Table of Contents
USAA Family of Funds..........................1
President's Message...........................2
Investment Review.............................4
Financial Information:
USAA S&P 500 Index Fund
Distributions to Shareholders.........6
Statement of Assets and Liabilities...7
Statement of Operations...............8
Statement of Changes in Net Assets... 9
Financial Highlights.................10
Notes to Financial Statements........11
Report of Independent Accountants....14
Equity 500 Index Portfolio
Schedule of Portfolio Investments....15
Statement of Assets and Liabilities..23
Statement of Operations..............24
Statements of Changes in Net Assets..25
Financial Highlights.................26
Notes to Financial Statements........27
Report of Independent Accountants....30
Important Information:
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One
copy of each report is sent to each address, rather than to every registered
owner. For many shareholders and their families, this eliminates duplicate
copies, saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report
per registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA S&P 500 Index
Fund, managed by USAA Investment Management Company (IMCO). It may be used as
sales literature only when preceded or accompanied by a current prospectus
which gives further details about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(copyright) 1997, USAA. All rights reserved.
<TABLE>
USAA Family of Funds Performance Summary
If you own only one or two USAA funds, you may not be aware of the performance
of our other funds. This summary is a snapshot of the performance of all 33
funds by investment objective as of December 31, 1996.
<CAPTION>
Average Annual Total Return (%)*
Investment Inception Since
Objective Date 1 yr 5 yrs 10 yrs Inception
===========================================================================================
<S> <C> <C> <C> <C> <C>
Capital Appreciation
Aggressive Growth 10/19/81 16.47 11.45 13.12 -
Emerging Markets(1) 11/7/94 16.59 - - 4.84
Gold(1) 8/15/84 0.00 6.57 .93 -
Growth 4/5/71 17.80 13.69 13.24 -
Growth & Income 6/1/93 23.04 - - 16.24
International(1) 7/11/88 19.15 13.09 - 10.60
S&P 500 Index(4) 5/1/96 - - - 16.83++
World Growth(1) 10/1/92 19.08 - - 13.66
___________________________________________________________________________________________
Asset Allocation
Balanced Strategy 9/1/95 13.45 - - 12.49
Cornerstone Strategy(1) 8/15/84 17.87 12.69 10.70 -
Growth and Tax Strategy(2)** 1/11/89 11.12 9.64 - 9.97
Growth Strategy(1) 9/1/95 22.13 - - 21.47
Income Strategy 9/1/95 3.00 - - 9.72
___________________________________________________________________________________________
Income-Taxable
GNMA 2/1/91 2.94 6.43 - 7.66
Income 3/4/74 1.33 7.33 9.25 -
Income Stock 5/4/87 18.70 12.76 - 12.78
Short-Term Bond 6/1/93 6.31 - - 5.60
____________________________________________________________________________________________
Income - Tax Exempt
Long-Term(2)** 3/19/82 4.47 6.87 7.37 -
Intermediate-Term(2)** 3/19/82 4.49 6.89 7.09 -
Short-Term(2)** 3/19/82 4.44 4.94 5.45 -
California Bond(2)** 8/1/89 5.39 7.29 - 7.65
Florida Tax-Free Income(2)** 10/1/93 4.38 - - 3.69
New York Bond(2)** 10/15/90 3.73 6.61 - 8.35
Texas Tax-Free Income(2)** 8/1/94 5.25 - - 9.44
Virginia Bond(2)** 10/15/90 5.06 7.09 - 8.18
_____________________________________________________________________________________________
Money Market
Money Market(3) 2/2/81 5.24 4.37 5.84 -
Tax Exempt Money Market(2),(3)** 2/6/84 3.34 3.04 4.21 -
Treasury Money Market Trust(3) 2/1/91 5.10 4.16 - 4.32
California Money Market(2),(3)** 8/1/89 3.27 2.93 - 3.64
Florida Tax-Free Money
Market(2),(3)** 10/1/93 3.24 - - 3.01
New York Money Market(2),(3)** 10/15/90 3.20 2.79 - 3.07
Texas Tax-Free Money
Market(2),(3)** 8/1/94 3.25 - - 3.32
Virginia Money Market(2),(3)** 10/15/90 3.17 2.87 - 3.20
_____________________________________________________________________________________________
Non-deposit investment products offered by USAA Investment Management Company are not
insured by the FDIC, are not deposits or other obligations of, or guaranteed by, USAA
Federal Savings Bank, and are subject to investment risks, including possible loss
of the principal amount invested.
For more complete information about the mutual funds managed and distributed by
USAA IMCO, including charges and expenses, please call 1-800-531-8181 for a prospectus.
Read it carefully before you invest.
(1) Foreign investing is subject to additional risks, which are discussed in the funds'
prospectuses.
(2) Some income may be subject to state or local taxes or the federal alternative minimum tax.
(3) An investment in a money market fund is neither insured nor guaranteed by the U.S.
government and there is no assurance that any of the funds will be able to maintain a
stable net asset value of $1 per share.
(4) S&P 500(Registered Trademark) is a trademark of The McGraw-Hill Companies, Inc., and
has been licensed for use. The product is not sponsored, sold or promoted by Standard
& Poor's, and Standard & Poor's makes no representation regarding the advisability of
investing in the product.
* Total return equals income yield plus share price change and assumes reinvestment of
all dividends and capital gain distributions. No adjustment has been made for taxes
payable by shareholders on their reinvested dividends and capital gain distributions.
The performance data quoted represent past performance and are not an
indication of future results. Investment return and principal value of an
investment will fluctuate, and an investor's shares, when redeemed, may be
worth more or less than their original cost.
** IRAs are not available for tax-exempt funds. The Growth and Tax Strategy Fund
is not available as an investment for your IRA because the majority of its
income is tax-exempt. California, Florida, New York, Texas, and Virginia
funds available to residents only.
++ Cumulative total return since inception, including account maintenance fee.
</TABLE>
President's Message
The secret to running a successful index
fund is not a secret; perform as closely
in line with the Index as possible.
In 1996 the Standard & Poor's 500 Stock Index(1) showed a return of 22.95%.
In addition to being an outstanding investment result for a single year, this
number was better than the results achieved by over 81% of active portfolio
managers of mutual funds.(2) In a nutshell, that is why index funds have
become so popular. The USAA S&P 500 Index Fund began life on May 2, 1996,(3)
and by December 31, 1996, had a cumulative return of 16.83%(4) which compared
favorably to the Index's performance of 16.88% for the same time period. In a
nutshell, that is why this Fund has attracted so much attention.
The secret to running a successful index fund is not a secret; perform as
closely in line with the Index as possible. Doing that requires technical
skill, which our partner, Bankers Trust, has magnificently provided, and low
expenses which we have given to you. In fact, I do not believe that any
individual investor could buy a less expensive S&P 500 index fund than ours.
That fact combined with the stature of USAA and Bankers Trust creates
an unsurpassed opportunity.
Any discussion of stock market investments requires, especially at this point
in time, a word of caution. The year 1996 was the second in a row of
exceptional returns for the stock market. I have frequently urged that
investors not think in terms of 20% or 30% stock market returns. I believe
that the historical return of the stock market, as measured by the S&P 500,
is 10% to 12%. Achieving that requires 20% to 30% returns in a few years,
because we will see very low or negative returns in other years. Do not be
surprised when it happens. It will.
(1) The S&P 500 Index is an unmanaged index representing the average
performance of a group of 500 widely held, publicly traded stocks. It
is not possible to invest directly in the S&P 500 Index.
