MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Annual Report
September 30, 1995
Officers and Directors
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02101
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this
report should not be considered a representation of
future performance. Investment return and principal
value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their
original cost.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
After losing momentum through the second calendar
quarter of 1995, it now appears that the US economy
has resumed a moderate growth trend. Gross domes-
tic product growth for the three months ended June
30 was revised to show that the economy expanded at
a 1.1% pace, rather than the 0.5% rate that was origi-
nally reported. The employment report for August
exceeded consensus expectations, although most of
the new jobs created were in the service sector,
reflecting the ongoing sluggishness in manufacturing.
However, durable goods orders rebounded somewhat
in August, supported by stronger automobile sales.
Reflecting the trend of renewed economic growth--
and continued containment of inflationary pressures--
the Federal Reserve Board signaled no shift in
monetary policy following its September meeting.
One of the major developments during the September
quarter was the strengthening of the US dollar rela-
tive to the yen and the Deutschemark. Improving
interest rate differentials favoring the US currency,
combined with coordinated central bank intervention
and more positive investor sentiment, have helped to
bolster the dollar in foreign exchange markets. Other
factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows
to the United States and the prospect of increased
capital outflows from Japan. However, it remains to
be seen if the US dollar's strengthening trend can
continue without significant improvements in the
US budget and trade deficits.
In the weeks ahead, investor interest will continue to
focus on US economic activity. Clear signs of a moder-
ate, noninflationary expansion could further benefit
the US stock and bond markets. In addition, should
the current Federal budget deficit reduction efforts
now underway in Washington prove successful, the
implications would likely be positive for the US
financial markets.
Fiscal Year in Review
<PAGE>
High Income Portfolio
The high-yield market produced a total return of
+2.92% during third quarter 1995 as measured by the
unmanaged Merrill Lynch High Yield Master Index,
and had a total return of +16.05% for the nine months
ended September 30, 1995. While returns were excel-
lent, third quarter investment performance reflected
a marked deceleration. The major decline in inter-
mediate-term and long-term interest rates which
occurred during the first half of 1995 appears to have
ended. The Merrill Lynch High Yield Master Index
and the 10-year US Treasury Note were basically
unchanged.
Amidst signs of a firming economy, cyclical issues
outperformed defensive issues during the quarter
ended September 30, 1995 for the first time in 1995.
Another sign that reflects increased comfort with the
economy--the yield spread between BB-rated issues
and B-rated issue--narrowed modestly after widening
approximately 65 basis points in the first half of 1995.
New issue-volume was extraordinarily high, totaling
$13.6 billion during the September quarter compared
to less than $6 billion during the same quarter in
1994. Net of redemptions, upgrades to investment
grade, tenders and maturing issues, high-yield supply
increased $16 billion for the nine months ended
September 30, 1995. This brought the total size of the
high-yield universe to approximately $285 billion.
Investors continued to avoid highly speculative offer-
ings. This forced two prospective large issuers seeking
to finance global satellite telephone systems to with-
draw their offerings.
For the fiscal year ended September 30, 1995, we
employed various strategies in order to seek to enhance
the Portfolio's total return. In the first fiscal quarter,
the market was quite weak continuing into a bear
market which began in early 1994. The market then
improved during 1995 and was strong on balance
through the Fund's fiscal year-end. The table below
reflects quarterly yields, yield spreads over US Treasury
Notes and yield premiums of the Merrill Lynch High
Yield Master Index during the portfolio's fiscal year.
<PAGE>
Treasury Index Yield Yield
Yield* Yield Spread Premium
9/30/94 7.63% 10.88% 325 basis points 43.0%
12/31/94 7.81 11.26 345 44.1
3/31/95 7.08 10.75 367 51.8
6/30/95 6.26 10.05 379 60.5
9/30/95 6.27 10.04 377 60.1
[FN]
*10-year maturity.
We attempted to stay fully invested over this period in
order to reap the benefits of generally rising bond
prices. Net investments by shareholders contributed to
an increase in net assets from $3.2 billion to $4.4 bil-
lion over the course of the fiscal year. This flow of
new money required us to exercise an active invest-
ment role. While maintaining approximately a market
weighting in terms of credit quality sector representa-
tion, we have attempted to buy undervalued bonds of
companies with rising earnings and sell bonds of
issuers with weak earnings. These strategies provided
an above-average total return for each of the Portfolio's
classes of shares.
The internal dynamics of the high-yield market may
surprise investors accustomed to the relatively homo-
genous investment performance of industries within
the high-grade market. Prices of high-yield bonds
fluctuate widely as buyers and sellers changed per-
ceptions of credit quality. Valuations were reflected in
bond prices. For example, the industry groups with
the highest total return for the nine months ended
September 30, 1995 were: airlines, 23.9%; gaming, 19.8%;
housing, 18.4%; and utilities, 18.0%. The worst perform-
ers during the period were: retail, 3%; food/tobacco,
8.3%; metals/minerals, 12.3%; and financial, 12.8%.
Our outlook is positive. For the remainder of the year,
we anticipate a stable interest rate environment. Yield
spreads seem likely to remain relatively unchanged.
Industry groups that we have overweighted because
of above-average value include broadcasting & pub-
lishing, cellular telephones, and communications,
which aggregates 16.6% of net assets. This broad
category includes cable TV operations in the United
States, Great Britain and other foreign countries;
television and radio broadcasting companies; and US
cellular and paging services. Also included in this
category are large telephone companies in Argentina
and the Philippines whose bond ratings are below
investment grade because of the sovereign risk of
investing in these two countries. Other major indus-
tries included energy, 8.5% of net assets; hotels &
casinos, 8.0%; and paper, 7.0%.
<PAGE>
Investment Grade Portfolio &
Intermediate Term Portfolio
The bond market experienced one of its strongest
rallies in several years as the domestic economy
showed a significant deceleration from last year's
pace. Data released during the September period
reinforced the perception that the economy had
achieved a soft landing. Therefore, the torrid pace of
growth in fourth quarter 1994 had slowed without a
corresponding increase in inflationary pressures. Yields
dropped throughout the first six months of the year,
then began to rise slightly on fears that these same
lower interest rates would begin to overly stimulate
the economy. However, inflation remained contained
because of the absence of significant price pressures.
Real wage growth, the key factor that determines the
economy's core inflation rate, was particularly subdued.
During market rallies, from January 1995 through
June 1995, we extended the average maturity of Invest-
ment Grade Portfolio from 9.8 years to 10.6 years. This
action enabled us to capture the comparatively large
price moves on the longer end of the yield curve.
While we maintained our percentage of BBB-rated
bonds, we added to our holding of foreign securities
which were all high quality and US dollar-denominated.
We traded significantly within those sectors to realize
profits and to position the Portfolio to take advantage
of the incremental value added. During the summer
months, when the market sold off, we built up our
cash position, which protected us from the adverse
effects of higher yields. We subsequently reinvested
the cash as the market improved in the September
quarter. We invested in industrial names which did
well and avoided utilities which performed poorly.
For the Intermediate Term Portfolio, we also extended
the average maturity in order to take advantage of
market rallies from January 1995 through March 1995.
We extended the average maturity of the portfolio from
5.4 years to 6.2 years, which enabled us to capture the
comparatively large price moves in the longer end of
the intermediate market, which benefited total return.
<PAGE>
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
November 8, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to
purchase shares of the Fund through the Merrill
Lynch Select Pricing SM System, which offers four
pricing alternatives:
* Class A Shares incur a maximum initial sales charge
(front-end load) of 4% and bear no ongoing distribu-
tion or account maintenance fees for High Income
and Investment Grade Portfolio. Intermediate Term
Portfolio incurs a maximum initial sales charge
(front-end load) of 1% and bears no ongoing distri-
bution or account maintenance fees. Class A Shares
are available only to eligible investors.
<PAGE>
* Class B Shares are subject to a maximum contingent
deferred sales charge of 4% if redeemed during the
first year, decreasing 1% each year thereafter to 0%
after the fourth year for High Income and Investment
Grade Portfolio. Intermediate Term Portfolio is
subject to a maximum contingent deferred sales
charge of 1% if redeemed within one year of purchase.
In addition, High Income and Investment Grade
Portfolio are subject to a distribution fee of 0.50% and
an account maintenance fee of 0.25%. Intermediate
Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. All three
classes of shares automatically convert to Class D
Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of
0.55% and an account maintenance fee of 0.25% for
High Income and Investment Grade Portfolio. Inter-
mediate Term Portfolio is subject to a distribution
fee of 0.25% and an account maintenance fee of
0.25%. In addition, Class C Shares are subject to a
1% contingent deferred sales charge if redeemed
within one year of purchase.
* Class D Shares incur a maximum initial sales charge
of 4% and an account maintenance fee of 0.25% (but
no distribution fee) for High Income and Investment
Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account
maintenance fee of 0.10% (but no distribution fee).
Performance data for all of the Fund's shares are
presented in the "Total Return Based on a $10,000
Investment" graphs on pages 4--6 and the "Recent
Performance Results" table on page 8. The "Average
Annual Total Return" and "Performance Summary"
tables for the Fund's Class A and Class B Shares are
presented on pages 4--7. "Aggregate Total Return"
tables for Class C and Class D Shares are also
presented on pages 4--6.
The "Recent Performance Results" table shows
investment results before the deduction of any sales
charges for Class A and Class B Shares for the 12-
month and 3-month periods ended September 30,
1995 and for Class C and Class D Shares for the since
inception and 3-month periods ended September 30,
1995. All data in this table assume imposition of the
actual total expenses incurred by each class of
shares during the relevant period.
<PAGE>
None of the past results shown should be considered
a representation of future performance. Investment
return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each
class of shares will vary because of the different
levels of account maintenance, distribution and
transfer agency fees applicable to each class, which
are deducted from the income available to be paid
to shareholders.
PERFORMANCE DATA (continued)
HIGH INCOME PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A, B, C, and D Shares compared to the growth of an investment
in CS First Boston High Yield Index. Beginning and ending values are:
9/85 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
High Income Portfolio++--Class A Shares* $ 9,600 $29,637
CS First Boston High Yield Index++++ $10,000 $31,490
10/21/88** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
High Income Portfolio++--Class B Shares* $10,000 $21,091
CS First Boston High Yield Index++++ $10,000 $21,357
10/21/94** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
High Income Portfolio++--Class C Shares $10,000 $11,193
Merrill Lynch Corporate Bond Fund, Inc.'s
High Income Portfolio++--Class D Shares* $ 9,600 $10,883
CS First Boston High Yield Index++++ $10,000 $11,397
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++The Porfolio invests primarily in fixed-income securities which are
rated in the lower rating catagories of the established rating services,
or in unrated securities of comparable quality.
++++This unmanaged market-weighed Index, which mirrors the high-yield debt
market, is comprised of 423 securities rated BBB or below.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class A Shares*
Year Ended 9/30/95 +13.26% + 8.73%
Five Years Ended 9/30/95 +16.23 +15.28
Ten Years Ended 9/30/95 +11.93 +11.48
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class B Shares*
Year Ended 9/30/95 +12.42% + 8.42%
Five Years Ended 9/30/95 +15.33 +15.33
Inception (10/21/88)
through 9/30/95 +11.34 +11.34
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class C Shares*
Inception (10/21/94)
through 9/30/95 +12.93% +11.93%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class D Shares*
Inception (10/21/94)
through 9/30/95 +13.37% + 8.83%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
INVESTMENT GRADE PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A, B, C, and D Shares compared to the growth of an investment
in Merrill Lynch C0A0 Bond Index. Beginning and ending values are:
<PAGE>
9/85 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--Class A Shares* $ 9,600 $24,013
Merrill Lynch COAO Bond Index++++ $10,000 $28,287
10/21/88** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--Class B Shares* $10,000 $17,794
Merrill Lynch COAO Bond Index++++ $10,000 $19,930
10/21/94** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--Class C Shares $10,000 $11,361
Merrill Lynch Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--Class D Shares* $ 9,600 $11,061
Merrill Lynch COAO Bond Index++++ $10,000 $11,667
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++The Porfolio invests primarily in long-term corporate bonds rated A or
better by Moody's Investors Service, Inc. or Standard & Poor's Corp.
++++This unmanaged Index is comprised of all investment-grade corporate bonds
rated BBB3 or higher, of all maturities.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Investment Grade Portfolio Class A Shares*
Year Ended 9/30/95 +14.92% +10.32%
Five Years Ended 9/30/95 +10.09 + 9.19
Ten Years Ended 9/30/95 + 9.60 + 9.16
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class B Shares*
Year Ended 9/30/95 +14.05% +10.05%
Five Years Ended 9/30/95 + 9.26 + 9.26
Inception (10/21/88)
through 9/30/95 + 8.65 + 8.65
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class C Shares*
Inception (10/21/94)
through 9/30/95 +14.61% +13.61%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Investment Grade Portfolio Class D Shares*
Inception (10/21/94)
through 9/30/95 +15.21% +10.61%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (continued)
INTERMEDIATE TERM PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A, B, C, and D Shares compared to the growth of an investment
in Merrill Lynch C6AO Bond Index. Beginning and ending values are:
9/85 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--Class A Shares* $ 9,600 $24,099
Merrill Lynch C6AO Bond Index++++ $10,000 $27,085
10/13/92** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--Class B Shares* $10,000 $12,172
Merrill Lynch C6AO Bond Index++++ $10,000 $12,818
10/21/94** 9/95
Merrill Lynch Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--Class C Shares $10,000 $11,226
Merrill Lynch Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--Class D Shares* $ 9,600 $12,251
Merrill Lynch C6AO Bond Index++++ $10,000 $11,671
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++The Porfolio invests primarily in bonds rated in the four highest categories
or higher by Moody's Investors Service, Inc. or BBB or higher by Standard &
Poor's Corp., with a maximum remaining maturity not to exceed ten years
and, depending on market conditions, an average remaining maturity of five
to ten years.
