MERRILL LYNCH
CAPITAL FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1995
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, Senior Vice President
Donald C. Burke, Vice President
Ernest S. Watts, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 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.Statements and other information herein are as dated and are
subject to change.
Merrill Lynch
Capital Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CAPITAL FUND, INC.
PORTFOLIO SUMMARY
Security Diversification*
As of December 31, 1995
A pie chart illustrating the following percentages:
US Bonds 40.4%
Non-US Bonds 5.0%
Cash & Cash Equivalents 4.8%
US Stocks 39.6%
Non-US Stocks 10.2%
<PAGE>
Security Representation*
As a Percentage of Equities
As of December 31, 1995
A pie chart illustrating the following percentages:
Financial 27.8%
Credit Cyclicals 0.2%
Utilities 6.1%
Capital Goods-Technology 5.5%
Consumer Cyclical 9.8%
Energy 20.4%
Transportation 0.1%
Basic Industries 8.3%
Diversified 2.2%
Consumer Services 3.8%
Capital Goods 3.3%
Consumer Staples 12.5%
[FN]
*Totals may not equal 100%.
Geographic Diversification Percent of
As of December 31, 1995 Net Assets*
United States 87.4%
Argentina 4.8
United Kingdom 2.6
Switzerland 1.1
France 1.0
Canada 0.8
Netherlands 0.5
Spain 0.5
Australia 0.4
Singapore 0.3
Finland 0.2
Colombia 0.1
Hong Kong 0.1
Thailand 0.1
Ireland 0.1
[FN]
*Includes investments in short-term securities.
<PAGE>
US Common Stock Investments S&P
As of December 31, 1995 Fund 500*
Average Capitalization (in billions) $9.7 $8.9
Price/Book Value 2.2 3.9
Price/Earnings Ratio** 14.2 17.1
Yield Based on Current Dividend 2.8% 2.2%
[FN]
*An unmanaged broad-based index comprised of common stocks.
**Based on 1995 earnings estimates.
Fixed-Income Investments Merrill Lynch
As of December 31, 1995 Fund D0A0 Index*
Duration 6.0 Years 5.3 Years
Average Maturity 9.8 Years 12.8 Years
Asset Breakdown:
Corporates 49.7% 17.7%
US Treasuries/Agencies 44.7% 55.9%
Mortgage-Backed 2.4% 26.4%
International Governments 3.2% --
[FN]
*An unmanaged market weighted corporate, Government and mortgage
master bond index reflecting approximately 97% of total outstanding
bonds.
DEAR SHAREHOLDER
As 1995 drew to a close, the pace of US economic activity apparently
slowed. There was strong evidence of a slowing economy by mid-year,
a trend that was quickly reversed as gross domestic product growth
rebounded to a 4.2% pace during the third calendar quarter of 1995.
However, recent economic releases suggest that this rate of
expansion has not been sustained.
A number of key measures of economic growth indicate evidence of
slowing momentum. Retail sales for November were soft, a trend that
continued throughout the all-important holiday season, reflecting
ongoing caution on the part of debt-burdened consumers. At the same
time, there has been an increase in initial unemployment claims,
along with weak job and income growth. As labor costs continue to
decelerate and commodity price pressures remain subdued,
inflationary pressures continue to be well under control.
<PAGE>
These developments led the Federal Reserve Board to ease its
monetary policy slightly at the December 19, 1995 Federal Open
Market Committee meeting. However, the Clinton Administration and
Congress have yet to reach an agreement in their current Federal
budget deliberations. While the probable direction of economic
activity will continue to be the primary focus of investors in the
weeks ahead, a credible plan for reducing the Federal budget deficit
will also be an important factor in the investment outlook.
Portfolio Matters
The year 1995 was the thirteenth year of a bull market that has
quintupled investment values, as measured by the unmanaged Standard
& Poor's Composite Index of 500 stocks. As we move beyond 1995, our
strategy for the Fund remains the same: We intend to invest in a
conservative manner by choosing companies whose managements can
produce above-average corporate gains as measured on a per share
basis, while keeping their balance sheets in sound financial
condition. Companies that we believe belong in that category, whose
shares are selling at attractive valuations, are the ones in which
we will invest.
Entering 1996, the average stock in Merrill Lynch Capital Fund, Inc.
was priced at 12.3 times projected 1996 earnings, well below the
16.0 times for the average stock in the Standard & Poor's 500
Composite Index. On average, your portfolio's common stock
investments were valued at 2.2 times book value per share compared
to 3.9 times for the Index, with an average yield of 2.8% compared
to 2.2% for the S&P 500. Common stocks yielded 3% or more 90% of the
time during the last seven decades. We do not believe that even 3%
is an adequate current yield for stocks in a conservatively managed
growth and income fund. Because of the low yields available on
equity investments, and the recent strength in equity markets, we
have 45.4% of the portfolio invested in bonds maturing, on average,
in 9.8 years. This brings the yield for the Fund's long-term
investments more in line with the long-term average component of
total returns provided by dividends on common stocks. With that
accomplished, we take some comfort in noting that the earnings
yield--the complement of the price/earnings ratio based on projected
1996 earnings--is 8.1% for your equity holdings in Merrill Lynch
Capital Fund, Inc.
We believe the Fund's holdings in stocks and bonds provide current
income and the potential for growth of shareholder wealth. In our
view, the companies held in the Fund represent solid long-term
investments, particularly relative to an apparently modest rate of
inflation. In periods of stock price weakness, investments will be
increased in those companies that continue to prove that they have
above-average capabilities relative to prevailing economic
conditions, and to reduce holdings showing greater-than-anticipated
price strength or where competitive talents are not adequately
demonstrated.
