<PAGE> 1
ANNUAL
REPORT
DECEMBER 31, 1998
[AMR LOGO]
[AMERICAN AADVANTAGE FUNDS REGISTERED TRADEMARK]
S&P 500 INDEX FUND
-Institutional Class-
-PlanAhead Class-
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 present you with this annual report for the American
AAdvantage S&P 500 Index Fund (the "Fund"), providing a review of the markets,
the Portfolio, and our outlook as well as a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
Despite volatility throughout the year in Asia, Latin American, Russia and here
at home, the U.S. equity market indices continued to push on. The Fund's
performance for the year ended December 31, 1998 was 28.87% for the
Institutional Class and 18.58% for the PlanAhead Class for the period March 2,
through December 31, 1998. The return of the Institutional Class slightly
outperformed the returns of 28.58% for the S&P 500 Index and 28.05% for the
Lipper S&P 500 Index Average.
Equity indices climbed through the first half of the year even as volatility
increased. The S&P 500 Index crossed the 1,000 mark for the first time in
February 1998. The Index continued to reach higher through most of April, when,
towards the end of the month, fears of a tightening by the Federal Reserve Board
sparked a huge drop in the market. Stronger than anticipated economic numbers
supported a quick rebound and a similar roller coaster ride was replayed from
May through June.
All major U.S. equity indices posted negative returns for the third quarter, as
stocks tumbled on both domestic and international news. Lower corporate profits
expectations of slower growth in the second half, and the General Motors strike
contributed to a July sell off. In August, Russia defaulted on its domestic
debt; weak commodity prices dampened the economic outlook for Latin America; and
ongoing economic instability in Asia impacted markets worldwide. In fact, the
August S&P 500 Index return was one of the ten worst since the Index's
inception. September began with tremendous gains. The market had recovered more
than half of August's losses towards the end of September, when it tumbled
again, having anticipated a 0.50% cut in interest rates by the Federal Reserve
Board, which turned out to be a 0.25% cut instead.
Fourth quarter returns, the strongest in some twenty years for most major U.S.
large cap equity indices, marked an explosive finish to a volatile year. The
technology sector, led by internet-related stocks, posted staggering returns for
the quarter. Such growth is evidenced by the addition of America Online Inc. and
Compuware Corp. to the S&P 500 Index, replacing Venator Group Inc. and
SunAmerica Inc., the latter of which was acquired by index component American
International Group Inc. Two more interest rate cuts of 0.25% each by the
Federal Reserve Board in the fourth quarter also buoyed the equity markets.
Overall, large capitalization stocks significantly outperformed small and mid
cap stocks for the annual period, and within the large cap sector, growth stocks
outperformed value stocks. Top performing sectors for the year included
technology, communication services, and health care. The weakest performing
sectors included energy, transportation, and basic materials. There were 48
changes to the S&P 500 Index during the year, over 75% of which were due to
mergers and acquisitions. These additions and deletions represent a 7.81%
turnover rate for the year, which was higher than in 1997.
<TABLE>
<CAPTION>
- ----------------------------------------------------
TEN LARGEST STOCK HOLDINGS
- ----------------------------------------------------
<S> <C>
General Electric Co. Pfizer, Inc.
Microsoft Corp. Wal-Mart Stores, Inc.
Coca-Cola Co. Intel Corp.
Exxon Corp. Procter & Gamble Co.
Merck & Company, Inc. Royal Dutch Petroleum Co.
- ----------------------------------------------------
</TABLE>
OUTLOOK
The Fund's advisor sees a slowly growing economy in the months ahead;
this bodes well for the U.S. equity markets. More specifically, the Fund's
advisor anticipates:
o GDP growth of around 2.5% in 1999
o Low inflation
o Consumer fundamentals remaining extremely favorable, and
o Low interest rates, with Federal Reserve Board policy likely on hold in
the face of low inflation, modest economic growth, healthy financial
markets, and the recent softening of the dollar.
Certain equity sectors may be impacted, however, by a problematic profit story,
given that rising labor costs are squeezing margins. The industrial sector, in
particular, may be additionally affected by adverse developments abroad.
Of course, it is important to reiterate that as an index fund, designed to
replicate the broad diversification and returns of the S&P 500 Index, the Fund's
advisor neither evaluates short-term fluctuations in the Fund's performance nor
manages according to a given outlook for the equity markets or the economy in
general. Still, the Fund's advisor continues to monitor economic conditions and
how they affect the financial markets.
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,
/s/ WILLIAM F. QUINN
William F. Quinn
President
American AAdvantage Funds
<PAGE> 3
DIVERSIFICATION OF PORTFOLIO INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Retail Trade 6.00%
Utilities 11.00%
Health Care 11.00%
Chemicals 2.00%
Consumer Non-Durables 23.00%
Other 3.00%
Energy 5.00%
Business Equip & Service 9.00%
Capital Goods 6.00%
Finance & Building 17.00%
</TABLE>
By sectors as of December 31, 1998
(percentages are based on net assets)
<PAGE> 4
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AMERICAN AADVANTAGE
S&P 500 INDEX FUND INSTITUTIONAL CLASS AND S&P 500 INDEX SINCE DECEMBER 31,
1996.
[CHART]
INSTITUTIONAL CLASS RETURNS
<TABLE>
<CAPTION>
-------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------
<S> <C> <C>
Periods Ended December 31, 1998 1 year Since
Inception
-------------------------------------------------------------------
American AAdvantage S&P 500 Index Fund
Institutional Class
(inception 12/31/96) 28.87% 30.96%
-------------------------------------------------------------------
S&P 500 Index 28.58% 30.97%
-------------------------------------------------------------------
</TABLE>
Past performance is not indicative of future performance.
The S&P 500 is unmanaged, and investments may not be made in an index.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE> 5
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AMERICAN AADVANTAGE
S&P INDEX FUND PLANAHEAD CLASS AND S&P 500 INDEX SINCE MARCH 2, 1998.
[GRAPH]
PLANAHEAD CLASS RETURNS
<TABLE>
<CAPTION>
-------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------
<S> <C> <C>
Periods Ended December 31, 1998 10 Months Since
Inception
-------------------------------------------------------------------
American AAdvantage S&P 500 Index Fund
PlanAhead Class
(inception 03/02/98) 18.58% 18.58%
-------------------------------------------------------------------
S&P 500 Index 18.78% 18.78%
-------------------------------------------------------------------
</TABLE>
Past performance is not indicative of future performance.
