-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A13HYhb7Eu5ThT3kwwGKIaNoIt6pGYkToM+hljZdKe3MixSW57ZBux6BEVUXapNM G3hJkU2jYKcoeZ2D2mCByA== 0000900092-97-000023.txt : 19970222 0000900092-97-000023.hdr.sgml : 19970222 ACCESSION NUMBER: 0000900092-97-000023 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970212 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH CAPITAL FUND INC CENTRAL INDEX KEY: 0000110055 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132757134 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-02405 FILM NUMBER: 97526709 BUSINESS ADDRESS: STREET 1: P O BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P.O. BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 FORMER COMPANY: FORMER CONFORMED NAME: LIONEL D EDIE CAPITAL FUND INC DATE OF NAME CHANGE: 19760810 N-30B-2 1 QUARTERLY REPORT MERRILL LYNCH CAPITAL FUND, INC. FUND LOGO Quarterly Report December 31, 1996 Officers and Directors Arthur Zeikel, President and Director Donald Cecil, Director M. Colyer Crum, Director Edward H. Meyer, Director Jack B. Sunderland, Director J. Thomas Touchton, Director Terry K. Glenn, Executive Vice President Norman R. Harvey, Senior Vice President Donald C. Burke, Vice President Kurt Schansinger, Vice President and Portfolio Manager Gerald M. Richard, Treasurer Mark B. Goldfus, Secretary Custodian The Bank of New York 90 Washington Street, 12th Floor New York, NY 10286 Transfer Agent Merrill Lynch Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund's current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. Merrill Lynch Capital Fund, Inc. Box 9011 Princeton, NJ 08543-9011 Printed on post-consumer recycled paper MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification As of December 31, 1996 A pie chart illustrating the following percentages: US Bonds 40.7% Non-US Bonds 3.1% Cash & Cash Equivalents 3.4% US Stocks 42.2% Non-US Stocks 10.6% Security Representation As a Percentage of US Equities As of December 31, 1996 A pie chart illustrating the following percentages: Financial Services 25.0% Consumer Services 5.2% Utilities 3.9% Transportation 1.3% Capital Goods--Technology 10.5% Consumer Cyclicals 9.2% Energy 16.0% Basic Industries 8.7% Diversified 2.7% Credit Cyclicals 1.7% Consumer Staples 11.1% Capital Goods 4.7% Geographic Diversification Percent of As of December 31, 1996 Net Assets* United States 85.8% Argentina 4.6 United Kingdom 3.4 Switzerland 1.6 Brazil 0.7 France 0.6 Netherlands 0.5 Italy 0.5 Finland 0.5 Thailand 0.3 Japan 0.3 Singapore 0.3 Mexico 0.3 Canada 0.2 Hong Kong 0.2 Peru 0.1 Ireland 0.1 [FN] *Includes investments in short-term securities. US Common Stock Investments S&P As of December 31, 1996 Fund 500* Average Capitalization (in billions) $14.1 $11.2 Price/Book Value 2.4 4.3 Price/Earnings Ratio** 16.7 19.2 Yield Based on Current Dividend 2.3% 2.0% [FN] *An unmanaged broad-based index comprised of common stocks. **Based on 1996 earnings estimates. Fixed-Income Investments Merrill Lynch As of December 31, 1996 Fund DOAO Index* Duration 5.4 Years 5.1 Years Average Maturity 8.5 Years 12.8 Years Asset Breakdown: Corporates 48.3% 16.9% US Treasuries/Agencies 45.9% 54.4% Mortgage-Backed 1.1% 28.7% International Governments 4.7% -- [FN] *An unmanaged market-weighted corporate, Government and mortgage master bond index reflecting approximately 97% of total outstanding bonds. DEAR SHAREHOLDER The US financial markets provided significant positive returns to investors during the quarter ended December 31, 1996. The combination of moderating economic growth, continued benign inflation pressures and favorable election results provided a very hospitable environment for financial asset price appreciation, propelling the stock market to near-record highs and precipitating a broad decline in interest rates. The stock market, as measured by the unmanaged Standard & Poor's 500 Index (S&P 500), generated a +8.36% total return for the quarter; and November's total return of +7.52% represented the largest monthly advance, in absolute dollar terms, in history. The bond market, as measured by the unmanaged Merrill Lynch Domestic Bond Master Index, generated a +3.05% total return, while short-term investments provided a total return of +1.30% for the December quarter. Total returns for Merrill Lynch Capital Fund, Inc.'s Class A, Class B, Class C and Class D Shares in the December quarter were +6.53%, +6.22%, +6.25% and +6.44%, respectively. (Fund results do not reflect sales charges; results would be lower if sales charges were included. Complete performance information, including average annual total returns, can be found on pages 5--6 of this report to shareholders.) On the economic front, the revised 2.1% gross domestic product growth rate during the third calendar quarter was less than half that of the second quarter. Although the housing market rebounded in November, following four months of decline, overall home sales activity remained well below the May 1996 peak and home prices are appreciating at only a nominal pace. Meanwhile, auto sales continue to be weak despite aggressive sales incentives. New job creation slowed markedly, with job gains during the September to November period averaging less than one-half the rate that prevailed from January 1996 through August 1996. The rate of growth in consumer credit continued to slow, after rising steadily for over three years, while retail sales showed an unexpected decline in November. In