Report of Independent Auditors
Board of Directors and Stockholder
Great Lakes Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Great Lakes Fund, 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 the
year ended December 31, 1996 and for the period from May 1, 1995 (commencement
of operations) to December 31, 1995 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 Great Lakes Fund, 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 each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
February 12, 1999
Great Lakes Fund, Inc.
Statement of Assets and Liabilities
December 31, 1998
Assets
Investments, at fair value (cost $769,551,828) 1,809,148,153
Dividends receivable 1,890,202
Interest receivable 15,303
Receivable for securities sold 293,611
Total assets 1,811,347,269
Liabilities
Accrued expenses 310,899
Notes payable (Note 5) 262,500
Accrued interest expense 6,956
Total liabilities 580,355
Net assets 1,810,766,914
Net assets are represented by:
Common stock at par value, $.01 per share, 199,995,250 shares
authorized, 37,508,445.64 shares issued and outstanding 375,084
Additional paid-in capital 773,572,766
Accumulated net realized loss (2,777,261)
Net unrealized appreciation of investments 1,039,596,325
Net assets 1,810,766,914
Net asset value per common shares outstanding 48.28
See accompanying notes.
Great Lakes Fund, Inc.
Statement of Operations
For the year ended December 31, 1998
Investment income:
Dividend income 23,343,405
Interest income 267,491
Total investment income 23,610,896
Expenses:
Administration fee (Note 2) 948,689
Investment management fee (Note 2) 158,287
Broker dealer fee on AMPS 1,159,968
Rating agencies fees 52,479
Auction agent fee 27,000
Independent accountants 32,221
Interest expense 24,885
Insurance 15,756
Directors fees and expenses 7,454
Amortization of organization costs 16,372
Other expenses 1,387
Total expenses 2,444,498
Net investment income 21,166,398
Net realized and unrealized gains on
investments:
Net realized gain on investments 3,576,182
Change in net unrealized appreciation of investments 395,583,988
Net increase in net assets resulting from
operations $ 420,326,568
See accompanying notes.
Great Lakes Fund, Inc.
Statement of Changes in Net Assets
For the years ended December 31, 1998 and 1997
1998 1997
From operations:
Net investment income $ 21,166,398 19,400,273
Net realized gain (loss) on investments 3,576,182 (2,777,261)
Net change in unrealized appreciation
of investments 395,583,988 340,597,383
Increase in net assets resulting from
operations 420,326,568 357,220,395
Dividends from net investment income:
Auction market preferred stock (19,211,608) (19,192,811)
Common stock (1,954,790) (207,462)
(21,166,398) (19,400,273)
Distributions from net realized gains:
Common stock (3,576,182) -
Decrease in net assets resulting from
distributions to stockholders (24,742,580) (19,400,273)
Increase (decrease) from capital transactions:
Issuance of auction market preferred stock - 75,000,000
Redemption of auction market preferred
stock (475,000,000) -
Capital contribution from common
stockholder 484,530,972 8,000,000
Distribution of capital to common
stockholder - (61,732,414)
9,530,972 21,267,586
Total increase in net assets 405,114,960 359,087,708
Net assets:
Beginning of year 1,405,651,954 1,046,564,246
End of year 1,810,766,914 1,405,651,954
See accompanying notes.
Great Lakes Fund, 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 Funds. Management is in the process of liquidating and
winding-up the Fund.
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. 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.
Organization Costs
Organization costs have been deferred and are being amortized by the Fund on a
straight-line basis over five years.
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 amounted to $5,530,972 and $207,462,
respectively.
2. Related Party Transactions (continued)
During the years ended December 31, 1998 and 1997, return of capital
distributions to the common stockholder amounted to approximately $0 and
$61,732,414, respectively. During 1998 and 1997, the common stockholder made
capital contributions to the Fund in the amount of $484,530,972 and
$8,000,000, respectively.
Comerica Bank serves as both custodian and administrator for the Fund and
receives a fee based on a percentage of net assets outstanding at the end of
the fiscal year. The annual fee as a percentage of net assets at December 31,
1998 and December 31, 1997 was 0.06% and 0.15%, respectively. 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 $22,984,837 and $16,396,809, respectively.
As of December 31, 1998, the net unrealized appreciation of $1,039,596,325 is
comprised of aggregate gross unrealized appreciation and depreciation of
investments of $1,051,974,431 and $12,378,106, respectively.
4. Auction Market Preferred Stock ("AMPS")
During 1998, the Fund redeemed 1,000 shares of Series A, 1,000 shares of
Series B, 1,000 shares of Series C, 500 shares of Series D, 500 shares of
Series E, and 750 shares of Series F 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.