The S&P 500 is unmanaged, and investments may not be made in an index.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE> 6
================================================================================
American AAdvantage S&P 500 Index Fund
STATEMENT OF ASSETS AND LIABILITIES December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in the BT Equity 500 Index Portfolio, at Value.................... $ 102,152,658
Receivable for Shares of Beneficial Interest Subscribed...................... 759,200
Receivable for Expense Reimbursement (Note 2)................................ 17,015
Deferred Organization Costs.................................................. 12,738
-------------
Total Assets..................................................................... 102,941,611
-------------
LIABILITIES
Payable For Fund Shares Redeemed............................................. 19,590
Accrued Organization Costs................................................... 12,738
Administrative Service Fees Payable (Note 2)................................. 21,384
Other Liabilities............................................................ 54,588
-------------
Total Liabilities................................................................ 108,300
-------------
NET ASSETS....................................................................... $ 102,833,311
=============
COMPOSITION OF NET ASSETS
Paid-in Capital.............................................................. $ 85,789,177
Accumulated Net Realized Loss from Investments and Futures Transactions...... (839,756)
Net Unrealized Appreciation on Investments and Futures Contracts............. 17,883,890
-------------
NET ASSETS....................................................................... $ 102,833,311
=============
SHARES OUTSTANDING (NO PAR VALUE)
Institutional Class.......................................................... 6,010,568
=============
PlanAhead Class.............................................................. 116,633
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class.......................................................... $ 16.78
=============
PlanAhead Class.............................................................. $ 16.83
=============
</TABLE>
================================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income Allocated from the BT Equity 500 Index Portfolio, net................. 626,535
EXPENSES
Administrative Service Fees
Institutional Class..................................................... 20,382
PlanAhead Class........................................................ 1,003
Transfer Agency Fees
Institutional Class..................................................... 2,396
PlanAhead Class........................................................ 197
Registration Fees............................................................ 15,247
Professional Fees............................................................ 9,235
Trustees Fees................................................................ 16
Amortization of Organization Costs........................................... 3,721
Other Expenses............................................................... 13,859
-------------
Total Expenses............................................................... 66,056
Less: Expenses Absorbed by AMR Investment Services, Inc...................... (16,324)
-------------
Net Expenses............................................................ 49,732
-------------
NET INVESTMENT INCOME............................................................ 576,803
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions............................... 317,967
Net Realized Loss from Futures Transactions.................................. (4,196)
Net Change in Unrealized Appreciation on Investments and Futures Contracts... 17,322,388
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS............ 17,636,159
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS....................................... $ 18,212,962
=============
</TABLE>
See Notes to Financial Statements
4
<PAGE> 7
================================================================================
American AAdvantage S&P 500 Index Fund
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR END YEAR END
DECEMBER 31,1998 DECEMBER 31, 1997
----------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income................................................................ $ 576,803 $ 53,953
Net Realized Gain from Investments and Futures Transactions ......................... 313,771 141,505
Net Change in Unrealized Appreciation on Investments and Futures Contracts .......... 17,322,388 561,502
--------------- ---------------
Net Increase in Net Assets from Operations .............................................. 18,212,962 756,960
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Institutional Class ............................................................ (577,626) (53,513)
PlanAhead Class ................................................................ (3,574) --
Net Realized Gain from Investments and Futures Transactions ......................... -- --
--------------- ---------------
Total Distributions ..................................................................... (581,200) (53,513)
--------------- ---------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Sales of Shares ....................................................... 98,403,500 7,145,316
Dividend Reinvestments .............................................................. 580,736 53,513
Cost of Shares Redeemed ............................................................. (21,645,049) (40,914)
--------------- ---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest ................. 77,339,187 7,157,915
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ............................................................ 94,970,949 7,861,362
NET ASSETS
Beginning of Year ....................................................................... 7,862,362 1,000
--------------- ---------------
End of Year ............................................................................. $ 102,833,311 $ 7,862,362
=============== ===============
</TABLE>
See Notes to Financial Statements
5
<PAGE> 8
================================================================================
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>
INSTITUTIONAL CLASS PLANAHEAD CLASS
-------------------------------------- ------------------
MARCH 2, 1998
FOR THE FOR THE (COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- ----------------- ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 13.16 $ 10.00 $ 14.27
--------------- --------------- ---------------
Income from Investment Operations
Net Investment Income ............................................... 0.16 0.14 0.08
Net Realized and Unrealized Gain on Investments
and Futures Transactions ........................................... 3.62 3.16 2.56
--------------- --------------- ---------------
Total from Investment Operations ........................................ 3.78 3.30 2.64
--------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ............................................... (0.16) (0.14) (0.08)
--------------- --------------- ---------------
Total Distributions ................................................. (0.16) (0.14) (0.08)
--------------- --------------- ---------------
NET ASSET VALUE, END OF PERIOD .......................................... $ 16.78 $ 13.16 $ 16.83
=============== =============== ===============
Total Investment Return ................................................. 28.87% 33.09% 18.58%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) ............................ $ 100,870 $ 7,862 $ 1,963
Ratios to Average Net Assets:
Net Investment Income ........................................ 1.41% 1.61% 1.04%
Expenses, including expenses of the BT Equity
500 Index Portfolio ......................................... 0.20% 0.20% 0.55%
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust and AMR
Investment Services, Inc. ............................... 0.06% 0.43% 0.24%
</TABLE>
- ---------------
See Notes to Financial Statements
6
<PAGE> 9
================================================================================
American AAdvantage S&P 500 Index Fund
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 "AMR Class" (the "Fund") is one of the nine funds
offered under the Trust and commenced active operations on December 31, 1996.
The Fund commenced sales of a second class of shares of the Fund, designated as
"PlanAhead Class" shares, on March 2, 1998. At the same time, the existing
shares of the Fund were redesignated as "Institutional Class" shares.
The Fund invests all of its investable assets in the BT Investment 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, 1998, the Fund's investment was 1.97% 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
gains and losses from the security transactions of 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 net investment income of the Fund normally will be declared and
paid quarterly. Distributions of net realized capital gains earned by the Fund,
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 regulated investment companies, 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 has a capital loss carryforward of $838,163
which expires in year 2006.
F. Deferred 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 of 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. Estimates
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
A. Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement that
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 average daily net assets of the Institutional Class and an
annualized fee of .30% of the
7
<PAGE> 10
================================================================================
American AAdvantage S&P 500 Index Fund
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
PlanAhead Class. AMR Investments has voluntarily undertaken to waive and
reimburse expenses of the Fund to the extent necessary to limit all expenses to
.20% of the average daily net assets of the Institutional Class and .55% of the
average daily net assets of the PlanAhead Class, including expenses of the
Portfolio.
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.
For the year ended December 31, 1998, the cost of air transportation was not
material to any of the Funds. At December 31, 1998, the Employee Retirement Plan
of The Sabre Group, subsidiary of AMR Corporation, owned 27% of the
Institutional Class of the Fund.