addition, results for the Christmas selling season were below expectations as well, with some merchants actually reporting sales declines for the period. Industrial activity remained lackluster. While industrial production rose in November, it remained 5% below the July peak. Durable goods orders fell in November, and have declined in three of the past six months. Finally, our major global trading partners continued to endure weak economic conditions which, when coupled with a strong US currency, will likely restrain the contribution of the export sector to overall US economic growth in 1997. This accumulating body of evidence suggests the economy is likely to remain sluggish in the period ahead. Inflation also continued to grow at only a modest pace. The core rate of consumer price inflation remained below 3% for all of 1996, while at the producer level, the core finished goods inflation rate of 0.6% for 1996 was the second smallest rise on record. On the political front, the re-election of President Clinton and the maintenance of a Republican-controlled Congress are expected to result in continued moderate Government policies. Investors concluded that this combination of developments would sustain the favorable backdrop for the financial markets, and responded by bidding prices sharply higher. Portfolio Matters Our investment position at December 31, 1996 showed 52.8% of portfolio net assets invested in equities, 43.8% in bonds, and 3.4% in cash and cash equivalents. This compares to 49.2% in equities, 47.1% in bonds, and 3.7% in cash and cash equivalents at the end of the September quarter. The extraordinary rise in stock prices since September exacerbated the relative valuation disparity between stocks and bonds. The broad stock market averages are selling at or near record high valuation levels despite a demonstrable slowdown in both the rate of economic growth and expectations for corporate profits. Meanwhile, bond yields appeared very attractive compared to both the current rate of inflation and the equity market. Indeed, the current level of real, inflation-adjusted interest rates was exceeded only once in the past 60 years. While the large fixed- income component of Merrill Lynch Capital Fund, Inc. detracted from overall returns this year, we continue to believe that bonds will provide an attractive total return over the next 12 months. A further significant upside advance in equities is likely to be constrained by the aforementioned high valuations and slowing pace of corporate earnings growth. Consequently, we continued to maintain a large bond weighting in the portfolio. Historically, performance in the year subsequent to two consecutive years of double-digit equity market returns has been lackluster. 1995 and 1996 mark the tenth instance of such returns to investors since 1950. For the nine previous occurrences, the price performance of the S&P 500 Index in the year following two successive years of double-digit returns averaged -4.1%. While third-year results were positive in four of the nine periods, they averaged a very modest +3.1% in a range of +1.4% in 1984 to +9.1% in 1965. Third-year returns were negative in five of the nine periods, with an average decline of -10.3% in a range of -6.6% in both 1953 and 1990 to - -17.4% in 1973. While these statistics have no predictive power in and of themselves, in our opinion 56 years of market history suggest that equity returns in 1997 are likely to be at best moderate. Within the equity component of the portfolio, we added seven new investments during the quarter and eliminated 27 holdings. We increased our holdings in 39 stocks, while reducing our ownership position in 33. The rapid increase in equity prices during the December quarter provided an attractive opportunity to reduce or eliminate several lower conviction holdings, resulting in what we believe to be a portfolio of high-quality companies selling at reasonable prices. Notable among the new investments is W.R. Berkley Corporation, a specialty insurance company. Berkley appears poised to emerge from an extended period of earnings volatility and declining returns. A combination of accelerating core earnings growth and increasingly positive contributions from previously money- losing, start-up and joint-venture operations, coupled with ongoing share repurchases, are expected to produce 15%--20% average annual earnings growth and 100 basis point--150 basis point annual improvements in return on shareholders' equity over the next three-- five years. Senior management is heavily incentivized to create shareholder value, as founder and CEO Bill Berkley owns almost 13% of the company. In addition, the senior management compensation program is tied exclusively to the achievement of the company's 15% return on equity objective. Downside in the stock should be limited by the company's improving fundamentals, low current valuation, active share repurchase program and the underperformance of the stock, which is selling at the same price as in early 1993. We eliminated our position in PHH Corp., the business services company, which is being acquired by HFS Incorporated in an exchange of stock which valued PHH at a 50% premium to the prevailing market price before the announcement of the transaction. PHH appreciated 80% in 1996 on top of a 35% advance in 1995, and provided a significant gain for Merrill Lynch Capital Fund, Inc. We also sold our position in Repsol, S.A., the