Scudder
S&P 500 Index
Fund
Annual Report
December 31, 1997
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund seeking to provide investment
results that, before expenses, correspond to the total return of common stocks
publicly traded in the United States, as represented by the Standard & Poor's
500 Composite Stock Price Index.
SCUDDER (logo)
<PAGE>
Scudder S&P 500 Index Fund
- --------------------------------------------------------------------------------
Date of Inception: 8/29/97 Total Net Assets as of Ticker Symbol: SCPIX
12/31/97: $16.9 million
- --------------------------------------------------------------------------------
o Scudder S&P 500 Index Fund invests substantially all of its assets in the
Equity 500 Index Portfolio, which has the same investment objective as the Fund.
o For the four-month period since its inception, the Fund returned 8.34%,
compared to the 8.51% return of the S&P 500 Index during the same period.
o The S&P 500 Index demonstrated strong overall performance in 1997, despite
short-term volatility.
o Concerns about the Asian crisis suggest that equity gains may be comparatively
lower in 1998, but any correction is expected to be brief and mild.
Table of Contents
3 Letter from the Fund's President
4 Portfolio Summary
5 Portfolio Management Discussion
7 Glossary of Investment Terms
Scudder S&P 500 Index Fund
8 Financial Statements
11 Financial Highlights
12 Notes to Financial Statements
14 Report of Independent Accountants
15 Tax Information
15 Officers and Trustees
Equity 500 Index Portfolio
16 Investment Portfolio
26 Financial Statements
29 Financial Highlights
30 Notes to Financial Statements
32 Report of Independent Accountants
36 Investment Products and Services
37 Scudder Solutions
2 - Scudder S&P 500 Index Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the initial annual report for Scudder S&P 500
Index Fund, covering the abbreviated period from the Fund's inception on August
29, 1997 through December 31, 1997.
The U.S. economy -- buoyed by moderate growth, strong employment, low
inflation and healthy corporate profits -- continued to enjoy strong performance
over the initial period of operations for Scudder S&P 500 Index Fund. In fact,
the U.S. economy can now lay claim to one of the longest expansions on record --
6 1/2 years -- a growth trend which we believe shows no sign of ending soon. The
investment community does, however, continue to speculate on the potential
impact of Asia's economic woes on the U.S. economy. While we think the
investment environment continues to remain healthy, we believe a return to
performance that is closer to the 10% average long-term return for stocks is
more realistic going forward.
For those of you who are interested in other new Scudder products, we
recently introduced a new industry sector fund, Scudder Financial Services Fund,
one of Scudder's Choice Series funds. The Fund seeks long-term growth by
investing in financial services companies in the U.S. and abroad. In addition,
two other Choice Series funds will be launched on March 2: Scudder Health Care
Fund, seeking long-term growth from health care companies located around the
world, and Scudder Technology Fund, pursuing long-term growth by investing in
companies that develop, produce, or distribute technology. For further
information on these new funds, please call 1-800-225-2470.
Thank you for your continued investment in Scudder S&P 500 Index Fund. If
you have any questions about your account, please call Scudder Investor
Relations at the toll-free number above, or visit our Internet Web site at
http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder S&P 500 Index Fund
3 - Scudder S&P 500 Index Fund
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 99%
Cash Equivalents 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Portfolio is substantially
fully invested in stocks that
are part of the S&P 500 Index.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 1% of Cash Equivalents)
- --------------------------------------------------------------------------
Financial 17%
Manufacturing 13%
Consumer Staples 11%
Health 11%
Energy 9%
Utilities 8%
Technology 8%
Consumer Discretionary 7%
Durables 4%
Other 12%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Financial stocks are the
largest sector component of
the S&P 500 Index.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(16% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. GENERAL ELECTRIC CO.
Producer of electrical equipment
2. COCA-COLA CO.
International soft drink company
3. MICROSOFT CORP.
Computer operating systems software
4. EXXON CORP.
International oil and gas company
5. MERCK & CO.
Leading ethical drug manufacturer
6. ROYAL DUTCH PETROLEUM CO.
Diversified petroleum company
7. INTEL CORP.
Semiconductor memory circuits
8. PHILIP MORRIS COMPANIES INC.
Tobacco, food products and brewing company
9. PROCTOR & GAMBLE CO.
Diversified manufacturer of consumer products
10. INTERNATIONAL BUSINESS MACHINES CORP.
Manufacturer of business computers
The Portfolio's top holdings
reflect the composition of the
S&P 500 Index.
For more complete details about the Fund's investment portfolio,
see page 16. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
4 - Equity 500 Index Portfolio
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the period beginning with its inception on August 29, 1997 and ending
December 31, 1997, the Scudder S&P 500 Index Fund (the "Fund") returned 8.34%,
closely tracking the 8.51% return of the S&P 500 Index over the same period.
1997 Market Activity
Prior to the Fund's inception at the end of August, 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 the year.
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 the
plummet here, there was little evidence of any meaningful impact of the ongoing
turmoil abroad on 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,
declining unemployment, low inflation, higher corporate earnings, and a Federal
Reserve Board on hold through the remainder of 1997, served as the backdrop to
this strong overall performance despite short-term volatility.
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
less assured. Volatility will likely continue to be high.
On the one hand, the current high valuations and ongoing concerns about fallout
from the Far East suggest that any equity gains will be comparatively low.
Questions about earnings, particularly for the large multinational companies,
persist, and the labor market remains tight, placing 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 for stock prices. Any correction that may occur is
anticipated to be brief and mild.
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, we neither
evaluate short-term fluctuations in the Fund's performance nor manage according
5 - Scudder S&P 500 Index Fund
<PAGE>
to a given outlook for the equity markets or the economy in general. Still, we
will continue monitoring economic conditions and how they affect the financial
markets, as we seek to track the performance of the S&P 500 closely.
Thank you for your support of the Scudder S&P 500 Index Fund. We look forward to
continuing to serve your investment needs for many years to come.
Sincerely,
/s/Frank Salerno
Frank Salerno
Portfolio Manager
6 - Scudder S&P 500 Index Fund
<PAGE>
Glossary of Investment Terms
INDEX FUND A mutual fund that seeks to replicate the
performance of a securities market index.
These funds are usually passively managed,
employing popular benchmarks such as the S&P
500, Russell 2000 (small-caps), or Lehman
Aggregate Bond Index. Because an index fund
essentially "buys the market," its
performance tends to closely track both
increases and decreases in the respective
index.
MARKET CAPITALIZATION The value of a company's outstanding shares
of common stock, determined by multiplying
the number of shares outstanding by the share
price (shares x price = market
capitalization). The universe of publicly
traded companies is frequently divided into
large-, mid-, and small-capitalizations.
"Large-cap" stocks tend to be more liquid and
less volatile, while "small-cap" stocks have
greater potential earnings growth and are
typically more volatile.
PASSIVE MANAGEMENT An investment approach that typically selects
investments based on non-fundamental
criteria, often by seeking to mirror the
performance of a securities market index.