(2) Lipper Analytical Services is an independent organization that monitors
the performance of mutual funds.
(3) Date the Fund initially invested in securities.
(4) Past Performance is no guarantee of future results. Yields and returns
will fluctuate.
Whatever the future holds, we will remain committed to providing you with an
Index Fund that tracks the S&P 500 as well as possible. We cannot guarantee
investment results, but we can pledge to you that our attention to technical
portfolio management and to the maintenance of very low expenses will not
waver.
I am pleased to let you know about another type of "waiver." Effective January
1, 1997, the $10 annual account maintenance fee was waived for all accounts
having a balance of $10,000 or more at the time the maintenance fee is assessed.
USAA Shareholder Account Services assesses this fee in order to offset part of
the cost of maintaining shareholder accounts. The fee is deducted from the
dividends paid to each shareholder account at a rate of $2.50 per quarter.
There is additional information on the fee in the Prospectus under "Fees and
Expenses," "Performance Information" and "Dividends, Distributions and Taxes."
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
(A photo of Michael J.C. Roth, President and Vice Chairman of the Board,
appears here.)
Investment Review
USAA S&P 500 Index Fund*
Objective: Seeks to provide investment results that, before expenses,
correspond to the total return of common stocks represented by the
S&P 500 Index.
Investment Instruments: Primarily equity securities, consisting of
common stock of current S&P 500 companies.
__________________________________________________________________
12/31/96
Net Assets................................. $179.1 Million
Net Asset Value Per Share.................. $11.57
__________________________________________________________________
Average Annual Total Return as of 12/31/96
May 1, 1996 to December 31, 1996.......... 16.83%
Total returns for periods of less than one year are not annualized.
This eight-month return is cumulative, and it includes the account
maintenance fee.
__________________________________________________________________
[A graph is shown here which is a comparison of the change in value of a
$10,000 investment, for the period of 5-2-96 to 12-31-96, with dividends
and capital gains reinvested. The ending value of each item graphed is
as follows: S&P 500 Index - $11,688 and the USAA S&P 500 Index Fund -
$11,683.]
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P
500 Index Fund compares to the S&P 500 Index, an unmanaged index representing
the average performance of a group of 500 widely held, publicly traded stocks.
It is not possible to invest directly in the S&P 500 Index.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested income
dividends and capital gain distributions. The performance data quoted
represent past performance and are not an indication of future results.
Investment return and principal value of an investment will fluctuate, and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
* S&P 500(registered trademark) is a trademark of The McGraw-Hill Companies,
Inc., and has been licensed for use. The product is not sponsored, sold
or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in the product.
** Date the Fund initially invested in securities represented by the Index.
[A pie chart is shown here depicting the Portfolio Mix as of December 31,
1996 of the S&P 500 Index Fund to be: Finance & Building -15.26%, Consumer
Non-Durables- 15.28%, Chemicals -3.24%, Consumer Durables -3.97%, Other -
4.51%, Retail Trade - 4.62%, Energy -8.73%, Business Equipment & Service -
9.64%, Utilities - 9.88%, Health Care - 10.46% and Capital Goods - 14.41%]
_____________________________
Ten Largest Stock Holdings
(% of Net Assets)
_____________________________
General Electric 2.7
Coca-Cola 2.2
Exxon 2.0
Intel 1.8
Microsoft 1.6
Merck & Company 1.6
Philip Morris Companies 1.5
Royal Dutch Petroleum 1.5
IBM 1.3
Procter & Gamble 1.2
_____________________________
Distributions to Shareholders
USAA S&P 500 Index Fund completed its calendar year end on December 31, 1996.
As required by Federal Law (Internal Revenue Code of 1986, as amended, and the
Regulations thereunder), the portion of the dividend distributions which
represent domestic dividend income qualifying for the Corporate Dividends
Received Deduction was 95.26%.
USAA S&P 500 Index Fund
Statement of Assets and Liabilities
December 31, 1996
Assets
Investment in Equity 500 Index Portfolio, at Value $ 178,098,474
Receivable for Capital Shares Sold 1,134,712
Receivable from USAA Transfer Agency Company 10,402
----------------
Total Assets 179,243,588
----------------
Liabilities
Payable for Capital Shares Redeemed 125,532
Accounts Payable and Accrued Expenses 45,496
----------------
Total Liabilities 171,028
-----------------
Net Assets Applicable to Capital Shares Outstanding $ 179,072,560
================
Represented By:
Paid-in Capital $ 162,469,732
Accumulated Undistributed Net Investment Income 39,414
Accumulated Net Realized Gain from Investments
and Futures Transactions 1,414,269
Net Unrealized Appreciation of Investments
and Futures Contracts 15,149,145
----------------
Net Assets Applicable to Capital Shares Outstanding $ 179,072,560
=================
Capital Shares Outstanding 15,478,919
=================
Net Asset Value, Redemption Price, and Offering Price Per Share $ 11.57
=============
See Notes to Financial Statements on Page 11
USAA S&P 500 Index Fund
Statement of Operations
For the eight months ended December 31, 1996*
Investment Income
Income Allocated from Equity 500 Index Portfolio, net $ 1,546,320
---------------
Expenses
Administration Fees 14,175
Custodian's Fees 5,969
Postage 12,993
Shareholder Reporting Fees 8,464
Directors' Fees 3,662
Registration Fees 77,987
Audit Fees 7,020
Legal Fees 1,179
Other 1,134
----------
Total Expenses 132,583
Expenses Reimbursed by Manager (70,514)
----------
Net Expenses after Reimbursement 62,069
----------
Net Investment Income 1,484,251
----------
Net Realized and Unrealized Gain on
Investments and Futures Contracts
Net Realized Gain from Investment Transactions 1,011,349
Net Realized Gain from Futures Transactions 402,920
Net Change in Unrealized Appreciation of Investments
and Futures Contracts 15,149,145
------------
Net Realized and Unrealized Gain on Investments
and Futures Contracts 16,563,414
------------
Net Increase in Net Assets from Operations $ 18,047,665
=============
* Fund commenced operations May 1, 1996.
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
Statement of Changes in Net Assets
For the eight months ended December 31, 1996*
<TABLE>
From Operations
<S> <C>
Net Investment Income $ 1,484,251
Net Realized Gain from Investment and Futures Transactions 1,414,269
Net Change in Unrealized Appreciation of Investments and Futures
Contracts 15,149,145
-----------
Net Increase in Net Assets from Operations 18,047,665
-----------
Distributions to Shareholders
Net Investment Income (1,444,837)
-----------
From Capital Share Transactions
Proceeds from Shares Sold 177,897,878
Shares Issued for Dividends Reinvested 1,086,693
Cost of Shares Redeemed (16,514,839)
------------
Net Increase in Net Assets from Capital Share Transactions 162,469,732
------------
Net Increase in Net Assets 179,072,560
Net Assets
Beginning of Period --
------------
End of Period $ 179,072,560
============
Undistributed Net Investment Income
Included in Net Assets
Beginning of Period $ --
============
End of Period $ 39,414
============
Change in Shares Outstanding
Shares Sold 16,887,079
Shares Issued for Dividends Reinvested 95,983
Shares Redeemed (1,504,143)
-------------
Increase in Shares Outstanding 15,478,919
=============
Authorized Shares of $.01 par value 50,000,000
=============
* Fund commenced operations May 1, 1996.
