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Previous: EVANS & SUTHERLAND COMPUTER CORP, SC 13G/A, 1996-02-15 |
Next: HILLHAVEN CORP, SC 13G/A, 1996-02-15 |
MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1995
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 con-
sidered a representation of future performance.
Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
Statements and other information herein are as
dated and are subject to change.
<PAGE>
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
As 1995 drew to a close, the pace of US economic
activity apparently slowed. There was strong evidence
of a slowing economy by mid-year, a trend that was
quickly reversed as gross domestic product growth
rebounded to a 4.2% pace during the third calendar
quarter of 1995. However, recent economic releases
suggest that this rate of expansion has not been
sustained.
A number of key measures of economic growth indi-
cate evidence of slowing momentum. Retail sales for
November were soft, a trend that continued through-
out the all-important holiday season, reflecting
ongoing caution on the part of debt-burdened con-
sumers. At the same time, there has been an increase in
initial unemployment claims, along with weak job and
income growth. As labor costs continue to decelerate
and commodity price pressures remain subdued, infla-
tionary pressures continue to be well under control.
<PAGE>
These developments led the Federal Reserve Board to
ease its monetary policy slightly at the December 19,
1995 Federal Open Market Committee meeting. How-
ever, the Clinton Administration and Congress have
yet to reach an agreement in their current Federal
budget deliberations. While the probable direction of
economic activity will continue to be the primary
focus of investors in the weeks ahead, a credible plan
for reducing the Federal budget deficit will also be an
important factor in the investment outlook.
Portfolio Strategy
High Income Portfolio
The high-yield bond market posted an outstanding
year with 1995's returns exceeded only by 1991's over
the last ten years. The December quarter also pro-
duced solid results. For the three-month period ended
December 31, 1995, the Portfolio's total returns for
Class A, Class B, Class C and Class D Shares were
+3.01%, +2.80%, +2.65% and +2.94%, respectively.
The size of the Portfolio also showed substantial
growth with assets increasing from $3.1 billion at
year-end 1994 to $4.7 billion at December 31, 1995, or
51.6% of net assets.
The driving force for the year and quarter was falling
interest rates. Yields on ten-year US Treasury bonds
fell from 7.85% to 5.63% over the course of the year as
investors reacted positively to moderate economic
growth, low inflation and falling short-term interest
rates. Because of its greater sensitivity to overall
interest rates, the higher-quality BB-rated sector of
the high-yield market outperformed issues rated B or
less in 1995. The air transportation industry (Delta
Air Lines Inc., United Air Lines Inc., USAir Inc.)
outperformed all other high-yield industry groups
with a return of +33.8%. Other above-average performers
included homebuilders, +28.2%; cable TV, +26%; tele-
communications, +24.7%; electric utilities +23%; and
broadcasting, +22%. The weak performers were retailers
- -0.7% and restaurants +7.2%. Companies in these
industries struggled with weak earnings and a num-
ber of defaults. Default rates rose from 1.4% in 1994 to
3.6% in 1995. The average annual default rate since
1978 has been 3.1%, and 1995 represents a return to
the norm after several very low years, in our opinion.
The Portfolio experienced a surprise bankruptcy in
November when Harrah's Jazz Company, a casino
project in New Orleans, filed for protection after the
bank lenders withdrew financing. We are pursuing
recovery vigorously.
<PAGE>
At year-end 1995, the Portfolio was structured in a
manner that we believe will enhance returns over the
new year. As modest economic growth and relatively
stable interest rates seem the most likely environ-
ment, at least perhaps over the next six months,
corporate profits may become the most important
factor influencing high-yield bond prices. Therefore,
in 1996 industry and company selection seem likely to
dominate investment performance to an even greater
degree than in 1995. We would like to highlight several
investment themes that have gained momentum over
the past year and should remain important in 1996.
* Media and communication companies are the Port-
folio's largest industry group with assets totaling
17.6% of net assets at year-end 1995. This broad sector
includes television and radio broadcasters and cable
television operators including four companies in the
United Kingdom offering both cable TV and telephones,
DBS (a satellite television delivery system), wireless
cable (which is the delivery of multi-channel tele-
vision by broadcast signal), and wireless cellular and
paging communications. While broadcasting and cable
delivery are seasoned concepts, new satellite and
electronic technologies have created new picture and
voice delivery systems at affordable and often declin-
ing cost for a mass market. Our investments have
helped finance the rapid growth of these industries.
* The portion of holdings of companies domiciled
outside the United States has grown to 15.3% of net
assets at year-end. This trend has been encouraged by
deregulation and privatization in certain parts of the
world.
For example, the two privatized telephone companies
in Argentina and several privatized energy companies
in that country have issued US dollar-denominated
bonds rated below investment grade. These issuers
are world-class companies with investment-grade finan-
cial statistics (in our judgment) and American deposi-
tary receipts trading on the New York Stock Exchange.
Because the Republic of Argentina is rated below
investment grade, corporate bond issuers domiciled
there are subject to the bond rating services' sovereign
ceiling, a policy that no entity within a country can be
rated higher than the country. This creates very attrac-
tive valuation as we believe that the positive trends
already in place in selected emerging markets will
continue. At year-end, Portfolio exposure to issuers
in non-US jurisdictions risk included: Argentina,
4% of net assets; Canada, 3%; and the United Kingdom,
2.6%. All of the Portfolio's non-US holdings are US
dollar-denominated and therefore not exposed to
currency risk.
<PAGE>
* The credit quality of the high-yield market has notice-
ably improved since 1992, as the lower tier shrank
from 7.7% of the market to 5.1% at the end of 1995.
Meanwhile, the upper tier increased from 24% to 28%.
This improvement is primarily a result of new issuance
of better rated BB and split BB securities. The sig-
nificant growth in the supply of more highly rated
credits has allowed better quality and crossover in-
vestors to increase the size and diversity of their
high-yield holdings. The quality of the High Income
Portfolio has also migrated up.
At December 31, 1995, our cash position was 7% of net
assets and the average portfolio maturity stood at 7.2
years. The Portfolio remained broadly diversified with
186 issuers representing 32 industries. In addition to
industries already mentioned, major sectors included
energy, 8.9% of net assets; paper, 7%; gaming, 6.5%;
utilities, 6.2% and food and beverages, 3.2%.
Investment Grade Portfolio and Intermediate Term
Portfolio
Moderate growth and mild inflation continued to
reinforce the opinion that the economic soft landing
is occurring. The resiliency of bond prices has demon-
strated investors' conviction that the economy is not
heating up. At the same time, a drop in consumer
confidence and sluggish retail sales figures have led to
speculation that the economy should be more con-
cerned with recession than inflation. On December 19,
1995, the Federal Reserve Board cut the Federal
Funds rate by 25 basis points (0.25%), the second
easing move since July and perhaps only the second in
an easing cycle which may extend into the middle of
1996. The yield curve steepened modestly with a drop
in both short-term and long-term maturities. The
economy began to lose momentum after growing at a
4.2% annual rate in the third quarter. Meanwhile,
inflation is at the lowest level in years. Consumer
prices did not change in November, the first month
this has happened since the 1991 recession.
<PAGE>
Throughout the December quarter, we extended the
average portfolio maturity of the Investment Grade
Portfolio from 10.6 years at the outset of the quarter
to 11.5 years at December 31, 1995. This is slightly
shorter than the Merrill Lynch Corporate Bond Master
Index. For the same period, we maintained an average
portfolio maturity of approximately 5.9 years for the
Intermediate Term Portfolio. This is relatively neutral
as compared to the Merrill Lynch Corporate Intermediate
Term Bond Index. These average portfolio maturities
reflect our sense of caution brought about by our opinion
that much of the positive news going forward has
already been priced into the current market. For the
Investment Grade Portfolio we continue to be under-
weighted in the utility sector. In addition, while this
Portfolio's cash flow was relatively heavy during the
December quarter, we maintained a cash position of
approximately 6.5% of net assets. For the Intermediate
Term Portfolio, we continue to be underweighted in
the utility sector as well, and we maintained the
Portfolio's cash position at 4.5% of net assets.
In Conclusion
We thank you for your continued investment in
Merrill Lynch Corporate Bond Fund, Inc., and we
look forward to reviewing our investment outlook
and strategies in our upcoming semi-annual report
to shareholders.
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 30, 1996
<PAGE>
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund
through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
*Class A Shares incur a maximum initial sales charge
(front-end load) of 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.
*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 approximately 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).
<PAGE>
None of the past results shown should be considered
a representation of future performance. Investment
return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each
class of shares will vary because of the different
levels of account maintenance, distribution and
transfer agency fees applicable to each class, which
are deducted from the income available to be paid
to shareholders.
