MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
The Environment
A relatively benign economic environment created the backdrop for
strong US stock and bond markets in 1996. Although expectations of
an overheating economy sparked inflationary concerns at mid-year,
business activity subsequently subsided back to a more moderate
pace. As a result, equity and bond prices rebounded in the latter
half of the year. Positive investor sentiment was further reinforced
when the Federal Reserve Board kept monetary policy unchanged. The
results of the US election were well-received by investors, and
further enhanced the already positive investment outlook.
<PAGE>
Highlighting the economic results as 1996 drew to a close were
reports of a decline in the trade deficit in October and stronger
industrial production. Underscoring the moderating growth trend were
some signs of softening in the labor market, and initial indications
suggested a respectable but unremarkable holiday selling season.
On balance, US economic fundamentals appear to be the most positive
they have been for many years. However, as 1997 begins, the dilemma
facing investors is how long the economic expansion can continue at
a steady, noninflationary pace. At this late stage of the current
economic recovery, investor expectations can quickly change from
positive to negative with the release of surprising economic
results. Therefore, continued reassurance of steady, noninflationary
economic growth would be a very positive development for the stock
and bond markets in the new year.
Portfolio Strategy
High Income Portfolio
The quarter and year ended December 31, 1996 provided excellent
investment results. The total returns of the Portfolio's Class A,
Class B, Class C and Class D Shares of +3.46%, +3.27%, +3.25% and
+3.27% for the quarter compared favorably with the unmanaged CS
First Boston High Yield Index which returned +4.41%. The total
returns of the Portfolio's Class A, Class B, Class C and Class D
Shares of +12.45%, +11.60%, +11.68% and +12.17% for the year also
compared favorably with the Index, which returned +12.42% for the
year. (Results shown do not reflect sales charges and would be lower
if sales charges were included. Complete performance information,
including average annual total returns, can be found on pages 3--7
of this report to shareholders.). While the 10-year Treasury note
returned a competitive +3.6% for the quarter, the return for all of
1996 was an anemic +1%. Thus, yield spreads between the two markets
collapsed. Research provided by Chase Securities, Inc. showed that
the yield spread of BB-rated securities tightened to 2.125% off
Treasury issues of similar maturity from almost 3% at year-end 1995;
and B-rated issues tightened even more dramatically, narrowing to
3.875% in 1996 from 5.50% at year-end 1995.
The high-yield market benefited from positive fundamentals. These
included low defaults, merger and acquisition activity which on
balance improved the credit quality of issuers, a buoyant equity
market which encouraged new common stock offerings by leveraged
companies, and the further recovery of dollar-denominated emerging
market debt issued by companies domiciled in Argentina, Brazil and
other non-investment grade countries.
While new-issue supply in 1996 was a record $78 billion, the demand
from all categories of high-yield buyers was strong. This included
"crossover" buyers, who are purchasers that normally buy investment
grade bonds but moved into the high-yield market seeking improved
performance. The Portfolio's assets grew to $6.2 billion in 1996
from $4.7 billion at the beginning of the year. This is a 32%
increase. The Portfolio's cash position was often higher than we
would have preferred because of difficulty in finding attractive
issues in which to invest the cash flow.
<PAGE>
While BB-rated bonds modestly outperformed B-rated bonds during the
quarter, B-rated bonds produced a +13.7% return versus +8% for BB-
rated bonds for the year. Thus, we believe valuation of the higher
quality sector has improved significantly.
The quality composition of the Portfolio has changed since last
year. We believe the most noticeable change was a shift to higher-
rated BB issues (38% versus 32%) and the corresponding decline in
lower-rated B issues (53% versus 59%). Whenever spreads between the
two categories narrowed, we tried to seize the opportunity to
upgrade the credit quality of the Portfolio. This effort is
reflected in the overall credit profile of the Portfolio's ten
largest holdings, seven of which are stable BB-rated issues.
As we mentioned, yield spreads between high-yield and Treasury
issues narrowed significantly during 1996, continuing a trend which
began in 1991. Valuation became rather full for the market as a
whole and certain industry segments of the B-rated quality sector
appear overvalued. This, of course, reflects the positive
fundamentals. However, it leaves the market vulnerable to changed
expectations. We anticipate that yield spreads may widen in 1997, at
least in the B sector. In addition, we are concerned about the
overall direction of interest rates. Further signs of economic
strength may result in upward yield pressure. Consequently, we are
pursuing a somewhat defensive strategy which is focused on enhancing
coupon return and limiting price volatility.
At December 31, 1996, our cash position was 8.6% of assets. The
average maturity of the invested portion of the Portfolio was 6
years. Major industries represented in the Portfolio were:
broadcasting/cable, 13.4% of net assets; communications, 9.3%;
energy, 7.4%; paper, 6.0%; and utilities, 4.9%.
Investment Grade Portfolio &
Intermediate Term Portfolio
On December 5, 1996, Federal Reserve Board Chairman Alan Greenspan
commented that there was an "irrational exuberance" in the US
financial markets. This comment caused a slight concern with
investors because its implication that the levels of both stock and
prices were not consistent with the economic data. Within two weeks
after his remarks, the US stock market dropped over 200 points and
there was a corresponding increase of 20 basis points (0.20%) in the
bellwether Treasury long bond. Yet a review of the underlying
economic and political conditions that normally influence the
behavior of stock and bond prices seems to justify investors'
optimism that prevailed in the autumn. For example, the Federal
Reserve Board's monetary policy remained unchanged during the
December quarter, contrary to widespread expectations during the
summer that there may be a tightening. This did not occur because it
became apparent that the economy was slowing on its own from the
torrid pace of the second quarter when the gross domestic product
(GDP) jumped to 4.7% from the 2.0% pace of the first quarter. In the
third quarter, the GDP declined to 2.1% while inflation remained
subdued. In addition, the US dollar increased in value, implying
less inflation and continued foreign investment in US securities.
Stock and bond prices improved by year-end, but without the
enthusiasm that had been characterized throughout fall.
<PAGE>
We extended the duration of the Portfolios modestly during the
December quarter because of the strength of the market. In order to
do this, we reduced cash and made several trades which lengthened
the maturity of several issues. We remained underweighted in the
utility sector and correspondingly, overweighted in industrial and
Yankee issues. Looking ahead, we believe that markets always have a
way of self-correcting. Although inflation remains at a low level,
we believe that the current level of bond prices fully reflects the
positive factors which characterized the economy in the last
quarter. Without significant additional good news, we believe that
the market is in a trading range which justifies a conservative
strategy.
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 31, 1997
As of December 31, 1996, N. John Hewitt retired as Senior Vice
President of the Fund. His colleagues at Merrill Lynch Asset
Management, L.P. join the Fund's Board of Directors in wishing Mr.
Hewitt well in his retirement.
<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 distribution 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 distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year 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. (There is no initial sales
charge for automatic share conversions.)
* 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. Intermediate 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).
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 Return--High Income Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +12.45% + 7.95%
Five Years Ended 12/31/96 +12.90 +11.98
Ten Years Ended 12/31/96 +11.68 +11.22
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +11.60% + 7.60%
Five Years Ended 12/31/96 +12.03 +12.03
Inception (10/21/88) through 12/31/96 +11.39 +11.39
[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 % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/96 +11.68% +10.68%
Inception (10/21/94) through 12/31/96 +12.49 +12.49
[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>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/96 +12.17% + 7.69%
Inception (10/21/94) through 12/31/96 +13.06 +10.98
[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 12/31/96 +2.21% -1.88%
Five Years Ended 12/31/96 +7.06 +6.19
Ten Years Ended 12/31/96 +8.09 +7.65
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +1.43% -2.39%
Five Years Ended 12/31/96 +6.24 +6.24
Inception (10/21/88) through 12/31/96 +8.04 +8.04
[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**
<PAGE>
Class C Shares*
Year Ended 12/31/96 +1.38% +0.42%
Inception (10/21/94) through 12/31/96 +9.18 +9.18
[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 12/31/96 +1.96% -2.12%
Inception (10/21/94) through 12/31/96 +9.81 +7.78
[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**
Class A Shares*
Year Ended 12/31/96 +2.94% +1.91%
Five Years Ended 12/31/96 +6.99 +6.78
Ten Years Ended 12/31/96 +7.88 +7.77
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +2.40% +1.44%
Inception (11/13/92) through 12/31/96 +6.51 +6.51
<PAGE>
[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 12/31/96 +2.37% +1.40%
Inception (10/21/94) through 12/31/96 +8.96 +8.96
[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 12/31/96 +2.83% +1.81%
Inception (10/21/94) through 12/31/96 +9.41 +8.91
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
<PAGE>
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<S> <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
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.75 0.76 0.73 +12.45 + 2.21 + 2.94
------ ------ ------
Total $17.14 $17.29 $16.64
Cumulative total return as of 12/31/96: +642.23%* +451.86%** +424.53%**
<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>
PERFORMANCE DATA (continued)
<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
<S> <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
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.69 0.67 0.67 +11.60 + 1.43 + 2.40
----- ----- -----
Total $6.53 $7.04 $3.31
Cumulative total return as of 12/31/96: +141.97%** +88.40%** +29.77%**
<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>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
<PAGE>
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<S> <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
1996 7.83/8.02 11.84/11.32 11.80/11.39 0.68 0.66 0.67 +11.68 + 1.38 + 2.37
----- ----- -----
Total $1.57 $1.50 $1.54
Cumulative total return as of 12/31/96: +29.47%** +21.27%** +20.71%**
<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
<S> <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 +19.52 +17.98
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.73 0.73 0.72 +12.17 + 1.96 + 2.83
----- ----- -----
Total $1.67 $1.65 $1.64
Cumulative total return as of 12/31/96: +30.91%** +22.79%** +21.82%**
<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>
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
12/31/96 9/30/96 12/31/95 % Change % Change As of 12/31/96
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 8.01 $ 7.93 $ 7.83 + 2.30% +1.01% 8.88%
High Income Portfolio Class B Shares 8.01 7.93 7.83 + 2.30 +1.01 8.48
High Income Portfolio Class C Shares 8.02 7.94 7.83 + 2.43 +1.01 8.41
High Income Portfolio Class D Shares 8.01 7.94 7.83 + 2.30 +0.88 8.64
Investment Grade Portfolio Class A Shares 11.32 11.16 11.84 - 4.39 +1.43 6.10
Investment Grade Portfolio Class B Shares 11.32 11.16 11.84 - 4.39 +1.43 5.58
Investment Grade Portfolio Class C Shares 11.32 11.17 11.84 - 4.39 +1.34 5.53
Investment Grade Portfolio Class D Shares 11.32 11.17 11.84 - 4.39 +1.34 5.86
Intermediate Term Portfolio Class A Shares 11.39 11.28 11.80 - 3.47 +0.98 5.99
Intermediate Term Portfolio Class B Shares 11.39 11.28 11.80 - 3.47 +0.98 5.62
Intermediate Term Portfolio Class C Shares 11.39 11.28 11.80 - 3.47 +0.98 5.49
Intermediate Term Portfolio Class D Shares 11.39 11.28 11.80 - 3.47 +0.98 5.88
High Income Portfolio Class A Shares--Total Return +12.45(1) +3.46(2)
High Income Portfolio Class B Shares--Total Return +11.60(3) +3.27(4)
High Income Portfolio Class C Shares--Total Return +11.68(5) +3.25(6)
High Income Portfolio Class D Shares--Total Return +12.17(7) +3.27(8)
Investment Grade Portfolio Class A Shares--Total Return + 2.21(9) +3.19(10)
Investment Grade Portfolio Class B Shares--Total Return + 1.43(11) +2.99(12)
Investment Grade Portfolio Class C Shares--Total Return + 1.38(13) +2.89(14)
Investment Grade Portfolio Class D Shares--Total Return + 1.96(15) +3.04(16)
Intermediate Term Portfolio Class A Shares--Total Return + 2.94(17) +2.64(18)
Intermediate Term Portfolio Class B Shares--Total Return + 2.40(19) +2.51(20)
Intermediate Term Portfolio Class C Shares--Total Return + 2.37(21) +2.50(22)
Intermediate Term Portfolio Class D Shares--Total Return + 2.83(23) +2.62(24)
<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 $0.748 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.215 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.688 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.198 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.684 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.197 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.729 per share
ordinary income dividends.
