MERRILL LYNCH
CAPITAL FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1994
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Executive Vice President
Donald C. Burke, Vice President
Ernest S. Watts, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or
a solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus.
Past performance results shown in this report should not be
considered a representation of future performance. Investment
return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their
original cost.
Merrill Lynch
Capital Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CAPITAL FUND, INC.
PORTFOLIO SUMMARY
Security Diversification
As of December 31, 1994
A pie chart illustrating the following percentages:
US Bonds 35.6%
Non-US Bonds 3.6%
Cash 0.9%
US Stocks 46.8%
Non-US Stocks 11.7%
Preferred Stocks 1.4%
<PAGE>
Sector Representation
As a Percentage of US Equities
As of December 31, 1994
A pie chart illustrating the following percentages:
Financial Services 30.0%
Credit Cyclicals 0.3%
Utilities 5.5%
Capital Goods--
Technology 8.3%
Consumer Cyclical 9.7%
Consumer Staples 10.5%
Capital Goods 4.2%
Transportation 3.5%
Consumer Services 2.0%
Diversified 2.0%
Basic Industries 13.5%
Energy 10.5%
Currency Diversification Percent of
As of December 31, 1994 Net Assets
US Dollar 93.1%
Canadian Dollar 1.6
Spanish Peseta 0.3
Argentinian Peso 1.2
French Franc 0.6
Hong Kong Dollar 0.3
Netherlands Guilder 0.5
UK Sterling 2.4
US Common Stock Investments S&P
As of December 31, 1994 Fund 500*
Average Capitalization (in billions) $ 6.9 $ 6.7
Price-to-Book Value 1.85 3.05
Price-to-Earnings Ratio** 14.29 15.59
Yield Based on Current Dividend 3.36% 2.82%
[FN]
*An unmanaged broad-based index comprised of common stocks.
**Based on 1994 earnings estimates.
Fixed-Income Investments Merrill Lynch
As of December 31, 1994 Fund BOAO Index*
Duration 4.2 Years 5.1 Years
Average Maturity 6.6 Years 9.1 Years
Asset Breakdown:
Corporates 60.7% 23.4%
US Treasuries/Agencies 32.9% 76.6%
Mortgage-Backed 5.1% --
International Governments 1.3% --
[FN]
*An unmanaged market-weighted corporate and Government master bond
index reflecting approximately 97% of total outstanding US bonds.
<PAGE>
DEAR SHAREHOLDER
Volatility in the US financial markets continued during the
December quarter, largely prompted by concerns of increasing
inflationary pressures. The possibility of continued monetary
policy tightening by the Federal Reserve Board was predominant in
the minds of investors throughout most of the period. Therefore,
there was little surprise in mid-November when the central bank
announced the sixth increase in short-term interest rates thus
far this year. Early in the period, the weakness of the US dollar
in foreign exchange markets prompted declines in US stock and
bond prices, but some strengthening of the US currency has
occurred recently.
In the weeks ahead, investors will continue to assess economic
data and inflationary trends in order to gauge whether further
increases in short-term interest rates are likely. The core
inflation rate rose less than 3% in 1994 following a 3% increase
in 1993, the best sustained inflation performance in 30 years. It
is not likely that such positive inflation results will be
duplicated in 1995. In addition, investor interest in the new
year will also be focused on the progress that the new Congress
makes on both reducing spending and the Federal budget deficit
and passing tax cuts that promote savings and investment.
Legislative progress, combined with continued indications of
moderate and sustainable levels of economic growth, would be
positive for the US capital markets. However, the lagged effects
of higher interest rates could slow the economy sharply and with
it, the growth of corporate profits.
Portfolio Matters
We have always kept the price for the average stock in your Fund
at a ratio to book value per share that is below the similarly
derived ratio for the Standard & Poor's Composite Index of 500
(S&P 500) stocks. When that ratio went above 2.0 for the S&P 500,
however, we began a more stringent approach of maintaining the
ratio for the average stock held in the Fund's portfolio at
2.0 or lower. Currently that ratio for the average stock held
in the Fund's portfolio is 1.85, versus 3.05 for the S&P 500. It
is not yet known how much companies earned on their equity for 1994.
There was improvement from 1993, when the average company in the S&P
earned 14.6%. The average company held in your Fund as of December 31,
1994, earned 13.2% on its equity in 1993. When you divide the
former number by the price/book value ratio, you should find that
the earnings yield from the S&P 500, representing the amount of
money earned in 1993 at today's price for the index, was 4.8%.
The earnings yield for companies held in the Fund's portfolio was
7.2%. Using estimates for 1994, the figures would be 6.5% for the
Index and 7.2% for companies held in the Fund's portfolio. Projecting
for the full year 1995, the figures become 7.1% for the Index and 9.0%
for companies held in the Fund's portfolio. If the companies meet our
earnings estimates, then the underlying value for your shares in
terms of dividends paid and increased book value could be 9.0% in 1995.
These projections are based on estimates for the companies currently
held by the Fund and are not intended to reflect the Fund's yield or
performance for 1995.
<PAGE>
We continue to work to find companies that we expect to do well
beyond 1995. One approach to long-term investing is to find
industries or themes where above-average growth appears to be
attainable at moderate prices. We believe growth in air travel
will continue at an above-average rate. Accordingly, we increased
your investments in The Boeing Co. and United Technologies Corp.,
while we added Rockwell International Corporation. In addition,
the Federal government is in the process of increasing the defense
budget. Therefore, we increased the stock holdings in each of the
other aerospace companies as well.
Growth aspects for the chemical industry seem to be working well
for your holdings, so we increased investment exposure. General
economic growth has been above-average in recent years, causing
investors to sell slower-growing investments. Add in reduced
allowed rates of return, higher interest rates and increasing
competitive pressures, and you have the combination that caused
electric utility stocks to decline 21% last year. At this juncture,
we believe the higher interest rates will cause the economy to
grow at a slower rate and lead to some increase in allowed rates
of return for electric utility companies. Providing above-average
yields and modest valuations in terms of price/book value and
earnings, we chose the industry for additional investments. For
many of the same reasons, we increased investments in natural gas
pipeline and distribution companies.
