MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1994
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
<PAGE>
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
Volatility in the US financial markets continued
during the December quarter, largely prompted by
concerns of increasing inflationary pressures. The
possibility of continued monetary policy tightening by
the Federal Reserve Board was predominant in the
minds of investors throughout most of the period.
Therefore, there was little surprise in mid-November
when the central bank announced the sixth increase
in short-term interest rates in 1994. Early in the
period, the weakness of the US dollar in foreign
exchange markets prompted declines in US stock
and bond prices, but some strengthening of the US
currency has occurred recently.
The manufacturing sector was the driving force behind
the US economy through the final quarter of the year,
making an important contribution to the substantial
increase in corporate earnings. US companies have
been successful at containing labor costs, which are
an important component of the inflation outlook.
Although consumer spending grew at a slower pace
than in previous economic recoveries, purchases of
vehicles and household durable goods rose in the
latter months of 1994. Despite the relatively modest
rise in consumer spending, the personal savings rate
fell to an all-time annual low in 1994.
In the weeks ahead, investors will continue to assess
economic data and inflationary trends in order to
gauge whether further increases in short-term inter-
est rates are likely. The core inflation rate rose less
than 3% in 1994 following a 3% increase in 1993, the
best sustained inflation performance in 30 years. It is
not likely that such positive inflation results will be
duplicated in 1995. In addition, investor interest in
the new year will also be focused on the progress that
the new Congress makes on both reducing spending
and the Federal budget deficit and passing tax cuts
that promote savings and investment. Legislative
progress, combined with continued indications of
moderate and sustainable levels of economic growth,
would be positive for the US capital markets. However,
the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of
corporate profits.
<PAGE>
Portfolio Strategy
High Income Portfolio
The year was difficult for most investors as interest
rates soared in the face of stronger-than-expected
economic growth and heightened inflationary expec-
tations. Common stock and bond indexes generally
posted negative returns, with fixed-income returns
being the worst in any calendar year since the 1920s.
Corporate profits in many industries and companies
exceeded expectations and provided some counter-
vailing positives for certain asset categories. The high-
yield market was helped by the surge in profits which
positively affected such cyclical industries as steel,
chemicals and paper. The total return on the unmanaged
Merrill Lynch High Yield Master Index was -1.17%,
compared with -8.97% on ten-year US Treasury notes.
While we believe it is likely that the Federal Reserve
Board will achieve its objective of slowing the econ-
omy to a noninflationary growth rate during the first
half of 1995, a recession will probably be avoided.
Certainly, the interest rate environment is likely to be
more benign in 1995. In this scenario, high-yield bonds
should perform relatively well. The credit outlook
remains generally positive. We believe that corporate
profits could increase in 1995, particularly in certain
cyclical industries like paper that only began the
recovery cycle in 1994.
Initial public offerings of equity should also continue
to provide credit support. In the first quarter in 1995,
three portfolio holdings, Fort Howard Corp., Uniroyal
Chemical (also known as UCC Investors Holding, Inc.)
and American Standard Inc., have equity issuances
planned. We believe that defaults and credit problems
will rise in 1995 but be moderate by historic standards.
Yield spreads and premiums of high-yield bonds com-
pared with US Treasury notes of similar maturity are
narrower than the longer-term averages. However, the
long-term averages are biased by the late 1980s and
early 1990s when the supply and quality of high-yield
debt was affected negatively by leveraged buyout
activity. The yield premiums are attractive compared
to the first half of the decade, and we think that
period more nearly resembles 1995.
<PAGE>
A number of high-yield market sectors that outper-
formed last year should continue to be leaders in
1995. For example, paper, chemical, and steel com-
panies experienced exceptional demand and strong
product price improvement in 1995. This trend should
continue. Atlantic City casinos performed poorly last
year because of concerns about legalization of gaming
in Pennsylvania. Since the elections seem to have
diminished this threat, this area may recover. Deferred
interest bonds also performed poorly last year. In a
better market, these securities have excellent recov-
ery potential, particularly since the issuers of deferred
coupon issues include many wireless communications
and entertainment companies which have excellent
operating outlooks. As these examples indicate, there
are currently many sectors of the high-yield market
that are out-of-favor and offer bonds at large discounts
to par value. This environment could provide an
opportunity and a challenge in 1995.
At December 31, 1994, the Portfolio's cash equivalents
were 6.2% of net assets. Major industry areas in the
Portfolio included hotels and casinos, 8.2% of net
assets; energy, 7.3%; paper, 7.1%; food and beverage,
6.7%; and communications, 6.9%.
Investment Grade Portfolio
During the December quarter, total returns for Invest-
ment Grade Portfolio's Class A and Class B Shares were
+0.32% and +0.11%, respectively. This compares to a
total return of +0.63% for the unmanaged Merrill
Lynch COAO Bond Index, which is comprised of
industrial bonds rated BBB or better by one of the
major rating services. The Portfolio's Class C and
Class D Shares provided total returns of +0.74% and
+0.76%, respectively, since inception (October 21,
1994) through December 31, 1994. (Results shown do
not include sales charges; results would be lower if a
sales charge was included. Complete performance
data, including average annual total returns, can
be found on pages 4, 5 and 6 of this report to share-
holders.) These returns occurred in an environment
where the Federal Reserve Board continued to
aggressively tighten monetary policy, causing the
yield curve to flatten sharply. The yield on the two-
year US Treasury note started the three-month period
at just above 6.60%, and ended at 7.66%, while the
yield on the 30-year bond increased from 7.85% to
only 7.88%. This lowered the difference between the
two issues from 116 basis points (1.16%) at the begin-
ning of the December quarter to only 22 basis points
at the end. This allowed longer-term bonds to out-
perform shorter-term issues during the quarter as
investors in long-term issues became more comfor-
table with the Federal Reserve Board's vigilance
against the threat of inflation.
<PAGE>
During the December quarter, we ventured toward a
more balanced approach to the allocation of the Port-
folio's assets across the yield curve. The Portfolio had
been heavily weighted in the intermediate sector of
the curve (7 years--10 years). With the increase in
interest rates during the year, the continued Federal
Reserve Board tightening and repeatedly low reported
levels of inflation, we believed that value returned in
the long-term sector of the yield curve. We moved to
remedy the Portfolio's underweighted position in
longer-term issues by adding to bonds with maturities
of over ten years. We did this in a mostly duration-
neutral fashion, as we also added to the shorter end
of the yield curve, especially in December. The
average duration of the Portfolio decreased only
slightly during the period, dropping from 5.29 years
to 4.98 years.
Corporate sector allocation also reflected the flatter
yield curve environment as we became more conser-
vative in our holdings of financial institutions. We
emphasized more stable consumer finance companies
over brokerage firms and banks, as the pinch on
earnings from the flatter yield curve will be felt in the
next few quarters, stopping any debt ratings upgrade
momentum seen in the banking sector in 1994. Credit
selectivity will be key. We are reestablishing invest-
ments in the electric utility sector, after being under-
weighted for over a year. We will concentrate on
high-quality companies that can benefit from the new
competitive environment.
Intermediate Term Portfolio
Intermediate Term Portfolio's Class A and Class B
Shares had total returns of +0.05% and -0.10%,
respectively, for the December quarter. This compared
to a 0.23% gain for the unmanaged Merrill Lynch C6A0
Bond Index, which is comprised of investment-grade
corporate bonds maturing in from five years--ten
years, and a 0.12% gain for the unmanaged Merrill
Lynch C0A0 Index, which is comprised of investment-
grade corporate bonds maturing in from one year to
ten years. The Portfolio's Class C and Class D Shares
provided total returns of +0.38% and +0.41%, respec-
tively, since inception (October 21, 1994) through
December 31, 1994.
<PAGE>
The Treasury yield curve flattened during the Decem-
ber quarter as short-term interest rates increased
much faster than long-term interest rates. The yield
on the two-year note started the three-month period
just above 6.60% and ended at 7.66%, while the yield
on the ten-year note increased from 7.65% to 7.83%. In
the short-term and intermediate-term sector in which
we invest, corporate bonds in the three-year--five-
year maturity range performed the most poorly, largely
as a result of the yield curve shift. The curve shifted
in part in response to the sixth tightening of mone-
tary policy this year by the Federal Reserve Board,
which occurred in mid-November. While we believe
that the Federal Reserve Board will continue to tighten
in 1995, we expect it to be much less aggressive than
in 1994. The average duration of the Portfolio was
shortened only slightly during the quarter, from 4.19
years to 4.05 years. The average yield-to-maturity
increased from 7.87% to 8.46% as interest rates rose
and the average portfolio quality was lowered slightly.
Corporate sector allocations in the Portfolio were
altered to reflect the changing economic and interest
rate environments. Continuing a trend seen earlier in
the year, the Portfolio's holdings in financial institu-
tions became more conservative as the flatter yield
curve will likely pressure profits at the more leveraged
firms. We favored more conservative consumer finan-
cial companies over brokerage firms. We continue to
emphasize firms with high-quality portfolios because
we believe an interim peak in consumer asset quality
is aproaching. In the industrial sector we increased
holdings in capital goods firms and lowered our retail
group. We continue to own a large holding in News
Corporation, based on our expectation that debt rat-
ing upgrades are imminent, which should cause bond
prices to rally as the company achieves full investment-
grade status. We are beginning to reestablish select
electric utility holdings closer to an index weighting,
but we remain very selective and will continue to
emphasize high-quality companies that will benefit
from the new competitive environment.
