Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Financial Information:
USAA S&P 500 Index Fund
Distributions to Shareholders 6
Statement of Assets and Liabilities 7
Statement of Operations 8
Statements of Changes in Net Assets 9
Financial Highlights 10
Notes to Financial Statements 11
Report of Independent Accountants 14
Year 2000 15
Equity 500 Index Fund Portfolio
Statement of Net Assets 16
Statement of Operations 24
Statements of Changes in Net Assets 25
Financial Highlights 26
Notes to Financial Statements 27
Report of Independent Accountants 30
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA S&P 500 Index
Fund, managed by USAA Investment Management Company (IMCO). It may be used as
sales literature only when preceded or accompanied by a current prospectus which
gives further details about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(Copyright)1999, 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
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 (Registered
Trademark) 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 not insured or guaranteed by the
FDIC or any other government agency. Although the fund seeks to preserve
the value of your investment at $1 per share, it is possible to lose
money by investing in the fund.
(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
The Semiannual Report to Shareholders which was dated June 30, 1998, contained
this statement: "As I write this message, many of the common measures of the
stock market are at all-time highs, including the S&P 500 Index(1)..." I went on
to note that this was the fourth consecutive year of such an occurrence, and
that was unusual. Then came August.
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH, CFA,
APPEARS HERE]
In the month of August the market gave up all of its gain for 1998 and slipped
into negative territory. A massive drop of more than 500 points on the Dow
climaxed this on August 31. Then, seemingly in the blink of an eye, the market
reversed to end the year with the S&P 500 Index showing a gain of 28.60%.
There were a couple of great lessons in this: one new, one old. The new lesson
was all about how the financial world has changed. The August turmoil had roots
in foreign markets. Severe problems in Russia, Asia, and Latin America quickly
spilled into the U.S. market. Activities of hedge funds(2) were also a
contributor. International problems have long been a factor in our market, but
this instantaneous impact is very impressive. The old lesson was an affirmation
of asset allocation. Adherence to a plan that included both equities and fixed
income worked very well. Holding that allocation was tough, but very important
because the year showed finally that you really did want your full equity
exposure. The USAA S&P 500 Index Fund's 28.62% return for the period ending
December 31, 1998, looked wonderful in your portfolio.(3)
And once again, the S&P 500 Index was a tough portfolio to beat. It remains the
benchmark against which investment success is measured.
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 weighted 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) A private investment pool for wealthy investors that unlike a mutual fund,
is exempt from SEC regulation.
(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.
For more complete information about mutual funds managed and distributed by USAA
IMCO, including charges and operating expenses, please call for a prospectus.
Read it carefully before investing.
The performance data quoted represents past performance; the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The Fund's total return since inception (5/1/96) is 29.67%.
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 publicly traded in the United States as
represented by the S&P 500 Index.
INVESTMENT INSTRUMENTS: Primarily equity securities, consisting of common stock
of current S&P 500 companies.
- --------------------------------------------------------------------------------
12/31/97 12/31/98
- --------------------------------------------------------------------------------
Net Assets $630.6 Million $1,855.9 Million
Net Asset Value Per Share $15.16 $19.27
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1 Year Since Inception on 5/1/96
28.62% 29.67%(+)
- --------------------------------------------------------------------------------
(+) 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 to the S&P 500
Index for the period of 05/02/96 through 12/31/98. 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
06/96 10,442 10,467
12/96 11,669 11,688
06/97 14,057 14,095
12/97 15,523 15,585
06/98 18,249 18,345
12/98 19,966 20,039
Data from 5/2/96** through 12/31/98
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 weighted
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 December 31, 1998 of
the USAA S&P 500 Index Fund to be:
Consumer Non-Durables - 23%; Finance & Building - 17%; Health Care - 11%;
Utilities - 11%; Business Equipment & Service - 9%; Consumer Durables - 7%;
Retail Trade - 6%; Capital Goods - 6%; Energy - 5%; Other - 3%; and Chemicals -
2%.
- -------------------------
TEN LARGEST
STOCK HOLDINGS
- -------------------------
Microsoft
General Electric
Intel
Wal-Mart Stores
Exxon
Merck & Company
IBM
Coca Cola
Pfizer
Cisco Systems
- -------------------------
Distributions to Shareholders
USAA S&P 500 Index Fund completed its calendar year end on December 31, 1998. As
required by Federal Law (Internal Revenue Code of 1986, as amended, and the
Regulations thereunder), the portion of the ordinary income dividend
distributions which represent domestic dividend income qualifying for deduction
by corporations was 100%.