<PAGE>
During the quarter ended December 31, 1995, the Fund initiated
investments in 26 new common stocks, increased 48, sold 24 and
reduced 43. Among the new selections, Nestle S.A. was by far the
largest purchase. It had severely lagged the stock markets both in
its home country of Switzerland and in the United States, reflecting
some operating setbacks which should be corrected. The company has a
solid long-term record, and the stock appeared to be moderately
priced for conservative growth.
Archer-Daniels-Midland Co. was added to the Fund's portfolio when
the stock declined in price, reflecting stories of alleged price
fixing. We believe the company has a record of efficiency spanning
decades, and that it is a low-cost producer of a substantial part of
the United States' needs for processed corn, wheat and soybeans as
well as other commodity products. Recent harvests were below
expectations, so earnings in the June 1996 fiscal year should be
down moderately for Archer-Daniels-Midland. However, the company
should be a major beneficiary of expected above-average increases in
acres planted for all three major crops in the United States this
year.
Additionally, utility and energy stocks appeared to be attractive
conservative selections for growth and income. For example, Canadian
National Railway Co. appeared to be modestly priced when the company
went public, and substantial cost-cutting opportunities seemed to be
available to its management. Price weakness was used as an
opportunity to increase holdings in Creative Technology, Ltd., Ruam
Pattana Fund II, Coastal Corp., Texaco Inc., and Wal-Mart Stores,
Inc., because long-term growth prospects remain above-average.
Lagging the appreciation recorded by other pharmaceutical stocks,
Glaxo Holdings PLC became a more compelling value, so more shares
were bought with the expectation of continued above-average growth.
In contrast, Merck & Co., Inc.'s stock price outpaced many drug
stocks. The Fund took substantial profits as the valuation of the
company's prospects outpaced its growth. An increase in economic
uncertainties often causes setbacks in financial stocks. Thus, each
of the financial holdings in Merrill Lynch Capital Fund, Inc. was
reduced because it appears that the best profits have been realized
for quite some time. Bank stocks were excellent performers.
However, we expect delinquencies to increase, margins to come under
pressure and loan growth might proceed at a slower pace. Reduced
income opportunities caused by lower interest rates should impact
some property and casualty companies. The Fund's investment in
American International Group, Inc. was reduced because the company
could be viewed as having inadequate reserves for environmental and
asbestos claims. Thus, the Fund's exposure to the financial sector
was reduced following generally strong price appreciation.
<PAGE>
Price gains were used to take some profits in Cadbury Schweppes PLC,
GATX Corp. and selected utility holdings. A price jump in the stock
of Federal Paper Board Co., Inc. following its agreement to merge
with International Paper Co. provided another opportunity to take
substantial profits. PacifiCare Health Systems, Inc. (Class B) was
sold after its stock price increased on the rumor that it would be
acquired. The Fund sold a number of relatively small positions in
order to concentrate capital in more meaningful amounts where the
investment opportunities appeared to be clearly above-average.
In Conclusion
We thank you for your interest in the Merrill Lynch Capital Fund,
Inc., and we look forward to reviewing our progress with you in the
annual report.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Ernest S. Watts)
Ernest S. Watts
Vice President and Portfolio Manager
January 29, 1996
PERFORMANCE DATA
About Fund Performance
<PAGE>
Investors are 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).
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +32.87% +25.89%
Five Years Ended 12/31/95 +14.83 +13.60
Ten Years Ended 12/31/95 +13.80 +13.19
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +31.52% +27.52%
Five Years Ended 12/31/95 +13.66 +13.66
Inception (10/21/88)
through 12/31/95 +12.38 +12.38
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +31.48% +30.48%
Inception (10/21/94)
through 12/31/95 +24.20 +24.20
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +32.55% +25.59%
Inception (10/21/94)
through 12/31/95 +25.19 +19.66
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<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
$14,620.76 on December 31, 1995.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Capital Fund, Inc. Class A Shares* $30.55 $31.11 $25.70 +24.55%(1) +1.82%(2)
ML Capital Fund, Inc. Class B Shares* 30.04 30.54 25.34 +24.30(1) +2.05(2)
ML Capital Fund, Inc. Class C Shares* 29.81 30.36 25.24 +23.88(1) +1.90(2)
ML Capital Fund, Inc. Class D Shares* 30.53 31.07 25.70 +24.47(1) +1.89(2)
Dow Jones Industrial Average** 5,117.12 4,789.08 3,834.44 +33.45 +6.85
Standard & Poor's 500 Index** 615.93 584.41 459.27 +34.11 +5.39
ML Capital Fund, Inc. Class A Shares--Total Return* +32.87(3) +6.85(4)
ML Capital Fund, Inc. Class B Shares--Total Return* +31.52(5) +6.58(6)
ML Capital Fund, Inc. Class C Shares--Total Return* +31.48(7) +6.57(8)
ML Capital Fund, Inc. Class D Shares--Total Return* +32.55(9) +6.80(10)
Dow Jones Industrial Average--Total Return** +36.92 +7.49
Standard & Poor's 500 Index--Total Return** +37.54 +6.01
<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.
(1)Percent change includes reinvestment of $1.419 per share capital
gains distributions.
(2)Percent change includes reinvestment of $1.111 per share capital
gains distributions.
(3)Percent change includes reinvestment of $2.036 per share ordinary
income dividends and $1.419 per share capital gains distributions.
(4)Percent change includes reinvestment of $1.542 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(5)Percent change includes reinvestment of $1.748 per share ordinary
income dividends and $1.419 per share capital gains distributions.
<PAGE>
(6)Percent change includes reinvestment of $1.365 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(7)Percent change includes reinvestment of $1.832 per share ordinary
income dividends and $1.419 per share capital gains distributions.
(8)Percent change includes reinvestment of $1.399 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(9)Percent change includes reinvestment of $1.978 per share ordinary
income dividends and $1.419 per share capital gains distributions.
(10)Percent change includes reinvestment of $1.503 per share
ordinary income dividends and $1.111 per share capital gains
distributions.
