MERRILL LYNCH
CAPITAL FUND, INC.
FUND LOGO
Quarterly Report
June 30, 1996
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
Kurt Schansinger, 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, NY 10286
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
<PAGE>
MERRILL LYNCH CAPITAL FUND, INC.
PORTFOLIO SUMMARY
Security Diversification
As of June 30, 1996
A pie chart illustrating the following percentages:
US Bonds 45.5%
Non-US Bonds 3.2%
US Stocks 36.2%
Non-US Stocks 12.4%
Cash 2.7%
Security Representation
As a Percentage of Equities
As of June 30, 1996
A pie chart illustrating the following percentages:
Financial Services 24.8%
Consumer Services 4.0%
Utilities 5.9%
Transportation 0.8%
Capital Goods--Technology 8.2%
Consumer Cyclicals 8.4%
Energy 21.3%
Basic Industries 7.1%
Diversified 3.6%
Credit Cyclicals 0.3%
Consumer Staples 11.2%
Capital Goods 4.4%
<PAGE>
Geographic Diversification Percent of
As of June 30, 1996 Net Assets*
United States 84.5%
Argentina 5.1
United Kingdom 3.2
Switzerland 1.2
France 1.2
Netherlands 0.9
Canada 0.7
Brazil 0.7
Spain 0.6
Australia 0.3
Singapore 0.3
Thailand 0.3
Finland 0.3
New Zealand 0.3
Hong Kong 0.1
Ireland 0.1
Peru 0.1
Colombia 0.1
[FN]
*Includes investments in short-term securities.
US Common Stock Investments S&P
As of June 30, 1996 Fund 500*
Average Capitalization (in billions) $10.9 $10.1
Price/Book Value 2.2 4.2
Price/Earnings Ratio** 13.8 17.3
Yield Based on Current Dividend 2.8% 2.1%
[FN]
*An unmanaged broad-based index comprised of common stocks.
**Based on 1996 earnings estimates.
Fixed-Income Investments Merrill Lynch
As of June 30, 1996 Fund DOAO Index*
Duration 5.3 Years 5.0 Years
Average Maturity 8.4 Years 12.8 Years
Asset Breakdown:
Corporates 47.3% 16.7%
US Treasuries/Agencies 43.4% 54.9%
Mortgage-Backed 2.7% 28.4%
International Governments 6.6% --
[FN]
*An unmanaged market-weighted corporate, Government and mortgage
master bond index reflecting approximately 97% of total outstanding
bonds.
<PAGE>
DEAR SHAREHOLDER
Building on the momentum evidenced earlier this year, the US economy
recorded strong growth in the quarter ended June 30, 1996. Fourth
quarter 1995 gross domestic product was reported to have grown at a
sluggish 0.5%, accelerating to 2.3% in the first quarter of 1996 and
an estimated 4.0% for the second quarter of 1996. Monthly employment
gains averaged 265,000 during the June quarter, and June's
unemployment rate fell to a six-year low of 5.3%. This strong job
market has encouraged consumers, who account for about two-thirds of
economic activity, to spend more aggressively, with May home sales
reaching record highs, surpassing the prior peak of December 1993,
and auto sales continuing at a brisk pace. The manufacturing sector
continued to improve as well, with May levels of industrial
production, factory orders and capacity utilization all consistent
with a strengthening economy.
Despite this clear, broad-based pick-up in economic activity,
inflation pressures remain subdued. The Consumer Price Index remains
below 3% on an annualized basis, as it has since 1991, while the
Producer Price Index was actually down in May and is running at an
annualized rate of less than 1% for the first six months of 1996.
Strong, noninflationary economic growth provides a very hospitable
environment for financial assets. The stock market, as measured by
the unmanaged Standard & Poor's 500 Index (S&P 500), provided a
+4.43% total return for the three months ended June 30, 1996,
continuing its strong 1996 performance. The bond market, as measured
by the unmanaged Merrill Lynch Master Domestic Bond Index, returned
+0.48% for the June quarter, a modest gain compared to stocks but a
reversal of the negative total return in the first quarter of 1996.
Cash equivalents, as measured by 91-day Treasury bills, returned
+1.29% for the June quarter.
<PAGE>
We do not believe the current level of economic activity is
sustainable and anticipate much slower, though still
noninflationary, growth going forward. Consumer credit continues to
grow at a rapid pace, and consumer debt service as a percentage of
disposable personal income is approaching the record high level
of 1990, witnessed just prior to the last recession. Credit card
delinquencies rose to a 15-year high in May, while personal
bankruptcy filings are at record levels despite the positive
economic and employment backdrop. Business inventories have been
substantially rebuilt, corporate capital expenditures are projected
to rise only modestly in the second half of the year, and the
continued strengthening of the US dollar, coupled with ongoing
economic weakness among many of our major trading partners, suggests
a less robust trade sector going forward. Therefore, we conclude
that an analysis of the fundamental components of economic activity
argues for a slowdown in the overall rate of economic growth with
continued low inflation in the months ahead.
Portfolio Matters
The critical determinant of Merrill Lynch Capital Fund, Inc.'s
performance so far this year has been the allocation of assets to
stocks, bonds and cash, far more so than the performance of each
individual asset class. At June 30, 1996, the Fund had 48.6% of net
assets invested in equities, 48.7% in bonds and 2.7% in cash,
comparable to the portfolio composition at the end of the first
quarter of 1996. While we believe the US economy will grow more
slowly in the future, our asset mix decision is not predicated on an
economic or interest rate forecast but rather on the relative
valuation between the stock and bond markets. Simply put, we believe
stocks are expensive relative to bonds. Relative to the current rate
of inflation, bonds are about as attractively priced as they have
been since the 1930s. Compared to the dividend yield on common
stocks, bonds have been cheaper only one other time over the last 40
years, namely in the third quarter of 1987, just prior to the major
stock market decline in October of that year.
Stocks are as expensive as they have been in more than 70 years on a
variety of historical valuation measures. Stocks sell at record high
levels relative to book value and dividends per share and at near-
record highs relative to earnings per share. This relative value
relationship underlies our decision to maintain an approximate equal
weighting between stocks and bonds in the Fund. The strong
performance of stocks relative to bonds so far in 1996 has only
served to make bonds even more attractive based upon these long-term
valuation parameters.