Spanish energy company. We were concerned that the deregulation of the Spanish energy market would result in a deterioration of the strong industrial position and high returns on capital that Repsol currently enjoys as competition begins to make inroads into their markets. In addition, the company has significantly increased its capital expenditures program to develop exploration and production properties in new geographic regions, a business in which the company has limited expertise. Finally, we were disconcerted by the forced departure of the company's chief executive officer, in whom we had high confidence. We also continued to reduce our exposure to the banking sector, selling our interests in both NationsBank Corp. and Bancorp Hawaii, Inc. The banking industry prospered over the last five years, benefiting from strong loan demand, solid credit quality and improving balance sheets, rapid earnings growth, and rising returns on capital. Shareholders in these companies prospered as well, as many bank stocks performed handsomely and reached record high valuation levels. We believe bank stock prices have generally reached levels that now adequately and accurately reflect their solid prospects and intrinsic values. Examining the industry concentration of the Fund's equity holdings, we continue to maintain low weightings relative to the S&P 500 Index in the broad technology and consumer sectors, while energy and financial services remain relatively heavily weighted in the Fund's mix. We strive to identify attractive investment opportunities in technology in order to participate in its strong secular growth outlook and have almost doubled our weighting in this area over the past year. However, it remains extremely challenging to uncover many specific technology companies which meet our investment criteria. The consumer segment of the equity market is represented by many high-quality companies, but the stocks tend to sell at high valuation levels, limiting their current investment appeal. While most of our energy stocks benefited from the strong commodity price environment of 1996, our large investment position in this sector is not based upon a top-down, commodity price forecast. We believe many companies in the energy business offer attractive unit volume growth and substantial restructuring opportunities, while selling at reasonable prices with high current dividend yields. The favorable oil and natural gas price environment was a bonus. Selected financial companies, including banks, insurance and other diversified providers, offer an attractive combination of high returns on capital, excess capital generation, consolidation opportunities and incentivized managements, while selling at reasonable prices. Within the fixed-income component of the portfolio, the average duration of our holdings remained stable at 5.4 years and average quality was maintained at A1/A+. The average yield to maturity on our bonds declined, coincident with the overall reduction of market yields, ending the period at 6.82% compared to 6.99% at the end of the prior quarter. We continued to increase our position in US Treasury securities, bringing them to 45.9% of bond assets from 44.8% at the end of September. We increased our holdings of high- yield corporate bonds to 4.3% of bond assets from 2.2%, while reducing the weighting in investment grade corporate bonds to 44.0% from 46.7%. This reflects our continuing view that the currently narrow yield spread between high-grade domestic corporate bonds and US Treasuries does not fully compensate for the higher risks associated with the corporate sector, increasing the relative attraction of intermediate-term Treasury securities in the mix. Bonds issued by foreign governments and mortgage-backed securities represent the remaining 5.8% of fixed-income investments as of December 31, 1996, compared to 6.4% at the end of September. Despite the high overall level of the stock market, we continue to identify and invest in above-average companies whose stocks sell at below-average valuation levels. We define an above-average company as one which maintains a strong competitive position, earns consistently high returns on capital, is financially sound, generates cash in excess of its internal needs and is managed by individuals motivated to create value for shareholders. We define a below-average price as one which does not adequately or accurately reflect what we believe to be the company's underlying intrinsic value. On average, the stocks held in Merrill Lynch Capital Fund, Inc. generated comparable returns on shareholders' equity and have stronger balance sheets, while offering faster earnings growth than the average company as measured by the S&P 500. However, these same stocks sell at an average price-to-earnings ratio of 13.5 times estimated 1997 earnings per share versus 17.9 times for the S&P 500, at 2.4 times current book value per share versus 4.3 times for the S&P 500 and provide a 2.3% dividend yield versus 2.0% for the S&P 500. We believe this formula will provide superior risk-adjusted equity returns over time. In Conclusion We appreciate your ongoing interest and participation in the Merrill Lynch Capital Fund, Inc., and we look forward to assisting you with your financial needs in the months and years to come. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Kurt Schansinger) Kurt Schansinger Vice President and Portfolio Manager January 31, 1997 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing SM System, which offers four pricing alternatives: * Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. * Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 8 years. (There is no initial sales charge for automatic share conversions.) * Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. * Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results