We expected financial stocks to perform poorly during the
December quarter, typical of their stock price action late in an
economic cycle. But we are seeking to build wealth on a
conservative basis. From that standpoint, it would appear to be
better to hold or buy stock in capable companies at 1.0 times--
1.5 times book value rather than pay a premium price of 3 times
book value for areas in vogue. In our opinion, Chemical Banking
Corp., the second-largest equity holding in your portfolio, is a
prime example. The stock is off from its price at the start of
1994, in part because investors are aware that the spread between
the discount rate (the price banks must pay to borrow money from
the Federal Reserve Bank), and the prime rate (the interest rate
that banks charge their most creditworthy customers), is at an
unsustainable 3.75% versus a 2.9% average over the last decade.
In our view, risk has been discounted to an extreme with the stock
selling at book value, at 7.4 times the earnings we believe the
company made in 1994, and at 6.1 times estimated 1995 net earnings
per share. NationsBank Corp., operating in the growing southeastern
part of the United States, was priced at 1.2 times book value.
Accordingly, we also substantially increased the size of this
investment. Allstate Corporation was down in price for the general
reasons mentioned earlier and also because of investor concern
about major losses resulting from earthquakes and hurricanes. This
well-run company is sharply changing the geographical exposure of
its homeowners and automobile insurance business. With more than
$3 a share in earnings expected for 1995, the stock appeared to be
unusually attractive for purchase.
<PAGE>
During the December quarter, we made additions to 58 common stock
holdings, while we added 18 new stocks. Carnival Corp. had
dropped sharply in price in anticipation of flat earnings for its
February 1995 quarter compared to a year ago, reflecting increased
winter competition. However, summer bookings are strong, the company
is operating close to capacity, and its capacity is scheduled to
grow by at least 13% a year each year into the late 1990s. Dresser
Industries, Inc. had declined to a point where it was at a historic
low as measured by price/cash flow, so we started a position to
gain representation in the underweighted oil field equipment and
machinery industries. Wal-Mart Stores, Inc. was down in price,
reflecting a more competitive retail environment. From a long-term
standpoint, however, we believe the company will become an important
factor in Latin America and the Far East. In addition to upward
earnings momentum, the recent purchases of Aetna Life & Casualty
Co., BancOne Corp., Central Hudson Gas & Electric Corp., Federal
National Mortgage Association, MAPCO, Inc. and Tenneco, Inc. have
one thing in common: a 1995 price/estimated earnings multiple
of less than ten.
As stocks moved from 53.8% of your portfolio on September 30,
1994 to 58.2% on December 31, 1994, there was less selling than
buying activity for the period, with 33 holdings reduced and 8
eliminated. We made those changes to reduce risk, improve
appreciation potential and increase current income. We eliminated
North Canadian Oils, Ltd. as its operating structure was changed
sharply by corporate family interests; we reduced the investment
in American Premier Underwriters, Inc. for the same reason. We
reduced the positions in H.J. Heinz Co., Kimberly-Clark Corp.,
TOTAL S.A., CIGNA Corp., Occidental Petroleum Corp., and the drug
industry as the stocks had advanced in price, thereby realizing
some of their upside potential.
Changes made in your portfolio during the December quarter served
to increase yield from the average stock to 3.38%, up from 3.25%
on September 30, 1994 and 3.10% on June 30, 1994, while the yield
of the average stock in the S&P 500 remained constant at 2.8%.
During this period of historically low yields from common stocks,
we remain of the opinion that a substantial part of capital should
be invested in bonds, particularly since they provide an above-
average current return both from a historical perspective and
relative to the perceived rate of inflation. As long-term interest
rates reached and temporarily exceeded 8%, $435 million in shorter-
term bonds were sold and the money reinvested in long-term bonds
maturing in about 20 years. This changed the time-to-maturity for
the average bond in your portfolio from 3.0 years at September
30, 1994 to 6.6 years at December quarter-end. We increased US
Government bonds to 33% from 25% of fixed-income net assets on
September 30, 1994, as the yield spread between the US Government
and corporate bond yields had narrowed to a level below the average
spread of recent years.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Ernest S. Watts)
Ernest S. Watts
Vice President and Portfolio Manager
January 31, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase
shares of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing
1% each year thereafter to 0% after the fourth year. In addition,
Class B Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. These shares automatically
convert to Class D Shares after 8 years.
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary" and "Average Annual Total
Return" tables on pages 5 and 6. The "Results of a $1,000 Investment
Since Inception--Class A Shares" table on page 5 illustrates the
performance of a $1,000 investment in Class A Shares made at the
Fund's inception (assuming the maximum initial sales charge of
5.25%) through December 31, 1994. "Aggregate Total Return" tables
for Class C and Class D Shares are also presented on page 5. Data
for all of the Fund's shares, including Class C and Class D Shares,
are presented in the "Recent Performance Results" table.
<PAGE>
The "Recent Performance Results" table below shows investment
results before the deduction of any sales charges for Class A and
Class B Shares for the 12-month and 3-month periods ended December
31, 1994 and for Class C and Class D Shares for the period since
inception through December 31, 1994. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which
are deducted from the income available to be paid to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
12/31/94 9/30/94++ 12/31/93 % Change % Change++
<S> <C> <C> <C> <C> <C>
ML Capital Fund, Inc. Class A Shares* $25.70 $27.42 $27.97 -3.65%(1) -3.99%(2)
ML Capital Fund, Inc. Class B Shares* 25.34 26.97 27.61 -3.70(1) -3.72(2)
ML Capital Fund, Inc. Class C Shares* 25.24 26.81 -- -- -2.07(2)
ML Capital Fund, Inc. Class D Shares* 25.70 27.27 -- -- -3.46(2)
Dow Jones Industrial Average** 3,834.44 3,843.19 3,754.09 +2.14 -0.23
Standard & Poor's 500 Index** 459.27 462.69 466.45 -1.54 -0.74
ML Capital Fund, Inc. Class A Shares--Total Return* +0.91(3) -1.84(4)
ML Capital Fund, Inc. Class B Shares--Total Return* -0.10(5) -2.06(6)
ML Capital Fund, Inc. Class C Shares--Total Return* -- -1.47(7)
ML Capital Fund, Inc. Class D Shares--Total Return* -- -1.33(8)
Dow Jones Industrial Average--Total Return** +4.99 +0.48
Standard & Poor's 500 Index--Total Return** +1.30 -0.02
<FN>
*Investment results shown do not reflect sales charges; results shown would be
lower if a sales charge was included.