PERFORMANCE DATA (continued)
Average Annual Total Return--High Income Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +18.38% +13.64%
Five Years Ended 12/31/95 +17.92 +16.96
Ten Years Ended 12/31/95 +11.72 +11.27
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +17.49% +13.49%
Five Years Ended 12/31/95 +17.00 +17.00
Inception (10/21/88) through
12/31/95 +11.35 +11.35
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +17.27% +16.27%
Inception (10/21/94) through
12/31/95 +13.17 +13.17
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +18.09% +13.37%
Inception (10/21/94) through
12/31/95 +13.80 + 9.98
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +19.82% +15.03%
Five Years Ended 12/31/95 +10.00 + 9.11
Ten Years Ended 12/31/95 + 9.30 + 8.86
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +18.92% +14.92%
Five Years Ended 12/31/95 + 9.17 + 9.17
Inception (10/21/88) through
12/31/95 + 8.98 + 8.98
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +18.74% +17.74%
Inception (10/21/94) through
12/31/95 +16.18 +16.18
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +19.53% +14.74%
Inception (10/21/94) through
12/31/95 +16.84 +12.92
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 12/31/95 +18.10% +16.92%
Five Years Ended 12/31/95 + 9.49 + 9.27
Ten Years Ended 12/31/95 + 9.02 + 8.91
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +17.50% +16.50%
Inception (11/13/92) through
12/31/95 + 7.86 + 7.86
[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 % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +17.48% +16.48%
Inception (10/21/94) through
12/31/95 +14.80 +14.80
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +17.98% +16.80%
Inception (10/21/94) through
12/31/95 +15.24 +14.27
<PAGE>
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
12/31/95 9/30/95 12/31/94 % Change % Change As of 12/31/95
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 7.83 $ 7.80 $ 7.31 + 7.11% +0.38% 9.52%
High Income Portfolio Class B Shares 7.83 7.80 7.31 + 7.11 +0.38 9.15
High Income Portfolio Class C Shares 7.83 7.81 7.32 + 6.97 +0.26 9.09
High Income Portfolio Class D Shares 7.83 7.80 7.31 + 7.11 +0.38 9.27
Investment Grade Portfolio Class A Shares 11.84 11.51 10.60 +11.70 +2.87 5.78
Investment Grade Portfolio Class B Shares 11.84 11.51 10.60 +11.70 +2.87 5.25
Investment Grade Portfolio Class C Shares 11.84 11.51 10.61 +11.59 +2.87 5.20
Investment Grade Portfolio Class D Shares 11.84 11.51 10.60 +11.70 +2.87 5.54
Intermediate Term Portfolio Class A Shares 11.80 11.50 10.70 +10.28 +2.61 5.69
Intermediate Term Portfolio Class B Shares 11.80 11.50 10.70 +10.28 +2.61 5.24
Intermediate Term Portfolio Class C Shares 11.80 11.50 10.70 +10.28 +2.61 5.22
Intermediate Term Portfolio Class D Shares 11.80 11.50 10.70 +10.28 +2.61 5.60
High Income Portfolio Class A Shares--Total Return +18.38(1) +3.01(2)
High Income Portfolio Class B Shares--Total Return +17.49(3) +2.80(4)
High Income Portfolio Class C Shares--Total Return +17.27(5) +2.65(6)
High Income Portfolio Class D Shares--Total Return +18.09(7) +2.94(8)
Investment Grade Portfolio Class A Shares--Total Return +19.82(9) +4.60(10)
Investment Grade Portfolio Class B Shares--Total Return +18.92(11) +4.38(12)
Investment Grade Portfolio Class C Shares--Total Return +18.74(13) +4.36(14)
Investment Grade Portfolio Class D Shares--Total Return +19.53(15) +4.53(16)
Intermediate Term Portfolio Class A Shares--Total Return +18.10(17) +4.27(18)
Intermediate Term Portfolio Class B Shares--Total Return +17.50(19) +4.12(12)
Intermediate Term Portfolio Class C Shares--Total Return +17.48(20) +4.11(21)
Intermediate Term Portfolio Class D Shares--Total Return +17.98(22) +4.24(23)
<FN>
*Investment results shown do not reflect sales charges;
results shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.773 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.224 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.715 per share
ordinary income dividends.
<PAGE>
(4)Percent change includes reinvestment of $0.207 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.712 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.206 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.755 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.218 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.797 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.217 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.711 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.192 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.705 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.190 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.769 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.209 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.780 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.208 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.722 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.720 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.191 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.768 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.205 per share
ordinary income dividends.
</TABLE>
<PAGE>
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 -- -- 1.05(a) -- -- + 2.36 -- --
1980(b) 8.73/7.91 $10.00/ 9.88 $10.00/ 9.93*** 1.07 $ 0.25 $ 0.26*** + 3.08 + 1.28% + 1.86%
1981 7.91/7.26 9.88/ 9.38 9.93/ 9.57 1.12 1.46 1.37 + 6.48 + 10.52 + 11.11
1982 7.26/7.74 9.38/10.51 9.57/10.59 1.04 1.36 1.36 + 23.09 + 28.74 + 26.74
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 + 0.65
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 + 13.63 + 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 + 7.51 + 7.28
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
1994 8.32/7.31 11.97/10.60 11.92/10.70 0.80 0.77 0.77 - 2.69 - 5.06 - 3.85
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.77 0.80 0.78 + 18.38 + 19.82 + 18.10
------ ------ ------
Total $16.39 $16.53 $15.91
Cumulative total return as of 12/31/95: +560.06%** +439.91%** +409.56%**
<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>
<PAGE>
<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 + 6.69 + 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
1994 8.33/7.31 11.97/10.60 11.92/10.70 0.74 0.69 0.71 - 3.54 - 5.78 - 4.34
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.72 0.71 0.72 + 17.49 + 18.92 +17.50
----- ----- -----
Total $5.84 $6.37 $2.64
Cumulative total return as of 12/31/95: +116.81%** +85.73%** +26.73%**
<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>
Performance Summary--Class C 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>
10/21/94--12/31/94 $7.59/7.32 $10.67/10.61 $10.81/10.70 $0.18 $0.14 $0.15 - 1.15% + 0.74% + 0.38%
1995 7.32/7.83 10.61/11.84 10.70/11.80 0.71 0.70 0.72 +17.27 +18.74 +17.48
----- ----- -----
Total $0.89 $0.84 $0.87
Cumulative total return as of 12/31/95: +15.92%** +19.62%** +17.92%**
<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.
</TABLE>
<TABLE>
Performance Summary--Class D 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>
10/21/94--12/31/94 $7.59/7.31 $10.67/10.60 $10.81/10.70 $0.19 $0.15 $0.15 - 1.17% + 0.76% + 0.41%
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.75 0.77 0.77 +18.09 +19.53 +17.98
----- ----- -----
Total $0.94 $0.92 $0.92
Cumulative total return as of 12/31/95: +16.70%** +20.43%** +18.46%**
<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.
</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--2.7% Delta Air Lines Inc.:
BB+ Baa2 $ 3,000,000 9.30% due 1/02/2010 $ 2,963,100 $ 3,552,750
BB+ Baa2 5,000,000 9.20% due 9/23/2014 4,839,050 5,705,750
BB+ Baa2 20,000,000 10.50% due 4/30/2016 20,481,900 25,324,299
Piedmont Aviation, Inc.:
BB- B1 200,000 Series C, 9.70% due 1/15/1999 201,676 198,616
BB- B1 100,000 Series C, 10.25% due 1/15/2007 103,706 101,479
BB- B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,020,770
BB- B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,076,526
BB- B1 50,000 Series G, 10.35% due 3/28/2011 51,425 53,244
BB- B1 450,000 Series H, 9.85% due 5/08/2005 454,617 444,528
BB- B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,558,140
BB- B1 536,000 Series I, 10% due 11/08/2012 545,048 556,775
United Air Lines Inc.:
BB+ Baa1 4,000,000 10.02% due 3/22/2014 4,050,000 4,806,160
BB+ Baa1 2,000,000 9.08% due 10/26/2015 1,847,200 2,234,470
BB+ Baa1 7,100,000 9.35% due 4/07/2016 7,215,446 7,872,125
BB+ Baa1 10,500,000 9.21% due 1/21/2017 10,480,125 11,820,112
USAir Inc.:
B B1 30,000,000 9.625% due 2/01/2001 24,109,906 26,250,000
BB- B1 18,500,000 10.375% due 3/01/2013 18,290,000 17,297,500
BB B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,495,602
BB B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,895,613
B+ B2 421,000 Series E, 10.70% due 1/01/2002 382,895 433,102
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,156,167
B+ B2 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,127,053
B+ B2 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,127,053
B+ B2 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,127,053
B+ B2 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,127,053
BB- B1 5,249,760 Series 89A1, 9.33% due 1/01/2006++++ 4,966,118 4,978,268
-------------- --------------
114,884,789 126,340,208
Automotive--0.5% NR* B1 10,000,000 Exide Corp., 10% due 4/15/2005 10,071,250 10,875,000
B B3 10,150,000 SPX Inc., 11.75% due 6/01/2002 10,175,000 10,797,063
-------------- --------------
20,246,250 21,672,063
<PAGE>
