MERRILL
LYNCH
CORPORATE
BOND
FUND, INC.
FUND LOGO
Semi-Annual Report March 31, 1994
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value
of shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
Inflationary expectations changed sharply during the
March quarter. Following better-than-expected eco-
nomic results, Federal Reserve Board Chairman
Alan Greenspan indicated in Congressional testimony
in January that continued strong expansion of the
economy would lead the central bank to tighten
monetary policy in an effort to control inflation. On
February 4, 1994, the central bank broke with
tradition and publicly announced a modest 25 basis
point (0.25%) increase in short-term interest rates.
At the March 22 meeting of the Federal Open Market
Committee, the Federal Reserve Board again raised
the Federal Funds rate by 25 basis points, and also
announced the increase.
Rather than view the Federal Reserve Board's first
tightening move as a preemptive strike against
inflation, fixed-income investors focused on Chairman
Greenspan's implicit promise of further tightening
should the rate of inflation accelerate, and bond
prices declined sharply. The setback in the bond
market was also reflected in greater stock market
volatility. While the second increase in the Federal
Funds rate was less of a surprise, investors remained
concerned that interest rates would trend upward
sharply. As a result, stock and bond prices continued
to decline through the end of March. The volatility in
the US capital markets was mirrored in international
markets. Political and economic developments,
along with concerns of heightened global inflationary
pressures, led to a sell-off in most capital markets,
especially the emerging markets that had appreciated
strongly in 1993.
In the weeks ahead, investors will continue to gauge
the pace of the economic expansion and watch for
signs of an overheating economy. At this time, there
is little evidence that the rate of inflation will increase
rapidly. Therefore, although the secular long-term
trend toward lower interest rates may be over, it is not
yet certain whether the pace of economic activity
will accelerate to the point where significant Federal
Reserve Board tightening will be necessary to
contain inflation.
<PAGE>
Portfolio Strategy
High Income Portfolio
The March quarter proved to be a difficult one for a
broad cross-section of investment markets. While the
high-yield corporate bond market fared better than
other markets, the total return of the unmanaged
Merrill Lynch High Yield Master Index was -0.87%.
The quarterly return on the Portfolio's Class A Shares
and Class B Shares was -0.71% and -1.02%, respec-
tively, and the total return on ten-year US Treasury
notes was -5.80%. (Complete performance informa-
tion, including average annual total returns, can be
found on pages 3, 4 and 5 of this report to shareholders.)
While the March quarter commenced with strong
demand and an upward bias in high-yield bond prices,
in late February the market succumbed to the
pressure of rising interest rates in competing bond
sectors, and prices retreated. The price decline was
moderated by the postponement of a large amount of
new-issue supply. Price declines were relatively even
across quality sectors, with some modest market
outperformance by securities rated BB compared to
B-rated bonds. At March quarter-end, the yield on
average B-rated industrials maturing in seven-years-
ten years was 10.50%--11.50%, and the yield on
BB-rated securities was 9.00%--10.00%. The yield
spread between high-yield bonds and US Treasury
bonds and notes narrowed over the course of the
quarter by 50 basis points (0.50%), providing yield
premiums in the 45%--50% range.
The impact of a 50 basis point rise in short-term
interest rates on the long-term market surprised most
forecasters. With an extraordinarily wide spread
between short-term and long-term interest rates, the
yield curve was historically quite steep prior to the
Federal Reserve Board's tightening of monetary policy.
It appeared that the long-term bond market investors
were assuming or building in an anticipated rise in
short-term interest rates. However, long-term interest
rates rose about twice as much as short-term interest
rates in the wake of the increases in the Federal
Funds rate. The violent movement of the long-term
markets seems to reflect the unwinding of speculative
leveraging. When investors begin to assume a more
rational view, we believe that yields in the long-term
US Treasury market will settle in the 7% area, and
the yield curve will remain extraordinarily steep. We
also believe that likely further rises in short-term
interest rates in 1994 will have a minimal impact on
the long-term market.
<PAGE>
In a relatively robust economic environment, credit
sensitivity of investors is likely to remain low. Last
year's default rates in the high-yield universe were
about 1%, the lowest since 1984. We believe that
results will be similar this year as strong corporate
profits and reequitization continue to benefit the
high-yield market. For these reasons, it seems likely
that yield spreads between high-yield bonds and
US Treasury securities will remain stable or perhaps
narrow a bit more over the remainder of the year.
Cash flows into high-yield mutual funds reversed
sharply in late February and have been erratic ever
since. We believe that the investment case for
high-yield securities remains compelling, and that
cash flows will reestablish themselves. In the near
term, however, the pressure of new-issue supply
seems likely to create erratic price fluctuations. We
expect this period to be conducive to accumulating
very attractively priced new issues.
At March 31, 1994, the Portfolio's cash position was
6.7%. Average portfolio maturity was nine years.
Major industries represented in the Portfolio included:
energy, 8.9%; hotels & casinos, 7.4%; food & beverage,
7.2%; conglomerates, 5.8%; and broadcasting &
publishing, 4.1%.
Investment Grade Portfolio
We believe that the bond market's behavior in recent
weeks implies a more negative outlook for inflation
and the economy than may be justified. Nevertheless,
in response to the bond market's turbulence, we
followed a definitive investment strategy, shortening
the maturity and duration of the Portfolio's invest-
ments. We reduced our exposure in the long-term end
of the market, and substantially built up our cash
position and short-term holdings. We made no major
industrial sector changes during the March quarter.
Intermediate Term Portfolio
In Investment Grade Portfolio, we pursued a defensive
strategy during the March quarter. We shortened the
maturity and duration of our holdings. With a marked
deterioration in the environment for electric utilities,
we reduced our exposure to this sector. We added to
our holdings of bonds in the financial services sector
because we believe this area is still undervalued
relative to others. We also substantially built up our
cash position and short-term holdings.
<PAGE>
We appreciate your ongoing investment in Merrill
Lynch Corporate Bond Fund, Inc., and we look
forward to assisting you with your financial needs
and objectives in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
April 29, 1994
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class A Shares*
Year Ended 3/31/94 + 9.83% + 5.44%
Five Years Ended 3/31/94 +13.85 +12.93
Ten Years Ended 3/31/94 +13.01 +12.55
Investment Grade Portfolio Class A Shares*
Year Ended 3/31/94 + 2.00% - 2.08%
Five Years Ended 3/31/94 +10.29 + 9.39
Ten Years Ended 3/31/94 +11.13 +10.68
Intermediate Term Portfolio Class A Shares*
Year Ended 3/31/94 + 2.30% + 0.25%
Five Years Ended 3/31/94 +10.06 + 9.62
Ten Years Ended 3/31/94 +10.61 +10.39
[FN]
*For High Income and Investment Grade Portfolios, maximum sales
charge is 4%. For Intermediate Term Portfolio, maximum sales
charge is 2%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class B Shares*
Year Ended 3/31/94 + 9.00% + 5.00%
Five Years Ended 3/31/94 +12.97 +12.97
Inception (10/21/88) through 3/31/94 +12.44 +12.44
Investment Grade Portfolio Class B Shares*
Year Ended 3/31/94 + 1.22% - 2.41%
Five Years Ended 3/31/94 + 9.46 + 9.46
Inception (10/21/88) through 3/31/94 + 8.83 + 8.83
Intermediate Term Portfolio Class B Shares*
Year Ended 3/31/94 + 1.77% - 0.09%
Inception (11/13/92) through 3/31/94 + 6.15 + 5.47
[FN]
*For High Income and Investment Grade Portfolios, maximum
contingent deferred sales charge is 4% and is reduced to 0% after
4 years. For Intermediate Term Portfolio, maximum contingent
deferred sales charge is 2% and is reduced to 0% after 2 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/10/78--12/31/78 $9.60/9.54 -- -- $ 0.13 -- -- + 0.73% -- --
1979 9.54/8.73 -- -- 1.03(a) -- -- + 2.36 -- --
1980(b) 8.73/7.91 $ 10.00/9.88 $ 10.00/9.93*** 1.07 $ 0.25 $ 0.25*** + 3.08 + 1.29% + 1.86%
1981 7.91/7.26 9.88/9.38 9.93/9.59 1.13 1.46 1.37 + 6.48 + 10.54 + 11.34
1982 7.26/7.74 9.38/10.51 9.59/10.59 1.04 1.36 1.36 + 23.09 + 28.74 + 26.48
1983 7.74/8.10 10.51/10.24 10.59/10.37 1.01 1.22 1.20 + 18.32 + 9.42 + 9.63
1984 8.10/7.72 10.24/10.44 10.37/10.52 1.02 1.21 1.18 + 8.66 + 15.10 + 14.00
1985 7.72/8.29 10.44/11.45 10.52/11.33 1.01 1.18 1.16 + 21.61 + 22.23 + 19.86
1986 8.29/8.34 11.45/11.95 11.33/11.87 0.98 1.07 1.03 + 12.91 + 14.26 + 14.34
1987 8.34/7.80 11.95/11.00 11.87/10.99 0.95 0.99 0.94 + 4.94 + 0.45 + 0.64
1988 7.80/7.80 11.00/10.90 10.99/10.83 0.95 0.99 0.97 + 12.71 + 8.30 + 7.51
1989 7.80/7.17 10.90/11.33 10.83/11.13 0.97 1.00 0.98 + 4.33 + 13.61 + 12.33
1990 7.17/5.88 11.33/11.13 11.13/11.05 1.00 0.94 0.97 - 4.61 + 6.97 + 8.43
1991 5.88/7.21 11.13/12.03 11.05/11.77 0.90 0.91 0.92 + 39.75 + 17.08 + 15.53
1992 7.21/7.78 12.03/11.86 11.77/11.60 0.86 1.03(c) 0.99(d) + 20.64 + 7.53 + 7.29
1993 7.78/8.32 11.86/11.97 11.60/11.92 0.76 1.35(e) 1.03(f) + 17.39 + 12.49 + 11.82
1/1/94--3/31/94 8.32/8.08 11.97/11.28 11.92/11.31 0.18 0.19 0.19 - 0.71 - 4.22 - 3.59
------ ------ ------
Total $14.99 $15.15 $14.54
Cumulative total return as of 3/31/94: +468.92%** +354.57%** +332.70%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was included.
***Adjusted for a 10-for-1 split effected in the form of a dividend through January 1981.
(a)Distribution for High Income Portfolio includes $0.024 per share capital gains distributions.
(b)For Investment Grade and Intermediate Term Portfolios, period covered is 10/31/80--12/31/80.
(c)Distribution for Investment Grade Portfolio includes $0.036 per share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio includes $0.012 per share capital gains distributions.
(e)Distribution for Investment Grade Portfolio includes $0.261 per share capital gains distributions.
(f)Distribution for Intermediate Term Portfolio includes $0.093 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term*** Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.92/7.80 $11.08/10.90 -- $ 0.18 $ 0.18 -- + 0.74% + 0.05% --
1989 7.80/7.17 10.90/11.33 -- 0.91 0.91 -- + 3.54 + 12.77 --
1990 7.17/5.89 11.33/11.13 -- 0.95 0.86 -- - 5.18 + 6.16 --
1991 5.89/7.22 11.13/12.03 -- 0.84 0.83 -- + 38.67 + 16.19 --
1992 7.22/7.78 12.03/11.86 $11.68/11.60 0.80 0.94(a) $ 0.24(b) + 19.57 + 6.71 + 1.34%
1993 7.78/8.33 11.86/11.97 11.60/11.92 0.70 1.25(c) 0.97(d) + 16.65 + 11.65 + 11.26
1/1/94--3/31/94 8.33/8.08 11.97/11.28 11.92/11.31 0.17 0.17 0.17 - 1.02 - 4.40 - 3.71
------ ------ ------
Total $ 4.55 $ 5.14 $ 1.38
Cumulative total return as of 3/31/94: + 89.35%** + 58.50%** + 8.57%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the payable date, and do
not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
***Figures for Intermediate Term Portfolio Class B Shares are since inception on November 13, 1992.
(a)Distribution for Investment Grade Portfolio includes $0.036 per share capital gains distributions.
(b)Distribution for Intermediate Term Portfolio includes $0.012 per share capital gains distributions.
(c) Distribution for Investment Grade Portfolio includes $0.261 per share capital gains distributions.
(d) Distribution for Intermediate Term Portfolio includes $0.093 per share capital gains distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
3/31/94 12/31/93 3/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 8.08 $ 8.32 $ 8.07 +0.12% -2.88%
High Income Portfolio Class B Shares 8.08 8.33 8.07 +0.12 -3.00
Investment Grade Portfolio Class A Shares 11.28 11.97 12.33 -6.52(1) -5.76
Investment Grade Portfolio Class B Shares 11.28 11.97 12.33 -6.52(1) -5.76
Intermediate Term Portfolio Class A Shares 11.31 11.92 12.04 -5.33(2) -5.12
Intermediate Term Portfolio Class B Shares 11.31 11.92 12.04 -5.33(2) -5.12
High Income Portfolio Class A Shares--Total Return +9.83(3) -0.71(4)
High Income Portfolio Class B Shares--Total Return +9.00(5) -1.02(6)
Investment Grade Portfolio Class A Shares--Total Return +2.00(7) -4.22(8)
Investment Grade Portfolio Class B Shares--Total Return +1.22(9) -4.40(10)
Intermediate Term Portfolio Class A Shares--Total Return +2.30(11) -3.59(12)
Intermediate Term Portfolio Class B Shares--Total Return +1.77(13) -3.71(14)
High Income Portfolio Class A Shares--Standardized 30-day Yield 9.00%
High Income Portfolio Class B Shares--Standardized 30-day Yield 8.59%
Investment Grade Portfolio Class A Shares--Standardized 30-day Yield 6.09%
Investment Grade Portfolio Class B Shares--Standardized 30-day Yield 5.56%
Intermediate Term Portfolio Class A Shares--Standardized 30-day Yield 5.79%
Intermediate Term Portfolio Class B Shares--Standardized 30-day Yield 5.39%
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of
any sales charges.
