<PAGE>
MAP-EQUITY FUND
To Our Shareholders:
The US equity markets continued an unprecedented run in 1997 due in large part
to sustained positive economic factors. These factors included strong economic
growth, low inflation, stable interest rates, and a very strong labor market.
The Standard & Poor's 500 Index, a generally accepted index of unmanaged equity
securities, increased by 33.4% in 1997. This impressive year follows returns of
23.0% and 37.5% in 1996 and 1995, respectively.
CONTINUED SOLID RISK-ADJUSTED PERFORMANCE
MAP-Equity Fund continued its admirable record of performance with a 28.0%
return for the year. The Fund's results were achieved while continuing to
maintain a lower risk profile than the overall market. In fact, we estimate that
the Fund maintained a risk level that averaged just 86% of the overall market.
Michael Mullarkey, Managing Director of Markston Investment Management and the
Fund's lead portfolio manager, discusses some of the major investments that
shaped the Fund's 1997 results in the letter that follows.
INCREASED RECOGNITION, IMPROVED SALES
1997 was a notable year for MAP-Equity Fund. MORNINGSTAR, INC., the
widely-recognized mutual fund rating service, awarded MAP-Equity Fund its
highest rating of five-stars (*****) in May, 1997. The Fund maintained its
overall five-star rating as of December 31, 1997 and for the last 3-, 5-, and
10-year periods.(1) (Note: There are 2,332, 1,292 and 676 funds in Morningstar's
domestic equity category for the 3-, 5-, and 10-year periods respectively.) We
are very proud of this and other recognition the Fund received in 1997.
Additionally, sales of new shares more than doubled over 1996 as a result of the
fine performance by Markston and increased promotional activity by the Fund's
distributor, First Priority Investment Corporation.
As always, we encourage your suggestions and comments. On behalf of the Board of
Directors of the Fund, we appreciate your continued support and confidence in
the Fund.
Sincerely,
[SIGNATURE]
KATHLEEN M. KOERBER
PRESIDENT
January 31, 1998
- ---------
(1)Morningstar's proprietary ratings reflect risk-adjusted performance and are
subject to change each month. Overall ratings are calculated from the Fund's 3-,
5-, and 10-year average annual returns in excess of 90-day T-bills with
appropriate fee adjustments and a risk factor that reflects fund performance
below 90-day T-bill returns. The top 10% of funds in an investment category
receive five stars. For a copy of the current Morningstar report, including its
analysis, please call First Priority Investment Corporation.
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Fellow Shareholders:
The MAP-Equity Fund appreciated 28.0% during 1997 versus 33.4% for the S&P 500.
During the year, the Fund continued its conservative approach, carrying a risk
level that averaged 85.9% of the market. The Fund has earned a five star rating
by MORNINGSTAR, INC., indicating it is in the top 10% of the funds in its class.
By the end of 1997, the US stock market as measured by the S&P 500 had
essentially doubled in the prior three years. Selling by corporate insiders has
recently been brisk. The employment rate has dropped to the point that wage
inflation is a risk in the domestic economy. All of this leads us to doubt that
the extraordinary gains we have enjoyed in the US equity markets are likely to
continue much longer.
As equity managers, we have always paid attention to risk. This is reflected in
the cash positions we have held and the diversification we have used while
pursuing capital appreciation. Given the backdrop of a robustly priced equity
market, the risks of domestic wage inflation and the dislocations in Southeast
Asia, we will continue to seek opportunities for appreciation, while limiting
the overall risk level of the portfolio to the extent possible.
Looking back at 1997, several of our holdings posted truly superior performance,
thereby contributing to the overall portfolio.
CATALINA MARKETING is an excellent example. Catalina is a supplier of coupons
that are generated at the supermarket checkout, and has experienced above
average growth and a high Return on Assets. We purchased Catalina after an
interruption in its growth caused it to miss analysts' expectations. As a
result, our purchase price was less than half the previous high for the stock.