USAA S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investment in Equity 500 Index Portfolio, at Value $ 1,853,152,027
Receivable for Capital Shares Sold 5,758,857
Receivable from USAA Transfer Agency Company 248,099
----------------
Total Assets 1,859,158,983
----------------
LIABILITIES
Payable for Capital Shares Redeemed 2,685,646
USAA Investment Management Company 279,251
Accounts Payable and Accrued Expenses 339,211
----------------
Total Liabilities 3,304,108
----------------
Net Assets Applicable to Capital Shares Outstanding $ 1,855,854,875
================
REPRESENTED BY:
Paid-in Capital $ 1,473,145,595
Accumulated Undistributed Net Investment Income 661,877
Accumulated Net Realized Gain from Investments and
Futures Transactions 3,137,315
Net Unrealized Appreciation on Investments and Futures
Contracts 378,910,088
----------------
Net Assets Applicable to Capital Shares Outstanding $ 1,855,854,875
================
Capital Shares Outstanding ($.01 par value per share,
175,000,000 shares authorized) 96,295,588
================
Net Asset Value, Redemption Price, and Offering Price
Per Share $ 19.27
================
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1998
INVESTMENT INCOME
Income Allocated from Equity 500 Index Portfolio, net $ 17,796,414
----------------
EXPENSES
Administration Fees 461,363
Custodian's Fees 23,593
Postage 146,984
Shareholder Reporting Fees 49,297
Directors' Fees 3,713
Registration Fees 462,875
Professional Fees 22,192
Other 16,403
----------------
Total Expenses 1,186,420
----------------
Net Investment Income 16,609,994
----------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions 10,308,889
Net Realized Gain from Futures Transactions 429,531
Net Change in Unrealized Appreciation/Depreciation on
Investments and Futures Contracts 281,497,244
----------------
Net Realized and Unrealized Gain on Investments and
Futures Contracts 292,235,664
----------------
Net Increase in Net Assets from Operations $ 308,845,658
================
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31,
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 16,609,994 $ 6,890,866
Net Realized Gain from Investment
and Futures Transactions 10,738,420 16,529,655
Net Change in Unrealized Appreciation/Depreciation
on Investments and Futures Contracts 281,497,244 82,263,699
-------------------------------------
Net Increase in Net Assets from Operations 308,845,658 105,684,220
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (16,008,199) (6,870,198)
-------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from Shares Sold 1,192,785,880 429,485,745
Dividend Reinvestments 11,488,944 5,388,985
Cost of Shares Redeemed (271,875,937) (82,142,783)
-------------------------------------
Net Increase in Net Assets from Capital Share
Transactions 932,398,887 352,731,947
-------------------------------------
Net Increase in Net Assets 1,225,236,346 451,545,969
NET ASSETS:
Beginning of Period 630,618,529 179,072,560
-------------------------------------
End of Period $1,855,854,875 $ 630,618,529
=====================================
UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS
End of Period $ 661,877 $ 60,082
=====================================
CHANGE IN SHARES OUTSTANDING
Shares Sold 70,104,665 31,712,665
Shares Issued for Dividends Reinvested 646,762 384,579
Shares Redeemed (16,046,032) (5,985,970)
-------------------------------------
Increase in Shares Outstanding 54,705,395 26,111,274
=====================================
</TABLE>
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
December 31, 1998
Contained below are selected ratios and supplemental data for the periods
indicated for the USAA S&P 500 Index Fund.
<TABLE>
<CAPTION>
Eight Months
Years Ended December 31, Ended December 31,
1998 1997 1996*
-------------------------------------------------------------
<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 .21 .21 .12
Net Realized and Unrealized Gain on Investments
and Futures Transactions 4.11 3.59 1.57
-------------------------------------------------------------
Total from Investment Operations 4.32 3.80 1.69
Distributions from Net Investment Income (.21) (.21) (.12)
-------------------------------------------------------------
Net Asset Value at End of Period $ 19.27 $ 15.16 $ 11.57
=============================================================
Total Return (%)** 28.62 33.03 16.90
Supplemental Data and Ratios:
Net Assets at End of Period (000) $1,855,855 $ 630,619 $ 179,073
Ratios to Average Net Assets:
Net Investment Income (%) 1.40 1.64 2.09(a)
Expenses, including Expenses of the
Equity 500 Index Portfolio (%) .18 .18 .18(a)
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust and the Manager (%) .02 .07 .15(a)
</TABLE>
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Fund commenced operations May 1, 1996.
** Assumes reinvestment of all dividend income distributions during the
period; does not reflect $10 annual account maintenance fee.
See Notes to Financial Statements on Page 11
USAA S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(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 annual 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 December 31,
1998, the Fund's investment was 35.63% 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. As a result of certain permanent
differences between book and tax basis accounting, reclassifications have been
made on the statement of assets and liabilities to decrease accumulated net
realized gain from investments and futures transactions and to increase paid-in
capital by $25,545,029.
D. 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
For the year ended December 31, 1998, the Fund participated 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). Effective January 12, 1999, the CAPCO agreement will split into two
separate agreements with CAPCO, one for $500 million uncommitted and one for
$250 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 agreements 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 agreements, does not
exceed 25% of its total assets at NationsBank's borrowing rate plus a markup.
The Fund had no borrowings under any of these agreements during the year ended
December 31, 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 December 31, 1998, the Association and its affiliates
owned 32,122,393 shares (33.36%) 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.
Report of Independent Accountants
To the Board of Directors and Shareholders of
USAA S&P 500 Index Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
USAA S&P 500 Index Fund (the "Fund") at December 31, 1998, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
USAA S&P 500 INDEX FUND
UNAUDITED FINANCIAL INFORMATION
December 31, 1998
YEAR 2000
Like other mutual funds, the Fund could be adversely affected if the computer
systems used by the Manager and the Fund's other service providers are not able
to perform their intended functions effectively after 1999 because of the
inability of computer software to distinguish the year 2000 from the year 1900.
The Manager is taking steps to address this potential year 2000 problem with
respect to the computer systems that they use and to obtain satisfactory
assurances that comparable steps are being taken by the Fund's other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Fund from this
problem.
