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, 1998, the related statement of operations for the year then
ended, and the statement of changes in net assets and financial highlights for
each of the two years in the period 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 audits. The financial highlights for each
of the three years in the period ended December 31, 1996 were audited by other
auditors whose report dated February 14, 1997, expressed an unqualified
opinion on those statements.
We conducted our audits 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 verification of investments
owned as of December 31, 1998, 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 audits provide a reasonable basis
for our opinion.
In our opinion, the 1998 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, 1998, the
results of its operations for the year then ended, and the changes in its net
assets and financial highlights for the each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
February 12, 1999
Select Asset Fund, Series 2, Inc.
Statement of Assets and Liabilities
December 31, 1998
Assets
Investments, at fair value (cost $161,464,999) $ 371,254,003
Dividends receivable 353,939
Interest receivable 2,338
Total assets 371,610,280
Liabilities
Accrued expenses 76,726
Notes payable (Note 5) 111,400
Accrued interest expense 2,637
Total liabilities 190,763
Net assets $ 371,419,517
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 160,919,803
Net unrealized appreciation of investments 209,789,004
Net assets $ 371,419,517
Net asset value per common shares outstanding $ 5.23
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statement of Operations
For the year ended December 31, 1998
Investment income:
Dividend income $ 5,849,345
Interest income 202,680
Total investment income 6,052,025
Expenses:
Administration fee (Note 2) 271,851
Investment management fee (Note 2) 22,860
Rating agencies fees 9,833
Independent accountants 32,222
Legal fees 29,335
Insurance 6,685
Directors fees and expenses 7,454
Interest expense 9,437
Other expenses 850
Total expenses 390,527
Net investment income 5,661,498
Net realized and unrealized gains (losses)
on investments:
Net realized gain on investment 6,393,972
Change in net unrealized appreciation of investments (195,542,832)
Net decrease in net assets resulting from operations $ (183,487,362)
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statement of Changes in Net Assets
For the years ended December 31, 1998 and 1997
1998 1997
From operations:
Net investment income 5,661,498 15,610,280
Net realized gain on investments 6,393,972 138,593,661
Net change in unrealized appreciation
of investments (195,542,832) 114,877,968
Increase (decrease) in net assets resulting from
operations (183,487,362) 269,081,909
Dividends from net investment income:
Auction market preferred stock - (13,419,520)
Common stock (5,661,498) (2,190,760)
(5,661,498) (15,610,280)
Distributions from net realized gains:
Common stock (6,393,972) (138,719,277)
Decrease in net assets resulting from
distributions to stockholders (12,055,470) (154,329,557)
Increase (decrease) from capital transactions:
Issuance of auction market preferred stock - 50,000,000
Capital contribution from common
stockholder 138,719,277 364,000,000
Redemption of auction market preferred
stock - (360,000,000)
Distribution of capital to common
stockholder (249,797,572) (285,896,935)
(111,078,295) (231,896,935)
Total decrease in net assets (306,621,127) (117,144,583)
Net assets:
Beginning of year 678,040,643 795,185,226
End of year $ 371,419,517 678,040,643
See accompanying notes.
SELECT ASSET FUND, SERIES 2, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Organization and Significant Accounting Policies
On January 7, 1999 the Board of Directors approved a Plan of Liquidation and
Dissolution for the Fund. Management is in the process of liquidating and
winding-up the Fund.
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 on which the securities are traded. 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, 1998 and 1997, dividend and capital gain
distributions to the common stockholder were $12,055,470 and $140,910,037,
respectively.
During the years ended December 31, 1998 and 1997, return of capital
distributions to the common stockholder amounted to approximately $249,800,000
and approximately $285,900,000, respectively.
During 1998 and 1997, the common stockholder made capital contributions to the
Fund in the amounts of $138,719,277 and $364,000,000, respectively.
2. Related Party Transactions (continued)
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, 1998 were $34,548,980 and $279,800,317, respectively.
As of December 31, 1998, the net unrealized appreciation of $209,789,004 is
comprised of aggregate gross unrealized appreciation and depreciation of
investments of $218,475,208 and $8,686,204, respectively.