See Notes to Financial Statements on Page 11
</TABLE>
USAA S&P 500 INDEX FUND
Financial Highlights
December 31, 1996
Contained below are selected ratios and supplemental data for the period
indicated for the USAA S&P 500 Index Fund.
Eight-Month
Period Ended
December 31, 1996*
Per Share Operating Performance
Net Asset Value at Beginning of Period $ 10.00
------------
Income from Investment Operations:
Net Investment Income .12
Net Realized and Unrealized Gain on Investments
and Futures Transactions 1.57
------------
Total from Investment Operations 1.69
Distributions from Net Investment Income (.12)
------------
Net Asset Value at End of Period $ 11.57
============
Total Return** 16.90%
Supplemental Data and Ratios
Net Assets at End of Period (000) $ 179,073
Ratios to Average Net Assets:
Net Investment Income 2.09% (a)
Expenses, including Expenses of the Equity 500 Index Portfolio .18% (a)
Decrease Reflected in Above Expense Ratio Due to Absorption
of Expenses by Bankers Trust and the Manager .15% (a)
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Fund commenced operations May 1, 1996.
** Assumes reinvestment of all dividend income distributions during the
period; does not reflect $10 annual account maintenance fee.
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940 (the Act), as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of eight
separate funds. The information presented in this annual report pertains only to
the USAA S&P 500 Index Fund (the Fund), which commenced operations on May 1,
1996. The Fund's primary investment objective is to provide investment results
that, before expenses, correspond to the total return of common stocks
represented by the S&P 500 Index. 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, 1996, the Fund's investment was 9.25% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
A. Valuation of Investments - 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.
B. Investment Income and Expenses - 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.
C. Federal Taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. The Fund may periodically
make reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
D. Distributions - Distributions to shareholders are recorded on the ex-dividend
date. Distributions of net investment income are made quarterly. Distributions
of the Fund's pro rata share of the Portfolio's realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal year
or as otherwise required to avoid the payment of federal taxes. At December 31,
1996, as a result of differences in the allocation of capital gains/losses
between book and tax basis, the Fund had a capital loss carryover for federal
income tax purposes of approximately $1,430,435 which, if not offset by
subsequent capital gains, will expire in 2004. It is unlikely that the Board of
Directors of the Fund will authorize a distribution of capital gains realized in
the future until the capital loss carryover has been utilized or expires.
E. Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
(2) Lines of Credit
The Fund participates with other USAA funds in two joint short-term revolving
loan agreements totaling $850 million through January 13, 1998, one with USAA
Capital Corporation (CAPCO), an affiliate of the Manager ($750 million
uncommitted), and one with an unaffiliated bank ($100 million committed). The
purpose of the agreements is to meet temporary or emergency cash needs,
including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability under these agreements, the
Fund may borrow up to a maximum of 25% of its total assets, of which only 5%
may be borrowed from CAPCO, at the lending institution's borrowing rate plus
a markup. The Fund had no borrowings under either of these agreements during
the eight-month period ended December 31, 1996.
(3) Transactions with Manager
A. Administrative Fees - The Fund has entered into an Administration Agreement
with USAA Investment Management Company (the Manager) under which the Manager
provides administrative services to the Fund. The Fund's administrative fee is
computed at .02% of its annual average net assets.
The Manager has voluntarily agreed to reimburse expenses of the Fund to the
extent necessary to limit the expenses of the Fund to .18% of its annual average
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 .10% of its annual average net assets through October 31, 1996 and
to .08% of its annual average net assets beginning November 1, 1996.
B. Transfer Agent's Fees -The Fund has entered into a Transfer Agency Agreement
with USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services, an
affiliate of the Manager, under which transfer agency services are provided to
the Fund. The Fund does not pay for these services. The Transfer Agent assesses
shareholders an annual account maintenance fee of $10 to cover costs of
maintaining shareholder accounts. Effective January 1, 1997, the account
maintenance fee will be waived on accounts with a balance of $10,000 or more
at the time of the quarterly income distributions.
C. Underwriting Agreement - The Company has an agreement with the Manager for
exclusive underwriting and distribution of the Fund's shares on a continuing
best efforts basis. The Underwriting Agreement provides that the Manager will
receive no fee or other remuneration for such services.
D. Management Agreement - The Manager serves as investment adviser to the Fund.
Under the Management Agreement, the Manager is responsible for monitoring the
services provided to the Portfolio by Bankers Trust. While the Fund maintains
its investment in the Portfolio, this agreement provides that the Manager will
receive no fee for this service.
(4) Transactions with Affiliates
USAA Investment Management Company is indirectly wholly owned by United
Services Automobile Association (the Association), a large, diversified
financial services institution. At December 31, 1996, the Association and its
affiliates owned 4,881,762 shares (31.54%) of the Fund.
Certain directors and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the directors so affiliated received
compensation for services as director of the Fund. Similarly, none of the Fund's
officers received compensation from the Fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of USAA S&P 500 Index Fund:
We have audited the accompanying statement of assets and liabilities of the USAA
S&P 500 Index Fund (one of the funds comprising USAA Mutual Fund, Inc.) as of
December 31, 1996, and the related statement of operations, statement of changes
in net assets, and financial highlights for each of the periods presented
therein. 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, 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA S&P 500 Index Fund as of December 31, 1996, the results of its operations,
the changes in its net assets, and the financial highlights for the period
referred to above, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
January 27, 1997
EQUITY 500 INDEX PORTFOLIO
Schedule of Portfolio Investments
December 31, 1996
Shares Security Value
- ------- ---------- -------
Common Stocks (93.88%)
Aerospace - 2.00%
114,744 Boeing Co. $ 12,205,893
17,022 General Dynamics Corp. 1,200,051
64,745 Lockheed Martin Corp. 5,924,168
69,576 McDonnell Douglas Corp. 4,452,864
17,079 Northrop Grumman Corp. 1,413,287
77,514 Raytheon Co. 3,730,361
71,924 Rockwell International Corp. 4,378,374
79,512 United Technologies Corp. 5,247,792
- ------------------------------------------------------
38,552,790
- ------------------------------------------------------
Airlines - 0.30%
28,102 AMR Corp. 2,476,489
26,649 Delta Air Lines, Inc. 1,888,748
45,100 Southwest Airlines Co. 997,838
20,915 USAir Group, Inc. 488,888
- ------------------------------------------------------
5,851,963
- ------------------------------------------------------
Apparel, Textiles - 0.62%
16,503 Charming Shoppes, Inc. (a) 83,546
77,614 Corning, Inc. 3,589,648
18,200 Fruit of the Loom, Inc.