**An unmanaged broad-based index comprised of common stocks. Total investment
returns for unmanaged indexes are based on estimates.
++Investment results shown for Class C and Class D Shares are since inception
(10/21/94).
(1)Percent change includes reinvestment of $1.245 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.617 per share capital gains distributions.
(3)Percent change includes reinvestment of $1.247 per share ordinary income dividends
and $1.245 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.580 per share ordinary income dividends
and $0.617 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.974 per share ordinary income dividends
and $1.245 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.441 per share ordinary income dividends
and $0.617 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.543 per share ordinary income dividends
and $0.617 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.572 per share ordinary income dividends
and $0.617 per share capital gains distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% sales charge--$947.50 net amount invested; assuming
reinvestment of all dividends and capital gains distributions)
A mountain chart depicting the growth of an investment in the Fund's
Class A Shares from $947.50 on November 8, 1973 to $11,004.17
on December 31, 1994.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 + 0.91% - 4.38%
Five Years Ended 12/31/94 + 8.72 + 7.55
Ten Years Ended 12/31/94 +13.54 +12.93
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -0.10% -3.77%
Five Years Ended 12/31/94 +7.63 +7.63
Inception (10/21/88) through 12/31/94 +9.57 +9.57
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 12/31/94 -1.47% -2.41%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94) through 12/31/94 -1.33% -6.51%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
11/8/73--12/31/73 $14.03 $13.87 -- -- - 1.11%
1974 13.87 10.78 -- $ 0.560 -18.62
1975 10.78 12.83 -- 0.510 +23.86
1976 12.83 14.10 -- 0.360 +12.75
1977 14.10 12.68 -- 0.370 - 7.37
1978 12.68 13.63 -- 0.500 +11.65
1979 13.63 16.54 -- 0.650 +26.73
1980 16.54 17.70 $ 1.250 1.150 +24.83
1981 17.70 16.62 1.990 1.150 +11.85
1982 16.62 17.85 0.830 0.930 +19.27
1983 17.85 20.63 0.600 0.690 +23.13
1984 20.63 19.33 1.990 0.670 + 7.98
1985 19.33 22.57 1.600 0.660 +29.88
1986 22.57 24.40 2.100 0.440 +19.89
1987 24.40 19.79 5.763 0.219 + 4.60
1988 19.79 21.39 1.008 0.742 +17.04
1989 21.39 24.43 0.723 1.099 +22.98
1990 24.43 23.01 0.390 1.295 + 1.08
1991 23.01 26.92 0.262 1.361 +24.69
1992 26.92 26.33 0.954 0.921 + 5.03
1993 26.33 27.97 0.699 1.201 +13.71
1994 27.97 25.70 1.245 1.247 + 0.91
------- -------
Total $21.404 Total $16.725
Cumulative total return as of 12/31/94: +1,061.39%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not include sales charge;
results would be lower if sales charge was included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $22.64 $21.38 $0.773 $0.537 + 0.25%
1989 21.38 24.29 0.723 0.961 +21.70
1990 24.29 22.85 0.390 1.077 + 0.10
1991 22.85 26.66 0.262 1.147 +23.39
1992 26.66 26.03 0.954 0.684 + 3.99
1993 26.03 27.61 0.699 0.930 +12.54
1994 27.61 25.34 1.245 0.974 - 0.10
------ ------
Total $5.046 Total $6.310
Cumulative total return as of 12/31/94: +76.17%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not reflect deduction of
any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Aerospace 600,000 The Boeing Co. $ 26,687,248 $ 28,050,000 0.5%
399,000 E-Systems, Inc. 16,299,728 16,608,375 0.3
259,000 Lockheed Corp. 17,076,978 18,809,875 0.3
1,350,000 Rockwell International Corporation 48,442,403 48,262,500 0.8
386,000 Thiokol Corporation 9,689,799 10,759,750 0.2
-------------- -------------- ------
118,196,156 122,490,500 2.1
Automobile 770,000 Echlin Inc. 21,940,768 23,100,000 0.4
Equipment
Banking 440,000 BancOne Corp. 12,173,393 11,165,000 0.2
742,000 Banco Bilboa Vizcaya (ADR)* 18,174,924 18,179,000 0.3
1,593,000 Bancorp Hawaii, Inc. 45,961,032 40,422,375 0.7
3,645,000 Chemical Banking Corp. 135,614,179 130,764,375 2.3
300,000 First Union Corp. 12,568,927 12,412,500 0.2
2,635,000 NationsBank Corp. 126,377,008 118,904,375 2.1
3,285,000 SouthTrust Corp. 51,852,712 59,130,000 1.0
1,569,000 Union Planters Corp. 19,098,491 32,752,875 0.6
-------------- -------------- ------
421,820,666 423,730,500 7.4
<PAGE>
Building Materials 200,000 Masco Corp. 4,676,499 4,525,000 0.1
Capital Goods 683,000 GATX Corp. 23,355,006 30,052,000 0.5
Chemicals 1,170,000 Albemarle Corp. 17,028,866 16,233,750 0.3
670,000 du Pont (E.I.) de Nemours & Co. 33,743,552 37,687,500 0.7
980,000 Engelhard Corp. 24,149,970 21,805,000 0.4
102,000 Goodrich (B.F.) Co. 4,421,197 4,424,250 0.1
1,800,000 Grace (W.R.) & Co. 71,231,647 69,525,000 1.2
950,000 Imperial Chemical Industries PLC (ADR)* 45,172,457 44,175,000 0.8
1,630,000 Union Carbide Corp. 38,407,503 47,881,250 0.8
-------------- -------------- ------
