Report of Independent Auditors
Board of Directors and Stockholder
Select Asset Fund, Series 2, Inc.
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of
Select Asset Fund, Series 2, Inc. as of December 31, 1997,
and the related statement of operations, the statement of
changes in net assets, and the financial highlights for the
year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audit. The statement of changes in net assets of Select
Asset Fund, Series 2, Inc. for the year ended December 31,
1996, and the financial highlights for each of the three
years in the period then ended and for the period from
April 28, 1993 (commencement of operations) to December 31,
1993 were audited by other auditors whose report dated
February 14, 1997, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31,
1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1997 financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Select Asset Fund,
Series 2, Inc. at December 31, 1997, the results of its
operations, the changes in its net assets, and its financial
highlights for the year then ended, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Detroit, Michigan i
January 23, 1998
Select Asset Fund, Series 2, Inc.
Statement of Assets and Liabilities
December 31, 1997
Assets
Investments, at fair value (cost $409,576,706) $814,908,541
Cash 825,375
Dividends receivable 1,277,133
Prepaid expenses 11,000
Total assets 817,022,049
Liabilities
Common stock dividend payable 138,719,277
Accrued expenses 146,044
Notes payable (Note 5) 113,400
Accrued interest expense 2,685
Total liabilities 138,981,406
Net assets $678,040,643
Net assets are represented by:
Common stock at par value, $.01 per share, 199,992,400 shares
authorized, 71,071,001.64 shares issued and outstanding $710,710
Additional paid-in capital 271,998,097
Net unrealized appreciation of investments 405,331,836
Net assets $678,040,643
Net asset value per common shares outstanding $9.54
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statement of Operations
For the year ended December 31, 1997
Investment income:
Dividend income $16,544,097
Interest income 339,750
Total investment income 16,883,847
Expenses:
Administration fee (Note 2) 553,897
Investment management fee (Note 2) 92,098
Broker dealer fee on AMPS 488,236
Rating agencies fees 49,167
Independent accountants 26,223
Auction agent fee 24,943
Insurance 16,365
Directors fees and expenses 10,875
Interest expense 9,529
Other expenses 2,234
Total expenses 1,273,567
Net investment income 15,610,280
Net realized and unrealized gains on investments:
Net realized gain on investment 138,593,661
Change in net unrealized appreciation of investments 114,877,968
Net increase in net assets resulting from operations $269,081,909
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statement of Changes in Net Assets
For the years ended December 31, 1997 and 1996
1997 1996
From operations:
Net investment income $15,610,280 $14,087,883
Net realized gain on investments 138,593,661 122,507,248
Net change in unrealized appreciation
of investments 114,877,968 3,364,522
Increase in net assets resulting from operations 269,081,909 139,959,653
Dividends from net investment income:
Auction market preferred stock (13,419,520) (10,388,299)
Common stock (2,190,760) (3,699,584)
(15,610,280) (14,087,883)
Distributions from net realized gains:
Common stock (138,719,277) (122,381,631)
Decrease in net assets resulting from
distributions to stockholders (154,329,557) (136,469,514)
Increase (decrease) from capital transactions:
Issuance of auction market preferred stock 50,000,000 310,000,000
Issuance of common stock - 36,154,530
Capital contribution from common stockholder 364,000,000 -
Redemption of auction market preferred stock (360,000,000) -
Distribution of capital to common stockholder (285,896,935) (490,818,932)
(231,896,935) (144,664,402)
Total decrease in net assets (117,144,583) (141,174,263)
Net assets:
Beginning of year 795,185,226 936,359,489
End of year $678,040,643 $795,185,226
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Notes to Financial Statements
December 31, 1997
1
1. Organization and Significant Accounting Policies
The Select Asset Fund, Series 2, Inc. (the "Fund") is
registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940,
as amended. The Fund commenced investment operations on
April 28, 1993.
The Fund's objective is long-term capital appreciation with
income as a secondary objective. The Fund's investments
consist primarily of common stocks of large and medium
capitalization U.S. companies. The Fund's investment
portfolio must conform to certain rating agency asset
coverage tests so long as the Fund has preferred stock
outstanding.
The following is a summary of significant accounting
policies consistently followed by the Fund in preparation of
its financial statements.
Security Valuation
Investments in securities traded on a national securities
exchange (or reported on the Nasdaq national market) are
valued at the last reported sales price on the primary
exchange. Temporary investments are valued at amortized
cost which approximates fair value.
Security Transactions
Security transactions are accounted for on a trade date plus
one business day basis which does not differ materially from
a trade date basis. The cost of securities sold is
determined using the identified cost method. Dividend
income is recorded on ex-dividend date and interest income
is recorded on the accrual basis.
Federal Income Taxes
It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment
companies and distribute its taxable income to
stockholders. Therefore, no provision for Federal income
tax is required.
1. Organization and Significant Accounting Policies
(continued)
Distribution of Income and Gains
The Fund distributes substantially all of its taxable income
in excess of the dividends paid to the preferred
stockholders to the common stockholder. Dividends to the
common stockholder are declared and paid at least annually.