This is in contrast to active management, in
which an investment manager attempts to
select the most promising investments by
analyzing company financial statements,
market conditions, and industry trends.
STANDARD & POOR'S A broad-based measurement of changes in stock
COMPOSITE INDEX OF 500 market conditions based on the average
STOCKS (S&P 500) performance of 500 widely held common stocks.
The index is comprised of 400 industrial
company stocks, 20 transportation company
stocks, 40 financial company stocks, and 40
public utilities. The stocks which comprise
the S&P 500 represent some of the largest
companies in terms of market capitalization.
STANDARD & POOR'S CORPORATION A subsidiary of McGraw-Hill, Inc. that
provides a broad range of investment
services, including rating commercial paper,
compiling the Standard & Poor's Composite
Index of 500 Stocks, the Standard & Poor's
400 Industrial Index, and the Standard &
Poor's 100 Index, among other indexes. The
company also provides a wide variety of
statistical materials, investment advisory
reports, and other financial information.
(Sources: SKI; Barron's Dictionary of Finance and Investment Terms)
7 - Scudder S&P 500 Index Fund
<PAGE>
Financial Statements
Scudder S&P 500 Index Fund
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investment in Equity 500 Index Portfolio, at market .................... $ 16,453,695
Receivable for Fund shares sold ........................................ 451,143
Deferred organization expenses ......................................... 27,471
----------------
Total assets ........................................................... 16,932,309
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ....................................... 11,060
Accrued administration fee ............................................. 1,934
Other payables and accrued expenses .................................... 7,039
----------------
Total liabilities ...................................................... 20,033
--------------------------------------------------------------------------------------------
Net assets, at market value $ 16,912,276
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... 1,046
Unrealized appreciation on investments and futures transactions ........ 264,868
Accumulated net realized gain from investments and futures
transactions ........................................................... 142,842
Paid-in capital ........................................................ 16,503,520
--------------------------------------------------------------------------------------------
Net assets, at market value $ 16,912,276
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($16,912,276 / 1,307,405 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) .... $12.94
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - Scudder S&P 500 Index Fund
<PAGE>
Scudder S&P 500 Index Fund
Statement of Operations
for the period August 29, 1997
(commencement of operations) to December 31, 1997
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Income allocated from Equity 500 Index Portfolio, net .................. $ 48,852
-----------------
Expenses:
Administration fee ..................................................... 1,934
Services to shareholders ............................................... 34,079
Custodian and accounting fee ........................................... 6,443
Trustees' fees and expenses ............................................ 5,448
Auditing ............................................................... 15,565
Registration fees ...................................................... 40,615
Reports to shareholders ................................................ 11,490
Legal .................................................................. 4,881
Amortization of organization expense ................................... 1,942
Other .................................................................. 2,812
-----------------
Total expenses before reductions ....................................... 125,209
Expense reductions ..................................................... (116,004)
-----------------
Expenses, net .......................................................... 9,205
---------------------------------------------------------------------------------------------
Net investment income 39,647
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................ 150,865
Futures contracts ...................................................... (8,023)
-----------------
142,842
-----------------
Net unrealized appreciation (depreciation) during the period on
investments and futures contracts ................................... 264,868
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 407,710
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 447,357
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder S&P 500 Index Fund
<PAGE>
Scudder S&P 500 Index Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
August 29, 1997
(commencement of
operations) to
December 31,
Increase (Decrease) in Net Assets 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income ............................................... $ 39,647
Net realized gain (loss) from investment transactions ............... 142,842
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................... 264,868
-------------------
Net increase (decrease) in net assets resulting from operations ..... 447,357
-------------------
Distributions to shareholders from net investment income ............ (74,511)
-------------------
Fund share transactions:
Proceeds from shares sold ........................................... 18,098,523
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................... 72,136
Cost of shares redeemed ............................................. (1,632,429)
-------------------
Net increase (decrease) in net assets from Fund share
transactions ..................................................... 16,538,230
-------------------
Increase (decrease) in net assets ................................... 16,911,076
Net assets at beginning of period ................................... 1,200
Net assets at end of period (including undistributed net -------------------
investment income of $1,046) ..................................... $16,912,276
-------------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................... 100
-------------------
Shares sold ......................................................... 1,431,700
Shares issued to shareholders in reinvestment of distributions ...... 5,676
Shares redeemed ..................................................... (130,071)
-------------------
Net increase in Fund shares ......................................... 1,307,305
-------------------
Shares outstanding at end of period ................................. 1,307,405
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder S&P 500 Index Fund
<PAGE>
Financial Highlights
Scudder S&P 500 Index Fund
The following table includes selected data for a share outstanding (a)
throughout each period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
For the Period
August 29, 1997
(commencement
of operations) to
December 31, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period .......................................... $12.00
-------------------
Income from investment operations:
Net investment income.......................................................... .05
Net realized and unrealized gain (loss) on investment transactions ............ .95
-------------------
Total from investment operations .............................................. $1.00
-------------------
Less distributions from net investment income ................................. (.06)
-------------------
Net asset value, end of period ................................................ $12.94
- ----------------------------------------------------------------------------------------------------------
Total Return (%) (b) .......................................................... 8.34**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................ 17
Ratio of operating expenses, net to average daily net assets (%) (c) .......... .40*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) (c) ............................................................. 4.42*
Ratio of net investment income to average daily net assets (%) ................ 1.35*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Includes expenses of the Equity 500 Index Portfolio.
* Annualized
** Not annualized
11 - Scudder S&P 500 Index Fund
<PAGE>
Notes to Financial Statements
Scudder S&P 500 Index Fund
A. Significant Accounting Policies
Scudder S&P 500 Index Fund (the "Fund") is a diversified series of Scudder
Investment Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund
seeks to achieve its investment objective by investing substantially all of its
assets in the Equity 500 Index Portfolio (the "Portfolio"), an open-end
management investment company advised by Bankers Trust Company which has the
same investment objective as the Fund. At December 31, 1997, the Fund's
investment was approximately 0.6% of the Portfolio.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements. The financial statements of the
Portfolio, including the Schedule of Investments, are contained elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
Security Valuation. The Fund records its investment in the Portfolio at value,
which reflects its proportionate interest in the net assets of the Portfolio.
Valuation of the securities held by the Portfolio is discussed in the notes to
the Portfolio's financial statements included elsewhere in this report.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no federal income taxes and no provision
for federal income taxes was required. At December 31, 1997, the Fund had a net
tax basis capital loss carryforward of approximately $216,000, which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until December 31, 2005, whichever occurs first. In
addition, from November 1 through December 31, the Fund incurred approximately
$137,000 of realized long-term capital losses. As permitted by tax regulations,
the Fund intends to elect to defer these losses and treat them as arising in the
year ending December 31, 1998.
Distribution of Income and Gains. Distributions of net investment income are
made quarterly. During any particular year, the Fund's pro rata share of the
Portfolio's realized gains from security transactions, in excess of available
capital loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
Other. The Fund records daily its pro rata share of the Portfolio's income,
expenses, and realized and unrealized gains and losses. In addition, the Fund
accrues its own expenses.