C. Reimbursement of Expenses
For the year ended December 31, 1998, the Manager reimbursed expenses totaling
$16,324 to the Fund.
NOTE 3-SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------ ------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold ............... 6,838,350 $ 96,488,025 596,284 $ 7,145,316
Reinvested ......... 37,373 577,616 4,178 53,513
Redeemed ........... (1,462,391) (21,576,248) (3,326) (40,914)
------------ ------------ ------------ ------------
Net increase ....... 5,413,332 $ 75,489,393 597,138 $ 7,157,915
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PLAN AHEAD CLASS
FOR THE PERIOD ENDED
DECEMBER 31, 1998
---------------------
Shares Amount
------------ ------------
<S> <C> <C>
Sold ............... 120,767 $ 1,915,475
Reinvested ......... 203 3,120
Redeemed ........... (4,337) (68,798)
============ ============
Net increase ....... 116,633 $ 1,849,797
============ ============
</TABLE>
8
<PAGE> 11
================================================================================
American AAdvantage S&P 500 Index Fund
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of American AAdvantage Funds and
Shareholders of S&P 500 Index Fund
In our opinion, the accompanying statement of assets and liabilities 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
S&P 500 Index Fund (one of the funds comprising the American AAdvantage Funds,
hereafter referred to as the "Fund") at December 31, 1998, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, 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
