MERRILL LYNCH
ASSET BUILDER
PROGRAM, INC.
FUND LOGO
Annual Report
January 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Program unless
accompanied or preceded by the Program'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
Asset Builder Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Asset Builder Program, Inc.
Officers and
Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Joel Heymsfeld, Vice President
Gregory Mark Maunz, Vice President
Kevin M. Rendino, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secratary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
DEAR SHAREHOLDER
We are pleased to provide you with this first annual report for
Merrill Lynch Asset Builder Program, Inc. The Program consists of
four separate diversified portfolios, each with its own investment
objectives.
Complete performance information, including aggregate total returns,
for all four portfolios can be found on pages 6--11 of this report
to shareholders.
Merrill Lynch Fundamental
Value Portfolio
As 1995 drew to a close, the pace of US economic activity apparently
slowed. Although the Government shutdown affected the timely release
of key Government economic growth data, the statistics released
showed weak retail sales, increased unemployment claims and weak job
and income growth. Against this backdrop of a slowing economy, the
Federal Reserve Board continued to ease monetary policy at the
December 19, 1995 and January 31, 1996 Federal Open Market Committee
meetings. Concerns over corporate earnings caused dramatic
underperformance of cyclical stocks compared to more stable blue-
chip growth stocks, although much of the divergence narrowed
recently. We used this period of weakness to add to our weighting in
stocks more sensitive to changes in the economy including Beazer
Homes USA, Inc., USX-US Steel Group, and WHX Corp.
The economy slowed enough to cause uncertainty in the earnings for
many of our holdings, but valuations remain quite attractive. As of
January quarter-end, the stock market had reached record highs, had
not experienced a 10% correction in over five years, and was trading
at 3.7 times book value, 18.7 times trailing earnings, and averaged
a 2.2% dividend yield: all at historically record valuation levels.
While we are not suggesting an impending correction, and are not
market timers, we remained disciplined in selecting stocks that fit
our strict valuation parameters. Therefore, the Portfolio trades at
1.8 times book value, 10 times trailing earnings and with a
comparable market yield, making this a true value fund. We do not
expect to alter this strategy and attempt to chase expensive stocks
in an effort to keep pace with the overall stock market.
<PAGE>
During the January quarter, we invested $7.5 million to add to 20 of
our existing positions and establish eight new positions. Our
biggest investment was the addition of International Business
Machines Corp. After the stock reached a high of $113 in mid-1995
following a broad restructuring plan initiated by new management
several years ago, IBM stock came under severe pressure because of
concerns about its acquisition of Lotus Corp., and confusion over
the long-term strategy of increasing IBM's revenues. At our average
cost of $89 per share, IBM was trading at 7.3 times 1996 earnings
estimates, a level we found compelling. We remain convinced that
over time, new management will outline a long-term strategy that
will ease investor concerns and help IBM resume its turnaround.
During the quarter ended January 31, 1996, we also purchased
National Semiconductor Corp., whose shares came under pressure
because of concerns of oversupply in the semiconductor industry.
Although it is apparent that order trends slowed slightly for
National Semiconductor Corp. because of excess inventories at
cellular customers like Motorola Inc. and Nokia Corp., its stock is
trading at 8.2 times 1996 fiscal year estimates and 6.5 times
anticipated 1997 results. We view the current slump in the
semiconductor industry as temporary and expect a resumption of
growth in the second half of the calendar year. Other new
investments during the quarter ended January 31, 1996, included
American Exploration Co., Century Communications Corp., FelCor Suite
Hotels, Inc., Lone Star Technologies, Inc., NationsBank Corp., and
Norwest Corp.
During the January quarter, we exited our unprofitable position in
Kmart Corp. Weak retail sales coupled with Kmart's difficult
challenge of competing with Wal-Mart and Target led to weak earnings
at Kmart. We believe it is likely that the necessary financial
restructuring will be done at the dilutive expense of the common
equity shareholder. We also eliminated our positions in Bay View
Capital Corp. and SPX Corp. with gains, and The Limited, Inc., Simon
Property Group, Inc., and Unisys Corp. with losses.
Fiscal Year in Review
We concluded the Portfolio's first year of operation with an
attractive absolute return which far exceeded the historical norm
for stocks. However, our strategy of investing part of our assets in
small-capitalization value companies hurt overall performance as
small-cap companies significantly underperformed big multinational
companies in 1995 and early 1996. We continue to believe that our
overweighting in cyclicals will be rewarded as the Federal Reserve
Board continues to ease interest rates in order to stimulate the
economy. After the recent uptrend in the US stock market, we expect
more modest gains in upcoming months, and will continue to select
stocks that meet our strict valuation measures.
Merrill Lynch Global Opportunity Portfolio
As of January 31, 1996, the Portfolio's asset allocation was: US
stocks, 17% of net assets; foreign stocks, 24%; US bonds, 14%;
foreign bonds, 7%; and cash, 38%.
<PAGE>
The cash reserve position at January 31, 1996, reflected the
significant increase undertaken during the last two months of 1995,
mainly as a result of reducing foreign equity positions. Evidence of
slowing European economic growth led us to maintain a highly
selective approach. Our new investments included companies whose
restructuring efforts should lead to improved long-term earnings,
such as Philips Electronics N.V. and Compagnie Generale des
Establissement Michelin S.A. We also established a position in
Sandoz AG based on the exceptional potential of the company's
product pipeline.
In Asia, the largest concentration of Portfolio assets is in
telecommunications companies, including Hong Kong Telecommunications
Ltd., P.T. Indonesian Satellite Corp. and Philippine Long Distance
Telephone Co. We recently expanded the Portfolio's Asian
representation through positions in HSBC Holdings Ltd. and San
Miguel Corp.
In Latin America, Argentina accounted for the largest Portfolio
representation because we believe that investors there are beginning
to be rewarded for the country's decision not to devalue its
currency. New Latin American positions were established in
Panamerican Beverages Inc. and Telecomunicacoes Brasileiras S.A.
Japan remained the largest country representation outside the United
States, accounting for 9.7% of Portfolio net assets. An aggressively
accommodative stance by the Bank of Japan, and indications that the
Japanese government is dealing with the problems of the financial
system in a meaningful way, led us to remain favorably disposed
toward Japan. At the same time, the Japanese economy is showing
signs of beginning a recovery, a result of its reflationary monetary
policy and a weaker yen. We believe that the yen could continue to
weaken relative to the US dollar. Therefore, approximately two-
thirds of the market value of our yen-denominated holdings is hedged
back into US dollars.
In the US equity sector, significant commitments were retained in
sectors which we expect to perform well in sluggish environments,
including consumer staples, financial services and energy. A modest
weighting was also maintained in technology-related equities,
including Corning Inc., General Motors Corp. (Class E) and Texas
Instruments Inc. At the same time, we expect the Federal Reserve
Board to react to the sluggish US economy by continuing to ease
monetary policy in upcoming months. We retained commitments in early
cycle equities which could appreciate on the expectation that lower
short-term interest rates will lead to somewhat stronger economic
activity as 1996 progresses. Equities which have this potential
include consumer cyclicals such as Ford Motor Co., Whirlpool
Corporation and Sears, Roebuck & Company.
<PAGE>
The Portfolio's position in high-yield US bonds was unchanged during
the quarter ended January 31, 1996. We believe that the potential
exists for further declines in intermediate-term and long-term US
interest rates during 1996. The catalyst for further interest rate
declines will come from evidence that the US inflation rate is
likely to remain at historically low levels. Given this outlook, our
US commitments should prove rewarding on a total return basis over
the next six months to twelve months. We also retained positions in
UK and Canadian bonds in view of their appeal relative to other
overseas fixed-income investments.
We are not uncomfortable with maintaining a relatively large cash
reserve position over the near term. The US stock market has enjoyed
a strong uptrend since late 1994 and a temporary reversal seems
possible. Such a pullback could present increased opportunities for
the establishment of additional US equity commitments at attractive
valuations. We also intend to take advantage of opportunities in
foreign equities in the months ahead.
Fiscal Year in Review
The primary positive contributor to overall Portfolio returns was
the US equity sector, since the US stock market was among the
highest returning equity markets during the year ended January 31,
1996. Even with a strong uptrend for a number of emerging markets in
January 1996, the returns of other equity markets represented in the
Portfolio lagged the US market. Although returns on high-yield US
bonds and foreign fixed-income securities were attractive on a
historical basis, overall bond returns lagged those of US equities.
The cash position also held down the Portfolio's return during the
year ended January 31, 1996.
Merrill Lynch Quality Bond Portfolio
The Portfolio commenced operations at a favorable time. The bond
market experienced one of its strongest rallies in several years as
the domestic economy showed a significant deceleration from the 1994
pace. In addition, the economic data released during 1995 reinforced
the perception that the economy had achieved a soft landing. The
torrid economic growth seen in the fourth quarter of 1994 slowed
without a corresponding increase in inflationary pressures. The
Federal Reserve Board's earlier efforts to guard against significant
price increases by raising the Federal Funds rate seven times in
1994 and early 1995, was effective. Consumer prices rose just 2.5%
in 1995, the smallest increase in a decade. Real wages, the key
factor that determines the economy's core rate of inflation, rose by
the smallest amount since the government started tracking the
statistics in 1982. Bond yields dropped during the first six months
of 1995 and then began to rise slightly in July because investors
feared that these same lower rates would begin to overly stimulate
the economy. However, inflation remained contained because of the
absence of significant price pressures. Interest rates resumed their
downward trend in August, and have remained in a narrow trading
range since the beginning of December. The Federal Reserve Board
began to ease short-term interest rates in July, and cut interest
rates again in December and January.
<PAGE>
A note of confusion was added to the market during the January
quarter by the deadlock of budget discussions in Washington. The
Government appeared mired in a power struggle between two separate
ideologies and political agendas during an election year. The
resulting stalemate slowed the rally, although bond market investors
remained optimistic because of the Federal Reserve Board's easing of
monetary policy, the lack of inflationary pressures, and the
continued weakening economy.
Fiscal Year in Review
Total investment returns of the Quality Bond Portfolio's Class A,
Class B, Class C and Class D Shares were +9.22%, +8.35%, +8.27%, and
+8.98%, respectively, from its inception (February 1, 1995) to
January 31, 1996.
The Portfolio commenced with an asset base of $2 million, which grew
to over $6 million during the fiscal year. The Portfolio's
investment guidelines (as detailed in the Program's prospectus)
restrict holding more than 5% of the Portfolio in one investment,
preventing us from purchasing more than $300,000 per position.
Therefore, we needed to find many diversified issuers that were
consistent with our investment objectives and research outlook. In
addition to cash purchases, we achieved our performance through
judicious swapping among portfolio holdings. We extended the average
portfolio maturity from 5.9 years at the outset of the fiscal year
to 9.0 years by January 31, 1996.
Total returns of the Portfolio were +3.72%, +3.61%, +3.59%, and
+3.76%, for Class A, Class B, Class C and Class D Shares,
respectively, for the quarter ended January 31, 1996. This compares
with a +4.06% total return for the Merrill Lynch C0A0 Corporate
Master Bond Index. There is a difference in returns because the
average cash position of the Portfolio was about 15% during the
January quarter, a result of the investment restrictions described
earlier.