12 - Scudder S&P 500 Index Fund
<PAGE>
B. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments Inc. ("Scudder Kemper" or the "Manager"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement.
Under the Management Agreement with Scudder Kemper, the Manager monitors the
Fund's investments in the Portfolio. Scudder Kemper receives no fee for
providing these monitoring services. In the event the Board of Trustees
determines it is in the best interest of the Fund's shareholders to withdraw its
investment in the Portfolio, Scudder Kemper would become responsible for
directly managing the assets of the Fund. In such event, the Fund would pay the
Manager an annual fee of 0.15% of the Fund's average daily net assets, accrued
daily and paid monthly.
The Fund also has an Administrative Services Agreement with the Manager, under
which the Manager provides shareholder and administrative services to the Fund.
Scudder Kemper receives a fee of 0.10% of the Fund's average daily net assets,
accrued daily and paid monthly. The Manager has voluntarily agreed to maintain
expenses of the Fund to the extent necessary to limit the expenses of the Fund
to 0.40% of its annual average daily net assets (including the Fund's pro rata
share of the expenses of the Portfolio). Under the terms of a Third Party Feeder
Agreement between the Fund, the Manager and Bankers Trust, Bankers Trust has
voluntarily agreed to waive expenses of the Portfolio to the extent necessary to
limit the expenses of the Portfolio to 0.08% of its annual average net assets.
For the period ended December 31, 1997, the Manager did not impose any of its
fee, which amounted to $1,934. Further, due to the limitations of such
Agreement, the Manager's reimbursement to the Fund for the period ended December
31, 1997, amounted to $85,349.
Scudder Service Corporation ("SSC"), a subsidiary of the Manager, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1997, SSC did not impose any of its fee, which amounted
to $28,721.
The Fund pays each Trustee not affiliated with the Manager an annual retainer.
For the year ended December 31, 1997, Trustees' fees aggregated $5,448.
13 - Scudder S&P 500 Index Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Investment Trust and the Shareholders of Scudder S&P
500 Index Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
S&P 500 Index Fund as of December 31, 1997, and the related statement of
operations, the statement of changes in net assets, and the financial highlights
for the period August 29, 1997 (commencement of operations) to December 31,
1997. 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
Scudder 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
period August 29, 1997 (commencement of operations) to December 31, 1997 in
conformity with generally accepted accounting principles.
Kansas City, Missouri COOPERS & LYBRAND L.L.P.
February 13, 1998
14 - Scudder S&P 500 Index Fund
<PAGE>
Tax Information
For corporate shareholders, 100% of the income dividends paid during the period
ended December 31, 1997 qualified for the dividends received deduction.
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center for Business Ethics, Bentley College
Peter B. Freeman
Trustee; Director, The A. H. Belo Company
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Bruce F. Beaty*
Vice President
Philip S. Fortuna*
Vice President
William F. Gadsden*
Vice President
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
15 - Scudder S&P 500 Index Fund
<PAGE>
Investment Portfolio as of December 31, 1997
Equity 500 Index Portfolio
Principal Market
Amount ($) Value ($)
- --------------------------------------------------------------------------------
Short-Term Instruments 1.2%
- --------------------------------------------------------------------------------
Mutual Funds 1.1%
BT Institutional Cash
Management Fund ................................. 30,227,816 30,227,816
U.S. Treasury Bill 0.1%
5.3%, 3/05/98 (b) ................................. 4,170,000 4,133,229
- --------------------------------------------------------------------------------
Total Short-Term Instruments (Cost $34,360,106) 34,361,045
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
Common Stocks 98.7%
- --------------------------------------------------------------------------------
Advertising 0.1%
Omnicom Group, Inc. ............................... 57,600 2,440,800
-------------
Aerospace 1.7%
Boeing Co. ........................................ 367,446 17,981,889
General Dynamics Corp. ............................ 24,122 2,085,045
Lockheed Martin Corp. ............................. 72,745 7,165,382
Northrop Grumman Corp. ............................ 24,579 2,826,585
Raytheon Co.-Class A .............................. 17,497 862,844
Raytheon Co.-Class B .............................. 95,514 4,823,457
Rockwell International Corp. ...................... 80,624 4,212,604
United Technologies Corp. ......................... 85,612 6,233,624
-------------
46,191,430
-------------
Airlines 0.4%
AMR Corp. (a) ..................................... 34,202 4,394,957
Delta Air Lines, Inc. ............................. 27,849 3,314,031
Southwest Airlines Co. ............................ 73,200 1,802,550
U.S. Airways Group Inc. (a) ....................... 31,715 1,982,188
-------------
11,493,726
-------------
Apparel, Textiles 0.4%
Charming Shoppes, Inc. (a) ........................ 16,203 75,951
Corning Inc. ...................................... 91,414 3,393,745
Fruit of the Loom, Inc.-Class A (a) ............... 24,800 635,500
Liz Claiborne, Inc. ............................... 24,203 1,011,988
Nike, Inc.-Class B ................................ 71,248 2,796,484
Reebok International Ltd. (a) ..................... 21,129 608,779
Russell Corp. ..................................... 7,011 186,230
Springs Industries, Inc.-Class A .................. 7,304 379,808
V.F. Corp. ........................................ 49,830 2,289,066
-------------
11,377,551
-------------
Auto Related 2.1%
AutoZone, Inc. (a) ................................ 56,400 1,635,600
Chrysler Corp. .................................... 254,002 8,937,695
Cummins Engine Co., Inc. .......................... 16,534 976,539
Dana Corp. ........................................ 31,374 1,490,265
Eaton Corp. ....................................... 32,182 2,872,243
Echlin, Inc. ...................................... 29,244 1,058,267
Ford Motor Co. .................................... 417,364 20,320,410
General Motors Corp. .............................. 259,984 15,761,530
Genuine Parts Co. ................................. 67,526 2,291,664
Meritor Automotive, Inc. .......................... 1 21
PACCAR Inc. ....................................... 33,080 1,736,700
Parker Hannifin Corp. ............................. 46,414 2,129,242
Timken Co. ........................................ 24,196 831,738
-------------
60,041,914
-------------
Banks 8.1%
Ahmanson (H.F.) & Co. ............................. 36,034 2,412,026
Banc One Corp. .................................... 222,834 12,102,672
Bank of New York Company, Inc. .................... 138,400 8,001,250
BankAmerica Corp. ................................. 254,872 18,605,656
BankBoston Corp. .................................. 58,067 5,454,669
Barnett Banks, Inc. ............................... 76,294 5,483,631
BB&T Corp. ........................................ 55,600 3,561,875
Chase Manhattan Corp. ............................. 154,952 16,967,244
Citicorp .......................................... 169,266 21,401,570
Comerica, Inc. .................................... 41,200 3,718,300
CoreStates Financial Corp. ........................ 78,364 6,274,018
Fifth Third Bancorp ............................... 54,250 4,434,937
First Chicago NBD Corp. ........................... 112,536 9,396,756
First Union Corp. ................................. 239,600 12,279,500
The accompanying notes are an integral part of the financial statements.
