<PAGE> 1
Annual
Report
December 31, 1997
[AMERICAN AIRLINES LOGO]
AMERICAN
AADVANTAGE FUNDS
S $ P 500 INDEX FUND
- AMR Class -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
MANAGED BY
AMR INVESTMENT SERVICES, INC.
<PAGE> 2
- ---------------------------------------------------------------------------
American AAdvantage S&P 500 Index Fund
LETTER TO SHAREHOLDERS
- ---------------------------------------------------------------------------
Dear Fellow Shareholder:
We are pleased to report to you on the performance of the American AAdvantage
S&P 500 Index Fund (the "Fund") and to provide you with a copy of the Annual
Report for the year ended December 31, 1997. The Fund returned 33.09% for the
twelve months ended December 31, 1997, tracking the 33.36% return of the S&P
500 Index and slightly outperforming the 32.60% return of the Lipper S&P 500
Average.*
MARKET ACTIVITY
Large capitalization equities had quite a year. Having broken the 7,000 barrier
in February 1997, it took only five months for the Dow Jones Industrial Average
to reach the 8,000 milestone in the middle of July. The S&P 500 Index also
reached record high levels. However, as anticipated, short-term volatility
plagued the bull market for equities virtually throughout.
For example, the S&P Index started the year with its strongest January
performance since 1989. The large capitalization sector then eased off by
March, primarily as a result of the Federal Reserve Board's hike of the Fed
Funds rate that month. As technology stocks picked up mid-year, the large cap
sector as a whole recovered in September and finished the third quarter better
than anticipated. Then, on October 27, the Dow Jones experienced its largest
single one-day point loss ever, and the S&P 500 dropped dramatically as well.
Though weakened currencies and economies in Southeast Asia and market
volatility in the Far East led to plummet here, there was little evidence of
any meaningful impact of the ongoing turmoil abroad impacting domestic
activity. Thus the very next day, the Dow Jones experienced its largest one-day
point gain ever, and the S&P 500 regained more than two-thirds of the previous
day's drop. The remainder of the fourth quarter of the year was marked by
continued strength in financial stocks and renewed strength in utilities. A
favorable economy-supported by slowed growth, low employment, low inflation,
higher corporate earnings, and a Federal Reserve Board on hold through the
remainder on 1997-served as the backdrop to this short-term volatility, yet
strong overall performance.
For the annual period, large capitalization stocks outperformed small cap
stocks, though small cap stocks outperformed for the six months from March
through September 1997, due to a resurgence in technology stocks. In contrast
to both 1996 and the first half of 1997, value stocks outperformed growth
stocks within the large cap sector for the 12-month period. Value also
outperformed growth within the small cap sector. Overall, leading groups for
the year included financial services, health care and consumer staples. The
weakest performing sectors were energy, technology and basic materials, the
first two of which still produced double digit-returns. There were 29 changes
to the S&P 500 Index this year, which is lower turnover than in 1996.
MANAGER OUTLOOK
Overall, real economic growth is anticipated to cool from its earlier rapid
pace, coming in at about 2% for all of 1998, and the environment is expected to
be positive for the equities market. Given the previous three solidly upward
years, however, the prospect for gains in the stock market for 1998 appear to be
limited. Volatility will likely continue to be high.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Ten Largest Stock Holdings
- -----------------------------------------------------------------
<S> <C>
General Electric Co. Royal Dutch Petroleum Co.
- -----------------------------------------------------------------
CocaCola Co. Intel Corp.
- -----------------------------------------------------------------
Microsoft Corp. Philip Morris Companies, Inc.
- -----------------------------------------------------------------
Exxon Corp. Procter & Gamble Co.
- -----------------------------------------------------------------
Merck & Company, Inc. IBM Corp.
- -----------------------------------------------------------------
</TABLE>
On the one hard, the current high valuations and ongoing concerns about fallout
from the Far East suggest that any equity gains will be comparatively lower.
So, too, questions about earnings, particularly for the large multinational
companies, persist and the labor market remains tight and will place upward
pressure on wages. On the other hand, productivity improvement has been
sufficient to offset any higher costs, thereby allowing profits to expand while
keeping a lid on inflation. Several underlying fundamentals impacting the
consumer-including rising incomes and high levels of confidence-are also
expected to keep the economy on a relatively strong upward course for the near
term. Finally, low interest rates and hefty flows of retirement funds into the
equity market should provide some support to stock prices. Any correction that
may occur is anticipated to be brief and mild, followed by renewed strength
in the equity market.
As always, we appreciate your ongoing support of the American AAdvantage S&P
500 Index Fund, and we look forward to continuing to serve your investment
needs for many years to come.
Sincerely,
William F. Quinn
President
* Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's share, when redeemed, may
be worth more or less than their original cost.
1
<PAGE> 3
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in the American AAdvantage
S&P 500 Index Fund and S&P 500 Index since December 31, 1996.
Total Return
Ended December 31, 1997
One Year
33.09%
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
[CHART]
American AAdvantage S&P 500 Index Fund - $13,309
S&P 500 Index - $13,336
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE S&P 500 INDEX IS
UNMANAGED, AND INVESTMENTS MAY NOT BE MADE IN AN INDEX.
2
<PAGE> 4
================================================================================
American AAdvantage S&P 500 Index Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investment in the Equity 500 Index Portfolio, at Value........................ $ 7,594,242
Receivable for Shares of Beneficial Interest Subscribed....................... 270,659
Receivable for Expense Reimbursement (Note 2)................................. 12,060
Deferred Organization Expenses................................................ 16,984
Total Assets.................................................................... ------------
7,893,945
------------
LIABILITIES
Accrued Organization Costs..................................................... 19,541
Administrative Service Fees Payable (Note 2)................................... 1,679
Other Liabilities.............................................................. 10,363
------------
Total Liabilities................................................................ 31,583
------------
NET ASSETS....................................................................... $ 7,862,362
============
SHARES OUTSTANDING (no par value per share, unlimited number of shares of
beneficial interest authorized)................................................ 597,236
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OUTSTANDING)..................................... $ 13.16
============
COMPOSITION OF NET ASSETS
Paid-In Capital................................................................ $ 7,158,915
Undistributed Net Investment Income............................................ 440
Accumulated Net Realized Gain from investments and Futures Transactions........ 141,505
Net Unrealized Appreciation on Investments and Futures Contracts............... 561,502
------------
NET ASSETS....................................................................... $ 7,862,362
============
</TABLE>
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the year ended December 31, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income Allocated from the Equity 500 Index Portfolio, net $ 57,988
---------------
EXPENSES 1,679
Administrative Service Fees.................................................... 788
Registration Fees.............................................................. 5,003
Professional fees.............................................................. 90
Trustees Fees.................................................................. 8,535
Other Expenses................................................................. ---------------
Total Expenses................................................................. 16,095
Less: Expenses Absorbed by AMR Investment Services, Inc. ..................... (12,060)
Net Expenses................................................................. ---------------
4,035
Net Investment Income ---------------
53,953
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS............... ---------------
Net Realized Gain From Investment Transactions................................. 140,168
Net Realized Gain from Futures Transactions.................................... 1,337
Net Change in Unrealized Appreciation on Investments and Futures Contracts..... 561,502
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS.............. 703,007
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................ $ 756,960
===============
</TABLE>
See Notes to Financial Statements
3
<PAGE> 5
================================================================================
American AAdvantage S&P 500 Index Fund
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
INCREASE(DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ............................................................ $ 53,953
Net Realized Gain from Investments and Futures Transactions....................... 141,505
Net Change in Unrealized Appreciation on Investments and Futures Contracts........ 561,502
---------------
Net Increase in Net Assets from Operations............................................. 756,960
---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ............................................................ (53,513)
---------------
Total Distributions.................................................................... (53,513)
---------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Sales of Shares..................................................... 7,145,316
Dividend Reinvestments............................................................ 53,513
Cost of Shares Redeemed........................................................... (40,914)
---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest................ 7,157,915
---------------
TOTAL INCREASE IN NET ASSETS........................................................... 7,861,362
NET ASSETS
Beginning of Year...................................................................... 1,000
End of Year (including undistributed net investment income of $440).................... $ 7,862,362
===============
</TABLE>
See Notes to Financial Statements
4
<PAGE> 6
================================================================================
American AAdvantage S&P 500 Index Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the
American AAdvantage S&P 500 Index Fund.
