Table of Contents
USAA Family of Funds 1
Message from the President 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
Statement of Net Assets 13
Statement of Operations 23
Statements of Changes in Net Assets 24
Financial Highlights 25
Notes to Financial Statements 26
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)1998, USAA. All rights reserved.
USAA Family of Funds Summary
Fund Minimum
Type/Name Volatility Investment*
--------- ---------- ----------
CAPITAL APPRECIATION
===============================================================================
Aggressive Growth Very high $3,000
Emerging Markets(1) Very high $3,000
USAA First Start Growth Moderate to high $3,000
Gold(1) Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International(1) Moderate to high $3,000
S&P 500 Index(2) Moderate $3,000
Science & Technology(5) Very high $3,000
World Growth(1) Moderate to high $3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy(1) Moderate $3,000
Cornerstone Strategy(1) Moderate $3,000
Growth and Tax
Strategy(3) Moderate $3,000
Growth Strategy(1) Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
===============================================================================
GNMA Low to moderate $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term(3) Moderate $3,000
Intermediate-Term(3) Low to moderate $3,000
Short-Term(3) Low $3,000
State Bond Income(3)** Moderate $3,000
MONEY MARKET
===============================================================================
Money Market(4) Very low $3,000
Tax Exempt
Money Market(3),(4) Very low $3,000
Treasury Money
Market Trust(4) Very low $3,000
State Money Market(3),(4)** Very low $3,000
(1) Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2) 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.
(3) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(4) 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.
(5) This Fund may be more volatile than a fund that diversifies across many
industries.
* The InveStart (Registered Trademark) program is available for investors
without the $3,000 initial investment required to open an IMCO mutual fund
account. A mutual fund account can be opened with no initial investment if
you elect to have monthly automatic investments of at least $50 from a bank
account. InveStart is not available on tax-exempt funds or the S&P 500
Index Fund. The minimum initial investment for IRAs is $250, except for the
$2,000 minimum required for the S&P 500 Index Fund. 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.
Non-deposit investment products 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, and may lose value.
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.
Message from the President
[PHOTOGRAPH OF MICHAEL J. C. ROTH, CFA, PRESIDENT AND VICE CHAIRMAN OF THE BOARD
APPEARS HERE]
As I write this message, many of the common measures of the stock market are at
all-time highs, including the S&P 500(Registered Trademark) Index (1) and the
Dow Jones Industrial Average.(2) For the fourth consecutive year the market, as
measured by these benchmarks, is setting a pace that is difficult to match with
a different portfolio. One effect of this situation has been that the assets of
your USAA S&P 500 Index Fund (3) now well exceed one billion dollars and has
continued to grow rapidly. I think this is a good time to look ahead.
An index fund may be a great investment vehicle, but it should still be regarded
as part of an investment plan. As I have noted before, the S&P 500 is the
benchmark that defines success as an equity investor. However, that index is
dominated by the stocks of about 50 very large companies.(4) I believe that an
investor should always be asking, "Are there attractive opportunities that may
help both the return and the risk in my portfolios?" The answer to that lies in
the idea that types of investments with similar potential returns but different
patterns of returns can be blended together to form a portfolio that should
potentially perform better than any single investment type. Simply put, a
combination of an index fund with, say, a small cap fund, an emerging markets
fund (5) and an equity income fund might stand a good chance of producing
a satisfactory rate of return with less overall volatility than any one type
of these funds. Many investors might also benefit from adding a tax-exempt
income fund (6) to the mix.
"Your index fund has been a great building block, but it should still be
regarded as part of an investment plan."
A portfolio approach may likely give investors the comfort and confidence they
need to deal with bad markets when they come. That confidence will help you be
in the market in a year like 1995 when this latest bull market began. Your index
fund has been a great building block in such a portfolio.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
(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 in the S&P 500 Index.
(2) The Dow Jones Industrial Average is a price weighted average of 30 actively
traded Blue Chip Stocks, primarily industrials.
(3) "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.
(4) As of 6/30/98, the top 50 companies comprise a cumulative 51% of the S&P 500
Index.
(5) Foreign investing is subject to additional risks, such as currency
fluctuations, market illiquidity and political instability, which are
discussed in the Fund's prospectus.
(6) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
For more information about mutual funds managed and distributed by USAA IMCO,
including charges and expenses, please call for a prospectus. Read it carefully
before investing.
Past performance is no guarantee of future results.
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.
================================================================================
6/30/98 12/31/97
- --------------------------------------------------------------------------------
Net Assets $1,223.1 Million $630.6 Million
Net Asset Value Per Share $17.72 $15.16
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/98
- --------------------------------------------------------------------------------
12/31/97 to 6/30/98 1 Year Since Inception on 5/1/96
17.56% (+) 29.82% 32.08% (++)
================================================================================
(+) 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.
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.
Cumulative Performance Comparison
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA S&P 500 Index Fund and the S&P 500
Index for the period of 05/02/96 through 06/30/98. The data points from the
graph are as follows:
USAA S&P 500
INDEX FUND S&P 500 INDEX
--------------------- -------------
05/02/96 10,000 10,000
05/31/96 10,420 10,427
06/96 10,459 10,467
07/96 9,998 10,004
08/96 10,208 10,215
09/96 10,778 10,789
10/96 11,070 11,087
11/96 11,914 11,924
12/96 11,686 11,688
01/97 12,403 12,417
02/97 12,504 12,515
03/97 11,978 12,002
04/97 12,698 12,718
05/97 13,479 13,495
06/97 14,077 14,095
07/97 15,197 15,216
08/97 14,342 14,364
09/97 15,126 15,149
10/97 14,615 14,643
11/97 15,289 15,321
12/97 15,545 15,585
01/98 15,730 15,756
02/98 16,848 16,892
03/98 17,709 17,757
04/98 17,874 17,938
05/98 17,565 17,630
06/98 18,275 18,345
Data from 5/2/96** through 6/30/98
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund so closely tracks the S&P 500 Index that its results are not visible
in the graph. 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.
* 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.
PORTFOLIO SECTOR DIVERSIFICATION
% OF COMMON STOCK MARKET VALUE
A pie chart is shown here depicting the Portfolio Mix as of June 30, 1998 for
the USAA S&P 500 Index Fund: Consumer Non-Durables - 22%; Finance & Building
- - 20%; Health Care - 12%; Utilities - 9%; Energy - 7%; Capital Goods - 7%;
Consumer Durables - 6%; Business Equipment & Service - 6%; Retail Trade - 5%;
Chemicals - 3%; and Other - 3%.