4. Auction Market Preferred Stock ("AMPS")
In 1997 the Fund issued $50 million and redeemed $360 million of AMPS,
respectively. No AMPS were outstanding at December 31, 1997 and 1998.
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.
5. Notes Payable
As of December 31, 1998, the Fund had $111,400 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, 1998, the Fund was
paying interest at 7.98% 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,
1998 1997 1996 1995 1994
For a share of common stock outstanding throughout the period:
Net asset value, beginning
of period $9.54 $6.83 $14.41 $10.97 $11.42
Net investment income 0.08 0.21 0.20 0.52 0.46
Net realized and unrealized gains
(losses) on investments (2.66) 3.57 1.77 6.00 (0.24)
Total from investment operations (2.58) 3.78 1.97 6.52 0.22
Capital contribution 1.95 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)
Dividends paid to common stockholder (0.08) (0.03) (0.06) (0.05) (0.38)
Less distributions from net realized gains:
Common stock equivalent of distribution
to AMPS holders - - - - (0.03)
Distribution to common stockholder (0.09) (1.95) (1.80) (0.54) (0.03)
Less distributions from paid-in capital:
Distribution of capital to common
stockholder (3.51) (4.02) (7.55) (2.04) -
Total distributions (3.68) (6.19) (9.55) (3.08) (0.67)
Net asset value, end of period $5.23 $9.54 $6.83 $14.41 $10.97
Total investment return -27.06% 33.84% 13.67% 59.43% 1.93%
Ratios/supplemental data:
Net assets end of period (000s) $371420 $678041 $795185 $936359 $886412
Average net assets (000s) $418540 $926937 $860368 $901872 $846485
Ratio of expenses to average net assets
applicable to common stock (1) 0.09% 0.14% 0.23% 0.13% 0.15%
Ratio of net investment income to
average net assets applicable
to common stock (1) 1.35% 1.68% 1.64% 2.64% 2.45%
Portfolio turnover 8.25% 5.37% 17.51% 16.27% 3.52%
Asset coverage per AMPS share, end of
period - - $256511 - $221603
AMPS shares outstanding - - 3,100 - 4,000
Asset coverage for notes payable, end of
period 333413% 598019% 674557% 794298% 751934%
Notes payable, end of period $111400 $113400 $117900 $117900 $117900
(1)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 to AMPS holders.
See accompanying notes.
SELECT ASSET FUND, SERIES 2, INC.
Portfolio of Investments
December 31, 1998
No. of
Shares Market Value
COMMON STOCK
BUILDING AND CONSTRUCTION 1.49%
BUILDING MATERIALS
2,900 GEORGIA PACIFIC CORP 169,831.25
66,400 HOME DEPOT 4,062,850.00
1,400 MASCO CORP 40,250.00
7,900 OWENS CORNING 279,956.25
