<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholder
Great Lakes Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Great
Lakes Fund, Inc., including the portfolio of investments, as of December 31,
1995 and the related statements of operations and changes in net assets and
the financial highlights for the period from May 1, 1995 (commencement of
operations) to December 31, 1995. These financial statements and financial
highlights are the responsibility of the Company's management. Our responsi-
bility is to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. 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, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Great Lakes Fund, Inc. as of December 31, 1995, the results of its operations
and changes in net assets and its financial highlights for the period from May
1, 1995 (commencement of operations) to December 31, 1995, presented in con-
formity with generally accepted accounting principles.
KPMG Peat Marwick, LLP
February 16, 1996
New York, New York
<PAGE>
GREAT LAKES FUND, INC.
Statement of Assets and Liabilities
December 31, 1995
Assets
Investments, at value (cost $744,578,416) $867,540,243
Cash 9,449
Dividends receivable 1,628,555
Interest receivable 30,671
Prepaid expenses 52,927
Deferred organization cost, net 30,406
Total Assets 869,292,251
Liabilities
AMPS dividends payable (note 4) 695,528
Common stock dividends payable 2,219,168
Accrued expenses 14,831
Notes payable (note 5) 319,000
Accrued interest expense (note 5) 9,393
Total Liabilities 3,257,920
Net Assets $866,034,331
Net assets are represented by:
Series A Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share,
1,000 shares authorized,
issued and outstanding 100,000,000
Series B Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share,
1,000 shares authorized,
issued and outstanding 100,000,000
Series C Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share,
1,000 shares authorized,
issued and outstanding 100,000,000
Series D Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share,
500 shares authorized,
issued and outstanding 50,000,000
Common stock at par value, $.01 per share,
199,996,500 shares authorized,
37,508,445.64 shares issued and outstanding 375,084
Additional paid-in capital 392,716,012
Distribution in excess of net realized gains (18,592)
Net unrealized appreciation of investments 122,961,827
Net Assets $866,034,331
Net asset value per common shares outstanding $13.76
See accompanying notes to the financial statements.
<PAGE>
GREAT LAKES FUND, INC.
Statement of Operations
For the period from May 1, 1995 (commencement of operations)
to December 31, 1995
Investment income:
Dividend income $11,610,941
Interest income 121,686
Total investment income 11,732,627
Expenses:
Broker dealer fee 463,555
Legal fees 124,474
Rating agencies fees 90,833
Independent accountants 31,550
Auction agent fee 9,834
Custody / administration fees (note 2) 81,420
Directors fees and expenses 10,800
Interest expense 20,647
Insurance 5,146
Investment management fee (note 2) 49,224
Amortization of organizational costs 4,678
Miscellaneous expenses 525
Total expenses 892,686
Net investment income 10,839,941
Net realized and unrealized gains on investments:
Net realized gain on investments:
Proceeds from sales $19,212,240
Cost of securities sold (18,915,962)
296,278
Unrealized appreciation of investments:
Beginning of period 0
End of period 122,961,827
Increase in net unrealized
appreciation of investments 122,961,827
Net increase in net assets resulting from operations 134,098,046
See accompanying notes to the financial statements.
<PAGE>
GREAT LAKES FUND, INC.
Statement of Changes in Net Assets
For the period from May 1, 1995 (commencement of operations)
to December 31, 1995
From operations:
Net investment income $10,839,941
Net realized gain on investments 296,278
Net change in unrealized appreciation
on investments 122,961,827
Increase in net assets resulting from operations 134,098,046
Dividends to stockholders from net investment income:
Auction market preferred stock (8,874,439)
Common stock (1,965,502)
(10,839,941)
Dividends to stockholders from net realized gains
Auction market rate preferred stock 0
Common Stock (314,870)
Decrease in net assets resulting from (11,154,811)
dividends to stockholders
From issuance of capital shares:
Auction market preferred stock 350,000,000
Common stock 393,091,096
743,091,096
Total increase in net assets 866,034,331
Net assets:
Beginning of period 0
End of period 866,034,331
See accompanying notes to the financial statements.
<PAGE>
GREAT LAKES FUND, INC.
Notes to the Financial Statements
December 31, 1995
(1) Organization and Significant Accounting Policies
The Great Lakes Fund, 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 May 1,
1995.
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.
In May 1995, the Fund sold $200 million of Auction Market Preferred Stock
("AMPS") and purchased securities with an aggregate fair value of
$449,301,107 from a collective trust fund for employee benefit plans in
exchange for 24,930,110.7 shares of common stock and $200 million in cash.
The following is a summary of significant accounting policies
consistently followed by the Fund in preparation of its financial
statements.
(a) 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.
(b) Security Transactions
Security transactions are accounted for on a trade date basis.
The cost of securities sold is determined using the identified
cost method. Dividend income is recorded on ex-dividend date.
(c) 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 shareholders.
Therefore, no provision for Federal income tax is required.
(d) 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 capital gains, if
any, are distributed annually.
<PAGE>
(e) 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 period from May 1, 1995 (inception) to December 31, 1995,
dividends paid to the common stockholder were $2,280,372.