========================
TEN LARGEST
STOCK HOLDINGS
- ------------------------
General Electric
Microsoft
Coca Cola
Exxon
Merck & Company
Pfizer
Wal-Mart Stores
Intel
Procter & Gamble
Royal Dutch Petroleum
========================
USAA S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS
Investment in Equity 500 Index Portfolio, at Value $1,220,135,417
Receivable for Capital Shares Sold 3,718,741
----------------
Total Assets 1,223,854,158
----------------
LIABILITIES
Payable for Capital Shares Redeemed 488,948
USAA Investment Management Company 50,832
Accounts Payable and Accrued Expenses 167,205
----------------
Total Liabilities 706,985
----------------
Net Assets Applicable to Capital Shares Outstanding $1,223,147,173
================
REPRESENTED BY:
Paid-in Capital $ 979,007,929
Accumulated Undistributed Net Investment Income 467,118
Accumulated Net Realized Gain from Investment and
Futures Transactions 24,359,341
Net Unrealized Appreciation on Investments and
Futures Contracts 219,312,785
----------------
Net Assets Applicable to Capital Shares Outstanding $1,223,147,173
================
Capital Shares Outstanding ($.01 par value per share,
175,000,000 shares authorized) 69,010,048
================
Net Asset Value, Redemption Price, and Offering Price
Per Share $ 17.72
================
See Notes to Financial Statements on Page 10
USAA S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
Six-month period ended June 30, 1998
(Unaudited)
INVESTMENT INCOME
Income Allocated from Equity 500 Index Portfolio, net $ 6,710,595
----------------
EXPENSES
Administration Fees 73,224
Custodian's Fees 8,195
Postage 59,208
Shareholder Reporting Fees 29,121
Directors' Fees 2,080
Registration Fees 250,304
Professional Fees 12,458
Other 7,261
----------------
Total Expenses 441,851
----------------
Net Investment Income 6,268,744
----------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions 6,082,150
Net Realized Gain from Futures Transactions 333,267
Net Change in Unrealized Appreciation on Investments
and Futures Contracts 121,899,941
----------------
Net Realized and Unrealized Gain on Investments and
Futures Contracts 128,315,358
----------------
Net Increase in Net Assets from Operations $134,584,102
================
See Notes to Financial Statements on Page 10
USAA S&P 500 INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six-month period ended June 30, 1998 and
Year ended December 31, 1997
(Unaudited)
6/30/98 12/31/97
------------------------------------
FROM OPERATIONS
Net Investment Income $ 6,268,744 $ 6,890,866
Net Realized Gain from Investment
and Futures Transactions 6,415,417 16,529,655
Net Change in Unrealized Appreciation
on Investments and Futures Contracts 121,899,941 82,263,699
------------------------------------
Net Increase in Net Assets from Operations 134,584,102 105,684,220
------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (5,861,708) (6,870,198)
------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from Shares Sold 573,249,220 429,485,745
Dividend Reinvestments 4,740,415 5,388,985
Cost of Shares Redeemed (114,183,385) (82,142,783)
------------------------------------
Net Increase in Net Assets from
Capital Share Transactions 463,806,250 352,731,947
------------------------------------
Net Increase in Net Assets 592,528,644 451,545,969
NET ASSETS:
Beginning of Period 630,618,529 179,072,560
------------------------------------
End of Period $1,223,147,173 $630,618,529
====================================
UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS
End of Period $ 467,118 $ 60,082
====================================
CHANGE IN SHARES OUTSTANDING
Shares Sold 33,972,702 31,712,665
Shares Issued for Dividends Reinvested 271,876 384,579
Shares Redeemed (6,824,723) (5,985,970)
------------------------------------
Increase in Shares Outstanding 27,419,855 26,111,274
====================================
See Notes to Financial Statements on Page 10
USAA S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
June 30, 1998
(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 Year Ended Ended
June 30, December 31, December 31,
1998 1997 1996(1)
------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value at Beginning of Period $ 15.16 $ 11.57 $ 10.00
------------------------------------------------------------
Income from Investment Operations:
Net Investment Income .10 .21 .12
Net Realized and Unrealized Gain on
Investment and Futures Transactions 2.56 3.59 1.57
------------------------------------------------------------
Total from Investment Operations 2.66 3.80 1.69
Distributions from Net Investment Income (.10) (.21) (.12)
------------------------------------------------------------
Net Asset Value at End of Period $ 17.72 $ 15.16 $ 11.57
============================================================
Total Return (%) (2) 17.56 33.03 16.90
SUPPLEMENTAL DATA AND RATIOS
Net Assets at End of Period (000) $1,223,147 $630,619 $179,073
Ratios to Average Net Assets:
Net Investment Income (%) 1.41(3) 1.64 2.09(3)
Expenses, including Expenses of the
Equity 500 Index Portfolio (%) .18(3) .18 .18(3)
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust and the Manager (%) .06(3) .07 .15(3)
</TABLE>
- ------------------------------------------
(1) Fund commenced operations May 1, 1996.
(2) Assumes reinvestment of all dividend income distributions during the period;
does not reflect $10 annual account maintenance fee.
(3) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
See Notes to Financial Statements on Page 10
USAA S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(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 ten
separate funds. The information presented in this semiannual report pertains
only to the USAA 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. USAA
Investment Management Company (the Manager) seeks to achieve this objective by
investing substantially all of the Fund's 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, 1998, the Fund's investment was 30.11% of the Portfolio.
The financial statements of the Portfolio, including the Statement of Net
Assets, 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, 1997, the Fund had a capital loss carryover for federal income
tax purposes of approximately $321,987 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. Actual results could differ from those estimates.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in two joint short-term revolving
loan agreements totaling $850 million, one with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($750 million uncommitted), and one with
NationsBank of Texas, N.A. ($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 its agreement with CAPCO, the Fund may borrow from
CAPCO an amount up to 5% of its total assets at CAPCO's borrowing rate with no
markup. Subject to availability under its agreement with NationsBank, the Fund
may borrow from NationsBank an amount which, when added to outstanding
borrowings under the CAPCO agreement, does not exceed 25% of its total assets at
NationsBank's borrowing rate plus a markup. The Fund had no borrowings under
either of these agreements during the six-month period ended June 30, 1998.
(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 pays the Manager a
monthly administrative fee which on an annual basis is equal to the lesser of
.06% of the average daily net assets of the Fund or the amount that brings the
total Fund and Portfolio annual operating expenses up to .18% of the Fund's
average net assets.