Cl. A (a) 689,325
25,303 Liz Claiborne, Inc. 977,328
61,348 Nike, Inc. Cl. B 3,665,543
24,429 Reebok International Ltd. 1,026,018
7,511 Russell Corp. 223,452
7,504 Spring Industries, Inc. Cl. A 322,672
6,149 Stride Rite Corp. 61,490
20,415 V.F. Corp. 1,378,013
- ------------------------------------------------------
12,017,035
- ------------------------------------------------------
Auto Related - 2.20%
12,500 AutoZone, Inc. (a) 343,750
236,702 Chrysler Corp. 7,811,166
12,534 Cummins Engine, Inc. 576,564
26,574 Dana Corp. 866,977
27,782 Eaton Corp. 1,937,794
21,444 Echlin Inc. 678,167
375,964 Ford Motor Co. 11,983,852
246,284 General Motors Corp. 13,730,333
43,084 Genuine Parts Co. 1,917,238
13,490 PACCAR Inc. 917,320
24,643 Parker-Hannifin Corp. 954,916
12,748 Timken Co. 584,814
- ------------------------------------------------------
42,302,891
- ------------------------------------------------------
Banks - 6.85%
35,234 Ahmanson (H.F.) & Co. $ 1,145,105
141,134 Banc One Corp. 6,068,762
50,567 Bank of Boston Corp. 3,248,930
132,000 Bank of New York
Company, Inc. 4,455,000
116,436 BankAmerica Corp. 11,614,491
65,494 Barnett Banks, Inc. 2,693,441
52,454 Boatmen's Bancshares, Inc. 3,383,283
139,052 Chase Manhattan Corp. 12,410,391
148,766 Citicorp Co. 15,322,898
39,000 Comerica Inc. 2,042,625
74,964 Corestates Financial Corp. 3,888,757
37,100 Fifth Third Bancorp 2,330,344
106,536 First Chicago NBD Corp. 5,726,310
92,250 First Union Corp. 6,826,500
13,717 Golden West Financial Corp. 865,886
48,784 Great Western Financial Corp. 1,414,736
75,400 KeyCorp 3,807,700
43,862 Mellon Bank Corp. 3,114,202
62,560 Morgan (J.P.) & Company, Inc. 6,107,420
66,500 National City Corp. 2,984,187
94,326 NationsBank Corp. 9,220,366
124,208 Norwest Corp. 5,403,048
14,300 Republic New York Corp. 1,167,238
67,160 Suntrust Banks, Inc. 3,307,630
53,188 U.S. Bancorp 2,390,136
49,100 Wachovia Corp. 2,774,150
30,170 Wells Fargo & Co. 8,138,357
- ------------------------------------------------------
131,851,893
- ------------------------------------------------------
Beverages - 3.57%
162,180 Anheuser-Busch
Companies, Inc. 6,487,200
7,519 Brown Forman, Inc. Cl. B 343,994
806,922 Coca-Cola Co. 42,464,270
5,668 Coors (Adolph), Inc. Cl. B 107,692
498,694 PepsiCo Inc. 14,586,800
124,337 Seagram Ltd. 4,818,059
- ------------------------------------------------------
68,808,015
- ------------------------------------------------------
Building & Construction - 0.65%
13,283 Armstrong World
Industries, Inc. 923,168
6,490 Centex Corp. 244,186
9,466 Crane Co. 274,514
8,706 Fleetwood Enterprises, Inc. 239,415
151,151 Home Depot, Inc. 7,576,444
55,611 Masco Corp. 2,001,996
12,950 Owens Corning 551,994
23,130 Stanley Works 624,510
- -------------------------------------------------------
12,436,227
- -------------------------------------------------------
Building, Forest Products - 0.46%
19,603 Boise Cascade Corp. 622,395
33,528 Champion International Corp. 1,450,086
29,801 Georgia-Pacific Corp. 2,145,672
10,377 Johnson Controls, Inc. 859,994
1,845 Kaufman & Broad Home Corp. 23,754
27,758 Louisiana Pacific Corp. 586,388
4,501 Potlatch Corp. 193,543
62,594 Weyerhaeuser Co. 2,965,391
- ------------------------------------------------------
8,847,223
- ------------------------------------------------------
Chemicals & Toxic Waste - 2.94%
32,204 Air Products & Chemical Corp. 2,226,101
87,440 Amgen Inc. (a) 4,754,550
76,576 Dow Chemical Co. 6,001,644
178,996 Du Pont (E.I.) de Nemours
& Co. 16,892,747
27,481 Eastman Chemical Co. 1,518,325
9,350 FMC Corp. (a) 655,669
30,749 Grace (W.R.) & Co. 1,591,261
23,296 Great Lakes Chemical Corp. 1,089,088
35,514 Hercules, Inc. 1,535,980
27,402 Mallinckrodt, Inc. 1,209,113
188,020 Monsanto Co. 7,309,277
48,606 Morton International, Inc. 1,980,695
16,525 Nalco Chemical Co. 596,966
56,642 PPG Industries, Inc. 3,179,032
16,038 Raychem Corp. 1,285,045
22,259 Rohm & Haas Co. 1,816,891
18,600 Sigma-Aldrich Corp. 1,161,338
44,017 Union Carbide Corp. 1,799,195
- ------------------------------------------------------
56,602,917
- ------------------------------------------------------
Computer Services - 1.02%
56,100 3Com Corp. (a) 4,116,337
87,012 Automatic Data Processing, Inc. 3,730,639
51,400 Cabletron Systems, Inc. (a) 1,709,050
124,050 CUC International, Inc. (a) 2,946,188
59,400 Dell Computer Corp. (a) 3,155,625
75,200 EMC Corp. (a) 2,491,000
58,015 Silicon Graphics, Inc. (a) 1,479,383
- ------------------------------------------------------
19,628,222
- ------------------------------------------------------
Computer Software - 3.26%
210,900 Cisco Systems, Inc. (a) 13,418,512
115,350 Computer Associates
International Inc. 5,738,663
382,300 Microsoft Corp. (a) 31,587,538
208,404 Oracle Corp. (a) 8,700,867
83,100 Seagate Technology (a) 3,282,450
- -------------------------------------------------------
62,728,030
- -------------------------------------------------------
Containers - 0.25%
27,930 Avery Dennison Corp. 988,024
2,854 Ball Corp. 74,204
42,650 Crown Cork & Seal
Company, Inc. 2,319,094
26,249 Stone Container Corp. 390,454
19,322 Temple-Inland, Inc. 1,045,803
- -------------------------------------------------------
4,817,579
- -------------------------------------------------------
Cosmetics & Toiletries - 0.95%
1,399 Alberto-Culver Co. Cl. B 67,152
45,028 Avon Products, Inc. 2,572,225
178,408 Gillette Co. 13,871,222
39,387 International Flavors &
Fragrance, Inc. 1,772,415
- -------------------------------------------------------
18,283,014
- -------------------------------------------------------
Diversified - 1.36%
47,469 Allegheny Teledyne, Inc. 1,091,787
20,702 Ceridian Corp. (a) 838,431
46,600 First Bank System, Inc. 3,180,450
35,100 Loews Corp. 3,308,175
134,578 Minnesota Mining &
Manufacturing Co. 11,153,152
3,927 NACCO Industries, Inc. Cl. A 210,094
40,064 Pall Corp. 1,021,632
51,715 Praxair, Inc. 2,385,354
22,420 Supervalu, Inc. 636,168
24,303 Textron, Inc. 2,290,558
- ------------------------------------------------------
26,115,801
- ------------------------------------------------------
Drugs - 5.43%
201,966 American Home
Products Corp. 11,840,257
163,289 Bristol Myers Squibb Co. 17,757,679
178,370 Lilly (Eli) & Co. 13,021,010
385,297 Merck & Company, Inc. 30,534,787
205,104 Pfizer Inc. 16,997,994
118,558 Schering-Plough Corp . 7,676,630
89,786 Warner-Lambert Co. 6,733,950
- -------------------------------------------------------
