<PAGE>
MAP-EQUITY FUND
To Our Shareholders:
For the twelve months ending December 31, 1998, MAP-Equity Fund returned 24.2%
after expenses versus the Standard & Poor's 500 Index (the "S&P 500") return of
28.6%. The S&P 500 is a generally accepted index of unmanaged securities. The
analysis that follows this letter was prepared by Markston Investment Management
(the Fund's investment adviser) and discusses the various factors that
contributed to the Fund's performance.
MAP-Equity has earned an overall 4-star (****) above average rating from
Morningstar as of January 31, 1999. The Fund earned a 5-star rating for the last
5-year period as of January 31, 1999, and a 4-star rating for the last 3-year
and 10-year periods(1). (Note: There are 2,859, 1,734, and 741 funds in
Morningstar's domestic equity category for the 3-, 5- and 10-year periods,
respectively.)
UPDATE ON ORGANIZATIONAL DEVELOPMENTS
As we reported to you via a "sticker" supplement to your MAP-Equity prospectus
dated August 6, 1998, MBL Life Assurance Corporation ("MBL Life"), the Fund's
current sponsor, entered into a transaction to sell substantially all of its
life insurance and annuity businesses to Anchor National Life Insurance Company,
a subsidiary of SunAmerica Inc. (the "Transaction"). The Transaction, which
received all necessary regulatory approvals and became effective on December 31,
1998, also affects the Fund, its investment adviser (Markston Investment
Management) and its distributor (First Priority Investment Corporation).
As a result of the Transaction, MBL Life withdrew the 49% of the Fund's
outstanding shares that it owned in early November, 1998. The redemption was
made "in kind", with MBL Life receiving a pro rata distribution of securities
held by the Fund. The Fund's normal year-end capital gains distribution was
accelerated to late October, 1998 in order to facilitate MBL Life absorbing its
pro rata share of such capital gains prior to the withdrawal.
We also told you previously that the Board of Directors was exploring strategic
alternatives for the Fund because MBL Life and First Priority will not be able
to continue providing services to the Fund after June 30, 1999. While these
arrangements have not been finalized as of the date of this letter, we are
pleased to report that, on January 7, 1999, the Fund entered into a letter of
intent concerning a proposed arrangement with another mutual fund organization.
While the letter of intent includes a confidentiality provision which prevents
us from disclosing the identity of the mutual fund organization, the proposed
arrangement assumes that a new investment advisory entity and distributor will
be retained by the Fund.
Of course, we will provide you with more details on this proposed transaction as
soon as we can. In addition, your approval will be necessary before any new
investment advisory and/or distribution agreements can take effect. The Board of
Directors of the Fund is committed to maintaining the Fund's record of superior
investment performance, reasonable expense levels and high quality shareholder
services. This commitment underlies the Board's evaluation of alternatives for
the Fund.
- ---------
(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 and 22.5% receive four stars. For a copy of the current
Morningstar report, including its analysis, please call First Priority
Investment Corporation.
<PAGE>
To help facilitate the transition of the Fund to new sponsorship, the Fund's two
interested directors, William G. Clark and I, resigned as directors in January,
1999. Both Mr. Clark and I continue to serve as officers of the Fund, and will
do our utmost to assure a smooth transition.
Thank you for your continued support of the Fund, and we welcome your comments
and observations.
Sincerely yours,
/S/ KATHLEEN M. KOERBER
---------------------------------------
KATHLEEN M. KOERBER
PRESIDENT
February 19, 1999
2
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Fellow Shareholders:
During 1998, the MAP-Equity Fund, under Markston's management, returned 24.2%.
Map-Equity has earned an overall four star(****) above average rating from
Morningstar as of January 31, 1999.
Some of our better performers during the year include Biogen, National Computer
Systems, Time Warner, CVS, Sprint, Pharmacia & UpJohn and Harte-Hanks.
BIOGEN appreciated 128% during the year largely on the back of better than
expected Avonex sales. Avonex appears to have effective medication for Multiple
Sclerosis, is highly profitable and is consistently gaining new users. This
gives Biogen the cash flow to fund additional biotech research.