Merrill Lynch US Government
Securities Portfolio
The Portfolio's initial fiscal year encompassed a strong bull market
for fixed-income securities. Yield declines on the five-year
Treasury note and 30-year Treasury bond were 227 basis points
(2.27%) and 167 basis points, respectively. Their yields at fiscal
year-end were 5.23% and 6.02%. The decline in interest rates
resulted in extremely attractive returns as all US Treasury notes
and bonds with maturities of two years and longer experienced double-
digit total returns for the fiscal year.
<PAGE>
The rally in 1995 was sizable. However, only long-term maturities
recovered fully from the rise in interest rates that took place in
1994. This is especially true for the short end of the yield curve,
where the three-month Treasury bill only declined 95 basis points.
Currently, the ten-year Treasury note yield is 22 basis points below
its year-end 1993 level and the one-year Treasury bill is 131 basis
points higher. This exemplifies the flattening of the yield curve.
Economic data released during 1995 indicated a slowing economy.
Gross domestic product (GDP) growth was forecast at 2.6% for 1995
and even slower for 1996. Retail sales for the holiday period
appeared weak, signaling a possible retrenchment by consumers.
Consumer activity represents two-thirds of the GDP, and consumers
are currently saddled with record levels of debt.
The Leading Economic Indicators (LEI) Index increased only two
months in 1995, and during the Portfolio's fiscal year was negative
for four consecutive months. We reported in our July 31, 1995
shareholders' letter that a negative LEI for three consecutive
months has been a predictor of all nine recessions since World War
II, but has also occurred three times when a recession did not
follow.
The National Association of Purchasing Managers (NAPM) Index surveys
purchasing managers for information relating to the manufacturing
sector. A rating below 50 indicates a contraction in the
manufacturing sector. The NAPM Index has been below 50 for each of
the last six months. In addition, housing starts continued to
decline since August 1995, although the decline in interest rates
has meant very attrac-tive mortgage financing. This decline, in
turn, does not bode well for durable goods expenditures which turned
negative in October 1995.
The good news is that inflation remains well under control as the
Consumer Price Index (CPI) was 2.6% for the 12-month period ended
January 31, 1996 and is slowing. In addition, the CPI annualized
rate was only 1.8% for the past six months. We expect the Federal
Reserve Board to respond to the combination of slow growth and low
inflation and further reduce short-term interest rates in attempting
to achieve a soft landing for the economy.
Federal Reserve Board Chairman Alan Greenspan appears intent on
controlling inflation. Therefore, with low inflation, real interest
rates are high, especially at the short end of the yield curve. Long-
term interest rates are at appropriate levels given the rate of
inflation, but near term there is uncertainty regarding the budget
negotiations between Congress and President Clinton which may cause
fluctuations within a trading range. Although 1996 may be a more
temperate year for returns on fixed-income investments, the expected
steepening of the yield curve will provide many opportunities. Also,
there will be a greater focus on yield and coupon flow as these
components will play a more important role in investment return.
<PAGE>
Our investment strategy focused on maintaining a balance between
yield and potential price appreciation. An example of this was the
purchase of FHLMC pool #555228, an 11.50% coupon security backed by
seasoned (aged 15 years) high interest rate mortgages. Reflecting
the 18% prepayment rate experienced during the January quarter, the
pool generated income at a rate of 8.73%. We intend to maintain our
position in this pool since we feel that the age and low balances of
the underlying mortgages will not result in a material increase in
prepayments even in a low interest rate environment.
Fiscal Year in Review
The Portfolio was well positioned to benefit from declining interest
rates during the early months of the fiscal year as Treasury
securities exceeded 50% of the Portfolio with an average maturity of
8.5 years. We pared the Treasury position as the year progressed and
adopted a relatively neutral view about interest rates. By January
31, 1996, we maintained an 11% position in Treasury issues including
8% in a zero coupon which matures in August 2000. Treasury
securities primarily provide duration to the Portfolio and are most
price sensitive with interest rate changes. Mortgage-backed
securities (MBS) comprised 85% of the Portfolio by fiscal year-end.
MBS provide significant yield advantage over Treasury issues, and
the majority of MBS in the portfolio have reasonable price-
sensitivity characteristics. The Portfolio had a 4.7% cash position
at the close of January.
We anticipate 1996 to be an environment which is favorable for MBS,
and expect the yield curve to steepen via a decline in short-term
interest rates. Given the cash flow mechanism of MBS, this scenario
would be a positive event for the Portfolio.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kevin M. Rendino)
Kevin M. Rendino
Vice President and Portfolio Manager
<PAGE>
(Joel Heymsfeld)
Joel Heymsfeld
Vice President and Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
(Gregory Mark Maunz)
Gregory Mark Maunz
Vice President and Portfolio Manager
March 14, 1996
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Program through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees for Fundamental Value and Global Opportunity
Portfolios. Quality Bond and US Government Securities Portfolios
incur a maximum initial sales charge (front-end load) of 4% and bear
no ongoing distribution or account maintenance fees.Class A Shares
are available only to eligible investors.
<PAGE>
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Fundamental Value,
Global Opportunity, Quality Bond and US Government Securities
Portfolios. In addition, Quality Bond and US Government Securities
Portfolios are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. Fundamental Value and Global Opportunity
Portfolios are subject to a 0.75% distribution fee and a 0.25%
account maintenance fee. Fundamental Value and Global Opportunity
Portfolios automatically convert to Class D Shares after
approximately 8 years. Quality Bond and US Government Securities
Portfolios automatically convert to Class D Shares after
approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Quality Bond and US Government
Securities Portfolios. Fundamental Value and Global Opportunity
Portfolios are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to
a 1% contingent deferred sales charge if redeemed within one year of
purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee) for
Fundamental Value and Global Opportunity Portfolios. Quality Bond
and US Government Securities Portfolios incur a maximum initial
sales charge of 4% and an account maintenance fee of 0.25% (but no
distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Total Return
Based on a
$10,000
Investment--
Fundamental
Value
Portfolio
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares and Class B Shares compared to growth
of an investment in the S&P 500 Index. Beginning and ending values
are:
<PAGE>
2/01/95** 1/96
Fundamental Value Portfolio++--
Class A Shares* $ 9,475 $11,380
Fundamental Value Portfolio++--
Class B Shares* $10,000 $11,489
S&P 500 Index++++ $10,000 $13,862
A line graph depicting the growth of an investment in the
Portfolio's Class C Shares and Class D Shares compared to growth
of an investment in the S&P 500 Index. Beginning and ending values
are:
2/01/95** 1/96
Fundamental Value Portfolio++--
Class C Shares* $10,000 $11,789
Fundamental Value Portfolio++--
Class D Shares* $ 9,475 $11,360
S&P 500 Index++++ $10,000 $13,862
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Fundamental Value Portfolio invests in equities, primarily common
stocks and, to a lesser extent, securities convertible into common
stock, as well as preferred stocks and non-convertible debt securities.
++++This unmanaged broad-based Index is comprised of common stocks.
Aggregate
Total Returns--
Fundamental
Value
Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Inception (2/01/95) to 12/31/95 +20.20% +13.89%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 12/31/95 +19.10% +15.10%
[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*
Inception (2/01/95) to 12/31/95 +19.10% +18.10%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 12/31/95 +20.00% +13.70%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
Total Return
Based on a
$10,000
Investment--
Global
Opportunity
Portfolio
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares and Class B Shares compared to growth
of an investment in the Morgan Stanley Capital International
World Index and the Salomon Brothers World Government Bond
Index. Beginning and ending values are:
2/01/95** 1/96
Global Opportunity Portfolio++--
Class A Shares* $ 9,475 $10,531
Global Opportunity Portfolio++--
Class B Shares* $10,000 $10,589
Morgan Stanley Capital International
World Index++++ $10,000 $12,478
Salomon Brothers World Government
Bond Index++++++ $10,000 $11,515
A line graph depicting the growth of an investment in the
Portfolio's Class C Shares and Class D Shares compared to growth
of an investment in the Morgan Stanley Capital International
World Index and the Salomon Brothers World Government Bond
Index. Beginning and ending values are:
2/01/95** 1/96
Global Opportunity Portfolio++--
Class C Shares* $10,000 $10,881
Global Opportunity Portfolio++--
Class D Shares* $ 9,475 $10,498
Morgan Stanley Capital International
World Index++++ $10,000 $12,478
<PAGE>
Salomon Brothers World Government
Bond Index++++++ $10,000 $11,515
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Global Opportunity Portfolio invests in a portfolio of US
and foreign equity, debt and money market securities.
++++This unmanaged market capitalization-weighted Index is
comprised of an representative sampling of stocks of large-,
medium-, and small-capitalization companies in 22 countries,
including the United States.
++++++This unmanaged market capitalization-weighted Index
tracks the performance of the government bond markets
of Australia, Austria, Belgium, Canada, Denmark, France,
Germany, Italy, Japan, the Netherlands, Spain, Sweden, the
United Kingdom and the United States.
Aggregate
Total Returns--
Global
Opportunity
Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 12/31/95 +9.50% +3.75%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 12/31/95 +8.35% +4.35%
<PAGE>
[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*
Inception (2/01/95) to 12/31/95 +8.28% +7.28%
[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*
Inception (2/01/95) to 12/31/95 +9.16% +3.43%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
Total Return
Based on a
$10,000
Investment--
Quality Bond
Portfolio
<PAGE>
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares and Class B Shares compared to growth
of an investment in the ML C0A0 Corporate Master Bond Index.
Beginning and ending values are:
2/01/95** 1/96
Quality Bond Portfolio++--
Class A Shares* $ 9,600 $10,485
Quality Bond Portfolio++--
Class B Shares* $10,000 $10,435
ML C0A0 Corporate Master
Bond Index++++ $10,000 $11,995
A line graph depicting the growth of an investment in the
Portfolio's Class C Shares and Class D Shares compared to growth
of an investment in the ML C0A0 Corporate Master Bond Index.
Beginning and ending values are:
2/01/95** 1/96
Quality Bond Portfolio++--
Class A Shares* $10,000 $10,727
Quality Bond Portfolio++--
Class B Shares* $ 9,600 $10,462
ML C0A0 Corporate Master
Bond Index++++ $10,000 $11,995
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Quality Bond Portfolio invests in a diversified portfolio
of debt obligations, including corporate bonds and notes,
convertible securities, preferred stocks and government
obligations. The Portfolio will invest primarily in securities
rated in the top three rating categories (A or better) of a
nationally recognized rating agency or in securities with
similar credit characteristics.
++++This unmanaged Index is comprised of all investment-grade
corporate bonds rated BB3 or higher, of all maturies.
Past performance is not predictive of future performance.
<PAGE>
Aggregate
Total Returns--
Quality Bond
Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 12/31/95 +8.79% +4.44%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 12/31/95 +7.86% +3.86%
[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*
Inception (2/01/95) to 12/31/95 +7.79% +6.79%
[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*
Inception (2/01/95) to 12/31/95 +8.46% +4.12%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Total Return
Based on a
$10,000
Investment--
US Government
Securities
Portfolio
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares and Class B Shares compared to growth
of an investment in the Salomon Brothers Mortgage Index.