The Portfolio's sovereign holdings have increased
significantly. We established holdings in the Kingdom
of Thailand, which was subsequently upgraded by
Standard & Poor's Corp. during the quarter. We also
bought bonds in the Republic of South Africa in two
steps. The first step was at the initial offering of the
bonds. After the currency crisis in Mexico indiscrim-
inantly hurt bond prices in all developing markets, we
bought some more. We believe that a trade surplus,
established infrastructure and favorable political
regime all bode well for South Africa's immediate
future. All our holdings are denominated in US dollars.
<PAGE>
In Conclusion
We appreciate your ongoing investment in Merrill
Lynch Corporate Bond Fund, Inc., and we look for-
ward to assisting you with your financial needs and
objectives in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
January 26, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to
purchase shares of the Fund through the Merrill
Lynch Select Pricing SM System, which offers four
pricing alternatives:
* Class A Shares incur a maximum initial sales charge
(front-end load) of 4% and bear no ongoing distribu-
tion or account maintenance fees for High Income
and Investment Grade Portfolio. Intermediate Term
Portfolio incurs a maximum initial sales charge
(front-end load) of 1% and bears no ongoing distri-
bution or account maintenance fees. Class A Shares
are available only to eligible investors.
<PAGE>
* 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 for High Income and Investment
Grade Portfolio. Intermediate Term Portfolio is
subject to a maximum contingent deferred sales
charge of 1% if redeemed within one year of purchase.
In addition, High Income and Investment Grade
Portfolio are subject to a distribution fee of 0.50% and
an account maintenance fee of 0.25%. Intermediate
Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. All three
classes of shares automatically convert to Class D
Shares after 10 years.
* Class C Shares are subject to a distribution fee of
0.55% and an account maintenance fee of 0.25% for
High Income and Investment Grade Portfolio. Inter-
mediate Term Portfolio is subject to a distribution
fee of 0.25% 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 4% and an account maintenance fee of 0.25% (but
no distribution fee) for High Income and Investment
Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account
maintenance fee of 0.10% (but no distribution fee).
"Average Annual Total Return" tables for the Fund's
Class A and Class B Shares are presented on page 5.
"Aggregate Total Return" tables for Class C and Class
D Shares are also presented on page 5. Data for all of
the Fund's shares, including Class C and Class D
Shares, are presented in the "Recent Performance
Results" table.
The "Recent Performance Results" table on page 6
shows investment results before the deduction of
any sales charges for Class A and Class B Shares for
the 12-month and 3-month periods ended December
31, 1994 and for Class C and Class D Shares for the
period since inception through December 31, 1994.
All data in this table assume imposition of the actual
total expenses incurred by each class of shares
during the relevant period.
None of the past results shown should be considered
a representation of future performance. Investment
return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each
class of shares will vary because of the different
levels of account maintenance, distribution and
transfer agency fees applicable to each class, which
are deducted from the income available to be paid
to shareholders.
<PAGE>
PERFORMANCE DATA (continued)
Average Annual Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class A Shares*
Year Ended 12/31/94 - 2.69% - 6.59%
Five Years Ended 12/31/94 +12.93 +12.02
Ten Years Ended 12/31/94 +12.03 +11.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class B Shares*
Year Ended 12/31/94 - 3.54% - 7.03%
Five Years Ended 12/31/94 +12.09 +12.09
Inception (10/21/88) through 12/31/94 +10.39 +10.39
[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 Without % Return With
ales Charge Sales Charge**
Investment Grade Portfolio Class A Shares*
Year Ended 12/31/94 -5.06% -8.86%
Five Years Ended 12/31/94 +7.54 +6.66
Ten Years Ended 12/31/94 +9.52 +9.07
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class B Shares*
Year Ended 12/31/94 -5.78% -9.32%
Five Years Ended 12/31/94 +6.72 +6.72
Inception (10/21/88) through 12/31/94 +7.46 +7.46
[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 Without % Return With
Sales Charge Sales Charge**
Intermediate Term Portfolio Class A Shares*
Year Ended 12/31/94 -3.85% -4.82%
Five Years Ended 12/31/94 +7.64 +7.42
Ten Years Ended 12/31/94 +9.18 +9.07
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class B Shares*
Year Ended 12/31/94 -4.34% -5.24%
Inception (11/13/92) through 12/31/94 +3.61 +3.61
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to
0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Returns
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class C Shares*
Inception (10/21/94) through 12/31/94 -1.15% -2.11%
[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**
High Income Portfolio Class D Shares*
Inception (10/21/94) through 12/31/94 -1.17% -5.13%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class C Shares*
Inception (10/21/94) through 12/31/94 +0.74% -0.25%
[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**
Investment Grade Portfolio Class D Shares*
Inception (10/21/94) through 12/31/94 +0.76% -3.27%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class C Shares*
Inception (10/21/94) through 12/31/94 +0.38% -0.61%
[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**
Intermediate Term Portfolio Class D Shares*
Inception (10/21/94) through 12/31/94 +0.41% -0.59%
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
12/31/94 9/30/94++ 12/31/93 % Change % Change++ As of 12/31/94
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 7.31 $ 7.66 $ 8.32 -12.14% -4.57% 11.43%
High Income Portfolio Class B Shares 7.31 7.66 8.33 -12.24 -4.57 11.15
High Income Portfolio Class C Shares 7.32 7.59 -- -- -3.56 11.83
High Income Portfolio Class D Shares 7.31 7.59 -- -- -3.69 12.27
Investment Grade Portfolio Class A Shares 10.60 10.77 11.97 -11.45 -1.58 7.45
Investment Grade Portfolio Class B Shares 10.60 10.77 11.97 -11.45 -1.58 6.98
Investment Grade Portfolio Class C Shares 10.61 10.67 -- -- -0.56 6.91
Investment Grade Portfolio Class D Shares 10.60 10.67 -- -- -0.66 7.21
Intermediate Term Portfolio Class A Shares 10.70 10.90 11.92 -10.23 -1.83 7.75
Intermediate Term Portfolio Class B Shares 10.70 10.90 11.92 -10.23 -1.83 7.30
Intermediate Term Portfolio Class C Shares 10.70 10.81 -- -- -1.02 7.54
Intermediate Term Portfolio Class D Shares 10.70 10.81 -- -- -1.02 7.65
High Income Portfolio Class A Shares--Total Return - 2.69(1) -1.44(2)
High Income Portfolio Class B Shares--Total Return - 3.54(3) -1.64(4)
High Income Portfolio Class C Shares--Total Return -- -1.15(5)
High Income Portfolio Class D Shares--Total Return -- -1.17(6)
Investment Grade Portfolio Class A Shares--Total Return - 5.06(7) +0.32(8)
Investment Grade Portfolio Class B Shares--Total Return - 5.78(9) +0.11(10)
Investment Grade Portfolio Class C Shares--Total Return -- +0.74(11)
Investment Grade Portfolio Class D Shares--Total Return -- +0.76(12)
Intermediate Term Portfolio Class A Shares--Total Return - 3.85(13) +0.05(14)
Intermediate Term Portfolio Class B Shares--Total Return - 4.34(15) -0.10(16)
Intermediate Term Portfolio Class C Shares--Total Return -- +0.38(12)
Intermediate Term Portfolio Class D Shares--Total Return -- +0.41(17)
<FN>
*Investment results shown do not reflect sales charges; results shown would be lower
if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since inception (10/21/94).
(1)Percent change includes reinvestment of $0.798 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.261 per share ordinary income dividends.
(3)Percent change includes reinvestment of $0.738 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.245 per share ordinary income dividends.
(5)Percent change includes reinvestment of $0.183 per share ordinary income dividends.
(6)Percent change includes reinvestment of $0.191 per share ordinary income dividends.
(7)Percent change includes reinvestment of $0.771 per share ordinary income dividends.
(8)Percent change includes reinvestment of $0.223 per share ordinary income dividends.
(9)Percent change includes reinvestment of $0.686 per share ordinary income dividends.
(10)Percent change includes reinvestment of $0.201 per share ordinary income dividends.
(11)Percent change includes reinvestment of $0.138 per share ordinary income dividends.
(12)Percent change includes reinvestment of $0.150 per share ordinary income dividends.
(13)Percent change includes reinvestment of $0.765 per share ordinary income dividends.
(14)Percent change includes reinvestment of $0.224 per share ordinary income dividends.
(15)Percent change includes reinvestment of $0.708 per share ordinary income dividends.
(16)Percent change includes reinvestment of $0.209 per share ordinary income dividends.
