) (1.08) (1.49) (0.96) (1.36)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.57) (1.59) (1.83) (1.30) (1.77)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.28 $ 13.64 $ 11.74 $ 12.43 $ 11.62
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 13.75% 26.50% (0.46%) 17.71% 7.74%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $129,558 $173,155 $165,039 $ 152,862 $143,434
Ratio of Expenses to Average Net Assets (1) 0.58% 0.74% 0.78% 0.78% 0.78%
Ratio of Net Investment Income to Average Net Assets 3.82% 3.07% 2.98% 2.86% 2.93%
Portfolio Turnover Rate 122% 141% 107% 101% 152%
---------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.08% 0.08% 0.04% 0.02% 0.03%
Ratio Including Expense Offsets 0.58% 0.74% 0.78% 0.78% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Class
------------------------------------------------------------
June 10, Year Ended September 30,
1996** to ----------------------------------
September 30, 1997+ 1998+ 1999 2000
1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 12.27 $ 13.63 $ 11.74 $ 12.41
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.36 0.36 0.35 0.33
Net Realized and Unrealized Gain (Loss) on
Investments 0.08 2.57 (0.45) 1.62 0.60
---------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.21 2.93 (0.09) 1.97 0.93
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (0.11) (0.49) (0.31) (0.34) (0.30)
In Excess of Net Investment Income -- -- -- -- (0.10)
Realized Net Gain -- (1.08) (1.49) (0.96) (1.36)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.11) (1.57) (1.80) (1.30) (1.76)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.27 $ 13.63 $ 11.74 $ 12.41 $ 11.58
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.75% 26.32% (0.61%) 17.53% 7.54%
---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands) $ 3,074 $ 5,075 $ 6,233 $ 7,246 $ 5,565
Ratio of Expenses to Average Net Assets (2) 0.73%* 0.96% 0.93% 0.93% 0.93%
Ratio of Net Investment Income to Average Net
Assets 3.68%* 2.85% 2.86% 2.72% 2.77%
Portfolio Turnover Rate 122% 141% 107% 101% 152%
---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIO OF EXPENSES
TO AVERAGE NET ASSETS:
Reduction in Ratio due to Expense
Reimbursement/Waiver 0.08%* 0.55% 0.04% 0.02% 0.03%
Ratio Including Expense Offsets 0.73%* 0.96% 0.93% 0.93% 0.93%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
** Initial offering of Investment Class shares.
-----------------------------------------------------------------
* Annualized
+ Per share amounts are based on average shares outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
178
<PAGE> 181
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 financial
statements for the Advisory Foreign Fixed Income, Advisory Foreign Fixed Income
II, and Advisory Mortgage 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. Accounting principles generally accepted in the United States of
America 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. Securities in the Cash Reserves Portfolio, and other
Portfolios' 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 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 agreement. Any such joint repurchase agreement is
covered by the same collateral requirements as discussed above.
4. FUTURES: Financial futures contracts (secured by cash and securities
deposited with brokers as "initial margin") are valued based upon their
quoted daily settlement prices; changes in initial settlement value
(represented by cash paid to or received from brokers as "variation
margin") are accounted for as unrealized appreciation (depreciation). When
futures contracts are closed, the difference between the opening value at
the date
--------------------------------------------------------------------------------
179
<PAGE> 182
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
of purchase and the value at closing is recorded as realized gain or loss
in the Statement of Operations.
Futures contracts may be used by each Portfolio, except the Cash Reserves
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 Cash Reserves and Mid Cap
Growth Portfolios, may enter into swap agreements to exchange the interest
rate on or return generated by one nominal instrument for the return
generated by another nominal instrument. The following summarizes swaps
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, except the Cash Reserves
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 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
--------------------------------------------------------------------------------
180
<PAGE> 183
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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, Domestic Fixed Income, Cash Reserves, and
Limited Duration 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.
