MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Semi-Annual Report
March 31, 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, Massachusetts 02101
<PAGE>
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 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
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
Increasing signs of slowing economic growth led
to higher US stock and bond prices during the March
quarter. Although gross domestic product (GDP) was
reported to have increased at a revised 5.1% rate
during the final quarter of 1994, declines in other
indicators such as new home sales and durable goods
orders registered thus far in 1995 have led investors
to anticipate that the economy is losing enough
momentum to keep inflation under control and pre-
clude further significant monetary policy tightening
by the Federal Reserve Board.
<PAGE>
However, as US stock and bond markets have risen,
the value of the US dollar reached new lows relative
to the yen and the Deutschemark. Persistent trade
deficits and exports of capital from the United States
have kept the US currency in a decade-long decline
relative to the Japanese and German currencies. Over
the longer term, since the United States has the
highest productivity among industrialized nations and
among the lowest labor costs, demand for US dollar-
denominated assets may improve. However, a reduc-
tion of the still-widening US trade deficit may be
necessary before the US dollar appreciates substan-
tially relative to the yen and the Deutschemark.
The first three months of 1995 were very positive
for the US stock and bond markets. Continued signs
of a moderating expansion and well-contained infla-
tionary pressures would provide further assurance
that the peak in interest rates is behind us, creating
a stronger foundation for higher stock and bond
prices. On the other hand, indications of reaccelera-
ting growth and further significant monetary policy
tightening by the Federal Reserve Board would be a
decided negative for the US financial markets.
Portfolio Strategy
High Income Portfolio
The fixed-income markets posted strong returns
during the quarter ended March 31, 1995 as evidence
of a slowing US economy accumulated. This eased
fears that inflationary pressures would intensify and
increased the probability that the upward spiral in
short-term interest rates was over. The ten-year
Treasury note declined from 7.81% at year-end 1994
to 7.17% at March 31, 1995, with a total return of
+6.20%. The unmanaged Merrill Lynch High Yield
Master Index II, a broad-based index representative
of the high-yield market, produced a total return
of +6.07% as yields fell from 11.32% at year-end
1994 to 10.88% at March 31, 1995.
<PAGE>
The High Income Portfolio was well positioned for the
improved market conditions. Cable and communica-
tions companies, as well as bonds in the airlines and
gaming sectors, were particularly strong performers
during the March quarter, and the portfolio was
somewhat overweighted in these sectors. Various
mergers and acquisitions, and positive events relating
to specific issues, had a positive impact on portfolio
results. For example, USAir Inc.'s agreement with its
pilot union on wage and work rule concessions con-
tributed to a sharp rise in that company's bonds. Both
Nextel Communications Inc. and Fresh Del Monte
Corp. bond prices surged on news that each company
would receive new equity investments. Continental
Medsystems, Inc. bonds rallied in response to the
news that it would merge with the more conservatively
capitalized Horizon Healthcare. A number of initial
public offerings (IPOs) also occurred in the first
quarter. Fort Howard Corp., American Standard Inc.,
and Videotron Holdings PLC all issued stock and used
the proceeds to retire debt and improve credit quality.
Several IPOs that are planned for the second quarter
were also announced.
In general, the outlook appears positive over the next
six months. We expect that short-term interest rates
will remain stable. In addition, we look for
continued reequitization of balance sheets through
equity issuance and merger and acquisition activity.
Good corporate profits should continue to support
credit quality fundamentals. Certain industries such
as paper, steel and airlines will continue to benefit
from strong earnings. The economic slowdown could
provide some negative surprises, such as earnings
disappointments that may cause prices of specific
issues to fall.
We anticipate that there will be continued strong
cash flows into high-yield funds. In the first quarter
of 1995, net inflows were reported to be $2.7 billion,
and the trend may accelerate. At this time, valuation
is only adequate. The yield spread between US Treasury
bonds and high-yield bonds is toward the narrow end of
the range over the past 15 years. However, given the
strong positive fundamentals, yield spreads should
remain relatively stable. In the March quarter,
valuation improved as Treasury yields declined more
than high-yield bonds, causing the yield premium of
the Merrill Lynch Master Index II to widen to 51.7%
compared to 45% at December 31, 1994.
<PAGE>
At March 31, 1995, the Portfolio's cash equivalents
were 7.4%. Major industry areas represented in the
Portfolio included: energy, 8.1% of net assets; hotels
and casinos, 8.1%; communications, 8.0%; and paper,
7.5%. The Portfolio's average maturity was 7.5 years.
Investment Grade Portfolio &
Intermediate Term Portfolio
Investor sentiment began to change to a more positive
outlook since the beginning of the year. Despite the
fact that the economy grew at a stronger-than-expected
4.5% annual rate in the fourth quarter of 1994, inflation
was at the lowest level in three decades.
However, fixed-income investors were reluctant to
become genuinely optimistic after a difficult 1994.
Interest rates began to decline in a restrained pattern
throughout the March quarter. The long-term Treasury
bond yield dropped irregularly from 8.01% in early
December to 7.43% at the end of March. The yield
curve steepened as short-term interest rates dropped
further than long-term interest rates. The yield spread
between two-year and 30-year issues widened from
19 basis points to 65 basis points during the three-
month period ended March 31, 1995.
Cash flows into the Investment Grade Portfolio
increased during the March quarter, and we used
the opportunity to make investments. We extended
the average portfolio maturity from 4.97 years to
5.34 years. This was accomplished through a reduction
in our cash position from 10% of net assets to 4.2% and
by a series of trades in which the average maturity
was lengthened.
For the Intermediate Term Portfolio, we invested in
an aggressive manner during the March quarter to
take advantage of the strong market. We extended the
average portfolio maturity from 4.05 years to 4.19
years. We accomplished this through a reduction of
our cash position from 4.6% of net assets to 3.5% and
by a series of trades in which the average maturity
was lengthened.
In Conclusion
We appreciate your ongoing investment in Merrill
Lynch Corporate Bond Fund, Inc., and we look for-
ward to assisting you with your financial needs and
objectives in the months and years ahead.
<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
May 3, 1995
<TABLE>
PROXY RESULTS
During the six-month period ended March 31, 1995, Merrill Lynch Corporate Bond Fund, Inc. shareholders voted on the following
proposals. Proposals 1, 2 and 4 were approved at a special shareholders' meeting on September 26, 1994. Proposal 3 was passed at
a special shareholders' meeting on January 31, 1995. The description of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
High Income Portfolio For Without Authority
<S> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W. Forbes 391,699,559 6,933,584
Cynthia A. Montgomery 391,557,128 7,076,015
Charles C. Reilly 391,692,980 6,940,163
Kevin A. Ryan 391,719,443 6,913,700
Richard R. West 391,636,383 6,996,760
Arthur Zeikel 391,628,245 7,004,898
<PAGE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent
auditors. 386,626,945 3,166,426 8,839,772
3. To approve certain changes to the Fund's fundamental
investment restrictions. 210,609,478 13,764,931 14,752,964
4. To amend the Fund's articles of incorporation to implement
the Merrill Lynch Select PricingSM System. 346,612,841 27,061,827 24,958,475
<CAPTION>
Shares Voted Shares Voted
Investment Grade Portfolio For Without Authority
<S> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W. Forbes 75,699,781 1,297,930
Cynthia A. Montgomery 75,708,285 1,289,426
Charles C. Reilly 75,724,498 1,273,213
Kevin A. Ryan 75,722,179 1,275,532
Richard R. West 75,721,275 1,276,436
Arthur Zeikel 75,702,388 1,295,323
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent
auditors. 74,588,516 758,642 1,650,553
3. To approve certain changes to the Fund's fundamental
investment restrictions. 38,499,593 1,852,764 2,249,013
4. To amend the Fund's articles of incorporation to implement
the Merrill Lynch Select PricingSM System. 68,817,697 3,765,309 4,414,705
<CAPTION>
Shares Voted Shares Voted
Intermediate Term Portfolio For Without Authority
<S> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W. Forbes 27,265,833 738,405
Cynthia A. Montgomery 27,280,103 724,135
Charles C. Reilly 27,280,103 724,135
Kevin A. Ryan 27,280,103 724,135
Richard R. West 27,265,833 738,405
Arthur Zeikel 27,265,833 738,405
<PAGE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's
independent auditors. 26,800,138 209,584 994,516
3. To approve certain changes to the Fund's fundamental
investment restrictions. 13,338,614 758,464 796,370
4. To amend the Fund's articles of incorporation to
implement the Merrill Lynch Select Pricing SM System. 24,160,594 1,661,723 2,181,921
</TABLE>
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.
*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 10 years.
<PAGE>
*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).
The "Performance Summary" and "Average Annual
Total Return" tables for the Fund's Class A and Class
B Shares are presented on page 5. "Aggregate Total
Return" tables for Class C and Class D Shares are
also presented on pages 5 and 6. Data for all of the
Fund's shares, including Class C and Class D Shares,
are presented in the "Recent Performance Results"
table on page 7.
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 March 31, 1995 and for Class C and Class D
Shares for the since inception and 3-month periods ended
March 31, 1995. All data in this table assume imposition
of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered
a representation of future performance. Investment
return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each
class of shares will vary because of the different
levels of account maintenance, distribution and
transfer agency fees applicable to each class, which
are deducted from the income available to be paid
to shareholders.
<PAGE>
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class A Shares*
Year Ended 3/31/95 + 3.59% - 0.56%
Five Years Ended 3/31/95 +14.53 +13.60
Ten Years Ended 3/31/95 +11.97 +11.52
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Investment Grade Portfolio Class A Shares*
Year Ended 3/31/95 +3.98% -0.18%
Five Years Ended 3/31/95 +8.79 +7.91
Ten Years Ended 3/31/95 +9.82 +9.37
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Intermediate Term Portfolio Class A Shares*
Year Ended 3/31/95 +4.18% +3.14%
Five Years Ended 3/31/95 +8.61 +8.39
Ten Years Ended 3/31/95 +9.43 +9.32
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class B Shares*
Year Ended 3/31/95 + 2.84% - 0.90%
Five Years Ended 3/31/95 +13.68 +13.68
Inception (10/21/88) through 3/31/95 +10.90 +10.90
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to
0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class B Shares*
Year Ended 3/31/95 +3.22% -0.66%
Five Years Ended 3/31/95 +7.97 +7.97
Inception (10/21/88) through 3/31/95 +7.94 +7.94
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to
0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class B Shares*
Year Ended 3/31/95 +3.67% +2.70%
Inception (11/13/92) through 3/31/95 +5.10 +5.10
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to
0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
High Income Portfolio Class C Shares*
Inception (10/21/94) through 3/31/95 +4.29% +3.29%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to
0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Investment Grade Portfolio Class C Shares*
Inception (10/21/94) through 3/31/95 +5.40% +4.40%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to
0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Intermediate Term Portfolio Class C Shares*
Inception (10/21/94) through 3/31/95 +4.84% +3.84%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to
0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
High Income Portfolio Class D Shares*
Inception (10/21/94) through 3/31/95 +4.53% +0.35%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Investment Grade Portfolio Class D Shares*
Inception (10/21/94) through 3/31/95 +5.65% +1.42%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Intermediate Term Portfolio Class D Shares*
Inception (10/21/94) through 3/31/95 +4.88% +3.83%
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1--12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/10/78--12/31/78 $9.60/9.54 -- -- $ 0.13 -- -- + 0.73% -- --
1979 9.54/8.73 -- -- 1.03(a) -- -- + 2.36 -- --
1980(b) 8.73/7.91 $ 10.00/9.88 $ 10.00/9.93*** 1.07 $ 0.25 $ 0.25*** + 3.08 + 1.28% + 1.86%
1981 7.91/7.26 9.88/9.38 9.93/9.57 1.13 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 + 13.61 + 12.33
1990 7.17/5.88 11.33/11.13 11.13/11.05 1.00 0.94 0.97 - 4.61 + 6.97 + 8.43
1991 5.88/7.21 11.13/12.03 11.05/11.77 0.90 0.91 0.92 + 39.75 + 17.08 + 15.53
1992 7.21/7.78 12.03/11.86 11.77/11.60 0.86 1.03(c) 0.99(d) + 20.64 + 7.53 + 7.29
1993 7.78/8.32 11.86/11.97 11.60/11.92 0.76 1.35(e) 1.03(f) + 17.39 + 12.49 + 11.82
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--3/31/95 7.31/7.53 10.60/10.92 10.70/10.98 0.17 0.18 0.18 + 5.69 + 4.91 + 4.47
------ ------ ------
Total $15.78 $15.91 $15.30
Cumulative total return as of 3/31/95: +489.32%** +372.68%** +350.80%**
<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 in-
cludes $0.036 per share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio in-
cludes $0.012 per share capital gains distributions.
(e)Distribution for Investment Grade Portfolio
includes $0.261 per share capital gains distributions.