4. Auction Market Preferred Stock ("AMPS") (continued)
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, 1998, the Fund had $262,500 of principal notes outstanding
to investors. The notes are due on May 8, 2020 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 3.50%. As of December 31, 1998, the Fund was paying
interest at 8.83% 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.
Great Lakes Fund, Inc.
Financial Highlights
Year ended December 31,
1998 1997 1996 1995 (1)
For a share of common stock outstanding
throughout the period:
Net asset value, beginning of period $24.81 $17.24 $13.77 $10.00
Net investment income 0.56 0.52 0.46 0.33
Net realized and unrealized gains
on investments 10.65 9.01 4.91 3.77
Total from investment operations 11.21 9.53 5.37 4.10
Capital contribution 12.92 0.21 - -
Less distributions from net investment
income:
Common stock equivalent of dividends
paid to AMPS holders (0.51) (0.51) (0.40) (0.27)
Dividends paid to common stockholder (0.05) (0.01) (0.07) (0.05)
Less distributions from net realized gains:
Distribution to common stockholder (0.10) - (0.10) (0.01)
Less distributions from paid-in capital:
Distribution of capital to common
stockholder - (1.65) (1.33) -
Total distributions (0.66) (2.17) (1.90) (0.33)
Net asset value, end of period $48.28 $24.81 $17.24 $13.77
Total investment return 29.90% 34.13% 38.98% 40.90%(3)
Ratios/supplemental data:
Net assets at end of period (000s) $1810767 $1405652 $1046564 $866034
Average net assets (000s) $1584546 $1291147 $1282826 $854566
Ratio of expenses to average net assets
applicable to common stock (4) 0.15% 0.26% 0.40% 0.10%(3)
Ratio of net investment income to average
net assets applicable to common
stock (4) 1.34% 1.50% 1.34% 1.27%(3)
Portfolio turnover 1.03% 3.53% 2.23% 2.22%
Asset coverage per AMPS share,
end of period - $295,927 $261,641 $247,438
AMPS shares outstanding - 4,750 4,000 3,500
Asset coverage for notes payable,
end of period 689816% 460115% 329108% 271484%
Notes payable, end of period $262,500 $305,500 $318,000 $319,000
(1)For the period May 1, 1995 (commencement of operations) to
December 31, 1995.
(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 to AMPS holders.
See accompanying notes.
GREAT LAKES FUND, INC.
Portfolio of Investments
December 31, 1998
No. of
Shares Market Value
COMMON STOCK
BUILDING AND CONSTRUCTION 1.27%
BUILDING MATERIALS
14,800 CHAMPION INTL CORP 599,400.00
16,800 GEORGIA PACIFIC CORP 983,850.00
228,000 HOME DEPOT 13,950,750.00
10,600 LOUISIANA PAC CORP 194,112.50
60,400 MASCO CORP 1,736,500.00
8,800 OWENS CORNING 311,850.00
PAINT AND FLAT GLASS
36,500 PPG INDUS INC 2,126,125.00
35,600 SHERWIN WILLIAMS CO 1,045,750.00
INDUSTRIAL CHEMICALS
2,100 GREAT LAKES CHEM CRP 84,000.00
43,200 ROHM & HAAS CO 1,301,400.00
MISCELLANEOUS
8,400 FLUOR CORP 357,525.00
4,300 FOSTER WHEELER CORP 56,706.25
7,400 KAUFMAN & BROAD HOME CORP 212,750.00
TOTAL BUILDING AND CONSTRUCTION $22,960,718.75