++++This unmanaged Index is comprised of all investment-grade corporate bonds
maturity in from five to ten years.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Intermediate Term Portfolio Class A Shares*
Year Ended 9/30/95 +13.32% +12.19%
Five Years Ended 9/30/95 + 9.39 + 9.17
Ten Years Ended 9/30/95 + 9.30 + 9.19
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class B Shares*
Year Ended 9/30/95 +12.74% +11.74%
Inception (11/13/92)
through 9/30/95 + 7.06 + 7.06
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class C Shares*
Inception (10/21/94)
through 9/30/95 +13.26% +12.26%
<PAGE>
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Intermediate Term Portfolio Class D Shares*
Inception (10/21/94)
through 9/30/95 +13.65% +12.51%
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
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 $ 0.26*** + 3.08 + 1.28% + 1.86%
1981 7.91/7.26 9.88/ 9.38 9.93/ 9.57 1.12 1.46 1.37 + 6.48 +10.52 +11.11
1982 7.26/7.74 9.38/10.51 9.57/10.59 1.04 1.36 1.36 +23.09 +28.74 +26.74
1983 7.74/8.10 10.51/10.24 10.59/10.37 1.01 1.22 1.20 +18.32 + 9.42 + 9.63
1984 8.10/7.72 10.24/10.44 10.37/10.52 1.02 1.21 1.18 + 8.66 +15.10 +14.00
1985 7.72/8.29 10.44/11.45 10.52/11.33 1.01 1.18 1.16 +21.61 +22.23 +19.86
1986 8.29/8.34 11.45/11.95 11.33/11.87 0.98 1.07 1.03 +12.91 +14.26 +14.34
1987 8.34/7.80 11.95/11.00 11.87/10.99 0.95 0.99 0.94 + 4.94 + 0.45 + 0.65
1988 7.80/7.80 11.00/10.90 10.99/10.83 0.95 0.99 0.97 +12.71 + 8.30 + 7.51
1989 7.80/7.17 10.90/11.33 10.83/11.13 0.97 1.00 0.98 + 4.33 +13.63 +12.33
1990 7.17/5.88 11.33/11.13 11.13/11.05 1.00 0.94 0.97 - 4.61 + 6.97 + 8.43
1991 5.88/7.21 11.13/12.03 11.05/11.77 0.90 0.91 0.92 +39.75 +17.08 +15.53
1992 7.21/7.78 12.03/11.86 11.77/11.60 0.86 1.03(c) 0.99(d) +20.64 + 7.51 + 7.28
1993 7.78/8.32 11.86/11.97 11.60/11.92 0.76 1.35(e) 1.03(f) +17.39 +12.49 +11.82
1994 8.32/7.31 11.97/10.60 11.92/10.70 0.80 0.77 0.77 - 2.69 - 5.06 - 3.85
1/1/95--9/30/95 7.31/7.80 10.60/11.51 10.70/11.50 0.55 0.58 0.57 +14.92 +14.55 +13.27
------ ------ ------
Total $16.15 $16.31 $15.70
Cumulative total return as of 9/30/95: +540.74%** +416.16%** +388.72%**
<PAGE>
<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>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.92/7.80 $11.08/10.90 -- $0.18 $0.18 -- + 0.74% + 0.05% --
1989 7.80/7.17 10.90/11.33 -- 0.91 0.91 -- + 3.54 +12.77 --
1990 7.17/5.89 11.33/11.13 -- 0.95 0.86 -- - 5.18 + 6.16 --
1991 5.89/7.22 11.13/12.03 -- 0.84 0.83 -- +38.67 +16.19 --
1992 7.22/7.78 12.03/11.86 $11.68/11.60 0.80 0.94(a) $0.24(b) +19.57 + 6.69 + 1.34%
1993 7.78/8.33 11.86/11.97 11.60/11.92 0.70 1.25(c) 0.97(d) +16.65 +11.65 +11.26
1994 8.33/7.31 11.97/10.60 11.92/10.70 0.74 0.69 0.71 - 3.54 - 5.78 - 4.34
1/1/95--9/30/95 7.31/7.80 10.60/11.51 10.70/11.50 0.51 0.52 0.53 +14.29 +13.93 +12.85
----- ----- -----
Total $5.63 $6.18 $2.45
Cumulative total return as of 9/30/95: +110.91%** + 77.94%** +21.72%**
<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>
Standardized
12 Month 3 Month 30-day Yield
9/30/95 6/30/95 9/30/94++ % Change++ % Change As of 9/30/95
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 7.80 $ 7.74 $ 7.66 + 1.83% +0.78% 9.53%
High Income Portfolio Class B Shares 7.80 7.75 7.66 + 1.83 +0.65 9.17
High Income Portfolio Class C Shares 7.81 7.75 7.59 + 2.90 +0.77 9.12
High Income Portfolio Class D Shares 7.80 7.75 7.59 + 2.77 +0.65 9.31
Investment Grade Portfolio Class A Shares 11.51 11.47 10.77 + 6.87 +0.35 6.20
Investment Grade Portfolio Class B Shares 11.51 11.47 10.77 + 6.87 +0.35 5.68
Investment Grade Portfolio Class C Shares 11.51 11.48 10.67 + 7.87 +0.26 5.62
Investment Grade Portfolio Class D Shares 11.51 11.48 10.67 + 7.87 +0.26 5.96
Intermediate Term Portfolio Class A Shares 11.50 11.49 10.90 + 5.50 +0.09 6.13
Intermediate Term Portfolio Class B Shares 11.50 11.49 10.90 + 5.50 +0.09 5.66
Intermediate Term Portfolio Class C Shares 11.50 11.50 10.81 + 6.38 +0.00 5.62
Intermediate Term Portfolio Class D Shares 11.50 11.50 10.81 + 6.38 +0.00 6.03
High Income Portfolio Class A Shares--Total Return +13.26(1) +3.17(2)
High Income Portfolio Class B Shares--Total Return +12.42(3) +2.85(4)
High Income Portfolio Class C Shares--Total Return +12.93(5) +2.96(6)
High Income Portfolio Class D Shares--Total Return +13.37(7) +2.98(8)
Investment Grade Portfolio Class A Shares--Total Return +14.92(9) +2.10(10)
Investment Grade Portfolio Class B Shares--Total Return +14.05(11) +1.90(12)
Investment Grade Portfolio Class C Shares--Total Return +14.61(13) +1.80(14)
Investment Grade Portfolio Class D Shares--Total Return +15.21(15) +1.94(16)
Intermediate Term Portfolio Class A Shares--Total Return +13.32(17) +1.77(18)
Intermediate Term Portfolio Class B Shares--Total Return +12.74(19) +1.64(20)
Intermediate Term Portfolio Class C Shares--Total Return +13.26(21) +1.55(22)
Intermediate Term Portfolio Class D Shares--Total Return +13.65(23) +1.66(24)
<FN>
*Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since inception
(10/21/94).
(1)Percent change includes reinvestment of $0.811 per share ordinary income
dividends.
(2)Percent change includes reinvestment of $0.184 per share ordinary income
dividends.
(3)Percent change includes reinvestment of $0.753 per share ordinary income
dividends.
<PAGE>
(4)Percent change includes reinvestment of $0.169 per share ordinary income
dividends.
(5)Percent change includes reinvestment of $0.689 per share ordinary income
dividends.
(6)Percent change includes reinvestment of $0.168 per share ordinary income
dividends.
(7)Percent change includes reinvestment of $0.728 per share ordinary income
dividends.
(8)Percent change includes reinvestment of $0.179 per share ordinary income
dividends.
(9)Percent change includes reinvestment of $0.803 per share ordinary income
dividends.
(10)Percent change includes reinvestment of $0.197 per share ordinary income
dividends.
(11)Percent change includes reinvestment of $0.719 per share ordinary income
dividends.
(12)Percent change includes reinvestment of $0.175 per share ordinary income
dividends.
(13)Percent change includes reinvestment of $0.652 per share ordinary income
dividends.
(14)Percent change includes reinvestment of $0.174 per share ordinary income
dividends.
(15)Percent change includes reinvestment of $0.711 per share ordinary income
dividends.
(16)Percent change includes reinvestment of $0.190 per share ordinary income
dividends.
(17)Percent change includes reinvestment of $0.796 per share ordinary income
dividends.
(18)Percent change includes reinvestment of $0.191 per share ordinary income
dividends.
(19)Percent change includes reinvestment of $0.739 per share ordinary income
dividends.
(20)Percent change includes reinvestment of $0.176 per share ordinary income
dividends.
(21)Percent change includes reinvestment of $0.679 per share ordinary income
dividends.
(22)Percent change includes reinvestment of $0.176 per share ordinary income
dividends.
(23)Percent change includes reinvestment of $0.717 per share ordinary income
dividends.
(24)Percent change includes reinvestment of $0.188 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--2.8% Delta Air Lines Inc.:
BB+ Baa3 $ 3,000,000 9.30% due 1/02/2010 $ 2,963,100 $ 3,307,632
BB+ Baa3 5,000,000 9.20% due 9/23/2014 4,839,050 5,387,525
BB+ Baa3 20,000,000 10.50% due 4/30/2016 20,481,900 23,863,599
Piedmont Aviation, Inc.:
BB- B1 200,000 Series C, 9.70% due 1/15/1999 201,676 195,849
BB- B1 100,000 Series C, 10.25% due 1/15/2007 103,706 97,585
BB- B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,943,940
BB- B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 1,983,657
BB- B1 50,000 Series G, 10.35% due 3/28/2011 51,425 50,863
BB- B1 450,000 Series H, 9.85% due 5/08/2005 454,617 428,850
BB- B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,454,963
BB- B1 536,000 Series I, 10% due 11/08/2012 545,048 519,907
United Air Lines Inc.:
BB+ Baa2 4,000,000 10.02% due 3/22/2014 4,050,000 4,533,320
BB+ Baa2 2,000,000 9.08% due 10/26/2015 1,847,200 2,111,580
BB+ Baa2 7,100,000 9.35% due 4/07/2016 7,215,446 7,649,185
BB+ Ba2 10,500,000 9.21% due 1/21/2017 10,480,125 11,189,693
USAir Inc.:
B B1 30,000,000 9.625% due 2/01/2001 24,109,906 25,050,000
BB- B1 18,500,000 10.375% due 3/01/2013 18,290,000 17,390,000
BB B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,439,582
BB B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,824,365
B+ B2 421,000 Series E, 10.70% due 1/01/2002 382,895 421,979
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,112,712
B+ B2 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,094,856
B+ B2 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,094,856
B+ B2 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,094,856
B+ B2 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,094,856
BB- B1 5,249,759 Series 89A1, 9.33% due 1/01/2006++++ 4,966,118 4,956,823
-------------- --------------
114,884,789 121,293,033
Automobile NR* B1 10,000,000 Exide Corp., 10% due 4/15/2005 (k) 10,071,250 10,600,000
Parts--0.5% B B3 10,150,000 SPX Inc., 11.75% due 6/01/2002 10,175,000 10,860,500
-------------- --------------
20,246,250 21,460,500
<PAGE>
Broadcasting & American Telecasting, Inc. (a):
Publishing--6.7% CCC+ Caa 38,190,545 14.86% due 6/15/2004 21,986,825 22,914,327
CCC+ Caa 10,100,000 14.50% due 8/15/2005 (b) 5,106,639 5,050,000
CCC B3 29,117,000 Australis Media Ltd., 14.07% due
5/15/2003 (a) (g) 15,525,401 17,615,785
BB- Ba3 22,500,000 Century Communications Corporation,
9.75% due 2/15/2002 22,112,500 22,893,750
B B1 10,000,000 Comcast Corporation, 9.50% due 1/15/2008 9,350,000 10,162,500
BB+ Ba2 10,000,000 Continental Cablevision Inc., 9.50%
due 8/01/2013 10,000,000 10,400,000
BB- Ba3 13,150,000 Heritage Media Services Corporation, 11%
due 6/15/2002 13,158,750 14,136,250
BB- Ba3 4,200,000 K-III Communications Corp., 10.625%
due 5/01/2002 4,192,500 4,473,000
B B3 14,000,000 The Katz Corp., 12.75% due 11/15/2002 14,313,750 15,190,000
B Caa 25,000,000 NWCG Holding Corp., 13.79%
due 6/15/1999 (a) 15,251,243 16,593,750
CCC+ Caa 20,000,000 Peoples Choice T.V. Corporation, 13.48%
due 6/01/2004 (a) (h) 10,776,609 10,550,000
BB- B3 10,000,000 SCI Television Inc., 11% due 6/30/2005 10,350,000 10,612,500
</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>
Broadcasting & Sinclair Broadcasting Group Inc.:
Publishing B+ B1 $ 26,500,000 10% due 9/30/2003 $ 26,612,500 $ 27,096,250
(concluded) B+ B3 15,000,000 10% due 12/15/2003 15,036,250 15,262,500
United International Holdings, Inc. (a):
B- B3 10,000,000 12.18% due 11/15/1999 6,143,300 6,150,000
B- B3 50,000,000 13.99% due 11/15/1999 (i) 28,634,902 31,875,000
Videotron Groupe L'TEE:
BB+ Ba3 11,250,000 10.25% due 10/15/2002 11,322,500 11,756,250
BB+ Baa3 3,300,000 10.625% due 2/15/2005 3,279,375 3,481,500
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,150,000
NR* NR* 13,000,000 Young Broadcasting Inc., 10.125%
due 2/15/2005 (k) 13,000,000 13,715,000
-------------- --------------
276,172,419 290,078,362
<PAGE>
Building CCC B3 20,000,000 Nortek Inc., 9.875% due 3/01/2004 19,834,240 18,250,000
Materials--1.7% B+ B3 26,720,000 Pacific Lumber Co., 10.50% due 3/01/2003 26,420,738 25,517,600
B+ B2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 28,647,740
-------------- --------------
72,144,984 72,415,340
Building American Standard Inc.:
Products--0.6% B+ Ba3 3,000,000 11.375% due 5/15/2004 3,120,000 3,315,000
B B1 6,000,000 11.52% due 6/01/2005 (a) 4,244,972 4,890,000
B Ba3 20,000,000 Inter-City Products Corp., 9.75%
due 3/01/2000 19,508,750 17,300,000
-------------- --------------
26,873,722 25,505,000
Capital Goods-- B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 20,914,992
1.5% B- B3 22,000,000 International Wire Group, 11.75%
due 6/01/2005 (k) 22,012,500 22,055,000
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 24,050,000
-------------- --------------
68,705,563 67,019,992