</TABLE>
PERFORMANCE DATA (continued)
<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
1995 25.70 30.55 1.419 2.036 +32.87
------- -------
Total $22.823 Total $18.761
Cumulative total return as of 12/31/95: +1,443.09%**
<PAGE>
<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>
<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
1995 25.34 30.04 1.419 1.748 +31.52
------ ------
Total $6.465 Total $8.058
Cumulative total return as of 12/31/95: +131.69%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $26.81 $25.24 $0.617 $0.543 - 1.47%
1995 25.24 29.81 1.419 1.832 +31.48
------ ------
Total $2.036 Total $2.375
<PAGE>
Cumulative total return as of 12/31/95: +29.55%**
<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>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $27.27 $25.70 $0.617 $0.572 - 1.33%
1995 25.70 30.53 1.419 1.978 +32.55
------ ------
Total $2.036 Total $2.550
Cumulative total return as of 12/31/95: +30.78%**
<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>
PORTFOLIO INFORMATION
Percent of
Ten Largest Stock Holdings Net Assets
YPF S.A. (Sponsored) (ADR) 2.9%
Williams Companies, Inc. 2.0
Pfizer, Inc. 1.8
The Goodyear Tire & Rubber Co. 1.8
NationsBank Corp. 1.5
General Motors Corp. 1.2
United Technologies Corp. 1.2
Travelers Inc. 1.1
Columbia/HCA Healthcare Corp. 1.1
Nestle S.A. 1.1
<PAGE>
Percent of
Ten Largest Industries Net Assets*
Banking 8.9%
Insurance 7.3
Oil--Integrated 7.3
Finance 5.3
Natural Gas Suppliers 4.4
Pharmaceuticals 4.1
Utilities--Electric, Gas & Water 3.3
Diversified Companies 3.1
Tires & Rubber 1.8
Hospital Management 1.8
[FN]
*Based on total holdings in common stocks and bonds.
Common Stock Portfolio Changes for the Quarter
Ended December 31, 1995
Additions
Aquarion Co.
Archer-Daniels-Midland Co.
*Baltimore Gas & Electric Co.
Canadian National Railway Co.
Cooper Industries, Inc.
Cultor OY
Dean Foods Co.
El Paso Natural Gas Co.
*Elan Corp. PLC (Sponsored) (ADR)
Energen Corp.
English China Clays PLC (Ordinary)
First Colony Holding Corp.
Kerr-McGee Corp.
MCN Corp.
*Mid Atlantic Medical Services, Inc.
Minsura Sociedad Limitada S.A.
(T Shares)
National Health Investors, Inc.
Nestle S.A.
Nokia Corp. (ADR)
Northwest Natural Gas Co.
PT Telekomunikasi Indonesia (ADR)
South West Properties Trust
Texas Utilities Co.
*Transport Holdings Inc. (Class A)
Ultramar Corp.
Washington Water Power Co.
<PAGE>
Deletions
Albemarle Corp.
American Greetings Corp.
*Baltimore Gas & Electric Co.
Consolidated Natural Gas Co.
Corning Inc.
*Elan Corp. PLC (Sponsored) (ADR)
Exxon Corp.
Fleming Cos., Inc.
Ford Motor Company
Household International, Inc.
Kumagai Gumi Co., Ltd. (Ordinary)
Lilly (Eli) and Company
MAPCO, Inc.
Magma Copper Co.
*Mid Atlantic Medical Services, Inc.
Mobil Corp.
National Australian Bank Ltd.
ONEOK Inc.
Occidental Petroleum Corp.
PacifiCare Health Systems, Inc. (Class B)
Pittston Services Group
Redland PLC
Roche Holdings AG
*Transport Holdings Inc. (Class A)
[FN]
*Added and deleted in the same quarter.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Aerospace 228,000 Goodrich (B.F.) Co. $ 11,309,954 $ 15,532,500 0.2%
340,000 Lockheed Martin Corp. (a) 18,353,186 26,860,000 0.3
1,130,000 Rockwell International Corporation 40,367,486 59,748,750 0.7
-------------- -------------- ------
70,030,626 102,141,250 1.2
Automobile Equipment 947,000 Echlin Inc. 28,473,821 34,565,500 0.4
<PAGE>
Automotive 1,990,000 General Motors Corp. 95,352,631 105,221,250 1.2
Banking 240,000 Banco Bilboa Vizcaya (ADR)* 5,913,128 8,580,000 0.1
1,577,000 Bancorp Hawaii, Inc. 45,488,956 56,574,875 0.7
600,000 Bangkok Bank Company Ltd. 5,935,084 7,291,501 0.1
499,000 BankAmerica Corp. 27,603,488 32,310,250 0.4
1,035,900 Chemical Banking Corp. 37,428,346 60,859,125 0.7
1,897,000 NationsBank Corp. 91,163,281 132,078,625 1.5
2,840,000 SouthTrust Corp. 48,284,026 72,775,000 0.9
1,212,000 Union Planters Corp. 14,897,052 38,632,500 0.4
-------------- -------------- ------
276,713,361 409,101,876 4.8
Beverages 2,900,000 Cadbury Schweppes PLC 20,298,573 23,924,835 0.3
Building Materials 241,000 Medusa Corp. 6,023,782 6,386,500 0.1
Capital Goods 488,300 GATX Corp. 18,793,048 23,743,588 0.3
330,000 Giddings & Lewis, Inc. 5,584,452 5,362,500 0.1
-------------- -------------- ------
24,377,500 29,106,088 0.4