NATIONAL COMPUTER SYSTEMS appreciated 109% during the year. This leading
educational service provider has been an important beneficiary of the nationwide
program to test school children statewide and to measure the effectiveness of
the education they have received. In our view, Wall Street is finally beginning
to recognize National Computer Systems as a very well run consistent grower.
TIME WARNER was a superb performer during the year as the value of cable systems
continue to appreciate. First, it appears that cable modem use should increase
dramatically in the next several years. Second, AT&T's acquisition of
Telecommunications, Inc. with the intention to use the cable company plant for
telephony has positive implications for Time Warner. Telecommunications
equipment manufacturers should now be able to produce the necessary equipment
for cable telephony on a large enough scale to drive down prices. These lower
prices make the economics of cable telephony much more attractive. Finally,
there has also been much speculation that Time Warner and AT&T are also in
discussions regarding a joint venture for cable telephony which would presumably
be accretive to Time Warner.
CVS appreciated almost 72% for the year and contributed nicely to overall
portfolio performance. The stock enjoyed price earnings multiple expansion as
management successfully integrated the Revco and Arbor stores into CVS format,
and continued to post strong same store sales growth on rising margins.
SPRINT appreciated 63% during the year benefitting from the spin-off of its
cellular subsidiary Sprint PCS. Sprint PCS is a rapidly growing nationwide
digital mobile carrier with a premier brand name and, because of its parent,
assured financing.
PHARMACIA & UPJOHN increased 54.6% during the year. This was driven by continued
cultural change inside the company forging it into a unified international
competitor. Continued new product launches also contributed to the excellent
performance.
We attribute HARTE-HANKS' above average performance to some participation in the
Internet frenzy, which gripped the stock market at year-end. Harte-Hanks' direct
marketing services group can offer clients extensive Internet support. Other
factors helping performance were the rebound in the financial markets, which
helps Harte-Hanks' mutual fund support services. Also helping were earnings that
exceeded expectations.
Among our poorer full year performers were MedPartners, National Service
Industries and Gillette.
MEDPARTNERS declined dramatically during the year, as its strategy of creating a
nationwide physician practice company proved unworkable. New management had to
be brought in. We believe the situation has
3
<PAGE>
finally stabilized. There has recently been substantial insider purchasing, cash
flow has turned positive and money losing operations are, in some instances,
being sold. The company's Caremark subsidiary, which is a leading pharmacy
benefit manager is being expanded and offers the potential for appreciation.
NATIONAL SERVICE INDUSTRIES declined because of an earnings shortfall. The
company has new management headed up by a former partner at McKinsey. New middle
managers and a new compensation system are also in place. The company's product
lines are relatively mundane however, and are subject to lower margins as growth
is pursued. We are inclined to give new management time to see what it can
deliver. In the meantime, we have downside protection because of the stock's
above average yield.
Although success with its new Mach 3 razor boosted GILLETTE in the December
quarter, a sharp fall in operating income during the summer left the stock with
a loss for the year. In 1997 management made the decision to clear the decks for
the new shaver in the U.S. and Europe by limiting advertising and promotion on
existing products. The company was prepared for the lower sales that ensued.
What it wasn't prepared for was the sharp 1998 fall in demand from international
distributors who faced prohibitive financing and foreign exchange costs brought
on by economic turmoil in the developing world. Happily, attention is now being
refocused on the strength of the new Mach 3. For the month of January 1999, for
instance, the company's blade and razor sales in the U.S. and Europe were up
about 30% over January 1998. Although profits on the new shaving system are
being held down by start-up costs, the robust sales numbers augur well for the
future.
Sincerely,
/S/ MICHAEL J. MULLARKEY
--------------------------------------
MICHAEL J. MULLARKEY
Managing Director
MARKSTON INVESTMENT MANAGEMENT
February 19, 1999
4
<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, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
<S> <C> <C>
18.33% 20.62% 16.90%
MAP - Equity Fund S&P 500
1988 $9,525 $10,000
1989 $12,210 $13,160
1990 $11,588 $12,752
1991 $14,796 $16,629
1992 $16,354 $17,892
1993 $17,773 $19,700
1994 $18,263 $19,958
1995 $24,199 $27,448
1996 $29,964 $33,750
1997 $38,351 $45,009
1998 $47,644 $57,935
</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.