Broadcasting/ American Telecasting, Inc. (a):
Cable--6.1% CCC+ Caa 38,190,545 14.86% due 6/15/2004 22,740,982 26,399,214
CCC+ Caa 3,100,000 14.50% due 8/15/2005 (b) 1,623,203 1,929,750
CCC B3 29,117,000 Australis Media Ltd., 14.07% due
5/15/2003 (a) (f) 16,064,443 21,146,221
BB- B2 50,000,000 Bell Cablemedia PLC, 11.80%
due 9/15/2005 (a) 29,202,145 31,500,000
BB- B3 13,500,000 Cai Wireless Systems Inc., 12.25%
due 9/15/2002 13,500,000 14,445,000
BB- Ba3 22,500,000 Century Communications Corporation,
9.75% due 2/15/2002 22,112,500 23,568,750
B+ B1 10,000,000 Comcast Corporation, 9.50% due 1/15/2008 9,350,000 10,625,000
B B2 50,000,000 Comcast UK Cable Partners Ltd., 11.21%
due 11/15/2000 (a) 29,386,712 29,375,000
BB+ Ba3 20,000,000 Lenfest Communications, Inc., 8.375%
due 11/01/2005 19,941,200 20,087,500
CCC+ Caa 20,000,000 Peoples Choice T.V. Corporation, 13.48%
due 6/01/2004 (a) (g) 11,135,357 11,750,000
United International Holdings, Inc. (a):
B- B3 5,000,000 12.18% due 11/15/1999 3,094,247 3,125,000
B- B3 50,000,000 13.99% due 11/15/1999 (h) 29,624,834 31,625,000
B- B3 18,750,000 14% due 11/15/1999 11,105,282 11,718,750
</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>
Broadcasting/ Videotron Groupe L'TEE:
Cable BB+ Ba3 $ 11,250,000 10.25% due 10/15/2002 $ 11,322,500 $ 11,868,750
(concluded) BB+ Baa3 3,300,000 10.625% due 2/15/2005 3,279,375 3,547,500
B+ B3 50,000,000 Videotron Holdings PLC, 12.08% due
7/01/2004 (a) 32,118,089 35,062,500
-------------- --------------
265,600,869 287,773,935
Broadcasting & B- B2 17,500,000 EZ Communications, Inc., 9.75%
Publishing--3.2% due 12/01/2005 17,361,575 17,675,000
BB- Ba3 13,150,000 Heritage Media Services Corporation, 11%
due 6/15/2002 13,158,750 14,054,062
B B3 14,000,000 The Katz Corp., 12.75% due 11/15/2002 14,313,750 15,050,000
B Caa 25,000,000 NWCG Holding Corp., 13.79%
due 6/15/1999 (a) 15,765,568 17,312,500
BB- B3 10,000,000 SCI Television Inc., 11% due 6/30/2005 10,350,000 10,612,500
Sinclair Broadcasting Group Inc.:
B+ B3 15,000,000 10% due 12/15/2003 15,036,250 15,375,000
B+ B1 26,500,000 10% due 9/30/2005 26,612,500 27,228,750
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,675,000
B B2 13,000,000 Young Broadcasting Inc., 10.125%
due 2/15/2005 13,000,000 13,715,000
-------------- --------------
145,617,768 151,697,812
<PAGE>
Building B Caa 20,000,000 Inter-City Products Corp., 9.75%
Materials--1.9% due 3/01/2000 19,508,750 14,100,000
CCC B3 20,000,000 Nortek Inc., 9.875% due 3/01/2004 19,834,240 18,800,000
B+ B3 26,720,000 Pacific Lumber Co., 10.50% due 3/01/2003 26,420,738 25,584,400
B+ B2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 29,084,000
-------------- --------------
91,653,734 87,568,400
Capital Goods-- B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 21,128,512
1.0% B- B3 25,000,000 International Wire Group, 11.75%
due 6/01/2005 24,986,250 23,875,000
-------------- --------------
46,532,750 45,003,512
Chemicals--1.6% B B2 15,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 15,060,000 16,612,500
B+ Ba3 45,000,000 G-I Holdings, Inc., 11.44% due
10/01/1998 (a) 33,142,197 35,100,000
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.65% due 7/15/2001 (a) 24,818,057 23,875,000
-------------- --------------
73,020,254 75,587,500
Communications-- CCC+ B3 23,000,000 Cellular Communications, Inc., 13.25%
8.4% due 8/15/2000 (a) (c) 12,711,769 14,490,000
B+ B3 41,472,000 Comunicacion Celular, 13.13%
due 5/15/2000 (a) 22,358,020 23,639,040
B- Caa 46,688,000 Echostar Communications Corp.,
13.62% due 6/10/1999 (a) (i) 28,972,278 30,474,282
CCC+ Caa 29,547,000 Horizon Cellular Telephone Co., 11.48%
due 10/01/2000 (a) 24,255,883 25,779,758
CCC+ B3 25,000,000 Mobilemedia Communication, Inc., 11.32%
due 12/01/2003 (a) 17,597,498 19,562,500
CCC+ B3 60,000,000 Nextel Communications Inc., 11.32% due
8/15/2004 (a) 40,395,502 32,700,000
NR* NR* 21,000,000 Page Mart Inc., 12.74% due 11/01/2003 (a) 14,514,341 15,592,500
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Communications Paging Network, Inc.:
(concluded) B B2 $ 20,000,000 11.75% due 5/15/2002 $ 20,387,500 $ 22,125,000
B B2 15,000,000 10.125% due 8/01/2007 15,000,000 16,256,250
B- B3 36,710,000 Pan Am Sat L.P., 11.35% due 8/01/2003 (a) 27,517,281 30,193,975
BB- B2 35,925,000 Rogers Communications Inc., 10.875%
due 4/15/2004 36,431,094 37,631,438
BB- B1 31,000,000 Telecom Argentina S.A., 8.375% due
10/18/2000 25,952,625 29,527,500
Telefonica de Argentina S.A.:
NR* B1 2,690,000 8.375% due 10/01/2000 2,051,125 2,575,675
NR* B1 7,000,000 8.375% due 10/01/2000 5,385,000 6,702,500
BB- B1 40,000,000 11.875% due 11/01/2004 38,763,075 41,500,000
BB B1 50,000,000 Telewest Communications PLC, 11%
due 10/01/2000 (a) 30,070,450 30,250,000
CCC+ B3 14,730,000 USA Mobile Communications Holdings, Inc.,
9.50% due 2/01/2004 14,135,375 14,693,175
-------------- --------------
376,498,816 393,693,593
Computer Services-- ComputerVision Corp.:
1.0% CCC+ B3 15,000,000 11.375% due 8/15/1999 14,473,750 15,675,000
CCC+ NR* 12,500,000 8% due 12/01/2009 6,802,472 9,125,000
B- B3 20,000,000 Dictaphone Corp., 11.75% due 8/01/2005 20,000,000 19,900,000
-------------- --------------
41,276,222 44,700,000
Conglomerates-- BB+ Ba3 25,000,000 ADT Operations Inc., 9.25% due 8/01/2003 25,094,187 26,906,250
4.6% BB- B3 29,700,000 Coltec Industries, Inc., 10.25% due
4/01/2002 30,310,075 30,628,125
CCC+ B3 20,000,000 The Interlake Corp., 12.125% due 3/01/2002 20,147,500 19,100,000
B+ B2 10,000,000 JB Poindexter & Co., Inc., 12.50% due
5/15/2004 10,000,000 8,075,000
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 8,542,500
NR* NR* 9,100,000 MacAndrews & Forbes Holdings, Inc., 13%
due 3/01/1999 8,568,400 9,236,500
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 24,310,000
BB- B1 30,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 29,829,688 32,100,000
NR* NR* 40,000,000 Walter Industries Inc., 12.19% due
3/15/2000 40,600,000 40,525,000
-------------- --------------
217,934,188 217,323,375
<PAGE>
Consumer B B3 10,000,000 Cabot Corporation, 12.50% due 7/15/2005 10,000,000 10,650,000
Products--4.3% B NR* 39,760,000 Coleman Holdings, Inc., 11.57% due
5/27/1998 (a) 30,229,052 32,305,000
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 15,975,000
B+ Ba2 25,600,000 International Semi-Tech Microelectronics,
12.98% due 8/15/2003 (a) 13,824,237 13,568,000
B- Caa 16,750,000 Polymer Group Inc., 12.25% due 7/15/2002 16,680,000 17,336,250
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,190,457 3,552,500
B B2 22,000,000 9.375% due 4/01/2001 19,973,932 22,385,000
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 9,713,750
B- B3 36,650,000 Samsonite Corporation, 11.125%
due 7/15/2005 36,088,625 35,367,250
B+ B1 22,800,000 Sealy Corp., 9.50% due 5/01/2003 22,707,775 23,028,000
B- B3 13,000,000 Selmer Co. Inc., 11% due 5/15/2005 12,985,000 12,870,000
-------------- --------------
189,474,078 196,750,750
</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% due
Bonds**--0.3% 8/15/2005 (4) $ 4,886,880 $ 7,589,880
D C 10,363,000 Lomas Financial Corp., 9% due
10/31/2003 (2) 9,654,393 725,410
B- B3 2,084,000 MEDIQ, Inc., 7.25% due 6/01/2006 (3) 1,207,575 1,651,570
B B2 2,000,000 OHM Corp., 8% due 10/01/2006 (5) 1,400,000 1,755,000
B B2 3,659,000 UNC, Inc., 7.50% due 3/31/2006 (1) 2,151,592 3,249,649
-------------- --------------
19,300,440 14,971,509
Diversified-- B B1 25,000,000 Foamex Capital Corp., 11.25%
0.7% due 10/01/2002 24,964,375 25,125,000
NR* B3 10,000,000 RBX Corporation, 11.25% due 10/15/2005 10,006,250 9,825,000
-------------- --------------
34,970,625 34,950,000
Drug Stores--0.4% B B2 20,000,000 Thrifty Payless Holdings, Inc., 11.75%
due 4/15/2003 20,000,000 21,650,000
<PAGE>
Energy--8.9% BB- Ba3 24,000,000 California Energy Company, Inc., 9.875%
due 6/30/2003 24,122,500 25,320,000
BB Ba2 30,000,000 Ce Casecnan Water & Energy, 11.45%
due 11/15/2005 30,000,000 30,337,500
B+ B1 49,500,000 Clark R&M Holdings, Inc., 11% due
2/15/2000 (a) 31,839,232 33,165,000
B+ B2 9,000,000 Clark USA Inc., 10.875% due 12/01/2005 9,000,000 9,495,000
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12.22% due
7/15/2003 (a) 13,574,285 10,891,875
Falcon Drilling Company, Inc.:
B- B2 16,000,000 9.75% due 1/15/2001 16,000,000 16,420,000
B- B3 8,500,000 12.50% due 3/15/2005 8,500,000 9,052,500
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 22,200,000
Gulf Canada Resources Ltd.:
BB B1 12,750,000 9% due 8/15/1999 11,735,937 13,515,000
B+ Ba3 10,000,000 9.25% due 1/15/2004 9,726,605 10,400,000
Maxus Energy Corp.:
BB- B1 17,750,000 9.875% due 10/15/2002 16,726,250 17,927,500
BB- B1 5,300,000 11.50% due 11/15/2015 4,987,000 5,538,500
BB- Ba3 8,750,000 Noble Drilling Corp., 9.25% due
10/01/2003 8,925,000 9,220,313
BBB- Baa3 28,000,000 Oleoducts Central S.A., 9.35% due
9/01/2005 27,967,500 28,420,000
B+ Ba3 15,000,000 Rowan Companies, Inc., 11.875% due
12/01/2001 15,085,000 16,312,500
BB- B1 25,000,000 Seagull Energy Corp., 8.625% due
8/01/2005 24,990,000 24,312,500
NR* B3 4,016,000 Tesoro Petroleum Corp., 12.75% due
3/15/2001 3,436,342 4,136,480
B- Caa 50,000,000 Transamerican Refining Corp., 18.83%
due 2/15/2002 (a) 33,495,100 30,500,000
BB+ B2 30,000,000 TransTexas Gas Corp., 11.50% due 6/15/2002 30,000,000 31,087,500
B+ B1 31,525,000 Triton Energy Corp., 10.61% due
11/01/1997 (a) 25,963,817 27,308,531
B+ B1 8,000,000 Vintage Petroleum Inc., 9% due 12/15/2005 7,978,240 8,110,000
BB- B1 40,000,000 Yacimientos Petroliferos Fiscales S.A.