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF NET ASSETS
December 31, 1998
Shares Security Value
- -------------------------------------------------------------------------
COMMON STOCKS - 99.0%
193,200 3Com Corporation * $ 8,657,775
785,044 Abbott Laboratories 38,467,156
33,800 Adobe Systems Inc. 1,580,150
15,968 Adolph Coors Company - Class B 901,194
68,941 Advanced Micro Devices, Inc. * 1,994,980
12,527 Aeroquip-Vickers, Inc. 375,027
87,100 AES Corporation * 4,126,362
80,059 Aetna, Inc. 6,294,639
118,608 Air Products & Chemical, Inc. 4,744,320
288,935 Airtouch Communications, Inc. * 20,839,437
8,998 Alberto-Culver Co. - Class B 240,134
130,902 Albertson's, Inc. 8,336,821
113,636 Alcan Aluminium Ltd. 3,075,274
85,969 Allegheny Teledyne, Inc. 1,756,991
37,701 Allergan, Inc. 2,441,140
284,512 Allied-Signal, Inc. 12,607,438
430,698 Allstate Corp 16,635,710
144,200 Alltel Corp. 8,624,962
96,300 Aluminum Co. of America 7,180,369
51,934 ALZA Corporation * 2,713,551
50,993 Amerada Hess Corp. 2,536,902
61,220 Ameren Corporation 2,613,329
221,400 America Online, Inc. * 35,424,000
85,010 American Electric Power Co. 4,000,783
233,216 American Express Co. 23,846,336
132,737 American General Corp. 10,353,486
38,114 American Greetings Corp. - Class A 1,565,056
681,792 American Home Products Corp. 38,393,412
540,600 American International Group, Inc. 52,235,475
145,536 American Stores Company 5,375,736
568,204 Ameritech Corp. 36,009,928
131,240 Amgen, Inc. * 13,722,782
11,604 Amoco Corp. 700,592
107,392 AMP, Inc. 5,591,096
101,604 AMR Corporation 6,032,737
54,100 Anadarko Petroleum Corp. 1,670,337
41,176 Andrew Corporation * 679,404
252,180 Anheuser-Busch Companies, Inc. 16,549,312
96,550 AON Corp. 5,346,456
44,400 Apache Corp. 1,123,875
78,642 Apple Computer, Inc. 3,219,407
187,500 Applied Materials, Inc. * 8,003,906
297,447 Archer-Daniels-Midland Co. 5,112,370
24,583 Armstrong World Industries Inc. 1,482,662
20,449 Asarco, Inc. 308,013
117,300 Ascend Communications, Inc. * 7,712,475
29,687 Ashland, Inc. 1,436,109
348,322 Associates First Capital Corp. - Class A 14,760,145
917,506 AT&T Corp. 69,042,326
175,250 Atlantic Richfield Co. 11,435,062
35,514 Autodesk, Inc. 1,516,004
149,912 Automatic Data Processing, Inc. 12,021,068
80,600 AutoZone, Inc. * 2,654,762
48,830 Avery Dennison Corp. 2,200,402
140,756 Avon Products, Inc. 6,228,453
172,013 Baker Hughes, Inc. 3,042,480
7,954 Ball Corp. 363,895
60,725 Baltimore Gas & Electric Co. 1,874,884
620,380 Banc One Corp. 31,678,154
391,800 Bank of New York Company, Inc. 15,769,950
907,657 Bankamerica Corp. 54,572,877
164,434 BankBoston Corp. 6,402,649
207,700 Barrick Gold Corp. 4,050,150
59,100 Battle Mountain Gold Co. 243,787
24,923 Bausch & Lomb, Inc. 1,495,380
159,763 Baxter International, Inc. 10,274,758
129,700 BB&T Corp. 5,228,531
65,100 Bear Stearns Companies, Inc. 2,433,112
135,664 Becton, Dickinson & Co. 5,791,157
820,436 Bell Atlantic Corp. 46,611,020
1,010,664 BellSouth Corp. 50,406,867
16,031 Bemis Company, Inc. 608,176
6 Berkshire Hathaway, Inc. - Class A * 465,368
153,060 Bestfoods 8,150,445
57,449 Bethlehem Steel Corp. * 481,135
61,250 Biomet, Inc. * 2,465,312
50,771 Black & Decker Corp. 2,846,349
106,000 BMC Software, Inc. * 4,723,625
524,346 Boeing Co. 17,106,788
24,603 Boise Cascade Corp. 762,693
198,000 Boston Scientific Corp. * 5,308,875
12,182 Briggs & Stratton Corp. 607,577
511,978 Bristol-Myers Squibb Co. 68,509,056
18,019 Brown-Forman, Inc. - Class B 1,363,813
106,535 Browning-Ferris Industries, Inc. 3,029,589
47,442 Brunswick Corp. 1,174,189
242,386 Burlington Northern Santa Fe Corp. 8,180,527
99,639 Burlington Resources, Inc. 3,568,322
30,877 C. R. Bard, Inc. 1,528,411
69,900 Cabletron Systems, Inc. * 585,412
236,054 Campbell Soup Co. 12,982,970
33,800 Capital One Financial Corp. 3,887,000
100,997 Cardinal Health, Inc. 7,663,147
282,000 Carnival Corporation - Class A 13,536,000
61,128 Carolina Power & Light Co. 2,876,836
41,900 Case Corp. 913,944
185,564 Caterpillar, Inc. 8,535,944
378,210 CBS Corp. 12,386,377
449,634 Cendant Corporation * 8,571,148