<PAGE>
(8)Percent change includes reinvestment of $0.210 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.757 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.219 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.670 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.194 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.664 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.193 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.729 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.211 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.735 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.210 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.675 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.193 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.671 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.192 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.723 per share
ordinary income dividends.
(24)Percent change includes reinvestment of $0.207 per share
ordinary income dividends.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds High Income Portfolio
<S> <C> <C> <C> <S> <C> <C>
Airlines--1.3% Piedmont Aviation, Inc.:
B+ B1 $ 1,304,000 Series 88J, 10.05% due 5/13/2005 $ 1,181,685 $ 1,242,347
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,059,620
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 3,734,415
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 2,494,474
B+ B1 104,000 Series 88J, 10.20% due 5/13/2012 90,874 101,410
B+ B1 870,000 Series 88K, 9.95% due 5/13/2003 796,746 831,729
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,123,448
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 2,558,027
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,447,159
B+ B1 200,000 Series C, 9.70% due 1/15/1999 201,676 196,056
B+ B1 100,000 Series C, 10.25% due 1/15/2007 103,706 95,959
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,909,372
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 1,822,665
B+ B1 50,000 Series G, 10.35% due 3/28/2011 51,425 46,735
B+ B1 450,000 Series H, 9.85% due 5/08/2005 454,617 423,900
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,368,150
B+ B1 536,000 Series I, 10% due 11/08/2012 545,048 488,886
USAir Inc.:
CCC+ B3 25,000,000 9.625% due 2/01/2001 20,109,906 25,375,000
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 21,945,000
B+ B1 5,000,330 Series 89A1, 9.33% due 1/01/2006++ 4,730,165 4,769,065
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,412,811
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,790,679
B+ B1 421,000 Series E, 10.70% due 1/01/2002 382,895 417,459
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,092,166
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,081,506
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,081,506
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,081,506
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,081,506
-------------- --------------
76,664,633 84,072,556
Automotive-- B B3 14,000,000 Collins & Aikman Corp., 11.50% due
0.7% 4/15/2006 14,000,000 15,295,000
Exide Corp.:
B+ B1 21,875,000 10.75% due 12/15/2002 22,358,281 22,968,750
B B2 5,095,000 11.675% due 12/15/2004 (a) 4,622,159 4,712,875
-------------- --------------
40,980,440 42,976,625
<PAGE>
Broadcasting & BB- B2 19,240,000 Argyle Television Inc., 9.75% due
Publishing-- 11/01/2005 19,003,950 19,576,700
3.5% B- B2 17,500,000 EZ Communications, Inc., 9.75% due
12/01/2005 17,361,575 18,331,250
Grupo Televisa, S.A. de C.V.:
BB Ba3 2,500,000 11.375% due 5/15/2003 2,637,500 2,690,625
BB Ba3 39,000,000 11.875% due 5/15/2006 42,079,687 43,338,750
B Ba3 21,500,000 Hollinger International, Inc., 9.25% due
2/01/2006 20,925,313 21,392,500
B Ba3 12,000,000 Katz Media Corporation, 10.50% due
1/15/2007 12,000,000 12,300,000
B Caa 25,000,000 NWCG Holding Corp., 13.79% due
6/15/1999 (a) 17,988,016 20,687,500
Sinclair Broadcasting Group Inc.:
B B2 15,000,000 10% due 12/15/2003 15,036,250 15,262,500
B B2 45,000,000 10% due 9/30/2005 45,207,019 45,787,500
BB- B1 20,000,000 World Color Press, Inc., 9.125% due
3/15/2003 20,019,375 20,300,000
B B2 2,000,000 Young Broadcasting Inc., 10.125% due
2/15/2005 2,000,000 2,055,000
-------------- --------------
214,258,685 221,722,325
</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> <C> <C> <C> <S> <C> <C>
Broadcasting/ CCC+ Caa $36,190,545 American Telecasting, Inc.,
Cable--13.4% 15.087% due 6/15/2004 (a) $ 24,548,307 $ 15,380,982
CCC Caa 79,117,000 Australis Media Ltd., 13.81% due
5/15/2003 (a) (d) 50,696,872 41,734,218
BB- B2 59,000,000 Bell Cablemedia PLC, 11.86% due
9/15/2005 (a) 38,542,564 47,495,000
CCC+ Caa 10,500,000 CS Wireless Systems Inc.,
12.041% due 3/01/2001 (a) 6,318,289 3,832,500
Cablevision System Corp.:
B B2 2,000,000 10.75% due 4/01/2004 2,030,000 2,085,000
B B2 7,750,000 9.875% due 5/15/2006 7,561,250 7,963,125
B B2 5,000,000 10.50% due 5/15/2016 4,900,000 5,175,000
Century Communications Corporation:
BB- Ba3 30,750,000 9.75% due 2/15/2002 30,486,250 31,749,375
BB- Ba3 42,000,000 9.50% due 3/01/2005 41,400,313 43,155,000
BB- B1 20,350,000 Comcast Corporation, 9.50%
due 1/15/2008 19,494,750 21,113,125
B B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 35,995,482 38,362,500
<PAGE> B B2 60,000,000 Echostar Communications Corp.,
13.056% due 6/01/2004 (a) (f) 43,860,999 49,867,854
B- Caa 20,000,000 Echostar Satellite Broadcasting Corp.,
13.125% due 3/15/2000 (a) 13,313,664 15,400,000
B+ NR* 28,500,000 Globo Communicacoes Participacoes,
10.50% due 12/20/2006 28,414,450 28,731,563
B B2 31,000,000 Intermedia Capital Partners,
11.25% due 8/01/2006 31,002,500 32,046,250
B B3 80,000,000 International Cabletel Inc., Series B,
11.702% due 2/01/2006 (a) 49,957,383 54,600,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 48,437,500
BB- B2 30,000,000 10.50% due 6/15/2006 29,921,700 31,800,000
B B1 42,000,000 Olympus Communications L.P.,
10.625% due 11/15/2006 41,982,500 43,050,000
CCC+ Caa 20,000,000 People's Choice T.V. Corporation,
13.48% due 6/01/2004 (a) 12,557,913 8,600,000
BB+ Ba3 12,500,000 Rogers Cablesystems Ltd., 10% due
3/15/2005 12,769,375 13,343,750
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 36,968,750
BB B1 75,000,000 TeleWest Communications PLC,
11.02% due 10/01/2007 (a) 50,154,794 52,500,000
B- B2 45,000,000 UIH Australia/Pacific, Series B,
14% due 5/15/2006 (a) 24,971,168 24,075,000
United International Holdings, Inc. (a):
B- B3 5,000,000 12.18% due 11/15/1999 3,495,678 3,562,500
B- B3 50,000,000 13.99% due 11/15/1999 (e) 33,916,694 36,250,000
B- B3 18,750,000 14% due 11/15/1999 12,715,586 13,406,250
BB+ Ba3 11,250,000 Videotron Groupe L'TEE, 10.25% due
10/15/2002 11,322,500 12,009,375
Videotron Holdings PLC:
B+ B3 50,000,000 12.08% due 7/01/2004 (a) 36,049,071 43,625,000
BB+ Ba3 3,300,000 10.625% due 2/15/2005 3,279,375 3,646,500
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a) 27,659,149 24,665,620
-------------- --------------
812,224,776 834,631,737