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 is 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 those of the
Municipal, Limited Duration and Intermediate Duration Portfolios which are
declared and paid monthly, Small Cap Value, Mid Cap Growth, Mid Cap Value,
Small Cap Growth, and Strategic Small Value Portfolios which are declared
and paid annually, and Cash Reserves Portfolio which are declared daily and
paid monthly. Net realized capital gains are
--------------------------------------------------------------------------------
181
<PAGE> 184
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 D),
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 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% --% --% --%
Equity 0.500 -- -- --
Small Cap Value 0.750 -- -- --
Mid Cap Growth 0.500 -- -- --
Mid Cap Value 0.750 -- -- --
Small Cap Growth 1.000 1.15 -- --
Strategic Small Value 1.000 1.15 -- --
Fixed Income 0.375 -- -- --
Domestic Fixed Income 0.375 0.50 -- 0.75
High Yield 0.450 -- -- --
Cash Reserves 0.250 0.32 0.47 --
Fixed Income II 0.375 -- -- --
Limited Duration 0.300 -- -- --
Special Purpose Fixed
Income 0.375 -- -- --
Municipal 0.375 0.50 -- --
Global Fixed Income 0.375 -- -- --
International Fixed
Income 0.375 -- -- --
Intermediate Duration 0.375 -- -- --
Multi-Market Fixed
Income 0.450 0.58 -- --
Balanced 0.450 -- -- --
Multi-Asset-Class 0.650 0.78 0.93 --
</TABLE>
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios for certain expenses so that annual
operating expenses, after 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-purpose broker/dealer whose only function is
to distribute open-end mutual fund shares. The Distributor
--------------------------------------------------------------------------------
182
<PAGE> 185
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 interested 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 $239,000.
Expenses 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.
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
Equity 1,405,492 1,534,967
Small Cap Value 2,299,826 2,126,764
Mid Cap Growth 4,938,677 3,604,260
Mid Cap Value 2,999,293 2,433,244
Small Cap Growth 941,555 700,402
Strategic Small Value 2,356,569 157,084
Fixed Income 3,486,871 4,310,304
Domestic Fixed Income 115,741 156,215
High Yield 530,809 522,096
Cash Reserves -- --
Fixed Income II 186,261 340,825
Limited Duration 101,766 130,656
Special Purpose Fixed Income 285,175 401,261
Municipal 109,790 151,154
Global Fixed Income 26,034 50,168
International Fixed Income 94,595 96,500
Intermediate Duration 54,312 62,236
Multi-Market Fixed Income 55,036 82,091
Balanced 716,597 742,291
Multi-Asset-Class 221,867 243,489
</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>
Value $ 973,026 $144,673 $(126,818) $ 17,855
Equity 530,444 133,140 (26,486) 106,654
Small Cap Value 1,220,487 234,937 (127,355) 107,582
Mid Cap Growth 2,713,995 635,539 (171,450) 464,089
Mid Cap Value 1,448,521 238,655 (169,887) 68,768
Small Cap Growth 354,363 113,814 (25,372) 88,442