Within the equity component of the portfolio, the Fund's strategy
remains to invest in above-average companies with strong competitive
positions, solid financial characteristics and shareholder-oriented
managements which are selling at below-average valuations. On
average, the stocks we hold generate higher returns on shareholders'
equity, offer faster earnings growth and have stronger balance
sheets than the average company as measured by the S&P 500. However,
the Fund's stocks sell at an average price/earnings ratio of 13.8
times estimated 1996 earnings per share, at 2.2 times current book
value per share and provide a 2.8% dividend yield as compared to
17.3 times, 4.2 times and 2.1% for the S&P 500, respectively. This
combination of superior companies selling at discount prices is an
attractive formula for generating superior risk-adjusted equity
returns over time. Within the bond component of the portfolio, the
average maturity of the Fund's bond holdings at June quarter-end was
8.4 years with a modified duration of 5.3 years. The average yield
to maturity of our bond holdings was 7.12%, while quality has been
maintained at A1/A+.
<PAGE>
Examining the industry concentration of the Fund's equity holdings,
the technology, consumer and utility sectors represent significant
underweightings relative to the S&P 500, while the energy and
financial services sectors represent substantial overweightings. We
were very selective in our ownership of technology stocks, as the
rapid pace of change and high risk of obsolescence for these
companies compound the difficulty of assessing their competitive
positions or intrinsic values. While many excellent companies
operate in the consumer segment of the economy, their high stock
market valuations fairly reflect their attractive business
attributes. Utilities, particularly telephone utilities, are under-
represented in the Fund since we believe these companies are most at
risk in the rapidly deregulating telecommunications industry. The
Fund is significantly overweighted in both energy and financial
services. Our large energy holding is not predicated on a commodity
price forecast but rather reflects the attractive unit volume growth
and restructuring potential of many of these companies, which
generally sell at reasonable prices with high current dividend
yields. Financial companies, including banks, insurance and other
specialized providers, generate high returns on capital, are
increasingly well-managed for the shareholder and are among the most
reasonably priced stock groups in the equity market.
Our investment emphasis continues to be on those companies that best
control their own destinies. These companies can, by more
effectively allocating capital, create shareholder value independent
of the external economic or financial market environment. Uncertain
and unpredictable economic prospects, coupled with the constraints
that we perceive on further significant advances in equity prices,
suggest that those companies which possess an internal dynamic for
change will command increasingly large premiums in the equity
market. It is on these companies that our research efforts are
focused.
<PAGE>
During the quarter ended June 30, 1996, we initiated new investments
in five stocks while eliminating nine from the portfolio. In
addition, we increased the Fund's holdings in 56 companies while
reducing positions in 31. Notable among the new holdings is Melville
Corporation, a once-diversified specialty retailer now focused on
its high-growth, high-return drug store chain, CVS. Through a
comprehensive strategic restructuring program, Melville has
divested, or is in the process of divesting, all of its ancillary
retail businesses. The core CVS operation is the nation's fifth-
largest drug store chain, with leading market shares in 21 of its 29
markets, strong financial characteristics including nominal net
debt, estimated mid-teens earnings growth prospects, and a very
shareholder-oriented management team. We believe this company will
command a much higher stock market valuation as its restructuring
nears completion. Cincinnati Milacron, Inc. is another new addition
to the Fund. This is a substantially changed and much-improved
company over the last five years, becoming less cyclical and more
profitable with enhanced growth opportunities. Overall returns from
the company's three business segments of plastics machinery,
industrial consumables and machine tools are very attractive, and we
estimate a 1996 return on shareholders' equity of over 20%. Officers
and directors own over 6% of the company's outstanding shares and
stock-based incentives represent a significant component of senior
management's compensation. We believe the combination of rising
revenues, improving margins, high returns on capital and good
management make this an attractive investment at the current price.
We sold the Fund's holding in Safeco Corp., a Seattle, Washington-
based multi-line insurance company and asset manager. With
competition intensifying across all of the company's business lines,
insurance premium growth continues to slow and pricing is under
pressure. In addition, the company appears to be losing market share
in its core auto segment. In the context of these developments, we
decided to redeploy these assets into more attractive investment
opportunities. We also sold the Fund's investment in Cadbury
Schweppes PLC, the UK beverage and confectionary company. The
company is losing market share in its US beverage operation, while
the confectionary business is requiring significant additional
capital investment to achieve scale in emerging markets. Further,
the company's acquisition strategy does not appear to represent good
value for shareholders, so we took advantage of the recently
improved price action in the stock to eliminate our position.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kurt Schansinger)
Kurt Schansinger
Vice President and Portfolio Manager
<PAGE>
July 26, 1996
Ernest S. Watts has retired as Senior Portfolio Manager of Merrill
Lynch Capital Fund, Inc. Mr. Watts became the Fund's Senior
Portfolio Manager on June 8, 1983. Under his stewardship, Merrill
Lynch Capital Fund grew to over $9 billion in assets under
management. It is one of only three mutual funds in the industry
that has not experienced at least one negative annual total return
since 1977. This consistency of long-term performance thus was
largely achieved under Mr. Watts' management. The Board of Directors
congratulates Mr. Watts for his outstanding contribution to Merrill
Lynch Capital Fund's success, and joins with his colleagues at
Merrill Lynch to wish him the best in his retirement.
Kurt Schansinger is now the Fund's Senior Portfolio Manager. Mr.
Schansinger has been Associate Portfolio Manager of the Fund and
Vice President of Merrill Lynch Asset Management, L.P. since January
1996. From 1983 to 1995, he was a Portfolio Manager at Oppenheimer
Capital.
PERFORMANCE DATA
About Fund Performance
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 approximately 8 years.
<PAGE>
* 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.