Net realized capital gains, if any, are generally
distributed annually.
The character of income and gains distributed is determined
in accordance with income tax regulations which may differ
from generally accepted accounting principles. Amounts
distributed in excess of taxable income and net realized
capital gains, if any, are considered a return of capital.
Use of Estimates
Estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes
in the economic environment, financial markets and any other
parameters used in determining these estimates could cause
actual results to differ from these amounts.
2. Related Party Transactions
A collective trust fund for employee benefit plans is the
sole common stockholder of the Fund. Certain officers and
directors of the Fund are affiliated with the common
stockholder. No fees or expenses were paid to the
affiliated officers and directors.
For the years ended December 31, 1997 and 1996, dividend and
capital gain distributions to the common stockholder were
$140,910,037 and $126,081,215, respectively.
During the years ended December 31, 1997 and 1996, return of
capital distributions to the common stockholder amounted to
approximately $285,900,000 and approximately $490,800,000,
respectively.
During 1997, the common stockholder made a capital
contribution to the Fund in the amount of $364,000,000.
In June 1996, the Fund issued an additional $50 million of
AMPS and issued 6,098,042.8 shares of common stock for
$36,154,530.
Comerica Bank serves as both custodian and administrator for
the Fund and receives a fee based on 0.06% of net assets
outstanding at the end of the fiscal year. An affiliate of
Comerica Bank serves as investment advisor to the Fund. The
annual investment management fee is 0.01% of average equity
investments. The administration and management fees are
calculated, accrued and paid on a monthly basis.
3. Investment Transactions
The aggregate cost of securities purchased and the aggregate
proceeds of securities sold excluding short-term securities,
for the year ended December 31, 1997 were $49,778,163 and
$294,840,539, respectively.
As of December 31, 1997, the net unrealized appreciation of
$405,331,836 is comprised of aggregate gross unrealized
appreciation and depreciation of investments of $411,975,287
and $6,643,451, respectively.
4. Auction Market Preferred Stock ("AMPS")
In February 1997 and January 1996, the Fund issued $50
million and $260 million of AMPS, respectively.
During 1997, the Fund redeemed 1000 shares of Series A, 1000
shares of Series B, 600 shares of Series C, 500 shares of
Series D and 500 shares of Series E AMPS.
Each series of AMPS was redeemable at the option of the Fund
in whole, but not in part, at a price of $100,000 per share
plus accumulated and unpaid dividends. Dividends were
cumulative from the date of original issue and were paid
every 49 days at a rate set through Dutch Auction. The Fund
was subject to certain asset coverage tests, and the AMPS
were subject to mandatory redemption if the tests were not
met.
In addition, the AMPS were subject to mandatory redemption
if the Fund ceased to qualify as a regulated investment
company or if Merrill Lynch, Pierce, Fenner & Smith
Incorporated ceased to be the broker dealer. The
liquidation value under mandatory redemption of the AMPS was
$100,000 per share plus accumulated and unpaid dividends.
5. Notes Payable
As of December 31, 1997, the Fund had $113,400 of principal
notes outstanding to investors. The notes are due on April
28, 2018 and bear interest at a floating rate. The interest
rate, which resets annually, is set at the one-year U.S.
Treasury bill rate plus 2.50%. As of December 31, 1997, the
Fund was paying interest at 8.54% per annum.
6. Year 2000 (Unaudited)
Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the advisor/administrator and other service providers do not
properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem". The advisor/administrator is
taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer
systems that it uses and to obtain reasonable 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 to the Fund.
Select Asset Fund, Series 2, Inc.
Financial Highlights
Year ended December 31,
1997 1996 1995 1994 1993(1)
For a share of common stock outstanding
throughout the period:
Net asset value, beginning $6.83 $14.41 $10.97 $11.42 $10.00
Net investment income 0.21 0.20 0.52 0.46 0.35
Net realized and unrealized gains
(losses) on investments 3.57 1.77 6.00 (0.24) 1.25
Total from investment operations 3.78 1.97 6.52 0.22 1.60
Capital contribution 5.12 - - - -
Less distributions from net investment income:
Common stock equivalent of dividends
paid to AMPS holders (0.19) (0.14) (0.45) (0.23) (0.12)
Dividends paid to common stock
holder (0.03) (0.06) (0.05) (0.38) (0.06)
Less distributions from net realized gains:
Common stock equivalent of distribution
to AMPS holders - - - (0.03) -
Distribution to common
stockholder (1.95) (1.80) (0.54) (0.03) -
Less distributions from paid-in capital:
Distribution of capital to
common stockholder (4.02) (7.55) (2.04) - -
Total distributions (6.19) (9.55) (3.08) (0.67) (0.18)
Net asset value, end of period $9.54 $6.83 $14.41 $10.97 $11.42
Total investment return 33.84% 13.67% 59.43% 1.93% 14.85%(2)
Ratios/supplemental data:
Net assets at end of period $678,041 $795,185 $936,359 $886,412 $712,983
Average net assets (000s) $926,937 $860,368 $901,872 $846,485 $158,376
Ratio of expenses to average net
assets applicable to
common stock (4) 0.14% 0.23% 0.13% 0.15% 0.24%(3)
Ratio of net investment income to
Ratio of net investment income to average net
assets applicable to com 1.68% 1.64% 2.64% 2.45% 8.05%(3)
Portfolio turnover 5.37% 17.51% 16.27% 3.52% 1.00%
Average commissions paid on
equity securities
transactions (5) $0.0497 $0.0200 - - -
Asset coverage per AMPS share,
end of period - $256,511 - $221,603 $237,661
AMPS shares outstanding - 3,100 - 4,000 3,000
Asset coverage for notes payable,
end of period 598019% 674557% 794298% 751934% 604836%
Notes payable, end of period $113,400 $117,900 $117,900 $117,900 $117,900
(1) For the period March 4, 1993 (commencement of operations) to
December 31, 1993.