(17)Percent change includes reinvestment of $0.154 per share ordinary income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds High Income Portfolio
Airlines--3.1% Delta Air Lines Inc.:
BB+ Baa3 $ 1,930,238 9.875% due 4/30/2008++++ $ 1,947,128 $ 1,847,604
BB+ Baa3 3,000,000 9.30% due 1/02/2010 2,963,100 2,812,185
BB+ Baa3 5,000,000 9.20% due 9/23/2014 4,839,050 4,399,200
BB+ Baa3 28,000,000 10.50% due 4/30/2016 28,481,900 27,597,919
Piedmont Aviation, Inc.:
BB- B1 200,000 Series C, 9.70% due 1/15/1999 201,676 183,991
BB- B1 100,000 Series C, 10.25% due 1/15/2007 103,706 87,163
BB- B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,767,950
BB- B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 1,797,081
BB- B1 50,000 Series G, 10.35% due 3/28/2011 51,425 46,079
BB- B1 450,000 Series H, 9.85% due 5/08/2005 454,617 392,240
BB- B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,313,513
BB- B1 536,000 Series I, 10% due 11/08/2012 545,048 469,362
United Air Lines Inc.:
BB+ Baa2 7,100,000 9.35% due 4/07/2016 7,215,446 6,272,850
BB Baa1 10,500,000 9.21% due 1/21/2017 10,480,125 9,091,530
USAir Inc.:
CCC+ B1 28,000,000 9.625% due 2/01/2001 22,360,000 15,540,000
BB B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,288,034
BB B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,632,529
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 995,708
BB B1 5,476,404 Series 89A1, 9.33% due 1/01/2006++++ 5,180,517 4,426,354
BB B1 5,000,000 Series 89A2, 9.82% due 1/01/2013 4,837,500 4,158,465
B+ B2 14,500,000 Series 93A3, 10.375% due 3/01/2013 14,530,000 11,890,000
-------------- --------------
114,157,155 98,009,757
Automobile B B3 10,150,000 SPX Inc., 11.75% due 6/01/2002 10,175,000 10,137,313
Parts--0.3%
Broadcasting & BB- Ba2 15,000,000 Continental Cablevision Inc., 9.50%
Publishing--4.2% due 8/01/2013 15,000,000 13,781,250
BB- Ba3 13,150,000 Heritage Media Services Corporation, 11%
due 6/15/2002 13,158,750 13,413,000
BB- Ba3 4,200,000 K-III Communications Corp., 10.625%
due 5/01/2002 4,192,500 4,095,000
B B3 12,500,000 The Katz Corp., 12.75% due 11/15/2002 12,740,625 13,062,500
B Caa 22,000,000 NWCG Holding Corp., 13.50%
due 6/15/1999 (a) 12,208,887 11,330,000
CCC+ B3 10,000,000 SCI Television Inc., 11% due 6/30/2005 10,350,000 10,150,000
B+ B3 12,500,000 Sinclair Broadcasting Group Inc.,
10% due 12/15/2003 12,530,000 11,687,500
B B3 49,000,000 United International Holdings, Inc.,
14% due 11/15/1999 25,360,484 24,806,250
BB+ Ba3 10,000,000 Videotron Groupe L'TEE, 10.25%
due 10/15/2002 10,097,500 9,850,000
BB- B1 20,000,000 World Color Press, Inc., 9.125%
<PAGE> due 3/15/2003 20,019,375 18,550,000
-------------- --------------
135,658,121 130,725,500
Building CCC B3 20,000,000 Nortek Inc., 9.875% due 3/01/2004 19,834,240 17,800,000
Materials--2.1% B+ B3 21,705,000 Pacific Lumber Co., 10.50% due 3/01/2003 21,745,538 20,294,175
B B2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 25,012,240
-------------- --------------
67,469,784 63,106,415
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Building American Standard Inc.:
Products--1.3% B Ba3 $ 6,750,000 9.875% due 6/01/2001 $ 6,750,000 $ 6,564,375
B+ Ba3 10,150,000 9.25% due 12/01/2016 10,203,625 9,338,000
CCC- Caa 9,300,000 Amstar Corp., 11.375% due 2/15/1997 6,566,250 9,183,750
B Ba3 16,000,000 Inter-City Products Corp., 9.75%
due 3/01/2000 15,888,750 15,000,000
-------------- --------------
39,408,625 40,086,125
Capital Goods--1.3% B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 20,273,691
B+ B3 22,935,000 Sequa Corp., 9.375% due 12/15/2003 22,556,800 20,297,475
-------------- --------------
44,103,300 40,571,166
Chemicals--2.7% B+ Ba3 15,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 15,060,000 15,225,000
B+ Ba3 42,540,000 G-I Holdings, Inc., 11.38% due 10/01/1998 (a) 28,111,641 26,481,150
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.25% due 7/15/2001 (a) 22,163,783 20,718,750
B- B3 20,000,000 UCC Investors Holding, Inc., 11%
due 5/01/2003 20,550,000 19,800,000
-------------- --------------
85,885,424 82,224,900
Communications--6.9% B- Caa 25,000,000 American Telecasting, Inc., 12.50%
due 6/15/1999 (a) 13,644,120 10,875,000
B- B3 13,000,000 Dial Page Inc., 12.25% due 2/15/2000 13,080,500 13,065,000
B- Caa 46,688,000 Echostar Communication Corp.,
12.875% due 6/01/1999 (a) 26,907,011 24,511,200
CCC+ Caa 20,235,000 Horizon Cellular Telephone Co.,
11.38% due 10/01/1997 (a) 14,936,132 14,063,325
CCC+ B3 17,000,000 Mobilemedia Communication, Inc.,
10.50% due 12/01/1998 (a) 11,391,369 9,775,000
CCC+ B3 40,000,000 Nextel Communications Inc., 9.75% due
<PAGE> 12/15/1999 (a) 27,023,341 14,100,000
NR* NR* 12,400,000 Page Mart Inc., 12.25% due 11/01/1998 (a) (b) 7,746,623 7,471,000
B B2 20,000,000 Paging Network, Inc., 11.75% due 5/15/2002 20,387,500 19,900,000
Panamsat L.P.:
B- B3 28,710,000 11.375% due 8/01/1998 (a) 19,536,575 18,087,300
B+ Ba3 4,750,000 9.75% due 8/01/2000 4,750,000 4,500,625
BB- B2 20,925,000 Rogers Communication Inc., 10.875%
due 4/15/2004 21,384,219 21,343,500
Telecom Argentina, S.A.:
NR* B1 13,000,000 8.375% due 10/01/2000 11,583,250 10,562,500
NR* B1 2,000,000 8.375% due 10/18/2000 1,809,060 1,625,000
BB- B1 15,000,000 11.875% due 11/01/2004 14,701,200 13,522,155
CCC+ B3 14,730,000 USA Mobile Communications Holdings, Inc.,
9.50% due 2/01/2004 14,135,375 12,004,950
B+ B3 33,850,000 Videotron Holdings PLC, 11.125% due
7/01/1999 (a) 19,053,280 17,940,500
-------------- --------------
242,069,555 213,347,055
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Conglomerates-- NR* B3 $ 9,083,000 Astrum International Corp., 11.50% due
4.8% 6/08/2003 $ 9,137,780 $ 9,177,281
Colt Industries, Inc.:
B+ B1 21,200,000 10.25% due 4/01/2002 21,560,075 20,882,000
BB Ba2 2,531,000 11.25% due 12/01/2015 2,694,343 2,705,436
B+ B1 25,000,000 Foamex Capital Corp., 11.25% due 10/01/2002 24,964,375 23,875,000
CCC+ B3 23,250,000 The Interlake Corp., 12.125% due 3/01/2002 23,483,750 21,738,750
B B2 10,000,000 JB Poindexter & Co., Inc., 12.50% due
5/15/2004 10,000,000 9,350,000
B+ B3 20,000,000 Jordan Industries Inc., 10.375% due 8/01/2003 19,961,000 17,900,000
NR* NR* 8,500,000 MacAndrews & Forbes Group, Inc., 12.25%
due 7/01/1996 8,276,775 8,415,000
NR* NR* 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 8,568,400 9,054,500
BB- Ba3 25,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 24,979,063 24,125,000
-------------- --------------
153,625,561 147,222,967
<PAGE>
Consumer NR* NR* 31,050,000 Coleman Holdings, Inc., 11.39% due
Products--3.4% 5/27/1998 (a) 21,200,635 20,997,563
NR* NR* 9,000,000 Formica Corporation, 14.843% due 9/15/2005++ 9,000,000 10,476,022
Liggett Group Inc.:
NR* NR* 13,000,000 11.50% due 2/01/1999 12,261,016 9,230,000
NR* NR* 4,299,000 16.50% due 2/01/1999 3,909,000 3,697,140
B- Caa 15,000,000 Polymer Group, Inc., 12.25% due 7/15/2002 15,000,000 14,662,500
Revlon Consumer Products Corp.:
B+ B2 5,500,000 9.50% due 6/01/1999 4,995,291 5,115,000
B B2 20,000,000 9.375% due 4/01/2001 17,993,872 17,975,000
NR* B3 4,500,000 10.50% due 2/15/2003 4,068,750 4,038,750
B+ B1 19,620,000 Sealy Corp., 9.50% due 5/01/2003 19,721,800 18,639,000
-------------- --------------
108,150,364 104,830,975
Containers--3.5% B B2 20,000,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008 20,000,000 17,300,000
B- Caa 21,500,000 Ivex Packaging Corp., 13.25%
due 3/15/2000 (a) 11,052,012 8,815,000
BB Ba3 23,000,000 Owens-Illinois, Inc., 11% due 12/01/2003 23,521,250 23,920,000
