TABLE OF CONENTS
USAA Family of Funds 1
President's Message 2
Investment Review 4
Financial Information:
USAA S&P 500 Index Fund
Statement of Assets and Liabilities 6
Statement of Operations 7
Statements of Changes in Net Assets 8
Financial Highlights 9
Notes to Financial Statements 10
Equity 500 Index Portfolio
Schedule of Portfolio Investments 13
Statement of Assets and Liabilities 21
Statement of Operations 22
Statements of Changes in Net Assets 23
Financial Highlights 24
Notes to Financial Statements 25
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.
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 June 30, 1997.
<TABLE>
<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 -1.72 18.38 10.88 -
Emerging Markets(1) 11/7/94 15.35 - - 10.25
Gold(1) 8/15/84 -22.26 3.54 -4.75 -
Growth 4/5/71 21.60 16.94 11.97 -
Growth & Income 6/1/93 31.29 - - 18.53
International(1) 7/11/88 21.81 15.39 - 11.77
S&P 500 Index(4)+ 5/1/96 34.59 - - 33.24
World Growth(1) 10/1/92 21.85 - - 15.50
Asset Allocation
Balanced Strategy(1) 9/1/95 22.38 - - 15.48
Cornerstone Strategy(1) 8/15/84 20.45 14.33 9.22 -
Growth and Tax Strategy(2)** 1/11/89 15.72 11.23 - 10.45
Growth Strategy(1) 9/1/95 15.37 - - 21.37
Income Strategy 9/1/95 14.48 - - 10.36
Income u Taxable
GNMA 2/1/91 9.37 6.85 - 7.67
Income 3/4/74 8.21 7.44 9.45 -
Income Stock 5/4/87 20.77 14.21 12.89 -
Short-Term Bond 6/1/93 7.71 - - 5.69
Income u Tax Exempt
Long-Term(2)** 3/19/82 9.22 6.71 8.09 -
Intermediate-Term(2)** 3/19/82 8.20 6.76 7.54 -
Short-Term(2)** 3/19/82 5.50 4.80 5.59 -
California Bond(2)** 8/1/89 8.90 7.13 - 7.58
Florida Tax-Free Income(2)** 10/1/93 9.79 - - 4.29
New York Bond(2)** 10/15/90 8.86 6.46 - 8.31
Texas Tax-Free Income(2)** 8/1/94 10.37 - - 9.24
Virginia Bond(2)** 10/15/90 8.50 6.93 - 8.08
Money Market
Money Market(3) 2/2/81 5.28 4.48 5.80 -
Tax Exempt Money Market(2),(3)** 2/6/84 3.36 3.04 4.15 -
Treasury Money Market Trust(3) 2/1/91 5.13 4.28 - 4.38
California Money Market(2),(3)** 8/1/89 3.29 2.94 - 3.62
Florida Tax-Free Money
Market(2),(3)** 10/1/93 3.26 - - 3.04
New York Money Market(2),(3)** 10/15/90 3.21 2.82 - 3.08
Texas Tax-Free Money
Market(2),(3)** 8/1/94 3.31 - - 3.33
Virginia Money Market(2),(3)** 10/15/90 3.22 2.87 - 3.20
</TABLE>
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 return 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.
+ Includes the $10 annual account maintenance fee through December 31, 1996.
THE PRESIDENT'S MESSAGE
The USAA S&P 500 Index Fund(1) has accumulated assets faster than any other
mutual fund in the history of USAA Investment Management Company (IMCO). As I
write this message, the Fund has a total value in excess of $485 million. This
is both highly gratifying to us as money managers and highly important.
The importance of the fact that the Fund has achieved this size relates to the
great interest that our competitors and the financial press have shown in the
Fund. They have frequently suggested that our very low expense ratio was a
marketing ploy to gain shareholders quickly. They pointed out that IMCO was
reimbursing the Fund for some expenses in order to achieve that low expense
ratio.
On that last point they were correct. But I have stated repeatedly these tenets
of our relationship with our shareholders:
- -We would offer an index fund only if we could make it a competitive investment.
- -To be competitive an index fund must have a low expense ratio.
- -Since small mutual funds have high expense ratios, a simple fact of arithmetic,
we would have to begin by reimbursing some expenses.
- -We have done this with other funds.
- -We believe that we can grow our funds to the point where the reimbursement is
no longer necessary.
- -We have done it!
(Photo of the President, Michael J.C. Roth, appears here.)
At this writing the S&P 500 Index Fund is, in fact, covering all of its expenses
with an expense ratio of .18%.(2) As it grows we shall have another
money-making mutual fund, and you shall have an index fund that is as fine as
any in the industry.
Sincerely,
Michael J. C. Roth, CFA
President and
Vice Chairman of the Board
P.S. Bankers Trust's Frank Salerno, who manages the USAA S&P 500 Index Fund,
appears as a guest on the America Online's SAGE Chat program [email protected] on
September 3. The one-hour "Chat" starts at 9:00 p.m. Eastern Time.
"To be competitive an index fund
must have a low expense ratio . . .
We have done it!"
(1) 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.
(2) As of July 31, 1997, the Fund's total operating expenses are .18% with no
reimbursement of expenses by the Fund Manager. The Manager is entitled to
receive fees from the Fund only if the total operating expenses of the Fund
and the Portfolio do not exceed .18% of the Fund's average net assets. The
Manager will reimburse the Fund for any expenses in excess of .18% until
May 1, 1998. A $10 annual account maintenance fee will be charged on
accounts with balances less than $10,000 which may be higher or lower than
that charged by other mutual funds.
For more complete information about the mutual funds managed and distributed by
IMCO, including charges and expenses, please call for a prospectus. Read it
carefully before you invest.
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 6/30/97
Net Assets.............................. $179.1 MILLION $407.0 MILLION
Net Asset Value Per Share............... $11.57 $13.83
Average Annual Total Return as of 6/30/97
December 31, 1996 to June 30, 1997............................... 20.46%+
1 Year........................................................... 34.59%++
Since Inception on May 1, 1996................................... 33.24%++
+ Total returns for periods of less than one year are not annualized.
This six-month return is cumulative and does not include the account
maintenance fee.
++ Includes the $10 annual account maintenance fee through December 31,
1996.