41,080 Centex Corp. 1,851,167
126,930 Central & South West Corp. 3,482,642
32,402 Ceridian Corporation 2,262,065
56,428 Champion International Corp. 2,285,334
196,750 Charles Schwab Corp. 11,054,891
446,264 Chase Manhattan Corp. 30,373,843
337,466 Chevron Corp. 27,988,586
84,272 Chubb Corp. 5,467,146
106,799 CIGNA Corp. 8,256,898
74,700 Cincinnati Financial Corp. 2,735,887
62,822 Cinergy Corp. 2,159,506
56,646 Circuit City Stores, Inc. 2,828,760
812,925 Cisco Systems, Inc. * 75,449,602
1,184,983 Citigroup 58,656,658
130,400 Clear Channel Communications, Inc. * 7,106,800
56,704 Clorox Company 6,623,736
111,432 Coastal Corp. 3,893,155
1,275,122 Coca-Cola Co. 85,273,784
217,000 Coca-Cola Enterprises, Inc. 7,757,750
160,002 Colgate-Palmolive Co. 14,860,186
37,802 Columbia Energy Group 2,183,065
339,822 Columbia/HCA Healthcare Corp. 8,410,594
178,862 Comcast Corporation - Special Class A 10,496,964
80,760 Comerica, Inc. 5,506,822
874,784 Compaq Computer Corp. 36,686,254
282,175 Computer Associates International, Inc. 12,027,709
91,072 Computer Sciences Corp. * 5,868,452
85,500 Compuware Corp. * 6,679,688
255,432 ConAgra, Inc. 8,046,108
167,468 Conseco, Inc. 5,118,241
129,336 Consolidated Edison, Inc. 6,838,641
54,705 Consolidated Natural Gas Co. 2,954,070
57,900 Consolidated Stores Corp. * 1,168,856
53,548 Cooper Industries, Inc. 2,553,570
35,851 Cooper Tire & Rubber Co. 732,705
121,214 Corning Incorporated 5,454,630
117,799 Costco Companies, Inc. * 8,503,615
72,200 Countrywide Credit Industries, Inc. 3,623,537
30,449 Crane Co. 919,179
71,950 Crown Cork & Seal Co., Inc. 2,216,959
121,332 CSX Corp. 5,035,278
18,934 Cummins Engine Co., Inc. 672,157
190,338 CVS Corporation 10,468,590
44,694 Cyprus Amax Minerals Co. 446,940
87,947 Dana Corp. 3,594,834
65,400 Danaher Corporation 3,552,037
63,719 Darden Restaurants, Inc. 1,146,942
21,345 Data General Corp. * 350,858
227,416 Dayton Hudson Corp. 12,337,318
123,323 Deere & Co. 4,085,074
658,400 Dell Computer Corporation * 48,186,650
74,698 Delta Air Lines, Inc. 3,884,296
43,591 Deluxe Corp. 1,593,796
57,497 Dillard Department Stores, Inc. - Class A 1,631,477
109,925 Dollar General Corp. 2,596,978
110,906 Dominion Resources, Inc. 5,184,855
110,008 Dover Corporation 4,029,043
114,476 Dow Chemical Co. 10,410,161
41,172 Dow Jones & Co., Inc. 1,981,402
73,676 DTE Energy Co. 3,158,858
183,595 Duke Power Co. 11,761,555
76,879 Dun & Bradstreet Corp. 2,426,493
584,092 Du Pont (E.I.) de Nemours & Co. 30,993,382
9,242 Eastern Enterprises 404,337
35,081 Eastman Chemical Co. 1,569,875
160,126 Eastman Kodak Co. 11,529,072
39,582 Eaton Corp. 2,797,953
46,600 Ecolab, Inc. 1,686,337
207,170 Edison International, Inc. 5,774,864
30,825 EG & G, Inc. 857,320
257,800 Electronic Data Systems Corporation 12,954,450
572,440 Eli Lilly & Co. 50,875,605
264,700 EMC Corporation * 22,499,500
226,600 Emerson Electric Co. 14,176,663
63,608 Engelhard Corp. 1,240,356
173,166 Enron Corp. 9,881,285
141,907 Entergy Corp. 4,416,855
68,100 Equifax Inc. 2,328,169
1,257,634 Exxon Corp. 91,964,486
520,614 Fannie Mae 38,525,436
80,855 FDX Corporation * 7,196,095
361,814 Freddie Mac 23,314,390
110,800 Federated Department Stores, Inc. * 4,826,725
146,467 Fifth Third Bancorp 10,444,928
228,500 First Data Corp. 7,240,594
512,493 First Union Corp. 31,165,981
77,500 Firstar Corporation 7,207,500
116,984 FirstEnergy Corp. 3,809,291
289,188 Fleet Financial Group, Inc. 12,923,089
33,306 Fleetwood Enterprises, Inc. 1,157,383
37,881 Fluor Corporation 1,612,310
17,750 FMC Corporation * 994,000
589,244 Ford Motor Co. 34,581,257
113,635 Fort James Corp. 4,545,400
86,174 Fortune Brands, Inc. 2,725,253
25,938 Foster Wheeler Corp. 342,057
92,094 FPL Group, Inc. 5,675,293
133,020 Franklin Resources, Inc. 4,256,640
72,200 Fred Meyer, Inc. * 4,350,050
59,900 Freeport-McMoRan Copper & Gold, Inc. - Class B 625,206
102,400 Frontier Corp. 3,481,600
30,800 Fruit of the Loom, Inc. - Class A * 425,425
145,692 Gannett Company, Inc. 9,642,989
303,266 The Gap, Inc. 17,058,713
76,400 Gateway 2000, Inc. * 3,910,725