(f)Distribution for Intermediate Term Portfolio
includes $0.093 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
1/1--12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.92/7.80 $11.08/10.90 -- $0.18 $0.18 -- + 0.74% + 0.05% --
1989 7.80/7.17 10.90/11.33 -- 0.91 0.91 -- + 3.54 +12.77 --
1990 7.17/5.89 11.33/11.13 -- 0.95 0.86 -- - 5.18 + 6.16 --
1991 5.89/7.22 11.13/12.03 -- 0.84 0.83 -- +38.67 +16.19 --
1992 7.22/7.78 12.03/11.86 $11.68/11.60 0.80 0.94(a) $0.24(b) +19.57 + 6.71 + 1.34%
1993 7.78/8.33 11.86/11.97 11.60/11.92 0.70 1.25(c) 0.97(d) +16.65 +11.65 +11.26
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--3/31/95 7.31/7.53 10.60/10.92 10.70/10.98 0.16 0.16 0.16 + 5.52 + 4.73 + 4.36
----- -----
Total $5.28 $5.82 $2.08
Cumulative total return as of 3/31/95: +94.72%** +63.60%** +12.56%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends
and capital gains distributions at net asset
value on the payable date, and do not 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 in-
cludes $0.036 per share capital gains distributions.
(b)Distribution for Intermediate Term Portfolio in-
cludes $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
3/31/95 12/31/94 3/31/94++ % Change++ % Change As of 3/31/95
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 7.53 $ 7.31 $ 8.08 -6.81% +3.01% 10.86%
High Income Portfolio Class B Shares 7.53 7.31 8.08 -6.81 +3.01 10.54
High Income Portfolio Class C Shares 7.54 7.32 7.59 -0.66 +3.01 10.47
High Income Portfolio Class D Shares 7.54 7.31 7.59 -0.66 +3.15 10.62
Investment Grade Portfolio Class A Shares 10.92 10.60 11.28 -3.19 +3.02 7.03
Investment Grade Portfolio Class B Shares 10.92 10.60 11.28 -3.19 +3.02 6.55
Investment Grade Portfolio Class C Shares 10.92 10.61 10.67 +2.34 +2.92 6.49
Investment Grade Portfolio Class D Shares 10.92 10.60 10.67 +2.34 +3.02 6.79
Intermediate Term Portfolio Class A Shares 10.98 10.70 11.31 -2.92 +2.62 7.15
Intermediate Term Portfolio Class B Shares 10.98 10.70 11.31 -2.92 +2.62 6.69
Intermediate Term Portfolio Class C Shares 10.99 10.70 10.81 +1.67 +2.71 6.69
Intermediate Term Portfolio Class D Shares 10.98 10.70 10.81 +1.57 +2.62 7.05
High Income Portfolio Class A Shares--Total Return +3.59(1) +5.69(2)
High Income Portfolio Class B Shares--Total Return +2.84(3) +5.52(4)
High Income Portfolio Class C Shares--Total Return +4.29(5) +5.50(6)
High Income Portfolio Class D Shares--Total Return +4.53(7) +5.78(8)
Investment Grade Portfolio Class A Shares--Total Return +3.98(9) +4.91(10)
Investment Grade Portfolio Class B Shares--Total Return +3.22(11) +4.73(6)
Investment Grade Portfolio Class C Shares--Total Return +5.40(12) +4.62(13)
Investment Grade Portfolio Class D Shares--Total Return +5.65(14) +4.85(15)
Intermediate Term Portfolio Class A Shares--Total Return +4.18(16) +4.47(17)
Intermediate Term Portfolio Class B Shares--Total Return +3.67(18) +4.36(19)
Intermediate Term Portfolio Class C Shares--Total Return +4.84(20) +4.45(19)
Intermediate Term Portfolio Class D Shares--Total Return +4.88(21) +4.45(22)
<PAGE>
<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 $0.786 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.172 per share ordinary income dividends.
(3)Percent change includes reinvestment of $0.730 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.160 per share ordinary income dividends.
(5)Percent change includes reinvestment of $0.342 per share ordinary income dividends.
(6)Percent change includes reinvestment of $0.159 per share ordinary income dividends.
(7)Percent change includes reinvestment of $0.360 per share ordinary income dividends.
(8)Percent change includes reinvestment of $0.168 per share ordinary income dividends.
(9)Percent change includes reinvestment of $0.757 per share ordinary income dividends.
(10)Percent change includes reinvestment of $0.177 per share ordinary income dividends.
(11)Percent change includes reinvestment of $0.677 per share ordinary income dividends.
(12)Percent change includes reinvestment of $0.296 per share ordinary income dividends.
(13)Percent change includes reinvestment of $0.158 per share ordinary income dividends.
(14)Percent change includes reinvestment of $0.322 per share ordinary income dividends.
(15)Percent change includes reinvestment of $0.171 per share ordinary income dividends.
(16)Percent change includes reinvestment of $0.754 per share ordinary income dividends.
(17)Percent change includes reinvestment of $0.176 per share ordinary income dividends.
(18)Percent change includes reinvestment of $0.700 per share ordinary income dividends.
(19)Percent change includes reinvestment of $0.164 per share ordinary income dividends.
(20)Percent change includes reinvestment of $0.314 per share ordinary income dividends.
(21)Percent change includes reinvestment of $0.327 per share ordinary income dividends.
(22)Percent change includes reinvestment of $0.173 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)
<S> <C> <C> <C> <S> <C> <C>
Bonds High Income Portfolio
Airlines--3.0% Delta Air Lines Inc.:
BB+ Baa3 $ 1,930,238 9.875% due 4/30/2008++++ $ 1,947,128 $ 2,034,702
BB+ Baa3 3,000,000 9.30% due 1/02/2010 2,963,100 3,066,981
BB+ Baa3 5,000,000 9.20% due 9/23/2014 4,839,050 4,811,450
BB+ Baa3 25,000,000 10.50% due 4/30/2016 25,481,900 26,701,375
Piedmont Aviation, Inc.:
BB- B1 200,000 Series C, 9.70% due 1/15/1999 201,676 188,756
BB- B1 100,000 Series C, 10.25% due 1/15/2007 103,706 90,779
BB- B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,843,261
BB- B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 1,855,425
BB- B1 50,000 Series G, 10.35% due 3/28/2011 51,425 47,575
BB- B1 450,000 Series H, 9.85% due 5/08/2005 454,617 408,042
BB- B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,357,613
BB- B1 536,000 Series I, 10% due 11/08/2012 545,048 485,120
United Air Lines Inc.:
BB+ Ba2 2,000,000 9.08% due 10/26/2015 1,847,200 1,835,440
BB+ Baa2 7,100,000 9.35% due 4/07/2016 7,215,446 6,301,250
BB+ Baa2 10,500,000 9.21% due 1/21/2017 10,480,125 9,736,755
USAir Inc.:
B- B2 25,000,000 9.625% due 2/01/2001 19,960,000 19,125,000
BB- B1 14,500,000 10.375% due 3/01/2013 14,530,000 12,542,500
BB B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,338,848
BB B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,696,934
BB- B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,034,990
BB- B1 5,408,531 Series 89A1, 9.33% due 1/01/2006++++ 5,116,310 4,904,234
BB B1 5,000,000 Series 89A2, 9.82% due 1/01/2013 4,837,500 4,686,300
-------------- --------------
110,540,148 106,093,330
Automobile B B3 10,150,000 SPX Inc., 11.75% due 6/01/2002 10,175,000 10,606,750
Parts--0.3%
<PAGE>
Broadcasting BB- Ba3 22,500,000 Century Communications Corporation,
& Publishing--4.7% 9.75% due 2/15/2002 22,112,500 22,218,750
BB Ba2 15,000,000 Continental Cablevision Inc., 9.50%
due 8/01/2013 15,000,000 14,362,500
BB- Ba3 13,150,000 Heritage Media Services Corporation, 11%
due 6/15/2002 13,158,750 13,807,500
BB- Ba3 4,200,000 K-III Communications Corp., 10.625%
due 5/01/2002 4,192,500 4,331,250
B B3 14,000,000 The Katz Corp., 12.75% due
11/15/2002 14,313,750 14,700,000
B Caa 25,000,000 NWCG Holding Corp., 13.79%
due 6/15/1999 (a) 14,280,105 14,625,000
BB- B3 10,000,000 SCI Television Inc., 11%
due 6/30/2005 10,350,000 10,262,500
B+ B3 12,500,000 Sinclair Broadcasting Group Inc.,
10% due 12/15/2003 12,530,000 12,062,500
B- B3 50,000,000 United International Holdings, Inc.,
13.99% due 11/15/1999 (a) 26,776,071 27,125,000
Videotron Groupe L'TEE:
BB+ Ba3 11,250,000 10.25% due 10/15/2002 11,322,500 11,418,750
BB+ Ba3 3,300,000 10.625% due 2/15/2005 3,279,375 3,361,875
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 19,000,000
-------------- --------------
167,334,926 167,275,625
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Building CCC B3 $ 20,000,000 Nortek Inc., 9.875% due 3/01/2004 $ 19,834,240 $ 18,425,000
Materials--1.9% B+ B3 24,705,000 Pacific Lumber Co., 10.50% due 3/01/2003 24,546,788 23,346,225
B+ B2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 26,321,020
-------------- --------------
70,271,034 68,092,245
<PAGE>
Building American Standard Inc.:
Products--1.2% B+ Ba3 3,000,000 11.375% due 5/15/2004 3,120,000 3,270,000
B B1 6,000,000 10.50% due 6/01/2005 (a) 4,017,974 4,095,000
B+ Ba3 10,150,000 9.25% due 12/01/2016 10,203,625 9,693,250
CCC- Caa 9,300,000 Amstar Corp., 11.375% due 2/15/1997 6,566,250 9,393,000
B Ba3 16,000,000 Inter-City Products Corp., 9.75%
due 3/01/2000 15,888,750 14,760,000
-------------- --------------
39,796,599 41,211,250
Capital B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 20,919,631
Goods--1.3% B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 23,757,500
-------------- --------------
46,693,063 44,677,131
Chemicals--1.9% B+ Ba3 15,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 15,060,000 15,450,000
B+ Ba3 45,000,000 G-I Holdings, Inc., 11.44% due
10/01/1998 (a) 30,503,204 29,250,000
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.65% due 7/15/2001 (a) 22,795,104 21,750,000
-------------- --------------
68,358,308 66,450,000
Communications-- CCC+ Caa 32,500,000 American Telecasting, Inc., 14.03%
8.0% due 6/15/2004 (a) 17,346,992 14,787,500
B B1 10,000,000 Comcast Corporation, 9.50% due 1/15/2008 9,350,000 9,462,500
CCC Caa 13,000,000 Dial Page Inc., 12.25% due 2/15/2000 13,080,500 13,195,000
B- Caa 46,688,000 Echostar Communication Corp.,
12.88% due 6/01/2004 (a) 27,750,710 22,643,680
CCC+ Caa 24,547,000 Horizon Cellular Telephone Co.,
11.44% due 10/01/2000 (a) 18,573,851 18,839,823
CCC+ B3 25,000,000 Mobilemedia Communication, Inc.,
11.32% due 12/01/2003 (a) 16,227,721 14,437,500
CCC+ B3 40,000,000 Nextel Communications Inc., 9.75% due
8/15/2004 (a) 27,665,346 16,600,000
NR* NR* 20,000,000 Page Mart Inc., 12.73% due
11/01/2003 (a) (b) 12,588,153 12,150,000
B B2 20,000,000 Paging Network, Inc., 11.75% due 5/15/2002 20,387,500 21,000,000
Panamsat L.P.:
B+ Ba3 4,750,000 9.75% due 8/01/2000 4,750,000 4,714,375
B- B3 28,710,000 11.44% due 8/01/2003 (a) 20,059,346 19,092,150
BB- B2 35,925,000 Rogers Communication Inc., 10.875%
due 4/15/2004 36,431,094 36,239,344
NR* NR* 25,000,000 Telecom Argentina S.A., 8.375%
due 10/18/2000 (g) 20,502,625 19,875,000
Telefonica de Argentina S.A.:
NR* B1 9,690,000 8.375% due 10/01/2000 7,436,125 7,642,988
BB- B1 17,000,000 11.875% due 11/01/2004 16,371,200 15,410,534
CCC+ B3 14,730,000 USA Mobile Communications Holdings, Inc.,
9.50% due 2/01/2004 14,135,375 12,575,738
B+ B3 35,850,000 Videotron Holdings PLC, 12.23% due
7/01/2004 (a) 20,815,754 21,465,188
-------------- --------------
303,472,292 280,131,320
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Conglomerates--4.3% NR* B3 $ 9,083,000 Astrum International Corp., 11.50% due
6/08/2003 $ 9,137,780 $ 9,290,769
B+ B1 21,200,000 Colt Industries, Inc., 10.25%
due 4/01/2002 21,560,075 21,518,000
B B1 25,000,000 Foamex Capital Corp., 11.25%
due 10/01/2002 24,964,375 24,937,500
CCC+ B3 24,500,000 The Interlake Corp., 12.125%
due 3/01/2002 24,647,500 24,010,000
B B2 10,000,000 JB Poindexter & Co., Inc., 12.50% due
5/15/2004 10,000,000 9,525,000
B+ B3 20,000,000 Jordan Industries Inc., 10.375%
due 8/01/2003 19,961,000 18,550,000
NR* NR* 8,500,000 MacAndrews & Forbes Group, Inc., 12.25%
due 7/01/1996 8,276,775 8,500,000
NR* NR* 9,100,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 8,568,400 9,054,500
BB- B1 25,000,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 24,979,063 24,593,750
-------------- --------------
152,094,968 149,979,519
Consumer Products B NR* 39,760,000 Coleman Holdings, Inc., 11.57% due
--2.8% 5/27/1998 (a) 27,881,556 28,030,800
Liggett Group Inc.:
NR* NR* 10,500,000 11.50% due 2/01/1999 (g) 9,790,288 7,665,000
NR* NR* 6,799,000 19.75% due 2/01/1999 6,202,750 6,357,065
B- Caa 16,750,000 Polymer Group, Inc., 12.75%
due 7/15/2002 (g) 16,680,000 16,247,500
Revlon Consumer Products Corp.:
B B2 5,500,000 9.50% due 6/01/1999 4,999,662 5,197,500
B B2 20,000,000 9.375% due 4/01/2001 18,003,997 18,700,000
B- B3 4,500,000 10.50% due 2/15/2003 4,068,750 4,241,250
B+ B1 11,620,000 Sealy Corp., 9.50% due 5/01/2003 11,701,725 11,736,200
-------------- --------------
99,328,728 98,175,315
<PAGE>
Containers--3.1% B B2 30,000,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008 28,437,500 26,025,000
B- Caa 21,500,000 Ivex Packaging Corp., 13.22%
due 3/15/2005 (a) 11,407,782 10,427,500
BB Ba3 30,000,000 Owens-Illinois, Inc., 11% due 12/01/2003 30,810,000 32,062,500
B+ Ba3 10,000,000 Plastic Container Corp., 10.75%
due 4/01/2001 10,022,500 10,150,000
B- B3 32,628,000 Silgan Holdings Inc., 12.91%
due 12/15/2002 (a) 28,203,271 29,202,060
-------------- --------------
108,881,053 107,867,060
Convertible B B2 8,352,000 Builders Transport, Inc., 8% due
Bonds**--0.8% 8/15/2005 (4) 4,886,880 7,567,050
B- B2 10,363,000 Lomas Financial Corp., 9% due
10/31/2003 (2) 9,654,393 4,507,905
B- B3 6,941,000 MEDIQ, Inc., 7.25% due 6/01/2006 (3) 4,539,685 5,609,196
B B2 6,000,000 Ohm Corp., 8% due 10/01/2006 (5) 4,160,000 5,295,000
B B2 5,909,000 UNC, Inc., 7.50% due 3/31/2006 (1) 3,442,530 4,815,835
-------------- --------------
26,683,488 27,794,986
Drug Stores--0.7% B B2 24,000,000 Thrifty Payless Holdings, Inc., 11.75% due
4/15/2003 24,000,000 25,080,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Energy--8.1% B+ B1 $ 49,500,000 Clark R&M Holdings, Inc., 11% due
2/15/2000 (a) $ 29,381,151 $ 28,215,000
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12% due
7/15/2003 (a) 12,423,580 10,822,500
Falcon Drilling Company, Inc.:
B- B2 16,000,000 9.75% due 1/15/2001 16,000,000 15,200,000
B- B3 10,000,000 12.50% due 3/15/2005 10,000,000 10,025,000
B+ B1 20,000,000 Global Marine Inc., 12.75% due 12/15/1999 20,047,500 21,675,000
Gulf Canada Resources Ltd.:
BB B1 12,750,000 9% due 8/15/1999 11,735,937 12,622,500
B+ B2 10,000,000 9.25% due 1/15/2004 9,726,605 9,537,500
Maxus Energy Corp.:
BB- B1 10,750,000 9.875% due 10/15/2002 9,901,250 9,406,250
BB- B1 3,550,000 11.50% due 11/15/2015 3,394,500 3,159,500
BB- Ba3 8,750,000 Noble Drilling Corp., 9.25% due 10/01/2003 8,925,000 8,575,000
B+ B2 10,000,000 Petroleum Heat & Power Company, Inc.