(1)Percent change includes reinvestment of $0.261 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.093 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.763 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.184 per share ordinary income dividends.
(5)Percent change includes reinvestment of $0.700 per share ordinary income dividends.
(6)Percent change includes reinvestment of $0.168 per share ordinary income dividends.
(7)Percent change includes reinvestment of $1.079 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.190 per share ordinary income dividends.
(9)Percent change includes reinvestment of $0.984 per share ordinary income dividends
and $0.261 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.168 per share ordinary income dividends.
(11)Percent change includes reinvestment of $0.939 per share ordinary income dividends
and $0.093 per share capital gains distributions.
(12)Percent change includes reinvestment of $0.187 per share ordinary income dividends.
(13)Percent change includes reinvestment of $0.877 per share ordinary income dividends
and $0.093 per share capital gains distributions.
(14)Percent change includes reinvestment of $0.172 per share ordinary income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Airlines--3.5% Delta Air Lines Inc.:
BB+ Baa3 $ 1,963,718 9.875% due 4/30/2008++++ $ 1,980,901 $ 2,026,137
BB+ Baa3 3,000,000 9.30% due 1/02/2010 2,963,100 2,950,701
BB+ Baa3 5,000,000 9.20% due 9/23/2014++++ 4,839,050 4,688,400
BB+ Baa3 28,000,000 10.50% due 4/30/2016 28,481,900 29,491,812
Piedmont Aviation, Inc.:
BB+ Ba2 200,000 Series C, 9.70% due 1/15/1999 201,676 194,415
BB+ Ba2 100,000 Series C, 10.25% due 1/15/2007 103,706 97,277
BB+ Ba2 500,000 Series E, 10.30% due 3/28/2007 520,395 467,500
BB+ Ba2 1,950,000 Series F, 10.35% due 3/28/2011 1,999,718 1,905,864
BB+ Ba2 50,000 Series G, 10.35% due 3/28/2011 51,424 48,868
BB+ Ba2 450,000 Series H, 9.85% due 5/08/2005 454,617 428,215
BB+ Ba2 1,500,000 Series H, 10.00% due 11/08/2012 1,493,250 1,422,645
BB+ Ba2 536,000 Series I, 10.00% due 11/08/2012 545,048 490,440
United Air Lines Inc.:
BB+ Baa1 7,100,000 9.35% due 4/07/2016 7,215,446 6,887,000
BB+ Baa1 10,500,000 9.21% due 1/21/2017 10,480,125 9,996,042
USAir Inc.:
B+ Ba3 28,000,000 9.625% due 2/01/2001 22,360,000 22,222,368
BB+ Ba2 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,444,395
BB+ Ba2 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,830,711
BB+ Ba2 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,115,811
BB+ Ba2 3,715,855 Series 89A1, 9.33% due 1/01/2006++++ 3,712,232 3,388,191
BB+ Ba2 5,000,000 Series 89A2, 9.82% due 1/01/2013++++ 4,837,500 4,600,000
BB+ Ba2 16,500,000 Series 93A3, 10.375% due 3/01/2013 16,530,000 15,732,849
------------ ------------
113,387,745 111,429,641
Automobile BB- B2 13,000,000 Exide Corp., 10.75% due 12/15/2002 13,558,125 13,845,000
Parts--0.4%
<PAGE>
Broadcasting & B B2 10,550,000 Century Communications Corp., 11.875%
Publishing--4.1% due 10/15/2003 10,550,000 11,420,375
BB- Ba2 15,000,000 Continental Cablevision Inc., 9.50%
due 8/01/2013 15,000,000 14,625,000
BB- Ba3 13,150,000 Heritage Media Services Corporation, 11.00%
due 6/15/2002 13,158,750 13,610,250
B B1 9,200,000 K-III Communications Corp.,
10.625% due 5/01/2002 9,192,500 9,683,000
B B3 10,000,000 The Katz Corp., 12.75% due 11/15/2002 10,125,000 10,750,000
CCC+ B3 10,000,000 SCI Television Inc., 11.00% due 6/30/2005 10,350,000 10,000,000
B+ B3 12,500,000 Sinclair Broadcasting Group Inc.,
10.00% due 12/15/2003 12,530,000 12,562,500
B B1 5,000,000 Storer Communications, Inc., 10.00%
due 5/15/2003 3,556,250 5,000,000
B- B3 9,000,000 Summit Communications Group Inc.,
10.50% due 4/15/2005 9,000,000 9,135,000
BB+ Ba3 10,000,000 Videotron Groupe L'TEE, 10.25%
due 10/15/2002 10,097,500 10,350,000
BB- B1 22,750,000 World Color Press, Inc., 9.125% due 3/15/2003 22,769,375 22,522,500
------------ ------------
126,329,375 129,658,625
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Building B+ B1 $ 4,885,000 National Gypsum Co., 10.00% due 7/01/2003 $ 4,890,000 $ 4,958,275
Materials--2.5% CCC Caa 20,000,000 Nortek Inc., 9.875% due 3/01/2004 19,834,240 18,500,000
B+ B3 21,455,000 Pacific Lumber Co., 10.50% due 3/01/2003 21,514,913 21,133,175
US Gypsum Corp.:
B+ B2 7,000,000 10.25% due 12/15/2002 6,993,750 7,070,000
B- B3 29,084,000 8.75% due 3/01/2017 25,890,006 28,066,060
------------ ------------
79,122,909 79,727,510
Building American Standard Inc.:
Products--1.3% B Ba3 6,750,000 9.875% due 6/01/2001 6,750,000 6,615,000
B+ Ba3 10,150,000 9.25% due 12/01/2016 10,203,625 10,302,250
CCC- Caa 9,300,000 Amstar Corp., 11.375% due 2/15/1997 6,566,250 9,253,500
B Ba3 16,000,000 Inter-City Products Corp., 9.75%
due 3/01/2000 15,888,750 15,120,000
------------ ------------
39,408,625 41,290,750
<PAGE>
Capital B+ B1 21,450,000 Essex Group Inc., 10.00% due 5/01/2003 21,546,500 21,450,000
Goods--1.3% Sequa Corp.:
B+ B3 2,696,000 10.50% due 5/01/1998 2,783,620 2,786,990
B+ B3 16,935,000 9.375% due 12/15/2003 17,066,800 16,342,275
------------ ------------
41,396,920 40,579,265
Cellular B- B3 13,000,000 Dial Page Inc., 12.25% due 2/15/2000 13,080,500 13,585,000
Telephones--2.3% CCC+ Caa 20,235,000 Horizon Cellular Telephone Co.,
11.375% due 10/01/2000 (a) 13,421,258 14,063,325
CCC+ B3 17,000,000 Mobilemedia Communication, Inc., 10.50%
due 12/01/2003 (a) 10,368,905 10,115,000
NR NR 10,267,000 Page Mart Inc., 12.25% due 11/01/2003 (a) (b) (g) 5,929,679 6,147,366
B B3 15,000,000 Paging Network, Inc., 11.75% due 5/15/2002 15,000,000 16,200,000
BB- Ba3 13,150,000 Rogers Communication Inc., 10.875%
due 4/15/2004 13,366,250 13,610,250
------------ ------------
71,166,592 73,720,941
Chemicals--2.9% B B2 17,000,000 Agriculture Minerals & Chemicals Company,
L.P., 10.75% due 9/30/2003 17,060,000 17,595,000
B+ Ba3 42,540,000 G-I Holdings, Inc., 11.38% due 10/01/1998 (a) 25,873,174 26,162,100
Harris Chemical North America Inc.:
B+ B2 18,750,000 10.25% due 7/15/2001 (a) 15,214,142 15,562,500
B B3 12,000,000 10.75% due 10/15/2003 12,000,000 12,240,000
B- B3 20,000,000 UCC Investors Holding, Inc., 11.00%
due 5/01/2003 20,550,000 20,700,000
------------ ------------
90,697,316 92,259,600
Communications--1.5% CCC- B3 40,000,000 Nextel Communications Inc., 9.75% due
8/15/2004 (a) 25,000,762 23,800,000
Panamsat L.P.:
B+ Ba3 4,750,000 9.75% due 8/01/2000 4,750,000 4,797,500
B- B3 28,710,000 11.38% due 8/01/2003 (a) 17,454,871 17,656,650
------------ ------------
47,205,633 46,254,150
Conglomerates--5.8% NR NR 9,083,000 Astrum International Corp., 11.50% due
6/08/2003 9,137,780 9,593,919
Collins & Aikman Group Inc.:
CCC+ Caa 4,300,000 11.375% due 5/01/1997 4,209,385 4,321,500
B Caa 9,900,000 14.39% due 1/31/2005 (a) 7,989,091 9,615,375
Colt Industries, Inc.:
B+ B1 20,000,000 10.25% due 4/01/2002 20,350,000 20,800,000
BB Ba2 3,237,000 11.25% due 12/01/2015 3,447,997 3,471,682
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Conglomerates B+ B1 $ 18,500,000 Foamex Capital Corp., 11.25% due 10/01/2002 $ 18,495,000 $ 19,702,500
(concluded) NR NR 13,000,000 Gillette Holdings, Inc., 12.25% due 6/30/2002 13,346,250 14,235,000
B- B3 23,250,000 The Interlake Corp., 12.125% due 3/01/2002 23,483,750 23,133,750
B+ B3 25,000,000 Jordan Industries Inc., 10.375% due 8/01/2003 24,961,000 25,125,000
NR NR 8,500,000 MacAndrews & Forbes Group, Inc., 12.25%
due 7/01/1996 8,276,775 8,755,000
NR NR 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13.00% due 3/01/1999 8,568,400 9,168,250
BB- Ba3 11,250,000 Reeves Industries, Inc., 11.00% due 7/15/2002 11,266,913 11,531,250
BB- Ba3 25,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 24,979,063 24,562,500
------------ ------------
178,511,404 184,015,726
Consumer B NR 7,200,000 Coleman Holdings, 11.49% due 5/27/1998 (a) 7,093,070 7,112,000
Products--3.0% Formica Corporation:
NR NR 23,500,000 13.06% due 10/01/2001++++ (a) 21,171,269 22,795,000
NR NR 9,000,000 13.928% due 9/15/2005 9,000,000 9,180,000
Liggett Group Inc.:
NR NR 13,000,000 11.50% due 2/01/1999 12,261,015 9,555,000
NR NR 4,300,000 16.50% due 2/01/1999 (g) 3,910,000 4,063,500
NR B3 5,500,000 Revlon Consumer Products Corp., 10.50%
due 2/15/2003 5,624,375 4,950,000
B- B3 40,350,000 Revlon Worldwide Corp., 12.00% due
3/15/1998 (a) 24,932,725 18,561,000
B+ B1 19,850,000 Sealy Corp., 9.50% due 5/01/2003 19,951,800 19,750,750
------------ ------------
103,944,254 95,967,250
Containers--3.8% B B2 20,000,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008 20,000,000 20,050,000
Ivex Packaging Corp.:
B+ B3 13,250,000 12.50% due 12/15/2002 13,157,117 13,846,250
B- Caa 21,500,000 13.25% due 3/15/2005 (a) 9,492,907 10,293,125
BB Ba3 19,000,000 Owens-Illinois, Inc., 11.00% due 12/01/2003 19,380,000 20,852,500
B+ Ba3 10,000,000 Plastic Container Corp., 10.75% due 4/01/2001 10,022,500 9,950,000
B- B3 32,628,000 Silgan Holdings Inc., 13.25% due 12/15/2002 (a) 25,019,888 24,960,420
B+ Ba3 20,000,000 Sweetheart Cup Co., 9.625% due 9/01/2000 20,000,000 20,100,000
------------ ------------
117,072,412 120,052,295
<PAGE>
Convertible B B2 8,352,000 Builders Transport, Inc., 8.00%
Bonds*--1.1% due 8/15/2005 (4) 4,886,880 8,289,360
B+ Ba3 10,362,000 Lomas Financial Corp., 9.00%
due 10/31/2003 (2) 9,653,775 9,442,372
B- B3 6,941,000 MEDIQ, Inc., 7.25% due 6/01/2006 (3) 4,539,685 5,413,980
B B2 6,000,000 Ohm Corp., 8.00% due 10/01/2006 (5) 4,160,000 5,880,000
B+ B2 5,909,000 UNC, Inc., 7.50% due 3/31/2006 (1) 3,442,530 5,716,957
------------ ------------
26,682,870 34,742,669
Energy--8.9% B+ B1 49,500,000 Clark R&M Holdings Inc., 11.00% due
2/15/2000 (a) 26,406,700 26,482,500
NR NR 36,000,000 Consolidated Hydro Inc., 12.00% due
7/15/2003 (a) 20,802,853 22,500,000
CC Caa 2,037,000 Empire Gas Corp., 12.00% due 3/31/2002 1,606,510 2,031,907
CC Caa 5,900,000 Empire, Inc., 9.00% due 12/31/2007 3,290,116 5,383,750
B- B2 16,000,000 Falcon Drilling Company, Inc., 9.75% due
1/15/2001 (g) 16,000,000 15,440,000