Beginning and ending values are:
2/01/95** 1/96
US Government Securities Portfolio++--
Class A Shares* $ 9,600 $11,080
US Government Securities Portfolio++--
Class B Shares* $10,000 $11,052
Salomon Brothers Mortgage Index++++ $10,000 $11,509
A line graph depicting the growth of an investment in the
Portfolio's Class C Shares and Class D Shares compared to growth
of an investment in the Salomon Brothers Mortgage Index.
Beginning and ending values are:
2/01/95** 1/96
US Government Securities Portfolio++--
Class C Shares* $10,000 $11,335
US Government Securities Portfolio++--
Class D Shares* $ 9,600 $11,049
<PAGE>
Salomon Brothers Mortgage Index++++ $10,000 $11,509
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++US Government Securities Portfolio invests in marketable
securities issued or guaranteed by the US Government,
by various agencies of the US Government and by various
instrumentalities which have been established or sponsored
by the US Government.
++++This unmanaged Index reflects the performance of a capital
market weighting of the outstanding agency-issued mortgage-
backed securities.
Past performance is not predictive of future performance.
Aggregate
Total Returns--
US Government
Securities
Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 12/31/95 +13.97% + 9.41%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 12/31/95 +13.12% + 9.12%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/01/95) to 12/31/95 +13.06% +12.06%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 12/31/95 +13.76% + 9.21%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
Since Standardized
Inception++ 3 Month 30-day Yield
1/31/96 10/31/95 Inception++ % Change % Change As of 1/31/96
<S> <C> <C> <C> <C> <C> <C>
Fundamental Value Portfolio Class A Shares $11.67 $11.30 $10.00 +16.70% +3.27% --
Fundamental Value Portfolio Class B Shares 11.55 11.22 10.00 +15.50 +2.94 --
Fundamental Value Portfolio Class C Shares 11.55 11.22 10.00 +15.50 +2.94 --
Fundamental Value Portfolio Class D Shares 11.65 11.29 10.00 +16.50 +3.19 --
Global Opportunity Portfolio Class A Shares 10.82 10.71 10.00 + 8.20 +1.03 --
Global Opportunity Portfolio Class B Shares 10.76 10.62 10.00 + 7.60 +1.32 --
Global Opportunity Portfolio Class C Shares 10.75 10.62 10.00 + 7.50 +1.22 --
Global Opportunity Portfolio Class D Shares 10.80 10.69 10.00 + 8.00 +1.03 --
Quality Bond Portfolio Class A Shares 10.27 10.06 10.00 + 2.70 +2.09 5.64%
Quality Bond Portfolio Class B Shares 10.27 10.05 10.00 + 2.70 +2.19 5.12%
Quality Bond Portfolio Class C Shares 10.27 10.05 10.00 + 2.70 +2.19 5.07%
Quality Bond Portfolio Class D Shares 10.27 10.05 10.00 + 2.70 +2.19 5.40%
US Government Securities Portfolio Class A Shares 10.48 10.58 10.00 + 4.80 -0.95 6.38%
US Government Securities Portfolio Class B Shares 10.48 10.58 10.00 + 4.80 -0.95 5.90%
US Government Securities Portfolio Class C Shares 10.47 10.57 10.00 + 4.70 -0.95 5.85%
US Government Securities Portfolio Class D Shares 10.48 10.58 10.00 + 4.80 -0.95 6.14%
Fundamental Value Portfolio Class A Shares--Total Return +20.10(1) +6.28(1)
Fundamental Value Portfolio Class B Shares--Total Return +18.89(1) +5.97(1)
Fundamental Value Portfolio Class C Shares--Total Return +18.89(1) +5.97(1)
Fundamental Value Portfolio Class D Shares--Total Return +19.90(1) +6.20(1)
Global Opportunity Portfolio Class A Shares--Total Return +11.15(2) +3.78(2)
Global Opportunity Portfolio Class B Shares--Total Return + 9.89(3) +3.47(3)
Global Opportunity Portfolio Class C Shares--Total Return + 9.81(4) +3.40(4)
Global Opportunity Portfolio Class D Shares--Total Return +10.80(5) +3.65(5)
Quality Bond Portfolio Class A Shares--Total Return + 9.22(6) +3.72(7)
Quality Bond Portfolio Class B Shares--Total Return + 8.35(8) +3.61(9)
Quality Bond Portfolio Class C Shares--Total Return + 8.27(10) +3.59(11)
Quality Bond Portfolio Class D Shares--Total Return + 8.98(12) +3.76(13)
US Government Securities Portfolio Class A Shares--Total Return +15.42(14) +3.27(15)
US Government Securities Portfolio Class B Shares--Total Return +14.52(16) +3.06(17)
US Government Securities Portfolio Class C Shares--Total Return +14.35(18) +3.04(19)
US Government Securities Portfolio Class D Shares--Total Return +15.09(20) +3.20(21)
<PAGE>
<FN>
++The Program commenced operations on 2/01/95.
*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 $0.337 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.288 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.224 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.226 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.274 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.600 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.163 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.519 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.142 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.512 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.140 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.576 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.157 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.992 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.440 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.909 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.419 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.903 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.417 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.962 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.434 per share
ordinary income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Fundamental Value Portfolio
LATIN Shares Value Percent of
AMERICA Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Oil--International 30,000 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR)* $ 541,850 $ 678,750 2.2%
Total Investments in Argentina 541,850 678,750 2.2
Total Investments in Latin America 541,850 678,750 2.2
NORTH
AMERICA
United Auto--Related 45,000 ++National Auto Credit, Inc. 491,931 551,250 1.8
States
Automotive 10,000 Ford Motor Co. 266,380 296,250 0.9
10,000 General Motors Corp. 422,423 526,250 1.7
----------- ----------- ------
688,803 822,500 2.6
Banking 15,000 Bankers Trust New York Corp. 955,408 973,125 3.1
5,000 NationsBank Corp. 331,550 349,375 1.1
7,000 Norwest Corp. 224,104 240,625 0.8
----------- ----------- ------
1,511,062 1,563,125 5.0
Cable 50,000 ++Century Communications Corp. 418,750 381,250 1.2
Capital Goods 5,000 Eaton Corp. 259,915 290,000 0.9
Chemicals 7,000 Olin Corp. 506,329 576,625 1.8
Conglomerates 40,000 ++ADT Ltd. 477,625 580,000 1.8
Environmental 100,000 ++Allwaste Inc. 550,879 475,000 1.5
Services
Farm & Construction 15,000 Deere & Co. 432,225 562,500 1.8
Equipment
Financial Services 8,000 Student Loan Marketing Association 284,105 589,000 1.9
Home Builders 30,000 ++Beazer Homes USA, Inc. 489,300 581,250 1.8
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
NORTH Fundamental Value Portfolio (concluded)
AMERICA Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Hotels 41,400 ++John Q. Hammons Hotels, Inc. $ 508,238 $ 419,175 1.3%
States
(concluded) Information 10,000 International Business Machines Corp. 891,940 1,087,500 3.4
Processing 60,000 ++Tandem Computers, Inc. 672,118 562,500 1.8
----------- ----------- ------
1,564,058 1,650,000 5.2
Insurance 15,000 TIG Holdings, Ltd. 339,105 416,250 1.3
Medical Services 75,000 ++Applied Bioscience International Inc. 388,612 534,375 1.7
15,000 ++Foundation Health Corp. 474,225 648,750 2.1
----------- ----------- ------
862,837 1,183,125 3.8
Metals--Non-Ferrous 20,000 ASARCO Inc. 554,351 635,000 2.0
Oil--Domestic 50,000 ++American Exploration Co. 540,000 581,250 1.8
25,000 Occidental Petroleum Corp. 553,375 537,500 1.7
----------- ----------- ------
1,093,375 1,118,750 3.5
Oil/Gas Producers 60,000 ++Swift Energy Co. 514,699 720,000 2.3
Oil Refiners 60,000 Total Petroleum (North America) Ltd. 683,773 528,750 1.7
Oil--Related 30,000 ++TETRA Technologies, Inc. 364,150 472,500 1.5
Paper & Forest 14,000 International Paper Co. 532,450 572,250 1.8
Products
Pharmaceuticals 5,000 Bristol-Myers Squibb Co. 316,560 442,500 1.4
Photography 10,000 Eastman Kodak Co. 675,700 733,750 2.3
Real Estate 20,000 Bay Apartment Communities, Inc. 356,450 477,500 1.5
Investment Trusts 20,000 Camden Property Trust 450,613 482,500 1.5
20,000 Evans Withycombe Residential, Inc. 404,875 437,500 1.4
25,000 FelCor Suite Hotels, Inc. 662,500 740,625 2.3
----------- ----------- ------
1,874,438 2,138,125 6.7
<PAGE>
Restaurants 30,000 Darden Restaurants, Inc. 329,558 345,000 1.1
Retail 130,000 Charming Shoppes, Inc. 481,193 349,375 1.1
25,000 Dillard Department Stores Inc. 682,325 725,000 2.3
55,000 Woolworth Corp. 712,736 618,750 2.0
----------- ----------- ------
1,876,254 1,693,125 5.4
Savings & Loans 60,000 ++Greater New York Savings Bank 574,667 705,000 2.2
40,000 Klamath First Bancorp, Inc. 519,485 520,000 1.6
20,000 Washington Mutual Savings Bank 417,984 602,500 1.9
----------- ----------- ------