B+ Ba3 10,000,000 Plastic Container Corp., 10.75% due 4/01/2001 10,022,500 9,950,000
B- B3 32,628,000 Silgan Holdings Inc., 13.25% due 6/15/1996 (a) 27,375,637 27,570,660
B+ Ba3 20,000,000 Sweetheart Cup Co., 9.625% due 9/01/2000 20,000,000 19,000,000
-------------- --------------
111,971,399 106,555,660
Convertible B B2 8,352,000 Builders Transport, Inc., 8% due
Bonds**--0.9% 8/15/2005 (4) 4,886,880 7,399,976
B+ Ba3 10,362,000 Lomas Financial Corp., 9% due
10/31/2003 (2) 9,653,775 6,579,870
B- B3 6,941,000 MEDIQ, Inc., 7.25% due 6/01/2006 (3) 4,539,685 4,442,240
B B2 6,000,000 Ohm Corp., 8% due 10/01/2006 (5) 4,160,000 4,680,000
B+ B2 5,909,000 UNC, Inc., 7.50% due 3/31/2006 (1) 3,442,530 4,638,565
-------------- --------------
26,682,870 27,740,651
Drug Stores--0.8% B B2 24,000,000 Thrifty Payless Holdings, Inc., 11.75% due
4/15/2003 24,000,000 23,610,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
<PAGE>
Energy--7.3% B+ B1 $ 49,500,000 Clark R&M Holdings, Inc., 11.009% due
2/15/2000 (a) $ 28,615,685 $ 28,351,905
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12% due
7/15/1998 (a) 12,064,634 10,822,500
B- B2 16,000,000 Falcon Drilling Company, Inc., 9.75% due
1/15/2001 16,000,000 15,120,000
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 21,600,000
Gulf Canada Resources Ltd.:
BB B1 12,750,000 9% due 8/15/1999 11,735,938 12,176,250
B+ B2 8,700,000 9.25% due 1/15/2004 8,488,355 8,025,750
Maxus Energy Corp.:
BB B1 9,750,000 9.875% due 10/15/2002 9,067,500 8,531,250
BB B1 2,550,000 11.50% due 11/15/2015 2,534,500 2,358,750
BB- Ba3 8,750,000 Noble Drilling Corp., 9.25% due 10/01/2003 8,925,000 8,312,500
B+ Ba3 15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,085,000 15,525,000
BB- Ba3 25,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 24,990,000 21,562,500
CCC+ Caa 8,650,000 Tesoro Petroleum Corp., 12.75% due 3/15/2001 7,483,899 8,650,000
BB- B1 27,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 26,900,000 25,920,000
B+ B1 31,525,000 Triton Energy Corp., 12.71%
due 11/01/1997 (a) 23,434,077 23,308,797
BB- B1 20,000,000 Yacimientos Petroliferos Fiscales S.A. (YPF)
(Sponsored), 8% due 2/15/2004 16,641,750 14,500,000
-------------- --------------
232,013,838 224,765,202
Entertainment-- B B3 11,750,000 AMC Entertainment, Inc., 12.625%
2.8% due 8/01/2002 11,696,095 12,484,375
B+ B1 9,000,000 Cinemark USA Inc., 12% due 6/01/2002 9,058,750 9,405,000
Marvel Holdings Inc:
B Caa 25,700,000 9.125% due 2/15/1998 22,744,500 22,487,500
B B3 20,000,000 11.41% due 4/15/1998 (a) 13,878,547 12,350,000
B B3 10,000,000 Plitt Theatres, Inc., 10.875% due 6/15/2004 10,000,000 9,350,000
Spectravision Inc.:
CCC+ B2 39,250,000 11.50% due 10/01/1996 (a) 31,931,372 17,270,000
CCC- B3 22,610,000 11.65% due 12/01/2002++ 21,286,981 3,152,697
-------------- --------------
120,596,245 86,499,572
Financial B- B2 6,400,000 American Annuity Group Inc.,
Services--1.6% 11.125% due 2/01/2003 6,400,000 6,304,000
BB Ba1 21,000,000 Lomas Mortgage USA, Inc., 10.25% due
10/01/2002 21,140,625 17,535,000
BB+ NR* 3,000,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 2,380,000 2,992,500
Reliance Group Holdings, Inc.:
BB+ Ba3 17,425,000 9% due 11/15/2000 16,008,125 15,943,875
BB- B1 7,575,000 9.75% due 11/15/2003 7,537,500 6,666,000
-------------- --------------
53,466,250 49,441,375
<PAGE>
Food & Chiquita Brands International Inc.:
Beverage--6.7% B+ B3 5,745,000 11.50% due 6/01/2001 6,139,969 5,630,100
BB- B1 13,000,000 9.125% due 3/01/2004 12,990,000 11,375,000
NR* NR* 15,000,000 Cumberland Farms, 10.50% due 10/01/2003 14,681,250 12,600,000
B- B2 26,463,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 25,608,891 18,656,415
B- B3 10,520,000 Farm Fresh, Inc., 7.50% due 3/01/2010 5,488,575 6,540,936
B B1 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 17,375,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Food & B+ B2 $ 29,500,000 Grand Union Corp., 12.25% due 7/15/2002 $ 29,475,625 $ 11,800,000
Beverage B B3 20,000,000 P F Acquisition Corp., 12.25% due 2/01/2005 20,000,000 20,250,000
(concluded) BB- Ba3 7,000,000 P&C Food Markets, Inc., 11.50% due 10/15/2001 7,100,000 7,140,000
B B2 25,000,000 Penn Traffic Co., 9.625% due 4/15/2005 24,781,750 21,875,000
B- B2 20,325,000 Pueblo Xtra International Inc., 9.50% due
8/01/2003 18,787,125 17,276,250
B- Caa 21,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 21,967,500 18,421,000
Specialty Foods Corp.:
B B2 20,000,000 10.25% due 8/15/2001 19,618,750 17,900,000
B- B3 2,250,000 11.25% due 8/15/2003 2,261,250 1,968,750
B B3 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 17,500,000
-------------- --------------
253,915,685 206,308,451
Health Services-- B+ B1 11,500,000 Continental Medical Systems, Inc.,
1.0% 10.875% due 8/15/2002 11,523,750 9,315,000
B+ B1 10,000,000 Continental Medsystems, Inc., 10.375%
due 4/01/2003 9,991,250 7,800,000
B+ B1 11,500,000 MEDIQ/PRN Life Support Services, Inc.,
11.125% due 7/01/1999 11,455,000 10,752,500
-------------- --------------
32,970,000 27,867,500
High Technology-- ComputerVision Corp.:
0.5% CCC B3 10,000,000 11.375% due 8/15/1999 9,706,250 8,250,000
CCC NR* 12,500,000 8% due 12/01/2009 (a) 6,802,473 7,500,000
-------------- --------------
16,508,723 15,750,000
<PAGE>
Home Builders-- B- B2 20,000,000 Baldwin Homes Company, 10.375%
2.5% due 8/01/2003 19,879,500 11,100,000
Del E. Webb Corporation:
B+ Ba3 3,500,000 10.875% due 3/31/2000 3,524,375 3,342,500
B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 5,845,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,060,000
NR NR 14,000,000 Greystone Homes Inc., 10.75% due 3/01/2004 14,000,000 13,090,000
B B1 10,250,000 K Hovanian Enterprises Inc., 11.25%
due 4/15/2002 10,204,063 8,661,250
BB Ba2 12,000,000 Standard Pacific Corp., 10.50% due 3/01/2000 11,995,000 11,820,000
B+ B2 5,000,000 UDC Homes, Inc., 11.75% due 4/30/2003 4,400,000 3,350,000
B B1 20,000,000 U.S. Home Corp., 9.75% due 6/15/2003 20,000,000 17,400,000
-------------- --------------
94,087,848 77,668,750
Hotels & B B2 22,325,000 Aztar Corp., 11% due 10/01/2002 22,557,250 20,427,375
Casinos--8.2% BB B1 30,000,000 Bally's Park Place, Inc., 9.25% due 3/15/2004 28,485,200 25,950,000
NR* Caa 12,000,000 Capital Gaming International, Inc.,
11.50% due 2/01/2001 (c) 9,426,041 6,300,000
B+ B2 28,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 27,235,000 22,960,000
BBB- B2 12,750,000 GNS Finance Corp., 9.25% due 3/15/2003 12,610,371 12,303,750
NR* NR* 7,682,000 Goldriver Hotel & Casino Corp.,
13.375% due 8/31/1999 (a) 8,609,882 6,721,750
B+ B1 25,000,000 Harrah's Jazz Company, 14.25% due 11/15/2001 25,020,000 26,312,500
BB- B1 18,033,000 Host Marriott Corp., 10.375% due 6/15/2011 18,344,557 18,111,894
BB- B1 11,000,000 John Q. Hammons Hotel, Inc., 8.875%
due 2/15/2004 9,737,500 9,570,000
B+ B1 15,000,000 MGM Grand Hotel Finance Corp., 12%
due 5/01/2002 15,230,500 16,275,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
<PAGE>
Hotels & Casinos B+ B1 $ 10,000,000 Pioneer Finance Corp., 13.50% due
(concluded) 12/01/1998 $ 10,542,500 $ 7,350,000
Showboat, Inc.:
BB- Ba3 9,450,000 9.25% due 5/01/2008 9,370,000 7,938,000
B B2 25,550,000 13% due 8/01/2009 24,754,250 24,400,250
NR* Caa 10,406,612 Trump Castle Funding, Inc., 11.75%
due 11/15/2003 9,285,732 5,359,405
B B3 37,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 35,260,770 28,397,500
NR* Caa 20,039,043 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999++ 14,685,025 12,196,714
-------------- --------------
281,154,578 250,574,138