65,544 General Dynamics Corp. 3,842,517
1,695,044 General Electric Co. 173,000,428
77,300 General Instrument Corp. * 2,623,369
77,919 General Mills, Inc. 6,058,202
338,484 General Motors Corp. 24,222,761
91,426 Genuine Parts Co. 3,057,057
54,201 Georgia-Pacific Corp. 3,174,146
568,116 Gillette Co. 27,447,104
20,017 Golden West Financial Corp. 1,835,309
46,452 Goodrich (B.F.) Co. 1,666,465
80,636 Goodyear Tire & Rubber Co. 4,067,078
57,600 GPU, Inc. 2,545,200
17,025 Great Atlantic & Pacific Tea Co., Inc. 504,366
26,396 Great Lakes Chemical Corp. 1,055,840
500,636 GTE Corp. 33,761,640
76,700 Guidant Corp. 8,456,175
56,735 H & R Block, Inc. 2,553,075
231,862 Halliburton Company 6,868,912
27,139 Harcourt General, Inc. 1,443,456
19,822 Harnischfeger Industries, Inc. 201,937
46,915 Harrah's Entertainment, Inc. * 735,979
41,342 Harris Corp. 1,514,151
125,646 Hartford Financial Services Group, Inc. 6,894,824
68,647 Hasbro, Inc. 2,479,873
262,900 HBO & Co. 7,541,944
53,000 HCR Manor Care, Inc. * 1,556,875
236,000 HEALTHSOUTH Corporation 3,643,250
190,175 H.J. Heinz Co. 10,768,659
28,016 Helmerich and Payne 542,810
52,814 Hercules, Inc. 1,445,783
50,594 Hershey Foods Corp. 3,146,314
536,440 Hewlett-Packard Co. 36,645,558
134,441 Hilton Hotels Corp. 2,571,184
753,652 Home Depot, Inc. 46,114,082
134,043 Homestake Mining Co. 1,231,520
64,919 Honeywell, Inc. 4,889,212
249,685 Household International, Inc. 9,893,768
127,892 Houston Industries, Inc. 4,108,530
83,600 Humana, Inc. 1,489,125
91,770 Huntington Bancshares, Inc. 2,758,836
61,762 Ikon Office Solutions, Inc. 528,837
135,692 Illinois Tool Works, Inc. 7,870,136
84,179 IMS Health Incorporated 6,350,253
75,266 Inco, Ltd. 794,997
90,446 Ingersoll-Rand Co. 4,245,309
863,728 Intel Corp. 102,405,751
477,382 International Business Machines Corp. 88,196,324
63,387 International Flavors & Fragrances, Inc. 2,800,913
157,744 International Paper Co. 7,068,903
77,760 The Interpublic Group of Companies, Inc. 6,201,360
52,223 ITT Industries * 2,075,864
135,550 J.C. Penney Co., Inc. 6,353,906
47,765 Jefferson-Pilot Corp. 3,582,375
697,296 Johnson & Johnson 58,485,702
35,354 Johnson Controls, Inc. 2,085,886
7,639 Jostens, Inc. 200,046
17,545 Kaufman & Broad Home Corp. 504,419
212,714 Kellogg Co. 7,258,865
30,732 Kerr-McGee Corp. 1,175,499
242,800 KeyCorp 7,769,600
293,406 Kimberly Clark Corp. 15,990,627
32,912 King World Productions, Inc. * 968,847
50,100 KLA/Tencor Corporation * 2,173,088
236,503 Kmart Corporation * 3,621,452
51,926 Knight-Ridder, Inc. 2,654,717
79,700 Kohl's Corporation * 4,896,569
132,520 The Kroger Co. 8,017,460
118,000 Laidlaw, Inc. 1,187,375
69,700 Lehman Brothers, Inc. 3,071,156
99,860 The Limited, Inc. 2,908,423
58,210 Lincoln National Corp. 4,762,306
34,803 Liz Claiborne, Inc. 1,098,470
107,145 Lockheed Martin Corp. 9,080,539
53,400 Loews Corporation 5,246,550
18,026 Longs Drug Stores, Inc. 675,975
66,958 Louisiana-Pacific Corp. 1,226,168
180,088 Lowe's Companies, Inc. 9,218,255
75,800 LSI Logic Corporation * 1,222,275
679,982 Lucent Technologies, Inc. 74,798,020
49,202 Mallinckrodt Group, Inc. 1,516,037
130,380 Marriott International 3,781,020
141,486 Marsh and McLennan 8,268,088
173,022 Masco Corp. 4,974,383
161,465 Mattel, Inc. 3,683,420
127,898 May Department Stores Co. 7,721,842
51,712 Maytag Corp. 3,219,072
49,300 MBIA, Inc. 3,232,231
385,187 MBNA Corp. 9,605,601
25,887 McDermott International, Inc. 639,085
349,914 McDonald's Corp. 26,812,160
50,930 McGraw-Hill, Inc. 5,188,494
916,631 MCI Worldcom, Inc. 65,768,274
57,702 Mead Corp. 1,691,390
316,828 MediaOne Group * 14,890,916
236,304 Medtronic, Inc. 17,545,572
139,524 Mellon Bank Corp. 9,592,275
66,600 Mercantile Bancorporation, Inc. 3,071,925
616,097 Merck & Co., Inc. 90,989,826
18,772 Meredith Corp. 710,990
1 Meritor Automotive, Inc. 21
180,576 Merrill Lynch & Co., Inc. 12,053,448
62,500 MGIC Investment Corp. 2,488,281
120,700 Micron Technology, Inc. 6,102,894
1,294,700 Microsoft Corporation * 179,558,706
13,647 Milacron, Inc. 262,705
19,792 Millipore Corp. 562,835
205,778 Minnesota Mining & Manufacturing Co. 14,635,960