1,512,136 1,827,500 5.7
Semiconductors 25,000 ++National Semiconductor Corp. 523,623 431,250 1.4
Steel 10,300 ++Lone Star Technologies, Inc. 83,688 99,138 0.3
20,000 USX-US Steel Group 616,525 712,500 2.3
50,000 ++WHX Corp. 534,467 681,250 2.2
----------- ----------- ------
1,234,680 1,492,888 4.8
Technology 44,100 ++Computervision Corp. 513,108 545,737 1.7
45,000 ++Exabyte Corp. 630,075 607,500 1.9
90,000 ++Micronics Computers, Inc. 420,582 281,250 0.9
25,000 ++Storage Technology Corp. 578,074 662,500 2.1
45,000 ++SyQuest Technology, Inc. 502,325 337,500 1.1
30,000 ++Western Digital Corp. 513,861 555,000 1.8
----------- ----------- ------
3,158,025 2,989,487 9.5
Telecommunications 20,000 COMSAT Corporation 467,496 375,000 1.2
20,000 MCI Communications Corp. 436,950 570,000 1.8
----------- ----------- ------
904,446 945,000 3.0
Textiles 25,000 ++Burlington Industries, Inc. 281,265 318,750 1.0
Total Investments in the
United States 25,814,645 28,045,675 88.8
Total Investments in North America 25,814,645 28,045,675 88.8
SHORT-TERM Face
SECURITIES Amount
<PAGE>
Commercial Paper** $1,225,000 General Electric Capital Corp.,
5.90% due 2/01/1996 1,225,000 1,225,000 3.9
US Government 500,000 Federal Home Loan Bank, 5.42%
& Agency due 2/05/1996 499,699 499,699 1.5
Obligations** 1,000,000 Federal National Mortgage
Association, 5.42% due 2/13/1996 998,193 998,193 3.2
----------- ----------- ------
1,497,892 1,497,892 4.7
Total Investments in Short-Term
Securities 2,722,892 2,722,892 8.6
Total Investments $29,079,387 31,447,317 99.6
===========
Other Assets Less Liabilities 123,446 0.4
----------- ------
Net Assets $31,570,763 100.0%
=========== ======
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
rates paid at the time of purchase by the Portfolio.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Global Opportunity Portfolio
Face Value Percent of
COUNTRY Industries Amount* Corporate Bonds Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Cellular US$ 100,000 Rogers Communication, Inc., 10.875%
Telephones due 4/15/2004 $ 100,250 $ 106,000 0.4%
Chemicals 100,000 Acetex Corporation, 9.75% due
10/01/2003 (b) 99,563 103,500 0.4
<PAGE>
Conglomerates 200,000 Sherritt Gordon Ltd., 9.75% due
4/01/2003 192,500 216,750 0.9
Energy 100,000 Gulf Canada Resources, Ltd.,
9.25% due 1/15/2004 95,000 104,500 0.4
Financial Services 100,000 Groupe L'TEE Videotron, 10.625%
due 2/15/2005 99,375 109,250 0.4
Total Corporate Bonds in Canada 586,688 640,000 2.5
United Broadcasting & 125,000 The Katz Corp., 12.75% due 11/15/2002 129,625 138,750 0.6
States Publishing
Building & 100,000 Del E. Webb Corporation, 9.75% due
Construction 3/01/2003 86,000 102,000 0.4
Business 356,000 Bell Cablemedia PLC, 11.875% due
Publishing 9/15/2005 (a) (b) 208,907 234,515 0.9
Chemicals 205,000 G-I Holdings Inc., 11.64% due
10/01/1998 (a) 151,731 164,513 0.6
Communications 300,000 PanAmSat L.P., 11.08% due
8/01/2003 (a) 224,733 255,750 1.0
Consumer Products 280,000 Coleman Holdings, Inc., 9.96% due
5/27/1998 (a) 219,593 230,300 0.9
Cosmetics 100,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001 90,085 101,000 0.4
Energy 200,000 Maxus Energy Corp., 9.875% due
10/15/2002 182,250 204,000 0.8
250,000 Oleoducts Central S.A., 9.35%
due 9/01/2005 250,000 255,000 1.0
----------- ----------- ------
432,250 459,000 1.8
Entertainment 100,000 Marvel III Holdings, Inc., 9.125%
due 2/15/1998 93,500 93,000 0.4
Financial 200,000 Reliance Group Holdings, Inc.,
Services 9.75% due 11/15/2003 192,750 207,000 0.8
Health Care 100,000 Tenet Healthcare Corp., 10.125%
due 3/01/2005 100,000 112,000 0.5
Hotels 100,000 John Q. Hammons Hotels, Inc.,
8.875% due 2/15/2004 89,750 100,000 0.4
<PAGE>
Hotels & Casinos 200,000 Bally's Park Place Funding Corp.,
9.25% due 3/15/2004 182,000 205,000 0.8
100,000 Host Marriott Hospitality, Inc.,
9.50% due 5/15/2005 96,490 103,000 0.4
200,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 177,500 212,000 0.8
----------- ----------- ------
455,990 520,000 2.0
Industrial 100,000 Repap Wisconsin, Inc., 9.25% due
2/01/2002 89,500 96,250 0.4
Industrial--Energy 100,000 TransTexas Gas Corp., 11.50% due
6/15/2002 100,000 102,500 0.4
Metal & Mining 50,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 52,250 55,500 0.2
Steel 100,000 WCI Steel, Inc., 10.50% due 3/01/2002 97,000 99,375 0.4
Textiles 100,000 WestPoint Stevens, Inc., 9.375%
due 12/15/2005 98,250 100,250 0.4
Transport 100,000 Eletson Holdings, Inc., 9.25% due
Services 11/15/2003 94,360 100,500 0.4
Transportation 100,000 Viking Star Shipping Co., 9.625%
due 7/15/2003 96,000 105,000 0.4
Utilities 95,000 Beaver Valley Funding Co., 8.625%
due 6/01/2007 77,900 88,410 0.4
100,000 CTC Mansfield Funding Corp., 11.125%
due 9/30/2016 98,750 106,455 0.4
----------- ----------- ------
176,650 194,865 0.8
Total Corporate Bonds in the
United States 3,278,924 3,572,068 14.1
Total Investments in Corporate
Bonds 3,865,612 4,212,068 16.6
Foreign Government Obligations
Canada C$ 800,000 Canadian Government Bond, 7.25%
due 6/01/2003 563,965 595,784 2.3
<PAGE>
Total Foreign Government
Obligations in Canada 563,965 595,784 2.3
United Kingdom Pound 400,000 United Kingdom Treasury Gilt, 8%
Sterling due 6/10/2003 627,464 631,935 2.5
Total Foreign Government Obligations
in the United Kingdom 627,464 631,935 2.5
Total Investments in Foreign
Government Obligations 1,191,429 1,227,719 4.8
Total Investments in Corporate
Bonds and Foreign Government
Obligations 5,057,041 5,439,787 21.4
Shares
Held US Stocks
United Aerospace & Defense 2,500 United Technologies Corporation 174,848 256,563 1.0
States
Airlines 1,000 Boeing Company (The) 73,254 77,625 0.3
Appliances 3,000 Whirlpool Corporation 173,678 163,125 0.6
Automobiles 5,400 Ford Motor Co. 144,378 159,975 0.6
1,800 General Motors Corp. 92,649 99,900 0.4
----------- ----------- ------
237,027 259,875 1.0
Banking 1,600 Bank of New York Company, Inc. (The) 75,613 82,000 0.3
1,100 Citicorp 80,029 81,263 0.3
----------- ----------- ------
155,642 163,263 0.6
Chemicals 2,900 Eastman Chemical Co. 159,485 191,762 0.8
Diversified 3,500 Corning Inc. 97,383 109,375 0.4
Electronic/Instruments 1,400 Texas Instruments Inc. 84,098 65,100 0.3
Engineering & 2,000 Foster Wheeler Corporation 87,844 88,250 0.3
Construction
<PAGE>
Hardware Products 4,500 Stanley Works (The) 180,743 231,750 0.9
Health Care--HMOs 10,000 ++Humana Inc. 212,450 276,250 1.1
Hospital Supplies 5,000 Abbott Laboratories 185,467 211,250 0.8
Insurance 1,300 Aetna Life & Casualty Company 96,747 96,850 0.4
2,000 Allstate Corp. 81,864 87,250 0.3
2,000 National Re Corp. 66,103 72,250 0.3
----------- ----------- ------
244,714 256,350 1.0
Manufacturing 6,000 Fisher Scientific International Inc. 188,659 211,500 0.8
Oil & Gas Producers 2,000 Enron Corp. 75,530 74,000 0.3
Oil Service 8,500 Dresser Industries, Inc. 178,223 221,000 0.9
1,800 Schlumberger Ltd., Inc. 95,976 126,225 0.5
----------- ----------- ------
274,199 347,225 1.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Global Opportunity Portfolio (continued)
Shares Value Percent of
COUNTRY Industries Held US Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Petroleum 2,500 Pennzoil Company $ 100,457 $ 101,562 0.4%
States
(concluded) Pharmaceuticals 3,100 Merck & Co., Inc. 128,460 217,775 0.9
Photography 3,000 Eastman Kodak Company 160,085 220,125 0.9
Pollution Control 9,000 Wheelabrator Technologies Inc. 140,505 145,125 0.6
Retail Trade 2,200 Sears, Roebuck & Co. 87,701 91,300 0.4
Telecommunications 3,700 AT&T Corp. 191,509 247,437 1.0
2,600 Bell Atlantic Corporation 140,051 179,075 0.7
----------- ----------- ------
331,560 426,512 1.7
Total Stocks in the United States 3,553,789 4,185,662 16.5
Foreign Stocks
<PAGE>
Argentina Banking 7,080 Banco de Galicia y Buenos
Aires S.A. (ADR)** 106,800 181,425 0.7
5,750 Banco Frances del Rio de la
Plata S.A. (ADR)** 80,350 168,187 0.7
----------- ----------- ------
187,150 349,612 1.4
Petroleum 6,700 Yacimientos Petroliferos Fiscales
S.A. (Sponsored)(ADR)** 134,514 151,587 0.6
Total Stocks in Argentina 321,664 501,199 2.0
Brazil Telecommunications 3,000 Telecomunicacoes Brasileiras
S.A.--Telebras PN (ADR)** 164,018 167,250 0.7
Total Stocks in Brazil 164,018 167,250 0.7
Canada Conglomerates 10,800 Canadian Pacific Limited (ADR)** 165,958 210,600 0.8
Telecommunications 4,800 Northern Telecom Ltd. 171,686 216,000 0.8
Total Stocks in Canada 337,644 426,600 1.6
France Tires 2,500 ++Compagnie Generale des Establisse-
ments Michelin S.A. (Class B) 104,193 106,193 0.4
Total Stocks in France 104,193 106,193 0.4
Germany Electronics 300 Siemens AG 143,480 170,291 0.7
Machinery & 450 Mannesmann AG 127,844 156,189 0.6
Equipment
Multi-Industry 300 Preussag AG 91,752 88,805 0.3
Total Stocks in Germany 363,076 415,285 1.6
Hong Kong Banking 10,000 HSBC Holdings Ltd. 161,000 165,559 0.6
Telecommunications 9,000 Hong Kong Telecommunications
Ltd. (ADR)** 160,490 171,000 0.7
Total Stocks in Hong Kong 321,490 336,559 1.3
<PAGE>
Indonesia Telecommunications 3,000 P.T. Indonesian Satellite Corp.