Industrial BB- B2 25,000,000 ADT Operations Inc., 9.25% due 8/01/2003 25,094,187 23,218,750
Services--2.5% B- B3 10,000,000 Bell & Howell Co., 10.75% due 10/01/2002 10,040,000 9,548,591
B+ B1 25,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 23,537,500 22,562,500
CC B2 7,720,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 5,699,947 7,642,800
Thermadyne Industries, Inc.:
NR* NR* 5,706,000 10.25% due 5/01/2002 5,711,822 5,420,700
NR* NR* 7,912,000 10.75% due 11/01/2003 7,914,802 7,437,280
-------------- --------------
77,998,258 75,830,621
Metals & B- B2 26,750,000 Kaiser Aluminum & Chemical Corp.,
Mining--1.8% 12.75% due 2/01/2003 26,660,625 27,084,375
Maxxam Group, Inc.:
B- B3 41,155,000 12.25% due 8/01/1998 (a) 26,692,410 23,458,350
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 4,712,500
-------------- --------------
58,271,785 55,255,225
Paper--7.1% B+ B2 15,420,000 Container Corporation of America:
9.75% due 4/01/2003 15,433,400 14,687,550
B+ B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,357,500
BB- Ba3 15,000,000 Doman Industries Ltd., 8.75% due 3/15/2004 15,000,000 13,350,000
Fort Howard Corp.:
B+ B1 11,000,000 9.25% due 3/15/2001 11,000,000 10,340,000
B B2 31,000,000 9% due 2/01/2006 28,380,625 26,815,000
B B3 25,000,000 Gaylord Container Corp., 11.50% due 5/15/2001 25,001,250 25,812,500
BB Ba3 10,000,000 PT Indah Kiat Pulp & Paper Corporation,
11.875% due 6/15/2002 10,000,000 9,750,000
BB- Ba3 10,000,000 Rainy River Forest Products, 10.75%
due 10/15/2001 9,971,810 9,975,000
B B1 25,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 25,767,500 25,781,250
B+ B1 16,000,000 S.D. Warren Co, 12% due 12/15/2004 16,000,000 16,420,000
B+ B1 11,500,000 Stone-Consolidated Corp., 10.25%
due 12/15/2000 11,520,000 11,370,625
Stone Container Corp.:
B+ B2 6,500,000 11.50% due 9/01/1999 6,264,562 6,565,000
B B1 15,000,000 9.875% due 2/01/2001 13,948,672 14,156,250
B+ B1 15,000,000 10.75% due 10/01/2002 14,825,000 14,962,500
BB B1 5,000,000 Tjiwa Kimia, Tjiwi Kimia International
Finance, 13.25% due 8/01/2001 5,000,000 5,087,500
-------------- --------------
221,112,819 218,430,675
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Pollution Control-- B B3 $ 22,950,000 Mid-American Waste Systems, Inc.,
0.8% 12.25% due 2/15/2003 $ 22,891,000 $ 23,064,750
Railroads--0.2% B+ Ba3 8,000,000 Southern Pacific Rail Co., 9.375%
due 8/15/2005 8,000,000 7,400,000
Restaurants/ Family Restaurants Inc.:
Food Services-- B- B3 13,500,000 10.875% due 2/01/1997 (a) 10,831,323 7,222,500
2.3% B B1 13,000,000 9.75% due 2/01/2002 13,000,000 10,270,000
CCC+ B2 30,000,000 Flagstar Corp., 11.375% due 9/15/2003 30,092,500 25,050,000
Foodmaker, Inc.:
B- B3 16,000,000 9.75% due 6/01/2002 15,455,000 12,080,000
B+ Ba3 23,000,000 Series 1993A, 9.75% due 11/01/2003 22,641,200 17,365,000
-------------- --------------
92,020,023 71,987,500
Retail B- B3 10,000,000 Pamida Holdings, Inc., 11.75% due 3/15/2003 9,997,500 9,400,000
Specialty--1.0% Specialty Retailers Group, Inc.:
B+ B1 21,000,000 10% due 8/15/2000 21,000,000 19,110,000
B- B3 3,670,000 11% due 8/15/2003 3,673,350 3,339,700
-------------- --------------
34,670,850 31,849,700
Steel--2.1% B+ B1 21,000,000 A.K. Steel Holding Corp., 10.75%
due 4/01/2004 21,000,000 20,895,000
B B2 15,000,000 Republic Engineered Steel Inc., 9.875%
due 12/15/2001 15,000,000 13,650,000
B+ B1 17,500,000 WCI Steel, Inc., 10.50% due 3/01/2002 17,500,000 16,887,500
BB B1 15,000,000 Wheeling-Pittsburg Steel Corp.,
9.375% due 11/15/2003 14,390,000 12,825,000
-------------- --------------
67,890,000 64,257,500
<PAGE>
Textiles--0.9% B+ B3 30,000,000 Westpoint Stevens Inc., 9.375% due 12/15/2005 30,100,000 27,262,500
Transportation B+ B2 4,371,000 ACF Industries, Inc., 11.60% due 5/15/2000 4,174,305 4,388,175
Services--2.3% BB Ba2 9,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 9,000,000 8,147,008
BB Ba2 10,000,000 Gearbulk Holdings, Ltd., 11.25% due 12/01/2004 10,000,000 9,900,000
BB- Ba2 15,000,000 Transportacion Maritima Mexicana, S.A.
de C.V., 9.25% due 5/15/2003 13,093,875 10,612,500
NR* NR* 36,106,000 Transtar Holdings, L.P., 13.375% due
12/15/1999 (a) 20,065,155 18,233,530
B+ Ba3 20,000,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 20,045,000 18,600,000
-------------- --------------
76,378,335 69,881,213
Utilities--4.4% Beaver Valley Funding Corp.:
BB+ Ba3 5,051,000 8.625% due 6/01/2007 4,811,077 3,965,035
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 24,817,680
CTC Mansfield Funding Corp.:
BB+ Ba1 6,100,000 10.25% due 3/30/2003 5,942,750 5,734,000
BB+ Ba1 20,000,000 11.125% due 9/30/2016 21,488,750 18,631,400
Midland Cogeneration Venture
Limited Partnership:
BB Ba3 4,733,391 10.33% due 7/23/2002++++ 4,638,724 4,476,690
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 10,304,549
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 5,311,295
NR* NR* 16,028,687 Sunflower Electric Power Corp., 8%
due 12/31/2016++++ (a) 10,484,876 12,802,914
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds (concluded) High Income Portfolio
Utilities
(concluded) B B1 $ 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 $ 20,065,000 $ 19,800,000
Tucson Electric & Power Co.:
NR* NR* 17,323,081 10.21% due 1/01/2009 16,029,025 14,882,433
NR* NR* 17,426,207 10.732% due 1/01/2013 16,252,461 15,350,397
-------------- --------------
148,106,734 136,076,393
<PAGE>
Total Investments in Bonds--91.3% 3,085,510,129 2,808,339,549
Shares
Held
Preferred Stocks
Broadcasting & 421,000 K--III Communications Corp. 10,562,750 10,630,250
Publishing--0.7% 118,128 K--III Communications Corp.++ 12,000,107 11,377,279
-------------- --------------
22,562,857 22,007,529
Energy--0.5% 29,517 Consolidated Hydro, Inc. 14,891,917 15,164,359
Steel--0.4% 550,000 USX Capital LLC 13,750,000 12,168,750
Total Investments in Preferred Stocks--1.6% 51,204,774 49,340,638
Common Stocks
Conglomerates--0.2% 200,369 Astrum International Corp. 4,085,240 4,458,210
Containers--0.0% 150,000 Silgan Holdings Inc. 66,600 975,000
Energy--0.1% 57,237 Mesa Inc. 325,690 279,030
122,500 Petrolane Inc. 1,424,062 1,661,406
-------------- --------------
1,749,752 1,940,436
Financial Services--0.0% 132,527 Lomas Financial Corporation 1,689,719 546,674
Food & 120,194 Abco Markets Inc. 4,054,875 1,584,759
Beverage--0.1% 142,807 Doskocil Companies, Inc. 5,716,757 1,053,202
-------------- --------------
9,771,632 2,637,961
<PAGE>
Hotels & 320,040 Capital Gaming International Inc. 2,882,508 950,119
Casinos--0.0% 75,500 Goldriver Hotel & Casino Corporation
(Class B) (d) 540,045 224,141
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 235,750
-------------- --------------
3,434,053 1,410,010
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 133,237
Total Investments in Common Stocks--0.4% 20,962,296 12,101,528
Trusts & Warrants
Cellular Telephones--0.0% 57,040 Page Mart Inc. (Warrants) (e) 236,127 128,340
Communications--0.0% 125,000 American Telecasting Inc. 278,266 250,000
Energy--0.0% 18,000 Consolidated Hydro Inc. (Warrants) (e) 390,123 432,000
20,833 UGI Corp. (Warrants) (e) 91,057 23,437
-------------- --------------
481,180 455,437
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares
Industries Held Issue Cost Value
<S> <C> <S> <C> <C>
Trusts & Warrants (concluded) High Income Portfolio
Financial Services--0.0% 7,194 Reliance Group Holdings, Inc.
(Warrants) (e) $ 0 $ 0
High Technology--0.0% 394,563 Anacomp, Inc. (Warrants) (e) 495,400 394,563
Hotels & 273,000 Capital Gaming International Inc.