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
9
<PAGE> 12
================================================================================
Equity 500 Index Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
COMMON STOCKS - 99.0%
193,200 3Com Corporation *............................ $ 8,657,775
785,044 Abbott Laboratories .......................... 38,467,156
33,800 Adobe Systems Inc. ........................... 1,580,150
15,968 Adolph Coors Company - Class B ............... 901,194
68,941 Advanced Micro Devices, Inc.* ................ 1,994,980
12,527 Aeroquip-Vickers, Inc. ....................... 375,027
87,100 AES Corporation * ............................ 4,126,362
80,059 Aetna, Inc. .................................. 6,294,639
118,608 Air Products & Chemical, Inc. ................ 4,744,320
288,935 Airtouch Communications, Inc.* ............... 20,839,437
8,998 Alberto-Culver Co. - Class B ................. 240,134
130,902 Albertson's, Inc. ............................ 8,336,821
113,636 Alcan Aluminium Ltd. ......................... 3,075,274
85,969 Allegheny Teledyne, Inc. ..................... 1,756,991
37,701 Allergan, Inc. ............................... 2,441,140
284,512 Allied-Signal, Inc. .......................... 12,607,438
430,698 Allstate Corp. ............................... 16,635,710
144,200 Alltel Corp. ................................. 8,624,962
96,300 Aluminum Company of America .................. 7,180,369
51,934 ALZA Corporation* ............................ 2,713,551
50,993 Amerada Hess Corp. ........................... 2,536,902
61,220 Ameren Corporation ........................... 2,613,329
221,400 America Online, Inc.* ........................ 35,424,000
85,010 American Electric Power Co. .................. 4,000,783
233,216 American Express Co. ......................... 23,846,336
132,737 American General Corp. ....................... 10,353,486
38,114 American Greetings Corp. - Class A ........... 1,565,056
681,792 American Home Products Corp. ................. 38,393,412
540,600 American International Group, Inc. ........... 52,235,475
145,536 American Stores Company ...................... 5,375,736
568,204 Ameritech Corp. .............................. 36,009,928
131,240 Amgen, Inc.* ................................. 13,722,782
11,604 Amoco Corp. .................................. 700,592
107,392 AMP, Inc. .................................... 5,591,096
101,604 AMR Corporation .............................. 6,032,737
54,100 Anadarko Petroleum Corp. ..................... 1,670,337
41,176 Andrew Corporation* .......................... 679,404
252,180 Anheuser-Busch Companies, Inc. ............... 16,549,312
96,550 AON Corp. .................................... 5,346,456
44,400 Apache Corp. ................................. 1,123,875
78,642 Apple Computer, Inc. ......................... 3,219,407
187,500 Applied Materials, Inc.* ..................... 8,003,906
297,447 Archer-Daniels-Midland Co. ................... 5,112,370
24,583 Armstrong World Industries Inc. .............. 1,482,662
20,449 Asarco, Inc. ................................. 308,013
117,300 Ascend Communications, Inc.* ................. 7,712,475
29,687 Ashland, Inc. ................................ 1,436,109
348,322 Associates First Capital Corp. - Class A ..... 14,760,145
917,506 AT&T Corp. ................................... 69,042,326
175,250 Atlantic Richfield Co. ....................... 11,435,062
35,514 Autodesk, Inc. ............................... 1,516,004
149,912 Automatic Data Processing, Inc. .............. 12,021,068
80,600 AutoZone, Inc.* .............................. 2,654,762
48,830 Avery Dennison Corp. ......................... 2,200,402
140,756 Avon Products, Inc. .......................... 6,228,453
172,013 Baker Hughes, Inc. ........................... 3,042,480
7,954 Ball Corp. ................................... 363,895
60,725 Baltimore Gas & Electric Co. ................. 1,874,884
620,380 Banc One Corp. ............................... 31,678,154
391,800 Bank of New York Company, Inc. ............... 15,769,950
907,657 Bankamerica Corp. ............................ 54,572,877
164,434 BankBoston Corp. ............................. 6,402,649
207,700 Barrick Gold Corp. ........................... 4,050,150
59,100 Battle Mountain Gold Co. ..................... 243,787
24,923 Bausch & Lomb, Inc. .......................... 1,495,380
159,763 Baxter International, Inc. ................... 10,274,758
129,700 BB&T Corp. ................................... 5,228,531
65,100 Bear Stearns Companies, Inc. ................. 2,433,112
135,664 Becton, Dickinson & Co. ...................... 5,791,157
820,436 Bell Atlantic Corp. .......................... 46,611,020
1,010,664 BellSouth Corp. .............................. 50,406,867
16,031 Bemis Company, Inc. .......................... 608,176
6 Berkshire Hathaway, Inc. - Class A* .......... 465,368
153,060 Bestfoods .................................... 8,150,445
57,449 Bethlehem Steel Corp.* ....................... 481,135
61,250 Biomet, Inc.* ................................ 2,465,312
50,771 Black & Decker Corp. ......................... 2,846,349
106,000 BMC Software, Inc.* .......................... 4,723,625
524,346 Boeing Co. ................................... 17,106,788
24,603 Boise Cascade Corp. .......................... 762,693
198,000 Boston Scientific Corporation* ............... 5,308,875
12,182 Briggs & Stratton Corp. ...................... 607,577
511,978 Bristol-Myers Squibb Co. ..................... 68,509,056
18,019 Brown-Forman, Inc. - Class B ................. 1,363,813
106,535 Browning-Ferris Industries, Inc. ............. 3,029,589
47,442 Brunswick Corp. .............................. 1,174,189
242,386 Burlington Northern Santa Fe Corp. ........... 8,180,527
99,639 Burlington Resources, Inc. ................... 3,568,322
30,877 C. R. Bard, Inc. ............................. 1,528,411
69,900 Cabletron Systems, Inc.* ..................... 585,412
236,054 Campbell Soup Company ........................ 12,982,970
33,800 Capital One Financial Corp. .................. 3,887,000
100,997 Cardinal Health, Inc. ........................ 7,663,147
282,000 Carnival Corporation - Class A .............. 13,536,000
61,128 Carolina Power & Light Co. ................... 2,876,836
41,900 Case Corp. ................................... 913,944
185,564 Caterpillar, Inc. ............................ 8,535,944
378,210 CBS Corp. .................................... 12,386,377
449,634 Cendant Corporation* ......................... 8,571,148
41,080 Centex Corp. ................................. 1,851,167
126,930 Central & South West Corp. ................... 3,482,642
32,402 Ceridian Corporation ......................... 2,262,065
56,428 Champion International Corp. ................. 2,285,334
196,750 Charles Schwab Corporation ................... 11,054,891
446,264 Chase Manhattan Corp. ........................ 30,373,843
337,466 Chevron Corp. ................................ 27,988,586
84,272 Chubb Corporation ............................ 5,467,146
106,799 CIGNA Corp. .................................. 8,256,898
74,700 Cincinnati Financial Corp. ................... 2,735,887
62,822 Cinergy Corp. ................................ 2,159,506
56,646 Circuit City Stores, Inc. .................... 2,828,760
812,925 Cisco Systems, Inc.* ......................... 75,449,602
1,184,983 Citigroup .................................... 58,656,658
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
================================================================================
Equity 500 Index Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
130,400 Clear Channel Communications, Inc.* .......... $ 7,106,800
56,704 Clorox Company ............................... 6,623,736
111,432 Coastal Corp. ................................ 3,893,155
1,275,122 Coca-Cola Co. ................................ 85,273,784
217,000 Coca-Cola Enterprises, Inc. .................. 7,757,750
160,002 Colgate-Palmolive Co. ........................ 14,860,186
37,802 Columbia Energy Group ........................ 2,183,065
339,822 Columbia/HCA Healthcare Corporation .......... 8,410,594
178,862 Comcast Corporation - Special Class A ........ 10,496,964
80,760 Comerica, Inc. ............................... 5,506,822
874,784 Compaq Computer Corp. ........................ 36,686,254
282,175 Computer Associates International, Inc. ...... 12,027,709