Chemicals 174,000 Dexter Corporation 4,329,254 4,110,750 0.1
507,000 du Pont (E.I.) de Nemours & Co. 29,269,048 35,426,625 0.4
850,000 Engelhard Corp. 14,038,210 18,487,500 0.2
355,000 English China Clays PLC (Ordinary) 1,849,850 1,744,013 0.0
1,300,000 Imperial Chemical Industries PLC (ADR)* 62,854,854 60,775,000 0.7
-------------- -------------- ------
112,341,216 120,543,888 1.4
Computer Software 1,025,000 Creative Technology, Ltd. 12,833,743 8,840,625 0.1
Diversified 2,140,000 Hanson PLC (Sponsored) (ADR)* 35,957,776 32,635,000 0.4
Companies 10,599,000 Hillsdown Holdings PLC 25,028,158 27,968,005 0.3
640,000 Tenneco, Inc. 25,492,062 31,760,000 0.4
1,100,000 United Technologies Corp. 63,816,513 104,362,500 1.2
968,000 Worldtex Inc. 4,607,763 5,566,000 0.1
-------------- -------------- ------
154,902,272 202,291,505 2.4
Drug Stores 336,000 Rite Aid Corp. 8,302,186 11,508,000 0.1
Electrical Equipment 230,000 Cooper Industries, Inc. 8,364,916 8,452,500 0.1
880,000 General Electric Co. 44,473,129 63,360,000 0.8
990,000 Philips Electronics N.V. (ADR)* 22,164,417 35,516,250 0.4
-------------- -------------- ------
75,002,462 107,328,750 1.3
Financial Services 360,000 Federal National Mortgage Association 34,263,026 44,685,000 0.5
4,600,000 Ruam Pattana Fund II 2,722,568 2,785,941 0.0
-------------- -------------- ------
36,985,594 47,470,941 0.5
Food Distribution 16,045,000 Dairy Farm International Holdings
Ltd. (Ordinary) 19,450,268 14,761,400 0.2
</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>
Foods/Food 1,530,000 Archer-Daniels-Midland Co. $ 26,698,628 $ 27,540,000 0.3%
Processing 100,000 Cultor OY 4,137,171 4,147,179 0.1
200,000 Dean Foods Co. 5,412,000 5,500,000 0.1
82,000 Nestle S.A. 85,662,287 90,929,000 1.1
-------------- -------------- ------
121,910,086 128,116,179 1.6
Footwear 28,648,000 Yue Yuen Industrial (Holdings Limited) 7,462,709 7,595,499 0.1
Forest Products 560,000 Weyerhaeuser Co. 25,720,280 24,220,000 0.3
Home Builders 268,000 Oriole Homes Corp. 2,476,771 1,641,500 0.0
Hospital Management 1,840,000 Columbia/HCA Healthcare Corp. 87,306,839 93,380,000 1.1
2,750,000 Tenet Healthcare Corp. (b) 34,568,474 57,062,500 0.7
-------------- -------------- ------
121,875,313 150,442,500 1.8
Household Products 150,000 Armor All Products Corp. 2,726,828 2,662,500 0.0
Insurance 313,800 Aetna Life & Casualty Co. 20,113,610 21,730,650 0.3
1,630,000 Allstate Corporation 41,225,010 67,033,750 0.8
350,000 American General Corporation 12,352,062 12,206,250 0.1
860,000 American International Group, Inc. 54,900,442 79,550,000 0.9
176,000 American National Insurance Co. 10,182,521 11,616,000 0.1
1,170,000 EXEL Ltd. (ADR)* 48,676,056 71,370,000 0.8
320,000 First Colony Holding Corp. 8,066,386 8,120,000 0.1
1,375,000 Fremont General Corp. 27,740,488 50,531,250 0.6
432,000 Horace Mann Educators Corp. 10,621,148 13,500,000 0.2
100,000 Integon Corp. 1,666,308 2,062,500 0.0
2,000,000 Lowndes Lambert Group Holdings PLC 5,013,508 4,097,808 0.1
307,000 Provident Life & Accident Insurance Co. 7,798,461 10,399,625 0.1
1,580,000 Safeco Corp. 41,769,848 54,510,000 0.6
685,000 Sphere Drake Holdings Ltd. 10,168,638 9,590,000 0.1
520,000 St. Paul Companies, Inc. 26,176,571 28,925,000 0.3
465,000 TIG Holdings, Inc. 10,689,988 13,252,500 0.2
1,490,000 Travelers Inc. 32,540,660 93,683,750 1.1
211,000 USLIFE Corporation 5,092,128 6,303,625 0.1
-------------- -------------- ------
374,793,833 558,482,708 6.5
<PAGE>
Iron & Steel 542,000 Birmingham Steel Corp. 11,727,398 8,062,250 0.1
427,000 British Steel PLC (ADR)* 12,000,114 10,941,875 0.1
912,000 Cleveland-Cliffs, Inc. 31,071,506 37,392,000 0.4
-------------- -------------- ------
54,799,018 56,396,125 0.6
Leisure/Hotels 1,080,000 Carnival Corp. (Class A) 25,090,663 26,325,000 0.3
3,300,000 Mandarin Oriental International Ltd. 3,198,247 3,993,000 0.1
-------------- -------------- ------
28,288,910 30,318,000 0.4
Manufactured Housing 440,000 Fleetwood Enterprises, Inc. 9,375,098 11,330,000 0.1
Metals & Basic 347,000 Cameco Corp. 7,535,147 12,907,902 0.2
Materials 450,000 Minsura Sociedad Limitada S.A. (T Shares) 3,276,354 3,172,324 0.0
399,000 Newmont Mining Corp. 14,990,196 18,054,750 0.2
-------------- -------------- ------