During the year, the Fund issued $150 million in AMPS and
12,578,234.94 in shares of common stock with a fair value of
$143,788,989.46. The Fund purchased securities with an aggregate
market value of $293,788,989.46 with the proceeds from the sale of
AMPS and common stock.
Comerica Bank serves as both custodian and administrator for the
Fund. 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 management fee is calculated and accrued on
a monthly basis.
(3) Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds
of securities sold, for the year ended December 31, 1995 were
$763,494,378 and $19,212,240,respectively.
As of December 31, 1995 based on cost for Federal income tax
purposes, the aggregate gross unrealized appreciation and
depreciation for all securities were $136,804,751 and $13,842,924,
respectively.
(4) Auction Market Preferred Stock
The Fund has outstanding at December 31, 1995, 1000 shares each of
Series A, Series B and Series C and 500 shares of Series D AMPS at a
liquidation value of $100,000 per share. Dividends are cumulative
from the date of original issue and are paid every 49 days at a rate
set through a Dutch Auction. The AMPS rates in effect on December
31, 1995 were 4.5%, 4.75%, 4.63% and 4.5% for Series A, Series B,
Series C and Series D, respectively.
<PAGE>
Each series of AMPS is 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. The Fund is subject to certain asset coverage
tests, and the AMPS are subject to mandatory redemption if the tests
are not met.
In addition, the AMPS are subject to mandatory redemption if the Fund
ceases to qualify as a regulated investment company or if Merrill
Lynch, Pierce, Fenner & Smith Incorporated ceases to be the broker
dealer. The liquidation value under mandatory redemption of the AMPS
is $100,000 per share plus accumulated and unpaid dividends.
(5) Notes Payable
As of December 31, 1995, the Fund had $319,000 of principal notes
outstanding to investors. The notes due on May 8, 2020, bear
interest at a floating rate. The interest rate, which resets
annually, is set at the one-year U.S. Treasury bill rate plus 3.50%.
As of December 31, 1995, the Fund was paying interest at 10% per
annum.
<PAGE>
GREAT LAKES FUND, INC.
Financial Highlights
For the period from May 1, 1995 (commencement of operations)
to December 31, 1995
For a share of common stock outstanding throughout the period:
Net asset value, beginning of period $10.00
Net investment income 0.33
Net gains on investments
realized and unrealized 3.76
Total from investment operations 4.09
Less distributions from net investment income and net realized gains:
Common share equivalent of dividends paid
to AMPS holders (0.27)
Dividends paid to common shareholders (0.05)
Total distributions (0.32)
Net asset value, end of period $13.77
Total investment return 40.90%*
Net assets at end of period (000s) $866,034
Ratio of expenses to average net assets applicable to common
shares 0.10%
Ratio of net investment income to average net assets applicable
to common shares + 0.23%
Portfolio turnover 2.22%
+Net investment income is adjusted for distributions paid to AMPS holders.
*Total investment return for the period; not annualized.
See accompanying notes to financial statements.
<PAGE>
GREAT LAKES FUND, INC.
Portfolio of investments
December 31, 1995
No. of
shares Value
Common Stocks
BUILDING AND CONSTRUCTION 1.41%
BUILDING MATERIALS
18,200 CHAMPION INTERNATIONAL CORP $764,400
16,700 GEORGIA PACIFIC CORP 1,146,038
72,300 HOME DEPOT 3,461,363
