MERRILL LYNCH
CORPORATE BOND
FUND, INC.
FUND LOGO
Semi-Annual Report
March 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH CORPORATE BOND FUND, INC.
TO OUR SHAREHOLDERS
Stock and bond market turbulence increased during the three-month
period ended March 31, 1997. Mounting evidence of stronger-than-
expected economic growth suggested to investors that the Federal Re-
serve Board would make a preemptive strike to contain inflationary
pressures. These concerns were heightened by statements made by
Federal Reserve Board Chairman Alan Greenspan, and culminated in an
announced increase in the Federal Funds rate of 0.25% to 5.50% on
March 25. As investors became concerned that this might prove to be
only the first in a series of monetary policy tightening moves,
interest rates rose and stock and bond prices declined. Following
the central bank's action, investor sentiment fluctuated from
negative to more positive, depending upon whether the latest
economic data releases were perceived to suggest an overheating or
moderating trend. It appears that clear-cut signs of continued low
inflation and moderate economic growth, as well as no further
indications of monetary policy tightening, are needed before
stability returns to the financial markets.
On the international front, although the Federal Reserve Board's
action triggered some weakness in the US dollar, the US dollar
subsequently continued its strong advance relative to the yen and
the Deutschemark, raising concerns about the outlook for US trade.
In early February, the leading industrialized nations expressed
apparent agreement that it was time to seek a lower US dollar and
less volatility in the foreign exchange markets. It remains to be
seen whether these stated intentions will be acted upon, or if the
US dollar continues to rise relative to other major currencies.
<PAGE>
Portfolio Strategy
High Income Portfolio
The high-yield market posted positive total returns during the first
quarter of 1997 despite a very weak period for bond prices in March
precipitated by a Federal Reserve Board interest rate increase.
Total returns for the Portfolio's Class A, Class B, Class C and
Class D Shares were +0.64%, +0.45%, +0.44% and +0.57%, respectively,
for the quarter. This compared with a +1.47% return for the
unmanaged CS First Boston High Yield Index and -2.3% for ten-year
Treasury notes. Portfolio cash inflows continued to be strong during
the quarter ended March 31, 1997, with net subscriptions totaling
$456 million.
The March quarter's positive returns masked a sharp deterioration in
the internal dynamics of the high-yield market during the last two
weeks of March. Demand faded with the Federal Reserve Board's
interest rate increase. Prices softened and the resulting decline in
mutual fund net asset values precipitated significant outflows from
the high-yield funds, which tend to be used extensively by market-
timing services. The $335 million mutual fund outflow in March was
the first negative month seen in over a year.
In our December 31, 1996 shareholder's letter, we observed that the
narrow yield spreads that developed between high-yield bonds and
Treasury securities of similar maturity left high-yield bonds
vulnerable to either a change in fundamentals or to investor
sentiment. We also expressed uncertainty about the direction of
interest rates. The rise in yields during the quarter ended March
31, 1997 gave us a measure of comfort; while yields may rise
somewhat from current levels, the 7% area on ten-year Treasury
securities appears to offer excellent value. However, we are still
uncomfortable with the historically narrow yield spreads between
high-yield bonds and Treasury securities. The yield spread
represents the premium demanded by investors for the credit risk
assumed in owning high-yield bonds. These spreads can be very wide
in periods of weak economic activity or high perceived default risk.
They are quite narrow currently because fundamentals were
extraordinarily good for a while, and the economy is healthy.
The quality of new-issue supply was excellent, and default rates
were historically low. High-yield bonds outperformed high-grade
bonds by a wide margin over the past 15 months. Since the end of
1995, the yield spread between the Merrill Lynch High Yield Master
Index and ten-year Treasury securities narrowed approximately 0.75%.
These positive arguments for investing in high-yield bonds attracted
large amounts of new funds to the market. New-issue supply was
rationed to eager buyers. Not surprisingly, the quality of many
recent new issues has deteriorated.
<PAGE>
In an investment environment in which risk premiums are small, we
believe it is appropriate to reduce the Portfolio's exposure to
credit risk. Consequently, the Portfolio was structured in a
somewhat defensive manner. We are emphasizing shorter maturities and
higher-quality BB-rated issues which, we believe, will be less
sensitive to widening yield spreads.
At March 31, 1997, cash equivalents composed 8.5% of net assets. The
average maturity of the portfolio was 6.3 years. Major industries
represented in the Portfolio were: energy, 7.8% of net assets;
international cable, 6.8%; domestic cable, 6.4%; paper & forest
products, 5.7%; and utilities, 4.6%.
Investment Grade Portfolio &
Intermediate Term Portfolio
Bond market turbulence accelerated during the March quarter as
investors anticipated that the Federal Reserve Board would launch
its promised preemptive strike against inflation. As a result, the
yield on the bellwether Treasury bond reached 7.10% by March month-
end. We maintained a defensive position in each Portfolio during
this period. The average duration for the Portfolios was shortened
from 4.25 years to 4 years. We accomplished this by reducing our
exposure in the three-year--five-year sector and the five-year--
seven-year sector of the yield curve and by overweighting in shorter-
term maturities. We balanced our position in Treasury securities by
holding a percentage of Baa-rated corporate issues. We remain
underweighted in the utility industry because of our concerns
regarding the changes occurring in that industry. We also reduced
our holdings in Canadian bonds by diversifying into other foreign
issues. Looking ahead, we believe that we will continue to see price
volatility in the securities markets with a bias against a
significant price rally. We believe that our current duration range
is consistent with our outlook of somewhat higher interest rates.
In Conclusion
We appreciate your ongoing investment in Merrill Lynch Corporate
Bond Fund, Inc., and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(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 8, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for High Income and Investment Grade Portfolio. Intermediate
Term Portfolio incurs a maximum initial sales charge (front-end
load) of 1% and bears no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for High Income and
Investment Grade Portfolio. Intermediate Term Portfolio is subject
to a maximum contingent deferred sales charge of 1% if redeemed
within one year of purchase. In addition, High Income and Investment
Grade Portfolio are subject to a distribution fee of 0.50% and an
account maintenance fee of 0.25%. Intermediate Term Portfolio is
subject to a 0.25% distribution fee and a 0.25% account maintenance
fee. All three classes of shares automatically convert to Class D
Shares after approximately 10 years. (There is no initial sales
charge for automatic share conversions.)
<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. Intermediate Term Portfolio is subject to a
distribution fee of 0.25% and an account maintenance fee of 0.25%.
In addition, Class C Shares are subject to a 1% contingent deferred
sales charge if redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for High
Income and Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge of 1% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. 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.
Average Annual Total Return--High Income Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 +10.46% + 6.05%
Five Years Ended 3/31/97 +10.96 +10.06
Ten Years Ended 3/31/97 +11.07 +10.62
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
<PAGE>
Class B Shares*
Year Ended 3/31/97 + 9.63% + 5.63%
Five Years Ended 3/31/97 +10.13 +10.13
Inception (10/21/88) through 3/31/97 +11.09 +11.10
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 + 9.58% + 8.58%
Inception (10/21/94) through 3/31/97 +11.36 +11.36
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +10.05% + 5.65%
Inception (10/21/94) through 3/31/97 +11.93 +10.07
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
Average Annual Total Return--Investment Grade Portfolio
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 +4.69% +0.50%
Five Years Ended 3/31/97 +7.37 +6.50
Ten Years Ended 3/31/97 +7.88 +7.44
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +3.89% -0.02%
Five Years Ended 3/31/97 +6.56 +6.56
Inception (10/21/88) through 3/31/97 +7.71 +7.71
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +3.84% +2.86%
Inception (10/21/94) through 3/31/97 +7.92 +7.92
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +4.34% +0.17%
Inception (10/21/94) through 3/31/97 +8.53 +6.73
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 +4.42% +3.38%
Five Years Ended 3/31/97 +7.25 +7.03
Ten Years Ended 3/31/97 +7.69 +7.58
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +3.88% +2.90%
Inception (11/13/92) through 3/31/97 +6.03 +6.03
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +3.85% +2.87%
Inception (10/21/94) through 3/31/97 +7.83 +7.83
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +4.32% +3.28%
Inception (10/21/94) through 3/31/97 +8.28 +7.84
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
3/31/97 12/31/96 3/31/96 % Change % Change As of 3/31/97
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $ 7.88 $ 8.01 $ 7.84 + 0.51% -1.62% 8.68%
High Income Portfolio Class B Shares 7.88 8.01 7.84 + 0.51 -1.62 8.26
High Income Portfolio Class C Shares 7.89 8.02 7.85 + 0.51 -1.62 8.19
High Income Portfolio Class D Shares 7.88 8.01 7.85 + 0.38 -1.62 8.43
Investment Grade Portfolio Class A Shares 11.08 11.32 11.32 - 2.12 -2.12 6.39
Investment Grade Portfolio Class B Shares 11.08 11.32 11.32 - 2.12 -2.12 5.88
Investment Grade Portfolio Class C Shares 11.08 11.32 11.32 - 2.12 -2.12 5.83
Investment Grade Portfolio Class D Shares 11.08 11.32 11.33 - 2.21 -2.12 6.15
Intermediate Term Portfolio Class A Shares 11.18 11.39 11.42 - 2.10 -1.84 6.30
Intermediate Term Portfolio Class B Shares 11.18 11.39 11.42 - 2.10 -1.84 5.84
Intermediate Term Portfolio Class C Shares 11.18 11.39 11.42 - 2.10 -1.84 5.80
Intermediate Term Portfolio Class D Shares 11.18 11.39 11.42 - 2.10 -1.84 6.17
High Income Portfolio Class A Shares--Total Return +10.46(1) +0.64(2)
High Income Portfolio Class B Shares--Total Return + 9.63(3) +0.45(4)
High Income Portfolio Class C Shares--Total Return + 9.58(5) +0.44(6)
High Income Portfolio Class D Shares--Total Return +10.05(7) +0.57(8)
Investment Grade Portfolio Class A Shares--Total Return + 4.69(9) -0.48(10)
Investment Grade Portfolio Class B Shares--Total Return + 3.89(11) -0.67(12)
Investment Grade Portfolio Class C Shares--Total Return + 3.84(13) -0.68(14)
Investment Grade Portfolio Class D Shares--Total Return + 4.34(15) -0.54(16)
Intermediate Term Portfolio Class A Shares--Total Return + 4.42(17) -0.28(18)
Intermediate Term Portfolio Class B Shares--Total Return + 3.88(19) -0.41(20)
Intermediate Term Portfolio Class C Shares--Total Return + 3.85(21) -0.42(22)
Intermediate Term Portfolio Class D Shares--Total Return + 4.32(23) -0.31(24)
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.747 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.161 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.687 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.148 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.683 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.147 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.728 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.157 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.755 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.164 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.669 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.146 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.663 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.144 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.727 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.158 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.731 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.157 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.672 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.144 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.668 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.143 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.720 per share
ordinary income dividends.
(24)Percent change includes reinvestment of $0.155 per share
ordinary income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/10/78--12/31/78 $9.60/9.54 -- -- $ 0.13 -- -- + 0.73% -- --
1979 9.54/8.73 -- -- 1.05(a) -- -- + 2.36 -- --
1980(b) 8.73/7.91 $10.00/ 9.88 $10.00/ 9.93*** 1.07 $ 0.25 $ 0.26*** + 3.08 + 1.28% + 1.86%
1981 7.91/7.26 9.88/ 9.38 9.93/ 9.57 1.12 1.46 1.37 + 6.48 +10.52 +11.11
1982 7.26/7.74 9.38/10.51 9.57/10.59 1.04 1.36 1.36 +23.09 +28.74 +26.74
1983 7.74/8.10 10.51/10.24 10.59/10.37 1.01 1.22 1.20 +18.32 + 9.42 + 9.63
1984 8.10/7.72 10.24/10.44 10.37/10.52 1.02 1.21 1.18 + 8.66 +15.10 +14.00
1985 7.72/8.29 10.44/11.45 10.52/11.33 1.01 1.18 1.16 +21.61 +22.23 +19.86
1986 8.29/8.34 11.45/11.95 11.33/11.87 0.98 1.07 1.03 +12.91 +14.26 +14.34
1987 8.34/7.80 11.95/11.00 11.87/10.99 0.95 0.99 0.94 + 4.94 + 0.45 + 0.65
1988 7.80/7.80 11.00/10.90 10.99/10.83 0.95 0.99 0.97 +12.71 + 8.30 + 7.51
1989 7.80/7.17 10.90/11.33 10.83/11.13 0.97 1.00 0.98 + 4.33 +13.63 +12.33
1990 7.17/5.88 11.33/11.13 11.13/11.05 1.00 0.94 0.97 - 4.61 + 6.97 + 8.43
1991 5.88/7.21 11.13/12.03 11.05/11.77 0.90 0.91 0.92 +39.75 +17.08 +15.53
1992 7.21/7.78 12.03/11.86 11.77/11.60 0.86 1.03(c) 0.99(d) +20.64 + 7.51 + 7.28
1993 7.78/8.32 11.86/11.97 11.60/11.92 0.76 1.35(e) 1.03(f) +17.39 +12.49 +11.82
1994 8.32/7.31 11.97/10.60 11.92/10.70 0.80 0.77 0.77 - 2.69 - 5.06 - 3.85
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.77 0.80 0.78 +18.38 +19.82 +18.10
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.75 0.76 0.73 +12.45 + 2.21 + 2.94
1/1/97--3/31/97 8.01/7.88 11.32/11.08 11.39/11.18 0.16 0.16 0.16 + 0.64 - 0.48 - 0.28
------ ------ ------
Total $17.30 $17.45 $16.80
Cumulative total return as of 3/31/97: +646.94%** +449.21%** +423.04%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***Adjusted for a 10-for-1 split effected in the form of a dividend
through January 1981.
(a)Distribution for High Income Portfolio includes $0.024 per share
capital gains distributions.
(b)For Investment Grade and Intermediate Term Portfolios, period
covered is 10/31/80--12/31/80.
(c)Distribution for Investment Grade Portfolio includes $0.036 per
share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio includes $0.012 per
share capital gains distributions.
(e)Distribution for Investment Grade Portfolio includes $0.261 per
share capital gains distributions.
(f)Distribution for Intermediate Term Portfolio includes $0.093 per
share capital gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.92/7.80 $11.08/10.90 -- $0.18 $0.18 -- + 0.74% + 0.05% --
1989 7.80/7.17 10.90/11.33 -- 0.91 0.91 -- + 3.54 +12.77 --
1990 7.17/5.89 11.33/11.13 -- 0.95 0.86 -- - 5.18 + 6.16 --
1991 5.89/7.22 11.13/12.03 -- 0.84 0.83 -- +38.67 +16.19 --
1992 7.22/7.78 12.03/11.86 $11.68/11.60 0.80 0.94(a) $0.24(b) +19.57 + 6.69 + 1.34%
1993 7.78/8.33 11.86/11.97 11.60/11.92 0.70 1.25(c) 0.97(d) +16.65 +11.65 +11.26
1994 8.33/7.31 11.97/10.60 11.92/10.70 0.74 0.69 0.71 - 3.54 - 5.78 - 4.34
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.72 0.71 0.72 +17.49 +18.92 +17.50
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.69 0.67 0.67 +11.60 + 1.43 + 2.40
1/1/97--3/31/97 8.01/7.88 11.32/11.08 11.39/11.18 0.15 0.15 0.14 + 0.45 - 0.67 - 0.41
----- ----- -----
Total $6.68 $7.19 $3.45
Cumulative total return as of 3/31/97: +143.06%** +87.14%** +29.24%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
***Figures for Intermediate Term Portfolio Class B Shares are since
inception on November 13, 1992.
(a)Distribution for Investment Grade Portfolio includes $0.036 per
share capital gains distributions.