After our purchase, both the management of the company and the company itself
bought the stock. Earnings recovered, and the stock appreciated roughly 70% from
our purchase price. Late in 1997, we lightened our position.
AMERICAN EXPRESS was another superb performer, appreciating 56% during 1997.
Early in the year, the stock benefited from share repurchase by the company.
Later in the year, there was speculation that Citicorp might be interested in
acquiring American Express. Throughout the year, earnings met or exceeded
expectations.
CVS was another excellent performer, appreciating 52% during the year. This was
largely based on CVS's acquisition of Revco, which made it one of the four
leading national drug store chains. The Revco acquisition gave CVS a major
opportunity to bring its superior merchandising to a less effectively run chain.
This, of course, implied future earnings growth.
ACNIELSEN was another good contributor, appreciating 59% during the year. We
initially bought Nielsen after its spin off from Dun & Bradstreet. There was
significant insider buying at the time. In 1997, as excellent earnings were
reported, it became obvious that new management was improving operations.
NORTHERN TRUST appreciated dramatically as the company continues to profitably
expand both its wealth management division and investor services division.
Northern Trust earns more than two thirds of its income from non-spread
businesses. While many banks' strategic plans place a growing emphasis on
business with recurring revenue streams, Northern Trust is already well
positioned and moving forward. Additionally, the stock price was clearly helped
by the merger activity in the banking industry; banks with less desirable lines
of business than Northern were acquired for high multiples of earnings and book
value.
Our worst performer during the year was Eastman Kodak.
2
<PAGE>
EASTMAN KODAK declined for a combination of reasons. Price competition from Fuji
became intense during the summer. Earnings were hurt by losses in the digital
photography area and excess staffing. Late in the year, the Board of Directors
mandated a withdrawal from several endeavors related to digital photography, and
a 20% reduction in staffing. We had materially reduced our position prior to the
full decline in Kodak. Since the staff reduction was announced, we have
partially rebuilt the position.
We thank you for the continuing opportunity to manage your assets. It is good to
be fellow shareholders with you.
Sincerely,
[SIGNATURE]
MICHAEL J. MULLARKEY
Managing Director
MARKSTON INVESTMENT MANAGEMENT
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE MAP-EQUITY FUND
AND THE STANDARD & POOR'S 500 INDEX
FOR THE TEN YEAR PERIOD ENDED DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
<S> <C> <C>
21.91% 17.44% 17.42%
MAP - Equity Fund S&P 500
1987 $9,525 $10,000
1988 $12,375 $11,660
1989 $15,862 $15,345
1990 $15,055 $14,869
1991 $19,223 $19,389
1992 $21,247 $20,863
1993 $23,090 $22,970
1994 $23,727 $23,271
1995 $31,439 $32,004
1996 $38,928 $39,352
1997 $49,825 $52,480
</TABLE>
THE GRAPH ABOVE DEPICTS THE PERFORMANCE OF MAP-EQUITY FUND VERSUS THE STANDARD &
POOR'S 500 INDEX (AN UNMANAGED INDEX OF STOCKS CONSIDERED REPRESENTATIVE OF THE
OVERALL STOCK MARKET). IT IS IMPORTANT TO NOTE THAT MAP-EQUITY FUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS NOT AVAILABLE FOR
INVESTMENT, IS UNMANAGED AND IS SHOWN FOR COMPARISON ONLY.
THIS GRAPH ASSUMES AN INITIAL INVESTMENT OF $10,000, THE MAXIMUM 4.75% SALES
CHARGE ON FUND SHARES, AS WELL AS REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S
SHARES MAY BE WORTH MORE OR LESS THAN WHEN ORIGINALLY PURCHASED.