(YPF) (Sponsored), 8% due 2/15/2004 31,966,750 37,600,000
-------------- --------------
406,067,058 421,270,699
Entertainment-- B+ B1 9,000,000 Cinemark USA, Inc., 12% due 6/01/2002 9,058,750 9,855,000
1.9% Marvel Holdings Inc.:
B- Caa 28,000,000 9.125% due 2/15/1998 24,810,750 25,900,000
B- B3 14,500,000 11.69% due 4/15/1998 (a) 11,150,871 10,512,500
B- B3 5,500,000 15.97% due 4/15/1998 (a) 3,801,070 3,946,250
B B2 40,000,000 Six Flags Theme Parks, 12.18% due
6/15/1998 (a) 29,995,080 31,400,000
Spectravision Inc.:
D Caa 39,250,000 11.74% due 10/01/2001 (a) 33,732,587 8,046,250
D Caa 24,040,000 11.65% due 12/01/2002 21,422,831 1,803,000
-------------- --------------
133,971,939 91,463,000
</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>
Financial D Ca $ 25,000,000 Lomas Mortgage USA, Inc., 10.25% due
Services--1.5% 10/01/2002 $ 23,095,625 $ 12,125,000
NR* B3 15,000,000 Olympic Financial Ltd., 13% due 5/01/2000 15,000,000 16,443,750
BB- B1 9,000,000 Penncorp Financial, 9.25% due 12/15/2003 9,090,000 9,180,000
BBB NR* 1,500,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 1,200,000 1,523,430
Reliance Group Holdings, Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,657,031
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 23,308,688
-------------- --------------
76,546,250 70,237,899
Food & Chiquita Brands International Inc.:
Beverage--3.2% B B3 9,655,000 11.50% due 6/01/2001 9,966,881 10,041,200
B+ B1 13,000,000 9.125% due 3/01/2004 12,990,000 12,935,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25% due
2/01/2005 23,562,125 24,036,250
B- B2 26,463,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 25,608,891 19,847,250
CCC+ Caa 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 22,750,000
D Caa 21,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 21,967,500 12,971,000
Specialty Foods Corp.:
B B3 19,250,000 10.25% due 8/15/2001 18,784,375 18,287,500
B B3 12,000,000 11.125% due 10/01/2002 11,970,000 11,700,000
B B3 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 19,850,000
-------------- --------------
169,864,772 152,418,200
Foreign Government BB- B1 20,000,000 Republic of Argentina, 8.375% due
Obligations--0.4% 12/20/2003 15,481,250 16,912,500
<PAGE>
Gaming--6.5% B B2 17,325,000 Aztar Corp., 11% due 10/01/2002 17,557,250 17,411,625
BB B1 30,000,000 Bally's Park Place, Inc., 9.25% due
3/15/2004 28,485,200 30,637,500
NR* Caa 12,000,000 Capital Gaming International, Inc.,
11.50% due 2/01/2001 9,426,041 5,640,000
B+ B2 37,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 35,072,500 32,652,500
D NR* 7,682,000 Goldriver Hotel & Casino Corp., 13.375%
due 8/31/1999 8,609,882 3,648,950
BB Ba3 25,000,000 Grand Casinos Inc., 10.125% due
12/01/2003 25,000,000 26,281,250
D Caa 60,115,000 Harrah's Jazz Company, 14.25%
due 11/15/2001 49,536,050 16,832,200
B+ B2 15,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 14,291,901 13,800,000
BB- B1 15,000,000 MGM Grand Hotel Finance Corp., 12%
due 5/01/2002 15,230,500 16,481,250
B- B3 10,000,000 Pioneer Finance Corp., 13.50% due
12/01/1998 10,542,500 7,900,000
Showboat, Inc.:
BB- Ba3 8,450,000 9.25% due 5/01/2008 8,233,475 8,534,500
B B2 26,550,000 13% due 8/01/2009 25,863,625 30,001,500
B B2 10,000,000 Station Casinos, Inc., 9.625% due
6/01/2003 8,837,474 9,875,000
B- B3 20,000,000 Trump Holdings, Inc., 15.50% due
6/15/2005 19,891,250 21,500,000
B+ B3 42,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 39,780,770 43,680,000
NR* Caa 20,434,814 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999++ 15,620,532 19,211,953
-------------- --------------
331,978,950 304,088,228
</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>
Health Services-- B+ B1 $ 11,500,000 MEDIQ, Inc., 12.125% due 7/01/1999 $ 11,455,000 $ 11,557,500
1.0% B+ Ba3 30,000,000 Tenet Healthcare Corp., 10.125%
due 3/01/2005 30,062,500 33,412,500
-------------- --------------
41,517,500 44,970,000
Home Builders-- Del E. Webb Corporation:
1.5% B+ Ba3 3,500,000 10.875% due 3/31/2000 3,524,375 3,587,500
B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 7,157,500
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,820,000
B B3 20,000,000 Greystone Homes Inc., 10.75% due
3/01/2004 19,115,000 18,500,000
B B1 10,250,000 K. Hovnanian Enterprises Inc., 11.25%
due 4/15/2002 10,204,062 9,430,000
BB Ba2 12,000,000 Standard Pacific Corp., 10.50%
due 3/01/2000 11,995,000 12,300,000
B+ Ba3 15,000,000 U.S. Home Corp., 9.75% due 6/15/2003 15,000,000 15,393,750
-------------- --------------
69,923,347 70,188,750
<PAGE>
Hotels--2.2% BB- Ba3 50,000,000 HMC Acquisition Properties, 9%
due 12/15/2007 50,000,000 50,750,000
BB- B1 40,000,000 HMH Properties Inc., 9.50% due 5/15/2005 38,841,877 41,050,000
BB- B1 13,250,000 John Q. Hammons Hotel, Inc., 8.875%
due 2/15/2004 11,835,625 13,183,750
-------------- --------------
100,677,502 104,983,750
Industrial B- B3 1,500,000 Day International Corp., 11.125%
Services--0.6% due 6/01/2005 1,522,500 1,515,000
B- Caa 15,230,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 13,547,667 15,344,225
Thermadyne Industries, Inc.:
CCC B3 5,706,000 10.25% due 5/01/2002 5,711,822 5,706,000
CCC B3 7,912,000 10.75% due 11/01/2003 7,914,802 7,872,440
-------------- --------------
28,696,791 30,437,665
Metals & B- B2 26,750,000 Kaiser Aluminum & Chemical Corp.,
Mining--1.3% 12.75% due 2/01/2003 26,660,625 29,358,125
Maxxam Group, Inc.:
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 4,775,000
B- B3 41,155,000 12.37% due 8/01/2003 (a) 30,091,872 28,396,950
-------------- --------------
61,671,247 62,530,075
Packaging--2.1% CCC+ Ca 35,775,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008 32,401,063 21,822,750
B- Caa 21,500,000 Ivex Packaging Corp., 13.22% due
3/15/2005 (a) 12,552,617 12,147,500
Owens-Illinois, Inc.:
BB Ba3 20,000,000 11% due 12/01/2003 20,810,000 22,625,000
B+ B2 6,000,000 9.95% due 10/15/2004 5,931,250 6,397,500
B+ Ba3 6,000,000 Plastic Container Corp., 10.75%
due 4/01/2001 6,022,500 6,210,000
B- B3 32,628,000 Silgan Holdings Inc., 12.91%
due 12/15/2002 (a) 30,879,542 30,915,030
-------------- --------------
108,596,972 100,117,780
</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>
Paper--7.0% BB Ba3 $ 25,500,000 APP International Finance, 11.75% due
10/01/2005 $ 25,566,250 $ 25,372,500
Container Corporation of America:
B+ B2 15,420,000 9.75% due 4/01/2003 15,433,400 15,111,600
B+ B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,455,000
B B3 19,150,000 Crown Paper Co., 11% due 9/01/2005 17,698,594 16,852,000
BB- Ba3 20,000,000 Doman Industries Ltd., 8.75% due
3/15/2004 19,800,000 19,050,000
Fort Howard Corp.:
B+ B1 10,000,000 9.25% due 3/15/2001 10,000,000 10,175,000
B B2 31,000,000 9% due 2/01/2006 28,380,625 30,457,500
B B3 35,000,000 Gaylord Container Corp., 11.50%
due 5/15/2001 35,401,250 36,137,500
BB Ba2 7,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 7,462,500 7,537,500
BB Ba2 10,000,000 P.T. Indah Kiat Pulp & Paper Corporation,
11.875% due 6/15/2002 10,000,000 10,150,000
B+ B2 17,000,000 Repap New Brunswick, 10.625%
due 4/15/2005 17,140,000 16,660,000
BB- B1 25,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 23,537,500 23,875,000
B B1 25,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 25,767,500 27,187,500
B+ B1 16,000,000 S.D. Warren Co., 12% due 12/15/2004 16,000,000 17,720,000
B+ B1 11,500,000 Stone Consolidated Corp., 10.25%
due 12/15/2000 11,520,000 12,333,750
Stone Container Corp.:
B- B2 6,500,000 11% due 8/15/1999 6,418,750 6,467,500
B B1 15,000,000 9.875% due 2/01/2001 13,948,672 14,625,000
B+ B1 15,000,000 10.75% due 10/01/2002 14,825,000 15,525,000
BB B1 10,000,000 Tjiwa Kimia, Tjiwi Kimia International
Finance, 13.25% due 8/01/2001 10,021,775 10,862,500
-------------- --------------
321,921,816 329,554,850
Pollution B B3 23,700,000 Mid-American Waste Systems, Inc.,
Control--0.5% 12.25% due 2/15/2003 23,667,250 22,633,500
Restaurants-- CCC+ Caa 25,000,000 Flagstar Corp., 11.375% due 9/15/2003 25,092,500 17,875,000
0.9% B+ Ba3 25,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 24,296,200 23,125,000
-------------- --------------
49,388,700 41,000,000
Retail NR* NR* 23,000,000 Cumberland Farms, 10.50% due 10/01/2003 21,971,250 21,390,000
