MERRILL LYNCH
ASSET BUILDER
PROGRAM, INC.
FUND LOGO
Semi-Annual Report
July 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the 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.
Merrill Lynch
Asset Builder Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
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
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Lawrence R. Fuller, Vice President
Geraldine C. Gunn, Vice President
Jay C. Harbeck, Vice President
Gregory Mark Maunz, Vice President
Thomas R. Robinson, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
We are pleased to provide you with this semi-annual report for
Merrill Lynch Asset Builder Program, Inc. The Program consists of
five separate diversified portfolios, each with its own investment
objectives.
Complete performance information, including average annual total
returns, for all five portfolios can be found on pages 7--11 of this
report to shareholders.
Fundamental Value Portfolio
The quarter ended July 31, 1997 proved to be an exceptional one for
the US equity market, with share prices rebounding sharply from the
April downdraft. Driving the market higher were continued favorable
economic and corporate dynamics as well as strong mutual fund cash
inflows. The unmanaged Standard & Poor's 500 (S&P 500) Index
registered a +19.58% total return during the three months ended July
31, 1997, exceeding Fundamental Value Portfolio's total returns of
+17.59%, +17.26%, +17.26% and +17.49% for Class A, Class B, Class C
and Class D Shares, respectively. (Results shown do not reflect
sales charges and would be lower if sales charges were included.)
The underperformance of the Portfolio reflects, in part, the
generally lagging returns of low price/earnings issues. The relative
performance of these equities has been hindered by the indexing
phenomenon, which tends to favor large-capitalization growth
companies. We believe that the valuation disparities arising from
this trend created opportunities in many "basic value" issues. Some
of these opportunities have just begun to be realized as the
market's leadership has shown signs of broadening.
Examining the Portfolio's results for the period ended July 31,
1997, reveals the favorable influence of holdings in the technology
and basic industry sectors, and the adverse impact of positions in
the telecommunications, auto and media areas. Technology issues
benefited from solid earnings gains, and basic industry equities
were boosted by improved fundamentals. Telecommunications companies
continue to be plagued by ramifications of the Telecommunications
Act of 1996, auto issues were hindered by cyclical concerns, and
media companies were hampered by lackluster results. Leading
individual gainers for the Portfolio in the July period included
Tandem Computers, Inc., the subject of a takeover; WHX Corp., which
rebounded on news of a strike settlement; and Scitex Corp. Ltd.,
whose fundamentals began to show marked improvement.
Reflecting the heightened market volatility, Portfolio activity was
particularly heavy in the period ended July 31, 1997. We initiated
five positions, eliminated 13, incremented 50% of current holdings
and reduced 20%. Cash and cash equivalents increased to 15.8% of
net assets at July 31, 1997, from 14.0% at April 30, 1997.
During the July period, we invested in out-of-favor issues in the
insurance, multi-industry, refining and marketing, and technology
sectors. TIG Holdings, Inc., a property and casualty insurer, was
purchased on weakness related to disappointing earnings results and
a feared reserve deficiency. We judged that the adversities were
adequately reflected in the share's valuation, with TIG trading at a
very reasonable 1.3 times book value per share and at 10 times 1998
estimated earnings per share. TIG's near-term premium growth is
expected to be modest as the company transitions its business to
specialty lines. Longer term, we believe the company is favorably
positioned for generating attractive returns. Bolstering our
confidence in the shares is the heavy management ownership as well
as the continued sizable share buybacks.
Tenneco, Inc. underwent significant restructuring over the last
several years and is now favorably positioned in two product areas--
auto parts and specialty packaging. We believe the shares offer
attractive appreciation potential driven by solid market positions,
turnaround potential in the packaging business, an Economic Value
Added-driven (EVA) management team and continued share buybacks.
Tenneco was reasonably valued at 13.5 times 1998 estimated earnings
per share and provided a dividend yield of 2.7%.
Sun Company, Inc., one of the largest independent refining and
marketing companies in the United States, was a lackluster performer
for many years. We judged the company's fortunes were about to
change under the direction of a new president, the first corporate
outsider chosen for this position in Sun's 113-year history. The new
leader has announced restructuring initiatives, including refinery
reconfigurations and cost reduction programs, that have already
yielded tangible operating results. The shares were available at a
modest 10.5 times 1998 estimated earnings per share and provided an
above-average dividend yield of 3.2%.
Novell, Inc., a provider of network operating systems and services,
was a stock market laggard for several years. The company's shares
peaked in 1993 at $35.25 and declined to a low near $6.00 in June
1997, reflecting the severe competitive pressures inflicted by
Microsoft Corp. as well as several very untimely acquisitions made
by former management. We believe Novell offers an attractive
turnaround potential driven by new leadership, a refocused strategy,
and exciting new products. The new chief executive officer is
transitioning the company from being a network operating system
vendor, where competition is intense, to being a diversified
provider of network services where there is no clear leader.
Novell's balance sheet is solid with cash and short-term investments
of $3 per share and no long-term debt.
Digital Equipment Corp. represents an attractive turnaround
candidate, in our view. The shares have dramatically underperformed
the market for some time, languishing 56% below their early 1996
high of $76.50 per share. The underperformance reflects lackluster
operating results resulting from a weak personal computer business,
losses in semiconductors, and a misaligned sales structure. These
problems have been largely rectified, and we believe the company is
poised for improved operating results. Indeed, management has laid
out an intermediate-term net margin goal of 7%, implying an earnings
potential of $6.00 per share in several years, a marked improvement
from the depressed $0.68 per share reported in the fiscal year ended
June 30, 1997. The shares were purchased at a modest 39% of sales
per share and at a reasonable 13 times 1998 estimated earnings per
share.
Completed sales in the July period included three issues that were
the subjects of takeovers/mergers: Total Petroleum Ltd.,
Transitional Hospitals Corp., and Greater New York Savings Bank. A
partial sale, Tandem Computers, Inc., was also the subject of a
takeover. Other positions eliminated included two technology
holdings that had reached our price targets, National Semiconductor
Corp. and 3Com Corp. Issues whose turnaround potentials had
diminished, and thus were eliminated, included Computervision Corp.,
Evans Withycombe Residential, Inc. and National Auto Credit, Inc.
Though the overall US stock market is trading at record valuation
levels, we continue to find attractive candidates for inclusion in
the Fundamental Value Portfolio. Our strict valuation discipline
results in the Portfolio having a reasonable valuation. The average
price/earnings ratio of the Portfolio's equity investments is two-
thirds of the S&P 500's multiple, and the price/book ratio is less
than one-half that of the market benchmark.
Global Opportunity Portfolio
As of July 31, 1997, the asset allocation for Global Opportunity
Portfolio was: foreign stocks, 51% of net assets; US stocks, 26%;
foreign bonds, 10%; US bonds, 10%; and cash reserves of 3%.
During the three months ended July 31, 1997, the total returns of
Global Opportunity Portfolio's Class A, Class B, Class C and Class D
Shares were +15.04%, +14.68%, +14.69% and +14.98%, respectively.
(Results shown do not reflect sales charges and would be lower if
sales charges were included.)
During the period ended July 31, 1997, we became more positive
toward US bonds, and increased the weighting from 3% of net assets
as of April 30, 1997 to 10% as of July 31, 1997. The duration of the
US fixed-income sector was also increased from 5 years to 6 years.
Our more optimistic stance toward US bonds reflected evidence of a
slowdown in the US economy's growth rate and indications that
inflationary pressures were exceptionally subdued. At the same time,
the rapid shrinkage of the Federal budget deficit reduced the supply
of newly issued US Government securities relative to the demand.
Overall, we expected a decline in intermediate- and long-term
interest rates to continue, resulting in a favorable reward/risk
relationship for US bonds going forward.
To expand the US bond commitment, we primarily used proceeds from
sales of foreign bonds. We reduced foreign bond holdings from 15% to
10% of net assets during the July period by eliminating positions in
Australian, French and Finnish bonds and reducing the commitment to
German obligations. At the same time, our belief that the total
return potential of UK obligations was attractive led us to
establish a position in sterling-denominated bonds. As a result,
European bonds continue to account for the major portion of assets
in the foreign bond sector. We maintained a position in Canada as a
means of obtaining indirect exposure to US interest rates. Our
expectation of further US dollar strength resulted in our hedging
the European bonds and stock positions (except for UK holdings), the
Japanese equity holdings, and the position in Australian common
stock back to the US dollar.
Foreign equity allocation did not materially change during the July
period. Japan remained the largest single commitment, although the
weighting remains below the benchmark Morgan Stanley Europe
Australia Far East Index. While we sold the position in Eisai Co.,
Ltd. in Japan, we established commitments in Matsushita Electric
Works, Ltd. and Amway Japan, Ltd. We continue to maintain a
meaningful position in Canada and Latin America, with a new position
established in Uniao de Bancos Brasileiros S.A. (Unibanco). In
Europe, changes included the sale of British Steel PLC and the
establishment of commitments in Gucci Group N.V., Orion-yhtyma OY,
and Perstorp AB. We also reduced our already limited representation
in Asia by accepting profits in Hong Kong Telecommunications Ltd.
In the US equity sector, the largest concentration of assets
remained in the financial services category, which is a beneficiary
of declining US interest rates. We also maintained meaningful
positions in healthcare, technology and energy. These areas of
emphasis are unchanged over the past three months, and reflect our
expectation that earnings of selected companies in these sectors
should continue to exceed consensus expectations despite a slower
rate of US economic growth.
Growth Opportunity Portfolio
During the quarter ended July 31, 1997, the total returns of Growth
Opportunity Portfolio's Class A, Class B, Class C and Class D Shares
were +22.03%, +21.72%, +21.63% and +21.98%, respectively. The
Portfolio outperformed the Lipper Growth Funds Average total returns
of +20.98%, and the +19.58% return of the unmanaged S&P 500.
(Results shown do not reflect sales charges and would be lower if
sales charges were included.)
The most important contributors to the Portfolio's positive absolute
and relative returns were the significant weightings in the
communications equipment industry (14.4% of July quarter-end net
assets), computer software (8.7%), oil services (6.7%) and the
computer industry (5.9%). Individual companies contributing
significantly to the positive returns were Cisco Systems, Inc.,
Lucent Technologies, Inc., Schlumberger, Ltd., and COMPAQ Computers
Corp., all of which were among the top ten equity holdings.
Investment activities during the July period focused on increasing
the equity weightings in the communications equipment, computer
software and oil service industries. We reduced the pharmaceutical
industry weighting because of our concerns about a near-term decline
in valuation ratios as the rate of earnings growth moderates.
Corporate reports of capital spending intentions during the period
ended July 31, 1997 reflected the possibility of a continued
increase in the rate of investment spending on network computer
systems, advanced digital wired and wireless communication
infrastructure and energy exploration activities. Although the
overall rate of growth in corporate earnings reported for the July
period was at a slower pace than the year-to-year gains in the first
quarter of 1997, the rate of growth appears sufficient to sustain
the capital spending pace in the communications equipment,
computers, computer software and oil services industries.
The ten largest industry sectors in the Portfolio at July 31, 1997
were communications equipment, computer software, pharmaceuticals,
oil services, banking and financial, computers, financial services,
electrical equipment, medical technology and cosmetics. These
industries represented 65.5% of net assets on July 31, 1997. The top
ten equity holdings were equal to 37% of net assets.
We added four companies to the Portfolio during the period ended
July 31, 1997. They included Citicorp, BankAmerica Corp., CVS
Corporation and American Express Company. Citicorp, the world's
leading multinational financial services and banking organization,
was added because of the attractive valuation relative to
expectations of above-average growth in earnings and rates of return
with relative consistency. Citicorp has a broad base of business in
the emerging markets of Asia, Latin America and Eastern Europe as
well as the developed world. We added BankAmerica Corp. because of
the attractive valuation relative to expectations of above-average
growth rates in earnings from internal restructuring of operations.
CVS Corporation, one of the major pharmaceutical retailers, was
added to the Portfolio because of the attractive valuation relative
to the expectations of above-average rates of growth in earnings.
American Express Company was added because of the attractive
valuation relative to expectations of above-average rates of growth
in earnings from asset management as well as travel-related business
services.
We eliminated Wells Fargo & Co. from the Portfolio because we viewed
the stock as overvalued relative to our perspective on the
fundamentals of the organization.
We continued to be relatively fully invested during the July period,
with cash and cash equivalents at July 31, 1997 equal to 6.1% of net
assets. We continued to have a positive outlook for investment in
the US equity markets.
Quality Bond Portfolio
At the beginning of the year, Federal Reserve Board (FRB) Chairman
Alan Greenspan cautioned investors about a possible preemptive
strike against inflation. While there were few signs of accelerating
inflation in the then-current data, he warned that monetary policy
acts with a lag and that it would be easier to tighten policy at
that time, as a precaution, rather than tighten later and more
sharply once inflation was evident. The FRB followed through with
Chairman Greenspan's warning and tightened policy on March 25, 1997.
Since the March tightening, economic data have been more benign,
including bullish inflation reports from the employment cost index
and producer price index. The yield on the long-term Treasury bond
peaked at 7.17% in mid-April, then began to drop. This rally was
fueled by a significant change in investor expectations regarding
the economy and the outlook for interest rates.
In early May there was widespread agreement that the FRB was ready
for another tightening of monetary policy, and it was generally
assumed that a further tightening would be needed by July. However,
the Consumer Price Index (CPI) rose only 1.4% for the first five
months of 1997, compared with a 3.8% increase over the same period
in 1996. At the same time, retail sales figures continued to
decline. As a result, the May increase in interest rates did not
occur and the bond market continued to gain momentum. Increasing
evidence of noninflationary economic growth boosted investor
confidence, which was confirmed further at the beginning of July
when, as widely expected, the FRB chose to leave monetary policy
unchanged. This confluence of positive indicators helped produce a
significant rally in the US securities market.
We participated in the bond rally by extending the average maturity
of the Quality Bond Portfolio to 8.8 years. Investments favored the
financial services sector which stands to benefit from the low
inflation environment. The average credit quality of the Portfolio's
holdings is AA, as measured by Standard & Poor's Corp. ratings. Cash
was invested in short-term instruments to take advantage of the
favorable spread.
US Government Securities
Portfolio
On July 23, 1997, FRB Chairman Alan Greenspan delivered his Humphrey-
Hawkins testimony which was the most positive assessment of the US
economy he has ever delivered. The speech appears to have erased the
prospect of any near-term rise in interest rates, and FRB policy
will likely remain on hold for the foreseeable future. The
fundamentals and technicals continue to impress investors, pushing
both the bond and equity markets to new heights. The Dow Jones
Industrial Average soared past 8000 this past quarter and the long-
term US Treasury bond yield broke 6.5%.