(2) Total investment return for the period; not annualized.
(3) Annualized.
(4) Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred stock relative to the average net assets
of the common stockholder. Ratios do not reflect the effect of dividend
payments to AMPS holders. Ratios from 1996 and years prior have been
restated to exclude the effect of dividend payments.
(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
on which commissions are charged.
See accompanying notes.
SELECT ASSET FUND, SERIES 2, INC.
Portfolio of Investments
December 31, 1997
No. of
Shares Market Value
COMMON STOCK
BUILDING AND CONSTRUCTION 1.24%
BUILDING MATERIALS
3,300 CHAMPION INTL CORP 149,531.25
15,600 GEORGIA PACIFIC CORP 947,700.00
117,750 HOME DEPOT 6,932,531.25
9,200 OWENS CORNING 313,950.00
CONSTRUCTION EQUIPMENT
17 MORRISON KNUDSEN CORP-WTS 48.88
PAINT AND FLAT GLASS
6,200 PPG INDUS INC 354,175.00
25,600 SHERWIN WILLIAMS CO 710,400.00
INDUSTRIAL CHEMICALS
800 ROHM & HAAS CO 76,600.00
MISCELLANEOUS
5,000 FLUOR CORP 186,875.00
9,500 FOSTER WHEELER CORP 257,093.75
6,500 KAUFMAN & BROAD HOME CORP 145,843.75
TOTAL BUILDING AND CONSTRUCTION $10,074,748.88
CHEMICALS AND DRUGS 14.69%
CHEMICALS
4,200 AIR PRODS & CHEMS INC 345,450.00
15,300 AMGEN INC 828,112.50
32,900 BOSTON SCIENTIFIC CORP 1,509,287.50
43,000 DOW CHEMICAL CO 4,364,500.00
154,500 DUPONT DENEMOURS & CO 9,279,656.25
3,500 EASTMAN CHEMICAL CO 208,468.75
18,525 ENGLEHARD CORP 321,871.88
5,800 FMC CORP-NEW 390,412.50
8,700 GRACE W. R. & CO. (NEW) 699,806.25
24,900 HERCULES INC 1,246,556.25
37,200 MONSANTO CO 1,562,400.00
19,800 MORTON INTERNATIONAL INC 680,625.00
10,000 NALCO CHEM CO 395,625.00
26,100 PRAXIAIR INC 1,174,500.00
12,200 SIGMA-ALDRICH CORP 484,950.00
17,300 UNION CARBIDE CORP 742,818.75
DRUGS
38,900 ABBOT LABS 2,550,381.25
4,800 ALZA CORP CL A 152,700.00
98,600 AMERICAN HOME PRODUCTS 7,542,900.00
160,800 BRISTOL MYERS SQUIBB CO 15,215,700.00
86,300 JOHNSON & JOHNSON 5,685,012.50
174,900 LILLY ELI & CO 12,177,412.50
194,400 MERCK & CO., INC 20,655,000.00
216,700 PFIZER INC 16,157,693.75
102,090 PHARMACIA & UPJOHN INC 3,739,046.25
22,400 SCHERING PLOUGH 1,391,600.00
19,600 WALGREEN CO 614,950.00
COSMETICS
3,500 ALBERTO CULVER CO CL B 112,218.75
21,200 AVON PRODUCTS INC 1,301,150.00
2,600 INTL FLAVORS & FRAGRANCES 133,900.00
HEALTH PRODUCTS/CARE
2,200 ALLERGAN INC 73,837.50
13,300 BARD CR INC 416,456.25
2,200 BAUSCH & LOMB 87,175.00
42,100 BAXTER INTL INC. 2,123,418.75
18,600 BECTON DICKINSON & CO 930,000.00
45,505 COLUMBIA/HCA HEALTHCARE 1,348,085.63
15,400 GUIDANT CORP 958,650.00
37,700 TENET HEALTHCARE CORP 1,248,812.50
11,100 U S SURGICAL 325,368.75
10,700 UTD HEALTHCARE CORP 531,656.25
TOTAL CHEMICALS AND DRUGS $119,708,166.26
CONSUMER PRODUCTS 10.63%
CONFECTIONS AND BEVERAGES
89,500 ANHEUSER-BUSCH COS 3,938,000.00
11,300 BROWN FORMAN INC CL B 624,325.00
80,000 COCA COLA CO 5,330,000.00
5,400 NEWELL CO. 229,500.00
79,900 PEPSICO INC 2,911,356.25
CONTAINERS
17,900 AVERY DENNISON CORP 801,025.00
6,700 BALL CORP 236,593.75