91,072 Computer Sciences Corp.* ..................... 5,868,452
85,500 Compuware Corporation* ....................... 6,679,688
255,432 ConAgra, Inc. ................................ 8,046,108
167,468 Conseco, Inc. ................................ 5,118,241
129,336 Consolidated Edison, Inc. .................... 6,838,641
54,705 Consolidated Natural Gas Co. ................. 2,954,070
57,900 Consolidated Stores Corporation* ............. 1,168,856
53,548 Cooper Industries, Inc. ...................... 2,553,570
35,851 Cooper Tire & Rubber Co. ..................... 732,705
121,214 Corning Incorporated ......................... 5,454,630
117,799 Costco Companies, Inc.* ...................... 8,503,615
72,200 Countrywide Credit Industries, Inc. .......... 3,623,537
30,449 Crane Co. .................................... 919,179
71,950 Crown Cork & Seal Co., Inc. .................. 2,216,959
121,332 CSX Corp. .................................... 5,035,278
18,934 Cummins Engine Co., Inc. ..................... 672,157
190,338 CVS Corporation .............................. 10,468,590
44,694 Cyprus Amax Minerals Company ................. 446,940
87,947 Dana Corp. ................................... 3,594,834
65,400 Danaher Corporation .......................... 3,552,037
63,719 Darden Restaurants, Inc. ..................... 1,146,942
21,345 Data General Corp.* .......................... 350,858
227,416 Dayton Hudson Corp. .......................... 12,337,318
123,323 Deere & Co. .................................. 4,085,074
658,400 Dell Computer Corporation* ................... 48,186,650
74,698 Delta Air Lines, Inc. ........................ 3,884,296
43,591 Deluxe Corp. ................................. 1,593,796
57,497 Dillard Department Stores, Inc. - Class A .... 1,631,477
109,925 Dollar General Corp. ......................... 2,596,978
110,906 Dominion Resources, Inc. ..................... 5,184,855
110,008 Dover Corporation ............................ 4,029,043
114,476 Dow Chemical Co. ............................. 10,410,161
41,172 Dow Jones & Co., Inc. ........................ 1,981,402
73,676 DTE Energy Co. ............................... 3,158,858
183,595 Duke Power Co. ............................... 11,761,555
76,879 Dun & Bradstreet Corp. ....................... 2,426,493
584,092 Du Pont (E.I.) de Nemours & Co. .............. 30,993,382
9,242 Eastern Enterprises .......................... 404,337
35,081 Eastman Chemical Co. ......................... 1,569,875
160,126 Eastman Kodak Co. ............................ 11,529,072
39,582 Eaton Corp. .................................. 2,797,953
46,600 Ecolab, Inc. ................................. 1,686,337
207,170 Edison International, Inc. ................... 5,774,864
30,825 EG & G, Inc. ................................. 857,320
257,800 Electronic Data Systems Corporation .......... 12,954,450
572,440 Eli Lilly & Co. .............................. 50,875,605
264,700 EMC Corporation* ............................. 22,499,500
226,600 Emerson Electric Co. ......................... 14,176,663
63,608 Engelhard Corp. .............................. 1,240,356
173,166 Enron Corp. .................................. 9,881,285
141,907 Entergy Corp. ................................ 4,416,855
68,100 Equifax Inc. ................................. 2,328,169
1,257,634 Exxon Corp. .................................. 91,964,486
520,614 Fannie Mae ................................... 38,525,436
80,855 FDX Corporation* ............................. 7,196,095
361,814 Freddie Mac .................................. 23,314,390
110,800 Federated Department Stores, Inc.* ........... 4,826,725
146,467 Fifth Third Bancorp .......................... 10,444,928
228,500 First Data Corp. ............................. 7,240,594
512,493 First Union Corp. ............................ 31,165,981
77,500 Firstar Corporation .......................... 7,207,500
116,984 FirstEnergy Corp. ............................ 3,809,291
289,188 Fleet Financial Group, Inc. .................. 12,923,089
33,306 Fleetwood Enterprises, Inc. .................. 1,157,383
37,881 Fluor Corporation ............................ 1,612,310
17,750 FMC Corporation* ............................. 994,000
589,244 Ford Motor Co. ............................... 34,581,257
113,635 Fort James Corp. ............................. 4,545,400
86,174 Fortune Brands, Inc. ......................... 2,725,253
25,938 Foster Wheeler Corp. ......................... 342,057
92,094 FPL Group, Inc. .............................. 5,675,293
133,020 Franklin Resources, Inc. ..................... 4,256,640
72,200 Fred Meyer, Inc.* ............................ 4,350,050
59,900 Freeport-McMoRan Copper &
Gold. - Class B ............................ 625,206
102,400 Frontier Corp. ............................... 3,481,600
30,800 Fruit of the Loom, Inc. - Class A * .......... 425,425
145,692 Gannett Company, Inc. ........................ 9,642,989
303,266 The Gap, Inc. ................................ 17,058,713
76,400 Gateway 2000, Inc.* .......................... 3,910,725
65,544 General Dynamics Corp. ....................... 3,842,517
1,695,044 General Electric Co. ......................... 173,000,428
77,300 General Instrument Corporation* .............. 2,623,369
77,919 General Mills, Inc. .......................... 6,058,202
338,484 General Motors Corp. ......................... 24,222,761
91,426 Genuine Parts Co. ............................ 3,057,057
54,201 Georgia-Pacific Corp. ........................ 3,174,146
568,116 Gillette Co. ................................. 27,447,104
20,017 Golden West Financial Corp. .................. 1,835,309
46,452 Goodrich (B.F.) Co. .......................... 1,666,465
80,636 Goodyear Tire & Rubber Co. ................... 4,067,078
57,600 GPU, Inc. .................................... 2,545,200
17,025 Great Atlantic & Pacific Tea Co., Inc. ....... 504,366
26,396 Great Lakes Chemical Corp. ................... 1,055,840
500,636 GTE Corp. .................................... 33,761,640
76,700 Guidant Corp. ................................ 8,456,175
56,735 H & R Block, Inc. ............................ 2,553,075
231,862 Halliburton Company .......................... 6,868,912
27,139 Harcourt General, Inc. ....................... 1,443,456
19,822 Harnischfeger Industries, Inc. ............... 201,937
46,915 Harrah's Entertainment, Inc.* ................ 735,979
41,342 Harris Corp. ................................. 1,514,151
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
================================================================================
Equity 500 Index Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
125,646 Hartford Financial Services Group, Inc. ...... $ 6,894,824
68,647 Hasbro, Inc. ................................. 2,479,873
262,900 HBO & Co. .................................... 7,541,944
53,000 HCR Manor Care, Inc.* ........................ 1,556,875
236,000 HEALTHSOUTH Corporation ...................... 3,643,250
190,175 H.J. Heinz Co. ............................... 10,768,659
28,016 Helmerich and Payne .......................... 542,810
52,814 Hercules, Inc. ............................... 1,445,783
50,594 Hershey Foods Corp. .......................... 3,146,314
536,440 Hewlett-Packard Co. .......................... 36,645,558
134,441 Hilton Hotels Corp. .......................... 2,571,184
753,652 Home Depot, Inc. ............................. 46,114,082
134,043 Homestake Mining Co. ......................... 1,231,520
64,919 Honeywell, Inc. .............................. 4,889,212
249,685 Household International, Inc. ................ 9,893,768
127,892 Houston Industries, Inc. ..................... 4,108,530
83,600 Humana, Inc. ................................. 1,489,125
91,770 Huntington Bancshares, Inc. .................. 2,758,836
61,762 Ikon Office Solutions, Inc. .................. 528,837
135,692 Illinois Tool Works, Inc. .................... 7,870,136
84,179 IMS Health Incorporated ...................... 6,350,253
75,266 Inco, Ltd. ................................... 794,997
90,446 Ingersoll-Rand Co. ........................... 4,245,309
863,728 Intel Corp. .................................. 102,405,751
477,382 International Business Machines Corp. ........ 88,196,324
63,387 International Flavors & Fragrances, Inc. ..... 2,800,913
157,744 International Paper Co. ...................... 7,068,903
77,760 The Interpublic Group of Companies, Inc. ..... 6,201,360