5
<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, 1998, 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As discussed in Note B of the notes to financial statements, the Fund has
executed a letter of intent to reorganize with another mutual fund complex.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 11, 1999
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MAP-EQUITY FUND
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments:
Common stocks (cost $39,017,648).............................................. $ 56,757,941
Preferred stocks (cost $92,849)............................................... 238,189
Corporate bond (cost $24,813)................................................. 4,365
Short-term investments (cost $3,169,682)...................................... 3,169,682
------------
60,170,177
Cash............................................................................ 70,126
Receivable from distributor..................................................... 38,766
Receivable for Fund shares sold................................................. 235,985
Dividends receivable............................................................ 68,546
Other assets.................................................................... 20,171
------------
Total Assets............................................................ 60,603,771
------------
LIABILITIES
Payable for Fund shares redeemed................................................ 7,849
Accrued investment advisory fee................................................. 62,292
Accounts payable and accrued expenses........................................... 119,387
------------
Total Liabilities....................................................... 189,528
------------
Net Assets.............................................................. $ 60,414,243
------------
------------
NET ASSETS
Capital stock (2,457,556 shares of $1.00 par value capital stock outstanding,
21,000,000 shares authorized)................................................. $ 2,457,556
Paid-in capital................................................................. 39,562,715
Accumulated undistributed net investment income................................. 45,300
Accumulated undistributed net realized gain from security transactions.......... 483,487
Net unrealized appreciation of investments...................................... 17,865,185
------------
Net Assets.............................................................. $ 60,414,243
------------
------------
Net asset value and redemption price per share ($60,414,243 DIVIDED BY
2,457,556 shares of capital stock outstanding)................................ $24.58
------------
------------
Computation of maximum public offering price per share -- $24.58 DIVIDED BY
.9525 (on sales of $50,000 or more, the maximum sales charge and, accordingly,
the offering price, is reduced)............................................... $25.81
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
MAP-EQUITY FUND
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
Dividends..................................................................... $ 1,125,289
Interest...................................................................... 606,635
------------
1,731,924
Expenses:
Investment advisory fee....................................................... $ 334,330
Legal......................................................................... 118,663
Transfer Agent................................................................ 77,982
Custodian..................................................................... 75,422
Audit......................................................................... 29,567
State taxes................................................................... 21,040
Filing fees................................................................... 19,120
Insurance expense............................................................. 18,727
Directors' fees............................................................... 16,000
Miscellaneous................................................................. 15,829
Printing...................................................................... 12,395
------------
739,075
Less expenses reimbursed by distributor......................................... (64,087) 674,988
------------ ------------
Net Investment Income................................................... 1,056,936
------------
Realized and Unrealized Gain on Investments:
Net realized gain from security transactions.................................. 24,437,046
Decrease in unrealized appreciation of investments............................ (7,605,790)
------------
Net Gain on Investments..................................................... 16,831,256
------------
Net Increase in Net Assets Resulting from Operations........................ $ 17,888,192
------------
------------
</TABLE>
See notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
MAP-EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income..................................... $ 1,056,936 $ 1,004,104
Net realized gain from security transactions.............. 24,437,046 13,691,368
Increase (decrease) in unrealized appreciation of
investments............................................. (7,605,790) 6,028,801
------------- -------------
Net Increase in Net Assets Resulting from Operations.... 17,888,192 20,724,273
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income...................... (1,058,983) (1,043,783)
Distributions from net realized gain from security
transactions............................................ (12,763,987) (12,333,249)
------------- -------------
Total Distributions to Shareholders..................... (13,822,970) (13,377,032)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from capital share