Casinos--0.0% (Warrants) (e) 1,344,151 213,281
7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust 192,320 137,028
113,386 Trump Castle Funding, Inc. 0 0
-------------- --------------
1,536,471 350,309
<PAGE>
Paper--0.1% 435,184 Gaylord Container Corp. (Warrants) (e) 920,251 3,155,084
Telecommunications--0.0% 302,500 ALC Communications Corp. (Warrants) (e) 831,875 0
Total Investments in Trusts & Warrants--0.1% 4,779,570 4,733,733
Face
Amount
Short-Term Securities
Commercial $100,710,000 General Electric Capital Corp.,
Paper***--6.2% 5.80% due 1/03/1995 100,710,000 100,710,000
ONYX Inc.:
30,000,000 6.35% due 1/04/1995 29,994,708 29,994,708
20,000,000 6.60% due 1/17/1995 19,948,666 19,948,666
Vons Supermarket:
20,000,000 6.25% due 1/20/1995 19,940,972 19,940,972
20,000,000 6.20% due 2/03/1995 19,893,222 19,893,222
-------------- --------------
190,487,568 190,487,568
Promissory Notes--0.0% 120,000 Capital Gaming International, Inc.,
5% due 8/01/1995 120,000 120,000
Total Investments in Short-Term
Securities--6.2% 190,607,568 190,607,568
Total Investments--99.6% $3,353,064,337 3,065,123,016
==============
Other Assets Less Liabilities--0.4% 14,637,603
--------------
Net Assets--100.0% $3,079,760,619
==============
Net Asset Class A--Based on net assets of $811,200,145 and 110,969,127 shares outstanding $ 7.31
Value: ==============
Class B--Based on net assets of $2,249,074,141 and 307,575,964 shares outstanding $ 7.31
==============
Class C--Based on net assets of $9,767,547 and 1,334,855 shares outstanding $ 7.32
==============
Class D--Based on net assets of $9,718,786 and 1,328,939 shares outstanding $ 7.31
==============
<PAGE>
<FN>
++Represents a pay-in-kind security which may pay interest/dividend in
additional face/shares.
++++Subject to principal paydowns.
*Not Rated.
**Industry classifications for convertible bonds are:
(1) Conglomerates; (2) Financial Services; (3) Health Services;
(4) Transportation Services; (5) 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 a zero coupon or step bond. The interest rate shown
is the effective yield at the time of purchase.
(b)Represents units. Each unit consists of 10,000 Par Notes and 46 Warrants.
(c)Represents units. Each unit consists of one 11.50% Note due 2001,
20.25 Warrants and 26.67 shares of Common Stock.
(d)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.
(e)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.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes Investment Grade Portfolio
US Government United States Treasury Notes & Bonds:
Obligations--4.7% AAA Aaa $ 11,000,000 8.875% due 11/15/1997 $ 11,354,063 $ 11,292,229
AAA Aaa 1,000,000 7.50% due 11/15/2001 999,375 982,032
AAA Aaa 1,000,000 7.875% due 11/15/2004 992,690 1,002,966
AAA Aaa 5,000,000 7.50% due 11/15/2016 5,538,531 4,746,862
AAA Aaa 4,000,000 8.875% due 8/15/2017 4,363,750 4,358,730
AAA Aaa 5,500,000 6.25% due 8/15/2023 4,369,922 4,472,194
AAA Aaa 13,500,000 7.50% due 11/15/2024 13,037,802 12,915,669
-------------- --------------
40,656,133 39,770,682
<PAGE>
Banking--8.4% A A2 12,000,000 Comerica Inc., 8.375% due 7/15/2024 11,412,360 11,207,280
First Interstate Bancorp. (a):
A- A2 3,000,000 11% due 3/05/1998 3,603,060 3,199,770
BBB+ A3 3,000,000 9.90% due 11/15/2001 3,642,840 3,171,458
First Union Corp.:
A- A3 1,000,000 8.125% due 6/24/2002 1,109,750 975,010
A- A3 8,300,000 8% due 11/15/2002 8,810,850 7,965,468
Golden West Financial Corp.:
A- A3 5,000,000 9.15% due 5/23/1998 5,678,700 5,126,050
A- A3 5,000,000 8.375% due 4/15/2002 5,035,950 4,943,175
A- A3 8,000,000 Huntington Bancshares, Inc., 7.625%
due 1/15/2003 8,405,600 7,586,600
A+ A1 3,500,000 Norwest Corp., 6.625% due 3/15/2003 3,553,235 3,141,950
AA- A1 5,000,000 Republic Bank of NY Corp.,
9.125% due 5/15/2021 5,676,450 5,252,525
A- A1 2,000,000 Society National Bank, 6% due 4/25/1996 1,953,480 1,964,120
AA Aa3 9,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 (a) 8,993,430 8,716,132
A A2 7,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 7,430,130 7,354,130
-------------- --------------
75,305,835 70,603,668
Federal Federal National Mortgage Association:
Agencies--6.1% AAA Aaa 5,000,000 6.26% due 12/22/1997 4,762,600 4,783,723
AAA Aaa 9,500,000 5.20% due 7/10/1998 8,659,535 9,189,035
AAA Aaa 15,000,000 7.85% due 9/10/2004 14,817,437 14,399,925
AAA Aaa 5,000,000 8.25% due 10/12/2004 4,939,844 4,908,581
AAA Aaa 13,000,000 8.55% due 12/10/2004 12,989,844 12,894,375
AAA Aaa 5,000,000 Private Export Funding Corp.,
8.35% due 1/31/2001 5,786,950 5,061,225
-------------- --------------
51,956,210 51,236,864
Financial Services-- Chrysler Financial Corp.:
Captive--3.9% BBB+ A3 2,000,000 9.50% due 12/15/1999 2,263,120 2,079,180
BBB+ A3 13,000,000 10.95% due 8/01/2017 15,208,500 14,289,535
A A2 1,000,000 Ford Motor Credit Corp., 7.75%
due 11/15/2002 1,040,130 956,375
General Motors Acceptance Corp.:
BBB+ Baa1 7,575,000 8% due 10/01/1996 7,761,648 7,520,611
BBB+ Baa1 8,000,000 7.60% due 1/20/1998 7,829,600 7,794,200
-------------- --------------
34,102,998 32,639,901
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (continued) Investment Grade Portfolio
<PAGE>
Financial Services-- A+ A1 $ 2,500,000 American General Finance Corp.,
Consumer--6.4% 8.50% due 8/15/1998 $ 2,848,650 $ 2,511,325
Associates Corp. of North America:
AA- A1 6,000,000 8.375% due 1/15/1998 6,019,320 6,000,180
AA- A1 2,000,000 8.80% due 8/01/1998 2,253,820 2,021,120
AA- A1 1,500,000 8.25% due 12/01/1999 1,495,110 1,494,180
A A2 19,000,000 Beneficial Corporation, 6.68% due 10/14/1997 19,000,000 19,000,380
A+ Aa3 8,000,000 CIT Group Holdings, Inc.,
6.73% due 5/02/1997 8,000,000 8,013,654
Commercial Credit Co.:
A+ A1 6,000,000 6.70% due 8/01/1999 6,001,800 5,610,870
A+ A1 3,000,000 8.25% due 11/01/2001 2,978,010 2,962,170
A+ A2 7,000,000 Transamerica Finance Corp.,
7.50% due 3/15/2004 7,000,000 6,555,115
-------------- --------------
55,596,710 54,168,994
Financial Services-- Dean Witter & Discover Co.:
Other--7.0% A A2 5,000,000 6.50% due 11/01/2005 4,942,250 4,261,950
A A2 6,000,000 6.75% due 10/15/2013 5,880,540 4,908,030
General Electric Capital Corp.:
AAA Aaa 6,000,000 14% due 7/01/1996 (a) 6,811,140 6,514,219
AAA Aaa 6,200,000 8.125% due 5/15/2012 6,301,726 6,107,000
A A3 5,000,000 Lehman Brothers Inc., 7.375% due 8/15/1997 4,993,500 4,852,500
A+ A1 5,000,000 Morgan Stanley Group Inc., 8.875%
due 10/15/2001 5,755,450 5,057,150
PaineWebber Group Inc.:
BBB+ A3 3,000,000 6.25% due 6/15/1998 3,078,060 2,762,970
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,185,100 7,090,300
A+ A3 8,000,000 Torchmark Corp., 9.625% due 5/01/1998 7,941,440 8,221,520
A+ A2 9,000,000 The Travelers Corp., 9.50% due 3/01/2002 9,610,100 9,455,940
-------------- --------------
63,499,306 59,231,579
<PAGE>
Foreign*--10.6% AA- A1 10,000,000 Aegon N.V., 8% due 8/15/2006 (2) 9,908,700 9,617,150
CRA Finance Ltd. (2):
A+ A2 4,000,000 6.50% due 12/01/2003 4,005,890 3,513,060
A+ A2 3,500,000 7.125% due 12/01/2013 3,479,700 3,001,862
AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
due 12/01/1999 (2) 4,226,640 4,040,700
A A2 15,835,000 Kingdom of Thailand, 8.25% due 3/15/2002 (6) 15,619,331 15,544,110
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,674,587
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,070,245