PAINT AND FLAT GLASS
800 PPG INDUS INC 46,600.00
20,000 SHERWIN WILLIAMS CO 587,500.00
MISCELLANEOUS
1,400 FLUOR CORP 59,587.50
8,800 FOSTER WHEELER CORP 116,050.00
5,800 KAUFMAN & BROAD HOME CORP 166,750.00
TOTAL BUILDING AND CONSTRUCTION $5,529,375.00
CHEMICALS AND DRUGS 8.91%
CHEMICALS
1,800 AIR PRODS & CHEMS INC 72,000.00
4,800 AMGEN INC 501,900.00
63,200 BOSTON SCIENTIFIC CORP 1,694,550.00
6,900 DOW CHEMICAL CO 627,468.75
4,300 DUPONT DENEMOURS & CO 228,168.75
500 EASTMAN CHEMICAL CO 22,375.00
15,225 ENGLEHARD CORP 296,887.50
4,100 FMC CORP-NEW 229,600.00
22,300 HERCULES INC 610,462.50
30,700 MONSANTO CO 1,458,250.00
13,100 MORTON INTERNATIONAL INC 320,950.00
8,700 NALCO CHEM CO 269,700.00
23,100 PRAXIAIR INC 814,275.00
10,000 SIGMA-ALDRICH CORP 293,750.00
16,800 UNION CARBIDE CORP 714,000.00
7,300 WR GRACE & CO NEW 114,518.75
DRUGS
4,400 ABBOT LABS 215,600.00
22,400 AMERICAN HOME PRODUCTS 1,261,400.00
21,200 BRISTOL MYERS SQUIBB CO 2,836,825.00
9,700 JOHNSON & JOHNSON 813,587.50
20,400 LILLY ELI & CO 1,813,050.00
29,400 MERCK & CO., INC 4,342,012.50
38,700 PFIZER INC 4,854,431.25
44,590 PHARMACIA & UPJOHN INC 2,524,908.75
2,400 SCHERING PLOUGH 132,600.00
15,800 WALGREEN CO 925,287.50
COSMETICS
1,300 ALBERTO CULVER CO CL B 34,693.75
5,200 AVON PRODUCTS INC 230,100.00
HEALTH PRODUCTS/CARE
12,300 BARD CR INC 608,850.00
5,200 BAXTER INTL INC. 334,425.00
32,800 BECTON DICKINSON & CO 1,400,150.00
24,505 COLUMBIA/HCA HEALTHCARE 606,498.75
10,600 GUIDANT CORP 1,168,650.00
9,200 HCR MANOR CARE 270,250.00
11,500 TENET HEALTHCARE CORP 301,875.00
3,000 UTD HEALTHCARE CORP 129,187.50
TOTAL CHEMICALS AND DRUGS $33,073,238.75
CONSUMER PRODUCTS 10.77%
CONFECTIONS AND BEVERAGES
15,600 ANHEUSER-BUSCH COS 1,023,750.00
10,000 BROWN FORMAN INC CL B 756,875.00
13,200 COCA COLA CO 882,750.00
6,900 PEPSICO INC 282,468.75
CONTAINERS
18,300 AVERY DENNISON CORP 824,643.75
6,200 BALL CORP 283,650.00
21,900 CROWN CORK & SEAL INC 674,793.75
2,100 OWENS - ILLINOIS INC 64,312.50
6,874 SEALED AIR CORP 351,003.63
9,700 TEMPLE INLAND INC 575,331.25
PACKAGED FOOD
35,800 BESTFOODS 1,906,350.00
2,200 CAMPBELL SOUP CO 121,000.00
2,000 CONAGRA 63,000.00
5,200 COORS ADOLPH CO CL B 293,475.00
700 GENERAL MILLS INC 54,425.00
2,050 HEINZ H J CO 116,081.25
15,000 HERSHEY FOODS CORP 932,812.50
1,200 KELLOGG CO 40,950.00
7,200 PIONEER HI BRED INTL INC 194,400.00
800 QUAKER OATS CO 47,600.00
51,000 RALSTON-PURINA GROUP 1,651,125.00
12,800 SARA LEE CORP 360,800.00
38,400 SYSCO CORP 1,053,600.00
PAPER
12,600 AMERICAN GREETINGS CL A 517,387.50