Since the last FRB interest rate increase in March, the economy,
though still growing, has slowed, and inflation has been tame. In
fact, the Producer Price Index (PPI), CPI, and the Employment Cost
Index (ECI) have been subdued for so long, it appears that investors
are no longer fearful of increases as they were in the past. Many
economists theorized a "new reality" economic environment, one in
which economic growth can be achieved without increased inflation.
The FRB was tolerant of sustained economic growth because it was
accompanied by low inflation. The PPI released in July marked its
sixth consecutive monthly decline and the CPI released in July rose
a modest 0.1%, keeping inflation at a 31-year low. This put the
inflation rate for the first six months of 1997 at the lowest level
in 11 years. The ECI is something that the FRB watches closely, and
it continues to run at under 3%. In order for the FRB to warrant a
tightening of monetary policy, we believe they will need to see some
mixture of above-potential economic growth and evidence of
inflation.
As of July 31, 1997, the 10-year Treasury note yield, a benchmark
for mortgage-backed securities (MBS), stood at 6.01%. This yield is
49 basis points lower for the one-month period, 71 basis points
lower for the three-month period and 48 basis points lower for the
six-month period. As typically happens in months where interest
rates drop dramatically in a very short period of time, MBS yields
spreads widened versus their Treasury counterparts in July. When
interest rates decrease, refinancing opportunities increase and MBS
prices tend to compress as prepayment fears get priced into their
yields.
The US Government Securities Portfolio was somewhat immune to the
widening spreads as we avoided those MBS which are the most
susceptible to prepaying and suffered the most widening. Of the
Portfolio's 73% MBS allocation, 61% is invested in low coupon MBS
whose homeowners have no incentive to refinance. The remaining 12%
of MBS is invested in super-premium MBS whose homeowners have
already gone through several refinancing opportunities. The
Portfolio also has 24% of net assets invested in US Treasury notes
and STRIPS and a 10.6% cash position.
During the July period, we extended the duration of the US Treasury
notes allocation in the Portfolio. This benefited performance as
long-term Treasury securities had the strongest performance as
yields came down and the US Treasury curve flattened. We also
lowered the average coupon of the MBS allocation in the Portfolio,
and kept duration neutral in this sector with the purchase of 7-year
balloon MBS and additional 15-year MBS. Although MBS underperformed
their Treasury counterparts in July, they still offer a very
attractive yield advantage. This factor, coupled with low long-term
implied volatility, should keep MBS a very attractive fixed-income
investment.
In Conclusion
We thank you for your investment in Merrill Lynch Asset Builder
Program, Inc., and we look forward to reviewing our outlook and
strategy with you again in our upcoming quarterly report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Geraldine C. Gunn)
Geraldine C. Gunn
Vice President and Portfolio Manager
Fundamental Value Portfolio
(Thomas R. Robinson)
Thomas R. Robinson
Vice President and Portfolio Manager
Global Opportunity Portfolio
(Lawrence R. Fuller)
Lawrence R. Fuller
Vice President and Portfolio Manager
Growth Opportunity Portfolio
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
Quality Bond Portfolio
(Gregory Mark Maunz)
Gregory Mark Maunz
Vice President and Portfolio Manager
US Government Securities Portfolio
September 11, 1997
Effective June 17, 1997, Geraldine C. Gunn joined Merrill Lynch
Asset Builder Program, Inc. as Portfolio Manager for the Fundamental
Value Portfolio. She is responsible for the day-to-day management of
the Portfolio's investments. She has been a Vice President of the
Investment Adviser since 1989.
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, Global Opportunity and
Growth 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.
* 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, Growth 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,
Global Opportunity and Growth Opportunity Portfolios are subject to
a 0.75% distribution fee and a 0.25% account maintenance fee.
Fundamental Value, Global Opportunity and Growth 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. (There is no initial sales charge for
automatic share conversions.)
* 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, Global Opportunity and
Growth 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, Global Opportunity and Growth 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. Figures shown in the "Average Annual Total
Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend or payable
date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
PERFORMANCE DATA (continued)
Fundamental
Value Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +21.13% +14.77%
Inception (2/01/95) to 6/30/97 +21.53 +18.84
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +19.85% +15.85%
Inception (2/01/95) to 6/30/97 +20.26 +19.62
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +19.88% +18.88%
Inception (2/01/95) to 6/30/97 +20.27 +20.27
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +20.88% +14.54%
Inception (2/01/95) to 6/30/97 +21.27 +18.59
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Global
Opportunity Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +21.82% +15.42%
Inception (2/01/95) to 6/30/97 +14.36 +11.83
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +20.57% +16.57%
Inception (2/01/95) to 6/30/97 +13.17 +12.47
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +20.53% +19.53%
Inception (2/01/95) to 6/30/97 +13.12 +13.12
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +21.61% +15.22%
Inception (2/01/95) to 6/30/97 +14.13 +11.60
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Growth
Opportunity
Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +29.03% +22.25%
Inception (2/02/96) to 6/30/97 +22.97 +18.35
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +27.69% +23.69%
Inception (2/02/96) to 6/30/97 +21.73 +19.75
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +27.69% +26.69%
Inception (2/02/96) to 6/30/97 +21.73 +21.73
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +28.83% +22.07%
Inception (2/02/96) to 6/30/97 +22.84 +18.22
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Quality Bond
Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +7.86% +3.54%
Inception (2/01/95) to 6/30/97 +5.98 +4.20
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +7.04% +3.04%
Inception (2/01/95) to 6/30/97 +5.08 +4.32
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +6.85% +5.85%
Inception (2/01/95) to 6/30/97 +4.96 +4.96
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +7.70% +3.39%
Inception (2/01/95) to 6/30/97 +5.72 +3.94
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
US Government
Securities
Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +8.53% +4.19%
Inception (2/01/95) to 6/30/97 +9.54 +7.70
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +7.64% +3.64%
Inception (2/01/95) to 6/30/97 +8.65 +7.90
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +7.57% +6.57%
Inception (2/01/95) to 6/30/97 +8.58 +8.58
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +8.16% +3.83%
Inception (2/01/95) to 6/30/97 +9.25 +7.41
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
7/31/97 4/30/97 7/31/96 % Change % Change As of 7/31/97
<S> <C> <C> <C> <C> <C> <C>
Fundamental Value Portfolio Class A Shares $15.51 $13.19 $12.17 +29.83%(1) +17.59% --
Fundamental Value Portfolio Class B Shares 15.22 12.98 11.98 +29.45(1) +17.26 --
Fundamental Value Portfolio Class C Shares 15.22 12.98 11.98 +29.45(1) +17.26 --
Fundamental Value Portfolio Class D Shares 15.45 13.15 12.14 +29.65(1) +17.49 --
Global Opportunity Portfolio Class A Shares 13.92 12.10 10.66 +31.98(2) +15.04 --
Global Opportunity Portfolio Class B Shares 13.75 11.99 10.55 +31.73(2) +14.68 --
Global Opportunity Portfolio Class C Shares 13.74 11.98 10.55 +31.64(2) +14.69 --
Global Opportunity Portfolio Class D Shares 13.89 12.08 10.64 +31.94(2) +14.98 --
Growth Opportunity Portfolio Class A Shares 14.68 12.03 9.99 +46.95 +22.03 --
Growth Opportunity Portfolio Class B Shares 14.46 11.88 9.95 +45.33 +21.72 --
Growth Opportunity Portfolio Class C Shares 14.45 11.88 9.95 +45.23 +21.63 --
Growth Opportunity Portfolio Class D Shares 14.65 12.01 10.00 +46.50 +21.98 --
Quality Bond Portfolio Class A Shares 10.00 9.69 9.71 + 2.99 + 3.20 6.37%
Quality Bond Portfolio Class B Shares 9.99 9.69 9.71 + 2.88 + 3.10 5.91
Quality Bond Portfolio Class C Shares 9.99 9.68 9.71 + 2.88 + 3.20 5.79
Quality Bond Portfolio Class D Shares 9.99 9.69 9.71 + 2.88 + 3.10 6.22
US Government Securities Portfolio Class A Shares 10.38 10.12 10.11 + 2.72(3) + 2.57 6.51
US Government Securities Portfolio Class B Shares 10.38 10.12 10.11 + 2.72(3) + 2.57 6.03
US Government Securities Portfolio Class C Shares 10.38 10.12 10.11 + 2.72(3) + 2.57 5.98
US Government Securities Portfolio Class D Shares 10.38 10.12 10.12 + 2.62(3) + 2.57 6.27
Fundamental Value Portfolio Class A Shares--Total Return +34.92(4) +17.59
Fundamental Value Portfolio Class B Shares--Total Return +33.47(5) +17.26
Fundamental Value Portfolio Class C Shares--Total Return +33.50(6) +17.26
Fundamental Value Portfolio Class D Shares--Total Return +34.49(7) +17.49
Global Opportunity Portfolio Class A Shares--Total Return +33.45(8) +15.04
Global Opportunity Portfolio Class B Shares--Total Return +32.04(9) +14.68
Global Opportunity Portfolio Class C Shares--Total Return +31.98(10) +14.69
Global Opportunity Portfolio Class D Shares--Total Return +33.14(11) +14.98
Growth Opportunity Portfolio Class A Shares--Total Return +46.95 +22.03
Growth Opportunity Portfolio Class B Shares--Total Return +45.33 +21.72
Growth Opportunity Portfolio Class C Shares--Total Return +45.23 +21.63
Growth Opportunity Portfolio Class D Shares--Total Return +46.50 +21.98
Quality Bond Portfolio Class A Shares--Total Return +10.84(12) + 5.02(13)
Quality Bond Portfolio Class B Shares--Total Return + 9.78(14) + 4.69(15)
Quality Bond Portfolio Class C Shares--Total Return + 9.70(16) + 4.78(17)
Quality Bond Portfolio Class D Shares--Total Return +10.46(18) + 4.85(19)
US Government Securities Portfolio Class A Shares--Total Return +10.54(20) + 4.35(21)
US Government Securities Portfolio Class B Shares--Total Return + 9.64(22) + 4.13(23)
US Government Securities Portfolio Class C Shares--Total Return + 9.57(24) + 4.11(25)
US Government Securities Portfolio Class D Shares--Total Return +10.16(26) + 4.28(27)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.248 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.122 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.005 per share capital
gains distributions.
(4)Percent change includes reinvestment of $0.530 per share ordinary
income dividends and $0.248 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.415 per share ordinary
income dividends and $0.248 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.417 per share ordinary
income dividends and $0.248 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.503 per share ordinary
income dividends and $0.248 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.128 per share ordinary
income dividends and $0.122 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.027 per share ordinary
income dividends and $0.122 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.030 per share
ordinary income dividends and $0.122 per share capital gains
distributions.
(11)Percent change includes reinvestment of $0.105 per share
ordinary income dividends and $0.122 per share capital gains
distributions.
(12)Percent change includes reinvestment of $0.721 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.171 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.636 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.150 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.628 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.148 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.696 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.165 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.750 per share
ordinary income dividends and $0.005 per share capital gains
distributions.
(21)Percent change includes reinvestment of $0.174 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.666 per share
ordinary income dividends and $0.005 per share capital gains
distributions.
(23)Percent change includes reinvestment of $0.153 per share
ordinary income dividends.
(24)Percent change includes reinvestment of $0.659 per share
ordinary income dividends and $0.005 per share capital gains
distributions.
(25)Percent change includes reinvestment of $0.151 per share
ordinary income dividends.
(26)Percent change includes reinvestment of $0.725 per share
ordinary income dividends and $0.005 per share capital gains
distributions.
(27)Percent change includes reinvestment of $0.168 per share
ordinary income dividends.