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
MAP-Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of MAP-Equity Fund (the "Fund") at
December 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 9, 1998
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MAP-EQUITY FUND
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments:
Common stocks (cost $57,617,761).............................................. $ 82,814,066
Preferred stocks (cost $183,286).............................................. 398,355
Corporate bonds (cost $166,133)............................................... 225,734
Short-term investments (cost $12,897,413)..................................... 12,897,413
------------
96,335,568
Receivable for investment securities sold....................................... 276,793
Receivable for Fund shares sold................................................. 96,867
Dividends and interest receivable............................................... 90,774
Other assets.................................................................... 9,204
------------
Total Assets............................................................ 96,809,206
------------
LIABILITIES
Payable for investment securities purchased..................................... 2,027,294
Payable for Fund shares redeemed................................................ 49,889
Bank overdraft.................................................................. 378,168
Accrued investment advisory fee................................................. 127,543
Accounts payable and accrued expenses........................................... 54,122
------------
Total Liabilities....................................................... 2,637,016
------------
Net Assets.............................................................. $ 94,172,190
------------
------------
NET ASSETS
Capital stock (4,142,975 shares of $1.00 par value capital stock outstanding,
21,000,000 shares authorized)................................................. $ 4,142,975
Paid-in capital................................................................. 62,700,277
Accumulated undistributed net investment income................................. 47,347
Accumulated undistributed net realized gain from security transactions.......... 1,810,616
Net unrealized appreciation of investments...................................... 25,470,975
------------
Net Assets.............................................................. $ 94,172,190
------------
------------
Net asset value and redemption price per share ($94,172,190 DIVIDED BY
4,142,975 shares of capital stock outstanding)................................ $22.73
------------
------------
Computation of maximum public offering price per share -- $22.73 DIVIDED BY
.9525 (on sales of $50,000 or more, the maximum sales charge and, accordingly,
the offering price, is reduced)............................................... $23.86
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
MAP-EQUITY FUND
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income:
Dividends..................................................................... $ 966,569
Interest...................................................................... 736,058
------------
1,702,627
Expenses:
Investment advisory fee....................................................... 432,252
Custodian..................................................................... 76,534
Transfer Agent................................................................ 69,450
Audit......................................................................... 27,400
Legal......................................................................... 23,032
Filing Fees................................................................... 16,975
State taxes................................................................... 16,520
Insurance expense............................................................. 12,837
Printing...................................................................... 11,353
Directors' fees............................................................... 7,500
Miscellaneous................................................................. 4,670
------------
698,523
------------
Net Investment Income................................................... 1,004,104
------------
Realized and Unrealized Gain on
Investments:
Net realized gain from security transactions.................................. 13,691,368
Increase in unrealized appreciation of investments............................ 6,028,801
------------
Net Gain on Investments..................................................... 19,720,169
------------
Net Increase in Net Assets Resulting from Operations........................ $ 20,724,273
------------
------------
</TABLE>
See notes to financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
MAP-EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income..................................... $ 1,004,104 $ 1,188,756
Net realized gain from security transactions.............. 13,691,368 9,760,046
Increase in unrealized appreciation of investments........ 6,028,801 3,273,899
------------- -------------
Net Increase in Net Assets Resulting from Operations.... 20,724,273 14,222,701
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income...................... (1,043,783) (1,177,663)
Distributions from net realized gain from security
transactions............................................ (12,333,249) (8,902,823)
------------- -------------