(ADR)** 95,430 121,500 0.5
Total Stocks in Indonesia 95,430 121,500 0.5
Italy Telecommunications 50,000 Societa Finanziara Telefonica
S.p.A. (STET) 146,511 156,675 0.6
Total Stocks in Italy 146,511 156,675 0.6
Japan Banking & 8,000 Sanwa Bank, Ltd. 158,426 151,183 0.6
Financial
Building & 12,000 Maeda Corp. 133,874 123,491 0.5
Construction 15,000 Okumura Corp. 134,507 137,384 0.5
----------- ----------- ------
268,381 260,875 1.0
Capital Goods 17,000 Hitachi Cable Ltd. 129,552 127,234 0.5
21,000 Mitsubishi Heavy Industries, Ltd. 144,773 166,798 0.7
----------- ----------- ------
274,325 294,032 1.2
Consumer-- 8,000 Matsushita Electric Industrial
Electronics Co., Ltd. 116,780 133,221 0.5
Electrical 19,000 Mitsubishi Electric Corp. 137,527 137,758 0.5
Equipment
Electronics 3,000 Rohm Company Ltd. 141,942 166,152 0.7
Financial 9,000 Mitsubishi Trust and Banking Corp. 151,523 139,770 0.6
Services 6,000 Nomura Securities Co., Ltd. 122,069 130,227 0.5
----------- ----------- ------
273,592 269,997 1.1
Insurance 13,000 Tokio Marine & Fire Insurance
Co., Ltd. 143,259 162,971 0.6
Machinery 2,000 SMC Corporation 98,090 141,080 0.6
Photography 6,000 Canon Inc. 88,100 113,388 0.4
Printing & 9,000 Dai Nippon Printing Co., Ltd. 144,952 154,084 0.6
Publishing
Textiles 22,000 Toray Industries Inc. 139,370 143,250 0.6
Trading 16,000 Kamigumi Co., Ltd. 136,552 155,674 0.6
13,000 Sumitomo Corp. 124,539 134,999 0.5
----------- ----------- ------
261,091 290,673 1.1
<PAGE>
Warehouse & 5,000 Mitsui-Soko 40,029 39,527 0.2
Storage
Total Stocks in Japan 2,285,864 2,458,191 9.7
Mexico Beverages 1,300 Panamerican Beverages Inc. (ADR)** 50,818 51,350 0.2
Total Stocks in Mexico 50,818 51,350 0.2
Netherlands Appliances 5,000 Singer Co. N.V. (c) 133,935 141,250 0.6
Electrical Equipment 3,200 Philips Electronics N.V. 124,063 127,754 0.5
Petroleum 1,300 Royal Dutch Petroleum N.V. (ADR)** 153,715 180,700 0.7
Total Stocks in the Netherlands 411,713 449,704 1.8
Philippines Beverages 2,000 San Miguel Corp. (Class B) 7,652 7,564 0.0
Telecommunications 2,000 Philippine Long Distance Telephone
Co. (ADR)** 141,453 129,000 0.5
Total Stocks in the Philippines 149,105 136,564 0.5
Spain Petroleum 4,800 Repsol S.A. (ADR)** 143,703 167,400 0.7
Total Stocks in Spain 143,703 167,400 0.7
Switzerland Electrical Equipment 150 BBC Brown Boveri & Cie (Bearer) 140,031 172,905 0.7
Pharmaceuticals 3,000 Sandoz AG (ADR)** 129,917 130,125 0.5
Total Stocks in Switzerland 269,948 303,030 1.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Global Opportunity Portfolio (concluded)
Shares Value Percent of
COUNTRY Industries Held Foreign Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Business Services 9,000 GKN PLC $ 92,846 $ 112,525 0.5%
Kingdom
Chemicals 2,200 Imperial Chemical Industries PLC (
ADR)** 100,782 109,725 0.4
<PAGE>
Electrical 20,000 General Electric Co. PLC (Ordinary) 97,276 109,626 0.4
Equipment
Total Stocks in the United Kingdom 290,904 331,876 1.3
Total Investments in Foreign Stocks 5,456,081 6,129,376 24.1
Total Investments in US &
Foreign Stocks 9,009,870 10,315,038 40.6
SHORT-TERM Face
SECURITIES Amount Short-Term Securities
US Government US$ 6,540,000 Federal Home Loan Mortgage Corp.,
& Agency 5.80% due 2/01/1996 6,540,000 6,540,000 25.7
Obligations*** 3,000,000 US Treasury Bill, 5.35% due
2/08/1996 2,996,879 2,996,700 11.8
Total Investments in Short-Term
Securities 9,536,879 9,536,700 37.5
Total Investments $23,603,790 25,291,525 99.5
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 19,398 0.1
Other Assets Less Liabilities 113,750 0.4
----------- ------
Net Assets $25,424,673 100.0%
=========== ======
<FN>
*Denominated in US dollars unless otherwise indicated.
**American Depositary Receipts (ADR).
***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.
++Non-income producing security.
++++Forward foreign exchange contracts sold as of January 31, 1996
were as follows:
<PAGE>
<CAPTION>
Foreign Expiration Unrealized
Currency Sold Date Appreciation
<C> <S> <C>
YEN 180,000,000 July 1996 $19,398
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts Sold
(US$ Commitment--$1,721,078) $19,398
=======
(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)Restricted security as to resale. The value of the Portfolio's
investment in restricted securities was approximately $338,000,
representing 1.3% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Acetex Corporation, 9.75%
due 10/01/2003 9/22/1995 $ 99,563 $103,500
Bell Cablemedia PLC, 11.875%
due 9/15/2005 9/13/1995 208,907 234,515
Total $308,470 $338,015
======== ========
(c)Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for
determination of foreign issuer status may be (i) the country under
whose laws the issuer is organized, (ii) the country in which the
issuer's securities are principally traded, or (iii) the country in
which the issuer derives a significant proportion (at least 50%) of
vits revenue or profits from goods produced or sold, investments
made, or services performed in the country, or in which at least 50%
of the assets of the issuer are situated.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Quality Bond Portfolio
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Bonds & Notes Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Banking BBB+ A3 $115,000 ++Bangkok Metropolitan Bank Public Company
- --4.2% Limited, 7.25% due 9/15/2005 $ 113,956 $ 119,164
A- A3 150,000 First Bank System, Inc., 6.875% due 9/15/2007 148,611 155,874
---------- ----------
262,567 275,038
Financial A A2 200,000 Bear Stearns Co., 6.75% due 8/15/2000 198,730 206,640
Services A A2 150,000 Dean Witter, Discover & Co., 6.30% due 1/15/2006 149,340 149,728
- --7.8% A- A3 150,000 Smith Barney Holdings, 6.875% due 6/15/2005 148,485 154,428
---------- ----------
496,555 510,796
Financial A+ A1 200,000 Ford Motor Credit Co., 6.25% due 11/08/2000 199,154 203,770
Services-- A- A3 150,000 General Motors Acceptance Corp., 7.85% due 3/05/1997 153,815 153,972
Captive--5.4% ---------- ----------
352,969 357,742
Financial AA- Aa3 200,000 Associates Corp. of North America, 5.25%
Services-- due 9/01/1998 193,918 199,312
Consumer--3.0%
Industrial-- A- A2 150,000 American Home Products Corporation, 7.90%
Consumer due 2/15/2005 162,417 168,406
Goods--7.6% AA- A1 100,000 Anheuser-Busch Co., Inc., 8.75% due 12/01/1999 107,905 111,060
A+ A1 100,000 Bass America, Inc., 8.125% due 3/31/2002 105,928 111,773
BBB A2 100,000 Sears, Roebuck & Co., 9.25% due 4/15/1998 106,444 107,791
---------- ----------
482,694 499,030
Industrial AA- Aa3 175,000 BP America Inc., 9.375% due 11/01/2000 200,263 201,919
- --Energy A+ A1 175,000 Texaco Capital Inc., 8.625% due 11/15/2031 205,665 218,138
- --6.4% ---------- ----------
405,928 420,057
Industrial-- AA- Aa2 100,000 Archer-Daniels-Midland Co., 8.125% due 6/01/2012 111,874 114,027
Other--5.7% A- A3 150,000 Carnival Cruise Lines, Inc., 7.70% due 7/15/2004 156,745 161,640
BBB+ A3 100,000 Harris Corporation, 7% due 1/15/2026 99,503 100,416
---------- ----------
368,122 376,083
Supra- AAA Aaa 200,000 Asian Development Bank, 6.125% due 3/09/2004 198,300 203,650
national AAA Aaa 166,000 International Bank for Reconstruction &
- --6.5% Development, 12.375% due 10/15/2002 222,483 226,565
---------- ----------
420,783 430,215
<PAGE>
US Government US Treasury Notes:
Obligations AAA Aaa 250,000 5.875% due 6/30/2000 245,039 256,368
- --17.4% AAA Aaa 250,000 6.375% due 8/15/2002 256,250 263,360
AAA Aaa 350,000 6.50% due 5/15/2005 359,297 372,092
AAA Aaa 250,000 5.875% due 11/15/2005 254,687 255,352
---------- ----------
1,115,273 1,147,172
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Quality Bond Portfolio
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Bonds & Notes Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Utilities A A2 $200,000 Central Power & Light Co., 6% due 10/01/1997 $ 200,622 $ 202,362
- --Electric AA- A1 250,000 Northern States Power Company, 7.125% due
- --9.7% 7/01/2025 254,800 264,047
A A2 150,000 Virginia Electric & Power Co., 8.625% due
10/01/2024 166,200 172,287
---------- ----------
621,622 638,696
Yankees-- A+ A1 250,000 Mass Transit Railway Corporation, 7.25%
Corporates due 10/01/2005 260,325 259,255
- --5.5% A+ A1 100,000 Pohang Iron & Steel Company, Ltd., 7.375%
due 5/15/2005 101,816 106,076
---------- ----------
362,141 365,331
Yankees-- A+ A2 150,000 Province of Quebec, 7.125% due 2/09/2024 150,195 150,044
Sovereigns
- --2.3%
Total Investments in Bonds & Notes--81.5% 5,232,767 5,369,516
SHORT-TERM
SECURITIES Issue
Commercial 263,000 General Electric Capital Corp., 5.90%
Paper*--6.3% due 2/01/1996 263,000 263,000
150,000 National Fleet Funding Corp., 5.50% due
3/01/1996 149,336 149,336
---------- ----------
412,336 412,336
<PAGE>
US Government & 186,000 Federal Home Loan Mortgage Corp., 5.50%
Agency Obliga- due 2/05/1996 185,886 185,886
tions*--11.1% Federal National Mortgage Association:
250,000 5.37% due 2/16/1996 249,441 249,441
300,000 5.35% due 2/21/1996 299,108 299,108
---------- ----------
734,435 734,435
Total Investments in Short-Term
Securities--17.4% 1,146,771 1,146,771
Total Investments--98.9% $6,379,538 6,516,287
==========
Other Assets Less Liabilities--1.1% 72,286
----------
Net Assets--100.0% $6,588,573
==========
<FN>
++Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $119,000,
representing 1.8% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Bangkok Metropolitan Bank Public
Company Limited, 7.25% due 9/15/2005 9/22/1995 $113,956 $119,164
Total $113,956 $119,164
======== ========
*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.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
US Government Securities Portfolio
Face Interest Maturity Value
Issue Amount Rate Date(s) (Note 1a)
<S> <S> <C> <C> <C> <C>
US Federal Home Loan Mortgage Corporation $2,000,000 6.50 % 1/10/2020 $ 2,018,120
Government Federal Home Loan Mortgage Corporation 1,986,085 7.50 8/01/2025--10/01/2025 2,037,583
& Agency Federal Home Loan Mortgage Corporation 1,951,724 11.50 6/01/2019 2,201,662
Mortgage Government National Mortgage Association 1,953,508 7.50 12/15/2022--10/01/2025 2,010,883
- -Backed
Obligations*
- --84.5%
Total US Government & Agency Mortgage-Backed Obligations (Cost--$8,101,174) 8,268,248
US US Treasury Notes 230,000 7.875 11/15/2004 265,901
Government US Treasury STRIPS*** 1,000,000 5.424++ 8/15/2000 789,910
& Agency
Obligations
- --10.8%
Total US Government & Agency Obligations (Cost--$1,017,046) 1,055,811
Face
Amount Issue
Repurchase $1,190,000 Nikko Securities Company, purchased on 1/31/1996, to yield 5.90% to 2/01/1996 1,190,000
Agreement**
- --12.2%
Total Repurchase Agreement (Cost--$1,190,000) 1,190,000
Total Investments (Cost--$10,308,220)--107.5% 10,514,059
Liabilities in Excess of Other Assets--(7.5%) (736,701)
-----------
Net Assets--100.0% $ 9,777,358
===========
<FN>
++Represents the yield-to-maturity on this zero coupon issue.