26,400 CROWN CORK & SEAL INC 1,323,300.00
23,900 STONE CONTAINER 249,456.25
10,600 TEMPLE INLAND INC 554,512.50
PACKAGED FOOD
20,191 ARCHER DANIELS MIDLAND CO 437,892.31
23,200 CAMPBELL SOUP CO 1,348,500.00
13,400 CONAGRA 439,687.50
5,900 COORS ADOLPH CO CL B 196,175.00
20,700 CPC INTL INC 2,230,425.00
3,700 GENERAL MILLS INC 265,012.50
20,650 HEINZ H J CO 1,049,278.13
17,900 HERSHEY FOODS CORP 1,108,681.25
21,600 KELLOGG CO 1,071,900.00
8,500 QUAKER OATS CO 448,375.00
18,900 RALSTON-PURINA GROUP 1,756,518.75
50,200 SARA LEE CORP 2,826,887.50
24,800 SYSCO CORP 1,129,950.00
2,300 WRIGLEY WM JR CO 182,993.75
PAPER
14,900 AMERICAN GREETINGS CL A 582,962.50
10,600 BEMIS CO 467,062.50
12,500 BOISE CASCADE CORP 378,125.00
2,100 FORT JAMES CORPORATION 80,325.00
41,936 INTERNATIONAL PAPER CO 1,808,490.00
84,168 KIMBERLY CLARK CORP 4,150,534.50
2,800 MEAD CORP 78,400.00
4,900 POTLATCH CORP 210,700.00
16,900 UNION CAMP CORP 907,318.75
44,900 WILLIAMETTE INDUSTRIAL 1,445,218.75
PRINTING AND PUBLISHING
8,300 JOSTENS INC 191,418.75
3,600 KNIGHT-RIDDER INC 187,200.00
5,900 MCGRAW-HILL COMPANIES INC 436,600.00
1,400 MEREDITH CORP 49,962.50
3,200 NEW YORK TIMES CO CL A 211,600.00
87,700 TIME WARNER INC 5,437,400.00
4,100 TRIBUNE CO 255,225.00
16,550 WESTVACO CORP 520,290.63
RECREATIONAL EQUIPMENT
14,200 BRUNSWICK CORP 430,437.50
31,100 HARRAH'S ENTERTAINMENT 587,012.50
25,400 HASBRO INC 800,100.00
35,481 MATTEL INC 1,321,667.25
SOAPS
19,400 CLOROX CO 1,533,812.50
OTHER CONSUMER PRODUCTS
16,600 COLGATE PALMOLIVE CO 1,220,100.00
33,000 FORTUNE BRANDS INC 1,223,062.50
81,800 GILLETTE CO 8,215,787.50
76,800 PROCTER & GAMBLE CO 6,129,600.00
45,000 RUBBERMAID INC 1,125,000.00
2,700 SPRINGS INDUS INC 140,400.00
4,400 TUPPERWARE CORPORATION 122,650.00
44,000 UST INC 1,625,250.00
18,500 WHITMAN CORP 482,156.25
PHOTOGRAPHY
15,600 EASTMAN KODAK CO 948,675.00
8,400 POLAROID CORP 408,975.00
HOUSEHOLD FURN/APPLIANCES
6,700 ARMSTRONG WORLD IND 500,825.00
14,600 MAYTAG CO 544,762.50
RETAIL
82,500 FEDERATED DEPT STORES NEW 3,552,656.25
APPAREL
4,000 LIMITED INC 102,000.00
17,100 NIKE INC CL B 671,175.00
23,400 V F CORP 1,074,937.50
BROADCASTING
50,053 DISNEY WALT CO 4,958,375.31
5,700 KING WORLD INC 329,175.00
MISCELLANEOUS
25,200 PALL CORP 521,325.00
TOTAL CONSUMER PRODUCTS $86,659,096.88
DURABLE GOODS 24.22%
AEROSPACE-AIRCRAFT
86,044 BOEING CO 4,210,778.25
10,500 GENERAL DYNAMICS CORP 907,593.75
37,461 LOCKHEED MARTIN CORP 3,689,908.50
11,900 NORTHROP GRUMMAN CORP 1,368,500.00
3,000 TEXTRON INC 187,500.00
10,800 UNITED TECHNOLOGIES CORP 786,375.00
AGRICULTURAL MACHINERY
56,800 CATERPILLAR INC 2,758,350.00
16,200 DEERE & CO 944,662.50
AUTOMOBILE AND PARTS
13,500 AUTOZONE INC 391,500.00
41,900 CHRYSLER CORP 1,474,356.25
5,500 CUMMINS ENGINE INC 324,843.75
15,800 DANA CORP 750,500.00
11,700 EATON CORP 1,044,225.00
1,600 ECHLIN INC 57,900.00
219,800 FORD MTR CO 10,701,512.50
122,500 GENERAL MTRS CORP 7,426,562.50
32,450 GENUINE PARTS CO 1,101,271.88
3,733 MERITOR AUTOMOTIVE INC 78,626.31