</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> <C> <C> <C> <S> <C> <C>
Building BB B1 $15,000,000 Cemex S.A., 12.75% due 7/15/2006 $ 15,000,000 $ 16,837,500
Materials-- B- B2 20,550,000 Nortek Inc., 9.875% due 3/01/2004 20,362,365 20,858,250
1.5% B+ B3 27,220,000 Pacific Lumber Co., 10.50% due 3/01/2003 26,868,238 27,764,400
BB Ba2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 29,665,680
-------------- --------------
88,120,609 95,125,830
<PAGE>
Capital Goods-- B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 22,088,832
0.8% B- B3 25,000,000 International Wire Group, Inc.,
11.75% due 6/01/2005 24,986,250 26,875,000
-------------- --------------
46,532,750 48,963,832
Chemicals--1.3% B+ Ba3 15,000,000 Agriculture Minerals & Chemicals Company,
L.P., 10.75% due 9/30/2003 15,060,000 16,368,750
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.25% due 7/15/2001 25,000,000 26,046,875
ISP Holdings Inc.:
B+ Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,087,060
B+ Ba3 20,000,000 9% due 10/15/2003 19,944,200 20,500,000
-------------- --------------
79,506,200 83,002,685
Communications-- Brooks Fiber Properties Inc. (a):
9.3% NR* NR* 30,000,000 11.875% due 11/01/2001 17,181,618 19,275,000
NR* NR* 35,000,000 11.56% due 3/01/2006 21,428,717 22,575,000
CCC- B3 2,000,000 Cencall Communications Corp.,
13.347% due 1/15/2004 (a) 1,360,766 1,372,500
Comtel Brasileira Ltd.:
NR* NR* 29,500,000 10.75% due 9/26/2004 29,500,000 30,385,000
NR* NR* 500,000 10.75% due 9/26/2004 517,500 513,750
B+ B3 53,472,000 Comunicacion Celular,
12.76% due 11/15/2003 (a) 33,384,055 35,558,880
CCC- B3 30,000,000 Dial Call Communications,
13.852% due 4/15/2004 (a) 20,849,645 21,750,000
B- B3 85,000,000 Millicom International Celular S.A.,
13.503% due 6/01/2006 (a) 47,753,451 53,125,000
Mobilemedia Communication, Inc.:
D C 33,000,000 11.58% due 12/01/2003 (a) 25,098,450 7,260,000
D C 12,126,000 9.375% due 11/01/2007 10,618,705 3,334,650
B- B3 78,000,000 Nextel Communications Inc.,
12.107% due 8/15/2004 (a) 55,703,889 53,332,500
NR* NR* 21,000,000 Page Mart Inc., 12.74% due 11/01/2003 (a) 16,469,917 16,380,000
Paging Network, Inc.:
B B2 10,000,000 11.75% due 5/15/2002 10,387,500 10,825,000
B B2 65,000,000 10% due 10/15/2008 64,856,250 65,975,000
B B3 46,210,000 PanAmSat L.P., 11.09% due 8/01/2003 (a) 39,126,165 43,090,825
Rogers Communications Inc.:
BB- B2 35,925,000 10.875% due 4/15/2004 36,431,094 37,766,156
BB- B2 2,000,000 9.125% due 1/15/2006 1,897,500 1,975,000
BB- B1 40,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004 38,763,075 44,200,000
Teleport Communications Group Inc.:
B B1 34,350,000 9.875% due 7/01/2006 34,957,812 36,797,438
B B1 9,000,000 10.843% due 7/01/2007 (a) 5,662,560 6,187,500
</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> <C> <C> <C> <S> <C> <C>
Communications B- B2 $19,730,000 USA Mobile Communications Holdings, Inc.,
(concluded) 9.50% due 2/01/2004 $ 18,997,875 $ 18,842,150
B+ B1 25,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006 24,975,250 25,437,500
B- B3 25,000,000 Western Wireless Corp., 10.50% due
2/01/2007 25,062,500 26,187,500
-------------- --------------
580,984,294 582,146,349
Computer BB- Ba1 38,500,000 Advanced Micro Devices, Inc.,
Services--1.9% 11% due 8/01/2003 38,938,750 41,868,750
B B2 12,000,000 Celestica International, 10.50% due
12/31/2006 12,000,000 12,630,000
ComputerVision Corp.:
B- B3 15,000,000 11.375% due 8/15/1999 14,473,750 15,768,750
B+ B2 12,500,000 8% due 12/01/2009 6,802,472 10,625,000
B- B3 40,000,000 Dictaphone Corp., 11.75% due 8/01/2005 39,705,625 37,000,000
-------------- --------------
111,920,597 117,892,500
Conglomerates-- CCC+ B3 16,000,000 The Interlake Corp., 12.125%
1.0% due 3/01/2002 16,147,500 16,640,000
B- B2 10,000,000 JB Poindexter & Co., Inc., 12.50%
due 5/15/2004 10,000,000 9,800,000
NR* NR* 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 8,568,400 9,145,500
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,562 26,650,000
-------------- --------------
59,862,462 62,235,500
Consumer B NR* 50,000,000 Coleman Holdings, Inc., 11.16% due
Products--3.5% 5/27/1998 (a) 42,660,448 41,750,000
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 16,312,500
B+ Ba2 45,880,000 International Semi-Tech Microelectronics,
Inc., 12.51% due 8/15/2000 (a) 28,838,190 29,822,000
B- B2 16,000,000 Polymer Group Inc., 12.25% due 7/15/2002 16,323,750 17,560,000
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,203,331 3,591,875
B B2 27,000,000 9.375% due 4/01/2001 24,951,684 27,641,250
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 9,998,750
B- B2 36,650,000 Samsonite Corporation, 11.125% due
7/15/2005 36,088,625 40,223,375
B+ B1 32,550,000 Sealy Corp., 9.50% due 5/01/2003 32,274,650 32,997,563
-------------- --------------
208,135,678 219,897,313
<PAGE>
Convertible B B2 6,195,000 Builders Transport, Inc., 8% due
Bonds**--0.2% 8/15/2005 (3) 3,614,250 3,678,281
BBB+ Ba1 6,375,000 Quantum Health Resources Inc.,
4.75% due 10/01/2000 (2) 5,956,562 5,737,500
B Caa 3,659,000 UNC, Inc., 7.50% due 3/31/2006 (1) 2,151,592 3,540,083
-------------- --------------
11,722,404 12,955,864
Diversified-- Foamex Capital Corp.:
0.6% NR* Caa 10,980,000 11.671% due 7/01/1999 (a) 8,924,343 9,168,300
B B1 25,000,000 11.25% due 10/01/2002 24,964,375 26,625,000
-------------- --------------
33,888,718 35,793,300
</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> <C> <C> <C> <S> <C> <C>
Energy--7.4% B+ B1 $49,500,000 Clark R&M Holdings, Inc., 11% due
2/15/2000 (a) $ 35,436,382 $ 35,763,750
B+ B2 9,000,000 Clark USA Inc., Series B, 10.875% due
12/01/2005 9,000,000 9,337,500
B+ Ba1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 21,525,000
B- B1 22,000,000 KCS Energy Inc., 11% due 1/15/2003 22,723,750 23,925,000
Maxus Energy Corp.:
BB- B1 17,750,000 9.875% due 10/15/2002 16,726,250 18,282,500
BB- B1 7,550,000 11.50% due 11/15/2015 7,363,000 7,927,500
BB Ba2 8,750,000 Noble Drilling Corp., 9.25%
due 10/01/2003 8,925,000 9,373,438
BBB- Baa3 28,000,000 Oleoducto Centrale S.A., 9.35% due
9/01/2005 27,967,500 29,295,000
B+ B1 21,500,000 Parker Drilling Co., 9.750% due
11/15/2006 21,440,725 22,790,000
Petroleo Brasileiro S.A.--Petrobras:
B+ B1 13,000,000 10% due 10/17/2006 13,107,500 13,178,750
B+ B1 15,000,000 10% due 10/17/2006 14,869,812 15,206,250
B+ Ba2 15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,085,000 16,050,000
BB- B1 25,000,000 Seagull Energy Corp., 8.625%
due 8/01/2005 24,990,000 25,500,000
B B1 10,000,000 Statia Terminals, 11.75% due 11/15/2003 10,000,000 10,450,000
NR* NR* 17,000,000 Transamerican Exploration Corp.,
14% due 9/19/1998 16,830,000 17,340,000
Transamerican Refining Corp.:
CCC+ Caa 10,000,000 16.50% due 2/15/2002 9,517,519 10,100,000
CCC+ Caa 60,000,000 19.40% due 2/15/2002 (a) 47,664,591 49,725,000
BB- B2 50,000,000 TransTexas Gas Corp., 11.50%
due 6/15/2002 50,018,750 54,125,000
B+ B1 31,525,000 Triton Energy Corp., 10.61% due
11/01/1997 (a) 28,832,407 29,357,656
BB- B1 46,000,000 Yacimientos Petroliferos Fiscales S.A.
