MERRILL
LYNCH
CORPORATE
BOND
FUND, INC.
FUND LOGO
Quarterly Report December 31, 1993
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
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
As 1993 drew to a close the US economy began to
show some signs of improvement with little evidence
of an appreciable increase in the rate of inflation.
Interest rate-sensitive sectors of the US economy are
expanding, such as capital goods, consumer durables
and residential construction. However, excluding the
interest rate-sensitive sectors, the US economy grew
only marginally during 1993. Growth was hampered by
declining government spending, a deteriorating trade
balance, and sluggishness in other sectors of the
economy. Despite the areas of economic weakness
that persist, concerns arose late in 1993 that the rate
of business activity might increase inflationary pres-
sures which were reflected in an upturn of long-term
interest rates.
<PAGE>
Other developments late in the year had significant
long-term implications for the US financial markets.
The outline for proposed healthcare reform is very
important for the US economy. As the various
healthcare reform proposals are debated, investors
will focus on their potential effects on the Federal
budget, the US economy and the quality of healthcare
delivery in the United States. In addition, the
ratification of the North American Free Trade Agree-
ment by the US Congress was important not only for
the prospect of expanding trade with Canada and
Mexico, but also as a positive influence on the
recently concluded round of negotiations on the
General Agreement on Tariffs and Trade. Further
economic integration and growth through trade
liberalization would be positive for the capital
markets in the United States and around the world.
Portfolio Strategy
High Income Portfolio
1993 was a very good year for high-yield securities. It
was a year in which high-yield bond prices advanced
with relative consistency (excepting two minor
corrections in April and September), capped by a
solid rally during October. The net result was a
+3.5% return for the unmanaged Merrill Lynch High
Yield Master Index for the three months ended
December 31, 1993, bringing the twelve-month return
to +17.2%.
During the year, a record 330 new issues totaling $59
billion were brought to market compared with 204
issues and $38 billion in the prior year. Steady cash
inflows into high-yield mutual funds enhanced the
receptivity of new issues while price gains in selected
cyclical securities contributed to a strong secondary
market environment. Fortunately, the credit quality of
the new-issue volume remained good. Only 16% of the
new high-yield bonds sold in 1993 were rated in the
lowest-quality categories (B- or lower) by the major
rating services, about the same as 1992. These
numbers compare most favorably with the 60% B--and
below in 1987-1988, a time of exceptionally low
quality new supply.
<PAGE>
Portfolio strategies over the course of 1993 have
reflected our positive outlook for high-yield bonds. As
our confidence in the strength of the economy grew
during the year, we increased investments in cyclical
companies (those whose earnings are very sensitive
to the business cycle). In the first half of the year, we
added the issues of three airlines and building
products companies such as U.S. Gypsum Corp.,
National Gypsum Industry, Pacific Lumber Co., and
American Standard Inc. We also increased portfolio
exposure to aluminum and paper industry issues
during the year. These strategies benefited the total
return of the Portfolio during the period under review.
Overall, yield spreads between quality groups contin-
ued to compress in 1993 with somewhat better
performance in lower-quality, higher-yielding names.
It appears likely that this trend of compression of
yields between quality groups which began several
years ago has about run its course. Our credit quality
profile, therefore, approaches a market weighting.
We have focused securities purchases on new issues
generally with five-year call protection. The largest
contribution to portfolio returns was from cyclical
credits, including chemicals, paper, transportation,
and building-related companies. We believe cyclicals
will continue to outperform in 1994.
We believe that the outlook for the high-yield market
remains attractive. Our positive view reflects:
Attractive valuation. The yield spreads off US
Treasury securities remain compelling at 4%. Also,
yield premiums, which measure the incremental yield
provided by high-yield bonds over US Treasury
securities of similar maturity, are in the highest
quartile of their range over the past ten years.
A benign environment for high-yield investments. The
economy has been expanding moderately throughout
the year and we believe that growth is likely to
continue over at least the next few quarters. This
means generally improving corporate profits, a posi-
tive particularly for cyclical companies. In addition,
the relatively high valuation on equities has encour-
aged reequitization or the substitution of debt with
equity on the balance sheets of leveraged companies.
These trends have resulted in the lowest default rates
in years. We believe that low default rates will
continue at least through 1994.
<PAGE>
An improving technical situation. The high-yield
bond market was depressed in the third quarter by a
record supply of new issues in the face of modest
flows of cash from the market. Much of the supply
reflected the desire of companies to reduce short-term
bank debt, extend the maturity of debt obligations,
and reduce annual debt repayment requirements. Since
that time, cash inflows have increased sharply though
supply has remained heavy. We believe supply could
ease the second quarter of 1994, permitting the prices
of outstanding bonds to rise.
At December 31, 1993, cash equivalents totaled 6.4%
of net assets. The Portfolio's average maturity was
8 years, 9 months. Major industries represented in the
Portfolio include: energy, 9.4%; conglomerates, 6.4%;
food and beverage, 5.8%; broadcasting and publishing,
5.1%; and hotels and casinos, 5.3%.
Investment Grade Portfolio
Effective January 27, 1994, High Quality Portfolio
was renamed Investment Grade Portfolio. The change
in name does not represent a change in the Portfolio's
investment objectives, which remain the same as before.
After a disappointing start in the first quarter of
1993, the domestic economy began to show signs of
increasing activity for the balance of the year. This
could be measured in the pattern of increases in the
gross domestic product (GDP) from 0.80% in the first
quarter to 1.09% in the second quarter, to 2.90% in the
third quarter. While fourth quarter 1993 results are
not yet available, they are expected to be in the
4.00%--5.00% range. This decidedly upbeat tone was
evidenced by a jump in new home sales and an in-
crease in automobile sales and durable goods orders.
The lowest mortgage rates in well over a decade en-
couraged new buyers into the market as affordability
improved. The pent-up demand of buyers who were
shut out of the housing market by rapid price in-
creases in the 1980s helped boost demand. Auto sales
continued to improve, based on many factors,
including low interest rates, improved consumer
confidence and the yen-US dollar exchange rate.
The usual expectation is that a pick-up in economic
growth is accompanied by a commensurate increase
in the rate of inflation. This expectation led to an
uptick in interest rates in the December quarter.
However, inflation did not keep pace with the economy.
The underlying rate of inflation was 3.2%, the smallest
annual increase in 20 years. Faster economic growth
translates into higher inflation only when the economy
is operating close to potential output, and these
conditions are not currently being met.
<PAGE>
During the first six months of 1993, we extended the
average maturity of the Portfolio from 10.6 years to
11.5 years. This enabled us to participate in the bond
rally that occurred during this period. In anticipation
of the rise in interest rates that began in the fourth
quarter of 1993, we assumed a more defensive posture
in investment strategy. The average maturity of the
Portfolio was reduced from 11.5 years to 10.2 years in
the quarter ended December 31, 1993, and the
Portfolio's cash position was increased from 3% to 6%.
We believe that the change in regulations in the
electric utility industry will result in increased
competition and difficulty for a number of companies.
Therefore, we reduced our exposure to this industry
as well as to the telephone industry. Because we
believed that the low interest rate environment would
help companies in the banking and brokerage indus-
tries, we added to these sectors. We also increased
holdings in dollar-denominated foreign securities and
in supranational issues.
Intermediate Term Portfolio
During the first six months of 1993, we extended the
average maturity of the Portfolio from 6.4 years to 7.7
years. This enabled us to participate in the bond rally
that occurred during this period. In anticipation of
the rise in interest rates which began in the fourth
quarter, we assumed a more defensive posture in the
investment strategy. The average maturity of the
Portfolio was reduced from 7.7 years to 7.4 years at
year-end. Even though yield spreads between Govern-
ment agency issues and US Treasuries were histori-
cally tight, we increased the percentage of holdings in
the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corp. for the higher
yields offered.