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 $15,027.54 on
June 30, 1996.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +16.61% +10.49%
Five Years Ended 6/30/96 +13.27 +12.05
Ten Years Ended 6/30/96 +12.14 +11.53
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +15.46% +11.46%
Five Years Ended 6/30/96 +12.12 +12.12
Inception (10/21/88)
through 6/30/96 +11.87 +11.87
[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 6/30/96 +15.42% +14.42%
Inception (10/21/94)
through 6/30/96 +18.09 +18.09
[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 6/30/96 +16.33% +10.23%
Inception (10/21/94)
through 6/30/96 +19.00 +15.27
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
6/30/96 3/31/96 6/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Capital Fund, Inc. Class A Shares* $31.40 $30.90 $29.30 +11.12%(1) +1.62%
ML Capital Fund, Inc. Class B Shares* 30.72 30.30 28.83 +10.55(1) +1.39
ML Capital Fund, Inc. Class C Shares* 30.49 30.08 28.67 +10.37(1) +1.36
ML Capital Fund, Inc. Class D Shares* 31.34 30.86 29.28 +10.99(1) +1.56
Dow Jones Industrial Average** 5,654.63 5,587.14 4,556.10 +24.11 +1.21
Standard & Poor's 500 Index** 670.63 645.50 544.75 +23.11 +3.89
ML Capital Fund, Inc. Class A Shares--Total Return* +16.61(2) +1.62
ML Capital Fund, Inc. Class B Shares--Total Return* +15.46(3) +1.39
ML Capital Fund, Inc. Class C Shares--Total Return* +15.42(4) +1.36
ML Capital Fund, Inc. Class D Shares--Total Return* +16.33(5) +1.56
Dow Jones Industrial Average--Total Return** +27.05 +1.76
Standard & Poor's 500 Index--Total Return** +25.92 +4.43
<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 $1.111 per share capital
gains distributions.
(2)Percent change includes reinvestment of $1.542 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(3)Percent change includes reinvestment of $1.365 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(4)Percent change includes reinvestment of $1.399 per share ordinary
income dividends and $1.111 per share capital gains distributions.
(5)Percent change includes reinvestment of $1.503 per share ordinary
income dividends and $1.111 per share capital gains distributions.
</TABLE>
PORTFOLIO INFORMATION
<PAGE>
Ten Largest Percent of
Common Stock Holdings Net Assets
YPF S.A. (Sponsored) (ADR) 2.8%
Williams Companies, Inc. 2.0
The Goodyear Tire & Rubber Co. 1.6
Pfizer, Inc. 1.3
United Technologies Corp. 1.3
Nestle S.A. 1.3
Columbia/HCA Healthcare Corp. 1.2
TOTAL S.A. (ADR) 1.2
Travelers Inc. 1.2
Allstate Corporation 1.2
Percent of
Ten Largest Industries Net Assets*
Banking 8.4%
Oil--Integrated 7.7
Insurance 6.7
Finance 5.0
Natural Gas Suppliers 3.9
Diversified Companies 3.6
Pharmaceuticals 3.0
Financial Services 3.0
Utilities--Electric, Gas & Water 2.7
Telecommunications 2.6
[FN]
*Based on total holdings in common stocks and bonds.
Common Stock Portfolio Changes for the Quarter
Ended June 30, 1996
Additions
*Associates First Capital Corp.
Cincinnati Milacron, Inc.
Danaher Corporation
Industrias Penoles S.A.
Melville Corporation
*Pacificare Health Systems, Inc.
Thai Military Bank Public Company,
Ltd.
<PAGE>
Deletions
Ahmanson (H.F.) & Co.
American National Insurance Co.
*Associates First Capital Corp.
Bumrungrad Hospital Public Company,
Ltd. (Local)
Cadbury Schweppes PLC
Cultor OY
Fleetwood Enterprises, Inc.
Mallinckrodt Group
*Pacificare Health Systems, Inc.
Safeco Corp.
Thai Theparos Food Product Public
Company Limited (Local)
[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 328,000 Goodrich (B.F.) Co. $ 8,467,452 $ 12,259,000 0.1%
700,000 Lockheed Martin Corp. 45,471,854 58,800,000 0.7
1,010,000 Rockwell International Corporation 35,951,594 57,822,500 0.6
-------------- -------------- ------
89,890,900 128,881,500 1.4
Airlines 455,000 KLM Royal Dutch Airlines N.V. 15,454,833 14,562,134 0.2
453,000 KLM Royal Dutch Airlines N.V.
(NY Registered Shares) 14,501,045 14,382,750 0.1
-------------- -------------- ------
29,955,878 28,944,884 0.3
Automobile Equipment 1,350,000 Echlin Inc. 43,133,055 51,131,250 0.6
Automotive 975,000 General Motors Corp. 46,002,358 51,065,625 0.6
Banking 237,000 Banco Bilboa Vizcaya (ADR)* 5,835,430 9,509,625 0.1
1,593,000 Bancorp Hawaii, Inc. 46,046,216 57,348,000 0.6
600,000 Bangkok Bank Public Company Ltd. 5,935,084 8,129,185 0.1
300,000 BankAmerica Corp. 16,847,917 22,725,000 0.2
360,000 The Chase Manhattan Corp. (a) 12,987,657 25,425,000 0.3
780,000 NationsBank Corp. 37,778,016 64,447,500 0.7
2,500,000 SouthTrust Corp. 45,573,821 70,312,500 0.8
850,000 Thai Military Bank Public Company, Ltd. 3,812,736 3,347,775 0.0
1,220,000 Union Planters Corp. 17,085,667 37,057,500 0.4