234,155,192 241,731,750 4.3
Computer 100,000 Trident Microsystems, Inc. 897,908 1,125,000 0.0
Equipment
Diversified 320,000 Corning Inc. 9,612,286 9,560,000 0.2
Companies 400,000 Dial Corp. 7,989,393 8,500,000 0.2
9,000,000 Hillsdown Holdings PLC 20,864,759 25,369,200 0.4
350,000 ITT Corp. 24,204,249 31,018,750 0.5
600,000 Tenneco, Inc. 23,717,598 25,500,000 0.4
1,286,000 United Technologies Corp. 71,265,007 80,857,250 1.4
587,000 Worldtex Inc. 3,175,821 2,127,875 0.0
-------------- -------------- ------
160,829,113 182,933,075 3.1
Electrical 781,000 General Electric Co. 37,721,509 39,831,000 0.7
Equipment 400,000 Honeywell, Inc. 13,515,363 12,600,000 0.2
920,000 Philips Electronics N.V. (ADR)* 14,016,805 27,025,000 0.5
-------------- -------------- ------
65,253,677 79,456,000 1.4
Electronics 416,000 General Motors Corp. (Class H) 12,036,268 14,508,000 0.3
Financial Services 600,000 Dean Witter, Discover & Co. 17,960,711 20,325,000 0.4
610,000 Federal National Mortgage Association 45,235,793 44,453,750 0.8
300,000 Household International, Inc. 10,488,142 11,137,500 0.2
-------------- -------------- ------
73,684,646 75,916,250 1.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Food Distribution 8,346,000 Dairy Farm International Holdings Ltd. (Ordinary) $ 13,113,902 $ 8,954,473 0.2%
350,000 Fleming Cos., Inc. 10,501,925 8,137,500 0.1
-------------- -------------- ------
23,615,827 17,091,973 0.3
<PAGE>
Foods 2,330,000 Heinz (H.J.) Co. 84,414,182 85,627,500 1.5
626,000 Universal Foods Corp. 20,015,105 17,215,000 0.3
-------------- -------------- ------
104,429,287 102,842,500 1.8
Home Builders 270,000 Oriole Homes Corp. 2,499,746 1,822,500 0.0
255,000 Ryland Group, Inc. 4,051,737 3,825,000 0.1
-------------- -------------- ------
6,551,483 5,647,500 0.1
Hospital 3,268,000 National Medical Enterprises, Inc. 42,109,969 46,160,500 0.8
Management
Insurance 153,000 Aetna Life & Casualty Co. 7,037,108 7,210,125 0.1
1,591,000 Allstate Corporation 38,982,997 37,587,375 0.7
613,000 American General Corporation 16,765,484 17,317,250 0.3
940,000 American International Group, Inc. 71,814,168 92,120,000 1.6
520,000 American Premier Underwriters, Inc. 13,171,144 13,455,000 0.2
209,000 CIGNA Corp. 13,655,208 13,297,625 0.2
1,320,000 EXEL Limited 53,556,226 52,140,000 0.9
1,450,000 Fremont General Corp. 30,727,920 33,893,750 0.6
190,000 Ohio Casualty Corp. 5,686,973 5,367,500 0.1
672,000 Provident Life & Accident Insurance Co. 16,191,650 14,616,000 0.3
800,000 Safeco Corp. 41,891,912 41,600,000 0.7
1,750,000 Travelers Inc. 36,715,930 56,875,000 1.0
316,000 USLIFE Corporation 10,851,014 11,020,500 0.2
-------------- -------------- ------
357,047,734 396,500,125 6.9
Lodging/Hotels 150,000 Carnival Corp. (Class A) 3,048,365 3,187,500 0.1
Manufactured 1,000,000 Fleetwood Enterprises, Inc. 18,895,257 18,750,000 0.3
Housing
Metals & 219,000 Cameco Corp. 4,127,767 4,859,814 0.1
Basic Materials 1,115,000 Newmont Mining Corp. 44,961,690 40,140,000 0.7
-------------- -------------- ------
49,089,457 44,999,814 0.8
<PAGE>
Natural Gas 1,226,000 Coastal Corp. 33,519,298 31,569,500 0.6
Suppliers 357,000 MAPCO, Inc. 18,905,501 18,296,250 0.3
720,000 MetroGas S.A. (ADR)* 9,320,513 7,290,000 0.1
195,000 NICOR, Inc. 4,748,827 4,436,250 0.1
415,000 ONEOK Inc. 8,110,235 7,470,000 0.1
3,150,000 TransCanada Pipelines, Ltd. 47,409,728 38,193,750 0.7
1,695,700 Williams Cos., Inc. 44,956,613 42,604,462 0.7
-------------- -------------- ------
166,970,715 149,860,212 2.6
Office Equipment 1,143,000 Wallace Computer Services, Inc. 27,348,699 33,147,000 0.6
Oil & Gas 48,600 Rigel Energy Corp. 485,774 486,000 0.0
Producers 2,750,000 Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR)* 67,336,557 58,781,250 1.0
-------------- -------------- ------
67,822,331 59,267,250 1.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Oil--Integrated 260,000 Mobil Corp. $ 20,778,681 $ 21,905,000 0.4%
2,348,000 Occidental Petroleum Corp. 47,699,396 45,199,000 0.8
1,130,000 TOTAL S.A. (ADR)* 27,749,827 33,335,000 0.6
580,000 USX-Marathon Group, Inc. 10,138,000 9,497,500 0.2
-------------- -------------- ------
106,365,904 109,936,500 2.0
Oil Services 220,000 Dresser Industries, Inc. 4,334,319 4,152,500 0.1
Paper 1,940,000 Federal Paper Board Co., Inc. 52,439,082 56,260,000 1.0
177,000 Kimberly-Clark Corp. 9,188,403 8,938,500 0.2
1,000,000 Temple-Inland, Inc. 48,100,444 45,125,000 0.8
-------------- -------------- ------
109,727,929 110,323,500 2.0
Pharmaceuticals 485,000 Block Drug, Inc. (Class A) 14,594,736 18,187,500 0.3
750,000 Glaxo Holdings PLC (ADR)* 14,055,160 15,281,250 0.3
550,000 IVAX Corp. 10,259,341 10,450,000 0.2
1,755,000 Mallinckrodt Group Inc. 56,149,680 52,430,625 0.9
1,550,000 Merck & Co., Inc. 47,275,552 59,093,750 1.0
270,000 Pfizer, Inc. 18,431,056 20,857,500 0.4
657,000 Warner-Lambert Co. 42,891,381 50,589,000 0.9
-------------- -------------- ------