transactions............................................ (37,823,169) 13,234,335
------------- -------------
Net Increase (Decrease) in Net Assets................... (33,757,947) 20,581,576
NET ASSETS
Beginning of year......................................... 94,172,190 73,590,614
------------- -------------
End of year (including undistributed net investment income
of $45,300 and $47,347, respectively)................... $ 60,414,243 $ 94,172,190
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MAP-EQUITY FUND
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
COMMON STOCKS (93.95%)
CONSUMER NON-DURABLES (9.32%)
32,862 Archer Daniels Midland Co............................................. $ 564,816
6,589 Bestfoods, Inc........................................................ 350,864
5,070 Clorox Co............................................................. 592,239
8,308 Coca-Cola Co.......................................................... 555,597
5,832 First Brands Corp..................................................... 229,999
12,863 Gillette Co........................................................... 621,444
18,744 National Service Industries, Inc...................................... 712,272
8,258 Newell Co............................................................. 340,643
17,935 Pennzoil-Quaker State Co.............................................. 265,662
3,597 Pepsico, Inc.......................................................... 147,252
11,349 Quaker Oats Co........................................................ 675,266
14,641 Ralston Purina Co..................................................... 474,002
6,079 Tupperware Corp....................................................... 99,924
-------------
5,629,980
-------------
ENERGY (2.40%)
9,625 Amoco Corp............................................................ 567,875
5,661 Apache Corp........................................................... 143,294
17,935 PennzEnergy Co........................................................ 292,565
2,534 Petroleum Helicopters, Inc., non-voting............................... 41,178
8,415 Royal Dutch Petroleum Co.............................................. 402,868
-------------
1,447,780
-------------
FINANCIAL SERVICES (15.75%)
33,251 Allmerica Financial Corp.............................................. 1,924,402
12,207 American Express Co................................................... 1,248,166
2,837 Argonaut Group, Inc................................................... 69,506
32,722 Bankers Trust New York Corp........................................... 2,795,686
14,946 Health Care Property Investors, Inc................................... 459,589
12,005 Northern Trust Co..................................................... 1,047,436
24,458 Popular, Inc.......................................................... 825,451
5,826 Reliance Group Holdings, Inc.......................................... 75,010
17,680 Safeco Corp........................................................... 759,135
2,786 T. Rowe Price Associates, Inc......................................... 94,376
21,339 United Dominion Realty Trust, Inc..................................... 220,058
-------------
9,518,815
-------------
HEALTH CARE (12.04%)
8,056 Biogen, Inc.*......................................................... 667,641
50,023 HBO & Co.............................................................. 1,435,035
10,740 Humana, Inc.*......................................................... 191,306
8,365 IMS Health, Inc....................................................... 631,035
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
HEALTH CARE (CONTINUED)
2,027 Johnson & Johnson..................................................... $ 170,015
152,342 Medpartners, Inc.*.................................................... 799,795
46,657 Pharmacia & Upjohn, Inc............................................... 2,641,953
13,384 Schering-Plough Corp.................................................. 739,466
-------------
7,276,246
-------------
INDUSTRIAL (8.71%)
3,648 Boeing Co............................................................. 119,016
2,381 Calmat Co............................................................. 73,513
28,318 Commscope, Inc.*...................................................... 476,096
5,977 Cummins Engine, Inc................................................... 212,183
405 Great Lakes Chemical Corp............................................. 16,200
3,850 IMC Global, Inc....................................................... 82,294
10,540 Lone Star Industries, Inc............................................. 388,004
12,563 Louisiana-Pacific Corp................................................ 230,060
10,790 Minnesota Mining & Manufacturing Co................................... 767,439
9,930 Morgan Products Ltd.*................................................. 34,755
10,436 Ogden Corp............................................................ 261,552
16,372 Pentair, Inc.......................................................... 651,810
4,509 Union Pacific Resource Group, Inc..................................... 40,863
3,445 Valspar Corp.......................................................... 128,542
13,526 Vulcan Materials Co................................................... 1,779,514
-------------
5,261,841
-------------
MEDIA/ENTERTAINMENT/LEISURE (15.45%)
90,259 ACNielsen Corp.*...................................................... 2,549,817
861 Armstrong World Industries............................................ 51,929
19,920 Dun & Bradstreet Corp................................................. 628,725
4,799 Eastman Kodak Co...................................................... 345,528
81,562 Harte-Hanks, Inc...................................................... 2,324,517