(YPF) (Sponsored), 8% due 2/15/2004 37,389,250 44,390,000
-------------- --------------
437,934,936 463,642,344
<PAGE>
Entertainment-- B- B2 50,000,000 AMF Group Inc., Series B,
1.1% 12.41% due 3/15/2006 (a) 29,996,164 33,312,500
D C 3,000,000 Marvel Holdings Inc., 9.125%
due 2/15/1998 2,685,750 585,000
B B2 40,000,000 Six Flags Theme Parks,
12.18% due 6/15/2005 (a) 33,725,260 37,800,000
-------------- --------------
66,407,174 71,697,500
Financial NR* Ba3 12,000,000 First Nationwide Escrow,
Services--1.4% 10.625% due 10/01/2003 12,000,000 12,990,000
B B2 17,000,000 First Nationwide Holdings, 12.50% due
4/15/2003 16,806,710 18,785,000
BB+ B1 9,000,000 Penncorp Financial Group Inc.,
9.25% due 12/15/2003 9,090,000 9,405,000
Reliance Group Holdings Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,666,313
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 23,534,438
BB- Baa3 15,000,000 Riggs Capital Trust, 8.625%
due 12/31/2026 15,000,000 15,112,500
-------------- --------------
81,057,335 87,493,251
</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> <C> <C> <C> <S> <C> <C>
Food & Beverage Chiquita Brands International Inc.:
- --3.0% B+ B1 $30,000,000 9.125% due 3/01/2004 $ 29,585,625 $ 30,450,000
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,200,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25% due
2/01/2005 23,562,125 24,388,000
B- B3 23,463,000 Envirodyne Industries, Inc.,
10.25% due 12/01/2001 22,781,845 22,524,480
CCC+ Caa 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 24,000,000
B- B2 24,000,000 International Home Foods,
10.375% due 11/01/2006 24,000,000 25,140,000
Specialty Foods Corp.:
B B3 9,250,000 10.25% due 8/15/2001 8,784,375 8,579,375
B B3 9,500,000 11.125% due 10/01/2002 9,470,000 9,072,500
B+ B1 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 20,350,000
-------------- --------------
183,080,370 185,704,355
<PAGE>
Foreign BB Ba2 40,000,000 Banco Nationale de Commerce,
Government 7.25% due 2/02/2004 33,873,125 35,488,212
Obligations-- Republic of Argentina:
1.5% BB- B1 25,000,000 8.375% due 12/20/2003 20,075,000 23,652,325
NR* B1 30,000,000 11% due 10/09/2006 (g) 29,833,680 31,500,000
-------------- --------------
83,781,805 90,640,537
Gaming--3.5% B+ B2 37,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 35,072,500 31,265,000
BB Ba3 20,000,000 Grand Casinos Inc., 10.125% due
12/01/2003 19,837,500 20,150,000
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001 49,536,050 29,982,356
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,172,102 19,300,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 24,656,250
Station Casinos Inc.:
B+ B2 2,200,000 9.625% due 6/01/2003 2,134,516 2,178,000
B+ B2 2,000,000 9.625% due 6/01/2003 1,955,000 2,000,000
B+ B2 3,000,000 10.125% due 3/15/2006 2,977,500 3,030,000
BB- B1 85,000,000 Trump Atlantic City, 11.25%
due 5/01/2006 84,029,062 84,256,250
-------------- --------------
239,978,855 216,817,856
Health B+ B1 45,200,000 Beverly Enterprises, Inc.,
Services 9% due 2/15/2006 44,200,550 45,595,500
1.3% B B3 10,500,000 Imed Corp., 9.75% due 12/01/2006 10,505,312 10,723,125
B B3 20,000,000 Unilab Corp., 11% due 4/01/2006 19,843,480 13,800,000
BB- NR* 13,000,000 Veritas Holdings, 9.625% due 12/15/2003 13,000,000 13,130,000
-------------- --------------
87,549,342 83,248,625
Home Builders-- Del E. Webb Corp.:
1.5% B+ Ba3 3,500,000 10.875% due 3/31/2000 3,524,375 3,622,500
B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 7,175,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,910,000
B B1 20,000,000 Greystone Homes Inc., 10.75%
due 3/01/2004 19,115,000 20,500,000
BB Ba2 20,000,000 Ryland Group, Inc. (The), 10.50% due
7/01/2006 19,697,400 20,950,000
BB Ba2 36,300,000 U.S. Home Corp., 9.75% due 6/15/2003 36,367,250 37,752,000
-------------- --------------
88,788,935 93,909,500
</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> <C> <C> <C> <S> <C> <C>
Hotels--2.0% BB- Ba3 $80,000,000 HMC Acquisition Properties, 9% due
12/15/2007 $ 79,272,500 $ 81,600,000
BB- B1 40,000,000 HMH Properties Inc., 9.50%
due 5/15/2005 39,085,361 41,950,000
-------------- --------------
118,357,861 123,550,000
Independent B+ Ba1 35,000,000 AES Corporation (The), 10.25%
Power due 7/15/2006 35,000,000 37,800,000
Producers--2.4% BB Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 33,000,000
BB Ba2 24,000,000 California Energy Company, Inc.,
9.875% due 6/30/2003 24,122,500 25,320,000
NR* NR* 18,500,000 Consolidated Hydro, Inc.,
12.22% due 7/15/2003 (a) 15,278,452 6,012,500
Midland Cogeneration Venture
Limited Partnership:
BB- Ba3 4,110,433 10.33% due 7/23/2002 4,399,884 4,367,335
BB- Ba3 20,826,836 10.33% due 7/23/2002 21,575,578 22,180,580
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 12,455,550
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,354,315
-------------- --------------
147,688,979 147,490,280
Industrial CCC Caa 7,912,000 Thermadyne Industries, Inc.,
Services--0.1% 10.75% due 11/01/2003 7,914,802 8,169,140
Metals & B- B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
Mining--1.6% 12.75% due 2/01/2003 51,088,125 53,875,000
Maxxam Group, Inc.:
B- B3 11,750,000 11.25% due 8/01/2003 11,816,250 12,043,750
B- B3 41,155,000 12.37% due 8/01/2003 (a) 33,934,637 35,290,413
-------------- --------------
96,839,012 101,209,163
Packaging--1.1% B- Caa 21,500,000 Ivex Packaging Corp., 13.22% due
3/15/2005 (a) 14,268,887 16,823,750
Owens-Illinois, Inc.:
BB Ba3 20,000,000 11% due 12/01/2003 20,810,000 22,275,000
B+ B2 6,000,000 9.95% due 10/15/2004 5,931,250 6,375,000
B+ B3 15,000,000 Printpack Inc., 10.625% due 8/15/2006 15,000,000 15,637,500
B- B3 8,560,000 Silgan Holdings Inc., 13.25%
due 12/15/2002 8,560,000 8,645,600
-------------- --------------
64,570,137 69,756,850
<PAGE>
Paper--6.0% BB Ba3 35,500,000 APP International Finance,
11.75% due 10/01/2005 35,306,250 38,162,500
Container Corporation of America:
B+ B1 15,420,000 9.75% due 4/01/2003 15,433,400 16,229,550
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,137,500
B B3 25,000,000 Crown Paper Co., 11% due 9/01/2005 23,108,781 23,562,500
BB- Ba3 50,000,000 Doman Industries Ltd., 8.75%
due 3/15/2004 47,581,250 47,000,000
Fort Howard Corp.:
B+ B1 10,000,000 9.25% due 3/15/2001 10,000,000 10,437,500
B B2 35,250,000 9% due 2/01/2006 32,561,250 35,646,563
B B3 35,000,000 Gaylord Container Corp., 11.50%
due 5/15/2001 35,401,250 37,975,000
P.T. Indah Kiat International Finance:
BB Ba2 3,000,000 11.875% due 6/15/2002 3,000,000 3,225,000
BB Ba2 14,500,000 12.50% due 6/15/2006 14,572,500 16,022,500
B+ B3 25,500,000 Repap New Brunswick, Inc.,
10.625% due 4/15/2005 25,597,500 26,647,500
BB- B2 25,000,000 Repap Wisconsin Inc., 9.25%
due 2/01/2002 23,537,500 25,312,500
</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> <C> <C> <C> <S> <C> <C>
Paper Riverwood International Corp.:
(concluded) B B2 $ 5,000,000 10.25% due 4/01/2006 $ 4,790,000 $ 4,906,250
B B3 30,000,000 10.875% due 4/01/2008 30,105,000 27,900,000
B+ B1 16,000,000 S.D. Warren Co., 12% due 12/15/2004 16,000,000 17,320,000
Stone Container Corp.:
B+ B1 15,000,000 9.875% due 2/01/2001 13,948,672 15,168,750
BB- B1 15,000,000 10.75% due 10/01/2002 14,825,000 15,843,750
-------------- --------------
358,768,353 375,497,363
Restaurants-- CCC+ Caa 10,890,000 Flagstar Corp., 11.375% due 9/15/2003 10,982,500 4,601,025
0.5% B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 26,216,200 26,662,500
-------------- --------------
37,198,700 31,263,525
Specialty NR* NR* 26,526,000 Cumberland Farms Inc., DE,
Retailing--0.7% 10.50% due 10/01/2003 25,331,072 25,630,748
B+ B1 20,000,000 Specialty Retailers Group, Inc.,
10% due 8/15/2000 20,000,000 20,900,000
-------------- --------------
45,331,072 46,530,748
<PAGE>
Steel--2.0% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125% due
12/15/2006 25,056,250 25,687,500
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 9,800,000
B B3 25,000,000 Republic Engineered Steel Inc.,
9.875% due 12/15/2001 24,117,500 23,375,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 25,500,000
B B2 23,000,000 Weirton Steel Inc., 10.75% due 6/01/2005 22,413,750 22,597,500
BB- B1 20,000,000 Wheeling-Pittsburg Steel Corp.,
9.375% due 11/15/2003 18,670,000 19,850,000
-------------- --------------
125,057,500 126,810,000
Supermarkets-- Penn Traffic Co.:
1.8% BB- B1 10,000,000 8.625% due 12/15/2003 8,369,260 8,250,000
BB- B1 19,000,000 11.50% due 4/15/2006 17,086,250 16,815,000
B- B2 21,075,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 19,460,250 19,836,844
Ralph's Grocery Co.:
B B1 20,000,000 10.45% due 6/15/2004 18,973,820 21,350,000
B B1 10,000,000 10.45% due 6/15/2004 9,702,500 10,650,000
B- B3 30,000,000 Smith's Food & Drug Centers Inc.,
11.25% due 5/15/2007 30,065,000 33,300,000