[A chart in the form of a line graph appears here, illustrating the growth of
a $10,000 Investment. The data points from the graph are as follows:
S&P 500 INDEX
Year Amount
- ----------------------------
5/2/96** 10,000
6/96 10,467
7/96 10,004
8/96 10,215
9/96 10,789
10/96 11,087
11/96 11,924
12/96 11,688
1/97 12,417
2/97 12,515
3/97 12,002
4/97 12,717
5/97 13,494
6/97 14,095
USAA S&P 500 Index Fund
Year Amount
- ------------------------------
5/2/96** 10,000
6/96 10,459
7/96 9,998
8/96 10,208
9/96 10,778
10/96 11,070
11/96 11,914
12/96 11,686
1/97 12,403
2/97 12,504
3/97 11,977
4/97 12,697
5/97 13,478
6/97 14,077
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 June 30, 1997 of
the S&P 500 Index Fund to be: Finance & Building - 16%, Other - 11%, Retail
Trade - 5%, Utilities - 9%, Energy - 9%, Health Care -10%, Business
Equipment & Services-10%, Consumer Non-Durables - 15%, Capital Goods - 15%]
Ten Largest Stock Holdings
(% of Portfolio)
General Electric 3.11
Coca-Cola 2.45
Exxon 2.23
Microsoft 2.21
Merck & Company 1.82
Royal Dutch Petroleum 1.71
Intel 1.70
Philip Morris Companies 1.57
Procter & Gamble 1.40
IBM 1.31
USAA S&P 500 Index Fund
Statement of Assets and Liabilities
June 30, 1997
<TABLE>
<S> <C>
Assets
Investment in Equity 500 Index Portfolio, at Value $ 403,007,369
Receivable for Capital Shares Sold 4,244,112
-------------
Total Assets 407,251,481
-------------
Liabilities
Payable for Capital Shares Redeemed 224,958
USAA Investment Management Company 2,643
Accounts Payable and Accrued Expenses 66,690
-------------
Total Liabilities 294,291
-------------
Net Assets Applicable to Capital Shares Outstanding $ 406,957,190
=============
Represented By:
Paid-in Capital $ 336,954,984
Accumulated Undistributed Net Investment Income 49,488
Accumulated Net Realized Gain from Investments
and Futures Transactions 8,802,838
Net Unrealized Appreciation of Investments
and Futures Contracts 61,149,880
-------------
Net Assets Applicable to Capital Shares Outstanding $ 406,957,190
=============
Capital Shares Outstanding 29,433,256
=============
Net Asset Value, Redemption Price, and Offering Price Per Share $ 13.83
=============
</TABLE>
See Notes to Financial Statements on Page 10
USAA S&P 500 Index Fund
Statement of Operations
Six months ended June 30, 1997
(Unaudited)
<TABLE>
<S> <C>
Investment Income
Income Allocated from Equity 500 Index Portfolio, net $ 2,809,648
-------------
Expenses
Administration Fees 17,803
Custodian's Fees 5,100
Postage 11,156
Shareholder Reporting Fees 9,071
Directors' Fees 2,217
Registration Fees 95,079
Audit Fees 4,474
Legal Fees 1,800
Other 3,360
-------------
Total Expenses 150,060
Expenses Reimbursed by Manager (1,002)
-------------
Net Expenses after Reimbursement 149,058
-------------
Net Investment Income 2,660,590
-------------
Net Realized and Unrealized Gain on
Investments and Futures Contracts
Net Realized Gain from Investment Transactions 6,985,085
Net Realized Gain from Futures Transactions 403,484
Net Change in Unrealized Appreciation of Investments
and Futures Contracts 46,000,735
-------------
Net Realized and Unrealized Gain on Investments
and Futures Contracts 53,389,304
-------------
Net Increase in Net Assets from Operations $ 56,049,894
=============
</TABLE>
See Notes to Financial Statements on Page 10
USAA S&P 500 Index Fund
Statements of Changes in Net Assets
Six months ended June 30, 1997 and
Eight months ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
6/30/97 12/31/96*
-------- --------
<S> <C> <C>
From Operations
Net Investment Income $ 2,660,590 $ 1,484,251
Net Realized Gain from Investment
and Futures Transactions 7,388,569 1,414,269
Net Change in Unrealized Appreciation
of Investments and Futures Contracts 46,000,735 15,149,145
------------- --------------
Net Increase in Net Assets from Operations 56,049,894 18,047,665
------------- --------------
Distributions to Shareholders
Net Investment Income (2,650,516) (1,444,837)
------------- --------------
From Capital Share Transactions
Proceeds from Shares Sold 205,003,547 177,897,878
Shares Issued for Dividends Reinvested 1,974,161 1,086,693
Cost of Shares Redeemed (32,492,456) (16,514,839)
------------- --------------
Net Increase in Net Assets from
Capital Share Transactions 174,485,252 162,469,732
------------- --------------
Net Increase in Net Assets 227,884,630 179,072,560
Net Assets
Beginning of Period 179,072,560 -
------------- --------------
End of Period $ 406,957,190 $ 179,072,560
============= ==============
Undistributed Net Investment Income
Included in Net Assets
Beginning of Period $ 39,414 $ -
============= ==============
End of Period $ 49,488 $ 39,414
============= ==============
Change in Shares Outstanding
Shares Sold 16,407,111 16,887,079
Shares Issued for Dividends Reinvested 152,098 95,983
Shares Redeemed (2,604,872) (1,504,143)
============= =============
Increase in Shares Outstanding 13,954,337 15,478,919
============= =============
Authorized Shares of $.01 par value 50,000,000 50,000,000
============= =============
</TABLE>
* Fund commenced operations May 1, 1996.
See Notes to Financial Statements on Page 10
USAA S&P 500 Index Fund
Financial Highlights
June 30, 1997
(Unaudited)
Contained below are selected ratios and supplemental data for the periods
indicated for the USAA S&P 500 Index Fund.
<TABLE>
<CAPTION>
Six Months Eight Months
Ended Ended
June 30, 1997 December 31, 1996*
------------- -------------------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value at Beginning of Period $ 11.57 $ 10.00
---------- ---------
Income from Investment Operations:
Net Investment Income .10 .12
Net Realized and Unrealized Gain on Investments
and Futures Transactions 2.26 1.57
Total from Investment Operations 2.36 1.69
Distributions from Net Investment Income (.10) (.12)
---------- ---------
Net Asset Value at End of Period $ 13.83 $ 11.57
========== =========
Total Return (%) ** 20.46 16.90
Supplemental Data and Ratios
Net Assets at End of Period (000) $ 406,957 $ 179,073
Ratios to Average Net Assets:
Net Investment Income (%) 1.78(a) 2.09(a)
Expenses, including Expenses of the
Equity 500 Index Portfolio (%) .18(a) .18(a)
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust and the Manager (%) .07(a) .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.