203,656,906 226,889,625 4.0
<PAGE>
Photography 200,000 Eastman Kodak Co. 8,509,497 9,550,000 0.2
376,000 Polaroid Corp. 12,121,261 12,220,000 0.2
-------------- -------------- ------
20,630,758 21,770,000 0.4
Plastic Recycling 1,030,000 Wellman Inc. 21,301,896 29,097,500 0.5
Printing & 390,000 American Greetings Corp. 10,897,819 10,481,250 0.2
Publishing 13,086,000 Oriental Press Holdings (Ordinary) 9,117,359 6,131,948 0.1
-------------- -------------- ------
20,015,178 16,613,198 0.3
Railroads 2,010,000 Canadian Pacific Ltd. 31,797,822 30,150,000 0.5
1,107,000 Conrail, Inc. 53,273,764 55,903,500 1.0
500,000 Norfolk Southern Corp. 31,189,401 30,312,500 0.5
-------------- -------------- ------
116,260,987 116,366,000 2.0
Real Estate 935,000 RFS Hotel Investors, Inc. 14,775,599 13,557,500 0.2
Investment Trusts 796,000 Walden Residential Properties, Inc. 15,362,805 14,228,500 0.2
-------------- -------------- ------
30,138,404 27,786,000 0.4
Restaurants 150,000 Luby's Cafeterias, Inc. 3,487,670 3,356,250 0.1
Retail Trade 1,000,000 Fingerhut Companies, Inc. 20,114,554 15,500,000 0.3
350,000 Penney (J.C.) Company, Inc. 17,658,984 15,618,750 0.3
2,076,000 Sears, Roebuck & Co. 74,433,322 95,496,000 1.7
1,000,000 Wal-Mart Stores, Inc. 24,232,700 21,250,000 0.4
-------------- -------------- ------
136,439,560 147,864,750 2.7
Savings & Loan 599,000 Ahmanson (H.F.) & Co. 10,232,597 9,658,875 0.2
Associations
Services 1,670,000 PHH Corp. 62,537,753 58,032,500 1.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Steel 280,000 Birmingham Steel Corp. $ 6,773,212 $ 5,600,000 0.1%
1,060,000 Cleveland Cliffs, Inc. 36,501,159 39,220,000 0.7
-------------- -------------- ------
43,274,371 44,820,000 0.8
Telecommunications 2,170,000 GTE Corp. 67,977,235 65,913,750 1.2
Textiles 492,000 Delta Woodside Industries, Inc. 6,181,898 5,658,000 0.1
Tires & Rubber 3,554,000 The Goodyear Tire & Rubber Co. 135,703,450 119,503,250 2.1
Utilities-- 323,000 American Water Works Co., Inc. 7,051,203 8,721,000 0.1
Electric & Water 118,000 Central Hudson Gas & Electric Corp. 3,027,616 3,127,000 0.1
1,041,700 Illinova Corp. (a) 21,525,425 22,656,975 0.4
372,000 PacifiCorp 6,571,029 6,742,500 0.1
1,275,000 Pinnacle West Capital Corp. 24,686,480 25,181,250 0.4
160,000 Public Service Co. of Colorado 4,269,476 4,700,000 0.1
1,600,000 Unicom Corp. 35,621,411 38,400,000 0.7
219,000 Western Resources, Inc. 6,293,169 6,268,875 0.1
-------------- -------------- ------
109,045,809 115,797,600 2.0
Total Common Stocks 3,211,087,647 3,310,562,247 58.2
<CAPTION>
Shares
Held Convertible Preferred Stocks
<S> <C> <S> <C> <C> <C>
Computer--Retail 674,000 Tandy Corp. Preferred PERCS (b) 22,858,484 25,443,500 0.4
Pharmaceuticals 140,000 Liposome Co., Inc. 2,453,465 2,870,000 0.1
Retail Trade 884,000 Sears, Roebuck & Co. Preferred PERCS (b) 42,511,844 49,172,500 0.9
<PAGE>
Total Convertible Preferred Stocks 67,823,793 77,486,000 1.4
<CAPTION>
Face
Amount Corporate Bonds
<S> <C> <S> <C> <C> <C>
Aerospace 10,000,000 Lockheed Corp., 5.65% due 4/01/1997 9,708,300 9,484,800 0.2
McDonnell Douglas Finance Corp.:
10,000,000 6.38% due 1/15/1996 9,989,900 9,779,800 0.2
15,000,000 5.61% due 2/25/1997 15,000,000 14,095,050 0.2
-------------- -------------- ------
34,698,200 33,359,650 0.6
Automotive Ford Motor Co.:
20,000,000 5.625% due 3/03/1997 19,484,400 18,944,200 0.3
10,000,000 7.20% due 6/18/1997 10,000,000 9,757,600 0.2
20,000,000 5.625% due 12/15/1998 19,369,800 18,108,600 0.3
10,000,000 5.625% due 1/15/1999 9,985,700 9,035,300 0.2
-------------- -------------- ------
58,839,900 55,845,700 1.0
Banking 20,000,000 Banco Rio de la Plata, 8.75% due 12/15/2003 20,060,800 14,300,000 0.2
BankAmerica Corp.:
10,000,000 7.25% due 2/03/1997 10,019,000 9,847,800 0.2
10,000,000 7.50% due 3/15/1997 10,141,800 9,845,300 0.2
25,000,000 Bankers Trust Company, 4.70% due 7/01/1996 24,551,500 23,868,250 0.4
The Chase Manhattan Corp.:
18,000,000 7.50% due 12/01/1997 18,298,080 17,552,700 0.3
20,000,000 7.75% due 11/01/1999 20,190,800 19,354,400 0.3
</TABL
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Banking $20,000,000 Chemical Banking Corp., 6.50% due 1/15/2009 $ 16,127,950 $ 16,205,400 0.3%
(concluded) 10,000,000 First Chicago Corp., 6.875% due 6/15/2003 8,952,700 8,943,700 0.2
5,000,000 First Security Corp., 5.71% due 2/09/1999 5,000,000 4,530,400 0.1
15,000,000 First USA Bank, Wilmington, 5.75% due 1/15/1999 15,005,550 13,453,500 0.2
13,000,000 Great Western Financial Corp., 6.125% due 6/15/1998 12,244,010 12,106,250 0.2
10,000,000 Margaretten Financial Corp., 6.75% due 6/15/2000 9,621,060 9,247,100 0.2
Nations Bank Corp.:
10,500,000 5.70% due 9/11/2000 9,545,865 9,262,365 0.2
20,000,000 6.50% due 8/15/2003 17,358,050 17,408,000 0.3
5,000,000 8.57% due 11/15/2024 5,011,800 5,011,900 0.1
Norwest Financial, Inc.:
13,000,000 4.93% due 11/15/1996 12,571,910 12,306,320 0.2
10,000,000 6.25% due 2/15/1997 9,976,800 9,629,300 0.2