Total Distributions to Shareholders..................... (13,377,032) (10,080,486)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase in net assets from capital share
transactions............................................ 13,234,335 8,981,118
------------- -------------
Net Increase in Net Assets.............................. 20,581,576 13,123,333
NET ASSETS
Beginning of year......................................... 73,590,614 60,467,281
------------- -------------
End of year (including undistributed net investment income
of $47,347 and $87,026, respectively)................... $ 94,172,190 $ 73,590,614
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MAP-EQUITY FUND
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
COMMON STOCKS (87.94%)
CONSUMER NON-DURABLES (10.67%)
108,780 Archer Daniels Midland Co............................................. $ 2,359,166
5,800 CPC International, Inc................................................ 624,950
8,700 Clorox Co............................................................. 687,844
18,600 Coca-Cola Co.......................................................... 1,239,225
19,600 First Brands Corp..................................................... 527,975
11,788 Gillette Co........................................................... 1,183,957
41,100 National Service Industries, Inc...................................... 2,037,019
3,400 Newell Co............................................................. 144,500
3,800 Pete's Brewing Co.*................................................... 15,438
20,400 Quaker Oats Co........................................................ 1,076,100
1,600 Stanhome, Inc......................................................... 41,100
4,100 Tupperware Corp....................................................... 114,288
-------------
10,051,562
-------------
ENERGY (2.27%)
9,500 Amoco Corp............................................................ 808,688
774 Apache Corp........................................................... 27,138
2,200 Petroleum Helicopters, Inc., voting................................... 48,950
5,800 Petroleum Helicopters, Inc., non-voting............................... 130,500
20,800 Royal Dutch Petroleum Co.............................................. 1,127,100
-------------
2,142,376
-------------
FINANCIAL SERVICES (10.50%)
69,684 Allmerica Financial Corp.............................................. 3,479,845
8,400 American Express Co................................................... 749,700
6,000 Argonaut Group, Inc................................................... 203,250
27,500 Health Care Property Investors, Inc................................... 1,039,844
25,400 Northern Trust Corp................................................... 1,771,650
22,249 Popular, Inc.......................................................... 1,095,763
56,100 Reliance Group Holdings, Inc.......................................... 792,413
3,200 USF&G Corp............................................................ 70,600
48,900 United Dominion Realty Trust, Inc..................................... 681,544
-------------
9,884,609
-------------
HEALTH CARE (8.94%)
59,400 Access Health, Inc.*.................................................. 1,722,600
15,900 Biogen, Inc.*......................................................... 578,362
8,100 Cooper Companies, Inc.*............................................... 331,087
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
HEALTH CARE (CONTINUED)
19,900 Humana, Inc.*......................................................... $ 412,925
17,257 Medpartners, Inc.*.................................................... 386,125
100,600 Pharmacia & Upjohn, Inc............................................... 3,684,475
21,000 Schering-Plough Corp.................................................. 1,304,625
-------------
8,420,199
-------------
INDUSTRIAL (8.61%)
2,500 Cummins Engine, Inc................................................... 147,656
35,700 Dravo Corp.*.......................................................... 392,700
7,600 IMC Global, Inc....................................................... 248,900
14,700 Lone Star Industries, Inc............................................. 780,937
1,600 Lubrizol Corp......................................................... 59,000
14,200 Minnesota Mining & Manufacturing Co................................... 1,165,287
19,600 Morgan Products Ltd.*................................................. 104,125
20,600 Ogden Corp............................................................ 580,663
34,988 Pentair, Inc.......................................................... 1,257,381
6,800 Valspar Corp.......................................................... 216,750
30,900 Vulcan Materials Co................................................... 3,155,663
-------------
8,109,062
-------------
MEDIA/ENTERTAINMENT/LEISURE (17.16%)
159,966 ACNielsen Corp.*...................................................... 3,899,171
9,600 Cognizant Corp........................................................ 427,800
13,400 Dun & Bradstreet Corp................................................. 414,562
51,700 Eastman Kodak Co...................................................... 3,144,006
84,200 Harte-Hanks Communications............................................ 3,125,925
5,300 Hasbro, Inc........................................................... 166,950
8,621 Mattel, Inc........................................................... 321,132
39,900 Meredith Corp......................................................... 1,423,931