-------------- -------------- ------
191,902,544 298,302,085 3.2
<PAGE>
Building Materials 325,000 Medusa Corp. 8,495,910 10,075,000 0.1
Capital Goods 1,000,000 Cincinnati Milacron, Inc. 24,399,349 24,000,000 0.3
100,000 Danaher Corporation 3,789,612 4,350,000 0.1
442,000 GATX Corp. 17,933,469 21,326,500 0.2
458,000 Giddings & Lewis, Inc. 7,717,565 7,442,500 0.1
425,000 Kennametal, Inc. 13,816,934 14,450,000 0.2
275,000 United Dominion Industries, Ltd. 6,613,724 6,325,000 0.1
-------------- -------------- ------
74,270,653 77,894,000 1.0
Chemicals 350,000 Dexter Corporation 9,042,303 10,412,500 0.1
400,000 du Pont (E.I.) de Nemours & Co. 24,194,771 31,650,000 0.4
792,000 Engelhard Corp. 13,001,621 18,216,000 0.2
1,725,000 Imperial Chemical Industries PLC (ADR)* 85,286,516 84,740,625 0.9
-------------- -------------- ------
131,525,211 145,019,125 1.6
Computer Software 1,025,000 Creative Technology, Ltd. 12,833,743 6,150,000 0.1
Diversified 4,100,000 Hanson PLC (Sponsored)(ADR)* 65,181,095 58,425,000 0.6
Companies 10,599,000 Hillsdown Holdings PLC 25,028,158 28,540,038 0.3
1,100,000 Tenneco, Inc. 49,676,268 56,237,500 0.6
4,500,000 Tomkins PLC 18,622,903 16,909,992 0.2
1,000,000 United Technologies Corp. 59,058,703 115,000,000 1.3
1,334,000 Worldtex Inc. 6,427,371 8,004,000 0.1
-------------- -------------- ------
223,994,498 283,116,530 3.1
Drug Stores 1,450,000 Rite Aid Corp. 42,038,675 43,137,500 0.5
Electrical Equipment 400,000 Cooper Industries, Inc. 15,309,502 16,600,000 0.2
820,000 General Electric Co. 41,535,004 70,930,000 0.8
868,000 Philips Electronics N.V. (ADR)* 21,479,447 28,318,500 0.3
-------------- -------------- ------
78,323,953 115,848,500 1.3
</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>
Financial Services 1,900,000 Federal National Mortgage Association $ 49,161,099 $ 63,650,000 0.7%
9,770,000 Ruam Pattana II Fund (Foreign) 6,201,194 6,445,353 0.1
5,250,000 Ruam Pattana II Fund (Local) 3,618,277 3,463,470 0.0
-------------- -------------- ------
58,980,570 73,558,823 0.8
Food Distribution 13,870,000 Dairy Farm International Holdings Ltd.
(Ordinary) 15,534,045 11,720,155 0.1
Foods/Food 1,800,000 Archer-Daniels-Midland Co. 32,122,951 34,425,000 0.4
Processing 500,000 Dean Foods Co. 12,904,201 12,375,000 0.1
99,000 Nestle S.A. 103,564,527 113,086,331 1.3
226,700 Thai Theparos Food Product Public
Company Limited (Foreign) 1,021,198 1,169,661 0.0
-------------- -------------- ------
149,612,877 161,055,992 1.8
Footwear 28,618,000 Yue Yuen Industrial (Holdings Limited) 7,454,895 8,133,790 0.1
Forest Products 900,000 Weyerhaeuser Co. 41,366,916 38,250,000 0.4
Home Builders 260,000 Oriole Homes Corp. 2,394,771 1,917,500 0.0
Hospital Management 2,100,000 Columbia/HCA Healthcare Corp. 100,922,252 112,087,500 1.2
3,050,000 Tenet Healthcare Corp. 40,910,907 65,193,750 0.7
-------------- -------------- ------
141,833,159 177,281,250 1.9
Household Products 185,000 Armor All Products Corp. 3,267,341 2,751,875 0.0
<PAGE>
Insurance 2,300,000 Allstate Corporation 69,292,895 104,937,500 1.2
400,000 American General Corporation 14,395,240 14,550,000 0.2
850,000 American International Group, Inc. 57,419,473 83,831,250 0.9
85,900 Ayudhya Insurance Company, Ltd.
(Foreign) 614,069 642,812 0.0
330,000 Ayudhya Insurance Company, Ltd. (Local) 2,432,052 2,469,476 0.0
992,000 EXEL Ltd. (ADR)* 42,546,437 69,936,000 0.8
400,000 First Colony Holding Corp. 9,867,001 12,400,000 0.1
2,532,000 Fremont General Corp. 38,472,729 58,236,000 0.6
664,000 Horace Mann Educators Corp. 17,828,906 21,082,000 0.2
250,000 Integon Corp. 4,501,656 5,031,250 0.1
2,154,000 Lowndes Lambert Group Holdings PLC 5,366,108 4,532,111 0.1
498,000 Penncorp Financial Group, Inc. 15,073,780 15,811,500 0.2
493,000 Provident Life & Accident Insurance Co. 14,517,638 18,241,000 0.2
1,376,000 Sphere Drake Holdings Ltd. 17,861,002 14,104,000 0.1
395,000 St. Paul Companies, Inc. 20,169,892 21,132,500 0.2
400,000 TIG Holdings, Inc. 9,313,651 11,600,000 0.1
2,400,000 Travelers Inc. 41,045,348 109,500,000 1.2
50,000 USLIFE Corporation 1,467,717 1,643,750 0.0
-------------- -------------- ------
382,185,594 569,681,149 6.2
Iron & Steel 1,128,000 Birmingham Steel Corp. 20,539,064 18,471,000 0.2
854,000 Cleveland-Cliffs, Inc. 28,920,123 33,412,750 0.4
-------------- -------------- ------
49,459,187 51,883,750 0.6
Leisure/Hotels 1,125,000 Carnival Corp. (Class A) 26,274,925 32,484,375 0.3
3,800,000 Mandarin Oriental International Ltd. 3,828,224 5,320,000 0.1
-------------- -------------- ------
30,103,149 37,804,375 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>
Medical Services 691,450 Bumrungrad Hospital Public Company, Ltd.