*Mortgage-Backed Obligations are subject to principal paydowns as a
result of prepayments or refinancing of the underlying mortgage
instruments. As a result, the average life may be substantially
less than the original maturity.
**Repurchase Agreement is fully collateralized by US Government &
Agency Obligations.
***STRIPS--Separate Trading of Registered Interest and Principal of
Securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
As of January 31, 1996 Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $31,447,317 $25,291,525 $ 6,516,287 $10,514,059
Cash -- -- 207 120
Unrealized appreciation on forward
foreign exchange contracts (Note 1b) -- 19,398 -- --
Receivables:
Securities sold 345,964 -- -- 1,025,469
Capital shares sold. 245,913 274,475 11,916 43,864
Interest -- 116,262 99,249 77,850
Investment adviser (Note 2) -- -- 54,132 59,975
Principal paydowns -- -- -- 45,690
Dividends 17,630 14,408 -- --
Deferred organization expenses
(Note 1f) 29,653 69,189 16,995 37,149
Prepaid registration fees and other
assets (Note 1f) 112,774 251,547 91,724 179,143
----------- ----------- ----------- -----------
Total assets 32,199,251 26,036,804 6,790,510 11,983,319
----------- ----------- ----------- -----------
Liabilities: Payables:
Securities purchased 342,272 446,889 155,331 2,015,680
Capital shares redeemed. 32,309 20,624 12,808 108,244
Distributor (Note 2) 25,597 18,276 2,596 2,484
Dividends to shareholders
(Note 1g) -- -- 13,586 21,724
Investment adviser (Note 2) 17,763 16,898 -- --
Accrued expenses and other
liabilities 210,547 109,444 17,616 57,829
----------- ----------- ----------- -----------
Total liabilities 628,488 612,131 201,937 2,205,961
----------- ----------- ----------- -----------
Net Assets: Net assets $31,570,763 $25,424,673 $ 6,588,573 $ 9,777,358
=========== =========== =========== ===========
<PAGE>
Net Assets Class A Common Stock, $0.10
Consist of: par value++ $ 1,034 $ 27,965 $ 21,370 $ 52,149
Class B Common Stock, $0.10
par value++++ 181,714 149,776 29,694 29,049
Class C Common Stock, $0.10
par value++++++ 69,185 44,356 10,941 10,403
Class D Common Stock, $0.10
par value++++++++ 21,209 14,006 2,150 1,736
Paid-in capital in excess of par. 29,195,489 23,798,678 6,356,162 9,406,103
Accumulated distributions in
excess of investment income--net -- (112,356) -- --
Undistributed (accumulated)
realized capital gains (losses)
on investments and foreign
currency transactions--net (2,597) (132,463) 31,507 72,079
Accumulated distributions in
excess of realized gain on
investments--net (263,201) (71,570) -- --
Unrealized appreciation on
investments and foreign currency
transactions--net 2,367,930 1,706,281 136,749 205,839
----------- ----------- ----------- -----------
Net assets $31,570,763 $25,424,673 $ 6,588,573 $ 9,777,358
=========== =========== =========== ===========
Net Asset Value: Class A:
Net assets $ 120,673 $ 3,025,048 $ 2,195,379 $ 5,463,061
=========== =========== =========== ===========
Shares outstanding 10,341 279,647 213,698 521,489
=========== =========== =========== ===========
Net asset value and redemption
price per share $ 11.67 $ 10.82 $ 10.27 $ 10.48
=========== =========== =========== ===========
Class B:
Net assets $20,989,210 $16,116,487 $ 3,048,998 $ 3,042,922
=========== =========== =========== ===========
Shares outstanding 1,817,144 1,497,764 296,940 290,485
=========== =========== =========== ===========
Net asset value and redemption
price per share $ 11.55 $ 10.76 $ 10.27 $ 10.48
=========== =========== =========== ===========
Class C:
Net assets $ 7,990,024 $ 4,770,236 $ 1,123,370 $ 1,089,443
=========== =========== =========== ===========
Shares outstanding 691,852 443,560 109,412 104,027
=========== =========== =========== ===========
Net asset value and redemption
price per share $ 11.55 $ 10.75 $ 10.27 $ 10.47
<PAGE> =========== =========== =========== ===========
Class D:
Net assets $ 2,470,856 $ 1,512,902 $ 220,826 $ 181,932
=========== =========== =========== ===========
Shares outstanding 212,095 140,061 21,505 17,359
=========== =========== =========== ===========
Net asset value and redemption
price per share $ 11.65 $ 10.80 $ 10.27 $ 10.48
=========== =========== =========== ===========
<FN>
*Identified cost $29,079,387 $23,603,790 $ 6,379,538 $10,308,220
=========== =========== =========== ===========
++Authorized shares--Class A 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++Authorized shares--Class B 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++++Authorized shares--Class C 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++++++Authorized shares--Class D 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
For the Year Ended January 31, 1996++ Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Investment Income Interest and discount earned* $ 219,482 $ 693,296 $ 288,935 $ 548,298
(Notes 1d & 1e): Dividends** 317,142 237,566 -- --
Other -- 5,000 -- --
----------- ----------- ----------- -----------
Total income 536,624 935,862 288,935 548,298
----------- ----------- ----------- -----------
Expenses: Investment advisory fees (Note 2) 128,082 146,953 23,114 37,948
Account maintenance and distribution
fees--Class B (Note 2) 125,337 90,528 13,769 11,770
Accounting services (Note 2) 50,776 55,145 16,948 56,177
Printing and shareholder reports 57,649 70,193 9,051 22,989
Registration fees (Note 1f) 73,253 57,300 25,748 2,734
Transfer agent fees--Class B (Note 2) 68,705 38,823 7,031 3,452
Account maintenance and distribution
<PAGE> fees--Class C (Note 2) 44,518 24,524 4,600 4,309
Amortization of organization expenses
(Note 1f) 7,414 17,297 12,138 26,207
Custodian fees 17,215 24,507 8,552 8,911
Professional fees 16,360 17,337 4,897 19,027
Transfer agent fees--Class C (Note 2) 26,014 11,554 2,402 1,224
Transfer agent fees--Class A (Note 2) 4,604 21,696 6,219 7,452
Directors' fees and expenses 6,061 10,901 2,199 5,528
Transfer agent fees--Class D (Note 2) 6,833 2,715 387 134
Pricing fees (Note 2) 212 8,557 776 226
Account maintenance fees--Class D
(Note 2) 3,718 2,015 348 245
Other 5,062 5,878 -- 2,169
----------- ----------- ----------- -----------
Total expenses before reimbursement 641,813 605,923 138,179 210,502
Reimbursement of expenses (Note 2) (23,907) (33,240) (119,461) (194,178)
----------- ----------- ----------- -----------
Total expenses after reimbursement 617,906 572,683 18,718 16,324
----------- ----------- ----------- -----------
Investment income (loss)--net (81,282) 363,179 270,217 531,974
----------- ----------- ----------- -----------
Realized & Realized gain (loss) from:
Unrealized Investments--net 563,770 (281,507) 31,507 297,048
Gain (Loss) on Foreign currency transactions
Investments & --net -- 149,044 -- --
Foreign Currency Unrealized appreciation on:
Transactions--Net Investments--net 2,367,930 1,687,735 136,749 205,839
(Notes 1b, 1c, Foreign currency transactions--net -- 18,546 -- --
1e & 3): ----------- ----------- ----------- -----------
Net realized and unrealized gain
on investments and foreign
currency transactions 2,931,700 1,573,818 168,256 502,887
----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations $ 2,850,418 $ 1,936,997 $ 438,473 $ 1,034,861
=========== =========== =========== ===========
<FN>
*Net of withholding tax on interest $ -- $ 1,618 $ -- $ --
=========== =========== =========== ===========
**Net of withholding tax on
dividends $ 1,931 $ 17,536 $ -- $ --
=========== =========== =========== ===========
<FN>
++The Program commenced operations on February 1, 1995.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended January 31, 1996++
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Increase (Decrease) in Net Assets: Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Operations: Investment income (loss)--net $ (81,282) $ 363,179 $ 270,217 $ 531,974
Realized gain (loss) on investments
and foreign currency transactions
--net 563,770 (132,463) 31,507 297,048
Unrealized appreciation on
investments and foreign currency
transactions--net 2,367,930 1,706,281 136,749 205,839
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 2,850,418 1,936,997 438,473 1,034,861
----------- ----------- ----------- -----------
Dividends & Investment income--net:
Distributions to Class A -- (90,788) (128,948) (393,269)
Shareholders Class B -- (193,635) (101,375) (98,505)
(Note 1g): Class C -- (56,404) (31,396) (33,445)
Class D -- (22,352) (8,498) (6,755)
In excess of investment income--net:
Class A -- (28,087) -- --
Class B -- (59,905) -- --
Class C -- (17,449) -- --
Class D -- (6,915) -- --
Realized gain on investments--net:
Class A (1,832) -- -- (133,258)
Class B (326,209) -- -- (64,660)
Class C (125,467) -- -- (23,204)
Class D (38,990) -- -- (3,847)
In excess of realized gain on
investments--net:
Class A (978) (14,537) -- --
Class B (174,333) (41,351) -- --
Class C (67,053) (11,895) -- --
Class D (20,837) (3,787) -- --
Return of capital--net:
Class A (265) -- -- --
Class B (47,208) -- -- --
Class C (18,157) -- -- --
Class D (5,642) -- -- --
<PAGE> ----------- ----------- ----------- -----------
Net decrease in net assets
resulting from dividends and
distributions to shareholders (826,971) (547,105) (270,217) (756,943)
----------- ----------- ----------- -----------
Capital Share Net increase in net assets
Transactions derived from capital share
(Note 4): transactions 29,522,316 24,009,781 6,395,317 9,474,440
----------- ----------- ----------- -----------
Net Assets: Total increase in net assets 31,545,763 25,399,673 6,563,573 9,752,358
Beginning of period 25,000 25,000 25,000 25,000
----------- ----------- ----------- -----------
End of period $31,570,763 $25,424,673 $ 6,588,573 $ 9,777,358
=========== =========== =========== ===========
<FN>
++The Program commenced operations on February 1, 1995.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data
and ratios have been derived
from information provided
in the financial statements.