20,800 Nelson, Thomas Inc.................................................... 240,500
34,200 Time Warner, Inc...................................................... 2,120,400
14,200 Times Mirror Co., Series A............................................ 873,300
-------------
16,157,677
-------------
MISCELLANEOUS (1.73%)
29,600 Catalina Marketing Corp.*............................................. 1,369,000
17,500 Olsten Corp........................................................... 262,500
-------------
1,631,500
-------------
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MAP-EQUITY FUND
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
RETAIL (8.87%)
72,980 Burlington Coat Factory Warehouse Corp................................ $ 1,199,609
45,423 CVS Corp.............................................................. 2,909,911
51,909 Cash America International, Inc....................................... 671,573
113,500 Charming Shoppes, Inc.*............................................... 524,937
42,725 Genovese Drug Stores, Inc., Class A................................... 731,664
7,900 Hartmarx Corp.*....................................................... 60,237
4,400 Mazel Stores, Inc.*................................................... 64,350
13,300 McDonald's Corp....................................................... 635,075
23,500 Oshkosh B'Gosh, Inc., Class A......................................... 752,000
47,200 Vicorp Restaurants, Inc.*............................................. 802,400
-------------
8,351,756
-------------
TECHNOLOGY (12.11%)
4,100 Adobe Systems, Inc.................................................... 168,613
56,800 Avid Technology, Inc.*................................................ 1,519,400
24,700 Bay Networks, Inc.*................................................... 631,394
1,600 Calcomp Technology, Inc.*............................................. 5,000
68,800 Checkpoint Systems, Inc.*............................................. 1,204,000
17,000 Electronic Data Systems Corp.......................................... 746,937
56,200 Glenayre Technologies, Inc.*.......................................... 554,975
73,500 Global Directmail Corp.*.............................................. 1,272,469
12,020 Imation Corp.*........................................................ 192,320
7,100 Integrated Systems, Inc.*............................................. 97,625
2,200 Intel Corp............................................................ 154,412
3,000 Motorola, Inc......................................................... 171,188
70,200 National Computer Systems, Inc........................................ 2,474,550
12,400 Shared Medical System Corp............................................ 818,400
500 Storage Technology Corp.*............................................. 30,969
36,700 3-D Systems Corp.*.................................................... 220,200
20,476 Vishay Intertechnology, Inc.*......................................... 483,746
65,300 Xircom, Inc.*......................................................... 657,081
-------------
11,403,279
-------------
UTILITIES (7.08%)
16,800 Cinergy Corp.......................................................... 643,650
47,312 Duke Power Co......................................................... 2,619,902
6,500 Eastern Utilities Assoc............................................... 170,625
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
UTILITIES (CONTINUED)
17,600 GTE Corp.............................................................. $ 919,600
36,421 Houston Industries, Inc............................................... 971,985
9,150 Northwest Natural Gas Co.............................................. 283,650
5,000 Piedmont Natural Gas, Inc............................................. 179,688
13,530 Sprint Corp........................................................... 793,196
4,400 UniSource Energy Corp.*............................................... 79,750
-------------
6,662,046
-------------
TOTAL COMMON STOCKS................................................... 82,814,066
-------------
PREFERRED STOCKS (0.42%)
MEDIA/ENTERTAINMENT/LEISURE (0.36%)
17,004 News Corp. Ltd., limited voting*...................................... 337,955
-------------
MISCELLANEOUS (0.06%)
3,200 Craig Corp., Class A*................................................. 60,400
-------------
TOTAL PREFERRED STOCKS................................................ 398,355
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C>
CORPORATE BONDS (0.24%)
$ 129,000 CII Financial, Inc.,
7.50% conv. sub. deb.,
due September 15, 2001.............................................. 120,454
112,000 National Education Corp.,
6.50% conv. sub. deb.,
due May 15, 2011.................................................... 105,280
-------------
TOTAL CORPORATE BONDS................................................. 225,734
-------------
SHORT-TERM INVESTMENTS (13.70%)
12,925,000 U.S. Treasury Bills, 5.00% to 5.31%,
due January 8 to February 19, 1998.................................. 12,897,413
-------------
TOTAL INVESTMENTS (102.30%)........................................... 96,335,568
Liabilities in excess of other assets (2.30%)......................... (2,163,378)
-------------
NET ASSETS (100.00%).................................................. $ 94,172,190
-------------
-------------
</TABLE>
- ---------
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the total net assets of the Fund.