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,194,160
Petro-Canada (4):
BBB Baa1 3,000,000 8.60% due 10/15/2001 3,292,470 3,015,495
BBB Baa1 5,000,000 9.25% due 10/15/2021 5,300,650 5,219,325
Province of Ontario (Canada) (5):
AA- Aa3 7,000,000 8% due 10/17/2001 7,564,970 6,918,240
AA- Aa3 14,000,000 7.75% due 6/04/2002 14,274,490 13,534,219
Province of Quebec (Canada) (5):
A+ A1 4,000,000 8.80% due 4/15/2003 4,048,000 4,043,520
A+ A1 4,500,000 13% due 10/01/2013 5,706,285 5,306,512
A A2 5,000,000 WMC (Western Mining Corp.) Finance,
7.25% due 11/15/2013 (1) 5,036,900 4,346,400
-------------- --------------
94,287,852 89,039,585
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (continued) Investment Grade Portfolio
Industrial-- AA- A1 $ 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
Consumer 12/01/1999 $ 3,367,590 $ 3,067,650
Goods--9.8% A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 9,859,449
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 3,867,300
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,266,225
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 3,726,080
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 9,082,349
AAA Aaa 7,000,000 Johnson & Johnson Co., 8.72% due 11/01/2024 7,057,420 7,120,050
A A2 9,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 9,698,815 9,636,847
Sears, Roebuck & Co.:
BBB Baa1 5,000,000 9.25% due 4/15/1998 5,712,125 5,134,425
BBB Baa1 8,785,000 8.45% due 11/01/1998 9,709,797 8,785,834
BBB Baa1 9,000,000 10% due 2/03/2012 10,470,870 9,836,926
AA Aa1 7,000,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 6,872,720 6,881,350
-------------- --------------
86,861,497 82,264,485
<PAGE>
Industrial-- BP America Inc.:
Energy--4.4% AA- A1 3,250,000 9.375% due 11/01/2000 3,544,190 3,417,684
AA- A1 9,000,000 7.875% due 5/15/2002 9,519,510 8,822,745
AA- A1 11,000,000 10% due 7/01/2018 11,869,080 11,989,009
Texaco Capital Inc.:
A+ A1 5,500,000 9% due 12/15/1999 6,215,190 5,668,767
A+ A1 2,000,000 8.875% due 2/15/2021 1,999,720 2,102,369
A+ A1 5,000,000 8.625% due 11/15/2031 5,226,950 4,997,350
-------------- --------------
38,374,640 36,997,924
Industrial-- BBB- Baa3 12,000,000 Applied Materials Inc., 8% due 9/01/2004 11,912,280 11,501,400
Other--12.3% AA- Aa2 10,100,000 Archer-Daniels-Midland Co., 8.875%
due 4/15/2011 10,888,935 10,548,238
AA- Aa3 4,000,000 Capital Cities/ABC, Inc., 8.875%
due 12/15/2000 4,305,360 4,119,600
Carnival Cruise Lines, Inc.:
A- A3 1,000,000 6.15% due 10/01/2003 891,530 853,840
A- A3 8,000,000 7.70% due 7/15/2004 7,872,580 7,589,360
BBB Baa2 7,000,000 Carter Holt Harvey, Ltd.,
8.875% due 12/01/2004 6,960,800 7,090,755
Ford Capital B.V.:
A A2 13,000,000 9.875% due 5/15/2002 13,570,410 13,897,909
A A2 3,995,000 9.50% due 6/01/2010 4,430,215 4,230,046
A- A3 7,710,000 International Paper Co., 9.70% due 3/15/2000 9,293,944 8,153,094
AA Aa2 8,500,000 Kaiser Foundation Hospital, 9.55%
due 7/15/2005 9,561,225 9,158,580
BBB Baa2 6,000,000 Loral Corporation, 8.375% due 6/15/2024 5,493,240 5,574,480
Telecommunications, Inc.:
BBB- Baa3 10,000,000 8.25% due 1/15/2003 9,713,200 9,397,300
BBB- Baa3 2,500,000 9.80% due 2/01/2012 2,631,150 2,503,650
Time Warner Entertainment Co.:
BBB- Baa3 5,000,000 10.15% due 5/01/2012 5,036,200 5,052,225
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 4,161,025
-------------- --------------
107,842,519 103,831,502
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (concluded) Investment Grade Portfolio
Supranational-- Asian Development Bank:
5.0% AAA Aaa $ 3,000,000 10.75% due 6/01/1997 $ 3,302,730 $ 3,172,455
AAA Aaa 4,000,000 8.50% due 5/02/2001 4,299,200 4,062,980
AAA Aaa 4,000,000 European Investment Bank, 9.125%
due 6/01/2002 4,890,870 4,202,800
AAA Aaa 8,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 10,115,250 8,485,520
AAA Aaa 17,500,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 22,022,410 21,563,500
-------------- --------------
44,630,460 41,487,255
<PAGE>
Transportation-- Southwest Airlines, Inc.:
1.8% A- Baa1 10,000,000 9.40% due 7/01/2001 11,326,040 10,396,450
A- Baa1 2,000,000 8.75% due 10/15/2003 2,138,860 2,033,170
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 2,817,510
-------------- --------------
16,448,850 15,247,130
Utilities-- BBB+ Baa1 4,000,000 GTE Corp., 9.10% due 6/01/2003 4,242,720 4,111,380
Communications-- AA- Aa2 2,000,000 New England Telephone & Telegraph Co.,
3.5% 8.625% due 8/01/2001 2,233,620 2,038,400
Pacific Bell, Inc.:
AA- Aa3 3,500,000 8.70% due 6/15/2001 3,614,010 3,577,332
AA- Aa3 3,000,000 7.25% due 7/01/2002 2,985,420 2,831,850
A+ A1 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,831,700
Sprint Corp.:
BBB Baa3 3,600,000 8.125% due 7/15/2002 3,662,532 3,522,258
BBB Baa3 8,736,000 9.25% due 4/15/2022 9,575,704 9,310,217
BBB Baa3 2,585,000 United Telecommunications, Inc.,
9.50% due 4/01/2003 2,744,779 2,729,786
-------------- --------------
31,070,035 29,952,923
Utilities-- A A2 5,000,000 Central Power & Light Co., 6% due 10/01/1997 4,973,400 4,726,100
Electric--5.5% AA- Aa2 6,000,000 Duke Power Co., 8% due 11/01/1999 5,964,660 5,968,020
A A2 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,848,810
BBB Baa1 3,425,000 PECO Energy Co., 8% due 4/01/2002 3,459,387 3,328,843
A A2 8,000,000 Pennsylvania Power & Light Co.,
7.75% due 5/01/2002 8,388,270 7,704,200
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,214,972
BBB+ Baa1 10,000,000 Texas Utilities Electric Co., 8.75%
due 11/01/2023 9,595,550 9,621,900
A A2 8,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024 8,377,160 8,404,332
-------------- --------------
47,719,847 46,817,177
Utilities-- Consolidated Natural Gas Co.:
Gas--1.0% AA- A1 1,000,000 9.375% due 2/01/1997 1,031,440 1,022,475
AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 7,609,987
-------------- --------------
8,482,100 8,632,462
Total Investments in Bonds & Notes--90.4% 796,834,992 761,922,131
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
<S> <C> <S> <C> <C>
Short-Term Securities Investment Grade Portfolio
Commercial $ 30,000,000 American Express Credit Corp.,
Paper**--3.6% 5.875% due 1/03/1995 $ 30,000,000 $ 30,000,000
Repurchase 43,412,000 UBS Securities Inc., purchased on
Agreements***--5.1% 12/30/1994 to yield 5.75% to 1/03/1995 43,412,000 43,412,000
Total Investments in Short-Term
Securities--8.7% 73,412,000 73,412,000
Total Investments--99.1% $ 870,246,992 835,334,131
==============
Other Assets Less Liabilities--0.9% 7,488,009
--------------
Net Assets--100.0% $ 842,822,140
==============
Net Asset Class A--Based on net assets of $364,085,013 and 34,343,024 shares outstanding $ 10.60
Value: ==============
Class B--Based on net assets of $471,921,437 and 44,515,902 shares outstanding $ 10.60
==============
Class C--Based on net assets of $1,850,141 and 174,443 shares outstanding $ 10.61
==============
Class D--Based on net assets of $4,965,549 and 468,238 shares outstanding $ 10.60
==============
<FN>
*Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Industrial Mining.
(2)Financial Institution; Government-Owned & Guaranteed.
(3)Government Entity; Guaranteed by Japan.
(4)Energy Company; not Guaranteed by Canada.
(5)Government Entity; Guaranteed by the Province.
(6)Government Entity.