12.25% due 2/01/2005 (g) 10,000,000 10,450,000
B+ Ba3 15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,085,000 15,750,000
BB- B1 25,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 24,990,000 22,812,500
NR* B3 8,650,000 Tesoro Petroleum Corp., 12.75%
due 3/15/2001 7,483,899 8,650,000
B- Caa 39,550,000 Transamerican Refining Corp., 19.12%
due 2/15/2002 (a) 22,746,974 22,345,750
BB- B1 27,000,000 TransTexas Gas Corp., 10.50% due 9/01/2000 26,900,000 27,286,875
B+ B1 31,525,000 Triton Energy Corp., 10.61%
due 11/01/1997 (a) 24,037,028 24,550,094
BB- B1 32,400,000 Yacimientos Petroliferos Fiscales S.A. (YPF)
(Sponsored), 8% due 2/15/2004 25,508,750 25,758,000
-------------- --------------
due 2/15/2002 (a) 22,746,974 22,345,750
288,287,174 286,841,469
<PAGE>
Entertainment--2.5% B B3 11,750,000 AMC Entertainment, Inc., 12.625%
due 8/01/2002 11,696,095 12,851,562
B+ B1 9,000,000 Cinemark USA Inc., 12% due 6/01/2002 9,058,750 9,540,000
Marvel Holdings Inc:
B Caa 26,700,000 9.125% due 2/15/1998 23,624,500 23,829,750
B B3 14,500,000 11.69% due 4/15/1998 (a) 10,270,230 9,280,000
B B3 5,500,000 15.97% due 4/15/1998 (a) 3,444,105 3,465,000
B B3 10,000,000 Plitt Theatres, Inc., 10.875% due 6/15/2004 10,000,000 9,925,000
Spectravision Inc.:
CCC+ B2 39,250,000 11.74% due 10/01/2001 (a) 32,853,177 18,055,000
CCC- Caa 22,610,000 11.65% due 12/01/2002++ 21,286,981 2,388,368
-------------- --------------
122,233,838 89,334,680
Financial B+ B1 21,000,000 Lomas Mortgage USA, Inc., 10.25% due
Services--1.2% 10/01/2002 21,140,625 15,960,000
BBB NR* 3,000,000 Reliance Financial Services Corp., 10.36%
due 12/01/2000 2,380,000 2,992,500
Reliance Group Holdings, Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 6,979,500
BB- B1 17,575,000 9.75% due 11/15/2003 16,412,500 16,147,031
-------------- --------------
46,731,250 42,079,031
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Food & Chiquita Brands International Inc.:
Beverage--6.3% B B3 $ 9,655,000 11.50% due 6/01/2001 $ 9,966,881 $ 9,896,375
B+ B1 13,000,000 9.125% due 3/01/2004 12,990,000 12,025,000
NR* NR* 15,000,000 Cumberland Farms, 10.50% due 10/01/2003 (g) 14,681,250 12,225,000
B B3 20,000,000 Curtice Burns Food, Inc.,
12.25% due 2/01/2005 20,000,000 20,975,000
B- B2 26,463,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 25,608,891 21,831,975
B- B3 10,520,000 Farm Fresh, Inc., 7.50% due 3/01/2010 5,488,575 5,996,400
B B3 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 19,500,000
D Caa 29,500,000 Grand Union Corp., 12.25% due 7/15/2002 (f) 29,475,625 10,177,500
BB- Ba3 7,000,000 P&C Food Markets, Inc., 11.50% due 10/15/2001 7,100,000 7,393,750
B B2 25,000,000 Penn Traffic Co., 9.625% due 4/15/2005 24,781,750 23,171,875
B- B2 20,325,000 Pueblo Xtra International Inc., 9.50% due
8/01/2003 18,787,125 17,784,375
B- Caa 21,800,000 Seven-Up/RC Bottling Co. of Southern
California, Inc., 11.50% due 8/01/1999 21,967,500 19,075,000
B B3 22,250,000 Specialty Foods Corp., 10.25% due 8/15/2001 21,784,375 21,805,000
B B3 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 18,950,000
-------------- --------------
257,646,972 220,807,250
<PAGE>
Health Services-- B B2 10,000,000 Continental Medsystems, Inc., 10.375%
1.6% due 4/01/2003 9,991,250 9,200,000
B+ B1 11,500,000 MEDIQ/PRN Life Support Services, Inc.,
11.125% due 7/01/1999 11,455,000 10,637,500
National Medical Enterprises:
BB- Ba2 2,000,000 9.625% due 9/01/2002 2,000,000 2,047,500
B+ Ba3 33,000,000 10.125% due 3/01/2005 33,000,000 33,928,125
-------------- --------------
56,446,250 55,813,125
High Technology-- ComputerVision Corp.:
0.5% CCC+ B3 10,000,000 11.375% due 8/15/1999 9,706,250 9,200,000
CCC+ NR* 12,500,000 8% due 12/01/2009 6,802,472 8,062,500
-------------- --------------
16,508,722 17,262,500
Home Builders--2.4% B- B2 21,000,000 Baldwin Homes Company, 10.375%
due 8/01/2003 20,474,500 13,230,000
Del E. Webb Corporation:
B+ Ba3 3,500,000 10.875% due 3/31/2000 3,524,375 3,552,500
B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 6,335,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,280,000
B B3 20,000,000 Greystone Homes Inc., 10.75% due 3/01/2004 19,115,000 17,400,000
B B1 10,250,000 K Hovnanian Enterprises Inc., 11.25%
due 4/15/2002 10,204,062 8,815,000
BB Ba2 12,000,000 Standard Pacific Corp., 10.50% due 3/01/2000 11,995,000 11,880,000
C B2 5,000,000 UDC Homes, Inc., 11.75% due 4/30/2003 4,400,000 3,200,000
B+ Ba3 20,000,000 U.S. Home Corp., 9.75% due 6/15/2003 20,000,000 18,600,000
-------------- --------------
99,797,847 86,292,500
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Hotels & B B2 $ 22,325,000 Aztar Corp., 11% due 10/01/2002 $ 22,557,250 $ 21,878,500
Casinos--8.1% BB B1 30,000,000 Bally's Park Place, Inc., 9.25%
due 3/15/2004 28,485,200 26,625,000
NR* Caa 12,000,000 Capital Gaming International, Inc.,
11.50% due 2/01/2001 (c) 9,426,041 9,060,000
B+ B2 28,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 27,235,000 23,730,000
BBB- B2 12,750,000 GNS Finance Corp., 9.25% due 3/15/2003 12,610,371 12,797,812
NR* NR* 7,682,000 Goldriver Hotel & Casino Corp., 13.375%
due 8/31/1999 8,609,882 5,876,730
BB- B1 12,000,000 John Q. Hammons Hotel, Inc., 8.875%
due 2/15/2004 10,610,000 11,235,000
B+ B1 25,000,000 Harrah's Jazz Company, 14.25% due 11/15/2001 25,020,000 26,875,000
BB- B1 27,309,000 Host Marriott Corp., 10.375% due 6/15/2011 27,590,437 27,428,477
BB- B1 15,000,000 MGM Grand Hotel Finance Corp., 12%
due 5/01/2002 15,230,500 16,575,000
B- B3 10,000,000 Pioneer Finance Corp., 13.50% due
12/01/1998 10,542,500 8,100,000
Showboat, Inc.:
BB- Ba3 9,450,000 9.25% due 5/01/2008 9,370,000 8,280,562
B B2 25,550,000 13% due 8/01/2009 24,754,250 26,572,000
B B2 10,000,000 Station Casinos, Inc., 9.625% due 6/01/2003 8,780,211 8,750,000
NR* Caa 10,406,612 Trump Castle Funding, Inc., 11.75%
due 11/15/2003 9,293,091 6,348,033
B B3 37,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 35,260,770 30,155,000
NR* Caa 20,039,043 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999++ 14,842,193 13,459,820
-------------- --------------
300,217,696 283,746,934
<PAGE>
Industrial BB- B2 25,000,000 ADT Operations Inc., 9.25% due 8/01/2003 25,094,187 24,531,250
Services--1.8% B- B3 10,000,000 Bell & Howell Co., 10.75% due 10/01/2002 10,040,000 10,252,223
B+ B2 2,500,000 Owens-Illinois, Inc., 9.95% due 10/15/2004 2,462,500 2,462,500
B- Caa 11,950,000 Southeastern Public Service Co., 11.875%
due 2/01/1998 10,266,067 11,950,000
Thermadyne Industries, Inc.:
NR* Caa 5,706,000 10.25% due 5/01/2002 5,711,822 5,506,290
NR* Caa 7,912,000 10.75% due 11/01/2003 7,914,802 7,753,760
-------------- --------------
61,489,378 62,456,023
Metals & B- B2 26,750,000 Kaiser Aluminum & Chemical Corp.,
Mining--1.6% 12.75% due 2/01/2003 26,660,625 27,820,000
Maxxam Group, Inc.:
B- B3 5,000,000 11.25% due 8/01/2003 4,918,750 4,750,000
B- B3 41,155,000 12.37% due 8/01/2003 (a) 27,497,733 23,869,900
-------------- --------------
59,077,108 56,439,900
Paper--7.4% B+ B2 15,420,000 Container Corporation of America:
9.75% due 4/01/2003 15,433,400 15,188,700
B+ B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,666,250
BB- Ba3 15,000,000 Doman Industries Ltd., 8.75% due 3/15/2004 15,000,000 13,800,000
Fort Howard Corp.:
B+ B1 11,000,000 9.25% due 3/15/2001 11,000,000 10,670,000
B B2 31,000,000 9% due 2/01/2006 28,380,625 27,280,000
B B3 25,000,000 Gaylord Container Corp., 11.50%
due 5/15/2001 25,001,250 26,312,500
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (continued) High Income Portfolio
Paper (concluded) BB Ba3 $ 10,000,000 PT Indah Kiat Pulp & Paper Corporation,
11.875% due 6/15/2002 $ 10,000,000 $ 9,750,000
BB NR* 10,000,000 PT International Indoray, 9.125%
due 10/15/2000 8,200,000 8,450,000
BB- Ba3 10,000,000 Rainy River Forest Products, 10.75%
due 10/15/2001 9,971,810 10,275,000
B+ B1 25,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 23,537,500 23,500,000
B B1 25,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 25,767,500 26,437,500
B+ B1 16,000,000 S.D. Warren Co., 12% due 12/15/2004 (g) 16,000,000 16,920,000
B+ B1 11,500,000 Stone Consolidated Corp., 10.25%
due 12/15/2000 11,520,000 11,643,750
Stone Container Corp.:
B- B2 6,500,000 11% due 8/15/1999 6,418,750 6,630,000
B B1 15,000,000 9.875% due 2/01/2001 13,948,672 14,587,500
B+ B1 15,000,000 10.75% due 10/01/2002 14,825,000 15,487,500
BB B1 10,000,000 Tjiwa Kimia, Tjiwi Kimia International
Finance, 13.25% due 8/01/2001 10,021,775 10,075,000
-------------- --------------
258,026,282 260,673,700
Pollution B B3 22,950,000 Mid-American Waste Systems, Inc.,
Control--0.7% 12.25% due 2/15/2003 22,891,000 23,523,750
Restaurants/ Family Restaurants Inc.:
Food Services--1.9% B B1 14,000,000 9.75% due 2/01/2002 13,717,500 9,800,000
B- B3 13,500,000 10.875% due 2/01/2004 (a) 11,118,449 5,332,500
CCC+ Caa 27,500,000 Flagstar Corp., 11.375% due 9/15/2003 27,592,500 23,271,875
Foodmaker, Inc.:
B+ B1 2,000,000 9.25% due 3/01/1999 1,717,500 1,675,000
B- B2 14,000,000 9.75% due 6/01/2002 13,525,000 10,325,000
B+ Ba3 23,000,000 Series 1993A, 9.75% due 11/01/2003 22,641,200 17,623,750
-------------- --------------
90,312,149 68,028,125
<PAGE>
Retail B- B3 10,000,000 Pamida Holdings, Inc., 11.75%
Specialty--0.8% due 3/15/2003 9,997,500 9,550,000
B+ B1 21,000,000 Specialty Retailers Group, Inc.,
10% due 8/15/2000 21,000,000 19,425,000
-------------- --------------
30,997,500 28,975,000
Steel--2.2% B B2 21,000,000 A.K. Steel Holding Corp., 10.75%
due 4/01/2004 21,000,000 21,262,500
B B2 12,000,000 Republic Engineered Steel Inc., 9.875%
due 12/15/2001 12,000,000 10,980,000
B B2 10,000,000 Ucar Global Enterprises, Inc.