CHEMICALS AND DRUGS 14.04%
CHEMICALS
46,200 AIR PRODS & CHEMS INC 1,848,000.00
56,000 AMGEN INC 5,855,500.00
46,800 BOSTON SCIENTIFIC CORP 1,254,825.00
42,700 DOW CHEMICAL CO 3,883,031.25
255,400 DUPONT DENEMOURS & CO 13,552,162.50
15,900 EASTMAN CHEMICAL CO 711,525.00
31,050 ENGLEHARD CORP 605,475.00
7,500 FMC CORP-NEW 420,000.00
13,500 HERCULES INC 369,562.50
116,600 MONSANTO CO 5,538,500.00
31,100 MORTON INTERNATIONAL INC 761,950.00
13,100 NALCO CHEM CO 406,100.00
28,700 PRAXIAIR INC 1,011,675.00
23,400 SIGMA-ALDRICH CORP 687,375.00
28,000 UNION CARBIDE CORP 1,190,000.00
15,200 WR GRACE & CO NEW 238,450.00
DRUGS
341,800 ABBOT LABS 16,748,200.00
12,100 ALZA CORP CL A 632,225.00
272,400 AMERICAN HOME PRODUCTS 15,339,525.00
202,000 BRISTOL MYERS SQUIBB CO 27,030,125.00
17,250 DOLLAR GENERAL CORP 407,531.25
282,200 JOHNSON & JOHNSON 23,669,525.00
226,600 LILLY ELI & CO 20,139,075.00
230,200 MERCK & CO., INC 33,997,662.50
247,800 PFIZER INC 31,083,412.50
45,820 PHARMACIA & UPJOHN INC 2,594,557.50
324,800 SCHERING PLOUGH 17,945,200.00
101,600 WALGREEN CO 5,949,950.00
COSMETICS
11,600 ALBERTO CULVER CO CL B 309,575.00
54,400 AVON PRODUCTS INC 2,407,200.00
14,400 INTL FLAVORS & FRAGRANCES 636,300.00
HEALTH PRODUCTS/CARE
9,700 ALLERGAN INC 628,075.00
5,900 BARD CR INC 292,050.00
8,900 BAUSCH & LOMB 534,000.00
57,300 BAXTER INTL INC. 3,685,106.25
51,200 BECTON DICKINSON & CO 2,185,600.00
170,300 COLUMBIA/HCA HEALTHCARE 4,214,925.00
27,600 GUIDANT CORP 3,042,900.00
10,900 HCR MANOR CARE 320,187.50
46,800 TENET HEALTHCARE CORP 1,228,500.00
16,600 UTD HEALTHCARE CORP 714,837.50
TOTAL CHEMICALS AND DRUGS $254,070,376.25
CONSUMER PRODUCTS 11.50%
CONFECTIONS AND BEVERAGES
90,000 ANHEUSER-BUSCH COS 5,906,250.00
12,800 BROWN FORMAN INC CL B 968,800.00
480,200 COCA COLA CO 32,113,375.00
31,800 NEWELL CO. 1,311,750.00
330,500 PEPSICO INC 13,529,843.75
CONTAINERS
19,600 AVERY DENNISON CORP 883,225.00
3,300 BALL CORP 150,975.00
9,500 CROWN CORK & SEAL INC 292,718.75
8,147 SEALED AIR CORP 416,006.19
8,900 TEMPLE INLAND INC 527,881.25
PACKAGED FOOD
124,297 ARCHER DANIELS MIDLAND CO 2,136,354.69
61,200 BESTFOODS 3,258,900.00
98,000 CAMPBELL SOUP CO 5,390,000.00
103,600 CONAGRA 3,263,400.00
7,300 COORS ADOLPH CO CL B 411,993.75
30,100 GENERAL MILLS INC 2,340,275.00
79,000 HEINZ H J CO 4,473,375.00
33,600 HERSHEY FOODS CORP 2,089,500.00
91,600 KELLOGG CO 3,125,850.00
42,900 PIONEER HI BRED INTL INC 1,158,300.00
28,800 QUAKER OATS CO 1,713,600.00
55,500 RALSTON-PURINA GROUP 1,796,812.50
198,400 SARA LEE CORP 5,592,400.00
76,200 SYSCO CORP 2,090,737.50
26,400 WRIGLEY WM JR CO 2,364,450.00
PAPER
11,400 AMERICAN GREETINGS CL A 468,112.50
8,200 BEMIS CO 311,087.50
3,800 BOISE CASCADE CORP 117,800.00
17,900 FORT JAMES CORPORATION 716,000.00
61,812 INTERNATIONAL PAPER CO 2,769,950.25
119,479 KIMBERLY CLARK CORP 6,511,605.50
20,000 MEAD CORP 586,250.00
5,600 POTLATCH CORP 206,500.00
7,200 UNION CAMP CORP 486,000.00
37,000 WEYERHAEUSER CO 1,880,062.50