</TABLE>
<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 45,000 Yacimientos Petroliferos Fiscales
S.A. (YPF) (ADR)* $ 862,750 $ 1,456,875 2.1%
Total Investments in Latin
America 862,750 1,456,875 2.1
MIDDLE
EAST
Israel Computer Services 125,000 Scitex Corp. Ltd. 1,244,861 1,226,562 1.8
Total Investments in the
Middle East 1,244,861 1,226,562 1.8
NORTH
AMERICA
United Airlines 90,000 ++Mesa Air Group, Inc. 753,168 492,188 0.7
States
Automotive 25,000 Ford Motor Co. 810,389 1,021,875 1.5
25,000 General Motors Corp. 1,359,960 1,546,875 2.2
----------- ----------- ------
2,170,349 2,568,750 3.7
Banking 10,000 Bankers Trust New York Corp. 637,295 1,011,875 1.5
80,000 Hibernia Corp. (Class A) 948,558 1,210,000 1.7
----------- ----------- ------
1,585,853 2,221,875 3.2
Banks/Regional 5,000 Wells Fargo & Company 1,274,628 1,374,688 2.0
Beverage & 30,000 Seagram Company Ltd. (The) 1,089,712 1,149,375 1.7
Entertainment
Chemicals 20,000 Eastman Chemical Co. 1,124,950 1,210,000 1.8
30,000 Great Lakes Chemical Corp. 1,289,188 1,501,875 2.2
50,000 Millennium Chemicals Inc. 978,696 1,053,125 1.5
----------- ----------- ------
3,392,834 3,765,000 5.5
Computer Software 55,000 ++CompuServe Corporation 575,800 632,500 0.9
100,000 ++Mentor Graphics Corporation 983,068 1,050,000 1.5
125,000 ++Novell, Inc. 982,244 945,313 1.4
----------- ----------- ------
2,541,112 2,627,813 3.8
Computers 45,000 ++Digital Equipment Corp. 1,504,041 1,853,437 2.7
Diversified 35,000 Tenneco, Inc. 1,564,600 1,631,875 2.4
Entertainment 60,000 ++Harrah's Entertainment, Inc. 1,136,713 1,230,000 1.8
Hardware Products 35,000 Black & Decker Corp. 1,167,470 1,474,375 2.1
Health Care 60,000 ++Humana, Inc. 1,171,635 1,462,500 2.1
Information 22,000 International Business Machines
Processing Corp. 1,309,275 2,326,500 3.4
23,800 ++Tandem Computers, Inc. 293,015 699,125 1.0
----------- ----------- ------
1,602,290 3,025,625 4.4
Insurance 50,000 TIG Holdings, Inc. 1,474,737 1,637,500 2.4
Machinery 50,000 ITT Industries Inc. 1,177,983 1,415,625 2.1
Medical Services 50,000 ++Pharmaceutical Product
Development, Inc. 858,032 1,168,750 1.7
Metals--Non-Ferrous 45,000 ASARCO Inc. 1,240,590 1,530,000 2.2
Oil--Domestic 60,000 ++American Exploration Co. 678,188 855,000 1.2
70,000 Occidental Petroleum Corp. 1,612,950 1,754,375 2.6
42,000 Sun Company, Inc. 1,307,258 1,504,125 2.2
----------- ----------- ------
3,598,396 4,113,500 6.0
Oil Service 30,000 Dresser Industries, Inc. 927,909 1,252,500 1.8
Paper & Forest 22,500 International Paper Co. 881,980 1,260,000 1.8
Products 60,000 Louisiana-Pacific Corp. 1,351,137 1,376,250 2.0
----------- ----------- ------
2,233,117 2,636,250 3.8
Pharmaceuticals 11,000 Bristol-Myers Squibb Co. 421,102 862,812 1.2
40,000 Pharmacia & Upjohn, Inc. 1,326,355 1,510,000 2.2
----------- ----------- ------
1,747,457 2,372,812 3.4
Photography 25,000 Eastman Kodak Co. 1,765,546 1,675,000 2.4
Publishing/ 27,500 Dow Jones & Company, Inc. 1,021,761 1,187,656 1.7
Newspapers
Retail 40,000 Dillards Inc. (Class A) 1,260,809 1,512,500 2.2
100,000 ++Kmart Corporation 1,083,573 1,187,500 1.7
50,000 ++Woolworth Corp. 634,936 1,415,625 2.1
----------- ----------- ------
2,979,318 4,115,625 6.0
Retail Specialty 42,000 ++Toys 'R' Us, Inc. 1,172,815 1,430,625 2.1
Steel 40,000 USX-US Steel Group, Inc. 1,147,077 1,462,500 2.1
125,000 ++WHX Corp. 1,176,103 1,125,000 1.7
----------- ----------- ------
2,323,180 2,587,500 3.8
Technology 80,000 ++Exabyte Corp. 1,024,595 930,000 1.3
Telecommunications 30,000 GTE Corp. 1,326,489 1,395,000 2.0
50,000 ++US West Media Group 869,720 1,103,125 1.6
----------- ----------- ------
2,196,209 2,498,125 3.6
Utilities/ 40,000 AT&T Corp. 1,436,737 1,472,500 2.1
Communications
Total Investments in North
America 48,132,787 56,901,469 82.5
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
Commercial US$ 3,000,000 Countrywide Home Loan, 5.57% due
Paper** 8/26/1997 2,988,396 2,988,396 4.3
US Government 1,991,000 Federal Home Loan Banks, Inc.,
Agency 5.58% due 8/01/1997 1,991,000 1,991,000 2.9
Obligations** 5,946,000 Federal Home Loan Mortgage Corp.,
5.75% due 8/01/1997 5,946,000 5,946,000 8.6
----------- ----------- ------
7,937,000 7,937,000 11.5
Total Investments in Short-Term
Securities 10,925,396 10,925,396 15.8
Total Investments $61,165,794 70,510,302 102.2
===========
Liabilities in Excess of Other Assets (1,511,213) (2.2)
----------- ------
Net Assets $68,999,089 100.0%
=========== ======
<FN>
++Non-income producing security.
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the rates
paid at the time of purchase by the Portfolio.
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Global Opportunity Portfolio
Face Value Percent of
COUNTRY Amount Foreign Government Obligations Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada C$ 575,000 Canadian Government Bonds, 7% due
12/01/2006 $ 436,840 $ 452,668 0.7%
Denmark Dkr 5,100,000 Denmark Government Bonds, 7% due
11/15/2007 814,777 781,095 1.3
Germany Bundesrepublik Deutschland:
DM 735,000 7.125% due 12/20/2002 513,394 442,826 0.7
850,000 6.50% due 10/14/2005 547,951 495,490 0.8
800,000 Treuhandanstalt, 6.875% due
6/11/2003 532,016 477,324 0.8
----------- ----------- ------
1,593,361 1,415,640 2.3
Italy Lit 1,175,000,000 Buoni Poliennali del Tesoro
(Italian Government Bonds), 8.50%
due 1/01/2004 746,059 729,034 1.2
Spain Pta 80,000,000 Bonos del Estado (Spanish
Government Bonds), 7.90% due
2/28/2002 648,305 565,768 0.9
Sweden Government of Sweden:
Skr 2,000,000 10.25% due 5/05/2000 336,811 282,461 0.5
3,400,000 8% due 8/15/2007 533,736 477,592 0.8
----------- ----------- ------
870,547 760,053 1.3
United Kingdom Pound 750,000 UK Treasury Gilt, 7.25% due
Sterling 12/07/2007 1,241,406 1,252,399 2.1
Total Investments in Foreign
Government Obligations 6,351,295 5,956,657 9.8
US Government Obligations
United States US Treasury Notes and Bonds:
US$ 500,000 5% due 1/31/1998 495,586 498,515 0.8
1,600,000 6% due 8/15/1999 1,604,375 1,608,000 2.6
800,000 6.50% due 5/31/2002 805,375 819,496 1.4
725,000 6.25% due 2/15/2007 730,777 735,991 1.2
635,000 6.625% due 5/15/2007 642,934 663,575 1.1
1,925,000 6.625% due 2/15/2027 1,860,012 2,009,816 3.3
Total Investments in US Government
Obligations 6,139,059 6,335,393 10.4
Total Investments in Foreign & US
Government Obligations 12,490,354 12,292,050 20.2
<CAPTION>
Shares
Industries Held US Stocks
United Aerospace & Defense 4,100 AlliedSignal, Inc. 302,342 378,225 0.6
States 5,000 GenCorp, Inc. 145,845 145,625 0.3
3,000 United Technologies Corporation 126,671 253,688 0.4
----------- ----------- ------
574,858 777,538 1.3
Airlines 6,000 ++US Airways Group Inc. 220,454 229,875 0.4
Appliances 7,600 Sunbeam Corp., Inc. 290,054 297,350 0.5
Auto--Related 4,600 Hertz Corporation (Class A) 141,401 159,850 0.3
Banking 6,762 Banc One Corp. 298,826 379,517 0.6
7,800 The Bank of New York Company, Inc. 210,424 378,788 0.6
4,900 BankAmerica Corp. 262,022 369,950 0.6
----------- ----------- ------
771,272 1,128,255 1.8
Broadcasting/Cable 7,100 ++Tele-Communications, Inc. (Class A) 102,747 121,144 0.2
Chemicals 4,000 du Pont (E.I.) de Nemours & Company 221,876 267,750 0.4
Communication 8,500 ++WorldCom, Inc. 219,474 296,969 0.5
Equipment
Computer Sales 1,100 International Business Machines
Corp. 64,579 116,325 0.2
Computer Software 6,300 ++BMC Software, Inc. 257,436 378,788 0.6
700 ++Microsoft Corporation 74,970 98,919 0.2
3,675 ++Oracle Corp. 126,046 199,598 0.3
----------- ----------- ------
458,452 677,305 1.1
Computers 6,375 ++COMPAQ Computer Corp. 189,367 364,172 0.6
5,400 ++Quantum Corporation 153,565 156,938 0.3
----------- ----------- ------
342,932 521,110 0.9
Containers 9,200 ++Owens-Illinois, Inc. 273,289 317,400 0.5
Electronics 4,200 Intel Corporation 293,664 385,350 0.6
Energy 14,300 Edison International, Inc. 282,926 361,075 0.6
Financial Services 4,850 American Express Company 243,176 406,188 0.6
4,000 First Data Corp. 149,574 174,500 0.3
6,900 MGIC Investment Corporation 270,302 362,681 0.6
----------- ----------- ------
663,052 943,369 1.5
Hardware Products 4,500 Black & Decker Corp. 154,250 189,563 0.3
Health Care 11,200 ++HEALTHSOUTH Corporation 304,565 296,800 0.5
Health Care Cost 4,800 ++Oxford Health Plans, Inc. 304,333 403,800 0.7
Containment
Hospitals 7,100 ++Tenet Healthcare Corp. 190,669 212,556 0.4
Information Processing 5,400 Computer Associates International,
Inc. 229,230 367,538 0.6
Insurance 2,550 Aetna Inc. 210,659 290,541 0.5
4,600 Allstate Corp. 215,810 363,400 0.6
2,025 Hartford Life, Inc. (Class A) 67,002 83,278 0.1
1,800 Nationwide Financial Services,
Inc. (Class A) 42,897 54,450 0.1
5,100 Travelers Group Inc. 268,916 366,881 0.6
2,200 Travelers Property Casualty Corp.
(Class A) 88,807 94,600 0.2
7,400 UNUM Corporation 248,319 329,300 0.5
----------- ----------- ------
1,142,410 1,582,450 2.6
</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 Leisure & Tourism 8,700 Brunswick Corporation $ 217,289 $ 280,575 0.5%
States 8,000 Carnival Corporation (Class A) 231,110 337,000 0.5
(concluded) ----------- ----------- ------
448,399 617,575 1.0
Machinery 5,100 ++American Standard Companies, Inc. 185,809 253,406 0.4
5,800 Ingersoll-Rand Company 271,072 394,763 0.7
----------- ----------- ------
456,881 648,169 1.1
Medical Services 700 ++Horizon/CMS Healthcare Corporation 15,103 14,963 0.0
Medical Supplies 2,800 DENTSPLY International Inc. 141,544 151,550 0.3
Natural Gas 5,100 El Paso Natural Gas Co. 260,662 294,844 0.5
5,100 Enron Corp. 194,067 193,481 0.3
----------- ----------- ------
454,729 488,325 0.8
Oil & Gas Producers 4,200 ++Smith International, Inc. 202,498 301,088 0.5
Oil Service 7,800 Dresser Industries, Inc. 179,893 325,650 0.5
2,000 Schlumberger Ltd. 73,712 152,750 0.3
----------- ----------- ------
253,605 478,400 0.8
Paper 4,700 Kimberly-Clark Corp. 180,580 238,231 0.4
Petroleum 1,700 Pennzoil Company 68,080 132,813 0.2
4,900 Unocal Corp. 166,650 196,000 0.3
----------- ----------- ------
234,730 328,813 0.5
Pharmaceuticals 4,700 American Home Products Corporation 285,436 387,456 0.6
2,900 Merck & Co., Inc. 176,711 301,419 0.5
----------- ----------- ------
462,147 688,875 1.1
Railroads 2,700 Burlington Northern Santa Fe Corp. 231,374 260,719 0.4
Real Estate 5,500 Prentiss Properties Trust 114,074 143,000 0.2
Investment Trusts 4,600 Starwood Lodging Trust 205,717 214,475 0.4
----------- ----------- ------
319,791 357,475 0.6
Retail 1,400 ++Safeway, Inc. 74,104 75,075 0.1
Retail--Drug Stores 6,555 Rite Aid Corporation 227,722 340,450 0.6
Retail Trade 4,700 Sears, Roebuck & Co. 214,793 297,569 0.5
Telecommunications 4,900 ++AirTouch Communications, Inc. 138,867 161,394 0.3
1,853 TCI Pacific Communications
(Convertible Preferred) 176,274 205,683 0.3
----------- ----------- ------
315,141 367,077 0.6
Tobacco 4,000 Philip Morris Companies, Inc. 147,842 180,500 0.3
Total Investments in US Stocks 11,627,470 15,488,226 25.5
Foreign Stocks
Argentina Petroleum 19,300 Yacimientos Petroliferos Fiscales
S.A. (ADR)* 424,738 624,837 1.0
Total Stocks in Argentina 424,738 624,837 1.0
Australia Diversified 45,000 Broken Hill Proprietary Co., Ltd. 596,100 611,086 1.0
Resources Company
Total Stocks in Australia 596,100 611,086 1.0
Brazil Banking 8,100 ++Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)** 273,418 326,025 0.5
Beverages 768,000 Companhia Cervejaria Brahma S.A. PN
(Preferred) 443,021 581,542 1.0
Telecommunications 4,400 Telecomunicacoes Brasileiras S.A.--
Telebras PN (ADR)* 232,442 652,850 1.1
Total Stocks in Brazil 948,881 1,560,417 2.6
Canada Automotive Parts 10,100 Magna International, Inc. (Class A) 478,119 674,175 1.1
Conglomerates 21,800 Canadian Pacific, Ltd. 409,020 658,087 1.1
Entertainment 13,200 ++Imax Corp. 210,684 356,400 0.6
Fertilizers 6,700 Potash Corp. of Saskatchewan, Inc. 462,562 509,200 0.8
Total Stocks in Canada 1,560,385 2,197,862 3.6
Finland Holding Company 17,000 ++Amer Group Ltd. 306,406 310,718 0.5
Paper & Forest 24,000 UPM-Kymmene Corp. 500,294 582,541 1.0
Products
Pharmaceuticals 8,000 Orion-yhtyma OY (Class B) 310,927 292,440 0.5
Transportation 10,800 Finnlines OY 211,570 332,614 0.5
Total Stocks in Finland 1,329,197 1,518,313 2.5
France Insurance 13,200 Scor S.A. 512,003 577,695 0.9
Semiconductor 7,500 ++SGS-Thomson Microelectronics N.V.
Capital Equipment (NY Registered) 274,852 685,312 1.1
Steel 32,400 Usinor-Sacilor S.A. 510,124 646,200 1.1
Total Stocks in France 1,296,979 1,909,207 3.1
Germany Chemicals 600 Henkel KGaA 26,670 30,426 0.1
5,400 Henkel KGaA (Preferred) 229,478 301,487 0.5
----------- ----------- ------
256,148 331,913 0.6
Electronics 9,950 Siemens AG 504,790 694,262 1.1
Machinery & 1,350 Mannesmann AG 467,510 631,284 1.0
Equipment
Total Stocks in Germany 1,228,448 1,657,459 2.7
Hong Kong Banking 20,000 HSBC Holdings PLC 312,430 697,494 1.2
Total Stocks in Hong Kong 312,430 697,494 1.2
Indonesia Telecommunications 20,200 P.T. Indonesian Satellite Corp.