12% due 1/15/2005 10,000,000 10,537,500
B+ B1 22,550,000 WCI Steel, Inc., 10.50% due 3/01/2002 22,399,875 21,817,125
BB B1 15,000,000 Wheeling-Pittsburg Steel Corp.,
9.375% due 11/15/2003 14,390,000 13,050,000
-------------- --------------
79,789,875 77,647,125
Textiles--0.8% B+ B3 30,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 30,100,000 27,525,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds (concluded) High Income Portfolio
Transportation B+ B2 $ 4,371,000 ACF Industries, Inc., 11.60% due 5/15/2000 $ 4,174,305 $ 4,387,589
Services--2.4% BB- Ba2 15,000,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 14,372,500 14,143,717
BB Ba2 15,000,000 Gearbulk Holdings, Ltd., 11.25%
due 12/01/2004 15,181,250 15,712,500
Transportacion Maritima
Mexicana, S.A. de C.V.:
BB- Ba2 5,475,000 8.50% due 10/15/2000 3,175,500 3,421,875
BB- Ba2 16,950,000 9.25% due 5/15/2003 14,263,875 9,915,750
NR* NR* 36,106,000 Transtar Holdings, L.P., 12.41% due
12/15/2003 (a) 20,645,544 18,955,650
B+ Ba3 20,000,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 20,045,000 18,800,000
-------------- --------------
91,857,974 85,337,081
<PAGE>
Utilities--4.4% Beaver Valley Funding Corp.:
B+ B1 10,051,000 8.625% due 6/01/2007 8,986,077 8,518,222
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 26,713,475
CTC Mansfield Funding Corp.:
B+ Ba3 6,100,000 10.25% due 3/30/2003 5,942,750 6,008,500
B+ Ba3 25,000,000 11.125% due 9/30/2016 26,416,875 24,874,750
Midland Cogeneration Venture
Limited Partnership:
BB Ba3 4,581,094 10.33% due 7/23/2002++++ 4,489,472 4,533,776
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 10,943,099
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 5,667,750
NR* NR* 15,890,717 Sunflower Electric Power Corp., 8%
due 12/31/2016++++ (g) 10,394,625 12,692,711
B+ B1 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 20,900,000
Tucson Electric & Power Co.:
NR* NR* 19,023,082 10.21% due 1/01/2009 (g) 17,593,025 16,808,605
NR* NR* 17,426,207 10.732% due 1/01/2013 (g) 16,252,461 15,811,146
-------------- --------------
158,534,356 153,472,034
Total Investments in Bonds--88.7% 3,298,574,978 3,119,689,758
<CAPTION>
Shares
Held
Preferred Stocks
<S> <C> <S> <C> <C>
Broadcasting & 421,000 K-III Communications Corp. 10,562,750 11,209,125
Publishing--0.6% 121,562 K-III Communications Corp. 12,322,148 11,768,683
-------------- --------------
22,884,898 22,977,808
Energy--0.4% 29,517 Consolidated Hydro, Inc. 14,891,917 15,216,013
250 Transamerican Energy 25,000 25,000
-------------- --------------
14,916,917 15,241,013
Steel--0.4% 550,000 USX Capital LLC 13,750,000 13,062,500
Utilities--0.3% 60,000 S.D. Warren Co. 1,725,000 1,811,250
300,000 S.D. Warren Co. 8,175,000 8,212,500
-------------- --------------
9,900,000 10,023,750
Total Investments in Preferred
Stocks--1.7% 61,451,815 61,305,071
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
<S> <C> <S> <C> <C>
Common Stocks High Income Portfolio
Conglomerates--0.1% 200,369 Astrum International Corp. $ 4,085,240 $ 5,009,225
Energy--0.1% 57,237 Mesa Inc. 325,690 350,577
122,500 Petrolane Inc. 1,424,062 1,860,469
-------------- --------------
1,749,752 2,211,046
Financial Services--0.0% 132,531 Lomas Financial Corporation 1,689,731 248,496
Food & 120,194 Abco Markets Inc. (g) 4,054,875 1,584,759
Beverage--0.1% 144,250 Doskocil Companies, Inc. 5,728,121 1,126,953
-------------- --------------
9,782,996 2,711,712
Hotels & 320,040 Capital Gaming International Inc. 2,882,508 1,690,211
Casinos--0.1% 75,500 Goldriver Hotel & Casino Corporation
(Class B) (d) 540,045 224,141
23,000 Trump Taj Mahal Holding Corp. (Class A) 11,500 235,750
-------------- --------------
3,434,053 2,150,102
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 166,725
Total Investments in Common
Stocks--0.4% 20,907,072 12,497,306
Trusts & Warrants
Cellular Telephones--0.0% 57,040 Page Mart Inc. (Warrants) (e) 236,127 142,600
Communications--0.0% 162,500 American Telecasting Inc. (Warrants) (e) 323,723 243,750
Energy--0.1% 18,000 Consolidated Hydro Inc. (Warrants) (e) 390,123 261,000
407,678 Transamerican Refining Corp. (Warrants) (e) 950,408 1,121,114
20,833 UGI Corp. (Warrants) (e) 91,057 4,167
-------------- --------------
1,431,588 1,386,281
<PAGE>
Financial Services--0.0% 7,194 Reliance Group Holdings, Inc. (Warrants) (e) 0 0
High Technology--0.0% 394,563 Anacomp, Inc. (Warrants) (e) (g) 495,400 295,922
Hotels & 273,000 Capital Gaming International Inc.
Casinos--0.0% (Warrants) (e) 1,344,151 708,094
7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust (g) 192,320 137,028
113,386 Trump Castle Funding, Inc. (Warrants) (e) 0 0
-------------- --------------
1,536,471 845,122
Telecommunications--0.0% 302,500 ALC Communications Corp. (Warrants) (e) 831,875 0
Total Investments in Trusts &
Warrants--0.1% 4,855,184 2,913,675
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities High Income Portfolio
<S> <C> <S> <C> <C>
Commercial $117,419,000 General Electric Capital Corp.,
Paper***--7.3% 6.25% due 4/03/1995 $ 117,419,000 $ 117,419,000
20,000,000 Hewlett-Packard Corporation, 5.93%
due 4/07/1995 19,986,822 19,986,822
30,000,000 IBM Credit Corp., 5.94% due 4/13/1995 29,950,500 29,950,500
ONYX Inc.:
30,000,000 6.65% due 4/13/1995 29,944,583 29,944,583
20,000,000 6.65% due 4/25/1995 19,918,722 19,918,722
Vons Supermarket:
20,000,000 6.33% due 4/05/1995 19,992,967 19,992,967
20,000,000 6.33% due 4/12/1995 19,968,350 19,968,350
-------------- --------------
257,180,944 257,180,944
Promissory Notes--0.0% 120,000 Capital Gaming International, Inc., 5%
due 8/01/1995 120,000 120,000
<PAGE>
US Government & Agency 1,609,000 US Treasury Bills, 5.55% due 4/06/1995 1,608,256 1,608,256
Obligations***--0.1%
Total Investments in Short-Term
Securities--7.4% 258,909,200 258,909,200
Total Investments--98.3% $3,644,698,249 3,455,315,010
==============
Other Assets Less Liabilities--1.7% 61,038,263
--------------
Net Assets--100.0% $3,516,353,273
==============
<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.
(b)Represents units. Each unit consists of 10,000 Par
Notes and 46 Warrants.
(c)Represents units. Each unit consists of one 11.50%
Note due 2001, 20.25 Warrants and 26.67 shares of
Common Stock.
(d)Each share of Series B Stock contains a right which
entitles the Portfolio to purchase a predetermined
number of shares of preferred stock. The purchase
price and number of shares are subject to
adjustment.
(e)Warrants entitle the portfolio to purchase a
predetermined number of shares of common stock/face
amount of bonds. The purchase price and number of
shares/face amount are subject to adjustment
under certain conditions until the expiration date.
(f)Non-income producing securities.
(g)Restricted securities. The value of the Portfolio's
investments in restricted securities was approximately
$130,713,000, representing 3.7% net assets.
<PAGE>
<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 495,400 295,922
Cumberland Farms,
10.50% due 10/01/2003 2/18/1994 14,681,250 12,225,000
Goldriver Hotel & Casino
Corp. Liquidating Trust 8/31/1992 192,320 137,028
Liggett Group Inc., 11.50%
due 2/01/1999 1/26/1994--1/31/1994 9,790,288 7,665,000
Petroleum Heat & Power
Company, Inc., 12.25%
due 2/01/2005 2/02/1995 10,000,000 10,450,000
Polymer Group, Inc.,
12.75% due 7/15/2002 6/17/1994 16,680,000 16,247,500
S.D. Warren Co.,
12% due 12/15/2004 12/13/1994 16,000,000 16,920,000
Sunflower Electric Power Corp.
