Report of Independent Accountants
To the Board of Directors of
Lernoult Investment Fund, Inc.
We have examined management's assertion, included in the accompanying
Management Statement Regarding Compliance with Certain Provisions of the
Investment Company Act of 1940, that Lernoult Investment Fund, Inc. (the
"Fund") was in compliance with the requirements of subsection (b) and (c) of
Rule 17f-2 of the Investment Company Act of 1940 ("the Act") as of
December 31, 1998 with respect to securities and similar investments reflected
in the investment account of the Fund. Management is responsible for the
Fund's compliance with those requirements. Our responsibility is to express
an opinion on management's assertion about the Fund's compliance based on our
examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and accordingly, included
examining, on a test basis, evidence about the Fund's compliance with those
requirements and performing such other procedures as we considered necessary
in the circumstances. Included among our procedures were the following tests
performed as of December 31, 1998, and with respect to agreement of security
and similar investments purchases and sales, for the year ended December 31,
1998;
* Roll forward of securities held at December 31, 1998 and subsequent review
of the disposal of all securities.
* Reconciliation of all securities and investments to the books and records
of the Fund and the Custodian.
We believe that our examination provides a reasonable basis for our opinion.
Our examination does not provide a legal determination on the Fund's
compliance with specified requirements.
In our opinion, management's assertion that Lernoult Investment Fund, Inc. was
in compliance with the requirements of subsection (b) and (c) of Rule 17f-2 of
the Investment Company Act of 1940 as of December 31, 1998, with respect to
securities and similar investments reflected in the investment account of the
Fund is fairly stated, in all material respects.
This report is intended solely for the information and use of management of
Lernoult Investment Fund, Inc. and the Securities and Exchange Commission and
should not be used for any other purpose.
Ernst & Young, LLP
Detroit, Michigan
February 12, 1999
LERNOULT INVESTMENT FUND, INC.
Portfolio of Investments
December 31, 1998
No. of
Shares Market Value
COMMON STOCK
BUILDING AND CONSTRUCTION 1.69%
BUILDING MATERIALS
8,800 GEORGIA PACIFIC CORP 515,350.00
138,200 HOME DEPOT 8,456,112.50
31,200 MASCO CORP 897,000.00
INDUSTRIAL CHEMICALS
16,800 PPG INDUS INC 978,600.00
TOTAL BUILDING AND CONSTRUCTION $10,847,062.50
CHEMICALS AND DRUGS 15.82%
CHEMICALS
21,400 DOW CHEMICAL CO 1,946,062.50
107,000 DUPONT DENEMOURS & CO 5,677,687.50