Strategic Small Value 2,386 234 (131) 103
Fixed Income 6,143,608 49,940 (153,585) (103,645)
Domestic Fixed Income 252,144 1,554 (5,082) (3,528)
High Yield 979,396 13,104 (150,103) (136,999)
Cash Reserves 117,826 -- -- --
Fixed Income II 374,026 2,406 (12,249) (9,843)
Limited Duration 204,981 867 (2,225) (1,358)
Special Purpose Fixed
Income 605,094 4,868 (18,148) (13,280)
Municipal 112,046 3,041 (1,754) 1,287
Global Fixed Income 38,034 377 (3,899) (3,522)
International Fixed
Income 120,249 1,071 (12,453) (11,382)
Intermediate Duration 82,413 613 (1,563) (950)
Multi-Market Fixed
Income 77,496 570 (6,551) (5,981)
Balanced 484,786 46,215 (17,722) 28,493
Multi-Asset-Class 144,528 14,968 (8,216) 6,752
</TABLE>
--------------------------------------------------------------------------------
183
<PAGE> 186
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3. FORWARD FOREIGN CURRENCY CONTRACTS: Under the terms of the forward foreign
currency contracts open at September 30, 2000, each Portfolio is obligated
to deliver or receive currency in exchange for U.S. dollars as indicated in
the following table:
<TABLE>
<CAPTION>
(000)
--------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------------------- ---------- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
HIGH YIELD
Purchases
US$ 2,460 EUR 2,720 10/30/00 US$ 2,407 US$ (53)
3,361 GBP 2,270 11/3/00 3,358 (3)
5,477 EUR 6,185 11/10/00 5,475 (2)
3,081 EUR 3,475 11/30/00 3,079 (2)
----------
US$ (60)
----------
Sales
EUR 9,950 US$ 9,341 10/26/00 US$ 8,802 US$ 539
EUR 11,125 10,541 10/30/00 9,843 698
EUR 8,870 8,403 10/30/00 7,848 555
GBP 16,980 25,499 11/3/00 25,123 376
EUR 10,455 9,476 11/10/00 9,255 221
EUR 3,475 3,074 11/30/00 3,079 (5)
----------
US$ 2,384
----------
NET US$ 2,324
==========
GLOBAL FIXED INCOME
Purchases
US$ 1,493 JPY 160,740 10/5/00 US$ 1,492 US$ (1)
281 AUD 475 10/11/00 257 (24)
681 JPY 73,000 11/2/00 681 --
276 AUD 475 11/3/00 257 (19)
90 GBP 60 11/14/00 89 (1)
290 SEK 2,650 11/15/00 277 (13)
603 AUD 1,055 11/30/00 572 (31)
212 EUR 240 11/30/00 212 --
674 CAD 990 12/6/00 658 (16)
475 JPY 50,000 12/12/00 470 (5)
3,171 JPY 335,000 12/19/00 3,151 (20)
----------
US$ (130)
----------
Sales
JPY160,740 US$ 1,494 10/5/00 US$ 1,492 US$ 2
JPY 79,260 737 10/6/00 736 1
EUR 135 119 10/26/00 119 --
JPY 73,000 676 11/2/00 681 (5)
AUD 550 322 11/8/00 298 24
GBP 60 90 11/14/00 89 1
SEK 7,235 792 11/15/00 755 37
----------
US$ 60
----------
NET US$ (70)
==========
INTERNATIONAL FIXED INCOME
Purchases
US$ 5,223 JPY 558,000 10/5/00 US$ 5,180 US$ (43)
664 AUD 1,120 10/11/00 607 (57)
667 EUR 775 10/26/00 686 19
1,099 AUD 1,870 11/9/00 1,013 (86)
1,103 GBP 735 11/14/00 1,088 (15)
1,331 EUR 1,510 11/28/00 1,338 7
1,653 AUD 2,895 11/30/00 1,568 (85)
7,378 EUR 8,335 11/30/00 7,386 8
1,310 CAD 1,925 12/5/00 1,280 (30)
15,170 JPY1,585,000 12/12/00 14,891 (279)
2,288 GBP 1,620 12/14/00 2,399 111
----------
US$ (450)
----------
Sales
EUR 3,790 US$ 3,558 10/26/00 US$ 3,352 US$ 206
EUR 1,400 1,238 10/26/00 1,238 --
SEK 6,940 776 10/26/00 723 53
</TABLE>
<TABLE>
<CAPTION>
(000)