8% due 12/31/2016 11/29/1991--7/15/1994 10,394,625 12,692,711
Telecom Argentina S.A.,
8.375% due 10/18/2000 7/18/1994--7/26/1994 20,502,625 19,875,000
Tucson Electric & Power Co.:
10.21% due 1/01/2009 6/04/1993--7/19/1994 17,593,025 16,808,605
10.732% due 1/01/2013 3/01/1993--7/16/1993 16,252,461 15,811,146
$136,636,869 $130,712,671
============ ============
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)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes Investment Grade Portfolio
US Government United States Treasury Notes & Bonds:
Obligations--10.5% AAA Aaa $ 11,000,000 8.875% due 11/15/1997 $ 11,354,063 $ 11,510,469
AAA Aaa 8,000,000 9.25% due 8/15/1998 8,463,750 8,538,740
AAA Aaa 5,000,000 7.125% due 2/29/2000 5,010,937 5,007,831
AAA Aaa 4,000,000 7.75% due 2/15/2001 4,101,250 4,120,010
AAA Aaa 1,000,000 7.50% due 11/15/2001 999,375 1,017,812
AAA Aaa 13,000,000 7.50% due 2/15/2005 13,257,812 13,266,061
AAA Aaa 5,000,000 7.50% due 11/15/2016 5,538,531 4,963,262
AAA Aaa 16,000,000 8.875% due 8/15/2017 18,012,969 18,190,020
AAA Aaa 5,500,000 6.25% due 8/15/2023 4,369,922 4,687,004
AAA Aaa 25,500,000 7.50% due 11/15/2024 24,738,281 25,551,669
-------------- --------------
95,846,890 96,852,878
<PAGE>
Banking--6.7% A A2 7,000,000 Citicorp, 8.80% due 2/01/2000 7,000,000 7,288,362
A A2 12,000,000 Comerica Inc., 8.375% due 7/15/2024 11,412,360 11,728,260
First Interstate Bancorp (a):
A- A2 3,000,000 11% due 3/05/1998 3,603,060 3,257,055
BBB+ A3 3,000,000 9.90% due 11/15/2001 3,642,840 3,287,398
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,240,325
AA Aa3 9,000,000 J.P. Morgan & Company, Inc., 7.625%
due 9/15/2004 8,678,440 8,917,560
A A2 5,000,000 NationsBank Corporation, 7.50% due 2/15/1997 4,995,700 5,027,050
A+ A1 3,500,000 Norwest Corp., 6.625% due 3/15/2003 3,553,235 3,268,580
AA- A1 5,000,000 Republic Bank of NY Corp., 9.125%
due 5/15/2021 5,676,450 5,498,225
AA Aa3 6,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 (a) 5,995,620 5,936,593
-------------- --------------
60,236,405 59,449,408
Federal Federal National Mortgage Association:
Agencies--4.4% AAA Aaa 15,000,000 7.85% due 9/10/2004 14,817,437 15,046,875
AAA Aaa 5,000,000 8.25% due 10/12/2004 4,939,844 5,075,781
AAA Aaa 13,000,000 8.55% due 12/10/2004 12,989,844 13,300,625
AAA Aaa 5,000,000 Private Export Funding Corp.,
8.35% due 1/31/2001 5,786,950 5,220,575
-------------- --------------
38,534,075 38,643,856
Financial Services-- Chrysler Financial Corp.:
Captive--3.7% A- A3 2,000,000 9.50% due 12/15/1999 2,263,120 2,134,470
A- A3 14,000,000 10.95% due 8/01/2017 16,298,000 15,596,840
A+ A1 1,000,000 Ford Motor Credit Corp., 7.75% due 3/15/2005 999,090 990,399
General Motors Acceptance Corp.:
BBB+ Baa1 7,575,000 8% due 10/01/1996 7,761,648 7,658,590
BBB+ Baa1 8,000,000 7.60% due 1/20/1998 7,829,600 8,005,900
-------------- --------------
35,151,458 34,386,199
Financial Services-- BBB- Baa3 15,000,000 Advanta Corp., 6.525% due 2/02/1996 14,992,800 14,991,300
Consumer--7.3% A+ A1 2,500,000 American General Finance Corp., 8.50%
due 8/15/1998 2,848,650 2,577,900
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,141,300
AA- Aa3 2,000,000 8.80% due 8/01/1998 2,253,820 2,078,970
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,481,955
A A2 19,000,000 Beneficial Corporation, 6.22% due 10/14/1997 19,000,000 18,964,280
A+ Aa3 8,000,000 CIT Group Holdings, Inc., 6.27%
due 5/02/1997 8,000,000 7,989,749
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes (continued) Investment Grade Portfolio
Financial Services-- A+ A1 $ 6,000,000 Commercial Credit Co., 6.70% due
Consumer (concluded) 8/01/1999 $ 6,001,800 $ 5,815,560
A+ A2 7,000,000 Transamerica Finance Corp.,
7.50% due 3/15/2004 7,000,000 6,823,600
-------------- --------------
67,597,820 66,864,614
Financial Services-- A A2 9,900,000 Bear Stearns Companies, Inc., 6.70%
Other--6.6% due 8/01/2003 8,945,640 8,929,107
Dean Witter, Discover & Co.:
A A2 3,000,000 6.50% due 11/01/2005 2,965,350 2,681,910
A A2 6,000,000 6.75% due 10/15/2013 5,880,540 5,076,660
General Electric Capital Corp.:
AAA Aaa 6,000,000 14% due 7/01/1996 (a) 6,811,140 6,491,803
AAA Aaa 6,200,000 8.125% due 5/15/2012 6,301,726 6,389,565
A Baa1 5,000,000 Lehman Brothers Inc., 7.375% due 8/15/1997 4,993,500 4,921,325
A+ A1 5,000,000 Morgan Stanley Group Inc., 8.875%
due 10/15/2001 5,755,450 5,217,550
PaineWebber Group Inc.:
BBB+ A3 3,000,000 6.25% due 6/15/1998 3,078,060 2,847,180
BBB+ A3 7,000,000 8.875% due 3/15/2005 6,971,510 6,987,750
A+ A2 9,000,000 The Travelers Corp., 9.50% due 3/01/2002 9,610,100 9,730,800
-------------- --------------
61,313,016 59,273,650
<PAGE>
Foreign*--9.8% AA- A1 10,000,000 Aegon N.V., 8% due 8/15/2006 (2) 9,908,700 9,985,399
CRA Finance Ltd. (1):
A+ A2 4,000,000 6.50% due 12/01/2003 4,005,890 3,663,860
A+ A2 3,500,000 7.125% due 12/01/2013 3,479,700 3,127,337
AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
due 12/01/1999 (3) 4,226,640 4,151,980
A A2 15,835,000 Kingdom of Thailand, 8.25% due 3/15/2002 (6) 15,619,331 16,129,135
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,762,166
AAA Aaa 3,000,000 8.70% due 10/05/1999 3,469,410 3,142,245
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,321,600
BBB Baa1 5,000,000 Petro-Canada, 9.25% due 10/15/2021 (4) 5,300,650 5,434,525
AA- Aa3 21,000,000 Province of Ontario (Canada), 7.75%
due 6/04/2002 (5) 21,240,180 21,024,675
Province of Quebec (Canada) (5):
A+ A1 4,000,000 8.80% due 4/15/2003 4,048,000 4,176,680
A+ A1 4,500,000 13% due 10/01/2013 5,706,285 5,399,752
A A2 5,000,000 WMC (Western Mining Corp.) Finance,
7.25% due 11/15/2013 (1) 5,036,900 4,533,750
-------------- --------------
90,396,102 88,853,104
Industrial-- A- A2 6,000,000 American Home Products Corporation, 7.90%
Consumer due 2/15/2005 5,988,300 6,089,070
Goods--13.7% AA- A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
12/01/1999 3,367,590 3,153,960
A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 10,233,650
A+ A1 5,000,000 Becton, Dickinson & Company, 8.70%
due 1/15/2025 4,959,900 5,154,230
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 3,982,820
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,443,350
Grand Metropolitan Investment Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999 4,000,000 3,846,860
A+ A2 9,000,000 8.625% due 8/15/2001 9,412,690 9,390,329
AAA Aaa 7,000,000 Johnson & Johnson Co., 8.72% due 11/01/2024 7,057,420 7,390,635
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes (continued) Investment Grade Portfolio
Industrial-- BBB Baa1 $ 10,000,000 Kmart Corporation, 7.24% due 7/06/1999 $ 9,734,500 $ 9,860,455
Consumer A A2 9,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 9,698,815 9,976,662
Goods RJR Nabisco, Inc.:
(concluded) BBB- Baa3 7,000,000 8.75% due 4/15/2004 6,794,580 6,942,950
BBB- Baa3 13,000,000 8.75% due 8/15/2005 12,570,510 12,755,599
Sears, Roebuck & Co.:
BBB A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,246,950
BBB A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,030,496
AA Aa1 7,000,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 6,872,720 7,167,720
A A2 9,000,000 Weyerhaeuser Company, 7.95%
due 3/15/2025 8,901,360 8,876,339
-------------- --------------
125,339,777 124,542,075
Industrial-- BP America Inc.:
Energy--4.2% AA- A1 3,250,000 9.375% due 11/01/2000 3,544,190 3,528,411
AA- A1 9,000,000 7.875% due 5/15/2002 9,519,510 9,165,554
AA- A1 11,000,000 10% due 7/01/2018 11,869,080 12,401,785
Texaco Capital Inc.:
A+ A1 5,500,000 9% due 12/15/1999 6,215,190 5,826,590
A+ A1 2,000,000 8.875% due 2/15/2021 1,999,720 2,207,137
A+ A1 5,000,000 8.625% due 4/01/2032 5,325,300 5,287,075
-------------- --------------
38,472,990 38,416,552
<PAGE>
Industrial-- BBB- Baa3 12,000,000 Applied Materials Inc., 8% due 9/01/2004 11,912,280 11,888,760
Other--14.4% AA- Aa2 10,100,000 Archer-Daniels-Midland Co., 8.875%
due 4/15/2011 10,888,935 10,974,710
AA- Aa3 4,000,000 Capital Cities/ABC, Inc., 8.75% due 8/15/2021 4,338,800 4,302,920
Carnival Cruise Lines, Inc.:
A- A3 1,000,000 6.15% due 10/01/2003 891,530 891,955
A- A3 8,000,000 7.70% due 7/15/2004 7,872,580 7,899,360
BBB Baa3 15,000,000 Developers Diversified Realty Corporation,
7.10% due 12/27/1995 14,978,550 15,059,610
BBB Baa2 9,000,000 Federal Express Corporation, 9.65%
due 6/15/2012 9,928,890 9,875,340
Ford Capital B.V.:
A+ A1 13,000,000 9.875% due 5/15/2002 13,570,410 14,405,885
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,550,265
A- A3 7,710,000 International Paper Co., 9.70% due 3/15/2000 9,293,944 8,366,660
AA Aa2 8,500,000 Kaiser Foundation Hospital, 9.55%
due 7/15/2005 9,561,225 9,534,535
BBB Baa2 6,000,000 Loral Corporation, 8.375% due 6/15/2024 5,493,240 5,865,090
A+ A1 5,000,000 New York Times Company, 7.625%
due 3/15/2005 4,989,050 4,990,730
Telecommunications, Inc.:
BBB- Baa3 10,000,000 8.25% due 1/15/2003 9,713,200 9,778,700
BBB- Baa3 2,500,000 9.80% due 2/01/2012 2,631,150 2,590,700
Time Warner Entertainment Co.:
BBB- Baa3 5,000,000 10.15% due 5/01/2012 5,036,200 5,339,500
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 4,454,625
-------------- --------------
130,811,649 130,769,345
Supranational--3.8% AAA Aaa 3,000,000 Asian Development Bank, 10.75%
due 6/01/1997 3,302,730 3,213,435
AAA Aaa 8,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 10,115,250 8,964,600
AAA Aaa 17,500,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 22,022,410 22,205,050
-------------- --------------
35,440,390 34,383,085
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes (concluded) Investment Grade Portfolio
Transportation--1.7% Southwest Airlines, Inc.:
A- Baa1 $ 10,000,000 9.40% due 7/01/2001 $ 11,326,040 $ 10,726,149
A- Baa1 2,000,000 8% due 3/01/2005 1,989,220 2,009,270
A- Baa1 3,000,000 7.875% due 9/01/2007 2,983,950 2,958,855
-------------- --------------
16,299,210 15,694,274
Utilities-- AA Aa3 6,000,000 AT&T Corporation, 8.35% due 1/15/2025 5,893,620 6,025,770
Communications--3.8% GTE Corp.:
BBB+ Baa1 4,000,000 9.10% due 6/01/2003 4,242,720 4,257,320
BBB+ Baa1 9,500,000 8.75% due 11/01/2021 9,904,225 9,921,515
AAA Aaa 5,500,000 Southern Bell Telephone and Telegraph
Company, 8.625% due 9/01/2026 5,341,545 5,562,727
A+ A1 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,889,160
BBB Baa3 3,600,000 Sprint Corp., 8.125% due 7/15/2002 3,662,532 3,647,790
BBB Baa3 2,585,000 United Telecommunications, Inc.,
9.50% due 4/01/2003 2,744,779 2,824,772
-------------- --------------
33,800,671 34,129,054
Utilities-- A A2 5,000,000 Central Power & Light Co., 6% due 10/01/1997 4,973,400 4,848,725
Electric--4.5% AA- Aa2 6,000,000 Duke Power Co., 8% due 11/01/1999 5,964,660 6,135,990
A+ A2 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,906,730
BBB+ Baa1 3,425,000 PECO Energy Co., 8% due 4/01/2002 3,459,387 3,454,746
AA- Aa3 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 (a) 5,000,000 5,366,021
BBB Baa2 10,000,000 Texas Utilities Electric Co., 8.75%
due 11/01/2023 9,595,550 10,266,600
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 8,762,990
-------------- --------------
39,331,577 40,741,802
<PAGE>
Utilities-- Consolidated Natural Gas Co.:
Gas--1.0% AA- A1 1,000,000 9.375% due 2/01/1997 1,031,440 1,035,910
AA- A1 7,500,000 8.75% due 6/01/1999 7,450,660 7,814,925
-------------- --------------
8,482,100 8,850,835
Total Investments in Bonds &
Notes--96.1% 877,054,130 871,850,731
Short-Term Securities
Repurchase 19,856,000 SBC Capital Markets Inc., purchased on
Agreements**--2.2% 3/31/1995 to yield 6.15% to 4/03/1995 19,856,000 19,856,000
Total Investments in Short-Term
Securities--2.2% 19,856,000 19,856,000
Total Investments--98.3% $ 896,910,130 891,706,731
==============
Other Assets Less Liabilities--1.7% 15,159,408
--------------
Net Assets--100.0% $ 906,866,139
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1) Industrial Mining. (2) Financial Institution. Government Owned &
Operated. (3) Government Entity; Guaranteed by Japan. (4) Energy
Company; not Guaranteed by Canada. (5) Government Entity;
Guaranteed by the Province. (6) Government Entity.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
(a) Medium-Term Note.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes Intermediate Term Portfolio
US Government United States Treasury Notes:
Obligations--9.8% AAA Aaa $ 5,000,000 8.875% due 11/15/1997 $ 5,160,938 $ 5,232,031
AAA Aaa 1,500,000 7.125% due 2/29/2000 1,503,281 1,502,349
AAA Aaa 5,500,000 7.875% due 8/15/2001 5,710,547 5,701,974
AAA Aaa 5,000,000 7.25% due 5/15/2004 5,026,563 5,003,913
AAA Aaa 5,000,000 7.875% due 11/15/2004 5,246,875 5,217,162
AAA Aaa 7,500,000 7.50% due 2/15/2005 7,639,889 7,653,497
-------------- --------------
30,288,093 30,310,926
Banking--11.4% A A2 2,000,000 Citicorp, 8.80% due 2/01/2000 2,000,000 2,082,389
First Interstate Bancorp.:
A- A2 4,500,000 11% due 3/05/1998 5,404,590 4,885,582
BBB+ A3 7,000,000 9.90% due 11/15/2001 8,552,250 7,670,596
A- A3 4,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 4,542,960 4,192,260
AA Aa3 5,000,000 J.P. Morgan & Company, Inc., 7.625%
due 9/15/2004 4,821,350 4,954,200
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 5,635,230
A+ A1 1,000,000 Norwest Corp., 6.625% due 3/15/2003 1,003,060 933,880