Cellular NR* NR* 21,000,000 Page Mart Inc., 12.74%
Telephones--0.3% due 11/01/2003 (a) 14,060,598 13,965,000
Chemicals--1.6% B B2 15,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 15,060,000 15,787,500
B+ Ba3 45,000,000 G-I Holdings, Inc., 11.44% due
10/01/1998 (a) 32,231,632 32,793,750
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.65% due 7/15/2001 (a) 24,123,108 22,218,750
-------------- --------------
71,414,740 70,800,000
Communications-- BB- B2 47,294,000 Bell Cablemedia PLC, 11.50%
9.6% due 9/15/2005 (a) (k) 26,766,422 27,844,343
BB- B3 13,500,000 Cai Wireless Systems Inc., 12.25%
due 9/15/2002 13,500,000 14,040,000
CCC+ B3 23,000,000 Cellular Communications, Inc., 13.25%
due 8/15/2000 (a) (c) 12,310,557 12,765,000
B- Caa 46,688,000 Echostar Communication Corp.,
12.88% due 6/01/2004 (a) (j) 29,531,776 26,612,160
CCC+ Caa 29,547,000 Horizon Cellular Telephone Co., 11.48%
due 10/01/2000 (a) 23,588,062 24,893,348
CCC+ B3 25,000,000 Mobilemedia Communication, Inc.,
11.32% due 12/01/2003 (a) 17,126,368 18,437,500
CCC+ B3 55,000,000 Nextel Communications Inc., 10.80% due
8/15/2004 (a) 36,838,808 27,225,000
</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>
Communications Paging Network, Inc.:
(concluded) B B2 $ 20,000,000 11.75% due 5/15/2002 $ 20,387,500 $ 22,100,000
B B2 15,000,000 10.125% due 8/01/2007 15,000,000 15,675,000
B- B3 36,710,000 PanAmSat L.P., 11.35% due 8/01/2003 (a) 26,778,911 28,817,350
BB Ba2 12,000,000 Philippine Long Distance Telephone Co.,
9.875% due 8/01/2005 11,998,440 12,299,400
BB- B2 35,925,000 Rogers Communications Inc., 10.875%
due 4/15/2004 36,431,094 37,496,719
NR* NR* 31,000,000 Telecom Argentina S.A., 8.375%
due 10/18/2000 (k) 25,952,625 27,667,500
Telefonica de Argentina S.A.:
NR* NR* 2,690,000 8.375% due 10/01/2000 2,051,125 2,414,275
NR* B1 7,000,000 8.375% due 10/01/2000 5,385,000 6,300,000
BB- B1 40,000,000 11.875% due 11/01/2004 38,763,075 39,948,000
BB B1 50,000,000 Telewest Communications PLC, 11%
due 10/01/2007 (a) 29,289,000 29,289,000
CCC+ B3 14,730,000 USA Mobile Communications Holdings, Inc.,
9.50% due 2/01/2004 14,135,375 13,772,550
B+ B3 47,850,000 Videotron Holdings PLC, 12.08% due
7/01/2004 (a) 29,762,274 31,700,625
-------------- --------------
415,596,412 419,297,770
Conglomerates-- BB- B1 21,200,000 Coltec Industries, Inc., 10.25% due
3.3% 4/01/2002 21,560,075 22,048,000
B+ B1 25,000,000 Foamex Capital Corp., 11.25% due 10/01/2002 24,964,375 25,750,000
CCC+ B3 20,000,000 The Interlake Corp., 12.125% due 3/01/2002 20,147,500 19,700,000
B+ B2 10,000,000 JB Poindexter & Co., Inc., 12.50% due
5/15/2004 10,000,000 9,750,000
B+ B3 20,000,000 Jordan Industries Inc., 10.375% due
8/01/2003 19,961,000 18,800,000
NR* NR* 8,500,000 MacAndrews & Forbes Group, Inc., 12.25%
due 7/01/1996 8,276,775 8,542,500
NR* NR* 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 8,568,400 9,179,625
BB- B1 30,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 29,829,688 30,750,000
-------------- --------------
143,307,813 144,520,125
<PAGE>
Consumer NR* B3 10,000,000 Cabot Corporation, 12.50% due
Products--4.2% 7/15/2005 (k) 10,000,000 10,412,500
B NR* 39,760,000 Coleman Holdings, Inc., 11.57% due
5/27/1998 (a) 29,420,454 31,062,500
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 15,675,000
NR* NR* 650,000 Liggett Group, Inc., 19.75% due 2/01/1999 596,375 614,250
B- Caa 16,750,000 Polymer Group, Inc., 12.75% due
7/15/2002 (k) 16,680,000 17,336,250
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,187,415 3,517,500
B B2 22,000,000 9.375% due 4/01/2001 19,961,775 21,835,000
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 9,630,625
NR* B2 22,500,000 Samsonite Corporation, 11.125% due
7/15/2005 (k) 22,418,750 21,937,500
B+ B1 22,800,000 Sealy Corp., 9.50% due 5/01/2003 22,707,775 22,686,000
NR* B3 13,000,000 Selmer Co. Inc., 11% due 5/15/2005 (k) 12,985,000 12,675,000
BB NR* 15,000,000 Terra Holdings, Inc., 10.75% due 7/01/2005 15,000,000 16,012,500
-------------- --------------
176,752,544 183,394,625
</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>
Containers--2.3% B B2 $ 30,000,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008 $ 28,437,500 $ 24,600,000
B- Caa 21,500,000 Ivex Packaging Corp., 13.22% due
3/15/2005 (a) 12,153,312 12,631,250
Owens-Illinois, Inc.:
BB Ba3 20,000,000 11% due 12/01/2003 20,810,000 22,000,000
A A3 6,000,000 9.95% due 10/15/2004 5,931,250 6,187,500
B+ Ba3 6,000,000 Plastic Container Corp., 10.75% due
4/01/2001 6,022,500 6,270,000
B- B3 32,628,000 Silgan Holdings Inc., 12.91%
due 12/15/2002 (a) 29,953,444 30,670,320
-------------- --------------
103,308,006 102,359,070
<PAGE>
Convertible B B2 8,352,000 Builders Transport, Inc., 8% due
Bonds**--0.6% 8/15/2005 (4) 4,886,880 7,903,235
B+ Ba3 10,363,000 Lomas Financial Corp., 9% due
10/31/2003 (2) 9,654,393 1,787,618
B- B3 6,941,000 MEDIQ, Inc., 7.25% due 6/01/2006 (3) 4,539,685 5,934,555
B B2 6,000,000 Ohm Corp., 8% due 10/01/2006 (5) 4,160,000 5,535,000
B B2 5,909,000 UNC, Inc., 7.50% due 3/31/2006 (1) 3,442,530 5,236,851
-------------- --------------
26,683,488 26,397,259
Drug Stores--0.5% B B2 20,000,000 Thrifty Payless Holdings, Inc., 11.75% due
4/15/2003 20,000,000 21,125,000
Energy--8.5% BB- Ba3 24,000,000 California Energy Company, Inc., 9.875%
due 6/30/2003 24,122,500 24,600,000
B+ B1 49,500,000 Clark R&M Holdings, Inc., 11% due
2/15/2000 (a) 30,998,537 31,803,750
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12.19% due
7/15/2003 (a) 13,178,908 8,972,500
Falcon Drilling Company, Inc.:
B- B2 16,000,000 9.75% due 1/15/2001 16,000,000 15,760,000
B- B3 8,500,000 12.50% due 3/15/2005 8,500,000 8,967,500
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 22,200,000
Gulf Canada Resources Ltd.:
BB B1 12,750,000 9% due 8/15/1999 11,735,938 13,005,000
B+ B2 10,000,000 9.25% due 1/15/2004 9,726,605 9,950,000
Maxus Energy Corp.:
BB- B1 17,750,000 9.875% due 10/15/2002 16,726,250 17,727,813
BB- B1 5,300,000 11.50% due 11/15/2015 4,987,000 5,485,500
BB- Ba3 8,750,000 Noble Drilling Corp., 9.25% due 10/01/2003 8,925,000 9,023,438
BBB- NR* 28,000,000 Oleoducts Central S.A., 9.35% due
9/01/2005 (k) 27,967,500 28,140,000
B+ Ba3 15,000,000 Rowan Companies, Inc., 11.875% due
12/01/2001 15,085,000 16,312,500
BB- B1 25,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 24,990,000 23,875,000
NR* B3 8,650,000 Tesoro Petroleum Corp., 12.75% due 3/15/2001 7,691,491 8,823,000
B- Caa 50,000,000 Transamerican Refining Corp., 18.83%
due 2/15/2002 (a) 31,989,188 35,250,000
BB+ B2 30,000,000 TransTexas Gas Corp., 11.50% due 6/15/2002 30,000,000 31,462,500
B+ B1 31,525,000 Triton Energy Corp., 10.61% due
11/01/1997 (a) 25,295,277 26,520,406
BB- B1 40,000,000 Yacimientos Petroliferos Fiscales S.A.
(YPF) (Sponsored), 8% due 2/15/2004 31,966,750 34,400,000
-------------- --------------
359,933,444 372,278,907
</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>
Entertainment-- B B3 $ 11,750,000 AMC Entertainment, Inc., 12.625%
2.5% due 8/01/2002 $ 11,696,095 $ 13,042,500
B+ B1 9,000,000 Cinemark USA Inc., 12% due 6/01/2002 9,058,750 9,855,000
Marvel Holdings Inc:
B Caa 28,000,000 9.125% due 2/15/1998 24,810,750 26,180,000
B B3 14,500,000 11.69% due 4/15/1998 (a) 10,847,202 10,512,500
B B3 5,500,000 15.97% due 4/15/1998 (a) 3,677,684 3,932,500
NR* B2 40,000,000 Six Flags Theme Parks, 12.18% due
6/15/2005 (a) (k) 29,125,369 30,200,000
Spectravision Inc. (f):
D Caa 39,250,000 11.74% due 10/01/2001 (a) 33,732,587 13,737,500
CCC- B3 24,040,000 11.65% due 12/01/2002 21,422,831 2,404,000
-------------- --------------
144,371,268 109,864,000
Financial B+ B1 21,000,000 Lomas Mortgage USA, Inc., 10.25% due
Services--1.6% 10/01/2002 21,140,625 14,805,000
NR* B3 20,000,000 Olympic Financial Ltd., 13% due 5/01/2000 20,000,000 21,500,000
BBB NR* 1,500,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 1,200,000 1,522,500
Reliance Group Holdings, Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,415,719
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 22,518,563
-------------- --------------
70,501,250 67,761,782
Food & Chiquita Brands International Inc.:
Beverage--4.4% B+ B3 9,655,000 11.50% due 6/01/2001 9,966,881 10,065,337
B+ B1 13,000,000 9.125% due 3/01/2004 12,990,000 12,837,500
B B3 20,000,000 Curtice Burns Food, Inc., 12.25% due
2/01/2005 (k) 20,000,000 21,250,000
B- B2 26,463,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 25,608,891 21,567,345
B B3 10,520,000 Farm Fresh, Inc., 7.50% due 3/01/2010 5,488,575 5,949,197
B B3 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 20,250,000
B B2 25,000,000 Penn Traffic Co., 9.625% due 4/15/2005 24,781,750 20,375,000
B- B2 20,325,000 Pueblo Xtra International Inc., 9.50% due
8/01/2003 18,787,125 19,613,625
B- Caa 21,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 (f) 21,967,500 9,592,000
Specialty Foods Corp.:
B B3 19,250,000 10.25% due 8/15/2001 18,784,375 18,431,875
NR* B3 12,000,000 11.125% due 10/01/2002 (k) 11,970,000 11,820,000
B B3 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 19,775,000
-------------- --------------
215,360,097 191,526,879
<PAGE>
Foreign Government BB- B1 5,000,000 Republic of Argentina, 8.375% due
Obligations--0.1% 12/20/2003 3,750,000 3,731,250
Health Services-- B+ B1 11,500,000 MEDIQ, Inc., 11.125% due 7/01/1999 11,455,000 10,867,500
1.0% B+ Ba3 30,000,000 Tenet Healthcare Corp., 10.125%
due 3/01/2005 30,062,500 31,762,500
-------------- --------------
41,517,500 42,630,000
High Technology-- ComputerVision Corp.:
0.6% CCC+ B3 15,000,000 11.375% due 8/15/1999 14,473,750 15,375,000
CCC+ NR* 12,500,000 8% due 12/01/2009 6,802,472 9,437,500
-------------- --------------
21,276,222 24,812,500
</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>
Home Builders-- Del E. Webb Corporation:
1.6% B+ Ba3 $ 3,500,000 10.875% due 3/31/2000 $ 3,524,375 $ 3,605,000
B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 6,895,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,730,000
B B3 20,000,000 Greystone Homes Inc., 10.75% due 3/01/2004 19,115,000 17,650,000
B B1 10,250,000 K Hovnanian Enterprises Inc., 11.25%
due 4/15/2002 10,204,062 9,327,500
BB Ba2 12,000,000 Standard Pacific Corp., 10.50% due 3/01/2000 11,995,000 12,420,000
B+ Ba3 15,000,000 U.S. Home Corp., 9.75% due 6/15/2003 15,000,000 15,000,000
-------------- --------------
69,923,347 68,627,500
Hotels & B B2 17,325,000 Aztar Corp., 11% due 10/01/2002 17,557,250 16,632,000
Casinos--8.0% BB B1 30,000,000 Bally's Park Place, Inc., 9.25% due
3/15/2004 28,485,200 29,212,500
NR* Caa 12,000,000 Capital Gaming International, Inc.,
11.50% due 2/01/2001 (f) 9,426,041 6,750,000
B+ B2 35,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 33,402,500 29,618,750
NR* NR* 7,682,000 Goldriver Hotel & Casino Corp., 13.375%
due 8/31/1999 (f) 8,609,882 5,646,270
BB- B1 50,000,000 HMH Properties, Inc., 9.50% due
5/15/2005 (k) 48,464,602 49,312,500
B+ B1 40,000,000 Harrah's Jazz Company, 14.25% due
11/15/2001 39,947,500 37,500,000
BB- B1 12,000,000 John Q. Hammons Hotel, Inc., 8.875%
due 2/15/2004 10,610,000 11,385,000
<PAGE>
BB- B1 15,000,000 MGM Grand Hotel Finance Corp., 12%
due 5/01/2002 15,230,500 16,537,500
NR* NR* 10,000,000 Monhegan Tribal, 13.50% due 11/15/2002 10,000,000 10,000,000
B- B3 10,000,000 Pioneer Finance Corp., 13.50% due
12/01/1998 10,542,500 8,550,000
Showboat, Inc.:
BB- Ba3 8,450,000 9.25% due 5/01/2008 8,233,475 8,016,937
B B2 26,550,000 13% due 8/01/2009 25,863,625 28,806,750
B B2 10,000,000 Station Casinos, Inc., 9.625% due 6/01/2003 8,817,732 9,550,000
NR* Caa 10,406,612 Trump Castle Funding, Inc., 11.75%
due 11/15/2003 9,308,474 8,078,133
B- B3 20,000,000 Trump Holdings, Inc., 15.50% due 6/15/2005 19,891,250 19,900,000
B+ B3 42,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 39,780,770 38,561,250
NR* Caa 20,434,814 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999++ 15,432,690 17,279,079
-------------- --------------
359,603,991 351,336,669