(ADR)* 631,726 628,725 1.0
Total Stocks in Indonesia 631,726 628,725 1.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Global Opportunity Portfolio (continued)
Shares Value Percent of
COUNTRY Industries Held Foreign Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Italy Apparel 9,300 Gucci Group N.V. (NY Registered) $ 667,262 $ 587,063 1.0%
Machinery 71,000 Danieli & Co. 266,366 258,758 0.4
Publishing 47,000 Mondadori (Arnoldo) Editore S.p.A. 372,369 288,020 0.5
Total Stocks in Italy 1,305,997 1,133,841 1.9
Japan Building & 54,000 Maeda Corp. 438,663 270,228 0.4
Construction 40,000 Okumura Corp. 367,731 223,460 0.4
----------- ----------- ------
806,394 493,688 0.8
Building Products 25,000 Matsushita Electric Works, Ltd. 284,565 314,346 0.5
Capital Goods 79,000 Mitsubishi Heavy Industries, Ltd. 581,237 556,667 0.9
Consumer--Electronics 7,000 Rohm Company Ltd. 404,881 915,612 1.5
Consumer-- 8,000 Amway Japan Ltd. 307,130 243,713 0.4
Miscellaneous
Electrical Equipment 84,000 Mitsubishi Electric Corp. 557,561 460,759 0.8
7,000 Sony Corporation 512,739 697,046 1.1
----------- ----------- ------
1,070,300 1,157,805 1.9
Electronics 22,000 Canon Inc. 412,502 701,772 1.2
29,000 Matsushita Electric Industrial
Co., Ltd. 463,584 604,473 1.0
----------- ----------- ------
876,086 1,306,245 2.2
Insurance 50,000 Tokio Marine & Fire Insurance
Co., Ltd. 537,609 637,131 1.1
Retail 5,000 Autobacs Seven Co., Ltd. 328,783 372,996 0.6
Textiles 85,000 Toray Industries Inc. 520,808 558,059 0.9
Tires & Rubber 25,000 Bridgestone Corp. 445,755 599,156 1.0
Warehouse & Storage 55,000 Mitsui-Soko Co., Ltd. 396,640 325,359 0.5
Total Stocks in Japan 6,560,188 7,480,777 12.3
Mexico Beverages 20,100 Panamerican Beverages, Inc.
(Class A) 449,467 673,350 1.1
Conglomerates 42,800 Grupo Carso, S.A. de C.V. (ADR)* 555,727 679,450 1.1
Utilities-- 12,400 Telefonos de Mexico, S.A. de C.V.
Communications (Telmex) (ADR)* 478,040 688,200 1.2
Total Stocks in Mexico 1,483,234 2,041,000 3.4
Netherlands Banking 31,600 ABN AMRO Holding N.V. 466,422 744,447 1.2
Total Stocks in the Netherlands 466,422 744,447 1.2
Norway Transportation 57,089 Color Line ASA 230,614 252,586 0.4
Services
Total Stocks in Norway 230,614 252,586 0.4
Philippines Beverages 183,700 San Miguel Corp. (Class B) 554,679 400,453 0.7
Total Stocks in the Philippines 554,679 400,453 0.7
South Diversified 43,000 Sasol Limited 505,901 515,459 0.9
Africa
Insurance 17,400 De Beers Consolidated Mines Ltd.
(ADR)* 600,181 624,225 1.0
Total Stocks in South Africa 1,106,082 1,139,684 1.9
South Engineering & 4,900 ++Hyundai Engineering & Construction
Korea Construction Co., Ltd. (GDR)**++++ 62,897 18,987 0.0
74 ++Hyundai Engineering & Construction
Co., Ltd. (New) (GDR)**++++ 950 287 0.0
Total Stocks in South Korea 63,847 19,274 0.0
Spain Petroleum 13,500 Repsol S.A. (ADR)* 484,459 543,375 0.9
Total Stocks in Spain 484,459 543,375 0.9
Sweden Banking 16,200 Sparbanken Sverige AB (Class A) 207,538 357,070 0.6
Chemicals 17,000 Perstorp AB (Class B) 318,484 290,368 0.5
Investment 22,000 Bure Investment AB 207,219 256,961 0.4
Management
Real Estate 12,200 ++Castellum AB 81,843 101,893 0.2
Total Stocks in Sweden 815,084 1,006,292 1.7
Switzerland Electrical 435 ABB AG 466,462 619,083 1.0
Equipment
Pharmaceuticals 8,000 Novartis AG (ADR)* 406,854 642,000 1.1
60 Roche Holding AG 502,766 581,126 0.9
----------- ----------- ------
909,620 1,223,126 2.0
Total Stocks in Switzerland 1,376,082 1,842,209 3.0
United Automobile Parts 85,300 LucasVarity PLC 293,415 262,355 0.4
Kingdom
Beverages 61,300 Grand Metropolitan PLC 442,059 600,216 1.0
Chemicals 12,600 Imperial Chemical Industries PLC 154,919 206,468 0.4
7,500 Imperial Chemical Industries PLC
(ADR)* 389,042 505,312 0.8
----------- ----------- ------
543,961 711,780 1.2
Metals & Mining 34,000 Rio Tinto PLC 511,297 552,346 0.9
Retail 47,000 Boots Company PLC 468,725 594,375 1.0
Telecommunications 114,000 Vodafone Group PLC 417,309 574,432 0.9
Total Stocks in the United Kingdom 2,676,766 3,295,504 5.4
Total Investments in Foreign
Stocks 25,452,338 31,304,842 51.5
Total Investments in US & Foreign
Stocks 37,079,808 46,793,068 77.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Global Opportunity Portfolio (concluded)
SHORT-TERM Face Value Percent of
SECURITIES Amount Issue Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Commercial US$ 364,000 General Motors Acceptance Corp.,
Paper*** 5.81% due 8/01/1997 $ 364,000 $ 364,000 0.6%
Total Investments in Short-Term
Securities 364,000 364,000 0.6
Total Investments $49,934,162 59,449,118 97.8
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts++++++ 790,550 1.3
Other Assets Less Liabilities 535,873 0.9
----------- ------
Net Assets $60,775,541 100.0%
=========== ======
<FN>
*American Depositary Receipts (ADR).
**Global Depositary Receipts (GDR).
***Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the
Portfolio.
++Non-income producing security.
++++The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
++++++Forward foreign exchange contracts sold as of July 31, 1997
were as follows:
Unrealized
Appreciation
Foreign Expiration (Depreciation)
Currency Sold Date (Note 1b)
A$ 700,000 August 1997 $(5,824)
Chf 2,650,000 August 1997 28,540
Dkr 5,440,000 August 1997 3,172
DM 5,825,000 August 1997 170,813
Fim 6,900,000 August 1997 43,657
Frf 9,475,000 August 1997 83,303
Lit 3,225,000,000 August 1997 3,871
Pta 170,000,000 August 1997 54,881
Skr 14,200,000 August 1997 9,235
YEN 800,000,000 August 1997 398,902
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts Sold--Net
(US$ Commitment--$21,254,001) $790,550
========
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Growth Opportunity Portfolio
Shares Value Percent of
Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Advertising 5,100 Interpublic Group of Companies,
Inc. $ 153,631 $ 228,225 0.8%
Banking & 8,000 Banc One Corp. 372,883 449,000 1.5
Financial 11,000 BankAmerica Corp. 794,686 830,500 2.9
2,000 Citicorp 230,288 271,500 0.9
4,000 State Street Corp. 137,605 224,250 0.8
----------- ----------- ------
1,535,462 1,775,250 6.1
Beverages 13,000 The Coca-Cola Company 666,199 900,250 3.1
Communications 14,000 ++Cisco Systems, Inc. 803,528 1,112,125 3.8
Equipment 14,000 ++FORE Systems, Inc. 348,363 226,625 0.8
12,000 Lucent Technologies, Inc. 645,283 1,019,250 3.5
10,000 ++Newbridge Networks Corp. 376,652 521,250 1.8
8,000 Northern Telecom Ltd. 619,208 836,500 2.9
10,000 Telefonaktiebolaget LM Ericsson
(ADR)* 385,085 452,500 1.6
----------- ----------- ------
3,178,119 4,168,250 14.4
Computers 26,250 ++COMPAQ Computer Corp. 910,606 1,499,531 5.2
3,000 Hewlett-Packard Co. 153,435 210,188 0.7
----------- ----------- ------
1,064,041 1,709,719 5.9
Cosmetics 10,000 Gillette Company (The) 694,860 990,000 3.4
1,500 International Flavors &
Fragrances Inc. 66,304 79,594 0.3
----------- ----------- ------
761,164 1,069,594 3.7
Electrical 2,000 Emerson Electric Company 108,040 118,000 0.4
Equipment 12,000 General Electric Co. 549,468 842,250 2.9
2,000 Honeywell, Inc. 144,477 149,375 0.5
----------- ----------- ------
801,985 1,109,625 3.8
Electronics 10,000 Intel Corp. 689,203 917,500 3.2
Energy 8,800 El Paso Natural Gas Co. 426,756 508,750 1.8
11,000 Enron Corp. 464,926 417,313 1.4
----------- ----------- ------
891,682 926,063 3.2
Entertainment 6,400 ++Viacom, Inc. (Class A) 241,568 195,600 0.7
3,000 Walt Disney Co. 207,887 242,438 0.8
----------- ----------- ------
449,455 438,038 1.5
Financial Services 4,000 American Express Company 308,861 335,000 1.2
12,000 Federal National Mortgage
Association 512,733 567,750 2.0
7,000 The Travelers Group, Inc. 320,104 503,563 1.7
----------- ----------- ------
1,141,698 1,406,313 4.9
Food 1,500 ConAgra, Inc. 70,590 105,469 0.4
2,000 Wrigley (Wm.) Jr. Co. 128,603 153,875 0.5
----------- ----------- ------
199,193 259,344 0.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Growth Opportunity Portfolio (concluded)
Shares Value Percent of
Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Food Merchandising 4,000 Albertsons, Inc. $ 159,212 $ 148,250 0.5%
8,000 ++Meyer (Fred), Inc. 326,607 458,500 1.6
----------- ----------- ------
485,819 606,750 2.1
Hotels 1,000 Marriott International, Inc. 46,921 68,750 0.2
Household Products 1,000 Colgate-Palmolive Co. 37,260 75,750 0.2
1,500 Kimberly-Clark Corp. 56,995 76,031 0.3
4,000 Procter & Gamble Company 460,197 608,500 2.1
----------- ----------- ------
554,452 760,281 2.6
Information 8,000 First Data Corp. 300,549 349,000 1.2
Processing
Insurance 1,000 Aetna Inc. 82,249 113,938 0.4
2,250 American International Group,
Inc. 160,349 239,625 0.8
----------- ----------- ------
242,598 353,563 1.2
Leisure 8,500 Polygram N.V. (NY Registered
Shares) 446,700 453,156 1.6
Medical Technology 8,000 ++Boston Scientific Corp. 453,955 574,000 2.0
8,000 Johnson & Johnson 415,736 498,500 1.7
----------- ----------- ------
869,691 1,072,500 3.7
Oil Services 12,000 Baker Hughes, Inc. 454,108 528,750 1.8
5,200 Diamond Offshore Drilling, Inc. 366,689 484,900 1.7
12,000 Schlumberger, Ltd. 651,711 916,500 3.2
----------- ----------- ------
1,472,508 1,930,150 6.7
Pharmaceuticals 11,000 ++Amgen, Inc. 669,875 646,250 2.2
7,500 Bristol-Myers Squibb Co. 468,408 588,281 2.0
4,000 Merck & Co., Inc. 316,381 415,750 1.5
5,500 Pfizer, Inc. 260,241 327,937 1.1
----------- ----------- ------
1,714,905 1,978,218 6.8
Photography 1,200 Eastman Kodak Co. 89,634 80,400 0.3
Pollution Control 500 Waste Management, Inc. 14,160 16,000 0.0
Restaurants 3,000 McDonald's Corp. 142,703 161,250 0.6
Retail--Specialty 750 ++Staples, Inc. 13,000 18,844 0.1
Retail Stores 7,000 CVS Corporation 379,825 398,125 1.4
23,000 Wal-Mart Stores, Inc. 774,064 863,937 3.0
7,000 Walgreen Co. 315,619 395,500 1.3
----------- ----------- ------
1,469,508 1,657,562 5.7
Software--Computer 8,000 ++Baan Company, N.V. 406,437 551,000 1.9
7,000 ++Microsoft Corp. 569,538 989,187 3.4
6,000 ++Oracle Corp. 262,159 325,875 1.1
8,000 SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(ADR)* 454,125 653,000 2.3
----------- ----------- ------
1,692,259 2,519,062 8.7
Toys 7,000 Hasbro, Inc. 161,420 214,812 0.7
Travel & Lodging 1,000 Carnival Corporation (Class A) 26,786 42,125 0.2
Total Investments in Common
Stocks 21,275,445 27,190,594 93.9
Face
Amount Short-Term Securities
US Government $ 2,305,000 Federal Home Loan Mortgage Corp.,
Agency 5.75% due 8/01/1997 2,305,000 2,305,000 7.9
Obligations**
Total Investments in Short-Term
Securities 2,305,000 2,305,000 7.9
Total Investments $23,580,445 29,495,594 101.8
===========
Liabilities in Excess of Other Assets (528,870) (1.8)
----------- ------
Net Assets $28,966,724 100.0%
=========== ======
<FN>
*American Depositary Receipts (ADR).