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR................................................... $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................................................... 0.14
Net Realized and Unrealized Gain on Investments and Futures Transactions........ 3.16
--------------
Total from Investment Operations......................................................... 3.30
--------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income........................................................... (0.14)
--------------
Total Distributions............................................................. (0.14)
--------------
NET ASSET VALUE, END OF YEAR......................................................... $ 13.16
==============
TOTAL INVESTMENT RETURN.............................................................. 33.09%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted).......................................... $ 7,862
Ratios to Average Net Assets:
Net Investment Income...................................................... 1.61%
Expenses, including expenses of the Equity 500 Index Portfolio............. 0.20%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust and the Manager............... 0.43%
</TABLE>
- ------------------
See Notes to Financial Statements
5
<PAGE> 7
=============================================================================
American AAdvantage S&P 500 Index Fund
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization
American AAdvantage Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. The
American AAdvantage S&P 500 Index Fund (the "Fund") is one of the nine funds
offered under the Trust and commenced active operations on December 31, 1996.
The Fund invests all of its investable assets in the BT Equity 500 Index
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The value of such investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio.
At December 31, 1997, the Fund's investment was 0.27% of the Portfolio.
These financial statements relate to the Fund. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary of
AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
B. Valuation of Investments
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. Investment Income
The Fund records its share of net investment income and realized and unrealized
gain (loss) in the Portfolio each day. All net investment income and realized
and unrealized gain (loss) of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Dividends.
Dividends from the net investment income of the Fund normally will be declared
and paid quarterly. Distributions of net realized capital gains, if any, will be
paid annually.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than generally accepted accounting
principles.
E. Federal Income and Excise Taxes.
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to a regulated investment company and to distribute
substantially all net investment income as well as any net realized capital
gains on the sale of investments. Therefore, no federal income or excise tax
provision is required. The Fund may periodically make reclassifications among
certain of its capital accounts as a result of time and characterization of
certain income and capital gains distributions determined annually in
accordance with federal tax regulations which may differ from generally
accepted accounting principles. At December 31, 1997, as a result of
differences in the allocation of capital gain/losses between book and tax
basis, the Fund had a capital loss carryover for federal income tax purposes of
approximately $23,603 which, if not offset by subsequent capital gains, will
expire in 2005. It is unlikely that the Board of Directors of the Fund will
authorize a distribution of capital gains realized in the future until the
capital loss carryover has been utilized or expires.
F. Defered Organization Expenses
Expenses incurred by the Fund in connection with its organization are being
amortized on a straight-line basis over a five-year period.
G. Expenses
Expenses directly attributable to the Fund are charged to the Fund's
operations. Expenses incurred by the Trust with respect to any two or more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund bears equally those expenses that are allocated to the
Fund as a whole.
H. Valuation of Shares
The price per share is calculated on each day on which shares are offered for
sale and orders accepted or upon receipt of a redemption request. Net asset
value per share is computed by dividing the value of the Fund's total assets
(which includes the value of the Fund's investment in the Portfolio), less
liabilities, by the number of Fund shares outstanding.
I. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts in the financial statements. Actual results
could differ from those estimates.
6
<PAGE> 8
================================================================================
American AAdvantage S&P 500 Index Fund
NOTES TO FINANCIAL STATEMENTS - (continued)
- --------------------------------------------------------------------------------
NOTE 2-FEES AND TRANSACTIONS WITH AFFILIATES
A. Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee
of .05% of the Fund's average daily net assets.
B. Other
Certain officers or trustees of the Trust are also officers of the Manager or
American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an
amount equal to the Trustee's income tax on the value of this free airline
travel.
On December 31, 1997, the Employee Retirement Plan of The Sabre Group, a
subsidiary of AMR Corporation, owned 100% of the Fund.
C. Reimbursement of Expenses
The Manager has voluntarily undertaken to waive and reimburse expenses of the
Fund to the extent necessary to limit all expenses to 0.12 of 1% of the average
daily net assets of the Fund, excluding expenses of the Portfolio and 0.20 of
1% of the average daily net assets of the Fund, including expenses of the
Portfolio. For the year ended December 31, 1997, expenses of the Fund have been
reduced by $12,060.