1,900 NAVISTAR INTL CORP (NEW) 47,143.75
27,800 TENNECO INC (NEW) 1,098,100.00
6,600 TRW INC 352,275.00
ELECTRICAL
12,128 AMP INC 509,376.00
19,800 EMERSON ELEC CO 1,117,462.50
11,400 HONEYWELL INC 780,900.00
17,200 RAYCHEM CORP 740,675.00
ELECTRONICS
15,200 ADVANCED MICRO-DEVICES 272,650.00
47,100 APPLIED MATLS INC 1,418,887.50
5,250 CISCO SYS INC 292,687.50
549,400 GENERAL ELECTRIC CO 40,312,225.00
7,000 GENERAL SIGNAL CORP 295,312.50
111,300 HEWLETT PACKARD CO 6,956,250.00
70,400 INTEL CORP 4,945,600.00
52,700 LSI LOGIC CORP 1,040,825.00
43,600 MICRON TECH 1,133,600.00
12,700 NATIONAL SEMICONDUCTOR 329,406.25
2,600 NATIONAL SVC INDS 128,862.50
174,475 ORACLE CORPORATION 3,892,973.44
6,500 PERKIN ELMER CORP 461,906.25
7,812 RAYTHEON CO CL A 385,220.62
5,700 RAYTHEON CO CL B 287,850.00
14,900 SEAGATE TECHNOLOGY INC 286,825.00
4,950 TEKTRONIX INC 196,453.13
41,600 TEXAS INSTRUMENTS 1,872,000.00
8,000 THOMAS & BETTS CORP 378,000.00
INDUSTRIAL MACHINERY
1,100 AEROQUIP-VICKERS INC 53,968.75
3,800 BRIGGS & STRATTON CORP 184,537.50
24,500 CASE CORPORATION 1,480,718.75
7,300 CINCINNATI MILACRON INC 189,343.75
3,200 COOPER INDUS INC 156,800.00
36,600 DOVER CORP 1,322,175.00
3,500 HARNISCHFEGER INDUS INC 123,593.75
10,350 INGERSOLL RAND CO 419,175.00
1,300 NACCO INDUS INC CL A 139,343.75
11,200 ROCKWELL INTL CORP W/I 585,200.00
OFFICE EQUIPMENT AND SUPPLIES
3,100 DELUXE CORP 106,950.00
7,300 HARLAND JOHN H CO 153,300.00
6,800 IKON OFFICE SOLUTIONS 191,250.00
3,500 PITNEY BOWES INC 314,781.25
44,400 XEROX CORP. 3,277,275.00
RUBBER
7,900 GOODRICH B F CO 327,356.25
10,000 GOODYEAR TIRE & RUBBER 636,250.00
OTHER DURABLE GOODS
45,200 CORNING INCORPORATED 1,678,050.00
5,700 CRANE CO 247,237.50
38,600 ILLINOIS TOOL WORKS 2,320,825.00
2,700 MILLIPORE CORP 91,631.25
59,000 MINNESOTA MNG & MFR 4,841,687.50
1,600 STANLEY WORKS 75,500.00
COMPUTERS AND SOFTWARE
4,900 APPLE COMPUTER INC 64,312.50
80,500 BAY NETWORKS INC 2,057,781.25
2,000 CABLETRON SYSTEMS INC 30,000.00
18,400 CERIDIAN CORP 842,950.00
59,007 COMPAQ COMPUTER CORP 3,330,207.56
81,037 COMPUTER ASSOC INTL INC 4,284,831.38
2,600 DATA GENL CORP 45,337.50
43,000 DELL COMPUTER CORP 3,612,000.00
14,200 DIGITAL EQUIP CORP 525,400.00
100,000 IBM CORP 10,456,250.00
156,800 MICROSOFT CORP 20,266,400.00
29,500 NEXTLEVEL SYSTEMS INC 527,312.50
3,900 NOVELL INC 29,250.00
28,500 SILICON GRAPHICS 354,468.75
43,600 SUN MICROSYSTEMS 1,738,550.00
24,000 UNISYS CORP 333,000.00
HOUSEHOLD FURN/APPLIANCES
12,500 WHIRLPOOL CORP 687,500.00
TELECOMMUNICATIONS
78,400 AIRTOUCH COMMUNICATIONS 3,258,500.00
4,162 ANDREW CORP 99,888.00
18,700 DSC COMMUNICATIONS 448,800.00
104,344 LUCENT TECHNOLOGIES INC 8,334,477.00
160,500 WORLDCOM INC 4,855,125.00
MISCELLANEOUS
31,500 ALLIED-SIGNAL INC 1,226,531.25
5,900 BLACK & DECKER CORP 230,468.75
9,800 ITT INDUSTRIES INC 307,475.00
11,900 JOHNSON CTLS INC 568,225.00
12,275 PARKER HANNIFIN CORP 563,115.63
10,650 SNAP ON TOOLS CORP 464,606.25
27,200 THERMO ELECTRON CORP 1,210,400.00
TOTAL DURABLE GOODS $197,408,546.45
FINANCIAL 16.29%
BANKS