**Certain US Government Agency Obligations are traded on a discount
basis; the interest rate shown is the discount rate paid at the
time of purchase by the Fund.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<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>
Asset-Backed AAA Aaa $150,000 Arcadia Automobile Receivables Trust, 6.10% due
Securities--1.5% 6/15/2000 (b) $ 149,971 $ 150,604
Banking--14.3% AA- Aa3 150,000 Banc One, Milwaukee, N.A., 6.625% due 4/15/2003 156,155 151,778
A A2 250,000 Bank of New York Company Inc. (The), 7.875% due
11/15/2002 276,675 266,778
A+ A1 250,000 BankAmerica Corp., 6.65% due 5/01/2001 249,863 253,510
A A2 253,000 First Chicago Corp., 9% due 6/15/1999 268,428 265,895
AA- Aa3 250,000 Norwest Corporation, 6.75% due 5/12/2000 249,628 254,160
A- A2 200,000 Wells Fargo & Company, 8.375% due 5/15/2002 213,120 215,804
---------- ----------
1,413,869 1,407,925
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Quality Bond Portfolio (concluded)
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Bonds & Notes Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Financial A A2 $200,000 Bear Stearns Co., 6.75% due 8/15/2000 $ 198,730 $ 202,770
Services--14.2% A A2 200,000 Beneficial Corporation, 7.75% due 11/08/2002 209,676 212,040
AA Aa2 200,000 MBIA, Inc., 7.15% due 7/15/2027 199,510 205,384
A+ A1 300,000 Morgan Stanley Group, Inc., 6.875% due 3/01/2007 298,923 304,857
A A2 150,000 Smith Barney Holdings, Inc., 7.375% due 5/15/2007 149,866 156,473
A+ aa3 100,000 Travelers Capital II, 7.75% due 12/01/2036 100,170 101,439
A+ A1 200,000 The Travelers Group, Inc., 7.875% due 5/15/2025 205,616 219,040
---------- ----------
1,362,491 1,402,003
Financial Services-- A+ A1 200,000 American General Finance Corp., 7.70% due
Consumer--6.4% 11/15/1997 203,396 200,882
AA- Aa3 200,000 Associates Corp. of North America, 5.25% due
9/01/1998 193,918 198,584
A aa3 150,000 CIT Capital Trust I, 7.70% due 2/15/2027 149,316 154,813
A+ Aa3 75,000 CIT Group Holdings, Inc., 7% due 9/30/1997 75,607 75,037
---------- ----------
622,237 629,316
Industrial-- A+ A1 100,000 Anheuser-Busch Co., Inc., 8.75% due 12/01/1999 107,905 105,724
Consumer Goods-- A+ A1 100,000 Bass America, Inc., 8.125% due 3/31/2002 105,928 107,363
6.3% A- A3 90,000 IBP, Inc., 6.125% due 2/01/2006 82,690 87,182
A- A2 100,000 Sears, Roebuck & Co., 9.25% due 4/15/1998 106,444 102,284
AA Aa2 200,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 207,350 222,696
---------- ----------
610,317 625,249
Industrial-- AA Aa2 175,000 BP America Inc., 9.375% due 11/01/2000 200,263 191,711
Energy--2.0%
Industrial-- A A2 150,000 Carnival Cruise Lines, Inc., 7.70% due 7/15/2004 156,745 159,679
Other--10.6% A+ A1 200,000 Ford Motor Credit Company, 7% due 9/25/2001 199,204 205,338
A- A3 100,000 General Motors Acceptance Corp., 8.50% due
1/01/2003 108,510 109,503
BBB+ A3 250,000 Lockheed Martin Corp., 6.55% due 5/15/1999 249,880 252,110
AA+ A2 100,000 McDonnell Douglas Corp., 9.25% due 4/01/2002 111,097 111,851
BBB Baa3 200,000 Seagate Technology, 7.125% due 3/01/2004 199,650 205,006
---------- ----------
1,025,086 1,043,487
Industrial-- A A2 240,631 Disney Enterprises Inc., 6.85% due 1/10/2007
Services--3.6% (a)(b) 240,468 244,144
BBB- Baa3 100,000 Time Warner Entertainment, 8.375% due 3/15/2023 107,029 109,634
---------- ----------
347,497 353,778
Supranational-- AAA Aaa 200,000 Asian Development Bank, 6.125% due 3/09/2004 198,300 200,542
2.0%
US Government US Treasury Notes:
Obligations--13.2% AAA Aaa 150,000 7.125% due 10/15/1998 158,086 152,601
AAA Aaa 200,000 6.375% due 5/15/1999 200,469 202,188
AAA Aaa 200,000 7.50% due 11/15/2001 210,406 212,094
AAA Aaa 200,000 5.875% due 2/15/2004 194,031 199,188
AAA Aaa 300,000 7.25% due 8/15/2004 321,937 321,561
AAA Aaa 211,000 6.50% due 5/15/2005 210,267 217,265
---------- ----------
1,295,196 1,304,897
Utilities-- A+ A2 300,000 Alltel Corp., 6.75% due 9/15/2005 295,380 304,590
Communications--
3.1%
Utilities-- A+ Aa3 200,000 Duke Power Co., 8% due 11/01/1999 208,016 208,114
Electric--8.3% AA- Aa3 250,000 Northern States Power Company, 7.125% due
7/01/2025 254,800 258,955
A- A3 180,000 Public Service Electric & Gas Co., 7.125% due
11/01/1997 181,514 180,481
A A2 150,000 Virginia Electric & Power Co., 8.625% due
10/01/2024 166,200 166,551
---------- ----------
810,530 814,101
Yankees BBB+ Baa3 200,000 Fairfax Financial Holdings, Ltd., 7.75% due
Corporate--4.7% 7/15/2037 (a) 199,002 204,720
A+ A3 250,000 Mass Transit Railway Corp., 7.25% due 10/01/2005 260,325 259,250
---------- ----------
459,327 463,970
Yankees A+ A2 150,000 Province of Quebec, 7.125% due 2/09/2024 150,195 150,352
Sovereign--1.5%
Total Investments in Bonds & Notes--91.7% 8,940,659 9,042,525
<CAPTION>
SHORT-TERM
SECURITIES Issue
US Government 550,000 Federal Home Loan Mortgage Corp., 5.75% due
Agency 8/01/1997 550,000 550,000
Obligations**--5.6%
Total Investments in Short-Term Securities--5.6% 550,000 550,000
Total Investments--97.3% $9,490,659 9,592,525
==========
Other Assets Less Liabilities--2.7% 270,336
----------
Net Assets--100.0% $9,862,861
==========
<FN>
*Not Rated.
**Certain US Government Agency Obligations are traded on a discount
basis; the interest rates shown are the discount rates paid at the
time of purchase by the Portfolio.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(b)Subject to principal paydowns.
See Notes to Financial Statements.
</TABLE>
<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> <S> <C>
US Government Federal Home Loan Mortgage Corporation $ 1,152,884 11.50 % 6/01/2019 $ 1,299,577
Agency Mortgage- Federal Home Loan Mortgage Corporation--
Backed Obligations* Gold Program 696,501 6.00 6/01/2004 687,571
- --72.8% Federal Home Loan Mortgage Corporation--
Gold Program 2,725,265 6.50 5/01/11-5/01/12 2,716,111
Government National Mortgage Association 496,968 6.50 2/15/2026 487,804
Government National Mortgage Association 1,000,000 7.00 7/15/27 1,001,560
Government National Mortgage Association 1,928,232 7.50 10/15/2025-12/15/2026 1,961,765
Total US Government Agency Mortgage-Backed Obligations (Cost--$8,020,493) 8,154,388
US Government US Treasury Notes 1,900,000 5.875 11/15/2005 1,880,107
Obligations--23.9% US Treasury STRIPS*** 1,000,000 6.35++ 8/15/2001 791,630
Total US Government Obligations (Cost--$2,621,885) 2,671,737
<CAPTION>
SHORT-TERM
SECURITIES Face Amount Issue
Repurchase $1,187,000 Nikko Securities Company, purchased on 7/31/1997
to yield 5.84% to 8/01/1997 1,187,000
Agreements**--10.6%
Total Investments in Short-Term Securities (Cost--$1,187,000) 1,187,000
Total Investments (Cost--$11,829,378)--107.3% 12,013,125
Liabilities in Excess of Other Assets--(7.3%) (814,472)
-----------
Net Assets--100.0% $11,198,653
===========
<FN>
*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 Agreements are fully collateralized by US
Government & Agency Obligations.
***STRIPS--Separate Trading of Registered Interest and
Principal of Securities.
++Represents the yield-to-maturity on this zero coupon
issue at the time of purchase by the Portfolio.
See Notes to Financial Statements.
</TABLE>
EQUITY PORTFOLIO CHANGES
FUNDAMENTAL
VALUE PORTFOLIO
For the Quarter Ended July 31, 1997
Additions
*Applied Magnetics Corp.
*Darden Restaurants, Inc.
Digital Equipment Corp.
Novell, Inc.
Sun Company, Inc.
TIG Holdings, Inc.
Tenneco, Inc.
Deletions
3Com Corp.
Apple Computer, Inc.
*Applied Magnetics Corp.
Charming Shoppes, Inc.
Computervision Corp.
*Darden Restaurants, Inc.
Evans Withycombe Residential, Inc.
Greater New York Savings Bank
Integrated Device Technology, Inc.
National Auto Credit, Inc.
National Semiconductor Corp.
Phelps Dodge Corp.
Reebok International Ltd.
Total Petroleum (North America) Ltd.
Transitional Hospitals Corp.
GLOBAL
OPPORTUNITY
PORTFOLIO
For the Quarter Ended July 31, 1997
Additions
Amway Japan Ltd.
Banc One Corp.
Castellum AB
DENTSPLY International Inc.
GenCorp, Inc.
Gucci Group N.V. (NY Registered)
HEALTHSOUTH Corporation
Hartford Life, Inc. (Class A)
Horizon/CMS Healthcare Corporation
Hyundai Engineering & Construction Co.,
Ltd. (New) (GDR)
LucasVarity PLC
Matsushita Electric Works, Ltd.
Orion-yhtyma OY (Class B)
Owens-Illinois, Inc.
Perstorp AB (Class B)
Quantum Corporation
Safeway, Inc.
Sunbeam Corp., Inc.
Travelers Property Casualty Corp.
(Class A)
US Airways Group Inc.
Uniao de Bancos Brasileiros S.A.
(Unibanco)(GDR)
Deletions
Abbott Laboratories
British Steel PLC
Cabletron Systems, Inc.
Chase Manhattan Corporation (The)
Eisai Co., Ltd.
First USA, Inc.
Fisher Scientific International Inc.
Health Management Associates, Inc.
(Class A)
Hong Kong Telecommunications Ltd. (ADR)
IMC Global, Inc.
McDonald's Corporation
Rauma OY
GROWTH
OPPORTUNITY
PORTFOLIO
For the Quarter Ended July 31, 1997
Additions
American Express Company
BankAmerica Corp.
CVS Corporation
Citicorp
Deletions
Wells Fargo & Co.
[FN]
*Added and deleted in the same quarter.
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Fundamental Global Growth Quality US Government
Value Opportunity Opportunity Bond Securities
As of July 31, 1997 Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C> <C>
Assets: Investments, at value*
(Note 1a) $70,510,302 $59,449,118 $29,495,594 $ 9,592,525 $12,013,125
Foreign cash (Note 1c) -- 13,858 -- -- --
Cash 1,909 401 524 163 --
Unrealized appreciation on
forward foreign exchange
contracts (Note 1b) -- 790,550 -- -- --
Receivables:
Interest -- 312,385 -- 168,290 83,162
Capital shares sold 119,102 181,766 122,963 62,045 41,198
Dividends 65,045 86,624 18,306 -- --
Securities sold -- 123,747 -- -- --
Investment adviser (Note 2) -- -- -- 53,611 42,097
Forward foreign exchange
contracts (Note 1b)--47,004 -- -- --
Principal paydowns -- -- -- -- 26,518
Deferred organization expenses
(Note 1f) 22,240 51,891 64,510 12,735 27,849
Prepaid registration fees and
other assets (Note 1f) 99,094 46,561 12,346 61,655 45,983
----------- ----------- ----------- ----------- -----------
Total assets 70,817,692 61,103,905 29,714,243 9,951,024 12,279,932
----------- ----------- ----------- ----------- -----------
Liabilities: Payables:
Securities purchased 1,472,885 -- 616,373 -- 997,132
Capital shares redeemed. 93,579 66,343 31,433 9,624 4,356
Distributor (Note 2) 53,491 47,671 22,474 4,891 4,388
Investment adviser (Note 2) 36,880 37,353 15,197 -- --
Dividends to shareholders
(Note 1g) -- -- -- 23,375 23,845
Forward foreign exchange
contracts (Note 1b) -- 26,281 -- -- --
Accrued expenses and other
liabilities 161,768 150,716 62,042 50,273 51,558
----------- ----------- ----------- ----------- -----------
Total liabilities 1,818,603 328,364 747,519 88,163 1,081,279
----------- ----------- ----------- ----------- -----------
Net Assets: Net assets $68,999,089 $60,775,541 $28,966,724 $ 9,862,861 $11,198,653
=========== =========== =========== =========== ===========
Net Assets Class A Common Stock, $0.10
Consist of: par value++ $ 1,727 $ 1,167 $ 908 $ 18,574 $ 39,442
Class B Common Stock, $0.10
par value++++ 288,243 302,807 128,932 52,025 47,293
Class C Common Stock, $0.10
par value++++++ 131,452 114,434 61,323 22,878 18,158
Class D Common Stock, $0.10
par value++++++++ 31,476 23,351 9,023 5,219 3,001
Paid-in capital in excess
of par 52,057,353 47,088,520 21,743,144 9,714,434 10,881,936
Undistributed (accumulated)
investment income (loss)--net (663,466) 140,095 (319,658) -- --
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency transactions
--net (Note 5) 7,807,796 2,815,137 1,427,903 (17,418) 25,076
Accumulated distributions in
excess of realized capital
gains on investments--net
(Note 1g) -- -- -- (34,717) --
Unrealized appreciation on
investments and foreign
currency transactions--
net 9,344,508 10,290,030 5,915,149 101,866 183,747
----------- ----------- ----------- ----------- -----------
Net assets $68,999,089 $60,775,541 $28,966,724 $ 9,862,861 $11,198,653
=========== =========== =========== =========== ===========
Net Asset Value: Class A:
Net assets $ 267,817 $ 162,424 $ 133,339 $ 1,857,000 $ 4,094,080
=========== =========== =========== =========== ===========
Shares outstanding 17,267 11,667 9,081 185,737 394,420
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 15.51 $ 13.92 $ 14.68 $ 10.00 $ 10.38
=========== =========== =========== =========== ===========
Class B:
Net assets $43,862,810 $41,650,182 $18,647,615 $ 5,198,515 $ 4,908,630
=========== =========== =========== =========== ===========
Shares outstanding 2,882,425 3,028,067 1,289,323 520,245 472,928
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 15.22 $ 13.75 $ 14.46 $ 9.99 $ 10.38
=========== =========== =========== =========== ===========
Class C:
Net assets $20,003,851 $15,719,027 $ 8,863,567 $ 2,285,833 $ 1,884,318
=========== =========== =========== =========== ===========
Shares outstanding. 1,314,525 1,144,337 613,226 228,776 181,584
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 15.22 $ 13.74 $ 14.45 $ 9.99 $ 10.38
=========== =========== =========== =========== ===========
Class D:
Net assets $ 4,864,611 $ 3,243,908 $ 1,322,203 $ 521,513 $ 311,625
=========== =========== =========== =========== ===========
Shares outstanding 314,764 233,514 90,225 52,191 30,010
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 15.45 $ 13.89 $ 14.65 $ 9.99 $ 10.38
=========== =========== =========== =========== ===========
<FN>
*Identified cost $61,165,794 $49,934,162 $23,580,445 $ 9,490,659 $11,829,378
=========== =========== =========== =========== ===========
++Authorized shares--Class A 6,250,000 6,250,000 6,250,000 6,250,000 26,250,000
=========== =========== =========== =========== ===========
++++Authorized shares--Class B 10,000,000 10,000,000 6,250,000 6,250,000 26,250,000
=========== =========== =========== =========== ===========
++++++Authorized shares--Class C 6,250,000 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 6,250,000
=========== =========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Fundamental Global Growth Quality US Government
For the Six Months Ended Value Opportunity Opportunity Bond Securities
July 31,1997 Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C> <C>
Investment Income Interest and discount earned* $ 270,721 $ 378,211 $ 51,028 $ 321,712 $ 364,381
(Notes 1d & 1e): Dividends** 346,884 508,077 100,932 -- --
Loaned securities -- -- -- 46 --