The Manager is contractually entitled to receive fees from the Fund only to the
extent that the aggregate annual operating expenses of the Fund and the
Portfolio do not exceed .18% of the Fund's 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, 1998, the Association and its affiliates
owned 17,009,525 shares (24.65%) 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
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
Shares Security Value
- ----------------------------------------------------------------
COMMON STOCKS - 97.74%
Advertising - 0.09%
75,000 Omnicom Group, Inc. $ 3,740,625
Aerospace - 1.44%
450,246 Boeing Co. 20,064,087
55,444 General Dynamics Corp. 2,578,146
87,245 Lockheed Martin Corp. 9,237,064
29,779 Northrop Grumman Corp. 3,070,959
158,414 Raytheon Co. - Class B 9,366,228
89,124 Rockwell International Corp. 4,283,522
106,312 United Technologies Corp. 9,833,860
- ----------------------------------------------------------------
58,433,866
- ----------------------------------------------------------------
Airlines - 0.43%
80,104 AMR Corp. * 6,668,658
35,049 Delta Air Lines, Inc. 4,530,083
97,800 Southwest Airlines Co. 2,897,325
41,915 U.S. Air, Inc. * 3,321,764
- ----------------------------------------------------------------
17,417,830
- ----------------------------------------------------------------
Apparel, Textiles - 0.35%
101,814 Corning Inc. 3,538,036
30,200 Fruit of the Loom, Inc. -
Class A * 1,002,262
28,903 Liz Claiborne, Inc. 1,510,182
84,948 Nike, Inc. - Class B 4,135,906
21,129 Reebok International Ltd. * 585,009
15,811 Russell Corp. 477,295
5,504 Springs Industries, Inc. -
Class A 253,872
53,330 V.F. Corp. 2,746,495
- ----------------------------------------------------------------
14,249,057
- ----------------------------------------------------------------
Auto Related - 2.03%
66,900 AutoZone, Inc. * 2,136,619
292,302 Chrysler Corp. 16,478,525
18,634 Cummins Engine Co., Inc. 954,992
53,774 Dana Corp. 2,876,909
31,282 Eaton Corp. 2,432,176
29,244 Echlin, Inc. 1,434,784
503,864 Ford Motor Co. 29,727,976
292,984 General Motors Corp. 19,574,993
73,726 Genuine Parts Co. 2,548,155
1 Meritor Automotive, Inc. 24
34,180 PACCAR Inc. 1,785,905
46,414 Parker Hannifin Corp. 1,769,534
24,196 Timken Co. 745,539
- ----------------------------------------------------------------
82,466,131
- ----------------------------------------------------------------
Banks - 8.12%
48,834 Ahmanson (H.F.) & Co. 3,467,214
319,507 Banc One Corp. 17,832,484
172,100 Bank of New York Company, Inc. 10,444,319
308,672 BankAmerica Corp. 26,680,836
137,134 BankBoston Corp. 7,628,079
55,600 BB&T Corp. 3,759,950
373,604 Chase Manhattan Corp. 28,207,102
198,966 Citicorp 29,695,676
73,300 Comerica, Inc. 4,856,125
110,825 Fifth Third Bancorp 6,981,975
133,136 First Chicago NBD Corp. 11,799,177
438,453 First Union Corp. 25,539,887
18,917 Golden West Financial Corp. 2,011,114
73,700 Huntington Bancshares, Inc. 2,468,950
208,000 KeyCorp 7,410,000
118,924 Mellon Bank Corp. 8,280,084
58,900 Mercantile Bancorp, Inc. 2,967,087
82,560 Morgan (J.P.) & Company, Inc. 9,669,840
150,200 National City Corp. 10,664,200
432,103 NationsBank Corp. 33,055,880
53,800 Northern Trust Corp. 4,102,250
349,016 Norwest Corp. 13,044,473
47,400 Republic New York Corp. 2,983,237
86,600 Summit Bancorp 4,113,500
97,460 SunTrust Banks, Inc. 7,924,716
325,897 U.S. Bancorp 14,013,571
91,500 Wachovia Corp. 7,731,750
175,577 Washington Mutual, Inc. 7,626,626
38,770 Wells Fargo & Co. 14,306,130
- ----------------------------------------------------------------
329,266,232
- ----------------------------------------------------------------
Beverages - 3.45%
216,180 Anheuser-Busch Companies, Inc. 10,200,994
17,719 Brown-Forman, Inc. - Class B 1,138,446
1,094,322 Coca-Cola Co. 93,564,531
15,768 Coors (Adolph) Co. - Class B 536,112
672,194 PepsiCo, Inc. 27,685,990
162,537 Seagram Ltd. 6,653,858
- ----------------------------------------------------------------
139,779,931
- ----------------------------------------------------------------
Building and Construction - 0.93%
17,483 Armstrong World Industries, Inc. 1,177,917
28,080 Centex Corp. 1,060,020
19,966 Crane Co. 969,599
8,506 Fleetwood Enterprises, Inc. 340,240
327,726 Home Depot, Inc. 27,221,741
74,411 Masco Corp. 4,501,866
22,350 Owens Corning 912,159
38,530 Stanley Works 1,601,403
- ----------------------------------------------------------------
37,784,945
- ----------------------------------------------------------------
Building, Forest Products - 0.33%
24,003 Boise Cascade Corp. 786,097
46,128 Champion International Corp. 2,268,921
41,801 Georgia-Pacific Corp. 2,463,646
34,654 Johnson Controls, Inc. 1,981,776
17,145 Kaufman & Broad Home Corp. 544,354
46,658 Louisiana-Pacific Corp. 851,509
13,101 Potlatch Corp. 550,242
87,294 Weyerhaeuser Co. 4,031,892
- ----------------------------------------------------------------
13,478,437
- ----------------------------------------------------------------
Chemicals and Toxic Waste - 2.44%
102,708 Air Products & Chemical, Inc. 4,108,320
118,040 Amgen, Inc. * 7,716,865
104,676 Dow Chemical Co. 10,120,861
499,692 Du Pont (E.I.) de Nemours & Co. 37,289,516
32,581 Eastman Chemical Co. 2,028,167
17,350 FMC Corp. * 1,183,053
34,949 Grace (W. R.) & Co. * 596,317
25,796 Great Lakes Chemical Corp. 1,017,330
42,014 Hercules, Inc. 1,727,826
32,702 Mallinckrodt, Inc. 970,841
272,620 Monsanto Co. 15,232,643
64,306 Morton International, Inc. 1,607,650
16,325 Nalco Chemical Co. 766,603
79,342 PPG Industries, Inc. 5,519,227
42,576 Raychem Corp. 1,258,653
26,059 Rohm & Haas Co. 2,708,507
44,200 Sigma-Aldrich Corp. 1,552,525