--------------------------------------------------------------------
Net
Currency In Unrealized
to Exchange Settlement Appreciation
Portfolio Deliver For Date Value (Depreciation)
--------------------- ---------- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
DKK 12,345 US$ 1,530 10/30/00 US$ 1,463 US$ 67
SEK 1,670 188 10/30/00 174 14
DKK 23,550 2,881 11/9/00 2,792 89
GBP 1,250 1,878 11/14/00 1,850 28
SEK 17,420 1,907 11/15/00 1,819 88
----------
US$ 545
----------
NET US$ 95
==========
MULTI-MARKET FIXED INCOME
Purchases
US$ 263 EUR 290 10/26/00 US$ 257 US$ (6)
416 EUR 460 10/30/00 407 (9)
457 AUD 785 11/3/00 425 (32)
440 AUD 750 11/9/00 406 (34)
40 AUD 70 11/30/00 38 (2)
848 GBP 600 12/14/00 889 41
----------
US$ (42)
----------
Sales
EUR 1,415 US$ 1,329 10/26/00 US$ 1,252 US$ 77
EUR 460 436 10/30/00 407 29
JPY120,000 1,112 11/2/00 1,119 (7)
GBP 305 457 11/2/00 451 6
GBP 460 690 11/3/00 680 10
GBP 330 495 11/3/00 488 7
DKK 6,715 821 11/9/00 796 25
EUR 46 40 12/21/00 40 --
----------
US$ 147
----------
NET US$ 105
==========
MULTI-ASSET-CLASS
Purchases
US$ 62 AUD 105 10/11/00 US$ 57 US$ (5)
4,376 EUR 4,600 10/27/00 4,069 (307)
63 EUR 70 10/30/00 62 (1)
48 JPY 5,000 11/2/00 47 (1)
84 AUD 145 11/3/00 78 (6)
195 GBP 130 11/10/00 192 (3)
106 EUR 120 11/28/00 106 --
49 AUD 85 11/30/00 46 (3)
66 EUR 75 11/30/00 66 --
852 JPY 89,000 12/12/00 836 (16)
184 GBP 130 12/14/00 193 9
7,587 EUR 7,830 12/21/00 6,946 (641)
----------
US$ (974)
----------
Sales
EUR 160 US$ 147 10/26/00 US$ 142 US$ 5
DKK 1,175 149 10/30/00 139 10
EUR 145 137 10/30/00 128 9
EUR 85 80 10/30/00 75 5
SEK 1,410 159 10/30/00 147 12
CAD 40 27 11/2/00 27 --
JPY 66,000 612 11/2/00 616 (4)
GBP 155 233 11/3/00 229 4
DKK 460 56 11/9/00 54 2
EUR 100 91 11/10/00 89 2
GBP 20 30 11/10/00 30 --
SEK 355 39 11/15/00 37 2
EUR 185 164 11/30/00 164 --
EUR 5,680 5,019 12/21/00 5,039 (20)
----------
US$ 27
----------
NET US$ (947)
==========
</TABLE>
<TABLE>
<S> <C> <C>
AUD -- Australian Dollar
CAD -- Canadian Dollar
DKK -- Danish Krone
EUR -- Euro
GBP -- British Pound
JPY -- Japanese Yen
SEK -- Swedish Krona
US$ -- U.S. Dollar
</TABLE>
--------------------------------------------------------------------------------
184
<PAGE> 187
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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
HIGH YIELD
U.S. Treasury 10
yr. Note 320 US$ 32,070 Dec-00 51
LIMITED DURATION
U.S. Treasury 2 yr.
Note 30 US$ 6,000 Dec-00 29
U.S. Treasury 5 yr.
Note 66 US$ 6,635 Dec-00 44
MUNICIPAL
Muni Bond 19 US$ 1,860 Dec-00 (12)
U.S. Treasury 10
yr. Note 144 US$ 14,432 Dec-00 37
GLOBAL FIXED INCOME
90 Day Euro 4 EUR 421 Dec-00 3
Japanese Yen 10 yr.
Bond 1 JPY 132,430 Dec-00 18
U.S. Treasury 2 yr.
Note 34 US$ 6,801 Dec-00 28
INTERNATIONAL FIXED INCOME
Japanese Yen 10 yr.
Bond 13 JPY 1,721,590 Dec-00 239
U.S. Treasury 2 yr.
Note 27 US$ 5,400 Dec-00 22
INTERMEDIATE DURATION
U.S. Treasury 2 yr.
Note 2 US$ 400 Dec-00 1
U.S. Treasury 10
yr. Note 39 US$ 3,909 Dec-00 3
U.S. Treasury 10
yr. Note 15 US$ 1,418 Dec-00 14
MULTI-MARKET FIXED INCOME
U.S. Treasury 2 yr.