NOTE 3-SHARES OF BENEFICIAL INTEREST
At December 31, 1997, there were unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest as follows:
<TABLE>
<CAPTION>
For the year ended
December 31, 1997
-----------------------
Shares Amount
--------- ----------
<S> <C> <C>
Sold..................... 596,284 $7,145,316
Reinvested............... 4,178 53,513
Redeemed................. (3,326) (40,914)
--------- ----------
Net increase............. 597,136 $7,157,915
========= ==========
</TABLE>
7
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of American AAdvantage Funds
and Shareholders of American AAdvantage S&P 500 Index Fund:
We have audited the accompanying statement of assets and liabilities of the
American AAdvantage S&P 500 Index Fund (one of the Funds comprising American
AAdvantage Funds) as of December 31, 1997, and the related statement of
operations, the statement of 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.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain 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 securities
owned as of December 31, 1997, by correspondence with the custodian. 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 that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
American AAdvantage S&P 500 Index Fund as of December 31, 1997 the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
February 13, 1998
8
<PAGE> 10
THIS PAGE WAS LEFT INTENTIONALLY BLANK
<PAGE> 11
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
COMMON STOCKS - 98.64%
ADVERTISING - 0.09%
<S> <C> <C>
57,600 Omnicom Group, Inc. ........................ $ 2,440,800
-----------
AEROSPACE - 1.65%
367,446 Boeing Co. ................................. 17,981,889
24,122 General Dynamics Corp. ..................... 2,085,045
72,745 Lockheed Martin Corp. ...................... 7,165,382
24,579 Northrop Grumman Corp. ..................... 2,826,585
17,497 Raytheon Co. - Class A ..................... 862,844
95,514 Raytheon Co. - Class B ..................... 4,823,457
80,624 Rockwell International Corp. ............... 4,212,604
85,612 United Technologies Corp. .................. 6,233,624
-----------
46,191,430
-----------
AIRLINES - 0.41%
34,202 AMR Corp. (a) .............................. 4,394,957
27,849 Delta Air Lines, Inc. ...................... 3,314,031
73,200 Southwest Airlines Co. ..................... 1,802,550
31,715 U.S. Airways Group Inc. (a) ................ 1,982,188
-----------
11,493,726
-----------
APPAREL, TEXTILES - 0.41%
16,203 Charming Shoppes, Inc. (a) ................. 75,951
91,414 Corning Inc. ............................... 3,393,745
24,800 Fruit of the Loom, Inc. - Class A (a) ...... 635,500
24,203 Liz Claiborne, Inc. ........................ 1,011,988
71,248 Nike, Inc. - Class B ....................... 2,796,484
21,129 Reebok International Ltd. (a) .............. 608,779
7,011 Russell Corp. .............................. 186,230
7,304 Springs Industries, Inc. - Class A ......... 379,808
49,830 V.F. Corp. ................................. 2,289,066
-----------
11,377,551
-----------
AUTO RELATED - 2.14%
56,400 AutoZone, Inc. (a) ......................... 1,635,600
254,002 Chrysler Corp. ............................. 8,937,695
16,534 Cummins Engine Co., Inc. ................... 976,539
31,374 Dana Corp. ................................. 1,490,265
32,182 Eaton Corp. ................................ 2,872,243
29,244 Echlin, Inc. ............................... 1,058,267
417,364 Ford Motor Co. ............................. 20,320,410
259,984 General Motors Corp. ....................... 15,761,530
67,526 Genuine Parts Co. .......................... 2,291,664
1 Meritor Automotive, Inc. ................... 21
33,080 PACCAR Inc. ................................ 1,736,700
46,414 Parker Hannifin Corp. ...................... 2,129,242
24,196 Timken Co. ................................. 831,738
-----------
60,041,914
-----------
BANKS - 8.11%
36,034 Ahmanson (H.F.) & Co. ...................... 2,412,026
222,834 Banc One Corp. ............................. 12,102,672
138,400 Bank of New York Company, Inc. ............. 8,001,250
254,872 BankAmerica Corp. .......................... 18,605,656
58,067 BankBoston Corp. ........................... 5,454,669
76,294 Barnett Banks, Inc. ........................ 5,483,631
55,600 BB&T Corp. ................................. 3,561,875
154,952 Chase Manhattan Corp. ...................... 16,967,244
169,266 Citicorp ................................... 21,401,570
41,200 Comerica, Inc. ............................. 3,718,300
78,364 CoreStates Financial Corp. ................. 6,274,018
54,250 Fifth Third Bancorp ........................ 4,434,937
112,536 First Chicago NBD Corp. .................... 9,396,756
239,600 First Union Corp. .......................... 12,279,500
16,517 Golden West Financial Corp. ................ 1,615,569
73,700 Huntington Bancshares, Inc. ................ 2,653,200
87,600 KeyCorp .................................... 6,203,175
93,524 Mellon Bank Corp. .......................... 5,669,893
69,360 Morgan (J.P.) & Company, Inc. .............. 7,829,010
85,800 National City Corp. ........................ 5,641,350
265,804 NationsBank Corp. .......................... 16,164,206
277,616 Norwest Corp. .............................. 10,722,918
17,400 Republic New York Corp. .................... 1,986,862
73,160 SunTrust Banks, Inc. ....................... 5,221,795
90,199 U.S. Bancorp ............................... 10,096,651
72,200 Wachovia Corp. ............................. 5,857,225
97,685 Washington Mutual, Inc. .................... 6,233,524
33,370 Wells Fargo & Co. .......................... 11,327,029
-----------
227,316,511
-----------
BEVERAGES - 3.36%
182,380 Anheuser-Busch Companies, Inc. ............. 8,024,720
9,419 Brown-Forman, Inc. - Class B ............... 520,400
909,122 Coca-Cola Co. .............................. 60,570,253
15,768 Coors (Adolph) Co. - Class B ............... 524,286
557,594 PepsiCo, Inc. .............................. 20,317,332
132,737 Seagram Ltd. ............................... 4,289,064
-----------
94,246,055
-----------
BUILDING AND CONSTRUCTION - 0.85%
17,283 Armstrong World Industries, Inc. ........... 1,291,904
11,290 Centex Corp. ............................... 710,564
9,466 Crane Co. .................................. 410,588
8,506 Fleetwood Enterprises, Inc. ................ 360,973
269,426 Home Depot, Inc. ........................... 15,862,456
62,811 Masco Corp. ................................ 3,195,510
12,450 Owens Corning .............................. 424,856
32,130 Stanley Works .............................. 1,516,134
-----------
23,772,985
-----------
BUILDING, FOREST PRODUCTS - 0.35%
24,003 Boise Cascade Corp. ........................ 726,091
36,528 Champion International Corp. ............... 1,655,175
33,201 Georgia-Pacific Corp. ...................... 2,016,961
22,354 Johnson Controls, Inc. ..................... 1,067,403
2,045 Kaufman & Broad Home Corp. ................. 45,885
34,158 Louisiana-Pacific Corp. .................... 649,002
4,401 Potlatch Corp. ............................. 189,243
69,994 Weyerhaeuser Co. ........................... 3,434,080
-----------
9,783,840
-----------
Chemicals and Toxic Waste - 2.64%
46,304 Air Products & Chemical, Inc. .............. 3,808,504
96,740 Amgen, Inc. (a) ............................ 5,236,052