-------------- -------------- ------
224,677,675 212,872,685 3.8
<PAGE>
Broadcasting & 30,000,000 News America Holdings, Inc., 7.50% due 3/01/2000 29,179,330 28,223,700 0.5
Publishing
Building 20,000,000 Cemex, S.A. de C.V., 8.875% due 6/10/1998 20,566,200 17,425,000 0.3
Materials
Capital Goods GATX Capital Corp.:
30,000,000 5.45% due 3/18/1996 30,000,000 29,153,400 0.5
15,000,000 5.48% due 3/22/1996 15,000,000 14,577,150 0.2
10,000,000 8.20% due 5/05/1997 10,000,000 9,938,300 0.2
10,000,000 General American Transport Corp.,
8.625% due 12/01/2004 9,936,900 9,930,000 0.2
-------------- -------------- ------
64,936,900 63,598,850 1.1
Chemicals 7,000,000 Dow Chemical Co., 6.85% due 8/15/2013 5,819,660 5,890,220 0.1
Grace (W.R.) & Co.:
10,000,000 6.85% due 6/23/1997 9,903,700 9,636,700 0.2
40,000,000 7.40% due 2/01/2000 39,260,500 37,892,000 0.6
-------------- -------------- ------
54,983,860 53,418,920 0.9
Computers 10,000,000 International Business Machines Corp.,
7.50% due 6/15/2013 8,914,600 8,899,800 0.2
Diversified ITT Corp.:
Companies 20,000,000 5.50% due 3/24/1997 20,000,000 18,918,400 0.3
10,000,000 7.25% due 5/15/1997 10,080,100 9,739,400 0.2
5,000,000 8.125% due 11/15/1998 5,065,810 4,948,150 0.1
-------------- -------------- ------
35,145,910 33,605,950 0.6
Finance 15,000,000 Associates Corp., 4.75% due 8/01/1996 14,780,200 14,267,100 0.2
5,000,000 Caterpillar Financial Services Corp., 5.35%
due 11/10/1998 4,924,800 4,491,450 0.1
Chrysler Finance Corp.:
10,000,000 6% due 6/03/1996 9,955,300 9,768,000 0.2
36,600,000 6.50% due 6/15/1998 36,805,762 34,335,192 0.6
40,000,000 GTE Finance Corp., 5.81% due 12/15/1997 40,000,000 37,160,000 0.6
General Electric Capital Corp.:
15,000,000 5.38% due 11/17/1997 15,000,000 13,948,800 0.2
8,000,000 5.13% due 4/01/2004 8,000,000 7,784,320 0.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Finance General Motors Acceptance Corp.:
(concluded) $ 8,000,000 5.20% due 12/13/1996 $ 7,680,000 $ 7,552,400 0.1%
22,000,000 6.70% due 4/15/1997 21,755,440 21,200,740 0.4
15,000,000 7.75% due 4/15/1997 15,231,600 14,752,050 0.3
10,000,000 7.45% due 6/05/1997 10,042,500 9,773,100 0.2
25,000,000 7% due 8/19/1997 24,898,750 24,112,250 0.4
25,000,000 5.875% due 1/12/1999 25,044,500 22,671,000 0.4
40,000,000 5.625% due 2/01/1999 39,314,225 35,887,600 0.6
10,000,000 7.15% due 4/30/1999 9,884,400 9,458,000 0.2
11,000,000 7.375% due 6/22/2000 10,855,790 10,380,040 0.2
10,000,000 Greyhound Financial Corp., 6.75% due 3/25/1999 9,694,200 9,362,500 0.2
Household Finance Corp.:
10,000,000 5.51% due 3/17/1997 10,000,000 9,475,100 0.2
10,000,000 6.70% due 8/08/1997 9,999,800 9,648,900 0.2
10,000,000 6.25% due 10/15/1997 10,078,100 9,505,800 0.2
15,000,000 Household International, Inc., 5.25% due 10/15/1998 13,887,750 13,498,800 0.2
International Lease Finance Corp.:
25,000,000 5.98% due 11/16/1998 24,975,500 22,956,000 0.4
22,500,000 6.05% due 4/30/1999 22,368,375 20,509,650 0.3
5,000,000 7.10% due 6/15/1999 4,930,900 4,736,700 0.1
10,000,000 8.15% due 10/01/2004 9,691,300 9,620,700 0.2
-------------- -------------- ------
409,799,192 386,856,192 6.8
Financial 20,000,000 AVCO Financial Services, Inc., 5.875% due 10/15/1997 19,443,600 18,829,800 0.3
Services 25,000,000 Dean Witter, Discover & Co., 6% due 3/01/1998 24,735,550 23,342,750 0.4
15,000,000 Morgan Stanley Group, Inc., 7.875% due 12/15/1998 14,940,900 14,684,250 0.3
20,000,000 Smith Barney Shearson Holdings, Inc., 6% due
3/15/1997 19,897,700 19,037,600 0.3
-------------- -------------- ------
79,017,750 75,894,400 1.3
Food & Tobacco 15,000,000 RJR Nabisco Holding Corp., 8.30% due 4/15/1999 14,897,500 14,456,250 0.3
Foreign 10,000,000 Hellenic Republic (Greece), 9.75% due 11/28/1999 10,020,300 9,963,600 0.2
Government 20,000,000 Republic of Argentina, 10.95% due 11/01/1999 19,985,000 18,650,000 0.3
Obligations -------------- -------------- ------
30,005,300 28,613,600 0.5
<PAGE>
Hospital 20,000,000 Columbia-HCA Healthcare Corp., 6.125% due 12/15/2000 18,456,800 17,663,000 0.3
Management National Medical Enterprises, Inc.:
4,000,000 8.05% due 5/15/1997 4,015,580 3,904,120 0.1
6,000,000 7.375% due 9/01/1997 5,877,650 5,751,720 0.1
-------------- -------------- ------
28,350,030 27,318,840 0.5
Industrial 9,775,000 Crane Co., 7.25% due 6/15/1999 9,619,840 9,260,249 0.2
10,000,000 Tenneco, Inc., 8% due 11/15/1999 10,167,600 9,780,400 0.2
10,000,000 Tennessee Gas Pipeline, 6% due 12/15/2011 7,518,110 7,566,000 0.1
-------------- -------------- ------
27,305,550 26,606,649 0.5
Insurance 10,000,000 NAC Re Corp., 8% due 6/15/1999 10,189,300 9,709,800 0.2
20,000,000 Travelers Inc., 6.125% due 6/15/2000 18,772,550 17,959,400 0.3
-------------- -------------- ------
28,961,850 27,669,200 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Machinery $ 5,000,000 Black & Decker Corp., 6.625% due 11/15/2000 $ 4,654,150 $ 4,450,400 0.1%