14,600 LOUISIANA PACIFIC CORP 354,050
24,000 MASCO CORPORATION 753,000
CONSTRUCTION EQUIPMENT
7,400 GIDDINGS & LEWIS 122,100
PAINT AND FLAT GLASS
39,000 PPG INDUSTRIES INC 1,784,250
17,800 SHERWIN WILLIAMS COMPANY 725,350
INDUSTRIAL CHEMICALS
9,600 GREAT LAKES CHEMICAL CORP 691,200
12,200 ROHM & HAAS CO 785,375
MISCELLANEOUS
17,600 FLUOR CORP 1,161,600
7,800 FOSTER WHEELER CORP 331,500
7,100 KAUFMAN & BROAD HOME CORPORATION 105,613
TOTAL BUILDING AND CONSTRUCTION $12,185,838
CHEMICALS AND DRUGS 13.27%
CHEMICALS
19,900 AIR PRODUCTS & CHEMICALS INC $1,049,725
56,000 AMGEN INC COMMON STOCK 3,325,000
23,400 BOSTON SCIENTIFIC CORP 1,146,600
42,600 DOW CHEMICAL CO 2,997,975
123,800 DUPONT DE NEMOURS & CO. 8,650,525
15,900 EASTMAN CHEMICAL CO 995,738
39,950 ENGLEHARD CORP 868,913
7,200 FMC CORP-NEW 486,900
17,400 GRACE WR & CO 1,028,775
23,800 HERCULES INC 1,341,725
22,400 MONSANTO CO 2,744,000
31,100 MORTON INTERNATIONAL 1,115,713
<PAGE>
13,700 NALCO CHEMICAL CO 412,713
27,700 PRAXAIR INC 931,413
11,700 SIGMA-ALDRICH CORP 579,150
28,000 UNION CARBIDE CORPORATION 1,050,000
DRUGS
169,800 ABBOT LABS 7,089,150
12,100 ALZA CORP CLASS A 299,475
65,600 AMERICAN HOME PRODUCTS 6,363,200
101,000 BRISTOL MYERS SQUIBB CO 8,673,375
140,600 JOHNSON & JOHNSON 12,038,875
112,400 LILLY ELI & COMPANY 6,322,500
230,200 MERCK & COMPANY, INC. 15,135,650
45,820 PHARMACIA & UPJOHN INC 1,775,525
120,100 PFIZER INC 7,566,300
68,700 SCHERING PLOUGH 3,761,325
43,600 WALGREEN CO 1,302,550
COSMETICS
5,800 ALBERTO CULVER CO CLASS B 199,375
13,600 AVON PRODUCTS INC 1,025,100
20,400 INTERNATIONAL FLAVORS & FRAGRANCES 979,200
HEALTH PRODUCTS/CARE
9,700 ALLERGAN INC 315,250
10,600 BARD C R INC 341,850
12,400 BAUSCH & LOMB INC 491,350
56,400 BAXTER INTERNATIONAL INC. 2,361,750
12,800 BECTON DICKINSON & COMPANY 960,000
23,100 BEVERLY ENTERPRISES INC 245,438
112,600 COLUMBIA/HCA HEALTHCARE CORP 5,714,450
9,200 COMMUNITY PSYCHIATRIC CENTERS 112,700
16,200 MALLINCKRODT GROUP INC 589,275
40,800 TENET HEALTHCARE CORP 846,600
13,800 UNITED HEALTHCARE CORP 903,900
11,400 U S HEALTH CARE INC 530,100
10,800 U S SURGICAL 230,850
TOTAL CHEMICAL AND DRUGS $114,899,975
CONSUMER PRODUCTS 13.25%
CONFECTIONS AND BEVERAGES
45,000 ANHEUSER-BUSCH COS $3,009,375
12,800 BROWN FORMAN INC CLASS B 467,200
239,200 COCA COLA COMPANY 17,760,600
<PAGE>
24,900 NEWELL COMPANY 644,288
164,100 PEPSICO INC 9,169,088
CONTAINERS
9,800 AVERY DENNISON CORP 491,225
5,700 BALL CORPORATION 156,750
16,400 CROWN CORK & SEAL INC 684,700
10,800 STONE CONTAINER 155,250
9,600 TEMPLE INLAND INC 423,600
PACKAGED FOOD
97,230 ARCHER DANIELS MIDLAND CO 1,750,140
30,600 CPC INTERNATIONAL, INC. 2,099,925
49,000 CAMPBELL SOUP CO 2,940,000
44,000 CONAGRA INC 1,815,000
7,300 COORS ADOLPH CO CLASS B 161,513
30,100 GENERAL MILLS INCORPORATED 1,738,275
78,300 HEINZ H J COMPANY 2,593,688
16,800 HERSHEY FOODS CORP 1,092,000
45,800 KELLOG COMPANY 3,538,050
17,800 PIONEER HI BRED INTERNATIONAL INC 990,125
27,900 QUAKER OATS CO 962,550
18,400 RALSTON-PURINA GROUP 1,147,700
97,700 SARA LEE CORPORATION 3,114,188
37,300 SYSCO CORP 1,212,250
21,200 WRIGLEY WILLIAM JR CO 1,113,000
PAPER
11,200 AMERICAN GREETINGS CLASS A 309,400
8,200 BEMIS CO 210,125
4,000 BOISE CASCADE CORP 138,500
8,700 FEDERAL PAPER BOARD INC 451,313
50,600 INTERNATIONAL PAPER CO 1,916,475
16,300 JAMES RIVER CORP 393,238
57,088 KIMBERLY CLARK CORP 4,724,032
8,700 MEAD CORP 454,575
5,600 POTLATCH CORP 224,000
12,100 UNION CAMP CORP 576,263
43,100 WEYERHAEUSER CO 1,864,075
PRINTING AND PUBLISHING
5,700 JOSTENS INC 138,225