-------------- --------------
103,657,080 110,201,844
Textiles--0.4% B+ B2 25,000,000 Westpoint Stevens Inc., 9.375% due
12/15/2005 25,100,000 25,812,500
Transportation BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25% due
- --2.4% 11/15/2003 24,472,500 25,251,592
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25% due
12/01/2004 20,518,750 22,100,000
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba2 5,475,000 8.50% due 10/15/2000 3,175,500 5,317,594
BB- Ba2 20,000,000 9.25% due 5/15/2003 17,092,750 19,600,000
BB Ba2 15,000,000 (Class A), 10% due 11/15/2006 14,943,750 15,262,500
B- B3 54,606,000 Transtar Holdings L.P., 12.04% due
12/15/2003 (a) 39,813,543 43,957,830
BB Ba2 20,000,000 Viking Star Shipping Co., Inc.,
9.625% due 7/15/2003 20,045,000 21,025,000
-------------- --------------
140,061,793 152,514,516
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded) High Income Portfolio
<S> <C> <C> <C> <S> <C> <C>
Utilities--4.9% Beaver Valley Funding Corp.:
B+ B1 $ 8,070,000 8.625% due 6/01/2007 $ 7,099,175 $ 7,845,008
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 32,917,550
CTC Mansfield Funding Corp.:
B+ Ba3 15,950,000 10.25% due 3/30/2003 15,903,640 16,185,422
B+ Ba3 25,000,000 11.125% due 9/30/2016 26,416,875 26,375,000
BB Ba2 15,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 14,971,200 15,815,700
BB- Ba3 27,000,000 El Paso Electric Company, 9.40% due
5/01/2011 26,990,000 29,025,000
BB- B1 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 44,000,000
NR* NR* 15,803,838 Sunflower Electric Power Corp.,
8% due 12/31/2016 10,366,870 12,208,465
B+ B1 20,000,000 Texas-New Mexico Power Corp.,
10.75% due 9/15/2003 20,065,000 21,450,000
BBB- NR* 42,000,000 Trans Gas de Occidente, 9.79% due
11/01/2010 42,075,000 43,575,000
Tucson Electric & Power Co.:
NR* NR* 33,847,782 10.21% due 1/01/2009 32,005,359 32,962,324
NR* NR* 21,526,207 10.732% due 1/01/2013 20,326,836 21,095,468
-------------- --------------
287,333,336 303,454,937
Waste B+ B3 20,000,000 Allied Waste North America,
Management-- 10.25% due 12/01/2006 20,000,000 21,075,000
0.5% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 23,667,250 8,769,000
-------------- --------------
43,667,250 29,844,000
Total Investments in Bonds--86.1% 5,234,926,873 5,386,675,250
<CAPTION>
Shares
Held
Preferred Stocks
Broadcasting & 421,000 K-III Communications Corp. 10,562,750 11,314,375
Publishing--0.6% 148,553 K-III Communications Corp., Series B 14,963,300 14,966,708
125,000 K-III Communications Corp., Series C 12,500,000 12,312,500
-------------- --------------
38,026,050 38,593,583
<PAGE>
Broadcasting/Cable--0.2% 111,948 Cablevision Systems Corp., Series M 10,091,070 10,355,190
Communications--0.1% 7,255 Paxson Communications 6,865,975 6,855,975
Energy--0.0% 250 Transamerican Energy 25,000 29,812
Entertainment--1.4% 80,730 Time Warner Inc. (Series K) 80,663,261 87,995,700
Health Services--0.5% 30,000 Fresenius Medical Care 30,000,000 30,600,000
Independent Power 29,517 Consolidated Hydro, Inc. 14,891,917 4,427,550
Producers--0.1%
Paper--0.5% 295,000 S.D. Warren Co. 8,333,750 8,628,750
685,000 S.D. Warren Co., Series B 20,659,690 25,002,500
-------------- --------------
28,993,440 33,631,250
Steel--0.2% 550,000 USX Capital LLC 13,750,000 13,956,250
Utilities--0.2% 108,427 El Paso Electric Company 10,912,223 12,062,504
Total Investments in
Preferred Stocks--3.8% 234,218,936 238,507,814
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Common Stocks High Income Portfolio
<S> <C> <S> <C> <C>
Broadcasting/ 210,096 Echostar Communications Corp. $ 1,492,461 $ 4,700,898
Cable--0.1%
Consumer 200,369 Culligan Water Technologies Inc. 1,686,248 8,114,944
Products--0.3% 200,369 Samsonite Corp. 2,398,992 7,701,683
-------------- --------------
4,085,240 15,816,627
<PAGE>
Energy--0.0% 57,237 Mesa Inc. 199,648 300,494
Entertainment--0.3% 1,155,994 On Command Corporation 52,121,914 18,640,403
Food & Beverage--0.2% 147,263 Foodbrands America 5,771,245 2,024,866
763,000 Seven-Up/RC Bottling Company 13,403,214 7,773,062
-------------- --------------
19,174,459 9,797,928
Gaming--0.0% 75,500 Goldriver Hotel & Casino Corporation
(Class B) (b) 540,045 0
Hotels--0.0% 6,539 Buckhead America Corp. 36,373 42,095
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 313,500
Industrials--0.0% 2,888 CS Wireless Systems Inc. 20,336 6
Supermarkets--0.0% 120,194 ABCO Markets Inc. 4,054,875 0
521,389 Grand Union Co. 29,475,625 2,574,358
-------------- --------------
33,530,500 2,574,358
Total Investments in Common Stocks--0.9% 111,366,276 52,186,309
<CAPTION>
Trusts & Warrants
Broadcasting/Cable--0.0% 177,500 American Telecasting Inc. (Warrants) (c) 413,723 421,562
20,000 People's Choice T.V. Corp. (Warrants) (c) 117,784 20,000
-------------- --------------
531,507 441,562
Communications--0.0% 53,472 Comunicacion Celular (Warrants) (c) 109,680 401,040
57,040 Page Mart Inc. (Warrants) (c) 236,127 299,460
-------------- --------------
345,807 700,500
Energy--0.0% 407,677 Transamerican Refining Corp.
(Warrants) (c) 950,408 917,273
<PAGE>
Entertainment--0.1% 379,188 On Command Corporation (Warrants) (c) 3,033,504 3,175,699
Financial Services--0.0% 7,194 Reliance Group Holdings, Inc.
(Warrants) (c) 0 0
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust 192,320 68,514
113,386 Trump Castle Funding, Inc. (Warrants) (c) 0 0
-------------- --------------
192,320 68,514
Independent Power 18,000 Consolidated Hydro Inc. (Warrants) (c) 390,123 258,750
Producers--0.0%
Paper--0.0% 60,000 S.D. Warren Co. (Warrants) (c) 165,310 187,500
Total Investments in
Trusts & Warrants--0.1% 5,608,979 5,749,798
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities High Income Portfolio
<S> <C> <S> <C> <C>
Commercial $26,340,000 Deer Park Refining L.P., 5.50%
Paper***--6.9% due 1/13/1997 $ 26,295,734 $ 26,295,734
41,400,000 Falcon Asset Securitization Corp.,
5.45% due 1/15/1997 41,318,522 41,318,522
88,465,000 General Motors Acceptance Corp.,
7.50% due 1/02/1997 88,465,000 88,465,000
50,000,000 Goldman Sachs Group L.P., 5.42% due
1/21/1997 49,856,972 49,856,972
15,000,000 IBM Credit Corp., 5.30% due 1/07/1997 14,988,958 14,988,958
International Securitization Corporation:
33,410,000 5.34% due 1/17/1997 33,335,663 33,335,663
25,109,000 5.43% due 1/28/1997 25,010,531 25,010,531
25,000,000 National Fleet Funding Corp.,
5.33% due 1/06/1997 24,985,194 24,985,194
Navistar Financial Corp.:
15,000,000 5.75% due 1/10/1997 14,980,833 14,980,833
45,000,000 5.93% due 1/21/1997 44,859,163 44,859,163
Onyx Corp.:
15,000,000 5.85% due 1/10/1997 14,980,500 14,980,500
50,000,000 6.03% due 1/21/1997 49,840,875 49,840,875
-------------- --------------
428,917,945 428,917,945
<PAGE>
US Government & Federal Home Loan Mortgage Corp.:
Agency Obligations***-- 60,000,000 5.60% due 1/07/1997 59,953,333 59,953,333
1.7% 20,000,000 5.36% due 2/20/1997 19,854,089 19,854,089
30,000,000 Federal National Mortgage Association,
5.25% due 1/10/1997 29,965,000 29,965,000
-------------- --------------
109,772,422 109,772,422
Total Investments in Short-Term
Securities--8.6% 538,690,367 538,690,367
Total Investments--99.5% $6,124,811,431 6,221,809,538
==============
Other Assets Less Liabilities--0.5% 32,438,400
--------------
Net Assets--100.0% $6,254,247,938
==============
Net Asset Class A--Based on net assets of $966,476,186 and 120,695,474
Value: shares outstanding $ 8.01
==============
Class B--Based on net assets of $4,528,633,399 and 565,381,624
shares outstanding $ 8.01
==============
Class C--Based on net assets of $421,573,068 and 52,596,141
shares outstanding $ 8.02
==============
Class D--Based on net assets of $337,565,285 and 42,126,613
shares outstanding $ 8.01
==============
<FN>
++Subject to principal paydowns.
*Not Rated.
**Industry classifications for convertible bonds are:
(1) Conglomerates; (2) Health Services; (3) Transportation Services
***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 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.
<PAGE>
(c)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock/face amount of bonds. The purchase price
and number of shares/face amount are subject to adjustment under
certain conditions until the expiration date.
(d)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(e)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(f)Each $1,000 face amount contains six warrants of Echostar
Communications Corp.
(g)Floating Rate Bond.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Investment Grade Portfolio
<S> <C> <C> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations-- AAA Aaa $ 5,000,000 8.875% due 11/15/1997 $ 5,160,938 $ 5,134,350
3.7% AAA Aaa 5,000,000 9.25% due 8/15/1998 5,289,844 5,260,150
AAA Aaa 9,000,000 6.375% due 5/15/1999 8,990,156 9,077,310