52,223 ITT Industries* .............................. 2,075,864
135,550 J.C. Penney Co., Inc. ........................ 6,353,906
47,765 Jefferson-Pilot Corp. ........................ 3,582,375
697,296 Johnson & Johnson ............................ 58,485,702
35,354 Johnson Controls, Inc. ....................... 2,085,886
7,639 Jostens, Inc. ................................ 200,046
17,545 Kaufman & Broad Home Corp. ................... 504,419
212,714 Kellogg Co. .................................. 7,258,865
30,732 Kerr-McGee Corp. ............................. 1,175,499
242,800 KeyCorp ...................................... 7,769,600
293,406 Kimberly Clark Corp. ......................... 15,990,627
32,912 King World Productions, Inc.* ................ 968,847
50,100 KLA/Tencor Corporation* ...................... 2,173,088
236,503 Kmart Corporation* ........................... 3,621,452
51,926 Knight-Ridder, Inc. .......................... 2,654,717
79,700 Kohl's Corporation* .......................... 4,896,569
132,520 The Kroger Co. ............................... 8,017,460
118,000 Laidlaw, Inc. ................................ 1,187,375
69,700 Lehman Brothers, Inc. ........................ 3,071,156
99,860 The Limited, Inc. ............................ 2,908,423
58,210 Lincoln National Corp. ....................... 4,762,306
34,803 Liz Claiborne, Inc. .......................... 1,098,470
107,145 Lockheed Martin Corp. ........................ 9,080,539
53,400 Loews Corporation ............................ 5,246,550
18,026 Longs Drug Stores, Inc. ...................... 675,975
66,958 Louisiana-Pacific Corp. ...................... 1,226,168
180,088 Lowe's Companies, Inc. ....................... 9,218,255
75,800 LSI Logic Corporation* ....................... 1,222,275
679,982 Lucent Technologies, Inc. .................... 74,798,020
49,202 Mallinckrodt Group, Inc. ..................... 1,516,037
130,380 Marriott International ....................... 3,781,020
141,486 Marsh and McLennan ........................... 8,268,088
173,022 Masco Corp. .................................. 4,974,383
161,465 Mattel, Inc. ................................. 3,683,420
127,898 May Department Stores Co. .................... 7,721,842
51,712 Maytag Corp. ................................. 3,219,072
49,300 MBIA, Inc. ................................... 3,232,231
385,187 MBNA Corp. ................................... 9,605,601
25,887 McDermott International, Inc. ................ 639,085
349,914 McDonald's Corp. ............................. 26,812,160
50,930 McGraw-Hill, Inc. ............................ 5,188,494
916,631 MCI WorldCom, Inc. ........................... 65,768,274
57,702 Mead Corp. ................................... 1,691,390
316,828 MediaOne Group* .............................. 14,890,916
236,304 Medtronic, Inc. .............................. 17,545,572
139,524 Mellon Bank Corp. ............................ 9,592,275
66,600 Mercantile Bancorporation, Inc. .............. 3,071,925
616,097 Merck & Co., Inc. ............................ 90,989,826
18,772 Meredith Corp. ............................... 710,990
1 Meritor Automotive, Inc. ..................... 21
180,576 Merrill Lynch & Co., Inc. .................... 12,053,448
62,500 MGIC Investment Corp. ........................ 2,488,281
120,700 Micron Technology, Inc. ...................... 6,102,894
1,294,700 Microsoft Corporation* ....................... 179,558,706
13,647 Milacron, Inc. ............................... 262,705
19,792 Millipore Corp. .............................. 562,835
205,778 Minnesota Mining & Manufacturing Co. ......... 14,635,960
105,000 Mirage Resorts Incorporated* ................. 1,568,438
403,342 Mobil Corp. .................................. 35,141,172
311,720 Monsanto Co. ................................. 14,806,700
25,179 Moore Corporation Ltd. ....................... 276,969
298,833 Morgan Stanley Dean Witter
Discover & Co. ............................. 21,217,143
90,460 Morgan (J.P.) & Co., Inc. ................... 9,503,954
83,306 Morton International, Inc. ................... 2,040,997
310,442 Motorola, Inc. ............................... 18,956,365
3,627 NACCO Industries, Inc. - Class A ............. 333,684
28,325 Nalco Chemical Company ....................... 878,075
171,400 National City Corp. .......................... 12,426,500
77,126 National Semiconductor Corp.* ................ 1,041,201
21,726 National Service Industries, Inc. ............ 825,588
34,158 Navistar International Corporation ........... 973,503
55,200 New Century Energies, Inc. ................... 2,691,000
90,668 New York Times Co. - Class A ................. 3,145,046
71,258 Newell Co. ................................... 2,939,393
85,710 Newmont Mining Corp. ......................... 1,548,137
140,900 Nextel Communications, Inc. - Class A* ....... 3,328,763
72,242 Niagara Mohawk Power Corporation ............. 1,164,902
24,769 NICOR, Inc. .................................. 1,046,490
105,148 Nike, Inc. ................................... 4,265,066
82,958 Nordstrom, Inc. .............................. 2,877,606
192,753 Norfolk Southern Corp. ....................... 6,107,861
53,888 Northern States Power Company ................ 1,495,392
343,562 Northern Telecom Ltd. ........................ 17,221,045
60,300 Northern Trust Corp. ......................... 5,264,944
39,479 Northrop Grumman Corp. ....................... 2,886,902
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
================================================================================
Equity 500 Index Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C>
176,292 Novell, Inc.* ................................ $ 3,195,293
48,694 Nucor Corp. .................................. 2,106,016
178,914 Occidental Petroleum Corp. ................... 3,019,174
82,900 Omnicom Group, Inc. .......................... 4,808,200
13,991 Oneok, Inc. .................................. 505,425
495,156 Oracle Corporation* .......................... 21,353,603
48,279 Oryx Energy Company .......................... 648,749
33,750 Owens Corning ................................ 1,196,016
91,600 Owens-Illinois, Inc.* ........................ 2,805,250
42,080 Paccar, Inc. ................................. 1,730,540
153,789 Pacificorp ................................... 3,239,181
64,164 Pall Corp. ................................... 1,624,151
162,000 Parametric Technology Corporation* ........... 2,652,750
64,714 Parker-Hannifin Corp. ........................ 2,119,384
89,800 Paychex, Inc. ................................ 4,619,088
117,284 PECO Energy .................................. 4,881,947
9 PennzEnergy Company .......................... 147
17,055 People's Energy Corp. ........................ 680,068
112,500 PeopleSoft, Inc.* ............................ 2,130,469
26,712 Pep Boys (Manny Moe & Jack) .................. 419,045
752,794 Pepsico, Inc. ................................ 30,817,504
26,925 Perkin Elmer Corp. ........................... 2,626,870
669,028 Pfizer, Inc. ................................. 83,921,200
221,105 PG & E Corp. ................................. 6,964,808
262,832 Pharmacia & Upjohn, Inc. ..................... 14,882,862
26,508 Phelps Dodge Corporation ..................... 1,348,595
1,260,198 Philip Morris Companies ...................... 67,420,593
116,806 Phillips Petroleum Co. ....................... 4,978,856
101,420 Pioneer Hi-Bred International, Inc. .......... 2,738,340
143,896 Pitney Bowes, Inc. ........................... 9,506,130
106,404 Placer Dome, Inc. ............................ 1,223,646
158,333 PNC Bank Corp. ............................... 8,569,774
36,182 Polaroid Corp. ............................... 676,151
13,301 Potlatch ..................................... 490,474
91,642 PPG Industries, Inc. ......................... 5,338,146
71,007 P.P.& L. Resources, Inc. ..................... 1,979,320
82,615 Praxair, Inc. ................................ 2,912,179
688,740 Procter & Gamble Co. ......................... 62,890,571
39,950 Progressive Corporation of Ohio .............. 6,766,531
63,900 Provident Companies, Inc. .................... 2,651,850
73,397 Providian Financial Corp. .................... 5,504,775
130,994 Public Service Enterprise Group .............. 5,239,760
20,632 Pulte Corp. .................................. 573,828
70,384 Quaker Oats Co. .............................. 4,187,848