Specialty--1.0% B- Caa 10,000,000 Pamida Holdings, Inc., 11.75% due
3/15/2003 9,997,500 7,800,000
B+ B1 20,000,000 Specialty Retailers Group, Inc., 10% due
8/15/2000 20,000,000 18,850,000
-------------- --------------
51,968,750 48,040,000
<PAGE>
Steel--2.7% BB- Ba3 20,000,000 A.K. Steel Holding Corp., 10.75%
due 4/01/2004 20,000,000 22,250,000
B B1 25,000,000 Gulf States Steel Acquisition Corp.,
13.50% due 4/15/2003 24,760,851 22,187,500
B+ B2 20,000,000 Republic Engineered Steel Inc., 9.875%
due 12/15/2001 19,455,000 18,100,000
B+ B1 24,050,000 WCI Steel, Inc., 10.50% due 3/01/2002 23,824,875 23,448,750
B B2 23,000,000 Weirton Steel Corporation, 10.75%
due 6/01/2005 22,413,750 21,763,750
BB B1 20,000,000 Wheeling-Pittsburg Steel Corp., 9.375%
due 11/15/2003 18,670,000 19,000,000
-------------- --------------
129,124,476 126,750,000
</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>
Supermarkets-- B B2 $40,000,000 Penn Traffic Co., 9.625% due 4/15/2005 $ 35,908,000 $ 31,400,000
1.1% B- B2 20,325,000 Pueblo Xtra International Inc., 9.50%
due 8/01/2003 18,787,125 19,715,250
-------------- --------------
54,695,125 51,115,250
Textiles--0.6% B+ B3 30,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 30,100,000 29,700,000
Transportation-- BB- Ba2 15,000,000 Eletson Holdings, Inc., 9.25%
2.2% due 11/15/2003 14,372,500 14,856,557
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25% due
12/01/2004 20,518,750 21,450,000
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba2 5,475,000 8.50% due 10/15/2000 3,175,500 4,927,500
BB- Ba2 16,950,000 9.25% due 5/15/2003 14,263,875 14,958,375
B- B3 38,106,000 Transtar Holdings, L.P., 12.42% due
12/15/2003 (a) 23,778,579 25,340,490
B+ Ba3 20,000,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 20,045,000 20,500,000
-------------- --------------
96,154,204 102,032,922
<PAGE>
Utilities--6.2% Beaver Valley Funding Corp.:
B+ B1 9,357,000 8.625% due 6/01/2007 8,325,042 8,848,260
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 29,418,602
CTC Mansfield Funding Corp.:
B+ Ba3 16,000,000 10.25% due 3/30/2003 15,952,640 16,260,000
B+ Ba3 25,000,000 11.125% due 9/30/2016 26,416,875 26,740,000
BB Ba2 15,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 14,971,200 15,600,000
BB- B1 38,500,000 Metrogas S.A., 12% due 8/15/2000 38,492,500 39,173,750
Midland Cogeneration Venture
Limited Partnership:
BB Ba3 4,329,158 10.33% due 7/23/2002++++ 4,242,575 4,571,993
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 11,819,024
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 5,793,233
NR* NR* 16,199,639 Sunflower Electric Power Corp., 8%
due 12/31/2016++++ 10,626,504 13,121,708
B+ B1 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 22,087,499
BBB- NR* 37,000,000 Trans Gas de Occidente, 9.79%
due 11/01/2010 37,000,000 36,722,500
NR* B1 20,950,000 Transportadora de Gas del Sur S.A.,
7.75% due 12/23/1998 18,253,500 20,190,563
Tucson Electric & Power Co.:
NR* NR* 21,223,082 10.21% due 1/01/2009 19,760,025 21,558,194
NR* NR* 17,426,207 10.732% due 1/01/2013 16,252,461 17,536,864
-------------- --------------
278,752,393 289,442,190
Total Investments in Bonds--90.0% 4,237,777,075 4,229,569,915
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Preferred Stocks High Income Portfolio
<S> <C> <S> <C> <C>
Broadcasting & 132,470 K--III Communications Corp. $ 13,354,560 $ 13,147,677
Publishing--0.5% 421,000 K--III Communications Corp. 10,562,750 11,472,250
-------------- --------------
23,917,310 24,619,927
<PAGE>
Capital Goods--0.2% 350,665 BCP/Essex Holdings, Inc., Series B 9,202,142 8,898,124
Energy--0.3% 29,517 Consolidated Hydro, Inc. 14,891,917 14,847,051
250 Transamerican Energy 25,000 25,656
-------------- --------------
14,916,917 14,872,707
Paper--0.6% 830,000 S.D. Warren Co. 23,405,940 26,560,000
Steel--0.3% 550,000 USX Capital LLC 13,750,000 13,956,250
Total Investments in Preferred
Stocks--1.9% 85,192,309 88,907,008
Common Stocks
Communications--0.1% 210,096 Echostar Communications Corp. 1,492,461 5,160,483
Consumer 200,369 Culligan Water Technologies 1,686,248 4,858,948
Products--0.2% 200,369 Samsonite Corp. 2,398,992 2,003,690
-------------- --------------
4,085,240 6,862,638
Energy--0.0% 57,237 Mesa Inc. 325,690 214,639
Financial Services--0.0% 132,585 Lomas Financial Corporation 1,689,807 0
Food & 144,250 Foodbrands America 5,728,121 1,694,938
Beverage--0.0%
Gaming--0.0% 320,040 Capital Gaming International Inc. 2,882,508 41,880
75,500 Goldriver Hotel & Casino Corporation
(Class B) (d) 540,045 94,375
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 437,000
-------------- --------------
3,434,053 573,255
Hotels--0.0% 6,539 Buckhead America Corp. 36,373 41,277
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 207,338
Supermarkets--0.1% 120,194 Abco Markets Inc. 4,054,875 1,584,759
521,389 Grand Union Co. 29,475,625 3,910,418
-------------- --------------
33,530,500 5,495,177
Total Investments in
Common Stocks--0.4% 50,487,545 20,249,745
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Trusts & Warrants High Income Portfolio
<S> <C> <S> <C> <C>
Broadcasting/Cable--0.0% 177,500 American Telecasting Inc. (Warrants) (e) $ 413,723 $ 1,131,563
Communications--0.0% 302,500 ALC Communications Corp. (Warrants) (e) 831,875 0
57,040 Page Mart Inc. (Warrants) (e) 236,127 313,720
-------------- --------------
1,068,002 313,720
Computer Services--0.0% 394,563 Anacomp, Inc. (Warrants) (e) 495,400 12,350
Energy--0.0% 18,000 Consolidated Hydro Inc. (Warrants) (e) 390,123 263,250
20,833 UGI Corp. (Warrants) (e) 91,057 3,437
-------------- --------------
481,180 266,687
Financial Services--0.0% 7,194 Reliance Group Holdings, Inc.
(Warrants) (e) 0 0
Gaming--0.0% 273,000 Capital Gaming International Inc.
(Warrants) (e) 1,344,151 8,190
7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust 192,320 68,514
113,386 Trump Castle Funding, Inc. (Warrants) (e) 0 0
-------------- --------------
1,536,471 76,704
Industrial-Energy--0.0% 407,677 Transamerican Refining Corp.
(Warrants) (e) 950,408 1,172,071
Paper--0.0% 60,000 S.D. Warren Co. (Warrants) (e) 165,310 330,000
Steel--0.0% 25,000 Gulf States Steel (Warrants) (e) 275,399 6,875
Total Investments in Trusts &
Warrants--0.0% 5,385,893 3,309,970
Face
Amount
<PAGE>
Short-Term Securities
Commercial 40,000,000 Ciesco L.P., 5.58% due 1/31/1996 39,820,200 39,820,200
Paper***--5.9% 40,000,000 Ford Motor Credit Co., 5.76%
due 1/04/1996 39,987,200 39,987,200
29,603,000 General Electric Capital Corp.,
5.90% due 1/02/1996 29,603,000 29,603,000
15,000,000 National Fleet Funding Corp., 5.75% due
2/01/1996 14,928,125 14,928,125
Navistar Financial Corporation:
25,000,000 6.05% due 1/22/1996 24,915,972 24,915,972
20,000,000 6.05% due 1/29/1996 19,909,250 19,909,250
50,000,000 Onyx Corp., 6.35% due 1/29/1996 49,761,875 49,761,875
Vons Supermarket:
20,000,000 6.13% due 1/12/1996 19,965,944 19,965,944
20,000,000 6.13% due 1/19/1996 19,942,106 19,942,106
20,000,000 5.95% due 1/29/1996 19,910,750 19,910,750
-------------- --------------
278,744,422 278,744,422
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities (concluded) High Income Portfolio
<S> <C> <S> <C> <C>
US Government Agency $50,000,000 Federal Home Loan Mortgage Corp.,
Obligations***--1.1% 5.50% due 1/31/1996 $ 49,778,472 $ 49,778,472
Total Investments in Short-Term
Securities--7.0% 328,522,894 328,522,894
Total Investments--99.3% $4,707,365,716 4,670,559,532
==============
Other Assets Less Liabilities--0.7% 30,221,651
--------------
Net Assets--100.0% $4,700,781,183
==============
<PAGE>
Net Asset Class A--Based on net assets of $902,377,323 and 115,295,050 shares outstanding $ 7.83
Value: ==============
Class B--Based on net assets of $3,473,955,135 and 443,729,455 shares outstanding $ 7.83
==============
Class C--Based on net assets of $190,913,649 and 24,369,222 shares outstanding $ 7.83
==============
Class D--Based on net assets of $133,535,076 and 17,052,520 shares outstanding $ 7.83
==============
<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 and certain US Government & Agency
Obligations are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of
purchase by the Portfolio.