(b)Distribution for Intermediate Term Portfolio includes $0.012 per
share capital gains distributions.
(c)Distribution for Investment Grade Portfolio includes $0.261 per
share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio includes $0.093 per
share capital gains distributions.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
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>
10/21/94--12/31/94 $7.59/7.32 $10.67/10.61 $10.81/10.70 $0.18 $0.14 $0.15 - 1.15% + 0.74% + 0.38%
1995 7.32/7.83 10.61/11.84 10.70/11.80 0.71 0.70 0.72 +17.27 +18.74 +17.48
1996 7.83/8.02 11.84/11.32 11.80/11.39 0.68 0.66 0.67 +11.68 - 1.38 + 2.37
1/1/97--3/31/97 8.02/7.89 11.32/11.08 11.39/11.18 0.15 0.14 0.14 + 0.44 - 0.68 - 0.42
----- ----- -----
Total $1.72 $1.64 $1.68
Cumulative total return as of 3/31/97: +30.04%** +20.44%** +20.20%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period High Investment Intermediate High Investment Intermediate High Investment Intermediate
Covered Income Grade Term Income Grade Term Income Grade Term
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $7.59/7.31 $10.67/10.60 $10.81/10.70 $0.19 $0.15 $0.15 - 1.17% + 0.76% + 0.41%
1995 7.31/7.83 10.60/11.84 10.70/11.80 0.75 0.77 0.77 +18.09 +19.53 +17.98
1996 7.83/8.01 11.84/11.32 11.80/11.39 0.73 0.73 0.72 +12.17 + 1.96 + 2.83
1/1/97--3/31/97 8.01/7.88 11.32/11.08 11.39/11.18 0.16 0.16 0.15 + 0.57 - 0.54 - 0.31
----- ----- -----
Total $1.83 $1.81 $1.79
Cumulative total return as of 3/31/97: +31.66%** +22.13%** +21.45%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Airlines--1.3% Piedmont Aviation, Inc.:
B+ B1 $ 1,304,000 Series 88J, 10.05% due 5/13/2005 $ 1,181,685 $ 1,279,583
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,097,279
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 3,665,894
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 2,612,874
B+ B1 104,000 Series 88J, 10.20% due 5/13/2012 90,874 98,150
B+ B1 870,000 Series 88K, 9.95% due 5/13/2003 796,746 861,274
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,184,652
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 2,597,564
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,487,844
B+ B1 200,000 Series C, 9.70% due 1/15/1999 201,676 198,662
B+ B1 100,000 Series C, 10.25% due 1/15/2007 103,706 99,253
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,976,643
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 1,908,816
B+ B1 50,000 Series G, 10.35% due 3/28/2011 51,425 48,944
B+ B1 450,000 Series H, 9.85% due 5/08/2005 454,617 436,747
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,399,140
B+ B1 536,000 Series I, 10% due 11/08/2012 545,048 499,959
USAir Inc.:
B+ B3 25,000,000 9.625% due 2/01/2001 20,109,906 25,500,000
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 22,365,000
B+ B1 4,917,665 Series 89A1, 9.33% due
1/01/2006++ 4,651,966 4,628,752
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,460,511
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,851,137
B+ B1 421,000 Series E, 10.70% due 1/01/2002 382,895 429,308
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,129,040
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,115,309
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,115,309
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,115,309
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,115,309
------------- -------------
76,586,434 85,278,262
<PAGE>
Automotive--0.8% B B3 14,000,000 Collins & Aikman Corp., 11.50%
due 4/15/2006 14,000,000 15,505,000
Exide Corp.:
B+ B1 21,875,000 10.75% due 12/15/2002 22,358,281 22,121,094
B+ B1 18,095,000 11.66% due 12/15/2004 (a) 17,116,163 16,964,063
------------- -------------
53,474,444 54,590,157
Broadcasting-- B- B2 19,240,000 Argyle Television Inc., 9.75%
Radio & due 11/01/2005 19,003,950 20,105,800
Television--2.4% B- B2 17,500,000 EZ Communications, Inc., 9.75%
due 12/01/2005 17,361,575 18,112,500
B Caa 25,000,000 NWCG Holding Corp., 13.79% due
6/15/1999 (a) 18,576,894 21,250,000
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 36,487,500
Sinclair Broadcasting Group Inc.:
B B2 15,000,000 10% due 12/15/2003 15,036,250 14,962,500
B B2 50,000,000 10% due 9/30/2005 50,343,269 49,875,000
------------- -------------
155,240,688 160,793,300
Building BB B1 15,000,000 Cemex S.A., 12.75% due 7/15/2006 15,000,000 16,875,000
Materials--1.1% Nortek Inc.:
B- B2 20,550,000 9.875% due 3/01/2004 20,362,365 20,344,500
B+ Ba3 9,000,000 9.25% due 3/15/2007 8,947,980 8,887,500
BB+ Ba2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 29,338,485
------------- -------------
70,200,351 75,445,485
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<PAGE>
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Cable-- CCC+ Caa $ 48,190,545 American Telecasting, Inc.,
Domestic-- 18.79% due 6/15/2004 (a) $ 29,336,657 $ 16,625,738
6.4% NR* NR* 20,000,000 CCA Industries, Inc., 13%
due 12/31/1999 (m) 16,463,336 16,780,735
CCC+ Caa 10,500,000 CS Wireless Systems Inc., 12.041%
due 3/01/2001 (a) 6,498,669 3,360,000
Cablevision System Corp.:
B B2 2,000,000 10.75% due 4/01/2004 2,030,000 2,062,500
B B2 13,750,000 9.875% due 5/15/2006 13,718,750 13,509,375
B B2 5,000,000 10.50% due 5/15/2016 4,900,000 5,037,500
Century Communications Corporation:
BB- Ba3 44,500,000 9.75% due 2/15/2002 44,895,938 44,833,750
BB- Ba3 42,000,000 9.50% due 3/01/2005 41,400,312 41,265,000
Comcast Corporation:
BB- Ba3 5,000,000 9.125% due 10/15/2006 5,112,500 4,975,000
BB- Ba3 30,000,000 9.50% due 1/15/2008 29,469,562 30,187,500
B B2 55,000,000 Echostar Communications Corp.,
12.77% due 6/01/2004 (a) 42,053,141 47,025,000
B B2 31,000,000 Intermedia Capital Partners,
11.25% due 8/01/2006 31,002,500 31,775,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 45,625,000
BB- B2 38,000,000 10.50% due 6/15/2006 38,416,700 38,950,000
B B1 50,000,000 Olympus Communications L.P.,
10.625% due 11/15/2006 50,282,500 50,500,000
CCC+ Caa 25,000,000 People's Choice T.V. Corporation,
15.21% due 6/01/2004 (a) 15,027,070 10,125,000
B- B3 20,000,000 TCI Satellite Entertainment, Inc.,
6.03% due 2/15/2007 (a) 10,933,206 9,100,000
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a)(d) 28,556,611 12,836,190
------------- -------------
458,084,902 424,573,288
Cable-- CCC+ Caa 79,117,000 Australis Media Ltd., 13.81% due
International-- 5/15/2003 (a)(f) 52,305,111 46,283,445
6.8% BB- B2 59,000,000 Bell Cablemedia PLC, 11.86% due
9/15/2005 (a) 39,640,447 47,495,000
B B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 36,975,063 36,025,000
NR* NR* 25,000,000 Diamond Cable Communications PLC,
10.87% due 2/15/2002 (a) 14,868,917 13,875,000
International Cabletel Inc.:
B- B3 25,000,000 10% due 2/15/2007 25,015,625 24,000,000
B- B3 80,000,000 Series B, 11.702% due
2/01/2006 (a) 51,357,825 49,800,000
BB+ Ba3 12,500,000 Rogers Cablesystems Ltd., 10%
due 3/15/2005 12,769,375 13,000,000
Rogers Communications Inc.:
BB- B2 35,925,000 10.875% due 4/15/2004 36,431,094 37,631,438
BB- B2 2,000,000 9.125% due 1/15/2006 1,897,500 1,935,000
BB B1 75,000,000 TeleWest Communications PLC,
11.02% due 10/01/2007 (a) 51,483,964 48,843,750
B- B2 45,000,000 UIH Australia/Pacific, Series B,
14% due 5/15/2006 (a) 25,811,957 23,625,000
United International Holdings,
Inc. (a):
<PAGE> B- B3 5,000,000 12.18% due 11/15/1999 3,602,904 3,600,000
B- B3 50,000,000 13.99% due 11/15/1999 (h) 35,063,085 36,750,000
B- B3 18,750,000 14% due 11/15/1999 13,145,711 13,500,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Cable-- BB+ Ba3 $ 11,250,000 Videotron Groupe L'TEE, 10.25%
International due 10/15/2002 $ 11,322,500 $ 11,981,250
(concluded) B+ B3 50,000,000 Videotron Holdings PLC, 12.08%
due 7/01/2004 (a) 37,082,962 43,125,000
------------- -------------
448,774,040 451,469,883
Capital Goods-- B+ B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 22,308,000
0.7% B- B3 25,000,000 International Wire Group, Inc.,
11.75% due 6/01/2005 24,986,250 26,500,000
------------- -------------
46,532,750 48,808,000
Chemicals-- B+ Ba3 15,000,000 Agriculture Minerals & Chemicals
1.1% Company,L.P., 10.75% due
9/30/2003 15,060,000 15,900,000
B+ B2 25,000,000 Harris Chemical North America Inc.,
10.25% due 7/15/2001 25,000,000 25,125,000
ISP Holdings Inc.:
B+ Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,282,080
B+ Ba3 10,000,000 9% due 10/15/2003 (m) 9,972,100 10,100,000
------------- -------------
69,534,100 71,407,080
Computer BB- Ba1 38,500,000 Advanced Micro Devices, Inc.,
Services-- 11% due 8/01/2003 38,938,750 41,772,500
1.8% B B2 12,000,000 Celestica International, 10.50%
due 12/31/2006 12,000,000 12,690,000
ComputerVision Corp.:
B- B3 15,000,000 11.375% due 8/15/1999 14,473,750 15,637,500
B+ B2 12,500,000 8% due 12/01/2009 6,802,472 11,156,250
B- B3 40,500,000 Dictaphone Corp., 11.75% due
8/01/2005 40,114,375 37,057,500
------------- -------------
112,329,347 118,313,750
<PAGE>
Conglomerates-- NR* NR* 7,279,000 MacAndrews & Forbes Holdings,
0.5% Inc., 13% due 3/01/1999 6,779,200 7,324,494
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,562 25,805,000
------------- -------------
31,925,762 33,129,494
Consumer B NR* 50,000,000 Coleman Holdings, Inc., 11.16%
Products-- due 5/27/1998 (a) 43,770,671 43,750,000
2.9% B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 15,825,000
B+ Ba2 45,880,000 International Semi-Tech
Microelectronics, Inc.,
12.51% due 8/15/2000 (a) 29,681,910 23,398,800
B B2 16,000,000 Polymer Group Inc., 12.25% due
7/15/2002 16,323,750 17,480,000
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,206,673 3,605,000
B B2 27,000,000 9.375% due 4/01/2001 24,968,030 28,080,000
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 10,070,000
B- B1 9,940,000 Samsonite Corporation, 11.125%
due 7/15/2005 9,596,732 11,257,050
B+ B1 33,550,000 Sealy Corp., 10.25% due 5/01/2003 33,915,500 34,556,500
------------- -------------
185,258,266 188,022,350
Convertible B B2 6,195,000 Builders Transport, Inc., 8%
Bonds**--0.2% due 8/15/2005 (3) 3,614,250 4,119,675
BBB+ Ba1 6,375,000 Quantum Health Resources Inc.,
4.75% due 10/01/2000 (2) 5,956,562 5,865,000
B Caa 3,659,000 UNC, Inc., 7.50% due 3/31/2006 (1) 2,151,592 3,620,123
------------- -------------
11,722,404 13,604,798
Diversified-- B B1 25,000,000 Foamex Capital Corp., 11.25%
0.4% due 10/01/2002 24,964,375 26,000,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<PAGE>
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Energy--7.8% B+ B1 $ 49,500,000 Clark R&M Holdings, Inc.,
11% due 2/15/2000 (a) $ 36,373,451 $ 36,258,750
B+ B2 9,000,000 Clark USA Inc., Series B, 10.875%
due 12/01/2005 9,000,000 9,270,000
BBB- B1 17,500,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due
1/30/2004 (m) 17,462,500 17,281,250
B B1 20,000,000 Forcenergy, Inc., 8.50% due
2/15/2007 (m) 19,740,050 19,050,000
B+ Ba1 20,000,000 Global Marine Inc., 12.75% due
12/15/1999 20,047,500 21,350,000
B- B1 22,000,000 KCS Energy Inc., 11% due 1/15/2003 22,723,750 23,595,000
Maxus Energy Corp.:
BBB B1 17,750,000 9.875% due 10/15/2002 16,726,250 18,371,250
BBB- B1 7,550,000 11.50% due 11/15/2015 7,363,000 7,927,500
BBB- Baa3 28,000,000 Oleoducto Centrale S.A., 9.35%
due 9/01/2005 (m) 27,967,500 29,505,000
B+ B1 25,500,000 Parker Drilling Co., 9.75% due
11/15/2006 25,510,725 26,902,500
Petroleo Brasileiro S.A.--Petrobras:
BB- B1 13,000,000 10% due 10/17/2006 13,107,500 13,520,000
BB- B1 15,000,000 10% due 10/17/2006 (m) 14,869,812 15,600,000
B+ Ba2 15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,085,000 15,984,375
BB- B1 25,000,000 Seagull Energy Corp., 8.625%
due 8/01/2005 24,990,000 25,062,500
Transamerican Exploration Corp. (n):
NR* NR* 18,000,000 15% due 3/14/1998 17,460,000 18,000,000
NR* NR* 4,000,000 14% due 9/19/1998 3,920,000 4,080,000
NR* NR* 8,000,000 14% due 9/19/1998 7,920,000 8,160,000
NR* NR* 17,000,000 14% due 9/19/1998 16,830,000 17,340,000
Transamerican Refining Corp.:
CCC+ Caa 10,000,000 16.50% due 2/15/2002 9,530,840 10,850,000
CCC+ Caa 65,000,000 19.36% due 2/15/2002 (a) 54,495,475 59,800,000
BB- B2 50,000,000 TransTexas Gas Corp., 11.50% due
6/15/2002 50,018,750 54,875,000
B+ B1 31,525,000 Triton Energy Corp., 10.61% due
11/01/1997 (a) 29,591,898 30,264,000
BBB- B1 36,000,000 Yacimientos Petroliferos Fiscales
S.A. (YPF) (Sponsored), 8% due
2/15/2004 28,739,250 34,560,000
------------- -------------
489,473,251 517,607,125
Entertainment-- B- B2 40,000,000 AMF Group Inc., Series B, 12.45%
1.0% due 3/15/2006 (a) 24,645,816 27,400,000
B B2 40,000,000 Six Flags Theme Parks, 12.18% due
6/15/2005 (a) 34,706,556 39,000,000
------------- -------------
59,352,372 66,400,000
<PAGE>
Financial NR* Ba3 12,000,000 First Nationwide Escrow, 10.625%
Services-- due 10/01/2003 12,000,000 12,750,000
1.4% B B2 17,000,000 First Nationwide Holdings, 12.50%
due 4/15/2003 16,806,710 18,615,000
BB- B2 8,000,000 Olympic Financial Ltd., 11.50% due
3/15/2007(e) 8,000,000 7,840,000
BB+ B1 9,000,000 Penncorp Financial Group Inc., 9.25%
due 12/15/2003 9,090,000 9,135,000
Reliance Group Holdings Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,536,375
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 23,365,125
BB- NR* 13,000,000 Veritas Holdings, 9.625% due
12/15/2003 (m) 13,000,000 12,935,000
------------- -------------
87,057,335 92,176,500
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Food & Beverage-- Chiquita Brands International Inc.:
2.6% B+ B1 $ 30,000,000 9.125% due 3/01/2004 $ 29,585,625 $ 30,075,000
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 20,950,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25%
due 2/01/2005 23,562,125 24,270,750
B B3 23,463,000 Envirodyne Industries, Inc., 10.25%
due 12/01/2001 22,781,845 23,228,370
CCC+ Caa 25,000,000 Fresh Del Monte Corp., 10% due
5/01/2003 25,012,500 24,937,500
B- B2 24,000,000 International Home Foods, 10.375%
due 11/01/2006 (m) 24,000,000 24,540,000
B+ B1 20,000,000 Texas Bottling Group, Inc., 9%
due 11/15/2003 20,002,500 20,150,000
------------- -------------
164,825,995 168,151,620
Foreign Republic of Argentina:
Government BB B1 35,000,000 11% due 10/09/2006 35,133,680 36,050,000
Obligations-- BB B1 30,750,000 Global Bonds, 11.375% due