AA Aa3 5,000,000 Wachovia Corporation, 6.55% due 6/09/1997 4,996,350 4,947,160
-------------- --------------
36,803,780 35,301,297
Federal Federal National Mortgage Association:
Agencies--2.1% AAA Aaa 2,500,000 7.85% due 9/10/2004 2,496,484 2,507,812
AAA Aaa 4,000,000 8.55% due 12/10/2004 3,996,875 4,092,500
-------------- --------------
6,493,359 6,600,312
Financial Services-- A- A3 8,000,000 Chrysler Financial Corp., 9.50% due 12/15/1999 9,275,380 8,537,880
Captive--6.8% A+ A1 5,000,000 Ford Motor Credit Co., 7.75% due 3/15/2005 4,995,450 4,951,995
General Motors Acceptance Corp.:
BBB- Baa1 6,000,000 7.85% due 3/05/1997 5,977,380 6,048,601
BBB- Baa1 2,000,000 7.60% due 1/20/1998 1,957,400 2,001,475
-------------- --------------
22,205,610 21,539,951
<PAGE>
Financial Services-- BBB- Baa3 5,000,000 Advanta Corp., 6.525% due 2/02/1996 4,997,600 4,997,100
Consumer--8.7% American General Finance Corp.:
A+ A1 2,000,000 7.70% due 11/15/1997 1,977,660 2,017,540
A+ A1 1,500,000 8.50% due 8/15/1998 1,680,255 1,546,740
Associates Corp. of North America:
AA- Aa3 1,500,000 8.375% due 1/15/1998 1,504,830 1,535,325
AA- Aa3 3,000,000 8.80% due 8/01/1998 3,380,730 3,118,455
A A2 7,000,000 Beneficial Corp., 6.22% due 10/14/1997 7,000,000 6,986,840
CIT Group Holdings, Inc.:
A+ Aa3 4,000,000 7.625% due 12/05/1996 3,987,120 4,033,760
A+ Aa3 3,000,000 6.225% due 2/28/1997 2,998,020 3,001,489
-------------- --------------
27,526,215 27,237,249
Financial Services-- PaineWebber Group Inc.:
Other--4.1% BBB+ A3 2,000,000 6.25% due 6/15/1998 2,052,040 1,898,120
BBB+ A3 7,000,000 8.875% due 3/15/2005 7,018,490 6,987,750
A- A3 2,000,000 Smith Barney Holdings, Inc., 7.98%
due 3/01/2000 2,000,000 2,006,790
A+ A2 2,000,000 The Travelers Corp., 9.50% due 3/01/2002 2,168,400 2,162,400
-------------- --------------
13,238,930 13,055,060
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes (continued) Intermediate Term Portfolio
Foreign*--11.4% A+ A2 $ 4,000,000 CRA Finance Ltd., 6.50% due
12/01/2003 (4) $ 4,006,020 $ 3,663,860
AAA Aaa 1,500,000 Japan Finance Corp. for Municipal
Enterprises, 9.125% due 3/13/2000 (2) 1,654,665 1,587,712
A A2 2,000,000 Kingdom of Thailand, 8.25% due 3/15/2002 (1) 1,971,770 2,037,150
AAA Aaa 2,000,000 Metropolis of Tokyo (Japan), 8.70%
due 10/05/1999 (5) 2,312,940 2,094,830
AA- Aa3 7,000,000 Province of Ontario (Canada), 7.75%
due 6/04/2002 (3) 6,852,200 7,008,225
A- A1 9,000,000 Province of Quebec (Canada), 8.80%
due 4/15/2003 (3) 9,288,960 9,397,530
BB Baa3 10,000,000 Republic of South Africa, 9.625%
due 12/15/1999 (1) 9,839,025 9,668,650
-------------- --------------
35,925,580 35,457,957
<PAGE>
Industrial-- A- A2 2,000,000 American Home Products Corporation
Consumer--13.8% 7.90% due 2/15/2005 1,996,100 2,029,690
AA- A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
due 12/01/1999 6,189,909 5,762,285
A+ A1 3,000,000 Bass America, Inc., 8.125% due 3/31/2002 3,095,170 3,070,095
A+ A2 1,000,000 Dillard Department Stores, Inc., 7.15%
due 9/01/2002 1,046,710 969,400
Grand Metropolitan Investment Corp.:
A+ A2 3,000,000 6.50% due 9/15/1999 3,040,120 2,885,145
A+ A2 3,000,000 8.625% due 8/15/2001 3,069,700 3,130,110
A A1 4,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 3,972,240 3,887,260
A A2 3,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 3,576,195 3,675,612
BBB- Baa3 8,000,000 RJR Nabisco, Inc., 8.75% due 4/15/2004 7,785,920 7,934,800
Sears, Roebuck & Co.:
BBB A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,623,475
BBB A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,195,615
-------------- --------------
44,371,719 43,163,487
Industrial-- AA- A1 1,000,000 BP America Inc., 7.875% due 5/15/2002 1,055,380 1,018,395
Energy--1.6% Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 1,953,250
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,118,760
-------------- --------------
5,393,960 5,090,405
Industrial-- BBB- Baa3 4,000,000 Applied Materials Inc., 8% due 9/01/2004 3,970,760 3,962,920
Other--14.1% Carnival Cruise Lines, Inc.:
A- A3 1,000,000 6.15% due 10/01/2003 891,530 891,955
A- A3 6,000,000 7.70% due 7/15/2004 5,643,060 5,924,520
BBB Baa3 5,000,000 Developers Diversified Realty Corporation,
7.10% due 12/27/1995 4,992,500 5,019,870
A- A3 2,000,000 International Paper Co., 9.40% due 6/01/2002 2,201,380 2,188,870
A+ A1 2,500,000 New York Times Company,
7.625% due 3/15/2005 2,494,525 2,495,350
BBB- Ba1 12,500,000 News America Holdings Inc.,
8.50% due 2/15/2005 12,639,625 12,657,999
BBB Baa3 5,000,000 Northrop Grumman Corp., 8.625%
due 10/15/2004 5,000,000 5,191,525
BBB- Baa3 5,000,000 Telecommunications, Inc., 9.25%
due 4/15/2002 5,189,300 5,220,325
-------------- --------------
43,022,680 43,553,334
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <C> <C> <C> <S> <C> <C>
Bonds & Notes (concluded) Intermediate Term Portfolio
Supranational--0.6% AAA Aaa $ 1,500,000 International Bank for Reconstruction &
Development, 12.375% due 10/15/2002 $ 1,954,980 $ 1,903,290
Transportation AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,679,860
Services--3.7% Southwest Airlines, Inc.:
A- Baa1 6,500,000 9.40% due 7/01/2001 7,564,180 6,971,997
A- Baa1 1,000,000 8% due 3/01/2005 994,610 1,004,635
-------------- --------------
12,158,750 11,656,492
Utilities-- BBB Baa3 6,500,000 United Telecommunications, Inc.,
Communications--2.3% 9.50% due 4/01/2003 6,901,765 7,102,907
Utilities-- BBB+ Baa1 7,000,000 PECO Energy Co., 8% due 4/01/2002 7,000,440 7,060,795
Electric--4.1% A- A2 4,000,000 Pennsylvania Power & Light Co.,
5.50% due 4/01/1998 3,991,280 3,806,560
BBB Baa2 2,000,000 Texas Utilities Electric Co., 8%
due 6/01/2002 1,972,080 1,983,140
-------------- --------------
12,963,800 12,850,495
Utilities-- Consolidated Natural Gas Co.:
Gas--2.0% AA- A1 4,000,000 9.375% due 2/01/1997 4,125,760 4,143,640
AA- A1 2,000,000 8.75% due 6/01/1999 2,125,440 2,083,980
-------------- --------------
6,251,200 6,227,620
Total Investments in Bonds &
Notes--96.5% 305,500,421 301,050,782
<PAGE>
Short-Term Securities
Repurchase 5,983,000 SBC Capital Markets Inc., purchased on
Agreements**--1.9% 3/31/1995 to yield 6.15% to 4/03/1995 5,983,000 5,983,000
Total Investments in Short-Term
Securities--1.9% 5,983,000 5,983,000
Total Investments--98.4% $ 311,483,421 307,033,782
==============
Other Assets Less Liabilities--1.6% 4,871,785
--------------
Net Assets--100.0% $ 311,905,567
==============
<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.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statements of Assets and Liabilities as of March 31, 1995
High Income Investment Intermediate
Portfolio Grade Portfolio Term Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $3,455,315,010 $891,706,731 $307,033,782
Cash 951,166 377,285 122,485
Receivables: Interest 78,133,003 19,252,568 12,084,053
Capital shares sold 18,912,821 3,972,645 784,314
Securities sold 2,104,088 10,420,430 6,666,391
Loans -- 159,599 49,156
Paydowns 69,668 -- --
Prepaid registration fees and other assets (Note 1e) 1,653,084 58,449 70,435
-------------- ------------ ------------
Total assets 3,557,138,840 925,947,707 326,810,616
<PAGE>
Liabilities: Payables: Securities purchased 20,230,078 10,189,440 12,787,194
Capital shares redeemed 7,102,684 6,113,380 1,189,138
Dividends to shareholders (Note 1f) 9,530,203 1,772,930 653,282
Distributor (Note 2) 1,732,185 350,439 64,365
Investment adviser (Note 2) 1,288,634 298,468 102,672
Accrued expenses and other liabilities 901,783 356,911 108,398
-------------- ------------ ------------
Total liabilities 40,785,567 19,081,568 14,905,049
Net Assets: Net assets $3,516,353,273 $906,866,139 $311,905,567
============== ============ ============
Net Assets Class A Common Stock, $0.10 par value++ $ 11,302,944 $ 3,448,431 $ 1,502,972
Consist of: Class B Common Stock, $0.10 par value++++ 34,249,664 4,708,336 1,297,521
Class C Common Stock, $0.10 par value++++++ 542,814 54,961 3,830
Class D Common Stock, $0.10 par value++++++++ 578,946 95,020 35,863
Paid-in capital in excess of par 3,681,231,917 955,773,568 330,594,173
Accumulated distributions in excess of realized capital
losses on investments--net -- (33,005,165) (9,401,034)
Accumulated realized capital losses on investments--net (22,169,773) (19,005,613) (7,678,119)
Unrealized depreciation on investments--net (189,383,239) (5,203,399) (4,449,639)
-------------- ------------ ------------
Net assets $3,516,353,273 $906,866,139 $311,905,567
============== ============ ============
Net Asset Class A: Net assets $ 851,350,884 $376,474,317 $165,052,820
Value: ============== ============ ============
Shares outstanding 113,029,442 34,484,308 15,029,720
============== ============ ============
Net asset value and redemption price per share $ 7.53 $ 10.92 $ 10.98
============== ============ ============
Class B: Net assets $2,580,442,402 $514,011,507 $142,492,597
============== ============ ============
Shares outstanding 342,496,639 47,083,364 12,975,214
============== ============ ============
Net asset value and redemption price per share $ 7.53 $ 10.92 $ 10.98
============== ============ ============
Class C: Net assets $ 40,924,386 $ 6,002,642 $ 420,755
============== ============ ============
Shares outstanding 5,428,142 549,612 38,302
============== ============ ============
Net asset value and redemption price per share $ 7.54 $ 10.92 $ 10.99
============== ============ ============
<PAGE>
Class D: Net assets $ 43,635,601 $ 10,377,673 $ 3,939,395
============== ============ ============
Shares outstanding 5,789,460 950,197 358,626
============== ============ ============
Net asset value and redemption price per share $ 7.54 $ 10.92 $ 10.98
============== ============ ============
<FN>
*Identified cost $3,644,698,249 $896,910,130 $311,483,421
============== ============ ============
++Authorized shares--Class A 200,000,000 100,000,000 50,000,000
============== ============ ============
++++Authorized shares--Class B 500,000,000 100,000,000 50,000,000
============== ============ ============
++++++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>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Operations for the Six Months Ended March 31, 1995
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and discount earned $ 192,674,619 $ 34,696,247 $ 12,038,094
Income Dividends 1,861,486 -- --
(Note 1d): Loaned securities -- 60,240 24,869
Other 1,727,916 -- --
-------------- ------------ ------------
Total income 196,264,021 34,756,487 12,062,963
-------------- ------------ ------------
<PAGE>
Expenses: Distribution fees--Class B (Note 2) 8,767,965 1,805,111 341,526
Investment advisory fees (Note 2) 6,679,652 1,573,601 551,659
Transfer agent fees--Class B (Note 2) 1,396,201 444,865 94,417
Transfer agent fees--Class A (Note 2) 435,932 303,606 97,907
Printing and shareholder reports 186,280 56,094 17,097
Registration fees (Note 1e) 35,402 76,080 50,357
Accounting services (Note 2) 86,829 41,119 16,518
Custodian fees 64,126 27,263 15,301
Professional fees 57,524 13,945 8,307
Distribution fees--Class C (Note 2) 49,685 8,720 367
Account maintenance fees--Class D (Note 2) 17,639 5,901 847
Directors' fees and expenses 17,523 4,417 1,556
Pricing fees (Note 2) 8,810 4,550 1,963
Transfer agent fees--Class D (Note 2) 6,256 4,074 1,281
Transfer agent fees--Class C (Note 2) 6,493 2,174 152
Other 22,549 8,536 4,328
-------------- ------------ ------------
Total expenses 17,838,866 4,380,056 1,203,583
-------------- ------------ ------------
Investment income--net 178,425,155 30,376,431 10,859,380
-------------- ------------ ------------
Realized & Realized loss on investments--net (9,961,416) (19,005,613) (7,678,119)
Unrealized Change in unrealized depreciation on investments--net (37,003,681) 31,371,369 9,937,918
Gain (Loss) on -------------- ------------ ------------
Investments-- Net Increase in Net Assets Resulting from Operations $ 131,460,058 $ 42,742,187 $ 13,119,179
Net (Notes ============== ============ ============
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets High Income Portfolio
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 178,425,155 $ 271,518,055
Realized gain (loss) on investments--net (9,961,416) 13,337,857
Change in unrealized appreciation/depreciation on investments--net (37,003,681) (218,088,489)
-------------- --------------
Net increase in net assets resulting from operations 131,460,058 66,767,423
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (49,083,614) (84,737,805)
(Note 1f): Class B (127,901,988) (186,780,250)
Class C (658,443) --
Class D (781,110) --
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (178,425,155) (271,518,055)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 339,523,199 718,487,003
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 292,558,102 513,736,371
Beginning of period 3,223,795,171 2,710,058,800
-------------- --------------
End of period $3,516,353,273 $3,223,795,171
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets (continued) Investment Grade Portfolio
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 30,376,431 $ 55,789,198
Realized loss on investments--net (19,005,613) (27,366,985)
Change in unrealized appreciation/depreciation on investments--net 31,371,369 (89,071,174)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 42,742,187 (60,648,961)