We appreciate your ongoing investment in Merrill
Lynch Corporate Bond Fund, Inc., and we look
forward to assisting you with your financial needs and
objectives in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
February 1, 1994
PERFORMANCE DATA
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class A Shares*
Year Ended 12/31/93 +17.39% +12.70%
Five Years Ended 12/31/93 +14.52 +13.59
Ten Years Ended 12/31/93 +13.27 +12.81
Investment Grade Portfolio Class A Shares*
Year Ended 12/31/93 +12.49% + 7.99%
Five Years Ended 12/31/93 +11.47 +10.56
Ten Years Ended 12/31/93 +11.65 +11.19
Intermediate Term Portfolio Class A Shares*
Year Ended 12/31/93 +11.82% + 9.59%
Five Years Ended 12/31/93 +11.04 +10.59
Ten Years Ended 12/31/93 +11.06 +10.83
[FN]
*For High Income and Investment Grade Portfolios, maximum sales
charge is 4%. For Intermediate Term Portfolio, maximum sales
charge is 2%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class B Shares*
Year Ended 12/31/93 +16.65% +12.65%
Five Years Ended 12/31/93 +13.69 +13.69
Inception (10/21/88) through 12/31/93 +13.29 +13.29
<PAGE>
Investment Grade Portfolio Class B Shares*
Year Ended 12/31/93 +11.65% + 7.65%
Five Years Ended 12/31/93 +10.63 +10.63
Inception (10/21/88) through 12/31/93 +10.22 +10.22
Intermediate Term Portfolio Class B Shares*
Year Ended 12/31/93 +11.26% + 9.26%
Inception (11/13/92) through 12/31/93 +11.19 +11.19
[FN]
*For High Income and Investment Grade Portfolios, maximum
contingent deferred sales charge is 4% and is reduced to 0% after
4 years. For Intermediate Term Portfolio, maximum contingent
deferred sales charge is 2% and is reduced to 0% after 2 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1--12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
------------------------------------------- ------------------------------ -------------------------------
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/10/78-12/31/78 $9.60/9.54 - - $ 0.13 - - + 0.73% - -
1979 9.54/8.73 - - 1.03(a) - - + 2.36 - -
1980(b) 8.73/7.91 $ 10.00/9.88 $ 10.00/9.93*** 1.07 $ 0.25 $ 0.25*** + 3.08 + 1.29% + 1.86%
1981 7.91/7.26 9.88/9.38 9.93/9.59 1.13 1.46 1.37 + 6.48 + 10.54 + 11.34
1982 7.26/7.74 9.38/10.51 9.59/10.59 1.04 1.36 1.36 + 23.09 + 28.74 + 26.48
1983 7.74/8.10 10.51/10.24 10.59/10.37 1.01 1.22 1.20 + 18.32 + 9.42 + 9.63
1984 8.10/7.72 10.24/10.44 10.37/10.52 1.02 1.21 1.18 + 8.66 + 15.10 + 14.00
1985 7.72/8.29 10.44/11.45 10.52/11.33 1.01 1.18 1.16 + 21.61 + 22.23 + 19.86
1986 8.29/8.34 11.45/11.95 11.33/11.87 0.98 1.07 1.03 + 12.91 + 14.26 + 14.34
1987 8.34/7.80 11.95/11.00 11.87/10.99 0.95 0.99 0.94 + 4.94 + 0.45 + 0.64
1988 7.80/7.80 11.00/10.90 10.99/10.83 0.95 0.99 0.97 + 12.71 + 8.30 + 7.51
1989 7.80/7.17 10.90/11.33 10.83/11.13 0.97 1.00 0.98 + 4.33 + 13.61 + 12.33
1990 7.17/5.88 11.33/11.13 11.13/11.05 1.00 0.94 0.97 - 4.61 + 6.97 + 8.43
1991 5.88/7.21 11.13/12.03 11.05/11.77 0.90 0.91 0.92 + 39.75 + 17.08 + 15.53
1992 7.21/7.78 12.03/11.86 11.77/11.60 0.86 1.03(c) 0.99(d) + 20.64 + 7.53 + 7.29
1993 7.78/8.32 11.86/11.97 11.60/11.92 0.76 1.35(e) 1.03(f) + 17.39 + 12.49 + 11.82
------ ------ ------
Total $14.81 $14.96 $14.35
Cumulative total return as of 12/31/93: +473.01%** +374.59%** +348.79%**
<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 payable date, and do not
include sales charge; results would be lower if sales charge was included.
***Adjusted for a 10-for-1 split effected in the form of a dividend through January 1981.
(a) Distribution for High Income Portfolio includes $0.024 per share capital gains distributions.
(b) For Investment Grade and Intermediate Term Portfolios, period covered is 10/31/80-12/31/80.
(c) Distribution for Investment Grade Portfolio includes $0.036 per share capital gains distributions.
(d) Distribution for Intermediate Term Portfolio includes $0.012 per share capital gains distributions.
(e) Distribution for Investment Grade Portfolio includes $0.261 per share capital gains distributions.
(f) Distribution for Intermediate Term Portfolio includes $0.093 per share capital gains distributions.
</TABLE>
<TABLE>
Performance Summary-Class B Shares
<CAPTION>
1/1--12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
------------------------------------------- ------------------------------ --------------------------------
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term*** Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88-12/31/88 $7.92/7.80 $11.08/10.90 - $0.18 $ 0.18 - + 0.74% + 0.05% -
1989 7.80/7.17 10.90/11.33 - 0.91 0.91 - + 3.54 +12.77 -
1990 7.17/5.89 11.33/11.13 - 0.95 0.86 - - 5.18 + 6.16 -
1991 5.89/7.22 11.13/12.03 - 0.84 0.83 - +38.67 +16.19 -
1992 7.22/7.78 12.03/11.86 $11.68/11.60 0.80 0.94(a) $0.24(b) +19.57 + 6.71 + 1.34%
1993 7.78/8.33 11.86/11.97 11.60/11.92 0.70 1.25(c) 0.97(d) +16.65 +11.65 +11.26
----- ------ -----
Total $4.38 $4.97 $1.21
Cumulative total return as of 12/31/93: +91.30%** +65.80%** +12.75%**
<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 payable date, and do
not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
***Figures for Intermediate Term Portfolio Class B Shares are since inception on November 13, 1992.
(a) Distribution for Investment Grade Portfolio includes $0.036 per share capital gains distributions.
(b) Distribution for Intermediate Term Portfolio includes $0.012 per share capital gains distributions.
(c) Distribution for Investment Grade Portfolio includes $0.261 per share capital gains distributions.
(d) Distribution for Intermediate Term Portfolio includes $0.093 per share capital gains distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
12/31/93 9/30/93 12/31/92 % Change % Change
<S> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 8.32 $ 8.13 $ 7.78 + 6.94% +2.34%
High Income Portfolio Class B Shares 8.33 8.13 7.78 + 7.07 +2.46
Investment Grade Portfolio Class A Shares 11.97 12.81 11.86 + 3.13(1) -4.52(1)
Investment Grade Portfolio Class B Shares 11.97 12.81 11.86 + 3.13(1) -4.52(1)
Intermediate Term Portfolio Class A Shares 11.92 12.44 11.60 + 3.56(2) -3.43(2)
Intermediate Term Portfolio Class B Shares 11.92 12.44 11.60 + 3.56(2) -3.43(2)
High Income Portfolio Class A Shares--Total Return +17.39(3) +4.76(4)
High Income Portfolio Class B Shares--Total Return +16.65(5) +4.68(6)
Investment Grade Portfolio Class A Shares--Total Return +12.49(7) -0.70(8)
Investment Grade Portfolio Class B Shares--Total Return +11.65(9) -0.90(10)
Intermediate Term Portfolio Class A Shares--Total Return +11.82(11) -0.36(12)
Intermediate Term Portfolio Class B Shares--Total Return +11.26(13) -0.49(14)
High Income Portfolio Class A Shares--Standardized 30-day Yield 8.58%
High Income Portfolio Class B Shares--Standardized 30-day Yield 8.16%
Investment Grade Portfolio Class A Shares--Standardized 30-day Yield 5.75%
Investment Grade Portfolio Class B Shares--Standardized 30-day Yield 5.19%
Intermediate Term Portfolio Class A Shares--Standardized 30-day Yield 5.49%
Intermediate Term Portfolio Class B Shares--Standardized 30-day Yield 5.08%
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges.
(1) Percent change includes reinvestment of $0.261 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.093 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.762 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.194 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.700 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.178 per share ordinary income dividends.
(7) Percent change includes reinvestment of $1.084 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(8) Percent change includes reinvestment of $0.489 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(9) Percent change includes reinvestment of $0.989 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(10) Percent change includes reinvestment of $0.464 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(11) Percent change includes reinvestment of $0.935 per share ordinary income dividends