AAA Aaa 3,500,000 5.875% due 6/30/2000 3,502,835 3,473,750
AAA Aaa 16,000,000 6.25% due 8/31/2000 16,012,734 16,060,000
AAA Aaa 5,250,000 5.875% due 11/30/2001 5,192,053 5,173,717
AAA Aaa 1,000,000 5.75% due 8/15/2003 976,719 970,000
AAA Aaa 9,000,000 6.75% due 8/15/2026 9,201,406 9,067,500
-------------- --------------
54,326,685 54,216,777
Asset-Backed AAA Aaa 15,000,000 Advanta Corp., 5.525% due 6/15/2005 (a) 14,995,313 15,009,300
Securities++-- AAA Aaa 31,255,000 Banc One, Master Trust, (Series B),
5.6% 7.55% due 12/15/1999 31,858,028 31,704,134
AAA Aaa 10,000,000 Citibank Credit Card Master Trust I,
5.62% due 12/10/2008 9,996,100 9,990,600
AAA Aaa 24,989,764 Fifth Third Auto Grantor Trust,
6.45% due 3/15/2002 24,980,003 25,091,223
-------------- --------------
81,829,444 81,795,257
<PAGE>
Banking--14.9% AA- Aa3 2,000,000 Banc One, Dayton, 6.625% due 4/15/2003 2,082,060 1,971,080
AA- Aa3 3,000,000 Banc One, Milwaukee, 6.625% due 4/15/2003 3,123,090 2,980,650
BankAmerica Corp.:
A+ A1 4,000,000 6.65% due 5/01/2001 3,996,120 4,003,560
A+ A1 3,000,000 7.125% due 5/12/2005 3,087,560 3,022,620
A A2 5,000,000 7.125% due 5/01/2006 4,846,700 5,027,250
BBB- Baa3 22,800,000 Capital One Bank, 6.83% due 5/17/1999 23,064,936 22,915,368
A- A2 10,300,000 Chase Manhattan Bank Corporation,
8.65% due 2/13/1999 10,805,215 10,780,907
A+ A1 7,000,000 Citicorp., 8.80% due 2/01/2000 7,000,000 7,013,650
A+ A1 6,000,000 Fifth Third Bank, 6.75% due 7/15/2005 5,960,400 5,888,940
First Bank System, Inc.:
A- A3 10,000,000 6.375% due 3/15/2001 9,858,065 9,935,800
A- A3 8,500,000 6.875% due 9/15/2007 8,421,290 8,343,430
A A2 3,000,000 First Chicago Corp., 9% due 6/15/1999 3,182,940 3,158,370
BBB+ A3 8,400,000 First Interstate Bancorp, 9.90% due
11/15/2001 9,536,016 9,508,548
BBB+ A1 10,500,000 First Union Capital, 7.85% due 1/01/2027 10,481,730 10,481,730
First Union Corp.:
A- A2 9,000,000 6.75% due 1/15/1998 9,069,660 9,072,090
A- A2 6,350,000 7.50% due 7/15/2006 6,352,921 6,518,148
A- A3 5,000,000 Golden West Financial Corp., 9.15% due
5/23/1998 5,678,700 5,189,650
BBB+ A3 14,000,000 HSBC Americas Inc., 7.808% due 12/15/2026 13,838,440 13,525,400
AA- Aa2 4,900,000 JPM Capital Trust, 7.54% due 1/15/2027 4,900,000 4,788,721
BBB+ A2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 5,814,300
A A2 5,000,000 NationsBank Corporation, 7.50%
due 2/15/1997 4,995,700 5,009,350
Norwest Corp.:
AA- Aa3 17,000,000 6.25% due 4/15/1999 16,944,240 17,013,600
AA- Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,539,550
A+ A1 3,500,000 6.625% due 3/15/2003 3,553,235 3,439,275
</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> <C> <C> <C> <S> <C> <C>
Banking A+ A1 $10,000,000 Republic Bank of New York Corp.,
(concluded) 7.75% due 11/15/2026 $ 9,957,700 $ 9,874,900
A- A3 7,500,000 US Bancorp, 6.75% due 10/15/2005 7,459,650 7,304,850
AA+ Aa2 6,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 5,995,620 6,025,560
BBB A1 15,300,000 Wells Fargo Capital I, 7.96% due
12/15/2026 15,031,281 15,293,421
-------------- --------------
218,718,054 217,440,718
<PAGE>
Canadian Province of Quebec (Canada) (1):
Provinces*-- A+ A2 9,535,000 7.50% due 7/15/2002 10,058,986 9,824,864
2.1% A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,603,660
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 5,175,225
A+ A2 9,000,000 7.125% due 2/09/2024 8,673,600 8,643,060
-------------- --------------
31,213,231 30,246,809
Federal AAA Aaa 5,500,000 Federal Home Loan Banks, 6.65% due
Agencies--1.4% 11/13/2001 5,495,703 5,485,370
AAA Aaa 15,000,000 Federal National Mortgage Association,
7.85% due 9/10/2004 14,817,438 15,351,600
-------------- --------------
20,313,141 20,836,970
Finance--6.3% Advanta Corp.:
BBB- Baa2 15,000,000 6.26% due 9/01/1997 14,991,450 15,009,000
BBB- Baa2 3,000,000 7% due 5/01/2001 2,974,950 3,006,360
A+ A1 1,300,000 American General Finance Corp.,
7.70% due 11/15/1997 1,322,074 1,317,420
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,138,840
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,970,780
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,532,940
CIT Group Holdings, Inc.:
A+ Aa3 8,000,000 5.52% due 5/02/1997 (a) 8,000,000 7,995,280
A+ Aa3 13,000,000 7% due 9/30/1997 13,118,040 13,108,030
Finova Capital Corp.:
A- Baa1 31,460,000 8.25% due 3/11/1997 31,956,159 31,596,222
A- Baa1 7,000,000 6.375% due 10/15/2000 6,972,850 6,952,540
AAA Aaa 3,500,000 General Electric Capital Corp.,
8.125% due 5/15/2012 3,721,480 3,869,250
-------------- --------------
92,496,933 92,496,662
Finance-- Bear Stearns Companies, Inc.:
Other--8.5% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,004,740
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,463,484
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,286,080
Dean Witter, Discover & Co.:
A A2 3,500,000 6.75% due 8/15/2000 3,486,805 3,525,375
A A2 3,000,000 6.30% due 1/15/2006 2,986,800 2,834,016
A A2 9,500,000 6.75% due 1/01/2016 9,064,450 8,745,890
A+ A2 10,000,000 Equitable Cos. Inc., 9% due 12/15/2004 11,040,500 11,197,000
A A2 7,500,000 Equitable Life Assurance Society of the
US, 7.70% due 12/01/2015 7,448,310 7,496,850
A Baa1 5,000,000 Lehman Brothers Inc., 7.375% due 8/15/1997 4,993,500 5,032,650
BBB+ A3 5,000,000 MBNA Corporation, 5.681% due 9/14/1998 (a) 5,000,000 5,001,980
</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> <C> <C> <C> <S> <C> <C>
Finance-- A+ A1 $ 7,000,000 Morgan Stanley Group Inc., 5.625% due
Other 3/01/1999 $ 6,985,580 $ 6,909,840
(concluded) PaineWebber Group Inc.:
BBB+ Baa1 10,000,000 8.875% due 3/15/2005 9,997,850 10,846,200
BBB+ Baa1 1,500,000 7.625% due 2/15/2014 1,432,470 1,469,280
Smith Barney Holdings, Inc.:
A- A2 7,000,000 6.50% due 10/15/2002 6,961,080 6,883,940
A- A2 6,000,000 6.875% due 6/15/2005 5,957,580 5,906,760
A A1 9,900,000 Travelers Capital II, 7.75% due
12/01/2036 9,910,430 9,519,444
The Travelers Corp.:
A+ A1 9,000,000 9.50% due 3/01/2002 9,610,100 10,072,710
A+ A1 10,800,000 7.875% due 5/15/2025 10,845,324 11,280,492
-------------- --------------
121,606,319 123,476,731
Financial A A2 5,000,000 Ford Motor Credit Co., 8% due 6/15/2002 5,286,350 5,287,150
Services--
Captive--0.4%
Industrial-- AA- A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
Consumer 12/01/1999 3,367,590 3,187,500
Goods--3.3% AA Aa2 5,000,000 Kimberly-Clark Corporation, 7.875% due
2/01/2023 5,084,900 5,205,200
BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 8,925,930
A A2 9,500,000 Philip Morris Cos., Inc., 9%
due 1/01/2001 9,698,815 10,220,765
RJR Nabisco, Inc.:
BBB- Baa3 4,750,000 6.25% due 1/31/1997 4,731,000 4,749,620
BBB- Baa3 3,000,000 8.75% due 4/15/2004 2,912,220 3,027,780
BBB- Baa3 13,000,000 8.75% due 8/15/2005 12,720,550 13,058,500
-------------- --------------
47,497,035 48,375,295
Industrial-- BBB- Baa3 5,500,000 Arkla Inc., 8.875% due 7/15/1999 5,819,675 5,777,420
Energy--2.8% BP America Inc.:
AA Aa3 4,075,000 9.375% due 11/01/2000 4,488,287 4,484,497
AA Aa3 11,000,000 10% due 7/01/2018 11,869,080 11,999,570
AA- A1 7,500,000 Consolidated Natural Gas Co., 8.75% due
6/01/1999 7,450,660 7,887,750
BBB- Baa3 5,000,000 Noram Energy Corp., 7.50% due 8/01/2000 5,113,400 5,117,100
A+ A1 5,500,000 Texaco Capital Inc., 9% due 12/15/1999 6,215,190 5,889,070
-------------- --------------
40,956,292 41,155,407
<PAGE>
Industrial-- A- A3 14,000,000 Chrysler Financial Corp., 10.95% due
Manufacturing-- 8/01/2017 16,298,000 15,092,560
8.7% AA- Aa3 4,500,000 du Pont (E.I.) de Nemours & Co.,
8.25% due 1/15/2022 4,676,445 4,733,010
Ford Motor Credit Co.:
A+ A1 5,000,000 7% due 9/25/2001 4,980,100 5,074,550
A+ A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,147,300
A+ A1 1,000,000 7.75% due 3/15/2005 999,090 1,041,450
General Motors Acceptance Corp.:
A- A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,140,240
A- A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,192,842
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 3,962,040
A- A3 7,000,000 7.125% due 5/01/2003 6,964,230 7,100,030
A- A3 7,000,000 7.40% due 9/01/2025 6,943,580 6,922,580
</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> <C> <C> <C> <S> <C> <C>
Industrial-- BBB- Baa3 $ 8,450,000 James River Corp. of Virginia,
Manufacturing 9.25% due 11/15/2021 $ 9,952,861 $ 9,854,644
(concluded) Lockheed Martin Corp.:
BBB+ A3 10,000,000 6.625% due 6/15/1998 9,998,700 10,077,100
BBB+ A3 8,750,000 6.55% due 5/15/1999 8,745,800 8,790,863
BBB+ A3 5,000,000 6.85% due 5/15/2001 4,995,950 5,044,500
BBB+ A3 11,000,000 Loral Corporation, 8.375% due 6/15/2024 11,056,040 12,177,110
BBB+ A3 4,000,000 Martin Marietta Corporation,
7.375% due 4/15/2013 3,846,440 4,049,320
McDonnell Douglas Financial Corp.:
A- Baa2 9,000,000 8.625% due 4/01/1997 9,203,220 9,059,130