Industrial BB+ Ba3 25,000,000 ADT Operations Inc., 9.25% due 8/01/2003 25,094,187 26,156,250
Services--1.7% B- B3 20,000,000 Dictaphone Corp., 11.75% due 8/01/2005 20,000,000 19,800,000
B- Caa 15,230,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 13,547,667 15,230,000
Thermadyne Industries, Inc.:
NR* Caa 5,706,000 10.25% due 5/01/2002 5,711,822 5,734,530
NR* Caa 7,912,000 10.75% due 11/01/2003 7,914,802 7,872,440
-------------- --------------
72,268,478 74,793,220
</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>
Metals & B- B2 $ 26,750,000 Kaiser Aluminum & Chemical Corp.,
Mining--1.4% 12.75% due 2/01/2003 $ 26,660,625 $ 29,057,187
Maxxam Group, Inc.:
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 4,912,500
B- B3 41,155,000 12.37% due 8/01/2003 (a) 29,201,106 27,059,412
-------------- --------------
60,780,481 61,029,099
<PAGE>
Paper--7.0% BB Ba3 15,500,000 APP International Finance, 11.75% due
10/01/2005 15,550,000 15,693,750
Container Corporation of America:
B+ B2 15,420,000 9.75% due 4/01/2003 15,433,400 15,574,200
B+ B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,796,250
BB- Ba3 15,000,000 Doman Industries Ltd., 8.75% due 3/15/2004 15,000,000 14,531,250
Fort Howard Corp.:
B+ B1 10,000,000 9.25% due 3/15/2001 10,000,000 9,937,500
B B2 31,000,000 9% due 2/01/2006 28,380,625 29,295,000
B B3 25,000,000 Gaylord Container Corp., 11.50%
due 5/15/2001 25,001,250 26,125,000
BB Ba3 7,500,000 PT Indah Kiat International Finance,
12.50% due 6/15/2006 7,462,500 7,800,000
BB Ba3 10,000,000 PT Indah Kiat Pulp & Paper Corporation,
11.875% due 6/15/2002 10,000,000 10,350,000
BB NR* 5,000,000 PT International Indoray, 9.125%
due 10/15/2000 4,100,000 4,725,000
BB- Ba3 10,000,000 Rainy River Forest Products, 10.75%
due 10/15/2001 9,971,810 10,750,000
Repap New Brunswick:
BB- Ba3 7,000,000 9.875% due 7/15/2000 7,000,000 7,052,500
B+ B2 10,000,000 10.625% due 4/15/2005 10,000,000 10,150,000
B+ B1 25,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 23,537,500 24,156,250
B B1 25,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 25,767,500 26,875,000
B+ B1 16,000,000 S.D. Warren Co., 12% due 12/15/2004 16,000,000 17,780,000
B+ B1 11,500,000 Stone Consolidated Corp., 10.25%
due 12/15/2000 11,520,000 12,161,250
Stone Container Corp.:
B- B2 6,500,000 11% due 8/15/1999 6,418,750 6,792,500
B B1 15,000,000 9.875% due 2/01/2001 13,948,672 14,831,250
B+ B1 15,000,000 10.75% due 10/01/2002 14,825,000 15,581,250
BB B1 10,000,000 Tjiwa Kimia, Tjiwi Kimia International
Finance, 13.25% due 8/01/2001 10,021,775 10,850,000
-------------- --------------
292,938,782 304,807,950
Pollution B B3 22,950,000 Mid-American Waste Systems, Inc.,
Control--0.5% 12.25% due 2/15/2003 22,891,000 23,294,250
Restaurants/ CCC+ Caa 25,000,000 Flagstar Corp., 11.375% due 9/15/2003 25,092,500 19,406,250
Food Services B+ Ba3 25,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 24,296,200 21,125,000
- --0.9% -------------- --------------
49,388,700 40,531,250
</TABLE>
<PAGE>
<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>
Retail NR* NR* $ 15,000,000 Cumberland Farms, 10.50% due
Specialty--0.9% 10/01/2003 (k) $ 14,681,250 $ 13,012,500
B- B3 10,000,000 Pamida Holdings, Inc., 11.75% due
3/15/2003 9,997,500 8,450,000
B+ B1 20,000,000 Specialty Retailers Group, Inc., 10% due
8/15/2000 20,000,000 19,400,000
-------------- --------------
44,678,750 40,862,500
Steel--2.9% B B2 20,000,000 A.K. Steel Holding Corp., 10.75%
due 4/01/2004 20,000,000 21,437,500
NR* B1 25,000,000 Gulf States Steel, 13.50% due 4/15/2003 (k) 24,760,851 23,250,000
B B2 20,000,000 Republic Engineered Steel Inc., 9.875%
due 12/15/2001 19,455,000 18,700,000
B+ B1 22,550,000 WCI Steel, Inc., 10.50% due 3/01/2002 22,399,875 21,760,750
B B2 23,000,000 Weirton Steel Corporation, 10.75%
due 6/01/2005 (k) 22,413,750 21,332,500
BB B1 20,000,000 Wheeling-Pittsburg Steel Corp., 9.375% due
11/15/2003 18,670,000 18,350,000
-------------- --------------
127,699,476 124,830,750
Textiles--0.7% B+ B3 30,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 30,100,000 29,287,500
Transportation BB- Ba2 15,000,000 Eletson Holdings, Inc., 9.25% due
Services--2.3% 11/15/2003 14,372,500 14,707,219
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25% due
12/01/2004 20,518,750 21,100,000
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba2 5,475,000 8.50% due 10/15/2000 3,175,500 4,927,500
BB- Ba2 16,950,000 9.25% due 5/15/2003 14,263,875 14,936,340
NR* NR* 38,106,000 Transtar Holdings, L.P., 12.42% due
12/15/2003 (a) 23,092,701 24,197,310
B+ Ba3 20,000,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 20,045,000 20,450,000
-------------- --------------
95,468,326 100,318,369
<PAGE>
Utilities--5.6% Beaver Valley Funding Corp.:
B+ B1 10,051,000 8.625% due 6/01/2007 8,986,077 9,260,087
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 28,784,717
CTC Mansfield Funding Corp.:
B+ Ba3 16,000,000 10.25% due 3/30/2003 15,952,640 16,240,000
B+ Ba3 25,000,000 11.125% due 9/30/2016 26,416,875 25,793,500
BB Ba2 15,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 14,971,200 15,077,250
BB- B1 38,500,000 Metrogas Inc., 12% due 8/15/2000 (k) 38,492,500 37,826,250
Midland Cogeneration Venture
Limited Partnership:
BB Ba3 4,329,158 10.33% due 7/23/2002++++ 4,242,575 4,515,957
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 11,845,631
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 5,681,142
NR* NR* 16,272,122 Sunflower Electric Power Corp., 8%
due 12/31/2016 (k)++++ 10,673,917 12,895,656
B+ B1 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 21,300,000
</TABLE>
<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>
Utilities NR* NR* $ 20,950,000 Transportadora de Gas del Sur, 7.75%
(concluded) due 12/23/1998 $ 18,253,500 $ 18,959,750
Tucson Electric & Power Co. (k):
NR* NR* 19,023,082 10.21% due 1/01/2009 17,593,025 18,706,728
NR* NR* 17,426,207 10.732% due 1/01/2013 16,252,461 16,931,826
-------------- --------------
240,293,841 243,818,494
Total Investments in Bonds--88.4% 3,872,896,281 3,855,773,945
<CAPTION>
<PAGE> Shares
Preferred Stocks
<S> <C> <S> <C> <C>
Broadcasting & 128,730 K--III Communications Corp. 12,997,276 12,631,605
Publishing--0.6% 421,000 K--III Communications Corp. 10,562,750 11,340,687
-------------- --------------
23,560,026 23,972,292
Capital Goods--0.2% 325,775 BCP/Essex Holdings, Inc. (k) 8,255,060 8,347,984
Energy--0.3% 29,517 Consolidated Hydro, Inc. 14,891,917 14,765,879
250 Transamerican Energy 25,000 25,062
-------------- --------------
14,916,917 14,790,941
Paper--0.6% 830,000 S.D. Warren Co. 23,405,940 25,937,500
Steel--0.3% 550,000 USX Capital LLC 13,750,000 13,612,500
Total Investments in Preferred
Stocks--2.0% 83,887,943 86,661,217
Common Stocks
Consumer 200,369 Culligan Water Technologies 1,686,248 3,005,535
Products--0.2% 200,369 Samsonite Corp. 2,398,992 2,366,859
-------------- --------------
4,085,240 5,372,394
Energy--0.0% 57,237 Mesa Inc. 325,690 271,876
Financial Services--0.0% 132,585 Lomas Financial Corporation 1,689,807 74,579
Food & 120,194 Abco Markets Inc. (k) 4,054,875 1,584,759
Beverage--0.2% 144,250 Foodbrands America 5,728,121 2,046,547
521,389 Grand Union Co. (f) 29,475,625 6,745,470
-------------- --------------
39,258,621 10,376,776
<PAGE>
Hotels & 320,040 Capital Gaming International Inc. 2,882,508 89,386
Casinos--0.0% 75,500 Goldriver Hotel & Casino Corporation
(Class B) (d) 540,045 94,375
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 293,250
-------------- --------------
3,434,053 477,011
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 205,912
Total Investments in
Common Stocks--0.4% 48,958,711 16,778,548
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Trusts & Warrants High Income Portfolio
<S> <C> <S> <C> <C>
Broadcasting & 177,500 American Telecasting Inc. (Warrants) (e) $ 413,723 $ 576,875
Publishing--0.0%
Cellular Telephones--0.0% 57,040 Page Mart Inc. (Warrants) (e) 236,127 313,720
Energy--0.0% 18,000 Consolidated Hydro Inc. (Warrants) (e) 390,123 258,750
407,678 Transamerican Refining Corp. (Warrants) (e) 950,408 1,477,833
20,833 UGI Corp. (Warrants) (e) 91,057 3,437
-------------- --------------
1,431,588 1,740,020
Financial Services--0.0% 7,194 Reliance Group Holdings, Inc. (Warrants) (e) 0 0
High Technology--0.0% 394,563 Anacomp, Inc. (Warrants) (e) (k) 495,400 36,990
<PAGE>
Hotels & 273,000 Capital Gaming International Inc.
Casinos--0.0% (Warrants) (e) 1,344,151 12,967
7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust (k) 192,320 68,514
113,386 Trump Castle Funding, Inc. (Warrants) (e) 0 0
-------------- --------------
1,536,471 81,481
Paper--0.0% 60,000 S.D. Warren Co. (Warrants) (e) 165,310 405,000
Steel--0.0% 25,000 Gulf States Steel (Warrants) (e) 275,399 21,875
Telecommunications--0.0% 302,500 ALC Communications Corp. (Warrants) (e) 831,875 0
Total Investments in Trusts &
Warrants--0.0% 5,385,893 3,175,961
Face
Amount
Short-Term Securities
Commercial $ 30,000,000 ANZ (Delaware), Inc:
Paper***--9.0% 5.71% due 10/11/1995 29,957,175 29,957,175
10,000,000 Federal Home Loan Banks, Discount Note,
5.62% due 10/26/1995 9,962,533 9,962,533
100,000,000 Ford Motor Credit Co., 5.74%
due 10/02/1995 100,000,000 100,000,000
69,769,000 General Electric Capital Corp.,
6.45% due 10/02/1995 69,769,000 69,769,000
30,000,000 JC Penney Funding Corp., 5.75% due
11/16/1995 29,784,375 29,784,375
Navistar Financial Corporation:
20,000,000 6.125% due 10/19/1995 19,942,153 19,942,153
25,000,000 6.125% due 10/23/1995 24,910,677 24,910,677
Onyx Corp.:
20,000,000 6.45% due 10/02/1995 20,000,000 20,000,000
30,000,000 6.45% due 10/06/1995 29,978,500 29,978,500
Vons Supermarket:
15,000,000 6% due 10/16/1995 14,965,000 14,965,000
20,000,000 6% due 10/19/1995 19,943,333 19,943,333
20,000,000 6.05% due 10/26/1995 19,919,333 19,919,333
-------------- --------------
389,132,079 389,132,079
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities (concluded) High Income Portfolio
<S> <C> <S> <C> <C>
US Government Agency
Obligations***--0.0% $ 780,000 Federal Home Loan Banks, 5.62% due
10/16/1995 $ 778,295 $ 778,295
Total Investments in Short-Term
Securities--9.0% 389,910,374 389,910,374
Total Investments--99.8% $4,401,039,202 4,352,300,045
==============
Other Assets Less Liabilities--0.2% 8,482,583
--------------
Net Assets--100.0% $4,360,782,628
==============
<FN>
++Represents a pay-in-kind security which may pay interest/dividend in
additional face/shares.
++++Subject to principal paydowns.
*Not Rated.
**Industry classifications for convertible bonds are: (1) Conglomerates;
(2) Financial Services; (3) Health Services; (4) Transportation Services;
(5) Waste Management.
***Commercial Paper and certain US Government & Agency Obligations are traded
on a discount basis; the interest rates shown are the discount rates paid
at the time of purchase by the Portfolio.
(a)Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase by the Portfolio.
(b)Each $1,000 face amount contains one warrant of American Telecasting, Inc.
(c)Each $1,000 face amount contains one warrant of Cellular Communications Corp.
(d)Each share of Series B Stock contains a right which entitles the Portfolio
to purchase a predetermined number of shares of preferred stock. The
purchase price and number of shares are subject to adjustment.
(e)Warrants entitle the portfolio to purchase a predetermined number of shares
of common stock/face amount of bonds. The purchase price and number of
shares/face amount are subject to adjustment under certain conditions until
the expiration date.
<PAGE>
(f)Non-income producing security.
(g)Each $1,000 face amount contains one warrant of Australis Media Ltd.
(h)Each $1,000 face amount contains one warrant of Peoples Choice T.V.
Corporation.
(i)Each $1,000 face amount contains one warrant of United International
Holdings, Inc.
(j)Each $1,000 face amount contains six warrants of Echostar Communications,
Corp.