67,152 Union Carbide Corp. 3,584,238
- ----------------------------------------------------------------
98,989,142
- ----------------------------------------------------------------
Computer Services - 1.60%
154,100 3Com Corp. * 4,728,944
33,100 Adobe Systems, Inc. 1,404,681
128,512 Automatic Data Processing, Inc. 9,365,312
68,400 Cabletron Systems, Inc. * 919,125
363,234 Cendant Corp. * 7,582,510
283,400 Dell Computer Corp. * 26,303,063
226,000 EMC Corp. * 10,127,625
128,400 Parametric Technology Co.* 3,482,850
83,515 Silicon Graphics, Inc. * 1,012,619
- ----------------------------------------------------------------
64,926,729
- ----------------------------------------------------------------
Computer Software - 4.63%
463,950 Cisco Systems, Inc. * 42,712,397
240,675 Computer Associates
International, Inc. 13,372,505
1,090,000 Microsoft Corp. * 118,128,750
442,256 Oracle Corp. * 10,862,913
106,500 Seagate Technology, Inc. * 2,536,031
- ----------------------------------------------------------------
187,612,596
- ----------------------------------------------------------------
Containers - 0.29%
44,230 Avery Dennison Corp. 2,377,363
7,854 Ball Corp. 315,632
58,950 Crown Cork & Seal Company, Inc. 2,800,125
65,200 Owens-Illinois, Inc. * 2,917,700
36,505 Sealed Air Corp. * 1,341,559
39,849 Stone Container Corp. 622,641
24,922 Temple-Inland, Inc. 1,342,672
- ----------------------------------------------------------------
11,717,692
- ----------------------------------------------------------------
Cosmetics and Toiletries - 0.87%
8,898 Alberto-Culver Co. - Class B 258,042
63,728 Avon Products, Inc. 4,938,920
491,916 Gillette Co. 27,885,488
53,887 International Flavors
& Fragrances, Inc. 2,340,717
- ----------------------------------------------------------------
35,423,167
- ----------------------------------------------------------------
Diversified - 0.85%
76,169 Allegheny Teledyne Inc. 1,742,366
31,702 Ceridian Corp. * 1,862,493
49,400 Loews Corp. 4,303,975
181,578 Minnesota Mining
& Manufacturing Co. 14,923,442
3,527 NACCO Industries, Inc. - Class A 455,865
54,464 Pall Corp. 1,116,512
72,815 Praxair, Inc. 3,408,652
31,220 SUPERVALU, Inc. 1,385,387
59,706 Textron, Inc. 5,140,424
- ----------------------------------------------------------------
34,339,116
- ----------------------------------------------------------------
Drugs - 7.44%
579,232 American Home Products Corp. 29,975,256
446,378 Bristol-Myers Squibb Co. 51,305,571
496,640 Lilly (Eli) & Co. 32,809,280
527,197 Merck & Company, Inc. 70,512,599
576,608 Pfizer, Inc. 62,670,082
321,216 Schering-Plough Corp. 29,431,416
359,158 Warner-Lambert Co. 24,916,586
- ----------------------------------------------------------------
301,620,790
- ----------------------------------------------------------------
Electrical Equipment - 4.45%
1,440,444 General Electric Co. 131,080,404
23,072 General Signal Corp. 830,592
40,530 Grainger (W.W.), Inc. 2,018,901
466,940 Hewlett-Packard Co. 27,958,032
51,223 ITT Industries, Inc. 1,914,460
264,264 Tyco International Ltd. 16,648,632
- ----------------------------------------------------------------
180,451,021
- ----------------------------------------------------------------
Electronics - 3.47.%
55,041 Advanced Micro Devices, Inc.* 939,137
12,327 Aeroquip-Vickers, Inc. 719,589
248,212 AlliedSignal, Inc. 11,014,407
104,173 AMP, Inc. 3,580,947
162,600 Applied Materials, Inc. * 4,796,700
193,800 Emerson Electric Co. 11,700,675
34,942 Harris Corp. 1,561,471
748,928 Intel Corp. 55,514,288
35,400 KLA Instruments Corp. * 980,138
57,500 LSI Logic Corp. * 1,326,094
93,500 Micron Technology, Inc. * 2,319,969
261,742 Motorola, Inc. 13,757,814
75,626 National Semiconductor Corp. * 997,317
225,402 Northern Telecom Ltd. 12,791,564
22,625 Perkin-Elmer Corp. 1,406,992
35,638 Scientific-Atlanta, Inc. 904,314
22,307 Tektronix, Inc. 789,110
173,656 Texas Instruments, Inc. 10,126,316
64,400 Thermo Electron Corp. * 2,201,675
21,100 Thomas & Betts Corp. 1,039,175
25,859 Western Atlas, Inc. * 2,194,782
- ----------------------------------------------------------------
140,662,474
- ----------------------------------------------------------------
Environmental Control - 0.28%
80,635 Browning-Ferris Industries, Inc. 2,802,066
115,600 Laidlaw, Inc. - Class B 1,408,875
200,358 Waste Management, Inc. 7,012,530
- ----------------------------------------------------------------
11,223,471
- ----------------------------------------------------------------
Financial Services - 5.85%
200,966 American Express Co. 22,910,124
158,061 Associates First Capital
Corp. - Class A 12,150,939
48,400 Bear Stearns Companies, Inc. 2,752,750
26,352 Beneficial Corp. 4,036,797
27,800 Capital One Financial Corp. 3,452,413
116,900 Charles Schwab Corp. 3,799,250
73,200 Cincinnati Financial Corp. 2,809,050
50,500 Countrywide Credit Industries 2,562,875
66,700 Equifax 2,422,044
462,864 Fannie Mae 28,118,987
196,100 First Data Corp. 6,532,581
131,844 Fleet Financial Group, Inc. 11,008,974
110,700 Franklin Resources, Inc. 5,977,800
298,824 Freddie Mac 14,063,405
60,600 Green Tree Financial Corp. 2,594,438
53,723 Hartford Financial Services Group 6,144,568
150,274 Household International, Inc. 7,476,132
52,200 Lehman Brothers Holdings Inc. 4,048,762
220,225 MBNA Corp. 7,267,425
151,476 Merrill Lynch & Co., Inc. 13,973,661
260,393 Morgan Stanley, Dean Witter,
Discover & Co. 23,793,410
138,433 PNC Banc Corp. 7,449,426
71,800 SLM Holding Corp. 3,518,200
67,800 State Street Corp. 4,712,100
103,650 Synovus Financial Corp. 2,461,688
509,821 Travelers Group, Inc. 30,907,898
- ----------------------------------------------------------------