(a)Represents a zero coupon or step bond; the interest rate
shown is the effective yield at the time of purchase by
the Portfolio.
(b)Each $1,000 face amount contains one warrant of
American Telecasting, Inc.
(c)Each $1,000 face amount contains one warrant of
Cellular Communications Corp.
(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.
(f)Each $1,000 face amount contains one warrant of Australis Media Ltd.
(g)Each $1,000 face amount contains one warrant of Peoples Choice
T.V. Corporation.
(h)Each $1,000 face amount contains one warrant of United International
Holdings, Inc.
(i)Each $1,000 face amount contains six warrants of Echostar
Communications, Corp.
</TABLE>
<PAGE>
<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--10.4% AAA Aaa $ 6,000,000 5.75% due 9/30/1997 $ 5,994,453 $ 6,055,297
AAA Aaa 11,000,000 8.875% due 11/15/1997 11,354,063 11,709,789
AAA Aaa 5,000,000 9.25% due 8/15/1998 5,289,844 5,485,131
AAA Aaa 10,000,000 5.50% due 11/15/1998 10,013,672 10,074,962
AAA Aaa 7,000,000 6.875% due 8/31/1999 7,211,094 7,358,767
AAA Aaa 7,000,000 5.875% due 6/30/2000 7,005,670 7,144,357
AAA Aaa 5,000,000 8% due 5/15/2001 5,563,281 5,598,412
AAA Aaa 3,000,000 7.50% due 11/15/2001 3,200,625 3,305,168
AAA Aaa 10,000,000 5.875% due 2/15/2004 9,803,125 10,214,025
AAA Aaa 9,000,000 7.875% due 11/15/2004 10,378,125 10,420,313
AAA Aaa 1,000,000 6.50% due 5/15/2005 1,014,687 1,064,222
AAA Aaa 5,000,000 6.50% due 8/15/2005 5,077,344 5,328,112
AAA Aaa 17,500,000 5.875% due 11/15/2005 17,762,969 17,896,484
AAA Aaa 10,000,000 8.75% due 8/15/2020 12,529,687 13,412,525
AAA Aaa 15,500,000 7.625% due 2/15/2025 18,336,719 18,955,977
-------------- --------------
130,535,358 134,023,541
Banking--6.8% A+ Aa2 20,000,000 ABN AMRO Bank, 7.25% due 5/31/2005 20,293,530 21,508,499
A A2 8,000,000 BankAmerica Corp., 7.125% due 5/12/2005 8,015,060 8,498,480
A+ A2 7,000,000 Citicorp, 8.80% due 2/01/2000 7,000,000 7,230,125
A+ A1 6,000,000 Fifth Third Bank, 6.75% due 7/15/2005 5,960,400 6,259,050
A- A3 8,500,000 First Bank System, Inc., 6.875%
due 9/15/2007 8,421,290 8,881,693
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,387,800
NationsBank Corporation:
A A2 5,000,000 7.50% due 2/15/1997 4,995,700 5,105,800
A- A3 6,000,000 7.75% due 8/15/2015 6,000,000 6,589,320
A+ A1 3,500,000 Norwest Corp., 6.625% due 3/15/2003 3,553,235 3,600,362
A- A3 7,500,000 United States Bancorporation, 6.75%
due 10/15/2005 7,459,650 7,768,013
AA+ Aa2 6,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 (a) 5,995,620 6,097,740
-------------- --------------
83,373,185 86,926,882
Federal AAA Aaa 15,000,000 Federal National Mortgage Association,
Agencies--1.2% 7.85% due 9/10/2004 14,817,437 15,958,538
<PAGE>
Financial Chrysler Financial Corp., 10.95%
Services-- A- A3 14,000,000 due 8/01/2017 16,298,000 15,720,530
Captive--4.7% Ford Motor Credit Co.:
A+ A1 10,000,000 6.25% due 11/08/2000 9,957,700 10,146,400
A+ A1 1,000,000 7.75% due 3/15/2005 999,090 1,103,635
General Motors Acceptance Corp.:
BBB+ A3 7,630,000 5% due 1/27/1997 7,501,587 7,590,858
BBB+ A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,307,360
BBB+ A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,298,433
BBB+ A3 4,000,000 6.625% due 10/01/2002 3,992,800 4,115,320
BBB+ A3 7,000,000 7.40% due 9/01/2025 6,943,580 7,515,340
-------------- --------------
59,691,165 60,797,876
</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>
Financial BBB- Baa2 $15,000,000 Advanta Corp., 6.26% due 9/01/1997 (b) $ 14,991,450 $ 15,112,500
Services-- A+ A1 2,500,000 American General Finance Corp., 8.50%
Consumer--4.8% due 8/15/1998 2,848,650 2,675,688
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,328,740
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,984,830
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,573,523
A A2 19,000,000 Beneficial Corporation, 5.65% due
10/14/1997 (b) 19,000,000 18,923,221
A+ Aa3 8,000,000 CIT Group Holdings, Inc., 5.70%
due 5/02/1997 (b) 8,000,000 7,980,560
BBB+ Baa1 7,000,000 Finova Capital Corp., 6.375%
due 10/15/2000 6,972,850 7,127,190
-------------- --------------
61,252,880 61,706,252
Financial Bear Stearns Companies, Inc.:
Services-- A A2 9,900,000 6.70% due 8/01/2003 8,945,640 10,031,422
Other--7.4% A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,438,795
Dean Witter, Discover & Co.:
A A2 3,500,000 6.75% due 8/15/2000 3,486,805 3,627,120
A A2 3,000,000 6.50% due 11/01/2005 2,965,350 3,042,165
A A2 6,000,000 6.75% due 10/15/2013 5,880,540 5,994,480
General Electric Capital Corp.:
AAA Aaa 6,000,000 14% due 7/01/1996 (a) 6,811,140 6,243,420
AAA Aaa 6,200,000 8.125% due 5/15/2012 6,301,726 7,258,402
A A3 5,000,000 Lehman Brothers Inc., 7.375% due
8/15/1997 4,993,500 5,112,150
A+ A1 5,000,000 Morgan Stanley Group Inc., 8.875% due
<PAGE> 10/15/2001 5,755,450 5,685,800
BBB+ Baa1 10,000,000 PaineWebber Group Inc., 8.875% due
3/15/2005 9,997,850 11,418,850
Smith Barney Holdings, Inc.:
A- A3 7,000,000 6.50% due 10/15/2002 6,961,080 7,141,155
A- A3 6,000,000 6.875% due 6/15/2005 5,957,580 6,192,030
The Travelers Corp.:
A+ A2 9,000,000 9.50% due 3/01/2002 9,610,100 10,577,700
A+ A2 9,000,000 7.875% due 5/15/2025 8,994,780 10,106,010
-------------- --------------
89,885,971 95,869,499
Foreign*--13.2% AA- A1 10,000,000 Aegon N.V., 8% due 8/15/2006 (2) 9,908,700 11,342,400
BBB+ A3 8,885,000 Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 (2) 8,799,674 9,251,151
CRA Finance Ltd. (1):
A+ A2 9,500,000 6.50% due 12/01/2003 9,519,310 9,660,930
A+ A2 6,000,000 7.125% due 12/01/2013 6,008,775 6,206,040
AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
due 12/01/1999 (3) 4,226,640 4,387,380
A A3 11,500,000 Mass Trans Rycorp, 7.25% due 10/01/2005 (8) 11,657,700 11,983,689
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,885,280
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,311,295
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,603,440
A- A2 10,000,000 Norsk Hydro AS, 7.15% due 11/15/2025 (9) 9,958,300 10,417,000
BBB Baa1 5,000,000 Petro-Canada, 9.25% due 10/15/2021 (4) 5,300,650 6,259,000
A+ A2 12,000,000 Pohang Iron & Steel Industries,
7.375% due 5/15/2005 (7) 12,217,645 12,792,120
AA- Aa3 11,000,000 Province of Ontario (Canada), 7.75%
due 6/04/2002 (5) 10,910,730 11,980,925
</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>
Foreign Province of Quebec (Canada) (5):
(concluded) AA- Aa3 $ 9,285,000 7.50% due 7/15/2002 $ 9,804,171 $ 9,871,301
A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,879,510
A+ A2 6,000,000 7.125% due 2/09/2004 5,966,040 6,052,140
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 5,495,287
AA A1 13,803,000 Republic of Italy, 6.875% due
9/27/2023 (6) 11,896,625 13,503,957
A+ A1 12,500,000 Telekom Malaysia Berhad, 7.125% due
<PAGE> 8/01/2005 (6) 12,644,470 13,191,499
A A2 9,000,000 WMC (Western Mining Corp.) Finance,
7.25% due 11/15/2013 (1) 9,089,100 9,560,880
-------------- --------------
162,213,001 170,635,224
Government A- A3 5,000,000 State of Israel, 6.375% due 12/15/2005 4,957,750 5,027,325
National Bond--
Foreign--0.4%
Industrial-- A- A2 6,000,000 American Home Products Corporation,
Consumer 7.90% due 2/15/2005 5,988,300 6,770,880
Goods--11.2% AA- A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
12/01/1999 3,367,590 3,324,375
A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 11,164,999
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,185,940