(k)Restricted securities. The value of the Portfolio's investments in
restricted securities was approximately $437,709,000, representing
10.0% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
Abco Markets Inc. 11/19/1992 $ 4,054,875 $ 1,584,759
Anacomp, Inc. (Warrants) 10/23/1990--3/14/1991 495,400 36,990
BCP/Essex Holdings, Inc. 5/26/1995--6/20/1995 8,255,060 8,347,984
Bell Cablemedia PLC, 11.50%
due 9/15/2005 9/13/1995--9/27/1995 26,766,422 27,844,343
Cabot Corporation, 12.50%
due 7/15/2005 6/29/1995 10,000,000 10,412,500
Cumberland Farms,
10.50% due 10/01/2003 2/18/1994 14,681,250 13,012,500
Exide Corp., 10% due 4/15/2005 4/21/1995--6/28/1995 10,071,250 10,600,000
Goldriver Hotel & Casino
Corp. Liquidating Trust 8/31/1992 192,320 68,514
Gulf State Steel, 13.50%
due 4/15/2003 4/12/1995--6/08/1995 24,760,851 23,250,000
HMH Properties, Inc.,
9.50% due 5/15/2005 5/18/1995--9/06/1995 48,464,602 49,312,500
International Wire Group,
11.75% due 6/01/2005 6/07/1995--8/30/1995 22,012,500 22,055,000
Metrogas Inc., 12% due 8/15/2000 8/07/1995--9/29/1995 38,492,500 37,826,250
Oleoducto Central S.A.,
9.35% due 9/01/2005 9/21/1995 27,967,500 28,140,000
Polymer Group, Inc.,
12.75% due 7/15/2002 6/17/1994 16,680,000 17,336,250
Samsonite Corporation,
11.125% due 7/15/2005 7/07/1995--10/03/1995 22,418,750 21,937,500
Selmer Inc., 11% due 5/15/2005 5/18/1995--9/06/1995 12,985,000 12,675,000
Six Flags Theme Parks,
12.18% due 6/01/2005 6/16/1995--9/06/1995 29,125,369 30,200,000
Specialty Foods Corp.,
11.125% due 10/01/2002 7/12/1995--9/08/1995 11,970,000 11,820,000
Sunflower Electric Power
Corp., 8% due 12/31/2016 11/29/1991--7/15/1994 10,673,917 12,895,656
<PAGE>
Telecom Argentina S.A.,
8.375% due 10/18/2000 7/18/1994--7/26/1994 25,952,625 27,667,500
Tucson Electric & Power Co.:
10.21% due 1/01/2009 6/04/1993--7/19/1994 17,593,025 18,706,728
10.732% due 1/01/2013 3/01/1993--7/16/1993 16,252,461 16,931,826
Weirton Steel Corporation,
10.75% due 6/01/2005 6/05/1995--9/22/1995 22,413,750 21,332,500
Young Broadcasting Inc.,
10.125% due 2/15/2005 6/07/1995 13,000,000 13,715,000
$435,279,427 $437,709,300
============ ============
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</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--8.8% AAA Aaa $11,000,000 8.875% due 11/15/1997 $ 11,354,063 $ 11,644,559
AAA Aaa 5,000,000 9.25% due 8/15/1998 5,289,844 5,433,581
AAA Aaa 10,000,000 6.875% due 8/31/1999 10,301,562 10,301,525
AAA Aaa 7,000,000 5.875% due 6/30/2000 7,005,670 6,963,897
AAA Aaa 5,000,000 6.25% due 8/31/2000 5,048,437 5,048,431
AAA Aaa 3,000,000 7.50% due 11/15/2001 3,200,625 3,213,757
AAA Aaa 8,000,000 6.375% due 8/15/2002 7,982,882 8,121,220
AAA Aaa 6,000,000 6.50% due 5/15/2005 6,088,125 6,139,695
AAA Aaa 7,500,000 6.50% due 8/15/2005 7,616,016 7,685,147
AAA Aaa 9,500,000 8.875% due 8/15/2017 10,806,250 11,915,114
AAA Aaa 12,000,000 7.50% due 11/15/2024 13,037,969 13,357,515
AAA Aaa 10,000,000 7.625% due 2/15/2025 11,221,875 11,324,962
-------------- --------------
98,953,318 101,149,403
<PAGE>
Banking--6.0% A A2 6,000,000 BankAmerica Corp., 7.125% due 5/12/2005 5,913,000 6,125,520
A A2 7,000,000 Citicorp, 8.80% due 2/01/2000 7,000,000 7,568,282
A+ A1 6,000,000 Fifth Third Bank, 6.75% due 7/15/2005 5,960,400 6,022,470
A- A3 8,500,000 First Bank System, Inc., 6.875% due
9/15/2007 8,421,290 8,471,865
A- A3 7,500,000 First Union Corp., 7.05% due 8/01/2005 7,417,500 7,596,825
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,337,400
A- A2 7,650,000 Maybank New York, 7.125% due 9/15/2005 7,600,887 7,682,359
NationsBank Corporation:
A A2 5,000,000 7.50% due 2/15/1997 4,995,700 5,088,575
A- A3 6,000,000 7.75% due 8/15/2015 6,000,000 6,186,750
A+ A1 3,500,000 Norwest Corp., 6.625% due 3/15/2003 3,553,235 3,481,957
AA+ Aa2 6,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 (a) 5,995,620 6,053,860
-------------- --------------
68,536,332 69,615,863
Federal AAA Aaa 15,000,000 Federal National Mortgage Association,
Agencies--1.4% 7.85% due 9/10/2004 14,817,437 15,653,925
Financial Chrysler Financial Corp.:
Services-- A- A3 2,000,000 9.50% due 12/15/1999 2,263,120 2,192,770
Captive--4.1% A- A3 14,000,000 10.95% due 8/01/2017 16,298,000 15,684,899
A+ A1 1,000,000 Ford Motor Credit Co., 7.75% due
3/15/2005 999,090 1,059,215
General Motors Acceptance Corp.:
BBB+ A3 7,630,000 5% due 1/27/1997 7,501,587 7,522,704
BBB+ A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,210,755
BBB+ A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,206,365
BBB+ A3 7,000,000 7.40% due 9/01/2025 6,943,580 7,010,570
-------------- --------------
48,003,785 47,887,278
Financial BBB- Baa2 15,000,000 Advanta Corp., 6.26% due 9/01/1997 14,991,450 14,962,050
Services-- A+ A1 2,500,000 American General Finance Corp., 8.50%
Consumer--4.7% due 8/15/1998 2,848,650 2,644,300
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,273,720
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,947,620
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,545,900
A A2 19,000,000 Beneficial Corporation, 5.65% due
10/14/1997 (b) 19,000,000 18,912,049
A+ Aa3 8,000,000 CIT Group Holdings, Inc., 5.70%
due 5/02/1997 (b) 8,000,000 7,974,840
-------------- --------------
54,280,030 54,260,479
</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 Bear Stearns Companies, Inc.:
Services-- A A2 $ 9,900,000 6.70% due 8/01/2003 $ 8,945,640 $ 9,685,368
Other--7.7% A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,327,285
Dean Witter, Discover & Co.:
A A2 3,500,000 6.75% due 8/15/2000 3,486,805 3,539,165
A A2 3,000,000 6.50% due 11/01/2005 2,965,350 2,915,145
A A2 6,000,000 6.75% due 10/15/2013 5,880,540 5,616,540
General Electric Capital Corp.:
AAA Aaa 6,000,000 14% due 7/01/1996 (a) 6,811,140 6,348,282
AAA Aaa 6,200,000 8.125% due 5/15/2012 6,301,726 6,859,246
A A3 5,000,000 Lehman Brothers Inc., 7.375% due
8/15/1997 4,993,500 5,069,075
A+ A1 5,000,000 Morgan Stanley Group Inc., 8.875% due
10/15/2001 5,755,450 5,539,450
BBB+ Baa1 10,000,000 PaineWebber Group Inc., 8.875% due
3/15/2005 9,997,850 11,015,500
Smith Barney Holdings, Inc.:
A- A3 3,000,000 7.50% due 5/01/2002 3,046,590 3,110,895
A- A3 6,000,000 6.875% due 6/15/2005 5,957,580 5,936,940
The Travelers Corp.:
A+ A2 9,000,000 9.50% due 3/01/2002 9,610,100 10,291,275
A+ A2 9,000,000 7.875% due 5/15/2025 8,994,780 9,390,015
-------------- --------------
85,971,481 88,644,181
Foreign*--10.5% A+ Aa2 15,000,000 ABN AMRO Bank, N.V., 7.25% due
5/31/2005 (2) 15,028,410 15,446,250
AA- A1 10,000,000 Aegon N.V., 8% due 8/15/2006 (2) 9,908,700 10,879,299
BBB+ A3 8,885,000 Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 (c) 8,799,674 8,887,576
CRA Finance Ltd. (1):
A+ A2 4,000,000 6.50% due 12/01/2003 4,005,890 3,921,600
A+ A2 3,500,000 7.125% due 12/01/2013 3,479,700 3,405,570
AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
due 12/01/1999 (3) 4,226,640 4,319,000
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,842,289
<PAGE>
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,254,865
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,507,280
BBB Baa1 5,000,000 Petro-Canada, 9.25% due 10/15/2021 (4) 5,300,650 5,943,875
A+ A2 12,000,000 Pohang Iron & Steel Industries,
7.375% due 5/15/2005 (7) 12,217,645 12,242,580
AA- Aa3 11,000,000 Province of Ontario (Canada), 7.75%
due 6/04/2002 (5) 10,910,730 11,725,285
Province of Quebec (Canada) (5):
A+ A2 4,000,000 8.80% due 4/15/2003 4,048,000 4,452,740
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 5,462,122
AA A1 13,803,000 Republic of Italy, 6.875% due 9/27/2023 (6) 11,896,625 12,602,415
A+ A1 5,500,000 Telekom Malaysia Berhad, 7.125% due
8/01/2005 (6) (c) 5,463,480 5,612,997
A A2 5,000,000 WMC (Western Mining Corp.) Finance,
7.25% due 11/15/2013 (1) 5,036,900 5,000,850
-------------- --------------
117,853,155 121,506,593
</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-- A- A2 $ 6,000,000 American Home Products Corporation,
Consumer 7.90% due 2/15/2005 $ 5,988,300 $ 6,497,070
Goods--12.5% AA- A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
12/01/1999 3,367,590 3,270,705
A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 10,768,950
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,136,100
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,964,650
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 4,009,840
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 9,833,490
A+ A1 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,988,155
AAA Aaa 7,000,000 Johnson & Johnson Co., 8.72% due
11/01/2024 7,057,420 7,954,835
AA Aa2 5,000,000 Kimberly-Clark Corporation, 7.875%
due 2/01/2023 5,084,900 5,252,900
BBB Baa1 10,000,000 Kmart Corporation, 7.24% due 7/06/1999 9,734,500 10,039,237
A A2 9,500,000 Philip Morris Cos., Inc., 9% due
1/01/2001 9,698,815 10,404,305
<PAGE>
RJR Nabisco, Inc.:
BBB- Baa3 7,000,000 8.75% due 4/15/2004 6,794,580 7,106,330
BBB- Baa3 13,000,000 8.75% due 8/15/2005 12,570,510 13,157,235
BBB Baa2 9,000,000 7.55% due 6/15/2015 8,981,960 8,978,130
Sears, Roebuck & Co.:
BBB A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,333,550
BBB A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,277,443
AA Aa1 7,000,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 6,872,720 7,779,800
A A2 9,000,000 Weyerhaeuser Company, 7.95% due
3/15/2025 8,901,360 9,882,630
-------------- --------------
139,438,637 144,635,355
Industrial- BP America Inc.:
Energy--5.0% AA- A1 11,000,000 10% due 7/01/2018 11,869,080 12,360,095
AA- A1 4,075,000 9.375% due 11/01/2000 4,488,287 4,603,731
AA- A1 9,000,000 7.875% due 5/15/2002 9,519,510 9,692,505
A+ A1 12,000,000 Petroliam Nasional Berhad, 6.875%
due 7/01/2003 (c) 11,929,530 12,060,780
AA- Aa3 5,000,000 Repsol International Finance, 7%
due 8/01/2005 4,997,450 5,087,000
Texaco Capital Inc.:
A+ A1 5,500,000 9% due 12/15/1999 6,215,190 6,018,540
A+ A1 2,000,000 8.875% due 2/15/2021 1,999,720 2,451,182
A+ A1 4,500,000 8.625% due 4/01/2032 4,792,770 5,296,500
-------------- --------------
55,811,537 57,570,333
Industrial-- BBB Baa2 12,000,000 Applied Materials Inc., 8% due 9/01/2004 11,912,280 12,841,740
Other--17.9% Archer-Daniels-Midland Co.:
AA- Aa2 8,100,000 8.875% due 4/15/2011 8,733,635 9,464,283
AA- Aa2 2,000,000 8.125% due 6/01/2012 2,125,020 2,208,400
AA- Aa3 7,800,000 Capital Cities/ABC, Inc., 8.75% due
8/15/2021 8,800,114 9,149,595
A- A3 11,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 11,028,940 11,546,149
Columbia/HCA Healthcare Corp.:
BBB+ A3 5,000,000 6.87% due 9/15/2003 5,000,000 5,008,830
BBB+ A3 6,000,000 9% due 12/15/2014 6,651,540 7,029,397
</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-- BBB Baa3 $ 15,000,000 Developers Diversified Realty Corporation,
Other 6.717% due 12/27/1995 (b) $ 14,978,550 $ 15,020,745
(concluded) AA- Aa3 12,000,000 Du Pont (E.I.) de Nemours & Co., 8.25%
due 1/15/2022 12,481,570 12,869,519
A A1 2,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (c) 1,998,420 2,027,500
BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due
6/15/2012 10,137,590 10,753,740
Ford Capital B.V.:
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,651,599
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,832,212
AA- A2 6,500,000 Hubbell Incorporated, 6.625% due 10/01/2005 6,459,700 6,459,700
BBB- Baa3 9,000,000 James River Corp. of Virginia, 6.70% due
11/15/2003 8,350,380 8,854,110
AA Aa2 8,500,000 Kaiser Foundation Hospital, 9.55% due
7/15/2005 9,561,225 10,170,547
BBB Baa2 6,000,000 Loral Corporation, 8.375% due 6/15/2024 5,493,240 6,518,580
News American Holdings, Inc.:
BBB- Baa3 4,000,000 9.125% due 10/15/1999 4,298,640 4,348,260
A A3 6,000,000 9.25% due 2/01/2013 6,786,960 6,785,820
BBB Baa2 8,000,000 Placer Dome Inc., 7.75% due 6/15/2015 7,922,480 7,903,960
AA- Aa3 9,000,000 Reed Elsevier Capital, 7.50% due 5/15/2025 8,899,380 9,286,766
Telecommunications, Inc.:
BBB- Baa3 7,059,000 9.25% due 4/15/2002 7,780,924 7,811,277
BBB- Baa3 10,000,000 8.25% due 1/15/2003 9,713,200 10,448,100
BBB- Baa3 2,500,000 9.80% due 2/01/2012 2,631,150 2,849,000
Time Warner Entertainment Co.:
BBB- Baa3 5,000,000 10.15% due 5/01/2012 5,036,200 5,999,225
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 5,131,650
-------------- --------------
197,024,003 206,970,704
Supranational-- AAA Aaa 3,000,000 Asian Development Bank, 10.75% due
3.3% 6/01/1997 3,302,730 3,216,015
AAA Aaa 8,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 10,115,250 9,748,960
AAA Aaa 19,000,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 24,032,800 25,324,720
-------------- --------------
37,450,780 38,289,695
<PAGE>
Transportation-- Southwest Airlines, Inc.:
1.9% A- Baa1 10,000,000 9.40% due 7/01/2001 11,326,040 11,238,749
A- Baa1 2,000,000 8% due 3/01/2005 1,989,220 2,151,200
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 3,213,135
A- A3 5,000,000 Union Pacific Corp., 7.375% due 5/15/2001 5,000,000 5,183,600
-------------- --------------
21,299,210 21,786,684
Utilities-- AA Aa3 6,000,000 AT&T Corporation, 8.35% due 1/15/2025 5,893,620 6,438,840
Communications-- GTE Corp.:
2.2% BBB+ Baa1 4,000,000 9.10% due 6/01/2003 4,242,720 4,537,660
BBB+ Baa1 9,500,000 8.75% due 11/01/2021 9,904,225 10,930,462
A+ A1 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,984,500
AA- Aa3 1,000,000 US West Communications, 7.25%
due 9/15/2025 998,300 1,007,635
-------------- --------------
23,050,115 24,899,097
</TABLE>
<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-- A A2 $ 5,000,000 Central Power & Light Co., 6%
Electric--3.0% due 10/01/1997 $ 4,973,400 $ 4,971,350
AA- Aa2 6,000,000 Duke Power Co., 8% due 11/01/1999 5,964,660 6,356,160
A A2 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,980,310
AA- A1 3,000,000 Northern States Power Company, 7.125%
due 7/01/2025 2,972,040 2,957,421
BBB+ Baa1 3,425,000 PECO Energy Co., 8% due 4/01/2002 3,459,387 3,650,331
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,566,736
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 9,451,447
-------------- --------------
32,708,067 34,933,755
Utilities-- Consolidated Natural Gas Co.:
Gas--0.8% AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 8,070,750
AA- A1 1,000,000 7.375% due 4/01/2005 993,380 1,048,045
-------------- --------------
8,444,040 9,118,795
Total Investments in Bonds &
Notes--89.8% 1,003,641,927 1,036,922,140
<PAGE>
Short-Term Securities
Commercial 50,000,000 American Express Credit Corp.,
Paper**--5.3% 5.65% due 10/02/1995 50,000,000 50,000,000
12,000,000 General Electric Capital Corp.,
5.72% due 10/02/1995 12,000,000 12,000,000
-------------- --------------
62,000,000 62,000,000
Repurchase 51,715,000 UBS Securities Funding, Inc., purchased
Agreements***--4.5% on 9/29/1995 to yield 6.42%
due 10/02/1995 51,715,000 51,715,000
Total Investments in Short-Term
Securities--9.8% 113,715,000 113,715,000
Total Investments--99.6% $1,117,356,927 1,150,637,140
==============
Other Assets Less Liabilities--0.4% 4,199,002
--------------
Net Assets--100.0% $1,154,836,142
==============
<FN>
*Corresponding industry groups for foreign securities which are denominated in
US dollars: (1) Industrial Mining. (2) Financial Institution. (3) Government
Entity; Guaranteed by Japan. (4) Energy Company; not Guaranteed by Canada.
(5) Government Entity; Guaranteed by the Province. (6) Government Entity.
(7) Industrial; Metals.
**Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Portfolio.
***Repurchase Agreements are fully collateralized by US Government Obligations.
(a)Medium-Term Note.
(b)Floating Rate Note.
(c)Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $28,509,000, representing 2.5% of
net assets.