and $0.093 per share capital gains distributions.
(12) Percent change includes reinvestment of $0.382 per share ordinary income dividends
and $0.093 per share capital gains distributions.
(13) Percent change includes reinvestment of $0.873 per share ordinary income dividends
and $0.093 per share capital gains distributions.
(14) Percent change includes reinvestment of $0.366 per share ordinary income dividends
and $0.093 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Airlines--3.2% Delta Air Lines Inc.:
BB+ Baa3 $ 1,963,718 9.875% due 4/30/2008++++ $ 1,980,901 $ 2,061,120
BB+ Baa3 3,000,000 9.30% due 1/02/2010 2,963,100 2,997,444
BB+ Baa3 5,000,000 9.20% due 9/23/2014 4,839,050 4,957,900
BB+ Baa3 28,000,000 10.50% due 4/30/2016++++ 28,481,900 30,022,188
Piedmont Aviation:
BB+ Ba2 200,000 Series C, 9.70% due 1/15/1999 201,676 197,742
BB+ Ba2 100,000 Series C, 10.25% due 1/15/2007 103,706 99,147
BB+ Ba2 500,000 Series E, 10.30% due 3/28/2007 520,395 507,500
BB+ Ba2 1,950,000 Series F, 10.35% due 3/28/2011 1,999,718 1,969,726
BB+ Ba2 50,000 Series G, 10.35% due 3/28/2011 51,424 50,506
BB+ Ba2 450,000 Series H, 9.85% due 5/08/2005 454,617 443,872
BB+ Ba2 1,500,000 Series H, 10.00% due 11/08/2012 1,493,250 1,469,791
BB+ Ba2 536,000 Series I, 10.00% due 11/08/2012 545,048 533,320
United Air Lines Inc.:
BB+ Baa1 7,100,000 9.35% due 4/07/2016 7,215,446 7,526,000
BB+ Baa1 10,500,000 9.21% due 1/21/2017 10,480,125 10,589,565
USAir Inc.:
B+ Ba3 8,000,000 10.00% due 7/01/2003 8,000,000 7,680,000
BB+ Ba2 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,110,014
BB+ Ba2 3,756,465 Series 89A1, 9.33% due 1/01/2006++++ 3,752,802 3,695,475
BB+ Ba2 5,000,000 Series 89A2, 9.82% due 1/01/2013++++ 4,837,500 4,925,000
BB+ Ba2 15,000,000 Series 93A3, 10.375% due 3/01/2013 15,000,000 15,014,445
----------- ----------
94,080,130 95,850,755
Automobile BB- B2 13,000,000 Exide Corp., 10.75% due 12/15/2002 13,558,125 14,235,000
Parts--0.5%
Broadcasting & B B2 10,550,000 Century Communications Corp., 11.875%
Publishing--5.1% due 10/15/2003 10,550,000 12,132,500
BB- Ba2 15,000,000 Continental Cablevision, 9.50% due 8/01/2013 15,000,000 16,800,000
BB- Ba3 15,000,000 Heritage Media, 11.00% due 6/15/2002 15,008,750 16,612,500
BB- Ba2 9,200,000 K-III Communications Corp.,
10.625% due 5/01/2002 9,192,500 10,028,000
B B3 10,000,000 The Katz Corp., 12.75% due 11/15/2002 10,125,000 11,125,000
CCC+ B3 10,000,000 SCI Television, 11.00% due 6/30/2005 10,350,000 10,400,000
B+ B3 25,000,000 Sinclair Broadcasting, 10.00% due 12/15/2003 25,030,000 25,687,500
B B1 5,000,000 Storer Communications, Inc., 10.00%
due 5/15/2003 3,556,250 5,075,000
B- B3 9,000,000 Summit Communications Group Inc.,
10.50% due 4/15/2005 9,000,000 9,675,000
BB+ Ba3 11,000,000 Videotron L'TEE, 10.25% due 10/15/2002 11,097,500 12,210,000
BB- B1 22,750,000 World Color Press, 9.125% due 3/15/2003 22,769,375 23,603,125
----------- ------------
141,679,375 153,348,625
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Building B+ B1 $ 9,750,000 National Gypsum Industry, 10.00%
Materials--2.2% due 7/01/2003 $ 9,755,000 $ 9,896,250
B+ B3 20,000,000 Pacific Lumber Co., 10.50% due 3/01/2003 20,049,000 20,750,000
US Gypsum Corp.:
B+ B2 7,000,000 10.25% due 12/15/2002 6,993,750 7,210,000
B- B3 29,084,000 8.75% due 3/01/2017 25,890,006 26,902,700
------------ -----------
62,687,756 64,758,950
Building American Standard Inc.:
Products--1.4% B Ba3 6,750,000 9.875% due 6/01/2001 6,750,000 7,095,938
B+ Ba3 10,150,000 9.25% due 12/01/2016 10,203,625 10,530,625
CCC- Caa 9,300,000 Amstar Corp., 11.375% due 2/15/1997 6,566,250 9,532,500
B Ba3 16,000,000 Inter-City Products Corp., 9.75%
due 3/01/2000 15,888,750 16,040,000
----------- -----------
39,408,625 43,199,063
Capital B+ B1 21,450,000 Essex Group Inc., 10.00% due 5/01/2003 21,546,500 21,637,688
Goods--1.9% B+ Ba3 5,000,000 Rexnord Corp., 10.75% due 7/01/2002 5,000,000 6,025,000
Sequa Corp.:
B+ B3 17,500,000 10.50% due 5/01/1998 17,763,250 18,375,000
B+ B3 9,000,000 9.375% due 12/15/2003 9,000,000 9,090,000
----------- -----------
53,309,750 55,127,688
Cellular B- B3 13,000,000 Dial Page Inc., 12.25% due 2/15/2000 13,080,500 14,495,000
Telephones--2.5% CCC+ Caa 20,235,000 Horizon Cellular Telephone Co.,
11.375% due 10/01/2000 (a) 13,210,833 14,468,025
CCC+ B3 17,000,000 Mobilemedia Communication, Inc., 10.50%
due 12/01/2003 (a) 10,237,107 10,497,500
NR NR 7,000,000 Page Mart Inc., 12.25% due 11/01/2003 (a) 3,895,300 4,200,000
B B2 15,000,000 Paging Network, Inc., 11.75% due 5/15/2002 15,000,000 16,987,500
BB- Ba3 13,150,000 Rogers Communication Inc., 10.875%
due 4/15/2004 13,366,250 14,728,000
------------ -----------
68,789,990 75,376,025
<PAGE>
Chemicals--3.2% B B2 17,000,000 Agriculture Minerals, 10.75% due 9/30/2003 17,060,000 17,935,000
B+ Ba3 42,540,000 G-I Holdings, Inc., 11.38% due 10/01/1998 (a) 25,167,465 27,305,363
Harris Chemical:
B+ B2 18,750,000 10.25% due 7/15/2001 (a) 15,105,077 16,101,563
B B3 12,000,000 10.75% due 10/15/2003 12,000,000 12,690,000
B- B3 20,000,000 UCC Investors Holding, Inc., 11.00%
due 5/01/2003 20,550,000 21,750,000
----------- -----------
89,882,542 95,781,926
Communications-- Panamsat L.P.:
0.8% B+ Ba3 4,750,000 9.75% due 8/01/2000 4,750,000 5,046,875
B- B3 28,710,000 11.38% due 8/01/2003 (a) 17,225,978 19,235,700
----------- -----------
21,975,978 24,282,575
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Conglomerates-- NR NR $ 9,083,000 Astrum International, 11.50% due 6/08/2003 $ 9,137,780 $ 9,616,626
6.4% Collins & Aikman Group:
CCC+ Caa 4,300,000 11.375% due 5/01/1997 4,203,602 4,386,000
B Caa 9,900,000 14.39% due 1/31/2005 (a) 7,991,248 9,763,875
Colt Industries, Inc.:
B+ Ba2 5,000,000 9.75% due 4/01/2000 5,300,000 5,343,750
B+ B1 15,000,000 10.25% due 4/01/2002 15,000,000 16,162,500
BB Ba2 3,237,000 11.25% due 12/01/2015 3,447,997 3,479,775
B+ B1 18,500,000 Foamex Capital Corp., 11.25% due 10/01/2002 18,495,000 20,257,500
NR NR 15,000,000 Gillette Holdings, 12.25% due 6/30/2002 15,396,250 16,425,000
B+ B3 25,000,000 Jordan Industries, 10.375% due 8/01/2003 24,961,000 25,500,000
NR NR 8,500,000 MacAndrews & Forbes Group, Inc., 12.25%
due 7/01/1996 8,276,775 8,765,625
NR NR 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13.00% due 3/01/1999 8,568,400 9,156,875
BB- Ba3 11,250,000 Reeves Industries, Inc., 11.00% due 7/15/2002 11,266,912 12,206,250
BB- Ba3 25,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 24,979,062 25,250,000
B- B3 23,250,000 The Interlake Corp., 12.125%
due 3/01/2002 23,483,750 23,540,625
----------- -----------
180,507,776 189,854,401
<PAGE>
Consumer Formica Corp.:
Products--3.0% NR NR 23,500,000 13.06% due 10/01/2001 (a) 21,110,931 22,207,500
NR NR 9,000,000 13.125% due 9/15/2005 9,000,000 9,140,625
NR NR 15,000,000 Liggett Group Inc., 11.50% due 2/01/1999 14,237,597 11,100,000
NR B3 5,500,000 Revlon Consumer Products Corp., 10.50%
due 2/15/2003 5,624,375 5,335,000
B- B3 40,350,000 Revlon Worldwide Corp., 12.00%
due 3/15/1998 (a) 24,199,886 20,780,250
B+ B1 19,850,000 Sealy Corp., 9.50% due 5/01/2003 19,951,800 20,792,875
----------- -----------
94,124,589 89,356,250
Containers--4.6% B B2 20,000,000 Anchor Glass Containers, 9.875%
due 12/15/2008 20,000,000 20,500,000
Ivex Packaging Corp.:
B- B3 13,250,000 12.50% due 12/15/2002 13,157,117 14,442,500
B- Caa 21,500,000 13.25% due 3/15/2005 (a) 9,317,264 10,857,500
BB Ba3 19,000,000 Owens-Illinois, Inc., 11.00% due 12/01/2003 19,380,000 21,897,500
B+ Ba3 11,000,000 Plastic Container Corp., 10.75% due 4/01/2001 11,022,500 11,632,500
B- B3 30,840,000 Silgan Holdings, 13.25% due 6/15/1996 (a) 22,857,906 23,901,000
B+ B1 11,500,000 Stone Consolidated, 10.25% due 12/15/2000 11,520,000 11,615,000
B+ Ba3 20,000,000 Sweetheart Cup, 9.625% due 9/01/2000 20,000,000 21,100,000
------------ -----------
127,254,787 135,946,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Convertible B B2 $ 8,352,000 Builders Transport, Inc., 8.00% due