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAP-EQUITY FUND
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
MAP-Equity Fund (the "Fund") is a diversified, open-end, management investment
company registered under the Investment Company Act of 1940, as amended.
Significant accounting policies of the Fund are as follows:
INVESTMENTS: Investments, except for short-term investments which are stated at
amortized cost which approximates market value, are valued at closing prices on
national securities exchanges. Securities traded on a national securities
exchange for which there are no sales on the valuation date and securities
traded over-the-counter are valued at closing bid prices. Investment security
transactions are recorded on the date of purchase or sale. Realized gains and
losses on investment transactions are determined on the basis of identified
cost.
FEDERAL INCOME TAXES: The Fund does not provide for federal income taxes since
it intends to continue to qualify as a "regulated investment company" under the
Internal Revenue Code and to maintain this qualification by distributing each
year substantially all of its taxable net income and net realized capital gains
to its shareholders. Income dividends and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes, but not for tax purposes, are reported as distributions in
excess of net investment income and distributions in excess of net realized
capital gains.
DIVIDENDS AND INTEREST INCOME: Dividends from investment securities and
dividends to shareholders are recorded on the ex-dividend date and interest is
accrued as earned. Discounts or premiums on debt securities purchased are
accreted or amortized to interest income over the lives of the respective
securities.
ESTIMATES: The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS
The Fund has investment advisory and service agreements with Markston Investment
Management ("Adviser"), a partnership between Markston International, Inc.
("Markston") and MBL Sales Corporation ("MBL Sales"). Markston is a 49% general
partner of Adviser, and MBL Sales is a 51% general partner. MBL Sales is a
wholly-owned subsidiary of MBLLAC Holding Corporation which is a wholly-owned
subsidiary of the MBL Life Assurance Corporation ("MBL Life"). Under the
investment advisory and service agreements, the Fund pays Adviser a periodic fee
(basic fee) at the annual rate of .50% of the first $200,000,000 of the Fund's
net assets, .45% of the next $100,000,000 of such value, .40% of the next
$100,000,000 of such value, and .35% of such value in excess of $400,000,000.
The basic fee may be adjusted by an amount determined according to a formula
based on the Fund's performance in relation to the Standard & Poor's 500 Index
("Index"). The formula provides for a weekly increase or decrease in the basic
fee by an amount equal to .05% of net assets per annum for each full two
percentage points that the Fund's investment performance, over a 24-month
period, is better or worse than that of the Index. The maximum adjustment is
.30%. The fee is computed and accrued daily and paid quarterly. For the year
ended December 31, 1997, the basic advisory fee amounted to $425,929. The actual
fee amounted to $432,252 which reflected an upward performance adjustment of
$6,323.
10
<PAGE>
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- CONTINUED
In addition, the Fund has a distribution agreement with First Priority
Investment Corporation ("FPIC"), a wholly-owned subsidiary of MBLLAC Holding
Corporation. During the year ended December 31, 1997, the Fund was advised that
FPIC received $37,522 as distributor of the Fund's shares. FPIC paid this amount
to its sales force.
The compensation of each disinterested director in 1997 was paid by the Fund at
the rate of $400 per meeting attended, plus an annual retainer of $900.
Aggregate fees paid during the year to the Fund's disinterested directors
amounted to $7,500. Two of the directors of the Fund and all officers of the
Fund are either officers or employees of MBL Life. The compensation of the
directors, officers and any employees of the Fund affiliated with Adviser or
FPIC is paid by the affiliated entities.
At December 31, 1997, MBL Life owned 2,087,581 Fund shares.