<PAGE>
<CAPTION>
Acquisition Value
Issue Dates Cost (Note 1a)
<S> <C> <C> <C>
Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 9/22/1995 $ 8,799,674 $ 8,887,576
Electronic Data Systems Corp.,
6.85% due 5/15/2000 5/19/1995 1,998,420 2,027,500
Petroliam Nasional Berhad,
6.875% due 7/01/2003 7/14/1995--8/07/1995 11,929,530 12,060,780
Telekom Malaysia Berhad,
7.125% due 8/01/2005 8/04/1995 5,463,480 5,612,997
$28,191,104 $28,588,853
=========== ===========
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<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--12.1% AAA Aaa $ 1,000,000 8.875% due 11/15/1997 $ 1,032,188 $ 1,058,596
AAA Aaa 2,000,000 6.875% due 8/31/1999 2,060,312 2,060,305
AAA Aaa 5,500,000 5.875% due 6/30/2000 5,512,465 5,471,634
AAA Aaa 7,000,000 6.25% due 8/31/2000 7,067,812 7,067,804
AAA Aaa 2,000,000 7.875% due 8/15/2001 2,076,563 2,175,005
AAA Aaa 2,000,000 7.50% due 11/15/2001 2,133,750 2,142,505
AAA Aaa 5,000,000 6.375% due 8/15/2002 5,125,000 5,075,762
AAA Aaa 5,000,000 7.25% due 5/15/2004 5,026,563 5,342,962
AAA Aaa 5,000,000 7.875% due 11/15/2004 5,246,875 5,561,712
AAA Aaa 11,500,000 6.50% due 5/15/2005 11,739,219 11,767,749
AAA Aaa 7,000,000 6.50% due 8/15/2005 7,146,719 7,172,804
-------------- --------------
54,167,466 54,896,838
<PAGE>
Banking--8.2% A A2 3,000,000 BankAmerica Corp., 7.125% due 5/12/2005 2,956,500 3,062,760
A+ A2 2,000,000 Citicorp, 8.80% due 2/01/2000 2,000,000 2,162,366
A+ A1 4,000,000 Fifth Third Bank, 6.75% due 7/15/2005 3,973,600 4,014,980
A- A3 2,500,000 First Union Corp., 7.05% due 8/01/2005 2,472,500 2,532,275
A- A3 4,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 4,542,960 4,269,920
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 6,014,190
A+ A1 1,000,000 Norwest Corp., 6.625% due 3/15/2003 1,003,060 994,845
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 4,957,652
BBB Baa1 9,000,000 Washington Mutual Inc., 7.25%
due 8/15/2005 8,930,520 9,200,700
-------------- --------------
36,253,310 37,209,688
Federal AAA Aaa 2,500,000 Federal National Mortgage Association,
Agencies--0.6% 7.85% due 9/10/2004 2,496,484 2,608,987
Financial A- A3 8,000,000 Chrysler Financial Corp., 9.50% due 9,275,380 8,771,080
Services-- 12/15/1999
Captive--6.6% Ford Motor Credit Co.:
A+ A1 2,000,000 9.875% due 5/15/2002 2,300,380 2,330,320
A+ A1 5,000,000 7.75% due 3/15/2005 4,995,450 5,296,075
General Motors Acceptance Corp.:
BBB+ A3 6,000,000 7.85% due 3/05/1997 5,977,380 6,135,899
BBB+ A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,052,689
BBB+ A3 5,000,000 7.125% due 5/11/1998 5,056,400 5,087,185
-------------- --------------
29,562,390 29,673,248
Financial BBB- Baa2 10,000,000 Advanta Corp., 6.26% due 9/01/1997 (a) 9,994,300 9,974,700
Services-- Associates Corp. of North America:
Consumer--6.3% AA- Aa3 1,500,000 8.375% due 1/15/1998 1,504,830 1,568,430
AA- Aa3 3,000,000 5.25% due 9/01/1998 2,908,770 2,921,430
A A2 7,000,000 Beneficial Corp., 5.65% due 10/14/1997 (a) 7,000,000 6,967,597
CIT Group Holdings, Inc.:
A+ Aa3 4,000,000 7.625% due 12/05/1996 3,987,120 4,065,420
A+ Aa3 3,000,000 5.971% due 2/28/1997 2,998,020 3,006,681
-------------- --------------
28,393,040 28,504,258
</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>
Financial BBB Baa2 $ 6,000,000 Alex Brown Inc., 7.625% due 8/15/2005 $ 5,966,820 $ 6,149,550
Services-- A A2 3,000,000 Bear Stearns Companies, Inc., 8.75%
Other--6.6% due 3/15/2004 3,224,430 3,327,285
BBB Baa2 4,000,000 Comdisco, Inc., 7.25% due 4/15/1998 3,990,720 4,072,940
A A2 6,250,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 6,226,437 6,319,937
BBB+ Baa1 4,000,000 PaineWebber Group Inc., 8.875% due 3/15/2005 4,025,080 4,406,200
Smith Barney Holdings, Inc.:
A- A3 2,000,000 7.98% due 3/01/2000 2,000,000 2,102,970
A- A3 1,000,000 6.875% due 6/15/2005 992,930 989,490
A+ A2 2,000,000 The Travelers Corp., 9.50% due 3/01/2002 2,168,400 2,286,950
-------------- --------------
28,594,817 29,655,322
Foreign*--9.5% A+ Aa2 3,500,000 ABN AMRO Bank, N.V., 7.25% due 5/31/2005 (2) 3,497,025 3,604,125
BBB+ A3 5,000,000 Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 (2)(b) 4,949,950 5,001,450
A+ A2 4,000,000 CRA Finance Ltd., 6.50% due
12/01/2003 (4) 4,006,020 3,921,600
AAA Aaa 1,500,000 Japan Finance Corp. for Municipal
Enterprises, 9.125% due 3/13/2000 (2) 1,654,665 1,642,897
AAA Aaa 2,000,000 Metropolis of Tokyo (Japan), 8.70%
due 10/05/1999 (5) 2,312,940 2,169,910
A+ A2 1,000,000 Pohang Iron & Steel Co., 7.375% due
5/15/2005 (6) 1,018,160 1,020,215
A+ A2 9,000,000 Province of Quebec (Canada), 8.80%
due 4/15/2003 (3) 9,288,960 10,018,664
BB Baa3 10,000,000 Republic of South Africa, 9.625%
due 12/15/1999 (1) 9,839,025 10,487,000
A+ A1 5,000,000 Telekom Malaysia Berhad, 7.125%
due 8/01/2005 (1) (b) 4,966,800 5,102,725
-------------- --------------
41,533,545 42,968,586
<PAGE>
Industrial-- A- A2 2,000,000 American Home Products Corporation,
Consumer--12.4% 7.90% due 2/15/2005 1,996,100 2,165,690
AA- A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
due 12/01/1999 6,189,909 5,975,578
A+ A1 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 2,825,520 3,002,160
Grand Metropolitan Investment Corp.:
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 3,007,380
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,277,830
A+ A1 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,988,155
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 3,989,740
A A2 3,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 3,576,195 3,833,165
RJR Nabisco, Inc.:
BBB- Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 4,936,650
BBB- Baa3 8,000,000 8.75% due 4/15/2004 7,785,920 8,121,520
BBB- Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 2,952,735
Sears, Roebuck & Co.:
BBB A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,666,775
BBB A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,392,385
-------------- --------------
56,038,609 56,309,763
</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>
Industrial-- AA- A1 $ 1,000,000 BP America Inc., 7.875% due 5/15/2002 $ 1,055,380 $ 1,076,945
Energy--3.8% A+ A1 2,000,000 Petroliam Nasional Berhad,
6.875% due 7/01/2003 (b) 1,972,960 2,010,130
AA- Aa3 4,500,000 Repsol International Finance,
7% due 8/01/2005 4,497,705 4,578,300
BBB- Baa2 5,000,000 Tenneco, Inc., 7.875% due 10/01/2002 5,250,000 5,308,625
Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,029,560
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,188,560
-------------- --------------
17,114,625 17,192,120
<PAGE>
Industrial-- Applied Materials Inc.:
Other--12.3% BBB- Baa2 4,000,000 6.65% due 9/05/2000 4,000,000 3,968,659
BBB Baa2 4,000,000 8% due 9/01/2004 3,970,760 4,280,580
A- A3 9,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 8,799,420 9,446,849
BBB+ A3 5,000,000 Columbia/HCA Healthcare Corp.,
6.87% due 9/15/2003 5,000,000 5,008,830
BBB Baa3 5,000,000 Developers Diversified Realty Corporation,
6.717% due 12/27/1995 (a) 4,992,500 5,006,915
A A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (b) 3,497,235 3,548,125
BBB- Ba1 14,500,000 News America Holdings Inc., 8.50%
due 2/15/2005 14,789,005 15,803,984
BBB- Baa3 8,000,000 Telecommunications, Inc., 9.25%
due 4/15/2002 8,496,110 8,818,160
-------------- --------------
53,545,030 55,882,102
Supranational-- AAA Aaa 1,500,000 International Bank for Reconstruction &
0.4% Development, 12.375% due 10/15/2002 1,954,980 1,999,320
Transportation BB+ Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,606,528
Services--4.6% AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,942,840
Southwest Airlines, Inc.:
A- Baa1 6,500,000 9.40% due 7/01/2001 7,564,180 7,305,187
A- Baa1 1,000,000 8% due 3/01/2005 994,610 1,075,600
A- A3 4,000,000 Union Pacific Corporation, 7.375%
due 5/15/2001 4,000,000 4,146,880
-------------- --------------
20,765,278 21,077,035
Utilities-- BBB+ Baa2 3,000,000 National Rural Utilities Cooperative
Electric--3.7% Finance Corp., 6.50% due 9/15/2002 2,993,280 2,998,860
BBB+ Baa1 7,000,000 PECO Energy Co., 8% due 4/01/2002 7,000,440 7,460,530
A- A2 4,000,000 Pennsylvania Power & Light Co., 5.50%
due 4/01/1998 3,991,280 3,927,580
BBB+ Baa2 2,000,000 Texas Utilities Electric Co., 8%
due 6/01/2002 1,972,080 2,141,250
-------------- --------------
15,957,080 16,528,220
</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) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- Consolidated Natural Gas Co.:
Gas--1.5% AA- A1 $ 2,000,000 8.75% due 6/01/1999 $ 2,125,440 $ 2,152,200
AA- A1 4,500,000 7.375% due 4/01/2005 4,470,210 4,716,202
-------------- --------------
6,595,650 6,868,402
Total Investments in Bonds &
Notes--88.6% 392,972,304 401,373,889
Short-Term Securities
Commercial 14,000,000 General Electric Capital Corp.,
Paper**--3.1% 5.70% due 10/02/1995 14,000,000 14,000,000
Repurchase 19,773,000 UBS Securities Funding, Inc., purchased on
Agreements***--4.4% 9/29/1995 to yield 6.42% to 10/02/1995 19,773,000 19,773,000
Total Investments in Short-Term
Securities--7.5% 33,773,000 33,773,000
Total Investments--96.1% $ 426,745,304 435,146,889
==============
Other Assets Less Liabilities--3.9% 17,868,633
--------------
Net Assets--100.0% $ 453,015,522
==============
<FN>
*Corresponding industry groups for foreign securities, which are denominated
in US dollars: (1) Government Entity. (2) Financial Institution;
Government-Owned & Guaranteed. (3) Government Entity; Guaranteed by Province.
(4) Industrial Mining. (5) Government Entity; Guaranteed by Japan.
(6) Industrial; Metals.
**Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Portfolio.
***Repurchase Agreements are fully collateralized by US Government Obligations.
(a)Floating Rate Note.
(b)Restricted security as to resale. The value of the Portfolio's investments
in restricted securities was approximately $15,662,000, representing 3.5% of
net assets.
<PAGE>
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Bangkok Bank Public Company Limited,
7.25% due 9/15/2005 9/22/1995 $ 4,949,950 $ 5,001,450
Electronic Data Systems Corp.,
6.85% due 5/15/2000 5/15/1995 3,497,235 3,548,125
Petroliam Nasional Berhad,
6.875% due 7/01/2003 8/07/1995 1,972,960 2,010,130
Telekom Malaysia Berhad,
7.125% due 8/01/2005 8/04/1995 4,966,800 5,102,725
$15,386,945 $15,662,430
=========== ===========
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of September 30, 1995
<CAPTION>
High Income Investment Intermediate
Portfolio Grade Portfolio Term Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $4,352,300,045 $1,150,637,140 $435,146,889
Receivables: Interest 92,858,745 20,786,194 7,523,975
Capital shares sold 17,063,314 5,822,222 27,454,416
Securities sold 891,000 8,159,022 3,059,633
Loans -- 81,353 30,548
Dividends 100,260 -- --
Prepaid registration fees and other assets (Note 1e) 77,987 27,628 32,630
-------------- -------------- ------------
Total assets 4,463,291,351 1,185,513,559 473,248,091
-------------- -------------- ------------
Liabilities: Payables: Securities purchased 55,889,628 26,399,690 18,349,478
Dividends to shareholders (Note 1f) 10,854,613 1,925,248 712,080
Capital shares redeemed 4,748,608 1,263,731 821,080
Distributor (Note 2) 2,128,296 388,133 83,226
Investment adviser (Note 2) 1,509,157 327,320 126,002
Accrued expenses and other liabilities 27,378,421 373,295 140,703
-------------- -------------- ------------
Total liabilities 102,508,723 30,677,417 20,232,569
-------------- -------------- ------------
<PAGE>
Net Assets: Net assets $4,360,782,628 $1,154,836,142 $453,015,522
============== ============== ============
Net Assets Class A Common Stock, $.10 par value++ $ 11,569,395 $ 4,105,387 $ 1,892,800
Consist of: Class B Common Stock, $.10 par value++++ 41,283,769 5,488,414 1,844,392
Class C Common Stock, $.10 par value++++++ 1,729,575 223,958 59,173
Class D Common Stock, $.10 par value++++++++ 1,315,773 218,473 142,135
Paid-in capital in excess of par 4,387,414,022 1,151,204,980 455,439,394
Undistributed investment income--net 2,875,853 -- --
Accumulated realized capital losses on
investments--net (36,666,602) (6,680,118) (5,362,923)
Accumulated distributions in excess of realized
capital gains on investments--net -- (33,005,165) (9,401,034)
Unrealized appreciation (depreciation) on
investments--net (48,739,157) 33,280,213 8,401,585
-------------- -------------- ------------
Net assets $4,360,782,628 $1,154,836,142 $453,015,522
============== ============== ============
Net Asset Class A: Net assets $ 902,321,267 $ 472,388,101 $217,713,602
Value: ============== ============== ============
Shares outstanding 115,693,946 41,053,869 18,928,003
============== ============== ============
Net asset value and redemption price per
share $ 7.80 $ 11.51 $ 11.50
============== ============== ============
Class B: Net assets $3,220,766,637 $ 631,517,399 $212,146,426
============== ============== ============
Shares outstanding 412,837,687 54,884,140 18,443,916
============== ============== ============
Net asset value and redemption price per
share $ 7.80 $ 11.51 $ 11.50
============== ============== ============
Class C: Net assets $ 135,018,928 $ 25,777,792 $ 6,806,202
============== ============== ============
Shares outstanding 17,295,752 2,239,580 591,728
============== ============== ============
Net asset value and redemption price per
share $ 7.81 $ 11.51 $ 11.50
============== ============== ============
Class D: Net assets $ 102,675,796 $ 25,152,850 $ 16,349,292
============== ============== ============
Shares outstanding 13,157,731 2,184,726 1,421,349
============== ============== ============
Net asset value and redemption price per
share $ 7.80 $ 11.51 $ 11.50
============== ============== ============
<PAGE>
<FN>
*Identified cost $4,401,039,202 $1,117,356,927 $426,745,304
============== ============== ============
++Authorized shares--Class A 200,000,000 100,000,000 50,000,000
============== ============== ============
++++Authorized shares--Class B 700,000,000 100,000,000 50,000,000
============== ============== ============
++++++Authorized shares--Class C 200,000,000 100,000,000 50,000,000
============== ============== ============
++++++++Authorized shares--Class D 500,000,000 100,000,000 50,000,000
============== ============== ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statements of Operations for the Year Ended September 30, 1995
<CAPTION>
High Income Investment Intermediate
Portfolio Grade Portfolio Term Portfolio
<S> <S> <C> <C> <C>
Investment Income Interest and discount earned $393,314,590 $ 72,190,599 $25,026,588
(Note 1d): Dividends 3,743,363 -- --
Loaned securities -- 170,706 135,007
Other 3,607,693 382,572 140,024
------------ ------------ -----------
Total income 400,665,646 72,743,877 25,301,619
------------ ------------ -----------
<PAGE>
Expenses: Account maintenance and distribution fees--Class B
(Note 2) 19,752,109 3,862,733 751,159
Investment advisory fees (Note 2) 14,910,211 3,378,301 1,194,362
Transfer agent fees--Class B (Note 2) 2,851,365 927,076 240,605
Transfer agent fees--Class A (Note 2) 800,739 628,878 241,585
Registration fees (Note 1e) 557,957 134,105 112,919
Printing and shareholder reports 492,456 123,671 37,528
Account maintenance and distribution fees--Class C
(Note 2) 392,368 58,465 4,675
Accounting services (Note 2) 215,484 118,390 49,765
Custodian fees 138,725 57,818 32,518
Professional fees 102,151 30,683 19,128
Account maintenance fees--Class D (Note 2) 105,669 26,207 5,229
Transfer agent fees--Class C (Note 2) 56,316 13,365 1,812
Transfer agent fees--Class D (Note 2) 40,291 16,710 7,934
Directors' fees and expenses 34,846 9,198 3,877
Pricing fees (Note 2) 16,336 9,158 4,530
Other 67,144 16,233 8,996
------------ ------------ -----------
Total expenses 40,534,167 9,410,991 2,716,622
Fees paid indirectly (25,008) (9,814) (757)
Net expenses 40,509,159 9,401,177 2,715,865
------------ ------------ -----------
Investment income--net 360,156,487 63,342,700 22,585,754
------------ ------------ -----------
Realized & Realized loss on investments--net (21,583,485) (6,680,118) (5,362,923)
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net 103,640,401 69,854,981 22,789,142
Investments--Net ------------ ------------ -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from
Operations $442,213,403 $126,517,563 $40,011,973
============ ============ ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets High Income Portfolio
<CAPTION>
For the Year Ended September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 360,156,487 $ 271,518,055
Realized gain (loss) on investments--net (21,583,485) 13,337,857
Change in unrealized appreciation/depreciation on investments--net 103,640,401 (218,088,489)