B B2 18,450,000 Ferrell Gas Companies, Inc., 11.625% due
12/15/2003 18,612,865 19,464,750
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 21,450,000
Gulf Canada Resources Ltd.:
BB B1 12,750,000 9.00% due 8/15/1999 11,735,937 12,651,965
B+ B2 8,700,000 9.25% due 1/15/2004 8,488,355 8,047,500
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Energy BB B1 $ 12,300,000 Maxus Energy Corp., 11.50% due 11/15/2015 $ 11,988,138 $ 12,853,500
(concluded) Mesa Capital Corp.:
CCC B3 1,363,000 12.75% due 6/30/1996 (a) 961,266 1,148,328
CCC+ B3 4,341,000 12.75% due 6/30/1998 (a) 3,295,754 3,874,343
B- Caa 7,610,000 National Propane Corp., 13.125% due 3/01/1999 5,405,665 7,648,050
BB- Ba3 8,750,000 Noble Drilling Corp., 9.25% due 10/01/2003 8,925,000 8,618,750
BBB- Ba2 18,000,000 Oryx Energy Co., 10.375% due 9/15/2018 17,823,010 19,396,098
B- B3 3,750,000 Presidio Oil Co., 11.50% due 9/15/2000 3,750,000 3,759,375
BB Ba2 15,000,000 Rowan Companies, Inc., 11.875% due 12/01/2001 15,085,000 15,675,000
BB- Ba3 25,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 24,990,000 24,125,000
CCC+ Caa 8,650,000 Tesoro Petroleum Corp., 12.75% due 3/15/2001 7,483,899 8,650,000
BB- B1 23,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 23,000,000 23,287,500
B+ B1 31,525,000 Triton Energy Corp., 12.816%
due 11/01/1997 (a) 21,724,514 22,067,500
------------ ------------
271,423,082 284,555,816
<PAGE>
Entertainment--3.0% B B2 11,750,000 AMC Entertainment, Inc., 12.625% due
8/01/2002 11,696,095 12,983,750
B+ B1 9,000,000 Cinemark USA Inc., 12.00% due 6/01/2002 9,058,750 9,787,500
B B3 50,000,000 Marvel Holdings Inc., 11.475% due 4/15/1998 (a) 31,940,889 31,125,000
SPI Holding Inc.:
B+ B2 33,250,000 11.50% due 10/01/2001 (a) 24,301,207 24,438,750
B- B3 20,000,000 11.65% due 12/01/2002++ 19,900,000 18,500,000
------------ ------------
96,896,941 96,835,000
Financial American Annuity Group Inc.:
Services--2.2% B+ Ba3 11,000,000 9.50% due 8/15/2001 11,000,000 10,890,000
B- B2 12,000,000 11.125% due 2/01/2003 12,000,000 12,480,000
BB Ba1 21,000,000 Lomas Mortgage USA, Inc., 10.25% due
10/01/2002 21,140,625 21,315,000
BB+ NR 3,000,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 2,380,000 2,992,500
BB- B1 25,000,000 Reliance Group Holdings, Inc., 9.75%
due 11/15/2003 24,962,500 23,625,000
------------ ------------
71,483,125 71,302,500
Food & Chiquita Brands International Inc.:
Beverage--7.2% B+ B3 5,745,000 11.50% due 6/01/2001 6,139,969 6,003,525
BB- B1 13,000,000 9.125% due 3/01/2004 12,990,000 12,155,000
NR NR 15,000,000 Cumberland Farms, 10.50% due 10/01/2003+++ 14,681,250 14,418,750
BB- Ba3 25,000,000 Del Monte Corp., 10.00% due 5/01/2003 (g) 25,012,500 23,625,000
NR B2 24,963,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 24,298,891 24,713,370
B- B3 10,520,000 Farm Fresh, Inc., 7.50% due 3/01/2010 5,488,575 7,574,400
B+ B2 29,500,000 Grand Union Corp., 12.25% due 7/15/2002 29,475,625 29,426,250
B- B2 5,000,000 Kash-n-Karry Inc., 12.375% due 2/01/1999 4,975,000 4,512,500
BB- Ba3 7,000,000 P & C Food Markets, Inc., 11.50% due 10/15/2001 7,100,000 7,560,000
B B2 25,000,000 Penn Traffic Co., 9.625% due 4/15/2005 24,781,750 24,750,000
B- B2 9,575,000 Pueblo Xtra International Inc., 9.50% due
8/01/2003 9,280,250 9,000,500
B+ B1 19,250,000 Royal Crown Corp., 9.75% due 8/01/2000 19,275,000 18,961,250
B- Caa 11,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 11,967,500 11,741,000
Specialty Foods Corp.:
B B2 15,000,000 10.25% due 8/15/2001 15,000,000 15,225,000
B- B3 2,250,000 11.25% due 8/15/2003 2,261,250 2,283,750
B B3 20,000,000 Texas Bottling Group, Inc., 9.00% due
11/15/2003 20,002,500 18,900,000
------------ ------------
232,730,060 230,850,295
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Health BB- Ba2 $ 5,000,000 American Medical International Inc., 11.25%
Services--1.9% due 6/01/2015 $ 5,097,500 $ 5,325,000
B+ B1 11,500,000 Continental Medical Systems, Inc., 10.875%
due 8/15/2002 11,523,750 11,298,750
B+ B1 10,000,000 Continental Medsystems, Inc.,
10.375% due 4/01/2003 9,991,250 9,650,000
NR NR 9,764,706 Epic Properties, Inc., 11.50% due 7/15/2001++++ 9,703,188 11,961,765
B+ B1 10,000,000 HealthTrust Co. (The Hospital), 8.75%
due 3/15/2005 9,850,000 9,500,000
B+ B1 11,500,000 MEDIQ/PRN Life Support Services, Inc.,
11.125% due 7/01/1999 11,455,000 11,816,250
------------ ------------
57,620,688 59,551,765
High CCC+ B3 4,000,000 Anacomp, Inc., 15.00% due 11/01/2000 3,562,500 4,520,000
Technology--0.7% ComputerVision Corp.:
B- B3 10,000,000 11.375% due 8/15/1999 9,706,250 9,050,000
B- B3 12,500,000 8.00% due 12/01/2009 6,802,472 8,125,000
------------ ------------
20,071,222 21,695,000
Home Builders--3.0% B- B2 20,000,000 Baldwin Company, 10.375% due 8/01/2003 19,879,500 19,000,000
Del E. Webb Corporation:
BB- Ba2 7,000,000 10.875% due 3/31/2000 7,002,795 7,262,500
B B2 7,500,000 9.75% due 3/01/2003 7,440,975 7,537,500
B B2 5,000,000 9.00% due 2/15/2006 4,993,750 4,650,000
B B3 14,000,000 Greystone Homes Inc., 10.75% due 3/01/2004+++ 14,000,000 13,860,000
B B1 10,250,000 K Hovnanian Enterprises, 11.25% due 4/15/2002 10,204,062 10,660,000
BB Ba2 12,000,000 Standard Pacific Corp., 10.50% due 3/01/2000 11,995,000 12,120,000
B+ Ba3 20,000,000 U.S. Home Corp., 9.75% due 6/15/2003 20,000,000 20,000,000
------------ ------------
95,516,082 95,090,000
<PAGE>
Hotels & B B2 22,325,000 Aztar Corp., 11.00% due 10/01/2002 22,557,250 21,990,125
Casinos--7.4% BB B1 25,000,000 Bally's Park Place, Inc., 9.25% due 3/15/2004 24,267,700 23,187,500
NR NR 12,000,000 Capital Gaming International, Inc., 11.50%
due 2/01/2001 (c)(g) 13,600,200 14,400,000
B+ B2 25,000,000 GB Property Funding Corp., 10.875% due
1/15/2004 24,837,500 23,000,000
B+ B2 24,750,000 GNS Finance Corp., 9.25% due 3/15/2003 24,610,371 25,616,250
NR NR 7,682,000 Goldriver Hotel & Casino Corporation,
11.375% due 8/31/1999 (a) 8,609,882 7,182,670
BB- B 17,000,000 Host Marriott Corp., 10.375% due 6/15/2011 17,439,375 17,255,000
B+ B1 15,000,000 MGM Grand Hotel Finance Corp., 12.00%
due 5/01//2002 15,230,500 16,800,000
CCC+ B2 10,000,000 Pioneer Finance Corp., 13.50% due 12/01/1998 10,542,500 10,400,000
BB- Ba3 25,000,000 Showboat, Inc., 9.25% due 5/01/2008 24,920,000 23,625,000
Trump Castle Funding Inc.:
NR Caa 8,585,250 11.75% due 11/15/2003 6,887,807 7,855,504
NR Ca 1,774,285 7.00% due 11/15/2005++ (a) 1,272,626 1,554,762
B B3 31,250,000 Trump Plaza Funding, Inc., 10.875% due
6/15/2001 31,037,645 29,375,000
NR Caa 15,979,095 Trump Taj Mahal Funding, Inc., 11.35% due
11/15/1999++ 11,688,477 14,370,879
------------ ------------
237,501,833 236,612,690
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial BB- B2 $25,000,000 ADT Operations Inc., 9.25% due 8/01/2003 $ 25,097,437 $ 24,000,000
Services--2.1% B- B3 10,000,000 Bell & Howell Co., 10.75% due 10/01/2002 10,040,000 10,450,000
B+ B1 10,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 10,000,000 9,600,000
B- Caa 7,720,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 5,699,947 7,835,800
Thermadyne Industries, Inc.:
NR NR 5,706,000 10.25% due 5/01/2002 5,711,468 5,734,530
NR NR 7,913,000 10.75% due 11/01/2003 7,915,156 7,952,565
------------ ------------
64,464,008 65,572,895
<PAGE>
Metals Kaiser Aluminum & Chemical Corp.:
& Mining--1.8% B+ B1 3,750,000 9.875% due 2/15/2002 3,724,650 3,487,500
B- B2 23,000,000 12.75% due 2/01/2003 22,845,000 23,460,000
Maxxam Group, Inc.:
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 5,012,500
B- B3 41,155,000 12.25% due 8/01/2003 (a) 23,561,256 25,516,100
------------ ------------
55,049,656 57,476,100
Paper--5.0% B+ B2 15,420,000 Container Corporation of America, 9.75% due
4/01/2003 15,433,400 15,265,800
BB- Ba3 15,000,000 Doman Industries Ltd., 8.75% due 3/15/2004 15,000,000 13,800,000
Fort Howard Corp.:
B+ B1 11,000,000 9.25% due 3/15/2001 11,000,000 10,725,000
B B2 11,000,000 10.00% due 3/15/2003 11,000,000 10,725,000
B B2 14,000,000 9.00% due 2/01/2006 13,915,000 12,670,000
B B3 25,000,000 Gaylord Container Corp., 11.50% due 5/15/2001 25,001,250 25,375,000
B B1 23,000,000 Riverwood International Corp.,
11.25% due 6/15/2002 23,680,000 24,610,000
B+ B1 11,500,000 Stone-Consolidated Corp., 10.25% due
12/15/2000 11,520,000 10,925,000
Stone Container Corp.:
B- B2 10,000,000 10.75% due 6/15/1997 9,426,125 9,850,000
B B1 3,000,000 12.625% due 7/15/1998 3,000,000 3,225,000
B B1 12,000,000 11.875% due 12/01/1998 11,921,975 12,360,000
B- B2 6,500,000 11.50% due 9/01/1999 6,264,563 6,353,750
B B1 5,000,000 9.875% due 2/01/2001 5,000,000 4,575,000
------------ ------------
162,162,313 160,459,550
Railroads--0.6% B+ Ba3 17,750,000 Southern Pacific Rail Co., 9.375% due
8/15/2005 17,750,000 17,705,625
Restaurants/ Family Restaurants Inc.:
Food Services--2.8% B B1 13,000,000 9.75% due 2/01/2002 13,000,000 12,090,000
B- B3 13,500,000 10.875% due 2/01/2004 (a) 9,871,168 9,112,500
B- B2 30,000,000 Flagstar Corp., 11.375% due 9/15/2003 30,092,500 29,550,000
Foodmaker, Inc:
B- B2 16,000,000 9.75% due 6/01/2002 15,455,000 15,280,000
B- B2 23,000,000 Series 1993A, 9.75% due 11/01/2003 (g) 22,641,200 22,568,750
------------ ------------
91,059,868 88,601,250
Retail B- B3 10,000,000 Pamida Holdings, Inc., 11.75% due 3/15/2003 9,997,500 9,850,000
Specialty--1.1% Specialty Retailers Group, Inc.:
B+ B1 21,000,000 10.00% due 8/15/2000 21,000,000 21,105,000
B- B3 3,670,000 11.00% due 8/15/2003 3,673,350 3,706,700
------------ ------------
34,670,850 34,661,700
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (concluded) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Steel--2.1% B B2 $21,000,000 A.K. Steel Corp., 10.75% due 4/01/2004 $ 21,000,000 $ 21,105,000
B B2 15,000,000 Republic Engineered Steel,
9.875% due 12/15/2001 15,000,000 14,775,000
B+ B1 17,500,000 WCI Steel, Inc., 10.50% due 3/01/2002 (g) 17,500,000 18,462,500
BB- B1 12,000,000 Wheeling-Pittsburg Corp.,
9.375% due 11/15/2003 11,650,000 11,340,000
------------ ------------
65,150,000 65,682,500
Telecommuni- CCC+ B3 11,500,000 USA Mobile Communications Holdings, Inc.,