1.8% 1/30/2017 31,692,220 31,749,375
BB Ba2 50,000,000 United Mexican States, Government
Bonds, 11.50% due 5/15/2026 53,238,750 51,750,000
------------- -------------
120,064,650 119,549,375
<PAGE>
Gaming--3.7% B+ B2 37,000,000 GB Property Funding Corp.,
10.875% due 1/15/2004 35,072,500 30,525,000
BB Ba3 20,000,000 Grand Casinos Inc., 10.125% due
12/01/2003 19,837,500 19,725,000
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001 (k) 49,536,050 28,404,337
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,190,685 20,000,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 24,875,000
B+ Ba3 10,000,000 Sun International Hotels Ltd., 9%
due 3/15/2007 9,967,110 9,525,000
BB- B1 90,000,000 Trump Atlantic City Associates,
11.25% due 5/01/2006 88,879,062 82,012,500
NR* Caa 35,000,000 Trump Castle Funding, Inc., 11.75%
due 11/15/2003 31,775,057 27,125,000
------------- -------------
279,522,589 242,191,837
Health Services-- B+ B1 45,200,000 Beverly Enterprises, Inc.,
2.1% 9% due 2/15/2006 44,200,550 45,200,000
B+ Ba3 52,390,000 Fresensius Medical Center, 9%
due 12/01/2006 52,771,550 51,604,150
B B3 11,500,000 Imed Corp., 9.75% due
12/01/2006 (m) 11,535,312 11,442,500
B+ Ba3 30,000,000 Tenet Healthcare Corp.,
8.625% due 1/15/2007 29,968,200 29,325,000
------------- -------------
138,475,612 137,571,650
Home Builders-- Del E. Webb Corp.:
1.4% B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 7,035,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,960,000
B B1 20,000,000 Greystone Homes Inc., 10.75%
due 3/01/2004 19,115,000 20,850,000
BB Ba2 20,000,000 Ryland Group, Inc. (The), 10.50%
due 7/01/2006 19,697,400 21,200,000
BB Ba2 36,300,000 U.S. Home Corp., 9.75% due
6/15/2003 36,367,250 38,296,500
------------- -------------
85,264,560 91,341,500
Hotels--1.8% BB- Ba3 80,000,000 HMC Acquisition Properties,
9% due 12/15/2007 79,272,500 80,000,000
BB- Ba3 40,000,000 HMH Properties Inc., 9.50%
due 5/15/2005 39,102,872 40,000,000
------------- -------------
118,375,372 120,000,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Independent Power B+ Ba1 $ 30,000,000 AES Corporation (The), 10.25%
Producers--2.2% due 7/15/2006 $ 30,000,000 $ 32,925,000
BB Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 33,075,000
BB B2 24,000,000 California Energy Company, Inc.,
9.875% due 6/30/2003 24,122,500 26,040,000
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12.22%
due 7/15/2003 (a)(k) 15,656,356 7,585,000
Midland Cogeneration Venture
Limited Partnership:
BB- Ba3 3,899,832 10.33% due 7/23/2002 4,174,453 4,153,322
BB- Ba3 19,759,759 10.33% due 7/23/2002 20,470,139 21,068,843
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 12,794,793
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,493,987
------------- -------------
141,736,013 144,135,945
Industrial CCC Caa 7,912,000 Thermadyne Industries, Inc.,
Services--0.1% 10.75% due 11/01/2003 7,914,802 8,208,700
Media & B Ba2 5,000,000 CANTV Finance Ltd., 9.25% due
Communications 2/01/2004 4,990,500 4,925,000
International-- Comtel Brasileira Ltd.:
3.2% NR* NR* 500,000 10.75% due 9/26/2004 (n) 517,500 528,750
NR* NR* 29,500,000 10.75% due 9/26/2004 (m) 29,500,000 31,196,250
B+ B2 37,000,000 Globo Communicacoes e Participacoes,
Ltd., 10.50% due 12/20/2006 (m) 37,171,950 37,508,750
Grupo Televisa S.A. de C.V.:
BB Ba3 2,500,000 11.375% due 5/15/2003 2,637,500 2,631,250
BB Ba3 39,000,000 11.875% due 5/15/2006 42,079,687 41,925,000
B B2 16,000,000 Orion Network Systems, Inc., 11.25%
due 1/15/2007 (g) 16,000,000 15,840,000
B B3 34,610,000 PanAmSat L.P., 10.99% due
8/01/2003 (a) 30,104,851 32,619,925
BBB- B1 40,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004 38,763,075 45,200,000
------------- -------------
201,765,063 212,374,925
<PAGE>
Metals & Mining-- B- B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
1.6% 12.75% due 2/01/2003 51,088,125 54,000,000
Maxxam Group, Inc.:
B- B3 11,750,000 11.25% due 8/01/2003 11,816,250 12,043,750
B- B3 41,155,000 12.37% due 8/01/2003 (a) 34,946,306 36,010,625
------------- -------------
97,850,681 102,054,375
Packaging--0.9% B- Caa 21,500,000 Ivex Packaging Corp., 13.22% due
3/15/2005 (a) 14,723,628 17,791,250
Owens-Illinois, Inc.:
BB Ba3 20,000,000 11% due 12/01/2003 20,810,000 22,075,000
B+ B2 6,000,000 9.95% due 10/15/2004 5,931,250 6,330,000
B+ B3 15,000,000 Printpack Inc., 10.625% due
8/15/2006 15,000,000 15,450,000
------------- -------------
56,464,878 61,646,250
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Paper & Forest BB Ba3 $ 35,500,000 APP International Finance, 11.75%
Products--5.7% due 10/01/2005 $ 35,306,250 $ 37,896,250
Container Corporation of America:
B+ B1 15,420,000 9.75% due 4/01/2003 15,433,400 16,113,900
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,105,000
BB- Ba3 50,000,000 Doman Industries Ltd., 8.75% due
3/15/2004 47,581,250 47,000,000
Fort Howard Corp.:
B+ B1 10,000,000 9.25% due 3/15/2001 10,000,000 10,375,000
B B2 35,250,000 9% due 2/01/2006 32,561,250 35,778,750
B B3 35,000,000 Gaylord Container Corp., 11.50% due
5/15/2001 35,401,250 36,925,000
BB Ba2 14,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 16,149,375
B+ B3 27,220,000 Pacific Lumber Co., 10.50% due
3/01/2003 26,868,237 27,628,300
B+ B3 25,500,000 Repap New Brunswick, Inc., 10.625%
due 4/15/2005 25,597,500 25,755,000
BB- B2 25,000,000 Repap Wisconsin Inc., 9.25% due
2/01/2002 23,537,500 25,000,000
Riverwood International Corp.:
B- B2 15,000,000 10.25% due 4/01/2006 14,396,250 13,875,000
B B3 30,000,000 10.875% due 4/01/2008 29,248,750 24,900,000
B+ B1 15,000,000 S.D. Warren Co., 12% due 12/15/2004 15,000,000 16,425,000
Stone Container Corp.:
B+ B1 15,000,000 9.875% due 2/01/2001 13,948,672 14,062,500
BB- B1 15,000,000 10.75% due 10/01/2002 14,825,000 14,775,000
------------- -------------
367,277,809 376,764,075
<PAGE>
Publishing & Hollinger International, Inc.:
Printing--0.7% BB+ Ba3 5,000,000 8.625% due 3/15/2005 4,975,000 4,856,250
BB- B1 21,500,000 9.25% due 2/01/2006 20,925,312 20,747,500
BB- B1 3,000,000 9.25% due 3/15/2007 2,980,740 2,925,000
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,100,000
------------- -------------
48,900,427 48,628,750
Restaurants--0.4% B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due
11/01/2003 26,216,200 26,730,000
Specialty NR* NR* 25,201,000 Cumberland Farms, Inc., DE, 10.50%
Retailing--0.7% due 10/01/2003 (n) 24,034,229 24,696,980
B+ B1 20,000,000 Specialty Retailers Group, Inc.,
10% due 8/15/2000 20,000,000 21,300,000
------------- -------------
44,034,229 45,996,980
Steel--1.9% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125%
due 12/15/2006 25,056,250 24,812,500
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 10,325,000
B B3 25,000,000 Republic Engineered Steel Inc.,
9.875% due 12/15/2001 24,117,500 22,375,000
B+ B2 25,000,000 WCI Steel Inc., 10% due
12/01/2004 (m) 25,000,000 25,062,500
B B2 23,000,000 Weirton Steel Inc., 10.75% due
6/01/2005 22,413,750 23,115,000
BB- B1 20,000,000 Wheeling-Pittsburg Steel Corp.,
9.375% due 11/15/2003 18,670,000 19,100,000
------------- -------------
125,057,500 124,790,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Supermarkets-- BB- B1 $ 10,000,000 Penn Traffic Co., 11.50% due
1.3% 4/15/2006 $ 8,920,000 $ 9,050,000
B- B2 21,075,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 19,460,250 20,337,375
Ralph's Grocery Co.:
B B1 20,000,000 10.45% due 6/15/2004 18,995,685 21,050,000
B B1 10,000,000 10.45% due 6/15/2004 9,702,500 10,375,000
B- B3 20,000,000 Smith's Food & Drug Centers Inc.,
11.25% due 5/15/2007 20,065,000 22,000,000
------------- -------------
77,143,435 82,812,375
<PAGE>
Telephone-- Brooks Fiber Properties Inc. (a):
Competitive NR* NR* 30,000,000 11.875% due 11/01/2001 17,675,896 17,775,000
Local Exchange NR* NR* 35,000,000 11.56% due 3/01/2006 22,019,682 21,875,000
Carriers--1.2% B B1 40,000,000 Teleport Communications Group
Inc., 9.875% due 7/01/2006 40,943,500 41,600,000
------------- -------------
80,639,078 81,250,000
Textiles--0.4% B+ B2 25,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 25,100,000 25,062,500
Transportation-- BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25%
2.3% due 11/15/2003 24,472,500 24,937,500
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25%
due 12/01/2004 20,518,750 21,900,000
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba2 20,000,000 9.25% due 5/15/2003 17,092,750 19,400,000
BB Ba2 20,000,000 (Class A), 10% due 11/15/2006 19,781,250 19,150,000
B- B3 54,606,000 Transtar Holdings L.P., 12.04% due
12/15/2003 (a) 40,834,692 44,367,375
BB Ba2 20,000,000 Viking Star Shipping Co., Inc.,
9.625% due 7/15/2003 20,045,000 20,300,000
------------- -------------
142,744,942 150,054,875
US Government AAA Aaa 127,000,000 United States Treasury Bonds,
Obligations-- 6.625% due 2/15/2027 122,718,801 119,519,224
1.8%
Utilities--4.6% Beaver Valley Funding Corp.:
B+ B1 8,070,000 8.625% due 6/01/2007 7,099,175 7,962,507
B+ B1 34,469,000 9% due 6/01/2017 31,081,506 34,123,274
CTC Mansfield Funding Corp.:
B+ Ba3 15,777,000 10.25% due 3/30/2003 15,734,100 15,644,078
B+ Ba3 25,000,000 11.125% due 9/30/2016 26,416,875 26,335,499
BB Ba2 15,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 14,971,200 16,055,699
BB- Ba3 27,000,000 El Paso Electric Company, 9.40%
due 5/01/2011 26,990,000 29,001,240
BB- B1 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 43,750,000
NR* NR* 15,719,866 Sunflower Electric Power Corp.,
8% due 12/31/2016 (n) 10,311,786 11,947,098
B+ B1 20,000,000 Texas-New Mexico Power Corp.,
10.75% due 9/15/2003 20,065,000 21,650,000
BBB- NR* 42,000,000 Trans Gas de Occidente, 9.79% due
11/01/2010 (m) 42,075,000 44,837,898
Tucson Electric & Power Co. (n):
NR* NR* 33,847,782 10.21% due 1/01/2009 32,005,359 33,272,031
NR* NR* 21,526,207 10.732% due 1/01/2013 20,326,836 21,201,377
------------- -------------
287,108,712 305,780,701
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued) High Income Portfolio
<S> <S> <S> <C> <S> <C> <C>
Waste B+ B3 $ 20,000,000 Allied Waste North America,
Management-- 10.25% due 12/01/2006 $ 20,000,000 $ 20,500,000
0.5% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 (k) 23,667,250 11,494,500
------------- -------------
43,667,250 31,994,500
Wireless CCC- B3 30,000,000 Dial Call Communications, 13.852%
Communications-- due 4/15/2004 (a) 21,523,933 21,750,000
Domestic Paging & Mobilemedia Communication, Inc.:
Cellular--3.6% D C 33,000,000 11.58% due 12/01/2003 (a)(k) 25,098,450 6,105,000
D C 12,126,000 9.375% due 11/01/2007 10,618,705 2,910,240
B- B3 80,000,000 Nextel Communications Inc., 12.08%
due 8/15/2004 (a) 58,646,658 54,600,000
NR* NR* 21,000,000 Page Mart Inc., 12.74% due
11/01/2003 (a) 16,989,894 16,852,500
B B2 75,000,000 Paging Network, Inc., 10% due
10/15/2008 74,756,250 67,500,000
B- B2 19,730,000 USA Mobile Communications Holdings,
Inc., 9.50% due 2/01/2004 18,997,875 17,066,450
B+ B1 25,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006 24,975,250 24,750,000
B- B3 25,000,000 Western Wireless Corp., 10.50%
due 2/01/2007 25,062,500 24,875,000
------------- -------------
276,669,515 236,409,190
Wireless B+ B3 53,472,000 Comunicacion Celular, 12.76% due
Communications-- 11/15/2003 (a)(j) 34,361,808 37,029,360
International B- B3 90,000,000 Millicom International Celular S.A.,
Paging & 13.39% due 6/01/2006 (a) 52,664,641 58,950,000
Cellular--1.5% ------------- -------------
87,026,449 95,979,360
Total Investments in Bonds--84.6% 5,547,075,383 5,586,618,179
<PAGE>
Shares
Held
Preferred Stocks
Broadcasting--Radio & 7,255 Paxson Communications (m)++++ 6,865,975 7,146,175
Television--0.4% 200,000 SFX Broadcasting Inc. 20,000,000 19,350,000
------------- -------------
26,865,975 26,496,175
Cable-- 167,812 Cablevision Systems Corp.,
Domestic--0.7% Series M 14,634,820 14,872,338
30,000,000 TCI Communications Inc.,
9.65 due 3/31/2027 29,995,860 29,709,300
------------- -------------
44,630,680 44,581,638
Cable--International--0.3% 19,500 International Cabletel Inc. (m)++++ 19,477,500 18,573,750
Energy--0.0% 250 Transamerican Energy 25,000 26,375
Entertainment--1.4% 82,798 Time Warner Inc. (Series K) 82,918,471 89,318,342
Financial Services--0.5% 1,230,000 California Federal Bank (Series A) 30,815,000 30,288,750
Independent Power 29,517 Consolidated Hydro, Inc. 14,891,917 4,427,550
Producers--0.1%
Paper & Forest 435,000 S.D. Warren Co., Series B (m) 13,847,190 16,095,000
Products--0.2%
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Preferred Stocks (concluded) High Income Portfolio
<S> <C> <S> <C> <C>
Publishing & 421,000 K-III Communications Corp. $ 10,562,750 $ 11,156,500
Printing--0.6% 152,870 K-III Communications Corp.,
Series B 15,398,238 16,586,386
125,000 K-III Communications Corp.,
Series C 12,500,000 12,515,625
------------- -------------
38,460,988 40,258,511
Steel--0.2% 550,000 USX Capital LLC 13,750,000 13,818,750
<PAGE>
Telephone--Competitive 1,000 Intermedia Communications Inc. (m) 10,000,000 9,575,000
Local Exchange Carriers--0.1%
Utilities--0.2% 111,517 El Paso Electric Company 11,250,191 12,294,749
Total Investments in
Preferred Stocks--4.7% 306,932,912 305,754,590
Common Stocks
Cable--0.1% 2,887 CS Wireless Systems Inc. (k) 20,336 58
195,096 Echostar Communications Corp. (k) 1,385,894 4,072,629
------------- -------------
1,406,230 4,072,687
Consumer Products--0.1% 200,369 Culligan Water Technologies
Inc. (k) 1,686,248 7,839,437
Energy--0.0% 57,237 Mesa Inc. 199,648 343,422
Entertainment--0.2% 1,155,961 On Command Corporation (k)(o) 52,121,914 13,004,561
Food & Beverage--0.2% 147,263 FoodBrands America 5,771,245 3,405,457
763,000 Seven-Up/RC Bottling Company (o) 13,403,214 9,084,469
------------- -------------
19,174,459 12,489,926
Gaming--0.0% 75,500 Goldriver Hotel & Casino
Corporation (Class B) (b)(o) 540,045 0
Industrial 11,400 Thermadyne Industries, Inc. 165,300 312,787
Services--0.0%
Supermarkets-- 120,194 ABCO Markets Inc. (k)(n) 4,054,875 0
0.0% 521,389 Grand Union Co. (k)(o) 29,475,625 1,824,861
------------- -------------
33,530,500 1,824,861
Total Investments in
Common Stocks--0.6% 108,824,344 39,887,681
Trusts & Warrants
Cable--0.0% 177,500 American Telecasting Inc.