400 WILLIAMETTE INDUSTRIAL 13,400.00
PRINTING AND PUBLISHING
5,800 JOSTENS INC 151,887.50
15,900 KNIGHT-RIDDER INC 812,887.50
19,800 MCGRAW-HILL COMPANIES INC 2,017,125.00
11,000 MEREDITH CORP 416,625.00
38,000 NEW YORK TIMES CO CL A 1,318,125.00
169,200 TIME WARNER INC 10,500,975.00
17,900 TIMES MIRROR CO CL A NEW 1,002,400.00
26,800 TRIBUNE CO 1,768,800.00
19,150 WESTVACO CORP 513,459.38
RECREATIONAL EQUIPMENT
20,300 BRUNSWICK CORP 502,425.00
3,600 HARRAH'S ENTERTAINMENT 56,475.00
21,300 HASBRO INC 769,462.50
50,425 MATTEL INC 1,150,320.31
SOAPS
18,000 CLOROX CO 2,102,625.00
OTHER CONSUMER PRODUCTS
63,000 COLGATE PALMOLIVE CO 5,851,125.00
31,300 FORTUNE BRANDS INC 989,862.50
192,600 GILLETTE CO 9,304,987.50
279,200 PROCTER & GAMBLE CO 25,494,450.00
9,300 RUBBERMAID INC 292,368.75
3,100 SPRINGS INDUS INC 128,456.25
5,300 TUPPERWARE CORPORATION 87,118.75
22,700 UST INC 791,662.50
PHOTOGRAPHY
73,200 EASTMAN KODAK CO 5,270,400.00
7,800 POLAROID CORP 145,762.50
HOUSEHOLD FURN/APPLIANCES
6,700 ARMSTRONG WORLD IND 404,093.75
21,200 MAYTAG CO 1,319,700.00
RETAIL
2,400 FEDERATED DEPT STORES NEW 104,550.00
3,000 KOHLS CORP 184,312.50
50,400 TJX COS INC (NEW) 1,461,600.00
APPAREL
27,500 FRUIT OF THE LOOM CL A 379,843.75
47,225 LIMITED INC 1,375,428.13
10,900 LIZ CLAIBORNE INC 344,031.25
56,400 NIKE INC CL B 2,287,725.00
20,600 V F CORP 965,625.00
19,000 VENATOR GROUP INC 122,312.50
BROADCASTING
439,326 DISNEY WALT CO 13,179,780.00
15,400 KING WORLD INC 453,337.50
MISCELLANEOUS
48,500 CARNIVAL CORP 2,328,000.00
13,900 PALL CORP 351,843.75
TOTAL CONSUMER PRODUCTS $208,075,510.70
DURABLE GOODS 29.32%
AEROSPACE-AIRCRAFT
204,618 BOEING CO 6,675,662.25
23,000 GENERAL DYNAMICS CORP 1,348,375.00
34,500 LOCKHEED MARTIN CORP 2,923,875.00
11,400 NORTHROP GRUMMAN CORP 833,625.00
37,000 TEXTRON INC 2,809,687.50
51,600 UNITED TECHNOLOGIES CORP 5,611,500.00
AGRICULTURAL MACHINERY
81,000 CATERPILLAR INC 3,726,000.00
49,800 DEERE & CO 1,649,625.00
AUTOMOBILE AND PARTS
36,000 AUTOZONE INC 1,185,750.00
3,000 COOPER TIRE & RUBBER 61,312.50
7,200 CUMMINS ENGINE INC 255,600.00
94,896 DAIMLERCHRYSLER AG 9,115,947.00
28,556 DANA CORP 1,167,226.50
15,600 EATON CORP 1,102,725.00
203,500 FORD MTR CO 11,942,906.25
140,600 GENERAL MTRS CORP 10,061,687.50
32,550 GENUINE PARTS CO 1,088,390.63
16,400 NAVISTAR INTL CORP (NEW) 467,400.00
29,500 TENNECO INC (NEW) 1,004,843.75
28,000 TRW INC 1,573,250.00
ELECTRICAL
50,104 AMP INC 2,608,539.50
96,000 EMERSON ELEC CO 5,808,000.00
24,200 HONEYWELL INC 1,822,562.50
13,000 RAYCHEM CORP 420,062.50
ELECTRONICS
16,300 ADVANCED MICRO-DEVICES 471,681.25
79,800 APPLIED MATLS INC 3,406,462.50
367,200 CISCO SYS INC 34,080,750.00
7,000 E G & G INC 194,687.50
646,000 GENERAL ELECTRIC CO 65,932,375.00
7,800 GENERAL INSTRUMENT CORP 264,712.50
230,200 HEWLETT PACKARD CO 15,725,537.50
428,200 INTEL CORP 50,768,462.50
30,000 MICRON TECH 1,516,875.00
36,300 NATIONAL SEMICONDUCTOR 490,050.00
9,800 NATIONAL SVC INDS 372,400.00