146,015 Ralston Purina Group ......................... 4,727,236
49,976 Raychem Corp. ................................ 1,614,850
175,214 Raytheon Co. - Class B ....................... 9,330,146
25,029 Reebok International Ltd. .................... 372,306
127,770 Regions Financial Corp. ...................... 5,150,728
67,100 Republic New York Corp. ...................... 3,057,244
45,849 Reynolds Metals Co............................ 2,415,669
131,302 Rite Aid Corp. ............................... 6,507,655
168,000 RJR Nabisco Holdings Corp. ................... 4,987,500
103,224 Rockwell International Corp. ................. 5,012,816
98,377 Rohm & Haas Co. .............................. 2,963,607
39,100 Rowan Companies, Inc.* ....................... 391,000
1,109,204 Royal Dutch Petroleum Co. .................... 53,103,141
63,552 R.R. Donnelley & Sons Co. .................... 2,784,372
78,502 Rubbermaid, Inc. ............................. 2,467,907
16,011 Russell Corp. ................................ 325,223
34,017 Ryder Systems, Inc. .......................... 884,442
70,502 Safeco ....................................... 3,027,180
256,800 Safeway, Inc.* ............................... 15,648,750
478,654 Sara Lee Corp. ............................... 13,492,060
1,031,528 SBC Communications, Inc. ..................... 55,315,689
757,232 Schering-Plough Corp. ........................ 41,837,068
275,962 Schlumberger Ltd. ............................ 12,728,747
36,238 Scientific-Atlanta, Inc. ..................... 826,679
133,100 Seagate Technology, Inc.* .................... 4,026,275
187,637 Seagram Co. Ltd. ............................. 7,130,206
47,005 Sealed Air Corporation ....................... 2,400,193
201,409 Sears, Roebuck & Co. ......................... 8,559,883
121,414 Sempra Energy ................................ 3,080,880
138,092 Service Corp. International .................. 5,256,127
10,974 Shared Medical Systems Corp. ................. 547,328
87,974 Sherwin-Williams Company ..................... 2,584,236
59,500 Sigma Aldrich Corp. .......................... 1,747,813
109,115 Silicon Graphics, Inc.* ...................... 1,404,856
95,100 SLM Holding Corp. ............................ 4,564,800
39,794 Snap-On Tools Corp. .......................... 1,385,329
58,000 Solectron Corporation* ....................... 5,390,375
48,110 Sonat, Inc. .................................. 1,301,977
386,658 Southern Co. ................................. 11,237,248
161,700 Southwest Airlines Co. ....................... 3,628,144
5,604 Springs Industries, Inc. - Class A ........... 232,216
168,982 Sprint Corporation ........................... 14,215,611
220,491 Sprint PCS* .................................. 5,098,854
37,388 St. Jude Medical, Inc.* ...................... 1,035,180
121,928 St. Paul Companies, Inc. ..................... 4,236,998
39,330 Stanley Works ................................ 1,091,408
145,100 Staples, Inc.* ............................... 6,339,056
76,700 State Street Corp. ........................... 5,335,444
93,800 Summit Bancorp. .............................. 4,097,888
202,856 Sun Microsystems, Inc.* ...................... 17,369,545
104,100 SunAmerica, Inc. ............................. 8,445,113
41,245 Sunoco, Inc. ................................. 1,487,398
163,460 Suntrust Banks, Inc. ......................... 12,504,690
63,640 SuperValu, Inc. .............................. 1,781,920
116,350 Synovus Financial Corp. ...................... 2,836,031
175,020 Sysco Corporation ............................ 4,802,111
56,166 Tandy Corp. .................................. 2,313,337
36,707 Tektronix, Inc. .............................. 1,103,504
246,960 Tele-Communications, Inc. - Class A* ......... 13,659,975
100,000 Tellabs, Inc.* ............................... 6,856,250
28,622 Temple Inland, Inc. .......................... 1,697,642
156,810 Tenet Healthcare Corporation ................. 4,116,263
88,034 Tenneco, Inc. ................................ 2,998,658
280,322 Texaco, Inc. ................................. 14,822,026
202,956 Texas Instruments, Inc. ...................... 17,365,423
158,227 Texas Utilities Co. .......................... 7,387,223
77,006 Textron, Inc. ................................ 5,847,643
95,100 Thermo Electron Corporation* ................. 1,610,756
38,000 Thomas & Betts Corp. ......................... 1,645,875
569,430 Time Warner, Inc. ............................ 35,340,249
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
================================================================================
Equity 500 Index Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
28,529 Times Mirror Co. - Class A .................. $ 1,597,624
24,796 Timken Company .............................. 468,025
189,516 TJX Companies, Inc. ......................... 5,495,964
63,468 Torchmark Corp. ............................. 2,241,214
156,218 Toys 'R' Us, Inc.* .......................... 2,636,179
28,243 Transamerica Corporation .................... 3,262,067
53,596 Tribune Company ............................. 3,537,336
81,999 Tricon Global Restaurants, Inc.* ............ 4,110,200
61,792 TRW, Inc. ................................... 3,482,052
27,396 Tupperware Corp. ............................ 450,322
339,870 Tyco International Ltd. ..................... 25,638,943
269,255 U.S. West Incorporated ...................... 17,400,604
394,737 U.S. Bancorp ................................ 14,013,164
138,825 Unicom Corporation .......................... 5,353,439
323,868 Unilever NV ................................. 26,860,802
36,203 Union Camp Corp. ............................ 2,443,703
68,552 Union Carbide Corporation ................... 2,913,460
130,847 Union Pacific Corp. ......................... 5,896,293
146,248 Union Pacific Resources Group, Inc. ......... 1,325,373
64,900 Union Planters Corporation .................. 2,940,781
121,599 Unisys Corporation .......................... 4,187,566
93,500 United Healthcare Corp. ..................... 4,026,344
113,512 United Technologies Corp. ................... 12,344,430
127,837 Unocal Corp. ................................ 3,731,242
61,800 UNUM Corp. .................................. 3,607,575
42,715 US Airways Group, Inc.* ..................... 2,221,180
96,207 UST, Inc. ................................... 3,355,219
154,864 USX Marathon Group .......................... 4,665,278
61,577 USX - U.S. Steel Group ...................... 1,416,271
65,730 V.F. Corporation ............................ 3,081,094
148,249 Viacom, Inc. - Class B ...................... 10,970,426
113,910 Wachovia Corp. .............................. 9,960,006
1,157,848 Wal-Mart Stores, Inc. ....................... 94,292,246
257,268 Walgreen Co. ................................ 15,066,257
1,064,071 Walt Disney Company ......................... 31,922,130
428,458 Warner-Lambert Company ...................... 32,214,686
321,022 Washington Mutual, Inc. ..................... 12,259,028
287,956 Waste Management, Inc. ...................... 13,425,949
853,636 Wells Fargo Company ......................... 34,092,088
75,762 Wendy's International, Inc. ................. 1,652,559
39,960 Westvaco Corporation ........................ 1,071,428
103,894 Weyerhaeuser Co. ............................ 5,279,114
33,439 Whirlpool Corp. ............................. 1,851,685
43,700 Willamette Industries, Inc. ................. 1,463,950
243,136 Williams Companies, Inc. .................... 7,582,804
66,580 Winn-Dixie Stores, Inc. ..................... 2,987,778
46,892 Wm. Wrigley, Jr. Company .................... 4,199,765
31,279 Worthington Industries, Inc. ................ 390,988
35,649 W. R. Grace & Co.* .......................... 559,244
48,330 W.W. Grainger, Inc. ......................... 2,011,736
169,635 Xerox Corp. ................................. 20,016,930
-----------
Total Common Stocks (Cost $3,244,951,024)................ 5,146,921,230
=============
</TABLE>
<TABLE>
SHORT TERM INSTRUMENTS - 0.7%
<S> <C> <C>
Mutual Fund - 0.6%
33,163,964 BT Institutional Cash Management
Fund ................................. 33,163,964
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ---------
<S> <C> <C>
U.S. Treasury Bills - 0.1%
$ 330,000 3.906%, 1/14/99** .................... 329,529
5,535,000 4.70%, 1/14/99** .................... 5,526,511
-------------
5,856,040
-------------