6,891 Information Resources, Inc.*.......................................... 69,771
2,348 Mattel, Inc........................................................... 53,564
5,928 MediaOne Group, Inc.*................................................. 278,616
15,400 Meredith Corp......................................................... 583,275
10,082 Nelson, Thomas Inc.................................................... 136,107
2,954 Nielsen Media Research................................................ 53,172
9,808 R.H. Donnelley Corp................................................... 142,829
30,702 Time Warner, Inc...................................................... 1,905,443
3,749 Times Mirror Co., Series A............................................ 209,944
-------------
9,333,237
-------------
MISCELLANEOUS (0.73%)
6,437 Catalina Marketing Corp.*............................................. 440,130
-------------
</TABLE>
9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MAP-EQUITY FUND
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
RETAIL (7.61%)
31,348 Burlington Coat Factory Warehouse Corp................................ $ 511,364
14,286 Burlington Industries, Inc............................................ 157,146
38,776 CVS Corp.............................................................. 2,132,680
24,524 Cash America International, Inc....................................... 372,458
57,500 Charming Shoppes, Inc.*............................................... 240,781
3,343 Genovese Drug Stores, Inc., Class A................................... 95,275
4,002 Hartmarx Corp.*....................................................... 22,511
1,064 Meyer, Fred Inc.*..................................................... 64,106
23,152 Oshkosh B'Gosh, Inc., Class A......................................... 465,934
34,398 Vicorp Restaurants, Inc.*............................................. 533,169
-------------
4,595,424
-------------
TECHNOLOGY (17.51%)
6,586 3-D Systems Corp.*.................................................... 49,395
20,670 AMP Inc............................................................... 1,076,132
36,475 Arrow Electronics Inc................................................. 973,427
32,932 Avid Technology, Inc.*................................................ 769,785
1,530 Avnet Inc............................................................. 92,565
23,203 Checkpoint Systems, Inc.*............................................. 287,137
912 Cirrus Logic, Inc.*................................................... 8,892
5,200 CompUSA, Inc.*........................................................ 67,925
8,613 EDS Corp.............................................................. 432,803
8,157 Glenayre Technologies, Inc.*.......................................... 35,687
38,806 Global Directmail Corp.*.............................................. 907,090
37,731 Motorola, Inc......................................................... 2,303,949
60,640 National Computer Systems, Inc........................................ 2,228,520
22,138 National Semiconductor Corp........................................... 298,863
2,736 Northern Telecom Ltd.................................................. 137,142
13,628 Seagate Technology, Inc.*............................................. 412,247
6,282 Shared Medical System Corp............................................ 313,315
2,026 Triquint Semiconductor, Inc.*......................................... 39,254
9,822 Vishay Intertechnology, Inc.*......................................... 142,419
-------------
10,576,547
-------------
<CAPTION>
NUMBER
OF
SHARES MARKET VALUE
- -------------- -------------
<C> <S> <C>
UTILITIES (4.43%)
7,650 Cinergy Corp.......................................................... $ 262,969
6,237 GTE Corp.............................................................. 405,405
31,622 Houston Industries, Inc............................................... 1,015,857
4,635 Northwest Natural Gas Co.............................................. 119,351
2,533 Piedmont Natural Gas, Inc............................................. 91,505
7,867 Sprint Corp........................................................... 661,811
3,933 Sprint PCS*........................................................... 90,951
2,229 UniSource Energy Corp.*............................................... 30,092
-------------
2,677,941
-------------
TOTAL COMMON STOCKS................................................... 56,757,941
-------------
PREFERRED STOCKS (0.39%)
MEDIA/ENTERTAINMENT/LEISURE (0.35%)
8,614 News Corp. Ltd., limited voting*...................................... 212,658
-------------
MISCELLANEOUS (0.04%)
3,242 Craig Corp., Class A*................................................. 25,531
-------------
TOTAL PREFERRED STOCKS................................................ 238,189
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C>
CORPORATE BOND (0.01%)
$ 97,000 Boston Chicken, 7.75% conv. sub. deb., due May 1, 2004*(a)............ 4,365
-------------
SHORT-TERM INVESTMENTS (5.25%)
3,175,000 U.S. Treasury Bills, 4.10% to 4.44%,
due January 7 to 21, 1999........................................... 3,169,682
-------------
TOTAL INVESTMENTS (99.60%)............................................ $ 60,170,177
-------------
-------------
</TABLE>
- ---------
* Non-income producing security.
(a) Issuer in bankruptcy.
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.
10
<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
Subchaper M of the Internal Revenue Code 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 tax regulations, which may differ from generally accepted
accounting principles. These "book/tax differences" are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their Federal tax basis treatment; temporary differences do not require
reclassification.