30,569 BANC ONE CORP 1,660,278.81
46,800 BANK NEW YORK INC 2,705,625.00
46,400 BANKAMERICA CORP 3,387,200.00
17,700 BANKBOSTON CORPORATION 1,662,693.75
2,100 BANKERS TR NY CORP 236,118.75
26,700 BARNETT BANKS INC 1,919,062.50
39,012 CHASE MANHATTAN CORP NEW 4,271,814.00
41,700 CITICORP 5,272,443.75
32,314 CORESTATES FINL CORP 2,587,139.63
54,650 FIFTH THIRD BANCORP COM 4,467,637.50
24,732 FIRST CHICAGO NBD CORP 2,065,122.00
89,110 FIRST UNION CORP 4,566,887.50
25,514 FLEET FINANCIAL GROUP INC 1,911,955.38
50,030 MBNA CORP 1,366,444.38
24,900 MELLON BANK CORP 1,509,562.50
42,400 NATIONAL CITY CORP 2,787,800.00
121,416 NATIONSBANK CORP 7,383,610.50
116,000 NORWEST CORP 4,480,500.00
31,000 PNC FINANCIAL 1,768,937.50
36,800 SUNTRUST BANKS INC 2,626,600.00
84,394 U.S. BANCORP 9,446,853.38
3,900 WACHOVIA CORP 316,387.50
8,833 WELLS FARGO & CO 2,998,251.44
FINANCE COMPANIES
12,500 AMERICAN EXPRESS CO 1,115,625.00
8,100 BENEFICIAL CORP 673,312.50
38,200 FED HOME LN MTG CORP 1,602,012.50
53,200 GREEN TREE FINANCIAL 1,393,175.00
16,000 HOUSEHOLD INTL CORP 2,041,000.00
HOLDING COMPANY
3,100 EASTERN ENTERPRISES 139,500.00
109,770 MS, DW, DISCOVER & CO 6,490,151.25
FIRE AND CASUALTY INSURANCE
7,600 CHUBB CORP 574,750.00
600 GENERAL RE CORP 127,200.00
2,600 SAFECO CORP 126,750.00
INSURANCE
21,000 AETNA INC 1,481,812.50
24,854 ALLSTATE CORPORATION 2,258,607.25
117,025 AMERICAN INTL GROUP 12,726,468.75
54,800 AON CORP 3,212,650.00
3,800 CIGNA CORP 657,637.50
5,900 CINCINNATI FINANCIAL CORP 830,425.00
18,900 CONSECO INC 858,768.75
9,700 HARTFORD FINANCIAL SVCS 907,556.25
12,000 MBIA INC 801,750.00
2,300 ST PAUL COS INC 188,743.75
600 TRANSAMERICA CORP 63,900.00
128,291 TRAVELERS GROUP INC 6,911,677.63
8,800 UNUM CORP. 478,500.00
6,200 USF & G CORP 136,787.50
LIFE INSURANCE
42,787 AMERICAN GENERAL CORP 2,313,172.19
13,100 JEFFERSON PILOT CORP 1,020,162.50
19,000 LINCOLN NATL CORP IND 1,484,375.00
REAL ESTATE
152,100 FEDERAL NATL MTGE ASSN 8,679,206.25
SAVINGS & LOANS
4,400 AHMANSON H F & CO 294,525.00
6,700 GOLDEN WEST FINL CORP 655,343.75
BROKERAGE
14,000 MERRILL LYNCH & CO 1,021,125.00
MISCELLANEOUS
1,370 WASHINGTON MUTUAL 87,423.13
TOTAL FINANCIAL $132,753,019.72
METALS AND MINING 0.73%
ALUMINUM
9,800 ALUMINUM CO AMER 689,675.00
10,100 REYNOLDS METALS CO 606,000.00
MINING
39,000 HOMESTAKE MNG CO 346,125.00
STEEL
21,767 ALLEGHENY TELEDYNE 563,221.13
25,300 ARMCO, INC. 124,918.75
6,300 BETHLEHEM STEEL CORP 54,337.50
10,400 INLAND STEEL INDUS INC 178,100.00
24,600 NUCOR CORP 1,188,487.50
7,700 TIMKEN CO 264,687.50
5,700 USX-US STEEL GROUP 178,125.00
2,500 WORTHINGTON INDS INC 41,250.00
OTHER METALS
9,600 ASARCO INC 215,400.00
22,587 NEWMONT MNG CORP 663,493.13
9,900 PHELPS DODGE CORP 616,275.00
MINERALS
13,450 CYPRUS AMAX MINERALS CO 206,793.75
TOTAL METALS AND MINING $5,936,889.26
COLLECTIBLES & PRECIOUS MATERIALS 0.13%
GOLD-DIAMOND-GEMS
69,600 FREEPORT-MCMORAN COPPER-B 1,096,200.00
TOTAL COLLECTIBLES & PRECIOUS MATERIALS $1,096,200.00
OIL-ENERGY 7.12%
OIL & GAS PRODUCERS
5,400 AMERADA HESS CORP 296,325.00