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 6,263,125
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 4,097,500
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 10,170,675
JC Penney & Co.:
A+ A1 5,000,000 6.375% due 9/15/2000 4,991,900 5,108,160
A+ A1 6,000,000 6.875% due 10/15/2015 5,938,260 6,193,566
AAA Aaa 7,000,000 Johnson & Johnson Co., 8.72% due
11/01/2024 7,057,420 8,165,045
AA Aa2 5,000,000 Kimberly-Clark Corporation, 7.875%
due 2/01/2023 5,084,900 5,496,600
BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 9,391,185
A A2 9,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 9,698,815 10,707,687
RJR Nabisco, Inc.:
BBB- Baa3 3,000,000 8.75% due 4/15/2004 2,912,220 3,110,910
BBB- Baa3 17,000,000 8.75% due 8/15/2005 16,594,230 17,469,794
Sears, Roebuck & Co.:
BBB A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,385,150
BBB A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,390,769
AA Aa1 7,000,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 6,872,720 8,097,180
A A2 9,000,000 Weyerhaeuser Company, 7.95% due
3/15/2025 8,901,360 10,526,805
-------------- --------------
135,783,757 145,020,345
Industrial-- BP America Inc.:
Energy--3.4% AA- A1 4,075,000 9.375% due 11/01/2000 4,488,287 4,690,305
AA- A1 11,000,000 10% due 7/01/2018 11,869,080 12,477,739
A+ A1 12,000,000 Petroliam Nasional Berhad, 6.875%
due 7/01/2003 11,929,530 12,483,600
Texaco Capital Inc.:
A+ A1 5,500,000 9% due 12/15/1999 6,215,190 6,123,562
A+ A1 2,000,000 8.875% due 2/15/2021 1,999,720 2,583,880
A+ A1 4,500,000 8.625% due 4/01/2032 4,792,770 5,686,312
-------------- --------------
41,294,577 44,045,398
</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>
Industrial-- A A3 $10,000,000 Alco Standard Corporation, 6.75%
Other--16.5% due 12/01/2025 $ 9,848,000 $ 9,934,060
BBB Baa2 12,000,000 Applied Materials Inc., 8% due 9/01/2004 11,912,280 13,355,639
AA- Aa2 10,400,000 Archer-Daniels-Midland Co.,
8.125% due 6/01/2012 11,522,436 12,011,011
AA- Aa3 7,800,000 Capital Cities/ABC, Inc., 8.75% due
8/15/2021 8,800,114 9,785,802
A- A3 11,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 11,028,940 11,910,250
BBB Baa2 4,000,000 Carter Holt Harvey Ltd., 8.375% due
4/15/2015 4,443,560 4,620,460
Columbia/HCA Healthcare Corp.:
BBB+ A3 5,000,000 6.87% due 9/15/2003 5,000,000 5,202,235
BBB+ A3 6,000,000 9% due 12/15/2014 6,651,540 7,399,260
AA- Aa3 12,000,000 Du Pont (E.I.) de Nemours & Co., 8.25%
due 1/15/2022 12,481,570 13,243,500
A A1 2,000,000 Electronic Data Systems Corp., 6.85% due
5/15/2000 1,998,420 2,087,500
BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due
6/15/2012 10,137,590 11,157,525
Ford Capital B.V.:
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,979,399
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,993,750
AA- A2 6,500,000 Hubbell Incorporated, 6.625% due
10/01/2005 6,459,700 6,808,165
AA Aa2 8,500,000 Kaiser Foundation Hospital, 9.55% due
7/15/2005 9,561,225 10,543,697
BBB Baa2 11,000,000 Loral Corporation, 8.375% due 6/15/2024 11,056,040 12,706,759
BBB Baa2 5,000,000 McDonnell Douglas Financial Corp.,
6.30% due 10/20/1999 5,029,550 5,005,850
News American Holdings, Inc.:
BBB- Baa3 4,000,000 9.125% due 10/15/1999 4,298,640 4,425,080
10,000,000 8.625% due 2/01/2003 10,965,400 11,247,600
BBB Baa3 10,000,000 7.60% due 10/11/2015 9,917,800 10,253,850
<PAGE> Telecommunications, Inc.:
BBB- Baa3 7,059,000 9.25% due 4/15/2002 7,780,924 8,039,777
BBB- Baa3 10,000,000 8.25% due 1/15/2003 9,713,200 10,811,400
BBB- Baa3 2,500,000 9.80% due 2/01/2012 2,631,150 3,004,487
Time Warner Entertainment Co.:
BBB- Ba2 6,000,000 8.875% due 10/01/2012 6,624,540 6,770,190
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 5,397,650
-------------- --------------
198,105,484 212,694,896
Supranational-- Asian Development Bank:
3.0% AAA Aaa 3,000,000 10.75% due 6/01/1997 3,302,730 3,213,495
AAA Aaa 12,000,000 6.125% due 3/09/2004 11,886,960 12,067,800
AAA Aaa 8,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 10,115,250 10,227,160
AAA Aaa 10,000,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 13,082,110 13,646,800
-------------- --------------
38,387,050 39,155,255
Transportation-- BBB+ Baa2 15,000,000 Kansas City Southern Industries, Inc.,
2.5% 7% due 12/15/2025 14,805,750 15,145,349
Southwest Airlines, Inc.:
A- Baa1 10,000,000 9.40% due 7/01/2001 11,326,040 11,525,650
A- Baa1 2,000,000 8% due 3/01/2005 1,989,220 2,232,980
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 3,267,000
-------------- --------------
31,104,960 32,170,979
</TABLE>
<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-- AA Aa3 $6,000,000 AT&T Corp., 8.35% due 1/15/2025 $ 5,893,620 $ 6,872,700
Communications-- AAA Aaa 5,500,000 BellSouth Corp., 7% due 10/01/2025 5,448,740 5,883,845
2.9% GTE Corp.:
BBB+ Baa1 4,000,000 9.10% due 6/01/2003 4,242,720 4,663,740
BBB+ Baa1 9,500,000 8.75% due 11/01/2021 9,904,225 11,328,750
A+ A1 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 2,034,880
AA- Aa3 6,000,000 US West Communications, 7.25%
due 9/15/2025 6,066,100 6,497,910
-------------- --------------
33,566,655 37,281,825
<PAGE>
Utilities-- A A2 7,800,000 Central Power & Light Co., 6% due
Electric--3.4% 10/01/1997 7,782,108 7,871,838
AA- Aa2 6,000,000 Duke Power Co., 8% due 11/01/1999 5,964,660 6,479,340
A A2 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 2,025,060
AA- A1 7,750,000 Northern States Power Company, 7.125%
due 7/01/2025 7,813,240 8,285,013
BBB+ Baa1 3,425,000 PECO Energy Co., 8% due 4/01/2002 3,459,387 3,764,554
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,676,700
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 9,928,085
-------------- --------------
40,357,975 44,030,590
Utilities-- Consolidated Natural Gas Co.:
Gas--0.7% AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 8,191,462
AA- A1 1,000,000 7.375% due 4/01/2005 993,380 1,079,810
-------------- --------------
8,444,040 9,271,272
Total Investments in Bonds &
Notes--92.5% 1,133,771,245 1,194,615,697
Short-Term Securities 15,000,000 American Express Credit Corp.,
Commercial 5.61% due 1/03/1996 14,997,663 14,997,663
Paper**--1.9% 10,000,000 General Electric Capital Corp.,
5.80% due 10/02/1996 10,000,000 10,000,000
-------------- --------------
24,997,663 24,997,663
Repurchase 59,447,000 Morgan Stanley Group, Inc. purchased
Agreements***--4.6% on 12/29/1995 to yield 5.87%
to 1/02/1996 59,447,000 59,447,000
Total Investments in Short-Term
Securities--6.5% 84,444,663 84,444,663
Total Investments--99.0% $1,218,215,908 1,279,060,360
==============
Other Assets Less Liabilities--1.0% 12,319,638
--------------
Net Assets--100.0% $1,291,379,998
==============
<PAGE>
NetAsset Class A--Based on net assets of $530,586,115 and 44,830,579 shares outstanding $ 11.84
Value: ==============
Class B--Based on net assets of $688,654,407 and 58,186,795 shares outstanding $ 11.84
==============
Class C--Based on net assets of $37,958,127 and 3,206,090 shares outstanding $ 11.84
==============
Class D--Based on net assets of $34,181,349, and 2,886,441 shares outstanding $ 11.84
==============
<FN>
*Corresponding industry groups for foreign securities
which are denominated in US dollars:
(1)Industrial Mining. (2)Financial Institution.
(3)Government Entity; Guaranteed by Japan.
(4)Energy Company; not Guaranteed by Canada.
(5)Government Entity; Guaranteed by the Province.
(6)Government Entity. (7)Industrial; Metals.
(8)Transporation. (9)Industrial.