For the Year Ended January 31, 1996++
Increase (Decrease) in Fundamental Value Portfolio++++ Global Opportunity Portfolio++++
Net Asset Value: Class A Class B Class C Class D Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Performance: ------- ------- ------- ------- ------- ------- ------- -------
Investment income
(loss)--net .25 (.07) (.09) .03 .34 .13 .12 .22
Realized and unrealized
gain on investments and
foreign currency trans-
actions--net 1.76 1.96 1.98 1.96 .77 .85 .85 .85
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
<PAGE> operations 2.01 1.89 1.89 1.99 1.11 .98 .97 1.07
------- ------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
Investment income
--net -- -- -- -- (.20) (.15) (.15) (.18)
In excess of investment
income on investments
--net -- -- -- -- (.06) (.04) (.04) (.06)
Realized gain on
investments--net (.20) (.20) (.20) (.20) -- -- -- --
In excess of realized
gain on investments--net (.11) (.11) (.11) (.11) (.03) (.03) (.03) (.03)
Return of capital--net (.03) (.03) (.03) (.03) -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions (.34) (.34) (.34) (.34) (.29) (.22) (.22) (.27)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $ 11.67 $ 11.55 $ 11.55 $ 11.65 $ 10.82 $ 10.76 $ 10.75 $ 10.80
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Based on net asset
Return:* value per share. 20.10% 18.89% 18.89% 19.90% 11.15% 9.89% 9.81% 10.80%
======= ======= ======= ======= ======= ======= ======= =======
Ratio to Expenses, net of
Average Net reimbursement 1.54% 3.29% 3.38% 2.45% 2.01% 3.50% 3.58% 2.67%
Assets: ======= ======= ======= ======= ======= ======= ======= =======
Expenses 2.00% 3.39% 3.46% 2.56% 2.32% 3.61% 3.65% 2.77%
======= ======= ======= ======= ======= ======= ======= =======
Investment income
(loss)--net 1.99% (.61%) (.75%) .24% 2.92% 1.20% 1.07% 2.00%
======= ======= ======= ======= ======= ======= ======= =======
Supplemental Net assets end of
Data: period (in thousands) $ 121 $20,989 $ 7,990 $ 2,471 $ 3,025 $16,117 $ 4,770 $ 1,513
======= ======= ======= ======= ======= ======= ======= =======
Portfolio turnover 51.37% 51.37% 51.37% 51.37% 83.14% 83.14% 83.14% 83.14%
======= ======= ======= ======= ======= ======= ======= =======
<PAGE>
<CAPTION>
The following per share data
and ratios have been derived
from information provided
in the financial statements.
For the Year Ended January 31, 1996++
Increase (Decrease) in Quality Bond Portfolio US Government Securities Portfolio
Net Asset Value: Class A Class B Class C Class D Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Performance: ------- ------- ------- ------- ------- ------- ------- -------
Investment income--net .62 .54 .53 .60 .76 .68 .67 .74
Realized and unrealized
gain on investments--net .27 .27 .27 .27 .74 .74 .73 .74
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations .89 .81 .80 .87 1.50 1.42 1.40 1.48
------- ------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
Investment income--net (.62) (.54) (.53) (.60) (.76) (.68) (.67) (.74)
Realized gain on
investments--net -- -- -- -- (.26) (.26) (.26) (.26)
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions (.62) (.54) (.53) (.60) (1.02) (.94) (.93) (1.00)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $ 10.27 $ 10.27 $ 10.27 $ 10.27 $ 10.48 $ 10.48 $ 10.47 $ 10.48
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Based on net asset
Return:* value per share 9.22% 8.35% 8.27% 8.98% 15.42% 14.52% 14.35% 15.09%
======= ======= ======= ======= ======= ======= ======= =======
Ratios to Average Expenses, net of
Net Assets: reimbursement .00% .79% .87% .19% .00% .81% .86% .22%
======= ======= ======= ======= ======= ======= ======= =======
Expenses 2.60% 3.31% 3.44% 2.70% 2.54% 3.35% 3.41% 2.77%
======= ======= ======= ======= ======= ======= ======= =======
Investment income--net 6.22% 5.52% 5.46% 6.11% 7.30% 6.28% 6.21% 6.90%
======= ======= ======= ======= ======= ======= ======= =======
Supplemental Net assets, end of
Data: period (in thousands) $ 2,196 $ 3,049 $ 1,123 $ 221 $ 5,463 $ 3,043 $ 1,089 $ 182
======= ======= ======= ======= ======= ======= ======= =======
Portfolio turnover 86.68% 86.68% 86.68% 86.68% 113.05% 113.05% 113.05% 113.05%
======= ======= ======= ======= ======= ======= ======= =======
<PAGE>
<FN>
*Total investment returns exclude the effect of sales loads.
++The Program commenced operations on February 1, 1995
++++Based on average shares outstanding during the period.
+++Aggregate total return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Asset Builder Program, Inc. (the "Program") is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company consisting of
four separate portfolios: Fundamental Value Portfolio, Global
Opportunity Portfolio, Quality Bond Portfolio and US Government
Securities Portfolio (the "Portfolios"). The Program's Portfolios
offer four classes of shares under the Merrill Lynch Select
Pricing SM System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the
Program.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price in the
over-the-counter market prior to the time of valuation. In cases
where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the
authority of the Board of Directors as the primary market.
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. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the last bid price. Short-term securities
are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market
quotations are not readily available are valued at fair market value
as determined in good faith by or under the direction of the Board
of Directors of the Program.
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Derivative financial instruments--Each Portfolio may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
or 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 Portfolios may purchase or sell
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
Portfolios deposit and maintain as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolios agree 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 Portfolios as unrealized
gains or losses. When the contract is closed, the Portfolios record
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 Portfolios are authorized to purchase and write call
and put options. When the Portfolios write an option, an amount
equal to the premium received by the Portfolios 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 Portfolios enter into a closing
transaction), the Portfolios realize a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the
extent the cost of the closing transaction exceeds the premium paid
or received).
Written and purchased options are non-income producing investments.
* Forward foreign exchange contracts--Fundamental Value and Global
Opportunity Portfolios are authorized to enter into forward foreign
exchange contracts as a hedge against either specific transactions
or portfolio positions. Such contracts are not entered on the
Portfolios' records. However, the effect on operations is recorded
from the date the Portfolios enter into such contracts. Premium or
discount is amortized over the life of the contracts.
* Foreign currency options and futures--Fundamental Value and Global
Opportunity Portfolios may also purchase or sell listed or over-the-
counter foreign currency options, foreign currency futures and
related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-US dollar
denominated securities owned by the Portfolios, sold by the
Portfolios but not yet delivered, or committed or anticipated to be
purchased by the Portfolios.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is each Portfolio'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. Under the applicable foreign tax law, a
witholding tax may be imposed on interest, dividends and capital
gains at various rates.
(e) 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 except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Portfolios are informed of the ex-dividend date. 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>
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income of Quality Bond and US Government Securities Portfolios are
declared daily and paid monthly. Dividends from net investment
income of Fundamental Value and Global Opportunity Portfolios are
recorded on the ex-dividend dates. Distributions of capital gains
for all Portfolios are recorded on the ex-dividend dates.
Distributions in excess of investment income and realized gains are
due primarily to differing tax treatments for futures transactions
and post-October losses.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $2,597 and $78,685 on the Fundamental Value Portfolio have been
reclassified from accumulated net realized capital losses and paid-
in capital in excess of par, respectively, to undistributed net
investment income. These reclassifications have no effect on net
assets or net asset values per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Program has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Program 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.
MLAM is responsible for the management of the Program's portfolios
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Program.
For such services, each Portfolio pays a monthly fee based on the
average daily value of that Portfolio's net assets at the following
annual rates; 0.65% for Fundamental Value Portfolio, 0.50% for
Quality Bond and US Government Securities Portfolios and 0.75% for
Global Opportunity Portfolio.
The Investment Advisory Agreement obligates MLAM to reimburse the
Program to the extent the Program's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Program's first $30 million
of average daily net assets, 2.0% of the Program's next $70 million
of average daily net assets, and 1.5% of the average daily net
assets in excess thereof. No fee payment will be made to MLAM during
any fiscal year which will cause such expenses to exceed the pro
rata expense limitation at the time of such payment.
<PAGE>
For the period February 1, 1995 to January 31, 1996, MLAM had
voluntarily waived management fees and reimbursed each Portfolio for
additional expenses as follows:
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Management fee $23,907 -- $23,114 $ 37,948
Additional
expenses -- $33,240 $96,347 $156,230
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Program in accordance with Rule 12b-1 under the
Investment Company Act of 1940, each Portfolio pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Maintenance Fees
Class B Class C Class D
Fundamental Value Portfolio 0.25% 0.25% 0.25%
Global Opportunity Portfolio 0.25% 0.25% 0.25%
Quality Bond Portfolio 0.25% 0.25% 0.25%
US Government Securities Portfolio 0.25% 0.25% 0.25%
Distribution Fees
Class B Class C
Fundamental Value Portfolio 0.75% 0.75%
Global Opportunity Portfolio 0.75% 0.75%
Quality Bond Portfolio 0.50% 0.55%
US Government Securities Portfolio 0.50% 0.55%
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
Program. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account main-tenance services
to Class B, Class C and Class D 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.
<PAGE>
For the period February 1, 1995 to January 31, 1996, MLFD earned
underwriting discounts and MLPF&S earned dealer concessions on sales
of each Portfolio's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A Class D Class A Class D
Fundamental Value Portfolio $ 5 $2,345 $ 91 $44,760
Global Opportunity Portfolio $11 $ 959 $199 $18,584
Quality Bond Portfolio -- $ 192 -- $ 2,637
US Government Securities
Portfolio $ 3 $ 203 $ 46 $ 2,871
NOTE TO FINANCIAL STATEMENTS (continued)
For the period February 1, 1995 to January 31, 1996, MLPF&S received
contingent deferred sales charges relating to transactions in Class
B and Class C Shares as follows:
Class B Shares Class C Shares
Fundamental Value Portfolio $11,993 $2,371
Global Opportunity Portfolio $12,061 $1,357
Quality Bond Portfolio $ 1,288 $ 224
US Government Securities Portfolio $ 2,636 $ 255
In addition, MLPF&S received $2,890 and $10,690 in commissions on
the execution of portfolio security transactions for the Fundamental
Value and Global Opportunity Portfolios, respectively, for the
period February 1, 1995 to January 31, 1996.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Program's transfer agent.
During the period February 1, 1995 to January 31, 1996, the Global
Opportunity, Quality Bond and US Government Securities Portfolio
paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$1,194, $349 and $126, respectively, for security price quotations
to compute the net asset value of the Portfolios.
Accounting services are provided to each Portfolio by MLAM at cost.