9,800 BEMIS CO 371,787.50
10,700 BOISE CASCADE CORP 331,700.00
12,500 FORT JAMES CORPORATION 500,000.00
5,836 INTERNATIONAL PAPER CO 261,525.75
5,968 KIMBERLY CLARK CORP 325,256.00
4,400 POTLATCH CORP 162,250.00
15,900 UNION CAMP CORP 1,073,250.00
42,400 WILLIAMETTE INDUSTRIAL 1,420,400.00
PRINTING AND PUBLISHING
7,700 JOSTENS INC 201,643.75
800 MCGRAW-HILL COMPANIES INC 81,500.00
46,200 TIME WARNER INC 2,867,287.50
14,650 WESTVACO CORP 392,803.13
RECREATIONAL EQUIPMENT
11,300 BRUNSWICK CORP 279,675.00
29,800 HARRAH'S ENTERTAINMENT 467,487.50
24,500 HASBRO INC 885,062.50
31,581 MATTEL INC 720,441.56
SOAPS
17,800 CLOROX CO 2,079,262.50
OTHER CONSUMER PRODUCTS
1,500 COLGATE PALMOLIVE CO 139,312.50
26,600 FORTUNE BRANDS INC 841,225.00
38,300 GILLETTE CO 1,850,368.75
9,200 PROCTER & GAMBLE CO 840,075.00
43,400 RUBBERMAID INC 1,364,387.50
2,200 SPRINGS INDUS INC 91,162.50
1,800 TUPPERWARE CORPORATION 29,587.50
15,300 UST INC 533,587.50
PHOTOGRAPHY
700 EASTMAN KODAK CO 50,400.00
7,700 POLAROID CORP 143,893.75
HOUSEHOLD FURN/APPLIANCES
5,800 ARMSTRONG WORLD IND 349,812.50
11,000 MAYTAG CO 684,750.00
RETAIL
72,800 FEDERATED DEPT STORES NEW 3,171,350.00
APPAREL
2,600 NIKE INC CL B 105,462.50
19,700 V F CORP 923,437.50
32,900 VENATOR GROUP INC 211,793.75
BROADCASTING
13,659 DISNEY WALT CO 409,770.00
10,100 KING WORLD INC 297,318.75
MISCELLANEOUS
23,900 PALL CORP 604,968.75
62,000 RJR NABISCO HLDGS CORP 1,840,625.00
TOTAL CONSUMER PRODUCTS $39,977,206.32
DURABLE GOODS 29.73%
AEROSPACE-AIRCRAFT
11,444 BOEING CO 373,360.50
18,600 GENERAL DYNAMICS CORP 1,090,425.00
7,861 LOCKHEED MARTIN CORP 666,219.75
10,700 NORTHROP GRUMMAN CORP 782,437.50
100 TEXTRON INC 7,593.75
700 UNITED TECHNOLOGIES CORP 76,125.00
AGRICULTURAL MACHINERY
1,100 CATERPILLAR INC 50,600.00
2,400 DEERE & CO 79,500.00
AUTOMOBILE AND PARTS
9,000 AUTOZONE INC 296,437.50
4,600 CUMMINS ENGINE INC 163,300.00
13,700 DANA CORP 559,987.50
53,800 FORD MTR CO 3,157,387.50
4,600 GENERAL MTRS CORP 329,187.50
6,850 GENUINE PARTS CO 229,046.88
5,900 TENNECO INC (NEW) 200,968.75
200 TRW INC 11,237.50
ELECTRICAL
1,500 EMERSON ELEC CO 90,750.00
2,000 HONEYWELL INC 150,625.00
14,200 RAYCHEM CORP 458,837.50
ELECTRONICS
13,400 ADVANCED MICRO-DEVICES 387,762.50
36,200 APPLIED MATLS INC 1,545,287.50
10,725 CISCO SYS INC 995,414.06
75,600 GENERAL ELECTRIC CO 7,715,925.00
28,200 GENERAL INSTRUMENT CORP 957,037.50
6,200 HEWLETT PACKARD CO 423,537.50
500 KLA-TENCOR CORPORATION 21,687.50
51,300 LSI LOGIC CORP 827,212.50
35,900 MICRON TECH 1,815,193.75