104,562,307
- -------------------------------------------------------
Electrical Equipment - 4.26%
527,222 General Electric Co. 52,129,075
46,700 General Instrument Corp. (a) 1,009,887
15,572 General Signal Corp. 665,703
15,665 Grainger (W.W.), Inc. 1,257,116
324,040 Hewlett-Packard Co. 16,283,010
39,023 ITT Corp. (New) (a) 1,692,623
39,123 ITT Hartford Group, Inc. 2,640,802
39,023 ITT Industries, Inc. 956,064
53,532 Tyco International Ltd. 2,830,505
129,910 Westinghouse Electric Corp. 2,581,961
- -------------------------------------------------------
82,046,746
- -------------------------------------------------------
Electronics - 4.30%
46,741 Advanced Micro Devices,
Inc. (a) 1,203,581
88,306 AlliedSignal, Inc. 5,916,502
74,873 AMP Inc. 2,873,251
57,200 Applied Materials (a) 2,055,625
74,300 Emerson Electric Co. 7,188,525
14,371 Harris Corp. 986,210
263,014 Intel Corp. 34,438,396
43,800 LSI Logic Corp. (a) 1,171,650
65,700 Micron Technology, Inc. 1,913,512
188,142 Motorola, Inc. 11,547,215
48,026 National Semiconductor
Corp. (a) 1,170,634
81,301 Northern Telecom Ltd. 5,030,499
12,825 Perkin-Elmer Corp. 755,072
17,638 Scientific-Atlanta, Inc. 264,570
7,938 Tektronix, Inc. 406,823
59,328 Texas Instruments, Inc. 3,782,160
20,800 Thomas & Betts Corp. 923,000
5,527 Trinova Corp. 201,045
14,359 Western Atlas, Inc. (a) 1,017,694
- --------------------------------------------------------
82,845,964
- --------------------------------------------------------
Environmental Control - 0.41%
67,335 Browning-Ferris
Industries, Inc. 1,767,544
69,400 Laidlaw, Inc. Cl. B 798,100
6,726 Safety-Kleen 110,138
162,358 WMX Technologies, Inc. 5,296,930
- --------------------------------------------------------
7,972,712
- --------------------------------------------------------
Financial Services - 3.75%
155,166 American Express Co. 8,766,879
19,352 Beneficial Corp. 1,226,433
52,974 Dean Witter, Discover & Co. 3,509,527
59,256 Federal Home Loan
Mortgage Corp. 6,525,567
345,864 Federal National
Mortgage Assn. 12,883,434
149,200 First Data Corp. 5,445,800
87,144 Fleet Financial Group, Inc. 4,346,307
46,200 Green Tree Financial Corp. 1,784,475
31,158 Household International, Inc. 2,874,325
68,745 MBNA Corp. 2,852,918
50,938 Merrill Lynch & Co., Inc. 4,151,447
45,700 Morgan Stanley Group, Inc. 2,610,613
115,333 PNC Banc Corp. 4,339,404
38,233 Salomon, Inc. 1,801,730
201,912 Travelers Group, Inc. 9,161,757
- -------------------------------------------------------
72,280,616
- -------------------------------------------------------
Food Services, Lodging - 0.59%
46,319 Darden Restaurants, Inc. 405,291
220,114 McDonald's Corp. 9,960,159
43,462 Wendy's International, Inc. 890,971
- -------------------------------------------------------
11,256,421
- -------------------------------------------------------
Foods - 2.91%
178,802 Archer-Daniels-Midland Co. 3,933,644
77,477 Campbell Soup Co. 6,217,529
73,516 ConAgra, Inc. 3,657,421
49,230 CPC International, Inc. 3,815,325
48,619 General Mills, Inc. 3,081,229
123,675 Heinz, (H.J.) Co. 4,421,381
38,094 Hershey Foods Corp. 1,666,613
65,207 Kellogg Co. 4,279,209
23,500 Pioneer Hi-Bred
International, Inc. 1,645,000
47,484 Quaker Oats Co. 1,810,328
30,705 Ralston Purina Co. 2,252,979
150,387 Sara Lee Corp. 5,601,916
61,710 Sysco Corp. 2,013,289
52,717 Unilever N.V., ADR 9,238,654
21,827 Whitman Corp. 499,293
33,492 Wrigley (WM) Jr. Co. 1,883,925
- ------------------------------------------------------
56,017,735
- ------------------------------------------------------
Forest Products & Paper - 0.06%
16,000 Willamette Industries, Inc. 1,118,000
- ------------------------------------------------------
Healthcare - 1.10%
245,022 Abbott Laboratories 12,434,866
212,322 Columbia/HCA Healthcare
Corp. 8,652,122
- ------------------------------------------------------
21,086,988
- ------------------------------------------------------
Hospital Supplies & Healthcare - 2.53%
23,601 Allergan, Inc. 840,786
31,534 Alza Corp. (a) 815,942
12,477 Bard (C.R.), Inc. 349,356
18,223 Bausch & Lomb, Inc. 637,805
92,463 Baxter International, Inc. 3,790,983
42,332 Becton, Dickinson Co. 1,836,150
20,682 Beverly Enterprises (a) 263,695
37,950 Biomet, Inc. 573,994
59,400 Boston Scientific Corp. (a) 3,564,000
23,200 Guidant Corp. 1,322,400
54,200 Humana, Inc. (a) 1,036,575
424,396 Johnson & Johnson 21,113,701
18,360 Manor Care, Inc. 495,720
79,552 Medtronic, Inc. 5,409,536
10,274 Shared Medical Systems Corp. 505,995
27,219 St. Jude Medical, Inc. (a) 1,160,210
62,510 Tenet Healthcare Corp. (a) 1,367,406
61,300 United Healthcare Corp. 2,758,500
21,548 US Surgical Corp. 848,453
- ------------------------------------------------------
48,691,207
- ------------------------------------------------------
Hotel/Motel - 0.37%
43,200 HFS, Inc. (a) 2,581,200
80,341 Hilton Hotels Corp. 2,098,909
44,190 Marriott International, Inc. 2,441,497
- ------------------------------------------------------
7,121,606
- ------------------------------------------------------
Household Furnishings - 0.17%
20,612 Maytag Corp. 407,087
47,858 Newell Co. 1,507,527
27,339 Whirlpool Corp. 1,274,681
- ------------------------------------------------------
3,189,295
- ------------------------------------------------------
Household Products - 1.65%
17,652 Clorox Co. 1,771,819
47,651 Colgate-Palmolive Co. 4,395,805
218,470 Procter & Gamble Co. 23,485,525
44,002 Rubbermaid, Inc. 1,001,046
22,196 Tupperware Corp. 1,190,261
- ------------------------------------------------------
31,844,456
- ------------------------------------------------------
Insurance - 3.18%
50,459 Aetna, Inc. 4,036,720
6,909 Alexander & Alexander
Services, Inc. 120,044
142,450 Allstate Corp. 8,244,294
68,654 American General Corp. 2,806,232
148,767 American International
Group, Inc. 16,104,028
31,700 Aon Corp. 1,969,362
57,972 Chubb Corp. 3,115,995
25,833 Cigna Corp. 3,529,434
27,378 General Re Corp. 4,318,879
19,477 Jefferson-Pilot Corp. 1,102,885
28,510 Lincoln National Corp. 1,496,775
24,962 Marsh & McLennan
Companies, Inc. 2,596,048
14,000 MBIA, Inc. 1,417,500
19,300 MGIC Investment Corp. 1,466,800
31,598 Providian Corp. 1,623,347
43,302 SAFECO Corp. 1,707,723
30,130 St. Paul Companies, Inc. 1,766,371
18,834 Torchmark Corp. 951,117
26,000 UNUM Corp. 1,878,500
30,017 USF&G Corp. 626,605
11,930 USLife Corp. 396,673
- -----------------------------------------------------
61,275,332