16 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Golden West Financial Corp. ....................... 16,517 1,615,569
Huntington Bancshares, Inc. ....................... 73,700 2,653,200
KeyCorp ........................................... 87,600 6,203,175
Mellon Bank Corp. ................................. 93,524 5,669,893
Morgan (J.P.) & Company, Inc. ..................... 69,360 7,829,010
National City Corp. ............................... 85,800 5,641,350
NationsBank Corp. ................................. 265,804 16,164,206
Norwest Corp. ..................................... 277,616 10,722,918
Republic New York Corp. ........................... 17,400 1,986,862
SunTrust Banks, Inc. .............................. 73,160 5,221,795
U.S. Bancorp ...................................... 90,199 10,096,651
Wachovia Corp. .................................... 72,200 5,857,225
Washington Mutual, Inc. ........................... 97,685 6,233,524
Wells Fargo & Co. ................................. 33,370 11,327,029
-------------
227,316,511
-------------
Beverages 3.4%
Anheuser-Busch Companies, Inc. .................... 182,380 8,024,720
Brown-Forman, Inc.-Class B ........................ 9,419 520,400
Coca-Cola Co. ..................................... 909,122 60,570,253
Coors (Adolph) Co.-Class B ........................ 15,768 524,286
PepsiCo, Inc. ..................................... 557,594 20,317,332
Seagram Ltd. ...................................... 132,737 4,289,064
-------------
94,246,055
-------------
Building and Construction 0.9%
Armstrong World Industries, Inc. .................. 17,283 1,291,904
Centex Corp. ...................................... 11,290 710,564
Crane Co. ......................................... 9,466 410,588
Fleetwood Enterprises, Inc. ....................... 8,506 360,973
Home Depot, Inc. .................................. 269,426 15,862,456
Masco Corp. ....................................... 62,811 3,195,510
Owens Corning ..................................... 12,450 424,856
Stanley Works ..................................... 32,130 1,516,134
-------------
23,772,985
-------------
Building, Forest Products 0.4%
Boise Cascade Corp. ............................... 24,003 726,091
Champion International Corp. ...................... 36,528 1,655,175
Georgia-Pacific Corp. ............................. 33,201 2,016,961
Johnson Controls, Inc. ............................ 22,354 1,067,403
Kaufman & Broad Home Corp. ........................ 2,045 45,885
Louisiana-Pacific Corp. ........................... 34,158 649,002
Potlatch Corp. .................................... 4,401 189,243
Weyerhaeuser Co. .................................. 69,994 3,434,080
-------------
9,783,840
-------------
Chemicals and Toxic Waste 2.6%
Air Products & Chemical, Inc. ..................... 46,304 3,808,504
Amgen, Inc. (a) ................................... 96,740 5,236,052
Dow Chemical Co. .................................. 83,676 8,493,114
Du Pont (E.I.) de Nemours & Co. ................... 415,692 24,967,501
Eastman Chemical Co. .............................. 30,181 1,797,656
FMC Corp. (a) ..................................... 16,450 1,107,291
Grace (W.R.) & Co. ................................ 27,249 2,191,841
Great Lakes Chemical Corp. ........................ 22,096 991,558
Hercules, Inc. .................................... 38,814 1,943,126
Mallinckrodt, Inc ................................. 27,102 1,029,876
Monsanto Co. ...................................... 216,920 9,110,640
Morton International, Inc. ........................ 46,406 1,595,206
Nalco Chemical Co. ................................ 16,325 645,858
PPG Industries, Inc. .............................. 60,142 3,435,612
Raychem Corp. ..................................... 33,276 1,432,948
Rohm & Haas Co. ................................... 23,159 2,217,474
Sigma-Aldrich Corp. ............................... 39,700 1,578,075
Union Carbide Corp. ............................... 54,252 2,329,445
-------------
73,911,777
-------------
Computer Services 1.5%
3Com Corp. (a) .................................... 127,200 4,444,050
Adobe Systems, Inc. ............................... 29,100 1,200,375
Automatic Data Processing, Inc. ................... 107,512 6,598,549
Cabletron Systems, Inc. (a) ....................... 58,100 871,500
Cendant Corp. (a) ................................. 293,934 10,103,981
Dell Computer Corp. (a) ........................... 120,000 10,080,000
The accompanying notes are an integral part of the financial statements.
17 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
EMC Corp. (a) ..................................... 182,300 5,001,856
Parametric Technology Co.(a) ...................... 50,000 2,368,750
Silicon Graphics, Inc. (a) ........................ 74,315 924,293
-------------
41,593,354
-------------
Computer Software 3.5%
Cisco Systems, Inc. (a) ........................... 375,450 20,931,338
Computer Associates
International, Inc. ............................. 201,975 10,679,427
Microsoft Corp. (a) ............................... 443,500 57,322,375
Oracle Corp. (a) .................................. 363,356 8,107,381
Seagate Technology, Inc. (a) ...................... 94,700 1,822,975
-------------
98,863,496
-------------
Containers 0.3%
Avery Dennison Corp. .............................. 35,330 1,581,017
Ball Corp. ........................................ 2,754 97,251
Crown Cork & Seal Company, Inc. ................... 50,850 2,548,856
Owens-Illinois, Inc. (a) .......................... 52,500 1,991,719
Stone Container Corp. ............................. 39,849 415,924
Temple-Inland, Inc. ............................... 21,522 1,125,870
-------------
7,760,637
-------------
Cosmetics and Toiletries 0.9%
Alberto-Culver Co.-Class B ........................ 2,798 89,711
Avon Products, Inc. ............................... 54,028 3,315,969
Gillette Co. ...................................... 205,908 20,680,885
International Flavors &
Fragrances, Inc. ................................ 42,387 2,182,930
-------------
26,269,495
-------------
Diversified 1.0%
Allegheny Teledyne Inc. ........................... 54,169 1,401,623
Ceridian Corp. (a) ................................ 28,102 1,287,423
Loews Corp. ....................................... 39,400 4,181,325
Minnesota Mining &
Manufacturing Co. ............................... 155,478 12,758,913
NACCO Industries, Inc.-Class A .................... 3,527 378,050
Pall Corp. ........................................ 47,964 992,255
Praxair, Inc. ..................................... 57,915 2,606,175
SUPERVALU, Inc. ................................... 31,220 1,307,338
Textron, Inc. ..................................... 59,706 3,731,625
-------------
28,644,727
-------------
Drugs 6.9%
American Home Products Corp. ...................... 238,766 18,265,599
Bristol-Myers Squibb Co. .......................... 365,478 34,583,356
Lilly (Eli) & Co. ................................. 407,740 28,388,897
Merck & Company, Inc. ............................. 440,397 46,792,181
Pfizer, Inc. ...................................... 475,408 35,447,609
Schering-Plough Corp. ............................. 269,116 16,718,832
Warner-Lambert Co. ................................ 100,086 12,410,664
-------------
192,607,138
-------------
Electrical Equipment 4.9%
CBS Corp. ......................................... 261,410 7,695,257
General Electric Co. .............................. 1,202,944 88,266,016
General Signal Corp. .............................. 23,072 973,350
Grainger (W.W.), Inc. ............................. 14,965 1,454,411
Hewlett-Packard Co. ............................... 385,940 24,121,250
ITT Corp. (a) ..................................... 43,023 3,565,531
ITT Industries, Inc. .............................. 37,423 1,174,147
Tyco International Ltd. ........................... 192,664 8,681,921
-------------
135,931,883
-------------
Electronics 3.9%
Advanced Micro Devices, Inc.(a) ................... 55,041 987,298
Aeroquip-Vickers, Inc. ............................ 5,527 271,168
AlliedSignal, Inc. ................................ 207,712 8,087,786
AMP, Inc. ......................................... 80,873 3,396,666
Applied Materials, Inc. (a) ....................... 134,900 4,063,863
Emerson Electric Co. .............................. 167,500 9,453,281
Harris Corp. ...................................... 26,542 1,217,614
Intel Corp. ....................................... 600,228 42,166,017
KLA Instruments Corp. (a) ......................... 31,800 1,228,275
LSI Logic Corp. (a) ............................... 52,600 1,038,850
Micron Technology, Inc. (a) ....................... 82,800 2,152,800
The accompanying notes are an integral part of the financial statements.