NOTE C -- CAPITAL STOCK
A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Year Ended December 31, 1996
--------------------------------- ---------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold................................ 133,282 $ 3,080,596 62,033 $ 1,297,411
Shares issued in reinvestment of income
dividends and capital gain
distributions............................ 563,972 12,915,669 478,896 9,781,641
------------- ------------- ------------- -------------
697,254 15,996,265 540,929 11,079,052
Less shares repurchased.................... (116,774) (2,761,930) (101,992) (2,097,934)
------------- ------------- ------------- -------------
Net increase in number of shares
outstanding and net assets resulting from
capital share transactions............... 580,480 $ 13,234,335 438,937 $ 8,981,118
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
NOTE D -- PURCHASES AND SALES OF INVESTMENTS
Purchases and proceeds from sales of investments during the year ended December
31, 1997, other than short-term investments, aggregated $41,174,959 and
$43,498,418, respectively.
The identified cost of investments owned at December 31, 1997 for federal income
tax purposes was $70,864,593. At December 31, 1997, gross unrealized
appreciation of investments was $26,992,818 and gross unrealized depreciation
was $1,521,843 resulting in net unrealized appreciation of $25,470,975 for
federal income tax purposes.
------------------------------------------------------------------------------
11
<PAGE>
FINANCIAL HIGHLIGHTS
MAP-EQUITY FUND
Selected data for each share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.............................. $ 20.66 $ 19.36 $ 16.67 $ 18.13 $ 20.02
----------- ------- ------- ------- -------
Net investment income............... 0.28 0.36 0.43 0.37 0.36
Net realized and unrealized gain on
investments....................... 5.49 4.16 4.90 0.13 1.32
----------- ------- ------- ------- -------
Net increase in net assets from
operations........................ 5.77 4.52 5.33 0.50 1.68
----------- ------- ------- ------- -------
Dividends from net investment
income............................ (0.29) (0.36) (0.43) (0.37) (0.36)
Distributions from net realized gain
from security transactions........ (3.41) (2.86) (2.07) (1.59) (3.21)
Distribution in excess of net
investment income (see Note A).... -- -- (0.14) -- --
----------- ------- ------- ------- -------
Total distributions................. (3.70) (3.22) (2.64) (1.96) (3.57)
----------- ------- ------- ------- -------
Net Asset Value, End of Year........ $ 22.73 $ 20.66 $ 19.36 $ 16.67 $ 18.13
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Total Return(1)..................... 27.99% 23.82% 32.50% 2.76% 8.67%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)....................... $ 94,172 $73,591 $60,467 $48,130 $49,438
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratio of Expenses to Average Net
Assets............................ 0.82% 0.74% 0.81% 1.07% 1.04%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratio of Net Investment Income to
Average Net Assets................ 1.18% 1.82% 2.30% 2.03% 1.76%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Portfolio Turnover Rate............. 57.57% 52.88% 39.40% 39.31% 19.55%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Average Commission Rate Paid........ $ 0.0235 $0.0261 -- -- --
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
</TABLE>
- ----------
(1) Total return does not reflect the sales commission (maximum 4.75%) charged
on Fund shares.
See notes to financial statements.
12
<PAGE>
NET ASSET VALUES AND PAYOUTS
(UNAUDITED)
Following is a tabular illustration of the Fund's history since shares of the
Fund were first offered for sale on January 21, 1971. Prior to May 1, 1995, the
Fund was known as the Mutual Benefit Fund.