cations--0.3% 9.50% due 2/01/2004 11,456,250 10,752,500
Textiles--0.9% B+ B3 30,000,000 Westpoint Stevens, 9.375% due 12/15/2005 30,100,000 28,425,000
Transportation B+ B1 5,095,000 ACF Industries, Inc., 11.60% due 5/15/2000 4,865,725 5,120,475
Services--2.0% BB Ba2 9,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 9,000,000 8,775,000
BB- B1 11,000,000 International Shipholding Corp., 9.00% due
7/01/2003 10,998,750 10,615,000
NR NR 36,106,000 Transtar Holdings, L.P., 13.375% due
12/15/2003 (a)(g) 18,177,966 19,677,770
B+ Ba3 19,000,000 Viking Star Shipping, Inc., 9.625%
due 7/15/2003 19,077,500 18,869,375
------------ ------------
62,119,941 63,057,620
<PAGE>
Utilities--4.4% Beaver Valley Funding:
B+ Ba3 5,299,000 8.625% due 6/01/2007 5,047,297 4,753,479
B+ Ba3 25,000,000 9.00% due 6/01/2017 23,494,000 22,306,875
BB+ Ba1 19,500,000 CTC Mansfield Funding, 11.125% due 9/30/2016 21,013,750 20,719,023
Midland Cogeneration Venture
Limited Partnership:
BB- Ba2 4,610,891 10.33% due 7/23/2002++++ 4,760,745 4,591,779
BB- Ba2 11,250,000 11.75% due 7/23/2005 11,310,000 11,768,985
BB- B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,204,863
NR NR 14,517,815 Sunflower Electric Power Corp., 8.00%
due 12/31/2016+++++++ 9,306,139 11,940,903
Texas-New Mexico Power Corp.:
BB Ba3 5,000,000 9.25% due 9/15/2000 5,000,000 5,282,665
B+ B1 18,000,000 10.75% due 9/15/2003 18,060,000 19,339,740
B Ba3 5,000,000 Transco Energy Co., 9.875% due 6/15/2020 4,687,500 5,212,500
Tucson Electric & Power Co.:
NR NR 12,323,081 Series B, 10.21% due 1/01/2009+++ 11,547,774 11,799,350
NR NR 17,426,207 Series C, 10.73239% due 1/01/2013+++ 16,252,461 16,946,987
------------ ------------
136,482,231 140,867,149
Total Investments in Bonds--90.9% 2,862,192,330 2,893,298,377
<CAPTION>
Shares
Held
Preferred Stocks
<S> <C> <S> <C> <C>
Broadcasting & 471,000 K-III Communications Corp. 11,812,750 12,834,750
Publishing--0.7% 108,401 K-III Communications Corp.++ 11,047,046 10,867,209
------------ ------------
22,859,796 23,701,959
Energy--0.2% 10,000 Consolidated Hydro, Inc. 4,743,077 5,160,000
Steel--0.5% 600,000 USX Capital LLC 15,000,000 14,400,000
Total Investments in Preferred Stocks--1.4% 42,602,873 43,261,959
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Common Stocks High Income Portfolio
<S> <C> <S> <C> <C>
Banking--0.2% 168,000 Chase Manhattan Corp. $ 7,000,000 $ 5,439,000
Conglomerates--0.1% 200,369 Astrum International Corp. 4,085,240 4,934,087
Energy--0.1% 57,237 Mesa Inc. 325,690 329,113
122,500 Petrolane Inc. 1,424,063 1,424,063
------------ ------------
1,749,753 1,753,176
Financial Services--0.0% 132,527 Lomas Financial Corporation 1,689,719 1,060,216
Food & 120,194 Abco Markets Inc.+++ (f) 4,054,875 1,584,759
Beverage--0.2% 139,068 Doskocil Companies, Inc. 5,678,900 1,816,576
313,879 RJR Nabisco Holdings Corp. 3,060,320 1,804,804
------------ ------------
12,794,095 5,206,139
Hospital Supplies--0.3% 467,103 Ply-Gem Industries 8,878,758 9,633,999
Hotels & 66,824 Buckhead Corporation of America+++ (f) 167,060 167,060
Casinos--0.00% 75,500 Goldriver Hotel & Casino Corporation
(Class B)(d)(f) 540,045 316,156
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 523,250
------------ ------------
718,605 1,006,466
Industrial Services--0.0% 11,400 Thermadyne Industries 165,300 153,900
Steel--0.0% 47,242 LTV Corp. 5,521,163 708,630
Total Investments in Common Stocks--0.9% 42,602,633 29,895,613
<PAGE>
Trusts & Warrants
Energy--0.0% 18,000 Consolidated Hydro (Warrants)(e) 390,123 432,000
20,833 UGI (Warrants)(e) 91,057 33,854
------------ ------------
481,180 465,854
Financial Services--0.0% 7,194 Reliance Group Holdings (Warrants)(e) 0 0
High Technology--0.0% 394,563 Anacomp, Inc. (Warrants)(e)(g) 495,400 937,087
Hotels & 30,000 Capital Gaming (Warrants)(e) 52,500 75,000
Casinos--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust+++ 192,320 137,028
------------ ------------
244,820 212,028
Paper--0.1% 813,584 Gaylord Container Corp. (Warrants)(e) 1,707,305 2,745,846
Telecommunications--0.0% 302,500 ALC Communications Corp. (Warrants)(e) 831,875 0
Total Investments in Trusts &
Warrants--0.1% 3,760,580 4,360,815
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities High Income Portfolio
<S> <C> <S> <C> <C>
Commercial $102,408,000 General Electric Capital Corp., 3.53%
Paper**--6.2% due 4/04/1994 $ 102,408,000 $ 102,408,000
Oryx Inc.:
30,000,000 3.95% due 4/20/1994 29,947,333 29,947,333
20,000,000 3.98% due 4/21/1994 19,962,411 19,962,411
Vons Companies, Inc.:
15,000,000 3.80% due 4/11/1994 14,988,917 14,988,917
10,000,000 3.80% due 4/14/1994 9,989,444 9,989,444
10,000,000 3.83% due 4/18/1994 9,985,106 9,985,106
10,000,000 3.83% due 4/19/1994 9,984,042 9,984,042
-------------- --------------
197,265,253 197,265,253
US Government 14,857,000 US Treasury Bill, 3.14% due 4/07/1994 14,853,112 14,853,112
Discount Notes**--0.5%
Total Investments in Short-Term
Securities-6.7% 212,118,365 212,118,365
Total Investments--100.0% $3,163,276,781 3,182,935,129
==============
Other Assets Less Liabilities--0.0% 750,906
--------------
Net Assets--100.0% $3,183,686,035
==============
<PAGE>
<FN>
++Represents a pay-in-kind security which may
pay interest/dividend in additional face/shares.
++++Subject to principal paydowns.
*Industry classification for convertible bonds are:
(1)Conglomerates; (2)Financial Services;
(3)Health Services; (4)Transportation Services;
(5)Waste Management.
**Commercial Paper and US Government
Discount Notes 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 the effective yield at time of purchase.
(b)Represents units. Each unit consists of 10 Senior
Discount Notes and 46 Warrants.
(c)Represents units. Each unit consists of one
11.5% Note due 2001, 20.25 Warrants and 26.67
shares of Common Stock.
(d)Each share of Series B Stock contains a right
which entitles the Portfolio to purchase a
predetermined number of shares of preferred
stock. The purchase price and number of shares
are subject to adjustment.
(e)Warrants entitle the portfolio to purchase a
predetermined number of shares of common
stock/face amount of bonds. The purchase price
and number of shares/face amount are subject
to adjustment under certain conditions until the
expiration date.
(f)Non-income producing securities.
(g)Restricted security pursuant to Rule 144A.
See Notes to Financial Statements.
+++Restricted securities as to resale. The value of the Portfolio's investments in restricted
securities was approximately $97,713,000, representing 3.07% of the Portfolio's net assets.
<PAGE>
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Abco Markets Inc. 11/19/1992 $ 4,054,875 $ 1,584,759
Buckhead Corporation of America 12/29/1992 167,060 167,060
Cumberland Farms, 10.50% due
10/01/2003 2/18/1994 14,681,250 14,418,750
Formica Corporation, 13.06% due
10/01/2001 6/03/1993 21,171,269 22,795,000
Goldriver Hotel & Casino Corp.
Liquidating Trust 8/31/1992 192,320 137,028
Greystone Homes Inc., 10.75% due
3/01/2004 9/24/1993 14,000,000 13,860,000
Liggett Group Inc., 16.50% due 2/01/1999 1/26/1994-1/31/1994 3,910,000 4,063,500
Sunflower Electric Power Corp.,
8.00% due 12/31/2016 11/29/1991-9/15/1992 9,306,139 11,940,903
Tucson Electric & Power Co. (Series B),
10.21% due 1/01/2009 6/04/1993-7/28/1993 11,547,774 11,799,350
Tucson Electric & Power Co. (Series C),
10.73239% due 1/01/2013 3/01/1993-7/16/1993 16,252,461 16,946,987
----------- -----------
$95,283,148 $97,713,337
=========== ===========
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Notes & Bonds:
Obligations--8.0% NR Aaa $18,000,000 8.25% due 7/15/1998 $ 20,015,625 $ 19,428,750
NR Aaa 3,000,000 8.75% due 8/15/2000 3,569,453 3,351,561
NR Aaa 18,500,000 6.375% due 8/15/2002 19,784,844 18,089,541
NR Aaa 21,000,000 5.875% due 2/15/2004 20,942,047 19,694,073
NR Aaa 10,000,000 7.50% due 11/15/2016 11,087,231 10,271,870
------------ ------------
75,399,200 70,835,795
<PAGE>
Banking--7.7% First Interstate Bancorp.:
A- A3 3,000,000 11.00% due 3/05/1998 3,603,060 3,456,789
A- A3 3,000,000 9.90% due 11/15/2001 3,642,840 3,437,550
First Union Corp.:
A- A3 1,000,000 8.125% due 6/24/2002 1,109,750 1,034,063
A- A3 8,300,000 8.00% due 11/15/2002 8,810,850 8,507,127
Golden West Financial Corp.:
A- A3 5,000,000 9.15% due 5/23/1998 5,678,700 5,470,710
A- A3 5,000,000 8.375% due 4/15/2002 5,035,950 5,275,825
A- A3 8,000,000 Huntington Bancshares, Inc., 7.625%
due 1/15/2003 8,405,600 8,035,936
BBB+ A3 7,000,000 Meridian Bancorp, 6.625% due 3/15/2003 6,887,370 6,550,327
Norwest Corp.:
A A2 3,500,000 6.625% due 3/15/2003 3,553,235 3,307,567
A A2 13,500,000 6.65% due 10/15/2023 13,116,260 11,392,609
A- A1 3,500,000 Society National Bank, 7.85% due 11/01/2002 3,870,125 3,589,113
A A2 7,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 7,430,130 7,883,414
------------ ------------
71,143,870 67,941,030
Federal NR Aaa 1,500,000 Federal Home Loan Mortgage Corp.,
Agencies--2.7% 6.55% due 4/02/2003 1,526,265 1,440,033
Federal National Mortgage Association:
NR Aaa 10,500,000 6.90% due 3/01/2004 10,486,875 10,197,705
NR Aaa 7,000,000 6.85% due 4/05/2004 6,992,344 6,924,190
AAA Aaa 5,000,000 Private Export Funding,
8.35% due 1/31/2001 5,786,950 5,517,580
------------ ------------
24,792,434 24,079,508
Financial Services-- Chrysler Financial Corp.:
Captive--1.4% BBB Baa2 2,000,000 9.50% due 12/15/1999 2,263,120 2,217,564
BBB Baa2 8,000,000 10.95% due 8/01/2017 9,701,900 9,317,232
A A2 1,000,000 Ford Motor Credit Corp., 7.75%
due 11/15/2002 1,040,130 1,006,763
------------ ------------
13,005,150 12,541,559
Financial Services-- American General Finance Corp.:
Consumer--7.5% A+ A1 2,500,000 8.50% due 8/15/1998 2,848,650 2,672,095
A+ A1 9,000,000 7.45% due 7/01/2002 9,131,640 8,978,913
Associates Corp. of North America:
AA- A1 2,000,000 8.80% due 8/01/1998 2,253,820 2,166,322
AA- A1 1,550,000 6.75% due 10/15/1999 1,612,945 1,535,901
A A2 16,000,000 Beneficial Corp., 4.76% due 3/15/1999 (a)(b) 16,000,000 15,989,920