25,801,697 34,134,976 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Natural Gas 1,510,000 Coastal Corp. $ 42,935,160 $ 56,247,500 0.7%
Suppliers 703,000 El Paso Natural Gas Co. 19,275,213 19,947,625 0.2
690,000 MetroGas S.A. (ADR)* 8,250,336 6,727,500 0.1
3,694,000 TransCanada Pipelines, Ltd. (ADR)* 54,426,444 50,792,500 0.6
3,900,000 Williams Companies, Inc. 104,744,564 171,112,500 2.0
-------------- -------------- ------
229,631,717 304,827,625 3.6
Oil--Integrated 120,000 Kerr-McGee Corp. 7,142,403 7,620,000 0.1
2,000,000 Phillips Petroleum Co. 69,200,011 68,250,000 0.8
1,040,000 Repsol, S.A. (Ordinary) 30,515,180 34,094,845 0.4
900,000 Texaco Inc. 59,757,901 70,650,000 0.8
2,500,000 TOTAL S.A. (ADR)* 69,950,840 85,000,000 1.0
11,313,000 YPF S.A. (Sponsored) (ADR)* 234,428,432 244,643,625 2.9
-------------- -------------- ------
470,994,767 510,258,470 6.0
Oil--Refining & 319,000 Ultramar Corp. 8,258,567 8,214,250 0.1
Marketing
Oil Service 1,265,000 Dresser Industries, Inc. 28,464,979 30,834,375 0.4
<PAGE>
Paper 310,000 Federal Paper Board Co., Inc. 7,723,063 16,081,250 0.2
2,800,000 Jefferson Smurfit Group 8,705,331 6,736,548 0.1
1,170,000 Temple-Inland, Inc. 54,672,820 51,626,250 0.6
-------------- -------------- ------
71,101,214 74,444,048 0.9
Pharmaceuticals 502,300 Block Drug, Inc. (Class A) 15,206,005 17,329,350 0.2
2,055,000 Glaxo Holdings PLC (ADR)* 51,370,263 58,053,750 0.7
1,090,000 Mallinckrodt Group Inc. 33,368,275 39,648,750 0.5
415,000 Merck & Co., Inc. 19,131,767 27,286,250 0.3
2,480,000 Pfizer, Inc. 112,309,578 156,240,000 1.8
500,000 Warner-Lambert Co. 40,354,373 48,562,500 0.6
-------------- -------------- ------
271,740,261 347,120,600 4.1
Photography 329,000 Eastman Kodak Co. 18,679,679 22,043,000 0.3
Plastic Recycling 1,065,000 Wellman Inc. 23,401,879 24,228,750 0.3
Railroads 255,000 Canadian National Railway Co. 3,581,623 3,825,000 0.0
Real Estate 200,000 National Health Investors, Inc. 6,362,000 6,625,000 0.1
Investment Trusts 1,860,000 RFS Hotel Investors, Inc. 28,125,066 28,597,500 0.3
170,000 South West Properties Trust 2,163,387 2,295,000 0.0
1,283,000 Walden Residential Properties, Inc. 24,384,631 26,782,625 0.3
-------------- -------------- ------
61,035,084 64,300,125 0.7
Retail Trade 2,711,000 Wal-Mart Stores, Inc. 65,485,088 60,658,625 0.7
Savings & Loan 470,000 Ahmanson (H.F.) & Co. 9,596,525 12,455,000 0.2
Associations
Services 1,670,000 PHH Corp. 62,537,753 78,072,500 0.9
440,000 Rollins, Inc. 11,044,159 9,735,000 0.1
-------------- -------------- ------
73,581,912 87,807,500 1.0
Telecommunications 1,780,000 GTE Corp. 55,498,701 78,320,000 0.9
250,000 Nokia Corp. (ADR)* 8,352,445 9,718,750 0.1
100,000 PT Telekomunikasi Indonesia (ADR)* 1,848,136 2,525,000 0.0
-------------- -------------- ------
65,699,282 90,563,750 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>
Tires & Rubber 3,425,000 The Goodyear Tire & Rubber Co. $ 132,103,543 $ 155,409,375 1.8%
Utilities--Electric, 150,000 American Water Works Co., Inc. 4,170,603 5,831,250 0.1
Gas & Water 101,000 Aquarion Co. 2,306,022 2,575,500 0.0
100,000 Central Hudson Gas & Electric Corp. 2,607,280 3,087,500 0.0
126,000 Energen Corp. 2,854,783 3,039,750 0.0
575,000 Entergy Corp. 13,533,192 16,818,750 0.2
950,000 Illinova Corp 19,575,244 28,500,000 0.3
100,000 MCN Corp. 2,046,563 2,325,000 0.0
181,000 Montana Power Co. 4,165,397 4,095,125 0.1
127,000 Northwest Natural Gas Co. 4,147,913 4,127,500 0.1
1,900,000 Pinnacle West Capital Corp. 37,516,110 54,625,000 0.6
116,000 Public Service Company of North Carolina 1,832,259 2,073,500 0.0
170,000 Texas Utilities Co. 6,767,700 6,991,250 0.1
1,230,000 Unicom Corp. 27,333,892 40,282,500 0.5
327,000 Washington Water Power Co. 5,488,938 5,722,500 0.1
-------------- -------------- ------
134,345,896 180,095,125 2.1
Total Common Stocks 3,384,020,594 4,205,618,013 49.4
Face Amount Corporate Bonds
Automobile Parts $ 20,000,000 Eaton Corp., 6.50% due 6/01/2025 19,929,200 21,158,600 0.3
Automotive 10,000,000 Ford Motor Co., 5.625% due 12/15/1998 9,703,400 9,927,200 0.1
22,000,000 Hertz Corp., 6.70% due 6/15/2002 21,982,500 22,628,540 0.3
-------------- -------------- ------
31,685,900 32,555,740 0.4
Banking 20,000,000 Banco Rio de la Plata, 8.75% due
12/15/2003 20,060,800 17,500,000 0.2
10,000,000 Bank of Boston Corp., 6.625% due