<TABLE>
<CAPTION>
Per share
--------------------------
Dividends
Net asset from net Capital
value investment gains
Year ended per share income distributions
- ----------------------------------------------------------
<S> <C> <C> <C>
December 31, 1971 $ 10.81 $ .09 --
December 31, 1972 11.27 .10 $ .02
December 31, 1973 8.98 .08 --
December 31, 1974 6.52 .17 --
December 31, 1975 8.26 .155 --
December 31, 1976 9.70 .18 --
December 31, 1977 9.05 .225 --
December 31, 1978 8.86 .33 --
December 31, 1979 9.46 .43 --
December 31, 1980 10.77 .53 --
December 31, 1981 10.55 .45 --
December 31, 1982 11.60 .775 1.39
December 31, 1983 13.93 .37 .28
December 31, 1984 11.08 .39 2.51
December 31, 1985 12.89 .38 1.01
December 31, 1986 13.65 .315 1.66
December 31, 1987 11.65 .475 1.03
December 31, 1988 14.27 .31 .52
December 31, 1989 17.46 .41 .44
December 31, 1990 15.84 .54 .19
December 31, 1991 19.66 .49 .05
December 31, 1992 20.02 .43 1.28
December 31, 1993 18.13 .36 3.21
December 31, 1994 16.67 .37 1.59
December 31, 1995 19.36 .43 2.21
December 31, 1996 20.66 .36 2.86
December 31, 1997 22.73 .29 3.41
- ----------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the year ended December 31, 1997:
INVESTMENTS ADDED
Adobe Systems, Inc.
Access Health, Inc.
Allmerica Financial Corp.
Anixter International, Inc.
Archer Daniels Midland Co.
Avid Technology, Inc.
Biogen, Inc.
CVS Corp.
Catalina Marketing Corp.
Charming Shoppes, Inc.
Checkpoint Systems, Inc.
Cummins Engine, Inc.
Dravo Corp.
Duke Power Co.
Glenayre Technologies, Inc.
Global Directmail Corp.
Harte-Hanks Communications
Hartmarx Corp.
Heritage Media Corp.
Houston Industries, Inc.
Humana, Inc.
Integrated Systems, Inc.
Mazel Stores, Inc.
Newell Co.
News Corp. Ltd. (preferred)
Olsten Corp.
Pete's Brewing Co.
Pharmacia & Upjohn, Inc.
Reliance Group Holdings, Inc.
Stanhome, Inc.
3-D Systems Corp.
Tupperware Corp.
Wang Laboratories, Inc. (warrants)
Xircom, Inc.
INVESTMENTS ELIMINATED
Allegheny Teledyne, Inc.
Allmerica Property & Casualty Companies, Inc.
Alltel Corp.
American Greetings Corp., Class A
Anixter International, Inc.
Avnet, Inc.
Data General Corp.
Dean Witter Government Income Trust
Gemini II, Inc. (income shares)
Heritage Media Corp.
Kellogg Co.
Luby's Cafeterias, Inc.
National Education Corp.
Noram Energy Corp.
Novell, Inc.
PanEnergy Corp.
Quaker State Corp.
Quest for Value Dual Purpose Fund, Inc.
(income and capital shares)
Revco D.S., Inc.
Sequent Computer Systems, Inc.
Showbiz Pizza Time, Inc.
Symantec Corp.
360 Communications Co.
Universal International, Inc.
Wang Laboratories, Inc. (warrants)
Wilmington Trust Corp.
13
<PAGE>
MAP-EQUITY FUND
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
William G. Clark
Horace J. DePodwin
Herbert M. Groce, Jr.
Kathleen M. Koerber
Jerome M. Scheckman
INVESTMENT ADVISER
Markston Investment Management
1 North Lexington Avenue
White Plains, New York 10601-1702
DISTRIBUTOR
First Priority Investment Corporation
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
CUSTODIAN and TRANSFER AGENT
State Street Bank & Trust Co.
P.O. Box 8500
Boston, Massachusetts 02266-8500
1-800-343-0529
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
THIS REPORT HAS BEEN PREPARED FOR THE SHAREHOLDERS OF THE FUND. IT IS NOT
AUTHORIZED FOR OTHER DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT
PROSPECTUS, WHICH INCLUDES INFORMATION CONCERNING THE FUND AND THE SALES
COMMISSION CHARGED ON FUND SHARES.
FS-306 (2-98)
15152
[LOGO]
MAP-
EQUITY
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1997
--------------------