Certain officers and/or directors of the Program are officers and/or
directors of MLAM, PSI, MLPF&S, MLFD, MLFDS, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period February 1, 1995 to January 31, 1996 were as follows:
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Purchases $33,906,783 $26,605,160 $7,476,885 $16,657,523
Sales $ 8,113,989 $12,325,939 $2,275,679 $ 7,219,021
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Fundamental Value Portfolio Gains Gains
Long-term investments $ 563,700 $2,367,930
Short-term investments 70 --
----------- ----------
Total $ 563,770 $2,367,930
=========== ==========
Realized Unrealized
Gains Gains
Global Opportunity Portfolio (Losses) (Losses)
Long-term investments $ (281,678) $1,687,914
Short-term investments 171 (179)
Foreign currency transactions (17,603) (852)
Forward foreign exchange contracts 166,647 19,398
----------- ----------
Total $ (132,463) $1,706,281
=========== ==========
Realized
Gains Unrealized
Quality Bond Portfolio (Losses) Gains
<PAGE>
Long-term investments $ 31,562 $ 136,749
Short-term investments (55) --
----------- ----------
Total $ 31,507 $ 136,749
=========== ==========
Realized
Gains Unrealized
US Government Securities Portfolio (Losses) Gains
Long-term investments $ 297,536 $ 205,839
Short-term investments (488) --
----------- ----------
Total $ 297,048 $ 205,839
=========== ==========
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes was as follows:
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Gross
unrealized
appreciation $3,588,293 $1,765,219 $134,760 $205,839
Gross
unrealized
depreciation (1,220,363) (79,447) (1,221) --
---------- ---------- -------- --------
Net
unrealized
appreciation $2,367,930 $1,685,772 $133,539 $205,839
========== ========== ======== ========
The aggregate cost of investments at January 31, 1996 for Federal
income tax purposes was $29,079,387 for the Fundamental Value
Portfolio, $23,605,753 for the Global Opportunity Portfolio,
$6,382,748 for the Quality Bond Portfolio, and $10,308,220 for the
US Government Securities Portfolio.
<PAGE>
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
for the period February 1, 1995 to January 31, 1996, was $29,522,316
for the Fundamental Value Portfolio, $24,009,781 for the Global
Opportunity Portfolio, $6,395,317 for the Quality Bond Portfolio,
and $9,474,440 for the US Government Securities Portfolio.
Transactions in capital shares for each class were as follows:
Fundamental Value Portfolio
Class A Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 211,092 $ 2,121,694
Shares issued to shareholders in
reinvestment of distributions 226 2,614
----------- -----------
Total issued 211,318 2,124,308
Shares redeemed (201,602) (2,349,514)
----------- -----------
Net increase (decrease) 9,716 $ (225,206)
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class B Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 1,898,235 $20,687,636
Shares issued to shareholders in
reinvestment of distributions 46,363 530,851
----------- -----------
Total issued 1,944,598 21,218,487
Shares redeemed (128,079) (1,426,547)
----------- -----------
Net increase 1,816,519 $19,791,940
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
Fundamental Value Portfolio
Class C Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 722,871 $ 7,998,489
Shares issued to shareholders in
reinvestment of distributions 17,800 203,810
----------- -----------
Total issued 740,671 8,202,299
Shares redeemed (49,444) (560,243)
----------- -----------
Net increase 691,227 $ 7,642,056
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class D Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 217,786 $ 2,387,449
Shares issued to shareholders in
reinvestment of distributions 5,449 62,881
----------- -----------
Total issued 223,235 2,450,330
Shares redeemed (11,765) (136,804)
----------- -----------
Net increase 211,470 $ 2,313,526
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class A Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
<PAGE>
Shares sold 835,209 $ 8,372,011
Shares issued to shareholders
in reinvestment of dividends
and distributions 12,609 133,409
----------- -----------
Total issued 847,818 8,505,420
Shares redeemed (568,796) (6,107,760)
----------- -----------
Net increase 279,022 $ 2,397,660
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class B Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 1,579,063 $16,389,513
Shares issued to shareholders
in reinvestment of dividends
and distributions 27,153 286,188
----------- -----------
Total issued 1,606,216 16,675,701
Automatic conversion of shares (12,547) (136,198)
Shares redeemed (96,530) (1,007,511)
----------- -----------
Net increase 1,497,139 $15,531,992
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
NOTES TO FINANCIAL STATEMENTS (concluded)
Global Opportunity Portfolio
Class C Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
<PAGE>
Shares sold 460,425 $ 4,809,137
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,790 82,108
----------- -----------
Total issued 468,215 4,891,245
Shares redeemed (25,280) (268,389)
----------- -----------
Net increase 442,935 $ 4,622,856
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class D Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 129,359 $ 1,346,418
Automatic conversion of shares sold 12,498 136,198
Shares issued to shareholders
in reinvestment of dividends
and distributions. 3,015 31,872
----------- -----------
Total issued 144,872 1,514,488
Shares redeemed (5,436) (57,215)
----------- -----------
Net increase 139,436 $ 1,457,273
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class A Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 200,766 $ 2,007,639
Shares issued to shareholders in
reinvestment of dividends 12,321 123,667
----------- -----------
Total issued 213,087 2,131,306
Shares redeemed. (14) (145)
----------- -----------
Net increase 213,073 $ 2,131,161
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
Quality Bond Portfolio
Class B Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 310,972 $ 3,112,230
Shares issued to shareholders in
reinvestment of dividends 8,720 87,735
----------- -----------
Total issued. 319,692 3,199,965
Shares redeemed (23,377) (234,918)
----------- -----------
Net increase 296,315 $ 2,965,047
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class C Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 119,801 $ 1,200,962
Shares issued to shareholders in
reinvestment of dividends 2,715 27,344
----------- -----------
Total issued 122,516 1,228,306
Shares redeemed (13,729) (138,226)
----------- -----------
Net increase 108,787 $ 1,090,080
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class D Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
<PAGE>
Shares sold. 22,296 $ 223,184
Shares issued to shareholders in
reinvestment of dividends 764 7,677
----------- -----------
Total issued 23,060 230,861
Shares redeemed (2,180) (21,832)
----------- -----------
Net increase 20,880 $ 209,029
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class A Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 512,777 $ 5,133,291
Shares issued to shareholders
in reinvestment of dividends
and distributions 46,368 481,964
----------- -----------
Total issued 559,145 5,615,255
Shares redeemed (38,281) (400,291)
----------- -----------
Net increase 520,864 $ 5,214,964
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class B Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 316,580 $ 3,300,722
Shares issued to shareholders
in reinvestment of dividends
and distributions 8,754 79,114
<PAGE> ----------- -----------
Total issued 325,334 3,379,836
Shares redeemed (35,474) (369,739)
----------- -----------
Net increase 289,860 $ 3,010,097
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class C Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 106,091 $ 1,106,574
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,930 26,407
----------- -----------
Total issued 109,021 1,132,981
Shares redeemed (5,619) (57,961)
----------- -----------
Net increase 103,402 $ 1,075,020
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class D Shares for the Period
February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold. 23,396 $ 243,530
Shares issued to shareholders
in reinvestment of dividends
and distributions 517 4,969
----------- -----------
Total issued. 23,913 248,499
Shares redeemed (7,179) (74,140)
----------- -----------
Net increase 16,734 $ 174,359
=========== ===========
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
5. Commitments:
At January 31, 1996, the Global Opportunity Portfolio had foreign
exchange contracts, in addition to the contracts listed on the
Schedule of Investments, under which it had agreed to purchase a
foreign currency with an approximate value of $152,000.
6. Subsequent Event:
On February 2, 1996, the Growth Opportunity Portfolio commenced
operations as an additional portfolio of the Program.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Asset Builder Program, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of the
Fundamental Value, Global Opportunity, Quality Bond and US
Government Securities Portfolios of the Merrill Lynch Asset Builder
Program, Inc. as of January 31, 1996, the related statements of
operations and changes in net assets and the financial highlights
for the year ended January 31, 1996. These financial statements and
the financial highlights are the responsibility of the Program's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at January
31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Asset Builder Program, Inc. as of January 31, 1996,
the results of its operations, the changes in its net assets, and
the financial highlights for the year ended January 31, 1996, in
conformity with generally accepted accounting principles.
Deloitte & Touche, LLP
Princeton, New Jersey
March 14, 1996
</AUDIT-REPORT>
EQUITY PORTFOLIO CHANGES (unaudited)
FUNDAMENTAL
VALUE PORTFOLIO
For the Quarter Ended January 31, 1996
Additions
American Exploration Co.
*Canadian National Railway Co.
Century Communications Corp.
FelCor Suite Hotels, Inc.
International Business
Machines Corp.
Lone Star Technologies, Inc.
National Semiconductor Corp.
NationsBank Corp.
Norwest Corp.
Deletions
Bay View Capital Corp.
*Canadian National Railway Co.
Kmart Corp.
The Limited, Inc.
SPX Corp.
Simon Property Group, Inc.
Unisys Corp.
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GLOBAL
OPPORTUNITY PORTFOLIO
For the Quarter Ended January 31, 1996
Additions
Aetna Life & Casualty Company
Allstate Corp.
*Aluminum Co. of America
Bank of New York Company, Inc. (The)
Boeing Company (The)
Citicorp
Compagnie Generale des Establissements
Michelin S.A. (Class B)
Corning Inc.
Enron Corp.
Foster Wheeler Corporation
General Motors Corp.
HSBC Holdings Ltd.
Mitsui-Soko
National Re Corp.
Nomura Securities Co., Ltd.
Panamerican Beverages Inc. (ADR)
Pennzoil Company
Philips Electronics N.V.
San Miguel Corp. (Class B)
Sandoz AG (ADR)
Sears, Roebuck & Co.
Singer Co. N.V.
Telecomunicacoes Brasileiras S.A.--
Telebras PN (ADR)
Texas Instruments Inc.
Deletions
Alcatel Alsthom Cie Generale d'Electricite
S.A.
*Aluminum Co. of America
Asahi Glass Co., Ltd.
Banco Comercial Portugues (B.C.P.) (ADR)
Banco O' Higgins S.A. (ADR)
British Gas PLC (ADR)
British Telecommunications PLC (ADR)
California Energy Company, Inc.
Cementos Mexicanos, S.A. de C.V. (Cemex)
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China Light & Power Co., Ltd
Compagnie de Saint-Gobain
Comsat Corporation
Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)
GTE Corporation
Gannett Co., Inc.
General Signal Corporation
Grand Metropolitan PLC (ADR)
Holderbank Financiere Glarus AG (Bearer)
Hong Leong Industries BHD
Imperial Oil Ltd.
Ingersoll--Rand Company
Italcementi S.p.A.
Ito-Yokado Co., Ltd
Kandenko Co., Ltd.
Keystone International, Inc.
Komatsu Ltd.
Kvaerner A.S. (Class B)
Kyocera Corporation
Lucas Industries PLC (Ordinary)
MDX Company Ltd.
Makita Electric Work Ltd.
Nalco Chemical Company
National Australia Bank Limited
Neptune Orient Lines Ltd.
Nippon Fire & Marine Insurance Co., Ltd.
Nippon Oil Co., Ltd.
Pacific Dunlop Ltd.
Phillips Petroleum Company
Pitney Bowes, Inc.
SKF AB 'B' Free
Schneider S.A.
Sekisui Chemical Co., Ltd.
Shanghai Petrochemical Co., Ltd. (ADR)
Sharp Corp.
Stewart & Stevenson Services, Inc.
Sulzer Gebrueder AG
Sun Hung Kai Properties, Ltd.
Swire Pacific Ltd. (Class A)
TOTAL S.A. (ADR)
Telefonos de Mexico, S.A. de C.V. (ADR)
Thyssen AG
Tokyo Style Co., Ltd.
Toto Ltd.
UMW Holdings BHD
Westcoast Energy Inc.
Yamazaki Baking Co., Ltd.
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[FN]
*Added and deleted in the same quarter.