18 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Motorola, Inc. .................................... 219,442 12,521,909
National Semiconductor Corp. (a) .................. 58,026 1,505,049
Northern Telecom Ltd. ............................. 95,701 8,517,389
Perkin-Elmer Corp. ................................ 17,825 1,266,689
Scientific-Atlanta, Inc. .......................... 29,938 501,462
Tektronix, Inc. ................................... 16,707 663,059
Texas Instruments, Inc. ........................... 143,456 6,455,520
Thermo Electron Corp. (a) ......................... 58,900 2,621,050
Thomas & Betts Corp. .............................. 17,300 817,425
Western Atlas, Inc. (a) ........................... 21,259 1,573,166
-------------
110,506,336
-------------
Environmental Control 0.3%
Browning-Ferris Industries, Inc. .................. 81,035 2,998,295
Laidlaw, Inc.-Class B ............................. 98,900 1,347,513
Safety-Kleen Corp. ................................ 20,126 552,207
Waste Management, Inc. ............................ 159,458 4,385,095
-------------
9,283,110
-------------
Financial Services 5.1%
American Express Co. .............................. 170,866 15,249,791
Beneficial Corp. .................................. 17,852 1,483,947
Charles Schwab Corp. .............................. 96,400 4,042,775
Cincinnati Financial Corp. ........................ 10,200 1,435,650
Countrywide Credit Industries ..................... 36,700 1,573,513
Equifax ........................................... 47,500 1,683,281
Fannie Mae ........................................ 389,964 22,252,321
First Data Corp. .................................. 157,300 4,601,025
Fleet Financial Group, Inc. ....................... 92,444 6,927,522
Freddie Mac ....................................... 254,724 10,682,488
Green Tree Financial Corp. ........................ 53,500 1,401,031
Hartford Financial Services Group ................. 46,923 4,390,233
Household International, Inc. ..................... 39,358 5,020,605
MBNA Corp. ........................................ 184,225 5,031,645
Merrill Lynch & Co., Inc. ......................... 122,276 8,918,506
Morgan Stanley, Dean Witter,
Discover & Co. .................................. 215,793 12,758,761
PNC Banc Corp. .................................... 123,633 7,054,808
State Street Corp. ................................ 59,700 3,473,794
Synovus Financial Corp. ........................... 59,000 1,932,250
Travelers Group, Inc. ............................. 420,521 22,655,569
-------------
142,569,515
-------------
Food Services/Lodging 0.6%
Darden Restaurants, Inc. .......................... 44,719 558,988
McDonald's Corp. .................................. 256,114 12,229,443
Tricon Global Restaurants, Inc. (a) ............... 60,699 1,764,065
Wendy's International, Inc. ....................... 54,462 1,310,492
-------------
15,862,988
-------------
Foods 3.1%
Archer-Daniels-Midland Co. ........................ 195,317 4,235,937
Campbell Soup Co. ................................. 167,054 9,710,014
ConAgra, Inc. ..................................... 171,632 5,631,675
CPC International, Inc. ........................... 52,830 5,692,432
General Mills, Inc ................................ 64,319 4,606,848
Heinz (H.J.) Co. .................................. 134,375 6,827,930
Hershey Foods Corp. ............................... 41,294 2,557,647
Kellogg Co. ....................................... 148,014 7,345,195
Pioneer Hi-Bred International, Inc. ............... 25,840 2,771,340
Quaker Oats Co. ................................... 50,884 2,684,131
Ralston-Purina Group .............................. 38,605 3,587,852
Sara Lee Corp. .................................... 175,687 9,893,374
Sysco Corp. ....................................... 62,810 2,861,781
Unilever N.V ...................................... 233,368 14,570,915
Whitman Corp. ..................................... 35,127 915,497
Wrigley (WM) Jr. Co. .............................. 34,092 2,712,445
-------------
86,605,013
-------------
Forest Products and Paper 0.0%
Willamette Industries, Inc ........................ 34,600 1,113,688
-------------
Health Care 0.9%
Abbott Laboratories ............................... 281,122 18,431,061
Columbia/HCA Healthcare Corp. ..................... 227,222 6,731,452
-------------
25,162,513
-------------
The accompanying notes are an integral part of the financial statements.