(Warrants) (c) 413,723 421,562
25,000 People's Choice T.V. Corp.
(Warrants) (c) 140,353 18,750
------------- -------------
554,076 440,312
<PAGE>
Energy--0.0% 407,677 Transamerican Refining Corp.
(Warrants) (c) 950,408 917,273
Entertainment--0.1% 379,186 On Command Corporation (Warrants)
(c)(o) 3,033,504 1,943,328
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust (n) 192,320 0
113,386 Trump Castle Funding, Inc.
(Warrants) (c) 0 0
------------- -------------
192,320 0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Trusts & Warrants (concluded) High Income Portfolio
<S> <C> <S> <C> <C>
Independent Power 18,000 Consolidated Hydro, Inc.
Producers--0.0% (Warrants) (c) $ 390,123 $ 261,000
Paper & Forest Products--0.0% 60,000 S.D. Warren Co. (Warrants) (c)(n) 165,310 262,500
Wireless Communications-- 57,040 Page Mart Inc. (Warrants) (c) 236,127 146,165
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular (Warrants)
International Paging & Cellular--0.0% (c)(m) 109,680 374,304
Total Investments in
Trusts & Warrants--0.1% 5,631,548 4,344,882
Face
Amount
Short-Term Securities
<PAGE>
Commercial Allomon Funding Corp.:
Paper***--8.4% $ 10,047,000 5.35% due 4/07/1997 10,038,041 10,038,041
15,000,000 5.32% due 4/11/1997 14,977,833 14,977,833
35,000,000 American Home Products
Corporation, 5.34% due 5/02/1997 34,839,058 34,839,058
25,000,000 Atlantic Asset Securitization Corp.,
5.34% due 4/14/1997 24,951,792 24,951,792
CXC Inc.:
30,000,000 5.30% due 4/08/1997 29,969,083 29,969,083
50,000,000 5.35% due 4/14/1997 49,903,403 49,903,403
24,000,000 Ciesco L.P., 5.30% due 4/28/1997 23,904,600 23,904,600
40,000,000 Columbia/HCA Healthcare Corp.,
5.34% due 5/01/1997 39,822,000 39,822,000
17,000,000 Corporate Asset Funding Co. Inc.,
5.30% due 4/01/1997 17,000,000 17,000,000
12,000,000 Deer Park Refining L.P., 5.33% due
4/21/1997 11,964,467 11,964,467
15,000,000 Eureka Securitization PLC, 5.28%
due 4/22/1997 14,953,800 14,953,800
14,000,000 GTE Corp., 5.35% due 4/03/1997 13,995,839 13,995,839
32,016,000 General Motors Acceptance Corp.,
6.75% due 4/01/1997 32,016,000 32,016,000
43,000,000 International Securitization
Corporation, 5.37% due 4/14/1997 42,916,616 42,916,616
NYNEX Corporation:
25,000,000 5.29% due 4/16/1997 24,944,896 24,944,896
25,000,000 5.34% due 5/09/1997 24,859,083 24,859,083
15,000,000 National Fleet Funding Corp.,
5.33% due 4/25/1997 14,946,700 14,946,700
47,780,000 National Rural Utilities
Cooperative Finance Corporation,
5.28% due 4/10/1997 47,716,930 47,716,930
60,000,000 Navistar Financial Corp., 5.80%
due 4/18/1997 59,835,667 59,835,667
20,000,000 Onyx Corp., 5.90% due 4/18/1997 19,944,278 19,944,278
------------- -------------
553,500,086 553,500,086
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
<PAGE>
Short-Term Securities (concluded) High Income Portfolio
<S> <C> <S> <C> <C>
US Government $ 10,000,000 Federal Home Loan Mortgage
Agency Obligations***-- Corp., 5.38% due 4/17/1997 $ 9,976,089 $ 9,976,089
0.1%
Total Investments in
Short-Term Securities--8.5% 563,476,175 563,476,175
Total Investments--98.5% $6,531,940,362 6,500,081,507
==============
Other Assets Less Liabilities--1.5% 101,569,933
--------------
Net Assets--100.0% $6,601,651,440
==============
<FN>
++Subject to principal paydowns.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
*Not Rated.
**Industry classifications for convertible bonds are:
(1) Conglomerates; (2) Health Services; (3) Transportation Services;
(4) Waste Management.
***Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Portfolio.
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(b)Each 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.
(c)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock/face amount of bonds. The purchase price
and number of shares/face amount are subject to adjustment under
certain conditions until the expiration date.
(d)Each $1,000 face amount contains one warrant of Wireless One Inc.
(e)Each $1,000 face amount contains one warrantof Olympic Financial
Ltd.
(f)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(g)Each $1,000 face amount contains one warrant of Orion Network
Systems, Inc.
(h)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(i)Each $1,000 face amount contains six warrants of Echostar
Communications Corp.
(j)Each $1,000 face amount contains one warrant of Comunicacion
Celular.
(k)Non-income producing security.
(l)Floating Rate Bond.
(m)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(n)Restricted securities as to resale. The value of the Portfolio's
investments in restricted securities was approximately $109,249,000,
representing 1.7% of 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 $ 0
Comtel Brasileira Ltd.,
10.75% due 9/26/2004 9/18/1996 517,500 528,750
Cumberland Farms, Inc., DE,
10.50% due 10/01/2003 2/18/1994--12/24/1996 24,034,229 24,696,980
Goldriver Hotel & Casino
Corp., Liquidating Trust 8/31/1992--11/17/1992 192,320 0
S.D. Warren Co. (Warrants) 6/06/1995 165,310 262,500
Sunflower Electric Power Corp.,
8% due 12/31/2016 11/29/1991--8/23/1995 10,311,786 11,947,098
Transamerican Exploration Corp.,
14% due 9/19/1998 9/17/1996 16,830,000 17,340,000
Tucson Electric & Power Co.:
10.21% due 1/01/2009 7/27/1993--4/01/1996 32,005,359 33,272,031
10.732% due 1/01/2013 3/01/1993--7/16/1993 20,326,836 21,201,377
Total $108,438,115 $109,248,736
============ ============
(o)Investments in companies 5% or more of whose outstanding
securities are held by the Fund (such companies are defined as
"Affiliated Companies" in section 2(a)(3) of the Investment Company
Act of 1940) are as follows:
<CAPTION>
Net Share Value Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <S>
Gaming Goldriver Hotel & Casino Corporation -- -- (k)
(Class B)
Supermarkets Grand Union Co. -- -- (k)
Entertainment On Command Corporation 1,155,961 $52,121,914 (k)
Entertainment On Command Corporation (Warrants) 379,186 3,033,504 (k)
Food & Beverage Seven-Up/RC Bottling Company -- -- (k)
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury
Obligations--4.8% Bonds & Notes:
AAA Aaa $ 5,000,000 9.25% due 8/15/1998 $ 5,289,844 $ 5,190,600
AAA Aaa 22,800,000 6.375% due 5/15/1999 22,853,438 22,750,068
AAA Aaa 3,000,000 7.50% due 10/31/1999 3,092,344 3,064,680
AAA Aaa 3,500,000 5.875% due 6/30/2000 3,502,835 3,421,810
AAA Aaa 16,000,000 6.25% due 8/31/2000 16,012,734 15,797,440
AAA Aaa 3,000,000 6.25% due 1/31/2002 3,014,766 2,934,840
AAA Aaa 2,500,000 6.375% due 8/15/2002 2,494,531 2,454,300
AAA Aaa 1,000,000 5.75% due 8/15/2003 976,719 943,910
AAA Aaa 3,100,000 5.875% due 2/15/2004 2,995,375 2,932,414
AAA Aaa 3,500,000 6.50% due 5/15/2005 3,471,016 3,405,920
AAA Aaa 2,650,000 6.25% due 2/15/2007 2,581,570 2,525,371
AAA Aaa 5,000,000 6.50% due 11/15/2026 4,763,281 4,603,100
-------------- --------------
71,048,453 70,024,453
Asset-Backed AAA Aaa 26,905,000 Banc One, Master Trust (Series B),
Securities++-- 7.55% due 12/15/1999 27,427,315 27,140,419
6.0% AAA Aaa 4,350,000 Case Corporation, 6% due 3/15/2004 4,347,962 4,330,289
AAA Aaa 10,000,000 Citibank Credit Card Master Trust
I, 5.682% due 12/10/2008 (a) 9,996,100 9,996,800
AAA Aaa 22,084,319 Fifth Third Auto Grantor Trust,
6.45% due 3/15/2002 22,075,693 22,056,714
AAA Aaa 6,000,000 First Bank Corporate Card Master
Trust, 6.40% due 2/15/2003 5,992,634 5,834,520
NR* NR* 15,000,000 Household Afinity Credit Card,
Master Trust, 5.767% due
8/16/2004 15,000,000 14,995,313
-------------- --------------
84,839,704 84,354,055
<PAGE>
Banking-- AA- Aa3 2,000,000 Banc One, Dayton, 6.625% due
11.4% 4/15/2003 2,082,060 1,920,220
AA- Aa3 3,000,000 Banc One, Milwaukee, 6.625% due
4/15/2003 3,123,090 2,902,860
BBB+ A1 4,900,000 Bank of New York, Capital I,
7.97% due 12/31/2026 4,882,997 4,730,166
BankAmerica Corp.:
A+ A1 4,000,000 6.65% due 5/01/2001 3,996,120 3,938,160
A+ A1 3,000,000 7.125% due 5/12/2005 3,087,560 2,933,370
A- NR* 5,000,000 Chase Capital II, 6.062% due
2/01/2027 (a) 4,886,400 4,923,235
A- A2 10,300,000 Chase Manhattan Bank Corporation,
8.65% due 2/13/1999 10,805,215 10,645,668
A+ A1 6,000,000 Fifth Third Bank, 6.75% due
7/15/2005 5,960,400 5,756,700
A- A3 10,000,000 First Bank System, Inc., 6.375%
due 3/15/2001 9,865,183 9,759,200
A A2 3,000,000 First Chicago Corp., 9% due
6/15/1999 3,182,940 3,130,320
A- A1 17,500,000 First Chicago NBD Capital I,
6.112% due 2/01/2027 (a) 17,317,930 17,210,568
A- A2 8,400,000 First Interstate Bancorp, 9.90%
due 11/15/2001 9,536,016 9,298,884
BBB A1 17,800,000 Fleet Capital Trust II, 7.92%
due 12/11/2026 17,612,506 17,047,950
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,139,750
BBB+ A3 14,000,000 HSBC Americas Inc., 7.808% due
12/15/2026 (b) 13,838,440 13,010,410
BBB+ A3 5,000,000 MBNA Corporation, 5.712% due
9/14/1998 (a) 5,000,000 5,009,450
BBB+ A2 6,000,000 Mellon Capital I, 7.72% due
12/01/2026 6,000,000 5,621,580
Norwest Corp.:
AA- Aa3 17,000,000 6.25% due 4/15/1999 16,944,240 16,846,150
AA- Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,485,335
A+ A1 3,500,000 6.625% due 3/15/2003 3,553,235 3,361,190
AA+ Aa2 6,000,000 Wachovia Bank of North Carolina,
6.55% due 6/09/1997 5,995,620 6,008,280
A- A2 8,000,000 Wells Fargo Capital I, 7.96% due
12/15/2026 7,855,625 7,705,680
-------------- --------------
164,699,062 160,385,126
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Canadian Province of Quebec (Canada)(1):
Provinces*-- A+ A2 $ 7,035,000 7.50% due 7/15/2002 $ 7,440,311 $ 7,105,561
1.9% A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,417,420
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 5,079,375
A+ A2 9,000,000 7.125% due 2/09/2024 8,673,600 8,144,280
-------------- --------------
28,594,556 26,746,636
Federal AAA Aaa 15,000,000 Federal National Mortgage
Agencies-- Association, 7.85% due
1.2% 9/10/2004 14,817,438 15,093,750
Finance--4.6% BBB- Baa2 15,000,000 Advanta Corp., 6.26% due
9/01/1997 14,991,450 15,132,000
A+ A1 1,300,000 American General Finance Corp.,
7.70% due 11/15/1997 1,322,074 1,310,660
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,089,940
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,963,900
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,513,875
A A2 9,250,000 Beneficial Corporation, 6.42%
due 1/15/2002 9,093,583 8,944,657
A Aa3 1,250,000 CIT Capital Trust I, 7.70% due
2/15/2027 (b) 1,244,300 1,179,185
CIT Group Holdings, Inc.:
A+ Aa3 8,000,000 5.75% due 5/02/1997 (a) 8,000,000 7,997,360
A+ Aa3 13,000,000 7% due 9/30/1997 13,118,040 13,061,880
A- Baa1 7,000,000 Finova Capital Corp., 6.375%
due 10/15/2000 6,972,850 6,836,410
-------------- --------------
64,182,227 64,029,867
<PAGE>
Finance-- Bear Stearns Companies, Inc.:
Other--7.6% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 1,971,900
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,221,979
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,206,700
Dean Witter, Discover & Co.:
A A2 3,500,000 6.75% due 8/15/2000 3,486,805 3,470,530
A A2 9,500,000 6.75% due 1/01/2016 9,064,450 8,469,060
A+ A2 10,000,000 Equitable Cos. Inc., 9% due
12/15/2004 11,040,500 10,861,700
A A2 7,500,000 Equitable Life Assurance
Society of the US,
7.70% due 12/01/2015 (b) 7,448,310 7,496,250
A Baa1 5,000,000 Lehman Brothers Inc., 7.375%
due 8/15/1997 4,993,500 5,024,700
BBB+ Baa1 1,500,000 PaineWebber Group Inc., 7.625%
due 2/15/2014 1,432,470 1,418,370
BBB Baa1 10,000,000 Salomon Inc., 7.20% due 2/01/2004 9,991,700 9,805,300
Smith Barney Holdings, Inc.:
A- A2 7,000,000 6.50% due 10/15/2002 6,961,080 6,754,440
A- A2 2,500,000 6.875% due 6/15/2005 2,482,325 2,395,825
A+ A1 14,900,000 Travelers Capital II, 7.75% due
12/01/2036 14,613,730 13,863,109
The Travelers Corp.:
A+ A1 9,000,000 9.50% due 3/01/2002 9,610,100 9,832,590
A+ A1 10,800,000 7.875% due 5/15/2025 10,845,324 10,678,500
-------------- --------------
107,855,834 106,470,953
Financial A+ A1 5,000,000 Ford Motor Credit Co., 8%
Services-- due 6/15/2002 5,286,350 5,163,700
Captive--0.4%
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Financial A+ A1 $ 9,200,000 Morgan Stanley Group Inc.,
Services-- 6.875% due 3/01/2007 $ 9,166,972 $ 8,782,412