A- Baa2 5,000,000 6.30% due 10/20/1999 5,029,550 4,896,200
-------------- --------------
126,743,694 127,355,469
<PAGE>
Industrial-- A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 10,627,300
Services--15.5% A A2 11,000,000 Carnival Cruise Lines, Inc., 7.70% due
7/15/2004 11,028,940 11,439,120
Circus Circus Enterprises, Inc.:
BBB+ Baa2 6,000,000 6.45% due 2/01/2006 5,986,860 5,679,960
BBB+ Baa2 10,000,000 6.70% due 11/15/2096 9,977,700 9,835,200
Columbia/HCA Healthcare Corp.:
A- A2 9,000,000 6.87% due 9/15/2003 9,101,160 9,060,120
A- A2 6,000,000 9% due 12/15/2014 6,651,540 6,877,920
A- A2 5,000,000 7.05% due 12/01/2027 4,688,200 4,760,550
A- A2 5,000,000 7.75% due 7/15/2036 4,961,400 5,097,500
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,071,360
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,775,350
A+ A1 2,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 1,998,420 2,024,442
A+ A1 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,978,550
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 7,788,760
May Department Stores Co.:
A A2 9,000,000 6.875% due 11/01/2005 8,972,480 8,953,560
A A2 10,000,000 7.45% due 10/15/2016 10,306,100 10,088,100
News American Holdings, Inc.:
BBB Baa3 4,000,000 9.125% due 10/15/1999 4,298,640 4,268,160
BBB Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,366,677
BBB Baa3 10,000,000 7.60% due 10/11/2015 9,917,800 9,544,800
Royal Caribbean Cruises Ltd.:
BBB- Baa3 2,500,000 8.25% due 4/01/2005 2,568,775 2,625,375
BBB- Baa3 3,500,000 7.25% due 8/15/2006 3,372,950 3,446,975
Sears, Roebuck & Co.:
A- A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,192,650
A- A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,118,566
A- A2 8,000,000 6.82% due 10/17/2002 8,016,320 8,010,880
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 6,989,766
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,471,215 9,481,665
</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> <C> <C> <C> <S> <C> <C>
Industrial-- Time Warner Entertainment Co.:
Services BBB- Baa3 $ 6,000,000 8.875% due 10/01/2012 $ 6,624,540 $ 6,558,600
(concluded) BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 5,069,350
AA A2 14,345,000 Wal-Mart Stores, Inc., 8.50%
due 9/15/2024 14,488,240 15,349,867
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,474,040
A A2 15,250,000 6.85% due 1/10/2007 15,239,783 15,239,172
-------------- --------------
227,047,291 226,794,335
<PAGE>
Industrial-- BBB Baa2 9,000,000 Federal Express Corporation,
Transportation-- 9.65% due 6/15/2012 10,137,590 10,711,710
1.8% Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,870,000
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,115,740
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,098,370
-------------- --------------
26,436,800 26,795,820
Supranational-- AAA Aaa 3,000,000 Asian Development Bank, 10.75% due
0.9% 6/01/1997 3,302,730 3,057,510
AAA Aaa 8,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 10,115,250 9,322,080
-------------- --------------
13,417,980 12,379,590
Utilities-- GTE Corp.:
Communications-- BBB+ A3 7,500,000 9.375% due 12/01/2000 8,235,170 8,241,525
2.1% BBB+ A3 4,000,000 9.10% due 6/01/2003 4,242,720 4,461,960
BBB+ A3 3,000,000 10.30% due 11/15/2017 3,285,270 3,247,350
AAA Aaa 7,000,000 Indiana Bell Telephone Co. Inc.,
7.30% due 8/15/2026 6,988,030 7,103,880
A A2 6,000,000 MCI Communications Corporation,
6.95% due 8/15/2006 5,980,200 6,036,000
AA Aa3 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,987,160
-------------- --------------
30,742,640 31,077,875
Utilities-- AA- Aa2 6,000,000 Duke Power Co., 8% due 11/01/1999 5,964,660 6,247,020
Electric--2.4% A+ A1 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,988,760
AA- A1 5,000,000 Northern States Power Company,
7.125% due 7/01/2025 5,305,900 4,900,300
A- A3 7,000,000 Public Service Electric & Gas Co.,
7.125% due 11/01/1997 7,058,870 7,051,170
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,000,000 5,424,150
A A2 8,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024 8,377,160 9,196,133
-------------- --------------
33,668,010 34,807,533
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds & Notes (continued) Investment Grade Portfolio
<S> <C> <C> <C> <S> <C> <C>
Yankee ABN AMRO Bank (2):
Corporates*-- AA- Aa2 $ 6,000,000 7.55% due 6/28/2006 $ 5,999,160 $ 6,212,220
16.2% AA- Aa2 11,000,000 7.30% due 12/01/2026 10,756,900 10,458,800
A+ A1 6,000,000 Australia & New Zealand Banking Group
Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,176,640
Bangkok Metropolitan Bank Public Company
Limited (2):
BBB+ A3 8,885,000 7.25% due 9/15/2005 8,799,674 8,687,220
BBB A3 6,000,000 8.25% due 3/15/2016 6,048,720 6,089,760
AA- Aa3 9,500,000 CRA Finance Ltd., 6.50% due 12/01/2003 (2) 9,519,310 9,256,705
BBB Baa1 7,500,000 China International Trust, 9% due
10/15/2006 (2) 8,060,850 8,283,450
A A3 4,000,000 China Light & Power Company, Limited,
7.50% due 4/15/2006 (9) 3,974,520 4,033,280
BBB+ Baa1 15,500,000 Crown Cork & Seal Company, Inc.,
6.75% due 12/15/2003 (2) 15,416,765 15,314,155
Enersis S.A. (9):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,439,975
A- Baa1 7,000,000 7.40% due 12/01/2016 6,963,040 6,791,680
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,924,960
Ford Capital B.V. (2):
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,374,000
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,744,702
Grand Metropolitan Investment Corp. (2):
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 4,002,320
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 9,712,710
BBB+ A3 6,000,000 HSBC Americas Inc., 7% due 11/01/2006 (2) 5,949,600 5,923,200
Husky Oil Ltd. (9):
BBB Baa3 6,000,000 6.875% due 11/15/2003 5,984,040 5,956,560
BBB Baa3 3,000,000 7.125% due 11/15/2006 2,986,590 3,000,120
BBB Baa3 6,000,000 7.55% due 11/15/2016 5,975,940 6,009,240
A- A3 5,000,000 Israel Electric Corp. Ltd.,
7.25% due 12/15/2006 (9) 4,990,500 4,995,300
AA- A1 11,000,000 Korea Electric Power Corp., 8% due
7/01/2002 (9) 11,572,110 11,606,430
A A3 11,500,000 Mass Transit Railway Corp.,
7.25% due 10/01/2005 (8) 11,657,700 11,408,805
A- A2 6,250,000 Maybank New York, 7.125% due 9/15/2005 (2) 6,217,937 6,210,375
A A1 2,000,000 Midland Bank PLC, 7.625% due 6/15/2006 (2) 1,995,240 2,070,920
BBB+ A3 5,000,000 Petro-Canada, 9.25% due 10/15/2021 (4) 5,300,650 5,965,500
A+ A1 12,000,000 Petroliam Nasional BHD,
6.875% due 7/01/2003 (9) 11,929,530 12,017,160
BBB+ A3 5,000,000 Philips Electronics N.V., 7.20% due
6/01/2026 (9) 4,988,700 5,068,750
Pohang Iron & Steel Industries
Co., Ltd. (7):
A+ A2 12,000,000 7.375% due 5/15/2005 12,217,645 12,164,520
A+ A2 11,000,000 7.125% due 11/01/2006 10,987,570 10,969,970
A+ A1 6,500,000 Telekom Malaysia BHD, 7.125% due
8/01/2005 (9) 6,668,405 6,525,480
A A2 9,000,000 WMC (Western Mining Corp.) Finance Ltd.,
7.25% due 11/15/2013 (5) 9,089,100 8,918,550
-------------- --------------
234,901,131 236,313,457
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <C> <C> <C> <S> <C> <C>
Yankee AAA Aaa $ 4,000,000 Export-Import Bank of Japan, 8.35%
Sovereign*--2.0% due 12/01/1999 (3) $ 4,226,640 $ 4,214,120
AA- A1 9,000,000 Korea Development Bank,
6.625% due 11/21/2003 (2) 9,045,790 8,910,000
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,732,008
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,184,290
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,378,520
BBB A3 5,000,000 People's Republic of China,
6.625% due 1/15/2003 (6) 4,975,800 4,904,150
-------------- --------------
30,072,056 29,323,088
Total Investments in
Bonds & Notes--98.6% 1,437,273,086 1,440,174,943
Short-Term Securities
Repurchase 8,120,000 Lehman Brothers Inc., purchased on
Agreements**--0.6% 12/31/1996 to yield 7.10% to 1/02/1997 8,120,000 8,120,000
Total Investments in
Short-Term Securities--0.6% 8,120,000 8,120,000
Total Investments--99.2% $1,445,393,086 1,448,294,943
==============
Other Assets Less Liabilities--0.8% 12,037,284
--------------
Net Assets--100.0% $1,460,332,227
==============
Net Asset Class A--Based on net assets of $614,101,502 and 54,267,882
Value: shares outstanding $ 11.32
==============
Class B--Based on net assets of $713,333,222 and 63,038,527
shares outstanding $ 11.32
==============
Class C--Based on net assets of $65,671,609 and 5,801,358
shares outstanding $ 11.32
==============
Class D--Based on net assets of $67,225,894 and 5,937,174
shares outstanding $ 11.32
==============
<PAGE>
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1) Government Entity; Guaranteed by the Province.
(2) Financial Institution.
(3) Government Entity; Guaranteed by Japan.
(4) Energy Company; not Guaranteed by Canada.
(5) Industrial Mining.
(6) Government Entity.
(7) Industrial; Metals.
(8) Transportation.