</TABLE>
See Notes to Financial Statements on Page 18
10
<PAGE> 12
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
83,676 Dow Chemical Co. ........................... $ 8,493,114
415,692 Du Pont (E.I.) de Nemours & Co. ............ 24,967,501
30,181 Eastman Chemical Co. ....................... 1,797,656
16,450 FMC Corp. (a) .............................. 1,107,291
27,249 Grace (W.R.) & Co. ......................... 2,191,841
22,096 Great Lakes Chemical Corp. ................. 991,558
38,814 Hercules, Inc. ............................. 1,943,126
27,102 Mallinckrodt, Inc. ......................... 1,029,876
216,920 Monsanto Co. ............................... 9,110,640
46,406 Morton International, Inc. ................. 1,595,206
16,325 Nalco Chemical Co. ......................... 645,858
60,142 PPG Industries, Inc. ....................... 3,435,612
33,276 Raychem Corp. .............................. 1,432,948
23,159 Rohm & Haas Co. ............................ 2,217,474
39,700 Sigma-Aldrich Corp. ........................ 1,578,075
54,252 Union Carbide Corp. ........................ 2,329,445
-----------
73,911,777
-----------
COMPUTER SERVICES - 1.48%
127,200 3Com Corp. (a) ............................. 4,444,050
29,100 Adobe Systems, Inc. ........................ 1,200,375
107,512 Automatic Data Processing, Inc. ............ 6,598,549
58,100 Cabletron Systems, Inc. (a) ................ 871,500
293,934 Cendant Corp. (a) .......................... 10,103,981
120,000 Dell Computer Corp. (a) .................... 10,080,000
182,300 EMC Corp. (a) .............................. 5,001,856
50,000 Parametric Technology Co.(a) ............... 2,368,750
74,315 Silicon Graphics, Inc. (a) ................. 924,293
-----------
41,593,354
-----------
COMPUTER SOFTWARE - 3.53%
375,450 Cisco Systems, In c. (a) ................... 20,931,338
201,975 Computer Associates
International, Inc. ...................... 10,679,427
443,500 Microsoft Corp. (a) ........................ 57,322,375
363,356 Oracle Corp. (a) ........................... 8,107,381
94,700 Seagate Technology, Inc. (a) ............... 1,822,975
-----------
98,863,496
-----------
CONTAINERS - 0.28%
35,330 Avery Dennison Corp. ....................... 1,581,017
2,754 Ball Corp. ................................. 97,251
50,850 Crown Cork & Seal Company, Inc. ............ 2,548,856
52,500 Owens-Illinois, Inc. (a) ................... 1,991,719
39,849 Stone Container Corp. ...................... 415,924
21,522 Temple-Inland, Inc. ........................ 1,125,870
-----------
7,760,637
-----------
COSMETICS AND TOILETRIES - 0.94%
2,798 Alberto-Culver Co. - Class B ............... 89,711
54,028 Avon Products, Inc. ........................ 3,315,969
205,908 Gillette Co. ............................... 20,680,885
42,387 International Flavors &
Fragrances, Inc. ......................... 2,182,930
-----------
26,269,495
-----------
DIVERSIFIED - 1.02%
54,169 Allegheny Teledyne Inc. .................... $ 1,401,623
28,102 Ceridian Corp. (a) ......................... 1,287,423
39,400 Loews Corp. ................................ 4,181,325
155,478 Minnesota Mining
Manufacturing Co ........................... 12,758,913
3,527 NACCO Industries, Inc. - Class A ........... 378,050
47,964 Pall Corp. ................................. 992,255
57,915 Praxair, Inc. .............................. 2,606,175
31,220 SUPERVALU, Inc. ............................ 1,307,338
59,706 Textron, Inc. .............................. 3,731,625
-----------
28,644,727
-----------
DRUGS - 6.87%
238,766 American Home Products Corp. ............... 18,265,599
365,478 Bristol-Myers Squibb Co. ................... 34,583,356
407,740 Lilly (Eli) & Co. .......................... 28,388,897
440,397 Merck & Company, Inc. ...................... 46,792,181
475,408 Pfizer, Inc. ............................... 35,447,609
269,116 Schering-Plough Corp. ...................... 16,718,832
100,086 Warner-Lambert Co. ......................... 12,410,664
-----------
192,607,138
-----------
ELECTRICAL EQUIPMENT - 4.85%
261,410 CBS Corp. .................................. 7,695,257
1,202,944 General Electric Co. ....................... 88,266,016
23,072 General Signal Corp. ....................... 973,350
14,965 Grainger (W.W.), Inc. ...................... 1,454,411
385,940 Hewlett-Packard Co. ........................ 24,121,250
43,023 ITT Corp. (a) .............................. 3,565,531
37,423 ITT Industries, Inc. ....................... 1,174,147
192,664 Tyco International Ltd. .................... 8,681,921
-----------
135,931,883
-----------
ELECTRONICS - 3.94%
55,041 Advanced Micro Devices, Inc.(a) ............ 987,298
5,527 Aeroquip-Vickers, Inc. ..................... 271,168
207,712 AlliedSignal, Inc. ......................... 8,087,786
80,873 AMP, Inc. .................................. 3,396,666
134,900 Applied Materials, Inc. (a) ................ 4,063,863
167,500 Emerson Electric Co. ....................... 9,453,281
26,542 Harris Corp. ............................... 1,217,614
600,228 Intel Corp. ................................ 42,166,017
31,800 KLA Instruments Corp. (a) .................. 1,228,275
52,600 LSI Logic Corp. (a) ........................ 1,038,850
82,800 Micron Technology, Inc. (a) ................ 2,152,800
219,442 Motorola, Inc. ............................. 12,521,909
58,026 National Semiconductor Corp. (a) ........... 1,505,049
95,701 Northern Telecom Ltd. ...................... 8,517,389
17,825 Perkin-Elmer Corp. ......................... 1,266,689
29,938 Scientific-Atlanta, Inc. ................... 501,462
16,707 Tektronix, Inc. ............................ 663,059
143,456 Texas Instruments, Inc. .................... 6,455,520
58,900 Thermo Electron Corp. (a) .................. 2,621,050
17,300 Thomas & Betts Corp. ....................... 817,425
21,259 Western Atlas, Inc. (a) .................... 1,573,166
-----------
110,506,336
-----------
</TABLE>
See Notes to Financial Statements on Page 18
11
<PAGE> 13
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
ENVIRONMENTAL CONTROL - 0.33%
<S> <C> <C>
81,035 Browning-Ferris Industries, Inc. ........... $ 2,998,295
98,900 Laidlaw, Inc. - Class B .................... 1,347,513
20,126 Safety-Kleen Corp. ......................... 552,207
159,458 Waste Management, Inc. ..................... 4,385,095
-----------
9,283,110
-----------
FINANCIAL SERVICES - 5.09%
170,866 American Express Co. ....................... 15,249,791
17,852 Beneficial Corp. ........................... 1,483,947
96,400 Charles Schwab Corp. ....................... 4,042,775
10,200 Cincinnati Financial Corp. ................. 1,435,650
36,700 Countrywide Credit Industries .............. 1,573,513
47,500 Equifax .................................... 1,683,281
389,964 Fannie Mae ................................. 22,252,321
157,300 First Data Corp. ........................... 4,601,025
92,444 Fleet Financial Group, Inc. ................ 6,927,522
254,724 Freddie Mac ................................ 10,682,488
53,500 Green Tree Financial Corp. ................. 1,401,031
46,923 Hartford Financial Services Group .......... 4,390,233
39,358 Household International, Inc. .............. 5,020,605
184,225 MBNA Corp. ................................. 5,031,645
122,276 Merrill Lynch & Co., Inc. .................. 8,918,506
215,793 Morgan Stanley, Dean Witter,