Total Short Term Instruments (Cost $39,020,004) ......... 39,020,004
-------------
Total Investments (Cost $3,283,971,028) ...... 99.7% 5,185,941,234
------ -------------
Other Assets Less Liabilities ................. 0.3% 14,563,176
------ -------------
Total Net Assets .............................. 100.0% $5,200,504,410
====== =============
</TABLE>
- --------------------
* Non-income producing security
** Held as collateral for futures contracts.
See Notes to Financial Statements.
14
<PAGE> 17
================================================================================
Equity 500 Index Portfolio
STATEMENT OF OPERATIONS For the year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $284,044) ................... $ 56,672,952
Interest ................................................................. 4,806,144
-------------
TOTAL INVESTMENT INCOME ...................................................... 61,479,096
-------------
EXPENSES
Advisory Fees ............................................................ 3,186,503
Administration and Services Fees ......................................... 676,625
Professional Fees ........................................................ 46,189
Miscellaneous ............................................................ 4,344
-------------
Total Expenses ........................................................... 3,913,661
Less: Expenses absorbed by Bankers Trust ................................. (799,296)
-------------
Net Expenses ......................................................... 3,114,365
-------------
NET INVESTMENT INCOME ........................................................ 58,364,731
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions ........................... 33,524,253
Net Realized Gain from Futures Transactions .............................. 1,750,435
Net Change in Unrealized Appreciation/Depreciation on Investments ........ 894,561,271
Net Change in Unrealized Appreciation/Depreciation on Futures Contracts 528,247
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS ........ 930,364,206
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................... $ 988,728,937
=============
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
================================================================================
Equity 500 Index Portfolio
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ...................................................... $ 58,364,731 $ 42,706,376
Net Realized Gain from Investment Transactions and Futures Transactions .... 35,274,688 95,286,448
Net Change in Unrealized Appreciation/Depreciation on Investments
and Futures Contracts .................................................... 895,089,518 528,775,836
--------------- ---------------
Net Increase in Net Assets from Operations ..................................... 988,728,937 666,768,660
CAPITAL TRANSACTIONS
Proceeds from Capital Invested ............................................. 2,853,940,069 1,462,422,481
Value of Capital Withdrawn ................................................. (1,445,251,067) (1,251,328,236)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions ........................... 1,408,689,002 211,094,245
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ................................................... 2,397,417,939 877,862,905
NET ASSETS
Beginning of Year .......................................................... 2,803,086,471 1,925,223,566
--------------- ---------------
End of Year ................................................................ $ 5,200,504,410 $ 2,803,086,471
=============== ===============
</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,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA AND RATIOS:
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year (000s omitted) ............. $ 5,200,504 $ 2,803,086 $ 1,925,224 $ 1,080,736 $ 559,772
Ratios to Average Net Assets:
Net Investment Income .......................... 1.50% 1.76% 2.20% 2.52% 2.84%
Expenses ....................................... 0.08% 0.08% 0.10% 0.10% 0.10%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust.... 0.02% 0.07% 0.05% 0.05% 0.06%
Portfolio Turnover Rate ............................ 4% 19% 15% 6% 21%
</TABLE>
See Notes to Financial Statements.
16
<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 that, 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 accretion of 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 cash or securities in an amount equal to
a certain percentage of the contract amount. Variation margin 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
The Portfolio is considered a partnership under 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 .005% of the Portfolio's average daily net
assets. For the period January 1, 1998 to May 6, 1998 the Administration and
Services Fee was .05% on an accrual basis. For the year ended December 31, 1998,
Administration and Services Fees amounted to $676,625, of which $21,178 was
payable at the end of the year.
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 .075% of the Portfolio's
average daily net assets. For the period January 1, 1998 to May 6, 1998 the
Advisory fee was .10%. For the year ended December 31, 1998, Advisor Fees
amounted to $3,186,503, of which $309,104 was payable at the end of the year.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.08% of the average daily net assets of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund (the
"Fund"), an open-end management investment company managed by Bankers Trust
Company (the "Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio as of December 31, 1998 amounted to $4,490,254 and are included
in dividend income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility and a discretionary demand line of credit facility
("collectively the credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively, which expire March 15, 1999. A commitment fee of
.07% per annum on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned equally among all participants.
Amounts borrowed under the credit facilities will bear interest at a rate per
annum equal to the Federal Funds Rate plus .45%. No amounts were drawn down or
outstanding under the credit facilities as of and for the year ended December
31, 1998.
For the year ended December 31, 1998, the Portfolio paid affiliated brokerage
commissions of $333.
17
<PAGE> 20
================================================================================
Equity 500 Index Portfolio
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
- --------------------------------------------------------------------------------
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, 1998, were
$1,607,662,962 and $153,777,789, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1998 was $3,302,071,681. The
aggregate gross unrealized appreciation was $1,914,790,859, and the aggregate
gross unrealized depreciation was $69,941,310 for all investments as of December
31, 1998. Payable for securities purchased at December 31, 1998 amounted to
$58,369,160.
NOTE 4-FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1998
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 1999 334 Long $100,118,660 $81,600
</TABLE>
At December 31, 1998, the Portfolio segregated $5,856,040 to cover margin
requirements on open futures contracts.
NOTE 5-NET ASSETS
<TABLE>
<S> <C>
Paid-in-Capital .................................... $3,297,393,868
Net Unrealized Appreciation on Investments
and Futures ...................................... 1,903,110,542
--------------
Total Net Assets ................................... $5,200,504,410
==============
</TABLE>
18
<PAGE> 21
================================================================================
Equity 500 Index Portfolio
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of
Equity 500 Index Portfolio:
In our opinion, the accompanying statement of net assets 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
Equity 500 Index Portfolio (the "Portfolio") at December 31, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio'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.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
19
<PAGE> 22
[AMERICAN AADVANTAGE FUNDS REGISTERED TRADEMARK]
-Institutional Class-
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 658-5811
-PlanAhead Class-
P.O. Box 419643
Kansas City, Missouri 64141-6644
(800) 388-3344
MANAGED BY
AMR INVESTMENT SERVICES, INC.