19 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Hospital Supplies and Health Care 2.9%
Allergan, Inc. .................................... 22,401 751,834
Alza Corp. (a) .................................... 35,234 1,120,882
Bard (C.R.), Inc. ................................. 23,477 735,124
Bausch & Lomb, Inc. ............................... 21,723 860,774
Baxter International Inc. ......................... 108,863 5,490,777
Becton, Dickinson & Co. ........................... 40,532 2,026,600
Biomet, Inc. ...................................... 45,450 1,164,656
Boston Scientific Corp. (a) ....................... 71,500 3,280,062
Cardinal Health, Inc. ............................. 40,200 3,020,025
Guidant Corp. ..................................... 54,400 3,386,400
HBO & Co. ......................................... 73,400 3,523,200
HEALTHSOUTH Corp. (a) ............................. 141,000 3,912,750
Humana, Inc. (a) .................................. 51,700 1,072,775
Johnson & Johnson ................................. 493,896 32,535,399
Manor Care, Inc. .................................. 17,560 614,600
Medtronic, Inc. ................................... 172,304 9,013,653
Shared Medical Systems Corp. ...................... 9,674 638,484
St. Jude Medical, Inc. (a) ........................ 39,419 1,202,280
Tenet Healthcare Corp. (a) ........................ 111,710 3,700,394
United Healthcare Corp. ........................... 71,000 3,527,812
U.S. Surgical Corp. ............................... 22,848 669,732
-------------
82,248,213
-------------
Hotel/Motel 0.2%
Hilton Hotels Corp. ............................... 92,041 2,738,220
Marriott International, Inc. ...................... 46,690 3,233,282
-------------
5,971,502
-------------
Household Furnishings 0.2%
Maytag Corp. ...................................... 29,012 1,082,510
Newell Co. ........................................ 52,858 2,246,465
Whirlpool Corp. ................................... 29,939 1,646,645
-------------
4,975,620
-------------
Household Products 1.9%
Clorox Co. ........................................ 42,704 3,376,285
Colgate-Palmolive Co. ............................. 108,702 7,989,597
Procter & Gamble Co. .............................. 494,040 39,430,568
Rubbermaid, Inc. .................................. 49,802 1,245,050
Tupperware Corp. .................................. 20,596 574,113
-------------
52,615,613
-------------
Insurance 3.8%
Aetna, Inc. ....................................... 54,959 3,878,044
Allstate Corp. .................................... 157,650 14,326,444
American General Corp. ............................ 87,137 4,710,844
American International Group, Inc. ................ 257,800 28,035,750
Aon Corp. ......................................... 56,950 3,338,694
Chubb Corp. ....................................... 61,772 4,671,507
CIGNA Corp. ....................................... 28,233 4,886,074
Conseco, Inc. ..................................... 70,400 3,198,800
General Re Corp. .................................. 29,578 6,270,536
Jefferson-Pilot Corp. ............................. 26,077 2,030,746
Lincoln National Corp. ............................ 37,410 2,922,656
Marsh & McLennan
Companies, Inc. ................................. 66,624 4,967,652
MBIA, Inc. ........................................ 36,000 2,405,250
MGIC Investment Corp. ............................. 44,900 2,985,850
Progressive Corp. ................................. 26,400 3,164,700
Providian Financial ............................... 36,998 1,671,847
SAFECO Corp. ...................................... 59,202 2,886,098
St. Paul Companies, Inc. .......................... 34,830 2,858,237
SunAmerica, Inc. .................................. 60,900 2,603,475
Torchmark Corp. ................................... 46,268 1,946,148
UNUM Corp. ........................................ 51,500 2,800,312
USF&G Corp. ....................................... 29,017 640,188
-------------
107,199,852
-------------
Leisure Related 1.3%
American Greetings
Corp.-Class A ................................... 31,314 1,225,160
Brunswick Corp .................................... 28,442 862,148
Disney (Walt) Co. ................................. 248,157 24,583,053
Harcourt General, Inc. ............................ 18,039 987,635
The accompanying notes are an integral part of the financial statements.
20 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Harrah's Entertainment, Inc. (a) .................. 35,215 664,683
Hasbro, Inc. ...................................... 49,487 1,558,841
Jostens, Inc. ..................................... 5,639 130,049
Mattel, Inc. ...................................... 107,165 3,991,896
Mirage Resorts, Inc. (a) .......................... 61,300 1,394,575
-------------
35,398,040
-------------
Machinery 1.3%
Black & Decker Corp. .............................. 37,671 1,471,523
Briggs & Stratton Corp. ........................... 11,982 581,876
Case Corp. ........................................ 29,200 1,764,775
Caterpillar Inc. .................................. 136,864 6,646,458
Cincinnati Milacron, Inc. ......................... 7,447 193,157
Cooper Industries, Inc. ........................... 39,148 1,918,252
Deere & Co. ....................................... 97,623 5,692,641
Dover Corp. ....................................... 74,808 2,702,439
Dresser Industries, Inc. .......................... 64,482 2,704,214
Echo Bay Mines Ltd. (a) ........................... 28,730 70,029
Harnischfeger Industries, Inc. .................... 18,922 668,183
Illinois Tool Works, Inc. ......................... 90,792 5,458,869
Ingersoll-Rand Co. ................................ 65,696 2,660,688
Millipore Corp. ................................... 18,592 630,966
Navistar International Corp. (a) .................. 10,658 264,452
Snap-On, Inc. ..................................... 14,094 614,851
TRW Inc. .......................................... 46,672 2,491,118
-------------
36,534,491
-------------
Metals 0.9%
Alcan Aluminium Ltd. .............................. 80,536 2,224,807
Aluminum Company of America ....................... 63,400 4,461,775
Armco, Inc. (a) ................................... 62,935 310,742
Asarco, Inc. ...................................... 15,849 355,612
Barrick Gold Corp. ................................ 137,100 2,553,487
Battle Mountain Gold Co. .......................... 44,400 260,850
Bethlehem Steel Corp. (a) ......................... 40,449 348,873
Cyprus Amax Minerals Co. .......................... 29,194 448,858
Engelhard Corp. ................................... 40,008 695,139
Freeport-McMoRan Copper &
Gold, Inc.-Class B .............................. 30,600 481,950
Homestake Mining Co. .............................. 63,643 564,832
Inco Ltd. ......................................... 57,566 978,622
Inland Steel Industries, Inc. ..................... 16,603 284,326
Newmont Mining Corp. .............................. 66,610 1,956,669
Nucor Corp. ....................................... 36,494 1,763,116
Phelps Dodge Corp. ................................ 25,408 1,581,647
Placer Dome, Inc. ................................. 89,604 1,136,851
Reynolds Metals Co. ............................... 29,349 1,760,940
USX-U.S. Steel Group, Inc. ........................ 38,977 1,218,031
Worthington Industries, Inc. ...................... 20,379 336,254
-------------
23,723,381
-------------
Miscellaneous 0.1%
ACNielsen Corp. (a) ............................... 1 24
Cognizant Corp. ................................... 60,579 2,699,552
NextLevel Systems, Inc. (a) ....................... 58,000 1,036,750
-------------
3,736,326
-------------
Office Equipment and Computers 3.0%
Apple Computer, Inc. (a) .......................... 46,142 605,614
Autodesk, Inc. .................................... 17,114 633,218
Compaq Computer Corp. ............................. 278,231 15,702,662
Computer Sciences Corp. (a) ....................... 29,886 2,495,481
Data General Corp. (a) ............................ 18,745 326,866
Digital Equipment Corp. (a) ....................... 55,932 2,069,484
Honeywell, Inc. ................................... 46,819 3,207,102
Ikon Office Solutions, Inc. ....................... 50,562 1,422,056
International Business
Machines Corp. .................................. 357,382 37,368,755
Moore Corp. Ltd. .................................. 22,079 333,945
Novell, Inc. (a) .................................. 118,992 892,440
Pitney Bowes, Inc. ................................ 52,098 4,685,564
Sun Microsystems, Inc. (a) ........................ 137,656 5,489,033
Unisys Corp. (a) .................................. 72,599 1,007,311
The accompanying notes are an integral part of the financial statements.