169,475 ORACLE CORPORATION 7,308,609.38
9,200 PERKIN ELMER CORP 897,575.00
53,100 RAYTHEON CO CL B 2,827,575.00
8,600 SEAGATE TECHNOLOGY INC 260,150.00
13,800 TEKTRONIX INC 414,862.50
93,800 TEXAS INSTRUMENTS 8,025,762.50
7,700 THOMAS & BETTS CORP 333,506.25
INDUSTRIAL MACHINERY
7,000 AEROQUIP-VICKERS INC 209,562.50
5,400 BRIGGS & STRATTON CORP 269,325.00
700 CASE CORPORATION 15,268.75
19,100 COOPER INDUS INC 910,831.25
43,200 DOVER CORP 1,582,200.00
4,100 HARNISCHFEGER INDUS INC 41,768.75
35,100 INGERSOLL RAND CO 1,647,506.25
6,800 MILACRON 130,900.00
1,700 NACCO INDUS INC CL A 156,400.00
47,000 ROCKWELL INTL CORP W/I 2,282,437.50
OFFICE EQUIPMENT AND SUPPLIES
17,700 DELUXE CORP 647,156.25
19,200 IKON OFFICE SOLUTIONS 164,400.00
66,800 PITNEY BOWES INC 4,412,975.00
68,500 XEROX CORP. 8,083,000.00
RUBBER
10,900 GOODRICH B F CO 391,037.50
30,200 GOODYEAR TIRE & RUBBER 1,523,212.50
OTHER DURABLE GOODS
36,000 CORNING INCORPORATED 1,620,000.00
16,200 CRANE CO 489,037.50
50,200 ILLINOIS TOOL WORKS 2,911,600.00
8,600 MILLIPORE CORP 244,562.50
81,400 MINNESOTA MNG & MFR 5,789,575.00
20,200 STANLEY WORKS 560,550.00
COMPUTERS AND SOFTWARE
17,500 APPLE COMPUTER INC 716,406.25
60,700 CABLETRON SYSTEMS INC 508,362.50
5,700 CERIDIAN CORP 397,931.25
342,547 COMPAQ COMPUTER CORP 14,365,564.81
116,812 COMPUTER ASSOC INTL INC 4,979,111.50
8,600 DATA GENL CORP 141,362.50
187,200 DELL COMPUTER CORP 13,700,700.00
13,000 ELECTRONIC DATA SYSTEMS 653,250.00
274,600 IBM CORP 50,732,350.00
27,500 IMS HEALTH INC 2,074,531.25
566,000 MICROSOFT CORP 78,497,125.00
56,300 NOVELL INC 1,020,437.50
28,100 SILICON GRAPHICS 361,787.50
87,600 SUN MICROSYSTEMS 7,500,750.00
37,700 UNISYS CORP 1,298,293.75
HOUSEHOLD FURN/APPLIANCES
13,100 WHIRLPOOL CORP 725,412.50
TELECOMMUNICATIONS
86,900 AIRTOUCH COMMUNICATIONS 6,267,662.50
21,725 ANDREW CORP 358,462.50
40,000 ASCEND COMMUNICATIONS 2,630,000.00
220,744 LUCENT TECHNOLOGIES INC 24,281,840.00
130,500 MEDIAONE GROUP INC (NEW) 6,133,500.00
38,400 SPRINT CORP PCS GROUP 888,000.00
MISCELLANEOUS
112,600 ALLIED-SIGNAL INC 4,989,587.50
17,300 BLACK & DECKER CORP 969,881.25
26,300 ITT INDUSTRIES INC 1,045,425.00
17,800 JOHNSON CTLS INC 1,050,200.00
27,450 PARKER HANNIFIN CORP 898,987.50
10,600 SNAP ON TOOLS CORP 369,012.50
13,000 THERMO ELECTRON CORP 220,187.50
TOTAL DURABLE GOODS $530,416,016.57
FINANCIAL 14.88%
BANKS
142,600 BANK NEW YORK INC 5,739,650.00
68,800 BANKBOSTON CORPORATION 2,678,900.00
18,100 BANKERS TR NY CORP 1,546,418.75
193,440 CHASE MANHATTAN CORP NEW 13,166,010.00
6,750 FIFTH THIRD BANCORP COM 481,359.38
173,303 FIRST UNION CORP 10,538,988.69
110,720 FLEET FINANCIAL GROUP INC 4,947,800.00
84,200 KEYCORP NEW 2,694,400.00
154,405 MBNA CORP 3,850,474.69
44,600 MELLON BANK CORP 3,066,250.00
24,100 MERCANTILE BANCORP INC 1,111,612.50
38,500 MORGAN J P & CO 4,044,906.25
37,100 NATIONAL CITY CORP 2,689,750.00
53,000 PNC FINANCIAL 2,868,625.00
47,600 REPUBLIC NEW YORK CORP 2,168,775.00