Other--2.3% BBB Baa1 24,000,000 Salomon Inc., 6.50% due 3/01/2000 24,000,000 23,634,000
-------------- --------------
33,166,972 32,416,412
<PAGE>
Industrial-- AA- A1 3,000,000 Anheuser-Busch Cos., Inc.,
Consumer Goods-- 8.75% due 12/01/1999 3,367,590 3,133,110
3.7% AA Aa2 5,000,000 Kimberly-Clark Corporation,
7.875% due 2/01/2023 5,084,900 4,935,700
BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 8,651,250
Philip Morris Cos., Inc.:
A A2 9,500,000 9% due 1/01/2001 9,698,815 10,003,880
A A2 10,000,000 7.75% due 1/15/2027 9,914,800 9,474,700
RJR Nabisco, Inc.:
BBB- Baa3 3,000,000 8.75% due 4/15/2004 2,912,220 2,981,910
BBB- Baa3 13,000,000 8.75% due 8/15/2005 12,720,550 12,836,460
-------------- --------------
52,680,835 52,017,010
Industrial-- BBB- Baa3 5,500,000 Arkla Inc., 8.875% due 7/15/1999 5,819,675 5,726,270
Energy--2.8% BP America Inc.:
AA Aa2 4,075,000 9.375% due 11/01/2000 4,488,287 4,387,186
AA Aa3 11,000,000 10% due 7/01/2018 11,869,080 11,864,820
BBB- Baa3 5,000,000 Noram Energy Corp., 7.50%
due 8/01/2000 5,113,400 5,048,600
BBB Baa3 7,000,000 Tennessee Gas Pipeline Co.,
7.50% due 4/01/2017 6,940,080 6,799,310
A+ A1 5,500,000 Texaco Capital Inc., 9% due
12/15/1999 6,215,190 5,784,680
-------------- --------------
40,445,712 39,610,866
Industrial-- Chrysler Financial Corp.:
Manufacturing-- A- A3 14,000,000 10.95% due 8/01/2017 16,298,000 14,951,720
10.6% A- A3 7,000,000 7.45% due 3/01/2027 6,965,980 6,629,700
AA- Aa3 4,500,000 du Pont (E.I.) de Nemours & Co.,
8.25% due 1/15/2022 4,676,445 4,488,930
Ford Motor Credit Co.:
A+ A1 5,000,000 7% due 9/25/2001 4,980,100 4,970,200
A+ A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,029,450
A+ A1 1,000,000 7.75% due 3/15/2005 999,090 1,014,150
General Motors Acceptance Corp.:
A- A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,083,680
A- A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,151,362
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 3,884,760
A- A3 7,000,000 7.125% due 5/01/2003 6,964,230 6,947,780
BBB- Baa3 8,450,000 James River Corp. of Virginia,
9.25% due 11/15/2021 9,952,861 9,422,426
Lockheed Martin Corp.:
BBB+ A3 10,000,000 6.625% due 6/15/1998 9,998,700 10,019,300
BBB+ A3 8,750,000 6.55% due 5/15/1999 8,745,800 8,698,200
BBB+ A3 5,000,000 6.85% due 5/15/2001 4,995,950 4,950,650
BBB+ A3 11,000,000 Loral Corporation, 8.375% due
6/15/2024 11,056,040 11,598,400
BBB+ A3 4,000,000 Martin Marietta Corp., 7.375%
due 4/15/2013 3,846,440 3,874,040
McDonnell Douglas Financial Corp.:
A- Baa2 9,000,000 8.625% due 4/01/1997 9,203,220 8,957,790
A- Baa2 7,500,000 6.13% due 12/23/1998 7,484,550 7,273,875
A- Baa2 5,000,000 6.30% due 10/20/1999 5,029,550 4,819,300
BBB Baa3 17,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 16,970,250 16,644,020
-------------- --------------
151,220,894 148,409,733
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A+ A1 $ 10,000,000 Bass America, Inc., 8.125%
Services-- due 3/31/2002 $ 10,250,610 $ 10,368,400
14.0% A A2 8,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 8,076,380 8,062,400
Circus Circus Enterprises, Inc.:
BBB+ Baa2 6,000,000 6.45% due 2/01/2006 5,986,860 5,492,280
BBB+ Baa2 10,000,000 6.70% due 11/15/2096 9,977,700 9,563,900
Columbia/HCA Healthcare Corp.:
A- A2 9,000,000 6.87% due 9/15/2003 9,101,160 8,810,820
A- A2 5,500,000 7.05% due 12/01/2027 5,158,380 4,971,285
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,046,640
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,624,700
A+ A1 2,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (b) 1,998,420 1,995,312
A A2 5,000,000 JC Penney & Co., 6.375% due
9/15/2000 4,991,900 4,899,850
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due
11/01/2024 7,057,420 7,414,890
News American Holdings, Inc.:
BBB Baa3 4,000,000 9.125% due 10/15/1999 4,298,640 4,199,360
BBB Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,077,828
BBB Baa3 10,000,000 8% due 10/17/2016 9,699,900 9,597,100
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 4,822,250
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 3,825,920
Royal Caribbean Cruises Ltd.:
BBB- Baa3 2,500,000 8.25% due 4/01/2005 2,568,775 2,576,600
BBB- Baa3 3,500,000 7.25% due 8/15/2006 3,372,950 3,381,945
Sears, Roebuck & Co.:
A- A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,140,750
A- A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,007,963
<PAGE> A- A2 8,000,000 6.82% due 10/17/2002 8,016,320 7,827,120
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 6,889,680
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,471,215 9,282,364
Time Warner Entertainment Co.:
BBB- Baa3 6,000,000 8.875% due 10/01/2012 6,624,540 6,356,340
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 4,935,150
AA A2 14,345,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024 14,488,240 14,613,682
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,383,730
A A2 15,191,414 6.85% due 1/10/2007 (b)++ 15,181,235 14,792,791
-------------- --------------
202,396,943 196,961,050
Industrial BBB Baa2 9,000,000 Federal Express Corporation,
Transportation-- 9.65% due 6/15/2012 10,137,590 10,435,230
1.9% Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,771,300
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,051,300
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,066,660
-------------- --------------
26,436,800 26,324,490
Supranational-- AAA Aaa 3,000,000 Asian Development Bank, 10.75%
0.7% due 6/01/1997 3,302,730 3,021,150
AAA Aaa 6,000,000 Inter-American Development Bank Co.,
8.875% due 6/01/2009 7,633,550 6,779,100
-------------- --------------
10,936,280 9,800,250
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A+ A2 $ 8,700,000 ALLTEL Corporation, 6.75%
Communications-- due 9/15/2005 $ 8,566,020 $ 8,348,172
3.0% GTE Corp.:
A- A3 3,000,000 8.85% due 3/01/1998 3,081,000 3,063,750
BBB+ A3 7,500,000 9.375% due 12/01/2000 8,235,170 8,062,050
A- A3 4,000,000 9.10% due 6/01/2003 4,242,720 4,332,160
A- A3 3,000,000 10.30% due 11/15/2017 3,285,270 3,205,980
AA Aa3 2,000,000 Southwestern Bell
<PAGE> Telecommunications Corp.,
6.125% due 3/01/2000 2,011,250 1,960,200
US West Capital Funding, Inc.:
BBB+ Baa1 5,000,000 6.85% due 1/15/2002 4,998,050 4,917,150
BBB+ Baa1 6,000,000 7.90% due 2/01/2027 6,000,000 5,835,900
BBB+ Baa1 3,000,000 7.95% due 2/01/2097 2,970,000 2,896,080
-------------- --------------
43,389,480 42,621,442
Utilities-- BBB+ Baa1 13,500,000 Arizona Public Service Co.,
Electric-- 7.625% due 3/15/1998 13,708,305 13,650,390
4.0% AA- Aa2 6,675,000 Duke Power Co., 8% due 11/01/1999 6,666,714 6,852,889
A+ A1 2,000,000 Georgia Power Co., 6.125% due
9/01/1999 1,961,420 1,966,400
AA- A1 5,000,000 Northern States Power Company,
7.125% due 7/01/2025 5,305,900 4,700,100
A- A3 3,000,000 Pennsylvania Power & Light Co.,
6.875% due 2/01/2003 3,048,870 2,947,260
A- A3 7,000,000 Public Service Electric & Gas Co.,
7.125% due 11/01/1997 7,058,870 7,035,490
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due
6/12/2000 5,000,000 5,317,800
BBB Baa2 5,000,000 Texas Utilities Electric Company,
8.175% due 1/30/2037 5,000,000 4,851,550
A A2 8,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024 8,377,160 8,830,480
-------------- --------------
56,127,239 56,152,359
Yankee AA- Aa2 6,000,000 ABN AMRO Bank, 7.55% due
Corporates*-- 6/28/2006 (2) 5,999,160 6,025,200
12.9% A+ A1 6,000,000 Australia & New Zealand Banking
Group Ltd., 7.55% due
9/15/2006 (2) 5,990,880 5,983,080
Bangkok Metropolitan Bank Public
Company Limited (2)(b):
BBB+ A3 8,885,000 7.25% due 9/15/2005 8,799,674 8,454,682
BBB A3 6,000,000 8.25% due 3/15/2016 6,048,720 5,788,620
BBB Baa1 13,575,000 China International Trust, 9%
due 10/15/2006 (2) 14,699,340 14,642,809
A A3 4,000,000 China Light & Power Company Ltd.,
7.50% due 4/15/2006 (8) 3,974,520 3,940,440
Enersis S.A. (8):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,366,450
A- Baa1 7,000,000 7.40% due 12/01/2016 6,963,040 6,544,650
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,817,960
Ford Capital B.V. (2):
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,122,300
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,575,274
A A2 4,000,000 Grand Metropolitan Investment
Corp., 6.50% due 9/15/1999 (2) 4,000,000 3,976,960
A- Baa1 6,000,000 HSBC Americas Inc., 7% due
11/01/2006 (2) 5,949,600 5,741,460
Husky Oil Ltd. (8):
BBB Baa3 6,000,000 6.875% due 11/15/2003 5,984,040 5,793,600
BBB Baa3 3,000,000 7.125% due 11/15/2006 2,986,590 2,891,490
BBB Baa3 6,000,000 7.55% due 11/15/2016 5,975,940 5,755,020
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee A- A3 $ 5,000,000 Israel Electric Corp. Ltd,
Corporates*-- 7.25% due 12/15/2006 (8)(b) $ 4,990,500 $ 4,822,850
(concluded) AA- A1 11,000,000 Korea Electric Power Corporation,
8% due 7/01/2002 (8) 11,572,110 11,312,180
A A3 5,500,000 Mass Transit Railway Corp.,
7.25% due 10/01/2005 (7) 5,663,700 5,370,585
A- A2 6,250,000 Maybank New York, 7.125% due
9/15/2005 (2) 6,217,938 6,025,125
A A1 2,000,000 Midland Bank PLC, 7.625%
due 6/15/2006 (2) 1,995,240 2,006,680
A+ A1 12,000,000 Petroliam Nasional BHD, 6.875% due
7/01/2003 (8)(b) 11,929,530 11,710,920
BBB+ A3 5,000,000 Philips Electronics N.V., 7.20%
due 6/01/2026 (8) 4,988,700 4,892,950
Pohang Iron & Steel Industries
Co., Ltd. (6):
A+ A2 12,000,000 7.375% due 5/15/2005 12,217,645 11,806,200
A+ A2 11,000,000 7.125% due 11/01/2006 10,987,570 10,574,960
A+ A1 6,500,000 Telekom Malaysia BHD, 7.125% due
8/01/2005 (8)(b) 6,668,405 6,353,990
A A2 9,000,000 WMC (Western Mining Corp.) Finance
Ltd., 7.25% due 11/15/2013 (4) 9,089,100 8,565,030
-------------- --------------
185,139,307 180,861,465
Yankee AAA Aaa 4,000,000 Export-Import Bank of Japan,
Sovereign*-- 8.35% due 12/01/1999 (3) 4,226,640 4,144,160
1.8% AA- A1 9,000,000 Korea Development Bank, 6.625%
due 11/21/2003 (2) 9,045,790 8,667,630
Metropolis of Tokyo (Japan) (3):
AAA Aaa 3,550,000 9.25% due 10/11/1998 4,134,756 3,684,474
AAA Aaa 4,000,000 9.25% due 11/08/2000 4,219,660 4,284,280
BBB A3 5,000,000 People's Republic of China, 6.625%
due 1/15/2003 (5) 4,975,800 4,802,100
-------------- --------------
26,602,646 25,582,644
Total Investments in
Bonds & Notes--95.6% 1,369,866,732 1,343,026,261
<PAGE>
Short-Term Securities
Repurchase 46,618,000 UBS Securities Funding, Inc.,
Agreements**--3.3% purchased on 3/31/1997 to
yield 6.38% to 4/01/1997 46,618,000 46,618,000
Total Investments in
Short-Term Securities--3.3% 46,618,000 46,618,000
Total Investments--98.9% $1,416,484,732 1,389,644,261
==============
Other Assets Less Liabilities--1.1% 15,882,273
--------------
Net Assets--100.0% $1,405,526,534
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity; Guaranteed by the Province.
(2)Financial Institution.
(3)Government Entity; Guaranteed by Japan.
(4)Industrial Mining.
(5)Government Entity.
(6)Industrial; Metals.
(7)Transportation.
(8)Industrial.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Subject to principal paydowns.
(a)Floating Rate Note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury
Obligations-- Bonds & Notes:
11.6% AAA Aaa $ 5,000,000 7.875% due 4/15/1998 $ 5,105,859 $ 5,086,700
AAA Aaa 2,000,000 7.50% due 10/31/1999 2,061,563 2,043,120
AAA Aaa 3,000,000 7.75% due 12/31/1999 3,122,344 3,085,770
AAA Aaa 1,000,000 5.875% due 2/15/2000 989,375 981,410
AAA Aaa 2,000,000 6.25% due 8/31/2000 2,000,781 1,974,680
AAA Aaa 2,000,000 5.75% due 10/31/2000 1,963,750 1,940,940
AAA Aaa 4,500,000 5.625% due 2/28/2001 4,383,281 4,333,365
AAA Aaa 1,000,000 8% due 5/15/2001 1,070,000 1,044,840
AAA Aaa 11,000,000 6.25% due 1/31/2002 11,054,141 10,761,080
AAA Aaa 4,000,000 6.375% due 8/15/2002 3,991,250 3,926,880
AAA Aaa 6,100,000 5.875% due 2/15/2004 5,881,000 5,770,234
AAA Aaa 4,000,000 7% due 7/15/2006 4,262,500 4,010,000
AAA Aaa 9,400,000 6.25% due 2/15/2007 9,197,313 8,957,918
-------------- --------------
55,083,157 53,916,937
Asset-Backed 2,000,000 First Bank Corporate Card Master
Securities++--0.4% Trust, 6.40% due 2/15/2003 1,997,545 1,944,840
Banking-- A- A2 3,500,000 Bank of New York Company, Inc.