During the period ended December 31, 1998, the Fund made capital account
reclassifications amounting to $13,000,189 from accumulated net realized gain to
paid in capital due to a redemption effected by a distribution of portfolio
securities (see Note D).
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 -- REORGANIZATION
On January 7, 1999, the Fund entered into a letter of intent whereby the Fund
would be reorganized into a newly formed series of another fund complex. The
proposed reorganization is subject to Board of Directors and shareholder
approvals. It is currently anticipated that the proposed reorganization will be
completed on or before June 30, 1999. The terms of the letter of intent
contemplate a new investment adviser and distributor for the Fund (see Notes C
and D).
NOTE C -- 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
11
<PAGE>
NOTE C -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- CONTINUED
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, 1998, the basic advisory fee amounted
to $483,418. The actual fee amounted to $334,330 which reflected a downward
performance adjustment of $149,088.
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, 1998, the Fund was advised that
FPIC received $162,627 as distributor of the Fund's shares. FPIC paid this
amount to its sales force.
The compensation of each disinterested director is paid by the Fund at the rate
of $400 per meeting attended, plus an annual retainer of $1,200. Aggregate fees
paid during the year to the Fund's disinterested directors amounted to $16,000.
The officers of the Fund are either officers or employees of MBL Life. The
compensation of the officers and any employees of the Fund affiliated with
Adviser or FPIC is paid by the affiliated entities.
NOTE D -- RELATED PARTY TRANSACTIONS
On December 31, 1998, MBL Life sold substantially all of its general account
life insurance and annuity business to SunAmerica Inc. (the "Acquisition"). The
Acquisition along with the Order of the Superior Court of New Jersey approving
the transaction, effected a resolution to the proceedings associated with the
Plan of Rehabilitation of the Mutual Benefit Life Insurance Company (the
"Plan"). The Rehabilitation Period will end on June 30, 1999.
In connection with the resolution of the proceedings associated with the Plan,
on November 3, 1998, MBL Life redeemed its entire investment in the Fund. The
redemption was effected by a distribution of a pro rata portion of the Fund's
investment portfolio, equal in value to the value of MBL Life's shares of the
Fund. Under the terms of the Acquisition, MBL Life's interest in both Adviser
and FPIC were not included in the assets transferred to SunAmerica. MBL Life
intends to divest of its partnership interest in Adviser prior to the end of the
Rehabilitation Period.
In anticipation of the increase of the Fund's ratio of expenses to average net
assets resulting from MBL Life's redemptions, FPIC agreed to assume the
operating expenses of the Fund (excluding taxes, interest, brokerage
commissions, and extraordinary expenses) to the extent such daily expenses
exceeded 1.00% on an annualized basis of the Fund's daily net assets through
December 31, 1998. For the year ended December 31, 1998, such reimbursement
amounted to $64,087.
12
<PAGE>
NOTE E -- CAPITAL STOCK
A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Year Ended December 31, 1997
--------------------------------- ---------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 419,396 $ 10,253,237 133,282 $ 3,080,596
Shares issued in reinvestment of income
dividends and capital gain
distributions......................... 569,204 12,935,771 563,972 12,915,669
------------- ------------- ------------- -------------
988,600 23,189,008 697,254 15,996,265
Less shares repurchased................. (2,674,019) (61,012,177) (116,774) (2,761,930)
------------- ------------- ------------- -------------
Net increase (decrease) in number of
shares outstanding and net assets
resulting from capital share
transactions.......................... (1,685,419) $ (37,823,169) 580,480 $ 13,234,335
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
NOTE F -- PURCHASES AND SALES OF INVESTMENTS
Purchases and proceeds from sales of investments during the year ended December
31, 1998, other than short-term investments, aggregated $34,376,093 and
$77,653,130, respectively.
The identified cost of investments owned at December 31, 1998 for federal income
tax purposes was $42,313,242. At December 31, 1998, gross unrealized
appreciation of investments was $19,681,811 and gross unrealized depreciation
was $1,824,876 resulting in net unrealized appreciation of $17,856,935 for
federal income tax purposes.