236,945,697
- ----------------------------------------------------------------
Food Services/Lodging - 0.63%
62,419 Darden Restaurants, Inc. 990,902
308,214 McDonald's Corp. 21,266,765
67,099 Tricon Global Restaurants, Inc. * 2,126,200
56,562 Wendy's International, Inc. 1,329,207
- ----------------------------------------------------------------
25,713,074
- ----------------------------------------------------------------
Foods - 2.67%
269,417 Archer-Daniels - Midland Co. 5,219,954
126,760 Bestfoods 7,360,003
198,854 Campbell Soup Co. 10,564,119
210,932 ConAgra, Inc. 6,683,908
76,319 General Mills, Inc. 5,218,312
160,075 Heinz (H.J.) Co. 8,984,209
49,594 Hershey Foods Corp. 3,421,986
169,714 Kellogg Co. 6,374,882
99,420 Pioneer Hi-Bred International, Inc. 4,113,503
63,484 Quaker Oats Co. 3,487,652
47,805 Ralston-Purina Group 5,584,222
206,687 Sara Lee Corp. 11,561,554
148,020 Sysco Corp. 3,793,012
277,768 Unilever N.V. 21,926,312
40,592 Wrigley (WM) Jr. Co. 3,978,016
- ----------------------------------------------------------------
108,271,644
- ----------------------------------------------------------------
Forest Products and Paper - 0.03%
42,900 Willamette Industries, Inc. 1,372,800
- ----------------------------------------------------------------
Healthcare - 0.89%
686,344 Abbott Laboratories 28,054,311
272,822 Columbia/HCA Healthcare Corp. 7,945,941
- ----------------------------------------------------------------
36,000,252
- ----------------------------------------------------------------
Hospital Supplies and Healthcare - 2.97%
27,501 Allergan, Inc. 1,275,359
40,234 Alza Corp. * 1,740,121
25,277 Bard (C.R.), Inc. 962,106
24,323 Bausch & Lomb, Inc. 1,219,190
124,863 Baxter International Inc. 6,719,190
53,932 Becton, Dickinson & Co. 4,186,472
52,050 Biomet, Inc. 1,720,903
86,400 Boston Scientific Corp. * 6,188,400
52,800 Cardinal Health, Inc. 4,950,000
68,200 Guidant Corp. 4,863,513
199,500 HBO & Co. 7,032,375
171,900 HEALTHSOUTH Corp. * 4,587,581
81,900 Humana, Inc. * 2,554,256
603,296 Johnson & Johnson 44,493,080
23,660 Manor Care, Inc. 909,431
214,304 Medtronic, Inc. 13,661,880
10,774 Shared Medical Systems Corp. 791,216
36,688 St. Jude Medical, Inc. * 1,350,577
134,510 Tenet Healthcare Corp. * 4,203,437
86,400 United Healthcare Corp. 5,486,400
27,848 U.S. Surgical Corp. 1,270,565
- ----------------------------------------------------------------
120,166,052
- ----------------------------------------------------------------
Hotel/Motel - 0.16%
112,041 Hilton Hotels Corp. 3,193,169
104,980 Marriott International, Inc. 3,398,727
- ----------------------------------------------------------------
6,591,896
- ----------------------------------------------------------------
Household Furnishings - 0.20%
44,612 Maytag Corp. 2,202,717
69,858 Newell Co. 3,479,802
32,739 Whirlpool Corp. 2,250,806
- ----------------------------------------------------------------
7,933,325
- ----------------------------------------------------------------
Household Products - 1.82%
50,604 Clorox Co. 4,826,357
129,602 Colgate-Palmolive Co. 11,404,976
593,640 Procter & Gamble Co. 54,058,342
76,702 Rubbermaid, Inc. 2,545,548
26,796 Tupperware Corp. 753,637
- ----------------------------------------------------------------
73,588,860
- ----------------------------------------------------------------
Insurance - 3.74%
63,759 Aetna, Inc. 4,853,654
192,150 Allstate Corp. 17,593,734
111,037 American General Corp. 7,904,446
306,900 American International Group, Inc. 44,807,400
73,950 Aon Corp. 5,194,988
73,672 Chubb Corp. 5,921,387
96,799 CIGNA Corp. 6,679,131
82,000 Conseco, Inc. 3,833,500
33,778 General Re Corp. 8,562,723
46,865 Jefferson-Pilot Corp. 2,715,241
43,910 Lincoln National Corp. 4,012,276
112,986 Marsh & McLennan Companies, Inc. 6,828,591
39,200 MBIA, Inc. 2,935,100
56,700 MGIC Investment Corp. 3,235,444
31,900 Progressive Corp. 4,497,900
44,098 Providian Financial 3,464,449
73,002 SAFECO Corp. 3,317,028
103,928 St. Paul Companies, Inc. 4,371,472
78,400 SunAmerica, Inc. 4,503,100
62,168 Torchmark Corp. 2,844,186
60,500 UNUM Corp. 3,357,750
- ----------------------------------------------------------------
151,433,500
- ----------------------------------------------------------------
Leisure Related - 1.40%
37,414 American Greetings Corp. -
Class A 1,905,776
46,542 Brunswick Corp. 1,151,915
321,810 CBS Corp. 10,217,467
299,557 Disney (Walt) Co. 31,472,207
22,339 Harcourt General, Inc. 1,329,171
46,015 Harrah's Entertainment, Inc. * 1,069,849
58,087 Hasbro, Inc. 2,283,545
7,539 Jostens, Inc. 181,877
128,565 Mattel, Inc. 5,439,907
79,100 Mirage Resorts, Inc. * 1,685,819
- ----------------------------------------------------------------
56,737,533
- ----------------------------------------------------------------
Machinery - 1.13%
41,671 Black & Decker Corp. 2,541,931
11,982 Briggs & Stratton Corp. 448,576
32,900 Case Corp. 1,587,425
168,064 Caterpillar Inc. 8,886,384
13,447 Cincinnati Milacron, Inc. 326,930
52,948 Cooper Industries, Inc. 2,908,831
116,623 Deere & Co. 6,166,441
97,708 Dover Corp. 3,346,499
77,182 Dresser Industries, Inc. 3,400,832
19,322 Harnischfeger Industries, Inc. 547,054
109,692 Illinois Tool Works, Inc. 7,315,085
72,796 Ingersoll-Rand Co. 3,207,574
19,292 Millipore Corp. 525,707
22,558 Navistar International Corp. * 651,362
30,594 Snap-On, Inc. 1,109,033
53,672 TRW Inc. 2,931,833
- ----------------------------------------------------------------
45,901,497
- ----------------------------------------------------------------
Marketing - 0.00%
1 ACNielsen Corp. * 25
- ----------------------------------------------------------------
Metals - 0.66%