14.5% (The), 7.875% due 11/15/2002 3,873,450 3,592,470
BankAmerica Corp.:
A+ A1 5,000,000 6.65% due 5/01/2001 4,997,250 4,922,700
A A2 4,000,000 7.50% due 10/15/2002 4,268,880 4,061,600
A+ A1 3,000,000 7.125% due 5/12/2005 2,956,500 2,933,370
A+ A1 4,000,000 Fifth Third Bank, 6.75%
due 7/15/2005 3,973,600 3,837,800
A A2 9,000,000 First Chicago Corp., 9% due
6/15/1999 9,548,820 9,390,960
A- A3 6,000,000 Mellon Financial, 6.875% due
3/01/2003 5,483,220 5,845,980
A+ A1 11,500,000 NationsBank Corporation, 6.65%
due 4/09/2002 11,423,540 11,234,914
Norwest Corp.:
AA- Aa3 7,000,000 6.25% due 4/15/1999 6,977,040 6,936,650
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 960,340
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due
3/15/1999 4,890,950 4,943,850
BBB A3 9,000,000 Washington Mutual Inc., 7.25%
due 8/15/2005 8,930,520 8,750,430
-------------- --------------
68,326,830 67,411,064
<PAGE>
Canadian Province of Quebec (Canada) (3):
Provinces*-- A+ A2 5,000,000 7.50% due 7/15/2002 5,296,190 5,050,150
2.2% A+ A2 5,000,000 8.80% due 4/15/2003 5,538,670 5,347,850
-------------- --------------
10,834,860 10,398,000
Federal AAA Aaa 2,500,000 Federal National Mortgage
Agencies-- Association, 7.85% due
0.5% 9/10/2004 2,496,484 2,515,625
Finance--6.2% BBB- Baa2 10,000,000 Advanta Corp., 6.26% due
9/01/1997 9,994,300 10,088,000
Beneficial Corporation:
A A2 3,000,000 6.42% due 1/15/2002 2,949,270 2,900,970
A A2 5,800,000 7.75% due 11/08/2002 6,080,604 5,925,628
Finova Capital Corp.:
A- Baa1 5,000,000 6.375% due 10/15/2000 4,980,700 4,883,150
A- Baa1 4,525,000 9.125% due 2/27/2002 4,984,876 4,869,941
-------------- --------------
28,989,750 28,667,689
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- BBB Baa2 $ 11,580,000 Alex Brown Inc., 7.625%
Other--8.5% due 8/15/2005 $ 11,797,083 $ 11,461,537
Bear Stearns Companies, Inc.:
A A2 2,000,000 6.75% due 5/01/2001 1,993,680 1,971,900
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,206,700
A A2 6,250,000 Dean Witter, Discover & Co.,
6.75% due 8/15/2000 6,226,437 6,197,375
Salomon Inc.:
BBB Baa1 10,000,000 6.50% due 3/01/2000 10,000,000 9,847,500
BBB+ Baa1 4,000,000 7.20% due 2/01/2004 3,996,680 3,922,120
A- A2 1,000,000 Smith Barney Holdings Inc.,
6.875% due 6/15/2005 992,930 958,330
A+ A1 2,000,000 The Travelers Corp., 9.50% due
3/01/2002 2,168,400 2,185,020
-------------- --------------
40,399,640 39,750,482
<PAGE>
Industrial-- AA- A1 5,481,000 Anheuser-Busch Cos., Inc.,
Consumer--4.3% 8.75% due 12/01/1999 6,189,909 5,724,192
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 4,848,600
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 2,872,230
A A2 3,500,000 Philip Morris Cos., Inc.,
9% due 1/01/2001 3,576,195 3,685,640
BBB- Baa3 3,000,000 RJR Nabisco Holding Corp.,
8.75% due 4/15/2004 2,911,320 2,981,910
-------------- --------------
20,668,774 20,112,572
Industrial-- Texaco Capital Inc.:
Energy--0.9% A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,006,260
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,103,520
-------------- --------------
4,338,580 4,109,780
Industrial-- BBB Baa2 4,000,000 Applied Materials Inc., 6.65%
Manufacturing-- due 9/05/2000 4,000,000 3,940,880
8.6% A+ A1 5,000,000 Ford Motor Credit Co., 7.75%
due 3/15/2005 4,995,450 5,070,750
General Motors Acceptance Corp.:
A- A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,020,920
A- A3 5,000,000 6.625% due 10/01/2002 4,991,000 4,864,600
A- A3 2,000,000 7.125% due 5/01/2003 1,989,780 1,985,080
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,001,930
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,485,200
BBB+ A3 8,000,000 6.85% due 5/15/2001 8,018,810 7,921,040
A- Baa2 5,000,000 McDonnell Douglas Corporation,
6.30% due 10/20/1999 5,029,550 4,819,300
BBB Baa3 6,000,000 Seagate Technology, 7.125% due
3/01/2004 5,989,500 5,874,360
-------------- --------------
40,470,160 39,984,060
Industrial-- A+ A1 3,000,000 Bass America, Inc., 6.625%
Services-- due 3/01/2003 2,825,520 2,888,850
17.4% A A2 6,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 5,952,060 6,046,800
A- A2 7,000,000 Columbia/HCA Healthcare Corp.,
6.87% due 9/15/2003 7,043,300 6,852,860
A+ A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (a) 3,497,235 3,491,796
A A2 5,000,000 JC Penney & Co., 6.375% due
9/15/2000 4,991,900 4,899,850
BBB- Ba1 10,000,000 La Quinta Inns, Inc., 7.25% due
3/15/2004 9,949,000 9,704,210
News American Holdings, Inc.:
BBB Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,203,400
BBB Baa3 4,500,000 8.50% due 2/15/2005 4,677,305 4,705,740
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- BBB+ Baa2 $ 1,000,000 Oracle Corporation, 6.91%
Services due 2/15/2007 $ 1,000,000 $ 956,480
(concluded) Royal Caribbean Cruises Ltd.:
BBB- Baa3 2,500,000 8.25% due 4/01/2005 2,568,775 2,576,600
BBB- Baa3 1,800,000 7.25% due 8/15/2006 1,776,006 1,739,286
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,570,375
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,177,660
A- A2 5,550,000 Sears Roebuck Acceptance Corp.,
6.22% due 3/25/1999 5,478,183 5,494,944
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 984,240
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,465,637
Time Warner Entertainment:
BBB- Ba1 5,000,000 7.95% due 2/01/2000 5,172,300 5,102,550
BBB- Baa3 5,000,000 9.625% due 5/01/2002 5,586,000 5,453,950
A A2 4,980,791 Walt Disney Co., 6.85% due
1/10/2007 (a) 4,977,454 4,850,095
-------------- --------------
82,873,528 81,165,323
Industrial BB+ Baa3 4,310,000 AMR Corporation, 9.50% due
Transportation-- 7/15/1998 4,606,528 4,464,427
3.5% AA A1 4,000,000 Boeing Co. (The), 6.35% due
6/15/2003 3,599,960 3,832,640
Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,001,345
A- A3 1,000,000 8% due 3/01/2005 994,610 1,025,650
-------------- --------------
16,765,278 16,324,062
<PAGE>
Utilities-- A+ A2 4,000,000 Alltel Corporation, 6.75%
Communications-- due 9/15/2005 3,938,400 3,838,240
4.4% GTE Corporation:
A- A3 1,000,000 9.375% due 12/01/2000 1,090,310 1,074,940
A- A3 2,000,000 9.10% due 6/01/2003 2,194,920 2,166,080
A A2 6,000,000 MCI Communications Corporation,
6.95% due 8/15/2006 5,980,200 5,838,240
AA Aa3 2,200,000 Southwestern Bell Capital Corp.,
6.625% due 4/01/2005 2,108,590 2,113,936
BBB- Ba1 5,500,000 TCI Communications Inc., 8% due
8/01/2005 5,561,380 5,359,035
-------------- --------------
20,873,800 20,390,471
Utilities-- BBB+ Baa1 4,000,000 Arizona Public Service Company,
Electric-- 6.75% due 11/15/2006 3,905,840 3,793,600
1.9% Pennsylvania Power & Light Co.:
A- A3 4,000,000 5.50% due 4/01/1998 3,991,280 3,964,440
A- A3 1,000,000 6.875% due 2/01/2003 1,016,290 982,420
-------------- --------------
8,913,410 8,740,460
Yankee BBB+ A3 5,000,000 Bangkok Metropolitan Bank
Corporates*-- Public Company Limited, 7.25%
8.7% due 9/15/2005 (8)(a) 4,949,950 4,757,840
AA+ Aa1 5,000,000 Deutsche Bank Financial Inc.,
6.70% due 12/13/2006 (8) 4,984,550 4,749,750
A- Baa1 1,500,000 Enersis S.A., 6.90% due
12/01/2006 (7) 1,496,130 1,419,870
A+ A1 2,000,000 Ford Capital B.V., 9.875% due
5/15/2002 (8) 2,300,380 2,224,460
A A2 3,000,000 Grand Metropolitan Investment
Corp., 6.50% due 9/15/1999 (8) 3,040,120 2,982,720
A- Baa1 1,000,000 HSBC Americas Inc., 7% due
11/01/2006 (8) 991,600 956,910
BBB Baa3 1,500,000 Husky Oil Ltd., 7.125% due
11/15/2006 (7) 1,493,295 1,445,745
A- A3 2,000,000 Israel Electric Corp. Ltd., 7.25%
due 12/15/2006 (7)(a) 1,996,200 1,929,140
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee A+ A1 $ 2,000,000 Petroliam Nasional BHD, 6.875%
Corporates* due 7/01/2003 (7)(a) $ 1,972,960 $ 1,951,820
(concluded) BBB+ A3 5,000,000 Philips Electronics N.V., 7.75%
due 4/15/2004 (7) 5,430,750 5,039,700
Pohang Iron & Steel Co. (6):
A+ A2 1,000,000 7.375% due 5/15/2005 1,018,160 983,850
A+ A2 5,000,000 7.125% due 11/01/2006 4,994,350 4,806,800
A+ A1 7,500,000 Telekom Malaysia BHD, 7.125% due
8/01/2005 (7)(a) 7,712,135 7,331,527
-------------- --------------
42,380,580 40,580,132
Yankee AA- A1 2,000,000 Korea Development Bank, 6.625%
Sovereign*-- due 11/21/2003 (2) 2,003,170 1,926,140
1.4% People's Republic of China (1):
BBB A3 3,000,000 6.625% due 1/15/2003 2,985,480 2,881,260
BBB A3 1,500,000 7.75% due 7/05/2006 1,475,865 1,503,285
-------------- --------------
6,464,515 6,310,685
Total Investments in
Bonds & Notes--95.0% 451,876,891 442,322,182
Short-Term Securities
Repurchase 19,054,000 UBS Securities Funding, Inc.,
Agreements**--4.1% purchased on 3/31/1997 to
yield 6.38% to 4/01/1997 19,054,000 19,054,000
Total Investments in
Short-Term Securities--4.1% 19,054,000 19,054,000
Total Investments--99.1% $ 470,930,891 461,376,182
==============
Other Assets Less Liabilities--0.9% 4,295,767
--------------
Net Assets--100.0% $ 465,671,949
==============
<PAGE>
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution; Government-Owned & Guaranteed.
(3)Government Entity; Guaranteed by the Province.
(4)Industrial Mining.
(5)Government Entity; Guaranteed by Japan.
(6)Industrial; Metals.
(7)Industrial.