</TABLE>
See Notes to Financial Statements on Page 10
USAA S&P 500 Index Fund
Notes to Financial Statements
June 30, 1997
(Unaudited)
(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 semiannual report pertains
only to the S&P 500 Index Fund (the Fund). 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 June 30, 1997, the Fund's investment was
16.17% 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, 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
six-month period ended June 30, 1997.
(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. Prior to May 1, 1997, the Fund's
administrative fee was computed at .02% of its annual average net assets.
Beginning May 1, 1997, the Fund pays the Manager a monthly administrative fee
which on an annual basis is equal to the lesser of .06% of the average annual
net assets of the Fund or the amount that brings the Fund's total expense ratio
to .18% of its annual average net assets, including the Fund's pro rata share of
the expenses of the Portfolio.
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 Fund Agreement between the
Company (on behalf of 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 .08% of its annual average
net assets.
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. This fee is waived on accounts with a balance
of $10,000 or more.
C. Underwriting Agreement - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
D. Management Agreement - The Manager serves as investment adviser to the Fund
and is responsible for monitoring the services provided to the Portfolio by
Bankers Trust. While the Fund maintains its investment in the Portfolio, the
Manager receives 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 June 30, 1997, the Association and its affiliates owned
8,119,641 shares (27.59%) of the Fund.
Certain directors and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated directors or Fund officers
received any compensation from the Fund.
Equity 500 Index Portfolio
Schedule of Portfolio Investments
June 30, 1997
(Unaudited)
Shares Security Value
- ------ -------- -----
COMMON STOCK - 98.92%
Aerospace - 1.86%
262,188 Boeing Co. $ 13,912,351
26,222 General Dynamics Corp. 1,966,650
70,145 Lockheed Martin Corp. 7,264,392
75,976 McDonnell Douglas Corp. 5,204,356
21,079 Northrop Grumman Corp. 1,851,000
89,614 Raytheon Co. 4,570,314
73,524 Rockwell International Corp. 4,337,916
86,112 United Technologies Corp. 7,147,296
------------
46,254,275
------------
Airlines - 0.30%
32,602 AMR Corp. (a) 3,015,685
28,949 Delta Air Lines, Inc. 2,373,818
47,100 Southwest Airlines Co. 1,218,713
22,215 U.S. Airways Group Inc.(a) 777,525
------------
7,385,741
------------
Apparel, Textiles - 0.59%
17,703 Charming Shoppes, Inc. (a) 92,388
83,414 Corning Inc. 4,639,904
27,000 Fruit of the Loom, Inc.
Cl. A (a) 837,000
26,503 Liz Claiborne, Inc. 1,235,702
71,648 Nike, Inc. Cl. B 4,182,452
19,929 Reebok International Ltd. (a) 931,681
7,711 Russell Corp. 228,438
8,004 Springs Industries, Inc. Cl. A 422,211
6,549 Stride Rite Corp. 84,318
23,515 V.F. Corp. 2,001,714
------------
14,655,808
------------
Auto Related - 2.10%
61,800 AutoZone, Inc. (a) 1,456,162
257,402 Chrysler Corp. 8,446,003
13,034 Cummins Engine Co., Inc. 919,712
31,274 Dana Corp. 1,188,412
28,982 Eaton Corp. 2,530,491
22,344 Echlin, Inc. 804,384
407,064 Ford Motor Co. 15,366,666
270,784 General Motors Corp. 15,079,284
65,426 Genuine Parts Co. 2,216,306
32,580 PACCAR Inc. 1,512,934
31,043 Parker Hannifin Corp. 1,883,922
26,496 Timken Co. 942,264
------------
52,346,540
------------
Banks - 7.06%
42,834 Ahmanson (H.F.) & Co. 1,841,862
200,634 Banc One Corp. 9,718,209
147,100 Bank of New York Company, Inc. 6,398,850
261,572 BankAmerica Corp. 16,887,742
55,867 BankBoston Corp. 4,025,916
75,894 Barnett Banks, Inc. 3,984,435
154,852 Chase Manhattan Corp. 15,030,322
166,966 Citicorp 20,129,838
42,700 Comerica, Inc. 2,903,600
83,564 CoreStates Financial Corp. 4,491,565
39,600 Fifth Third Bancorp 3,249,675
117,736 First Chicago NBD Corp. 7,123,028
101,750 First Union Corp. 9,411,875
16,517 Golden West Financial Corp. 1,156,190
49,984 Great Western Financial Corp. 2,686,640
86,800 KeyCorp 4,849,950
100,524 Mellon Bank Corp. 4,536,145
65,360 Morgan (J.P.) & Company, Inc. 6,821,950
84,600 National City Corp. 4,441,500
261,404 NationsBank Corp. 16,860,558
135,308 Norwest Corp. 7,611,075
19,000 Republic New York Corp. 2,042,500
74,060 SunTrust Banks, Inc. 4,077,929
53,588 U.S. Bancorp 3,436,331
56,100 Wachovia Corp. 3,271,331
32,970 Wells Fargo & Co. 8,885,415
------------
175,874,431
------------
Beverages - 3.87%
185,080 Anheuser-Busch
Companies, Inc. 7,761,793
10,319 Brown-Forman, Inc. Cl. B 503,696
906,422 Coca-Cola Co. 61,183,485
12,068 Coors (Adolph), Inc. Cl. B 321,311
560,494 PepsiCo, Inc. 21,053,556
138,537 Seagram Ltd. 5,576,114
------------
96,399,955
------------