Discover & Co. ........................... 12,758,761
123,633 PNC Banc Corp. ............................. 7,054,808
59,700 State Street Corp. ......................... 3,473,794
59,000 Synovus Financial Corp. .................... 1,932,250
420,521 Travelers Group, Inc. ...................... 22,655,569
-----------
142,569,515
-----------
FOOD SERVICES/LODGING - 0.57%
44,719 Darden Restaurants, Inc. ................... 558,988
256,114 McDonald's Corp. ........................... 12,229,443
60,699 Tricon Global Restaurants, Inc. (a) ........ 1,764,065
54,462 Wendy's International, Inc. ................ 1,310,492
-----------
15,862,988
-----------
FOODS - 3.09%
195,317 Archer-Daniels-Midland Co. ................. 4,235,937
167,054 Campbell Soup Co. .......................... 9,710,014
171,632 ConAgra, Inc. .............................. 5,631,675
52,830 CPC International, Inc. .................... 5,692,432
64,319 General Mills, Inc. ........................ 4,606,848
134,375 Heinz (H.J.) Co. ........................... 6,827,930
41,294 Hershey Foods Corp. ........................ 2,557,647
148,014 Kellogg Co. ................................ 7,345,195
25,840 Pioneer Hi-Bred International, Inc. ........ 2,771,340
50,884 Quaker Oats Co. ............................ 2,684,131
38,605 Ralston-Purina Group ....................... 3,587,852
175,687 Sara Lee Corp. ............................. 9,893,374
62,810 Sysco Corp. ................................ 2,861,781
233,368 Unilever N.V ............................... 14,570,915
35,127 Whitman Corp. .............................. 915,497
34,092 Wrigley (WM) Jr. Co. ....................... 2,712,445
-----------
86,605,013
-----------
FOREST PRODUCTS AND PAPER - 0.04%
34,600 Willamette Industries, Inc. ................ $ 1,113,688
-----------
HEALTH CARE - 0.90%
281,122 Abbott Laboratories ........................ 18,431,061
227,222 Columbia/HCA Healthcare Corp. .............. 6,731,452
-----------
25,162,513
-----------
HOSPITAL SUPPLIES AND HEALTH CARE - 2.92%
22,401 Allergan, Inc. ............................. 751,834
35,234 Alza Corp. (a) ............................. 1,120,882
23,477 Bard (C.R.), Inc. .......................... 735,124
21,723 Bausch & Lomb, Inc. ........................ 860,774
108,863 Baxter International Inc. .................. 5,490,777
40,532 Becton, Dickinson & Co. .................... 2,026,600
45,450 Biomet, Inc. ............................... 1,164,656
71,500 Boston Scientific Corp. (a) ................ 3,280,062
40,200 Cardinal Health, Inc. ...................... 3,020,025
54,400 Guidant Corp. .............................. 3,386,400
73,400 HBO & Co. .................................. 3,523,200
141,000 HEALTHSOUTH Corp. (a) ...................... 3,912,750
51,700 Humana, Inc. (a) ........................... 1,072,775
493,896 Johnson & Johnson .......................... 32,535,399
17,560 Manor Care, Inc. ........................... 614,600
172,304 Medtronic, Inc. ............................ 9,013,653
9,674 Shared Medical Systems Corp. ............... 638,484
39,419 St. Jude Medical, Inc. (a) ................. 1,202,280
111,710 Tenet Healthcare Corp. (a) ................. 3,700,394
71,000 United Healthcare Corp. .................... 3,527,812
22,848 U.S. Surgical Corp. ........................ 669,732
-----------
82,248,213
-----------
HOTEL/MOTEL - 0.21%
92,041 Hilton Hotels Corp. ........................ 2,738,220
46,690 Marriott International, Inc. ............... 3,233,282
-----------
5,971,502
-----------
HOUSEHOLD FURNISHINGS - 0.18%
29,012 Maytag Corp. ............................... 1,082,510
52,858 Newell Co. ................................. 2,246,465
29,939 Whirlpool Corp. ............................ 1,646,645
-----------
4,975,620
-----------
HOUSEHOLD PRODUCTS - 1.88%
42,704 Clorox Co. ................................. 3,376,285
108,702 Colgate-Palmolive Co. ...................... 7,989,597
494,040 Procter & Gamble Co. ....................... 39,430,568
49,802 Rubbermaid, Inc. ........................... 1,245,050
20,596 Tupperware Corp. ........................... 574,113
-----------
52,615,613
-----------
INSURANCE - 3.82%
54,959 Aetna, Inc. ................................ 3,878,044
157,650 Allstate Corp. ............................. 14,326,444
87,137 American General Corp. ..................... 4,710,844
257,800 American International Group, Inc. ......... 28,035,750
</TABLE>
See Notes to Financial Statements on Page 18
12
<PAGE> 14
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
56,950 Aon Corp. .................................. $ 3,338,694
61,772 Chubb Corp. ................................ 4,671,507
28,233 CIGNA Corp. ................................ 4,886,074
70,400 Conseco, Inc. .............................. 3,198,800
29,578 General Re Corp. ........................... 6,270,536
26,077 Jefferson-Pilot Corp. ...................... 2,030,746
37,410 Lincoln National Corp. ..................... 2,922,656
66,624 Marsh & McLennan Companies, Inc. ........... 4,967,652
36,000 MBIA, Inc. ................................. 2,405,250
44,900 MGIC Investment Corp. ...................... 2,985,850
26,400 Progressive Corp. .......................... 3,164,700
36,998 Providian Financial ........................ 1,671,847
59,202 SAFECO Corp. ............................... 2,886,098
34,830 St. Paul Companies, Inc. ................... 2,858,237
60,900 SunAmerica, Inc. ........................... 2,603,475
46,268 Torchmark Corp. ............................ 1,946,148
51,500 UNUM Corp. ................................. 2,800,312
29,017 USF&G Corp. ................................ 640,188
-----------
107,199,852
-----------
LEISURE RELATED - 1.26%
31,314 American Greetings Corp. - Class A ......... 1,225,160
28,442 Brunswick Corp. ............................ 862,148
248,157 Disney (Walt) Co. .......................... 24,583,053
18,039 Harcourt General, Inc. ..................... 987,635
35,215 Harrah's Entertainment, Inc. (a) ........... 664,683
49,487 Hasbro, Inc. ............................... 1,558,841
5,639 Jostens, Inc. .............................. 130,049
107,165 Mattel, Inc. ............................... 3,991,896
61,300 Mirage Resorts, Inc. (a) ................... 1,394,575
-----------
35,398,040
-----------
MACHINERY - 1.30%
37,671 Black & Decker Corp. ....................... 1,471,523
11,982 Briggs & Stratton Corp. .................... 581,876
29,200 Case Corp. ................................. 1,764,775
136,864 Caterpillar Inc. ........................... 6,646,458
7,447 Cincinnati Milacron, Inc. .................. 193,157
39,148 Cooper Industries, Inc. .................... 1,918,252
97,623 Deere & Co. ................................ 5,692,641
74,808 Dover Corp. ................................ 2,702,439
64,482 Dresser Industries, Inc. ................... 2,704,214
28,730 Echo Bay Mines Ltd. (a) .................... 70,029
18,922 Harnischfeger Industries, Inc. ............. 668,183
90,792 Illinois Tool Works, Inc. .................. 5,458,869
65,696 Ingersoll-Rand Co. ......................... 2,660,688
18,592 Millipore Corp. ............................ 630,966
10,658 Navistar International Corp. (a) ........... 264,452
14,094 Snap-On, Inc. .............................. 614,851
46,672 TRW Inc. ................................... 2,491,118
-----------
36,534,491
-----------
METALS - 0.85%