82,336 Alcan Aluminium Ltd. 2,274,532
71,700 Aluminum Company of America 4,727,719
59,635 Armco, Inc. * 380,173
20,049 Asarco, Inc. 446,090
165,500 Barrick Gold Corp. 3,175,531
58,100 Battle Mountain Gold Co. 344,969
56,249 Bethlehem Steel Corp. * 699,597
43,894 Cyprus Amax Minerals Co. 581,596
62,308 Engelhard Corp. 1,261,737
58,700 Freeport-McMoRan Copper
& Gold, Inc. - Class B 891,506
92,443 Homestake Mining Co. 959,096
73,766 Inco Ltd. 1,005,062
68,610 Newmont Mining Corp. 1,620,911
36,494 Nucor Corp. 1,678,724
25,908 Phelps Dodge Corp. 1,481,614
104,304 Placer Dome, Inc. 1,225,572
34,149 Reynolds Metals Co. 1,910,210
46,677 USX-U.S. Steel Group, Inc. 1,540,341
30,679 Worthington Industries, Inc. 462,102
- ----------------------------------------------------------------
26,667,082
- ----------------------------------------------------------------
Miscellaneous - 0.12%
77,979 Cognizant Corp. 4,912,677
- ----------------------------------------------------------------
Office Equipment and Computers - 2.94%
58,542 Apple Computer, Inc. * 1,679,424
26,914 Autodesk, Inc. 1,039,553
724,384 Compaq Computer Corp. 20,554,396
71,572 Computer Sciences Corp. * 4,580,608
21,045 Data General Corp. * 314,360
68,600 Gateway 2000, Inc. * 3,472,875
60,719 Honeywell, Inc. 5,073,831
60,462 Ikon Office Solutions, Inc. 880,478
414,782 International Business
Machines Corp. 47,622,158
24,579 Moore Corp. Ltd. 325,672
172,792 Novell, Inc. * 2,203,098
120,196 Pitney Bowes, Inc. 5,784,433
170,256 Sun Microsystems, Inc. * 7,395,495
110,399 Unisys Corp. * 3,118,772
149,735 Xerox Corp. 15,216,819
- ----------------------------------------------------------------
119,261,972
- ----------------------------------------------------------------
Oil Related - 7.28%
43,393 Amerada Hess Corp. 2,356,782
420,104 Amoco Corp. 17,486,829
26,500 Anadarko Petroleum 1,780,469
43,600 Apache Corp. 1,373,400
24,587 Ashland Inc. 1,269,304
140,450 Atlantic Richfield Co. 10,972,656
70,944 Baker Hughes, Inc. 2,452,002
79,839 Burlington Resources, Inc. 3,438,067
286,366 Chevron Corp. 23,786,276
1,078,714 Exxon Corp. 76,925,792
34,381 Fluor Corp. 1,753,431
25,538 Foster Wheeler Corp. 547,471
124,280 Halliburton Co. 5,538,228
27,416 Helmerich & Payne, Inc. 610,006
20,832 Kerr-McGee Corp. 1,205,652
25,387 McDermott International, Inc. 874,265
345,742 Mobil Corp. 26,492,481
160,214 Occidental Petroleum Corp. 4,325,778
47,397 Oryx Energy Co. * 1,048,260
20,954 Pennzoil Co. 1,060,796
114,406 Phillips Petroleum Co. 5,512,939
38,300 Rowan Companies, Inc. * 744,455
961,504 Royal Dutch Petroleum Co. 52,702,438
218,862 Schlumberger Ltd. 14,951,010
35,145 Sun Co, Inc. 1,364,065
79,034 Tenneco, Inc. 3,008,232
249,322 Texaco, Inc. 14,881,407
117,848 Union Pacific Resources Group Inc. 2,069,706
109,337 Unocal Corp. 3,908,798
126,764 USX-Marathon Group 4,349,590
188,636 Williams Companies, Inc. 6,366,465
- ----------------------------------------------------------------
295,157,050
- ----------------------------------------------------------------
Paper - 0.66%
15,631 Bemis Company, Inc. 638,917
95,035 Fort James Corp. 4,229,058
134,944 International Paper Co. 5,802,592
256,430 Kimberly-Clark Corp. 11,763,726
50,702 Mead Corp. 1,609,789
32,103 Union Camp Corp. 1,593,111
39,160 Westvaco Corp. 1,106,270
- ----------------------------------------------------------------
26,743,463
- ----------------------------------------------------------------
Pharmaceuticals - 0.27%
233,532 Pharmacia & Upjohn, Inc. 10,771,664
- ----------------------------------------------------------------
Photography and Optical - 0.27%
141,726 Eastman Kodak Co. 10,354,856
19,982 Polaroid Corp. 710,610
- ----------------------------------------------------------------
11,065,466
- ----------------------------------------------------------------
Printing and Publishing - 1.32%
42,691 Deluxe Corp. 1,528,871
62,252 Donnelley (R.R.) & Sons Co. 2,848,029
31,072 Dow Jones & Co, Inc. 1,732,264
75,379 Dun & Bradstreet Corp. 2,723,066
124,492 Gannett Co., Inc. 8,846,713
40,926 Knight-Ridder, Inc. 2,253,488
50,130 McGraw-Hill Companies, Inc. 4,088,728
18,472 Meredith Corp. 867,030
39,684 New York Times Co. - Class A 3,144,957
233,215 Time Warner, Inc. 19,925,307
27,929 Times Mirror Co. - Class A 1,756,036
52,496 Tribune Co. 3,612,381
- ----------------------------------------------------------------
53,326,870
- ----------------------------------------------------------------
Professional Services - 0.41%
45,835 Block (H&R), Inc. 1,930,799
45,600 Ecolab, Inc. 1,413,600
30,425 EG&G, Inc. 912,750
53,660 Interpublic Group of Companies, Inc. 3,256,491
20,326 National Service Industries 1,034,085
112,692 Service Corporation International 4,831,670
27,643 Transamerica Corp. 3,182,400
- ----------------------------------------------------------------
16,561,795
- ----------------------------------------------------------------
Railroads - 0.52%
70,462 Burlington Northern Santa Fe Corp. 6,918,488
95,932 CSX Corp. 4,364,906
166,653 Norfolk Southern Corp. 4,968,343
108,347 Union Pacific Corp. 4,780,811
- ----------------------------------------------------------------
21,032,548
- ----------------------------------------------------------------
Real Estate - 0.01%
20,332 Pulte Corp. 607,419
- ----------------------------------------------------------------
Retail - 4.75%
74 Abercrombie & Fitch Company * 3,256
108,602 Albertson's, Inc. 5,626,941
120,336 American Stores Co. 2,910,627
43,546 Circuit City Stores, Inc. 2,041,219
49,500 Consolidated Stores Corp. * 1,794,375
100,899 Costco Companies, Inc. * 6,362,943
168,338 CVS Corp. 6,554,661
192,416 Dayton Hudson Corp. 9,332,176