Building and Construction - 0.76%
14,083 Armstrong World
Industries, Inc. 1,033,340
7,290 Centex Corp. 296,156
10,366 Crane Co. 433,428
9,306 Fleetwood Enterprises, Inc. 277,435
176,751 Home Depot, Inc. 12,184,772
63,711 Masco Corp. 2,659,934
13,650 Owens Corning 588,656
35,230 Stanley Works 1,409,200
------------
18,882,921
------------
Building, Forest Products - 0.46%
20,303 Boise Cascade Corp. 716,950
34,728 Champion International Corp. 1,918,722
33,201 Georgia-Pacific Corp. 2,834,535
24,554 Johnson Controls, Inc. 1,008,249
2,245 Kaufman & Broad Home Corp. 39,428
37,458 Louisiana-Pacific Corp. 791,300
4,801 Potlatch Corp. 217,245
73,794 Weyerhaeuser Co. 3,837,288
------------
11,363,717
------------
Chemicals and Toxic Waste - 2.95%
40,304 Air Products & Chemical, Inc. 3,274,700
99,340 Amgen, Inc. (a) 5,774,137
85,176 Dow Chemical Co. 7,420,959
410,292 Du Pont (E.I.) de
Nemours & Co. 25,797,109
33,081 Eastman Chemical Co. 2,100,643
9,950 FMC Corp. (a) 790,403
26,349 Grace (W.R.) & Co. 1,452,489
24,296 Great Lakes Chemical Corp. 1,272,503
36,514 Hercules, Inc. 1,748,108
29,702 Mallinckrodt, Inc. 1,128,676
215,020 Monsanto Co. 9,259,299
50,906 Morton International, Inc. 1,536,725
17,825 Nalco Chemical Co. 688,491
65,842 PPG Industries, Inc. 3,827,066
18,238 Raychem Corp. 1,356,451
25,359 Rohm & Haas Co. 2,283,895
43,500 Sigma-Aldrich Corp. 1,525,219
50,317 Union Carbide Corp. 2,368,044
------------
73,604,917
------------
Computer Services - 1.24%
121,200 3Com Corp. (a) 5,454,000
28,800 Adobe Systems, Inc. 1,009,800
106,512 Automatic Data
Processing, Inc. 5,006,064
56,600 Cabletron Systems, Inc. (a) 1,602,487
148,850 CUC International, Inc. (a) 3,842,191
61,100 Dell Computer Corp. (a) 7,175,431
90,900 EMC Corp. (a) 3,545,100
51,100 Parametric Technology Co. (a) 2,174,944
65,315 Silicon Graphics, Inc. (a) 979,725
------------
30,789,742
------------
Computer Software - 3.77%
243,200 Cisco Systems, Inc. (a) 16,324,800
130,850 Computer Associates
International, Inc. 7,286,709
435,500 Microsoft Corp. (a) 55,036,312
241,404 Oracle Corp. (a) 12,160,727
93,300 Seagate Technology, Inc.(a) 3,282,994
------------
94,091,542
------------
Containers - 0.25%
38,730 Avery Dennison Corp. 1,554,041
3,054 Ball Corp. 91,811
51,850 Crown Cork & Seal
Company, Inc. 2,770,734
43,649 Stone Container Corp.(a) 624,726
23,522 Temple-Inland, Inc. 1,270,188
------------
6,311,500
------------
Cosmetics and Toiletries - 1.01%
3,098 Alberto-Culver Co. Cl. B 86,744
53,128 Avon Products, Inc. 3,748,844
202,808 Gillette Co. 19,216,058
43,587 International Flavors
& Fragrances, Inc. 2,201,143
------------
25,252,789
------------
Diversified - 1.44%
54,869 Allegheny Teledyne, Inc. 1,481,463
27,602 Ceridian Corp. (a) 1,166,184
48,500 First Bank System, Inc. 4,140,688
42,200 Loews Corp. 4,225,275
151,278 Minnesota Mining &
Manufacturing Co. 15,430,356
3,927 NACCO Industries, Inc. Cl. A 221,630
52,564 Pall Corp. 1,222,113
56,315 Praxair, Inc. 3,153,640
24,020 SUPERVALU, Inc. 828,690
59,606 Textron, Inc. 3,956,348
------------
35,826,387
------------
Drugs - 6.74%
233,966 American Home Products Corp. 17,898,399
363,478 Bristol-Myers Squibb Co. 29,441,718
203,070 Lilly (Eli) & Co. 22,198,089
438,697 Merck & Company, Inc. 45,405,139
234,604 Pfizer, Inc. 28,035,178
267,616 Schering-Plough Corp. 12,812,116
98,586 Warner-Lambert Co. 12,249,311
------------
168,039,950
------------
Electrical Equipment - 4.61%
1,187,244 General Electric Co. 77,616,077
49,000 General Instrument Corp. (a) 1,225,000
21,272 General Signal Corp. 927,991
16,465 Grainger (W.W.), Inc. 1,287,357
370,740 Hewlett-Packard Co. 20,761,440
41,823 ITT Corp. (a) 2,553,817
40,923 ITT Industries, Inc. 1,053,767
61,132 Tyco International Ltd. 4,252,495
226,310 Westinghouse Electric Corp. 5,233,419
------------
114,911,363
------------
Electronics - 4.65%
53,641 Advanced Micro
Devices, Inc. (a) 1,931,076
6,027 Aeroquip-Vickers, Inc. 284,776
102,406 AlliedSignal, Inc. 8,602,104
87,473 AMP, Inc. 3,651,998
68,400 Applied Materials, Inc. (a) 4,843,575
158,900 Emerson Electric Co. 8,749,431
14,471 Harris Corp. 1,215,564
298,014 Intel Corp. 42,262,110
52,500 LSI Logic Corp. (a) 1,680,000
79,600 Micron Technology, Inc. (a) 3,179,025
215,842 Motorola, Inc. 16,403,992
54,426 National Semiconductor
Corp. (a) 1,666,796
97,401 Northern Telecom Ltd. 8,863,491
17,325 Perkin-Elmer Corp. 1,378,420
18,638 Scientific-Atlanta, Inc. 407,706
8,438 Tektronix, Inc. 506,280
69,528 Texas Instruments, Inc. 5,844,698
58,600 Thermo Electron Corp. (a) 1,992,400
18,900 Thomas & Betts Corp. 993,431
19,559 Western Atlas, Inc. (a) 1,432,697
------------
115,889,570
------------
Environmental Control - 0.38%
80,535 Browning-Ferris
Industries, Inc. 2,677,789
82,500 Laidlaw, Inc. Cl. B 1,139,531
7,526 Safety-Kleen Corp. 127,001
170,358 Waste Management, Inc. 5,472,751
------------
9,417,072
------------