7,400 EASTMAN CHEMICAL 331,150.00
DRUGS
144,600 ABBOT LABS 7,085,400.00
8,100 ALZA CORP CL A 423,225.00
122,800 AMERICAN HOME PRODUCTS 6,915,175.00
94,000 BRISTOL MYERS SQUIBB CO 12,578,375.00
104,900 LILLY ELI & CO 9,322,987.50
113,300 MERCK & CO., INC 16,732,993.75
122,200 PFIZER INC 15,328,462.50
48,000 PHARMACIA & UPJOHN INC 2,718,000.00
138,400 SCHERING PLOUGH 7,646,600.00
77,100 WARNER-LAMBERT 5,796,956.25
COSMETICS
25,000 AVON PRODUCTS INC 1,106,250.00
10,300 INTL FLAVORS & FRAGRANCES 455,131.25
HEALTH PRODUCTS/CARE
26,500 BAXTER INTL INC. 1,704,281.25
105,800 GILLETTE CO 5,111,462.50
28,900 TENET HEALTHCARE CORP 758,625.00
TOTAL CHEMICALS AND DRUGS $101,638,825.00
CONSUMER PRODUCTS 12.82%
CONFECTIONS AND BEVERAGES
46,300 ANHEUSER-BUSCH COS 3,038,437.50
233,800 COCA COLA CO 15,635,375.00
143,400 PEPSICO INC 5,870,437.50
PACKAGED FOOD
43,100 CAMPBELL SOUP CO 2,370,500.00
44,900 CONAGRA 1,414,350.00
34,500 HEINZ H J CO 1,953,562.50
38,800 KELLOGG CO 1,324,050.00
229,200 PHILLIP MORRIS CO INC 12,262,200.00
13,100 QUAKER OATS CO 779,450.00
89,400 SARA LEE CORP 2,519,962.50
4,310 VLASIC FOODS INTL 102,631.88
PAPER
28,600 INTERNATIONAL PAPER CO 1,281,637.50
52,500 KIMBERLY CLARK CORP 2,861,250.00
18,900 WEYERHAEUSER CO 960,356.25
PRINTING AND PUBLISHING
26,800 GANNETT CO., INC 1,728,600.00
9,400 MCGRAW-HILL COMPANIES INC 957,625.00
103,800 TIME WARNER INC 6,442,087.50
OTHER CONSUMER PRODUCTS
28,000 COLGATE PALMOLIVE CO 2,600,500.00
38,600 MINNESOTA MNG & MFR 2,745,425.00
126,900 PROCTER & GAMBLE CO 11,587,556.25
17,400 UST INC 606,825.00
PHOTOGRAPHY
30,700 EASTMAN KODAK CO. 2,210,400.00
APPAREL
27,500 NIKE INC CL B 1,115,468.75
TOTAL CONSUMER PRODUCTS $82,368,688.13
DURABLE GOODS 22.17%
AEROSPACE-AIRCRAFT
94,500 BOEING CO 3,083,062.50
18,400 LOCKHEED MARTIN CORP 1,559,400.00
15,500 TEXTRON INC 1,177,031.25
22,000 UNITED TECHNOLOGIES CORP 2,392,500.00
AGRICULTURAL MACHINERY
35,200 CATERPILLAR INC 1,619,200.00
23,600 DEERE & CO 781,750.00
AUTOMOBILE AND PARTS
23,320 DAIMLERCHRYSLER AG 2,240,177.50
113,400 FORD MTR CO 6,655,162.50
65,000 GENERAL MTRS CORP 4,651,562.50
16,900 GENUINE PARTS CO 565,093.75
16,100 TENNECO INC 548,406.25
11,600 TRW INC 651,775.00
ELECTRICAL
20,800 AMP INC 1,082,900.00
41,900 EMERSON ELEC CO 2,534,950.00
12,000 HONEYWELL INC 903,750.00
ELECTRONICS
7,300 EATON CORP 516,018.75
309,300 GENERAL ELECTRIC CO 31,567,931.25
15,000 GENERAL MILLS INC 1,166,250.00
154,600 INTEL CORP 18,329,762.50
56,400 MOTOROLA INC 3,443,925.00
INDUSTRIAL MACHINERY
11,400 COOPER INDUS INC 543,637.50
OFFICE EQUIPMENT AND SUPPLIES
91,900 IBM COMMON 16,978,525.00
27,400 PITNEY BOWES INC 1,810,112.50
30,800 XEROX CORP. 3,634,400.00
RUBBER
14,800 GOODYEAR TIRE & RUBBER 746,475.00
OTHER DURABLE GOODS