80,536 Alcan Aluminium Ltd. ....................... 2,224,807
63,400 Aluminum Company of America ................ 4,461,775
62,935 Armco, Inc. (a) ............................ 310,742
15,849 Asarco, Inc. ............................... 355,612
137,100 Barrick Gold Corp. ......................... 2,553,487
44,400 Battle Mountain Gold Co. ................... 260,850
40,449 Bethlehem Steel Corp. (a) .................. 348,873
29,194 Cyprus Amax Minerals Co. ................... 448,858
40,008 Engelhard Corp. ............................ 695,139
30,600 Freeport-McMoRan Copper
Gold, Inc. - Class B ..................... 481,950
63,643 Homestake Mining Co. ....................... 564,832
57,566 Inco Ltd. .................................. 978,622
16,603 Inland Steel Industries, Inc. .............. 284,326
66,610 Newmont Mining Corp. ....................... 1,956,669
36,494 Nucor Corp. ................................ 1,763,116
25,408 Phelps Dodge Corp. ......................... 1,581,647
89,604 Placer Dome, Inc. .......................... 1,136,851
29,349 Reynolds Metals Co. ........................ 1,760,940
38,977 USX-U.S. Steel Group, Inc. ................. 1,218,031
20,379 Worthington Industries, Inc. ............... 336,254
-----------
23,723,381
-----------
MISCELLANEOUS - 0.13%
1 ACNielsen Corp. (a) ........................ 24
60,579 Cognizant Corp. ............................ 2,699,552
58,000 NextLevel Systems, Inc. (a) ................ 1,036,750
-----------
3,736,326
-----------
OFFICE EQUIPMENT AND COMPUTERS - 3.03%
46,142 Apple Computer, Inc. (a) ................... 605,614
17,114 Autodesk, Inc. ............................. 633,218
278,231 Compaq Computer Corp. ...................... 15,702,662
29,886 Computer Sciences Corp. (a) ................ 2,495,481
18,745 Data General Corp. (a) ..................... 326,866
55,932 Digital Equipment Corp. (a) ................ 2,069,484
46,819 Honeywell, Inc. ............................ 3,207,102
50,562 Ikon Office Solutions, Inc. ................ 1,422,056
357,382 International Business Machines
Corp. .................................... 37,368,755
22,079 Moore Corp. Ltd. ........................... 333,945
118,992 Novell, Inc. (a) ........................... 892,440
52,098 Pitney Bowes, Inc. ......................... 4,685,564
137,656 Sun Microsystems, Inc. (a) ................. 5,489,033
72,599 Unisys Corp. (a) ........................... 1,007,311
118,735 Xerox Corp. ................................ 8,764,127
-----------
85,003,658
-----------
OIL RELATED - 8.45%
36,193 Amerada Hess Corp. ......................... 1,986,091
179,002 Amoco Corp. ................................ 15,237,545
19,500 Anadarko Petroleum ......................... 1,183,406
35,200 Apache Corp. ............................... 1,234,200
21,387 Ashland Inc. ............................... 1,148,215
118,750 Atlantic Richfield Co. ..................... 9,514,844
65,144 Baker Hughes, Inc. ......................... 2,841,907
60,239 Burlington Resources, Inc. ................. 2,699,460
241,966 Chevron Corp. .............................. 18,631,382
906,414 Exxon Corp. ................................ 55,461,207
</TABLE>
See Notes to Financial Statements on Page 18
13
<PAGE> 15
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
32,381 Fluor Corp. ................................ $ 1,210,240
16,538 Foster Wheeler Corp. ....................... 447,560
98,480 Halliburton Co. ............................ 5,114,805
9,808 Helmerich & Payne, Inc. .................... 665,718
20,832 Kerr-McGee Corp. ........................... 1,318,926
24,087 McDermott International, Inc. .............. 882,186
289,142 Mobil Corp. ................................ 20,872,438
125,714 Occidental Petroleum Corp. ................. 3,684,992
43,979 Oryx Energy Co. (a) ........................ 1,121,464
18,754 Pennzoil Co. ............................... 1,253,002
90,706 Phillips Petroleum Co. ..................... 4,410,579
29,900 Rowan Companies, Inc. (a) .................. 911,950
788,204 Royal Dutch Petroleum Co. .................. 42,710,804
183,562 Schlumberger Ltd. .......................... 14,776,741
29,845 Sun Co., Inc. .............................. 1,255,355
69,434 Tenneco, Inc. .............................. 2,742,643
201,122 Texaco, Inc. ............................... 10,936,009
93,748 Union Pacific Resources Group Inc. ......... 2,273,389
90,637 Unocal Corp. ............................... 3,517,849
99,364 USX-Marathon Group ......................... 3,353,535
118,236 Williams Companies, Inc. ................... 3,354,946
-----------
236,753,388
-----------
PAPER - 0.80%
11,531 Bemis Company, Inc. ........................ 508,085
73,035 Fort James Corp. ........................... 2,793,589
111,144 International Paper Co. .................... 4,793,085
212,130 Kimberly-Clark Corp. ....................... 10,460,660
42,102 Mead Corp. ................................. 1,178,856
29,303 Union Camp Corp. ........................... 1,573,205
34,960 Westvaco Corp. ............................. 1,099,055
-----------
22,406,535
-----------
PHARMACEUTICALS - 0.24%
186,532 Pharmacia & Upjohn, Inc. ................... 6,831,735
-----------
PHOTOGRAPHY AND OPTICAL - 0.29%
121,326 Eastman Kodak Co. .......................... 7,378,138
16,482 Polaroid Corp. ............................. 802,467
-----------
8,180,605
-----------
PRINTING AND PUBLISHING - 1.31%
30,091 Deluxe Corp. ............................... 1,038,140
58,152 Donnelley (R.R.) & Sons Co. ................ 2,166,162
30,172 Dow Jones & Co, Inc. ....................... 1,619,859
62,579 Dun & Bradstreet Corp. ..................... 1,936,038
104,292 Gannett Co., Inc. .......................... 6,446,549
3,304 Harland (John H.) Co. ...................... 69,384
37,626 Knight-Ridder, Inc. ........................ 1,956,552
37,630 McGraw-Hill Companies, Inc. ................ 2,784,620
8,272 Meredith Corp. ............................. 295,207
30,284 New York Times Co. - Class A ............... 2,002,529
192,815 Time Warner, Inc. .......................... 11,954,530
27,329 Times Mirror Co. - Class A ................. 1,680,734
46,596 Tribune Co. ................................ 2,900,601
-----------
36,850,905
-----------
PROFESSIONAL SERVICES - 0.42%
40,535 Block (H&R), Inc. .......................... $ 1,816,475
18,600 Ecolab, Inc. ............................... 1,031,138
8,125 EG&G, Inc. ................................. 169,102
39,160 Interpublic Group of Companies, Inc. ....... 1,950,657
20,326 National Service Industries ................ 1,007,407
84,792 Service Corporation International .......... 3,132,005
23,843 Transamerica Corp. ......................... 2,539,279
-----------
11,646,063
-----------
RAILROADS - 0.70%
57,362 Burlington Northern Santa Fe Corp. ......... 5,331,081
79,332 CSX Corp. .................................. 4,283,927
130,353 Norfolk Southern Corp. ..................... 4,016,502
95,647 Union Pacific Corp. ........................ 5,971,960
-----------
19,603,470
-----------
REAL ESTATE - 0.02%
10,166 Pulte Corp. ................................ 425,066
-----------
RETAIL - 4.12%
92,202 Albertson's, Inc. .......................... 4,368,070
106,736 American Stores Co. ........................ 2,194,759
39,346 Circuit City Stores, Inc. .................. 1,399,242
78,599 Costco Companies, Inc. (a) ................. 3,507,480