------------------------------------------------------------------------------
13
<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,
-----------------------------------------------
1998 1997 1996 1995 1994
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.............................. $ 22.73 $ 20.66 $ 19.36 $ 16.67 $ 18.13
----------- ------- ------- ------- -------
Net investment income............... 0.33 0.28 0.36 0.43 0.37
Net realized and unrealized gain on
investments....................... 4.81 5.49 4.16 4.90 0.13
----------- ------- ------- ------- -------
Net increase in net assets from
operations........................ 5.14 5.77 4.52 5.33 0.50
----------- ------- ------- ------- -------
Dividends from net investment
income............................ (0.33) (0.29) (0.36) (0.43) (0.37)
Distributions from net realized gain
from security transactions........ (2.96) (3.41) (2.86) (2.07) (1.59)
Distribution in excess of net
investment income (see Note A).... -- -- -- (0.14) --
----------- ------- ------- ------- -------
Total distributions................. (3.29) (3.70) (3.22) (2.64) (1.96)
----------- ------- ------- ------- -------
Net Asset Value, End of Year........ $ 24.58 $ 22.73 $ 20.66 $ 19.36 $ 16.67
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Total Return(1)..................... 24.23% 27.99% 23.82% 32.50% 2.76%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)....................... $ 60,414 $94,172 $73,591 $60,467 $48,130
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratio of Expenses to Average Net
Assets(2)......................... 0.70% 0.82% 0.74% 0.81% 1.07%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratio of Net Investment Income to
Average Net Assets(2)............. 1.10% 1.18% 1.82% 2.30% 2.03%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Portfolio Turnover Rate............. 40.57% 57.57% 52.88% 39.40% 39.31%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
</TABLE>
- ----------
(1) Total return does not reflect the sales commission (maximum 4.75%) charged
on Fund shares.
(2) Without reimbursement by distributor, the ratio of expenses to average net
assets would have been 0.77%, and the ratio of net investment income to
average net assets would have been 1.03% for the year ended December 31,
1998 (see Note D of the notes to financial statements).
See notes to financial statements.
14
<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
December 31, 1998 24.58 .33 2.96
- ----------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the year ended December 31, 1998:
INVESTMENTS ADDED
AMP Inc.
Armstrong World Industries
Arrow Electronics Inc.
Avnet Inc.
Bankers Trust New York Corp.
Boeing Co.
Boston Chicken (bonds)
Burlington Industries, Inc.
Calmat Co.
Cirrus Logic, Inc.
Commscope, Inc.
CompUSA, Inc.
Great Lakes Chemical Corp.
HBO & Co.
IMS Health, Inc.
Information Resources, Inc.
Johnson & Johnson
Louisiana-Pacific Corp.
MediaOne Group, Inc.
Meyer, Fred Inc.
National Semiconductor Corp.
Nielsen Media Research
Northern Telecom Ltd.
PennzEnergy
Pennzoil-Quaker State Co.
Pepsico, Inc.
R.H. Donnelley Corp.
Ralston Purina Co.
Safeco Corp.
Seagate Technology, Inc.
Sprint PCS
St. Paul Companies, Inc.
T. Rowe Price Associates, Inc.
Triquint Semiconductor, Inc.
Union Pacific Resource Group, Inc.
INVESTMENTS ELIMINATED
Adobe Systems, Inc.
Access Health, Inc.
Bay Networks, Inc.
Calcomp Technology, Inc.
CII Financial, Inc. (bonds)
Cognizant Corp.
Cooper Companies, Inc.
Dravo Corp.
Duke Power Co.
Eastern Utilities Assoc.
Hasbro, Inc.
Imation Corp.
Integrated Systems, Inc.
Intel Corp.
Lubrizol Corp.
Mazel Stores, Inc.
McDonald's Corp.
National Education Corp. (bonds)
Olsten Corp.
Pete's Brewing Co.
Petroleum Helicopters, Inc., voting
St. Paul Companies, Inc.
Stanhome, Inc.
Storage Technology Corp.
USF&G Corp.
Xircom, Inc.
15
<PAGE>
MAP-EQUITY FUND
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
Horace J. DePodwin
Herbert M. Groce, Jr.
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
PricewaterhouseCoopers 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 (2-99)
15152
[LOGO]
MAP-
EQUITY FUND
ANNUAL REPORT
DECEMBER 31, 1998
--------------------