-------------- --------------
Dividends & Investment income--net:
Distributions Class A (13,877,791) (25,781,848)
to Class B (16,253,912) (30,007,350)
Shareholders Class C (72,980) --
(Note 1f): Class D (171,748) --
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 (30,376,431) (96,176,149)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 44,655,126 83,643,841
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 57,020,882 (73,181,269)
Beginning of period 849,845,257 923,026,526
-------------- --------------
End of period $ 906,866,139 $ 849,845,257
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Mar. 31, 1995 Sept. 30, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 10,859,380 $ 20,758,590
Realized loss on investments--net (7,678,119) (8,401,311)
Change in unrealized appreciation/depreciation on investments--net 9,937,918 (27,976,092)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 13,119,179 (15,618,813)
-------------- --------------
Dividends & Investment income--net:
Distributions Class A (6,046,610) (11,981,544)
to Class B (4,744,688) (8,777,046)
Shareholders Class C (5,708) --
(Note 1f): Class D (62,374) --
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 (10,859,380) (28,712,508)
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (1,787,690) 28,138,074
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets 472,109 (16,193,247)
Beginning of period 311,433,458 327,626,705
-------------- --------------
End of period $ 311,905,567 $ 311,433,458
============== ==============
</TABLE>
<PAGE>
<TABLE>
Financial Highlights High Income Portfolio
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, 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 Net asset value, beginning of period $ 7.66 $ 8.13 $ 7.84 $ 7.02 $ 6.39
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .44 .75 .79 .87 .92
Realized and unrealized gain (loss) on
investments--net (.13) (.47) .29 .82 .63
---------- ---------- ---------- -------- --------
Total from investment operations .31 .28 1.08 1.69 1.55
---------- ---------- ---------- -------- --------
Less dividends from investment income--net (.44) (.75) (.79) (.87) (.92)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 7.53 $ 7.66 $ 8.13 $ 7.84 $ 7.02
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 4.17%+++ 3.42% 14.35% 25.22% 26.46%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses .55%* .53% .55% .59% .66%
Net Assets: ========== ========== ========== ======== ========
Investment income--net 11.72%* 9.27% 9.78% 11.44% 14.13%
========== ========== ========== ======== ========
Supplemental Net assets, end of period (in thousands) $ 851,351 $ 876,573 $ 886,784 $683,801 $522,703
Data: ========== ========== ========== ======== ========
Portfolio turnover 12.47% 32.52% 34.85% 40.52% 39.95%
========== ========== ========== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights (continued) High Income Portfolio
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, 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 Net asset value, beginning of period $ 7.66 $ 8.13 $ 7.85 $ 7.02 $ 6.40
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .41 .69 .72 .81 .87
Realized and unrealized gain (loss) on
investments--net (.13) (.47) .28 .83 .62
---------- ---------- ---------- -------- --------
Total from investment operations .28 .22 1.00 1.64 1.49
---------- ---------- ---------- -------- --------
Less dividends from investment
income--net (.41) (.69) (.72) (.81) (.87)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 7.53 $ 7.66 $ 8.13 $ 7.85 $ 7.02
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 3.79%+++ 2.66% 13.35% 24.44% 25.32%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses, excluding distribution fees .57%* .54% .56% .60% .67%
Net Assets: ========== ========== ========== ======== ========
Expenses 1.32%* 1.29% 1.31% 1.35% 1.42%
========== ========== ========== ======== ========
Investment income--net 10.94%* 8.53% 8.94% 10.42% 13.24%
========== ========== ========== ======== ========
Supplemental Net assets, end of period (in thousands) $2,580,442 $2,347,223 $1,823,275 $847,354 $264,486
Data: ========== ========== ========== ======== ========
Portfolio turnover 12.47% 32.52% 34.85% 40.52% 39.95%
========== ========== ========== ======== ========
<PAGE>
<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 March 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 7.59 $ 7.59
Operating ------- -------
Performance: Investment income--net .36 .38
Realized and unrealized loss on investments--net (.05) (.05)
------- -------
Total from investment operations .31 .33
------- -------
Less dividends from investment income--net (.36) (.38)
------- -------
Net asset value, end of period $ 7.54 $ 7.54
======= =======
Total Investment Based on net asset value per share 4.29%+++ 4.53%+++
Return:** ======= =======
Ratios to Average Expenses, excluding account maintenance and distribution fees .55%* .53%*
Net Assets: ======= =======
Expenses 1.35%* .78%*
======= =======
Investment income--net 10.60%* 11.07%*
======= =======
Supplemental Net assets, end of period (in thousands) $40,924 $43,636
Data: ======= =======
Portfolio turnover 12.47% 12.47%
======= =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights (continued) Investment Grade Portfolio
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, 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 Net asset value, beginning of period $ 10.77 $ 12.81 $ 12.30 $ 11.59 $ 10.83
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .40 .75 .81 .88 .92
Realized and unrealized gain (loss) on
investments--net .15 (1.49) .67 .71 .76
---------- ---------- ---------- -------- --------
Total from investment operations .55 (.74) 1.48 1.59 1.68
---------- ---------- ---------- -------- --------
Less dividends and distributions:
Investment income--net (.40) (.75) (.81) (.88) (.92)
Realized gain on investments--net -- (.10) (.16) -- --
In excess of realized gain on
investments--net -- (.45) -- -- --
---------- ---------- ---------- -------- --------
Total dividends and distributions (.40) (1.30) (.97) (.88) (.92)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 10.92 $ 10.77 $ 12.81 $ 12.30 $ 11.59
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 5.25%+++ (6.03)% 12.78% 14.30% 16.18%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses .59%* .53% .56% .58% .61%
Net Assets: ========== ========== ========== ======== ========
Investment income--net 7.52%* 6.61% 6.94% 7.43% 8.26%
========== ========== ========== ======== ========
Supplemental Net assets, end of period (in thousands) $ 376,474 $ 366,792 $ 407,625 $362,139 $324,818
Data: ========== ========== ========== ======== ========
Portfolio turnover 62.54% 159.05% 121.34% 65.43% 126.32%
========== ========== ========== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights (continued) Investment Grade Portfolio
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, 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 Net asset value, beginning of period $ 10.77 $ 12.81 $ 12.30 $ 11.59 $ 10.83
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .36 .66 .72 .79 .84
Realized and unrealized gain (loss) on
investments--net .15 (1.49) .67 .71 .76
---------- ---------- ---------- -------- --------
Total from investment operations .51 (.83) 1.39 1.50 1.60
---------- ---------- ---------- -------- --------
Less dividends and distributions:
Investment income--net (.36) (.66) (.72) (.79) (.84)
Realized gain on investments--net -- (.10) (.16) -- --
In excess of realized gain on
investments--net -- (.45) -- -- --
---------- ---------- ---------- -------- --------
Total dividends and distributions (.36) (1.21) (.88) (.79) (.84)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 10.92 $ 10.77 $ 12.81 $ 12.30 $ 11.59
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 4.85%+++ (6.73%) 11.92% 13.44% 15.30%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses, excluding distribution fees .61%* .54% .54% .59% .62%
Net Assets: ========== ========== ========== ======== ========
Expenses 1.36%* 1.29% 1.29% 1.34% 1.37%
========== ========== ========== ======== ========
Investment income--net 6.75%* 5.85% 5.80% 6.65% 7.50%
========== ========== ========== ======== ========
Supplemental Net assets, end of period (in thousands) $ 514,012 $ 483,053 $ 515,402 $325,706 $198,504
Data: ========== ========== ========== ======== ========
Portfolio turnover 62.54% 159.05% 121.34% 65.43% 126.32%
========== ========== ========== ======== ========
<PAGE>
<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 March 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.67 $ 10.67
Operating ------- -------
Performance: Investment income--net .32 .34
Realized and unrealized gain on investments--net .25 .25
------- -------
Total from investment operations .57 .59
------- -------
Less dividends from investment income--net (.32) (.34)
------- -------
Net asset value, end of period $ 10.92 $ 10.92
======= =======
Total Investment Based on net asset value per share 5.40%+++ 5.65%+++
Return:** ======= =======
Ratios to Average Expenses, excluding account maintenance and distribution fees .62%* .60%*
Net Assets: ======= =======
Expenses 1.42%* .85%*
======= =======
Investment income--net 6.70%* 7.28%*
======= =======
Supplemental Net assets, end of period (in thousands) $ 6,003 $10,378
Data: ======= =======
Portfolio turnover 62.54% 62.54%
======= =======
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights (continued) Intermediate Term Portfolio
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, 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 Net asset value, beginning of period $ 10.90 $ 12.44 $ 12.03 $ 11.41 $ 10.88
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .40 .75 .76 .88 .93
Realized and unrealized gain (loss) on
investments--net .08 (1.26) .55 .62 .53
---------- ---------- ---------- -------- --------
Total from investment operations .48 (.51) 1.31 1.50 1.46
---------- ---------- ---------- -------- --------
Less dividends and distributions:
Investment income--net (.40) (.75) (.76) (.88) (.93)
Realized gain on investments--net -- -- (.14) -- --
In excess of realized gain on
investments--net -- (.28) -- -- --
---------- ---------- ---------- -------- --------
Total dividends and distributions (.40) (1.03) (.90) (.88) (.93)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 10.98 $ 10.90 $ 12.44 $ 12.03 $ 11.41
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 4.52%+++ (4.25%) 11.40% 13.71% 13.97%
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses .56%* .53% .58% .62% .67%
Net Assets: ========== ========== ========== ======== ========
Investment income--net 7.46%* 6.48% 6.42% 7.54% 8.35%
========== ========== ========== ======== ========
Supplemental Net assets, end of period (in thousands) $ 165,053 $ 170,222 $ 193,505 $154,333 $103,170
Data: ========== ========== ========== ======== ========
Portfolio turnover 82.88% 155.42% 180.52% 95.33% 132.56%
========== ========== ========== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights (concluded) Intermediate Term Portfolio
Class B Class C Class D
For the For the For the
For the Period Period Period
The following per share data and ratios have been derived Six Months For the Nov. 13, Oct. 21, Oct. 21,
from information provided in the financial statements. Ended Year Ended 1992++ to 1994++ to 1994++ to
March 31, Sept. 30, Sept. 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1995 1995
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.90 $ 12.44 $ 11.68 $ 10.81 $ 10.81
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net .37 .69 .61 .34 .35
Realized and unrealized gain (loss) on
investments--net .08 (1.26) .90 .18 .17
---------- ---------- ---------- -------- --------
Total from investment operations .45 (.57) 1.51 .52 .52
---------- ---------- ---------- -------- --------
Less dividends and distributions:
Investment income--net (.37) (.69) (.61) (.34) (.35)
Realized gain on investments--net -- -- (.14) -- --
In excess of realized gain on
investments--net -- (.28) -- -- --
---------- ---------- ---------- -------- --------
Total dividends and distributions (.37) (.97) (.75) (.34) (.35)
---------- ---------- ---------- -------- --------
Net asset value, end of period $ 10.98 $ 10.90 $ 12.44 $ 10.99 $ 10.98
========== ========== ========== ======== ========
Total Investment Based on net asset value per share 4.26%+++ (4.72%) 13.31%+++ 4.84%+++ 4.88%+++
Return:** ========== ========== ========== ======== ========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees .58%* .54% .57%* .65%* .61%*
========== ========== ========== ======== ========
Expenses 1.08%* 1.04% 1.07%* 1.10%* .71%*
========== ========== ========== ======== ========
Investment income--net 6.95%* 5.98% 5.61%* 6.99%* 7.36%*
========== ========== ========== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 142,493 $ 141,212 $ 134,122 $ 421 $ 3,939
Data: ========== ========== ========== ======== ========
Portfolio turnover 82.88% 155.42% 180.52% 82.88% 82.88%
========== ========== ========== ======== ========
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effect of sales loads.