105,000 Mirage Resorts Incorporated * 1,568,438
403,342 Mobil Corp. 35,141,172
311,720 Monsanto Co. 14,806,700
25,179 Moore Corporation Ltd. 276,969
298,833 Morgan Stanley Dean Witter Discover & Co. 21,217,143
90,460 Morgan (J.P.) & Co., Inc. 9,503,954
83,306 Morton International, Inc. 2,040,997
310,442 Motorola, Inc. 18,956,365
3,627 NACCO Industries, Inc. - Class A 333,684
28,325 Nalco Chemical Company 878,075
171,400 National City Corp. 12,426,500
77,126 National Semiconductor Corp. * 1,041,201
21,726 National Service Industries, Inc. 825,588
34,158 Navistar International Corporation 973,503
55,200 New Century Energies, Inc. 2,691,000
90,668 New York Times Co. - Class A 3,145,046
71,258 Newell Co. 2,939,393
85,710 Newmont Mining Corp. 1,548,137
140,900 Nextel Communications, Inc. - Class A * 3,328,763
72,242 Niagara Mohawk Power Corporation 1,164,902
24,769 NICOR, Inc. 1,046,490
105,148 Nike, Inc. 4,265,066
82,958 Nordstrom, Inc. 2,877,606
192,753 Norfolk Southern Corp. 6,107,861
53,888 Northern States Power Company 1,495,392
343,562 Northern Telecom Ltd. 17,221,045
60,300 Northern Trust Corp. 5,264,944
39,479 Northrop Grumman Corp. 2,886,902
176,292 Novell, Inc. * 3,195,293
48,694 Nucor Corp. 2,106,016
178,914 Occidental Petroleum Corp. 3,019,174
82,900 Omnicom Group, Inc. 4,808,200
13,991 Oneok, Inc. 505,425
495,156 Oracle Corp. * 21,353,603
48,279 Oryx Energy Co. 648,749
33,750 Owens Corning 1,196,016
91,600 Owens-Illinois, Inc. * 2,805,250
42,080 Paccar, Inc. 1,730,540
153,789 Pacificorp 3,239,181
64,164 Pall Corp. 1,624,151
162,000 Parametric Technology Corporation * 2,652,750
64,714 Parker-Hannifin Corp. 2,119,384
89,800 Paychex, Inc. 4,619,088
117,284 PECO Energy 4,881,947
9 PennzEnergy Company 147
17,055 People's Energy Corp. 680,068
112,500 PeopleSoft, Inc. * 2,130,469
26,712 Pep Boys (Manny Moe & Jack) 419,045
752,794 Pepsico, Inc. 30,817,504
26,925 Perkin Elmer Corp. 2,626,870
669,028 Pfizer, Inc. 83,921,200
221,105 PG & E Corp. 6,964,808
262,832 Pharmacia & Upjohn, Inc. 14,882,862
26,508 Phelps Dodge Corporation 1,348,595
1,260,198 Philip Morris Companies 67,420,593
116,806 Phillips Petroleum Co. 4,978,856
101,420 Pioneer Hi-Bred International, Inc. 2,738,340
143,896 Pitney Bowes, Inc. 9,506,130
106,404 Placer Dome, Inc. 1,223,646
158,333 PNC Bank Corp. 8,569,774
36,182 Polaroid Corp. 676,151
13,301 Potlatch 490,474
91,642 PPG Industries, Inc. 5,338,146
71,007 P.P.& L. Resources, Inc. 1,979,320
82,615 Praxair, Inc. 2,912,179
688,740 Procter & Gamble Co. 62,890,571
39,950 Progressive Corporation of Ohio 6,766,531
63,900 Provident Companies, Inc. 2,651,850
73,397 Providian Financial Corp. 5,504,775
130,994 Public Service Enterprise Group 5,239,760
20,632 Pulte Corp. 573,828
70,384 Quaker Oats Co. 4,187,848
146,015 Ralston Purina Group 4,727,236
49,976 Raychem Corp. 1,614,850
175,214 Raytheon Co. - Class B 9,330,146
25,029 Reebok International Ltd. 372,306
127,770 Regions Financial Corp. 5,150,728
67,100 Republic New York Corp. 3,057,244
45,849 Reynolds Metals Co. 2,415,669
131,302 Rite Aid Corp. 6,507,655
168,000 RJR Nabisco Holdings Corp. 4,987,500
103,224 Rockwell International Corp. 5,012,816
98,377 Rohm & Haas Co. 2,963,607
39,100 Rowan Companies, Inc. * 391,000
1,109,204 Royal Dutch Petroleum Co. 53,103,141
63,552 R.R. Donnelley & Sons Co. 2,784,372
78,502 Rubbermaid, Inc. 2,467,907
16,011 Russell Corp. 325,223
34,017 Ryder Systems, Inc. 884,442
70,502 Safeco 3,027,180
256,800 Safeway, Inc. * 15,648,750
478,654 Sara Lee Corp. 13,492,060
1,031,528 SBC Communications, Inc. 55,315,689
757,232 Schering-Plough Corp. 41,837,068
275,962 Schlumberger Ltd. 12,728,747
36,238 Scientific-Atlanta, Inc. 826,679
133,100 Seagate Technology, Inc. * 4,026,275
187,637 Seagram Co. Ltd. 7,130,206
47,005 Sealed Air Corporation 2,400,193
201,409 Sears, Roebuck & Co. 8,559,883
121,414 Sempra Energy 3,080,880
138,092 Service Corp. International 5,256,127
10,974 Shared Medical Systems Corp. 547,328
87,974 Sherwin-Williams Company 2,584,236
59,500 Sigma Aldrich Corporation 1,747,813