21 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Xerox Corp. ....................................... 118,735 8,764,127
-------------
85,003,658
-------------
Oil Related 8.5%
Amerada Hess Corp. ................................ 36,193 1,986,091
Amoco Corp. ....................................... 179,002 15,237,545
Anadarko Petroleum ................................ 19,500 1,183,406
Apache Corp. ...................................... 35,200 1,234,200
Ashland Inc. ...................................... 21,387 1,148,215
Atlantic Richfield Co. ............................ 118,750 9,514,844
Baker Hughes, Inc. ................................ 65,144 2,841,907
Burlington Resources, Inc. ........................ 60,239 2,699,460
Chevron Corp. ..................................... 241,966 18,631,382
Exxon Corp. ....................................... 906,414 55,461,207
Fluor Corp. ....................................... 32,381 1,210,240
Foster Wheeler Corp. .............................. 16,538 447,560
Halliburton Co. ................................... 98,480 5,114,805
Helmerich & Payne, Inc. ........................... 9,808 665,718
Kerr-McGee Corp. .................................. 20,832 1,318,926
McDermott International, Inc. ..................... 24,087 882,186
Mobil Corp. ....................................... 289,142 20,872,438
Occidental Petroleum Corp. ........................ 125,714 3,684,992
Oryx Energy Co. (a) ............................... 43,979 1,121,464
Pennzoil Co. ...................................... 18,754 1,253,002
Phillips Petroleum Co. ............................ 90,706 4,410,579
Rowan Companies, Inc. (a) ......................... 29,900 911,950
Royal Dutch Petroleum Co. ......................... 788,204 42,710,804
Schlumberger Ltd. ................................. 183,562 14,776,741
Sun Co., Inc. ..................................... 29,845 1,255,355
Tenneco, Inc. ..................................... 69,434 2,742,643
Texaco, Inc. ...................................... 201,122 10,936,009
Union Pacific Resources
Group Inc. ...................................... 93,748 2,273,389
Unocal Corp. ...................................... 90,637 3,517,849
USX-Marathon Group ................................ 99,364 3,353,535
Williams Companies, Inc. .......................... 118,236 3,354,946
-------------
236,753,388
-------------
Paper 0.8%
Bemis Company, Inc. ............................... 11,531 508,085
Fort James Corp. .................................. 73,035 2,793,589
International Paper Co. ........................... 111,144 4,793,085
Kimberly-Clark Corp. .............................. 212,130 10,460,660
Mead Corp. ........................................ 42,102 1,178,856
Union Camp Corp. .................................. 29,303 1,573,205
Westvaco Corp. .................................... 34,960 1,099,055
-------------
22,406,535
-------------
Pharmaceuticals 0.2%
Pharmacia & Upjohn, Inc. .......................... 186,532 6,831,735
-------------
Photography and Optical 0.3%
Eastman Kodak Co. ................................. 121,326 7,378,138
Polaroid Corp. .................................... 16,482 802,467
-------------
8,180,605
-------------
Printing and Publishing 1.3%
Deluxe Corp. ...................................... 30,091 1,038,140
Donnelley (R.R.) & Sons Co. ....................... 58,152 2,166,162
Dow Jones & Co, Inc. .............................. 30,172 1,619,859
Dun & Bradstreet Corp. ............................ 62,579 1,936,038
Gannett Co., Inc. ................................. 104,292 6,446,549
Harland (John H.) Co. ............................. 3,304 69,384
Knight-Ridder, Inc. ............................... 37,626 1,956,552
McGraw-Hill Companies, Inc. ....................... 37,630 2,784,620
Meredith Corp. .................................... 8,272 295,207
New York Times Co.--Class A ....................... 30,284 2,002,529
Time Warner, Inc. ................................. 192,815 11,954,530
Times Mirror Co.--Class A ......................... 27,329 1,680,734
Tribune Co. ....................................... 46,596 2,900,601
-------------
36,850,905
-------------
Professional Services 0.4%
Block (H&R), Inc. ................................. 40,535 1,816,475
Ecolab, Inc. ...................................... 18,600 1,031,138
The accompanying notes are an integral part of the financial statements.
22 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
EG&G, Inc. ........................................ 8,125 169,102
Interpublic Group of
Companies, Inc. ................................. 39,160 1,950,657
National Service Industries ....................... 20,326 1,007,407
Service Corporation International ................. 84,792 3,132,005
Transamerica Corp. ................................ 23,843 2,539,279
-------------
11,646,063
-------------
Railroads 0.7%
Burlington Northern
Santa Fe Corp. .................................. 57,362 5,331,081
CSX Corp. ......................................... 79,332 4,283,927
Norfolk Southern Corp. ............................ 130,353 4,016,502
Union Pacific Corp. ............................... 95,647 5,971,960
-------------
19,603,470
-------------
Real Estate 0.0%
Pulte Corp. ....................................... 10,166 425,066
-------------
Retail 4.1%
Albertson's, Inc. ................................. 92,202 4,368,070
American Stores Co. ............................... 106,736 2,194,759
Circuit City Stores, Inc. ......................... 39,346 1,399,242
Costco Companies, Inc. (a) ........................ 78,599 3,507,480
CVS Corp. ......................................... 64,419 4,126,842
Dayton Hudson Corp. ............................... 80,108 5,407,290
Dillards Department
Stores, Inc.-Class A ............................ 42,797 1,508,594
Federated Department
Stores, Inc.(a) ................................. 77,400 3,333,038
Gap, Inc. ......................................... 147,771 5,236,635
Giant Food, Inc.-Class A .......................... 17,093 575,820
Great Atlantic & Pacific Tea
Co., Inc. ....................................... 8,025 238,242
Kmart Corp. (a) ................................... 178,903 2,068,566
Kroger Co. (a) .................................... 93,720 3,461,783
Limited, Inc. ..................................... 92,447 2,357,399
Longs Drug Stores, Inc. ........................... 10,826 347,785
Lowe's Companies, Inc. ............................ 66,694 3,180,470
May Department Stores Co. ......................... 83,298 4,388,763
Mercantile Stores Company, Inc. ................... 8,030 488,826
Nordstrom, Inc. ................................... 31,729 1,915,638
Penney (J.C.) Co., Inc. ........................... 98,150 5,919,672
Pep Boys-Manny, Moe & Jack ........................ 15,512 370,349
Rite Aid Corp. .................................... 51,001 2,993,121
Sears, Roebuck & Co. .............................. 141,709 6,412,332
Sherwin-Williams Co. .............................. 64,974 1,803,029
Tandy Corp. ....................................... 37,966 1,464,064
TJX Companies, Inc. ............................... 59,308 2,038,713
Toys `R' Us, Inc. (a) ............................. 108,618 3,414,678
Walgreen Co. ...................................... 182,468 5,724,934
Wal-Mart Stores, Inc. ............................. 825,548 32,557,549
Winn-Dixie Stores, Inc. ........................... 47,180 2,061,176
Woolworth Corp. (a) ............................... 36,122 735,986
-------------
115,600,845
-------------
Telecommunications 3.9%
360 Communications Co. (a) ........................ 1 20
Airtouch Communications, Inc. (a) ................. 185,535 7,711,298
Alltel Corp. ...................................... 59,000 2,422,687
Ameritech Corp. ................................... 202,052 16,265,186
Andrew Corp. (a) .................................. 37,976 911,424
Bay Networks, Inc. (a) ............................ 77,300 1,975,981
Clear Channel
Communications, Inc. (a) ........................ 37,600 2,986,850
Comcast Corp.-Class A ............................. 113,362 3,577,988
DSC Communications Corp. (a) ...................... 43,990 1,055,760
Frontier Corp. .................................... 56,400 1,357,125
GTE Corp. ......................................... 351,936 18,388,656
King World Productions, Inc. ...................... 17,406 1,005,197
Lucent Technologies, Inc. ......................... 236,441 18,885,725
MCI Communications Corp. .......................... 251,720 10,776,763
Tele-Communications, Inc.