6,700 KNIGHT-RIDDER INC 418,750
9,900 MCGRAW-HILL COMPANIES INC 862,538
4,400 MEREDITH CORP 184,250
15,400 NEW YORK TIMES CO CLASS A 456,225
<PAGE>
65,800 TIME WARNER INC 2,492,175
23,300 TIMES MIRROR CO CL A NEW 789,288
13,400 TRIBUNE CO 819,075
19,650 WESTVACO CORP 545,288
RECREATIONAL EQUIPMENT
12,500 BALLY ENTERTAINMENT CORP 175,000
20,300 BRUNSWICK CORP 487,200
12,800 HARRAH'S ENTERTAINMENT INC 310,400
14,100 HASBRO INC 437,100
40,100 MATTEL INC 1,233,075
4,200 OUTBOARD MARINE CORP 85,575
SOAPS
9,000 CLOROX CO 644,625
OTHER CONSUMER PRODUCTS
31,300 AMERICAN BRANDS INC 1,396,763
30,600 COLGATE PALMOLIVE CO 2,149,650
15,700 DIAL CORP ARIZ 465,113
83,000 GILLETTE CO 4,326,375
138,500 PROCTER & GAMBLE CO 11,495,500
22,300 RUBBERMAID INC 568,650
3,401 SCHWEITZER-MAUDUIT INTL INC 78,644
3,800 SPRINGS INDUSTRIES INC 157,225
22,700 UST INC 757,613
17,700 WHITMAN CORPORATION 411,525
PHOTOGRAPHY
73,200 EASTMAN KODAK CO 4,904,400
7,400 POLAROID CORP 350,575
HOUSEHOLD FURN/APPLIANCES
6,700 ARMSTRONG WORLD INDUSTUSTRIES 415,400
21,200 MAYTAG CO 429,300
RETAIL
8,400 TJX COMPANIES INC (NEW) 158,550
APPAREL
3,000 BROWN GROUP INC 42,750
45,000 FRUIT OF THE LOOM CL A 1,096,875
59,800 LIMITED INC 1,039,025
<PAGE>
13,500 LIZ CLAIBORNE INC 374,625
28,200 NIKE INC CL B 1,963,425
8,300 STRIDE RITE CORP 62,250
10,200 V F CORP 538,050
BROADCASTING
7,300 KING WORLD INC 283,788
MISCELLANEOUS
25,100 PALL CORPORATION 674,563
TOTAL CONSUMER PRODUCTS $114,711,891
DURABLE GOODS 22.44%
AEROSPACE-AIRCRAFT
68,200 BOEING CO $5,345,175
11,500 GENERAL DYNAMICS CORP 679,938
34,500 LOCKHEED MARTIN CORPORATION 2,725,500
24,100 MCDONNELL DOUGLAS CORP 2,217,200
9,200 NORTHROP GRUMMAN CORP 588,800
45,200 RAYTHEON COMPANY 2,135,700
49,600 ROCKWELL INTERNATIONAL 2,622,600
14,800 TEXTRON INC 999,000
25,800 UNITED TECHNOLOGIES CORP 2,447,775
AGRICULTURAL MACHINERY
40,500 CATERPILLAR INC 2,379,375
49,800 DEERE & CO 1,755,450
AUTOMOBILE AND PARTS
76,100 CHRYSLER CORP 4,214,038
9,700 COOPER TIRE & RUBBER 238,863
7,200 CUMMINS ENGINE INC 266,400
20,100 DANA CORP 587,925
15,600 EATON CORP 836,550
9,800 ECHLIN INC 357,700
181,200 FORD MOTOR CO 5,254,800
137,400 GENERAL MOTORS CORP 7,265,025
21,600 GENUINE PARTS CO 885,600
16,400 NAVISTAR INTL CORP (NEW) 172,200
14,000 TRW INC 1,085,000
8,300 VARITY CORP NEW 308,138
<PAGE>
ELECTRICAL
52,504 AMP INC 2,014,841
48,000 EMERSON ELECTRIC COMPANY 3,924,000
24,200 HONEYWELL INC 1,176,725
5,900 RAYCHEM CORP 335,563
76,900 WESTINGHOUSE ELECTRIC CORPORATION 1,268,850
ELECTRONICS
19,300 ADVANCED MICRO-DEVICES 318,450
39,200 APPLIED MATLS INC 1,543,500
58,300 CISCO SYSTEMS INC 4,350,638
11,500 E G & G INC 278,875
322,100 GENERAL ELECTRIC CORPORATION 23,191,200
9,600 GENERAL SIGNAL CORP 310,800
114,400 HEWLETT PACKARD CO 9,581,000
209,800 INTEL CORP 11,906,150
38,000 LORAL CORPORATION 1,344,250
46,200 MICRON TECHNOLGY INC. 1,830,675
34,800 NATIONAL SEMICONDUCTOR CORP 774,300
9,800 NATIONAL SERVICES INDUSTRIES INC 317,275
75,300 ORACLE CORPORATION 3,190,838
8,700 PERKIN ELMER CORP 328,425
9,200 TEKTRONIX INC 451,950
8,600 TELEDYNE INC 220,375
46,200 TEXAS INSTRUMENTS 2,390,850
3,500 THOMAS AND BETTS CORPORATION 258,125
INDUSTRIAL MACHINERY
5,400 BRIGGS & STRATTON CORP 234,225
8,500 CINCINNATI MILACRON INC 223,125
17,200 COOPER INDUSTRIES INC 632,100
21,600 DOVER CORPORATION 796,500
5,800 HARNISCHFEGER INDUSTRIES INC 192,850
23,400 INGERSOLL RAND CO 821,925
1,700 NACCO INDUSTRIES INC CLASS A 94,350
7,000 TRINOVA CORP 200,375
OFFICE EQUIPMENT AND SUPPLIE