Bonds*--1.8% 8/15/2005 (7) $ 4,886,880 $ 8,393,760
B- B3 10,520,000 Farm Fresh, Inc., 7.50% due 3/01/2010 (4) 5,488,575 6,995,800
B+ Ba3 10,362,000 Lomas Financial Corp., 9.00% due
10/31/2003 (3) 9,653,775 9,714,375
B- B3 6,941,000 MEDIQ, Inc., 7.25% due 6/01/2006 (5) 4,539,685 6,021,318
CCC+ B3 223,000 Mesa Capital Corp., 12.00% due
6/30/1998 (2) (a) 325,690 318,332
B B2 6,000,000 Ohm Corp., 8.00% due 10/01/2006 (8) 4,160,000 5,887,500
B B2 8,482,000 Ply-Gem Industries, Inc., 10.00% due
10/01/2008 (6) 8,490,000 9,733,095
B+ B2 5,909,000 UNC, Inc., 7.50% due 3/31/2006 (1) 3,442,530 5,628,322
------------ ------------
40,987,135 52,692,502
<PAGE>
Energy--9.4% B+ A1 49,500,000 Clark Oil, 11.00% due 2/15/2000 (a) 25,711,159 27,286,875
NR NR 34,500,000 Consolidated Hydro Inc., 12.00% due
7/15/2003 (a) 19,551,038 20,527,500
CC Caa 2,100,000 Empire Gas Corp., 12.00% due 3/31/2002 1,656,910 2,110,500
CC Caa 5,900,000 Empire, Inc., 9.00% due 12/31/2007 3,290,116 5,162,500
B B2 17,300,000 Ferrell Gas Cos., Inc., 11.625% due
12/15/2003 17,385,240 18,835,375
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 22,300,000
BB B1 12,750,000 Gulf Canada Resources Ltd.,
9.00% due 8/15/1999 11,735,937 12,659,947
BB B1 12,300,000 Maxus Energy Corp., 11.50% due 11/15/2015 11,988,138 12,976,500
Mesa Capital Corp.:
CCC B3 1,363,000 12.75% due 6/30/1996 (a) 936,665 1,086,992
CCC B3 4,341,000 12.75% due 6/30/1998 (a) 3,261,073 3,689,850
C Caa 8,697,000 National Propane Corp., 13.125% due 3/01/1999 6,263,027 8,653,515
BB- Ba3 3,750,000 Noble Drilling, 9.25% due 10/01/2003 3,750,000 3,881,250
BBB- Ba2 18,000,000 Oryx Energy Co., 10.375% due 9/15/2018 17,823,010 19,394,982
Presidio Oil Co.:
B- B3 3,750,000 11.50% due 9/15/2000 3,750,000 3,900,000
CCC Ca 5,000,000 14.05% due 7/15/2002 (d) 5,093,750 5,300,000
BB Ba2 15,000,000 Rowan Companies, Inc., 11.875% due 12/01/2001 15,085,000 16,762,500
BB- Ba3 25,000,000 Seagull Energy, 8.625% due 8/01/2005 24,990,000 25,000,000
CCC+ Caa 8,650,000 Tesoro Petroleum Corp., 12.75% due 3/15/2001 7,483,899 8,660,812
BB- B1 23,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 23,000,000 24,265,000
B+ B1 31,525,000 Triton Energy Corp., 12.816% due
11/01/1997 (a) 21,184,386 22,067,500
B+ B1 13,000,000 Western Co. of North America,
12.875% due 12/01/2002 12,850,100 15,470,000
------------ ------------
256,836,948 279,991,598
Entertainment--3.5% B- B3 11,750,000 AMC Entertainment, 12.625% due 8/01/2002 11,696,095 13,424,375
B+ B1 9,000,000 Cinemark USA Inc., 12.00% due 6/01/2002 9,058,750 10,080,000
CCC+ B3 13,150,000 Fair Lanes, Inc., 11.875% due 8/15/1997 13,293,970 9,270,750
B B3 50,000,000 Marvel Holdings, 11.475% due 4/15/1998 (a) 31,076,109 32,875,000
NR Caa 13,000,000 New World Pictures, 12.25% due 9/15/1998 12,636,000 13,195,000
B+ B2 33,250,000 SPI Holdings, 11.50% due 10/01/2001 (a) 24,048,406 25,935,000
------------ ------------
101,809,330 104,780,125
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
<PAGE>
Financial American Annuity Group Inc.:
Services--2.4% B+ Ba3 $11,000,000 9.50% due 8/15/2001 $ 11,000,000 $ 11,302,500
B- B2 12,000,000 11.125% due 2/01/2003 12,000,000 12,930,000
B- B3 2,786,000 I.C.H. Corp., 16.50% due 12/31/1994 2,755,750 2,841,720
BB Ba1 21,000,000 Lomas Mortgage USA, 10.25% due 10/01/2002 21,140,625 22,155,000
BB+ NR 3,000,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 2,380,000 3,045,000
BB- B1 20,000,000 Reliance Group Holdings, Inc., 9.75%
due 11/15/2003 20,000,000 20,650,000
------------ ------------
69,276,375 72,924,220
Food & Beverage-- BB- Ba3 22,000,000 Del Monte Corp., 10.00% due 5/01/2003 22,080,000 21,780,000
5.8% C Caa 18,500,000 Envirodyne Industries, Inc., 21.59% due
8/01/1994 (a) 15,376,703 16,441,875
B+ B2 25,000,000 Grand Union Corp., 12.25% due 7/15/2002 25,020,625 26,312,500
B- B2 5,000,000 Kash-n-Karry Inc., 12.375% due 2/01/1999 4,975,000 5,237,500
B- Ba3 7,000,000 P & C Food Markets, Inc., 11.50% due
10/15/2001 7,100,000 7,831,250
B B2 25,000,000 Penn Traffic Co., 9.625% due 4/15/2005 24,781,750 26,062,500
B+ B1 19,250,000 Royal Crown Corp., 9.75% due 8/01/2000 19,275,000 19,827,500
B- Caa 11,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 11,967,500 12,065,500
Specialty Foods:
B B2 15,000,000 10.25% due 8/15/2001 15,000,000 15,712,500
B- B3 2,250,000 11.25% due 8/15/2003 2,261,250 2,323,125
B B3 20,000,000 Texas Bottling, 9.00% due 11/15/2003 20,002,500 20,050,000
------------ ------------
167,840,328 173,644,250
Health Services-- B- B1 6,500,000 Abbey Healthcare Group, 9.50% due 11/01/2002 6,500,000 6,670,625
3.0% B+ Ba3 5,000,000 American Medical International Inc., 11.25%
due 6/01/2015 5,097,500 5,325,000
B+ B1 11,500,000 Continental Medical, 10.875% due 8/15/2002 11,523,750 11,931,250
B+ B1 10,000,000 Continental Medsystems, Inc.,
10.375% due 4/01/2003 9,991,250 10,200,000
NR NR 9,823,529 Epic Properties, Inc., 11.50% due 7/15/2001++++ 9,761,641 11,051,470
HealthTrust Co. (The Hospital):
B B1 10,000,000 10.75% due 5/01/2002 10,087,500 11,225,000
B+ B1 10,000,000 8.75% due 3/15/2005 9,850,000 10,400,000
B+ B1 11,500,000 MEDIQ/PRN Life Support Services, Inc.,
11.125% due 7/01/1999 11,455,000 12,132,500
B- B3 9,562,000 The Multicare Companies Inc., 12.50% due
7/01/2002 9,510,090 10,757,250
----------- -----------
83,776,731 89,693,095
<PAGE>
High CCC+ B3 10,000,000 Anacomp, Inc., 15.00% due 11/01/2000 8,972,100 11,550,000
Technology--0.9% ComputerVision Corp.:
B- B3 10,000,000 11.375% due 8/15/1999 9,706,250 8,600,000
B- NR 12,500,000 8.00% due 12/01/2009 6,802,472 6,937,500
----------- ----------
25,480,822 27,087,500
Home Builders-- B- B2 17,000,000 Baldwin Homes Co., 10.375% due 8/01/2003 16,864,500 16,405,000
2.7% Del E. Webb Corp.:
BB- Ba2 7,000,000 10.875% due 3/31/2000 7,002,795 7,472,500
B B2 7,500,000 9.75% due 3/01/2003 7,440,975 7,706,250
B B1 10,250,000 K Hovnanian Enterprises, 11.25% due 4/15/2002 10,204,062 11,210,938
BB Ba2 12,000,000 Standard Pacific Corp., 10.50% due 3/01/2000 11,995,000 12,660,000
B+ Ba3 24,000,000 U.S. Home Corp., 9.75% due 6/15/2003 24,000,000 24,780,000
----------- -----------
77,507,332 80,234,688
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Hotels & B B2 $ 20,000,000 Aztar Corp., 11.00% due 10/01/2002 $ 20,162,500 $ 20,400,000
Casinos--5.3% B+ B2 24,750,000 GNS Finance Corp., 9.25% due 3/15/2003 24,610,371 25,925,625
NR NR 7,682,000 Goldriver Hotel & Casino Corp.,
11.375% due 8/31/1999 (a) 8,609,882 6,260,830
B+ B1 15,000,000 MGM Grand Hotel, 12.00% due 5/01//2002 15,230,500 17,437,500
CCC+ B2 10,000,000 Pioneer Finance Corp., 13.50% due 12/01/1998 10,542,500 10,550,000
BB- Ba3 25,000,000 Showboat, Inc., 9.25% due 5/01/2008 24,920,000 25,625,000
NR Caa 11,447,482 Trump Castle Funding Inc., 9.50% due
8/15/1998++ 8,157,457 9,485,390
B B3 26,000,000 Trump Plaza Funding, Inc., 10.875% due
6/15/2001 25,774,520 26,130,000
NR Caa 15,979,095 Trump Taj Mahal Funding, Inc., 11.35% due
11/15/1999++ 11,585,400 15,006,555
----------- -----------
149,593,130 156,820,900
<PAGE>
Industrial BB- B2 20,000,000 ADT Operations, 9.25% due 8/01/2003 20,091,937 20,600,000
Services--2.7% Bell & Howell Co.:
B+ B1 2,000,000 9.25% due 7/15/2000 2,000,000 2,100,000
B- B3 10,000,000 10.75% due 10/01/2002 10,040,000 10,975,000
B- B3 24,250,000 11.50% due 3/01/2005 (a) 11,785,578 13,458,750
B+ B2 3,300,000 Blount, Inc., 9.00% due 6/15/2003 3,300,000 3,423,750
B- B3 9,000,000 Neodata Services Inc., 12.00% due
5/01/2003 (a) 6,500,823 6,862,500
C Caa 9,007,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 6,662,417 9,232,175
NR Caa 13,052,534 Thermadyne Industries, Inc., 16.59% due
5/01/1999++ (a) 12,995,411 13,625,475
----------- -----------
73,376,166 80,277,650
Metals B- B2 20,000,000 Kaiser Aluminum, 12.75% due 2/01/2003 19,650,000 20,150,000
& Mining--1.6% Maxxam Group, Inc.:
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 5,000,000