**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.
(a)Medium-Term Note.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes Intermediate Term Portfolio
US Government United States Treasury Notes:
Obligations--5.4% AAA Aaa 10,000,000 8.875% due 11/15/1997 10,321,875 10,265,662
AAA Aaa 1,500,000 8.50% due 11/15/2000 1,615,625 1,546,639
AAA Aaa 4,000,000 7.875% due 11/15/2004 3,970,760 4,011,865
-------------- --------------
15,908,260 15,824,166
Banking--12.8% First Interstate Bancorp.:
A- A2 4,500,000 11% due 3/05/1998 5,404,590 4,799,655
BBB+ A3 7,000,000 9.90% due 11/15/2001 8,552,250 7,400,069
A- A3 5,000,000 First Union Corp., 8% due 11/15/2002 5,002,240 4,798,475
Golden West Financial Corp.:
A- A3 4,000,000 9.15% due 5/23/1998 4,542,960 4,100,840
A- A3 1,000,000 8.375% due 4/15/2002 987,040 988,635
A- A3 2,000,000 Huntington Bancshares, Inc., 7.625%
due 1/15/2003 1,974,640 1,896,650
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 5,421,750
A+ A1 1,000,000 Norwest Corp., 6.625% due 3/15/2003 1,003,060 897,700
AA Aa3 5,000,000 Wachovia Corporation, 6.55% due 6/09/1997 4,996,350 4,842,295
A A2 2,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 2,072,740 2,101,180
-------------- --------------
40,019,090 37,247,249
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (continued) Intermediate Term Portfolio
Federal Federal National Mortgage Association:
Agencies--3.8% NR* Aaa $ 5,000,000 6.26% due 12/22/1997 $ 4,762,600 $ 4,783,723
NR* Aaa 2,500,000 7.85% due 9/10/2004 2,496,484 2,399,987
NR* Aaa 4,000,000 8.55% due 12/10/2004 3,996,875 3,967,500
-------------- --------------
11,255,959 11,151,210
<PAGE>
Financial Services-- BBB+ A3 8,000,000 Chrysler Financial Corp., 9.50% due 12/15/1999 9,275,380 8,316,720
Captive--7.2% Ford Motor Credit Co.:
A A2 2,000,000 7.25% due 5/15/1999 1,964,280 1,912,440
A A2 2,000,000 8% due 6/15/2002 1,937,810 1,936,550
A A2 1,000,000 7.75% due 11/15/2002 996,220 956,375
General Motors Acceptance Corp.:
BBB+ Baa1 6,000,000 7.85% due 3/05/1997 5,977,380 5,930,041
BBB+ Baa1 2,000,000 7.60% due 1/20/1998 1,957,400 1,948,550
-------------- --------------
22,108,470 21,000,676
Financial Services-- American General Finance Corp.:
Consumer--8.6% A+ A1 2,000,000 7.70% due 11/15/1997 1,977,660 1,967,800
A+ A1 1,500,000 8.50% due 8/15/1998 1,680,255 1,506,795
Associates Corp. of North America:
AA- A1 1,500,000 8.375% due 1/15/1998 1,504,830 1,500,045
AA- A1 3,000,000 8.80% due 8/01/1998 3,380,730 3,031,680
A A2 7,000,000 Beneficial Corp., 6.68% due 10/14/1997 7,000,000 7,000,140
CIT Group Holdings, Inc.:
A+ Aa3 4,000,000 7.625% due 12/05/1996 3,987,120 3,976,076
A+ Aa3 3,000,000 6.225% due 2/28/1997 2,998,020 3,012,107
A+ A1 3,000,000 Commercial Credit Co., 8.25% due 11/01/2001 2,978,790 2,962,170
-------------- --------------
25,507,405 24,956,813
Financial Services-- PaineWebber Group Inc.:
Other--4.5% BBB+ A3 2,000,000 6.25% due 6/15/1998 2,052,040 1,841,980
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,174,550 7,090,300
A- A3 2,000,000 Smith Barney Holdings, Inc., 7.875%
due 10/01/1999 1,993,080 1,948,720
A+ A2 2,000,000 The Travelers Corp., 9.50% due 3/01/2002 2,168,400 2,101,320
-------------- --------------
14,388,070 12,982,320
<PAGE>
Foreign*--12.0% A+ A2 4,000,000 CRA Finance Ltd., 6.50% due 12/01/2003 (2) 4,006,020 3,513,060
AAA Aaa 1,500,000 Japan Finance Corp. for Municipal
Enterprises, 9.125% due 3/13/2000 (2) 1,654,665 1,542,465
A A2 2,000,000 Kingdom of Thailand, 8.25% due
3/15/2002 (1) 1,971,770 1,963,260
AAA Aaa 2,000,000 Metropolis of Tokyo (Japan),
8.70% due 10/05/1999 (2) 2,312,940 2,046,830
Province of Ontario (Canada) (3):
AA- Aa3 1,000,000 8% due 10/17/2001 1,080,710 988,320
AA- Aa3 6,000,000 7.75% due 6/04/2002 5,887,680 5,800,380
A+ A1 9,000,000 Province of Quebec (Canada),
8.80% due 4/15/2003 (3) 9,288,960 9,097,920
BB Baa3 10,000,000 Republic of South Africa,
9.625% due 12/15/1999 (1) 9,839,025 9,927,670
-------------- --------------
36,041,770 34,879,905
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (continued) Intermediate Term Portfolio
Industrial-- AA- A1 $ 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--11.0% due 12/01/1999 $ 6,189,909 $ 5,604,596
A+ A1 3,000,000 Bass America, Inc., 8.125% due 3/31/2002 3,095,170 2,957,835
A+ A2 1,000,000 Dillard Department Stores, Inc.,
7.15% due 9/01/2002 1,046,710 931,995
Grand Metropolitan Investment Corp.:
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 2,794,560
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,027,450
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 3,782,220
A A2 3,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 3,576,195 3,550,417
Sears, Roebuck & Co.:
BBB Baa1 2,500,000 9.25% due 4/15/1998 2,837,275 2,567,212
BBB Baa1 7,000,000 8.45% due 11/01/1998 7,762,380 7,000,665
-------------- --------------
34,589,699 32,216,950
Industrial-- AA- A1 1,000,000 BP America Inc., 7.875% due 5/15/2002 1,055,380 980,305
Energy--1.7% Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 1,894,260
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,061,370
-------------- --------------
5,393,960 4,935,935
<PAGE>
Industrial-- BBB- Baa3 4,000,000 Applied Materials Inc., 8% due 9/01/2004 3,970,760 3,833,800
Other--14.8% Carnival Cruise Lines, Inc.:
A- A3 1,000,000 6.15% due 10/01/2003 891,530 853,840
A- A3 6,000,000 7.70% due 7/15/2004 5,643,060 5,692,020
BBB Baa2 4,000,000 Carter Holt Harvey, Ltd.,
8.875% due 12/01/2004 3,977,600 4,051,860
A- A3 2,000,000 International Paper Co., 9.40% due 6/01/2002 2,201,380 2,115,580
BBB- Ba1 12,250,000 News America Holdings Inc., 7.50%
due 3/01/2000 12,173,963 11,548,626
BBB Baa3 5,000,000 Northrop Grumman Corp., 8.625%
due 10/15/2004 5,000,000 4,955,150
BBB- Baa3 10,000,000 Telecommunications, Inc., 9.25%
due 4/15/2002 11,126,050 10,001,699
-------------- --------------
44,984,343 43,052,575
Supranational-- AAA Aaa 1,500,000 International Bank for Reconstruction &
0.6% Development, 12.375% due 10/15/2002 1,954,980 1,848,300
Transportation AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,532,300
Services--3.9% Southwest Airlines, Inc.:
A- Baa1 6,500,000 9.40% due 7/01/2001 7,564,180 6,757,692
A- Baa1 1,000,000 8.75% due 10/15/2003 1,069,430 1,016,585
-------------- --------------
12,233,570 11,306,577
Utilities-- BBB Baa3 6,500,000 United Telecommunications, Inc.,
Communications-- 9.50% due 4/01/2003 6,901,765 6,864,065
2.4%
Utilities-- BBB+ Baa1 7,000,000 PECO Energy Co., 8% due 4/01/2002 7,000,440 6,803,475
Electric--4.6% Pennsylvania Power & Light Co.:
A A2 4,000,000 5.50% due 4/01/1998 3,991,280 3,694,560
A A2 1,000,000 7.75% due 5/01/2002 1,043,980 963,025
BBB Baa2 2,000,000 Texas Utilities Electric Co., 8% due 6/01/2002 1,972,080 1,916,740
-------------- --------------
14,007,780 13,377,800
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<S> <S> <S> <C> <S> <C> <C>
Bonds & Notes (concluded) Intermediate Term Portfolio
<PAGE>
Utilities-- Consolidated Natural Gas Co.:
Gas--2.1% AA- A1 $ 4,000,000 9.375% due 2/01/1997 $ 4,125,760 $ 4,089,900
AA- A1 2,000,000 8.75% due 6/01/1999 2,125,440 2,029,330
-------------- --------------
6,251,200 6,119,230
Total Investments in Bonds & Notes--95.4% 291,546,321 277,763,771
Short-Term Securities
Repurchase 14,619,000 UBS Securities Inc., purchased on
Agreements***--5.0% 12/30/1994 to yield 5.75% to 1/03/1995 14,619,000 14,619,000
Total Investments in Short-Term
Securities--5.0% 14,619,000 14,619,000
Total Investments--100.4% $ 306,165,321 292,382,771
==============
Liabilities in Excess of Other Assets--(0.4)% (1,133,591)
--------------
Net Assets--100.0% $ 291,249,180
==============
Net Asset Value: Class A--Based on net assets of $157,398,153 and 14,708,645 shares outstanding $ 10.70
==============
Class B--Based on net assets of $132,120,412 and 12,346,163 shares outstanding $ 10.70
==============
Class C--Based on net assets of $147,096 and 13,743 shares outstanding $ 10.70
==============
Class D--Based on net assets of $1,583,519 and 147,945 shares outstanding $ 10.70
==============
<FN>
*Not Rated.
**Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution; Government-Owned & Guaranteed.
(3)Government Entity; Guaranteed by Province.
***Repurchase Agreements are fully collateralized by US Government
Obligations.
</TABLE>
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, 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