46,897 Dillard Department Stores, Inc. -
Class A 1,943,294
92,500 Federated Department Stores, Inc. * 4,977,656
179,071 Gap, Inc. 11,035,250
17,093 Giant Food, Inc. - Class A 736,067
16,825 Great Atlantic & Pacific Tea
Co., Inc. 556,277
216,203 Kmart Corp. * 4,161,908
114,220 Kroger Co. * 4,897,183
97,960 Limited, Inc. 3,244,911
17,726 Longs Drug Stores, Inc. 511,838
162,588 Lowe's Companies, Inc. 6,594,976
101,098 May Department Stores Co. 6,621,919
19,230 Mercantile Stores Company, Inc. 1,517,968
34,929 Nordstrom, Inc. 2,698,265
114,750 Penney (J.C.) Co., Inc. 8,297,859
26,112 Pep Boys-Manny, Moe & Jack 494,496
113,602 Rite Aid Corp. 4,267,175
171,609 Sears, Roebuck & Co. 10,478,875
76,274 Sherwin-Williams Co. 2,526,576
48,066 Tandy Corp. 2,550,502
143,216 TJX Companies, Inc. 3,455,086
126,318 Toys 'R' Us, Inc. * 2,976,368
59,622 Venator Group, Inc. 1,140,271
213,068 Walgreen Co. 8,802,372
986,348 Wal-Mart Stores, Inc. 59,920,641
65,180 Winn-Dixie Stores, Inc. 3,336,401
- ----------------------------------------------------------------
192,370,332
- ----------------------------------------------------------------
Telecommunications - 5.06%
1 360 Communications Co. * 32
250,735 Airtouch Communications, Inc. * 14,652,327
110,900 Alltel Corp. 5,156,850
498,004 Ameritech Corp. 22,347,930
40,376 Andrew Corp. * 729,292
79,800 Ascend Communications, Inc. * 3,955,087
91,700 Bay Networks, Inc. * 2,957,325
56,400 Clear Channel Communications,
Inc. * 6,154,650
152,462 Comcast Corp. - Class A 6,189,004
53,490 DSC Communications Corp. * 1,604,700
75,200 Frontier Corp. 2,368,800
66,400 General Instrument Corp. * 1,805,250
421,936 GTE Corp. 23,470,190
32,212 King World Productions, Inc. 821,406
585,882 Lucent Technologies, Inc. 48,738,059
310,220 MCI Communications Corp. 18,031,537
119,200 Nextel Communications, Inc. 2,965,100
207,360 Tele-Communications, Inc. -
Class A * 7,970,400
82,100 Tellabs, Inc. * 5,880,412
125,549 Viacom, Inc. - Class B * 7,313,229
449,300 WorldCom, Inc. * 21,762,969
- ----------------------------------------------------------------
204,874,549
- ----------------------------------------------------------------
Tire and Rubber - 0.17%
35,151 Cooper Tire & Rubber Co. 724,989
31,952 Goodrich (B.F.) Co. 1,585,618
68,836 Goodyear Tire & Rubber Co. 4,435,620
- ----------------------------------------------------------------
6,746,227
- ----------------------------------------------------------------
Tobacco - 1.18%
68,074 Fortune Brands, Inc. 2,616,594
1,084,998 Philip Morris Companies, Inc. 42,721,796
85,807 UST, Inc. 2,316,789
- ----------------------------------------------------------------
47,655,179
- ----------------------------------------------------------------
Trucking, Shipping - 0.14%
71,655 FDX Corp. * 4,496,351
33,317 Ryder System, Inc. 1,051,568
- ----------------------------------------------------------------
5,547,919
- ----------------------------------------------------------------
Utilities - 7.00%
60,120 Ameren Corp. 2,389,770
83,310 American Electric Power Co. 3,780,191
711,606 AT&T Corp. 40,650,493
59,425 Baltimore Gas & Electric Co. 1,845,889
680,036 Bell Atlantic Corp. 31,026,643
446,132 BellSouth Corp. 29,946,611
53,028 Carolina Power & Light Co. 2,300,090
106,930 Central & South West Corp. 2,873,744
61,522 CINergy Corp. 2,153,270
46,566 Coastal Corp. 3,250,889
37,102 Columbia Gas System, Inc. 2,063,799
103,136 Consolidated Edison Company of
New York, Inc. 4,750,702
44,005 Consolidated Natural Gas Co. 2,590,794
86,056 Dominion Resources, Inc. 3,525,120
72,176 DTE Energy Co. 2,914,106
157,795 Duke Energy Co. 9,349,354
9,142 Eastern Enterprises 391,963
159,270 Edison International 4,708,419
136,666 Enron Corp. 7,388,506
121,707 Entergy Corp. 3,499,076
92,884 FirstEnergy Corp. * 2,856,182
79,994 FPL Group, Inc. 5,039,622
56,500 GPU, Inc. 2,136,406
125,392 Houston Industries, Inc. 3,871,478
266,828 MediaOne Group, Inc. * 11,723,755
53,142 Niagara Mohawk Power Corp. * 793,809
21,069 NICOR, Inc. 845,394
44,988 Northern States Power Co. 1,287,782
13,791 ONEOK, Inc. 549,916
130,889 PacifiCorp 2,961,364
102,784 PECO Energy Co. 3,000,007
16,855 People's Energy Corp. 651,024
186,305 PG&E Corp. 5,880,252
73,300 PP&L Resources, Inc. 1,662,994
112,094 Public Service Enterprise
Group, Inc. 3,860,237
805,128 SBC Communications, Inc. 32,205,120
92,364 Sempra Energy * 2,487,224
47,210 Sonat, Inc. 1,823,486
304,458 Southern Co. 8,429,681
158,682 Sprint Corp. 11,187,081
121,927 Texas Utilities Co. 5,075,211
94,925 Unicom Corp. 3,328,307
224,855 U.S. West, Inc. - Communications
Group 10,568,185
- ----------------------------------------------------------------
283,623,946
- ----------------------------------------------------------------
Total Common Stocks
(Cost $2,475,377,707) 3,961,165,565
- ----------------------------------------------------------------
SHORT TERM INSTRUMENTS - 2.87%
Mutual Fund - 2.80%
113,526,530 BT Institutional Cash
Management Fund 113,526,530
- ----------------------------------------------------------------
Principal
Amount
- ------------
U.S. Treasury Bill - 0.07%
$2,870,000 5.005%, 10/01/98 ** 2,833,694
- ----------------------------------------------------------------
Total Short Term Instruments
(Cost $116,360,531) 116,360,224
- ----------------------------------------------------------------
Total Investments
(Cost $2,591,738,238) 100.61% 4,077,525,789
Liabilities in Excess
of Other Assets (0.61)% (24,794,022)
- ----------------------------------------------------------------
Net Assets 100.00% 4,052,731,767
================================================================
* Non-income producing security.