B- B3 40,155,000 12.25% due 8/01/2003 (a) 22,624,039 22,988,738
----------- -----------
47,192,789 48,138,738
Paper--4.6% Container Corp. of America:
B B3 14,322,000 14.00% due 12/01/2001 15,016,795 16,022,738
B+ B2 15,420,000 9.75% due 4/01/2003 15,433,400 15,998,250
Fort Howard Corp.:
B+ B1 11,000,000 9.25% due 3/15/2001 11,000,000 11,316,250
B B2 11,000,000 10.00% due 3/15/2003 11,000,000 11,385,000
B B3 25,000,000 Gaylord Container Corp., 11.50% due 5/15/2001 25,001,250 26,750,000
B B1 23,000,000 Riverwood International Corp.,
11.25% due 6/15/2002 23,680,000 25,185,000
Stone Container Group:
B- B2 10,000,000 10.75% due 6/15/1997 9,426,125 9,262,500
B B1 3,000,000 12.625% due 7/15/1998 3,000,000 3,090,000
B B1 12,000,000 11.875% due 12/01/1998 11,921,975 12,210,000
B- B2 6,500,000 11.50% due 9/01/1999 6,264,563 6,061,250
------------ -----------
131,744,108 137,280,988
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Pollution B B1 $ 6,666,000 International Technology Corp., 9.375%
Control--0.2% due 7/01/1996 $ 5,909,400 $ 6,699,330
Railroads--0.6% B+ B3 17,750,000 Southern Pacific Rail Co., 9.375% due
8/15/2005 17,750,000 18,992,500
<PAGE>
Restaurants/ B B2 10,000,000 Chi Chi's Inc., 9.00% due 10/15/2009 8,800,000 9,050,000
Food Services-- B- B2 28,000,000 Flagstar Corp., 11.375% due 9/15/2003 28,000,000 28,980,000
2.6% Foodmaker, Inc:
B- B2 23,000,000 9.75% due 11/01/2003 15,455,000 16,280,000
B- B2 16,000,000 Series 1993A, 9.75% due 6/01/2002 22,641,200 22,655,000
------------- -------------
74,896,200 76,965,000
Retail B- B3 10,000,000 Pamida Holdings, Inc., 11.75% due 3/15/2003 9,997,500 10,225,000
Specialty--1.2% Specialty Retailers:
B+ B1 21,000,000 10.00% due 8/15/2000 21,000,000 21,525,000
B- B3 3,670,000 11.00% due 8/15/2003 3,673,350 3,780,100
------------- -------------
34,670,850 35,530,100
Steel--1.5% B B2 15,000,000 Republic Engineered Steel,
9.875% due 12/15/2001 15,000,000 15,281,250
B+ B1 17,500,000 WCI Steel, Inc., 10.50% due 3/01/2002 17,500,000 18,200,000
BB- B1 12,000,000 Wheeling-Pittsburg Corp.,
9.375% due 11/15/2003 12,000,000 12,435,000
------------- -------------
44,500,000 45,916,250
Textiles--0.9% B+ B3 25,000,000 Westpoint Stevens, 9.375% due 12/15/2005 25,000,000 25,343,750
Transportation B+ B1 5,095,000 ACF Industries, Inc., 11.60% due 5/15/2000 4,865,725 5,120,475
Services--1.9% BB Ba2 9,000,000 Eletson Holdings, 9.25% due 11/15/2003 9,000,000 9,157,500
BB- B1 11,000,000 International Shipping, 9.00% due 7/01/2003 10,998,750 11,247,500
NR NR 22,898,000 Transtar Holdings, 13.375% due 12/15/2003(a) 10,558,290 11,420,378
B+ Ba3 19,000,000 Viking Star Shipping, 9.625% due 7/15/2003 19,077,500 19,593,750
------------- -------------
54,500,265 56,539,603
Utilities--3.8% BB+ Ba1 19,500,000 CTC Mansfield Funding, 11.125% due 9/30/2016 21,013,750 21,139,853
Midland Cogeneration Venture
Limited Partnership:
BB- Ba2 4,643,461 10.33% due 7/23/2002++++ 4,794,374 4,794,048
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 12,208,455
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,480,859
NR NR 14,575,633 Sunflower Electric Power Corp.,
8.00% due 12/31/2016++++ 9,343,201 10,385,138
Texas-New Mexico Power Corp.:
BB Ba3 5,000,000 9.25% due 9/15/2000 5,000,000 5,232,795
B B1 18,000,000 10.75% due 9/15/2003 18,060,000 19,069,632
B Ba3 5,000,000 Transco Energy Co., 9.875% due 6/15/2020 4,687,500 5,625,000
Tucson Electric & Power:
NR NR 12,323,081 Series B, 10.21% due 1/01/2009 11,547,774 11,884,071
NR NR 17,426,207 Series C, 10.73239% due 1/01/2013 16,252,461 17,012,335
------------- -------------
108,011,625 113,832,186
Total Investments in Bonds--91.2% 2,577,918,957 2,720,502,231
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Preferred Stocks High Income Portfolio
<S> <C> <S> <C> <C>
Broadcasting & 471,000 K-III Communications Corp. $ 11,812,750 $ 12,981,938
Publishing--0.8% 105,340 K-III Communications Corp.++ 10,743,225 10,639,332
------------ ------------
22,555,975 23,621,270
Energy--0.2% 1,000 Consolidated Hydro, Inc. 5,133,200 5,450,000
Financial Services--0.0% 13,935 Southmark Corp. (Series A) 4,979,760 69,675
Total Investments in Preferred Stocks--1.0% 32,668,935 29,140,945
<CAPTION>
Common Stocks
<S> <C> <S> <C> <C>
Banking--0.2% 168,000 Chase Manhattan Corp. 7,000,000 5,691,000
Conglomerates--0.2% 200,369 Astrum International 4,085,240 4,545,872
Defense--0.0% 1,560 Empire of Carolina, Inc. 234,000 10,140
Energy--0.1% 122,500 Petrolane Inc. 1,424,063 1,179,063
Financial Services--0.0% 132,527 Lomas Financial Corp. 1,689,719 1,027,084
273,986 Southmark Corp. 8,159,240 0
----------- -----------
9,848,959 1,027,084
Food & 120,194 Abco Markets Inc. 4,054,875 1,584,759
Beverage--0.2% 139,068 Doskocil Companies, Inc. 5,678,900 1,521,056
313,879 RJR Nabisco Holdings Corp. 3,060,320 2,000,979
----------- -----------
12,794,095 5,106,794
Hotels & 66,824 Buckhead Corp. of America 167,060 167,060
Casinos--0.0% 75,500 Goldriver Hotel & Casino Corp.
(Class B) (b) 540,045 306,719
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 523,250
----------- -----------
718,605 997,029
Paper--0.0% 153,176 Gaylord Container Corp. (Class A) 406,524 698,866
<PAGE>
Steel--0.0% 47,242 LTV Corp. 5,521,163 761,777
Total Investments in Common Stocks--0.7% 42,032,649 20,017,625
<CAPTION>
Trusts & Warrants
<S> <C> <S> <C> <C>
Energy--0.0% 20,833 UGI (Warrants) (c) 91,057 23,437
Financial Services--0.0% 7,194 Reliance Group Holdings (Warrants) (c) 0 0
High Technology--0.0% 394,563 Anacomp, Inc. (Warrants) (c) 495,400 1,035,728
Hotels & 7,550 Goldriver Hotel & Casino Corp.
Casinos--0.0% Liquidating Trust 192,320 137,028
Industrial--0.0% 3,465 Thermadyne Industries, Inc. (Warrants) (c) 34,650 15,159
Paper--0.1% 813,584 Gaylord Container Corp. (Warrants) (c) 1,707,305 2,949,242
Telecommunications--0.0% 302,500 ALC Communications Corp. (Warrants) (c) 831,875 0
Total Investments in Trusts &
Warrants--0.1% 3,352,607 4,160,594
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities High Income Portfolio
<S> <C> <S> <C> <C>
Commercial $106,136,000 General Electric Capital Corp., 3.22%
Paper**-6.4% due 1/03/1994 $ 106,136,000 $ 106,136,000
Oryx Inc.:
30,000,000 3.80% due 1/14/1994 29,965,167 29,965,167
20,000,000 3.85% due 1/18/1994 19,967,917 19,967,917
Vons Companies, Inc.:
15,000,000 3.45% due 1/12/1994 14,987,062 14,987,062
10,000,000 3.40% due 1/21/1994 9,983,000 9,983,000
10,000,000 3.50% due 1/28/1994 9,975,694 9,975,694
-------------- -------------
191,014,840 191,014,840
Total Investments in Short-Term
Securities--6.4% 191,014,840 191,014,840
Total Investments--99.4% $2,846,987,988 2,964,836,235
<PAGE> ==============
Other Assets Less Liabilities--0.6% 18,962,893
--------------
Net Assets--100.0% $2,983,799,128
==============
Net Asset Value: Class A--Based on net assets of $923,086,303 and 110,891,419 capital shares outstanding $ 8.32
==============
Class B--Based on net assets of $2,060,712,825 and 247,484,542 capital shares outstanding $ 8.33
==============
<FN>
++ Represents a pay-in-kind security which may pay interest/dividend in
additional face/shares.
++++ Subject to principal paydowns.
* Industry classification for convertible bonds are: (1) Conglomerates;
(2) Energy; (3) Financial Services; (4) Food & Beverages; (5) Health Services;
(6) High Technology; (7) Transportation Services; (8) Waste Management.
** Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Portfolio.
(a) Represents the effective yield at time of purchase.
(b) Each share of Series B Stock contains a right which entitles the Portfolio
to purchase a predetermined number of shares of preferred stock. The
purchase price and number of shares are subject to adjustment.
(c) Warrants entitle the portfolio to purchase a predetermined number of
shares of common stock/face amount of bonds. The purchase price and
number of shares/face amount are subject to adjustment under certain
conditions until the expiration date.