19,200 ALCO STANDARD CORP 876,000
17,700 DELUXE CORP 513,300
5,500 HARLAND JOHN H COMPANY 114,813
27,900 PITNEY BOWES INC 1,311,300
22,400 XEROX CORPORATION 3,068,800
<PAGE>
RUBBER
5,300 GOODRICH B F CO 361,063
29,500 GOODYEAR TIRE & RUBBER CO 1,338,563
12,600 PREMARK INTERNATIONAL INC 637,875
OTHER DURABLE GOODS
35,000 CORNING INCORPORATED 1,120,000
7,200 CRANE CO 265,500
23,300 ILLINOIS TOOL WORKS INC 1,374,700
8,600 MILLIPORE CORP 353,675
80,700 MINNESOTA MINING & MANUFACTURING 5,346,375
12,900 OWENS CORNING FIBERGLASS CORP-NEW 578,888
8,100 STANLEY WORKS 417,150
COMPUTERS AND SOFTWARE
26,200 APPLE COMPUTER INC 835,125
102,700 CUC INTERNATIOANL 3,504,638
42,500 CABLETRON SYSTEMS INC. 3,442,500
9,200 CERIDIAN CORP (FORMERLY CONTROL DATA CORP DEL) 379,500
57,300 COMPAQ COMPUTER CORPORATION 2,750,400
50,850 COMPUTER ASSOCIATES INTERNATIONAL INC. 2,892,094
5,000 CRAY RESEARCH INC 123,750
8,100 DATA GENERAL CORP 111,375
39,500 DIGITAL EQUIPMENT CORPORATION 2,532,938
6,600 INTERGRAPH CORP 103,950
136,400 IBM COMMON 12,514,700
136,100 MICROSOFT CORP 11,942,775
84,900 NOVELL INC 1,209,825
38,300 SILICON GRAPHICS 1,053,250
45,800 SUN MICROSYSTEMS 2,089,625
11,400 TANDEM COMPUTERS INC 121,125
36,500 UNISYS CORP 205,313
HOUSEHOLD FURN/APPLIANCES
13,000 WHIRLPOOL CORP 692,250
TELECOMMUNICATIONS
83,200 AIRTOUCH COMMUNICATIONS 2,350,400
9,900 ANDREW CORP 378,675
26,900 DSC COMMUNICATIONS 991,938
MISCELLANEOUS
56,300 ALLIED-SIGNAL INC 2,674,250
17,300 BLACK & DECKER CORP 609,825
<PAGE>
25,300 ITT INDUSTRIES INC 607,200
8,900 JOHNSON CONTROLS INC 611,875
18,300 PARKER HANNIFIN CORP 626,775
7,000 SNAP ON TOOLS CORPORATION 316,750
30,400 TYCO LABRATORIES INC 1,083,000
TOTAL DURABLE GOODS $194,305,672
FINANCIAL 13.77%
BANKS
78,000 BANC ONE CORP $2,944,500
26,900 BANK OF BOSTON CORP 1,244,125
35,100 BANK NEW YORK INC 1,711,125
71,900 BANKAMERICA CORPORATION 4,655,525
15,600 BANKERS TRUST NEW YORK CORP 1,037,400
18,900 BARNETT BANKS INC 1,115,100
27,200 BOATMEN'S BANCSHARES INC 1,111,800
45,500 CHASE MANHATTAN CORP 2,758,438
48,700 CHEMICAL BANKING CORPORATION (FORMERLY CHEMICA 2,861,125
88,000 CITICORP 5,918,000
27,700 CORESTATES FINANCIAL CORP 1,049,138
34,100 DEAN WITTER DISCOVER & CO 1,602,700
59,514 FIRST CHICAGO NBD CORP 2,350,803
13,500 FIRST FIDELITY BANCORPORATION NEW 1,017,563
12,200 FIRST INTERSTATE BANCORP 1,665,300
32,800 FIRST UNION CORP 1,824,500
51,257 FLEET FINANCIAL GROUP INC 2,088,723
36,900 KEYCORP NEW 1,337,625
30,500 MBNA CORP 1,124,688
24,000 MELLON BANK CORP 1,290,000
39,400 MORGAN J P & CO 3,161,850
27,600 NATIONAL CITY CORP 914,250
45,800 NATIONSBANK CORP 3,188,825
71,400 NORWEST CORP 2,356,200
43,000 PNC FINANCIAL CORPORATION 1,386,750
30,800 REPUBLIC NEW YORK CORP 1,913,450
20,700 SUNTRUST BANKS INC 1,417,950
19,800 U S BANCORP ORE 665,775
31,300 WACHOVIA CORP 1,431,975
9,500 WELLS FARGO & CO 2,052,000
FINANCE COMPANIES
89,500 AMERICAN EXPRESS CO 3,703,063
10,700 BENEFICIAL CORP 498,888
39,400 FEDERAL HOME LOAN MORTGAGE CORP 3,289,900
20,400 HOUSEHOLD INTERNATIONAL CORP 1,206,150
<PAGE>
HOLDING COMPANY
4,100 EASTERN ENTERPRISES 144,525
FIRE AND CASUALTY INSURANCE
16,200 CHUBB CORP 1,567,350
13,800 GENERAL RE CORP 2,139,000
24,400 SAFECO CORP 841,800
INSURANCE
21,100 AETNA LIFE & CASUALTY CO 1,461,175
8,500 ALEXANDER & ALEXANDER SERVICES INC 161,500
103,669 ALLSTATE CORPORATION 4,263,388
91,350 AMERICAN INTERNATIONAL GROUP 8,449,875
12,300 CIGNA CORP 1,269,975
25,300 ITT HARTFORD 1,223,888
69,800 LOEWS CORP 5,470,575
11,600 MARSH & MCLENNAN COMPANIES INC. 1,029,500