Note 18 US$ 3,600 Dec-00 9
U.S. Treasury Long
Bond 26 US$ 2,614 Dec-00 17
BALANCED
U.S. Treasury 5 yr.
Note 30 US$ 3,016 Dec-00 11
MULTI-ASSET CLASS
DAX Index 13 EUR 2,234 Dec-00 (139)
DJ Euro Stoxx 50
Index 213 EUR 10,580 Dec-00 (551)
FTSE 100 Index 12 EUR 763 Dec-00 (54)
Hang Seng Index 4 HKD 3,140 Oct-00 17
IBEX Plus Index 13 EUR 1,421 Oct-00 (45)
MIB30 Index 2 EUR 457 Dec-00 (24)
OMX Index 81 SEK 11,765 Oct-00 (18)
TOPIX Index 50 JPY 735,000 Dec-00 (22)
U.S. Treasury 2 yr.
Note 4 US$ 800 Dec-00 1
U.S. Treasury 5 yr.
Note 11 US$ 1,106 Dec-00 7
U.S. Treasury 10
yr. Note 4 US$ 401 Dec-00 1
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
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
HIGH YIELD
U.K. Long Gilt 127 GBP 21,288 Dec-00 (209)
FIXED INCOME II
U.S. Treasury 2 yr.
Note 30 US$ 6,000 Dec-00 (25)
U.S. Treasury 5 yr.
Note 180 US$ 17,982 Dec-00 (114)
U.S. Treasury 10
yr. Note 261 US$ 26,058 Dec-00 (99)
U.S. Treasury Long
Bond 363 US$ 36,373 Dec-00 560
LIMITED DURATION
U.S. Treasury 10
yr. Note 396 US$ 39,687 Dec-00 (154)
SPECIAL PURPOSE FIXED INCOME
U.S. Treasury 5 yr.
Note 60 US$ 6,032 Dec-00 (11)
U.S. Treasury 10
yr. Note 595 US$ 59,630 Dec-00 (224)
U.S. Treasury Long
Bond 352 US$ 34,727 Dec-00 542
MUNICIPAL
U.S. Treasury Long
Bond 581 US$ 57,319 Dec-00 726
GLOBAL FIXED INCOME
U.K. Long Gilt 8 GBP 906 Dec-00 (13)
U.S. Treasury Long
Bond 13 US$ 1,283 Dec-00 16
U.S. Treasury 5 yr.
Note 4 US$ 402 Dec-00 (3)
U.S. Treasury 10
yr. Note 79 US$ 7,917 Dec-00 (32)
INTERNATIONAL FIXED INCOME
U.K. Long Gilt 18 GBP 2,039 Dec-00 (30)
U.S. Treasury Long
Bond 42 US$ 4,144 Dec-00 56
U.S. Treasury 10
yr. Note 48 US$ 4,811 Dec-00 (16)
INTERMEDIATE DURATION
U.S. Treasury 5 yr.
Note 33 US$ 3,318 Dec-00 (21)
U.S. Treasury Long
Bond 46 US$ 4,538 Dec-00 71
MULTI-MARKET FIXED INCOME
U.K. Long Gilt 2 GBP 227 Dec-00 (3)
U.S. Treasury 10
yr. Note 166 US$ 16,636 Dec-00 (53)
U.S. Treasury Long
Bond 25 US$ 2,466 Dec-00 37
BALANCED
U.S. Treasury 10
yr. Note 206 US$ 20,645 Dec-00 (101)
U.S. Treasury Long
Bond 174 US$ 17,166 Dec-00 269
MULTI-ASSET CLASS
OMX Index 81 SEK 11,765 Oct-00 (93)
U.K. Long Gilt 1 GBP 113 Dec-00 (2)
U.S. Long Bond 53 US$ 5,229 Dec-00 81
</TABLE>
--------------------------------------------------------------------------------
185
<PAGE> 188
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Number Aggregate Appreciation
of Face Value Expiration (Depreciation)
Portfolio Contracts (000) Date (000)
--------- --------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury 5 yr.