(d) The interest rate is subject to change periodically based upon the
prevailing market rate. The interest rate shown is the rate in effect at
December 31, 1993.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Notes & Bonds:
Obligations-- NR Aaa $ 10,000,000 8.25% due 7/15/1998 $ 11,253,125 $ 11,256,200
12.2% NR Aaa 13,000,000 6.375% due 7/15/1999 13,906,250 13,662,090
NR Aaa 5,000,000 8.75% due 8/15/2000 5,950,391 5,903,100
NR Aaa 4,500,000 7.50% due 11/15/2001 5,054,766 5,021,685
NR Aaa 21,500,000 6.375% due 8/15/2002 23,008,906 22,427,080
NR Aaa 21,000,000 5.75% due 8/15/2003 21,761,094 20,934,270
NR Aaa 10,000,000 7.50% due 11/15/2016 11,087,231 11,106,200
NR Aaa 10,000,000 7.875% due 2/15/2021 10,075,037 11,646,800
NR Aaa 5,500,000 7.125% due 2/15/2023 6,208,984 5,953,695
----------- -----------
108,305,784 107,911,120
<PAGE>
Banks & Thrifts-- BBB Baa3 7,000,000 H.F. Ahmanson & Co., 9.875% due 11/15/1999 8,269,100 8,282,848
12.6% A- Baa1 5,000,000 Bank of New York, 6.50% due 12/01/2003 4,978,125 4,973,890
A- A3 5,000,000 Boatmen's Bancshares Inc.,
6.75% due 3/15/2003 5,028,900 5,091,045
First Interstate Bancorp.:
A- A3 3,000,000 11.00% due 3/05/1998 3,603,060 3,557,994
BBB+ Baa1 3,000,000 9.90% due 11/15/2001 3,642,840 3,638,340
First Union Corp.:
A- A3 1,000,000 8.125% due 6/24/2002 1,109,750 1,111,182
A- A3 8,300,000 8.00% due 11/15/2002 8,810,850 9,134,225
Golden West Financial Corp.:
A- A3 5,000,000 9.15% due 5/23/1998 5,678,700 5,684,280
A- A3 5,000,000 7.875% due 1/15/2002 5,025,600 5,460,350
A- A3 5,000,000 8.375% due 4/15/2002 5,035,950 5,628,255
A- A3 8,000,000 Huntington Bancshares,
7.625% due 1/15/2003 8,405,600 8,615,416
BBB+ A3 7,000,000 Meridian Bancorp, 6.625% due 3/15/2003 6,887,370 7,054,173
A- A3 8,000,000 NationsBank Corp., 6.875% due 2/15/2005 8,438,160 8,169,856
Norwest Corp.:
A A2 8,500,000 6.625% due 3/15/2003 8,612,110 8,665,776
A A2 8,000,000 6.65% due 10/15/2023 7,968,480 7,427,288
A- A3 3,500,000 Society National Bank, 7.85% due 11/01/2002 3,870,125 3,839,577
A- Baa1 6,500,000 US Bancorp, 7.00% due 3/15/2003 6,483,750 6,732,518
A A2 7,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 7,430,130 8,235,731
----------- -----------
109,278,600 111,302,744
Federal NR Aaa 1,500,000 Federal Home Loan Mortgage Corp.,
Agencies--1.6% 6.55% due 4/02/2003 1,526,265 1,526,616
NR Aaa 7,000,000 Federal National Mortgage Association,
5.80% due 12/10/2003 6,978,125 6,925,338
AAA Aaa 5,000,000 Private Export Funding,
8.35% due 1/31/2001 5,786,950 5,797,155
----------- -----------
14,291,340 14,249,109
Financial Services-- Chrysler Financial Corp.:
Captive--2.8% BBB Baa2 8,000,000 6.50% due 6/15/1998 8,353,920 8,201,448
BBB Baa2 2,250,000 9.50% due 12/15/1999 2,639,318 2,622,794
BBB Baa2 5,000,000 10.95% due 8/01/2017 6,068,750 6,030,460
Ford Motor Credit Corp.:
A A2 1,000,000 7.75% due 11/15/2002 1,040,130 1,093,898
A A2 7,000,000 6.75% due 8/15/2008 6,959,050 6,958,504
----------- -----------
25,061,168 24,907,104
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Financial Services-- American General Finance Corp.:
Consumer--3.4% A+ A1 $ 2,500,000 8.50% due 8/15/1998 $ 2,848,650 $ 2,791,357
A+ A1 9,000,000 7.45% due 7/01/2002 9,131,640 9,660,276
Associates Corp. of North America:
AA- A1 2,000,000 8.80% due 8/01/1998 2,253,820 2,257,816
AA- A1 1,550,000 6.75% due 10/15/1999 1,612,945 1,617,507
A+ A1 6,000,000 Commercial Credit Co., 6.70% due 8/01/1999 6,001,800 6,235,752
A+ A2 7,000,000 Transamerica Finance Corp.,
7.94% due 12/02/2002 (a) 7,672,700 7,742,560
------------ ------------
29,521,555 30,305,268
Financial Services-- Bear Stearns Cos. Inc.:
Other--7.8% A A2 3,000,000 6.75% due 4/15/2003 3,125,580 3,018,891
A A2 6,000,000 6.70% due 8/01/2003 5,970,660 6,016,248
Dean Witter & Discover:
A A3 3,000,000 6.875% due 3/01/2003 3,087,120 3,072,585
A A3 2,000,000 6.50% due 11/01/2005 2,000,000 1,982,490
A A3 6,000,000 6.75% due 10/15/2013 5,880,540 5,688,186
AAA Aaa 4,500,000 General Electric Capital Corp.,
8.70% due 2/15/2003 5,449,725 5,256,275
Morgan Stanley Group Inc.:
A+ A1 10,000,000 8.875% due 10/15/2001 11,482,400 11,536,630
A+ A1 12,000,000 7.00% due 10/01/2013 12,021,310 11,695,188
PaineWebber Group Inc.:
BBB+ A3 3,000,000 6.25% due 6/15/1998 3,078,060 3,023,583
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,185,100 8,098,916
A+ A3 8,000,000 Torchmark Corp., 9.625% due 5/01/1998 7,941,440 9,206,424
------------ ------------
68,221,935 68,595,416
Foreign*--9.3% A+ A2 7,500,000 CRA Finance Ltd., 7.125% due 12/01/2013 (1) 7,456,500 7,383,495
Hydro-Quebec (2):
A+ A1 10,000,000 8.00% due 2/01/2013 11,212,600 10,810,960
A+ A1 6,000,000 8.40% due 1/15/2022 6,709,620 6,720,240
AAA Aaa 2,000,000 Japan Finance Corp. for Municipal
Enterprises, 8.70% due 7/30/2001 (3) 2,237,380 2,332,942
AAA Aaa 5,000,000 KFW International Finance Inc.,
7.00% due 3/01/2013 (4) 4,944,350 5,094,810
A+ A1 6,500,000 Korea Development Bank,
7.90% due 2/01/2002 (5) 7,110,740 7,013,116
A+ A1 5,000,000 Korea Electric Power, 7.75% due 4/01/2013 (6) 5,117,200 5,130,485
<PAGE> Metropolis of Tokyo (Japan) (7):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 4,097,264
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,749,308
BBB Baa1 3,000,000 Petro Canada, 8.60% due 10/15/2001 (8) 3,292,470 3,371,391
AA+ Aa1 5,000,000 Province of British Columbia (Canada),
7.00% due 1/15/2003 (9) 4,982,870 5,283,750
A+ A1 2,500,000 Province of Manitoba (Canada),
8.80% due 1/15/2020 (9) 2,959,500 2,950,628
Province of Ontario (Canada) (9):
AA- Aa2 7,000,000 8.00% due 10/17/2001 7,564,970 7,726,369
AA- Aa2 5,000,000 7.75% due 6/04/2002 5,398,150 5,450,205
A+ A1 3,000,000 Province of Quebec (Canada),
13.00% due 10/01/2013 (9) 3,918,120 3,983,553
------------ ------------
81,258,886 82,098,516
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-
Consumer--12.0% AA- A1 $ 3,000,000 Anheuser-Busch Cos., Inc.,
8.75% due 12/01/1999 $ 3,367,590 $ 3,441,039
Bass America, Inc.:
A+ A1 3,000,000 6.75% due 8/01/1999 3,027,270 3,126,231
A+ A1 12,000,000 8.125% due 3/31/2002 12,156,070 13,293,000
Dilliard Department Stores, Inc.:
A+ A2 3,000,000 7.375% due 6/15/1999 3,173,880 3,227,655
A+ A2 8,000,000 7.85% due 10/01/2012 7,926,890 8,662,688
BBB+ Baa2 3,500,000 Fruit of the Loom, Inc., 7.875% due 10/15/1999 3,799,075 3,801,875
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 4,133,152
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 10,351,539
A+ A2 6,000,000 7.125% due 9/15/2004 6,499,940 6,330,978
A+ A2 4,000,000 9.00% due 8/15/2011 4,764,410 4,766,172
A A2 6,000,000 K mart Corp., 7.77% due 7/02/2002 (a) 6,000,000 6,453,960