12/01/2005 8,621,750 10,173,900 0.1
BankAmerica Corp.:
15,000,000 6.875% due 6/01/2003 14,149,050 15,553,050 0.2
30,000,000 6.75% due 9/15/2005 29,591,750 31,065,000 0.4
10,000,000 Bankers Trust Company, 7.50% due
1/15/2002 9,688,700 10,570,700 0.1
The Chase Manhattan Corp.:
30,000,000 6.50% due 8/01/2005 29,105,700 30,055,800 0.4
20,000,000 6.75% due 8/15/2008 17,436,420 20,381,800 0.2
Chemical Bank:
11,400,000 7% due 6/01/2005 11,191,266 11,980,146 0.1
12,000,000 6.50% due 1/15/2009 10,872,840 12,057,840 0.1
First Chicago Corp.:
15,000,000 6.875% due 6/15/2003 13,963,300 15,618,900 0.2
15,000,000 6.375% due 1/30/2009 13,276,092 14,868,900 0.2
6,000,000 First Hawaiian, Inc., 6.25% due
8/15/2000 5,841,600 5,996,940 0.1
First Security Corp.:
5,000,000 5.71% due 2/09/1999 5,000,000 4,988,900 0.1
10,000,000 7% due 7/15/2005 9,978,700 10,428,750 0.1
30,000,000 First Union Corp., 6.55% due
10/15/2035 29,953,350 31,200,900 0.4
Great Western Financial Corp.:
13,000,000 6.125% due 6/15/1998 12,244,010 13,086,970 0.2
10,000,000 6.375% due 7/01/2000 9,998,800 10,144,300 0.1
NationsBank Corp.:
10,500,000 5.70% due 9/11/2000 9,545,865 10,433,745 0.1
8,000,000 6.20% due 8/15/2003 7,657,280 8,062,720 0.1
25,000,000 6.50% due 8/15/2003 22,104,200 25,507,750 0.3
20,000,000 Union Planters Corp., 6.25%
due 11/01/2003 18,756,100 19,894,800 0.2
20,000,000 Wachovia Corp., 6.605% due 10/01/2025 20,012,500 20,680,200 0.2
-------------- -------------- ------
329,050,073 350,252,011 4.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Face Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Broadcasting & $ 30,000,000 News America Holdings, Inc., 7.50%
Publishing due 3/01/2000 $ 29,179,330 $ 31,552,500 0.4%
Capital Goods 5,000,000 Giddings & Lewis, Inc., 7.50% due
10/01/2005 5,000,000 5,236,750 0.1
Chemicals 25,000,000 Union Carbide Corp., 6.79% due
6/01/2025 25,000,000 26,795,750 0.3
Diversified Grace (W.R.) & Co.:
Companies 10,000,000 6.85% due 6/23/1997 9,903,700 10,173,800 0.1
20,000,000 7.40% due 2/01/2000 19,663,100 20,876,200 0.3
Tenneco, Inc.:
15,000,000 7.875% due 10/01/2002 14,619,180 16,382,550 0.2
10,000,000 6.50% due 12/15/2005 9,941,900 10,054,400 0.1
-------------- -------------- ------
54,127,880 57,486,950 0.7
Electronics 10,000,000 Philips Electronics N.V., 7.125%
due 5/15/2025 9,972,650 11,133,600 0.1
Finance 5,000,000 Caterpillar Financial Services Corp.,
5.35% due 11/10/1998 4,924,800 4,947,550 0.1
Chrysler Finance Corp.:
13,000,000 6.50% due 6/15/1998 12,752,820 13,244,920 0.1
12,000,000 5.375% due 10/15/1998 11,439,770 11,826,720 0.1
30,000,000 6.20% due 12/06/2000 30,000,000 30,143,400 0.4
Ford Motor Credit Co.:
10,000,000 5.625% due 1/15/1999 9,928,500 9,975,310 0.1
20,000,000 6.25% due 11/08/2000 19,934,000 20,271,800 0.2
40,000,000 GTE Finance Corp., 5.81% due
12/15/1997 40,000,000 39,932,800 0.5
8,000,000 General Electric Capital Corp.,
5.13% due 4/01/2004 8,000,000 9,112,240 0.1
General Motors Acceptance Corp.:
10,000,000 6.375% due 9/01/1998 9,983,700 10,162,100 0.1
15,000,000 5.95% due 1/11/1999 13,783,650 15,093,450 0.2
25,000,000 5.875% due 1/12/1999 25,044,500 25,104,250 0.3
48,500,000 5.625% due 2/01/1999 47,273,190 48,270,110 0.6
10,000,000 7.15% due 4/30/1999 9,884,400 10,413,900 0.1
21,000,000 7.375% due 6/22/2000 20,693,890 22,190,910 0.3
30,000,000 6.75% due 6/10/2002 29,520,300 30,956,700 0.4
10,000,000 Greyhound Financial Corp., 6.75%
due 3/25/1999 9,694,200 10,207,700 0.1
Household Finance Corp.:
15,000,000 7.125% due 4/30/1999 14,356,800 15,584,700 0.2
10,000,000 7.45% due 4/01/2000 9,958,700 10,575,900 0.1
10,300,000 6.50% due 7/15/2003 10,202,253 10,406,708 0.1
International Lease Finance Corp.:
25,000,000 5.98% due 11/16/1998 24,975,500 25,084,750 0.3
22,500,000 6.05% due 4/30/1999 22,368,375 22,591,350 0.3
5,000,000 7.10% due 6/15/1999 4,930,900 5,180,250 0.1
10,000,000 Margaretten Financial Corp., 6.75%
due 6/15/2000 9,621,060 10,213,400 0.1
Sears, Roebuck Acceptance Corp.:
20,000,000 6.50% due 6/15/2000 20,025,000 20,460,600 0.2
15,000,000 6.29% due 10/18/2000 14,956,800 15,207,300 0.2
-------------- -------------- ------
434,253,108 447,158,818 5.3
Financial GATX Corp.:
Leasing 30,000,000 5.45% due 3/18/1996 30,000,000 29,972,700 0.4
15,000,000 5.48% due 3/22/1996 15,000,000 14,986,800 0.2