-------------- --------------
Net increase in net assets resulting from operations 442,213,403 66,767,423
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (92,450,302) (84,737,805)
(Note 1f): Class B (259,162,896) (186,780,250)
Class C (4,442,179) --
Class D (4,101,110) --
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (360,156,487) (271,518,055)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 1,054,930,541 718,487,003
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 1,136,987,457 513,736,371
Beginning of year 3,223,795,171 2,710,058,800
-------------- --------------
End of year* $4,360,782,628 $3,223,795,171
============== ==============
<FN>
*Undistributed investment income--net (Note 1g) $ 2,875,853 --
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets (continued) Investment Grade Portfolio
<CAPTION>
For the Year Ended September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 63,342,700 $ 55,789,198
Realized loss on investments--net (6,680,118) (27,366,985)
Change in unrealized appreciation/depreciation on investments--net 69,854,981 (89,071,174)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 126,517,563 (60,648,961)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (28,557,399) (25,781,848)
Shareholders Class B (33,602,341) (30,007,350)
(Note 1f): Class C (458,421) --
Class D (724,539) --
Realized gain on investments--net:
Class A -- (3,174,664)
Class B -- (4,207,122)
In excess of realized gain on investments--net:
Class A -- (14,194,438)
Class B -- (18,810,727)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (63,342,700) (96,176,149)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 241,816,022 83,643,841
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 304,990,885 (73,181,269)
Beginning of year 849,845,257 923,026,526
-------------- --------------
End of year $1,154,836,142 $ 849,845,257
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
<CAPTION>
For the Year Ended September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 22,585,754 $ 20,758,590
Realized loss on investments--net (5,362,923) (8,401,311)
Change in unrealized appreciation/depreciation on investments--net 22,789,142 (27,976,092)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 40,011,973 (15,618,813)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (12,207,578) (11,981,544)
Shareholders Class B (9,963,391) (8,777,046)
(Note 1f): Class C (58,841) --
Class D (355,944) --
In excess of realized gain on investments:
Class A -- (4,476,067)
Class B -- (3,477,851)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (22,585,754) (28,712,508)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 124,155,845 28,138,074
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 141,582,064 (16,193,247)
Beginning of year 311,433,458 327,626,705
-------------- --------------
End of year $ 453,015,522 $ 311,433,458
============== ==============
<PAGE>
<CAPTION>
Financial Highlights High Income Portfolio
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 7.66 $ 8.13 $ 7.84 $ 7.02 $ 6.39
Performance: -------- -------- -------- -------- --------
Investment income--net .81 .75 .79 .87 .92
Realized and unrealized gain (loss) on
investments--net .14 (.47) .29 .82 .63
-------- -------- -------- -------- --------
Total from investment operations .95 .28 1.08 1.69 1.55
-------- -------- -------- -------- --------
Less dividends from investment income--net (.81) (.75) (.79) (.87) (.92)
-------- -------- -------- -------- --------
Net asset value, end of year $ 7.80 $ 7.66 $ 8.13 $ 7.84 $ 7.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.26% 3.42% 14.35% 25.22% 26.46%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .55% .53% .55% .59% .66%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 10.70% 9.27% 9.78% 11.44% 14.13%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $902,321 $876,573 $886,784 $683,801 $522,703
Data: ======== ======== ======== ======== ========
Portfolio turnover 24.58% 32.52% 34.85% 40.52% 39.95%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued) High Income Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 7.66 $ 8.13 $ 7.85 $ 7.02 $ 6.40
Performance: ---------- ---------- ---------- -------- --------
Investment income--net .75 .69 .72 .81 .87
Realized and unrealized gain (loss) on
investments--net .14 (.47) .28 .83 .62
---------- ---------- ---------- -------- --------
Total from investment operations .89 .22 1.00 1.64 1.49
---------- ---------- ---------- -------- --------
Less dividends from investment
income--net (.75) (.69) (.72) (.81) (.87)
---------- ---------- ---------- -------- --------
Net asset value, end of year $ 7.80 $ 7.66 $ 8.13 $ 7.85 $ 7.02
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 12.42% 2.66% 13.35% 24.44% 25.32%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses, excluding account
Net Assets: maintenance and distribution fees .57% .54% .56% .60% .67%
========== ========== ========== ======== ========
Expenses 1.32% 1.29% 1.31% 1.35% 1.42%
========== ========== ========== ======== ========
Investment income--net 9.81% 8.53% 8.94% 10.42% 13.24%
========== ========== ========== ======== ========
Supplemental Net assets, end of year (in thousands) $3,220,767 $2,347,223 $1,823,275 $847,354 $264,486
Data: ========== ========== ========== ======== ========
Portfolio turnover 24.58% 32.52% 34.85% 40.52% 39.95%
========== ========== ========== ======== ========
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
September 30, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Operating Net asset value, beginning of period $ 7.59 $ 7.59
Performance: -------- --------
Investment income--net .71 .75
Realized and unrealized gain on investments--net .22 .21
-------- --------
Total from investment operations .93 .96
-------- --------
Less dividends from investment income--net (.71) (.75)
-------- --------
Net asset value, end of period $ 7.81 $ 7.80
======== ========
<PAGE>
Total Investment Based on net asset value per share 12.93%+++ 13.37%+++
Return:** ======== ========
Ratios to Average Expenses, excluding account maintenance and distribution fees .58%* .56%*
Net Assets: ======== ========
Expenses 1.38%* .81%*
======== ========
Investment income--net 9.06%* 9.70%*
======== ========
Supplemental Net assets, end of period (in thousands) $135,019 $102,676
Data: ======== ========
Portfolio turnover 24.58% 24.58%
======== ========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 10.77 $ 12.81 $ 12.30 $ 11.59 $ 10.83
Performance: -------- -------- -------- -------- --------
Investment income--net .80 .75 .81 .88 .92
Realized and unrealized gain (loss) on
investments--net .74 (1.49) .67 .71 .76
-------- -------- -------- -------- --------
Total from investment operations 1.54 (.74) 1.48 1.59 1.68
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.80) (.75) (.81) (.88) (.92)
Realized gain on investments--net -- (.10) (.16) -- --
In excess of realized gain on
investments--net -- (.45) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.80) (1.30) (.97) (.88) (.92)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.51 $ 10.77 $ 12.81 $ 12.30 $ 11.59
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 14.92% (6.03%) 12.76% 14.30% 16.18%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .58% .53% .56% .58% .61%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 7.30% 6.61% 6.94% 7.43% 8.26%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $472,388 $366,792 $407,625 $362,139 $324,818
Data: ======== ======== ======== ======== ========
Portfolio turnover 108.07% 159.05% 121.34% 65.43% 126.32%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 10.77 $ 12.81 $ 12.30 $ 11.59 $ 10.83
Performance: -------- -------- -------- -------- --------
Investment income--net .72 .66 .72 .79 .84
Realized and unrealized gain (loss) on
investments--net .74 (1.49) .67 .71 .76
-------- -------- -------- -------- --------
Total from investment operations 1.46 (.83) 1.39 1.50 1.60
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.72) (.66) (.72) (.79) (.84)
Realized gain on investments--net -- (.10) (.16) -- --
In excess of realized gain on
investments--net -- (.45) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.72) (1.21) (.88) (.79) (.84)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.51 $ 10.77 $ 12.81 $ 12.30 $ 11.59
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 14.05% (6.73%) 11.91% 13.44% 15.30%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees .60% .54% .54% .59% .62%
======== ======== ======== ======== ========
Expenses 1.35% 1.29% 1.29% 1.34% 1.37%
======== ======== ======== ======== ========
Investment income--net 6.52% 5.85% 5.80% 6.65% 7.50%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $631,517 $483,053 $515,402 $325,706 $198,504
Data: ======== ======== ======== ======== ========
Portfolio turnover 108.07% 159.05% 121.34% 65.43% 126.32%
======== ======== ======== ======== ========
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to September 30, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Operating Net asset value, beginning of period $ 10.67 $ 10.67
Performance: -------- --------
Investment income--net .67 .73
Realized and unrealized gain on investments--net .84 .84
-------- --------
Total from investment operations 1.51 1.57
-------- --------
Less dividends from investment income--net (.67) (.73)
-------- --------
Net asset value, end of period $ 11.51 $ 11.51
======== ========
Total Investment Based on net asset value per share 14.61%+++ 15.21%+++
Return:** ======== ========
Ratios to Average Expenses, excluding account maintenance and distribution fees .60%* .58%*
Net Assets: ======== ========
Expenses 1.40%* .83%*
======== ========
Investment income--net 6.27%* 6.91%*
======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $25,778 $25,153
Data: ======== ========
Portfolio turnover 108.07% 108.07%
======== ========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 10.90 $ 12.44 $ 12.03 $ 11.41 $ 10.88
Performance: -------- -------- -------- -------- --------
Investment income--net .79 .75 .76 .88 .93
Realized and unrealized gain (loss) on
investments--net .60 (1.26) .55 .62 .53
-------- -------- -------- -------- --------
Total from investment operations 1.39 (.51) 1.31 1.50 1.46
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.79) (.75) (.76) (.88) (.93)
Realized gain on investments--net -- -- (.14) -- --
In excess of realized gain on
investments--net -- (.28) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.79) (1.03) (.90) (.88) (.93)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.50 $ 10.90 $ 12.44 $ 12.03 $ 11.41
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 13.32% (4.25%) 11.39% 13.71% 13.97%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .59% .53% .58% .62% .67%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 7.14% 6.48% 6.42% 7.54% 8.35%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $217,714 $170,222 $193,505 $154,333 $103,170
Data: ======== ======== ======== ======== ========
Portfolio turnover 142.84% 155.42% 180.52% 95.33% 132.56%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
Class B Class C Class D
For the For the For the
Period Period Period
The following per share data and ratios have been derived Nov. 13, Oct. 21, Oct. 21,
from information provided in the financial statements. For the Year Ended 1992++ to 1994++ to 1994++ to
September 30, Sept. 30, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1995 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of period $ 10.90 $ 12.44 $ 11.68 $ 10.81 $ 10.81
Performance: -------- -------- -------- -------- --------
Investment income--net .74 .69 .61 .70 .74
Realized and unrealized gain (loss) on
investments--net .60 (1.26) .90 .69 .69
-------- -------- -------- -------- --------
Total from investment operations 1.34 (.57) 1.51 1.39 1.43
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.74) (.69) (.61) (.70) (.74)
Realized gain on investments--net -- -- (.14) -- --
In excess of realized gain on
investments--net -- (.28) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.74) (.97) (.75) (.70) (.74)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.50 $ 10.90 $ 12.44 $ 11.50 $ 11.50
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 12.74% (4.72%) 13.30%+++ 13.26%+++ 13.65%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees .61% .54% .57%* .64%* .60%*
======== ======== ======== ======== ========
Expenses 1.11% 1.04% 1.07%* 1.14%* .70%*
======== ======== ======== ======== ========
Investment income--net 6.61% 5.98% 5.61%* 6.24%* 6.81%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $212,146 $141,212 $134,122 $ 6,806 $ 16,349
Data: ======== ======== ======== ======== ========
Portfolio turnover 142.84% 155.42% 180.52% 142.84% 142.84%
======== ======== ======== ======== ========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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 management invest-
ment company consisting of three separate portfolios:
the High Income Portfolio, the Investment Grade Port-
folio and the Intermediate Term Portfolio. The Fund
offers four classes of shares under the Merrill Lynch
Select Pricing SM System. Shares of Class A and Class D
are sold with a front-end sales charge. Shares of Class B
and Class C may be subject to a contingent deferred
sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same
terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive
voting rights with respect to matters relating to its
account maintenance and distribution expenditures.
The following is a summary of significant accounting
policies followed by the Fund.
<PAGE>
(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 value.
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 purchased. Inter-
est 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 pric-
ing service retained by the Fund which may use a
matrix system for valuations.
(b) Derivative financial instruments--The Fund may
engage in various portfolio strategies to seek to increase
its return by hedging its portfolio against adverse move-
ments in the equity, debt and currency markets. Losses
may arise due to changes in the value of the contract or
if the counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase
or sell interest rate futures contracts and options on
such futures contracts for the purpose of hedging the
market risk on existing securities or the intended pur-
chase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral
such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the con-
tract, the Fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract
is closed, the Fund records a realized gain or loss
equal to the difference between the value of the con-
tract at the time it was opened and the value at the
time it was closed.
<PAGE>
* Options--The Fund is authorized to purchase and
write call and put options. When the Fund writes an
option, an amount equal to the premium received by
the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently
marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exer-
cise of an option, the related premium paid (or received)
is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the
Fund enters into a closing transaction), the Fund real-
izes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent
the cost of the closing transaction exceeds the pre-
mium paid or received).
Written and purchased options are non-income produc-
ing investments.
(c) 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 provi-
sion is required.
(d) 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.
(e) Prepaid registration fees--Prepaid registration fees
are charged to expense as the related shares are issued.
(f) 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. Distributions in excess of realized
capital gains are due primarily to differing tax treat-
ments for futures transactions and post-October losses.
<PAGE>
(g) Reclassification--Generally accepted accounting
principles require that certain differences between
accumulated net realized capital losses for financial
reporting and tax purposes, if permanent, be
reclassified to undistributed net investment income.
Accordingly, current year's permanent book/tax differences
of $2,875,853 on the High Income Portfolio have been
reclassified from accumulated net realized capital
losses to undistributed net investment income. These
reclassifications have no effect on net assets or
net asset values per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Fund Asset Management, L.P. ("FAM").