14,000 SAINT PAUL COMPANIES INC 778,750
11,100 TORCHMARK CORPORATION 502,275
12,400 TRANSAMERICA CORP 903,650
67,500 TRAVELERS GROUP INC 4,244,063
11,600 UNUM CORPORATION 638,000
22,500 USF & G CORP 379,688
LIFE INSURANCE
39,000 AMERICAN GENERAL CORP 1,360,125
12,450 JEFFERSON PILOT CORP 578,925
17,000 LINCOLN NATIONAL CORP IND 913,750
15,600 PROVIDIAN CORP 635,700
337 TRANSPORT HOLDINGS, INC 13,733
6,450 USLIFE CORP 192,694
REAL ESTATE
57,600 FEDERAL NATIONAL MORTGAGE ASSOCIATION 7,149,600
SAVINGS & LOANS
28,500 AHMANSON H F & CO 755,250
14,100 GOLDEN WEST FINANCIAL CORP 779,025
32,300 GREAT WESTERN FINANCIAL 823,650
BROKERAGE
38,200 MERRILL LYNCH & CO 1,948,200
21,700 SALOMON INC 770,350
TOTAL FINANCIAL $119,285,177
<PAGE>
METALS AND MINING 0.87%
ALUMINUM
36,000 ALUMINUM CO OF AMERICA $1,903,500
12,500 REYNOLDS METALS CO 707,813
MINING
21,100 HOMESTAKE MINING CO 329,688
STEEL
20,200 ARMCO, INC. 118,675
13,600 BETHLEHEM STEEL CORPORATION 190,400
8,700 INLAND STEEL INDUSTRIES INC 218,588
11,300 NUCOR CORP 645,513
7,400 TIMKEN CO 283,050
10,400 USX-U S STEEL GROUP 319,800
14,900 WORTHINGTON INDUSTRIES INC 310,106
OTHER METALS
8,100 ASARCO INC 259,200
15,300 NEWMONT MINING CORP 692,325
12,000 PHELPS DODGE CORP 747,000
15,000 FREEPORT-MCMORAN COPPER-B 421,875
MINERALS
16,200 CYPRUS AMAX MINERALS CO 423,223
TOTAL METALS AND MINING $7,570,756
OIL-ENERGY 7.88%
OIL & GAS PRODUCERS
18,500 AMERADA HESS CORP $980,500
100,800 AMOCO CORPORATION 7,245,000
21,800 COASTAL CORP 812,050
16,400 ENSERCH CORP 266,500
5,500 HELMERICH AND PAYNE INC. 163,625
68,300 OCCIDENTAL PETROLEUM CORP 1,459,913
18,800 ROWAN COMPANIES INC 185,650
16,700 SANTA FE ENERGY RES INC 160,738
32,200 TENNECO INC 1,597,925
70,000 USX-MARATHON GROUP COM NEW FORMERLY USX CORP 1,365,000
<PAGE>
NATURAL RESOURCES
36,500 DRESSER INDUSTRIES INC 889,688
10,400 KERR MCGEE CORP 660,400
6,300 LOUISIANA LAND & EXPLORATION CO 270,113
25,300 WILLIAMS COMPANIES INC-DELAWARE 1,110,038
OIL EQUIPMENT, WELLS & SVCS
13,200 ASHLAND, INC 463,650
31,200 BAKER HUGHES INC 760,500
23,800 HALLIBURTON CO 1,204,875
11,000 WESTERN ATLAS INC 555,500
OIL - DOMESTIC
21,600 BURLINGTON RESOURCES INC 847,800
9,500 PENNZOIL CO 401,375
46,700 PHILLIPS PETROLEUM CO 1,593,638
45,500 UNOCAL CORP 1,325,188
OIL - INTERNATIONAL
29,900 ATLANTIC RICHFIELD CO 3,311,425
121,300 CHEVRON CORP 6,368,250
254,300 EXXON CORP. 20,375,788
80,600 MOBIL CORP 9,027,200
26,000 ORYX ENERGY COMPANY 347,750
13,500 SUN COMPANY INC 369,563
52,800 TEXACO INC 4,144,800
TOTAL OIL-ENERGY $68,264,438
RETAIL 3.34%
DEPARTMENT STORES
10,300 DAYTON HUDSON CORP $772,500
18,500 DILLARD DEPARTMENT STORES 527,250
12,600 HARCOURT GENERAL INC 527,625
92,800 K MART 672,800
42,200 MAY DEPARTMENT STORES COMPANY 1,782,950
17,500 MELVILLE CORPORATION 538,125
6,700 MERCANTILE STORES 309,875
36,200 PENNEY JC INC 1,724,025
75,600 SEARS ROEBUCK & CO 2,948,400
355,200 WAL MART STORES INC 7,947,600
28,000 WINN-DIXIE STORES INC 1,032,500
19,000 WOOLWORTH CORP 247,000
<PAGE>
GROCERY
44,700 ALBERTSON'S INC 1,469,513
27,200 AMERICAN STORES CO 727,600
631 BRUNOS INC NEW 6,626
7,800 FLEMING COMPANIES 160,875
13,800 GIANT FOOD INC 434,700
8,800 GREAT ATLANTIC & PACIFIC TEA INC 202,400
16,900 KROGER CO 633,750
12,000 SUPERVALUE INC 378,000
OTHER RETAIL
17,700 CIRCUIT CITY STORES 488,963
3,900 LONGS DRUG STORES CORP 186,713
17,800 LOWES COMPANIES INC 596,300
6,200 PEP BOYS - MANNY, MOE, AND JACK 158,875
44,700 PRICE/COSTCO INC 681,675
14,600 RITE AID CORPORATION 500,050
6,100 TANDY CORP 253,150