64,419 CVS Corp. .................................. 4,126,842
80,108 Dayton Hudson Corp. ........................ 5,407,290
42,797 Dillard's Department Stores, Inc. -
Class A .................................. 1,508,594
77,400 Federated Department
Stores, Inc. (a) ......................... 3,333,038
147,771 Gap, Inc. .................................. 5,236,635
17,093 Giant Food, Inc. - Class A ................. 575,820
8,025 Great Atlantic & Pacific Tea Co., Inc. ..... 238,242
178,903 Kmart Corp. (a) ............................ 2,068,566
93,720 Kroger Co. (a) ............................. 3,461,783
92,447 Limited, Inc. .............................. 2,357,399
10,826 Longs Drug Stores, Inc. .................... 347,785
66,694 Lowe's Companies, Inc. ..................... 3,180,470
83,298 May Department Stores Co. .................. 4,388,763
8,030 Mercantile Stores Company, Inc. ............ 488,826
31,729 Nordstrom, Inc. ............................ 1,915,638
98,150 Penney (J.C.) Co., Inc. .................... 5,919,672
15,512 Pep Boys-Manny, Moe & Jack ................. 370,349
51,001 Rite Aid Corp. ............................. 2,993,121
141,709 Sears, Roebuck & Co. ....................... 6,412,332
64,974 Sherwin-Williams Co. ....................... 1,803,029
37,966 Tandy Corp. ................................ 1,464,064
59,308 TJX Companies, Inc. ........................ 2,038,713
108,618 Toys 'R' Us, Inc. (a) ...................... 3,414,678
182,468 Walgreen Co. ............................... 5,724,934
825,548 Wal-Mart Stores, Inc. ...................... 32,557,549
47,180 Winn-Dixie Stores, Inc. .................... 2,061,176
36,122 Woolworth Corp. (a) ........................ 735,986
-----------
115,600,845
-----------
</TABLE>
See Notes to Financial Statements on Page 18
14
<PAGE> 16
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
TELECOMMUNICATIONS - 3.92%
<S> <C> <C>
1 360 Communications Co. (a) ................. $ 20
185,535 Airtouch Communications, Inc. (a) .......... 7,711,298
59,000 Alltel Corp. ............................... 2,422,687
202,052 Ameritech Corp. ............................ 16,265,186
37,976 Andrew Corp. (a) ........................... 911,424
77,300 Bay Networks, Inc. (a) ..................... 1,975,981
37,600 Clear Channel Communications,
Inc. (a) ................................. 2,986,850
113,362 Comcast Corp. - Class A .................... 3,577,988
43,990 DSC Communications Corp. (a) ............... 1,055,760
56,400 Frontier Corp. ............................. 1,357,125
351,936 GTE Corp. .................................. 18,388,656
17,406 King World Productions, Inc. ............... 1,005,197
236,441 Lucent Technologies, Inc. .................. 18,885,725
251,720 MCI Communications Corp. ................... 10,776,763
165,360 Tele-Communications, Inc. - Class A (a) 4,619,745
69,300 Tellabs, Inc. (a) .......................... 3,664,238
99,849 Viacom, Inc. - Class B (a) ................. 4,137,493
332,100 WorldCom, Inc. (a) ......................... 10,046,025
-----------
109,788,161
-----------
TIRE AND RUBBER - 0.19%
18,851 Cooper Tire & Rubber Co. ................... 459,493
24,952 Goodrich (B.F.) Co. ........................ 1,033,949
59,836 Goodyear Tire & Rubber Co. ................. 3,807,065
-----------
5,300,507
-----------
TOBACCO - 1.61%
64,574 Fortune Brands, Inc. ....................... 2,393,274
890,598 Philip Morris Companies, Inc. .............. 40,355,222
67,707 UST, Inc. .................................. 2,500,927
-----------
45,249,423
-----------
TRUCKING, SHIPPING - 0.17%
16,882 Caliber System, Inc. ....................... 821,942
42,750 Federal Express Corp. (a) .................. 2,610,422
37,617 Ryder System, Inc. ......................... 1,231,957
-----------
4,664,321
-----------
UTILITIES - 7.88%
80,310 American Electric Power Co. ................ 4,146,004
597,006 AT&T Corp. ................................. 36,566,618
40,625 Baltimore Gas & Electric Co. ............... 1,383,789
285,418 Bell Atlantic Corp. ........................ 25,973,038
364,432 BellSouth Corp. ............................ 20,522,077
42,028 Carolina Power & Light Co. ................. 1,783,563
85,230 Central & South West Corp. ................. 2,306,537
46,622 CINergy Corp. .............................. 1,786,205
37,966 Coastal Corp. .............................. 2,351,519
24,735 Columbia Gas System, Inc. .................. 1,943,243
94,036 Consolidated Edison Company
of New York, Inc. ........................ 3,855,476
39,405 Consolidated Natural Gas Co. ............... 2,384,002
63,206 Dominion Resources, Inc. ................... 2,690,205
57,576 DTE Energy Co. ............................. 1,997,168
135,295 Duke Energy Corp. .......................... 7,491,961
3,742 Eastern Enterprises ........................ 168,390
135,970 Edison International ....................... 3,696,684
117,866 Enron Corp. ................................ 4,898,806
105,207 Entergy Corp. .............................. 3,149,635
78,884 FirstEnergy Corp. (a) ...................... 2,287,636
66,294 FPL Group, Inc. ............................ 3,923,776
47,800 GPU, Inc. .................................. 2,013,575
114,092 Houston Industries, Inc. ................... 3,044,830
38,342 Niagara Mohawk Power Corp. (a) ............. 402,591
10,069 NICOR, Inc. ................................ 424,786
18,844 Northern States Power Co. .................. 1,097,663
11,791 ONEOK, Inc. ................................ 476,062
21,768 Pacific Enterprises ........................ 819,021
91,389 PacifiCorp ................................. 2,496,062
91,284 PECO Energy Co. ............................ 2,213,637
5,455 People's Energy Corp. ...................... 214,791
170,505 PG&E Corp. ................................. 5,189,746
73,300 PP&L Resources, Inc. ....................... 1,754,619
95,494 Public Service Enterprise Group, Inc. ...... 3,025,966
338,614 SBC Communications, Inc. ................... 24,803,475
34,810 Sonat, Inc. ................................ 1,592,558
259,458 Southern Co. ............................... 6,713,476
126,282 Sprint Corp. ............................... 7,403,282
90,127 Texas Utilities Co. ........................ 3,745,903
79,525 Unicom Corp. ............................... 2,445,394
26,720 Union Electric Co. ......................... 1,155,640
182,328 U.S. West, Inc. - Communications
Group .................................... 8,227,551
219,028 U.S. West, Inc. - Media Group (a) .......... 6,324,433
-------------
220,891,393
-------------
TOTAL COMMON STOCK (Cost $1,757,541,598)..................... 2,764,949,595
</TABLE>
SHORT TERM INSTRUMENTS - 1.23%
MUTUAL FUNDS - 1.08%
30,227,816 BT Institutional Cash Management
Fund........................................ 30,227,816
<TABLE>
<CAPTION>
Principal
Amount
- ------
<S> <C> <C>
U.S. TREASURY BILL - 0.15%
$ 4,170,000 5.30%, 3/05/98 (b).......................... 4,133,229
TOTAL SHORT TERM INSTRUMENTS (Cost $34,360,106)............... 34,361,045
TOTAL INVESTMENTS (Cost $1,791,901,704).................99.87% 2,799,310,640
Other Assets Less Liabilities............................0.13% 3,775,831
------- --------------
NET ASSETS.............................................100.00% $2,803,086,471
======= ==============
</TABLE>
- ---------------------
(a) Non-income producing security.