A+ A1 16,500,000 CIT Group Holdings, Inc., 4.83%
due 3/29/1999 (a)(b) 16,500,000 16,510,395
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Financial Services-- A A2 $ 6,000,000 Commercial Credit Co., 6.70% due
Consumer 8/01/1999 $ 6,001,800 $ 5,943,126
(concluded) Transamerica Finance Corp.:
A+ A2 6,000,000 6.80% due 3/15/1999 5,998,380 6,000,000
A+ A2 7,000,000 7.50% due 3/15/2004 7,000,000 7,000,000
------------ ------------
67,347,235 66,796,672
Financial Services-- Bear Stearns Cos. Inc.:
Other--8.6% A A2 3,000,000 6.75% due 4/15/2003 3,125,580 2,801,826
A A2 6,000,000 6.70% due 8/01/2003 5,970,660 5,573,010
Dean Witter & Discover:
A A3 5,000,000 6.50% due 11/01/2005 4,942,250 4,583,445
A A3 6,000,000 6.75% due 10/15/2013 5,880,540 5,207,496
AAA Aaa 4,500,000 General Electric Capital Corp., 8.70%
due 2/15/2003 5,449,725 4,920,170
A A3 12,000,000 Lehman Brothers Holding Corp., 4.43%
due 1/12/1999(a)(b) 12,062,760 11,977,440
Morgan Stanley Group Inc.:
A+ A1 10,000,000 8.875% due 10/15/2001 11,482,400 10,834,760
A+ A1 12,000,000 7.00% due 10/01/2013 12,021,310 10,801,572
PaineWebber Group Inc.:
BBB+ A3 3,000,000 6.25% due 6/15/1998 3,078,060 2,921,133
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,185,100 7,577,409
A+ A3 8,000,000 Torchmark Corp., 9.625% due 5/01/1998 7,941,440 8,815,400
------------ ------------
80,139,825 76,013,661
<PAGE>
Foreign*--9.9% A A1 9,000,000 Australian New Zealand Bank,
6.25% due 2/01/2004 (1) 8,973,450 8,268,021
CRA Finance Ltd. (2):
A+ A2 4,000,000 6.50% due 12/01/2003 4,005,890 3,717,096
A+ A2 3,500,000 7.125% due 12/01/2013 3,479,700 3,206,770
A+ A1 10,000,000 Hydro-Quebec, 8.00% due 2/01/2013 (3) 11,212,600 10,018,200
AAA Aaa 2,000,000 Japan Finance Corp. for Municipal
Enterprises, 8.70% due 7/30/2001 (4) 2,237,380 2,191,486
A+ A1 6,500,000 Korea Development Bank,
7.90% due 2/01/2002 (5) 7,110,740 6,642,863
A+ A3 5,000,000 Korea Electric Power Corp., 7.75% due
4/01/2013 (6) 5,117,200 4,734,755
Metropolis of Tokyo (Japan) (7):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,924,770
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,299,286
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,533,176
BBB Baa1 3,000,000 Petro Canada, 8.60% due 10/15/2001 (8) 3,292,470 3,233,334
AA+ Aa1 5,000,000 Province of British Columbia (Canada),
7.00% due 1/15/2003 (9) 4,982,870 4,956,550
A+ A1 2,500,000 Province of Manitoba (Canada), 8.80% due
1/15/2020 (9) 2,959,500 2,729,825
Province of Ontario (Canada) (9):
AA Aa2 7,000,000 8.00% due 10/17/2001 7,564,970 7,318,990
AA Aa2 5,000,000 7.75% due 6/04/2002 5,398,150 5,144,600
A+ A1 3,000,000 Province of Quebec (Canada), 13.00% due
10/01/2013 (9) 3,918,120 3,827,610
AA A1 6,000,000 Republic of Italy, 6.875% due 9/27/2023 (10) 5,774,220 5,197,608
A A2 5,000,000 Western Mining Corporation Holdings, Ltd.,
7.25% due 11/15/2013 (2) 5,036,900 4,540,005
------------ ------------
92,887,986 87,484,945
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- AA- A1 $ 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
Consumer--11.2% 12/01/1999 $ 3,367,590 $ 3,266,193
Bass America, Inc.:
A+ A1 3,000,000 6.75% due 8/01/1999 3,027,270 2,971,011
A+ A1 7,000,000 8.125% due 3/31/2002 7,162,320 7,328,083
Dilliard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,077,332
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,565,015
A+ A2 8,000,000 7.85% due 10/01/2012 7,926,890 7,994,760
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 3,932,224
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 9,653,958
A+ A2 6,000,000 7.125% due 9/15/2004 6,499,940 5,882,256
A+ A2 4,000,000 9.00% due 8/15/2011 4,764,410 4,414,968
Philip Morris Cos., Inc.:
A A2 2,000,000 9.00% due 1/01/2001 2,061,930 2,178,074
A A2 5,000,000 7.25% due 1/15/2003 5,113,110 4,861,375
Sears Roebuck & Co.:
BBB+ Baa1 5,000,000 9.25% due 4/15/1998 5,712,125 5,434,335
BBB+ Baa1 8,785,000 8.45% due 11/01/1998 9,709,797 9,302,867
AA Aa1 16,810,000 Wal-Mart Stores, Inc., 8.625% due 4/01/2001 18,401,637 18,117,667
AA Aa3 5,000,000 Warner-Lambert Co., 6.625% due 9/15/2002 4,910,350 4,781,720
------------ ------------
102,378,919 99,761,838
Industrial-- A+ A1 5,000,000 Atlantic Richfield Company (ARCO), 10.375%
Energy--4.5% due 7/15/1995 5,266,660 5,305,730
AA- A1 9,000,000 BP America Inc. (Guaranteed by the British
Petroleum Co., PLC), 7.875% due 5/15/2002 9,519,510 9,285,840
Burlington Resources, Inc.:
A- A3 8,500,000 9.625% due 6/15/2000 9,720,390 9,560,783
A- A3 1,000,000 8.50% due 10/01/2001 1,165,780 1,060,066
Texaco Capital Inc.:
A+ A1 5,500,000 9.00% due 12/15/1999 6,215,190 6,013,156
A+ A1 1,000,000 8.50% due 2/15/2003 1,089,360 1,063,567
A+ A1 2,000,000 8.875% due 9/01/2021 2,440,280 2,200,208
A+ A1 5,000,000 8.00% due 8/01/2032 4,848,650 5,001,980
------------ ------------
40,265,820 39,491,330
<PAGE>
Industrial-- A+ A1 4,000,000 Air Products & Chemicals, Inc., 6.25%
Other--12.3% due 6/15/2003 3,965,400 3,701,492
AA- Aa2 10,000,000 Archer-Daniels-Midland Co., 6.25% due
5/15/2003 9,950,460 9,345,650
A+ A1 4,000,000 Capital Cities/ABC, Inc., 8.875% due
12/15/2000 4,305,360 4,415,656
A- Baa1 8,000,000 Carnival Cruise Lines, Inc., 6.15%
due 10/01/2003 7,995,600 7,241,608
A A2 6,000,000 Communications Satellite Corp., 8.125%
due 4/01/2004 6,376,270 6,291,732
Ford Capital B.V.:
A A2 2,500,000 9.375% due 5/15/2001 2,762,725 2,773,025
A A2 4,000,000 9.50% due 7/01/2001 4,527,920 4,464,864
A A2 9,000,000 9.875% due 5/15/2002 9,080,850 10,266,867
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- BBB- Baa3 $ 5,000,000 Georgia Pacific Corp., 9.95% due 6/15/2002 $ 5,772,150 $ 5,697,955
Other A- A3 7,710,000 International Paper Co., 9.70% due 3/15/2000 9,293,944 8,664,136
(concluded) AA Aa2 8,740,000 Kaiser Foundation Hospital, 9.00% due
11/01/2001 9,835,623 9,630,492
AAA Aaa 8,500,000 Stanford University, 6.875% due 2/01/2024 8,435,400 7,759,437
Telecommunications, Inc.:
BBB- Baa3 2,500,000 9.25% due 4/15/2002 2,968,375 2,681,350
BBB- Baa3 10,000,000 9.25% due 1/15/2023 11,433,450 10,361,640
BBB- Baa3 5,000,000 Time Warner Entertainment Co.,
8.375% due 3/15/2023 5,281,450 4,775,000
AAA Aaa 3,000,000 United Parcel Service of America Inc., 8.375%
due 4/01/2020 2,859,590 3,272,469
A A2 5,000,000 Weyerhaeuser Corp., 7.25% due 7/01/2013 5,234,850 4,772,590
A A3 3,000,000 Witco Corp., 6.60% due 4/01/2003 2,999,130 2,828,316
------------ ------------
113,078,547 108,944,279
<PAGE>
Supranational--5.9% Asian Development Bank:
AAA Aaa 3,000,000 10.75% due 6/01/1997 3,302,730 3,414,690
AAA Aaa 9,000,000 9.125% due 6/01/2000 9,455,080 10,156,032
AAA Aaa 4,000,000 6.50% due 9/21/2002 3,875,000 3,908,596
European Investment Bank:
AAA Aaa 2,000,000 8.875% due 3/01/2001 2,380,320 2,226,946
AAA Aaa 4,000,000 9.125% due 6/01/2002 4,890,870 4,528,368
Inter-American Development Bank:
AAA Aaa 8,000,000 8.875% due 6/01/2009 10,115,250 9,200,544
AAA Aaa 5,000,000 8.50% due 3/15/2011 5,955,170 5,537,345
AAA Aaa 10,000,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 12,247,510 13,306,150
------------ ------------
52,221,930 52,278,671
Transportation--0.8% Southwest Airlines, Inc.:
A- Baa1 4,000,000 9.40% due 7/01/2001 4,814,240 4,443,136
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 3,011,970
------------ ------------
7,798,190 7,455,106
Utilities-- BBB+ A3 4,000,000 GTE Corp., 9.10% due 6/01/2003 4,242,720 4,404,544
Communications-- A+ A1 5,000,000 General Telephone of California, Inc.,
4.7% 6.75% due 3/15/2004 4,864,250 4,812,770
AA- Aa2 2,000,000 New England Telephone & Telegraph Co.,
8.625% due 8/01/2001 2,233,620 2,167,138
Pacific Bell, Inc.:
AA- Aa3 4,000,000 8.70% due 6/15/2001 3,958,040 4,390,052
AA- Aa3 6,000,000 7.25% due 7/01/2002 5,970,840 5,962,194
AA- Aa3 4,500,000 7.375% due 6/15/2025 4,602,510 4,136,845
A+ A1 2,000,000 Southwestern Bell Telecommunications Co.,
6.125% due 3/01/2000 2,011,250 1,926,440
AA- Aa3 14,000,000 US West Communications, Inc.,
4.65% due 3/25/1999 (a)(b) 14,000,000 14,008,680
------------ ------------
41,883,230 41,808,663
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- Central Power & Light Co.:
Electric--7.2% A A2 $ 5,000,000 6.00% due 10/01/1997 $ 4,973,400 $ 4,936,925
A A2 5,000,000 7.50% due 4/01/2023 5,118,750 4,687,405
A- A3 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,933,172
Pacific Gas & Electric Co.:
A A1 12,000,000 7.875% due 3/01/2002 12,232,160 12,384,036
A A1 9,000,000 6.25% due 8/01/2003 8,990,280 8,302,923
A A1 5,000,000 7.25% due 8/01/2026 5,056,400 4,566,275
Pennsylvania Power & Light Co.:
A A2 8,000,000 7.75% due 5/01/2002 8,388,270 8,180,288
A A2 7,500,000 6.875% due 2/01/2003 7,607,625 7,195,605
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,577,950
Virginia Electric & Power Co.:
A A2 3,000,000 6.625% due 4/01/2003 2,996,700 2,841,756
A A2 4,000,000 7.00% due 1/01/2024 3,889,400 3,575,000
------------ ------------
66,214,405 64,181,335
Utilities-- Consolidated Natural Gas Co.:
Gas--1.6% AA- A1 1,000,000 9.375% due 2/01/1997 1,031,440 1,085,863
AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 8,158,035
AA- A1 2,000,000 5.75% due 8/01/2003 1,970,080 1,783,788
BBB Baa2 3,000,000 Union Oil of California, Inc., 9.25% due
2/01/2003 3,422,340 3,338,433
------------ ------------
13,874,520 14,366,119
Total Investments in
Bonds & Notes--94.0% 862,431,261 833,980,511
<PAGE>
Short-Term
Securities
Repurchase 39,714,000 Carroll McEntee & McGinley, Inc.,
Agreements**--4.5% purchased on 3/31/1994 to yield 3.55%
to 4/04/1994 39,714,000 39,714,000
Total Investments in Short-Term
Securities--4.5% 39,714,000 39,714,000
Total Investments--98.5% $902,145,261 873,694,511
============
Other Assets Less Liabilities--1.5% 13,802,571
------------
Net Assets--100.0% $887,497,082
============
<FN>
(a)Medium-Term Note.
(b)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate
in effect at March 31, 1994.
*Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Financial Institution; Guaranteed by the Government.
(2)Industrial Mining.