13,200 NATIONAL SEMICONDUCTOR 178,200.00
900 NATIONAL SVC INDS 34,200.00
140,275 ORACLE CORPORATION 6,049,359.38
6,500 PERKIN ELMER CORP 634,156.25
3,900 SEAGATE TECHNOLOGY INC 117,975.00
3,950 TEKTRONIX INC 118,746.88
33,600 TEXAS INSTRUMENTS 2,874,900.00
6,500 THOMAS & BETTS CORP 281,531.25
INDUSTRIAL MACHINERY
3,400 BRIGGS & STRATTON CORP 169,575.00
23,600 CASE CORPORATION 514,775.00
900 COOPER INDUS INC 42,918.75
32,700 DOVER CORP 1,197,637.50
1,400 HARNISCHFEGER INDUS INC 14,262.50
3,950 INGERSOLL RAND CO 185,403.13
6,600 MILACRON 127,050.00
1,200 NACCO INDUS INC CL A 110,400.00
3,300 ROCKWELL INTL CORP W/I 160,256.25
OFFICE EQUIPMENT AND SUPPLIES
5,900 IKON OFFICE SOLUTIONS 50,518.75
4,400 XEROX CORP. 519,200.00
RUBBER
9,400 GOODRICH B F CO 337,225.00
1,600 GOODYEAR TIRE & RUBBER 80,700.00
OTHER DURABLE GOODS
12,400 CORNING INCORPORATED 558,000.00
7,050 CRANE CO 212,821.88
34,000 ILLINOIS TOOL WORKS 1,972,000.00
1,000 MILLIPORE CORP 28,437.50
5,300 MINNESOTA MNG & MFR 376,962.50
COMPUTERS AND SOFTWARE
15,000 CERIDIAN CORP 1,047,187.50
26,625 COMPAQ COMPUTER CORP 1,116,585.94
71,137 COMPUTER ASSOC INTL INC 3,032,214.63
2,600 DATA GENL CORP 42,737.50
132,600 DELL COMPUTER CORP 9,704,662.50
7,500 ELECTRONIC DATA SYSTEMS 376,875.00
26,500 GATEWAY 2000 1,356,468.75
12,700 HBO AND CO 364,331.25
236,900 MICROSOFT CORP 32,855,068.75
3,200 NOVELL INC 58,000.00
2,500 PARAMETRIC TECNOLOGY 40,937.50
25,200 SILICON GRAPHICS 324,450.00
33,900 SUN MICROSYSTEMS 2,902,687.50
8,400 UNISYS CORP 289,275.00
HOUSEHOLD FURN/APPLIANCES
11,100 WHIRLPOOL CORP 614,662.50
TELECOMMUNICATIONS
77,000 AIRTOUCH COMMUNICATIONS 5,553,625.00
662 ANDREW CORP 10,923.00
17,100 ASCEND COMMUNICATIONS 1,124,325.00
6,200 CLEAR CHANNEL COMMUNICATI 337,900.00
50,988 LUCENT TECHNOLOGIES INC 5,608,680.00
13,200 MEDIAONE GROUP INC (NEW) 620,400.00
7,850 SPRINT CORP PCS GROUP 181,531.25
MISCELLANEOUS
4,600 ALLIED-SIGNAL INC 203,837.50
5,400 BLACK & DECKER CORP 302,737.50
5,900 ITT INDUSTRIES INC 234,525.00
10,200 JOHNSON CTLS INC 601,800.00
9,775 PARKER HANNIFIN CORP 320,131.25
9,550 SNAP ON TOOLS CORP 332,459.38
24,500 THERMO ELECTRON CORP 414,968.75
TOTAL DURABLE GOODS $110,384,285.41
FINANCIAL 12.35%
BANKS
17,600 BANK NEW YORK INC 708,400.00
2,200 BB&T CORP 88,687.50
2,924 CHASE MANHATTAN CORP NEW 199,014.75
80,325 FIFTH THIRD BANCORP COM 5,728,176.56
32,932 FIRST UNION CORP 2,002,677.25
10,566 FLEET FINANCIAL GROUP INC 472,168.13
1,000 KEYCORP NEW 32,000.00
9,045 MBNA CORP 225,559.69
6,500 MELLON BANK CORP 446,875.00