Financial Services - 4.45%
172,566 American Express Co. 12,856,167
19,552 Beneficial Corp. 1,389,414
60,300 Charles Schwab Corp. 2,453,456
32,100 Countrywide
Credit Industries 1,001,119
52,000 Equifax 1,933,750
387,964 Federal National
Mortgage Assn. 16,924,929
251,524 Federal Home Loan
Mortgage Corp. 8,646,137
163,000 First Data Corp. 7,161,813
94,844 Fleet Financial Group, Inc. 5,998,883
54,900 Green Tree Financial Corp. 1,955,813
42,823 Hartford Financial
Services Group 3,543,603
35,358 Household International, Inc. 4,152,355
121,417 MBNA Corp. 4,446,898
120,076 Merrill Lynch & Co., Inc. 7,159,532
209,393 Morgan Stanley, Dean Witter,
Discover & Co. 9,016,986
121,233 PNC Bank Corp. 5,046,324
43,633 Salomon, Inc. 2,427,086
233,012 Travelers Group, Inc. 14,694,319
------------
110,808,584
------------
Food Services/Lodging - 0.56%
48,919 Darden Restaurants, Inc. 443,328
251,514 McDonald's Corp. 12,151,270
50,462 Wendy's International, Inc. 1,308,858
------------
13,903,456
------------
Foods - 3.04%
202,902 Archer-Daniels-Midland Co. 4,768,197
168,054 Campbell Soup Co. 8,402,700
87,616 ConAgra, Inc. 5,618,376
53,330 CPC International, Inc. 4,923,026
56,719 General Mills, Inc. 3,693,825
133,575 Heinz (H.J.) Co. 6,161,147
44,394 Hershey Foods Corp. 2,455,543
74,207 Kellogg Co. 6,353,974
26,400 Pioneer Hi-Bred
International, Inc. 2,112,000
49,584 Quaker Oats Co. 2,225,082
35,105 Ralston-Purina Group 2,885,192
174,587 Sara Lee Corp. 7,267,184
72,110 Sysco Corp. 2,632,015
59,817 Unilever N.V. ADR 13,040,106
28,327 Whitman Corp. 717,027
37,292 Wrigley (WM) Jr. Co. 2,498,564
------------
75,753,958
------------
Forest Products and Paper - 0.05%
16,800 Willamette Industries, Inc. 1,176,000
------------
Healthcare - 1.12%
281,122 Abbott Laboratories 18,764,894
235,022 Columbia/HCA
Healthcare Corp. 9,239,302
------------
28,004,196
------------
Hospital Supplies
and Healthcare - 2.99%
24,601 Allergan, Inc. 782,619
32,734 Alza Corp. (a) 949,286
25,777 Bard (C.R.), Inc. 936,027
23,723 Bausch & Lomb, Inc. 1,117,946
97,063 Baxter International, Inc. 5,071,542
44,332 Becton, Dickinson & Co. 2,244,307
21,282 Beverly Enterprises (a) 345,833
49,750 Biomet, Inc. 926,594
73,700 Boston Scientific Corp. (a) 4,527,944
39,400 Cardinal Health, Inc. 2,255,650
26,900 Guidant Corp. 2,286,500
119,100 HEALTHSOUTH Corp. (a) 2,970,056
56,600 Humana, Inc. (a) 1,308,875
484,096 Johnson & Johnson 31,163,680
19,160 Manor Care, Inc. 625,095
87,052 Medtronic, Inc. 7,051,212
10,574 Shared Medical
Systems Corp. 570,996
32,119 St. Jude Medical, Inc. (a) 1,252,641
116,010 Tenet Healthcare Corp. (a) 3,429,546
71,100 United Healthcare Corp. 3,697,200
25,048 U.S. Surgical Corp. 933,038
------------
74,446,587
------------
Hotel/Motel - 0.34%
58,200 HFS, Inc. (a) 3,375,600
87,841 Hilton Hotels Corp. 2,333,277
45,990 Marriott International, Inc. 2,822,636
------------
8,531,513
------------
Household Furnishings - 0.18%
26,912 Maytag Corp. 703,076
57,858 Newell Co. 2,292,623
28,739 Whirlpool Corp. 1,568,072
------------
4,563,771
------------
Household Products - 1.88%
18,752 Clorox Co. 2,475,264
106,702 Colgate-Palmolive Co. 6,962,305
246,170 Procter & Gamble Co. 34,771,513
54,502 Rubbermaid, Inc. 1,621,435
26,596 Tupperware Corp. 970,754
------------
46,801,271
------------
Insurance - 3.63%
55,759 Aetna, Inc. 5,708,328
158,150 Allstate Corp. 11,544,950
91,751 American General Corp. 4,381,110
170,567 American International
Group, Inc. 25,478,446
56,350 Aon Corp. 2,916,112
61,872 Chubb Corp. 4,137,690
27,033 CIGNA Corp. 4,798,357
72,100 Conseco, Inc. 2,667,700
31,278 General Re Corp. 5,692,596
20,577 Jefferson-Pilot Corp. 1,437,818
34,410 Lincoln National Corp. 2,215,144
60,124 Marsh & McLennan
Companies, Inc. 4,291,350
18,200 MBIA, Inc. 2,053,187
45,800 MGIC Investment Corp. 2,195,538
39,898 Providian Financial 1,281,723
49,502 SAFECO Corp. 2,311,125
33,030 St. Paul Companies, Inc. 2,518,538
28,434 Torchmark Corp. 2,025,923
50,700 UNUM Corp. 2,129,400
31,717 USF&G Corp. 761,208
------------
90,546,243
------------
Leisure Related - 1.15%
25,714 American Greetings Corp. 954,632
26,742 Brunswick Corp. 835,688
247,357 Disney (Walt) Co. 19,850,399
19,839 Harcourt General, Inc. 944,832
38,615 Harrah's
Entertainment, Inc. (a) 704,724
52,387 Hasbro, Inc. 1,486,481
6,139 Jostens, Inc. 164,218
112,465 Mattel, Inc. 3,809,752
------------
28,750,726
------------
Machinery - 1.48%
35,771 Black & Decker Corp. 1,330,234
13,082 Briggs & Stratton Corp. 654,100
29,500 Case Corp. 2,031,812
69,282 Caterpillar Inc. 7,439,155
8,147 Cincinnati Milacron, Inc. 211,313
42,948 Cooper Industries, Inc. 2,136,663
93,123 Deere & Co. 5,110,125
40,904 Dover Corp. 2,515,596
68,382 Dresser Industries, Inc. 2,547,230
31,430 Echo Bay Mines Ltd. (a) 180,723
15,647 Giddings & Lewis, Inc. 326,631
20,722 Harnischfeger Industries, Inc. 859,963
94,192 Illinois Tool Works, Inc. 4,703,713