24,209 SUMMIT BANCORP 1,057,630.69
41,500 SUNTRUST BANKS INC 3,174,750.00
46,572 U.S. BANCORP 1,653,306.00
37,700 WACHOVIA CORP 3,296,393.75
331,930 WELLS FARGO COMPANY NEW 13,256,454.38
FINANCE COMPANIES
105,100 AMERICAN EXPRESS CO 10,746,475.00
106,668 ASSOCIATES 1ST CAPITAL A 4,520,056.50
10,000 CAP ONE FINL CORP 1,150,000.00
157,600 FED HOME LN MTG CORP 10,155,350.00
94,012 HOUSEHOLD INTL CORP 3,725,225.50
0 WADDELL & REED FIN CL A 8.53
1 WADDELL & REED FIN CL B 13.02
HOLDING COMPANY
206,842 BANK ONE CORP 10,561,869.63
335,707 BANKAMERICA CORP NEW 20,184,383.38
481,031 CITIGROUP INC 23,811,009.75
4,100 EASTERN ENTERPRISES 179,375.00
71,025 MS, DW, DISCOVER & CO 5,042,775.00
FIRE AND CASUALTY INSURANCE
37,200 CHUBB CORP 2,413,350.00
29,900 SAFECO CORP 1,283,831.25
INSURANCE
23,660 AETNA INC 1,860,267.50
207,338 ALLSTATE CORPORATION 8,008,430.25
207,112 AMERICAN INTL GROUP 20,012,197.00
1,350 AON CORP 74,756.25
45,600 CIGNA CORP 3,525,450.00
30,600 CINCINNATI FINANCIAL CORP 1,120,725.00
25,641 CONSECO INC 783,653.06
52,600 HARTFORD FINANCIAL SVCS 2,886,425.00
47,300 LOEWS CORP 4,647,225.00
40,200 MARSH & MCLENNAN CO. 2,349,187.50
14,000 MBIA INC 917,875.00
8,300 MGIC INVT CROP 330,443.75
49,124 ST PAUL COS INC 1,707,059.00
24,400 TORCHMARK CORP 861,625.00
14,900 TRANSAMERICA CORP 1,720,950.00
29,400 UNUM CORP. 1,716,225.00
LIFE INSURANCE
46,139 AMERICAN GENERAL CORP 3,598,842.00
18,825 JEFFERSON PILOT CORP 1,411,875.00
17,200 LINCOLN NATL CORP IND 1,407,175.00
25,050 PROVIDIAN FINL CORP W/I 1,878,750.00
REAL ESTATE
232,800 FEDERAL NATL MTGE ASSN 17,227,200.00
SAVINGS & LOANS
14,100 GOLDEN WEST FINL CORP 1,292,793.75
18,600 SLM HOLDING 892,800.00
BROKERAGE
20,000 BEAR STEARNS COS INC 747,500.00
31,700 FRANKLIN RESOURCES 1,014,400.00
76,400 MERRILL LYNCH & CO 5,099,700.00
MISCELLANEOUS
27,100 DUN & BRADSTREET CORP NEW 855,343.75
91,485 WASHINGTON MUTUAL 3,493,583.44
TOTAL FINANCIAL $269,248,634.89
METALS AND MINING 0.33%
ALUMINUM
36,000 ALUMINUM CO AMER 2,684,250.00
11,700 REYNOLDS METALS CO 616,443.75
MINING
9,100 HOMESTAKE MNG CO 83,606.25
STEEL
30,255 ALLEGHENY TELEDYNE 618,336.56
9,000 BETHLEHEM STEEL CORP 75,375.00
5,400 NUCOR CORP 233,550.00
14,800 TIMKEN CO 279,350.00
9,100 USX-US STEEL GROUP 209,300.00
12,400 WORTHINGTON INDS INC 155,000.00
OTHER METALS
4,900 ASARCO INC 73,806.25
16,137 NEWMONT MNG CORP 291,474.56
11,100 PHELPS DODGE CORP 564,712.50
MINERALS
11,300 CYPRUS AMAX MINERALS CO 113,000.00
TOTAL METALS AND MINING $5,998,204.87
COLLECTIBLES & PRECIOUS MATERIALS 0.00%
GOLD-DIAMOND-GEMS
4,100 FREEPORT-MCMORAN COPPER-B 42,793.75
TOTAL COLLECTIBLES & PRECIOUS MATERIALS $42,793.75
OIL-ENERGY 5.83%
OIL & GAS PRODUCERS
18,500 AMERADA HESS CORP 920,375.00
203,000 AMOCO CORP 11,977,000.00
43,600 COASTAL CORP 1,523,275.00
11,000 HELMERICH & PAYNE INC. 213,125.00
67,600 OCCIDENTAL PETROLEUM 1,140,750.00
18,800 ROWAN COS INC 188,000.00
13,500 SUNOCO INC 486,843.75
30,192 UNION PACIFIC RESOURCES 273,615.00