-Class A (a) .................................... 165,360 4,619,745
Tellabs, Inc. (a) ................................. 69,300 3,664,238
The accompanying notes are an integral part of the financial statements.
23 - Equity 500 Index Portfolio
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Viacom, Inc.-Class B (a) .......................... 99,849 4,137,493
WorldCom, Inc. (a) ................................ 332,100 10,046,025
-------------
109,788,161
-------------
Tire and Rubber 0.2%
Cooper Tire & Rubber Co. .......................... 18,851 459,493
Goodrich (B.F.) Co. ............................... 24,952 1,033,949
Goodyear Tire & Rubber Co. ........................ 59,836 3,807,065
-------------
5,300,507
-------------
Tobacco 1.6%
Fortune Brands, Inc. .............................. 64,574 2,393,274
Philip Morris Companies, Inc. ..................... 890,598 40,355,222
UST, Inc. ......................................... 67,707 2,500,927
-------------
45,249,423
-------------
Trucking, Shipping 0.2%
Caliber System, Inc. .............................. 16,882 821,942
Federal Express Corp. (a) ......................... 42,750 2,610,422
Ryder System, Inc. ................................ 37,617 1,231,957
-------------
4,664,321
-------------
Utilities 7.9%
American Electric Power Co. ....................... 80,310 4,146,004
AT&T Corp. ........................................ 597,006 36,566,618
Baltimore Gas & Electric Co. ...................... 40,625 1,383,789
Bell Atlantic Corp. ............................... 285,418 25,973,038
BellSouth Corp. ................................... 364,432 20,522,077
Carolina Power & Light Co. ........................ 42,028 1,783,563
Central & South West Corp. ........................ 85,230 2,306,537
CINergy Corp. ..................................... 46,622 1,786,205
Coastal Corp. ..................................... 37,966 2,351,519
Columbia Gas System, Inc. ......................... 24,735 1,943,243
Consolidated Edison Company
of New York, Inc. ............................... 94,036 3,855,476
Consolidated Natural Gas Co. ...................... 39,405 2,384,002
Dominion Resources, Inc. .......................... 63,206 2,690,205
DTE Energy Co ..................................... 57,576 1,997,168
Duke Energy Corp. ................................. 135,295 7,491,961
Eastern Enterprises ............................... 3,742 168,390
Edison International .............................. 135,970 3,696,684
Enron Corp. ....................................... 117,866 4,898,806
Entergy Corp. ..................................... 105,207 3,149,635
FirstEnergy Corp. (a) ............................. 78,884 2,287,636
FPL Group, Inc. ................................... 66,294 3,923,776
GPU, Inc. ......................................... 47,800 2,013,575
Houston Industries, Inc. .......................... 114,092 3,044,830
Niagara Mohawk Power Corp. (a ) ................... 38,342 402,591
NICOR, Inc. ....................................... 10,069 424,786
Northern States Power Co .......................... 18,844 1,097,663
ONEOK, Inc. ....................................... 11,791 476,062
Pacific Enterprises ............................... 21,768 819,021
PacifiCorp ........................................ 91,389 2,496,062
PECO Energy Co. ................................... 91,284 2,213,637
People's Energy Corp. ............................. 5,455 214,791
PG&E Corp. ........................................ 170,505 5,189,746
PP&L Resources, Inc. .............................. 73,300 1,754,619
Public Service Enterprise
Group, Inc. ..................................... 95,494 3,025,966
SBC Communications, Inc. .......................... 338,614 24,803,475
Sonat, Inc. ....................................... 34,810 1,592,558
Southern Co. ...................................... 259,458 6,713,476
Sprint Corp. ...................................... 126,282 7,403,282
Texas Utilities Co. ............................... 90,127 3,745,903
Unicom Corp. ...................................... 79,525 2,445,394
Union Electric Co. ................................ 26,720 1,155,640
U.S. West, Inc.-Communications
Group ........................................... 182,328 8,227,551
U.S. West, Inc.-Media Group (a) ................... 219,028 6,324,433
-------------
220,891,393
- --------------------------------------------------------------------------------
Total Common Stocks (Cost $1,757,541,598) 2,764,949,595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24 - Equity 500 Index Portfolio
<PAGE>
% of
Net Assets
- --------------------------------------------------------------------------------
Total Investment Portfolio
(Cost $1,791,901,704) ......................... 99.9% 2,799,310,640
Other Assets Less Liabilities ................... 0.1% 3,775,831
----- -------------
Net Assets ...................................... 100.0% 2,803,086,471
===== =============
(a) Non-income producing security.
(b) Held as collateral for futures contracts.
The accompanying notes are an integral part of the financial statements.
25 - Equity 500 Index Portfolio
<PAGE>
Financial Statements
Equity 500 Index Portfolio
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
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
Accured 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.
The accompanying notes are an integral part of the financial statements.
26 - Equity 500 Index Portfolio
<PAGE>
Equity 500 Index Portfolio
Statement of Operations
for the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
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' fee .......................................................... 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.
The accompanying notes are an integral part of the financial statements.
27 - Equity 500 Index Portfolio
<PAGE>
Equity 500 Index Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase in Net Assets from: 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
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 at beginning of year .............................. 1,925,223,566 1,080,736,026
---------------- -----------------
Net assets at end of year .................................... $2,803,086,471 $1,925,223,566
---------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 - Equity 500 Index Portfolio
<PAGE>
Financial Highlights
Equity 500 Index Portfolio
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 a portfolio is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
29 - Equity 500 Index Portfolio
<PAGE>
Notes to Financial Statements
Equity 500 Index Portfolio
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.
30 - Equity 500 Index Portfolio
<PAGE>
F. Other
The preparation of financial statement 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 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 $22,011,501 for all investments as of December
31, 1997.
Note 4-Futures Contracts
A summary of obligations under these financial instruments at December 31, 1997
is as follows:
<TABLE>
<CAPTION>
Unrealized
Type of Future Expiration Contracts Position Market Value ($) 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.
31 - Equity 500 Index Portfolio
<PAGE>
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.
Kansas City, Missouri COOPERS & LYBRAND L.L.P.
February 13, 1998
32 - Equity 500 Index Portfolio
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.
33 - Scudder S&P 500 Index Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
34 - Scudder S&P 500 Index Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
35 - Scudder S&P 500 Index Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
[LOGO]