(8)Financial Institutional.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Subject to principal paydowns.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of March 31, 1997
<CAPTION>
High Income Investment Intermediate
Portfolio Grade Portfolio Term Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $6,500,081,507 $1,389,644,261 $ 461,376,182
Cash 4,648,035 -- 944
Receivables: Interest 126,311,064 25,781,155 7,839,478
Capital shares sold 22,182,657 8,316,055 1,520,349
Securities sold 13,803,634 -- --
Dividends 2,260,961 -- --
Paydowns 83,973 -- --
Loans -- 4,920 4,566
Prepaid registration fees and other assets
(Note 1e) 114,224 65,728 46,377
-------------- -------------- --------------
Total assets 6,669,486,055 1,423,812,119 470,787,896
-------------- -------------- --------------
<PAGE>
Liabilities: Payables: Capital shares redeemed 21,216,868 13,895,416 3,718,287
Securities purchased 22,792,438 -- --
Dividends to shareholders
(Note 1f) 16,839,042 2,735,017 885,876
Distributor (Note 2) 3,240,584 448,491 85,806
Investment adviser (Note 2) 2,166,516 406,330 135,416
Accrued expenses and other liabilities 1,579,167 800,331 290,562
-------------- -------------- --------------
Total liabilities 67,834,615 18,285,585 5,115,947
-------------- -------------- --------------
Net Assets: Net assets $6,601,651,440 $1,405,526,534 $ 465,671,949
============== ============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 12,547,800 $ 5,661,568 $ 1,901,036
Consist of: Class B Common Stock, $.10 par value++++ 60,164,931 5,870,165 1,705,086
Class C Common Stock, $.10 par value++++++ 6,184,120 529,890 69,977
Class D Common Stock, $.10 par value++++++++ 4,865,099 626,154 489,465
Paid-in capital in excess of par 6,560,200,819 1,452,903,662 481,235,077
Accumulated investment loss--net (4,308) -- --
Accumulated distributions in excess of
investment income--net (Note 1f) (2,665,658) -- --
Accumulated realized capital losses on
investments--net (7,782,508) (1,459,727) (4,653,344)
Accumulated distributions in excess of
realized capital gains on investments--net
(Note 1f) -- (31,764,707) (5,520,639)
Unrealized depreciation on investments--net (31,858,855) (26,840,471) (9,554,709)
-------------- -------------- --------------
Net assets $6,601,651,440 $1,405,526,534 $ 465,671,949
============== ============== ==============
Net Asset Class A: Net assets $ 988,631,862 $ 627,158,339 $ 212,513,579
Value: ============== ============== ==============
Shares outstanding 125,477,999 56,615,677 19,010,354
============== ============== ==============
Net asset value and redemption price per share $ 7.88 $ 11.08 $ 11.18
============== ============== ==============
Class B: Net assets $4,741,723,376 $ 650,246,403 $ 190,614,851
============== ============== ==============
Shares outstanding 601,649,311 58,701,653 17,050,859
============== ============== ==============
Net asset value and redemption price per share $ 7.88 $ 11.08 $ 11.18
============== ============== ==============
Class C: Net assets $ 487,713,101 $ 58,719,185 $ 7,823,069
============== ============== ==============
Shares outstanding 61,841,195 5,298,903 699,774
============== ============== ==============
Net asset value and redemption price per share $ 7.89 $ 11.08 $ 11.18
<PAGE> ============== ============== ==============
Class D: Net assets $ 383,583,101 $ 69,402,607 $ 54,720,450
============== ============== ==============
Shares outstanding 48,650,993 6,261,541 4,894,644
============== ============== ==============
Net asset value and redemption price per share $ 7.88 $ 11.08 $ 11.18
============== ============== ==============
<FN>
*Identified cost $6,531,940,362 $1,416,484,732 $ 470,930,891
============== ============== ==============
++Authorized shares--Class A 500,000,000 250,000,000 100,000,000
============== ============== ==============
++++Authorized shares--Class B 1,500,000,000 250,000,000 50,000,000
============== ============== ==============
++++++Authorized shares--Class C 200,000,000 100,000,000 50,000,000
============== ============== ==============
++++++++Authorized shares--Class D 500,000,000 100,000,000 50,000,000
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Six Months Ended March 31, 1997
<CAPTION>
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and discount earned $ 296,884,453 $ 53,735,825 $ 17,108,719
Income Dividends 8,801,348 -- --
(Note 1d): Other 3,958,029 13,605 9,234
-------------- -------------- --------------
Total income 309,643,830 53,749,430 17,117,953
-------------- -------------- --------------
<PAGE>
Expenses: Account maintenance and distribution fees
--Class B (Note 2) 16,958,275 2,649,244 528,431
Investment advisory fees (Note 2) 12,785,554 2,622,901 867,824
Transfer agent fees--Class B (Note 2) 1,615,065 593,411 242,884
Account maintenance and distribution fees
--Class C (Note 2) 1,699,354 259,324 23,877
Transfer agent fees--Class A (Note 2) 286,917 468,095 226,370
Registration fees (Note 1e) 347,404 132,035 42,337
Printing and shareholder reports 210,135 58,161 19,973
Accounting services (Note 2) 157,537 55,058 31,400
Custodian fees 74,798 39,811 18,625
Professional fees 69,695 13,768 5,675
Account maintenance fees--Class D
(Note 2) 411,738 84,752 21,119
Transfer agent fees--Class D (Note 2) 96,910 51,108 43,725
Transfer agent fees--Class C (Note 2) 157,906 56,008 12,642
Pricing fees (Note 2) 8,968 4,852 2,994
Directors' fees and expenses 17,582 4,468 1,796
Other 29,077 8,074 3,348
-------------- -------------- --------------
Total expenses 34,926,915 7,101,070 2,093,020
-------------- -------------- --------------
Investment income--net 274,716,915 46,648,360 15,024,933
-------------- -------------- --------------
Realized & Realized gain (loss) on investments--net (2,641,246) 5,220,391 709,579
Unrealized Gain Change in unrealized appreciation/depreciation
(Loss) on on investments--net (48,266,500) (15,659,006) (4,872,427)
Investments--Net -------------- -------------- --------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from
Operations $ 223,809,169 $ 36,209,745 $ 10,862,085
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets High Income Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: March 31, 1997 Sept. 30, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 274,716,915 $ 452,381,675
Realized gain (loss) on investments--net (2,641,246) 31,483,874
Change in unrealized appreciation/depreciation on investments
--net (48,266,500) 65,146,802
-------------- --------------
Net increase in net assets resulting from operations 223,809,169 549,012,351
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (45,824,762) (87,755,895)
Shareholders Class B (195,563,110) (329,093,983)
(Note 1f): Class C (18,251,648) (21,699,154)
Class D (15,081,703) (16,708,496)
In excess of investment income--net:
Class A -- (505,842)
Class B -- (1,896,961)
Class C -- (125,078)
Class D -- (96,311)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (274,721,223) (457,881,720)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 824,340,288 1,376,309,947
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 773,428,234 1,467,440,578
Beginning of period 5,828,223,206 4,360,782,628
-------------- --------------
End of period $6,601,651,440 $5,828,223,206
============== ==============
</TABLE>
<TABLE>
Statements of Changes in Net Assets (continued) Investment Grade Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: March 31, 1997 Sept. 30, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 46,648,360 $ 83,065,190
Realized gain on investments--net 5,220,391 1,240,458
Change in unrealized appreciation/depreciation on investments
--net (15,659,006) (44,461,678)
-------------- --------------
Net increase in net assets resulting from operations 36,209,745 39,843,970
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (21,153,925) (36,619,895)
(Note 1f): Class B (21,331,389) (40,835,373)
Class C (1,940,011) (2,822,765)
Class D (2,223,035) (2,787,157)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (46,648,360) (83,065,190)
-------------- --------------
<PAGE>
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (45,777,736) 350,127,963
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (56,216,351) 306,906,743
Beginning of period 1,461,742,885 1,154,836,142
-------------- --------------
End of period $1,405,526,534 $1,461,742,885
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: March 31, 1997 Sept. 30, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 15,024,933 $ 29,804,225
Realized gain on investments--net 709,579 3,880,395
Change in unrealized appreciation/depreciation on investments
--net (4,872,427) (13,083,867)
-------------- --------------
Net increase in net assets resulting from operations 10,862,085 20,600,753
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (7,118,756) (14,523,748)
(Note 1f): Class B (6,279,597) (13,124,698)
Class C (282,039) (542,378)
Class D (1,344,541) (1,613,401)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (15,024,933) (29,804,225)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (6,765,135) 32,787,882
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (10,927,983) 23,584,410
Beginning of period 476,599,932 453,015,522
-------------- --------------
End of period $ 465,671,949 $ 476,599,932
============== ==============
</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: 1997++ 1996++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.93 $ 7.80 $ 7.66 $ 8.13 $ 7.84
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .38 .75 .81 .75 .79
Realized and unrealized gain (loss)
on investments--net (.05) .14 .14 (.47) .29
---------- ---------- ---------- ---------- ----------
Total from investment operations .33 .89 .95 .28 1.08
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.76) (.81) (.75) (.79)
In excess of investment income
--net -- --+++++ -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.38) (.76) (.81) (.75) (.79)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.88 $ 7.93 $ 7.80 $ 7.66 $ 8.13
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 4.12%+++ 11.95% 13.27% 3.42% 14.35%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .50%* .51% .55% .53% .55%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 9.41%* 9.57% 10.70% 9.27% 9.78%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 988,632 $ 947,479 $ 902,321 $ 876,573 $ 886,784
========== ========== ========== ========== ==========
Portfolio turnover 18.27% 32.44% 24.58% 32.52% 34.85%
========== ========== ========== ========== ==========
<FN>
++Based on average shares outstanding during the period.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) High Income Portfolio
<CAPTION>
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: 1997++ 1996++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.93 $ 7.80 $ 7.66 $ 8.13 $ 7.85
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .34 .69 .75 .69 .72
Realized and unrealized gain (loss)
on investments--net (.05) .15 .14 (.47) .28
---------- ---------- ---------- ---------- ----------
Total from investment operations .29 .84 .89 .22 1.00
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.34) (.71) (.75) (.69) (.72)
In excess of investment income
--net -- --+++++ -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.34) (.71) (.75) (.69) (.72)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.88 $ 7.93 $ 7.80 $ 7.66 $ 8.13
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 3.73%+++ 11.11% 12.41% 2.66% 13.35%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.26%* 1.28% 1.32% 1.29% 1.31%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 8.65%* 8.80% 9.81% 8.53% 8.94%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $4,741,723 $4,250,539 $3,220,767 $2,347,223 $1,823,275
========== ========== ========== ========== ==========
Portfolio turnover 18.27% 32.44% 24.58% 32.52% 34.85%
========== ========== ========== ========== ==========
<CAPTION>
Class C
For the
<PAGE> For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++++ to
March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.94 $ 7.81 $ 7.59
Operating ---------- ---------- ----------
Performance: Investment income--net .34 .68 .71
Realized and unrealized gain (loss) on investments
--net (.05) .15 .22
---------- ---------- ----------
Total from investment operations .29 .83 .93
---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.34) (.70) (.71)
In excess of investment income--net -- --+++++ --
---------- ---------- ----------
Total dividends and distributions (.34) (.70) (.71)
---------- ---------- ----------
Net asset value, end of period $ 7.89 $ 7.94 $ 7.81
========== ========== ==========
Total Investment Based on net asset value per share 3.70%+++ 11.05% 12.92%+++
Return:** ========== ========== ==========
Ratios to Average Expenses 1.31%* 1.33% 1.38%*
Net Assets: ========== ========== ==========
Investment income--net 8.59%* 8.73% 9.06%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 487,713 $ 362,518 $ 135,019
Data: ========== ========== ==========
Portfolio turnover 18.27% 32.44% 24.58%
========== ========== ==========
<FN>
++Based on average shares outstanding during the period.
++++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued) High Income Portfolio
<CAPTION>
Class D
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++++ to
March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.94 $ 7.80 $ 7.59
Operating ---------- ---------- ----------
Performance: Investment income--net .37 .72 .75
Realized and unrealized gain (loss) on investments
--net (.06) .16 .21
---------- ---------- ----------
Total from investment operations .31 .88 .96
---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.37) (.74) (.75)
In excess of investment income--net -- --+++++ --
---------- ---------- ----------
Total dividends and distributions (.37) (.74) (.75)
---------- ---------- ----------
Net asset value, end of period $ 7.88 $ 7.94 $ 7.80
========== ========== ==========
Total Investment Based on net asset value per share 3.86%+++ 11.82% 13.37%+++
Return:** ========== ========== ==========
Ratios to Average Expenses .75%* .76% .81%*
Net Assets: ========== ========== ==========
Investment income--net 9.16%* 9.30% 9.70%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 383,583 $ 267,687 $ 102,676
Data: ========== ========== ==========
Portfolio turnover 18.27% 32.44% 24.58%
========== ========== ==========
<FN>
++Based on average shares outstanding during the period.
++++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade 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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.16 $ 11.51 $ 10.77 $ 12.81 $ 12.30
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .38 .76 .80 .75 .81
Realized and unrealized gain (loss)
on investments--net (.08) (.35) .74 (1.49) .67
---------- ---------- ---------- ---------- ----------
Total from investment operations .30 .41 1.54 (.74) 1.48
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.76) (.80) (.75) (.81)
Realized gain on investments--net -- -- -- (.10) (.16)
In excess of realized gain on
investments--net -- -- -- (.45) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.38) (.76) (.80) (1.30) (.97)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.08 $ 11.16 $ 11.51 $ 10.77 $ 12.81
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.70%+++ 3.60% 14.93% (6.03%) 12.76%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .55%* .56% .58% .53% .56%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 6.81%* 6.64% 7.30% 6.61% 6.94%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 627,158 $ 608,901 $ 472,388 $ 366,792 $ 407,625
========== ========== ========== ========== ==========
Portfolio turnover 71.60% 88.53% 108.07% 159.05% 121.34%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class 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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.16 $ 11.51 $ 10.77 $ 12.81 $ 12.30
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .34 .67 .72 .66 .72
Realized and unrealized gain (loss)
on investments--net (.08) (.35) .74 (1.49) .67
---------- ---------- ---------- ---------- ----------
Total from investment operations .26 .32 1.46 (.83) 1.39
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.34) (.67) (.72) (.66) (.72)
Realized gain on investments--net -- -- -- (.10) (.16)
In excess of realized gain on
investments--net -- -- -- (.45) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.34) (.67) (.72) (1.21) (.88)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.08 $ 11.16 $ 11.51 $ 10.77 $ 12.81
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.31%+++ 2.81% 14.04% (6.73%) 11.91%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.32%* 1.32% 1.35% 1.29% 1.29%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 6.04%* 5.88% 6.52% 5.85% 5.80%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 650,247 $ 724,089 $ 631,517 $ 483,053 $ 515,402
========== ========== ========== ========== ==========
Portfolio turnover 71.60% 88.53% 108.07% 159.05% 121.34%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class C
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.17 $ 11.51 $ 10.67
Operating ---------- ---------- ----------
Performance: Investment income--net .34 .66 .67
Realized and unrealized gain (loss) on investments
--net (.09) (.34) .84
---------- ---------- ----------
Total from investment operations .25 .32 1.51
---------- ---------- ----------
Less dividends from investment income--net (.34) (.66) (.67)
---------- ---------- ----------
Net asset value, end of period $ 11.08 $ 11.17 $ 11.51
========== ========== ==========
Total Investment Based on net asset value per share 2.19%+++ 2.85% 14.60%+++
Return:** ========== ========== ==========
Ratios to Average Expenses 1.38%* 1.38% 1.40%*
Net Assets: ========== ========== ==========
Investment income--net 5.98%* 5.83% 6.27%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 58,719 $ 64,931 $ 25,778
Data: ========== ========== ==========
Portfolio turnover 71.60% 88.53% 108.07%
========== ========== ==========
<PAGE>
<CAPTION>
Class D
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.17 $ 11.51 $ 10.67
Operating ---------- ---------- ----------
Performance: Investment income--net .37 .73 .73
Realized and unrealized gain (loss) on investments
--net (.09) (.34) .84
---------- ---------- ----------
Total from investment operations .28 .39 1.57
---------- ---------- ----------
Less dividends from investment income--net (.37) (.73) (.73)
---------- ---------- ----------
Net asset value, end of period $ 11.08 $ 11.17 $ 11.51
========== ========== ==========
Total Investment Based on net asset value per share 2.48%+++ 3.43% 15.22%+++
Return:** ========== ========== ==========
Ratios to Average Expenses .80%* .81% .83%*
Net Assets: ========== ========== ==========
Investment income--net 6.56%* 6.40% 6.91%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 69,403 $ 63,822 $ 25,153
Data: ========== ========== ==========
Portfolio turnover 71.60% 88.53% 108.07%
========== ========== ==========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued) Intermediate Term 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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.90 $ 12.44 $ 12.03
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .37 .73 .79 .75 .76
Realized and unrealized gain (loss)
on investments--net (.10) (.22) .60 (1.26) .55
---------- ---------- ---------- ---------- ----------
Total from investment operations .27 .51 1.39 (.51) 1.31
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.37) (.73) (.79) (.75) (.76)
Realized gain on investments--net -- -- -- -- (.14)
In excess of realized gain on
investments--net -- -- -- (.28) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.37) (.73) (.79) (1.03) (.90)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.18 $ 11.28 $ 11.50 $ 10.90 $ 12.44
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.35%+++ 4.56% 13.33% (4.25%) 11.39%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .62%* .59% .59% .53% .58%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 6.47%* 6.41% 7.14% 6.48% 6.42%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 212,514 $ 216,545 $ 217,714 $ 170,222 $ 193,505
========== ========== ========== ========== ==========
Portfolio turnover 40.58% 96.40% 142.84% 155.42% 180.52%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Intermediate Term Portfolio
Class B
For the For the
The following per share data and ratios have been derived Six Months Period
from information provided in the financial statements. Ended For the Year Ended Nov. 13, 1992++
March 31, September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.90 $ 12.44 $ 11.68
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .34 .67 .74 .69 .61
Realized and unrealized gain (loss)
on investments--net (.10) (.22) .60 (1.26) .90
---------- ---------- ---------- ---------- ----------
Total from investment operations .24 .45 1.34 (.57) 1.51
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.34) (.67) (.74) (.69) (.61)
Realized gain on investments--net -- -- -- -- (.14)
In excess of realized gain on
investments--net -- -- -- (.28) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.34) (.67) (.74) (.97) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 11.18 $ 11.28 $ 11.50 $ 10.90 $ 12.44
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.09%+++ 4.02% 12.73% (4.72%) 13.30%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.14%* 1.11% 1.11% 1.04% 1.07%*
Net Assets: Investment income--net 5.94%* 5.89% 6.61% 5.98% 5.61%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 190,615 $ 216,641 $ 212,146 $ 141,212 $ 134,122
========== ========== ========== ========== ==========
Portfolio turnover 40.58% 96.40% 142.84% 155.42% 180.52%
========== ========== ========== ========== ==========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
Class C
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.81
Operating ---------- ---------- ----------
Performance: Investment income--net .34 .67 .70
Realized and unrealized gain (loss) on investments
--net (.10) (.22) .69
---------- ---------- ----------
Total from investment operations .24 .45 1.39
---------- ---------- ----------
Less dividends from investment income--net (.34) (.67) (.70)
---------- ---------- ----------
Net asset value, end of period $ 11.18 $ 11.28 $ 11.50
========== ========== ==========
Total Investment Based on net asset value per share 2.07%+++ 3.99% 13.25%+++
Return:** ========== ========== ==========
Ratios to Average Expenses 1.18%* 1.15% 1.14%*
Net Assets: ========== ========== ==========
Investment income--net 5.91%* 5.86% 6.24%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 7,823 $ 10,144 $ 6,806
Data: ========== ========== ==========
Portfolio turnover 40.58% 96.40% 142.84%
========== ========== ==========
<CAPTION>
Class D
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
<PAGE> March 31, Sept. 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.81
Operating ---------- ---------- ----------
Performance: Investment income--net .36 .72 .74
Realized and unrealized gain (loss) on investments
--net (.10) (.22) .69
---------- ---------- ----------
Total from investment operations .26 .50 1.43
---------- ---------- ----------
Less dividends from investment income--net (.36) (.72) (.74)
---------- ---------- ----------
Net asset value, end of period $ 11.18 $ 11.28 $ 11.50
========== ========== ==========
Total Investment Based on net asset value per share 2.30%+++ 4.46% 13.65%+++
Return:** ========== ========== ==========
Ratios to Average Expenses .72%* .71% .70%*
Net Assets: ========== ========== ==========
Investment income--net 6.37%* 6.32% 6.81%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 54,720 $ 33,270 $ 16,349
Data: ========== ========== ==========
Portfolio turnover 40.58% 96.40% 142.84%
========== ========== ==========
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 investment company consisting of three separate
portfolios: the High Income Portfolio, the Investment Grade
Portfolio and the Intermediate Term Portfolio ("Portfolios" or
"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 presented. 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 mainte-nance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
(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 (in the case of the Investment Grade and
Intermediate Term Portfolios) or at the mean of the most recent bid
and asked prices (in the case of the High Income Portfolio) 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. Interest rate futures contracts and
options thereon, which are traded on exchanges, are valued at their
closing price at the close of such exchanges. Securities and assets
for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of
the Board of Directors of the Fund, including valuations furnished
by a pricing service retained by the Fund which may use a matrix
system for valuations.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended 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 collateral 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.