44,331 Ingersoll-Rand Co. 2,737,439
20,392 Millipore Corp. 897,248
11,758 Navistar International Corp. (a) 202,826
15,494 Snap-On, Inc. 610,076
41,872 TRW Inc. 2,378,853
------------
36,873,700
------------
Metals - 1.21%
79,836 Alcan Aluminum Ltd. 2,769,311
68,400 Aluminum Company
of America 5,155,650
68,935 Armco, Inc. (a) 267,123
17,349 Asarco, Inc. 531,313
149,400 Barrick Gold Corp. 3,286,800
48,600 Battle Mountain Gold Co. 276,413
44,249 Bethlehem Steel Corp. (a) 461,849
31,994 Cyprus Amax Minerals Co. 783,853
43,808 Engelhard Corp. 917,230
33,500 Freeport-McMoRan
Copper & Gold, Inc. Cl. B 1,042,688
69,743 Homestake Mining Co. 911,018
62,966 Inco Ltd. 1,892,915
18,203 Inland Steel Industries, Inc. 475,553
57,710 Newmont Mining Corp. 2,250,690
35,494 Nucor Corp. 2,005,411
25,108 Phelps Dodge Corp. 2,138,888
98,104 Placer Dome, Inc. 1,606,453
25,549 Reynolds Metals Co. 1,820,366
33,077 USX-U.S. Steel Group, Inc. 1,159,762
22,279 Worthington Industries, Inc. 407,984
------------
30,161,270
------------
Miscellaneous - 0.10%
1 ACNielsen Corp. (a) 20
60,879 C ognizant Corp. 2,465,599
------------
2,465,619
------------
Office Equipment
and Computers - 2.99%
35,857 Amdahl Corp. (a) 313,749
50,442 Apple Computer, Inc. (a) 718,798
20,214 Autodesk, Inc. 774,449
99,613 Compaq Computer Corp. (a) 9,886,590
27,186 Computer Sciences Corp. (a) 1,960,790
20,545 Data General Corp. (a) 534,170
61,432 Digital Equipment Corp. (a) 2,176,996
46,219 Honeywell, Inc. 3,506,867
55,462 Ikon Office Solutions, Inc. 1,383,084
9,046 Intergraph Corp. (a) 76,891
363,182 IBM Corp. 32,754,477
24,179 Moore Corp. Ltd. 476,024
130,292 Novell, Inc. (a) 903,901
52,798 Pitney Bowes, Inc. 3,669,461
134,056 Sun Microsystems, Inc. (a) 4,989,397
31,960 Tandem Computers,
Inc. (a) 647,190
61,699 Unisys Corp. (a) 470,455
117,635 Xerox Corp. 9,278,460
------------
74,521,749
------------
Oil Related - 9.00%
34,793 Amerada Hess Corp. 1,933,186
181,102 Amoco Corp. 15,744,555
20,687 Ashland Inc. 959,360
117,050 Atlantic Richfield Co. 8,252,025
52,644 Baker Hughes, Inc. 2,036,665
45,800 Burlington Resources, Inc. 2,020,925
237,466 Chevron Corp. 17,557,642
902,514 Exxon Corp. 55,504,611
31,181 Fluor Corp. 1,720,801
18,138 Foster Wheeler Corp. 734,589
47,490 Halliburton Co. 3,763,582
10,708 Helmerich & Payne, Inc. 617,048
17,432 Kerr-McGee Corp. 1,104,753
10,762 Louisiana Land
& Exploration Co. 614,779
26,387 McDermott International, Inc. 770,171
286,742 Mobil Corp. 20,036,097
52,228 NorAm Energy Corp. 796,477
119,014 Occidental Petroleum Corp. 2,982,788
27,779 Oryx Energy Co. (a) 586,831
18,454 Pennzoil Co. 1,416,344
95,806 Phillips Petroleum Co. 4,191,513
32,700 Rowan Companies, Inc. (a) 921,731
782,404 Royal Dutch Petroleum Co. 42,543,218
20,969 Santa Fe Energy
Resources, Inc. (a) 307,982
89,181 Schlumberger Ltd. 11,147,625
26,545 Sun Co, Inc. 822,895
64,634 Tenneco, Inc. 2,920,649
99,661 Texaco, Inc. 10,838,134
91,148 Union Pacific Resources
Group Inc. 2,267,307
90,737 Unocal Corp. 3,521,730
104,564 USX-Marathon Group 3,019,286
61,918 Williams Companies, Inc. 2,708,913
------------
224,364,212
------------
Paper - 0.84%
12,631 Bemis Company, Inc. 546,291
110,744 International Paper Co. 5,378,005
36,835 James River Corp. 1,362,895
203,430 Kimberly-Clark Corp. 10,120,643
23,051 Mead Corp. 1,434,925
27,303 Union Camp Corp. 1,365,150
27,360 Westvaco Corp. 860,130
------------
21,068,039
------------
Pharmaceuticals - 0.27%
191,632 Pharmacia & Upjohn, Inc. 6,659,212
------------
Photography and Optical - 0.41%
119,526 Eastman Kodak Co. 9,173,621
17,582 Polaroid Corp. 975,801
------------
10,149,422
------------
Printing and Publishing - 1.20%
32,991 Deluxe Corp. 1,125,818
56,252 Donnelley (R.R.) & Sons Co. 2,060,230
26,972 Dow Jones & Co., Inc. 1,083,937
62,179 Dun & Bradstreet Corp. 1,632,199
50,496 Gannett Co., Inc. 4,986,480
3,604 Harland (John H.) o. 82,216
36,626 Knight-Ridder, Inc. 1,796,963
40,030 McGraw-Hill Companies, Inc. 2,354,264
9,072 Meredith Corp. 263,088
33,184 New York Times Co. Cl. A 1,642,608
185,015 Time Warner, Inc. 8,926,974
26,929 Times Mirror Co. Cl. A 1,487,827
51,096 Tribune Co. 2,455,802
------------
29,898,406
------------
Professional Services - 0.41%
36,835 Block (H&R), Inc. 1,187,929
16,700 Ecolab, Inc. 797,425
8,925 EG&G, Inc. 200,813
26,307 Interpublic Group
of Companies, Inc. 1,612,948
22,226 National Service Industries 1,082,128
92,892 Service Corporation
International 3,053,825
24,543 Transamerica Corp. 2,296,304
------------
10,231,372
------------
Railroads - 0.83%
58,262 Burlington Northern
Santa Fe Corp. 5,236,297
83,632 CSX Corp. 4,641,576
43,851 Norfolk Southern Corp. 4,417,988
89,747 Union Pacific Corp. 6,327,164
------------
20,623,025
------------
Real Estate - 0.02%
11,166 Pulte Corp. 385,925
------------
Retail - 4.07%
94,302 Albertson's, Inc. 3,442,023
57,818 American Stores Co. 2,854,764