(9) Industrial.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
(a)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> <C> <C> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations- AAA Aaa $ 6,000,000 7.75% due 12/31/1999 $ 6,271,875 $ 6,275,640
- -3.7% AAA Aaa 2,000,000 6.25% due 8/31/2000 2,000,781 2,007,500
AAA Aaa 1,000,000 8% due 5/15/2001 1,070,000 1,068,590
AAA Aaa 8,000,000 7% due 7/15/2006 8,525,000 8,311,280
-------------- --------------
17,867,656 17,663,010
Banking--15.3% A- A2 3,500,000 Bank of New York Company, Inc. (The),
7.875% due 11/15/2002 3,873,450 3,685,850
BankAmerica Corp.:
A+ A1 5,000,000 6.65% due 5/01/2001 4,997,250 5,004,450
A A2 4,000,000 7.50% due 10/15/2002 4,268,880 4,135,240
A+ A1 3,000,000 7.125% due 5/12/2005 2,956,500 3,022,620
A+ A1 2,000,000 Citicorp., 8.80% due 2/01/2000 2,000,000 2,003,900
A+ A1 4,000,000 Fifth Third Bank, 6.75% due 7/15/2005 3,973,600 3,925,960
A A2 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,475,110
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 6,000,720
A A2 11,500,000 NationsBank Corporation, 6.65%
due 4/09/2002 11,423,540 11,481,060
Norwest Corp.:
AA- Aa3 7,000,000 6.25% due 4/15/1999 6,977,040 7,005,600
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 982,650
A- A3 2,500,000 US Bancorp, 6.75% due 10/15/2005 2,486,550 2,434,950
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 4,986,000
BBB Baa1 9,000,000 Washington Mutual Inc., 7.25%
due 8/15/2005 8,930,520 9,020,610
-------------- --------------
72,813,380 73,164,720
<PAGE>
Canadian Province of Quebec (Canada) (3):
Provinces*--3.1% A+ A2 9,000,000 7.50% due 7/15/2002 9,486,070 9,273,600
A+ A2 5,000,000 8.80% due 4/15/2003 5,538,670 5,503,050
-------------- --------------
15,024,740 14,776,650
Federal AAA Aaa 4,000,000 Federal Home Loan Bank, 6.65%
Agencies--1.4% due 11/13/2001 3,996,875 3,989,360
AAA Aaa 2,500,000 Federal National Mortgage Association,
7.85% due 9/10/2004 2,496,484 2,558,600
-------------- --------------
6,493,359 6,547,960
Finance--11.6% Advanta Corp.:
BBB- Baa2 10,000,000 6.26% due 9/01/1997 9,994,300 10,006,000
BBB- Baa2 11,000,000 7% due 5/01/2001 10,980,980 11,023,320
AA- Aa3 10,000,000 Associates Corp. of North America,
7.375% due 8/01/2006 10,122,100 10,281,300
A A2 5,800,000 Beneficial Corporation, 7.75%
due 11/08/2002 6,080,604 6,077,356
A+ Aa3 3,000,000 CIT Group Holdings, Inc.,
5.764% due 2/28/1997 (a) 2,998,020 3,000,150
Finova Capital Corp.:
A- Baa1 7,000,000 6.375% due 10/15/2000 6,972,980 6,952,540
A- Baa1 4,525,000 9.125% due 2/27/2002 4,984,876 4,963,970
-------------- --------------
52,133,860 52,304,636
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <C> <C> <C> <S> <C> <C>
Financial BBB Baa2 $11,580,000 Alex Brown Inc., 7.625% due 8/15/2005 $ 11,797,083 $ 11,814,495
Services-- Bear Stearns Companies, Inc.:
Other--8.9% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,004,740
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,286,080
BBB+ Baa1 4,500,000 Comdisco, Inc., 5.75% due 2/15/2001 4,401,675 4,355,955
A A2 6,250,000 Dean Witter, Discover & Co.,
6.75% due 8/15/2000 6,226,438 6,295,313
A+ A1 8,000,000 Morgan Stanley Group, Inc.,
5.625% due 3/01/1999 7,983,520 7,896,960
BBB+ Baa1 4,000,000 PaineWebber Group Inc., 8.875% due
3/15/2005 4,025,080 4,338,480
Smith Barney Holdings Inc.:
A- A2 3,000,000 6.625% due 11/15/2003 2,982,480 2,954,070
A- A2 1,000,000 6.875% due 6/15/2005 992,930 984,460
A+ A1 2,000,000 The Travelers Corp., 9.50% due 3/01/2002 2,168,400 2,238,380
-------------- --------------
45,795,716 46,168,933
<PAGE>
Industrial-- AA- A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75% due
Consumer 12/01/1999 6,189,909 5,823,562
Goods--4.3% Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 4,950,300
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 2,948,700
A A2 3,500,000 Philip Morris Cos., Inc., 9%
due 1/01/2001 3,576,195 3,765,545
BBB- Baa3 3,000,000 RJR Nabisco Holding Corp., 8.75%
due 4/15/2004 2,911,320 3,027,780
-------------- --------------
20,668,774 20,515,887
Industrial-- AA- A1 2,000,000 Consolidated Natural Gas Co.,
Energy--1.3% 8.75% due 6/01/1999 2,125,440 2,103,400
Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,018,560
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,141,480
-------------- --------------
6,464,020 6,263,440
Industrial-- BBB Baa2 4,000,000 Applied Materials Inc., 6.65% due
Manufacturing-- 9/05/2000 4,000,000 4,003,600
7.7% A+ A1 5,000,000 Ford Motor Credit Co., 7.75% due
3/15/2005 4,995,450 5,207,250
General Motors Acceptance Corp.:
A- A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,035,060
A- A3 5,000,000 7.125% due 5/11/1998 5,056,400 5,076,100
A- A3 5,000,000 6.625% due 10/01/2002 4,991,000 4,967,750
A- A3 2,000,000 7.125% due 5/01/2003 1,989,780 2,028,580
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,007,710
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,511,675
BBB+ A3 5,000,000 6.85% due 5/15/2001 4,995,950 5,044,500
A- Baa2 5,000,000 McDonnell Douglas Corporation,
6.30% due 10/20/1999 5,029,550 4,896,200
-------------- --------------
36,514,200 36,778,425
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <C> <C> <C> <S> <C> <C>
Industrial-- A+ A1 $ 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 $ 2,825,520 $ 2,955,690
Services-- A A2 9,000,000 Carnival Cruise Lines, Inc., 7.70% due
20.0% 7/15/2004 8,799,420 9,359,280
A- A2 7,000,000 Columbia/HCA Healthcare Corp.,
6.87% due 9/15/2003 7,043,300 7,046,760
A+ A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 3,497,235 3,542,773
A+ A1 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,978,550
BBB- Ba1 10,000,000 La Quinta Inns, Inc., 7.25% due 3/15/2004 9,949,000 9,784,150
News American Holdings, Inc.:
BBB Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,296,240
BBB Baa3 14,500,000 8.50% due 2/15/2005 14,789,005 15,528,775
Royal Caribbean Cruises Ltd.:
BBB- Baa3 2,500,000 8.25% due 4/01/2005 2,568,775 2,625,375
BBB- Baa3 1,800,000 7.25% due 8/15/2006 1,776,006 1,772,730
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,596,325
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,265,790
A- A2 5,550,000 Sears Roebuck Acceptance Corp.,
6.22% due 3/25/1999 5,478,183 5,544,006
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 998,538
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,497,105
Time Warner Entertainment:
BBB- Ba1 5,000,000 7.95% due 2/01/2000 5,172,300 5,163,450
BBB- Ba1 5,000,000 9.625% due 5/01/2002 5,586,000 5,578,150
A A2 5,000,000 Walt Disney Co., 6.85% due 1/10/2007 4,996,650 4,996,450
-------------- --------------
94,851,784 95,530,137
Industrial-- BB+ Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,499,769
Transportation-- AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,936,320
3.4% Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,065,500
A- A3 1,000,000 8% due 3/01/2005 994,610 1,057,870
-------------- --------------
16,765,278 16,559,459
Utilities-- GTE Corporation:
Communications-- BBB+ A3 1,000,000 9.375% due 12/01/2000 1,090,310 1,098,870
2.4% BBB+ A3 2,000,000 9.10% due 6/01/2003 2,194,920 2,230,980
A A2 6,000,000 MCI Communications Corporation,
6.95% due 8/15/2006 5,980,200 6,036,000
AA Aa3 2,200,000 Southwestern Bell Capital Corp.,
6.625% due 4/01/2005 2,108,590 2,176,790
-------------- --------------
11,374,020 11,542,640
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <C> <C> <C> <S> <C> <C>
Utilities-- A- A3 $ 4,000,000 Pennsylvania Power & Light Co.,
Electric-- 5.50% due 4/01/1998 $ 3,991,280 $ 3,972,080
0.8%
Yankee BBB+ A3 5,000,000 Bangkok Metropolitan Bank Public Company
Corporates*-- Limited, 7.25% due 9/15/2005 (8) 4,949,950 4,888,700
12.2% AA- Aa3 4,000,000 CRA Finance Ltd., 6.50% due 12/01/2003 (8) 4,006,020 3,897,560
BBB+ Baa1 6,000,000 Crown Cork & Seal Company, Inc.,
6.75% due 12/15/2003 (8) 5,967,780 5,928,060
AA+ Aa1 9,000,000 Deutsche Bank Financial Inc.,
6.70% due 12/13/2006 (8) 8,972,190 8,832,240
A- Baa1 1,500,000 Enersis S.A., 6.90% due 12/01/2006 1,496,130 1,463,985
A+ A1 2,000,000 Ford Capital B.V., 9.875% due
5/15/2002 (8) 2,300,380 2,274,800
Grand Metropolitan Investment Corp. (8):
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 3,001,740
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,237,570
BBB+ A3 1,000,000 HSBC Americas Inc., 7% due
11/01/2006 (8) 991,600 987,200
BBB Baa3 1,500,000 Husky Oil Ltd., 7.125% due
11/15/2006 (7) 1,493,295 1,500,060
A- A3 2,000,000 Israel Electric Corp. Ltd.,
7.25% due 12/15/2006 (7) 1,996,200 1,998,120
A+ A1 2,000,000 Petroliam Nasional BHD,
6.875% due 7/01/2003 (7) 1,972,960 2,002,860
BBB+ A3 5,000,000 Philips Electronics N.V.,
7.75% due 4/15/2004 (7) 5,430,750 5,180,750
Pohang Iron & Steel Co. (6):
A+ A2 1,000,000 7.375% due 5/15/2005 1,018,160 1,013,710
A+ A2 5,000,000 7.125% due 11/01/2006 4,994,350 4,986,350
A+ A1 7,500,000 Telekom Malaysia BHD,
7.125% due 8/01/2005 (7) 7,712,135 7,529,400
-------------- --------------
59,411,720 58,723,105
Yankee AA- A1 2,000,000 Korea Development Bank, 6.625%
Sovereign*-- due 11/21/2003 (2) 2,003,170 1,980,000
1.8% AAA Aaa 2,000,000 Metropolis of Tokyo (Japan), 8.70%
due 10/05/1999 (5) 2,312,940 2,122,860
People's Republic of China (1):
BBB A3 3,000,000 6.625% due 1/15/2003 2,985,480 2,919,627
BBB A3 1,500,000 7.75% due 7/05/2006 1,475,865 1,546,485
-------------- --------------
8,777,455 8,568,972
<PAGE>
Total Investments in Bonds & Notes--97.9% 468,947,242 469,080,054
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities Intermediate Term Portfolio
<S> <C> <S> <C> <C>
Repurchase $ 1,840,000 UBS Securities Funding, Inc., purchased
Agreements**--0.4% on 12/31/1996 to yield 6.75% to
1/02/1997 $ 1,840,000 $ 1,840,000
Total Investments in
Short-Term Securities--0.4% 1,840,000 1,840,000
Total Investments--98.3% $ 470,787,242 470,920,054
==============
Other Assets Less Liabilities--1.7% 8,342,513
--------------
Net Assets--100.0% $ 479,262,567
==============
Net Asset Class A--Based on net assets of $217,121,617 and 19,056,454
Value: shares outstanding $ 11.39
==============
Class B--Based on net assets of $213,124,250 and 18,704,914
shares outstanding $ 11.39
==============
Class C--Based on net assets of $9,634,239 and 845,533
shares outstanding $ 11.39
==============
Class D--Based on net assets of $39,382,461 and 3,456,263
shares outstanding $ 11.39
==============
<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 the Province.
(4) Industrial Mining.
(5) Government Entity; Guaranteed by Japan.
(6) Industrial; Metals.
(7) Industrial.
(8) Financial Institution.
<PAGE>
**Repurchase Agreements are fully collateralized by US Government
Obligations.
(a)Floating Rate Note.
</TABLE>
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
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