* 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 exercise 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 loss or gain to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing 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
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend 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.
<PAGE>
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
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, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the average daily value of the Fund's net assets.
Aggregate of Average Rate of Advisory Fee
Daily Net Assets of High Investment Intermediate
The Three Combined Income Grade Term
Portfolios Portfolio Portfolio Portfolio
Not exceeding
$250 million 0.55% 0.50% 0.50%
In excess of $250 million
but not more than
$500 million 0.50% 0.45% 0.45%
In excess of $500 million
but not more than
$750 million 0.45% 0.40% 0.40%
In excess of $750 million 0.40% 0.35% 0.35%
<PAGE>
Pursuant to the distribution plans (the "Distribution Plan") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor ongoing account
maintenance and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets
of the shares as follows:
Account Distribution
Maintenance Fees Fees
Class B Class C Class D Class B Class C
High Income
Portfolio 0.25% 0.25% 0.25% 0.50% 0.55%
Investment
Grade Portfolio 0.25% 0.25% 0.25% 0.50% 0.55%
Intermediate
Term Portfolio 0.25% 0.25% 0.10% 0.25% 0.25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. 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, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D Shares as
follows:
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
High Income $17,759 $82,507 $165,721 $815,272
Investment Grade 2,349 5,844 23,098 58,113
Intermediate Term 142 622 2,027 7,429
NOTES TO FINANCIAL STATEMENTS (continued)
<PAGE>
For the six months ended March 31, 1997, MLPF&S received contingent
deferred sales charges of $5,142,964 relating to transactions in
Class B Shares, amounting to $3,347,132, $1,500,673, and $295,159 in
the High Income, Investment Grade, and Intermediate Term Portfolios,
respectively, $148,572 relating to transactions in Class C Shares,
amounting to $123,903, $22,595 and $2,074 in the High Income,
Investment Grade, and Intermediate Term Portfolios, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1997, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $8,647 for
security price quotations to compute the net asset value of the
Fund.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1997 were as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Purchases $1,654,069,879 $1,008,680,066 $187,676,094
============== ============== ============
Sales $1,033,512,907 $1,048,277,154 $202,858,710
============== ============== ============
Net realized and unrealized gains (losses) as of March 31, 1997 were
as follows:
Realized Unrealized
High Income Portfolio Losses Losses
Long-term investments $(2,640,080) $ (31,858,855)
Short-term investments (1,166) --
----------- -------------
Total $(2,641,246) $ (31,858,855)
=========== =============
<PAGE>
Realized Unrealized
Investment Grade Portfolio Gains Losses
Long-term investments $ 5,220,391 $ (26,840,471)
----------- -------------
Total $ 5,220,391 $ (26,840,471)
=========== =============
Realized Unrealized
Intermediate Term Portfolio Gains Losses
Long-term investments $ 709,579 $ (9,554,709)
----------- -------------
Total $ 709,579 $ (9,554,709)
=========== =============
As of March 31, 1997, net unrealized appreciation (depreciation) for
Federal income tax purposes was as follows:
High Investment Intermediate
Income Grade Term
Portfolio Portfolio Portfolio
Gross unrealized
appreciation $ 244,602,995 $ 5,760,762 $ 1,383,753
Gross unrealized
depreciation (276,461,850) (32,601,233) (10,938,462)
------------- ------------ ------------
Net unrealized
depreciation $ (31,858,855) $(26,840,471) $ (9,554,709)
============= ============ ============
The aggregate cost of investments at March 31, 1997 for Federal
income tax purposes was $6,531,940,362 for the High Income
Portfolio, $1,416,484,732 for the Investment Grade Portfolio, and
$470,930,891 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, 1997 was
$824,340,288 for the High Income Portfolio, $(45,777,736) for the
Investment Grade Portfolio and $(6,765,135) for the Intermediate
Term Portfolio. Net increase in net assets derived from capital
share transactions for the year ended September 30, 1996, was
$1,376,309,947 for the High Income Portfolio, $350,127,963 for the
Investment Grade Portfolio and $32,787,882 for the Intermediate Term
Portfolio.
Transactions in capital shares for each class were as follows:
<PAGE>
High Income Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 16,620,753 $ 133,066,522
Shares issued to shareholders
in reinvestment of dividends 2,743,561 21,943,384
------------ --------------
Total issued 19,364,314 155,009,906
Shares redeemed (13,343,528) (106,775,174)
------------ --------------
Net increase 6,020,786 $ 48,234,732
============ ==============
High Income Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 17,653,142 $ 138,206,292
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,577,702 43,685,460
------------ --------------
Total issued 23,230,844 181,891,752
Shares redeemed (19,467,577) (152,268,118)
------------ --------------
Net increase 3,763,267 $ 29,623,634
============ ==============
High Income Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 99,818,917 $ 798,262,362
Shares issued to shareholders
in reinvestment of dividends 11,106,656 88,898,544
------------ --------------
Total issued 110,925,573 887,160,906
Automatic conversion of
shares (1,362,579) (10,882,828)
Shares redeemed (43,663,390) (349,135,287)
------------ --------------
Net increase 65,899,604 $ 527,142,791
============ ==============
<PAGE>
High Income Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 182,572,014 $1,430,080,855
Shares issued to shareholders
in reinvestment of dividends
and distributions 19,579,491 153,319,965
------------ --------------
Total issued 202,151,505 1,583,400,820
Automatic conversion of
shares (2,223,768) (17,369,063)
Shares redeemed (77,015,717) (603,076,378)
------------ --------------
Net increase 122,912,020 $ 962,955,379
============ ==============
High Income Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 22,106,720 $ 176,951,231
Shares issued to shareholders
in reinvestment of dividends 1,267,001 10,147,785
------------ --------------
Total issued 23,373,721 187,099,016
Shares redeemed (7,194,926) (57,565,581)
------------ --------------
Net increase 16,178,795 $ 129,533,435
============ ==============
High Income Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 35,104,878 $ 275,231,433
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,535,893 12,030,927
------------ --------------
Total issued 36,640,771 287,262,360
Shares redeemed (8,274,123) (64,777,972)
------------ --------------
Net increase 28,366,648 $ 222,484,388
============ ==============
<PAGE>
High Income Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 18,799,578 $ 150,382,514
Automatic conversion of shares 1,358,518 10,882,828
Shares issued to shareholders
in reinvestment of dividends 933,217 7,475,481
------------ --------------
Total issued 21,091,313 168,740,823
Shares redeemed (6,167,755) (49,311,493)
------------ --------------
Net increase 14,923,558 $ 119,429,330
============ ==============
High Income Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 45,431,713 $ 356,012,837
Automatic conversion of
shares 2,222,223 17,369,063
Shares issued to shareholders
in reinvestment of dividends
and distributions 997,894 7,813,928
------------ --------------
Total issued 48,651,830 381,195,828
Shares redeemed (28,082,126) (219,949,282)
------------ --------------
Net increase 20,569,704 $ 161,246,546
============ ==============
Investment Grade Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 17,744,846 $ 201,399,642
Shares issued to shareholders
in reinvestment of dividends 855,189 9,674,516
------------ --------------
Total issued 18,600,035 211,074,158
Shares redeemed (16,524,091) (187,798,316)
------------ --------------
Net increase 2,075,944 $ 23,275,842
============ ==============
<PAGE>
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 21,512,307 $ 245,167,944
Shares issued to shareholders
in reinvestment of dividends 1,723,312 19,614,975
------------ --------------
Total issued 23,235,619 264,782,919
Shares redeemed (9,749,755) (110,603,218)
------------ --------------
Net increase 13,485,864 $ 154,179,701
============ ==============
Investment Grade Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
<PAGE>
Shares sold 6,705,338 $ 75,749,969
Shares issued to shareholders
in reinvestment of dividends 1,222,176 13,823,676
------------ --------------
Total issued 7,927,514 89,573,645
Automatic conversion of
shares (227,016) (2,571,223)
Shares redeemed (13,857,443) (156,470,705)
------------ --------------
Net decrease (6,156,945) $ (69,468,283)
============ ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 25,682,986 $ 293,704,255
Shares issued to shareholders
in reinvestment of dividends 2,302,336 26,218,517
------------ --------------
Total issued 27,985,322 319,922,772
Automatic conversion of
shares (492,211) (5,556,607)
Shares redeemed (17,518,653) (199,596,946)
------------ --------------
Net increase 9,974,458 $ 114,769,219
============ ==============
NOTES TO FINANCIAL STATEMENTS (concluded)
Investment Grade Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 1,119,321 $ 12,661,681
Shares issued to shareholders
in reinvestment of dividends 122,228 1,382,582
------------ --------------
Total issued 1,241,549 14,044,263
Shares redeemed (1,756,532) (19,840,538)
------------ --------------
Net decrease (514,983) $ (5,796,275)
============ ==============
<PAGE>
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 4,830,230 $ 55,222,029
Shares issued to shareholders
in reinvestment of dividends 170,995 1,937,935
------------ --------------
Total issued 5,001,225 57,159,964
Shares redeemed (1,426,919) (16,176,400)
------------ --------------
Net increase 3,574,306 $ 40,983,564
============ ==============
Investment Grade Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 1,542,703 $ 17,439,068
Automatic conversion of
shares 226,815 2,571,223
Shares issued to shareholders
in reinvestment of dividends 123,999 1,402,713
------------ --------------
Total issued 1,893,517 21,413,004
Shares redeemed (1,345,153) (15,202,024)
------------ --------------
Net increase 548,364 $ 6,210,980
============ ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 4,314,720 $ 49,192,753
Automatic conversion of
shares 491,987 5,556,607
Shares issued to shareholders
in reinvestment of dividends 169,863 1,927,735
------------ --------------
Total issued 4,976,570 56,677,095
Shares redeemed (1,448,119) (16,481,616)
------------ --------------
Net increase 3,528,451 $ 40,195,479
============ ==============
<PAGE>
Intermediate Term Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 6,385,422 $ 72,732,305
Shares issued to shareholders
in reinvestment of dividends 316,737 3,610,270
------------ --------------
Total issued 6,702,159 76,342,575
Shares redeemed (6,889,764) (78,448,065)
------------ --------------
Net decrease (187,605) $ (2,105,490)
============ ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 7,219,026 $ 82,894,354
Shares issued to shareholders
in reinvestment of dividends 697,766 8,005,089
------------ --------------
Total issued 7,916,792 90,899,443
Shares redeemed (7,646,836) (87,796,852)
------------ --------------
Net increase 269,956 $ 3,102,591
============ ==============
Intermediate Term Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 2,128,934 $ 24,262,451
Shares issued to shareholders
in reinvestment of dividends 371,526 4,234,173
------------ --------------
Total issued 2,500,460 28,496,624
Automatic conversion of
shares (67,631) (771,693)
Shares redeemed (4,587,805) (52,201,562)
------------ --------------
Net decrease (2,154,976) $ (24,476,631)
============ ==============
<PAGE>
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 8,947,464 $ 102,809,743
Shares issued to shareholders
in reinvestment of dividends 750,062 8,601,518
------------ --------------
Total issued 9,697,526 111,411,261
Automatic conversion of
shares (94,088) (1,066,696)
Shares redeemed (8,841,519) (101,696,552)
------------ --------------
Net increase 761,919 $ 8,648,013
============ ==============
Intermediate Term Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 138,977 $ 1,584,391
Shares issued to shareholders
in reinvestment of dividends 18,931 215,804
------------ --------------
Total issued 157,908 1,800,195
Shares redeemed (357,430) (4,068,630)
------------ --------------
Net decrease (199,522) $ (2,268,435)
============ ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 807,328 $ 9,279,082
Shares issued to shareholders
in reinvestment of dividends 36,273 415,777
------------ --------------
Total issued 843,601 9,694,859
Shares redeemed (536,033) (6,197,495)
------------ --------------
Net increase 307,568 $ 3,497,364
============ ==============
<PAGE>
Intermediate Term Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1997 Shares Amount
Shares sold 2,336,826 $ 26,542,392
Automatic conversion of
shares 67,631 771,693
Shares issued to shareholders
in reinvestment of dividends 76,743 873,962
------------ --------------
Total issued 2,481,200 28,188,047
Shares redeemed (535,805) (6,102,626)
------------ --------------
Net increase 1,945,395 $ 22,085,421
============ ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 2,494,925 $ 28,661,987
Automatic conversion of
shares 94,087 1,066,696
Shares issued to shareholders
in reinvestment of dividends 95,536 1,090,298
------------ --------------
Total issued 2,684,548 30,818,981
Shares redeemed (1,156,648) (13,279,067)
------------ --------------
Net increase 1,527,900 $ 17,539,914
============ ==============
5. Loaned Securities:
At March 31, 1997, the Investment Grade Portfolio held US Treasury
Bonds/Notes having an aggregate value of approximately $10,340,000
as collateral for Portfolio securities loaned, having a market value
of approximately $10,438,000. The Intermediate Term Portfolio held
US Treasury Bonds/Notes having an aggregate value of approximately
$14,859,000 as collateral for Portfolio securities loaned, having a
market value of approximately $15,078,000.
<PAGE>
6. Capital Loss Carryforward:
At September 30, 1996, the Fund had a net capital loss carryforward
of approximately $4,727,000 in the High Income Portfolio, all of
which expires in 1999; approximately $34,388,000 in the Investment
Grade Portfolio, all of which expires in 2003; and approximately
$10,707,000 in the Intermediate Term Port-folio, all of which
expires in 2003. These amounts will be available to offset like
amounts of any future taxable gains.
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
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