53,300 ALLIED-SIGNAL INC 2,361,856.25
21,800 CORNING INCORPORATED 981,000.00
COMPUTERS AND SOFTWARE
28,300 AUTOMATIC DATA PROC 2,269,306.25
143,100 COMPAQ COMPUTER CORP 6,001,256.25
98,300 HEWLETT PACKARD CO 6,715,118.75
20,200 UNISYS CORP 695,637.50
TELECOMMUNICATIONS
123,000 LUCENT TECHNOLOGIES INC 13,530,000.00
31,200 SPRINT CORP PCS GROUP 721,500.00
TOTAL DURABLE GOODS $142,459,433.75
FINANCIAL 17.99%
BANKS
71,200 BANK NEW YORK INC 2,865,800.00
27,400 BANKBOSTON CORPORATION 1,066,887.50
9,300 BANKERS TR NY CORP 794,568.75
79,600 CHASE MANHATTAN CORP NEW 5,417,775.00
79,994 FIRST UNION CORP 4,864,635.13
51,600 FLEET FINANCIAL GROUP INC 2,305,875.00
19,910 HUNTINGTON BANCSHARES INC 598,544.38
41,500 KEYCORP 1,328,000.00
71,100 MBNA CORP 1,773,056.25
24,100 MELLON BANK CORP 1,656,875.00
16,800 MORGAN J P & CO 1,765,050.00
20,000 NATIONAL CITY CORP 1,450,000.00
19,900 SUNTRUST BANKS INC 1,522,350.00
69,600 U.S. BANCORP 2,470,800.00
17,600 WACHOVIA CORP 1,538,900.00
36,450 WASHINGTON MUTUAL INC 1,391,934.38
153,400 WELLS FARGO COMPANY NEW 6,126,412.50
FINANCE COMPANIES
43,900 AMERICAN EXPRESS CO 4,488,775.00
59,440 ASSOCIATES FIRST CAPITAL 2,518,770.00
65,700 FED HOME LN MTG CORP 4,233,543.75
100,300 FEDERAL NATL MTGE ASSN 7,422,200.00
30,300 HOUSEHOLD INTL CORP 1,200,637.50
56,000 MORGAN ST DE WTR DISC 3,976,000.00
28,800 PNC FINANCIAL 1,558,800.00
HOLDING COMPANY
105,550 BANK ONE CORP 5,389,646.88
163,019 BANKAMERICA CORP NEW 9,801,517.38
216,400 CITIGROUP INC 10,711,800.00
FIRE AND CASUALTY INSURANCE
16,100 CHUBB CORP 1,044,487.50
13,300 SAFECO CORP 571,068.75
INSURANCE
81,000 ALLSTATE CORP. 3,128,625.00
99,450 AMERICAN INTL GROUP 9,609,356.25
15,900 AON CORP 880,462.50
21,000 CIGNA CORP 1,623,562.50
22,400 HARTFORD FINANCIAL SVCS 1,229,200.00
24,150 MARSH & MCLENNAN CO. 1,411,265.63
15,800 ST PAUL COS INC 549,050.00
LIFE INSURANCE
24,000 AMERICAN GENERAL CORP 1,872,000.00
9,700 LINCOLN NATL CORP IND 793,581.25
BROKERAGE
31,500 MERRILL LYNCH & CO 2,102,625.00
MISCELLANEOUS
16,100 DUN & BRADSTREET CORP NEW 508,156.25
TOTAL FINANCIAL $115,562,595.03
METALS AND MINING 0.21%
ALUMINUM
15,300 ALUMINUM CO AMER 1,140,806.25
OTHER METALS
18,300 FREEPORT-MCMORAN COPPER-B 191,006.25
TOTAL METALS AND MINING $1,331,812.50
OIL-ENERGY 6.78%
OIL & GAS PRODUCERS
92,000 AMOCO CORP 5,428,000.00
32,000 OCCIDENTAL PETROLEUM 540,000.00
27,300 USX-MARTHON GROUP COM NEW 822,412.50
NATURAL RESOURCES
30,200 WILLIAMS COS INC-DEL 941,862.50
OIL - DOMESTIC
24,900 PHILLIPS PETE CO 1,061,362.50
23,300 UNOCAL CORP 680,068.75
OIL - INTERNATIONAL
30,300 ATLANTIC RICHFIELD CO 1,977,075.00
62,100 CHEVRON CORP 5,150,418.75
233,100 EXXON CORP. 17,045,437.50
74,100 MOBIL CORP 6,455,962.50
51,800 TEXACO INC 2,738,925.00