70,000 USX-MARTHON GROUP COM NEW 2,108,750.00
NATURAL RESOURCES
10,400 KERR MCGEE CORP 397,800.00
6,600 ONEOK INC 238,425.00
75,900 WILLIAMS COS INC-DEL 2,367,131.25
OIL EQUIPMENT, WELLS & SVCS
13,200 ASHLAND, INC 638,550.00
59,700 BAKER HUGHES INC 1,055,943.75
84,100 HALLIBURTON CO 2,491,462.50
OIL - DOMESTIC
31,207 BURLINGTON RESOURCES INC 1,117,600.69
47,800 PHILLIPS PETE CO 2,037,475.00
45,800 UNOCAL CORP 1,336,787.50
OIL - INTERNATIONAL
72,400 ATLANTIC RICHFIELD CO 4,724,100.00
141,200 CHEVRON CORP 11,710,775.00
511,200 EXXON CORP. 37,381,500.00
161,200 MOBIL CORP 14,044,550.00
26,000 ORYX ENERGY COMPANY 349,375.00
106,800 TEXACO INC 5,647,050.00
MISCELLANEOUS
35,200 FIRSTENERGY CORP 1,146,200.00
TOTAL OIL-ENERGY $105,516,459.44
RETAIL 4.61%
DEPARTMENT STORES
44,200 CVS CORP 2,431,000.00
64,800 DAYTON HUDSON CORP 3,515,400.00
18,700 DILLARDS INCORPORATED 530,612.50
12,700 HARCOURT GENERAL INC 675,481.25
61,000 K MART 934,062.50
47,000 MAY DEPT STORES CO 2,837,625.00
36,700 PENNEY JC INC 1,720,312.50
100,000 SAFEWAY INC 6,093,750.00
75,600 SEARS ROEBUCK & CO 3,213,000.00
358,900 WAL MART STORES INC 29,227,918.75
34,400 WINN-DIXIE STORES INC 1,543,700.00
GROCERY
52,100 ALBERTSON'S INC 3,318,118.75
66,800 AMERICAN STORES CO 2,467,425.00
8,800 GREAT ATLANTIC & PAC TEA 260,700.00
37,200 KROGER CO 2,250,600.00
23,200 SUPERVALUE INC 649,600.00
OTHER RETAIL
17,900 CIRCUIT CITY STORES 893,881.25
45,600 COSTCO COMPANIES INC 3,291,750.00
7,800 LONGS DRUG STORES CORP 292,500.00
40,400 LOWES COS INC 2,067,975.00
1,500 PEP BOYS-MAN, MO, JACK 23,531.25
36,000 RITE AID CORP 1,784,250.00
14,200 TANDY CORP 584,862.50
56,500 TOYS R US 953,437.50
SPORTING GOODS
9,800 REEBOK INTL LTD 145,775.00
6,700 RUSSELL CORP 136,093.75
APPAREL
94,950 GAP INC 5,340,937.50
27,600 NORDSTROM INC 957,375.00
MISCELLANEOUS
69,014 TYCO INTERNATIONAL LTD 5,206,243.63
TOTAL RETAIL $83,347,918.63
UTILITIES 9.41%
ELECTRIC
15,400 AMEREN CORP 657,387.50
37,900 AMERICAN ELEC PWR INC 1,783,668.75
27,400 BALTIMORE GAS & ELEC 845,975.00
21,500 CAROLINA PWR & LT CO 1,011,843.75
23,700 CENTRAL & SOUTH WEST CORP 650,268.75
22,600 CINERGY CORP 776,875.00
42,400 CONSOLIDATED EDISON INC 2,241,900.00
32,300 DOMINION RES INC-VA 1,510,025.00
28,200 DTE ENERGY COMPANY 1,209,075.00
74,325 DUKE POWER CO 4,761,445.31
95,400 EDISON INTERNATIONAL 2,659,275.00
39,900 ENTERGY CORP NEW 1,241,887.50
35,600 FPL GROUP INC 2,193,850.00
20,700 GPU INC 914,681.25
54,650 HOUSTON INDS INC 1,755,631.25
21,900 NIAGARA MOHAWK PWR 353,137.50
27,200 NORTHERN STS PWR CO 754,800.00
53,600 PACIFICORP 1,128,950.00
25,700 PECO ENERGY 1,069,762.50
29,100 PG&E CORP 916,650.00
19,000 PUBLIC SVC ENTERPRISE GRP 760,000.00
372,162 SBC COMMUNICATIONS INC 19,957,187.25
137,700 SOUTHERN CO 4,001,906.25
44,100 UNICOM CORP 1,700,606.25
GAS
17,850 COLUMBIA GAS SYS INC 1,030,837.50
14,400 CONSOLIDATED NATL GAS 777,600.00
49,500 ENRON CORP 2,824,593.75
10,600 NICOR INC 447,850.00
8,300 PEOPLES ENERGY CORP 330,962.50