26,000 MERCANTILE BANCORP INC 1,199,250.00
16,500 NATIONAL CITY CORP 1,196,250.00
21,000 NORTHERN TRUST CO 1,833,562.50
7,200 PNC FINANCIAL 389,700.00
1,000 REGIONS FINANCIAL CORP 40,312.50
26,800 SUMMIT BANCORP 1,170,825.00
5,100 SUNTRUST BANKS INC 390,150.00
115,282 U.S. BANCORP 4,092,511.00
2,400 WACHOVIA CORP 209,850.00
18,400 WELLS FARGO COMPANY NEW 734,850.00
FINANCE COMPANIES
700 AMERICAN EXPRESS CO 71,575.00
36,880 ASSOCIATES 1ST CAPITAL A 1,562,790.00
30,772 HOUSEHOLD INTL CORP 1,219,340.50
HOLDING COMPANY
9,425 BANK ONE CORP 481,264.06
40,385 BANKAMERICA CORP NEW 2,428,148.13
24,541 CITIGROUP INC 1,214,779.50
2,700 EASTERN ENTERPRISES 118,125.00
40,470 MS, DW, DISCOVER & CO 2,873,370.00
FIRE AND CASUALTY INSURANCE
700 CHUBB CORP 45,412.50
200 SAFECO CORP 8,587.50
INSURANCE
15,300 AETNA INC 1,202,962.50
26,437 AMERICAN INTL GROUP 2,554,475.13
28,600 AON CORP 1,583,725.00
1,200 CIGNA CORP 92,775.00
15,300 CINCINNATI FINANCIAL CORP 560,362.50
65,458 CONSECO INC 2,000,560.13
1,000 HARTFORD FINANCIAL SVCS 54,875.00
10,600 MBIA INC 694,962.50
2,370 ST PAUL COS INC 82,357.50
3,500 UNUM CORP. 204,312.50
LIFE INSURANCE
8,487 AMERICAN GENERAL CORP 661,986.00
18,000 JEFFERSON PILOT CORP 1,350,000.00
4,500 LINCOLN NATL CORP IND 368,156.25
REAL ESTATE
300 FEDERAL NATL MTGE ASSN 22,200.00
SAVINGS & LOANS
5,600 GOLDEN WEST FINL CORP 513,450.00
BROKERAGE
10,000 BEAR STEARNS COS INC 373,750.00
32,400 FRANKLIN RESOURCES 1,036,800.00
22,500 LEHMAN BROS HLDGS INC 991,406.25
2,400 MERRILL LYNCH & CO 160,200.00
MISCELLANEOUS
3,955 WASHINGTON MUTUAL 151,031.56
TOTAL FINANCIAL $45,844,559.89
METALS AND MINING 1.01%
ALUMINUM
1,200 ALUMINUM CO AMER 89,475.00
10,100 REYNOLDS METALS CO 532,143.75
MINING
46,600 HOMESTAKE MNG CO 428,137.50
STEEL
21,367 ALLEGHENY TELEDYNE 436,688.06
7,800 BETHLEHEM STEEL CORP 65,325.00
23,400 NUCOR CORP 1,012,050.00
6,300 TIMKEN CO 118,912.50
2,000 USX-US STEEL GROUP 46,000.00
2,300 WORTHINGTON INDS INC 28,750.00
OTHER METALS
7,900 ASARCO INC 118,993.75
17,787 NEWMONT MNG CORP 321,277.69
8,900 PHELPS DODGE CORP 452,787.50
MINERALS
10,750 CYPRUS AMAX MINERALS CO 107,500.00
TOTAL METALS AND MINING $3,758,040.75
COLLECTIBLES & PRECIOUS MATERIALS 0.08%
GOLD-DIAMOND-GEMS
28,800 FREEPORT-MCMORAN COPPER-B 300,600.00
TOTAL COLLECTIBLES & PRECIOUS MATERIALS $300,600.00
OIL-ENERGY 2.83%
OIL & GAS PRODUCERS
1,700 AMERADA HESS CORP 84,575.00
9,500 AMOCO CORP 560,500.00
1,300 APACHE CORP 32,906.25
26,800 COASTAL CORP 936,325.00
6,100 HELMERICH & PAYNE INC. 118,187.50
8,500 OCCIDENTAL PETROLEUM 143,437.50