49,900 TOYS R US 1,085,325
SPORTING GOODS
9,200 REEBOK INTERNATIONAL LIMITED 259,900
6,700 RUSSELL CORP 185,925
APPAREL
17,600 CHARMING SHOPPES INC 50,600
20,900 GAP INC 877,800
13,700 NORDSTROM INC 554,850
TOTAL RETAIL $28,924,238
UTILITIES 12.24%
ELECTRIC
37,000 AMERICAN ELECTRIC POWER INC $1,498,500
27,400 BALTIMORE GAS & ELECTRIC CO 780,900
29,800 CAROLINA POWER & LIGHT CO 1,028,100
37,400 CENTRAL & SOUTH WEST CORP 1,042,525
21,800 CINERGY CORP 667,625
45,200 CONSOLIDATED EDISON NY INC 1,446,400
28,200 DETROIT EDISON CO 972,900
32,300 DOMINION RESOURCES INC-VA 1,332,375
40,800 DUKE POWER CO 1,932,900
45,400 ENTERGY CORP NEW 1,327,950
35,600 FPL GROUP INC 1,650,950
<PAGE>
20,600 GENERAL PUBLIC UTILITIES CORPORATION 700,400
51,400 HOUSTON INDUSTRIES INC 1,246,450
27,900 NIAGARA MOHAWK POWER 268,538
13,000 NORTHERN STATES POWER CO 638,625
28,600 OHIO EDISON CO 672,100
44,200 PECO ENERGY CO 1,331,525
89,300 PACIFIC GAS & ELECTRIC 2,533,888
50,400 PACIFICORP 1,071,000
44,400 PUBLIC SERVICE ENTERPRISE GROUP 1,359,750
126,000 SBC COMMUNICATIONS INC 7,245,000
94,700 SCE CORP 1,680,925
132,800 SOUTHERN CO 3,270,200
48,600 UNICOM CORPORATION 1,591,650
19,100 UNION ELECTRIC CO 797,425
GAS
10,100 COLUMBIA GAS SYSTEM INC 443,138
18,100 CONSOLIDATED NATURAL GAS 821,288
49,500 ENRON CORP 1,887,188
8,700 NICOR COMMON 239,250
28,500 NORAM ENERGY CORP 252,938
5,100 ONEOK INC 116,663
14,900 PACIFIC ENTERPRISES 420,925
31,100 PANHANDLE EASTERN CORP 866,913
6,700 PEOPLES ENERGY CORP 212,725
16,600 SONAT INC 591,375
43,900 TEXAS UTILITIES CO 1,805,388
TELEPHONE
277,300 A T & T 17,955,175
22,300 ALLTEL CORP 657,850
83,900 BELL ATLANTIC CORP 5,610,813
193,200 BELLSOUTH CORP 8,404,200
178,100 GTE CORP 7,836,400
82,800 NYNEX CORP 4,471,200
79,800 PACIFIC TELESIS GROUP 2,683,275
75,700 SPRINT CORP 3,018,538
96,300 U S WEST INC 3,442,725
96,300 US WEST MEDIA GROUP 1,829,700
WASTE DISPOSAL
44,800 BROWNING FERRIS INDUSTRIES INC 1,321,600
42,100 LAIDLAW TRANS INC CL B NON VOTING 431,525
87,400 WMX TECHNOLOGIES INC 2,611,075
TOTAL UTILITIES $106,020,463
<PAGE>
MISCELLANEOUS 11.04%
BROADCAST/COMMUNICATIONS
25,200 CAPITAL CITIES/ABC INC $3,109,050
46,600 COMCAST CORP CLASS A SPL 847,538
25,500 GANNETT CO., INC. 1,565,063
140,800 MCI COMMUNICATIONS 3,678,400
117,000 MOTOROLA INC 6,669,000
110,300 TELE COMMUNICATIONS INC CL A 2,192,213
42,200 TELLABS INC 1,561,400
70,700 VIACOM INC CL B VTG 3,349,413
99,200 DISNEY WALT CO 5,852,800
BUSINESS SERVICES
24,100 AMDAHL CORP 204,850
3,800 AUTODESK INC 130,150
27,900 AUTOMATIC DATA PROCESSING 2,071,575
18,200 BLOCK H & R INC 737,100
10,100 COMPUTER SCIENCES CORP 709,525
25,700 DONNELLEY R R & SONS 1,011,938
14,400 DOW JONES & CO 574,200
30,500 DUN & BRADSTREET 1,974,875
10,800 ECOLAB INC 324,000
41,000 FIRST DATA CORP 2,741,875
8,700 GRAINGER W W INC 576,375
15,800 INTERPUBLIC GROUP COMPANIES INC 685,325
9,400 OGDEN CORP 200,925
9,700 SAFETY KLEEN CORP 151,563
13,900 SCIENTIFIC-ATLANTA 208,500
19,500 SERVICE CORPORATION INTERNATIONAL 858,000
FOOD SERVICE
30,100 DARDEN RESTAURANTS INC 357,438
2,800 LUBYS CAFETERIAS INC 62,300
129,400 MCDONALDS CORPORATION 5,839,175
162,200 PHILLIP MORRIS COMPANIES INC 14,679,100
10,500 RYANS FAMILY STEAK HOUSE 73,500
8,600 SHONEY'S INC 88,150
19,800 WENDYS INTERNATIONAL INC 420,750
HOTEL & MOTEL
9,300 HILTON HOTELS CORP 571,950
25,300 ITT CORP NEW 1,340,900
23,500 MARRIOTT INTERNATIONAL CORP 898,875
<PAGE>
HOUSING
3,900 PULTE CORP 131,138
MED SERV & SUPPLIES
23,600 BIOMET INC 421,850
10,800 MANOR CARE INC 378,000