(Foreign) $ 708,202 $ 633,171 0.0%
Metals & Basic 130,000 Cameco Corp. 3,445,596 6,122,912 0.1
Materials 256,000 Industrias Penoles S.A. 1,221,570 1,174,560 0.0
701,000 Minsur Sociedad Limitada S.A. (T Shares) 5,179,884 6,277,398 0.1
-------------- -------------- ------
9,847,050 13,574,870 0.2
<PAGE>
Natural Gas 1,200,000 Coastal Corp. 34,314,060 50,100,000 0.5
Suppliers 320,000 El Paso Natural Gas Co. 8,804,854 12,320,000 0.1
431,000 MetroGas S.A. (ADR)* 4,883,336 4,525,500 0.1
3,684,000 TransCanada Pipelines, Ltd. (ADR)* 54,273,082 54,339,000 0.6
3,700,000 Williams Companies, Inc. 99,361,340 183,150,000 2.0
-------------- -------------- ------
201,636,672 304,434,500 3.3
Oil & Gas 192,000 BELCO Oil & Gas Corporation 4,826,200 6,816,000 0.1
Exploration
Oil--Integrated 185,000 Mobil Corporation 20,424,102 20,743,125 0.2
2,408,000 Phillips Petroleum Company 83,020,877 100,835,000 1.1
37,000 Repsol, S.A. (ADR)* 1,287,719 1,285,750 0.0
1,240,000 Repsol, S.A. (Ordinary) 37,646,000 43,151,070 0.5
448,000 Texaco Inc. 29,612,871 37,576,000 0.4
3,000,000 TOTAL S.A. (ADR)* 86,214,090 111,375,000 1.2
11,313,000 YPF S.A. (Sponsored) (ADR)* 234,428,432 254,542,500 2.8
-------------- -------------- ------
492,634,091 569,508,445 6.2
Oil--Refining & 200,000 Ultramar Corp. 5,172,303 5,800,000 0.1
Marketing
Oil Service 1,950,000 Dresser Industries, Inc. 48,383,644 57,525,000 0.6
Paper 200,000 Jefferson Smurfit Group PLC (ADR)* 6,207,462 5,350,000 0.1
790,000 Temple-Inland, Inc. 36,163,014 36,932,500 0.4
-------------- -------------- ------
42,370,476 42,282,500 0.5
Pharmaceuticals 502,000 Block Drug, Inc. (Class A) 15,212,377 20,582,000 0.2
3,650,000 Glaxo Holdings PLC (ADR)* 94,777,915 97,637,500 1.1
425,000 Merck & Co., Inc. 20,739,224 27,465,625 0.3
1,700,000 Pfizer, Inc. 81,423,152 121,337,500 1.3
226,000 Warner-Lambert Co. 9,136,314 12,430,000 0.1
-------------- -------------- ------
221,288,982 279,452,625 3.0
Photography 250,000 Eastman Kodak Co. 14,627,440 19,437,500 0.2
Plastic Recycling 946,000 Wellman Inc. 20,386,872 22,112,750 0.2
<PAGE>
Railroads 420,000 Canadian National Railway Co. 6,732,746 7,717,500 0.1
Real Estate 195,000 National Health Investors, Inc. 6,202,950 6,386,250 0.1
Investment Trusts 1,850,000 RFS Hotel Investors, Inc. 27,921,299 28,675,000 0.3
406,000 South West Properties Trust 5,523,927 5,430,250 0.1
1,350,000 Walden Residential Properties, Inc. 24,943,513 27,506,250 0.3
-------------- -------------- ------
64,591,689 67,997,750 0.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Retail Trade 550,000 Melville Corporation $ 21,535,282 $ 22,275,000 0.2%
1,904,000 Wal-Mart Stores, Inc. 45,929,299 48,314,000 0.5
-------------- -------------- ------
67,464,581 70,589,000 0.7
Services 1,630,000 PHH Corp. 61,200,804 92,910,000 1.0
57,000 Rollins, Inc. 1,283,124 1,339,500 0.0
-------------- -------------- ------
62,483,928 94,249,500 1.0
Telecommunications 800,000 Frontier Corporation 24,085,307 24,500,000 0.3
1,900,000 GTE Corp. 61,457,068 85,025,000 0.9
700,000 Nokia Corp. (ADR)* 24,488,477 25,900,000 0.3
970,000 Telecomunicacoes Brasileiras
S.A.--Telebras (ADR)* 53,263,047 67,536,250 0.7
-------------- -------------- ------
163,293,899 202,961,250 2.2
Tires & Rubber 3,000,000 The Goodyear Tire & Rubber Co. 119,321,790 144,750,000 1.6
<PAGE>
Utilities--Electric, 90,000 Aquarion Co. 2,057,987 2,227,500 0.0
Gas & Water 115,000 Central Hudson Gas & Electric Corp. 3,045,568 3,593,750 0.1
101,000 Energen Corp. 2,317,221 2,234,625 0.0
640,000 Entergy Corp. 15,520,093 18,160,000 0.2
1,050,000 Illinova Corp. 22,555,391 30,187,500 0.3
156,000 Montana Power Co. 3,575,431 3,471,000 0.1
118,000 Northwest Natural Gas Co. 3,862,348 4,130,000 0.1
29,000 NUI Corporation 538,240 518,375 0.0
1,000,000 Pinnacle West Capital Corp. 20,439,778 30,375,000 0.3
160,000 Public Service Company of North Carolina 2,555,808 2,720,000 0.0
288,000 Texas Utilities Co. 11,556,428 12,312,000 0.1
1,400,000 Unicom Corp. 32,447,717 39,025,000 0.4
200,000 United Water Resources, Inc. 2,591,939 2,575,000 0.0
240,000 Washington Water Power Co. 4,030,780 4,470,000 0.1
-------------- -------------- ------
127,094,729 155,999,750 1.7
Total Common Stocks 3,527,425,176 4,439,446,769 48.6
Face Amount Corporate Bonds
Aerospace US$ 15,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 14,987,850 14,962,950 0.2
Automobile Parts 20,000,000 Eaton Corp., 6.50% due 6/01/2025 19,929,200 19,066,600 0.2
Automotive Hertz Corp.:
15,000,000 6.70% due 6/15/2002 14,982,500 14,701,800 0.2
13,000,000 6% due 1/15/2003 12,891,670 12,254,970 0.1
10,000,000 Walbro Corp., 9.875% due 7/15/2005 9,962,500 9,800,000 0.1