**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.
(b)Floating Rate 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 & Bonds:
Obligations--16.6% AAA Aaa $ 1,000,000 8.875% due 11/15/1997 $ 1,032,188 $ 1,064,526
AAA Aaa 7,000,000 6.875% due 8/31/1999 7,240,625 7,358,767
AAA Aaa 8,500,000 7.75% due 12/31/1999 9,077,734 9,226,516
AAA Aaa 3,500,000 5.875% due 6/30/2000 3,509,844 3,572,179
AAA Aaa 5,000,000 5.75% due 8/15/2001 4,997,656 5,046,081
AAA Aaa 2,000,000 7.875% due 8/15/2001 2,076,563 2,234,365
AAA Aaa 2,000,000 7.50% due 11/15/2001 2,133,750 2,203,445
AAA Aaa 3,500,000 6.375% due 8/15/2002 3,574,375 3,671,159
<PAGE> AAA Aaa 5,000,000 5.875% due 2/15/2004 4,912,500 5,107,012
AAA Aaa 10,000,000 7.25% due 5/15/2004 10,570,625 11,103,125
AAA Aaa 6,000,000 7.875% due 11/15/2004 6,396,563 6,946,875
AAA Aaa 4,000,000 7.50% due 2/15/2005 4,427,500 4,535,010
AAA Aaa 7,500,000 6.50% due 5/15/2005 7,628,750 7,981,669
AAA Aaa 7,000,000 6.50% due 8/15/2005 7,238,906 7,459,357
AAA Aaa 4,000,000 5.875% due 11/15/2005 4,067,812 4,090,625
-------------- --------------
78,885,391 81,600,711
Banking--8.5% A+ Aa2 3,500,000 ABN AMRO BANK, 7.25% due 5/31/2005 3,497,025 3,763,987
A A2 3,000,000 BankAmerica Corp., 7.125% due 5/12/2005 2,956,500 3,186,930
A+ A2 2,000,000 Citicorp, 8.80% due 2/01/2000 2,000,000 2,065,750
A+ A1 4,000,000 Fifth Third Bank, 6.75% due 7/15/2005 3,973,600 4,172,700
A- A3 4,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 4,542,960 4,310,240
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 6,240,270
A+ A1 1,000,000 Norwest Corp., 6.625% due 3/15/2003 1,003,060 1,028,675
A- A3 2,500,000 US Bancorp, 6.75% due 10/15/2005 2,486,550 2,589,337
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 5,058,600
BBB Baa1 9,000,000 Washington Mutual Inc., 7.25% due
8/15/2005 8,930,520 9,579,240
-------------- --------------
39,764,385 41,995,729
Federal AAA Aaa 2,500,000 Federal National Mortgage Association,
Agencies--0.5% 7.85% due 9/10/2004 2,496,484 2,659,756
Financial Ford Motor Credit Co.:
Services-- A+ A1 2,000,000 9.875% due 5/15/2002 2,300,380 2,395,880
Captive--5.4% A+ A1 5,000,000 7.75% due 3/15/2005 4,995,450 5,518,175
General Motors Acceptance Corp.:
BBB+ A3 6,000,000 7.85% due 3/05/1997 5,977,380 6,154,080
BBB+ A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,076,840
BBB+ A3 5,000,000 7.125% due 5/11/1998 5,056,400 5,162,650
BBB+ A3 5,000,000 6.625% due 10/01/2002 4,991,000 5,144,150
-------------- --------------
25,278,010 26,451,775
Financial BBB- Baa2 10,000,000 Advanta Corp., 6.26% due 9/01/1997 (a) 9,994,300 10,075,000
Services-- Associates Corp. of North America:
Consumer--7.3% AA- Aa3 1,500,000 8.375% due 1/15/1998 1,504,830 1,582,185
AA- Aa3 3,000,000 5.25% due 9/01/1998 2,908,770 2,977,245
A A2 7,000,000 Beneficial Corp., 5.65% due 10/14/1997 (a) 7,000,000 6,971,713
CIT Group Holdings, Inc.:
A+ Aa3 4,000,000 7.625% due 12/05/1996 3,987,120 4,070,720
A+ Aa3 3,000,000 5.971% due 2/28/1997 2,998,020 2,991,828
BBB+ Baa1 7,000,000 Finova Capital Corp., 6.375% due
10/15/2000 6,972,980 7,127,190
-------------- --------------
35,366,020 35,795,881
</TABLE>
<PAGE>
<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 BBB Baa2 $11,580,000 Alex Brown Inc., 7.625% due 8/15/2005 $ 11,797,083 $ 12,350,823
Services-- A A2 3,000,000 Bear Stearns Companies, Inc., 8.75%
Other--7.6% due 3/15/2004 3,224,430 3,438,795
BBB Baa2 4,000,000 Comdisco, Inc., 7.25% due 4/15/1998 3,990,720 4,123,020
A A2 6,250,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 6,226,438 6,477,000
BBB+ Baa1 4,000,000 PaineWebber Group, Inc., 8.875%
due 3/15/2005 4,025,080 4,567,540
Smith Barney Holdings Inc.:
A- A3 3,000,000 6.50% due 10/15/2002 2,986,120 3,060,495
A- A3 1,000,000 6.875% due 6/15/2005 992,930 1,032,005
A+ A2 2,000,000 The Travelers Corp., 9.50% due 3/01/2002 2,168,400 2,350,600
-------------- --------------
35,411,201 37,400,278
Foreign*--10.9% BBB+ A3 5,000,000 Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 (2) 4,949,950 5,206,050
A- A2 4,000,000 CRA Finance Ltd., 6.50% due 12/01/2003 (4) 4,006,020 4,067,760
AAA Aaa 1,500,000 Japan Finance Corp. for Municipal
Enterprises, 9.125% due 3/13/2000 (2) 1,654,665 1,673,250
AAA Aaa 2,000,000 Metropolis of Tokyo (Japan), 8.70%
due 10/05/1999 (5) 2,312,940 2,207,530
A+ A2 1,000,000 Pohang Iron & Steel Co., 7.375% due
5/15/2005 (6) 1,018,160 1,066,010
AA- Aa3 9,000,000 Province of Quebec (Canada), 7.50%
due 7/15/2002 (3) 9,486,070 9,568,304
A+ A2 5,000,000 Province of Quebec (Canada), 8.80%
due 4/15/2003 (3) 5,538,670 5,732,925
BB Baa3 10,000,000 Republic of South Africa, 9.625%
due 12/15/1999 (1) 9,839,025 10,825,000
A+ A1 12,500,000 Telekom Malaysia Berhad, 7.125%
due 8/01/2005 (1) 12,662,775 13,191,499
-------------- --------------
51,468,275 53,538,328
<PAGE>
Government A- A3 2,000,000 State of Israel, 6.375% due 12/15/2005 1,983,100 2,010,930
National Bond--
Foreign--0.4%
Industrial-- A- A2 2,000,000 American Home Products Corporation,
Consumer 7.90% due 2/15/2005 1,996,100 2,256,960
Goods--11.7% AA- A1 5,481,000 Anheuser-Busch Cos., Inc.,
8.75% due 12/01/1999 6,189,909 6,073,633
A+ A1 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 2,825,520 3,103,305
Grand Metropolitan Investment Corp.:
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 3,073,125
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,390,225
A+ A1 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 5,108,160
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 4,044,660
A A2 3,500,000 Philip Morris Cos., Inc., 9%
due 1/01/2001 3,576,195 3,944,937
RJR Nabisco Holding Corp.:
BBB- Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 5,091,050
BBB- Baa2 8,000,000 8.75% due 4/15/2004 7,785,920 8,295,760
BBB- Baa3 3,000,000 6.85% due 6/15/2005 2,994,300 3,052,065
Sears, Roebuck & Co.:
BBB A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,692,575
BBB A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,482,685
-------------- --------------
56,038,609 57,609,140
</TABLE>
<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>
Industrial-- A+ A1 $ 2,000,000 Petroliam Nasional Berhad,
Energy--1.3% 6.875% due 7/01/2003 $ 1,972,960 $ 2,080,600
Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,070,000
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,226,750
-------------- --------------
6,311,540 6,377,350
<PAGE>
Industrial-- Applied Materials Inc.:
Other--13.0% BBB- Baa2 4,000,000 8% due 9/01/2004 3,970,760 4,451,880
BBB Baa2 4,000,000 6.65% due 9/05/2000 4,000,000 4,110,520
A- A3 9,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 8,799,420 9,744,750
BBB+ A3 7,000,000 Columbia/HCA Healthcare Corp.,
6.87% due 9/15/2003 7,043,300 7,283,129
A A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 3,497,235 3,653,125
McDonnell Douglas Corporation:
BBB Baa2 4,000,000 8.625% due 4/01/1997 4,142,720 4,144,440
BBB Baa2 5,000,000 6.30% due 10/20/1999 5,029,550 5,005,850
BBB- Ba1 14,500,000 News American Holdings, Inc., 8.50%
due 2/15/2005 14,789,005 16,379,344
BBB- Baa3 8,000,000 Telecommunications, Inc., 9.25%
due 4/15/2002 8,496,110 9,111,520
-------------- --------------
59,768,100 63,884,558
Supranational-- AAA AAA 5,000,000 Asian Development Bank, 6.125%
- --1.0% due 3/09/2004 4,952,900 5,028,250
Transportation BB+ Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,660,467
Services--3.5% AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 4,085,240
Southwest Airlines, Inc.:
A- Baa1 6,500,000 9.40% due 7/01/2001 7,564,180 7,491,672
A- Baa1 1,000,000 8% due 3/01/2005 994,610 1,116,490
-------------- --------------
16,765,278 17,353,869
Utilities-- AA- Aa3 8,000,000 US West Communications,
Communications 6.375% due 10/15/2002 7,977,600 8,227,000
- --1.7%
Utilities-- BBB+ Baa1 7,000,000 PECO Energy Co., 8% due 4/01/2002 7,000,440 7,693,980
Electric--2.8% A- A2 4,000,000 Pennsylvania Power & Light Co., 5.50%
due 4/01/1998 3,991,280 3,995,200
BBB+ Baa2 2,000,000 Texas Utilities Electric Co., 8%
due 6/01/2002 1,972,080 2,209,450
-------------- --------------
12,963,800 13,898,630
Utilities-- Consolidated Natural Gas Co.:
Gas--2.3% AA- A1 2,000,000 8.75% due 6/01/1999 2,125,440 2,184,390
AA- A1 8,500,000 7.375% due 4/01/2005 8,704,490 9,178,385
-------------- --------------
10,829,930 11,362,775
Total Investments in Bonds & Notes--94.5% 446,260,623 465,194,960
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities Intermediate Term Portfolio
<S> <C> <S> <C> <C>
Repurchase $22,174,000 Morgan Stanley Group, Inc.,
Agreement**--4.5% purchased on 12/29/1995 to yield
5.87% to 1/02/1996 $ 22,174,000 $ 22,174,000
Total Investments in Short-Term
Securities--4.5% 22,174,000 22,174,000
Total Investments--99.0% $468,434,623 487,368,960
============
Other Assets Less Liabilities--1.0% 5,060,271
------------
Net Assets--100.0% $492,429,231
============
Net Asset Value: Class A--Based on net assets of $235,864,719 and 19,994,817 shares outstanding $ 11.80
============
Class B--Based on net assets of $228,436,740 and 19,364,192 shares outstanding $ 11.80
============
Class C--Based on net assets of $8,915,529 and 755,709 shares outstanding $ 11.80
============
Class D--Based on net assets of $19,212,243 and 1,628,569 shares outstanding $ 11.80
============
<FN>
*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.
(4)Industrial Mining.
(5)Government Entity; Guaranteed by Japan.
(6)Industrial; Metals.
**Repurchase Agreements are fully collateralized
by US Government Obligations.
(a)Floating Rate Note.
</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
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
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