----------- ----------- ----------- ----------- -----------
Total income 617,605 886,288 151,960 321,758 364,381
----------- ----------- ----------- ----------- -----------
Expenses: Investment advisory fees
(Note 2) 192,248 188,217 67,588 23,110 27,404
Account maintenance and
distribution fees--Class B
(Note 2) 188,565 172,848 66,794 17,876 16,916
Transfer agent fees--Class B
(Note 2) 103,419 93,654 41,948 12,938 6,896
Account maintenance and
distribution fees--Class C
(Note 2) 84,257 63,414 31,714 8,041 7,112
Registration fees (Note 1f) 37,845 34,211 27,597 43,066 32,987
Transfer agent fees--Class C
(Note 2) 48,788 36,839 21,336 5,802 2,929
Printing and shareholder
reports 43,356 40,382 14,493 8,543 7,614
Accounting services (Note 2) 42,367 35,211 15,399 7,176 7,464
Professional fees 22,097 20,814 8,683 6,185 6,863
Custodian fees 11,711 20,769 7,776 5,743 6,515
Amortization of organization
expenses (Note 1f) 3,547 8,074 7,050 2,058 4,638
Transfer agent fees--Class D
(Note 2) 10,033 6,285 2,552 1,027 362
Directors' fees and expenses 4,726 3,885 1,300 1,017 1,144
Account maintenance fees--
Class D (Note 2) 5,449 3,497 1,248 605 399
Transfer agent fees--Class A
(Note 2) 528 317 244 4,190 4,750
Pricing fees (Note 2) 653 3,576 129 1,496 610
Other 2,847 3,373 1,733 1,759 1,573
----------- ----------- ----------- ----------- -----------
Total expenses before
reimbursement 802,436 735,366 317,584 150,632 136,176
Reimbursement of expenses
(Note 2) -- -- -- (124,110) (111,749)
----------- ----------- ----------- ----------- -----------
Total expenses after
reimbursement 802,436 735,366 317,584 26,522 24,427
----------- ----------- ----------- ----------- -----------
Investment income (loss)
--net (184,831) 150,922 (165,624) 295,236 339,954
----------- ----------- ----------- ----------- -----------
Realized & Realized gain from:
Unrealized Investments--net 4,355,982 1,742,606 1,049,129 2,361 27,468
Gain on Foreign currency trans-
Investments & actions--net -- 580,551 -- -- --
Foreign Currency Change in unrealized
Transactions--Net appreciation/depreciation on:
(Notes 1b, 1c, Investments--net 4,137,274 5,543,233 4,371,789 196,280 172,319
1e & 3): Foreign currency
transactions--net -- 129,821 -- -- --
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain on investments and
foreign currency transactions 8,493,256 7,996,211 5,420,918 198,641 199,787
----------- ----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations $ 8,308,425 $ 8,147,133 $ 5,255,294 $ 493,877 $ 539,741
=========== =========== =========== =========== ===========
<FN>
*Net of foreign withholding
tax on interest -- $ 212 -- -- --
=========== =========== =========== =========== ===========
**Net of foreign withholding
tax on dividends $ 3,734 $ 54,845 $ 1,051 -- --
=========== =========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Fundamental Global Opportunity
Value Portfolio Portfolio
For the For the
For the Six Year Ended For the Six Year Ended
Months Ended January 31, Months Ended January 31,
Increase (Decrease) in Net Assets: July 31, 1997 1997 July 31, 1997 1997
<S> <S> <C> <C> <C> <C>
Operations: Investment income (loss)--net $ (184,831) $ (478,635) $ 150,922 $ (112,394)
Realized gain on investments--net 4,355,982 6,235,956 2,323,157 1,453,296
Change in unrealized appreciation on
investments--net 4,137,274 2,839,304 5,673,054 2,910,695
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 8,308,425 8,596,625 8,147,133 4,251,597
----------- ----------- ----------- -----------
Dividends & In excess of investment income--net:
Distributions to Class A -- -- -- (1,274)
Shareholders Class B -- -- -- (65,176)
(Note 1g): Class C -- -- -- (25,328)
Class D -- -- -- (21,506)
Realized gain on investments--net:
Class A -- (11,190) -- (1,213)
Class B -- (1,597,213) -- (298,844)
Class C -- (693,946) -- (104,853)
Class D -- (215,995) -- (25,165)
----------- ----------- ----------- -----------
Net decrease in net assets resulting
from dividends and distributions to
shareholders -- (2,518,344) -- (543,359)
----------- ----------- ----------- -----------
Capital Share Net increase in net assets derived from
Transactions capital share transactions 6,451,967 16,589,653 8,775,749 14,719,748
(Note 4): ----------- ----------- ----------- -----------
Net Assets: Total increase in net assets 14,760,392 22,667,934 16,922,882 18,427,986
Beginning of period 54,238,697 31,570,763 43,852,659 25,424,673
----------- ----------- ----------- -----------
End of period* $68,999,089 $54,238,697 $60,775,541 $43,852,659
=========== =========== =========== ===========
<FN>
*Undistributed (accumulated) investment
income (loss)--net $ (663,466) $ (478,635) $ 140,095 $ (10,827)
=========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (concluded)
<CAPTION>
Growth Quality US Government
Opportunity Bond Securities
Portfolio Portfolio Portfolio
For the Six For the Period For the Six For the For the Six For the
Increase Months Ended Feb. 2, 1996++ Months Ended Year Ended Months Ended Year Ended
(Decrease)in July 31, January 31, July 31, January 31, July 31, January 31,
Net Assets: 1997 1997 1997 1997 1997 1997
<S> <S> <C> <C> <C> <C> <C> <C>
Operations: Investment
income (loss)
--net $ (165,624) $ (154,034) $ 295,236 $ 506,519 $ 339,954 $ 661,707
Realized gain
(loss) on
investments--
net 1,049,129 378,775 2,361 (51,285) 27,468 243
Change in
unrealized
appreciation/
depreciation
on investments
--net 4,371,789 1,543,360 196,280 (231,164) 172,319 (194,411)
----------- ----------- ----------- ----------- ----------- -----------
Net increase
in net assets
resulting from
operations 5,255,294 1,768,101 493,877 224,070 539,741 467,539
----------- ----------- ----------- ----------- ----------- -----------
Dividends & Investment
Distributions to income--net:
Shareholders Class A -- -- (69,988) (150,009) (144,196) (329,353)
(Note 1g): Class B -- -- (147,453) (238,507) (136,867) (222,614)
Class C -- -- (61,324) (96,264) (53,308) (85,215)
Class D -- -- (16,471) (21,739) (10,616) (16,900)
Realized gain
on investments
--net:
Class A -- -- -- -- -- (32,773)
Class B -- -- -- -- -- (29,573)
Class C -- -- -- -- -- (12,740)
Class D -- -- -- -- -- (2,220)
In excess of
realized gain
on investments
--net:
Class A -- -- -- (8,426) -- --
Class B -- -- -- (17,644) -- --
Class C -- -- -- (7,230) -- --
Class D -- -- -- (1,417) -- --
----------- ----------- ----------- ----------- ----------- -----------
Net decrease
in net assets
resulting from
dividends and
distributions
to shareholders -- -- (295,236) (541,236) (344,987) (731,388)
----------- ----------- ----------- ----------- ----------- -----------
Capital Share Net increase
Transactions (decrease) in
(Note 4): net assets
derived from
capital share
transactions 8,369,632 13,569,697 249,078 3,143,735 (66,455) 1,556,845
----------- ----------- ----------- ----------- ----------- -----------
Net Assets: Total
increase in
net assets 13,624,926 15,337,798 447,719 2,826,569 128,299 1,292,996
Beginning of
period 15,341,798 4,000 9,415,142 6,588,573 11,070,354 9,777,358
----------- ----------- ----------- ----------- ----------- -----------
End of period $28,966,724 $15,341,798 $ 9,862,861 $ 9,415,142 $11,198,653 $11,070,354
=========== =========== =========== =========== =========== ===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Fundamental Value Portfolio++++
The following per share data and
ratios have been derived from
information provided in the Class A Class B
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning of
period $ 13.58 $ 11.67 $ 10.00 $ 13.39 $ 11.55 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income (loss)
--net .03 (.01) .25 (.05) (.15) (.07)
Realized and
unrealized
gain on
investments--
net 1.90 2.70 1.76 1.88 2.65 1.96
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations 1.93 2.69 2.01 1.83 2.50 1.89
----------- ----------- ----------- ----------- ----------- -----------
Less dividends
and
distributions:
Realized
gain on
investments
--net -- (.78) (.20) -- (.66) (.20)
In excess of
realized gain
on investments
--net -- -- (.11) -- -- (.11)
Return of
capital--net -- -- (.03) -- -- (.03)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions -- (.78) (.34) -- (.66) (.34)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 15.51 $ 13.58 $ 11.67 $ 15.22 $ 13.39 $ 11.55
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 14.21%+++ 23.20% 20.10%+++ 13.67%+++ 21.79% 18.89%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment 1.68%* 2.03% 1.54% 2.77%* 3.11% 3.29%
=========== =========== =========== =========== =========== ===========
Expenses 1.68%* 2.03% 2.00% 2.77%* 3.11% 3.39%
=========== =========== =========== =========== =========== ===========
Investment
income (loss)
--net .40%* (.07%) 1.99% (.68%)* (1.15%) (.61%)
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 268 $ 209 $ 121 $ 43,863 $ 34,828 $ 20,989
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 52.75% 80.60% 51.37% 52.75% 80.60% 51.37%
=========== =========== =========== =========== =========== ===========
Average
commission
rate
paid+++++ $ .0560 $ .0539 -- $ .0560 $ .0539 --
=========== =========== =========== =========== =========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++The Program commenced operations on February 1, 1995.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Fundamental Value Portfolio++++
The following per share data and
ratios have been derived from
information provided in the Class C Class D
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning of
period $ 13.39 $ 11.55 $ 10.00 $ 13.54 $ 11.65 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income (loss)
--net (.05) (.15) (.09) .01 (.04) .03
Realized and
unrealized
gain on
investments
--net 1.88 2.66 1.98 1.90 2.68 1.96
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations 1.83 2.51 1.89 1.91 2.64 1.99
----------- ----------- ----------- ----------- ----------- -----------
Less dividends
and
distributions:
Realized
gain on
investments
--net -- (.67) (.20) -- (.75) (.20)
In excess
of realized
gain on
investments
--net -- -- (.11) -- -- (.11)
Return of
capital--net -- -- (.03) -- -- (.03)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions -- (.67) (.34) -- (.75) (.34)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 15.22 $ 13.39 $ 11.55 $ 15.45 $ 13.54 $ 11.65
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 13.67%+++ 21.82% 18.89%+++ 14.11%+++ 22.82% 19.90%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment 2.80%* 3.15% 3.38% 1.93%* 2.27% 2.45%
=========== =========== =========== =========== =========== ===========
Expenses 2.80%* 3.15% 3.46% 1.93%* 2.27% 2.56%
=========== =========== =========== =========== =========== ===========
Investment
income (loss)
--net (.71%)* (1.19%) (.75%) .15%* (.31%) .24%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 20,004 $ 15,022 $ 7,990 $ 4,864 $ 4,180 $ 2,471
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 52.75% 80.60% 51.37% 52.75% 80.60% 51.37%
=========== =========== =========== =========== =========== ===========
Average
commission
rate
paid +++++ $ .0560 $ .0539 -- $ .0560 $ .0539 --
=========== =========== =========== =========== =========== ===========
<CAPTION>
Global Opportunity Portfolio++++
The following per share data and
ratios have been derived from
information provided in the Class A Class B
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning of
period $ 11.93 $ 10.82 $ 10.00 $ 11.86 $ 10.76 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income (loss)
--net .10 .15 .34 .03 (.04) .13
Realized and
unrealized
gain on
investments
and foreign
currency
transactions
--net 1.89 1.21 .77 1.86 1.29 .85
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations 1.99 1.36 1.11 1.89 1.25 .98
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net -- -- (.20) -- -- (.15)
In excess
of invest-
ment income
--net -- (.13) (.06) -- (.03) (.04)
Realized
gain on
investments
--net -- (.12) -- -- (.12) --
In excess of
realized
gain on
investments
--net -- -- (.03) -- -- (.03)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions -- (.25) (.29) -- (.15) (.22)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 13.92 $ 11.93 $ 10.82 $ 13.75 $ 11.86 $ 10.76
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 16.68%+++ 12.68% 11.15%+++ 15.94%+++ 11.67% 9.89%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment 1.88%* 2.47% 2.01% 2.97%* 3.76% 3.50%
=========== =========== =========== =========== =========== ===========
Expenses 1.88%* 2.90% 2.32% 2.97%* 4.01% 3.61%
=========== =========== =========== =========== =========== ===========
Investment
income (loss)
--net 1.65%* 1.83% 2.92% .56%* (.39%) 1.20%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 163 $ 129 $ 3,025 $ 41,650 $ 30,469 $ 16,117
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 46.90% 125.68% 83.14% 46.90% 125.68% 83.14%
=========== =========== =========== =========== =========== ===========
Average
commission
rate
paid+++++ $ .0151 $ .0170 -- $ .0151 $ .0170 --
=========== =========== =========== =========== =========== ===========
<CAPTION>
Global Opportunity Portfolio++++
The following per share data and
ratios have been derived from
information provided in the Class C Class D
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning of
period $ 11.84 $ 10.75 $ 10.00 $ 11.92 $ 10.80 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income (loss)
--net .03 (.05) .12 .09 .05 .22
Realized and
unrealized
gain on
investments
and foreign
currency
transactions
--net 1.87 1.29 .85 1.88 1.29 .85
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations 1.90 1.24 .97 1.97 1.34 1.07
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net -- -- (.15) -- -- (.18)
In excess
of invest-
ment income
--net -- (.03) (.04) -- (.10) (.06)
Realized
gain on
investments
--net -- (.12) -- -- (.12) --
In excess of
realized
gain on
investments
--net -- -- (.03) -- -- (.03)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions -- (.15) (.22) -- (.22) (.27)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 13.74 $ 11.84 $ 10.75 $ 13.89 $ 11.92 $ 10.80
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 16.05%+++ 11.61% 9.81%+++ 16.53%+++ 12.56% 10.80%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment 3.01%* 3.81% 3.58% 2.13%* 2.91% 2.67%
=========== =========== =========== =========== =========== ===========