36,146 Circuit City Stores, Inc. 1,285,442
82,799 Costco Companies, Inc. (a) 2,722,017
60,519 CVS Corp. 3,101,599
79,108 Dayton Hudson Corp. 4,207,557
41,997 Dillard's Department
Stores, Inc. Cl. A 1,454,146
77,200 Federated Department
Stores, Inc. (a) 2,682,700
6,779 Fleming Companies, Inc. 122,022
97,914 Gap, Inc. 3,806,407
18,693 Giant Food, Inc. 609,859
8,825 Great Atlantic & Pacific
Tea Co., Inc. 239,930
183,303 Kmart Corp. (a) 2,245,462
92,320 Kroger Co. (a) 2,677,280
101,247 Limited, Inc. 2,050,252
11,926 Longs Drug Stores, Inc. 312,312
63,994 Lowe's Companies, Inc. 2,375,777
84,498 May Department Stores Co. 3,992,530
8,830 Mercantile Stores
Company, Inc. 555,738
32,029 Nordstrom, Inc. 1,571,423
90,050 Penney (J.C.) Company, Inc. 4,699,484
17,012 Pep Boys-Manny, Moe & Jack 579,471
45,401 Rite Aid Corp. 2,264,375
139,609 Sears, Roebuck & Co. 7,503,984
64,574 Sherwin-Williams Co. 1,993,722
24,383 Tandy Corp. 1,365,448
64,908 TJX Companies, Inc. 1,711,948
105,118 Toys 'R' Us, Inc. (a) 3,679,130
90,934 Walgreen Co. 4,876,336
823,448 Wal-Mart Stores, Inc. 27,842,836
47,080 Winn-Dixie Stores, Inc. 1,753,730
39,522 Woolworth Corp. (a) 948,528
------------
101,528,232
------------
Telecommunications - 4.00%
1 360 Communications Co.(a) 17
190,335 Airtouch
Communications, Inc. (a) 5,210,421
59,900 Alltel Corp. 2,002,906
198,952 Ameritech Corp. 13,516,301
34,576 Andrew Corp. (a) 972,450
76,200 Bay Networks, Inc. (a) 2,024,062
103,062 Comcast Corp. Cl. A 2,202,950
40,890 DSC Communications Corp.(a) 909,802
61,800 Frontier Corp. 1,232,138
347,036 GTE Corp. 15,226,205
9,706 King World Productions, Inc. 339,710
232,541 Lucent Technologies, Inc. 16,757,486
248,020 MCI Communications Corp. 9,494,516
159,300 NYNEX Corp. 9,179,663
217,416 Tele-Communications, Inc.
Cl. A (a) 3,234,063
65,600 Tellabs, Inc. (a) 3,665,400
109,349 Viacom, Inc. Cl. B (a) 3,280,470
324,500 WorldCom, Inc. (a) 10,384,000
------------
99,632,560
------------
Tire and Rubber - 0.21%
20,651 Cooper Tire & Rubber Co. 454,322
23,352 Goodrich (B.F.) Co. 1,011,434
60,536 Goodyear Tire & Rubber Co. 3,832,686
------------
5,298,442
------------
Tobacco - 1.74%
68,874 Fortune Brands, Inc. 2,569,861
880,398 Philip Morris
Companies, Inc. 39,067,661
66,707 UST, Inc. 1,851,119
------------
43,488,641
------------
Trucking, Shipping - 0.17%
13,982 Caliber System, Inc. 520,829
42,350 Federal Express Corp. (a) 2,445,713
36,017 Ryder System, Inc. 1,188,561
------------
4,155,103
------------
Utilities - 6.54%
59,310 American Electric Power Co. 2,491,020
598,506 AT&T Corp. 20,985,117
44,425 Baltimore Gas
& Electric Co. 1,185,592
159,139 Bell Atlantic Corp. 12,074,672
362,232 BellSouth Corp. 16,798,509
45,928 Carolina Power & Light Co. 1,647,667
93,330 Central & South West Corp. 1,983,262
51,122 CINergy Corp. 1,779,685
37,766 Coastal Corp. 2,008,679
22,435 Columbia Gas System, Inc. 1,463,884
93,036 Consolidated Edison
Company of New York, Inc. 2,738,747
40,005 Consolidated Natural Gas Co. 2,152,769
69,206 Dominion Resources, Inc. 2,534,670
45,076 DTE Energy Co. 1,245,224
130,795 Duke Power Co. 6,269,985
4,142 Eastern Enterprises 143,676
149,070 Edison International 3,708,116
99,666 Enron Corp. 4,067,619
17,124 ENSERCH Corp. 381,009
100,207 Entergy Corp. 2,743,167
63,294 FPL Group, Inc. 2,915,480
52,400 GPU, Inc. 1,879,850
104,356 Houston Industries, Inc. 2,237,132
42,042 Niagara Mohawk
Power Corp. (a) 359,985
11,069 NICOR, Inc. 397,100
17,544 Northern States Power Co. 907,902
63,984 Ohio Edison Co. 1,395,651
12,891 ONEOK, Inc. 414,929
23,768 Pacific Enterprises 799,199
92,789 PacifiCorp 2,041,358
99,584 PECO Energy Co. 2,091,264
5,955 People's Energy Corp. 222,940
167,905 PG&E Corp. 4,071,696
45,100 PP&L Resources, Inc. 899,181
97,894 Public Service Enterprise
Group, Inc. 2,447,350
331,514 SBC Communications, Inc. 20,512,429
35,010 Sonat, Inc. 1,794,262
240,658 Southern Co. 5,264,394
132,182 Sprint Corp. 6,956,078
83,665 Texas Utilities Co. 2,881,213
89,125 Unicom Corp. 1,983,031
29,320 Union Electric Co. 1,104,998
175,228 U.S. West, Inc. -
Communications Group 6,603,905
223,428 U.S. West, Inc. -
Media Group (a) 4,524,417
------------
163,108,813
------------
Total Common Stock
(Cost $1,643,024,982) 2,465,198,267
-------------
Short-Term Instruments - 1.05%
Mutual Funds - 0.83%
20,797,078 BT Institutional Cash
Management Fund,
5.47%, 7/01/97 20,797,078
-------------
Principal
Amount
---------
U.S. Treasury Bills - 0.22%
$ 395,000 5.18%, 7/03/97 (b) 394,889
5,005,000 5.19%, 9/04/97 (b) 4,959,274
-------------
5,354,163
-------------
Total Short-Term Instruments
(Cost $26,152,152) 26,151,241
-------------
Total Investments
(Cost $1,669,177,134) - 99.97% 2,491,349,508
Other Assets Less Liabilities - 0.03% 858,533
--------------
Net Assets - 100% $2,492,208,041
==============
- ---------------------------------------------------
(a) Non-income producing security.