12 Month 3 Month 12/31/96 9/30/96 12/31/95 % Change % Change ML Capital Fund, Inc. Class A Shares* $31.05 $30.51 $30.55 + 6.62%(1) + 4.38%(2) ML Capital Fund, Inc. Class B Shares* 30.46 29.89 30.04 + 6.46(1) + 4.57(2) ML Capital Fund, Inc. Class C Shares* 30.19 29.63 29.81 + 6.38(1) + 4.58(2) ML Capital Fund, Inc. Class D Shares* 31.02 30.47 30.53 + 6.59(1) + 4.42(2) Dow Jones Industrial Average 6,448.27 5,882.17 5,117.12 +26.01 + 9.62 Standard & Poor's 500 Index** 740.74 687.31 615.93 +20.26 + 7.77 ML Capital Fund, Inc. Class A Shares--Total Return* +12.67(3) + 6.53(4) ML Capital Fund, Inc. Class B Shares--Total Return* +11.50(5) + 6.22(6) ML Capital Fund, Inc. Class C Shares--Total Return* +11.54(7) + 6.25(8) ML Capital Fund, Inc. Class D Shares--Total Return* +12.39(9) + 6.44(10) Dow Jones Industrial Average--Total Return +29.49 +10.72 Standard & Poor's 500 Index--Total Return** +22.98 + 8.36 *Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. **An unmanaged broad-based index comprised of common stocks. Total investment returns for unmanaged indexes are based on estimates. (1)Percent change includes reinvestment of $1.464 per share capital gains distributions. (2)Percent change includes reinvestment of $0.789 per share capital gains distributions. (3)Percent change includes reinvestment of $1.725 per share ordinary income dividends and $1.464 per share capital gains distributions. (4)Percent change includes reinvestment of $0.648 per share ordinary income dividends and $0.789 per share capital gains distributions. (5)Percent change includes reinvestment of $1.412 per share ordinary income dividends and $1.464 per share capital gains distributions. (6)Percent change includes reinvestment of $0.487 per share ordinary income dividends and $0.789 per share capital gains distributions. (7)Percent change includes reinvestment of $1.437 per share ordinary income dividends and $1.464 per share capital gains distributions. (8)Percent change includes reinvestment of $0.491 per share ordinary income dividends and $0.789 per share capital gains distributions. (9)Percent change includes reinvestment of $1.652 per share ordinary income dividends and $1.464 per share capital gains distributions. (10)Percent change includes reinvestment of $0.608 per share ordinary income dividends and $0.789 per share capital gains distributions.
PERFORMANCE DATA (concluded) Results of a $1,000 Investment Since Inception--Class A Shares (5.25% sales charge--$947.50 net amount invested; assuming reinvestment of all dividends and capital gains distributions) A mountain chart depicting the growth of an investment in the Fund's Class A Shares from $947.50 on November 8, 1973 to $16,473.71 on December 31, 1996. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** Class A Shares* Year Ended 12/31/96 +12.67% + 6.76% Five Years Ended 12/31/96 +12.53 +11.32 Ten Years Ended 12/31/96 +13.10 +12.49 [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 12/31/96 +11.50% + 7.50% Five Years Ended 12/31/96 +11.38 +11.38 Inception (10/21/88) through 12/31/96 +12.28 +12.28 [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 +11.54% +10.54% Inception (10/21/94) through 12/31/96 +18.26 +18.26 [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 +12.39% + 6.49% Inception (10/21/94) through 12/31/96 +19.18 +16.29 [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. SCHEDULE OF INVESTMENTS
Shares Percent of Industries Held Common Stocks Cost Value Net Assets Aerospace 1,100,000 Lockheed Martin Corp. $ 80,991,980 $ 100,650,000 1.1% 850,000 Rockwell International Corporation 28,742,166 51,743,750 0.5 -------------- -------------- ------ 109,734,146 152,393,750 1.6 Automobile Equipment 1,903,000 Echlin Inc. 60,797,432 60,182,375 0.6 Automotive 1,100,000 General Motors Corp. 52,297,358 61,325,000 0.6 Banking 700,000 Bangkok Bank Public Company Ltd. 7,163,083 6,768,823 0.1 1,200,000 The Chase Manhattan Corp. (a) 83,067,256 107,100,000 1.1 810,000 SouthTrust Corp. 15,269,839 28,147,500 0.3 1,750,000 Thai Military Bank Public Company, Ltd. 7,010,952 3,445,822 0.0 800,000 Union Planters Corp. 14,078,719 31,200,000 0.3 -------------- -------------- ------ 126,589,849 176,662,145 1.8 Building Materials 2,300,000 Masco Corporation 71,758,199 82,800,000 0.9 148,300 Medusa Corp. 4,049,772 5,097,813 0.1 -------------- -------------- ------ 75,807,971 87,897,813 1.0 Capital Goods 442,000 GATX Corp. 17,933,469 21,437,000 0.2 500,000 Kennametal, Inc. 16,344,834 19,437,500 0.2 1,310,000 United Dominion Industries, Ltd. 29,541,336 30,785,000 0.3 -------------- -------------- ------ 63,819,639 71,659,500 0.7 Chemicals 350,000 Dexter Corporation 9,042,303 11,156,250 0.1 800,000 du Pont (E.I.) de Nemours & Co. 58,036,997 75,500,000 0.8 1,150,000 Engelhard Corp. 20,377,189 21,993,750 0.2 2,000,000 Imperial Chemical Industries PLC (ADR)* 98,975,520 104,000,000 1.1 499,997 Millennium Chemicals Inc. 13,552,363 8,874,947 0.1 -------------- -------------- ------ 199,984,372 221,524,947 2.3 Computer Software 1,025,000 Creative Technology, Ltd. 