-------------- -------------- ------
37,836,670 36,756,770 0.4
Banking 20,000,000 Banco Rio de la Plata, 8.75% due
12/15/2003 20,060,800 17,800,000 0.2
25,000,000 Bank of Boston Corp., 6.625% due
12/01/2005 23,519,000 23,655,750 0.2
BankAmerica Corp.:
15,000,000 6.875% due 6/01/2003 14,149,050 14,743,800 0.2
30,000,000 6.75% due 9/15/2005 29,591,750 28,753,200 0.3
Bankers Trust Company:
10,000,000 7.50% due 1/15/2002 9,688,700 10,137,000 0.1
30,000,000 7.125% due 3/15/2006 29,511,250 29,214,300 0.3
30,000,000 The Chase Manhattan Corp., 6.50%
due 8/01/2005 29,105,700 28,239,300 0.3
15,000,000 First Chicago Corp., 6.875% due
6/15/2003 13,963,300 14,764,350 0.2
</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>
Banking US$ 6,000,000 First Hawaiian, Inc., 6.25% due
(concluded) 8/15/2000 $ 5,841,600 $ 5,830,800 0.1%
First Security Corp.:
5,000,000 5.71% due 2/09/1999 5,000,000 4,889,700 0.1
20,000,000 7% due 7/15/2005 19,803,850 19,363,000 0.2
30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 28,579,200 0.3
20,000,000 Firstbank Puerto Rico, 7.625% due
12/20/2005 19,451,445 19,447,000 0.2
Great Western Financial Corp.:
13,000,000 6.125% due 6/15/1998 12,244,010 12,917,060 0.1
10,000,000 6.375% due 7/01/2000 9,998,800 9,822,400 0.1
Household Bank:
10,000,000 6.87% due 5/15/2001 9,868,800 9,868,800 0.1
20,000,000 6.875% due 3/17/2003 19,886,200 19,780,600 0.2
10,300,000 6.50% due 7/15/2003 10,202,253 9,899,021 0.1
NationsBank Corp.:
10,500,000 5.70% due 9/11/2000 9,545,865 10,061,625 0.1
40,000,000 5.60% due 2/07/2001 40,000,000 37,978,800 0.4
10,000,000 6.20% due 8/15/2003 9,670,360 9,499,700 0.1
25,000,000 6.50% due 8/15/2003 22,104,200 23,989,250 0.3
25,500,000 PNC Funding Corp., 6.125% due 9/01/2003 24,922,025 23,923,080 0.3
Provident Bank:
10,000,000 6.125% due 12/15/2000 10,071,000 9,640,200 0.1
15,000,000 6.375% due 1/15/2004 14,709,250 14,026,950 0.2
20,000,000 Union Planters Corp., 6.25% due
11/01/2003 18,756,100 18,716,400 0.2
20,000,000 Wachovia Corp., 6.605% due 10/01/2025 20,012,500 19,271,600 0.2
-------------- -------------- ------
481,631,158 474,812,886 5.2
Broadcasting & 30,000,000 News America Holdings, Inc.,
Publishing 7.50% due 3/01/2000 29,179,330 30,416,100 0.3
Capital Goods 5,000,000 Giddings & Lewis, Inc., 7.50% due
10/01/2005 5,000,000 4,848,050 0.1
Chemicals 16,000,000 Lyondell Petrochemical Company,
6.50% due 2/15/2006 15,228,970 14,845,760 0.2
25,000,000 Union Carbide Corp., 6.79% due 6/01/2025 25,000,000 24,255,000 0.3
-------------- -------------- ------
40,228,970 39,100,760 0.5
<PAGE>
Diversified 20,000,000 Grace (W.R.) & Co., 7.40% due 2/01/2000 19,663,100 20,245,400 0.2
Companies Tenneco, Inc.:
15,000,000 7.875% due 10/01/2002 14,619,180 15,441,750 0.2
10,000,000 6.50% due 12/15/2005 10,050,000 9,325,300 0.1
-------------- -------------- ------
44,332,280 45,012,450 0.5
Electronics 16,000,000 Litton Industries, Inc., 6.98% due
3/15/2006 16,000,000 15,592,048 0.2
Philips Electronics N.V.:
10,000,000 6.75% due 8/15/2003 9,866,300 9,634,700 0.1
15,000,000 7.125% due 5/15/2025 14,954,200 14,674,200 0.2
-------------- -------------- ------
40,820,500 39,900,948 0.5
Finance Chrysler Finance Corp.:
10,000,000 6.50% due 6/15/1998 9,740,760 10,016,100 0.1
12,000,000 5.375% due 10/15/1998 11,439,770 11,707,200 0.1
10,000,000 5.70% due 1/19/1999 10,011,600 9,805,300 0.1
30,000,000 6.20% due 12/06/2000 30,000,000 29,107,800 0.3
30,000,000 Ford Motor Credit Co., 5.75% due
1/25/2001 29,937,200 28,636,200 0.3
35,000,000 GTE Finance Corp., 5.81% due 12/15/1997 35,000,000 34,737,500 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Face Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Finance General Motors Acceptance Corp.:
(concluded) US$ 25,000,000 5.625% due 2/01/1999 $ 23,855,545 $ 24,398,250 0.3%
50,000,000 6.375% due 4/04/2000 49,887,500 49,217,000 0.5
50,000,000 5.625% due 2/15/2001 49,623,200 47,531,500 0.5
30,000,000 6.75% due 6/10/2002 29,520,300 29,554,200 0.3
10,000,000 Greyhound Financial Corp., 6.75% due
3/25/1999 9,694,200 9,930,500 0.1
15,000,000 Household Finance Corp., 7.05% due
6/06/2001 15,013,950 15,015,600 0.2
International Lease Finance Corp.:
22,500,000 6.05% due 4/30/1999 22,368,375 22,181,625 0.2
20,000,000 5.62% due 2/01/2000 19,876,200 19,283,000 0.3
10,000,000 Margaretten Financial Corp., 6.75%
due 6/15/2000 9,621,060 9,920,500 0.1
Sears, Roebuck Acceptance Corp.:
20,000,000 6.50% due 6/15/2000 20,025,000 19,772,200 0.2
25,000,000 5.71% due 2/06/2001 25,000,000 23,859,500 0.3
50,000,000 5.63% due 2/07/2001 49,996,500 47,510,500 0.5
15,000,000 USL Capital Corp., 5.79% due 1/23/2001 14,995,800 14,358,000 0.2