** Held as collateral for futures contracts.
See Notes to Financial Statements on Page 26
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Six-month period ended June 30, 1998
(Unaudited)
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $156,829) $ 26,845,061
Interest 123,941
---------------
Total Investment Income 26,969,002
---------------
EXPENSES
Advisory Fees 1,524,644
Administration and Services Fees 846,656
Professional Fees 11,756
Trustees Fees 3,499
Miscellaneous 447
---------------
Total Expenses 2,387,002
Less: Expenses Absorbed by Bankers Trust (1,032,352)
---------------
Net Expenses 1,354,650
---------------
Net Investment Income 25,614,352
---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions 21,556,558
Net Realized Gain from Futures Transactions 2,045,391
Net Change in Unrealized Appreciation on Investments 478,378,615
Net Change in Unrealized Appreciation on Futures Contracts 294,781
---------------
Net Realized and Unrealized Gain on Investments and
Futures Contracts 502,275,345
---------------
Net Increase in Net Assets from Operations 527,889,697
===============
See Notes to Financial Statements on Page 26
EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Six-month period ended June 30, 1998 and
Year ended December 31, 1997
(Unaudited)
6/30/98 12/31/97
-----------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net Investment Income $ 25,614,352 $ 42,706,376
Net Realized Gain from Investment
and Futures Transactions 23,601,949 95,286,448
Net Change in Unrealized
Appreciation on Investments
and Futures Contracts 478,673,396 528,775,836
-----------------------------------
Net Increase in Net Assets from Operations 527,889,697 666,768,660
-----------------------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested 1,386,506,855 1,462,422,481
Value of Capital Withdrawn (664,751,256) (1,251,328,236)
-----------------------------------
Net Increase in Net Assets from
Capital Transactions 721,755,599 211,094,245
-----------------------------------
Total Increase in Net Assets 1,249,645,296 877,862,905
NET ASSETS
Beginning of Period 2,803,086,471 1,925,223,566
-----------------------------------
End of Period $4,052,731,767 $ 2,803,086,471
===================================
See Notes to Financial Statements on Page 26
EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
June 30, 1998
(Unaudited)
Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the Equity 500 Index Portfolio.
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
----------------------------------------------------------------
June 30, 1998 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000) $4,052,732 $2,803,086 $1,925,224 $1,080,736 $559,772 $151,805
Ratios to Average
Net Assets:
Net Investment Income (%) 1.55(1) 1.76 2.20 2.52 2.84 2.67
Expenses (%) .08(1) .08 .10 .10 .10 .10
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
Bankers Trust (%) .06(1) .07 .05 .05 .06 .10
Portfolio Turnover
Rate (%) 2 19 15 6 21 31
</TABLE>
- -------------------------------
(1) Annualized.
See Notes to Financial Statements on Page 26
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(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 that, with accrued interest, approximates
value. Securities for which quotations are not available are stated at fair
value as determined by the Trustees.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and 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 that are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. Federal Income Taxes
It is in the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
(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 .05% of the Portfolio's average daily net
assets. At June 30, 1998, amounts owed under the Administration and Services
Agreement amounted to $78,558, net of waived expenses of $80,412.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of .075% of the Portfolio's
average daily net assets. For the period January 1, 1998 to April 30, 1998 the
Advisory fee was .10%. At June 30, 1998, amounts owed under the Advisory
Agreement amounted to $173,136, net of waived expenses of $144,804.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.08% of the average daily net assets of the Portfolio. For the six-month period
ended June 30, 1998, expenses of the Portfolio have been reduced by $1,032,352.
The Portfolio may invest in the BT Institutional Cash Management Fund (the
Fund), an open-end management investment company managed by Bankers Trust
Company (the Company). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the
Fund to the Portfolio as of June 30, 1998 amounted to $2,082,691 and are
included in dividend income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility (the revolver) and a discretionary demand line of credit
facility (collectively the credit facilities) in the amounts of $50,000,000 and
$100,000,000, respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. Amounts borrowed under the credit
facilities will bear interest at a rate per annum equal to the Federal Funds
Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the period ended June 30, 1998.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. (Edgewood). Effective August 11, 1998, ICC Distributors,
Inc. will replace Edgewood as distributor of the Trust.
Certain officers of the Portfolio are also directors, officers and employees of
Edgewood. None of the officers so affiliated received compensation for services
as officers of the Portfolio.
For the six-month period ended June 30, 1998, the Equity 500 Index Portfolio
paid brokerage commissions of $226,179.
(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-month period ended June 30, 1998, were
$754,650,857 and $58,371,306, respectively. For federal income tax purposes, the
tax basis of investments held at June 30, 1998 was $2,602,421,738. The aggregate
gross unrealized appreciation was $1,514,149,698, and the aggregate gross
unrealized depreciation was $28,362,147 for all investments as of June 30, 1998.
Payable for securities purchased at June 30, 1998 amounted to $66,583,078.
(4) FUTURES CONTRACTS
A summary of obligations under these financial instruments at June 30, 1998 is
as follows:
Market Unrealized
Type of Future Expiration Contracts Position Value Appreciation
- --------------------------------------------------------------------------------
S&P 500
Index Futures Sept. 1998 348 Long $99,441,000 $906,869
At June 30, 1998, the Portfolio segregated $2,833,694 to cover margin
requirements on open futures contracts.
(5) NET ASSETS
Paid in Capital $2,516,821,046
Undistributed Net Investment Income 25,614,352
Accumulated Realized Gain on Investments 21,556,558
Accumulated Realized Gain on Futures Transactions 2,952,260
Unrealized Appreciation on Investments 1,485,787,551
-----------------
Total Net Assets $4,052,731,767
=================
DIRECTORS
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
Investment Adviser, Underwriter and Distributor
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
Transfer Agent
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
Custodian
Bankers Trust Company
Four Albany Street
New York, NY 10006
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Auditors
Pricewaterhouse Coopers LLP
250 West Pratt Street
Baltimore, Maryland 21201
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 8:00 a.m. to 8:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
For Additional Information On Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-Hour Service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
Mutual Fund TouchLine(Registered Trademark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