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. These unaudited
financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair
statement of the results for the interim period pre-
sented. All such adjustments are of a normal recurring
nature. 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 distri-
bution 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
most recent bid prices 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 debt markets. Losses may arise due to
changes in the value of the contract or if the counter-
party 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
purchase 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 col-
lateral such initial margin as required by the exchange
on which the transaction is effected. Pursuant to the
contract, 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 contract 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
realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the
extent the cost of the closing transaction exceeds the
premium 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.
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
<PAGE>
(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.
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" or "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.
Rate of Advisory Fee
Aggregate of Average
Daily Net Assets of High Investment Intermediate
the Three Combined Income Grade* Term
Portfolios Portfolio Portfolio Portfolio
Not exceeding $250 million 0.55% 0.50% 0.50%
In excess of $250 million but
not more than $500 million 0.50 0.45 0.45
In excess of $500 million but
not more than $750 million 0.45 0.40 0.40
In excess of $750 million 0.40 0.35 0.35
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 the
Investment Adviser during any fiscal year which will
cause such expenses to exceed the pro rata expense
limitation at the time of such payment.
<PAGE>
Pursuant to the distribution plans (the "Distribution
Plans") adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor ongoing 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
Class B Class C Class D
High Income Portfolio 0.25% 0.25% 0.25%
Investment Grade Portfolio 0.25% 0.25% 0.25%
Intermediate Term Portfolio 0.25% 0.25% 0.10%
Distribution Fees
Class B Class C
High Income Portfolio 0.50% 0.55%
Investment Grade Portfolio 0.50% 0.55%
Intermediate Term Portfolio 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
providing shareholder and distribution-related services
to Class B and Class C shareholders.
For the six months ended March 31, 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
Portfolio Class A Class D
High Income $ 21,061 $ 31,640
Investment Grade $ 3,368 $ 4,525
Intermediate Term $ 484 $ 984
MLPF&S
Portfolio Class A Class D
High Income $233,305 $373,008
Investment Grade $ 40,055 $ 51,244
Intermediate Term $ 9,270 $ 11,194
For the six months ended March 31, 1995, MLPF&S
received contingent deferred sales charges of $3,678,108
relating to transactions in Class B Shares, amounting
to $2,887,537, $654,730, and $135,840 in the High Income,
Investment Grade, and Intermediate Term Portfolios,
respectively, and $8,296 relating to transactions
in Class C Shares, amounting to $3,533 and $4,763 in
the High Income and Investment Grade Portfolios,
respectively. In addition, MLPF&S received $24,688 in
commissions on the execution of portfolio security
transactions for the High Income Portfolio for the six
months ended March 31, 1995.
Financial Data Services, Inc. ("FDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1995, Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S,
provided security price quotations to 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,
FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the six months ended March 31, 1995
were as follows:
<PAGE>
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Purchases $602,980,251 $558,938,053 $248,297,038
============ ============ ============
Sales $370,901,534 $499,861,533 $238,577,981
============ ============ ============
Net realized and unrealized losses as of March 31, 1995
were as follows:
Realized Unrealized
High Income Portfolio Losses Losses
Long-term investments $ (9,961,416) $(189,383,239)
------------ -------------
Total $ (9,961,416) $(189,383,239)
============ =============
Realized Unrealized
Investment Grade Portfolio Losses Losses
Long-term investments $(19,005,613) $ (5,203,399)
------------ -------------
Total $(19,005,613) $ (5,203,399)
============ =============
Realized Unrealized
Intermediate Term Portfolio Losses Losses
Long-term investments $ (7,678,119) $ (4,449,639)
------------ -------------
Total $ (7,678,119) $ (4,449,639)
============ =============
As of March 31, 1995, net unrealized depreciation
for Federal income tax purposes was as follows:
<PAGE>
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Gross unrealized
appreciation $ 58,293,016 $ 11,533,296 $ 2,405,111
Gross unrealized
depreciation (247,676,255) (16,736,695) (6,854,750)
------------- ------------ ------------
Net unrealized
depreciation $(189,383,239) $ (5,203,399) $ (4,449,639)
============= ============ ============
The aggregate cost of investments at March 31, 1995
for Federal income tax purposes was $3,644,698,249
for the High Income Portfolio, $896,910,130 for the
Investment Grade Portfolio, and $311,483,421 for the
Intermediate Term Portfolio.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from
capital share transactions for the six months ended
March 31, 1995 was $339,523,199 for the High Income
Portfolio, $44,655,126 for the Investment Grade Port-
folio and $(1,787,690) for the Intermediate Term
Portfolio. Net increase in net assets derived from capital
share transactions for the year ended March 31, 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 were as follows:
High Income Portfolio
Class A Shares for the
Six Months Ended Dollar
March 31, 1995 Shares Amount
Shares sold 6,505,065 $ 48,341,345
Shares issued to shareholders in
reinvestment of dividends 3,452,745 25,647,302
------------- --------------
Total issued 9,957,810 73,988,647
Shares redeemed (11,430,003) (85,107,577)
------------- --------------
Net decrease (1,472,193) $ (11,118,930)
============= ==============
<PAGE>
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
============= ==============
NOTES TO FINANCIAL STATEMENTS (concluded)
High Income Portfolio
Class B Shares for the Six Dollar
Months Ended March 31, 1995 Shares Amount
Shares sold 63,915,156 $ 475,364,581
Shares issued to shareholders in
reinvestment of dividends 7,996,949 59,414,355
------------- --------------
Total issued 71,912,105 534,778,936
Automatic conversion of shares (57,305) (429,188)
Shares redeemed (35,875,037) (267,135,822)
------------- --------------
Net increase 35,979,763 $ 267,213,926
============= ==============
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
============= ==============
<PAGE>
High Income Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 5,874,049 $ 43,752,013
Shares issued to shareholders in
reinvestment of dividends 40,778 303,234
------------- --------------
Total issued 5,914,827 44,055,247
Shares redeemed (486,685) (3,623,384)
------------- --------------
Net increase 5,428,142 $ 40,431,863
============= ==============
[FN]
++Commencement of Operations.
High Income Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 7,738,068 $ 57,559,433
Automatic conversion of shares 57,305 429,188
Shares issued to shareholders in
reinvestment of dividends 47,577 353,638
------------- --------------
Total issued 7,842,950 58,342,259
Shares redeemed (2,053,490) (15,345,919)
------------- --------------
Net increase 5,789,460 $ 42,996,340
============= ==============
[FN]
++Commencement of Operations.
<PAGE>
Investment Grade Portfolio
Class A Shares for the Six Dollar
Months Ended March 31, 1995 Shares Amount
Shares sold 4,230,260 $ 45,350,280
Shares issued to shareholders in
reinvestment of dividends 739,240 7,908,860
------------- --------------
Total issued 4,969,500 53,259,140
Shares redeemed (4,549,772) (48,695,987)
------------- --------------
Net increase 419,728 $ 4,563,153
============= ==============
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 Six Dollar
Months Ended March 31, 1995 Shares Amount
Shares sold 8,958,293 $ 95,997,546
Shares issued to shareholders in
reinvestment of dividends 921,013 9,854,821
------------- --------------
Total issued 9,879,306 105,852,367
Automatic conversion of shares (12,227) (130,707)
Shares redeemed (7,646,706) (81,685,766)
------------- --------------
Net increase 2,220,373 $ 24,035,894
============= ==============
<PAGE>
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
============= ==============
Investment Grade Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 661,597 $ 7,105,945
Shares issued to shareholders in
reinvestment of dividends 3,905 42,217
------------- --------------
Total issued 665,502 7,148,162
Shares redeemed (115,890) (1,248,391)
------------- --------------
Net increase 549,612 $ 5,899,771
============= ==============
[FN]
++Commencement of Operations.
<PAGE>
Investment Grade Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 1,126,714 $ 12,052,976
Automatic conversion of shares 12,227 130,707
Shares issued to shareholders in
reinvestment of dividends 10,606 114,505
------------- --------------
Total issued 1,149,547 12,298,188
Shares redeemed (199,350) (2,141,880)
------------- --------------
Net increase 950,197 $ 10,156,308
============= ==============
[FN]
++Commencement of Operations.
Intermediate Term Portfolio
Class A Shares for the Six Dollar
Months Ended March 31, 1995 Shares Amount
Shares sold 1,082,360 $ 11,742,636
Shares issued to shareholders in
reinvestment of dividends 364,998 3,943,415
------------- --------------
Total issued 1,447,358 15,686,051
Shares redeemed (2,040,902) (22,036,178)
------------- --------------
Net decrease (593,544) $ (6,350,127)
============= ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended 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
============= ==============
<PAGE>
Intermediate Term Portfolio
Class B Shares for the Six Dollar
Months Ended March 31, 1995 Shares Amount
Shares sold 2,763,782 $ 29,941,035
Shares issued to shareholders in
reinvestment of dividends 251,728 2,719,832
------------- --------------
Total issued 3,015,510 32,660,867
Automatic conversion of shares (832) (8,897)
Shares redeemed (2,999,749) (32,371,266)
------------- --------------
Net increase 14,929 $ 280,704
============= ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended 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
============= ==============
Intermediate Term Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 40,309 $ 437,415
Shares issued to shareholders in
reinvestment of dividends 179 1,952
------------- --------------
Total issued 40,488 439,367
Shares redeemed (2,186) (23,976)
------------- --------------
Net increase 38,302 $ 415,391
============= ==============
[FN]
++Commencement of Operations.
<PAGE>
Intermediate Term Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
March 31, 1995 Shares Amount
Shares sold 483,802 $ 5,227,989
Automatic conversion of shares 832 8,897
Shares issued to shareholders in
reinvestment of dividends 3,194 34,767
------------- --------------
Total issued 487,828 5,271,653
Shares redeemed (129,202) (1,405,311)
------------- --------------
Net increase 358,626 $ 3,866,342
============= ==============
[FN]
++Commencement of Operations.
5. Loaned Securities:
At March 31, 1995, the Investment Grade Portfolio
held US Treasury Bonds/Notes having an aggregate
value of approximately $45,974,000 as collateral for
Portfolio securities loaned, having a market value of
approximately $43,826,000. The Intermediate Term
Portfolio held US Treasury Bonds/Notes having an aggre-
gate value of approximately $9,433,000 as collateral
for Portfolio securities loaned, having a market value of
approximately $9,156,000.
6. Capital Loss Carryforward:
At September 30, 1994, the Fund had a capital loss
carryforward of approximately $14,496,000 in the High
Income Portfolio, all of which expires in 1999. This
will be available to offset like amounts of any future
taxable gains.