Note 1 US$ 101 Dec-00 $(1)
U.S. Treasury 10
yr. Note 62 US$ 6,214 Dec-00 (27)
</TABLE>
<TABLE>
<S> <C> <C>
EUR -- Euro
GBP -- British Pound
HKD -- Hong Kong Dollar
JPY -- Japanese Yen
SEK -- Swedish Krona
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
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(2,551)
$50,000 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (2,318)
$41,000 Agreement with Deutsche Bank
terminating November 8, 2009 to pay
3 month LIBOR quarterly and to
receive fixed rate at 6.81%
semiannually. (243)
$72,000 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. 3,412
$19,750 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 872
$35,100 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 1,423
$89,300 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 3,018
$40,200 Agreement with Salomon Brothers
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 1,545
</TABLE>
<TABLE>
--------------------------------------------------------------------
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
<C> <S> <C>
$42,000 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. $1,527
-----------
$6,685
===========
DOMESTIC FIXED INCOME
$900 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(45)
$1,500 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (70)
$9,000 Agreement with Deutsche Bank
terminating November 8, 2009 to pay
3 month LIBOR quarterly and to
receive fixed rate at 6.81%
semiannually. (53)
$7,350 Agreement with Salomon Brothers
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 203
$3,400 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 115
$2,800 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. 133
$750 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 33
$1,350 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 55
$1,550 Agreement with Salomon Brothers
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 60
$1,650 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. 60
-----------
$491
===========
</TABLE>
--------------------------------------------------------------------------------
186
<PAGE> 189
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
--------------------------------------------------------------------
<C> <S> <C>
FIXED INCOME II
$4,300 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(215)
$7,300 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (338)
$3,350 Agreement with Salomon Brothers
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 92
$7,000 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 237
$5,600 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. 265
$1,500 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 66
$2,700 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 110
$3,100 Agreement with Salomon Brothers
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 119
$3,250 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. 118
-----------
$454
===========
LIMITED DURATION
$2,800 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(140)
$2,300 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (107)
-----------
$(247)
===========
</TABLE>
<TABLE>
--------------------------------------------------------------------
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
<C> <S> <C>
SPECIAL PURPOSE FIXED INCOME
$6,000 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(300)
$5,100 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (237)
$14,500 Agreement with Salomon Brothers
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 400
$8,100 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 274
$6,650 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. 315
$1,825 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 81
$3,150 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 128
$3,600 Agreement with Salomon Brothers
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 138
$3,850 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. 140
-----------
$939
===========
MUNICIPAL
$15,000 Agreement with Goldman Sachs
terminating March 28, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. $411
===========
GLOBAL FIXED INCOME
$300 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(15)
</TABLE>
--------------------------------------------------------------------------------
187
<PAGE> 190
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
--------------------------------------------------------------------
<C> <S> <C>
$400 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. $(19)
-----------
$(34)
===========
INTERMEDIATE DURATION
$1,400 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(70)
$2,500 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (116)
-----------
$(186)
===========
MULTI-MARKET FIXED INCOME
$1,000 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(50)
$800 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (37)
$7,000 Agreement with Goldman Sachs
terminating March 30, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.37% semiannually. 228
-----------
$141
===========
BALANCED