10,000,000 Harris Corp., 10.375% due 12/01/2018 10,541,400 11,055,500 0.2
10,000,000 TRINOVA Corp., 7.95% due 5/01/1997 9,975,000 9,734,100 0.2
-------------- -------------- ------
25,170,550 25,240,000 0.5
Manufactured 3,000,000 Oakwood Homes Corp., 9.125% due 6/01/2007 3,000,000 3,003,750 0.0
Housing
Natural Gas 13,000,000 Coastal Corp., 8.75% due 5/15/1999 13,055,960 12,854,660 0.2
Oil--Integrated Occidental Petroleum Corp.:
2,500,000 6.04% due 9/15/1997 2,425,350 2,354,900 0.0
15,100,000 5.85% due 11/09/1998 14,057,259 13,761,989 0.2
12,000,000 5.90% due 11/09/1998 11,343,120 10,955,280 0.2
-------------- -------------- ------
27,825,729 27,072,169 0.4
<PAGE>
Oil--International 5,000,000 Union Texas Petroleum Holdings, Inc.,
8.25% due 11/15/1999 4,968,450 4,858,400 0.1
Pharmaceutical 5,750,000 Cardinal Distribution, Inc., 8% due 3/01/1997 5,750,000 5,686,175 0.1
Distribution
Railroads 3,000,000 Burlington Northern, Inc., 7.40% due 5/15/1999 2,993,580 2,884,740 0.0
Retail Trade Sears, Roebuck & Co.:
25,000,000 5.25% due 2/24/1997 24,982,000 23,469,000 0.4
5,000,000 8.45% due 11/01/1998 5,112,150 4,992,450 0.1
6,000,000 5.86% due 1/22/1999 6,020,580 5,453,940 0.1
-------------- -------------- ------
36,114,730 33,915,390 0.6
Services 17,725,000 ADT Operations, 8.25% due 8/01/2000 17,873,500 16,307,000 0.3
Steel 20,000,000 USX Corp., 6.375% due 7/15/1998 19,894,000 18,577,600 0.3
Telecommunications 20,000,000 AT&T Capital Corp., 6.99% due 10/04/1996 19,982,800 19,625,000 0.3
10,000,000 Allnet Communications Services, Inc.,
9% due 5/15/2003 9,746,250 9,450,000 0.2
10,000,000 Bell Atlantic Financial Services, Inc.,
5.47% due 4/27/1998 10,031,400 9,230,500 0.2
20,000,000 Bell Canada, Inc., 7.125% due 5/01/1998 15,519,015 13,375,160 0.2
-------------- -------------- ------
55,279,465 51,680,660 0.9
Tires & Rubber 10,000,000 Canadian Tire Corp., 7.50% due 3/04/1998 7,786,503 6,703,978 0.1
Utilities-- Commonwealth Edison Co.:
Electric 10,000,000 7% due 2/01/1997 9,961,300 9,727,700 0.2
10,000,000 6% due 3/15/1998 10,157,200 9,238,900 0.2
5,000,000 Long Island Lighting Co., 7.625% due 4/15/1998 4,986,210 4,807,500 0.1
15,000,000 PECO Energy Co., 7.50% due 1/15/1999 15,111,500 14,452,350 0.3
Texas Utilities Co.:
5,000,000 7.125% due 6/01/1997 4,987,500 4,852,500 0.1
9,500,000 5.75% due 7/01/1998 9,297,135 8,735,820 0.1
United Illuminating Co.:
5,000,000 7.375% due 1/15/1998 5,003,125 4,785,900 0.1
5,000,000 6.20% due 1/15/1999 4,693,050 4,526,750 0.0
12,700,000 UtiliCorp United, Inc., 6% due 4/01/1998 12,694,842 11,606,149 0.2
-------------- -------------- ------
76,891,862 72,733,569 1.3
Total Corporate Bonds 1,446,884,076 1,376,183,477 24.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Amount Collateralized Mortgage Obligations Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
$ 5,000,000 Federal Home Loan Mortgage Corp.,
5.40% due 4/15/2002 $ 4,800,000 $ 4,668,750 0.1%
Federal Home Loan Mortgage Corp.:
20,000,000 5.80% due 4/15/2006 18,615,625 17,731,200 0.3
18,494,000 6% due 4/15/2006 18,067,049 17,349,684 0.3
Federal National Mortgage Association:
20,000,000 5.10% due 3/25/2002 19,256,250 18,631,200 0.3
20,000,000 5% due 3/25/2012 19,425,000 18,396,800 0.3
20,000,000 5% due 4/25/2014 19,512,500 18,430,000 0.3
20,368,688 Prudential Home Mortgage Security Co.,
5.25% due 12/25/2000 19,496,653 18,981,071 0.4
Total Collateralized Mortgage Obligations 119,173,077 114,188,705 2.0
<CAPTION>
US Government Obligations
<C> <S> <C> <C> <C>
US Treasury Notes:
30,000,000 4% due 1/31/1996 29,653,125 28,964,100 0.5
30,000,000 4.625% due 2/15/1996 29,982,813 29,095,200 0.5
100,000,000 4.25% due 5/15/1996 99,328,125 95,844,000 1.7
25,000,000 4.375% due 8/15/1996 24,859,375 23,785,250 0.4
100,000,000 4.375% due 11/15/1996 99,125,000 94,312,000 1.7
15,000,000 5.25% due 7/31/1998 14,196,094 13,800,000 0.3
32,000,000 5.875% due 3/31/1999 30,824,375 29,729,920 0.5
40,000,000 5.75% due 8/15/2003 36,137,500 34,762,400 0.6
200,000,000 7.25% due 5/15/2016 183,272,656 184,938,000 3.2
205,000,000 7.50% due 11/15/2016 192,697,656 194,557,300 3.4
Total US Government Obligations 740,076,719 729,788,170 12.8
<CAPTION>
Short-Term Investments
<S> <C> <S> <C> <C> <C>
Commercial 49,128,000 General Electric Capital Corp., 5.80% due 01/03/1995 49,104,255 49,104,255 0.9
Paper**
Total Short-Term Investments 49,104,255 49,104,255 0.9
<PAGE>
Total Investments $5,634,149,567 5,657,312,854 99.5
==============
Other Assets Less Liabilities 28,788,713 0.5
-------------- ------
Net Assets $5,686,101,567 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $2,296,146,109 and 89,330,915 $ 25.70
==============
Class B--Based on net assets of $3,272,923,230 and 129,151,486 $ 25.34
==============
Class C--Based on net assets of $15,282,098 and 605,437 $ 25.24
==============
Class D--Based on net assets of $101,750,130 and 3,958,477 $ 25.70
==============
<FN>
*American Depositary Receipt (ADR).