8,400 ROWAN COS INC 84,000.00
14,500 SUNOCO INC 522,906.25
26,487 UNION PACIFIC RESOURCES 240,038.44
NATURAL RESOURCES
5,400 KERR MCGEE CORP 206,550.00
25,800 WILLIAMS COS INC-DEL 804,637.50
OIL EQUIPMENT, WELLS & SVCS
9,000 ASHLAND, INC 435,375.00
16,740 BAKER HUGHES INC 296,088.75
32,400 HALLIBURTON CO 959,850.00
OIL - DOMESTIC
2,412 BURLINGTON RESOURCES INC 86,379.75
8,600 PHILLIPS PETE CO 366,575.00
1,900 UNOCAL CORP 55,456.25
OIL - INTERNATIONAL
1,800 CHEVRON CORP 149,287.50
34,100 EXXON CORP. 2,493,562.50
13,200 MOBIL CORP 1,150,050.00
8,300 ORYX ENERGY COMPANY 111,531.25
12,700 TEXACO INC 671,512.50
TOTAL OIL-ENERGY $10,509,731.94
RETAIL 10.21%
DEPARTMENT STORES
12,500 CVS CORP 687,500.00
25,800 DAYTON HUDSON CORP 1,399,650.00
20,900 DILLARDS INCORPORATED 593,037.50
11,400 HARCOURT GENERAL INC 606,337.50
38,500 K MART 589,531.25
14,200 PENNEY JC INC 665,625.00
40,000 SAFEWAY INC 2,437,500.00
4,000 SEARS ROEBUCK & CO 170,000.00
146,100 WAL MART STORES INC 11,898,018.75
GROCERY
900 ALBERTSON'S INC 57,318.75
4,300 GREAT ATLANTIC & PAC TEA 127,387.50
42,700 KROGER CO 2,583,350.00
OTHER RETAIL
20,800 CONSOLIDATED STORES INC 419,900.00
8,567 COSTCO COMPANIES INC 618,430.31
6,100 LONGS DRUG STORES CORP 228,750.00
68,800 LOWES COS INC 3,521,700.00
17,800 PEP BOYS-MAN, MO, JACK 279,237.50
5,200 RITE AID CORP 257,725.00
SPORTING GOODS
5,500 RUSSELL CORP 111,718.75
APPAREL
110,400 GAP INC 6,210,000.00
25,600 NORDSTROM INC 888,000.00
MISCELLANEOUS
47,199 TYCO INTERNATIONAL LTD 3,560,574.56
TOTAL RETAIL $37,911,292.37
UTILITIES 8.50%
ELECTRIC
5,200 AMEREN CORP 221,975.00
1,500 AMERICAN ELEC PWR INC 70,593.75
4,600 BALTIMORE GAS & ELEC 142,025.00
400 CENTRAL & SOUTH WEST CORP 10,975.00
7,621 CINERGY CORP 261,971.88
2,800 DOMINION RES INC-VA 130,900.00
1,400 DTE ENERGY COMPANY 60,025.00
6,309 DUKE POWER CO 404,170.31
800 ENTERGY CORP NEW 24,900.00
4,400 FPL GROUP INC 271,150.00
5,300 GPU INC 234,193.75
4,245 HOUSTON INDS INC 136,370.63
900 NIAGARA MOHAWK PWR 14,512.50
2,800 NORTHERN STS PWR CO 77,700.00
10,400 PACIFICORP 219,050.00
5,100 PECO ENERGY 212,287.50
37,000 PG&E CORP 1,165,500.00
35,900 PP&L RESOURCES INC 1,000,712.50
22,674 SBC COMMUNICATIONS INC 1,215,893.25
7,100 SOUTHERN CO 206,343.75
700 UNICOM CORP 26,993.75
GAS
1,800 COLUMBIA GAS SYS INC 103,950.00
10,500 ENRON CORP 599,156.25
19,800 SONAT INC 535,837.50
7,190 TEXAS UTILITIES CO 335,683.13
TELEPHONE
65,700 A T & T 4,943,925.00
19,500 ALLTEL CORP 1,166,343.75
2,590 BELL ATLANTIC CORP 137,270.00
18,800 BELLSOUTH CORP 937,650.00