- -----------------------------------------------------
Leisure Related - 1.13%
29,114 American Greetings
Corp. Cl. A 826,110
24,842 Brunswick Corp. 596,208
215,457 Disney (Walt) Co. 15,001,194
18,939 Harcourt General, Inc. 873,561
37,115 Harrah's Entertainment,
Inc. (a) 737,661
29,425 Hasbro, Inc. 1,143,897
5,839 Jostens, Inc. 123,349
90,965 Mattel, Inc. 2,524,279
- -----------------------------------------------------
21,826,259
- -----------------------------------------------------
Machinery - 1.32%
25,971 Black & Decker Corp. 782,376
10,182 Briggs & Stratton Corp. 448,008
26,000 Case Corp. 1,417,000
64,082 Caterpillar, Inc. 4,822,171
7,847 Cincinnati Milacron, Inc. 171,653
38,648 Cooper Industries, Inc. 1,628,047
84,923 Deere & Co. 3,449,997
36,204 Dover Corp. 1,819,251
59,882 Dresser Industries, Inc. 1,856,342
30,130 Echo Bay Mines Ltd. 199,611
15,447 Giddings & Lewis, Inc. 198,880
15,322 Harnischfeger Industries, Inc. 737,371
40,496 Illinois Tool Works 3,234,618
34,831 Ingersoll-Rand Co. 1,549,980
9,792 Millipore Corp. 405,144
10,958 Navistar International Corp. (a) 99,992
14,394 Snap-On, Inc. 512,786
39,872 TRW, Inc. 1,973,664
- -----------------------------------------------------
25,306,891
- -----------------------------------------------------
Metals - 1.31%
66,036 Alcan Aluminium Ltd. 2,220,460
57,900 Aluminum Co. of America 3,691,125
66,735 Armco, Inc. (a) 275,282
16,649 Asarco, Inc. 414,144
120,900 Barrick Gold Corp. 3,475,875
46,200 Battle Mountain Gold Co. 317,625
42,349 Bethlehem Steel Corp. (a) 381,141
23,594 Cyprus Amax Minerals Co. 551,510
36,408 Engelhard Corp. 696,303
31,700 Freeport-McMoRan
Copper & Gold, Inc. Cl. B 947,037
58,143 Homestake Mining Co. 828,538
52,766 Inco Ltd. 1,681,916
17,603 Inland Steel Industries, Inc. 352,060
34,534 Newmont Mining Corp. 1,545,397
25,594 Nucor Corp. 1,305,294
21,408 Phelps Dodge Corp. 1,445,040
80,604 Placer Dome, Inc. 1,753,137
24,349 Reynolds Metals Co. 1,372,675
38,808 Santa Fe Pacific Gold Corp. 596,673
31,677 USX-U.S. Steel Group 993,866
21,679 Worthington Industries, Inc. 392,932
- ----------------------------------------------------
25,238,030
- ----------------------------------------------------
Miscellaneous - 0.10%
1 ACNielsen Corp. (a) 15
58,479 Cognizant Corp. 1,929,807
- ----------------------------------------------------
1,929,822
- ----------------------------------------------------
Office Equipment & Computers - 2.90%
43,662 Alco Standard Corp. 2,254,051
33,957 Amdahl Corp. (a) 411,729
42,342 Apple Computer, Inc. (a) 883,889
19,514 Autodesk, Inc. 546,392
85,713 Compaq Computer Corp. (a) 6,364,190
25,886 Computer Sciences Corp. (a) 2,125,888
5,545 Data General Corp. (a) 80,402
48,432 Digital Equipment Corp. (a) 1,761,714
41,319 Honeywell, Inc. 2,716,724
8,246 Intergraph Corp. (a) 84,522
166,041 IBM Corp. 25,072,191
23,079 Moore Corp. Ltd. 470,235
109,692 Novell, Inc. (a) 1,038,646
47,498 Pitney Bowes, Inc. 2,588,641
120,556 Sun Microsystems, Inc. (a) 3,096,782
30,060 Tandem Computers, Inc. (a) 413,325
59,499 Unisys Corp. (a) 401,618
106,235 Xerox Corp. 5,590,617
- ------------------------------------------------------
55,901,556
- ------------------------------------------------------
Oil Related - 8.81%
31,493 Amerada Hess Corp. 1,822,657
157,902 Amoco Corp. 12,711,111
16,487 Ashland, Inc. 723,367
50,825 Atlantic Richfield Co. 6,734,312
46,644 Baker Hughes, Inc. 1,609,218
41,000 Burlington Resources, Inc. 2,065,375
213,766 Chevron Corp. 13,894,790
397,057 Exxon Corp. 38,911,586
28,581 Fluor Corp. 1,793,458
17,338 Foster Wheeler Corp. 643,673
40,690 Halliburton Co. 2,451,572
10,308 Helmerich & Payne, Inc. 537,305
13,032 Kerr-McGee Corp. 938,304
10,262 Louisiana Land &
Exploration Co. 550,300
25,587 McDermott International, Inc. 425,384
126,571 Mobil Corp. 15,473,305
49,728 Noram Energy Corp. 764,568
106,414 Occidental Petroleum Corp. 2,487,427
26,079 Oryx Energy Co. (a) 645,455
17,754 Pennzoil Co. 1,003,101
79,606 Phillips Petroleum Co. 3,522,566
31,100 Rowan Companies, Inc. (a) 703,638
171,101 Royal Dutch Petroleum Co. 29,215,496
20,069 Santa Fe Energy
Resources, Inc. (a) 278,457
77,481 Schlumberger Ltd. 7,738,415
29,345 Sun Co. 715,284
59,234 Tenneco, Inc. 2,672,934
86,461 Texaco, Inc. 8,483,986
79,848 Union Pacific Resources
Group, Inc. 2,335,554
85,137 Unocal Corp. 3,458,691
96,764 USX-Marathon Group 2,310,241
54,318 Williams Companies, Inc. 2,036,925
- -----------------------------------------------------
169,658,455
- -----------------------------------------------------
Paper - 0.90%
11,831 Bemis Co. 436,268
99,044 International Paper Co. 3,998,902
31,335 James River Corp. 1,037,972
90,365 Kimberly-Clark Corp. 8,607,266
20,351 Mead Corp. 1,182,902
26,203 Union Camp Corp. 1,251,193
25,760 Westvaco Corp. 740,600
- ------------------------------------------------------
17,255,103
- ------------------------------------------------------
Pharmaceuticals - 0.34%
166,832 Pharmacia & Upjohn, Inc. 6,610,718
- ------------------------------------------------------
Photography & Optical - 0.48%
105,026 Eastman Kodak Co. 8,428,337
16,882 Polaroid Corp. 734,367
- ------------------------------------------------------
9,162,704
- ------------------------------------------------------
Printing & Publishing - 1.21%
31,791 Deluxe Corp. 1,041,155
53,852 Donnelley (RR) & Sons Co. 1,689,606
36,872 Dow Jones & Co. 1,249,039
64,479 Dun & Bradstreet Corp. 1,531,376
46,596 Gannett Co. 3,488,875
3,404 Harland (John H.) Co. 112,332
34,226 Knight-Ridder, Inc. 1,309,145
35,930 McGraw-Hill Companies, Inc. 1,657,271
4,336 Meredith Corp. 228,724
25,784 New York Times Co. Cl. A 979,792
178,715 Time Warner, Inc. 6,701,813
31,029 Times Mirror Co. Cl. A 1,543,693
21,698 Tribune Co. 1,711,430
- -------------------------------------------------------
23,244,251
- -------------------------------------------------------
Professional Services - 0.38%
35,135 Block (H&R), Inc. 1,018,915
15,800 Ecolab, Inc. 594,475
8,025 EG&G, Inc. 161,503
23,007 Interpublic Group of
Companies, Inc. 1,092,833
18,726 National Service
Industries, Inc. 699,884
69,392 Service Corp International 1,942,976
23,343 Transamerica Corp. 1,844,097
- ------------------------------------------------------
7,354,683
- ------------------------------------------------------
Railroads - 0.93%
47,062 Burlington Northern
Santa Fe Corp. 4,064,980
27,113 Conrail, Inc. 2,701,133
64,932 CSX Corp. 2,743,377
39,751 Norfolk Southern Corp. 3,478,212