75,900 AMOCO CORP 6,460,987.50
15,500 COASTAL CORP 960,031.25
3,500 HELMERICH & PAYNE INC. 237,562.50
46,100 OCCIDENTAL PETROLEUM 1,351,306.25
10,500 ROWAN COS INC 320,250.00
30,787 UNION PACIFIC RESOURCES 746,584.75
9,700 USX-MARTHON GROUP COM NEW 327,375.00
NATURAL RESOURCES
8,400 DRESSER INDUS INC 352,275.00
6,400 KERR MCGEE CORP 405,200.00
500 ONEOK INC 20,187.50
17,900 WILLIAMS COS INC-DEL 507,912.50
OIL EQUIPMENT, WELLS & SVCS
9,000 ASHLAND, INC 483,187.50
35,900 HALLIBURTON CO 1,864,556.25
7,400 WESTERN ATLAS INC 547,600.00
OIL - DOMESTIC
9,912 BURLINGTON RESOURCES INC 444,181.50
2,000 PENNZOIL CO 133,625.00
47,400 PHILLIPS PETE CO 2,304,825.00
10,600 UNOCAL CORP 411,412.50
OIL - INTERNATIONAL
24,100 CHEVRON CORP 1,855,700.00
385,000 EXXON CORP. 23,557,187.50
123,300 MOBIL CORP 8,900,718.75
11,300 ORYX ENERGY COMPANY 288,150.00
12,500 SUN CO INC 525,781.25
84,500 TEXACO INC 4,594,687.50
MISCELLANEOUS
3,300 FIRSTENERGY CORP 95,700.00
TOTAL OIL-ENERGY $57,993,310.00
RETAIL 5.47%
DEPARTMENT STORES
3,200 CVS CORP 205,000.00
44,400 DAYTON HUDSON CORP 2,997,000.00
23,700 DILLARDS INCORPORATED 835,425.00
12,600 HARCOURT GENERAL INC 689,850.00
111,200 K MART 1,285,750.00
800 MERCANTILE STORES 48,700.00
42,400 PENNEY JC INC 2,557,250.00
24,000 SEARS ROEBUCK & CO 1,086,000.00
565,100 WAL MART STORES INC 22,286,131.25
3,600 WINN-DIXIE STORES INC 157,275.00
35,700 WOOLWORTH CORP 727,387.50
GROCERY
9,500 ALBERTSON'S INC 450,062.50
8,800 AMERICAN STORES CO 180,950.00
10,900 GIANT FOOD INC 367,193.75
5,100 GREAT ATLANTIC & PAC TEA 151,406.25
51,400 KROGER CO 1,898,587.50
OTHER RETAIL
15,767 COSTCO COMPANIES INC 703,602.38
6,700 LONGS DRUG STORES CORP 215,237.50
37,500 LOWES COS INC 1,788,281.25
18,800 PEP BOYS-MAN, MO, JACK 448,850.00
1,600 RITE AID CORP 93,900.00
1,000 TANDY CORP 38,562.50
SPORTING GOODS
400 REEBOK INTL LTD 11,525.00
6,200 RUSSELL CORP 164,687.50
APPAREL
18,400 CHARMING SHOPPES INC 86,250.00
83,100 GAP INC 2,944,856.25
14,000 NORDSTROM INC 845,250.00
MISCELLANEOUS
29,800 TYCO INTERNATIONAL LTD 1,342,862.50
TOTAL RETAIL $44,607,833.63
UTILITIES 8.83%
ELECTRIC
11,300 AMERICAN ELEC PWR INC 583,362.50
24,800 BALTIMORE GAS & ELEC 844,750.00
1,000 CENTRAL & SOUTH WEST CORP 27,062.50
25,021 CINERGY CORP 958,617.06
5,300 DOMINION RES INC-VA 225,581.25
54,109 DUKE POWER CO 2,996,285.88
51,100 EDISON INTERNATIONAL 1,389,281.25
28,700 FPL GROUP INC 1,698,681.25
21,300 GPU INC 897,262.50
15,945 HOUSTON INDS INC 425,532.19
3,100 NIAGARA MOHAWK PWR 32,550.00
4,400 NORTHERN STS PWR CO 256,300.00
51,200 PACIFICORP 1,398,400.00
13,800 PECO ENERGY 334,650.00
91,800 PG&E CORP 2,794,162.50
65,900 PP&L RESOURCES INC 1,577,481.25
84,567 SBC COMMUNICATIONS INC 6,194,532.75
39,700 SOUTHERN CO 1,027,237.50
5,700 UNICOM CORP 175,275.00
GAS
3,400 COLUMBIA GAS SYS INC 267,112.50
37,500 ENRON CORP 1,558,593.75
1,400 NICOR INC 59,062.50
12,700 PACIFIC ENTERPRISES 477,837.50
700 PEOPLES ENERGY CORP 27,562.50
13,900 SONAT INC 635,925.00
50,690 TEXAS UTILITIES CO 2,106,803.13
TELEPHONE