Philip Morris Cos., Inc.:
A A2 2,000,000 9.00% due 1/01/2001 2,061,930 2,309,122
A A2 5,000,000 7.25% due 1/15/2003 5,113,110 5,264,395
BBB+ Baa1 5,000,000 Sears, Roebuck & Co., 9.25% due
4/15/1998 5,712,125 5,676,140
Wal-Mart Stores, Inc.:
AA Aa1 10,000,000 8.625% due 4/01/2001 10,509,800 11,628,050
AA Aa1 8,000,000 6.50% due 6/01/2003 7,982,480 8,189,440
AA Aa3 5,000,000 Warner-Lambert Co.,
6.625% due 9/15/2002 4,910,350 5,170,360
------------ ------------
100,417,610 105,825,796
<PAGE>
Industrial--
Energy--4.8% A+ A1 5,000,000 Atlantic Richfield, 10.375% due 7/15/1995 5,266,660 5,447,005
AA- A1 9,000,000 BP America Inc. (Guaranteed by the
British Petroleum Co., PLC), 7.875%
due 5/15/2002 9,519,510 9,947,313
Burlington Resources Inc.:
A- A3 8,500,000 9.625% due 6/15/2000 9,720,390 10,148,558
A- A3 1,000,000 8.50% due 10/01/2001 1,165,780 1,140,152
Texaco Capital Inc.:
A+ A1 5,500,000 9.00% due 12/15/1999 6,215,190 6,367,488
A+ A1 1,000,000 8.50% due 2/15/2003 1,089,360 1,150,450
A+ A1 2,000,000 8.875% due 9/01/2021 2,440,280 2,416,154
A+ A1 5,000,000 8.00% due 8/01/2032 4,848,650 5,509,550
------------ ------------
40,265,820 42,126,670
Industrial--
Other--13.0% A+ A1 4,000,000 Air Products & Chemicals, 6.25%
due 6/15/2003 3,965,400 4,003,000
Archer-Daniels-Midland Co.:
AA- Aa2 10,000,000 6.25% due 5/15/2003 9,950,460 10,112,600
AA- Aa2 5,000,000 7.125% due 3/01/2013 4,986,800 5,143,835
Baxter International Inc.:
A- A3 8,000,000 8.125% due 11/15/2001 8,399,300 8,884,248
A- A3 4,000,000 7.625% due 11/15/2002 3,997,200 4,314,536
A+ A1 4,000,000 Capital Cities/ABC, Inc., 8.875% due
12/15/2000 4,305,360 4,678,784
A- Baa1 8,000,000 Carnival Cruise Lines, Inc., 6.15%
due 10/01/2003 7,995,600 7,792,760
A A2 6,000,000 Communications Satellite Corp., 8.125%
due 4/01/2004 6,376,270 6,736,668
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- Ford Capital B.V.:
Other A A2 $ 2,500,000 9.375% due 5/15/2001 $ 2,762,725 $ 2,943,155
(concluded) A A2 4,000,000 9.50% due 7/01/2001 4,527,920 4,745,360
A A2 9,000,000 9.875% due 5/15/2002 9,080,850 10,977,966
AA- Aa3 6,000,000 Gannett Co. Inc., 5.25% due 3/01/1998 5,980,920 5,995,608
AA Aa2 8,740,000 Kaiser Foundation Hospital, 9.00% due
11/01/2001 9,835,623 10,246,391
BBB- Baa3 5,000,000 Telecommunications, Inc., 7.25% due
8/01/2005 5,410,950 5,139,220
BBB- Baa3 5,000,000 Time Warner Entertainment Co., 8.375%
<PAGE> due 3/15/2023 5,281,450 5,275,000
AAA Aaa 3,000,000 United Parcel Service, 8.375% due 4/01/2020 2,859,590 3,561,558
AA- Aa3 6,000,000 Walt Disney Co., 5.80% due 10/27/2008 6,000,000 5,641,500
A2 A 5,000,000 Weyerhaeuser Corp., 7.50% due 3/01/2013 5,000,000 5,266,505
A A3 3,000,000 Witco Corp., 6.60% due 4/01/2003 2,999,130 3,045,390
------------ ------------
109,715,548 114,504,084
Supranational-- Asian Development Bank:
6.0% AAA Aaa 3,000,000 10.75% due 6/01/1997 3,302,730 3,529,869
AAA Aaa 9,000,000 9.125% due 6/01/2000 9,455,080 10,585,404
AAA Aaa 4,000,000 6.50% due 9/21/2002 3,875,000 4,117,244
AAA Aaa 4,000,000 European Investment Bank,
9.125% due 6/01/2002 4,890,870 4,797,408
Inter-American Development Bank:
AAA Aaa 8,000,000 8.875% due 6/01/2009 10,115,250 9,859,352
AAA Aaa 5,000,000 8.50% due 3/15/2011 5,955,170 5,939,160
AAA Aaa 10,000,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 12,247,510 14,135,930
------------ ------------
49,841,610 52,964,367
Transportation--
0.9% Southwest Airlines, Inc.:
A- Baa1 4,000,000 9.40% due 7/01/2001 4,814,240 4,707,424
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 3,260,649
------------ ------------
7,798,190 7,968,073
Utilities--
Communications--
3.1% BBB+ A3 4,000,000 GTE Corp., 9.10% due 6/01/2003 4,242,720 4,727,908
AA- Aa2 2,000,000 New England Telephone & Telegraph Co.,
8.625% due 8/01/2001 2,233,620 2,307,924
Pacific Bell, Inc.:
AA- Aa3 4,000,000 8.70% due 6/15/2001 3,958,040 4,634,992
AA- Aa3 6,000,000 7.25% due 7/01/2002 5,970,840 6,422,520
AA- Aa3 4,500,000 7.125% due 3/15/2026 4,598,370 4,513,684
A+ A1 5,000,000 Southwestern Bell Telecommunications,
6.125% due 3/01/2000 5,028,125 5,082,810
============ ============
26,031,715 27,689,838
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A+ A1 $ 2,000,000 Baltimore Gas & Electric Co., 8.375% due
Electric--7.0% 8/15/2001 $ 2,040,240 $ 2,273,180
A A2 5,000,000 Central Power & Light Co., 6.00% due
10/01/1997 4,973,400 5,102,330
A- A3 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 2,032,082
Pacific Gas & Electric Co.:
A A1 12,000,000 7.875% due 3/01/2002 12,232,160 13,234,152
A A1 9,000,000 6.25% due 8/01/2003 8,990,280 8,928,621
A A1 5,000,000 7.25% due 8/01/2026 5,056,400 4,949,920
Pennsylvania Power & Light Co.:
A A2 8,000,000 7.75% due 5/01/2002 8,388,270 8,749,968
A A2 7,500,000 6.875% due 2/01/2003 7,607,625 7,762,687
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,888,600
A A2 3,000,000 Virginia Electric & Power Co., 6.625% due
4/01/2003 2,996,700 3,077,208
----------- -----------
59,246,495 61,998,748
Utilities-- Consolidated Natural Gas Co.:
Gas--1.3% AA- A1 1,000,000 9.375% due 2/01/1997 1,031,440 1,122,268
AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 8,552,543
AA- A1 2,000,000 5.75% due 8/01/2003 1,970,080 1,934,784
---------- ----------
10,452,180 11,609,595
Total Investments in
Bonds & Notes--97.8% 839,708,436 864,056,448
<CAPTION>
Short-Term Securities
<S> <C> <S> <C> <C>
Repurchase 48,762,000 Bankers Trust Co., purchased on
Agreements**--5.5% 12/31/1993 to yield 3.25% to 1/03/1994 48,762,000 48,762,000
Total Investments in Short-Term
Securities--5.5% 48,762,000 48,762,000
Total Investments--103.3% $888,470,436 912,818,448
============
Liabilities in Excess of Other Assets--(3.3%) (29,056,098)
------------
Net Assets--100.0% $883,762,350
============
Net Asset Class A--Based on net assets of $378,242,584 and 31,610,808 capital shares outstanding $ 11.97
Value: ============
Class B--Based on net assets of $505,519,766 and 42,249,276 capital shares outstanding $ 11.97
============
<PAGE>
<FN>
* Corresponding industry groups for foreign securities, which
are denominated in US dollars:
(1) Industrial Mining.
(2) Electric Utility; Owned & Guaranteed by the Province.
(3) Financial Institution; Government-Owned & Guaranteed.
(4) Financial Institution: Government-Owned & Supported,
not Guaranteed.
(5) Financial Institution: Government-Owned & Guaranteed
by Korea.
(6) Electric Utility; Majority-Owned, not Guaranteed by
Korea.
(7) Government Entity; Guaranteed by Japan.
(8) Energy Company not Guaranteed by Canada.
(9) Government Entity; Guaranteed by the Province.
** Repurchase Agreements are fully collateralized by
US Government Obligations.