Expenes 3.01%* 4.06% 3.65% 2.13%* 3.17% 2.77%
=========== =========== =========== =========== =========== ===========
Investment
income (loss)
--net .53%* (.46%) 1.07% 1.40%* .48% 2.00%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 15,719 $ 10,659 $ 4,770 $ 3,244 $ 2,596 $ 1,513
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 46.90% 125.68% 83.14% 46.90% 125.68% 83.14%
=========== =========== =========== =========== =========== ===========
Average
commission
rate
paid+++++ $ .0151 $ .0170 -- $ .0151 $ .0170 --
=========== =========== =========== =========== =========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++The Program commenced operations on February 1, 1995.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Growth Opportunity Portfolio++++
Class A Class B
For For the For For the
The following per share data and ratios the Six Period the Six Period
have been derived from information provided Months Feb. 2, Months Feb. 2,
in the financial statements. Ended 1996++ to Ended 1996++ to
July 31, Jan. 31, July 31, Jan. 31,
Increase (Decrease) in Net Asset Value: 1997 1997 1997 1997
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.79 $ 10.00 $ 11.68 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net (.03) .03 (.10) (.21)
Realized and unrealized gain on investments
--net 2.92 1.76 2.88 1.89
------- ------- ------- -------
Total from investment operations 2.89 1.79 2.78 1.68
------- ------- ------- -------
Net asset value, end of period $ 14.68 $ 11.79 $ 14.46 $ 11.68
======= ======= ======= =======
Total Investment Based on net asset value per share 24.51%+++ 17.90%+++ 23.80%+++ 16.80%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 1.96%* 2.44%* 3.09%* 3.84%*
Average Net ======= ======= ======= =======
Assets: Expenses 1.96%* 3.08%* 3.09%* 4.00%*
======= ======= ======= =======
Investment income (loss)--net (.50%)* .23%* (1.63%)* (1.93%)*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 133 $ 58 $18,648 $ 9,816
Data: ======= ======= ======= =======
Portfolio turnover 33.49% 51.63% 33.49% 51.63%
======= ======= ======= =======
Average commission rate paid+++++ $ .0637 $ .0626 $ .0637 $ .0626
======= ======= ======= =======
<CAPTION>
Growth Opportunity Portfolio++++
Class C Class D
For For the For For the
The following per share data and ratios the Six Period the Six Period
have been derived from information provided Months Feb. 2, Months Feb. 2,
in the financial statements. Ended 1996++ to Ended 1996++ to
July 31, Jan. 31, July 31, Jan. 31,
Increase (Decrease) in Net Asset Value: 1997 1997 1997 1997
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.67 $ 10.00 $ 11.78 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net (.10) (.22) (.05) (.11)
Realized and unrealized gain on investments
--net 2.88 1.89 2.92 1.89
------- ------- ------- -------
Total from investment operations 2.78 1.67 2.87 1.78
------- ------- ------- -------
Net asset value, end of period $ 14.45 $ 11.67 $ 14.65 $ 11.78
======= ======= ======= =======
Total Investment Based on net asset value per share. 23.82%+++ 16.70%+++ 24.36%+++ 17.80%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 3.13%* 3.88%* 2.22%* 2.94%*
Average Net ======= ======= ======= =======
Assets: Expenses 3.13%* 4.05%* 2.22%* 3.13%*
======= ======= ======= =======
Investment income (loss)--net (1.67%)* (1.98%)* (.76%)* (1.00%)*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 8,864 $ 4,649 $ 1,322 $ 819
Data: ======= ======= ======= =======
Portfolio turnover 33.49% 51.63% 33.49% 51.63%
======= ======= ======= =======
Average commission rate paid+++++ $ .0637 $ .0626 $ .0637 $ .0626
======= ======= ======= =======
<CAPTION>
Quality Bond Portfolio
The following per share data and
ratios have been derived from
information provided in the Class A Class B
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++++++ July 31, 1997 1997 1996++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of
Performance: period $ 9.79 $ 10.27 $ 10.00 $ 9.79 $ 10.27 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income--net .34 .68 .62 .30 .59 .54
Realized and
unrealized
gain (loss)
on investments
--net .21 (.44) .27 .20 (.44) .27
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations .55 .24 .89 .50 .15 .81
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net (.34) (.68) (.62) (.30) (.59) (.54)
In excess of
realized
gain on
investments
--net -- (.04) -- -- (.04) --
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions (.34) (.72) (.62) (.30) (.63) (.54)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 10.00 $ 9.79 $ 10.27 $ 9.99 $ 9.79 $ 10.27
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 5.72%+++ 2.51% 9.26%+++ 5.17%+++ 1.62% 8.35%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment .00%* .00% .00% .77%* .78% .79%
=========== =========== =========== =========== =========== ===========
Expenses 2.59%* 3.23% 2.60% 3.46%* 4.08% 3.31%
=========== =========== =========== =========== =========== ===========
Investment
income--net 7.06%* 6.85% 6.22% 6.19%* 6.00% 5.52%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 1,857 $ 2,254 $ 2,196 $ 5,199 $ 4,824 $ 3,049
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 36.73% 91.10% 86.68% 36.73% 91.10% 86.68%
=========== =========== =========== =========== =========== ===========
<CAPTION>
Quality Bond Portfolio
The following per share data and
ratios have been derived from
information provided in the Class C Class D
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++++++ July 31, 1997 1997 1996++++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of
Performance: period $ 9.79 $ 10.27 $ 10.00 $ 9.79 $ 10.27 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income--net .29 .58 .53 .33 .65 .60
Realized and
unrealized
gain (loss) on
investments
--net .20 (.44) .27 .20 (.44) .27
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations .49 .14 .80 .53 .21 .87
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net (.29) (.58) (.53) (.33) (.65) (.60)
In excess of
realized
gain on
investments
--net -- (.04) -- -- (.04) --
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions (.29) (.62) (.53) (.33) (.69) (.60)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 9.99 $ 9.79 $ 10.27 $ 9.99 $ 9.79 $ 10.27
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 5.13%+++ 1.55% 8.27%+++ 5.49%+++ 2.25% 8.99%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment .86%* .85% .87% .16%* .16% .19%
=========== =========== =========== =========== =========== ===========
Expenses 3.55%* 4.15% 3.44% 2.84%* 3.47% 2.70%
=========== =========== =========== =========== =========== ===========
Investment
income--net 6.10%* 5.93% 5.46% 6.81%* 6.62% 6.11%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 2,286 $ 1,885 $ 1,123 $ 521 $ 452 $ 221
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 36.73% 91.10% 86.68% 36.73% 91.10% 86.68%
=========== =========== =========== =========== =========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++The Program commenced operations on February 1, 1995.
+++Aggregate total investment return.
+++++Includes commissions paid in foreign currencies, which have
been converted into US dollars using the prevailing exchange rate on
the date of the transaction. Such conversions may significantly
affect the rate shown.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
US Government Securities Portfolio
The following per share data and
ratios have been derived from
information provided in the Class A Class B
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning of
period $ 10.20 $ 10.48 $ 10.00 $ 10.20 $ 10.48 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income--net .34 .69 .76 .30 .60 .68
Realized and
unrealized
gain (loss)
on investments
--net .18 (.21) .74 .18 (.21) .74
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations .52 .48 1.50 .48 .39 1.42
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net (.34) (69) (.76) (.30) (.60) (.68)
Realized
gain on
investments
--net -- (.07) (.26) -- (.07) (.26)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions (.34) (.76) (1.02) (.30) (.67) (.94)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 10.38 $ 10.20 $ 10.48 $ 10.38 $ 10.20 $ 10.48
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 5.25%+++ 4.76% 15.47%+++ 4.83%+++ 3.90% 14.53%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment .00%* .00% .00% .78%* .78% .81%
=========== =========== =========== =========== =========== ===========
Expenses 2.03%* 2.92% 2.54% 2.85%* 3.72% 3.35%
=========== =========== =========== =========== =========== ===========
Investment
income--net 6.81%* 6.69% 7.30% 5.98%* 5.85% 6.28%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 4,094 $ 4,486 $ 5,463 $ 4,909 $ 4,514 $ 3,043
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 232.81% 27.32% 113.05% 232.81% 27.32% 113.05%
=========== =========== =========== =========== =========== ===========
<CAPTION>
US Government Securities Portfolio
The following per share data and
ratios have been derived from
information provided in the Class C Class D
financial statements.
For the Six For the Year For the Six For the Year
Increase (Decrease) in Months Ended Ended January 31, Months Ended Ended January 31,
Net Asset Value: July 31, 1997 1997 1996++ July 31, 1997 1997 1996++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset
Operating value,
Performance: beginning
period $ 10.19 $ 10.47 $ 10.00 $ 10.20 $ 10.48 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment
income--net .30 .59 .67 .33 .66 .74
Realized and
unrealized
gain (loss)
on investments
--net .19 (.21) .73 .18 (.21) .74
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations .49 .38 1.40 .51 .45 1.48
----------- ----------- ----------- ----------- ----------- -----------
Less divi-
dends and
distributions:
Investment
income--net (.30) (59) (.67) (.33) (.66) (.74)
Realized
gain on
investments
--net -- (.07) (.26) -- (.07) (.26)
----------- ----------- ----------- ----------- ----------- -----------
Total divi-
dends and
distributions (.30) (.66) (.93) (.33) (.73) (1.00)
----------- ----------- ----------- ----------- ----------- -----------
Net asset
value, end
of period $ 10.38 $ 10.19 $ 10.47 $ 10.38 $ 10.20 $ 10.48
=========== =========== =========== =========== =========== ===========
Total Investment Based on net
Return:** asset value
per share 4.89%+++ 3.83% 14.36%+++ 5.12%+++ 4.49% 15.13%+++
=========== =========== =========== =========== =========== ===========
Ratios to Expenses, net
Average Net of reimburse-
Assets: ment .85%* .85% .86% .20%* .21% .22%
=========== =========== =========== =========== =========== ===========
Expenses 2.92%* 3.78% 3.41% 2.27%* 3.14% 2.77%
=========== =========== =========== =========== =========== ===========
Investment
income--net 5.90%* 5.78% 6.21% 6.56%* 6.42% 6.90%
=========== =========== =========== =========== =========== ===========
Supplemental Net assets,
Data: end of period
(in thousands) $ 1,884 $ 1,757 $ 1,089 $ 312 $ 313 $ 182
=========== =========== =========== =========== =========== ===========
Portfolio
turnover 232.81% 27.32% 113.05% 232.81% 27.32% 113.05%
=========== =========== =========== =========== =========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++The Program commenced operations on February 1, 1995.
+++Aggregate total investment 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
five separate portfolios: Fundamental Value Portfolio, Global
Opportunity Portfolio, Growth Opportunity Portfolio, Quality Bond
Portfolio and US Government Securities Portfolio (the "Portfolios"),
except for Growth Opportunity Portfolio which is classified as a non-
diversified portfolio. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary
to a fair statement of results for the interim period presented. All
such adjustments are of a normal recurring nature. 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.
(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, Global
Opportunity and Growth 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, Global
Opportunity and Growth 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
withholding 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. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Portfolios have determined the ex-dividend date. Interest income (in-
cluding amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(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, Global Opportunity and Growth
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.
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 and Growth Opportunity
Portfolios, 0.50% for Quality Bond and US Government Securities
Portfolios and 0.75% for Global Opportunity Portfolio.
For the six months ended July 31, 1997, MLAM had voluntarily waived
management fees and reimbursed each Portfolio for additional
expenses as follows:
Management Additional
Fee Expenses
Quality Bond Portfolio $23,110 $101,000
US Government Securities Portfolio $27,404 $ 84,345
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%
Growth 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%
NOTES TO FINANCIAL STATEMENTS (continued)
Distribution Fees
Class B Class C
Fundamental Value Portfolio 0.75% 0.75%
Global Opportunity Portfolio 0.75% 0.75%
Growth 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 maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended July 31, 1997, MLFD earned underwriting
discounts and direct commissions 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 $6 $797 $115 $15,420
Global Opportunity Portfolio 6 734 119 16,052
Growth Opportunity Portfolio -- 529 -- 10,484
Quality Bond Portfolio 1 153 12 1,197
US Government Securities Portfolio -- 23 -- 355
For the six months ended July 31, 1997, 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 $63,967 $2,635
Global Opportunity Portfolio 57,368 2,188
Growth Opportunity Portfolio 14,950 1,399
Quality Bond Portfolio 19,837 384
US Government Securities Portfolio 9,046 337
In addition, MLPF&S received $384, $4,314, and $773 in commissions
on the execution of portfolio security transactions for the
Fundamental Value, Global Opportunity and Growth Opportunity
Portfolios, respectively, for the six months ended July 31, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Program's transfer agent.