$2,200 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(110)
$1,850 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (86)
$6,600 Agreement with Salomon Brothers
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 182
$3,100 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 105
</TABLE>
<TABLE>
--------------------------------------------------------------------
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
<C> <S> <C>
$2,500 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. $119
$675 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 30
$1,200 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 48
$1,400 Agreement with Salomon Brothers
terminating March 10, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 54
$1,450 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. 53
-----------
$395
===========
MULTI-ASSET-CLASS
$700 Agreement with Bankers Trust Company
terminating August 25, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.04% semiannually. $(35)
$550 Agreement with Bankers Trust Company
terminating August 27, 2008 to pay 3
month LIBOR quarterly and to receive
fixed rate at 6.10% semiannually. (25)
$650 Agreement with Goldman Sachs
terminating March 2, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.36% semiannually. 31
$175 Agreement with Goldman Sachs
terminating March 3, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.34% semiannually. 8
$300 Agreement with Goldman Sachs
terminating March 9, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.31% semiannually. 12
$1,400 Agreement with Salomon Brothers
terminating March 24, 2010 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.29% semiannually. 38
$700 Agreement with Salomon Brothers
terminating February 10, 2030 to pay
3 month LIBOR quarterly and to
receive fixed rate at 7.26%
semiannually. 24
</TABLE>
--------------------------------------------------------------------------------
188
<PAGE> 191
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Notional Appreciation
Amount (Depreciation)
(000) Description (000)
--------------------------------------------------------------------
<C> <S> <C>
$350 Agreement with Salomon Brothers
Company terminating March 10, 2030
to pay 3 month LIBOR quarterly and
to receive fixed rate at 7.29%
semiannually. $13
$400 Agreement with Salomon Brothers
terminating March 13, 2030 to pay 3
month LIBOR quarterly and to receive
fixed rate at 7.27% semiannually. 14
-----------
$80
===========
</TABLE>
LIBOR -- London Interbank Offer Rate
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
High Yield -- -- 718 12,211
Fixed Income II -- -- 1,082 8,222
Limited Duration 3,536 172 -- 1,092
Special Purpose Fixed
Income -- -- 1,135 11,622
Municipal -- -- -- 1,040
Global Fixed -- -- -- 92
Intermediate Duration -- -- -- 2,279
Multi-Market Fixed
Income -- -- 895 903
</TABLE>
I. POST OCTOBER LOSSES. Under 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
Strategic Small Value 2
Fixed Income 64,291
Domestic Fixed Income 3,372
High Yield 24,751
Fixed Income II 5,980
Limited Duration 76
Special Purpose Fixed Income 2,824
Municipal 1,699
Global Fixed Income 4,490
Intermediate Duration 728
International Fixed Income 7,880
Multi-Market Fixed Income 1,511
Multi-Asset-Class 3,660
</TABLE>
J. IN-KIND TRANSACTIONS. For the year ended September 30, 2000, the following
Portfolios realized losses from in-kind redemptions of approximately:
<TABLE>
<CAPTION>
Portfolio (000)
--------- --------
<S> <C>
Small Cap Value $ (5,530)
Fixed Income (6,326)
High Yield (21,851)
</TABLE>
K. SECURITIES LENDING. Certain Portfolios loan securities to brokers and
receive security lending fees. Security lending fees are included in interest
income in the Statement of Operations in the amount of $302,000. For the year
ended September 30, 2000, the following Portfolios had security lending fees
totaling:
<TABLE>
<CAPTION>
Fees
Portfolio (000)
--------- ---------
<S> <C>
Value $ 56
Equity 33
Mid Cap Growth 6
Fixed Income 972
Domestic Fixed Income 10
Fixed Income II 23
Special Purpose Fixed Income 47
Balanced 7
</TABLE>
--------------------------------------------------------------------------------
189
<PAGE> 192
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 Value
Loaned of
Securities Collateral
Portfolio (000) (000)
--------- ---------- ----------
<S> <C> <C>
Value $107,827 $111,224
Equity 3,481 3,485
Fixed Income 255,200 259,146
Domestic Fixed Income 15,371 15,563
High Yield 57,977 58,981
Fixed Income II 1,880 1,893
Special Purpose Fixed Income 56,993 57,918
Balanced 16,549 16,739
</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 $1,151,000
for the year ended September 30, 2000.
L. OTHER. At September 30, 2000, the High Yield Portfolio's net assets were
substantially comprised of high yield fixed income securities. The financial
condition of an issuer of these securities and general economic and industry
specific conditions may affect the issuer's ability to make payments of income
and principal on these securities and ultimately impact their valuation.