12,833,743 11,915,625 0.1 Consumer Electronics 400,000 Nintendo Corp. Ltd. 28,474,285 28,497,409 0.3 Diversified 1,650,000 Tenneco, Inc. 65,489,909 74,456,250 0.8 Companies 6,000,000 Tomkins PLC 24,678,005 27,714,960 0.3 2,000,000 United Technologies Corp. 59,058,703 132,000,000 1.4 200,000 Varian Associates, Inc. 9,906,240 10,175,000 0.1 -------------- -------------- ------ 159,132,857 244,346,210 2.6 Drug Stores 1,100,000 CVS Corp. (b) 39,041,965 45,512,500 0.5 2,100,000 Rite Aid Corp. 66,079,936 83,475,000 0.9 -------------- -------------- ------ 105,121,901 128,987,500 1.4 Electrical Equipment 650,000 Belden Inc. 18,307,478 24,050,000 0.3 900,000 Cooper Industries, Inc. 35,594,061 37,912,500 0.4 800,000 General Electric Co. 40,557,953 79,100,000 0.8 600,000 Philips Electronics N.V. (NY Registered Shares) (c) 18,270,764 24,000,000 0.2 -------------- -------------- ------ 112,730,256 165,062,500 1.7 Electronic 972,400 Avnet, Inc. 51,861,721 56,642,300 0.6 Components
SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets Financial Services 2,000,000 Federal National Mortgage Association $ 52,392,099 $ 74,500,000 0.8% 17,200,000 Ruam Pattana II Fund (Foreign) 11,054,096 7,041,759 0.1 300,000 Ruam Pattana II Fund (Local) 157,970 122,821 0.0 1,000,000 Transamerica Corporation 72,588,153 79,000,000 0.8 -------------- -------------- ------ 136,192,318 160,664,580 1.7 Food Distribution 15,000,000 Dairy Farm International Holdings Ltd. (Ordinary) 16,436,481 12,083,632 0.1 Foods/Food 2,000,000 Archer-Daniels-Midland Co. 34,105,377 44,000,000 0.5 Processing 10,000,000 Hillsdown Holding PLC 23,692,604 34,216,000 0.4 99,000 Nestle S.A. 103,564,527 106,261,578 1.1 145,000 Thai Theparos Food Product Public Company Limited (Foreign) 661,718 520,139 0.0 -------------- -------------- ------ 162,024,226 184,997,717 2.0 Footware 1,037,999 Footstar, Inc. 21,025,031 25,820,225 0.3 40,000,000 Yue Yuen Industrial (Holdings Limited) 10,727,086 15,257,306 0.2 -------------- -------------- ------ 31,752,117 41,077,531 0.5 Forest Products 1,500,000 Weyerhaeuser Co. 68,440,172 71,062,500 0.7 Hospital Management 3,150,000 Columbia/HCA Healthcare Corp. 100,922,252 128,362,500 1.4 3,600,000 Tenet Healthcare Corp. 52,634,362 78,750,000 0.8 -------------- -------------- ------ 153,556,614 207,112,500 2.2 Insurance 2,300,000 Allstate Corporation 69,292,895 133,112,500 1.4 800,000 American International Group, Inc. 54,533,179 86,600,000 0.9 1,000,000 Ayudhya Insurance Company, Ltd. (Foreign) 7,458,665 7,720,201 0.1 1,147,500 Berkley (W.R.) Corporation 59,493,954 58,235,625 0.6 1,900,000 EXEL Ltd. 41,181,437 71,962,500 0.8 2,300,000 Fremont General Corp. 36,637,575 71,300,000 0.7 900,000 Horace Mann Educators Corp. 26,396,317 36,337,500 0.4 2,154,000 Lowndes Lambert Group Holdings PLC 5,366,108 3,915,380 0.0 2,000,000 Penncorp Financial Group, Inc. 62,850,797 72,000,000 0.8 1,800,000 Provident Companies, Inc. 70,077,847 87,075,000 0.9 1,400,000 Sphere Drake Holdings Ltd. 18,102,202 12,425,000 0.1 275,000 St. Paul Companies, Inc. 14,277,667 16,121,875 0.2 1,100,000 TIG Holdings, Inc. 31,247,983 37,262,500 0.4 3,098,800 Travelers Group, Inc. 40,483,298 140,608,050 1.5 -------------- -------------- ------ 537,399,924 834,676,131 8.8 Iron & Steel 1,600,000 Birmingham Steel Corp. 28,005,214 30,400,000 0.3 800,000 Cleveland-Cliffs, Inc. 26,879,911 36,300,000 0.4 -------------- -------------- ------ 54,885,125 66,700,000 0.7 Leisure/Hotels 2,200,000 Carnival Corp. (Class A) 57,830,550 72,600,000 0.8 2,579,200 Harrah's Entertainment, Inc. 47,720,751 51,261,600 0.5 3,800,000 Mandarin Oriental International Ltd. 3,828,224 5,358,000 0.1 -------------- -------------- ------ 109,379,525 129,219,600 1.4 Machinery & 1,000,000 Cincinnati Milacron, Inc. 24,399,349 21,875,000 0.2 Machine Tools
SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets Medical Services 296,650 Bumrungrad Hospital Public Company, Ltd. (Foreign) $ 234,339 $ 202,417 0.0% Metals & Basic 21,700 Cameco Corp. 651,441 869,584 0.0 Materials 1,200,000 Industrias Penoles S.A. 5,465,971 4,253,589 0.0 1,721,235 Minsura Sociedad Limitada S.A. (T Shares) 5,179,884 5,986,618 0.1 -------------- -------------- ------ 11,297,296 11,109,791 0.1 Natural Gas 850,000 Coastal Corp. 24,580,560 41,543,750 0.5 Suppliers 1,000,000 El Paso Natural Gas Co. 39,357,038 50,500,000 0.5 1,000,000 TransCanada Pipelines Ltd. 13,695,107 17,500,000 0.2 5,406,500 Williams Companies, Inc. 96,475,716 202,743,750 2.1 -------------- -------------- ----- 174,108,421 312,287,500 3.3 Oil--Integrated 850,000 Ente Nazionale Idrocarburi S.p.A. (ENI) (ADR)* 39,739,120 43,881,250 0.5 315,000 Mobil Corporation 34,897,263 38,508,750 0.4 1,500,000 Phillips Petroleum Company 51,475,180 66,375,000 0.7 1,400,000 TOTAL S.A. (ADR)* 43,464,673 56,350,000 0.6 7,800,000 YPF S.A. (ADR)* 151,197,747 196,950,000 2.1 -------------- -------------- ------ 320,773,983 402,065,000 4.3 Oil--Service 2,900,000 Dresser Industries, Inc. 77,166,439 89,900,000 0.9 Paper 200,000 Jefferson Smurfit Group PLC (ADR)* 6,207,462 5,425,000 0.1 790,000 Temple-Inland, Inc. 36,163,014 42,758,750 0.4 -------------- -------------- ------ 42,370,476 48,183,750 0.5 Pharmaceuticals 387,900 Block Drug, Inc. (Class A) 12,605,774 17,843,400 0.2 3,650,000 Glaxo Wellcome PLC (ADR)* (d) 94,777,915 115,887,500 1.2 400,000 Merck & Co., Inc. 19,645,017 31,700,000 0.4 35,000 Novartis AG (e) 40,936,042 40,076,935 0.4 700,000 Pfizer, Inc. 37,944,168 58,012,500 0.6 -------------- -------------- ------ 205,908,916 263,520,335 2.8 Plastic Recycling 946,000 Wellman Inc. 20,386,872 16,200,250 0.2 Railroads 1,400,000 Kansas City Southern Industries, Inc. 60,738,001 63,000,000 0.7 Real Estate 600,000 CarrAmerica Realty Corp. 15,908,527 17,550,000 0.2 Investment Trusts 1,850,000 RFS Hotel Investors, Inc. 27,921,299 36,537,500 0.4 1,100,000 Walden Residential Properties, Inc. 20,339,176 27,362,500 0.3 -------------- -------------- ------ 64,169,002 81,450,000 0.9 Retail Trade 2,831,400 Wal-Mart Stores, Inc. 69,442,573 64,768,275 0.7 Telecommunications 1,900,000 Frontier Corporation 54,362,106 42,987,500 0.4 2,000,000 GTE Corp. 65,447,448 91,000,000 1.0 800,000 Nokia Corp. (ADR)* 28,161,352 46,100,000 0.5 850,000 Telecomunicacoes Brasileiras S.A.