109,115 Silicon Graphics, Inc. * 1,404,856
95,100 SLM Holding Corp. 4,564,800
39,794 Snap-On Tools Corp. 1,385,329
58,000 Solectron Corporation * 5,390,375
48,110 Sonat, Inc. 1,301,977
386,658 Southern Co. 11,237,248
161,700 Southwest Airlines Co. 3,628,144
5,604 Springs Industries, Inc. - Class A 232,216
168,982 Sprint Corporation 14,215,611
220,491 Sprint PCS * 5,098,854
37,388 St. Jude Medical, Inc. * 1,035,180
121,928 St. Paul Companies, Inc. 4,236,998
39,330 Stanley Works 1,091,408
145,100 Staples, Inc. * 6,339,056
76,700 State Street Corp. 5,335,444
93,800 Summit Bancorp. 4,097,888
202,856 Sun Microsystems, Inc. * 17,369,545
104,100 SunAmerica, Inc. 8,445,113
41,245 Sunoco, Inc. 1,487,398
163,460 Suntrust Banks, Inc. 12,504,690
63,640 SuperValu, Inc. 1,781,920
116,350 Synovus Financial Corp. 2,836,031
175,020 Sysco Corporation 4,802,111
56,166 Tandy Corp. 2,313,337
36,707 Tektronix, Inc. 1,103,504
246,960 Tele-Communications, Inc. - Class A * 13,659,975
100,000 Tellabs, Inc. * 6,856,250
28,622 Temple Inland, Inc. 1,697,642
156,810 Tenet Healthcare Corp. 4,116,263
88,034 Tenneco, Inc. 2,998,658
280,322 Texaco, Inc. 14,822,026
202,956 Texas Instruments, Inc. 17,365,423
158,227 Texas Utilities Co. 7,387,223
77,006 Textron, Inc. 5,847,643
95,100 Thermo Electron Corp. * 1,610,756
38,000 Thomas & Betts Corp. 1,645,875
569,430 Time Warner, Inc. 35,340,249
28,529 Times Mirror Co. - Class A 1,597,624
24,796 Timken Company 468,025
189,516 TJX Companies, Inc. 5,495,964
63,468 Torchmark Corp. 2,241,214
156,218 Toys `R' Us, Inc. * 2,636,179
28,243 Transamerica Corp. 3,262,067
53,596 Tribune Company 3,537,336
81,999 Tricon Global Restaurants, Inc. * 4,110,200
61,792 TRW, Inc. 3,482,052
27,396 Tupperware Corp. 450,322
339,870 Tyco International Ltd. 25,638,943
269,255 U.S. West Incorporated 17,400,604
394,737 U.S. Bancorp 14,013,164
138,825 Unicom Corporation 5,353,439
323,868 Unilever NV 26,860,802
36,203 Union Camp Corp. 2,443,703
68,552 Union Carbide Corporation 2,913,460
130,847 Union Pacific Corp. 5,896,293
146,248 Union Pacific Resources Group, Inc. 1,325,373
64,900 Union Planters Corporation 2,940,781
121,599 Unisys Corporation 4,187,566
93,500 United Healthcare Corp. 4,026,344
113,512 United Technologies Corp. 12,344,430
127,837 Unocal Corp. 3,731,242
61,800 UNUM Corp. 3,607,575
42,715 US Airways Group, Inc. * 2,221,180
96,207 UST, Inc. 3,355,219
154,864 USX Marathon Group 4,665,278
61,577 USX - U.S. Steel Group 1,416,271
65,730 V.F. Corporation 3,081,094
148,249 Viacom, Inc. - Class B 10,970,426
113,910 Wachovia Corp. 9,960,006
1,157,848 Wal-Mart Stores, Inc. 94,292,246
257,268 Walgreen Co. 15,066,257
1,064,071 Walt Disney Company 31,922,130
428,458 Warner-Lambert Company 32,214,686
321,022 Washington Mutual, Inc. 12,259,028
287,956 Waste Management, Inc. 13,425,949
853,636 Wells Fargo Co. 34,092,088
75,762 Wendy's International, Inc. 1,652,559
39,960 Westvaco Corporation 1,071,428
103,894 Weyerhaeuser Co. 5,279,114
33,439 Whirlpool Corp. 1,851,685
43,700 Willamette Industries, Inc. 1,463,950
243,136 Williams Companies, Inc. 7,582,804
66,580 Winn-Dixie Stores, Inc. 2,987,778
46,892 Wm. Wrigley, Jr. Company 4,199,765
31,279 Worthington Industries, Inc. 390,988
35,649 W. R. Grace & Co. * 559,244
48,330 W.W. Grainger, Inc. 2,011,736
169,635 Xerox Corp. 20,016,930
---------------
Total Common Stocks (Cost $3,244,951,024) 5,146,921,230
---------------
SHORT TERM INSTRUMENTS - 0.7%
Mutual Fund - 0.6%
33,163,964 BT Institutional Cash Management Fund $ 33,163,964
---------------
Principal
Amount
- ------------
U.S. Treasury Bills - 0.1%
$ 330,000 3.906%, 1/14/99** 329,529
5,535,000 4.70%, 1/14/99** 5,526,511
---------------
5,856,040
---------------
Total Short Term Instruments (Cost $39,020,004) 39,020,004
---------------
Total Investments (Cost $3,283,971,028) 99.7% 5,185,941,234
-------------------------
Other Assets
Less Liabilities 0.3% 14,563,176
-------------------------
Total Net Assets 100.0% $5,200,504,410
=========================
- ----------------------------------
* Non-income producing security.