25,000,000 6.69% due 11/30/2005 24,984,750 25,672,250 0.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Face Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Financial XTRA Corp.:
Leasing $ 20,000,000 6.79% due 8/01/2001 $ 19,945,800 $ 20,625,400 0.2%
(concluded) 20,000,000 6.68% due 11/30/2001 20,000,000 20,508,400 0.2
-------------- -------------- ------
109,930,550 111,765,550 1.3
Financial Services 10,000,000 American Express Credit Corp., 6.125%
due 11/15/2001 9,963,300 10,086,400 0.1
Finova Capital Corp.:
25,000,000 6.45% due 6/01/2000 24,766,550 25,348,750 0.3
10,000,000 6.56% due 11/15/2002 10,000,000 10,153,200 0.1
20,000,000 First USA Corp., 6.375% due 10/23/2000 19,937,600 20,390,400 0.2
McDonnell Douglas Finance Corp.:
10,000,000 6.375% due 7/15/1999 9,877,343 10,137,000 0.1
10,000,000 6.77% due 9/11/2002 9,983,500 10,066,300 0.1
20,000,000 6.965% due 9/12/2005 20,049,200 20,540,000 0.3
Smith Barney Shearson Holdings, Inc.:
20,000,000 6% due 3/15/1997 19,897,700 20,080,400 0.2
20,000,000 7% due 5/15/2000 19,930,000 20,781,200 0.3
-------------- -------------- ------
144,405,193 147,583,650 1.7
Food & Tobacco RJR Nabisco Holding Corp.:
21,000,000 6.70% due 6/15/2002 20,830,000 21,354,690 0.3
20,000,000 6.85% due 6/15/2005 20,000,000 20,312,000 0.2
40,830,000 41,666,690 0.5
Foreign Government 20,000,000 Province of Buenos Aires, 11.50%
Obligations due 10/19/1998 20,000,000 20,388,000 0.2
Republic of Argentina:
50,000,000 8.375% due 12/20/2003 36,266,250 42,250,000 0.5
75,000,000 6.812% due 3/31/2005 50,225,000 53,437,500 0.6
4,500,000 Republic of Colombia, 7.25% due
2/23/2004 4,145,000 4,316,580 0.1
-------------- -------------- ------
110,636,250 120,392,080 1.4
Hospital Columbia/HCA Healthcare Corp.:
20,000,000 6.125% due 12/15/2000 18,456,800 20,139,800 0.2
20,000,000 6.91% due 6/15/2005 19,919,400 20,894,800 0.3
17,500,000 6.63% due 7/15/2045 17,149,625 18,291,350 0.2
5,000,000 Tenet Healthcare Corp., 9.625%
due 9/01/2002 5,000,000 5,500,000 0.1
-------------- -------------- ------
60,525,825 64,825,950 0.8
<PAGE>
Industrial 9,775,000 Crane Co., 7.25% due 6/15/1999 9,619,840 10,103,049 0.1
Insurance 15,125,000 Integon Corp., 8% due 8/15/1999 15,225,519 15,559,693 0.2
10,000,000 NAC Re Corp., 8% due 6/15/1999 10,189,300 10,545,900 0.1
Travelers Inc.:
20,000,000 6.125% due 6/15/2000 18,772,550 20,070,400 0.2
20,000,000 6.875% due 6/01/2025 20,037,200 21,658,400 0.3
-------------- -------------- ------
64,224,569 67,834,393 0.8
Machinery 15,000,000 Black & Decker Corp., 6.625%
due 11/15/2000 14,248,100 15,301,200 0.2
20,000,000 FMC Corp., 6.375% due 9/01/2003 18,940,800 19,760,800 0.2
Harris Corp.:
22,500,000 6.375% due 8/15/2002 22,461,850 22,757,850 0.3
10,000,000 10.375% due 12/01/2018 10,541,400 11,301,700 0.1
10,000,000 TRINOVA Corp., 7.95% due 5/01/1997 9,975,000 10,249,700 0.1
-------------- -------------- ------
76,167,150 79,371,250 0.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Face Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Manufactured $ 3,000,000 Oakwood Homes Corp., 9.125%
Housing due 6/01/2007 $ 3,000,000 $ 3,011,250 0.0%
Natural Gas Coastal Corp.:
Suppliers 13,000,000 8.75% due 5/15/1999 13,055,960 14,027,260 0.2
30,000,000 8.125% due 9/15/2002 29,984,410 32,813,100 0.4
15,000,000 ENSERCH Corporation, 7.125%
due 6/15/2005 15,095,150 15,810,900 0.2
-------------- -------------- ------
58,135,520 62,651,260 0.8
Oil--Integrated Occidental Petroleum Corp.:
12,000,000 5.85% due 11/09/1998 11,150,172 12,029,520 0.1
14,475,000 5.90% due 11/09/1998 14,325,907 14,529,426 0.2
18,375,000 6.24% due 11/24/2000 18,135,306 18,618,653 0.2
11,000,000 11.75% due 3/15/2011 11,730,250 11,647,350 0.1
Union Texas Petroleum Holdings, Inc.:
10,000,000 6.70% due 11/18/2002 10,000,000 10,165,000 0.1
20,000,000 6.81% due 12/05/2007 20,000,000 20,641,600 0.3
25,000,000 YPF S.A., 8% due 2/15/2004 21,533,750 23,500,000 0.3
-------------- -------------- ------
106,875,385 111,131,549 1.3
Oil--Related 20,000,000 Tosco Corporation, 7% due 7/15/2000 19,894,250 20,275,000 0.2
Railroads 3,000,000 Burlington Northern, Inc., 7.40%
due 5/15/1999 2,993,580 3,132,030 0.0
Services 19,375,000 ADT Operations, 8.25% due 8/01/2000 19,511,125 20,440,625 0.2
Steel 20,000,000 USX Corp., 6.375% due 7/15/1998 19,894,000 20,156,800 0.2