-- Telebras (ADR)* 46,585,931 65,025,000 0.7 -------------- -------------- ------ 194,556,837 245,112,500 2.6 Tires & Rubber 3,000,000 The Goodyear Tire & Rubber Co. 119,321,790 154,125,000 1.6
SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets Utilities--Electric, 453,500 Illinova Corp. $ 10,299,601 $ 12,471,250 0.1% Gas & Water 475,000 Pinnacle West Capital Corp. 10,036,715 15,081,250 0.2 97,000 Public Service Company of North Carolina 1,548,233 1,770,250 0.0 200,000 Texas Utilities Co. 8,053,148 8,150,000 0.1 800,000 Unicom Corp. 19,470,066 21,700,000 0.2 -------------- -------------- ------ 49,407,763 59,172,750 0.6 Total Common Stocks 3,863,534,089 5,007,663,833 52.8 Face Amount Corporate Bonds Aerospace US$ 15,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 14,987,850 15,133,500 0.2 Automobile Parts 20,000,000 Eaton Corp., 6.50% due 6/01/2025 19,929,200 19,467,200 0.2 Automotive Hertz Corp.: 25,000,000 6.70% due 6/15/2002 24,815,300 24,863,000 0.3 13,000,000 6% due 1/15/2003 12,891,670 12,492,480 0.1 -------------- -------------- ------ 37,706,970 37,355,480 0.4 Banking 20,000,000 Banco Rio de la Plata, 8.75% due 12/15/2003 20,060,800 19,850,000 0.2 25,000,000 Bank of Boston Corp., 6.625% due 12/01/2005 23,519,000 24,220,500 0.3 BankAmerica Corp.: 15,000,000 6.875% due 6/01/2003 14,149,050 14,994,750 0.2 30,000,000 6.75% due 9/15/2005 29,591,750 29,433,300 0.3 Bankers Trust Company: 10,000,000 7.50% due 1/15/2002 9,688,700 10,284,500 0.1 35,000,000 7.125% due 3/15/2006 34,548,800 34,862,100 0.4 The Chase Manhattan Corp.: 20,000,000 6.50% due 8/01/2005 19,403,800 19,235,400 0.2 10,000,000 6.25% due 1/15/2006 9,137,000 9,470,900 0.1 15,000,000 First Chicago Corp., 6.875% due 6/15/2003 13,963,300 15,013,050 0.2 6,000,000 First Hawaiian, Inc., 6.25% due 8/15/2000 5,841,600 5,908,980 0.1 First Security Corp.: 5,000,000 5.71% due 2/09/1999 5,000,000 4,942,800 0.0 20,000,000 7% due 7/15/2005 19,803,850 19,739,760 0.2 30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 29,194,200 0.3 20,000,000 Firstbank Puerto Rico, 7.625% due 2/15/2005 19,451,445 20,082,200 0.2 10,000,000 Great Western Financial Corp., 6.375% due 7/01/2000 9,998,800 9,946,600 0.1 Household Bank: 10,000,000 6.87% due 5/15/2001 9,868,800 10,083,400 0.1 20,000,000 6.875% due 3/17/2003 19,886,200 20,024,200 0.2 10,300,000 6.50% due 7/15/2003 10,202,253 10,082,567 0.1 NationsBank Corp.: 10,500,000 5.70% due 9/11/2000 9,545,865 10,205,055 0.1 40,000,000 5.60% due 2/07/2001 40,000,000 38,551,200 0.4 10,000,000 6.20% due 8/15/2003 9,670,360 9,673,700 0.1 25,000,000 6.50% due 8/15/2003 22,104,200 24,439,250 0.3 25,500,000 PNC Funding Corp., 6.125% due 9/01/2003 24,922,025 24,513,405 0.3 15,000,000 People's Bank-Bridgeport, 7.20% due 12/01/2006 15,047,100 14,664,900 0.1 25,000,000 Provident Bank, 6.375% due 1/15/2004 24,296,430 24,047,500 0.2 Union Planters Corp.: 20,000,000 6.25% due 11/01/2003 18,756,100 19,208,600 0.2 7,500,000 6.75% due 11/01/2005 7,205,925 7,270,950 0.1 20,000,000 Wachovia Corp., 6.605% due 10/01/2025 20,012,500 19,844,400 0.2 -------------- -------------- ------ 495,629,003 499,788,167 5.3
SCHEDULE OF INVESTMENTS (continued)
Percent of Industries Face Amount Corporate Bonds Cost Value Net Assets Beverages US$ 19,000,000 Coca-Cola Femsa S.A., 8.95% due 11/01/2006 $ 18,969,595 $ 19,261,250 0.2% Broadcasting 20,000,000 British Sky Broadcasting Group PLC, 7.30% due 10/15/2006 20,037,440 20,105,200 0.2 Capital Goods 5,000,000 Giddings & Lewis, Inc., 7.50% due 10/01/2005 5,000,000 4,945,050 0.1 Chemicals 21,250,000 Lyondell Petrochemical Company, 6.50% due 2/15/2006 20,179,860 20,168,800 0.2 25,000,000 Union Carbide Corp., 6.79% due 6/01/2025 25,000,000 24,583,250 0.3 -------------- -------------- ------ 45,179,860 44,752,050 0.5 Consumer Services Loewen Group, Inc.: 12,000,000 7.75% due 10/15/2001 11,994,600 12,090,000 0.1 20,000,000 8.25% due 10/15/2003 20,130,300 20,125,000 0.2 -------------- -------------- ------ 32,124,900 32,215,000 0.3 Diversified 20,000,000 Grace (W.R.) & Co., 7.40% due 2/01/2000 19,663,100 20,464,400 0.2 Companies 10,000,000 Tenneco, Inc., 6.70% due 12/15/2005 9,808,500 9,657,040 0.1 -------------- -------------- ------ 29,471,600 30,121,440 0.3 Electronics 16,000,000 Litton Industries, Inc., 6.98% due 3/15/2006 16,000,000 15,954,912 0.2 Philips Electronics N.V.: 10,000,000 6.75% due 8/15/2003 9,866,300 9,805,500 0.1 15,000,000 7.125% due 5/15/2025 14,954,200 15,001,200 0.1 -------------- -------------- ------ 40,820,500 40,761,612 0.4 Finance 30,000,000 Chrysler Finance Corp., 6.20% due 12/06/2000 30,000,000 29,659,860 0.3 Ford Motor Credit Co.: 35,000,000 5.75% due 1/25/2001 34,744,400 