(3)Electric Utility; Owned & Guaranteed by the Province.
(4)Financial Institution; Government-Owned & Guaranteed.
(5)Financial Institution; Government-Owned & Guaranteed by Korea.
(6)Electric Utility; Majority-Owned, not Guaranteed by Korea.
(7)Government Entity; Guaranteed by Japan.
(8)Energy Company not Guaranteed by Canada.
(9)Government Entity; Guaranteed by the Province.
(10)Government Entity; Guaranteed by Italy.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Notes:
Obligations--3.6% NR Aaa $ 3,000,000 8.25% due 7/15/1998 $ 3,374,531 $ 3,238,125
NR Aaa 6,000,000 4.75% due 8/31/1998 5,918,760 5,681,250
NR Aaa 2,000,000 6.375% due 8/15/2002 2,090,625 1,955,626
NR Aaa 1,000,000 5.875% due 2/15/2004 1,013,770 937,813
------------ ------------
12,397,686 11,812,814
Banks & Thrifts-- First Interstate Bancorp.:
10.8% A- A3 4,500,000 11.00% due 3/05/1998 5,404,590 5,185,184
A- A3 7,000,000 9.90% due 11/15/2001 8,552,250 8,020,950
First Union Corp.:
A- A3 5,000,000 8.00% due 11/15/2002 5,002,240 5,124,775
A- A3 3,000,000 7.25% due 2/15/2003 2,990,730 2,924,256
Golden West Financial Corp.:
A- A3 4,000,000 9.15% due 5/23/1998 4,542,960 4,376,568
A- A3 1,000,000 8.375% due 4/15/2002 987,040 1,055,165
BBB+ A3 4,500,000 Meridian Bancorp, 6.625% due 3/15/2003 4,364,145 4,210,924
A A2 3,000,000 Norwest Corp., 6.625% due 3/15/2003 3,002,870 2,835,057
A A2 2,000,000 World Savings and Loan Association,
9.90% due 7/01/2000 2,072,740 2,252,404
------------ ------------
36,919,565 35,985,283
Federal NR Aaa 1,000,000 Federal Home Loan Mortgage Corp.,
Agencies-1.2% 6.55% due 4/02/2003 1,017,510 960,022
NR Aaa 3,000,000 Federal National Mortgage Association,
6.90% due 3/01/2004 2,996,250 2,913,630
------------ ------------
4,013,760 3,873,652
<PAGE>
Financial Services-- BBB Baa2 8,000,000 Chrysler Financial Corp., 9.50% due 12/15/1999 9,275,380 8,870,256
Captive--4.2% Ford Motor Credit Co.:
A A2 2,000,000 8.00% due 1/15/1999 2,197,100 2,087,848
A A2 1,000,000 7.75% due 11/15/2002 1,040,130 1,006,763
A A2 2,000,000 7.50% due 1/15/2003 2,040,640 1,993,560
------------ ------------
14,553,250 13,958,427
Financial Services-- American General Finance Corp.:
Consumer--8.6% A+ A1 1,500,000 8.50% due 8/15/1998 1,680,255 1,603,257
A+ A1 1,000,000 7.45% due 7/01/2002 997,800 997,657
A+ A1 3,500,000 6.375% due 3/01/2003 3,457,190 3,254,352
Associates Corp. of North America:
AA- A1 3,000,000 8.80% due 8/01/1998 3,380,730 3,249,483
AA- A1 1,500,000 7.50% due 5/15/1999 1,645,950 1,546,913
A A2 5,000,000 Beneficial Corp., 4.76% due 3/15/1999 (a)(b) 5,000,000 4,996,850
A+ A1 9,000,000 CIT Group Holdings, Inc.,
4.83% due 3/29/1999 (a)(b) 9,000,000 9,005,670
A A2 2,000,000 Commercial Credit Co.,
6.70% due 8/01/1999 2,001,200 1,981,042
A2 A+ 2,000,000 Transamerica Finance Corp.,
6.80% due 3/15/1999 1,999,460 2,000,000
------------ ------------
29,162,585 28,635,224
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Financial Services-- Bear Stearns Cos. Inc.:
Other--10.3% A A2 $ 6,500,000 6.75% due 4/15/2003 $ 6,577,675 $ 6,070,623
A A2 2,000,000 6.70% due 8/01/2003 2,072,560 1,857,670
A A3 5,000,000 Dean Witter & Discover, 6.875% due 3/01/2003 5,017,470 4,772,945
A A3 5,000,000 Lehman Brothers Holding Corp.,
4.43% due 1/12/1999 (a)(b) 5,026,150 4,990,600
Morgan Stanley Group Inc.:
A+ A1 2,500,000 9.375% due 6/15/2001 2,952,975 2,773,265
A+ A1 3,000,000 8.875% due 10/15/2001 3,482,840 3,250,428
PaineWebber Group Inc.:
BBB+ A3 2,000,000 6.25% due 6/15/1998 2,052,040 1,947,422
BBB+ A3 7,000,000 9.25% due 12/15/2001 8,174,550 7,577,409
A+ A3 1,000,000 Torchmark Corp., 9.625% due 5/01/1998 1,139,040 1,101,925
------------ ------------
36,495,300 34,342,287
<PAGE>
Foreign*--7.8% A A1 2,000,000 Australian New Zealand Bank,
6.25% due 2/01/2004 (1) 1,994,100 1,837,338
A+ A2 4,000,000 CRA Finance Ltd., 6.50% due 12/01/2003 (2) 4,006,020 3,717,096
Korea Development Bank (3):
A+ A1 1,500,000 6.25% due 5/01/2000 1,508,040 1,422,429
A+ A1 2,500,000 7.90% due 2/01/2002 2,734,900 2,554,947
A+ A1 3,000,000 Korea Electric Power, Corp.
6.375% due 12/01/2003 (4) 2,955,810 2,715,399
AAA Aaa 2,000,000 Metropolis of Tokyo (Japan),
8.70% due 10/05/1999 (5) 2,312,940 2,199,524
BBB Baa1 5,000,000 Petro Canada, 8.60% due 10/15/2001 (6) 5,194,980 5,388,890
AA+ Aa1 2,000,000 Province of British Columbia (Canada),
7.00% due 1/15/2003 (7) 1,998,500 1,982,620
AA+ Aa1 1,000,000 Province of Ontario (Canada),
8.00% due 10/17/2001 (7) 1,080,710 1,045,570
A+ A1 3,000,000 Province of Quebec (Canada),
7.50% due 7/15/2002 (7) 3,228,060 3,015,810
------------ ------------
27,014,060 25,879,623
Industrial-- AA- A1 5,481,000 Anheuser-Busch Cos., Inc.,
Consumer--11.9% 8.75% due 12/01/1999 6,189,910 5,967,335
Bass America, Inc.:
A+ A1 1,000,000 6.75% due 8/01/1999 1,009,090 990,337
A+ A1 2,000,000 8.125% due 3/31/2002 2,065,740 2,093,738
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,191,980 4,077,332
A+ A2 1,000,000 7.15% due 9/01/2002 1,046,710 975,788
Grand Metropolitan Investment Corp.:
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 2,949,168
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,217,986
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 3,971,268
A A2 2,000,000 Phillip Morris Cos., Inc., 9.00% due 1/01/2001 1,983,340 2,178,074
Sears, Roebuck & Co.:
BBB+ Baa1 2,500,000 9.25% due 4/15/1998 2,837,275 2,717,168
BBB+ Baa1 7,000,000 8.45% due 11/01/1998 7,762,380 7,412,643
AA Aa1 2,000,000 Wal-Mart Stores, Inc., 8.625% due 4/01/2001 2,101,960 2,155,582
AA Aa3 1,000,000 Warner-Lambert Co., 6.625% due 9/15/2002 1,024,270 956,344
------------ ------------
40,294,715 39,662,763
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A+ A1 $ 2,000,000 Atlantic Richfield Company (ARCO), 10.375%
Energy--4.6% due 7/15/1995 $ 2,176,960 $ 2,122,292
AA- A1 1,000,000 BP America Inc. (Guaranteed by the
British Petroleum Co., PLC),
7.875% due 5/15/2002 1,055,380 1,031,760
Burlington Resources, Inc.:
A- A3 3,500,000 9.625% due 6/15/2000 4,186,510 3,936,793
A- A3 1,000,000 8.50% due 10/01/2001 1,165,780 1,060,066
BBB+ Baa2 3,000,000 Louisiana Land & Exploration Company,
8.25% due 6/15/2002 3,000,000 3,080,985
Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,000,754
A+ A1 2,000,000 9.00% due 12/15/1999 2,342,460 2,186,602
------------ ------------
15,923,210 15,419,252
Industrial-- A+ A1 4,000,000 Air Products & Chemicals, Inc.,
Other--13.0% 6.25% due 6/15/2003 3,965,400 3,701,492
AA- Aa2 2,000,000 Archer-Daniels-Midland Co., 6.25% due
5/15/2003 1,989,000 1,869,130
A+ A1 3,000,000 Capital Cities/ABC, Inc., 8.875% due
12/15/2000 3,514,560 3,311,742
A- Baa1 3,000,000 Carnival Cruise Lines, Inc., 6.15% due
10/01/2003 2,998,350 2,715,603
A A3 2,000,000 First Data Corp., 6.625% due 4/01/2003 1,989,620 1,882,880
AA Aa2 3,500,000 Kaiser Foundation Hospital, 9.00% due
11/01/2001 3,881,070 3,856,604
BBB- Ba1 3,000,000 News America Holdings Inc., 7.50% due
3/01/2000 3,152,370 2,980,011
Telecommunications, Inc.:
BBB- Baa3 9,000,000 9.25% due 4/15/2002 10,732,560 9,652,860
BBB- Baa3 5,000,000 8.25% due 1/15/2003 5,271,050 5,044,185
BBB- Baa2 6,000,000 Tenneco, Inc., 8.00% due 11/15/1999 6,371,100 6,197,130
A A3 2,000,000 Witco Corp., 6.60% due 4/01/2003 1,999,420 1,885,544
------------ ------------
45,864,500 43,097,181
<PAGE>
Supranational--3.0% Asian Development Bank:
AAA Aaa 2,000,000 9.125% due 6/01/2000 2,234,280 2,256,896
AAA Aaa 2,500,000 6.50% due 9/21/2002 2,421,875 2,442,872
AAA Aaa 4,800,000 European Investment Bank, 9.125% due
6/01/2002 5,819,666 5,434,042
------------ ------------
10,475,821 10,133,810
Transportation-- A- Baa1 5,000,000 Southwest Airlines, Inc., 9.40% due 7/01/2001 5,949,310 5,553,920
1.7%
Utilities-- A+ A1 6,000,000 General Telephone of California, Inc.,
Communications-- 6.75% due 3/15/2004 5,837,100 5,775,324
3.0% Pacific Bell, Inc.:
AA- Aa3 1,000,000 8.70% due 6/15/2001 1,113,620 1,097,513
AA- Aa3 1,000,000 7.25% due 7/01/2002 995,140 993,699
AA- Aa3 2,000,000 US West Communications, Inc., 4.65%
due 3/25/1999 (a) (b) 2,000,000 2,001,240
------------ ------------
9,945,860 9,867,776
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A A1 $ 3,000,000 Pacific Gas & Electric Co., 7.875% due
Electric--2.4% 3/01/2002 $ 3,058,040 $ 3,096,009
Pennsylvania Power & Light Co.:
A A2 4,000,000 5.50% due 4/01/1998 3,991,280 3,855,628
A A2 1,000,000 7.75% due 5/01/2002 1,043,980 1,022,536
------------ ------------
8,093,300 7,974,173
<PAGE>
Utilities-- Consolidated Natural Gas Co.:
Gas--5.5% AA- A1 4,000,000 9.375% due 2/01/1997 4,125,760 4,343,452
AA- A1 5,000,000 5.75% due 8/01/2003 4,996,030 4,459,470
BBB Baa2 8,250,000 Union Oil of California, Inc.,
9.75% due 12/01/2000 9,919,305 9,381,793
------------ ------------
19,041,095 18,184,715
Total Investments in
Bonds & Notes--91.6% 316,144,017 304,380,900
Short-Term
Securities
Commercial 6,000,000 General Electric Capital Corp.,
Paper**--1.8% 3.53% due 4/01/1994 6,000,000 6,000,000
Repurchase 16,266,000 Carroll McEntee & McGinley, Inc.,
Agreements***--4.9% purchased on 3/31/1994 to yield 3.55%
to 4/04/1994 16,266,000 16,266,000
Total Investments in Short-Term
Securities--6.7% 22,266,000 22,266,000
Total Investments--98.3% $338,410,017 326,646,900
============
Other Assets Less Liabilities--1.7% 5,495,325
------------
Net Assets--100.0% $332,142,225
============
<FN>
(a)Medium-Term Note.
(b)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate
in effect at March 31, 1994.
<PAGE>
*Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Financial Institution; Guaranteed by the Government.
(2)Industrial Mining.
(3)Financial Institution; Government-Owned and Guaranteed by Korea.
(4)Electric Utility; Majority-Owned, not Guaranteed by Korea.
(5)Government Entity; Guaranteed by Japan.
(6)Energy Company; not Guaranteed by Canada.
(7)Government Entity; Guaranteed by the Province.
**Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Portfolio.
***Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of March 31, 1994
<CAPTION>
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $3,182,935,129 $873,694,511 $326,646,900
Cash 793 466 766
Receivables:
Interest 69,238,348 18,224,841 6,484,727
Securities sold 24,605,970 29,940,519 7,736,915
Capital shares sold 15,234,649 3,998,195 1,995,263
Dividends 102,000 -- --
Prepaid registration fees and other assets (Note 1d) 902,399 119,135 63,700
-------------- ------------ ------------
Total assets 3,293,019,288 925,977,667 342,928,271
-------------- ------------ ------------
Liabilities: Payables:
Securities purchased 70,927,074 30,852,585 7,866,246
Capital shares redeemed 22,687,107 4,832,868 1,894,245
Investment adviser (Note 2) 1,258,574 308,466 114,807
Dividends to shareholders (Note 1e) 12,420,212 1,963,448 728,186
Distributor (Note 2) 1,603,302 360,792 69,281
Accrued expenses and other liabilities 436,984 162,426 113,281
-------------- ------------ ------------
Total liabilities 109,333,253 38,480,585 10,786,046
-------------- ------------ ------------
Net Assets: Net assets $3,183,686,035 $887,497,082 $332,142,225
============== ============ ============
Net Assets Class A Common Stock, $0.10 par value++ $ 11,385,596 $ 3,377,350 $ 1,628,947
Consist of: Class B Common Stock, $0.10 par value++++ 28,014,722 4,493,289 1,307,572
Paid-in capital in excess of par 3,137,414,832 908,908,145 340,884,168
Undistributed (accumulated) realized capital gains
(losses)--net (12,787,463) (830,952) 84,655
Unrealized appreciation/depreciation on investments--
net 19,658,348 (28,450,750) (11,763,117)
-------------- ------------ ------------
Net assets $3,183,686,035 $887,497,082 $332,142,225
============== ============ ============
<PAGE>
Net Asset Value: Class A:
Net assets $ 919,806,773 $380,838,894 $184,243,802
============== ============ ============
Shares outstanding 113,855,959 33,773,498 16,289,470
============== ============ ============
Net asset value and redemption price per share $ 8.08 $ 11.28 $ 11.31
============== ============ ============
Class B:
Net assets $2,263,879,262 $506,658,188 $147,898,423
============== ============ ============
Shares outstanding 280,147,216 44,932,891 13,075,723
============== ============ ============
Net asset value and redemption price per share $ 8.08 $ 11.28 $ 11.31
============== ============ ============
<FN>
*Identified cost $3,163,276,781 $902,145,261 $338,410,017
============== ============ ============
++Authorized shares--Class A 200,000,000 100,000,000 50,000,000
============== ============ ============
++++Authorized shares--Class B 500,000,000 100,000,000 50,000,000
============== ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Six Months Ended March 31, 1994
<CAPTION>
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and discount earned $142,548,746 $ 31,871,570 $ 11,407,036
Income Dividends 1,494,019 -- --
(Note 1c): Other 577,326 108,146 61,505
------------ ------------ ------------
Total income 144,620,091 31,979,716 11,468,541
------------ ------------ ------------
Expenses: Distribution fees--Class B (Note 2) 7,898,418 1,983,466 370,650
Investment advisory fees (Note 2) 6,362,332 1,713,212 627,361
Transfer agent fees--Class B (Note 2) 792,489 282,737 67,065
Transfer agent fees--Class A (Note 2) 312,298 191,757 78,402
Registration fees (Note 1d) 203,732 61,800 53,057
Printing and shareholder reports 97,030 38,964 13,393
Accounting services (Note 2) 71,698 35,458 24,202
Custodian fees 62,793 29,413 21,910
Professional fees 53,121 21,534 8,072
Pricing fees 15,353 17,556 6,705
Directors' fees and expenses 13,357 3,681 1,553
Amortization of organization expenses (Note 1d) 614 217 --
Other 13,817 2,431 405
------------ ------------ ------------
Total expenses 15,897,052 4,382,226 1,272,775
------------ ------------ ------------
Investment income--net 128,723,039 27,597,490 10,195,766
------------ ------------ ------------
Realized & Realized gain on investments--net 12,758,750 4,807,228 1,084,377
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net (46,050,583) (80,947,157) (25,351,651)
Investments--Net ------------ ------------ ------------
(Notes 1c & 3): Net Increase (Decrease) in Net Assets Resulting from
Operations $ 95,431,206 $(48,542,439) $(14,071,508)
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets High Income Portfolio
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: March 31, 1994 Sept. 30, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 128,723,039 $ 191,944,836
Realized gain on investments--net 12,758,750 39,490,168
Change in unrealized appreciation/depreciation on investments--net (46,050,583) 30,800,724
-------------- --------------
Net increase in net assets resulting from operations 95,431,206 262,235,728
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (42,257,980) (77,067,944)
(Note 1e): Class B (86,465,059) (114,876,892)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (128,723,039) (191,944,836)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 506,919,068 1,108,612,505
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 473,627,235 1,178,903,397
Beginning of period 2,710,058,800 1,531,155,403
-------------- --------------
End of period $3,183,686,035 $2,710,058,800
============== ==============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets (continued) Investment Grade Portfolio
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: March 31, 1994 Sept. 30, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 27,597,490 $ 49,188,032
Realized gain on investments--net 4,807,228 35,442,646
Change in unrealized appreciation/depreciation on investments--net (80,947,157) 12,048,232
-------------- --------------
Net increase (decrease) in net assets resulting from operations (48,542,439) 96,678,910
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (12,803,580) (24,831,019)
Shareholders Class B (14,793,910) (24,357,013)
(Note 1e): Realized gain on investments--net:
Class A (17,369,101) (4,865,108)
Class B (23,017,849) (5,004,106)
-------------- --------------
Net decrease in net assets resulting from dividends and distributions to
shareholders (67,984,440) (59,057,246)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 80,997,435 197,559,404
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (35,529,444) 235,181,068
Beginning of period 923,026,526 687,845,458
-------------- --------------
End of period $ 887,497,082 $ 923,026,526
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: March 31, 1994 Sept. 30, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 10,195,766 $ 14,760,592
Realized gain on investments--net 1,084,377 7,219,619
Change in unrealized appreciation/depreciation on investments--net (25,351,651) 6,890,072
-------------- --------------
Net increase (decrease) in net assets resulting from operations (14,071,508) 28,870,283
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (5,976,831) (10,854,121)
Shareholders Class B (4,218,935) (3,906,471)
(Note 1e): Realized gain on investments--net:
Class A (4,476,067) (1,857,266)
Class B (3,477,851) (293,192)
-------------- --------------
Net decrease in net assets resulting from dividends and distributions to
shareholders (18,149,684) (16,911,050)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 36,736,712 161,334,292
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 4,515,520 173,293,525
Beginning of period 327,626,705 154,333,180
-------------- --------------
End of period $ 332,142,225 $ 327,626,705
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights High Income Portfolio
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.13 $ 7.84 $ 7.02 $ 6.39 $ 7.52
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .38 .79 .87 .92 1.00
Realized and unrealized gain (loss) on
investments--net (.05) .29 .82 .63 (1.13)
---------- ---------- ---------- ---------- ----------
Total from investment operations .33 1.08 1.69 1.55 (.13)
---------- ---------- ---------- ---------- ----------
Less dividends:
Investment income--net (.38) (.79) (.87) (.92) (1.00)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.08 $ 8.13 $ 7.84 $ 7.02 $ 6.39
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 4.01%++ 14.35% 25.22% 26.46% (1.95%)
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .52%* .55% .59% .66% .68%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 8.98%* 9.78% 11.44% 14.13% 14.22%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 919,807 $ 886,784 $ 683,801 $ 522,703 $ 486,426
Data: ========== ========== ========== ========== ==========
Portfolio turnover 17.76% 34.85% 40.52% 39.95% 47.60%
========== ========== ========== ========== ==========
<PAGE>
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.13 $ 7.85 $ 7.02 $ 6.40 $ 7.52
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .35 .72 .81 .87 .95
Realized and unrealized gain (loss) on
investments--net (.05) .28 .83 .62 (1.12)
---------- ---------- ---------- ---------- ----------
Total from investment operations .30 1.00 1.64 1.49 (.17)
---------- ---------- ---------- ---------- ----------
Less dividends:
Investment income--net (.35) (.72) (.81) (.87) (.95)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.08 $ 8.13 $ 7.85 $ 7.02 $ 6.40
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 3.61%++ 13.35% 24.44% 25.32% (2.54%)
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses, excluding distribution fees .53%* .56% .60% .67% .70%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.28%* 1.31% 1.35% 1.42% 1.45%
========== ========== ========== ========== ==========
Investment income--net 8.21%* 8.94% 10.42% 13.24% 13.69%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $2,263,879 $1,823,275 $ 847,354 $ 264,486 $ 157,979
Data: ========== ========== ========== ========== ==========
Portfolio turnover 17.76% 34.85% 40.52% 39.95% 47.60%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.81 $ 12.30 $ 11.59 $ 10.83 $ 11.21
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .39 .81 .88 .92 .95
Realized and unrealized gain (loss) on
investments--net (.98) .67 .71 .76 (.38)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.59) 1.48 1.59 1.68 .57
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.39) (.81) (.88) (.92) (.95)
Realized gain on investments--net (.55) (.16) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.94) (.97) (.88) (.92) (.95)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.28 $ 12.81 $ 12.30 $ 11.59 $ 10.83
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (4.89%)++ 12.78% 14.30% 16.18% 5.22%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .51%* .56% .58% .61% .64%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 6.35%* 6.94% 7.43% 8.26% 8.54%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 380,839 $ 407,625 $ 362,139 $ 324,818 $ 307,723
Data: ========== ========== ========== ========== ==========
Portfolio turnover 62.63% 121.34% 65.43% 126.32% 126.39%
========== ========== ========== ========== ==========
<PAGE>
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.81 $ 12.30 $ 11.59 $ 10.83 $ 11.21
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss)--net .35 .72 .79 .84 .86
Realized and unrealized gain (loss) on
investments--net (.98) .67 .71 .76 (.38)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.63) 1.39 1.50 1.60 .48
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.72) (.79) (.84) (.86)
Realized gain on investments--net (.55) (.16) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.90) (.88) (.79) (.84) (.86)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.28 $ 12.81 $ 12.30 $ 11.59 $ 10.83
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (5.26%)++ 11.92% 13.44% 15.30% 4.42%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses, excluding distribution fees .52%* .54% .59% .62% .66%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.27%* 1.29% 1.34% 1.37% 1.41%
========== ========== ========== ========== ==========
Investment income--net 5.59%* 5.80% 6.65% 7.50% 7.77%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 506,658 $ 515,402 $ 325,706 $ 198,504 $ 174,914
Data: ========== ========== ========== ========== ==========
Portfolio turnover 62.63% 121.34% 65.43% 126.32% 126.39%
========== ========== ========== ========== ==========
<FN>
++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.44 $ 12.03 $ 11.41 $ 10.88 $ 11.05
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .38 .76 .88 .93 .97
Realized and unrealized gain (loss) on
investments--net (.85) .55 .62 .53 (.17)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.47) 1.31 1.50 1.46 .80
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.76) (.88) (.93) (.97)
Realized gain on investments--net (.28) (.14) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.66) (.90) (.88) (.93) (.97)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.31 $ 12.44 $ 12.03 $ 11.41 $ 10.88
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (3.93%)++ 11.40% 13.71% 13.97% 7.55%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .52%* .58% .62% .67% .71%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 6.19%* 6.42% 7.54% 8.35% 8.86%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 184,244 $ 193,505 $ 154,333 $ 103,170 $ 88,248
Data: ========== ========== ========== ========== ==========
Portfolio turnover 76.18% 180.52% 95.33% 132.56% 102.53%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION> Class B
For the
For the Six Period
The following per share data and ratios have been derived Months Nov. 13,
from information provided in the financial statements. Ended 1992++ to
March 31, Sept. 30,
Increase (Decrease) in Net Asset Value: 1994 1993
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 12.44 $ 11.68
Operating ---------- ----------
Performance: Investment income--net .35 .61
Realized and unrealized gain (loss) on investments--net (.85) .90
---------- ----------
Total from investment operations (.50) 1.51
---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.61)
Realized gain on investments--net (.28) (.14)
---------- ----------
Total dividends and distributions (.63) (.75)
---------- ----------
Net asset value, end of period $ 11.31 $ 12.44
========== ==========
Total Investment Based on net asset value per share (4.18%)+++ 13.31%+++
Return:** ========== ==========
Ratios to Average Expenses, excluding distribution fees .53%* .57%**
Net Assets: ========== ==========
Expenses 1.03%* 1.07%**
========== ==========
Investment income--net 5.69%* 5.61%**
========== ==========
Supplemental Net assets, end of period (in thousands) $ 147,898 $ 134,122
Data: ========== ==========
Portfolio turnover 76.18% 180.52%
========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Corporate Bond Fund, Inc. (the
"Fund") is registered under the Investment Company
Act of 1940 as a diversified, open-end investment
management company consisting of three separate
portfolios: the High Income Portfolio, the Invest-
ment Grade Portfolio (formerly known as the High
Quality Portfolio), and the Intermediate Term
Portfolio. The Fund's Portfolios offer Class A and
Class B Shares. Class A Shares are sold with a front-
end sales charge. Class B Shares may be subject to
a contingent deferred sales charge. Both classes of
shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses
related to the distribution of such shares and have
exclusive voting rights with respect to matters relat-
ing to such distribution expenditures. The following
is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Portfolio securities
which are traded on stock exchanges are valued at
the last sale price as of the close of business on the
day the securities are being valued, or lacking any
sales, at the mean between closing bid and asked
prices. Securities traded in the over-the-counter
market are valued at the mean between the bid and
asked prices or yield equivalent as obtained from
one or more dealers that make markets in the
securities. Portfolio securities which are traded
both in the over-the-counter market and on a stock
exchange are valued according to the broadest and
most representative market, and it is expected
that for debt securities this ordinarily will be the
over-the-counter market. Short-term securities
are valued at amortized cost which approximates
market.