Telecommunications 25,000,000 AT&T Capital Corp., 6.07% due
10/24/1997 25,000,000 25,220,000 0.3
10,000,000 Bell Atlantic Financial Services, Inc.,
5.47% due 4/27/1998 10,031,400 9,994,400 0.1
10,000,000 Pacific Telecom, Inc., 6.625% due
10/20/2005 10,000,000 10,177,000 0.1
-------------- -------------- ------
45,031,400 45,391,400 0.5
Transportation 10,000,000 General American Transportation Corp.,
6.44% due 11/13/2001 10,000,000 10,140,600 0.1
Utilities--Electric, 10,000,000 Commonwealth Edison Co., 6% due
Gas & Water 3 /15/1998 10,157,200 10,039,000 0.1
25,000,000 Enron Corp., 6.75% due 7/01/2005 24,050,050 25,549,250 0.3
5,000,000 Long Island Lighting Co., 7.625%
due 4/15/1998 4,986,210 5,025,200 0.1
10,000,000 Niagara Mohawk Power Corp., 5.875%
due 9/01/2002 9,196,500 8,924,300 0.1
PECO Energy Co.:
5,000,000 7.50% due 1/15/1999 5,043,600 5,238,950 0.1
20,000,000 5.625% due 11/01/2001 18,908,800 19,474,800 0.2
Texas Utilities Co.:
5,000,000 7.125% due 6/01/1997 4,987,500 5,100,450 0.1
9,500,000 5.75% due 7/01/1998 9,297,135 9,519,000 0.1
United Illuminating Co.:
5,000,000 7.375% due 1/15/1998 5,003,125 5,104,500 0.1
5,000,000 6.20% due 1/15/1999 4,693,050 4,978,400 0.0
-------------- -------------- ------
96,323,170 98,953,850 1.2
Total Corporate Bonds 1,936,195,948 2,022,157,695 23.7
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Percent of
Face Amount Collateralized Mortgage Obligations Cost Value Net Assets
<C> <S> <C> <C> <C>
Federal Home Loan Mortgage Corp.:
$ 20,000,000 5.80% due 4/15/2006 $ 18,615,625 $ 19,868,600 0.3%
15,711,806 6% due 4/15/2006 15,349,084 15,814,875 0.2
Federal National Mortgage Association:
20,000,000 5.10% due 3/25/2002 19,256,250 19,837,400 0.2
12,000,000 6.50% due 1/25/2008 11,608,125 12,116,160 0.1
10,000,000 5% due 4/25/2014 9,756,250 9,884,300 0.1
14,893,879 Prudential Home Mortgage Security Co.,
5.25% due 12/25/2000 14,256,235 14,591,236 0.2
Total Collateralized Mortgage Obligations 88,841,569 92,112,571 1.1
US Government Obligations
US Treasury Notes:
130,000,000 6.375% due 8/15/2002 124,197,885 136,316,700 1.6
450,000,000 5.75% due 8/15/2003 437,942,500 455,413,500 5.3
515,000,000 5.875% due 2/15/2004 509,188,281 525,861,350 6.2
385,000,000 7.25% due 5/15/2016 368,873,869 439,619,950 5.2
150,000,000 6.25% due 8/15/2023 144,208,008 154,336,500 1.8
Total US Government Obligations 1,584,410,543 1,711,548,000 20.1
Short-Term Investments
Commercial Paper** 40,000,000 Ciesco L.P., 5.70% due 1/12/1996 39,917,667 39,917,667 0.5
20,000,000 Corporate Asset Funding Co. Inc.,
5.75% due 1/05/1996 19,980,833 19,980,833 0.2
du Pont (E.I.) de Nemours & Co.:
50,000,000 5.70% due 1/12/1996 49,897,083 49,897,083 0.6
50,000,000 5.77% due 1/19/1996 49,839,722 49,839,722 0.6
82,865,000 General Electric Capital Corp., 5.90%
due 1/02/1996 82,824,258 82,824,258 1.0
10,000,000 IBM Credit Corp., 5.69% due 1/26/1996 9,957,325 9,957,325 0.1
40,000,000 National Australia Funding (Delaware)
Inc., 5.65% due 2/12/1996 39,723,778 39,723,778 0.4
35,000,000 Preferred Receivable Funding Corp.,
5.78% due 1/17/1996 34,898,850 34,898,850 0.4
-------------- -------------- ------
327,039,516 327,039,516 3.8
US Government & 40,000,000 Federal Home Loan Bank, 5.65%
Agency Obligations** due 1/19/1996 39,874,444 39,874,444 0.5
40,000,000 Federal National Mortgage Association,
5.65% due 1/19/1996 39,874,444 39,874,444 0.5
-------------- -------------- ------
79,748,888 79,748,888 1.0
<PAGE>
Total Short-Term Investments 406,788,404 406,788,404 4.8
Total Investments $7,400,257,058 8,438,224,683 99.1
==============
Other Assets Less Liabilities 72,772,032 0.9
============== ======
Net Assets $8,510,996,715 100.0%
============== ======
Net Asset Class A--Based on net assets of $3,120,465,661 and 102,148,946 shares outstanding $ 30.55
Value: ==============
Class B--Based on net assets of $4,785,514,792 and 159,324,696 shares outstanding $ 30.04
==============
Class C--Based on net assets of $180,624,186 and 6,058,512 shares outstanding $ 29.81
==============
Class D--Based on net assets of $424,392,076 and 13,902,463 shares outstanding $ 30.53
==============
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a)Formerly Lockheed Corp.
(b)Formerly National Medical Enterprises, Inc.
</TABLE>