81,247 Union Pacific Corp. 4,884,976
- -------------------------------------------------------
17,872,678
- -------------------------------------------------------
Real Estate - 0.02%
10,666 Pulte Corp. 327,979
- -------------------------------------------------------
Retail - 3.74%
83,102 Albertson's, Inc. 2,960,509
50,018 American Stores Co. 2,044,486
29,846 Circuit City Stores, Inc. 899,111
37,419 CVS Corp. 1,548,211
66,708 Dayton Hudson Corp. 2,618,289
37,197 Dillard Department Stores,
Inc. Cl. A 1,148,457
71,100 Federated Department
Stores, Inc. (a) 2,426,287
5,679 Fleming Companies, Inc. 97,963
91,014 Gap, Inc. 2,741,797
17,593 Giant Food, Inc. Cl. A 606,958
8,325 Great Atlantic & Pacific
Tea Company, Inc. 265,359
164,403 Kmart Corp. (a) 1,705,681
44,260 Kroger Co. (a) 2,058,090
89,747 Limited, Inc. 1,649,101
5,613 Longs Drug Stores Corp. 275,739
57,194 Lowe's Companies, Inc. 2,030,387
85,098 May Department Stores Co. 3,978,331
8,430 Mercantile Stores Co. 416,231
27,329 Nordstrom, Inc. 968,471
77,950 Penney (J.C.) Company, Inc. 3,800,063
15,812 Pep-Boys-Manny Moe & Jack 486,219
68,299 Price/Costco, Inc. (a) 1,716,012
43,701 Rite Aid Corp. 1,737,115
122,009 Sears, Roebuck & Co. 5,627,665
23,337 Sherwin-Williams Co. 1,306,872
17,083 Tandy Corp. 751,652
25,954 TJX Companies, Inc. 1,229,571
88,818 Toys `R' Us Inc. (a) 2,664,540
83,734 Walgreen Co. 3,349,360
730,548 Wal-Mart Stores, Inc. 16,711,286
41,680 Winn-Dixie Stores, Inc. 1,318,130
37,522 Woolworth Corp. (a) 820,794
- -------------------------------------------------------
71,958,737
- -------------------------------------------------------
Telecommunications - 3.90%
1 360 Communications Co. (a) 23
167,735 Airtouch Communications (a) 4,235,309
53,000 Alltel Corp. 1,662,875
173,952 Ameritech Corp. 10,545,840
20,184 Andrew Corp. (a) 1,071,013
59,900 Bay Networks, Inc. (a) 1,250,412
95,562 Comcast Corp. Cl. A 1,702,198
38,890 DSC Communications Corp. (a) 695,159
17,300 Frontier Corp. 391,413
310,336 GTE Corp. 14,120,288
9,306 King World Productions, Inc. (a) 343,159
202,241 Lucent Technologies, Inc. 9,353,646
225,420 MCI Communications Corp. 7,368,416
144,400 NYNEX Corp. 6,949,250
1 TCI Satellite Entertainment,
Inc. (a) 6
178,416 Tele-Communications, Inc.
Cl. A (a) 2,330,559
58,100 Tellabs, Inc. (a) 2,186,013
93,749 Viacom, Inc. Cl. B (a) 3,269,496
288,600 WorldCom, Inc. (a) 7,521,638
- -------------------------------------------------------
74,996,713
- -------------------------------------------------------
Tire & Rubber - 0.19%
19,051 Cooper Tire & Rubber Co. 376,257
13,452 Goodrich (B.F.) 544,806
52,136 Goodyear Tire & Rubber Co. 2,678,487
- -------------------------------------------------------
3,599,550
- -------------------------------------------------------
Tobacco - 1.78%
57,674 American Brands, Inc. 2,862,072
260,166 Philip Morris
Companies, Inc. 29,301,196
65,207 UST Corp. 2,111,077
- -------------------------------------------------------
34,274,345
- -------------------------------------------------------
Trucking, Shipping - 0.12%
6,782 Caliber System, Inc. 130,554
31,650 Federal Express (a) 1,408,425
30,417 Ryder Systems, Inc. 855,478
- -------------------------------------------------------
2,394,457
- -------------------------------------------------------
Utilities - 7.18%
56,110 American Electric Power Co. 2,307,524
517,106 AT&T Corp. 22,494,111
42,125 Baltimore Gas & Electric Co. 1,126,844
141,039 Bell Atlantic Corp. 9,132,275
314,132 BellSouth Corp. 12,683,080
40,628 Carolina Power & Light Co. 1,482,922
74,830 Central & South West Corp. 1,917,519
49,022 CINergy Corp. 1,636,109
29,566 Coastal Corp. 1,445,038
14,735 Columbia Gas System, Inc. 937,514
73,136 Consolidated Edison of
New York, Inc. 2,139,228
34,005 Consolidated Natural
Gas Co. 1,878,776
51,606 Dominion Resources, Inc. 1,986,831
42,976 DTE Energy Co. 1,391,348
59,087 Duke Power Co. 2,732,774
3,742 Eastern Enterprises 132,373
149,570 Edison International 2,972,704
85,966 Enron Corp. 3,707,284
15,824 ENSERCH Corp. 363,952
80,907 Entergy Corp. 2,245,169
60,194 FPL Group, Inc. 2,768,924
46,600 GPU, Inc. 1,566,925
93,156 Houston Industries, Inc. 2,107,654
39,542 Niagara Mohawk Power
Corp. (a) 390,477
10,369 NICOR, Inc. 370,692
16,644 Northern States Power Co. 763,543
61,984 Ohio Edison Co. 1,410,136
12,491 ONEOK, Inc. 374,730
38,300 PP&L Resources, Inc. 880,900
22,768 Pacific Enterprises 691,578
138,505 Pacific Gas & Electric Co. 2,908,605
136,035 Pacific Telesis Group 4,999,286
82,789 PacifiCorp 1,697,174
51,358 PanEnergy Corp. 2,311,110
78,684 PECO Energy Co. 1,986,771
5,255 People's Energy 178,013
85,994 Public Service Enterprise
Corp. 2,343,336
191,262 SBC Communications, Inc. 9,897,809
31,010 Sonat, Inc. 1,597,015
218,558 Southern Co. 4,944,875
115,482 Sprint Corp. 4,604,845
73,065 Texas Utilities Co. 2,977,399
162,128 US West, Inc. -
Communications Group 5,228,628
194,228 US West, Inc. -
Media Group (a) 3,593,218
74,825 Unicom Corp. 2,029,628
25,120 Union Electric Co. 967,120
- ------------------------------------------------------
138,303,766
- ------------------------------------------------------
Total Common Stocks
(Cost $1,328,011,568) 1,807,369,682
---------------
Principal
Amount Security Value
- --------- ---------- -------
Short-Term Investments (1.77%)
U.S. Treasury Bills
$4,053,000 5.30%, 1/23/97 4,041,510
1,545,000 4.98%, 3/6/97 (b) 1,531,643
22,197,000 5.17%, 4/3/97 21,913,655
6,734,000 5.12%, 4/24/97 6,628,620
- ------------------------------------------------------
Total Short-Term Investments
(Cost $34,111,154) 34,115,428
- ------------------------------------------------------
Total Investments
(Cost $1,362,122,722) - 95.65% 1,841,485,110
Other Assets Less Liabilities - 4.35% 83,738,456
======================================================
Net Assets - 100% $1,925,223,566
===============
_________________________________
(a) Non-Income Producing Security
(b) Held as collateral for futures contracts
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at Value (Cost of $1,362,122,722) $ 1,841,485,110
Cash 1,855,461
Receivable for Securities Sold 90,070,988
Dividends and Interest Receivable 3,297,967
Prepaid Expenses and Other 8,847
---------------
Total Assets 1,936,718,373
---------------
Liabilities
Due to Bankers Trust 118,244
Due to Equity 500 Index Fund 196,852
Payable for Securities Purchased 10,574,041
Variation Margin Payable 580,386
Accrued Expenses and Other 25,284