50,800 MEDTRONIC INC 2,838,450
12,900 ST. JUDE MEDICAL INC. 554,700
4,900 SHARED MEDICAL SYSTEM CORP 266,438
REAL ESTATE
4,400 CENTEX CORP 152,900
TRANSPORTATION
15,000 AMR CORP 1,113,750
26,903 BURLINGTON NORTHERN SANTA FE 2,098,434
40,200 CSX CORP 1,834,125
13,300 CONRAIL INC 931,000
3,900 CONSOLIDATED FREIGHTWAYS 103,350
9,900 DELTA AIR LINES INC 731,363
10,200 FEDERAL EXPRESS CORP 753,525
7,900 FLEETWOOD ENTERPRISES INC 203,425
23,500 NORFOLK SOUTHERN CORP 1,865,313
8,300 PACCAR INC 349,638
5,100 PITTSTON BRINKS GROUP 160,013
7,300 ROADWAY SERVICES 356,788
13,700 RYDER SYSTEMS INC 339,075
25,900 SANTA FE PACIFIC GOLD 314,038
39,700 SOUTHWEST AIRLINES CO 923,025
35,600 UNION PACIFIC CORP 2,349,600
13,800 U S AIR GROUP 182,850
6,500 YELLOW CORPORATION 80,438
MISCELLANEOUS
6,300 HANDLEMAN CO-DELAWARE 36,225
26,200 WARNER-LAMBERT 2,544,675
TELECOMMUNICATIONS
116,800 AMERITECH CORP 6,891,200
6,800 HARRIS CORP-DELAWARE 371,449
TOTAL MISCELLANEOUS $95,594,558
TOTAL COMMON STOCK $861,763,006
<PAGE>
OTHER
PREFERRED STOCKS 0.00%
219 TELEDYNE PFRD SERIES E 3,148
3,148
MUTUAL FUNDS - OPEN END 0.67%
5,774,107 AMERICAN AADVANTAGE MM FUND 5,774,089
5,774,089
TOTAL OTHER $5,777,237
TOTAL INVESTMENTS - 100.18% - (cost $744,578,416) $867,540,243
LIABILITIES IN EXCESS OF OTHER ASSETS - (1,505,912)
NET ASSETS - 100% $866,034,331
See accompanying notes to financial statements.
<PAGE>
To the Board of Directors and Shareholder
Great Lakes Fund, Inc.:
In planning and performing our audit of the financial statements of
Great Lakes Fund, Inc. for the year ended December 31, 1995, we consid-
ered its internal control structure, including procedures for safeguard-
ing securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on
the internal control structure.
The management of Great Lakes Fund, Inc. is responsible for establishing
and maintaining an internal control structure. In fulfilling this re-
sponsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control poli-
cies and procedures. Two of the objectives of an internal control
structure are to provide management with reasonable, but not absolute,
assurance that assets are safeguarded against loss from unauthorized use
or disposition and that transactions are executed in accordance with
management's authorization and recorded properly to permit preparation
of financial statements in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control structure, er-
rors or irregularities may occur and not be detected. Also, projection
of any evaluation of the structure to future periods is subject to the
risk that it may become inadequate because of changes in conditions or
that the effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessari-
ly disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Insti-
tute of Certified Public Accountants. A material weakness is a condi-
tion in which the design or operation of the specific internal control
structure elements does not reduce to a relatively low level the risk
that errors or irregularities in amounts that would be material in rela-
tion to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters in-
volving the internal control structure, including procedures for safe-
guarding securities, that we consider to be material weaknesses as de-
fined above as of December 31, 1995.
This report is intended solely for the information and use of the Board
of Directors, management and the Securities and Exchange Commission.
KPMG Peat Marwick, LLP
February 16, 1996
New York, New York