(a) Medium-Term Note.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Notes:
Obligations--8.2% NR Aaa $ 4,000,000 4.375% due 11/15/1996 $ 3,988,600 $ 3,984,960
NR Aaa 3,000,000 8.25% due 7/15/1998 3,374,531 3,376,860
NR Aaa 11,000,000 4.75% due 8/31/1998 10,851,060 10,824,660
NR Aaa 3,000,000 4.75% due 10/31/1998 3,004,620 2,947,470
NR Aaa 2,000,000 6.00% due 10/15/1999 2,070,000 2,064,980
NR Aaa 3,000,000 6.375% due 8/15/2002 3,135,938 3,129,360
NR Aaa 1,000,000 5.75% due 8/15/2003 1,025,469 996,870
----------- -----------
27,450,218 27,325,160
Banks & Thrifts-- BBB Baa3 3,000,000 H.F. Ahmanson & Co., 3.875% due 11/15/1999 3,543,900 3,549,792
17.4% A- Baa1 2,000,000 Bank of New York, 6.50% due 12/01/2003 1,991,250 1,989,556
A- A3 6,000,000 Boatmen's Bancshares, Inc.,
6.75% due 3/15/2003 6,022,720 6,109,254
First Interstate Bancorp.:
A- A3 4,500,000 11.00% due 3/05/1998 5,404,590 5,336,991
BBB+ Baa1 7,000,000 9.90% due 11/15/2001 8,552,250 8,489,460
First Union Corp.:
A- A3 5,000,000 8.00% due 11/15/2002 5,002,240 5,502,545
A- A3 3,000,000 7.25% due 2/15/2003 2,990,730 3,165,075
<PAGE> Golden West Financial Corp.:
A- A3 4,000,000 9.15% due 5/23/1998 4,542,960 4,547,424
A- A3 1,000,000 7.875% due 1/15/2002 1,089,750 1,092,070
A- A3 3,000,000 8.375% due 4/15/2002 2,961,120 3,376,953
BBB+ A3 4,500,000 Meridian Bancorp, 6.625% due 3/15/2003 4,364,145 4,534,826
A A2 3,000,000 Norwest Corp., 6.625% due 3/15/2003 3,002,870 3,058,509
A- Baa1 5,000,000 U.S. Bancorp, 7.00% due 3/15/2003 5,052,660 5,178,860
A A2 2,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 2,072,740 2,353,066
----------- -----------
56,593,925 58,284,381
Federal NR Aaa 1,000,000 Federal Home Loan Mortgage Corp.,
Agencies--0.3% 6.55% due 4/02/2003 1,017,510 1,017,744
Financial American General Finance Corp.:
Services--19.6% A+ A1 1,500,000 8.50% due 8/15/1998 1,680,255 1,674,815
A+ A1 1,000,000 7.45% due 7/01/2002 997,800 1,073,364
A+ A1 3,500,000 6.375% due 3/01/2003 3,457,190 3,497,473
Associates Corp. of North America:
AA- A1 3,000,000 8.80% due 8/01/1998 3,380,730 3,386,724
AA- A1 1,500,000 7.50% due 5/15/1999 1,645,950 1,619,500
Bear Stearns Cos. Inc.:
A A2 6,500,000 6.75% due 4/15/2003 6,577,675 6,540,930
A A2 2,000,000 6.70% due 8/01/2003 2,072,560 2,005,416
BBB Baa2 8,500,000 Chrysler Financial Corp., 9.50% due 12/15/1999 9,935,805 9,908,331
A A2 2,000,000 Commercial Credit Co., 6.70% due 8/01/1999 2,001,200 2,078,584
A A3 5,000,000 Dean Witter & Discover, 6.875% due 3/01/2003 5,017,470 5,120,975
Ford Motor Credit Co.:
A A2 2,000,000 8.00% due 1/15/1999 2,197,100 2,185,958
A A2 1,000,000 7.75% due 11/15/2002 1,040,130 1,093,898
A A2 2,000,000 7.50% due 1/15/2003 2,040,640 2,146,668
BBB+ Baa1 5,000,000 General Motors Acceptance Corp.,
7.75% due 1/15/1999 5,366,650 5,323,780
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Financial Morgan Stanley Group Inc.:
Services A+ A1 $ 2,500,000 9.375% due 6/15/2001 $ 2,952,975 $ 2,948,350
(concluded) A+ A1 3,000,000 8.875% due 10/15/2001 3,482,840 3,460,989
PaineWebber Group Inc.:
BBB+ A3 2,000,000 6.25% due 6/15/1998 2,052,040 2,015,722
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,174,550 8,098,916
A+ A3 1,000,000 Torchmark Corp., 9.625% due 5/01/1998 1,139,040 1,150,803
----------- -----------
65,212,600 65,331,196
<PAGE>
Foreign*--6.9% A+ A2 4,000,000 CRA Finance Ltd., 6.50% due 12/01/2003 (1) 3,994,000 3,995,640
Korea Development Bank (2):
A+ A1 1,500,000 6.25% due 5/01/2000 1,508,040 1,500,606
A+ A1 2,500,000 7.90% due 2/01/2002 2,734,900 2,697,353
A+ A1 3,000,000 Korea Electric Power,
6.375% due 12/01/2003 (3) 2,955,810 2,904,774
BBB Baa1 5,000,000 Petro Canada, 8.60% due 10/15/2001 (4) 5,194,980 5,618,985
AA+ Aa1 2,000,000 Province of British Columbia (Canada),
7.00% due 1/15/2003 (5) 1,998,500 2,113,500
AA- Aa2 1,000,000 Province of Ontario (Canada),
8.00% due 10/17/2001 (5) 1,080,710 1,103,767
A+ A1 3,000,000 Province of Quebec (Canada),
7.50% due 7/15/2002 (5) 3,228,060 3,208,035
----------- -----------
22,695,000 23,142,660
Industrials-- A+ A1 4,000,000 Air Products & Chemicals, 6.25% due
31.1% 6/15/2003 3,965,400 4,003,000
AA- A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75% due
12/01/1999 6,189,909 6,286,778
AA- Aa2 2,000,000 Archer-Daniels-Midland Co., 6.25% due
5/15/2003 1,989,000 2,022,520
A+ A1 2,000,000 Atlantic Richfield, 10.375% due 7/15/1995 2,176,960 2,178,802
Bass America, Inc.:
A+ A1 1,000,000 6.75% due 8/01/1999 1,009,090 1,042,077
A+ A1 2,000,000 8.125% due 3/31/2002 2,065,740 2,215,500
A- A3 1,000,000 Baxter International, Inc.,
8.125% due 11/15/2001 1,083,080 1,110,531
AA- A1 1,000,000 BP America Inc. (Guaranteed by the British
Petroleum Co., PLC), 7.875% due 5/15/2002 1,055,380 1,105,257
Burlington Resources, Inc.:
A- A3 3,500,000 9.625% due 6/15/2000 4,186,510 4,178,818
A- A3 1,000,000 8.50% due 10/01/2001 1,165,780 1,140,152
A- Baa1 3,000,000 Carnival Cruise Lines, Inc.,
6.15% due 10/01/2003 2,998,350 2,922,285
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,191,980 4,303,540
A+ A2 1,000,000 7.15% due 9/01/2002 1,046,710 1,062,543
A A3 2,000,000 First Data Corp., 6.625% due 4/01/2003 1,989,620 2,030,644
Fruit of the Loom, Inc.:
BBB+ Baa2 2,500,000 7.875% due 10/15/1999 2,713,625 2,715,625
BBB+ Baa2 6,000,000 6.50% due 11/15/2003 5,952,120 6,007,500
AA- Aa3 2,000,000 Gannett Co., Inc., 5.25% due 3/01/1998 1,993,640 1,998,536
Grand Metropolitan Investment Corp.:
A+ A2 1,000,000 6.50% due 9/15/1999 958,240 1,033,288
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,450,513
AA Aa2 3,500,000 Kaiser Foundation Hospital,
9.00% due 11/01/2001 3,881,070 4,103,246
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrials BBB+ Baa2 $ 3,000,000 Louisiana Land & Exploration,
(concluded) 8.25% due 6/15/2002 $ 3,000,000 $ 3,299,088
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 4,116,468
A A2 2,000,000 Phillip Morris Cos., Inc.,
9.00% due 1/01/2001 1,983,340 2,309,122
Sears, Roebuck & Co.:
BBB+ Baa1 2,500,000 9.25% due 4/15/1998 2,837,275 2,838,070
BBB+ Baa1 4,000,000 8.45% due 11/01/1998 4,446,570 4,435,848
Telecommunications, Inc.:
BBB- Baa3 3,000,000 9.25% due 4/15/2002 3,608,460 3,491,712
BBB- Baa3 5,000,000 8.25% due 1/15/2003 5,271,050 5,511,235
BBB- Baa2 6,000,000 Tenneco Inc., 8.00% due 11/15/1999 6,371,100 6,521,478
Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,107,270
A+ A1 2,000,000 9.00% due 12/15/1999 2,342,460 2,315,450
Wal-Mart Stores, Inc.:
AA Aa1 4,000,000 9.10% due 7/15/2000 4,661,520 4,744,152
AA Aa1 2,000,000 8.625% due 4/01/2001 2,101,960 2,325,610
AA Aa1 2,000,000 6.375% due 3/01/2003 1,994,860 2,028,226
AA Aa3 1,000,000 Warner-Lambert Co., 6.625% due 9/15/2002 1,024,270 1,034,072
A A3 2,000,000 Witco Corp., 6.60% due 4/01/2003 1,999,420 2,030,260
=========== ===========
101,292,549 104,019,216
Supranational-- Asian Development Bank:
3.2% AAA Aaa 2,000,000 9.125% due 6/01/2000 2,234,280 2,352,312
AAA Aaa 2,500,000 6.50% due 9/21/2002 2,421,875 2,573,277
AAA Aaa 4,800,000 European Investment Bank,
9.125% due 6/01/2002 5,819,666 5,756,890
----------- -----------
10,475,821 10,682,479
Transportation-- A- Baa1 5,000,000 Southwest Airlines, Inc., 9.40% due 7/01/2001 5,949,310 5,884,280
1.8%
Utilities-- Pacific Bell, Inc.:
Communications-- AA- Aa3 1,000,000 8.70% due 6/15/2001 1,113,620 1,158,748
0.7% AA- Aa3 1,000,000 7.25% due 7/01/2002 995,140 1,070,420
----------- -----------
2,108,760 2,229,168
<PAGE>
Utilities-- A A1 3,000,000 Pacific Gas & Electric Co.,
Electric--2.5% 7.875% due 3/01/2002 3,058,040 3,308,538
Pennsylvania Power & Light Co.:
A A2 4,000,000 5.50% due 4/01/1998 3,991,280 4,001,712
A A2 1,000,000 7.75% due 5/01/2002 1,043,980 1,093,746
----------- -----------
8,093,300 8,403,996
Utilities-- Consolidated Natural Gas Co.:
Gas--2.8% AA- A1 4,000,000 9.375% due 2/01/1997 4,125,760 4,489,072
AA- A1 5,000,000 5.75% due 8/01/2003 4,996,030 4,836,960
----------- -----------
9,121,790 9,326,032
Total Investments in
Bonds & Notes--94.5% 310,010,783 315,646,312
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities Intermediate Term Portfolio
<S> <C> <S> <C> <C>
Commercial $ 5,000,000 General Electric Capital Corp.,
Paper**--1.5% 3.22% due 1/03/1994 $ 5,000,000 $ 5,000,000
Repurchase 17,986,000 Bankers Trust Co., purchased on 12/31/1993
Agreements***--5.4% to yield 3.25% to 1/03/1994 17,986,000 17,986,000
Total Investments in Short-Term
Securities--6.9% 22,986,000 22,986,000
Total Investments--101.4% $332,996,783 338,632,312
============
Liabilities in Excess of Other Assets--(1.4%) (4,821,995)
------------
Net Assets--100.0% $333,810,317
============
Net Asset Value: Class A--Based on net assets of $186,955,126 and 15,683,420 capital shares outstanding $ 11.92
============
Class B--Based on net assets of $146,855,191 and 12,319,055 capital shares outstanding $ 11.92
============
<PAGE>
<FN>
* Corresponding industry groups for foreign securities,
which are denominated in US dollars:
(1) Industrial Mining.
(2) Financial Institution, Government-Owned and Guaranteed by Korea.
(3) Electric Utility; Majority-Owned, not Guaranteed by Korea.
(4) Independent Energy Company.
(5) Government Entity; Guaranteed by the Province.
** Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Portfolio.
*** Repurchase Agreements are fully collateralized by US Government
Obligations.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Marc A. White, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