-------------- -------------- ------
465,606,960 456,542,475 5.0
<PAGE>
Financial Leasing GATX Corp.:
7,000,000 6.66% due 3/15/2001 6,997,900 6,905,780 0.1
12,000,000 6.27% due 12/05/2001 11,823,270 11,570,520 0.1
25,000,000 6.69% due 11/30/2005 24,984,750 23,833,500 0.3
XTRA Corp.:
20,000,000 6.79% due 8/01/2001 19,945,800 19,779,600 0.2
20,000,000 6.68% due 11/30/2001 20,000,000 19,635,000 0.2
-------------- -------------- ------
83,751,720 81,724,400 0.9
Financial Services 10,000,000 American Express Credit Corp., 6.125%
due 11/15/2001 9,963,300 9,669,700 0.1
Finova Capital Corp.:
25,000,000 6.45% due 6/01/2000 24,766,550 24,609,500 0.3
15,000,000 5.98% due 2/27/2001 14,968,950 14,392,950 0.1
10,000,000 6.56% due 11/15/2002 10,000,000 9,709,400 0.1
McDonnell Douglas Finance Corp.:
5,000,000 5.48% due 2/08/1999 4,997,600 4,834,650 0.0
10,000,000 6.73% due 5/05/1999 10,000,000 9,986,060 0.1
10,000,000 6.77% due 9/11/2002 9,983,500 10,011,900 0.1
20,000,000 6.965% due 9/12/2005 20,049,200 19,342,000 0.2
35,000,000 Morgan Stanley Group, Inc., 5.75%
due 2/15/2001 34,968,150 33,344,500 0.4
13,500,000 Salomon, Inc., 7% due 5/15/1999 13,471,515 13,506,885 0.2
Smith Barney Shearson Holdings, Inc.:
40,000,000 5.875% due 2/01/2001 39,179,400 38,276,400 0.4
15,000,000 6.50% due 10/15/2002 14,690,800 14,448,150 0.2
-------------- -------------- ------
207,038,965 202,132,095 2.2
</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>
Food & Tobacco Nabisco Inc.:
US$ 21,000,000 6.70% due 6/15/2002 $ 20,830,000 $ 20,483,610 0.2%
20,000,000 6.85% due 6/15/2005 20,000,000 19,114,800 0.2
-------------- -------------- ------
40,830,000 39,598,410 0.4
Foreign NZ$ 42,000,000 New Zealand Government Bond, 8%
Government due 2/15/2001 27,158,207 27,636,414 0.3
Obligations US$ 5,000,000 Province of Buenos Aires, 11.50%
due 10/19/1998 5,000,000 5,181,250 0.1
Republic of Argentina:
61,000,000 9.25% due 2/23/2001 60,223,900 58,407,500 0.7
55,000,000 8.375% due 12/20/2003 40,435,000 47,918,750 0.5
74,250,000 6.312% due 3/31/2005 49,722,750 58,007,812 0.6
4,500,000 Republic of Colombia, 7.25% due
2/23/2004 4,145,000 4,095,000 0.0
-------------- -------------- ------
186,684,857 201,246,726 2.2
Forest Products 20,400,000 Champion International Corp., 6.40%
due 2/15/2026 20,238,456 18,985,240 0.2
Hospital Columbia/HCA Healthcare Corp.:
20,000,000 6.125% due 12/15/2000 18,456,800 19,330,200 0.2
20,000,000 6.91% due 6/15/2005 19,919,400 19,518,200 0.2
17,500,000 6.63% due 7/15/2045 17,149,625 16,938,425 0.2
15,000,000 Tenet Healthcare Corp., 8.625% due
12/01/2003 15,217,630 15,150,000 0.2
-------------- -------------- ------
70,743,455 70,936,825 0.8
Industrial 9,775,000 Crane Co., 7.25% due 6/15/1999 9,619,840 9,796,309 0.1
12,000,000 Diamond Shamrock, Inc., 7.65% due
7/01/2026 11,981,400 12,203,760 0.1
7,800,000 Interface, Inc., 9.50% due 11/15/2005 7,552,000 7,410,000 0.1
50,000,000 Williams Holdings of Delaware, Inc.,
6.25% due 2/01/2006 49,739,500 45,946,000 0.5
-------------- -------------- ------
78,892,740 75,356,069 0.8
<PAGE>
Insurance 15,125,000 Integon Corp., 8% due 8/15/1999 15,225,519 15,079,171 0.2
10,000,000 NAC Re Corp., 8% due 6/15/1999 10,189,300 10,205,800 0.1
20,000,000 Travelers Inc., 6.875% due 6/01/2025 20,037,200 19,643,000 0.2
-------------- -------------- ------
45,452,019 44,927,971 0.5
Machinery 20,000,000 Black & Decker Corp., 6.625% due
11/15/2000 19,217,900 19,754,400 0.2
20,000,000 FMC Corp., 6.375% due 9/01/2003 18,940,800 18,696,800 0.2
Harris Corp.:
22,500,000 6.375% due 8/15/2002 22,461,850 21,669,750 0.3
10,000,000 10.375% due 12/01/2018 10,541,400 10,942,800 0.1
10,000,000 TRINOVA Corp., 7.95% due 5/01/1997 9,975,000 10,115,200 0.1
-------------- -------------- ------
81,136,950 81,178,950 0.9
Manufactured 3,000,000 Oakwood Homes Corp., 9.125% due 6/01/2007 3,000,000 3,000,000 0.0
Housing
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Face Amount Corporate Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Natural Gas US$ 40,000,000 Coastal Corp., 8.125% due 9/15/2002 $ 40,295,315 $ 41,703,600 0.4%
Suppliers 15,000,000 ENSERCH Corporation, 7.125% due
6/15/2005 15,095,150 14,639,100 0.2
-------------- -------------- ------
55,390,465 56,342,700 0.6
Oil--Integrated Occidental Petroleum Corp.:
12,000,000 5.85% due 11/09/1998 11,150,172 11,790,960 0.1
14,475,000 5.90% due 11/09/1998 14,325,908 14,238,334 0.2
18,375,000 6.24% due 11/24/2000 18,135,306 17,896,882 0.2
Union Texas Petroleum Holdings, Inc.:
10,000,000 6.70% due 11/18/2002 10,000,000 9,703,000 0.1
20,000,000 6.81% due 12/05/2007 20,000,000 19,001,200 0.2
Unocal Corporation:
10,000,000 6.11% due 2/17/2004 10,000,000 9,306,800 0.1
40,000,000 6.23% due 2/15/2005 40,000,000 37,028,000 0.4
25,000,000 YPF S.A., 8% due 2/15/2004 21,533,750 22,156,250 0.2
-------------- -------------- ------
145,145,136 141,121,426 1.5
<PAGE>
Oil--Related Tosco Corporation:
20,000,000 7% due 7/15/2000 19,894,250 19,799,000 0.2
20,000,000 7.625% due 5/15/2006 19,978,400 19,938,400 0.2
-------------- -------------- ------
39,872,650 39,737,400 0.4
Services 20,000,000 ADT Operations, 8.25% due 8/01/2000 20,158,313 20,300,000 0.2
Steel 20,000,000 USX Corp., 6.375% due 7/15/1998 19,894,000 19,782,800 0.2
Telecommunications 15,000,000 AT&T Capital Corp., 6.07% due 10/24/1997 15,000,000 14,968,350 0.2
10,000,000 Bell Atlantic Financial Services,
Inc., 5.47% due 4/27/1998 10,031,400 9,851,600 0.1
10,000,000 Pacific Telecom, Inc., 6.625% due
10/20/2005 10,000,000 9,414,000 0.1
-------------- -------------- ------
35,031,400 34,233,950 0.4
Transportation 11,000,000 Burlington Northern Santa Fe, 7.29%
due 6/01/2036 10,874,710 10,976,680 0.1
10,000,000 General American Transportation Corp.,
6.44% due 11/13/2001 10,000,000 9,721,800 0.1
-------------- -------------- ------
20,874,710 20,698,480 0.2
Utilities--Electric, 10,000,000 Commonwealth Edison Co., 6% due
Gas & Water 3/15/1998 10,157,200 9,910,900 0.1
30,000,000 Enron Corp., 6.75% due 7/01/2005 28,878,400 28,475,700 0.3
5,000,000 Long Island Lighting Co., 7.625% due
4/15/1998 4,986,210 5,001,300 0.1
PECO Energy Co.:
5,000,000 7.50% due 1/15/1999 5,043,600 5,086,350 0.1
20,000,000 5.625% due 11/01/2001 18,908,800 18,600,000 0.2
9,500,000 Texas Utilities Co., 5.75% due 7/01/1998 9,297,135 9,377,640 0.1
United Illuminating Co.:
5,000,000 7.375% due 1/15/1998 5,003,125 5,020,350 0.1
5,000,000 6.20% due 1/15/1999 4,693,050 4,869,600 0.0
-------------- -------------- ------
86,967,520 86,341,840 1.0
Total Corporate Bonds 2,420,656,274 2,399,065,271 26.3
</TABLE>
<PAGE>
<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.:
US$ 20,000,000 5.80% due 4/15/2006 $ 18,615,625 $ 19,431,200 0.2%
14,036,364 6% due 4/15/2006 13,712,321 13,896,000 0.2
5,000,000 7% due 8/15/2008 4,762,500 4,782,800 0.1
13,000,000 6% due 2/15/2011 12,020,937 11,570,000 0.1
Federal National Mortgage Association:
20,000,000 5.10% due 3/25/2002 19,256,250 19,775,000 0.2
13,400,000 7% due 7/25/2006 13,236,687 12,926,712 0.1
12,000,000 6.50% due 1/25/2008 11,608,125 11,306,160 0.1
5,010,000 6.50% due 4/25/2008 4,653,037 4,660,866 0.1
10,000,000 5% due 4/25/2014 9,756,250 9,856,200 0.1
11,450,499 Prudential Home Mortgage Security Co.,
5.25% due 12/25/2000 10,960,274 11,199,962 0.1
Total Collateralized Mortgage
Obligations 118,582,006 119,404,900 1.3
US Government Obligations
US Treasury Notes:
95,000,000 5.75% due 10/31/2000 96,074,219 92,535,700 1.0
25,000,000 6.375% due 8/15/2002 25,000,000 24,800,750 0.3
625,000,000 5.75% due 8/15/2003 607,200,313 595,212,500 6.5
605,000,000 5.875% due 2/15/2004 600,813,281 578,246,900 6.3
25,000,000 6.50% due 5/15/2005 24,800,781 24,671,750 0.3
30,000,000 6.50% due 8/15/2005 29,900,594 29,568,600 0.3
495,000,000 5.875% due 11/15/2005 492,156,119 466,304,850 5.1
30,000,000 7.25% due 5/15/2016 30,001,562 30,703,200 0.3
100,000,000 6.25% due 8/15/2023 89,803,906 90,656,000 1.0
Total US Government Obligations 1,995,750,775 1,932,700,250 21.1
Short-Term Investments
<PAGE>
Commercial Paper** 40,000,000 Allied-Signal, Inc., 5.55% due 7/01/1996 39,987,667 39,987,667 0.4
50,000,000 Delaware Funding Corp., 5.37% due
7/15/1996 49,880,667 49,880,667 0.6
23,951,000 General Electric Capital Corp., 5.56%
due 7/01/1996 23,943,602 23,943,602 0.3
50,000,000 International Securitization
Corporation, 5.42% due 7/26/1996 49,796,750 49,796,750 0.5
46,400,000 National Fleet Funding Corp., 5.39%
due 8/09/1996 46,115,168 46,115,168 0.5
Total Short-Term Investments 209,723,854 209,723,854 2.3
Total Investments $8,272,138,085 9,100,341,044 99.6
==============
Other Assets Less Liabilities 34,903,612 0.4
-------------- ------
Net Assets $9,135,244,656 100.0%
============== ======
Net Asset Class A--Based on net assets of $3,207,817,450 and
Value: 102,159,706 shares outstanding $ 31.40
==============
Class B--Based on net assets of $5,049,645,689 and
164,388,981 shares outstanding $ 30.72
==============
Class C--Based on net assets of $293,674,960 and
9,631,797 shares outstanding $ 30.49
==============
Class D--Based on net assets of $584,106,557 and
18,638,180 shares outstanding $ 31.34
==============
<FN>
(a)Formerly Chemical Banking Corp.
*American Depositary Receipt (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
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