The general partner of FAM is Princeton Services,
Inc. ("PSI"), an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor, Inc. ("MLFD" of
"Distributor"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
FAM is responsible for the management of the Fund's
Portfolios and provides the necessary personnel, facili-
ties, 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.
Aggregate of Average Rate of Advisory Fee
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 extraordinary 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 FAM
during any fiscal year which will cause such expenses
to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the distribution plans (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 account
maintenance and distribution fees. The fees are accrued
daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Maintenance Fees Distribution Fees
Class B Class C Class D Class B Class C
High Income
Portfolio 0.25% 0.25% 0.25% 0.50% 0.55%
Investment Grade
Portfolio 0.25% 0.25% 0.25% 0.50% 0.55%
Intermediate Term
Portfolio 0.25% 0.25% 0.10% 0.25% 0.25%
Pursuant to a sub-agreement with the Distributor,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
a subsidiary of ML & Co., also provides account main-
tenance and distribution services to the Fund. The
ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account main-
tenance services to Class B, Class C and Class D share-
holders. The Distributor voluntarily did not collect any
Class C distribution fees until January 10, 1995 for the
Intermediate Term Portfolio. The ongoing distribution
fee compensates the Distributor and MLPF&S for pro-
viding shareholder and distribution-related services to
Class B and Class C shareholders.
For the year ended September 30, 1995, MLFD earned
underwriting discounts and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D
Shares as follows:
<PAGE>
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
High Income $ 52,365 $ 109,429 $541,146 $1,132,951
Investment Grade 7,682 14,085 79,597 148,959
Intermediate Term 785 2,252 14,413 26,024
For the year ended September 30, 1995, MLPF&S re-
ceived contingent deferred sales charges of $6,415,911
relating to transactions in Class B Shares, amounting to
$5,011,339, $1,112,592, and $291,880 in the High Income,
Investment Grade, and Intermediate Term Portfolios,
respectively, and $52,562 relating to transactions in
NOTES TO FINANCIAL STATEMENTS (continued)
Class C Shares, amounting to $43,196, $8,956 and
$410 in the High Income, Investment Grade, and
Intermediate Term Portfolios, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"),
a wholly-owned subsidiary of ML & Co., is the Fund's
transfer agent.
During the year ended September 30, 1995, the Fund
paid Merrill Lynch Security Pricing Service, an affiliate
of MLPF&S, $17,826 for security price quotations to
compute the net asset value of the Fund.
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, PSI, MLPF&S, MLFD, MLFDS,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the year ended September 30, 1995,
were as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Purchases $1,639,815,538 $1,112,459,005 $540,453,284
============== ============== ============
Sales $ 808,534,177 $ 939,157,923 $445,577,524
============== ============== ============
<PAGE>
Net realized and unrealized gains (losses) as of
September 30, 1995 were as follows:
Realized Unrealized
High Income Portfolio Gains (Losses) Losses
Long-term investments $(21,583,848) $(48,739,157)
Short-term investments 363 --
------------ ------------
Total $(21,583,485) $(48,739,157)
============ ============
Realized Unrealized
Investment Grade Portfolio Losses Gains
Long-term investments $ (6,680,118) $ 33,280,213
------------ ------------
Total $ (6,680,118) $ 33,280,213
============ ============
Realized Unrealized
Intermediate Term Portfolio Losses Gains
Long-term investments $ (5,362,921) $ 8,401,585
Short-term investments (2) --
------------ ------------
Total $ (5,362,923) $ 8,401,585
============ ============
As of September 30, 1995, net unrealized appreciation
(depreciation) for Federal income tax purposes was
as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Gross unrealized
appreciation $ 147,422,143 $38,363,701 $10,911,673
Gross unrealized
depreciation (203,039,359) (5,517,377) (2,711,700)
------------- ----------- -----------
Net unrealized
appreciation
(depreciation) $ (55,617,216) $32,846,324 $ 8,199,973
============= =========== ===========
<PAGE>
The aggregate cost of investments at September 30,
1995 for Federal income tax purposes was $4,407,917,261
for the High Income Portfolio, $1,117,790,816 for the
Investment Grade Portfolio, and $426,946,916 for the
Intermediate Term Portfolio.
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions for the year ended September 30, 1995,
was $1,054,930,541 for the High Income Portfolio,
$241,816,022 for the Investment Grade Portfolio and
$124,155,845 for the Intermediate Term Portfolio. Net
increase in net assets derived from capital share trans-
actions for the year ended September 30, 1994 was
$718,487,003 for the High Income Portfolio, $83,643,841
for the Investment Grade Portfolio and $28,138,074 for
the Intermediate Term Portfolio.
Transactions in capital shares for each class were
as follows:
High Income Portfolio
Class A Shares for the
Year Ended Dollar
September 30, 1995 Shares Amount
Shares sold 17,000,487 $ 129,792,483
Shares issued to shareholders in
reinvestment of dividends 6,278,026 47,543,088
-------------- --------------
Total issued 23,278,513 177,335,571
Shares redeemed (22,086,202) (167,868,415)
-------------- --------------
Net increase 1,192,311 $ 9,467,156
============== ==============
High Income Portfolio
Class A Shares for the
Year Ended Dollar
September 30, 1994 Shares Amount
Shares sold 24,265,055 $ 196,408,023
Shares issued to shareholders in
reinvestment of dividends 5,410,880 43,484,905
-------------- --------------
Total issued 29,675,935 239,892,928
Shares redeemed (24,265,005) (195,021,899)
-------------- --------------
Net increase 5,410,930 $ 44,871,029
============== ==============
<PAGE>
High Income Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1995 Shares Amount
Shares sold 159,617,311 $1,217,867,803
Shares issued to shareholders in
reinvestment of dividends 15,892,010 120,624,151
-------------- --------------
Total issued 175,509,321 1,338,491,954
Automatic conversion of shares (128,848) (985,692)
Shares redeemed (69,059,662) (524,845,954)
-------------- --------------
Net increase 106,320,811 $ 812,660,308
============== ==============
High Income Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1994 Shares Amount
Shares sold 139,760,948 $1,132,873,066
Shares issued to shareholders in
reinvestment of dividends 10,902,859 87,436,254
-------------- --------------
Total issued 150,663,807 1,220,309,320
Shares redeemed (68,376,686) (546,693,346)
-------------- --------------
Net increase 82,287,121 $ 673,615,974
============== ==============
High Income Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 19,648,421 $ 150,754,337
Shares issued to shareholders in
reinvestment of dividends 304,333 2,351,332
-------------- --------------
Total issued 19,952,754 153,105,669
Shares redeemed (2,657,002) (20,513,998)
-------------- --------------
Net increase 17,295,752 $ 132,591,671
============== ==============
[FN]
++Commencement of Operations.
<PAGE>
High Income Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 21,574,941 $ 165,091,505
Automatic conversion of shares 128,848 985,692
Shares issued to shareholders in
reinvestment of dividends 257,744 1,984,388
-------------- --------------
Total issued 21,961,533 168,061,585
Shares redeemed (8,803,802) (67,850,179)
-------------- --------------
Net increase 13,157,731 $ 100,211,406
============== ==============
[FN]
++Commencement of Operations.
Investment Grade Portfolio
Class A Shares for the
Year Ended Dollar
September 30, 1995 Shares Amount
Shares sold 14,319,272 $ 159,951,974
Shares issued to shareholders in
reinvestment of dividends 1,399,551 15,395,612
-------------- --------------
Total issued 15,718,823 175,347,586
Shares redeemed (8,729,534) (96,092,634)
-------------- --------------
Net increase 6,989,289 $ 79,254,952
============== ==============
<PAGE>
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1994 Shares Amount
Shares sold 8,030,423 $ 93,135,987
Shares issued to shareholders in
reinvestment of dividends
& distributions 2,562,146 29,991,889
-------------- --------------
Total issued 10,592,569 123,127,876
Shares redeemed (8,336,799) (96,592,992)
-------------- --------------
Net increase 2,255,770 $ 26,534,884
============== ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1995 Shares Amount
Shares sold 23,189,348 $ 258,078,382
Shares issued to shareholders in
reinvestment of dividends 1,854,252 20,437,623
-------------- --------------
Total issued 25,043,600 278,516,005
Automatic conversion of shares (35,738) (395,466)
Shares redeemed (14,986,713) (164,956,465)
-------------- --------------
Net increase 10,021,149 $ 113,164,074
============== ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1994 Shares Amount
Shares sold 15,835,177 $ 185,447,332
Shares issued to shareholders in
reinvestment of dividends
& distributions 2,940,143 34,360,112
-------------- --------------
Total issued 18,775,320 219,807,444
Shares redeemed (14,132,989) (162,698,487)
-------------- --------------
Net increase 4,642,331 $ 57,108,957
============== ==============
<PAGE>
Investment Grade Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 2,612,510 $ 29,346,737
Shares issued to shareholders in
reinvestment of dividends 25,192 284,361
-------------- --------------
Total issued 2,637,702 29,631,098
Shares redeemed (398,122) (4,456,879)
-------------- --------------
Net increase 2,239,580 $ 25,174,219
============== ==============
[FN]
++Commencement of Operations.
Investment Grade Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 2,756,661 $ 30,609,293
Automatic conversion of shares 35,721 395,466
Shares issued to shareholders in
reinvestment of dividends 45,859 515,048
-------------- --------------
Total issued 2,838,241 31,519,807
Shares redeemed (653,515) (7,297,030)
-------------- --------------
Net increase 2,184,726 $ 24,222,777
============== ==============
[FN]
++Commencement of Operations.
NOTES TO FINANCIAL STATEMENTS (concluded)
Intermediate Term Portfolio
Class A Shares for the
Year Ended Dollar
September 30, 1995 Shares Amount
Shares sold 6,450,433 $ 73,291,315
Shares issued to shareholders in
reinvestment of dividends 649,107 7,173,693
-------------- --------------
Total issued 7,099,540 80,465,008
Shares redeemed (3,794,801) (41,909,273)
-------------- --------------
Net increase 3,304,739 $ 38,555,735
============== ==============
<PAGE>
Intermediate Term Portfolio
Class A Shares for the
Year Ended Dollar
September 30, 1994 Shares Amount
Shares sold 3,674,523 $ 43,208,064
Shares issued to shareholders in
reinvestment of dividends
& distributions 932,160 10,823,344
-------------- --------------
Total issued 4,606,683 54,031,408
Shares redeemed (4,535,150) (52,574,546)
-------------- --------------
Net increase 71,533 $ 1,456,862
============== ==============
Intermediate Term Portfolio
Class B Shares for the
Year Ended Dollar
September 30, 1995 Shares Amount
Shares sold 10,542,654 $ 118,768,676
Shares issued to shareholders in
reinvestment of dividends 517,191 5,742,084
-------------- --------------
Total issued 11,059,845 124,510,760
Automatic conversion of shares (832) (17,252)
Shares redeemed (5,575,382) (61,692,334)
-------------- --------------
Net increase 5,483,631 $ 62,801,174
============== ==============
Intermediate Term Portfolio
Class B Shares for the
Year Ended Dollar
September 30, 1994 Shares Amount
Shares sold 6,504,586 $ 75,947,813
Shares issued to shareholders in
reinvestment of dividends
& distributions 605,926 7,028,720
-------------- --------------
Total issued 7,110,512 82,976,533
Shares redeemed (4,928,956) (56,295,321)
-------------- --------------
Net increase 2,181,556 $ 26,681,212
============== ==============
<PAGE>
Intermediate Term Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 663,716 $ 7,580,309
Shares issued to shareholders in
reinvestment of dividends 2,521 28,709
-------------- --------------
Total issued 666,237 7,609,018
Shares redeemed (74,509) (852,210)
-------------- --------------
Net increase 591,728 $ 6,756,808
============== ==============
[FN]
++Commencement of Operations.
Intermediate Term Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
September 30, 1995 Shares Amount
Shares sold 1,674,458 $ 18,850,195
Automatic conversion of shares 832 17,252
Shares issued to shareholders in
reinvestment of dividends 15,083 170,456
-------------- --------------
Total issued 1,690,373 19,037,903
Shares redeemed (269,024) (2,995,775)
-------------- --------------
Net increase 1,421,349 $ 16,042,128
============== ==============
[FN]
++Commencement of Operations.
5. Loaned Securities:
At September 30, 1995, the Investment Grade Portfolio
held US Treasury Bonds/Notes having an aggregate
value of approximately $38,200,000 as collateral for
Portfolio securities loaned, having a market value of
approximately $37,162,000. The Intermediate Term
Portfolio held US Treasury Bonds/Notes having an aggre-
gate value of approximately $28,500,000 as collateral for
Portfolio securities loaned, having a market value of
approximately $27,501,000.
<PAGE>
6. Capital Loss Carryforward:
At September 30, 1995, the Fund had a capital loss
carryforward of approximately $11,795,000 in the High
Income Portfolio, all of which expires in 1999;
approximately $35,299,000 in the Investment Grade Portfolio,
all of which expires in 2003; and approximately $12,447,000
in the Intermediate Term Portfolio, all of which expires
in 2003. These amounts will be available to offset like amounts
of any future taxable gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate Bond Fund, Inc.:
We have audited the accompanying statements of assets
and liabilities, including the schedule of investments, of
the High Income, Investment Grade and Intermediate
Term Portfolios of Merrill Lynch Corporate Bond Fund,
Inc. as of September 30, 1995, the related statements of
operations for the year then ended, and changes in net
assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years
in the five-year period then ended. These financial
statements and financial highlights are the responsibil-
ity of the Fund's management. Our responsibility is to
express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
the financial highlights are free of material misstate-
ment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confir-
mation of securities owned at September 30, 1995 by
correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement pres-
entation. We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of the High Income, Investment Grade
and Intermediate Term Portfolios of Merrill Lynch
Corporate Bond Fund, Inc. as of September 30, 1995,
the results of their operations, the changes in their net
assets, and the financial highlights for the respective
stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 8, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
High Income Portfolio
Of the ordinary income distributions paid monthly by
the Portfolio during the fiscal year ended September 30,
1995, 1.08% qualifies for the dividends received deduc-
tion for corporations. Additionally, there were no long-
term capital gain distributions paid during the year.
Investment Grade and Intermediate Term
Portfolios
None of the ordinary income distributions paid monthly
by the Portfolios during the fiscal year ended Septem-
ber 30, 1995 qualify for the dividends received deduction
for corporations. Additionally, there were no long-
term capital gain distributions paid during the year.
The law varies in each state as to whether and what
percentage of dividend income attributable to Federal
obligations is exempt from state income tax. We recom-
mend that you consult your tax adviser to determine if
any portion of the dividends you received is exempt
from state income tax.
Listed below are the percentages of total assets of the
Portfolios invested in Federal obligations* as of the end of
each quarter of the fiscal year.
For the Quarter Investment Grade Intermediate Term
Ended Portfolio Portfolio
December 31, 1994 4.43% 5.02%
March 31, 1995 10.46% 9.11%
June 30, 1995 9.34% 7.65%
September 30, 1995 8.11% 10.11%
Of the Fund's ordinary income distributions paid
monthly to shareholders from the Intermediate Term
and Investment Grade Portfolios during the fiscal year
ended September 30, 1995, 7.53% and 7.52%, respectively,
were attributable to Federal obligations. In calculating
the foregoing percentages, expenses of the Portfolios
have been allocated on a pro rata basis.
Please retain this information for your records.
[FN]
*For purposes of this calculation, Federal obligations include US Treasury
Notes, US Treasury Bills, and US Treasury Bonds. Also included are obligations
issued by the following agencies: Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Land Banks, Federal Home Loan Banks, and the Student
Loan Marketing Association. Repurchase agreements are not included in this
calculation.