During the six months ended July 31, 1997, Global Opportunity,
Quality Bond and US Government Securities Portfolios paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $23, $1,283
and $598, 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, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended July 31, 1997 were as follows:
Purchases Sales
Fundamental Value Portfolio $32,142,122 $26,354,060
Global Opportunity Portfolio $33,256,812 $22,461,392
Growth Opportunity Portfolio $13,798,978 $ 6,354,633
Quality Bond Portfolio $ 3,367,748 $ 3,150,515
US Government Securities Portfolio $24,444,228 $24,196,354
Net realized and unrealized gains (losses) as of July 31, 1997 were
as follows:
Realized Unrealized
Fundamental Value Portfolio Gains Gains
Long-term investments $4,355,976 $ 9,344,508
Short-term investments 6 --
---------- -----------
Total $4,355,982 $ 9,344,508
========== ===========
Realized Unrealized
Gains Gains
Global Opportunity Portfolio (Losses) (Losses)
Long-term investments $1,742,606 $ 9,514,956
Foreign currency transactions (395,339) (15,476)
Forward foreign exchange contracts 975,890 790,550
---------- -----------
Total $2,323,157 $10,290,030
========== ===========
Realized Unrealized
Growth Opportunity Portfolio Gains Gains
Long-term investments $1,049,129 $5,915,149
---------- ----------
Total $1,049,129 $5,915,149
========== ==========
Realized Unrealized
Quality Bond Portfolio Gains Gains
Long-term investments $ 2,361 $ 101,866
---------- ----------
Total $ 2,361 $ 101,866
========== ==========
Realized Unrealized
US Government Securities Portfolio Gains Gains
Long-term investments $ 27,468 $ 183,747
---------- ----------
Total $ 27,468 $ 183,747
========== ==========
As of July 31, 1997, net unrealized appreciation (depreciation) for
Federal income tax purposes was as follows:
Gross Gross
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
Fundamental Value
Portfolio $ 9,896,962 $ (552,454) $9,344,508
Global Opportunity
Portfolio $10,965,519 $(1,450,563) $9,514,956
Growth Opportunity
Portfolio $ 6,174,289 $ (259,140) $5,915,149
Quality Bond Portfolio $ 144,621 $ (42,755) $ 101,866
US Government Securities
Portfolio $ 183,747 -- $ 183,747
The aggregate cost of investments at July 31, 1997 for Federal
income tax purposes was $61,165,794 for the Fundamental Value
Portfolio, $49,934,162 for the Global Opportunity Portfolio,
$23,580,445 for the Growth Opportunity Portfolio, $9,490,659 for the
Quality Bond Portfolio, and $11,829,378 for the US Government
Securities Portfolio.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions for the six months ended July 31, 1997 and for the year
ended January 31, 1997, respectively, were as follows:
For the Six For the
Months Ended Year Ended
July 31, 1997 Jan. 31, 1997
Fundamental Value Portfolio $6,451,967 $16,589,653
Global Opportunity Portfolio $8,775,749 $14,719,748
Growth Opportunity Portfolio $8,369,632 $13,569,697
Quality Bond Portfolio $ 249,078 $ 3,143,735
US Government Securities Portfolio $ (66,455) $ 1,556,845
Transactions in capital shares for each class were as follows:
Fundamental Value Portfolio
Class A Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 4,284 $ 59,184
Shares redeemed (2,428) (33,244)
----------- -----------
Net increase 1,856 $ 25,940
=========== ===========
Fundamental Value Portfolio
Class A Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 7,936 $ 102,340
Shares issued to shareholders in
reinvestment of distributions 493 6,544
----------- -----------
Total issued 8,429 108,884
Shares redeemed (3,359) (43,444)
----------- -----------
Net increase 5,070 $ 65,440
========== ===========
Fundamental Value Portfolio
Class B Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 536,292 $ 7,244,250
Automatic conversion of shares (3,519) (48,303)
Shares redeemed (251,023) (3,420,238)
----------- -----------
Net increase 281,750 $ 3,775,709
=========== ===========
Fundamental Value Portfolio
Class B Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 1,015,710 $12,783,442
Shares issued to shareholders in
reinvestment of distributions 73,472 962,487
----------- -----------
Total issued 1,089,182 13,745,929
Automatic conversion of shares (25,869) (323,827)
Shares redeemed (279,781) (3,545,224)
----------- -----------
Net increase 783,532 $ 9,876,878
=========== ===========
Fundamental Value Portfolio
Class C Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 306,959 $ 4,146,924
Shares redeemed (113,961) (1,568,543)
----------- -----------
Net increase 192,998 $ 2,578,381
=========== ===========
Fundamental Value Portfolio
Class C Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 568,727 $ 7,170,424
Shares issued to shareholders in
reinvestment of distributions 31,790 416,450
----------- -----------
Total issued 600,517 7,586,874
Shares redeemed (170,842) (2,169,492)
----------- -----------
Net increase 429,675 $ 5,417,382
=========== ===========
NOTES TO FINANCIAL STATEMENTS (continued)
Fundamental Value Portfolio
Class D Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 31,260 $ 425,767
Automatic conversion of shares 3,473 48,303
----------- -----------
Total issued 34,733 474,070
Shares redeemed (28,589) (402,133)
----------- -----------
Net increase 6,144 $ 71,937
=========== ===========
Fundamental Value Portfolio
Class D Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 95,960 $ 1,214,323
Automatic conversion of shares 25,591 323,827
Shares issued to shareholders in
reinvestment of distributions 10,204 135,000
----------- -----------
Total issued 131,755 1,673,150
Shares redeemed (35,230) (443,197)
----------- -----------
Net increase 96,525 $ 1,229,953
=========== ===========
Global Opportunity Portfolio
Class A Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 3,482 $ 42,710
Shares redeemed (2,630) (32,386)
----------- -----------
Net increase 852 $ 10,324
=========== ===========
Global Opportunity Portfolio
Class A Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 5,866 $ 65,458
Shares issued to shareholders in
reinvestment of dividends and
distributions 209 2,379
----------- -----------
Total issued 6,075 67,837
Shares redeemed (274,907) (2,981,256)
----------- -----------
Net decrease (268,832) $(2,913,419)
=========== ===========
Global Opportunity Portfolio
Class B Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 682,793 $ 8,340,284
Automatic conversion of shares (6,329) (80,080)
Shares redeemed (218,314) (2,665,803)
----------- -----------
Net increase 458,150 $ 5,594,401
=========== ===========
Global Opportunity Portfolio
Class B Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 1,345,701 $14,794,340
Shares issued to shareholders in
reinvestment of dividends and
distributions 30,558 347,756
----------- -----------
Total issued 1,376,259 15,142,096
Automatic conversion of shares (5,557) (61,320)
Shares redeemed (298,549) (3,316,163)
----------- -----------
Net increase 1,072,153 $11,764,613
=========== ===========
Global Opportunity Portfolio
Class C Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 345,938 $ 4,233,328
Shares redeemed (101,678) (1,255,066)
----------- -----------
Net increase 244,260 $ 2,978,262
=========== ===========
Global Opportunity Portfolio
Class C Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 569,220 $ 6,253,388
Shares issued to shareholders in
reinvestment of dividends and
distributions 10,679 121,315
----------- -----------
Total issued 579,899 6,374,703
Shares redeemed (123,382) (1,369,969)
----------- -----------
Net increase 456,517 $ 5,004,734
=========== ===========
Global Opportunity Portfolio
Class D Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 36,086 $ 445,034
Automatic conversion of shares 6,281 80,080
----------- -----------
Total issued 42,367 525,114
Shares redeemed (26,589) (332,352)
----------- -----------
Net increase 15,778 $ 192,762
=========== ===========
Global Opportunity Portfolio
Class D Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 93,756 $ 1,043,467
Automatic conversion of shares 5,516 61,320
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,910 44,693
----------- -----------
Total issued 103,182 1,149,480
Shares redeemed (25,507) (285,660)
----------- -----------
Net increase 77,675 $ 863,820
=========== ===========
Growth Opportunity Portfolio
Class A Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 5,182 $ 63,285
Shares redeemed (974) (12,603)
----------- -----------
Net increase 4,208 $ 50,682
=========== ===========
Growth Opportunity Portfolio
Class A Shares for the
Period February 2, 1996++ to Dollar
January 31, 1997 Shares Amount
Shares sold 205,569 $ 2,057,557
Shares redeemed (200,796) (2,041,351)
----------- -----------
Net increase 4,773 $ 16,206
=========== ===========
[FN]
++Prior to February 2, 1996 (commencement of operations), the
Portfolio issued 100 shares to MLAM for $1,000.
Growth Opportunity Portfolio
Class B Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 510,956 $ 6,219,651
Automatic conversion of shares (112) (1,431)
Shares redeemed (62,244) (764,120)
----------- -----------
Net increase 448,600 $ 5,454,100
=========== ===========
Growth Opportunity Portfolio
Class B Shares for the
Period February 2, 1996++ to Dollar
January 31, 1997 Shares Amount
Shares sold 886,181 $ 9,203,628
Automatic conversion of shares (947) (10,034)
Shares redeemed (44,611) (477,407)
----------- -----------
Net increase 840,623 $ 8,716,187
=========== ===========
[FN]
++Prior to February 2, 1996 (commencement of operations), the
Portfolio issued 100 shares to MLAM for $1,000.
Growth Opportunity Portfolio
Class C Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 260,986 $ 3,190,365
Shares redeemed (46,069) (582,468)
----------- -----------
Net increase 214,917 $ 2,607,897
=========== ===========
Growth Opportunity Portfolio
Class C Shares for the Period
February 2, 1996++ to January 31, Dollar
1997 Shares Amount
Shares sold 429,086 $ 4,441,657
Shares redeemed (30,877) (324,727)
----------- -----------
Net increase 398,209 $ 4,116,930
=========== ===========
[FN]
++Prior to February 2, 1996 (commencement of operations), the
Portfolio issued 100 shares to MLAM for $1,000.
Growth Opportunity Portfolio
Class D Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 25,428 $ 315,001
Automatic conversion of shares 110 1,431
----------- -----------
Total issued 25,538 316,432
Shares redeemed (4,835) (59,479)
----------- -----------
Net increase 20,703 $ 256,953
=========== ===========
Growth Opportunity Portfolio
Class D Shares for the Period
February 2, 1996++ to January 31, Dollar
1997 Shares Amount
Shares sold 78,115 $ 811,625
Automatic conversion of shares 944 10,034
----------- -----------
Total issued 79,059 821,659
Shares redeemed (9,637) (101,285)
----------- -----------
Net increase 69,422 $ 720,374
=========== ===========
[FN]
++Prior to February 2, 1996 (commencement of operations), the
Portfolio issued 100 shares to MLAM for $1,000.
Quality Bond Portfolio
Class A Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 99 $ 952
Shares issued to shareholders in
reinvestment of dividends 7,114 69,415
----------- -----------
Total issued 7,213 70,367
Shares redeemed. (51,598) (500,267)
----------- -----------
Net decrease (44,385) $ (429,900)
=========== ===========
Quality Bond Portfolio
Class A Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 1,729 $ 5,246
Shares issued to shareholders in
reinvestment of dividends and
distributions 14,993 159,085
----------- -----------
Total issued 16,722 164,331
Shares redeemed. (298) (2,925)
----------- -----------
Net increase 16,424 $ 161,406
=========== ===========
NOTES TO FINANCIAL STATEMENTS (concluded)
Quality Bond Portfolio
Class B Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 114,953 $ 1,121,675
Shares issued to shareholders in
reinvestment of dividends 13,031 127,097
----------- -----------
Total issued. 127,984 1,248,772
Shares redeemed (100,495) (979,891)
----------- -----------
Net increase 27,489 $ 268,881
=========== ===========
Quality Bond Portfolio
Class B Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 234,175 $ 2,302,903
Shares issued to shareholders in
reinvestment of dividends and
distributions 23,284 228,615
----------- -----------
Total issued. 257,459 2,531,518
Shares redeemed (61,643) (608,507)
----------- -----------
Net increase 195,816 $ 1,923,011
=========== ===========
Quality Bond Portfolio
Class C Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 54,744 $ 532,184
Shares issued to shareholders in
reinvestment of dividends 5,687 55,473
----------- -----------
Total issued 60,431 587,657
Shares redeemed (24,218) (235,872)
----------- -----------
Net increase 36,213 $ 351,785
=========== ===========
Quality Bond Portfolio
Class C Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 124,149 $ 1,218,787
Shares issued to shareholders in
reinvestment of dividends and
distributions 9,844 96,601
----------- -----------
Total issued 133,993 1,315,388
Shares redeemed (50,842) (498,626)
----------- -----------
Net increase 83,151 $ 816,762
=========== ===========
Quality Bond Portfolio
Class D Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold. 11,788 $ 114,340
Shares issued to shareholders in
reinvestment of dividends 1,472 14,355
----------- -----------
Total issued 13,260 128,695
Shares redeemed (7,251) (70,383)
----------- -----------
Net increase 6,009 $ 58,312
=========== ===========
Quality Bond Portfolio
Class D Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold. 29,757 $ 292,294
Shares issued to shareholders in
reinvestment of dividends 2,068 20,304
----------- -----------
Total issued 31,825 312,598
Shares redeemed (7,148) (70,042)
----------- -----------
Net increase 24,677 $ 242,556
=========== ===========
US Government Securities Portfolio
Class A Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 29 $ 285
Shares issued to shareholders in
reinvestment of dividends 14,031 142,754
----------- -----------
Total issued 14,060 143,039
Shares redeemed (59,530) (602,826)
----------- -----------
Net decrease (45,470) $ (459,787)
=========== ===========
US Government Securities Portfolio
Class A Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 3,546 $ 36,344
Shares issued to shareholders in
reinvestment of dividends and
distributions 32,786 334,190
----------- -----------
Total issued 36,332 370,534
Shares redeemed (117,931) (1,201,716)
----------- -----------
Net decrease (81,599) $ (831,182)
=========== ===========
US Government Securities Portfolio
Class B Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 69,428 $ 706,140
Shares issued to shareholders in
reinvestment of dividends 9,897 100,709
----------- -----------
Total issued 79,325 806,849
Automatic conversion of shares (1,416) (14,369)
Shares redeemed (47,727) (484,990)
----------- -----------
Net increase 30,182 $ 307,490
=========== ===========
US Government Securities Portfolio
Class B Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 186,113 $ 1,900,921
Shares issued to shareholders in
reinvestment of dividends and
distributions 18,945 193,085
----------- -----------
Total issued 205,058 2,094,006
Automatic conversion of shares (3,692) (37,683)
Shares redeemed (49,105) (500,968)
----------- -----------
Net increase 152,261 $ 1,555,355
=========== ===========
US Government Securities Portfolio
Class C Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold 26,742 $ 270,817
Shares issued to shareholders in
reinvestment of dividends 4,826 49,095
----------- -----------
Total issued 31,568 319,912
Shares redeemed (22,372) (227,737)
----------- -----------
Net increase 9,196 $ 92,175
=========== ===========
US Government Securities Portfolio
Class C Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold 92,431 $ 942,477
Shares issued to shareholders in
reinvestment of dividends and
distributions 8,932 91,008
----------- -----------
Total issued 101,363 1,033,485
Shares redeemed (33,002) (336,458)
----------- -----------
Net increase 68,361 $ 697,027
=========== ===========
US Government Securities Portfolio
Class D Shares for the Six Months Dollar
Ended July 31, 1997 Shares Amount
Shares sold. 7,825 $ 79,955
Automatic conversion of shares 1,415 14,369
Shares issued to shareholders in
reinvestment of dividends 799 8,127
----------- -----------
Total issued. 10,039 102,451
Shares redeemed (10,677) (108,784)
----------- -----------
Net decrease (638) $ (6,333)
=========== ===========
US Government Securities Portfolio
Class D Shares for the Year Dollar
Ended January 31, 1997 Shares Amount
Shares sold. 14,460 $ 147,648
Automatic conversion of shares 3,691 37,683
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,438 14,664
----------- -----------
Total issued. 19,589 199,995
Shares redeemed (6,300) (64,350)
----------- -----------
Net increase 13,289 $ 135,645
=========== ===========
5. Capital Loss Carryforward:
At January 31, 1997, the Quality Bond Portfolio had a net capital
loss carryforward of approximately $48,000, all of which expires in
2005. This amount will be available to offset like amounts of any
future taxable gains.