A portion of the securities of the Municipal Portfolio are insured by certain
companies specializing in the insurance of municipal debt obligations. At
September 30, 2000, approximately 50.9% of the net assets of the Municipal
Portfolio are covered by such insurance. Listed below are the insurers that
insure obligations constituting more than 10% of the Portfolios net assets:
<TABLE>
<S> <C>
FGIC 16.7%
FSA 16.2
</TABLE>
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
Portfolios Class Class Class
---------- ------------- ---------- -------
<S> <C> <C> <C>
Value 25.9% 94.6% 85.4%
Equity -- -- 75.1
Small Cap Value -- -- 55.8
Mid Cap Growth 42.3 -- 66.7
Mid Cap Value 13.0 14.1 63.6
Small Cap Growth 39.1 -- --
Strategic Small Value 42.8 -- --
Fixed Income -- 43.5 67.6
Domestic Fixed Income 49.8 -- 100.0
High Yield 13.2 64.2 71.9
Cash Reserves 45.4 100.0 --
Fixed Income II 51.4 -- --
Limited Duration 46.6 -- --
Special Purpose Fixed
Income -- -- --
Municipal 27.5 -- --
Global Fixed Income 93.7 -- --
International Fixed
Income 85.2 -- --
Intermediate Duration 68.0 100.0 --
Multi-Market Fixed
Income 95.9 -- --
Balanced 45.5 98.3 96.5
Multi-Asset-Class 45.8 99.5 --
</TABLE>
--------------------------------------------------------------------------------
190
<PAGE> 193
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
M. REORGANIZATION. On December 4, 1998, the MAS Municipal Portfolio, as listed
below ("Acquiring Fund"), acquired substantially all of the assets and
liabilities of the MAS PA Municipal Portfolio, also listed below ("Acquired
Fund"), in a tax-free reorganization in exchange for shares of the Acquiring
Fund, pursuant to a plan of reorganization approved by the Trustees' and
shareholders of the Acquired Fund. The net assets of the PA Municipal Portfolio
Institutional Class shares were exchanged for 1,898,026 Institutional Class
shares of the Municipal Portfolio. Net assets as of the reorganization date
were as follows:
<TABLE>
<CAPTION>
Total Net
Assets of Acquired
Total Net Total Net Acquiring Fund
Acquiring Acquired Assets of Assets of Fund After Unrealized
Fund Fund Acquired Fund Acquiring Fund Acquisition Appreciation
--------- ------------ ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Municipal PA Municipal $22,605,495 $85,020,241 $107,625,736 $1,659,412
</TABLE>
--------------------------------------------------------------------------------
191
<PAGE> 194
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 twenty
one 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
--------------------------------------------------------------------------------
192
<PAGE> 195
--------------------------------------------------------------------------------
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
Equity 124,774
Small Cap Value 9,053
Mid Cap Growth 69,374
Mid Cap Value 605
Small Cap Growth 126
Municipal 680
Global Fixed Income 890
International Fixed Income 326
Balanced 31,959
Multi-Asset-Class 9,850
</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%
Equity 11.2
Small Cap Value 7.4
Mid Cap Growth 1.1
Mid Cap Value 4.6
Small Cap Growth 0.6
High Yield 0.8
Balanced 7.3
Multi-Asset-Class 5.5
</TABLE>
Foreign taxes accrued during the fiscal year ended September 30, 2000 amounting
to $20,000 for the International Fixed Income Portfolio is expected to be passed
through to shareholders as foreign tax credits on Form 1099-DIV for the year
ending December 31, 2000. In addition, for the year ended September 30, 2000,
gross income derived from sources within foreign countries amounted to
$5,465,000 for the International Fixed Income Portfolio.
For the fiscal year ended September 30, 2000*, the percentage of exempt interest
dividends paid by the Municipal Portfolio was 83.0%.
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
High Yield 10.0
Cash Reserves 14.0
Fixed Income II 12.4
Limited Duration 13.4
Special Purpose Fixed Income 12.4
Global Fixed Income 14.3
International Fixed Income 14.1
Intermediate Duration 19.7
Multi-Market Fixed Income 17.5
Balanced 12.9
Multi-Asset-Class 11.4
</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.
--------------------------------------------------------------------------------
193
<PAGE> 196
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> 197
[MAS LOGO]
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.
925-fannmas-1100