13,800 FRONTIER CORP 469,200.00
32,300 GTE CORP 2,099,500.00
147,390 MCI WORLDCOM INC 10,575,232.50
15,700 SPRINT CORP 1,320,762.50
3,860 US WEST INC (NEW) 249,452.50
WASTE DESPOSAL
4,400 BROWNING FERRIS IND 125,125.00
30,595 WASTE MANAGEMENT INC 1,426,491.88
MISCELLANEOUS
16,391 SEMPRA ENERGY 415,921.63
TOTAL UTILITIES $31,549,745.21
MISCELLANEOUS 13.76%
BROADCAST/COMMUNICATIONS
31,100 CBS CORP 1,018,525.00
28,400 COMCAST CORP CL A SPL 1,666,725.00
200 GANNETT CO., INC 12,900.00
9,100 MOTOROLA INC 555,668.75
46,330 TELE COMM. INC CL A 2,562,628.13
77,800 VIACOM INC CL B NON VTG 5,757,200.00
BUSINESS SERVICES
14,100 AUTODESK INC 601,893.75
3,700 AUTOMATIC DATA PROC 296,693.75
25,100 BLOCK H&R INC 1,129,500.00
13,018 CENDANT CORP 248,155.63
31,500 DONNELLEY RR & SONS 1,380,093.75
17,100 DOW JONES & CO 822,937.50
128,000 E M C CORP 10,880,000.00
77,400 FIRST DATA CORP 2,452,612.50
15,200 GRAINGER W W INC 632,700.00
19,250 INTERPUBLIC GROUP COS 1,535,187.50
16,500 OMNICOM GROUP INC 957,000.00
17,700 SCIENTIFIC-ATLANTA 403,781.25
35,700 SERVICE CORP INTL 1,358,831.25
61,900 THREE COM CORP 2,773,893.75
FOOD SERVICE
1,900 MCDONALDS CORP 145,587.50
56,300 PHILLIP MORRIS CO INC 3,012,050.00
1,790 TRICON GLOBAL RESTAURANTS 89,723.75
25,300 WENDYS INTL INC 551,856.25
HOTEL & MOTEL
26,700 HILTON HOTELS CORP 510,637.50
26,700 MARRIOTT INTL CL A 774,300.00
HOUSING
7,000 PULTE CORP 194,687.50
MED SERV & SUPPLIES
1,800 BIOMET INC 72,450.00
30,600 HEALTHSOUTH CORPORATION 472,387.50
34,400 HUMANA INC 612,750.00
8,600 MEDTRONIC INC 638,550.00
3,300 SHARED MEDICAL SYS CORP 164,587.50
12,650 ST. JUDE MED INC. 350,246.88
REAL ESTATE
9,700 CENTEX CORP 437,106.25
TRANSPORTATION
8,562 BURLINGTON NRTHN SANTA FE 288,967.50
300 CSX CORP 12,450.00
25,000 DELTA AIR LINES INC 1,300,000.00
16,940 FDX CORP 1,507,660.00
2,900 FLEETWOOD ENTERPRISES 100,775.00
11,900 NORFOLK SOUTHERN CORP 377,081.25
1,390 PACCAR INC 57,163.75
9,500 RYDER SYSTEMS INC 247,000.00
11,100 SOUTHWEST AIRLINES CO 249,056.25
3,500 U S AIR GROUP 182,000.00
3,700 UNION PACIFIC CORP 166,731.25
MISCELLANEOUS
1,300 MALLINCKRODT (NEW) 40,056.25
8,300 WARNER-LAMBERT 624,056.25
TELECOMMUNICATIONS
5,700 AMERITECH CORP NEW 361,237.50
13,400 HARRIS CORP-DEL 490,775.00
TOTAL MISCELLANEOUS $51,078,858.14
TOTAL COMMON STOCK $369,916,933.78
OTHER
0.36%
CASH EQUIVALENTS
1,337,069 AIM SHORT TERM INV SER 2 1,337,068.95
TOTAL $1,337,068.95
TOTAL OTHER $1,337,068.95
TOTAL INVESTMENTS - 100.00% $371,254,002.73
(cost $161,464,999)
See accompanying notes