(b) Held as collateral for futures contracts.
See Notes to Financial Statements on Page 25
Equity 500 Index Portfolio
Statement of Assets and Liabilities
June 30, 1997
(Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at Value (Cost of $1,669,177,134) $ 2,491,349,508
Dividends and Interest Receivable 3,126,038
Prepaid Expenses 3,492
-----------------
Total Assets 2,494,479,038
-----------------
Liabilities
Due to Bankers Trust 163,648
Due to Custodian 1,393
Payable for Securities Purchased 1,893,566
Variation Margin Payable 199,395
Accrued Expenses and Other 12,995
-----------------
Total Liabilities 2,270,997
-----------------
Net Assets $ 2,492,208,041
=================
Composition of Net Assets
Paid-in Capital $ 1,670,361,742
Net Unrealized Appreciation on Investments 822,172,374
Net Unrealized Depreciation on Futures Contracts (326,075)
-----------------
Net Assets $ 2,492,208,041
=================
</TABLE>
See Notes to Financial Statements on Page 25
Equity 500 Index Portfolio
Statement of Operations
Six months ended June 30, 1997
(Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends (net of foreign withholding tax of $132,101) $ 20,059,204
Interest 1,268,743
--------------
Total Investment Income 21,327,947
--------------
Expenses
Advisory Fees 1,095,075
Administration and Services Fees 547,538
Professional Fees 13,649
Trustees Fees 1,050
Miscellaneous 2,494
--------------
Total Expenses 1,659,806
Less: Expenses Absorbed by Bankers Trust (783,746)
--------------
Net Expenses 876,060
--------------
Net Investment Income 20,451,887
--------------
Realized and Unrealized Gain
on Investments and Futures Contracts
Net Realized Gain from Investment Transactions 47,419,332
Net Realized Gain from Futures Transactions 3,030,532
Net Change in Unrealized Appreciation on Investments 342,809,986
Net Change in Unrealized Depreciation on Futures Contracts (208,875)
--------------
Net Realized and Unrealized Gain on Investments
and Futures Contracts 393,050,975
--------------
Net Increase in Net Assets from Operations $ 413,502,862
==============
</TABLE>
See Notes to Financial Statements on Page 25
Equity 500 Index Portfolio
Statements of Changes in Net Assets
Six months ended June 30, 1997 and
Year ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
6/30/97 12/31/96
------- --------
<S> <C> <C>
Increase in Net Assets from:
Operations
Net Investment Income $ 20,451,887 $ 33,117,570
Net Realized Gain from Investments
and Futures Transactions 50,449,864 21,413,687
Net Change in Unrealized Appreciation
on Investments and Futures Contracts 342,601,111 267,538,386
---------------- ----------------
Net Increase in Net Assets from Operations 413,502,862 322,069,643
---------------- ----------------
Capital Transactions
Proceeds from Capital Invested 660,209,657 854,711,041
Value of Capital Withdrawn (506,728,044) (332,293,144)
---------------- ----------------
Net Increase in Net Assets from
Capital Transactions 153,481,613 522,417,897
---------------- ----------------
Total Increase in Net Assets 566,984,475 844,487,540
Net Assets
Beginning of Period 1,925,223,566 1,080,736,026
---------------- ----------------
End of Period $ 2,492,208,041 $ 1,925,223,566
================ ================
</TABLE>
See Notes to Financial Statements on Page 25
Equity 500 Index Portfolio
Financial Highlights
June 30, 1997
(Unaudited)
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:
<TABLE>
<CAPTION>
Six Months Ended Year ended December 31,
-----------------------
June 30, 1997 1996 1995 1994 1993
------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Assets, End
of Period (000) $ 2,492,208 $ 1,925,224 $ 1,080,736 $ 559,772 $ 151,805
Ratios to Average Net Assets:
Net Investment Income (%) 1.87 * 2.20 2.52 2.84 2.67
Expenses (%) .08 * .10 .10 .10 .10
Decrease Reflected
in Above Expense
Ratio Due to
Absorption of
Expenses by
Bankers Trust (%) .07 * .05 .05 .06 .10
Portfolio Turnover Rate (%) 6 15 6 21 31
Average Commission
Per Share** $ .025 $ .023
* Annualized
** For fiscal years beginning on or after September 1, 1995, a portfolio is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
</TABLE>
See Notes to Financial Statements on Page 25
Equity 500 Index Portfolio
Notes to Financial Statements
June 30, 1997
(Unaudited)
(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. 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 six months ended June 30, 1997, this fee aggregated
$547,538.
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 six months ended June 30, 1997,
this fee aggregated $1,095,075.
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 six months ended June 30,
1997, expenses of the Portfolio have been reduced by $783,746.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood Services, Inc. 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 six months ended June 30, 1997, the Equity 500 Index Portfolio paid
brokerage commissions of $169,740.
(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 six months ended June 30, 1997, were
$394,246,882 and $126,706,581, respectively. For federal income tax purposes,
the tax basis of investments held at June 30, 1997 was $1,680,085,503. The
aggregate gross unrealized appreciation was $828,647,371, and the aggregate
gross unrealized depreciation for all investments was $17,383,366 as of June 30,
1997.
(4) Futures Contracts
A summary of obligations under these financial instruments at June 30, 1997 is
as follows:
Market Unrealized
Type of Future Expiration Contracts Position Value Depreciation
-------------- --------- --------- -------- ----- ------------
S&P 500 Index Futures Sept. 1997 52 Long $23,146,500 $(326,075)
At June 30, 1997, the Portfolio has segregated approximately $5,400,000 to cover
margin requirements on open futures contracts.