16,600 SONAT INC 449,237.50
47,590 TEXAS UTILITIES CO 2,221,858.13
TELEPHONE
285,400 A T & T 21,476,350.00
38,700 ALLTEL CORP 2,314,743.75
332,272 BELL ATLANTIC CORP 17,610,416.00
387,600 BELLSOUTH CORP 19,331,550.00
13,000 FRONTIER CORP 442,000.00
178,100 GTE CORP 11,576,500.00
253,733 MCI WORLDCOM INC 18,205,342.75
76,800 SPRINT CORP 6,460,800.00
106,663 US WEST INC (NEW) 6,893,096.38
WASTE DESPOSAL
20,800 BROWNING FERRIS IND 591,500.00
38,535 WASTE MANAGEMENT INC 1,796,694.38
MISCELLANEOUS
22,557 SEMPRA ENERGY 572,383.88
TOTAL UTILITIES $170,211,105.33
MISCELLANEOUS 8.50%
BROADCAST/COMMUNICATIONS
101,300 CBS CORP 3,317,575.00
53,250 COMCAST CORP CL A SPL 3,125,109.38
64,600 GANNETT CO., INC 4,166,700.00
64,400 MOTOROLA INC 3,932,425.00
112,300 TELE COMM. INC CL A 6,211,593.75
71,800 TELLABS INC 4,922,787.50
41,400 VIACOM INC CL B NON VTG 3,063,600.00
BUSINESS SERVICES
200 AUTODESK INC 8,537.50
57,500 AUTOMATIC DATA PROC 4,610,781.25
9,400 BLOCK H&R INC 423,000.00
149,827 CENDANT CORP 2,856,077.19
44,000 COMPUTER SCIENCES CORP 2,835,250.00
16,300 DONNELLEY RR & SONS 714,143.75
14,600 DOW JONES & CO 702,625.00
25,400 E M C CORP 2,159,000.00
25,400 ECOLAB INC 919,162.50
83,000 FIRST DATA CORP 2,630,062.50
17,600 GRAINGER W W INC 732,600.00
25,350 INTERPUBLIC GROUP COS 2,021,662.50
30,000 OMNICOM GROUP INC 1,740,000.00
7,500 SCIENTIFIC-ATLANTA 171,093.75
43,500 SERVICE CORP INTL 1,655,718.75
1,000 THREE COM CORP 44,812.50
FOOD SERVICE
37,000 DARDEN RESTAURANTS INC 666,000.00
149,100 MCDONALDS CORP 11,424,787.50
486,600 PHILLIP MORRIS CO INC 26,033,100.00
33,050 TRICON GLOBAL RESTAURANTS 1,656,631.25
19,800 WENDYS INTL INC 431,887.50
HOTEL & MOTEL
49,700 HILTON HOTELS CORP 950,512.50
47,000 MARRIOTT INTL CL A 1,363,000.00
HOUSING
7,800 PULTE CORP 216,937.50
MED SERV & SUPPLIES
23,600 BIOMET INC 949,900.00
42,400 HEALTHSOUTH CORPORATION 654,550.00
1,300 HUMANA INC 23,156.25
110,800 MEDTRONIC INC 8,226,900.00
4,900 SHARED MEDICAL SYS CORP 244,387.50
12,900 ST. JUDE MED INC. 357,168.75
REAL ESTATE
9,000 CENTEX CORP 405,562.50
TRANSPORTATION
44,000 AMR CORP 2,612,500.00
94,809 BURLINGTON NRTHN SANTA FE 3,199,803.75
48,800 CSX CORP 2,025,200.00
20,800 DELTA AIR LINES INC 1,081,600.00
27,700 FDX CORP 2,465,300.00
8,100 FLEETWOOD ENTERPRISES 281,475.00
70,500 NORFOLK SOUTHERN CORP 2,233,968.75
16,600 PACCAR INC 682,675.00
14,200 RYDER SYSTEMS INC 369,200.00
72,225 SOUTHWEST AIRLINES CO 1,620,548.44
12,800 U S AIR GROUP 665,600.00
45,400 UNION PACIFIC CORP 2,045,837.50
MISCELLANEOUS
15,200 MALLINCKRODT (NEW) 468,350.00
159,300 WARNER-LAMBERT 11,977,368.75
TELECOMMUNICATIONS
235,200 AMERITECH CORP NEW 14,905,800.00
13,600 HARRIS CORP-DEL 498,100.00
TOTAL MISCELLANEOUS $153,702,126.26
TOTAL COMMON STOCK $1,803,589,865.44
OTHER
0.31%
CASH EQUIVALENTS
5,558,287 AIM SHORT TERM INV SER 2 5,558,287.18
TOTAL $5,558,287.18
TOTAL OTHER $5,558,287.18
TOTAL INVESTMENTS - 100.00% $1,809,148,152.62
(cost $769,551,828)
See accompanying notes