MISCELLANEOUS
21,800 FIRSTENERGY CORP 709,862.50
TOTAL OIL-ENERGY $43,551,387.50
RETAIL 4.00%
DEPARTMENT STORES
41,400 DAYTON HUDSON CORP 2,245,950.00
46,100 K MART 705,906.25
21,900 MAY DEPT STORES CO 1,322,212.50
23,600 PENNEY JC INC 1,106,250.00
37,100 SEARS ROEBUCK & CO 1,576,750.00
GROCERY
23,200 ALBERTSON'S INC 1,477,550.00
OTHER RETAIL
212,300 WAL MART STORES INC 17,289,181.25
TOTAL RETAIL $25,723,800.00
UTILITIES 11.45%
ELECTRIC
17,900 AMERICAN ELEC PWR INC 842,418.75
14,000 BALTIMORE GAS & ELEC 432,250.00
14,200 CAROLINA PWR & LT CO 668,287.50
20,100 CENTRAL & SOUTH WEST CORP 551,493.75
14,900 CINERGY CORP 512,187.50
22,200 CONSOLIDATED EDISON INC 1,173,825.00
18,300 DOMINION RES INC-VA 855,525.00
13,700 DTE ENERGY CO 587,387.50
34,000 DUKE POWER CO 2,178,125.00
36,100 EDISON INTERNATIONAL 1,006,287.50
23,100 ENTERGY CORP NEW 718,987.50
17,200 FPL GROUP INC 1,059,950.00
12,000 GPU INC 530,250.00
26,700 HOUSTON INDS INC 857,737.50
13,700 NIAGARA MOHAWK PWR 220,912.50
14,000 NORTHERN STS PWR CO 388,500.00
14,300 P P & L RESOURCES INC 398,612.50
28,000 PACIFICORP 589,750.00
21,000 PECO ENERGY CO 874,125.00
41,400 PG&E CORP 1,304,100.00
21,900 PUBLIC SVC ENTERPRISE GRP 876,000.00
65,200 SOUTHERN CO 1,894,875.00
20,500 UNICOM CORPORATION 790,531.25
GAS
9,000 CONSOLIDATED NATL GAS 486,000.00
23,300 TEXAS UTILITIES CO 1,087,818.75
TELEPHONE
153,500 A T & T 11,550,875.00
17,400 ALLTEL CORP 1,040,737.50
103,500 AMERITECH CORP NEW 6,559,312.50
146,800 BELL ATLANTIC CORP 7,780,400.00
187,400 BELLSOUTH CORP 9,346,575.00
29,400 ENRON CORP 1,677,637.50
15,500 FRONTIER CORP 527,000.00
90,500 GTE CORP 5,882,500.00
40,600 SPRINT CORP 3,415,475.00
45,700 US WEST INC (NEW) 2,953,362.50
WASTE DESPOSAL
18,300 BROWNING FERRIS IND 520,406.25
31,175 WASTE MANAGEMENT INC NEW 1,453,534.38
TOTAL UTILITIES $73,593,753.13
MISCELLANEOUS 6.01%
BROADCAST/COMMUNICATIONS
67,200 CBS CORP 2,200,800.00
191,400 DISNEY WALT CO 5,742,000.00
BUSINESS SERVICES
76,600 CENDANT CORP 1,460,187.50
FOOD SERVICE
65,100 MCDONALDS CORP 4,988,287.50
MED SERV & SUPPLIES
15,500 HUMANA INC 276,093.75
TRANSPORTATION
17,200 AMR CORP 1,021,250.00
44,400 BURLINGTON NRTHN SANTA FE 1,498,500.00
20,600 CSX CORP 854,900.00
35,600 NORFOLK SOUTHERN CORP 1,128,075.00
23,400 UNION PACIFIC CORP 1,054,462.50
MISCELLANEOUS
127,100 JOHNSON & JOHNSON 10,660,512.50
3,220 RH DONNELLEY CORP 46,891.25
TELECOMMUNICATIONS
143,200 SBC COMMUNICATIONS INC 7,679,100.00
TOTAL MISCELLANEOUS $38,611,060.00
TOTAL COMMON STOCK $635,688,417.54
OTHER
1.06%
CASH EQUIVALENTS
6,805,578 AIM SHORT TERM INV SER 2 6,805,578.18
TOTAL $6,805,578.18
TOTAL OTHER $6,805,578.18
TOTAL INVESTMENTS - 100.00% $642,493,995.72
(cost $573,490,527)
See accompanying notes