** Held as collateral for futures contracts.
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Year ended December 31, 1998
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $284,044) $ 56,672,952
Interest 4,806,144
---------------
Total Investment Income 61,479,096
---------------
EXPENSES
Advisory Fees 3,186,503
Administration and Services Fees 676,625
Professional Fees 46,189
Miscellaneous 4,344
---------------
Total Expenses 3,913,661
Less: Expenses absorbed by Bankers Trust (799,296)
---------------
Net Expenses 3,114,365
---------------
Net Investment Income 58,364,731
---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FUTURES CONTRACTS
Net Realized Gain from Investment Transactions 33,524,253
Net Realized Gain from Futures Transactions 1,750,435
Net Change in Unrealized Appreciation/Depreciation
on Investments 894,561,271
Net Change in Unrealized Appreciation/Depreciation
on Futures Contracts 528,247
---------------
Net Realized and Unrealized Gain on Investments and
Futures Contracts 930,364,206
---------------
Net Increase in Net Assets from Operations $ 988,728,937
===============
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31,
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income $ 58,364,731 $ 42,706,376
Net Realized Gain from Investment
Transactions and Futures Transactions 35,274,688 95,286,448
Net Change in Unrealized
Appreciation/Depreciation on Investments
and Futures Contracts 895,089,518 528,775,836
----------------------------------------------
Net Increase in Net Assets from Operations 988,728,937 666,768,660
----------------------------------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested 2,853,940,069 1,462,422,481
Value of Capital Withdrawn (1,445,251,067) (1,251,328,236)
----------------------------------------------
Net Increase in Net Assets from
Capital Transactions 1,408,689,002 211,094,245
----------------------------------------------
Total Increase in Net Assets 2,397,417,939 877,862,905
NET ASSETS
Beginning of Year 2,803,086,471 1,925,223,566
----------------------------------------------
End of Year $ 5,200,504,410 $ 2,803,086,471
==============================================
</TABLE>
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
December 31, 1998
Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the Equity 500 Index Portfolio.
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of
Year (000s omitted) $5,200,504 $2,803,086 $1,925,224 $1,080,736 $ 559,772
Ratios to Average
Net Assets:
Net Investment Income (%) 1.50 1.76 2.20 2.52 2.84
Expenses (%) .08 .08 .10 .10 .10
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses
by Bankers Trust (%) .02 .07 .05 .05 .06
Portfolio Turnover Rate (%) 4 19 15 6 21
</TABLE>
See Notes to Financial Statements on Page 27
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Equity 500 Index Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on December 11, 1991
as an unincorporated trust under the laws of New York and commenced operations
on December 31, 1992. The Declaration of Trust permits the Board of Trustees
(the "Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments are valued each business day by an independent
pricing service approved by the Trustees. Securities traded on national
exchanges or traded in the NASDAQ National Market System are valued at the last
sales prices reported at the close of business each day. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the mean of the bid and
asked prices. Short-term obligations with remaining maturities of 60 days or
less are valued at amortized cost that, with accrued interest, approximates
value. Securities for which quotations are not available are stated at fair
value as determined by the Trustees.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from securities transactions are recorded
on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Futures Contracts
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either cash or securities in an amount equal to
a certain percentage of the contract amount. Variation margin payments are made
or received by the Portfolio each day, dependent on the daily fluctuations in
the value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. Federal Income Taxes
The Portfolio is considered a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
(2) FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of .005% of the Portfolio's average daily net
assets. For the period January 1, 1998 to May 6, 1998 the Administrative and
Services Fee was .05% on an accrual basis. For the year ended December 31, 1998,
Administration and Service Fees amounted to $676,625, of which $21,178 was
payable at the end of the year.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of .075% of the Portfolio's
average daily net assets. For the period January 1, 1998 to May 6, 1998 the
Advisory fee was .10%. For the year ended December 31, 1998, Advisor Fees
amounted to $3,186,503, of which $309,104 was payable at the end of the year.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.08% of the average daily net assets of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund (the
"Fund"), an open-end management investment company managed by Bankers Trust
Company (the "Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio as of December 31, 1998 amounted to $4,490,254 and are included
in dividend income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility and a discretionary demand line of credit facility
("collectively the credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively, which expire March 15, 1999. A commitment fee of
.07% per annum on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned equally among all participants.
Amounts borrowed under the credit facilities will bear interest at a rate per
annum equal to the Federal Funds Rate plus .45%. No amounts were drawn down or
outstanding under the credit facilities as of and for the year ended December
31, 1998.
For the year ended December 31, 1998, the Portfolio paid affiliated brokerage
commissions of $333.
(3) PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 1998, were
$1,607,662,962 and $153,777,789, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1998 was $3,302,071,681. The
aggregate gross unrealized appreciation was $1,914,790,859, and the aggregate
gross unrealized depreciation was $69,941,310 for all investments as of December
31, 1998. Payable for securities purchased at December 31, 1998 amounted to
$58,369,160.
(4) FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1998
is as follows:
Market Unrealized
Type of Future Expiration Contracts Position Value Appreciation
- --------------------------------------------------------------------------------
S&P 500 Index
Futures March 1999 334 Long $100,118,660 $81,600
At December 31, 1998, the Portfolio segregated $5,856,040 to cover margin
requirements on open futures contracts.
(5) NET ASSETS
At December 31, 1998 net assets consisted of :
Paid-in-Capital $3,297,393,868
Net Unrealized Appreciation on Investments and Futures 1,903,110,542
----------------
Total Net Assets $5,200,504,410
================
Report of Independent Accountants
To the Trustees and Holders of Beneficial Interest of
Equity 500 Index Portfolio:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Equity 500 Index Portfolio (the "Portfolio") at December 31, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
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
130 Liberty Street
New York, New York 10006
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
250 West Pratt Street
Baltimore, Maryland 21201
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 7:30 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