33,882,100 0.4 9,000,000 5.90% due 2/23/2001 8,704,260 8,778,060 0.1 General Motors Acceptance Corp.: 50,000,000 6.375% due 4/04/2000 49,887,500 49,920,350 0.5 50,000,000 5.625% due 2/15/2001 49,623,200 48,178,500 0.5 30,000,000 6.75% due 6/10/2002 29,520,300 29,940,000 0.3 10,000,000 Greyhound Financial Corp., 6.75% due 3/25/1999 9,694,200 10,094,100 0.1 15,000,000 Household Finance Corp., 7.05% due 6/06/2001 15,013,950 15,197,550 0.2 International Lease Finance Corp.: 22,500,000 6.05% due 4/30/1999 22,368,375 22,401,000 0.2 20,000,000 5.62% due 2/01/2000 19,876,200 19,551,600 0.2 10,000,000 Margaretten Financial Corp., 6.75% due 6/15/2000 9,621,060 10,032,400 0.1 Sears, Roebuck Acceptance Corp.: 25,000,000 5.71% due 2/06/2001 25,000,000 24,231,000 0.2 50,000,000 5.63% due 2/07/2001 49,996,500 48,359,950 0.5 15,000,000 USL Capital Corp., 5.79% due 1/23/2001 14,995,800 14,563,050 0.2 -------------- -------------- ------ 369,045,745 364,789,520 3.8 Financial Leasing GATX Corp.: 7,000,000 6.66% due 3/15/2001 6,997,900 6,990,620 0.1 12,000,000 6.27% due 12/05/2001 11,823,270 11,737,560 0.1 25,000,000 6.69% due 11/30/2005 24,984,750 24,365,000 0.3 XTRA Corp.: 20,000,000 6.79% due 8/01/2001 19,945,800 20,061,840 0.2 20,000,000 6.68% due 11/30/2001 20,000,000 19,941,900 0.2 -------------- -------------- ------ 83,751,720 83,096,920 0.9
SCHEDULE OF INVESTMENTS (continued)
Percent of Industries Face Amount Corporate Bonds Cost Value Net Assets Financial US$ 10,000,000 American Express Credit Corp., 6.125% Services due 11/15/2001 $ 9,963,300 $ 9,804,500 0.1% Finova Capital Corp.: 25,000,000 6.45% due 6/01/2000 24,766,550 24,912,750 0.3 15,000,000 5.98% due 2/27/2001 14,968,950 14,632,965 0.1 10,000,000 6.56% due 11/15/2002 10,000,000 9,866,000 0.1 McDonnell Douglas Finance Corp.: 5,000,000 5.48% due 2/08/1999 4,997,600 4,897,450 0.0 20,000,000 6.78% due 12/19/2003 19,993,400 19,593,600 0.2 20,000,000 6.965% due 9/12/2005 20,049,200 19,977,800 0.2 35,000,000 Morgan Stanley Group, Inc., 5.75% due 2/15/2001 34,968,150 33,928,580 0.4 16,000,000 Salomon Inc., 7% due 5/15/1999 15,965,140 16,126,400 0.2 Smith Barney Shearson Holdings, Inc.: 40,000,000 5.875% due 2/01/2001 39,179,400 39,010,800 0.4 15,000,000 6.50% due 10/15/2002 14,690,800 14,751,300 0.2 -------------- -------------- ------ 209,542,490 207,502,145 2.2 Food & Tobacco Nabisco Inc.: 21,000,000 6.70% due 6/15/2002 20,830,000 20,791,260 0.2 20,000,000 6.85% due 6/15/2005 20,000,000 19,658,000 0.2 -------------- -------------- ------ 40,830,000 40,449,260 0.4 Foreign Government 5,000,000 Province of Buenos Aires, 11.50% Obligations due 10/19/1998 5,000,000 5,175,000 0.1 Republic of Argentina: 50,000,000 9.25% due 2/23/2001 49,238,640 50,812,500 0.5 82,000,000 8.375% due 12/20/2003 65,166,250 77,900,000 0.8 58,996,000 6.625% due 3/31/2005 39,445,368 51,255,725 0.6 -------------- -------------- ------ 158,850,258 185,143,225 2.0 Forest Products 20,400,000 Champion International Corp., 6.40% due 2/15/2026 20,238,456 19,452,134 0.2 Hospital 17,500,000 Columbia/HCA Healthcare Corp., 6.63% due 7/15/2045 17,149,625 17,596,075 0.2 15,000,000 Tenet Healthcare Corp., 8.625% due 12/01/2003 15,217,630 15,862,500 0.2 -------------- -------------- ------ 32,367,255 33,458,575 0.4 Industrial 12,750,000 Diamond Shamrock, Inc., 7.65% due 7/01/2026 12,741,188 13,217,160 0.1 7,800,000 Interface, Inc., 9.50% due 11/15/2005 7,552,000 7,975,500 0.1 50,000,000 Williams Holdings of Delaware, Inc., 6.25% due 2/01/2006 49,739,500 47,024,500 0.5 -------------- -------------- ------ 70,032,688 68,217,160 0.7 Insurance 15,125,000 Integon Corp., 8% due 8/15/1999 15,225,519 15,214,389 0.2 20,000,000 Travelers Inc., 6.875% due 6/01/2025 20,037,200 20,027,000 0.2 -------------- -------------- ------ 35,262,719 35,241,389 0.4 Machinery 20,000,000 Black & Decker Corp., 6.625% due 11/15/2000 19,217,900 19,998,000 0.2 20,000,000 FMC Corp., 6.375% due 9/01/2003 18,940,800 19,334,600 0.2 22,500,000 Harris Corp., 6.375% due 8/15/2002 22,461,850 22,003,650 0.2 -------------- -------------- ------ 60,620,550 61,336,250 0.6 Manufactured 3,000,000 Oakwood Homes Corp., 9.125% due Housing 6/01/2007 3,000,000 2,996,250 0.0
SCHEDULE OF INVESTMENTS (continued)
Percent of Industries Face Amount Corporate Bonds Cost Value Net Assets Natural Gas US$ 15,000,000 ENSERCH Corporation, 7.125% due Suppliers 6/15/2005 $ 15,095,150 $ 14,926,800 0.2% Oil--Integrated 18,375,000 Occidental Petroleum Corp., 6.24% due 11/24/2000 18,135,306 18,115,361 0.2 Oryx Energy Co.: 5,500,000 8% due 10/15/2003 5,380,610 5,564,625 0.1 15,000,000 8.375% due 7/15/2004 15,024,550 15,563,835 0.1 Union Texas Petroleum Holdings, Inc.: 10,000,000 6.70% due 11/18/2002 10,000,000 9,885,490 0.1 20,000,000 6.81% due 12/05/2007 20,000,000 19,454,600 0.2 10,000,000 Unocal Corporation, 6.11% due 2/17/2004 10,000,000 9,535,300 0.1 30,000,000 YPF S.A., 8% due 2/15/2004 26,252,500 28,950,000 0.3 -------------- -------------- ------ 104,792,966 107,069,211 1.1 Oil--Related Tosco Corporation: 20,000,000 7% due 7/15/2000 19,894,250 20,186,000 0.2 20,000,000 7.625% due 5/15/2006 19,978,400 20,648,400 0.2 -------------- -------------- ------ 39,872,650 40,834,400 0.4 Services 20,000,000 ADT Operations, 8.25% due 8/01/2000 20,158,313 21,150,000 0.2 Telecommunications 10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 10,000,000 9,719,730 0.1 Tires & Rubber 40,000,000 The Goodyear Tire & Rubber Co., 6.625% due 12/01/2006 