(b) Held as collateral for futures contracts.
See Notes to Financial Statements on Page 18
15
<PAGE> 17
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at Value (Cost of $1,791,901,704) ........ $2,799,310,640
Dividends and Interest Receivable* .................... 3,960,232
Variation Margin Receivable ........................... 22,425
Prepaid Expenses and Other ............................ 4,991
---------------
Total Assets ............................................... 2,803,298,288
---------------
LIABILITIES
Due to Bankers Trust .................................. 193,761
Accrued Expenses and Other ............................ 18,056
---------------
Total Liabilities .......................................... 211,817
---------------
NET ASSETS ................................................. $2,803,086,471
===============
COMPOSITION OF NET ASSETS
Paid-in capital ....................................... 1,795,065,447
Net Unrealized Appreciation on Investments ............ 1,007,408,936
Net Unrealized Appreciation on Futures Contracts ...... 612,088
---------------
NET ASSETS ................................................. $2,803,086,471
===============
</TABLE>
- -----------------
* Includes $151,469 from the Portfolio's investment in the BT Institutional
Cash Management Fund.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For The Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign withholding tax of $239,357) ............... $ 42,168,929
Interest** ........................................................... 2,481,564
-------------
TOTAL INVESTMENT INCOME ................................................... 44,650,493
-------------
EXPENSES
Advisory Fees......................................................... 2,430,147
Administration and Services Fees ..................................... 1,215,073
Professional Fees .................................................... 25,600
Trustees Fees ........................................................ 2,100
Miscellaneous ........................................................ 10,687
-------------
Total Expenses ....................................................... 3,683,607
Less: Expenses Absorbed by Bankers Trust ............................. (1,739,490)
-------------
Net Expenses .................................................... 1,944,117
-------------
NET INVESTMENT INCOME ..................................................... 42,706,376
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions ....................... 91,887,326
Net Realized Gain from Futures Transactions .......................... 3,399,122
Net Change in Unrealized Appreciation on Investments ................. 528,046,548
Net Change in Unrealized Appreciation on Futures Contracts ........... 729,288
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS ..... 624,062,284
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................ $ 666,768,660
=============
</TABLE>
- -----------------
** Includes $1,311,133 from the Portfolio's investment in the BT Institutional
Cash Management Fund.
See Notes to Financial Statements on Page 18
16
<PAGE> 18
- --------------------------------------------------------------------------------
Equity 500 Index Portfolio
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C> <C>
Net Investment Income .................................................... $ 42,706,376 $ 33,117,570
Net Realized Gain from Investments and Futures Transactions .............. 95,286,448 21,413,687
Net Change in Unrealized Appreciation on Investments and Futures Contracts 528,775,836 267,538,386
--------------- ---------------
Net Increase in Net Assets from Operations .................................... 666,768,660 322,069,643
--------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested ........................................... 1,462,422,481 854,711,041
Value of Capital Withdrawn ............................................... (1,251,328,236) (332,293,144)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions .......................... 211,094,245 522,417,897
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .................................................. 877,862,905 844,487,540
NET ASSETS
Beginning of Year ............................................................. 1,925,223,566 1,080,736,026
--------------- ---------------
End of Year ................................................................... $ 2,803,086,471 $ 1,925,223,566
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the Equity 500 Index Portfolio.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
SUPPLEMENTAL DATA AND RATIOS:
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period (000s omitted) ............. $2,803,086 $1,925,224 $1,080,736 $559,772 $151,805
Ratios to Average Net Assets:
Net Investment Income ........................... 1.76% 2.20% 2.52% 2.84% 2.67%
Expenses ........................................ 0.08% 0.10% 0.10% 0.10% 0.10%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust .... 0.07% 0.05% 0.05% 0.06% 0.10%
Portfolio Turnover Rate .............................. 19% 15% 6% 21% 31%
Average Commission Per Share* ........................ $ 0.0230 $ 0.0230 -- -- --
</TABLE>
- ------------------
* For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
See Notes to Financial Statements on Page 18
17
<PAGE> 19
- -------------------------------------------------------------------------------
Equity 500 Index Portfolio
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Equity 500 Index Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on December 11, 1991
as an unincorporated trust under the laws of New York, and commenced operations
on December 31, 1992. The Declaration of Trust permits the Board of Trustees
(the "Trustees") to issue beneficial interests in the Portfolio.
B. SECURITY VALUATION
The Portfolio's investments are valued each business day by an independent
pricing service approved by the Trustees. Securities traded on national
exchanges or traded in the NASDAQ National Market System are valued at the last
sales prices reported at the close of business each day. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the mean of the bid and
asked prices. Short-term obligations with remaining maturities of 60 days or
less are valued at amortized cost which, with accrued interest, approximates
value. Securities for which quotations are not available are stated at fair
value as determined by the Trustees.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discount on investments. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2-FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the year ended December 31, 1997, this fee aggregated
$1,215,073.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.10 of 1% of the
Portfolio's average daily net assets. For the year ended December 31, 1997, this
fee aggregated $2,430,147.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 0.08 of 1% of the
average daily net assets of the Portfolio. For the year ended December 31, 1997,
expenses of the Portfolio have been reduced by $1,739,490.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. ("Edgewood").
Certain officers of the Portfolio are also directors, officers and employees of
Edgewood Services, Inc., the distributor of the BT Institutional Funds. None of
the officers so affiliated received compensation for services as officers of the
Portfolio.
For the year ended December 31, 1997, the Equity 500 Index Portfolio paid
brokerage commissions of $341,058.
NOTE 3--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 1997, were
$777,096,136 and $439,507,213, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1997 was $1,807,569,264. The
aggregate gross unrealized appreciation was $1,013,752,877, and the aggregate
gross unrealized depreciation was $22,011,501 for all investments as of December
31, 1997.
NOTE 4--FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1997
is as follows:
<TABLE>
<CAPTION>
Market Unrealized
Type of Future Expiration Contracts Position Value Appreciation
- --------------------- ---------- --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
S&P 500 Index Futures March 1998 259 Long $63,396,725 $612,088
</TABLE>
At December 31, 1997, the Portfolio segregated $4,133,229 to cover margin
requirements on open futures contracts.
18
<PAGE> 20
- -------------------------------------------------------------------------------
Equity 500 Index Portfolio
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of the Equity 500 Index
Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Equity 500 Index Portfolio as of
December 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in 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. These financial statements and financial highlights are
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
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 securities owned as of
December 31, 1997, by correspondence with the custodian. 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Equity 500 Index Portfolio as of 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 the
periods referred to above, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
February 13, 1998
19