**Commercial Paper is traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase
by the Fund.
(a)Name changed from Illinois Power Co.
(b)Preference Equity Redemption Cumulative Stock (PERCS).
</TABLE>
PORTFOLIO INFORMATION
Ten Largest Percent of
Common Stock Holdings Net Assets
Sears, Roebuck & Co.* 2.6%
Chemical Banking Corp. 2.3
The Goodyear Tire & Rubber Co. 2.1
NationsBank Corp. 2.1
American International Group, Inc. 1.6
Heinz (H.J.) Co. 1.5
United Technologies Corp. 1.4
Grace (W.R.) & Co. 1.2
GTE Corp. 1.2
SouthTrust Corp. 1.0
[FN]
*Includes Common Stock and PERCS.
<PAGE>
Ten Largest Percent of
Industries Net Assets++
Banking 11.2%
Insurance 7.4
Finance 6.8
Chemicals 5.2
Retail Trade 4.2
Pharmaceuticals 4.1
Diversified Companies 3.7
Utilities--Electric & Water 3.4
Natural Gas 2.7
Financial Services 2.7
[FN]
++Based on total holdings in common stocks and bonds.
Portfolio Changes for the Quarter Ended
December 31, 1994
Additions
Stocks
*ABN-AMRO Holdings (Ordinary)
Aetna Life & Casualty Co.
Albemarle Corp.
*Alza Corp.
BancOne Corp.
Carnival Corp. (Class A)
Central Hudson Gas & Electric Corp.
*Clayton Homes, Inc.
Coastal Corp.
Dresser Industries, Inc.
Federal National Mortgage Association
IVAX Corp.
MAPCO, Inc.
Masco Corp.
MetroGas S.A. (ADR)
Rigel Energy Corp.
Rockwell International Corporation
Ryland Group, Inc.
Tenneco, Inc.
Wal-Mart Stores, Inc.
Western Resources, Inc.
<PAGE>
Bonds
AT&T Capital Corp., 6.99% due 10/04/1996
Chemical Banking Corp., 6.50% due 1/15/2009
Coastal Corp., 8.75% due 5/15/1999
Dow Chemical Co., 6.85% due 8/15/2013
First Chicago Corp., 6.875% due 6/15/2003
General American Transport Corp., 8.625% due 12/01/2004
Great Western Financial Corp., 6.125% due 6/15/1998
Hellenic Republic (Greece), 9.75% due 11/28/1999
International Business Machines Corp., 7.50% due 6/15/2013
International Lease Finance Corp., 8.15% due 10/01/2004
NationsBank Corp.:
6.50% due 8/15/2003
8.57% due 11/15/2024
Republic of Argentina, 10.95% due 11/01/1999
*Republic of South Africa, 9.625% due 12/15/1999
*Southwest Airlines Co., 7.875% due 9/01/2007
Tennessee Gas Pipeline, 6% due 12/15/2011
US Treasury Notes:
7.25% due 5/15/2016
7.50% due 11/15/2016
*World Savings & Loan Association, 4.875% due 3/01/1996
Deletions
Stocks
*ABN-AMRO Holdings (Ordinary)
*Alza Corp.
COMSAT Corp.
Centerior Energy Corp.
*Clayton Homes, Inc.
Cornerstone Imaging Inc.
Glimcher Realty Trust
Hanson PLC (Sponsored) (ADR)
Kumagai Gumi Co., Ltd. (Ordinary)
Martin Marietta Materials Inc. (MLM)
North Canadian Oils, Ltd.
<PAGE>
Bonds
ADT Limited, 6% due 10/03/2002
AT&T Capital Corp., 5.125% due 2/21/1997
American General Corporation:
5.80% due 4/01/1997
7.15% due 5/15/1997
6.625% due 6/01/1997
Associates Corp.:
4.625% due 11/30/1996
6.75% due 7/15/1997
Chrysler Finance Corp.:
4.71% due 11/17/1995
6% due 4/15/1996
Consolidated Edison Co., 5.30% due 8/01/1997
First Chicago Corp., 7.35% due 6/16/1997
GATX Capital Corp., 6.32% due 11/20/1995
General Electric Capital Corp., 5.70% due 10/02/1997
Greyhound Financial Corp., 5.875% due 1/26/1996
Hanson PLC, 5.50% due 1/15/1996
International Business Machines Corp., 6.375% due 11/01/1997
International Lease Finance Corp., 5.50% due 4/01/1997
John Deere Capital Corp., 4.625% due 9/02/1996
Masco Corp., 6.25% due 6/15/1995
MBNA Corp., 6.65% due 5/27/1997
NationsBank Corp., 4.75% due 8/15/1996
Pacific Northwest Bell Telephone Co., 7.50% due 12/01/1996
*Republic of South Africa, 9.625% due 12/15/1999
Ryder System, Inc.:
4.81% due 4/29/1996
5.53% due 2/28/1997
*Southwest Airlines Co., 7.875% due 9/01/2007
Toledo Edison Co., 7.25% due 8/01/1999
US Treasury Notes:
4.25% due 11/30/1995
4.25% due 12/31/1995
4.75% due 2/15/1997
Virginia Electric and Power Co., 6.28% due 5/28/1996
World Savings & Loan Association:
5.625% due 1/15/1996
*4.875% due 3/01/1996
[FN]
*Added and deleted in the same quarter.