298,800 A T & T 18,301,500.00
38,100 ALLTEL CORP 1,564,481.25
15,500 BELL ATLANTIC CORP 1,410,500.00
60,400 BELLSOUTH CORP 3,401,275.00
29,200 FRONTIER CORP 702,625.00
168,800 GTE CORP 8,819,800.00
74,000 SPRINT CORP 4,338,250.00
36,900 U S WEST MEDIA GROUP 1,065,487.50
WASTE DESPOSAL
11,100 BROWNING FERRIS IND 410,700.00
108,000 WASTE MANAGEMENT INC 2,970,000.00
TOTAL UTILITIES $71,954,521.01
MISCELLANEOUS 9.31%
BROADCAST/COMMUNICATIONS
90,000 CBS CORP 2,649,375.00
27,400 COMCAST CORP CL A SPL 864,812.50
6,600 GANNETT CO., INC 407,962.50
18,600 MCI COMMUNICATIONS 796,312.50
24,100 MOTOROLA INC 1,375,206.25
58,930 TELE COMM. INC CL A 1,646,356.88
82,400 VIACOM INC CL B NON VTG 3,414,450.00
BUSINESS SERVICES
15,200 AUTODESK INC 562,400.00
17,400 AUTOMATIC DATA PROC 1,067,925.00
26,600 BLOCK H&R INC 1,192,012.50
17,419 CENDANT CORP 598,764.38
2,700 COMPUTER SCIENCES CORP 225,450.00
35,300 DONNELLEY RR & SONS 1,314,925.00
19,600 DOW JONES & CO 1,052,275.00
137,400 E M C CORP 3,769,912.50
2,600 ECOLAB INC 144,137.50
83,100 FIRST DATA CORP 2,430,675.00
8,500 GRAINGER W W INC 826,093.75
19,650 INTERPUBLIC GROUP COS 978,815.63
17,200 OMNICOM GROUP INC 728,850.00
10,600 SAFETY KLEEN CORP 290,837.50
18,900 SCIENTIFIC-ATLANTA 316,575.00
38,200 SERVICE CORP INTL 1,411,012.50
60,100 THREE COM CORP 2,099,743.75
FOOD SERVICE
3,600 DARDEN RESTAURANTS INC 45,000.00
25,600 MCDONALDS CORP 1,222,400.00
406,500 PHILLIP MORRIS CO INC 18,419,531.25
7,990 TRICON GLOBAL RESTAURANTS 232,209.38
27,300 WENDYS INTL INC 656,906.25
HOTEL & MOTEL
34,900 HILTON HOTELS CORP 1,038,275.00
9,200 ITT CORP NEW 762,450.00
16,600 MARRIOTT INTL CORP 1,149,550.00
HOUSING
3,800 PULTE CORP 158,887.50
MED SERV & SUPPLIES
6,300 BIOMET INC 161,437.50
32,000 HEALTHSOUTH CORPORATION 888,000.00
65,900 HUMANA INC 1,367,425.00
10,500 MANOR CARE INC 367,500.00
26,600 MEDTRONIC INC 1,391,512.50
3,800 SHARED MEDICAL SYS CORP 250,800.00
16,450 ST. JUDE MED INC. 501,725.00
REAL ESTATE
5,400 CENTEX CORP 339,862.50
TRANSPORTATION
11,600 AMR CORP 1,490,600.00
22,754 BURLINGTON NRTHN SANTA FE 2,114,699.88
800 CALIBER SYSTEMS INC 38,950.00
7,300 CSX CORP 394,200.00
13,900 DELTA AIR LINES INC 1,654,100.00
19,800 FEDERAL EXPRESS CORP 1,209,037.50
3,800 FLEETWOOD ENTERPRISES 161,262.50
64,700 NORFOLK SOUTHERN CORP 1,993,568.75
4,490 PACCAR INC 235,725.00
12,400 RYDER SYSTEMS INC 406,100.00
8,700 SOUTHWEST AIRLINES CO 214,237.50
2,000 U S AIR GROUP 125,000.00
19,900 UNION PACIFIC CORP 1,242,506.25
MISCELLANEOUS
4,200 MALLINCKRODT (NEW) 159,600.00
16,600 WARNER-LAMBERT 2,058,400.00
TELECOMMUNICATIONS
31,700 AMERITECH CORP NEW 2,551,850.00
14,700 HARRIS CORP-DEL 674,362.50
TOTAL MISCELLANEOUS $75,842,552.40
UTILITIES 0.04%
ELECTRIC
8,700 DTE ENERGY COMPANY 301,781.25
TOTAL UTILITIES $301,781.25
TOTAL COMMON STOCK $804,336,665.74
OTHER
1.30%
CASH EQUIVALENTS
10,571,876 AIM SHORT TERM INV SER 2 10,571,875.50
TOTAL $10,571,875.50
TOTAL OTHER $10,571,875.50
TOTAL INVESTMENTS - 100.00% $814,908,541.24
(cost $409,576,706)
See accompanying notes