39,840,000 38,740,000 0.4 Transportation 10,000,000 General American Transportation Corp., 6.44% due 11/13/2001 10,000,000 9,856,000 0.1 15,000,000 Transportacion Maritima Mexicana, S.A. de C.V., 10% due 11/15/2006 15,130,250 15,056,250 0.2 -------------- -------------- ------ 25,130,250 24,912,250 0.3 Travel & Lodging Royal Caribbean Cruises Ltd.: 10,000,000 7.125% due 9/18/2002 9,900,050 10,019,500 0.1 10,000,000 7.25% due 8/15/2006 9,854,415 9,848,500 0.1 -------------- -------------- ------ 19,754,465 19,868,000 0.2 Utilities-- 30,000,000 Enron Corp., 6.75% due 7/01/2005 28,878,400 29,484,300 0.3 Electric, Gas & 5,000,000 Long Island Lighting Co., 7.625% due Water 4/15/1998 4,986,210 5,023,050 0.1 20,000,000 PECO Energy Co., 5.625% due 11/01/2001 18,908,800 19,093,600 0.2 5,000,000 United Illuminating Co., 6.20% due 1/15/1999 4,693,050 4,929,100 0.0 -------------- -------------- ------ 57,466,460 58,530,050 0.6 Total Corporate Bonds 2,175,509,053 2,201,339,218 23.2 Collateralized Mortgage Obligations Federal Home Loan Mortgage Corp.: 5,000,000 7% due 8/15/2008 4,762,500 4,884,350 0.1 13,000,000 6% due 2/15/2011 12,020,938 12,008,750 0.1 Federal National Mortgage Association: 13,400,000 7% due 7/25/2006 13,236,688 13,358,058 0.1 12,000,000 6.50% due 1/25/2008 11,608,125 11,610,000 0.1 5,010,000 6.50% due 4/25/2008 4,653,037 4,771,242 0.1 Total Collateralized Mortgage Obligations 46,281,288 46,632,400 0.5
SCHEDULE OF INVESTMENTS (concluded)
Percent of Face Amount US Government Obligations Cost Value Net Assets US Treasury Notes: US$ 605,000,000 5.75% due 8/15/2003 $ 587,315,938 $ 586,850,000 6.2% 670,000,000 5.875% due 2/15/2004 663,919,531 652,305,300 6.9 20,000,000 6.50% due 5/15/2005 19,840,625 20,134,400 0.2 30,000,000 6.50% due 8/15/2005 29,900,594 30,192,300 0.3 525,000,000 5.875% due 11/15/2005 520,758,669 506,215,500 5.3 125,000,000 6.25% due 8/15/2023 112,284,375 117,187,500 1.2 Total US Government Obligations 1,934,019,732 1,912,885,000 20.1 Short-Term Investments Commercial 45,318,000 CXC Inc., 5.45% due 1/10/1997 45,256,254 45,256,254 0.5 Paper** 75,396,000 General Motors Acceptance Corp., 7.50% due 1/02/1997 75,380,292 75,380,292 0.8 -------------- -------------- ------ 120,636,546 120,636,546 1.3 Commercial Czk 300,000,000 International Bank for Reconstruction & Paper-- Development, 11.50% due 10/09/1997 11,157,441 11,044,908 0.1 Foreign** Total Short-Term Investments 131,793,987 131,681,454 1.4 Total Investments $8,151,138,149 9,300,201,905 98.0 ============== Other Assets Less Liabilities 190,304,415 2.0 -------------- ------ Net Assets $9,490,506,320 100.0% ============== ====== Net Asset Class A--Based on net assets of $3,369,467,555 and Value: 108,531,961 shares outstanding $ 31.05 ============== Class B--Based on net assets of $5,156,393,502 and 169,279,021 shares outstanding $ 30.46 ============== Class C--Based on net assets of $325,685,722 and 10,789,648 shares outstanding $ 30.19 ============== Class D--Based on net assets of $638,959,541 and 20,601,362 shares outstanding $ 31.02 ============== *American Depositary Receipt (ADR). **Commercial Paper and Commercial Paper--Foreign are traded on a discount basis; the interest rates shown are the discount rates paid at the time of purchase by the Fund. (a)Formerly Chemical Banking Corp. (b)Formerly Melville Corporation. (c)Shares of Philips Electronics N.V. (ADR) were converted into shares of Philips Electronics N.V. (NY Registered Shares). (d)Formerly Glaxo Holdings PLC (ADR). (e)Formerly Sandoz AG.
PORTFOLIO INFORMATION Ten Largest Percent of Common Stock Holdings Net Assets Williams Companies, Inc. 2.1% YPF S.A. (ADR) 2.1 The Goodyear Tire & Rubber Co. 1.6 Travelers Group, Inc. 1.5 Allstate Corporation 1.4 United Technologies Corp. 1.4 Columbia/HCA Healthcare Corp. 1.4 Glaxo Wellcome PLC (ADR) 1.2 The Chase Manhattan Corp. 1.1 Nestle S.A. 1.1 Percent of Ten Largest Industries Net Assets* Insurance 9.2% Banking 7.1 Oil--Integrated 5.4 Financial Services 3.9 Finance 3.8 Natural Gas Suppliers 3.5 Diversified Companies 2.9 Chemicals 2.8 Pharmaceuticals 2.8 Telecommunications 2.7 [FN] *Based on total holdings in common stocks and bonds. Common Stock Portfolio Changes for the Quarter Ended December 31, 1996 Additions Berkley (W.R.) Corporation CarrAmerica Realty Corp. Ente Nazoinale Indrocarburi S.p.A. (ENI) (ADR) Footstar, Inc. Millenium Chemicals Inc. Nintendo Corp. Ltd. Varian Associates, Inc. Deletions American General Corporation Ayudhya Insurance Company, Ltd. (Local) Bancorp Hawaii, Inc. *Boeing Company Canadian National Railway Co. Dean Foods Co. Eastman Kodak Co. Energen Corp. Giddings & Lewis, Inc. Goodrich (B.F.) Co. Hanson PLC (ADR) **Imperial Tobacco Group PLC (ADR) KLM Royal Dutch Airlines N.V., Inc. (NY Registered Shares) MetroGas S.A. (ADR) National Health Investors, Inc. NationsBank Corp. ***Newport News Shipping, Inc. Northwest Natural Gas Co. PHH Corp. Repsol, S.A. (ADR) Repsol, S.A. (Ordinary) South West Properties Trust Telefonica del Peru S.A. (ADR) Texaco Inc. +++Ultramar Diamond Shamrock Corp. Washington Water Power Co. Worldtex Inc. [FN] *Received from the spin-off of Rockwell International Corporation during the December quarter. **Received from the spin-off of Hanson PLC (ADR) during the December quarter. ***Received from the spin-off of Tenneco, Inc. during the December quarter. +++Ultramar Corp. merged with Diamond Shamrock during the December quarter. -----END PRIVACY-ENHANCED MESSAGE-----