--------------
Total Liabilities 11,494,807
--------------
Net Assets $ 1,925,223,566
==============
Composition of Net Assets
Paid-in Capital $ 1,445,978,378
Net Unrealized Appreciation on Investments 479,362,388
Net Unrealized Depreciation on Futures Contracts (117,200)
---------------
Net Assets, December 31, 1996 $ 1,925,223,566
===============
</TABLE>
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Dividends (net of foreign withholding tax of $209,718) $ 32,142,522
Interest 2,415,557
--------------
Total Investment Income 34,558,079
--------------
Expenses
Advisory Fees 1,505,963
Administration and Service Fees 752,981
Professional Fees 30,525
Trustees Fees 9,865
Miscellaneous 11,199
-------------
Total Expenses 2,310,533
Less: Expenses Absorbed by Bankers Trust (870,024)
-------------
Net Expenses 1,440,509
-------------
Net Investment Income 33,117,570
-------------
Realized and Unrealized Gain on
Investments and Futures Contracts
Net Realized Gain from Investment Transactions 15,161,968
Net Realized Gain from Futures Transactions 6,251,719
Net Change in Unrealized Appreciation on Investments 267,628,961
Net Change in Unrealized Depreciation on Futures Contracts (90,575)
-------------
Net Realized and Unrealized Gain on Investments
and Futures Contracts 288,952,073
-------------
Net Increase in Net Assets from Operations $ 322,069,643
=============
See Notes to Financial Statements on Page 27
</TABLE>
EQUITY 500 INDEX PORTFOLIO
Statements of Changes in Net Assets
<TABLE>
Years ended December 31,
<CAPTION>
1996 1995
------ ------
Increase in Net Assets from:
<S> <C> <C>
Operations
Net Investment Income $ 33,117,570 $ 19,425,500
Net Realized Gain from Investments
and Futures Transactions 21,413,687 4,687,899
Net Change in Unrealized Appreciation
on Investments and Futures Contracts 267,538,386 212,725,683
------------- -------------
Net Increase in Net Assets from Operations 322,069,643 236,839,082
------------- -------------
Capital Transactions
Proceeds from Capital Invested 854,711,041 474,637,337
Value of Capital Withdrawn (332,293,144) (190,511,921)
--------------- --------------
Net Increase in Net Assets from
Capital Transactions 522,417,897 284,125,416
--------------- --------------
Total Increase in Net Assets 844,487,540 520,964,498
Net Assets
Beginning of Year 1,080,736,026 559,771,528
------------------ ---------------
End of Year $ 1,925,223,566 $ 1,080,736,026
================== ===============
</TABLE>
See Notes to Financial Statements on Page 27
Equity 500 Index Portfolio
Financial Highlights
December 31, 1996
<TABLE>
Contained below are selected supplemental data and ratios to average net
assets for the periods indicated for the Equity 500 Index Portfolio.
Supplemental Data and Ratios:
<CAPTION>
December 31, 1992
For the year ended December 31, (Commencement
---------------------------------
1996 1995 1994 1993 of Operations)
----- ---- ---- ---- ---------------
<S> <C> <C> <C> <C> <C>
Net Assets, End
of Period (000) $ 1,925,224 $ 1,080,736 $ 559,772 $ 151,805 $ 9,435
Ratios to Average Net Assets:
Net Investment Income 2.20% 2.52% 2.84% 2.67% --
Expenses .10% .10% .10% .10% --
Decrease Reflected
in Above Expense
Ratio Due to
Absorption of
Expenses by
Bankers Trust .05% .05% .06% .10% --
Portfolio Turnover
Rate 15% 6% 21% 31% --
Average Commission
Per Share* $ .023
* For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
See Notes to Financial Statements on Page 27
</TABLE>
Equity 500 Index Portfolio
Notes to Financial Statements
December 31, 1996
(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 (the 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. The Portfolio's
investment in the financial futures contracts is designed to closely replicate
the benchmark index used by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
(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, 1996, this fee aggregated $752,981.
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, 1996, this
fee aggregated $1,505,963.
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. On November 1, 1996, Bankers Trust
agreed to reduce the expense ratio for the Equity 500 Index Portfolio from 0.10
of 1% to 0.08 of 1% of the average daily net assets. This reduction changed the
annualized expense ratio to 0.096 of 1% of the average daily net assets for the
year ended December 31, 1996. For the year ended December 31, 1996, expenses of
the Portfolio have been reduced by $870,024.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. (Edgewood). Prior to September 30, 1996, Signature
Broker-Dealer Services, Inc. (Signature) was the Trust's Distributor.
Certain trustees and officers of the Portfolio are also directors, officers and
employees of Edgewood Services, Inc., the distributor of the BT Institutional
Funds. None of the trustees so affiliated received compensation for services as
trustees of the Portfolio. Similarly, none of the Portfolio's officers received
compensation from the Portfolio.
For the year ended December 31, 1996, the Equity 500 Index Portfolio paid
brokerage commissions of $289,791.
(3) Purchase and Sale 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, 1996, were
$679,809,069 and $217,908,533, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1996 was $1,370,096,954. The
aggregate gross unrealized appreciation was $487,540,984, and the aggregate
gross unrealized depreciation for all investments was $16,152,828 as of December
31, 1996.
(4) Futures Contracts
A summary of obligations under these financial instruments at December 31, 1996
is as follows:
<TABLE>
<CAPTION>
Market Unrealized
Type of Future Expiration Contracts Position Value Depreciation
-------------- ---------- --------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
S&P 500 Futures Index March 1997 85 Long $31,641,250 $(117,200)
</TABLE>
At December 31, 1996, the Portfolio has segregated $1,545,000 to cover margin
requirements on open futures contracts.
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, 1996, and the related statement of operations for the year then
ended, statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the periods presented
therein. 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, 1996, 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, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods referred to above, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
January 27, 1997