<PAGE>
Options on debt securities, which are traded on
exchanges, are valued at the last asked price for
options written and last bid price for options pur-
chased. Interest rate futures contracts and options
thereon, which are traded on exchanges, are valued
at their closing price at the close of such exchanges.
Securities and assets for which market quotations
are not readily available are valued at fair value as
determined in good faith by or under the direction
of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained
by the Fund which may use a matrix system for
valuations. Written and purchased options are
non-income producing investments.
(b) Income taxes--It is the Fund's policy to comply
with the requirements of the Internal Revenue Code
applicable to regulated investment companies and
to distribute substantially all of its taxable income
to its shareholders. Therefore, no Federal income
tax provision is required.
(c) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Divi-
dend income is recorded on the ex-dividend dates.
Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains
and losses on security transactions are determined
on the identified cost basis.
(d) Deferred organization expenses and prepaid reg-
istration fees--Deferred organization expenses are
charged to expense on a straight-line basis over a
five-year period. Costs related to the organization of
the second class of shares are charged to expense
over a period not exceeding five years. Prepaid regis-
tration fees are charged to expense as the related
shares are issued.
(e) Dividends and distributions--Dividends from net
investment income are declared daily and paid
monthly. Distributions of capital gains are recorded
on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Merrill Lynch Asset Management,
L.P. ("MLAM"). Effective January 1, 1994, the invest-
ment advisory business of MLAM was reorganized
from a corporation to a limited partnership. Both
prior to and after the reorganization, ultimate con-
trol of MLAM was vested with Merrill Lynch & Co.,
Inc. ("ML & Co."). The general partner of MLAM is
Princeton Services, Inc., an indirect wholly-owned
subsidiary of ML & Co. The limited partners are
ML & Co. and Merrill Lynch Investment Manage-
ment, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co. The Fund has
also entered into a Distribution Agreement and a
Distribution Plan with Merrill Lynch Funds distrib-
utor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of MLIM. FAM is responsible for the management
of the Fund's Portfolios and provides the necessary person-
nel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such
services, FAM receives at the end of each month
a fee with respect to each Portfolio at the annual
rates set forth below which are based upon the
average daily value of the Fund's net assets.
Rate of Advisory Fee
Aggregate of Average
Daily Net Assets of High Investment Intermediate
the Three Combined Income Grade Term
Portfolios Portfolio Portfolio Portfolio
Not exceeding $250 million 0.55% 0.50% 0.50%
In excess of $250 million but
not more than $500 million 0.50 0.45 0.45
In excess of $500 million but
not more than $750 million 0.45 0.40 0.40
In excess of $750 million 0.40 0.35 0.35
<PAGE>
The Investment Advisory Agreement obligates FAM
to reimburse the Fund to the extent the Fund's
expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraor-
dinary items) exceed 2.5% of the Fund's first $30
million of average daily net assets, 2.0% of the Fund's
next $70 million of average daily net assets, and
1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Investment
Adviser during any fiscal year which will cause such
expenses to exceed the pro rata expense limitation
at the time of such payment.
Pursuant to a distribution plan (the "Distribution
Plan") adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of
1940, the Fund pays the Distributor ongoing distri-
bution fee, accrued daily and paid monthly at the
annual rate of 0.50% (in the case of the High Income
Portfolio and the Investment Grade Portfolio) or
0.25% (in the case of the Intermediate Term Port-
folio) and an account maintenance fee at the annual
rate of 0.25% (for each of the Portfolios) of the
average daily net assets of the Class B Shares of such
Portfolio. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch also provides account
maintenance and distribution services to the Fund.
As authorized by the Plan, the Distributor has
entered into an agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), an affili-
ate of MLAM, which provides for the compensation
of MLPF&S for providing distribution-related serv-
ices to the Fund.
During the six months ended March 31, 1994, MLFD
earned underwriting discounts and MLPF&S earned
dealer concessions on sales of the Fund's Class A
Shares as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
MLFD $ 127,733 $ 28,664 $ 19,560
MLPF&S $1,513,985 $336,245 $217,991
<PAGE>
MLPF&S received contingent deferred sales charges
of $2,285,656 relating to transactions in Class B
Shares, amounting to $1,699,376, $458,594 and
$127,686 in the High Income, Investment Grade, and
Intermediate Term Portfolios, respectively, and
$3,750 in commissions on the execution of security
transactions for the High Income Portfolio during
the period.
Financial Data Services, Inc. ("FDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer
agent.
Accounting services are provided to the Fund by
FAM at cost.
Certain officers and/or directors of the Fund are
officers and/or directors of FAM, MLIM, MLFD, FDS,
MLPF&S, ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the six months ended March 31,
1994 were as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Purchases $994,573,867 $584,546,457 $261,036,551
============ ============ ============
Sales $493,350,228 $539,678,858 $238,509,848
============ ============ ============
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized and unrealized gains (losses) as of
March 31, 1994 were as follows:
Realized Unrealized
High Income Portfolio Gains Gains
Long-term investments $ 12,758,750 $ 19,658,348
-------------- --------------
Total $ 12,758,750 $ 19,658,348
============== ==============
<PAGE>
Realized Unrealized
Investment Grade Portfolio Gains Losses
Long-term investments $ 4,807,228 $ (28,450,750)
-------------- --------------
Total $ 4,807,228 $ (28,450,750)
============== ==============
Realized Unrealized
Intermediate Grade Portfolio Gains Losses
Long-term investments $ 1,084,377 $ (11,763,117)
-------------- --------------
Total $ 1,084,377 $ (11,763,117)
============== ==============
As of March 31, 1994, net unrealized appreciation
depreciation for Federal income tax purposes was
as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Gross unrealized
appreciation $ 92,450,794 $ 8,422,895 $ 1,381,217
Gross unrealized
depreciation (72,792,446) (36,873,645) (13,144,334)
------------ ------------ ------------
Net unrealized appre-
ciation/depreciation $ 19,658,348 $(28,450,750) $(11,763,117)
============ ============ ============
The aggregate cost of investments at March 31, 1994
for Federal income tax purposes was $3,163,276,781
for the High Income Portfolio, $902,145,261 for the
Investment Grade Portfolio, and $338,410,017 for
the Intermediate Term Portfolio.
<PAGE>
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions for the six months ended March 31,
1994 was $506,919,068 for the High Income Port-
folio, $80,997,435 for the Investment Grade Portfolio
and $36,736,712 for the Intermediate Term Portfolio.
Net increase in net assets derived from capital share
transactions for the year ended September 30, 1993
was $1,108,612,505 for the High Income Portfolio,
$197,559,404 for the Investment Grade Portfolio and
$161,334,292 for the Intermediate Term Portfolio.
Transactions in capital shares were as follows:
High Income Portfolio
Class A Shares for the Six Dollar
Months Ended March 31, 1994 Shares Amount
Shares sold 13,374,785 $ 111,427,018
Shares issued to shareholders in
reinvestment of dividends 2,697,287 22,359,741
------------- --------------
Total issued 16,072,072 133,786,759
Shares redeemed (11,306,818) (93,901,285)
------------- --------------
Net increase 4,765,254 $ 39,885,474
============= ==============
High Income Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 34,759,978 $ 277,722,778
Shares issued to shareholders in
reinvestment of dividends 4,969,045 39,803,859
------------- --------------
Total issued 39,729,023 317,526,637
Shares redeemed (17,827,332) (142,464,560)
------------- --------------
Net increase 21,901,691 $ 175,062,077
============= ==============
<PAGE>
High Income Portfolio
Class B Shares for the Six Dollar
Months Ended March 31, 1994 Shares Amount
Shares sold 77,205,318 $ 643,700,232
Shares issued to shareholders in
reinvestment of dividends 5,079,402 42,111,254
------------- --------------
Total issued 82,284,720 685,811,486
Shares redeemed (26,367,259) (218,777,892)
------------- --------------
Net increase 55,917,461 $ 467,033,594
============= ==============
<PAGE>
High Income Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 142,333,233 $ 1,141,712,615
Shares issued to shareholders
reinvestment of dividends 7,016,905 56,387,833
------------- ----------------
Total issued 149,350,138 1,198,100,448
Shares redeemed (33,122,536) (264,550,020)
------------- ----------------
Net increase 116,227,602 $ 933,550,428
============= ================
Investment Grade Portfolio
Class A Shares for the Six Dollar
Months Ended March 31, 1994 Shares Amount
Shares sold 4,365,146 $ 52,787,468
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,759,212 21,121,180
------------- --------------
Total issued 6,124,358 73,908,648
Shares redeemed (4,159,670) (50,653,683)
------------- --------------
Net increase 1,964,688 $ 23,254,965
============= ==============
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 7,448,640 $ 91,703,707
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,704,681 20,844,343
------------- --------------
Total issued 9,153,321 112,548,050
Shares redeemed (6,795,967) (83,737,710)
------------- --------------
Net increase 2,357,354 $ 28,810,340
============= ==============
<PAGE>
Investment Grade Portfolio
Class B Shares for the Six Dollar
Months Ended March 31, 1994 Shares Amount
Shares sold 9,227,825 $ 112,666,530
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,993,420 23,905,173
------------- --------------
Total issued 11,221,245 136,571,703
Shares redeemed (6,509,014) (78,829,233)
------------- --------------
Net increase 4,712,231 $ 57,742,470
============= ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 20,946,711 $ 257,900,677
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,496,071 18,304,113
------------- --------------
Total issued 22,442,782 276,204,790
Shares redeemed (8,711,514) (107,455,726)
------------- --------------
Net increase 13,731,268 $ 168,749,064
============= ==============
Intermediate Term Portfolio
Class A Shares for the Six Dollar
Months Ended March 31, 1994 Shares Amount
Shares sold 2,665,393 $ 32,018,245
Shares issued to shareholders in
reinvestment of dividends and
distributions 592,150 7,057,162
------------- --------------
Total issued 3,257,543 39,075,407
Shares redeemed (2,519,804) (30,248,786)
------------- --------------
Net increase 737,739 $ 8,826,621
============= ==============
<PAGE>
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 5,149,248 $ 61,875,256
Shares issued to shareholders in
reinvestment of dividends and
distributions 707,534 8,452,204
------------- --------------
Total issued 5,856,782 70,327,460
Shares redeemed (3,139,330) (37,802,328)
------------- --------------
Net increase 2,717,452 $ 32,525,132
============= ==============
Intermediate Term Portfolio
Class B Shares for the
Six Months Ended Dollar
March 31, 1994 Shares Amount
Shares sold 4,009,132 $ 48,262,973
Shares issued to shareholders in
reinvestment of dividends and
distributions 381,160 4,539,333
------------- --------------
Total issued 4,390,292 52,802,306
Shares redeemed (2,093,298) (24,892,215)
------------- --------------
Net increase 2,296,994 $ 27,910,091
============= ==============
<PAGE>
Intermediate Term Portfolio
Class B Shares for the Period
November 13, 1992++ to Dollar
September 30, 1993 Shares Amount
Shares sold 11,673,732 $ 139,623,863
Shares issued to shareholders in
reinvestment of dividends and
distributions 175,119 2,128,550
------------- --------------
Total issued 11,848,851 141,752,413
Shares redeemed (1,070,122) (12,943,253)
------------- --------------
Net increase 10,778,729 $ 128,809,160
============= ==============
[FN]
++Commencement of Operations.
5. Loaned Securities:
At March 31, 1994, the Investment Grade Portfolio
held US Treasury Bonds/Notes having an aggregate
value of approximately $20,336,000 as collateral for
Portfolio securities loaned, having a market value of
approximately $19,694,000. The Intermediate Term
Portfolio held US Treasury Bonds/Notes having an
aggregate value of approximately $967,000 as collat-
eral for Portfolio securities loaned, having a market
value of approximately $938,000.
6. Capital Loss Carryforward:
At September 30, 1993, the Fund had a capital loss
carryforward of approximately $28,547,000 in the
High Income Portfolio, all of which expires in 1999.
This will be available to offset like amounts of any
future taxable gains.
In accordance with generally accepted accounting
principles, expired capital loss carryforwards in the
amount of $16,670,558 for the High Income Portfolio
and $588,874 for the Intermediate Term Portfolio
have been reclassified from undistributed (accumu-
lated) realized capital gains (losses) net to paid-in
capital in excess of par.
